-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EjTPyBahGFxhUoPQp2Kt9cjXcqSvspSI1H9+6U1ChDX+DQt3p11X9x6vqQlYjuNm ppYmrX2YIekPWK6dMt+Ymg== 0000892569-99-000725.txt : 19990326 0000892569-99-000725.hdr.sgml : 19990326 ACCESSION NUMBER: 0000892569-99-000725 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 28 FILED AS OF DATE: 19990325 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AUTOBYTEL COM INC CENTRAL INDEX KEY: 0001023364 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS RETAIL [5900] IRS NUMBER: 330711569 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: SEC FILE NUMBER: 333-70621 FILM NUMBER: 99572036 BUSINESS ADDRESS: STREET 1: 18872 MACARTHUR BLVD STREET 2: SUITE 200 CITY: IRVINE STATE: CA ZIP: 92612-1400 BUSINESS PHONE: 9492254500 MAIL ADDRESS: STREET 1: AUTO BY TEL CORP STREET 2: 18872 MACARTHUR BLVD 2ND FL CITY: IRVINE STATE: CA ZIP: 92612-1400 FORMER COMPANY: FORMER CONFORMED NAME: AUTO BY TEL CORP DATE OF NAME CHANGE: 19960920 S-1/A 1 AMENDMENT NO 5 TO THE FORM S-1 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 25, 1999. REGISTRATION NO. 333-70621 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------- AMENDMENT NO. 5 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------- AUTOBYTEL.COM INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 7375 33-0711569 (STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
18872 MACARTHUR BOULEVARD IRVINE, CALIFORNIA 92612-1400 (949) 225-4500 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) MARK W. LORIMER, CHIEF EXECUTIVE OFFICER AND PRESIDENT AUTOBYTEL.COM INC. 18872 MACARTHUR BOULEVARD IRVINE, CALIFORNIA 92612-1400 (949) 225-4500 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ COPIES TO: THOMAS R. POLLOCK, ESQ. CHRISTOPHER L. KAUFMAN, ESQ. BRIGITTE LIPPMANN, ESQ. LAURA I. BUSHNELL, ESQ. PAUL, HASTINGS, JANOFSKY & WALKER LLP LATHAM & WATKINS 399 PARK AVENUE 135 COMMONWEALTH DRIVE NEW YORK, NEW YORK 10022 MENLO PARK, CALIFORNIA 94025 (212) 318-6000 (650) 328-4600
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [ ] ------------------------ CALCULATION OF REGISTRATION FEE - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- PROPOSED MAXIMUM PROPOSED TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2) REGISTRATION FEE(3) - ---------------------------------------------------------------------------------------------------------------------------- Common Stock, par value $.001 per share...................... 5,137,500 Shares $22.00 $113,025,000 $31,420.95 - ---------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------
(1) Includes 637,500 shares that may be sold upon exercise of the underwriters' over-allotment option. (2) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457 under the Securities Act of 1933, as amended. (3) This registration fee has been previously paid. ------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION MARCH 25, 1999 4,500,000 SHARES LOGO AUTOBYTEL.COM INC. COMMON STOCK We are offering 3,500,000 shares of our common stock. The selling stockholders identified in this prospectus are offering an additional 1,000,000 shares. We will not receive any of the proceeds from the sale of shares by the selling stockholders. There is currently no public market for our common stock. We expect that the public offering price will be between $20.00 and $22.00 per share. The market price of our common stock after this offering may be higher or lower than the actual price at which the shares of our common stock will be sold in this offering. Our common stock has been approved for quotation on the Nasdaq National Market under the symbol "ABTL." INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 6. Autobytel.com has received from international strategic investors indications of interest for the purchase of up to 250,000 shares registered under the registration statement of which this prospectus is a part at the initial public offering price. The sale of these shares will not be subject to the underwriting agreement between Autobytel.com and the underwriters. No underwriting discounts will apply to the sale of these shares, however, if these shares are sold to these investors we will pay a fee of $350,000 to an affiliate of one of the underwriters.
PER SHARE TOTAL --------- -------- Public Offering Price................................ $ $ Underwriting Discounts............................... $ $ Proceeds, before expenses, to Autobytel.com.......... $ $ Proceeds, before expenses, to the selling stockholders....................................... $ $
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The selling stockholders have granted the underwriters a 30-day option to purchase up to an additional 637,500 shares of common stock to cover any over-allotments. If the underwriters exercise the over-allotment option in full, these stockholders will receive $ from the proceeds. BT ALEXS BROWN LEHMAN BROTHERS PAINEWEBBER INCORPORATED , 1999 3 GATEFOLD - -------- Purchase Request Process utilizes easy-to-use online forms that enable consumers to choose their desired vehicle and options. The purchase request is then routed to the nearest Autobytel.com participating dealer, whom we expect to promptly contact the customer with a haggle-free, competitive offer. Research allows consumers to empower themselves by gathering up-to-date, useful information regarding vehicles, vehicle pricing and other related topics from Autobytel.com's comprehensive network of automobile information sources. Dealer Real Time(tm) is a extranet used exclusively by Autobytel.com and its participating dealers that delivers the purchase requests from consumers to Autobytel.com dealers in real time. It notifies dealers when new purchase requests have been received, enables dealers to efficiently manage the purchase process and allows dealers to load their pre-owned vehicle inventories directly to the network. Pre-Owned Vehicle Purchasing is simplified through Autobytel.com's Pre-Owned CyberStore, which enables consumers to search for vehicles according to specific search parameters such as the price, make, model, mileage, year and location of the vehicle. CyberStore locates and displays the description, location and actual photograph of all vehicles that satisfy the search parameters. INSIDE COVER - ------------ New Cars Consumers can shop for and select a new vehicle that specifically fits their needs using Autobytel.com. Pre-Owned CyberStore Consumers can search for, view and select a certified, pre-owned vehicle through CyberStore. Research Pricing information, consumer reports, "test drives" and up-to-date automotive industry information help consumers make informed and intelligent buying decisions. Finance Consumers can research loan and leasing information and receive online approval. Insure Consumers can receive insurance quotes and obtain approval online. Rewards Mobalist Rewards and its affiliate programs allow members to earn credits toward the purchase of a new or pre-owned car through Autobytel.com. Warranty Consumers can purchase extended warranty and mechanical breakdown insurance through our online affiliates. My Area Consumers can keep track of their current cars, watch expenses and plan future "dream car" purchases through this personalized homepage. 2 4 PROSPECTUS SUMMARY In addition to this summary, you should read the more detailed information appearing elsewhere in this prospectus, including the "Risk Factors" section and the Consolidated Financial Statements and Notes thereto. AUTOBYTEL.COM We are a leading, branded Internet site for new and pre-owned vehicle information and purchasing services. Through our Web site, www.autobytel.com, consumers can research pricing, specifications and other information regarding new and pre-owned vehicles. When consumers indicate they are ready to buy, they can be connected to Autobytel.com's network of over 2,700 dealers in North America, with each dealer representing a franchise for a particular vehicle make. Dealers participate in our network by entering into non-exclusive contracts with us. We expect our dealers to provide a haggle-free, competitive offer. We provide our services free of charge to consumers and derive substantially all of our revenues from fees paid by participating dealers. We believe our services benefit both consumers and participating dealers in the following ways: - we supply consumers with information they can use to make an informed and intelligent vehicle purchasing decision, - we provide consumers a convenient buying experience, - we provide consumers access to a broad range of related services such as insurance, financing and leasing through our Web site, - we reduce our participating dealers' costs by directing to them large volumes of potential automotive buyers, and - we train our dealers to appropriately deal with knowledgeable Internet consumers. We introduced our new vehicle purchasing services in May 1995 and our Certified Pre-Owned CyberStore program in April 1997. Our new vehicle purchasing service enables consumers to shop for and select a new vehicle through our Web site by providing research on new vehicles such as pricing, features, specifications and colors. When consumers indicate they are ready to buy, they can complete a purchase request online. A purchase request is an online inquiry a consumer makes to receive a price quote for a specific vehicle from one of the dealers in our network. The CyberStore allows consumers to search for a pre-owned vehicle according to the price, make, model, color, year and location of the vehicle. The CyberStore locates and displays the descriptions, locations and actual photographs of all vehicles that satisfy the consumers' search parameters. According to CNW Marketing/Research, an independent research organization, United States consumers spent over $657 and $667 billion on new and pre-owned vehicles representing the sale of over 60.0 and 60.3 million vehicles in 1997 and 1998, respectively. Although automotive retailing attracts significant consumer dollars, we believe that consumers associate the traditional vehicle buying experience with high-pressure sales tactics. In the United States, new vehicles are traditionally sold through face-to-face, negotiated transactions at approximately 49,000 dealerships franchised by manufacturers. Approximately 40% of pre-owned vehicles are also sold through these dealerships. Our company was founded with the objective of significantly improving the purchasing process for consumers and dealers. 3 5 Since inception, we have successfully expanded our dealer network to over 2,700 dealers and have directed approximately 2.5 million purchase requests to our dealer network. During 1998, we directed over 1.3 million purchase requests to our dealers. The dealers in our network use our online information platform, the Dealer Real Time system. The Dealer Real Time system is an Internet-based communications platform that provides dealers with immediate purchase request information, the ability to track customers and purchase requests, and other value-added features, including automatic uploading of pre-owned vehicle inventory into our database. We believe that the Dealer Real Time system gives dealers a competitive advantage compared to delivering purchase requests by fax. We have developed strategic marketing, advertising, development and distribution affiliations with other companies, including: - Internet search engine providers, such as Excite, Inc., - cable service providers, such as MediaOne Interactive Services, Inc., - international automotive distributors, such as Inchcape Automotive Limited and Bilia AB, - Internet providers of vehicle pricing and specification information, such as Edmund's Publications Corp., Kelley Blue Book, Pace Publications, Inc. and IntelliChoice, Inc., and - financing and insurance providers, such as Chase Manhattan Automotive Finance Corporation, General Electric Capital Auto Financial Services, Inc. and New Hampshire Insurance Corporation, a member company of the American International Group. We have received indications of interest from existing and potential strategic investors, including companies with international automotive operations, for the purchase of up to 250,000 shares at the initial public offering price. We have entered into agreements with e-solutions, Inc., Intec, Inc. and Trans Cosmos, Inc. to provide for the organization and establishment of a joint venture in Japan and the license for the use of our name and systems. Following this offering, our executive officers and directors will beneficially own or control approximately 5,856,614 shares or 30% of the outstanding shares of our common stock. In addition, after this offering, our founders, Peter Ellis and John Bedrosian will beneficially own or control approximately 19% and 17%, respectively, of the outstanding shares of our common stock. If the underwriters' over-allotment option is exercised in full, our founders will beneficially own or control approximately 17% and 16%, respectively, of the outstanding shares of our common stock. We are a Delaware corporation incorporated on May 17, 1996. We were previously formed in Delaware in January 1995 as a limited liability company under the name Auto-By-Tel LLC. Our principal executive offices are located at 18872 MacArthur Boulevard, Irvine, California 92612-1400, and our telephone number is (949) 225-4500. Our Web site is located at www.autobytel.com. 4 6 THE OFFERING The information below is stated as of December 31, 1998. Investors should be aware that the aggregate number of shares of common stock to be outstanding after the offering does not include 2,859,340 shares subject to outstanding options and 773,133 shares subject to outstanding warrants. Common stock offered by Autobytel.com... 3,500,000 shares Common stock offered by the selling stockholders.......................... 1,000,000 shares Common stock to be outstanding after the offering.............................. 17,858,745 shares Use of proceeds......................... For working capital and general corporate purposes Nasdaq National Market symbol........... "ABTL"
SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) We have calculated pro forma net loss per share assuming the conversion on their date of issuance of the outstanding preferred stock into common stock. The as adjusted for the offering column reflects the receipt by Autobytel.com of the estimated net proceeds of $66.8 million from our sale of common stock offered in this offering.
INCEPTION (JANUARY 31, 1995) TO YEARS ENDED DECEMBER 31, DECEMBER 31, ----------------------------- 1995 1996 1997 1998 ------------ ------- -------- -------- STATEMENT OF OPERATION DATA: Revenues................................ $ 274 $ 5,025 $ 15,338 $ 23,826 ======= ======= ======== ======== Loss from operations.................... (1,030) (6,159) (17,415) (20,643) ------- ------- -------- -------- Net loss................................ $(1,030) $(6,035) $(16,810) $(19,398) ======= ======= ======== ======== Basic net loss per share................ $ (0.12) $ (0.73) $ (2.03) $ (2.30) ======= ======= ======== ======== Shares used in computing basic net loss per share............................. 8,250 8,252 8,291 8,423 Pro forma basic net loss per share...... $ (0.12) $ (0.68) $ (1.53) $ (1.49) ======= ======= ======== ======== Shares used in computing pro forma basic net loss per share.................... 8,250 8,849 10,967 13,008
DECEMBER 31, 1998 --------------------------- AS ADJUSTED ACTUAL FOR THE OFFERING -------- ---------------- BALANCE SHEET DATA: Cash and cash equivalents................................. $ 27,984 $ 94,768 Working capital........................................... 23,436 90,220 Total assets.............................................. 34,207 100,991 Accumulated deficit....................................... (43,273) (43,273) Stockholders' equity...................................... 25,868 92,652
5 7 RISK FACTORS You should read the following risk factors carefully before purchasing our common stock. WE HAVE A HISTORY OF NET LOSSES AND EXPECT NET LOSSES FOR THE FORESEEABLE FUTURE. IF WE CONTINUE TO LOSE MONEY, OUR OPERATIONS WILL NOT BE FINANCIALLY VIABLE. We were formed in January 1995 as Auto-By-Tel LLC, and first received revenues from operations in March 1995. We therefore have a limited operating history upon which you may evaluate our operations and future prospects. Because of the recent emergence of the Internet-based vehicle information and purchasing industry, none of our executives has significant experience in the industry. This limited operating history and management experience means it is difficult for us to predict future operating results. We have incurred losses every quarter since inception and expect to continue to incur losses for the foreseeable future. We had an accumulated deficit of $43.3 million and $23.9 million as of December 31, 1998 and 1997, respectively. Our potential for future profitability must be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies in the early stages of development, particularly companies in new and rapidly evolving markets, such as the market for Internet commerce. To achieve profitability, we must, among other things: - generate increased vehicle buyer traffic to our Web site, - continue to send new and pre-owned vehicle purchase requests to dealers that result in sufficient dealer transactions to justify our fees, - continue to expand the number of dealers in our network and enhance the quality of dealers, - respond to competitive developments, - increase our brand name visibility, - successfully introduce new services, - continue to attract, retain and motivate qualified personnel, and - continue to upgrade and enhance our technologies to accommodate expanded service offerings and increased consumer traffic. We cannot be certain that we will be successful in achieving these goals. IF OUR DEALER TURNOVER INCREASES, OUR DEALER NETWORK AND REVENUE DERIVED FROM THIS NETWORK MAY DECREASE. Substantially all of our revenues are derived from fees paid by our network of subscribing dealerships. If dealer turnover increases and we are unable to add new dealers to mitigate any turnover, our revenues will decrease as our network of dealers decreases. If the number of dealers in our network declines our revenues may decrease and our business, results of operations and financial condition will be materially and adversely affected. A material factor affecting dealer turnover is our ability to provide dealers with high quality purchase requests. High quality purchase requests are those that result in high closing ratios. All of our subscribing dealerships have entered into written marketing agreements with us having a stated term of one year or five years, but they are cancelable at the option of either party upon 30 days notice. We cannot assure that dealers will not terminate their agreements with us. Subscribing dealers may terminate their relationship with us for any reason, including an unwillingness to accept our subscription terms or in order to join alternative marketing programs. Our business is dependent upon our ability to 6 8 attract and retain qualified new and pre-owned vehicle dealers. During 1998, 556 subscribing dealers in the United States terminated their affiliation with us or were terminated by us. During 1998 we also added 1,323 subscribing dealers to our dealership network. In order for us to grow or maintain our dealer network, we may need to reduce dealer turnover. WE MAY LOSE SUBSCRIBING DEALERS IF WE RECONFIGURE DEALER TERRITORIES. IF WE LOSE DEALERS, WE WILL LOSE THE REVENUES ASSOCIATED WITH THOSE DEALERS. If the volume of purchase requests increases, we may need to reduce or reconfigure the exclusive territories currently assigned to dealerships in order to serve consumers more effectively. If a dealer is unwilling to accept a reduction or reconfiguration of its territory, it may terminate its relationship with us. The loss of dealers will cause a subsequent reduction in revenue unless we are able to mitigate this loss by adding new dealers or increasing the fees we receive from our other dealers. A dealer also could sue us to prevent such reduction or reconfiguration, or collect damages from us. We have experienced one such lawsuit -- for more details, see the section in this prospectus entitled "Business -- Litigation." A material decrease in the number of dealers subscribing to our network or litigation with dealers could have a material adverse effect on our business, results of operations and financial condition. WE RELY HEAVILY ON OUR PARTICIPATING DEALERS TO PROMOTE OUR BRAND VALUE BY PROVIDING HIGH QUALITY SERVICES TO OUR CONSUMERS. IF DEALERS DO NOT PROVIDE OUR CONSUMERS HIGH QUALITY SERVICES, OUR BRAND VALUE WILL DIMINISH AND THE NUMBER OF CONSUMERS WHO USE OUR SERVICES MAY DECLINE CAUSING A DECREASE IN OUR REVENUES. Promotion of our brand value depends on our ability to provide consumers a high quality experience for purchasing vehicles throughout the purchasing process. If our dealers do not provide consumers with high quality service, the value of our brand could be damaged and the number of consumers using our services may decrease. We devote significant efforts to train participating dealerships in practices that are intended to increase consumer satisfaction. Our inability to train dealers effectively, or the failure by participating dealers to adopt recommended practices, respond rapidly and professionally to vehicle inquiries, or sell and lease vehicles in accordance with our marketing strategies, could result in low consumer satisfaction, damage our brand name and could materially and adversely affect our business, results of operations and financial condition. OUR QUARTERLY FINANCIAL RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS WHICH MAY MAKE IT DIFFICULT FOR INVESTORS TO PREDICT OUR FUTURE PERFORMANCE. Our quarterly operating results may fluctuate due to many factors. Our expense levels are based in part on our expectations of future revenues which may vary significantly. We plan our business operations based on increased revenues and if our revenues do not increase faster than our expenses, our business, results of operations and financial condition will be materially and adversely affected. Other factors that may adversely affect our quarterly operating results include: - our ability to retain existing dealers, attract new dealers and maintain dealer and customer satisfaction, - the announcement or introduction of new or enhanced sites, services and products by us or our competitors, - general economic conditions and economic conditions specific to the Internet, online commerce or the automobile industry, 7 9 - a decline in the usage levels of online services and consumer acceptance of the Internet and commercial online services for the purchase of consumer products and services such as those offered by us, - our ability to upgrade and develop our systems and infrastructure and to attract new personnel in a timely and effective manner, - the level of traffic on our Web site and other sites that refer traffic to our Web site, - technical difficulties, system downtime or Internet brownouts, - the amount and timing of operating costs and capital expenditures relating to expansion of our business, operations and infrastructure, - governmental regulation, and - unforeseen events affecting the industry. SEASONALITY IS LIKELY TO CAUSE FLUCTUATIONS IN OUR OPERATING RESULTS. INVESTORS MAY NOT BE ABLE TO PREDICT OUR ANNUAL OPERATING RESULTS BASED ON A QUARTER TO QUARTER COMPARISON OF OUR OPERATING RESULTS. To date, our quarter to quarter growth in revenues have offset any effects due to seasonality. However, we expect our business to experience seasonality as it matures. If this occurs, investors may not be able to predict our annual operating results based on a quarter to quarter comparison of our operating results. Seasonality in the automotive industry, Internet and commercial online service usage and advertising expenditures is likely to cause fluctuations in our operating results and could have a material adverse effect on our business, operating results and financial condition. We anticipate that purchase requests will typically increase during the first and third quarters when new vehicle models are introduced and will typically decline during the second and fourth quarters. Internet and commercial online service usage and the growth rate of such usage typically declines during the summer. INTENSE COMPETITION COULD REDUCE OUR MARKET SHARE AND HARM OUR FINANCIAL PERFORMANCE. OUR MARKET IS COMPETITIVE NOT ONLY BECAUSE THE INTERNET HAS MINIMAL BARRIERS TO ENTRY, BUT ALSO BECAUSE WE COMPETE DIRECTLY WITH OTHER COMPANIES IN THE OFFLINE ENVIRONMENT. Our vehicle purchasing services compete against a variety of Internet and traditional vehicle purchasing services and automotive brokers. Therefore, we are affected by the competitive factors faced by both Internet commerce companies as well as traditional, offline companies within the automotive and automotive-related industries. The market for Internet-based commercial services is new, and competition among commercial Web sites is expected to increase significantly in the future. Our business is characterized by minimal barriers to entry, and new competitors can launch a competitive service at relatively low cost. To compete successfully as an Internet-based commercial entity, we must significantly increase awareness of our services and brand name. Failure to achieve these objectives will cause our revenues to decline and would have a material adverse effect on our business, results of operations and financial condition. We compete with other entities which maintain similar commercial Web sites including Autoweb.com, Cendant Membership Service, Inc.'s AutoVantage, Microsoft Corporation's Carpoint and Stoneage Corporation. Republic Industries, Inc., a large consolidator of dealers, has announced its intention to launch a Web site for marketing vehicles. We also compete indirectly against vehicle brokerage firms and affinity programs 8 10 offered by several companies, including Costco Wholesale Corporation and Wal-Mart Stores, Inc. In addition, all major vehicle manufacturers have their own Web sites and many have recently launched or announced plans to launch online buying services, such as General Motors Corporation's BuyPower. We also compete with vehicle insurers, lenders and lessors as well as other dealers that are not part of our network. Such companies may already maintain or may introduce Web sites which compete with ours. We believe that the principal competitive factors in the online market are: - brand recognition, - speed and quality of fulfillment, - variety of value-added services, - ease of use, - customer satisfaction, - quality of service, and - technical expertise. We cannot assure that we can compete successfully against current or future competitors, many of which have substantially more capital, existing brand recognition, resources and access to additional financing. In addition, competitive pressures may result in increased marketing costs, decreased Web site traffic or loss of market share or otherwise may materially and adversely affect our business, results of operations and financial condition. IF ANY OF OUR RELATIONSHIPS WITH INTERNET SEARCH ENGINES OR ONLINE AUTOMOTIVE INFORMATION PROVIDERS TERMINATES, OUR PURCHASE REQUEST VOLUME COULD DECLINE. IF OUR PURCHASE REQUEST VOLUME DECLINES, OUR PARTICIPATING DEALERS MAY NOT BE SATISFIED WITH OUR SERVICES AND MAY TERMINATE THEIR RELATIONSHIP WITH US OR FORCE US TO DECREASE THE FEES WE CHARGE FOR OUR SERVICE. IF THIS OCCURS, OUR REVENUES WOULD DECREASE. We depend on a number of strategic relationships to direct a substantial amount of purchase requests and traffic to our Web site. The termination of any of these relationships or any significant reduction in traffic to Web sites on which our services are advertised or offered, or the failure to develop additional referral sources, would cause our purchase request volume to decline. Since our dealers would be receiving fewer purchase requests, they may no longer be satisfied with our service and may terminate their relationships with us or force us to decrease the fees we charge for our services. If our dealers terminate their relationship with us or force us to decrease the fees we charge for our services, our revenues will decline which will have a material adverse effect on our business, results of operations and financial condition. We receive a significant number of purchase requests through a limited number of Internet search engines, such as Excite, and online automotive information providers, such as Edmund's and Kelley Blue Book. For example, in 1997 and 1998, approximately 49% and 34%, respectively, of our purchase requests came through Edmund's. We may not be able to maintain our relationship with Edmund's or other online service providers or find alternative, comparable marketing partners capable of originating significant numbers of purchase requests on terms satisfactory to us. In addition, we periodically negotiate revisions to existing agreements and these revisions could increase our costs in future periods. A number of our agreements with online service providers may be terminated without cause. Also, our agreement with Excite relating to our sponsorship of Netscape Communications Corporation's NetCenter Auto Channel is conditioned on Excite's NetCenter agreement with Netscape remaining in effect. The 9 11 NetCenter agreement between Excite and Netscape can be terminated in the event of a change in control which may be triggered if America Online's proposed acquisition of Netscape occurs. IF WE CAN NOT BUILD STRONG BRAND LOYALTY OUR BUSINESS MAY SUFFER. We believe that the importance of brand recognition will increase as more companies engage in commerce over the Internet. Development and awareness of the Autobytel.com brand will depend largely on our ability to obtain a leadership position in Internet commerce. If dealers do not perceive us as an effective channel for increasing vehicle sales, or consumers do not perceive us as offering reliable information concerning new and pre-owned vehicles, as well as referrals to high quality dealers, in a user-friendly manner that reduces the time spent for vehicle purchases, we will be unsuccessful in promoting and maintaining our brand. Our brand may not be able to gain widespread acceptance among consumers or dealers. Our failure to develop our brand sufficiently would have a material adverse effect on our business, results of operations and financial condition. IF WE LOSE OUR KEY PERSONNEL OR ARE UNABLE TO ATTRACT, TRAIN AND RETAIN ADDITIONAL HIGHLY QUALIFIED SALES AND MARKETING, MANAGERIAL AND TECHNICAL PERSONNEL, OUR BUSINESS MAY SUFFER. Our future success depends on our ability to identify, hire, train and retain highly qualified sales and marketing, managerial and technical personnel. In addition, as we introduce new services we will need to hire a significant number of personnel. Competition for such personnel is intense, and we may not be able to attract, assimilate or retain such personnel in the future. The inability to attract and retain the necessary managerial, technical and sales and marketing personnel could have a material adverse effect on our business, results of operations and financial condition. Our business and operations are substantially dependent on the performance of our executive officers and key employees, some of whom are employed on an at-will basis and all of whom have worked together for only a short period of time. We maintain "key person" life insurance in the amount of $3.0 million on the life of Mark W. Lorimer, our Chief Executive Officer and President. The loss of the services of Mr. Lorimer or Ann Marie Delligatta, Executive Vice President and Chief Operating Officer, or one or more of our other executive officers or key employees could have a material adverse effect on our business, results of operations and financial condition. WE ARE A NEW BUSINESS IN A NEW INDUSTRY AND NEED TO MANAGE OUR GROWTH AND OUR ENTRY INTO NEW BUSINESS AREAS IN ORDER TO AVOID INCREASED EXPENSES WITHOUT CORRESPONDING REVENUES. We are constantly expanding our operations and introducing new services to consumers and dealers in order to establish ourselves as a leader in the evolving market for Internet-based vehicle purchasing services. We also intend to enter into new foreign markets. The growth of our operations requires us to increase expenditures before we generate revenues. For example, we need to hire personnel to oversee the introduction of new services before we generate revenue from these services. Our inability to generate satisfactory revenues from such expanded services to offset costs could have a material adverse effect on our business, financial condition and results of operations. As of December 31, 1998, we had 180 employees, compared to 159 employees as of December 31, 1997, and 73 employees as of December 31, 1996. 10 12 We believe establishing industry leadership also requires us to: - test, introduce and develop new services and products, including enhancing our Web site, - expand the breadth of products and services offered, - expand our market presence through relationships with third parties, and - acquire new or complementary businesses, products or technologies. We cannot assure you that we can successfully manage these tasks. IF FEDERAL OR STATE FRANCHISE LAWS APPLY TO US WE MAY BE REQUIRED TO MODIFY OR ELIMINATE OUR MARKETING PROGRAMS. IF WE ARE UNABLE TO MARKET OUR SERVICES IN THE MANNER WE CURRENTLY DO OUR REVENUES MAY DECREASE AND OUR BUSINESS MAY SUFFER. We believe that neither our relationship with our dealers nor our dealer subscription agreements constitute "franchises" under federal or state franchise laws and that we are not subject to the coverage of state and motor vehicle dealer licensing laws. However, in the event that any state's regulatory requirements relating to franchises or our method of business impose additional requirements on us or include us within an industry-specific regulatory scheme, we may be required to modify our marketing programs in such states in a manner which undermines the program's attractiveness to consumers or dealers, we may become subject to fines or other penalties or if we determine that the licensing and related requirements are overly burdensome, we may elect to terminate operations in such state. In each case, our revenues may decline and our business, results of operations and financial condition could be materially and adversely affected. A Federal district court in Michigan has ruled that our dealer subscription agreement is not a "franchise" under Michigan law. However, if our relationship or written agreement with our dealers were found to be a "franchise" under federal or state franchise laws, then we could be subjected to other regulations, such as franchise disclosure and registration requirements and limitations on our ability to effect changes in our relationships with our dealers. We also believe that our dealer marketing service does not qualify as an automobile brokerage activity and therefore state broker licensing requirements do not apply to us. In response to Texas Department of Transportation concerns, we modified our marketing program in that state to include a pricing model under which all subscribing dealerships in Texas are charged uniform fees based on the population density of their particular geographic area and to make our program open to all dealerships who wish to apply. IF FINANCIAL BROKER AND INSURANCE LICENSING REQUIREMENTS APPLY TO US IN STATES WHERE WE ARE NOT CURRENTLY LICENSED, WE WILL BE REQUIRED TO OBTAIN ADDITIONAL LICENSES AND OUR BUSINESS MAY SUFFER. We currently hold financial broker licenses in the states of Florida, Indiana, Rhode Island and Wisconsin and have applied for renewals in the states of California and Colorado. If we are required to be licensed elsewhere, it may result in an expensive and time-consuming process that could divert the effort of management away from day-to-day operations. In the event other states require us to be licensed and we are unable to do so, or are otherwise unable to comply with regulations required by changes in current operations or the introduction of new services, we could be subject to fines or other penalties, and our business, results of operations and financial condition could be materially and adversely affected. 11 13 We provide a link on our Web site to an online insurance application program offered by the American International Group. We receive fees from a member company of the American International Group in connection with this advertising activity. We do not believe that this activity requires us to be licensed under state insurance laws. The use of the Internet in the marketing of insurance products, however, is a relatively new practice. It is not clear whether or to what extent; state insurance licensing laws apply to activities similar to ours. Given these uncertainties, we currently hold, through a wholly-owned subsidiary, insurance agent licenses in California, Indiana, Nebraska, New Jersey, and Utah. We have applied for insurance agent licenses in the remaining thirty-two states that issue corporate licensing and are awaiting approval. In the event other states require us to be licensed and we are unable to do so, or are otherwise unable to comply with regulations required by changes in current operations or the introduction of new services, we could be subject to fines or other penalties, and our business, results of operations and financial condition could be materially and adversely affected. INTERNET COMMERCE HAS YET TO ATTRACT SIGNIFICANT REGULATION. GOVERNMENT REGULATIONS MAY RESULT IN ADMINISTRATIVE MONETARY FINES, PENALTIES OR TAXES THAT MAY REDUCE OUR FUTURE EARNINGS. There are currently few laws or regulations that apply directly to the Internet. Because our business is dependent on the Internet, the adoption of new local, state, national or international laws or regulations may decrease the growth of Internet usage or the acceptance of Internet commerce which could, in turn, decrease the demand for our services and increase our costs or otherwise have a material adverse effect on our business, results of operations and financial condition. Tax authorities in a number of states are currently reviewing the appropriate tax treatment of companies engaged in Internet commerce. New state tax regulations may subject us to additional state sales, use and income taxes. EVOLVING GOVERNMENT REGULATIONS MAY REQUIRE FUTURE LICENSING WHICH COULD INCREASE ADMINISTRATIVE COSTS OR ADVERSELY AFFECT OUR REVENUES. In a regulatory climate that is uncertain, our operations may be subject to direct and indirect adoption, expansion or reinterpretation of various domestic and foreign laws and regulations. Compliance with these future laws and regulations may require us to obtain appropriate licenses at an undeterminable and possibly significant initial monetary and annual expense. These additional monetary expenditures may increase future overhead, thereby potentially reducing our future results of operations. We have identified what we believe are the areas of domestic government regulation, which if changed, would be costly to us. These laws and regulations include franchise laws; motor vehicle brokerage licensing laws; insurance licensing laws; and motor vehicle dealership licensing laws, which may be applicable to aspects of our business. There could be laws and regulations applicable to our business which we have not identified or which, if changed, may be costly to us. The introduction of new services and expansion of our operations to foreign countries may require us to comply with additional, yet undetermined, laws and regulations. Compliance may require obtaining appropriate business licenses, filing of bonds, appointment of foreign agents and periodic business reporting activity. The failure to adequately comply with these future laws and regulations may delay or possibly prevent some of our products or services from being offered in a particular foreign country, thereby having an adverse affect on our results of operations. 12 14 OUR SUCCESS IS DEPENDENT ON OUR KEEPING PACE WITH ADVANCES IN TECHNOLOGY. IF WE ARE UNABLE TO KEEP PACE WITH ADVANCES IN TECHNOLOGY, CONSUMERS MAY STOP USING OUR SERVICES AND OUR REVENUES WILL DECREASE. The Internet and electronic commerce markets are characterized by rapid technological change, changes in user and customer requirements, frequent new service and product introductions embodying new technologies and the emergence of new industry standards and practices that could render our existing Web site and technology obsolete. If we are unable to adapt to changing technologies, our business, results of operations and financial condition could be materially and adversely affected. Our performance will depend, in part, on our ability to continue to enhance our existing services, develop new technology that addresses the increasingly sophisticated and varied needs of our prospective customers, license leading technologies and respond to technological advances and emerging industry standards and practices on a timely and cost-effective basis. The development of our Web site, Dealer Real Time system and other proprietary technology entails significant technical and business risks. We may not be successful in using new technologies effectively or adapting our Web site, Dealer Real Time system, or other proprietary technology to customer requirements or to emerging industry standards. WE ARE VULNERABLE TO COMMUNICATIONS SYSTEM INTERRUPTIONS BECAUSE ALL OF OUR PRIMARY SERVERS ARE LOCATED IN A SINGLE LOCATION. IF COMMUNICATIONS TO THAT LOCATION WERE INTERRUPTED, OUR OPERATIONS COULD BE ADVERSELY AFFECTED. We host our Web site and Dealer Real Time system at our corporate headquarters in Irvine, California. Although we maintain redundant local offsite backup servers, all of our primary servers are located at our corporate headquarters and are vulnerable to interruption by damage from fire, earthquake, flood, power loss, telecommunications failure, break-ins and other events beyond our control. In the event that we experience significant system disruptions, our business, results of operations and financial condition would be materially and adversely affected. We have, from time to time, experienced periodic systems interruptions and anticipate that such interruptions will occur in the future. We maintain business interruption insurance which pays up to $6 million for the actual loss of business income sustained due to the suspension of operations as a result of direct physical loss of or damage to property at our offices. However, in the event of a prolonged interruption, this business interruption insurance may not be sufficient to fully compensate us for the resulting losses. INTERNET COMMERCE IS NEW AND EVOLVING WITH FEW PROFITABLE BUSINESS MODELS. WE CANNOT ASSURE THAT OUR BUSINESS MODEL WILL BE PROFITABLE. The market for Internet-based purchasing services has only recently begun to develop and is rapidly evolving. While many Internet commerce companies have grown in terms of revenue, few are profitable. We can not assure that we will be profitable. As is typical for a new and rapidly evolving industry, demand and market acceptance for recently introduced services and products over the Internet are subject to a high level of uncertainty and there are few proven services and products. Moreover, since the market for our services is new and evolving, it is difficult to predict the future growth rate, if any, and size of this market. IF CONSUMERS DO NOT ADOPT INTERNET COMMERCE AS A MAINSTREAM MEDIUM OF COMMERCE, OUR REVENUES MAY NOT GROW AND OUR EARNINGS MAY SUFFER. The success of our services will depend upon the adoption of the Internet by consumers and dealers as a mainstream medium for commerce. While we believe that our services offer significant advantages to consumers and dealers, there can be no assurance 13 15 that widespread acceptance of Internet commerce in general, or of our services in particular, will occur. Our success assumes that consumers and dealers who have historically relied upon traditional means of commerce to purchase or lease vehicles, and to procure vehicle financing and insurance, will accept new methods of conducting business and exchanging information. In addition, dealers must be persuaded to adopt new selling models and be trained to use and invest in developing technologies. Moreover, critical issues concerning the commercial use of the Internet, such as, ease of access, security, reliability, cost, and quality of service, remain unresolved and may impact the growth of Internet use. If the market for Internet-based vehicle marketing services fails to develop, develops slower than expected or becomes saturated with competitors, or if our services do not achieve market acceptance, our business, results of operations and financial condition will be materially and adversely affected. THE PUBLIC MARKET FOR OUR COMMON STOCK MAY BE VOLATILE, ESPECIALLY SINCE MARKET PRICES FOR INTERNET-RELATED AND TECHNOLOGY STOCKS HAVE OFTEN BEEN UNRELATED TO OPERATING PERFORMANCE. Prior to this offering, there has been no public market for our common stock. We cannot assure that an active trading market will develop or be sustained or that the market price of the common stock will not decline. Even if an active trading market does develop, the market price of the common stock is likely to be highly volatile and could be subject to wide fluctuations in response to factors such as: - actual or anticipated variations in our quarterly operating results, - announcements of new product or service offerings, - technological innovations, - competitive developments, - changes in financial estimates by securities analysts, - conditions and trends in the Internet and electronic commerce industries, - adoption of new accounting standards affecting the automotive industry, and - general market conditions and other factors. Further, the stock markets, and in particular the Nasdaq National Market, have experienced extreme price and volume fluctuations that have particularly affected the market prices of equity securities of many technology companies and have often been unrelated or disproportionate to the operating performance of such companies. The trading prices of many technology companies' stocks are at or near historical highs. We cannot assure that such high trading prices will be sustained. These broad market factors may adversely affect the market price of our common stock. In addition, general economic, political and market conditions such as recessions, interest rates or international currency fluctuations, may adversely affect the market price of the common stock. In the past, following periods of volatility in the market price of a company's securities, securities class action litigation has often been instituted against companies with publicly traded securities. Such litigation, if instituted, could result in substantial costs and a diversion of management's attention and resources, which would have a material adverse effect on our business, results of operations and financial condition. WE FACE UNCERTAINTIES WITH CHANGING LEGISLATION IN THE AUTOMOTIVE INDUSTRY WHICH COULD REQUIRE INCREASED REGULATORY AND LOBBYING COSTS AND MAY HARM OUR BUSINESS. Our purchasing service may result in changing the way vehicles are sold which may be viewed as threatening by new and pre-owned vehicle dealers who do not subscribe to 14 16 the Autobytel.com program. Such businesses are often represented by influential lobbying organizations, and such organizations or other persons may propose legislation which could impact the evolving marketing and distribution model which our service promotes. Should current laws be changed or new laws passed, our business, results of operations and financial condition could be materially and adversely affected. As we introduce new services, we may need to comply with additional licensing regulations and regulatory requirements. To date, we have not spent significant resources on lobbying or related government affairs issues but we may need to do so in the future. A significant increase in the amount we spend on lobbying or related activities would have a material adverse effect on our results of operations and financial condition. OUR INTERNATIONAL EXPANSION MAY REQUIRE US TO COMPLY WITH BURDENSOME REGULATORY, TARIFF AND LICENSING REQUIREMENTS. OUR NEED TO COMPLY WITH BURDENSOME GOVERNMENTAL REQUIREMENTS MAY ADVERSELY AFFECT OUR ABILITY TO GROW OUR BUSINESS. We intend to expand our new vehicle purchasing service to foreign markets through licensing our technology, business processes and tradenames and by establishing relationships with vehicle dealers and strategic partners located in foreign markets. By expanding our operations to various other countries, we may become subject to laws or treaties that regulate the marketing, distribution and sale of motor vehicles. We will need to spend our resources to determine whether the laws of the countries in which we seek to operate require us to modify, or prohibit the use of, our Autobytel.com system. In addition, the laws of other countries may impose licensing, bonding or similar requirements on us as a condition to doing business in these countries. WE HAVE LIMITED EXPERIENCE IN PROVIDING OUR INTERNET-BASED MARKETING SERVICE ABROAD. WE MAY NOT BE SUCCESSFUL IN ESTABLISHING OUR BUSINESS ABROAD WHICH MAY LIMIT OUR FUTURE GROWTH. We have had limited experience in providing our Internet-based marketing service abroad and we cannot be certain that we will be successful in introducing or marketing our services abroad. In addition, there are risks inherent in conducting business in international markets, such as: - changes in political conditions, - regulatory requirements, - potentially weaker intellectual property protections, - tariffs and other trade barriers, fluctuations in currency exchange rates, potentially adverse tax consequences, - difficulties in managing or overseeing foreign operations, and - educating consumers and dealers who may be unfamiliar with the benefits of online marketing and commerce. One or more of such factors may have a material adverse effect on our current or future international operations and, consequently, on our business, results of operations and financial condition. 15 17 OUR COMPUTER INFRASTRUCTURE MAY BE VULNERABLE TO SECURITY BREACHES. ANY SUCH PROBLEMS COULD JEOPARDIZE CONFIDENTIAL INFORMATION TRANSMITTED OVER THE INTERNET, CAUSE INTERRUPTIONS IN OUR OPERATIONS OR CAUSE US TO HAVE LIABILITY TO THIRD PERSONS. Our computer infrastructure is potentially vulnerable to physical or electronic computer break-ins, viruses and similar disruptive problems and security breaches. Any such problems or security breach could cause us to have liability to one or more third parties and disrupt all or part of our operations. Any of these events would have a material adverse effect on our business, results of operations and financial condition. A party who is able to circumvent our security measures could misappropriate proprietary information, jeopardize the confidential nature of information transmitted over the Internet or cause interruptions in our operations. Concerns over the security of Internet transactions and the privacy of users could also inhibit the growth of the Internet in general, particularly as a means of conducting commercial transactions. To the extent that our activities or those of third party contractors involve the storage and transmission of proprietary information such as personal financial information, security breaches could expose us to a risk of financial loss, litigation and other liabilities. Our insurance does not currently protect against such losses. WE DEPEND ON CONTINUED TECHNOLOGICAL IMPROVEMENTS IN OUR SYSTEMS AND IN THE INTERNET OVERALL. IF WE ARE UNABLE TO HANDLE AN UNEXPECTEDLY LARGE INCREASE IN VOLUME OF CONSUMERS USING OUR WEB SITE, WE CANNOT ASSURE OUR CONSUMERS OR DEALERS THAT PURCHASE REQUESTS WILL BE EFFICIENTLY PROCESSED AND OUR BUSINESS MAY SUFFER. If the Internet continues to experience significant growth in the number of users and the level of use, then the Internet infrastructure may not be able to continue to support the demands placed on it by such potential growth. The Internet may not prove to be a viable commercial medium because of inadequate development of the necessary infrastructure, timely development of complementary products such as high speed modems, delays in the development or adoption of new standards and protocols required to handle increased levels of Internet activity or increased government regulation. An unexpectedly large increase in the volume or pace of traffic on our Web site or the number of orders placed by customers may require us to expand and further upgrade our technology, transaction-processing systems and network infrastructure. We may not be able to accurately project the rate or timing of increases, if any, in the use of our Web site or expand and upgrade our systems and infrastructure to accommodate such increases. In addition, we cannot assure that our dealers will efficiently process purchase requests. WE HAVE NO SPECIFIC PLAN FOR THE PROCEEDS OF THE OFFERING AND OUR MANAGEMENT MAY ALLOCATE OUR PORTION OF THE PROCEEDS TO USES THAT COULD ADVERSELY AFFECT OUR STOCKHOLDERS. We currently have no specific plans for the net proceeds of the offering. As a consequence, our management will have the discretion to allocate this portion of the net proceeds of this offering to uses that the stockholders may not deem desirable. We may not be able to invest these proceeds to yield a significant return. Substantially all of the proceeds of the offering will be invested in short-term, interest-bearing, investment grade securities for an indefinite period of time. 16 18 OUR BUSINESS COULD BE INTERRUPTED BY YEAR 2000 PROBLEMS IF OUR VENDORS, CONSUMERS OR DEALERS ARE UNABLE TO CONVERT THEIR SYSTEMS. THEIR FAILURE TO CONVERT THEIR SYSTEMS MAY AFFECT THE ABILITY OF OUR CONSUMERS AND DEALERS TO ACCESS OUR WEB SITE OR THE DEALER REAL TIME SYSTEM. OUR BUSINESS WOULD SUFFER IF SUCH FAILURE PREVENTED ACCESS TO OUR ONLINE SYSTEMS. Because many computer applications have been written using two digits rather than four to define the applicable year, date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This "Year 2000 issue" could result in system failures or miscalculations causing disruptions of operations, including disruptions of our Web site, the Dealer Real Time system or normal business activities. We cannot predict the extent to which the Year 2000 issue will affect our vendors, consumers or dealers, or the extent to which we would be vulnerable if such parties fail to resolve any Year 2000 issues on a timely basis. The failure of such parties to convert their systems on a timely basis or effect a conversion that is compatible with our systems in order to avoid any Year 2000 issues could have a material adverse effect on us. In addition, to the extent our customers are unable to access our Web site or dealers are unable to access the Dealer Real Time system, such failures would have a material adverse effect on our business, results of operations, or financial condition. The worst-case scenario related to the Year 2000 issue would be an overall failure of the national Internet and telecommunications infrastructure. If this failure were to prevent users and dealers from accessing the Internet, we would attempt to provide alternative means to allow users to connect to our servers. Any national disruption to the telecommunications systems used by our business will have a material adverse effect on our business, results of operations, or financial condition. MISAPPROPRIATION OF OUR INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS COULD IMPAIR OUR COMPETITIVE POSITION. Our ability to compete depends upon our proprietary systems and technology. While we rely on trademark, trade secret and copyright law, confidentiality agreements and technical measures to protect our proprietary rights, we believe that the technical and creative skills of our personnel, continued development of our proprietary systems and technology, brand name recognition and reliable Web site maintenance are more essential in establishing and maintaining a leadership position and strengthening our brand. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our services or to obtain and use information that we regard as proprietary. Policing unauthorized use of our proprietary rights is difficult. We cannot assure that the steps taken by us will prevent misappropriation of technology or that the agreements entered into for that purpose will be enforceable. Misappropriation of our intellectual property or potential litigation would have a material adverse effect on our business, results of operations and financial condition. Effective trademark, service mark, copyright and trade secret protection may not be available in every country in which our products and services are made available online. In addition, litigation may be necessary in the future to enforce or protect our intellectual property rights or to defend against claims or infringement or invalidity. As part of our confidentiality procedures, we generally enter into agreements with our employees and consultants and limit access to our trade secrets and technology. 17 19 OUR FOUNDERS, OFFICERS AND DIRECTORS AND THEIR AFFILIATES HAVE SUBSTANTIAL CONTROL OF OUR VOTING STOCK AND HAVE THE ABILITY TO MAKE DECISIONS THAT COULD ADVERSELY AFFECT STOCKHOLDERS. SUCH DECISIONS COULD ADVERSELY AFFECT OUR STOCK PRICE. The control of a large amount of our stock by insiders could have an adverse effect on the market price of our common stock. Following this offering, our executive officers and directors will beneficially own or control approximately 5,856,614 shares or 30% of the outstanding shares of our common stock. In addition, after this offering, our founders, Peter Ellis and John Bedrosian will beneficially own or control approximately 19% and 17%, respectively, of the outstanding shares of our common stock. If the underwriters' over-allotment option is exercised in full, our founders will beneficially own or control approximately 17% and 16%, respectively, of the outstanding shares of our common stock. Our officers, directors, founders and their affiliates, assuming they vote together, will have the ability to control the election of our board of directors and the outcome of corporate actions requiring stockholder approval, including mergers and other changes of corporate control, going private transactions and other extraordinary transactions. SUBSTANTIAL SALES OR THE PERCEPTION OF FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE. SINCE THE MARKET PRICES FOR INTERNET-RELATED STOCKS ARE LIKELY TO REMAIN VOLATILE, OUR STOCK PRICE MAY BE MORE ADVERSELY AFFECTED THAN OTHER COMPANIES BY SUCH FUTURE SALES. Sale of substantial numbers of shares of common stock in the public market could adversely affect the market price of our common stock and make it more difficult for us to raise funds through equity offerings in the future. A substantial number of outstanding shares of common stock and shares of common stock issuable upon exercise of outstanding stock options will become available for resale in the public market at prescribed times. Of the 17,858,745 shares to be outstanding after the offering, the 4,500,000 shares offered hereby will be eligible for immediate sale in the public market without restriction. Other outstanding shares of common stock are restricted by 180-day lock-up agreements with the underwriters, and 6,590,112 shares held by the selling stockholders are restricted by 270-day lock-up agreements with the underwriters. Upon the expiration of these lock-up agreements, such shares of common stock will become eligible for sale in the public market in accordance with the provisions of Rules 144 and 701 under the Securities Act and any contractual restrictions on their transfer, as applicable. BT Alex. Brown Incorporated may, in its sole discretion and at any time without notice, release all or any portion of the shares subject to lock-up agreements. Upon completion of the offering, the holders of approximately 12,997,957 shares of common stock will be entitled to certain registration rights with respect to such shares until such time as the holders of such common stock may sell such shares under Rule 144 of the Securities Act. In addition, we intend to register the shares of common stock reserved for issuance under our 1996 Stock Option Plan, 1996 Stock Incentive Plan, 1996 Employee Stock Purchase Plan, 1998 Stock Option Plan and 1999 Stock Option Plan after the offering. WE ARE UNCERTAIN OF OUR ABILITY TO OBTAIN ADDITIONAL FINANCING FOR OUR FUTURE CAPITAL NEEDS. IF WE ARE UNABLE TO OBTAIN ADDITIONAL FINANCING WE MAY NOT BE ABLE TO CONTINUE TO OPERATE OUR BUSINESS. We currently anticipate that the net proceeds of this offering that we will receive, together with our cash, cash equivalents and short-term investments, will be sufficient to meet our anticipated needs for working capital and other cash requirements for at least twelve months following the effective date of this prospectus. We may need to raise 18 20 additional funds sooner, however, in order to fund more rapid expansion, to develop new or enhance existing services or products, to respond to competitive pressures or to acquire complementary products, businesses or technologies. There can be no assurance that additional financing will be available on terms favorable to us, or at all. If adequate funds are not available or are not available on acceptable terms, our ability to fund our expansion, take advantage of potential acquisition opportunities, develop or enhance services or products or respond to competitive pressures would be significantly limited. Such limitation could have a material adverse effect on our business, results of operations, financial condition and prospects. OUR CERTIFICATE OF INCORPORATION AND BYLAWS AND DELAWARE LAW CONTAIN PROVISIONS THAT COULD DISCOURAGE A THIRD PARTY FROM ACQUIRING US OR LIMIT THE PRICE THIRD PARTIES ARE WILLING TO PAY FOR OUR STOCK. Provisions of our amended and restated certificate of incorporation and bylaws relating to our corporate governance could make it difficult for a third party to acquire us, and could discourage a third party from attempting to acquire control of us. These provisions allow us to issue preferred stock with rights senior to those of the common stock without any further vote or action by the stockholders. These provisions, effective upon the closing of this offering, provide that the board of directors will be divided into three classes, which may have the effect of delaying or preventing changes in control or change in our management because less than a majority of the board of directors are up for election at each annual meeting. In addition, these provisions impose various procedural and other requirements which could make it more difficult for stockholders to effect certain corporate actions. Such charter provisions could limit the price that certain investors might be willing to pay in the future for shares of our common stock and may have the effect of delaying or preventing a change in control. The issuance of preferred stock also could decrease the amount of earnings and assets available for distribution to the holders of common stock or could adversely affect the rights and powers, including voting rights, of the holders of the common stock. We are also subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law. In general, the statute prohibits a publicly held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. For purposes of Section 203, a "business combination" includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder, and an "interested stockholder" is a person who, together with affiliates and associates, owns or did own 15% or more of the corporation's voting stock. OUR ACTUAL RESULTS COULD DIFFER FROM FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS. This prospectus contains forward-looking statements based on current expectations which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors, including the risk factors set forth above and elsewhere in this prospectus. The cautionary statements made in this prospectus should be read as being applicable to all forward-looking statements wherever they appear in this prospectus. 19 21 USE OF PROCEEDS We estimate that the proceeds from the sale by us of the 3.5 million shares of common stock offered in this offering at an assumed initial public offering price of $21.00 per share, after deducting estimated underwriting discounts and estimated offering expenses, will be approximately $66.8 million. The selling stockholders will receive $19.5 million from the sale of one million shares of common stock, after deducting estimated underwriting discounts, and an additional $12.5 million if the underwriters' over-allotment option is exercised in full. We will not receive any proceeds from the sale of common stock by the selling stockholders. We intend to use all of the net proceeds from the offering for general corporate purposes, which may include online and traditional advertising programs designed to strengthen the Autobytel.com brand name, information technology investments to support and further develop our Web site and Dealer Real Time system and new products and services. We may use a portion of the proceeds from the offering for possible acquisitions of or investments in businesses and the introduction of products or technologies that expand, complement or are otherwise related to our current or planned services. We have no current plans, agreements or commitments with respect to any such transaction, and we are not currently engaged in any negotiations with respect to any such transaction. Pending such uses, we will invest the proceeds in short-term, investment grade, interest-bearing securities. DIVIDEND POLICY We have never declared or paid cash dividends on our common stock. We intend to retain all of our future earnings, if any, for use in our business, and therefore we do not expect to pay any cash dividends on our common stock in the foreseeable future. 20 22 CAPITALIZATION The following table sets forth the actual capitalization of Autobytel.com derived from our audited financial statements as of December 31, 1998. The as adjusted capitalization of Autobytel.com as of December 31, 1998 set forth in the following table reflects the conversion of all outstanding shares of preferred stock into 5,852,290 shares of common stock and the sale by us of 3,500,000 shares of common stock pursuant to the offering at an assumed public offering price of $21.00 net of estimated underwriting discounts and offering expenses. The capitalization information set forth in the table below is qualified by the more detailed consolidated financial statements and related notes included elsewhere in this prospectus and should be read in conjunction with such consolidated financial statements and related notes. Our stated number of common shares outstanding does not include 2,859,340 shares of common stock issuable upon exercise of options at a weighted average exercise price of $10.87 per share and 773,133 shares of common stock issuable upon exercise of warrants outstanding at a weighted average exercise price of $13.12 per share.
DECEMBER 31, 1998 -------------------------- AS ACTUAL ADJUSTED -------------- -------- (IN THOUSANDS) Cash and cash equivalents............................. $ 27,984 $ 94,768 ======== ======== Stockholders' equity: Convertible preferred stock, $0.001 par value; 11,445,187 shares authorized, 7,436,653 shares issued and outstanding, actual; 11,445,187 shares authorized, no shares issued and outstanding, as adjusted............................................ 7 -- Common stock, $0.001 par value; 50,000,000 shares authorized, 8,506,455 shares issued and outstanding, actual; 50,000,000 shares authorized, 17,858,745 shares issued and outstanding, as adjusted.......... 8 18 Warrants.............................................. 1,332 1,332 Additional paid-in capital............................ 67,813 134,594 Cumulative translation adjustment..................... (19) (19) Accumulated deficit................................... (43,273) (43,273) -------- -------- Total stockholders' equity............................ 25,868 92,652 ======== ======== Total capitalization.................................. $ 25,868 $ 92,652 ======== ========
21 23 DILUTION The pro forma net tangible book value of Autobytel.com as of December 31, 1998 was $25.8 million or $1.80 per share of common stock. Pro forma net tangible book value per share is equal to Autobytel.com's total tangible assets less its total liabilities, divided by the number of shares of common stock outstanding on a pro forma basis after giving effect to the conversion of the preferred stock into 5,852,290 shares of common stock concurrent with the closing of the offering. After giving effect to the sale of shares of common stock offered in this offering at an assumed initial public offering price of $21.00 and the receipt by Autobytel.com of the estimated net proceeds from such sale, after deducting estimated underwriting discounts and offering expenses, the pro forma net tangible book value of Autobytel.com at December 31, 1998 would have been $92.6 million, or $5.19 per share. This represents an immediate increase in pro forma net tangible book value of $3.39 per share to existing stockholders and an immediate dilution of $15.81 per share to new investors. The following table illustrates this per share dilution: Assumed initial public offering price per share............. $21.00 Pro forma net tangible book value per share before the offering.................................................. $ 1.80 Increase per share attributable to purchases of common stock offered in this offering.................................. 3.39 ------ Pro forma net tangible book value per share after the offering.................................................. 5.19 Dilution per share to purchasers of common stock offered in this offering............................................. $15.81 ======
The following table summarizes, as of December 31, 1998, the number of shares of common stock purchased from Autobytel.com, the total consideration paid to Autobytel.com and the average price per share paid by existing stockholders and by the investors purchasing shares of common stock in this offering, before deducting estimated underwriting discounts and estimated offering expenses at an assumed public offering price of $21.00 per share:
AVERAGE SHARES PURCHASED TOTAL CONSIDERATION PRICE -------------------- ---------------------- PER NUMBER PERCENT AMOUNT PERCENT SHARE ---------- ------- ------------ ------- --------- Existing stockholders........... 14,358,745 80.4 $ 68,033,000 48.1 $ 4.74 New investors................... 3,500,000 19.6 73,500,000 51.9 21.00 ---------- ----- ------------ ----- ------ Total......................... 17,858,745 100.0 $141,533,000 100.0 $ 7.93 ========== ===== ============ ===== ======
22 24 SELECTED CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) The following selected consolidated financial data should be read in conjunction with our consolidated financial statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing elsewhere in this prospectus. The statement of operations data for the period from inception (January 31, 1995) to December 31, 1995, the years ended December 31, 1996, 1997 and 1998 and the balance sheet data as of December 31, 1995, 1996, 1997 and 1998 are derived from our consolidated financial statements which have been audited by Arthur Andersen LLP, independent auditors, and are included elsewhere in this prospectus. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." We have calculated pro forma basic net loss per share assuming the conversion of the outstanding preferred stock on their issue date into common stock. The general and administrative expenses include a non-recurring $1.1 million charge associated with a proposed initial public offering that was withdrawn in April 1997.
INCEPTION (JANUARY 31, 1995) TO YEARS ENDED DECEMBER 31, DECEMBER 31, ------------------------------- 1995 1996 1997 1998 ------------- ------- -------- -------- STATEMENT OF OPERATIONS DATA: Revenues........................................... $ 274 $ 5,025 $ 15,338 $ 23,826 ------- ------- -------- -------- Operating expenses: Sales and marketing.............................. 930 7,790 21,454 30,033 Product and technology development............... 99 1,753 5,448 8,528 General and administrative....................... 275 1,641 5,851 5,908 ------- ------- -------- -------- Total operating expenses...................... 1,304 11,184 32,753 44,469 ------- ------- -------- -------- Loss from operations............................. (1,030) (6,159) (17,415) (20,643) Other income, net................................ -- 124 620 1,280 ------- ------- -------- -------- Loss before provision for income taxes........... (1,030) (6,035) (16,795) (19,363) Provision for income taxes....................... -- -- 15 35 ------- ------- -------- -------- Net loss......................................... $(1,030) $(6,035) $(16,810) $(19,398) ======= ======= ======== ======== Basic net loss per share........................... $ (0.12) $ (0.73) $ (2.03) $ (2.30) ======= ======= ======== ======== Shares used in computing basic net loss per share............................................ 8,250 8,252 8,291 8,423 Pro forma basic net loss per share................. $ (0.12) $ (0.68) $ (1.53) $ (1.49) ======= ======= ======== ======== Shares used in computing pro forma basic net loss per share........................................ 8,250 8,849 10,967 13,008
DECEMBER 31, 1998 DECEMBER 31, --------------------------------------------- AS ADJUSTED 1995 1996 1997 1998 FOR THE OFFERING ------- ------- -------- -------------- ---------------- BALANCE SHEET DATA: Cash and cash equivalents.................. $ 48 $ 9,062 $ 15,813 $ 27,984 $ 94,768 Working capital............................ (1,099) 5,977 10,938 23,436 90,220 Total assets............................... 285 12,298 20,513 34,207 100,991 Accumulated deficit........................ (1,030) (7,065) (23,875) (43,273) (43,273) Stockholders' equity (deficit)............. (990) 7,996 13,259 25,868 92,652
23 25 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of the results of operations and financial condition of Autobytel.com should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this prospectus. This discussion contains forward-looking statements based on current expectations that involve risks and uncertainties. Actual results and the timing of certain events may differ significantly from those projected in such forward-looking statements due to a number of factors, including those set forth in the section entitled "Risk Factors" and elsewhere in this prospectus. OVERVIEW We are a leading, branded Internet site for new and pre-owned vehicle information and purchasing services connecting consumers to our network of 2,718 participating dealers, as of December 31, 1998, in the United States and Canada. Through our Web site, www.autobytel.com, consumers can research pricing, specifications and other information regarding new and pre-owned vehicles. When consumers indicate they are ready to buy, they can be connected to Autobytel.com's dealer network. In addition, we are continuing to develop ancillary programs for consumers such as financing, insurance and warranty services. We introduced our new vehicle marketing service in 1995, and in 1997 commenced our CyberStore program. Our revenues have increased from $274,000 in 1995 to $23.8 million in 1998. We derive substantially all of our revenues from fees paid by subscribing dealers, and we expect to be primarily dependent on our dealer network for revenues in the foreseeable future. Dealers using our services pay an initial subscription fee, as well as ongoing monthly fees based on the aggregation and transmittal to them of purchase requests and through fiscal 1997, an annual fee. In January 1998, Autobytel.com started to eliminate annual fees and increase monthly fees to subscribing dealers. Average monthly program fees per dealer were $947, $785 and $557 in 1998, 1997 and 1996, respectively. We also derive some revenue on a per transaction basis by facilitating transactions between consumers and other third parties, primarily lenders and insurance companies. We reserve the right to raise our fees to dealers after 30 days notice. Since the end of January 1999 and on a going forward basis we are converting our dealers to new contracts with one year terms. Initial subscription fees from dealers are recognized ratably over the first twelve months of each dealer's contract in order to match the costs of integrating and training dealers with revenues earned. Amortized revenues from initial subscription fees were $2.4 million, $3.8 million and $2.2 million in 1998, 1997 and 1996, respectively. We anticipate that our initial subscription fee amortization revenue will decline as a percentage of total revenue over time as monthly fee revenues continue to grow. As our dealer network grows in absolute terms, the number of new dealers added as a percentage of total dealers is growing at a slower pace. Therefore, initial subscription fee revenue is declining as a percentage of total revenue while monthly fee revenues are growing. Monthly fees are recognized in the period the service is provided. Monthly fee revenues were $18.2 million, $8.5 million, and $2.6 million in 1998, 1997 and 1996, respectively. Annual fees are recognized ratably over twelve months. Amortized revenues from annual fees were $2.3 million, $1.1 million and $103,000 in 1998, 1997 and 1996, respectively. Annual fee revenue will decline in 1999 because we discontinued the practice of charging annual fees in late 1998. From October 1996 to February 1998, our revenues also included revenues from sales of personal computers to our dealers, a practice we discontinued in the first quarter of 1998. Our financial statements include revenues 24 26 derived from computer equipment sales of $197,000 in 1998, $1.5 million in 1997, and $147,000 in 1996. Excluding these revenues, our revenues would have been $23.6 million, $13.8 million and $4.9 million in 1998, 1997 and 1996, respectively. Although we do not derive any direct revenue from the volume of purchase requests, we believe our ability to increase the number of subscribing dealers and the amount of fees paid by dealers is related to the volume of purchase requests routed through our Web site. Vehicle purchase requests routed through our online system increased from approximately 345,000 in 1996 to approximately 761,000 in 1997, an increase of 121%, and to 1.3 million in 1998, an increase of 71% over the previous year. Since inception we have directed approximately 2.5 million purchase requests to dealers. We believe that our revenue growth has been and will continue to be primarily dependent on our ability to continue to drive a significant number of purchase requests to our dealer network, increase the number of dealers and increase the average fees paid by each dealer. Since inception, our dealer network has expanded in each quarter and as of December 31, 1998 there were 2,718 dealers. Of these dealers, 2,386 dealers, or 88% pay for our service and we call them core dealers. The remaining 332 dealers, or 12% do not pay for our service and we call them non-core dealers. Our non-core dealers are generally associated with lower volume vehicle manufacturers such as Jaguar or Suzuki or are located in remote, low volume territories and receive purchase request referrals without paying fees to us. We enter into agreements with non-core dealers to ensure the broadest geographic coverage possible for every make of vehicle. These agreements also allow us to increase consumer satisfaction by offering a complete selection of vehicle dealers throughout North America. However, our costs incurred from non-core dealers are not offset by revenues. Although the net number of our dealers in the United States increased by 51% during 1998, 556 of our dealers were terminated or canceled during the same period. We believe that the principal reasons for the dealer terminations were due to our enforcement of our dealer network agreements and the cancellation of our fax delivery of purchase requests in conjunction with the implementation of the Dealer Real Time system. Our inability or failure to reduce dealer turnover could have a material adverse effect on our business, results of operations and financial condition. Because our primary revenue source is from program fees, our business model is significantly different from many existing Internet commerce sites. The automobiles requested through our site are sold by individual dealers; therefore we derive no direct revenue from the sale of a vehicle and have no significant cost of goods sold, no procurement, carrying or shipping costs and no inventory risk. The only cost of goods sold incurred by us since our inception was the cost of computer equipment sold to dealers. We discontinued selling computer equipment in the first quarter of 1998. Sales and marketing costs consist primarily of promotion and advertising to build brand awareness and encourage potential customers to go to our Web site. Our sales and marketing expenses were $30.0 million, $21.5 million and $7.8 million in 1998, 1997 and 1996, respectively. We use Internet advertising, as well as traditional media, such as television, radio and print. The majority of our Internet advertising is comprised of sponsorship and partnership agreements with Internet portals and advertising and marketing affiliations with online automotive information providers. These internet portals and online information providers charge a combination of set-up, initial, annual, monthly and variable fees. Set-up fees are incurred for the development of the link between Autobytel.com and the internet portal or online information provider and are expensed in the period the link is established. Initial fees are prepaid annual fees, which are amortized over the period they relate to and monthly fees which are expensed in the month they 25 27 relate to. Variable fees are fees paid for purchase requests and are expensed in the period the purchase requests are received. During 1998, total Internet marketing and advertising costs incurred were $11.1 million, including initial, annual, monthly and variable fees of $50,000, $3.0 million, $2.9 million and $5.2 million, respectively. There were no set-up fees incurred in 1998. Also included in the sales and marketing expenses are the costs associated with signing up new dealers and their ongoing training and support. Sales and marketing costs are recorded as an expense in the period the service is provided. Sales and marketing expenses have historically fluctuated quarter-to-quarter due to varied levels of marketing and advertising and we believe this will continue in the future. RESULTS OF OPERATIONS The following table sets forth our results of operations as a percentage of revenues:
YEARS ENDED DECEMBER 31, ---------------------- 1996 1997 1998 ---- ---- ---- STATEMENT OF OPERATIONS DATA: Revenues............................................... 100% 100% 100% Operating expenses: Sales and marketing.................................. 155 140 126 Product and technology development................... 35 36 36 General and administrative........................... 33 38 25 ---- ---- ---- Total operating expenses..................... 223 214 187 ---- ---- ---- Loss from operations................................. (123) (114) (87) ---- ---- ---- Other income, net...................................... 2 4 5 Loss before provision for income taxes............... (120) (110) (81) ---- ---- ---- Provision for income taxes............................. -- -- -- ---- ---- ---- Net loss............................................. (120)% (110)% (81)% ==== ==== ====
1998 COMPARED TO 1997 Revenues. Our revenues increased by $8.5 million, or 56%, to $23.8 million in 1998, compared to $15.3 million in 1997. The growth in revenue in 1998 was primarily attributable to an increase in the net core dealer count and $162, or a 21% increase in the average monthly program fee charged to subscribing dealers. The net number of core dealers increased by 743, or 45%, to 2,386 as of December 31, 1998, compared to 1,643 as of December 31, 1997. Our financial statements include revenues derived from computer sales, a practice we discontinued in the first quarter of 1998, of $197,000 in 1998 and $1.5 million in 1997. Excluding our revenue from the sale of computer equipment, our revenues increased by $9.8 million, or 71%, to $23.6 million in 1998 as compared to $13.8 million in 1997. In 1998, we launched additional ancillary services such as Web site advertising and warranties. Sales and Marketing. Sales and marketing expenses primarily include advertising and marketing expenses paid to our purchase request providers and for developing our brand equity, as well as personnel and other costs associated with sales, training and support of our dealer network. Sales and marketing expense increased by $8.6 million, or 40%, to $30.0 million in 1998, compared to $21.5 million in 1997. The increase was primarily due to a $5.3 million or 91% increase in fees related to information search aggregators resulting from higher purchase requests and a $4.0 million, or 58% increase in other advertising and 26 28 marketing expenses to build brand awareness. We expect to continue to increase our advertising and marketing budget in the foreseeable future. Product and Technology Development. Product and technology development expense primarily includes personnel costs relating to enhancing the features, content and functionality of our Web site and Dealer Real Time system, as well as expenses associated with our telecommunications and computer infrastructure. Product and technology development expense increased by $3.1 million, or 57%, to $8.5 million in 1998, compared to $5.4 million in 1997. The increase was primarily due to the additional staff and expenses related to Auto-by-Tel UK Limited of $1.4 million in 1998. General and Administrative. General and administrative expense primarily consists of executive, financial and legal personnel expenses and related costs. General and administrative expense was $5.9 million in 1998 and 1997. Excluding a non-recurring charge of $1.1 million associated with a proposed initial public offering withdrawn in April 1997, general and administrative expense increased by $1.1 million, or 23%, to $5.9 million in 1998, compared to $4.8 million in 1997. This increase is primarily due to additional executive and financial personnel and rent due to expansion of facilities. Other Income. Other income consists primarily of interest income. Other income increased by $660,000, or 106%, to $1.3 million in 1998, compared to $620,000 in 1997. This increase is primarily due to a $1.4 million gain realized from the sale of Auto-by-Tel UK Limited to Inchcape Automotive Limited in November 1998, offset in part by a $792,000 charge for the value of warrants issued to Invision AG and Aureus Private Equity AG. Excluding these non-recurring items, other income increased by $44,000, or 7%, to $664,000 in 1998 as compared to $620,000 in 1997. Interest income increased due to higher cash balances from the sale of preferred stock in 1998. Income Taxes. No provision for federal income taxes has been recorded as we incurred net operating losses through December 31, 1998. As of December 31, 1998, we had approximately $37.1 million of federal and $18.4 million of state net operating loss carry forwards that we believe are available to offset future taxable income; such carry forwards expire in various years through 2018. Under the Tax Reform Act of 1986, the amounts of and benefits from our net operating losses carry forwards will likely be limited upon the completion of the initial public offering due to a cumulative ownership change of more than 50% over a three year period. Based on preliminary estimates, we believe the effect of such limitation, if imposed, will not have a material adverse effect on our business, results of operations and financial condition. 1997 COMPARED TO 1996 Revenues. Our revenues increased by $10.3 million, or 206%, to $15.3 million in 1997, compared to $5.0 million in 1996. The significant growth in revenue in 1997 was primarily attributable to an increase in the net core dealer count and a $228, or 41% increase in the average monthly program fee charged to subscribing dealers. The number of core dealers increased by 437, or 36%, to 1,643 as of December 31, 1997, compared to 1,206 as of December 31, 1996. We started selling computer equipment to our dealers during the last quarter of 1996 and these revenues were $1.5 million in 1997 and $147,000 in 1996. Excluding our revenue from the sale of computer equipment, our revenues increased by $9.0 million, or 184%, to $13.8 million in 1997, compared to $4.9 million in 1996. Also, we launched several new ancillary services in 1997, including leasing, financing, credit union services and the Mobalist Rewards program, which cumulatively represented less than 3% of total revenues during 1997. 27 29 Sales and Marketing. Sales and marketing expense increased by $13.7 million, or 176%, to $21.5 million in 1997, compared to $7.8 million in 1996. This increase is attributable primarily to the increase in advertising and marketing costs associated with driving the growth of purchase requests. The number of purchase requests increased by approximately 416,000, or 121%, to approximately 761,000. To a lesser degree this increase was also due to growth in personnel and other expenses associated with sales training and maintenance of our dealer channel. Product and Technology Development. Product and technology development expense increased by $3.7 million, or 206%, to $5.4 million in 1997, compared to $1.8 million in 1996. The increase in product and technology development expense was primarily associated with adding additional product and technical staff. General and Administrative. General and administrative expense increased by $4.2 million, or 263%, to $5.9 million in 1997, compared to $1.6 million in 1996. The increase was primarily due to additional executive, financial and legal personnel and related costs, as well as a non-recurring $1.1 million charge associated with a withdrawn initial public offering in 1997. Excluding this non-recurring charge, general and administrative expense increased by $3.1 million, or 194%, to $4.8 million in 1997, compared to $1.6 million in 1996. Other Income. Other income, which primarily consists of interest income, increased by $496,000, or 400%, to $620,000 in 1997, compared to $124,000 in 1996. Interest income increased due to higher cash balances from the sale of preferred stock in 1997. 28 30 QUARTERLY RESULTS OF OPERATIONS The following table sets forth quarterly statement of operations data for the eight quarters ended December 31, 1998. This quarterly information has been derived from our unaudited financial statements and, in our opinion, includes all adjustments necessary for a fair presentation of the information for the periods covered. The quarterly data should be read in conjunction with our consolidated financial statements and related notes. The operating results for any quarter are not necessarily indicative of the operating results for any future period. INCOME STATEMENT FOR THE THREE MONTHS ENDED (unaudited in thousands)
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, 1997 1997 1997 1997 1998 1998 1998 1998 -------- -------- --------- -------- -------- -------- --------- -------- REVENUES.......................... $ 3,063 $ 3,414 $ 4,293 $ 4,568 $ 4,632 $ 5,405 $ 6,462 $ 7,327 Operating expenses: Sales and marketing............. 6,675 4,683 4,436 5,660 8,459 5,470 8,320 7,784 Product and technology development................... 1,103 1,394 1,496 1,455 1,895 1,969 2,352 2,312 General and administrative...... 1,823 1,216 1,079 1,733 1,346 1,190 1,480 1,892 ------- ------- ------- ------- ------- ------- ------- ------- Total operating expenses...... 9,601 7,293 7,011 8,848 11,700 8,629 12,152 11,988 ------- ------- ------- ------- ------- ------- ------- ------- Loss from operations............ (6,538) (3,879) (2,718) (4,280) (7,068) (3,224) (5,690) (4,661) ------- ------- ------- ------- ------- ------- ------- ------- Other income, net................. 165 114 147 194 185 163 153 779 Loss before provision for income taxes......................... (6,373) (3,765) (2,571) (4,086) (6,883) (3,061) (5,537) (3,882) ------- ------- ------- ------- ------- ------- ------- ------- Provision for income taxes........ 11 4 -- -- 15 10 6 4 ------- ------- ------- ------- ------- ------- ------- ------- Net loss........................ $(6,384) $(3,769) $(2,571) $(4,086) $(6,898) $(3,071) $(5,543) $(3,886) ======= ======= ======= ======= ======= ======= ======= =======
PERCENTAGE OF REVENUE FOR THE THREE MONTHS ENDED (unaudited)
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, 1997 1997 1997 1997 1998 1998 1998 1998 -------- -------- --------- -------- -------- -------- --------- -------- Revenues........................... 100% 100% 100% 100% 100% 100% 100% 100% Operating expenses: Sales and marketing.............. 218 137 103 124 183 101 129 106 Product and technology development.................... 36 41 35 32 41 36 36 32 General and administrative....... 60 36 25 38 29 22 23 26 ---- ---- --- --- ---- --- --- --- Total operating expenses....... 313 214 163 194 253 160 188 164 ---- ---- --- --- ---- --- --- --- Loss from operations............. (213) (114) (63) (94) (153) (60) (88) (64) ---- ---- --- --- ---- --- --- --- Other income, net.................. 5 3 3 4 4 3 2 11 Loss before provision for income taxes.......................... (208) (110) (60) (89) (149) (57) (86) (53) ---- ---- --- --- ---- --- --- --- Provision for income taxes......... -- -- -- -- -- -- -- -- ---- ---- --- --- ---- --- --- --- Net loss......................... (208)% (110)% (60)% (89)% (149)% (57)% (86)% (53)% ==== ==== === === ==== === === ===
Revenues. Growth in our dealer network and increases in fees and the sale of ancillary products and services have resulted in a compounded quarterly growth in revenue of 13% over the last eight quarters of operations. Revenue growth is primarily associated with program fees and, to a lesser extent, new product offerings. Between the quarters ended December 31, 1996 and March 31, 1998, we recognized revenues associated with computer systems sold to dealers. After the introduction of the current Dealer Real Time system in February 1998, we discontinued the sale of computer equipment. Our financial 29 31 statements include non-recurring revenue for the Dealer Real Time system hardware sales of $147,000 in 1996, $1.5 million in 1997, and $197,000 in 1998. Sales and Marketing. We have increased spending on sales and marketing every year since our inception. The increase in sales and marketing spending accelerated after we completed our Series A preferred stock offering of $15.0 million in August 1996. We launched an aggressive advertising campaign, and in the quarters ended March 31, 1997 and 1998, we aired a television advertisement during the Super Bowl at a cost of approximately $1.3 million and $1.5 million, respectively. Additionally, in the quarter ended December 31, 1997, we entered into several Internet branding and purchase request generation contracts, including contracts with Excite. From October 1996 through February 1998, we incurred expenses of approximately $1.6 million associated with the sale of computer equipment to support the old Dealer Real Time system. Such expenses were included in sales and marketing. These computer sales were discontinued in February 1998. We have generally increased the number of sales and marketing personnel each quarter. Product and Technology Development. Product and technology development has generally risen on a dollar basis since our inception. The primary cause for the increase in product and technology development expenses is the addition of personnel to develop the technology infrastructure and new programs for our dealers and Internet consumers. General and Administrative. The quarter ended March 31, 1997 includes approximately $1.1 million in previously capitalized legal, accounting and other direct costs associated with a proposed initial public offering that was withdrawn in April 1997. In the quarter ended December 31, 1997, general and administrative expenses included legal, severance and bonuses incurred during the period. To date, quarter to quarter growth in our revenues have offset any effects due to seasonality. However, we expect our business to experience seasonality as it matures, reflecting seasonal fluctuations in the automotive industry, Internet and commercial online service usage and advertising expenditures. We anticipate that purchase requests will typically increase during the first and third quarters when new vehicle models are introduced and will typically decline during the second and fourth quarters. Internet and commercial online service usage and the growth rate of such usage may be expected typically to decline during the summer. In addition, our advertising costs in traditional media, such as broadcast and cable television, generally decline in the first and third quarters of each year. Depending on the extent to which the Internet and commercial online services are accepted as an advertising medium, seasonality in the level of advertising expenditures could become more pronounced for Internet-based advertising. Seasonality in the automotive industry, Internet and commercial online service usage, and advertising expenditures is likely to cause fluctuations in our operating results and could have a material adverse effect on our business, operating results and financial condition. STOCK OPTIONS GRANTED IN 1999 From January to March 1999, we granted stock options to purchase 392,112 shares of common stock under the 1999 Stock Option Plan. These stock options were granted to employees and directors at exercise prices of $13.20 and $16 per share which were below the fair market value at the date of grant. In relation to these grants, we will recognize estimated compensation expense of approximately $2.0 million ratably over the vesting term of one to four years. Compensation expense of approximately $826,000, $390,000, 30 32 $390,000, $390,000 and $30,000 will be classified as operating expense in the years ending 1999, 2000, 2001, 2002 and 2003, respectively. LIQUIDITY AND CAPITAL RESOURCES Since inception, we have financed our operations primarily from the issuance of shares of preferred stock, which through December 31, 1998 totaled $67.9 million, comprised of $15.0 million raised in August 1996, $9.1 million raised in January 1997, $13.0 million raised in October 1997, $0.5 million issued in exchange for advertising in April 1998, $5.0 million raised in May 1998, $0.6 million issued in exchange for advertising in October 1998, $5 million raised in November 1998 and $19.7 million raised in December 1998. As of December 31, 1998, we had approximately $28.0 million in cash and cash equivalents. Net cash used in operating activities increased to $16.3 million in 1998 from $13.5 million in 1997 and $3.6 million in 1996. The increases in the net cash used in operating activities resulted primarily from increased sales and marketing, product development and general and administrative expenditures related to expanding our infrastructure. Also, working capital was used to finance accounts receivable, prepaid expenditures and other assets, offset partially by increased deferred revenue. Net cash used in investing activities decreased to $1.1 million in 1998 from $1.8 million in 1997 and increased to $1.8 million in 1997 from $1.5 million in 1996. The net cash used in investing activities resulted primarily from purchases of property and equipment consisting of computer hardware, telecommunications equipment, furniture and leasehold improvements. Net cash provided by financing activities increased to $29.6 million in 1998 from $22.0 million in 1997 and $14.1 million in 1996. The net cash provided by financing activities resulted primarily from the issuance of preferred stock. We believe our current cash and cash equivalents, excluding proceeds from this offering, will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next 12 months. With respect to years beyond fiscal 1999, we may be required to raise additional capital to meet our long term operating requirements. Although we have grown our revenues consistently since inception, our expenses have continued to and in the foreseeable future are expected to exceed our revenues. Accordingly, we do not expect to be able to fund our operations from internally generated funds for the foreseeable future. Our cash requirements depend on several factors, including the level of expenditures on marketing and advertising, the rate of market acceptance, the ability to expand our customer base and increase the volume of purchase requests, the cost of contractual arrangements with online information providers, search engines and other referral sources, and other factors. The timing and amount of such working capital requirements cannot accurately be predicted. If capital requirements vary materially from those currently planned, we may require additional financing sooner than anticipated. We have no commitments for any additional financing, and there can be no assurance that any such commitments can be obtained on favorable terms, if at all. Any additional equity financing may be dilutive to our stockholders, and debt financing, if available, may involve restrictive covenants with respect to dividends, raising capital and other financial and operational matters which could restrict our operations or finances. If we are unable to obtain additional financing as needed, we may be required to reduce the scope of our operations or our anticipated expansion, which could have a material adverse effect on our business, results of operations and financial condition. 31 33 YEAR 2000 ISSUES Because many computer applications have been written using two digits rather than four to define the applicable year, some date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This "Year 2000 issue" could result in system failures or miscalculations causing disruptions of operations, including disruptions of our Web site, the Dealer Real Time system or normal business activities. The information technology systems pertain to software applications and database interface programs that support the consumer website, as well as the Dealer Real Time system that manages the inventory of pre-owned vehicles and purchase requests transmitted to our participating dealers. Non-information technology systems include accounts receivable/payable, payroll, banking, 401k, postal bar code, and Federal Express software that support our daily business activities. Although we have not conducted a survey, we believe there is no material exposure to our non-information technology systems. We believe that we do not have any other non-information, embedded technology systems, with potential Year 2000 issues. We do not believe that we have material exposure to the Year 2000 issue with respect to our own information systems since our existing systems correctly define the Year 2000 with four digits. We are currently taking two actions to mitigate the risk and exposure of the Year 2000 issue: 1. We are in the process of obtaining confirmation from all of our third-party vendors that they have resolved their Year 2000 issues. These third-party vendors can be categorized as follows: A. information technology systems - computer hardware vendors - computer software vendors - network communications vendors - data suppliers vendors B. non-information technology systems - landlord who oversees the facilities and utilities - building security company We expect to receive replies to our Year 2000 requests from third-party vendors by second quarter 1999. Approximately 35% of the third party vendors have responded. All of these vendors provided a statement of compliance either displayed on their website or furnished in hard copy format. These vendors who have already responded represent the most critical vendors in our business. 2. In March 1999, we implemented a test lab environment to simulate the Year 2000 rollover with hardware, software, network communications vendors and certain key data suppliers. We plan to make any modifications resulting from the test lab environment by the third quarter of 1999. Based on the test results, if any vendor was found to be non-compliant, our contingency plan is to first attempt to find a replacement vendor, and if no replacement can be found, to assist such vendor in becoming Year 2000 compliant. If we cannot effectively assist such vendor in becoming Year 2000 compliant, we plan to set up a front-end application to screen all non-compliant data or to receive the data and modify it so 32 34 that the data is Year 2000 compliant. We plan to establish our front-end application screen in the third quarter of 1999. The worst-case scenario pertaining to Year 2000 issue would be an overall failure of the national Internet and telecommunications infrastructure. This may require alternative means for users to gain connection to our servers. RECENT ACCOUNTING PRONOUNCEMENTS In June 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income." This statement, adopted by us in the first quarter of 1998, requires companies to report a new measurement of income. Comprehensive income (loss) is to include foreign currency translation gains and losses and other unrealized gains and losses that have historically been excluded from net income (loss) and reflected instead in equity. Currently, no material differences exist between our net income or loss and comprehensive net income or loss. In March 1998, the American Institute of Certified Public Accounts (AICPA) issued Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed or Obtained For Internal Use," which is effective for fiscal years beginning after December 15, 1998. SOP No. 98-1 provides guidance on accounting for the costs of computer software developed or obtained for internal use and defines specific criteria that determine when such costs are required to be expensed, and when such costs may be capitalized. Management believes the adoption of SOP 98-1 will not have a material effect on our consolidated financial statements. In April 1998, the AICPA issued SOP 98-5, "Reporting the Costs of Start-up Activities," which will be adopted by us in the beginning of our fiscal year beginning January 1, 1999. SOP No. 98-5 provides guidance on the financial reporting of start-up costs and organization costs and requires such costs to be expensed as incurred. We believe the adoption of SOP 98-5 will not have a material effect on our financial statements. In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, which will be adopted by us in our fiscal year beginning January 1, 2000. SFAS No. 133 establishes accounting and reporting standards for derivative instruments by requiring every derivative instrument to be recorded in the balance sheet as a liability or an asset at fair market value. Any changes to a derivatives fair market value must be recognized currently in earnings unless specific hedge accounting criteria are met. We do not have any derivative instruments or undertake any hedging activities and do not anticipate doing so, therefore the adoption of SFAS No. 133 will not have a material effect on our financial statements. LIMITATION ON NET OPERATING LOSS CARRYFORWARDS We have approximately $37.1 million federal net operating loss carryforwards as of December 31, 1998 which may be available to reduce the amount of United States federal income taxes payable by us in the future. However, if we undergo an "ownership change" within the meaning of Section 382 of the Internal Revenue Code, an annual limitation will be imposed on our use of net operating loss carryforwards. If an "ownership change" occurs, Section 382 of the Internal Revenue Code limits the amount of net operating losses that may be utilized from pre-ownership change years to offset our taxable income in any post-ownership change year to an amount equal to: 33 35 - the value of Autobytel.com's capital stock, as adjusted, at the time of the ownership change, multiplied by - the long-term tax exempt rate for the month of the ownership change. We believe that this offering will result in an ownership change for purposes of Section 382 of the Internal Revenue Code. As a result, the use of our pre-ownership change net operating loss carryforwards will be limited annually by Section 382 of the Internal Revenue Code under the rules described above. Based on an estimated company value of $393 million, we will be permitted to offset against any taxable income $18 million of losses per year using pre-charge net operating losses based on a long-term tax exempt rate of 4.7% and a share price of $22. 34 36 BUSINESS OVERVIEW We are a leading, branded Internet site for new and pre-owned vehicle information and purchasing services. Through our Web site, www.autobytel.com, consumers can research pricing, specifications and other information regarding new and pre-owned vehicles. When consumers indicate they are ready to buy, they can be connected to Autobytel.com's network of over 2,700 participating dealers in North America, with each dealer representing a particular vehicle make. Dealers participate in our network by entering into non-exclusive contracts with us. We expect our dealers to promptly provide a haggle-free, competitive offer. In addition, consumers can apply for and receive insurance, financing, leasing and warranty proposals as well as other services and information through our Web site. We believe that our services provide benefits for consumers by supplying them with information to make an informed and intelligent vehicle purchasing decision and by directing consumers to dealers, whom we expect to provide a competitive price. In addition, our services are intended to reduce our dealers' costs by directing to them large volumes of purchase requests from potential consumers who have already indicated their intent to buy, thereby enabling dealers to lower their marketing, advertising and personnel costs while enhancing sales productivity. We provide our services free of charge to consumers and derive substantially all of our revenues from fees paid by participating dealers. We introduced our new vehicle purchasing services in May 1995 and our Certified Pre-Owned CyberStore in April 1997. Our new vehicle purchasing service enables consumers to shop for and select a new vehicle through our Web site by providing research on new vehicles such as pricing, features, specifications and colors. When consumers indicate they are ready to buy, they can complete a purchase request online. The CyberStore allows consumers to search for a pre-owned vehicle according to the price, make, model, color, year and location of the vehicle. The CyberStore locates and displays the description, location and actual photograph of all vehicles that satisfy the consumer's search parameters. The dealers in our network use our online information platform, the Dealer Real Time system, which provides dealers with immediate purchase request information for new and pre-owned vehicles, the ability to track customers and purchase requests, and other value-added features, including automatic uploading of pre-owned vehicle inventory into our database. In addition, Autobytel.com offers a number of automotive finance and insurance services in conjunction with strategic partners, including automobile financing through Chase, GE Capital and Provident Bank, automotive insurance through member companies of the American International Group and extended warranty service through New Hampshire Insurance Company, a member company of the American International Group. BACKGROUND Growth of the Internet and Online Commerce. The Web and online services have emerged as significant global communications and commercial media enabling millions of people worldwide to share information, communicate and conduct business electronically. We believe that the number of Web users will grow based on a number of factors, including the large and growing base of installed personal computers in the home and workplace, the decreasing cost of personal computers, easier, faster and cheaper access to the Internet, the distribution of broadband applications, the proliferation of Internet 35 37 content and the increasing familiarity and acceptance of the Internet by businesses and consumers. The growth in the use of the Internet has also led to a rapid growth of online commerce. Web commerce sites are enabling businesses to target and manage a broad customer base and establish and maintain ongoing direct customer relationships. As a growing number of businesses and information providers have begun marketing on the Web, it has rapidly become a medium in which consumers can access a vast amount of information regarding the pricing, quality and specification of products. Additionally, online transactions can be faster, less expensive and more convenient than transactions conducted in person or even over the telephone. The Automotive Vehicle Market. Automotive dealers operate in localized markets and face significant state regulations and increasing business pressures. These fragmented markets, with over 49,000 dealers in aggregate, are characterized by: - a perceived overabundance of dealerships, - competitive sales within regional markets, - increasing advertising and marketing costs that continue to reduce dealer profits, - high-pressure sales tactics with consumers, and - large investments by dealers in real estate, construction, personnel and other overhead expenses. In addition, consumers have traditionally entered into the highly negotiated sales process with relatively little information regarding manufacturer's costs, leasing costs, financing costs, relative specifications and other important information. Buying a vehicle is considered to be one of the most significant purchases a United States consumer makes. According to CNW Marketing/Research, over $657 billion and $667 billion was spent on new and pre-owned vehicles in the United States representing the sale of over 60.0 and 60.3 million vehicles in 1997 and 1998, respectively. Although automotive retailing attracts significant consumer dollars, we believe that consumers associate the traditional vehicle buying experience with high-pressure sales tactics. THE AUTOBYTEL.COM SOLUTION We believe that our online products and services improve the vehicle purchasing process for both consumers and dealers. We offer consumers an information-rich Web site, numerous tools to configure this information, and a quality fulfillment experience. As part of the fulfillment experience, we expect our dealers to provide competitive price quotes for new and pre-owned vehicles. We believe our services enable dealers to reduce personnel and marketing costs, increase consumer satisfaction, increase customer volume, and expand dealer territories. Benefits to Consumers. Our Web site provides consumers free of charge up-to-date specifications and pricing information on vehicles. In addition, our consumers gain easy access to valuable automotive information, such as dealer invoice pricing and the AutoBuyTools(TM) services which consist of a lease calculator, a loan calculator to determine monthly payments and a lease or buy decision tool. Our database of articles allows consumers to perform online library research by accessing documents such as weekly automotive reports, consumer reviews and manufacturer brochures. Various automotive information service providers, such as Edmund's, Kelley Blue Book, Pace Publication's Carprice.com, and IntelliChoice, are also aggregated on Autobytel.com's Web site to assist consumers with specific vehicle and related automotive decisions such as insurance and 36 38 financing. Armed with such information, the consumer should be more confident and capable of making an informed and intelligent vehicle buying decision. We expect our dealers to provide competitive price quotes for new and pre-owned vehicles. By providing dealers with a large number of consumers through quality purchase requests, we believe that we can help our dealers to lower their operating costs due to higher sales volume. We believe that lowering their operating costs allows dealers to offer more competitive prices. We believe we offer consumers a significantly different vehicle purchasing experience from that of traditional methods. Consumers using the Autobytel.com system are able to shop for a vehicle, and make financing and insurance decisions from the convenience of their own home or office. We expect dealers to provide consumers a haggle-free price quote and a high level of customer service. We form our dealer relationships after careful analysis of automotive sales and demographic data in each region. We seek to include in our dealer network the largest and highest quality dealers within defined territories. Our strategy to be the leading Internet-based vehicle information and purchasing service depends on our ability to provide consumers with a quality experience. Benefits to Dealers. Autobytel.com benefits dealers by reducing the dealers' incremental personnel and marketing costs, increasing consumer satisfaction and increasing consumer volume. Through our investment in national advertising and brand recognition of Autobytel.com, we attract consumers to our Web site and direct them to dealers in their local area. We believe this provides dealers access to a larger number of prequalified consumers without increasing their advertising costs. Dealers' personnel costs should be reduced because we provide dealers access to potential purchasers who have completed their research and should be ready to buy or lease a vehicle. As a result, reaching these consumers and selling or leasing them vehicles costs the dealer little or no additional overhead expense other than the fees paid to us and the personnel costs of a dedicated Autobytel.com manager. Through our Dealer Real Time system, we provide dealers with on-site technology to better track sales, inventory, customer solicitations, responses and other communications. By providing consumers a quality fulfillment experience, we seek to provide Autobytel.com dealers a large number of consumers, allowing them to compete more effectively. Our solution includes an expanding network of over 2,700 participating dealers in the United States and Canada representing every major domestic and imported make of vehicles and light trucks. Because a single dealership location may hold multiple manufacturer franchises, the dealership may represent more than one dealer in the Autobytel.com network. To increase each dealer's incentive to participate in the Autobytel.com system, we allocate each dealer an exclusive geographic territory based upon specific vehicle make. A territory allocated by us to a dealer is generally larger than a territory assigned to a dealer by a manufacturer. By granting dealers exclusivity within a geographic area, we intend to assure dealers of a large enough volume of quality purchase requests to lower their operating costs. Our Web Site. Because Web sites can be continually updated and provide a large quantity of quality information, we believe the Internet offers the most efficient medium for consumers to learn about and shop for vehicles. The Internet's global reach to consumers allows us to leverage our investment in branding and marketing across a very large national and international audience to create qualified purchase requests for vehicles. 37 39 For these reasons, we also believe that the Internet represents the most efficient method of directing purchase requests to local markets and dealers. We currently provide the following services on our Web site: [Chart depicting programs and services accessible to Internet consumers through Autobytel.com] STRATEGY Our primary objective is to be the leading global Internet brand for vehicle information and purchasing services. We intend to achieve this objective through the following principal strategies: Continue to Build Brand Equity. We believe that due to our focus on both online and offline marketing, we have created one of the leading brand names in our sector. We intend to continue aggressively to market and advertise to enhance our brand recognition with consumers. We believe that continuing to strengthen brand awareness of the Autobytel.com name among consumers is critical to attract vehicle buyers, increase purchase requests and, in turn, increase the size of our dealer base. We intend to continue advertising on the Internet and through traditional media, such as television, radio and printed publications. Ensure the Highest Quality Consumer Experience. We believe that consumer satisfaction and loyalty is heavily influenced by the consumer's experience with our site and with our dealers. In order to enhance our appeal to consumers, we intend to continue developing our Web site by enhancing vehicle information, as well as building new features such as personalization, auto maintenance reminders and consumer reviews. As part of our continuing effort to enhance our Web site technology and features, we have entered into strategic co-development relationships, with Intel and Cow Inc. to improve our interactive dealer training. In addition, we plan to continue compiling high quality content from third 38 40 party sources on our site, including information from Edmund's, IntelliChoice, Carprices.com and Kelley Blue Book. We believe that consumer satisfaction with the vehicle purchasing experience is also essential to our success and the differentiation of our services from those of our competitors. We intend to continue to invest in our dealer training and support services to ensure a consistent, high-quality alternative to the traditional vehicle buying process. Increase Purchase Requests. We believe that increasing the volume and quality of purchase requests directed from our Web site to our dealer network is crucial to the long-term growth and success of our business. By augmenting the volume of quality purchase requests, we expect to attract additional dealers to our network, increase fees paid by dealers, and solidify our relationships with participating dealers. Our strategy for increasing traffic to our site and the number of purchase requests includes forming and maintaining online sponsorships and partnerships with Internet portals, such as Excite, and with Internet automotive information providers, such as Edmund's. As part of our strategy to improve the quality of purchase requests, we continue to expand the breadth and depth of information and services available through our Web site to insure that well informed, ready-to-buy consumers are directed to participating dealers. Expand and Improve Dealer Network. We believe that strengthening the size and quality of our dealer network is important to the success and growth of our business. We believe our network of over 2,700 dealers is one of the largest in the Internet-based vehicle purchasing industry. Our strategy is to increase the size of our dealer network by attracting new dealers and strengthening relationships with existing dealers by: - increasing the volume and quality of purchase requests, - advertising in trade publications aimed at dealers and participating in industry trade shows, - maintaining our extensive training and support program to participating dealers, and - providing our Dealer Real Time system to all participating dealers. Invest in Ancillary Online Services. We believe that expanding our services to both consumers and dealers will be critical to establishing ourselves as the premier provider of online automotive services in the future. Our strategy is to continue to invest in ancillary services, particularly in the CyberStore and warranty, finance and insurance services. We also intend to use the Dealer Real Time system to launch value added services for our dealer network, including allowing dealers to offer accessories and aftermarket products directly through the Autobytel.com Web site. We have recently begun to sell advertising on our Web site and expect to expand this business during 1999. We plan to launch an auction-based, online program for our dealers who sell pre-owned vehicles. We are also seeking opportunities to market the information contained in our databases. Expand Internationally. We intend to continue our international expansion through licensing agreements and partnering with local strategic partners. We have established licensing arrangements with strategic partners such as Inchcape Motors and Bilia AB in the United Kingdom and Scandinavia, respectively. In addition, we have entered into agreements with Invision AG and Aureus Private Equity AG to obtain their assistance in meeting potential strategic partners who will assist us in establishing national operating companies throughout the rest of Europe using Autobytel.com vehicle marketing systems. We have also entered into agreements in Japan with e-solutions, Inc., Intec, Inc. and 39 41 Trans Cosmos, Inc. to form a joint venture. We are currently exploring additional opportunities in Asia and Latin America. PRODUCTS, PROGRAMS AND SERVICES New Vehicle Purchasing Service. Our new vehicle marketing service enables consumers to shop for and select a new vehicle through our Web site by providing research on new vehicles such as pricing, features, specifications, colors, etc. When consumers indicate they are ready to buy, a consumer can complete a purchase request online, which specifies the type of vehicle and accessories the consumer desires, along with the consumer's contact information. The purchase request is then routed by us to the nearest participating dealer that sells the type of vehicle requested, and we promptly return an e-mail message to the consumer with the dealership's name and phone number and the name of the Autobytel.com manager at the dealership. Dealers agree in their contracts to contact the consumer within 24 hours of receiving the purchase request with a firm, haggle-free price quote for the requested vehicle. When consumers complete a purchase, they usually take delivery of their vehicle at the dealership showroom. Generally, within ten days of the submission of a consumer's purchase request, we contact the consumer again by e-mail to conduct a quality assurance survey that allows us to evaluate the sales process at participating dealers and improve the quality of dealer service. The Autobytel.com network has grown to 2,718 dealers as of December 31, 1998. These dealers represent every major domestic and imported make of vehicle and light truck sold in the United States and Canada. Core dealerships are charged initial subscription fees and on-going fees, principally on a monthly basis, to participate in our dealer network. Certified Pre-Owned CyberStore. We launched our CyberStore program in April 1997. The CyberStore allows consumers to search for a pre-owned vehicle according to specific search parameters such as the price, make, model, mileage, year and location of the vehicle. CyberStore locates and displays the description, location and actual digital photograph of all vehicles that satisfy the search parameters. The consumer can then complete a formal purchase request for a specific vehicle and is contacted by the dealer to conclude the sale. To be listed in the CyberStore a pre-owned vehicle must first pass a 135-point inspection, be covered by a 72-hour money-back guarantee and be covered by a three-month, 3,000-mile warranty, which is honored nationally by all CyberStore dealers. We charge each vehicle dealer that participates in the CyberStore program a separate additional monthly fee. The CyberStore program uses the Dealer Real Time system to provide participating dealers online purchase requests shortly after submission by consumers as well as the ability to track their inventory on a real-time basis. Ancillary Customer Services. We offer a number of ancillary services that we market to consumers through our Web site and the linked Web sites of participating partners such as Chase, GE Capital, Provident Bank and member companies of the American International Group. We make purchase and lease financing available to consumers through various Autobytel.com financing programs offered by Chase, GE Capital and Provident Bank that allow consumers to research and apply for vehicle financing online in a secure manner. Consumers can apply for a loan or lease online at the time they submit their purchase request for either a new or pre-owned vehicle. Consumers are able to arrive at the dealership with their loan pre-approved, their credit verification documents in hand, and the loan paperwork waiting for them. We believe that the convenience of pre-approved purchase or lease financing, combined with a firm, competitive price, enables dealers more easily to consummate purchase requests. Lenders to whom Autobytel.com refers customers 40 42 pay us an origination fee for most loans and the dealership is compensated by the lender for each loan made to an Autobytel.com consumer through either an origination fee or a limited rate participation fee. We currently market financing through Chase, GE Capital and Provident Bank. We provide a link on our Web site to an online insurance application program offered by the American International Group on behalf of its member companies through which consumers submit requests for insurance quotes and obtain approval. The types of insurance products offered through this link include automobile liability and property damage coverage. Our agreement with the American International Group provides that we receive an advertising fee based on a percentage of the net premiums earned and collected by the member companies of the American International Group on all policies issued to Autobytel.com consumers who access the American International Group Web site through a link from our Web site. We offer critical information concerning all aspects of owning and leasing new and pre-owned vehicles that we believe makes our Web site a valuable resource to consumers. AutoBuyTools(TM), a service on our Web site, consists of a lease calculator, a loan calculator to determine monthly payments and a lease or buy decision tool. The Dealer Real Time System. In 1997, we launched a new, proprietary technology and software system called the Dealer Real Time system. The Dealer Real Time system is an Internet-based communications platform that gives dealers a competitive advantage compared to delivering purchase requests by fax. A fax-based system has the following inherent inefficiencies: it is susceptible to system delays, has a less effective purchase request and inventory tracking system and it is difficult to control the distribution of purchase requests. Such inefficiencies include the delay of delivering faxes to salesmen and the uncertainty of response time to consumers related to this delivery. Using Internet technology, the Dealer Real Time system enables the dealer to: - instantaneously access a consumer's vehicle purchase request as soon as the consumer submits it online, - track all interaction with the consumer, - send e-mail to consumers using a variety of predetermined templates, - input used vehicle inventory information for immediate display to consumers on the Autobytel.com web page, - track dealership performance through a series of reports available online, - access Autobytel.com "news" and product information online, and - contact Autobytel.com technical support personnel via e-mail links. In March 1998, as part of our new Dealer Agreement, we began requiring our dealers to use the Dealer Real Time system, and have converted substantially all of our dealers to the Dealer Real Time system. Loyalty Rewards Program (ABT Mobalist). To attract new customers prior to their next vehicle purchase and encourage repeat business from our existing customers, we began to offer consumers in April 1998 an affinity program called Mobalist Rewards. To date, our affinity marketing partners include Virtual Vineyards, Inc. and Uniglobe Travel Online, Inc. This program allows members to earn credits toward the purchase price of a new or pre-owned vehicle through our service. Members earn credits by purchasing products and services from Autobytel.com's retail partners and also by using a credit card co-branded with the Autobytel.com trademark to make purchases. We earn a commission each time these services or the affinity program services are used. 41 43 Planned Online Auction Services. We plan to launch an auction-based program designed to streamline the process of wholesale buying and selling of pre-owned vehicles over the next year. Through this program, we expect that our dealers will be able to place online bids for pre-owned vehicles directly to the wholesaler, eliminating associated distribution costs. INTERNATIONAL ACTIVITIES We intend to expand our new vehicle marketing service to foreign markets through licensing agreements and by establishing relationships with vehicle dealers and strategic partners located in foreign markets. As of December 31, 1998, approximately 161 Canadian dealerships belonged to our network. We have entered into a 20 year agreement with Auto-by-Tel UK Limited, an affiliate of Inchcape Motors, the United Kingdom's largest independent automobile distributor, to exclusively license our technology, business processes and trade names in the United Kingdom, as well as provide maintenance and development for such technology. We have also entered into a similar arrangement with a term of up to 10 years with Auto-By-Tel AB, an affiliate of Bilia AB, to exclusively license our technology, business processes, and trade names in Sweden, Norway, Denmark and Finland for which we will receive annual licensing and maintenance fees as well as an initial license fee. Under the terms of our agreement with Auto-by-Tel UK Limited we are entitled to receive minimum annual license and maintenance and support fees of $850,000 and $250,000, respectively, and will receive an initial license fee. We intend to enter into similar relationships with strategic partners in other countries that have attractive automobile markets. In addition, we have entered into agreements with Aureus Private Equity AG and Invision AG to obtain their assistance in meeting potential strategic partners who will assist us in establishing national operating companies throughout the rest of Europe using Autobytel.com vehicle marketing systems. We intend to expand our operations to Japan and have entered into letter agreements with e-solutions, Inc., Intec, Inc. and Trans Cosmos, Inc. to form ABT Japan, a joint venture in which we will own a 33% interest. We will license our trade names, technology and business processes to ABT Japan. We expect ABT Japan to commence operations by the end of 1999. These companies have elected to invest $6 million in ABT Japan and to fund an additional $6 million to cover operating losses, if any, and we have agreed to incorporate ABT Japan with a capital contribution of $100,000. In addition, these companies have indicated an interest to purchase 200,000 shares in this offering. MARKETING AND SALES Our ability to enhance our brand name recognition, domestically and internationally, and position ourselves as a leading Internet-based vehicle information and purchasing services provider is critical to our efforts to increase the number of vehicle purchase requests and requests for ancillary services, as well as the number and quality of subscribing dealerships. We have invested approximately $60 million to date in sales, marketing and communications activities. Over the past several years, we have been the subject of numerous newspaper, magazine, radio and television stories. Articles about our new vehicle program have appeared in Business Week, Fortune, Forbes, Time, and the Wall Street Journal, among other publications. Television stories featuring us have been aired nationally on NBC Today, NBC Nightly News and CNN. We believe that ongoing media coverage is an important element in creating consumer awareness of the Autobytel.com brand name and has contributed to dealership awareness of, and participation in, our programs. 42 44 We have established marketing and advertising programs with many of the leading automotive information providers on the Internet, including Edmund's, IntelliChoice and Kelley Blue Book which help direct traffic to our Web site and increase purchase requests. Our agreements with automotive information providers typically have terms ranging from one to five years. The agreement with Kelley Blue Book is for an indefinite term but can be terminated on 30 days' notice by either party. Our Kelly Blue Book agreement calls for a monthly payment based on the number of times their visitors click on our links. Our position with Kelly Blue Book is not an exclusive arrangement. Therefore, our competitors may have similar relationships with Kelley Blue Book. Edmund's is our single largest referral service. In 1997 and 1998, approximately 49% and 34%, respectively, of our total purchase requests originated from Edmund's. This percentage decreased to 29% for the last quarter of 1998. Our agreement with Edmund's, pursuant to which we receive referrals from Edmund's Web site, is scheduled to expire July 31, 2000. Edmund's has agreed to recommend or refer visitors to its Web site only to us and no other competitive online marketing program with respect to new vehicles, although Edmund's may refer prospective buyers directly to automotive manufacturers' Web sites and dealer locator services. We expect Edmund's Web site to account for a significant number of purchase requests for the foreseeable future. We pay Edmund's a monthly fee based on a per purchase request basis. We pay IntelliChoice both a monthly fee for the use of its data and a fee for each purchase request. Our arrangement with them is not exclusive, as they provide data to other Web sites. We endeavor to position ourselves as the leading vehicle and related services purchasing program by affiliating ourselves with online services and Internet portals. We believe that our presence on these Internet sites helps to increase purchase request volume and will remain a key element of our future business. For example, we have agreements with AT&T Corp., Classifieds2000, Excite and Lycos that provide as follows: - We pay AT&T a monthly fee to insert our branded content on their site which includes a car purchasing link enabling their visitors to send us purchase requests. We also pay AT&T a fee for each purchase request it sends us. The agreement is not exclusive and is for an indefinite term which can be terminated on 30 days' notice by either party. - Our contract with Classifieds2000 provides that we pay a monthly fee as well as a fee for each purchase request it sends us for the number of users who submit purchase requests after having visited its site. Moreover, it includes our pre-owned vehicle inventory in its classified listings. In return we provide it with a link on our site where owners can list their cars for sale directly. Our arrangement with Classifieds2000 is exclusive. The agreement is for an indefinite term which can be terminated on 30 days' notice by either party. - Our agreement with Excite covering its auto channel provides that we pay Excite a set-up fee and an annual fee as well as a fee for each purchase request it sends us. The agreement provides us with exclusivity in their auto channel and is for a term of 3 years but can be terminated by us if the number of purchase requests does not meet specified threshold for each year of the term of the agreement. The agreement with Excite precludes us from providing supplementary automobile research information to other search engines. Our agreement with Netscape's NetCenter auto channel is through Excite which manages NetCenter for Netscape. The agreement provides for an annual fee as well as a fee for each purchase request it sends us. The agreement with NetCenter is exclusive and has a two year term. 43 45 - Our agreement with Lycos in its "New" automotive channel is based on an initial fee as well as a fee for each purchase request it sends us. The agreement provides us with exclusivity in their "New" automotive area. The agreement is for a term of one year. As of December 31, 1998, our Internet marketing agreements with our two largest search engines, NetCenter and Excite, required us to make aggregate minimum future payments of $4.9 million and provide up to three new vehicles to each in a 12 month period. As of December 31, 1998, our agreements with automotive information providers require aggregate minimum future commitments of $0.7 million. During 1998, total Internet marketing and advertising costs incurred were $11.1 million, including initial, annual and monthly fees of $50,000, $3.0 million and $2.9 million, respectively. No set-up fees were incurred in 1998 and variable fees were $5.2 million. We are also working with MediaOne to develop and deliver our broadband service offering. Broadband allows the Internet to deliver content and services at faster speeds through high capacity coaxial cable networks. We believe that the broadband opportunity is becoming an increasingly important focus within the Internet industry, and we intend to enhance our presence using this technology. We supplement our Internet presence with television and traditional print advertising. Our initial marketing focus was on computer user and hobbyist publications and major automotive magazines. In late 1996, we began to broaden our marketing efforts with a campaign to accelerate consumer awareness of the Autobytel.com brand name and drive traffic to our Web site through cable television advertisements featured on CNN and CNET, Inc. and network television advertisements featured on NBC and MSNBC. As part of our branding efforts, we aired a 30-second commercial during the broadcast of the Super Bowl in both 1997 and 1998. We expect to continue to use television advertising to strengthen our brand awareness. As of December 31, 1998, the aggregate future minimum payments we are required to make for television advertising was $1.7 million. In addition to our consumer-oriented marketing activities, we also market our programs directly to dealerships, participate in trade shows, advertise in trade publications and major automotive magazines and encourage subscribing dealerships to recommend our program to other dealerships. INTELLECTUAL PROPERTY We have the registered service mark Auto-By-Tel and have applied for the registered service marks Autobytel.com, AutoBuyTools, Certified Pre-Owned CyberStore, Kre8.net and Dealer Real Time. The Autobytel.com logo is a service mark and trademark for which we have applied for federal registration. DEALER RELATIONSHIPS AND SERVICES Dealer Network. Dealers participate in our network by entering into contracts with us. Prior to January 1998, substantially all of the dealer contracts we entered into were terminable by either party at its sole discretion with 30 days notice. Since the end of January 1999 and on a going forward basis we are converting our dealers to new contracts with one year terms. Our dealerships are located in most major metropolitan areas in the United States and Canada and we believe they are generally leaders in their respective markets. As of December 31, 1998, our participating dealership base totaled 2,718 dealers, of which 2,386, or 88%, are core dealers and 332, or 12%, are non-core dealers. Core 44 46 dealerships are franchises with typically high volume vehicle sales such as Ford or Toyota. These dealerships pay initiation and monthly fees to subscribe to our online marketing program. Both the initial and monthly subscription fees are established in the contract and are based upon many business factors including the type and location of the franchise. We reserve the right to raise our fees to dealers after 30 days notice. Non-core dealers are typically franchises of lower-volume vehicle manufacturers such as Jaguar or Suzuki or are located in remote, low volume territories, and receive purchase request referrals from us without paying us either initial or monthly subscription fees. We enter into agreements with non-core dealers to ensure the broadest geographic coverage possible for the make of vehicle represented by the non-core dealer. These agreements also allow us to increase consumer satisfaction by offering a complete selection of vehicle dealers throughout North America. However, our costs incurred from non-core dealers are not offset by revenues. We do not prevent dealers from entering into agreements with our competitors. Customer Support. We actively monitor subscribing dealers through ongoing customer surveys, and research conducted by our internal dealer support group. Generally, within ten days after a consumer submits a purchase request through our Web site, we re-contact the consumer by e-mail requesting completion of a quality assurance survey on our Web site that allows us to evaluate the sales process at participating dealers. Dealerships that fail to abide by our program guidelines or who receive repeated consumer complaints are generally reviewed and, if appropriate, terminated. In return for requiring a high level of consumer service, we assign participating dealerships exclusive territories. We try to assign dealers attractive territories in order to increase participation in our program. Our dealer agreements are cancelable by either party on 30 days notice. Each dealer agreement obligates the dealers to adhere to our policy of providing prompt responses to customers, no haggle pricing practices and full disclosure regarding vehicle availability, add-ons and related matters. We require each dealer to have an Autobytel.com manager whose principal responsibility is supervising our system, similar to the way in which most dealers have a new vehicle sales manager, pre-owned vehicle sales manager and service and parts department managers who are responsible for those dealership functions. We reserve the right to reduce or modify each dealer's assigned territory after the first six months, although there can be no assurance that a dealer whose territory is reduced or modified will not contest such a change or terminate its subscription. In addition, dealers whose territories are reduced or modified by us may sue us in an effort to prevent the change or recover damages. We have experienced one such suit. See "-- Litigation." Training. We believe that traditional dealers and their employees require specialized training to learn the skills necessary to serve the Internet user and take full advantage of our proprietary Dealer Real Time system. Therefore, we have developed an extensive training program for our dealers. We believe that this training is critical to enhancing the Autobytel.com brand and reputation. We require participating dealerships to have their representatives trained on our system. Training is conducted at our headquarters in Irvine, California, at regional training centers and at dealerships' premises. Training is currently provided to the dealers at no additional cost. In training our dealers, we de-emphasize traditional vehicle selling techniques and emphasize the Autobytel.com approach. To increase consumer satisfaction and reduce costs, we seek to discourage dealerships from using commissioned and multiple salespersons to interface with our customers. COMPETITION We believe that the principal competitive factors affecting the market for Internet-based vehicle marketing services include: 45 47 - successful marketing and establishment of national brand name recognition, - ease of use, speed and quality of service execution, - the size and effectiveness of the participating dealership base, - the volume and quality of traffic to and purchase requests from a Web site, - the ability to introduce new services in a timely and cost-effective manner. - technical expertise, - customer satisfaction, and - competitive dealer pricing. Our vehicle purchasing services compete against a variety of Internet and traditional vehicle buying services and automotive brokers. In the Internet-based market, we compete with other entities which maintain similar commercial Web sites including Autoweb.com, Cendant's AutoVantage, General Motors' BuyPower, Microsoft's CarPoint and Stoneage Corporation. Republic Industries has also announced its intention to create a Web site for marketing vehicles. We also compete indirectly against vehicle brokerage firms and affinity programs offered by several companies, including Costco Wholesale Corporation and Wal-Mart Stores, Inc. We compete with vehicle insurers, lenders and lessors as well as individual dealerships. Such companies may already maintain or may introduce Web sites which compete with ours. We cannot assure that we can compete successfully against current or future competitors, many of which have substantially more capital, resources and access to additional financing than we do, nor can there be any assurance that competitive pressures faced by us will not result in increased marketing costs, decreased Web site traffic or loss of market share or otherwise will not materially and adversely affect our business, results of operations and financial condition. We compete primarily on brand name recognition acquired through early entry into the Internet-based automotive purchase referral market and through customer and dealer satisfaction. OPERATIONS AND TECHNOLOGY We believe that our future success is significantly dependent upon our ability to continue to deliver a high-performance and reliable Web site, enhance consumer/dealer communications, maintain the highest levels of information privacy and ensure transactional security. We host our Web site at our corporate headquarters in Irvine, California. We currently contract the services of two nationally established Internet service providers to connect our systems with the Internet. Our primary provider supplies two-thirds of our capacity to connect with the Internet and our secondary provider supplies the remaining third. Our primary servers are housed in one climate-controlled, raised floor computer room with back-up power systems. We use industry-standard computers and equipment in our network. Network security is provided by utilizing standard products. System enhancements are primarily intended to accommodate increased traffic across our Web site, improve the speed in which purchase requests are processed and introduce new and enhanced products and services. System enhancements entail the implementation of sophisticated new technology and system processes. FACILITIES Our operations are principally located in a single office building in Irvine, California. We occupy three full floors, each consisting of approximately 12,000 square feet, which are 46 48 leased through August 2001. We have options to renew the leases on each floor for an additional 5-year term. We also lease office space in Houston, Texas, consisting of less than 5,000 square feet through one of our subsidiaries, Kre8.net, Inc., an Internet software company for dealer Web site design and systems backup. In order to replace their existing leased space, we have recently entered into a lease agreement for office space in Houston consisting of 9,000 square feet, which Kre8.net plans to move into in the second quarter of 1999. GOVERNMENT REGULATION Currently few laws or regulations have been adopted that apply directly to Internet business activities. The adoption of additional local, state, national or international laws or regulations may decrease the growth of Internet usage or the acceptance of Internet commerce. We believe that our dealer marketing services do not constitute franchising or vehicle brokerage activity in a way that makes federal and state franchise, motor vehicle dealer, or vehicle broker licensing laws applicable to us. However, if individual state regulatory requirements change or additional requirements are imposed on us, we may be required to modify our service programs in such a state in a manner which may undermine our program's attractiveness to consumers or dealers. If we are required by a state to be licensed as a vehicle broker and we determine that the licensing and related requirements are overly burdensome, we may elect to terminate operations in such a state. In the event a state deems that we are acting as a vehicle broker, we may be required to comply with burdensome licensing requirements of such state or terminate operations in such state. As we introduce new services, we may need to comply with additional licensing regulations and regulatory requirements. Our marketing service may result in changes in the way vehicles are currently sold or may be viewed as threatening by new and pre-owned vehicle dealers who do not subscribe to the Autobytel.com program. Such businesses are often represented by influential lobbying organizations, and such organizations or other persons may propose legislation that, if adopted, could impact our evolving marketing and distribution model, which our service promotes. We expect to expand our operations to other countries that may have laws or be subject to treaties that regulate the marketing, distribution, and sale of vehicles. As we consider specific foreign operations, we will need to determine whether the laws of the countries in which we seek to operate require us to modify our program or otherwise change the Autobytel.com system or prohibit the use of the system in such country entirely. In addition, the laws of a foreign country may impose licensing, bonding or similar requirements on us as a condition to doing business there. To date, we have not expended significant resources on lobbying or related government affairs issues but may be required to do so in the future. Franchise Classification. If our relationship or written agreement with our dealers was found to be a "franchise" under federal or state franchise laws, we could be subjected to additional regulations, including but not limited to licensing, increased reporting and disclosure requirements. Compliance with varied laws, regulations, and enforcement characteristics found in each state may require us to allocate both staff time and monetary resources, each of which may have an adverse affect on our results of operations. As an 47 49 additional risk, if our dealer relationship or subscription agreement is determined to establish a franchise, we may be subject to limitations on our ability to quickly and efficiently effect changes in our dealer relationships in response to changing market trends, which may negatively impact our ability to compete in the marketplace. We believe that neither our relationship with our subscribing dealers nor our dealer subscription agreements themselves constitute "franchises" under federal or state franchise laws. This belief has been challenged but upheld by a Federal District Court in Michigan that ruled our business relationship and our dealer subscription agreement does not rise to the level of a "franchise" under Michigan law. Vehicle Brokerage Activities. If government licensing and enforcement authorities determine that state motor vehicle brokering laws apply to our business operations, we may be required to apply for and obtain a motor vehicle brokers license. As additional risk, we may be required to pay administrative fees, fines, and penalties for failure to comply with such licensing requirements. We believe that state motor vehicles dealer or broker licensing laws do not apply to us. We believe that our dealer marketing service model does not qualify as an automobile brokerage activity and therefore state broker licensing requirements do not apply to us. In response to concerns about our marketing program raised by the Texas Department of Transportation, we modified our marketing program in that state to achieve compliance. These modifications included a unique pricing model under which all subscribing dealerships in Texas are charged uniform fees based on the population density of their particular geographic area and opening our program to all dealerships who wish to apply. In the event that any other state's regulatory requirements impose state specific requirements on us or include us within an industry-specific regulatory scheme, we may be required to modify our marketing programs in such states in a manner which may undermine the program's attractiveness to consumers or dealers. In the alternative, if we determine that the licensing and related requirements are overly burdensome, we may elect to terminate operations in such state. In each case, our business, results of operations and financial condition could be materially and adversely affected. Financing Related Activities. We provide a connection through our Web site that allows a consumer to obtain finance information and loan approval. We do not demand nor do we receive any fees from consumers for this service. We do receive fees from participating lenders. We currently hold financial broker licenses in the states of Florida, Indiana, Rhode Island, and Wisconsin and have applied for renewals in California and Colorado. In the event other states require us to be licensed, we intend to obtain such licenses. We may be unable to comply with a state's regulations affecting our current operations or newly introduced services, or we could be required to incur significant fees and expenses to license or be compelled to discontinue finance operations in those states. Insurance Related Activities. We provide access through a link from our Web site to a Web site owned and maintained by American International Group. Persons visiting our Web site who access the Web site maintained by American International Group may obtain insurance directly from its member companies. We receive fees from American International Group for allowing the American International Group's Web site to be accessed from ours. We receive no premiums from consumers nor do we charge consumers fees for our services. All applications are completed on American International Group's Web site and at no time do we receive the secure data found on the applications. 48 50 We do not believe that our activity requires us to be licensed under state insurance laws. The use of the Internet in the marketing of insurance products, however, is a relatively new practice. It is not clear whether or to what extent state insurance licensing laws apply to activities similar to ours. Given this aforementioned uncertainty, we elected to proactively apply for and currently hold insurance agent licenses in California, Indiana, Nebraska, New Jersey, and Utah. We have also applied for insurance agent licenses in all remaining states that license corporations as insurance agents and are awaiting approvals. EMPLOYEES As of December 31, 1998, we had a total of 180 employees. We also utilize independent contractors for software and hardware development and certain administrative activities. None of our employees are represented by a labor union. We have not experienced any work stoppages and consider our employee relations to be good. LITIGATION Jerome-Duncan Ford, a Michigan dealership, first subscribed to our new vehicle marketing program in June 1996. In January 1997, we sought to replace the existing agreement with our new standard subscription services agreement and realign Jerome-Duncan Ford territory. Jerome-Duncan Ford objected to the realignment and ceased payment of its monthly subscription fee to us. Unable to resolve the matter, we terminated Jerome-Duncan Ford's subscription dealer agreement. Jerome-Duncan Ford then sued us in Michigan State Court and sought an injunction to prevent us from cancelling Jerome-Duncan Ford's subscription services agreement. Jerome-Duncan Ford based its action on Michigan franchise law which prohibits a franchiser from terminating a franchisee without good cause. We removed the case to federal court. In late June 1997, the federal district court ruled in favor of us and denied the injunction. The court held that Jerome-Duncan Ford showed insufficient evidence of a likelihood of success on the merits involving claims of breach of Michigan franchise law. The court found that no franchise existed. We thereafter moved for summary judgment on the franchise issues. In late 1997, the court granted our motion for summary judgment and held that our subscription services agreement and method of operation did not constitute a franchise under Michigan state law. The plaintiffs have appealed the ruling. Halrec, Inc., a California based Toyota dealership, first subscribed to our new vehicle marketing program in October 1996 and subsequently to our financing program. On November 13, 1998, Halrec sued us in Superior Court, County of Santa Clara, California for, among other things, restraint of trade, intentional misrepresentation and unfair competition claiming that we wrongfully awarded to other car dealers geographic territories that were contractually the property of Halrec. We believe Halrec's claims are without merit and are vigorously defending ourselves against their claims. From time to time, we are involved in other litigation matters relating to claims arising out of the ordinary course of business. We are involved in at least one such case currently, including one seeking punitive damages in an unspecified amount. We believe that there are no claims or actions pending or threatened against us, the ultimate disposition of which would have a material adverse effect on our business, results of operations and financial condition. However, if a court or jury rules against us and the ruling is ultimately sustained on appeal and damages are awarded against us that include punitive damages, such ruling could have a material and adverse effect on our business, results of operations and financial condition. 49 51 MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS The following table sets forth certain information regarding the executive officers and directors of Autobytel.com. Our audit committee consists of Mr. Fuchs, Mr. Coats and Mr. Kaplan. Our compensation committee consists of Mr. Fuchs, Mr. Coats and Mr. Orton.
OFFICERS AND DIRECTORS AGE POSITION ---------------------- --- -------- Michael J. Fuchs.......................... 52 Chairman of the Board and Director Mark W. Lorimer........................... 39 Chief Executive Officer, President and Director Robert S. Grimes.......................... 54 Executive Vice President and Director Hoshi Printer............................. 57 Senior Vice President and Chief Financial Officer Ann M. Delligatta......................... 51 Executive Vice President and Chief Operating Officer Ariel Amir................................ 39 Vice President and General Counsel Jeffrey H. Coats.......................... 41 Director Mark N. Kaplan............................ 69 Director Kenneth J. Orton.......................... 47 Director Peter Titz................................ 45 Director Richard A. Post........................... 40 Director
Michael J. Fuchs was elected as a director of Autobytel.com in September 1996 and became Chairman in June 1998. Mr. Fuchs was Chairman and Chief Executive Officer of Home Box Office, a Division of TimeWarner Entertainment Company, L.P., a leading pay-television company, from October 1984 until November 1995, and Chairman and Chief Executive Officer of Warner Music Group, a Division of Time Warner Inc., from May 1995 to November 1995. Mr. Fuchs holds a B.A. from Union College and a J.D. from the New York University School of Law. Mr. Fuchs is a member of the board of directors of IMAX Corp., Wink Communications, Inc. and Consolidated Cigar Holdings Inc. Mark W. Lorimer joined Autobytel.com in December 1996 as Vice President, General Counsel and Secretary, and was promoted to Executive Vice President and Chief Operating Officer in May 1997. In May 1998, Mr. Lorimer was promoted to President. He was elected a director and appointed Chief Executive Officer of Autobytel.com in June 1998. From January 1996 to November 1996, Mr. Lorimer was a partner and, from March 1989 to January 1996, was an associate with the law firm of Dewey Ballantine LLP. Mr. Lorimer is a member of the board of directors of IMC Mortgage Company. Mr. Lorimer holds a B.S. in Speech from Northwestern University and a J.D. from the Fordham University School of Law. Robert S. Grimes has been a director of Autobytel.com since inception and has served as Executive Vice President since July 1996. Since September 1987, Mr. Grimes has been President of R.S. Grimes & Co., Inc., a private investment company. From April 1981 to March 1987, Mr. Grimes was a partner with the investment firm of Cowen & Company. Mr. Grimes holds a B.S. from the Wharton School of Commerce and Finance at the University of Pennsylvania and an L.L.B. from the University of Pennsylvania Law School. Mr. Grimes has served on the board of directors of Philips International Realty Corp., a New York Stock Exchange listed company, since April 1998. 50 52 Hoshi Printer joined Autobytel.com in January 1999 as Senior Vice President and Chief Financial Officer. From June 1996 to December 1998, Mr. Printer served as Vice President, Finance and Administration, Chief Financial Officer and Secretary of Peerless Systems Corporation, a software technology company. From July 1995 to May 1996, Mr. Printer was Chief Financial Officer of Neuron Data Inc., a software technology company. From July 1994 to June 1995 Mr. Printer served as Chief Financial Officer of Soane Technologies Inc., a polymer technology company. From January 1990 to June 1994, Mr. Printer was Chief Financial Officer of Catalytica Inc., an environmental technology company. Mr. Printer also worked at Xerox Corporation for over 17 years as Vice President of Finance and in 1976 served as a consultant to the White House for the President's Reorganization project on cash management. Mr. Printer holds a B.E. in mechanical engineering and a B.E. in electrical engineering from Poona University in India, an M.S. in industrial engineering from Oklahoma State University and an M.B.A. from Stanford University. Ann M. Delligatta joined Autobytel.com in June 1997 as Senior Vice President and Chief Technology Officer and was promoted to Executive Vice President and Chief Operating Officer in July 1998. From September 1996 to June 1997, Ms. Delligatta was President and Chief Executive Officer of the Pharos Group, an information technology consulting organization. From January 1987 to September 1996, Ms. Delligatta held a number of managerial positions at TRW Inc.'s TRW Information Systems and Services Group, most recently as Vice President and General Manager/Information Technology Services. Ms. Delligatta attended Mount St. Mary's College and was named by McGraw-Hill Companies as one of the "Top 100 Women in Computing in 1996" in recognition of her success in the alignment of business and technology strategies. Ariel Amir joined Autobytel.com as Vice President and General Counsel in March 1999. Mr. Amir was Vice President of Security Capital U.S. Realty from February 1998 until March 1999, where he was responsible for mergers and acquisitions and relations with strategic investees. Mr. Amir was Vice President of Security Capital Group Incorporated, where he provided securities offering and corporate acquisitions services from June 1994 until January 1998. Prior to joining Security Capital Group, Mr. Amir was an attorney with the law firm of Weil, Gotshal & Manges in New York where he practiced securities and corporate law from September 1985 until April 1994. Mr. Amir received his law degree from Georgetown University Law Center, an M.S. in industrial administration from Carnegie-Mellon University Graduate School of Industrial Administration and an A.B. in Economics, with honors, from Washington University in St. Louis. Jeffrey H. Coats was elected a director of Autobytel.com in August 1996. Mr. Coats has served as Managing Director of GE Equity Capital Group, Inc., a wholly-owned subsidiary of General Electric Capital Corporation, a significant stockholder in us, since April 1996. He has also held various positions, most recently as Managing Director, of GE Capital Corporate Finance Group, Inc., a wholly-owned subsidiary of General Electric Capital Corporation, from June 1987 to April 1993. From March 1994 to April 1996, Mr. Coats served as President of Maverick Capital Equity Partners, LLC, and from April 1993 to January 1994, Mr. Coats was a partner with Veritas Capital, Inc., both of which are investment firms. Mr. Coats holds a B.B.A. in Finance from the University of Georgia and a Masters in International Management in Finance from the American Graduate School of International Management. Mr. Coats is a director and Chairman of the Board of The Hastings Group, Inc., a privately-held clothing retailer, which on October 23, 1995, filed a voluntary petition under Chapter 11 of the Bankruptcy Code and confirmed a plan of liquidation in late 1997. Mr. Coats became a director of The Hastings Group in 51 53 connection with Maverick Capital Equity Partners' purchase of the assets of the predecessor of The Hastings Group in a previous bankruptcy proceeding. Maverick Capital Equity Partners was not able to make the business of The Hastings Group, Inc. profitable after it purchased the business in a previous bankruptcy proceeding and accordingly, The Hastings Group, Inc. filed for bankruptcy after Maverick Capital Equity Partners determined not to continue to fund its operating losses. Mr. Coats is a member of the board of directors of Wink Communications, Inc. and of Krause's Furniture, Inc., a publicly-held company. Mark N. Kaplan was elected as a director of Autobytel.com in June 1998. Mr. Kaplan has been a member of the law firm of Skadden, Arps, Slate, Meagher & Flom LLP since 1979. Mr. Kaplan serves on the board of directors of the following companies whose shares are publicly traded: American Biltrite, Inc., Congoleum Corporation, Inc., DRS Technologies, Inc., Grey Advertising, Inc., MovieFone, Inc., REFAC Technology Development Corporation, and Volt Information Services, Inc. Mr. Kaplan holds an A.B. from Columbia College and a J.D. from Columbia Law School. Kenneth J. Orton was elected a director of Autobytel.com in June 1998. Mr. Orton is currently a director, and through February 1999 Mr. Orton was the President and Chief Executive Officer, of Preview Travel, Inc., which he joined in April 1994 as President and Chief Operating Officer. From September 1989 to March 1994, Mr. Orton was Vice President and General Manager of the San Francisco division of Epsilon, a database marketing firm and a wholly owned subsidiary of American Express Company. Prior to his employment with Epsilon, Mr. Orton was Vice President of MARC Inc., a market research and database marketing company, and Vice President of Sales and Marketing for Future Computing. Mr. Orton also serves as a director of ONSALE, Inc., a publicly-held company. Mr. Orton received a B.A. from California State University, Fullerton. Peter Titz was elected a director of Autobytel.com in January 1999. Mr. Titz is a manager of Metro International Dienstleistung Beteiligungs AG and Invision AG. Before joining Metro and Invision AG in 1989, Mr. Titz was managing director of various institutions in the financial service sector including American Express in Frankfurt where he was responsible for the introduction of automatic teller machines and the installation of POS systems in Europe. Mr. Titz received a degree in engineering from the University of Aachen and a degree in economics from the University of Bonn. Mr. Titz is President of the board of directors of Aureus Private Equity AG and Deutsche Media AG and is a member of the board of directors of Teleclip AG. Richard A. Post was elected a director of Autobytel.com in February 1999. Mr. Post is Executive Vice President and Chief Financial Officer of MediaOne Group, Inc. and president of MediaOne Capital Corp., a subsidiary of MediaOne Group, Inc. Mr. Post joined US WEST Financial Services in April 1988 as manager of Corporate Development and was promoted in 1990, first to executive director, and then to vice president, responsible for all Capital Asset Group businesses. From June 1996 to January 1997, he was president of Corporate Development at US WEST, Inc. where he had responsibility for corporate development efforts at US WEST Communications, as well as US WEST, Inc. US WEST, Inc. has since split into two separate corporations, MediaOne Group, Inc. and US WEST. From December 1995 to June 1996, he served as vice president of Corporate Development for US WEST Media Group, a division of the former US WEST, Inc. Mr. Post holds both a business administration degree and an MBA from Delta State University. Mr. Post is a member of the board of directors of Financial Security Assurance Holdings, Inc., a financial guaranty company based in New York. 52 54 BOARD COMPOSITION The board of directors has currently authorized eight members of whom two are to be elected by the holders of series A preferred stock pursuant to Autobytel.com's certificate of incorporation. Mr. Coats and Mr. Fuchs are the designees of the series A preferred stock to the board of directors. The rights of the series A preferred stockholders will expire upon the closing of this offering. Members of the board of directors are elected each year at our annual meeting of stockholders, and serve until the following annual meeting of stockholders or until their respective successors have been elected and qualified. In accordance with the terms of Autobytel.com's restated certificate of incorporation, effective upon the closing of this offering, the terms of office of the board of directors will be divided into three classes: the Class I term will expire at the annual meeting of stockholders to be held in 1999; the Class II term will expire at the annual meeting of stockholders to be held in 2000; and the Class III term will expire at the annual meeting of stockholders to be held in 2001. The Class I directors will be Mr. Lorimer, Mr. Titz and Mr. Post, the Class II directors will be Mr. Kaplan and Mr. Orton and the Class III directors will be Mr. Grimes, Mr. Fuchs and Mr. Coats. At each annual meeting of stockholders after the initial classification, the successors to directors whose term will then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. In addition, our restated certificate of incorporation provides that the authorized number of directors shall be designated by the bylaws of Autobytel.com. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. This classification of the board of directors may have the effect of delaying or preventing changes in control or management of Autobytel.com. Directors of Autobytel.com may be removed, with or without cause, by the affirmative vote of the holders of a majority of the shares entitled to vote at an election of directors. There are no family relationships among any of the directors and executive officers of Autobytel.com. BOARD COMMITTEES The audit committee consists of Mr. Coats, Mr. Fuchs and Mr. Kaplan. The audit committee makes recommendations to the board of directors regarding the selection of independent public accountants, reviews the results and scope of the audit and other services provided by Autobytel.com's independent public accountants and reviews and evaluates our control functions. The compensation committee consists of Mr. Coats, Mr. Fuchs and Mr. Orton. The compensation committee administers the issuance of stock under Autobytel.com's 1996 Stock Incentive Plan, 1996 Stock Option Plan, 1996 Employee Stock Purchase Plan, 1998 Stock Option Plan and 1999 Stock Option Plan, makes recommendations regarding various incentive compensation and benefit plans and determines salaries for the executive officers and incentive compensation for employees and consultants of Autobytel.com. DIRECTOR COMPENSATION Our non-employee directors do not currently receive any cash compensation for service on Autobytel.com's board of directors or any committee thereof, but directors may be reimbursed for expenses incurred in connection with attendance at board and committee meetings. Our 1999 Stock Option Plan provides for automatic grants of stock options to non-employee directors. See "Stock Plans -- 1999 Stock Option Plan." 53 55 We have entered into indemnification agreements with each member of the board of directors and our officers providing for the indemnification of such person to the fullest extent authorized, permitted or allowed by law. EXECUTIVE COMPENSATION The following table sets forth information regarding the compensation (rounded to the nearest thousand) paid during each of our last three completed fiscal years to our Chief Executive Officer and each of our other five most highly compensated executive officers as of December 31, 1998. Mr. Ellis resigned as our Chief Executive Officer in June 1998. SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION AWARDS ANNUAL ------------ FISCAL COMPENSATION OTHER SECURITIES NAME AND PRINCIPAL YEAR ENDED ------------------- ANNUAL UNDERLYING POSITION DECEMBER 31, SALARY BONUS COMPENSATION OPTIONS(#) ------------------ ------------ -------- -------- ------------ ------------ Peter R. Ellis............. 1998 $219,000 $ -- $522,000(1) -- Former Chief Executive 1997 275,000 100,000 15,000 -- Officer and President 1996 123,000 321,000 11,000 -- Mark W. Lorimer............ 1998 316,000 150,000 9,000 750,000(2) Chief Executive Officer and 1997 200,000 100,000 70,000(3) 100,000 President 1996 8,000 -- -- 333,333 Robert S. Grimes........... 1998 220,000 75,000 -- 125,000 Executive Vice President 1997 180,000 -- -- 116,667 1996 90,000 -- -- 166,667 Ann M. Delligatta.......... 1998 177,000 100,000 -- 316,667(4) Executive Vice President 1997 88,000 -- -- 83,334 and Chief Operating Officer Michael J. Lowell.......... 1998 190,000 -- -- 16,667 Senior Vice President, 1997 139,000 50,000 -- 50,000 Development 1996 15,000 -- -- 111,111 Anne Benvenuto............. 1998 150,000 -- -- 16,667 Senior Vice President, 1997 13,000 5,000 15,000(3) 33,333 Marketing
- ------------------------- (1) Represents a one-time payment of $500,000, $14,000 car allowance and $8,000 legal expenses. See "Certain Transactions." (2) 500,000 shares of such securities underlying options are contingent on the performance of our market trading price after the closing of the offering. (3) Relocation expense reimbursement. (4) 200,000 shares of such securities underlying options are contingent on the performance of our market trading price after the closing of the offering. 54 56 OPTION GRANTS DURING 1998 The following table sets forth the five most highly compensated officers and certain information concerning stock options granted to them during 1998. We have never issued stock appreciation rights. Options were granted at an exercise price equal to the fair market value of the common stock at the date of grant. In determining the fair market value of the common stock, the board of directors considered various factors, including recent arms' length transactions, our financial condition and business prospects, operating results, the absence of a market for the common stock and the risks normally associated with investments in companies engaged in similar businesses. The term of each option granted is generally ten years from the date of grant. Options may terminate before their expiration dates, if the optionee's status as an employee or a consultant is terminated or upon the optionee's death or disability. We have not included disclosure on Mr. Ellis as he resigned as our Chief Executive Officer in June 1998 and did not receive any option grants in 1998.
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE ---------------------------------------------------------- OF ASSUMED ANNUAL RATES NUMBER OF PERCENT OF OF STOCK PRICE SECURITIES TOTAL OPTIONS APPRECIATION FOR OPTION UNDERLYING GRANTED TO EXERCISE TERM(3) OPTIONS EMPLOYEES IN PRICE EXPIRATION -------------------------- NAME GRANTED(#)(1) 1998(2) ($/SHARE) DATE(4) 5%($) 10%($) ---- ------------- -------------- ------------ ---------- ----------- ------------ Mark W. Lorimer...... 200,000 12.3% $13.20 12/17/08 $1,660,282 $ 4,207,480 500,000 30.7% 13.20 12/17/08 4,150,705 10,518,700 50,000 3.1% 13.20 06/21/08 415,070 1,051,870 Robert S. Grimes..... 125,000 7.7% 13.20 12/17/08 1,037,676 2,629,675 Ann M. Delligatta.... 100,000 6.1% 13.20 12/17/08 830,141 2,103,740 200,000 12.3% 13.20 12/17/08 1,660,282 4,207,480 16,667 1.0% 13.20 06/21/08 138,360 350,630 Anne Benvenuto....... 16,667 1.0% 13.20 06/21/08 138,360 350,630 Michael J. Lowell.... 16,667 1.0% 13.20 06/21/08 138,360 350,630
- ------------------------- (1) Represents options granted under our Amended and Restated 1996 Stock Incentive Plan and the 1998 Stock Option Plan. (2) Based on an aggregate 1,630,340 shares of our common stock subject to options granted to employees during fiscal 1998. (3) The 5% and 10% assumed annual rates of compounded stock price appreciation are mandated by rules of the Securities and Exchange Commission and do not represent our estimate or projection of our future common stock prices. 55 57 AGGREGATED OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES The following table sets forth for each of the five most highly compensated officers certain information concerning options exercised during fiscal 1998 and the number of shares subject to both exercisable and unexercisable stock options as of December 31, 1998. The values for "in-the-money" options are calculated by determining the difference between the fair market value of the securities underlying the options as of December 31, 1998 ($13.20 per share as determined by the board of directors) and the exercise price of the officer's options. In determining the fair market value of the common stock, the board of directors considered various factors, including recent arms' length transactions, our financial condition and business prospects, its operating results, the absence of a market for the common stock and the risks normally associated with investments in companies engaged in similar businesses. Autobytel.com has never issued stock appreciation rights. We have not included disclosure on Mr. Ellis as he resigned as our Chief Executive Officer in June 1998 and holds no options.
NUMBER OF SECURITIES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN- NUMBER OF OPTIONS AT THE-MONEY OPTIONS AT SHARES DECEMBER 31, 1998 DECEMBER 31, 1998($) ACQUIRED ON VALUE --------------------------- --------------------------- NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ---- ----------- ----------- ----------- ------------- ----------- ------------- Mark W. Lorimer........ -- $ -- 209,999 973,334 $1,609,491 $1,290,506 Michael J. Lowell...... -- -- 104,861 72,917 725,006 241,660 Robert S. Grimes....... -- -- 245,834 162,500 2,060,004 -- Ann M. Delligatta...... -- -- 29,165 370,836 -- -- Anne Benvenuto......... -- -- 8,333 41,667 -- --
STOCK PLANS Since our inception the board of directors has granted stock options in order to attract, retain and motivate employees. Our board of directors considers many factors in granting stock options. For example, among other factors, our board of directors considers competitive market conditions for employees and the risk associated with working for a development stage Internet company. 1996 Stock Option Plan. Autobytel.com's 1996 Stock Option Plan was approved by the board of directors on May 18, 1996 and the stockholders on May 31, 1996. The 1996 Option Plan was terminated by a resolution of the board of directors on October 23, 1996, at which time over 800,000 options had been issued. The 1996 Option Plan provided for the granting to employees and directors of stock options intended to qualify as incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, and for the grant to employees, consultants and directors of nonstatutory stock options. Autobytel.com reserved 1,194,444 shares of common stock for issuance under the 1996 Option Plan. Under the 1996 Option Plan, the exercise price of any incentive stock options granted under the 1996 Option Plan were not less than the fair market value of the common stock on the date of grant, and the exercise price of any non-statutory stock option granted under the 1996 Option Plan were not less than 85% of the fair market value of the common stock at the date of grant. The term of all options granted under the 1996 Option Plan did not exceed 10 years. The administrator of the options granted under the 1996 Option Plan is the board of directors or a committee of the board of directors. Any options granted under the 1996 Option Plan are exercisable at such times as determined by the administrator, but in no case at a rate 56 58 of less than 20% per year over five years from the grant date. A majority of the outstanding options vest and became exercisable as to one third of the grant on October 31, 1996, and as to an additional one third of the grant at each successive October 31. Options granted under the 1996 Option Plan generally must be exercised within 30 days following termination of the optionee's status as an employee, director or consultant of Autobytel.com, or within 12 months following such optionee's termination by death or disability. Any optionee holding options granted under the 1996 Option Plan cannot sell or transfer any shares of common stock during the 180 day period following the effective date of the registration statement relating to an initial public offering of securities filed pursuant to the Securities Act. 1996 Stock Incentive Plan. The Incentive Plan was approved by the board of directors on October 23, 1996, amended and restated by the board of directors on November 24, 1996 and approved by the stockholders on January 16, 1997. The 1996 Stock Incentive Plan provides for the granting to employees and directors of stock options intended to qualify as incentive stock options within the meaning of Section 422 of the Code, and for the granting to employees, directors and consultants of nonstatutory stock options and stock purchase rights. As approved by the stockholders, Autobytel.com reserved 833,333 shares of common stock for issuance under the Incentive Plan. Options with respect to all of the common stock reserved for issuance have been issued and are either incentive stock options or nonstatutory stock options. Options granted under the Incentive Plan are not generally transferable by the option holder, and each option is exercisable during the lifetime of the option holder only by such option holder. Options granted under the Incentive Plan must generally be exercised within three months of the end of the option holder's status as an employee or consultant of Autobytel.com, or within twelve months after such option holder's termination by death or disability, but in no event later than the expiration of the option's ten year term. The board of directors determined the exercise price of nonstatutory stock options granted under the Incentive Plan, and in all cases, the exercise price was the fair market value of the common stock on the date of grant. The term of all options granted under the Incentive Plan did not exceed ten years. Stock options granted under the Incentive Plan vest according to vesting schedules determined by the administrator. The Incentive Plan provides that in the event of a merger of Autobytel.com with or into another corporation, a sale of substantially all of Autobytel.com's assets or a like transaction involving Autobytel.com, each option will be assumed or an equivalent option substituted by the successor corporation. If the outstanding options are not assumed or substituted as described in the preceding sentence, the committee of the board of directors shall provide for each option holder to have the right to exercise the option as to all of the optioned stock, including shares as to which it would not otherwise be exercisable. If the administrator makes an option exercisable in full in the event of a merger or sale of assets, the administrator will notify the option holder that the option will be fully exercisable for a period of 15 days from the date of such notice, and the option will terminate upon the expiration of such period. From October 1996 through January 1999, we purported to grant incentive stock options to employees, of which 689,406 shares granted exceeded the Incentive Plan limit of 833,333 shares. As of January 29, 1999, 688,921 options, and 485 shares that were acquired upon the exercise of excess options were outstanding in excess of the Incentive 57 59 Plan limit. Because these grants exceed the plan's limit, they did not qualify as incentive stock options, which have more favorable tax treatment for employees than nonqualified stock options. In connection with these matters, on January 29, 1999, we filed an application with the California Department of Corporations for approval of a rescission offer to those affected optionholders holding options covering 689,406 shares of common stock. The Department of Corporations approved the rescission offer on February 12, 1999. The rescission offer allowed each affected optionholder to choose between a cash payment or a new grant of incentive stock options under the 1999 Stock Option Plan. The offer for a cash payment was for 10% of the aggregate exercise price per share of the option plus 7% statutory interest since the date of grant of the option. The terms of the options granted under the 1999 Stock Option Plan are similar to the terms of the original stock options, with an exercise price equal to the fair market value on the date of regrant. In addition, optionholders who chose new grants under the 1999 Stock Option Plan were granted additional options based on the length of time the original options were held. The aggregate maximum number of additional shares of common stock issuable under this choice for all those optionholders were 35,000 shares. All the affected optionholders participated in the rescission offer and we paid $8,000 to four optionholders who chose the cash alternative. 1996 Employee Stock Purchase Plan. Autobytel.com's 1996 Employee Stock Purchase Plan was adopted by the board of directors on November 18, 1996 and approved by the stockholders on January 16, 1997. The maximum number of shares of common stock available for sale is 444,444. Currently the plan has not been implemented. The Purchase Plan, which is intended to qualify under Section 423 of the Code, permits eligible employees of Autobytel.com to purchase shares of common stock through payroll deductions of up to ten percent of their compensation for all purchase periods ending within any calendar year. Individuals who are eligible employees on the start day of any offering period may enter the Purchase Plan on that start date. Individuals who become eligible employees after the start date of the offering period may join the Purchase Plan on any subsequent quarterly entry date within that period. Employees are eligible to participate if they are customarily employed by Autobytel.com or any designated subsidiary for at least 20 hours per week and for more than five months in any calendar year. The price of common stock purchased under the Purchase Plan will be 85% of the lower of the fair market value of the common stock on the first or last day of each six month purchase period. Employees may end their participation in the Purchase Plan at any time during an offering period, and they will be paid their payroll deductions to date. Participation ends automatically upon termination of employment with Autobytel.com. Rights granted under the Purchase Plan are not transferable by a participant other than by will, the laws of descent and distribution, or as otherwise provided under the plan. The Purchase Plan will be administered by the board of directors or by a committee appointed by the board of directors. The board of directors may amend or modify the Purchase Plan at any time. The Purchase Plan will terminate 10 years from the date of its adoption. 1998 Stock Option Plan. Our 1998 Stock Option Plan was adopted by the board of directors in December 1998. The Plan provides that an aggregate of 1,500,000 shares of our common stock is available to be granted to key employees of Autobytel.com and its parent or subsidiary corporations, if any. If any stock option expires or terminates for any reason without having been exercised in full, new stock options may be granted covering 58 60 the shares of our common stock originally set aside for the unexercised portion of such expired or terminated stock option. Under the 1998 Option Plan, eligible key employees of Autobytel.com may receive incentive stock options within the meaning of Section 422 of the Code or nonstatutory stock options. No eligible employee shall receive stock options with respect to more than 700,000 shares of our common stock during any one calendar year. Incentive stock options granted under the 1998 Option Plan must have an exercise price that is no less than the fair market value of our common stock as of the time the option is granted and generally may not be exercised more than ten years after the date of grant. Any incentive stock option that is granted to any option holder who beneficially owns more than 10% of the total combined voting power of all classes of outstanding shares of capital stock of Autobytel.com must have an exercise price that is no less than 110% of the fair market value of our common stock as of the time the option is granted and may not be exercised more than five years after the date of grant. To the extent that the aggregate fair market value of stock exercisable by an optionee for the first time in any one calendar year under incentive stock options granted under the 1998 Option Plan and all other stock plans of Autobytel.com exceeds $100,000, options for such shares shall not be considered incentive stock options but instead shall be considered nonstatutory stock options. Nonstatutory stock options granted under the 1998 Option Plan must have an exercise price that is no less than 85% of the fair market value of our common stock as of the time the option is granted and may not be exercised more than 10 years after the date they are granted. Under the 1998 Option Plan, nonstatutory stock options vest over a time period determined by the administrator, however, the vesting could accelerate based on the performance of our common stock. All other stock options granted under the 1998 Option Plan vest according to time-based vesting schedules determined by the administrator. In addition, an option holder who is not an officer, director or consultant shall have the right to exercise at least 20% of the options granted per year over 5 years from the date of grant. Options granted under the 1998 Option Plan are nontransferable, other than by will or the laws of descent and distribution. The 1998 Option Plan provides that, unless otherwise stated in a stock option agreement, upon any merger, consolidation, or sale or transfer of all or any part of our business or assets, any option shall vest and may be exercised immediately unless any party to these transactions specifically assumes our obligations under the 1998 Option Plan. In addition, unless otherwise provided in the stock option agreement for any given option, upon any liquidation or dissolution of Autobytel.com, all rights of the option holder with respect to the unexercised portion of any option will terminate and all options will be canceled unless the plan under which such liquidation or dissolution is effected makes specific provisions regarding the 1998 Option Plan. The holder of any option granted under the 1998 Option Plan has the right immediately prior to the effective date of a merger, consolidation or sale of all or any part of our business or assets or a liquidation or dissolution to exercise such option without regard to any time vesting provision of such option. In no event may any incentive stock options be exercised later than the date preceding the tenth anniversary date of the grant. The 1998 Option Plan will be administered by the board of directors or by a committee of the board of directors acting as the administrator. The administrator shall select the eligible key employees who are to be granted options, determine the number of shares to be subject to options to be granted to each eligible key employee and designate such options as incentive stock options or nonstatutory stock options. The board of 59 61 directors may at any time amend or modify the 1998 Option Plan, except that the board of directors may not, without approval of the stockholders of Autobytel.com: - increase the number of shares issued under the 1998 Option Plan, - modify the requirements as to eligibility for participation in the 1998 Option Plan or - change the option price provisions of the 1998 Option Plan so as to have a material adverse effect on Autobytel.com other than to conform with any applicable provisions of the Code or regulations or rulings. Unless terminated earlier, the 1998 Option Plan terminates ten years from the date it was adopted by the board of directors. 1999 Stock Option Plan. Our 1999 Stock Option Plan was adopted by the board of directors on January 14, 1999. The plan provides that an aggregate of 1,800,000 shares of our common stock are available to our employees; provided that after March 31, 1999, we may not grant more than 1,000,000 options under the plan. Unless otherwise provided in the stock option agreement, upon any merger, consolidation, or sale or transfer of all or any part of our business or assets, any option under the plan shall immediately vest and be exercisable unless any party to such a transaction specifically assumes the obligations of Autobytel.com under the 1999 Option Plan. Non-employee directors are entitled to participate in our 1999 Stock Option Plan. The 1999 Stock Option Plan provides for an automatic grant of a first option to purchase 20,000 shares of common stock to each non-employee director on the date on which the person first becomes a non-employee director; provided, that if any person serving as a non-employee director before January 14, 1999 received options for less than 20,000 shares on the date such person became a member of the board of directors, such person will be granted an option to purchase a number of shares equal to the difference between 20,000 shares and the shares actually granted. After the first option is granted to the non- employee director, he or she will automatically be granted a subsequent option to purchase 5,000 shares on November 1 of each subsequent year provided he or she is then a non-employee director and, provided further, that on such date he or she has served on the Board for at least six months. First options and each subsequent option will have a term of ten years. The shares related to the first option and each subsequent option vest in their entirety and becomes exercisable on the first anniversary of the grant date, provided that the option holder continues to serve as a director on such dates. The exercise price of shares subject to the first option and each subsequent option shall be 100% of the fair market value per share of the common stock on the date of the grant of the option. The 1999 Stock Option Plan is identical in all other material respects to the 1998 Stock Option Plan. 401(K) PLAN All employees of Autobytel.com over age 21 who have completed three months of service with Autobytel.com are eligible to participate in the Auto-By-Tel Retirement Savings Plan, a defined contribution plan effective September 1, 1997 and intended to qualify under Section 401 of the Internal Revenue Code. Eligible employees may enter the savings plan as of the first day of January or July following the date on which they have met the savings plan's eligibility requirements. Participants may make pre-tax contributions to the savings plan of up to 15 percent of their eligible earnings, but not in excess of a statutory annual limit. Autobytel.com may make discretionary matching contributions to the savings plan. For the year ended December 31, 1998, Autobytel.com made no 60 62 matching contributions to each eligible participant's contributions. Each participant in the savings plan is fully vested in his or her contributions and the investments earnings on these contributions. Participants vest in matching contributions made on their behalf, and the investment earnings on these contributions at the rate of 20 percent per year and are thus 100 percent vested in their employer matching contribution accounts after five years of service. Contributions by the participants or Autobytel.com and the income earned on such contributions are not taxable to the participants until withdrawn. Contributions by Autobytel.com, if any, are deductible by it when made. Contributions are held in trust as required by law. Individual participants may direct the trustee to invest their accounts in authorized investment alternatives. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION No interlocking relationship exists between the board of directors or compensation committee and the board of directors or compensation committee of any other company, nor has any such interlocking relationship existed in the past. The compensation committee of the board of directors currently consists of Mr. Fuchs, Mr. Coats and Mr. Orton. EMPLOYMENT AGREEMENTS On July 1, 1998, we entered into a three year employment agreement with Mr. Mark W. Lorimer, our President and Chief Executive Officer. Under this agreement, Mr. Lorimer is entitled to a base salary of $325,000 and a bonus as determined by the board of directors from time to time. Mr. Lorimer is also entitled to 200,000 options which vest over two years, 500,000 performance options which vest over seven years, unless accelerated upon the earlier accomplishment of stock price goals. In addition, Mr. Lorimer may participate in any medical, dental welfare plans, insurance coverages and any death benefit and disability benefit plans afforded to executive employees of Autobytel.com. If Mr. Lorimer's employment is terminated without cause or if Mr. Lorimer terminates his employment with good reason, Mr. Lorimer is entitled to a lump sum payment equal to the highest annual base salary in effect for the term of the agreement multiplied by the greater of (1) the remaining balance of the three year term or longer if there is a change of control or (2) two years. In the event of a change of control of Autobytel.com prior to January 1, 2000, and while Mr. Lorimer remains employed by Autobytel.com, the term of the agrement shall automatically extend for a period of three years from the date of the change of control. In addition to the above, in the event Lorimer's employment is terminated during the six month period prior to (or the first thirty-six months following) a change of control by Mr. Lorimer for good reason or by Autobytel.com other than for cause, disability or death, Mr. Lorimer is entitled to a lump sum payment equal to twice the highest bonus paid to Mr. Lorimer in the last three fiscal years plus the amount of the cost of all benefits for the greater of the remaining balance of the term or two years. In the event of a change of control while Mr. Lorimer is employed by Autobytel.com or if Lorimer's employment is terminated by Autobytel.com without cause or by Mr. Lorimer for good reason during the six month period prior to a change of control, unvested time based options shall become vested and exercisable and unvested performance-based options shall become vested and exercisable to the extent performance targets are met. In the event of the death or disability of Mr. Lorimer during the term of this employment agreement, Autobytel.com shall provide Mr. Lorimer or his successors, heirs or designees, with continued payment of Mr. Lorimer's then current base salary and all 61 63 benefits for a period of two years. If Mr. Lorimer's severance benefits are parachute payments under the Internal Revenue Code, we have agreed to make additional payments to him to compensate for his additional tax obligations. On December 17, 1998, Autobytel.com entered into a three year employment agreement with Ms. Ann Marie Delligatta, our Executive Vice President and Chief Operating Officer. Under this agreement, Ms. Delligatta is entitled to a base salary of $225,000, a bonus in such amounts and based on such criteria as may be established by the board of directors from time to time. Ms. Delligatta is also entitled to 100,000 options which vest fully by December 17, 2000 and 200,000 performance options which vest over seven years unless accelerated upon the earlier accomplishment of stock price goals. In addition, Ms. Delligatta may participate in any medical, dental welfare plans, insurance coverages and any death benefit and disability benefit plans afforded to executive employees of Autobytel.com. If Ms. Delligatta's employment is terminated without cause or if Ms. Delligatta terminates her employment for good reason, Ms. Delligatta is entitled to a lump sum payment equal to the base salary that would have been received by Ms. Delligatta if she had remained employed by Autobytel.com for the remaining balance of the three year term. Ms. Delligatta's employment with Autobytel.com shall terminate automatically in the event of death or upon 30 days' written notice of termination by Autobytel.com in the event of a disability. On March 4, 1999, we entered into an employment and severance agreement with Mr. Michael J. Lowell, our Senior Vice President, Development. Under this agreement, Mr. Lowell is entitled to a base salary of $140,000 per year and to all ordinary and customary perquisites such as any medical, dental welfare plans, insurance coverages and any death benefit and disability benefit plans afforded to executive employees of Autobytel.com. If Mr. Lowell's employment is terminated without cause, he is entitled to a lump sum severance payment in varying amounts depending on the date of termination. The maximum severance payment is $232,501, payable if the effective date of termination occurs during March 1999, and the minimum severance payment is $90,000, payable if the effective date of termination occurs after January 2000. Under a letter agreement dated December 18, 1998, Hoshi Printer, our Senior Vice President and Chief Financial Officer, is entitled to a base salary of $150,000, a $50,000 bonus payable upon closing of the offering, 150,000 options which vest fully by January 2003 and employee benefits such as health and insurance. Under a letter agreement dated March 7, 1999, Ariel Amir, our Vice President and General Counsel, is entitled to a base salary of $175,000, 125,000 options which vest fully by March 2003 and employee benefits, including health and insurance. If Mr. Amir's employment is terminated without cause during the first year of employment, Mr. Amir is entitled to one year's base salary payable monthly. If Mr. Amir's employment is terminated without cause thereafter, he is entitled to six month's base salary payable monthly. INDEMNIFICATION AND LIMITATION OF DIRECTOR AND OFFICER LIABILITY We have entered into agreements to indemnify our directors and officers, in addition to the indemnification provided for in our bylaws. These agreements, among other things, indemnify our directors and officers for expenses including attorneys' fees, judgments, fines and settlement amounts incurred by any such person in any action or proceeding arising out of such person's services as an officer or director of us. 62 64 In any event, our directors and officers shall not be entitled to indemnity under these agreements if a reviewing party appointed by the board of directors determines that such person is not entitled to be indemnified thereunder under applicable law. In addition, our directors and officers may not be indemnified for expenses reasonably incurred, regarding any claim related to the fact that such person was a director or officer of Autobytel.com: - if the expenses result from acts, omissions or transactions for which such person is prohibited from receiving indemnification; - if the claims were initiated or brought voluntarily by one of our directors or officers and not by way of defense, counterclaim or cross claim; or - if a claim instituted by one of our directors or officers or by us to enforce or interpret the indemnity agreement was found to be frivolous or made in bad faith by a court having jurisdiction over such matter. We believe that these agreements are necessary to attract and retain qualified directors and officers. To the extent indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us as discussed above, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. 63 65 FINANCINGS AND RELATED PARTY TRANSACTIONS Series A Preferred Stock On August 23, 1996, in a private placement transaction, we issued 1,500,000 shares of series A preferred stock at $10.00 per share convertible into common stock at the conversion price per share of $9.00. The number of shares of common stock into which each share of series A preferred stock will convert is 1.11 shares. The holders of such series A preferred stock are entitled to registration rights regarding the shares of common stock issued or issuable upon conversion. See "Description of Capital Stock--Registration Rights." The holders of outstanding shares of series A preferred stock are entitled to receive, when and as declared by the board of directors, dividends in cash at an annual rate of $0.80 per share of series A preferred stock. Such dividends, if any, are payable in preference and in priority to any declaration or payment of any dividend on the series B preferred stock or common stock. We have never declared or paid dividends on the series A preferred stock. All shares of series A preferred stock will automatically convert into shares of common stock upon the closing of the offering. From July 9, 1996 through August 13, 1996, Mr. Fuchs made loans to us in the aggregate principal amount of $500,000. These loans, along with accrued interest, converted into series A preferred stock on August 23, 1996 at $10.00 per share. In September 1996, Mr. Fuchs was appointed to our board of directors. The holders of series A preferred stock have the right to elect two members of the board of directors. Because General Electric Capital Corporation holds more than a majority of the shares of series A preferred stock it has the right to designate on behalf of all holders of series A preferred stock such directors. To date, General Electric Capital Corporation has designated Mr. Fuchs and Mr. Coats to the board of directors. Series B Preferred Stock On January 30, 1997, in a private placement transaction we issued 967,915 shares of series B preferred stock at $9.35 per share convertible into common stock at the conversion price per share of $10.37. The number of shares of common stock into which each share of series B preferred stock will convert is 0.90 shares. The holders of such series B preferred stock are entitled to registration rights with respect to the shares of common stock issued or issuable upon conversion. See "Description of Capital Stock--Registration Rights." The holders of outstanding shares of series B preferred stock are entitled to receive, when and as declared by the board of directors, dividends in cash at an annual rate of $0.80 per share of series B preferred stock. Such dividends, if any, are payable in preference and in priority to any declaration or payment of any dividend on the common stock. We have never declared or paid dividends on the series B preferred stock. All shares of series B preferred stock will automatically convert into shares of common stock upon the closing of the offering. Series C Preferred Stock On October 21, 1997, April 30, 1998, May 7, 1998, October 30, 1998, November 10, 1998, December 16, 1998, December 21, 1998 and December 24, 1998, in private placement transactions, we issued a total of 4,968,738 shares of series C preferred stock at $8.80 per share convertible into common stock at the conversion price per share of $13.20. 64 66 The number of shares of common stock into which each share of series C preferred stock will convert is 0.67 shares. The holders of such series C preferred stock are entitled to registration rights with respect to the shares of common stock issued or issuable upon conversion. See "Description of Capital Stock--Registration Rights". The holders of outstanding shares of series C preferred stock are entitled to receive, when and as declared by the board of directors, dividends in cash at an annual rate of $0.80 per share of series C preferred stock. Such dividends, if any, are payable in preference and in priority to any declaration or payment of any dividend on the series A preferred stock, series B preferred stock or common stock. We have never declared or paid dividends on the series C preferred stock. All shares of series C preferred stock will automatically convert into shares of common stock upon the closing of the offering. National Broadcasting Company acquired its shares by providing national spot advertising to Autobytel.com. The following chart lists the holders of Autobytel.com's preferred stock and the number and class of shares held by such holders as of March 1, 1999.
SERIES A SERIES B SERIES C NAME OF STOCKHOLDER PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK ------------------- --------------- --------------- --------------- General Electric Capital Corporation.......................... 800,000 534,760 681,819 National Union Fire Insurance Company of Pittsburgh, PA, an affiliate of American International Group......... 400,000 267,380 227,273 ContiTrade Services L.L.C............ 200,000 133,690 Michael Fuchs........................ 100,000 32,085 Tozer Kemsley and Millbourn Automotive, Ltd., a unit of Inchcape Motors............................... 568,182 Bilia AB............................. 568,182 National Broadcasting Company, Inc., an affiliate of General Electric Capital Corporation.................. 121,009 Invision AG.......................... 568,182 Aureus Private Equity AG............. 1,097,727 MediaOne Interactive Services, Inc.................................. 1,136,364
Loans From time to time, Autobytel.com has advanced funds to Peter R. Ellis, the former Chairman of the board of directors and Chief Executive Officer of Autobytel.com. As of December 31, 1998, Mr. Ellis was indebted to us in the amount of $250,000 plus accrued interest at the rate of 8% per year compounded quarterly. The principal amount of the loan is due and payable on or before March 1, 2003. We received a pledge of 100,657 of Mr. Ellis' shares of common stock to secure this loan. 65 67 Severance and General Release Agreement Autobytel.com and John M. Markovich, our former Senior Vice President and Chief Financial Officer, are parties to a severance and general release agreement dated January 30, 1998. Under the terms of the severance agreement regarding his resignation from Autobytel.com, we paid to Mr. Markovich a severance payment of $75,000, extended Mr. Markovich's health coverage through July 30, 1998, paid certain outplacement expenses of $10,000 and granted Mr. Markovich a warrant to purchase 33,333 shares of common stock at $11.25 per share. The warrant granted to Mr. Markovich expires on January 30, 2003. Advisory Agreement Autobytel.com and Mr. Ellis, our former Chief Executive Officer and Chairman of the board of directors, are parties to a two year advisory agreement dated as of August 20, 1998. Under the advisory agreement, Mr. Ellis received $500,000 on the date of execution. Commencing on the thirteenth month anniversary of this agreement, Mr. Ellis is entitled to receive $5,000 per month. Mr. Ellis is entitled to participate in all employee health plans and receives a car allowance of $1,000 per month until April 30, 1999. The advisory agreement may be terminated by us for cause or upon 30 days prior written notice without cause. In the event the advisory agreement is terminated without cause by Autobytel.com or due to his death or disability, Mr. Ellis will still be entitled to receive his base salary and health benefits through the remainder of the term of the of the agreement. Mr. Ellis has the right to terminate the advisory agreement on 90 days prior written notice to Autobytel.com. A majority of disinterested directors approved the advisory agreement and the loans made to Mr. Ellis from time to time. Voting Proxy In addition, on January 11, 1999, in consideration of us waiving our right of first refusal permitting the sale of $1.4 million of our common stock by Mr. Ellis to "accredited investors" as such term is defined under Rule 501 of the Securities Act, Mr. Ellis transferred to us the voting power of 593,175 shares of common stock of Autobytel.com owned by Mr. Ellis for a period that is the earlier of five years from such date or until such time as Mr. Ellis sells the shares to a person not affiliated with Mr. Ellis. Mr. Ellis sold these shares at $11.88 per share. Marketing Agreement Auto-By-Tel Acceptance Corporation, member companies of the American International Group, and Autobytel.com entered into a marketing agreement dated July 22, 1996. Under this agreement, Autobytel.com, through Auto-By-Tel Acceptance Corporation, authorizes and provides the American International Group access to its Internet server, for the publication, display, and exhibition of the American International Group's member companies' direct response automobile insurance sales materials. In return, Auto-By-Tel Acceptance Corporation is paid compensation based on a flat fee on the basis of the premiums collected from our consumers. Under a marketing and application processing agreement dated February 1, 1997, among GE Capital, Auto-By-Tel Acceptance Corporation and Autobytel.com, Auto-By-Tel 66 68 Acceptance Corporation and Autobytel.com agreed to refer customers seeking vehicle financing with favorable credit ratings to GE Capital. In return, GE Capital agreed to pay Auto-By-Tel Acceptance Corporation a marketing fee of $100.00 for each financing consummated by GE Capital under this agreement. GE Capital is an affiliate of General Electric Capital Corporation, which beneficially owns 1,831,903 shares of common stock. As of December 31, 1998, Auto-By-Tel Acceptance Corporation had referred customers to GE Capital to whom GE Capital extended financing in an aggregate amount of approximately $307,000 and received approximately $1,200 in marketing fees since the inception of this relationship. In addition, General Electric Capital Corporation is an affiliate of PaineWebber Incorporated, one of the underwriters taking part in this offering. As a result, BT Alex. Brown Incorporated will act as a qualified independent underwriter to establish the price of the shares offered by this prospectus. Issuance of Warrants On November 10, 1998, we issued to Invision AG a warrant to purchase an aggregate of 150,000 shares of our common stock at an exercise price of $13.20 per share. This warrant is exercisable as of such date and expires on November 10, 2001. On December 16, 1998 and December 23, 1998, we issued to Aureus Private Equity AG warrants to purchase 169,800 and 120,000 shares, respectively, of our common stock at an exercise price of $13.20 per share. These warrants are exercisable as of such date and expire on December 16, 2001 and December 23, 2001, respectively. In January 1999, Peter Titz, a manager of Invision AG and a director of Aureus Private Equity AG, was appointed to our board of directors. On December 21, 1998, we issued to MediaOne Interactive Services, Inc. a warrant to purchase an aggregate of 300,000 shares of common stock of Autobytel.com at an exercise price of $13.20 per share. This warrant is exercisable as of such date and expires on December 21, 2001. In February 1999, Richard Post, a director of MediaOne Interactive Services, Inc., was appointed to Autobytel.com's board of directors. Approval Procedure for Related Party Transactions All future transactions between Autobytel.com and interested directors and stockholders, if any, will be approved by the disinterested directors or stockholders, as appropriate in accordance with Delaware law and our certificate of incorporation and bylaws. 67 69 PRINCIPAL AND SELLING STOCKHOLDERS The following table sets forth information with respect to the beneficial ownership of the common stock as of March 15, 1999, as adjusted to reflect the conversion of the preferred stock into common stock concurrently with the offering and sale of common stock offered in this offering for: - each person or entity who is known by Autobytel.com to beneficially own five percent or more of the outstanding common stock, - each of our directors, - each of the five most highly compensated officers in 1998, - each stockholder who is selling shares of common stock in this offering, and - all directors and executive officers of Autobytel.com as a group. As of March 15, 1999, there were 14,372,783 shares of common stock outstanding. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options or warrants held by that person that are currently exercisable or exercisable within 60 days of March 15, 1999, are deemed outstanding. Such shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of each other person. Except as indicated in the footnotes to this table and under applicable community property laws, each stockholder named in the table has sole voting and investment power with respect to the shares set forth opposite such stockholder's name. The following table assumes no exercise of the underwriters' over-allotment option.
SHARES BENEFICIALLY SHARES BENEFICIALLY OWNED OWNED PRIOR TO OFFERING NUMBER OF AFTER OFFERING ------------------- SHARES BEING ------------------- NUMBER PERCENT OFFERED NUMBER PERCENT --------- ------- ------------ --------- ------- Peter R. Ellis(1)................... 3,877,032 27.0% 500,000 3,377,032 18.9% c/o Autobytel.com 18872 MacArthur Boulevard Irvine, California 92612-1400 John C. Bedrosian(2)................ 3,569,445 24.8% 500,000 3,069,445 17.2% c/o Autobytel.com 18872 MacArthur Boulevard Irvine, California 92612-1400 General Electric Capital Corporation(3).................... 1,832,022 12.7% 1,832,022 10.2% 260 Long Ridge Road Stamford, Connecticut 06927 Peter Titz(4)....................... 1,550,406 10.5% 1,550,406 8.5% c/o Aureus Private Equity AG Zugerstrasse 76b CH-6340 Baar Switzerland MediaOne Interactive Services, Inc.(5)........................... 1,057,576 7.2% 1,057,576 5.8% 9000 E. Nichols Avenue Englewood, Colorado 80112 Aureus Private Equity AG(4)......... 1,021,618 7.0% 1,021,618 5.6% Zugerstrasse 76b CH-6340 Baar Switzerland National Union Fire Insurance Company of Pittsburgh, PA(6)...... 837,157 5.8% 837,157 4.7% 200 Liberty Street New York, New York 10281
68 70
SHARES BENEFICIALLY SHARES BENEFICIALLY OWNED OWNED PRIOR TO OFFERING NUMBER OF AFTER OFFERING ------------------- SHARES BEING ------------------- NUMBER PERCENT OFFERED NUMBER PERCENT --------- ------- ------------ --------- ------- Robert S. Grimes(7)................. 809,493 5.5% 809,493 4.5% c/o R.S. Grimes & Co., Inc. 152 West 57th Street New York, NY 10019 Mark W. Lorimer(8).................. 296,412 2.0% 296,412 1.6% Michael J. Fuchs(9)................. 146,249 1.0% 146,249 * Michael J. Lowell(10)............... 110,280 * 110,280 * Ann M. Delligatta(11)............... 40,704 * 40,704 * Anne Benvenuto(12).................. 12,472 * 12,472 * Mark N. Kaplan...................... 1,000 * 1,000 * Kenneth J. Orton.................... -- * -- * Hoshi Printer....................... -- * -- * Ariel Amir.......................... -- * -- * All directors and executive officers as a group (14 persons)(13)....... 9,733,646 61.5% 9,233,646 47.7%
- --------------- * Less than 1% (1) Includes 46,110 shares held by trusts established for family members of Mr. Ellis as to which Mr. Ellis' spouse maintains sole voting power. Also includes 593,175 shares as to which Mr. Ellis granted voting power to Autobytel.com under a voting proxy dated January 11, 1999. See "Certain Transactions." If the underwriters' over-allotment option were exercised in full, the number of shares beneficially owned by Mr. Ellis after the offering would be 2,994,532 and the percentage would be 16.8%. (2) 2,569,445 shares are held in the John C. Bedrosian and Judith D. Bedrosian Revocable Trust in which Mr. Bedrosian maintains shared voting powers. 1,000,000 shares are held by the Bedrosian Investment Group, Ltd., of which Mr. Bedrosian and his spouse are general partners. If the underwriters' over-allotment option were exercised in full, the number of shares beneficially owned by Mr. Bedrosian after the offering would be 2,814,445 and the percentage would be 15.7%. (3) Mr. Jeffrey Coats is a managing director of GE Equity Capital Group, Inc., an affiliate of General Electric Capital Corporation, and is a director of Autobytel.com. Includes 888,889 shares held by General Electric Capital Corporation (GE) following the conversion of the series A preferred stock, 482,393 shares held by GE following the conversion of the series B preferred stock, and 454,546 shares held by GE following the conversion of the series C preferred stock. Also includes 6,194 shares issuable upon exercise of options exercisable within 60 days of March 15, 1999 which were granted to Mr. Coats, and subsequently assigned to GE. Mr. Coats disclaims beneficial ownership of such 6,194 shares. (4) Mr. Peter Titz is a director of Aureus Private Equity AG, a manager of Invision AG, and a director of Autobytel.com. Includes 731,818 shares following the conversion of the series C preferred stock and 289,800 shares issuable upon exercise of warrants held by Aureus Private Equity AG. Also includes 378,788 shares following the conversion of the series C preferred stock and 150,000 shares issuable upon exercise of warrants held by Invision AG. 69 71 (5) Mr. Richard Post is a director of MediaOne Interactive Services, Inc. and a director of Autobytel.com. Includes 757,576 shares held by MediaOne Interactive Services, Inc. following the conversion of the series C preferred stock and 300,000 shares issuable upon exercise of warrants. MediaOne Interactive Services, Inc. is an indirect wholly owned subsidiary of MediaOne Group, Inc. As a result, MediaOne Group, Inc., may be deemed to indirectly, beneficially own the shares reported as being directly beneficially owned by MediaOne Interactive Services, Inc. MediaOne Group, Inc., disclaims such beneficial ownership. (6) Represents 444,445 shares following the conversion of the series A preferred stock, 241,197 shares following the conversion of the series B preferred stock, and 151,515 shares following the conversion of the series C preferred stock. (7) Includes an aggregate of 5,554 shares held in irrevocable trusts as to which Mr. Grimes' spouse maintains sole voting power. Includes 253,938 shares issuable upon exercise of options exercisable within 60 days of March 15 1999. (8) Represents 296,412 shares issuable upon exercise of options exercisable within 60 days of March 15, 1999. (9) Includes 6,195 shares issuable upon exercise of options exercisable within 60 days of March 15, 1999 and 111,111 shares held by Mr. Fuchs following the conversion of the series A preferred stock and 28,943 shares following the conversion of the series B preferred stock. (10) Represents 110,280 shares issuable upon exercise of options exercisable within 60 days of March 15, 1999. (11) Represents 40,704 shares issuable upon exercise of options exercisable within 60 days of March 15, 1999. (12) Represents 12,472 shares issuable upon exercise of options exercisable within 60 days of March 15, 1999. (13) Includes 726,195 shares issuable upon exercise of options and 739,800 shares issuable upon exercise of warrants exercisable within 60 days of March 15, 1999. Mr. Ellis resigned as Chief Executive Officer of Autobytel.com in June 1998. If Mr. Ellis' shares are not included in the number of shares beneficially owned by all directors and executive officers as a group, the number of shares owned by the directors and executive officers prior to the offering is 5,856,614 shares or 37.0% of the shares of common stock outstanding, and after the offering would be 5,856,614 shares or 30.3% of the shares of common stock outstanding. DESCRIPTION OF CAPITAL STOCK Upon the closing of the offering, the outstanding shares of common stock will consist of 17,858,745 shares, $0.001 par value. As of December 31, 1998, there were 8,506,455 shares of common stock outstanding held of record by 49 stockholders. COMMON STOCK Autobytel.com is authorized to issue a total of 50,000,000 shares of common stock. Holders of common stock are entitled to one vote per share in all matters to be voted on by the stockholders. After the preferences of the preferred stock, holders of common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the board of directors out of funds legally available for payment. See "Dividend 70 72 Policy." In the event of a liquidation, dissolution or winding up of Autobytel.com, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities, after prior distribution rights of shares of preferred stock then outstanding, if any. The common stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock are fully paid and nonassessable, and the shares of common stock to be issued upon completion of the offering will be fully paid and non-assessable. PREFERRED STOCK Under our amended and restated certificate of incorporation, the board of directors has the authority, without further action by the stockholders, to issue up to 11,445,187 shares of preferred stock in one or more series. The board of directors also has the power to determine the rights of the preferred stock such as dividend rights, conversion rights, voting rights, and the terms of redemption and liquidation preferences. The board of directors, without stockholder approval, can issue preferred stock with voting, conversion or other rights that are greater than the rights of the holders of common stock. Preferred stock could thus be issued quickly with terms calculated to delay or prevent a change in control of Autobytel.com or make removal of management more difficult. Additionally, the issuance of preferred stock may have the effect of decreasing the market price of the common stock, and may adversely affect the voting and other rights of the holders of common stock. Upon the closing of the offering, no shares of preferred stock will be outstanding and Autobytel.com has no plans to issue any of the preferred stock. See "Financings and Related Party Transactions." REGISTRATION RIGHTS The amended and restated investors' rights agreement, dated October 21, 1997, among Autobytel.com and the holders of 12,997,957 shares of common stock and securities convertible into common stock, provides that the holders are entitled to registration rights. If we propose to register any of our securities under the Securities Act, either for our own account or for the account of other holders exercising registration rights, the holders are entitled to notice of such registration and may include shares of registrable securities in the registration statement. Additionally, the holders are also entitled to demand registration rights and may require us to file a registration statement under the Securities Act at our expense for their shares of registrable securities. The holders have waived their registration rights in connection with this offering. DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS Anti-Takeover Law The provisions of Section 203 of the Delaware General Corporation Law apply to Autobytel.com. In general, Section 203 prohibits a publicly-held Delaware corporation from engaging in a business combination with an "interested stockholder" for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner or unless the interested stockholder acquired at least 85% of the corporation's voting stock (excluding shares held by designated stockholders) in the transaction in which it became an interested stockholder. For purposes of Section 203, a "business combination" includes a merger, asset sale or other transaction resulting in a financial benefit to the interested 71 73 stockholder. Other than persons who own shares in excess of 15% of the voting stock of the corporation as a result of action taken solely by the corporation, an "interested stockholder" is a person who, together with affiliates and associates, owns, or within the previous three years did own, 15% or more of the corporation's voting stock. Limitation of Director and Officer Liability Our amended and restated certificate of incorporation and bylaws contain provisions relating to the limitation of liability and indemnification of directors and officers. Our amended and restated certificate of incorporation provides that our directors may not be held personally liable to us or our stockholders for a breach of fiduciary duty, except for liability: - for any breach of the director's duty of loyalty to us or our stockholders, - for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, - under Section 174 of the Delaware General Corporation Law, relating to prohibited dividends, distributions and repurchases or redemptions of stock, and - for any transaction from which the director derives an improper benefit. In addition, our amended and restated certificate of incorporation and bylaws provide that we will indemnify directors and officers to the fullest extent authorized by Delaware law. No Stockholder Action by Written Consent Our amended and restated certificate of incorporation provides that the stockholders can take action only at a duly called annual or special meeting of stockholders. Accordingly, stockholders of Autobytel.com will not be able to take action by written consent in lieu of a meeting. This provision may have the effect of deterring hostile takeovers or delaying changes in control or management of Autobytel.com. Staggered Board of Directors Our amended and restated certificate of incorporation provides that upon the closing of this offering, the terms of office of the board of directors will be divided into three classes, such that the terms of Class I, Class II and Class III directors shall expire at the annual meeting of stockholders to be held in 1999, 2000 and 2001, respectively. The number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. This provision may have the effect of delaying or preventing changes in control or change in our management because less than a majority of the board of directors are up for election at each annual meeting. TRANSFER AGENT AND REGISTRAR U.S. Stock Transfer Corporation, Glendale, California, has been appointed as the transfer agent and registrar for the common stock. Its telephone number for such purposes is (818) 502-1404. 72 74 SHARES ELIGIBLE FOR FUTURE SALE Prior to the offering, there has been no market for the common stock. Future sales of substantial amounts of common stock in the public market could adversely affect market prices prevailing from time to time. Upon completion of the offering, Autobytel.com will have outstanding an aggregate of 17,858,745 shares of common stock, assuming no exercise of outstanding options or warrants. Of these shares, the 4,500,000 shares sold in the offering will be freely tradeable without restriction or further registration under the Securities Act, except that any shares purchased by "affiliates" of Autobytel.com, as that term is defined in Rule 144 of the Securities Act, may generally only be sold in compliance with the limitations of Rule 144 described below. SALES OF RESTRICTED SHARES The remaining 13,358,745 shares of common stock held by existing stockholders are "restricted securities" under Rule 144. The number of shares of common stock available for sale in the public market is limited by restrictions under the Securities Act and lock-up agreements. Under the lock-up agreements, the holders of such shares have agreed not to sell or otherwise dispose of any of their shares for a period of 180 days after the date of this prospectus (the "lock-up period") without the prior written consent of BT Alex. Brown Incorporated. In addition, the selling shareholders have agreed to the same lock-up except that they have agreed to a 270-day lock-up. On the date of this prospectus, no shares other than the shares in this offering will be eligible for sale. In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus, a person, or persons who has beneficially owned restricted shares for at least one year would be entitled to sell within any three-month period a number of shares that does not exceed the greater of: - one percent of the number of shares of common stock then outstanding; or - the average weekly trading volume of the common stock on the Nasdaq National Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale. One percent of the number of shares of common stock outstanding after the offering equals approximately 178,587 shares. Sales must be made under manner of sale provisions and notice requirements specified by Rule 144 and current public information about Autobytel.com must be available. Under Rule 144(k), a person who is not deemed to have been an affiliate of Autobytel.com at any time during the 90 days preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, is entitled to sell such shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144. Therefore, unless otherwise restricted, "144(k) shares" could be sold immediately upon the completion of this offering. Following the expiration of the lock-up period, none of the restricted shares will become available for sale in the public market until the expiration of their respective holding periods (approximately 11,298,480 of such shares will have been held for more than one year at the end of such 180-day period). Upon completion of the offering, the holders of 12,997,957 shares of common stock, or their transferees, will be entitled to rights with respect to the registration of such shares under the Securities Act until such time as the holders of such common stock may sell such shares under the Rule 144 of the Securities Act. See "Description of Capital 73 75 Stock -- Registration Rights." Registration of such shares under the Securities Act would result in such shares becoming freely tradeable without restriction under the Securities Act, except for shares purchased by affiliates, immediately upon the effectiveness of such registration. OPTIONS AND RESTRICTED STOCK We intend to file a registration statement under the Securities Act covering shares of common stock reserved for issuance under the 1999 Stock Option Plan, 1998 Stock Option Plan, 1996 Stock Incentive Plan, the 1996 Stock Option Plan and the 1996 Employee Stock Purchase Plan. Such registration statement is expected to be filed and become effective as soon as practicable after the effective date of the offering. Accordingly, shares registered under such registration statement will, with regards to Rule 144 volume limitations applicable to affiliates, be available for sale in the open market, unless such shares are subject to vesting restrictions with Autobytel.com or the lock-up agreements described above. A total of 3,723,433 shares have been reserved for issuance under such plans. As of March 1, 1999, 737,191 options have been granted under the 1999 Stock Option Plan, 1,125,000 options have been granted under the 1998 Stock Option Plan, 833,333 options have been granted under the 1996 Stock Incentive Plan, 889,163 options have been granted under the 1996 Stock Option Plan and no shares have been purchased under the 1996 Employee Stock Purchase Plan. See "Management -- Stock Plans." In addition, under Rule 701 of the Securities Act as currently in effect, any employee, consultant or advisor of Autobytel.com who is not an affiliate who purchased shares from us under a compensatory stock or option plan or other written agreement is eligible to resell such shares 90 days after the effective date of this offering, governed by all provisions of Rule 144 except its minimum holding period. LOCK-UP AGREEMENTS All officers, directors, and other stockholders of Autobytel.com have entered into lock-up agreements. Under the lock-up agreements, each person agreed not to sell or otherwise dispose of any shares of common stock or any securities convertible into common stock for a period of 180 days after the date of this prospectus, without the prior written consent of BT Alex. Brown Incorporated. The selling stockholders have agreed to the same lock-up except for a period of 270 days after the date of this prospectus. See "Underwriting." In addition, under the terms of the 1999 Stock Option Plan, 1998 Stock Option Plan, the 1996 Stock Option Plan and the 1996 Stock Incentive Plan, holders of options to purchase common stock are obligated not to sell or transfer any shares of Autobytel.com acquired through exercise of options during such 180-day period if requested by us or the underwriters. 74 76 MATERIAL UNITED STATES TAX CONSIDERATIONS FOR NON-U.S. HOLDERS GENERAL The following is a general discussion of the material United States federal income and estate tax consequences of the ownership and disposition of common stock by a Non-U.S. Holder, as defined below. As used in this prospectus, the term "Non-U.S. Holder" is any person or entity that, for United States federal income tax purposes, is either a non-resident alien individual, a foreign corporation, a foreign partnership or a foreign trust in each case not subject to United States federal income tax on a net basis in respect of income or gain with respect to our common stock. An individual may be deemed to be a resident alien, as opposed to a nonresident alien, by virtue of being present in the United States for at least 31 days in the calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year. In determining whether an individual is present in the United States for at least 183 days, all of the days present in the current year, one-third of the days present in the immediately preceding year and one-sixth of the days present in the second preceding year are counted. Resident aliens are subject to United States federal income and estate tax in the same manner as United States citizens and residents. This discussion does not address all aspects of United States federal income and estate taxes that may be relevant to a particular Non-U.S. Holder in light of the holder's particular circumstances. This discussion is not intended to be applicable in all respects to all categories of Non-U.S. Holders, some of whom may be subject to special treatment under United States federal income tax laws. Moreover this discussion does not address United States state or local or foreign tax consequences. This discussion is based on provisions of the Internal Revenue Code of 1986, as amended, existing and proposed regulations under, and administrative and judicial interpretations of, the Internal Revenue Code, in effect on the date of this prospectus. All of these authorities may change, possibly with retroactive effect or different interpretations. The following summary is included in this prospectus for general information. Accordingly, prospective investors are urged to consult their tax advisers regarding the United States federal, state, local and non-United States income and other tax consequences of acquiring, holding and disposing of shares of our common stock. DIVIDENDS We do not anticipate paying cash dividends on our capital stock in the foreseeable future. See "Dividend Policy." In the event, however, that dividends are paid on shares of common stock, dividends paid to a Non-U.S. Holder of common stock generally will be subject to United States withholding tax at a 30% rate, unless an applicable income tax treaty provides for a lower withholding rate. Non-U.S. Holders should consult their tax advisors regarding their entitlement to benefit under a relevant income tax treaty. Currently the applicable United States Treasury regulations presume, absent actual knowledge to the contrary, that dividends paid to an address in a foreign country are paid to a resident of such country for purposes of the 30% withholding tax discussed above. However, the final United States Treasury regulations provide that, in the case of dividends paid after December 31, 1999, a Non-U.S. Holder who wishes to claim the benefits of an applicable treaty rate and avoid backup withholding tax at a 31% rate as discussed below 75 77 will be required to satisfy certification and other tax law requirements, which will include filing an Internal Revenue Service Form W-8 containing the Non-U.S. Holder's name, address and a certification that the holder is eligible for the benefits of the treaty under the treaty's Limitations in Benefits Article. In addition, certification and disclosure requirements must be met to be exempt from withholding under the effectively connected income exemption discussed below. The regulations under the Internal Revenue Code also provide special rules for dividend payments made to foreign intermediaries, United States or foreign wholly owned entities that are disregarded for United States federal income tax purposes and entities that are treated as fiscally transparent in the United States, the applicable income tax treaty jurisdiction, or both. In addition, recently enacted legislation, effective August 4, 1997, denies income tax treaty benefits to foreign partners receiving income derived through a partnership, or otherwise fiscally transparent entity, if the foreign partner does not certify as to its Non-U.S. Holder status and the partnership does not provide required information including a United States taxpayer identification number. Prospective investors should consult with their own tax advisers concerning the effect, if any, of these tax regulations and the recent legislation on an investment in the common stock. A Non-U.S. Holder of common stock that is eligible for a reduced rate of United States withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by filing an appropriate claim for a refund with the IRS. The recipient of dividends that are effectively connected with either a Non-U.S. Holder's: - conduct of a trade or business in the United States, - permanent establishment in the United States if a tax treaty applies, or - fixed base in the United States are taxed generally on a net income basis at regular graduated rates. The 30% withholding tax is not applicable to the payment of dividends if the Non-U.S. Holder files Form 4224 or any successor form with the payor or, after December 31, 1999, such holder provides its United States taxpayer identification number to the payor. Any United States trade or business income received by a Non-U.S. Holder that is a corporation also may be subject to an additional "branch profits tax" at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. GAIN ON DISPOSITION OF COMMON STOCK A Non-U.S. Holder generally will not have to pay United States federal income or withholding tax on gain recognized on a disposition of common stock unless: (1) the gain is effectively connected with the conduct of a trade or business of the Non-U.S. Holder within the United States or of a partnership, trust or estate in which the Non-U.S. Holder is a partner or beneficiary within the United States, (2) if a treaty applies, the gain is effectively connected to a permanent establishment of the Non-U.S. Holders within the United States, (3) the Non-U.S. Holder is an individual who holds the common stock as a capital asset within the meaning of Section 1221 of the Internal Revenue Code, is 76 78 present in the United States for 183 or more days in the taxable year of the disposition and meets other tax law requirements, (4) the Non-U.S. Holder is a United States expatriate is required to pay tax pursuant to the provisions of the United States tax law, or (5) Autobytel.com is or has been a "United States real property holding corporation" for federal income tax purposes at any time during the shorter of the five-year period preceding such disposition or the period that the Non-U.S. Holder holds the common stock. Generally, a corporation is a United States real property holding corporation if the fair market value of its United States real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. Autobytel.com believes that it is not, has not been and does not anticipate becoming a United States real property holding corporation for United States federal income tax purposes. However, even if Autobytel.com were to become a United States real property holding corporation, any gain realized by a Non-U.S. Holder still would not be required to pay United States federal income tax if the shares of Autobytel.com are regularly traded on an established securities market. Autobytel.com believes that its common stock is "regularly traded on an established securities market." If, however, Autobytel.com's common stock is not so treated, on a sale or disposition by a Non-U.S. Holder of the common stock the transferee of such stock will be required to withhold 10% of the proceeds unless Autobytel.com certifies that either it is not and has not been a United States real property holding company or another exemption from withholding applies. If a Non-U.S. Holder who is an individual meets the requirements of clause (1), (2) or (4) above that individual generally will be required to pay tax on the net gain derived from a sale of common stock under regular graduated United States federal income tax rates. If an individual Non-U.S. Holder meets the requirements of clause (3) above, such individual generally will be subject to a flat 30% tax on the gain derived from a sale. Thus, individual Non-United States Holders who have spent or expect to spend a short period of time in the United States should consult their tax advisers prior to the sale of common stock to determine the United States federal income tax consequences of the sale. If a Non-U.S. Holder is a foreign corporation that is engaged in a United States trade or business or has a United States permanent establishment, the corporation generally will be required to pay tax on its net gain under regular graduated United States federal income tax rates. Such a Non-U.S. Holder may also have to pay branch profit tax. FEDERAL ESTATE TAX For United States federal estate tax purposes, an individual's gross estate will include the common stock owned, or treated as owned, by an individual. Generally, this will be the case regardless of whether such individual was a United States citizen or a United States resident. This general rule of inclusion may be limited by an applicable estate tax or other treaty. INFORMATION REPORTING AND BACKUP WITHHOLDING TAX Under United States Treasury regulations, Autobytel.com must report annually to the IRS and to each Non-U.S. Holder the amount of dividends paid to such holder and the 77 79 tax withheld with respect to such dividends. These information reporting requirements apply regardless of whether withholding is required. Copies of the information returns reporting such dividends and withholding may also be made available to the tax authorities in the country in which the Non-U.S. Holder is a resident under the provisions of an applicable income tax treaty or agreement. Currently, the 31% United States backup withholding tax rate generally will not apply: - to dividends which are paid to Non-U.S. Holders and are taxed at the regular withholding tax rate as discussed above, or - before January 1, 2000, to dividends paid to a Non-U.S. Holder at an address outside of the United States unless the payor has actual knowledge that the payee is a United States Holder. Backup withholding and information reporting generally will apply to dividends paid to addresses inside the United States on shares of common stock to beneficial owners that are not "exempt recipients" and that fail to provide, in the manner required, identifying information. On October 6, 1997, the United States Treasury Department issued new regulations regarding the withholding and information reporting rules discussed above. These regulations apply to payments made after December 31, 1999. The regulations under the Internal Revenue Code do not significantly alter the foregoing substantive withholding and information reporting requirements but do alter the procedures for: - claiming the benefits of an income tax treaty for, and - the certification procedures relating to the receipt by intermediaries of, dividends paid after December 31, 1999. These regulations generally presume that backup withholding at the rate of 31% and information reporting applies to payments made to a Non-U.S. Holder unless Autobytel.com receives certification of such holder's Non-U.S. status. Depending on the circumstances, this certification will need to be provided either: - directly by the Non-U.S. Holder, - in the case of a Non-U.S. Holder that is treated as a partnership or other fiscally transparent entity, by the partners, shareholders or other beneficiaries of such entity, or - by qualified financial institutions or other qualified entities on behalf of the Non-U.S. Holder. Information reporting and backup withholding at a rate of 31% generally will not apply to the payment of the proceeds of the disposition of common stock by a holder to or through the United States office of a broker or through a non-United States branch of a United States broker unless the holder either certifies its status as a Non-U.S. Holder under penalties of perjury or otherwise establishes an exemption. The payment of the proceeds of the disposition by a Non-U.S. Holder of common stock to or through a Non-United States office of a non-United States broker will not have to comply with backup withholding or information reporting unless the non-United States broker has a connection to the United States as specified in the tax law. 78 80 In the case of the payment of proceeds from the disposition of common stock effected by a foreign office of a broker that is a United States person or a "United States related person," existing regulations require information reporting on the payment unless - the broker receives a statement from the owner, signed under penalty of perjury, certifying its non-United States status or the broker has documentary evidence in its files as to the Non-U.S. Holder's foreign status, and the broker has no actual knowledge to the contrary, and other United States federal tax law conditions are met or - the beneficial owner otherwise establishes an exemption. For this purpose, a "United States related person" is either - a "controlled foreign corporation" for United States federal income tax purposes; or - a foreign person 50% or more of whose gross income from all sources for the three-year period ending with the close of its taxable year preceding the payment is derived from activities that are effectively connected with the conduct of a United States trade or business. After December 31, 1999, the regulations under the Internal Revenue Code will impose information reporting and backup withholding on payments of the gross proceeds from the sales or redemptions of common stock that are effected through foreign offices of brokers having any of a broader class of specified connections with the United States. Such information reporting and backup withholding may be avoided, however, if a holder complies with the applicable IRS certification requirements. Prospective investors should consult with their own tax advisers regarding the regulations under the Internal Revenue Code and in particular with respect to whether the use of a particular broker would subject the investor to these rules. Any amounts withheld under the backup withholding rules from a payment to a Non-U.S. Holder will be either refunded or credited against the holder's United States federal income tax liability provided sufficient information is furnished to the Internal Revenue Service. 79 81 UNDERWRITING Under the terms of an underwriting agreement, the underwriters named below, through their representatives, BT Alex. Brown Incorporated, Lehman Brothers Inc. and PaineWebber Incorporated, have severally agreed to purchase from Autobytel.com the following respective number of shares of common stock at the public offering price less the underwriting discount set forth on the cover page of this prospectus.
NUMBER OF UNDERWRITERS SHARES ------------ --------- BT Alex. Brown Incorporated................................. Lehman Brothers Inc......................................... PaineWebber Incorporated.................................... --------- Total............................................. 4,250,000 =========
The underwriting agreement provides that the obligations of the underwriters are subject to conditions precedent as outlined in the underwriting agreement and that the underwriters will purchase all of the shares of common stock offered if any of such shares are purchased. Autobytel.com and the selling stockholders have been advised by the representatives that the underwriters propose to offer the shares of common stock to the public at the public offering price set forth on the cover page of this prospectus and to certain dealers at such price less a concession not in excess of $ per share. The underwriters may allow, and such dealers may re-allow, a concession not in excess of $ per share to certain other dealers. After the initial public offering, the offering price and other selling terms may be changed by the representatives of the underwriters. Selling stockholders have granted the underwriters an option, exercisable not later than 30 days after the date of this prospectus, to purchase up to 637,500 additional shares of common stock at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus. To the extent that the underwriters exercise such option, each of the underwriters will have a firm commitment to purchase approximately the same percentage of such option that the number of shares of common stock to be purchased by it in the above table bears to 4,250,000, and the selling stockholders will be obligated under the option to sell such shares to the underwriters. The underwriters may exercise such option only to cover over-allotments made in connection with the sale of the common stock offered in this offering. If purchased, the underwriters will offer such additional shares on the same terms as those on which the 4,250,000 shares are being offered. Autobytel.com and the selling stockholders have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act. Each of the officers and directors and substantially all of the stockholders of Autobytel.com agreed not to sell or otherwise dispose of any common stock for a period of 180 days after the date of our public offering, without the prior written consent of 80 82 BT Alex. Brown Incorporated. These officers, directors and stockholders hold 13,293,376 shares of our common stock in the aggregate. The selling stockholders have agreed to a lock-up for a period of 270 days after the date of Autobytel.com's public offering. BT Alex. Brown Incorporated may give such consent at any time without public notice and may give consent for some stockholders and not others. Autobytel.com has also entered into a similar agreement, except that we may grant options or warrants to purchase shares of common stock or any securities convertible into shares of common stock, under the exercise of outstanding options and warrants and our issuance of options and stock granted under our existing stock option and stock purchase plans. The representatives have advised Autobytel.com that the underwriters do not intend to confirm sales to any account over which they exercise discretionary authority. In order to facilitate the offering of the common stock, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the market price of the common stock. Specifically, the underwriters may over-allot shares of the common stock in connection with this offering, thus creating a short position in the common stock for their own account. Additionally, to cover such over-allotments or to stabilize the market price of the common stock, the underwriters may bid for, and purchase, shares of the common stock in the open market. Finally, the representatives, on behalf of the underwriters, also may reclaim selling concessions allowed to an underwriter or dealer if the underwriting syndicate repurchases shares distributed by that underwriter or dealer. Any of these activities may maintain the market price of our common stock at a level above that which might otherwise prevail in the open market. The underwriters are not required to engage in these activities and, if commenced, may end any of these activities at any time. At our request, the underwriters have reserved for sale, at the initial public offering price, up to 450,000 shares for friends of our founders, our employees, family members of our employees and our vendors. The number of shares of common stock available for sale to the general public will be reduced to the extent these people purchase such reserved shares. Any reserved shares which are not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered hereby. In addition, we are reserving 250,000 shares to be offered at the public offering price to strategic international investors. We expect that these strategic investors will enter into agreements not to sell any of the shares purchased by them for a period of at least 180 days following the completion of this offering. These shares are not subject to the underwriting agreement and the underwriters will not receive any fees or commissions in connection with the sale of these shares, however, if these shares are sold to the strategic investors then Autobytel.com will be required to pay a $350,000 fee to Bankers Trust, Tokyo Branch. Bankers Trust, Tokyo Branch is an affiliate of BT Alex. Brown Incorporated, one of the underwriters in this offering. General Electric Capital Services, Inc. ("GE Capital Services") indirectly beneficially owns approximately 22% of the issued and outstanding common stock of Paine Webber Group, Inc., which is the parent holding company of PaineWebber Incorporated, an SEC-registered broker-dealer and one of the underwriters in this offering. The voting rights with respect to such common stock are restricted by the terms of an amended and restated shareholder's agreement. As a result, the offering of the shares of common stock offered in this offering is required to be made in accordance with the applicable provisions of Rule 2720 of the NASD. 81 83 In compliance with Rule 2720, the public offering price can be no higher than that recommended by a "qualified independent underwriter." BT Alex. Brown Incorporated is acting as qualified independent underwriter and the public offering price of the shares of common stock offered hereby will not be higher than the public offering price recommended by BT Alex. Brown Incorporated. In this offering, BT Alex. Brown Incorporated, in its role as qualified independent underwriter, has performed due diligence investigations and reviewed and participated in the preparation of the registration statement of which this prospectus is a part. PRICING OF THIS OFFERING Prior to this offering, there has been no public market for our common stock. Consequently, the initial public offering price for our common stock will be determined by negotiation among representatives of the underwriters and Autobytel.com. Among the factors to be considered in determining the public offering price will be: - prevailing market conditions; - our results of operations in recent periods; - our present stage of development; - the market capitalizations and stages of development of other companies which we and the representatives of the underwriters believe to be comparable to us; and - estimates of our business potential. LEGAL MATTERS The validity of the shares of common stock offered in this offering will be passed upon for Autobytel.com by Paul, Hastings, Janofsky & Walker LLP, New York, New York and for the underwriters by Latham & Watkins, Menlo Park, California. Attorneys in the firm of Paul, Hastings, Janofsky & Walker LLP may participate in the directed share program in the offering in an amount of up to 15,000 shares. EXPERTS The consolidated financial statements as of December 31, 1997 and 1998 and for the years ended December 31, 1996, 1997 and 1998 appearing in this prospectus and the registration statement have been audited by Arthur Andersen LLP, independent public accountants, as set forth in their report and are included in reliance upon the authority of said firm as experts in giving said report. The discussion that appears under the headings "Risk Factors -- If financial broker and insurance licensing requirements apply to us in states where we are not currently licensed, we will be required to obtain additional licenses and our business may suffer," "Business -- Products, Programs and Services -- Ancillary Customer Services" and "Business -- Government Regulation" has been reviewed by Barger & Wolen LLP, Los Angeles, California, and has been included herein, to the extent such discussion involves regulations, laws or legal conclusions relating to issues involving insurance, in reliance upon the authority of such firm as an expert thereon. 82 84 ADDITIONAL INFORMATION A registration statement on Form S-1, including amendments, relating to the common stock offered in this offering has been filed by Autobytel.com with the Securities and Exchange Commission, Washington, D.C. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules. Statements contained in this prospectus as to the contents of any contract or other document referred to are not necessarily complete and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the registration statement, each such statement being qualified in all respects by such reference. This prospectus contains all material information required to be disclosed by the Securities Act. For further information regarding Autobytel.com and the common stock offered reference is made to such registration statement, exhibits and schedules. A copy of the registration statement may be inspected by anyone without charge at the SEC's principal office, 450 Fifth Street, N.W., Washington, D.C. 20549, the New York Regional Office located at 7 World Trade Center, 13th Floor, New York, NY 10048, and the Chicago Regional Office located at Northwestern Atrium Center, 500 West Madison Street, Chicago, IL 60661, and copies of all or any part including any exhibit may be obtained from the SEC upon the payment of fees prescribed by the SEC. The public may obtain information on the operation of the Public Reference room by calling the SEC at 1-800-SEC-0330. The SEC maintains a World Wide Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the site is http://www.sec.gov. 83 85 AUTOBYTEL.COM INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- Report of Independent Public Accountants.................... F-2 Consolidated Balance Sheets................................. F-3 Consolidated Statements of Operations....................... F-4 Consolidated Statements of Stockholders' Equity (Deficit)... F-5 Consolidated Statements of Cash Flows....................... F-6 Notes to Consolidated Financial Statements.................. F-7
F-1 86 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders of autobytel.com inc.: We have audited the accompanying consolidated balance sheets of autobytel.com inc. (a Delaware corporation) and subsidiaries as of December 31, 1997 and 1998, and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for the years ended December 31, 1996, 1997 and 1998. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of autobytel.com inc. and subsidiaries as of December 31, 1997 and 1998, and the results of their operations and their cash flows for the years ended December 31, 1996, 1997 and 1998 in conformity with generally accepted accounting principles. /s/ ARTHUR ANDERSEN LLP Los Angeles, California February 3, 1999 F-2 87 AUTOBYTEL.COM INC. CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except share and per share data) ASSETS
DECEMBER 31, -------------------- 1997 1998 -------- -------- Current assets: Cash and cash equivalents, includes restricted amounts of $248 and $248, respectively............................. $ 15,813 $ 27,984 Accounts receivable, net of allowance for doubtful accounts of $337 and $402, respectively................. 1,493 2,315 Prepaid expenses and other current assets................. 795 1,353 -------- -------- Total current assets............................... 18,101 31,652 Property and equipment, net................................. 2,317 2,208 Other assets................................................ 95 347 -------- -------- Total assets....................................... $ 20,513 $ 34,207 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.......................................... $ 2,223 $ 2,915 Accrued expenses.......................................... 1,047 915 Deferred revenue.......................................... 3,700 4,008 Customer deposits......................................... 127 345 Other current liabilities................................. 66 33 -------- -------- Total current liabilities.......................... 7,163 8,216 Deferred rent............................................. 91 123 -------- -------- Total liabilities.................................. 7,254 8,339 -------- -------- Commitments and contingencies Stockholders' equity: Convertible preferred stock, Series A, $0.001 par value; aggregate liquidation preference of $15,000 at December 31, 1998; 1,500,000 shares authorized; 1,500,000 shares issued and outstanding at December 31, 1997 and 1998.... 2 2 Convertible preferred stock, Series B, $0.001 par value; aggregate liquidation preference of $9,050 at December 31, 1998; 967,915 shares authorized 967,915 shares issued and outstanding at December 31, 1997 and 1998.... 1 1 Convertible preferred stock, Series C, $0.001 par value; aggregate liquidation preference of $43,725 at December 31, 1998; 6,977,272 shares authorized; 1,477,274 shares issued and outstanding at December 31, 1997; 4,968,738 shares issued and outstanding at December 31, 1998...... 1 4 Common stock, $0.001 par value; 50,000,000 shares authorized; 8,324,443 shares issued and outstanding December 31, 1997; 8,506,455 shares issued and outstanding at December 31, 1998........................ 8 8 Warrants.................................................. -- 1,332 Additional paid-in capital................................ 37,123 67,813 Deferred compensation..................................... (1) -- Cumulative translation adjustment......................... -- (19) Accumulated deficit....................................... (23,875) (43,273) -------- -------- Total stockholders' equity......................... 13,259 25,868 -------- -------- Total liabilities and stockholders' equity......... $ 20,513 $ 34,207 ======== ========
The accompanying notes are an integral part of these consolidated statements. F-3 88 AUTOBYTEL.COM INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except share and per share data)
YEARS ENDED DECEMBER 31, ---------------------------------------- 1996 1997 1998 ---------- ----------- ----------- Revenues............................... $ 5,025 $ 15,338 $ 23,826 ---------- ----------- ----------- Operating expenses: Sales and marketing.................. 7,790 21,454 30,033 Product and technology development... 1,753 5,448 8,528 General and administrative........... 1,641 5,851 5,908 ---------- ----------- ----------- Total operating expenses.......... 11,184 32,753 44,469 ---------- ----------- ----------- Loss from operations................. (6,159) (17,415) (20,643) Other income, net...................... 124 620 1,280 ---------- ----------- ----------- Loss before provision for income taxes............................. (6,035) (16,795) (19,363) Provision for income taxes............. -- 15 35 ---------- ----------- ----------- Net loss............................. $ (6,035) $ (16,810) $ (19,398) ========== =========== =========== Basic net loss per share............... $ (0.73) $ (2.03) $ (2.30) ========== =========== =========== Shares used in computing basic net loss per share............................ 8,252,325 8,291,142 8,423,038 ========== =========== =========== Pro forma basic net loss per share..... $ (0.68) $ (1.53) $ (1.49) ========== =========== =========== Shares used in computing pro forma basic net loss per share............. 8,848,864 10,966,633 13,008,090 ========== =========== ===========
The accompanying notes are an integral part of these consolidated statements. F-4 89 AUTOBYTEL.COM INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (Amounts in thousands, except share and per share data)
CONVERTIBLE MEMBERS' PREFERRED STOCK COMMON STOCK INTEREST/ ------------------ ------------------ ADDITIONAL DEFERRED CUMULATIVE NUMBER OF NUMBER OF PAID-IN COMPEN- TRANSLATION SHARES AMOUNT SHARES AMOUNT WARRANTS CAPITAL SATION ADJUSTMENT --------- ------ --------- ------ -------- ---------- -------- ----------- Balance, December 31, 1995............. -- $-- -- $-- $ -- $ 40 $ -- $ -- Sale of members' interest in ABT Acceptance Company, LLC............ -- -- -- -- -- 50 -- -- Issuance of common stock in exchange for members' interest.............. -- -- 8,250,000 8 -- (8) -- -- Issuance of common stock options with an exercise price of $0.90 per share.............................. -- -- -- -- -- 87 (87) -- Issuance of Series A convertible preferred stock at $10.00 per share.............................. 1,450,000 2 -- -- -- 14,363 -- -- Issuance of Series A convertible preferred stock at $10.00 per share upon conversion of debt............ 50,000 -- -- -- -- 500 -- -- Issuance of common stock in exchange for services....................... -- -- 6,667 -- -- 20 -- -- Issuance of common stock upon exercise of stock options.......... -- -- 28,148 -- -- 25 -- -- Amortization of deferred compensation....................... -- -- -- -- -- -- 61 -- Net loss............................. -- -- -- -- -- -- -- -- --------- -- --------- -- ------ ------- ---- ---- Balance, December 31, 1996............. 1,500,000 2 8,284,815 8 -- 15,077 (26) -- Issuance of Series B convertible preferred stock at $9.35 per share.............................. 967,915 1 -- -- -- 9,028 -- -- Issuance of Series C convertible preferred stock at $8.80 per share.............................. 1,477,274 1 -- -- -- 12,987 -- -- Issuance of common stock upon exercise of stock options.......... -- -- 39,628 -- -- 31 -- -- Amortization of deferred compensation....................... -- -- -- -- -- -- 25 -- Net loss............................. -- -- -- -- -- -- -- -- --------- -- --------- -- ------ ------- ---- ---- Balance, December 31, 1997............. 3,945,189 4 8,324,443 8 -- 37,123 (1) -- Issuance of Series C convertible preferred stock at $8.80 per share.............................. 3,370,455 3 -- -- -- 29,443 -- -- Issuance of Series C convertible preferred stock at $8.80 per share in exchange for advertising........ 121,009 -- -- -- -- 1,065 -- -- Issuance of warrants in exchange for start-up costs for a Pan-European entity............................. -- -- -- -- 792 -- -- -- Issuance of warrant in exchange for involvement in broadband application project................ -- -- -- -- 540 -- -- -- Issuance of common stock upon exercise of stock options.......... -- -- 181,012 -- -- 169 -- -- Issuance of common stock at $13.20 per share.......................... -- -- 1,000 -- -- 13 -- -- Amortization of deferred compensation....................... -- -- -- -- -- -- 1 -- Foreign currency translation adjustment......................... -- -- -- -- -- -- -- (19) Net loss............................. -- -- -- -- -- -- -- -- --------- -- --------- -- ------ ------- ---- ---- Balance, December 31, 1998............. 7,436,653 $7 8,506,455 $8 $1,332 $67,813 $ -- $(19) ========= == ========= == ====== ======= ==== ==== ACCUM- ULATED DEFICIT TOTAL -------- -------- Balance, December 31, 1995............. $ (1,030) $ (990) Sale of members' interest in ABT Acceptance Company, LLC............ -- 50 Issuance of common stock in exchange for members' interest.............. -- -- Issuance of common stock options with an exercise price of $0.90 per share.............................. -- -- Issuance of Series A convertible preferred stock at $10.00 per share.............................. -- 14,365 Issuance of Series A convertible preferred stock at $10.00 per share upon conversion of debt............ -- 500 Issuance of common stock in exchange for services....................... -- 20 Issuance of common stock upon exercise of stock options.......... -- 25 Amortization of deferred compensation....................... -- 61 Net loss............................. (6,035) (6,035) -------- -------- Balance, December 31, 1996............. (7,065) 7,996 Issuance of Series B convertible preferred stock at $9.35 per share.............................. -- 9,029 Issuance of Series C convertible preferred stock at $8.80 per share.............................. -- 12,988 Issuance of common stock upon exercise of stock options.......... -- 31 Amortization of deferred compensation....................... -- 25 Net loss............................. (16,810) (16,810) -------- -------- Balance, December 31, 1997............. (23,875) 13,259 Issuance of Series C convertible preferred stock at $8.80 per share.............................. -- 29,446 Issuance of Series C convertible preferred stock at $8.80 per share in exchange for advertising........ -- 1,065 Issuance of warrants in exchange for start-up costs for a Pan-European entity............................. -- 792 Issuance of warrant in exchange for involvement in broadband application project................ -- 540 Issuance of common stock upon exercise of stock options.......... -- 169 Issuance of common stock at $13.20 per share.......................... -- 13 Amortization of deferred compensation....................... -- 1 Foreign currency translation adjustment......................... -- (19) Net loss............................. (19,398) (19,398) -------- -------- Balance, December 31, 1998............. $(43,273) $ 25,868 ======== ========
The accompanying notes are an integral part of these consolidated statements. F-5 90 AUTOBYTEL.COM INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands, except share and per share data)
YEARS ENDED DECEMBER 31, ------------------------------- 1996 1997 1998 ------- -------- -------- Cash flows from operating activities: Net loss.................................................. $(6,035) $(16,810) $(19,398) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization........................... 178 860 1,255 Provision for bad debt.................................. 145 175 187 Loss on disposal of property and equiptment............. -- -- 1 Amortization of deferred compensation................... 61 25 1 Issuance of common stock in exchange for services....... 20 -- -- Issuance of Series C convertible preferred stock in exchange for advertising............................... -- -- 1,065 Issuance of warrants in exchange for start-up costs for a Pan-European entity.................................. -- -- 792 Issuance of warrant in exchange for involvement in broadband application project.......................... -- -- 540 Changes in assets and liabilities: Accounts receivable................................... (429) (1,370) (1,009) Prepaid expenses and other current assets............. (788) 107 (558) Other assets.......................................... (604) 516 (252) Accounts payable...................................... 564 1,572 692 Accrued expenses...................................... 722 325 (132) Deferred revenue...................................... 1,970 1,374 308 Customer deposits..................................... 554 (427) 218 Other current liabilities............................. 16 34 (33) Deferred rent......................................... 17 74 32 ------- -------- -------- Net cash used in operating activities............... (3,609) (13,545) (16,291) ------- -------- -------- Cash flows from investing activities: Acquisition of Internet Development Corporation........... -- (100) -- Purchases of property and equipment....................... (1,501) (1,652) (1,147) ------- -------- -------- Net cash used in investing activities............... (1,501) (1,752) (1,147) ------- -------- -------- Cash flows from financing activities: Proceeds from sale of common stock........................ 25 31 182 Proceeds from sale of members' interest in ABT Acceptance Company, LLC............................................ 50 -- -- Net proceeds from issuance of Series A convertible preferred stock......................................... 14,365 -- -- Net proceeds from issuance of Series B convertible preferred stock......................................... -- 9,029 -- Net proceeds from issuance of Series C convertible preferred stock......................................... -- 12,988 29,446 Proceeds from issuance of notes payable................... 765 -- -- Repayments of notes payable............................... (1,081) -- -- ------- -------- -------- Net cash provided by financing activities........... 14,124 22,048 29,628 ------- -------- -------- Effect of exchange rates on cash............................ -- -- (19) ------- -------- -------- Net increase in cash and cash equivalents................... 9,014 6,751 12,171 Cash and cash equivalents, at beginning of period........... 48 9,062 15,813 ------- -------- -------- Cash and cash equivalents, at end of period................. $ 9,062 $ 15,813 $ 27,984 ======= ======== ======== Supplemental disclosure of cash flow information: Cash paid during the period for income taxes.............. $ 4 $ 15 $ 35 ======= ======== ======== Cash paid during the period for interest.................. $ 24 $ -- $ 3 ======= ======== ========
Supplemental disclosure of non-cash financing activities (See Note 7): * In May 1996, 8,250,000 shares of common stock were issued to founding stockholders in exchange for members' interests in a predecessor limited liability company. * In August 1996, 50,000 shares of Series A convertible preferred stock were issued in exchange for $500 previously advanced to the Company under three notes payable. * In September 1996, 6,667 shares of common stock with a fair market value of $20 were issued for services. * In April 1998, 56,776 shares of Series C convertible preferred stock with a fair market value of $8.80 per share convertible into common stock at the conversion price of $13.20 per share were issued for advertising. * In October 1998, 64,233 shares of Series C convertible preferred stock with a fair market value of $8.80 per share convertible into common stock at the conversion price of $13.20 per share were issued for advertising. * In November and December 1998, warrants to purchase 439,800 shares of common stock at $13.20 per share were issued to investors in Series C convertible preferred stock in exchange for a commitment to fund start-up activities of a Pan-European entity in which the Company may invest with the investors. * In December 1998, a warrant to purchase 300,000 shares of common stock at $13.20 per share was issued to an investor in exchange for involvement in broadband application project. The accompanying notes are an integral part of these consolidated statements. F-6 91 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except share and per share data.) 1. ORGANIZATION AND OPERATIONS OF AUTOBYTEL.COM autobytel.com inc. (Autobytel.com) is a branded Internet site for new and pre-owned vehicle information and purchasing services. Through its Web site (www.autobytel.com), consumers can research pricing, specifications and other information related to new and pre-owned vehicles and, when consumers indicate they are ready to buy, can be connected to Autobytel.com's network of participating dealers. Autobytel.com also provides other related services such as financing, leasing, vehicle warranties and insurance. Autobytel.com's services are free to consumers and, to date, Autobytel.com has derived substantially all of its revenues from fees paid by subscribing dealers located in the United States and Canada. Auto-By-Tel, LLC (ABT), Autobytel.com's predecessor, was organized in January 1995 and commenced operations as a California limited liability company in March 1995. ABT Acceptance Company, LLC (ABTAC), an affiliated company under common control, was formed in February 1996. ABT and ABTAC (the LLCs) were reorganized in May 1996 as a Delaware corporation pursuant to the terms of a Contribution Agreement and Plan of Organization (the Plan of Organization) entered into by all of the members of the LLCs (See Note 7). As the LLCs were under common control, the reorganization was accounted for in a manner similar to a pooling-of-interests, whereby the assets and liabilities of ABT and ABTAC were transferred to Autobytel.com at their historical cost. Since inception, Autobytel.com has invested the majority of its efforts in marketing its brand name and developing infrastructure to support anticipated future operating growth. As a result, Autobytel.com has experienced significant operating losses and had an accumulated deficit of $43,273 at December 31, 1998. To date, such losses have been financed primarily through private placements of preferred stock (See Note 7). 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying consolidated financial statements include the accounts of Autobytel.com, its predecessors (See Note 1) and its wholly-owned subsidiaries: Autobytel Services Corporation, Autobytel Acceptance Corporation, Autobytel Insurance Services, Inc., Autobytel.ca Inc., Kre8.net, Inc., Auto-By-Tel International LLC, Auto-by-Tel UK Limited and AutoVisions Communications, Inc. All intercompany transactions and balances have been eliminated. Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. F-7 92 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Cash and Cash Equivalents For the purposes of the consolidated balance sheets and the consolidated statements of cash flows, Autobytel.com considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Concentration of Credit Risk Financial instruments that potentially subject Autobytel.com to significant concentrations of credit risk consist primarily of accounts receivable. To date, accounts receivable have primarily been derived from marketing fees billed to subscribing dealers located in the United States and Canada. Autobytel.com generally requires no collateral to support customer receivables. Autobytel.com maintains reserves for potential credit losses. Historically, such losses have been minor and within management's expectations. As of December 31, 1997 and 1998, no subscribing dealer accounted for greater than 10% of accounts receivable. Property and Equipment Property and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the respective assets, generally three years. Amortization of leasehold improvements is provided using the straight-line method over the lesser of the remaining lease term or the estimated useful lives of the improvements. Stock-Based Compensation In 1996, Autobytel.com adopted Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation." Autobytel.com has elected to continue accounting for stock-based compensation issued to employees using Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and, accordingly, pro forma disclosures required under SFAS No. 123 have been presented (See Note 8). Revenue Recognition Substantially all revenues to date consist of fees paid by subscribing dealers. These fees are comprised of an initial fee, a monthly fee and, through fiscal 1997, an annual fee. In January 1998, Autobytel.com started to eliminate annual fees and increase monthly fees to subscribing dealers. The initial fee and annual fee are recognized ratably over the service period of 12 months. The monthly fee is recognized in the period services are provided. Deferred revenue is comprised of unamortized fees. Risks Due to Concentration of Significant Customers and Export Sales For all periods presented in the accompanying consolidated statements of operations, no subscribing dealer accounted for greater than 10% of revenues. Autobytel.com conducts its business within one industry segment. Revenues from customers outside of the United States were less than 10% of total revenues for all periods presented in the accompanying consolidated statements of operations. F-8 93 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Sales and Marketing Sales and marketing expense primarily includes advertising and marketing expenses paid to purchase request providers and developing Autobytel.com's brand equity, as well as personnel and other costs associated with sales, training and support of its dealer network. Sales and marketing expense also includes cost of sales associated with the sale of computers, which was discontinued in February 1998. Sales and marketing costs are recorded as expenses as incurred. For the years ended December 31, 1996, 1997 and 1998, Internet marketing and advertising costs were $1,838, $5,828, and $11,090 and television advertising expenses were $396, $4,048, and $5,296, respectively. Product and Technology Development Product and technology development expense primarily includes personnel costs relating to enhancing the features, content and functionality of Autobytel.com's Web site and its online dealer information platform (DRT), as well as expenses associated with its telecommunications and computer infrastructure. Product and technology development expenditures are expensed as incurred. General and Administrative General and administrative expense primarily consists of executive, financial and legal personnel expenses and related costs. General and administrative expense for the year ended December 31, 1997 includes a non-recurring $1.1 million charge associated with a proposed and withdrawn initial public offering in April 1997. Foreign Currency Translation The functional currency of Autobytel.com's subsidiaries is the local currency. Accordingly, all assets and liabilities are translated into United States dollars at the current exchange rate as of the applicable balance sheet date. Revenues and expenses are translated at the average exchange rate prevailing during the period. Gains and losses resulting from the translation of the financial statements are reported as a separate component of stockholders' equity. Computation of Basic Net Loss Per Share and Pro Forma Basic Net Loss Per Share Historical net loss per share has been calculated under SFAS No. 128, "Earnings per Share." SFAS No. 128 requires companies to compute earnings per share under two different methods (basic and diluted). Basic net loss per share is calculated by dividing the net loss by the weighted average shares of common stock outstanding during the period. No diluted loss per share information has been presented in the accompanying consolidated statements of operations since potential common shares from the conversion of preferred stock, stock options and warrants are antidilutive. Autobytel.com evaluated the requirements of the Securities and Exchange Commission Staff Accounting Bulletin (SAB) No. 98, and concluded that there are no nominal issuances of common stock or potential common stock which would be required to be shown as outstanding for all periods as outlined in SAB No. 98. F-9 94 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Pro forma basic net loss per share has been calculated assuming the conversion of the outstanding preferred stock into common stock, as if the shares had been converted on the dates of their issuance. New Accounting Pronouncements In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income," which establishes standards for reporting and presentation of comprehensive income. SFAS No. 130, which was adopted by Autobytel.com in the first quarter of 1998, requires companies to report a new measurement of income. Comprehensive income (loss) is to include foreign currency translation gains and losses and other unrealized gains and losses that have historically been excluded from net income (loss) and reflected instead in equity. The only comprehensive income included in the accompanying stockholders' equity is foreign currency translation loss of $19 for the year ended December 31, 1998. As this amount is not material, comprehensive income (loss) is not presented in the accompanying consolidated financial statements. In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." Autobytel.com adopted SFAS No. 131 in the fourth quarter of 1998 (See Note 12). In March 1998, the American Institute of Certified Public Accountants (AICPA) issued Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," which is effective for fiscal years beginning after December 15, 1998. SOP 98-1 provides guidance on accounting for the costs of computer software developed or obtained for internal use and defines specific criteria that determine when such costs are required to be expensed, and when such costs may be capitalized. Autobytel.com currently expenses software development costs as incurred. Management anticipates that it will continue to incur such development costs. However, management expects that, as a percentage of revenues, such costs will remain consistent. In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-up Activities," which is effective for fiscal years beginning after December 15, 1998. SOP 98-5 provides guidance on the financial reporting of start-up cost and organization costs and require such costs to be expensed as incurred. Management believes that the adoption of SOP 98-5 will not have a material effect on Autobytel.com's consolidated financial statements. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which is effective for fiscal years beginning after June 15, 1999. SFAS No. 133 establishes accounting and reporting standards for derivative instruments. The statement requires that every derivative instrument be recorded in the balance sheet as either an asset or liability measured at its fair value, and that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Autobytel.com does not have any derivative instruments as of December 31, 1998. Management believes that the adoption of SFAS No. 133 will not have a material effect on Autobytel.com's consolidated financial statements. F-10 95 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. BUSINESS ACQUISITION In May 1997, one of Autobytel.com's subsidiaries, Kre8.net, Inc., entered into an asset purchase agreement with Internet Development Corporation to purchase certain assets and to assume certain liabilities of the business. The combined entity develops Web sites for automobile and other industries. The purchase price for the net assets was $100 in cash. The acquisition was accounted for by the purchase method. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair market values whose fair value equaled book value at the closing date. The excess of purchase price over the estimated fair value of net assets acquired was $93, and is being amortized using the straight-line method over a period of three years. The results of operations of the acquired business are included in the accompanying consolidated statements of operations and in Autobytel.com's accumulated deficit beginning in May 1997. Internet Development Corporation's revenues and results of operations since the date of acquisition are immaterial. 4. PROPERTY AND EQUIPMENT Property and equipment consists of the following:
DECEMBER 31, ------------------ 1997 1998 ------- ------- Computer software and hardware..................... $ 2,104 $ 2,800 Furniture and equipment............................ 892 1,206 Leasehold improvements............................. 427 561 ------- ------- 3,423 4,567 Less -- Accumulated depreciation and amortization..................................... (1,106) (2,359) ------- ------- $ 2,317 $ 2,208 ======= =======
5. COMMITMENTS AND CONTINGENCIES Operating Leases Autobytel.com leases its facilities and certain office equipment under operating leases which expire on various dates through 2001. At December 31, 1998, future minimum lease payments are as follows:
YEARS ENDING DECEMBER 31, ------------------------- 1999................................................... $ 619 2000................................................... 649 2001................................................... 501 2002................................................... -- 2003................................................... -- Thereafter............................................. -- ------ $1,769 ======
F-11 96 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Rent expense was $92, $247, and $491 for the years ended December 31, 1996, 1997 and 1998, respectively. Marketing and Advertising Agreements In September 1997, Autobytel.com entered into a three year Internet marketing agreement with a company that operates a search engine. The agreement permits Autobytel.com to maintain certain exclusive promotional rights and linkage with the search engine, and provides for certain advertising. The payments under the agreement consist of a set-up fee, an annual fee and a variable fee per purchase request. The set-up fee represents the cost of initiating the link between Autobytel.com and the search engine and was expensed in the period the link was established. Autobytel.com expenses the annual fee ratably over a 12-month period and the variable fee in the period purchase requests are received. The amount of variable fee per purchase request increases as the number of purchase requests received reaches agreed upon increments. Under the agreement, Autobytel.com is also to provide the search engine with up to three new vehicles in a 12-month period. The agreement grants Autobytel.com the right to terminate the agreement if the number of purchase requests does not meet the threshold specified for each year of the term of the agreement. As of December 31, 1998, the minimum future payments under the agreement amounted to $3.7 million. In June 1998, Autobytel.com entered into a two year Internet marketing agreement with another company that operates a search engine. The agreement permits Autobytel.com to maintain certain exclusive promotional rights and linkage with the search engine. The payments under the agreement consist of an annual fee, and a variable fee per purchase request. Autobytel.com expenses the annual fee ratably over a 12-month period and the variable fee in the period purchase requests are received. The amount of variable fee per purchase request increases as the number of purchase requests received reaches agreed upon increments. Under the agreement, Autobytel.com is also to provide the search engine with up to three new vehicles in a 12-month period, the total value of which is not to exceed $45, which has been expensed as incurred. The agreement grants Autobytel.com the right to terminate the agreement if the number of purchase requests does not meet the threshold specified for each year of the term of the agreement. As of December 31, 1998, the minimum future payments under the agreement amounted to $1.2 million. Autobytel.com has agreements with other automotive information providers that make available to consumers vehicle research data over the Internet. Such agreements are generally for a term of one to four years and require that Autobytel.com pay a combination of set-up, initial, annual, monthly and variable fees based on the volume of purchase requests received by Autobytel.com. The set-up fees are expensed as incurred, the initial fees and annual fees are amortized over the period they relate to. The monthly fees are expensed in the month they relate to and variable fees are expensed in the period purchase requests are received. As of December 31, 1998, the minimum future commitments under these agreements were $0.7 million. During 1998, total Internet marketing and advertising costs incurred were $11,090, including initial, annual and monthly fees of $50, $2,965 and $2,903, respectively. No set-up fees were incurred in 1998 and variable fees were $5,172. F-12 97 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Autobytel.com has agreements with network and cable television stations under which it has the right to purchase television advertising. As of December 31, 1998, the minimum future commitments under these agreements were $1.7 million. These amounts are expensed as advertisements are aired. For the years ended December 31, 1996, 1997 and 1998, Autobytel.com paid $2,721, $8,474 and $15,540, respectively, under these marketing and advertising agreements. Employment Agreements Autobytel.com has employment agreements with certain executives under which, in the event of termination without cause or resignation with a good reason, the executives are entitled to receive severance payments equal to the base salary that would have been received by the executives over the remaining term of the agreements. One of these agreements also provides for an additional severance payment in the event of a change in control as defined in the agreement. The term of the agreements range from two to three years. Litigation In the normal course of business, Autobytel.com is involved in various legal proceedings. Based upon the information presently available, management believes that the ultimate resolution of any such proceedings will not have a material adverse effect on Autobytel.com's financial position, liquidity or results of operations. 6. RETIREMENT SAVINGS PLAN Autobytel.com has a Retirement Savings Plan (the Retirement Plan) which qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. The Retirement Plan covers all full time employees of Autobytel.com who are over 21 years of age and have worked for Autobytel.com for at least 90 days. Under the Retirement Plan, participating employees are allowed to defer up to 15% of their pretax salaries up to a maximum of $10,000 per year. Company contributions to the Retirement Plan are discretionary. Autobytel.com has made no contributions since the inception of the Retirement Plan. 7. STOCKHOLDERS' EQUITY Series A Convertible Preferred Stock In August 1996, the Board of Directors authorized 1,500,000 shares of Series A convertible preferred stock (Series A Preferred), and Autobytel.com completed the sale of 1,500,000 shares of Series A Preferred at $10.00 per share through a private placement offering. Of the total shares sold, 50,000 shares were issued to an individual in exchange for $500 previously advanced to Autobytel.com under three notes payable. In addition, $1,081 of the proceeds were used to repay notes due to Autobytel.com's former Chairman and co-founder. The Series A Preferred will be automatically converted into 1,666,667 shares of common stock at the conversion ratio of approximately 1:1.11 upon the earliest of (i) the F-13 98 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) closing of an underwritten public offering of Autobytel.com's common stock with a minimum per share price of $13.50 per share, and minimum aggregate offering price of $30 million; (ii) the consent of two-thirds of the holders of preferred stock; or (iii) when fewer than 300,000 shares of Series A Preferred remain outstanding. The Series A Preferred is also convertible into 1,666,667 shares of common stock at the option of the holder. Autobytel.com has reserved 1,666,667 shares of common stock to permit the conversion of the Series A Preferred. Holders of Series A Preferred are entitled to one vote for each share of common stock into which such shares of Series A Preferred may be converted except with respect to election of directors, whereby the holders, voting separately as a class, are entitled to elect two directors. Each share of Series A Preferred entitles the holder to receive non-cumulative dividends, if and when declared by the Board of Directors, prior to any dividend paid on Series B Preferred or the common stock. Dividends, if any, on Series A Preferred shall be declared at an annual rate of $0.80 per share. As of December 31, 1998, no dividends have been declared. In the event of liquidation, the Series A Preferred has preference over Series B Preferred and the common stock in the amount of $10.00 per share, plus declared but unpaid dividends. Series B Convertible Preferred Stock In January 1997, the Board of Directors authorized 967,915 shares of Series B convertible preferred stock (Series B Preferred), and Autobytel.com completed the sale of 967,915 shares of Series B Preferred at $9.35 per share through a private placement offering. The Series B Preferred will be automatically converted into 873,131 shares of common stock at the conversion ratio of approximately 1:0.90 upon the earliest of (i) the closing of an underwritten public offering of Autobytel.com's common stock with a minimum per share price of $13.50 per share, and minimum aggregate offering price of $30 million; (ii) the consent of two-thirds of the holders of preferred stock; or (iii) when fewer than 200,000 shares of Series B Preferred remain outstanding. The Series B Preferred is also convertible into 873,131 shares of common stock at the option of the holder. Autobytel.com has reserved 873,131 shares of common stock to permit the conversion of the Series B Preferred. Holders of Series B Preferred are entitled to one vote for each share of common stock into which such shares of Series B Preferred may be converted. Each share of Series B Preferred entitles the holder to receive noncumulative dividends, if and when declared by the Board of Directors, prior to any dividend paid on the common stock. Dividends, if any, on Series B Preferred shall be declared at an annual rate of $0.80 per share. As of December 31, 1998, no dividends have been declared. In the event of liquidation, the Series B Preferred has preference over the common stock in the amount of $9.35 per share, plus declared but unpaid dividends. F-14 99 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Series C Convertible Preferred Stock In October 1997, the Board of Directors authorized 2,840,909 shares of Series C convertible preferred stock (Series C Preferred), and Autobytel.com completed the sale of 1,477,274 shares of Series C Preferred at $8.80 per share through a private placement offering. The Board of Directors authorized an additional 1,136,363 and 3,000,000 shares of Series C Preferred in February and December 1998, respectively. In April 1998, Autobytel.com issued 56,776 shares of its Series C Preferred in payment of television advertising with an estimated fair market value of $500. The majority of the advertising was aired and expensed in the three months ended March 31, 1998. In May 1998, Autobytel.com sold 568,182 shares of the Series C Preferred at $8.80 per share through a private placement. In October 1998, Autobytel.com issued 64,233 shares of Series C Preferred in payment of television advertising with an estimated fair market value of $565. The amount was expensed in the three months ended December 31, 1998. In November 1998, Autobytel.com sold 568,182 shares of Series C Preferred at $8.80 per share through a private placement. In December 1998, Autobytel.com sold 2,234,091 shares of Series C Preferred at $8.80 per share through private placements. Of these shares, 1,136,364 shares were issued to an investor with whom Autobytel.com entered into a Directed Proceeds Agreement. Under the Directed Proceeds Agreement, Autobytel.com is committed to expend up to $1,000 for the development of technology for broadband applications. In addition, Autobytel.com issued a warrant for 300,000 shares of common stock in exchange for the right to participate in the development of this technology and the warrant holder's agreement to use commercially reasonable efforts to involve Autobytel.com in other broadband application projects. The fair value of the warrant ($540) has been recorded as a prepaid expense at December 31, 1998. The Series C Preferred will be automatically converted into 3,312,492 shares of common stock at the conversion ratio of approximately 1:0.67 upon the earliest of (i) the closing of an underwritten public offering of Autobytel.com's common stock with a minimum per share price of $13.50 per share, and minimum aggregate offering price of $30 million; (ii) the consent of two-thirds of the holders of preferred stock; or (iii) when fewer than 250,000 shares of Series C Preferred remain outstanding. The Series C Preferred is also convertible into 3,312,492 shares of common stock at the option of the holder. Autobytel.com has reserved 3,312,492 shares of common stock to permit the conversion of the Series C Preferred. Holders of Series C Preferred are entitled to one vote for each share of common stock into which such shares of Series C Preferred may be converted. Each share of Series C Preferred entitles the holder to receive non-cumulative dividends, if and when declared by the Board of Directors, prior to any dividend paid on Series A and Series B Preferred and the common stock. Dividends, if any, on Series C Preferred shall be declared at an annual rate of $0.80 per share. As of December 31, 1998, no dividends have been declared. F-15 100 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) In the event of liquidation, the Series C Preferred has preference over Series A and Series B Preferred and the common stock in the amount of $8.80 per share, plus declared but unpaid dividends. As of December 31, 1998, 2,000,000 shares of preferred stock were undesignated. Common Stock Under the terms of the Plan of Organization, the interests of the members of the LLCs were transferred to autobytel.com inc. in a tax-free transaction. In consideration for their respective ownership interests, the members of ABT and ABTAC received 8,250,000 shares of common stock of Autobytel.com. Warrants In November 1998, Autobytel.com issued a warrant to purchase 150,000 shares of common stock to an investor in its Series C Preferred in exchange for the investor's commitment to assist Autobytel.com with organizational and start-up activities related to a Pan-European entity in which Autobytel.com may invest with the investor. The warrant is exercisable at $13.20 per share and expires in November 2001. The warrant was valued at $270, which was expensed in 1998, as the investor has fulfilled its commitment and has no further obligation to Autobytel.com. In December 1998, Autobytel.com issued warrants to purchase 289,800 shares of common stock to another investor in its Series C Preferred in exchange for the investor's commitment to assist Autobytel.com with organizational and start-up activities related to a Pan-European entity in which Autobytel.com may invest with the investor. The warrants are exercisable at $13.20 per share and expire in December 2001. The warrants were valued at $522, which was expensed in 1998, as the investor has fulfilled its commitment and has no further obligation to Autobytel.com. In December 1998, Autobytel.com issued a warrant to purchase 300,000 shares of common stock to an investor in exchange for the right to participate in the development of broadband application technology. The warrant is exercisable at $13.20 per share and expires in December 2001. The warrant was valued at $540, and is recorded as a prepaid expense at December 31, 1998. The fair value of each of these warrants was estimated using the Black-Scholes option-pricing model and the following assumptions: (1) no dividend yield, (2) volatility of 0.10%, (3) risk-free interest rate of 4.90%, and (4) expected life of three years. 8. STOCK OPTION PLANS 1996 Stock Option Plan Autobytel.com's 1996 Stock Option Plan (the Option Plan) was approved by the Board of Directors in May 1996. The Option Plan was terminated by a resolution of the Board of Directors in October 1996, at which time 870,555 options had been issued. The Option Plan provided for the granting to employees and directors of incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the Code), and for the granting to employees, consultants and directors of nonstatutory F-16 101 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) stock options. Autobytel.com reserved 1,194,444 shares of common stock for exercise of stock options under the Option Plan. The exercise price of incentive stock options granted under the Option Plan could not be lower than the fair market value of the common stock, and the exercise price of nonstatutory stock options could not be less than 85% of the fair market value of the common stock, as determined by the Board of Directors, on the date of grant. With respect to any participants who, at the time of grant, owned stock that possessed more than 10% of the voting power of all classes of stock of Autobytel.com, the exercise price of any stock option granted to such person was to be at least 110% of the fair market value on the grant date, and the maximum term of such option was five years. The term of all other options granted under the Option Plan did not exceed 10 years. Stock options granted under the Option Plan vest according to vesting schedules determined by the Board of Directors. As of December 31, 1998, options to purchase an aggregate of 206,388 shares of common stock at an exercise price ranging from $0.84 to $0.90 per share were outstanding under the Option Plan. 1996 Stock Incentive Plan Autobytel.com's 1996 Stock Incentive Plan (the Incentive Plan) was approved by the Board of Directors in October 1996, and was amended in November 1996. The Incentive Plan provides for the granting to employees and directors of incentive stock options within the meaning of Section 422 of the Code, and for the granting to employees, directors and consultants of nonstatutory stock options and stock purchase rights. Autobytel.com has reserved a total of 833,333 shares of common stock for issuance under the Incentive Plan. The exercise price of stock options granted under the Incentive Plan cannot be lower than the fair market value of the common stock, as determined by the Board of Directors, on the date of grant. With respect to any participants who, at the time of grant, own stock possessing more than 10% of the voting power of all classes of stock of Autobytel.com, the exercise price of stock options granted to such person must be at least 110% of the fair market value on the grant date, and the maximum term of such options is five years. The term of all other options granted under the Incentive Plan may be up to 10 years. Stock options granted under the Incentive Plan vest according to vesting schedules determined by the Board of Directors. 1998 Stock Option Plan In December 1998, Autobytel.com adopted the 1998 Stock Option Plan (the 1998 Option Plan). Autobytel.com has reserved 1,500,000 shares under the 1998 Option Plan. The 1998 Option Plan provides for the granting to employees of incentive stock options within the meaning of the Code, and for the granting to employees of nonstatutory stock options. The exercise price of non-statutory options granted under the 1998 Option Plan cannot be lower than 85% of the fair market value of the common stock on the date of grant. The exercise price of all incentive stock options granted cannot be lower than the fair market value on the grant date. With respect to any participants who beneficially own more than 10% of the voting power of all classes of stock of Autobytel.com, the exercise price of any stock option granted to such person must be at least 110% of the fair market value on the grant date, and the maximum term of such option is five years. The term of all other options granted under the 1998 Option Plan may be up to 10 years. Under the 1998 Option Plan, certain nonstatutory stock options (Performance Options) vest over a F-17 102 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) time period determined by the Board of Directors, however, the vesting could be accelerated based on the performance of Autobytel.com's common stock. In December 1998, the Board of Directors granted Performance Options to purchase 700,000 shares of common stock to its executives at an exercise price of $13.20 per share, which represents the fair market value on the date of grant. These options vest over a seven-year period, but the vesting could be accelerated based on the performance of Autobytel.com's common stock. The accelerated vesting schedule is conditioned on Autobytel.com consummating an initial public offering. The accelerated vesting schedule provides that the grants will vest in six installments, one installment vesting each six months over a three-year period if pre-established average trading prices of the common stock are achieved. Those installments will vest if the average trading price exceeds the exercise price by $6.60, $13.20, $19.80, $26.40, $33.00 and $39.60, respectively, in the applicable six month period after the date of grant. All other stock options granted under the 1998 Option Plan vest according to vesting schedules determined by the Board of Directors. The 1998 Option Plan provides that, unless otherwise provided in the stock option agreement, in the event of any merger, consolidation, or sale or transfer of all or any part of Autobytel.com's business or assets, all rights of the optionee with respect to the unexercised portion of any option shall become immediately vested and may be exercised immediately, except to the extent that any agreement or undertaking of any party to any such merger, consolidation, or sale or transfer of assets makes specific provisions for the assumption of the obligations of Autobytel.com with respect to the 1998 Option Plan. During the year ended December 31, 1996, Autobytel.com granted options under the aforementioned plans to purchase an aggregate of 1,568,059 shares of common stock at various exercise prices ranging from $0.90 to $11.25 per share. During the year ended December 31, 1996, Autobytel.com recorded, based upon an independent appraisal obtained by Autobytel.com's Board of Directors, $87 of deferred compensation expense relating to certain options. This amount was amortized over the vesting periods of the options. Amortization of deferred compensation for the years ended December 31, 1996, 1997 and 1998 was $61, $25 and $1, respectively. During the year ended December 31, 1997, Autobytel.com granted options to various employees to purchase 853,504 shares of common stock at an exercise price of $13.20 per share. During the year ended December 31, 1998, Autobytel.com granted options to various employees to purchase 1,630,340 shares of common stock at an exercise price of $13.20 per share. In January 1999, Autobytel.com granted options to Hoshi Printer, Senior Vice President and Chief Financial Officer, to purchase 150,000 shares of common stock at an exercise price of $13.20 per share. 1996 Employee Stock Purchase Plan Autobytel.com's 1996 Employee Stock Purchase Plan (the Purchase Plan) was adopted by the Board of Directors in November 1996. The Purchase Plan, which is intended to qualify under Section 423 of the Code, permits eligible employees of Autobytel.com to purchase shares of common stock through payroll deductions of up to F-18 103 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) ten percent of their compensation, up to a certain maximum amount for all purchase periods ending within any calendar year. Autobytel.com has reserved a total of 444,444 shares of common stock for issuance under the Purchase Plan. The price of common stock purchased under the Purchase Plan will be 85% of the lower of the fair market value of the common stock on the first or last day of each six month purchase period. Employees may end their participation in the Purchase Plan at any time during an offering period, and they will be paid their payroll deductions to date. Participation ends automatically upon termination of employment with Autobytel.com. There have been no stock purchases under the Purchase Plan. In January 1999, the Board of Directors ratified the suspension of the Purchase Plan. F-19 104 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) A summary of the status of Autobytel.com's stock options as of December 31, 1996, 1997 and 1998, and changes during such periods is presented below:
WEIGHTED AVERAGE NUMBER OF EXERCISE OPTIONS PRICE ---------- -------- Outstanding at December 31, 1995................ -- $ -- Granted......................................... 1,568,059 3.24 Exercised....................................... (28,148) 0.90 Canceled........................................ (19,353) 0.90 ---------- ------ Outstanding at December 31, 1996................ 1,520,558 3.32 Granted......................................... 853,504 13.20 Exercised....................................... (39,629) 0.90 Canceled........................................ (156,688) 7.88 ---------- ------ Outstanding at December 31, 1997................ 2,177,745 6.92 Granted......................................... 1,630,340 13.20 Exercised....................................... (181,012) 0.94 Canceled........................................ (767,733) 6.93 ---------- ------ Outstanding at December 31, 1998................ 2,859,340 $10.87 ========== ====== Exercisable at December 31, 1996................ 362,958 $ 0.89 ========== ====== Exercisable at December 31, 1997................ 858,187 $ 2.78 ========== ====== Exercisable at December 31, 1998................ 738,860 $ 6.42 ========== ====== Weighted-average fair value of options granted during 1996 whose exercise price is less than the market price of the stock on the grant date (169,445 options)........................ $ 2.45 ====== Weighted-average fair value of options granted during 1996 whose exercise price exceeds the market price of the stock on the grant date (1,398,614 options)........................... $ 1.16 ====== Weighted-average fair value of options granted during 1997 whose exercise price equals the market price of the stock on the grant date (853,504 options)............................. $ 2.73 ====== Weighted-average fair value of options granted during 1998 whose exercise price equals the market price of the stock on the grant date (1,630,340 options)........................... $ 3.25 ======
The fair value of each option granted through December 31, 1998 is estimated using the Black-Scholes option-pricing model on the date of grant using the following assumptions: (i) no dividend yield, (ii) volatility of effectively zero, (iii) weighted-average risk-free interest rate of approximately 6.70%, 6.18%, and 4.80% for the years ended December 31, 1996, 1997 and 1998, respectively, and (iv) expected life of six years for the years ended December 31, 1996 and 1997 and four to seven years for the year ended December 31, 1998. F-20 105 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The following table summarizes information about stock options outstanding at December 31, 1998:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------------------------------- -------------------------- WEIGHTED AVERAGE WEIGHTED WEIGHTED NUMBER OF REMAINING LIFE AVERAGE NUMBER OF AVERAGE EXERCISE PRICE OPTIONS (IN YEARS) EXERCISE PRICE OPTIONS EXERCISE PRICE - -------------- --------- -------------- -------------- --------- -------------- 0$.84......... 166,667 7.5 $ 0.84 166,667 $ 0.84 0.90......... 39,721 7.5 0.90 39,442 0.90 4.50......... 466,666 7.8 4.50 279,444 4.50 11.25........ 24,443 7.9 11.25 16,294 11.25 13.20........ 2,161,843 9.5 13.20 237,013 13.20 --------- --- ------ ------- ------ 0$.84-$13.20.. 2,859,340 9.1 $10.87 738,860 $ 6.42 ========= === ====== ======= ======
Had compensation cost for Autobytel.com's stock option grants for its stock-based compensation plans been determined consistent with SFAS No. 123, Autobytel.com's net loss and net loss per share for the years ended December 31, 1996, 1997 and 1998 would approximate the pro forma amounts below:
YEARS ENDED DECEMBER 31, ------------------------------- 1996 1997 1998 ------- -------- -------- Net loss, as reported.................. $(6,035) $(16,810) $(19,398) Net loss per share, as reported........ (0.73) (2.03) (2.30) Net loss, pro forma.................... (6,270) (17,624) (21,109) Net loss per share, pro forma.......... (0.76) (2.13) (2.51)
The effects of applying SFAS No. 123 in this pro forma disclosure are not indicative of future amounts. 9. SALE OF AUTO-BY-TEL UK LIMITED In November 1998, Autobytel.com entered into a Share Purchase Agreement with Inchcape Automotive Limited to sell 100% of its United Kingdom operations for a nominal cash amount and assumption of liabilities of $1,794. The sale resulted in a gain of $1,408, which is included in other income in the accompanying consolidated statements of operations. In connection with the Share Purchase Agreement, Autobytel.com entered into a License and Service Agreement with Auto-by-Tel UK Limited under which it will grant to Auto-by-Tel UK Limited a license to use its proprietary software, technology and other business procedures and provide maintenance and support in exchange for minimum annual license and maintenance and support fees over a 20-year period. The minimum annual license fee of $850 is payable in advance on a quarterly basis beginning on the launch date of the Web site. The Web site has not yet been launched. Beginning in the fourth year of this agreement, additional license fees are payable based on a formula involving a percentage of Auto-by-Tel UK Limited's gross revenue. A maintenance and support fee of $250 is payable in advance on a monthly basis beginning on the execution date of the agreement. F-21 106 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Annual license revenue will be recognized ratably over a 12-month period beginning on the Web site launch date. Maintenance and support revenue will be recognized ratably over the term of the agreement beginning on the execution date of the agreement, as the maintenance and support fee also covers efforts to develop the Web site. Autobytel.com recognized revenues of $26 under the License and Service Agreement in the year ended December 31, 1998. Under the Share Purchase Agreement, Inchcape shall not transfer 50% or more of the shares of Auto-by-tel UK Limited for a period of 365 days from the Web site launch date. Inchcape Automotive Limited, however, is entitled to transfer any shares, not to exceed 50%, at any time after the execution of the Share Purchase Agreement within the one-year period following the termination or expiration of the License and Service Agreement. If Inchcape Automotive Limited wishes to transfer any shares to a third party, Autobytel.com has the right to purchase all, but not a portion, of such shares. 10. INCOME TAXES Through May 1996, the LLCs were taxed as partnerships under the provisions of the Internal Revenue Code of 1986 (Internal Revenue Code). Under those provisions, Autobytel.com was not subject to corporate income taxes on its taxable income. Instead, Autobytel.com's taxable income or loss was included in the individual income tax returns of its members. Effective May 31, 1996, under the terms of the Plan of Organization, the LLCs were reorganized as a C Corporation under the provisions of the Internal Revenue Code (See Note 1). The reorganization required that Autobytel.com adopt SFAS No. 109, "Accounting for Income Taxes." Under SFAS No. 109, deferred income tax assets and liabilities are determined based on the differences between the book and tax basis of assets and liabilities and are measured using the currently enacted tax rates and laws. The cumulative tax effect of these temporary differences was immaterial at the time of the reorganization. No provision for federal income taxes has been recorded as Autobytel.com incurred net operating losses through December 31, 1998. Provision for income taxes included in the accompanying consolidated statements of operations primarily consists of franchise taxes paid to the state of Delaware. As of December 31, 1998, Autobytel.com had approximately $37.1 million and $18.4 million of federal and state net operating loss carryforwards available to offset future taxable income; such carry forwards expire in various years through 2018. Under the Tax Reform Act of 1986, the amounts of and benefits from Autobytel.com's net operating loss carryforwards will likely be limited upon the completion of the initial public offering due to a cumulative ownership change of more than 50% over a three year period. Based on preliminary estimates, management believes the effect of such limitation, if imposed, will not have a material adverse effect on Autobytel.com. Net deferred income tax assets, totaling approximately $6.3 million at December 31, 1997 and $15.8 million at December 31, 1998, consist primarily of the tax effect of net operating loss carry forwards, reserves and accrued expenses which are not yet deductible for tax purposes. Autobytel.com has provided a full valuation allowance on these deferred income tax assets because of the uncertainty regarding their realization. F-22 107 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 11. RELATED PARTY TRANSACTIONS Peter R. Ellis In March 1998, Autobytel.com extended a $250 loan to co-founding member and stockholder, Peter R. Ellis. The loan bears interest at 8% per annum compounded quarterly and principal and accrued interest are due in full in March 2003. The loan is secured by Mr. Ellis's stock in Autobytel.com. In June 1998, Mr. Ellis resigned from Autobytel.com as Chief Executive Officer. In August 1998, Autobytel.com executed a two year agreement with Mr. Ellis to provide advisory services. Under the agreement, Mr. Ellis received $500 in the first year and is entitled to receive $5 per month in the second year of the agreement term. The amounts paid to Mr. Ellis under this agreement are included in operating expenses in the accompanying consolidated statements of operations. 12. BUSINESS SEGMENT Autobytel.com conducts its business within one business segment, which is defined as providing online vehicle purchasing and other related services. 13. SUBSEQUENT EVENTS Proposed Initial Public Offering In January 1999, the Board of Directors authorized the filing of a registration statement with the Securities and Exchange Commission to permit Autobytel.com to sell shares of its common stock in connection with the proposed initial public offering (IPO). If the offering is consummated under the terms presently anticipated, the Series A, the Series B and the Series C Preferred (collectively Preferred Stock) outstanding at December 31, 1998 will automatically convert to common stock upon closing of the IPO (See Note 7). 1999 Stock Option Plan In January 1999, the Board of Directors adopted the 1999 Stock Option Plan (the 1999 Option Plan). Autobytel.com has reserved 1,800,000 shares under the 1999 Option Plan. The 1999 Option Plan provides for the granting of stock options to key employees of Autobytel.com. Under the 1999 Option Plan, not more than 1,000,000 shares may be granted after March 31, 1999. The 1999 Option Plan provides for an automatic grant of an option to purchase 20,000 shares of common stock to each non-employee director on the date on which the person first becomes a non-employee director. In each successive year the non-employee director shall automatically be granted an option to purchase 5,000 shares on November 1 of each subsequent year provided the non-employee director has served on the Board for at least six months. Each option shall have a term of 10 years. Such options vest in their entirety and become exercisable on the first anniversary of the grant date, provided that the optionee continues to serve as a director on such date and the exercise price per share shall be 100% of the fair market value of Autobytel.com's common stock on the date of grant. The 1999 Option Plan is identical in all other material respects to the 1998 Option Plan. F-23 108 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Rescission Offer for Stock Options Granted in Excess of the 1996 Incentive Plan Limit From May 1997 to January 1999, Autobytel.com issued grants of incentive stock options in excess of the plan limit of 833,333 shares. Subsequent to December 31, 1998, Autobytel.com offered to exchange the affected options for a cash payment or a new grant of incentive stock options under the 1999 Option Plan. In 1999, Autobytel.com has resolved this matter without a material impact on its financial statements. Total cash payments were less than $10. The new stock options were granted at the fair market value at the date of the new grant, which equaled the exercise price of the original options. All other significant provisions associated with the options remained the same. [The inside back cover of the prospectus depicts a map of the United States with dots generally representing the territories covered by United States dealers participating in the Autobytel.com network.] F-24 109 - ------------------------------------------------------ - ------------------------------------------------------ YOU MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR SALE OF COMMON STOCK MEANS THAT INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AFTER THE DATE OF THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY THESE SHARES OF COMMON STOCK IN ANY CIRCUMSTANCES UNDER WHICH THE OFFER OR SOLICITATION IS UNLAWFUL. ------------------ TABLE OF CONTENTS
PAGE ---- Prospectus Summary...................... 3 Risk Factors............................ 6 Use of Proceeds......................... 20 Dividend Policy......................... 20 Capitalization.......................... 21 Dilution................................ 22 Selected Consolidated Financial Data.... 23 Management's Discussion and Analysis of Financial Condition and Results of Operations............................ 24 Business................................ 35 Management.............................. 50 Financings and Related Party Transactions.......................... 64 Principal and Selling Stockholders...... 68 Description of Capital Stock............ 70 Shares Eligible for Future Sale......... 73 Material United States Tax Considerations for Non-U.S. Holders... 75 Underwriting............................ 80 Legal Matters........................... 82 Experts................................. 82 Additional Information.................. 83 Index to Consolidated Financial Statements............................ F-1
------------------ UNTIL , 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS THAT BUY, SELL OR TRADE THESE SHARES OF COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ 4,500,000 SHARES LOGO AUTOBYTEL.COM INC. COMMON STOCK ------------------- PROSPECTUS ------------------- BT ALEXS BROWN LEHMAN BROTHERS PAINEWEBBER INCORPORATED ------------------ , 1999 - ------------------------------------------------------ - ------------------------------------------------------ 110 PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the costs and expenses, other than underwriting discounts and commissions, to be paid in connection with the sale of the common stock being registered, all of which will be paid by the Registrant. All amounts are estimates except the SEC registration, NASD and Nasdaq filing fees. SEC Registration fee....................................... $ 32,000 NASD filing fee............................................ 9,000 Nasdaq National Market listing fee......................... 95,000 Blue Sky fees and expenses................................. 5,000 Accounting fees and expenses............................... 453,000 Legal fees and expenses.................................... 585,000 Transfer agent and registrar fees.......................... 15,000 Printing and engraving expenses............................ 300,000 Miscellaneous expenses..................................... 77,000 ---------- Total............................................ $1,571,000 ==========
- ------------------------- ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the Delaware General Corporation Law ("Delaware Law") and Autobytel.com's amended and restated certificate of incorporation provide for indemnification of Autobytel.com's directors and officers in a variety of circumstances which may include liabilities under the Securities Act. Article IX of Autobytel.com's amended and restated certificate of incorporation provides that Autobytel.com shall indemnify to the full extent permitted by the laws of Delaware, as from time to time in effect, the persons described in Section 145 of Delaware Law. The general effect of the provisions in our amended and restated certificate of incorporation and Delaware Law is to provide that we shall indemnify our directors and officers against all liabilities and expenses actually and reasonably incurred in connection with the defense or settlement of any judicial or administrative proceedings in which they have become involved by reason of their status as corporate directors or officers, if they acted in good faith and in the reasonable belief that their conduct was neither unlawful (in the case of criminal proceedings) nor inconsistent with the best interests of Autobytel.com. With respect to legal proceedings by or in the right of Autobytel.com in which a director or officer is adjudged liable for improper performance of his duty to Autobytel.com or another enterprise which such person served in a similar capacity at the request of Autobytel.com, indemnification is limited by such provisions to that amount which is permitted by the court. We will maintain officers' and directors' liability insurance which will insure against liabilities that our officers and directors may incur in such capacities. We have also entered into indemnification agreements with its directors and officers. Reference is made to the Proposed Form of Underwriting Agreement filed as Exhibit 1.1 which provides for indemnification of the directors and officers of Autobytel.com signing the Registration Statement and certain controlling persons of Autobytel.com against certain liabilities, including those arising under the Securities Act in certain instances, of the Underwriters. II-1 111 ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES Since Autobytel.com's inception, Autobytel.com has made the following sales of securities that were not registered under the Securities Act: 1. On May 31, 1996, Autobytel.com issued and sold 8,250,000 shares of common stock in exchange for membership interests in Autobytel LLC and Autobytel Acceptance Corporation LLC. 2. During the period from May 18, 1996 through December 31, 1998, Autobytel.com granted options to purchase an aggregate of 2,847,496 shares of common stock pursuant to the 1996 Stock Option Plan, 1996 Stock Incentive Plan and 1998 Stock Option Plan of which 248,788 options have been exercised. 3. On August 20, 1996, Autobytel.com issued and sold 1,500,000 shares of series A preferred stock in a private placement for an aggregate consideration of $15.0 million in cash and cancellation of indebtedness. In connection with such financing, Autobytel.com issued (i) 200,000 shares to ContiTrade Services L.L.C. in exchange for $2.0 million in cash, (ii) 400,000 shares to National Union Fire Insurance company of Pittsburgh, PA in exchange for $4.0 million in cash, (iii) 800,000 shares to General Electric Capital Corporation in exchange for $8.0 million in cash, and (iv) 100,000 shares to Michael Fuchs in exchange for $1.0 million in cash and cancellation of indebtedness. 4. On August 26, 1996, Autobytel.com issued and sold 6,667 shares to a consultant of Autobytel.com. 5. On January 30, 1997, Autobytel.com issued and sold 967,915 shares of series B preferred stock in a private placement for an aggregate consideration of $9.05 million in cash. In connection with such financing, Autobytel.com issued (i) 133,690 shares to ContiTrade Services L.L.C. in exchange for $1.25 million in cash, (ii) 267,380 shares to National Union Fire Insurance Company of Pittsburgh, PA in exchange for $2.5 million in cash, (iii) 534,760 shares to General Electric Capital Corporation in exchange for $5.0 million in cash, (iv) 32,085 shares to Michael Fuchs in exchange for $300 thousand in cash. 6. On October 21, 1997, Autobytel.com issued and sold 1,477,274 shares of series C preferred stock in a private placement for an aggregate consideration of $13.0 million in cash. In connection with such financing, Autobytel.com issued (i) 681,819 shares to General Electric Capital Corporation in exchange for approximately $6.0 million in cash; (ii) 227,273 shares to National Union Fire Insurance Company of Pittsburgh, PA in exchange for approximately $2.0 million in cash; and (iii) 568,182 shares to Tozer Kemsley and Millbourn Automotive Ltd., a unit of Inchcape Motors International plc in exchange for approximately $5.0 million in cash. 7. On January 30, 1998, Autobytel.com issued to John M. Markovich a warrant to purchase 33,333 shares of common stock of Autobytel.com (after adjustment for the Reverse Split) at an exercise price of $11.25 per share. The warrant expires on January 30, 2003. 8. On April 20, 1998, Autobytel.com entered into a transaction with National Broadcasting Company, Inc. ("NBC") whereby Autobytel.com issued and sold 56,776 shares of series C preferred stock in exchange for prime time advertisement spots with a fair market value of not less than $499,629. II-2 112 9. On May 7, 1998 Autobytel.com issued and sold 568,182 shares of series C preferred stock to Bilia AB in a private placement for a total consideration of approximately $5.0 million in cash. 10. On October 30, 1998, Autobytel.com entered into another transaction with NBC whereby Autobytel.com issued and sold 64,233 shares of Series C Stock in exchange for prime time advertisement spots with a fair market value of not less than $565,250. 11. On November 10, 1998, Autobytel.com issued and sold 568,182 shares of Series C Stock to Invision AG for a total consideration of approximately $5 million in cash. 12. On November 10, 1998, Autobytel.com issued to Invision AG a warrant to purchase an aggregate of 150,000 shares of common stock of Autobytel.com at an exercise price of $13.20 per share. This warrant expires on November 10, 2001. 13. On December 16, 1998, Autobytel.com issued and sold 643,182 shares of Series C Preferred Stock to Aureus Private Equity AG for a total consideration of approximately $5,660,000 in cash. 14. On December 16, 1998, Autobytel.com issued to Aureus Private Equity AG a warrant to purchase an aggregate of 169,800 shares of common stock of Autobytel.com at an exercise price of $13.20 per share. This warrant expires on December 16, 2001. 15. On December 21, 1998, Autobytel.com issued and sold 1,136,364 shares of Series C Preferred Stock to MediaOne Interactive Services, Inc. for a total consideration of approximately $10,000,000 in cash. 16. On December 21, 1998, Autobytel.com issued to MediaOne Interactive Services, Inc. a warrant to purchase an aggregate of 300,000 shares of common stock of Autobytel.com at an exercise price of $13.20 per share. This warrant expires on December 21, 2001. 17. On December 23, 1998, Autobytel.com issued an additional warrant to Aureus Private Equity AG to purchase 120,000 shares of common stock of Autobytel.com at an exercise price of $13.20 per share. This warrant expires on December 23, 2001. 18. On December 24, 1998, Autobytel.com issued and sold an additional 454,545 shares of Series C Preferred Stock to Aureus Private Equity AG for a total consideration of approximately $4,000,000 in cash. 19. On December 30, 1998, Autobytel.com issued and sold 1,000 shares of Common Stock to Mr. Kaplan for a total consideration of $13,200 in cash. None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering, and Autobytel.com believes that each transaction was exempt from the registration requirements of the Securities Act by virtue of Section 4(2) thereof, Regulation D promulgated thereunder or Rule 701 pursuant to compensatory benefit plans and contracts relating to compensation as provided under Rule 701. We did not engage in any general solicitation in connection with such sales and, other than Rule 701 issuances, believe that each acquiror qualifies as an "accredited investor" under Rule 501. In addition, the recipients in such transactions represented their intention to acquire the securities for investment only and not with a view to or for sale in II-3 113 connection with any distribution thereof, and appropriate legends were affixed to the share certificates and instruments issued in such transactions. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES a. Exhibits
NUMBER DESCRIPTION ------ ----------- 1.1 Form of Underwriting Agreement 3.1** Amended and Restated Certificate of Incorporation of autobytel.com inc. certified by the Secretary of State of Delaware (filed December 14, 1998 and amended March 1, 1999) 3.2** Amended and Restated Bylaws of autobytel.com inc. 4.1** Form of Stock Certificate 4.2** Amended and Restated Investors' Rights Agreement dated October 21, 1997, as amended from time to time, between autobytel.com inc. and the Investors named in Exhibit A thereto 4.3** Form of Lock-Up Agreement 5.1** Opinion and Consent of Paul, Hastings, Janofsky & Walker LLP 9.1** Voting Proxy dated January 11, 1999 by Peter R. Ellis 10.1** Form of Indemnification Agreement between autobytel.com inc. and its directors and officers 10.2 Employment Agreement dated July 1, 1998 between autobytel.com inc. and Mark W. Lorimer 10.3** Employment Agreement dated December 17, 1998 between autobytel.com inc. and Anne Delligatta 10.4** Amended and Restated Employment and Severance Agreement dated March 4, 1999 between autobytel.com inc. and Michael J. Lowell 10.5** 1996 Stock Option Plan and related agreements 10.6** 1996 Stock Incentive Plan and related agreements 10.7** 1996 Employee Stock Purchase Plan 10.8** 1998 Stock Option Plan 10.9 Marketing Agreement dated July 22, 1996, as amended on July 23, 1996, by and among Auto-By-Tel Acceptance Corporation, a subsidiary of the Registrant ("ABTAC"), the Registrant, as guarantor of the obligations of ABTAC, and AIU Insurance Company, American International South Insurance Company, American Home Assurance Company, American International Insurance Company, American International Insurance Company of California, Inc., Illinois National Insurance Company, Minnesota Insurance Company, National Union Fire Insurance Company of Pittsburgh, PA and the Insurance Company of the State of Pennsylvania 10.10 Marketing Agreement dated February 8, 1996 between Auto-By-Tel, LLC and Edmund's Publications Corp. 10.11 Amendment to Marketing Agreement of February 8, 1996, dated June 6, 1997 between Edmund Publications Corp. and the Registrant 10.12 Form of Dealership Agreements 10.13 Financing Inquiry Referral Agreement dated October 25, 1996 among Auto-By-Tel, Inc, as guarantor, Auto-By-Tel Acceptance Corporation and Chase Manhattan Automotive Finance Corporation
II-4 114
NUMBER DESCRIPTION ------ ----------- 10.14 Marketing and Application Processing Agreement dated February 1, 1997 between General Electric Capital Auto Financial Services, Inc., Auto-By-Tel Acceptance Corporation ("ABTAC") and Auto-By-Tel, Inc., as guarantor 10.15 Content License and Channel Sponsorship Term Sheet dated September 12, 1997 between Excite, Inc. and Auto-By-Tel 10.16 Data License and Web Site Agreement dated April 1, 1997 between IntelliChoice, Inc. and Auto-By-Tel Marketing Corporation and the Registrant 10.17 Kelley Blue Book/Auto-By-Tel Agreement dated November 19, 1997, as amended July 1, 1998, between Kelley Blue Book and Auto-By-Tel Corporation 10.18 Listings Distribution, Sponsorship, Display Advertising and Network Affiliation Agreement dated May 29, 1997 between Classifieds2000, Inc. and Auto-By-Tel Corporation 10.19 License Agreement dated June 4, 1998 among J.D. Power and Associates, Auto-By-Tel Marketing Corporation, and autobytel.com inc. 10.20 Site Page Sponsorship and Commission Agreement dated June 25, 1997, between Auto-By-Tel Marketing Corporation and AT&T Corporation 10.21 Letter agreement dated April 1, 1997, between Auto-By-Tel Marketing Corporation and NBC Multimedia Inc. 10.22 Sponsorship Agreement, dated as of June 24, 1998, between Excite, Inc. and Auto-By-Tel Corporation 10.23 License and Services Agreement dated August 7, 1998 between autobytel.com inc. and Auto-By-Tel AB 10.24 License and Services Agreement dated November 23, 1998 between autobytel.com inc. and Auto-by-Tel UK Limited 10.25 Share Purchase Agreement dated November 23, 1998 between autobytel.com inc. and Inchcape Automotive Limited 10.26 Financing Inquiry Referral Agreement dated December 31, 1998 between Provident Bank, Auto-By-Tel Acceptance Corporation and autobytel.com inc., as guarantor 10.27 Procurement and Trafficking Agreement dated September 24, 1998 between DoubleClick Inc. and autobytel.com inc. 10.28** Loan Agreement dated November 18, 1998 between Ann Benvenuto and autobytel.com inc. 10.29** Advisory Agreement dated August 20, 1998 between autobytel.com inc. and Peter R. Ellis 10.30** 1999 Stock Option Plan 10.31 Form of Gold Term Subscription Agreement 10.32 Form of Platinum Term Continuation Rider 10.33 Marketing Agreement dated February 18, 1999 between autobytel.com inc. and Lycos, Inc. 10.34** Letter Agreement dated March 12, 1999 between autobytel.com inc. and Trans Cosmos. Inc. 10.35** Letter Agreement dated March 12, 1999 between autobytel.com inc. and e-solutions, Inc.
II-5 115
NUMBER DESCRIPTION ------ ----------- 10.36** Letter Agreement dated March 12, 1999 between autobytel.com inc. and Intec, Inc. 10.37 Letter Agreement dated March 7, 1999 between Autobytel.com and Ariel Amir. 10.38 Letter Agreement dated December 18, 1998 between Autobytel.com and Hoshi Printer. 11.1** Statement Regarding Computation of Per Share Earnings 21.1** Subsidiaries of autobytel.com inc. 23.1 Consent of Arthur Andersen LLP, Independent Public Accountants 23.2** Consent of Paul, Hastings, Janofsky & Walker LLP (reference is made to Exhibit 5.1) 23.3** Consent of CNW Marketing Research 23.4** Consent of Barger & Wolen LLP 24.1** Power of Attorney (reference is made to the signature page) 27.1** Financial Data Schedule
- ------------------------- * To be filed by Amendment. ** Previously filed. (b) Financial Statement Schedules ITEM 17. UNDERTAKINGS (a) The Registrant hereby undertakes to provide to the Underwriters at the closing specified in the Underwriting Agreement, certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser. (b) Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted against the Registrant by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (c) The Registrant hereby undertakes that: (1) For purposes of determining any liability under the Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act (sec. 230.424(b)(1) or (4) or 230.497(h)) shall be deemed to be part of this Registration Statement as of the time the Commission declared it effective. (2) For purposes of determining any liability under the Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement for the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-6 116 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Amendment No. 5 to the Registration Statement to be signed on its behalf by the undersigned, hereunto duly authorized, in the City of Irvine, State of California, on March 24, 1999. autobytel.com inc. By: /s/ MARK W. LORIMER ----------------------------------- Name: Mark W. Lorimer Title: Chief Executive Officer, President and Director Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 5 to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated:
NAME TITLE DATE ---- ----- ---- * Chairman of the Board March 24, 1999 - ------------------------------------------------ and Director Michael Fuchs * Director March 24, 1999 - ------------------------------------------------ Jeffrey H. Coats * Director March 24, 1999 - ------------------------------------------------ Mark N. Kaplan * Director March 24, 1999 - ------------------------------------------------ Kenneth J. Orton * Executive Vice President March 24, 1999 - ------------------------------------------------ and Director Robert S. Grimes /s/ MARK W. LORIMER Chief Executive Officer, March 24, 1999 - ------------------------------------------------ President and Director Mark W. Lorimer (Principal Executive Officer) /s/ HOSHI PRINTER Senior Vice President March 24, 1999 - ------------------------------------------------ and Chief Financial Hoshi Printer Officer (Principal Financial Officer and Principal Accounting Officer)
II-7 117
NAME TITLE DATE ---- ----- ---- * Executive Vice President March 24, 1999 - ------------------------------------------------ and Chief Operating Ann M. Delligatta Officer * Director March 24, 1999 - ------------------------------------------------ Peter Titz * Director March 24, 1999 - ------------------------------------------------ Richard Post *By: /s/ HOSHI PRINTER --------------------------------------- Hoshi Printer, Attorney-in-Fact
II-8 118 EXHIBIT INDEX
SEQUENTIALLY NUMBERED NUMBER DESCRIPTION PAGE ------ ----------- ------------ 1.1 Form of Underwriting Agreement 3.1** Amended and Restated Certificate of Incorporation of autobytel.com inc. certified by the Secretary of State of Delaware (filed December 14, 1998 and amended March 1, 1999) 3.2** Amended and Restated Bylaws of autobytel.com inc. 4.1** Form of Stock Certificate 4.2** Amended and Restated Investors' Rights Agreement dated October 21, 1997 as amended from time to time, between autobytel.com inc. and the Investors named in Exhibit A thereto 4.3** Form of Lock-Up Agreement 5.1** Opinion and Consent of Paul, Hastings, Janofsky & Walker LLP 9.1** Voting Proxy dated January 11, 1999 by Peter R. Ellis 10.1** Form of Indemnification Agreement between autobytel.com inc. and its directors and officers 10.2 Employment Agreement dated July 1, 1998 between autobytel.com inc. and Mark W. Lorimer 10.3** Employment Agreement dated December 17, 1998 between autobytel.com.inc. and Anne Delligatta 10.4** Amended and Restated Employment and Severance Agreement dated March 5, 1999 between autobytel.com.inc. and Michael J. Lowell 10.5** 1996 Stock Option Plan and related agreements 10.6** 1996 Stock Incentive Plan and related agreements 10.7** 1996 Employee Stock Purchase Plan 10.8** 1998 Stock Option Plan 10.9 Marketing Agreement dated July 22, 1996, as amended on July 23, 1996, by and among Auto-By-Tel Acceptance Corporation, a subsidiary of the Registrant ("ABTAC"), the Registrant, as guarantor of the obligations of ABTAC, and AIU Insurance Company, American International South Insurance Company, American Home Assurance Company, American International Insurance Company, American International Insurance Company of California, Inc., Illinois National Insurance Company, Minnesota Insurance Company, National Union Fire Insurance Company of Pittsburgh, PA and the Insurance Company of the State of Pennsylvania 10.10 Marketing Agreement dated February 8, 1996 between Auto-By-Tel, LLC and Edmund Publications Corp. 10.11 Amendment to Marketing Agreement of February 8, 1996, dated June 6, 1997 between Edmund Publications Corp. and the Registrant
119
SEQUENTIALLY NUMBERED NUMBER DESCRIPTION PAGE ------ ----------- ------------ 10.12 Form of Dealership Agreements 10.13 Financing Inquiry Referral Agreement dated October 25, 1996 among Auto-By-Tel, Inc, as guarantor, Auto-By-Tel Acceptance Corporation and Chase Manhattan Automotive Finance Corporation 10.14 Marketing and Application Processing Agreement dated February 1, 1997 between General Electric Capital Auto Financial Services, Inc., Auto-By-Tel Acceptance Corporation ("ABTAC") and Auto-By-Tel, Inc., as guarantor 10.15 Content License and Channel Sponsorship Term Sheet dated September 12, 1997 between Excite, Inc. and Auto-By-Tel 10.16 Data License and Web Site Agreement dated April 1, 1997 between IntelliChoice, Inc. and Auto-By-Tel Marketing Corporation and the Registrant 10.17 Kelley Blue Book/Auto-By-Tel Agreement dated November 19, 1997, as amended July 1, 1998, between Kelley Blue Book and Auto-By-Tel Corporation 10.18 Listings Distribution, Sponsorship, Display Advertising and Network Affiliation Agreement dated May 29, 1997 between Classifieds2000, Inc. and Auto-By-Tel Corporation 10.19 License Agreement dated June 4, 1998 among J.D. Power and Associates, Auto-By-Tel Marketing Corporation, and autobytel.com inc. 10.20 Site Page Sponsorship and Commission Agreement dated June 25, 1997, between Auto-By-Tel Marketing Corporation and AT&T Corporation 10.21 Letter agreement dated April 1, 1997, between Auto-By-Tel Marketing Corporation and NBC Multimedia Inc. 10.22 Sponsorship Agreement, dated as of June 24, 1998, between Excite, Inc. and Auto-By-Tel Corporation 10.23 License and Services Agreement dated August 7, 1998 between autobytel.com inc. and Auto-By-Tel AB 10.24 License and Services Agreement dated November 23, 1998 between autobytel.com inc. and Auto-by-Tel UK Limited 10.25 Share Purchase Agreement dated November 23, 1998 between autobytel.com inc. and Inchcape Automotive Limited 10.26 Financing Inquiry Referral Agreement dated December 31, 1998 between Provident Bank, Auto-By-Tel Acceptance Corporation and autobytel.com inc., as guarantor 10.27 Procurement and Trafficking Agreement dated September 24, 1998 between DoubleClick Inc. and autobytel.com inc.
120
SEQUENTIALLY NUMBERED NUMBER DESCRIPTION PAGE ------ ----------- ------------ 10.28** Loan Agreement dated November 18, 1998 between Ann Benvenuto and autobytel.com inc. 10.29** Advisory Agreement dated August 20, 1998 between autobytel.com inc. and Peter R. Ellis 10.30** 1999 Stock Option Plan 10.31 Form of Gold Term Subscription Agreement 10.32 Form of Platinum Term Continuation Rider 10.33 Marketing Agreement dated February 18, 1999 between autobytel.com inc. and Lycos, Inc. 10.34** Letter Agreement dated March 12, 1999 between autobytel.com inc. and Trans Cosmos, Inc. 10.35** Letter Agreement dated March 12, 1999 between autobytel.com inc. and e-Solutions, Inc. 10.36** Letter Agreement dated March 12, 1999 between autobytel.com inc. and Intec, Inc. 10.37 Letter Agreement dated March 7, 1999 between Autobytel.com and Ariel Amir 10.38 Letter Agreement dated December 18, 1998 between Autobytel.com and Hoshi Printer. 11.1** Statement Regarding Computation of Per Share Earnings 21.1** Subsidiaries of autobytel.com inc. 23.1 Consent of Arthur Andersen LLP, Independent Public Accountants 23.2** Consent of Paul, Hastings, Janofsky & Walker LLP (reference is made to Exhibit 5.1) 23.3** Consent of CNW Marketing Research 23.4** Consent of Barger & Wolen LLP 24.1** Power of Attorney (reference is made to the signature page) 27.1** Financial Data Schedule
- ------------------------- * To be filed by Amendment. ** Previously filed. EX-1.1 2 UNDERWRITING AGREEMENT 1 EXHIBIT 1.1 4,250,000 Shares AUTOBYTEL.COM INC. Common Stock ($0.001 Par Value) EQUITY UNDERWRITING AGREEMENT March 25, 1999 BT Alex. Brown Incorporated Lehman Brothers Inc. PaineWebber Incorporated As Representatives of the Several Underwriters c/o BT Alex. Brown Incorporated One South Street Baltimore, Maryland 21202 Ladies and Gentlemen: AUTOBYTEL.COM INC., a Delaware corporation (the "Company"), and certain stockholders of the Company (the "Selling Stockholders") propose to sell to the several underwriters (the "Underwriters") named in Schedule I hereto for whom you are acting as representatives (the "Representatives") an aggregate of 4,250,000 shares of the Company's Common Stock, $0.001 par value (the "Firm Shares"), of which 3,250,000 will be sold by the Company and 1,000,000 shares will be sold by the Selling Stockholders. The respective amounts of the Firm Shares and Option Shares (as hereinafter defined) to be so purchased by the several Underwriters are set forth opposite their names in Schedule I hereto. The Company and the Selling Stockholders are sometimes referred to herein collectively as the "Sellers." The Selling Stockholders also propose to sell at the Underwriters' option an aggregate of up to 675,000 additional shares of the Company's Common Stock (the "Option Shares") as set forth below. The respective amounts of Firm Shares and Option Shares to be sold by the Selling Stockholders are set forth opposite their names in Schedule II hereto. As the Representatives, you have advised the Company and the Selling Stockholders (a) that you are authorized to enter into this Agreement on behalf of the several Underwriters, and 2 (b) that the several Underwriters are willing, acting severally and not jointly, to purchase the numbers of Firm Shares set forth opposite their respective names in Schedule I, plus their pro rata portion of the Option Shares if you elect to exercise the over-allotment option in whole or in part for the accounts of the several Underwriters. The Firm Shares and the Option Shares (to the extent the aforementioned option is exercised) are herein collectively called the "Shares." In consideration of the mutual agreements contained herein and of the interests of the parties in the transactions contemplated hereby, the parties hereto agree as follows: 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING STOCKHOLDERS. (a) The Company represents and warrants to each of the Underwriters as follows: (i) A registration statement on Form S-1 (File No. 333-70621) with respect to the Shares has been prepared by the Company in conformity with the requirements of the Securities Act of 1933, as amended (the "Act"), and the Rules and Regulations (the "Rules and Regulations") of the Securities and Exchange Commission (the "Commission") thereunder and has been filed with the Commission. Copies of such registration statement, including any amendments thereto, the preliminary prospectuses (meeting the requirements of the Rules and Regulations) contained therein and the exhibits, financial statements and schedules, as finally amended and revised, have heretofore been delivered by the Company to you. Such registration statement, together with any registration statement filed by the Company pursuant to Rule 462(b) of the Act, herein referred to as the "Registration Statement," which shall be deemed to include all information omitted therefrom in reliance upon Rule 430A and contained in the Prospectus referred to below, has become effective under the Act and no post-effective amendment to the Registration Statement has been filed as of the date of this Agreement. "Prospectus" means the form of prospectus first filed with the Commission pursuant to Rule 424(b). Each preliminary prospectus included in the Registration Statement prior to the time it becomes effective is herein referred to as a "Preliminary Prospectus." (ii) The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware, with corporate power and authority to own or lease its properties and conduct its business as described in the Registration Statement. Each of the subsidiaries of the Company as listed in Exhibit 21.1 of the Registration Statement (collectively, the "Subsidiaries") has been duly organized and is validly existing as a corporation or other entity, in good standing under the laws of the jurisdiction of its incorporation or organization, with corporate or other organizational power and authority to own or lease its properties and conduct its business as described in the Registration Statement. The Subsidiaries are the only subsidiaries, direct or indirect, of the Company. The Company and each of the Subsidiaries are duly qualified to transact business in all jurisdictions in which the conduct of their business requires such qualification except where the failure to so qualify would not have a material adverse effect on the earnings, business, management, properties, assets, rights, operations, condition (financial or otherwise) or prospects of the Company and of the 2 3 Subsidiaries, taken as a whole. All of the states in which the Company is duly qualified to transact business are set forth on Exhibit A hereto. The outstanding shares of capital stock or other ownership interests of each of the Subsidiaries have been duly authorized and validly issued, are fully paid and non-assessable and are owned by the Company or another Subsidiary free and clear of all liens, encumbrances and equities and claims; and no options, warrants or other rights to purchase, agreements or other obligations to issue or other rights to convert any obligations into shares of capital stock or ownership interests in the Subsidiaries are outstanding. (iii) The outstanding shares of Common Stock of the Company, including all shares to be sold by the Selling Stockholders, have been duly authorized and validly issued and are fully paid and non-assessable; the Shares to be issued and sold by the Company have been duly authorized and when issued and paid for as contemplated herein will be validly issued, fully paid and non-assessable; and no preemptive rights of stockholders exist with respect to any of the Shares or the issue and sale thereof. Neither the filing of the Registration Statement nor the offering or sale of the Shares as contemplated by this Agreement gives rise to any rights, other than those which have been waived or satisfied, for or relating to the registration of any shares of the Company's Common Stock. (iv) The information set forth under the caption "Capitalization" in the Prospectus is true and correct. All of the Shares conform to the description thereof contained in the Registration Statement. The form of certificates for the Shares conforms to the corporate law of the jurisdiction of the Company's incorporation. (v) The Commission has not issued an order preventing or suspending the use of any Prospectus relating to the proposed offering of the Shares nor, to the Company's knowledge, instituted proceedings for that purpose. The Registration Statement contains, and the Prospectus and any amendments or supplements thereto will contain, all statements which are required to be stated therein by, and will conform to, the requirements of the Act and the Rules and Regulations. At the time it became effective, the Registration Statement and any amendment thereto do not contain, and will not contain as of the Closing Date and Option Closing Date, any untrue statement of a material fact and do not omit, and as of the Closing Date and Option Closing Date will not omit, to state any material fact required to be stated therein or necessary to make the statements therein not misleading. The Prospectus and any amendments and supplements thereto do not contain, and as of the Closing Date and Option Closing Date will not contain, any untrue statement of material fact; and do not omit, and as of the Closing Date and Option Closing Date will not omit, to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representations or warranties as to information contained in or omitted from the Registration Statement or the Prospectus, or any such amendment or supplement, in reliance upon, and in conformity with, written information furnished to the Company by or on behalf of any Underwriter through the Representatives or Selling Stockholder, specifically for use in the preparation thereof. (vi) The consolidated financial statements of the Company and the Subsidiaries, together with related notes and schedules as set forth in the Registration Statement, 3 4 present fairly the financial position and the results of operations and cash flows of the Company and the consolidated Subsidiaries, at the indicated dates and for the indicated periods. Such financial statements and related schedules have been prepared in accordance with generally accepted principles of accounting, consistently applied throughout the periods involved, except as disclosed therein, and all adjustments necessary for a fair and accurate presentation of results for such periods have been made. The summary financial and statistical data included in the Registration Statement presents fairly and accurately the information shown therein and such data has been compiled on a basis consistent with the financial statements presented therein and the books and records of the Company. The pro forma financial information included in the Registration Statement and the Prospectus present fairly the information shown therein, have been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial information, have been properly compiled on the pro forma bases described therein, and, in the opinion of the Company, the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions or circumstances referred to therein. (vii) Arthur Andersen LLP, who have certified certain of the financial statements filed with the Commission as part of the Registration Statement, are independent public accountants as required by the Act and the Rules and Regulations. (viii) There is no action, suit, claim or proceeding pending or, to the knowledge of the Company, threatened against the Company or any of the Subsidiaries before any court or administrative agency or otherwise (A) which if determined adversely to the Company or any of its Subsidiaries might result in any material adverse change in the earnings, business, management, properties, assets, rights, operations, condition (financial or otherwise) or prospects of the Company and of the Subsidiaries taken as a whole or (B) to prevent the consummation of the transactions contemplated hereby, except as set forth in the Registration Statement. (ix) The Company and the Subsidiaries own or have good and marketable title to all of the properties and assets reflected in the financial statements (or as described in the Registration Statement) hereinabove described, subject to no lien, mortgage, pledge, charge or encumbrance of any kind except those reflected in such financial statements (or as described in the Registration Statement) or which are not material in amount. The Company and the Subsidiaries occupy their leased properties under valid and binding leases conforming in all material respects to the description thereof set forth in the Registration Statement. (x) The Company and the Subsidiaries have filed all Federal, State, local and foreign tax returns which have been required to be filed and have paid all taxes indicated by said returns and all assessments received by them or any of them to the extent that such taxes have become due and are not being contested in good faith [or for which no valid extension has been made] and for which an adequate reserve for accrual has been established in accordance with generally accepted accounting principles. All tax liabilities have been adequately provided for in the financial statements of the Company, and the Company does not know of any actual or proposed additional tax assessments, [except for such tax assessments which do not, individually or in the aggregate, amount to $10,000]. 4 5 (xi) Since the respective dates as of which information is given in the Registration Statement, as it may be amended or supplemented, there has not been any material adverse change or any development involving a prospective material adverse change in or affecting the earnings, business, management, properties, assets, rights, operations, condition (financial or otherwise), or prospects of the Company and its Subsidiaries taken as a whole whether or not occurring in the ordinary course of business, and there has not been any material transaction entered into or any material transaction that is probable of being entered into by the Company or the Subsidiaries, other than transactions in the ordinary course of business and changes and transactions described in the Registration Statement, as it may be amended or supplemented up to the Closing Date or the Option Closing Date. The Company and the Subsidiaries have no material contingent obligations which are not disclosed in the Company's financial statements which are included in the Registration Statement. (xii) Neither the Company nor any of the Subsidiaries is or with the giving of notice or lapse of time or both, will be, in violation of or in default under its certificate of incorporation or bylaws or other organizational document or under any agreement, lease, contract, indenture or other instrument or obligation to which it is a party or by which it, or any of its properties, is bound and which default is of material significance in respect of the condition, financial or otherwise of the Company and its Subsidiaries taken as a whole or the business, management, properties, assets, rights, operations, condition (financial or otherwise) or prospects of the Company and the Subsidiaries taken as a whole. The execution and delivery of this Agreement and the consummation of the transactions herein contemplated and the fulfillment of the terms hereof will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust or other agreement or instrument to which the Company or any Subsidiary is a party, or of the Company's or any Subsidiary's certificate of incorporation or bylaws or other organizational document, or any order, rule or regulation applicable to the Company or any Subsidiary of any court or of any regulatory body or administrative agency or other governmental body having jurisdiction over the Company or any Subsidiary. (xiii) Each approval, consent, order, authorization, designation, declaration or filing by or with any regulatory, administrative or other governmental body necessary in connection with the execution and delivery by the Company of this Agreement and the consummation of the transactions herein contemplated (except such additional steps as may be required by the Commission, the National Association of Securities Dealers, Inc. (the "NASD") or such additional steps as may be necessary to qualify the Shares for public offering by the Underwriters under state securities or blue sky laws) has been obtained or made and is in full force and effect. (xiv) The Company and each of the Subsidiaries holds all material licenses, certificates and permits from governmental authorities which are necessary to the conduct of their businesses. The Company owns, or possesses adequate rights to use, all material patents, patent rights, trademarks, service marks, trade names, trademark registrations, service mark registrations, domain names and copyrights necessary for the conduct of its and the Subsidiaries' 5 6 business and has no reason to believe that the conduct of its and the Subsidiaries' business will conflict with, and has not received any notice of any claim of conflict with any such rights, of others. To the Company's knowledge, neither the Company nor any of the Subsidiaries has infringed or is infringing any patents, patent rights, trade names, trademarks, service marks, domain names, service mark registrations, trademark registrations, or copyrights, which infringement is material to the business of the Company and the Subsidiaries taken as a whole. The Company knows of no material infringement by others of patents, patent rights, trade names, trademarks service marks, domain names, service mark registrations, trademark registrations, or copyrights owned by or licensed to the Company. (xv) Neither the Company, nor to the Company's knowledge, any of its affiliates, has taken or may take, directly or indirectly, any action designed to cause or result in, or which has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the shares of Common Stock to facilitate the sale or resale of the Shares. The Company acknowledges that the Underwriters may engage in passive market making transactions in the Shares on the Nasdaq Stock Market in accordance with Regulation M under the Securities and Exchange Act of 1934, as amended ("Exchange Act"). (xvi) Neither the Company nor any Subsidiary is an "investment company" within the meaning of such term under the Investment Company Act of 1940, (as amended, the "1940 Act") and the rules and regulations of the Commission thereunder. (xvii) The Company maintains a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (xviii) The Company and each of its Subsidiaries carry, or are covered by, insurance in such amounts and covering such risks as is adequate for the conduct of their respective businesses and the value of their respective properties and as is customary for companies engaged in similar industries. (xix) The Company is in compliance in all material respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for which the Company would have any liability; the Company has not incurred and does not expect to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the "Code"); and each "pension plan" for which the Company would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and, to the Company's knowledge, nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification. 6 7 (xx) To the Company's knowledge and based on questionnaires received by the Company from its officers, directors and 5% or greater securityholders, there are no affiliations or associations between any member of the NASD and any of the Company's officers, directors or 5% or greater securityholders, except as set forth in the Registration Statement. (xxi) The Company has reviewed its operations and that of the Subsidiaries and any third parties with which the Company or any of the Subsidiaries has a material relationship as described in the Prospectus to evaluate the extent to which the business or operations of the Company or any of the Subsidiaries will be affected by the Year 2000 Problem. As a result of such review, the Company has no reason to believe, and does not believe, that the Year 2000 Problem will have a material adverse effect on the Company and the Subsidiaries, taken as a whole. The "Year 2000 Problem" as used herein means any significant risk that computer hardware or software used in the receipt, transmission, processing, manipulation, storage, retrieval, retransmission or other utilization of data or in the operation of mechanical or electrical systems of any kind will not, in the case of dates or time periods occurring after December 31, 1999, function at least as effectively as in the case of dates or time periods occurring prior to January 1, 2000. (xxii) Peter R. Ellis is not an executive officer, a significant employee or in control of the Company within the meaning of the Act or the Rules and Regulations. (xxiii) All outstanding options to purchase shares of Common Stock of the Company have been duly and validly issued under and pursuant to the terms of the Company's 1996 Stock Option Plan, 1996 Stock Incentive Plan, 1998 Stock Option Plan, and 1999 Stock Option Plan, as the case may be. (xxiv) The Common Stock has been approved for quotation on the Nasdaq National Market, subject to official notice of issuance. (b) Each of the Selling Stockholders severally represents and warrants as follows: (i) Such Selling Stockholder now has and at the Closing Date and the Option Closing Date, (as such dates are hereinafter defined) will have good and marketable title to the Firm Shares and the Option Shares to be sold by such Selling Stockholder, free and clear of any liens, encumbrances, equities and claims (other than the Power of Attorney and Custodian Agreement referred to below), and full right, power and authority to effect the sale and delivery of such Firm Shares and Option Shares; and upon the delivery of, against payment for, such Firm Shares and Option Shares pursuant to this Agreement, the Underwriters will acquire good and marketable title thereto, free and clear of any liens, encumbrances, equities and claims. 7 8 (ii) Such Selling Stockholder has full right, power and authority to execute and deliver this Agreement, the Power of Attorney, and the Custodian Agreement referred to below and to perform its obligations under such Agreements. The execution and delivery of this Agreement and the consummation by such Selling Stockholder of the transactions herein contemplated and the fulfillment by such Selling Stockholder of the terms hereof will not require any consent, approval, authorization, or other order of any court, regulatory body, administrative agency or other governmental body (except as may be required under the Act, state securities laws or blue sky laws) and will not result in a breach of any of the terms and provisions of, or constitute a default under any indenture, mortgage, deed of trust or other agreement or instrument to which such Selling Stockholder is a party, or of any order, rule or regulation applicable to such Selling Stockholder of any court or of any regulatory body or administrative agency or other governmental body having jurisdiction. (iii) Such Selling Stockholder has not taken and will not take, directly or indirectly, any action designed to, or which has constituted, or which might reasonably be expected to cause or result in the stabilization or manipulation of the price of the Common Stock of the Company and, other than as permitted by the Act, the Selling Stockholder will not distribute any prospectus or other offering material in connection with the offering of the Shares. (iv) Without having undertaken to determine independently the accuracy or completeness of either the representations and warranties of the Company contained herein or the information contained in the Registration Statement or the Prospectus, such Selling Stockholder has read the Registration Statement and Prospectus and during the course of such reading, no fact has come to the attention of such Selling Stockholder that causes such Selling Stockholder to believe that the representations and warranties of the Company contained in this Section 1 are not true and correct, the Registration Statement, at the time it became effective, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order make the statements therein, in light of the circumstances under which they were made, not misleading, or that the Prospectus, or any supplement thereto, on the date it was filed pursuant to the Rules and Regulations and as of the Closing Date or the Option Closing Date, as the case may be, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; and the sale of the Firm Shares and the Option Shares by such Selling Stockholder pursuant hereto is not prompted by any information concerning the Company or any of the Subsidiaries which is not set forth in the Registration Statement. The information pertaining to such Selling Stockholder under the caption "Principal and Selling Stockholders" in the Prospectus is complete and accurate in all material respects. (c) Peter R. Ellis represents and warrants that he is not an executive officer, a significant employee or in control of the Company within the meaning of the Act or the Rules and Regulations. 8 9 2. PURCHASE, SALE AND DELIVERY OF THE FIRM SHARES. (a) On the basis of the representations, warranties and covenants herein contained, and subject to the conditions herein set forth, the Sellers agree to sell to the Underwriters and each Underwriter agrees, severally and not jointly, to purchase, at a price of $_______ per share, the number of Firm Shares set forth opposite the name of each Underwriter in Schedule I hereof, subject to adjustments in accordance with Section 9 hereof. The obligations of the Company and of each of the Selling Stockholders shall be several and not joint. (b) Certificates in negotiable form for the total number of the Shares to be sold hereunder by the Selling Stockholders have been placed in custody with U.S. Stock Transfer Corporation as custodian (the "Custodian") pursuant to the Custodian Agreement executed by each Selling Stockholder for delivery of all Firm Shares and any Option Shares to be sold hereunder by the Selling Stockholders. Each of the Selling Stockholders specifically agrees that the Firm Shares and any Option Shares represented by the certificates held in custody for the Selling Stockholders under the Custodian Agreement are subject to the interests of the Underwriters hereunder, that the arrangements made by the Selling Stockholders for such custody are to that extent irrevocable, and that the obligations of the Selling Stockholders hereunder shall not be terminable by any act or deed of the Selling Stockholders (or by any other person, firm or corporation including the Company, the Custodian or the Underwriters) or by operation of law (including the death of an individual Selling Stockholder or the dissolution of a corporate Selling Stockholder) or by the occurrence of any other event or events, except as set forth in the Custodian Agreement. If any such event should occur prior to the delivery to the Underwriters of the Firm Shares or the Option Shares hereunder, certificates for the Firm Shares or the Options Shares, as the case may be, shall be delivered by the Custodian in accordance with the terms and conditions of this Agreement as if such event has not occurred. The Custodian is authorized to receive and acknowledge receipt of the proceeds of sale of the Shares held by it against delivery of such Shares. (c) Payment for the Firm Shares to be sold hereunder is to be made in Federal (same day) funds to an account designated by the Company for the shares to be sold by it and to an account designated by the Custodian for the shares to be sold by the Selling Stockholders, in each case against delivery of certificates therefor to the Representatives for the several accounts of the Underwriters. Such payment and delivery are to be made through the facilities of the Depository Trust Company at 10:00 a.m., New York time, on the third business day after the date of this Agreement or at such other time and date not later than five business days thereafter as you and the Company shall agree upon, such time and date being herein referred to as the "Closing Date." (As used herein, "business day" means a day on which the New York Stock Exchange is open for trading and on which banks in New York are open for business and not permitted by law or executive order to be closed.) (d) In addition, on the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Selling Stockholders listed on Schedule II hereto hereby grant an option to the several Underwriters to purchase the Option 9 10 Shares at the price per share as set forth in the first paragraph of this Section 2. The maximum number of Option Shares to be sold by the Selling Stockholders is set forth opposite their respective names on Schedule II hereto. The option granted hereby may be exercised in whole or in part by giving written notice (i) at any time before the Closing Date and (ii) only once thereafter within 30 days after the date of this Agreement, by you, as Representatives of the several Underwriters, to the Attorney-in-Fact and the Custodian setting forth the number of Option Shares as to which the several Underwriters are exercising the option, the names and denominations in which the Option Shares are to be registered and the time and date at which such certificates are to be delivered. If the option granted hereby is exercised in part, the respective number of Option Shares to be sold by each of the Selling Stockholders listed in Schedule II hereto shall be determined on a pro rata basis in accordance with the percentages set forth opposite their names on Schedule II hereto, adjusted by you in such manner as to avoid fractional shares. The time and date at which certificates for Option Shares are to be delivered shall be determined by the Representatives but shall not be earlier than three nor later than ten full business days after the exercise of such option, nor in any event prior to the Closing Date (such time and date being herein referred to as the "Option Closing Date"). If the date of exercise of the option is three or more days before the Closing Date, the notice of exercise shall set the Closing Date as the Option Closing Date. The number of Option Shares to be purchased by each Underwriter shall be in the same proportion to the total number of Option Shares being purchased as the number of Firm Shares being purchased by such Underwriter bears to the total number of Firm Shares, adjusted by you in such manner as to avoid fractional shares. The option with respect to the Option Shares granted hereunder may be exercised only to cover over-allotments in the sale of the Firm Shares by the Underwriters. You, as Representatives of the several Underwriters, may cancel such option at any time prior to its expiration by giving written notice of such cancellation to the Attorney-in-Fact. To the extent, if any, that the option is exercised, payment for the Option Shares shall be made on the Option Closing Date in Federal (same day) funds drawn to the order of "_________, as Custodian" for the Option Shares to be sold by the Selling Stockholders against delivery of certificates therefor through the facilities of the Depository Trust Company, New York, New York. (e) If on the Closing Date or Option Closing Date, as the case may be, any Selling Stockholder fails to sell the Firm Shares or Option Shares which such Selling Stockholder has agreed to sell on such date as set forth in Schedule II hereto, the Company agrees that it will sell or arrange for the sale of that number of shares of Common Stock to the Underwriters which represents the Firm Shares or Option Shares which such Selling Stockholder has failed to so sell, as set forth in Schedule II hereto, or such lesser number as may be requested by the Representatives. 3. OFFERING BY THE UNDERWRITERS. It is understood that the several Underwriters are to make a public offering of the Firm Shares as soon as the Representatives deem it advisable to do so. The Firm Shares are to be initially offered to the public at the initial public offering price set forth in the Prospectus. The Representatives may from time to time thereafter change the public offering price and other 10 11 selling terms. To the extent, if at all, that any Option Shares are purchased pursuant to Section 2 hereof, the Underwriters will offer them to the public on the foregoing terms. It is further understood that you will act as the Representatives for the Underwriters in the offering and sale of the Shares in accordance with a Master Agreement Among Underwriters entered into by you and the several other Underwriters. 4. COVENANTS OF THE COMPANY AND THE SELLING STOCKHOLDERS. (a) The Company covenants and agrees with the several Underwriters that: (i) The Company will (A) use its best efforts to cause the Registration Statement to become effective or, if the procedure in Rule 430A of the Rules and Regulations is followed, to prepare and timely file with the Commission under Rule 424(b) of the Rules and Regulations a Prospectus in a form approved by the Representatives containing information previously omitted at the time of effectiveness of the Registration Statement in reliance on Rule 430A of the Rules and Regulations and (B) not file any amendment to the Registration Statement or supplement to the Prospectus of which the Representatives shall not previously have been advised and furnished with a copy or to which the Representatives shall have reasonably objected in writing or which is not in compliance with the Rules and Regulations. (ii) The Company will advise the Representatives promptly (A) when the Registration Statement or any post-effective amendment thereto shall have become effective, (B) of receipt of any comments from the Commission, (C) of any request of the Commission for amendment of the Registration Statement or for supplement to the Prospectus or for any additional information, and (D) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the use of the Prospectus or of the institution of any proceedings for that purpose. The Company will use its best efforts to prevent the issuance of any such stop order preventing or suspending the use of the Prospectus and to obtain as soon as possible the lifting thereof, if issued. (iii) The Company will cooperate with the Representatives in endeavoring to qualify the Shares for sale under the securities laws of such jurisdictions as the Representatives may reasonably have designated in writing and will make such applications, file such documents, and furnish such information as may be reasonably required for that purpose, provided the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction where it is not now so qualified or required to file such a consent. The Company will, from time to time, prepare and file such statements, reports, and other documents, as are or may be required to continue such qualifications in effect for so long a period as the Representatives may reasonably request for distribution of the Shares. (iv) The Company will deliver to, or upon the order of, the Representatives, from time to time, as many copies of any Preliminary Prospectus as the Representatives may reasonably request. The Company will deliver to, or upon the order of, the Representatives during the period when delivery of a Prospectus is required under the Act, as 11 12 many copies of the Prospectus in final form, or as thereafter amended or supplemented, as the Representatives may reasonably request. The Company will deliver to the Representatives at or before the Closing Date, one original (or facsimile) signed copy of the Registration Statement and all amendments thereto including all exhibits filed therewith, and will deliver to the Representatives such number of copies of the Registration Statement (including such number of copies of the exhibits filed therewith that may reasonably be requested), and of all amendments thereto, as the Representatives may reasonably request. (v) The Company will comply with the Act and the Rules and Regulations, and the Exchange Act and the rules and regulations of the Commission thereunder, so as to permit the completion of the distribution of the Shares as contemplated in this Agreement and the Prospectus. If during the period in which a prospectus is required by law to be delivered by an Underwriter or dealer, any event shall occur as a result of which, in the judgment of the Company or in the reasonable opinion of the Underwriters, it becomes necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances existing at the time the Prospectus is delivered to a purchaser, not misleading, or, if it is necessary at any time to amend or supplement the Prospectus to comply with any law, the Company promptly will prepare and file with the Commission an appropriate amendment to the Registration Statement or supplement to the Prospectus so that the Prospectus as so amended or supplemented will not, in the light of the circumstances when it is so delivered, be misleading, or so that the Prospectus will comply with the law. (vi) The Company will make generally available to its security holders, as soon as it is practicable to do so, but in any event not later than 15 months after the effective date of the Registration Statement, an earning statement (which need not be audited) in reasonable detail, covering a period of at least 12 consecutive months beginning after the effective date of the Registration Statement, which earning statement shall satisfy the requirements of Section 11(a) of the Act and Rule 158 of the Rules and Regulations and will advise you in writing when such statement has been so made available. (vii) Prior to the Closing Date, the Company will furnish to the Underwriters, as soon as they have been prepared by or are available to the Company, a copy of any unaudited interim financial statements of the Company for any period subsequent to the period covered by the most recent financial statements appearing in the Registration Statement and the Prospectus. (viii) No offering, sale, short sale or other disposition of any shares of Common Stock of the Company or other securities convertible into or exchangeable or exercisable for shares of Common Stock or derivative of Common Stock (or agreement for such) will be made for a period of 180 days after the date of this Agreement, directly or indirectly, by the Company otherwise than hereunder or with the prior written consent of BT Alex. Brown Incorporated, except that the Company may, without such consent, (A) issue shares upon exercise of options outstanding on the date of this Agreement issued pursuant to the Company's currently existing stock-based compensation plans, and (B) grant options, offer to sell and sell shares of its Common Stock to its employees, directors and consultants pursuant to its currently existing stock-based compensation plans, as such plans are described in the Prospectus. 12 13 (ix) Except for holders of ______ shares of Common Stock, the Company has caused each officer and director of the Company and each stockholder of the Company designated by BT Alex. Brown Incorporated to furnish to you, on or prior to the date of this agreement, a letter or letters, substantially in the form attached hereto as Exhibit B, pursuant to which each such person shall agree not to offer, sell, sell short or otherwise dispose of any shares of Common Stock of the Company or other capital stock of the Company, or any other securities convertible, exchangeable or exercisable for Common Shares or derivative of Common Shares owned by such person or request the registration for the offer or sale of any of the foregoing (or as to which such person has the right to direct the disposition of) for a period of 180 days (or, with respect to the Selling Stockholders, 270 days) after the date of this Agreement, directly or indirectly, except with the prior written consent of BT Alex. Brown Incorporated ("Lockup Agreements"). (x) The Company shall apply the net proceeds of its sale of the Shares as set forth in the Prospectus and shall file such reports with the Commission with respect to the sale of the Shares and the application of the proceeds therefrom as may be required in accordance with Rule 463 under the Act. (xi) The Company shall not invest, or otherwise use the proceeds received by the Company from its sale of the Shares in such a manner as would require the Company or any of the Subsidiaries to register as an investment company under the 1940 Act. (xii) The Company will maintain a transfer agent and, if necessary under the jurisdiction of incorporation of the Company, a registrar for the Common Stock. (xiii) The Company will not take, directly or indirectly, any action designed to cause or result in, or that has constituted or might reasonably be expected to constitute, the stabilization or manipulation of the price of any securities of the Company. (b) Each of the Selling Stockholders covenants and agrees with the several Underwriters that: (i) In order to document the Underwriters' compliance with the reporting and withholding provisions of the Tax Equity and Fiscal Responsibility Act of 1982 and the Interest and Dividend Tax Compliance Act of 1983 with respect to the transactions herein contemplated, each of the Selling Stockholders agrees to deliver to you prior to or at the Closing Date a properly completed and executed United States Treasury Department Form W-8 or W-9 (or other applicable form or statement specified by Treasury Department regulations in lieu thereof). (ii) Such Selling Stockholder will not take, directly or indirectly, any action designed to cause or result in, or that has constituted or might reasonably be expected to constitute, the stabilization or manipulation of the price of any securities of the Company. 13 14 5. COSTS AND EXPENSES. The Company will pay all costs, expenses and fees incident to the performance of the obligations of the Sellers under this Agreement, including, without limiting the generality of the foregoing, the following: accounting fees of the Company; the fees and disbursements of counsel for the Company; the cost of printing and delivering to, or as requested by, the Underwriters copies of the Registration Statement, Preliminary Prospectuses, the Prospectus, this Agreement, the blue sky survey and any supplements or amendments thereto; the filing fees of the Commission; the filing fees and expenses (including legal fees and disbursements) incident to securing any required review by the National Association of Securities Dealers, Inc. (the "NASD") of the terms of the sale of the Shares not to exceed $10,000; the listing fee of the Nasdaq Stock Market; and the expenses, including the fees and disbursements of counsel for the Underwriters, incurred in connection with the qualification of the Shares under state securities or blue sky laws. The fees and expenses of the Selling Stockholders' legal counsel shall be borne by the Selling Stockholders. Any transfer taxes imposed on the sale of the Shares to the several Underwriters will be paid by the Sellers pro rata. The Company agrees to pay all costs and expenses of the Underwriters, including the fees and disbursements of counsel for the Underwriters, incident to the offer and sale of directed shares of the Common Stock by the Underwriters to employees and persons having business relationships with the Company and its Subsidiaries. The Sellers shall not, however, be required to pay for any of the Underwriters expenses (other than those related to qualification under NASD regulation and state securities or blue sky laws) except that, if this Agreement shall not be consummated because the conditions in Section 6 hereof are not satisfied, or because this Agreement is terminated by the Representatives pursuant to Section 11 hereof, or by reason of any failure, refusal or inability on the part of the Company or the Selling Stockholders to perform any undertaking or satisfy any condition of this Agreement or to comply with any of the terms hereof on their part to be performed, unless such failure to satisfy said condition or to comply with said terms be due to the default or omission of any Underwriter, then the Company shall reimburse the several Underwriters for reasonable out-of-pocket expenses, including fees and disbursements of counsel, reasonably incurred in connection with investigating, marketing and proposing to market the Shares or in contemplation of performing their obligations hereunder; but the Company and the Selling Stockholders shall not in any event be liable to any of the several Underwriters for damages on account of loss of anticipated profits from the sale by them of the Shares. 6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS. The several obligations of the Underwriters to purchase the Firm Shares on the Closing Date and the Option Shares, if any, on the Option Closing Date are subject to the accuracy, as of the Closing Date or the Option Closing Date, as the case may be, of the representations and warranties of the Company and the Selling Stockholders contained herein, and to the performance by the Company and the Selling Stockholders of their covenants and obligations hereunder and to the following additional conditions: (a) The Registration Statement and all post-effective amendments thereto shall have become effective and any and all filings required by Rule 424 and Rule 430A of the 14 15 Rules and Regulations shall have been made, and any request of the Commission for additional information (to be included in the Registration Statement or otherwise) shall have been disclosed to the Representatives and complied with to their reasonable satisfaction. No stop order suspending the effectiveness of the Registration Statement, as amended from time to time, shall have been issued and no proceedings for that purpose shall have been taken or, to the knowledge of the Company or the Selling Stockholders, shall be contemplated by the Commission and no injunction, restraining order, or order of any nature by a Federal or state court of competent jurisdiction shall have been issued as of the Closing Date which would prevent the issuance of the Shares. (b) The Representatives shall have received on the Closing Date or the Option Closing Date, as the case may be, the opinions of Paul, Hastings, Janofsky & Walker LLP, counsel for the Company, dated the Closing Date or the Option Closing Date, as the case may be, addressed to the Underwriters (and stating that it may be relied upon by counsel to the Underwriters) to the effect that: (i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, with corporate power and authority to own or lease its properties and conduct its business as described in the Registration Statement; each of the Subsidiaries has been duly organized and is validly existing as a corporation or other entity in good standing under the laws of the jurisdiction of its incorporation or organization, with corporate or other organizational power and authority to own or lease its properties and conduct its business as described in the Registration Statement; the Company and each of the Subsidiaries are duly qualified to transact business in all states listed on Exhibit A hereto; and the outstanding shares of capital stock or organizational interests of each of the Subsidiaries have been duly authorized and validly issued and are fully paid and non-assessable and are owned by the Company or a Subsidiary; and, to the best of such counsel's knowledge, the outstanding shares of capital stock or other organizational interests of each of the Subsidiaries is owned free and clear of all liens, encumbrances and equities and claims, and no options, warrants or other rights to purchase, agreements or other obligations to issue or other rights to convert any obligations into any shares of capital stock or ownership interests in the Subsidiaries are outstanding. (ii) The Company has authorized and outstanding capital stock as set forth under the caption "Capitalization" in the Prospectus; the authorized shares of the Company's Common Stock have been duly authorized; the outstanding shares of the Company's Common Stock, including the Shares to be sold by the Selling Stockholders, have been duly authorized and validly issued and are fully paid and non-assessable; all of the Shares conform to the description thereof contained in the Prospectus; the certificates for the Shares, assuming they are in the form filed with the Commission, are in due and proper form under Delaware law; the shares of Common Stock to be sold by the Company pursuant to this Agreement have been duly authorized and will be validly issued, fully paid and non-assessable when issued and paid for as contemplated by this Agreement; no statutory preemptive rights of stockholders exist with respect to any of the Shares or the issue or sale thereof; and except as described in the Prospectus, all outstanding options to purchase shares of Common Stock of the Company have been duly and validly issued under and pursuant to the terms of the Company's 1996 Stock Option Plan, 1996 Stock Incentive Plan, 1998 Stock Option Plan, and 1999 Stock Option Plan, as the case may be. 15 16 (iii) Except as described in or contemplated by the Prospectus, to the knowledge of such counsel, (A) there are no outstanding securities of the Company convertible or exchangeable into or evidencing the right to purchase or subscribe for any shares of capital stock of the Company and (B) there are no outstanding or authorized options, warrants or rights of any character obligating the Company to issue any shares of its capital stock or any securities convertible or exchangeable into or evidencing the right to purchase or subscribe for any shares of such stock; and except as described in the Prospectus, to the knowledge of such counsel, no holder of any securities of the Company or any other person has the right, contractual or otherwise, which has not been satisfied or effectively waived, to cause the Company to sell or otherwise issue to them, or to permit them to underwrite the sale of, any of the Shares or the right to have any Common Shares or other securities of the Company included in the Registration Statement or the right, as a result of the filing of the Registration Statement, to require registration under the Act of any shares of Common Stock or other securities of the Company. (iv) The Registration Statement has become effective under the Act and, to the best knowledge of such counsel, no stop order proceedings with respect thereto have been instituted or are pending or threatened under the Act. (v) The Registration Statement, the Prospectus and each amendment or supplement thereto comply as to form in all material respects with the requirements of the Act and the applicable Rules and Regulations (except that such counsel need express no opinion as to the financial statements and related schedules therein). (vi) The statements under the captions "-- Our certificate of incorporation and bylaws and Delaware law contain provisions that could discourage a third party acquisition of us," "Business -- Litigation," "Management -- Indemnification and Limitation of Director and Officer Liability," "Financings and Related Party Transactions," "Description of Capital Stock," "Certain United States Tax Considerations for Non-U.S. Holders" and "Shares Eligible for Future Sale" in the Prospectus, insofar as such statements constitute a summary of documents referred to therein or matters of law, fairly summarize in all material respects the information called for with respect to such documents or matters. (vii) Such counsel does not know of any contracts or documents required to be filed as exhibits to the Registration Statement or described in the Registration Statement or the Prospectus which are not so filed or described as required, and such contracts and documents as are summarized in the Registration Statement or the Prospectus are fairly and accurately summarized in all material respects. (viii) Such counsel knows of no material legal or governmental proceedings pending or threatened against the Company or any of the Subsidiaries except as set forth in the Prospectus. 16 17 (ix) The execution and delivery of this Agreement and the consummation of the transactions herein contemplated do not and will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, the certificate of incorporation or bylaws of the Company, the certificate of incorporation or bylaws or other organizational documents of any Subsidiary, or any agreement or instrument known to such counsel to which the Company or any of the Subsidiaries is a party or by which the Company or any of the Subsidiaries may be bound. (x) This Agreement has been duly authorized, executed and delivered by the Company. (xi) No approval, consent, order, authorization, designation, declaration or filing by or with any regulatory, administrative or other governmental body is necessary in connection with the execution and delivery of this Agreement and the consummation of the transactions herein contemplated (other than as may be required by the NASD or as required by state securities and blue sky laws as to which such counsel need express no opinion) except such as have been obtained or made, specifying the same. (xii) The Company is not, and will not become, as a result of the consummation of the transactions contemplated by this Agreement, and application of the net proceeds therefrom as described in the Prospectus, required to register as an investment company under the 1940 Act. In rendering such opinion Paul, Hastings, Janofsky & Walker LLP may rely as to matters governed by the laws of states other than California, Delaware or Federal laws on local counsel in such jurisdictions. In addition to the matters set forth above, such opinion shall also include a statement to the effect that nothing has come to the attention of such counsel which leads them to believe that (i) the Registration Statement, at the time it became effective under the Act (but after giving effect to any modifications incorporated therein pursuant to Rule 430A under the Act), contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (ii) the Prospectus, or any supplement thereto, on the date it was filed pursuant to the Rules and Regulations and as of the Closing Date or the Option Closing Date, as the case may be, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading (except, in each case, that such counsel need express no view as to financial statements, schedules and statistical information therein). With respect to such statement, Paul, Hastings, Janofsky & Walker LLP may state that their belief is based upon the procedures set forth therein, but is without independent check and verification. (c) The Representatives shall have received on the Closing Date or the Option Closing Date, as the case may be, the opinions of counsel for the Selling Stockholders, dated the Closing Date or the Option Closing Date, as the case may be, addressed to the Underwriters to the effect that: 17 18 (i) Each of this Agreement, the Custodian Agreement and the Power of Attorney has been duly executed and delivered by or on behalf of the Selling Stockholder. (ii) Each of the Custodian Agreement and the Power of Attorney constitutes the legally valid and binding obligation of the Selling Stockholder, enforceable against the Selling Stockholder in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors' rights generally (including, without limitation, fraudulent conveyance laws) and by general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing and the possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or law. (iii) No order, consent, permit or approval of any California or federal governmental authority that such counsel has, in the exercise of customary professional diligence, recognized as applicable to the Selling Stockholder or the sale of the Shares by the Selling Stockholder as contemplated by this Agreement, is required on the part of the Selling Stockholder for the sale of the Shares, except as required under the Act and applicable blue sky and state securities laws. (iv) Upon payment for and delivery of the Shares to be sold by the Selling Stockholder in accordance with the terms of this Agreement, assuming the Underwriters are acquiring such Shares in New York and that the Underwriters are "protected purchasers" as defined in Article 8 of the New York Uniform Commercial Code, the Underwriters will acquire all rights in such Shares that the Selling Stockholder had free of any adverse claim as defined in Article 8 of the New York Uniform Commercial Code. (d) The Representatives shall have received on the Closing Date or the Option Closing Date, as the case may be, the opinion of Marc Bonanni, Esq., in-house counsel the Company, dated the Closing Date or the Option Closing Date, as the case may be, addressed to the Underwriters (and stating that it may be relied upon by counsel to the Underwriters) to the effect that the statements under the captions "Business -- Government Regulation -- Franchise Classification" and "-- Vehicle Brokerage Activities" in the Prospectus, insofar as such statements constitute a summary of documents referred to therein or matters of law, fairly summarize in all material respects the information called for with respect to such documents or matters. (e) The Representatives shall have received from Latham & Watkins, counsel for the Underwriters, an opinion dated the Closing Date or the Option Closing Date, as the case may be, substantially to the effect specified in subparagraphs (iv), (v) and (x) of Paragraph (b) of this Section 6, and that the Company is a duly organized and validly existing corporation under the laws of the State of Delaware. In rendering such opinion Latham & Watkins may rely as to all matters governed other than by the laws of the State of California or Delaware or Federal laws on the opinion of counsel referred to in Paragraph (b) of this Section 6. In addition to the matters set forth above, such opinion shall also include a statement to the effect that nothing has come to the attention of such counsel which leads them to believe that (i) the Registration Statement, or 18 19 any amendment thereto, as of the time it became effective under the Act (but after giving effect to any modifications incorporated therein pursuant to Rule 430A under the Act) as of the Closing Date or the Option Closing Date, as the case may be, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (ii) the Prospectus, or any supplement thereto, on the date it was filed pursuant to the Rules and Regulations and as of the Closing Date or the Option Closing Date, as the case may be, contained an untrue statement of a material fact or omitted to state a material fact, necessary in order to make the statements, in the light of the circumstances under which they are made, not misleading (except that such counsel need express no view as to financial statements, schedules and statistical information therein). With respect to such statement, Latham & Watkins may state that their belief is based upon the procedures set forth therein, but is without independent check and verification. (f) The Representatives shall have received at or prior to the Closing Date from Latham & Watkins a memorandum or summary, in form and substance satisfactory to the Representatives, with respect to the qualification for offering and sale by the Underwriters of the Shares under the state securities or blue sky laws of such jurisdictions as the Representatives may reasonably have designated to the Company. (g) You shall have received, on each of the dates hereof, the Closing Date and the Option Closing Date, as the case may be, a letter dated the date hereof, the Closing Date or the Option Closing Date, as the case may be, in form and substance satisfactory to you, of Arthur Andersen LLP confirming that they are independent public accountants within the meaning of the Act and the applicable published Rules and Regulations thereunder and stating that in their opinion the financial statements and schedules examined by them and included in the Registration Statement comply in form in all material respects with the applicable accounting requirements of the Act and the related published Rules and Regulations; and containing such other statements and information as is ordinarily included in accountants' "comfort letters" to Underwriters with respect to the financial statements and certain financial and statistical information contained in the Registration Statement and Prospectus. (h) The Representatives shall have received on the Closing Date or the Option Closing Date, as the case may be, a certificate or certificates of the Chief Executive Officer and the Chief Financial Officer of the Company to the effect that, as of the Closing Date or the Option Closing Date, as the case may be, each of them severally represents in their capacity as such, as follows: (i) The Registration Statement has become effective under the Act and no stop order suspending the effectiveness of the Registrations Statement has been issued, and no proceedings for such purpose have been taken or are, to his knowledge, contemplated by the Commission; (ii) The representations and warranties of the Company contained in Section 1 hereof are true and correct as of the Closing Date or the Option Closing Date, as the case may be; 19 20 (iii) All filings required to have been made pursuant to Rules 424 or 430A under the Act have been made; (iv) He or she has carefully examined the Registration Statement and the Prospectus and, in his or her opinion, as of the effective date of the Registration Statement, the statements contained in the Registration Statement were true and correct, and such Registration Statement and Prospectus did not omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, and since the effective date of the Registration Statement, no event has occurred which should have been set forth in a supplement to or an amendment of the Prospectus which has not been so set forth in such supplement or amendment; and (v) Since the respective dates as of which information is given in the Registration Statement and Prospectus, there has not been any material adverse change or any development involving a prospective material adverse change in or affecting the condition, financial or otherwise, of the Company and its Subsidiaries taken as a whole or the earnings, business, management, properties, assets, rights, operations, condition (financial or otherwise) or prospects of the Company and the Subsidiaries taken as a whole, whether or not arising in the ordinary course of business. (i) The Representatives shall have received on the Closing Date or the Option Closing Date, as the case may be, a certificate or certificates of each of the Selling Stockholders to the effect that, as of the Closing Date or the Option Closing Date, as the case may be, each of them severally represents that the representations and warranties of such Selling Stockholder contained in Section 1 hereof are true and correct as of the Closing Date or the Option Closing Date, as the case may be. (j) The Company and the Selling Stockholders shall have furnished to the Representatives such further certificates and documents confirming the representations and warranties, covenants and conditions contained herein and related matters as the Representatives may reasonably have requested. (k) The Firm Shares and Option Shares, if any, have been approved for designation upon notice of issuance on the Nasdaq Stock Market. (l) The Lockup Agreements described in Section 4(a)(x) are in full force and effect. The opinions and certificates mentioned in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in all material respects satisfactory to the Representatives and to Latham & Watkins, counsel for the Underwriters. If any of the conditions hereinabove provided for in this Section 6 shall not have been fulfilled when and as required by this Agreement to be fulfilled, the obligations of the Underwriters hereunder may be terminated by the Representatives by notifying the Company and 20 21 the Selling Stockholders of such termination in writing or by facsimile at or prior to the Closing Date or the Option Closing Date, as the case may be. In such event, the Selling Stockholders, the Company and the Underwriters shall not be under any obligation to each other (except to the extent provided in Sections 5 and 8 hereof). 7. CONDITIONS OF THE OBLIGATIONS OF THE SELLERS. The obligations of the Sellers to sell and deliver the portion of the Shares required to be delivered as and when specified in this Agreement are subject to the conditions that at the Closing Date or the Option Closing Date, as the case may be, no stop order suspending the effectiveness of the Registration Statement shall have been issued and in effect or proceedings therefor initiated or threatened. 8. INDEMNIFICATION. (a) The Company agrees: (1) to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of the Act, against any losses, claims, damages or liabilities to which such Underwriter or any such controlling person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) any alleged act or failure to act by any Underwriter in connection with, or relating in any manner to, the Shares or the offering contemplated hereby, and which is included as part of or referred to in any loss, claim, damage, liability or action arising out of or based upon matters covered by clause (i) or (ii) above provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement, or omission or alleged omission made in the Registration Statement, any Preliminary Prospectus, the Prospectus, or such amendment or supplement, in reliance upon and in conformity with written information furnished to the Company by or through the Representatives specifically for use in the preparation thereof; provided, further, that this Indemnity Agreement with respect to any preliminary prospectus shall not inure to the benefit of any Underwriter from whom the person asserting any such losses, liabilities, claims, damages or expenses purchased Shares, or any person controlling such Underwriter, if a copy of the Prospectus (as then amended or supplemented) was not sent or given by or on behalf of such Underwriter to such person, at or prior to the written confirmation of the sale of such Shares to such person and if the Prospectus (as so 21 22 amended or supplemented) would have corrected the defect giving rise to such loss, liability, claim, damage or expense. (2) to reimburse each Underwriter and each such controlling person upon demand for any legal or other out-of-pocket expenses reasonably incurred by such Underwriter or such controlling person in connection with investigating or defending any such loss, claim, damage or liability, action or proceeding or in responding to a subpoena or governmental inquiry related to the offering of the Shares, whether or not such Underwriter or controlling person is a party to any action or proceeding. In the event that it is finally judicially determined that the Underwriters were not entitled to receive payments for legal and other expenses pursuant to this subparagraph, the Underwriters will promptly return all sums that had been advanced pursuant hereto. (b) The Selling Stockholders severally and not jointly agree to indemnify the Company and the Underwriters and each person, if any, who controls any Underwriter within the meaning of the Act, against any losses, claims, damages or liabilities to which such Underwriter or controlling person may become subject under the Act or otherwise to the same extent as indemnity is provided by the Company pursuant to Section 8(a) above; provided, however, that each Selling Stockholder will be liable to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission has been made in the Registration Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such Selling Stockholder specifically for use in the preparation thereof. In no event, however, shall the liability of any Selling Stockholder for indemnification under this Section 8(b) exceed the proceeds received by such Selling Stockholder from the Underwriters in the offering. This indemnity obligation will be in addition to any liability which the Company may otherwise have. (c) Each Underwriter severally and not jointly will indemnify and hold harmless the Company, each of its directors, each of its officers who have signed the Registration Statement, the Selling Stockholders, and each person, if any, who controls the Company within the meaning of the Act, against any losses, claims, damages or liabilities to which the Company or any such director, officer, Selling Stockholder or controlling person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement thereto, or (ii) the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; and will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, Selling Stockholder or controlling person in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding; provided, however, that each Underwriter will be liable in each case to the extent, but only to the extent, that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration 22 23 Statement, any Preliminary Prospectus, the Prospectus or such amendment or supplement, in reliance upon and in conformity with written information furnished to the Company by or through the Representatives specifically for use in the preparation thereof. This indemnity agreement will be in addition to any liability which such Underwriter may otherwise have. (d) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to this Section 8, such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing. No indemnification provided for in Section 8(a), (b) or (c) shall be available to any party who shall fail to give notice as provided in this Section 8(d) if the party to whom notice was not given was unaware of the proceeding to which such notice would have related and was materially prejudiced by the failure to give such notice, but the failure to give such notice shall not relieve the indemnifying party or parties from any liability which it or they may have to the indemnified party otherwise than on account of the provisions of Section 8(a), (b) or (c). In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall promptly pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel at its own expense. Notwithstanding the foregoing, the indemnifying party shall pay as incurred (or within 30 days of presentation) the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel, (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them or (iii) the indemnifying party shall have failed to assume the defense and employ counsel reasonably acceptable to the indemnified party within a reasonable period of time after notice of commencement of the action. It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm for all such indemnified parties. Such firm shall be designated in writing by you in the case of parties indemnified pursuant to Section 8(a) or (b) and by the Company and the Selling Stockholders in the case of parties indemnified pursuant to Section 8(c). The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. In addition, the indemnifying party will not, without the prior written consent of the indemnified party, which consent shall not be unreasonably withheld, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding of which indemnification may be sought hereunder (whether or not any indemnified party is an actual or potential party to such claim, action or proceeding) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action or proceeding. 23 24 (e) If the indemnification provided for in this Section 8 is unavailable to hold harmless an indemnified party under Section 8(a), (b) or (c) above in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein, but is otherwise applicable by its terms, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Selling Stockholders on the one hand and the Underwriters on the other from the offering of the Shares. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company and the Selling Stockholders on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, (or actions or proceedings in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company and the Selling Stockholders on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company and the Selling Stockholders bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, the Selling Stockholders or the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Selling Stockholders and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 8(e) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 8(e). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to above in this Section 8(e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim to the extent not reimbursed. Notwithstanding the provisions of this subsection (e), (i) no Underwriter shall be required to contribute any amount in excess of the underwriting discounts and commissions applicable to the Shares purchased by such Underwriter, (ii) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation, and (iii) no Selling Stockholder shall be required to contribute any amount in excess of the proceeds received by such Selling Stockholder from the Underwriters in the offering. The Underwriters' obligations in this Section 8(e) to contribute are several in proportion to their respective underwriting obligations and not joint. 24 25 (f) In any proceeding relating to the Registration Statement, any Preliminary Prospectus, the Prospectus or any supplement or amendment thereto, each party against whom contribution may be sought under this Section 8 hereby consents to the jurisdiction of any court having jurisdiction over any other contributing party, agrees that process issuing from such court may be served upon him or it by any other contributing party and consents to the service of such process and agrees that any other contributing party may join him or it as an additional defendant in any such proceeding in which such other contributing party is a party. (g) Any losses, claims, damages, liabilities or expenses for which an indemnified party is entitled to indemnification or contribution under this Section 8 shall be promptly paid by the indemnifying party to the indemnified party. The indemnity and contribution agreements contained in this Section 8 and the representations and warranties of the Company and the Selling Stockholders set forth in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Underwriter or any person controlling any Underwriter, the Company, its directors or officers or any persons controlling the Company or the Selling Stockholders, (ii) acceptance of any Shares and payment therefor hereunder, and (iii) any termination of this Agreement. A successor to any Underwriter, or to the Company, its directors or officers, or any person controlling the Company or the Selling Stockholders, shall be entitled to the benefits of the indemnity, contribution and reimbursement agreements contained in this Section 8. 9. DEFAULT BY UNDERWRITERS. If on the Closing Date or the Option Closing Date, as the case may be, any Underwriter shall fail to purchase and pay for the portion of the Shares which such Underwriter has agreed to purchase and pay for on such date (otherwise than by reason of any default on the part of the Company or a Selling Stockholder), you, as Representatives of the Underwriters, shall use your reasonable efforts to procure within 36 hours thereafter one or more of the other Underwriters, or any others, to purchase from the Company and the Selling Stockholders such amounts as may be agreed upon and upon the terms set forth herein, the Firm Shares or Option Shares, as the case may be, which the defaulting Underwriter or Underwriters failed to purchase. If during such 36 hours you, as such Representatives, shall not have procured such other Underwriters, or any others, to purchase the Firm Shares or Option Shares, as the case may be, agreed to be purchased by the defaulting Underwriter or Underwriters, then (a) if the aggregate number of shares with respect to which such default shall occur does not exceed 10% of the Firm Shares or Option Shares, as the case may be, covered hereby, the other Underwriters shall be obligated, severally, in proportion to the respective numbers of Firm Shares or Option Shares, as the case may be, which they are obligated to purchase hereunder, to purchase the Firm Shares or Option Shares, as the case may be, which such defaulting Underwriter or Underwriters failed to purchase, or (b) if the aggregate number of shares of Firm Shares or Option Shares, as the case may be, with respect to which such default shall occur exceeds 10% of the Firm Shares or Option Shares, as the case may be, covered hereby, the Company and the Selling Stockholders or you as the Representatives of the Underwriters will have the right, by written notice given within the next 36-hour period to the parties to this Agreement, to terminate this Agreement without liability on the part of the non-defaulting Underwriters or of the Company or of the Selling 25 26 Stockholders except to the extent provided in Section 8 hereof. In the event of a default by any Underwriter or Underwriters, as set forth in this Section 9, the Closing Date or Option Closing Date, as the case may be, may be postponed for such period, not exceeding seven days, as you, as Representatives, may determine in order that the required changes in the Registration Statement or in the Prospectus or in any other documents or arrangements may be effected. The term "Underwriter" includes any person substituted for a defaulting Underwriter. Any action taken under this Section 9 shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. 10. NOTICES. All communications hereunder shall be in writing and, except as otherwise provided herein, will be mailed, delivered, telecopied or telegraphed and confirmed as follows: if to the Underwriters, to BT Alex. Brown Incorporated, One South Street, Baltimore, Maryland 21202, Attention: General Counsel; with a copy to BT Alex. Brown Incorporated, One Bankers Trust Plaza, 130 Liberty Street, New York, New York 10006, Attention: General Counsel; if to the Company, to autobytel.com inc., 18872 MacArthur Boulevard, Irvine, CA 92612-1400, Attention: President; if to the Selling Stockholders, to _________. 11. TERMINATION. (a) This Agreement may be terminated by you by notice to the Company and the Selling Stockholders at any time prior to the Closing Date if any of the following has occurred: (i) since the respective dates as of which information is given in the Registration Statement and the Prospectus, any material adverse change or any development involving a prospective material adverse change in or affecting the condition, financial or otherwise, of the Company and its Subsidiaries taken as a whole or the earnings, business, management, properties, assets, rights, operations, condition (financial or otherwise) or prospects of the Company and its Subsidiaries taken as a whole, whether or not arising in the ordinary course of business, (ii) any outbreak or escalation of hostilities or declaration of war or national emergency or other national or international calamity or crisis or change in economic or political conditions if the effect of such outbreak, escalation, declaration, emergency, calamity, crisis or change on the financial markets of the United States would, in your reasonable judgment, make it impracticable or inadvisable to market the Shares or to enforce contracts for the sale of the Shares, or (iii) suspension of trading in securities generally on the New York Stock Exchange or the American Stock Exchange or limitation on prices (other than limitations on hours or numbers of days of trading) for securities on either such Exchange, (iv) the enactment, publication, decree or other promulgation of any statute, regulation, rule or order of any court or other governmental authority which in your opinion materially and adversely affects or may materially and adversely affect the business or operations of the Company, (v) declaration of a banking moratorium by United States or New York State authorities, (vi) the suspension of trading of the Company's Common Stock by the Nasdaq Stock Market, the Commission, or any other governmental authority or, (vii) the taking of any action by any governmental body or agency in respect of its monetary or fiscal affairs which in your reasonable opinion has a material adverse effect on the securities markets in the United States; or (b) as provided in Sections 6 and 9 of this Agreement. 26 27 12. SUCCESSORS. This Agreement has been and is made solely for the benefit of the Underwriters, the Company and the Selling Stockholders and their respective successors, executors, administrators, heirs and assigns, and the officers, directors and controlling persons referred to herein, and no other person will have any right or obligation hereunder. No purchaser of any of the Shares from any Underwriter shall be deemed a successor or assign merely because of such purchase. 13. INFORMATION PROVIDED BY UNDERWRITERS. The Company, the Selling Stockholders and the Underwriters acknowledge and agree that the only information furnished or to be furnished by any Underwriter to the Company for inclusion in any Prospectus or the Registration Statement consists of the information set forth in the last paragraph on the front cover page of the Prospectus (insofar as such information relates to the Underwriters), legends required by Item 502(d) of Regulation S-K under the Act and the information under the caption "Underwriting" in the Prospectus. 14. MISCELLANEOUS. (a) The reimbursement, indemnification and contribution agreements contained in this Agreement and the representations, warranties and covenants in this Agreement shall remain in full force and effect regardless of (a) any termination of this Agreement, (b) any investigation made by or on behalf of any Underwriter or controlling person thereof, or by or on behalf of the Company or its directors or officers or any Selling Stockholder and (c) delivery of and payment for the Shares under this Agreement. (b) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (c) This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. If the foregoing letter is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicates hereof, whereupon it will become a binding agreement among the Selling Stockholders, the Company and the several Underwriters in accordance with its terms. 27 28 Any person executing and delivering this Agreement as Attorney-in-Fact for a Selling Stockholder represents by so doing that he has been duly appointed as Attorney-in-Fact by such Selling Stockholder pursuant to a validly existing and binding Power of Attorney which authorizes such Attorney-in-Fact to take such action. Very truly yours, AUTOBYTEL.COM INC. By --------------------------------------- President Selling Stockholders listed on Schedule II By --------------------------------------- --------------------------------------- Attorney-in-Fact The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written. BT ALEX. BROWN INCORPORATED LEHMAN BROTHERS INC. - ---------------------------------- PAINEWEBBER INCORPORATED - ---------------------------------- As Representatives of the several Underwriters listed on Schedule I By: BT Alex. Brown Incorporated By: -------------------------- Authorized Officer 28 29 SCHEDULE I SCHEDULE OF UNDERWRITERS
Number of Number of Option Shares to be Firm Shares Purchased if Maximum Underwriter to be Purchased Amount Exercised ----------- --------------- -------------------- BT Alex. Brown Incorporated................. Lehman Brothers Inc......................... PaineWebber Incorporated.................... [Names of Other Underwriters]............... --------- ------- Total........................ 4,250,000 675,000 ========= =======
29 30 SCHEDULE II SCHEDULE OF SELLING STOCKHOLDERS
Maximum Number of Percentage of Number of Firm Option Shares to Total Number of Shares to be be Sold Option Shares Seller Stockholder Sold ------------------ -------------- ----------------- --------------- Peter R. Ellis.................... 500,000 337,500 50% John C. Bedrosian................. 500,000 337,500 50% --------- ------- --- Total.............. 1,000,000 675,000 100% ========= ======= ===
30 31 EXHIBIT A STATES IN WHICH THE COMPANY IS DULY QUALIFIED TO TRANSACT BUSINESS 32 EXHIBIT B FORM OF LOCKUP AGREEMENT EX-10.2 3 EMPLOYMENT AGREEMENT - MARK LORIMER 1 EXHIBIT 10.2 EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") is made and entered into, at Irvine, California, as of the first day of July 1998, by and between autobytel.com inc., a corporation duly organized under the laws of the State of Delaware (the "Company"), with offices at 18872 MacArthur Blvd., Second Floor, Irvine, California, 92612-1400, and Mark W. Lorimer (hereinafter referred to as the "Executive"), who resides at 2624 Calle Onice, San Clemente, California 92673. RECITALS WHEREAS: The Company currently employs and desires to continue to employ the Executive as President and Chief Executive Officer. WHEREAS: The Executive is currently employed and desires to continue to be so employed by the Company, subject to the following terms and conditions. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and with reference to the above recitals, the parties hereby agree as follows: ARTICLE 1 TERM OF EMPLOYMENT The Company hereby employs the Executive as President and Chief Executive Officer of the Company and the Executive hereby accepts such employment by the Company for a period of three (3) years (the "Term") commencing from July 1, 1998 (the "Commencement Date") and expiring upon the third anniversary of the Commencement Date, unless extended at the mutual option of the parties. Notwithstanding the above, in the event of a Change of Control of the Company prior to January 1, 2001 and while the Executive remains employed by the Company, the Term shall automatically extend for a period of three (3) years commencing from the date of the Change of Control. For purposes of this Agreement "Change of Control" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation but not including any initial or secondary public offering) in one or a series of related transactions of all or substantially all of the assets of the Company taken as a whole to any person (a "Person") or group of persons acting together (a "Group") (other than any of the Company's wholly-owned subsidiaries, any Company employee pension or benefits plan, or any person or entity owning at least five (5) percent of the common stock of the Company as of October 1, 1998), (ii) the adoption of a plan relating to the liquidation or dissolution of the Company, (iii) the consummation of any transactions (including any stock or other purchase, sale, acquisition, disposition, merger or consolidation, but not including any initial or secondary public offering) the result of which is that any Person or Group (other than any of the Company's wholly-owned subsidiaries, any Company employee pension or benefits plan, or any person or entity owning at least five (5) percent of the common stock of the Company as of October 1, 1998), becomes the beneficial owners of more than 40 percent of the aggregate voting power of all classes of stock of the Company having the right to elect directors under ordinary circumstances; or (iv) the first day on which a majority of the members of the board of directors of the Company (the "Board") are not individuals who were nominated for election or elected to the Board with the approval of two-thirds of the members of the Board just prior to the time of such nomination or election. 1 2 ARTICLE 2 DUTIES AND OBLIGATIONS 2.1 During the Term of this Agreement, the Executive shall: (i) devote his full business time, attention and energies to the business of the Company; (ii) shall use his best efforts to promote the interests of the Company; (iii) shall perform all functions and services as the President and Chief Executive Officer of the Company, including general management and supervision over the operations of the business and employees of the Company; (iv) shall act in accordance with the policies and directives of the Company as determined from time to time by its Board and communicated to the Executive in writing; and (v) shall report directly to the Board. 2.2 The Executive covenants and agrees that, while actually employed by the Company, he shall not engage in any other business duties or pursuits whatsoever, or directly or indirectly render any services of a business or commercial nature to any other person or organization, including, but not limited to, providing services to any business that is in competition with or similar in nature to the Company, whether for compensation or otherwise, without the prior written consent of the Board. However, the expenditure of reasonable amounts of time for educational, charitable, or professional activities shall not be deemed a breach of this Agreement, if those activities do not materially interfere with the services required under this Agreement, and shall not require the prior written consent of the Board. Notwithstanding anything herein contained to the contrary, this Agreement shall not be construed to prohibit the Executive from making passive personal investments or conducting personal business, financial or legal affairs or other personal matters if those activities do not materially interfere with the services required hereunder. In addition to the foregoing, notwithstanding anything contained herein to the contrary, this Agreement shall not be construed to prohibit the Executive from serving as a director or board member of any other corporation, company, or other business entity, and such service shall not require approval by the Board. 2.3 The principal location in which the Executive's services are to be performed will be the Irvine, California area. The Executive shall not be required to change such principal location without his consent. ARTICLE 3 COMPENSATION 3.1 As compensation for the services to be rendered by the Executive pursuant to this Agreement, the Company hereby agrees to pay the Executive a base salary equal to at least Three Hundred Twenty Five Thousand Dollars ($325,000.00) per year during the Term of this Agreement, which rate shall be reviewed by the Board at least annually and may be increased (but not reduced) by the Board in such amounts as the Board deems appropriate. The base salary shall be paid in substantially equal bimonthly installments, in accordance with the normal payroll practices of the Company. 3.2 The Company shall provide the Executive with the opportunity to earn an annual bonus for each fiscal year of the Company, occurring in whole or in part during the Term. The annual bonus payable to the Executive shall be in such amount and based on such criteria for the award as may be established by the Board from time to time. Any bonus shall be paid as promptly as practicable following the end of the preceding fiscal year. The Executive shall participate also in all other short-term and long-term bonus or incentive plans or arrangements in which other senior executives of the Company are eligible to participate from time to time. The provisions of this Section 3.2 shall be subject to the provisions of Section 3.5. 2 3 3.3 As further consideration for the services rendered by the Executive during the Term, the Executive shall be granted stock options to purchase shares of the Company's common stock on the terms and conditions set forth in the attached Schedule A (each an "Option"). 3.4 The Company shall have the right to deduct or withhold from the compensation due to the Executive hereunder any and all sums required for federal income and employee social security taxes and all state or local income taxes now applicable or that may be enacted and become applicable during the Term. 3.5 In the event the Company becomes a "publicly held corporation" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), the Company may provide for shareholder approval of any performance based compensation provided herein which is first created after the Company becomes so "publicly held," and may provide for the establishment of a compensation committee to establish any applicable performance goals and determine whether such performance goals have been met. ARTICLE 4 EMPLOYEE BENEFITS 4.1 The Company agrees that the Executive shall be entitled to all ordinary and customary perquisites afforded to executive employees of the Company, at the Company's sole expense (except to the extent employee contribution may be required under the Company's benefit plans as they may now or hereafter exist), which shall in no event be less than the benefits afforded to the Executive on the date hereof and the other executive employees of the Company as of the date hereof or from time to time, but in any event shall include any qualified or non-qualified pension, profit sharing and savings plans, any death benefit and disability benefit plans, life insurance coverages, any medical, dental, health and welfare plans or insurance coverages and any stock purchase programs that are approved by the Board on terms and conditions at least as favorable as provided to the Executive on the date hereof and other senior executives of the Company as of the date hereof or from time to time. 4.2 The Executive shall be entitled to four (4) weeks of paid vacation for each year of his employment hereunder (including four weeks for 1998), which, to the extent unused in any given year, may be carried over in accordance with the policies of the Company then in effect. Notwithstanding anything to the contrary, however, the Executive shall be entitled to carry over any unused vacation for a period not less than two (2) years. 4.3 The Executive shall be entitled to a car allowance of One Thousand Five Hundred Dollars ($1,500) per month during the Term. 4.4 The Company shall reimburse the Executive for all reasonable fees and costs incurred for his health club membership, work-out sessions with a trainer and the purchase and installation of a home computer, printer and fax machine. All amounts paid pursuant to this Section 4.4 shall be equal on a net after tax basis to the fees incurred by the Executive, provided, however, that, as a condition to such reimbursement, the Executive shall furnish to the Company adequate records and other documentary evidence substantiating each expenditure. 3 4 ARTICLE 5 BUSINESS EXPENSES 5.1 The Company shall pay or reimburse the Executive for all reasonable and authorized business expenses incurred by the Executive during the Term; such payment or reimbursement shall not be unreasonably withheld so long as said business expenses have been incurred for and promote the business of the Company and are normally and customarily incurred by employees in comparable positions at other comparable businesses in the same or similar market. Notwithstanding the above, and except as otherwise provided in Section 4.4 hereof, the Company shall not pay or reimburse the Executive for the costs of any membership fees or dues for private clubs, civic organizations, and similar organizations or entities, unless such organizations and the fees and costs associated therewith have first been approved in writing by the Board. 5.2 The Company shall reimburse the Executive for expenses incurred with business-related travel. Notwithstanding the above, the Company shall not pay or reimburse the Executive for the costs of any business-related travel to the extent such costs exceed the cost of Business Class. 5.3 As a condition to reimbursement under this Article 5, the Executive shall furnish to the Company adequate records and other documentary evidence required by federal and state statutes and regulations for the substantiation of each expenditure. The Executive acknowledges and agrees that failure to furnish the required documentation may result in the Company denying all or part of the expense for which reimbursement is sought. 4 5 ARTICLE 6 TERMINATION OF EMPLOYMENT 6.1 Termination for Cause. The Board may, during the Term, without notice to the Executive, terminate this Agreement and discharge the Executive for Cause, whereupon the respective rights and obligations of the parties hereunder shall terminate; provided, however, that the Company shall immediately pay the Executive any amount due and owing pursuant to Articles 3, 4, and 5, prorated to the date of termination; provided, further, however, that no termination for Cause may occur without the Executive having the right to a hearing with the Executive's counsel present. As used herein, the term "for Cause" shall refer to the termination of the Executive's employment as a result of any one or more of the following: (i) any conviction of the Executive for a felony; (ii) the gross willful misconduct of the Executive which has a direct and material injurious effect on the business or reputation of the Company; or (iii) the gross dishonesty of the Executive which is directly and materially injurious to the business and reputation of the Company. For purposes of this Section 6.1, no act or failure to act, on the part of the Executive, shall be considered "willful" if it is done, or omitted to be done, by the Executive in good faith or with reasonable belief that his action or omission was in the best interest of the Company. The Executive shall have the opportunity to cure any such acts or omissions (other than item (i) above) within fifteen (15) days of the Executive's receipt of a resolution adopted by the Board finding that, in the good faith opinion of the Board, the Executive is guilty of acts or omissions constituting "Cause," which resolution has been duly adopted by an affirmative vote of a majority of the Board (excluding the Executive and any individual alleged to have participated in the acts constituting "Cause"). Any such vote shall be taken at a meeting of the Board called and held for such purpose, after reasonable written notice is provided to the Executive setting forth in reasonable detail the facts and circumstances claimed to provide a basis of termination for Cause and the Executive is given an opportunity, together with his counsel, to be heard before the Board. 6.2 Termination Without Cause. Anything in this Agreement to the contrary notwithstanding, the Board shall have the right, at any time in its sole and subjective discretion, to terminate this Agreement without Cause upon not less than thirty (30) days prior written notice to the Executive. The term "termination without Cause" shall mean the termination of the Executive's employment for any reason other than those expressly set forth in Section 6.1, or no reason at all, and shall also mean the Executive's decision to terminate this Agreement by reason of any act, decision or omission by the Company or the Board that: (A) materially modifies, reduces, changes, or restricts the Executive's salary, bonus opportunities, options or other compensation benefits or perquisites, or the Executive's authority, functions, services, duties, rights, and privileges as, or commensurate with the Executive's position as, President and Chief Executive Officer of the Company as described in Section 2.1 hereof; (B) relocates the Executive without his consent from the Company's offices located at 18872 MacArthur Boulevard, Irvine, California, 92612-1400 to any other location in excess of fifty (50) miles beyond the geographic limits of Irvine, California; (C) deprives the Executive of his titles and positions of President and Chief Executive Officer of the Company and/or his position as a member of the Board; or (D) involves or results in any failure by the Company to comply with any provision of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive (each a "Good Reason"). In the event the Company or the Executive shall exercise the termination right granted pursuant to this Section 6.2, the Company shall, within thirty (30) days of notice of termination to or from the Executive (as the case may be), pay to the Executive in a single lump-sum payment the base salary that would have been received by the Executive if he had remained employed by the Company for the greater of (A) the remaining balance of the Term or (B) two (2) years; provided, however, that for purposes of calculating the payment pursuant to this sentence, the Executive's base salary per year shall be the highest rate in effect during the Term. The Company also shall (i) continue to provide to the Executive and his beneficiaries, at its sole cost, the insurance coverages referred to in Section 4.1 above, and (ii) pay to the Executive in a single lump-sum payment the aggregate cost of the benefits (other than insurance coverages) 5 6 under Section 4.1 hereof, in each case to the extent he would have received such insurance coverages and benefits had he remained employed by the Company for the greater of (A) the remaining balance of the Term or (B) two (2) years. 6.3 Termination for Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Term. If the Company determines in good faith that the Disability (as defined below) of the Executive has occurred during the Term, it shall give written notice to the Executive of its intention to terminate his employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive, provided that, within the thirty (30) days after such receipt, the Executive shall not have returned to full-time performance of his duties. Anything in this Agreement to the contrary notwithstanding, upon the death or Disability of the Executive, the Company shall provide the Executive or his successors, heirs, designees, or assigns, with continued payment of the Executive's then current base salary and all benefits under Article 4 hereof for two (2) years. For purposes of this Agreement, "Disability" shall mean the inability of the Executive to perform his duties to the Company on account of physical or mental illness or incapacity for a period of one hundred eighty (180) consecutive calendar days, or for a period of two hundred ten (210) calendar days, whether or not consecutive, during any three hundred sixty-five (365) day period. 6 7 6.4 Termination Without Good Reason. Anything in this Agreement to the contrary notwithstanding, the Executive shall have the right, at any time in his sole and subjective discretion, to terminate this Agreement without Good Reason upon not less than thirty (30) days prior written notice to the Company. In the event the Executive voluntarily terminates his employment hereunder other than for Good Reason, the respective rights and obligations of the parties hereunder shall terminate; provided, however, that the Company shall immediately pay the Executive any amount due and owing pursuant to Articles 3, 4, and 5, prorated to the date of termination. 6.5 Termination Prior to or Following a Change of Control. Notwithstanding, the foregoing, in the event the employment of the Executive is terminated during the six (6) month period immediately prior to, or the first thirty-six (36) months following, a Change of Control either (i) by the Executive for Good Reason or (ii) by the Company other than for Cause, Disability or death, then, in addition to the payments and benefits provided in Section 6.2 hereof, the Company shall, within thirty (30) days of notice of termination to the Executive, pay to the Executive in a single lump-sum payment (i) an amount equal to (A) the highest annual bonus paid by the Company to the Executive during the three (3) fiscal years prior to termination, multiplied by (B) two (2); and (ii) an amount equal to the cost of all other benefits under Article 4 hereof for the greater of (A) the remaining balance of the Term or (B) two (2) years. For purposes of this Section 6.5, "Term" shall be the period of time of this Agreement as defined by Article 1 hereof, which includes any extension thereof by reason of a Change of Control prior to January 1, 2001. 6.6 Anything in this Agreement to the contrary notwithstanding, upon the Executive's termination under this Article 6, the Company's obligations with respect to any stock option to purchase shares of the Company's common stock granted to the Executive shall be determined by the terms and conditions of such option as set forth in the Executive's written option agreement regarding such option, which shall be fully consistent with the terms and conditions set forth in attached Schedule A with respect to the options described therein. ARTICLE 7 PARACHUTE TAX INDEMNITY 7.1 Gross-Up Payment. (a) If it shall be determined that any amount paid, distributed or treated as paid or distributed BY the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Article 7) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, being hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all federal, state and local taxes (including any interest or penalties imposed with respect to such taxes), including without limitation, any income taxes (including any interest or penalties imposed with respect thereto) and Excise Tax imposed on the Gross-up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments, provided, however, that in no event will the amount of the Gross-Up Payment payable pursuant to this Article 7 exceed Five Million Dollars ($5,000,000.00). 7 8 (b) The determinations of whether and when a Gross-Up Payment is required under this Article 7 shall be made by independent tax counsel (the "Tax Counsel") based on its good faith interpretation of applicable law. The amount of such Gross-Up Payment and the valuation assumptions to be utilized in arriving at such determination shall be made by an independent nationally recognized accounting firm (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. The Tax Counsel and Accounting Firm shall initially be appointed by the Company after consultation in good faith with the Executive and subject to the approval of the Executive (which approval shall not be unreasonably withheld), provided, however, that if the potential amount of the Gross-Up Payment (but for the limit in Section 7.1(a) above) could exceed Five Million Dollars, the Executive shall have the opportunity to appoint a new Tax Counsel and Accounting Firm after consultation in good faith with the Company. If the Tax Counsel and Accounting Firm selected by the Company determine that the amount of the Gross-Up Payment is less than $5 million, but Executive provides an opinion of a second independent Tax Counsel that the Gross-Up Payment (but for the limit in Section 7.1(a) above) could be greater than $5 million, then Executive shall be entitled to appoint the Tax Counsel and the Accounting Firm after consultation in good faith with the Company and subject to the approval of the Company (which approval shall not be unreasonably withheld). All fees and expenses of any Tax Counsels and Accounting Firms referred to above shall be borne by the Company. Any Gross-Up Payment, as determined pursuant to this Article 7, shall be paid by the Company to the Executive within ten (10) days of the receipt of the Accounting Firm's determination. Any determinations by the Tax Counsel and Accounting Firm shall be binding upon the Company and the Executive, provided, however, if it is later determined that there has been an underpayment of Excise Tax and that Executive is required to make an additional Excise Tax payment(s) on any Payment or Gross-Up Payment, the Company shall provide a similar full gross-up on such additional liability, subject to the overall $5 million limit set forth in Section 7.1(a) above. (c) For purposes of any determinations made by any Tax Counsel and Accounting Firm acting under Section 7.1(b) above: (i) All Payments and Gross-Up Payments with respect to Executive shall be deemed to be "parachute Payments" under Section 280G(b)(2) of the Code and to be "excess parachute payments" under Section 280G(b)(1) of the Code that are fully subject to the Excise Tax under Section 4999 of the Code, except to the extent (if any) that such Tax Counsel determines in writing in good faith that a Payment in whole or in part does not constitute a "parachute payment" or otherwise is not subject to Excise Tax; (ii) The value of any non-cash benefits or deferred or delayed payments or benefits shall be determined in a manner consistent with the principles of Section 280G of the Code; and (iii) Executive shall be deemed to pay federal, state and local income taxes at the actual marginal rate applicable to individuals in the calendar year in which the Gross-Up Payment is made, net of any applicable reduction in federal income taxes for any state and local taxes paid on the amounts in question. 8 9 7.2 Claims and Proceedings. The Executive shall notify the Company in writing of any Excise Tax claim by the Internal Revenue Service that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notification shall be given as soon as practicable but no later then twenty (20) business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such Excise Tax claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim; (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company after consultation in good faith with Executive and subject to approval by Executive (which approval shall not be unreasonably withheld) under the circumstances set forth in Section 7.1; (iii) cooperate with the Company in good faith in order to effectively contest such claim; and (iv) permit the Company to participate in any proceeding relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expense. Without limitation of the foregoing provisions of this Article 7, if the Gross-Up Payment payable hereunder (determined on the basis of the amount being contested), together with any previous Gross-Up Payment made by the Company to the Executive hereunder (collectively the "Aggregate Gross-Up Payment"), would not exceed Five Million Dollars ($5,000,000) (determined without regard to the $5 million limit in Section 7.1(a)), the Company shall control the Excise Tax portion of any proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such Excise Tax claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the Excise Tax claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine. If the Company directs the Executive to pay such Excise Tax claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest and penalties) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, however, that any Company-directed extension of the statute of limitations relating to payment of taxes for the Executive's taxable year with respect to which such contested Excise Tax amount is claimed to be due shall be effective only if it can be and is limited to the contested Excise Tax liability. Notwithstanding anything to the contrary herein, the Executive shall control the settlement or contest, as the case may be, of all non-Excise Tax issues and of any Excise Tax issues with respect to which the Aggregate Gross-Up Payment payable hereunder (but for the limit in Section 7.1(a) above) would exceed Five Million Dollars ($5,000,000). The Executive shall be entitled to settle or contest, as the case may be, any non-Excise Tax issue raised by the Internal Revenue Service or any other taxing authority, so long as such action does not have a material adverse effect on an Excise Tax contest being pursued by and under the control of the Company. 9 10 7.3 Refunds. If, after the Executive's receipt of an amount advanced by the Company pursuant to this Article 7 for payment of Excise Taxes, the Executive files an Excise Tax refund claim and receives any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of this Article 7) except as provided below, promptly pay to the Company the amount of any such refund of Excise Tax (together with any interest paid or credited thereon, but after any and all taxes applicable thereto), plus the amount (after any and all taxes applicable thereto) of the refund (if any is applied for and received) of any income tax paid by Executive with respect to and as a result of his prior receipt of any previously pai Gross-Up Payment indemnifying Executive with respect to any such Excise Tax later so refunded. In the event Executive files for a refund of the Excise Tax and such request would, if successful, require Executive to refund any amount to the Company pursuant to this provision, then Executive shall be required to seek a refund of the Income Tax portion of any corresponding Gross-Up Payment so long as such refund request would not have a material adverse effect on Executive (which determination shall be made by independent tax counsel selected by Executive after good faith consultation with the Company and subject to approval of the Company, which approval shall not be unreasonably withheld). Notwithstanding the above, Executive shall have no obligation to pay any portion of any such tax refund(s) to the Company if and to the extent that the Excise Tax to which such refund relates was not eligible for a Gross-Up Payment by reason of the $5 million limit in Section 7.1(a) above. For this purpose, if the total Excise Tax paid with respect to Executive exceeds the maximum amount eligible for Gross-Up Payment coverage by reason of the $5 million limit in Section 7.1 (a) above, any subsequent Excise Tax refunds shall first be applied against the portion of any Excise Tax payments that are not covered by the Gross-Up Payments provided under this Article 7. If, after the Executive's receipt of an amount advanced by the Company pursuant to this Article 7, a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of the Gross-Up Payment required to be paid. ARTICLE 8 NO MITIGATION OR OFFSET; INSURANCE 8.1 No Mitigation or Offset. The Executive shall not be required to seek other employment or to reduce any severance benefit payable to him under Article 6 hereof, and no severance benefit shall be reduced on account of any compensation received by the Executive from other employment. The Company's obligation to pay severance benefits under this Agreement shall not be reduced by any amount owed by the Executive to the Company. 10 11 8.2 Indemnification; Insurance. (a) If the Executive is a party or is threatened to be made a party to any threatened, pending or completed claim, action, suit or proceeding, or appeal therefrom, whether civil, criminal, administrative, investigative or otherwise, because he is or was an officer of the Company, or at the express request of the Company is or was serving, for purposes reasonably understood by him to be for the Company, as a director, officer, partner, employee, agent or trustee (or in any other capacity of an association, corporation, general or limited partnership, joint venture, trust or other entity), the Company shall indemnify the Executive against any reasonable expenses (including attorneys' fees and disbursements), and any judgments, fines and amounts paid in settlement incurred by him in connection with such claim, action, suit, proceeding or appeal therefrom to the extent such expenses, judgments, fines and amounts paid in settlement were not advanced by the Company on his behalf pursuant to subsection (b) below, to the fullest extent permitted under Delaware law. The Company shall provide Executive with D&O insurance coverage at least as favorable to Executive as what the Company maintains as of the date hereof or such greater coverage as the Company may maintain from time to time. (b) Upon the written request of the Executive specifying the amount of a requested advance and the intended use thereof, the Company shall indemnify Executive for his expenses (including attorneys' fees and disbursements), judgments, fines and amounts paid in settlement incurred by him in connection with such claim, action, suit, proceeding or appeal whether civil, criminal, administrative, investigative or otherwise, in advance of the final disposition of any such claim, action, suit, proceeding or appeal therefrom to the fullest extent permitted under Delaware law. ARTICLE 9 RESTRICTIVE COVENANTS 9.1 Covenant Not to Disclose Confidential Information. During the Term and following termination of this Agreement, the Executive agrees that, without the Company's prior written consent, he will not use or disclose to any person, firm, association, partnership, entity or corporation, any confidential information concerning: (i) the business operations or internal structure of the Company; (ii) the customers of the Company; (iii) the financial condition of the Company; and (iv) other confidential information pertaining to the Company, including without limitation, trade secrets, technical data, marketing analyses and studies, operating procedures, customer and/or inventor lists, or the existence or nature of any of the Company's agreements (other than this Agreement and any other option or compensation related agreements involving the Executive); provided, however, that the Executive shall be entitled to disclose such information: (i) to the extent the same shall have otherwise become publicly available (unless made publicly available by the Executive); (ii) during the course of or in connection with any actual or potential litigation, arbitration, or other proceeding based upon or in connection with the subject matter of this Agreement; (iii) as may be necessary or appropriate to conduct his duties hereunder, provided the Executive is acting in good faith and in the best interest of the Company; or (iv) as may be required by law or judicial process. 11 12 9.2 Covenant Not to Compete. The Executive acknowledges that he has established and will continue to establish favorable relations with the customers, clients and accounts of the Company and will have access to trade secrets of the Company. Therefore, in consideration of such relations and to further protect trade secrets, directly or indirectly, of the Company, the Executive agrees that during the Term and for a period of one (1) year from the date of termination of the Executive, the Executive will not, directly or indirectly, without the express written consent of the Board: (i) own or have any interest in or act as an officer, director, partner, principal, employee, agent, representative, consultant or independent contractor of, or in any way assist in, any business which is engaged, directly or indirectly, in any business competitive with the Company in those automotive markets and/or automotive products lines in which the Company competes within the United States at any time during the Term, or become associated with or render services to any person, firm, corporation or other entity so engaged ("Competitive Businesses"); provided, however; that the Executive may own without the express written consent of the Company not more than two (2) percent of the issued an outstanding securities of any company or enterprise whose securities are listed on a national securities exchange or actively traded in the over the counter market; (ii) solicit clients, customers or accounts of the Company for, on behalf of or otherwise related to any such Competitive Businesses or any products related thereto; or (iii) solicit any person who is or shall be in the employ or service of the Company to leave such employ or service for employment with the Executive or an affiliate of the Executive. Notwithstanding the foregoing, if any court determines that the covenant not to compete, or any part thereof, is unenforceable because of the duration of such provision or the geographic area or scope covered thereby, such court shall have the power to reduce the duration, area or scope of such provision to the extent necessary to make the provision enforceable and, in its reduced form, such provision shall then be enforceable and shall be enforced. 9.3 Specific Performance. Recognizing the irreparable damage will result to the Company in the event of the breach or threatened breach of any of the foregoing covenants and assurances by the Executive contained in Sections 9.1 and 9.2 hereof, and that the Company's remedies at law for any such breach or threatened breach may be inadequate, the Company and its successors and assigns, in addition to such other remedies which may be available to them, shall be entitled to an injunction to be issued by any court of competent jurisdiction ordering compliance with this Agreement or enjoining and restraining the Executive, and each and every person, firm or company acting in concert or participation with him, from the continuation of such breach. The obligations of the Executive and rights of the Company pursuant to this Article 9 shall survive the termination of this Agreement. The covenants and obligations of the Executive set forth in this Article 9 are in addition to and not in lieu of or exclusive of any other obligations and duties the Executive owes to the Company, whether expresses or implied in fact or law. 12 13 ARTICLE 10 GENERAL PROVISIONS 10.1 This Agreement and attached schedules (which are incorporated herein and shall be treated as part of hereof) are intended to be the final, complete and exclusive agreement between the parties relating to the employment of the Executive by the Company with respect to the Term and all prior or contemporaneous understandings, representations and statements, oral or written, are merged herein. Notwithstanding anything to the contrary, the terms and conditions of any stock option agreements signed by the Executive prior to the date hereof shall remain in effect. No modification waiver, amendment, discharge or change of this Agreement shall be valid unless the same is in writing and signed by the party against which the enforcement thereof is or may be sought. 10.2 No waiver, by conduct or otherwise, by any party of any term, provision, or condition of this Agreement, shall be deemed or construed as a further or continuing waiver of any such term, provision, or condition nor as a waiver of a similar or dissimilar condition or provision at the same time or at any prior or subsequent time. 10.3 The rights under this Agreement, or by law or equity, shall be cumulative and may be exercised at any time and from time to time. No failure by any party to exercise, and no delay in exercising, any rights shall be construed or deemed to be a waiver thereof, nor shall any single or partial exercise by any party preclude any other or future exercise thereof or the exercise of any other right. 10.4 Except as otherwise provided in this Agreement, any notice, approval, consent, waiver or other communication required or permitted to be given or to be served upon any person in connection with this Agreement shall be in writing. Such notice shall be personally served, sent by telegram, tested telex, fax or cable, or sent prepaid by either registered or certified mail with return receipt requested or Federal Express and shall be deemed given (i) if personally served or by Federal Express, when delivered to the person to whom such notice is addressed, (ii) if given by telegram, telex, fax or cable, when sent, or (ii) if given by mail, two (2) business days following deposit in the United States mail. Any notice given by telegram, telex, fax or cable shall be confirmed in writing by overnight mail or Federal Express within forty-eight (48) hours after being sent. Such notices shall be addressed to the party to whom such notice is to be given at the party's address set forth below or as such party shall otherwise direct. If to the Company: autobytel.com inc. 18872 MacArthur Boulevard Irvine, California 92612-1400 (949) 862-1323 (fax) Attn: General Counsel If to the Executive: Mark W. Lorimer 2624 Calle Onice San Clemente, California 92673 With a copy to: Brian Foley, Esq. 1 North Broadway 4th Floor White Plains, New York 10601-2310 (914) 946-9717 13 14 10.5 The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the successors and assigns of the parties hereto. 10.6 This Agreement shall be construed and enforced in accordance with the laws of the State of California, without giving effect to the principles of conflict of laws thereof, except that the indemnification provisions of Section 8.2 shall be governed by Delaware law without regard to conflict of laws principles. 10.7 This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one instrument. 10.8 The provisions of this Agreement are agreed to be severable, and if any provision, or application thereof, is held invalid or unenforceable, then such holding shall not effect any other provision or application. 10.9 As used herein, and as the circumstances require, the plural term shall include the singular, the singular shall include the plural, the neuter term shall include the masculine and feminine genders, and the feminine term shall include the neuter and the masculine genders. 10.10 Any controversy or claim arising out of, or related to, this Agreement, or the breach thereof, shall be settled by binding arbitration in the City of Irvine, California, in accordance with the rules then in effect of the American Arbitration Association, and the arbitrator's decision shall be binding and final, and judgment upon the award rendered may be entered in any court having jurisdiction thereof. Each party hereto shall pay its or their own expenses incident to the negotiation, preparation and resolution of any controversy or claim arising out of, or related to, this Agreement, or the breach thereof, provided, however, the Company shall pay and be solely responsible for any attorneys' fees and expenses and court or arbitration costs incurred by the Executive as a result of a claim that the Company has breached or otherwise failed to perform this Agreement or any provision hereof to be performed by the Company if the Executive prevails in the contest in whole or in part. 14 15 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. autobytel.com,inc. By /s/ Michael J. Fuchs ------------------------------- Michael J. Fuchs Chairman of the Board /s/ Mark w. Lorimer ----------------------------------- Mark W. Lorimer [Remainder of page intentionally left blank] 15 16 SCHEDULE A As further consideration for the services rendered by the Executive during the Term, the Executive shall be granted Options on the terms and conditions set forth below, effective as of December 17, 1998. Each such Option shall be effective upon such grant effective date. 1. Regular 1998 Options. The Executive shall be granted Options to purchase two hundred thousand (200,000) shares of the Company's common stock (the "Regular 1998 Options") under the Company's 1998 Stock Option Plan. The Regular 1998 Options shall have a ten (10) year term (the " Regular 1998 Option Term") of exercise and, except as otherwise provided herein, shall remain exercisable following vesting for the full term. The exercise price of an Option granted as a Regular 1998 Option shall be equal to the fair market value per share of the Company's common stock (as determined by the Company) as of the date such Option is granted. (a) Vesting. The Regular 1998 Options shall vest based on the continued employment of the Executive (which shall include the Executive's membership on the Board) in equal installments of fifty (50) percent of the number of subject shares on each of June 1, 1999 and June 1, 2000. (b) Payment Upon Exercise. Payment for the shares subject to any Regular 1998 Option may be tendered in cash or by certified, bank cashier's or teller's check or by shares of the Company's common stock (valued at fair market value (as determined by the Company) as of the date of tender) already owned by the Executive, or some combination of the foregoing or such other form of consideration which has been approved by the Board, including any approved cashless exercise mechanism or a promissory note given by the Executive. (c) Termination for Cause. As of the date of the Executive's termination for Cause under Section 6.1 of this Agreement, any unvested or unexercised portion of the Regular 1998 Options shall terminate immediately and shall be of no further force or effect. (d) Termination Without Cause or for Good Reason. As of the date of the Executive's termination by the Company without Cause or by the Executive for Good Reason under Section 6.2 of this Agreement, any unvested portion of the Regular 1998 Options shall become immediately and fully vested and exercisable from such termination of employment until the date that is two (2) years following the termination date. (e) Termination due to Death or Disability. As of the date of the Executive's termination due to death or Disability under Section 6.3 of this Agreement, any unvested portion of the Regular 1998 Options shall become immediately and fully vested and exercisable. Any previously vested but unexercised Regular 1998 Options shall remain exercisable from the date of such termination of employment until the end of the Regular 1998 Option Term or, if earlier, the date that is two (2) years following the termination date. (f) Termination Without Good Reason. As of the date of any voluntary termination of employment with the Company by the Executive other than due to death or Disability, and other than for Good Reason, any unvested portion of the Regular 1998 Options shall terminate immediately and shall be of no further force or effect. Any previously vested but unexercised Regular 1998 Options shall remain exercisable from the date of such termination of employment until the end of the Regular 1998 Option Term or, if earlier, the date that is one (1) year following the termination date. 16 17 (g) Termination Prior to or Following a Change of Control. In the event of a Change of Control while the Executive is employed by the Company, or the Executive's employment is terminated by the Company without Cause or by the Executive for Good Reason within six (6) months prior to a Change of Control during the Term, any unvested installment of the Regular 1998 Options shall immediately vest and become exercisable from the date of such Change of Control, or if earlier the date of termination, until the date that is two (2) years following (i) the Change of Control date, or (ii) if earlier the date of termination. 2. 1998 Performance Options. The Executive also shall be granted Options to purchase five hundred thousand (500,000) shares of the Company's common stock (the "1998 Performance Options") under the Company's 1998 Stock Option Plan. The 1998 Performance Options shall vest in six (6) installments with eighty thousand (80,000) shares subject to each of the first and second installments and eighty-five thousand (85,000) shares subject to each of the third, fourth, fifth and sixth installments. The 1998 Performance Options shall have a ten (10) year term (the "1998 Performance Option Term") of exercise and, except as otherwise provided herein shall remain exercisable following vesting for the full term. The exercise price of an Option granted as a 1998 Performance Option shall be equal to the fair market value (as determined by the Company) per share of the Company's common stock as of the date of grant. (the "Exercise Price"). (a) Vesting. The 1998 Performance Options shall vest on the seventh (7th) anniversary of the date of grant, subject to the continued employment of the Executive (without regard to the occurrence of an Initial Public Offering or stock price performance); provided however that following an effective initial public offering by the Company (the "IPO") and based on the continued employment of the Executive, the vesting of the 1998 Performance Options shall accelerate as follows: (i) the first installment will vest immediately and fully upon the first six (6) month anniversary of the date of grant, or any six month anniversary of such date thereafter, following the IPO if the average trading price (as determined by averaging either the closing price or bid-ask midpoint) of the Company's common stock for the ten trading days (the "Average Trading Price") preceding any such anniversary date exceeds the Exercise Price by at least Six Dollars and Sixty Cents ($6.60); (ii) the second installment will vest immediately and fully upon the first one (1) year anniversary of the date of grant, or any six month anniversary of such date thereafter, following the IPO if the Average Trading Price preceding any such anniversary date exceeds the Exercise Price by at least Thirteen Dollars and Twenty Cents ($13.20); (iii) the third installment will vest immediately and fully upon the first eighteen (18) month anniversary of the date of grant, or any six month anniversary of such date thereafter, following the IPO if the Average Trading Price preceding any such anniversary date exceeds the Exercise Price by at least Nineteen Dollars and Eighty Cents ($19.80); (iv) the fourth installment will vest immediately and fully upon the first two (2) year anniversary of the date of grant, or any six month anniversary of such date thereafter, following the IPO if the Average Trading Price preceding any such anniversary date exceeds the Exercise Price by at least Twenty-Six Dollars and Forty Cents ($26.40); 17 18 (v) the fifth installment will vest immediately and fully upon the first two and half year anniversary of the date of grant, or any six month anniversary of such date thereafter, following the IPO if the Average Trading Price preceding any such anniversary date exceeds the Exercise Price by at least Thirty-three Dollars ($33.00); and (vi) the sixth installment will vest immediately and fully upon the first three (3) year anniversary of the date of grant, or any six month anniversary of such date thereafter, following the IPO if the Average Trading Price preceding any such anniversary date exceeds the Exercise Price by at least Thirty-nine Dollars and Sixty Cents ($39.60). (b) Payment Upon Exercise. Payment for the shares subject to any 1998 Performance Option may be tendered in cash or by certified, bank cashier's or teller's check or by shares of the Company's common stock (valued at fair market value (as determined by the Company) as of the date of tender) already owned by the Executive, or some combination of the foregoing or such other form of consideration which has been approved by the Board, including any approved cashless exercise mechanism or a promissory note given by the Executive. (c) Termination for Cause. As of the date of the Executive's termination for Cause under Section 6.1 of this Agreement, any unvested or unexercised portion of the 1998 Performance Options shall terminate immediately and shall be of no further force or effect. (d) Termination Without Cause or for Good Reason. If the Company has not effected an IPO as of the date of the Executive's termination by the Company without Cause or by the Executive for Good Reason under Section 6.2 of this Agreement, any unvested portion of the 1998 Performance Options shall become immediately and fully vested and exercisable as of the date of such termination. Any shares subject to the 1998 Performance Options that become vested and exercisable in accordance with the foregoing and any previously vested but unexercised 1998 Performance Options shall remain exercisable from the date of such termination of employment until the date that is one (1) year following the termination date. If the Company has effected an IPO as of the date of the Executive's termination by the Company without Cause or by the Executive for Good Reason under Section 6.2 of this Agreement, any unvested portion of the 1998 Performance Options shall become immediately and fully vested and exercisable to the extent the stock price targets in Paragraph 2.(a)(i)-(vi) above are met on the termination date or as of the immediately preceding six (6) month anniversary of the date of grant, or as of the six (6) month anniversary of the grant date following such termination. Any shares subject to the 1998 Performance Options that become vested and exercisable in accordance with the foregoing and any previously vested but unexercised 1998 Performance Options shall remain exercisable from the date of such termination of employment until the date that is one (1) year following the termination date, provided, however, that if the Average Trading Price as of the date of termination exceeds the Company's IPO initial offering price by at least thirty (30) percent, the vested and unexercised 1998 Performance Options shall remain exercisable until the date that is two (2) years following the termination date. 18 19 (e) Due to Death or Disability. If the Company has not effected an IPO as of the date of the Executive's termination due to death or Disability under Section 6.3 of this Agreement, as of the date of such termination of the Executive any unvested portion of the 1998 Performance Options shall become immediately and fully vested and exercisable. If the Company has effected an IPO as of such termination date, any unvested portion of the 1998 Performance Options shall become vested and exercisable to the extent the stock price targets in Paragraph 2.(a)(i)-(vi) above are met on the termination date or as of the immediately preceding six (6) month anniversary of the date of grant, or as of the six (6) month anniversary of the grant date following such termination. Any shares subject to the 1998 Performance Options that become vested and exercisable in accordance with the foregoing and any previously vested but unexercised 1998 Performance Options shall remain exercisable from the date of such termination of employment until the date that is one (1) year following the termination date, provided, however, that if the Average Trading Price as of the date of termination exceeds the Company's IPO initial offering price by at least thirty (30) percent, the vested and unexercised 1998 Performance Options shall remain exercisable until the date that is two (2) years following the termination date. (f) Termination Without Good Reason. Regardless of whether the Company has or has not effected an IPO as of the date of any voluntary termination of employment with the Company by the Executive other than due to death or Disability and other than for Good Reason, as of the date of such termination by the Executive any unvested portion of the 1998 Performance Options shall terminate immediately and shall be of no further force or effect. Any previously vested but unexercised 1998 Performance Options shall remain exercisable from the date of such termination of employment until the date that is one (1) year following the termination date, provided, however, that if the Average Trading Price as of the date of termination exceeds the Company's IPO initial offering price by at least thirty (30) percent, the vested and unexercised 1998 Performance Options shall remain exercisable until the date that is two (2) years following the termination date. (g) Change of Control. In the event of a Change of Control while the Executive is employed by the Company, or the Executive's employment is terminated by the Company without Cause or by the Executive for Good Reason within six (6) months prior to a Change of Control during the Term, any otherwise unvested installment of the 1998 Performance Options shall immediately vest and become exercisable to the extent (i) the installment meets the applicable stock price targets in Paragraph 2.(a)(i)-(vi) above based on the Average Trading Price at the time of or within six (6) months of the Change of Control but without regard to any anniversary of the installment's grant date if the Company has effected an IPO as of the date of the Change of Control; or (ii) the fair market value (as determined by an independent appraiser designated by the Company) per share of the Company's common stock exceeds the Exercise Price of the installment by an amount equal to or greater than the applicable dollar amount for the installment as set forth in 2.(a)(i)-(vi) above if the Company has not effected an IPO as of the date of the Change of Control. Any shares subject to the 1998 Performance Options that become vested and exercisable in accordance with the foregoing and any previously vested but unexercised 1998 Performance Options shall be at the Executive's option either cashed out based on a value per share determined in accordance with (i) or (ii) of this clause (g), as applicable, or remain exercisable from the date of such Change of Control until the date that is one (1) year following the Change of Control date, provided, however, that if the Average Trading Price as of the date of the Change of Control exceeds the Company's IPO initial offering price by at least thirty (30) percent, the vested and unexercised 1998 Performance Options shall remain exercisable until the date that is two (2) years following the Change of Control date. 19 EX-10.9 4 MARKETING AGREEMENT DATED JULY 22, 1996 1 EXHIBIT 10.9 MARKETING AGREEMENT between AUTO-BY-TEL ACCEPTANCE CORPORATION on the one hand, and AIU INSURANCE COMPANY AMERICAN INTERNATIONAL SOUTH INSURANCE COMPANY AMERICAN HOME ASSURANCE COMPANY AMERICAN INTERNATIONAL INSURANCE COMPANY AMERICAN INTERNATIONAL INSURANCE COMPANY OF CALIFORNIA, INC. ILLINOIS NATIONAL INSURANCE COMPANY MINNESOTA INSURANCE COMPANY NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA and AUTO-BY-TEL, INC. as Guarantor of the obligations of AUTO-BY-TEL ACCEPTANCE CORPORATION hereunder 2
TABLE OF CONTENTS Page ---- 1. REPRESENTATIONS AND WARRANTIES................................................2 Section 1.1 Representations and Warranties of ABTAC and ABT.................2 Section 1.2 Representations and Warranties of AIC...........................2 2. MARKETING ARRANGEMENT.........................................................3 Section 2.1 Phases of Marketing Arrangement.................................3 Section 2.2 Preparation of Marketing Materials..............................4 Section 2.3 Ownership of Marketing Materials................................4 Section 2.4 Development Costs...............................................4 3. COVENANTS, DUTIES AND RIGHTS OF AIC...........................................5 Section 3.1 Regulatory Authorizations.......................................5 Section 3.2 Initial Product Offering........................................5 Section 3.3 Low Cost Products...............................................5 Section 3.4 Reservation of Rights...........................................5 Section 3.5 Toll Free Number................................................5 Section 3.6 Cross-Promotion.................................................5 Section 3.7 Payment of Development Costs....................................6 Section 3.8 Books and Records: Auditing.....................................6 4. COVENANTS, DUTIES AND RIGHTS OF ABTAC AND ABT.................................6 Section 4.1 Insurance Marketing Materials...................................6 Section 4.2 Relationships with ABT Friends..................................6 Section 4.3 Hyperlink Development Costs.....................................7 Section 4.4 Cross-Promotion.................................................7 Section 4.5 Guarantee.......................................................7 Section 4.6 Additional Services.............................................7 5. [RESERVED]....................................................................7 6. EXCLUSIVITY...................................................................7 Section 6.1 Exclusivity.....................................................7 Section 6.2 Exception From Exclusivity......................................8 Section 6.3 AIC Marks.......................................................8 Section 6.4 ABT Marks.......................................................8 7. FIRST REFUSAL.................................................................8 Section 7.1 New Product.....................................................8 Section 7.2 Right of First Refusal..........................................8 8. COMPENSATION..................................................................8
i 3
Page ---- 9. POLICIES.....................................................................9 Section 9.1 Product Control................................................9 Section 9.2 Underwriting and Administration................................9 Section 9.3 Policy and Quote Records.......................................9 Section 9.4 Billing........................................................9 Section 9.5 Authority as Insurance Provider................................9 Section 9.6 Privacy........................................................10 Section 9.7 Fair Credit Reporting..........................................10 10. CONFIDENTIALITY..............................................................10 Section 10.1 Confidential Information.......................................10 Section 10.2 Return of Confidential Information.............................10 Section 10.3 Survival of Confidentiality....................................10 11. USE OF NAMES/TRADEMARKS......................................................11 Section 11.1 Limitation on Use of AIC Marks.................................11 Section 11.2 Limitation on Use of ABT Marks.................................11 Section 11.3 Low Cost Logo..................................................11 Section 11.4 Use of User Data...............................................11 12. INDEPENDENT CONTRACTOR.......................................................11 Section 12.1 No Joint Venture...............................................11 Section 12.2 Limitations on Authority.......................................11 13. [RESERVED]...................................................................12 14. TERM AND TERMINATION.........................................................12 Section 14.1 Renewal........................................................12 Section 14.2 Cure Period....................................................12 Section 14.3 Termination Upon Insolvency....................................12 Section 14.4 Termination Upon Use of Marks..................................12 Section 14.5 Responsibilities Upon Termination..............................12 15. INDEMNIFICATION..............................................................13 16. NOTICES......................................................................13 Section 16.1 Legal and Regulatory Proceedings...............................13 Section 16.2 Addresses, etc.................................................13 17. MISCELLANEOUS................................................................13 Section 17.1 Choice of Law, Venue, Jurisdiction.............................13 Section 17.2 Assignment.....................................................13 Section 17.3 Modification; Waiver...........................................14
ii 4
Page ---- Section 17.4 Entire Agreement...............................................14 Section 17.5 Remedies.......................................................14 Section 17.6 References and Section Headings................................14 Section 17.7 Severability...................................................14 Section 17.8 Signatures and Recording.......................................14
-iii- 5 MARKETING AGREEMENT THIS AGREEMENT is made as of July 22, 1996, between AUTO-BY-TEL ACCEPTANCE CORPORATION ("ABTAC") a Delaware corporation, having its offices at 2711 E. Coast Highway, Suite 203, Corona Del Mar, California 92625, on the one hand, and AIU INSURANCE COMPANY, AMERICAN INTERNATIONAL SOUTH INSURANCE COMPANY, AMERICAN HOME ASSURANCE COMPANY, AMERICAN INTERNATIONAL INSURANCE COMPANY, AMERICAN INTERNATIONAL INSURANCE COMPANY OF CALIFORNIA, INC., ILLINOIS NATIONAL INSURANCE COMPANY, MINNESOTA INSURANCE COMPANY, NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA and THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA (collectively "AIC"), all member companies of American International Group, Inc. having offices at 505 Carr Road, Wilmington, Delaware 19809, on the other hand and AUTO-BY-TEL, INC. ("ABT") a Delaware corporation, having its offices at 2711 E. Coast Highway, Suite 203, Corona Del Mar, California 92625, in its capacity as Guarantor of ABTAC's obligations hereunder ("ABT"). W I T N E S S E T H: WHEREAS, AIC underwrites private passenger automobile, homeowner/tenant/condo, and personal umbrella liability insurance ("Products"), as well as (directly or through its affiliates) the products ("Additional Products") enumerated on Schedule A hereto and has experience in providing direct response marketing; and WHEREAS, AIC wishes to market Products, but primarily private passenger automobile insurance, to users of ABT's Internet Website and those Websites of its contractual partners which are approved by AIC from time to time ("Users"); and WHEREAS, AIC and ABTAC share a common philosophy on delivering a low-cost, high-quality program to Users; and WHEREAS, AIG Marketing, Inc. ("AIGM") acts as a marketing group for and on behalf of AIC and in such capacity has negotiated this Agreement on behalf of AIC and will provide such services and compensation as set forth herein; and WHEREAS, ABT is engaged in the marketing of automobile pricing and automobile buying services to Users via the Internet and ABTAC is a wholly-owned subsidiary of ABT established to, among other things, enter into arrangements pursuant to which Users are afforded the opportunity to enter into transactions they may find beneficial; and WHEREAS, ABT, through ABTAC, is desirous of authorizing and providing AIC access to its Internet Server ("Server"); and WHEREAS, AIC is desirous of securing access to the Server for the publication, display and exhibition of AIC's direct response sales materials to ABT Users. NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, ABT, ABTAC and AIC agree as follows: 6 1. REPRESENTATIONS AND WARRANTIES. Section 1.1 Representations and Warranties of ABTAC and ABT. Each of ABTAC and ABT, as the case may be, hereby makes the following representations and warranties to AIC: (a) Each of ABT and ABTAC has been duly organized and is validly existing as a corporation under the laws of the state of Delaware and each is duly licensed where required as a "Licensee" or is otherwise qualified in each state in which it transacts business and is not in default of such state's applicable laws, rules and regulations, except where the failure to so qualify or such default would not have a material adverse effect on its ability to conduct its business or to perform its obligations under this Agreement. (b) Each of ABT and ABTAC has the requisite power and authority and legal right to execute and deliver this Agreement, engage in the transactions contemplated by this Agreement, and perform and observe those terms and conditions of this Agreement to be performed or observed by it hereunder. The person or persons signatory to this Agreement and any document executed pursuant to it on behalf of each of ABT and ABTAC have full power and authority to bind either ABT or ABTAC, as the case may be. The execution, delivery and performance of this Agreement, and the performance by each of ABT and ABTAC of all transactions contemplated herein and therein, have been duly authorized by all necessary and appropriate corporate action on the part of ABT and ABTAC, as the case may be. (c) This Agreement has been duly authorized and executed by each of ABT and ABTAC and is valid, binding and enforceable against each of them in accordance with its terms, except that such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws (whether statutory, regulatory or decisional) now or hereafter in effect relating to creditors' rights generally, and the execution, delivery and performance by each of ABT and ABTAC of this Agreement do not conflict with any term or provision of (i) its certificates of incorporation or bylaws, (ii) any law, rule, regulation, order, judgment, writ, injunction or decree applicable to ABTAC of any court, regulatory body, administrative agency or governmental body having jurisdiction over either ABT or ABTAC or (iii) any agreement to which either ABT or ABTAC is a party or by which its property is bound. (d) No consent, approval, authorization or order of, registration or filing with, or notice to any governmental authority or court is required under applicable law in connection with the execution, delivery and performance by either ABT or ABTAC of this Agreement. (e) There is no action, proceeding or investigation pending or, to the best knowledge of both ABT and ABTAC, threatened against either of them before any court, administrative agency or other tribunal (i) asserting the invalidity of this Agreement, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement, or (iii) which could reasonably be expected to materially and adversely affect the performance by either of them of their respective obligations under, or the validity or enforceability of, this Agreement. (f) ABTAC or ABT, as the case may be, has all regulatory approvals, authorizations, licenses, permits and other permissions, consents and authorities whatsoever, as needed to operate the ABT Website. (g) ABTAC or ABT, as the case may be, warrants that it has the legal and valid right to use any registered or unregistered trademark, tradename, service mark, logo, emblem or other proprietary designation, or any variations, derivatives and modifications thereof, used by it in the Insurance Marketing Materials as defined hereafter (the "ABT Marks") Section 1.2 Representations and Warranties of AIC. AIC hereby makes the following representations and warranties, to ABTAC: 2 7 (a) AIC is duly licensed where and as required in each state in which it transacts business and is not in default of such state's applicable laws, rules and regulations, except where such default would not have a material adverse effect on the ability of AIC to conduct its business or to perform its obligations under this Agreement. (b) AIC has the requisite power and authority and legal right to execute and deliver, engage in the transactions contemplated by, and perform and observe the terms and conditions of, this Agreement. The person or persons signatory to this Agreement and any document executed pursuant to it on behalf of AIC have full power and authority to bind AIC. The execution, delivery and performance of this Agreement, and the performance by AIC of all transactions contemplated herein and therein, have been duly authorized by all necessary and appropriate and corporate action on the part of AIC. (c) This Agreement has been duly authorized and executed by AIC and is valid, binding and enforceable against AIC in accordance with its terms, except that such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws (whether statutory, regulatory or decisional) now or hereafter in effect relating to creditors' rights generally, and the execution, delivery and performance by AIC of this Agreement do not conflict with any term or provision of the certificate of incorporation or bylaws of AIC, or any law, rule, regulation, order, judgment, writ, injunction or decree applicable to AIC of any court, regulatory body, administrative agency or governmental body having jurisdiction over AIC. (d) No consent, approval, authorization or order of, registration or filing with, or notice to any governmental authority or court is required under applicable law in connection with the execution, delivery and performance by AIC of this Agreement. (e) There is no action, proceeding or investigation pending or, to the best knowledge of AIC, threatened against it before any court, administrative agency or other tribunal (i) asserting the invalidity of this Agreement, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement, or (iii) which could reasonably be expected to materially and adversely affect the performance by AIC of its obligations under, or the validity or enforceability of, this Agreement. (f) AIC warrants that it has all regulatory approvals, authorizations, licenses, permits and other permissions, consents and authorities whatsoever, as needed (i) to offer and sell the Products in each of the states (except for New Jersey, Massachusetts, North Carolina, South Carolina and New Hampshire (the "Excepted States")), territories and the District of Columbia of the United States (the "Territory") and to otherwise perform its obligations under this Agreement, and (ii) to use any Insurance Marketing Materials (as defined in Section 2.2 of this Agreement) developed by AIC, or provided for inclusion in any Insurance Marketing Materials developed jointly with ABTAC. (g) AIC warrants that it has the legal and valid right to use any registered or unregistered trademark, tradename, service mark, logo, emblem or other proprietary designation, or any variations, derivatives and modifications thereof, used by it in the Insurance Marketing Materials as defined hereafter (the "AIC Marks"). 2. MARKETING ARRANGEMENT. Section 2.1 Phases of Marketing Arrangement. ABTAC and AIC shall cooperate to provide the means for Users interested in the Products to establish contact with AIC and purchase Products in three phases as follows: (a) "'Phase 1' - Toll Free Telephone Marketing" Users accessing the ABT Website shall be able to click on an icon and access another page at the ABT Website containing information about the Products as well as a toll free telephone number. Users dialing the toll free number will be connected to AIC 3 8 employees who shall provide further information about the Products and take User information in order to prepare a request for quote (an "RFQ"). AIC will evaluate the RFQs for which they have received sufficient User information (either on the first User call or after subsequent contact) and quote qualified Users prices for the requested Products. Phase 1 shall commence approximately 30 days from the date of this Agreement and end when AIC and ABTAC agree that Phase 2 shall commence. (b) "'Phase 2' - Electronic File Transfer" Users accessing the ABT Website shall be able to click on an icon and access another page at the ABT Website containing information about the Products as well as an RFQ which the User can fill out and submit electronically. The ABT Website will forward the RFQ files electronically to AIC. Upon receipt of the RFQ files, AIC employees shall evaluate the RFQs for which they have received sufficient User information (either at first or after subsequent contact) and quote any qualified User prices for the requested Products. Phase 2 shall commence on such date as AIC and ABTAC agree (cooperatively and in good faith) which date is expected to be approximately 60 days from the date of the commencement of Phase 1 implementation. Phase 2 shall end when AIC and ABTAC agree that Phase 3 shall commence. (c) "'Phase 3' - Internet Hyperlink" Users accessing the ABT Website shall be able to click on an icon and be hyperlinked to an AIC Website containing information about the Products as well as an insurance RFQ which the User can fill out and submit electronically. The AIC Website will evaluate the RFQ file in real time (subject to System capabilities) and, if satisfactory (either at first or after subsequent contact), will quote any qualified User prices for the requested Products. Phase 3 shall commence on such date as AIC and ABTAC agree (cooperatively and in good faith) which date is expected to be prior to June 1, 1997. Section 2.2 Preparation of Marketing Materials. (a) AIC and ABTAC shall cooperate to prepare and produce (in each Phase of development) the Web page or pages describing the Products on the ABT Website (the "Insurance info Pages"), the Phase 2 ABT Website request for quote and electronic transfer mechanism, the Phase 3 hyperlink and AIC Website request for quote, and all other marketing materials (the "Collateral Materials") to be used to market and advertise the Products or the Insurance Info Pages (the Insurance Info Pages and the Other Materials, collectively, the "Insurance Marketing Materials"). (a) The content and form of the Insurance Marketing Materials must be approved in writing by both AIC and ABTAC prior to use. Any modification in any Insurance Marketing Materials shall be submitted by the party proposing the modification to the other party in writing for approval. Unless the requested modification is in any Insurance Marketing Material which is subject to any filing or notice requirement with any governmental entity, which materials are under the sole control of AIC, the party receiving such submission shall preliminarily respond to the submitting party within two (2) business days of receipt of such submission and shall deliver its final approval or disapproval within five (5) business days of receipt of such submission. Approval of requested modifications in Insurance Marketing Materials shall not be unreasonably withheld or delayed. ABTAC acknowledges that any change in any Insurance Marketing Materials subject to any filing or notice requirement with any governmental entity may take considerable time to secure the required approvals or to make the required filings. AIC acknowledges that the ABT Website may (and is likely to) change from time-to-time in response to, among other things, new display and/or hyperlink technologies, Internet server consolidation or congestion, and changes in Internet providers. Section 2.3 Ownership of Marketing Materials. Insurance Marketing Materials shall be owned by ABT if provided by ABT, AIC if provided by AIC, and by AIC if jointly produced. Ownership rights with respect to the AIC Marks and the ABT Marks shall not be affected by this Section 2.3. Section 2.4 Development Costs. AIC shall pay all reasonable out-of-pocket costs for the development of the Insurance Marketing Materials; provided, however, that the parties hereto agree that AIC's obligations to pay for costs related to Phase I and Phase 2 shall not exceed in the aggregate fifty thousand ($50,000) dollars. 4 9 3. COVENANTS, DUTIES AND RIGHTS OF AIC. Section 3.1 Regulatory Authorizations. AIC shall, at its own cost and expense, secure and maintain all regulatory approvals, authorizations, licenses, permits and other permissions, consents and authorities whatsoever, as needed to offer and sell the Products in the Territory ("Insurance Approval"). AIC shall use its best efforts to either (i) secure Insurance Approval as needed to offer and sell the Products in the Excepted States and the provinces of Canada, or (ii) to establish relationships with insurance producers or underwriters in the Excepted States and the provinces of Canada which will allow the offering and sale of Products in such jurisdictions in a manner which, as closely as possible, mirrors the offering and sale of Products in the Territory. AIC shall give ABTAC written notice promptly upon securing Insurance Approval in any Excepted State or province of Canada and thereafter for all purposes such jurisdiction shall be considered part of the Territory. AIC shall be responsible for all aspects of any relationship established pursuant to clause (ii) of the second sentence of this Section 3.1, and all Products sold pursuant to any such relationship shall, for all purposes of this Agreement, be considered Products sold within the Territory. Section 3.2 Initial Product Offering. AIC shall initially offer only automobile insurance, but shall use its best efforts to offer all Products by June, 1997. In addition, AIC will facilitate the development of plans to market those Additional Products through marketing on the ABT Website, either directly, or through relationships between ABTAC and AIC affiliates offering such products, which such relationships shall be facilitated and established in accordance with Section 3.6 of this Agreement. Section 3.3 Low Cost Products. AIC shall offer low-cost, high-quality Products to qualified Users. AIC shall not offer insurance products similar to the Products at prices lower than those quoted for the Products to qualified Users except through distribution channels with lower distribution and/or acquisition costs to AIC. For purposes of this Section 3.3, the similarity of the Products shall be determined on the basis of the coverage terms, limitations and conditions and the price levels shall be determined on the basis of persons of like underwriting profiles seeking similar insurance products. Section 3.4 Reservation of Rights. (a) AIC reserves the right to suspend, restrict or modify the offer and sale of the Products to accommodate regulations; provided, however, that AIC shall use its best efforts to limit such suspension, restriction or modification to the smallest scope possible (in both qualitative and temporal terms) to enable ABTAC to realize the full expectancy of this Agreement. (b) AIC reserves the right to use the services of AIGM for various marketing, servicing and administrative functions under this Agreement; provided, however, that AIC shall remain responsible at all times for its obligations under this Agreement. Section 3.5 Toll Free Number. AIC shall secure and maintain at least one toll free telephone number for use in Phase 1. AIC shall (i) inform ABTAC of such number, (ii) use its best efforts not to change such number, and (iii) devote sufficient numbers of its trained employees to the answering of such number so that Users dialing the number have to wait, on average, no more than three minutes to be connected to an employee who will take the User's RFQ and provide any requested information. From the commencement of Phase 1, the toll free number shall be so staffed no less than 12 hours per day on weekdays and six (6) hours per day on Saturdays. AIC acknowledges that ABTAC believes that the Internet is utilized most heavily during non-business hours and on weekends, and therefore agrees that it shall perform test marketing of expanded hours for the staffing of the toll free number. Section 3.6 Cross-Promotion. AIC shall promote and advertise the ABT Website on the Website of AIGM, and shall use its best efforts to promote and advertise the ABT Website on the Websites of all AIC corporate affiliates and all AIC affinity partners (collectively, the "AIC Friends") and to promote recognition and awareness of the ABT Website via ongoing public relations efforts. AIC shall use its best efforts to secure the cooperation of the AIC Friends in ABTAC's development and implementation of hyperlinks between the Websites of the AIC Friends, on the one hand, and the ABT Website, on the other. AIC agrees to facilitate the development of relationships between AIC's affiliates and ABTAC with respect to the marketing of 5 10 Additional Products or any other personal or commercial insurance products to Users. Any compensation to be paid to ABTAC by the AIC affiliate offering such products shall be mutually agreed upon by ABTAC and the related AIC affiliate. Section 3.7 Payment of Development Costs. (a) AIC shall promptly, and in any event, within 30 business days, pay ABTAC for any reasonable out-of-pocket costs in connection with the development of the hyperlinks contemplated by Phase 3 and by Section 4.3 of this Agreement. (b) AIC shall, subject to the reimbursement limit set forth in Section 2.4, promptly, and in any event, within 30 business days, pay ABTAC for any reasonable out-of-pocket costs in connection with the development of the electronic transmission mechanism contemplated by Phase 2. Section 3.8 Books and Records: Auditing. (a) AIC shall keep complete and accurate records of all of its activities under this Agreement at the address specified in Section 16.2 of this Agreement. AIC shall, no later than the 30th day of each month, deliver to ABTAC (i) the amounts to which ABTAC is entitled pursuant to Section 8 of this Agreement, and (ii) a report setting forth the amounts to be paid to ABTAC hereunder, accompanied by detail sufficient to permit ABTAC to determine the basis of the computation and the accuracy of the amount, together with a list of all Users of ABT's Website which have contacted AIC through the toll free number provided on ABT's Website and such other information as ABTAC shall reasonably request from time to time in order to monitor the performance of this Agreement. Subject to the provisions of the Insurance Information and Privacy Protection Model Act, as enacted in various states (as so enacted, the "Privacy Act"), all records maintained by AIC related to this Agreement shall be open to inspection and copying by ABTAC's employees, agents, attorneys, accountants or other authorized representatives at reasonable times during normal business hours. (b) ABTAC may also appoint public accountants of its choice, and at its sole expense, for the purpose of auditing AIC's performance of its obligations under this Agreement and AIC agrees to grant such accountants access to all records necessary to determine the compliance of AIC with the compensation provisions of this Agreement. If the results of such audit reveal a discrepancy between the amounts paid by AIC hereunder and the amounts which should have been paid hereunder, then the appropriate payments shall be made (i) if to ABTAC, immediately, and (ii) if to AIC, by the withholding of 1/12 of such amount from the payments to be made to ABTAC over the succeeding twelve months. If the discrepancy is in ABTAC's favor and exceeds $100,000, then AIC shall reimburse ABTAC for the full cost of the audit. 4. COVENANTS, DUTIES AND RIGHTS OF ABTAC AND ABT. Section 4.1 Insurance Marketing Materials. ABTAC shall maintain the Insurance Marketing Materials (as available) at the ABT Website. Section 4.2 Relationships with ABT Friends. ABT and ABTAC shall use best efforts to establish and maintain relationships with major automobile-related products and service providers on the Internet (such entities with which ABT or ABTAC has established such relationships, the "ABT Friends") such as, among others, Edmund's, Microsoft, Auto-Site and Kelly Blue Book which relationships may include toll free "800" numbers and/or hyperlinks with the Websites of the ABT Friends to the ABT Website allowing users at ABT Friends' Websites to link to the ABT Website and view the Insurance Marketing Materials and/or hyperlinks between the Websites of those ABT Friends approved in advance by AIC with the Website of AIGM. If ABTAC proposes to establish a hyperlink between the Website of AIGM and that of any ABT Friend, it shall submit such proposal to AIC in advance for approval. AIC shall preliminarily respond to ABTAC within two (2) business days of receipt of such submission and shall deliver its final approval or disapproval within five (5) business days of receipt of such submission. Approval of such proposed hyperlinks shall not be unreasonably withheld. AIC and ABTAC agree that (i) any compensation to be paid to any ABT Friends in connection with any relationship with respect to users at or originating at their Websites shall be solely the responsibility of ABTAC and (ii) any such users shall be considered Users for all purposes under this Agreement. 6 11 Section 4.3 Hyperlink Development Costs. (a) ABTAC shall use its best efforts to develop and implement the electronic transfer mechanism necessary for Phase 2 and the hyperlink necessary for Phase 3. (b) ABTAC shall use its best efforts to develop and implement hyperlinks between the Websites of the AIC Friends and that of ABT to allow users of the Websites of the AIC Friends to link to the ABT Website. (c) ABTAC shall, no less frequently than monthly and no more frequently than weekly (and in connection with the electronic transfer mechanism necessary for Phase 2, subject to the reimbursement limit set forth in Section 2.4), submit to AIC for reimbursement ABTAC's out-of-pocket expenses incurred in connection with this Section 4.3, such submission to be accompanied by detail sufficient to permit AIC to determine the basis of the computation and the accuracy of the amount claimed. Such reimbursement shall be made by AIC within 30 days of receipt of the related request. Section 4.4 Cross-Promotion. ABTAC shall promote and advertise the ABT Website through Internet search engines and other public mass media and to promote recognition and awareness of the ABT Website via ongoing public relations efforts. Section 4.5 Guarantee. ABT hereby unconditionally and irrevocably guarantees to AIC, its successors, endorsees and assigns, the performance when due of all present and future obligations and liabilities of all kinds of ABTAC arising out of or in connection with this Agreement, whether due or to become due, secured or unsecured, absolute or contingent, joint or several ("Obligations"). The Guarantor agrees that AIC and ABTAC may mutually agree to modify the Obligations or any agreement between AIC and ABTAC without in any way impairing or affecting this Guarantee. Section 4.6 Additional Services. ABTAC hereby agrees that it shall provide AIC, upon request of AIC, the following additional services: (a) Consulting services concerning marketing of automobile insurance to ABT Users; (b) Data concerning persons requesting the Phase 1 toll free number directly from ABT corporate offices; (c) E-Mail monitoring and consulting service in respect of and during Phase 3; (d) Hyperlink monitoring and consulting service in respect of and during Phase 3; (e) Access to officers of ABT for Internet marketing trend updates; and (f) Icon design consulting services for AIGM Website. 5. [RESERVED] 6. EXCLUSIVITY. Section 6.1 Exclusivity. (a) The parties hereto shall have an exclusive arrangement for the first 18 months of the Initial Term (as defined in Section 14.1 of this Agreement) (such first 18 months, the "Initial Exclusivity Period") whereby ABT and ABTAC, separately or together, shall not provide Website access to any other underwriter of Products and whereby AIC shall not market Products with any other Internet automobile buying program, automobile purchase assistance or financing program, automobile pricing service, vehicle information service or on-line service including, among others both existing and to be created or initiated, America On-Line, Microsoft, Prodigy, CompuServe and NetCom (collectively, "Internet Auto Providers"). The exclusivity of this Agreement shall automatically continue for a 12 month period beyond the Initial Exclusivity Period, and thereafter for successive 12 month periods, unless one party shall give the other party written 7 12 notice not less than 60 days prior to the end of the Initial Exclusivity Period or the then current 12 month exclusivity period, as the case may be, that the exclusivity shall end at the end of the Initial Exclusivity Period or the then current 12 month exclusivity period, as the case may be. (b) After the termination of the exclusivity of this Agreement, if either party uses the "Prohibited Marketing Term" ascribed to it in this clause (b), the other party shall have the right, but not the obligation, to terminate this Agreement upon 30 days written notice. With respect to AIC, the Prohibited Marketing Term shall be "[x] Low Cost Auto Insurance [y]" where "x" is the name of any Internet Auto Provider, and "y" is the name of AIC or any affiliate thereof or any variation thereon which conveys or links "x," "y" and the term Low Cost within any logo, service mark, trademark or icon. With respect to ABTAC or ABT, the Prohibited Marketing Term shall be "ABT Low Cost Auto Insurance [y]" where "y" is the name of any underwriter of Products except AIC or any affiliate thereof which conveys or links ABT or any affiliate thereof to "y" and the term Low Cost within any logo, service mark, trademark or icon. Section 6.2 Exception From Exclusivity. AIC's relationship with United Buying Services, Inc., as in effect on the date of this Agreement, is exempt from the provisions of Section 6.1 of this Agreement. Section 6.3 AIC Marks. If, either in conjunction with a properly noticed termination of exclusivity or at any time after such notice is delivered, AIC intends to use any AIC Marks in conjunction with the offering or sale of Products through any Internet Auto Providers, then AIC must give ABTAC 30 days prior written notice thereof. Section 6.4 ABT Marks. If, either in conjunction with a properly noticed termination of exclusivity or at any time after such notice is delivered, ABT or ABTAC intends to use any ABT Marks in conjunction with the marketing of any Products outside of the terms of this Agreement, then ABTAC must give AIC 30 days prior written notice thereof. 7. FIRST REFUSAL. Section 7.1 New Product. In the event that either (i) an insurer or entity other than AIC or any of its affiliates (a "Competing Insurer") proposes a program to offer on the ABT Website any personal or commercial insurance other than the Products offered pursuant to this Agreement (a "New Product") or (ii) ABTAC wishes to market a New Product through a Competing Insurer, then ABTAC shall immediately give AIC written notice of such New Product and the related terms (the "New Product Notice"). Section 7.2 Right of First Refusal. ABTAC hereby grants to AIC the right of first refusal to offer such New Product to ABT's Users on terms no less favorable to ABTAC or ABT's Users than those proposed by the Competing Insurer. AIC shall be obligated to respond with its intent to ABTAC within 10 business days after its receipt of the New Product Notice. If AIC does not respond within such period, ABTAC may market such New Product on terms no less favorable than those set forth in the related New Product Notice. 8. COMPENSATION. During the term of this Agreement, for the services to be performed by ABTAC hereunder (except for those services under Section 4.6 hereof), ABTAC shall be paid compensation by AIC calculated in accordance with Schedule B attached hereto and made a part hereof. All payments due ABTAC hereunder shall be made within thirty (30) days after the end of the month they become due. For the services to be 8 13 performed by ABTAC under Section 4.6 hereof, ABTAC shall be paid by AIC compensation for each year (or portion thereof) by August 31 of such year in an amount to be determined in good faith discussions to be held between AIC and ABTAC based on the value of such services. 9. POLICIES. Section 9.1 Product Control. Subject to its obligations under Section 3.3 hereof to offer low-cost insurance products, AIC reserves the sole right and power, exercisable in good faith at any time, to change the terms, rates, conditions, or other provisions contained in the Products or to reject requests for quotes for the Products or to rescind or refuse to renew or cancel any policy issued hereunder, in accordance with AIC's underwriting standards, except as may be limited by the terms of the policies or by applicable law or regulation. AIC further reserves the sole right and power to change its underwriting standards for the Products in accordance with sound insurance practices consistent with AIC's normal business practices and subject to applicable insurance law and further to suspend, restrict or modify the offer and sale of the Products for regulatory reasons. AIC shall inform ABTAC in writing promptly upon its taking any action under this Section 9.1. In the event AIC suspends the offer and sale of Products (or so restricts or modifies such offer and sale so as to render the Products unavailable to the majority of Users previously qualified for such Products on the terms and conditions previously offered) in any jurisdiction or area within the Territory, it shall use its best efforts to make provision for the offer and sale by another underwriter of Products in such jurisdiction or area in a manner which minimizes the effect of such suspension upon the orderly marketing of the Products in such jurisdiction or area, and maximizes the expectancy of ABTAC under this Agreement. If AIC has not made such provision within 10 days of any such suspension, ABTAC shall be entitled to establish a relationship with another underwriter of Products in such jurisdiction or area, such relationship to be for a term not to exceed twelve months, and shall be entitled to make such agreements as necessary to secure such relationship, including the use of a Prohibited Marketing Term (in connection with the offering and sale of Products in such jurisdiction or area), and no aspect of such relationship or agreements shall give rise to any rights of AIC under this Agreement. Section 9.2 Underwriting and Administration. AIC shall, at its expense, provide all underwriting, policy issuance services, policyholder services, premium disbursement and accounting services, premium collection, claims adjustment, and all other administrative services required for policies issued pursuant to this Agreement. Section 9.3 Policy and Quote Records. All policy and quote records for the policies issued hereunder shall be the property of AIC. Policy records shall include but not be limited to all policy requests for quotes, policy declarations pages, policy underwriting files and policy claim files, or computer data files containing such information. Section 9.4 Billing. AIC shall be responsible for the billing and collection of insurance premiums from all Users who purchase insurance under this Agreement. Section 9.5 Authority as Insurance Provider. Nothing in this Agreement shall be construed to mean that either ABT or ABTAC is a broker or an agent, and in no event shall either ABT or ABTAC have any authority or represent itself as having authority other than as is specifically set forth in this Agreement. Without limiting the generality of the foregoing, neither ABT nor ABTAC shall do any of the following: (a) Attempt to or make, waive, alter or change any term, rate or condition stated in any AIC policy, contract or AIC approved form; bind coverage; or discharge any contract in the name of AIC. (b) Offer to pay or pay directly or indirectly any rebate of premiums or any other inducement not specified in the policy to any person. 9 14 (c) Transact business in contravention of the rules and regulations of an Insurance Department and/or other governmental authorities having jurisdiction of all subject matters embraced within this Agreement. Section 9.6 Privacy. (a) ABTAC recognizes that, in the performance of its obligations under this Agreement, if permitted by the Privacy Act and other applicable laws, AIC may disclose personal or privileged information about individuals collected or received in connection with insurance transactions. Since the disclosure of such information is protected by law, ABTAC agrees that it will not redisclose any such privileged information of which ABTAC has actual notice without the individual's written authorization, unless such disclosure is permitted by law. (b) ABT and ABTAC represents and warrants to AIC that neither ABT nor ABTAC shall use such information as is disclosed by AIC pursuant to Section 9.6(a) other than in connection with the marketing of a product or service. Section 9.7 Fair Credit Reporting. Nothing herein shall be construed to require or imply that AIC is required to provide User information to ABT or ABTAC in contravention of the Fair Credit Reporting Act (the "FCRA"). AIC is not a "consumer reporting agency" as defined in the FCRA. 10. CONFIDENTIALITY. Section 10.1 Confidential Information. In performing their obligations pursuant to this Agreement, the parties may be provided access to and receive disclosure of certain confidential and/or proprietary information about the other including but not limited to names of Users, information provided by Users to AIC for the purpose of obtaining an insurance quotation, names of policyholders, marketing philosophy and objectives, financial results, technological developments, computer system information (including information provided in connection with the development of the Phase 2 and Phase 3 applications and links), trade secrets, and other materials and information that such party considers confidential and/or proprietary ("Confidential Information"). Unless expressly provided otherwise in this Agreement, AIC, ABT and ABTAC agree not to give, sell, or in any way transfer, either directly or indirectly, Confidential Information to any person or organization for any purpose without the prior written approval of the other, except as may be required by law, rule or regulation (including any filings under any securities law) or court order. Notwithstanding anything to the contrary herein, AIC, ABT and ABTAC may use Confidential Information for market research purposes upon written consent from the other party, to the extent permissible by law. AIC, ABT and ABTAC promise to make best efforts to see that all parties including employees comply with this provision. These obligations as to confidentiality and nonuse shall survive the termination of this Agreement. Section 10.2 Return of Confidential Information. Except as otherwise herein provided, all Confidential Information furnished by one party to the other in connection with this Agreement is the exclusive property of that party and shall be returned to that party upon request or upon termination of this Agreement. Section 10.3 Survival of Confidentiality. All obligations and duties of the parties with respect to Confidential Information shall survive for five years after the termination of this Agreement. Confidential Information shall no longer be considered Confidential Information to the extent that such information (a) is developed by a party independently, without reference to any Confidential Information of the other party's; (b) is obtained from a third party authorized to disclose it; (c) becomes a part of the public domain without the fault of the disclosing party; (d) is released by the disclosing party to third parties without similar restrictions; or (e) is released from such restrictions by prior written agreement. 10 15 11. USE OF NAMES/TRADEMARKS. Section 11.1 Limitation on Use of AIC Marks. (a) ABTAC agrees that neither it nor ABT shall use the AIC Marks without AIC's prior written consent. (b) AIC hereby grants to ABT and ABTAC a limited license to use and reproduce any AIC Mark approved in accordance with Sections 2.2(b) and 11.1 (a) of this Agreement, in connection with the marketing arrangements set forth in this Agreement and for no other purpose, and hereby agrees to provide ABT and ABTAC, for the sole purpose of marketing the Products, acceptable copies of the appropriate AIC Marks for purposes of reproduction. (c) For so long as AIC or one of its affiliates has the right to use the mark "AIG," AIC shall permit ABTAC to use the term "Auto-By-Tel Low Cost Auto Insurance From AIG" in marketing the Products during the term of this Agreement; provided however that the permission granted hereby shall not diminish AIC's rights to approve the form and content of any Insurance Marketing Materials pursuant to Section 2.2(b) hereof. Section 11.2 Limitation on Use of ABT Marks. (a) AIC agrees that it shall not use the ABT Marks without ABTAC's prior written consent. (b) ABTAC hereby grants to AIC a limited license to use and reproduce any ABT Mark approved in accordance with Sections 2.2(b) and 11.2(a) of this Agreement, in connection with the marketing arrangements set forth in this Agreement and for no other purpose, and hereby agree to provide AIC, for the sole purpose of marketing the Products, acceptable copies of the appropriate ABT Marks for purposes of reproduction. Section 11.3 Low Cost Logo. The "Auto-By-Tel; Low Cost Auto Insurance Through [NAME OF PROVIDER]" logo, and all variations and derivatives shall remain the exclusive property of ABTAC; provided, however, that such logo shall not refer to AIC after the termination of this Agreement. Section 11.4 Use of User Data. Notwithstanding anything in this Agreement to the contrary, AIC shall give to ABT and ABTAC User information subject to Sections 9.6 and 9.7 which may be used by ABT and ABTAC in any lawful manner, including for solicitation of such Users for financial products marketed through the ABT Website, automobile pricing, purchasing, leasing and information services offered or marketed through the ABT Website and any affinity programs in which ABT or ABTAC may participate. The ownership interest in such User data shall be held by AIC. Neither ABT nor ABTAC is an agent for purposes of collection of insurance data. 12. INDEPENDENT CONTRACTOR. Section 12.1 No Joint Venture. Nothing contained in this Agreement creates or is intended to create the relationship of a joint venture, partnership, agency or association between AIC and ABTAC. Nothing in this Agreement shall be construed to mean that either ABT or ABTAC is a broker or an agent, and in no event may ABTAC bind AIC to any contract of insurance or vary the terms of any such contract, nor may AIC bind ABT or ABTAC to any relationship or vary the terms of any agreement between ABT or ABTAC and any third party. Section 12.2 Limitations on Authority. Each of AIC, ABT and ABTAC shall have only those powers enumerated herein and none other shall be implied. Without limiting the generality of the foregoing, neither AIC, ABT nor ABTAC shall do any of the following: (a) Make, accept or endorse notes, endorse checks payable to the other party, or otherwise incur any expense or liability on behalf of the other party. (b) Waive a forfeiture. 11 16 (c) Extend the time for the payment of monies due the other party beyond the time agreed to by the other party. (d) Collect money for the other party. (e) Institute, prosecute, or maintain any legal proceedings in connection with any matter pertaining to the other party's business, unless otherwise approved in writing by the other party, nor accept legal process on behalf of the other party. (f) Hold itself out as an authorized agent of the other party in order to deal with any regulatory authority or file any contract or policy on behalf of the other party or contact or discuss any matter with any regulatory authority on behalf of the other party without written approval of that party. 13. [RESERVED] 14. TERM AND TERMINATION. Section 14.1 Renewal. This Agreement shall remain in effect for a period of five (5) years from the effective date ("Initial Term"). This Agreement shall automatically renew for subsequent five-year terms ("Renewal Term") unless written notice is given by either party of its intention to terminate this Agreement at the expiration of the Initial Term or any Renewal Term, as the case may be, at least one hundred eighty (180) days prior to such expiration. This Agreement shall also terminate if required by governmental authority or court of law, but only insofar as this Agreement applies to such jurisdiction affected. Section 14.2 Cure Period. If any party shall be in breach of any material obligation under this Agreement and such breach shall remain uncured for a period of thirty (30) days after written notice thereof from the other party (or, if such breach is curable and requires more than thirty (30) days to cure, if such cure is not commenced within thirty (30) days and thereafter diligently prosecuted), then the other party may, by written notice sent, cancel this Agreement upon 30 days after delivery of such notice. Non-payment of amounts due under this Agreement shall be deemed to be a breach of a material obligation hereunder, but institution of suit for payment of amounts due under this Agreement shall not be deemed to be a cancellation hereunder. This Section 14.2 shall not apply to termination pursuant to Section 14.3 or Section 14.4 of this Agreement. Section 14.3 Termination Upon Insolvency. At any party's option, and upon written notice of exercise of the option, this Agreement terminates upon the voluntary or involuntary bankruptcy or insolvency of a party, the voluntary or involuntary dissolution or liquidation of a party, the admission in writing by a party of its inability to pay its debts as they mature, or the assignment by a party for the benefit of creditors. Section 14.4 Termination Upon Use of Marks. If any party shall give notice to the other, under Section 6.1(b), then the Agreement shall terminate 30 days after receipt of such notice. Section 14.5 Responsibilities Upon Termination. The termination of this Agreement shall not terminate, affect, or impair any rights, obligations, or other liabilities of any party hereto which may accrue prior to such termination or which, under the terms of this Agreement, continue after the termination. After termination of this Agreement, coverage under the insurance policies issued hereunder shall continue pursuant to their terms. Ownership of all renewals written after termination of this Agreement shall at all times remain with AIC. Each party shall return all property and information rightfully belonging to the other party which is in its possession at the time of termination except as otherwise provided herein. The provisions of this Paragraph 14.5 shall survive termination of this Agreement. 12 17 15. INDEMNIFICATION. Each party shall hold the other (and its directors, officers, employees and authorized agents) harmless from and against any damages, liabilities, claims, charges, reasonable attorneys' fees, or other costs arising from or in connection with any claim, action, or proceeding relating to or arising from (a) any grossly negligent act or omission or any intentional misconduct relating to the subject matter of this Agreement or (b) the failure to comply with the terms of this Agreement. The provisions of this Section 15 shall survive the termination of this Agreement. 16. NOTICES. Section 16.1 Legal and Regulatory Proceedings. Each party shall promptly notify the others of any legal or regulatory proceeding or threat of legal or regulatory proceeding with respect to any matters which are the subject of this Agreement, except AIC shall have no obligation to notify ABTAC of legal proceedings involving claims under the Products. Section 16.2 Addresses, etc. All notices pursuant to this Agreement shall be by facsimile transmission, by personal delivery, or by registered or certified mail, return receipt requested, to the addresses of the parties listed below, or such other address as any party listed below shall specify in writing to the others in a notice conforming to this Section 16.2: If to AIC: AIG MARKETING, INC. 505 Carr Road Wilmington, DE 19809 Attention: J. Ernest Hansen, President, or his successor If to ABTAC: AUTO-BY-TEL ACCEPTANCE CORPORATION 2711 E. Coast Highway, Suite 203 Corona Del Mar, CA 92625 Attention: Peter Ellis, President, or his successor with copies to R.S. GRIMES & CO. 152 West 57th Street, 24th Floor New York, NY 10019 Attention: Robert S. Grimes, President, or his successor 17. MISCELLANEOUS. Section 17.1 Choice of Law, Venue, Jurisdiction. This Agreement shall be governed by the internal laws of the State of New York. The parties agree that any action in law or in equity brought under this Agreement shall be brought only in a state or federal court seated in New York County, New York, and each party hereto consents to the exclusive jurisdiction of such court and venue of such action. 13 18 Section 17.2 Assignment. Without the prior written consent of the other party, which consent shall not be unreasonably withheld, this Agreement may not be assigned in whole or in part by any party other than to an affiliate and subsidiary (provided (A) such affiliate or subsidiary (i) shall agree in writing to be bound by the terms of this Agreement and (ii) has a net worth immediately following the assignment equal to or greater than that of the assignor, and (B) the assignor gives written assurances that it will cause the assignee to perform as contained herein or the assignor will perform in the assignee's place). Notwithstanding the foregoing, ABTAC may assign this Agreement to ABT or any wholly owned subsidiary of ABT or ABTAC, provided, however, that the guarantee of ABT pursuant to Section 4.5 herein shall apply as to such subsidiary assignee in the same manner as it applied to ABTAC. Section 17.3 Modification; Waiver. This Agreement may only be revised and/or modified in a writing which must be executed by each of the parties to this Agreement. No other change, modification, addition, or deletion to any portion of this Agreement will be valid or binding upon any of them. Section 17.4 Entire Agreement. This Agreement constitutes the entire Agreement between the parties with respect to the subject matter contained herein and supersedes all oral or written negotiations of the parties. Section 17.5 Remedies. All remedies of any party are cumulative. Waiver by any party of any obligation of any other party does not constitute waiver of any future or other obligation of said party. Section 17.6 References and Section Headings. Any reference to the singular shall include reference to the plural and vice versa. Section headings are for description only and shall not be used to interpret this Agreement. Section 17.7 Severability. If any part, term, or provision of this Agreement shall be held void, illegal, or unenforceable, the validity of the remaining portions or provisions shall not be affected thereby. Section 17.8 Signatures and Recording. This Agreement shall not go into force until duly executed on behalf of ABTAC, ABT and AIC. Each party represents and warrants that each of the respective officers executing this Agreement on its behalf is duly authorized by its Board of Directors and is acting within the scope of his or her authority to bind said party under this Agreement. 14 19 IN WITNESS WHEREOF, the parties hereto have executed this Agreement below through their duly authorized officers as of the date first above written. AIU INSURANCE COMPANY AMERICAN INTERNATIONAL SOUTH INSURANCE COMPANY AMERICAN HOME ASSURANCE COMPANY AMERICAN INTERNATIONAL INSURANCE COMPANY AMERICAN INTERNATIONAL INSURANCE COMPANY OF CALIFORNIA, INC. ILLINOIS NATIONAL INSURANCE COMPANY MINNESOTA INSURANCE COMPANY NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA By: /s/ JOHN G. COLONA -------------------------------------- John G. Colona, Vice President AUTO-BY-TEL ACCEPTANCE CORPORATION By: -------------------------------------- Peter Ellis, President AUTO-BY-TEL, INC., as Guarantor By: -------------------------------------- Peter Ellis, President 15 20 IN WITNESS WHEREOF, the parties hereto have executed this Agreement below through their duly authorized officers as of the date first above written. AIU INSURANCE COMPANY AMERICAN INTERNATIONAL SOUTH INSURANCE COMPANY AMERICAN HOME ASSURANCE COMPANY AMERICAN INTERNATIONAL INSURANCE COMPANY AMERICAN INTERNATIONAL INSURANCE COMPANY OF CALIFORNIA, INC. ILLINOIS NATIONAL INSURANCE COMPANY MINNESOTA INSURANCE COMPANY NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA By: -------------------------------------- John G. Colona, Vice President AUTO-BY-TEL ACCEPTANCE CORPORATION By: /s/ PETER ELLIS -------------------------------------- Peter Ellis, President AUTO-BY-TEL, INC., as Guarantor By: /s/ PETER ELLIS -------------------------------------- Peter Ellis, President 15 21 [*] [*] Confidential Treatment Requested AMERICAN INTERNATIONAL COMPANIES c/o AIG Marketing, Inc. 505 Carr Road Wilmington, Delaware 19809 July 23, 1996 Auto-By-Tel, Inc. 2711 East Coast Highway Suite 203 Corona del Mar, California 92625 Attention: Mr. Peter Ellis, President - ---------- Re: Marketing Agreement between Auto-By-Tel Acceptance Corporation on the one hand, and AIU Insurance Company, American International South Insurance Company, American Home Assurance Company, American International Insurance Company, American International Insurance Company of California, Inc., Illinois National Insurance Company, Minnesota Insurance Company, National Union Fire Insurance Company of Pittsburgh, PA and The Insurance Company of the State of Pennsylvania on the other hand, and Auto-By-Tel, Inc. as Guarantor of the obligations of Auto-By-Tel Acceptance Corporation dated as of July 22, 1996 (the "Marketing Agreement") ---------------------------------------------------------------------- Gentlemen: Reference is made to Section 8 of the above-referenced Marketing Agreement. Capitalized terms used herein and in the attached Schedule A, and not defined herein or therein, shall have the meanings ascribed thereto in the Marketing Agreement. This will confirm our agreement that compensation to be paid for the services provided to AIC pursuant to Section 4.6 of the Marketing Agreement shall be calculated and paid in accordance with the attached Schedule A on or before August 31, 1997, and on each August 31st thereafter for as long as the Marketing Agreement is in effect. Please confirm that this represents our understanding with respect to the foregoing matter by executing a copy of this letter in the space provided below and returning to the undersigned. Best regards. Very truly yours, AIU INSURANCE COMPANY AMERICAN INTERNATIONAL SOUTH INSURANCE COMPANY AMERICAN HOME ASSURANCE COMPANY AMERICAN INTERNATIONAL INSURANCE COMPANY AMERICAN INTERNATIONAL INSURANCE COMPANY OF CALIFORNIA, INC. ILLINOIS NATIONAL INSURANCE COMPANY MINNESOTA INSURANCE COMPANY NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA By: /S/ JOHN G. COLONA ------------------- John G. Colona, Vice President 22 cc: Mr. Robert S. Grimes Robert S. Grimes & Company 152 West 57th Street 24th Floor New York, NY 10019 CONFIRMED AS OF JULY 24, 1996 AUTO-BY-TEL ACCEPTANCE CORP. By: /S/ PETER R. ELLIS ----------------------------------- Peter Ellis, President -2- SCHEDULE A In any calendar year in which collected premium with respect to all policies written in connection with the marketing arrangements exceeds five hundred thousand (500,000.00) dollars, and the loss ratio is less than or equal to the target loss ratio AIC shall pay ABTAC additional compensation, as set forth below, based upon statutory profit as determined by "losses" and "loss ratio" as defined below. Losses: that amount which with respect to claims with occurrence dates during any specified calendar year (hereinafter referred to as "Calendar Accident Year") is the total of: 1) all payments of such claims; 2) the amount of case reserves on such claims; 3) a reasonable (in light of AIC practices in its other similar portfolios) provision for future development of case reserves on such claims; 4) a reasonable (in light of AIC practices in its other similar portfolios) provision for payment of such claims incurred but not yet reported to the insurance company; 5) a reduction for salvage and subrogation payments, received or receivable, resulting from all claims; 6) the amount of loss adjustment expenses (the reasonable and customary costs associated with the defense and/or settlement of a claim, except for the claim payment itself) incurred or reasonably anticipated; 7) a residual market subsidy based on the proportional state-by-state distribution of the business in relation to residual market deficits; 8) a loss carryover provision which consists of the dollar amount by which the loss ratio percentage exceeds the target loss ratio in the preceding Calendar Accident Year calculation. This carryover will be restated each time the preceding Calendar Accident Year is adjusted in accordance with the payment cycle set forth below. Bad faith claim payments are specifically excluded from the definition of Losses. Loss Ratio: a fraction with the numerator being the sum of the losses, and the denominator being the corresponding earned premium with respect to the specified Calendar Accident Year, rounded to the nearest one tenth percent. Target: a loss ratio calculated for each applicable Calendar Accident Year which is derived by weighing 81.0% with that year's private passenger automobile earned premium and 69.0% with that year's combined homeowners and personal umbrella liability earned premium. This calculation is rounded to the nearest percent. Schedule A-1 23 ADDITIONAL COMPENSATION CHART ----------------------------- Loss Ratio* Additional Compensation ----------- ----------------------- Target and Higher 0% (Target - 1.0%) to (Target - 0.1%) .25% (Target - 2.0%) to (Target - 1.1%) .50% (Target - 3.0%) to (Target - 2.1%) .75% (Target - 4.0%) to (Target - 3.1%) 1.00% (Target - 5.0%) to (Target - 4.1%) 1.25% (Target - 6.0%) to (Target - 5.1%) 1.50% (Target - 7.0%) to (Target - 6.1%) 1.75% (Target - 7.1%) and Lower 2.00% * The endpoints of each range are included in the range. AIC shall, if appropriate, pay the additional compensation to ABTAC based on an initial calculation and three subsequent adjustments for each Calendar Accident Year to reflect the ultimate development of losses and over-reserves, as applicable. The first Calendar Accident Year will begin on January 1, 1996 and end on December 31, 1996. Subsequent Calendar Accident Years will run similarly. The initial calculation for each Calendar Accident Year will be made in the 18th month after the beginning of a Calendar Accident Year based on inception to date of evaluation losses for that Calendar Accident Year and the additional compensation shall be paid in accordance with the Additional Compensation Chart, if appropriate, by August 31st of the year in which the calculation is made. The first adjustment to the initial calculation for each Calendar Accident Year will be made in the 30th month after the beginning of such Calendar Accident Year based on inception to date of evaluation losses for such Calendar Accident Year. In the event the first adjustment indicates overpayment in the initial calculation of a Calendar Accident Year, the amount of overpayment will be deducted from additional compensation due for other Calendar Accident Years and, if not sufficient, the remaining overpayment will be deducted from current compensation under the Marketing Agreement. In the event the first adjustment indicates underpayment in the initial calculation of a Calendar Accident Year, such payment shall be made by August 31st of the year in which the first adjustment is made. The second and third adjustments for each Calendar Accident Year will be made in the 42nd month and 54th month, respectively, after the beginning of a Calendar Accident Year based on the same criteria as the first adjustment, and payments will be deducted or made in accordance with the procedure established for the first adjustment. In the event the Marketing Agreement is terminated, all rights to payments of additional compensation amounts shall terminate. Schedule A-2 24 SCHEDULE A ADDITIONAL PRODUCTS AIG Life Division Mega Term (High Limit Term Life) Graded Premium Life Senior Life Birthday Life Whole Life Universal Life Survivorship Universal Life Fixed Annuities Variable Annuities Variable Life AIG A & H Division Hospital Indemnity Hospital Accident Cancer Coverage Accidental Death & Dismemberment (AD&D) AIG Warranty Services Mechanical Breakdown Vehicle Service Agreement (VSA) GAP Coverage (stand alone or with above-mentioned products) Computer Warranty Coverage AIG Capital Management Corp. AIG All Ages Funds Schedule A-1 25 SCHEDULE B BASE COMPENSATION Compensation due to ABTAC pursuant to this Agreement shall be based on a flat fee calculated on the basis of 2% of annualized written automobile premium for all new policies in the first twelve months after the commencement of Phase 1. Calculations to adjust the compensation from a gross written premium basis to a net collected premium basis will occur in months 13 through 24; the resultant adjustments will be offset against the payments of future compensation in months 13 through 35. For purposes of this Schedule B, net collected premium basis means the annualized written premium for any new or renewal policy reduced only by those amounts not collected against the expectancy embodied in the annualized amount. Illustrations of the compensation calculation are attached as pages Schedule B-2 through Schedule B-7. Compensation for new and renewal automobile policies after month 12 shall be based on a flat fee calculated on the basis of 2% of net collected premium. Compensation for homeowners and personal umbrella liability policies shall be based on a flat fee calculated on the basis of 2% of new and renewal net collected premium. All payments due ABTAC by AIC during the term of this Agreement shall be paid by AIC to ABTAC thirty (30) days after the end of each calendar month. Schedule B-1 26 EXAMPLE # 1 $600 6-Month Policy Written in Month One and Collected Via Monthly Direct Bill for 1st and 2nd Term (12 Months)
================================================================================ Gross Annualized Net Collected Month Premium Compensation Premium Compensation 1 $1,200 $150 2 $24 $150 $3 3 $150 $3 4 $150 $3 5 $100 $3 6 $100 $2 7 $100 $2 8 $100 $2 9 $100 $2 10 $100 $2 11 $2 12 Total* $1,200 $24 $1,200 $24
* No adjustments required Schedule B-2 27 EXAMPLE # 2 $600 6-Month Policy Written in Month One and Collected Via Monthly Direct Bill for 1st and Half of 2nd Term and Then Policy Lapses
================================================================================ Gross Annualized Net Collected Month Premium Compensation Premium Compensation 1 $1,200 $150 2 $24 $150 $3 3 $150 $3 4 $150 $3 5 $100 $3 6 $100 $2 7 $100 $2 8 $2 9 10 11 12 Total* $1,200 $24 $900 $18
* $6 compensation adjustment @ .50(cent) per month ($24 - $18 divided by 12) will occur in months 13 thru 24. Schedule B-3 28 EXAMPLE # 3 Same as #1 Except Policy Written in Month 7
================================================================================ Gross Annualized Net Collected Month Premium Compensation Premium Compensation 1 2 3 4 5 6 7 $1,200 $150 8 $24 $150 $3 9 $150 $3 10 $150 $3 11 $100 $3 12 $100 $2 13 $100 $2 14 $100 $2 15 $100 $2 16 $100 $2 17 $2 Total* $1,200 $24 $1,200 $24
* No adjustment required Schedule B-4 29 EXAMPLE # 4 Same as #2 Except Policy Written in Month 7
================================================================================ Gross Annualized Net Collected Month Premium Compensation Premium Compensation 1 2 3 4 5 6 7 $1,200 $150 8 $24 $150 $3 9 $150 $3 10 $150 $3 11 $100 $3 12 $100 $2 13 $100 $2 14 $2 15 16 17 Total* $1,200 $24 $900 $18
* $6 compensation adjustment @ .50(cent) per month ($24 - 18 divided by 12) will occur in months 19 thru 30. Schedule B-5 30 EXAMPLE # 5 Same as #1 & #3 Except Policy Written in Month 12
================================================================================ Gross Annualized Net Collected Month Premium Compensation Premium Compensation 1 2 3 4 5 6 7 8 9 10 11 12 $1,200 $150 13 $24 $150 $3 14 $150 $3 15 $150 $3 16 $100 $3 17 $100 $2 18 $100 $2 19 $100 $2 20 $100 $2 21 $100 $2 22 $2 Total* $1,200 $24 $1,200 $24
* No adjustment required. Schedule B-6 31 EXAMPLE # 6 Same as #1 & #3 Except Policy Written in Month 12
================================================================================ Gross Annualized Net Collected Month Premium Compensation Premium Compensation 1 2 3 4 5 6 7 8 9 10 11 12 $1,200 $150 13 $24 $150 $3 14 $150 $3 15 $150 $3 16 $100 $3 17 $100 $2 18 $100 $2 19 $2 20 21 22 23 Total* $1,200 $24 $900 $18
* $6 compensation adjustment @ .50(cent) per month ($24 - 18 divided by 12) will occur in months 24 thru 35. Schedule B-7 32 autobytel.com November 12, 1998 Via Facsimile - ------------- And Certified Mail, Return Receipt Requested - -------------------------------------------- AIG MARKETING, INC. 505 Carr Road Wilmington, DE 19809 Attention: J. Ernest Hansen, President Or his successor Re: Marketing Agreement, dated as of July 22, 1996, between Auto-By-Tel Acceptance Corporation ("ABTAC") and Auto-By-Tel Corporation as guarantor, and all member companies of American International Group, (collectively "AIC") as signatory thereto (the "Agreement"). -------------------------------------------------------------------- Dear Mr. Hansen: Reference is made to Section 6.1(a) of the above referenced Agreement. This letter serves as notice that ABTAC elects to terminate the exclusivity provisions of the Agreement, upon the expiration of the now current twelve (12) month exclusivity period effective January 22, 1999. Please contact me should you have any questions or comments. Very truly yours, /s/ Mark W. Lorimer ------------------------------- Mark W. Lorimer cc: Robert Sandler R.S. Grimes & Co. 152 West 57th Street, 24th Floor New York, NY 10019 Attention: Robert S. Grimes President, Or his successor EX-10.10 5 MARKETING AGREEMENT W/EDMUND PUBLICATIONS 2/8/96 1 EXHIBIT 10.10 [*] Confidential Treatment has been requested for certain portions of this exhibit. MARKETING AGREEMENT This Agreement is made as of February 8, 1996, by and between Auto-By-Tel, LLC, a California limited liability company with its principal place of business at 2711 E. Coast Highway, Suite 203, Corona Del Mar, California 92625 (hereafter "ABT") and Edmund Publications Corp., a New York Corporation with its principal place of business at 300 N. Sepulveda Blvd., Suite 2050, El Segundo, California 90245 (hereafter "Edmund's"). RECITALS WHEREAS, ABT is in the business of providing new vehicle purchase and lease requests and other information to dealers of new automobiles and trucks; WHEREAS, ABT obtains information for use by dealers of new automobiles and trucks through Consumer inquiries on the Internet, Online services and other sources; WHEREAS, Edmund's is in the business of providing Consumers information to aid them in their purchase or lease of new automobiles and trucks; WHEREAS, Edmund's provides such information in print publications, on the Internet and through other sources; WHEREAS, ABT and Edmund's desire to enter into an agreement whereby Edmund's will provide marketing information to ABT. NOW THEREFORE, in consideration of the promises and covenants contained herein, the parties agree as follows: A. Definitions 1. "Edmund's Site" shall mean that information and text reflected on the Internet, and other online sources established by Edmund's for the purpose of providing information to aid Consumers in their purchase or lease of new cars and trucks. Despite the use of the singular "Site", "Edmund's Site" shall refer to all Internet and online services used by Edmund's as of the date of this Agreement and thereafter. However, "Edmund's Site" shall not include any Internet or other online source established by a third party under license from Edmund's. 2. "Consumer" shall mean those persons who use or otherwise obtain information from "Edmund's Site." 3. "ABT Purchase Request" shall mean a request by a Consumer for assistance with the purchase or lease of a new automobile or truck from whatever source. 2 [*] Confidential Treatment Requested B. Consumer Request for the Purchase or Lease of Automobiles and Trucks 1. Term of Agreement This agreement shall be deemed to have commenced on January 1, 1996 and shall expire on January 31, 1999; provided, however, that if Edmund's does not receive from ABT in calendar year 1997 aggregate fees (including the amounts referred to in Section C hereof and any additional amounts voluntarily paid by ABT) of at least $500,000, Edmund's may terminate this Agreement on not less than 10 days' prior written notice given to ABT on or before February 28, 1998. This Agreement may be terminated prior to such dates only (i) by Edmund's in the event that ABT does not pay the fees due Edmund's for ABT Purchase Requests originated by Edmund's within 30 days of the date billed for such ABT Purchase Requests, in the event that ABT does not pay the amounts required by Section C hereof within 60 days of ABT's receipt of such origination fees, or in the event ABT breaches any of the other terms of this Agreement, and (ii) by ABT in the event that Edmund's breaches any of the terms of this Agreement, or if Edmund's terminates the "Edmund's Site." Nothing herein shall preclude Edmund's from discontinuing the "Edmund's Site," any of its publications, or its entire business, or shall give ABT any rights against Edmund's hereunder as a result of any such discontinuation. 2. Pricing Information The "Edmund's Site" shall, so long as it is maintained by Edmund's, reflect pricing information in the United States for the sale of automobiles and trucks which is current and accurate. 3. ABT Information [*] 2 3 [*] Confidential Treatment Requested 4. Fees to be Paid to Edmund's a. ABT shall pay Edmund's [*] for each ABT Purchase Request which is received directly from Edmund's either from the "Edmund's Site" or otherwise. If the total number of ABT Purchase Requests exceeds 200,000 in any calendar year, ABT shall pay Edmund's [*] for each ABT Purchase Request in excess of 200,000 for such year. However, for purposes of calculating the amount of fees to be paid to Edmund's, only one ABT Purchase Request shall be counted for any one Consumer within a 90 day period. b. ABT shall pay Edmund's any fees due it pursuant to this paragraph within 30 days of receipt of billing. c. All ABT Purchase Requests and information contained therein received from Edmund's Site shall be the sole property of ABT. 5. Additional Advertisements In its print publications and CD ROM products, Edmund's shall advertise ABT's services in a form and content approved by ABT. In these advertisements, Edmund's shall be permitted to place Edmund's' address for the "Edmund's Site." C. Financing of Automobiles 1. Edmund's shall recommend an entity later identified by ABT for automobile and truck financing as ABT's source of automobile and truck financing in a form and content approved by ABT, provided that this financing program is in full operation within 150 days of the signing of this Agreement. 2. ABT shall pay Edmund's 25% of the net origination fee which it received as a result of referrals made or loans originated by Consumers from ABT Purchase Requests received from Edmund's. D. Non-competition and Confidentiality 1. Confidentiality Edmund's agrees to keep confidential and not disclose to any third party, without ABT's prior written consent, any confidential or proprietary information in its possession with respect to ABT's services. Edmund's will give notice of such covenant to its employees and require its employees to comply with such covenant. Such covenant shall not apply to any such information that is or becomes generally available to third parties other than as a result of its disclosure by Edmund's or its employees, which was available to Edmund's prior to its disclosure to Edmund's by ABT, or which is made available to Edmund's by a source other than ABT and its representatives. If Edmund's is requested to produce any of such confidential or 3 4 proprietary information by order of any governmental agency, court or civil process, Edmund's may, upon less than five days' written notice to ABT, release such information. 2. Non-Competition For the term of this Agreement and for two years following the termination of this Agreement pursuant to paragraph A.1., neither Edmund's nor its subsidiaries or affiliates or their respective directors, officers, employees or agents shall directly engage in the business of providing new vehicle purchase and lease requests to dealers of new automobiles and trucks. However, following such termination of this Agreement Edmund's shall be entitled to refer Consumers to other third parties who, like ABT, are engaged in such business, and following such termination Edmund's shall be entitled to advertise other automotive broker services. 3. Indemnification Edmund's agrees to indemnify and hold harmless ABT and its subsidiaries and affiliates and their respective directors, members, managers, officers, employees and agents against any and all losses, liabilities, claims, awards, damages, judgments, settlements and costs, (including attorneys' fees and expenses) arising out of or relating to any third party claim arising from the negligent or wrongful acts or omissions of Edmund's, its subsidiaries and affiliates, and their respective directors, officers, employees and agents. ABT agrees to indemnify and hold harmless Edmund's and its subsidiaries and affiliates and their respective directors, officers, employees and agents against any and all losses, liabilities, claims, awards, damages, judgments, settlements and costs, (including attorneys' fees and expenses) arising out of or relating to any third party claim arising from the negligent or wrongful acts or omissions of ABT, its subsidiaries and affiliates, and their respective directors, members, managers, officers, employees and agents. In addition, ABT hereby assigns to Edmund's any benefits of any indemnification or similar agreement or arrangement that ABT has received, or hereafter receives, from third parties with whom ABT does business (such as dealers), to the extent that such indemnification does not compromise ABT's rights of indemnification from such third parties. 4. Trade Marks and Service Marks Any and all trade marks and service marks associated with ABT are and shall remain the exclusive property of ABT. If during the term of this Agreement a trade mark registration is filed by ABT, all rights belong to ABT who shall bear the cost of such registration. Edmund's is permitted to use the trade mark and service mark of ABT only as set forth herein or only as authorized in writing by ABT. E. Miscellaneous 1. Independent Parties The relationship between ABT and Edmund's is, and at all times shall 4 5 remain, solely that of independent parties, and shall not be, or construed to be a joint venture, partnership, fiduciary, or other relationship of any nature. 2. Notices All notices and requests in connection with this Agreement shall be given or made upon the respective parties in writing, and shall be deemed as given on the day it is deposited in the U.S. Mail, postage prepaid, certified or registered, return receipt requested, and addressed as designated at the top of this Agreement, or such address as the party to receive the notice or request so designates by written notice to the other. 3. Headings The titles and captions of the various paragraphs and subparagraphs of this Agreement are inserted for convenience only, and are not a part of this Agreement, nor shall they be deemed in any manner to modify, explain, enlarge or restrict any of the provisions of this Agreement. 4. Severability The invalidity of any of the provisions or clauses in this Agreement shall not affect any remaining provisions, clauses, or applications which can be given effect without the invalid provision or clause. To this end, the provisions of this Agreement are declared to be severable. 5. Waivers A waiver of either party to exercise in any respect any right provided for herein, including the termination of this Agreement, shall not be deemed a waiver of any right hereunder. 6. Governing Law and Jurisdiction This Agreement and the performance hereunder shall be governed and construed in accordance with the laws of the State of California. Any dispute or claim arising between the parties hereto, shall be brought in a court of competent jurisdiction located in the State of California and the parties hereto agree to jurisdiction in California. 7. Attorney's Fees In the event any litigation is initiated by any of the parties to enforce any of the provisions of this Agreement, the prevailing party shall be entitled to receive from the other party its reasonable attorney's fees incurred in such litigation. 8. Entire Agreement 5 6 This Agreement may be modified, amended or waived in any respect only by a written instrument signed by all the parties hereof. This Agreement supersedes any and all agreements, either oral or written, between the parties and contains all of the representations, covenants, and agreements between the parties hereto. Each party to this Agreement acknowledges that no representations, inducements, promises or agreements, orally or otherwise have been made by any party, or anyone acting on behalf of any party which are not contained in this Agreement and that neither party enters this Agreement in reliance upon a later agreement regarding an ABT Associated Financing Program. 9. Authority The parties hereto have authorized the signatories identified below to enter this Agreement on behalf of Edmund's and ABT, respectively. EDMUND PUBLICATIONS CORP. AUTO-BY-TEL, LLC a New York Corporation a California limited liability company By: /s/ [SIG] By: /s/ [SIG] ------------------------------ ---------------------------------- Title: Chairman Title: President --------------------------- ------------------------------- 6 EX-10.11 6 AMENDMENT TO MARKETING AGREE. W/EDMUND PUBLICATION 1 EXHIBIT 10.11 [*] Confidential Treatment has been requested for certain portions of this exhibit. EDMUND PUBLICATIONS CORP. AUTO-BY-TEL MARKETING CORPORATION Amendment to Marketing Agreement dated February 8, 1996 1. Term of agreement to be extended [*] 2. Exclusivity: a. New cars: Exclusive for entire term. b. Used cars: Exclusivity unless and until terminated at Edmund's election on not less than 90 days' notice, but no such election to be effective prior to August 1, 1998. "Exclusivity" means that other than EVRI, ABT will be the exclusive retail used vehicle purchase program. Edmund shall have the right to terminate ABT's used car program, on not less than 90 days' notice, if the number of (non-duplicate) used car request forms is less than (i) 100,000 during the twelve months commencing with the first full calendar month after Edmund begins submitting used car request forms to ABT, (ii) 200,000 during the second such twelve-month period, or (iii) 250,000 during any subsequent twelve-month period. c. No exclusivity re financing. 3. Fees: a. [*] for each new car request form for the first 16,667 per calendar month. [*] for the next 8,333 per month, [*] for the next 8,333 per month, [*] for the next 8,333 per month, and [*] for any forms in excess of 41,667 per month. A reconciliation shall be made as soon as practicable after each March 31, June 30, September 30 and December 31 based on Edmund being entitled to [*] for each new car request form for the first 200,000 per twelve months, [*] for the next 100,000 per twelve months, [*] for the next 100,000 per twelve months, [*] for the next 100,000 per twelve months, and [*] for any forms in excess of 500,000 per twelve months (prorated for the number of months that are the subject of such reconciliation). The first reconciliation shall be for the period June 1 through September 30 1997. If, as a result of any such reconciliation, ABT paid Edmund too much for the applicable period, ABT shall offset such excess against the next payment due to Edmund. b. [*] for each used car request form, plus [*] for each form in excess of 16,667 per calendar month, while exclusivity is in effect. Thereafter, [*] for each used car request form plus [*] for each form in excess of 16,667 per calendar month. Similar reconciliation as for the new car request forms. c. 25% of net origination fees paid to ABT from Chase Manhattan Automotive Finance Corporation and/or other providers of purchase and/or lease financing with respect to purchase requests received through Edmund. 4. Upon execution hereof, ABT to pay Edmund $275,000 as a deposit against future payments (to be offset by ABT in 10 installments of $27,500 beginning with the payment due by ABT in August 1997 in respect of July 1997, or to be paid in full if the agreement is terminated). Edmund agrees to waive any right of offset or any other defenses to its unconditional obligation to pay such amount back to ABT on such terms. 2 [*] Confidential treatment requested. 5. Effective date of this amendment: June 1, irrespective of when the long-form agreement is executed. All fees reflected in this amendment to be paid in respect of requests forms submitted on or after June 1, 1997. 6. All Information from consumers is jointly owned by ABT and Edmund, and both parties have unrestricted rights to use and/or sell such information. 7. "Duplicate forms" issue: Edmund will be paid based on ABT's method of acceptance/rejection of forms. 8. Location of forms: a. New cars: to remain on Edmund site and Edmund will coordinate with ABT to ensure that consumers have a seamless transfer to ABT for financing. b. Used cars: will reside on ABT server; however, there will be appropriately-placed links back to Edmund. 9. Transmissions of data: c. New cars: no changes from current arrangement. d. Used cars and financing: ABT to e-mail to Edmund all information submitted by consumers while on the ABT server (other than financial information), and the consumer's search criteria. e. At end of each month, ABT to send Edmund the aggregate number of financings consummated by Edmund's consumers. 10. ABT and Edmunds will cooperate with one another on the issuance and timing of a press release. Agreed to and accepted this 6th day of June 1997: AUTO-BY-TEL MARKETING CORPORATION EDMUND PUBLICATIONS CORP. BY: /s/ MARK LORIMER By: /s/ PETER STEINLAUF ---------------------------------- ---------------------------------- Mark Lorimer Peter Steinlauf, President Executive Vice President and Chief Operating Officer 2 EX-10.12 7 FORM OF DEALERSHIP AGREEMENTS 1 EXHIBIT 10.12 AUTO-BY-TEL MARKETING CORPORATION MASTER SUBSCRIPTION AGREEMENT THIS AGREEMENT is entered into by and between Auto-By-Tel Marketing Corporation, a Delaware Corporation, with its principal place of business at 18872 MacArthur Boulevard, Second Floor, Irvine, CA 92612-1400 ("ABT"), and [Legal Name] a(n) [STInc] [Entity], with its principal place of business at [Address], [City], [ST] [Zip] ("Dealer"). In consideration of the following mutual covenants and promises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, ABT AND DEALER, on their own behalf and on behalf of each of their d.b.a. operation(s) set forth in Appendix "A" attached hereto, intending to be legally bound hereby, warrant, covenant and agree as follows: 1. SERVICES TO BE PERFORMED. ABT shall provide an Internet marketing program and Online Services to attract Potential Purchasers. ABT shall forward to Dealer information regarding the identified Potential Purchasers interested in purchasing/leasing a vehicle of the make subscribed to by Dealer and in the zip code area subscribed to by Dealer. 2. USE OF SERVICES. (A) DEALER CONTACT REPRESENTATIVE(S). Dealer shall designate a key employee(s) for the new vehicle program and a key employee(s) for the Used car CyberStore(TM) program, if so elected by Dealer, to act as a liaison ("ABT Manager") between ABT and Dealer. Dealer's ABT Manager shall be available to ABT to receive instructions from time to time from ABT or its authorized agent. Dealer may change the ABT Manager, provided that Dealer notifies ABT within ten (10) days with the identity of the newly designated ABT Manager. Except as otherwise provided to Dealer by ABT, Dealer shall be responsible for all internal costs, if any, associated with the training of its key employee(s) to use and implement ABT's systems and services within Dealer's facilities. (B) CUSTOMER SERVICE STANDARDS. Dealer agrees to abide by ABT's Customer Service Standards as set forth herein and on any Appendices or Amendments. In order to improve the services offered by ABT and maintain uniform delivery and quality standards among its Dealers, ABT reserves the right to amend the Customer Service Standards from time to time or impose additional Customer Service Standards, and ABT agrees to promptly notify Dealer in writing of any revisions thereto. Dealer acknowledges that ABT's Customer Service Standards are crucial to the value of ABT's services, and agrees to adopt and abide by such revisions, even though they may require more work or expense to implement. ABT agrees that it will not impose amendments or additions unless they are applied to all Dealers. (i) Dealer shall relay to Potential Purchasers a full and complete response to the Potential Purchasers' inquiries transmitted by ABT to Dealer within 24 hours of Dealer's receipt of the inquiry from ABT; and (ii) Dealer's initial response shall be by telephone and shall disclose all of the following information (the "Dealer Information"): (a) the availability of the vehicle inquired about; (b) the manufacturer's suggested retail price of the vehicle; (c) all requested options; (d) the price at which Dealer will sell or lease the vehicle with all requested options to the Potential Purchaser; (e) all other terms, costs and conditions required by law to be disclosed to prospective purchasers; and (f) relevant financing terms and conditions to which a consumer shall be entitled to receive. (C) DEALER INFORMATION. Dealer agrees that all Dealer Information transmitted to a Potential Purchaser shall remain in full force and effect and be binding on Dealer for a period of seven (7) days after its transmittal, provided the identified vehicle still remains available for sale. If pricing, terms, incentives or availability of vehicles used in the Dealer Information to the Prospective Purchaser are in reliance on a manufacturer sponsored program, the time period in which the terms and conditions shall remain in full force and effect shall coincide with the termination date of the Manufacturer's program, but shall not exceed seven (7) days. Dealer agrees to include a statement to such effect in the Dealer Information and shall inform the Prospective Purchaser of any reduction in the time period as set forth above. Any claim for damages arising out of Dealer's failure to inform Potential Purchasers of all information required by this Section shall be borne solely by Dealer who shall hold ABT harmless from any loss as a result. (D) PERIODIC OPERATIONS REPORTS. Dealer shall report to ABT on a monthly basis the number and names of Potential Purchasers who purchased vehicles from Dealer, the number of vehicles financed and amounts financed, and such other data as ABT may request. Upon Dealer's written request, ABT shall furnish to Dealer on a quarterly basis an operations report stating the number of purchase requests received by ABT from Potential Purchasers in Dealer's Territory. ABT shall use its best efforts to provide prompt transmission of data to Dealer, but shall not be liable for any loss of data or delays or errors in transmitting data or for any damages arising from any data loss, delay or error. 3. FINANCING PROGRAM PARTICIPATION. ABT, through its affiliate, Auto-By-Tel Acceptance Corporation, a Delaware Corporation ("ABTAC"), offers third party, low-cost financing programs for consumers on its website from sources arranged by ABTAC (the "Financing Arrangements"). Dealer's participation in offering financing through ABTAC, regardless of compensation to Dealer, is a material element of this Agreement. Dealer must be able to accommodate purchase requestors who are pre-approved for financing. Dealer participation in making ABTAC finance programs available to a purchase requestor is not OPTIONAL. Dealer agrees to fully participate in good faith by offering, arranging and accepting ABTAC financing. Dealer agrees to take such actions as reasonably requested by such Lenders or ABTAC to ensure high quality service and satisfaction to ABT customers in the handling of their Financing Arrangements. Dealer agrees it will not intentionally disparage or otherwise mislead customer as to the terms and conditions of the Financing Arrangements. Dealer shall not actively solicit the conversion of pre-approved financing and/or insurance for any ABTAC, credit union, or affinity programs presented by the purchase requestor to Dealer. In many cases, Dealer will be compensated from a Lender for placing financing through ABTAC. However, some Lenders do not offer compensation, and neither ABT nor ABTAC makes any guarantee that Dealer will receive compensation from any Lender. ABTAC uses its best efforts to negotiate advantageous terms for Dealers through Lenders and will, from time to time, add or delete Lenders, including banks, credit unions, thrift and loans and other sources to benefit customers and/or Dealers. Dealer agrees to timely enter into Dealer Participation Agreements with all Lenders as required by ABTAC within ten (10) working days from receipt. Dealer shall be paid a flat fee, as set forth on Appendix "B" hereto. Any disagreement regarding the terms and conditions of a lender's Dealer Participation Agreement shall be between Dealer and Lender, and shall not involve ABT or ABTAC. Dealer understands that each ABTAC finance contract will be pre-approved at the Lender's prevailing buy rate. Dealer further understands that both the customer and Dealer will be notified of the customer finance rate (APR) by ABT. 4. DEALER REAL TIME 2 INFORMATION SYSTEM In consideration of the fees paid as set forth in Section 12 of this agreement, ABT hereby grants to Dealer a nonexclusive, non-transferable license and password to access and use for up to two simultaneous users, ABT's proprietary real time access program referred to as Dealer Real Time 2 (DRT2), subject to the terms and conditions of Appendix "C." Dealer agrees to dedicate a personal computer and certain related ancillary equipment that meets or exceeds ABT's minimal system specifications, for use in ABT's Dealer Real Time 2 Internet program and services. ABT will provide access and technical support services to Dealer to assist Dealer in the access and use of the DRT2 system. 1 2 5. EQUIPMENT. ABT Equipment. ABT warrants that it possesses, or has access to and the right to use, computer and other equipment necessary for it to perform its services and provide the programs contemplated by this Agreement. Dealer Equipment. Unless otherwise agreed between the parties, Dealer, at its sole cost and expense, shall provide for itself a IBM compatible personal computer with the minimum specifications determined by ABT to properly receive and process purchase requests, facsimile machine and other office equipment specified by ABT in order to receive and properly use ABT's services provided under this Agreement. To ensure consistent, high quality service by Dealer, ABT reserves the right to specify from time to time the equipment and software required by its participating Dealers. Equipment Maintenance. Dealer, at its sole expense, shall maintain all its own computer/office equipment used for ABT services in good and proper working order, and shall assume all responsibility for loss, damage and maintenance to Dealer's own equipment. Dealer holds ABT harmless from any claim concerning Dealer's own equipment. 6. ASSIGNMENT OF TERRITORY. Subject to the terms and conditions of this Agreement, and its Appendices and/or Amendments, ABT hereby grants to Dealer the exclusive non-transferable right to conduct business using ABT's services (except for the Used Vehicle CyberStore(TM)) within the geographic area designated by the Zip Codes set forth in Appendix "A," attached hereto for each of Dealer's franchised makes and incorporated herein by this reference. This exclusive territory extends only to the make(s) of motor vehicles set forth in each Appendix "A" attached hereto (together referred to as the "Territory"). Unless otherwise agreed to between the parties, during the first six months of this Agreement this assigned territory shall remain fixed. Thereafter, to provide and maintain the highest quality of services to Dealer and Purchase Requester, ABT, in its sole discretion, reserves the right to alter Dealer's Territory upon thirty- (30) days' written notice to Dealer. ABT retains the right to market and use its programs and services for similar make dealers in all areas other than Dealer's Territory as designated above, and within Dealer's Territory for all makes of motor vehicles not listed above. 7. CONFIDENTIALITY. During the term of this Agreement, Dealer will have access to and become acquainted with various trade secrets consisting of formulas, strategies, processes, computer programs, compilations of information, records, specifications, and contractual information, all of which are owned by ABT and regularly used in the operation of ABT's business. Dealer shall promptly sign any confidentiality agreements submitted by ABT to protect ABT's proprietary rights. Dealer, on behalf of itself and its employees, agrees to keep all information with respect to ABT's services confidential. Dealer acknowledges and agrees that the sale or unauthorized use or disclosure of any of ABT's trade secrets constitutes theft and will greatly damage ABT. Dealer shall not impart ABT's services or the concept thereof to any person or entity other than Dealer's key employee(s) without the previous written consent of ABT. ABT agrees to treat all information provided by Dealer confidential. ABT may, however, transmit pertinent vehicle information to consumers making inquiries concerning the terms of purchase and financing or leasing of motor vehicles. Notwithstanding the foregoing, if either party is required to produce any such information by order of any government agency, court of competent jurisdiction, or other regulatory body, it may, upon not less than five (5) days' written notice to the other party, release the required information. 8. TITLE TO SYSTEM, TRADEMARKS. To the extent permitted by law, the services to be provided under this Agreement and any Appendices or Amendments are proprietary to ABT, and title thereto remains in ABT. All proprietary title and rights extends to any extension of this Agreement and any Appendices and Amendments, together with all copies thereof. All applicable rights to patents, copyrights, trademarks and trade secrets in the System and in the name "Auto-By-Tel" and its logo, now and in the future, belong exclusively to ABT. Any and all trademarks and service marks associated with ABT are and shall remain the exclusive property of ABT. If, during the term of this Agreement, a trademark registration is filed by ABT, all rights belong to ABT and ABT shall bear the costs for such registration. Dealer is permitted to use the trademark and service mark only as set forth herein or only as authorized in writing by ABT. 9. EXCLUSIVITY; NON-COMPETITION. Dealer acknowledges and agrees that its compliance with Sections 2, 6 and 8 is essential to this Agreement and necessary to protect the business and good will of ABT. Any breach of Sections 2, 6 or 8 hereof will cause irreparable harm and continuing damage to ABT, for which money damages may not provide adequate relief. Dealer understands and agrees that ABT's services include certain key elements (the "Key Elements") which include: (i) electronic transmission of customer purchase or lease requests; (ii) rapid response by Dealer to customers (including immediate telephone contact with up-front, firm pricing provided over the telephone); (iii) proper transmission to customers of the required Dealer Information and adherence to Customer Service Standards, as stated above; (iv) customer purchase or lease documentation completed or nearly completed prior to customer's arrival at the dealership for pickup so as to ensure the customer spends as little time as possible at the dealership; and (v) continued Dealer training and support to implement and maintain ABT's style and quality of services. The parties agree that ABT's services are restricted solely to use by Dealer and its designated key employee(s) and other duly authorized ABT Dealers. Dealer agrees it will not compete with ABT in providing for its own benefit the services contemplated in this Agreement, its Appendices and/or Amendments. Nothing in this section shall prohibit Dealer from establishing and maintaining its own Internet web site and/or participating in any factory direct program involving the Internet, World Wide Web online or other electronic means. Similarly, Dealer is not prohibited from establishing for its own internal use, business plans, policies or procedures that involve some or all of the "Key Elements." 10. INDEMNIFICATION. ABT agrees to indemnify and hold Dealer harmless against any and all losses, liabilities, claims, awards, damages, judgments, settlements, and costs, including fees and expenses, arising out of ABT's negligence or wrongful conduct, or arising out of or related to any third party claim arising out of or related to ABT's negligence or wrongful conduct, or from any other act done or omitted to be done by ABT in executing the terms of this Agreement. Dealer agrees to indemnify and hold harmless ABT and its subsidiaries and/or affiliates and their respective members, managers, directors, officers, employees and agents against any and all losses, liabilities, claims, awards, damages, judgments, settlements, and costs, including fees and expenses, arising out of or related to Dealer's negligence or wrongful conduct, or arising out of any third party claim, including, but not limited to, any claim for damages by any person or entity regarding the purchase, lease and/or finance of a motor vehicle from Dealer or resulting from Dealer's utilization of ABT's services, or from any other act done or omitted to be done by Dealer in executing the terms of this Agreement. In the event ABT shall be served with notification of action or suit against Dealer, ABT shall promptly notify Dealer of such claim and Dealer shall defend and settle, at its sole cost and expense, all such claims, actions, lawsuits or proceedings. In all events, ABT, in its sole discretion, shall have the right to participate in the defense of any such action through counsel of its own choosing and at ABT's sole expense. In the event Dealer shall be served with notification of action or suit against ABT, Dealer shall promptly notify ABT of such claim(s), and ABT, in its sole discretion, shall defend and settle all such actions or suits through counsel of its own choosing. 2 3 11. TERM AND TERMINATION & REINSTATEMENT. This Agreement shall be for a term of five (5) years, unless terminated earlier pursuant to this Section. (a) ABT may terminate this Agreement: (i) immediately if Dealer does not adhere to its obligations under Sections 2, 3, 6 and/or 8; or (ii) immediately if any fees due ABT pursuant to Sections 9, 11 and/or 12 are unpaid and outstanding more than thirty (30) days after ABT makes a written request therefor in the form of an invoice or any other written communication; or (iii) immediately for any other breach of this Agreement by Dealer which is not cured within ten (10) days after written notice by ABT to Dealer; or (iv) upon thirty (30) days' notice following Dealer's failure to exercise ABTAC Dealer Participation Agreement(s) in accordance with Section 3; or (v) at any other time with or without cause upon thirty (30) days' written notice to Dealer. (b) Dealer may terminate this Agreement: (i) immediately, if an order for liquidation against ABT is entered and not stayed in a bankruptcy proceeding; or (ii) immediately, if ABT is guilty of willful misconduct in the performance of its duties under this Agreement; or (iii) upon thirty (30) days' written notice in accordance with Section 17 of this Agreement following the effective date of any shrinkage of Dealer's Territory pursuant to Section 6; or (iv) at any other time, in Dealer's sole discretion, upon thirty- (30) days written notice to ABT in accordance with Section 17 of this Agreement. Dealer shall be responsible for all fees due up to and including the effective date of said termination. If this Agreement is terminated prior to the date set forth herein, the parties agree to continue to be bound to the covenants and promises set forth in Sections 6, 7, 8, 9, 17, 19 and 21 hereof. (c) If this agreement is terminated pursuant to Section 11(a)(ii) Dealer may, within 30 days after termination, apply in writing for reinstatement of this Subscription Agreement. The acceptance or rejection of Dealers application is within the sole discretion of ABT and conditioned upon 1) the territory is available for distribution, 2) Any unpaid fees are paid satisfied and 3) Dealer pre-pays to ABT a reinstatement fee of [ ]. (d) Dealer's participation in the Used Car CyberStore(TM) program may be cancelled by Dealer independently of the new vehicle subscription, upon thirty-(30) days written notice to ABT. 12. SUBSCRIPTION FEES. (a) As consideration for the ABT Master Subscription, Dealer shall pay ABT [WrittenAMTInFee] Dollars ($[InFee]) as an INITIAL START-UP FEE, to be paid concurrently with the execution of this agreement. Of this fee, [ ] shall be allocated for DRT2 initial start-up fee, receipt of which is hereby acknowledged. (b) As additional ongoing consideration, Dealer shall pay ABT the amount of [WrittenAMTMoFee] ($[MoFee]) as a total MONTHLY SUBSCRIPTION FEE that is due and payable monthly in advance on the first day of every month. The total monthly amount due shall be allocated as follows: DRT2(TM) Access Fee, [ ]; Used Car CyberStore, [UCCSMoFee]; [Make], [MoMakeFee] [Make1] [MoMkFee1] [Make2] [MoMkFee2] [Make3] [MoMkFee3] [Make4] [MoMkFee4] [Make5] [MoMkFee5] [Make6] [MoMkFee6] [Make7] [MoMkFee7] (c) The first month's total fee is due and payable concurrently with the execution of this agreement, receipt of which is hereby acknowledged. ABT in their sole discretion may change these monthly subscription fees upon thirty-(30) days' written notice to Dealer. 13. TAXES. Dealer is solely responsible for paying all taxes (local, state and federal) imposed by the sale or lease of any vehicles. ABT shall be responsible for paying all taxes imposed upon ABT by reason of providing services to Dealer. In the event ABT is required to collect and/or pay any taxes by reason of a consumer's purchase or lease of a vehicle through the services ABT provides to Dealer, Dealer shall promptly pay to ABT such taxes required to be collected or paid by ABT. 14. WARRANTY LIMITATION. Except as otherwise provided in Appendix "D," ABT makes no warranty regarding the performance of the services hereunder, and Dealer specifically waives all warranties, expressed or implied, arising out of or in connection with the services to be provided by ABT hereunder. Specifically excluded are all warranties, expressed or implied, including but not limited to, merchantability and fitness for a particular purpose. In no event shall ABT be liable for any loss of business profits or for any consequential, incidental, punitive or similar damages, or for any third party claims of damages, even if advised of the possibility of such damages. 15. NO WAIVER; NO REFUND. The failures of either party to exercise in any respect any right provided for herein shall not be deemed a waiver of any right hereunder. All fees paid to ABT under this agreement are deemed earned upon the execution of this agreement or delivery of services whichever occurs first. All fees paid to ABT are non-refundable regardless of circumstances. 16. INDEPENDENT CONTRACTORS. The relationship between ABT and Dealer created by this Agreement and/or any Appendices or Amendments hereto shall be that of independent contractor. Nothing contained in this Agreement shall be construed as creating or constituting a franchise, partnership, agency, or joint venture between ABT and Dealer. 17. NOTICES. All notices and requests in connection with this Agreement and/or any Appendices and/or Amendments hereto shall be given or made upon the respective parties in writing and shall be deemed given on the day deposited in the U.S. mail, postage prepaid, certified or registered, return receipt requested, and addressed as designated at the top of this Agreement, or to such address as the party to receive the notice or request so designates by written notice to the other. Notices may also be made by Facsimile and shall be deemed given on the day sent when a confirming notice from the sending facsimile machine has been generated. Notices may be made by overnight delivery service or courier, and shall be deemed received on the day scheduled for delivery. 18. ASSIGNMENT. This Agreement and the rights and duties hereunder, including any Appendices or Amendments hereto shall not be assignable by Dealer, except upon written consent of ABT. This Agreement and the rights and duties hereunder shall be assignable by ABT without restriction. 19. PRESS RELEASES. Except as agreed in writing between the parties, Dealer is prohibited from issuing any press release(s) or making any public announcement(s) regarding Dealer's business relationship with ABT or ABT's services or programs provided to Dealer. Nothing in this section shall be construed to prohibit Dealer from making reference to their affiliation with Auto-By-Tel in any advertisement published by Dealer for their own benefit. Dealer may upon written request receive a copy of ABT's logo, trademarks artwork and other printed material along with a revocable limited license permitting the use of such materials by Dealer within Dealer's advertisements. 3 4 20. GOVERNING LAW AND JURISDICTION. This Agreement and the performance hereunder shall be governed and construed in accordance with the laws of the State of California. Any dispute or claim arising between the parties hereto shall be brought in a court of competent jurisdiction located in the County of Orange in the State of California, and the parties hereto agree to jurisdiction in California. 21. OTHER AGREEMENTS; ATTACHMENTS. This Agreement and all Appendices and Amendments hereto supersedes any and all agreements, oral or written, between the parties, and contains all of the representations, covenants, and agreements between the parties with respect to services described in this Agreement. Each party to this Agreement acknowledges that no representations, inducements, promises, or agreements, orally or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not contained in this Agreement and/or any Appendices and/or Amendments hereto. No other agreement(s), statement(s), or promise(s) not contained in this Agreement or Appendices or Amendments hereto will be valid or binding. The parties agree that any unilateral changes, amendments or modifications made by one party are invalid against the other party. Any amendment, change or modification of this Agreement will be effective only when in writing and signed by the party to be charged. Upon ABT's request, Dealer agrees to confirm in writing any amendment, modification, or change in original terms or other action that alters the terms of this Agreement. All Appendices and subsequent Amendments hereto are incorporated into this Agreement by this reference as though fully set forth herein. 22. SEVERABILITY. If any provision of this Agreement shall be held to be invalid, illegal or unenforceable, such determination shall in no way alter or impair the validly, legality and enforceability of the remaining provisions of this Agreement and any Appendices and/or Amendments hereto. 23. ABT USED CAR CYBERSTORE PARTICIPATION ELECTION NOTE: BY SIGNING APPENDIX "D" YOU ARE AGREEING TO PARTICIPATE IN THE OPTIONAL ABT USED CAR CYBERSTORE(TM) (CYBERSTORE) AT AN ADDITIONAL MONTHLY FEE PER MONTH AS SET FORTH IN SECTION 12. ABT NEW VEHICLE MASTER SUBSCRIPTION MUST BE ESTABLISHED AND MAINTAINED CONCURRENTLY WITH THIS ELECTION. In addition to the terms and conditions set forth in Appendix "D," Dealer agrees as follows: The ABT Used Car CyberStore(TM) program will provide an Internet marketing program and online services targeted at persons ("Prospects") interested in purchasing or leasing used vehicles ("Vehicles"), and establishes a database permitting Dealer to publish "ABT Certified" Vehicles (as described below). Prospects will be able to search the database for Vehicles by make, model and option specifications. Purchase requests will be routed to dealers having the appropriate Vehicle in the database, based on geographic and other appropriate parameters established by ABT. Dealer agrees that only "ABT Certified" vehicles that satisfy all requirements specified by ABT's "Certified Car Checklist" may participate in the ABT Used Car CyberStore(TM) program. The ABT Checklist requirements will be provided to Dealer by ABT. ABT reserves the right to change the Checklist from time to time. ABT may also establish a compliance program to ensure that ABT certification and Checklist requirements are being met, and Dealer agrees to cooperate with any such compliance program(s). Dealer agrees to indemnify ABT for all liabilities for customary third party claims arising in connection with ABT certified vehicles. Dealer may periodically upload Vehicle photographic images and information for Certified vehicles to ABT's CyberStore database. Dealer agrees, at Dealer's expense, to make training resources available to Dealer's ABT Manager(s) in order to facilitate use of the equipment, software and other components of the ABT Used Car CyberStore(TM) program. In participating in the optional ABT Used Car CyberStore(TM) program, Dealer understands and agrees that additional fees and requirements apply, as set forth in Appendix "D." This Agreement is executed this ________day of __________________________, 1998. DEALER: [Legal Name] By:____________________________________________________ Name: [Auth Agnt] Title: [Title] AUTO-BY-TEL MARKETING CORPORATION By: ____________________________________________________ Name: Brent Jones Title: Chief Operating Officer 4 5 APPENDIX "A" EXCLUSIVE ZIP CODE TERRITORY ASSIGNMENT SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN SECTION 5 OF THE ABT MASTER SUBSCRIPTION AGREEMENT BETWEEN AUTO-BY-TEL MARKETING CORPORATION AND [LEGALNAME], THE FOLLOWING ZIP CODES ARE ASSIGNED TO DEALER AND SHALL COMPRISE DEALERS EXCLUSIVE TERRITORY: Acknowledged: [Legal Name] Dealer Principal:_____________________________________ Date:____________________ [AuthAgnt] [Title] 6 APPENDIX "B" ABTAC FINANCING PARTICIPATION DISCLOSURE STATEMENT ABTAC has entered into arrangements with an affiliate of the Chase Manhattan Automotive Finance Corporation ("Chase"), Triad Financial Corporation ("Triad") and General Electric Capital Auto Financial Services Inc. ("GECAL") and may enter into agreements with additional banks and finance companies (each, a "Finance Company") to make available to ABT Purchase Requesters financing for vehicles purchases. Dealer desires to instruct ABTAC to specify to Finance Company a binding amount of fee or "dealer participation" for these financing arrangements, which amount Dealer will be paid directly by Finance Company. Dealer and ABTAC agree as follows: Dealer hereby instructs ABTAC to inform Finance Company that Dealer agrees to accept, subject to the terms of the dealer agreement between Finance Company and Dealer, as compensation for financing transactions, the amount indicated below. In doing so, Dealer accepts a flat fee according to the following schedule to be paid directly to Dealer by Finance Company and Dealer shall not increase the customer finance rate (APR) over the buy rate (minimum rate). IN CONSIDERATION OF THIS FLAT FEE THERE ARE NO CHARGE BACKS TO DEALER FROM FINANCE COMPANY. The following fee schedule will be paid to dealer directly by finance source. The flat rate fee schedule is as follows: CHASE MANHATTAN BANK: Amount Financed Dealer Fee --------------- ---------- $25,000 + [ ] $15,001- $25,000 [ ] $10,000- $15,000 [ ] GE CAPITAL Amount Financed Dealer Fee: --------------- ----------- $25,000 + [ ] $15,001- $25,000 [ ] less than $15,000 [ ] Acknowleged: [Legal Name] Dealer Principal:___________________________________ Date:______________________ [Auth Agnt] [Title] 7 APPENDIX "C" DEALER REAL TIME 2(TM) LICENSE TERMS & CONDITIONS Dealer agrees to the following terms and conditions, in addition to those set forth in the Master Subscription Agreement: 1. System Requirements. Dealer shall provide at their own expense a personal computer and related equipment that meets or exceeds the following minimum specifications: 133 PENTIUM PROCESSOR; 32MB RAM; 33.6 MODEM (THE FASTER THE BETTER!); 2GB HARD DRIVE; WINDOWS '95; ISP (INTERNET SERVICE PROVIDER - IE: AT & T, NETCOM, MCI....); NETSCAPE NAVIGATOR WEB BROWSER SOFTWARE (VERSION 3.0 OR LATER). 2. Technical Support. Licensor shall maintain for the benefit of the Licensee a technical support help-line. Licensor shall establish and staff such help-line with persons knowledgeable about the DRT 2 program. The hours of availability shall be between 6:00 a.m. And 6:00 p.m. PST, excluding Sundays and federal holidays. Technicians will provide assistance to licensee with respect to accessing and using the DRT 2 program only. Technical assistance and support regarding computer or related hardware are beyond the scope of this agreement and will not be provided by Licensor. The hours of the availability of the help-line are subject to change at the sole discretion of the licensor. 3. Covenants of licensee. During the term of this agreement: (a) Licensee shall adopt and enforce such internal policies, procedures and monitoring mechanisms as are necessary to ensure that the DRT 2 program is used only in accordance with this agreement and that all steps necessary to ensure that no person or entity will have unauthorized access to the programs are taken. (b) Licensee shall not: (i) assign, sublicense, lease, encumber or otherwise transfer or attempt to transfer the DRT 2 program or any portion thereof; (ii) permit any third party other than the Licensee or its authorized agent acting in behalf of Licensee, to have access to the DRT 2 passwords or to use programs, whether by timesharing, networking, or any other means; (iii) duplicate, modify, translate, reverse, engineer, decompile or disassemble the DRT 2 program; (iv) possess or use the programs or any portion thereof, other than in machine readable object code; (v) remove any copyright, trademark, patent or other proprietary notices from the DRT 2 program(s), or any portion thereof without the express written consent of Licensor. 4. Program Modifications: Only the Licensor shall make Program modifications. Licensor shall from time to time provide upgrades and/or modifications to the DRT 2 program to Licensee. Licensee shall accept any upgrades or other modification made by licensor to the programs. 5. No warranty. The programs are provided on an "as is" basis. Licensor makes no warranties or representations, express or implied, including but not limited to any implied warranties of merchantability and fitness for a particular purpose. 6. Limitation of remedies. Regardless of whether any remedy set forth herein fails of its essential purpose, in no event will the licensor be liable the damages to the licensee for any special, consequential, indirect or similar damages, including any lost profits or lost data beyond the access fee paid for the month in which they occurred, arising out of the use or inability to use the DRT 2 program or any data supplied therewith. 7. Proprietary data. Licensee acknowledges that the programs are proprietary to licensor and that it has (and will have) no interest therein or in any modifications or improvements thereto, and hereby assigns to licensor all rights in any such modifications or improvements made by or on behalf of licensee. 8. Confidentiality. For the purpose of this agreement, confidential information includes the DRT 2 programs and all other information provided by licensor marked "confidential." Information shall not be deemed confidential information and licensee and licensee's employees shall have no obligation with respect to any such information if such information: (a) is or falls into the public domain through no wrongful act of licensee or the licensee's employees; (b) is rightfully received from a third party who is without restriction and without breach of this agreement; (c) is approved for release by written authorization of an officer of licensor; or (d) is disclosed pursuant to the requirements of a governmental agency or operation of law. 9. Should the licensee or licensee's employees learn of confidential information from licensor or any other source, neither licensee nor licensee's employees shall, at any time during the term, or for one year thereafter, disclose such information to any individual, agency, company or other entity. Licensee shall not use such confidential information for licensee's own advantage other than as permitted by this agreement. 10. Both parties recognize and acknowledge that breach of this Section 12 would cause irreparable injury inadequately compensable in damages. Accordingly, licensor may seek and obtain injunctive relief against a breach or threatened breach hereof, in addition to any other legal remedies that may be available at law or in equity. 11. Assignment. Except for assignments to affiliates, provided each such affiliate agrees to be bound by the terms hereof, licensee may not, without licensor's prior written consent, assign its rights or delegate its obligations under this agreement. 12. Independent contractors. Nothing in this agreement shall be deemed or construed by the parties or any third person to create a franchise, agency, partnership or joint venture between licensor and licensee. 13. Waiver. A failure of this licensor to enforce at any time any provision of this agreement shall in no way affect the full right of the licensor to enforce such provision at any time thereafter. Acknowledged: [Legal Name] Dealer Principal:__________________________________ Date:_______________________ [AuthAgnt] [Title] 8 APPENDIX "D" USED CAR CYBERSTORE(TM) ELECTION The undersigned Dealer elects to participate in the ABT Used Car CyberStore(TM) services program and agrees to the following terms and conditions, in addition to those set forth in the Master Subscription Agreement: 1. CUSTOMER SERVICE GUIDELINES. Dealer agrees to abide by ABT's Used Car CyberStore Customer Service Guidelines ("Guidelines") ABT in their sole discretion may, from time to time, amend the Guidelines, or impose additional Guidelines on thirty (30) days' notice to Dealer. Dealer acknowledges that following the Guidelines is crucial to the value of ABT's services and agrees to follow them and any amendments or additions to it even though they may require extra work or expense. The Guidelines include the following: (i) Dealer will warranty all vehicles sold through the CyberStore. The warranty coverage will not be less favorable to the purchaser than the law of the where Dealer is located, and as a minimum will be: "Three months or 3,000 miles, whichever comes first." The warranty will cover all matters governed by applicable law and by the form of the attached Warranty. Dealer will indemnify ABT for any third party claims arising under any warranty. (ii) Dealer will provide prices ("Posted Prices") and vehicle information for display on the ABT Website of all Vehicles posted to the CyberStore. Dealer agrees to price Vehicles competitively. Dealer, and not ABT, shall be solely responsible for the quality and accuracy of such information. ABT reserves the right to monitor the quality of the photos and information submitted. Dealer shall promptly correct any information or photo(s) deemed by ABT to be inaccurate or below necessary quality levels set forth in Section 5. If Dealer fails to correct such photo image(s) or information within 72 hours of ABT's written notification thereof, ABT may remove the photo image(s) and/or information from its website. (iii) Except where expressly prohibited by law, Dealer will offer, in writing, a return option allowing a purchaser to return a Vehicle to Dealer within 72 hours or 300 miles, whichever comes first. Provided there has been no damage to the Vehicle, Dealer will refund 100% of the amount paid by the purchaser to the Dealer for the Vehicle. Dealer will provide each purchaser the name and phone number of the Dealer employee to contact to exercise the repurchase option. Dealer will facilitate the purchaser's exercise of the option in good faith, and will use its best efforts to maximize the purchaser's satisfaction with the repurchase experience. Dealer agrees to refund all amounts due to the purchaser within five business days. (iv) Dealer will participate in the emergency repair system established by ABT. The emergency repair system will allows a purchaser of a CyberStore Vehicle who is more than 100 miles from their residence and encounters a situation where the vehicle is not operational (i.e. cannot be driven), to contact the nearest CyberStore Dealer (the "Repairing Dealer") and have the Repairing Dealer perform any warranted service or repair. The Repairing Dealer will contact the dealership where the purchaser acquired its Vehicle (the "Selling Dealer") and obtain an irrevocable Repair Order (an "R.O.") from the Selling Dealer authorizing the repair the vehicle. For other covered items other than those which disabled the vehicle, the owner should return to the Selling Dealer. In the interest of customer satisfaction and improved inter-dealer relations, the resulting R.O. will be calculated on an internal basis of "cost plus 25%" for parts and labor in all states, except for those states with higher mandates, in which states the applicable law will govern. In the event of a "major" repair (i.e. engine or transmission), the Selling Dealer will have the option of providing alternate transportation to the customer, retrieving the affected unit, and repairing the Vehicle at the Selling Dealer's service location. In the event of any dispute between the Selling Dealer and the Repairing Dealer, ABT will act as mediator. In such circumstance, ABT's decisions will be final and binding upon both parties. (v) Dealer agrees to adopt ABT sales procedures on Vehicle sales instituted through ABT's CyberStore program, including firm phone price quotes not to exceed the posted price, advanced document preparation, a "no-hassle-no-haggle" sales style and to take any other actions necessary to minimize the time spent by the Prospect in closing the transaction. Dealer will respond to the Prospect's inquiries within 24 hours from Dealer's receipt of the inquiry from ABT. Dealer's initial response will be by telephone and will disclose all "Dealer Information," as that term is defined in the Master Subscription Agreement. Dealer agrees that all terms and conditions contained in the Dealer Information transmitted to a Prospect shall remain in full force and effect and will be binding for a period of seven (7) days after its transmittal, provided the identified vehicle still remains available for sale. 2. DEALER EQUIPMENT. In order to assure consistent, high quality service by all dealers participating in the CyberStore, ABT reserves the right to specify the equipment and software required by participating dealers. Dealer will provide at their own expense the computer and equipment and receive the services provided in this Agreement as specified by ABT including the ABT Dealer Real Time 2(TM) program. Dealer AT their own expense, will maintain all of its specified equipment in good and proper working order. Dealer will assume all responsibility for loss, damage and maintenance of Dealer's equipment and hereby holds ABT, its officers, directors, agents and other representatives harmless from any claim concerning the specified equipment. 3. DEALER REPORTS. On a monthly basis, Dealer will report to ABT the number and names of Prospects who purchased used vehicles from Dealer, the number of used vehicles financed and the amounts financed and any other information ABT may request. 4. SUBSCRIPTION FEES. Dealer may publish an unlimited number of vehicles (images) on the CyberStore for a subscription fee of [ ] per month, which amount shall be due and payable in advance on the first day of each month. For each vehicle, Dealer shall publish one digital image together with relevant information in accordance with the Agreement. Such images shall be produced by Dealer in accordance with the Specifications and Guidelines set forth in Section 5 below. Upon receipt of an executed copy of this Amendment, ABT shall ship to Dealer a digital camera of ABT's choice, for the purposes of producing images of vehicles for publishing on the CyberStore. 5. SPECIFICATIONS AND GUIDELINES: All vehicle images shall (i) contain the vehicle as the sole subject matter of the image, and shall not contain any people, images of people, graphics, photos, artwork, overlays, signs, numbers, banners, balloons or any form of visual advertisement, or any other image that would have the effect of distracting from the vehicle; (ii) be side or angular photographs; and (iii) be true and correct images of the vehicle, without retouching, modification, manipulation or enhancement. 6. DIGITAL CAMERAS: ABT shall provide the dealer for their use, a Digital Camera for the first six-(6) months. Upon the conclusion of a six-(6) month of paid subscription term title and possession of this camera shall transfer to the Dealer. In the event Dealer shall cancel this subscription before the sixth (6th) month anniversary, Dealer shall promptly pay ABT the sum of [ ]. Accepted: [Legal Name] Dealer Principal: ______________________________________ Date: _________________ [AuthAgnt] [Title] 9 ATTENTION DEALER: This is a suggested sample form. Please add all state-mandated disclosures, etc. FRONT SIDE OF FORM WARRANTY [ ] FULL [X] LIMITED WARRANTY. The dealer will pay 100% of the labor and 100% of the parts for the covered systems that fail during the warranty period. See reverse side of this form for the explanation of warranty coverage, exclusions, and the dealer's repair obligations. SYSTEMS COVERED: DURATION: Engine Power steering 90 days or 3000 miles Transmission Power brakes whichever occurs first. Transaxle Air Conditioning Drive line Electrical Rear end *SEE BELOW FOR SYSTEMS AND PARTS COVERAGE. TRAVEL REPAIR PROVISION. A vehicle purchased through the Used Car CyberStore that becomes inoperative when traveling over 100 miles from the originating dealer will be eligible for repair at Auto-By-Tel accredited dealerships. Travel repair service will be available throughout the U.S. and Canada via the Auto-by-Tel accredited dealer network. On major repairs, the selling dealer has the option of providing the customer with alternate transportation and repairing the unit at the selling dealer's location. A vehicle that is non-operational will be repaired sufficiently to return to the originating dealer where additional repairs can be completed. To take advantage of the Travel Repair Provision, customers may contact the originating dealer who will direct them to the nearest Auto-By-Tel accredited dealership, or inquire through the Auto-By-Tel Website for instructions and directions: www.autobytel.com. PLEASE NOTE: Appearance and convenience items will NOT be covered by the Travel Repair Provision, nor will light bulbs, fuses, alignments, adjustments, switches, oil filters, and other maintenance items. SERVICE CONTRACT. A service contract is available at an extra charge on this vehicle. Ask your Dealer for details as to coverage, deductible, price and exclusions. PRE PURCHASE INSPECTION: ASK the dealer if you may have this vehicle inspected by your mechanic either on or off the lot. AUTO-BY-TEL HOME AND AWAY WARRANTY: - -------------------- ---------- ------------------------ ----- ---------- vehicle make model dealer stock number year vin number 10 BACK SIDE OF FORM [ ] FULL [X] LIMITED WARRANTY. The dealer will pay 100% of the labor and 100% of the parts for the covered systems that fail during the warranty period. The following is the entire representation of coverage, no other systems or parts are suggested or implied. State law may give your additional rights. SYSTEMS COVERED: PARTS COVERED: ENGINE: All internally lubricated parts including timing chains, gears and cover, timing belt, pulleys and cover, oil pump and gears, water pump, valve covers, oil pan, manifolds, flywheel, harmonic balancer, engine mounts, seals and gaskets, engine block, cylinder heads and turbocharger housing if damaged by the failure of internally lubricated parts. TRANSMISSION/TRANSFER CASE: All internally lubricated parts, torque converter, vacuum modulator, transmission mounts, seals and gaskets. (MANUAL CLUTCH ASSEMBLY AND COMPONENT PARTS ARE NOT COVERED) FRONT WHEEL DRIVE: All internally lubricated parts, axle shafts, output shafts, constant velocity joints, front hub bearings, seals and gaskets. REAR WHEEL DRIVE: All internally lubricated parts, propeller shafts, supports and U-joints, drive shafts, axle shafts and bearings, seals and gaskets. BRAKES: Master cylinder, power booster, wheel cylinders, calipers, hydraulic lines and fittings. (ABS COMPONENT PARTS ARE NOT COVERED.) STEERING: Steering gear housing and all internal parts, power steering pump, valve body and rack. ELECTRICAL: Alternator, generator and starter. AIR CONDITIONER Compressor, evaporator core, condenser. ALL SYSTEMS AND PARTS LISTED ARE COVERED 90 DAYS FROM PURCHASE OR 3000 MILES, WHICHEVER OCCURS FIRST. By accepting this warranty, Customer agrees to release Auto-By-Tel from all obligations with respect to the acquisition of covered unit. ____________________________________ ________________________________ AUTO-BY-TEL ACCREDITED DEALER / DATE CUSTOMER SIGNATURE / DATE EX-10.13 8 FINANCING INQUIRY REFERRAL AGREEMENT 10/25/96 1 EXHIBIT 10.13 [*] Confidential treatment has been requested for certain portions of this exhibit. EXECUTION COPY FINANCING INQUIRY REFERRAL AGREEMENT This FINANCING INQUIRY REFERRAL AGREEMENT ("Agreement"), dated as of October 25, 1996, between Chase Manhattan Automotive Finance Corporation, a Delaware corporation ("CAF"), with its principal place of business at 900 Stewart Avenue, Garden City, New York 11530, on the one hand, and Auto-By-Tel Acceptance Corporation ("ABTAC"), a Delaware corporation, with its principal place of business at 18722 MacArthur Blvd., Irvine, CA 92612 and Auto-By-Tel, Inc. ("ABT"), a Delaware corporation, located at 18722 MacArthur Blvd., Irvine, CA 92612, as guarantor of the obligations of ABTAC under this Agreement, (in such capacity, the "Guarantor"). W I T N E S S E T H WHEREAS, ABTAC is in the business of, among other things identifying persons interested in arranging financing for the purchase or lease of new and used Vehicles and trucks ("Vehicles") who visit the ABT Internet website and purchase a new Vehicle ("Customers") and CAF and Chase Manhattan Bank U.S.A., N.A. (hereinafter referred to collectively in the singular as "CAF") is in the business of extending financing to certain persons for the purchase and lease of Vehicles; and WHEREAS, ABTAC desires to refer such Customers to CAF, and CAF desires to purchase from Dealers (as defined herein) retail installment sale contracts originated by such Dealers to finance the purchase of new motor Vehicles only (excluding recreational vehicles) (such transactions, "RFTs") and to pay marketing fees in connection with RFTs purchased by CAF as a result of ABTAC's referrals; NOW THEREFORE, in consideration of the foregoing premises, and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound, ABTAC and CAF agree as follows: SECTION 1. FINANCING PROGRAM (a) ABTAC shall cause to be included on the ABT Website an application for credit containing requests for the information designated by CAF as set forth on Exhibit A hereto (the "Application"). The Application shall request the information specified by CAF and shall be in a form reasonably satisfactory to CAF. CAF may request changes from time to time in the information solicited by the Application and, provided the requests are made in writing and with reasonable notice, 2 ABTAC shall use its best efforts to promptly accommodate such requests; provided, however, that CAF shall use its best efforts not to request changes to the information requested by, or form of, the Application (unless such changes are required by law) more often than once in any three-month period; provided, further, if such changes are required by law, and CAF gives ABTAC 30 days notice, ABTAC shall honor such requested change within such thirty (30) day period. (b) Unless it already has done so, CAF will enter into its standard dealer agreement ("Closing Agreement") with each seller of Vehicles in the United States and the District of Columbia (the "Territory") who has executed an on-line purchase referral agreement with ABT (each, a "Dealer," and together the "Dealers"). The Closing Agreement shall contain customary terms no less favorable to the Dealers than CAF's customary agreements in use with its other financing programs and shall govern the terms upon which the Dealer and CAF will close vehicle financing transactions referred through this Agreement. Upon execution of a Closing Agreement, CAF shall assign such Dealer an identifying number (the "Dealer ID") and inform ABTAC of such number. CAF may terminate its relationship with any Dealer at any time for any reason, subject to the terms and conditions of its Closing Agreement with such Dealer. CAF shall notify ABT if it terminates any such Dealer under the provisions of its Closing Agreement with such Dealer. Notwithstanding the foregoing, CAF shall not be obligated to enter into a Closing Agreement or otherwise do business with any Dealer which CAF has determined it will not do any business. (c) Except as specified to the contrary in this Agreement, ABTAC (i) shall not be a party to, (ii) shall not have any obligations with respect to, and (iii) shall be held harmless by each Dealer and CAF with respect to any losses or liabilities arising from or in connection with, the Closing Agreements. If for any reason the Closing Agreement between a Dealer and CAF is terminated, then CAF shall be under no obligation to approve any Application received from Customers of such Dealer. (d) CAF agrees to offer a buy-rate for each approved Customer credit application at terms no less favorable than those offered to the applicable Dealer by CAF. For each Customer credit application approved, CAF agrees to inform ABTAC of the buy-rate offered to the applicable Dealer for RFTs. On a monthly basis, the buy rate for RFTs purchased from Dealers by CAF that month shall average no higher than 210 basis points over the 18-month treasury (the "Base Range"). CAF may, upon 90 days written notice (a "Base Range Notice") to ABTAC, raise the Base Range. Subject to the ability of CAF to handle the systems issues involved, as reasonably determined by CAF, and pursuant to a methodology to be agreed upon by CAF and ABTAC, from time to time, upon ten (10) business days written request from ABTAC, CAF shall raise the buy rate offered on RFTs, up to a limit 50bps over the life of the term of this Agreement, which raise shall be paid to ABTAC in the form of an increase in the fees paid to ABTAC by CAF pursuant to Section 6. Such increase in fees shall be determined by reference to the present value 2 3 of such rate raise determined in accordance with the assumptions employed by CAF for its valuation of excess spread on the portion of the excess spread CAF retains on such loan. (e) For so long as the "Exclusivity Conditions" (as defined below) are met, CAF shall not enter into any agreement or arrangement similar to this Agreement with any other Internet automobile buying, purchase assistance, or automotive pricing information program or service, whereby the Internet program or service provider receives or solicits credit information from its customers to finance the purchase of new motor vehicles only (excluding recreational vehicles), forwards that information for credit review to CAF and CAF purchases that customer's retail installment sales contract originated by an automobile dealer that has executed an on-line purchase or financing referral agreement or similar agreement with the Internet program or service provider; provided, however, that (i) CAF's rights to and/or use of IBM's Auto Loan Exchange System for indirect dealer financing shall not violate the provisions of this Section 1(e); and (ii) CAF, any affiliate of CAF or any person controlled by or under common control with CAF may, after the date hereof, acquire control (through merger, acquisition, consolidation or purchase of all or substantially all of the assets) of any corporation or other entity (other than a corporation or entity which has as its primary line of business services substantially similar to ABT and ABTAC) which at the time of such acquisition is engaged in a business or service substantially similar to that contemplated by this Agreement, so that such corporation or entity (including the surviving or continuing entity in any acquisition effective on a merger, consolidation or purchase of assets) shall not violate the provisions of this Section 1(e). CAF shall not use or participate in the use of the ABTAC Marks (as defined in Schedule 2) in conjunction with the offering or making of any automobile finance product or product related thereto on the Internet. For purposes of this Agreement, the term "Exclusivity Conditions" shall mean the occurrence of the following two conditions: (i) ABTAC forwards to CAF not less than 51% of the Applications for RFTs ABTAC receives from Customers who qualify for financing from or through ABTAC within the Base Range; and (ii) Of the Applications received by CAF from ABTAC, not less than 30% result in an RFT purchased from a Dealer. (f) From time to time, ABTAC shall forward to CAF Applications received from Customers. CAF shall review each forwarded Application and, if such Application does not represent a credit which CAF will approve within the Base Range, CAF shall so inform ABTAC and ABTAC may forward such Application to another financing source. 3 4 (g) ABTAC will be responsible for informing Dealers of the nature of CAF's financing program. ABTAC will provide CAF with a list of the Dealers with addresses so that CAF may forward Closing Agreements to them for signature. CAF shall provide ABTAC with a copy of the form of Closing Agreement. (h) ABTAC shall comply at all times with the provisions of the federal Fair Credit Reporting Act and the Equal Credit Opportunity Act as well as the so-called "fair lending" laws, in each case pertaining to the performance of its obligations under this Agreement: including but not limited to the following: (A) ABTAC will not submit any Application or credit information to CAF with respect to applicants if ABTAC has any knowledge that such Application, credit information or applicant is fraudulent, or that the Application or credit information contains information which ABTAC knows is untrue; and (B) ABTAC will, on its Website, advise each applicant that his/her Application may be submitted to Chase Manhattan Bank USA, N.A., 802 Delaware Avenue, Wilmington DE 19801, or such other address as CAF may specify from time to time. SECTION 2. RECEIPT AND TRANSMISSION OF APPLICANT INFORMATION (a) Subject to the provisions of Section 1 (f), ABTAC will transmit each completed Application to CAF by telephone, telefax, e-mail, or other electronic or agreed upon means. When transmitting an Application to CAF, ABTAC will also designate the Dealer that is to be notified of the credit decision. (b) ABTAC will not use any such information in any manner which violates applicable law in effect from time to time. SECTION 3. UNDERWRITING (a) Upon receipt, CAF will review each Application in accordance with its underwriting criteria in effect from time to time. ABTAC acknowledges that CAF has sole discretion in determining whether or not to approve an Application, which discretion CAF agrees to exercise in a manner consistent with its company-wide or market-wide underwriting procedures, as the case may be. CAF shall inform ABTAC whether an Applicant has been approved, conditionally approved or denied, but shall not reveal the reasons it has denied any Application. (b) CAF will complete its review of no less than 50% of the Applications within the two (2) business hours after electronic receipt of the Application and a further 80% of the Applications within four (4) business hours of 4 5 such time. Compliance with these performance standards shall be measured on a monthly basis. If CAF fails to comply with these performance standards, ABTAC's sole remedy shall be to terminate this Agreement pursuant to Section 9(b). CAF's business hours will be 8:00 a.m. to 9:00 p.m. Eastern Time, each day of the year, except for those days banks located in New York are required to close. Subject to the mutual agreement of the parties, the parties shall review the foregoing business hours and expand same if justified economically by business volume. (c) CAF reserves the sole right and power to change the Underwriting Criteria in accordance with sound lending practices consistent with CAF's normal business practices and subject to applicable law, and further to suspend, restrict or modify the purchase of RFTs from Dealers in any portion of the Territory for any reason. CAF shall provide ABTAC with advance written notice, given as early as practicable, of any actions under this clause (c) it plans to implement. Any such actions shall be taken in good faith and only if consistent with actions taken by CAF on a company-wide basis. SECTION 4. COMMUNICATION OF CREDIT DECISIONS At the completion of underwriting, subject to the time-frames set forth in Paragraph 3(b) of this Agreement, CAF will notify ABTAC, [via E-MAIL] or such other method as agreed upon by the parties from time to time, of CAF's credit decision, and ABTAC shall use its best efforts to promptly notify the Dealer and the Applicant on behalf of the Dealer and CAF of CAF's credit decision, and in any event shall notify no less than 80% of such Dealers and Applicants within two business hours. If CAF declines a request for credit, CAF will send to the Applicant any and all notices required pursuant to federal or applicable state law or regulation including, but not limited to, those required under the federal Equal Credit Opportunity Act and Federal Reserve Regulation B. CAF shall not provide Applications received from ABTAC which do not result in an RFT purchase from a Dealer to any other financing source, including without limitation, ProCredit Corp. SECTION 5. CLOSING AND FUNDING CAF and the Dealer shall use its best efforts to close approved financing within 24 business hours after receipt from the Dealer of all properly completed and required documentation pursuant to the terms of the Closing Agreements. CAF will remit the proceeds of each purchased RFT to the related Dealer in a timely manner. 5 6 [*] Confidential Treatment Requested SECTION 6. COMPENSATION (a) During the term of this Agreement, CAF shall pay ABTAC a service fee, in the amounts determined by reference to Exhibit A, and during the term of this Agreement, CAF shall pay to each Dealer a service fee, in the amounts determined by reference to Exhibit A and further subject to the terms of the Closing Agreement for each RFT purchased under the terms of this Agreement. The payment to ABTAC shall be made on the business day following any funding and the payment to Dealer shall be made in accordance with the terms of the applicable Closing Agreement. Dealer may markup CAF's buy rate, up to a maximum of 100 bps, subject to the terms of the Closing Agreement and any applicable agreement between the Dealer and ABTAC, which shall be provided to CAF. Dealers will earn reserves in accordance with CAF's standard practices in connection with any such mark up, subject to the terms of the Closing Agreement. (b) ABTAC may appoint public accountants of its choice no more than once during any 12 month period, and at its sole expense, for the purpose of auditing CAF's compliance with the compensation provisions specified in Section 6 of this Agreement and CAF agrees to grant such accountants access, during normal business hours and upon reasonable notice, to all records necessary to determine the compliance of CAF with the compensation provisions of Section 6 of this Agreement. If the results of such audit reveal a discrepancy between the amounts paid by CAF hereunder and the amounts which should have been paid hereunder, then the appropriate payments shall be made (i) if to ABTAC, immediately, and (ii) if to CAF, by the withholding of 1/6th of such amount from the payments to be made to ABTAC over the succeeding six months with any balance due hereunder payable on the 180th day notwithstanding any termination of this Agreement. If the discrepancy is in ABTAC's favor and exceeds $250,000, then CAF shall reimburse ABTAC for the full cost of the audit. SECTION 7. REPORTS (a) Each business day, via facsimile or such other method as agreed upon by the parties from time to time, CAF will send to ABTAC a report identifying each RFT to an Applicant, sorted by Dealer ID, that was purchased from a Dealer on the preceding day (or, in the case of a report submitted on a Monday, each RFT purchased from a Dealer on each of the three preceding days). (b) On or before the 10th day of each month, via facsimile or such other method as agreed upon by the parties from time to time, CAF will send to ABTAC a report, sorted by Dealer ID, outlining for the preceding month (i) the number of Applications received from ABTAC, (ii) the number of Applications that were approved, (iii) the number of Applications that were denied, (iv) the number of Applications pending at month-end, and (v) the average processing time for 6 7 Applications, and the amount financed under each RFT. In the case of the information set forth in clauses (i), (ii) and (iii) of the preceding sentence, the report shall identify each Application by name of applicant. CAT shall include with such report, a report indicating any Dealers which executed a Closing Agreement and any Closing Agreements which terminated. (c) On or before the 10th day of each month, via facsimile or such other method as agreed upon by the parties from time to time, CAF will send to ABTAC a report on the performance of RFTs purchased from Dealer detailing, for each month this Agreement shall have been in effect, the number and aggregate outstanding balance of (i) RFTs purchased during the month, (ii) RFTs in a current status, (iii) RFTs more than 30 but less than 60 days delinquent, (iv) RFTs more than 60 but less than 90 days delinquent, and (v) RFTs more than 90 days delinquent, (vi) repossessions and repossession ratio, (vii) gross and net charge-offs and loss ratios. This monthly report will be provided on an overall portfolio basis with respect to RFTs purchased from Dealers. (d) ABTAC agrees to maintain complete and accurate books and records and procedures concerning the taking and referral of Applications and credit information and compliance with all applicable law. Throughout the term of this Agreement, and for a period of twenty five (25) months after the termination of this Agreement, CAF, its duly authorized agents, representatives or employees or federal or state agencies having jurisdiction over CAF, may from time to time, upon reasonable notice and during normal business hours, inspect such books, records and procedures to ensure compliance with ABTAC's obligations concerning the taking and referral of Applications and credit information under this Agreement and compliance with all applicable law. (e) On or before the 10th day of each month, via facsimile or such other method as agreed upon by the partners from time to time, ABTAC will send to CAF a report specifying for the preceding month, the number of Applications for RFTs ABTAC receives from customers who qualified that month for financing from or through ABTAC within the Base Range. SECTION 8. INDEMNIFICATION (a) ABTAC shall defend, indemnify and hold harmless CAF and its affiliates and all of its and their officers, directors, owners, agents, attorneys, and employees, from and against any and all loss, liability, claims, counterclaims, damage, cost or expense (including reasonable attorney's fees and costs), whether asserted in a judicial or administrative proceeding, arising out of either (i) a breach of the representations and warranties of ABTAC designated on Schedule 2 as items A(l), A(2), A(3), A(4), A(6) or A(7); (ii) a breach of the provisions of Section 1(h); (iii) the receipt of a Customer's Application information by any person or entity other than CAF or 7 8 another entity that has a business relationship with ABTAC and a permissible purpose to receive such information, by hacking or by any other authorized or unauthorized method, unless such person or entity obtained or received such information directly or indirectly from CAF; or (iv) any gross negligence or intentional misconduct of ABTAC in connection with ABTAC's performance of its obligations under this Agreement. (b) CAF shall defend, indemnify and hold harmless ABTAC and its affiliates and all of its and their officers, directors, owners, agents, attorneys, and employees, from and against any and all loss, liability, claims, counterclaims, damage, cost or expense including reasonable attorney's fees and costs), whether asserted in a judicial or administrative proceeding, arising out of either (i) a breach of the representations and warranties of CAF designated on Schedule 2 as items B(1), B(2), B(3), B(4), B(6) or B(7); or (ii) any gross negligence or intentional misconduct of CAF in connection with CAF's performance of its obligations under this Agreement. (c) Promptly after the receipt by either party hereto of notice of any claim, action, suit or proceeding of any third party which is subject to indemnification hereunder, such party (the "Indemnified Party") shall give written notice of such claim to the party obligated to provide indemnification hereunder (the "Indemnifying Party"), stating the nature and basis of such claim and the amount thereof, to the extent known. Failure of the Indemnified Party to give such notice shall not relieve the Indemnifying Party from any liability which it may have on account of this indemnification or otherwise, except to the extent that the Indemnifying Party is materially and adversely prejudiced thereby. The Indemnifying Party shall be entitled to participate in the defense of and, if it so chooses, to assume the defense of, or otherwise contest, such claim, action, suit or proceeding with counsel selected by the Indemnifying Party and reasonably satisfactory to the Indemnified Party. Upon the election by the Indemnifying Party to assume the defense of, or otherwise contest, such claim, action, suit or proceeding, the Indemnifying Party shall not be liable for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof. Although the Indemnified Party shall have the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnifying Party. Notwithstanding the foregoing, the Indemnifying Party shall be liable for the fees and expenses of counsel employed by the Indemnified Party, if, and only to the extent that (i) the Indemnifying Party has not employed counsel or counsel reasonably acceptable to the Indemnified Party to assume the defense of action within a reasonable time after receiving notice of the commencement of the action, (ii) the employment of counsel and the amount reimbursable therefor by the Indemnified Party has been authorized in writing by the Indemnifying Party or (iii) representation of the Indemnifying Party and the Indemnified Party by the same counsel would, in the opinion of such counsel, constitute a conflict of interest (in which case the Indemnifying Party will not have the right to direct the defense of such action on behalf of the Indemnified Party). The parties shall use commercially reasonable efforts to minimize Losses from claims by third parties and shall act in good faith in responding to, defending against, settling or 8 9 otherwise dealing with such claims, notwithstanding any dispute as to liability as between the parties under this Article 9. The parties shall also cooperate in any such defense, give each other full access to all information relevant thereto and make employees and other representatives available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Whether or not the Indemnifying Party shall have assumed the defense, the Indemnifying Party shall not be obligated to indemnify the other party hereunder for any settlement entered into without the Indemnifying Party's prior written consent, which consent shall not be unreasonably withheld. The Indemnifying Party shall not compromise or settle any claim, action, suit or proceeding, without the consent of the Indemnified Party (which consent shall not be unreasonably withheld) unless the terms of such settlement or compromise release the Indemnified Party from any and all liability with respect to such claim, action, suit or proceeding. SECTION 9. TERM AND TERMINATION (a) This Agreement shall remain in effect for a period of three (3) years from the date hereof unless terminated by either party upon one hundred eighty (180) days prior written notice. This Agreement shall also terminate if required by governmental authority or court of law, but only insofar as this Agreement applies to such jurisdiction affected. (b) If any party shall be in breach of any material obligation under this Agreement and such breach shall remain uncured for a period of thirty (30) days after written notice thereof from the other party (or, if such breach is curable and requires more than thirty (30) days to cure, if such cure is not commenced within thirty (30) days and thereafter diligently prosecuted), then the other party may, by written notice sent, terminate this Agreement upon 30 days after delivery of such notice. Non-payment of amounts due under this Agreement shall be deemed to be a breach of a material obligation hereunder, but institution of suit for payment of amounts due under this Agreement shall not be deemed to be an automatic termination hereunder. Notwithstanding anything in this Agreement to the contrary, either party has the right to terminate this Agreement immediately, upon written notice to the other party, if the other party's breach of any material obligation of this Agreement causes the non-breaching party to be in violation of any applicable law, rule, regulation or order. (c) ABTAC may terminate this Agreement on thirty (30) business days notice at any time between the receipt of a Base Range Notice and the date specified in such notice for the increase in the Base Range. (d) Notwithstanding paragraph 9(a) above, CAF may terminate this Agreement on thirty (30) days written notice if, on the first business day of any calendar month, the Exclusivity Conditions have not been met during the most 9 10 recently completed six (6) month period, measured on a weighted average basis. For any six month period, CAF's right under this Section 9(d) shall expire on the fifteenth day of the month following the end of such period, but shall have no effect on any right CAF may have to terminate under any other provision of this Agreement. (e) At any party's option, and upon written notice of exercise of the option, this Agreement shall terminate upon the voluntary or involuntary bankruptcy or insolvency of a party, the voluntary or involuntary dissolution or liquidation of a party, the admission in writing by a party of its inability to pay its debts as they mature, or the assignment by a party for the benefit of creditors. SECTION 10. NOTICES All notices or transmissions pursuant to this Agreement, unless otherwise specified, shall be by facsimile transmission, by personal delivery, or by registered or certified mail, return receipt requested, to the addresses of the parties listed on Schedule 1 hereto, or such other address as any party listed below shall specify in writing to the others in a notice conforming to this Section. SECTION 11. GUARANTEE The Guarantor hereby unconditionally and irrevocably guarantees to CAF, its successors, endorsees and assigns, the performance when due of all present and future obligations and liabilities of all kinds of ABTAC arising out of or in connection with the Agreement, whether due or to become due, secured or unsecured, absolute or contingent, joint or several ("Obligations"). The Guarantor agrees that CAF and ABTAC may mutually agree to modify the Obligations or any agreement between CAF and ABTAC without in any way impairing or affecting this Guarantee. The Guarantor agrees that the liability hereunder will not be affected by any settlement, extension, renewal, or modification of this Agreement or by the discharge or release of the Obligations of ABTAC, whether by operation of law or otherwise. The Guarantor agrees to also be liable for all fees and costs, including reasonable attorney's fees, incurred by CAF in enforcing the terms of this guarantee. SECTION 12. REPRESENTATIONS, GENERAL The representations and warranties set forth on Schedule 2 to this Agreement and the provisions of general application set forth on Schedule 3 to this Agreement are incorporated herein by reference and shall have the same force and effect as if set forth herein in their entirety. 10 11 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized officer on the date first above written. CHASE MANHATTAN AUTOMOTIVE FINANCE CORPORATION By: /s/ [SIG] ------------------------------------------- Title: President ---------------------------------------- AUTO-BY-TEL ACCEPTANCE CORPORATION By: ------------------------------------------- Title: ---------------------------------------- AUTO BY-TEL, INC., as Guarantor By: ------------------------------------------- Title: ---------------------------------------- 11 12 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized officer on the date first above written. CHASE MANHATTAN AUTOMOTIVE FINANCE CORPORATION By: ------------------------------------------- Title: ---------------------------------------- AUTO-BY-TEL ACCEPTANCE CORPORATION By: /s/ [SIG] ------------------------------------------- Title: Chief Operating Officer ---------------------------------------- AUTO BY-TEL, INC., as Guarantor By: /s/ [SIG] ------------------------------------------- Title: President ---------------------------------------- 12 13 [*] Confidential Treatment Requested EXHIBIT A to Financing Inquiry Referral Agreement, dated as of October 25, 1996, between Chase Manhattan Automotive Finance Corporation, and Auto-By-Tel Acceptance Corporation and Auto-By-Tel, Inc., as guarantor (the "Agreement") COMPENSATION SCHEDULE Capitalized terms used in this Exhibit and not defined herein shall have the meanings ascribed thereto in the Agreement. The following compensation shall be paid for each financing contract (RFT or lease) funded pursuant to the Agreement: Fee to ABTAC ------------ Amount Financed Flat Fee --------------- -------- $25,000 + $125 15,001 - 25,000 100 10,000 - 15,000 50 < $10,000 0 Fee to Dealer ------------- Amount Financed Flat Fee --------------- -------- $25,000 + $75 15,001 - 25,000 50 10,000 - 15,000 25 < $10,000 25 Contracts or title documents which have to be returned to the Dealer for the correction of errors and omissions will not require payment, and will not be funded, until corrected documents are received and accepted by CAF. All amounts paid to Dealer shall be subject to the terms of the Closing Agreements. Exhibit A - Page 1 of 1 14 SCHEDULE 1 to Financing Inquiry Referral Agreement, dated as of October 25, 1996, between Chase Manhattan Automotive Finance Corporation, and Auto-By-Tel Acceptance Corporation and Auto-By-Tel, Inc., as guarantor (the "Agreement") NOTICES Capitalized terms used in this Schedule and not defined herein shall have the meanings ascribed thereto in the Agreement. If to CAF: Chase Manhattan Automotive Finance Corporation 900 Stewart Avenue Garden City, New York 11530 Attention: Anthony Langan, Marketing Executive, or his successor If to ABTAC: AUTO-BY-TEL ACCEPTANCE CORPORATION 18722 MacArthur Blvd. Irvine, CA 92612 Attention: Peter Ellis, President, or his successor If to ABT: AUTO-BY-TEL, INC. 18722 MacArthur Blvd. Irvine, CA 92612 Attention: Peter Ellis, President, or his successor Schedule 1 - Page 1 of 1 15 SCHEDULE 2 to Financing Inquiry Referral Agreement, dated as of October 25, 1996, between Chase Manhattan Automotive Finance Corporation, and Auto-By-Tel Acceptance Corporation and Auto-By-Tel, Inc., as guarantor (the "Agreement") REPRESENTATIONS AND WARRANTIES Capitalized terms used in this Schedule and not defined herein shall have the meanings ascribed thereto in the Agreement. (A) Representations and Warranties of ABTAC. ABTAC hereby makes the following representations and warranties to CAF: (1) ABTAC has been duly organized and is validly existing as a corporation under the laws of the state of Delaware and is duly licensed where required as a "Licensee" or is otherwise qualified in each state in which it transacts business and is not in default of such state's applicable laws, rules and regulations, except where the failure to so qualify or such default would not have a material adverse effect on its ability to conduct its business or to perform its obligations under the Agreement. (2) ABTAC has the requisite power and authority and legal right to execute and deliver the Agreement, engage in the transactions contemplated by the Agreement, and perform and observe those terms and conditions of the Agreement to be performed or observed by it hereunder. The person signing the Agreement, and any document executed pursuant to it, on behalf of ABTAC has full power and authority to bind ABTAC. The execution, delivery and performance of the Agreement, and the performance by ABTAC of all transactions contemplated therein, have been duly authorized by all necessary and appropriate corporate action on the part of ABTAC. (3) The Agreement has been duly authorized and executed by ABTAC and is valid, binding and enforceable against ABTAC in accordance with its terms, except that such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws (whether statutory, regulatory or decisional) now or hereafter in effect relating to creditors' rights generally, and the execution, delivery and Schedule 2 - Page 1 of 3 16 performance by ABTAC of the Agreement do not conflict with any term or provision of (i) its certificate of incorporation or bylaws, (ii) any law, rule, regulation, order, judgment, writ, injunction or decree applicable to ABTAC of any court, regulatory body, administrative agency or governmental body having jurisdiction over ABTAC or (iii) any agreement to which ABTAC is a party or by which its property is bound. (4) No consent, approval, authorization or order of, registration or filing with, or notice to any governmental authority or court is required under applicable law in connection with the execution, delivery and performance by ABTAC of the Agreement. (5) There is no action, proceeding or investigation pending or, to the best knowledge of ABTAC, threatened against it before any court, administrative agency or other tribunal (i) asserting the invalidity of the Agreement, (ii) seeking to prevent the consummation of any of the transactions contemplated by the Agreement, or (iii) which could reasonably be expected to materially and adversely affect its performance of its respective obligations under, or the validity or enforceability of, the Agreement. (6) ABTAC has all regulatory approvals, authorizations, licenses, permits and other permissions, consents and authorities whatsoever, needed to operate the ABT Website and perform ABTAC's obligations under the Agreement. (7) ABTAC warrants that it has the legal and valid right to use any registered or unregistered trademark, tradename, service mark, logo, emblem or other proprietary designation, or any variations, derivatives and modifications thereof, used by it in the materials provided to CAF or used by ABTAC in connection with the Agreement (the "ABTAC Marks"). (B) Representations and Warranties of CAF. CAF hereby makes the following representations and warranties to ABTAC: (1) CAF is duly licensed where and as required in each state in which it transacts business and is not in default of such state's applicable laws, rules and regulations, except where such default would not have a material adverse effect on the ability of CAF to conduct its business or to perform its obligations under the Agreement. (2) CAF has the requisite power and authority and legal right to execute and deliver, engage in the transactions contemplated by, and perform and observe the terms and conditions of, the Agreement. The person or persons signatory to the Agreement and any document executed pursuant to it on behalf of CAF have full power and authority to bind CAF. The execution, delivery and performance of the Agreement, and the performance by CAF of all transactions contemplated therein, have Schedule 2 - Page 2 of 3 17 been duly authorized by all necessary and appropriate and corporate action on the part of CAF. (3) The Agreement has been duly authorized and executed by CAF and is valid, binding and enforceable against CAF in accordance with its terms, except that such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws (whether statutory, regulatory or decisional) now or hereafter in effect relating to creditors' rights generally, and the execution, delivery and performance by CAF of the Agreement do not conflict with any term or provision of the certificate of incorporation or bylaws of CAF, or any law, rule, regulation, order, judgment, writ, injunction or decree applicable to CAF of any court, regulatory body, administrative agency or governmental body having jurisdiction over CAF. (4) No consent, approval, authorization or order of, registration or filing with, or notice to any governmental authority or court is required under applicable law in connection with the execution, delivery and performance by CAF of the Agreement. (5) There is no action, proceeding or investigation pending or, to the best knowledge of CAF, threatened against it before any court, administrative agency or other tribunal (i) asserting the invalidity of the Agreement, (ii) seeking to prevent the consummation of any of the transactions contemplated by the Agreement, or (iii) which could reasonably be expected to materially and adversely affect the performance by CAF of its obligations under, or the validity or enforceability of, the Agreement. (6) CAF warrants that it has all regulatory approvals, authorizations, licenses, permits and other permissions, consents and authorities whatsoever, as needed (i) to offer and enter into the financing arrangements with Customers contemplated by the Agreement in each jurisdiction in the Territory and to otherwise perform its obligations under the Agreement, and (ii) to use any materials developed, provided or used by CAF in connection with the Agreement. (7) CAF warrants that it has the legal and valid right to use any registered or unregistered trademark, tradename, service mark, logo, emblem or other proprietary designation, or any variations, derivatives and modifications thereof, used by it in any materials provided to ABTAC or used by CAF in connection with the Agreement. Schedule 2 - Page 3 of 3 18 SCHEDULE 3 to Financing Inquiry Referral Agreement, dated as of October 25, 1996, between Chase Manhattan Automotive Finance Corporation, and Auto-By-Tel Acceptance Corporation and Auto-By-Tel, Inc., as guarantor (the "Agreement") PROVISIONS OF GENERAL APPLICABILITY Capitalized terms used in this Schedule and not defined herein shall have the meanings ascribed thereto in the Agreement. (a) Entire Agreement. Except as specified in paragraph (b) of this Schedule 3, the Agreement and the exhibits and schedules thereto constitute the entire agreement of the parties, and may be amended from time to time only upon the execution of a written amendment by the parties. The indemnities of Section 8 of the Agreement shall survive the termination thereof. (b) Confidentiality. Both ABTAC and CAF have made and will continue throughout the term of the Agreement to make available to the other party confidential and proprietary materials and information ("Proprietary Information"). Prospectively, each party shall advise the other of material and information that is confidential and/or proprietary. Proprietary Information does not include materials or information that: (a) are already, or otherwise become, generally known by third parties as a result of no act or omission of the receiving party; (b) subsequent to disclosure hereunder are lawfully received from a third party having the right to disseminate the information and without restriction on disclosure; (c) are generally furnished to others by the disclosing party without restriction on disclosure; (d) were already known by the receiving party prior to receiving them from the disclosing party and were not received from a third party in breach of that third party's obligations or confidentiality; or (e) are independently developed by the receiving party without use of confidential information of the disclosing party. (i) Each party shall maintain the confidentiality of the other's Proprietary Information and will not disclose such Proprietary Information without the written consent of the other party unless required to by law, rule, regulation or court Schedule 3 - Page 1 of 3 19 order of any applicable jurisdiction. Each party shall also keep confidential the terms of the Agreement and/or schedule hereto. The confidentiality provisions of the Agreement shall survive the termination of the Agreement. Notwithstanding any contrary provision of the Agreement, the confidentiality provisions of the two confidentiality agreements executed by the parties hereto prior to the date of the Agreement shall remain in full force and effect. (ii) Notwithstanding any contrary provision of the Agreement, as long as each party protects Proprietary Information of the other, neither the exposure to the other party's confidential information nor its ownership of work products shall prevent either party from using ideas, concepts, expressions, know-how, skills and experience possessed by either party prior to its association with the other party or developed by either party during its association with the other party. (c) Limitation of Liability. In no event shall either party be liable to the other party for any incidental, special, exemplary or consequential losses or damages of any kind whatsoever (including but not limited to lost profits), even if advised of the possibility of such losses or damages and regardless of the form of action. (d) Assignment. Either party shall have the right to transfer or assign the Agreement to any direct or indirect wholly-owned subsidiary at no charge or penalty; provided, however, that such assignee assumes assignors obligations, and assignee remains liable hereunder. (e) Waiver. Neither party shall be deemed to be in default of any provision of the Agreement or be liable to the other party or to any third party for any delay, error, failure in performance or interruption of performance resulting directly or indirectly from causes beyond that party's reasonable control. The period of performance shall be extended to such extent as may be appropriate after the cause of the delay has been removed. If any excusable delay or failure to perform by a party exceeds thirty (30) days, the other party shall have the right to terminate the Agreement without liability. (f) Severability. If any provision of the Agreement is declared or found to be illegal, unenforceable or void, then both parties shall be relieved of all obligations arising under such provision, but only to the extent that such provision is illegal, unenforceable or void, it being the intent and agreement of the parties that the Agreement shall be deemed amended by modifying such provision to the extent necessary to make it legal and enforceable while preserving its intent or, if that is not possible, by substituting therefore another provision that is legal and enforceable and achieves the same objective. Each party agrees that it will perform its obligations hereunder in accordance with all applicable laws, rules and regulations now or hereafter in effect. Schedule 3 - Page 2 of 3 20 (g) Arbitration. The parties acknowledge that the Agreement evidences a transaction involving interstate commerce. Any controversy or claim arising out of or relating to the Agreement, or the breach of the same, shall be settled through consultation and negotiation in good faith and a spirit of mutual cooperation. However, if those attempts fail, the parties agree that any misunderstandings or disputes arising from the Agreement shall be decided by arbitration which shall be conducted, upon request by either party, in Orange County, California, before three (3) arbitrators (unless both parties agree on one (1) arbitrator) designated by the American Arbitration Association (the "AAA"), in accordance with the terms of the Commercial Arbitration Rule of the AAA, and, to the maximum extent applicable, the United States Arbitration Act (Title 9 of the United States Code), or if such Act is not applicable, any substantially equivalent state law. The parties further agree that the arbitrator(s) (i) will decide which party must bear the expense, of the arbitration proceedings; (ii) shall not have the authority to award punitive damages; and (iii) shall apply the internal laws of the State of California. Notwithstanding anything herein to the contrary, either party may proceed to a court of competent jurisdiction to obtain injunctive relief at any time. (h) Force Majeure. Neither party shall be deemed to be in default of any provision of the Agreement or be liable to the other party or to any third party for any delay, error, failure in performance or interruption of performance resulting directly or indirectly from causes beyond that party's reasonable control. The period of performance shall be extended to such extent as may be appropriate after the cause of the delay has been removed. (i) Media Releases. ABTAC and CAF may utilize media releases to publicize their business relationship with the prior approval of the other party which shall not be unreasonably withheld. ABTAC and CAF shall not use any trade name, service mark or any other information which identifies the other in sales, marketing, advertising and publicity materials placed in any medium without obtaining the prior written approval of the other. (j) Governing Law. The Agreement shall be governed by and construed in accordance with the laws of the State of California, without regard to conflicts of law principles. (k) No Agency: No Joint Venture. Neither of ABTAC nor CAF is the agent or representative of the other. Nothing contained herein nor the acts of the parties hereto shall be construed to create a partnership, agency or joint venture between ABTAC and CAF. (l) Counterparts. The Agreement may be signed in two or more counterparts, each of which shall be deemed an original, and taken together they shall be considered one agreement. Schedule 3 - Page 3 of 3 EX-10.14 9 MARKETING & APPLICATION PROCESSING AGREEMENT 1 EXHIBIT 10.14 MARKETING AND APPLICATION PROCESSING AGREEMENT This MARKETING AND APPLICATION PROCESSING AGREEMENT ("Agreement"), dated as of February 1, 1997, between General Electric Capital Auto Financial Services, Inc. ("GECAFS"), a Delaware corporation with its principal place of business at 600 Hart Road, Barrington, Illinois, and Auto-By-Tel Acceptance Corporation ("ABTAC") and Auto-By-Tel Corporation ("ABT") (as guarantor of the obligations of ABTAC under this Agreement, in such capacity, the "Guarantor"), each a Delaware corporation with its principal place of business at 18872 MacArthur Boulevard, Suite 200, Irvine, California 92612. WITNESSETH: WHEREAS, ABTAC is in the business of, among other things marketing financial services to persons interested in arranging financing for the lease of new and used motor vehicles ("Vehicles") who visit the ABT Internet website ("Customers") and GECAFS and its affiliates are in the business of purchasing leases of Vehicles from authorized dealers in the business of leasing such goods; and WHEREAS, ABTAC desires to promote the services of GECAFS to certain such Customers in exchange for a marketing fee, and GECAFS desires to purchase leases and is willing to pay such fees, in connection with new lease accounts opened as a result of ABTAC's marketing; NOW, THEREFORE, in consideration of the foregoing premises, and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound, ABTAC and GECAFS agree as follows: SECTION 1. FINANCING PROGRAM (A) ABTAC will cause to be included on the ABT Website, along with specific identification of GECAFS as a participating lender in form and content reasonably satisfactory to GECAFS, either an application in a form reasonably satisfactory to GECAFS, substantially as set forth on Exhibit A hereto, or a non-specific credit application soliciting information requested by GECAFS. (Each such completed application is referred to herein as a "GECAFS Application" and each Customer who completes a GECAFS Application is referred to herein as an "Applicant.") GECAFS may, from time to time, request changes in the information solicited by such application and ABTAC will use its best efforts to accommodate such requests. GECAFS will be under no obligation hereunder with respect to any GECAFS Application which does not solicit the information requested by GECAFS. (B) GECAFS will offer to enter into a contract purchase agreement ("Closing Agreement") with each seller of Vehicles in the continental United States (excluding Alaska and Hawaii) and the District of Columbia ("United States") who has executed an on-line purchase request referral agreement with ABT and who otherwise meets GECAFS's standards for such relationships ("Dealer(s)"). ABTAC will assist GECAFS in securing signed Closing Agreements with Dealers and will provide GECAFS with the address of each Dealer to facilitate this process. The Closing Agreement will contain customary terms no less favorable to the Dealers than GECAFS's customary agreements in use with its other leasing programs and will govern the terms upon which the Dealer and GECAFS will close the Vehicle leasing transactions the subject of this Agreement (Contracts"). ABTAC agrees, subject to its reasonable business judgment and available resources, to promote its leasing programs to Dealers and to support, assist and cooperate with GECAFS in the marketing of this program, and its proper execution, to Dealers. Upon execution of a Closing Agreement, GECAFS will assign such Dealer an identifying number (the "Dealer ID") and inform ABTAC of such number. GECAFS will be responsible for informing Dealers of the nature of its leasing programs. ABTAC will be responsible for informing Dealers of the nature of its services and the differences, if any, between the programs described by GECAFS and the ABTAC programs. 2 (C) ABTAC will not be a party to, will have no obligations with respect to and will be held harmless by GECAFS with respect to any act or omission by GECAFS which gives rise to any losses or liabilities arising from or in connection with the Closing Agreements. If for any reason the Closing Agreement between a Dealer and GECAFS is terminated, then GECAFS will be under no obligation to approve any application received from customers of such Dealer. (D) GECAFS agrees to provide each Applicant lease rates and terms not less favorable to Applicants than those offered by GECAFS to similar customers in its customary lease programs unless ABTAC requests, and GECAFS agrees to offer, less favorable terms. The standard money factor used to derive a monthly payment for any Contract will be the rate factor announced by GECAFS from time to time in its sole discretion as the minimum rate factor acceptable to GECAFS. Upon ten business days' prior written notice, ABTAC may request that GECAFS increase such rate factor, for such Contracts purchased by GECAFS and for such period as ABTAC may specify, by an amount which will result in a remittance to ABTAC, in accordance with Section 6 hereof, of a certain sum requested by ABTAC, not to exceed $100 unless otherwise agreed, for each applicable Contract purchased by GECAFS during such period. (E) Each GECAFS Application received by ABTAC with respect to which GECAFS is competitive will be forwarded to GECAFS for review until such time as the volume targets set forth in Section 1(F) are achieved. As used herein, "competitive" will mean cases in which the Applicant's monthly Contract payment under the standard GECAFS program applicable to such Contracts would be not more than $10 greater than the lowest monthly Contract payment otherwise available to the Applicant, all other Contract terms being equal, from any other source of financing with whom ABTAC is then doing business under the same or similar terms as ABTAC's agreement with GECAFS. "Competitiveness" will be determined as accurately as possible in good faith with reference to available data. GECAFS and ABTAC each reserves the right to audit the process by which "competitiveness" is determined. If GECAFS declines to proceed with the transaction as described, GECAFS will return such GECAFS Application to ABTAC for additional information or forwarding to another financing source, as the case may be. If ABTAC requests, GECAFS will cooperate with ABTAC in developing a screening methodology based upon GECAFS's underwriting criteria then in effect which would enable ABTAC to forward to GECAFS only those GECAFS Applications meeting an agreed-upon subset of credit criteria and to forward the remaining applications to other financing sources. Such responsibilities are illustrated by the Process Map attached hereto as Exhibit B, as may be modified from time to time. GECAFS and ABTAC have agreed upon the responsibilities of each in developing the tools necessary to implement this Process Map and this Agreement. (F) The terms of this Agreement are based in part upon the expectation by GECAFS of monthly Contract volume targets of 1000, 1250 and 1500, respectively, during the first three years of this Agreement and upon the expectation of ABTAC of providing such volume. The standard for "competitiveness" set forth above and volume targets will be subject to review after six months, and periodically thereafter, based upon the extent to which those expectations are being realized. SECTION 2. RECEIPT AND TRANSMISSION OF APPLICANT INFORMATION (A) Subject to the provisions of Section 1, ABTAC will transmit each completed GECAFS Application to GECAFS by telephone, telefax, e-mail, or other electronic or agreed-upon means. Also subject to the provisions of Section 1, ABTAC is under no obligation to screen or review any GECAFS Application before transmission to GECAFS; provided, however, that ABTAC agrees not to transmit incomplete Applications or Applicant information that ABTAC actually knows to be false or misleading in any material respect. 2 3 (B) ABTAC also agrees to subject Applicant information to the security and confidentiality procedures consistent with its corporate policies in effect from time to time. ABTAC will not use any such information in any manner which violates applicable law in effect from time to time and will keep communications from GECAFS to Applicants or Dealers confidential. (C) GECAFS acknowledges and agrees that ABTAC has no liability, duty or obligation with respect to the processing, underwriting, funding, or closing of any lease. Except as set forth herein, ABTAC will have no responsibility for, and makes no representation or warranty in connection with, the truth or accuracy of the information provided by or on behalf of any Applicant or in the GECAFS Application or regarding the eligibility of the Applicant for a lease. (D) ABTAC will not make, and will use its best efforts to keep any of its employees or agents from making, any oral or written statement to Applicants or Dealers that would discourage, on a basis prohibited by law, an Applicant from making or pursuing any transaction contemplated by this Agreement. SECTION 3. UNDERWRITING (A) Upon receipt, GECAFS will review each GECAFS Application in accordance with its underwriting criteria and applicable law. GECAFS will approve all GECAFS Applications meeting the underwriting criteria unless, in accordance with its usual practice of applying GECAFS's underwriting policies, the Applicant is otherwise not creditworthy. ABTAC acknowledges that GECAFS has sole discretion in determining whether or not to approve a GECAFS Application, which discretion GECAFS agrees to exercise in a manner consistent with its customary underwriting procedures in effect from time to time. (B) The goal of GECAFS will be to complete its review within four hours after electronic receipt of a GECAFS Application but, absent unusual circumstances, such review will be completed not later than the following business day. (C) GECAFS reserves the sole right and power to change the underwriting criteria in accordance with GECAFS's normal business practices and subject to applicable law, and further to suspend, restrict or modify the purchase of leases in any portion of the United States for regulatory reasons. GECAFS will provide ABTAC with advance written notice, given as early as practicable, of any actions it plans to implement under this Section. Any such actions will be taken in good faith. SECTION 4. COMMUNICATION OF CREDIT DECISIONS At the completion of underwriting as set forth in Section 3(B) of this Agreement, GECAFS will notify ABTAC of GECAFS's credit decision. ABTAC will notify the Dealer and the Applicant on behalf of GECAFS, in the case of approval, and the Applicant in the case of disapproval. If GECAFS declines a request for credit, GECAFS will send to the Applicant any and all notices required, but only those required, pursuant to federal or applicable state law or regulation including, but not limited to, those required under the federal Equal Credit Opportunity Act and Federal Reserve Regulation B. SECTION 5. CLOSING AND FUNDING After the notification to the Dealer and Applicant, ABTAC will have no responsibility under this Agreement to any of the Dealer (except as set forth in Section l(B)), the Applicant or GECAFS. GECAFS will use its best efforts to close all approved Contracts and will, absent unusual circumstances, remit the proceeds of each Contract to the related Dealer within two business days following compliance with all requirements for submission of Contracts under the terms of the applicable Closing Agreement. Contracts submitted incorrectly with respect to the parameters of the ABTAC program will not be accepted by GECAFS but will be corrected by agreement with the Dealer or returned to the Dealer for correction and resubmission provided, however, that GECAFS may afford 3 4 the Dealer the benefit of any GECAFS program available to its dealers from time to time the effect of which does not adversely affect the applicant's rate. GECAFS will advise ABTAC of the existence and provisions of such programs. ABTAC will assist GECAFS in encouraging Dealers to resubmit such corrected Contracts to GECAFS for approval and not to other lenders. SECTION 6. COMPENSATION During the term of this Agreement, GECAFS will pay to ABTAC a marketing fee of $100 for each Contract that is funded under the terms of this Agreement. GECAFS will use its best efforts to effect such payment, and any amount payable pursuant to Section 1.D. hereof, weekly for Contracts funded in the prior period but in no event will compensation for any Contract be paid more than 30 days after funding. ABTAC will be responsible for compensating the associated Dealer in accordance with its on-line purchase referral agreement with such Dealer. SECTION 7. REPORTS (A) On or before the 10th day of each month, GECAFS will transmit electronically to ABTAC a report, sorted by Dealer ID and identifying the name of each Applicant, outlining for the preceding month: (1) the number of GECAFS Applications received from ABTAC, (2) the number of GECAFS Applications that were approved and funded, (3) the number of GECAFS Applications pending at month-end and (4) the number and aggregate outstanding balance of Contracts funded during the effectiveness of this Agreement. GECAFS will include with such report a report indicating any Dealers which executed a Closing Agreement and any Closing Agreements which terminated during the preceding month. (B) On the effective date of this Agreement, ABTAC will advise GECAFS in writing of all sources of financing with whom ABTAC is doing business in the same or similar fashion as GECAFS. On or before the 10th day of each month, ABTAC will advise GECAFS in writing of any additions or deletions to such list. In addition, on or before the 10th day of each month, ABTAC will transmit electronically to GECAFS a report outlining for the preceding month: (1) total "purchase requests," (2) total "hits" on the "lease screen," (3) total lease applications submitted to ABTAC, and (4) total Applications. ABTAC will include with such report a report indicating any Dealers which executed an on-line purchase request referral agreement and any such agreements which terminated during the preceding month. (C) GECAFS and ABTAC will meet periodically, upon reasonable request, to review all aspects of the program. GECAFS agrees to discuss with ABTAC, not less than quarterly, at least the following aggregate portfolio performance information for the ABTAC leases: (1) the number and aggregate outstanding balance of Contracts funded during the effectiveness of this Agreement, (2) Contracts in a current status, (3) Contracts more than 30 but less than 60 days delinquent, (4) Contracts more than 60 but less than 90 days delinquent, (5) Contracts more than 90 days delinquent, and (6) repossessions and repossession ratio. ABTAC will keep such information strictly confidential and will hold GECAFS harmless for any inaccuracy in such data. GECAFS will also discuss, in accordance herewith, any other aggregate portfolio performance information for the ABTAC leases which it makes available to any unaffiliated third party. SECTION 8. STANDARDS FOR TRANSMITTING INFORMATION GECAFS will either provide or make available to ABTAC its unique code sets and edit procedures on a periodic basis as deemed necessary by GECAFS to permit performance hereunder. ABTAC will transmit all Applications and other information to GECAFS in the pre-defined format utilizing such GECAFS code sets and in accordance with such parameters, all as set forth in Exhibit C attached hereto and as may be amended from time to time. 4 5 SECTION 9. GUARANTEE Guarantor hereby unconditionally and irrevocably guarantees to GECAFS, its successors, endorsees and assigns, the performance when due of all present and future obligations and liabilities of all kinds of ABTAC arising out of or in connection with the Agreement, whether due or to become due, secured or unsecured, absolute or contingent, joint or several ("Obligations"). The Guarantor agrees that GECAFS and ABTAC may mutually agree to modify the Obligations or any agreement between GECAFS and ABTAC without in any way impairing or affecting this Guarantee. SECTION 10. REPRESENTATIONS AND WARRANTIES (A) Representations and Warranties of ABTAC. ABTAC hereby makes the following representations and warranties to GECAFS: (1) ABTAC has been duly organized and is validly existing as a corporation under the laws of the state of Delaware and is duly licensed where required or is otherwise qualified in each state in which it transacts business and is not in default of such state's applicable laws, rules and regulations, except where the failure to so qualify or such default would not have a material adverse effect on its ability to conduct its business or to perform its obligations under the Agreement. (2) ABTAC has the requisite power and authority and legal right to execute and deliver the Agreement, engage in the transactions contemplated by the Agreement, and perform and observe those terms and conditions of the Agreement to be performed or observed by it hereunder. The person signing the Agreement, and any document executed pursuant to it, on behalf of ABTAC has full power and authority to bind ABTAC. The execution, delivery and performance of the Agreement, and the performance by ABTAC of all transactions contemplated therein, have been duly authorized by all necessary and appropriate corporate action on the part of ABTAC. (3) The Agreement has been duly authorized and executed by ABTAC and is valid, binding and enforceable against ABTAC in accordance with its terms, except that such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws (whether statutory, regulatory or decisional) now or hereafter in effect relating to creditors' rights generally, and the execution, delivery and performance by ABTAC of the Agreement do not conflict with any term or provision of (a) its certificate of incorporation or bylaws, (b) any law, rule, regulation, order, judgment, writ, injunction or decree applicable to ABTAC of any court, regulatory body, administrative agency or governmental body having jurisdiction over ABTAC or (3) any agreement to which ABTAC is, a party or by which its property is bound. (4) No consent, approval, authorization or order of, registration or filing with, or notice to any governmental authority or court is required under applicable law in connection with the execution, delivery and performance by ABTAC of the Agreement. (5) There is no action, proceeding or investigation pending or, to the best knowledge of ABTAC, threatened against it before any court, administrative agency or other tribunal (a) asserting the invalidity of the Agreement, (b) seeking to prevent the consummation of any of the transactions contemplated by the Agreement, or (3) which could reasonably be expected to materially and adversely affect its performance of its respective obligations under, or the validity or enforceability of, the Agreement. (6) All regulatory approvals, authorizations, licenses, permits and other permissions, consents and authorities whatsoever needed to operate the ABT Website and perform this Agreement have been received. 5 6 (7) ABTAC warrants that it has the legal and valid right to use any registered or unregistered trademark, tradename, service mark, logo, emblem or other proprietary designation, or any variations, derivatives and modifications thereof, used by it in the materials provided to GECAFS or used by ABTAC in connection with the Agreement. (B) Representations and Warranties of GECAFS. GECAFS hereby makes the following representations and warranties to ABTAC: (1) GECAFS has been duly organized and is validly existing as a corporation under the laws of the state of Delaware and is duly licensed where required or is otherwise qualified in each state in which it transacts business and is not in default of such state's applicable laws, rules and regulations, except where the failure to so qualify or such default would not have a material adverse effect on its ability to conduct its business or to perform its obligations under the Agreement. (2) GECAFS has the requisite power and authority and legal right to execute and deliver, engage in the transactions contemplated by, and perform and observe the terms and conditions of, the Agreement. The person or persons signatory to the Agreement and any document executed pursuant to it on behalf of GECAFS have full power and authority to bind GECAFS. The execution, delivery and performance of the Agreement, and the performance by GECAFS of all transactions contemplated therein, have been duly authorized by all necessary and appropriate and corporate action on the part of GECAFS. (3) The Agreement has been duly authorized and executed by GECAFS and is valid, binding and enforceable against GECAFS in accordance with its terms, except that such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws (whether statutory, regulatory or decisional) now or hereafter in effect relating to creditors' rights generally, and the execution, delivery and performance by GECAFS of the Agreement do not conflict with any term or provision of (a) its certificate of incorporation or bylaws, (b) any law, rule, regulation, order, judgment, writ, injunction or decree applicable to GECAFS of any court, regulatory body, administrative agency or governmental body having jurisdiction over GECAFS or (3) any agreement to which GECAFS is a party or by which its properly is bound. (4) No consent, approval, authorization or order of, registration or filing with, or notice to any governmental authority or court is required under applicable law in connection with the execution, delivery and performance by GECAFS of the Agreement. (5) There is no action, proceeding or investigation pending or, to the best knowledge of GECAFS, threatened against it before any court, administrative agency or other tribunal (a) asserting the invalidity of the Agreement, (b) seeking to prevent the consummation of any of the transactions contemplated by the Agreement, or (3) which could reasonably be expected to materially and adversely affect the performance by GECAFS of its obligations under, or the validity or enforceability of, the Agreement. (6) GECAFS warrants that it has all regulatory approvals, authorizations, licenses, permits and other permissions , consents and authorities whatsoever, as needed (a) to offer and enter into the financing arrangements with Customers contemplated by the Agreement in each jurisdiction in the United States and to otherwise perform its obligations under the Agreement, and (b) to use any materials developed, provided or used by GECAFS in connection with the Agreement. (7) GECAFS warrants that it has the legal and valid right to use any registered or unregistered trademark, tradename, service mark, logo, emblem or other proprietary designation, or any variations, derivatives and modifications thereof, used by it in any materials provided to ABTAC or used by GECAFS in connection with the Agreement. 6 7 SECTION 11. INDEMNIFICATION (A) ABTAC will defend, indemnify and hold harmless GECAFS and its affiliates and all of its and their officers, directors, owners, agents, attorneys, and employees, from and against any and all loss, liability, claims, damage, cost or expense (including attorney's fees and costs) by third parties arising out of any gross negligence or intentional misconduct of ABTAC in connection with ABTAC's performance of its obligations under this Agreement or relating to any breach or alleged breach of a third-party's proprietary rights in connection with any intellectual property (except if provided by GECAFS), used by ABTAC in performance of its obligations under this Agreement. (B) GECAFS will defend, indemnify and hold harmless ABTAC and its affiliates and all of its and their officers, directors, owners, agents, attorneys, and employees, from and against any and all loss, liability, claims, damage, cost or expense (including attorney's fees and costs) by third parties arising out of any gross negligence or intentional misconduct of GECAFS in connection with GECAFS's performance of its obligations under this Agreement or relating to any claim regarding GECAFS's conduct with respect to any financing transaction or proposed financing transaction (including Customer claims) in connection with this Agreement and any breach or alleged breach of any law by GECAFS relating to consumer financing (unless caused solely by ABTAC) in connection with this Agreement and the transactions contemplated thereby. (C) The indemnified party must give the indemnifying party prompt notice of any claims covered by the indemnity of this Agreement. Each party will promptly notify the others of any legal or regulatory proceeding or threat of legal or regulatory proceeding with respect to any matters which are the subject of this Agreement; provided, however, that the failure to notify will not afford relief hereunder except to the extent that it results in prejudice. SECTION 12. TERM AND TERMINATION (A) This Agreement will remain in effect for a period of 3 years from the date hereof unless terminated by either party upon 6 months' prior written notice. This Agreement will also terminate if, required by governmental authority or court of law, but only insofar as this Agreement applies to such jurisdiction affected. In consideration of the significant investment made by GECAFS in the implementation of this Agreement, a termination fee in the amount of fifty thousand dollars ($50,000) will be due and payable from ABTAC to GECAFS in the event that ABTAC terminates this Agreement prior to the first anniversary hereof, except for cause as set forth below. Notwithstanding the foregoing, such termination fee will be reduced by $2,000 for each full calendar month during which the volume targets set forth in Section 1(F) are met and, provided further, that no termination penalty will be incurred in the event that the parties cannot agree in good faith upon the continued validity of the "competitiveness" standard after six months as set forth in Section l(E). (B) If any party will be in breach of any material obligation under this Agreement and such breach will remain uncured for a period of 30 days after written notice thereof from the other party (or, if such breach is curable and requires more than 30 days to cure, if such cure is not commenced within 30 days and thereafter diligently prosecuted), then the other party may, by written notice sent, terminate this Agreement 30 days after delivery of such notice. Non-payment of amounts due under this Agreement will be deemed to be a breach of a material obligation hereunder, but institution of suit for payment of amounts due under this Agreement will not be deemed to be an automatic termination hereunder. (C) At any party's option, and upon written notice of exercise of the option, this Agreement will terminate upon the voluntary or involuntary bankruptcy or insolvency of a party, the voluntary or involuntary dissolution or liquidation of a party, the admission in writing by a party of its inability to pay its debts as they mature, or the assignment by a party for the benefit of creditors. 7 8 SECTION 13. NOTICES All notices or transmissions pursuant to this Agreement, unless otherwise specified, will be by facsimile transmission, by personal delivery, or by registered or certified mail, return receipt requested, to the addresses of the parties set forth in the Preamble to this Agreement or such other address as any party listed below will specify in writing to the others. SECTION 14. PROVISIONS OF GENERAL APPLICABILITY (A) Entire Agreement. The Agreement and the exhibits thereto constitute the entire agreement of the parties, and may be amended from time to time only upon the execution of a written amendment by the parties. (B) Confidentiality. Both ABTAC and GECAFS have made and will continue throughout the term of the Agreement to make available to the other party confidential and proprietary materials and information ("Proprietary Information"). Prospectively, each party will advise the other of material and information that is confidential and/or proprietary. Proprietary Information does not include material or information that: (1) are already, or otherwise become, generally known by third parties as a result of no act or omission of the receiving party; (2) subsequent to disclosure hereunder are lawfully received from a third party having the right to disseminate the information and without restriction on disclosure; (3) are generally furnished to others by the disclosing party without restriction on disclosure; (4) were already known by the receiving party prior to receiving them from the disclosing party and were not received from a third party in breach of that third party's obligations or confidentiality; or (5) ideas, concepts, expressions, know-how, skills and experience possessed by either party prior to its association with the other party or developed by either party during its association with the other party without regard to Proprietary Information. Each party will maintain the confidentiality of the other's Proprietary Information and will not disclose such Proprietary Information without the written consent of the other party unless legally required by law, rule, regulation or court order of any applicable jurisdiction; in which case, each party will, before disclosing the Information, (unless prior notice is prohibited), promptly notify the other of the compelled disclosure. If a protective order or other appropriate relief from compelled disclosure is not obtained before disclosure is due, or if compliance with the provisions of this section is waived, only that portion of the Information will be furnished which counsel advises is legally required. Each party will also keep confidential the terms of the Agreement. The confidentiality provisions of the Agreement will survive the termination of the Agreement. (C) Limitation of Liability. In no event will either party be liable to the other party for any incidental, special, exemplary or consequential damages, even if advised of the possibility of such damages. (D) Appointment or Assignment. ABTAC and GECAFS will have the right to appoint an affiliate to provide any services to be provided hereunder or to assign the Agreement to any affiliate at no charge or penalty; provided, however, that such appointee will agree to be governed by the provisions hereof with respect to the provision of such services and such assignee assumes the obligations of its assignor. (E) Waiver. Neither party will be deemed to be in default of any provision of the Agreement or be liable to the other party or to any third party for any delay, error, failure in performance or interruption of performance resulting directly or indirectly from causes beyond that party's reasonable control. The period of performance will be extended to such extent as may be appropriate after the cause of the delay has been removed. If any excusable delay or failure to perform by a party exceeds 30 days, the other party will have the right to terminate the Agreement without liability. 8 9 (F) Severability. If any provision of the Agreement is declared or found to be illegal, unenforceable or void, then both parties will be relieved of all obligations arising under such provision, but only to the extent that such provision is illegal, unenforceable or void; it being the intent and agreement of the parties that the Agreement will be deemed amended by modifying such provision to the extent necessary to make it legal and enforceable while preserving its intent or, if that is not possible, by substituting therefore another provision that is legal and enforceable and achieves the same objective. Each party agrees that it will perform its obligations hereunder in accordance with all applicable laws, rules and regulations now or hereafter in effect. (G) Arbitration. Any controversy or claim arising out of or relating to the Agreement, or the breach of the same, will be settled through consultation and negotiation in good faith and a spirit of mutual cooperation. However, if those attempts fail, the parties agree that any misunderstandings or disputes arising from the Agreement will be decided by arbitration which will be conducted, upon request by either party, in Orange County, California, before three (3) arbitrators (unless both parties agree on one (1) arbitrator) designated by the American Arbitration Association (the ("AAA"), in accordance with the terms of the Commercial Arbitration Rules of the AAA, and, to the maximum extent applicable, the United States Arbitration Act (Title 9 of the United States Code), or if such Act is not applicable, any substantially equivalent state law. The parties further agree that they will share the expense of the arbitration proceedings equally. Notwithstanding anything herein to the contrary, either party may proceed to a court of competent jurisdiction to obtain injunctive relief at any time. (H) Media Releases. ABTAC and GECAFS may utilize media releases to publicize their business relationship only with the prior approval of the other party which will not be unreasonably withheld. ABTAC and GECAFS will not use any trade name, service mark or any other information which identifies the other in sales, marketing and publicity materials without obtaining the prior written approval of the other. (I) Governing Law. The Agreement will be governed by and construed in accordance with the laws of the State of California, without regard to conflicts of law principles. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized officer on the date first above written. GENERAL ELECTRIC CAPITAL AUTO FINANCIAL SERVICES, INC. By: [SIG] ------------------------------------ Its: Managing Dir. N.A. ----------------------------------- AUTO-BY-TEL ACCEPTANCE CORPORATION By: [SIG] ------------------------------------ Its: Chief Operating Officer ----------------------------------- AUTO-BY-TEL CORPORATION, as Guarantor By: [SIG] ------------------------------------ Its: Vice President/GC ----------------------------------- 9 10 [GE LOGO] GE Capital EXHIBIT A Consumer Application - ------------------------------------
INSTRUCTIONS: Please Use Black Ink To Complete Application. You may apply for credit individually or jointly. Please indicate whether you are applying: [ ] Individually or [ ] Jointly Please indicate whether the vehicle will be used primarily for: [ ] Personal or Family Purposes or [ ] Business, Commercial or Agricultural Purposes Boxes A and C below are to be completed by the Applicant. If this is a joint application, the Joint Applicant should complete Box B. If this is not a joint application, Box B should be completed with information about the Applicant's spouse if: (1) the Applicant is relying on the spouse's income as a repayment source for the credit requested or (2) the Applicant resides in a community property state or is relying on property as a repayment source which is located in a community property state (that is, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin). When completing Boxes A and B please note that alimony, child support, or separate maintenance income need not be revealed if you do not wish it considered a repayment source. If you reside in a community property state, please indicate whether you are: Applicant [ ] Married [ ] Separated [ ] Unmarried (includes single, divorced, or widowed) Joint Applicant [ ] Married [ ] Separated [ ] Unmarried (includes single, divorced, or widowed) If you are married and reside in a community property state, unless otherwise indicated on this application it will be presumed that all stated income and assets are community property, all stated debts and obligations are liabilities of the community property, and this request for credit is made in the interest of your marriage or family.
VEHICLE INFORMATION Type of Contract: [ ] Retail Installment [ ] "Flexible Loan" [ ] Long Term Lease [ ] Lease Assumption # Dealership Name - ----------------------------------------------------------------------------------------------------------------------------------- Dealer Phone Contact Yr. Make []New Model Mileage []Used []Demo - ----------------------------------------------------------------------------------------------------------------------------------- LEASE INFORMATION Cap MSRP Term Mo. Payment - ----------------------------------------------------------------------------------------------------------------------------------- RETAIL INSTALLMENT INFORMATION Amount Financed Invoice Dlr. Installed Options Credit Ins. MBP $ $ $ $ $ - ----------------------------------------------------------------------------------------------------------------------------------- Fax Other Charges Cash Down Payment $ Yr. Make Model Residual "Flexible Loan" Only Term Mo. Payment $ $ Trade In $ - ----------------------------------------------------------------------------------------------------------------------------------- A. INFORMATION REGARDING APPLICANT: - ----------------------------------------------------------------------------------------------------------------------------------- Full Name Date of Birth Social Security Number Ages of Dependents Home Phone - - [ ] - ----------------------------------------------------------------------------------------------------------------------------------- Current Address Street City State County Zip Code How Long? # Yrs. in Community Yrs. Mos. - ----------------------------------------------------------------------------------------------------------------------------------- Previous Address (Min. 5 yr. history - use addt'l sheets if necessary) Zip Code How Long? Business Phone Yrs. Mos. [ ] - ----------------------------------------------------------------------------------------------------------------------------------- Employer Name Business Address How Long? Occupation Yrs. Mos. - ----------------------------------------------------------------------------------------------------------------------------------- Self Employed Nature of Business Gross Monthly Income Source of Other Income Amount Total Gross Monthly [ ]Yes [ ]No $ (Alimony, Child Support Maintenance Optional) $ Income $ - ----------------------------------------------------------------------------------------------------------------------------------- Previous Employer Name, City, State Phone How Long? Occupation [ ] Yrs. Mos. - ----------------------------------------------------------------------------------------------------------------------------------- Nearest Relative Not Living With You (Full Address) Phone Relationship [ ] - ----------------------------------------------------------------------------------------------------------------------------------- Personal Reference (Full Address) Phone [ ] - ----------------------------------------------------------------------------------------------------------------------------------- B. INFORMATION REGARDING JOINT APPLICANT, SPOUSE OR OTHER PERSONS: - ----------------------------------------------------------------------------------------------------------------------------------- Full Name Relationship to the Applicant (if any) Date of Birth Social Security Number - ----------------------------------------------------------------------------------------------------------------------------------- Current Address (if different than applicant) Street City State Zip Code How Long? Occupation Yrs. Mos. - ----------------------------------------------------------------------------------------------------------------------------------- Employer Name Business Address How Long? Business Phone Yrs. Mos. [ ] - ----------------------------------------------------------------------------------------------------------------------------------- Self Employed Nature of Business Total Gross Monthly Source of Other Income Amount Total Gross Monthly [ ]Yes [ ]No Income $ (Alimony, Child Support Maintenance Optional) $ Income $ - ----------------------------------------------------------------------------------------------------------------------------------- Previous Employer Name, City, State Phone How Long? Occupation [ ] Yrs. Mos. - ----------------------------------------------------------------------------------------------------------------------------------- C. FINANCIAL INFORMATION - ALL LOANS, LEASES AND OTHER OBLIGATIONS (INCLUDING ALIMONY, CHILD SUPPORT, MAINTENANCE) - ----------------------------------------------------------------------------------------------------------------------------------- Residence Lienholder or Landlord Name Account No. Original Balance Balance Owing Mo. Payment [ ]Buying or Own [ ]Rent ----------------------------------------------------------------------------------------------------------------- [ ]With Parents Address $ $ $ - ----------------------------------------------------------------------------------------------------------------------------------- Name and Account No. Address $ $ $ - ----------------------------------------------------------------------------------------------------------------------------------- Name and Account No. Address $ $ $ - ----------------------------------------------------------------------------------------------------------------------------------- Previous Vehicle Was Name of Lessor or Financing Creditor Branch No. City, State Account No. Original Balance [ ]Open [ ]Leased [ ]Purchased [ ]Paid [ ]Trade - ----------------------------------------------------------------------------------------------------------------------------------- Checking Name Branch Phone Account No. Balance [ ] $ - ----------------------------------------------------------------------------------------------------------------------------------- Saving/ Name Branch Phone Account No. Balance Money Mkt. [ ] $ - ----------------------------------------------------------------------------------------------------------------------------------- Have You Ever Obtained Credit [ ] Yes (List Name & Address) Have You Ever No Under A Different Name? [ ] No Filed Bankruptcy Yes - Date_____________ - ----------------------------------------------------------------------------------------------------------------------------------- The following driver information is not required if application is being made for retail installment credit or "Flexible Loan" credit. - ----------------------------------------------------------------------------------------------------------------------------------- LIST ALL OPERATORS IN ORDER OF MOST FREQUENT USE: - ----------------------------------------------------------------------------------------------------------------------------------- % of Vehicle Use Birth Date Operator's License Number State Years Licensed Mo. Day Yr. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Garaging Address Number & Street City State Zip Phone Number If Other Than Residence [ ] - -----------------------------------------------------------------------------------------------------------------------------------
11 Exhibit A: Continued
- -------------------------------------------------------------------------------- Description Length Type (Alpha/Num) Required - -------------------------------------------------------------------------------- Applicants - -------------------------------------------------------------------------------- Primary First Name* 10 A Y " Middle Initial* 1 A Y(space if n/a) " Last Name* 15(*12) A Y " Date of Birth* 6 N Y " Social Security No.* 9 N Y " # of Dependents 2 N Y ` Telephone Number 10 N Y " Current Address* 19 A/N Y " Current City* 12(*13) A Y " Current State* 2 A Y " Current Zip Code* 5 N Y " Current Time at Addr.* 2 N Y " Previous Address 19 A/N Y -e) " Previous City 12 A Y -e) " Previous State 2 A Y -e) " Previous Zip Code 5 N Y -e) " Previous Time at Addr. 2 N Y -e) " Employer Name* 20 A/N Y(*N) " Employment Time* 2 N Y(*N) " Occupation Code 2 N Y " Occupation Description* 20(*15) A Y(*N) " Self-Employed Flag* 1 A Y -f)(*N) " Employer Telephone # * 10 N Y " Employer Address* 20 A/N Y " Employer City* 13 A Y " Employer State* 2 A Y " Employer Zip Code* 5 N Y " Gross Income* 6 N Y(*N) " Gross Income Flag (A,M,W,B)* 1 A Y -g) " Other Income* 6 N Y(0 if n/a) " Other Income Flag* 1 A Y -g) " Other Income Source* 13 A Y(spaces if n/a) " Previous Employer* 20 A Y(spaces if n/a) " Previous Employer Phone* 9 N Y(spaces if n/a) " Previous Employer Time* 2 N Y(spaces if n/a) " Prev. Employer Occupation* 15 A Y(spaces if n/a)
- -------------------------------------------------------------------------------- * Denotes Same Specifications for Joint Applicant 12 Exhibit A: Continued
- -------------------------------------------------------------------------------- Description Length Type (Alpha/Num) Required - -------------------------------------------------------------------------------- Collateral - -------------------------------------------------------------------------------- New, Used, Demo (N/U/D) 1 A Y Use (Personal, Business) 1 A Y Product (Retail, Flex, Lease) 1 A Y Received Date 6 N Y -a) Received Time 4 N Y Dealer Number 5 N Y Dealer Name 20 A/N Y -b) Dealer Telephone Number 10 N Y -b) Dealer Contact 11 A Y Vehicle Year 2 N Y Vehicle Make 4 A Y Joint Venture Flag (JV) 1 A Y -c) Model Code 2 N Y Cap Cost 6 N Y Invoice (MSRP) 6 N Y Down Payment 5 N Y Trade-In Amount 6 N Y Term 2 N Y Monthly Lease Payment 4 N Y Guar/CoSgn (G/C/N) 1 N Y -c) For 20 A/N Y -d)
- -------------------------------------------------------------------------------- (a- Cannot Be A Saturday or Sunday (subject to change????) (b- Automatically Generated From Look-Up Table Based On GECAL Dealer Number (c- Default to "N" (d- Required If Guar/CoSgn Field Is "C" or "G" 13 Exhibit A: Continued
Description Length Type (Alpha/Num) Required - -------------------------------------------------------------------------------- Applicants continued Joint - Relationship 7 A Y (spaces if n/a) Residence (O, R, L, M) 1 A Y Landlord/Lien holder 20 A/N Y (spaces if n/a) Mortgage/Rent Amount 5 N Y Previous Vehicle (Lease, Purch., None) 1 A Y Previous Vehicle Creditor 15 A Y (spaces if n/a) Driver Info (Lines 1 and 2) Driver (Primary, Joint, Other) 1 A Y Percentage Use 3 N Y -h) - --------------------------------------------------------------------------------
(e- Required If Current Address Is 0 or 1 year. (f- Default to "N" (g- Required If Income Is Input (h- Sum of Lines 1 and 2 Must Equal 100% 14 Exhibit B [FLOW CHART] GECAL - AFS / ABT Process Flow As Of 01/28/97 15 EXHIBIT C to Financing Inquiry Referral Agreement. dated as of February 1, 1997, between General Electric Capital Auto Financial Services, Inc. and Auto-By-Tel Acceptance Corporation and Auto-By-Tel, Inc., as Guarantor (the "Agreement") INFORMATION STANDARDS - - GECAL will either provide ABT or make available to ABT its unique code sets on a periodic basis as deemed necessary, including - Street rates - Residuals - Makes - Models - Dealer Information (i.e. ID, name, location) - Occupation Codes - others as required - - ABT will send all transactions to GECAL in the predefined format utilizing the GECAL code sets - - Conditional data edits (i.e. if field A = 1, then field B must = 2) will be incorporated into the online credit application by ABT. These edits will be provided to ABT from GECAL as the detailed design tasks are completed. - - The ABT lease calculator will utilize GECAL rates and residuals, but will also include a disclaimer to the consumer that the amounts shown (i.e. monthly payment) are estimates only. - - The Competitive Analysis query originated by ABT and sent to the GECAL competitive matrix will be based off of GECAL makes, models and body styles The specifics of these requirements are subject to change as the detailed design and implementation of the various system components are finalized. Both ABT and GECAL agree in good faith to implement these and any other requirements as they are encountered. EX-10.15 10 CONTENT LICENSE AND CHANNEL SPONSORSHIP TERM SHEET 1 EXHIBIT 10.15 [*] Confidential Treatment has been requested for certain portions of this exhibit. CONTENT LICENSE AND CHANNEL SPONSORSHIP TERM SHEET This agreement ("Agreement") is entered into as of the ___ ("Effective Date"), by and between Excite, Inc., a California corporation, located at 555 Broadway, Redwood City, California 94063 ("Excite"), and Auto-By-Tel, a _________________ corporation, located at ____________________________________ ("Auto-By-Tel"). RECITALS A. Excite maintains a site on the Internet at http://www.excite.com and owns and/or manages related Web sites worldwide (collectively, the "Excite Network") which, among other things, allow its users to search for and access content and other sites on the Internet. B. Within the Excite Network, Excite currently organizes certain content into topical channels, including the Excite Automotive Channel. C. Excite also maintains and/or manages certain Web pages which may be delivered to users via email, desktop "channels" or Internet "push" technologies (collectively, "Broadcast Pages") which may incorporate content supplied to Excite by third parties for the purpose of providing value to Excite users and providing access to the content, products and/or services of such third parties. D. Auto-By-Tel owns or has the right to distribute certain content relating to online automobile buying and maintains a related site on the Internet at http://www.autobytel.com (the "Auto-By-Tel Site") for which it wishes to generate increased traffic. E. Auto-By-Tel wishes to promote use of the Auto-By-Tel Site to Excite's users by sponsoring the Excite Automotive Channel and purchasing banner advertising on the Excite Network. Therefore, the parties agree as follows: 1. SPONSORSHIP OF EXCITE AUTOMOTIVE CHANNEL a) Auto-By-Tel will be the exclusive online automobile buying service sponsor of the Excite Automotive Channel, located at http://www.excite.com. b) During the term of the Agreement, Excite will not display any banner advertising or promotional placements for any of Auto-By-Tel's direct competitors (listed in Exhibit C) in the Excite Automotive Channel. Not more than once per quarter, Auto-By-Tel may update this list of competitors. 1 2 c) In the event that Excite intends to enter into an agreement with a third party with respect to sponsorship of the Excite Automotive Channel before the expiration of the term of the Agreement, Excite will deliver to Auto-By-Tel a written notice describing the relevant opportunity. Although Excite will not be required to disclose any information in violation of any nondisclosure agreement between Excite and any third party, the notice will include information sufficient to permit Auto-By-Tel to evaluate the requirements for meeting the competing offer for sponsorship of the Excite Automotive Channel and to formulate a meaningful response. Auto-By-Tel will have ten (10) days after receipt of such written notice to provide notice to Excite that it is prepared to enter into an agreement with Excite on the same terms and conditions as Excite proposes to accept from such third party. Excite and Auto-By-Tel will then promptly commence good faith negotiations to conclude the agreement. If Auto-By-Tel rejects said offer or fails to notify Excite of its acceptance within the ten (10) day period, Excite shall have the right to enter into the agreement with such third party, provided the terms and conditions of the agreement are not less favorable to Excite than previously offered by Auto-By-Tel. 2. MARKETING AND PROMOTION a) Excite will feature Auto-By-Tel in the Auto Buying Services department of the Excite Automotive Channel for the term of the Agreement. b) Excite will conduct three (3) two-week car give away promotions on the Excite home page promoting Auto-By-Tel during the first year of the Agreement, with one promotion coinciding with the launch of Auto-By-Tel's sponsorship and the other two to be mutually scheduled. Excite will conduct similar promotions in years two and three of the Agreement. Auto-By-Tel will provide the cars to be given away through these promotions. c) Auto-By-Tel will purchase banner advertising on the Excite Network in Year One of the Agreement in the amounts described in Exhibit A. Auto-By-Tel will purchase banner advertising on the Excite Network in Year Two and Year Three in amounts substantially comparable to the amounts agreed upon in Exhibit B. d) Excite will deliver a minimum of 150 impressions of Auto-By-Tel promotional placements during the term of the Agreement, including the placement in the Auto Buying Services department of the Excite Automotive Channel, the car give-away promotions and the banner advertisements described above, the display of Auto-By-Tel's content described below and other promotional placements that may be determined by the parties. e) Neither party will make any public statement, press release or other announcement relating to the terms of or existence of this Agreement without 2 3 [*] Confidential Treatment Requested the prior written approval of the other. Notwithstanding the foregoing, Auto-By-Tel hereby grants to Excite the right to issue an initial press release, the timing and wording of which will be subject to Auto-By-Tel's reasonable approval, regarding the relationship between Excite and Auto-By-Tel. 3. CONTENT PROVIDED TO EXCITE a) Auto-By-Tel will provide to Excite mutually agreed upon content relating to online automobile buying such as AutoSite and The Bank Rate Monitor (the "Content") which is described in Exhibit D. Excite may display the Content in the Excite Automotive Channel and in other locations in the Excite Network. Excite will determine the "look and feel" of the Excite Automotive Channel and the Excite Network. b) Auto-By-Tel will not provide the Content to any of Excite's competitors during the term of the Agreement, including, but not limited to, AltaVista, HotBot, Infoseek, Lycos, Search.com and Yahoo, or any other Web site promoting itself as a provider of Internet search and navigation services. Not more than once per quarter, Excite may update this list of competitors. c) Auto-By-Tel and Excite will determine mutually agreeable methods for the transmission and incorporation of updates to the Content. Other than updates to the Content or revisions as needed to reflect changes to Auto-By-Tel's name and/or brand, Auto-By-Tel will not alter the Content without Excite's prior consent. d) Auto-By-Tel will ensure that the Content will at all times feature the full array of content and functionality as made generally available by Auto-By-Tel at the Auto-By-Tel Site, through any other means of distribution of Auto-By-Tel's own branded service or through any other third-party relationship. e) Auto-By-Tel will have sole responsibility for providing, at its expense, the Content to Excite. f) Reasonable excerpts or portions of the Content may be incorporated into "Broadcast Pages" delivered by Excite via email, desktop "channels" or Internet "push" technologies. Excite will determine the "look and feel" of the Broadcast Pages. 4. SPONSORSHIP AND ADVERTISING FEES AND REVENUE SHARING a) A "set-up fee" of $550,000 will be due to Excite upon execution of the Agreement as compensation for exclusivity, costs of initiating access to the Excite Network, programming costs associated with the incorporation of the Content into the Excite Network, set-up costs and other expenses associated 3 4 [*] Confidential Treatment Requested with Excite's initiation of the links, placements, advertisements and promotions contemplated by this Agreement. b) Separate and apart from the set-up fee, sponsorship and advertising fees will be due to Excite as follows:
Year 1 Year 2 Year 3 ---------- ---------- ---------- Sponsorship $ 650,000 $1,400,000 $1,600,000 Banners - US $ 800,000 $ 700,000 $ 700,000 Banners - WebTV/ $ 300,000 $ 300,000 $ 300,000 International Total $1,750,000 $2,400,000 $2,600,000
In the event that Excite is unable to deliver the agreed-upon amount of banner advertising in the WebTV and/or International rotations, Excite will provide the undelivered amounts in rotation on its primary Web site. c) Auto-By-Tel will pay Excite a bounty per unique purchase request submitted by users referred to the Auto-By-Tel Site from the Excite Network of [*] for the first 100,000 unique purchase requests in each year of the Agreement, [*] for the second 100,000 unique purchase requests in each year of the Agreement and [*] for each unique purchase request in excess of 200,000 in each year of the Agreement. For the purposes of the Agreement, a "unique purchase request" is one purchase or lease request submitted by any particular user in a sixty [60] day period, as measured by Auto-By-Tel. d) If the number of unique purchase requests submitted by users referred directly to the Auto-By-Tel Site from the Excite Network in any year of the Agreement exceeds 180,000, the bounty increases to [*] for the first 100,000 unique purchase requests in the following year of the Agreement, [*] for the second 100,000 unique purchase requests In the following year of the Agreement and [*] for each unique purchase request in excess of 200,000 in the following year of the Agreement. e) The set-up, sponsorship and advertising fees are gross amounts and do not reflect any agency commissions to be paid by Auto-By-Tel. The bounty payment amounts are net of any agency commissions to be paid by Auto-By-Tel. f) Sponsorship and advertising fees will be paid in twelve equal monthly installments commencing on the execution of the Agreement. Bounty payments will be made quarterly. The parties will conduct annual reviews to ensure accurate payments and accounting. 4 5 g) Auto-By-Tel will maintain accurate records with respect to the calculation of all payments due under this Agreement. Excite may, upon no less than thirty (30) days prior written notice to Auto-By-Tel, cause an independent Certified Public Accountant to inspect the records of Auto-By-Tel reasonably related to the calculation of such payments during Auto-By-Tel's normal business hours. The fees charged by such Certified Public Accountant in connection with the inspection will be paid by Excite unless the payments made to Excite are determined to have been less than ninety-five percent (95%) of the payment owed to Excite, in which case Auto-By-Tel will be responsible for the payment of the reasonable fees for such inspection. 5. CUSTOMER INFORMATION a) Auto-By-Tel will retain all rights to customers acquired pursuant to the Agreement. b) Once per quarter, in connection with Auto-By-Tel's bounty payments, Auto-By-Tel will provide Excite with all of the customer information it acquires through the purchase requests submitted by users referred directly to Auto-By-Tel's Web site from the Excite Network. This customer information will be deemed to be the joint property of the parties. Under no circumstances will Excite sell, provide or transfer this customer information to any third party. 6. OPERATIONAL SUPPORT a) Excite will provide, at its sole expense, Account Management support of the Auto Buying Services department of the Excite Automotive Channel sufficient to support for the level of sales and marketing contemplated by the Agreement. b) The parties will hold formal reviews on a monthly basis to maintain anticipated results according to the sponsorship objectives. Advertising and sponsorship placements will be adjusted monthly by mutual agreement. 7. TERM AND TERMINATION a) The Agreement will have an initial term three (3) years. b) Auto-By-Tel will have the option to cancel the Agreement if, at the end of the first year of the Agreement, users referred to the Auto-By-Tel Site from the Excite Network do not submit 100,000 unique purchase requests. c) Either party may terminate this Agreement it the other party materially breaches its obligations hereunder and such breach remains uncured for thirty (30) days following the notice to the breaching party of the breach, with the following exceptions: 5 6 (i) In the event of three or more errors, failures or outages of the Content in any thirty (30) day period, Excite may elect to immediately terminate this Agreement upon written notice to Auto-By-Tel and enter into an other arrangements for the acquisition of similar content; or (ii) Auto-By-Tel will ensure that the Content will at all times be at least comparable to any other source of similar topical content available on the Internet in terms of the following factors, taken as a whole: (i) breadth and depth of coverage, (ii) timeliness of content updates and (iii) reputation and ranking based on a cross-section of third party reviewers in terms of features, functionality, quality and other qualitative factors. In the event that Auto-By-Tel fails to meet these quality criteria, Excite may terminate this agreement on thirty (30) days written notice and enter into an other arrangements for the acquisition of similar content. d) All payments that have accrued prior to the termination or expiration of this Agreement will be payable in full within thirty (30) days thereof. e) The provisions of Section 10 (Confidentiality), Section 11 (Warranty and Indemnity), Section 12 (Limitation of Liability) and Section 13 (Dispute Resolution) will survive any termination or expiration of this Agreement. 8. CONTENT OWNERSHIP AND LICENSE a) Auto-By-Tel will retain all right, title and interest in and to the Content worldwide (including, but not limited to, ownership of all copyrights and other intellectual property rights therein). Subject to the terms and conditions of this Agreement, Auto-By-Tel hereby grants to Excite a royalty-free, nonexclusive, worldwide license to use, reproduce, distribute, transmit and publicly display the Content in accordance with this Agreement and to sublicense the Content to Excite's wholly-owned subsidiaries or to joint ventures in which Excite participates for the sole purpose of using, reproducing, distributing, transmitting and publicly displaying the Content in accordance with this Agreement. b) Excite will retain all right, title, and interest in and to the Excite Network and the Broadcast Pages worldwide (including, but not limited to, ownership of all copyrights, look and feel and other intellectual property rights therein). 9. TRADEMARK OWNERSHIP AND LICENSE a) Auto-By-Tel will retain all right, title and interest in and to its trademarks, service marks and trade names worldwide, subject to the limited license granted to Excite hereunder. 6 7 b) Excite will retain all right, title and interest in and to its trademarks, service marks and trade names worldwide, subject to the limited license granted to Auto-By-Tel hereunder. c) Each party hereby grants to the other a non-exclusive, limited license to use its trademarks, service marks or trade names only as specifically described in this Agreement. All such use shall be in accordance with each party's reasonable policies regarding advertising and trademark usage as established from time to time. d) Upon the expiration or termination of this Agreement, each party will cease using the trademarks, service marks and/or trade names of the other except: i) As the parties may agree in writing; or ii) To the extent permitted by applicable law. 10. CONFIDENTIALITY a) For the purposes of this Agreement, "Confidential Information" means information about the disclosing party's (or its suppliers') business or activities that is proprietary and confidential, which shall include all business, financial, technical and other information of a party marked or designated by such party as "confidential" or "proprietary"; or information which, by the nature of the circumstances surrounding the disclosure, ought in good faith to be treated as confidential. b) Confidential Information will not include information that (i) is in or enters the public domain without breach of this Agreement, (ii) the receiving party lawfully receives from a third party without restriction on disclosure and without breach of a nondisclosure obligation or (iii) the receiving party knew prior to receiving such information from the disclosing party or develops independently. c) Each party agrees (i) that it will not disclose to any third party or use any Confidential Information disclosed to it by the other except as expressly permitted in this Agreement and (ii) that it will take all reasonable measures to maintain the confidentiality of all Confidential Information of the other party in its possession or control, which will in no event be less than the measures it uses to maintain the confidentiality of its own information of similar importance. d) Notwithstanding the foregoing, each party may disclose Confidential Information (i) to the extent required by a court of competent jurisdiction or other governmental authority or otherwise as required by law or (ii) on a 7 8 "need-to-know" basis under an obligation of confidentiality to its legal counsel, accountants, banks and other financing sources and their advisors. e) The information contained in the Usage Reports provided by each party hereunder will be deemed to be the Confidential Information of the disclosing party. f) The terms and conditions of this Agreement will be deemed to be the Confidential Information of each party and will not be disclosed without the written consent of the other party. 11. WARRANTY AND INDEMNITY a) Auto-By-Tel warrants that it owns, or has obtained the right to distribute and make available as specified in this Agreement, any and all content provided to Excite or made available to third parties in connection with this Agreement. b) Auto-By-Tel warrants that the Content will comply with the description and technical specifications contained in Exhibit D. c) Auto-By-Tel will indemnify, defend and hold harmless Excite, its affiliates, officers, directors, employees, consultants and agents from any and all third party claims, liability, damages and/or costs (including, but not limited to, attorneys fees) arising from: i) The breach of any warranty, representation or covenant in this Agreement; ii) Any claim that the Content infringes or violates any third party's copyright, patent, trade secret, trademark, right of publicity or right of privacy or contains any defamatory content; or iii) Any claim arising from content displayed on the Auto-By-Tel Site. Excite will promptly notify Auto-By-Tel of any and all such claims and will reasonably cooperate with Auto-By-Tel with the defense and/or settlement thereof; provided that, it any settlement requires an affirmative obligation of, results in any ongoing liability to or prejudices or detrimentally impacts Excite in any way and such obligation, liability, prejudice or impact, can reasonably be expected to be material, then such settlement shall require Excite's written consent (not to be unreasonably withheld or delayed) and Excite may have its own counsel in attendance at all proceedings and substantive negotiations relating to such claim, d) EXCEPT AS SPECIFIED IN THIS AGREEMENT, NEITHER PARTY MAKES ANY WARRANTY IN CONNECTION WITH THE SUBJECT MATTER OF THIS AGREEMENT AND HEREBY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES, INCLUDING ALL IMPLIED WARRANTIES OF 8 9 MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE REGARDING SUCH SUBJECT MATTER. 12. LIMITATION OF LIABILITY EXCEPT UNDER SECTION 11(c), IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER BASED ON BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, WHETHER OR NOT THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. THE LIABILITY OF EXCITE FOR DAMAGES OR ALLEGED DAMAGES HEREUNDER, WHETHER IN CONTRACT, TORT OR ANY OTHER LEGAL THEORY, IS LIMITED TO, AND WILL NOT EXCEED, THE AMOUNTS ACTUALLY PAID BY AUTO-BY-TEL TO EXCITE HEREUNDER. 13. DISPUTE RESOLUTION a) The parties agree that any breach of either of the parties' obligations regarding trademarks, service marks or trade names and/or confidentiality would result in irreparable injury for which there is no adequate remedy at law. Therefore, in the event of any breach or threatened breach of a party's obligations regarding trademarks, service marks or trade names or confidentiality, the aggrieved party will be entitled to seek equitable relief in addition to its other available legal remedies in a court of competent jurisdiction. For the purposes of this section only, the parties consent to venue in either the state courts of the county in which Excite has its principal place of business or the United States District Court for the Northern District of California. b) In the event of disputes between the parties arising from or concerning in any manner the subject matter of this Agreement, other than disputes arising from or concerning trademarks, service marks or trade names and/or confidentiality, the parties will first attempt to resolve the dispute(s) through good faith negotiation. In the event that the dispute(s) cannot be resolved through good faith negotiation, the parties will refer the dispute(s) to a mutually acceptable mediator for hearing in the county in which Excite has its principal place of business. c) In the event that disputes between the parties arising from or concerning in any manner the subject matter of this Agreement, other than disputes arising from or concerning trademarks, service marks or trade names and/or confidentiality, cannot be resolved through good faith negotiation and mediation, the parties will refer the dispute(s) to the American Arbitration Association for resolution through binding arbitration by a single arbitrator pursuant to the American Arbitration Association's rules applicable to 9 10 commercial disputes. The arbitration will be held in the county in which Excite has its principal place of business. 14. GENERAL a) Assignment. Neither party may assign this Agreement, in whole or in part, without the other party's written consent (which will not be unreasonably withheld), except that no such consent will be required in connection with a merger, reorganization or sale of all, or substantially all, of such party's assets. Any attempt to assign this Agreement other than as permitted above will be null and void. b) Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of California, notwithstanding the actual state or country of residence or incorporation of Auto-By-Tel. c) Notice. Any notice under this Agreement will be in writing and delivered by personal delivery, express courier, confirmed facsimile, confirmed email or certified or registered mail, return receipt requested, and will be deemed given upon personal delivery, one (1) day after deposit with express courier, upon confirmation of receipt of facsimile or email or five (5) days after deposit in the mail. Notices will be sent to a party at its address set forth below or such other address as that party may specify in writing pursuant to this Section. d) No Agency. The parties are independent contractors and will have no power or authority to assume or create any obligation or responsibility on behalf of each other. This Agreement will not be construed to create or imply any partnership, agency or joint venture. e) Force Majeure. Any delay in or failure of performance by either party under this Agreement will not be considered a breach of this Agreement and will be excused to the extent caused by any occurrence beyond the reasonable control of such party including, but not limited to, acts of God, power outages and governmental restrictions. f) Severability. In the event that any of the provisions of this Agreement are held by to be unenforceable by a court or arbitrator, the remaining portions of the Agreement will remain in full force and effect. g) Entire Agreement. This Agreement is the complete and exclusive agreement between the parties with respect to the subject matter hereof, superseding any prior agreements and communications (both written and oral) regarding such subject matter. This Agreement may only be modified, or any rights under it waived, by a written document executed by both parties. 10 11 Auto-By-Tel Excite, Inc. By: /s/ Mark W. Lorimer By: /s/ Robert C. Hood -------------------------------- ------------------------------ Name: Mark W. Lorimer Name: Robert C. Hood ------------------------------ ---------------------------- Title: EVP & COO Title: EVP & CFO ------------------------------ ---------------------------- Date: ______________________________ Date: ____________________________ [ADDRESS] 555 Broadway Redwood City, California 94063 415.568.6000 (voice) 415.568.6030 (fax) 11 12 EXHIBIT C AUTO-BY-TEL LIST OF COMPETITORS 12 13 EXHIBIT D CONTENT DESCRIPTION AND TECHNICAL SPECIFICATIONS 13 14 CONTENT LICENSE AND CHANNEL SPONSORSHIP TERM SHEET This term sheet describes the basic points regarding a proposed transaction between Excite, Inc. ("Excite") and Auto-By-Tel. The parties will enter into a definitive agreement ("Agreement") incorporating the terms and conditions contained in this term sheet as soon as reasonably possible. Until the execution of the Agreement, the parties will be bound by the terms and conditions contained in this term sheet. 1. SPONSORSHIP OF EXCITE AUTOMOTIVE CHANNEL a) Auto-By-Tel will be the exclusive online automobile buying service sponsor of the Excite Automotive Channel, located at http://www.excite.com. If, based upon customer feedback, Excite reasonably establishes that the user traffic level on this channel is not being optimized due to a lack of diversity in the user experience, the parties will work together in good faith to test enhancements for the user experience and to generate optimum traffic. b) During the term of the Agreement, Excite will not display any banner advertising or promotional placements for any of Auto-By-Tel's direct competitors in the Excite Automotive Channel. c) Auto-By-Tel will have a right of first refusal to renew its sponsorship of the Excite Automotive Channel upon the expiration of the Agreement. 2. MARKETING AND PROMOTION a) Excite will feature Auto-By-Tel in the Auto Buying Services department of the Excite Automotive Channel for the term of the Agreement. b) Excite will conduct three (3) two-week car give away promotions on the Excite home page promoting Auto-By-Tel during the first year of the Agreement, with one promotion coinciding with the launch of Auto-By-Tel's sponsorship and the other two to be mutually scheduled. Excite will conduct similar promotions three (3) times per year in years two and three of the Agreement. Auto-By-Tel will provide the cars to be given away through these promotions. c) Auto-By-Tel will purchase banner advertising on the Excite Network in the amounts described below, d) Excite will deliver an annual minimum of 150 million impressions of Auto-By-Tel promotional placements during the term of the Agreement, including the placement in the Auto Buying Services department of the Excite Automotive Channel, the car give-away promotions and the banner advertisements described above, the display of Auto-By-Tel's Content (described below) and 1 15 other promotional placements that may be agreed upon by the parties. Attached Exhibits A and B are examples of a Year One Promotional Plan and a Three Year Promotional Plan, respectively. e) The parties will issue an initial, mutually agreed upon press release. 3. CONTENT PROVIDED TO EXCITE a) Auto-By-Tel will provide to Excite mutually agreed upon content relating to online automobile buying such as AutoSite and The Bank Rate Monitor (the "Content"). Excite may display the Content in the Excite Automotive Channel and in other locations in the Excite Network. Excite will determine the "look and feel" of the Excite Automotive Channel and the Excite Network. b) Auto-By-Tel and Excite will determine mutually agreeable methods for the transmission and incorporation of updates to the Content. c) Reasonable excerpts or portions of the Content may be incorporated into "Broadcast Pages" delivered by Excite via email, desktop "channels" or Internet "Push" technologies. Excite will determine the "look and feel" of the Broadcast Pages. 4. SPONSORSHIP AND ADVERTISING FEES AND REVENUE SHARING a) A set-up fee of $550,000 will be due to Excite upon execution of the Agreement as compensation for exclusivity, costs of initiating access to the Excite Network, programming costs associated with the incorporation of the Content into the Excite Network, set-up costs and other expenses associated with Excite's initiation of the links, placements, advertisements and promotions contemplated by this Agreement. b) Sponsorship and advertising fees will be due to Excite as follows:
Year 1 Year 2 Year 3 ---------- ---------- ---------- Sponsorship $ 650,000 $1,400,000 $1,600,000 Banners - US $ 800,000 $ 700,000 $ 700,000 Banners - WebTV/ $ 300,000 $ 300,000 $ 300,000 International Total $1,750,000 $2,400,000 $2,600,000
In the event that Excite is unable to deliver the agreed-upon amount of banner advertising in the WebTV and/or international rotations, Excite will provide the undelivered amounts in rotation on its primary Web site. 2 16 [*] Confidential Treatment Requested c) Auto-By-Tel will pay Excite a bounty per unique auto purchase request (the "Bounty") submitted by users referred to Auto-By-Tel's Web site from the Excite Network. The Bounty will be payments of [*] for the first 100,000 unique auto purchase requests in each year of the Agreement, [*] for the second 100,000 unique auto purchase requests in each year of the Agreement and [*] for each unique auto purchase request in excess of 200,000 in each year of the Agreement. For the purposes of the Agreement, a "unique auto purchase request" is one new-automobile purchase or lease request submitted by any particular user in a sixty (60) day period, as measured by Auto-By-Tel. d) If the number of unique auto purchase requests submitted by users referred to Auto-By-Tel's Web site from the Excite Network in any year of the Agreement exceeds 180,000, the Bounty increases to [*] for the first 100,000 unique auto purchase requests In the subsequent year(s) of the Agreement, [*] for the second 100,000 unique auto purchase requests in the subsequent year(s) of the Agreement and [*] for each unique auto purchase request in excess of 200,000 in the subsequent year(s) of the Agreement. e) The set-up, sponsorship and advertising fees are gross amounts and do not reflect any agency commissions to be paid by Auto-By-Tel. The Bounty payment amounts are net of any agency commissions to be paid by Auto-By-Tel. f) Sponsorship and advertising fees will be paid in twelve equal monthly installments commencing on the execution of the Agreement. Bounty payments will be made quarterly. The parties will conduct annual reviews to ensure accurate payments and accounting. 5. CUSTOMER INFORMATION a) Auto-By-Tel will retain all rights to customers acquired pursuant to the Agreement. b) Once per quarter, in connection with Auto-By-Tel's Bounty payments, Auto-By-Tel will provide Excite with all of the customer information it acquires through the purchase requests submitted by users referred directly to Auto-By-Tel's Web site from the Excite Network. This customer information will be deemed to be the joint property of the parties. Under no circumstances will Excite sell, provide or transfer this customer information to any third party. 6. OPERATIONAL SUPPORT a) Excite will provide. at its sole expense, Account Management support of the Auto Buying Services department of the Excite Automotive Channel sufficient 3 17 to support for the level of sales and marketing contemplated by the Agreement. b) The parties will hold formal reviews on a monthly basis to maintain anticipated results according to the sponsorship objectives. Advertising and sponsorship placements will be adjusted monthly by mutual agreement, 7. TERM AND TERMINATION a) The Agreement will have an initial term three (3) years. b) Auto-By-Tel will have the option to cancel the Agreement it, at the end of the first year under the term of the Agreement, users referred to Auto-By-Tel's Web site from the Excite Network do not submit 100,000 unique AUTO purchase requests. c) Excite will have the option to cancel the Agreement if. at the end of the second year under the term of the Agreement, Excite has not received an aggregate of $1.4 million in Bounty. d) Either party may terminate if the other party breaches the Agreement and the breach remains uncured for thirty (30) days. 8. CONTENT OWNERSHIP AND LICENSE Auto-By-Tel will retain all right, title and interest in and to the Content worldwide, subject to a limited license necessary to perform the Agreement. Excite will retain all right, title, and interest in and to the Excite Network, the Excite Automotive Channel and the Broadcast Pages worldwide. 9. TRADEMARK OWNERSHIP AND LICENSE Auto-By-Tel and Excite will retain all right, title and Interest in and to their trademarks, service marks and trade names worldwide, subject to limited cross-licenses necessary to perform the Agreement. 10. CONFIDENTIALITY The terms and conditions of the Agreement will be confidential. 11. WARRANTY AND INDEMNITY Auto-By-Tel will indemnify Excite from third party claims that the Content infringes or violates any third party's copyright, patent, trade secret, trademark. right of publicity or right of privacy or contains any defamatory content, 12. LIMITATION OF LIABILITY 4 18 Except for liability for indemnity, neither Party will have liability for any damages other than direct damages. Excite's liability will be limited to the amounts actually paid by Auto-By-Tel. 13. DISPUTE RESOLUTION Disputes about trademarks, service marks, trade names and confidentiality can be resolved in court. All other disputes must be resolved through mediation and then binding arbitration. All proceedings will be held in the county in which Excite has its principal place of business. 14. GENERAL The Agreement will be governed by California law. Excite, Inc. Auto-By-Tel By: [SIG] By: /s/ MARK W. LORIMER -------------------------- -------------------------- Name: [ILLEGIBLE] Name. Mark W. Lorimer ------------------------ ------------------------ Title: Pres. and CEO Title: EVP & COO ----------------------- ----------------------- Date: 9/10/97 Date: 9/12/97 ------------------------ ------------------------ 5 19 [*] Confidential Treatment Requested AUTO-BY-TEL AND EXCITE YEAR ONE PROMOTIONAL PLAN EXHIBIT A
[COLUMN HEADS ILLEGIBLE] - ---------------------------------------------------------------------------------------------------------------------- BASE PAYMENT 10/1 Base payment excluding Purchase Y [*] requests EXCITE AUTOMOTIVE CHANNEL Sole buying service 10/1 Link under "Buying Services" to Y 150,000 [*] [*] sponsorship with link off custom area home page to Custom area Link under "Used Cars": Search ABT's Y Used Car Cyberstore Link under "News": Weekly Automotive Y Report Link under "Insurance & Finance": Y Generic Text/graphic on all pages Y KEYWORDS* Excite (Auto brand, keyword) 10/1 Minimum 12.5% "Gen'l Auto"* per month Y** 1,145 [*] [*] Integrated Search 9,160 ------ 10,305 Webcrawler (Auto brand, 10/1 Minimum 15% "Gen'l Auto"* per month N 1,100 [*] [*] keyword) LIFESTYLE DIRECTORIES/GEN'L Various & Specific 10/1 Business & Investing N 6,228 [*] [*] preferences Shopping Computers & Internet General Rotation 10/1 Various keyword results N 7,000 [*] [*] AUTOMOTIVE SHOPPING*** 10/1 Graphic link N 4,800 [*] 4,800M imp's/year EXCITE HOME PAGE SPONSOR*** 2 Weeks on Home Page (3X/yr.) 10/1 Car giveaway (1X in 1997, 3X/yr Y 0 [*] 6,000M imp's/wk. subsequent years) ABT to provide cars ($25,000) retail value per car) WEB TV, EUROPE, CANADA Programs TBD 10/1 25% Auto keywords on Web TV/possible Y 15,000 [*] [*] in Auto area Auto Keywords (Europe/Canada) TBD TOTAL 191,633 [*] [*] PURCHASE REQUEST PROGRAM 100M Unique requests annual 10/1 Net: [*] up to 100M, [*] up to 200M, N/A [*] guarantee [*] after 200M. Years 2*3: [*], [*], [*] GRAND TOTAL 196,433 [*] [*]
* Keywords: Car(s), Auto(s), Automobile(s), Automotive, Dealer, Incentive, Buyer(s) ** Category Exclusivity on the [*] Keywords listed above only, not Auto brand words *** impressions included within Autochannel 20 [*] Confidential Treatment Requested AUTO-BY-TEL AND EXCITE THREE YEAR PROMOTIONAL PLAN EXHIBIT B
Date of Impression Negotiate Content Area Description BASE PAYMENT Base payment excluding Purchase requests Y [*] [*] EXCITE AUTOMOTIVE CHANNEL Sole buying service sponsorship Link under "Buying Services" to Custom area Y 150,000 [*] [*] [*] with link off home page to "Used Cars": Search ABT's Used Car Cyberstore Y custom area Link under "News": Weekly Automotive Report Y Link under "Insurance & Finance". Generic Y Text/graphic on all pages Y KEYWORDS* Excite (Auto brand, keyword) Minimum 12.5% "Gen'l Auto"* Y 10,300 [*] [*] [*] Integrated Search Webcrawler (Auto brand, keyword) Minimum 15% "Gen'l Auto"* per month N 1,100 [*] [*] [*] LIFESTYLE DIRECTORIES/GEN'L Various Specific Preferences Business Investing N 8,228 [*] [*] [*] Shopping Computers & Internet General Position Various keyword results N 7,000 [*] [*] [*] AUTOMOTIVE SHOPPING*** Graphic link N 4,800 [*] [*] 4,800M imp's/year EXCITE HOME PAGE SPONSOR*** 2 weeks on Home Page (3x/yr.) Car giveaway 1x in 1997 3x/yr subsequent years Y 0 [*] [*] [*] 6,000M imp's/wk. ABT to provide cars ($25,000 retail value per car) WEB TV, EUROPE, CANADA Programs TBD 25% Auto keywords on Web TV/possible in Auto area Y 15,000 [*] [*] [*] Auto Keywords (Europe/Canada) 100 TOTAL 191,633 [*] [*] [*] PURCHASE REQUEST PROGRAM 100M Unique requests Net [*] illegible to 2000M, $?? after 200M N/A [*] [*] annual guarantee Years ??? illegible GRAND TOTAL $191,633 [*] [*] [*]
BASE PAYMENT Base payment excluding Purchase (requests) Y $2,600,000 [*] EXCITE AUTOMOTIVE CHANNEL Sole buying service sponsorship Link under "Buying Services" to Custom area Y $1,052,912 [*] [*] [*] with link off home page to "Used Cars": Search ABT's Used Car Cyberstore Y custom area Link under "News": Weekly Automotive Report Y Link under "Insurance & Finance" Generic Y Text/graphic on all pages Y KEYWORDS* Excite (Auto brand, keyword) Minimum 12.5% "Gen'l Auto"* Y $ 742,085 [*] [*] [*] Integrated Search Webcrawler (Auto brand, $ 45,350 [*] [*] [*] keyword) Minimum 15% "Gen'l Auto"* per month N LIFESTYLE DIRECTORIES/GEN'L $ 273,548 [*] [*] [*] Various Specific Preferences Business Investing N Shopping Computers & Internet $ 79,149 [*] [*] [*] General Position Various keyword results N $ 0 [*] [*] AUTOMOTIVE SHOPPING*** Graphic link N 4,800M imp's/year EXCITE HOME PAGE SPONSOR*** $ 0 [*] [*] 2 weeks on Home Page (3x/yr.) Car giveaway (1X in 1997 3x/yr subsequent years Y 6,000M imp's/wk. ABT to provide cars ($25,000 retail value per car) WEB TV, EUROPE, CANADA $ 406,956 [*] [*] [*] Programs TBD 25% Auto keywords on Web TV/possible in Auto area Y Auto Keywords (Europe/Canada) 100 $2,600,000 [*] [*] [*] TOTAL PURCHASE REQUEST PROGRAM 100M Unique requests Net [*] up to 100M, [*] up to 200M, [*] after ? $ 823,523 [*] annual guarantee 200M. Years 2 & 3: [*], [*], [*] GRAND TOTAL $3,423,529 [*] [*] [*]
*Keywords: Car(1), Auto(2), Automobile(3), AutoCenter, Dealer Incentive, Buyer(s). **Category Exclusivity on the [*] keywords rated above only, not auto brand words. ***impressions included within Autochannel number. EX-10.16 11 DATA LICENSE & WEB SITE AGREEMENT 4/1/97 1 EXHIBIT 10.16 [*] Confidential Treatment has been requested for certain portions of this exhibit. DATA LICENSE AND WEB SITE AGREEMENT This Data License and Web Site Agreement (the "Agreement") is entered into as of April 1, 1997 (the "Effective Date"), between (i) IntelliChoice, Inc. a California corporation with a place of business at 471 Division Street, Campbell, California 95008-6922 ("IntelliChoice") and (ii) Auto-By-Tel Marketing Corporation, a California corporation with its principal place of business at 18872 MacArthur Blvd., Suite 200, Irvine, California 92612-1400 ("ABT") and Auto-By-Tel Corporation, a California corporation with its principal place of business at 18872 MacArthur Blvd., Suite 200, 92612-1400 and the parent company of ABT ("Parent"). RECITALS A. IntelliChoice provides certain information concerning new and used automobiles and their purchase, sale, lease and financing to other companies, including by means of an Internet World Wide Web site ("Web Site"). B. ABT hosts several Web Sites where it provides certain data and services to end-users wishing to purchase, sell, lease, or finance new and used automobiles. C. ABT wishes to license certain data from IntelliChoice for use by ABT on its Web Site and to have IntelliChoice place certain other information on IntelliChoice's Web Site; IntelliChoice is willing to provide such license and services on the terms of this Agreement. D. This Agreement sets forth the agreements of the parties on these matters and related covenants, conditions and restrictions. AGREEMENTS IN CONSIDERATION OF THE ABOVE RECITALS AND THE MUTUAL PROMISES CONTAINED HEREIN, THE PARTIES AGREE AS FOLLOWS: 1. DEFINITIONS A. "ABT Site" shall mean the World Wide Web site, currently published in HTML format, available through URL http://www.autobytel.com and resident on an ABT-owned host server which provides those persons and entities that access that Web Site certain information concerning new and used automobiles, financing and other related information. B. "ABT Auxiliary Site" shall mean one or more World Wide Web sites, available through various URLs, resident on an ABT-owned host server, which is run by ABT for one or more Affinity Groups or Credit Unions, which provides those persons that access that Web Site 1 2 certain information concerning new and used automobiles, financing, and other related information. C. "ABT Site Clients" shall mean persons or entities that or who access the ABT Site. D. "Affinity Group" shall mean a group of individuals or entities that are members of a business, charitable, mutual benefit or similar organization, or who access the ABT or ABT Auxiliary Site via one specific web site, that has been submitted by ABT in writing and approved as such by IntelliChoice in writing in its reasonable discretion. E. "Affinity Group Clients" shall mean members of an Affinity Group. F. "Affinity Group Data" shall mean information contained in IntelliChoice's proprietary database consisting of that type of information described on Exhibit "A" as Affinity Group Data and such Updates to such data as IntelliChoice may compile from time to time in its sole and complete discretion, in the format and media provided by IntelliChoice. G. "Affinity Group Services" shall mean those services listed on Exhibit "A" as Affinity Group Services. H. "Affinity Group Site" shall mean the World Wide Web site, currently published in HTML format, and resident on the IntelliChoice host server, which will allow Affinity Group Clients the ability to access and utilize Affinity Group Data and Affinity Group Services, and support the "look and feel" as further defined in Section 3.H. The Affinity Group Site shall have Links to and from the ABT Site or ABT Auxiliary Site. Neither ABT nor IntelliChoice shall authorize any other Link to or from the Affinity Group Site without the consent of the other party. I. "Client Data" shall mean data, in both individual and aggregate (i.e., compilation of information) form, of persons or entities that access the IntelliChoice Site, including the Sites, such as, by way of example only, name, information request details, purchase, lease and financing information, which is ascertainable or recordable by IntelliChoice as the result of the access. J. "Credit Union" shall mean a credit union that has been submitted by ABT in writing and approved in writing as such by IntelliChoice in its reasonable discretion. K. "Credit Union Client" shall mean a member of a Credit Union. L. "Credit Union Data" shall mean information contained in IntelliChoice's proprietary database consisting of that type of information described on Exhibit "B" as Credit Union Data and such Updates to such data as IntelliChoice may compile from time to time in its sole and complete discretion, in the format and media provided by IntelliChoice. 2 3 M. "Credit Union Services" shall mean those services listed on Exhibit "B" as Credit Union Services. N. "Credit Union Site" shall mean the World Wide Web site published in HTML format, and resident on the IntelliChoice host server which will allow Credit Union Clients the ability to access and utilize Credit Union Data and Credit Union Services, and support the "look and feel" as further defined in Section 3.H.. The Credit Union Site shall have Links to and from the ABT Site or ABT Auxiliary Site. Neither ABT nor IntelliChoice shall authorize any other Link to or from the Credit Union Site without the consent of the other party. O. "Data License" shall have the meaning specified in Section 2.A. below. P. "Data Transfer Date" shall mean the date IntelliChoice first delivers to ABT IntelliChoice Car Data as required by Section 2.A. Q. "HTML" shall mean the Hypertext Markup Language. R. "IntelliChoice Car Data" shall mean, collectively, the IntelliChoice New Car Data and the IntelliChoice Used Car Data. S. "IntelliChoice Client" shall mean persons or entities that or who access the IntelliChoice Site (including the Sites). T. "IntelliChoice Data" shall mean, collectively, the IntelliChoice New Car Data, the Credit Union Data, the Affinity Group Data, the Credit Union Data and any other data or information now or hereafter contained on the IntelliChoice Site. U. "IntelliChoice New Car Data" shall mean information contained in IntelliChoice's proprietary database consisting of that type of information described on Exhibit "C" as IntelliChoice New Car Data relating to information compiled by IntelliChoice on certain makes and models of current model year automobiles and such Updates to such data as IntelliChoice may compile from time to time in its sole and complete discretion, in the format and media provided by IntelliChoice. V. "IntelliChoice Rights" has the meaning specified in Section 5.A. below. W. "IntelliChoice Used Car Data" shall mean information contained in IntelliChoice's proprietary database consisting of that type of information described on Exhibit "C" as IntelliChoice Used Car Data relating to information compiled by IntelliChoice on certain makes and models of pre-current model year automobiles and such Updates to such data as IntelliChoice may compile from time to time in its sole and complete discretion, in the format and media provided by IntelliChoice. 3 4 X. "IntelliChoice Services" shall mean all services of any nature provided by IntelliChoice hereunder, including without limitation, the Credit Union Services, the Affinity Group Services, and all services and obligations to operate, maintain, support or provide the IntelliChoice Site, including the Credit Union Site and the Affinity Group Site, and the Links to the ABT Site from the IntelliChoice Site. Y. "IntelliChoice Site" shall mean the World Wide Web site, currently published in HTML format, available through URL http://www.intellichoice.com and resident on an IntelliChoice owned host server which provides those persons and entities that access that Web Site certain information concerning new and used automobiles, financing and other related information, together with the Affinity Group Site and the Credit Union Site. It is understood that the IntelliChoice Site does not include any portion of the site resident on the host server which IntelliChoice does not at the relevant time make available to the general public at no cost or expense to the user. Z. "Link" shall mean a hypertext link, in the form of a text or graphical link, toolbar button or menu item. AA. "Sites" shall mean, collectively, the Affinity Group Site and the Credit Union Site. 4 5 2. DATA LICENSE A. IntelliChoice Car Data. On the terms and conditions set forth herein, IntelliChoice hereby grants to ABT a non-exclusive, limited term, non-transferable right and license (the "Data License"), during the Agreement Term to (i) reproduce and display IntelliChoice Car Data solely on the ABT Site and (ii) use, and reproduce the IntelliChoice Car Data internally, solely for the purpose of supporting the use of the IntelliChoice Car Data on the ABT Site. ABT will permit the use or accessing of the IntelliChoice Car Data solely by end-users of the ABT Site by means of accessing, viewing, printing or downloading such data from the ABT Site for their own use and not for sublicensing, reproduction or reuse by any other person or entity. ABT does not currently have a license governing the use of the ABT Site. In the event ABT institutes a license governing the use of the ABT Site, IntelliChoice shall have the right to approve, which approval shall not be unreasonably withheld, the terms by which users of the ABT Site are authorized to access and use the IntelliChoice Car Data. ABT may not use, perform or display the IntelliChoice Car Data (or permit such use, performance or display by any other person or entity) in any other format, in any other way or through any other means. The Data License is limited to rights and uses expressly permitted by this Agreement. B. Limits. ABT agrees, even after the Agreement Term, to comply with the terms of Sections 5.B. with respect to the IntelliChoice Car Data. ABT has no rights in the IntelliChoice Data or its use not expressly set forth in Section 2.A. C. Format. IntelliChoice Car Data will be formatted as tab-delimited, ASCII text files. Compression methods will be used if mutually agreed. Such format and means can change from time to time if mutually acceptable. D. Transfer. IntelliChoice Car Data will be uploaded by IntelliChoice to IntelliChoice's FTP server (currently "ftp://mail.intellichoice.com"). ABT will download from such server using a name and password to be mutually agreed. E. Update Schedule. IntelliChoice Car Data will be updated as follows. IntelliChoice, in its sole discretion, may update the IntelliChoice Car Data more frequently: IntelliChoice New Car Data Weekly IntelliChoice Used Car Data Quarterly 3. SITES AND RELATED OBLIGATIONS A. Creation and Maintenance of Credit Union Site. IntelliChoice shall use reasonable commercial efforts to have the Credit Union Site complete and available on IntelliChoice's host server for access to and use of the Credit Union Data and Credit Union Services within 30 days of the Effective Date. Thereafter, during the Agreement Term, IntelliChoice shall use reasonable commercial efforts to maintain the Credit Union Site. The Credit Union Site shall provide Credit 5 6 Union Clients with the ability to access and use Credit Union Data and Credit Union Services and shall provide a Link to the ABT Site or ABT Auxiliary Site through which a Credit Union Client may fill out a Purchase Request and Link back to the Credit Union Site. B. Creation and Maintenance of Affinity Group Site. IntelliChoice shall use reasonable commercial efforts to have the Affinity Group Site complete and available on IntelliChoice's host server for access to and use of the Affinity Group Data and Affinity Group Services within 30 days of the Effective Date. Thereafter, during the Agreement Term, IntelliChoice shall use reasonable commercial efforts to maintain the Affinity Group Site. The Affinity Group Site shall provide Affinity Group Clients with the ability to access and use Affinity Group Data and Affinity Group Services and shall provide a Link to the ABT Site or ABT Auxiliary Site through which a Affinity Group Client may fill out a Purchase Request and Link back to the Affinity Group Site. C. Creation and Maintenance of ABT and ABT Auxiliary Sites. ABT shall use reasonable commercial efforts to have the ABT and/or ABT Auxiliary Sites complete and available on ABT's host server with Links to the Credit Union Site and Affinity Group Site, the capability to capture a Purchase Request from a Credit Union Client or Affinity Group Client, Links back to the linking site, and the ability to track purchase requests, within 30 days of the Effective Date. Thereafter, during the Agreement Term, ABT shall use reasonable commercial efforts to maintain the ABT Site or ABT Auxiliary Site with these capabilities. IntelliChoice may terminate this Agreement upon 90 days written notice to ABT if ABT either (i) establishes Websites or portions thereof serving in excess of 25% of the aggregate number of its credit union clients which Websites or portions thereof contain third party data similar or competitive with the Credit Union Data, or (ii) establishes Websites or portions thereof serving in excess of 25% of the aggregate number of its affinity group clients which Websites or portions thereof contain third party data similar or competitive with the Affinity Group Data. In the event of a termination pursuant to the immediately preceding sentence, IntelliChoice shall be entitled to all moneys earned through he date of termination, ABT shall be relieved of any obligation to pay moneys which have not been earned at the date of termination. Any such termination shall not be deemed a default by either ABT or IntelliChoice, and after such termination, this Agreement shall be of no further force or effect. D. Registering and Deregistering Credit Union and Affinity Sites. ABT shall submit to Intellichoice in writing each affinity group or credit union proposed to be registered as an Affinity Group or Credit Union. IntelliChoice shall respond in writing with its approval, within its reasonable discretion, within five business days. ABT shall notify IntelliChoice in writing of any Affinity Group or Credit Union which ABT has deregistered. E. Access and License Rights. The right of Credit Union Clients and Affinity Group Clients to access and use the Credit Union Site and/or the Affinity Group Site shall be subject to all rules and policies and all license terms and restrictions generally applied by IntelliChoice to the IntelliChoice Site. 6 7 F. Links To ABT Site. IntelliChoice shall create and, during the Agreement Term after creation, maintain Links embedded in the IntelliChoice Site linking it to the ABT Site in: (i) that portion of the IntelliChoice Site which provides new vehicle information; and (ii) that portion of the IntelliChoice Site which provides used vehicle information. IntelliChoice agees that, during the Agreement Term, it shall not create Links from the IntelliChoice Site to any web site operated by Auto Web, Reynolds and Reynolds, CUC International, StoneAge or AutoTown on its own branded host server (each, an "Excluded Site"). Irrespective of the foregoing, a site shall not be deemed an Excluded Site if the site is labeled or co-labeled as a site of Microsoft Corporation and any Link to that site is undertaken as an obligation of a contract which is in force between IntelliChoice and Microsoft prior to the date that this contract is signed. In addition, during the Agreement Term, IntelliChoice shall not create a Link to any other web site which specifically identifies or characterizes that website as a "vehicle buying" program or service. The foregoing sentence shall not prevent IntelliChoice from providing any Link to any web site other than the Excluded Sites, including sites that provide vehicle buying programs or services, so long as such Link does not itself specifically identify or characterize the website as a vehicle buying program or service. In addition, during the Agreement Term, IntelliChoice shall from time to time, on a rotating on and off basis, place banner advertising for the ABT Site on the IntelliChoice Site, in places, sizes and frequency determined by IntelliChoice in its discretion. G. Identification Technology. ABT has developed software (the "Tracking Software") designed to identify which Clients pass from the ABT Site to the IntelliChoice Site (including the Affinity Group Site or the Credit Union Site) or from the IntelliChoice Site to the ABT Site using any Links on either Site or otherwise qualify for a Purchase Referral (as defined below). Additionally, IntelliChoice and ABT may, together or independently, desire to create or modify such Tracking Software.). In such event, the parties will use reasonable efforts to agree upon the criteria for the Tracking Software and to allocate development obligations. Unless otherwise agreed, each party will bear its own expense in connection with such development. Each party shall retain all rights to Tracking Software which they have developed. H. Rights. The Sites and all proprietary rights used on the Sites or in connection therewith (including any search engines, data, software, trademarks or tradenames and other IntelliChoice Rights) shall be published by and owned and operated solely by IntelliChoice. The rights of ABT, Credit Union Clients and Affinity Group Clients to access and use the Site (and data and services provided thereon) shall in all respects be non-exclusive. IntelliChoice will have any rights in the Client Data that are authorized by any IntelliChoice Client or are otherwise available to it at law or in equity. Except for the obligation of IntelliChoice to provide the Credit Union Data and Credit Union Services on the Credit Union Site and to provide the Affinity Group Data and the Affinity Group Services on the Affinity Group Site, all aspects of the creation and maintenance of the Sites shall be in IntelliChoice's sole discretion, including formats, layouts, content, locations, etc. Notwithstanding the foregoing sentence, the Affinity Group Site and the Credit Union Site will be designed so that users may reasonably perceive such Sites as part of the ABT Site through the use of the "look and feel" of the ABT Site. ABT will provide graphic 7 8 images, user interface specifications and any navigational information necessary to reproduce such look and feel, and IntelliChoice Agrees, subject the following sentence, to incorporate ABT comments on the format, layout, content, locations, etc. of the Affinity Group Site and the Credit Union Site with the goal of reasonably recreating such look and fee. The parties agree that "look and feel" refers to the general background of the screen, and that the functionality of the Sites (e.g. the design of the searching capabilities, the layout of the CarBuilder application, etc.) will not be modified from the way that IntelliChoice has designed such functionality. Additionally, the uniform reference locator of the Sites will begin with the prefix "http://www.intellichoice.com/" followed by the name of ABT's choice. At the option of IntelliChoice, the Sites may contain graphical and textual representations of the ABT Trademarks; provided, that the style, content and format of such ABT Trademarks shall be subject to the provisions of Section 6. 4. ADDITIONAL OBLIGATIONS A. Responsibility for ABT Site. ABT shall have all obligations and responsibilities (as well as ownership) of the ABT Site and its publication (subject to the rights of IntelliChoice licensed hereunder). ABT shall embed in the ABT Site text and graphical Links that will prominently feature IntelliChoice as a provider of data and services for the ABT Site and ABT Clients; such Links shall at a minimum appear in the ABT "Information Provider" section of the ABT Site (which Link shall be at least as prominent as any other Link in such section other than for "CarPoint") and in each place the IntelliChoice Car Data in available; each such Link shall be approved by IntelliChoice. In addition, in each place the IntelliChoice Data is available, IntelliChoice shall be prominently disclosed and credited as the provider of such data. To the extent that any Links or references contain the IntelliChoice corporate name or IntelliChoice Trademarks (as hereinafter defined), construction and design of such Links or reference shall be subject to the provisions of Section 6 hereof. Without limiting ABT's obligations hereunder, it must comply with all applicable laws and regulations relating to the use of the Internet, including laws and regulations regarding prohibited usage, materials and transmission on the Internet. As between ABT and IntelliChoice, ABT shall be reasonable for the compliance with such laws and regulations of its affiliates, employees, agents, consultants, customers and guests. B. Responsibility for IntelliChoice Site. IntelliChoice shall have all obligations and responsibilities (as well as ownership) of the IntelliChoice Site and its publication. Any Link to the ABT Site shall be approved by ABT. To the extent that any Links or references contain the ABT corporate name or ABT Trademarks (as hereinafter defined), construction and design of such Links or reference shall be subject to the provisions of Section 6 hereof. Without limiting IntelliChoice's obligations hereunder, it must comply with all applicable laws and regulations relating to the use of the Internet, including laws and regulations regarding prohibited usage, materials and transmission on the Internet. As between ABT and IntelliChoice, IntelliChoice shall be responsible for the compliance with such laws and regulations of its affiliates, employees, agents, consultants, customers and guests. 8 9 [*] Confidential Treatment Requested C. Acceptance. ABT shall have one week following the date a Site becomes available during which to review and conduct testing of the Site to determine whether it provides access to the applicable data and services. If, during the course of such testing ABT reasonably determines that the IntelliChoice Site fails to substantially provide such access (generally, "non-conformities"), it shall so notify IntelliChoice in a writing which sets forth the non-conformities discovered. IntelliChoice shall have a period of one week thereafter in which to correct such non-conformities and publish a revised version of the Site to ABT for further testing pursuant to the procedures set forth in this Section. The foregoing procedures shall be repeated until ABT determines that there are no material non-conformities in the Site. In the event the IntelliChoice Site is not approved after two (2) iterations of the foregoing process, ABT may terminate this Agreement, which termination shall end all obligations of the parties and shall be without further liability or obligation by either party, other than obligations which survive termination. Should ABT not reject the Site by providing the writing described above within one week, ABT shall be deemed to have accepted the Site (an "Acceptance"). 5. COMPENSATION A. Initial Fee. ABT agrees to pay to IntelliChoice, upon execution of this Agreement, a one-time fee of $25,000 as a fee to create the Sites (the "Initial Fee"). B. Monthly Fees. In consideration of the Data License and the provisions of Section 3.F, ABT agrees to pay IntelliChoice monthly fees (the "Monthly Fees") as follows: (i) for the first six months following the Data Transfer Date, the sum of [*] per month; and (ii) for the remainder of the Agreement Term, the sum of [*] per month. The Monthly Fees shall be due in advance on the Data Transfer Date and of the same calendar day of each month during the Agreement Term thereafter. Nothing in this Agreement, except a termination of this Agreement per Section 10 shall relieve ABT of the Monthly Fee obligation. C. Affinity Client Fee. In consideration of the Affinity Group Site, Affinity Group Data and Affinity Services, ABT agrees to pay IntelliChoice Five Hundred Dollars ($500) per month for each Affinity Client ABT has registered with IntelliChoice during such month. Affinity Group Clients registered during a month shall be charged to a pro-rata basis for such month. There shall be no pro-rations for any month in which an Affinity Client is de-registered by ABT. 9 10 [*] Confidential Treatment Requested D. Referral Fees (i) Credit Unions: Links. For each "Referral" (as defined below) for new vehicles submitted by an IntelliChoice Client (other than an Affinity Group Client) or by a Credit Union Client, ABT shall pay IntelliChoice a onetime fee of [*]. For each Referral for used vehicles purchased by an IntelliChoice Client (other than an Affinity Group Client) or by a Credit Union Client, ABT shall pay IntelliChoice a onetime fee of [*]. (ii) Affinity Group. For each Referral from an Affinity Group Client for a new or used vehicle, ABT shall pay IntelliChoice a onetime fee of [*]. (iii) Referral. A Referral shall mean any completion of a purchase request (a "Transaction Request") by any IntelliChoice Client (including any Credit Union Client or Affinity Group Client) that accesses the IntelliChoice Site (including the Sites) and thereafter submits a Transaction Request with ABT (whether at the ABT Site, the IntelliChoice Site, or elsewhere), whether or not the applicable client initiates first contact through the ABT Site or the IntelliChoice Site and whether or not such IntelliChoice Client makes a direct Link to the ABT Site or accesses the ABT Site or otherwise makes a Transaction Request at some later date. It is understood that each request for lease, financing or similar purpose will only occur in conjunction with, or after, a Transaction Request, and not independent of a Transaction Request. The parties will establish mechanisms in addition to the Tracking Software to track such Clients, including mechanisms to determine whether each person or entity that completes a Transaction Request accessed the IntelliChoice Site at any prior time. Multiple requests from an individual car buyer made within sixty (60) days shall count as one Referral. Multiple requests from an employee of a credit union or affinity group, made on behalf of credit union or affinity group members, shall count as one Referral only to the extent that only one Referral would have been counted if the credit union or affinity group members had made the requests themselves. Referrals shall be paid monthly, within twenty (20) days after the calendar month in which the Referral is made. Each payment of Referral Fees shall be accompanied by a detailed report, showing the transactions upon which the fees are based (including the name of each Credit Union Client, Affinity Group Client and the details of the transaction). Referral Fees will be payable after the Agreement Term for IntelliChoice Clients who access the IntelliChoice Car Data during the Agreement Term and make a Transaction Request within one (1) month after the Agreement Term. E. Books and Records: Audit. ABT agrees to maintain, until two (2) years after the termination of this Agreement, complete books, records and accounts regarding all Purchase Requests. ABT agrees to allow IntelliChoice's independent auditor, no more than three times each calendar year, to audit and examine such books, records and account during ABT's normal 10 11 business hours and upon at least five (5) days' prior written notice to ABT, in order to verify the accuracy of the reports under this Section. Such audit shall be subject to the auditor's agreement to confidentiality restrictions substantially similar to the terms and conditions of Section 10 if so requested by ABT. Such auditor shall report to ABT and IntelliChoice only whether any Purchase Referral Fees were under-reported and, if so, the amount of such under-reporting. If such auditor reasonably determines that ABT has not made full accounting to IntelliChoice under this Agreement, ABT agrees to promptly pay IntelliChoice the amount of such shortfall (together with late charges as applicable). If such auditor reasonably determines that ABT has overpaid IntelliChoice under this Agreement, ABT shall have a credit balance in its account with IntelliChoice of the amount of such overpayment. In addition, if any such examination reveals an under reporting to IntelliChoice with respect to Purchase Referral Fees of five percent (5%) or more, ABT shall reimburse IntelliChoice its costs of such examination. F. Taxes. ABT shall pay or, at IntelliChoice's option, reimburse IntelliChoice for any and all taxes, duties and assessments imposed on ABT or IntelliChoice in connection with the license and other transactions contemplated in this Agreement, including, without, limitation, all sales, use, excise and other taxes and duties, and excluding only taxes based upon IntelliChoice's income, and taxes (other than sales, use, and excise taxes) due by IntelliChoice under current taxing authority rules and regulations. G. Late Charges. Downtime Offsets: Etc. Any amounts not paid when due shall bear interest at the lesser of fifteen percent (15%) per annum and the maximum legal rate. All amounts shall be payable without offset, except the offset of a credit balance determined in Section 5E. Downtime or unavailability of a Site for any reason within the reasonable control of IntelliChoice for greater than seven (7) days in a month shall give ABT the right to terminate this Agreement, upon 30 day's notice, if the Site continues to be unavailable or down for seven (7) days within the notification period. A termination under this clause is not a default by IntelliChoice, and this Agreement will terminate without other force or effect. Upon termination, IntelliChoice is entitled to all moneys earned through the date of termination. ABT is relieved of any obligation to pay fees which have not been earned at the date of termination. H. Obligations of Parent. Parent hereby agrees that it is jointly and severally liable for all of the obligations of ABT hereunder. Parent acknowledges that it is obtaining direct benefit from this contract by reason of its ownership of ABT and its direct and indirect interests in the transactions contemplated hereby. 6. PROPRIETARY RIGHTS. A. Ownership. ABT agrees that IntelliChoice owns all right, title and interest in the IntelliChoice Data, the IntelliChoice Site, and all technology incorporated therein or used therein, and any and all presentations, modifications, enhancements and copies thereof, and in all trademarks, trade names, inventions, copyrights, patents, know-how and trade secrets used in or connection with the IntelliChoice Data, the IntelliChoice Site, and/or any software used on or in 11 12 connection with the IntelliChoice Site (collectively, the "IntelliChoice Rights"). ABT's use of the IntelliChoice Rights is authorized only for the purposes and to the extent set forth in this Agreement, and upon termination of this Agreement such authorization will cease immediately and ABT will deliver to IntelliChoice any tangible embodiments of any of the IntelliChoice Rights. ABT has no rights in or to any of the IntelliChoice Rights other than as expressly set forth in this Agreement and will acquire no additional rights during the Agreement Term. B. Limits. The right to use the IntelliChoice Car Data and to access the Sites in accordance with the terms of this Agreement does not convey any license, expressly or by implication, to manufacture, duplicate or otherwise copy or reproduce any IntelliChoice Data except as expressly provided in this Agreement. ABT agrees, during and after the Agreement Term: (a) not to copy (other than regular back-up copies), modify, disassemble, reverse engineer or decompile any IntelliChoice Rights, (b) not to copy, perform, distribute or sublicense the IntelliChoice Rights except as expressly permitted hereby, and (c) to maintain the IntelliChoice Rights which are not publicly available in complete confidence without disclosure to any third party (except employees with a need for access who agree to comply with your obligations), notify us immediately of any unauthorized disclosure or use, and cooperate with IntelliChoice to protect all proprietary rights in and ownership of the Intellectual Property. ABT may not retain, modify, copy, or distribute any IntelliChoice Rights which are accessed via the IntelliChoice Site. In addition, ABT acknowledges that no ABT Client, Credit Union Client or Affinity Group Client is granted permission to retain, modify, copy, or distribute any IntelliChoice Rights which are accessed via the IntelliChoice Site or the Sites. ABT will promptly notify IntelliChoice in writing of any such retention, modification, copying, or distribution of which it obtains actual knowledge or has reason to believe, and ABT agrees that any Credit Union or Affinity Group who suffers such retention, modification, or distribution shall immediately be deregistered. C. Improvements. All right, title and interest in and to any developments, modifications, derivations, continuations or improvements made, discovered or used by IntelliChoice or ABT during and after the term of this Agreement arising out of or in connection with the IntelliChoice Site or the IntelliChoice Data, including but not limited to, the presentation, retrieval, display, charge for access to the IntelliChoice Data (if any), shall belong exclusively to IntelliChoice, and ABT is not hereby granted any license thereto. ABT hereby retains all right, title and interest in and to all suggestions, drawings, reports, designs, specifications, screen displays and other materials or assistance provided by ABT and acknowledged as such in writing by IntelliChoice with respect to the Sites. 7. TRADEMARKS AND MARKETING A. Trademarks. The trademarks, trade names and other product and company identifiers of IntelliChoice that IntelliChoice may adopt from time to time, including but not limited to IntelliChoice. Just the Facts, CarCenter, CarBuilder, and Window Sticker Plus (collectively, the "IntelliChoice Trademarks"), are the sole property of IntelliChoice. Except for the use of IntelliChoice's Corporate name and logo among other customer names and logos in a 12 13 listing of ABT's customers, or as otherwise set forth in this Agreement, ABT shall not use IntelliChoice's corporate name or the IntelliChoice Trademarks with any product or service for any means, including any promotional advertisement without IntelliChoice's prior written consent. Any IntelliChoice Trademarks which ABT uses must be reproduced with the appropriate trademark notations in accordance with IntelliChoice's instructions and in the form and manner designated by IntelliChoice. The trademarks, trade names and other product and company identifiers of ABT that ABT may adopt from time to time (collectively, the "ABT Trademarks"), are the sole property of ABT. Except for the use of ABT's Corporate name and logo among other customer names and logos in a listing of IntelliChoice's customers, or as otherwise set forth in this Agreement, IntelliChoice shall not use ABT's corporate name or the ABT Trademarks with any product or service for any means, including any promotional advertisement without ABT's prior written consent. Any ABT Trademarks which IntelliChoice uses must be reproduced with the appropriate trademark notations in accordance with ABT's instructions and in the form and manner designated by ABT. B. Marketing. All representations of IntelliChoice Trademarks that ABT shall incorporate on the ABT Site or ABT Auxiliary Sites shall be exact copies of those used by IntelliChoice or shall be first submitted to IntelliChoice for approval (which shall not be unreasonably withheld) of design, color, and other details. ABT shall incorporate the IntelliChoice name and logo in all marketing materials or promotional advertisement related to the Sites; provided, however, that any promotional advertisement, marketing material or other public communication used for such purpose shall not be published or disseminated without the prior written approval of IntelliChoice. 8. WARRANTY; DISCLAIMERS OF WARRANTY A. Services. IntelliChoice warrants that, during the Agreement Term, the IntelliChoice Services will be provided in a professional, workerlike manner. If a claim occurs under this warranty, ABT must notify IntelliChoice within 30 days after ABT becomes aware of any facts supporting the claim. IntelliChoice will either correct the problem or re-perform the Services. THESE ARE INTELLICHOICE'S ONLY OBLIGATIONS AND ABT'S ONLY REMEDY FOR BREACH OF WARRANTY, EXCEPT FOR THE PROVISIONS OF SECTION 5.G., WITHOUT LIMITING SECTION 8.D., INTELLICHOICE MAKES NO OTHER WARRANTY, GUARANTY OR PROMISE CONCERNING THE INTELLICHOICE SERVICES EXCEPT FOR THE PROVISIONS OF SECTION 5.G. B. Data. IntelliChoice has conducted research to obtain the IntelliChoice Data in the manner IntelliChoice considers to be commercially reasonable from sources IntelliChoice considers to be reliable. IntelliChoice has made no independent verification of the accuracy of the information it has received. The IntelliChoice Data is comprised of the most recent available information in IntelliChoice's database. Timeliness of data is dependent upon IntelliChoice's collection schedule and the level of cooperation from third parties, including, but not limited to, dealers and car manufacturers. IntelliChoice cannot assure that the IntelliChoice Data will be 13 14 current at any time. WITHOUT LIMITING SECTION 8.D, INTELLICHOICE MAKES NO GUARANTY, WARRANTY OR REPRESENTATION WITH RESPECT TO INTELLICHOICE DATA OR ANY OTHER INFORMATION CONTAINED IN THE INTELLICHOICE SITE, INCLUDING AS TO COMPLETENESS, ADEQUACY, ACCURACY OR CURRENT NATURE. C. Sites. IntelliChoice shall use reasonable commercial efforts to maintain the Sites. If ABT claims IntelliChoice has breached this obligation, ABT must notify IntelliChoice within 30 days after ABT becomes aware of any facts supporting the claim. IntelliChoice will correct the problem as soon as commercially reasonable. THIS IS INTELLICHOICE'S ONLY OBLIGATION AND ABT'S ONLY REMEDY FOR BREACH OF THIS OBLIGATION EXCEPT FOR THE PROVISION OF SECTION 5.G. WITHOUT LIMITING SECTION 8.D, INTELLICHOICE MAKES NO GUARANTY, WARRANTY OR REPRESENTATION WITH RESPECT TO THE AVAILABILITY OR PERFORMANCE OF THE INTELLICHOICE SITE (INCLUDING THE SITES), OR THE PERFORMANCE OF ANY HOST SERVER ON WHICH SUCH SITES ARE RESIDENT. IN ADDITION, ABT RECOGNIZES THAT INTELLICHOICE HAS NO CONTROL OVER THE INTERNET OR ACCESS PROVIDERS THEREFORE AND HAS NO RESPONSIBILITY OF ANY NATURE WITH RESPECT THERETO. D. General Disclaimer. Except as expressly set forth in this Section 8., INTELLICHOICE MAKES NO WARRANTIES WITH RESPECT TO THE INTELLICHOICE SERVICES, THE INTELLICHOICE DATA, THE INTELLICHOICE SITE OR ANY INFORMATION CONTAINED THEREIN, OR ANY OTHER SUBJECT MATTER OR TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, AND INTELLICHOICE SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR INFRINGEMENT WITH RESPECT TO ANY SUCH MATTERS. 9. LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY LOST PROFITS, LOSS OF USE (EXCEPT FOR THE PROVISIONS OF SECTION 5.G.), LOSS OR INTERRUPTION OF BUSINESS, OR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, HOWEVER CAUSED, AND WHETHER BASED ON CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICK LIABILITY, STATUTORY CLAIM OR ANY OTHER THEORY OF LIABILITY. THE FOREGOING LIMITATION SHALL APPLY WHETHER OR NOT EITHER PARTY KNOWS OR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT WILL INTELLICHOICE BE LIABLE FOR (A) ANY REPRESENTATION OR WARRANTY MADE TO ANY CLIENT OR OTHER THIRD PARTY BY ABT, OR ANY AGENT OF ABT, OR (B) THE UNAVAILABILITY OF THE INTELLICHOICE SITE, THE INTELLICHOICE DATA OR OTHERWISE. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, EXCEPT AS TO ITS LIABILITY, IF ANY, UNDER SECTION 11, 14 15 INTELLICHOICE'S ENTIRE AGGREGATE LIABILITY TO ABT FOR DAMAGES CONCERNING PERFORMANCE OR NONPERFORMANCE OR IN ANY WAY RELATED TO THE SUBJECT MATTER HEREOF, AND REGARDLESS OF WHETHER THE CLAIM FOR SUCH DAMAGES IS BASED IN CONTRACT OR IN TORT (INCLUDING NEGLIGENCE) STRICT LIABILITY, STATUTORY OR OTHER THEORY OF LIABILITY, SHALL NOT EXCEED THE HIGHEST AMOUNT OF PAYMENTS OF MONTHLY FEES MADE HEREUNDER BY ABT WITHIN ANY CONSECUTIVE SIX MONTH PERIOD. IN THAT REGARD, ABT ACKNOWLEDGES THAT ABT IS RECEIVING VALUE FROM INTELLICHOICE'S OBLIGATIONS HEREUNDER AS THEY ARE RECEIVED, SO THAT DAMAGES ARE GENERALLY NEITHER BACKWARD OR FORWARD LOOKING. 10. TERM AND TERMINATION A. Term. This Agreement shall commence on the Effective Date and shall continue in full force and effect for two (2) years after the Data Transfer Date unless earlier terminated in accordance with the provisions of this Agreement (the "Initial Term"). Thereafter, this Agreement shall renew automatically for one (1) year (the "Renewal Terms") unless-either party provides thirty (30) days prior written notice to the other party of its intent to terminate for convenience. The Initial Term and any Renewal Term are collectively the ""Agreement Term". B. Termination for Cause. If either party defaults in the performance of any provision of this Agreement, and the default is one which is reasonably susceptible of cure, then the non-defaulting party may give written notice to the defaulting party that if the default is not cured within thirty (30) days this Agreement will terminate. If the non-defaulting party gives such notice and the default is not cured within thirty (30) days, this Agreement shall terminate automatically without any obligation on the non-defaulting party to provide any further notice of termination. If the default is one which is not reasonably susceptible of cure, this Agreement shall terminate immediately upon the giving of notice by the non-defaulting party, with no cure period provided. C. Effect of Termination. (I) Upon the termination of this Agreement, the following provisions shall take effect: (A) The rights and licenses granted under this Agreement, including IntelliChoice's obligations under Section 3, shall automatically terminate and ABT shall cease any use of any IntelliChoice Rights, and IntelliChoice shall cease use of any ABT Rights; (B) All payments owed to IntelliChoice shall become due and payable; (C) Except as otherwise provided herein, the non-breaching parties shall have all other rights and remedies available at law or in equity (and for such purposes, each party 15 16 acknowledges that injunctive relief will be appropriate to protect the other party's Rights, which are unique and special and which cannot be protected through the award of damages); and (D) The provisions of Sections 2.B, 6, 7.A, 8.D, 9, 10.C, 11, 12, and 13 shall survive the termination of this Agreement. 11. CONFIDENTIALITY A. Obligation of Confidentiality. The parties acknowledges that by reason of their relationship to each other hereunder, each shall have access to certain information and materials concerning the other's business, plans, customers, technology and products that is confidential and of substantial value to that other party, which value would be impaired if such information were disclosed to third parties. Confidential Information shall consist of the IntelliChoice Rights (as to IntelliChoice) and, as to each party, such other information and materials of such party as are marked as "Confidential", "Proprietary" or some similar designation ("Confidential Information"). Each party agrees that it shall not use in any way, for its own account or the account of any third party, nor disclose to any third party, any such Confidential Information revealed to it by the other party (except to carry out its express rights and obligations under this Agreement) and shall take every reasonable precaution to protect the confidentiality of such information. B. Exceptions. Information shall not be deemed Confidential Information hereunder if such information: (I) is known to the recipient on the Effective Date directly or indirectly from a source other than one having an obligation of confidentiality to the providing party; (II) hereafter becomes known (independently of disclosure by the providing party) to the recipient directly or indirectly from a source other than one as to which the recipient is aware that such source has an obligation of confidentiality to the providing party; (III) becomes publicly known or otherwise ceases to be secret or confidential, except through a breach of this Agreement by the recipient; or (IV) was independently developed by the recipient without use of or reference to the providing party's confidential information. 12. TRADEMARK INDEMNITY Each party shall defend, or at its option settle, any claim brought against the other by a third party and shall indemnify and hold harmless the other party against all costs and expenses of such claims alleging that, in the case of IntelliChoice, ABT's Trademarks, and, in the case of ABT, IntelliChoice's Trademarks, infringe a trademark, trade name, service mark or other intellectual property right of such third party, provided however, that: (i) the party to be indemnified shall notify the indemnifying party promptly of any such claim and gives the indemnifying party full and complete authority, information and assistance to defend or settle such claim at the indemnifying party's expense; and (ii) the party to be indemnified gives the indemnifying party full control of the defense and all negotiations for its compromise and settlement. 16 17 13. GENERAL A. Successors and Assigns. This Agreement and the rights and obligations hereunder may not be assigned or sublicensed by either party. Any attempt by either party to license, assign or transfer any of the rights, duties or obligations under this Agreement is void. Notwithstanding the foregoing, IntelliChoice may assign or transfer this Agreement in connection with any sale, or transfer of substantially all the ownership of IntelliChoice or its assets. Subject to the foregoing, this Agreement will benefit and bind the successors and assigns of the parties. For purposes of the foregoing, any transaction or series of transactions (other than a public offering) which results in an aggregate transfer of fifty percent (50%) or more of the assets or stock of ABT shall be considered an assignment of for purposes of this Agreement. B. Notices. All notices the parties may give to each other will be in writing and by personal delivery or by first class mail, registered or certified, postage prepaid with return receipt requested, addressed to the other party at the address provided at the beginning of the Agreement or to such other address as the parties designate to the other in writing pursuant to this Section. 12.B. A notice under this Agreement will be effective on personal delivery or three (3) days after deposit, if by U.S. mail. C. Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions shall continue in full force and effect. EACH PART OF THIS AGREEMENT THAT LIMITS LIABILITY, DISCLAIMS WARRANTIES OR GUARANTEES, OR EXCLUDES DAMAGES IS SEVERABLE AND INDEPENDENT OF ANY OTHER PROVISION AND IS TO BE ENFORCED THAT WAY. IF ANY REMEDY FAILS TO FULFILL ITS ESSENTIAL PURPOSE, THE LIMITATIONS OF LIABILITY AND EXCLUSIONS OF DAMAGES REMAIN IN EFFECT. D. Waivers. Any waivers must be in writing and the waiver of one breach or default in exercising any rights will not constitute a waiver of any subsequent breach or default. E. Attorney's Fees. If any action or arbitration is brought to enforce or interpret the provisions of this Agreement, the prevailing party will be entitled to reasonable attorney's fees and costs, in additions to any other relief to which that party may be entitled and awarded by a court of competent jurisdiction, including any fees and costs incurred on any appeal. F. Integration. This Agreement represents the entire agreement between the parties, may only be amended by a writing signed by both parties and supersedes all prior agreements and understandings with respect to the matters covered by this Agreement. G. Force Majeure. Neither party will be liable to the other for delays or failures in performance arising out of or resulting from causes beyond the reasonable control of that party, including, without limitation, acts of God, labor disputes or disturbance, material shortages or 17 18 rationing, riots, acts of war, governmental regulation, communication or utility failures, or casualties. H. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original, and all of which together will constitute the Agreement. I. Injunctive Relief. In addition to any of the other remedies available to the parties hereto, each party agrees that it shall be entitled to a decree of specific performance or an injunction restraining violations of a parties' proprietary rights (including any violation of Section 10 of this Agreement). No remedy provided herein is intended to be exclusive of any other remedy, and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or equity. J. Governing Law. This Agreement shall be governed by the laws of the State of California. K. Expenses. Each party hereto shall pay such party's own expenses incurred (including, without limitation, the fees of counsel) on such party's behalf in connection with this Agreement or the performance of its services hereunder. L. Entire Agreement. This Agreement embodies the entire agreement and understanding of the parties hereto as to the subject matter of this Agreement, and supersedes all prior or contemporaneous written or oral communications or agreements between the parties regarding the subject matter hereof. Without limiting the foregoing, neither party has any obligation to provide any services or data not expressly set forth in this Agreement, including any additional development work, maintenance or support. This Agreement may only be amended by written agreement between parties. M. Independent Contractors. The parties will act as independent contractors in the performance of this Agreement, and nothing contained in this Agreement will be construed to (i) give either party the power to direct and control the day-to-day activities of the other, (ii) constitute the parties, as partners, joint venturers, co-owners or otherwise as participants in a joint or common undertaking, or (iii) allow either party to create or assume any obligation on behalf of the other party for any purpose whatsoever. All financial obligations associated with each party's business are the sole responsibility of that party. All sales and other agreements between ABT and ABT Clients are ABT's exclusive responsibility and will have no effect on ABT's obligations under this Agreement. All sales and other agreements between IntelliChoice and IntelliChoice Clients and IntelliChoice's exclusive responsibility and will have no effect on IntelliChoice's obligations under this Agreement. N. Arbitration. Any controversy between ABT and IntelliChoice related directly or indirectly to any this Agreement or any rights or obligations hereunder (including as to whether a 18 19 dispute is subject to arbitration) will be settled by binding arbitration under the commercial rules of the American Arbitration Association then in effect, except as specifically stated in this Agreement. It does not matter whether the controversy is based on contract, tort, strict liability or other legal theory. Despite the foregoing, ABT and IntelliChoice will not arbitrate controversies involving violation of any of the proprietary rights of either party (including of the IntelliChoice Rights) or of third parties. Any arbitration will be held in Santa Clara, California, by one arbitrator with significant knowledge about the electronic information services industry. Each party reserves the right to obtain an interim or permanent injunction in court to prevent infringement, misappropriation or other violation of its proprietary rights of and/or the use of rights in violation of this Agreement. The Federal Arbitration Act, 9 U.S.C. Sections 1-15, not state law, will govern the arbitrability of all claims and all aspects of any arbitration. The arbitrator will not have authority to award any punitive, exemplary or other non-compensatory damages or any penalties relating to any dispute arbitrated or litigated. At the request of a party, the arbitrator will establish a discovery schedule that will: (i) allow each party to notice the depositions of up to three persons (and the length of any such deposition will not exceed two days), (ii) allow each party to serve up to 10 requests for production of up to forty documents or things, and (iii) require each party to notify the other party of the names and address of each person knowing any facts relating to the claims being arbitrated and describing briefly for each person the relevant facts known by that person. Each party will be allowed at least 20 days after receiving those names and addresses to notice the depositions stated in (i) above. The scope of the depositions, requests for production and the extent of the parties' obligations to respond will be governed by the Federal Rules of Civil Procedure. Except as provided above, there will be no discovery in any arbitration that results from this Agreement. 19 20 IN WITNESS WHEREOF, the parties by their duly authorized representatives have entered into this Agreement as of the Effective Date. Auto-By-Tel Marketing Corporation IntelliChoice, Inc. By: /s/ MARK W. LORIMER By: /s/ PETER S. LEVY ----------------------------- ---------------------------- Mark W. Lorimer, Peter S. Levy, President Vice President & Secretary Auto-By-Tel Corporation By: /s/ MARK W. LORIMER ----------------------------- Mark W. Lorimer, Vice President & Secretary 20 21 EXHIBIT A Affinity Group Data and Services URL: www.intellichoice.com/(to be specified) CONTENT AND FUNCTIONALITY: Current model-year vehicle criteria search engine: Search Criteria: Drive Passenger Doors Transmission Body Style Base Price or Monthly Payment (Max) Horsepower (Min) EPA City Mileage (Min) EPA Highway Mileage (Min) Seating Capacity (Min) Specified Safety Features Specified Optional Features Search Results: IntelliChoice Value Rating Vehicle Name Base Price Monthly Loan Payment New Car Pricing Reports: (Example is attached as Exhibit A-1) ABT supplied header image Model and Trim-Line Name Pricing Data: Last Mfg. Price Change Mfg. Code Base Invoice Price Destination Charge Consumer Rebate Dealer Incentive Consumer Information: General: MPG (City/Highway) Full Warranty Dimensions: Wheelbase Overall Length Curb Weight Cargo capacity Seating Capacity Front Headroom Front Legroom Safety: ABS Brakes 22 Automatic Seatbelts Driver Side Airbag Passenger Side Airbag Standard Features Packages Features IntelliChoice Attribution Listing and photo of current model-year Best Overall Value of the Year (BOVY) winners by category (At ABT's option) Listing of all current Manufacturer Rebates and Incentives (At ABT's option) Listing of current National and Regional Manufacturer leases included those awarded the IntelliChoice Gold Star Lease Award (At ABT's option) LINKS: As specified in Section 3B. WINDOW STICKER PLUS: IntelliChoice is in the process of developing and testing an application (working title: Window Sticker Plus) which allows users to select only valid options and features for selected trim lines. The application then computes a detailed window sticker for the vehicle. IntelliChoice will add this application to the Affinity Group Site within 30 days of implementing it at it's own site, www.intellichoice.com 23 EXHIBIT B Credit Union Data and Services URL: www.intellichoice.com/(to be specified) CONTENT AND FUNCTIONALITY: Current model-year vehicle criteria search engine: Search Criteria: Drive Passenger Doors Transmission Body Style Base Price or Monthly Payment (Max) Horsepower (Min) EPA City Mileage (Min) EPA Highway Mileage (Min) Seating Capacity (Min) Specified Safety Features Specified Optional Features Search Results: IntelliChoice Value Rating Vehicle Name Base Price Monthly Loan Payment New Car Pricing Reports: (Example is attached as Exhibit A-1) ABT supplied header image Model and Trim-Line Name Pricing Data: Last Mfg. Price Change Mfg. Code Base Invoice Price Destination Charge Consumer Rebate Dealer Incentive Consumer Information: General: MPG (City/Highway) Full Warranty Dimensions: Wheelbase Overall Length Curb Weight Cargo capacity Seating Capacity Front Headroom Front Legroom Safety: ABS Brakes Automatic Seatbelts Driver Side Airbag Passenger Side Airbag 24 Standard Features Packages Features IntelliChoice Attribution Listing and photo of current model-year Best Overall Value of the Year (BOVY) winners by category (At ABT's option) Listing of all current Manufacturer Rebates and Incentives (At ABT's option) LINKS: As specified in Section 3B. WINDOW STICKER PLUS: IntelliChoice is in the process of developing and testing an application (working title: Window Sticker Plus) which allows users to select only valid options and features for selected trim lines. The application then computes a detailed window sticker for the vehicle. IntelliChoice will add this application to the Credit Union Site within 30 days of implementing it at it's own site, www.intellichoice.com 25 EXHIBIT C New Car and Used Car Data NEW CAR DATA: - ------------- FILE#1: NEW VEHICLE FILE - ------------------------
1 Tag Unique IntelliChoice vehicle ID used as foreign key to other data files. 2 Brand Manufacturer name. 3 Model First word of model name (Model 1). 4 Series Remainder of model name (Model 2 - Model 5). 5 Doors Number of Doors 6 Class Classification of model. 7 Bodystyle Bodystyle 8 Invoice Invoice price 9 Retail Retail price 10 Destination Destination fee 11 Luxury Tax Luxury tax amount 12 Gas Guzzler Gas Guzzler tax amount FILE #2: STANDARD FEATURES - -------------------------- 1 Tag Unique IntelliChoice vehicle ID. 2 Name Feature Name.
26 FILE #3: OPTION PACKAGES - ------------------------
1 Tag Unique IntelliChoice vehicle ID. 2 Name Option Package Name 3 Availability Availability of option package 4 Invoice Invoice Price 5 Retail Retail Price 6 Components List of option package components. FILE #4: OPTION PACKAGE RELATIONS - --------------------------------- 1 Tag Unique IntelliChoice vehicle ID. 2 Name Option Package Name. 3 Relationship with Option package name of relation 4 Relationship Type Type of relation FILE #5: COLOR AVAILABILITY - --------------------------- 1 Tag Unique IntelliChoice vehicle ID. 2 Name Manufacturer name of paint. 3 Exterior Color 1 Exterior color. If two tone, then the upper color. 4 Exterior Color 2 Only used if two tone. Lower color. 5 Interior Color Material color. USED CAR DATA: - ------------- FILE #1: VEHICLE - ----------------------- 1 Year Year. 2 Brand Manufacturer name. 3 Model First word of model name (Model 1). 4 Series Remainder of model name (Model 2 - Model 5).
27 5 Class Classification of model. 6 Look Up Class Foreign key value, used in lookup of File #3. 7 Price Original Base Price. 8 Equipment Schedule Reference Reference Foreign key to File #4.
FILE #2: MPG FUNCTION FILE: 1 Year Year of vehicle to which the used mileage function stored in this record applies. 2 Low Dollar Amount Minimum dollar amount of used vehicle to which this mileage function applies. 3 High Dollar Amount Maximum dollar amount of used vehicle to which this mileage function applies. 4 Constant Constant in two degree polynomial mileage function. 5 Coefficient 1 Coefficient of x in two degree polynomial mileage function. 6 Coefficient 2 Coefficient of x squared in two degree polynomial mileage function.
28 FILE #3: MPG2 FUNCTION FILE: 1 Year Year of vehicle to which the used mileage function stored in this record applies. 2 Class Vehicle classification to which the used mileage function stored in this record applies. 3 Constant Constant in two degree polynomial mileage function. 4 Coefficient 1 Coefficient of x in two degree polynomial mileage function. 5 Coefficient 2 Coefficient of x squared in two degree polynomial mileage function.
FILE #4: FEATURE SCHEDULE: 1 Year Year. 2 Schedule Schedule to which this entry applies. 3 Name Name of feature. 4 Availability Availability of feature. 5 Offset Feature value offset.
EX-10.17 12 KELLEY BLUE BOOK/AUTO-BY-TEL AGREEMENT 11/19/97 1 EXHIBIT 10.17 [*] Confidential Treatment has been requested for certain portions of this exhibit. KELLEY BLUE BOOK/AUTO-BY-TEL AGREEMENT This Agreement supersedes the prior Agreements executed June 27, 1996 and January 31, 1996 between Kelley Blue Book and Auto-By-Tel. 1. Kelley Blue Book will provide a link to Auto-By-Tel from its pages beyond the "Buy A Car Now" and "Buy A New Car Now" buttons on the used car report pages and new car pricing report pages, respectively. (www.kbb.com/buyueast.html, www.kbb.com/buyneast.html and www.kbb.com/cgi-bin/cgi.exe?kbb+nc+byn) 2. Auto-By-Tel's link will be placed as the third position of the "auto buying services" on these pages. 3. Kelley Blue Book may, from time to time, change the geographic regions of the United States to which this service pertains. Initially, it will include all states, except California, Nevada, and Arizona. 4. Kelley Blue Book will track the number of click throughs to the Auto-By-Tel buying service each month by users coming from Kelley Blue Book's "buying service" pages. Auto-By-Tel will pay Kelley Blue Book a referral fee of [*] generated from the Kelley Blue Book site per month. 5. Kelley Blue Book will invoice Auto-By-Tel, with payment due in thirty (30) days. If payment is not made in a timely manner, Kelley Blue Book may, at its option, terminate this Agreement immediately. 6. Auto-By-Tel will provide a link to Kelley Blue Book's New and Used Car Pricing services. Users coming to Kelley Blue Book from Auto-By-Tel's site will see the Kelley Blue Book services in a controlled mode. In the controlled mode, all links to the Kelley Blue Book Home Page will be replaced with links to a page on the Auto-By-Tel site, and all other outside links, i.e. links to other "buying services", links to the Carfax service, and banner ads will be removed and the normal controlled mode service charge will be waived. 7. Auto-By-Tel and Kelley Blue Book will not disclose the terms of this Agreement to any outside entity at any time for any reason. 8. This Agreement will extend for a period of thirty (30) days from its effective date. It shall continue automatically until either party discontinues this Agreement by providing the other party with thirty (30) days prior written notice of such termination. /s/ PETE ELLIS 11-19-97 /s/ STEVE HENSON 11/17/97 - --------------------------------------- ------------------------------------ Pete Ellis Date Steve Henson Date AUTO-BY-TEL KELLEY BLUE BOOK 2 AMENDMENT Kelley Blue Book/Auto-By-Tel Agreement This is an Amendment to the Agreement executed November 19, 1997 by and between Kelley Blue Book and Auto-By-Tel. Paragraph 6 shall be Amended, effective 7/1/98, to read: 6. Auto-By-Tel will provide a link to Kelley Blue Book's New and Used Car Pricing services. Users coming to Kelley Blue Book from Auto-By-Tel's site will see the Kelley Blue Book services in a controlled mode. In the controlled mode, all links to the Kelley Blue Book Home Page will be replaced with links to a page on the Auto-By-Tel site, and all other outside links (banner ads, links to other buying services, vehicle history, finance sites, etc.) will be removed. Kelley Blue Book and Auto-By-Tel will work together on the "look and feel" of the controlled mode pages. Kelley Blue Book will track the number of reports (New Car, Trade-In and Retail Used Car) downloaded each month by users coming from the Auto-By-Tel site. At the end of each month, the number of reports will be multiplied by the price per report of 2 cents and used as the invoice amount for that month. Minimum payment, regardless of the number of reports downloaded, will be five hundred dollars ($500) per month. Kelley Blue Book will invoice Auto-By-Tel, with payment due by the 30th day of the following month. Paragraph 9 shall be added: 9. Once an Auto-By-Tel user has downloaded a used car report, Kelley Blue Book will, at Auto-By-Tel's option, pass back much of the vehicle information, including zip code, vehicle make/model, year, equipment, suggested retail price, etc. via the URL string to Auto-By-Tel. /s/ MARK LORIMER 6/30/98 /s/ STEVE HENSON 6/26/98 - ----------------------------------- ---------------------------------------- Mark W. Lorimer Date Steve Henson Date AUTO-BY-TEL KELLEY BLUE BOOK 3 ADDENDUM TO AGREEMENT Kelley Blue Book / Auto-By-Tel This is an Addendum to the Agreement executed November 19, 1997 by and between Kelley Blue Book and Auto-By-Tel. Effective February 13, 1998, Auto-By-Tel gives authorization to Kelley Blue Book to use the Auto-By-Tel registered trademark within the 'Web Export' function of Kelley Blue Book's KARPOWER(R) Used Car valuation software. /s/ MARK W. LORIMER 2/9/98 /s/ STEPHEN HENSON 2/9/98 - ----------------------------------- ------------------------------- Mark W. Lorimer C.O.O. Date Stephen Henson Date Auto-By-Tel Kelley Blue Book EX-10.18 13 LISTING DISTRIBUTION,SPONSORSHIP,DISPLAY ADVERTIS. 1 Exhibit 10.18 [*] Confidential Treatment has been requested for certain portions of this exhibit. CLASSIFIEDS2000 LISTINGS DISTRIBUTION, SPONSORSHIP, DISPLAY ADVERTISING AND NETWORK AFFILIATION AGREEMENT This LISTINGS DISTRIBUTION, SPONSORSHIP, DISPLAY ADVERTISING AND NETWORK AFFILIATION AGREEMENT (the "Agreement") is between CLASSIFIEDS2000, INC., a California corporation having its place of business at 617 Palomar Avenue, Sunnyvale, CA 94086 ("Classifieds2000"), and AUTO-BY-TEL, CORPORATION, a Delaware Corporation, having its place of business at 18872 MacArthur Blvd., 2nd Floor, Irvine, CA 92612 ("Customer"). This Agreement is effective as of May 29, 1998 (the "Effective Date"). WHEREAS, Classifieds2000 is the creator and administrator of an Internet classifieds service (the "Classifieds2000 Service"); WHEREAS, Customer is in the business of distributing Vehicle Listings ("Classified Advertisements" or "Listings") and offering other services on its own Web site and elsewhere on the Internet on behalf of its clients; WHEREAS, Customer desires to: (a) license Classifieds2000 to distribute Classified Advertisements through the Classifieds2000 Service; (b) be one of four (4) sponsors of the Classifieds2000 Vehicles Channel; (c) display banner and in-line text advertorials through the Classifieds2000 Vehicles category; and (d) be a Network Affiliate of the Classifieds2000 Network, as the Classifieds2000 Network presently exists or is augmented or supplemented from time to time during the term of this Agreement. WHEREAS, Customer and Classifieds2000 desire that this new Agreement replace any and all oral or written agreements or understandings between the parties as to the subject matter of this Agreement. NOW, THEREFORE, the parties hereby agree as follows: 1. SERVICES. Classifieds2000 will provide to Customer the services described in this section. For the purposes of this section, a Listing means a single used vehicle listing that is delivered to Classifieds2000 according to the Classifieds2000 Standard Vehicle Upload Specification. A summary of such services is shown in Attachment A. 1.1. DISTRIBUTION OF LISTINGS. Classifieds2000 will distribute all Listings provided by Customer within the Vehicles section of the Classifieds2000 Service. Customer may include listings from DealerSites.com in the Listings feed that it sends to Classifieds2000. Classifieds2000 will provide Customer with the ability to remotely and automatically upload and update the Listings it distributes in the Classifieds2000 Service on a regular basis. The upload and update capability currently allows changes on a twenty four-hour basis. 1.1.1. DETAIL PAGE LAYOUT AND BRANDING. For each Listing distributed by Customer, Classifieds2000 will display a detail page in a layout exactly as Customer's Listings are displayed in the current Classifieds2000 Service. Each Listing will display the Customer logo and will contain links to additional pages describing Customer's services. An example of this layout is shown in Attachment B. 1.1.2. CONTACT REQUEST LEADS. Classifieds2000 will provide Customer with contact request leads via a specialized Customer enhanced email form that captures specific information and directly processes such information into Customer's contact request service. 1.2. NETWORK-WIDE EXPOSURE. Classifieds2000 will integrate and display Customer's branding throughout the Classifieds2000 Service in the manner described below in order to provide users with easy access from various points within the Vehicles Channel of Classifieds2000's premier classifieds to the Customer Site. 1.2.1. CATEGORY-ENTRY SPONSOR BUTTON. Customer will be the exclusive Auto Buying Service Sponsor. As such, Customer shall receive a fixed presence logo link and FasTrak box on the Entry Page of the Vehicles Channel. The logo shall link to a page of Customer's choice. Minimum impressions from this box shall be one million (1,000,000) per month. 1.2.2. PRODUCTS AND SERVICES PAGE. Customer will receive a fixed presence logo, text link and two lines of text in the New Car Price Quotes Section of the Products and Services Page. The text link shall link to Customer's FasTrak new car buying form. Minimum impressions from this page shall be fourteen thousand (14,000) per month. Logo specifications shall be: 88x31 pixels. 1. 2 1.2.3. INLINE TEXT ADVERTORIALS. Customer will receive four (4) separate Text Advertorial links that will rotate randomly throughout the Search Results Grid of the Vehicles Channel of the Classifieds2000 Service. Minimum impressions from the Inline Text Advertorials shall be two million (2,000,000) per month. Inline text specifications shall be no greater than sixty (60) characters long; no mention of any company names or brands. 1.2.4. PAGE BOTTOM TEXT ADVERTISEMENTS. Customer will receive a Page Bottom Text Advertisement that will rotate on the Vehicle Search Results Pages and the Vehicle Details Pages of the Private Party Listings. These advertisements shall link to Customer's FasTrak new car buying form. Minimum impressions from the Page Bottom Text Advertisements shall be one million per month. 1.2.5. BANNER ADVERTISEMENTS. Customer will receive a minimum of five hundred thousand (500,000) banner impressions per month. Banner Specifications shall be 468 x 60 pixels; 10K maximum file size. 1.2.6. SEASONAL PROMOTIONS. Customer will be included in all relevant Classifieds2000 Service seasonal promotions for advertisers/sponsors that occur during the term of this Agreement. The impressions for this type of advertisement will vary. 1.3. CLASSIFIEDS2000 NETWORK AFFILIATION. Classifieds2000 will develop and offer the following network affiliation service to Member: 1.3.1. CONTENT AND TECHNOLOGY. Classifieds2000 will provide Customer with a private label classified advertising service including the Search Ad, Place Ad, Change Ad, Cool Notify and Hot List features ("Customer Classifieds"). The Customer Classifieds shall include the Vehicles category and any other classified categories selected by Member. The look and feel of the Customer Classifieds Service shall be as shown on: http://classifieds2000.com/cgi-cls/Display.exe?Customer-demo+class. 1.3.2. LISTINGS RESTRICTIONS. In the Vehicles category, the Customer Classifieds shall contain only private party listings provided by Classifieds2000. 1.3.3. ALL SERVICE UPGRADES AND NEW CATEGORIES. All new standard feature enhancements and categories will be added to the Customer Classifieds as they are released. 1.3.4. PROMOTION OF CUSTOMER CLASSIFIEDS ON WWW.AUTOBYTEL.COM/ ("CUSTOMER SITE"). Customer will provide a prominent home page link and tool/menu bar link to the Customer Classifieds from the Customer Site. 1.3.5. ADVERTISING SALES. No third party advertising or banners shall be displayed in the Customer Classifieds. 1.3.6. FREE SERVICE. Private parties will be able to list and view merchandise and services for free on Customer Classifieds. 1.3.7. EXCLUSIVITY. For the Term of this Agreement, Customer shall not enter into any on line co-branding or private label arrangements wherein any party (other than Classifieds2000) provides a private party classifieds service ("For Sale by Owner") to Customer. 1.3.8. CLASSIFIEDS2000 MARKS. A credit for the Classifieds2000 Service and a "Powered By Classifieds2000 - The Internet Classifieds" logo will be displayed on each page within the Customer Classifieds. 1.3.9. OPTION TO REMOVE OF CUSTOMER CLASSIFIEDS. Customer shall have the option of removing Customer Classifieds if it determines that it has a negative impact on Customer's Cyberstore service. 1.4. REPORTING. Classifieds2000 shall provide periodic reports by email to Customer outlining the number of banner impressions and total click-throughs delivered, number of Customer listings in the Classifieds2000 database, and detail pages viewed. Classifieds2000 shall commit to quarterly performance reviews to assess the quality of purchase requests being sent to Customer. Classifieds2000 shall commit to working closely with Customer to improve the quality of purchase requests throughout the term of this Agreement. 1.5. ADDITIONAL PER LISTING SERVICES. The fee for additional per listing services such as secondary detail pages will be on a per listing or setup fee basis 2. 3 [*] Confidential Treatment Requested 2. FEES. The fees for the services contemplated in this Agreement shall be as follows: 2.1 A flat fee of [*] per month for the Listings Distribution Services described in Section 1.1 together with the Network Affiliation Services described in Section 1.3 herein; plus 2.2 A flat fee of [*] per month for the Network Wide Exposure Services described in Section 1.2 herein; plus 2.3 A variable "Bounty" as follows: i. [*] per Unique New Car Purchase Request forwarded to Customer for the first seventy five thousand (75,000) Unique New Car Purchase Requests; ii. [*] per Unique New Car Purchase Request beginning with seventy five thousand and one (75,001) up to and including one hundred and fifty thousand (150,000) Unique New Car Purchase Requests; and iii. [*] per Unique New Car Purchase Requests after the first 150,000 new car purchase requests. 2.4 Classifieds2000 will guarantee a minimum of one hundred thousand (100,000) Unique New Car Purchase Requests over the term of this Agreement. 2.5 The total number of Unique New Car Purchase Request shall be calculated in accordance with Customer's standard de-duplication formula as set forth in item (i) on the attached Schedule C, incorporated herein by this reference. 2.6 All fees payable to Classifieds2000 shall be invoiced monthly at the beginning of the month. Fees due under this Agreement shall be paid within thirty (30) days of receipt of a statement of such payment obligations. In the event there is an unpaid thirty (30) days after payment is due, Customer shall also pay interest at the rate of the lesser of one and one-half (1.5%) per month or the then-highest interest rate allowed to be imposed by applicable law, plus Classifieds2000's reasonable costs of collection. 3. TERM. The term of this Agreement shall be as follows: 3.1 This Agreement shall have a stipulated start date of June 1, 1998, and shall remain in effect for one contract year ("Contract Year"). 3.2 A Contract Year shall be the longer of (a) twelve (1) consecutive months following the stipulated start date; or (b) that period of time following the stipulated start date deemed necessary for Classifieds2000 to deliver the guaranteed number of Unique New Car Purchase Requests as set forth in Section 2.3 above. Classifieds2000 agrees that in the event a Contract Year extends beyond twelve (12) months following the stipulated start date, then Classifieds2000 shall waive the fixed monthly cost associated with Section 2.2 of this Agreement until such time as the guaranteed number of Unique New Car Purchase Requests are delivered to Customer, and Customer shall only pay the variable fee per Unique New Car Purchase Request as identified in Section 2.2 above. 3.3 Upon the expiration of this Agreement, which shall be either the lapse of (12) months following the stipulated start date or upon the lapse of the Contract Year, whichever term is in effect, this Agreement will automatically renew on a monthly basis, unless either party provides thirty (30) days written notice of its election to not have this Agreement automatically renew. 3.4 After this Agreement has been in effect for twelve (12) consecutive months, either party may terminate or renegotiate the terms upon thirty (30) days written notice. 4. ADDITIONAL TERMS AND CONDITIONS. 4.1. CLASSIFIED ADVERTISEMENTS. Customer hereby authorizes Classifieds2000 to use, reproduce, publicly distribute and publicly display Classified Advertisements on the Classifieds2000 Service. Customer will be solely responsible for creating, managing, editing, reviewing, deleting and otherwise controlling the Listings. Customer will deliver to Classifieds2000 Customers' Classifieds Advertisements in the format specified by the document "Classifieds2000 Vehicle Listing Import Specification." Classifieds2000 and its affiliates may decline to include any Classified Advertisements in the Classifieds2000 Service for any reason or at any time. 3. 4 4.2. DISPLAY ADVERTISING. Electronic images and URLs must be submitted at least 3 days before the desired start date. GIFs and go-to URLs should be e-mailed to ron@classifieds2000.com. Classifieds2000 and its related parties reserve the right, at any time, and for any reason in its sole discretion to decline any advertising and to cease further publication of any advertising, and shall not be liable in any way, provided that any amounts received for advertising that is not published will be refunded. 4.3. TERMINATION. This Agreement may be terminated by the parties as follows: 4.3.1 This Agreement will terminate automatically in the event that Classifieds2000 decides, in its sole discretion, to stop operating its Web-accessible service. 4.3.2 Either party may terminate this Agreement after eight (8) months provided that sixty (60) days prior written notice is delivered. 4.3.3 Either party may terminate this agreement upon the material breach of the other party, if such breach remains uncured for thirty (30) days following written notice to the breaching party; except that Classifieds2000 may, by providing written notice, terminate this Agreement immediately if the monthly fees are not paid when due, as set forth herein. 4.3.4 Either Party may terminate this Agreement upon thirty (30) days written notice to Classifieds2000 upon the determination that the Unique New Car Purchase Requests forwarded to Customer fall below Customer's acceptable quality standard should such unacceptable quality standard remains uncured for sixty (60) days following written notice to the other party. For the purposes of this Agreement, Customer's quality standard shall be determined in accordance with the formula set forth in item (ii) on the attached Schedule C, incorporated herein by this reference. 4.3.5 Except for Classified Advertisements that Classifieds2000 requires for maintenance of its systems, upon the expiration or termination of this Agreement, Classifieds2000 will promptly remove the Classified Advertisements from its systems. Sections 2, 4.3, 4.5, 4.6, 4.7, 4.8, 4.9, 4.10, 4.11 and 4.12 shall survive any termination or expiration of this Agreement. 4.4. DISCLAIMER OF WARRANTIES. Classifieds2000 provides all Services performed hereunder "AS IS" and without any warranty of any kind. Classifieds2000 does not guarantee continuous or uninterrupted service to and use of the Services. In the event of interruption of Services, Classifieds2000's sole obligation shall be to restore service as soon as practicably and reasonably possible. 4.5. TRADEMARKS. Neither party may use the other party's trademarks, service marks, trade names, logos, or other commercial or product designations (collectively, "Marks") for any purpose whatsoever without the prior written consent of the other party. Notwithstanding the foregoing, each party grants to the other a revocable, non-exclusive, nontransferable, royalty-free, worldwide license to use each other's respective Marks (a) in conjunction with the Services for the purposes of marketing, promotion, and Classified Advertisements directories or indexes, and (b) in electronic or printed advertising, publicity, press releases, newsletters and mailings about the Services or Classifieds2000. 4.6. CLASSIFIEDS2000 SERVICE PROMOTION. Customer may not use the names of specific Classifieds2000 affiliates to promote, advertise, or publicly state, either verbally or in written form, that Customer's listings are being distributed on such affiliates' Web sites without explicitly stating that this distribution is enabled via an arrangement with Classifieds2000. 4.7. INDEMNITY. Customer agrees to defend, indemnify and hold harmless Classifieds2000 and its directors, officers, agents and employees for any and all losses, costs, liabilities or expenses (including without limitation reasonable attorneys' and expert witnesses' fees) incurred or arising from any Classified Advertisements. 4.8. LIMITATIONS ON LIABILITY. IN NO EVENT SHALL CLASSIFIEDS2000 BE LIABLE FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING BUT NOT LIMITED TO SUCH DAMAGES ARISING FROM BREACH OF CONTRACT OR WARRANTY OR FROM NEGLIGENCE OR STRICT LIABILITY), OR FOR INTERRUPTED COMMUNICATIONS, LOST DATA OR LOST PROFITS, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, EVEN IF CLASSIFIEDS2000 HAS BEEN ADVISED OF (OR KNOWS OR SHOULD KNOW OF) THE POSSIBILITY OF SUCH DAMAGES. UNDER NO CIRCUMSTANCES SHALL CLASSIFIEDS2000 BE LIABLE TO CUSTOMER OR ANY THIRD PARTIES FOR AN AMOUNT GREATER THAN THE AMOUNTS RECEIVED FROM CUSTOMER HEREUNDER. 4.9. GOVERNING LAW. This Agreement will be governed and construed in accordance with the laws of the State of California without giving effect to principles of conflict of laws. Customer agrees to submit to jurisdiction in California and further agrees that any cause of action arising under this Agreement may be brought in a court in Santa Clara County, California. 4. 5 4.10. SUCCESSORS AND ASSIGNS. Neither party may assign this Agreement without prior written consent of the other, except that no such consent shall be required for assignments in connection with the sale of all or substantially all of the assets or securities of a party or by merger (whether by operation of law or otherwise). The parties' rights and obligations will bind and inure to the benefit of their respective successors, heirs, executors and administrators and permitted assigns. 4.11. ENTIRE AGREEMENT. This Agreement sets forth the entire understanding and agreement of the parties and supersedes any and all oral or written agreements or understandings between the parties as to the subject matter of this Agreement. This Agreement may be changed only by a written agreement signed by both parties. 4.12. CONFIDENTIALITY. This Agreement and its terms and conditions are confidential information of both parties. Neither party may disclose the terms and conditions hereof without the advance written consent of the other party. Signed: AUTO-BY-TEL, CORPORATION CLASSIFIEDS2000, INC. /s/ Mark S. Lockareff - ---------------------------- -------------------------------------- Customer Signature Signature /s/ Mark Lockareff - ------------------------------- -------------------------------------- Anne M. Benvenuto Mark Lockareff Senior Vice President, Marketing Vice President, Classified Advertising 6/4/98 - ------------------------------- -------------------------------------- Date Date 5. 6 4.10. SUCCESSORS AND ASSIGNS. Neither party may assign this Agreement without prior written consent of the other, except that no such consent shall be required for assignment in connection with the sale of all or substantially all of the assets or securities of a party or by merger (whether by operation of law or otherwise). The parties' rights and obligations will bind and inure to the benefit of their respective successors, heirs, executors and administrators and permitted assigns. 4.11 ENTIRE AGREEMENT. This Agreement set forth the entire understanding and agreement of the parties and supersedes any and all oral or written agreements or understandings between the parties as to the subject matter of this Agreement. This Agreement may be changed only by a written agreement signed by both parties. 4.12. CONFIDENTIALITY. This Agreement and its terms and conditions are confidential information of both parties. Neither party may disclose the terms and conditions hereof without the advance written consent of the other party. Signed: AUTO-BY-TEL, CORPORATION CLASSIFIEDS2000, INC. - ------------------------------- ------------------------------- Customer Signature Signature /s/ ANNE M. BENVENUTO - ------------------------------- ------------------------------- Anne M. Benvenuto Mark Lockareff Vice President, Classified Advertising - ------------------------------- ------------------------------- Date Date 5. 7 [*] Confidential Treatment Requested ATTACHMENT A
USED CAR PROGRAM FLAT FEE INCLUDES: Fixed Monthly [*] [*] ----------- ---------- - - Listings Distribution on Network - - Per Listing Branding & Links - - Unlimited Dealer Participation - - Unlimited Contact Request Leads - - FSBO Listings on ABT Site NEW CAR PROGRAM FLAT FEE INCLUDES: Fixed Monthly [*] [*] - - Exclusive Buying Service Sponsor - - Real Estate Slotting Fee - - Minimum guarantee of 4,514,000 imps per month PER NEW PURCHASE REQUEST Variable Monthly [*] - - 0 - 75,000 - [*] - - 75,001 - 150,000 - [*] - - 150,001 + - [*] - - Minimum guarantee of 100,000 new "PR's" during terms TOTAL MONTHLY FIXED [*] TOTAL ANNUAL FIXED [*] TOTAL VARIABLE (ESTIMATED*) PER MONTH MONTH # PRs S/PR TOTAL Jun-98 3,000 [*] [*] * [*] Jul-98 5,000 [*] [*] Aug-98 6,000 [*] [*] Sep-98 7,000 [*] [*] Oct-98 7,000 [*] [*] Nov-98 8,000 [*] [*] Dec-98 9,000 [*] [*] Jan-99 9,000 [*] [*] Feb-99 10,000 [*] [*] Mar-99 11,000 [*] [*] Apr-99 12,000 [*] [*] May-99 13,000 [*] [*] ESTIMATED TOTAL ANNUAL VARIABLE 100,000 [*] TOTAL ESTIMATED MONTHLY COST Jun-98 [*] Jul-98 [*] Aug-98 [*] Sep-98 [*] Oct-98 [*] Nov-98 [*] Dec-98 [*] Jan-99 [*] Feb-99 [*] Mar-99 [*] Apr-99 [*] May-99 [*] ---------- TOTAL ESTIMATED ANNUAL COST [*] ----------
8 SCHEDULE C TO THAT CERTAIN CLASSIFIED2000 LISTING DISTRIBUTION, SPONSORSHIP, DISPLAY ADVERTISING AND NETWORK AFFILIATION AGREEMENT ("AGREEMENT") BETWEEN CLASSIFIEDS2000, INC AND AUTO-BY-TEL CORPORATION THE FOLLOWING LANGUAGE SHALL BE INCORPORATED INTO SECTION 2.4 OF THE AGREEMENT AS THOUGH FULLY SET FORTH THEREIN: i. Unique Purchase Request. For the purposes of this Agreement, a "Unique Purchase Request" shall be a new car purchase request electronic form with all data fields deemed mandatory by Customer completed by the user, which has been received by Customer from Classifieds2000, and for which Customer has not, within the previous ninety (90) day period, received a duplicate new car purchase request from Classifieds2000, or any other source from which Customer regularly receives purchase requests, for the same or similar vehicle, as determined by the year, make and model; from the same user, as identified by the same name, zip code and/or the same e-mail address. THE FOLLOWING LANGUAGE SHALL BE INCORPORATED INTO SECTION 4.3.4 OF THE AGREEMENT AS THOUGH FULLY SET FORTH THEREIN: ii. Customer may terminate this Agreement at any time during the term of hereof, if, based upon a random sampling over a thirty (30) day period of not less than one hundred (100) purchase requests referred by Classifieds2000 for either new or used vehicles, it is determined that the number of Classifieds2000 referred purchase requests which are converted to actual sales of vehicles is less than fifteen percent (15%) of the total number of conversion experienced by Customer with non-Classifieds2000 purchase requests during the same time frame. 9 ATTACHMENT B [CLASSIFIEDS2000 LETTERHEAD] "The most visited classifieds on the web!" FEATURES 7.25% OR 7.75% HOME CLICK HERE! SEARCH ADS CLICK HERE FOR MORE INFORMATION PLACE ADS DELETE ADS SEARCH ADS CHANGE ADS CATEGORIES / VEHICLES / CARS COOL NOTIFY HOT LIST Back to List Next Cool Notify Add to Hot List HELP AUTO-BY-TEL - RISK FREE VEHICLE! 72 hour money back refund! [PHOTOGRAPH] AUTO-BY-TEL MAKES YOUR USED CAR PURCHASE RISK-FREE - - Full refund within 72-hours - - National 3Mo./3K Mi. Limited Warranty - - Travel Repair Program - - Certified 135 Point Inspection CAR 1996, Pontiac Grand Am SE, 31K miles, $11,300 OPTIONS 31227 exterior Air Conditioning Cruise Control Two Door Automatic Transmission DESCRIPTION bucket seats, am/fm radio, tilt steering wheel, power door locks, stock number 67801 VEHICLE ID 1G2NE12M7TM565098 SELLER INFO More about Auto-By-Tel Purchase Guidelines Birmingham, Alabama 35209 Back to List Next Cool Notify Add to Hot List EX-10.19 14 LICENSE AGREEMENT - J.D. POWERS & ASSOCIATES 1 EXHIBIT 10.19 J.D. POWER AND ASSOCIATES LICENSE AGREEMENT This License Agreement (the "Agreement") is dated as of June 4, 1998 by and between J.D. POWER AND ASSOCIATES, a California corporation, and Auto-By-Tel Corporation, a Delaware corporation, which together with its wholly-owned subsidiary, Auto-By-Tel Marketing Corporation, a Delaware corporation, is referred to herein as "Licensee." 1.1 GRANT OF LICENSE. (a) J. D. Power and Associates hereby grants to Licensee a nonexclusive license to use the trade name and services mark, "J. D. Power and Associates," (collectively called the "Service Marks") in connection with the promotion and advertising of the claim(s) arising out of the J. D. Power and Associates 1998 Dealer Satisfaction With Online Buying Services Study(SM) as set forth on the attached Exhibit 1 (the "Claims") as follows: (i) On the proprietary Extranet for clients located in the United States operated by Licensee presently known as the Dealer Real Time System ("DRT"). (ii) In print or other traditional advertising media primarily circulated in the United States and Canada; and (iii) In Licensee's media /press releases ("Press Releases") circulated in United States and Canada. (b) J. D. Power and Associates will sell to Licensee merchandise described in Exhibit 4 bearing the Service Marks and Claims (the "Merchandise") provided that Licensee and any person or entity acting on behalf of Licensee first obtains written approval for each use of the Service Marks and Merchandise from J. D. Power and Associates pursuant to Section 1.4 hereof. Licensee shall 2 not use any of the Service Marks or Merchandise except as expressly permitted by the terms of this Agreement. (c) Use of the Claims as contemplated herein shall begin upon date of execution of this Agreement and shall continue until December 31, 1998, inclusive. 1.2 USE BY LICENSEE'S DISTRIBUTOR'S, DEALERS, DEALER ASSOCIATIONS AND THEIR ADVERTISING AGENCIES. (a) J.D. Power and Associates will permit Licensee's distributors, dealers, dealer associations and their advertising agencies to use the Service Marks in connection with the promotion and advertising of the Claims for the term of this Agreement, provided that such distributors, dealers, associations and agencies first execute and deliver to J.D. Power and Associates a written agreement for the express benefit of J.D. Power and Associates, in the form attached hereto as Exhibit 2, to be bound by the terms of this Agreement. (b) It is the obligation of Licensee to advise all parties acting on behalf of Licensee, and all of Licensee's distributors, dealers, dealer associations and their advertising agencies, of the rights and obligations stated herein. Once such advice has been given by Licensee, Licensee has no further obligation to monitor the compliance of its distributors, dealers, dealer associations and their advertising agencies with the terms of this License Agreement. 1.3 J.D. POWER AND ASSOCIATES' OWNERSHIP. Licensee acknowledges that J.D. Power and Associates is the exclusive owner of the Service Marks, and agrees to do nothing inconsistent with such ownership. Licensee agrees that the license or use of the Service Marks shall not create any 3 interest or right, express or implied, in Licensee except as set forth in this Agreement. Licensee shall not grant, assign, convey, sublicense or transfer any of its rights or obligations hereunder without the written consent of J.D. Power and Associates except as expressly permitted by this Agreement. 1.4 USE OF SERVICE MARKS AND QUALITY CONTROL. (a) Licensee shall faithfully reproduce the Service Marks and Claims as the same may be modified from time to time by J.D. Power and Associates in its sole discretion. J.D. Power and Associates agrees to give Licensee not less than thirty (30) days' written notice of any such modifications. (b) No Service Mark may be used unless the entire text of each proposed use is first submitted to J.D. Power and Associates for review, along with samples which are accurate and true representations of the final form of the proposed use of the Service Mark, and is first "Approved As Is" on the written form that J.D. Power and Associates then uses for such purposes. Once a specific creative execution has been so approved, it can be re-used without additional approval. If any changes of any kind whatsoever are made to the content of a creative execution that has been previously approved, it must again be submitted to J.D. Power and Associates for review and approval before it is used. Licensee shall comply with the then current Guidelines for J.D. Power and Associates Advertising Usage Approval, the current version of which is attached as Exhibit 3. (c) No Merchandise may be used unless a written proposal describing each proposed use is first submitted to J.D. Power and Associates for review, and unless such proposed use is first "Approved As Is" on the written form that J. D. Power and Associates uses for such purposes. If any changes of any kind whatsoever are made to the use of the Merchandise that has been previously 4 approved, the new proposed use must again be submitted to J.D. Power and Associates for review and approval. 2.1 LICENSE FEE. (a) Licensee shall pay a one-time license fee of $100,000 and submit a signed License Agreement prior to any advertising or promotional use of any claim. Liquidated damages in the amount $13,500 or, in the case of Merchandise, twice the purchase price of the Merchandise involved, will be paid for any creative execution of advertising or public relations/promotional use of a Service Mark for which prior written approval from J.D. Power and Associates was not obtained. (b) J.D. Power and Associates has the right, upon reasonable notice, at its sole cost, to have an inquiry conducted by an independent party of Licensee's media schedules, tear sheets and other documents relating to use of the Service Marks. 3.1 INFRINGEMENT OF THE SERVICE MARKS. If any third party's unauthorized or incorrect use of the Service Marks comes to the attention of Licensee, Licensee shall give J.D. Power and Associates prompt notice of all details. Licensee shall cooperate and assist J.D. Power and Associates in its investigation and prosecution of any such unauthorized or incorrect use but shall have no right to commence any action, or proceeding concerning infringement of the Service Marks. 5 3.2 INDEMNITY. J.D. Power and Associates does not endorse any of Licensee's Claims, and Licensee shall indemnify J.D. Power and Associates with respect to all losses or damages, including reasonable attorneys' fees that relate in any way to Licensee's use of the Service Marks; provided, however, that Licensee shall have no liability to J.D. Power and Associates for the acts or omissions of J.D. Power and Associates or its employees. 4.1 TERM. This Agreement shall be effective as of the date of this Agreement and shall remain in effect as provided in Section 1.1. 4.2 TERMINATION. J.D. Power and Associates may terminate this Agreement upon written notice if Licensee commits or threatens to commit any breach of this Agreement unless Licensee withdraws the threat or cures the breach within five (5) days after the date of such notice. Licensee may terminate this Agreement at any time upon 30 days prior written notice to J.D. Power and Associates. Licensee shall discontinue all use of the Service Marks or any confusingly similar or conflicting names or service marks after the effective date of the termination or expiration of this Agreement, and will destroy all Merchandise remaining in Licensee's possession, custody, and or control. 5.1 AMENDMENT. No waiver, alteration or amendment of this Agreement shall be effective except pursuant to a writing by an authorized representative of the party to be bound thereby. 6 IN WITNESS WHEREOF, the duly authorized representatives of J.D. Power and Associates and Licensee have executed this Agreement as of the date first set forth above. J.D. POWER AND ASSOCIATES AUTO-BY-TEL CORPORATION BY: [SIG] BY: [SIG] ------------------------------ ------------------------------------ ITS: CFO ITS: SR. V.P. MARKETING ------------------------------ ------------------------------------ AUTO-BY-TEL MARKETING CORPORATION BY: [SIG] ------------------------------------ ITS: President ------------------------------------ 7 5.2 GOVERNING LAW. This Agreement shall be governed by and interpreted in accordance with the internal laws of the State of California. 5.3 NO ENDORSEMENT. It is understood that J.D. Power and Associates approval of creative executions submitted to it for review does not constitute an endorsement by J.D. Power and Associates of any of Licensee's Claims. 5.4 WHOLE AGREEMENT. This Agreement constitutes the complete, final and exclusive statement of the terms of the agreement between the parties with respect to its subject matter and supersedes any and all other agreements, written or oral, with respect thereto. 5.5 HEADINGS. The headings in the Agreement are for convenience only and are of no legal effect. 8 EXHIBIT 1 J.D. POWER AND ASSOCIATES 1998 DEALER SATISFACTION WITH ONLINE BUYING SERVICES STUDY(SM) AUTO-BY-TEL CORPORATION AND AUTO-BY-TEL MARKETING CORPORATION ------------------------------------------------------------- "#1 in Dealer Satisfaction With Internet Buying Services" Based on top ranking in Dealer Services, Web Site Technology and Sales Effectiveness. DISCLAIMER: J.D. POWER AND ASSOCIATES 1998 DEALER SATISFACTION WITH ONLINE BUYING SERVICES STUDY(SM). STUDY CONDUCTED AMONG DEALERSHIP INTERNET SPECIALISTS WHO COMPLETED 540 INDIVIDUAL EVALUATIONS. 9 EXHIBIT 2 AGREEMENT TO BE BOUND - -------------------------------------------------------------------------------- (name of distributor, dealer, dealer association or advertising agency) hereby agrees, for the express benefit of J.D. Power and Associates, to be bound by the terms of the License Agreement between J.D. Power and Associates and Auto-By-Tel Corporation and Auto-By-Tel Marketing Corporation. - ------------------------------------ By: ------------------------------ Its: ------------------------------ 10 EXHIBIT 3 GUIDELINES FOR LICENSED USE OF J.D. POWER AND ASSOCIATES NAME OBJECTIVE J.D. Power and Associates marketing information provides data to ensure that consumer needs are properly identified and addressed. While the purpose and intent in providing this information has not been promotional use, we realize that manufacturers, and their distributors are able to establish product differentiation by doing so. It will always be the goal of J.D. Power and Associates to encourage our subscribers to use the information we collect to meet the needs of a consumer-driven marketplace and not merely create a contest ranking. In light of the above, widespread use of J.D. Power and Associates marketing information findings in advertising has required us to establish a licensing arrangement with formal policies and procedures for reviewing all materials which use information derived from J.D. Power and Associates proprietary information. These policies and procedures are intended to protect: 1. Our clients from making misstatements about the information used, thereby preventing costly production problems (e.g., network disapproval). 2. The findings of the studies conducted by J.D. Power and Associates. 3. Manufacturer claims approved by J.D. Power and Associates. 4. Consumers from misrepresentation. 11 GUIDELINES FOR LICENSED USE OF J.D. POWER AND ASSOCIATES NAME POLICIES/PROCEDURES J.D. Power and Associates, via the signed license agreement, permits licensees to use the specifically awarded claim from J. D. Power and Associates' survey as part of their print or broadcast advertising promotion, or public relations provided that: a. the manufacturer or the United States affiliate of the manufacturer is a paid subscriber to the study being cited, and has committed via a signed Letter of Intent to be a subscriber of the study during the period that the advertising is placed, and has signed and executed a license agreement with J.D. Power and Associates. b. the advertiser or its agency cites data from the most recently published version of the study containing the specific claim. c. the specific data cited is in the format and context used solely in the respective study's management report. d. advertising claims promote the advertiser's positive results without denigrating other manufacturers. e. only manufacturers ranking above industry average may be identified. Any segment that falls below industry average will not be permitted in an advertising claim. Manufacturers shall not disclose to advertising associations specific comparisons with makes or models that fall in the lower half of rankings. f. advertising claims are judged to be consistent with the findings from the survey cited. 12 GUIDELINES FOR LICENSED USE OF J.D. POWER AND ASSOCIATES NAME g. a disclaimer is included that identifies the source of the data to the appropriate J.D. Power and Associates survey and identifies the number of consumers responding to the survey. h. advertising claims have been reviewed and written approval has been granted by J.D. Power and Associates. Review complete upon receipt of claim approval (form indicated "Approved As Is"). i. clear and conspicuous disclosure of all information must be included in advertising. Disclaimers must not be relied upon to convey full disclosure. j. all creative executions submitted must include a representation of visuals that will accompany advertising. k. the advertiser and consumer understand that the use of the J.D. Power and Associates trade name and service mark does not in any way imply endorsement of advertising claims or imply that J.D. Power and Associates has rated, endorsed, or chosen any particular make or model. 1. in order for J. D. Power and Associates to better monitor usage and proper dissemination of information from syndicated studies, manufacturers/distributors shall provide J.D. Power and Associates with a complete copy of all materials taken from J. D. Power and Associates studies and forwarded internally. 13 GUIDELINES FOR LICENSED USE OF J.D. POWER AND ASSOCIATES NAME AWARD/LOGO REPRODUCTION The following details the policy for the use of the J.D. Power and Associates Service Mark reflecting the J.D. Power and Associates award ("Award") or circular award logo, hereinafter ("Logo"). 1. The Award must be an actual photographic representation. Photographic representation excludes the use of line art, computerized presentation, or any other non-photographic presentation. 2. The circular J.D. Power and Associates Logo contained in the Award must be 1" (one inch) minimum in its final reproduced form. There will be no exceptions to this policy. 3. The final version of the Award must include the 1" minimum circular Logo and all other features of the Award must be proportionally correct. 4. There is only one situation that allows reproduction of the Logo by itself, (outside the context of the full award representation), and that is use by the awardees of the "#1 Customer Satisfaction," "Airline," "Tire," "Computer," and "Medium Duty Truck" studies. All other advertising featuring the Award must include a photographic reproduction of the actual Award following the above guidelines. Advertising or promotion that does not meet the above criteria shall not be granted permission for use in public media. If an advertisement is aired or published that does not conform to the above standards, J. D. Power and Associates reserves the right to take appropriate legal or administrative action. 14 GUIDELINES FOR LICENSED USE OF J.D. POWER AND ASSOCIATES NAME CONTACT The Advertising Specialist at J.D. Power and Associates will be responsible for coordinating the review of the claim and issuing the release for its use. J.D. Power and Associates will attempt to process all requests within three working days of receipt of the proposed advertising copy and will strive to accommodate special client timing needs. Maximum turnaround time for responding to requests will be five working days. IMPORTANT: In an effort to protect your interests as well as the integrity of the information produced by J.D. Power and Associates, we would appreciate your assistance in helping us monitor what may be inappropriate or incorrect usage of J.D. Power and Associates marketing information. In such cases, please notify the Advertising Specialist. POLICY EFFECTIVE DATE: REVISED FEBRUARY 1998 15 EXHIBIT 4 IN CONNECTION WITH THE promotion of Claims, Licensee will purchase any and all merchandise (the "Merchandise" from J.D. Power and Associates that bear the Service Marks and Claims, provided that Licensee agrees to be bound by the terms of the License Agreement by signing and delivering to J.D. Power and Associates a signed License Agreement or, in the case of distributors, dealers, or advertising agencies, an Agreement to be Bound (Exhibit 2). According to the License Agreement, all proposed Merchandise using the Service Marks or Claims must be reviewed by J.D. Power and Associates, and submitted along with written descriptions of any proposed use of the Merchandise. This will be sent either by fax or mail. Merchandise is then reviewed and will receive an "Approved As Is" status before J.D. Power and Associates will move forward with production of Merchandise. Merchandise available will be on a variety of items and in a range of costs. J.D. Power and Associates has established this Merchandise program to ensure that all items bearing the J.D. Power and Associates Service Marks and Claims retain their official status and are of the highest quality reproduction and the integrity protected through the entire creative and production process. 16 [J.D. POWER AND ASSOCIATES LETTERHEAD] INVOICE NO.: 16895 INVOICE DATE: 12/30/98 PURCHASE ORDER NO.: CLIENT NO.: 124409 BILL TO: Mr. Eric Schaefer AUTOBYTEL.COM SHIP TO: 18872 MacArthur Blvd. Irvine, CA 92612 DESCRIPTION 1 License Fee for extension of license for "#1 in Dealer Satisfaction with Online Buying Services" claim to February 15, 1998 $25,000.00 8020: NET SALES 25,000.00 SALES TAX TOTAL AMOUNT DUE 25,000.00 PAYMENT DUE UPON RECEIPT Interest at the rate of 2% per month will be charged on any account over 30 days past due. EX-10.20 15 SITE PAGE SPONSORSHIP & COMMISSION AGREEMENT 1 [*] Confidential treatment has been requested for certain portions of this exhibit. EXHIBIT 10.20 AT&T WorldNet(SM) Service Site Page Sponsorship and Commission Agreement AT&T Corp., a New York corporation ("AT&T"), and Auto-By-Tel Marketing Corporation, 18872 MacArthur Blvd., Second Floor, Irvine, CA 92612, a Delaware corporation ("Company") agree to enter into this Site Page Sponsorship and Commission Agreement, including all schedules attached hereto (the "Agreement"). This Agreement becomes effective when signed by Company and accepted in writing by AT&T. The effective date (the "EFFECTIVE DATE") of this Agreement shall be the date indicated below AT&T's signature on the Agreement. Company and AT&T acknowledge receipt of good and valuable consideration for making this Agreement and pursuant to the terms and conditions of this Agreement agree as follows: Key Definitions "AT&T Contact" Sharon Love Advertising Sales Director, AT&T WorldNet Service, 400 Interpace Pkwy Parsippany, NJ 07054-1113 Tel: 201-331-7725, Fax: 201-331-4689 "Company Contact" Peter R. Ellis CEO/President, Auto-By-Tel 18872 MacArthur Blvd. Irvine, CA 92612-1400 Tel: 714-225-4500: Fax: 714-225-4541 "Company Site" means the Company's World Wide Web site on the Internet currently known as "Auto-By-Tel" at URL, http://www.autobytel.com. All references to the Company Site in this Agreement shall include the Tracked Pages as defined below, "Content" means information, data and/or other materials created by Company and/or third parties, including all updates thereof. "Automotive Page" means the page of the Service, currently known as the Automotive Page, and currently accessible at the home page (i.e., the "explore view") of the Service at the URLs, http://www.att.net and http://www.worldnet.att.net; or the equivalent of such Automotive Page as determined by AT&T, which is the primary site within the Service where automotive information and services are aggregated. "Tracked Pages" means the pages of the Company Site to which a User can link through the Service and be tracked in accordance with Section 2.2. "Market Square" means the page of the Service, currently known as Market Square, or its equivalent as determined by AT&T. "Members"/"Visitors"/ "Members" means registered subscribers of the Service; "Users" Visitors" means users of AT&T WorldNet Service's public sites on the Internet who are not Members; and "Users" means Members and Visitors, collectively. 1 2 "Service" means AT&T WorldNet Service. "Teaser Material" means Content, such as financing material, race car results, manufacturer news, recall information, etc., to be provided by Company to AT&T and to be used to attract users of the Service to the Tracked Pages in accordance with Section 2.3 "Term" means the period commencing on the date of this Agreement and, unless terminated earlier pursuant to Section 8, ending six (6) calendar months following the month in which the Deployment Date occurs, subject to renewal as provided in Section 1.2 below. 1.0 Scope of Agreement 1.1 Sponsorship. During the Term, Company shall be the sole sponsor of and the only Aggregate Automotive Service on the Automotive Page. "Sole sponsor" means that, unless otherwise agreed by the parties, only the Company Icon, Teaser Material and other Content provided by Company shall be displayed under the 435 pixel width bar entitled " Automotive" on the Automotive Page. "Aggregate Automotive Service" means a service that provides Internet users who wish to purchase a car with the ability to place purchase requests with respect to new and/or used cars..] If Company ceases to be the sole sponsor and the only Aggregate Automotive Service on the Automotive Page, Company shall have the right to terminate this Agreement in accordance with Section 8. 1.2 Deployment Date; Renewals. (a) The "DEPLOYMENT DATE" means the date on which the Tracked Pages will first generally be made available to Users through the Service, which date shall be mutually agreed upon by the parties. (b) The Term shall automatically be extended for additional consecutive six (6) month periods (each a "RENEWAL TERM") unless either party provides written notice to the other party, at least thirty (30) days prior to expiration of the Term, of its desire not to renew. Any reference herein to the "Term" shall include each Renewal Term, if any. 1.3 Non-Exclusivity; The relationship specified in this Agreement shall be nonexclusive for both parties (i.e., AT&T shall be entitled to make the sites of other companies available anywhere on the Service, and the Company shall be entitled to make the Company Site and any of its Content available through online or Internet access services other than the Service). 1.4 Market Square. During the initial Term of this Agreement, Company shall receive a text listing on, and link to the Company Site from, the "Market Square" area of the Service. Any link from Market Square shall be tracked in accordance with Section 2.2. The size and placement of the link shall be determined by AT&T in its sole discretion. 2.0 Development of Automotive Page; Linkage & Tracking; Teaser Material; Company Icon 2.1 Development of Automotive Page. (a) Company shall, at its expense, develop and make available to AT&T Content for display on the Automotive Page in accordance with Section 1.1. AT&T may reasonably require Company to present the Content in a specific format and font, in order to fit graphically within the look and feel of the Automotive Page, and the specific use determined by AT&T. As between AT&T and Company, Company shall have sole ownership of all Content provided by Company to AT&T for the Automotive Page. (b) AT&T shall, at its expense, design and develop the Automotive Page Trade Dress. "Automotive Page Trade Dress" means the general image, formats and appearance (i.e., the "look and feel") of the Automotive Page, including without limitation, the size and placement of the icons, Teaser Material and other material, the distinctive headers on the page, the colors, designs 2 3 and all other aspects of the page, as amended from time to time as provided in Section 2.1 (d). As between AT&T and Company, AT&T shall have sole ownership of all the Automotive Page Trade Dress. (c) Except as expressly provided in Section 1.1 and in this Section 2.1 (c), AT&T may, at its discretion, place advertising or any other Content anywhere on the Automotive Page, provided that no service offered and no advertising displayed on the Automotive Page shall comprise or include an Aggregate Automotive Service. All revenue received by AT&T from advertising or such other Content, as between Company and AT&T, shall belong exclusively to AT&T. No service offered at the Tracked Pages or through a transaction with a User arising out of the Tracked Pages, and no advertising displayed at the Tracked Pages, shall comprise or include local or long distance telephone service or online or Internet access service (other than a service offered by AT&T). (d) AT&T may, at its discretion and at its expense, from time to time modify or supplement the Automotive Page Trade Dress. AT&T may require Company to modify or supplement, at Company's expense, the Content made available through the Automotive Page upon reasonable advance notice. (e) Company shall not (i) on the Company Site or otherwise use trade dress that is substantially similar or confusingly similar to the Automotive Page Trade Dress or (ii) make the Content available to third parties using trade dress substantially similar or confusingly similar to the Automotive Page Trade Dress. (f) For Content that is of a "critical business nature," Company may change or modify any Content made available by Company for use on the Automotive Page upon one (1) business day prior notice to AT&T, and for Content that is of a non-critical business nature, upon seven (7) calendar days prior notice, provided that, in each case, the Content continues to meet the minimum specifications as agreed to by the parties. 2.2 Linkage & Tracking. Users shall be linked from the Service with the subset of the Company Site that constitutes the Tracked Pages, which shall be identical to the corresponding pages of the Company Site accessed through the URL www.autobytel.com (except for the addition of the WorldNet Icon and other changes as may be necessary to comply with the provisions of this Agreement) and which shall have distinct URLs in order to ensure the separate and accurate identification of all revenues generated by Users (as specified in Sections 4 below). Company will not invite or solicit any User, in their capacity as a User of the Service, to connect directly with the Company Site by any means other than through the Tracked Pages for the purpose of avoiding payment of commission to AT&T. AT&T acknowledges that Company conducts extensive advertising aimed at users of Internet at-large designed to attract users to the Company Site. 2.3 Teaser Material. From time to time, Company shall make available Teaser Material to AT&T. The Teaser Material shall be located on Company's server. AT&T may use the Teaser Material on or in connection with the Service, either independently or in conjunction with the Company Icon, for purposes of promoting visits by Users to the Tracked Pages. AT&T may reasonably require Company to present the Teaser Material in a specific format and font, in order to fit graphically within the look and feel of the Service, and the specific use determined by AT&T. The Teaser Material may be used in AT&T's sole discretion as a hyperlink icon appearing on the Service during the Term, which will link Users with the Company Site. Teaser Material shall not contain advertisements, but may contain references to Company programs or other promotions. 2.4. Company Icon. Company shall furnish to AT&T at least fourteen (14) days prior to the Deployment Date, one full color representation, in "GIF" or "JPEG" format (on diskette or by email), of Company's hyperlink icon ("Company Icon") to be used to take Users from the Service to the Tracked Pages. If Company subsequently modifies the Company Icon, it shall furnish a representation in the same format which AT&T shall substitute for the prior version within seven (7) days after receipt. The size and format of the Company Icon shall be subject to the reasonable approval of AT&T. The Company Icon, may, in AT&T's sole discretion, be included among the hyperlink icons appearing on the Service during the Term; when clicked upon by a User, the Company Icon will link that User with the Tracked Pages. 3 4 2.5 Company Permissions. (a) Company hereby grants to AT&T during the Term a worldwide, nonexclusive, nontransferable, nonassignable right (except as provided in Section 10(c)) to use (i.e., to copy, transmit, distribute, display and perform both privately and publicly), the Company Icon, the Company name, the Company Site name, and other related textual and graphic material to be provided by Company to AT&T from time to time (the "Other Material") on the Service. Company also authorizes AT&T to refer in advertising, marketing and promotion to the fact that the Tracked Pages are accessible through the Service, provided that any such statement: (A) does not include any trademarks, service marks, design marks, symbols and/or other indicia of origin of Company other than Company's name and/or the Company Site name in a non-distinctive typeface (i.e. not the typeface used in the logo design of either mark); and (B) except as set forth in Section 1.1, does not state, suggest or imply by the wording or prominence of such statement, or otherwise, that Company co-brands, sponsors, authorizes, and/or is the source or origin of the Service. All such use of the Company Icon, the Company name, the Company Site name, and the Other Material shall inure to the benefit of Company and shall not create any rights, title or interest in them for AT&T. No other use of the Company's names, trademarks, service marks, design marks, symbols and/or other indicia of origin will be made by AT&T for any purpose, without the prior written approval of Company. AT&T shall use the Company's name, the Company Site name and the Other Material in accordance with such reasonable guidelines as Company may provide to AT&T from time to time. AT&T agrees to cooperate with Company in facilitating Company's monitoring and control of the use of its name and marks and to supply Company with samples of AT&T's use of such names and marks upon request. 3.0 WorldNet Icon 3.1 WorldNet Icon. The graphic depicted on the attached Schedule A (the "WORLDNET ICON") shall be displayed by Company on each of the Tracked Pages during the Term, in the position within the page layout shown on Schedule A; AT&T-shall furnish to Company at least fourteen (14) days prior to the Deployment Date, a full color representation of the WorldNet Icon in "GIF or "JPEG" format (on diskette) for Company's use under this Agreement. If AT&T subsequently modifies the WorldNet Icon, it shall furnish a representation in the same format which Company shall substitute for the prior version within seven (7) days after receipt. If AT&T so requests, the WorldNet Icon shall be implemented as a "return icon", which when clicked upon by a User will link such User back to the Automotive Page or such other page as mutually agreed by the parties. 3.2 AT&T Permissions. AT&T hereby grants to Company during the Term a worldwide, nonexclusive, nontransferable, nonassignable right to use (i.e., to copy, transmit, distribute, display and perform both privately and publicly) the WorldNet Icon solely on each of Designated Page as provided in Section 3.1 above. AT&T also authorizes Company to refer in Company's advertising, marketing and promotion to the fact that the Company Site is accessible through the Service, provided that any such statement: (a) does not include any trademarks, service marks, design marks, symbols and/or other indicia of origin of AT&T other than the name of AT&T and/or the name of an agreed upon segment of the Service and/or the name of the Service, in a nondistinctive typeface (i.e. not the typeface used in the logo design of any such mark); and (b) does not state, suggest or imply by the wording or prominence of such statement, or otherwise, that AT&T is co-branding, sponsoring, authorizing, and/or is the source or origin of the Company Site or any Content or Company Products. All such use of the WorldNet Icon shall inure to the benefit of AT&T. Nothing in this Agreement shall create any rights, title or interest for Company in the WorldNet Icon (except to the extent provided in the first sentence of this Section) or in any of AT&T's other names, trademarks, service marks, design marks, symbols and/or other indicia of origin and no use of such will be made by Company for any purpose without the prior written approval of AT&T. Company shall use the WorldNet Icon in accordance with such reasonable guidelines as AT&T may provide to Company from time to time. Company agrees to cooperate with AT&T in facilitating AT&T's monitoring and control of the use of the WorldNet Icon and to supply AT&T with samples of use of the WorldNet Icon upon request. 4 5 [*] Confidential Treatment Requested 4.0 Commissions. 4.1. Sponsorship Fee. (a) During the initial Term and in each Renewal Term, if any, Company shall pay AT&T a non-refundable, monthly fee (the "Sponsorship Fee") in arrears equal to (i) a minimum of [*] plus (ii) [*] for each additional [*] Automotive Page Views over eighty thousand (80,000) in any such month, with overages rolling up to next 10,000 increment. For example, if there are [*] Automotive Page Views in a month, the Sponsorship Fee for that month be [*] and if there are 90,001 Automotive Page Views in a month, the Sponsorship Fee would be [*], and so on. The Sponsorship Fee shall not be less than [*] in any month, regardless of the number of Automotive Page Views, "Automotive Pages Views" means the number of times the Automotive Page is served, as determined by a third party auditor selected by AT&T. (b) During the initial Term, the Sponsorship Fee shall be capped at [*] dollars per month. Beginning on the first day of each Renewal Term, if any, the cap on the Sponsorship Fee shall be automatically adjusted in proportion to any increase in the number of Members of the Service, as reported by AT&T on the first day of such Renewal Term. For the purposes of this calculation, the parties agree that the baseline for the number of Members of the Service for the initial Term is nine hundred thousand (900,000). Thus, for example, if the Agreement is renewed beginning on the date that is six-months after the Deployment Date and the number of Members reported by AT&T on such date is 1,350,000, the monthly cap on the Sponsorship Fee for such six-month Renewal Term shall be [*]. 4.2 Commission Revenue. (a) During the initial Term, Company shall pay AT&T [*] for each Unique New Vehicle Purchase Request made by a User after the 5000th Unique Vehicle Purchase Request in any one month. "Unique New Vehicle Purchase Request" means any purchase request for a new vehicle by a User that is received by Company for which Company has not, within the previous ninety (90) day period, received a purchase request for a new vehicle from a person identified by the same name and/or the same e-mail address. (b) In addition, Company shall pay AT&T [*] dollars for each Unique Used Car Inquiry by a User that results in a request for purchase information. "Unique Used Car Inquiry" means any request for purchase information on a used car from a User that is received by Company for which Company has not, within the previous ninety (90) day period, received a request for purchase information on a used car from a person identified by the same name and/or the same e-mail address. 4.3 Tax Responsibility. Company is solely responsible and liable for the collection and remittance of any applicable federal, state and/or local sales taxes on all retail, advertising, and subscription membership, or similar sales. 4.4 Auditing. AT&T shall have the right, at its expense, upon five (5) business days written notice and during Company's normal business hours, to inspect and audit the site logs of the Company Site and other books and records of Company as necessary to verify any reports, information or payments due to AT&T under this Agreement. In the event of any shortfall in payment to AT&T is found which exceeds five percent (5%) of the total due to AT&T for the reporting period audited, Company shall reimburse AT&T for all reasonable costs of the audit, including without limitation, accountant fees and attorney fees, without limitation of AT&T's other rights and remedies. 4.5 Payments and Reporting to AT&T. (a) Payments. The first payment of the Sponsorship Fee shall be due 30 days after the end of the calendar month containing the Deployment Date, but shall be prorated based on the number of days for which the Automotive Page was "live" in accordance with the terms of this Agreement. All subsequent payments of the Sponsorship Fee shall be due thirty (30) days after the end of the applicable calendar month. All other payments under this Agreement are due thirty (30) days after the end of the applicable calendar quarter. For 5 6 all payments under this Agreement, Company will submit payment in full on or prior to the due date pursuant to the terms set forth in Schedule B. (b) Overdue Payments. Any amount payable by Company under Section 4 not paid when due shall bear interest at a rate of fifteen (15) percent per annum until paid in full. Such interest will be computed from the date payment was due until the date actually received by AT&T. (c) Company Reports. Within thirty (30) days following the close of each calendar month for so long as Company or any Company Affiliate receives gross consideration to which AT&T is entitled a commission (as provided in Sections 4.2), Company shall furnish AT&T with a statement showing the number of Users who visited the Company Site, the number of Users who completed New Car Purchase Requests and Used Car Inquiries during such month, and the calculation of the payment due to AT&T from each such category. 4.6 Company Affiliate. "COMPANY AFFILIATE" means a corporation or other entity that controls, is controlled by or is under common control with Company, where "control" means the direct or indirect ownership or control of more than fifty percent (50%) of the stock or other equity interest entitled to vote for the election of directors or equivalent governing body. 5.0 Press Releases. Neither party shall issue any press release or other public statement concerning the existence of this Agreement or the terms hereof without the prior written approval of the other party. Any press release issued by either party whose primary focus is the relationship established under this Agreement shall give first and primary mention to the method of accessing the Company Site set forth in this Agreement. 6.0 User Considerations. 6.1 Editorial Standards. The Content at the Company Site and any Content provided to AT&T by Company shall at all times during the Term conform with the Editorial Standards (annexed as Schedule C below). 6.2 Minimum Specifications. Company's server on which the Tracked Pages will be hosted, and from which the Tracked Pages will be accessed by Users, shall at all times meet the following minimum specifications: no page of the Tracked Pages shall have a download time of more than sixty (60) seconds at a modem speed of 28.8 kbps. 6.3 Customer Service Standards. Company shall adequately staff, equip, maintain and offer to all Users, at its sole expense, customer services which shall equal or exceed the standards which follow: Company shall (a) forward any electronic mail inquiries regarding Users and/or the Service to AT&T within twenty-four (24) hours following receipt; (b) electronically notify AT&T of any failure of service regarding the Company Site that affects Users within sixty (60) minutes of Company's becoming aware of its occurrence and give AT&T at least twenty-four (24) hours prior notice of any scheduled down time; and (c) provide AT&T with access (which may be by beeper) to Company's technical support twenty-four (24) hours per day, three hundred sixty-five (365) days per year, (d) display customer service contact information prominently and clearly within the Company Site, (e) maintain a maximum response time for service inquiries submitted by e-mail by Users of no more than twenty-four (24) hours. 6.4 Security Standards Company shall provide secure connections, Secure Sockets Layer ("SSL"), to the Tracked Pages for the transfer of User information required to complete an electronic transaction, if any, in which case, Company shall provide and maintain the necessary hardware and software to support SSL, version 2, at a minimum, at its sole expense. Company agrees to store all User-identifiable information, including credit card information, off-line behind a secure firewall. Company shall initiate all credit card settlements via either direct dial connection or dedicated private line connection to the card transaction processing agent. 6 7 6.5 User Privacy. Company agrees that it will not sell, lease, barter, or give away to third parties any User's name, telephone number, e-mail address, residential address, office address and/or fax number. Company further agrees that it will not send unsolicited e-mail messages or other unsolicited communications to Users; except that Company may send e-mails to Users, so long as such Users have an option at all times to elect not to receive such e-mail. 7.0 Confidentiality. The parties agree and acknowledge that, as a result of negotiating, entering into and performing this Agreement, each party has and will have access to certain of the other party's Confidential Information (as defined below). Each party also understands and agrees that misuse and/or disclosure of that information could adversely affect the other party's business. Accordingly, the parties agree that, during the term of this Agreement and thereafter, each party shall use and reproduce the other party's Confidential Information only for purposes of this Agreement and only to the extent necessary for such purpose and shall restrict disclosure of the other party's Confidential Information to its employees, consultants or independent contractors with a need to know and shall not disclose the other party's Confidential Information to any third party without the prior written approval of the other party. Notwithstanding the foregoing, it shall not be a breach of this Agreement for either party to disclose Confidential Information of the other party if compelled to do so under law, in a judicial or other governmental investigation or proceeding, provided the other party has been given prior notice to permit such other party a reasonable opportunity to object to the judicial or governmental requirement to disclosure. As used in this Agreement, the term "Confidential Information" refers to: (a) the terms and conditions of this Agreement; (b) each party's trade secrets, business plans, strategies, methods and/or practices; (c) any and all information which is governed by any now-existing or future non-disclosure agreement between the parties; and (d) any other information relating to either party that is not generally known to the public, including information about either party's personnel, products, customers, marketing strategies, services or future business plans. Notwithstanding the foregoing, the term "Confidential Information" specifically excludes (i) information that is now in the public domain or subsequently enters the public domain by publication or otherwise through no action or fault of the other party; (ii) information that is known to either party without restriction, prior to receipt from the other party under this Agreement, from its own independent sources, and which was not acquired, directly or indirectly, from the other party; (iii) information that either party receives from any third party having a legal right to transmit such information, and not under any obligation to keep such information confidential; and (iv) information independently developed by either party's employees or agents provided that either party can show that such information was developed without reference to the Confidential Information received hereunder. The provisions of this Section shall apply for the duration of the Term of this Agreement and for three (3) years after the expiration or termination of this Agreement. 8.0 Termination and Severance. (a) This Agreement may be terminated immediately by either party (i) if the other party shall fail to do business in the normal course or become subject to a bankruptcy or any similar proceeding, (ii) thirty (30) days after delivery of written notice from the terminating party to the effect that the other party has committed a material breach under this Agreement, provided such breach is not cured within such thirty (30) day period, (iii) if the Deployment Date does not occur within thirty (30) days of the Effective Date of this Agreement, provided such termination right is exercised before deployment occurs, (iv) thirty (30) days after delivery of written notice that, in the case AT&T is the terminating party, AT&T intends to terminate all or a substantial part of the Service, and, in the case Company is the terminating party, Company intends to terminate all or a substantial part of the Company Site, or (v) if Company ceases to be the sole sponsor and only Aggregate Automotive Service on the Automotive Page, then Company shall have the right to terminate this Agreement upon thirty (30) days' written notice to AT&T. (b) If Company's Site fails to perform in accordance with this Agreement, including, without limitation, with respect to "User Considerations" under Section 6 or "Product Responsibility" under Section 9, AT&T shall have the right at any time and at its discretion to sever immediately one or all of the links between the Service and the Tracked Pages. In the event that AT&T severs a link, 7 8 AT&T will give Company prompt notice of such fact and Company shall have five (5) days to resolve the problem to the reasonable satisfaction of AT&T. If the link remains severed for more than ten (10) days, then AT&T may, immediately and without further notice, terminate this Agreement. (c) Amounts due and owing AT&T arising prior to any termination shall continue to be paid to AT&T pursuant to Section 4, but AT&T shall not be entitled to collect commissions or any Sponsorship Fee accruing after such termination. The Sponsorship Fee payable upon termination shall be prorated based on the number of days in the calendar month prior to the termination date. 9.0 Liability. 9.1 Product and Content Responsibility. Company acknowledges that AT&T does not advocate or endorse the purchase or the use of products, if any, or services offered by Company by or through the Company Site or otherwise (the "COMPANY PRODUCTS"), nor does it guaranty the quality, fitness, or results of any such Company Products or their compliance with any law or regulation; and that AT&T is providing the Company Site an exposure on the Service to enable Company to offer Company Products for sale and has no control over the selection of goods or services offered for sale, over their quality or content or over the Content, advertisements or any other material at the Tracked Pages or the Company Site (except the WorldNet Icon). As between AT&T and Company, Company shall have sole responsibility and liability for: (a) the quality of all Company Products and compliance thereof with all Government Standards (defined in Section 9.2 below) (including without limitation safety standards); (b) processing all orders by Users of Company Products; and (c) shipping or otherwise furnishing Company Products as ordered and in timely fashion, in the event products are offered for sale by or through the Company Site. Company agrees to furnish Company Products as ordered to all Users throughout the United States and all of its possessions and territories, including Puerto Rico and the U.S. Virgin Islands, as well as Canada. Company shall display adequate notices, in a manner and form satisfactory to AT&T, on all Tracked Pages that offer Company Products. "Adequate notices" means (a) the selling company's legal name and place of business, (b) any territorial restrictions on the delivery of products or services offered by or through the Company Site, (c) the selling company's refund and return policies and (d) any other notices required by applicable laws. Further, AT&T may require that Company reproduce the following sentence in connection with Company Products offered on Tracked Pages: AT&T DOES NOT ADVOCATE OR ENDORSE THE PURCHASE OR USE OF ANY OF THE PRODUCTS BEING OFFERED FOR SALE BY [COMPANY], NOR DOES IT MAKE ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF ANY SUCH PRODUCTS OR THEIR COMPLIANCE OR [COMPANY'S] COMPLIANCE WITH ANY APPLICABLE LAW OR REGULATION. 9.2 Representations and warranties of AT&T. AT&T represents and warrants that: (a) AT&T has the right to enter into this Agreement and to grant the rights and licenses granted herein; and (b) AT&T shall comply with all applicable laws, statutes, ordinances, rules and regulations of each county, state and city or other political entity with respect to the operation of the Service (collectively, "Government Standards"). 9.3 Representations and warranties of Company. Company represents and warrants that: (a) Company has the right to enter into this Agreement and to grant the rights and licenses granted herein; is the owner of the Company Site; is a wholly-owned subsidiary of the Auto-By-Tel Corporation; and will cause the Auto-By-Tel Corporation to execute a performance guarantee, in a form reasonably satisfactory to AT&T, to cover its obligations under this Agreement; (b) the Company Site and the reproduction, distribution, transmission, public performance and public display of the Company Site, the Tracked Pages, the Company name, the Company Site name, the Other Material and the Teaser Material and any other Content provided to AT&T pursuant to this Agreement do not and will not (i) invade the right of privacy or publicity of any third person, (ii) contain any libelous, obscene, indecent or otherwise unlawful material; or (iii) infringe any patent, copyright or trademark right in any jurisdiction or otherwise contravene any rights of any 8 9 third person and Company has received no notice of such infringement; (iv) or otherwise fail to comply with any Government Standards; (c) the Company Products are and will be accurately presented, delivered as promised, merchantable and fit for the purposes for which they are intended; (d) the Company Products will be in all respects safe and noninjurious for the persons intended to use them, and all packaging, promotional materials, and Company's marketing, sales and distribution methods shall meet or exceed all Government Standards; (e) Company will not package, market, sell or distribute any Company Products or cause or permit any Company Products to be packaged, marketed, sold or distributed in violation of any such Government Standards; provided that the representations and warranties in subsection (b) above shall not apply to User Content or Product Content (as defined below). Instead, Company represents and warrants that it shall monitor and edit such User Content and Product Content and shall promptly remove any User Content and Product Content from the Company Site which fails to conform with the warranties and representations in subsection (b) above. "USER CONTENT" means content uploaded by Users and/or other end users of the Company Site; "PRODUCT CONTENT" means language incorporated by the manufacturer thereof (other than Company) in Company Products. 9.4 Indemnities. Each party to this Agreement shall and hereby agrees to defend, indemnify and hold harmless the other party and each of its officers, directors, employees and agents (each, an "Indemnitee") against and in respect of any loss, debt, liability, damage, obligation, claim, demand, judgment or settlement of any nature or kind, known or unknown, liquidated or unliquidated, including without limitation all reasonable costs and expenses incurred (legal, accounting or otherwise) (collectively, "DAMAGES") arising out of, resulting from or based upon any claim, action or proceeding by any third party alleging any breach of any representation, warranty or covenant made by such indemnifying party (the "INDEMNIFYING PARTY") in this Agreement. Company further agrees to defend, indemnify and hold harmless AT&T and its officers, directors, employees and agents against and in respect of any Damages arising out of, or resulting from or based upon any claim, action or proceeding by any third party relating to the Company Products, User Content, Product Content, Company Site, and other Content provided to AT&T pursuant to this Agreement and to other materials or information that Users can link to from the Tracked Pages. Whenever a claim shall arise for indemnification under this Section 9.4, the relevant Indemnitees, as appropriate, shall promptly notify the Indemnifying Party and request the Indemnifying Party to defend the same. 9.5 No Consequential or Punitive Damages. NEITHER PARTY WILL BE LIABLE TO THE OTHER PARTY (NOR TO ANY PERSON CLAIMING RIGHTS DERIVED FROM THE OTHER PARTY'S RIGHTS) FOR INCIDENTAL, INDIRECT, CONSEQUENTIAL, SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES OF ANY KIND -- INCLUDING LOST REVENUES OR PROFITS, LOSS OF BUSINESS OR LOSS OF DATA -- ARISING OUT OF THIS AGREEMENT (INCLUDING WITHOUT LIMITATION AS A RESULT OF ANY BREACH OF ANY WARRANTY OR OTHER TERM OF THIS AGREEMENT), REGARDLESS OF WHETHER THE PARTY LIABLE OR ALLEGEDLY LIABLE WAS ADVISED, HAD OTHER REASON TO KNOW, OR IN FACT KNEW OF THE POSSIBILITY THEREOF. 9.6 Acknowledgment of No Warranty. EXCEPT AS EXPRESSLY PROVIDED HEREIN, NEITHER PARTY WARRANTS THAT THE SERVICE OR THE COMPANY SITE, AS THE CASE MAY BE, WILL PERFORM IN THE MANNER EXPECTED OR WITHOUT INTERRUPTION, ERROR OR DEFECT. EXCEPT AS SET EXPRESSLY FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR WARRANTIES AGAINST INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS NOT SPECIFICALLY ENUMERATED. 9.7 Limitation of Liability. Each party's liability to the other party for any and all claims and damages incurred by such party relating to or arising out of the subject matter of this Agreement, whether in contract, tort, implied warranty, strict liability or other form of action, except for (a) real or tangible property damage or personal injury or death, and (b) any claims or damages relating to or arising out of any claim, action or proceeding by a third party which is 9 10 subject to any right of indemnity provided herein; shall be limited to the amounts paid by Company to AT&T pursuant to this Agreement. AT&T and Company each acknowledges that the provisions of this Agreement were negotiated to reflect an informed, voluntary allocation between them of all risks (both known and unknown) associated with the transactions associated with this Agreement. 9.8 Insurance. Company has obtained and shall maintain during the term of the Agreement, appropriate insurance covering the Company Site and all transactions made through it, and all products and services offered and/or sold through it, with a reputable insurer . Such insurance shall have limits of not less than One Million Dollars ($1,000,000) per occurrence and Three Million Dollars ($3,000,000) in the aggregate and shall have a deductible of not more than Ten Thousand Dollars ($10,000) per occurrence. Such insurance shall be primary, and no insurance maintained by AT&T shall be deemed contributory in any way. Such policy shall be non-cancelable except after (30) days prior written notice to AT&T. Company shall furnish AT&T with a copy of such policy within (30) days after execution of this Agreement and to the extent such an insurance must be renewed, shall furnish AT&T with proof of renewal at least thirty (30) days prior to the termination date of coverage. 10.0 Miscellaneous Provisions. (a) The provisions of Section 2.5 (for a reasonable period following termination), Section 4 (to the extent any payments are accrued prior to termination), Sections 5, 6.5, 7, 8(d), 9 and 10, shall survive termination or expiration of this Agreement. (b) Company and AT&T are independent contractors under this Agreement, and nothing herein shall be construed to create a partnership, joint venture or agency relationship between Company and AT&T. Neither party has authority to enter into agreements of any kind on behalf of the other party. (c) Neither Company nor AT&T may assign this Agreement or any of its rights or delegate any of its duties under this Agreement without the prior written consent of the other, except that (i) AT&T may, without Company's consent, assign this Agreement to a present or future affiliate or successor and may assign its right to receive payments and (ii) Company may, without AT&T's consent, assign this Agreement to a present or future affiliate or successor, provided that such affiliate or successor in not an Online Service Provider. "Online Service Provider" means any entity that, in AT&T's reasonable judgment, competes with AT&T in the marketing, offering or provision of online computer services (whether or not such services include or offer access to the Internet), Internet access services or communication services (including local exchange, interexchange or international communications services). Any purported assignment or delegation without such required consent shall be null and void. (d) This Agreement, its interpretation, performance or any breach thereof, shall be construed in accordance with, and all questions with respect thereto shall be determined by, the laws of the state of New York applicable to contracts entered into and wholly to be performed within said state. Any controversy or claim arising out of or relating to this Agreement or the breach thereof shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and by judgment upon the award rendered by the arbitrator(s) may be entered into any court having jurisdiction thereof. (e) No waiver of any breach of any provision of this Agreement shall constitute a waiver of any prior, concurrent or subsequent breach of the same or any other provisions hereof, and no waiver shall be effective unless made in writing and signed by an authorized representative of the waiving party. (f) All notices, demands and other communications hereunder shall be in writing or by written telecommunications, and shall be deemed to have been duly given: (i) if mailed to the other party's Addressee by certified mail, postage prepaid, on the date three (3) days from the date of mailing, (ii) if delivered by overnight courier, when received by the Addressee or (iii) if sent by confirmed telecommunication, one business day following receipt by the Addressee. "ADDRESSEE" shall mean (A) each party's respective "Contact" as set forth under "Key Definitions" above, plus in the case of AT&T, with a copy to V.P. Law, AT&T WorldNet Service, 295 North Maple Avenue, Basking Ridge, New Jersey 07920, and, in the case of Company, with a copy to General Counsel, Auto-By-Tel Marketing Corporation, 18872 MacArthur Blvd., Second Floor, Irvine, CA 92612; in each case by the same means of delivery or (B) such other addressee as one party may notify to the other party. (g) In the event any provision of this Agreement shall for any reason be held to be 10 11 invalid, illegal or unenforceable in any respect, the remaining provisions shall remain in full force and effect. (h) In resolving any dispute or construing any provision hereunder, there shall be no presumptions made or inferences drawn (i) because the attorneys for one of the parties drafted the Agreement; (ii) because of the drafting history of the Agreement; or (iii) because of the inclusion of a provision not contained in a prior draft, or the deletion of a provision contained in a prior draft. (i) Section headings are for convenience only and are not a part of this Agreement. (j) This Agreement contains the entire understanding of the parties hereto with respect to the transactions and matters contemplated hereby, supersedes all previous agreements between AT&T and Company concerning the subject matter, and cannot be amended except by a writing signed by both parties. No party hereto has relied on any statement, representation or promise of any other party or with any other officer, agent, employee or attorney for the other party in executing this Agreement except as expressly stated herein. AUTO-BY-TEL MARKETING CORPORATION AT&T CORPORATION By: /s/ MARK W. LORIMIR By: /s/ CHRIS VARLEY ----------------------------- ------------------------------------- (Authorized Signature) (Authorized Signature) MARK W. LORIMIR CHRIS VARLEY ----------------------------- ------------------------------------- (Typed or Printed Name) (Typed or Printed Name) EXECUTIVE VICE PRESIDENT CONTENT DIRECTOR ----------------------------- ------------------------------------- (Title) (Title) 6/25/97 6/25/97 ----------------------------- ------------------------------------- (Date) (Date) 11 12 SCHEDULE A [LOGO] Please place WorldNet Icon on top left side of all pages. 12 13 SCHEDULE B PAYMENT TERMS [Please make a copy of this form each calendar quarter to complete and mail with your quarterly commission payments] Submit Payments each quarter to AT&T c/o [NationsBank P.O. Box 277757 Atlanta, GA 30384-7757] Date: ----------------------------- From: ----------------------------- Auto-By-Tel Marketing Corp. SUBJECT: Please indicate either: (a) AT&T WorldNet Service Monthly Page Sponsorship Fee or (b) Quarterly Commission Payment, as the case may be. Credit to Account No. Commission Payment for ______ Month [Quarter] , 19__ (enter applicable month or quarter, and year) If any problems or questions arise with this payment, please contact: 13 14 SCHEDULE C Editorial Standards Neither the Company Site nor any product or service offered at the Company Site shall contain. 1. Any matter which is libelous, defamatory or which discloses private or personal matters concerning any person, including home phone numbers and addresses, credit card information, and/or Member account information such as Member passwords. 2. Any messages, data, images, programs, or other matter which are obscene or pornographic or which contain racial, ethnic or religious slurs or similar epithets, or advocating violence, hate or other language that is deeply and widely offensive. 3. Any messages, data, images, programs, or other matter that would violate the property rights of others, including unauthorized copyrighted text, images or programs, trade secrets or other confidential proprietary information or trademarks or service marks used in an infringing fashion. Furthermore, the Company Site shall not be used by any person or entity who conducts, or solicits the performance of, any illegal activity or other activity which infringes the rights of AT&T, Members, Visitors, merchants, or other publishers of information on the Service. 14 EX-10.21 16 LETTER AGREEMENT W/ NBC MULTIMEDIA INC. 4/1/97 1 EXHIBIT 10.21 [*] Confidential Treatment has been requested for certain portions of this exhibit. April 1, 1997 [NBC LETTERHEAD] Federal Express Mr. Peter Ellis President/CEO Auto-By-Tel 11872 MacArthur Blvd., Second Floor Irvine, CA 92612 Re: Auto-By-Tel Participation in NBC Syndication Platform Dear Mr. Ellis: This Letter sets forth the initial agreement between NBC Multimedia, Inc. ("NBC"), and Auto-By-Tel Marketing Corporation ("Company") with respect to the Company's agreement to provide content as part of NBC's Syndication Platform. The terms and conditions shall be as follows: 1. Description of NBC Syndication Platform: NBC intends to create a menu of localized world wide web services (the "NBC Syndication Platform") which it will offer to the NBC Television Network's ("NBC TV") owned and operated stations and interested affiliates (the "Stations"). NBC agrees that if it does actually offer the NBC Syndication Platform, localized versions of the Auto-By-Tel online automotive information, purchasing financing and related services created and operated by the Company ("Auto-By-Tel") shall be among the list of primary services offered as part of such platform subject to the terms and conditions hereof. Company acknowledges (i) that each Station will have the sole right to determine which individual services it will accept as part of the NBC Syndication Platform, (ii) that Auto-By-Tel may or may not be included in any individual Station's list of such services, and (iii) that NBC and declining Stations shall have no liability or obligations to Company due to any Stations' decision not to so include Auto-By-Tel. 2. Creation of Auto-By-Tel Local Sites: Company agrees that it shall create customized local versions of Auto-By-Tel (each a "Auto-By-Tel Local Site") for use by Stations participating in the NBC Syndication Platform. Such Auto-By-Tel Local Sites will be designed to provide online viewers of the Stations' world wide web sites (the "Station Sites") with automotive information and purchasing financing and related services. Each such Auto-By-Tel Local Site shall be a mirror Auto-By-Tel site which shall be framed within a sub-page of the Station Site but which will contain material to be provided by Company and located at a to be established URL on a server of the Company. As a result, all online viewers will be accessing and bookmarking the Auto-By-Tel Local Site content through the NBC Syndication Platform's portion of the Station's URL, and any user searches will continue to take place within the portion of the Station Site framing the Auto-By-Tel Local Site. 3. Links: As a condition of utilizing the NBC Syndication Platform, each participating Station will be required to devote a portion of the front page of the Station Site to the NBC Syndication Platform, subject to Station's right to have overall design control of the Station Site. Each Station shall be encouraged to devote enough space on its front page to permit the placement of hotlinks to the individual services which make up the NBC Syndication Platform within space on such front page allocated and dedicated to the NBC Syndication Platform, but at a minimum, each participating Station Site's front page shall contain a prominent hotlink to a special sub-page devoted to hotlinks for all of the services making up the NBC Syndication Platform, the size and placement 2 of which shall be comparable to that of any other link to a service offered by the Station. NBC agrees that when the individual services which make up the NBC Syndication Platform are displayed and a hotlink to the Auto-By-Tel Local Site is provided, whether on a front page or on a separate page, the link to the Auto-By-Tel Local Site which may be either a generic category description or a Auto-By-Tel logo or text (the "Auto-By-Tel Link") shall be comparable and consistent with the links devoted to any of the other individual services which are part of the NBC Syndication Platform. 4. Management of Auto-By-Tel Local Sites: The day-to-day management of the Auto-By-Tel Local Sites, and all costs associated therewith, shall be the responsibility of the Company subject to the following: (a) Content - Company will provide all of the content for each of the Auto-By-Tel Local Sites, provided that as part of the localization and customizing process required herein, NBC and the Stations may provide relevant local material (but not advertising) in their own discretion from time to time with reasonable notice for use on the relevant Auto-By-Tel Local Sites and Company will make good faith efforts to include such material in its reasonable discretion. Company will acquire all necessary rights and licenses required for the operation of each Auto-By-Tel Local Site as contemplated herein and for the acquisition and use of any content (e.g., automobile purchase analyses, appreciation costs, financing incentives, etc.) not provided by NBC and the Stations. Each of the Company, NBC and the Stations will retain and own all copyrights and other intellectual property rights in, and to, the material which that entity contributes for use hereunder. (b) Editorial - Editorial standards and direction regarding the inclusion and presentation of content will come from Company. In addition, Company agrees to allow NBC to review the Auto-By-Tel Local Sites for compliance with any NBC Broadcast Standards and Practices which may apply to the Auto-By-Tel Local Sites and make all changes requested by NBC in connection therewith. Finally, Company agrees to comply with any Rules and Regulations of the Federal Communications Commission which may be applicable to the Auto-By-Tel Local Sites and/or the rules and regulations of any other governmental body having jurisdiction. (c) Technology - Auto-By-Tel shall be responsible for all maintenance of the Auto-By-Tel Local Sites (including customer service, technical upkeep, etc.) including the costs associated therewith. Auto-By-Tel agrees to use its best efforts to work with NBC's technology partners to coordinate the interface between the Auto-By-Tel Local Sites and the Station Sites and provide the required services contemplated herein. (d) Branding - NBC shall create the Auto-By-Tel Link and may request that Company provide appropriate proprietary material for use thereon. The Auto-By-Tel Local Sites will be co-branded with trademarks and other material to be provided by NBC, the Stations and Company subject to the approval of each party and provided that the size of such brands shall be left to the reasonable discretion of NBC. The parties agree that the Company's brands on the Auto-By-Tel Local Sites shall be not more than fifty percent (50%) smaller than, but as visible as, the brands of NBC and the relevant Stations. Company agrees to abide by all requirements and guidelines which NBC and the Stations may have regarding the use of their trademarks, service marks and other brands and agrees that it shall make no use of such marks and brands which is not approved in advance by NBC and the relevant Stations. Branding for all other areas of the NBC Syndication Platform and the Station Sites shall be at the sole discretion of NBC and the Stations. 5. Promotion: As a condition of utilizing the NBC Syndication Platform, each Station will be required of offer a minimum of 10 on-air promos concerning, or mentions of, 2 3 the URL address of the Station Site per week. NBC shall encourage Stations to include information regarding the NBC Syndication Platform as part of such promos or mentions. 6. Exclusivity: NBC agrees that Auto-By-Tel will be the exclusive service provider for the online automotive purchasing and information category of the NBC Syndication Platform offered by NBC, provided that Company acknowledges that nothing in this Section 6 or elsewhere in the Letter Agreement shall restrict NBC rights in any way in connection with NBC's world wide web site ("NBC.com"), MSNBC.com, Intellicast.com or any other future NBC related interactive (or other) services other than the NBC Syndication Platform. Notwithstanding the foregoing, Company acknowledges that (i) other services provided by third parties may be offered to the Stations by NBC as part of the NBC Syndication Platform which happen to provide online automotive information in addition to their primary services as long as NBC does not offer such third party services in place of Company's services on the NBC Syndication Platform or materially promote such competing aspects of such third party services to the Stations or the public (other than through general advertising) in connection with the NBC Syndication Platform and (ii) NBC will have no ability to prevent the Stations from placing competing services elsewhere on their own Station Sites. Company agrees that NBC will be the exclusive United States television distribution partner for Auto-By-Tel's content and service, and Company agrees not to provide the Auto-By-Tel service, or any portion thereof, to national or regional television networks, syndicated programming services or syndicated or like content platforms distributed by or through the foregoing; provided, however, that NBC recognizes that such exclusivity shall not prevent Company from providing the Auto-By-Tel service to any internet service provider which uses televisions as a delivery device (i.e., Web TV). The exclusivity terms of this Paragraph 6 will be contingent upon NBC's reaching and then maintaining over each following year on average the following critical mass of Station support for the NBC Syndication Platform: (x) participating Stations providing 50% of the total Stations' television household market reach in the United States as of the later of December 31, 1998 or 18 months after launch of the platform and (y) participating Stations providing 75% of the total Stations' television household market reach in the United States three years after launch of the platform, provided that for purposes of this calculation, no Station Site including online automotive purchasing or information content or service shall be included when calculating the participating Stations. If such contingencies are not met, the exclusivity terms of this Section 6 shall no longer apply, but all other terms of this Letter Agreement shall remain in effect until the termination hereof. In addition, if Company is not able to provide competitive, localized coverage and service for any of the NBC TV markets, NBC will be free to contract with Company's competitors in order to obtain online automotive information in such markets. 7. Advertising Sales: Company shall be responsible for the sale of advertising inventory to be placed on each Auto-By-Tel Local Site, if any. Company shall have the responsibility of administering the contract for such advertising, paying all necessary expenses and collecting all fees related thereto in return for a seller's commission of [ ] of the gross advertising revenues related to such sale (the "Sales Commission"). Unless the parties mutually agree to the contrary, if Company decides in its sole discretion to sell advertising inventory for the Auto-By-Tel Local Sites at less than the rates normally charged by Company for advertising appearing elsewhere on Auto-By-Tel (the "Normal Rates") or barters such inventory in any way, such advertising inventory shall be deemed to have been sold at such Normal Rates for purposes of calculating revenues for purposes of Section 8(b) below. Company acknowledges that NBC and the Stations will be solely responsible for the sale of advertising which appears within the area of the Station Sites which frames Auto-By-Tel Local Sites and that Company will have no right to advertising revenues received by NBC and Stations in connection with such frames or any other portions of the 3 4 [*] Confidential Treatment Requested Station Sites other than the Auto-By-Tel Local Sites. NBC acknowledges that manufacturers' financing and insurance products or services offered through the Auto-By-Tel Local Site shall not be deemed advertising for the purposes hereof. 8. Financial Terms: Company agrees that it will be responsible for all costs and expenses associated with the creation and operation of the Auto-By-Tel Local Sites. Auto-By-Tel shall make the following monthly payments to NBC. (a) Annual License Fee - Company will pay NBC a license fee of [*] upon execution hereof and upon each anniversary date of the launch of the NBC Syndication Platform occurring during the term hereof. This fee shall also be considered a non-refundable advance on any revenues payable to NBC in connection with the terms of sub-section (c) of this Section 8. (b) Advertising Revenues - NBC and Company will equally share (i.e., 50/50) all gross revenues received by Company in connection with the sale of advertising for display anywhere within the Auto-By-Tel Local Sites after deduction of the Sales Commission is made but prior to the deduction of any expenses of any kind. (c) Lead Generation Revenues - Company will pay NBC [*] for each online or physical (e.g., mail, fax, etc.) submission of any "unique purchase request" to Auto-By-Tel by any individual or corporate user which is received by Company and attributable to usage on an Auto-By-Tel Local Site. "Unique purchase request" shall mean a purchase request from a user with a different name and e-mail address from any name or address received by Company in the past. In addition, once the Auto-By-Tel Local Sites generate one hundred and fifty thousand (150,000) such submissions in any calendar year during the term hereof, then Company will pay NBC [*] for each such submission received thereafter until the end of that calendar year. The parties agree that the Annual License Fee described above shall be an advance against payments for the first 8,333 submissions otherwise owed hereunder. (d) Future Revenue - The parties agree that if any future revenue generating opportunities not engaged in by Company through its Auto-By-Tel service as of the date hereof or described above are created in connection with the Auto-By-Tel Local Sites, the parties will negotiate in good faith regarding what revenue sharing arrangements between the parties would be appropriate, provided that, unless such opportunities involve characteristics which would make them materially different from the opportunities described above, it is the intent of the parties to share such revenues equally. 9. Payment and Audit Conditions. At the end of each month in which Company receives any revenue of the type described in Section 8 (b) and (c), Company shall prepare a monthly statement providing sufficient detail regarding the source of such revenue and will deliver such statement along with the required payment described therein to NBC no less than thirty (30) days following such date. Company agrees that NBC shall have the right to conduct a reasonable audit of the relevant books and records of such party in order to determine compliance with the terms of this Letter Agreement. The parties agree that all amounts due under this Agreement from the Company to NBC shall be paid directly to NBC and not to any of the individual Stations. 10. Representations and Warranties: (a) Company represents and warrants to NBC and the Stations that it has the right and power to perform its obligations and to grant the rights granted herein, that Company's creation and operation of the Auto-By-Tel Local Sites pursuant to this Letter Agreement will not violate any agreement or obligation between Company and a third party or any laws or regulations and that, except for material provided by NBC and the Stations, the material included on the Auto-By-Tel Local Sites and the Auto-By-Tel Link as well as the operation of the Auto-By-Tel 4 5 Local Sites as contemplated herein will, to the best of its knowledge, be accurate and correct and will not violate or infringe any third party rights, including intellectual property rights. Company also agrees that standard software industry representation and warranties will apply to all software and technology used by Company in order to carry out its obligations described herein. Company acknowledges that the Final Agreement (as defined below) will contain additional and more detailed versions of the representations and warranties described above. (b) NBC represents and warrants to Company that it has the right and power to perform its obligations and to grant the rights granted herein and that the material provided by NBC to Company for inclusion on the Auto-By-Tel Local Sites will, to the best of its knowledge, be accurate and correct and will not violate or infringe any third party rights, including intellectual property rights. 11. Indemnity. (a) Company agrees to indemnify, defend, and hold NBC, the Stations, their affiliates and their successors, officers, directors and employees harmless from any and all actions, causes of action, claims, demands, costs, liabilities, expenses (including reasonable attorneys' fees) and damages arising out of or in connection with any third party claims (i) relating to Company's operation and management of the Auto-By-Tel Local Sites, or (ii) relating to a breach of any of Company's representations and/or warranties set forth in Section 10 of this Letter Agreement. (b) NBC agrees to indemnify, defend, and hold Company, its affiliates and its successors, officers, directors and employees harmless from any and all actions, causes of action, claims, demands, costs, liabilities, expenses (including reasonable attorneys' fees) and damages arising out of or in connection with any third party claims relating to a breach of any of NBC's representations and/or warranties set forth in Section 10 of this Letter Agreement. (c) The indemnified party agrees to notify the other party promptly of any written claims or demands against the indemnified party for which the other party is responsible, and the Indemnified Party for which the other party will be entitled, at its option, to assume the defense or settlement of any such claim, provided that no settlement shall be reached without the consent of the indemnifying party. The indemnified party will promptly be reimbursed by the other party for Indemnified Amounts as they are incurred. (d) IN NO EVENT UNDER ANY CIRCUMSTANCES SHALL EITHER PARTY (OR ITS AFFILIATES) BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES ARISING OUT OF OR IN CONNECTION WITH ITS OBLIGATION UNDER THIS LETTER AGREEMENT; PROVIDED HOWEVER, THAT THE FORGOING LIMITATION SHALL NOT APPLY TO DIRECT DAMAGES RESULTING FROM THE INTENTIONAL OR WILLFUL BREACH OF THIS LETTER AGREEMENT. 12. Term. The initial term of this Letter Agreement shall be four (4) years, and ninety (90) days prior to the end of the initial term, the parties agree to negotiate in good faith regarding a possible extension of the term hereof for an additional two (2) years. Either party may terminate this Letter Agreement upon a material default by the other party of the terms hereof which default is not cured within thirty (30) days following such party's receipt of a written notice regarding the default. In addition, if Company materially alters the nature or quality of its service (e.g., changes Auto-By-Tel from a free to subscription service), NBC may terminate this Letter Agreement, at its option, by providing Company with ten (10) days prior notice thereof in writing. Finally, if NBC determines in its sole discretion at any time, not to offer the NBC Syndication Platform as such term is described in Paragraph 1, it will inform the Company of such 5 6 decision in writing and this Letter Agreement shall be deemed terminated as of the date of such notice. 13. Formal Agreement. Recognizing that time is of the essence, this Letter Agreement shall serve as the intent of both parties to enter into a more formal agreement for the creation and operation of Auto-By-Tel Local Sites (the "Final Agreement"). Both parties shall use reasonable efforts to complete the Final Agreement within a reasonable time period following the date of execution of this Letter Agreement, provided, however, that notwithstanding the foregoing, if no Final Agreement is reached, the terms contained herein shall govern the relationship between the parties for the Term. 14. NBC Local Link. The parties agree that each Auto-By-Tel Local Site shall include a link (which may include an appropriate NBC logo) to the NBC Local section of NBC.com in its first page. 15. Confidentiality. Neither party shall issue a press release or make any statement to the general public concerning this Letter Agreement, the NBC Syndication Platform or the Auto-By-Tel Local Sites, or the existence thereof, without the express prior written consent of the other; provided, however, that NBC agrees that Company may file this Letter Agreement with the Securities and Exchange Commission (the "SEC") if so required by the Securities Act of 1933 and Securities Exchange Act of 1934, in each case, as amended, the rules and regulations related thereto or any applicable state laws (the "Securities Laws") as long as Company agrees to use its best efforts to obtain confidential treatment of the economic and other material terms hereof under the Securities Laws and consult with NBC during the process. 16. Miscellaneous. This Letter Agreement constitutes the entire agreement and understanding of the parties relating to the subject matter hereof and supersedes all prior and contemporaneous agreements, negotiations, and understandings between the parties, both oral and written, provided that the Non-Disclosure and Confidentiality Agreement between the parties shall remain in full force and effect. No waiver or modification of any provision of this Letter Agreement shall be effective unless in writing and signed by both parties. Any waiver by either party of any provision of this Letter Agreement shall not be construed as a waiver of any other provision of this Letter Agreement, nor shall such waiver operate as or be construed as a waiver of such provision respecting any future event or circumstance. This Letter Agreement shall be governed by and construed under the laws of the State of New York applicable to contracts fully executed in New York, without regard to New York conflicts law. The parties hereby consent to and submit to the jurisdiction of the federal and state courts located in the State of New York. 6 7 If you are in agreement with the above terms and conditions, please indicate your acceptance by signing in the space provided below, and return one original to me. This Letter Agreement shall be null and void if not signed within 7 days of the date set forth above. Very truly yours, NBC MULTIMEDIA, INC. By: /s/ KEN KRUSHEL ------------------------------------- Name: Ken Krushel Title: Vice President ACCEPTED AND AGREED; AUTO-BY-TEL MARKETING CORPORATION By: /s/ MARK W. LORIMER ----------------------------------- Name: Mark W. Lorimer Title: Vice President, General Counsel and Secretary 7 8 Exclusivity "Critical Mass" Formula: NBC must reach and maintain over each following year, on average, the following critical mass: X= Participating stations providing 50% of the total station's television household market reach in the U.S. as of the later of 12/31/98 or 18 months after launch of the platform. Y= Participating stations providing 75% of the total station's television household market reach in the U.S. 3 years after launch of the platform. "Provided that no Station Site including online automotive purchasing or information content or service shall be included when calculating the participating stations." EX-10.22 17 SPONSORSHIP AGREEMENT W/ EXCITE DATED 6/24/98 1 EXHIBIT 10.22 [*] Confidential treatment has been requested for certain portions of this exhibit. CONFIDENTIAL ------------ SPONSORSHIP AGREEMENT This agreement ("Agreement") is entered into as of the 24th day of June, 1998 ("Effective Date"), by and between Excite, Inc., a California corporation, located at 555 Broadway, Redwood City, California 94063 ("Excite"), and Auto-By-Tel Corporation, a California corporation, located at 18872 MacArthur Boulevard, #200, Irvine, California 92612-1400 ("Client"). RECITALS A. Excite has obtained the right to program certain content and sell and display advertising on the site on the Internet maintained by Netscape Communications Corporation ("Netscape") located at http://home.netscape.com and/or other URLs or locations designated by Netscape (the "Excite Portion of the Netscape Site") pursuant to an agreement dated April 29, 1998 ("the Netcenter Agreement"), which, among other things, allow Netscape's users to search for and access content and other sites on the Internet. B. Within the Excite Portion of the Netscape Site, Excite plans to organize certain content into topical channels (each, a "Channel") and to provide an Internet search service ("Netscape Search"). C. Client is engaged in the business of, among other things, (i) providing online information and data to prospective purchasers of motor vehicles through its Web site located at http://www.autobytel.com (the "Client Site") and facilitating the acquisition of vehicles through a network of dealer subscribers; (ii) offering to any such purchaser vehicle financing and leasing programs, insurance programs and after market products, and (iii) offering an incentive "rewards" based membership program featuring a co- branded credit card, roadside assistance and select retail providers (the "Mobalist" Program). D. Client wishes to promote its business to Netscape's users through promotions, content and advertising in the Excite Portion of the Netscape Site. Therefore, the parties agree as follows: 1. SPONSORSHIP OF THE AUTOS CHANNEL (a) Client acknowledges that Excite's right to display promotional placements on the Excite Portion of the Netscape Site is conditioned on the Netcenter Agreement remaining in effect. However, Excite represents that it will, in good faith, perform all of its obligations under the Netcenter Agreement and do all other commercially 1 2 CONFIDENTIAL ------------ reasonable acts necessary to keep such Agreement in place, subject at all times to Netscape's rights to terminate the Netcenter Agreement for reasons unrelated to Excite's performance or breach. Therefore, subject to the Netcenter Agreement remaining in effect, commencing on the Launch Date (as defined below), Client will be promoted in the Autos Channel of the Excite Portion of the Netscape Site: (i) A link to the Client Site (consistent with the format used on similar links on the same page) will be displayed in the Autos Channel home page for the duration of the term of the Agreement. (ii) A link to the Client Site (consistent with the format used on similar links on the same page) will be displayed in the "Buy A Car Online" department of the Autos Channel (or a similar portion of the Autos Channel featuring comparable content) for the duration of the term of the Agreement. (iii) A link to the Client Site (consistent with the format used on similar links on the same page) will be displayed in the "Take a Test Drive" department of the Autos Channel (or a similar portion of the Autos Channel featuring comparable content) for the duration of the term of the Agreement. (iv) A link to the Client Site (consistent with the format used on similar links on the same page) will be displayed in the "Auto Makers" promotional area in the "SUV," "Truck," "Cars" and "Luxury Cars" departments of the Autos Channel (or a similar portion of the Autos Channel featuring comparable content) for the duration of the term of the Agreement. (b) Client acknowledges that Excite's right to display content on the Excite Portion of the Netscape Site is conditioned on the Netcenter Agreement remaining in effect. Therefore, subject to the Netcenter Agreement remaining in effect, commencing of the Launch Date (as defined below), motor vehicle related content supplied by Client ("Client Content") will be promoted in the Autos Channel of the Excite Portion of the Netscape Site: (i) Client Content from Bank Rate Monitor, Edmunds, Auto-By-Tel, and/or AIG (subject to approval by Excite) will be displayed in the Autos Channel for the duration of the term of the Agreement. The selection and placement of Client Content to appear in the Autos Channel will be subject to Excite's discretion. (ii) A module containing text and graphics links of less than 6K in file size, the pixel dimensions to be mutually determined by the parties, featuring Client's "Mobalist" program which will be displayed in the Autos Channel for the 2 3 [*] Confidential Treatment Requested CONFIDENTIAL ------------ duration of the term of the Agreement. The placement of the "Mobalist" module in the Autos Channel will be subject to Excite's discretion and continued positive user feedback. (iii) All Client Content will link to the Client Site. The "Mobalist" module will link to http://www.mobalist.com; unless, upon reasonable notice, Client directs Excite to link the Mobalist module to an additional or alternative address. (iv) Client and Excite will determine mutually agreeable methods for the transmission and incorporation of updates to the Client Content and "Mobalist" module. Other than updates to the Client Content and "Mobalist" module, Client will not alter the Client Content or "Mobalist" module without Excite's prior consent. (v) Netscape and Excite, on the one hand, and Client, on the other, will cooperate in good faith regarding the "look and feel" of the "Mobalist" module, but Netscape and Excite will have final decision authority over of the "look and feel" of the Client Content, the "Mobalist" module and the Autos Channel. (vi) Client will have sole responsibility for providing, at its expense, the Client Content and "Mobalist" module to Excite. 2. SWEEPSTAKES (a) Every twelve (12) months, Client, at its sole expense, will supply Excite with up to three (3) new motor vehicles to be used by Excite as sweepstakes prizes offered to Netscape users. The parties agree that the aggregate suggested manufacturer's retail price for the vehicle(s) selected by Excite though Client shall not exceed forty-five thousand dollars ($45,000) in any twelve-month period. (b) Client and Excite will cooperate in good faith to identify appropriate opportunities to promote these sweepstakes and Client in the Excite Portion of the Netscape Site during the term of the Agreement. (c) Other than the motor vehicles supplied by Client, Excite will assume all expenses involved in administering and promoting these sweepstakes. (d) Either party may issue press releases regarding the sweepstakes, the timing and wording of which will be mutually agreed upon. Any such press releases will 3 4 CONFIDENTIAL ------------ identify Excite as the host of the sweepstakes and Client as the provider of the prize vehicle. 3. ADVERTISING ON THE EXCITE PORTION OF THE NETSCAPE SITE (a) Client acknowledges that Excite's right to display advertising on the Excite Portion of the Netscape Site is conditioned on the Netcenter Agreement remaining in effect. Therefore, subject to the Netcenter Agreement remaining in effect, commencing of the Launch Date (as defined below), Excite will display Client's banner advertising in rotation on the Channels on the Excite Portion of the Netscape Site for the term of the Agreement. (b) Subject to the Netcenter Agreement remaining in effect, Excite guarantees the display of twenty-eight million seven hundred fifty thousand (28,750,000) of Client's advertising banners, which shall be distributed evenly and equitably per month, during the term of the Agreement. 4. EXCLUSIVITY (a) For the term of the Agreement, Excite will not enter into any agreement to display and shall not display on the Autos, Arts & Leisure, Auctions, Education, Games, Lifestyle, Real Estate or Shopping Channels of the Excite Portion of the Netscape Site content created by Excite promoting Client's "Competitors," content created by Client's Competitors or promotional placements and/or advertising banners from Client's Competitors. (b) For the purposes of this Agreement, "Competitors" means those merchants whose primary business is (i) the online referral of new motor vehicle purchase and/or leasing requests or the online referral of used motor vehicle purchase requests to a nationwide network of automobile dealers, (but does not include Excite's subsidiary, Classifieds2000, Inc. ("Classifieds2000")), together with the offering of ancillary motor vehicle products in connection with any such purchase or lease including financing, insurance and aftermarket products as well as (ii) the offering of a rewards-based incentive program targeted to motorists featuring a co-branded credit card, roadside assistance and select retail dealers (but does not include any rewards-based incentive program offered by Excite under the "Excite" brand). (c) Notwithstanding the foregoing, Excite may display links to Client's Competitors in Excite's general directory of Web sites that appears on the Netscape Site, in search results displayed in "Jango" shopping search services, in Netscape Search results 4 5 CONFIDENTIAL ------------ pages and in classified advertising listings, subject to any agreement entered into by Client and Classifieds2000, pursuant to Section 5 below. 5. RIGHT OF FIRST NEGOTIATION FOR CLASSIFIEDS CHANNEL (a) Client will have a right of first negotiation with Classifieds2000 for an exclusive sponsorship of the Classifieds Channel of the Excite Portion of the Netscape Site. (b) Excite will not propose, solicit or negotiate offers from entities other than Client for any exclusive sponsorships of the Classifieds Channel of the Excite Portion of the Netscape Site by any of Client's Competitors, if at all, prior to fifteen (15) business days from the Effective Date. (c) Classifieds2000 will negotiate with Client in good faith with respect to the terms and conditions under which Client would become the exclusive online seller of new motor vehicles sponsoring the Classifieds Channel of the Excite Portion of the Netscape Site. If Client and Classifieds2000 have not entered into a written sponsorship agreement by close of business on the fifteenth business day from the Effective Date, Excite and/or Classifieds2000 may enter into negotiations with any third party with respect to exclusive sponsorships of the Classifieds Channel of the Excite Portion of the Netscape Site. 6. LAUNCH DATE AND REPORTING (a) Client and Excite will use reasonable efforts to implement the display of the promotional placements, content and advertising described in the Agreement by July 1, 1998 (the "Launch Date"). The parties recognize that the scheduled Launch Date can be met only if Client provides final versions of all graphics, text, keywords, banner advertising, promotional placements, other promotional media and valid URL links necessary to implement the promotional placements, content and advertising described in the Agreement (collectively, "Impression Material") to Excite five (5) days prior to scheduled Launch Date. (b) In the event that Client fails to provide the Impression Material to Excite five (5)days in advance of the scheduled Launch Date, Excite may, at its sole discretion (i) reschedule the Launch Date at the earliest practicable date according to the availability of Excite's engineering resources after delivery of the complete Impression Material or (ii) commence delivery of Impressions based on Impression Material in Excite's possession at the time and/or reasonable placeholders created by Excite. 5 6 [*] Confidential Treatment Requested CONFIDENTIAL ------------ (c) Excite will provide Client with monthly reports substantiating the number of impressions of Client's advertising banners, content and promotional placements displayed on the Excite Portion of the Netscape Site. 7. SPONSORSHIP, ADVERTISING AND TRANSACTION FEES (a) Client will pay Excite sponsorship and advertising fees of two million four hundred eighty-seven thousand dollars ($2,487,000) in the first year of the term of the Agreement. These fees will be paid in equal monthly installments of two hundred seven thousand two hundred fifty dollars ($207,250). The first monthly payment will be due upon the display of the first of the promotional placements and advertising described in the Agreement. Subsequent installments will be due on a monthly basis thereafter. (b) Client will pay Excite sponsorship and advertising fees of four million one hundred fifty thousand dollars ($4,150,000) in the second year of the term of the Agreement. These fees will be paid in equal monthly installments of three hundred forty-five thousand eight hundred thirty three dollars and thirty-three cents ($345,833.33). The first monthly payment will be due upon the first anniversary of the display of the first of the promotional placements and advertising described in the Agreement. Subsequent installments will be due on a monthly basis thereafter. (c) Separate and apart from the sponsorship and advertising fees, Client will pay Excite for each "Unique Purchase Request" completed by users referred to the Client Site from the Excite Portion of the Netscape Site during the first year of the term of the Agreement. For the purposes of this Agreement, a "Unique Purchase Request" shall be a new car purchase request electronic form with all data fields deemed mandatory by Client completed by the user, which has been received by Client from Excite, and for which Client has not, within the previous ninety (90) day period, received a duplicate new car purchase request from the Excite Portion of the Netscape Site for the same or similar vehicle, as determined by the year, make and model; from the same user, as identified by the same name, zip code and/or the same e-mail address. Client will pay Excite for each Unique Purchase Request during the first year of the term of the Agreement as follows: (i) [*] per Unique Purchase Request up to the first one hundred fifty thousand (150,000) Unique Purchase Requests; (ii) [*] per Unique Purchase Request for between one hundred fifty thousand one (150,001) and two hundred thirty thousand (230,000) Unique Purchase Requests; and 6 7 [*] Confidential Treatment Requested CONFIDENTIAL ------------ (iii) [*] per Unique Purchase Request in excess of [*] Unique Purchase Requests. (d) Separate and apart from the sponsorship and advertising fees, Client will pay Excite for each Unique Purchase Request completed by users referred to the Client Site from the Excite Portion of the Netscape Site during the second year of the term of the Agreement as follows: (i) [*] per Unique Purchase Request up to the first [*] Unique Purchase Requests; (ii) [*] per Unique Purchase Request for between [*] and [*] Unique Purchase Requests; and (iii) [*] per Unique Purchase Request in excess of [*] Unique Purchase Requests. (e) The sponsorship fees and transaction payments are net of any agency commissions to be paid by Client. (f) Client will provide Excite with monthly reports of the number of "Unique Purchase Requests." It is currently Client's goal to provide these reports to Excite on or about the fifth business day after the close of the preceding month. Client shall pay Excite the transaction payments within [*] days after Excite's receipt of Client's report of the number of "Unique Purchase Requests" each month. In the event that Client does not pay the transaction payments within [*] days after Excite's receipt of Client's report of the number of "Unique Purchase Requests" for any month, that month shall be deemed to be a "Late Payment Month" for the purposes of this Agreement. In the event that there are [*] Late Payment Months in any [*] period during the term of the Agreement, Client will increase by [*] the monthly payment otherwise due for the second and any other Late Payment Month that occurs in the [*] period. (g) Client will provide complete reports to Excite within thirty (30) days of each month describing the month's transaction activity by users referred to the Client Site from the Excite Portion of the Netscape Site including, but not limited to, the total number of purchase requests submitted and the number of Unique Purchase Requests completed. Client will make good faith efforts to develop tracking and reporting capabilities to correlate this transaction information to the various promotional placements, content and advertising banners on the Excite Portion of the Netscape 7 8 CONFIDENTIAL ------------ Site in order to facilitate optimization of Client's sponsorship program. Client's reports will be delivered to Excite in a mutually agreed-upon electronic format to an email address or URL designated by Excite. In the event that Client does not provide the required reports to Excite within sixty (60) days after the end of any month, that month shall be deemed to be a "Late Reporting Month" for the purposes of this Agreement. In the event that there are two or more Late Reporting Months in any twelve (12) month period during the term of the Agreement, Client will increase by ten percent (10%) the monthly payment otherwise due for the second and any other Late Reporting Month that occurs in the twelve (12) month period. To the extent that interim reports regarding the quality of the performance of Client's sponsorship program on the Excite Portion of the Netscape Site, as described in Section 9(b)(i), are available more frequently than quarterly, Client will make good faith efforts to supply such interim reports to Excite as soon as reasonably practical. (h) Client will maintain accurate records with respect to the calculation of all transaction payments and reporting due under this Agreement. Once per year, the parties will review these records to verify the accuracy and appropriate accounting of all payments made pursuant to the Agreement. In addition, Excite may, upon no less than thirty (30) days prior written notice to Client, cause an independent Certified Public Accountant to inspect the records of Client reasonably related to the calculation of such payments during Client's normal business hours. The fees charged by such Certified Public Accountant in connection with the inspection will be paid by Excite unless the payments made to Excite are determined to have been less than ninety-five percent (95%) of the payments actually owed to Excite, in which case Client will be responsible for the payment of the reasonable fees for such inspection. 8. PUBLICITY Unless required by law, neither party will make any public statement, press release or other announcement relating to the terms of or existence of this Agreement without the prior written approval of the other. Notwithstanding the foregoing, the parties agree to issue an initial press release regarding the relationship between Excite and Client, the timing and wording of which will be mutually agreed upon. 9. TERM AND TERMINATION (a) The term of this Agreement will begin on the Launch Date and will end at the earlier of June 30, 2000 or the expiration or termination of the Netcenter Agreement. In the event that the Netcenter Agreement expires or is terminated prior to June 30, 8 9 CONFIDENTIAL ------------ 2000, Client and Excite will negotiate in good faith to resolve all outstanding promotional and financial issues. (b) Despite Excite's performance of its obligations hereunder, Client may terminate this Agreement under the following limited conditions: (i) Client and Excite will meet once per quarter throughout the term of the Agreement to review the performance of Client's sponsorship program on the Excite Portion of the Netscape Site. At the quarterly meeting, refers to the Client Site generated on the Excite Portion of the Netscape Site will be evaluated for quality and compared to an index (the "Performance Index") based on the performance of refers to the Client Site from the excite.com Web site (the "Excite Site"). The Parties agree that the Performance Index shall use June 1998 performance results of the Excite Site as its baseline, which shall be deemed "100%" for the purposes of comparison to the Excite Portion of the Netscape Site. Quality performance will be monitored and provided by Client's independent auditors (currently, Arthur Andersen). This information will be shared with Excite at the quarterly performance meetings. (ii) In the event that purchase request quality performance from the Excite Portion of the Netscape Site is materially below that from the Excite Site during any ninety (90) day period during the term of the Agreement, Client will notify Excite in writing of the poor performance. Excite will undertake commercially reasonable efforts to remedy the poor performance. (iii) In the first year of the term of the Agreement only, if Excite's efforts do not materially improve performance after a reasonable period of time after receiving Client's written notice of poor performance pursuant to Section 9(b)(ii), then, no later than forty-five (45) days prior to the end of the first year of the term of the Agreement, Client can give written notice to Excite of termination of the Agreement at the end of the first year due to the purchase request quality performance from the Excite Portion of the Netscape Site being materially below that from the Excite Site. This written termination notice must include supporting reports or analysis by the accredited neutral third party. Client may not terminate the Agreement prior to the end of the first year of the term of the Agreement under Sections 9(b)(ii) or 9(b)(iii). (iv) In the event that purchase request quality performance from the Excite Portion of the Netscape Site is materially below that from the Excite Site 9 10 CONFIDENTIAL ------------ during any ninety (90) day period during the second year of the term of the Agreement and Excite's efforts do not materially improve performance after a reasonable period of time after receiving Client's notice of poor performance then, in any quarterly meeting in the second year of the term of the Agreement, Client may give notice to Excite that Excite has sixty (60) days to remedy the poor performance or the Agreement will be subject to termination. Should Excite not be able to remedy purchase request quality performance within the sixty (60) day period, Client may give Excite written notice that the Agreement will be terminated in thirty (30) additional days. (v) In the event that Client receives less than one hundred fifty thousand (150,000) Unique Purchase Requests from users referred to the Client Site from the Excite Portion of the Netscape Site in the first year of the term of the Agreement, Client can terminate the Agreement upon written notice to Excite. Notwithstanding Section 7(c), within thirty (30) days of any such termination, Client will pay Excite the difference between (i) three million two hundred twenty-five thousand dollars ($3,225,000) and (ii) the amounts previously paid to Excite pursuant to 7(c)(i) for the Unique Purchase Requests from users referred to the Client Site from the Excite Portion of the Netscape Site in the first year of the term of the Agreement under the 150,000 minimum. (vi) As soon as it becomes reasonably apparent that Client is likely to pay Excite ten million two hundred thousand dollars ($10,200,000) for Unique Purchase Requests from users referred to the Client Site from the Excite Portion of the Netscape Site within the next sixty (60) days, Excite and Client will meet to discuss Client's plans to continue or terminate the Agreement. After that meeting, Client may, in its sole discretion, give Excite written notice terminating the Agreement effective thirty (30) days after Client has paid to Excite ten million two hundred thousand dollars ($10,200,000) for Unique Purchase Requests from users referred to the Client Site from the Excite Portion of the Netscape Site. Once Client gives written notice to Excite of its election to terminate the Agreement under this Section 9(b)(vi), Excite will be free to commence negotiations for replacement advertising and/or sponsorships of the Excite Portion of the Netscape Site with any third party, including Client's Competitors. (c) Either party may terminate this Agreement if the other party materially breaches its obligations hereunder and such breach remains uncured for thirty (30) days following the notice to the breaching party of the breach. 10 11 CONFIDENTIAL ------------ (d) All undisputed payments that have accrued prior to the termination or expiration of this Agreement will be payable in full within thirty (30) days thereof. (e) The provisions of Section 12 (Confidentiality), Section 13 (Indemnity), Section 14 (Limitation of Liability) and Section 15 (Dispute Resolution) will survive any termination or expiration of this Agreement. 10. TRADEMARK OWNERSHIP AND LICENSE (a) Client will retain all right, title and interest in and to its trademarks, service marks and trade names worldwide, subject to the limited license granted to Excite hereunder. (b) Excite will retain all right, title and interest in and to its trademarks, service marks and trade names worldwide, subject to the limited license granted to Client hereunder. (c) Each party hereby grants to the other a revocable, royalty-free, nonexclusive, limited license to use its trademarks, service marks or trade names only as specifically described in this Agreement. All such use shall be in accordance with each party's reasonable policies regarding advertising and trademark usage as established from time to time. (d) Upon the expiration or termination of this Agreement, each party will cease using the trademarks, service marks and/or trade names of the other except as the parties may agree in writing. 11. CONTENT OWNERSHIP AND LICENSE (a) Client will retain all right, title and interest in and to the Client Site worldwide including, but not limited to, ownership of all copyrights and other intellectual property rights therein. (b) Client will retain all right, title and interest in and to the Client Content and the content of the "Mobalist" module worldwide (including, but not limited to, ownership of all copyrights and other intellectual property rights therein). Subject to the terms and conditions of this Agreement, Client hereby grants to Excite a revocable, royalty-free, non-exclusive, worldwide license to use, reproduce, distribute, transmit and publicly display the Client Content and "Mobalist" module in accordance with this Agreement and to sub-license the Client Content and "Mobalist" module to Excite's wholly-owned subsidiaries or to joint ventures in 11 12 CONFIDENTIAL ------------ which Excite participates for the sole purpose of using, reproducing, distributing, transmitting and publicly displaying the Client Content and "Mobalist" module in accordance with this Agreement (c) Netscape and Excite will retain all right, title, and interest in and to the Excite Portion of the Netscape Site worldwide including, but not limited to, ownership of all copyrights, look and feel and other intellectual property rights therein. 12. CONFIDENTIALITY AND USER DATA (a) For the purposes of this Agreement, "Confidential Information" means information about the disclosing party's (or its suppliers') business or activities that is proprietary and confidential, which shall include all business, financial, technical and other information of a party marked or designated by such party as "confidential or "proprietary" or information which, by the nature of the circumstances surrounding the disclosure, ought in good faith to be treated as confidential. (b) Confidential Information will not include information that (i) is in or enters the public domain without breach of this Agreement, (ii) the receiving party lawfully receives from a third party without restriction on disclosure and without breach of a nondisclosure obligation, (iii) the receiving party knew prior to receiving such information from the disclosing party or (iv) the receiving party develops independent of any information originating from the disclosing party. (c) Each party agrees (i) that it will not disclose to any third party or use any Confidential Information disclosed to it by the other except as expressly permitted in this Agreement and (ii) that it will take all reasonable measures to maintain the confidentiality of all Confidential Information of the other party in its possession or control, which will in no event be less than the measures it uses to maintain the confidentiality of its own information of similar importance. (d) The usage reports provided by Excite to Client hereunder will be deemed to be the Confidential Information of Excite. The reports provided to Excite under Section 7(g) will be deemed to be the Confidential Information of Client. (e) The terms and conditions of this Agreement will be deemed to be Confidential Information and will not be disclosed without the written consent of the other party. (f) The parties acknowledge that Client is in the process of obtaining access to data base marketing capabilities and that it is Client's current goal to enable such data base marketing capabilities on or about January 1999. The parties will cooperate in good 12 13 CONFIDENTIAL ------------ faith to develop a program whereby Excite may leverage Client's data base marketing opportunities under the following guidelines: (i) Excite will not have direct access to any user data collected on the Client Site; (ii) Excite will have the right to market Excite's own services and/or products to Client's users coming through the Excite Portion of the Netscape Site, by specifying a profile of the target audience (e.g., male, 25 - 40 years old, etc.); (iii) Excite will deliver any marketing material to Client. Client will then arrange for delivery of the marketing material to the target audience; (iv) Excite will bear all direct expenses in connection with the creation and delivery of the marketing material. Client will not charge Excite for usage of Client's user data; (v) Excite's marketing plans and the results of Excite's marketing efforts through Client will be "Confidential Information" of Excite under this Agreement; and (vi) Excite will not conduct such marketing through Client on behalf of Client's Competitors. (g) Client will not use User Data to directly or indirectly target for solicitations any Excite users as a unique subset of Client's user data base (except as specifically provided in this Agreement or except to encourage the continued use of Client's own products and/or services) either individually or in the aggregate during the term of this Agreement and for a period of twelve (12) months following the expiration or termination of this Agreement (except to encourage the continued use of Client's own products and/or services). (h) Neither party will sell, disclose, transfer or rent any user data obtained from users referred to the Client Site from the Excite Portion of the Netscape Site which could reasonably be used to identify a specific named individual ("Individual Data") to any third party nor will either party use Individual Data on behalf of any third party without the express permission of the individual user. Where user permission for dissemination of Individual Data to third parties has been obtained, each party will use commercially reasonable efforts to require the third party recipients of Individual Data to provide an "unsubscribe" feature in any email communications generated by, or on behalf of, the third party recipients of Individual Data. 13 14 CONFIDENTIAL ------------ (i) Notwithstanding the foregoing, each party may disclose Confidential Information or user data obtained from users referred to the Client Site from the Excite Portion of the Netscape Site (i) to the extent required by a court of competent jurisdiction or other governmental authority or otherwise as required by law or (ii) on a "need-to-know" basis under an obligation of confidentiality to its legal counsel, accountants, banks and other financing sources and their advisors. Notwithstanding the foregoing, Excite may disclose Confidential Information or user data obtained from users referred to the Client Site from the Excite Portion of the Netscape Site to Netscape as required under the terms of the Netcenter Agreement. 13. INDEMNITY (a) Client will indemnify, defend and hold harmless Excite, its affiliates, officers, directors, employees, consultants and agents from any and all third party claims, liability, damages and/or costs (including, but not limited to, attorneys fees) arising from: (i) The breach of any representation or covenant in this Agreement; or (ii) Any claim that Client's Impression Material, the Client Content or the content of the "Mobalist" module infringe or violate any third party's copyright, patent, trade secret, trademark, right of publicity or right of privacy or contain any defamatory content; or (iii) Any claim arising from content displayed on the Client Site. Excite will promptly notify Client of any and all such claims and will reasonably cooperate with Client with the defense and/or settlement thereof; provided that, if any settlement requires an affirmative obligation of, results in any ongoing liability to or prejudices or detrimentally impacts Excite in any way and such obligation, liability, prejudice or impact can reasonably be expected to be material, then such settlement shall require Excite's written consent (not to be unreasonably withheld or delayed) and Excite may have its own counsel in attendance at all proceedings and substantive negotiations relating to such claim. (b) Excite will indemnify, defend and hold harmless Client, its affiliates, officers, directors, employees, consultants and agents from any and all third party claims, liability, damages and/or costs (including, but not limited to, attorneys fees) arising from: (i) The breach of any representation or covenant in this Agreement; or 14 15 CONFIDENTIAL ------------ (ii) Any claim arising from the Excite Portion of the Netscape Site other than content or services provided by Client. Client will promptly notify Excite of any and all such claims and will reasonably cooperate with Excite with the defense and/or settlement thereof; provided that, if any settlement requires an affirmative obligation of, results in any ongoing liability to or prejudices or detrimentally impacts Client in any way and such obligation, liability, prejudice or impact can reasonably be expected to be material, then such settlement shall require Client's written consent (not to be unreasonably withheld or delayed) and Client may have its own counsel in attendance at all proceedings and substantive negotiations relating to such claim. (c) EXCEPT AS SPECIFIED IN THIS AGREEMENT, NEITHER PARTY MAKES ANY WARRANTY IN CONNECTION WITH THE SUBJECT MATTER OF THIS AGREEMENT AND HEREBY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES, INCLUDING ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE REGARDING SUCH SUBJECT MATTER. 14. LIMITATION OF LIABILITY EXCEPT UNDER SECTIONS 13(a) AND 13(b), IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER BASED ON BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, WHETHER OR NOT THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. EXCEPT UNDER SECTIONS 13(a) AND 13(b), THE LIABILITY OF EITHER PARTY FOR DAMAGES OR ALLEGED DAMAGES HEREUNDER, WHETHER IN CONTRACT, TORT OR ANY OTHER LEGAL THEORY, IS LIMITED TO, AND WILL NOT EXCEED, THE AMOUNTS TO BE PAID BY CLIENT TO EXCITE HEREUNDER. 15. DISPUTE RESOLUTION (a) The parties agree that any breach of either of the parties' obligations regarding trademarks, service marks or trade names, confidentiality and/or User Data would result in irreparable injury for which there is no adequate remedy at law. Therefore, in the event of any breach or threatened breach of a party's obligations regarding trademarks, service marks or trade names or confidentiality, the aggrieved party will be entitled to seek equitable relief in addition to its other available legal remedies in a court of competent jurisdiction. 15 16 CONFIDENTIAL ------------ (b) In the event of disputes between the parties arising from or concerning in any manner the subject matter of this Agreement, other than disputes arising from or concerning trademarks, service marks or trade names, confidentiality and/or User Data, the parties will first attempt to resolve the dispute(s) through good faith negotiation. In the event that the dispute(s) cannot be resolved through good faith negotiation, the parties will refer the dispute(s) to a mutually acceptable mediator. (c) In the event that disputes between the parties arising from or concerning in any manner the subject matter of this Agreement, other than disputes arising from or concerning trademarks, service marks or trade names, confidentiality and/or User Data, cannot be resolved through good faith negotiation and mediation, the parties will refer the dispute(s) to the American Arbitration Association for resolution through binding arbitration by a single arbitrator pursuant to the American Arbitration Association's rules applicable to commercial disputes. 16. GENERAL (a) Assignment. Neither party may assign this Agreement, in whole or in part, without the other party's written consent (which will not be unreasonably withheld), except that no such consent will be required in connection with (i) a merger, reorganization or sale of all, or substantially all, of such party's assets or (ii) either party's assignment and/or delegation of its rights and responsibilities hereunder to a wholly-owned subsidiary or joint venture in which the assigning party holds an interest. Any attempt to assign this Agreement other than as permitted above will be null and void. (b) Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of California, notwithstanding the actual state or country of residence or incorporation of Excite or Client. (c) Notice. Any notice under this Agreement will be in writing and delivered by personal delivery, express courier, confirmed facsimile, confirmed email or certified or registered mail, return receipt requested, and will be deemed given upon personal delivery, one (1) day after deposit with express courier, upon confirmation of receipt of facsimile or email or five (5) days after deposit in the mail. Notices will be sent to a party at its address set forth in this Agreement or such other address as that party may specify in writing pursuant to this Section. (d) No Agency. The parties are independent contractors and will have no power or authority to assume or create any obligation or responsibility on behalf of each other. 16 17 CONFIDENTIAL ------------ This Agreement will not be construed to create or imply any partnership, agency or joint venture. (e) Force Majeure. Any delay in or failure of performance by either party under this Agreement will not be considered a breach of this Agreement and will be excused to the extent caused by any occurrence beyond the reasonable control of such party including, but not limited to, acts of God, power outages and governmental restrictions. (f) Severability. In the event that any of the provisions of this Agreement are held to be unenforceable by a court or arbitrator, the remaining portions of the Agreement will remain in full force and effect. (g) Entire Agreement. This Agreement is the complete and exclusive agreement between the parties with respect to the subject matter hereof, superseding any prior agreements and communications (both written and oral) regarding such subject matter. This Agreement may only be modified, or any rights under it waived, by a written document executed by both parties. (h) Counterparts. This Agreement may be executed in counterparts, each of which will serve to evidence the parties' binding agreement. Auto-By-Tel Corporation Excite, Inc. By: /s/ Anne Benvenuto By: /s/ Tod C. Harmon ------------------------- ------------------------- Name: Anne Benvenuto Name: Tod C. Harmon ------------------------- ------------------------- Title: Senior V.P., Marketing Title: Dir. Financial Planning ------------------------- ------------------------- Date: June 25, 1998 Date: June 29, 1998 ------------------------- ------------------------- 18872 MacArthur Blvd., #200 555 Broadway Irvine, California 92612-1400 Redwood City, California 94063 949-225-4500 (Voice) 650-566-6000 (Voice) 949-662-1323 (Fax) 650-566-6030 (Fax) 17 EX-10.23 18 LICENSE & SERVICE AGREEMENT W/AUTOBYTEL.COM INC. 1 EXHIBIT 10.23 [*] Confidential Treatment has been requested for certain portions of this exhibit. autobytel.com inc. LICENSE AND SERVICES AGREEMENT This LICENSE AND SERVICES AGREEMENT (this "Agreement") is entered into as of AUGUST 7, 1998, (the "Effective Date") by and between autobytel.com inc., a Delaware corporation with offices at 18872 MacArthur Boulevard, Irvine, California, 92612 ("ABT"), and Auto-By-Tel AB, a Swedish corporation with offices at Haradsvagen 255, 14172 Huddinge, Sweden ("ABT/Nordic"), and describes the terms and conditions pursuant to which ABT will grant to ABT/Nordic a license to use and modify the Software and Business Procedures (as defined below) and to use certain related technology, to deploy, develop and support a localized version of such Software and Business Procedures. BACKGROUND WHEREAS, ABT is engaged in an Internet-based marketing business for new and used vehicles in North America that provides Internet users with fast, haggle-free, and courteous purchasing and related services designed to improve consumers' overall vehicle buying experience; WHEREAS, ABT/Nordic desires to market new and used vehicles, including construction equipment vehicles, in Finland, Norway, Sweden and Denmark using the ABT proprietary Software, technology, and ABT Business Procedures; WHEREAS, ABT/Nordic desires to develop a localized version of ABT's proprietary Software and Business Procedures applicable to Finland, Norway, Sweden and Denmark; NOW, THEREFORE, in consideration of the mutual promises and upon the terms and conditions set forth below, the parties agree as follows: 1. Definitions 1.1 "ABT Brand" means the "Auto-By-Tel" trademark, service mark and logo, and does not include the mark DealerSites.com. 1.2 "Business Procedures" means the proprietary business procedures for offering purchasing-related services, as delivered by ABT to ABT/Nordic before the Effective Date, and any updates or new revisions thereof. 1.3 "Confidential Information" means this Agreement and all its Attachments, any addenda hereto signed by both parties, all Software listings, Documentation, information, data, drawings, 1 2 benchmark tests, specifications, trade secrets, object code and machine-readable copies of the Software, Business Procedures, and any other proprietary information disclosed by one party to the other. 1.4 "Current Term" means the initial three (3) years after the Launch Date, and any one (1) year renewal described in Section 11.1, during which this Agreement is in effect. 1.5 "Derivative Work" means a derivative work within the meaning of 17 U.S.C. Section 101 of the U.S. copyright law. 1.6 "Documentation" means any electronic instructions, manuals or other materials, including without limitation on-line help files, regarding the development or use of the Software provided by ABT under this Agreement. 1.7 "DRT" means the Dealer Communication System portion of the Software. 1.8 "Error Correction" means a patch to, or release or version of the Software containing error corrections or fixes. 1.9 "Extensions" means any modifications or additions to the Software or Business Procedures that are not Derivative Works of the Software or Business Procedures. 1.10 "Fees" mean all minimum and monthly license, maintenance and other fees payable to ABT hereunder. 1.11 "Global Brand Protocols" means the procedures for use of the ABT Brand set forth on Attachment B along with any revisions thereof provided by ABT from time to time in its sole discretion. 1.12 "Gross Revenues" means all payments actually received by ABT/Nordic with regard to the Local Business, including without limitation fees received from dealers for participating in the Internet referral system, payments received from dealers as a result of Internet inquiries referred to them, sums received as payments for advertising on internet sites which are part of the Local Business, gross revenues (but not reimbursement of costs or expenses) from providing maintenance of, and training regarding, the DRT, and all other revenues arising directly out of the Local Business. Gross revenues will not include revenues from sales of cars or other vehicles, from servicing of cars or other vehicles or from other activities by ABT/Nordic or any of its affiliates other than the operation of the Local Business. Gross Revenues received in any currencies other than U.S. dollars will be converted into U.S. dollars at the exchange rate in effect at 12:00 noon, Eastern Standard Time, on the first business day of the calendar month in which such revenues are received. 1.13 "Launch Date" means the first date ABT/Nordic makes the World Wide Web site for the Local Business generally available on the World Wide Web; but in no event later than March 31, 1999. 2 3 1.14 "Local Business" means a business providing Internet based marketing of automotive and automotive related products and services, including without limitation trucks and construction vehicles relating to vehicle dealers located in the Territory. The parties acknowledge that the inclusion of trucks and construction vehicles in the Local Business must not be construed to obligate ABT to include trucks and construction vehicles in the operation of the ABT business generally, nor to create any Software or Business Procedures relating thereto. 1.15 "Localized Version" means a Derivative Work of the Software and Business Procedures that implements the core functionality of the Software and Business Procedures, but incorporates the language, currency and functional variations for the various countries of the Territory, which Derivative Works are in each case created by or for use by ABT/Nordic. 1.16 "Localize, or Localization" means any modifications to the Software or Business Procedures necessary to facilitate the operation and functionality of the Software on the operating systems or platforms within the Territory, or the modification of the Business Procedures to meet local custom or technological or regulatory requirements. 1.17 "Fiscal Quarter" means a period of three (3) consecutive calendar months which period commences upon the Launch Date, or three (3), six (6), or nine (9) months thereafter; or the anniversary of any of the foregoing. 1.18 "Fiscal Year" means a period of four (4) consecutive Fiscal Quarters commencing on the Launch Date or the anniversary thereof. 1.19 "Software" means ABT's existing proprietary Software products specified on Attachment A hereto, together with any Error Corrections, Updates or Upgrades thereof provided to ABT/Nordic pursuant to this Agreement. 1.20 "Territory" means the geographical area of Finland, Norway, Sweden and Denmark. 1.21 "Update" means a release or version of the Software containing minor functional enhancements, or extensions. 1.22 "Upgrade" means any version of the Software designated as such by ABT, which contains new functionality or significantly enhanced operation. 2. Grant of License 2.1 License. Subject to the terms and conditions of this Agreement, ABT hereby grants to ABT/Nordic: (a) a non-exclusive, non-transferable license to use, reproduce, transmit, and to distribute, to provide access to and make available to employees of ABT/Nordic, the Software and Business 3 4 Procedures in the Territory, and to create Derivative Works and Extensions, solely in connection with the development of a Localized Version or Extension in connection with the operation of the Local Business in the Territory; and to provide access to and make available the Software and Business Procedures to third party contractors, solely in accordance with Section 10.4. (b) an exclusive, non-transferable license in the Territory to use, reproduce, make available on a server, and distribute, transmit, make available and provide access to, to employees of ABT/Nordic, the Software in object code format and the Business Procedures, solely for the operation of the Local Business in the Territory, provided that ABT/Nordic operates the Local Business solely in the accordance with the Business Procedures, and only with respect to vehicle dealers in the Territory. (c) a non-exclusive license to distribute, make available, provide access to, and to publicly perform and display, and to transmit copies of the client or "run-time" portions of the Software, or the DRT, in object code format, in the Territory, and to reproduce the Software as necessary to exercise such rights. 2.2 Sublicenses. ABT/Nordic may (a) grant non-exclusive sublicenses to vehicle dealers in the Territory to use copies of the DRT in object code format, solely for use in connection with the Local Business, and (b) grant to third parties the right to use and reproduce copies of client or "run-time" portions of the Software for use in connection with the Local Business' Web site. Such sublicenses must be granted solely in connection with end user licenses in a form subject to ABT's approval, which will not be unreasonably withheld. ABT/Nordic may grant sublicenses of the rights granted in Section 2.1 only upon the prior written approval of ABT. ABT shall not grant to any third party in the Territory a license to the use DRT in connection with a Local Business. 2.3 Copies. ABT shall deliver to ABT/Nordic, as soon as practicable, one (1) copy of the Software in executable form, and one (1) copy of the Software in commented source code form including APIs, one (1) copy of the related Documentation and one (1) copy of the Business Procedures. ABT/Nordic will be entitled to make one (1) copy of the Software solely for backup or archival purposes, and a reasonable number of copies for development purposes, and to retain one (1) copy of the Software for production purposes. Except as otherwise set forth herein, ABT/Nordic may not copy, distribute, reproduce, use or allow access to the Software and Business Procedures. All copies of the Software will be subject to the terms and conditions of this Agreement. Whenever ABT/Nordic is permitted to copy or reproduce all or any part of the Software and Business Procedures, all titles, trademark symbols, copyright symbols and legends, and other proprietary markings of ABT or its suppliers or licensors must be reproduced. ABT/Nordic shall not alter or remove any of ABT's trademarks, copyright notices or other proprietary notices affixed to the Software by ABT. 2.4 Ownership. ABT owns all right, title and interest in and to the Software and Business Procedures, together with any Localized Version or other modifications to the Software and Business Procedures made by either ABT or ABT/Nordic in connection with Localization of the Software or Business Procedures. The licenses granted herein transfers to ABT/Nordic neither title, nor any 4 5 proprietary or intellectual property rights to the Software, Business Procedures, or Documentation, or any copyrights, patents, or trademarks, embodied or used in connection therewith, except for the rights expressly granted herein. Upon development of any Localized Version by ABT/Nordic, ABT/Nordic hereby assigns all right, title and interest to such Localized Version to ABT. Such Localized Version will be included as, and incorporated in, the Software for the purposes of the license grant in this Section 2. ABT hereby grants ABT/Nordic an irrevocable, perpetual, worldwide, non-exclusive, fully paid-up, transferable, sublicenseable license to reproduce, distribute, publicly perform and display, transmit, make available, provide access to, and prepare Derivative Works of the Extensions, and Derivative Works thereof, in connection with the Local Business. The foregoing license will survive the termination of this Agreement. All rights in Software and Business Procedures not expressly granted hereunder are reserved to ABT. 2.5 Software and Business Procedure Localization. As between the parties, ABT/Nordic is responsible for any changes to the Software, Documentation, or Business Procedures necessary to Localize them in accordance with the operation of the Local Business. All such Localization changes, and the development of any Extensions, must be approved by ABT prior to development and implementation. All such Localization changes and the development of any Extensions must be either (i) performed by ABT in accordance with Section 3.2 below; or (ii) performed by ABT/Nordic, or by its independent contractor approved by ABT, under the technical oversight and subject to the approval of ABT, subject to Section 3.2 below. ABT will assist ABT/Nordic and any independent contractors approved by ABT in all reasonable ways in making Localization changes and developing Extensions, subject to any fees due for such services pursuant to Section 6.2. Any modifications made to the Software, Documentation, or Business Procedures without the approval of ABT will be a material breach of this Agreement. In the event the Business Procedures violate the laws or regulations of the Territory or the European Union, the parties will cooperate in good faith to Localize them to comply with the laws and regulations of the Territory or the European Union, as applicable. Upon completion of any Localized Version or Extension, ABT/Nordic must disclose to ABT a copy of such Localized Version or Extension. Any such disclosure of Localized Software or Extension must be in source code format. 2.6 Updates and Upgrades. During the term of this Agreement, and subject to ABT/Nordic's payment to ABT of the Maintenance Fee set forth in Section 5.3 below, ABT will deliver to ABT/Nordic any Error Corrections, Updates or Upgrades to the Software or Business Procedures that ABT uses or releases to any of ABT's other local country affiliates or United States licensees. ABT/Nordic shall promptly implement all use Error Corrections, Updates, or Upgrades provided by ABT under this Agreement, to the extent (i) consistent with Localization requirements and (ii) such Error Corrections, Updates, or Upgrades do not cause material errors in the software, Internet or telecommunications operations of the Local Business. Notwithstanding the above, ABT will not be obligated to provide such Error Corrections, Updates or Upgrades during the period during which, in the reasonable discretion of ABT's project manager, they are in release solely for testing purposes or otherwise not suitable for release outside the United States. 5 6 [*] Confidential Treatment Requested 2.7 License Restrictions. ABT/Nordic shall not: (a) sell, lease, license, sublicense or distribute the Software, Documentation, or Business Procedures except in accordance with this Agreement; (b) provide, disclose, divulge or make available to, or permit use of the Software, Documentation, Business Procedures, or Localized Version by any third party without ABT's prior written consent, except as specifically authorized by this Agreement; or (c) use the Software for any purpose except as expressly provided for in this Agreement. 2.8 Third Party Technology. The parties acknowledge that certain software, equipment, or technology of third parties, including without limitation server equipment, server software, and database software, may be required to operate the Software. ABT shall cooperate reasonably with ABT/Nordic to identify any such third-party technology that will be available to ABT/Nordic, but ABT will not be obligated to provide any such third party technology to ABT/Nordic. 2.9 Reimbursement for Certain Extensions. If ABT/Nordic wishes to create an Extension, it may request reimbursement for the development of such Extension pursuant to this Section 2.9. ABT/Nordic will submit to ABT a description in reasonable detail of such Extension. ABT shall, at ABT/Nordic's expense in accordance with Section 3.2, prepare a high-level specification, budget and schedule for development of the Extension. If the budgeted development fees for the Extension (the "Estimated Fees") are under [*], then ABT will not be obligated to reimburse ABT/Nordic for the development of such Extension. If the budgeted development fees for the Extension are [*] or over, then ABT shall have a right of first refusal to perform such development, as follows: ABT may, within ten (10) days after the completion of the aforementioned estimate, elect by written notice to perform the development of such Extension, pursuant Section 3.2. If ABT does not provide such notice within such ten (10) day period, ABT/Nordic may, in its discretion, elect to perform the development of such Extension, subject to the terms of Section 2.5. Upon completion of the Extension, ABT/Nordic shall provide a copy of such Extension in source code format, including any related technical documentation, to ABT. If, within the next one (1) year period after ABT/Nordic provides the Extension to ABT, either ABT or its affiliates use such Extension (other than solely for testing purposes), ABT shall, no later than thirty (30) days after the date of such use, reimburse ABT/Nordic [*] of the Estimated Fees for development of such Extension. 2.10 Outsourcing. Upon ABT/Nordic's request, the parties will use reasonable efforts to enter into an agreement, before the Launch Date, to allow ABT/Nordic to engage a third party to operate the Software on ABT/Nordic's behalf. 3. Obligations. 6 7 3.1 Services. Upon mutual agreement, ABT may, from time to time, perform services and provide support to ABT/Nordic that will be subject to a Services Agreement in a format similar to the Services Agreement included on Attachment D hereto (the "Services" as further defined below). (a) In addition to the compensation set forth in the definitive Services Agreement, ABT/Nordic shall reimburse ABT for the reasonable actual travel and living expenses of ABT's personnel engaged in performing the Services at locations other than ABT's facilities, together with other reasonable out-of-pocket expenses incurred in connection with the performance of such Services. ABT shall adhere to any travel policy reasonably promulgated by ABT/Nordic in connection therewith. (b) ABT/Nordic shall pay ABT for any Services provided under this Section 3.1 in accordance with the payment terms set forth in Section 5 below. 3.2 Scope of Services. The parties currently anticipate that the Services that may be performed in accordance with Section 3.1 above may include the following. However, nothing in this Section 3.2 will be deemed to create any binding obligation on either party. (a) Hardware selection and configuration consulting services; (b) Business model conversion support for software systems and operating procedures; (c) Marketing, sales and information technology training; (d) Support for training of vehicle dealers in the use of the DRT portions of the Software; and (e) Business Procedures marketing support, including support regarding know-how, cooperative advertising or other co-marketing activities. 3.3 ABT/Nordic Obligations. ABT/Nordic shall operate the Local Business solely in accordance with the Localized Business Procedures. ABT/Nordic shall operate the Local Business solely in accordance with the laws, regulations, and other requirements of the Territory and of the European Union. During the term of this Agreement, ABT/Nordic will devote sufficient resources and personnel to the Local Business to market, promote and operate the Local Business properly. ABT/Nordic will be responsible for training vehicle dealers in the use of the DRT portions of the Software and will be solely responsible for all costs and expenses related to the marketing, promotion and operation of the Local Business and for performing its obligations hereunder. ABT/Nordic will ensure that only properly trained and qualified persons perform its technical obligations under this Agreement. 3.4 Hyperlinks. ABT shall, on and after the Launch Date, maintain a location on its Web Page where ABT provides links to its local country affiliates, and display at that location a hypertext link pointing toward ABT/Nordic's home Web page for the Local Business, and ABT/Nordic shall, on and after the Launch Date, display a hypertext link on the home Web page for the Local Business pointing to such location. 7 8 3.5 Territory and Sales. The parties acknowledge that ABT/Nordic may receive inquiries or orders for sales of products or services from persons outside the Territory. In such case, ABT/Nordic shall respond to such inquiries only in accordance with the laws of the Territory and the European Union. In addition, ABT/Nordic acknowledges that ABT may enter into agreements with other parties who will operate a Local Business outside the Territory. ABT/Nordic shall use its best efforts to resolve any channel conflicts with such third parties relating to such inquiries in the manner which, in ABT's reasonable discretion, best promotes overall worldwide use of the business of providing Internet-based marketing of automobiles using the ABT Brand, the Software and the Business Procedures. 4. Warranty and Disclaimer 4.1 ABT Warranty. ABT warrants that (a) during the term of this Agreement, the Software will perform in substantial accordance with the Documentation; and (b) the Software, together with third party technology identified in accordance with Section 2.8, is all the technology ABT uses to operate its Internet-based marketing business for new and used cars in the manner ABT operates such business as of the Effective Date. If the Software does not perform as warranted in accordance with subsection (a) of this Section 4.1, ABT shall use commercially reasonable efforts to provide Error Corrections to correct the Software in accordance with the escalation procedures in Attachment C, and include the correction therefor in the next Error Correction released by ABT and provided to ABT/Nordic under Section 6.2 below. If additional technology is necessary due to a breach of the warranty in subsection (b) of this Section 4.1, ABT shall cooperate in good faith to assist ABT/Nordic in procuring any such additional technology. The foregoing are ABT/Nordic's sole and exclusive remedies for breach of warranty. The warranty will apply only if the then-current version of the Software has been properly installed and used at all times and in accordance with the Localized Business Procedures and any relevant Documentation. 4.2 ABT/Nordic Warranty. ABT/Nordic represents and warrants that ABT/Nordic is sufficiently capitalized to undertake the business transaction contemplated hereunder. 4.3 Disclaimer. EXCEPT FOR THE EXPRESS LIMITED WARRANTY SET FORTH IN SECTION 4.1 ABOVE, THE SOFTWARE, DOCUMENTATION AND BUSINESS PROCEDURES ARE PROVIDED "AS-IS" AND WITHOUT WARRANTY OF ANY KIND, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE. ABT HEREBY DISCLAIMS ANY WARRANTY THAT THE OPERATION OF THE SOFTWARE WILL BE UNINTERRUPTED OR ERROR-FREE. ABT SPECIFICALLY DISCLAIMS ALL IMPLIED WARRANTIES OF, MERCHANTABILITY, AND FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE SOFTWARE, DOCUMENTATION, OR BUSINESS PROCEDURES. 4.4 Disclaimer. The success of the business venture contemplated to be undertaken by ABT/Nordic by virtue of this Agreement is speculative and depends, to a large extent, upon the ability of ABT/Nordic as an independent business operator and the active participation of ABT/Nordic in the daily affairs of the Local Business, as well as other factors. ABT does not make any representation or 8 9 [*] Confidential Treatment Requested warranty, express, or implied, as to the potential success of the business venture contemplated by this Agreement. 5. Compensation. 5.1 Minimum License Fee. In consideration of the licenses granted herein, ABT/Nordic shall pay to ABT the minimum license fee specified on Attachment A ("Minimum Annual License Fee"). The Minimum Annual License Fee will be payable in four (4) equal installments, in advance of each Fiscal Quarter. 5.2 Additional License Fees. No later than thirty (30) days after the end of each month, ABT/Nordic shall pay to ABT an amount equal to [*] of Gross Revenues received by ABT/Nordic during such month in connection with the operation of the Local Business (the "Monthly Fees"). ABT/Nordic may credit any previously paid Minimum Annual License Fees paid for the current Fiscal Year against the Monthly Fees. 5.3 Maintenance Fee. In consideration of the services to be provided by ABT under Section 6, ABT/Nordic shall pay to ABT the maintenance fee specified on Attachment A (the "Maintenance Fee"). The Maintenance Fee will be due on the Effective Date, and each anniversary thereof. ABT may increase the Maintenance Fee after the first year of the Term, in proportion to any increase in the Orange County Technical Support Index, as compared to the latest index published as of the Effective Date. 5.4 Taxes. All charges and Fees provided for in this Agreement are exclusive of, and do not include, any taxes, duties, or similar charges imposed by any government. ABT/Nordic shall pay or reimburse ABT for all federal, state, dominion, provincial, or local sales, use, personal property, excise or other taxes, fees, or duties arising out of this Agreement or the transactions contemplated by this Agreement (other than taxes on the net income of ABT). 5.5 Payment. ABT/Nordic shall make all payments in U.S. Dollars by wire transfer to an account designated by ABT. Any payments due under this Agreement which are not paid when due will bear interest, to the extent permitted by applicable law, at the prime rate as reported by the Chase Manhattan Bank, New York, New York, on the date such payment is due, plus an additional three percent (3%), calculated on the number of days such payment is delinquent. This Section 5.5 will not limit any other remedies available to any party. 5.6 Records. ABT/Nordic shall make and maintain an accounting and record keeping system, approved in accordance with the standards and specifications set forth in the Business Procedures, which is sufficient to enable ABT/Nordic to calculate, and ABT to review, the monthly fees due under Section 5.3 and to provide all other information required under this Agreement. ABT will have the right, at its own expense, to inspect, through either its employees or agents, and upon reasonable notice in writing, and during regular business hours, ABT/Nordic's relevant records to verify the accuracy of fees paid by ABT/Nordic under the terms of this Agreement. If any such examination discloses a shortfall in the fees 9 10 [*] Confidential Treatment Requested due to ABT hereunder, ABT/Nordic shall reimburse ABT for the full amount of such shortfall plus interest and if the amount of the underpayment for any period is more than [*] ABT/Nordic shall pay ABT's costs of performing that audit with respect to such period. 6. Maintenance and Support. 6.1 Support. ABT shall provide Maintenance and Support as described in Section 6.2 below. ABT's provision of Maintenance and Support to ABT/Nordic will commence upon payment of the Maintenance Fee. 6.2 Maintenance and Support Services. For purposes of this Agreement, "Maintenance and Support" means that ABT will provide: (a) Error Corrections, Updates and Upgrades, if any, to the Software, Business Procedures and Documentation that ABT releases during the current period covered by the Maintenance Fee, in accordance with Section 2.6; and (b) up to six hundred (600) hours of technical support per year, in English, pursuant to the escalation procedures in Attachment C. Any hours of support provided by ABT on or after June 1, 1998 (whether or not such date is before the Effective Date) will be counted toward the six hundred (600) hours for the first year. ABT shall provide ABT/Nordic with a monthly report of the hours of technical support provided by ABT under this Section 6.2. Upon ABT/Nordic request, ABT shall provide copies of documents to support such invoices. Fees for any additional Maintenance and Support services beyond the initial six hundred (600) hours will be invoiced monthly in arrears by ABT, in reasonable detail showing such additional hours to the nearest quarter hour, and Customer shall pay such Fees no later than fifteen (15) days after the invoice date. The Fee for such additional hours is currently One Hundred Dollars ($100) per hour. However, ABT may increase such Fees for any such additional hours of Maintenance and Support in proportion to any increase in the Orange County Technical Support Index, as compared to the latest index published as of the Effective Date. All Maintenance and Support services will be provided by appropriately trained personnel in accordance with Attachment C. 6.3 Project Managers and Staff. Each party shall designate a project manager to administer Maintenance and Support under this Agreement. The parties shall coordinate all Maintenance and Support work under this Agreement through such project managers. Each party may change its project manager upon written notice. ABT will ensure that only properly trained and qualified persons perform its technical obligations under this Agreement. 7. Trademarks. 7.1 Trademarks. ABT hereby grants to ABT/Nordic the exclusive right and license to use the ABT Brand in connection with a Local Business in the Territory, including without limitation the right and license to use or display the ABT Brand on World Wide Web sites, or other world-wide Internet transmissions, relating to the Local Business. The above license will include, without limitation, the right to indicate to the public that ABT/Nordic is an authorized licensee of ABT and to advertise ABT/Nordic's products and services in connection with the Local Business under the ABT Brand. 10 11 ABT/Nordic shall fully comply with the Global Brand Protocols. ABT/Nordic shall present its annual marketing plans for ABT's review and keep ABT, informed about any material changes in such plans. Subject to the Global Brand Protocols, after approval of such marketing plans, ABT/Nordic may use media of its choice to present such marketing plan to the public. 7.2 Restrictions. Except as set forth in this Section 7.2, nothing contained in this Agreement will grant or will be deemed to grant to ABT/Nordic any right, title or interest in or to the ABT Brand. ABT/Nordic shall not challenge or assist others to challenge the ABT Brand (except to the extent such restriction is expressly prohibited by applicable law) or the registration thereof or attempt to register any trademarks, marks or trade names confusingly similar to those of ABT. If ABT/Nordic, in the course of exercising its rights hereunder, acquires any goodwill or reputation in the ABT Brand, all such goodwill or reputation will automatically vest in ABT when and as, on an on-going basis, such acquisition of goodwill or reputation occurs, as well as at the expiration or termination of this Agreement, without any separate payment or other consideration of any kind to ABT/Nordic, and ABT/Nordic agrees to take all such actions necessary to effect such vesting, including without limitation the transfer to ABT of rights in any filings or registrations made under Section 7.3 below. Upon termination of this Agreement, ABT/Nordic shall immediately cease to use the ABT Brand. 7.3 Trademark Registrations in the Territory. ABT/Nordic shall advise ABT regarding the appropriate registrations or filings appropriate to protect the use of the ABT Brand in the Territory and the European Union. ABT/Nordic shall make any registrations or filings requested by ABT with the appropriate authorities, and shall pay all costs or fees associated with such filing. 7.4 Registered User Agreements. To the extent ABT deems necessary, in its reasonable discretion, to properly protect ABT's rights, ABT and ABT/Nordic shall enter into registered user agreements with respect to the ABT Brand pursuant to applicable trademark law requirements in the Territory or the European Union. ABT/Nordic will be responsible for proper filing of registered user agreements with appropriate government authorities and shall pay all costs or fees associated with such filing. 7.5 Name Branding; Product Protection. On any promotional materials used or disseminated by ABT/Nordic relating to the Local Business, ABT/Nordic shall display the ABT Brand. Where both ABT/Nordic's marks and the ABT Brand are displayed, the marks will be presented equally legibly, and in a size and style in accordance with ABT's then-current Global Brand Protocols. 7.6 Enforcement of Standards. ABT will require all United States and foreign affiliates who are authorized to display, or market services or products under, the ABT Brand, in connection with an agreement similar to this Agreement, to (i) comply with the Global Brand Protocols, (ii) operate their businesses which use the ABT Brand in accordance with the Business Procedures (subject to reasonable localization). ABT will use commercially reasonable efforts to enforce those requirements with regard to all such affiliates. 11 12 8. Limitation of Liability EXCEPT FOR LIABILITY ARISING OUT OF SECTION 10, IN NO EVENT WILL ABT'S TOTAL LIABILITY ARISING OUT OF OR RELATED TO THIS AGREEMENT EXCEED THE TOTAL AMOUNTS PAID BY ABT/NORDIC TO ABT FOR THE CURRENT ONE-YEAR TERM. EXCEPT FOR LIABILITY FOR THIRD PARTY CLAIMS ARISING OUT OF SECTION 9 OR 10, IN NO EVENT WILL EITHER PARTY HAVE ANY LIABILITY FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, WHETHER FOR BREACH OF CONTRACT, TORT OR OTHERWISE, ARISING OUT OF OR RELATED TO THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO, LOSS OF ANTICIPATED PROFITS, LOSS OF DATA, LOSS OF USE, OR COST OF COVER, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. 9. Indemnification for Infringement 9.1 ABT Indemnity for Infringement. ABT shall, at its expense, defend or settle any claim, action or allegation brought against ABT/Nordic that the Software or Business Procedures infringes any copyright or trade secret right of any third party, and shall pay any final judgments awarded or settlements entered into; provided that ABT/Nordic gives prompt written notice to ABT of any such claim, action or allegation of infringement and gives ABT the authority to proceed as contemplated herein. ABT will have the exclusive right to defend any such claim, action or allegation and make settlements thereof in its own discretion, and ABT/Nordic may not settle or compromise such claim, action or allegation, except with the prior written consent of ABT. Not withstanding the above, ABT/Nordic shall have the right (i) to take action in order to prevent a default judgment, if ABT fails to act and (ii) to take action to prevent or dissolve any temporary restraining orders or other injunctions which materially impair ABT/Nordic's ability to conduct the Local Business. ABT/Nordic shall give such assistance and information as ABT may reasonably require to settle, or oppose such claims. In the event any intellectual property infringement, claim, action or allegation is brought or threatened, ABT shall, at its sole option and expense: (a) procure for ABT/Nordic the right to continue use of the Software or Business Procedures or infringing part thereof. (b) modify or amend the Software or Business Procedures or infringing part thereof, or replace the Software or Business Procedures or infringing part thereof with other Software or Business Procedures having substantially the same or better capabilities; or (c) if neither (a) nor (b) is reasonably possible, terminate this Agreement and repay to ABT/Nordic a portion of the Minimum Annual License Fee equal to the amount paid by ABT/Nordic less an amount equal to one twelfth (1/12) of the total Minimum Annual License Fee for each month or portion thereof of the current one (1) year term to account for use by ABT/Nordic. ABT and 12 13 ABT/Nordic will then be released from any further obligation to the other hereunder, except for the obligations that survive expiration or termination of this Agreement. The foregoing obligations will not apply to the extent the infringement arises as a result of modifications to the Software not made by or for ABT. The foregoing states the entire liability of ABT with respect to infringement of any patent, copyright, trademark, trade secret or other proprietary right. 9.2 ABT/Nordic Indemnity. ABT/Nordic shall, at its expense, defend or settle any claim, action or allegation brought against ABT (to the extent not covered by Section 9.1) arising from the act or omission of ABT/Nordic, including without limitation any claims of fraud, misrepresentation, or unfair business practices arising from the operation of the Local Business, or those that arise from the allegation that the Localized Version or any Extension, or the use of the ABT Brand in the Territory, infringes any copyright or trade secret right of any third party, and shall pay any final judgments awarded or settlements entered into; provided that ABT gives prompt written notice to ABT/Nordic of any such claim, action or allegation of infringement and gives ABT/Nordic the authority to proceed as contemplated herein. ABT/Nordic will have the exclusive right to defend any such claim, action or allegation and make settlements thereof in its own discretion, and ABT may not settle or compromise such claim, action or allegation, except with the prior written consent of ABT/Nordic. ABT shall give such assistance and information as ABT/Nordic may reasonably require to settle or oppose such claims. In the event any intellectual property infringement, claim, action or allegation is brought or threatened, ABT/Nordic shall, at its sole option and expense: (a) procure for ABT the right to continue use of the Localized Version or Extension or infringing part thereof; and/or (b) modify or amend the Localized Version or Extension or infringing part thereof, or replace the Localized Version or infringing part thereof with other materials having substantially the same or better capabilities; (c) if neither (a) nor (b) is reasonably possible, terminate ABT's rights in such Localized Version or Extension, and repay to ABT a portion of the fees paid or reimbursed by ABT for such Localized Version or Extension. The foregoing states the entire liability of ABT/Nordic with respect to infringement of any patent, copyright, trademark, trade secret or other proprietary right. 9.3 Prosecution of Infringers. ABT and ABT/Nordic shall give each other written notice of any acts of alleged infringement by third parties involving intellectual property rights relating to the Software, Business Procedures, or ABT Brand anywhere in the Territory of which ABT or ABT/Nordic has knowledge, and the parties shall consult together with a view to determine the course of action, if any, to be taken in such circumstances. ABT will have the right to take action to enforce such rights. If the parties are unable to agree on any such course of action to be taken, ABT/Nordic may take such 13 14 actions as ABT/Nordic considers necessary or appropriate in its own name (or, if required by law, in ABT's name) at ABT/Nordic's expense. Each party shall render to the other any assistance requested by the other in proceedings against an infringer within the Territory, at the other party's expense. Any damage that might be awarded will, after deduction of actual costs, be awarded to the party that undertakes legal action. 10. Confidential Information 10.1 Obligations. The parties acknowledge and agree that the Confidential Information disclosed by one party (the "Disclosing Party") to the other party (the "Receiving Party") directly or indirectly (which information is marked as "proprietary" or "confidential" or, if disclosed orally, is designated as confidential or proprietary at the time of disclosure) hereunder constitutes the confidential and proprietary information of the Disclosing Party. The Receiving Party shall retain in strict confidence and not disclose to any third party any Confidential Information without the Disclosing Party's express written consent, and the Receiving Party shall not use such Confidential Information except to exercise the rights and perform its obligations under this Agreement. Without limiting the foregoing, each party shall use at least the same procedures and degree of care which it uses to protect its own Confidential Information of like importance, and in no event less than reasonable care. 10.2 Exceptions. The Receiving Party shall be relieved of this obligation of confidentiality to the extent it can demonstrate that any such information is: publicly available, already in the Receiving Party's possession at the time of disclosure and not subject to a confidentiality obligation, obtained by the Receiving Party from third parties without restrictions on disclosure, independently developed by the Receiving Party without reference to Confidential Information, or required to be disclosed by order of a court or other governmental entity. 10.3 Source Code Protections. ABT/Nordic shall not under any circumstances distribute or disclose the source code for the Software in any manner, except in accordance with Section 10.4. Each copy or Derivative Work of the source code for the Software must be marked as the confidential and proprietary property of ABT to which access is restricted, and must be kept and used solely at ABT/Nordic's secure development facilities under password protection. ABT/Nordic agrees to limit access to the source code for the Software twenty-four (24) hours a day, and strictly to those employees to whom access is reasonably necessary in order to carry out the permitted uses of the source code for the Software hereunder. ABT/Nordic will use its best efforts to ensure that all such employees abide by the terms of its confidentiality obligations hereunder. ABT/Nordic shall keep records of all persons who have access to the source code for the Software. At ABT's request, ABT/Nordic agrees to provide such records to ABT for review. 10.4 Contractors. ABT/Nordic may appoint a third party contractor ("Contractor") to assist ABT/Nordic in ABT/Nordic's modification or implementation of the Localized Version as authorized hereunder; provided, however, any such Contractor's access to and use of the Software, including the Localized Version, will only be permitted pursuant to a signed written agreement between ABT/Nordic 14 15 [*] Confidential Treatment Requested and such Contractor reasonably acceptable to ABT and containing at least the terms set forth in this Section 10 ("Contractor Agreement"). Such agreement must be approved in writing by ABT prior to its execution. ABT may perform technical oversight of all work performed by a Contractor in accordance with this Section 10.4. ABT/Nordic shall indemnify and hold harmless ABT for any losses, damages, or expenses arising out of the breach of such agreements by such Contractors. 10.5 Notification of Security Breach. ABT/Nordic shall notify ABT promptly in the event of any breach of its security, under conditions in which it would appear that the trade secrets contained in the source code for the Software or the Localized Version were prejudiced or exposed to loss. ABT/Nordic shall, upon request of ABT, take all other reasonable steps necessary to recover any compromised trade secrets disclosed to or placed in the possession of ABT/Nordic by virtue of this Agreement. The cost of taking such steps will be borne solely by ABT/Nordic, unless ABT willfully caused the breach. 10.6 Injunctive Relief. In the event of actual or threatened breach of the provisions of Section 10.1 or 10.3, the non-breaching party will have no adequate remedy at law and will be entitled to immediate injunctive and other equitable relief, without the necessity of showing actual money damages. 11. Term and Termination 11.1 Term. This Agreement and the licenses granted hereunder will be effective as of the Effective Date and will continue in full force and effect for a term of up to ten (10) years (the "Term") after the Launch Date. During the first three (3) Fiscal Years, the Agreement will renew automatically on the anniversary of the Launch Date, and ABT/Nordic will be obligated to pay the related Fees as they become due and payable in accordance with the terms and conditions contained herein. 11.2 Renewal. (a) After the conclusion of the third Fiscal Year of the Term, this Agreement will renew automatically in one (1) Fiscal Year increments, unless terminated by ABT/Nordic in its option and discretion upon one hundred twenty (120) days' prior written notice of its intent to not to renew this Agreement. (b) Five (5) months before the conclusion of the fifth (5th) Fiscal Year of the Term, if the total Monthly Fees due to ABT for the prior twenty-four (24) months, divided by two (2) (the "Actual Annual Fees") , are less than the Minimum Annual License Fee, then, upon the written request of ABT/Nordic on or before the date one hundred twenty (120) days' prior to the conclusion of the fifth (5th) Fiscal Year of the Term, ABT shall, at its option and discretion, promptly either (i) reduce the Minimum Annual License Fee to the amount of such Actual Annual Fees for the duration of the Term, or (ii) terminate the Agreement, in which case (1) the non-competition obligations of Section 11.5(c) will cease in effect, and (2) for the period three (3) years after such termination, no later than thirty (30) days after the end of each month, ABT/Nordic shall pay to ABT an amount equal to [*] 15 16 of Gross Revenues received by ABT/Nordic during such month in connection with the operation of the Local Business (the "Monthly Fees"). (c) During the period one (1) year to one hundred eighty (180) days before the end of the Term, the parties shall negotiate in good faith the extension of the Term of the Agreement and the conditions therein, as follows: (d) If the parties cannot agree on extension of the Term of the Agreement and the conditions therein within the period described in subsection (a), then during the period one hundred eighty (180) to ten (10) days before the end of the Term, ABT shall not grant to any third party the right to use the ABT Brand, Software and Business Procedures to conduct a Local Business in the Territory without offering ABT/Nordic a right of first refusal, as follows: if ABT receives a bona fide proposal from any third party for such a license, ABT shall communicate the proposal in reasonable detail to ABT/Nordic, and ABT/Nordic shall, within ten (10) business days, either (x) elect to enter into an agreement with ABT on such terms, or (y) refuse to do so, in which case ABT would be free to enter into an agreement on substantially such terms with a third party. (e) If, by ten (10) days before the end of the Term, ABT has not entered into an agreement with a third party or ABT/Nordic as described in subsection (b) above, ABT/Nordic may, upon written notice to ABT before the end of the Term, elect to continue the Term for a five (5) year period based on a Minimum Annual License Fee each year equal to the average actual annual license fee due to ABT under the Agreement during the prior two (2) years of the Term. 11.3 Termination. This Agreement may be terminated by ABT/Nordic upon six (6) months prior written notice to ABT, with or without cause, upon payment of any unpaid Minimum Annual License Fee for the Current Term. 11.4 Termination For Cause. ABT may, by written notice to ABT/Nordic, terminate this Agreement if any of the following events ("Termination Events") occur: (a) ABT/Nordic fails to pay the Fees thirty (30) days after they become due; or (b) ABT/Nordic is in material breach of any nonmonetary term, condition or provision of this Agreement, which breach, if capable of being cured, is not cured within thirty (30) days after ABT gives ABT/Nordic written notice of such breach; or (c) ABT/Nordic (i) terminates or suspends its business; (ii) is insolvent, admits in writing its inability to pay its debts as they mature, makes an assignment for the benefit of creditors, or becomes subject to direct control of a trustee, receiver or similar authority; or (iii) becomes subject to any bankruptcy or insolvency proceeding under federal, foreign, or state statutes. If any Termination Event occurs, termination will become effective immediately or on the date set forth in the written notice of termination. For the avoidance of doubt, payment by ABT/Nordic of 16 17 any amount reported by ABT/Nordic in good faith under Section 5.2, and payment by ABT/Nordic of any amount invoiced in good faith by ABT under Section 3.1 or 6.1, will not be deemed a breach of this Agreement by ABT/Nordic, even if a subsequent audit reveals that the amount paid is less than the actual amount due. (d) Upgrades. In the event that during the Term there is a change in the prevalent platform for development and deployment of software systems over the World Wide Web, which change requires an Upgrade to the Software, ABT/Nordic may notify ABT that such an Upgrade should be performed. If ABT does not, within six (6) months after such notice, make significant efforts toward preparing such an Upgrade, or if within one (1) year after such notice, ABT does not provide such Upgrade to ABT/Nordic, ABT Nordic, may terminate this Agreement at the end of the current Fiscal Year in accordance with Section 11.2(a), and the obligations of Section 11.5(c) will cease in effect. 11.5 Effect of Termination. (a) Survival. Upon termination of this Agreement in accordance with the above provisions, the rights and licenses granted under this Agreement will immediately terminate except as otherwise stated herein. The terms and conditions of the following Sections will survive termination or expiration of this Agreement: 1, 2.4, 2.7, 4.2, 4.4, 5.6, 7.2, 8, 9, 10, 11.4, 11.5, 13 and 15, as well as any payment obligations in accordance with Section 5 which accrued prior to expiration or termination hereof. (b) Return of Materials. Within thirty (30) days after the date of termination or discontinuance of this Agreement for any reason whatsoever, (i) ABT/Nordic shall, at ABT's option, return or destroy any copies of the Software, Documentation, Business Procedures and any other Confidential Information in its possession that is in tangible form, and (ii) ABT shall, at ABT/Nordic's option, return or destroy any copies of any Confidential Information of ABT/Nordic that is in ABT's possession that is in tangible form. Each party shall furnish to the other with a certificate signed by an executive officer of ABT/Nordic verifying that the same has been done. (c) Non-Competition. Subject to Section 11.2(a), if this Agreement is terminated before the end of the Term, then during the period one (1) year after termination of this Agreement, ABT/Nordic shall not, either for its own account, or through any parent, subsidiaries, or affiliates, operate a Local Business in the Territory. Notwithstanding the above, ABT/Nordic may, through a subsidiary or affiliate, provide Internet based marketing of products and services related to trucks and construction vehicles for vehicle dealers located in the Territory; so long as such business does not infringe ABT's trademarks or other intellectual property rights. If ABT/Nordic assigns this Agreement to another party with ABT's consent under Section 12, this obligation will run to ABT/Nordic, and to such assignee. 11.6 License if ABT Enters Bankruptcy. If, at any time during the term of this Agreement, ABT (a) files a voluntary petition in bankruptcy under Chapter 7 of 11 United States Code (the "Bankruptcy Code"); or (b) has an involuntary petition in bankruptcy filed against it under Chapter 7 of the Bankruptcy Code, which petition is not dismissed within ninety (90) days, ABT/Nordic may elect to 17 18 retain its right in the licenses granted in this Agreement, subject to the terms of this Agreement, in accordance with Chapter 3, Section 365(n) of the Bankruptcy Code. The licenses granted in this Agreement will be deemed licenses of "intellectual property" under Section 365(n) of the Bankruptcy Code. 12. Nonassignment/Binding Agreement. Neither this Agreement, nor any rights under this Agreement, may be assigned or otherwise transferred by ABT/Nordic, in whole or in part, whether voluntary, or by operation of law, including by way of sale of assets, merger or consolidation, without the prior written consent of ABT. Any permitted assignee (including without limitation ABT/Nordic) must agree in writing to be bound by all the terms and conditions of this Agreement. Subject to the foregoing, this Agreement will be binding upon and inure to the benefit of the parties and their respective successors and assigns. 13. Bilia Obligations. Concurrently with the execution of the Agreement, and as a condition to its effectiveness, ABT, ABT/Nordic and Bilia AB shall enter into an Investment Rights Agreement, in the form attached hereto as Attachment E, setting forth the terms and conditions pursuant to which ABT will have the right to make certain investments in ABT/Nordic and the associated rights that ABT will obtain in connection with such investment. In addition, ABT/Nordic shall cause Bilia AB to enter into the side letter agreement attached hereto as Attachment F guaranteeing certain of ABT/Nordic's obligations under this Agreement. 14. Notices Any notice, submission, or communication required or permitted under the terms of this Agreement, or required by law, whether or not so required elsewhere in this Agreement, must be in writing and must be (a) delivered in person, (b) sent by first class registered mail, return receipt requested, or air mail, as appropriate, or (c) sent by overnight air courier; in each case properly posted and fully prepaid to the appropriate address set forth below. Either party may change its address for notice by notice to the other party given in accordance with this Section 14. Notices will be considered to have been given at the time of the earlier of (p) actual delivery in person, (q) the date of a receipt of such notice signed by an authorized representative of the party being notified, (r) the date of a written confirmation of receipt by the party being notified, or (s) thirty (30) days after deposit in the mail as set forth above. 15. Miscellaneous 15.1 Force Majeure. Neither party will incur any liability to the other party on account of any loss or damage resulting from any delay or failure to perform all or any part of this Agreement if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control, and without negligence of, the parties. Such events, occurrences, or causes will include, without limitation, acts of God, strikes, lockouts, riots, acts of war, fires and explosions, but the inability to meet financial obligations is expressly excluded. 18 19 15.2 No Waiver; Amendment. Any waiver of the provisions of this Agreement or of a party's rights or remedies under this Agreement must be in writing to be effective. Failure, neglect, or delay by a party to enforce the provisions of this Agreement or its rights or remedies at any time will not be construed and will not be deemed to be a waiver of such party's rights under this Agreement and will not in any way affect the validity of the whole or any part of this Agreement or prejudice such party's right to take subsequent action. This Agreement may not be amended, except by a writing signed by both parties. 15.3 Severability. If any term, condition, or provision of this Agreement is found to be invalid, unlawful or unenforceable to any extent, the parties shall endeavor in good faith to agree to such amendments that will preserve, as far as possible, the intentions expressed in this Agreement. If the parties fail to agree on such an amendment, such invalid term, condition or provision will be severed from the remaining terms, conditions and provisions, which will continue to be valid and enforceable to the fullest extent permitted by law. 15.4 Entire Agreement. This Agreement (including the Attachments and any addenda hereto signed by both parties) contains the entire agreement of the parties with respect to the subject matter of this Agreement and supersedes all previous communications, representations, understandings and agreements, either oral or written, between the parties with respect to said subject matter, except as provided in Section 1.3 with respect to the definition of "Confidential Information." 15.5 No Conflicting Provisions. No terms, provisions or conditions of any purchase order, acknowledgment or other business form that ABT/Nordic may use in connection with the acquisition or licensing of the Software will have any effect on the rights, duties or obligations of the parties under, or otherwise modify, this Agreement, regardless of any failure of ABT to object to such terms, provisions or conditions. 15.6 Consent. Unless expressly provided otherwise in this Agreement, any prior consent of ABT that is required before ABT/Nordic may take an action may be granted or withheld in ABT's sole and absolute discretion. 15.7 Export Restrictions. ABT/Nordic understands that ABT is subject to regulation by agencies of the U.S. government, including, but not limited to, the U.S. Department of Commerce, which prohibit export or diversion of certain technical products to certain countries. ABT/Nordic warrants that it will comply in all respects with the Export Administration Regulations and all other export or re-export restrictions applicable to the technology and Documentation licensed hereunder. Further, ABT/Nordic shall cooperate as requested by ABT to ensure compliance with any export restrictions or licenses relating to the Software, including the designation of a structurally independent contact regarding each installation of the Software. 15.8 Press Releases. Neither party shall disclose to any third party the terms and conditions of this Agreement, except as required by law, or by rules of a securities exchange in which either party's, or 19 20 its parent company's, securities are traded, or to legal or business advisors with a need to know acting under a duty of confidentiality. Notwithstanding the above, at a mutually agreed time, as soon as possible after the Effective Date, ABT and ABT/Nordic shall issue a joint press release announcing the relationship contemplated by this Agreement. 15.9 Rights and Remedies. No exercise or enforcement by either party of any right or remedy under this Agreement will preclude the enforcement by such party of any other right or remedy under this Agreement or that such party is entitled by law to enforce. 15.10 Counterparts. This Agreement may be executed in counterparts, each of which so executed will be deemed to be an original and such counterparts together will constitute one and the same agreement. 15.11 Governing Law. This Agreement will be interpreted and construed in accordance with the laws of the State of California and the United States of America, without regard to conflict of law principles and excluding the 1980 United Nations Convention on Contracts for the International Sale of Goods. Any dispute arising out of this Agreement will be subject to the exclusive venue of the state and federal courts in California. 15.12 Language. This Agreement is in the English language only, which language shall be controlling in all respects, and all versions hereof in any other language shall not be binding on the parties hereto. All communications and notices to be made or given pursuant to this Agreement shall be in the English language. 20 21 IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by duly authorized representatives on the dates set forth below. autobytel.com inc.("ABT") Auto-By-Tel AB ("ABT/Nordic") By: /s/ ROBERT S. GRIMES By: /s/ JOHAN ROHSS LARS ANDERSSON --------------------------------- ------------------------------------ Name: Robert S. Grimes Name: Johan Rohss Lars Andersson ------------------------------- ---------------------------------- Title: Executive V.P. Title: Chairman Director ------------------------------ --------------------------------- Date: August 7, 1998 Date: August 7, 1998 ------------------------------- ---------------------------------- Address: 18872 MacArthur Blvd. Address: Haradsvagen 255 ---------------------------- ------------------------------- Irvine, CA 92612 14172 Huddinge Sweden - ------------------------------------- ----------------------------------------
21 22 ATTACHMENT A SOFTWARE: The Software will include all core business applications, including:
APPLICATION CATEGORY NAME DESCRIPTION - -------------------------------------------------------------------------------- Consumer Affinity Restricted view of Consumer Web Interface Product Programs customized for Affinity Partners. Users are limited to the web pages (functionality) specified by Affinity Partner. - -------------------------------------------------------------------------------- Finance Used by End-User Customers to apply for credit to buy/lease an automobile. - -------------------------------------------------------------------------------- Information Used to provide New/Used Car Information to Provider customers via links to various information Links providers - -------------------------------------------------------------------------------- Insurance Hyperlink to Insurance Site(s). - -------------------------------------------------------------------------------- Mobalist Used by End-User Customers to sign-up for and monitor Mobalist Rewards account. - -------------------------------------------------------------------------------- New Car Request Used by End-User Customers to gather new car Process information and request a price quote. (FasTrak) - -------------------------------------------------------------------------------- Online Customer Used by End-Users to check on status of Purchase Service Center and Finance Requests. - -------------------------------------------------------------------------------- Quality Allow End-Users to answer QA survey questions. Assurance Survey(QA) - -------------------------------------------------------------------------------- Used Car Used by End-User Customers to gather used car Request Process information, review dealer used car inventories, (FasTrak) and make a used car purchase request. - -------------------------------------------------------------------------------- Dealer Dealer Used by ABT Contracted Dealers to manage purchase Interface Communications requests and customer contact information; System (DRT) Maintain Used Car Inventory information for Dealership(s). - -------------------------------------------------------------------------------- Dealer Contract Used by ABT Contract Administration department Management Management to manage contracts with subscribers including (CM) New Car (Postal), Used Car, Finance and DRT. - -------------------------------------------------------------------------------- Distribution Used by ABT Dealer Support Services (DSS) to [Dealer] set-up and maintain relationship with Dealers. Management (RD) - -------------------------------------------------------------------------------- QA Survey (QA) Used by ABT DSS/Training to monitor customer satisfaction and closure rates; Dealer Performance. - -------------------------------------------------------------------------------- Financial Car Match vehicle make, model, series in ABT_PROD Processing matching database to vehicles in GE Capital database in order to determine residual values. - -------------------------------------------------------------------------------- Credit Union Faxes consumer purchase requests to Credit Unions Faxing for processing. - --------------------------------------------------------------------------------
22 23
(CU FX) - ----------------------------------------------------------------------------------------------------------------------------------- Customer Financial Fax Faxes credit decisions to dealers for finance requests submitted by consumers. to Dealer (FinFaxDealer) - ----------------------------------------------------------------------------------------------------------------------------------- Financial Status Provides system operations with access to processing statistics, error logging Monitor and recovery procedures for financial request processing system. (FinancialStatus) - ----------------------------------------------------------------------------------------------------------------------------------- Finance/Customer E-mails credit decisions/information from financial institutions to consumers. Email (FML2) - ----------------------------------------------------------------------------------------------------------------------------------- Bank Matcher, Bank Sends financial requests to and receives credit decision from financial Transfer, Bank Watcher institutions. (FSMFrame) - ----------------------------------------------------------------------------------------------------------------------------------- Information Provider Interface Postal Code Updates Import Postal Code related data from Postal Service, GDT. Import Postal Code Centroids (Longitude, Latitude of center of zip codes). - ----------------------------------------------------------------------------------------------------------------------------------- Used Car Import/Export Import/Export Used Car data to/from information providers. - ----------------------------------------------------------------------------------------------------------------------------------- VIN Decoding Import Import Vintek data. Vintek provides the information required to Decode VINs. - ----------------------------------------------------------------------------------------------------------------------------------- New/Used Car Import Intellichoice data including make, model, series, options and pricing Information Import information. - ----------------------------------------------------------------------------------------------------------------------------------- MIS Financial Reports Reporting on Financial Requests. Reports are summarized by various (Financial) dimensions including: Time - day, week, month, quarter, year Type - Lease, Retail - ----------------------------------------------------------------------------------------------------------------------------------- Intranet Basic management reporting, system operation monitoring, data maintenance and company/employee information. - ----------------------------------------------------------------------------------------------------------------------------------- MIS/Billing Interface Used by ABT internal staff to pass billing data from ABT Core system to Dynamics (ABT's Internal Financial Accounting Application). - ----------------------------------------------------------------------------------------------------------------------------------- QA Reports (QA) Reporting on Customer Satisfaction, Closure rates Time - day, week, month, quarter, year Geography - region, state, dealer Vehicle - make, model, series PR Type - New car or Used Car Contract - Paying, Non-Paying Dealers - -----------------------------------------------------------------------------------------------------------------------------------
24 [*] Confidential Treatment Requested
- --------------------------------------------------------------------------------------------------------------------------------- Standard Reports Reporting on Purchase Requests. Reports are summarized by various dimensions including: (Standard) Time - day, week, month, quarter, year Geography - region, state, dealer Vehicle - make, model, series PR Type - New car or Used Car Contract - Paying, Non-Paying Dealers - --------------------------------------------------------------------------------------------------------------------------------- Various Base Network Much of the core functionality of the systems described above is encapsulated in stored Architecture & procedures/data tables in the following SQL databases: ABT_PROD, ABT_FINANCE, ABT_INTERFACE. Supporting Systems - ---------------------------------------------------------------------------------------------------------------------------------
MINIMUM ANNUAL LICENSE FEE: The annual Minimum Annual License Fee will be [*] payable in four (4) Fiscal Quarterly installments of [*]. ANNUAL MAINTENANCE FEE: The annual Maintenance Fee will be [*]. 25 ATTACHMENT B GLOBAL BRANDING PROTOCOL: INTRODUCTION TO GUIDELINES, PRACTICES AND PROCEDURES Introduction The Auto-By-Tel Corporation has recently changed its name to autobytel.com inc. and is currently in the process of conducting brand positioning research, which will be complete in September of 1995. Upon completion of this research, autobytel.com inc. will issue an update to it's global brand standards protocol (and look book), containing all of the new brand identity materials. In the interim the old book is attached as an example of its contents as well as this introductory document which is designed to address some of the more immediate needs. New Logo Our new logo embodies some of our initial learning. We have chosen a mark symbolizing a road, which signifies a destination that leads to Autobytel.com as opposed to an automobile icon, which is more predictable. This mark is highly differentiated from other companies in the category and positions autobytel.com inc. as the leader. The new logo is reliable, innovative, trustworthy, contemporary yet timeless. The idea of a road leading to a destination is empowering for the consumer, reminding them that they are in the driver's seat when buying through autobytel.com inc. The conveying of the concept of a destination will create an association with the brand over time. The logo will be adapted to each country by replacing the domain type that is relevant to that country; for example, autobytel.se, autobytel.ca, autobytel.uk, etc. Also the selling line can be inserted immediately in the lower left. Full treatments of the logo will be reviewed when the new look book is issued. Purpose and Function of Global Standards The purpose of the global brand standards is to clearly define and articulate the brand's core values and ensure that the brand's positioning remains consistent and properly communicated throughout all forms of marketing communication across the globe. Since a brand is a promise of an experience, it is important that it be comprised of the intangible as well as the tangible values in order to best create an enduring relationship between Autobytel.com and it's stakeholder target constituencies - shareholders, consumers and dealers alike. What Does the Standard Address 26 The image below graphically illustrates the intangible components (on the right), which the global brand protocol is designed to address. [CHART] Purpose and Intent of autobytel.com inc.'s "Global Brand Protocol and Look Book" The purpose of the global brand protocol and "Look Book" when complete, will be to aid Autobytel.com, all it's companies, subsidiaries, partners, and licensees to properly administer and steward autobytel.com inc.'s intangible assets - the brand. It is not designed to police licensees: but rather to ensure that the tenants of strong branding be observed for Autobytel.com so that all collateral, business, advertising, and web site creative and content guarantee quality and consistency of message. This will ensure that the net impression left in the mind of target audience is relevant, differentiated, and enduring. Differentiating 27 Autobytel.com by experience (emotional bond) with the customer, versus just the key rational benefits (e.g. low-cost, haggle-hassle-free, etc.) will ensure the success of Autobytel.com. Role of Autobytel.com Brand Management It is the role of Autobytel.com Corporate Marketing to clearly articulate and communicate the brand's core value, identity, positioning, and Global Brand Protocol to all autobytel.com inc. companies, subsidiaries, divisions, partners and licensees. Role of the Autobytel.com Global Brand Agency It is the role of the global brand agency to develop, create, recommend and steward autobytel.com inc.'s brand positioning so that it conforms to autobytel.com inc.'s brand values. They have the responsibility of managing the Autobytel.com brand communications on a global scale while recognizing local needs. In this role the agency will steward the brand with regards to the quality and consistency of the brand's global advertising. Role of the Local Agency It is the role of the local country agency to create successful advertising that conforms to autobytel.com inc.'s brand positioning. A LOOK AT THE REQUIREMENTS, PROCESS AND INTERACTION BETWEEN AUTOBYTEL.COM INC.'S GLOBAL BRAND AGENCY AND THE LOCAL COUNTRY'S AGENCY AS IT RELATES TO ADVERTISING Generally speaking, autobytel.com inc.'s advertising (visual and copy content) must be in synergy with the brand's core values and comply with the brand's positioning strategy as will be stated in the "Global Brand Protocol & Look Book" (after the brand positioning project is completed in September). While this book is dynamic and periodic updates should be expected, it is our intent to develop an enduring brand positioning, which should remain in effect over a number of years. All decisions regarding the appropriateness of Autobytel.com advertising will be measured against this benchmark. Some general requirements and procedures which you should expect to see outlined in the Global Brand Protocol about Autobytel.com advertising follows: Creative All creative formats and units must: 28 Feature the appropriate upper and lower case treatment of the company name (e.g. autobytel.com inc., and Autobytel.com, etc.) Feature the autobytel.com inc. logo Feature the Autobytel.com tag-line (which will be translated by the global brand agency into the appropriate language for each county in a way that is mutually agreeable so that it mutually satisfies the requirements of both the brand and country's cultural environment.) Feature the appropriate Autobytel.com URL (Uniform Resource Locator) for the country involved (e.g. autobytel.com, autobytel.ca, autobytel.uk, etc.) reflect the highest level of moral and ethical standards within the community to which the commercial's message is to be conveyed reflect the brand's recommended look and feel (e.g. color palettes, typefaces, imagery, etc.) of which examples will be provided in the look book. Autobytel.com strongly urges all licensees to use the network affiliate of the global brand agency. If for any reason, the licensee utilizes an agency that is not part of the global brand agency's network, the following will apply. Creative Procedure Each licensee does not need to submit creative concepts and executions to Autobytel.com for prior approval. But it is required that each country submit copies of all creative materials to autobytel.com inc.'s global brand agency at least quarterly. While it is not autobytel.com inc.'s intention to police creative, should the marketing materials not conform to the brand's positioning, Autobytel.com reserves the right to advise the country to discontinue the use of any creative that does not properly comply. In the unlikely event that this should occur, the country will be required to discontinue use of the materials within 45 days. Autobytel.com strongly encourages the country's local agency to implement an on-going dialogue with the global brand agency (a contact name will be issued). The frequency and format for this communication can be mutually agreeable to suit the needs and requirements of both parties, and may expand and contract based upon the need of each party. Media Procedure Each country can determine the specific marketing communications mix (e.g. PR, Advertising, Promotion, etc.) selection of media (e.g. Internet, TV, Radio, etc), and selection of specific media vehicles (e.g. stations, publications, etc). that is most appropriate for it's culture and environment. autobytel.com inc. may volunteer from time to time, the sharing of information about media that has been particularly successful in other countries across the globe. We will 29 encourage that all partners and licensees share information about what is/isn't working for the benefit of aggregated learning. However, it will be required that information about marketing communication mix and media plans be shared and submitted to Autobytel.com Corporation on at least a bi-annual basis. This may be submitted either in a written or digital format. Fees for Global Brand Management (For countries not using the local affiliate of autobytel.com inc.'s global agency) autobytel.com inc.'s global brand agency will be appropriately organized to steward the brand, bring strategic value to autobytel.com inc. and its licensees, and to facilitate communication among the parties. If the licensee does not use a local agency that is an affiliate of the global agency, autobytel.com inc. will charge the licensee for any expenses associated with stewarding the brand. ADVERTISING OPPORTUNITY ON AUTOBYTEL.COM INC.'S WEBSITE autobytel.com inc. will offer its licensees an opportunity to participate in its global web site advertising initiative. autobytel.com inc. plans to offer advertising on its U.S. site, and on each country's local site if the country chooses to participate. If the licensee participates, autobytel.com inc. will require to country's site to allocate 50% of the total pages serves and inventory. In return, autobytel.com inc. will offer licensees the opportunity to share in 50% of the revenues generated after expenses through this sale. If the licensee is interested, additional details will be provided after this program is finalized. In the interim, here are some examples of the guidelines: Site must be constructed to accommodate advertising Screen real estate positioning must conform to autobytel.com inc.'s global advertising standards (currently this is a top right position and 3 IAB unit sizes will be utilized 50% of ad inventory (equal to approximately 50% of total pages served) will be allocated to this effort. Licensee has 6 months after launch of site to have prepared for advertising In Closing, please refer to the attached Global Brand Protocol and Look Book, which is currently in development. A number of sections have been added since the last submission. 30 autobytel.com inc.'s new U.S. Web site, launched 07/31/98 [PICTURE OF WEBSITE OF AUTOBYTEL.COM] Note: Upon completion of the brand positioning, the new selling line will appear below in the top ledge frame of the site. 31 ATTACHMENT C ESCALATION PROCEDURES ABT - International Technical Support Escalation Procedure There will be one named primary technical support contact and one named backup support contact. All requests for technical support must come from the primary support contact. In the event the primary contact is not available, the backup contact may submit the technical support request. The primary support contact will be _______________________________ and the backup support contract will be _______________________________. Changes to the primary and/or backup support contacts must be received by ABT in writing 1 business day prior to them being effective. All local Technical Support escalation will occur prior to any escalation to Auto-By-Tel - International Technical Support team by either the primary or backup support contact. All infrastructure (Hardware/Network/Operating System/SQL Server/IIS Server) errors must be corrected prior to escalation. All Technical Support calls related to remaining APPLICATION ERRORS or SYSTEM ERRORS with severity level of ERROR or HIGHER should be routed through the ABT - Corporate NTS Support person at 1-949-xxx-xxxx. Response time will be as specified in table below. All Technical Support calls that related to errors with severity level of WARNING or APPLICATION PROBLEMS (as defined below) should be referred to the ABT - - International Technology Support Coordinator at l-949-xxx-xxxx. The quoted response times relate to the time required to have a qualified technical support person contact the person who made the technical support request. Depending on the severity of the problem, commercially reasonable efforts will be made to resolve the problem as soon as possible within the guidelines under RESPONSE LEVEL.
- -------------------------------------------------------------------------------- CATEGORY DESCRIPTION - -------------------------------------------------------------------------------- Application Problem Problem related to the use of a specific application program or module. The program does not appear to be functioning correctly, however, no error messages have been received. - -------------------------------------------------------------------------------- Application Error An application program or module has issued an error message. The error was not issued by the underlying technology, (i.e. the network, operating system, database management system server or internet server. - -------------------------------------------------------------------------------- System Error An error message has been received when executing an application or web page. The error message originated from the underlying technology, not the application itself. - --------------------------------------------------------------------------------
32
- ---------------------------------------------------------------------------------------------------------------- SEVERITY DESCRIPTION RESPONSE TIME RESPONSE LEVEL - ---------------------------------------------------------------------------------------------------------------- WARNING Provides information or warning message only. 72 hours Effort during Does not impact the overall operation of the Normal Bus. system. Hours - ---------------------------------------------------------------------------------------------------------------- ERROR Error interrupts processing of a single 12 hours (Next Effort during 7 application or module. System operation Business Day) days/week 8am- continues to support primary business functions. 5pm, until resolved - ---------------------------------------------------------------------------------------------------------------- SEVERE ERROR Error interrupts processing of multiple and/or 4 hours Effort 7 primary business applications. Primary business days/week 5am operations are impacted. - 9 pm, until resolved - ---------------------------------------------------------------------------------------------------------------- FATAL ERROR Error causes system to become unavailable. All 1 hour Effort 7 x 24, business processing is aborted. until resolved - ----------------------------------------------------------------------------------------------------------------
Applications Errors in the following applications will always be classified as at least "Severe Errors": Finance, New Car Request, Online Customer Service Center, Used Car Request, DRT, and Financial Status Monitor. 33 ATTACHMENT D SERVICES AGREEMENT AGREEMENT FOR CONSULTING BY AUTO-BY-TEL This Agreement for Consulting ("Agreement") is made and entered into as of the _____ day of ________, 199__ by and between autobytel.com, a Delaware corporation with offices at _______________ ("Consultant"), and Auto-By-Tel AB, a ____________ corporation with offices at _________________("Company"). The Company desires to retain Consultant as an independent contractor to perform consulting services for the Company and Consultant is willing to perform such services on terms set forth more fully below. In consideration of the mutual promises contained herein, the parties agree as follows: 1. SERVICES. Consultant agrees to perform for the Company the services described in Exhibit A ("Services") on the terms and conditions set forth therein. 2. COMPENSATION (a) Services. Company shall pay Consultant for performing the Services as shown in Exhibit A. (b) Expenses. The Company shall also reimburse Consultant for the reasonable actual travel and living expenses of its personnel engaged in the performance of Services at locations other than Consultant facilities, together with other reasonable out-of-pocket expenses incurred in connection with performance of the Services. Consultant shall adhere to any travel policy reasonably promulgated by Company, provided that Consultant may incur expenses up to a total of _____ dollars without Company's prior approval. (c) Payments. Consultant shall invoice Company for all amounts on or after the due date. Payment terms shall be net _____ days. Any amounts due Consultant under this Agreement not received by the date due shall be subject to a service charge of one and one-half percent (1.5%) per month, or the maximum charge permitted by law, whichever is less. 3. CONFIDENTIALITY (a) "Confidential Information" means any information disclosed by either party to the other party, either directly or indirectly, in writing, orally or by inspection of tangible objects (including without limitation documents, prototypes, samples, plant and equipment), which is designated as "Confidential," "Proprietary" or some similar designation. Information communicated orally shall be considered Confidential Information if such information is confirmed in writing as being Confidential Information within a reasonable time after the initial disclosure. Confidential Information may also include information disclosed to a disclosing party by third parties. Confidential Information shall not, however, include any 34 information which (i) was publicly known and made generally available in the public domain prior to the time of disclosure by the disclosing party; (ii) becomes publicly known and made generally available after disclosure by the disclosing party to the receiving party through no action or inaction of the receiving party; (iii) is already in the possession of the receiving party at the time of disclosure by the disclosing party as shown by the receiving party's files and records immediately prior to the time of disclosure; (iv) is obtained by the receiving party from a third party without a breach of such third party's obligations of confidentiality; (v) is independently developed by the receiving party without use of or reference to the disclosing party's Confidential Information, as shown by documents and other competent evidence in the receiving party's possession; or (vi) is required by law to be disclosed by the receiving party, provided that the receiving party gives the disclosing party prompt written notice of such requirement prior to such disclosure and assistance in obtaining an order protecting the information from public disclosure. (b) Non-use and Non-disclosure. Each party agrees not to use any Confidential Information of the other party for any purpose except to perform its obligations or exercise its rights under this Agreement. Each party agrees not to disclose any Confidential Information of the other party to third parties or to such party's employees, except to those employees of the receiving party who are required to have the information in order perform such party's obligations under this Agreement. Neither party shall reverse engineer, disassemble or decompile any prototypes, software or other tangible objects which embody the other party's Confidential Information and which are provided to the party hereunder. (c) Maintenance of Confidentiality. Each party agrees that it shall take reasonable measures to protect the secrecy of and avoid disclosure and unauthorized use of the Confidential Information of the other party. Without limiting the foregoing, each party shall take at least those measures that it takes to protect its own most highly confidential information and shall ensure that its employees who have access to Confidential Information of the other party have signed a non-use and non-disclosure agreement in content similar to the provisions hereof, prior to any disclosure of Confidential Information to such employees. Neither party shall make any copies of the Confidential Information of the other party unless the same are previously approved in writing by the other party. Each party shall reproduce the other party's proprietary rights notices on any such approved copies, in the same manner in which such notices were set forth in or on the original. 4. OWNERSHIP. The work product resulting from the Services shall consist of, and shall operate in conjunction with, multiple elements of intellectual property, as set forth in Exhibit B. The parties' respective rights with respect to such intellectual property shall be as set forth below. For purposes of this Agreement, the term "ownership" shall refer to ownership of all intellectual property rights including, but not limited to, all patent, copyright, trade secret and trademark rights, as applicable, with respect to the subject intellectual property: (a) Company Materials. For all materials designated as "Company Materials" in Exhibit B, Consultant agrees that such materials are the sole property of the Company, and shall be considered "works made for hire" as that term is defined in the United States Copyright Act. Consultant further agrees to assign 35 (or cause to be assigned) and does hereby assign fully to the Company all such works and the intellectual property rights relating thereto. (b) Third Party Materials. For all materials designated as "Third Party Materials" on Exhibit B, the parties hereby agree that such materials shall be necessary for Company to use the Company Materials or Consultant Materials, and Company shall be solely responsible for obtaining necessary licenses to the Third Party Materials. (c) Pre-existing Materials and Consultant Materials. For all materials designated as "Pre-existing Materials" or "Consultant Materials" in Exhibit B, Company agrees that such materials are the sole property of the Consultant. Consultant hereby grants to Company a worldwide, perpetual, royalty-free license to use the Consultant Materials, solely for its own internal purposes. No other grants of licenses or rights to Company shall be implied from the provisions stated in this Agreement. Company shall not obliterate or remove and will reproduce Consultant's intellectual property notices contained in the Consultant Materials or Pre-existing Materials. Company shall not reverse engineer, decompile, or otherwise attempt to derive source code from any portions of the Consultant Materials or Pre-existing Materials delivered in object code form. (d) Further Assurances. Each party agrees to execute any additional documents deemed reasonably necessary to effect and evidence the other party's rights with respect to the intellectual property elements set forth above. 5. REPORTS. Consultant agrees that it will from time to time during the term of this Agreement or any extension thereof keep the Company advised as to Consultant's progress in performing the Services hereunder and that Consultant will, as requested by the Company, prepare written reports with respect thereto. It is understood that the time required in the preparation of such written reports shall be considered time devoted to the performance of Consultant's Services. 6. TERM AND TERMINATION (a) Term. This Agreement will commence on the date first written above and will continue until final completion of the Services or termination as provided below. (b) Termination. The Company may terminate this Agreement at any time upon giving ten (10) days' prior written notice thereof to Consultant, provided, however, that Company shall pay Consultant for any Services performed up to the effective date of termination. Either party may terminate this Agreement upon thirty (30) days' notice of any uncured material breach of this Agreement by the other party. (c) Survival. Upon such termination all rights and duties of the parties toward each other shall cease except Sections 3, 4, 8, 9, 10, 11, 12, 13, 14, and 15 shall survive termination of this Agreement. 7. ASSIGNMENT. Neither this Agreement nor any right hereunder or interest herein may be assigned or transferred by either party without the express written consent of the other. 36 8. INDEPENDENT CONTRACTOR. Nothing in this Agreement shall in any way be construed to constitute Consultant as an agent, employee or representative of the Company, but Consultant shall perform the Services hereunder as an independent contractor. 9. ARBITRATION. The parties agree that any dispute or controversy arising out of or relating to any interpretation, construction, performance or breach of this Agreement, shall be settled by arbitration to be held in Santa Clara or San Mateo County, California, in accordance with the rules then in effect of the American Arbitration Association. The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. Judgement may be entered on the arbitrator's decision in any court of competent jurisdiction. Company and Consultant shall each pay one-half of the costs and expenses of such arbitration, and each shall separately pay its respective counsel fees and expenses. Notwithstanding the above, the parties may seek injunctive relief in any court of competent jurisdiction for a breach of Sections 3 or 4 of this Agreement. 10. GOVERNING LAW. This Agreement shall be governed by the laws of the State of California as applied to agreements entered into and performed within California by residents of that state. Each party hereby expressly consents to the nonexclusive personal jurisdiction and venue of the state and federal courts located in the federal Northern District of California for any lawsuit filed there against me by the Company arising from or relating to this Agreement. 11. NON-SOLICITATION. Company acknowledges and agrees that the employees and consultants of Consultant who perform the Services are a valuable asset to Consultant and are difficult to replace. Accordingly, Company agrees that, for the term of this Agreement and for a period of _________ months thereafter, it will not offer employment as an employee, independent contractor, or consultant to any Consultant employee or consultant. In the event Company breaches the provisions of this Section 11, the parties agree that it would be difficult to determine the amount of actual damages to Consultant that would result from such breach. The parties further agree that in the event Company breaches the provisions of this Section 11, Company shall pay Consultant liquidated damages of $__________ for each such breach, which is the parties' good faith estimate of the amount of damages to Consultant from such breach. 12. WARRANTY DISCLAIMER. CONSULTANT DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING ANY AND ALL IMPLIED WARRANTIES OF TITLE MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND NON-INFRINGEMENT. 13. LIMITATION OF REMEDIES AND DAMAGES THE LIABILITY OF CONSULTANT ARISING HEREUNDER SHALL BE LIMITED TO FEES PAID BY COMPANY HEREUNDER. CONSULTANT SHALL NOT BE LIABLE FOR ANY CONSEQUENTIAL, INCIDENTAL, OR INDIRECT DAMAGES, INCLUDING WITHOUT LIMITATION DAMAGES FOR LOSS OF BUSINESS PROFITS AND/OR BUSINESS INTERRUPTION, WHETHER FORESEEABLE OR NOT, AND WHETHER ARISING IN CONTRACT, TORT, OR NEGLIGENCE, EVEN IF A REPRESENTATIVE OF CONSULTANT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THESE 37 LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. 14. ENTIRE AGREEMENT. This Agreement and the Exhibits hereto form the entire agreement of the parties and supersede any prior agreements between them with respect to the subject matter hereof. 15. WAIVER. Waiver of any term or provision of this Agreement or forbearance to enforce any term or provision by either party shall not constitute a waiver as to any subsequent breach or failure of the same term or provision or a waiver of any other term or provision of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. Company: Consultant: By: ______________________________ By: _______________________________ Print Name:_______________________ Print Name:________________________ Title:____________________________ Title:_____________________________ 38 EXHIBIT A Services to be performed by Consultant: Compensation of Consultant: (a) Rate of pay: ___________________ per ___________________________ (b) Total payment limitation: ______________________________________ (c) Advance payment: _______________________________________________ (d) Expenses authorized for reimbursement by the Company: (e) Other: _________________________________________________________ (f) Expected duration of project: __________________________________ Company: Consultant: By: ______________________________ By: _______________________________ Print Name:_______________________ Print Name:________________________ Title:____________________________ Title:_____________________________ 39 EXHIBIT B COMPANY MATERIALS CONSULTANT MATERIALS THIRD PARTY MATERIALS PRE-EXISTING MATERIALS 40 ATTACHMENT E INVESTMENT RIGHTS AGREEMENT 41 [*] Confidential Treatment Requested INVESTMENT RIGHTS AGREEMENT This INVESTMENT RIGHTS AGREEMENT (the "Investment Rights Agreement") is entered into as of August 7, 1998 (the "Effective Date") by and between autobytel.com inc., a Delaware corporation with offices at 18872 MacArthur Blvd., Irvine, California 92612 ("ABT"), Bilia AB, a Swedish corporation with offices at Box 9003, 40091 Goteborg, Sweden ("Bilia"), and Auto-By-Tel AB, a Swedish corporation with offices at Haradsvagen 255, 14172 Huddinge, Sweden ("ABT/Nordic"), and describes the terms and conditions pursuant to which ABT will have the right to make certain investments in ABT/Nordic and the associated rights that ABT will obtain in connection with such investment. BACKGROUND WHEREAS, ABT and ABT/Nordic have entered into a License and Service Agreement of even date herewith (the "License Agreement"), providing for the grant by ABT to ABT/Nordic of certain rights to use ABT proprietary software, technology, and business procedures in Finland, Norway, Sweden and Denmark. WHEREAS, ABT desires to have the right to invest in ABT/Nordic at one or more times in the future. NOW, THEREFORE, in consideration of the mutual promises and upon the terms and conditions set forth below, the parties agree as follows: 1. Definitions. All capitalized terms not defined herein shall have the meaning specified in the License Agreement. 2. Purchase of Debenture. Simultaneously with the execution of this Agreement, ABT/Nordic is issuing to ABT, at par, a debenture (the "Debenture") in the principal amount of SEK 7,000, which grants ABT optional rights to subscribe for new shares in ABT/Nordic (the "Option"). The Debenture shall not bear interest. It shall mature on December 31, 1998. 3. Terms of the Option. The Option shall survive the maturity and repayment of the Debenture. The Option shall entitle ABT to subscribe for what, at the time the Option is exercised (or, in the case of multiple exercises, the last exercise), and giving effect to the issuance of shares upon exercise of the Option, will be 20% of the outstanding voting shares of ABT/Nordic on the following terms: (a) ABT may exercise the Option at any time during the term of the License Agreement, in one or more installments, as to all or any portion of the shares that are subject to the Option when it is exercised, provided that no such installment shall be less than the lesser of (i) 5% of the outstanding voting shares of ABT/Nordic, or (ii) the entire remaining amount of ABT/Nordic shares which ABT may purchase through exercise of the Option. 42 (b) The Option shall be exercised by written notice given to ABT/Nordic during the term of the License Agreement. Such notice shall specify the number of shares for which the Option is being exercised and a date and a time during normal business hours in Goteborg, Sweden (the "Subscription Time") for the consummation of ABT's purchase of ABT/Nordic shares through exercise of the Option. The specified Subscription Time shall not be later than 3:00 P.M. Goteborg time on the 30th day after the day on which the notice of exercise of the Option is given. (c) The class, series and type of shares issuable upon each exercise of the Option shall be (i) if the Option is exercised at a time when shares of ABT/Nordic are not quoted on a securities exchange or in another organized securities market, the class, series and type of voting shares then most recently issued to either (at ABT's option) Bilia or one or more Third Party Investors (as defined below) as part of the investment by such persons in ABT/Nordic, in one or more related transactions, of at least US$300,000 in the aggregate (the "Then Most Recent Financing"), or (ii) if the Option is exercised at a time when shares of ABT/Nordic are quoted on a securities exchange or in another organized securities market, the class, series and type of shares so quoted. (d) The exercise price to be paid for the shares issuable upon each exercise of the Option shall be (i) if the Option is exercised at a time when securities of ABT/Nordic are not quoted on a securities exchange or in another organized securities market, the price at which shares of such class, series and type were issued in the Then Most Recent Financing, or (ii) if the Option is exercised at a time when shares of ABT/Nordic are quoted on a securities exchange or in another organized securities market, an amount per share equal to the lesser of (A) the price at which shares of ABT/Nordic were initially sold to the public plus an amount equal to interest on that price at the rate of 10% per annum, compounded quarterly from the date on which the shares were initially sold to the public, or (B) 90% of the average of the last sale price of the ABT/Nordic stock on each of the 20 trading days before the day on which the notice of exercise of the Option is given, as reported on the principal stock exchange, or in the other principal market, in which ABT/Nordic shares are traded. (e) At the Subscription Time specified in the notice of exercise of the Option, ABT/Nordic shall deliver to ABT certificates representing the shares ABT is purchasing through exercise of the Option, and ABT shall pay the purchase price for such shares to ABT/Nordic by wire transfer of funds which are immediately available in the place of payment, or by another means agreed to by ABT and ABT/Nordic. (f) If the Option is exercised at a time when shares of ABT/Nordic are not quoted on a securities exchange or in another organized securities market, then, at the time of exercise, ABT and ABT/Nordic shall negotiate in good faith and enter into an agreement providing ABT the right to require ABT/Nordic to take all steps required to enable ABT to sell its ABT/Nordic shares without restriction in any public market in which ABT/Nordic shares are regularly traded, in compliance with applicable securities laws (including, if applicable, terms for exchanging shares held by ABT on an equitable basis for shares of the type which subsequently become regularly traded in a public market). (g) If the Option is exercised at a time when shares of ABT/Nordic are quoted on a securities exchange or in another organized securities market, then ABT/Nordic shall take all steps required to give ABT the ability, immediately following such exercise, to sell its ABT/Nordic shares -2- 43 [*] Confidential Treatment Requested without restriction in any public market in which ABT/Nordic shares are regularly traded, in compliance with applicable securities laws. (h) ABT agrees not to sell its ABT/Nordic shares, without the consent of Bilia, prior to the later of (i) three years after the date of this Agreement and (ii) two years from the date of purchase of such shares. 4. Security Issuances by ABT/Nordic. (a) ABT/Nordic shall not issue any equity securities (or securities convertible into or exercisable for equity securities) to any person other than Bilia or an affiliate of Bilia (such other type of person being referred to as a "Third Party Investor"), other than in a public offering, unless (i) at least 15 days before such securities are expected to be issued, ABT/Nordic notifies ABT of the proposed issuance, including a description of the securities to be issued, a description of the price and terms upon which the securities are proposed to be issued, the identity of each Third Party Investor to whom the securities are proposed to be issued, and any other reasonably relevant details regarding the proposed transaction, and (ii) ABT does not, during the 15 days after ABT/Nordic notifies ABT about the proposed issuance, reasonably object to the issuance. An objection to the issuance of securities to a firm that operates a competing Internet-based system for marketing automobiles or trucks, or to an affiliate of such a firm. will under no circumstances be unreasonable. An objection to issuance of securities based upon the identity of the Third Party Investor will not be reasonable if the Third Party Investor is, or controls, a dealer who will participate in the Local Business. An objection to an issuance of securities will be reasonable if it (i) would reduce Bilia's ownership in ABT/Nordic to below 3 1.25% (or to below 25% if ABT has exercised the Option in full, or a pro-rated percentage between 31.25% and 25% if ABT has exercised the option in part), or (ii) would cause anyone other than Bilia to have directly or indirectly (other than as a shareholder of Bilia) a greater percentage ownership in ABT/Nordic than Bilia's. (b) Each Third Party Investor to whom ABT/Nordic issues securities, other than in a public offering, must agree (i) not to sell those securities for at least three years from the date of acquisition of such securities and (ii) that if the Third Party Investor desires to sell, in a single transaction or a series of related transactions, securities which constitute more than 5% of the outstanding securities of any class of stock of ABT/Nordic, (x) such Third Party Investor shall give each of Bilia and ABT at least 10 days prior written notice of the sale and shall consider any purchase proposals which Bilia or ABT may make during that 10 day period, and (y) if neither Bilia nor ABT makes a purchase proposal during such 10 day period, or if either or both of them makes a purchase proposal but the Third Party Investor rejects that purchase proposal, the Third Party Investor may sell the securities described in the notice at any time within 120 days after the end of the 10 day period. Any such sale permitted by the foregoing sentence shall be (A) if neither Bilia nor ABT made a purchase proposal, on any terms that the Third Party Investor is willing to accept, or (B) if Bilia or ABT made a purchase proposal which the Third Party Investor did not accept, on terms which are no less favorable to the Third Party Investor than the terms of the proposal by Bilia or ABT which was most favorable to the Third Party Investor. (c) ABT/Nordic may issue securities in one or more public offerings, without prior notice to or consent from ABT, provided that (i) the securities sold in the initial public offering do not -3- 44 [*] Confidential Treatment Requested represent more than 25% of the voting equity securities of ABT/Nordic which will be outstanding immediately after the public offering, and (ii) the public offering will not reduce Bilia's ownership in ABT/Nordic to less than [*] (or less than 25% if ABT has exercised the Option in full, or a prorated percentage between 31.25% and 25% if ABT has exercised the option in part). 5. Bilia Sales of ABT/Nordic Securities. (a) Bilia shall not sell, transfer or otherwise dispose of any equity securities of ABT/Nordic to anyone other than a majority owned subsidiary of Bilia (i) at any time prior to three years after the date hereof, and (ii) at any time thereafter and prior to five years after the date hereof, if such sale, transfer or other disposition (A) would reduce Bilia's ownership in ABT/Nordic to below 31.25% (or to below 25% if ABT has exercised the Option in full, or a pro-rated percentage between 31.25% and 25% if ABT has exercised the option in part), or (B) would cause anyone other than Bilia to have directly or indirectly (other than as a shareholder of Bilia) a greater percentage ownership in ABT/Nordic than Bilia's. (b) If at any time after three years after the date hereof, and subject to the prohibition contained in Section 5(a)(ii), Bilia desires to sell ABT/Nordic securities to anyone other than a majority owned subsidiary of Bilia, before doing so, Bilia shall notify ABT of its desire to sell such securities, the number and class, series and type of the securities it desires to sell, and the minimum price or other minimum consideration that Bilia will accept for such securities. ABT shall then have an option, exercisable by written notice given to Bilia within 15 days after Bilia gives its notice to ABT, to purchase all, but not less than all, of the securities specified in Bilia's notice for the minimum price specified in such notice (or, if the minimum consideration specified in the notice is other than cash, for the cash value of that minimum consideration). If ABT exercises the option as to the securities specified in Bilia's notice, ABT shall purchase such securities, and pay for those securities, on a day specified in ABT's notice of exercise which is not fewer than 10 nor more than 30 days after the day on which ABT's notice of exercise is given. If ABT does not exercise the option, Bilia may, at any time within 120 days after the option expires, sell such securities for a price which is not less than the minimum price specified in Bilia's notice. 6. Board Seats. So long as the License Agreement is in effect, Bilia shall vote all securities of ABT/Nordic owned by it for the election to the Supervisory Board (or similar ultimate governing body) of ABT/Nordic of one person designated by ABT, and Bilia and ABT/Nordic shall do all other things which are reasonably in their respective powers to cause that person to be elected to the Supervisory Board (or similar body) of ABT/Nordic. ABT acknowledges that meetings of the ABT/Nordic Supervisory Board (or similar body) may be conducted in Swedish. 7. Shareholder Agreement. If, before ABT/Nordic securities have been offered to the public or otherwise become quoted on a securities exchange or in another organized securities market, ABT acquires any securities of ABT/Nordic, then ABT, Bilia and ABT/Nordic shall negotiate in good faith and enter into an investor rights agreement which is typical for an investment by a corporate investor in a privately held company. Such agreement shall provide for, at a minimum, (i) rights of ABT to receive periodic financial statements, budgets and other financial information (or, after securities of ABT/Nordic are quoted on a securities exchange or in another organized securities market, all -4- 45 information which is provided to public shareholders), and (ii) access at reasonable times to ABT/Nordic's management. 8. Non-Competition Covenant of Bilia. During the term of the License Agreement and for any additional period during which ABT/Nordic is limited from competing with ABT pursuant to Section 11.5(c) thereof, Bilia shall not, either for its own account, or through any parent, subsidiary or affiliate, operate a Local Business in the Territory (as such terms are defined in the License Agreement). Notwithstanding the above, nothing contained herein shall prohibit Bilia from marketing automobiles which it sells as a dealer nor from marketing trucks (gross weight of at least 3.5 tons) and construction vehicles which it sells as a distributor, nor from marketing parts and/or services for each of the foregoing; so long as such business does not infringe ABT's trademarks or other intellectual property rights. If Bilia assigns this Agreement to another party with ABT's consent under Section 10, this obligation will continue to bind Bilia and shall also bind such assignee. 9. Notices. Any notice, submission, or communication required or permitted under the terms of this Investment Rights Agreement, or required by law, whether or not so required elsewhere in this Investment Rights Agreement, must be in writing and must be (a) delivered in person, (b) sent by first class registered mail, return receipt requested, or air mail, as appropriate, or (c) sent by overnight air courier; in each case properly posted and fully prepaid to the appropriate address set forth below. Either party may change its address for notice by notice to the other party given in accordance with this Section 9. Notices shall be considered to have been given at the time of the earlier of (p) actual delivery in person, (q) the date of a receipt of such notice signed by an authorized representative of the party being notified, (r) the date of a written confirmation of receipt by the party being notified, or (s) thirty (30) days after deposit in the mail as set forth above. 10. Nonassignment/Binding Agreement. Neither this Investment Rights Agreement, nor any obligation or right under this Investment Rights Agreement, may be assigned or otherwise transferred (i) by ABT/Nordic or Bilia (except to each other), in whole or in part, whether voluntarily, or by operation of law, other than as part of a sale of its business substantially as an entirety, without the prior written consent of ABT, or (ii) by ABT, in whole or in part, whether voluntarily, or by operation of law, other than as part of a sale of its business substantially as an entirety, without the prior written consent of ABT/Nordic and Bilia. Any permitted assignee (including without limitation ABT/Nordic) must agree in writing to be bound by all the terms and conditions of this Investment Rights Agreement. Subject to the foregoing, this Investment Rights Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. 11. Miscellaneous (a) No Waiver; Amendment. Any waiver of the provisions of this Investment Rights Agreement or of a party's rights or remedies under this Investment Rights Agreement must be in writing to be effective. Failure, neglect, or delay by a party to enforce the provisions of this Investment Rights Agreement or its rights or remedies at any time shall not be construed and shall not be deemed to be a waiver of such party's rights under this Investment Rights Agreement and shall not in any way affect the validity of the whole or any part of this Investment Rights Agreement or prejudice such party's right -5- 46 to take subsequent action. This Investment Rights Agreement may not be amended, except by a writing signed by all parties. (b) Severability. If any term, condition or provision of this Investment Rights Agreement is found to be invalid, unlawful or unenforceable to any extent, the parties shall endeavor in good faith to agree to such amendments that will preserve, as far as possible, the intentions expressed in this Investment Rights Agreement. If the parties fail to agree on such an amendment, such invalid term, condition or provision shall be severed from the remaining terms, conditions and provisions, which shall continue to be valid and enforceable to the fullest extent permitted by law. (c) Entire Agreement. This Investment Rights Agreement contains the entire agreement of the parties with respect to the subject matter of this Investment Rights Agreement and supersedes all previous communications, representations, understandings and agreements, either oral or written, between the parties with respect to said subject matter. (d) Consent. Unless expressly provided otherwise in this Investment Rights Agreement, any prior consent of any party that is required before another party may take an action may be granted or withheld in the sole and absolute discretion of the party whose consent is required. (e) Rights and Remedies. No exercise or enforcement by any party of any right or remedy under this Investment Rights Agreement shall preclude the enforcement by such party of any other right or remedy under this Investment Rights Agreement or that such party is entitled by law to enforce. (f) Counterparts. This Investment Rights Agreement may be executed in counterparts, each of which so executed shall be deemed to be an original and such counterparts together shall constitute one and the same agreement. (g) Governing Law. This Investment Rights Agreement shall be interpreted and construed in accordance with the laws of the State of California and the United States of America, without regard to conflict of law principles, except insofar as it involves Swedish corporate law relating to the issuance of securities by ABT/Nordic. [Any dispute arising out of this Investment Rights Agreement shall be subject to the exclusive venue of the state and federal courts in California.] (h) Language. This Investment Rights Agreement is in the English language only, which language shall be controlling in all respects, and all versions hereof in any other language shall not be binding on the parties hereto. All communications and notices to be made or given pursuant to this Investment Rights Agreement shall be in the English language. IN WITNESS WHEREOF, the parties have caused this Investment Rights Agreement to be signed by duly authorized representatives on the dates set forth below. -6- 47 autobytel.com inc. ("ABT") Auto-By-Tel AB ("ABT/Nordic") By: /s/ ROBERT S. GRIMES By: /s/ JOHAN ROHSS & LARS ANDERSSON ------------------------------ -------------------------------- Name: ROBERT S. GRIMES Name: JOHAN ROHSS & LARS ANDERSSON ----------------------------- ------------------------------- Title: Executive V.P. Title: Chairman & Director ---------------------------- ------------------------------ Date: August 7, 1998 Date: August 7, 1998 ----------------------------- ------------------------------- Address: 18872 MacArthur Blvd. Address: HARADSVAGEN 255 -------------------------- ---------------------------- Irvine, CA 92612 141 72 Huddinge, Sweden -------------------------- ---------------------------- BILIA AB ("Bilia") By: /s/ MATS JANSSON ------------------------------ Name: MATS JANSSON ----------------------------- Title: President & CEO ---------------------------- Date: August 7, 1998 ----------------------------- Address: Box 9003 40091 -------------------------- Goteborg, Sweden -------------------------- -7- 48 ATTACHMENT F BILIA GUARANTEE LETTER WHEREAS, Auto-By-Tel AB, a Swedish corporation with offices at Haradsvagen 255, 14172 Huddinge, Sweden ("ABT/Nordic") and auto-by-tel inc., a Delaware corporation with offices at 18872 MacArthur Boulevard, Irvine, California, 92612 ("ABT") have entered into a License and Services Agreement of even date herewith ("Agreement"); and WHEREAS, ABT/Nordic and ABT wish Bilia AB, a Swedish company with an address at Box 9003, 40091 Goteborg, Sweden ("Bilia"), to guarantee certain obligations under the Agreement, and Bilia is willing to do so; NOW, THEREFORE, Bilia hereby unconditionally guarantees to ABT the obligations of ABT/Nordic to pay (a) the Minimum Annual License Fee due under the Agreement with regard to the first three (3) Fiscal Years; and (b) and Maintenance Fees due under the Agreement for the first three (3) years after the Effective Date. All capitalized terms not defined herein will have the meaning assigned to them in the Agreement. Bilia AB By: _____________________________ Title: __________________________ Date: ___________________________ 49 AUTOBYTEL.COM INC. August 7, 1998 Johan Rohss Auto-By-Tel AB Haradsvagen 255, 14172 Huddinge, Sweden RE: LICENSE AND SERVICES AGREEMENT Dear Mr. Rohss: This letter supplements the terms of that certain License and Services Agreement dated [8/7/98] (the "Agreement") between autobytel.com inc. ("ABT") and Auto-By-Tel AB ("ABT/Nordic") with respect to the marketing obligations and expenses in the Global Brand Protocols. Capitalized terms used in this letter agreement and not otherwise defined herein shall have the meanings specified in the Agreement. ABT/Nordic will designate a person with marketing and advertising experience that will communicate, on a weekly basis, if necessary, with ABT's designated marketing brand steward contact. ABT, Nordic and ABT will share expenses on an annual basis with respect to stewarding the brand as follows: To the extent the invoices for these annual expenses are up to and including the first $15,000, ABT/Nordic shall be responsible for all payments within 30 days after receipt of such invoices; To the extent the invoices for these annual expenses are from $15,001 up to and including $30,000, ABT will be responsible for such payments; and To the extent the invoices for these annual expenses exceed $30,000. ABT/Nordic and ABT will mutually resolve a solution for the payment of these expenses. If the foregoing correctly states your understanding of our agreement, please execute both copies of this letter in the appropriate space below, and return one copy to me. Very truly yours, autobytel.com inc. /s/ ROBERT S. GRIMES Robert S. Grimes Executive Vice President 50 BILIA GUARANTEE LETTER WHEREAS, Auto-By-Tel AB, a Swedish corporation with offices at Haradsvagen 255, 14172 Huddinge, Sweden ("ABT/Nordic") and autobytel.com inc., a Delaware corporation with offices at 18872 MacArthur Boulevard, Irvine, California, 92612 ("ABT") have entered into a License and Services Agreement of even date herewith ("Agreement"); and WHEREAS, ABT/Nordic and ABT wish Bilia AB, a Swedish company with an address at Box 9003, 40091 Goteborg, Sweden to guarantee certain obligations under the Agreement, and Bilia is willing to do so; NOW, THEREFORE. Bilia hereby unconditionally guarantees to ABT the obligations of ABT/Nordic to pay (a) the Minimum Annual License Fee due under the Agreement with regard to the first three (3) Fiscal Years; and (b) and Maintenance Fees due under the Agreement for the first three (3) years after the Effective Date. All capitalized terms not defined herein will have the meaning assigned to them in the Agreement. Bilia AB By: [ILLEGIBLE] ------------------------------- Title: President & CEO ---------------------------- Date: August 2, 1998 ----------------------------- 51 Accepted and agreed: Auto-By-Tel AB By: /s/ JOHAN ROHSS ------------------------------- Name: Mr. Johan Rohss Title: Chairman ----------------------------- Date: August 7, 1998 ------------------------------ EX-10.24 19 LICENSE & SERVICES AGREEMENT W/AUTO-BY-TEL UK LTD 1 EXHIBIT 10.24 [*] Confidential Treatment has been requested for certain portions of this exhibit. AUTOBYTEL.COM LICENSE AND SERVICES AGREEMENT This LICENSE AND SERVICES AGREEMENT (this "Agreement") is entered into as of November 23, 1998, (the "Effective Date") by and between autobytel.com inc., a Delaware corporation with offices at 18872 MacArthur Boulevard, Irvine, California, 92612 ("APT"), and Auto by Tel UK Limited, a corporation organized under the laws of the United Kingdom with offices at _______________ ("ABT/UK"), and describes the terms and conditions pursuant to which ABT will grant to ABT/UK a license to use and modify the Software and Business Procedures (as defined below) and to use certain related technology, to deploy, develop and support a localized version of such Software and Business Procedures. BACKGROUND WHEREAS, ABT is engaged in an Internet-based marketing business for new and used vehicles in North America that provides Internet users with fast, haggle-free, and courteous purchasing and related services designed to improve consumers' overall vehicle buying experience: WHEREAS, ABT/UK desires to market new and used vehicles, in the United Kingdom using the ABT proprietary Software, technology, and ABT Business Procedures; WHEREAS, ABT/UK desires to develop a localized version of ABT's proprietary Software and Business Procedures applicable to the United Kingdom; WHEREAS, ABT/UK is a wholly-owned subsidiary of Inchcape Automotive Limited, registered number 3580629 whose registered office is 33 Cavendish Square, London W1M 9HF, a corporation organized under the laws of the United Kingdom; and WHEREAS, ABT and Inchcape have entered into a Share Purchase Agreement of even date herewith memorializing certain arrangements between ABT and Inchcape plc regarding the ownership of ABT/UK. NOW, THEREFORE, in consideration of the mutual promises and upon the terms and conditions set forth below, the parties agree as follows: 1 Definitions 1.1 "ABT Brand" means the "Auto-By-Tel" trademark, service mark and logo, and the ABT/UK Domain, and does not include the mark DealerSites.com. 1 2 1.2 "ABT/UK Domain" means the Uniform Resource Locator "autobytel.uk.co" 1.3 "Affiliate" of a party means (i) any entity controlled by, controlling, or under common control with such party, where "control" means ownership, either direct or indirect, of more than 50% of the equity interest entitled to vote for the election of directors or equivalent governing body and/or (ii) any entity of which such party has possession, either direct or indirect, of the power to direct or cause the direction of management and policies of the entity through ownership of voting securities, by contract or otherwise. 1.4 "Business Procedures" means the general proprietary business procedures for operating the Local Business described on Attachment B, and any updates or new revisions thereof provided by ABT in accordance with this Agreement from time to time upon ninety (90) days prior notice, which, may be supplemented by ABT with more specific procedures as described in Section 2.9. 1.5 "Confidential Information" means this Agreement and all its Attachments, any addenda hereto signed by both parties, all Software listings, Documentation, information, data, drawings, benchmark tests, specifications, trade secrets, object code and machine-readable copies of the Software, Business Procedures, and any other proprietary information disclosed by one party to the other. 1.6 "Consumer Price Index" means the Consumer Price Index, for All Urban Consumers, Subgroup AA11 Items=, for the Los Angeles-Riverside-Orange County Area (Base Year 1982-84=100), which is currently being published by the United States Department of Labor, Bureau of Labor Statistics. If, however, this Consumer Price Index is changed so that the base year is altered from that used as of the Commencement Date, then the Consumer Price Index will be converted in accordance with the conversion factor published by the United States Department of Labor, Bureau of Labor Statistics, to obtain the same results that would have been obtained had the base year not been changed. If no conversion factor is available or if the Consumer Price Index is otherwise changed, revised or discontinued for any reason, the term "Consumer Price Index" will thereafter refer to the most nearly comparable official price index of the United States Government to obtain substantially the same result as would have been obtained had the original Consumer Price Index not been changed, revised or discontinued. 1.7 "Derivative Work" means a derivative work within the meaning of 17 U.S.C. Section 101 of the U.S. copyright law (even if the term is not capitalized when used herein). 1.8 "Documentation" means any electronic instructions, manuals or other materials, including without limitation on-line help files, regarding the development or use of the Software provided by ABT under this Agreement. 1.9 "DRT" means the Dealer Communication System portion of the Software. 2 3 1.10 "Error" means a material, reproducible failure of the Software to perform in substantial conformity with the functional specifications in the Documentation. 1.11 "Error Correction" means a release or version of the Software containing corrections or fixes of Errors which may be indicated by a change in the numeric identifier to the Software in the digit to the right of the decimal. 1.12 "Fees" mean all minimum and monthly license, maintenance and other fees payable to ABT hereunder. 1.13 "Global Brand Protocols" means the procedures for use of the ABT Brand set forth on Attachment C along with any revisions thereof, which ABT may, subject to Section 2.9, provide from time to time in its sole discretion upon ninety (90) days prior notice. 1.14 "Gross Revenues" means all payments actually received by ABT/UK with regard to the Local Business, including without limitation fees received from dealers for participating in the Internet referral system, payments received from dealers as a result of Internet inquiries referred to them, sums received as payments for advertising on internet sites which are part of the Local Business, gross revenues from providing maintenance of, and training regarding, the DRT, and all other revenues arising directly out of the Local Business. Gross revenues will not include revenues from sales of cars, from servicing of cars or from other activities by ABT/UK or any of its affiliates other than the operation of the Local Business. 1.15 "Launch Date" means the earlier of (a) the first date ABT/UK makes the World Wide Web site for the Local Business generally available on the World Wide Web; (b) thirty (30) days after completion of Initial Localization Services under Section 3.1(c); and (c) June 1, 1999. 1.16 "Local Business" means a business providing Internet-based automotive and automotive related products and services relating to vehicle dealers located in the Territory. 1.17 "Localized Version" means a Derivative Work of the Software and Business Procedures that implements the core functionality of the Software and Business Procedures, but incorporates the language, currency and functional variations for the Territory, which Derivative Works are in each case created by or for use by ABT/UK 1.18 "Localize, or Localization" means any modifications to the Software or Business Procedures necessary to facilitate the operation and functionality of the Software on the operating systems or platforms within the Territory, or the modification of the Business Procedures to meet local custom or technological or regulatory requirements. 3 4 1.19 "Fiscal Quarter" means a period of three (3) consecutive calendar months which period commences upon the Launch Date, or three (3), six (6), or nine (9) months thereafter; or the anniversary of any of the foregoing. 1.20 "Fiscal Year" means a period of four (4) consecutive Fiscal Quarters commencing on the Launch Date or the anniversary thereof. 1.21 "Software" means ABT's existing proprietary Software products specified on Attachment A hereto, in source code form, and object code form (where applicable), together with any Error Corrections, Updates or Upgrades thereof provided to ABT/UK pursuant to this Agreement. 1.22 "Territory" means the United Kingdom as constituted on the Effective Date. 1.23 "Update" means a release or version of the Software, in source code form, and object code form (where applicable), containing minor functional enhancements, extensions, error corrections or fixes, which may be indicated by a change in the numeric identifier to the Software in the digit to the right of the decimal. 1.24 "Upgrade" means any version of the Software, in source code form, and object code form (where applicable), designated as such by ABT, which contains new functionality or significantly enhanced operation and may be indicated by a change in the numeric identifier to the Software in the digit to the left of the decimal. 1.25 "Use" means utilization of the Software by ABT/UK solely in accordance with this Agreement. 2. Grant of License 2.1 License. Subject to the terms and conditions of this Agreement, ABT hereby grants to ABT/UK: (a) an exclusive, non-transferable license in the Territory to copy and create Derivative Works of the Software, Business Procedures and Derivative Works thereof, in each case solely for the development of a Localized Version. In this Section 2.1 (a), "exclusive" means that ABT shall not for its own account, nor grant to any third party in the Territory a license to create derivative works of the Software or the Business Procedures in order to create a Localized Version in connection with the operation of a Local Business. (b) an exclusive, non-transferable license to Use the Software and Business Procedures in connection with the operation of the Local Business in the Territory; provided, however, that ABT/UK will not have the right to use the Software with respect to vehicle dealers outside the Territory. In this Section 2.1(b), "exclusive" means that ABT shall not for its own account, nor grant to 4 5 any third party a license to use the Software or the Business Procedures in connection with the operation of a Local Business. (c) an exclusive, non-transferable license in the Territory to Use the Business Procedures and the Documentation solely for the operation of the Local Business, provided that ABT/UK operates the Local Business solely in the accordance with the Business Procedures; and provided that ABT/UK does not use the Business Procedures and Documentation with respect to vehicle dealers outside the Territory. 2.2 Sublicenses. ABT/UK may grant non-exclusive sublicenses to vehicle dealers in the Territory to use copies of the DRT in object code format, solely for use in connection with the Local Business, and solely in connection with an end user license in a form as protective of ABT's rights as the form set forth in Attachment H. ABT/UK may grant sublicenses of the rights granted in Section 2.1 only upon the prior written approval of ABT. 2.3 Copies. ABT shall deliver to ABT/UK, as soon as practicable, one (1) copy of the Software, one (1) copy of the related Documentation and one (1) copy of the Business Procedures. ABT/UK will be entitled: (a) to make two (2) copies of the Software solely for backup or archival purposes, (b) to retain one (1) copy of the Software for production purposes, and (c) to make and retain such copies of the Software as reasonably necessary for ABT/UK to Use the Software in connection with the Local Business; provided, however, that ABT/UK shall immediately advise ABT of any such copies made and their location. Except as otherwise set forth herein, ABT/UK may not copy, distribute, reproduce, use or allow access to the Software and Business Procedures. All copies of the Software will be subject to the terms and conditions of this Agreement. Whenever ABT/UK is permitted to copy or reproduce all or any part of the Software and Business Procedures, all titles, trademark symbols, copyright symbols and legends, and other proprietary markings must be reproduced. ABT/UK shall not alter or remove any of ABT's trademarks, copyright notices or other proprietary notices affixed to the Software by ABT. 2.4 Ownership. ABT owns all right, title and interest in and to the Software and Business Procedures, together with any Localized Version or other modifications to the Software and Business Procedures made by either ABT or ABT/UK in connection with Localization of the Software or Business Procedures. The licenses granted herein transfers to ABT/UK neither title, nor any proprietary or intellectual property rights to the Software, Business Procedures, or Documentation, or any copyrights, patents, or trademarks, embodied or Used in connection therewith, except for the rights expressly granted herein. Upon development of any Localized Version by ABT/UK, ABT/UK hereby assigns all right, title and interest to such Localized Version to ABT. Such Localized Version will be included as, and incorporated in, the Software for the purposes of the license grant in this Section 2. For any Localizations or Extensions incorporated into ABT's generally available version of the Software, ABT shall promptly incorporate related Documentation. Except as otherwise set forth in the applicable Work Order for the Localization services (as such term is defined in the "Services Agreement" in 5 6 Attachment D, any modifications that are not Derivative Works of the Software or Business Procedures and that contain no part of the Software or Business Procedures (such modifications to be referred to as "Extensions"), ABT hereby grants ABT/UK an irrevocable, non-exclusive, fully paid-up, nontransferable license to reproduce, distribute, publicly perform and display, transmit, and prepare derivative works of the Extensions in connection with the Local Business. This license to use Extensions will survive the termination of this Agreement. All rights not expressly granted hereunder are reserved to ABT. To the extent that a Localized Version, or any Extension prepared by ABT/UK's employees or Contractors (as defined in Section 10.4) and provided to ABT hereunder, embody patentable methods of doing business, inventions, or algorithms ("ABT/UK Inventions"), then ABT/UK retains all right, title and interest in and to such ABT/UK Inventions, and ABT/UK hereby grants ABT an irrevocable, non-exclusive, fully paid-up, royalty-free, non-transferable license to make, have made, use, sell, import, and otherwise exploit products embodying such ABT/UK Inventions. ABT may sublicense such rights in connection with licenses of the Software and ABT's trademarks. This license to ABT/UK Inventions will survive the termination of this Agreement. 2.5 Software and Business Procedure Localizations and Extensions. Except as otherwise set forth in this Agreement or as otherwise agreed by the parties, as between the parties, ABT/UK is responsible for any changes to the Software, Documentation, or Business Procedures necessary to Localize them in accordance with the operation of the Local Business. All such Localization changes, and the development of any Extensions, must be approved by ABT prior to development and implementation, as set forth in this Section. All such Localization changes and the development of any Extensions must be either: (i) performed by ABT in accordance with Section 3.1 below; or (ii) performed by ABT/UK, or by its independent contractor approved by ABT, under the technical oversight and subject to the approval of ABT, subject to Section 3.1 below. ABT's approval of such Localizations or Extensions shall not be unreasonably withheld, and without limiting the above, will not be withheld where the requested Localization or Extension: (x) is required to comply with the laws and regulations of the Territory, or (y) is in current use in ABT's United States version of the Software. Further, subject to the above provisions of this Section 2.5, ABT may withhold approval for any implementation of a Localization or Enhancement which would materially impair the value of the ABT Brand, cause the Local Business not to be in accordance with the Business Procedures, or require a change in the technical architecture of the Software. Any modifications made to the Software, Documentation, or Business Procedures without the approval of ABT as set forth herein will be a material breach of this Agreement. Upon completion of any Localized Version or Extension (other than by ABT), ABT/UK must disclose to ABT a copy of such Localized Version or Extension. Any such disclosure of Localized Software or Extension must be in source code format. 2.6 Updates and Upgrades. During the Term, and (except as required in Section 11.2(d)) subject to ABT/UK's payment to ABT of the Minimum Maintenance Fees and Maintenance and Support Fees set forth in Sections 5.3 and 6.2 below, ABT will deliver to ABT/UK any Error Corrections, Updates or Upgrades to the Software or Business Procedures that it releases to any of ABT's other local country affiliates or United States licensees within a reasonable time after such Error 6 7 Correction, Update, or Upgrade is released in the United States. ABT/UK shall implement all Error Corrections, Updates, or Upgrades provided by ABT under this Agreement, no later than one (1) year after delivery thereof to ABT/UK. Notwithstanding the above, ABT will not be obligated to provide such Error Corrections, Updates or Upgrades during the period during which, in the reasonable discretion of ABT's project manager, they are in release for testing purposes or otherwise not suitable for release outside the United States. 2.7 License Restrictions. ABT/UK shall not: (a) sell, lease, license, sublicense or distribute the Software, Documentation, or Business Procedures except in accordance with this Agreement; (b) provide, disclose, divulge or make available to, or permit use of the Software, Documentation, Business Procedures, or Localized Version by any third party without ABT's prior written consent, except as specifically authorized by this Agreement; or (c) use the Software for any purpose except as expressly provided for in this Agreement. 2.8 Third Party Technology. The parties acknowledge that certain software, equipment, or technology of third parties, including without limitation server equipment, server software, and database software, may be required to operate the Software. ABT shall cooperate reasonably with ABT/UK to identify any such third-party technology, but ABT will not be obligated to provide any such third party technology to ABT/UK. 2.9 Changes to Business Procedures and Global Branding Protocols. ABT may only make those changes to the Business Procedures and Global Branding Protocols that ABT makes generally for ABT's and ABT's licensees using the Software and Business Procedures. Where feasible, ABT shall seek comments and suggestions of ABT/UK regarding such changes. ABT shall discuss in good faith any concerns ABT/UK may have with respect to such changes. 3. Obligations. 3.1 Services. Upon mutual agreement, ABT may, from time to time, perform services and provide support to ABT/UK that will be subject to the Services Agreement included on Attachment D hereto (the "Services" as further defined below). (a) In addition to the compensation set forth in the definitive Services Agreement, ABT/UK shall reimburse ABT for the reasonable actual travel and living expenses of ABT's personnel engaged in performing the Services at locations other than ABT's facilities, together with other reasonable out-of-pocket expenses incurred in connection with the performance of such Services, subject to ABT's adherence to any travel policy reasonably promulgated by ABT/UK in connection therewith. 7 8 (b) ABT/UK shall pay ABT for any Services provided under this Section 3.1 in accordance with the payment terms set forth in Section 5 below. (c) ABT shall provide initial Services to Localize the Software (the "Initial Localization Services") in accordance with the initial Work Order (as such term is defined in the Services Agreement) set forth in Attachment E. ABT shall provide further Services to Localize the Software in accordance with such subsequent Work Orders agreed to by the parties in writing according to the software development procedures described in Attachment G. (d) Notwithstanding the above, ABT shall provide ABT/UK with a one-time, three (3) day "train the trainer" session at ABT's office in Irvine, California, at no charge to ABT/UK. ABT/UK will be responsible for any travel, living, and related expenses of any persons it sends to such training session. 3.2 Scope of Services. The parties currently anticipate that the Services that may be performed in accordance with Section 3.1 above may include the following. However, nothing in this Section 3.2 will be deemed to create any binding obligation on either party. (a) Hardware selection and configuration consulting services; (b) Business model conversion support for software systems and operating procedures; (c) Marketing, sales and information technology training; (d) Support for training of vehicle dealers in the use of the DRT portions of the Software; and (e) Business Procedures marketing support, including support regarding know-how, cooperative advertising or other co-marketing activities. 3.3 ABT/UK Obligations. ABT/UK shall operate the Local Business solely in accordance with the Business Procedures, which the parties acknowledge set forth general principles for operation of the Local Business. The parties shall agree in good faith upon more detailed business procedures, and ABT/UK shall use reasonable efforts to abide by the business procedures generally provided by ABT to its licensees. ABT/UK shall operate the Local Business solely in accordance with the laws, regulations, and other requirements of the Territory and of the European Union. During the Term, ABT/UK will devote sufficient resources and personnel to the Local Business to market, promote and operate the Local Business. ABT/UK will be responsible for training vehicle dealers in the use of the DRT portions of the Software and will be solely responsible for all costs and expenses related to the marketing, promotion and operation of the Local Business and for performing its obligations hereunder. ABT/UK 8 9 will ensure that only properly trained and qualified persons perform ABT/UK's technical obligations under this Agreement. 3.4 Hyperlinks. ABT shall, on and after the first date ABT/UK makes the World Wide Web site for the Local Business generally available on the World Wide Web, display a hypertext link on its Web page at the location where ABT provides links to its local country affiliates, pointing toward ABT/UK's home Web page for the Local Business, and ABT/UK shall, on and after the first date ABT/UK makes the World Wide Web site for the Local Business generally available on the World Wide Web, display a hypertext link on the home Web page for the Local Business pointing to such location. 3.5 Territory and Sales. The parties acknowledge that ABT/UK may receive inquiries or orders for sales of products or services from persons outside the Territory. In such case, ABT/UK shall respond to such inquiries only in accordance with the laws of the Territory and the European Union. In addition, ABT/UK acknowledges that ABT may enter into agreements with other parties who will operate a Local Business outside the Territory. ABT/UK shall use its best efforts to resolve any channel conflicts with such third parties relating to such inquiries. 3.6 Reports. No less frequently than each month, as reasonably requested by ABT, ABT Entity (as defined in Attachment B) will provide to ABT, in a format reasonably acceptable to ABT, a summary report of business data regarding the operation of the business of the ABT Entity, including without limitation the number of purchase requests and finance requests, Web statistics, and revenue data, as required for the ABT global data warehouse and reporting system. 4. Warranty and Disclaimer 4.1 ABT Warranty. (a) ABT represents and warrants to ABT/UK that during the Term, the Software in the form delivered to ABT/UK will perform in substantial accordance with the Documentation. (b) Without limitation to any other warranty, ABT represents and warrants to ABT/UK that the Software in the form delivered to ABT/UK is Year 2000 Compliant. "Year 2000 Compliant" means that the Software, when used in accordance with the Documentation and with the hardware and operating systems approved by ABT, will: (a) initiate and operate; (b) correctly store, represent and process dates; and (c) not cause or result in an abnormal termination or ending or degradation of performance; when processing data containing dates in the Year 2000 and in any preceding and following years, including leap years, provided that all third party products that exchange date data with the Software do so in a form and format compatible with the Software. (c) ABT warrants and represents to ABT/UK that the Software, in the form delivered to ABT/UK and on the media delivered to ABT/UK does not contain any virus, codes, commands or 9 10 instructions that alter, delete, erase, damage, disable, disrupt, or otherwise interfere with A.BT/UK's use of, the Software. (d) If the Software does not perform as warranted under Sections 4.1(a), 4.1(b), or 4.1(c), ABT shall, at no charge to ABT/UK, use reasonably diligent efforts to correct the Software in accordance with the escalation procedures in Attachment F, and include the correction thereof in the next Error Correction released by ABT and provided to ABT/UK under Section 6.2 below. The foregoing are ABT/UK's sole and exclusive remedies for breach of warranties. The warranty will apply only if the then-current version of the Software has been properly installed and Used at all times and in accordance with the instructions for Use. (e) ABT represents and warrants to ABT/UK that ABT has full power, right and authority to enter into this Agreement, to carry out its obligations under this Agreement and to grant the rights granted to ABT/UK herein. (f) ABT represents and warrants to ABT/UK that all Services performed by ABT under this Agreement shall be performed in a professional manner consistent with industry standards by personnel with the required training, background and experience to perform such services. In the event of a breach of such warranty, ABT shall re-perform the non-conforming services at no charge. The foregoing is ABT/UK's sole and exclusive remedy for breach of such warranty. 4.2 ABT/UK Warranty. ABT/UK represents and warrants to ABT that ABT/UK has MI power, right and authority to enter into this Agreement, to carry out its obligations under this Agreement and to grant the rights granted to ABT herein. ABT/UK represents and warrants to ABT that ABT/UK is sufficiently capitalized to undertake the business transaction contemplated hereunder. 4.3 Disclaimer. EXCEPT FOR THE EXPRESS LIMITED WARRANTY SET FORTH IN SECTION 4.1 ABOVE, THE SOFTWARE, DOCUMENTATION AND BUSINESS PROCEDURES ARE PROVIDED "AS-IS" AND WITHOUT WARRANTY OF ANY KIND, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE. ABT HEREBY DISCLAIMS ANY WARRANTY THAT THE OPERATION OF THE SOFTWARE WILL BE UNINTERRUPTED OR ERROR-FREE. ABT SPECIFICALLY DISCLAIMS ALL IMPLIED WARRANTIES OF NONINFRINGEMENT, MERCHANTABILITY, AND FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE SOFTWARE, DOCUMENTATION, BUSINESS PROCEDURES AND ANY SERVICES PROVIDED BY ABT HEREUNDER. 4.4 Additional Disclaimer. The success of the business venture contemplated to be undertaken by ABT/UK by virtue of this Agreement is speculative and depends, to a large extent, upon the ability of ABT/UK as an independent business operator and the active participation of ABT/UK in the daily affairs of the Local Business, as well as other factors. ABT does not make any representation or warranty, express, or implied, as to the potential success of the business venture contemplated by this Agreement. 10 11 [*] Confidential Treatment Requested 5. Compensation. 5.1 Minimum License Fee. In consideration of the licenses granted herein, ABT/UK shall pay to ABT the minimum license fee specified on Attachment A ("Minimum Annual License Fee"). The Minimum Annual License Fee will be payable in four (4) equal installments, in advance of each Fiscal Quarter. 5.2 Additional License Fees. In consideration of the licenses granted herein, ABT/UK shall pay to ABT the following fees ("Additional License Fees"): (a) For the [*]. (b) For the sixth (6th) Fiscal Year and each Fiscal Year thereafter, ABT/UK shall, no later than fifteen (15) days after the end of each month pay to ABT an amount equal to [*] of Gross Revenues received by ABT/UK during such month in connection with the operation of the Local Business. Such fees will be in addition to any fees due under Section 5.1. For purposes of this Section 5.2, the "Credit Amount" means one million one hundred thousand dollars ($1,100,000); however, if ABT/UK terminates the maintenance portion of this Agreement under Section 11.2(d), the Credit Amount for each Fiscal Year ending after such termination will be eight hundred fifty thousand dollars ($850,000). ABT/UK may credit up to the Credit Amount each Fiscal Year against Additional License Fees payable under this Section 5.2(b). Such credits may only be applied against ABT/UK's payment of Additional License Fees under this Section 5.2(b) and in no event will be refundable to ABT/UK or reduce the amount of fees payable under Section 5.1. (c) For the fourth (4th) and fifth (5th) Fiscal Years, ABT/UK shall pay ABT the fees set forth in Section 5.2(b). Notwithstanding the monthly payment and calculation of such fees under Section 5.2(b), in the fourth (4th) or fifth (5th) Fiscal Years, such fees will be calculated and paid on a Fiscal Quarterly basis. However, ABT/UK will not be required under this Section 5.2(c) to pay more than one-half (1/2) of its cumulative Gross Profit to date during such Fiscal Year. For purposes of this section, "Gross Profits" for a Fiscal Quarter means Gross Revenues for such Fiscal Quarter, less trading expenses (i.e., all expenses of ABT/UK during the Fiscal Quarter, but not including interest expenses or taxes), less 1/4 of the Credit Amount for the Fiscal Year. For example:
All figures in US $1,000 QUARTER FISCAL 1 2 3 4 YEAR - ------------------------------------------------------------------------------------------------------- A Gross Revenues [*] [*] [*] [*] [*] B Fees due to ABT [*] of Gross [*] [*] [*] [*] [*] Revenue
11 12 [*] Confidential Treatment Requested C Trading Expenses [*] [*] [*] [*] [*] D [*] of Credit Amount [*] [*] [*] [*] [*] E Gross Profit (=A-C-D) [*] [*] [*] [*] [*] F Cumulative Gross Profit for Fiscal [*] [*] [*] [*] Year to date G [*] Cumulative Gross Profit [*] [*] [*] [*] [*] [*] H Credit Amount [*] [*] [*] I Additional License Fees, Less Credit [*] [*] [*] [*] [*] [*] J Additional License Fee Payable (at [*] [*] [*] [*] [*] the end of the Fiscal Quarter) K Cumulative License Fee Payable to [*] [*] [*] [*] [*] date for Fiscal Year (which cannot be more than [*])
If, in the last Fiscal Quarter of the fourth (4th) Fiscal Year, ABT/UK has a negative Gross Profit for such Fiscal Quarter which will result in a negative cumulative Gross Profit for the fourth (4th) Fiscal Year, then ABT/UK may credit up to one-half (1/2) of the amount of such negative Gross Profit for such Fiscal Year against payments of the Additional License Fee (after deduction of the Credit Amount), if any, due under this Section 5.2 for the fifth (5th) Fiscal Year. Such credits may only be applied against ABT/UK's payment of Additional License Fees under this Section 5.2(c) and in no event will be refundable to ABT/UK or reduce the amount of fees payable under Section 5.1. If, in the last Fiscal Quarter of the fifth (5th) Fiscal Year, ABT/UK has a negative Gross Profit for such Fiscal Quarter which will result in a negative cumulative Gross Profit for the fifth (5) Fiscal Year, then there will be no credit to the Additional License Fee due by ABT/UK in the sixth (6th) Fiscal Year. (d) No later than ninety (90) days after the end of each ABT/UK Fiscal Period during the Term, ABT/UK shall pay to ABT (by way of a fee payable, as set forth in this Section 5.2(d), in the ABT/UK Fiscal Period after that which has expired) [*] of any Aggregate Profits, where "Aggregate Profits" means aggregate profits of ABT/UK and its subsidiaries shown by the audited accounts of ABT/UK (and any subsidiary thereof, as applicable), that are available for distribution as defined in section 263(3) of the UK Companies Act 1985, (i) after adding thereto any amounts distributed or repaid as premium in respect of share capital to the shareholders of ABT/UK on or prior to the end of such ABT/UK Fiscal Period and (ii) after deducting any amounts owed by ABT/UK to its shareholders and the amount paid up in respect of the share capital of ABT/UK at the end of such ABT/UK Fiscal Period, less any amounts previously paid under this Section 5.2(d). No amount payable under this Section will be repayable to ABT/UK regardless of whether the calculation of Aggregate Profits for any later 12 13 [*] Confidential Treatment Requested ABT/UK Fiscal Period would result in an a fee under this Section 5.2(d) of zero or less. If this Agreement is terminated other than at the end of a Fiscal Period, then no later than ninety (90) days after the termination of this Agreement, ABT/UK shall pay [*] of Aggregate Profits as defined above, as calculated as of the date of termination. For purposes of this Section 5.2(d), "ABT Fiscal Period" means a regular fiscal reporting period, no less frequent that an annual period, for which ABT/UK chooses to conduct its financial accounting. ABT/UK shall select the frequency and ending date of the ABT Fiscal Period, and notify ABT thereof in writing no later than one (1) year after the Effective Date. (e) Minimum Fee. Notwithstanding anything else in this Agreement, if ABT/UK pays to ABT less than one million one hundred thousand dollars $1,100,000) in Total Fees for any Fiscal Year, where "Total Fees" for a Fiscal Year means Minimum License Fees, Additional License Fees, and Minimum Maintenance Fees for such Fiscal Year, ABT/UK shall, within ninety (90) days after the end of such Fiscal Year, pay to ABT the difference between one million one hundred thousand dollars ($1,100,000) and such Total Fees. 5.3 Maintenance Fee. In consideration of the services to be provided by ABT under Section 6, ABT/UK shall pay to ABT the maintenance fee specified on Attachment A (the "Minimum Maintenance Fee"). The Minimum Maintenance Fee will be payable in equal monthly installments in advance. ABT may increase the Minimum Maintenance Fee after the first year of the Term, in proportion to any increase in the Consumer Price Index over the previous year. 5.4 Taxes. All charges and Fees provided for in this Agreement are exclusive of, and do not include, any taxes, duties, or similar charges imposed by any government. ABT/UK shall pay or reimburse ABT for all federal, state, dominion, provincial, or local sales, use, personal property, excise or other taxes, fees, or duties arising out of this Agreement or the transactions contemplated by this Agreement (other than taxes on the net income of ABT). 5.5 Payment. ABT/UK shall calculate, denominate, and make all payments in U.S. Dollars by wire transfer to an account designated by ABT. Any payments due under this Agreement which are not paid when due will bear interest, to the extent permitted by applicable law, at the prime rate as reported by the Chase Manhattan Bank, New York, New York, beginning on the date such payment is due, plus an additional three percent (3%), calculated on the number of days such payment is delinquent. This Section 5.5 will not limit any other remedies available to any party. 5.6 Records. ABT/UK shall make and maintain, and shall cause its subsidiaries to make and maintain, an accounting and record keeping system, including the basic accounting information necessary to prepare sufficient financial statements and a general ledger in accordance with the United Kingdom's Generally Accepted Accounting Principles (UKGAAP) with adequate and verifiable records and supporting documentation, including, without limitation, invoices, payroll records, check registers, sales tax records, cash receipts and disbursements journals, and general ledgers in order to calculate and confirm ABT/UK's payment obligations hereunder. At a minimum, ABT/UK will maintain such 13 14 [*] Confidential Treatment Requested records until the expiration of three (3) years after the year to which such records pertain. ABT will have the right, at its own expense, to inspect, through either its employees or agents, and upon reasonable notice in writing, and during regular business hours, such records to verify the accuracy of fees paid by ABT/UK under the terms of this Agreement; provided, however, that any third party auditors must sign a non-disclosure agreement reasonably acceptable to ABT/UK. If any such examination discloses a shortfall in the fees due to ABT hereunder, ABT/UK shall reimburse ABT for the full amount of such shortfall plus interest and if the amount of the underpayment for any period is more than five percent (5%) ABT/UK shall pay ABT's costs of performing that audit with respect to such period. 6. Maintenance and Support. 6.1 Support. For so long as ABT/UK is current in payment of all fees, ABT shall provide Maintenance and Support as described in Section 6.2 below. ABT's provision of Maintenance and Support to ABT/UK will commence upon payment of the Maintenance Fee and will continue for as long as ABT/UK continues to pay the annual Maintenance Fee. 6.2 Maintenance and Support Services. For purposes of this Agreement, "Maintenance and Support" means that ABT will: (a) use reasonably diligent efforts to correct and resolve Errors that ABT/UK reports to ABT in accordance with the escalation procedures set forth in Attachment F and (b) provide Error Corrections, Updates and Upgrades, if any, to the Software, Business Procedures and Documentation that ABT releases during the current period covered by the Minimum Maintenance Fee, in accordance with Section 2.6; and (c) up to twenty-five hundred (2,500) hours of technical support per year, in English, pursuant to the escalation procedures in Attachment F, and the software development resource commitment guidelines in Attachment G. The parties acknowledge that such technical support services may be applied to any Services performed by ABT pursuant to the Services Agreement in Attachment D and will not include any time spent by ABT to create or provide Error Corrections, Updates, or Upgrades, or to provide telephone support related thereto, except as mutually agreed in a Work Order as specified in Attachment D. ABT shall provide ABT/UK with a monthly report of the hours of technical support provided by ABT under this Section 6.2. Each month, ABT shall invoice ABT/UK in arrears for Fees for any Maintenance and Support services in excess of one-twelfth of the allotted twenty-five hundred (2,500) hours for the year, in reasonable detail showing such additional hours to the nearest quarter hour, and Customer shall pay such Fees no later than fifteen (15) days after the invoice date. Any such additional Maintenance and Support services will be billed at a rate equal to [*] per hour. ABT may increase such rate after the first year of the Term, in proportion to any increase in the Consumer Price Index over the previous year. 6.3 Project Managers and Staff. Each party shall designate a project manager to administer Maintenance and Support under this Agreement. The parties shall coordinate all Maintenance and Support work under this Agreement through such project managers. Each party may change its project manager upon written notice. ABT will ensure that only properly trained and qualified persons perform its technical obligations under this Agreement. 14 15 7. Trademarks and Domain Names. 7.1 Trademarks. ABT hereby grants to ABT/UK the exclusive right to use the ABT Brand in connection with a Local Business in the Territory. The above license will include, without limitation, the right to indicate to the public that ABT/UK is an authorized licensee of ABT and to advertise ABT/UK's products and services in connection with the Local Business under the ABT Brand. ABT/UK shall fully comply with the Global Brand Protocols in relation to ABT/UK's use of the ABT Brand. All representations of the ABT Brand that ABT/UK intends to use must first be submitted to ABT for approval of design, color and other details, subject to the following limitations: (a) ABT's approval will not be unreasonably withheld or delayed; (b) such approval, once given, will not be unreasonably withdrawn; and (c) once ABT has approved a particular use, ABT/UK need not re-submit for approval any substantially similar use. 7.2 Restrictions. Except as set forth in this Section 7, nothing contained in this Agreement will grant or will be deemed to grant to ABT/UK any right, title or interest in or to the ABT Brand. ABT/UK shall not challenge or assist others to challenge the ABT Brand (except to the extent such restriction is expressly prohibited by applicable law) or the registration thereof or attempt to register any trademarks, marks trade names, Uniform Resource Locators, or other designations confusingly similar to those of ABT. If ABT/UK, in the course of exercising its rights hereunder, acquires any goodwill or reputation in the ABT Brand, all such goodwill or reputation will automatically vest in ABT when and as, on an on-going basis, such acquisition of goodwill or reputation occurs, as well as at the expiration or termination of this Agreement, without any separate payment or other consideration of any kind to A.BT/UK, and ABT/UK agrees to take all such actions necessary to effect such vesting, including without limitation the transfer to ABT of rights in any filings or registrations made under Section 7.3 below, and including without limitation the transfer from ABT/UK to ABT the ABT Domain upon termination of this Agreement. Upon termination of this Agreement, ABT/UK shall immediately cease to use the ABT Brand. 7.3 Trademark Registrations in the Territory. ABT/UK shall advise ABT regarding the appropriate registrations or filings appropriate to protect the use of the ABT Brand in the Territory. ABT shall make, and ABT/UK shall cooperate with ABT to make such registrations or filings with the appropriate authorities. ABT shall pay all costs or fees associated with such filing. 7.4 Registered User Agreements. ABT/UK shall cooperate with ABT to make any registrations or filings with the appropriate authorities referenced in Section 7.3, including without limitation entering into registered user agreements with respect to the ABT Brand pursuant to applicable trademark law requirements in the Territory. ABT will be responsible for proper filing of registered user agreements with appropriate government authorities and shall pay all costs or fees associated with such filing. 15 16 7.5 Name Branding; Product Protection. On any promotional materials used or disseminated by ABT/UK relating to the Local Business, ABT/UK shall display the ABT Brand. Where both ABT/UK's marks and the ABT Brand are displayed, the marks will be presented equally legibly, and in a size and style in accordance with ABT's then-current Global Brand Protocols. 7.6 Domain Names. ABT hereby grants to ABT/UK the right to use the ABT/UK Domain, solely for the operation of a Local Business. ABT shall, prior to the first date ABT/UK makes the World Wide Web site for the Local Business generally available on the World Wide Web, register the ABT/UK Domain name with InterNIC or its successor Internet name assignment authority, and shall pay the registration fees for one year. Thereafter, ABT/UK shall in a timely fashion renew such registration with such authority at its own expense each time such registration becomes due during the Term. 8. Limitation of Liability EXCEPT FOR LIABILITY FOR THIRD PARTY CLAIMS ARISING OUT OF SECTIONS 9 OR 10, (A) IN NO EVENT WILL EITHER PARTY'S TOTAL LIABILITY ARISING OUT OF OR RELATED TO THIS AGREEMENT EXCEED THE TOTAL AMOUNTS PAID OR PAYABLE BY ABT/UK TO ABT UNDER THIS AGREEMENT, AND (B) IN NO EVENT WILL EITHER PARTY HAVE ANY LIABILITY FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, WHETHER FOR BREACH OF CONTRACT, TORT OR OTHERWISE, ARISING OUT OF OR RELATED TO THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO, LOSS OF. ANTICIPATED PROFITS, LOSS OF DATA, OR LOSS OF USE, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. 9. Indemnification for Infringement 9.1 ABT Indemnity for Infringement. ABT shall, at its expense, defend or settle any claim, action or allegation brought against ABT/UK that the Software, or any Localization or Extension developed by ABT, or the use of the ABT Brand in the Territory, infringes any copyright, patent, trademark or trade secret right of any third party, or that any Localization or Extension not developed by ABT/UK infringes such rights as a necessary result of specifications required by ABT, and shall pay any final judgments awarded or settlements entered into; provided that ABT/UK gives prompt written notice to ABT of any such claim, action or allegation of infringement and gives ABT the authority to proceed as contemplated herein. ABT will have the exclusive right to defend any such claim, action or allegation and make settlements thereof in its own discretion, and ABT/UK may not settle or compromise such claim, action or allegation, except with the prior written consent of ABT. ABT/UK shall give such assistance and information as ABT may reasonably require to settle, or oppose such claims. In the event any such infringement, claim, action or allegation is brought or threatened, ABT shall, at its sole option and expense: 16 17 (a) procure for ABT/UK the right to continue use of the Software or Business Procedures or infringing part thereof, (b) modify or amend the Software or Business Procedures or infringing part thereof, or replace the Software or Business Procedures or infringing part thereof with other Software or Business Procedures having substantially the same or better capabilities; or if neither (a) nor (b) is reasonably possible, (c) terminate this Agreement and repay to ABT/UK a portion of the Minimum Annual License Fee equal to the amount paid by ABT/UK less an amount equal to one twelfth (1/12) of the total Minimum Annual License Fee for each month or portion thereof of the current one (1) year term to account for use by ABT/UK. The foregoing obligations will not apply to the extent the infringement arises as a result of modifications to the Software not made by or for ABT. The foregoing states the entire liability of ABT with respect to infringement of any patent, copyright, trademark, trade secret or other proprietary right. 9.2 ABT/UK Indemnity. ABT/UK shall, at its expense, defend or settle any claim, action or allegation brought against ABT (to the extent not covered by Section 9.1) arising from the act or omission of ABT/UK, where a third party alleges fraud, misrepresentation, or unfair business practices arising from the operation of the Local Business, or those that arise from a third party allegation that a Localized Version or Extension, infringes any copyright, patent, trademark, or trade secret or other intellectual property right of any third party, or that any Localization or Extension developed by ABT/UK infringes such rights as a necessary result of specifications required by ABT/UK, and shall pay any final judgments awarded or settlements entered into; provided that ABT gives prompt written notice to ABT/UK of any such claim, action or allegation of infringement and gives ABT/UK the authority to proceed as contemplated herein. ABT/UK will have the exclusive right to defend any such claim, action or allegation and make settlements thereof in its own discretion, and ABT may not settle or compromise such claim, action or allegation, except with the prior written consent of ABT/UK. ABT shall give such assistance and information as ABT/UK may reasonably require to settle or oppose such claims. In the event any such infringement, claim, action or allegation is brought or threatened, ABT/UK may, at its sole option and expense: (a) procure for ABT the right to continue use of the Localized Version or Extension or infringing part thereof; or (b) modify or amend the Localized Version or Extension or infringing part thereof, or replace the Localized Version or Extension or infringing part thereof with other materials having substantially the same or better capabilities. 9.3 Prosecution of Infringers. ABT and ABT/UK shall give each other written notice of any acts of infringement by third parties involving intellectual property rights relating to the Localized 17 18 Version, Extensions, Software, Business Procedures, or ABT Brand anywhere in the Territory of which ABT or ABT/UK has knowledge, and the parties shall consult together with a view to determine the course of action, if any, to be taken in such circumstances. ABT will have the right to take action to enforce such rights. If the parties are unable to agree on any such course of action to be taken, then ABT shall authorize ABT/UK to take such actions as ABT/UK considers necessary or appropriate and ABT/UK will be entitled to take such actions at ABT/UK's expense. Each party shall render to the other any assistance requested by the other in proceedings against an infringer within the Territory, at the other party's expense. Any damage that might be awarded will, after deduction of actual costs, be awarded to the party that undertakes legal action. 10. Confidential Information 10.1 Obligations. The parties acknowledge and agree that the Confidential Information disclosed by one party (the "Disclosing Party") to the other party (the "Receiving Party") directly or indirectly (which information is marked as "proprietary" or "confidential" or, if disclosed orally, is designated as confidential or proprietary at the time of disclosure) hereunder constitutes the confidential and proprietary information of the Disclosing Party. The Receiving Party shall retain in strict confidence and not disclose to any third party any Confidential Information without the Disclosing Party's express written consent, and the Receiving Party shall not use such Confidential Information except to exercise the rights and perform its obligations under this Agreement. Without limiting the foregoing, each party shall use at least the same procedures and degree of care which it uses to protect its own Confidential Information of like importance, and in no event less than reasonable care. 10.2 Exceptions. The Receiving Party shall be relieved of this obligation of confidentiality to the extent it can demonstrate that any such information is: publicly available, already in the Receiving Party's possession at the time of disclosure and not subject to a confidentiality obligation, obtained by the Receiving Party from third parties without restrictions on disclosure, independently developed by the Receiving Party without reference to Confidential Information, or required to be disclosed by order of a court or other governmental entity or stock exchange, or disclosed to business or legal advisors acting under a duty of confidentiality. 10.3 Source Code Protections. ABT/UK shall not under any circumstances distribute the source code for the Software in any manner. ABT/UK shall reproduce and shall not obscure or remove any marking on any copy or Derivative Work of the source code for the Software. In addition, each copy or Derivative Work of the source code for the Software must be marked as the confidential and proprietary property of ABT to which access is restricted, and ABT/UK shall keep and use the source code for the Software solely at ABT/UK's secure development facilities under password protection. ABT/UK agrees to limit access to the source code for the Software twenty-four (24) hours a day, and strictly to those employees or Contractors to whom access is reasonably necessary in order to carry out the permitted uses of the source code for the Software hereunder. ABT/UK shall keep records of all 18 19 persons who have access to the source code for the Software. At ABT's request, ABT/UK agrees to provide such records to ABT for review. 10.4 Contractors. ABT/UK may appoint a third party contractor ("Contractor") to assist ABT/UK in ABT/UK's modification or implementation of the Localized Version as authorized hereunder; provided, however, that any such Contractor's access to and use of the Software (including the Localized Version): (a) will only be permitted pursuant to a signed written agreement between ABT/UK and such Contractor that contains terms at least as restrictive as those set forth in this Section 10, (b) protects ABT's proprietary rights in the Software to the degree set forth in this Agreement, and (c) grants the Contractor no rights in the Localized Version beyond those expressly granted hereunder ("Contractor Agreement"). Such agreement must be approved in writing by ABT prior to its execution. ABT may perform technical oversight of all work performed by a Contractor in accordance with this Section 10.4. 10.5 Notification of Security Breach. ABT/UK shall notify ABT promptly in the event of any breach of its security of which ABT/UK becomes aware, under conditions in which it would appear that the trade secrets contained in the source code for the Software or the Localized Version were prejudiced or exposed to loss. ABT/UK shall, upon request of ABT, take all other reasonable steps necessary to recover any compromised trade secrets disclosed to or placed in the possession of ABT/UK by virtue of this Agreement. The cost of taking such steps will be borne solely by ABT/UK, unless ABT willfully caused the breach. 10.6 Injunctive Relief In the event of breach of the provisions of Section 10.1 or 10.3, the non-breaching party will have no adequate remedy at law and will be entitled to seek immediate injunctive and other equitable relief, without the necessity of showing actual money damages. 11. Term and Termination 11.1 Term. This Agreement and the licenses granted hereunder will be effective as of the Effective Date and will continue in full force and effect for a term of twenty (20) years (the "Term") after the Launch Date, unless terminated as set forth in this Section 11. 11.2 Termination. This Agreement may be terminated only as follows, if any of the following events ("Termination Events") occur: (a) Termination at Will. ABT/UK may terminate this Agreement, for any reason or no reason, upon no less than one hundred eighty (180) days prior written notice to ABT; however, such notice may not be given before the date one (1) year after the Launch Date. (b) Nonpayment of Fees. In the event that: (i) ABT/UK fails to pay the Fees as they become due, in accordance with Section 5 above, and (ii) fails to do so after sixty (60) days written 19 20 notice thereof, ABT may terminate this Agreement upon written notice to ABT/UK; provided, however, that: (i) ABT may terminate this Agreement based on non-payment of Fees only if. (A) the cumulative amount of unpaid Fees is more than sixty-two thousand five hundred dollars ($62,500); or (B) any Fees in excess of ten thousand dollars ($10,000) are unpaid for more than ninety (90) days. Notwithstanding the above, ABT shall continue to have the right to seek damages from ABT/UK, and seek attorneys' fees under Section 15.14. (ii) In all events, if ABT attempts to terminate this Agreement under this Section 11.2(b), and the Fees due to ABT are subject to a good faith dispute, then either party may initiate an arbitration proceeding in accordance with Section 15.13(c), and the Agreement shall remain in force during such arbitration provided that ABT/UK continues to pay ongoing Fees into an escrow account to be distributed based on the findings of the arbitrator. (c) Default. In the event that either party defaults in the performance of a material non-monetary obligation under this Agreement (other than nonpayment of Fees as set forth in Section 11.2(b)(i) above, then the non-defaulting party may provide written notice to the defaulting party indicating: (i) the nature and basis of such default with reference to the applicable provisions of this Agreement; and (ii) the non-defaulting party's intention to terminate this Agreement. If such default is amenable to cure within thirty (30) days, the non-defaulting party may seek to terminate this Agreement under this Section 11.2(c) in the event that such material default is not cured within such thirty (30) day period. If such default is not amenable to cure within thirty (30) days, then the non-defaulting party may seek to terminate this Agreement if the defaulting party has not made significant and ongoing attempts to cure such default within thirty (30) days, or if the defaulting party has not cured such default as soon as possible thereafter. In either case, upon the expiration of such cure periods the non-defaulting party may initiate an arbitration proceeding to terminate this Agreement in accordance with Section 15.13(c). The parties shall instruct the arbitrators to make a determination as to whether a material default has occurred within thirty (30) days after the arbitration proceeding is initiated. If the arbitrators deter-mine that a material default has occurred, the non-defaulting party may terminate this Agreement immediately upon written notice. (d) Severable Termination for ABT/UK. In the event that ABT breaches and fails to cure its obligations under this Agreement and ABT/UK obtains the right to terminate this Agreement as contemplated in Section 11.2(c) above, ABT/UK shall have the right, after the date three (3) years after the Effective Date, to terminate this Agreement as to its obligation to pay Minimum Services Fees under Sections 3, 5.3, and the Services Agreement, and as to ABT's obligation to provide Services thereunder, but that all other provisions of this Agreement shall remain in force, however, each party will continue to be obligated to perform its duties under Section 2.6; or 20 21 (e) ABT may terminate this Agreement immediately upon written notice if ABT/UK: (i) terminates or suspends its business; (ii) admits in writing its inability to pay its debts as they Mature, makes an assignment for the benefit of creditors, or becomes subject to direct control of a trustee, receiver or similar authority; or (iii) becomes subject to any bankruptcy or insolvency proceeding under federal, foreign, or state statutes; or (f) ABT/UK may terminate this Agreement immediately upon written notice to ABT in the event that the final Deliverable (as defined in the initial Work Order referenced in Section 3.1(c)) is not accepted by March 31, 1999. Such termination will be deemed a termination at will, and will be ABT/UK's sole remedy and ABT's sole liability for ABT's failure to deliver conforming Initial Localization Services under Section 3.1(c). ABT/UK's ability to terminate under this Section 11.2(f) will cease upon the Launch Date. If ABT/UK terminates this Agreement under this Section 11.2(f), ABT/UK will not be obligated to pay any amounts not already due as of the date of termination under the Services agreement or under this Agreement; however, ABT/UK will not be entitled to any refund of any amount payable under this Agreement or the Services agreement. 11.3 Effect of Termination. (a) Unwind Services. Upon any expiration or termination of this Agreement in accordance with Sections 11.2(a), (b), or (c) that takes place after the first date ABT/UK makes the World Wide Web site for the Local Business generally available on the World Wide Web, each party shall continue to perform its obligations under this Agreement, for a period of up to one hundred eighty (180) days following the effective date of termination ("Unwind Services"). In consideration of the performance by ABT of such services and ABT/UK's continued use of the Localized Version, Business Procedures and ABT Brand during such period, ABT/UK shall continue to pay ABT the amounts set forth in Section 5, and the Agreement shall be deemed to continue in force until the termination of the Unwind Services. (b) Survival. Upon termination of this Agreement in accordance with the above provisions, the rights and licenses granted under this Agreement will immediately terminate except as otherwise stated herein. The terms and conditions of the following Sections will survive termination or expiration of this Agreement: 1, 2.3, 2.7, 4.3, 4.4, 5.6, 7.2, 8, 9, 10, 11.2, 11.3, 11.4, 13 and 15, as well as any payment obligations in accordance with Section 5 which accrued prior to expiration or termination hereof. (c) Return of Materials. Within thirty (30) days after the date of termination or discontinuance of this Agreement for any reason whatsoever, ABT/UK shall, at ABT's option, return or destroy any copies of the Software, Documentation, Business Procedures and any other Confidential Information in its possession that is in tangible form. ABT/UK shall furnish ABT with a certificate signed by an executive officer of ABT/UK verifying that the same has been done. 21 22 (d) Non-Competition. If this Agreement is terminated by ABT/UK under Section 11.2(a), or if this Agreement is terminated by ABT under Section 11.2(b), (c) or (e) before the end of the Term, then during the period between termination of this Agreement and two (2) years after termination of the Agreement, ABT/UK shall not operate a Local Business. If ABT/UK assigns this Agreement to another party in accordance with the terms of Section 12, this obligation will ran to ABT/UK, and to such assignee. Nothing in this Section 11.3(d) will be construed to limit the ability of ABT/UK or its affiliates to operate Web sites that primarily promote the automobiles and related products of a particular manufacturer, for instance, an Internet site promoting automobiles featuring the brand of Chrysler Corporation. 11.4 License if ABT Enters Bankruptcy. If, at any time during the Term, ABT: (a) files a voluntary petition in bankruptcy under Chapter 7 of 11 United States Code (the "Bankruptcy Code"); or (b) has an involuntary petition in bankruptcy filed against it under Chapter 7 of the Bankruptcy Code, which petition is not dismissed within ninety (90) days, ABT/UK may elect to retain its right in the licenses granted in this Agreement, subject to the terms of this Agreement, in accordance with Chapter 3, Section 365(n) of the Bankruptcy Code. The licenses granted in this Agreement will be deemed licenses of "intellectual property" under Section 365(n) of the Bankruptcy Code. 12. Nonassignment/Binding Agreement. Neither this Agreement, nor any rights under this Agreement, may be assigned or otherwise transferred by ABT/UK, in whole or in part, whether voluntary, or by operation of law, including by way of sale of assets, merger or consolidation, without the prior written consent of ABT. ABT may assign all its rights and obligations under this Agreement to an Affiliate of ABT. Any permitted assignee must agree in writing to be bound by all the terms and conditions of this Agreement. Subject to the foregoing, this Agreement will be binding upon and inure to the benefit of the parties and their respective successors and assigns. 13. Non-Solicitation. Each party acknowledges and agrees that the technical and development employees and consultants of the other party are a valuable asset of such party and are difficult to replace. Accordingly, each party agrees that, for the Term and for a period of two (2) years thereafter, it will not offer employment as an employee, independent contractor, or consultant to any such employee or consultant of the other party. In the event of a breach of the provisions of this Section 13, the parties agree that it would be difficult to determine the amount of actual damages that would result from such breach. The parties further agree that in the event of a breach of the provisions of this Section 13, the breaching party shall pay the non-breaching party liquidated damages of $25,000 for each such breach, which is the parties' good faith estimate of the amount of damages to the non-breaching party from such breach. 14. Notices. Any notice, submission, or communication required or permitted under the terms of this Agreement, or required by law, whether or not so required elsewhere in this Agreement, must be in writing and must be: (a) delivered in person, (b) sent by first class registered mail, return receipt requested, or air mail, as appropriate, or (c) sent by overnight air courier; in each case properly posted and fully 22 23 prepaid to the appropriate address set forth below. Either party may change its address for notice by notice to the other party given in accordance with this Section 14. Notices will be considered to have been given at the time of the earlier of: (p) actual delivery in person, (q) the date of a receipt of such notice signed by an authorized representative of the party being notified, (r) the date of a written confirmation of receipt by the party being notified, or (s) thirty (30) days after deposit in the mail as set forth above. 15. Miscellaneous 15.1 Force Majeure. Neither party will incur any liability to the other party on account of any loss or damage resulting from any delay or failure to perform all or any part of this Agreement if such delay or failure is caused, in whole or in part, by embargoes, floods, acts of civil or military authority, fuel crisis, acts of God, strikes, lockouts, riots, acts of war, fires and explosions, but the inability to meet financial obligations is expressly excluded ("Force Majeure"). The time for performance will be extended for a period equal to the duration of the delay, but in no event longer than one hundred eighty (180) days. If, as a result of a Force Majeure, a party is unable to resume performance within such one hundred eighty (ISO) day period, the other party will have the right to terminate this Agreement. 15.2 No Waiver; Amendment. Any waiver of the provisions of this Agreement or of a party's rights or remedies under this Agreement must be in writing to be effective. Failure, neglect, or delay by a party to enforce the provisions of this Agreement or its rights or remedies at any time will not be construed and will not be deemed to be a waiver of such party's rights under this Agreement and will not in any way affect the validity of the whole or any part of this Agreement or prejudice such party's right to take subsequent action. This Agreement may not be amended, except by a writing signed by both parties. 15.3 Severability. If any term, condition, or provision of this Agreement is found to be invalid, unlawful or unenforceable to any extent, the parties shall endeavor in good faith to agree to such amendments that will preserve, as far as possible, the intentions expressed in this Agreement. If the parties fail to agree on such an amendment, such invalid term, condition or provision will be severed from the remaining terms, conditions and provisions, which will continue to be valid and enforceable to the fullest extent permitted by law. 15.4 Entire Agreement. This Agreement (including the Attachments and any addenda hereto signed by both parties) contains the entire agreement of the parties with respect to the subject matter of this Agreement and supersedes all previous communications, representations, understandings and agreements, either oral or written, between the parties with respect to said subject matter. 15.5 No Conflicting Provisions. No terms, provisions or conditions of any purchase order, acknowledgment or other business form that either party may use in connection with this Agreement have any effect on the rights, duties or obligations of the parties under, or otherwise modify, this Agreement, regardless of any failure of the other party to object to such terms, provisions or conditions. 23 24 15.6 Consent. Unless expressly provided otherwise in this Agreement, any prior consent of ABT that is required before ABT/UK may take an action may be granted or withheld in ABT's sole and absolute discretion. 15.7 Export Restrictions. ABT/UK understands that ABT is subject to regulation by agencies of the U.S. government, including, but not limited to, the U.S. Department of Commerce, which prohibit export or diversion of certain technical products to certain countries. ABT/UK warrants that it will comply in all respects with the Export Administration Regulations and all other export or re-export restrictions applicable to the technology and Documentation licensed hereunder. Further, ABT/UK shall cooperate as requested by ABT to ensure compliance with any export restrictions or licenses relating to the Software. 15.8 Press Releases. Neither party shall disclose to any third party the terms and conditions of this Agreement, except as required by the law, of any relevant jurisdiction, or to any securities exchange or regulatory authority or governmental body or quasi-governmental department or agency to which either party is subject, wherever situated (including without limitation the London Stock Exchange Limited, the Panel on Takeovers and Mergers, the Securities and Exchange Commission, and the U.S. Department of Justice) whether or not the requirement has force of law, in which case the party making such disclosure shall take all such steps as are reasonable and practicable in the circumstances to agree upon the contents of such disclosure with the other party before marking such disclosure. Either party may disclose the terms and conditions of this Agreement to their respective legal or business advisors with a need to know acting under a duty of confidentiality. Notwithstanding the above, at a mutually agreed time, as soon as possible but no later than sixty (60) days after the Effective Date, ABT and ABT/UK shall issue a mutually acceptable joint press release announcing the relationship contemplated by this Agreement. 15.9 Rights and Remedies. No exercise or enforcement by either party of any right or remedy under this Agreement will preclude the enforcement by such party of any other right or remedy under this Agreement or that such party is entitled by law to enforce. 15.10 Counterparts. This Agreement may be executed in counterparts, each of which so executed will be deemed to be an original and such counterparts together will constitute one and the same agreement. 15.11 Governing Law. This Agreement will be interpreted and construed in accordance with the laws of the State of California and the United States of America, without regard to conflict of law principles and excluding the 1980 United Nations Convention on Contracts for the International Sale of Goods. 15.12 Language. This Agreement is in the English language only, which language shall be controlling in all respects, and all versions hereof in any other language shall not be binding on the 24 25 parties hereto. All communications and notices to be made or given pursuant to this Agreement shall be in the English language. 15.13 Dispute Resolution. (a) Escalation. If a dispute otherwise arises under this Agreement, it should be referred to the President of each of the parties for resolution, and such persons shall use their best efforts to resolve the matter for no less than thirty (30) days. Any matter such persons are unable to resolve within such period may be submitted to the dispute resolution procedure set forth in Section 15.13 (b) or (c), as applicable. (b) Fast Track Resolution for Technical Disputes. For all disputes between the parties that relate to technical issues under this Agreement, which disputes cannot be resolved under Section 15.13(a), the parties shall refer the dispute to a single third party individual mutually agreed to by the parties, who possesses such technical expertise and impartiality to resolve the dispute, such approval of such individual not to be unreasonably withheld (the "Expert"). The parties shall each bear fifty percent (50%) of the Expert's expenses, and shall direct the Expert to issue a decision on the matter within fifteen (15) days, which decision shall be final and binding on both parties. If the parties are unable to agree upon an Expert, or upon whether a dispute is a technical dispute, notwithstanding the good faith efforts to do so, then the dispute shall be submitted to arbitration as set forth in Section 15.13(c). Except as expressly set forth to the contrary in this Section 15.13(b), any such fast track resolution will take place according to the procedures set forth in Section 15.13(c). (c) Arbitration. Any dispute or claim arising out of or in relation to this Agreement not resolved by Sections 15.13(a) or 15.13(b) above must be settled by binding arbitration under the Rules of Conciliation and Arbitration of the International Chamber of Commerce as presently in force ("Rules") and by one (1) arbitrator appointed in accordance with said Rules. Judgment on the award rendered may be entered in any court having jurisdiction thereof. The place of arbitration will be Orange County, California, U.S.A. Any monetary award must be calculated and denominated in U.S. dollars and the arbitration must be conducted in the English language. Notwithstanding the other provisions of this Section 15.13, either party may apply to any court of competent jurisdiction for injunctive or equitable relief 15.14 Legal Expenses. If there is a successful action by one party against the other party to enforce this Agreement or obtain damages as a result of any breach of this Agreement, then the prevailing party shall be entitled to recover from the other party, in addition to any damages, all costs and expenses incurred by the prevailing party in connection with the action, including reasonable attorneys' fees and court costs. 25 26 IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by duly authorized representatives on the dates set forth below. autobytel.com inc. ABT/UK By: By: -------------------------------- --------------------------------- Name: Name: ------------------------------ -------------------------------- Title: Title: ----------------------------- ------------------------------- Date: Date: ------------------------------ -------------------------------- Address: Address: --------------------------- ----------------------------- - ----------------------------------- ------------------------------------- 26 27 CONFIDENTIAL - WSGR DRAFT 11/20/98 ATTACHMENT A SOFTWARE: The Software will include all core business applications, including:
- --------------------------------------------------------------------------------------------------------------------------------- CATEGORY APPLICATION NAME DESCRIPTION - --------------------------------------------------------------------------------------------------------------------------------- Consumer Product Affinity Programs Restricted view of Consumer Web Interface customized for Affinity Partners. Users are limited to the web pages (functionality) specified by Affinity Partner. - --------------------------------------------------------------------------------------------------------------------------------- Finance Used by End-User Customers to apply for credit to buy/lease an automobile. - --------------------------------------------------------------------------------------------------------------------------------- Information Provider Used to provide New/Used Car Information to customers via links to various information Links providers. - --------------------------------------------------------------------------------------------------------------------------------- Insurance Hyperlink to Insurance Site(s). - --------------------------------------------------------------------------------------------------------------------------------- Mobalist Used by End-User Customers to sign-up for and monitor Mobalist Rewards account. - --------------------------------------------------------------------------------------------------------------------------------- New Car Request Used by End-User Customers to gather new car information and request a price quote. Process (FasTrak) - --------------------------------------------------------------------------------------------------------------------------------- Online Customer Used by End-Users to check on status of Purchase and Finance Requests. Service Center - --------------------------------------------------------------------------------------------------------------------------------- Quality Assurance Allow End-Users to answer QA survey questions. Survey (QA) - --------------------------------------------------------------------------------------------------------------------------------- Used Car Request Used by End-User Customers to gather used car information, review dealer used car Process (FasTrak) inventories, and make a used car purchase request. - --------------------------------------------------------------------------------------------------------------------------------- Dealer Interface Dealer Communication Used by ABT Contracted Dealers to manage purchase requests and customer contact System (DRT) information; Maintain Used Car Inventory information for Dealership(s). - --------------------------------------------------------------------------------------------------------------------------------- Dealer Management Contract Management Used by ABT Contract Administration department to manage contracts with subscribers (CM) including New Car (Postal), Used Car, Finance and DRT. - --------------------------------------------------------------------------------------------------------------------------------- Distribution [Dealer] Used by ABT Dealer Support Services (DSS) to set-up and maintain relationship with Management (RD) dealers. - --------------------------------------------------------------------------------------------------------------------------------- QA Survey (QA) Used by ABT DSS/Training to monitor customer satisfaction and closure rates; Dealer Performance. - --------------------------------------------------------------------------------------------------------------------------------- Financial Car matching Match vehicle make, model, series in ABT_PROD database to vehicles in GE Capital Processing database in order to determine residual values. - ---------------------------------------------------------------------------------------------------------------------------------
28 CONFIDENTIAL-WSGR DRAFT 11/20/98 Credit Union Faxing Faxes consumer purchase requests to Credit Unions for processing. (CU FX) Customer Financial Fax Faxes credit decisions to dealers for finance requests submitted by consumers. to Dealer (FinFaxDealer) Financial Status Provides system operations with access to processing statistics, error logging Monitor and recovery procedures for financial request processing system. (Financial Status) Finance/Customer E-mails credit decisions/information from financial institutions to consumers. Email (FML2) Bank Matcher, Bank Sends financial requests to and receives credit decision from financial institutions. Transfer, Bank Watcher (FSMFrame) Information Postal Code Updates Imports Postal Code related data from Postal Service, GDT. Import Postal Code Provider Centroids (Longitude, Latitude of center of zip codes). Interface Used Car Import/Export Import/Export Used Car data to/from information providers. VIN Decoding Import Import Vintek data. Vintek provides the information required to Decode VIN's. New/Used Car Import Intellichoice data including make, model, series, options and pricing Information Import information. MIS Financial Reports Reporting on Financial Requests. Reports are summarized by various (Financial) dimensions including: Time - day, week, month, quarter, year Type - Lease, Retail Intranet Basic management reporting, system operation monitoring, data maintenance and company/employee information. MIS/Billing Interface Used by ABT internal staff to pass billing data from ABT Core system to Dynamics (ABT's Internal Financial Accounting Application). QA Reports (QA) Reporting on Customer Satisfaction, Closure rates Time - day, week, month, quarter, year Geography - region, state, dealer Vehicle - make, model, series PR Type - New car or Used Car Contract - Paying, Non-Paying Dealers
29 CONFIDENTIAL-WSGR DRAFT 11/20/98
Standard Reports Reporting on Purchase Requests. Reports are summarized by various (Standard) dimensions including: Time - day, week, month, quarter, year Geography - region, state, dealer Vehicle - make, model, series PR Type - New Car or Used Car Contract - Paying, Non-Paying Dealers Various Base Network Much of the core functionality of the systems described above is Architecture & encapsulated in stored procedures/data tables in the following SQL Supporting Systems databases: ABT_PROD, ABT_FINANCE, ABT_INTERFACE.
MINIMUM ANNUAL LICENSE FEE: The annual Minimum Annual License Fee will be Eight Hundred Fifty Thousand Dollars ($850,000) payable in four (4) Fiscal Quarterly installments of Two Hundred Twelve Thousand Five Hundred Dollars ($212,500). ANNUAL MAINTENANCE FEE: The annual Minimum Maintenance Fee will be Two Hundred Fifty Thousand dollars ($250,000) payable in advance. 30 CONFIDENTIAL-WSGR DRAFT 11/20/98 ATTACHMENT B ABT BUSINESS PROCEDURES The following general principles will apply, in ABT/UK is described as the "ABT Entity." The parties will agree in good faith upon more detailed business procedures, and ABT/UK will use reasonable efforts to abide by the business procedures generally provided by ABT to its licensees. GENERAL ABT Entity will have a consumer focus and will supply consumer products and services at competitive prices, in a hassle free, haggle free environment. ("Universal Autobytel.com Philosophy") ABT Entity will strive to offer all automotive related products and services, including the purchase or lease of new and used vehicles from dealers, financing, insurance and the sale of warranty services, and after market products, if applicable. Additional products and services may be added to the basic model, but only in accordance with universal ABT philosophy (for example, consumer to consumer used car sales, dealer to dealer auctions and the Mobalist). CONSUMER ABT Entity will supply consumer with access to information on automotive products and services, including pricing information, specifications and other useful information to educate the consumer on automotive related matters. ABT Entity is to use a purchase request concept under which a consumer provides pertinent information and specifications on the vehicle the consumer wishes to purchase or lease. In addition, the ABT Entity will notify the consumer of purchase request's receipt, the dealer to whom the request was forwarded and provide a toll free number to call if purchase request is not responded to within a defined period of hours. Consumer personal information will be considered confidential and treated as such. It should not be sold or supplied to external sources without the permission of the consumer. Any such distribution of data should be made to reputable external partners only. DEALER The goal of the Universal Autobytel.com Philosophy is that dealers and manufacturer will benefit from supplying consumer products and services at competitive prices, in a hassle free, haggle free environment. 31 CONFIDENTIAL-WSGR DRAFT 11/20/98 ABT Entity must require each dealer to appoint at least one dedicated ABT Manager who is a salaried employee (not a commission salesman) whose function is to interact with the consumer from receipt of purchase request to delivery of the vehicle. The ABT Manager must respond to purchase requests within a defined period of hours. For new car transactions, there will be exclusive geographic (e.g. postal code based) territories for each auto manufacturer franchise; one dealer per territory for each auto manufacturer franchise. The size of each territory will be based on criteria such as population, average driving distance, auto manufacturer franchise popularity (based on new vehicle registrations), Internet penetration and household income levels. Dealers will be selected based on criteria such as reputation in community, consumer satisfaction, inventory, financial strength and ability to handle large volume of business. Each dealer will sign a contract (with rights of ABT Entity to cancel if the dealer does not meet certain minimum performance requirements) paying ABT Entity monthly marketing and software fees (the determination of the fees being made on a country by country basis). The ABT Entity may also receive additional fees from the offering of various complementary products and services to the consumer. ABT Entity will require the dealer to use the DRT system to process requests, manage customer contacts and record status of purchase requests through completion. The ABT Entity will train the ABT Manager, educate the owner of the dealership, the manager and other relevant personnel on all ABT procedures. Such training sessions will include periodic visits to dealerships, classes, updates and reviews of ABT systems and software. For used car transactions, the ABT Entity may include both dealers and independent dealers meeting ABT Entity standards (in accordance with the Universal Autobytel Philosophy). Used cars sold under ABT brand will be sold under a customer assurance program, which may include a money-back return or vehicle exchange policy and limited warranty policy. However, such a requirement will not apply to any "back lot" or exotic used car sales programs. ABT Entity will require dealers to maintain used car data in a timely manner. Dealers will be responsible for ensuring used car information is updated to reflect sales and/or availability. ABT ENTITY OPERATIONS ABT Entity will maintain a dealer relations organization to communicate with dealers and their ABT Managers. ABT Entity will maintain a consumer communication organization to answer consumer questions and complaints. 32 CONFIDENTIAL-WSGR DRAFT 11/20/98 ABT Entity will survey each consumer within a defined time after a purchase request is received. Surveys will be reviewed and the conclusions sent to the participating dealers on a monthly basis. ABT Entity will remove ABT dealers who do not comply with ABT standards set by ABT in each country (but adhering to universal ABT philosophy). ABT Entity will review all technical modifications/extensions with Autobytel.com CTO prior to the design, coding and implementation phases of each project. ABT Entity will abide to technology standards and direction provided by Autobytel.com. Any deviations from standards must be approved by the Autobytel.com CTO in advance of development and implementation. ABT Entity will ensure all Autobytel.com confidential proprietary and copyrighted materials are secured and used with at least the same care and procedures that the ABT Entity would use to protect its own confidential proprietary and copyrighted materials. ABT Entity will provide for 24x7 system availability to the consumer (Web Site) and dealers (DRT), with only short, off-peak downtime for planned or unscheduled maintenance. Additionally, ABT Entity will implement a disaster recovery/business continuity plan to handle potential system/facility outages. ABT Entity will, as soon as reasonably possible, implement a defined technical quality assurance process that provides for at least unit and system level testing of each significant system change. Autobytel.com will reserve the right to oversee QA procedures as necessary to ensure quality of customer/dealer experience with ABT systems. 33 CONFIDENTIAL-WSGR DRAFT 11/20/98 ATTACHMENT C ABT'S GLOBAL BRAND PROTOCOLS GLOBAL BRANDING PROTOCOL: INTRODUCTION TO GUIDELINES, PRACTICES AND PROCEDURES Introduction The Auto-By-Tel Corporation has recently changed its name to autobytel.com inc. and is currently in the process of conducting brand positioning research, which will be complete in September of 1995. Upon completion of this research, autobytel.com inc. will issue an update to its global brand standards protocol (and look book), containing all of the new brand identity materials. In the interim the old book is attached as an example of its contents as well as this introductory document which is designed to address some of the more immediate needs. New Logo Our new logo embodies some of our initial learning. We have chosen a mark symbolizing a road, which signifies a destination that leads to Autobytel.com as opposed to an automobile icon, which is more predictable. This mark is highly differentiated from other companies in the category and positions autobytel.com inc. as the leader. The new logo is reliable, innovative, trustworthy, contemporary yet timeless. The idea of a road leading to a destination is empowering for the consumer, reminding them that they are in the driver's seat when buying through autobytel.com inc. The conveying of the concept of a destination will create an association with the brand over time. The logo will be adapted to each country by replacing the domain type that is relevant to that country; for example, autobytel.se, autobytel.ca, autobytel.uk, etc. Also the selling line can be inserted immediately in the lower left. Full treatments of the logo will be reviewed when the new look book is issued. Purpose and Function of Global Standards The purpose of the global brand standards is to clearly define and articulate the brand's core values and ensure that the brand's positioning remains consistent and properly communicated throughout all forms of marketing communication across the globe. Since a brand is a promise of an experience, it is important that it be comprised of the intangible as well as the tangible values in order to best create an enduring relationship 34 CONFIDENTIAL-WSGR DRAFT 11/20/98 between Autobytel.com and its stakeholder target constituencies - shareholders, consumers and dealers alike. What Does the Standard Address The image below graphically illustrates the intangible components (on the right), which the global brand protocol is designed to address. Purpose and Intent of autobytel.com inc.'s "Global Brand Protocol and Look Book" The purpose of the global brand protocol and "Look Book" when complete, will be to aid Autobytel.com, all its companies, subsidiaries, partners, and licensees to properly administer and steward autobytel.com inc.'s intangible assets - the brand. It is not designed to police licensees: but rather to ensure that the tenets of strong branding be observed for Autobytel.com so that all collateral, business, advertising, and web site creative and content guarantee quality and consistency of message. This will ensure that the net impression left in the mind of target audience is relevant, differentiated, and enduring. Differentiating Autobytel.com by experience (emotional bond) with the customer, versus just the key rational benefits (e.g. low-cost, haggle-hassle-free, etc.) will ensure the success of Autobytel.com. Role of Autobytel.com Brand Management It is the role of Autobytel.com Corporate Marketing to clearly articulate and communicate the brand's core value, identity, positioning, and Global Brand Protocol to all autobytel.com inc. companies, subsidiaries, divisions, partners and licensees. Role of the Autobytel.com Global Brand Agency It is the role of the global brand agency to develop, create, recommend and steward autobytel.com inc.'s brand positioning so that it conforms to autobytel.com inc.'s brand values. They have the responsibility of managing the Autobytel.com brand communications on a global scale while recognizing local needs. In this role the agency will steward the brand with regards to the quality and consistency of the brand's global advertising. Role of the Local Agency It is the role of the local country agency to create successful advertising that conforms to autobytel.com inc.'s brand positioning. 35 CONFIDENTIAL-WSGR DRAFT 11/20/98 A LOOK AT THE REQUIREMENTS, PROCESS AND INTERACTION BETWEEN autobytel.com inc.'s GLOBAL BRAND AGENCY AND THE LOCAL COUNTRY'S AGENCY AS IT RELATES TO ADVERTISING Generally speaking, autobytel.com inc.'s advertising (visual and copy content) must be in synergy with the brand's core values and comply with the brand's positioning strategy as will be stated in the "Global Brand Protocol & Look Book" (after the brand positioning project is completed in September). While this book is dynamic and periodic updates should be expected, it is our intent to develop an enduring brand positioning, which should remain in effect over a number of years. All decisions regarding the appropriateness of Autobytel.com advertising will be measured against this benchmark. Some general requirements and procedures which you should expect to see outlined in the Global Brand Protocol about Autobytel.com advertising follows: Creative All creative formats and units must: Feature the appropriate upper and lower case treatment of the company name (e.g. autobytel.com inc., and Autobytel.com, etc.) Feature the autobytel.com inc. logo Feature the Autobytel.com tag-line (which will be translated by the global brand agency into the appropriate language for each county in a way that is mutually agreeable so that it mutually satisfies the requirements of both the brand and country's cultural environment.) Feature the appropriate Autobytel.com URL (Uniform Resource Locator) for the country involved (e.g. autobytel.com, autobytel.ca, autobytel.uk, etc.) reflect the highest level of moral and ethical standards within the community to which the commercial's message is to be conveyed reflect the brand's recommended look and feel (e.g. color palettes, typefaces, imagery, etc.) of which examples will be provided in the look book. Autobytel.com strongly urges all licensees to use the network affiliate of the global brand agency. If for any reason, the licensee utilizes an agency that is not part of the global brand agency's network, the following will apply. 36 CONFIDENTIAL-WSGR DRAFT 11/20/98 Creative Procedure Each licensee does not need to submit creative concepts and executions to Autobytel.com for prior approval. But it is required that each country submit copies of all creative materials to autobytel.com inc.'s global brand agency at least quarterly. While it is not autobytel.com inc.'s intention to police creative, should the marketing materials not conform to the brand's positioning, Autobytel.com reserves the right to advise the country to discontinue the use of any creative that does not properly comply. In the unlikely event that this should occur, the country will be required to discontinue use of the materials within 45 days. Autobytel.com strongly encourages the country's local agency to implement an on-going dialogue with the global brand agency (a contact name will be issued). The frequency and format for this communication can be mutually agreeable to suit the needs and requirements of both parties, and may expand and contract based upon the need of each party. Media Procedure Each country can determine the specific marketing communications mix (e.g. PR, Advertising, Promotion, etc.) selection of media (e.g. Internet, TV, Radio, etc), and selection of specific media vehicles (e.g. stations, publications, etc), that is most appropriate for its culture and environment. autobytel.com inc. may volunteer from time to time, the sharing of information about media that has been particularly successful in other countries across the globe. We will encourage that all partners and licensees share information about what is/isn't working for the benefit of aggregated learning. However, it will be required that information about marketing communication mix and media plans be shared and submitted to Autobytel.com Corporation on at least a bi-annual basis. This may be submitted either in a written or digital format. Fees for Global Brand Management (For countries not using the local affiliate of autobytel.com inc.'s global agency) autobytel.com inc.'s global brand agency will be appropriately organized to steward the brand, bring strategic value to autobytel.com inc. and its licensees, and to facilitate communication among the parties. If the licensee does not use a local agency that is an affiliate of the global agency, autobytel.com inc. will charge the licensee for any expenses associated with stewarding the brand. ADVERTISING OPPORTUNITY ON autobytel.com inc.'s WEBSITE autobytel.com inc. will offer its licensees an opportunity to participate in its global web site advertising initiative. autobytel.com inc. plans to offer advertising on its U.S. site, and on each 37 CONFIDENTIAL-WSGR DRAFT 11/20/98 country's local site if the country chooses to participate. If the licensee participates, autobytel.com inc. will require to country's site to allocate 50% of the total pages served and inventory. In return, autobytel.com inc. will offer licensees the opportunity to share in 50% of the revenues generated after expenses through this sale. If the licensee is interested, additional details will be provided after this program is finalized. In the interim, here are some examples of the guidelines: Site must be constructed to accommodate advertising Screen real estate positioning must conform to autobytel.com inc.'s global advertising standards (currently this is a top right position and 3 IAB unit sizes will be utilized 50% of ad inventory (equal to approximately 50% of total pages served) will be allocated to this effort. Licensee has 6 months after launch of site to have prepared for advertising In Closing, please refer to the attached Global Brand Protocol and Look Book, which is currently in development. A number of sections have been added since the last submission. 38 CONFIDENTIAL-WSGR DRAFT 11/20/98 autobytel.com inc.'s new U.S. Web site, launched 07/31/98 [GRAPHIC] Note: Upon completion of the brand positioning, the new selling line will appear below in the top ledge frame of the site. 39 ATTACHMENT D SERVICES AGREEMENT AGREEMENT FOR CONSULTING BY AUTO-BY-TEL This Agreement for Consulting ("Agreement") is made and entered into as of the ___ day of ___________, 199_ by and between autobytel.com inc., a Delaware corporation with offices at 18872 MacArthur Boulevard, Irvine, California, 92612 ("APT"), and Auto by Tel UK Limited, a ___________ corporation with offices at _____________ ("ABT/UK"). The ABT/UK desires to retain ABT as an independent contractor to perform certain development and consulting services for the ABT/UK as described in the License and Services Agreement between the parties dated _______________ ("License and Services Agreement"), and ABT is willing to perform such services on terms set forth more fully below. In consideration of the mutual promises contained herein, the parties agree as follows: 1. SERVICES. (a) Work Orders. The parties may from time to time agree upon certain software development and related services to be provided by ABT under this Agreement ("Services"). The parties shall develop a description of such Services in reasonable detail ("Work Order") in a form substantially as set forth in the Work Order. ABT agrees to perform for the ABT/UK the services described in each Work Order on the terms and conditions set forth therein. The parties acknowledge that ABT/UK may have certain obligations under each Work Order, and all of ABT's obligations will be subject to the prompt performance of ABT/UK's obligations thereunder. In addition, any delays in ABT's performance of the Services due to allocation of ABT's development resources in accordance with requests of ABT/UK for additional Services will not be deemed a breach of this Agreement. The parties expressly agree that ATTACHMENT E to the License and Services Agreement will be the initial Work Order for this Agreement. (b) Change Orders. Any changes to Specifications ("Change Orders") are subject to mutual agreement. All Change Orders must be coordinated through a single point of contact for each party, and approved in advance in writing by CEO of ABT/UK and the CTO of ABT. The parties will discuss any proposed Change Order, and ABT will use reasonable efforts to estimate any additional fees that would result from changed or additional Services to be performed under the Work Order. If the parties cannot agree on whether a Change Order should be implemented, or upon the related fees, ABT/UK may, at its sole option and discretion, continue with the Work Order as specified before the Change Order, or terminate the Work Order and pay ABT for all services performed up to the effective date of termination. In such a case, ABT shall deliver to ABT/UK all work in process not yet delivered to ABT/UK under the Work Order; provided, however, that such work in process will be provided "as is," not subject to the warranty in Section 10(a). (c) Change Orders due to Technical Infeasibility. If ABT decides, in its reasonable discretion, during performance of a Work Order, that the Work Order is technically infeasible or that ABT, despite using its best efforts, will not be able to complete the Work Order, ABT shall notify ABT/UK that a Change Order is required to complete the development, and shall propose a Change Order to ABT/UK. ABT/UK may, at its sole option and discretion, agree to the Change Order, or terminate the Work Order, 40 in which case, (a) ABT shall deliver to ABT/UK all work in process not yet delivered to ABT/UK under the Work Order; provided, however, that such work in process will be provided "as is," not subject to the warranty in Section 10(a); (b) ABT/UK will not be obligated to pay for the work performed on that Work Order after the last-completed Milestone; and (c) ABT shall provide a reasonable number of hours of free technical support to assist ABT/UK to perform the remainder of the Work Order by itself or through a third party, up to 10% of the total hours for which ABT/UK has paid in connection with the Work Order. 2. COMPENSATION (a) Services. ABT/UK shall pay ABT for performing the Services as shown in the Work Order. (b) Expenses. The ABT/UK shall also reimburse ABT for the reasonable actual travel and living expenses of its personnel engaged in the performance of Services at locations other than ABT facilities, together with other reasonable out-of-pocket expenses incurred in connection with performance of the Services. ABT shall adhere to any travel policy reasonably promulgated by ABT/UK, provided that ABT may incur expenses up to a total of ________ dollars without ABT/UK's prior approval. (c) Payments. ABT shall invoice ABT/UK for all amounts on or after the due date. Payment terms shall be net ____ days. Any amounts due ABT under this Agreement not received by the date due shall be subject to a service charge of one and one-half percent (1.5%) per month, or the maximum charge permitted by law, whichever is less. Any payment terms set forth in the applicable Work Order will take precedence over this Section 2(c). 3. CONFIDENTIALITY. All information disclosed under this Agreement will be subject to Section 10 of the License and Services Agreement. 4. OWNERSHIP. The work product resulting from the Services shall consist of, and shall operate in conjunction with, multiple elements of intellectual property, as set forth in the Work Order, approximately in the form set forth in Exhibit B. The parties' respective rights with respect to such intellectual property shall be as set forth below. For purposes of this Agreement, the term "ownership" shall refer to ownership of all intellectual property rights including, but not limited to, all patent, copyright, trade secret and trademark rights, as applicable, with respect to the subject intellectual property: (a) ABT/UK Materials and Pre-Existing ABT/UK Materials. For all materials designated as "ABT/UK Materials" in the Work Order, ABT agrees that such materials are the sole property of the ABT/UK, and shall be considered "works made for hire" as that term is defined in the United States Copyright Act. ABT further agrees to assign (or cause to be assigned) and does hereby assign fully to the ABT/UK all such works and the intellectual property rights relating thereto. For all materials designated as "Pre-Existing ABT/UK Materials" in the Work Order, ABT agrees that such materials are the sole property of the ABT/UK, and ABT/UK hereby grants to ABT a non-exclusive, non-transferable, royalty-free, fully paid up license to use, reproduce, and prepare derivative works of such materials solely for the purpose of performing ABT's obligations under this Agreement. (b) Third Party Materials. For all materials designated as "Third Party Materials" on the Work Order, the parties hereby agree that such materials shall be necessary for ABT/UK to use the ABT/UK 41 Materials or ABT Materials, and ABT/UK shall be solely responsible for obtaining necessary licenses to the Third Party Materials. (c) Pre-existing Materials and ABT Materials. For all materials designated as "Pre-existing Materials" or "ABT Materials" in the Work Order, ABT/UK agrees that such materials are the sole property of the ABT. All work product resulting from the Services will be deemed "ABT Materials" unless otherwise designated in the Work Order. ABT hereby grants to ABT/UK a license to use the ABT Materials as part of the Software, set forth in the License and Services Agreement. No other grants of licenses or rights to ABT/UK shall be implied from the provisions stated in this Agreement. ABT/UK shall not obliterate or remove and will reproduce ABT's intellectual property notices contained in the ABT Materials or Pre-existing Materials. (d) Further Assurances. Each party agrees to execute any additional documents deemed reasonably necessary to effect and evidence the other party's rights with respect to the intellectual property elements set forth above. 5. REPORTS. Except as otherwise set forth in the applicable Work Order, ABT agrees that it will, approximately once per month during the term of this Agreement or any extension thereof, keep the ABT/UK advised as to ABT's progress in performing the Services hereunder and that ABT will, as requested by the ABT/UK, prepare written reports with respect thereto. It is understood that the time required in the preparation of such written reports shall be considered time devoted to the performance of ABT's Services. 6. TERM AND TERMINATION (a) Term. This Agreement will commence on the date first written above and will continue until final completion of the Services or termination as provided below. (b) Termination. The ABT/UK may terminate this Agreement or any Work Order at any time upon giving ten (10) days' prior written notice thereof to ABT, provided, however, that ABT/UK shall pay ABT for any Services performed up to the effective date of termination, and, promptly upon ABT's request, pay all of ABT's sunk costs related to any terminated Work Order, including without limitation any cancellation payments to third parties to terminate contracts entered into by ABT in reliance upon the Work Order. ABT shall deliver any work in process promptly after such payments. Such work in process will be provided "as is," and will not be subject to the warranty in Section 10(a). Either party may terminate this Agreement upon thirty (30) days' notice of any uncured material breach of this Agreement by the other party. (c) Survival. Upon such termination all rights and duties of the parties toward each other shall cease except Sections 3, 4, 8, 9, 10, 11, 12, and 13 shall survive termination of this Agreement. 7. ASSIGNMENT. Neither this Agreement nor any right hereunder or interest herein may be assigned or transferred by either party without the express written consent of the other. 8. INDEPENDENT CONTRACTOR. Nothing in this Agreement shall in any way be construed to constitute ABT as an agent, employee or representative of the ABT/UK, but ABT shall perform the Services hereunder as an independent contractor. 42 9. ARBITRATION. The parties agree that any dispute or controversy arising out of or relating to any interpretation, construction, performance or breach of this Agreement will be resolved as set forth in the License and Services Agreement. 1O. WARRANTY AND DISCLAIMER. (c) ABT represents and warrants to ABT/UK that all software deliverables specified in any Work Order ("Software"), in the form delivered to ABT/UK, will perform in substantial accordance with the specifications therefor in the Work Order, and any other specifications developed in writing pursuant to the Work Order. If the Software does not perform as warranted, ABT shall use reasonably diligent efforts to correct the Software in accordance with the escalation procedures in Attachment F to the License and Services Agreement. The foregoing are ABT/UK's sole and exclusive remedies for breach of such warranty. The warranty will apply only if the then-current version of the Software has been properly installed and used in accordance with the instructions for use. (b) OTHER THAN AS EXPLICITLY SET FORTH IN THIS SECTION 12, ABT DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING ANY AND ALL IMPLIED WARRANTIES OF TITLE MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND NON-INFRINGEMENT. 11. LIMITATION OF REMEDIES AND DAMAGES EXCEPT FOR CLAIMS ARISING FROM SERVICES PROVIDED HEREUNDER THAT ARE COVERED BY SECTION 9 OF THE LICENSES AND SERVICES AGREEMENT (A) EACH PARTY'S LIABILITY ARISING HEREUNDER SHALL BE LIMITED TO FEES PAID BY ABT/UK HEREUNDER, AND (B) NEITHER PARTY SHALL BE LIABLE FOR ANY CONSEQUENTIAL, INCIDENTAL, OR INDIRECT DAMAGES, INCLUDING WITHOUT LIMITATION DAMAGES FOR LOSS OF BUSINESS PROFITS AND/OR BUSINESS INTERRUPTION, WHETHER FORESEEABLE OR NOT, AND WHETHER ARISING IN CONTRACT, TORT, OR NEGLIGENCE, EVEN IF A REPRESENTATIVE OF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THESE LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. 12. ENTIRE AGREEMENT. This Agreement and the Exhibits hereto form the entire agreement of the parties and supersede any prior agreements between them with respect to the subject matter hereof. 13. WAIVER. Waiver of any term or provision of this Agreement or forbearance to enforce any term or provision by either party shall not constitute a waiver as to any subsequent breach or failure of the same term or provision or a waiver of any other term or provision of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. ABT/UK: ABT: By: By: ------------------------------- ---------------------------- 43 Print Name: Print Name: ----------------------- --------------------- Title: Title: ----------------------- ------------------------- 44 EXHIBIT A WORK ORDER FORMAT Services to be performed by ABT: Compensation of ABT: (a) Rate of pay: per --------- ---------- (b) Total payment limitation: -------------------------------- (c) Advance payment: ----------------------------------------- (d) Expenses authorized for reimbursement by the ABT/UK: (e) Other: --------------------------------------------------- (f) Expected duration of project: ---------------------------- ABT/UK: ABT: By: By: -------------------------------- --------------------------- Print Name: Print Name: ----------------------- ------------------- Title: Title: ---------------------------- ------------------------ 45 EXHIBIT B ABT/UK MATERIALS ABT MATERIALS THIRD PARTY MATERIALS PRE-EXISTING MATERIALS PRE-EXISTING ABT/UK MATERIALS 46 [*] Confidential Treatment Requested ATTACHMENT E WORK ORDER FOR INITIAL LOCALIZATION SOFTWARE DEVELOPMENTS DEVELOPMENT OF SPECIFICATIONS AND ACCEPTANCE TEST PLAN. The parties intend that the performance of the Services will result in the production of one or more specifications describing the requirements to modify the Software (the "Specifications"), which will include a delivery schedule, estimated fees and expenses relating thereto, and associated deliverables ("Deliverables") and milestones ("Milestones"), and a plan for acceptance testing of the Software modifications to be performed ("Acceptance Test Plan"). ABT/UK will provide a written request for the Services to ABT in a mutually acceptable format. ABT will prepare detailed Specifications for such Services in a mutually acceptable format. Each Specification must be agreed upon in writing by the CEO of ABT/UK and the CTO of ABT. If the parties cannot agree on the Specifications or Acceptance Test Plan, either party may terminate this Work Order upon written notice, and neither party will have any further obligations under this Work Order. Once the Specification is complete, the Specification will be added to this Agreement, and ABT shall perform the Services described therein. Any changes to a Specification after the Specification has been agreed to by the parties must be affected in accordance with the "Change Orders" section set forth below. The parties intend that there will be at least one Deliverable or Milestone for each month during which Services will be performed. ACCEPTANCE TESTING. Upon delivery by ABT of any Deliverable consisting of software or modifications thereto, ABT/UK shall review such Deliverable according to the Acceptance Test Plan to determine whether it conforms in all material respects to the applicable Specifications. ABT/UK shall, no later than ten (10) working days after receiving such Deliverable, review and accept such Deliverable that meets the Specifications. Deliverables submitted for acceptance that ABT/UK does not reject in writing within such period will be deemed accepted. If ABT/UK rejects such a Deliverable, ABT/UK shall provide ABT with written notice setting forth in reasonable detail why the Deliverable fails to meet the Specifications. ABT will have thirty (30) days from notice of rejection to resubmit such Deliverable to ABT/UK for acceptance. This procedure will be repeated until the Deliverable is accepted. If any Deliverable is rejected more than twice ABT/UK may terminate this Agreement in accordance with the provisions of this Work Order below entitled "Termination." The Acceptance Test Plan must include, at a minimum, for ABT to test the Deliverables according to the then-current quality assurance procedures of ABT. Such testing must be approved in writing by the CTO of ABT. Acceptance testing must be approved in writing by the CEO of ABT/UK. FEES. The fee for the Services (the "Fees") will be [*]. The development of the Specifications and Acceptance Test Plan will be on a time and materials basis. All work thereafter will be payable on a time and materials basis upon completion of Milestones, as set forth in the paragraph below entitled "Fees." As part of the Specifications, the parties will agree on a budget for each Milestone. ABT will inform ABT/UK as soon as reasonably possible, but in no event later than the next weekly status report, if it appears to ABT that the Services required to complete a Milestone will exceed the amount budgeted by more than 10%. In such event, if the parties cannot agree on a revised budget for such Milestone, either party may terminate this Work Order immediately upon written notice, and if this Work Order is terminated, neither party will have any further obligations under this Work Order. ABT/UK's payment of Fees is subject to the provisions of Attachment G entitled "Penalties for Large Developments." 47 PAYMENT. ABT shall invoice ABT/UK each month for Fees and expenses due for Services performed during the previous month. ABT/UK shall pay ABT any expenses set forth on each invoice, within (10) days after receipt of the invoice. ABT/UK shall pay ABT any Fees for a particular Milestone upon acceptance of such Milestone in accordance with the Acceptance Test Plan. ABT may credit against any such Fees any Minimum Maintenance Fees paid under the License and Services Agreement. TERMINATION. If a Deliverable is rejected more than twice, as described above in the Section entitled "Acceptance Testing," or if the final Deliverable is not accepted by ________ , ABT/UK may provide written notice of its intent to terminate (a) this Agreement; or (b) both, this Agreement and the License and Services Agreement in accordance with Section 11.2(c). If ABT/UK terminates this Agreement under this paragraph, notwithstanding Section 6(b) of this Agreement, ABT/UK may withhold any amount associated with the current Milestone that it has not yet paid. For avoidance of doubt, any Minimum Maintenance Fees paid under the License and Services Agreement will not be refunded. ABT/UK: ABT: By: By: -------------------------------- --------------------------- Print Name: Print Name: ----------------------- ------------------- Title: Title: ---------------------------- ------------------------ 48 ATTACHMENT F ABT ESCALATION PROCEDURES ABT - International Technical Support Escalation Procedure There will be one named primary technical support contact and one named backup support contact. All requests for technical support must come from the primary support contact. In the event the primary contact is not available, the backup contact may submit the technical support request. The primary support contact will be ____________ and the back-up support contract will be ______________. Changes to the primary and/or backup support contacts must be received by ABT in writing 1 business day prior to them being effective. All local Technical Support escalation will occur prior to any escalation to Auto-By-Tel International Technical Support team by either the primary or backup support contact. All infrastructure (Hardware/Network/Operating System/SQL Server/IIS Server) errors must be corrected prior to escalation. All Technical Support calls related to remaining APPLICATION ERRORS or SYSTEM ERRORS with severity level of ERROR OR HIGHER should be routed through the ABT - Corporate NTS Support person at 1-949-xxx-xxxx. Response time will be as specified in table below. All Technical Support calls that related to errors with severity level of WARNING or APPLICATION PROBLEMS (as defined below) should be referred to the ABT - - International Technology Support Coordinator at 1-949-xxx-xxxx. The quoted response times relate to the time required to have a qualified technical support person contact the person who made the technical support request. Depending on the severity of the problem, reasonably diligent efforts will be made to resolve the problem as soon as possible within the guidelines under RESPONSE LEVEL.
CATEGORY DESCRIPTION - -------------------------------------------------------------------------------- Application Problem Problem related to the use of a specific application program or module. The program does not appear to be functioning correctly, however, no error messages have been received. Application Error An application program or module has issued an error message. The error was not issued by the underlying technology, (i.e. the network, operating system, database management system server or internet server. System Error An error message has been received when executing an application or web page. The error message originated from the underlying technology, not the application itself.
SEVERITY DESCRIPTION RESPONSE TIME RESPONSE LEVEL WARNING Provides information or warning message only. 72 hours Effort during Does not impact the overall operation of Normal Bus. the system. Hours ERROR Error interrupts processing of a single 12 hours (Next Effort during 7 application or module. System operation Business Day) days/week 8am- continues to support primary business functions. 5pm, until resolved.
49 SEVERE ERROR Error interrupts processing of multiple and/or 4 hours Effort 7 primary business applications. Primary business days/week 5am operations are impacted. - 9 pm, until resolved FATAL ERROR Error causes system to become unavailable. All 1 hour Effort 7 x 24, business processing is aborted. until resolved
ABT will provide help desk support (i.e. other than reporting of Errors) by telephone from the hours of 2:30 p.m. to 5:30 p.m. Pacific Time on U.S. business days. ABT will handle all help desk inquiries during other hours by U.S. next business day fax/email back. THE FOLLOWING CHART EXPLAINS THE RESPONSIBILITIES OF ABT AND ABT/UK REGARDING MAINTENANCE AND SUPPORT. TECHNICAL SUPPORT/MAINTENANCE EXAMPLES
SITUATION ABT ABT/UK COMMENTS - --------- --- ------ -------- ABT/UK SQL Server configuration parameter Assisted if Requested Responsible for Fix Any Hardware, Operating (e.g. number of locks) is changed by (Maintenance Hours) System, or Third-party ABT/UK Staff for tuning purposes. SQL product configuration Queries begin failing because there are issues/changes/problems not enough locks available. should not be the responsibility of ABT. ABT/UK Servers are running the UK-English Assisted if Requested Responsible for Fix Same as above. ABT/UK should (rather than US English) versions of (Maintenance Hours) work with Microsoft (or the Microsoft software (NT, SQL Server, IIS). other vendor) technical An error occurs in one of those support to resolve problem. third-party programs that causes the system to fail. The error is related to the fact that the UK-English version of the software is at a slightly different revision level than the US version. ABT software uses a complicated algorithm Responsible for Fix. Since this is a "bug" that to calculate distance between two (Not counted against is part of the core system, (longitude, latitude) points. The ABT/UK Maint Hours) then it should be fixed as team notices that the distance calculation part of the ABT ongoing algorithm is not implemented correctly, maintenance efforts. which causes distances to be noticeably incorrect. The "bug" is present in the ABT system as well. It had not been detected.
50
SITUATION ABT ABT/UK COMMENTS - --------- --- ------ -------- ABT (on behalf of ABT/UK) changes Will perform Responsible for Fix Since the ABT development team the distance calculations throughout modifications simply made changes specified by the system to multiply the US Miles (Maintenance Hours) ABT/UK staff, AFT/UK staff is distance by a conversion factor to responsible for the correction. (Had arrive at an appropriate distance in the error occurred because the ABT UK Miles. ABT/UK analyst provided ABT Development team had not implemented with specification for the conversion the specification correctly, the fix calculation and factor. As it turns would be preformed by ABT at no cost out, the specification provided by the to the UK) UK analyst is incorrect. ABT/UK data provider changes format Assist if Requested Responsible for Fix ABT/UK is responsible for day-to-day of data extracts that feed ABT system. (Maintenance Hours) monitoring of systems and for all data ABT/UK staff attempt to import data inputs/outputs. Many system problems into ABT System. Importing this data can be traced back to problems with corrupts data in ABT System. Corrupted improper data in the system. It is not data causes ABT system to not operate always possible to differentiate a correctly. Depending on the extent of programming issue from a data issue the data corruption, this problem might up front. Sometimes, it takes several be detected immediately or it may be hours/days to determine the root cause so subtle that it is not detected for of a problem. ABT hours spent in this days or weeks. Problem Identification process will be charged as Maintenance Hours if the root cause of the problem is found to be ABT/UK responsibility.
51
SITUATION ABT ABT/UK COMMENTS - --------- --- ------ -------- ABT/UK IT staff develop several Assist if Requested Responsible for Fix Again, the relationship between the management reports that run against (Maintenance Hours) system performance problem and the production data. System performance execution of the management reports is significantly impacted by execution may not be clearly understood. For of the management reports. example, in the first month or two of operation, ABT/UK staff may develop these reports and the reports may run quickly because there is a relatively small amount of data in the database. Twelve (12) months into the operation of the system, the performance seems to be very poor compared to user expectations. Since those reports were written 9-12 months ago, the ABT/UK staff don't relate the performance problems to those reports. They complain to ABT (Technical Support) about the performance issues. ABT spends two weeks trying to analyze the problem. Eventually, the source of the problem is identified. ABT/UK should be responsible for the ABT efforts. ABT staff train ABT/UK IT staff on Assist if Requested Responsible for Re- ABT/UK is responsible for paying for operating procedures for software. (Maintenance Hours) Training re-training. ABT/UK IT turnover occurs, requiring additional training. Suppose ABT has a report that shows Assist if Requested Responsible for ABT/UK management notice a summary level purchase request (Maintenance Hours) Development of discrepancy between the overall counts sorted by dealer within sales new report without purchase request report and the region. Further, suppose the report exclusion summary report that excludes green excludes requests that are for green cars. They report it as a bug. cars because the ABT sales However, ABT technical support organization requested that exclusion doesn't consider this a bug because it when the report was originally meets the original specification. So it defined. (For whatever reason). is not changed. IF ABT/UK management required a new report that did not exclude green cars, that would constitute development work and be paid for with development hours. ABT/UK does not have access to Provide development License new Where a UK specific piece of third Infopower Delphi libraries. ABT/UK support per services product, pay for party software requires enhancements finds another product that provides agreement. development per to ABT/UK code ABT could do this similar functionality. ABT asks ABT services agreement. work under the Services Agreement, to incorporate this new product in but this would be chargeable to ABT/UK. place of the Infopower library. Microsoft introduces a new version of Upgrade to core Responsible for Where an upgrade to third party SQL Server. ABT incorporates new system provided to obtaining license for software demands adjustment to the version of SQL Server into ABT core UK for free under upgraded version of standard ABT system in order for it to
52
SITUATION ABT ABT/UK COMMENTS - --------- --- ------ -------- system. ABT Releases new version of Maintenance and SQL Server from operate effectively, this should be core system. Support Services. Microsoft. treated as an upgrade to the ABT Re-localization is ABT/UK would also system and therefore passed on to performed at pay for any ABT/UK free of charge under ABT/UK's cost per localization related Maintenance and Support Services. services agreement. to the new upgrade of the ABT system per services agreement.
53 ATTACHMENT G SOFTWARE DEVELOPMENT RESOURCE COMMITMENT PROCEDURES 1. PURPOSE. This document is designed to govern the processes for planning software Localization for ABT/UK, and to describe when ABT will be obligated to assign software engineers and other technical and management personnel to perform such Localization. In this document, assigning software engineers and other technical and management personnel to a project, and providing the services of those personnel, will be described as "committing resources." For avoidance of doubt, ABT has already agreed to its commitment of resources for the Work Order for the Initial Localization Services. 2. MAINTENANCE AND SUPPORT. This document describes the obligations of ABT to commit resources covered by the 2,500 annual pre-paid hours of Maintenance and Support services ABT is required to commit under the License and Services Agreement, as well as other resources that may be committed by ABT as described in this Attachment G. ABT will commit resources up to 1/12 of such 2500 hours (i.e. 208 hours) (the "Minimum Monthly Commitment") each month upon ABT/UK's request in its sole discretion. If ABT/UK does not request a resource commitment in a given month, or requests less than the Minimum Monthly Commitment in a given month, ABT/UK may carry forward each month's Minimum Monthly Commitment into the next 2 months. Any requests by ABT/UK for development that would require ABT to carry forward more hours, or carry forward any hours for more than one month, will be subject to the resource commitment requirements for small and large developments set forth in this Attachment G. 3. SMALL AND LARGE DEVELOPMENTS. Two processes will exist - one to manage small developments, where "small developments" means those that ABT estimates will be performed in 10 man days or less; and another to manage large developments, where "large developments" means those that ABT estimates will be performed in more than 10 man days. 4. MONTHLY MEETINGS. The parties will meet monthly to plan large and small developments. Progress on all developments will be monitored at such monthly meetings. All such meetings will take place at ABT corporate headquarters in Irvine. For large developments, ABT shall provide weekly updates by telephone or email. 5. SMALL DEVELOPMENTS. Small developments will have a lead time of 1 month; i.e. ABT may, if resources are available, but will not be obligated to, commit resources for any small development sooner than 1 month after the initial request by ABT/UK. ABT will be obligated to commit resources of a minimum of 20 man days in such month; 40 man days in the next month; and 60 man days in the next month. For example, if ABT/UK requests on January 1 for ABT to perform a small development, then ABT shall commit resources of 20 man days in February, 40 man days in March, and 60 man days in April. 6. LARGE DEVELOPMENTS. Large developments will have a lead time of 3 months; i.e. ABT may, if resources are available, but will not be obligated to, provide services for any Large Development any sooner than 3 months after the initial request by ABT/UK. ABT will be obligated to commit resources of a minimum of 60 man days in such month; 80 man days in the next month; and 100 man days in the next month. For example, if ABT/UK requests on January 1 for ABT to perform a 54 large development, ABT shall commit resources of 60 man days in April, 80 man days in May, and 100 man days in June. 7. OVERALL COMMITMENTS. For large and small developments combined, ABT will not be obligated to commit resources of more than 200 man days in any month. Of these 200 man days, ABT will not be obligated to commit resources of more than 60 man days to small developments. 8. PRIORITY OF DEVELOPMENTS. For each new development, ABT/UK must specify which ongoing developments, if any, will be prioritized above and below the new development. Any changes to priority of developments must be agreed in writing between the parties. Unless otherwise agreed, ABT may prioritize large developments over small developments, and may further prioritize resources that it is required to commit under this Attachment G using its professional judgment. For any development that takes priority over another, ABT may, in its sole discretion, use resources that would be otherwise committed to the lower priority development to finish the higher priority development in a timely fashion, if in ABT's reasonable discretion, it is necessary to do so. 9. PENALTIES FOR LARGE DEVELOPMENTS. For a large development, if ABT fails to complete the Work Order by the estimated completion date because ABT failed to commit the resources it was required to commit under this Attachment G, ABT shall, upon ABT/UK's request, complete the development, but ABT/UK will not be obligated to pay ABT for the price of the "undelivered hours," which means resources required to be committed under Attachment G, less the resources actually provided at the estimated project completion date. 10. TECHNICAL FEASIBILITY. If ABT, in its reasonable discretion, determines that a requested Localization is not technically feasible, ABT will not be obligated to commit resources to perform such Localization. 55 ATTACHMENT H DRT END USER LICENSE DRT DEALER REAL TIME ACCESS AGREEMENT THIS AGREEMENT IS ENTERED INTO THIS _____, DAY OF _____ BETWEEN AUTO-BY-TEL MARKETING CORPORATION, A DELAWARE CORPORATION WITH ITS PRINCIPAL PLACE OF BUSINESS LOCATED AT 18872 MACARTHUR BOULEVARD, IRVINE, CALIFORNIA 92612-1400 ("LICENSOR"), AND __________ A(N) ____________ LIMITED LIABILITY CORPORATION, WITH ITS PRINCIPAL PLACE OF BUSINESS LOCATED AT ___________________ ("LICENSEE"). WHEREAS, LICENSEE HAS EXECUTED AN AUTO-BY-TEL MARKETING CORPORATION NEW CAR SUBSCRIPTION AGREEMENT AND/OR "USED CAR CYBERSTORE(TM)" SUBSCRIPTION AGREEMENT; AND WHEREAS, LICENSOR HAS DEVELOPED AND OWNS THE RIGHT TO LICENSE CERTAIN PROPRIETARY SOFTWARE PROGRAMS COMMONLY REFERRED TO AS THE AUTO-BY-TEL DEALER REAL TIME (DRT) PROGRAM AS WELL AS RELATED INFORMATION AND DOCUMENTATION CURRENTLY RESIDING EXCLUSIVELY WITH LICENSOR; AND WHEREAS, LICENSEE HAS REPRESENTED TO LICENSOR THAT THEY WILL PROVIDE FOR THEMSELVES A PERSONAL COMPUTER, AND CERTAIN ANCILLARY EQUIPMENT RELATED THERETO WHICH MEETS THE MINIMUM SPECIFICATIONS SET FORTH HEREIN (TOGETHER, THE "EQUIPMENT") FOR USE IN CONNECTION WITH DRT AND WHEREAS, LICENSOR WILL PROVIDE DATA ACCESS, PROGRAM MAINTENANCE, UPDATING AND HELP-LINE TECHNICAL SERVICES TO LICENSEE TO ASSIST LICENSEE IN THE USE OF THE PROGRAMS; NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS AND PREMISES HEREIN RECITED AND FOR OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED, THE PARTIES, INTENDING TO BE LEGALLY BOUND HEREBY, WARRANT, COVENANT AND AGREE AS FOLLOWS: GRANT OF LICENSE. LICENSOR HEREBY GRANTS TO LICENSEE A NON-EXCLUSIVE, NON-TRANSFERABLE LICENSE TO ACCESS AND USE THE DRT PROPRIETARY PROGRAM AND ANY RELATED INFORMATION AND DOCUMENTATION SUPPLIED BY LICENSOR SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN THIS AGREEMENT. TERM OF THIS AGREEMENT: EXCEPT AS PROVIDED HEREIN, THE RIGHTS AND OBLIGATIONS CONFERRED BY THIS AGREEMENT SHALL RUN CONCURRENTLY WITH THE TERM OF THE ABT MASTER SUBSCRIPTION AGREEMENT EXECUTED BETWEEN THE PARTIES. LICENSOR MAY IMMEDIATELY TERMINATE THIS AGREEMENT IN THE EVENT OF A MATERIAL BREACH BY LICENSEE OF ANY PROVISION OF THIS AGREEMENT, OR ANY OTHER AGREEMENT BETWEEN LICENSEE AND LICENSOR OR ANY OF THEIR RESPECTIVE AFFILIATES, INCLUDING WITHOUT LIMITATION THE ABT MASTER SUBSCRIPTION AGREEMENT. EITHER PARTY MAY VOLUNTARILY TERMINATE THIS AGREEMENT UPON 30 DAYS' WRITTEN NOTICE TO THE OTHER PARTY. UPON TERMINATION OF THIS AGREEMENT FOR ANY REASON, LICENSEE SHALL PROMPTLY DISCONTINUE USE OF THE PROGRAMS, DELETE ALL COPIES OF THE DRT PROGRAM, IF ANY, IN WHATEVER FORM, RESIDING ON ITS COMPUTERS, STORAGE MEDIA AND/OR ON HARD COPY. RIGHT OF USE. DURING THE TERM OF THIS AGREEMENT, LICENSEE SHALL HAVE THE RIGHT TO ACCESS THE DRT PROGRAM IN CONNECTION WITH THE INTERNAL OPERATION AND MANAGEMENT OF LICENSEE'S OWN BUSINESS. LICENSEE IS PROHIBITED FROM RESELLING OR OTHERWISE ALLOWING ACCESS BY THIRD PARTIES NOT AFFILIATED WITH LICENSEE'S AUTO DEALERSHIP BUSINESS. LICENSE FEE. LICENSEE SHALL PAY LICENSOR THE INITIAL SUM OF ____________ DOLLAR ($_________ AS CONSIDERATION FOR THE LICENSE GRANTED HEREUNDER. 56 MONTHLY ACCESS FEE. LICENSEE SHALL PAY LICENSOR A MONTHLY ACCESS FEE OF ONE HUNDRED AND FIFTY DOLLARS ($150.00) AND BE ENTITLED TO AN ACCESS VIA UNIQUE PASSWORD(S) ALLOWING SIMULTANEOUS LOGON FOR A MAXIMUM OF TWO USERS PER SESSION. SYSTEM REQUIREMENTS. DEALER SHALL PROVIDE AT THEIR OWN EXPENSE A PERSONAL COMPUTER AND RELATED EQUIPMENT THAT MEETS OR EXCEEDS THE FOLLOWING MINIMUM SPECIFICATIONS: 133 Pentium Processor; 32MB RAM; 33.6 Modem (The faster the better!); 2GB Hard Drive; Windows '95; ISP (Internet Service Provider - ie: AT & T, Netcom, MCI .... ); Netscape Navigator Web Browser Software (version 3.0 or later). TECHNICAL SUPPORT. LICENSOR SHALL MAINTAIN FOR THE BENEFIT OF THE LICENSEE A TECHNICAL SUPPORT HELP-LINE. LICENSOR SHALL ESTABLISH AND STAFF SUCH HELP-LINE WITH PERSONS KNOWLEDGEABLE ABOUT THE DRT PROGRAM. THE HOURS OF AVAILABILITY SHALL BE BETWEEN 6:00 A.M. AND 5:00 P.M. PST, EXCLUDING SATURDAYS AND SUNDAYS. TECHNICIANS WILL PROVIDE ASSISTANCE TO LICENSEE WITH RESPECT TO ACCESSING AND USING THE DRT PROGRAM ONLY. TECHNICAL ASSISTANCE AND SUPPORT REGARDING COMPUTER OR RELATED HARDWARE ARE BEYOND THE SCOPE OF THIS AGREEMENT AND WILL NOT BE PROVIDED BY LICENSOR. THE HOURS OF THE AVAILABILITY OF THE HELP-LINE ARE SUBJECT TO CHANGE AT THE SOLE DISCRETION OF THE LICENSOR. COVENANTS OF LICENSEE. DURING THE TERM OF THIS AGREEMENT: LICENSEE SHALL ADOPT AND ENFORCE SUCH INTERNAL POLICIES, PROCEDURES AND MONITORING MECHANISMS AS ARE NECESSARY TO ENSURE THAT THE DRT PROGRAM IS USED ONLY IN ACCORDANCE WITH THIS AGREEMENT AND THAT ALL STEPS NECESSARY TO ENSURE THAT NO PERSON OR ENTITY WILL HAVE UNAUTHORIZED ACCESS TO THE PROGRAMS ARE TAKEN. LICENSEE SHALL NOT: ASSIGN, SUBLICENSE, LEASE, ENCUMBER OR OTHERWISE TRANSFER OR ATTEMPT TO TRANSFER THE DRT PROGRAM OR ANY PORTION THEREOF; PERMIT ANY THIRD PARTY OTHER THAN THE LICENSEE OR ITS AUTHORIZED AGENT ACTING IN BEHALF OF LICENSEE, TO HAVE ACCESS TO THE DRT PASSWORDS OR TO USE PROGRAMS, WHETHER BY TIMESHARING, NETWORKING, OR ANY OTHER MEANS; DUPLICATE, MODIFY, TRANSLATE, REVERSE, ENGINEER, DECOMPILE OR DISASSEMBLE THE DRT PROGRAM; POSSESS OR USE THE PROGRAMS OR ANY PORTION THEREOF, OTHER THAN IN MACHINE READABLE OBJECT CODE; REMOVE ANY COPYRIGHT, TRADEMARK, PATENT OR OTHER PROPRIETARY NOTICES FROM THE DRT PROGRAM(S), OR ANY PORTION THEREOF WITHOUT THE EXPRESS WRITTEN CONSENT OF LICENSOR. PROGRAM MODIFICATIONS: ONLY THE LICENSOR SHALL MAKE PROGRAM MODIFICATIONS. LICENSOR SHALL FROM TIME TO TIME PROVIDE UPGRADES AND/OR MODIFICATIONS TO THE DRT PROGRAM TO LICENSEE. LICENSEE SHALL ACCEPT ANY UPGRADES OR OTHER MODIFICATION MADE BY LICENSOR TO THE PROGRAMS. NO WARRANTY. THE PROGRAMS ARE PROVIDED ON AN "AS-IS" BASIS. LICENSOR MAKES NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. LIMITATION OF REMEDIES. REGARDLESS OF WHETHER ANY REMEDY SET FORTH HEREIN FAILS OF ITS ESSENTIAL PURPOSE, IN NO EVENT WILL THE LICENSOR BE LIABLE THE DAMAGES TO THE LICENSEE FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT OR SIMILAR DAMAGES, INCLUDING ANY LOST PROFITS OR LOST DATA BEYOND THE ACCESS FEE PAID FOR THE MONTH IN WHICH THEY OCCURRED, ARISING OUT OF THE USE OR INABILITY TO USE THE DRT PROGRAM OR ANY DATA SUPPLIED THEREWITH. PROPRIETARY DATA. LICENSEE ACKNOWLEDGES THAT THE PROGRAMS ARE PROPRIETARY TO LICENSOR AND THAT IT HAS (AND WILL HAVE) NO INTEREST THEREIN OR IN ANY MODIFICATIONS OR IMPROVEMENTS THERETO, AND HEREBY ASSIGNS TO LICENSOR ALL RIGHTS IN ANY SUCH MODIFICATIONS OR IMPROVEMENTS MADE BY OR ON BEHALF OF LICENSEE. CONFIDENTIALITY. FOR THE PURPOSE OF THIS AGREEMENT, CONFIDENTIAL INFORMATION INCLUDES THE DRT PROGRAMS AND ALL OTHER INFORMATION PROVIDED BY LICENSOR MARKED "CONFIDENTIAL." INFORMATION SHALL NOT BE DEEMED CONFIDENTIAL INFORMATION AND LICENSEE AND LICENSEE'S EMPLOYEES SHALL HAVE NO OBLIGATION WITH RESPECT TO ANY SUCH INFORMATION IF SUCH INFORMATION: (A) IS OR FALLS INTO THE PUBLIC DOMAIN THROUGH NO WRONGFUL ACT OF LICENSEE OR THE LICENSEE'S EMPLOYEES; (B) IS RIGHTFULLY RECEIVED FROM A THIRD PARTY WHO IS WITHOUT RESTRICTION AND WITHOUT BREACH OF THIS AGREEMENT; (C) 57 IS APPROVED FOR RELEASE BY WRITTEN AUTHORIZATION OF AN OFFICER OF LICENSOR; OR (D) IS DISCLOSED PURSUANT TO THE REQUIREMENTS OF A GOVERNMENTAL AGENCY OR OPERATION OF LAW. Should the licensee or licensee's employees learn of confidential information from licensor or any other source, neither licensee nor licensee's employees shall, at any time during the term, or for one year thereafter, disclose such information to any individual, agency, company or other entity. Licensee shall not use such confidential information for licensee's own advantage other than as permitted by this agreement. BOTH PARTIES RECOGNIZE AND ACKNOWLEDGE THAT BREACH OF THIS SECTION 13 WOULD CAUSE IRREPARABLE INJURY INADEQUATELY COMPENSABLE IN DAMAGES. ACCORDINGLY, LICENSOR MAY SEEK AND OBTAIN INJUNCTIVE RELIEF AGAINST A BREACH OR THREATENED BREACH HEREOF, IN ADDITION TO ANY OTHER LEGAL REMEDIES THAT MAY BE AVAILABLE AT LAW OR IN EQUITY. 14. ASSIGNMENT. EXCEPT FOR ASSIGNMENTS TO AFFILIATES, PROVIDED EACH SUCH AFFILIATE AGREES TO BE BOUND BY THE TERMS HEREOF, LICENSEE MAY NOT, WITHOUT LICENSOR'S PRIOR WRITTEN CONSENT, ASSIGN ITS RIGHTS OR DELEGATE ITS OBLIGATIONS UNDER THIS AGREEMENT. SEVERABILITY. IF ANY PROVISION OF THIS AGREEMENT SHALL BE HELD TO BE INVALID, ILLEGAL OR ENFORCEABLE, SUCH DETERMINATION SHALL IN NOR WAY ALTER OR IMPAIR THE VALIDITY, LEGALITY AND ENFORCEABILITY OF THE REMAINING PROVISIONS OF THIS AGREEMENT. GOVERNING LAW. THE FORMATION AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED AND INTERPRETED IN ACCORDANCE WITH THE LAWS IN EFFECT IN THE STATE OF CALIFORNIA. ENTIRE AGREEMENT. THIS AGREEMENT AND ITS PREAMBLE CONSTITUTE THE ENTIRE AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SHALL SUPERSEDE ALL PREVIOUS ORAL AND WRITTEN PROPOSALS, NEGOTIATIONS, REPRESENTATIONS, COMMITMENTS AND OTHER COMMUNICATIONS BETWEEN THE PARTIES. THIS AGREEMENT MAY NOT BE RELEASED, DISCHARGED, CHANGED OR MODIFIED EXCEPT BY A WRITTEN INSTRUMENT THAT IS SIGNED BY DULY AUTHORIZED REPRESENTATIVES OF EACH PARTY AND THAT EXPRESSLY INTENDS SUCH RELEASE, DISCHARGE, CHANGE OR MODIFICATION. INDEPENDENT CONTRACTORS. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR CONSTRUED BY THE PARTIES OR ANY THIRD PERSON TO CREATE A FRANCHISE, AGENCY, PARTNERSHIP OR JOINT VENTURE BETWEEN LICENSOR AND LICENSEE. WAIVER. A FAILURE OF THIS LICENSOR TO ENFORCE AT ANY TIME ANY PROVISION OF THIS AGREEMENT SHALL IN NO WAY AFFECT THE FULL RIGHT OF THE LICENSOR TO ENFORCE SUCH PROVISION AT ANY TIME THEREAFTER. EX-10.25 20 SHARE PURCHASE AGREEMENT W/INCHCAPE AUTOMOTIVE LTD 1 EXHIBIT 10.25 [*] Confidential treatment has been requested for certain portions of this exhibit. DATED 23rd NOVEMBER, 1998 autobytel.com inc. and INCHCAPE AUTOMOTIVE LIMITED ------------------------ SHARE PURCHASE AGREEMENT ------------------------ Slaughter and May 35 Basinghall Street London EC2V 5DB (NPB/NSXM) CD982390.004 2 CONTENTS
PAGE 1. Interpretation 1 2. Sale and Purchase 5 3. Repayment of Indebtedness by the Company to ABT 5 4. Consideration 5 5. Completion 6 6. ABT's Warranties and Covenants 7 7. Restrictions on ABT's Business Activities 8 8. Restrictions on the activities of the Company, Inchcape and the Inchcape Group 9 9. Access 10 10. Effect of Completion 10 11. Remedies and Waivers 10 12. Restrictions on Share Transfers 10 13. Further Assurance 13 14. Entire Agreement 13 15. Notices 14 16. Announcements 15 17. Restrictive Trade Practices Act 1976 16 18. Costs and Expenses 16 19. Counterparts 16 20. Time of Essence 16 21. Invalidity 16 22. Choice of Governing Law 17 23. Jurisdiction 17
3 24. Agent for Service 17
SCHEDULES Schedule 1 (Completion Arrangements) 19 Schedule 2 (Representations and Warranties) 21 Schedule 3 (Ownership of the Shares) 24 Schedule 4 (Basic Information about the Company) 25 Schedule 5 (List of Commitments and Liabilities of the Company) 27
4 THIS AGREEMENT is made on the 23rd day of November, 1998 BETWEEN:- 1. autobytel.cominc., a company incorporated in Delaware whose principal office is at 18872 MacArthur Boulevard, Irvine, California 92612, USA ("ABT") AND 2. INCHCAPE AUTOMOTIVE LIMITED, a company incorporated in England under number 3580629 whose registered office is at 33 Cavendish Square, London W1M 9HF ("INCHCAPE") WHEREAS:- (A) Particulars of the Company (as defined in this agreement) are set out in Schedule 4 (Basic Information about the Company). (B) ABT has agreed to sell or procure the sale of, and Inchcape has agreed to purchase, the Shares (as defined in this agreement) on the terms and subject to the conditions of this agreement. (C) The Company has entered into a License and Services Agreement with ABT of even date herewith. (D) The business of the Company is to conduct and develop an electronic commerce business in connection with the sale in the Territory of new and used cars through the Internet. IT IS HEREBY AGREED as follows:- 1. INTERPRETATION 1.1 In this agreement and the Schedules to it:- "ABT'S SOLICITORS" means Skadden, Arps, Slate, Meagher & Flom LLP; "BOOKS AND RECORDS" has its common law meaning and includes, without limitation, all notices, correspondence, orders, inquiries, drawings, plans, books of account and other documents and all computer disks or tapes or other machine legible programs or other records; "BUSINESS DAY" means a day (other than a Saturday or a Sunday) on which banks are open for business in London and New York;
5 2 "BUSINESS INFORMATION" means all information and records (whether or not confidential and in whatever form held) including (without limitation) all business plans and forecasts, monthly financial statements and contact lists of motor dealers contacted or visited by the Company; "BUSINESS PLAN" means the business plan for the five year period to 31st December 2003 to be adopted by the Company prepared by, inter alia, Inchcape and ABT and any drafts thereof; "COMPANIES ACTS" means the Companies Act 1985, the Companies Consolidation (Consequential Provisions) Act 1985, the Companies Act 1989 and Part V of the Criminal Justice Act 1993; "COMPANY" means Auto-by-Tel UK Limited, basic information concerning which is set out in Schedule 4 (Basic Information about the Company); "COMPLETION" means completion of the sale and purchase of the Shares under this agreement; "COMPLETION DATE" means the date of this agreement; "CONFIDENTIAL BUSINESS means Business Information (other than the Business INFORMATION" Plan and any information contained therein) which is confidential or not generally known; "GROUP" means in relation to any body corporate, any subsidiary undertaking for the time being of that body corporate, any parent undertaking for the time being of that body corporate and any subsidiary undertaking for the time being of such a parent undertaking; "INCHCAPE'S SOLICITORS" means Slaughter and May; "INTERNET" means the global collection of telecommunications and information computer networks known as the Internet as may be constituted from time to time; "LICENSE AND SERVICES means the License and Services Agreement to be AGREEMENT" entered into between ABT and the Company of even date herewith to which is attached, inter alia, The Work Order for Initial Localization Software Development;
6 3 "PERMITTED SECURITY means a mortgage, charge or pledge of all or any of the INTEREST" Shares to a credit institution authorised for the purpose of deposit-taking business by the Financial Services Authority pursuant to the Banking Act 1987 provided that any such mortgage, charge or pledge provides that the provisions of clause 12 shall be applicable to such Shares if such Shares are to be foreclosed upon by a mortgagee, chargee or pledgee; "PROCEEDINGS" means any proceeding, suit or action arising out of or in connection with this agreement; "PROPERTY" means freehold, leasehold or other immovable property in any part of the world; "RETAINED GROUP" means, in relation to its subsidiaries and subsidiary undertakings from time to time, any holding company of ABT and all other subsidiaries or subsidiary undertakings of any such holding company (except of the Company); "RTPA 1976" means the Restrictive Trade Practices Act 1976; "SERVICE DOCUMENT" has the meaning given in clause 24 (Agent for Service); "SHARES" means all the issued ordinary shares of Ll each in the capital of the Company; "SHARE PURCHASE has the meaning given to it in clause 14 (Entire DOCUMENTS" Agreement); "TAX" OR "TAXATION" means and includes all forms of taxation and statutory, governmental, supra-governmental, state, principal, local governmental or municipal impositions, duties, contributions and levies, in each case whether of the United Kingdom or elsewhere and whenever imposed, and all penalties, charges, costs and interest relating thereto and without limitation all employment taxes and any deductions or withholdings of any sort; "TERRITORY" means the United Kingdom;
7 4 "WARRANTIES" means the representations and warranties set out in Schedule 2 (Representations and Warranties) given by ABT and any other representations or warranties made by or on behalf of ABT in this agreement or which have become terms of this agreement and "WARRANTY" shall be construed accordingly; "WORKING HOURS" means 2.30 p.m. to 5.30 p.m. (London time) on a Business Day;
1.2 in this agreement, unless otherwise specified:- (A) references to clauses, sub-clauses and Schedules are to clauses, sub-clauses and Schedules to, this agreement; (B) a reference to any statute or statutory provision shall be construed as a reference to the same as it may have been, or may from time to time be, amended, modified or re-enacted; (C) references to a "COMPANY" shall be construed so as to include any company, corporation or other body corporate, wherever and however incorporated or established; (D) references to a "PERSON" shall be construed so as to include any individual, firm, company, government, state or agency of a state or any joint venture, association or partnership (whether or not having separate legal personality); (E) references to "INDEMNIFY" and "INDEMNIFYING" any person against any circumstance include indemnifying and keeping him harmless from all actions, claims and proceedings from time to time made against that person and all loss or damage and all payments, costs or expenses made or incurred by that person as a consequence of or which would not have arisen but for that circumstance; (F) the expressions "BODY CORPORATE", "SUBSIDIARY", "SUBSIDIARY UNDERTAKING" and "PARENT UNDERTAKING" shall have the meaning given in the Companies Acts; (G) references to writing shall include any modes of reproducing words in a legible and non-transitory form; (H) references to times of the day are to London time; (I) headings to clauses and Schedules are for convenience only and do not affect the interpretation of this agreement; 8 5 (J) the Schedules form part of this agreement and shall have the same force and effect as if expressly set out in the body of this agreement, and any reference to this agreement shall include the Schedules; (K) (i) the rule known as the ejusdem generis rule shall not apply and accordingly general words introduced by the word "other" shall not be given a restrictive meaning by reason of the fact that they are preceded by words indicating a particular class of acts, matters or things; and (ii) general words shall not be given a restrictive meaning by reason of the fact that they are followed by particular examples intended to be embraced by the general words. 2. SALE AND PURCHASE 2.1 ABT hereby agrees to sell or procure the sale of and Inchcape agrees to purchase the Shares with all rights attached or accruing to them at Completion. 2.2 ABT has the right to transfer or procure the transfer of legal and beneficial title to the Shares. 2.3 The Shares shall be free from all charges and encumbrances and from all other rights exercisable by or claims by third parties. 3. REPAYMENT OF INDEBTEDNESS BY THE COMPANY TO ABT 3.1 As at the date of this agreement, the Company owes L136,243 to ABT which ABT confirms is an interest free loan repayable on demand. Inchcape undertakes that, provided the License and Services Agreement has been executed and delivered, it will procure the valid repayment by the Company of such indebtedness, without interest, to ABT at Completion or within 2 Business Days of Completion. 3.2 Inchcape confirms that until such time as the License and Services Agreement is validly terminated or, if earlier, until such time as Inchcape ceases to own the entire beneficial interest in 50% or more of the issued share capital of the Company or at least 50% of the votes generally exercisable at any general meeting thereof, it will provide or procure for the Company such finance as shall be necessary to ensure the adequate funding of the Company to enable it to meet its obligations under the License and Services Agreement. 4. CONSIDERATION 4.1 The total consideration for the sale of the Shares to Inchcape shall be the payment by Inchcape of the sum of L2.00 in accordance with clause 5 (Completion). 4.2 In the event that, prior to the termination or expiry of the License and Services Agreement, Inchcape or any member of the Inchcape Group sells any or all of the 9 6 Shares or any interest therein to a third party, otherwise than pursuant to clause 12.8, ABT shall be entitled to receive, as additional consideration for the sale of the Shares pursuant to clause 2, an amount equal to 15% of any consideration paid pursuant to such sale. Such amount shall be paid no later than five days following the completion of such sale. If the consideration for the Shares or interest therein to be received pursuant to such sale is other than cash, unless otherwise agreed by ABT and Inchcape, an independent valuer (who shall be an internationally recognised investment banking or accountancy firm, experienced in the valuation of companies carrying on a similar business to that of the relevant third party) shall be appointed by Inchcape to assess the cash equivalent of such non-cash consideration and ABT shall be entitled to receive an amount equal to 15% of the amount of the cash equivalent so determined. 4.3 Inchcape shall notify ABT within five days following the appointment of an independent valuer pursuant to clause 4.2 and, in the event that ABT shall object to the appointment of such independent valuer within five days of being so notified by Inchcape, either Inchcape or ABT may request the President of the Institute of Chartered Accountants in England and Wales to nominate a suitable independent valuer for the purpose of assessing the cash equivalent of the non-cash consideration referred to in clause 4.2 who shall thereupon be appointed by Inchcape as aforesaid. 4.4 Prior to the termination or expiry of the License and Services Agreement, except with the prior consent in writing of ABT (such consent not to be unreasonably withheld or delayed), Inchcape shall not procure or permit any change in the constitution or reorganisation of the affairs of the Company the primary purpose of which is to undermine the commercial intent of the parties as reflected in clause 4.2 above and clause 5.2(b) of the License and Services Agreement. Nothing in this clause 4.4 shall be construed as prohibiting the carrying on of the business of the Company in the ordinary course. Furthermore, nothing in this clause 4.4 shall be construed as prohibiting the directors of the Company from declaring a dividend at any time or incurring borrowings for the purpose of paying such a dividend or as requiring ABT's prior written consent in relation thereto. 5. COMPLETION 5.1 Completion shall take place immediately after signature of this agreement at the offices of Inchcape's Solicitors at 35 Basinghall Street, London EC2V 5DB. 5.2 At Completion ABT shall do those things listed in Schedule 1 (Completion Arrangements). 5.3 Inchcape shall not be obliged to complete this agreement unless ABT complies fully with the requirements of sub-clause 5.2 and Schedule 1 (Completion Arrangements). 5.4 Payment of the amount stated in clause 4 (Consideration) in accordance with Schedule 1 (Completion Arrangements) shall constitute payment of the consideration 10 7 for the Shares and shall discharge the obligations of Inchcape under clause 2 (Sale and Purchase). 6. ABT'S WARRANTIES AND COVENANTS 6.1 ABT represents and warrants to Inchcape that each of the Warranties is accurate in all respects and not misleading at the date of this agreement and accepts that Inchcape is entering into this agreement in reliance upon each of the Warranties. 6.2 ABT undertakes to disclose in writing to Inchcape anything which is or may constitute a breach of or be inconsistent with any of the Warranties as soon as reasonably practicable after it comes to the notice of ABT both before, at the time of and after Completion. 6.3 ABT undertakes (if any claim is made against it in connection with the sale of the Shares to Inchcape) not to make any claim against the Company or any director, employee or adviser of the Company on whom it may have relied before agreeing to any terms of this agreement. 6.4 Each of the Warranties shall be construed as a separate and independent warranty and (except where expressly provided to the contrary) shall not be limited or restricted by reference to or inference from the terms of any other Warranty or any other term of this agreement. 6.5 No claim shall be brought under any of the Warranties unless the aggregate liability of ABT in respect of all claims thereunder exceeds L5,000 (in which event Inchcape shall be entitled to damages in respect of the full amount of such claims and not just the excess) provided that the total liability of ABT under the Warranties shall not in any event exceed L136,243. No claim shall be brought against ABT in respect of any of the Warranties unless Inchcape shall have given ABT written notice of such claim specifying (in reasonable detail) the matter which gives rise to the claim, the nature of the claim (but not necessarily the amount claimed in respect thereof) on or before the date falling eighteen months after the Completion Date PROVIDED THAT the liability of ABT in respect of any such claim shall absolutely determine if such claim has not previously been satisfied, settled or withdrawn unless legal proceedings in respect thereof shall have been commenced against ABT within 9 months of the giving of the notice as aforesaid. 6.6 Upon Inchcape becoming aware of any possible claim in respect of any of the Warranties, Inchcape shall: (A) as soon as practicable notify ABT thereof by written notice; (B) subject to ABT indemnifying Inchcape in a form satisfactory to Inchcape against any liability, cost, damage or expense which may be incurred thereby, take such action and give such information, access and assistance as ABT may reasonably request and ABT shall be entitled to require Inchcape to take or 11 8 procure to be taken such reasonable action and give such reasonable information and assistance in order to avoid, dispute, resist, mitigate, settle, compromise, defend or appeal any matter in respect thereof or adjudication with respect thereto and Inchcape shall make no, nor permit any, admission of liability, agreement, settlement or compromise with any third party in relation to any matter giving rise to such claim without the prior written consent of ABT such consent not to be unreasonably withheld or delayed and shall take all action to mitigate any loss suffered by it in respect of which a claim could be made under the Warranties. 6.7 Inchcape shall not be entitled to recover damages or otherwise obtain reimbursement or restitution more than once in respect of any individual breach of the Warranties. 6.8 Inchcape shall not be entitled to claim that any fact, matter or circumstance causes any of the Warranties to be breached if in relation to any fact, matter or circumstance forming the basis of the claim Inchcape or its officers or advisers had actual knowledge of it on or before the date of this agreement. 7. RESTRICTIONS ON ABT'S BUSINESS ACTIVITIES 7.1 Without prejudice to the terms of the License and Services Agreement, ABT undertakes to procure that each member of the Retained Group of which ABT forms part will not, either alone or in conjunction with or on behalf of any other person, do any of the following things:- (A) for so long as the License and Services Agreement is in force, either for its own account, or grant to any third party a licence to, use the Software, or the Business Procedures in connection with the operation of a Local Business in the Territory (and for the purposes of this clause 7.1 (A), "Software", "Business Procedures" and "Local Business" shall have the meaning attributed to them in the License and Services Agreement); (B) pass on any copy of the Business Plan to any third party or disclose information derived therefrom concerning numbers of dealers, proposed charges to dealers, amounts paid to any Internet on-line or search engine providers and employee emoluments or Confidential Business Information received by it from the Company to any third party without such third party first having entered into a confidentiality agreement providing, inter alia, that such information shall not be used in any way for the purposes of competing with the Company in the Territory during a minimum period expiring on the earlier of 12 months following the entry into of such confidentiality agreement and 31 December 2000 or during such longer period as ABT using its reasonable endeavours is able to negotiate but in any event not by virtue of this provision expiring later than 31 March 2001. (C) for so long as the License and Services Agreement is in force, either for its own account, or grant to any Third Party the right to, use the ABT Brand in 12 9 connection with a Local Business in the Territory (and for the purposes of this clause 7.1 (C), "ABT Brand" and "Local Business" shall have the meaning attributed to them in the License and Services Agreement); (D) neither pending nor within two years after Completion, solicit or entice away from the employment of the Company any person at present an employee of the Company; nor (E) assist any other person to do any of the foregoing things. 7.2 Each undertaking contained in this clause shall be construed as a separate undertaking and if one or more of the undertakings is held to be against the public interest or unlawful or in any way an unreasonable restraint of trade, the remaining undertakings shall continue to bind ABT. 8. RESTRICTIONS ON THE ACTIVITIES OF THE COMPANY, INCHCAPE AND THE INCHCAPE GROUP 8.1 For the avoidance of doubt and without prejudice to the terms of the License and Services Agreement, nothing in this agreement shall be construed to prohibit Inchcape, any member of the Inchcape Group or the Company from competing with ABT or any member of the ABT Group outside the Territory provided that it or they, as the case may be, do not utilise the ABT Brand, Documentation, Global Brand Protocols and Software (in each case as defined in the License and Services Agreement) in the Territory or otherwise other than as permitted pursuant to the License and Services Agreement. 8.2 Inchcape undertakes to procure that no information disclosed to it or to the Company or any of their respective directors officers employees agents representatives affiliates auditors or other persons acting on their behalf (which information is confidential and not generally known other than as a result of any breach of this undertaking) by ABT or any licensee of ABT and no analyses, compilations, studies, notes or other documents prepared by or for Inchcape or the Company which contain or are based upon such information (including, without limitation, any information which is the subject matter of the License and Services Agreement) shall be disclosed (i) to any other member of the Inchcape Group save that Inchcape shall be permitted to supply such information regarding the financial position and affairs of the Company as shall reasonably be necessary for the purposes of preparation of management and audited accounts of the Inchcape Group of which the Company is a member and otherwise as may be required to enable any holding company thereof to perform its legal and regulatory obligations or (ii) to any third party other than by the Company in accordance with the License and Services Agreement. 8.3 In the event that the License and Services Agreement shall be terminated or upon the Company ceasing to carry on business or being placed into liquidation, Inchcape shall procure that the name of the Company (and any entity controlled thereby) is changed so as no longer to include the name, initials, trademark, service mark or logo or any reference to the name, initials, trademark, service mark or logo of ABT or any 13 10 variation thereof or name, initials, trademark, service mark or logo that may reasonably be confused therewith. 9. ACCESS As from the date of this agreement, Inchcape and any persons authorised by it will be given full access to the premises at Central Business Exchange II, West Wing 382-390 Midsummer Boulevard, Central Milton Keynes, MK9 2RG or any other premises from where the Company carries on business and all the Books and Records and title deeds of the Company and the directors and employees of the Company and the Company will be instructed to give promptly all information and explanations to Inchcape or any such persons as they may request. 10. EFFECT OF COMPLETION Any provision of this agreement and any other documents referred to in it which is capable of being performed after but which has not been performed at or before Completion and all Warranties and covenants and other undertakings contained in or entered into pursuant to this agreement shall remain in full force and effect notwithstanding Completion. 11. REMEDIES AND WAIVERS 11.1 No delay or omission by any party to this agreement in exercising any right, power or remedy provided by law or under this agreement shall:- (A) impair such right, power or remedy; or (B) operate as a waiver thereof 11.2 The single or partial exercise of any right, power or remedy provided by law or under this agreement shall not preclude any other or further exercise thereof or the exercise of any other right, power or remedy. 11.3 The rights, powers and remedies provided in this agreement are cumulative and not exclusive of any rights, powers and remedies provided by law. 12. RESTRICTIONS ON SHARE TRANSFERS 12.1 Inchcape shall not (other than to a Group Transferee (as defined in clause 12.8 below)) transfer, by one or more transactions, 50% or more of the Shares or any interest therein for a period of 365 days from the Launch Date (as defined in the License and Services Agreement). Subject to the provisions of this clause 12, Inchcape is and shall be entitled to transfer up to (but not including) 50% of the Shares or any interest therein by one or more transactions at any time after Completion. 14 11 12.2 If, without prejudice to clause 12.1 and subject to clause 12.8, prior to or within the one year period following the termination or expiry of the License and Services Agreement, Inchcape wishes to transfer any Shares or any interest therein (the "SALE SHARES") to a third party, Inchcape shall give to ABT notice in writing (a "TRANSFER NOTICE") of such desire together with details of any proposed third party purchaser thereof (the "THIRD PARTY PURCHASER"), the purchase price and other material terms agreed between Inchcape and the Third Party Purchaser and such Transfer Notice shall constitute an offer made by Inchcape to ABT to acquire the Sale Shares on the terms specified in the Transfer Notice. A Transfer Notice shall, except as hereinafter provided, be irrevocable. 12.3 On receipt of the Transfer Notice, ABT shall have the right to purchase all (but not some only) of the Sale Shares on the terms specified in the Transfer Notice by giving written notice (the "ACCEPTANCE NOTICE") to Inchcape within 1 month of the later of receipt of the Transfer Notice and the delivery to ABT of a copy of the report of any independent valuer appointed pursuant to clause 12.5. 12.4 ABT shall become bound to purchase the Sale Shares following the giving of the Acceptance Notice to Inchcape. In such event, completion of the sale and purchase of the Sale Shares shall take place within thirty days after the giving of such Acceptance Notice. At such completion the transferor shall deliver the Sale Shares free and clear of any liens, claims, options, charges, encumbrances and third party rights howsoever arising. ABT shall deliver, at closing, payment due from it in full in immediately available funds for the Sale Shares. Each of the parties shall use its reasonable endeavours to take or procure the taking of all such actions and to execute or procure the execution of such additional documents as are otherwise necessary or appropriate in connection therewith. 12.5 (i) In the event that the consideration for the Sale Shares to be offered by the Third Party Purchaser is other than cash, an independent valuer (who shall be an internationally recognised investment banking or accountancy firm, experienced in the valuation of companies carrying on a similar business to that of the Third Party Purchaser) shall be appointed by Inchcape to assess the cash equivalent of such non-cash consideration and if, pursuant to clause 12.4, ABT shall become bound to purchase the Sale Shares, ABT shall deliver at closing to Inchcape an amount equal to the amount of the cash equivalent so determined. (ii) Inchcape shall notify ABT within five days following the appointment of an independent valuer pursuant to clause 12.5(i) and, in the event that ABT shall object to the appointment of such independent valuer within five days of being so notified by Inchcape, either Inchcape or ABT may request the President of the Institute of Chartered Accountants in England and Wales to nominate a suitable independent valuer for the purpose of assessing the cash 15 12 equivalent of the non-cash consideration referred to in clause 12.5(i) who shall thereupon be appointed by Inchcape as aforesaid. 12.6 In the event that ABT do not exercise their pre-emption rights pursuant to clauses 12.2, 12.3 and 12.4 to acquire all (but not some only) of the Sale Shares, Inchcape shall (subject as hereinafter provided and to clause 4.2 (deferred consideration) be entitled to transfer the Sale Shares on a bona fide arm's length sale for the consideration, whether cash or non-cash consideration and other terms and, to the Third Party Purchaser if any specified in the Transfer Notice PROVIDED THAT (A) such transfer shall have been completed within a period of 180 days after the date of the Transfer Notice; and (B) if, as a result of such proposed transfer (and subject to sub-clause (D) below) Inchcape shall cease to own the entire beneficial interest in 50% or more of the issued share capital of the Company or at least 50% of the votes generally exercisable at any general meeting thereof, Inchcape shall obtain ABT's prior written consent to such transfer, such consent not to be withheld where evidence and commitments are provided to the reasonable satisfaction of ABT that the Third Party Purchaser is financially able and willing to guarantee the actual and contingent payment obligations of the Company to ABT pursuant to the License and Services Agreement; (C) if, as a result of such proposed transfer (and subject to sub-clause (D) below) Inchcape shall continue to own the entire beneficial interest in 50% or more of the issued share capital of the Company or at least 50% of the votes generally exercisable at any general meeting thereof, Inchcape shall obtain ABT's prior written consent to such transfer, such consent not to be unreasonably withheld or delayed; and (D) with respect to any proposed transfer of Shares permitted pursuant to this clause 12.6, Inchcape shall not transfer the Shares to a competitor. For the purposes of this clause 12.6 "COMPETITOR" means any entity either in or outside the Territory which provides an independent (meaning an entity not primarily concerned with the sale of products of the Group of which it is a member) Internet on-line car buying service for new and used cars at the time the Transfer Notice is served by Inchcape on ABT (the "RESTRICTED BUSINESS") (except that the definition of "competitor" shall not in any circumstances apply to a body corporate which holds not more than 10 per cent. of any class of voting shares, or securities which are convertible into securities which themselves carry voting rights, or options to acquire any class of securities which themselves carry voting rights in an entity carrying on the Restricted Business). 12.7 Without prejudice to clause 12.5, each of the parties hereby agrees that, as between themselves, all transfers provided for in this clause 12 shall be made only for consideration payable in cash (U.S. dollars and/or UK pounds sterling). 16 13 12.8 Inchcape shall be entitled at any time to transfer any of the Shares held by it to a company which is a member of its Group ("GROUP TRANSFEREE"). Any Group Transferee acquiring Shares pursuant hereto shall be deemed to enjoy the same rights and be deemed to be subject to the same obligations as Inchcape under this clause 12. Inchcape shall remain a party to this agreement and undertakes to ABT to procure the performance by such Group Transferee of such obligations as if such Group Transferee were a party to this agreement and to indemnify ABT from and against the breach by such Group Transferee of any of its deemed obligations under this agreement. Inchcape undertakes to procure that, if any such Group Transferee is to cease at any time to be a member of such Group, such Group Transferee prior to so ceasing shall have transferred all of the Shares held by it at the time in question to Inchcape or to another member of such Group pursuant to and in accordance, mutatis mutandis, with the provisions of this clause 12. 12.9 For the purposes of this clause 12, "transfer" shall include, without limitation: sale, assignment, transfer and creating or permitting to subsist any mortgage, charge, pledge or lien or other security interest or encumbrance other than a Permitted Security Interest. Inchcape shall at any time be entitled to create a Permitted Security Interest in respect of all or any of the Shares provided that it shall have given prior written notice to ABT of its intention to make such mortgage, charge or pledge prior to effecting the same, specifying the name and address of the mortgagee, chargee or pledgee and representing that such mortgagee, chargee or pledgee has agreed that the provisions of this clause 12 shall be applicable to such Shares. 13. FURTHER ASSURANCE ABT shall from time to time at its own cost, on being required to do so by Inchcape, now or at any time in the future, do or procure the doing of all such acts and/or execute or procure the execution of all such documents in a form reasonably satisfactory to Inchcape as Inchcape may reasonably request and consider necessary for giving full effect to this agreement and securing to Inchcape the full benefit of the rights, powers and remedies conferred upon Inchcape in this agreement. 14. ENTIRE AGREEMENT 14.1 For the purpose of this clause, "PRE-CONTRACTUAL STATEMENT" means a draft, agreement, undertaking, representation, warranty, promise, assurance or arrangement of any nature whatsoever, whether or not in writing, relating to the Share Purchase Documents or any of them (as defined in sub-clause 14.2) made or given by a party to any of the Share Purchase Documents or any other person at any time prior to execution of the Share Purchase Documents. 14.2 This agreement, any disclosures notified by ABT to Inchcape in writing in relation to the Company, and any other documents referred to in this agreement (the "SHARE PURCHASE DOCUMENTS") constitute the whole and only agreement between the parties relating to the sale and purchase of the Shares. 12.10 Inchcape undertakes to procure that, during such time as it controls 50% or more of the Shares, no change shall be made in the rights conferred by the Shares and no shares in the capital of the Company shall be allotted or issued without the prior written consent of ABT such consent not to be unreasonably withheld or delayed PROVIDED THAT nothing in this clause shall present an increase in the authorised share capital of the Company or the allotment and/or issue of any additional Shares to Inchcape. 17 14 14.3 Except to the extent repeated in any of the Share Purchase Documents, the Share Purchase Documents supersede and extinguish any prior Pre-contractual Statement relating thereto. 14.4 Each party acknowledges that in entering into the Share Purchase Documents or any of them on the terms set out therein, it is not relying upon any Pre-contractual Statement which is not expressly set out therein. 14.5 None of the parties shall have any right of action against any other party to this agreement arising out of or in connection with any Pre-contractual Statement (except in the case of fraud). 14.6 This agreement may only be varied in writing signed by each of the parties. 15. NOTICES 15.1 Any notice or other communication given or made under or in connection with the matters contemplated by this agreement shall be in writing (other than writing on the screen of a visual display unit or other similar device which shall not be treated as writing for the purposes of this clause). For the avoidance of doubt, faxes are permitted. 15.2 Any such notice or other communication shall be addressed as provided in sub-clause 15.3 and, if so addressed, shall be deemed to have been duly given or made as follows:- (A) if sent by personal delivery, upon delivery at the address of the relevant party; (B) if sent by first class post, four Business Days after the date of posting; and (C) if sent by facsimile, when despatched; PROVIDED THAT if, in accordance with the above provisions, any such notice or other communication would otherwise be deemed to be given or made outside Working Hours, such notice or other communication shall be deemed to be given or made at the start of Working Hours on the next Business Day. 15.3 The relevant addressee, address and facsimile number of each party for the purposes of this agreement, subject to sub-clause 15.4, are:-
Name of Party Name of addressee Address Facsimile No. ------------- ----------------- ------- ------------- Inchcape F.A.O. Managing 33 Cavendish Square, 0171 546 8444 Automotive Director London, W1M 9HF Limited
18 15 autobytel.cominc. F.A.O. Chief Executive 11872 MacArthur 001949 225 Officer Boulevard 4401 Irvine and California 92612 autobytel.cominc F.A.O. Senior Resident One Canada Square, 0171 519 7070 Partner, Skadden, Canary Wharf, Arps, Slate, Meagher London E14 5DS & Flom LLP
15.4 A party may notify the other parties to this agreement of a change to its name, relevant addressee, address or facsimile number for the purposes of sub-clause 15.3 PROVIDED THAT such notification shall only be effective on:- (A) the date specified in the notification as the date on which the change is to take place; or (B) if no date is specified or the date specified is less than five clear Business Days after the date on which notice is given, the date falling five clear Business Days after notice of any such change has been given. 15.5 The provisions of this clause 15 (Notices) shall not apply in relation to the service of Service Documents. 16. ANNOUNCEMENTS 16.1 Subject to sub-clause 16.2, no announcement concerning the sale of the Shares by ABT to Inchcape or any ancillary matter shall be made by either party without the prior written approval of the other, such approval not to be unreasonably withheld or delayed. 16.2 Either party may make an announcement concerning the sale of the Shares or any ancillary matter if required by:- (A) the law of any relevant jurisdiction; or (B) any securities exchange or regulatory authority or governmental body or quasi-governmental department or agency to which either party is subject, wherever situated, including (without limitation) the London Stock Exchange Limited or The Panel on Takeovers and Mergers, whether or not the requirement has the force of law, in which case the party concerned shall take all such steps as are reasonable and practicable in the circumstances to agree the contents of such announcement with the other party before making such announcement. 19 16 16.3 The restrictions contained in this clause shall continue to apply after Completion without limit in time. 17. RESTRICTIVE TRADE PRACTICES ACT 1976 If there is any provision of this agreement, or of any agreement or arrangement of which this agreement forms part, which causes or would cause this agreement or that agreement or arrangement to be subject to registration under RTPA 1976, and this agreement or that agreement or arrangement is not a non-notifiable agreement under RTPA 1976 then that provision shall not take effect until the day after particulars of this agreement or of that agreement or arrangement (as the case may be) have been furnished to the Director General of Fair Trading pursuant to section 24 RTPA 1976. 18. COSTS AND EXPENSES Except as otherwise stated in this agreement, each party shall pay its own costs and expenses in relation to the negotiations leading up to the sale of the Shares and to the preparation, execution and carrying into effect of this agreement and all other documents referred to in it and ABT confirms that no expense of whatever nature relating to the sale of the Shares has been or is to be borne by the Company. 19. COUNTERPARTS This agreement may be executed in any number of counterparts, and by the parties on separate counterparts, but shall not be effective until each party has executed at least one counterpart. Each counterpart shall constitute an original of this agreement, but all the counterparts shall together constitute but one and the same instrument. 20. TIME OF ESSENCE Except as otherwise expressly provided, time is of the essence of this agreement. 21. INVALIDITY If at any time any provision of this agreement is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, that shall not affect or impair:- (A) the legality, validity or enforceability in that jurisdiction of any other provision of this agreement; or (B) the legality, validity or enforceability under the law of any other jurisdiction of that or any other provision of this agreement. provided that the commercial affect of this agreement shall not be materially altered as a result thereof. 20 17 22. CHOICE OF GOVERNING LAW This agreement shall be governed by and construed in accordance with English law. 23. JURISDICTION The parties to this agreement irrevocably agree for the exclusive benefit of Inchcape that the courts of England are to have jurisdiction to settle any disputes which may arise out of or in connection with this agreement and that accordingly any Proceedings may be brought in the English courts. Nothing contained in this clause 23 shall limit the right of Inchcape to take Proceedings against ABT in any other court of competent jurisdiction, nor shall the taking of Proceedings in one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction, whether concurrently or not, to the extent permitted by the law of such other jurisdiction. 24. AGENT FOR SERVICE 24.1 ABT irrevocably appoints Skadden, Arps, Slate, Meagher & Flom LLP of One Canada Square, Canary Wharf, London E14 5DS to be its agent for the service of process in England. It agrees that any writ, summons, order, judgment or other document relating to or in connection with any Proceedings ("SERVICE DOCUMENT") may be effectively served on it in connection with Proceedings in England and Wales by service on its agent. 24.2 Any Service Document shall be deemed to have been duly served if marked for the attention of the Senior Resident Partner, Skadden, Arps, Slate, Meagher & Flom LLP at One Canada Square, Canary Wharf, London E14 5DS or such other address within England or Wales as may be notified and: (A) left at the specified address; or (B) sent to the specified address by first class post. In the case of (A), the Service Document shall be deemed to have been duly served when it is left. In the case of (B), the Service Document shall be deemed to have been duly served two clear Business Days after the date of posting. 24.3 If the agent at any time ceases for any reason to act as such, ABT shall appoint a replacement agent having an address for service in England or Wales and shall notify Inchcape of the name and address of the replacement agent. Failing such appointment and notification, the Company shall be entitled by notice to ABT to appoint a replacement agent to act on ABT's behalf. The provisions of this clause 24 applying to service on an agent apply equally to service on a replacement agent. 21 18 24.4 A copy of any Service Document served on an agent shall be sent by post to ABT. Failure or delay in so doing shall not prejudice the effectiveness of service of the Service Document. 22 19 SCHEDULE 1 (COMPLETION ARRANGEMENTS) At Completion:- 1. ABT shall deliver to Inchcape or Inchcape's Solicitors a duly executed transfer in respect of the Shares in favour of Inchcape or such person as Inchcape may nominate and share certificates for the Shares in the name of ABT (or other relevant transferor) and any power of attorney under which any transfer is executed on behalf of ABT or nominee; 2. ABT shall deliver to Inchcape (or to any person whom Inchcape may nominate) such of the following as Inchcape may require:- (A) the statutory books (which shall be written up to but not including the Completion Date), the certificate of incorporation (and any certificate of incorporation on change of name) and common seal (if any) of the Company; and (B) a copy of the minutes of a duly held meeting of the directors of ABT authorising the execution by ABT of this agreement (such copy minutes being certified as correct by an officer of ABT); 3. ABT shall procure the present directors and secretary of the Company (other than Kevin Turnbull) to resign their offices as such and to relinquish any rights which they may have under any contract of employment with the Company or under any statutory provision including any right to damages for wrongful dismissal, redundancy payment or compensation for loss of office or unfair dismissal, such resignations to be tendered at the board meetings referred to in paragraph 4; 4. ABT shall procure a board meeting of the Company to be held at which:- (A) it shall be resolved that the transfers relating to the Shares delivered pursuant hereto shall be approved for registration and (subject only to the transfers being duly stamped) Inchcape (or such person as Inchcape may nominate) be registered as the holder of the Shares concerned in the register of members; (B) each of the persons nominated by Inchcape shall be appointed directors and/or secretary, as Inchcape shall direct, such appointments to take effect on the Completion Date; (C) the resignations of the directors and secretary referred to in paragraph 3 above shall be tendered and accepted so as to take effect at the later of Completion and the close of the meeting and each of the persons tendering his resignation shall deliver to the Company an acknowledgement executed as a deed that he has no claim against the Company for breach of contract, compensation for loss of office, redundancy or unfair dismissal or on any 23 20 other account whatsoever and that no agreement or arrangement is outstanding under which the Company has or could have any obligation to him; (D) all existing instructions to banks shall continue. However, the existing bank mandates will be amended to reflect the appointment of new directors; (E) the situation of the registered office shall be changed to such address as Inchcape may nominate and (subject to the provisions of the Companies Acts) the accounting reference date shall be changed to 31st December; (F) PricewaterhouseCoopers be appointed auditors of the Company. ABT shall procure that minutes of the duly held board meeting, certified as correct by the secretary of the Company and the resignations and acknowledgements, referred to are delivered to Inchcape or Inchcape's Solicitors; Inchcape shall pay the sum of L2.00 to ABT being the total consideration payable in respect of the Shares. 24 21 SCHEDULE 2 (REPRESENTATIONS AND WARRANTIES) The Sellers represent and warrant to Inchcape as follows:- 1. OWNERSHIP OF THE SHARES ABT is the sole beneficial owner of the Shares set opposite its name in Schedule 3 (Ownership of the Shares), and such shares in aggregate constitute the entire issued and allotted share capital of the Company. 2. CAPACITY OF ABT 2.1 ABT is duly incorporated and has the requisite power and authority to enter into and perform this agreement. 2.2 This agreement constitutes binding obligations of ABT in accordance with its terms. 2.3 The execution and delivery of, and the performance by ABT of its obligations under, this agreement is within its powers, has been duly authorised by all necessary action on its part and so far as it is aware does not, and will not, violate any provision of law or any rule, regulation, order, writ, judgment, decree or other determination presently in effect applicable to it or its constitutional documents. 3. ARRANGEMENTS BETWEEN THE COMPANY AND ABT Save in respect of indebtedness of L136,243 referred to herein owing by the Company to ABT (to be repaid in accordance with clause 3 (Repayment of Indebtedness by the Company to ABT)), no indebtedness (actual or contingent) and no contract or arrangement other than at arm's length is outstanding between the Company and ABT or any person required to resign as a director of the Company pursuant to Schedule 1. 4. GROUP STRUCTURE, ETC. 4.1 The Shares are fully paid up. 4.2 There is no agreement or commitment outstanding with or by the Company which calls for the allotment, issue or transfer of, or accords to any person the right to call for the allotment or issue of, any shares (including the Shares) or debentures in or securities of the Company. 5. OPTIONS, MORTGAGES AND OTHER ENCUMBRANCES 5.1 There is no option, right to acquire, mortgage, charge, pledge, lien or other form of security or encumbrance or equity on, over or affecting the Shares or any of them and 25 22 there is no agreement or commitment to give or create any and no claim has been made by any person to be entitled to any. 5.2 So far as ABT is aware, no option, right to acquire, mortgage, charge, pledge, lien (other than a lien arising by operation of law in the ordinary course of trading) or other form of security or encumbrance or equity on, over or affecting the whole or any part of the undertaking or assets of the Company is outstanding and there is no agreement or commitment to give or create any and no claim has been made by any person to be entitled to any. 6. CONTRACTS AND COMMITMENTS, LIABILITIES 6.1 So far as ABT is aware (having made no specific enquiry other than of Kevin Turnbull), the Company has no material liabilities (whether actual, contingent, unqualified, disputed or otherwise) including, without limitation, contracts, arrangements with, and commitments to, third parties, insurance policies and borrowings which are not disclosed by ABT in Schedule 5 (List of Commitments and Liabilities of the Company). 6.2 ABT has not entered into any agreement with the Company other than the subscription of the Shares, the memorandum and articles of association of the Company (as amended by written resolution dated 29th October 1998), the License and Services Agreement and matters concerning the indebtedness referred to in clause 3.1 and the indebtedness of the Company to Inchcape Motors International plc or Inchcape as the case may be referred to in paragraph 1.2 of Schedule 5. 7. INSOLVENCY 7.1 So far as ABT is aware (having made no specific enquiry other than of Kevin Turnbull), no order has been made and no resolution has been passed for the winding up of the Company or for a provisional liquidator to be appointed in respect of the Company and no petition has been presented and no meeting has been convened for the purpose of winding up the Company. 7.2 So far as ABT is aware (having made no specific enquiry other than of Kevin Turnbull), no administration order has been made and no petition for such an order has been presented in respect of the Company and no receiver (which expression shall include an administrative receiver) has been appointed in respect of the Company or all or any of its assets. 7.3 So far as ABT is aware (having made no specific enquiry other than of Kevin Turnbull), no unsatisfied judgment is outstanding against the Company. 8. LITIGATION So far as ABT is aware (having made no specific enquiry other than of Kevin Turnbull), the Company is not engaged in any litigation or arbitration, administrative 26 23 or criminal proceedings, whether as plaintiff, defendant or otherwise, and no litigation or arbitration, administrative or criminal proceedings by or against the Company is pending, threatened or expected and so far as ABT is aware (having made no specific enquiry other than of Kevin Turnbull), there is no fact or circumstance likely to give rise to any such litigation or arbitration, administrative or criminal proceedings or to any proceedings against any director or employee (past or present) of the Company in respect of any act or default for which the Company might be vicariously liable. 9. DELINQUENT AND WRONGFUL ACTS 9.1 So far as ABT is aware (having made no specific enquiry other than of Kevin Turnbull), the Company has not committed or is liable for any criminal, illegal, unlawful or unauthorised act or breach of any obligation or duty whether imposed by or pursuant to statute, contract or otherwise. 9.2 So far as ABT is aware (having made no specific enquiry other than of Kevin Turnbull), the Company has not received notification that any investigation or inquiry is being or has been conducted by any governmental or other body in respect of the affairs of the Company and ABT (having made no specific enquiry other than of Kevin Turnbull) is not aware of any circumstances which would give rise to such investigation or inquiry. 10. INTELLECTUAL PROPERTY The Company has applied for registration as a data user and so far as ABT is aware (having made no specific enquiry other than of Kevin Turnbull) the Company has complied with the Data Protection Principles as set out in the Data Protection Act 1984. 11. THE ACCOUNTS AND TAX The Company not realised any taxable profits other than the invoice dated 19th October 1998 from the Company to Inchcape or chargeable gains since incorporation and the Company has not engaged in any transactions or agreements with ABT or any member of the ABT Group other than those transactions and agreements referred to in Warranty 6.2 above. 27 24 SCHEDULE 3 (OWNERSHIP OF THE SHARES) Name and address of, and numbers of Shares beneficially owned by, ABT
Number of Ordinary Full name Registered address Shares owned --------- ------------------ ------------ autobytel.cominc. 18872 MacArthur 2 Boulevard, Irvine, California 92612, USA
Name and address of registered holder of Shares in the Company
Number of Ordinary Full name Registered address Shares owned --------- ------------------ ------------ Auto-by-Tel International 18872 MacArthur 2 LLC Boulevard, Irvine, California 92612, USA
28 25 SCHEDULE 4 (BASIC INFORMATION ABOUT THE COMPANY) 1. Registered number : 03470555 2. Date of incorporation : 19th November, 1997 3. Place of incorporation : England 4. Address of registered office : One Canada Square 39th Floor London E14 5DS 5. Class of company : Private company limited by shares 6. Authorised share capital : L1,000 divided into 1000 ordinary shares of L1.00 each 7. Issued share capital : 2 ordinary shares of L1.00 each 8. Directors: Full name Usual residential address Nationality Mark Wayne Lorimer 18872 MacArthur Blvd. American Suite 200 Irvine California USA 92612 Robert Steven Grimes 152 West 57th Street American 24th Floor New York New York 10019 USA Kevin Hugh Burgoyne 9, Cedar Grange British Turnbull Harrogate N. Yorks HG2 9NY 9. Secretary: Full name Usual residential address Mark Wayne Lorimer 18872 MacArthur Blvd. American Suite 200 Irvine California USA 92612
29 26 10. Accounting reference date : 30th November 11. Tax residence : UK 12. Business activities : Electronic commerce
30 27 SCHEDULE 5 (LIST OF COMMITMENTS AND LIABILITIES OF THE COMPANY) 1. Indebtedness of the Company 1.1 The Company has an interest-free loan, repayable on demand from ABT in the amount of L136,243 to be repaid in accordance with clause 3.1. 1.2 The Company has an interest-free loan, repayable on demand from Inchcape Motors International plc in the amount of L200,000 and an interest-free loan from Inchcape Motors International plc in the amount of L245,372 (as at 31st October, 1998) relating to payroll and other expenses for K. Turnbull and S. Butler who are at present on the payroll of Inchcape Motors International plc. On Completion, both such debts will be assigned by Inchcape Motors International plc to Inchcape Automotive Limited. 2. Assets The following assets were purchased and acquired by Inchcape Motors International p1c. The costs of the following assets will be reimbursed to Inchcape Motors International plc on or after Completion.
ITEM OF HARDWARE QUANTITY PRICE EACH(L) VALUE(L) ---------------- -------- ------------- -------- Deskpro EP6266X with 5 1,096.84 5,484.20 monitor, keyboard, modem, multimedia 32mb 5dram Satellite Pro 480CDT with 5 1,991.39 9,956.95 modem, 32mb HP 670C Deskjet 8 112.15 897.20 Laserjet 6NP 1 564.51 564.51 Laserjet 3100 1 473.44 473.44 Tecra 780DVD with modem 3 and E link card 2,788.80 11,155.20 Infocus 420 PC Projector 2 3,063.33 6,126.66 HP Scanjet 5100C 1 149.78 149.78 HP Deskjet 720C 1 157.31 157.31 2 laptops from Inchcape 2 Value not known Value not known Kevin Turnbull Keyboard 1 66.00 66.00 Monitor 1 165.95 165.95
31 28 Card Station 1 236.55 236.55 Printer Switch 2 125.00 250.00 Mouse 6 25.00 150.00 SUB-TOTAL L35,833.75 ========== Brought forward total L35,833.75 ==========
Software/Other items Quantity Price each(L) Value(L) - -------------------- -------- ------------- -------- MS Office Standard 14 319.56 4,474.72 MS Access 1 330.00 330.00 MS Project 1 308.00 308.00 Corel Draw 1 261.00 261.00 MS Schedule 1 73.00 73.00 Configuration of PC's 1 1,960.00 1,960.00 Modem Cards 7 131.18 918.26 Extra 32mb RAM 5 91.40 457.00 Network Cards 5 80.55 402.75 Cables and sundry equipment 108.50 Sub-total L 9,293.23 ========== TOTAL L45,126.98 ==========
3. Summary of Employees' Contracts
Date of Date of offer acceptance Starting date Summary of employment Name of of of for terms including annual Employee employment employment employment Position salary & bonus - ------------ ------------- ------------ -------------- ---------- ---------------------------- 1. Kevin 13th January, N/A 15th January, Chief L125,000 plus bonus in the Turnbull 1998 1998 Executive two calendar years (i.e. 1998 and 1999) of up to 40% of base salary; in third to fifth calendar years of
32 29
- --------------------------------------------------------------------------------------------------------------------- Date of offer Date of Starting date Summary of employment Name of of acceptance for terms including annual Employee employment of employment employment Position salary & bonus - --------------------------------------------------------------------------------------------------------------------- employment, a profit share of 5% of profit before tax capped at L250,000 per annum. Pension contribution is 15% of base salary per annum; two company cars. Employment contract is terminable on six months' notice. Salary is currently being paid by Inchcape Motors International plc. - --------------------------------------------------------------------------------------------------------------------- 2. Suzanne 19th March, 23rd March, 24th March, Manager, PR L30,000 plus bonus of Butler 1998 1998 1998 & Events of up to 20% of base salary; company car. Salary is currently being paid by Inchcape Motors International plc. - --------------------------------------------------------------------------------------------------------------------- 3. Nicola 29th 30th 26th October, Operations/ L16,000. No pension Young September, September, 1998 Customer benefits. 1998 1998 service - --------------------------------------------------------------------------------------------------------------------- 4. Jordanna 10th May, 12th May, 18th May, Regional L30,000 plus bonus of up Goswell 1998 1998 1998 Training to 20% of base salary; Manager company car. - --------------------------------------------------------------------------------------------------------------------- 5. Jonathan 17th May, 10th July, Operations L75,000 plus bonus of Beveridge 1998 1998 Director up to L25,000. During first year of employment, L10,000 of the potential bonus payment is guaranteed; pension contribution is 10% of base salary per annum; company car. Employment contract is terminable on six months' notice. - ---------------------------------------------------------------------------------------------------------------------
33 30
Name of Date of offer Date of Starting date Position Summary of employment Employee of acceptance for terms including annual employment of employment salary & bonus employment 6. Alan 17th May, 18th May, 18th May, Regional L35,000 plus bonus of up to Crane 1998 1998 1998 Sales 20% of base salary; Manager company car 7. Derek 28th May, 28th May, 1st July, Regional L30,000 plus bonus of up to Mars 1998 1998 1998 Training 20% of base salary; Manager company car 8. Marianne 10th June, 20th June, 29th June, Call Centre L25,000 plus bonus of Kilsby 1998 1998 1998 Manager Pound 3,000 based on agreed achievement objectives 9. Nigel 16th June, -- -- Regional L36,000 plus bonus of up to White 1998 Sales 20% of base salary; Manager company car 10. Roger 24th June, 4th July, 17th August, Financial L40,000 plus bonus of up to Keith 1998 1998 1998 Controller 20% of base salary; 11. Peter 30th June, 2nd July, 6th July, Regional L35,000 plus bonus of up to Bradshaw 1998 1998 1998 Sales 20% of base salary; Manager company car 12. Nick 3rd July, 6th July, 3rd August, Regional L37,000 plus bonus of up to Deacon 1998 1998 1998 Sales 20% of base salary; pension Manager contribution of 5% of base salary; company car 13. Paul 7th July, -- -- Business L40,000 plus bonus of up to Donaldson 1998 Development 20% of base salary; Manager company car 14. Roger 20th August, 24th August, 21st September, Regional L30,000 plus bonus of up to Haymer 1998 1998 1998 Training 20% of base salary; pension Manager contribution of 5% of base salary per annum; company car
34 31 Name of Date of offer Date of Starting date Position Summary of employment Employee of acceptance for terms including annual employment of employment salary & bonus employment 15. Jonathan 4th 7th 12th October, IT Manager L40,000 plus bonus of up to Matthews September, September, 1998 20% of base salary; pension 1998 1998 contribution of 5% of base salary; company car allowance of L4,000 per annum. 16. Dharmesh 30th October, 2nd 1st Database L20,000 plus bonus of up to Chudasama 1998 November, December, Administrator 20% of base salary; pension 1998 1998 contribution of 5% of base salary.
Unless otherwise stipulated above, all employment contracts are terminable by either party on one month's notice in writing. Unless otherwise stipulated, the above employment contracts provide for pension contributions on terms to be agreed as and when the pension scheme is established. There will be a period of service requirement before employees will be eligible to join the proposed scheme. 4. PAYE/National Insurance All liabilities in respect of PAYE and National Insurance contributions in respect of all employees of the Company (other than Kevin Turnbull and Suzanne Butler who are on the payroll of Inchcape Motors International p1c as at the date of this agreement) have been fully-paid and no liabilities in respect of PAYE and National Insurance are outstanding as at the date of this agreement. 5. List of motor dealers visited and details of commitments (if any) made Document 5A shows the list of motor dealers who have been visited by the Company. Those dealers who are highlighted have made a verbal commitment to the Company to operate the ABT service and to reserve the appropriate postcode territory for the supply of new car sales. One dealer, Elt Brothers (AC) in the Birmingham postal district has written to the Company agreeing to operate the ABT service. However, the terms on which Elt Brothers (AC) would be involved are contingent upon a formal dealer agreement being signed. No dealer has yet entered into a legally binding contract with the Company. 6. Direct Marketing programme A direct marketing campaign has been commenced in-house by the Company which targets the top car dealer groups and resulted in up to 200 direct mail pieces being 35 [*] Confidential Treatment Requested 32 sent out. The mailing comprised a letter, corporate brochure and one colour advert of the Company. Each of the mailing pieces cost L0.40. This direct marketing campaign commenced at the beginning of September 1998 and continued through October 1998. This campaign will be extended through the November/December 1998 period to the next volume tier of car dealer groups. Up to 2,500 direct mail pieces will be sent out during this period. 7. Public relations cost The Company has employed the services of a public relations agency, Quadrangle Communications Limited who receive a monthly retainer of L7,000 excluding VAT. A spreadsheet for the trade launch campaign is attached as Document 5B. 8. Information providers; Finance & Insurance Companies The Company has contacted CAP (emap National Publications Limited), Glass's Guides (Glass's Information Services Limited), JATO (Jato Dynamics Limited) and the BBC (British Broadcasting Corporation) with a view to such companies and corporation becoming involved in the capacity of information providers to the Company to support the information content on the Company's website. No formal agreement has been entered into with any of the parties. The Company is currently in discussions with certain finance and insurance companies who could supply services for the Company's website: GE Capital AFS, Capital Bank, Alliance & Leicester Bank, Citibank, General Accident, Eagle Star and London & General Holdings. As at the date of this agreement, no formal agreement has been entered into with any of these finance and insurance companies. 9. Manufacturers visited A large number of car manufacturers have been visited by the Company but there are no contractual agreements sought or entered into between the Company and any such car manufacturers. 10. Bank Account Details The Company has one current account and one premium account with [*]. There is one standing order on the Company's Current Account whereby L850.00 per month excluding VAT is paid in respect of Kevin Turnbull's accommodation at "Carriers Cottage". In addition, the Company has issued Kevin Turnbull with a company credit card (Barclaycard DD no. 706602066). The average monthly bill on this credit card is L1,000 including VAT. Otherwise, there are no direct debit or standing order arrangements in relation to either of the Company's accounts. 36 33 As at 23rd November, 1998, the cash ledger amount on the Current Account was L36,322.00. As at 23rd November, 1998, the cash ledger amount on the Business Premium Account was nil. 11. Data Protection Act The Company applied for registration under the Data Protection Act 1984 in the last week of August 1998 and has been granted a temporary registration number PX 3892703. 12. Premises The Company has an outstanding liability of two months' rent for the months of November and December 1998 to Regus UK Limited in the amount of L12,540. 37 34 IN WITNESS WHEREOF this agreement has been executed and delivered as a deed on the day and year first before written: Executed as a deed by /s/ MARK WAYNE LORIMER autobytel.cominc. acting by --------------------------------------- Mark Wayne Lorimer Executed as a deed by INCHCAPE AUTOMOTIVE LIMITED --------------------------------------- Director --------------------------------------- Director/Secretary 38 34 IN WITNESS WHEREOF this agreement has been executed and delivered as a deed on the day and year first before written: Executed as a deed by autobytel.cominc. acting by --------------------------------------- Mark Wayne Lorimer Executed as a deed by INCHCAPE [SIG] AUTOMOTIVE LIMITED --------------------------------------- Director /s/ R.C. WILLIAMS --------------------------------------- Director 39 AUTO-BY-TEL UK LTD
TIER 2 FORD VAUXHALL ROVER 1 West London Dagenham Motors Sutton Sutton Currie Motors/ 2 North London. Dagenham Motors West End 3 East London. Dagenham Motors 4 SouthEast London. Dagenham Motors Penfold Motors Beadle/Sarg&Collins 5 Southwest London. Dagenham Motors Masters Inchcape 6 Bucks. 7 Berks. Inchcape 8 Oxon. City Motors 9 Beds/North Herts. Dagenham Motors Marshall 10 Herts. (Rest). Dagenham Motors Inchcape 11 NorthEast Essex. Dover Court 12 SouthWest Essex. Dover Court Inchcape/Bristol St. Bristol Street 13 East Kent. Dagenham Motors 14 West Kent. Dagenham Motors Beadles Group 15 East Sussex. Dagenham Motors 16 West Sussex. Dagenham Motors Inchcape/Harwood 17 West Surrey/NorthEast Hants Doves (Summit Grp) Whichford 18 Surrey (Rest). Doves (Summit Grp) 19 Hants (Rest). Inchcape/Wessex Whichford 20 Dorset. Vospers Tice Poole Bristol Street 21 Cornwall & Plymouth Vospers Dale Centre 22 Devon (Rest). Inchcape 23 Somerset/South Avon. 24 North Avon. Quartic 25 Wilts. Approach UK 26 Gloucs. Bristol Street Haines & Strange 27 Hereford & Worcs. Brooklyn (AC) 28 Warwick & Coventry. Brooklyn/Corner Cov 29 Birmingham. Bristol Street(2)/Quartic Elt Brothers (AC) Colliers 30 Black Country. Inchcape 31 Shropshire & Stoke-on-Trent Bristol Street 32 Staffs (Rest). Bristol Street 33 Leicester. Sandcliffe (AC) Marshall
1 40 AUTO-BY-TEL UK LTD
TIER 2 FORD VAUXHALL ROVER 34 North Notts. & Chesterfield Blake (AC) 35 Derby's (Rest). 36 Notts. (Rest). Sandicliffe (AC) 37 Lincs. Inchcape 38 Northants. 39 Sheffield & Rotherham Inchcape 40 Barnsley & Doncaster 41 East Yorks. Rydales 42 North Yorks. Crystal Motor Group Rydales 43 Leeds & Bradford 44 Huddersfield & Wakefield. 45 Cleveland. South Cleveland 46 Durham. M.S.F. 47 Northumberland & Tyneside (Part). 48 Tyneside (Rest) & Wearside Bristol Street 49 Cumbria 50 North & West Lancs. 51 South & East Lancs. M.S.F. Duerdens 52 North Merseyside. Peoples (AC) Duerdens 53 Bolton & Wigan. M.S.F. Duerdens 54 Manchester & Salford. Bristol Street 55 Stockport & East Cheshire Quartic 56 South Merseyside & West Cheshire M.S.F. 57 Gwent & South Glamorgan. Thorne (AC)/Inchcape 58 Mid & West Glamorgan. 59 West & Mid Wales. 60 North Wales. 61 Lothian. Peoples (AC) John Martin 62 Dumfries, Galloway & Borders. 63 Ayr. 64 Glasgow. Peoples (AC) 65 Outer Strathclyde. 66 Grampian. 67 Highlands & Islands.
2 41 AUTO-BY-TEL UK LTD
TIER 2 FORD VAUXHALL ROVER 68 Tayside & Fife. 69 Belfast & N Ireland East. 70 Derry & North Ireland West. 71 Norfolk John Grose Ford Inchcape 72 Suffolk John Grose Ford Marshall 73 Cambs Part Taken John Grose Inchcape/ Marshall Marshall
3 42 AUTO-BY-TEL UK LTD
Tier 3 Renault Peugeot VW ------ ------- ------- -- 1 North & West London Dovercourt 2 North East London 3 South London. Inchcape/Whitehouse Charters Dovercourt 4 Essex. Whichford 5 Kent. Whitehouse Whitehouse Whitehouse 6 West/East Sussex. Charters 7 Hants. Inchcape Inchcape/Whichford 8 Herts./South Beds. Hunts Garage 9 Berks./South Bucks/South Oxon. 10 Norfolk/Suffolk. 11 Cambs./Lincs. Marshall 12 Northants/North Bucks/North Beds/North Oxon Bristol(2)/Inchcape 13 Leics./South Derby's Ilkeston Co-op(2) 14 Notts./North Derby's Blake/Ilkeston Co-op(2) 15 Devon/Cornwall Plymouth Renault Cntr. Inchcape 16 Dorset/Somerset/South Wilts. 17 Avon/North Wilts. Craze Bros. Inchcape/Dovercourt 18 Hereford & Worcs./South Warwick/Gloucs 19 West Midlands (Birmingham & Coventry)North Warwick Colliers 20 West Midlands (Black Country) South Staffs TG Holdcroft 21 Shropshire/North Wales. Inchcape 22 South Yorks. 23 Humberside. Crystal Motor Group 24 West Yorks. M.S.F/Sunwin Motors Sunwin Motors 25 North York's/Cleveland. Sinclair Garages 26 Gwent/South & Mid Glamorgan. Sinclair Garages 27 West Glamorgan/West & Mid Wales. 28 Durham/Wearside. 29 Northumberside/Tyneside. 30 Cumbria/North Lancs. 31 North Merseyside/Southwest Lancs. 32 Greater Manchester/South & East Lancs. Radcliffe Smith Knight Fay
1 43 AUTO-BY-TEL UK LTD
Tier 3 Renault Peugeot VW ------ ------- ------- -- 33 Greater Manchester/South & East Cheshire Radcliffe Smith Knight Fay 34 South Merseyside/West & Central Cheshire Smith Knight Fay 35 Lothian/Borders. John Martin 36 South Strathclyde/Dumfries & Galloway 37 North Strathclyde. 38 Grampian/Highlands. 39 Tayside/Fife/Central. Barnetts Barnetts 40 Northern Ireland.
2 44 AUTO-BY-TEL UK LTD
Tier 3 Nissan Toyota Fiat Citroen BMW Honda - ------------------------------------------ ------------ -------------- ---------- ------------ ---------- -------------- 1 North & West London Inchcape/DNR Currie Motors Toyota 2 North East London Currie 3 South London. Pinewood Pinewood/Inch/ Sheerwater Inchcape Currie 4 Essex. Whichford Whichford 5 Kent. Whitehouse Whitehouse Whitehouse 6 West/East Sussex. Whitehouse 7 Hants. Whichford Whichford 8 Herts./South Beds. Currie Motors 9 Berks/South Bucks/South Oxon. Whichford Whichford Inchcape Marshall/WFord 10 Norfolk/Suffolk. 11 Cambs./Lincs. Marshall Marshall Marshall Marshall Marshall 12 Northants/North Bucks/North Beds/ North Oxon Marshall 13 Leics./South Derby's M.Pritchard 14 Notts./North Derby's Inchcape Bristol St. 15 Devon/Cornwall 16 Dorset/Somerset/South Wilts. Bristol St. 17 Avon/North Wilts. 18 Hereford & Worcs./South Warwick/ Gloucs 19 West Midlands (Birmingham & Coventry)/North Warwick Colliers Colliers 20 West Midlands (Black Country) TG H/croft TG Holdcroft TG Holdcroft(2) South Staffs 21 Shropshire/North Wales. 22 South Yorks. 23 Humberside. 24 West Yorks. 25 North York's/Cleveland. S Cleveland 26 Gwent/South & Mid Glamorgan. 27 West Glamorgan/West & Mid Wales. 28 Durham/Wearside. 29 Northumberside/Tyneside. NE Garages 30 Cumbria/North Lancs. Masons 31 North Merseyside/Southwest Lancs. 32 Greater Manchester/South & East Lancs. Radcliffe
3 45 AUTO-BY-TEL UK LTD
Tier 3 Nissan Toyota Fiat Citroen BMW Honda ----------------------- ----------- -------------------- ------------ ------------ ---------- ------------ 33 Greater Manchester/ Radcliffe/Smith Kni TG Holdcroft TG Holdcroft Mainland Inv South & East Cheshire 34 South Merseyside/ Mainland Investments Mainland Inv West & Central Cheshire 35 Lothian/Borders. John Martin John Martin 36 South Strathclyde/ Dumfries & Galloway 37 North Strathclyde. John Martin John Martin 38 Grampian/Highlands. 39 Tayside/Fife/Central. John Martin John Martin John Martin 40 Northern Ireland.
4 46 AUTO-BY-TEL UK LTD ------------------
Tier 4 Mercedes Mazda Hyundai Volvo Skoda Audi ------------------------------- ----------- ------------- ------------ ------------ ---------- ------------ 1 North & West London/Herts. Ickleford Dovercourt 2 South London. Marshall Currie Dovercourt 3 Kent/East Sussex. Whouse Whitehouse 4 Surrey/West Sussex/ Pinewood ??? North & East Hants. 5 Berks./Oxon./South & Whichford 1/2 Squire & Central Bucks. 1/2 Fawcetts 6 Northeast London/South Essex. LondonRd 7 Norfolk/Suffolk/Cambs./ North Essex. 8 Dorset/South West Hants/South & Mistral Hyfer Bros. Central/Wilts/E. Somerset. 9 Devon/Cornwall/West Somerset. Inchcape 10 Avon/Gloucs./North Wilts./ Wford InchcapeDovercourt Hereford/Worcs. 11 South & Central Wales. Sinclair Sinclair 12 West Midlands/Warwick's. Inchcape 13 Northants./Beds./North Ilkeston Co-op Bucks./Leics. 14 Notts./Derby's/Lincs. Speeds Ilkeston Co-op Ilkeston Co-op 15 Staffs./Shropshire/North Wales. Brooklyn TG Holdcoft TG H/Croft Inchcape 16 Merseyside/West Cheshire. 17 Greater Manchester/East Cheshire. Smith Knight Duerden Fay 18 South Yorks./East Yorks. 19 North Yorks./West Yorks. 20 Lancs./Cumbria. Speeds 21 Northumberland/Tyne & Wear/ N.E Gar Durham/Cleveland. 22 Strathclyde/Dumfries & Galloway. J.Martin 23 Lothian/Central/Fife/Borders. John Martin 24 Gramplan/Tayside/Highlands/ Barnetts Barnetts Barnetts Islands. 25 Northern Ireland.
47 AUTO-BY-TEL UK LTD ------------------
Tier 4 Lexus MG 1 North & West London/Herts. Currie/Inchcape 2 South London. Pinewood/Currie ??? 3 Kent/East Sussex. 4 Surrey/West Sussex/North & East Hants. Inchcape Inchwoods 5 Berks./Oxon./South & Central Bucks. 6 Northeast London/South Essex. 7 Norfolk/Suffolk/Cambs./North Essex. Marshall Inchape 8 Dorset/South West Hants/South & Central/Wilts/E. Somerset. Bristol Street 9 Devon/Cornwall/West Somerset. Dale Motors 10 Avon/Gloucs./North Wilts./Hereford/Worcs. 11 South & Central Wales. 12 West Midlands/Warwick's. Colliers 13 Northants./Beds./North Bucks./Leics. 14 Notts./Derby's/Lincs. Inchcape 15 Staffs./Shropshire/North Wales. TG Holdcroft 16 Merseyside/West Cheshire. Mainland Inv 17 Greater Manchester/East Cheshire. Radcliffe 18 South Yorks./East Yorks. Inchcape 19 North Yorks./West Yorks. 20 Lancs./Cumbria. 21 Northumberland/Tyne & Wear/Durham/Cleveland 22 Strathclyde/Dumfries & Galloway. 23 Lothian/Central/Fife/Borders. J. Martin 24 Gramplan/Tayside/Highlands/Islands. 25 Northern Ireland.
4 48 AUTO-BY-TEL UK LIMITED - LAUNCH ACTIVITIES PRE-LAUNCH ACTIVITY: 18th/19th MAY - AUTO BUSINESS CONVENTION organised by Automotive Management - KT to speak on the panel: 'Dawn of the digital dealer' - ABT stand 6m by 2m, theme: 'car selling paradise' - ABT held one-to-one press briefings 17th SEPTEMBER - NON-STOP SHOPPING conference - KT to speak on a panel: 'Home Shopping & Influence of Internet, Digital TV' 23rd SEPTEMBER - CONGRESS 98, Automotive Management one day conference - ABT have a stand 3m by 2m, 'car selling paradise' set to be used 20th OCTOBER - MOTORTRADER ONE DAY CONFERENCE - US ABT Dealer, Thomas Vann, to be on the speaking panel 21st OCTOBER - INCHCAPE CONFERENCE. KT to be present with the ABT stand 27th JANUARY - USED CARS 99 conference - KT to speak: 'How is the internet being exploited and used?' DEALER RECRUITMENT CAMPAIGN: - --------------------------- Phase 1: Completed: one page adverts in MotorTrader and Automotive Management on 29th June. Phase 2: (i) Adverts published are as follows: . MOTOR INDUSTRY MANAGEMENT - back page advert for September issue . MOTORTRADER - one page advert in the 24th August publication (page 7) . AUTOMOTIVE MANAGEMENT - back page advert, 'Technology Made Easy' supplement, published 7th September (ii) INSERT in Automotive Management on the 5th Oct and MotorTrader insert on 19th Oct. (ii) A YEARS LIST RENTAL from MotorTrader of 3,000 UK: MDs, GMs, DPs, Chairman & Owners. (iii) TELEMARKETING CAMPAIGN - being done by Jon Costin who joined on 28th Sept for 5 weeks. (iv) DIRECT MARKETING CAMPAIGN = '123' campaign commences 24/08/98 and is successfully targeting the 123 groups after the top 40 that we had not previously spoken to. (v) MOTOR SHOW MEETING, 21st October, at the Stakis Metropole Hotel, Birmingham in the Norfolk Suite. The event was SMMT approved and commenced at 9am with hourly presentations by ABT and Thomas Vann (US Dealer), with the opportunity to view the website, light food and beverage available throughout the day. There were senior representatives from a large number of the top 40 Dealer Groups and the event which finished at 5:30 p.m. AUTO-BY-TEL LAUNCH PROGRAMME TIMING ----------------------------------- JANUARY/FEBRUARY - US PRESS TRIP (NON-TRADE) - -------------------------------------------- The format will be to take 3 or 4 key journalists out to Irvine. Each journalist selected will specialise in a different consumer area and therefore will receive an exclusive story - eg. an IT angle, the business success/profile angle, a car focus, etc. MARCH - DEALER LAUNCH EVENT/BUSINESS MEETING - -------------------------------------------- FORMAT: 1. To involve all the dealers/groups signed up to the service 2. To be held in London (venue & timing to be decided) 3. Purpose to the event: - To introduce the new UK site prior to the launch - To inform dealers about the partners we have: eg. Glass's, CAP, F&I, etc. - To outline the advertising about to commence (sneak preview of ads perhaps) - Information on the internet service provider deals/partnerships we have struck - Motivate dealers and gain their enthusiasm and involvement in ABT MARCH - PRESS CONFERENCE/LAUNCH TO JOURNALISTS - ---------------------------------------------- FORMAT: 1. To be held in London (venue & timing to be decided) 2. Purpose: - To gain maximum coverage of the ABT launch in all media - trade & consumer - press, radio, TV, magazines 3. To be invited: key consumer & Trade journalists from IT, Car, Business, Women's, Men's and lifestyle magazines and press APRIL (TO BE CONFIRMED) 1999 - ABT "LAUNCH" ------------------------------------------- START OF MEDIA/ADVERTISING CAMPAIGN ----------------------------------- 49 DEALER RECRUITMENT CAMPAIGN
DATE ACTIVITY COST VAT TOTAL COMMIT INVOICE PAID - ---- -------- ---- --- ----- ------ ------- ---- 29th June MotorTrade Advert - one page, 4 colour 2900 507.05 3407.5 C R P 29th June Automotive Management - one page, 4 colour 2900 507.05 3407.5 C R P 24th August MotorTrade Advert - one page, 4 colour 2647.5 463.31 3110.81 C R P 7th September Automotive Management Advert - TME back page 3000 525 3525 C R P September Motor Industry Management Advert 1300 227.5 1527.5 C R P 5th October Automotive Management cost of Inserts - 18260 circ 1940 339.5 2279.5 C 18th August 12 month List Rental from MotorTrader, 3000 names 1822.8 318.99 2141.79 C R P 23rd September Automotive Management Congress 98 - stand & tickets 995 174.13 1169.13 C 23rd September Exhibitions Company costs for Congress 98 Conference 1823.3 319.09 2142.39 C R 28th September Operations Meeting Venue 400 C R P Sub Total 14688 2570.3 TOTAL: 23111.1 September 50,000 Leaflets for Inserting in MT and AM 2971 519.93 3490.93 C R 19th October Motor Trader cost of Inserts - 25,225 circ 1400 245 1645 C R P 14th August Colour copy of the advert (150 quantity) 130 22.75 152.75 C P September D/Marketing Pack - quantity 200 post - at 40p 80 80 C P 28th Sept-Nov Jon Costin, Telemarketing - L180 pd. & 25 days booked 4500 4500 C 28th Sept-Nov Jon Costin - Expenses (Phone, Travel) 400 400 C 21st October Motor Show - Stakis Metropole, Norfolk Suite 1580.04 C R P 21st October Motor Show - Stakis Metropole - Stand/Exhib Costs 2000 350 2350 C 21st October Motor Show - Stakis - Invitation cards (500) 451 79.45 530.45 C October Operations Meeting Venue 800 NO 19-23 October Tom Vann (US Dealer) Flight: Detroit to HRW rtn 3272.7 3272.7 C 19-23 October Tom Vann (US Dealer) Hotel 3 nights @ L105 + val 321.38 56.24 377.63 C R P TOTAL: 42290.6
50 AUTO-BY-TEL UK LIMITED MONTHLY FINANCIAL STATEMENTS (POUNDS STERLING)
JANUARY FEBRUARY MARCH APRIL MAY --------------- --------------- ----------------- ---------------- ----------------- MONTH YTD MONTH YTD MONTH YTD MONTH YTD MONTH YTD ------- ------- ------- ------- -------- -------- -------- ------- -------- ------- INCOME (INTEREST) 0 0 0 0 0 0 0 0 0 0 EXPENSES: (MARKETING) MARKETING/ADVERTISING 0 0 0 0 0 0 0 0 0 0 PUBLIC RELATIONS 0 0 0 0 0 0 7,000 7,000 7,000 14,000 ------- ------- ------- ------- -------- -------- -------- ------- -------- -------- TOTAL 0 0 0 0 0 0 7,000 7,000 7,000 14,000 ------- ------- ------- ------- -------- -------- -------- ------- -------- -------- CONSULTANCY 16,450 35,450 7,500 42,950 8,550 51,550 9,100 60,600 21,662 82,262 (OPERATIONS) TRAINING 0 0 0 0 0 0 0 0 3,534 3,534 ------- ------- ------- ------- -------- -------- -------- ------- -------- -------- TOTAL 0 0 0 0 0 0 0 0 3,534 3,534 ------- ------- ------- ------- -------- -------- -------- ------- -------- -------- EMPLOYMENT PAYROLL 6,346 6,346 11,458 17,804 11,496 29,300 14,949 44,249 14,208 58,457 RECRUITMENT 0 0 0 0 42,857 42,857 34,475 77,332 6,366 83,698 TRAVEL/SUBSISTENCE 4,705 4,705 4,502 9,207 1,593 10,800 727 11,527 973 12,500 ------- ------- ------- ------- -------- -------- -------- ------- -------- -------- (TOTAL) 11,051 11,051 15,960 27,011 55,946 82,957 50,151 133,108 21,547 154,655 ------- ------- ------- ------- -------- -------- -------- ------- -------- -------- (PREMISES & OTHER) RENT 0 0 0 0 0 0 4,680 4,680 4,804 9,484 PRINTING/STATIONARY 0 0 0 0 0 0 158 158 4,205 4,363 IT / SUNDRIES 0 0 1,252 1,252 848 2,100 2,399 4,499 1,395 5,894 ------- ------- ------- ------- -------- -------- -------- ------- -------- -------- (TOTAL) 0 0 1,252 1,252 848 2,100 7,237 9,337 10,404 19,741 ------- ------- ------- ------- -------- -------- -------- ------- -------- -------- TOTAL EXPENSES 27,501 46,501 24,712 71,213 65,344 136,557 73,488 210,045 64,147 274,192 ------- ------- ------- ------- -------- -------- -------- ------- -------- -------- LOSS FOR PERIOD -27,501 -24,712 -65,344 -73,488 -64,147 ------- ------- -------- -------- -------- CUMULATIVE LOSS -46,501 -71,213 -136,557 -210,045 -274,192 ------- ------- -------- -------- --------
JUNE JULY AUGUST SEPTEMBER ---------------- ---------------- ----------------- ----------------- MONTH YTD MONTH YTD MONTH YTD MONTH YTD ------- -------- ------- -------- -------- -------- -------- -------- INCOME INTEREST 0 0 0 0 0 0 337 337 EXPENSES MARKETING MARKETING/ADVERTISING 8,745 8,745 3,150 11,895 10,350 22,245 8,258 30,504 PUBLIC RELATIONS 7,000 21,000 7,172 28,172 10,000 38,172 7,000 45,172 ------- -------- ------- -------- -------- -------- -------- -------- TOTAL 15,745 29,745 10,322 40,067 20,350 60,417 15,258 75,676 ------- -------- ------- -------- -------- -------- -------- -------- CONSULTANCY 14,378 96,640 -7,428 89,212 11,270 100,482 33,334 133,816 OPERATIONS TRAINING 0 3,534 0 3,534 0 3,534 0 3,534 ------- -------- ------- -------- -------- -------- -------- -------- TOTAL 0 3,534 0 3,534 0 3,534 0 3,534 ------- -------- ------- -------- -------- -------- -------- -------- EMPLOYMENT PAYROLL 14,243 72,700 54,692 127,392 43,490 170,682 46,884 217,765 RECRUITMENT 5,500 89,198 1,800 90,798 12,590 103,388 2,300 105,688 TRAVEL/SUBSISTENCE 6,600 19,100 8,771 27,871 14,509 42,380 7,833 50,213 ------- -------- ------- -------- -------- -------- -------- -------- TOTAL 26,343 180,998 65,063 246,061 70,589 316,650 57,017 373,667 ------- -------- ------- -------- -------- -------- -------- -------- PREMISES & OTHER RENT 7,327 16,811 3,124 19,935 9,397 29,332 10,661 40,193 PRINTING/STATIONARY 0 4,363 509 4,872 0 4,872 552 5,424 IT / SUNDRIES 2,306 8,200 3,766 11,966 3,999 15,965 1,512 17,476 ------- -------- ------- -------- -------- -------- -------- -------- TOTAL 9,633 29,374 7,399 36,773 13,396 50,169 12,925 63,094 ------- -------- ------- -------- -------- -------- -------- -------- TOTAL EXPENSES 66,099 340,291 75,356 415,647 115,605 531,252 118,534 649,786 ------- -------- ------- -------- -------- -------- -------- -------- LOSS FOR PERIOD -66,099 -75,356 -115,605 -118,197 ------- ------- -------- -------- CUMULATIVE LOSS -340,291 -415,647 -531,252 -649,450 -------- -------- -------- --------
1 51 AUTO-BY-TEL UK LIMITED BALANCE SHEETS AT MONTH-END (POUND'S)
JANUARY FEBRUARY MARCH APRIL MAY ------- -------- ----- ----- --- NET FIXED ASSETS 0 0 0 0 8,950 CURRENT ASSETS CASH AT BANK 0 0 0 20,871 59,261 RENT DEPOSIT 0 0 0 9,360 9,360 TAX REFUNDS DUE 0 0 7,500 19,650 27,689 OTHER 2 2 2 2 2 ----- ------ ------- ------- ------ TOTAL 2 2 7,502 49,883 96,312 ----- ------ ------- ------- ------ CURRENT LIABILITIES CREDITORS AND ACCRUALS 0 0 50,357 107,275 106,447 OTHER 0 0 0 0 0 ----- ------ ------- ------- ------- TOTAL 0 0 50,357 107,275 106,447 ----- ------ ------- ------- ------- NET CURRENT ASSETS/ LIABILITIES 2 2 -42,855 -57,392 -10,135 ------- ------- -------- -------- ------- NET ASSETS 2 2 -42,855 -57,392 -1,185 ======= ======= ======== ======== ======= SHAREHOLDERS' FUNDS SHARE CAPITAL 2 2 2 2 2 LOANS ON DEMAND LOAN-ABT INC 0 0 0 35,730 136,243 LOAN-INCHCAPE INCHCAPE INTERCO DEBT 46,501 71,213 93,700 116,921 136,762 PROFIT AND LOSS A/C -46,501 -71,213 -136,557 -210,045 -274,192 ------- ------- -------- -------- ------- NET FUNDS 2 2 -42,855 -57,392 -1,185 ======= ====== ======== ======== ======= JUNE JULY AUGUST SEPTEMBER NET FIXED ASSETS 28,950 28,950 39,012 41,937 CURRENT ASSETS CASH AT BANK 216,092 103,346 90,794 9,366 RENT DEPOSIT 12,540 12,540 6,270 12,540 TAX REFUNDS DUE 31,980 42,214 16,953 30,632 OTHER 2 2 2 11,559 ------- ------- ------- ------- TOTAL 260,614 158,102 114,019 64,097 ------- ------- ------- ------- CURRENT LIABILITIES CREDITORS AND ACCRUALS 124,010 76,554 110,407 151,304 OTHER 0 0 3,430 11,013 ------- ------- ------- ------- TOTAL 124,010 76,554 113,837 162,317 ------- ------- ------- ------- NET CURRENT ASSETS/ LIABILITIES 136,604 81,548 182 -98,220 -------- -------- -------- -------- NET ASSETS 165,554 110,498 39,195 -56,283 ======== ======== ======== ======== SHAREHOLDERS' FUNDS SHARE CAPITAL 2 2 2 2 LOANS ON DEMAND LOAN-ABT INC 136,243 136,243 136,243 136,243 LOAN-INCHCAPE 200,000 200,000 200,000 200,000 INCHCAPE INTERCO DEBT 169,600 189,900 234,202 256,922 PROFIT AND LOSS A/C -340,291 -415,647 -531,252 -649,450 -------- -------- -------- -------- NET FUNDS 165,554 110,498 39,195 -56,283 ======== ======== ======== ========
2 EX-10.26 21 FINANCING INQUIRY REFERRAL AGREEMENT W/ PROVIDENT 1 [*] Confidential treatment has been requested for certain portions of this exhibit. EXHIBIT 10.26 FINANCING INQUIRY REFERRAL AGREEMENT THIS FINANCING INQUIRY REFERRAL AGREEMENT ("Agreement"), dated as of December 31, 1998, is made between PROVIDENT Bank dba: Provident Automotive Financial Services and Provident Auto Leasing Company, an Ohio banking corporation ("PROVIDENT"), with its principal place of business at One East Fourth Street, Cincinnati, Ohio 45202, and Auto-By-Tel Acceptance Corporation ("ABTAC"), a Delaware corporation, with its principal place of business at 18872 MacArthur Blvd., Irvine, CA 92612, and autobytel.com inc. (collectively, "ABT"), a Delaware corporation located at 18722 MacArthur Blvd., Irvine, CA 92612, as guarantor of the obligations of ABTAC under this Agreement, (in such capacity, the "Guarantor"). WITNESSETH WHEREAS, ABTAC is in the business of, among other things, identifying persons interested in arranging financing for the lease of new and used automobiles and trucks ("Vehicles") who visit the ABT Internet website and lease a Vehicle ("Customers"); and WHEREAS, PROVIDENT is in the business of extending financing to credit worthy persons for the lease of Vehicles; and WHEREAS, ABTAC desires to refer such Customers to PROVIDENT and PROVIDENT desires to purchase from Autobytel.com subscribing dealers ("Dealers") in accordance with Schedule A attached hereto, retail vehicle leases originated by such Dealers (excluding recreational vehicles) (such transactions referred to as "RFTs") and to pay marketing fees in connection with RFTs purchased by PROVIDENT as a result of ABTAC's referrals; NOW, THEREFORE, in consideration of the foregoing premises, and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, ABTAC and PROVIDENT agree as follows: SECTION 1. FINANCING PROGRAM (a) ABTAC shall cause to be included on the ABT Website an application for credit (the "Application"). The Application shall request the information specified by PROVIDENT and shall be in a form reasonably satisfactory to PROVIDENT. PROVIDENT may request changes from time to time in the information solicited by the Application and, provided such requests are made in writing and with reasonable notice, ABTAC shall use its best efforts to promptly accommodate such requests; provided however, that PROVIDENT shall use its best efforts not to request changes to the information requested by, or form of, the Application (unless such changes are required by law) more often than once in any three-month period; provided further, that if such changes are required by law and PROVIDENT gives ABTAC thirty (30) days notice, ABTAC shall honor such requested change within such thirty (30) day period. (b) Unless it already has done so, PROVIDENT will attempt to enter into its standard dealer agreement ("Dealer Agreement") with each Dealer in their designated area as set forth in Schedule A (the "Territory") who has executed an on-line purchase referral agreement with ABT Page 1 of 14 2 (each, a "Dealer," and together the "Dealers"). The Dealer Agreement shall contain customary terms no less favorable to the Dealers than PROVIDENT's customary Dealer agreements in use with its other Vehicle Lease financing programs and shall govern the terms upon which the Dealer and PROVIDENT will close Vehicle Lease financing transactions referred through this Agreement. Upon execution of a Dealer Agreement, PROVIDENT shall assign such Dealer an identifying number (the "Dealer ID") and inform ABTAC of such number. PROVIDENT may terminate its relationship with any Dealer at any time, subject to the terms and conditions of its Dealer Agreement with such Dealer. PROVIDENT shall notify ABTAC if it terminates any such Dealer under the provisions of its Dealer Agreement with such Dealer. Notwithstanding the foregoing, PROVIDENT shall not be obligated to enter into a Dealer Agreement or otherwise do business with any Dealer, which PROVIDENT has determined in good faith it will not do any business. (c) Except as specified to the contrary in this Agreement, ABTAC (i) shall not be a party to, (ii) shall not have any obligations with respect to, and (iii) shall be held harmless by PROVIDENT with respect to any losses or liabilities arising from or in connection with, the Dealer Agreements. If for any reason the Dealer Agreement between a Dealer and PROVIDENT is terminated, then PROVIDENT shall be under no obligation to approve any Application received from Customers of such Dealer. (d) For each Customer credit application approved, PROVIDENT agrees to inform ABTAC of the lease terms offered to the Customer. (e) PROVIDENT agrees to offer competitive lease terms and conditions to Dealers who have executed a Dealer Agreement. Competitive shall mean that PROVIDENT will offer monthly payments on comparable leases, and to comparable lessees with comparable credit qualifications within ten dollars ($10) per month of the least expensive lessor located within the Territory. These terms will be extended to Dealers representing eighty percent (80%) of the vehicles sold in the Territory. For purposes of the $10/month and the 80% test, lease terms offered by manufacturers or their representatives shall be excluded. The $10/month test shall be measured utilizing "LeaseLink," an automotive leasing software provider, or other comparable information supplier if LeaseLink no longer provides such data. (f) For so long as the Exclusivity Conditions (as defined below) are met, PROVIDENT shall not enter into any agreement or arrangement similar to this Agreement with any other Internet automobile leasing program, or service, whereby the Internet program or service provider receives or solicits credit information from its customers to finance the lease of vehicles (excluding recreational vehicles), forwards that information for credit review to PROVIDENT and PROVIDENT purchases that customer's lease contract originated by an automobile dealer that has executed an on-line purchase or financing referral agreement or similar agreement with the Internet program or service provider; provided, however, that (i) PROVIDENT's rights to and/or use of CMSI's Auto Loan Exchange System, credit connection, or other similar system for indirect dealer lease financing; shall not violate the provisions of this Section 1(f); and (ii) PROVIDENT, any affiliate of PROVIDENT, or any person controlled by or under common control (including partnership and joint ventures) with PROVIDENT may, after the date hereof, acquire control through merger, acquisition, consolidation or purchase of all or substantially all of the assets or other arrangements of any corporation or other entity shall not violate the provisions of this Section 1(f): and (iii) PROVIDENT shall not use or participate in the use Page 2 of 14 3 of the ABTAC Marks or the ABT Marks in conjunction with the offering or making of any automobile finance product or product related thereto on the Internet. (g) For purposes of this Agreement, the term "Exclusivity Conditions" shall mean, as it relates to ABTAC, the occurrence of the following: (i) ABTAC forwards to PROVIDENT all of the Applications for RFTs in the agreed Territory as defined in Schedule A, that ABTAC receives from Customers who request vehicle lease financing from or through ABTAC. (ii) ABTAC shall forward to PROVIDENT Applications received from Customers within the Territory. PROVIDENT shall review each forwarded Application and, if such Application does not represent a credit, which PROVIDENT will approve, PROVIDENT shall so inform ABTAC and ABTAC may forward such Application to another vehicle lease financing source. (iii) ABTAC will be responsible for informing Dealers of the nature of PROVIDENT's vehicle lease financing program. ABTAC will provide PROVIDENT with a list of the Dealers with addresses so that PROVIDENT may forward Dealer Agreements to them for signature. PROVIDENT shall provide ABTAC with a copy of the form of Dealer Agreement. (iv) ABTAC will attempt, when practicable, during the course of this Agreement, to telemarket dealers and customers with the intended purpose of attempting to close the fundings for approved vehicle leases. (v) ABTAC will, during the course of this Agreement, make available to PROVIDENT brand identifying website space for its market area (Territory) in a fashion and manner equal to its other institutions having similar agreements, under similar terms and conditions. (vi) ABTAC shall upon executing this Agreement, completion of electronic connectivity and during the course of this Agreement with PROVIDENT, provide press releases that contain mention of the PROVIDENT ABTAC partnership. (h) ABTAC shall comply at all times with the provisions of the Federal Fair Credit Reporting Act and the Equal Credit Opportunity Act as well as the so-called "fair lending" laws, in each case pertaining to the performance of its obligations under this Agreement. Further, ABTAC will not submit any Application or credit information to PROVIDENT with respect to applicants if ABTAC has any knowledge that such Application, credit information or applicant is fraudulent, or that the Application or credit information contains information which ABTAC has reasonable information to cause it to believe that such credit information is untrue. (i) PROVIDENT shall not be responsible for paying or reimbursing dealers or ABTAC for any document programming. Page 3 of 14 4 SECTION 2. RECEIPT AND TRANSMISSION OF APPLICANT INFORMATION (a) Subject to the provisions of Section 1 (g), ABTAC will transmit each completed Application to PROVIDENT via the Internet or other electronic means as mutually agreed. When transmitting an Application to PROVIDENT, ABTAC will also designate the Dealer that is to be notified of the credit decision. (b) ABTAC will not use any such information in any manner which violates applicable law in effect from time to time. SECTION 3. UNDERWRITING (a) Upon receipt, PROVIDENT will review each Application in accordance with its underwriting criteria in effect from time to time. ABTAC acknowledges that PROVIDENT has sole discretion in determining whether or not to approve an Application, which discretion PROVIDENT agrees to exercise in a manner consistent with its company-wide or market-wide underwriting procedures, as the case may be. PROVIDENT shall inform ABTAC whether an Applicant has been approved, conditionally approved or denied, but shall not reveal the reasons it has denied any Application. (b) PROVIDENT will process no less than fifty percent (50%) of the Applications within the two (2) business hours after electronic receipt of the Application. Compliance with this performance standard regarding processing time for applications shall be measured pursuant to Section 8(b) on a monthly basis. If PROVIDENT fails to comply with this performance standard, ABTAC's sole remedy shall be to terminate this Agreement pursuant to Section 10(b). [Subject to the mutual agreement of the parties, the parties shall review the foregoing business hours and expand same if justified economically by business volume.] (c) PROVIDENT reserves the sole right and power to change the Underwriting Criteria in accordance with sound lending practices consistent with PROVIDENT's normal business practices and subject to applicable law, and further to suspend, restrict or modify the purchase of RFTs from Dealers in any portion of the Territory for any reason. PROVIDENT shall provide ABTAC with advance written notice, given as early as practicable, of any actions under this clause it plans to implement. Any such actions shall be taken in good faith and only if consistent with actions taken by PROVIDENT on a company-wide basis. SECTION 4. COMMUNICATION OF CREDIT DECISIONS At the completion of underwriting, subject to the time-frames set forth in Paragraph 3(b) of this Agreement, PROVIDENT will notify ABTAC, via the Internet or such other method as agreed upon by the parties from time to time, of PROVIDENT's credit decision, and ABTAC shall use its best efforts to promptly notify the Dealer and the Applicant on behalf of the Dealer of PROVIDENT's credit decision. If PROVIDENT declines a request for credit, PROVIDENT will send to the Applicant any and all notices required pursuant to federal or applicable state law or regulation including, but not limited to, those required under the federal Equal Credit Opportunity Act and Federal Reserve Regulation B. [PROVIDENT shall not provide Applications received from ABTAC which do not result in an RFT purchase from a Dealer to any other financing source.] Page 4 OF 14 5 SECTION 5. CLOSING AND FUNDING PROVIDENT and the Dealer shall use its best efforts to close approved financing within twenty-four (24) business hours after receipt from the Dealer of all properly completed and required documentation pursuant to the terms of the Dealer Agreement. PROVIDENT will remit the proceeds to the Dealer by means of a sight draft drawn on PROVIDENT from standard draft stock or by ACH electronic transfer of funds or by other means as established by PROVIDENT from time to time for each purchased RFT. SECTION 6. COMPENSATION (a) During the term of this Agreement, PROVIDENT shall pay ABTAC a service fee, in the amounts determined by reference to Schedule B, for each RFT purchased under the terms of this Agreement. The payments to ABTAC shall be made on or before the fifteenth (15th) of the following month for the prior month's production booked the prior month by PROVIDENT. (b) ABTAC may appoint public accountants of its choice no more than once during any twelve (12) month period, and at its sole expense, for the purpose of auditing PROVIDENT's compliance with the compensation provisions specified in Section 6(a) of this Agreement, and PROVIDENT agrees to grant such accountants access, during normal business hours and upon reasonable notice, to all records necessary to determine the compliance of PROVIDENT with the compensation provisions of Section 6(a) of this Agreement. If the results of such audit reveal a discrepancy between the amounts paid by PROVIDENT to ABTAC hereunder and the amounts which should have been paid hereunder, than the appropriate payments shall be made immediately to the party entitled to such additional amounts. SECTION 7. USER DATA (a) The parties agree that any and all "user data" compiled as a result of this Agreement shall remain the sole and exclusive property of ABT and its subsidiaries and affiliates, and that PROVIDENT shall not acquire any right, title or interest in or to such information. For the purposes of this Agreement, "User" shall be defined as any consumer visiting the ABT web site for the purposes of, among other things, inquiring about leasing a vehicle that does not transact the lease of a vehicle through PROVIDENT. (Such transaction referred to as RFT's). For the purposes of this Agreement, "User Data" shall be defined as: The name, address, telephone number, email address and any additional data provided by a user including but not limited to personal financial information, place of employment, or other demographic data as provided during the process of submitting an application for the lease of a Vehicle. Page 5 OF 14 6 (b) Accordingly, PROVIDENT agrees that it will not sell, disclose, transfer or rent any User Data obtained from users referred from the ABT which could reasonably be used to identify a specific named individual to any third party. SECTION 8. REPORTS (a) Each business day, via facsimile or such other method as agreed upon by the parties from time to time, PROVIDENT will send to ABTAC a report identifying each RFT to an Applicant, that was booked by PROVIDENT the prior business day. (b) On or before the 15th day of each month, via facsimile or such other method as agreed upon by the parties from time to time, PROVIDENT will send to ABTAC a report, sorted by Dealer ID, outlining for the preceding month (i) the number of Applications received from ABTAC, (ii) the number of Applications that were approved, (iii) the number of Applications that were denied, (iv) the number of Applications pending at month-end, (v) the number of RFT's booked by PROVIDENT, and (vi) the average processing time for Applications. Processing time for Applications shall be measured from the point in time the Application is received by PROVIDENT's application system and the time its credit decision is transmitted back to ABTAC. In the case of the information set forth in clauses (i), (ii), (iii) and (v) of the preceding sentence, the report shall identify each Application by name of applicant. PROVIDENT shall include with such report, a report indicating any Dealer added or deleted. (c) ABTAC agrees to maintain complete and accurate books and records and procedures concerning the taking and referral of Applications and credit information and compliance with applicable law. Throughout the term of this Agreement, and for a period of twenty five (25) months after the termination of this Agreement, PROVIDENT, its duly authorized agents, representatives or employees or federal or state agencies having jurisdiction over PROVIDENT, may from time to time, upon reasonable notice and during normal business hours, inspect such books, records and procedures to ensure compliance with ABTAC's obligations concerning the taking and referral of Applications and credit information under this Agreement and compliance with all applicable law. SECTION 9. INDEMNIFICATION (a) ABTAC shall defend, indemnify and hold harmless PROVIDENT and its affiliates and all of its and their officers, directors, owners, agents, attorneys, and employees from and against any and all loss, liability, claims counterclaims, damages, cost or expense (including reasonable attorney's fees and costs), whether asserted in a judicial or administrative proceeding, arising out of either (i) a breach of the representations and warranties of ABTAC in Section 13; (ii) a breach of the provisions of Section 1(h); (iii) the receipt of a Customer's Application information by any person or entity other than PROVIDENT or another entity that has a business relationship with ABTAC and a permissible purpose to receive such information, by hacking or by any other authorized or unauthorized method; unless such person or entity obtained or received such information directly or indirectly from PROVIDENT; or (iv) any negligence or intentional misconduct of ABTAC in connection with ABTAC's performance of its obligations under this Agreement. Page 6 OF 14 7 (b) PROVIDENT shall defend, indemnify and hold harmless ABTAC and its affiliates and all of its and their officers, directors, owners, agents, attorneys, and employees, from and against any and all loss, liability, claims, counterclaims, damage, cost or expense (including reasonable attorney's fees and costs), whether asserted in a judicial or administrative proceeding, arising out of either (i) a breach of the representations and warranties of PROVIDENT designated in Section 13; or (ii) any gross negligence or intentional misconduct of PROVIDENT in connection with PROVIDENT's performance of its obligations under this Agreement. (c) Promptly after the receipt by either party hereto of notice of any claim, action, suit or proceeding of any third party which is subject to indemnification hereunder, such party (the "Indemnified Party") shall give written notice of such claim to the party obligated to provide indemnification hereunder (the "Indemnifying Party"), stating the nature and basis of such claim and the amount thereof, to the extent known. Failure of the Indemnified Party to give such notice shall not relieve the Indemnifying Party from any liability which it may have on account of this indemnification or otherwise, except to the extent that the Indemnifying Party is materially and adversely prejudiced thereby. The Indemnifying Party shall be entitled to participate in the defense of and, if it so chooses, to assume the defense of, or otherwise contest, such claim, action, suit or proceeding with counsel selected by the Indemnifying Party and reasonably satisfactory to the Indemnified Party. Upon the election by the Indemnifying Party to assume the defense of, or otherwise contest, such claim, action, suit or proceeding, the Indemnifying Party shall not be liable for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof The Indemnified Party shall have the right to participate in the defense thereof and to employ counsel at its own expense, and separate from the counsel employed by the Indemnifying Party. Notwithstanding the foregoing, the Indemnifying Party shall be liable for the reasonable fees and expenses of counsel employed by the Indemnified Party, if, and only to the extent that (i) the Indemnifying Party has not employed counsel or counsel that is reasonably acceptable to the Indemnified Party to assume the defense of any such action within a reasonable time after receiving notice of the commencement of the action; (ii) the employment of counsel and the amount reimbursable therefor by the Indemnified Party has been authorized in writing by the Indemnifying Party or (iii) representation of the Indemnifying Party and the Indemnified Party by the same counsel would, in the opinion of such counsel, constitute a conflict of interest (in which case the Indemnifying Party will not have the right to direct the defense of such action on behalf of the Indemnified Party). The parties shall use commercially reasonable efforts to minimize Losses from claims by third parties and shall act in good faith in responding to, defending against, settling or otherwise dealing with such claims, notwithstanding any dispute as to liability as between the parties under this Section 8. The parties shall also cooperate in any such defense, give each other full access to all information relevant thereto and make employees and other representatives available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Whether or not the Indemnifying Party shall have assumed the defense, the Indemnifying Party shall not be obligated to indemnify the other party hereunder for any settlement entered into without the Indemnifying Party's prior written consent which consent shall not be unreasonably withheld or delayed. The Indemnifying Party shall not compromise or settle any claim, action, suit or proceeding, without the consent of the indemnified Party (which consent shall not be unreasonably withheld) unless the terms of such settlement or compromise release the Indemnified Party from any and all liability with respect to such claim, action, suit or proceeding. Page 7 of 14 8 SECTION 10. TERM AND TERMINATION (a) This Agreement shall remain in effect for a term of one (1) year from the date hereof (the "Initial Term") and shall automatically renew for subsequent one (1) year periods a "(Renewal Term") unless terminated by either party upon ninety (90) days written notice prior to the expiration of the Initial Term or any Renewal Term. This Agreement shall also terminate if required by governmental authority or court of law, but only insofar as this Agreement applies to such jurisdiction affected. (b) If any party shall be in breach of any material obligation under this Agreement and such breach shall remain uncured for a period of thirty (30) days after written notice thereof from the other party (or, if such breach is curable and requires more than thirty (30) days to cure, if such cure is not commenced within thirty (30) days and thereafter diligently prosecuted), then the other party may, by written notice, terminate this Agreement upon thirty (30) days after delivery of such notice. Nonpayment of amounts' due under this Agreement shall be deemed to be a breach of a material obligation if suit or payment of amounts due under this Agreement shall not be deemed to be an automatic termination hereunder. Notwithstanding anything in this Agreement to the contrary, either party has the right to terminate this Agreement immediately, upon written notice to the other party, if the other party's breach of any material obligation of this Agreement causes the non-breaching party to be in violation of any applicable law, rule, regulation or order. (c) At any party's option, and upon written notice of exercise of the option, this Agreement shall terminate upon the voluntary or involuntary bankruptcy or insolvency of a party, the voluntary or involuntary dissolution or liquidation of a party, the admission in writing by a party of its inability to pay its debts as they mature, or the assignment by a party for the benefit of creditors. SECTION 11. NOTICES All notices or transmissions pursuant to this Agreement, unless otherwise specified, shall be by facsimile transmission, by personal delivery, or by registered, or certified mail, return receipt requested, to the addresses of the parties listed on page 1, or such other address as any party listed below shall specify in writing to the others in a notice conforming to this Section. SECTION 12. GUARANTEE The Guarantor hereby unconditionally and irrevocably guarantees to PROVIDENT its successors, endorsees and assigns, the performance when due of all present and future obligations and liabilities of all kinds of ABTAC arising out of or in connection with the Agreement, whether due or to become due, secured or unsecured, absolute or contingent, joint or several ("Obligations"). The Guarantor agrees that PROVIDENT and ABTAC may mutually agree to modify the Obligations or any agreement between PROVIDENT and ABTAC without in any way impairing or affecting this Guarantee Notice. The Guarantor agrees that the liability hereunder will not be affected by any settlement, extension, renewal, or modification of this Agreement or by the discharge or release of the Obligations of ABTAC, whether by operation of law or otherwise. The Guarantor agrees to also be liable for all fees and costs, including reasonable attorney's fees, incurred by PROVIDENT in enforcing the terms of this Guarantee. Page 8 of 14 9 SECTION 13. REPRESENTATIONS, GENERAL A. Representations and Warranties of ABTAC ABTAC hereby makes the following representations and warranties to PROVIDENT: (1) ABTAC has been duly organized and is validly existing as a corporation under the laws of the state of Delaware and is duly licensed where required as a "licensee" to conduct its business or is otherwise qualified in each state in which it transacts business and is not in default of such state's applicable laws, rules and regulations, except where the failure to so qualify or such default would not have a material adverse effect on its ability to conduct its business or to perform its obligations under this Agreement. (2) ABTAC has the requisite power and authority and legal right to execute and deliver the Agreement, engage in the transactions contemplated by the Agreement, and perform and observe those terms and conditions of the Agreement to be performed or observed by it hereunder. The person signing this Agreement, and any document executed pursuant to it, on behalf of ABTAC has full power and authority to bind ABTAC. The execution, delivery and performance of this Agreement, and the performance by ABTAC of all transactions contemplated herein, have been duly authorized by all necessary and appropriate corporate action on the part of ABTAC. (3) This Agreement been duly authorized and executed by ABTAC and is valid, binding and enforceable against ABTAC in accordance with its terms, except that such enforcement may be subject to, and automatically stayed by bankruptcy, insolvency, reorganization, moratorium or other similar laws (whether statutory, regulatory or decisional) now or hereafter in effect relating to creditors' rights generally, and the execution, delivery and performance by ABTAC of this Agreement do not conflict with any term or provision of (i) its certificate of incorporation or bylaws, (ii) any law, rule, regulation, order, judgment, writ, injunction or decree applicable to ABTAC of any court, regulatory body, administrative agency or governmental body having jurisdiction over ABTAC or (iii) any agreement to which ABTAC is a party or by which its property is bound. (4) No consent, approval, authorization or order of, registration or filing with, or notice to any governmental authority or court is required under applicable law in connection with the execution, delivery and performance by ABTAC of this Agreement. (5) There is no action, proceeding or investigation pending or, to the best knowledge of ABTAC, threatened against it before any court, administrative agency or other tribunal (i) asserting the invalidity of this Agreement, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement, or (iii) which could reasonably be expected to materially and adversely affect its performance of its respective obligations under, or the validity or enforceability of, this Agreement. (6) ABTAC has all regulatory approvals, authorizations, licenses, permits and other permissions, consents and authorities whatsoever needed to operate the ABT Website and perform ABTAC's obligations under this Agreement. (7) ABTAC warrants that it has the legal and valid right to use any registered or unregistered trademark, tradename, service mark, logo, emblem or other proprietary designation, or Page 9 OF 14 10 any variations, derivatives and modifications thereof, used by it in the materials provided to PROVIDENT or used by ABTAC in connection with this Agreement (the "ABTAC Marks"). (8) ABTAC represents and warrants that its computer systems, software and the services offered (collectively referred to as the "Services") under this Agreement are designed to be used prior to, during and after calendar year 2000 A.D. and that its computer systems, software and the Services will operate during each such time period without error relating to the date data, provided that any other software used by PROVIDENT that interconnects or works in connection with ABTAC's computer system, software and the Services including, without limitation, hardware, software and firmware, properly exchange date data with ABTAC's Services. Without limiting the generality of the foregoing, ABTAC further represents and warrants that (a) its computer systems and the Services will not abnormally end or provide invalid or incorrect results relating to date data, including date data century recognition, calculations which accommodate same century and multi-century formulas and date values and date data interface values that reflect the century; and (b) any provision of the Agreement which tends to limit or eliminate liability or responsibility of either party shall have no application with respect to this Year 2000 compliance set forth herein. Further, ABTAC agrees to provide PROVIDENT any testing results and certifications as may be reasonably requested. B. Representations and Warranties of PROVIDENT. PROVIDENT hereby makes the following representations and warranties to ABTAC, (1) PROVIDENT is duly licensed where and as required in each state in which it transacts business and is not in default of such states applicable laws, rules and regulations, except where such default would not have a material adverse effect on the ability of PROVIDENT to conduct its business or to perform its obligations under the Agreement. (2) PROVIDENT has the requisite power and authority and legal right to execute and deliver, engage in the transactions contemplated by, and perform and observe the terms and conditions of, this Agreement. The person(s) signatory to this Agreement and any document executed pursuant to it on behalf of PROVIDENT have full power and authority to bind PROVIDENT. (3) This Agreement has been duly authorized and executed by PROVIDENT and is valid, binding and enforceable against PROVIDENT in accordance with its terms, except that such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws (whether statutory, regulatory or decisional) now or hereafter in effect relating to creditors' rights generally, and the execution, delivery and performance by PROVIDENT of this Agreement do not conflict with any term or provision of the certificate of incorporation or bylaws of PROVIDENT, or any law, rule, regulation, order, judgment, writ, injunction or decree applicable to PROVIDENT of any court, regulatory body, administrative agency or governmental body having jurisdiction over PROVIDENT. (4) No consent, approval, authorization or order of, registration or filing with, or notice to any governmental authority or court is required under applicable law in connection with the execution, delivery and performance by PROVIDENT of this Agreement. (5) There is no action, proceeding or investigation pending or, to the best knowledge of PROVIDENT, threatened against it before any court, administrative agency or other Page 10 of 14 11 tribunal (i) asserting the invalidity of the Agreement, (ii) seeking to prevent the consummation of any of the transactions contemplated by the Agreement, or (iii) which could reasonably be expected to materially and adversely affect the performance by PROVIDENT of its obligations under, or the validity or enforceability of, the Agreement. (6) PROVIDENT warrants that it has all regulatory approvals, authorizations, licenses, permits and other permissions, consents and authorities whatsoever, as needed (i) to offer and enter into the financing arrangements with Customers contemplated by this Agreement in each jurisdiction in the Territory and to otherwise perform its obligations under this Agreement, and (ii) to use any materials developed, provided or used by PROVIDENT, in connection with this Agreement. (7) PROVIDENT warrants that it has the legal and valid right to use any registered trademark, service mark, logo, emblem or other proprietary designation, or any variations, derivatives and modifications thereof, used by it in any materials provided to ABTAC or used by PROVIDENT in connection with this Agreement. SECTION 14. CONFIDENTIALITY Both ABTAC and PROVIDENT have made and will continue throughout the term of the Agreement to make available to the other party confidential and proprietary materials and information ("Proprietary Information"). Prospectively, each party shall advise the other of material and information that is confidential and/or proprietary. Proprietary Information does not include materials or information that: (a) are already, or otherwise become, generally known by third parties as a result of no act or omission of the receiving party; (b) subsequent to disclosure hereunder are lawfully received from a third party having the right to disseminate the information and without restriction on disclosure; (c) are generally furnished to others by the disclosing party without restriction on disclosure; (d) were already known by the receiving party prior to receiving them from the disclosing party and were not received from a third party in breach of that third party's obligations or confidentiality; or (e) are independently developed by the receiving party without use of, confidential information of the disclosing party. Each party shall maintain the confidentiality of the other's Proprietary Information and will not disclose such Proprietary Information without the written consent of the other party unless required to by law, rule, regulation or court been duly authorized by all necessary and appropriate and corporate action on the part of PROVIDENT. Page 11 of 14 12 IN WITNESS WHEREOF, the parties have caused this agreement to be executed by their duly authorized officer on the date first above written. THE PROVIDENT BANK DBA: PROVIDENT AUTOMOTIVE FINANCIAL SERVICES AND PROVIDENT AUTO LEASING COMPANY By: [SIG] ------------------------------------------- Title: Vice President ---------------------------------------- AUTO-BY-TEL ACCEPTANCE CORPORATION AUTOBYTEL.COM INC. By: [SIG] ------------------------------------------- Title: Executive Vice President & Chief Operating Officer ---------------------------------------- Page 12 of 14 13 SCHEDULE A To Financing Inquiry Referral Agreement, Dated as of December 22, 1998 Between PROVIDENT Bank dba PROVIDENT Automotive Financial Services And Provident Auto Leasing Company And Auto-By-Tel Acceptance Corporation And autobytel.com inc. as guarantor (the "Agreement") PROVIDENT TERRITORY ------------------- Florida Georgia Indiana Kentucky Michigan Minnesota North Carolina Ohio Pennsylvania Tennessee POLICY FOR TERRITORY EXPANSION: As PROVIDENT expands its auto lease business into additional states other than the states listed above, ABTAC may upon management approval grant PROVIDENT the additional territory provided PROVIDENT provides and maintains its level of competitiveness as described in paragraph 1(e). Page 13 of 14 14 [*] Confidential Treatment Requested SCHEDULE B To Financing Inquiry Referral Agreement, Dated as of December 22, 1998 Between PROVIDENT Bank dba PROVIDENT Automotive Financial Services And Provident Auto Leasing Company And Auto-By-Tel Acceptance Corporation And autobytel.com. inc. as guarantor (the "Agreement") COMPENSATION SCHEDULE --------------------- NEW VEHICLES
AMOUNT LEASED FLAT FEE TO ABTAC ------------- ----------------- $25,000 + $100 $15,001 - $25,000 $100 $10,000 - $15,000 $ 50
USED VEHICLES
AMOUNT LEASED FLAT FEE TO ABTAC ------------- ----------------- $25,000 + $100 $15,001 - $25,000 $100 $10,000 - $15,000 $ 50
AMOUNT LEASED = Adjusted capitalized cost minus any acquisition fee. Page 14 OF 14 EX-10.27 22 PROCUREMENT AND TRAFFICKING AGREEMENT 1 EXHIBIT 10.27 [*] Confidential Treatment has been requested for certain portions of this exhibit. PROCUREMENT AND TRAFFICKING AGREEMENT This PROCUREMENT AND TRAFFICKING AGREEMENT ("Agreement") is entered into this 24 day of September, 1998 by and between DoubleClick Inc., a Delaware corporation ("DoubleClick") having its principal place of business at 41 Madison Avenue, 32nd Floor, New York, NY 10010, and autobytel.com inc., a Delaware corporation ("Company") having its principal place of business at 18872 MacArthur Boulevard, Second Floor, Irvine, CA 92612, and is made in connection with the following: WHEREAS, Company is in the business of, among other things, the operation and maintenance of a site on the World Wide Web having the URL of www.autobytel.com (the "Web Site") for the purposes of providing online information and related data to prospective purchasers of new and used automobiles and facilitating the purchase and sale thereof through a network of subscribing dealers; WHEREAS, DoubleClick is in the business of, among other things, delivering advertising to pages of a customer's Web site based on certain predetermined criteria; and WHEREAS, Company desires to retain DoubleClick to deliver advertising to Pages (as defined below) of the Web Site and DoubleClick desires to accept such engagement subject to the terms and conditions as set forth below; NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows: 1. DEFINITIONS All terms used in this Agreement shall bear the meaning as such terms are defined in Paragraph 11 of the Standard Terms and Conditions attached hereto, marked EXHIBIT A and incorporated herein by this reference. II. DESCRIPTION OF SERVICES A. DoubleClick hereby agrees to link Pages to the Service and through such Service, DoubleClick shall deliver Advertisers' Advertising to users accessing Pages. DoubleClick and Company shall mutually agree upon the number and type of Pages to be linked to the Service. It is understood and agreed that all unsold inventory on Company's Pages shall be made available for delivery of Direct Advertising. B. During the Term (as defined below), the Company shall not place, or permit the placement or delivery of, any Advertising on the Web Site except through DoubleClick or DoubleClick's authorized representatives, licensees and assigns which shall be Company's sole and exclusive representative for the placement and delivery of all Advertising on the Web Site. For clarity, the parties acknowledge that the Company may, from time to time, enter into a co-branded content or syndicated content relationship with a third party ("Product 2 [*] Confidential Treatment Requested Marketing Partner"); it being understood that no such arrangement will be bundled with the delivery of Advertisements of a Product Marketing Partner to the Web Site. If such arrangement provides that the co-branded or syndicated Pages of the Web Site will be delivered to users by Company, then all Advertising (if any) on such Pages shall be placed and delivered by DoubleClick, and neither Company nor its Product Marketing Partner shall be permitted to place or deliver, or permit the placement or delivery of, any Advertising to such Pages. However, if such arrangement provides that such co-branded or syndicated Pages of the Web Site will be delivered to users by the Product Marketing Partner from its own server, then the parties agree that, notwithstanding the foregoing, the Company shall be permitted to allow a Product Marketing Partner to place and deliver Advertising for such Pages only. C. Notwithstanding the foregoing paragraph, DoubleClick acknowledges and agrees that Company may develop and launch, from time to time during the Term of this Agreement, an additional page or pages to the Web Site for the purposes of, among other things, joint or cooperative advertising or promotion of products and services of the Company or other third parties. DoubleClick further acknowledges that such additional page or pages shall not be subject to this Agreement and that any and all such advertising shall be placed exclusively by the Company from its own facility. D. Company reserves the right, at its sole discretion, to withhold up to a maximum of ten per cent (10%) of the total advertising spot inventory available on the Web Site (the "Reserved Inventory") for the purposes of placing Advertisements by or through Company on behalf of third parties as a result of a barter, exchange of services or other non-monetary arrangements entered into between Company and such third parties. Company agrees to use its reasonable best efforts to provide notice to DoubleClick of any such intended use of the Reserved Inventory prior to the placement of any such Advertising. i. Company agrees that it shall designate specific pages within the Web Site wherein such advertisements as a result of a barter, exchange of services of other non-monetary arrangements shall be placed. ii. Company agrees that any and all advertisements placed within the Reserved Inventory as a result of a barter, exchange of services or other non-monetary arrangements shall be placed and delivered by DoubleClick at the rate of [*] per thousand (the "Serving Fee"). Notwithstanding the foregoing, DoubleClick agrees that in the event Company purchases "Dart for Agencies" from DoubleClick, then DoubleClick shall waive any and all Serving Fees due as a result of this Section II (C). 2 3 iii. Company hereby authorizes DoubleClick to withhold from amounts payable to Company pursuant to Section 4 of this Agreement, all amounts due and owing from Company for Serving Fees Incurred during the applicable billing period. iv. DoubleClick agrees that in the event Company determined that Serving Fees are not cost effective, Company may, upon fourteen (14) days written notice to DoubleClick, "de-link" the Reserved Inventory and place and deliver such advertisements on its own behalf. Company agrees that it shall place and deliver all such advertisements itself from its corporate facility, and shall not engage the services of any third party for placement or delivery of such advertisements. V. DoubleClick further agrees that, in the event Company determines that it requires additional Reserved Inventory, Company shall provide fourteen (14) days written notice to DoubleClick, and DoubleClick shall make available an additional five percent (5%) of unsold Inventory to Company for the purposes of placing advertisement as a result of a barter, exchange of services or other non-monetary arrangements. Company agrees that such additional five percent (5%) of Reserved Inventory shall be made available to Company on an "as-needed" basis, and the Reserved Inventory shall revert to ten percent (10%) of unsold Inventory upon completion of the subject advertising flight. E. DoubleClick shall promptly inform Company in the event that DoubleClick enters into a Procurement and Trafficking Agreement with an online automotive buying service including, but no limited to the entities listed on Exhibit B (which list may be amended by Company in writing from to time) to perform services substantially similar to the services set forth in this Agreement. Company shall have thirty (30) days upon receipt of such notice to give written notice of its intent to terminate this Agreement. The effective date of any such termination shall be not less than thirty (30) days from DoubleClick's receipt of Company's notice to terminate. III TERM AND TERMINATION A. The term (the "Term") of this Agreement shall commence on September 24, 1998 and shall continue for a period of two (2) years or until such time that it is terminated by either party on not less than one hundred and eighty (180) days prior written notice to the other party; provided, however, that in no event may this Agreement be terminated effective prior to the first anniversary of such commencement date. 3 4 [*] Confidential Treatment Requested B. This Agreement may be terminated immediately by either party upon the occurrence of any of the following events: i. Upon the breach of any material term of this Agreement which remains uncured for thirty (30) days following written notice to the breaching party; or ii. In the event the other party suffers any insolvency proceeding, either voluntary or involuntary, that is not dismissed within sixty (60) days following filing, or is adjudicated bankrupt or makes any assignment for the benefit of creditors. Such termination shall not relieve the party in proceedings from liability for the performance of its obligations arising prior to such termination and shall be in addition to all other rights and remedies the terminating party may have available to it under this Agreement at law or in equity. IV. COMPENSATION/PAYMENT A. With respect to the placement and delivery of Advertising (other than Direct Advertising), DoubleClick shall pay Company, and Company agrees to accept the following:
TOTAL IMPRESSIONS IN A CALENDAR MONTH PERCENTAGE OF NET REVENUES GENERATED FROM ADVERTISING DELIVERED THROUGH THE SERVICE TO THE PAGES - -------------------------------------------------------------------------------------------- 5,000,000 or fewer [*] 5,000,001 to 10,000,000 [*] over 10,000,000 [*]
B. DoubleClick shall pay Company within five (5) days of DoubleClick's Day's Sales Outstanding (as defined herein) following the end of the month in which Advertisers' Advertising is delivered to Pages. For purposes of calculating Impressions (defined in Section II of the General Terms and Conditions) under this Section IV.A., no more than one Advertisement shall be deemed to be on the user's screen at any one time. C. With respect to the placement and delivery of Direct Advertising, DoubleClick shall pay Company and Company agrees to accept, the same percentage payable to Company pursuant to Section III.A. hereof of the DoubleClick Adjusted Commissions. Company acknowledges that the DoubleClick Commissions are contingent on Completed Actions occurring on Advertisers' Web Sites. DoubleClick shall pay this compensation within sixty-five (65) days of each Completed Action. D. Company shall be solely responsible for any costs or expenses it incurs in connection with the Service or performance of its obligations under this Agreement including, without limitation, expenses associated with any HTML programming and linking Pages to the Service. 4 5 E. Notwithstanding anything to the contrary contained herein, in the event Company terminates this Agreement in accordance with Section II above and DoubleClick, prior to said termination, has entered into agreements with Advertisers ("Advertiser Contracts") for the delivery of Advertising to the Pages, the duration of which Advertiser Contracts extend beyond the date on which this Agreement has been terminated by Company, and Company or a third party (other than DoubleClick) continues to deliver said Advertising after the termination of this Agreement, then notwithstanding the fact that DoubleClick does not deliver said Advertising after the termination of this Agreement, DoubleClick shall be entitled to receive twenty-five percent of the revenues derived from the continued delivery of said Advertising by Company or such third party as consideration for DoubleClick's solicitation and procurement of said Advertiser. V. COMPANY OBLIGATIONS AND RIGHTS A. Company agrees to effect all necessary HTML programming with respect to the Web Site and Pages in accordance with the HTML modifications (the "HTML Modifications") designated by DoubleClick so as to enable DoubleClick to perform its obligations under this Agreement. B. Spots must be within the first screen of a Page and otherwise conform to the HTML Modifications unless otherwise agreed upon by Company and DoubleClick. C. Promptly after the execution of this Agreement, Company agrees to the following: (i) Include Advertising in rotation within one (1) of three (3) advertising environments on the home page of the Web Site, which shall rotate with promotional information displayed by the Company. Due to the nature of display rotation, Company makes no guaranty that Advertising will always be displayed in one of the advertising environments. DoubleClick further acknowledges that such advertising environments are presently 112x82 pixels in size, and that Company reserves the right to change the size and/or number of such advertising environments at its sole discretion. (ii) At the discretion of the Company, Include frames, I-frames or layers on all Pages to permit delivery of enhanced creative; (iii) At the discretion of the Company, allow for double Spots on Pages. (iv) Include a text link on the Web Site's home page and/or on another heavily-trafficked Page on the Web Site to facilitate advertiser inquiry and to direct any such inquiries to DoubleClick. (v) Reserve space for a full banner (468x60 pixels) Advertisement within the top frame on the main channels of the Web Site which are currently identified as tabs and as are more particularly identified on the attached EXHIBIT C. (vi) Reserve space for a full banner (468x60 pixels) Advertisement within the top frame on subsequent Pages of the Web Site. 5 6 D. Notwithstanding the foregoing, DoubleClick agrees that: (i) No Advertising shall be placed on any Page within the Web Site wherein the Company engages a customer in a transaction (hereinafter, a "Transactional Page"). By way of example but not by way of limitation, those Pages wherein a Customer completes and submits a Purchase Request, a request for vehicle financing, an insurance quote request, or submits an inquiry regarding after-market products or services shall be deemed to be a Transactional Page. (ii) No Advertising shall be placed on any content integration Page wherein (1) the subject content is owned by a third party content provider; or (2) Company is in partnership with a third party for such content. Notwithstanding the foregoing, Company agrees that in the event any such third party consents to displaying Advertising on any such Page, a commission or compensation arrangement shall be entered into between DoubleClick, the Company and such third party separate and independent from this Agreement. E. At such time, if ever, that DoubleClick is able to sell sponsorship Advertising to an Advertiser for a designated area on a Page which DoubleClick has determined is suitable and appropriate for sponsorship Advertising, Company shall affect all necessary HTML and technical modifications necessary to accommodate said sponsorship Advertising. F. Company will maintain its Pages and Web Site at a quality standard that is no less than the standard that exists as of the date of this Agreement and in a manner in keeping with the quality of other web sites in the Service. G. Company agrees that DoubleClick has no responsibility to review the contents of Pages or the Web Site. H. Company agrees that it shall not delink or remove more than five percent (5%) of the Pages from the Service during any consecutive thirty (30) day period without DoubleClick's prior written consent. I. Company shall have the right to ban and remove Advertising from the Web Site, and to establish domain restrictions to prevent delivery of Advertising linked to certain domains, by accessing the Manage Site Application (located at www.doubleclick.net). DoubleClick shall use reasonable commercial efforts to prevent the delivery of Advertising that advertises or promotes the products and services listed on EXHIBIT C attached hereto or otherwise poses a general conflict with the business of the Company. (the "Prohibited Advertising"). By way of example, but not by way of limitation, a "general conflict" shall be (i) advertising for an online automotive buying service; (ii) the creation of a link on the Web site to a site which provides listings of used vehicles and/or sales of used vehicles directly to consumers; (iii) establishing a direct link on the Web site to an automobile manufacturer's buying service. 6 7 VI. DOUBLECLICK OBLIGATIONS AND RIGHTS A. DoubleClick shall have the right to refuse to include in the Service, and to require Company to remove from the Service, any Pages (including its contents) that DoubleClick determines do not meet the standards of the Service or which do not comply with the HTML Modifications, as DoubleClick deems reasonable and necessary in its sole good faith discretion, or in the event of any material change in the nature of the Web Site or the Page from that set forth in Company's application. B. Subject to the provisions of Section V (H) of this Agreement, DoubleClick shall determine in its sole discretion which Advertisers shall have access to the Service. C. Company acknowledges and agrees that promotion of the Service is critical to enhance usage by Advertisers and in connection therewith Company agrees that (i) DoubleClick shall have the right to use Company's name and Pages in advertising and promoting the Service in any media now or hereafter known and (ii) Company shall, upon DoubleClick's reasonable request, supply DoubleClick with a reasonable amount of Company's promotional materials so as to facilitate DoubleClick's sales efforts to prospective Advertisers. D. DoubleClick shall have the right to use for DoubleClick's own use or for use in connection with potential Advertisers on the Service, information concerning Pages, Impressions and users accessing Pages obtained through the Service, provided DoubleClick does not reproduce any Pages without Company's prior consent and DoubleClick shall not disclose to any third party any such current information specifically pertaining to such users. E. DoubleClick will make site reports available to Company through DoubleClick's web site (www.doubleclick.net) listing the number of Impressions and click-over rates by Page. F. It is understood and agreed that DoubleClick shall determine the rate card (and any applicable discount) charged to said Advertisers for delivery of Advertising. It is further understood and agreed that DoubleClick shall have the right, in its sole discretion, to provide Advertisers with bonus Impressions free of charge. G. At the beginning of each calendar quarter, DoubleClick shall furnish to Company a list of those suppliers of automotive products and services that are among DoubleClick's top prospects for the purchase of Advertising (including sponsorships) on the Web Site. Company agrees, promptly following receipt of such notice or otherwise upon DoubleClick's request, to share with DoubleClick all discussions or arrangements (in each case, both pending or past) between Company and such entities that would be relevant to DoubleClick's discussions with such entities. 7 8 IN WITNESS WHEREOF, the Parties have entered into this Agreement, effective as of the date first written above. DOUBLECLICK COMPANY DOUBLECLICK, INC. AUTOBYTEL.COM By: /s/ [ILLEGIBLE] By: /s/ ANNE BENVENUTO ----------------------------- -------------------------------- (Signature) Anne Benvenuto Senior Vice President, Marketing [ILLEGIBLE] autobytel.com inc. - ------------------------------- (Printed/Typed Name) VP Business Development - ------------------------------- (Official Title) 9/24/98 8 9 EXHIBIT A STANDARD TERMS AND CONDITIONS 1. No Assignment. Neither party to this Agreement shall sell, transfer or assign this Agreement or the rights or obligations hereunder, other than to a parent or whollyowned subsidiary, without the prior written consent of the other party. Notwithstanding the foregoing, either party shall have the right to transfer or assign this Agreement to a third party successor-in-interest, which for the purposes of this Section shall mean any third party which acquires all or substantially all of the assets of either party, or more than 75% of the outstanding stock of such party, whether by sale, consolidation, merger or otherwise. Any act in derogation of the foregoing shall be null and void. 2. Proprietary Rights. Company understands and agrees that Company shall not have, nor will it claim, any right, title or interest in and to any Advertising (other than its own Advertising), the Service or any elements thereof (including, without limitation, the grant of a license in or to the Service or any software, source codes, modifications, updates and enhancements thereof or any other aspect of the Service), the name "DoubleClick" or any derivatives thereof, or any other trademarks and logos which are owned or controlled by DoubleClick and made available to Company through the Service or otherwise. 3. Representation and Indemnity. Company warrants and represents at all times that Company (i) owns the Web Site, (ii) has the right and full power and authority to enter into this Agreement, to grant the rights herein granted and fully to perform its obligations hereunder, (iii) owns and/or has the right to use all materials contained on the Web Site or Pages, including, without limitation, all copyrights, trademarks and other proprietary rights in and to such materials, and (iv) has secured the requisite permission to use any person's name, voice, likeness and performance as embodied in such materials, or any other element contained in said material. In furtherance of the foregoing, Company agrees to indemnify and hold DoubleClick and the Advertisers harmless from and against any and all claims, actions, losses, damages, liability, costs and expenses (including reasonable attorneys' fees) arising out of or in connection with (i) the breach of any representation, warranty or agreement made by Company hereunder and/or (ii) the Web Site or Pages, including, without limitation, claims for infringement of copyright or other intellectual property rights and violation of rights of privacy or publicity. DoubleClick shall promptly notify Company of all claims and proceedings related thereto of which DoubleClick becomes aware. DoubleClick warrants and represents at all times that DoubleClick owns the Service and that such Service will not infringe upon or conflict with the copyright held by any third party. In furtherance of the foregoing, DoubleClick shall indemnify, defend and hold Company harmless from and against any and all claims, actions, losses, damages. liabilities, costs and expenses (including reasonable attorneys' fees) resulting from or arising out of or in connection with any breach of the foregoing representations and warranties. Company shall promptly notify DoubleClick of all claims and proceedings related thereto of which Company becomes aware. 9 10 4. No Warranties/Liabilities. EXCEPT AS EXPRESSLY PROVIDED ABOVE, NEITHER PARTY MAKES ANY WARRANTIES OF ANY KIND, WHETHER EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS OF THE SERVICE OR THE WEB SITE FOR A PARTICULAR PURPOSE INCLUDING, WITHOUT LIMITATION, THE TYPE OF ADVERTISING OR AMOUNT OF ADVERTISING WHICH WILL BE DELIVERED TO PAGES THROUGH THE SERVICE. DOUBLECLICK SHALL NOT BE LIABLE FOR ANY ADVERTISERS WHOSE ADVERTISING APPEARS ON THE SERVICE, NOR THE CONTENTS OF ANY ADVERTISING, NOR SHALL DOUBLECLICK BE LIABLE FOR ANY LOSS, COST, DAMAGE OR EXPENSE (INCLUDING COUNSEL FEES) INCURRED BY COMPANY IN CONNECTION WITH COMPANY'S PARTICIPATION IN THE SERVICE. NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY TECHNICAL MALFUNCTION, COMPUTER ERROR OR LOSS OF DATA OR OTHER INJURY, DAMAGE OR DISRUPTION TO COMPANY'S PAGES OR WEB SITE OR THE SERVICE. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL OR CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES ARISING OUT OF OR IN RELATION TO THIS AGREEMENT. 5. Confidentialitv. Any information relating to or disclosed in the course of this Agreement by either party (the "Disclosing Party") to the other party (the "Receiving Party"), which is or should be reasonably understood to be confidential or proprietary to the Disclosing Party, including but not limited to, the material terms of this Agreement, information about the Service and technical processes and formulas, source code, product designs, sales, cost and other unpublished financial information, product and business plans, projections, and marketing data shall be deemed "Confidential Information" and shall not be used, disclosed or reproduced by the Receiving Party without the Disclosing Party's prior written consent. "Confidential Information" shall not include information (a) already lawfully known to or independently developed by the Receiving Party, (b) disclosed in published materials, (c) generally known to the public, (d) lawfully obtained from any third party, or (e) required to be disclosed by law. 6. Breach. Either party shall have the right to immediately terminate this Agreement in the event the other party commits a material breach of this Agreement and such breach is not cured by the breaching party within thirty (30) days of its receipt of notice of such breach from the non breaching party. 7. Independent parties. Notwithstanding any provision hereof, for the purpose of this Agreement each party shall be and act as an independent contractor and not as an employee, partner, joint venturer, or agent of the other and shall not bind nor attempt to bind the other to any contract. 10 11 8. No Modification. This Agreement, including the Standard Terms and Conditions, represents the entire understanding between DoubleClick and Company regarding DoubleClick's services and supersedes all prior agreements. No waiver, modification or addition to this Agreement shall be valid unless in writing and signed by the parties to this Agreement. Notwithstanding the foregoing, Doubleclick shall have the right to modify or make additions to the placement algorithm governing Advertising delivery, and the HTML Modifications, from time to time upon reasonable prior notice to Company. 9. Severability. If any provision of this Agreement shall be adjudicated by any court of competent jurisdiction to be unenforceable or invalid, that provision shall be limited or eliminated to the minimum extent necessary so that this Agreement shall otherwise remain in full force and effect and the other provisions shall be unaffected. 1O. Applicable Law. This Agreement shall be governed by and construed in accordance with the substantive laws of the State of New York and Company agrees that jurisdiction and venue of all matters relating to this Agreement shall be vested exclusively in the federal, state or local courts within the State of New York. 11. Definitions. The following terms, as used in the Agreement, shall have the following meanings: a. "ADVERTISER" is defined as a company, entity or individual, which provides Advertising to DoubleClick for distribution through the Service. b. "ADVERTISER'S WEB SITE" is defined as the web site linked to Direct Advertising and where a Completed Action occurs. c. "ADVERTISING" OR "ADVERTISEMENT" is defined as third party materials including two "banners", "pop-up windows", "buttons", "roadblocks", "tickers". "intermercials". "incentives" and any other forms of advertisements and their contents, including sponsorships of any type or form. d. "COMPLETED ACTION" is defined as users' activities, as determined by DoubleClick in its sole discretion, after clicking through on Direct Advertising, which actions may include, but not be limited to users (i) completing a form or survey, (ii) making a purchase; (iii) downloading materials; or (iv) performing a click or multiple clicks within Advertiser's Web Site. e. "DAY'S SALES OUTSTANDING" shall be the average number of days it takes DoubleClick to collect its Net Accounts Receivable (as defined herein) from Advertisers and which shall be calculated as follows: DoubleClick's account's receivable balance from the immediately preceding semi-annual accounting period (calculated on a calendar year basis) after adjustment for any reserve for doubtful accounts and deferred or unbilled revenue ("Net Accounts Receivable") shall be divided by the average daily revenue recognized by DoubleClick for the last two months of such semiannual accounting period. DoubleClick's Day's Sales Outstanding shall be calculated following the end of 11 12 each semi-annual accounting period and shall be used in determining the date of payment for amounts due to Company for Advertising which is delivered to Pages in each of the months comprising the ensuing semi-annual accounting period. f. "DIRECT ADVERTISING" OR A "DIRECT ADVERTISEMENT" is defined as an advertisement and its contents on which users can click-through to an Advertiser's Web Site to perform a Completed Action. g. "DOUBLECLICK COMMISSIONS" is defined as monies payable to DoubleClick from an Advertiser as a result of a Completed Action. h. "DOUBLECLICK ADJUSTED COMMISSIONS" is defined as the DoubleClick Commission less (i) a bad debt and marketing allowance of three percent (3%) and (ii) broker and agent fees payable by DoubleClick with respect to the Advertiser. i "IMPRESSION" is defined as occurring each time Advertising (whether a full banner (468 by 60 pixels) or half banner (234 by 60 pixels)) appears on a Page resulting from a user accessing or visiting such Page. j. "NET REVENUES" is defined as the gross billings earned from Advertisers by DoubleClick less (i) rate card and volume discounts and agency commissions, and (ii) a bad debt allowance of 1% of said gross billings. k. "PAGE" is defined as a page in the Web Site designated by Company to be linked to the Service and is accepted and approved by DoubleClick. 1. "PAID ADVERTISING" or "Paid Advertisement" is defined as any Advertising which is paid for by an Advertiser. m. "SERVICE" is defined as the DoubleClick service that delivers Advertising to any Page(s) of the Web Site in the following order and manner: For users which match the criteria selected by an Advertiser from information currently available to DoubleClick concerning users, a Paid Advertisement from such Advertiser will appear. If no match occurs or a Paid Advertisement is unavailable, a Direct Advertisement will appear, pursuant to the terms or this Agreement. If no match occurs or a Direct Advertisement is unavailable, Advertising promoting the Service and Advertising promoting charitable causes and non-profit organizations (e.g. public service announcements) may appear on Pages. n. "SPOT" is defined as the specific place on a Page where Advertising may appear through the Service. 0. "WEB SITE" is defined as the Company's web site referred to above. 12 13 EXHIBIT B CERTAIN ENTITIES COMPANIES: Auto By Internet Auto Connect AutoNation USA AutoVantage AutoWeb CarPoint Cars.com CCC Consumer Car Club Consumer Car Sales DealerNet GM Buy Power Kelley Blue Book Online Auto Price Auto Outlet Priceline.com 13 14 EXHIBIT C PROHIBITED ADVERTISING
COMPANIES OR PRODUCTS SEGMENT CONFLICT AUTOBYTEL.COM INC. BUSINESS UNIT Auto By Internet Competitor ABT.com Auto Connect Competitor ABT.com Auto Trader Online Competitor UCC AutoNation USA Competitor UCC AutoVantage Competitor ABT.com AutoWeb Competitor ABT.com CarMax Competitor UCC CarPoint Competitor ABT.com CarPrices.com Competitor ABT.com CarQwik Competitor ABT.com Cars.com Competitor ABT.com CCC Auto Infomercial ABT.com Cendant Corp. (CUC) Auto Buying/CU Program ABT.com Consumer Car Club Competitor ABt.com Consumer Car Sales Competitor UCC Consumer Reports Competitor ABT.com DealerNet Competitor ABT.com Drivers Mart Competitor UCC Ford Pre-owned Competitor UCC GM Buy Power Competitor ABT.com Hertz Car Sales Competitor UCC Kelley Blue Book Competitor ABT.com Mannheim Auto Auctions Competitor UCC NetMarket Competitor ABT.com Online Auto Competitor ABT.com Other Warranty Programs AutoByTel.com Platinum Plus ABT.com Price Auto Outlet Competitor UCC Priceline.com Competitor UCC Republic Industries Competitor ABT.com Toyota Certified Competitor UCC World Wide Wheels Competitor ABT.com
GENERAL COMPETITIVE MARKETS (THE KEY IS IF IT IS "AUTO" RELATED) New Car Buying Used Car Buying Auto Insurance Services Auto Loans/Financing Auto Warranty Coverage Auto Clubs Auto Rewards Programs In addition to the foregoing, any Advertising that advertises or promotes any Web site displaying (i) sexually explicit content, (ii) gambling; or (iii) distilled spirits shall be deemed to be Prohibited Advertising as used in this Agreement. 14 15 EXHIBIT D MAIN CHANNELS OF WEB SITE {GRAPHIC] 15 EX-10.31 23 FORM OF GOLD TERM SUBSCRIPTION AGREEMENT 1 EXHIBIT 10.31 [LOGO] GOLD TERM SUBSCRIPTION AGREEMENT WELCOME to autobytel.com inc.'s family of accredited motor vehicle dealers. This Agreement is entered into by and between autobytel.com inc., a Delaware Corporation, with its principal place of business at 18872 MacArthur Blvd., Irvine, California 92612 ("ABT"or "Us" or "We" or "Our") and [LEGAL NAME], a(n) [INC ST] [ENTITY] dba [DBA] with its principal place of business at [ADDRESS], [CITY], [ST] [ZIP]("Dealer" or "You" or "Your"). (ABT and Dealer, each a "Party" hereunder are sometimes collectively referred to herein as the "Parties.") In consideration of the following mutual promises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, ABT and Dealer, on their own behalf and on behalf of each of their "d.b.a." operation(s) set forth in Appendix "A" attached hereto, intending to be legally bound hereby, warrant, covenant and agree as follows: I. OUR COMMITMENT TO YOU: 1. ABT promises to provide an Internet-based marketing program and Online services to attract potential purchasers to HTTP//WWW.AUTOBYTEL.COM, (THE "WEBSITE"); 2. ABT promises to advertise in national markets the general services offered to consumers through ABT; 3. ABT promises to use best efforts to promptly forward to You information regarding an identified potential purchaser whose purchase/lease request emanated from within Your assigned Primary Market Area (PMA); 4. ABT promises to provide You with technical support during regular business hours (Pacific Standard Time) to assist You and/or Your representative(s) in the use of Our products and services. Except where otherwise informed by the technical support staff at the time services are requested, this service is free of charge. As some services require substantial time and effort to complete, ABT reserves the right to institute supplemental charges for some services without prior notification; 5. We promise to provide consumers with assistance and support through Our Customer WOW! Program, during normal business hours (Pacific Standard Time); 6. We agree, subject to individual state law restrictions, to continue to develop, maintain, and enforce uniform Customer Service Standards that will be implemented by Our subscribing dealers. To meet such a commitment, ABT reserves the right to amend the Customer Service Standards from time to time to modify, eliminate or impose additional Customer Service Standards as the law or the changing business climate may dictate; 7. We promise to promptly notify Dealer in writing of any revisions to the Customer Service Standards outlined herein. We will not impose amendments or additions to Our Customer Service Standards unless they are applied to all subscribing dealers within Your state; 8. We promise to use best efforts to effectively communicate mutually beneficial information relating to the ABT products and services provided during the term of this subscription; 9. ABT shall use its best efforts to provide prompt transmission of data to Dealer, but shall not be liable for any unintentional loss of data, delays or errors in transmitting data, nor shall We be liable for any damages arising from any data loss, delay, or error; 10. We are responsible to maintain Our own equipment at Our sole expense and will assume all responsibility for loss, damage, and maintenance to Our own equipment; 11. We hereby grant to You a nonexclusive, non-transferable license that will allow up to two simultaneous users to access Our proprietary Dealer Real Time (DRT) information communications system to receive Purchase Requests; 12. NEW VEHICLE EXCLUSIVE PRIMARY MARKET ASSIGNMENT ("PMA"): You have been assigned an exclusive market area for the subscribed new vehicle franchises of [FRANCHISES]. This exclusive area effects new vehicle Purchase Requests only. The U.S. Postal Code description of this PMA assignment is set for in Exhibit "A" attached to this Agreement and incorporated herein by this reference. ABT has sole and complete authority to define Your PMA. Your exclusive PMA will remain in effect for six (6) months without the possibility of adjustment. ABT reserves the right to conduct a market representation study to determine the effectiveness of Your PMA at least once during the term of this Agreement. ABT in their sole discretion may use the results of these studies to among other things, evaluate the market value of Your PMA and Your effectiveness in servicing purchase requests from Your PMA. ABT reserves the right to adjust Your PMA as necessary following such studies by providing You with not less than thirty-(30) days written notice of the pending change; 13. TERM: This Agreement shall be for a term of twelve (12) months, unless terminated earlier pursuant to Section 14. Upon the mutual consent of Dealer and ABT, this Agreement may be extended at ninety-(90) day intervals, up to a maximum of one (1) year. Such consent shall be evidenced in writing, signed by each Party hereto. If Dealer shall meet the qualifications for the Platinum level Agreement at any time during the term of this agreement or any extension thereof, Dealer may be converted at the end of the twelve-month term to an extended Platinum Term Subscription for an additional five (5) years. In the event Dealer shall fail to qualify for a Platinum Term Subscription agreement at the end of the last available extension, this agreement shall terminate; 14. ABT MAY TERMINATE THIS AGREEMENT: (a) immediately for any breach of this Agreement by You which is not cured within ten (10) days after You receive written notice of the breach from Us; (b) immediately if any fees due ABT under this Agreement are unpaid and outstanding more than thirty (30) days after ABT makes a written request for payment; (c) immediately, if Dealer is guilty of willful misconduct in the performance of its duties under this Agreement; (d) immediately upon a finding of dealer's violation of state or Federal law or conviction for such violation, whether administratively, civilly, or criminally; (e) Immediately upon discovery of Dealers' sale or transfer of all or substantially all of its dealership assets and /or management and control. (f) immediately if an order for liquidation against You is entered and not stayed in a bankruptcy proceeding; (g) upon sixty (60) days' written notice to You regarding poor overall performance, including but not limited to such areas as unsatisfactory Purchase Requester contact rates, poor overall customer satisfaction, poor Overall Satisfaction Index (OSI) rating. 15. TAXES: We shall be responsible for paying all taxes imposed upon Us by reason of the compensation paid to Us for providing services to You under this Agreement. 16. INDEMNIFICATION: We promise to indemnify and hold You and Your subsidiaries and/or affiliates and Your respective members, managers, directors, officers, employees, harmless against any and all losses, liabilities, claims, awards, damages, judgments, settlements, and costs, including fees and expenses, arising out of Our negligence or wrongful conduct, or arising out of or related to any third Party claim arising out of or related to Our negligence or wrongful conduct, or from any other act done or omitted to be done by Us in executing the terms of this Agreement. II. YOUR COMMITMENT TO US: 1. At all times during the term of this Agreement, You and/or Your designated representatives will abide by the terms of this Agreement and will perform the duties as set forth herein, in accordance with the terms of this Agreement. 2. Your Dealer Principal and General Manager will actively participate in the application, implementation, and operation of the ABT service system within the dealership(s). 3. You understand and agree that You are responsible for all internal costs, if any, associated with implementation of Our systems and services within Your facilities. 4. You will dedicate at least one (1) key employee to be responsible for the new vehicle program and at least one (1) key employee to be responsible for the Certified Pre-Owned CyberStore(R) program, if so elected. This person(s) will be empowered to act as a liaison between ABT and Dealer. This person(s) shall be referred to as the "ABT Manager." You promise to notify Us in writing within ten (10) days with the identity of any newly designated ABT Manager. 1 2 5. You will make Your ABT Manager(s) available to Us for training upon reasonable request and notice, Your Dealer Principal and General Manager agree to participate in at least one (1) ABT-U Basic Training program offered by ABT either at the dealer's facility or at an offsite facility offered by ABT, within One Hundred Twenty (120) days from the date of this Agreement. ABT shall reserve for You, free of tuition costs, two (2) seats for ABT Manager Training and one seat per Dealer Principal and GM per franchise per year at an ABT-U Basic Training course. Additional seats may be purchased at a cost of [ ] per seat. Dealer will ensure that each ABT Manager will attend at least one ABT Phone Training Session prior to activating our services and (1) ABT-U Basic training course within ninety (90) days from the date of this agreement. Dealer understands that ABT will not forward Purchase Requests under this Agreement until such time as The ABT Manager Phone Training has been completed. ABT may suspend Purchase Requests in the event all ABT-U Basic Training has not been completed by the qualified ABT Manager(s), Dealer, and GM within the time frames stated herein. Until such time as Dealer's compliance with this term has been confirmed by ABT, ABT is hereby granted express authority and permission to re-route any Purchase Requests received from Dealer's PMA to the nearest qualified ABT subscribing dealer for the subject vehicle make, without prior notice to Dealer. 6. You will set aside and designate an exclusive work area within Your dealership wherein the ABT Manager(s) may perform his/her/their duties under this Agreement. 7. When working with each Purchase Requester provided to You through Our service system, You will, at all times, act in good faith and in accordance with state and federal laws. 8. You promise to reasonably participate in ABT's program offerings, including any programs or services developed in the future. 9. Dealer shall contact one hundred percent (100%) of the Potential Purchasers within one (1) business day of Dealer's receipt of the inquiry from ABT. ABT retains the right to re-route to another accredited ABT dealer, at any time, any Purchase Requester(s) not contacted by You, without prior notice; and 10. Dealer's initial response shall be by telephone or e-mail and shall confirm receipt of the Purchase Request. Dealer shall at the same time, but in no event more than two (2) business days following receipt of the Purchase Request, disclose all of the following information (the "Dealer Information"): (a) the availability of the vehicle inquired about; (b) the manufacturer's suggested retail price (MSRP) of the vehicle; (c) availability of all requested options; (d) the complete price that You will sell or lease the vehicle to the Potential Purchaser, including all options requested, preparation fees, destination fees and/or advertising costs or charges not otherwise included in the vehicle price; (e) all relevant financing terms and conditions which may apply to the purchase or lease transaction requested; (f) all other terms, costs and conditions required by law to be disclosed to prospective purchasers; and (g) ABT retains the right to re-route any Purchase Request(s) to another accredited ABT Dealer in the event the information called for in this section II(12) are not completely disclosed to a Purchase Requester(s). 11. You agree to maintain an Overall Satisfaction Index (OSI) score as measured by ABT at a level that is equal to or above the regional average for comparable make dealers in Your PMA area. OSI is a quarterly scoring method which measures and ranks performance by comparing Dealer's average Purchase Request contact ratio, actual sales completed from Purchase Requests provided, the number of finance transactions completed through ABT, and customer service ratings as provided by customer surveys, with those of other similarly situated Dealers within a region. A satisfactory OSI is material to Your ability to receive a Platinum Term Continuation Agreement. In the event Dealer's performance does not meet the requirements for a Platinum Term Continuation Agreement, ABT in their sole their discretion may extend the terms of this Gold Term Subscription Agreement as specified in Section Section I (13) herein. 12. You promise that all Dealer Information, including the price, that You transmitted to a Potential Purchaser shall be valid and be binding on Dealer for a period of seven (7) days after its transmittal, provided the identified vehicle still remains available for sale. If You relied on a manufacturer sponsored program when quoting Your pricing, terms, incentives or availability of vehicles, the time period in which the Dealer Information must be valid shall coincide with the termination date of the Manufacturer's program or seven (7) days, whichever is less. If the offer time is less than seven (7) days for the above reason, You promise to include a statement in the Dealer Information informing the Prospective Purchaser of any reduction in the time period as set forth above. You agree that any claim for damages or loss arising out of Your failure to inform Potential Purchasers of all Dealer Information required by this section shall be borne solely by You and not ABT. 13. You promise to adopt and abide by revisions to any Customer Service Standard no later than thirty (30) days following notification of a change, even though they may require additional work or expense to implement. 14. You promise to use best efforts to effectively communicate mutually beneficial information relating to the ABT products and services provided during the term of this subscription. 15. You agree to update, on a weekly basis, Your sales data in the Dealer Real Time(R) System indicating the number and names of Potential Purchasers who purchased or leased vehicles from You through Our system. You agree to include in Your data, the number of those vehicles financed and amount financed and such other related data as may from time to time be requested. 16. You agree to provide at Your own expense, dedicated access to an IBM compatible personal computer with Internet access and related equipment that meets or exceeds the minimum specifications published from time to time, by ABT. You are solely responsible for ensuring that your computer system is in compliance with all-relevant "Year 2000" specifications. Upon request, you agree to provide Us with written assurances regarding your compliance with this provision. 17. In addition to the personal computer outlined above, You agree to provide at Your own expense, a dedicated workstation that is at a minimum, comprised of a desk, a compatible printer, telephone, and other office supplies and equipment as may be necessary to receive and properly implement at Your dealership, the services contemplated by this Agreement. 18. You are responsible to maintain Your own equipment at Your sole expense and will assume all responsibility for loss, damage, and maintenance to Your own equipment. 19. You understand that ABT services are free of charge to a Purchase Requester. You or any employee/agent of You, are expressly prohibited from representing to any Purchase Requester, in any manner, either orally or in writing, the existence of any charge or fee to be paid to You or to You on behalf of ABT by reason of their using Our services to facilitate the Purchase or Lease of any vehicle from You. 20. DEALER REAL TIME SYSTEM(R)U.S.PAT.PEND. (DRT): You agree to actively utilize the DRT information system in the daily implementation of the services contemplated by this Agreement. As an express condition of the license hereby granted to You by ABT, You are prohibited from reselling, loaning or otherwise sharing the use of Your password with anyone not subject to this contract. 21. ABT ACCEPTANCE CORPORATION PRE-APPROVED FINANCING: Through Our affiliate, Autobytel Acceptance Corporation, a Delaware Corporation ("ABTAC"), We offer pre-approved, third-party, low-cost financing programs on Our website for consumers from commercial lending sources arranged by ABTAC or through federal credit unions under contract with ABTAC (the "Financing Arrangements"). To accommodate Purchase Requesters who are pre-approved for financing through ABTAC's lenders and to participate in the financial rewards offered by these financing programs, You must apply on Your own to each lender for a Dealer Participation Agreement and receive approval from each lender independently. If You do not participate with ABTAC's lenders, You will still receive Purchase Requests however, Purchase Requesters will be notified that You are not participating in Our financing programs and We will be providing them with alternative lending options, including but not limited to direct lending, if available. If You are approved by each lender as a participating Dealer, You agree to honor the following commitments to Our financing program: a. You promise to maintain a loan-closing ratio of at least ten percent (10%) for those loans pre-approved by ABTAC lenders. b. You promise that You will use best efforts to re-solicit for an application to ABTAC finance programs to at least ten percent (10%) of the non-credit Purchaser Requesters forwarded to You by ABT. c. You promise that You or any one in Your employment will not intentionally disparage or otherwise mislead the customer as to the terms and conditions of Our Financing Arrangements. 2 3 d. When a Purchase Requester has been pre-approved at Our lender's prevailing buy rate or at a credit union under contract with ABT for Our financing, You promise that You will not actively solicit the Purchase Requester to convert to an independently promoted loan program offered through Your dealership. Violation of this section will be considered a breach of this contract and subject this Agreement to termination in accordance with the terms outlined in this Agreement. ABT, in many cases, has arranged for You to be compensated for Your participation in ABTAC arranged finance programs. This compensation, if available, will come directly from the lender and not ABT or ABTAC. Any disagreement regarding the terms and conditions of a lender's Participation Agreement shall be dealt with exclusively between You and the lender. Neither ABT nor ABTAC makes any guarantee that You will receive compensation from any lender. ABTAC uses its best efforts to negotiate advantageous terms for Our subscribing dealers and will, from time to time, add or delete lenders, including banks, credit unions, thrift and loans and other sources to benefit You and the Purchase Requester. 22. CERTIFIED PRE-OWNED CYBERSTORE(R) PARTICIPATION ELECTION (OPTIONAL): Your participation in Our used vehicle program is optional and there is an additional charge for this service. The terms and conditions of Your participation in this program are set forth separately in Appendix "B" attached to this Agreement and incorporated herein by this reference. 23. AFTERMARKET ACCESSORIES (OPTIONAL): Your participation in Our Aftermarket Accessory program is optional and there is an additional charge of [ ] dollars per Purchase Request wherein Aftermarket Accessory items are requested. The terms and conditions of Your participation in this program are set forth separately in attached Appendix "C" to this Agreement and incorporated herein by this reference. 24. COMPENSATION TO ABT: You promise to pay ABT a monetary fee comprised of an initial start-up fee and a monthly subscription fee as follows: [SIGN UP FEE WRITTEN] Dollars ($[SIGN UP FEE]) as an initial start-up fee. Of this fee, [ ] shall be allocated to the DRT initial start-up fee, receipt of which is hereby acknowledged. As additional ongoing consideration, You agree to pay ABT the amount of [MONTHLY FEE WRITTEN] ($[MONTHLY FEE]) as a total monthly subscription fee, which is due and payable in advance on the first day of every calendar month. The total monthly amount due shall be allocated as follows: DRT Access Fee, [ ]; Certified Pre-Owned CyberStore(R), [UCC MONTHLY]; [MAKE 1], [MAKE 1 MONTHLY] [MAKE 2] [MAKE 2 MONTHLY] [MAKE 3] [MAKE 3 MONTHLY] [MAKE 4] [MAKE 4 MONTHLY] [MAKE 5] [MAKE 5 MONTHLY] The amount of fees charged for your subscription is determined by several factors, including but not limited to your geographical location, the franchise make of vehicle you offer through this subscription, population concentrations, per capita vehicle registrations for your PMA, and ABT's Seasonal Annual Adjusted Rate (SAAR) percentage share of national retail vehicle sales for the year in question. The above stated fees shall remain unchanged during the first six (6) months of this Gold Term Agreement. Thereafter, ABT, in Our sole discretion, may change the fee charged to You upon thirty- (30) days written notice, however, in no event shall more than two (2) such fee changes take place within the initial twelve-(12) month term of this Agreement. In the event this Gold Term Subscription agreement is extended pursuant to section Section I(13), ABT reserves the right to change the fee, with thirty (30) days written notice to You according to Section Section IV(4) below. Payments received more than thirty (30) days following the invoice date shall be subject to a late fee of $25.00 and shall incur interest charges on the balance due at an annual percentage rate of eighteen (18.0%) percent per annum. ABT reserves the right to suspend services for any payment sixty (60) days or more past due until the account is brought current. The first month's total fee and initial sign-up fee is due and payable concurrently with the execution of this Agreement, receipt of which is hereby acknowledged. All fees paid to ABT under this Agreement are deemed earned upon the execution of this Agreement or delivery of services whichever occurs first. All fees paid to ABT pursuant to this Agreement are non-refundable regardless of circumstances. 25. DEALER MAY TERMINATE THIS AGREEMENT : (a) immediately, if an order for liquidation against ABT is entered and not stayed in a bankruptcy proceeding; (b) immediately, if ABT is guilty of willful misconduct in the performance of its duties under this Agreement; or (c) immediately for any breach of this Agreement by You which is not cured within ten (10) days after You provide written notice of the breach to Us; or (d) immediately upon a finding of Dealer's violation of state or Federal law or conviction for such violation, whether administratively, civilly, or criminally; (e) upon thirty (30) days written notice in accordance with Section Section IV(4) of this Agreement following the effective date of any adjustment in Dealer's PMA pursuant to Section Section I(12) of this agreement; (f) upon thirty (30) days written notice in accordance with Section Section IV(4) of this Agreement following the effective date of any increase in Dealer's monthly Subscription fee pursuant to Section Section II(24) of this agreement; (g) upon thirty (30) days written notice in accordance with Section Section IV(4) of this Agreement, for any reason on or after the last day of the sixth (6) month from the date of this agreement. (h) Under no other circumstances may Dealer terminate this Agreement without the prior written consent of ABT's then Chief Operating Officer. 26. TAXES: You are solely responsible for paying all taxes (local, state and federal) imposed as a result of the sale or lease of any vehicle(s). In the event We are required to collect and/or pay any taxes by reason of a consumer's purchase or lease of a vehicle from You through the services ABT provides to You, You agree to promptly reimburse Us for those taxes We were required to pay within ten (10) days following receipt of written notification from ABT. 27. INDEMNIFICATION: You promise to indemnify and hold harmless Us and Our subsidiaries and/or affiliates and Our respective members, managers, directors, officers, employees, and agents against any and all losses, liabilities, claims, awards, damages, judgments, settlements, and costs, including fees and expenses, arising out of or related to Your negligence or wrongful conduct, or arising out of any third-party claim, including, but not limited to, any claim for damages by any person or entity regarding the purchase, lease and/or finance of a motor vehicle from Dealer or resulting from Dealer's utilization of ABT's services, or from any other act done or omitted to be done by Dealer in executing the terms of this Agreement. In the event We are served with notification of action or suit against You, We will promptly notify You of such claim. You promise to defend at Your sole cost and expense, all such claims, actions, lawsuits, or proceedings. In all events, ABT, in its sole discretion, shall have the right to participate in the defense of any such action through counsel of its own choosing at ABT's sole expense. In the event You are served with notification of action or suit against Us, You promise to promptly notify Us of such claim(s), and ABT, in its sole discretion, shall defend all such actions or suits through counsel of Our own choosing. 3 4 IV. GENERAL TERMS & CONDITIONS: 1. WARRANTY LIMITATION: ABT does not guarantee or warranty the performance of the services provided hereunder including but not limited to the number of Purchase Requests or vehicle sales/leases Dealer may receive from Our service. You specifically waive all warranties, expressed or implied, arising out of or in connection with the services to be provided by ABT hereunder. Specifically excluded are all warranties, expressed or implied, including but not limited to, merchantability and fitness for a particular purpose. In no event shall ABT be liable for any loss of business profits or for any consequential, incidental, punitive or similar damages, or for any third-party claims of damages, even if advised of the possibility of such damages. 2. NO WAIVER: The failures of either Party to exercise in any respect any right provided for herein shall not be deemed a waiver of any right hereunder. 3. INDEPENDENT CONTRACTOR ARRANGEMENT. The relationship created by this Agreement between ABT and Dealer is intended to be and shall for all purposes hereunder be considered as an independent contractor. Nothing contained in this Agreement and/or any Appendices or Amendments hereto shall be construed as intending, creating or constituting a franchise, partnership, agency, or joint venture between ABT and Dealer. 4. NOTICES: All notices and requests in connection with this Agreement and/or any Appendices and/or Amendments hereto shall be given or made upon the respective Parties in writing and shall be deemed given by any of the following means 1) on the day deposited in the U.S. mail, postage prepaid, and addressed as designated at the top of this Agreement, or to such address as the Party to receive the notice or request so designates by written notice to the other. 2) by Facsimile which shall be deemed received on the day sent when a confirming notice from the sending facsimile machine has been generated. Or 3) by overnight delivery service or courier, which shall be deemed received on the day of physical delivery. 5. ASSIGNMENT: This Agreement and the rights and duties hereunder, including any Appendices or Amendments hereto shall not be assignable by Dealer, except upon written consent of ABT. This Agreement and the rights and duties hereunder shall be assignable by ABT without restriction ten-(10) days written notice to Dealer. 6. PRESS RELEASES: Unless We agree in writing to the contrary, You are prohibited from issuing any press release(s) or making any public announcement(s) regarding Your business relationship with ABT or ABT's services or programs provided to You. You may however, make references to Your affiliation with autobytel.com inc. in any advertisement published by You for Your own benefit. 7. GOVERNING LAW AND JURISDICTION: This Agreement and the performance hereunder shall be governed and construed in accordance with the laws of the State of California. Any dispute or claim arising between the Parties hereto that is brought by Dealer against ABT shall be brought in a court of competent jurisdiction located in the County of Orange in the State of California, and the Parties hereto agree to jurisdiction in California. Any dispute or claim arising between the Parties hereto that is brought by ABT against Dealer shall be brought in a court of competent jurisdiction located in the county and state wherein the principal place of business is located and the Parties hereto agree to jurisdiction in that state and county. 8. ATTORNEY FEES AND COSTS: In the event any action shall be instituted to resolve a dispute between the Parties regarding this Agreement or to enforce the terms of this Agreement, the prevailing Party in such action shall be entitled to reasonable attorneys fees and costs incurred as a result. As used in this section, the word "action" includes but is not limited to any act requiring legal counsel involvement up to and including a formal litigation filed in a court of competent jurisdiction. 9. CONFIDENTIALITY: Each of the Parties hereto, on behalf of themselves and their employees, agree to keep all non-public information gained as a result of the business dealings contemplated in this Agreement confidential. Each Party may however, use such confidential information for their internal use only to further their performance under this Agreement. Each Party hereto understands and agrees that the sale or unauthorized use or disclosure of any trade secrets or other confidential information, including but not limited to private information provided by Purchase Requester constitutes theft and will greatly damage the non-disclosing Party and is prohibited. Dealer shall not impart ABT's services or the concept thereof to any person or entity other than Dealer's key employee(s) without the previous written consent of ABT. ABT reserves the right to transmit pertinent vehicle information to consumers making inquiries concerning the terms of purchase and financing or leasing of motor vehicles. Notwithstanding the foregoing, if either Party is required to produce any such information by order of any government agency, court of competent jurisdiction, or other regulatory body, it may, upon not less than five-(5) days written notice to the other Party, release the required information. 10. TITLE TO SYSTEM, TRADEMARKS: To the extent permitted by law, the services to be provided under this Agreement and any Appendices or Amendments are proprietary to ABT, and title thereto remains in ABT. All proprietary title and rights held by ABT extends to any extension of this Agreement and any Appendices and Amendments, together with all copies thereof. All applicable rights to patents, copyrights, trademarks, and trade secrets in the System and in the name "Autobytel.com" and its logo, now and in the future, belong exclusively to ABT. Any and all trademarks and service marks associated with ABT are and shall forever remain the exclusive property of ABT. Upon the written consent of ABT, Dealer is permitted to use the trademark and service mark for inclusion on business cards, and media advertisements that communicate Your association with ABT. You may request, in writing, a copy of ABT's logo, trademarks, artwork, and other printed material for use in Your advertisements. This authority to use ABT's name, logo, and other artwork is revocable at any time by ABT. ABT reserves the right to review such uses and if determined to be abusive of this privilege, revoke Your permission to use the trademark in the future. 11. CONTROLLING AGREEMENT: This Agreement and all Appendices and Amendments hereto supersedes any and all agreements, oral or written, between the Parties, and contains all of the representations, covenants, and agreements between the Parties with respect to services described in this Agreement. Each Party to this Agreement acknowledges that no representations, inducements, promises, or agreements, orally or otherwise, have been made by any Party, or anyone acting on behalf of any Party, which are not contained in this Agreement and/or any Appendices and/or Amendments hereto. No other Agreement(s), statement(s), or promise(s) not contained in this Agreement or Appendices or Amendments hereto will be valid or binding. 12. MODIFICATIONS TO AGREEMENT: Except where otherwise set forth in this Agreement, all modifications or amendments to this Agreement shall be in writing, properly noticed in accordance with the notice provisions of this Agreement. Any amendment, change or modification of this Agreement will be effective only when in writing and signed by the Party to be charged. Such signature shall not be unreasonably withheld by the Party to be charged and shall be returned to the maker not more than ten (10) calendar days after receipt. Except where otherwise reserved in this Agreement, the Parties agree that any unilateral changes, amendments or modifications made by one Party are invalid against the other Party unless ratified in writing by the Party to be charged. 13. APPENDICES & AMENDMENTS: All Appendices and subsequent Amendments hereto are incorporated into this Agreement by this reference as through fully set forth herein. 14. SEVERABILITY: If any provision of this Agreement shall be held to be invalid, illegal or unenforceable, such determination shall in no way alter or impair the validity, legality, and enforceability of the remaining provisions of this Agreement and any Appendices and/or Amendments 15. REQUISITE AUTHORITY: The undersigned hereby represents that he or she is authorized on behalf of their respective corporations to enter into this Agreement, and that each corporation is in good standing under the laws of the state of their incorporation. This Agreement is executed this ________day of __________________________, 1999. Dealer: [LEGAL NAME] autobytel.com inc By: ___________________________________ By: ________________________________ Name: [AA 1ST NAME] [AA LAST NAME] Name: Ann Delligatta Title: [AA TITLE] Title: Chief Operating Officer 4 5 APPENDIX "A" MARKET AREA ASSIGNMENT (NEW VEHICLES ONLY) Subject to the terms and conditions set forth in the foregoing ABT Subscription Agreement between autobytel.com inc. and [LEGAL NAME], the following Postal Codes are assigned to Dealer and shall comprise Dealer's new vehicle Market Area: Acknowledged: [LEGAL NAME] Dealer Principal:_____________________________________ Date:____________________ [AA 1ST NAME] [AA LAST NAME] [AA TITLE] 5 6 APPENDIX "C" AFTERMARKET ACCESSORY OPTION ACCEPTANCE AGREEMENT Subject to the terms and conditions set forth in Section II (23) of the ABT Gold Term Subscription Agreement between autobytel.com inc. and [Legal Name], agrees as follows: (a) ABT shall provide a marketing venue whereby dealer may offer for sale available optional equipment, service warranties, or other accessories applicable to the vehicle described in a particular Purchase Request; (b) Dealer shall be responsible for listing, updating and refreshing the data listing the available accessories; (c) Dealer shall compensate ABT [ ] containing a request for Aftermarket Accessories, regardless of the manufacturer or supplier of the accessory. Said amount is due to ABT upon tender of the valid Purchase Request, regardless of whether an actual sale of said vehicle or accessory(s) resulted from such request. ABT shall credit dealer for invalid Purchase Requests which are defined as Purchase Requests containing bogus names, phone number or e-mail address creating a physical inability to contact the Purchase Requester. Credits shall also be granted for duplicate Purchase Request from the same person for the same vehicle type. All credits shall be applied as a offset for any amounts due and payable under the Aftermarket program for the month immediately following the month in which the request for credit is received. Acknowledged and accepted: [LEGAL NAME] Dealer Principal:_____________________________________ Date:____________________ [AA 1ST NAME] [AA LAST NAME] [AA TITLE] 6 7 APPENDIX "B" CERTIFIED PRE-OWNED CYBERSTORE(R) ELECTION The undersigned Dealer elects to participate in the Certified Pre-Owned CyberStore(R) services program and agrees to the following terms and conditions, in addition to those set forth in the Gold Term Subscription Agreement: 1. CUSTOMER SERVICE GUIDELINES Dealer agrees to abide by Certified Pre-Owned CyberStore(R) Customer Service Guidelines ("Guidelines"). ABT in their sole discretion may, from time to time, amend the Guidelines, or impose additional Guidelines on thirty-(30) days' notice to Dealer. Dealer acknowledges that following the Guidelines are crucial to the value of ABT's services and agrees to follow them and any amendments or additions to it even though they may require extra work or expense. The Guidelines include the following: (i) Limited Warranty: Dealer will warranty all vehicles sold through the Certified Pre-Owned CyberStore(R). The warranty coverage will not be less favorable to the purchaser than the law of the where Dealer is located, and as a minimum will be: "Three (3) months or 3,000 miles, whichever comes first." The warranty will cover all matters governed by applicable law and by the form of the attached warranty. Dealer will indemnify ABT for any third-party claims arising under any warranty. (ii) Vehicle Pricing: Dealer will provide prices ("Posted Prices") and vehicle information for display on the ABT Website of all vehicles posted to the Certified Pre-Owned CyberStore(R). Dealer agrees to price vehicles competitively within the market region in which they are located. Dealer, and not ABT, shall be solely responsible for the quality and accuracy of such information. ABT reserves the right to monitor the quality of the photos and information submitted. Dealer shall promptly correct any information or photo(s) deemed by ABT to be inaccurate or below necessary quality levels set forth in This Agreement. If Dealer fails to correct such photo image(s) or information within 72 hours of ABT's written notification thereof, ABT may remove the photo image(s) and/or information from its Website. (iii) Vehicle Return Policy: Except where expressly prohibited by law, Dealer will offer, in writing, a return option allowing a purchaser to return a vehicle to Dealer within 72 hours or 300 miles, whichever comes first. Provided there has been no damage to the vehicle, Dealer will refund 100% of the amount paid by the purchaser to the Dealer for the vehicle. Dealer will provide each purchaser the name and phone number of the Dealer employee to contact to exercise the repurchase option. Dealer will facilitate the purchaser's exercise of the option in good faith, and will use its best efforts to maximize the purchaser's satisfaction with the repurchase experience. Dealer agrees to refund all amounts due to the purchaser within five (5) business days. (iv) Out of Area Repairs: Dealer will participate in the emergency repair system established by ABT. During the warranty period, the emergency repair system allows a purchaser of a Certified Pre-Owned CyberStore(R) vehicle who is more than 100 miles from their residence and encounters a situation where the vehicle is not operational (i.e. cannot be driven), to contact the nearest Certified Pre-Owned CyberStore(R) Dealer (the "Repairing Dealer") and have the Repairing Dealer perform any warranted service or repair. The Repairing Dealer will contact the dealership where the purchaser acquired its vehicle (the "Selling Dealer") and obtain an irrevocable Repair Order (an "RO") from the Selling Dealer authorizing the repair of the vehicle. For other covered items other than those that disabled the vehicle, the owner should return to the Selling Dealer. In the interest of customer satisfaction and improved inter-dealer relations, the resulting RO will be calculated on an internal basis of "cost plus 25%" for parts and labor in all states, except for those states with higher mandates, in which states the applicable law will govern. In the event of a "major" repair (i.e. engine or transmission), the Selling Dealer will have the option of providing alternate transportation to the customer, retrieving the affected unit, and repairing the vehicle at the Selling Dealer's service location. 2. DIGITAL IMAGES Dealer may publish an unlimited number of vehicles (images) on the Certified Pre-Owned CyberStore(R). For each vehicle, Dealer shall publish one digital image together with relevant information in accordance with the Agreement. Dealer in accordance with the Specifications shall produce such images and guidelines set forth in This Agreement below. 3. DIGITAL CAMERAS ABT shall provide the dealer for their use, a Digital Camera. In the event Dealer shall cancel this subscription before the sixth (6th) month anniversary and only in such event, Dealer shall promptly pay ABT the sum of [ ] in exchange for such camera. ABT will not accept a return of the camera in lieu of such payment unless the camera is returned unused, with its original packaging intact. 4. SPECIFICATIONS AND GUIDELINES All vehicle images shall (i) contain the vehicle as the sole subject matter of the image, and shall not contain any people, images of people, graphics, photos, artwork, overlays, signs, numbers, banners, balloons or any form of visual advertisement, or any other image that would have the effect of distracting from the vehicle; (ii) be side or angular photographs; and (iii) be true and correct images of the vehicle, without retouching, modification, manipulation, or enhancement. Accepted: [LEGAL NAME] [Legal Name] Dealer Principal:_____________________________________ Date:____________________ [AA 1ST NAME] [AA LAST NAME] [AA TITLE] 7 8 ATTENTION DEALER: THIS IS A SUGGESTED SAMPLE USED VEHICLE BUYERS GUIDE FORM. PLEASE USE FTC APPROVED FORMS THAT INCLUDE ALL STATE-MANDATED DISCLOSURES, ETC. FRONT SIDE OF FORM - -------------------------------------------------------------------------------- LIMITED WARRANTY FULL X LIMITED WARRANTY. ----- --- The dealer will pay 100% of the labor and 100% of the parts for the covered systems that fail during the warranty period. See reverse side of this form for the explanation of warranty coverage, exclusions, and the dealer's repair obligations. SYSTEMS COVERED: Duration: Engine Power steering 90 days or 3000 miles Transmission Power brakes whichever occurs first. Transaxle Air Conditioning Drive line Electrical Rear end *See below for systems and parts coverage. Travel Repair Provision. A vehicle purchased through the Certified Pre-Owned CyberStore(R) that becomes inoperative when traveling over 100 miles from the originating dealer will be eligible for repair at Autobytel.com accredited dealerships. Travel repair service will be available throughout the U.S. and Canada via the Autobytel.com accredited dealer network. On major repairs, the selling dealer has the option of providing the customer with alternate transportation and repairing the unit at the selling dealer's location. A vehicle that is non-operational will be repaired sufficiently to return to the originating dealer where additional repairs can be completed. To take advantage of the Travel Repair Provision, customers may contact the originating dealer who will direct them to the nearest Autobytel.com accredited dealership, or inquire through the Autobytel.com website for instructions and directions: WWW.AUTOBYTEL.COM. PLEASE NOTE: Appearance and convenience items will not be covered by the Travel Repair Provision, nor will light bulbs, fuses, alignments, adjustments, switches, oil filters, and other maintenance items. Failure to strictly comply with the terms and conditions of this limited warranty will cause this limited warranty to become null & void. SERVICE CONTRACT. A service contract is available at an extra charge on this vehicle. Ask Your Dealer for details as to coverage, deductible, price, and exclusions. PRE PURCHASE INSPECTION: Ask the dealer if You may have this vehicle inspected by Your mechanic either on or off the lot. - ------------- ------------ -------------------- ------- --------------- vehicle make model dealer stock number year vin number - -------------------------------------------------------------------------------- 8 9 BACK SIDE OF FORM FULL X LIMITED WARRANTY. ----- --- The dealer will pay 100% of the labor and 100% of the parts for the covered systems that fail during the warranty period. The following is the entire representation of coverage; no other systems or parts are suggested or implied. State law may give you additional rights. Systems Covered: Parts Covered: Engine: All internally lubricated parts including timing chains, gears and cover, timing belt, pulleys and cover, oil pump and gears, water pump, valve covers, oil pan, manifolds, flywheel, harmonic balancer, engine mounts seals and gaskets, engine block, cylinder heads and turbocharger housing if damaged by the failure of internally lubricated parts. Transmission/Transfer Case: All internally lubricated parts, torque converter, vacuum modulator, transmission mounts, seals and gaskets. (Manual clutch assembly and component parts are not covered) Front wheel Drive: All internally lubricated parts, axle shafts, output shafts, and constant velocity joints, front hub bearings, seals and gaskets. Rear wheel Drive: All internally lubricated parts, propeller shafts, supports and U-joints, drive shafts, axle shafts and bearings, seals and gaskets. Brakes: Master cylinder, power booster, wheel cylinders, calipers, hydraulic lines and fittings. (ABS component parts are not covered.) Steering: Steering gear housing and all internal parts, power steering pump, valve body and rack. Electrical: Alternator, generator, and starter. Air Conditioner: Compressor, evaporator core, condenser. ALL SYSTEMS AND PARTS LISTED ABOVE ARE COVERED 90 DAYS FROM PURCHASE OR 3000 MILES, WHICHEVER OCCURS FIRST. NOTE: This Agreement is exclusively between the selling dealer and the customer. By accepting this Limited Warranty, Customer agrees to release autobytel.com inc. from all obligations with respect to the acquisition, service, or repair of the covered vehicle. Customer's failure to strictly adhere to the terms and conditions of this Limited Warranty shall result in loss of coverage. - ---------------------------------------- ----------------------------------- Autobytel.com Accredited Dealer / Date Customer Signature / Date - -------------------------------------------------------------------------------- 9 10 135 POINT CERTIFIED PRE-OWNED CYBERSTORE(R) VEHICLE CHECKLIST ================================================================================================================== ADDRESS/LOCATION: ================================================================================================================== YR: MAKE: MODEL: BODY TYPE: ENGINE: 4 6 8 CYL TRANS: - ------------------------------------------------------------------------------------------------------------------ VIN: COLOR: LICENSE PLATE NO: MILEAGE: ================================================================================================================== CIRCLE OPTIONS: WHEELS: RADIO: AM/FM CASSETTE EQUALIZER CD ALLOY CUSTOM:______________ - ------------------------------------------------------------------------------------------------------------------ INTERIOR: VINYL CLOTH LEATHER AIR BAGS 1 OR 2 SUN ROOF AIR CONDITION: YES NO - ------------------------------------------------------------------------------------------------------------------ POWER: WINDOWS LOCKS SEATS STEERING BRAKES/ABS TILT CRUISE REAR DEFROSTER - ------------------------------------------------------------------------------------------------------------------ MAINTENANCE ITEMS: MECHANICAL AREA: OK OR DESCRIBE DAMAGE CIRCLE DOLLAR ONE ================================================================================================================== ENGINE OIL LOW DIRTY STARTING Repair $ BURNED LEAKS Replace - ------------------------------------------------------------------------------------------------------------------ TRANS FLUID LOW DIRTY ENGINE Repair $ BURNED LEAKS Replace - ------------------------------------------------------------------------------------------------------------------ BRAKE FLUID LOW DIRTY TRANSMISSION Repair $ BURNED LEAKS Replace - ------------------------------------------------------------------------------------------------------------------ COOLANT LOW RUSTY DRIVE LINE Repair $ BURNED LEAKS Replace - ------------------------------------------------------------------------------------------------------------------ PWR STEERING LOW DIRTY STEERING Repair $ BURNED LEAKS Replace - ------------------------------------------------------------------------------------------------------------------ BATTERY CORRODED BRAKES 50% LINING Repair $ LOW CHARGE Replace - ------------------------------------------------------------------------------------------------------------------ BELTS SERPENTINE CLIMATE CONTROL Repair $ WORN Replace - ------------------------------------------------------------------------------------------------------------------ HOSES WORN SUSPENSION Repair $ Replace ================================================================================================================== BODY AREA: OK OR DESCRIBE CIRCLE ONE DOLLAR ELECTRICAL OK OR DESCRIBE CIRCLE DOLLAR DAMAGE AREA: DAMAGE ONE ================================================================================================================== WINDSHIELD Repair $ TAIL Repair $ Replace LIGHTS Replace - ------------------------------------------------------------------------------------------------------------------ HOOD / COWL Repair $ PARKING Repair $ Replace LIGHTS Replace - ------------------------------------------------------------------------------------------------------------------ GRILL Repair $ TURN Repair $ Replace SIGNALS Replace - ------------------------------------------------------------------------------------------------------------------ FRONT BUMPER Repair $ INTERIOR Repair $ Replace LIGHTS Replace - ------------------------------------------------------------------------------------------------------------------ REAR BUMPER Repair $ HORN Repair $ Replace Replace - ------------------------------------------------------------------------------------------------------------------ HEADLIGHT ASSY'S Repair $ POWER Repair $ Replace WINDOWS Replace - ------------------------------------------------------------------------------------------------------------------ RIGHT FENDER Repair $ POWER Repair $ Replace LOCKS Replace - ------------------------------------------------------------------------------------------------------------------ RIGHT SIDE GLASS Repair $ POWER Repair $ Replace SEATS Replace - ------------------------------------------------------------------------------------------------------------------ RIGHT DOORS Repair $ MEMORY Repair $ Replace SEAT Replace - ------------------------------------------------------------------------------------------------------------------ RIGHT QUARTER Repair $ POWER Repair $ Replace MIRROR Replace - ------------------------------------------------------------------------------------------------------------------ REAR GLASS Repair $ MEMORY Repair $ Replace MIRROR Replace - ------------------------------------------------------------------------------------------------------------------ DECK LID Repair $ RADIO Repair $ Replace AM/FM Replace - ------------------------------------------------------------------------------------------------------------------ LEFT QUARTER Repair $ TAPE Repair $ Replace PLAYER Replace - ------------------------------------------------------------------------------------------------------------------ LEFT DOORS Repair $ CD Repair $ Replace PLAYER Replace - ------------------------------------------------------------------------------------------------------------------ LEFT SIDE GLASS Repair $ CLOCK Repair $ Replace Replace - ------------------------------------------------------------------------------------------------------------------ LEFT FENDER Repair $ KEYLESS Repair $ Replace ENTRY Replace - ------------------------------------------------------------------------------------------------------------------ ROOF Repair $ ANTI-THEFT Repair $ Replace Replace - ------------------------------------------------------------------------------------------------------------------ WHEELS / COVERS Repair $ WINDSHIELD Repair $ Replace Replace - ------------------------------------------------------------------------------------------------------------------ TIRES 5/32" TREAD Repair $ WINDSHIELD Repair $ Replace WIPER Replace - ------------------------------------------------------------------------------------------------------------------ SPARE TIRE W/JACK Repair $ HOOD Repair $ Replace RELEASE Replace - ------------------------------------------------------------------------------------------------------------------ FRONT/REAR SEATS Repair $ TRUNK Repair $ Replace RELEASE Replace - ------------------------------------------------------------------------------------------------------------------ INTERIOR/DASH Repair $ GAS Repair $ Replace DOOR Replace - ------------------------------------------------------------------------------------------------------------------ EXTERIOR PAINT Repair $ SPEEDOMETER Repair $ Replace Replace - ------------------------------------------------------------------------------------------------------------------ OTHER: Repair $ ODOMETER Repair $ Replace Replace ================================================================================================================== CIRCLE CHOICE: TOTAL: $ THIS VEHICLE ------ WAS/WAS NOT TEST DRIVEN OVERALL CONDITION: GOOD FAIR POOR ==================================================================================================================
10 EX-10.32 24 FORM OF PLATINUM TERM CONTINUATION RIDER 1 EXHIBIT 10.32 [*] Confidential treatment has been requested for certain portions of this exhibit. PLATINUM TERM CONTINUATION RIDER Congratulations. Your performance and commitment to the success of Autobytel.com enables you to move forward and enjoy the highest standard of service we offer our family of accredited motor vehicle dealers. This Platinum Term Continuation Rider ("Rider") agreement is entered into by and between Autobytel.com, a Delaware Corporation, with its principal place of business at 18872 MacArthur Blvd., Irvine, California 92612 ("ABT" or "us" or "we") and [legal name], a(n) [state] with its principal place of business at [address], (Dealer" or "you" or "Your"). This Rider amends the Gold Term Subscription Agreement ("Agreement") entered into between ABT and Dealer on [date]. This Rider shall supersede and prevail over any inconsistent term, provision, or condition of the Agreement or any other related Agreement. This amendment incorporates provisions that were expressly negotiated by the parties. In consideration of the following mutual promises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, ABT and Dealer, on their own behalf and on behalf of each of their d.b.a. operation(s), intending to be legally bound hereby, amended the Agreement is as follows: SECTION I (12)(2) IS AMENDED AS FOLLOWS: 12. You agree to maintain an Overall Satisfaction Index (OSI) score as measured by ABT at a level that is within the top 25% of your region when measured against comparable make dealers in your PMA. OSI is a quarterly scoring method which measures and ranks performance by comparing Dealer's average Purchase Request contact ratio, actual sales completed from Purchase Requests provided, the number of finance transactions completed through ABT and customer service ratings as provided by customer surveys, with those of other similarly situated dealers within a region. You further agree to maintain an ABT Satisfaction Index Performance (ABTSSI) level of eighty (80%) or better but in no event shall your performance rating be less than the regional average for all participating ABT subscribed dealers. SECTION I (14) IS AMENDED AS FOLLOWS: TERM & TERMINATION: This Agreement shall be for a term of Five (5) years, unless terminated earlier pursuant to this section. During the term of this agreement: (A) ABT MAY TERMINATE THIS AGREEMENT: 1. except as otherwise stated herein, immediately for any breach of this Agreement by you which is not cured within fifteen (15) days after you receive written notice of the breach from us; 2. immediately if any fees due ABT under this Agreement are unpaid and outstanding more than thirty (30) days after ABT makes a written request for payment; 3. immediately, if Dealer is guilty of willful misconduct in the performance of its duties under this Agreement; or 4. immediately upon a finding of dealer's violation of State or Federal law or conviction for such violation, whether administratively, civilly, or criminally; 5. immediately, if an order for liquidation against you is entered and not stayed in a bankruptcy proceeding; 6. upon ninety (90) days' written notice to you regarding poor overall performance, including but not limited to such areas as unsatisfactory Purchase Requestor contact rates, and poor overall satisfaction index score unless Dealer provides satisfactory proof that the situation complained of has been cured within this ninety (90) day period. (B) DEALER MAY TERMINATE THIS AGREEMENT: 1. immediately, if an order for liquidation against ABT is entered and not stayed in a bankruptcy proceeding; 2. immediately, if ABT is guilty of willful misconduct in the performance of its duties under this Agreement; or 3. upon sixty (60) days written notice to ABT in accordance with the notice provisions of this agreement. Upon your voluntary termination, you shall be responsible for all fees due to ABT up to and including the effective date of said termination. 2 SECTION I (17) IS ADDED AS FOLLOWS: 17. COURTESY ROUTING: Occasionally ABT may route a Purchase Requester to Dealer from an area outside Dealers PMA. This may occur for a variety of reasons including but limited to the lack of a subscribed dealer in the Purchase Requesters area, customer satisfaction or other reason determined by ABT in our sole discretion warrants such a routing. Dealer agrees to accommodate such courtesy routings under the terms of this agreement as though provided from within their PMA. Dealer understands that courtesy routings are at the sole discretion of ABT. ABT makes no guarantee as to the quantity, originating location and duration Dealer may expect during the term of this agreement. SECTION I (18) IS ADDED AS FOLLOWS: 18. MONITORED GROWTH AREAS: ABT reserves the right to determine monitored growth areas when determining Primary Market Areas. A Monitored Growth Area is defined as a designated PMA where ABT has determined the potential for full value is insufficient at the present time to warrant a dedicated subscribing dealer. Dealer may, but is not guaranteed, the ability to temporarily service a monitored growth area contiguous to Dealer's PMA if one exists. ABT in our sole discretion may charge an additional monthly fee for such Monitored Growth Area. If assigned a monitored growth area, Dealer agrees to service such an area under the same terms and conditions as set forth and agreed to under Dealer's contracted PMA. SECTION II (5) IS AMENDED AS FOLLOWS: 5. You will at all times during this term employ at least one full-time employee to be responsible for the new vehicle program and at least one full-time employee to be responsible for the Certified Pre-Owned CyberStore(R) program. This person(s) will be empowered to act as a liaison between ABT and Dealer. This person(s) shall be referred to as the "ABT Manager." Dealer shall, at all hours of dealership sales operation, insure a qualified ABT Manager is on premises and capable of processing any Purchase Requests provided to Dealer by ABT. You promise to notify us in writing within ten (10) days with the identity of any newly designated ABT Manager. In the event dealer does not have a qualified ABT Manager on premises, for any reason, ABT reserves the right to re-route any Purchase Request to the Qualified ABT subscribing dealer closest to the Purchase Requestor, offering the same make. You will make your ABT Manager(s) available to us for basic and advanced training offered by ABT from time to time. ABT shall reserve for Dealer, free of tuition costs, two (2) seats per franchise per year for ABT Managers to attend an ABT-U Basic Training Course. Additional seats for the basic training may be purchased at a cost of [ ] per seat. Advanced certification courses will be made available to Dealer form time to time at an additional cost. Dealer's participation in these advanced programs is voluntary. Dealer will insure that each ABT Manager will attend at least one ABT-U Basic training course each year during the term of this agreement. Dealer understands that ABT will not forward Purchase Requests under this agreement until such time as all ABT-U Basic Training has been completed by the qualified ABT manager(s). Until such time as Dealer's compliance with this term has been confirmed by ABT, ABT is hereby granted express authority and permission to re-route any Purchase Requests received from Dealers PMA to the nearest qualified ABT subscribing dealer for the subject vehicle make, without prior notice to Dealer. SECTION II (6) IS AMENDED AS FOLLOWS: 6. You will establish an exclusive department within your dealership wherein the ABT Manager(s) may perform his/her/their duties under this agreement. Until such time as Dealer's compliance with this term has been confirmed by ABT, ABT is hereby granted express authority and permission to re-route any Purchase Requests received from Dealers PMA to the nearest qualified ABT subscribing dealer for the subject vehicle make, without prior notice to Dealer. SECTION II (12) IS AMENDED AS FOLLOWS: 12. NEW VEHICLE EXCLUSIVE PRIMARY MARKET ASSIGNMENT ("PMA"):: You have been assigned an exclusive market area for the subscribed new vehicle franchises of ________, ________, _______, _______ in accordance with the market representation study and plan conducted [date of last study]. This exclusive area effects new vehicle Purchase Requests only. The U.S. Postal Code description of this PMA assignment is set forth in Exhibit "A" attached to this agreement and incorporated herein by this reference as though fully set forth. ABT has sole and complete authority to define your PMA. Your exclusive PMA will remain in effect for at least twelve-(12) months without adjustment. ABT reserves the right to conduct periodic market representation studies of your PMA. ABT in their sole discretion may use the results of these studies to evaluate the market value of your PMA as well as your ability to service Purchase Requests received in your PMA. In no event shall such a study be conducted within six (6) months of any prior study within Dealer's designated market area (DMA). Except for rural areas, ABT will perform such studies for an entire DMA, which shall effect all similar franchised dealers concurrently. ABT reserves the rights to conduct a single market area study in rural areas which may effect a single dealer location only. ABT reserves the right to adjust your PMA as necessary following such studies. Changes in Dealers PMA as a result of these studies 3 shall be implemented Three (3) months following the date the study was conducted. ABT promises to provide you with not less than thirty- (30) days written notice of the pending change and the effective date. Following such PMA changes, Dealer's adjusted PMA shall remain in effect and shall not be adjusted unless as a result of a subsequent market representation study is completed for the DMA. [ABT retains the right to market and use its programs and services for similar make dealers in all areas other than your PMA, and within your PMA for all makes of motor vehicles not subscribed to by you.] SECTION II (12) IS AMENDED AS FOLLOWS: 12. You agree to update, on a weekly basis, your sales data in the Dealer Real Time System indicating the number and names of Potential Purchasers who purchased or leased vehicles from you though our system. You agree to include in your data, the number of those vehicles financed and amount of the financed and such other related data as may from time to time be requested. You further agree to accurately disclose in your weekly report, data reflecting your cost of sale for each vehicle sold through the ABT program as well as the cost of sale for all vehicles sold by means other than ABT. All such information provided shall remain strictly confidential and shall be used solely by ABT in evaluating your overall performance. SECTION II (21) IS AMENDED AS FOLLOWS: 21. ABT ACCEPTANCE CORPORATION PRE-APPROVED FINANCING: To accommodate Purchase Requestors who are pre-approved for financing though ABTAC's lenders and to participate in the financial rewards offered by these financing programs, you will apply for a dealer participation agreement and receive approval from each ABTAC approved lender. You agree to maintain each of these financing arrangements throughout the remaining term of this agreement. You agree to honor the following commitments to our financing program: 1. You will participate in good faith by accepting ABTAC arranged financing currently available and for programs that may be added in the future. 2. You agree too fully complete lender participation agreements, if required by our lenders, within ten (10) working days from receipt. 3. You will to maintain an average loan-closing ratio of at least 10% of those loans pre-approved during the term of this subscription. 4. You agree that during the term of this agreement you will re-solicit for an application to ABTAC finance programs, any non-credit Purchaser Requesters forwarded to you by ABT. 5. You promise you or any one in your employment will not intentionally disparage or otherwise mislead customer as to the terms and conditions of our Financing Arrangements. 6. When a Purchase Requestor has been pre-approved at the Lender's prevailing buy rate for our financing, you promise that you will not actively solicit the Purchase Requestor to convert from our pre-approved financing to an independently promoted loan program offered through your dealership. ABT, in many cases, has arranged for you to be compensated for your participation in ABTAC arranged financing programs. This compensation, if available, will come directly from the lender and not ABT or ABTAC. Any disagreement regarding the terms and conditions of a lender's Participation Agreement shall be dealt with between you and the lender. Neither ABT nor ABTAC makes any guarantee that you will receive compensation from any Lender. ABTAC uses its best efforts to negotiate advantageous terms for our subscribing dealers and will, from time to time, add or delete lenders, including banks, credit unions, thrift and loans and other sources to benefit you and the Purchase Requestor. SECTION II (22) IS AMENDED AS FOLLOWS: 22. CERTIFIED PRE-OWNED CYBERSTORE(R) PARTICIPATION: Throughout the term of this agreement, dealer agrees to actively participate in the Certified Pre-Owned Cyberstore(R) program. Dealer hereby agrees to honor the terms and conditions of this program as set forth separately in Appendix "B" attached to this agreement and incorporated herein by this reference. SECTION II (23) IS AMENDED AS FOLLOWS: 23. AFTERMARKET ACCESSORIES: Throughout the term of this agreement, you agree to actively participate in our Aftermarket Accessory program for an additional charge of [ ] dollars per Purchase Request wherein aftermartket accessory items are requested. The terms and conditions of your participation in this program are set forth separately in Appendix "C" attached to this agreement and incorporated herein by this reference as though fully set forth. SECTION II (24) IS AMENDED AS FOLLOWS: 24. COMPENSATION TO ABT: As consideration for the business opportunities and promises we have made to you in this Agreement, you promise to pay ABT a monetary fee comprised of an initial start-up fee and a monthly subscription fee. The amount of fees charged for your subscription is determined by several factors, including but not limited to your geographical location, the franchise make of vehicle you offer through this 4 subscription, population concentrations, per capita vehicle registrations for your PMA, and ABT's Seasonal Annual Adjusted Rate (SAAR) percentage share of national retail vehicle sales for the year in question. ABT shall review such factors at twelve (12) month intervals to determine the value of the services being provided to you. ABT, in our sole discretion, may change the fee charged to you upon thirty- (30) days written notice. However, in no event shall more than one (1) such fee change take place within a twelve (12) month period. The subscription fee(s) you hereby promise to pay as of the date of this agreement is [WrittenAMTInFee] Dollars ($[InFee]) as a total MONTHLY SUBSCRIPTION FEE, Which is due and payable in advance on the first day of every calendar month. The total monthly amount due shall be allocated as follows: DRT Access Fee, $150.00; Certified Pre-Owned CyberStore(R), [UCCSMoFee]; [Make], [MoMakeFee] [Make1] [MoMkFee1] [Make2] [MoMkFee2] [Make3] [MoMkFee3] [Make4] [MoMkFee4] [Make5] [MoMkFee5] [Make6] [MoMkFee6] [Make7] [MoMkFee7] All fees paid to ABT under this agreement are deemed earned upon the execution of this agreement or delivery of services whichever occurs first. All fees paid to ABT are non-refundable regardless of circumstances. Payments received more than thirty (30) days following the invoice date shall be subject to a late fee of $25.00 and shall incur interest charges on the balance due at an annual percentage rate of eighteen (18.0%) percent per annum. EXCEPT TO THE EXTENT THEY ARE INCONSISTENT WITH THE PROVISIONS OF THIS RIDER, ALL OTHER SECTIONS OF THE AGREEMENT SHALL REMAIN UNCHANGED. This Agreement is executed this ________day of __________________________, 1999. DEALER: [LEGAL NAME] By:_________________________________ Name: [Auth Agnt] Title: [Title] AUTOBYTEL.COM By: _________________________________ Name: Ann Delligatta Title: Chief Operating Officer 5 APPENDIX "B" CERTIFIED PRE-OWNED CYBERSTORE(R) ELECTION The undersigned Dealer elects to participate in the Certified Pre-Owned CyberStore(R) services program and agrees to the following terms and conditions, in addition to those set forth in the Term Subscription Agreement: 1. CUSTOMER SERVICE GUIDELINES Dealer agrees to abide by Certified Pre-Owned CyberStore Customer Service Guidelines ("Guidelines") ABT in their sole discretion may, from time to time, amend the Guidelines, or impose additional Guidelines on thirty (30) days' notice to Dealer. Dealer acknowledges that following the Guidelines is crucial to the value of ABT's services and agrees to follow them and any amendments or additions to it even though they may require extra work or expense. The Guidelines include the following: (i) Limited Warranty: Dealer will warranty all vehicles sold through the Certified Pre-Owned CyberStore. The warranty coverage will not be less favorable to the purchaser than the law of the where Dealer is located, and as a minimum will be: "Three months or 3,000 miles, whichever comes first." The warranty will cover all matters governed by applicable law and by the form of the attached Warranty. Dealer will indemnify ABT for any third party claims arising under any warranty. (ii) Vehicle Pricing: Dealer will provide prices ("Posted Prices") and vehicle information for display on the ABT Website of all Vehicles posted to the Certified Pre-Owned CyberStore. Dealer agrees to price Vehicles competitively within the market region in which they are located. Dealer, and not ABT, shall be solely responsible for the quality and accuracy of such information. ABT reserves the right to monitor the quality of the photos and information submitted. Dealer shall promptly correct any information or photo(s) deemed by ABT to be inaccurate or below necessary quality levels set forth in Section 5. If Dealer fails to correct such photo image(s) or information within 72 hours of ABT's written notification thereof, ABT may remove the photo image(s) and/or information from its website. (iii) Vehicle Return Policy: Except where expressly prohibited by law, Dealer will offer, in writing, a return option allowing a purchaser to return a Vehicle to Dealer within 72 hours or 300 miles, whichever comes first. Provided there has been no damage to the Vehicle, Dealer will refund 100% of the amount paid by the purchaser to the Dealer for the Vehicle. Dealer will provide each purchaser the name and phone number of the Dealer employee to contact to exercise the repurchase option. Dealer will facilitate the purchaser's exercise of the option in good faith, and will use its best efforts to maximize the purchaser's satisfaction with the repurchase experience. Dealer agrees to refund all amounts due to the purchaser within five business days. (iv) Out of Area Repairs: Dealer will participate in the emergency repair system established by ABT. During the warranty period, the emergency repair system allows a purchaser of a Certified Pre-Owned CyberStore Vehicle who is more than 100 miles from their residence and encounters a situation where the vehicle is not operational (i.e. cannot be driven), to contact the nearest Certified Pre-Owned CyberStore Dealer (the "Repairing Dealer") and have the Repairing Dealer perform any warranted service or repair. The repairing Dealer will contact the dealership where the purchaser acquired its Vehicle (the "Selling Dealer") and obtain an irrevocable Repair Order (an "R.O.") from the Selling Dealer authorizing the repair the vehicle. For other covered items other than those that disabled the vehicle, the owner should return to the Selling Dealer. In the interest of customer satisfaction and improved inter-dealer relations, the resulting R.O. will be calculated on an internal basis of "cost plus 25%" for parts and labor in all states, except for those states with higher mandates, in which states the applicable law will govern. In the event of a "major" repair (i.e. engine or transmission), the Selling Dealer will have the option of providing alternate transportation to the customer, retrieving the affected unit, and repairing the Vehicle at the Selling Dealer's service location. 2. DIGITAL IMAGES: Dealer may publish an unlimited number of vehicles (images) on the Certified Pre-Owned CyberStore. For each vehicle, Dealer shall publish one digital image together with relevant information in accordance with the Agreement. Dealer in accordance with the Specifications shall produce such images and guidelines set forth in Section 5 below. 3. DIGITAL CAMERAS: ABT shall provide the dealer for their use, a Digital Camera. In the event Dealer shall cancel this subscription before the sixth (6th) month anniversary and only in such event, Dealer shall promptly pay ABT the sum of [ ] in exchange for such camera. ABT will not accept a return of the camera in lieu of such payment unless the camera is returned, unused with its original packaging in tact. 4. SPECIFICATIONS AND GUIDELINES: All vehicle images shall (i) contain the vehicle as the sole subject matter of the image, and shall not contain any people, images of people, graphics, photos, artwork, overlays, signs, numbers, banners, balloons or any form of visual advertisement, or any other image that would have the effect of distracting from the vehicle; (ii) be side or angular photographs; and (iii) be true and correct images of the vehicle, without retouching, modification, manipulation or enhancement. Accepted: [Legal Name] Dealer Principal:_________________________________________ Date:________________ [Auth Agnt] [Title] 6 ATTENTION DEALER: THIS IS A SUGGESTED SAMPLE USED VEHICLE BUYERS GUIDE FORM. PLEASE USE FTC APPROVED FORMS THAT INCLUDE ALL STATE-MANDATED DISCLOSURES, ETC. FRONT SIDE OF FORM - -------------------------------------------------------------------------------- LIMITED WARRANTY FULL X LIMITED WARRANTY. ----- --- The dealer will pay 100% of the labor and 100% of the parts for the covered systems that fail during the warranty period. See reverse side of this form for the explanation of warranty coverage, exclusions, and the dealer's repair obligations. SYSTEMS COVERED: Duration: Engine Power steering 90 days or 3000 miles Transmission Power brakes whichever occurs first. Transaxle Air Conditioning Drive line Electrical Rear end *See below for systems and parts coverage. Travel Repair Provision. A vehicle purchased through the Certified Pre-Owned CyberStore(R) that becomes inoperative when traveling over 100 miles from the originating dealer will be eligible for repair at Autobytel.com accredited dealerships. Travel repair service will be available throughout the U.S. and Canada via the Autobytel.com accredited dealer network. On major repairs, the selling dealer has the option of providing the customer with alternate transportation and repairing the unit at the selling dealer's location. A vehicle that is non-operational will be repaired sufficiently to return to the originating dealer where additional repairs can be completed. To take advantage of the Travel Repair Provision, customers may contact the originating dealer who will direct them to the nearest Autobytel.com accredited dealership, or inquire through the Autobytel.com website for instructions and directions: WWW.AUTOBYTEL.COM. PLEASE NOTE: Appearance and convenience items will not be covered by the Travel Repair Provision, nor will light bulbs, fuses, alignments, adjustments, switches, oil filters, and other maintenance items. Failure to strictly comply with the terms and conditions of this limited warranty will cause this limited warranty to become null & void. SERVICE CONTRACT. A service contract is available at an extra charge on this vehicle. Ask Your Dealer for details as to coverage, deductible, price, and exclusions. PRE PURCHASE INSPECTION: Ask the dealer if You may have this vehicle inspected by Your mechanic either on or off the lot. - -------------- -------- --------------------- --------- --------------- vehicle make model dealer stock number year vin number 7 BACK SIDE OF FORM - -------------------------------------------------------------------------------- FULL X LIMITED WARRANTY. ----- --- The dealer will pay 100% of the labor and 100% of the parts for the covered systems that fail during the warranty period. The following is the entire representation of coverage; no other systems or parts are suggested or implied. State law may give you additional rights. Systems Covered: Parts Covered: Engine: All internally lubricated parts including timing chains, gears and cover, timing belt, pulleys and cover, oil pump and gears, water pump, valve covers, oil pan, manifolds, flywheel, harmonic balancer, engine mounts seals and gaskets, engine block, cylinder heads and turbocharger housing if damaged by the failure of internally lubricated parts. Transmission/Transfer Case: All internally lubricated parts, torque converter, vacuum modulator, transmission mounts, seals and gaskets. (Manual clutch assembly and component parts are not covered) Front wheel Drive: All internally lubricated parts, axle shafts, output shafts, and constant velocity joints, front hub bearings, seals and gaskets. Rear wheel Drive: All internally lubricated parts, propeller shafts, supports and U-joints, drive shafts, axle shafts and bearings, seals and gaskets. Brakes: Master cylinder, power booster, wheel cylinders, calipers, hydraulic lines and fittings. (ABS component parts are not covered.) Steering: Steering gear housing and all internal parts, power steering pump, valve body and rack. Electrical: Alternator, generator, and starter. Air Conditioner Compressor, evaporator core, condenser. ALL SYSTEMS AND PARTS LISTED ABOVE ARE COVERED 90 DAYS FROM PURCHASE OR 3000 MILES, WHICHEVER OCCURS FIRST. NOTE: This Agreement is exclusively between the selling dealer and the customer. By accepting this Limited Warranty, Customer agrees to release autobytel.com inc. from all obligations with respect to the acquisition, service, or repair of the covered vehicle. Customer's failure to strictly adhere to the terms and conditions of this Limited Warranty shall result in loss of coverage. - ---------------------------------------- ------------------------------------ Autobytel.com Accredited Dealer/Date Customer Signature/Date - -------------------------------------------------------------------------------- 8 135 POINT CERTIFIED PRE-OWNED CYBERSTORE(R) VEHICLE CHECKLIST ================================================================================================================== ADDRESS/LOCATION: ================================================================================================================== YR: MAKE: MODEL: BODY TYPE: ENGINE: 4 6 8 CYL TRANS: - ------------------------------------------------------------------------------------------------------------------ VIN: COLOR: LICENSE PLATE NO: MILEAGE: ================================================================================================================== CIRCLE OPTIONS: WHEELS: RADIO: AM/FM CASSETTE EQUALIZER CD CUSTOM:___________________ ALLOY CUSTOM:______________ - ------------------------------------------------------------------------------------------------------------------ INTERIOR: VINYL CLOTH LEATHER AIR BAGS 1 OR 2 SUN ROOF AIR CONDITION: YES NO - ------------------------------------------------------------------------------------------------------------------ POWER: WINDOWS LOCKS SEATS STEERING BRAKES/ABS TILT CRUISE REAR DEFROSTER - ------------------------------------------------------------------------------------------------------------------ MAINTENANCE ITEMS: MECHANICAL AREA: OK OR DESCRIBE DAMAGE CIRCLE DOLLAR ONE ================================================================================================================== ENGINE OIL LOW DIRTY STARTING Repair $ BURNED LEAKS Replace - ------------------------------------------------------------------------------------------------------------------ TRANS FLUID LOW DIRTY ENGINE Repair $ BURNED LEAKS Replace - ------------------------------------------------------------------------------------------------------------------ BRAKE FLUID LOW DIRTY TRANSMISSION Repair $ BURNED LEAKS Replace - ------------------------------------------------------------------------------------------------------------------ COOLANT LOW RUSTY DRIVE LINE Repair $ BURNED LEAKS Replace - ------------------------------------------------------------------------------------------------------------------ PWR STEERING LOW DIRTY STEERING Repair $ BURNED LEAKS Replace - ------------------------------------------------------------------------------------------------------------------ BATTERY CORRODED BRAKES 50% LINING Repair $ LOW CHARGE Replace - ------------------------------------------------------------------------------------------------------------------ BELTS SERPENTINE CLIMATE CONTROL Repair $ WORN Replace - ------------------------------------------------------------------------------------------------------------------ HOSES WORN SUSPENSION Repair $ Replace ================================================================================================================== BODY AREA: OK OR DESCRIBE CIRCLE ONE DOLLAR ELECTRICAL OK OR DESCRIBE CIRCLE DOLLAR DAMAGE AREA: DAMAGE ONE ================================================================================================================== WINDSHIELD Repair $ TAIL Repair $ Replace LIGHTS Replace - ------------------------------------------------------------------------------------------------------------------ HOOD / COWL Repair $ PARKING Repair $ Replace LIGHTS Replace - ------------------------------------------------------------------------------------------------------------------ GRILL Repair $ TURN Repair $ Replace SIGNALS Replace - ------------------------------------------------------------------------------------------------------------------ FRONT BUMPER Repair $ INTERIOR Repair $ Replace LIGHTS Replace - ------------------------------------------------------------------------------------------------------------------ REAR BUMPER Repair $ HORN Repair $ Replace Replace - ------------------------------------------------------------------------------------------------------------------ HEADLIGHT ASSY'S Repair $ POWER Repair $ Replace WINDOWS Replace - ------------------------------------------------------------------------------------------------------------------ RIGHT FENDER Repair $ POWER Repair $ Replace LOCKS Replace - ------------------------------------------------------------------------------------------------------------------ RIGHT SIDE GLASS Repair $ POWER Repair $ Replace SEATS Replace - ------------------------------------------------------------------------------------------------------------------ RIGHT DOORS Repair $ MEMORY Repair $ Replace SEAT Replace - ------------------------------------------------------------------------------------------------------------------ RIGHT QUARTER Repair $ POWER Repair $ Replace MIRROR Replace - ------------------------------------------------------------------------------------------------------------------ REAR GLASS Repair $ MEMORY Repair $ Replace MIRROR Replace - ------------------------------------------------------------------------------------------------------------------ DECK LID Repair $ RADIO Repair $ Replace AM/FM Replace - ------------------------------------------------------------------------------------------------------------------ LEFT QUARTER Repair $ TAPE Repair $ Replace PLAYER Replace - ------------------------------------------------------------------------------------------------------------------ LEFT DOORS Repair $ CD Repair $ Replace PLAYER Replace - ------------------------------------------------------------------------------------------------------------------ LEFT SIDE GLASS Repair $ CLOCK Repair $ Replace Replace - ------------------------------------------------------------------------------------------------------------------ LEFT FENDER Repair $ KEYLESS Repair $ Replace ENTRY Replace - ------------------------------------------------------------------------------------------------------------------ ROOF Repair $ ANTI-THEFT Repair $ Replace Replace - ------------------------------------------------------------------------------------------------------------------ WHEELS / COVERS Repair $ WINDSHIELD Repair $ Replace Replace - ------------------------------------------------------------------------------------------------------------------ TIRES 5/32" TREAD Repair $ WINDSHIELD Repair $ Replace WIPER Replace - ------------------------------------------------------------------------------------------------------------------ SPARE TIRE W/JACK Repair $ HOOD Repair $ Replace RELEASE Replace - ------------------------------------------------------------------------------------------------------------------ FRONT/REAR SEATS Repair $ TRUNK Repair $ Replace RELEASE Replace - ------------------------------------------------------------------------------------------------------------------ INTERIOR/DASH Repair $ GAS Repair $ Replace DOOR Replace - ------------------------------------------------------------------------------------------------------------------ EXTERIOR PAINT Repair $ SPEEDOMETER Repair $ Replace Replace - ------------------------------------------------------------------------------------------------------------------
9
OTHER: Repair $ ODOMETER Repair $ Replace Replace ================================================================================================================== CIRCLE CHOICE: TOTAL: $ THIS VEHICLE ------ WAS/WAS NOT TEST DRIVEN OVERALL CONDITION: GOOD FAIR POOR ==================================================================================================================
APPENDIX "C" AFTERMARKET ACCESSORY OPTION ACCEPTANCE AGREEMENT SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN SECTION (E) OF THE PLATINUM TERM CONTINUATION SUBSCRIPTION AGREEMENT BETWEEN AUTOBYTEL SERVICES CORPORATION AND [LEGAL NAME], AGREES AS FOLLOWS: 1. ABT shall provide a marketing venue whereby dealer may offer for sale available optional equipment, service warranties, or other accessories applicable to the vehicle described in a particular Purchase Request; 2. Dealer shall be responsible for listing, updating and refreshing the data listing the available accessories; 3. Dealer shall compensate ABT $______ for each purchase request containing a request for Aftermarket Accessories, regardless of the manufacturer or supplier of the accessory. Said amount is due to ABT upon tender of the valid Purchase Request, regardless of whether an actual sale of said vehicle or accessory(s) resulted from such request. ABT shall credit dealer for invalid Purchase Requests which are defined as Purchase Requests containing bogus names, phone number or e-mail address creating a physical inability to contact the Purchase Requester. Credits shall also be granted for duplicate Purchase Request from the same person for the same vehicle type. All credits shall be applied as a offset for any amounts due and payable under the Aftermarket program for the month immediately following the month in which the request for credit is received. Acknowledged and accepted: [LEGAL NAME] Dealer Principal:_________________________________________ Date:________________ [Auth Agnt] [Title] 10 135 POINT CERTIFIED PRE-OWNED VEHICLE CHECKLIST ================================================================================================================== ADDRESS/LOCATION: ================================================================================================================== YR: MAKE: MODEL: BODY TYPE: ENGINE: 4 6 8 CYL TRANS: - ------------------------------------------------------------------------------------------------------------------ VIN: COLOR: LICENSE PLATE NO: MILEAGE: ================================================================================================================== CIRCLE OPTIONS: RADIO AM/FM CASSETTE EQUALIZER CD WHEELS: ALLOY - ------------------------------------------------------------------------------------------------------------------ INTERIOR: VINYL CLOTH LEATHER AIR BAGS 1 OR 2 SUN ROOF AIR CONDITION: YES NO - ------------------------------------------------------------------------------------------------------------------ POWER: WINDOWS LOCKS SEATS STEERING BRAKES/ABS TILT CRUISE REAR DEFROSTER - ------------------------------------------------------------------------------------------------------------------ MAINTENANCE ITEMS: MECHANICAL AREA: OK OR DESCRIBE DAMAGE CIRCLE DOLLAR ONE ================================================================================================================== ENGINE OIL LOW DIRTY STARTING Repair $ BURNED LEAKS Replace - ------------------------------------------------------------------------------------------------------------------ TRANS FLUID LOW DIRTY ENGINE Repair $ BURNED LEAKS Replace - ------------------------------------------------------------------------------------------------------------------ BRAKE FLUID LOW DIRTY TRANSMISSION Repair $ LEAKS Replace - ------------------------------------------------------------------------------------------------------------------ COOLANT LOW RUSTY DRIVE LINE Repair $ LEAKS Replace - ------------------------------------------------------------------------------------------------------------------ PWR STEERING LOW DIRTY STEERING Repair $ LEAKS Replace - ------------------------------------------------------------------------------------------------------------------ BATTERY CORRODED BRAKES 50% LINING Repair $ LOW CHARGE Replace - ------------------------------------------------------------------------------------------------------------------ BELTS SERPENTINE CLIMATE CONTROL Repair $ WORN Replace - ------------------------------------------------------------------------------------------------------------------ HOSES WORN SUSPENSION Repair $ Replace ================================================================================================================== BODY AREA: OK OR DESCRIBE CIRCLE ONE DOLLAR ELECTRICAL OK OR DESCRIBE CIRCLE DOLLAR DAMAGE AREA: DAMAGE ONE ================================================================================================================== WINDSHIELD Repair $ TAIL Repair $ Replace LIGHTS Replace - ------------------------------------------------------------------------------------------------------------------ HOOD / COWL Repair $ PARKING Repair $ Replace LIGHTS Replace - ------------------------------------------------------------------------------------------------------------------ GRILL Repair $ TURN Repair $ Replace SIGNALS Replace - ------------------------------------------------------------------------------------------------------------------ FRONT BUMPER Repair $ INTERIOR Repair $ Replace LIGHTS Replace - ------------------------------------------------------------------------------------------------------------------ REAR BUMPER Repair $ HORN Repair $ Replace Replace - ------------------------------------------------------------------------------------------------------------------ HEADLIGHT ASSY'S Repair $ POWER Repair $ Replace WINDOWS Replace - ------------------------------------------------------------------------------------------------------------------ RIGHT FENDER Repair $ POWER Repair $ Replace LOCKS Replace - ------------------------------------------------------------------------------------------------------------------ RIGHT SIDE GLASS Repair $ POWER Repair $ Replace SEATS Replace - ------------------------------------------------------------------------------------------------------------------ RIGHT DOORS Repair $ MEMORY Repair $ Replace SEAT Replace - ------------------------------------------------------------------------------------------------------------------ RIGHT QUARTER Repair $ POWER Repair $ Replace MIRROR Replace - ------------------------------------------------------------------------------------------------------------------ REAR GLASS Repair $ MEMORY Repair $ Replace MIRROR Replace - ------------------------------------------------------------------------------------------------------------------ DECK LID Repair $ RADIO Repair $ Replace AM/FM Replace - ------------------------------------------------------------------------------------------------------------------ LEFT QUARTER Repair $ TAPE Repair $ Replace PLAYER Replace - ------------------------------------------------------------------------------------------------------------------ LEFT DOORS Repair $ CD Repair $ Replace PLAYER Replace - ------------------------------------------------------------------------------------------------------------------ LEFT SIDE GLASS Repair $ CLOCK Repair $ Replace Replace - ------------------------------------------------------------------------------------------------------------------ LEFT FENDER Repair $ KEYLESS Repair $ Replace ENTRY Replace - ------------------------------------------------------------------------------------------------------------------ ROOF Repair $ ANTI-THEFT Repair $ Replace Replace - ------------------------------------------------------------------------------------------------------------------ WHEELS / COVERS Repair $ WINDSHIELD Repair $ Replace Replace - ------------------------------------------------------------------------------------------------------------------ TIRES 5/32" TREAD Repair $ WINDSHIELD Repair $ Replace WIPER Replace - ------------------------------------------------------------------------------------------------------------------ SPARE TIRE W/JACK Repair $ HOOD Repair $ Replace RELEASE Replace - ------------------------------------------------------------------------------------------------------------------ FRONT/REAR SEATS Repair $ TRUNK Repair $
11
Replace RELEASE Replace - ------------------------------------------------------------------------------------------------------------------ INTERIOR/DASH Repair $ GAS Repair $ Replace DOOR Replace - ------------------------------------------------------------------------------------------------------------------ EXTERIOR PAINT Repair $ SPEEDOMETER Repair $ Replace Replace - ------------------------------------------------------------------------------------------------------------------ ODOMETER ================================================================================================================== Circle Choice: This vehicle WAS/ WAS NOT Test Driven Overall Condition: GOOD FAIR POOR TOTAL: $ ==================================================================================================================
EX-10.33 25 MARKETING AGREEMENT W/LYCOS, INC DATED 2/18/99 1 EXHIBIT 10.33 [*] Confidential treatment has been requested for certain portions of this exhibit. AGREEMENT This Agreement, dated as of February 18, 1999 (the "Effective Date"), is made by and between Lycos, Inc., a Delaware corporation with a principal place of business at 400-2 Totten Pond Road, Waltham, MA 02154 ("Lycos") and autobytel.com, Inc., a Delaware corporation with a principal place of business at 18872 MacArthur Blvd., Suite 200, Irvine, CA, 92612. ("autobytel") Recitals A. Lycos is the owner or licensee of certain Web services (collectively, the "Lycos Services"), which are accessible through the URLs www.lycos.com (the "Lycos Site"), www.tripod.com (the "Tripod Site"), www.whowhere.com (the "WhoWhere Site"), and www.mailcity.com (the "Mailcity Site") (all of the above-named sites are referred to collectively as the "Lycos Network"). B. autobytel is the operator of a Web site accessible through the URL www.autobytel.com (the "autobytel Site") on which autobytel promotes information about car purchases, and provides referrals to, among others, new car dealers (all the content and information on the autobytel Site shall be referred to herein as the "Content"). C. Lycos and autobytel wish to establish a relationship through which Lycos will integrate links throughout the Lycos Network to a co-branded version of the autobytel Site (the "Linked Site"). NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lycos and autobytel hereby agree as follows: Terms 1. Linked Site. a. Serving and Hosting. autobytel shall launch the Linked Site on or before March 1, 1999 (the "Launch Date"). Each page on the Linked Site that is related to new car buying shall identify Lycos by the placement of the Lycos logo in a prominent position substantially in the form and dimensions as set forth on the attached EXHIBIT C. The Lycos logo shall serve as a hyperlink to contextually relevant pages of Lycos' choice on the Lycos Site. autobytel will operate and serve the Linked Site in a manner consistent with the present quality standards of Lycos and which meets response performance standards for Lycos users at least as good as those of the Lycos Site. In addition, autobytel will be responsible for system operation software costs, hardware costs, and network costs. Additional services and functionality that are developed by autobytel for the autobytel Site (or any successor to it) will be provided by autobytel at no cost so that the Linked Site is maintained at a level substantially equal to the 2 autobytel Site as it appears from time to time. Lycos shall have the right to provide online access to the Linked Site to Lycos' subsidiaries, joint venture partners of Lycos, and licensees of the Lycos Services. b. Branding. The Linked Site will have the autobytel "look and feel" but with Lycos' logo displayed on the home page and each page related to new car buying. Branding for Lycos on the Linked Site shall consist of a "Back to Lycos" button in substantially the form illustrated on the attached EXHIBIT C, incorporated herein by reference, unless otherwise agreed to by both parties. c. Referrals. autobytel and the entities to which autobytel refers car-buyers shall be responsible for all aspects of purchase requests generated from the Linked Site, including, without limitation, taking orders, processing payments, ordering and stocking inventory, etc. Lycos shall take no part in, and have no responsibility or liability for, the actual transactions. 2. Lycos Network Integration. During the Term, commencing on the Launch Date, Lycos shall provide autobytel with a total of 194,427,669 impressions on the Lycos Network (including 18,497,979 impressions in yet-to-be-determined, mutually agreed, contextually relevant areas of sites within the Lycos Network). Each impression shall link directly to the Linked Site. Such impressions shall conform with the Placement Summary, attached hereto as EXHIBIT D, and shall consist of the following number of links displayed in the following places: a. Lycos Site. Lycos shall provide autobytel with links (i) on Web search results pages generated by queries of mutually agreed keywords and phrases (including, without limitation, those keywords and phrases listed on the attached Exhibit A, incorporated herein by reference) (117,221,066 impressions), (ii) in the Autos Web Guide (19,175,064 impressions), (iii) in the Lycos Classifieds section (1,000,000 impressions), (iv) in the Lycos Roadmaps section (3,200,000 impressions), (v) in the Lycos Sports Web Guide (4,291,644 impressions), (vi) in the Lycos Investing section (4,231,916 impressions), and (vii) within the Shopping Network (no guaranteed impression level). b. Tripod Site. Lycos shall provide autobytel with links from the Car & Truck Zone (7,000,000 impressions). c. WhoWhere Site. Lycos shall provide autobytel with a text link from the home page of WhoWhere for new car buying (16,457,000 impressions). d. MailCity. Lycos shall provide autobytel with links from those places on the MailCity Site that, at Lycos' discretion, target the automotive profile (as determined by user input upon registration) (3,353,000 impressions). e. Redesigning of the Lycos Site. autobytel acknowledges that, consistent with Lycos' need for editorial discretion, Lycos may redesign, delete or replace the pages on which the impressions described in this Section 2 will be displayed or may redesign or 3 replace the type of links and banners described above; provided, that Lycos will use good faith efforts to provide autobytel with comparable links and banners on any re-designed or replacement pages. f. Redesigning of the autobytel.com Site. Lycos acknowledges that, consistent with autobytel's need for editorial discretion, autobytel may redesign all or part of its Site, provided, that autobytel will use good faith efforts to provide Lycos with comparable links on any re-designed areas of the Site subject to this Agreement. g. Reporting. Lycos shall provide autobytel with weekly reports regarding the impressions outlined in this Sections 2. h. autobytel Audit Rights. autobytel will have the right, at its expense to audit Lycos' books and records for the purpose of verifying impressions. Such audits will be made not more than once per year, on not less than ten (10) days written notice, during regular business hours, by auditors reasonably acceptable to Lycos. If the auditor's figures reflect impressions lower than those reported by Lycos, Lycos will provide autobytel with makegood impressions. If the auditor's figures vary more than 10% from the figures provided by Lycos, Lycos will also pay the reasonable cost of the audit. 3. Standard Terms and Conditions. Any standard advertising products provided pursuant to this Agreement will be subject to the Terms and Conditions outlined in the attached Exhibit B, which Terms and Conditions are incorporated herein by reference. Throughout the Term, all advertising banners must meet the Lycos specification found at http://adreporting.lycos.com/specs.html, as they appear from time to time. 4. autobytel' Implementation Obligations. autobytel shall provide Lycos with any assistance requested by Lycos in establishing the links between the Lycos Network and the Linked Site, and with all artwork (subject to Lycos' approval) for the advertising banners and links. autobytel also shall provide and implement affiliate management software with which to track traffic and transactions from the Lycos Network sites to the Linked Site. 5. Exclusivity. autobytel shall be the exclusive new car referral service featured on those areas of the Lycos Network on which the links described in Section 2 above appear. Notwithstanding the foregoing, the terms of the exclusivity granted herein shall not prevent Lycos from displaying banners, advertisements or hyperlinks to new car manufacturers, provided however, that any such banners, advertisements or hyperlinks shall not promote, display or feature any on-line service for the purposes of selling new vehicles directly to consumers or distributing referrals for the purchase of new vehicles. Neither autobytel's promotional links (including, without limitation, banner ads) nor autobytel's "Fast Track" units (functional showcase boxes) on the Lycos Network and Linked Sites shall include information on, or promotion of, used cars, auto insurance, or financing/leasing options. 6. Fees and Royalties. a. Lycos Network Integration Fees. autobytel shall pay Lycos $1,500,000, 4 [*] Confidential Treatment Requested payable as follows: (i) $375,000 on the Effective Date; $375,000 on May 10, 1999, $375,000 on August 10, 1999; and $375,000 on November 10, 1999. b. Lycos Transaction Royalties. In addition to the integration fees outlined above, during the Term, autobytel shall pay Lycos [*] for each Purchase Request over 75,000 Purchase Requests submitted from the Linked Site by users who click through on any of the impressions outlined in Section 2 above. A "Purchase Request" is submitted when a user completes all reasonably required fields on a referral form, submits that form, and receives a confirmation from autobytel. Payment will be made in the month following the month in which the user submits such Purchase Request. c. Reporting. autobytel shall provide Lycos with monthly reports regarding the number of unique Purchase Requests submitted by users who click through on any of the impressions outlined in Section 2 above. For the purposes of this Agreement, a "Unique Purchase Request" shall be a purchase request deemed valid by autobytel in accordance with its standard de-duping policy as presently in effect, or as amended from time to time during the term of this Agreement. A copy of the current de-duping policy in effect is attached hereto, marked EXHIBIT E. autobytel shall reconcile and confirm or correct (as is appropriate) such reports on a monthly basis. d. Lycos Audit Rights. Lycos will have the right, at its expense to audit autobytel's books and records relating to reports and data provided hereunder for the purpose of verifying Purchase Requests. Such audits will be made not more than once per year, on not less than ten (10) days written notice, during regular business hours, by auditors reasonably acceptable to autobytel. If the auditor's figures reflect Purchase Requests higher than those reported by autobytel, and if the auditor's figures reflect more than 75,000 Purchase Requests, autobytel will pay Lycos an amount equal to [*] multiplied by the difference; provided, however, that autobytel shall not pay for any Purchase Requests below the 75,000 threshold. If the auditor's figures vary more than 10% from the figures provided by autobytel, autobytel will also pay the reasonable cost of the audit. 7. Customer Profile Data. Subject to the provisions of Section 14 below, autobytel shall provide Lycos with a brief write-up that provides a profile of autobytel's customer profile analysis created from actual purchase requests processed through autobytel's system or the results from autobytel's most recent research in effect. 8. Licenses. To the extent access to the Linked Site is deemed a use, public display, transmission, distribution or reproduction of the Content, or to the extent the Content is actually used, publicly displayed, transmitted, distributed or reproduced on the Lycos Network sites, autobytel hereby grants Lycos limited, revocable, non-transferable (except as provided herein), royalty-free (except as provided herein), worldwide licenses to use, publicly display, transmit, distribute and reproduce the Linked Site and the Content during the Term solely for the purposes described herein. 5 9. Term: The term ("Term") of this Agreement shall commence on the Effective Date and continue until the first anniversary of the Launch Date, unless terminated earlier as provided in Section 15 below. 10. Marks: Lycos hereby grant to autobytel a non-exclusive, non-transferable license to reproduce and display Lycos' and Tripod's trademarks, service marks, logos and the like solely for the purposes specified in this Agreement. autobytel hereby grants Lycos a non-exclusive, non-transferable license to reproduce and display autobytel's trademarks, service marks, logos and the like solely for the purposes specified in this Agreement. Except as expressly stated herein, neither party shall make any other use of the other party's marks. Upon request of either party, the other party shall provide appropriate attribution of the use of the requesting party's marks. (e.g., "Go Get It(R) is a registered service mark of Lycos, Inc. All Rights Reserved."). Such licenses shall terminate automatically upon the effective date of expiration or termination of this Agreement. 11. Representations and Warranties: Each party hereby represents and warrants as follows: a. Corporate Power. Such party is duly organized and validly existing under the laws of the state of its incorporation and has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof. b. Due Authorization. Such party is duly authorized to execute and deliver this Agreement and to perform its obligations hereunder. c. Binding Agreement. This Agreement is a legal and valid obligation binding upon it and enforceable with its terms. The execution, delivery and performance of this Agreement by such party does not conflict with any agreement, instrument or understanding, oral or written, to which it is a party or by which it may be bound, nor violate any law or regulation of any court, governmental body or administrative or other agency having jurisdiction over it. d. Intellectual Property Rights. i. autobytel has the full and exclusive right to grant or otherwise permit Lycos to access the autobytel Site and the Linked Site, and to use autobytel's intellectual property, and autobytel is aware of no claims by any third parties adverse to any of such intellectual property rights. ii. Lycos has the full and exclusive right to grant or otherwise permit autobytel to access the Lycos Network and to use Lycos' intellectual property, and Lycos is aware of no claims by any third parties adverse to any of such intellectual property rights. iii. If either party's (the "Infringing Party") intellectual property rights are alleged or held to infringe the intellectual property rights of a third party, the Infringing Party 6 shall, at its own expense, and in its sole discretion, (1) procure for the non-Infringing Party the right to continue to use the allegedly infringing intellectual property or (2) replace or modify the intellectual property to make it non-infringing; provided, however, if neither option is possible or economically feasible and if the inability to use such intellectual property would cause a material breach of this Agreement (as determined by the non-Infringing Party), the Infringing Party may terminate this Agreement. The representations and warranties and covenants in this Section 11 are continuous in nature and shall be deemed to have been given by each party at execution of this Agreement and at each stage of performance hereunder. These representations, warranties and covenants shall survive termination or expiration of this Agreement. 12. Limitation of Warranty. EXCEPT AS EXPRESSLY WARRANTED IN SECTION 11 ABOVE, EACH PARTY EXPRESSLY DISCLAIMS ANY FURTHER WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY, INCLUDING BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, LYCOS MAKES NO EXPRESS OR IMPLIED WARRANTIES OR REPRESENTATIONS WITH RESPECT TO THE LYCOS NETWORK, THE LINKED SITE, AND LYCOS SHALL NOT BE LIABLE FOR THE CONSEQUENCES OF ANY INTERRUPTIONS OR ERRORS RELATED THERETO. LYCOS SPECIFICALLY DISCLAIMS ALL LIABILITY FOR THE COMPANY SITE, THE LINKED SITE, AND THE CONTENT THEREIN, AND COMPANY SPECIFICALLY DISCLAIMS ALL LIABILITY FOR THE LYCOS NETWORK AND THE CONTENT THEREIN. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, LYCOS MAKES NO EXPRESS OR IMPLIED WARRANTIES OR REPRESENTATIONS WITH RESPECT TO ANY PRODUCTS OFFERED OR SOLD THROUGH THE LYCOS NETWORK, THE COMPANY SITE OR THE LINKED SITE (INCLUDING, WITHOUT LIMITATION, WARRANTIES OF FITNESS, MERCHANTABILITY, NON-INFRINGEMENT OR ANY IMPLIED WARRANTIES ARISING OUT OF A COURSE OF PERFORMANCE, DEALING OR TRADE USAGE). 13. Indemnification. a. autobytel Indemnity. autobytel will at all times defend, indemnify and hold harmless Lycos and its officers, directors, shareholders, employees, accountants, attorneys, agents, successors and assigns from and against any and all third party claims, damages, liabilities, costs and expenses, including reasonable legal fees and expenses, arising out of or related to any breach of any warranty, representation, covenant or agreement made by autobytel in this Agreement or the development, operation or maintenance of the autobytel Site or the Linked Site, including the Content thereon. Lycos shall give autobytel prompt written notice of any claim, action or demand for which indemnity is claimed. autobytel shall have the right, but not the obligation, to control the defense and/or settlement of any claim in which it is named as a party and which arises as a result of autobytel's breach of any warranty, representation, covenant or agreement under this Agreement. Lycos shall have the right to participate in any defense of a 7 claim by autobytel with counsel of Lycos' choice at Lycos' own expense. The foregoing indemnity is conditioned upon: prompt written notice by Lycos to autobytel of any claim, action or demand for which indemnity is claimed; complete control of the defense and settlement thereof by autobytel; and such reasonable cooperation by Lycos in the defense as autobytel may request. b. Lycos Indemnity. Lycos will at all times defend, indemnify and hold harmless autobytel and its officers, directors, shareholders, employees, accountants, attorneys, agents, successors and assigns from and against any and all third party claims, damages, liabilities, costs and expenses, including reasonable legal fees and expenses, arising out of or related to any breach of any warranty, representation, covenant or agreement made by Lycos in this Agreement or the development, operation or maintenance of the Lycos Network, including the content thereon (but specifically excluding any content posted by users and appearing in search results, chat or bulletin boards). autobytel shall give Lycos prompt written notice of any claim, action or demand for which indemnity is claimed. Lycos shall have the right, but not the obligation, to control the defense and/or settlement of any claim in which it is named as a party. autobytel shall have the right to participate in any defense of a claim by Lycos with counsel of autobytel's choice at autobytel's own expense. The foregoing indemnity is conditioned upon; prompt written notice by autobytel to Lycos of any claim, action or demand for which indemnity is claimed; complete control of the defense and settlement thereof by Lycos; and such reasonable cooperation by autobytel in the defense as Lycos may request. c. Settlement. Neither party shall, without the prior written consent of the other party, settle, compromise or consent to the entry of any judgment with respect to any pending or threatened claim unless the settlement, compromise or consent provides for and includes an express, unconditional release of all claims, damages, liabilities, costs and expenses, including reasonable legal fees and expenses, against the indemnified party. 14. Confidentiality, Press Releases. a. Non-Disclosure Agreement. The parties agree and acknowledge that, as a result of negotiating, entering into and performing this Agreement, each party has and will have access to certain of the other party's Confidential Information (as defined below). Each party also understands and agrees that misuse and/or disclosure of that information could adversely affect the other party's business. Accordingly, the parties agree that, during the Term of this Agreement and thereafter, each party shall use and reproduce the other party's Confidential Information only for purposes of this Agreement and only to the extent necessary for such purpose and shall restrict disclosure of the other party's Confidential Information to its employees, consultants or independent contractors with a need to know and shall not disclose the other party's Confidential Information to any third party without the prior written approval of the other party . Notwithstanding the foregoing, it shall not be a breach of this Agreement for either party to disclose Confidential Information of the other party if required to do so under law or in a judicial or other governmental investigation or proceeding, provided the other party has been given prior notice and the disclosing party has sought all available safeguards against widespread dissemination prior to such disclosure. 8 b. Confidential Information Defined. As used in this Agreement, the term "Confidential Information" refers to: (i) the terms and conditions of this Agreement; (ii) each party's trade secrets, business plans, strategies, methods and/or practices; (iii) any and all information relating to Purchase Requests submitted through the Linked Site, including reports produced pursuant to Section 6(c) of this Agreement; and (iv) other information relating to either party that is not generally known to the public, including information about either party's personnel, products, customers, marketing strategies, services or future business plans. Notwithstanding the foregoing, the term "Confidential Information" specifically excludes (A) information that is now in the public domain or subsequently enters the public domain by publication or otherwise through no action or fault of the other party; (B) information that is known to either party without restriction, prior to receipt from the other party under this Agreement, from its own independent sources as evidenced by such party's written records, and which was not acquired, directly or indirectly, from the other party; (C) information that either party receives from any third party reasonably known by such receiving party to have a legal right to transmit such information, and not under any obligation to keep such information confidential; and (D) information independently developed by either party's employees or agents provided that either party can show that those same employees or agents had no access to the Confidential Information received hereunder. c. Press Releases. Lycos and autobytel may jointly prepare press releases concerning the existence of this Agreement and the terms hereof. Otherwise, no public statements concerning the existence or terms of this Agreement shall be made or released to any medium except with the prior approval of Lycos and autobytel or as required by law. 15. Termination. Either party may terminate this Agreement if (a) the other party files a petition for bankruptcy or is adjudicated bankrupt; (b) a petition in bankruptcy is filed against the other party and such petition is not dismissed within sixty (60) days of the filing date; (c) the other party becomes insolvent or makes an assignment for the benefit of its creditors pursuant to any bankruptcy law; (d) a receiver is appointed for the other party or its business; (e) upon the occurrence of a material breach of a material provision by the other party if such breach is not cured within thirty (30) days after written notice is received by the breaching party identifying the matter constituting the material breach; (f) upon thirty (30) days written notice if the other party's service or product viewed as a whole, ceases to be competitive with substantially similar services then being offered by third parties; or (g) by mutual consent of the parties; (h) Lycos may terminate this Agreement upon sixty (60) days written notice to autobytel; (i) In addition, if autobytel fails to pay to Lycos any amount due Lycos under this Agreement when such amount is due, Lycos may terminate this Agreement immediately upon the sending of written notice in accordance with Section 26. The Parties agree that in the event that this Agreement is terminated prior to the expiration of this Agreement by autobytel pursuant to Subsection (e) or by Lycos pursuant to Subsection (h), above, any and all unearned fees or royalties due Lycos hereunder shall be returned to autobytel.com on a pro-rata basis on or before the effective date of termination. 16. Force Majeure. In the event that either party is prevented from performing, 9 or is unable to perform, any of its obligations under this Agreement due to any cause beyond the reasonable control of the party invoking this provision, the affected party's performance shall be excused and the time for performance shall be extended for the period of delay or inability to perform due to such occurrence. 17. Relationship of Parties. autobytel and Lycos are independent contractors under this Agreement, and nothing herein shall be construed to create a partnership, joint venture or agency relationship between autobytel and Lycos. Neither party has authority to enter into agreements of any kind on behalf of the other. 18. Assignment, Binding Effect. Neither Lycos nor autobytel may assign this Agreement or any of its rights or delegate any of its duties under this Agreement without the prior written consent of the other. Notwithstanding the foregoing, Lycos may assign this Agreement to any successor of Lycos upon reasonable notice to autobytel. 19. Choice of Law and Forum. This Agreement, its interpretation, performance or any breach thereof, shall be construed in accordance with, and all questions with respect thereto shall be determined by, the laws of the Commonwealth of Massachusetts applicable to contracts entered into and wholly to be performed within said state. autobytel hereby consents to the personal jurisdiction of the Commonwealth of Massachusetts, acknowledges that venue is proper in any state or Federal court in the Commonwealth of Massachusetts, agrees that any action related to this Agreement must be brought in a state or Federal court in the Commonwealth of Massachusetts, and waives any objection autobytel has or may have in the future with respect to any of the foregoing. 20. Good Faith. The parties agree to act in good faith with respect to each provision of this Agreement and any dispute that may arise related hereto. 21. Additional Documents/Information. The parties agree to sign and/or provide such additional documents and/or information as may reasonably be required to carry out the intent of this Agreement and to effectuate its purposes. 22. Counterparts and Facsimile Signatures. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. Facsimile signatures will be considered original signatures. 23. No Waiver. The waiver by either party of a breach or a default of any provision of this Agreement by the other party shall not be construed as a waiver of any succeeding breach of the same or any other provision, nor shall any delay or omission on the part of either party to exercise or avail itself of any right, power or privilege that it has, or may have hereunder, operate as a waiver of any right, power or privilege by such party. 24. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and assigns; provided however 10 that this Agreement shall immediately terminate should any successor or assign of this Agreement own or operate a service deemed competitive with a party hereto. 25. Severability. Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision. 26. Notices. All notice required to be given under this Agreement must be given in writing and delivered either in hand, by certified mail, return receipt requested, postage pre-paid, or by Federal Express or other recognized overnight delivery service, all delivery charges pre-paid, and addressed: If to Lycos: Lycos, Inc. 400-2 Totten Pond Road Waltham, MA 02154 Fax No.: (781) 370-2600 Attention: General Counsel With a copy to: Lycos, Inc. 400-2 Totten Pond Road Waltham, MA 02154 Fax No.: (781) 370-2600 Attention: Chief Financial Officer If to autobytel: autobytel.com inc. 18872 MacArthur Boulevard Irvine, CA 92612-1400 Fax No.: (949) 862-1323 Attention: General Counsel 27. Entire Agreement. This Agreement contains the entire understanding of the parties hereto with respect to the transactions and matters contemplated hereby, supersedes all previous agreements between Lycos and autobytel concerning the subject matter, and cannot be amended except by a writing signed by both parties. No party hereto has relied on any statement, representation or promise of any other party or with any other officer, agent, employee or attorney for the other party in executing this Agreement except as expressly stated herein. 28. LIMITATIONS OF LIABILITY. UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES (EVEN IF SUCH DAMAGES ARE FORSEEABLE OR THAT PARTY HAS BEEN ADVISED OR HAS CONSTRUCTIVE KNOWLEDGE OF THE POSSIBILITY OF SUCH DAMAGES), ARISING FROM SUCH PARTY'S PERFORMANCE OR NON-PERFORMANCE PURSUANT TO ANY PROVISION OF THIS AGREEMENT OR THE OPERATION OF SUCH PARTY'S SITE (INCLUDING SUCH DAMAGES INCURRED BY THIRD 11 PARTIES), SUCH AS, BUT NOT LIMITED TO, LOSS OF REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR DAMAGES IN EXCESS OF THE AMOUNT RECEIVED BY SUCH PARTY UNDER THIS AGREEMENT. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, HOWEVER, THIS SECTION SHALL NOT LIMIT EITHER PARTY'S LIABILITY TO THE OTHER FOR (A) WILLFUL AND MALICIOUS MISCONDUCT; (B) DIRECT DAMAGES TO REAL OR TANGIBLE PERSONAL PROPERTY; (C) BODILY INJURY OR DEATH CAUSED BY NEGLIGENCE; OR (D) INDEMNIFICATION OR CONFIDENTIALITY OBLIGATIONS HEREUNDER. 29. Survival. All terms of this Agreement which by their nature extend beyond its termination remain in effect until fulfilled, and apply to respective successors and assigns. IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement as of the date set forth above. autobytel.com inc. LYCOS, INC. By: ______________________________ By: ______________________________ Name: ____________________________ Name: ____________________________ Title: _____________________________ Title: _____________________________ Date: _____________________________ Date: _____________________________ 12 EXHIBIT A 4x4 trucks accord acura alfaromeo alfa romeo alfa romero audi auto auto nation autobytel autobytell automobile automobiles autonation autos beemer benz bmw bodyshop buick buying cars cabriolet cadillac camaro car cars cherokee chevrolet chevy convertible convertibles corolla corvette cougar daewo daihatsu delorean explorer ferrari ford general motors gm trucks honda hondas hummer hummers infinity 13 isuzu jaguar jeep kia landcruiser land rover landrover lexus limousine lincoln M3 maserati mazda mechanics mercedes mercedes benz mercury mgb minivan minivans mitsubishi motorcycle motorcycles mustang new vehicles nissan pickup truck plymouth pontiac range rover rangerover renault rolls royce rollsroyce saab saturn sedan sedans sentra station wagons stationwagon stationwagons sting ray stingray subaru suburban suburban suv suzuki taurus thunderbird toyota 14 toyotas trans am truck trucks used cars used pickup van vans vans vehicle vehicle prices vehicles viper volkswagon volvo vw 15 EXHIBIT B ADDITIONAL ADVERTISING TERMS 1. CHANGES AND CANCELLATIONS. All artwork must be received at least five days in advance of publication date. Cancellations or copy changes will not be accepted after the published closing date of the update to the Lycos site. Changes to artwork must be received by Lycos at least five days in advance of requested change date. Lycos' ad banner specifications are accessible through the URL adreporting.lycos.com/specs.html; Lycos reserves the right to change any of its ad banner specifications at any time. Any cancellations or change orders must be made in writing and acknowledged by Lycos. Change orders cannot be submitted any more frequently than once every fourteen days. 2. LICENSES AND INDEMNIFICATION. autobytel represents that it is the owner or is licensed to use the entire contents and subject matter contained in its advertising and collateral information, including, without limitation, (a) the names and/or pictures of persons; (b) any copyrighted material, trademarks, service marks, logos, and/or depictions of trademarked or service marked goods or services; and (c) any testimonials or endorsements contained in any advertisement submitted to Lycos. In consideration of Lycos' acceptance of such advertisements and information for publication, autobytel will jointly and severally indemnify and hold Lycos harmless against all loss, liability, damage and expense of any nature (including attorney's fees) arising out of Lycos' performance under this contract or the copying, printing, distributing, or publishing of autobytel's advertisements. If autobytel possesses any preexisting copyright interests in the advertisements, advertiser grants Lycos the right to use, reproduce, and distribute the advertisements. 3. KEY WORDS AND PHRASES. Each advertiser may be given a "first right" to its exact company name and trademarks for keyword/phrase advertising. Lycos may pre-empt an existing key word/phrase advertiser by submitting a three-month advertising contract. The existing contract-holder for the key word/phrase will be provided with a two-week notification of preemption and will receive a pro-rated refund for any unfulfilled number of guaranteed impressions. If two or more advertisers have the same name or trademark, the allocation will be on a first-come basis and the existing contract will take precedence. 4. REJECTIONS. Lycos reserves the right, without liability, to reject, omit or exclude any advertisement or to reject or terminate any links for any reason at any time, with or without notice to autobytel, and whether or not such advertisement or link was previously acknowledged, accepted, or published. 5. LIMITATION OF LIABILITY. Lycos shall not be liable for any errors in content or omissions. Should an error appear in an advertisement, Lycos' liability will be limited to the cost of the advertisement (prorated for the publishing completed). 16 EXHIBIT C MOCK-UP OF THE LINKED SITE [GRAPHIC OF A WEB PAGE] 17 EXHIBIT D LYCOS PLACEMENT SUMMARY
================================================================================================================================= AREA/COMPONENT SECTION/CHANNEL UNIT/ITEM EXCLUSIVITY ================================================================================================================================= Lycos Automotive Autos FasTrak ENCBS Lycos Automotive Autos>Pages Related to New Car Buying FasTrak ECBS Lycos Automotive Autos>Makes/Models FasTrak ENCBS Lycos Automotive Autos>Makes/Models>Automakers FasTrak ENCBS Lycos Automotive Autos>Repairs&Customizing>Parts FasTrak ENCBS Lycos Automotive Autos>Repairs&Customizing>Repairs FasTrak ENCBS Lycos Automotive Autos>Motorcycles FasTrak ENCBS Lycos Automotive Autos>Racing FasTrak ENCBS Lycos Automotive Autos>Safety FasTrak ENCBS Lycos Automotive Additional WebGuide opportunities (FasTraks in other wires) FasTrak ENCBS Lycos Automotive AUTOS Web Guide Banners ENCBS Lycos Classifieds Lycos Auto Classifieds Banners Non-Excl. Lycos Classifieds Lycos Auto Classifieds>Main Page FasTrak ENCBS Lycos Classifieds Lycos Auto Classifieds>New Cars FasTrak ECBS LYCOS Reserved testing impressions (including but not limited to N/A N/A ShopNet, Holidays, additional KITI graphics, Lycos and Tripod newsletters, etc.) Lycos RoadMaps RoadMaps Front Page FasTrak Non-Excl. Lycos RoadMaps RoadMaps Site Banners Non-Excl. Lycos Sports Lycos Sports Web Guide Premiere Graphic Non-Excl. Tripod Automotive Tripod Car & Truck Zone and Affiliated Pods Banners ENCBS LYCOS INVESTING LYCOS INVESTING BANNERS NON-EXCL. WhoWhere? Home Page WhoWhere? Text Link for New Car Buying Text Link ENCBS WhoWhere? Automotive WhoWhere? Automotive Channel FasTrak ENCBS MailCity e-mail MailCity Automotive Profile Targeting Banners Non-Excl. (Mail City users who indicate they plan to Purchase a New Car) Lycos Automotive Auto Keyword Banners ENCBS Lycos Automotive Auto Keyword Pop-Up ENCBS Lycos Automotive Auto Keyword Kiti Links ENCBS LYCOS AUTOMOTIVE AUTO KEYWORD GRAPHIC KITI LINKS ENCBS ================================================================================================================================== AREA/COMPONENT SECTION/CHANNEL IMPRESSIONS % OF INVENTORY ================================================================================================================================== Lycos Automotive Autos 5,229,948 2.7% Lycos Automotive Autos>Pages Related to New Car Buying 2,073,154 1.1% Lycos Automotive Autos>Makes/Models 453,864 0.2% Lycos Automotive Autos>Makes/Models>Automakers 152,988 0.1% Lycos Automotive Autos>Repairs&Customizing>Parts 139,762 0.1% Lycos Automotive Autos>Repairs&Customizing>Repairs 139,762 0.1% Lycos Automotive Autos>Motorcycles 201,408 0.1% Lycos Automotive Autos>Racing 172,104 0.1% Lycos Automotive Autos>Safety 121,728 0.1% Lycos Automotive Additional WebGuide opportunities (FasTraks in other wires) 4,490,346 2.3% Lycos Automotive AUTOS Web Guide 6,000,000 3.1% Lycos Classifieds Lycos Auto Classifieds 1,000,000 0.5% Lycos Classifieds Lycos Auto Classifieds>Main Page 0 0.0% Lycos Classifieds Lycos Auto Classifieds>New Cars 0 0.0% LYCOS Reserved testing impressions (including but not limited to 18,497,979 9.5% ShopNet, Holidays, additional KITI graphics, Lycos and Tripod newsletters, etc.) Lycos RoadMaps RoadMaps Front Page 1,200,000 0.6% Lycos RoadMaps RoadMaps Site 2,000,000 1.0% Lycos Sports Lycos Sports Web Guide 4,291,644 2.2% Tripod Automotive Tripod Car & Truck Zone and Affiliated Pods 7,000,000 3.6% LYCOS INVESTING LYCOS INVESTING 4,231,916 2.2% WhoWhere? Home Page WhoWhere? Text Link for New Car Buying 16,457,000 8.5% WhoWhere? Automotive WhoWhere? Automotive Channel 0 0.0% MailCity e-mail MailCity Automotive Profile Targeting 3,353,000 1.7% (Mail City users who indicate they plan to Purchase a New Car) Lycos Automotive Auto Keyword 25,866,141 13.3% Lycos Automotive Auto Keyword 32,485,630 16.7% Lycos Automotive Auto Keyword 33,869,295 17.4% LYCOS AUTOMOTIVE AUTO KEYWORD 25,000,000 12.9% IMPRESSIONS TOTAL ANNUAL IMPRESSIONS 194,427,669 100.0% AUTO IMPRESSIONS 147,749,130 76.0% NON-AUTO IMPRESSIONS 46,678,539 24.0% NOTE: ENCBS = Exclusive New Car Buying Service ECBS = Exclusive Car Buying Service Non-Excl. = Non-Exclusive
18 EXHIBIT E UNIQUE PURCHASE REQUEST A Unique Purchase Request shall be defined as follows: i. The Purchase Request is the product of an end user visiting the linked site. ii. A Purchase Request which has been received by ABT from the linked site for which autobytel has not, within the previous ninety (90) day period, received a Purchase Request for the same or similar Vehicle from a person identified by the same name and/or the same e-mail address; and iii. The end user indicates his or her intention to purchase the desired vehicle within forty-eight (48) hours; two (2) weeks or thirty (30) days as prompted on the autobytel purchase request form. iv. All fields in the present Purchase Request form presently deemed mandatory by autobytel which are the fields currently employed in such form, have been completed by the user including but not limited to name, address, phone number and valid email address. v. The end user provides a valid USPS zip code. EX-10.37 26 LETTER AGREEMENT - ARIEL AMIR 1 EXHIBIT 10.37 autobytel.com inc. 18872 MacArthur Boulevard Irvine, California 92612-1400 March 7, 1999 Ariel Amir 32 Evelyn Gardens, Flat 8 London SW7 3BJ United Kingdom Dear Ariel: We are pleased to offer you the position of Vice President and General Counsel of autobytel.com inc. ("ABT") with responsibilities customary for such position. Your position will not diminish during your employment. You will report to the President of ABT. You will use your best efforts to commence employment with ABT prior to March 31, 1999. You will be paid an annual base salary of not less than $175,000 payable semimonthly and will be eligible to receive an annual bonus when, as and if determined by the board of directors. You will be granted stock options under ABT's 1999 Stock Option Plan to purchase 125,000 shares of ABT common stock at an exercise price of $16 per share. One-fourth of the option grant (31,250 shares) will vest on the first anniversary of the date of grant and the remainder of the option grant will vest at a rate of 1/48th of the entire grant (2,604.16 shares) per month, with the entire grant also vesting as otherwise provided in such plan. In addition, if your employment is terminated by ABT without Cause, by you for Good Reason or due to death or Disability (each such capitalized term as defined in Ann M. Delligatta's Employment Agreement), the unvested portion of such options will become immediately and fully vested and will be exercisable from such termination date for one year thereafter. If your employment is terminated without Cause during the first year of employment, you will receive one year's base salary payable monthly. If your employment is terminated without Cause thereafter, you will receive six month's base salary payable monthly. You will be included in any additional long-term incentive plans that are created for senior management. You will be entitled to participate in all employee benefit plans, programs and policies which are available to employees of ABT, including health and insurance plans. You will also be entitled to receive severance arrangements similar to those available to executives of the level of Chief Financial Officer of ABT. During the term of your employment, you will be reimbursed for all business expenses incurred in accordance with company policy. To the extent not reimbursed by your current employer, ABT will pay your reasonable moving expenses up to $15,000. ABT will pay for temporary living accommodations at the Airport Hilton, Irvine for a period of up to 60 days so as to allow you time to complete your relocation and make arrangements for permanent housing. The foregoing terms are binding on ABT and all necessary approvals to bind ABT have been obtained. If the terms of this letter are acceptable to you, please sign below. Very truly yours, /s/ Mark W. Lorimer ----------------------------------- Mark W. Lorimer President and Chief Executive Officer AGREED TO AND ACCEPTED this 7th day of March, 1999: /s/ Ariel Amir - --------------------------------- Ariel Amir EX-10.38 27 LETTER AGREEMENT - HOSHI PRINTER 1 EXHIBIT 10.38 December 18, 1998 VIA FEDERAL EXPRESS - ------------------- Mr. Hoshi Printer 113 38th Street Manhattan Beach, CA 90266 Dear Mr. Printer: This letter will confirm our offer to you for the position of Chief Financial Officer, AUTOBYTEL.COM INC. located at its corporate headquarters in Irvine, California. You will be reporting to Mr. Mark Lorimer, President and Chief Executive Officer. It is expected you will commence employment as soon as possible and in no event later than January 11, 1999. Base Salary: $150,000 annualized, paid on a bi-weekly basis Bonus: A guaranteed bonus of $50,000 to be paid upon close of an IPO. Performance Review: You will be eligible for review of your base salary commencing January, 2000. Options: 150,000 - exercise price of $13.20 per share. Vesting schedule: 1/4 on first year anniversary; 1/48th of grant per month until fully vested. Additionally, you will be eligible to participate in the company's health insurance plan and 401(k) plan, each in accordance with the terms of such plan. For your review, enclosed are materials describing these plans. Please sign, date and return one original of this letter in the envelope provided, if the above terms are agreed to by you. This officer shall expire at the close of business on Monday, December 21, 1998. Page 1 2 Mr. Hoshi Printer December 18, 1998 We look forward to your joining AUTOBYTEL.COM INC. Sincerely, /s/ Mark W. Lorimer --------------------------- Mark W. Lorimer President and CEO mwl/fr enclosures /s/ Hoshi Printer December 20, 1998 - ---------------------------- ---------------------------- Hoshi Printer Date Page 2 EX-23.1 28 CONSENT OF ARTHUR ANDERSEN LLP 1 EXHIBIT 23.1 [ARTHUR ANDERSEN LLP LETTERHEAD] Consent of Independent Public Accountants As independent public accountants, we hereby consent to the inclusion in this registration statement on Amendment No. 5 to Form S-1 (Registration No. 333-70621) of our report dated February 3, 1999 on our audits of the consolidated balance sheets of autobytel.com inc. and subsidiaries as of December 31, 1997 and 1998, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for the years ended December 31, 1996, 1997 and 1998. We also consent to the reference to our firm under the caption "Experts". /s/ ARTHUR ANDERSEN LLP ----------------------------------- ARTHUR ANDERSEN LLP Los Angeles, California March 24, 1999 -----END PRIVACY-ENHANCED MESSAGE-----