<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 31, 1997
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
AUTO-BY-TEL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 7375 33-0711569
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
--------------
AUTO-BY-TEL CORPORATION
18872 MACARTHUR BOULEVARD, SUITE 200
IRVINE, CALIFORNIA 92612-1400
(714) 225-4500
(ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------
MARK W. LORIMER, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
AUTO-BY-TEL CORPORATION
18872 MACARTHUR BOULEVARD, SUITE 200
IRVINE, CALIFORNIA 92612-1400
(714) 225-4500
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE OF PROCESS)
--------------
COPIES TO:
RICHARD J. CHAR, ESQ. ROD A. GUERRA, JR., ESQ.
RICHARD J. HART, ESQ. SKADDEN, ARPS, SLATE,
DAVID M. CAMPBELL, ESQ. MEAGHER & FLOM LLP
WILSON SONSINI GOODRICH & ROSATI 300 SOUTH GRAND AVENUE
PROFESSIONAL CORPORATION LOS ANGELES, CALIFORNIA 90071
650 PAGE MILL ROAD (213) 687-5000
PALO ALTO, CALIFORNIA 94304
(415) 493-9300
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APPROXIMATE DATE OF COMMENCEMENT 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
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- --------------------------------------------------------------------------------------------------
<CAPTION>
PROPOSED
MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED OFFERING PRICE(1) FEE
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<S> <C> <C>
Common Stock, par value $0.001 per share........................... $55,200,000 $16,728
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</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee. The estimate is made pursuant to Rule 457 of the
Securities Act of 1933, as amended.
--------------
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.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THE SECURITIES DESCRIBED HEREIN HAS BEEN +
+FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT +
+BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION +
+STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO +
+SELL OR THE SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF +
+THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD +
+BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS +
+OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JANUARY 31, 1997
SHARES
(LOGO)
AUTO-BY-TEL CORPORATION
COMMON STOCK
Of the shares of Common Stock offered hereby (the "Offering"), are
being sold by Auto-By-Tel Corporation ("Auto-By-Tel" or the "Company") and
are being sold by the Selling Stockholder. The Company will not receive any of
the proceeds from the sale of shares by the Selling Stockholder. See "Principal
and Selling Stockholders." Prior to the Offering, there has been no public
market for the Common Stock. It is currently estimated that the initial public
offering price will be between $ and $ per share. See "Underwriting"
for a discussion of the factors to be considered in determining the initial
public offering price. The Company has filed an application to have the Common
Stock approved for quotation on the Nasdaq National Market under the symbol
"ABTL."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" COMMENCING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD
BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OF COMMON STOCK OFFERED
HEREBY.
-----------
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND +
+ EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE +
+ SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION +
+ PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY +
+ REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
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<TABLE>
<CAPTION>
Price Proceeds Proceeds to
to Underwriting to Selling
Public Discount(1) Company(2) Stockholder
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<S> <C> <C> <C> <C>
Per Share............................ $ $ $ $
Total(3)............................. $ $ $ $
</TABLE>
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(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to additional shares of Common Stock solely to cover over-allotments,
if any. If the Underwriters exercise this option in full, the Price to
Public will total $ , the Underwriting Discount will total $
and the Proceeds to Company will total $ . See "Underwriting."
The shares of Common Stock are offered by the several Underwriters named
herein, subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that delivery of the
certificates representing such shares will be made against payment therefor at
the office of Montgomery Securities on or about , 1997.
-----------
MONTGOMERY SECURITIES
COWEN & COMPANY
ROBERTSON, STEPHENS & COMPANY
, 1997
<PAGE>
The top half of this page contains a picture showing the first page of the
Company's Web site.
The Company intends to distribute to its stockholders annual reports
containing financial statements audited by its independent accountants and
copies of quarterly earnings reports for the first three quarters of each
fiscal year containing unaudited financial information.
Auto-By-Tel is a registered service mark of the Company. Auto-By-Tel, ABT
Mobilist and the Company's logo are trademarks of the Company. This Prospectus
also includes trademarks and tradenames of companies other than the Company.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
INSIDE FRONT COVER FOLD OUT
This page contains a series of six pictures depicting the steps to buying a
vehicle using the Auto-By-Tel program. The page is entitled "How Auto-By-Tel
Works." In the center of the six pictures is the caption: "The easiest, most
hassle-free way ever invented to buy a car."
Picture #1 depicts a consumer sitting at a terminal. The caption beneath
picture #1 reads: "At any time of day or night, Internet users can start their
vehicle purchasing process on the AUTO-BY-TEL World Wide Web site. No
salespeople, no crowds, no hassles."
Picture #2 depicts the Company's Web site. The caption beneath picture #2
reads: "The AUTO-BY-TEL home page is an easy interface for everyone to use."
Picture #3 depicts another page from the Company's Web site featuring
automobile information providers. The caption beneath picture #3 reads: "AUTO-
BY-TEL has arrangements with popular automotive information providers on the
World Wide Web. To date, hundreds of thousands of vehicle buyers have taken
AUTO-BY-TEL for a test drive." Above picture #3 are the logos of three of the
Company's automotive information providers.
Picture #4 depicts the form of purchase request from the Company's Web site.
The caption beneath picture #4 reads: "An AUTO-BY-TEL participating dealership
calls the customer usually within 48 hours of a purchase request with a low,
no haggle price. All paperwork is prepared before a customer arrives at the
participating dealership to pick up the vehicle."
Picture #5 depicts a map of the United States with Auto-By-Tel dealer
locations represented. The caption beneath picture #5 reads: "AUTO-BY-TEL has
hundreds of participating dealerships, including members of some of the
largest auto dealer groups in the U.S., waiting to serve our customers."
Picture #6 depicts a consumer taking delivery of a vehicle. The caption
beneath picture #6 reads: "Prospective vehicle buyers indicate their desired
vehicle and options by completing an online purchase request. This is
delivered electronically to the AUTO-BY-TEL participating dealership closest
to the buyer."
<PAGE>
PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and is qualified in
its entirety by, the more detailed information, including "Risk Factors" and
the Consolidated Financial Statements and Notes thereto, appearing elsewhere in
this Prospectus. Except as otherwise noted or the context otherwise requires,
all information in this Prospectus (i) gives effect to a five-for-three split
of the Company's Common Stock approved by the Board of Directors on November
24, 1996, (ii) gives effect to the conversion of all outstanding shares of
Preferred Stock into 3,467,915 shares of Common Stock which will occur
automatically immediately prior to the closing of this Offering, (iii) assumes
no exercise of outstanding options to purchase 2,471,213 shares of the
Company's Common Stock under the Company's 1996 Stock Option Plan and 1996
Stock Incentive Plan, and (iv) assumes no exercise of the Underwriters' over-
allotment option. See "Management--Stock Plans," "Description of Capital Stock"
and "Underwriting."
THE COMPANY
Auto-By-Tel is establishing a nationally branded Internet-based marketing
service for new and used vehicle purchasing and related consumer services. The
Company's Web site (www.autobytel.com) enables consumers to gather valuable
information about automobiles and light duty trucks ("vehicles") and shop for
vehicles and related consumer services from the convenience of their home or
office. This convenience, coupled with low, haggle-free pricing and quick and
courteous service, improves consumers' overall buying experiences. The
Company's Internet-based alternative to traditional vehicle retailing
dramatically reduces participating dealerships' selling costs per vehicle and
increases sales volumes by channeling a large number of ready-to-buy, well-
informed consumers to Auto-By-Tel participating dealerships. The Company's
Internet-based services are free to consumers and, to date, the Company has
derived substantially all of its revenues from fees paid by subscribing
dealerships.
Consumers wishing to purchase new vehicles through the Company's service
complete a purchase request available on the Company's and its partners' Web
sites which specifies the type of vehicle and accessories desired along with
the consumer's phone number, e-mail address and zip code. The purchase request
is then forwarded to the Auto-By-Tel participating dealership located in the
consumer's geographic area. Typically, consumers are contacted by Auto-By-Tel
dealers within 48 hours with a firm, competitive quote for the vehicle,
eliminating the unwelcome and time consuming task of negotiating with the
dealer and thus facilitating completion of the sale. As of December 31, 1996
the Company's dealership base consisted of (i) 1,206 paying franchises of
dealerships, (ii) 509 non-paying franchises affiliated with paying dealerships
(collectively, "subscribing dealerships") and (iii) approximately 230 "trial
dealers." From the commencement of operations in March 1995 to December 31,
1996, the Company received more than 385,000 new vehicle purchase requests.
The emergence of the Internet as a significant communications medium is
driving the development and adoption of Web content and commerce applications
that offer convenience and value to consumers, as well as unique marketing
opportunities and reduced operating costs to businesses. A growing number of
consumers have begun to transact business electronically, including paying
bills, booking airline tickets, trading securities and purchasing consumer
goods, such as personal computers, consumer electronics, compact disks, books
and vehicles. Moreover, online transactions can be faster, less expensive and
more convenient than transactions conducted through a human intermediary. In
addition, Web commerce applications enable businesses to rapidly target and
economically manage a broad customer base and establish and maintain ongoing
direct customer relationships. International Data Corporation ("IDC") estimates
that the dollar value of goods and services purchased over the Web will
increase from approximately $318 million in 1995 to $95 billion in the year
2000. The Auto-By-Tel vehicle marketing service seeks to utilize the unique
marketing capabilities of the Web to address the $660 billion annual U.S. new
and used vehicle market.
3
<PAGE>
To create higher levels of consumer satisfaction, the Company focuses on
improving the manner in which dealers interact with consumers. Auto-By-Tel
seeks to establish business relationships with dealerships which share the
Company's commitment to improving customer service in the vehicle retailing
industry. To meet this goal, the Company requests that participating
dealerships have their representatives trained in the Auto-By-Tel marketing
program, dedicate electronic and human resources to the Auto-By-Tel system and
comply with the Auto-By-Tel guidelines of rapid consumer response, full
disclosure, and competitive and up-front pricing communicated over telephone.
An important aspect of the Company's strategy is to strengthen the Auto-By-
Tel brand name, as a means of driving consumer traffic to the Company's Web
site, and thereby increasing the volume of vehicle purchase requests. In
addition to marketing its services through relationships with Internet content
providers and advertising on Internet search engines and other online services,
the Company is expanding its marketing efforts through traditional print media
and on network television. The Company intends to capitalize on the increasing
visibility of the Auto-By-Tel brand name as a nationally recognized Internet-
based marketing service for new vehicles by offering additional services such
as online used vehicle purchasing, financing, leasing and insurance services.
Auto-By-Tel is currently developing a used vehicle purchasing program for its
network of new vehicle dealerships. The Company has an agreement with American
International Group ("AIG") one of the largest international insurance
providers, to offer vehicle insurance through the Company's Web site. The
Company also has an agreement with Chase Manhattan Automotive Finance
Corporation ("Chase Manhattan") under which Chase Manhattan, together with its
affiliates, will receive credit applications for new vehicle financing online
via the Company's Web site from Auto-By-Tel's consumers with prime credit
ratings. In addition, the Company is currently negotiating similar
relationships with several leading financial institutions to offer new and used
vehicle leasing services and new and used vehicle financing to sub-prime credit
consumers.
Auto-By-Tel LLC was formed in January 1995 and began operations in March
1995. In July 1995, it introduced its Web site. Effective as of May 31, 1996,
the interests of the members of Auto-By-Tel LLC and ABT Acceptance Company LLC,
an affiliate, were transferred to the Company in a tax free transaction. The
address of the Company's principal executive offices is 18872 MacArthur
Boulevard, Suite 200, Irvine, California 92612-1400, and the Company's
telephone and fax numbers are (714) 225-4500 and (714) 225-4562, respectively.
The Company's home page is located on the World Wide Web at
http://www.autobytel.com. Information contained on the Company's Web site or
online services does not constitute part of this Prospectus.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.. shares
Common Stock offered by the Selling
Stockholder......................... shares
Common Stock to be outstanding after
the Offering........................ shares(1)
Use of proceeds...................... For working capital and general corporate
purposes
Proposed Nasdaq National Market
symbol.............................. ABTL
</TABLE>
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND SUPPLEMENTAL OPERATING DATA
(IN THOUSANDS, EXCEPT SHARE, PER SHARE AND SUPPLEMENTAL OPERATING DATA)
<TABLE>
<CAPTION>
JANUARY 31, 1995 THREE MONTHS ENDED
(DATE OF INCEPTION) -------------------------------------------------- YEAR ENDED
TO DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1995 1996 1996 1996 1996 1996
------------------- ---------- ---------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $ 274 $ 436 $ 952 $ 1,434 $ 2,203 $ 5,025
---------- ---------- ---------- ---------- ---------- ----------
Operating expenses:
Marketing and
advertising........... 476 475 678 1,247 2,039 4,439
Selling, training and
support............... 454 362 563 851 1,417 3,193
Technology development. 99 67 78 294 954 1,393
General and
administrative......... 275 134 258 740 1,027 2,159
---------- ---------- ---------- ---------- ---------- ----------
Total operating
expenses........... 1,304 1,038 1,577 3,132 5,437 11,184
---------- ---------- ---------- ---------- ---------- ----------
Loss from operations.... (1,030) (602) (625) (1,698) (3,234) (6,159)
Other income (expense),
net.................... -- -- (6) 22 108 124
---------- ---------- ---------- ---------- ---------- ----------
Net loss................ (1,030) (602) (631) (1,676) (3,126) (6,035)
========== ========== ========== ========== ========== ==========
Net loss per common and
common equivalent
share(2)............... $ (.07) $ (.04) $ (.04) $ (.11) $ (.19) $ (.38)
========== ========== ========== ========== ========== ==========
Weighted average common
and common equivalent
shares outstanding(2).. 15,270,154 15,270,154 15,270,154 15,900,467 16,769,853 15,800,184
SUPPLEMENTAL OPERATING
DATA:
Purchase requests
received............... 42,600 44,900 73,700 102,700 123,700 345,000
Paying franchises of
subscribing
dealerships............ 253 546 728 978 1,206 1,206
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------
PRO FORMA
ACTUAL AS ADJUSTED (2)
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<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............................. $ 9,062 $
Working capital........................................ 5,960
Total assets........................................... 12,298
Total liabilities...................................... 4,302 4,302
Accumulated deficit.................................... (7,065) (7,065)
Stockholders' equity................................... 7,996
</TABLE>
- --------
(1) Based on 15,895,136 shares of Common Stock outstanding on a pro forma basis
as of January 31, 1997. Excludes 2,471,213 shares of Common Stock issuable
upon exercise of outstanding options as of January 31, 1997, at a weighted
average exercise price of $2.72 per share. Assumes no exercise of the
Underwriters' over-allotment option.
(2) See Note 1.o of Notes to Consolidated Financial Statements for an
explanation of the determination of shares used in computing net lost per
share.
(3) Adjusted to reflect (i) the sale of 967,915 shares of Series B Preferred on
January 30, 1997 at a price of $9.35 per share and (ii) the conversion of
all outstanding shares of Preferred Stock immediately prior to the closing
of the Offering and (iii) the receipt by the Company of the estimated net
proceeds of $ from the sale of shares of Common Stock offered
hereby at an assumed initial public offering price of $ per share. See
"Use of Proceeds."
5
<PAGE>
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk. In addition to the other information in this Prospectus, the following
risk factors should be carefully considered in evaluating the Company and its
business before purchasing the shares of Common Stock offered hereby. This
Prospectus contains certain forward-looking statements based on current
expectations which involve risks and uncertainties. Actual results and the
timing of certain events may differ materially from those projected in such
forward-looking statements due to a number of factors, including those set
forth below.
LIMITED OPERATING HISTORY; ACCUMULATED DEFICIT
The Company was formed in January 1995 and introduced its vehicle marketing
program for new vehicle dealerships over Prodigy in March 1995 and over the
Internet in July 1995. The Company first recognized revenues from operations
in March 1995. Accordingly, the Company has only a limited operating history
upon which an evaluation of the Company and its prospects can be based, and
this limited operating history makes the prediction of future operating
results difficult or impossible. In addition, the Company believes that, in
order to achieve its objectives, it will need to significantly increase
revenues from existing services and generate revenues from new services, such
as its used vehicle buying service and its vehicle financing and insurance
policy referral services. There can be no assurance that the Company will
successfully introduce or generate sufficient revenues from such services. The
Company had an accumulated deficit as of December 31, 1996 of $7.1 million. In
addition, the Company expects to incur operating losses in future periods. The
Company's prospects 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 address these risks, the
Company must, among other things, continue to send vehicle purchase requests
to dealers that result in sales in sufficient numbers to support the marketing
fees charged by the Company to its subscribing dealerships, respond to
competitive developments, increase its brand name visibility, successfully
introduce new services, continue to attract, retain and motivate qualified
personnel, and continue to upgrade and enhance its technologies to accommodate
expanded service offerings and increased consumer traffic. There can be no
assurance that the Company will be successful in addressing such risks. In
addition, although the Company has experienced revenue growth in recent
periods, historical growth rates are not sustainable and are not indicative of
future operating results, and there can be no assurance that the Company will
achieve or maintain profitability. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS
As a result of the Company's limited operating history, the Company lacks
sufficient historical financial and operating data on which to adequately base
future operating results. The Company's costs are based, in part, on fees paid
to companies that maintain Web sites which allow consumers to submit purchase
requests. Agreements with such companies generally have fixed terms ranging
from one to five years, although certain of these agreements are terminable on
short notice. Under such agreements, fees may be fixed or may vary depending
on the number of purchase requests submitted through other companies' Web
sites, or may be a combination thereof. Accordingly, increases in the number
of purchase requests received will increase the Company's operating costs,
which may not result in increased revenues to the Company. In addition, the
Company incurs significant expenses to market its services on other Web sites
and online services. Such expenses are generally fixed and are paid pursuant
to marketing agreements which have terms of up to one year. The Company's
expense levels are based in part on its expectations as to future revenues,
which may vary in relation to increases or decreases in the number of
dealerships that subscribe to the Company's marketing programs. Currently,
less than half of subscribing dealerships are subject to written marketing
agreements and these subscribing dealerships may cancel their agreements with
30 days' prior notice. As a result, quarterly revenues and operating results
may vary significantly in response to any significant change in the number of
subscribing dealerships. The Company's inability to adjust spending in a
timely manner to compensate for any unexpected revenue shortfall would have a
material adverse effect on the Company's business, results of operations and
6
<PAGE>
financial condition. In addition, the Company anticipates significant
increases in expenses as a result of planned increases in its marketing and
advertising programs, development of affiliate programs relating to vehicle
insurance and financing, and the introduction of a used vehicle marketing
service. To the extent that such expenses exceed, precede or are not
subsequently followed by increased revenues, the Company's business, results
of operations and financial condition will be materially adversely affected.
Significant fluctuations in future quarterly operating results may also be
caused by general economic conditions or traditional seasonality in the
automotive and light duty truck markets, which may result in fluctuations in
the level of purchase requests completed by consumers or adversely affect
demand for the Company's existing and planned services. The introduction of
new services by the Company's competitors, market acceptance of Internet-
related services in general and the introduction by the Company of new
services and market acceptance of such services may also result in significant
fluctuations in quarterly operating results. In addition, as a strategic
response to changes in the competitive environment, the Company may from time
to time make certain pricing or marketing decisions or establish strategic
relationships that could have a material adverse effect on the Company's
business, results of operations or financial condition. In particular, the
Company may need to revise the marketing fees it charges to subscribing
dealerships. There can be no assurance that subscribing dealerships will
continue to participate in the Company's marketing programs or agree to future
fee increases. In addition, there can be no assurance that marketing fees
derived from subscribing dealerships will be sufficient to cover the Company's
expenses. The foregoing factors make it likely that in some future quarters
the Company's operating results will be below the expectations of the Company,
securities analysts or investors. In such event, the trading price of the
Common Stock would likely be materially and adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
REGULATORY UNCERTAINTIES AND GOVERNMENT REGULATION
The Company believes that its dealer marketing service does not qualify as a
brokerage activity and, therefore, that the Company does not need to comply
with state broker licensing requirements. In Texas, however, the Company was
required to modify its marketing program to include a pricing model under
which subscribing dealerships are charged uniform fees based on the population
density of their particular geographic area and to make its program open to
all dealerships who wish to apply. In the event that individual state
regulatory requirements change or additional requirements are imposed on the
Company, the Company may be required to modify its marketing programs in such
states in a manner which may undermine the program's attractiveness to
consumers or dealers. In addition, in the event that a state deems that the
Company is acting as a broker, the Company may be required to comply with
burdensome licensing requirements of such state or terminate operations in
such state. In each case, the Company's business, results of operations or
financial condition could be materially and adversely affected.
The Company's marketing service may result in changes in the way new and
used vehicles are sold which may be deemed to be threatening by new and used
vehicle dealers who do not subscribe to the Auto-By-Tel program. Such
businesses are often represented by influential lobbying organizations, and
such organizations may seek to introduce legislation which may impact the
evolving marketing and distribution model which the Company's service
promotes. Should legislative or legal challenges be brought successfully by
such organizations, the Company's business, results of operations or financial
condition could be materially and adversely affected.
As the Company introduces new services, the Company may need to comply with
additional licensing regulations and regulatory requirements. For example, the
Company recently obtained an insurance brokerage license in California and has
begun procuring insurance brokerage licenses in other states to ensure
compliance with applicable insurance regulations, if any, of such states. In
addition, the Company is currently in the process of applying for financial
brokers' licenses in those states in which the Company believes such licenses
are required. Becoming licensed may be an expensive and time-consuming process
which could divert the efforts of management. In the event that the Company
does not successfully become licensed under applicable state
7
<PAGE>
insurance or lending rules or otherwise comply with regulations necessitated
by changes in current regulations or the introduction of new services, the
Company's business, results of operations or financial condition could be
materially and adversely affected.
Additionally, there are currently few laws or regulations directly
applicable to access to or commerce on the Internet. However, due to the
increasing popularity and use of the Internet, it is likely that a number of
laws and regulations may be adopted at the local, state, national or
international levels with respect to commerce over the Internet, potentially
covering issues such as pricing of services and products, advertising, user
privacy and expression, intellectual property, information security, anti-
competitive practices or the convergence of traditional distribution channels
with Internet commerce. In addition, 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 the Company to
additional state sales and income taxes. The adoption of any such laws or
regulations may decrease the growth of Internet usage or the acceptance of
Internet commerce which could, in turn, decrease the demand for the Company's
services and increase the Company's costs or otherwise have a material adverse
effect on the Company's business, results of operations or financial
condition. See "Business--Government Regulation."
STRENGTHENING THE AUTO-BY-TEL BRAND NAME; HIGH COST OF ADVERTISING AND
MARKETING
The Company believes that enhancing its national brand name recognition is
critical to its efforts to maintain and increase the number of purchase
requests and subscribing dealerships. The growing number of Web sites which
offer competing services and the relatively low barriers to entry in providing
Internet services increase the importance of establishing and maintaining
brand name recognition. In order to achieve this objective, the Company will
need to continue to maintain high quality services and incur considerable
costs to enhance and expand brand name recognition and improve its competitive
position. Much of the Company's advertising is placed on Web sites maintained
by online service providers and online search engine companies. Advertising
agreements with these online service providers and search engine companies are
generally short-term contracts or are otherwise cancelable on short notice.
There can be no assurance that such online advertisers will not cancel such
contracts, or that competitors will not be able to displace Auto-By-Tel from
its preferred advertising arrangements with such companies.
In addition, the intense competition in the sale of Internet advertising,
including competition from other vehicle marketing services, has resulted in a
wide range of rates quoted by different vendors for a variety of advertising
services. This makes it very difficult to project future levels of Internet
advertising costs and availability of prime advertising space. The Company has
also entered into agreements with automotive information services, such as
Edmund's and Microsoft CarPoint, to display the Company's services on their
Web sites. These agreements require the Company to pay such entities a fee for
each user who completes a purchase request on their sites. Accordingly, any
increase in the volume of purchase requests received from these sites will
result in increased advertising costs with no assurance of a corresponding
increase in revenues to the Company. The Company is also incurring significant
expenses to increase awareness of its nationally branded Internet-based
marketing services in print and television media. The Company expects these
expenses to increase significantly, particularly in the first half of 1997.
There can be no assurance that the Company's efforts to brand the Auto-By-Tel
name will be successful or that advertising on the Internet, on television or
in other media will attract consumers to the Company's Web site, or that
existing marketing or advertising sources will continue to be available on
commercially reasonable terms, or at all. See "Business--Strategy" and "--
Sales and Marketing."
COMPETITION
The Company's vehicle buying services compete against a variety of Internet
and traditional vehicle buying services and automobile brokers. In the
Internet-based market, the Company competes for attention with other entities
which maintain similar commercial Web sites. The Company also competes
indirectly against automobile brokerage firms and affinity programs offered by
several companies, including Price Costco and Wal-Mart. Like
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the Company's services, the services offered by competing Web sites, vehicle
brokerage firms and affinity programs seek to increase consumer satisfaction
and reduce vehicle purchasing costs.
Although the Company does not currently compete directly with vehicle
dealers and manufacturers, such competition would arise in the future if
dealers and manufacturers introduced competing Web sites or developed
cooperative relationships among themselves or with online vehicle information
providers. Moreover, the Company's ability to achieve its objectives would be
adversely affected if dealers and manufacturers adopted a low cost, firm price
sales model similar to that facilitated by the Auto-By-Tel program.
The market for Internet-based commercial services is new and competition
among commercial Web sites is expected to increase significantly in the
future. The Internet is characterized by minimal barriers to entry, and
current and new competitors can launch new Web sites at relatively low cost.
Potential competitors could include, but are not limited to, automotive
information service providers, manufacturers and new and used vehicle dealers.
In order to compete successfully as an Internet commercial entity, the Company
must significantly increase awareness of the Company and its brand name,
effectively market its services and successfully differentiate its Web site.
Many of the Company's current and potential competitors have longer operating
histories, greater name recognition and significantly greater financial and
marketing resources than the Company. Such competitors could undertake more
aggressive and costly marketing campaigns than the Company which may adversely
affect the Company's marketing strategies which could have a material adverse
effect on the Company's business, results of operations or financial
condition.
In addition, as the Company introduces new services, it will compete
directly with a greater number of companies, including vehicle insurers and
lenders as well as used vehicle superstores, such as CarMax and Auto Nation.
Such companies may already maintain or may introduce Web sites which compete
with that of the Company. There can be no assurance that the Company can
continue to compete successfully against current or future competitors nor can
there be any assurance that competitive pressures faced by the Company will
not result in increased marketing costs, decreased Internet traffic or loss of
market share or otherwise will not materially adversely affect its business,
results of operations and financial condition. See "Business--Strategy" and
"--Competition."
DEPENDENCE ON DEALERSHIP NETWORK
To date, substantially all of the Company's revenues have been derived from
fees paid by subscribing dealerships. Currently, less than half of subscribing
dealers have entered into written marketing agreements with the Company, and
such agreements are cancelable at the option of either party with 30 days'
notice. Accordingly, subscribing dealers may terminate their affiliation with
the Company for any reason, including an unwillingness to accept the Company's
subscription terms or to join other marketing programs. In December 1996, the
Company commenced an effort to have all subscribing dealerships execute
written marketing agreements with the Company which have been revised to
provide, among other things, that such dealerships will not participate in any
other Internet-based or online program with attributes similar to those of the
Auto-By-Tel program. At the same time, the Company has begun a program to have
all subscribing dealerships enter into written agreements relating to the
Auto-By-Tel financing program. As of December 31, 1996, approximately 24% and
13% of all subscribing dealerships had signed the revised marketing agreement
and the financing agreement, respectively. The Company believes that some of
its dealers may resist signing written agreements and there can be no
assurance that the Company will be able to convince subscribing dealerships to
enter into written agreements with the Company or revise existing agreements
or that the Company's efforts to cause subscribing dealerships to revise their
agreements will not result in subscribing dealerships terminating their
relationship with Auto-By-Tel. In addition, should the volume of purchase
requests increase, the Company anticipates that it will need to reduce the
size of the exclusive territories currently allocated to dealerships in order
to serve consumers more effectively. Dealers may be unwilling to accept
reductions in the size of their territories and may, therefore, terminate
their Auto-By-Tel relationship, refuse to execute formal agreements with the
Company or decide not to join the Company's marketing programs. A material
decrease in the number of subscribing dealerships, or
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slower than expected growth in the number of subscribing dealerships, could
have a material adverse effect on the Company's business, results of
operations or financial condition. The Company may also become unable to refer
an adequate number of consumers to participating dealerships. There can be no
assurance that the Company will be able to continue to attract additional
dealerships and retain existing dealerships.
Moreover, the success of the Company's business strategy depends on its
participating dealerships' adherence to the Company's consumer oriented sales
practices. The Company devotes significant efforts to train participating
dealerships in such practices which are intended to increase consumer
satisfaction. The Company's inability to train dealerships effectively, or the
failure by participating dealerships to adopt such practices, respond rapidly
and professionally to vehicle purchase requests, or sell vehicles in
accordance with the Company's marketing strategies, could result in low
consumer satisfaction, damage the Company's brand name and materially
adversely affect the Company's business, results of operations or financial
condition. See "Management's Discussion and Analysis of Financial Condition
and Results of Operation" and "Business--Strategy" and "--Dealership Network
and Training."
RAPID TECHNOLOGICAL CHANGE; SECURITY RISKS AND SYSTEM DISRUPTIONS
The Internet is characterized by rapidly changing technology. The Company
believes that its future success is significantly dependent on its ability to
continuously improve the speed and reliability of its Web site, enhance
communications functionality with its consumers and dealers and maintain the
highest-level of information privacy and ensure transactional security. The
Company recently migrated its Web site platform to a more robust enterprise
network, internalized all Web server hosting functions and, to accelerate
connectivity, has installed two 1.54 Mbps T-1 lines for outbound traffic and a
6Mbps fractional DS/3 line for inbound traffic. The Company has also recently
upgraded its routers and has installed firewall technology to protect its
private network. System enhancements entail the implementation of
sophisticated new technology and system processes and there can be no
assurance that such continuous enhancements may not result in unanticipated
system disruptions. In addition, since launching its first Web site in July
1995, the Company has experienced system downtime for limited periods of up to
a few hours due to power loss and telecommunications failures, and there can
be no assurance that future interruptions will not recur. Although the Company
maintains redundant local offsite backup servers, all of the Company's primary
servers are located at its corporate headquarters and are vulnerable to
interruption by damage from fire, earthquake, power loss, telecommunications
failure and other events beyond the Company's control. The Company is in the
process of developing comprehensive out-of-state disaster recovery plans to
safeguard dealer and consumer information. The Company's business interruption
insurance may not be sufficient to compensate the Company for all losses that
may occur. In the event that the Company experiences significant system
disruptions, the Company's business, results of operations or financial
condition could be materially and adversely affected.
In addition, the Company is currently in the process of completing a
conversion to a redundant client/server SQL database platform which involves
the integration of several different internal databases used to handle the
Company's consumer and dealer information and transmission requirements, as
well as the Company's financial, accounting and record-keeping requirements.
No assurance can be given that the implementation of this new platform will
not result in disruptions to the Company's business, such as the loss of data,
errors in purchase request transmissions, delays in the Company's ability to
effect periodic closings of its accounting records and other similar problems.
Any such disruptions or any failure to successfully implement this new
information system in a timely manner could have a material adverse effect on
the Company's business, results of operations or financial condition.
The Company's services may be vulnerable to break-ins and similar disruptive
problems caused by Internet users. Further, weaknesses in the Internet may
compromise the security of confidential electronic information exchanged
across the Internet. This includes, but is not limited to, the security of the
physical network and security of the physical machines used for the
information transfer. Any such flaws in the Internet, the end-user
environment, or weaknesses or vulnerabilities in the Company's services or the
licensed technology incorporated in such services could jeopardize the
confidential nature of information transmitted over the Internet and could
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require the Company to expend significant financial and human resources to
protect against future breaches, if any, and alleviate or mitigate problems
caused by such security breaches. Concerns over the security of Internet
transactions and the privacy of users may also inhibit the growth of the
Internet generally, particularly as a means of conducting commercial
transactions. To the extent that activities of the Company, or third party
contractors, involve the storage and transmission of proprietary information
(such as personal financial information or credit card numbers), security
breaches could expose the Company to a risk of financial loss, litigation and
other liabilities. The Company does not currently maintain insurance to
protect against such losses. Any such occurrence could reduce consumer
satisfaction in the Company's services and could have a material adverse
effect on the Company's business, results of operations or financial
condition. See "Business--Operations and Technology; Facilities."
NEW SERVICE OFFERINGS
In order to generate additional revenues, to attract more consumers to its
Web site and dealerships to its programs and remain competitive, the Company
must successfully develop, market and introduce new services. The Company
believes that to achieve its objectives it will need to generate a substantial
portion of its future revenues from new services. The Company recently
introduced an Internet-based insurance service with American International
Group ("AIG"), one of the largest international insurance companies. Consumers
can currently link to AIG's Web site to submit insurance applications and,
when the service is fully implemented, will be able to receive real-time,
online quotes. The Company also recently entered into an agreement with Chase
Manhattan Automotive Finance Corporation ("Chase Manhattan") under which Chase
Manhattan, together with its affiliates, will receive credit applications for
new vehicle financing from prime (higher quality) credit consumers who access
Auto-By-Tel's Web Site. The agreement with Chase Manhattan has a term of three
years but may be terminated sooner by Chase Manhattan with six months' notice
or in the event that certain ongoing conditions are not satisfied. In
addition, the Company is developing client/server database applications and
user interfaces which will enable the Company to provide consumers access to
vehicles currently listed by dealerships who participate in the Company's used
vehicle program. None of these new services has been fully developed and, in
some cases, their introduction has recently been delayed due to difficulties
encountered by the Company's partners in developing their software systems.
There can be no assurance that the Company will successfully develop or
introduce these new services, that such services will achieve market
acceptance or that subscribing dealerships will not view such new services as
competitive to services already offered by such dealerships. For example,
consumers may be reticent to purchase vehicle insurance or procure vehicle
financing online. Also, it may be more difficult to educate consumers as to
the value of locating used vehicles for purchase through the Internet since
used vehicle purchases are generally thought to require a greater level of
hands-on involvement. The Company expects to incur additional expenses to
develop and successfully market such services. To the extent that revenues
generated by such additional services are insufficient to cover increased
expenses, the Company's operating results would be adversely affected. Should
the Company fail to develop and successfully market these services, or should
competitors successfully introduce competing services, the Company's business,
results of operations and financial condition may be materially and adversely
affected. See "Management's Discussion and Analysis of Financial Condition and
Results of Operation" and "Business--Products and Services."
DEPENDENCE ON STRATEGIC RELATIONSHIPS
The Company is dependent to a large extent on a number of third party
relationships to create traffic on its Web site. These relationships include
positioning the Company's advertisements or services on sites maintained by
(i) automotive information providers, such as AutoSite, Edmund's and Microsoft
CarPoint, (ii) Internet search engine companies, such as Excite, Magellan and
WebCrawler and (iii) online services, including America Online's Digital
Cities, CompuServe and Prodigy. The Company receives a significant number of
purchase requests from a limited number of such Web sites, including Edmund's
and Microsoft CarPoint. The termination of any of these relationships, or any
significant reduction in traffic to the Web sites on which the Company's
services are advertised or offered, could have a material adverse effect on
the Company's business, results of
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operations or financial condition. A number of the Company's agreements with
such online service providers may be cancelled on short notice and there can
be no assurance that online service providers will not terminate such
agreements. In addition, the Company continuously negotiates revisions to
existing agreements and these revisions could increase the Company's costs in
future periods.
The Company believes that its comprehensive utilization of these Internet
referral sources is and will remain critical in strengthening its national
brand name and maintaining and increasing usage of its Internet-based
services. In the event that the Company fails to maintain these strategic
relationships or develop relationships with additional online services, the
volume of traffic to the Company's Web site may be reduced and the Company's
business, results of operations or financial condition could be materially and
adversely affected.
As a part of its overall strategy, the Company plans to develop new services
by entering into alliances with other companies engaged in complementary
businesses, such as vehicle financing and leasing, and insurance providers.
For example, the Company recently entered into agreements with Chase Manhattan
to provide vehicle financing and AIG to provide vehicle insurance services to
its consumers. Strategic relationships involve numerous risks, including
difficulties in the introduction and marketing of new services, diversion of
management's attention from other business requirements, and the risks of
entering markets in which the Company has no or limited direct prior
experience and where competitors in such markets have stronger market
positions. There can be no assurance that the Company would be successful in
overcoming these risks or any other problems encountered in connection with
such strategic alliances or that such transactions will not adversely affect
the Company's business, results of operations and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation" and "Business--Strategy" and "--Products and Services."
DEVELOPING MARKET; UNCERTAIN ACCEPTANCE OF THE INTERNET FOR ONLINE COMMERCE
The market for the Company's Internet-based marketing service has only
recently begun to develop and is rapidly evolving. 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 exist few proven services and products. Moreover,
since the market for the Company's services is new and evolving, it is
difficult to predict the future growth rate, if any, and size of this market.
The success of the Company's service will depend upon the adoption of the
Internet by consumers and dealers as a mainstream medium for commerce. While
the Company believes that its services offer significant advantages to
consumers and dealers, there can be no assurance that widespread acceptance of
Internet commerce in general, or of the Company's services in particular, will
occur. Consumers and dealers who have historically relied upon traditional
means of commerce to purchase vehicles and vehicle insurance, or to procure
vehicle financing, must accept novel ways 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 systems and
technologies. Moreover, critical issues concerning the commercial use of the
Internet (including ease of access, security, reliability, cost, and quality
of service) remain unresolved and may impact the growth of Internet use or the
attractiveness of conducting commerce online. There can be no assurance that
consumers will use the Internet for commerce or that the market for the
Company's services will develop successfully or achieve widespread market
acceptance. If the market for Internet-based vehicle marketing services fails
to develop, develops more slowly than expected or becomes saturated with
competitors, or if the Company's services do not achieve market acceptance,
the Company's business, results of operations and financial condition will be
materially and adversely affected. See "Management's Discussion and Analysis
of Financial Condition and Results of Operation" and "Business--Strategy."
MANAGEMENT OF GROWTH
The rapid execution necessary for the Company to establish itself as a
leader in the evolving market for Internet-based vehicle marketing services
requires an effective planning and management process. The Company's rapid
growth has placed, and is expected to continue to place, a significant strain
on the Company's
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managerial, technical, sales and marketing and administrative personnel and
financial resources. As of December 31, 1996, the Company had 73 employees
(including two employees located in Canada), compared to 17 employees as of
December 31, 1995. The Company is also in the process of testing, introducing
or developing new services. The Company anticipates that to effectively
develop, introduce and maintain such new services, it will need to hire a
significant number of qualified managerial, technical and sales and marketing
personnel in the future. Competition for such qualified individuals is intense
and there can be no assurance that the Company will be able to recruit and
retain such employees.
To manage its growth, the Company must continue to implement and improve its
operational and financial systems, and expand, train and manage its employee
base and subscribing dealerships. There can be no assurance that the Company
will be able to successfully implement these changes on a timely basis.
Further, the Company is required and will continue to be required to manage
multiple relationships with consumers, dealers, strategic partners and other
third parties. There can be no assurance that the Company's systems,
procedures or controls will be adequate to support the Company's current or
future operations or that Company management will be able to achieve the rapid
execution necessary to establish itself as a leader in the evolving market for
Internet-based vehicle marketing services. For example, to date the Company
has been able to enter into written marketing agreements with less than half
of its subscribing dealership base. The Company's future operating results
will also depend on its ability to expand its sales and marketing
organizations, implement and manage new services to penetrate broader markets
and further develop and expand its organization and technology infrastructure,
to support an increased number of services. If the Company is unable to manage
growth effectively, the Company's business, results of operations and
financial condition will be materially adversely affected. See "Business--
Employees."
The Company's growth strategy is predicated in part on its ability to
successfully identify, acquire and integrate companies that complement or
expand the Company's service offerings. While the Company is not currently
negotiating any acquisitions and does not have any commitments or agreements
with respect to any acquisitions, the Company anticipates that potential
acquisition opportunities may arise. The Company intends to actively pursue
any attractive acquisition opportunities. In the event that the Company were
to issue Common Stock to consummate such potential acquisitions, such
additional issuance could dilute the holdings of investors purchasing the
Common Stock offered hereby. Additionally, the Company may utilize cash to
consummate such acquisitions. There can be no assurance that the Company will
have adequate resources to consummate any acquisition, that any acquisition
will or will not occur, that any target company can be successfully integrated
into the Company, and that, if any acquisition does occur, it will not be
dilutive to the Company's earnings per share or otherwise have a material
adverse affect on the Company's business, results of operations and financial
condition.
DEPENDENCE ON KEY PERSONNEL
The Company's performance is substantially dependent on the performance of
its executive officers and key employees, all of whom are employed on an at-
will basis and many of whom have worked together for only a short period of
time. Given the Company's early stage of development, the Company is dependent
on its ability to retain and motivate highly qualified personnel, especially
its management, technical and business development teams. The Company
maintains "key person" life insurance in the amount of $7.5 million on the
life of Peter R. Ellis, the Company's President and Chief Executive Officer.
However, the loss of the services of Mr. Ellis, or one or more of the
Company's other executive officers or key employees would likely have a
material adverse effect on the business, results of operations or financial
condition of the Company. Certain Company officers have been involved in legal
matters prior to the formation of Auto-By-Tel. While management believes that
these matters have been resolved, future proceedings, if any, could interfere
to some extent with the officers' services for the Company. See "Management."
The Company's future success also depends on its ability to identify, hire,
train and retain other highly qualified sales and marketing, managerial and
technical personnel. In addition, the Company anticipates the need to hire a
significant number of personnel as it introduces new services. Competition for
such personnel is intense,
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and there can be no assurance that the Company will 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 upon the Company's business,
results of operations or financial condition. See "Business--Employees."
RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION
The Company intends to expand its new vehicle marketing service to foreign
jurisdictions by establishing relationships with vehicle dealers and strategic
partners located in foreign jurisdictions in which similar challenges and
inefficiencies in the market for new vehicles exist. In April 1996, the
Company introduced its new vehicle marketing service in Canada and as of
December 31, 1996, the Company had 72 paying franchises of subscribing
dealerships located in Canada. To date, the Company has had limited experience
in providing its Internet-based marketing service abroad and there can be no
assurance that the Company will be successful in introducing or marketing its
service abroad or will not encounter foreign regulation of its operations. In
addition, there are certain risks inherent in doing business in international
markets, such as changes in regulatory requirements, 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. There can be no assurance that one or more of
such factors will not have a material adverse effect on the Company's current
or future international operations and, consequently, on the Company's
business, results of operations and financial condition.
DEPENDENCE ON THE INTERNET; CAPACITY CONSTRAINTS
The Company's ability to efficiently process purchase requests for vehicles
received through the Company's Internet-based marketing service will depend,
in large part, upon a robust communications industry and infrastructure for
providing Internet access and carrying Internet traffic. The Internet may not
prove to be a viable commercial marketplace because of inadequate development
of the necessary infrastructure (e.g., reliable network backbone), timely
development of complementary products (e.g., 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. In
addition, to the extent that the Internet continues to experience significant
growth in the number of users and the level of use, there can be no assurance
that the Internet infrastructure will continue to be able to support the
demands placed on it by such potential growth. Because global commerce and
exchange of information on the Internet is new and evolving, it is difficult
to predict with any assurance whether the Internet will prove to be a viable
commercial marketplace. If the necessary infrastructure or complementary
products are not developed, or if the Internet does not become a viable
commercial marketplace, the Company's business, results of operations and
financial condition will be materially adversely affected. See "Business--
Operations and Technology; Facilities."
DEPENDENCE ON PROPRIETARY SYSTEMS AND TECHNOLOGY
The Company's success and ability to compete is dependent in part upon its
proprietary systems and technology. While the Company relies on trademark,
trade secret and copyright law to protect its proprietary rights, the Company
believes that the technical and creative skills of its personnel, continued
development of its proprietary systems and technology, brand name recognition
and reliable Web site maintenance are more essential in establishing and
maintaining a leadership position and strengthening its brand. Despite the
Company's efforts to protect its proprietary rights, unauthorized parties may
attempt to copy aspects of the Company's services or to obtain and use
information that the Company regards as proprietary. Policing unauthorized use
of the Company's proprietary rights is difficult. In addition, litigation may
be necessary in the future to enforce or protect the Company's intellectual
property rights or to defend against claims of infringement or invalidity.
Misappropriation of the Company's intellectual property or potential
litigation could have a material adverse effect on the Company's business,
results of operations or financial condition. See "Business--Operations and
Technology; Facilities."
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SUBSTANTIAL CONTROL BY OFFICERS AND DIRECTORS AND THEIR AFFILIATES
Following the Offering, the Company's officers and directors and their
affiliates will beneficially own or control approximately % of the
outstanding shares of Common Stock (after giving effect to the conversion of
all outstanding Preferred Stock and the exercise of all outstanding options
and assuming no exercise of the Underwriter's over-allotment option). The
Company's officers, directors and their affiliates will have the ability to
control the election of the Company's Board of Directors and the outcome of
corporate actions requiring stockholder approval. See "Principal and Selling
Stockholders."
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Amended and Restated Articles of
Incorporation and Bylaws could make it difficult for a third party to acquire,
and could discourage a third party from attempting to acquire, control of the
Company. Certain of these provisions allow the Company to issue Preferred
Stock with rights senior to those of the Common Stock without any further vote
or action by the stockholders and 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 the
Company's Common Stock or Preferred Stock and may have the effect of delaying
or preventing a change in control of the Company. 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. See "Description of Capital Stock--Common Stock" and "--Preferred
Stock."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
There has been no public market for the Company's Common Stock prior to this
offering. Although application will be made to the Nasdaq National Market for
listing of the Common Stock, there can be no assurance that an active trading
market will develop or be sustained or that the market price of the Common
Stock will not decline below the initial public offering price. The initial
public offering price will be determined through negotiations between the
Company and the Underwriters and may not be indicative of the market price for
the Common Stock following the Offering. See "Underwriting" for a discussion
of the factors to be considered in determining the initial public offering
price. Even if an active trading market does develop, the market price of the
Common Stock following this offering may be highly volatile. Factors such as
variations in the Company's revenue, earnings and cash flow, announcements of
new service offerings, technological innovations or price reductions by the
Company, its competitors or providers of alternative services, changes in
financial estimates by securities analysts or other events or factors could
cause the market price of the Common Stock to fluctuate substantially. In
addition, the stock markets recently have experienced significant price and
volume fluctuations that have particularly affected companies in the
technology sector and that have been unrelated to the operating performance of
those companies. Such broad market fluctuations or any failure of the
Company's operating results in a particular quarter to meet market
expectations may adversely affect the market price of the Common Stock
following this offering.
DILUTION
Investors participating in the Offering will incur immediate, substantial
dilution. To the extent that outstanding options to purchase the Company's
Common Stock are exercised, there will be further dilution. See "Dilution."
ABSENCE OF DIVIDENDS
The Company intends to retain all future earnings for use in the development
of its business and does not currently anticipate paying any cash dividends in
the foreseeable future. See "Dividend Policy."
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SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sale of substantial numbers of shares of Common Stock in the public market
could adversely affect the market price of the Common Stock and make it more
difficult for the Company to raise funds through equity offerings in the
future. A substantial number of outstanding shares of Common Stock and other
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 shares to be outstanding after the Offering, the
shares offered hereby will be eligible for immediate sale in the public market
without restriction. All other outstanding shares of Common Stock are subject
to 180-day lock-up agreements with the Underwriters. Upon the expiration of
the 180-day lock-up agreements, such shares of Common Stock will become
eligible for sale in the public market, subject to the provisions of Rules
144(k), 144 and 701 under the Act and any contractual restrictions on their
transfer. Montgomery Securities may, in its sole discretion and at any time
without notice, release all or any portion of the securities subject to lock-
up agreements. Upon completion of the Offering, the holders of approximately
15,322,248 shares of Common Stock will be entitled to certain registration
rights with respect to such shares. In addition, the Company intends to
register the shares of Common Stock reserved for issuance under the Company's
1996 Stock Option Plan, 1996 Stock Incentive Plan and 1996 Employee Stock
Purchase Plan following the date of this Prospectus. See "Shares Eligible for
Future Sale" and "Description of Capital Stock--Registration Rights."
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USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby at an assumed initial public offering price of $ per share,
after deducting estimated underwriting discounts and estimated offering
expenses, are estimated to be approximately $ (approximately $ if
the Underwriters' over-allotment is exercised in full). The Company will not
receive any proceeds from the sale of shares of Common Stock by the Selling
Stockholder. See "Principal and Selling Stockholders."
The Company expects to use the net proceeds from the Offering for working
capital purposes, including online and traditional advertising programs
designed to strengthen the Auto-By-Tel brand name, and general corporate
purposes, including the funding of information technology investments required
to support the transition to a real-time online communications platform and to
develop new products and services. A portion of the proceeds from the Offering
also may be used for possible acquisitions of or investments in businesses,
products or technologies that expand, complement or are otherwise related to
the Company's current or planned services, although no specific acquisitions
are currently in negotiation. Pending such uses, the proceeds will be invested
in short-term, investment grade, interest-bearing securities. The Company may
require additional financing in the future to finance continuing growth. No
assurance can be given that such financing will be available on favorable
terms or at all.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its capital stock.
The Company currently intends to retain all of its future earnings, if any,
for use in its business and does not anticipate paying any cash dividends in
the foreseeable future.
17
<PAGE>
CAPITALIZATION
The following table sets forth (i) the actual capitalization of the Company
derived from its financial statements as of December 31, 1996, (ii) pro forma
capitalization of the Company, giving effect to (a) the authorization of
967,915 shares of Series B Preferred Stock and the sale and issuance on
January 30, 1997 of 967,915 shares of Series B Preferred Stock at a price of
$9.35 per share and (b) the restatement of the Company's Amended and Restated
Certificate of Incorporation to provide for authorized capital stock of
50,000,000 shares of Common Stock and 5,000,000 shares of undesignated
Preferred Stock, and (c) the conversion of all outstanding shares of Preferred
Stock into 3,467,915 shares of Common Stock immediately prior to the closing
of the Offering, and (iii) the pro forma as adjusted capitalization of the
Company to reflect the sale by the Company of shares of Common Stock
pursuant to the Offering at an assumed public offering price of $ and the
receipt by the Company of the estimated net proceeds therefrom, after
deducting estimated underwriting discounts and estimated offering expenses.
The capitalization information set forth in the table below is qualified by
the more detailed Consolidated Financial Statements and Notes thereto included
elsewhere in this Prospectus and should be read in conjunction with such
Consolidated Financial Statements and Notes.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents...................... $ 9,062 $18,112 $
======= ======= =======
Stockholders' equity (1):
Convertible preferred stock, $0.001 par value;
1,500,000 shares authorized, 1,500,000 shares
issued and outstanding, actual; 5,000,000
shares authorized, no shares issued and
outstanding, pro forma and pro forma as
adjusted..................................... 2 -- --
Common stock, $0.001 par value; 16,666,666
shares authorized, 12,427,221 shares issued
and outstanding, actual; 50,000,000 shares
authorized, 15,895,136 shares outstanding,
pro forma; 50,000,000 shares authorized,
shares issued and outstanding, pro
forma as adjusted............................ 12 16
Additional paid-in capital.................... 15,073 24,121
Deferred compensation......................... (26) (26) (26)
Accumulated deficit........................... (7,065) (7,068) (7,065)
------- ------- -------
Total stockholders' equity................... 7,996 17,046
------- ------- -------
Total capitalization....................... $ 7,996 $17,046 $
======= ======= =======
</TABLE>
- --------
(1) Gives effect to a five-for-three stock split approved by the Board of
Directors on November 24, 1996 and effected January 30, 1997. Excludes as
of December 31, 1996: (i) 2,280,815 shares of Common Stock reserved for
issuance pursuant to options outstanding under the Company's 1996 Stock
Option Plan and 1996 Stock Incentive Plan at a weighted exercise price of
$2.21 per share. On October 23, 1996, the Company terminated the 1996
Stock Option Plan and adopted the 1996 Stock Incentive Plan and, on
November 24, 1996, amended the 1996 Stock Incentive Plan and adopted the
1996 Employee Stock Purchase Plan and reserved 1,250,000 and 666,666
shares of Common Stock, respectively, for issuance thereunder. Subsequent
to December 31, 1996, the Board of Directors granted options to purchase
an additional 190,398 shares of Common Stock with an exercise price of
$18.80 per share under the Company's 1996 Stock Incentive Plan. See
"Capitalization," "Management--Stock Plans" and Notes 1, 7 and 8 of Notes
to Consolidated Financial Statements.
18
<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of December 31, 1996
was $8.0 million or $0.50 per share of Common Stock. Pro forma net tangible
book value per share is equal to the Company'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 (i) the sale and issuance on
January 30, 1997 of 967,915 shares of Series B Preferred Stock at a price of
$9.35 per share and (b) the conversion of all shares of Preferred Stock into
3,467,915 shares of Common Stock immediately prior to the closing of the
Offering. After giving effect to the sale of shares of Common Stock
offered hereby at an assumed initial public offering price of $ and the
receipt by the Company of the estimated net proceeds therefrom, after
deducting estimated underwriting discounts and estimated offering expenses,
the pro forma net tangible book value of the Company at December 31, 1996
would have been $ , or $ per share. This represents an immediate
increase in pro forma net tangible book value of $ per share to existing
stockholders and an immediate dilution of $ per share to new investors.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $
-------
Pro forma net tangible book value per share before the
Offering...................................................... $ 0.50
Increase per share attributable to new investors............... $
-------
Pro forma net tangible book value per share after the Offering..
-------
Dilution per share to new investors............................. $
=======
</TABLE>
The following table summarizes, on a pro forma basis as of December 31,
1996, the number of shares of Common Stock purchased from the Company, the
total consideration paid to the Company 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):
<TABLE>
<CAPTION>
TOTAL AVERAGE
SHARES PURCHASED CONSIDERATION PRICE
------------------ ----------------- PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1).......... 15,895,136 % $ % $
New investors(1).................. % %
---------- ----- --------- ----- --------
Total........................... 100.0% 100.0%
========== ===== ========= =====
</TABLE>
- --------
(1) The sale of shares by the Selling Stockholder in the Offering will cause
the number of shares held by the existing stockholders to be reduced to
15,495,136, or approximately % of the total number of shares, and will
increase the number of shares to be purchased by new stockholders to
, or % of the total number of shares. Assuming full exercise of
the Underwriters' over-allotment option, the number of shares held by new
stockholders would be increased to shares or % of the total
number of shares outstanding.
The foregoing tables exclude 2,471,213 shares that are issuable upon
exercise of options outstanding as of January 31, 1997 with a weighted average
exercise price of $2.71 per share. See "Management--Stock Plans." To the
extent that outstanding options are exercised in the future, there will be
further dilution to new investors.
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements and related notes
thereto 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, and the year ended December 31, 1996 and the balance sheet
data as of December 31, 1995 and December 31, 1996 are derived from the
Consolidated Financial Statements of the Company 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."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JANUARY 31, 1995 -------------------------------------------------- YEAR ENDED
(DATE OF INCEPTION) MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
TO DECEMBER 31, 1995 1996 1996 1996 1996 1996
-------------------- ---------- ---------- ------------- ------------ ------------
(IN THOUSANDS, EXCEPT SHARE, PER SHARE AND SUPPLEMENTAL OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $ 274 $ 436 $ 952 $ 1,434 $ 2,203 $ 5,025
---------- ---------- ---------- ---------- ---------- ----------
Operating expenses:
Marketing and
advertising........... 476 475 678 1,247 2,039 4,439
Selling, training and
support............... 454 362 563 851 1,417 3,193
Technology development. 99 67 78 294 954 1,393
General and
administrative......... 275 134 258 740 1,027 2,159
---------- ---------- ---------- ---------- ---------- ----------
Total operating
expenses............. 1,304 1,038 1,577 3,132 5,437 11,184
---------- ---------- ---------- ---------- ---------- ----------
Loss from operations.... (1,030) (602) (625) (1,698) (3,234) (6,159)
Other income (expense),
net.................... -- -- (6) 22 108 124
---------- ---------- ---------- ---------- ---------- ----------
Net loss................ $ (1,030) $ (602) $ (631) $ (1,676) $ (3,126) $ (6,035)
========== ========== ========== ========== ========== ==========
Net loss per common and
common equivalent
shares (1)............. $ (.07) $ (.04) $ (.04) $ (.11) $ (.19) $ (.38)
========== ========== ========== ========== ========== ==========
Weighted average common
and common equivalent
shares outstanding (1). 15,270,154 15,270,154 15,270,154 15,900,467 16,769,853 15,800,184
SUPPLEMENTAL OPERATING
DATA:
Purchase requests
received............... 42,600 44,900 73,700 102,700 123,700 345,000
Paying franchises of
subscribing
dealerships............ 253 546 728 978 1,206 1,206
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................................... $ 48 $ 9,062
Working capital (deficit)..................................... (1,099) 5,960
Total assets.................................................. 285 12,298
Total liabilities............................................. 1,275 4,302
Accumulated deficit........................................... (1,030) (7,065)
Stockholders' equity (deficit)................................ (990) 7,996
</TABLE>
- -------
(1) See Note 1.o of Notes to Consolidated Financial Statements for an
explanation of the determination of shares used in computing net loss per
share.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion of the results of operations and financial
condition of the Company should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto included elsewhere in this
Prospectus. This discussion contains forward-looking statements based on
current expectations which 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
Auto-By-Tel is establishing a nationally branded Internet-based marketing
service for new and used vehicle purchasing and related consumer services. The
Company's Web site (www.autobytel.com) enables consumers to gather valuable
automotive information and shop for vehicles and related consumer services
from the convenience of their home or office. This convenience, coupled with
low, haggle-free pricing and quick and courteous service, improves consumers'
overall buying experiences. The Company's Internet-based alternative to
traditional vehicle retailing dramatically reduces participating dealerships'
selling costs per vehicle and increases sales volumes by channeling a large
number of ready-to-buy, well-informed consumers to Auto-By-Tel participating
dealerships. Monthly vehicle purchase requests increased from 10,700 in
January 1996 to 40,000 in December 1996. During the same period, the number of
paying franchises of subscribing dealerships increased from 253 franchises as
of December 31, 1995 to 1,206 franchises as of December 31, 1996. The Company
believes that the growth rates experienced by the Company since inception are
not indicative of future growth rates and that growth will be slower in the
future. Auto-By-Tel LLC was formed in January 1995 and began operations in
March 1995. In July 1995, it introduced its Web site. Effective as of May 31,
1996, the interests of the members of Auto-By-Tel LLC and ABT Acceptance
Company LLC, an affiliate, were transferred to the Company in a tax-free
transaction.
To date, substantially all of the Company's revenues have been derived from
new vehicle marketing fees paid by franchises of subscribing new vehicle
dealerships. To date, less than half of subscribing dealerships have entered
into written marketing agreements with the Company, and such agreements are
cancelable at the option of either party with 30 days' prior notice.
Accordingly, subscribing dealerships may terminate their affiliation with the
Company for any reason, including an unwillingness to accept the terms of the
Company's revised marketing agreement or to join other marketing programs. New
vehicle marketing revenues derived under subscription agreements are
recognized as follows: initial fees are recognized ratably over the first
twelve months following receipt, annual fees are recognized ratably over the
twelve months commencing when due, and monthly fees are recognized when due.
In certain instances, the Company will waive a newly subscribing dealership's
monthly fees for several months. The Company's new vehicle dealer fees are not
calculated on a per vehicle basis. See Note 1.e of Notes to Consolidated
Financial Statements.
As of December 31, 1996 the Company's participating dealership base
consisted of (i) 1,206 paying franchises of dealerships, (ii) 509 non-paying
franchises affiliated with paying dealerships (collectively, "subscribing
dealerships") and (iii) approximately 230 "trial dealers." A subscribing
dealership is comprised of one or more franchises with typically high volume
vehicle sales (such as Ford or Toyota). A subscribing dealership may sell
vehicles from multiple manufacturers and therefore have multiple subscribing
dealer franchises. Dealerships pay initial, annual and monthly fees per
franchise to subscribe to the Company's nationally branded Internet-based
marketing program. Non-paying franchises are associated with lower volume
vehicle manufacturers (such as Audi, Saab or Suzuki) and receive purchase
request referrals without paying fees to Auto-By-Tel. The Company enters into
informal arrangements with potential dealership participants on a trial basis
in order to assist the Company and the dealership in evaluating the
effectiveness of the Auto-By-Tel program at such dealerships. The Company
refers consumers to trial dealerships but does not collect fees.
21
<PAGE>
In order to generate additional revenues, attract more consumers to its Web
site and dealerships to its program and remain competitive, the Company must
successfully develop, market and introduce new services. The Company believes
that to achieve its objectives it will need to generate a majority of its
future revenues from new services. These new services will leverage the
Company's existing network of dealerships. The Company's used vehicle
marketing program is expected to commence in the first quarter of 1997. The
Company will charge each new vehicle dealership which participates in the
Company's used vehicle program separate signup and annual fees. In addition,
the Company intends to charge daily listing fees for each used vehicle
marketed through the used vehicle program. In October 1996, the Company
entered into an agreement with Chase Manhattan pursuant to which Chase
Manhattan will offer vehicle loans to consumers with prime (higher quality)
credit ratings referred by the Company and pay the Company and the related
subscribing dealership an origination fee on each loan. The Company's
financing program with Chase Manhattan is expected to become available to
purchasers of new vehicles in the first quarter of 1997. Additionally, the
Company expects to begin offering financing to purchasers with sub-prime
(lower quality) credit ratings in the second quarter of 1997. Finance program
revenues will be recognized in the month the loan is originated. The Company
also plans to offer leasing through a major financial institution in the
second quarter of 1997. In August 1996, the Company began offering vehicle
insurance to its consumers through AIG, a major insurance underwriter, and
recently began offering a direct hyperlink to AIG's Web site. In October 1996,
the Company received an insurance brokerage license from the State of
California. Subsequent to receipt of this license, the Company became eligible
to receive referral fees from AIG. Fees due the Company under the insurance
program are calculated as a percentage of the net premiums collected by AIG
and revenues are recognized by the Company as premiums on the underlying
policies are earned by AIG.
The Company first recognized revenues from operations in March 1995.
Accordingly, the Company has only a limited operating history upon which an
evaluation of the Company and its prospects can be based, and this limited
operating history makes the prediction of future operating results difficult
or impossible. In addition, the Company believes that, in order to achieve its
objectives, it will need to significantly increase revenues from existing
services and generate revenues from new services, such as the planned used
vehicle buying service and the planned vehicle financing, leasing and
insurance policy referral services. There can be no assurance that the Company
will successfully introduce or generate sufficient revenues from such
services. The Company had an accumulated deficit as of December 31, 1996 of
$7.1 million. In addition, the Company expects to incur substantial operating
losses in future periods. The Company's future prospects 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 address these risks, the Company must, among other things,
continue to send vehicle purchase requests to dealers that result in sales in
sufficient numbers to support the marketing fees charged by the Company,
respond to competitive developments, increase its brand name visibility,
successfully introduce new services, continue to attract, retain and motivate
qualified employees, and continue to upgrade and enhance its information
systems technologies to accommodate expanded service offerings and increased
consumer traffic. There can be no assurance that the Company will be
successful in addressing such risks. In addition, although the Company has
experienced rapid revenue growth in recent periods, historical growth rates
will not be sustainable and are not indicative of future operating results,
and there can be no assurance that the Company will achieve or maintain
profitability.
The introduction of new services by the Company's competitors, market
acceptance of Internet-related services in general and, in particular, demand
for the Company's services, and the introduction by the Company of new
services and market acceptance of such services may also result in significant
fluctuations in quarterly operating results. In addition, as a strategic
response to changes in the competitive environment, the Company may from time
to time make certain pricing or marketing decisions or establish strategic
relationships that could have a material adverse effect on the Company's
business, results of operations or financial condition. In particular, the
Company may need to revise the marketing fees it charges to subscribing
dealers. There can be no assurance that subscribing dealerships will continue
to participate in the Company's marketing program or agree to future fee
increases. Currently, less than half of subscribing dealerships have entered
into written marketing
22
<PAGE>
agreements with the Company and these subscribing dealerships may cancel
subscriptions on 30 days' prior notice. As a result, quarterly sales and
operating results may vary significantly in response to any significant change
in the number of subscribing dealerships. In December 1996, the Company
commenced an effort to have all subscribing dealerships execute revised
marketing agreements with the Company, which have been revised to provide,
among other things, that such dealerships will not participate in any other
Internet-based or online program with attributes similar to those of the Auto-
By-Tel program. At the same time, the Company commenced a program to have all
subscribing dealerships enter into written agreements relating to the Auto-By-
Tel financing program. As of January 30, 1997, approximately 24% and 13% of
all subscribing dealers had signed the revised marketing agreement and the
financing agreement, respectively. The Company believes that some of its
dealers may resist signing written agreements and there can be no assurance
that the Company will be able to convince its subscribing dealers to enter
into written agreements with the Company or revise existing agreements or that
the Company's efforts to cause subscribing dealers to sign these agreements
will not result in the subscribing dealers terminating their relationship with
Auto-By-Tel.
Much of the Company's advertising is placed on Web sites maintained by
online service providers and online search engine companies. The Company's
advertising agreements with online service providers and search engine
companies are generally short-term contracts or are otherwise cancelable on
short notice. There can be no assurance that these advertisers will not cancel
such contracts, or that competitors will not be able to displace Auto-By-Tel
from its preferred advertising arrangements with such companies. The intense
competition in the sale of Internet advertising, including competition from
other vehicle marketing services, has resulted in a wide range of rates quoted
by different vendors for a variety of advertising services. This makes it very
difficult to project future levels of Internet advertising costs and
availability of prime advertising space. The Company has also entered into
agreements with automotive information services, such as Edmunds and Microsoft
CarPoint, to display the Company's services on their Web sites. These
agreements require the Company to pay such entities a fee for each user who
submits a vehicle purchase request to Auto-By-Tel from their sites.
Accordingly, any increase in the volume of purchase requests will result in
increased advertising costs, but revenue from dealers will not necessarily
increase thereafter. The Company is also incurring significant expenses to
increase awareness of its Internet-based marketing service in print and
television media. The Company expects these expenses to increase
significantly, particularly in the first half of 1997. In the fourth quarter
of 1996, the Company began to advertise on cable television. In the first
quarter of 1997, the Company commenced advertising on network television,
including a 30 second commercial which aired during the Super Bowl.
As a result of the Company's limited operating history, the Company lacks
sufficient historical financial and operating data on which to base operating
results. The Company's expense levels are based in part on its expectations as
to future revenues, which may vary in relation to increases or decreases in
the number of dealerships which subscribe to the Company's marketing program.
The Company's inability to adjust spending in a timely manner to compensate
for any unexpected revenue shortfall would have a material adverse effect on
the Company's business, results of operations and financial condition. In
addition, the Company anticipates significant increases in costs and expenses
as a result of planned increases in its marketing and advertising efforts,
dealership training and support, development of affiliate programs relating to
vehicle insurance and financing, and the introduction of a used vehicle buying
program. The Company also anticipates significant additions to its managerial,
technical, sales and marketing, and administrative personnel in order to
support the Company's growth and business objectives. To the extent that such
expenses exceed, precede or are not subsequently followed by increased
revenues, the Company's business, results of operations and financial
condition will be materially adversely affected.
Significant fluctuations in future quarterly operating results may also be
caused by general economic conditions or traditional seasonality in the
automobile and light duty truck markets, which may result in fluctuations in
the level of purchase requests completed by consumers or adversely affect
demand for the Company's existing and planned services. The foregoing factors
make it likely that, in some future quarters, the Company's operating results
will be below the expectations of the Company, securities analysts or
investors. In such event, the trading price of the Common Stock would likely
be materially and adversely affected.
23
<PAGE>
RESULTS OF OPERATIONS
The following tables set forth certain unaudited quarterly financial
information for the eight quarters ended December 31, 1996. In the opinion of
management, this information has been prepared substantially on the same basis
as the financial statements appearing elsewhere in this Prospectus, and all
necessary adjustments (consisting only of normal recurring adjustments and
certain non-recurring adjustments) have been included in the amounts stated
below to present fairly the unaudited quarterly results when read in
conjunction with the audited consolidated financial statements of the Company
and related notes thereto appearing elsewhere in this Prospectus. The
operating results for any quarter are not necessarily indicative of the
operating results for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------------
SEPT.
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, 30, DEC. 31,
1995(1) 1995 1995 1995 1996 1996 1996 1996
-------- -------- --------- -------- -------- -------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $ 3 $ 18 $ 77 $ 176 $ 436 $ 952 $ 1,434 $ 2,203
---- ----- ----- ----- ------ ------ ------- -------
Operating expenses:
Marketing and
advertising........... 6 38 130 302 475 678 1,247 2,039
Selling, training and
support............... 13 98 136 207 362 563 851 1,417
Technology development. 6 28 44 21 67 78 294 954
General and
administrative........ 14 73 83 105 134 258 740 1,027
---- ----- ----- ----- ------ ------ ------- -------
Total operating
expenses........... 39 237 393 635 1,038 1,577 3,132 5,437
---- ----- ----- ----- ------ ------ ------- -------
Loss from operations.... (36) (219) (316) (459) (602) (625) (1,698) (3,234)
Other income (expense),
net.................... -- -- -- -- -- (6) 22 108
---- ----- ----- ----- ------ ------ ------- -------
Net loss................ $(36) $(219) $(316) $(459) $ (602) $ (631) $(1,676) $(3,126)
==== ===== ===== ===== ====== ====== ======= =======
</TABLE>
- --------
(1)Period from the Company's inception on January 31, 1995.
REVENUES
Revenues were $274,000 in 1995 and $5.0 million in 1996. Revenues increased
each successive quarter, from $3,000 in the first quarter of 1995 to $176,000
in the fourth quarter of 1995 to $436,000 in the first quarter of 1996 to $2.2
million in the fourth quarter of 1996. The growth in revenues was primarily
due to an increase in the number of paying subscribing dealerships in the
Company's new vehicle marketing programs from 253 as of December 31, 1995 to
1,206 as of December 31, 1996, and, to a lesser extent, increases in average
dealership fees.
Since its inception in January 1995, the Company has derived substantially
all of its revenues from fees paid by its paying subscribing new vehicle
dealerships. Currently, these fees typically consist of (i) initial
subscription fees ranging from $2,500 to $4,500, (ii) annual fees of $2,500
and (iii) monthly fees ranging from $250 to $1,500. Under the Company's
marketing agreements, which less than half of subscribing dealerships have
signed, the Company may typically increase or decrease dealership fees with 30
or 60 days prior notice. The Company intends to continuously review its
pricing structure and adjust dealership fees in a manner commensurate with its
ability to reduce a dealership's selling costs.
MARKETING AND ADVERTISING
Marketing and advertising expenses have historically consisted primarily of
referral fees paid to online automotive information providers, online service
providers and online search engine companies which recommend and refer
consumers to the Auto-By-Tel Web site or allow consumers to complete Auto-By-
Tel
24
<PAGE>
vehicle purchase requests on their Web sites. Other marketing and advertising
expenses include print advertising, public relations expenses, salaries and
associated expenses related to the Company's marketing personnel. Marketing
and advertising expenses were $476,000 in 1995 and $4.4 million in 1996.
Marketing and advertising expenses increased each successive quarter, from
$6,000 in the first quarter of 1995 to $302,000 in the fourth quarter of 1995
to $475,000 in the first quarter of 1996 to $2.0 million in the fourth quarter
of 1996. Marketing and advertising expenses increased due to increased
referral fees paid as a result of increased vehicle purchase requests,
increased print advertising, and the addition of marketing and advertising
employees as well as national print and television branding efforts. The
marketing and advertising staff grew from two employees as of December 31,
1995 to five employees as of December 31, 1996. The Company anticipates that
the overall level of marketing and advertising expenditures will increase
significantly in the future, particularly in the first half of 1997 in
connection with the Company's efforts to further increase awareness of the
Auto-By-Tel brand name. The Company commenced cable television advertising in
the fourth quarter of 1996 and launched network television advertising in the
first quarter of 1997. Due to seasonal variations in the timing of marketing
and advertising expenditures, the Company anticipates that marketing and
advertising expenses will vary significantly from quarter to quarter.
SELLING, TRAINING AND SUPPORT
Selling, training and support expenses consist primarily of dealer training
and support, salaries and related costs for customer service personnel and
travel and entertainment. Selling, training and support expenses were $454,000
in 1995 and $3.2 million in 1996. Selling, training and support expenses
increased each successive quarter, from $13,000 in the first quarter of 1995
to $207,000 in the fourth quarter of 1995 to $362,000 in the first quarter of
1996 to $1.4 million in the fourth quarter of 1996. Selling, training and
support expenses increased primarily as the result of the addition of selling,
training, and support staff and the associated overhead and employment costs.
Selling, training and support staff grew from 12 employees as of December 31,
1995 to 39 employees (including two in Canada) as of December 31, 1996.
TECHNOLOGY DEVELOPMENT
Technology development expenditures are charged to expense as incurred and
consist primarily of personnel and related compensation costs and contract
labor to support software development and configuration and implementation of
the Company's Internet, telecommunications and support system infrastructure.
Technology development expenses have increased significantly since the
Company's inception, from $6,000 in the first quarter of 1995 to $67,000 in
the first quarter of 1996 to $954,000 in the fourth quarter of 1996.
Technology development expenses increased primarily as a result of increased
third party software development costs and increased costs associated with the
increase in technical headcount from one employee as of March 31, 1996 to 12
employees as of December 31, 1996 and, to a lesser extent, additional indirect
costs associated with the Company's expanded technology development efforts.
These increased expenditures were necessary to support the Company's
development of its Dealer Realtime System, the used vehicle program software
and systems, and the rollout of the financing and lease programs.
GENERAL AND ADMINISTRATIVE
General and administrative expenses consist primarily of salaries of
financial and administrative personnel, a portion of salaries of other
managerial personnel and related travel expenses, as well as legal and
accounting expenses. General and administrative expenses increased each
successive quarter, from $14,000 in the first quarter of 1995 to $105,000 in
the fourth quarter of 1995 to $134,000 in the first quarter of 1996 to $1.0
million in the fourth quarter of 1996. General and administrative expenses
increased primarily as a result of increased accounting and legal expenses,
and the addition of administrative and financial staff. The general and
administrative staff grew from four employees as of December 31, 1995 to 17
employees as of December 31, 1996. The Company intends to increase the
absolute dollar level of general and administrative expenses in future
periods. The Company anticipates significant additions to its managerial,
technical, sales and marketing and administrative personnel in order to
support the Company's growth and business objectives. To the extent that such
expenses exceed, precede or are not subsequently followed by increased
revenues, the Company's business, results of operations and financial
condition will be materially adversely affected.
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OTHER INCOME (EXPENSE), NET
Other expense in the second and third quarters of 1996 consisted of interest
expense on amounts borrowed from the Company's Chairman, John Bedrosian, and
Michael Fuchs, who subsequently became a director of the Company. These
amounts were loaned to the Company to allow the Company to meet its liquidity
requirements. Following the Company's $15.0 million financing in August 1996,
the Company repaid the amounts borrowed from Mr. Bedrosian, together with
$20,000 of accrued interest expense, and converted the amounts borrowed from
Mr. Fuchs, together with accrued interest, into Series A Preferred Stock. The
Company realized $40,000 and $108,000 of interest income in the third and
fourth quarters, respectively, as a result of increased cash balances derived
from the issuance of Series A Preferred Stock. See Notes 3 and 5.a of Notes to
Consolidated Financial Statements.
INCOME TAXES
No provision for federal and state income taxes has been recorded as the
Company incurred operating losses through December 31, 1996. As of December
31, 1996, the Company had approximately $4.7 million of net operating loss
carryforwards which are available to offset future federal and state taxable
income; such carryforwards expire in various years through 2011. Under the Tax
Reform Act of 1986, the amounts of and the benefits from net operating loss
carryforwards may be impaired in certain circumstances. Events which may cause
such limitations in the amount of available net operating losses which the
Company may utilize in any one year include, but are not limited to, a
cumulative ownership change of more than 50% over a three year period. As of
December 31, 1996, the effect of such limitation, if imposed, has not been
determined. The Company has provided a full valuation allowance on the
deferred tax asset because of the uncertainty regarding its realization. See
Note 4 of Notes to Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1996, the Company had approximately $9.1 million in cash
and short-term investments. Since its inception, the Company has financed its
operations primarily through loans from John Bedrosian, the Company's Chairman
and co-founder, loans from Mr. Michael Fuchs, who subsequently became a
director of the Company, and the issuance of Preferred Stock in August 1996
and January 1997. For fiscal 1995 and 1996, cash used in operating activities
was primarily attributable to the net losses from operations and increases in
accounts receivable, prepaid expenses and other assets, offset to some extent
by increases in deferred income and other current liabilities. For the year
ended December 31, 1996, cash used in investing activities was attributable to
purchases of property and equipment consisting primarily of computer hardware,
telecommunications equipment, furniture and leasehold improvements.
The Company has no material commitments other than those under the operating
lease for its principal executive offices and certain marketing and
advertising agreements and arrangements. The Company anticipates a substantial
increase in its capital expenditures and operating lease expenses in 1997. The
Company believes that the net proceeds from this offering, along with current
cash and cash equivalents, will be sufficient to fund its working capital and
capital expenditure requirements for at least the next twelve months.
Thereafter, if cash generated from operations is insufficient to satisfy the
Company's liquidity requirements, the Company may seek to issue additional
equity or debt securities or establish a credit facility. The issuance of
additional equity or convertible debt securities could result in additional
dilution to the Company's shareholders. There can be no assurance that
financing will be available to the Company in amounts or on terms acceptable
to the Company. See "Use of Proceeds" and Notes 2, 3, 5, 6, 7 and 8 of Notes
to Consolidated Financial Statements.
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BUSINESS
OVERVIEW
Auto-By-Tel is establishing a nationally branded Internet-based marketing
service for new and used vehicle purchasing and related consumer services. The
Company's Web site (www.autobytel.com) enables consumers to gather valuable
information about automobiles and light duty trucks ("vehicles") and shop for
vehicles and related consumer services from the convenience of their home or
office. This convenience, coupled with low, haggle-free pricing and quick and
courteous service, improves consumers' overall buying experiences. The
Company's Internet-based alternative to traditional vehicle retailing
dramatically reduces participating dealerships' selling costs per vehicle and
increases sales volumes by channeling a large number of ready-to-buy, well-
informed consumers to Auto-By-Tel dealerships. The Company's Internet-based
services are free to consumers and, to date, the Company has derived
substantially all of its revenues from fees paid by subscribing dealerships.
Consumers wishing to purchase new vehicles through the Company's services
complete a request available on the Company's and its partners' Web sites
which specifies the type of vehicle and accessories desired, along with the
consumer's phone number, e-mail address and zip code. The purchase request is
then forwarded to the Auto-By-Tel participating dealership located in the
consumer's geographic area. Typically, consumers are contacted by dealers
within 48 hours with a firm, competitive quote for the vehicle, eliminating
the unwelcome and time-consuming task of negotiating with the dealer and thus
facilitating completion of the sale. As of December 31, 1996 the Company's
Internet-based dealership base consisted of (i) 1,206 paying franchises of
dealerships, (ii) 509 non-paying franchises affiliated with paying dealerships
(collectively, "subscribing dealerships"), and (iii) approximately 230 "trial
dealers." From the commencement of operations in March 1995 to December 31,
1996, the Company received more than 385,000 new vehicle purchase requests.
INDUSTRY BACKGROUND
Information and Commerce on the Internet
The Internet is a network of computers which enables users to access and
share information and conduct business transactions. Much of the recent growth
in the use of the Internet by businesses and individuals has been driven by
the emergence of the World Wide Web (the "Web") which enables non-technical
users to exploit the resources of the Internet. International Data Corporation
("IDC") estimates that the number of Web users increased from 16.1 million at
the end of 1995 to 34.6 million at the end of 1996 and that this number will
increase to 163 million by the end of the year 2000.
The emergence of the Internet as a significant communications medium is
driving the development and adoption of Web content and commerce applications
that offer convenience and value to consumers, as well as unique marketing
opportunities and reduced operating costs to businesses. By hosting
information about products and services on the Web, a company can enable
potential customers in any geographical area to gather relevant, in-depth
information about products and services at their convenience and according to
their preferences. A growing number of consumers have begun to transact
business electronically, such as paying bills, booking airline tickets,
trading securities and purchasing consumer goods, including personal
computers, consumer electronics, compact disks, books and vehicles. Moreover,
online transactions can be faster, less expensive and more convenient than
transactions conducted through a human intermediary. In addition, Web commerce
applications enable businesses to rapidly target and economically manage a
broad customer base and establish and maintain ongoing direct customer
relationships. IDC estimates that the dollar value of goods and services
purchased over the Web will increase from approximately $318 million in 1995
to $95 billion in the year 2000.
The increasing use of the Internet has encouraged information providers to
post their automotive information on the Internet. For example, Kelley Blue
Book (www.kbb.com), Edmund Publications (www.edmund.com), AutoSite
(www.autosite.com), IntelliChoice (www.intellichoice.com) and Microsoft's
CarPoint (carpoint.msn.com) all maintain Web sites that allow consumers to
conduct comprehensive automotive
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research online. The marketing capabilities of the Web, combined with the easy
availability of automotive information, have enabled the establishment of Web-
based vehicle marketing services. Many of these services may be characterized
as either online services sponsored by technology providers with little
understanding of the automobile and light duty truck markets, or Web sites
published by traditional vehicle dealers or manufacturers which do not
effectively utilize the capabilities of the Internet to provide an effective
buying solution.
New Vehicle Retailing
Buying a new vehicle is the second largest purchase an average consumer
makes. According to the National Automobile Dealers Association ("NADA"), the
industry's largest dealer organization, $293 billion was spent by consumers in
the United States in 1995 on new vehicles, representing 14.8 million new
units. Although it attracts significant consumer dollars, the vehicle sales
process has not changed significantly in the last 25 years. In the United
States, new vehicles are sold almost exclusively by approximately 22,000
dealerships franchised by manufacturers.
The excitement of purchasing a new vehicle is often muted by the fear of
being misled, intimidated or pressured into making a purchase decision.
Dealerships typically retain multiple levels of sales personnel trained in
sales, deal closing, finance and insurance. As a result, a consumer is often
faced with the prospect of negotiating with numerous individuals, all of whom
receive compensation based on a percentage of the profits on each sale. This
makes it difficult for a consumer to receive clear information or a fair price
without protracted and unpleasant negotiation. These dynamics often result in
low consumer satisfaction as consumers view sales tactics utilized by some
dealers as self serving, unfair, intimidating or overbearing.
Notwithstanding the magnitude of the new vehicle market, the automotive
dealer infrastructure is under pressure and consolidating. The new vehicle
retailing business is fiercely competitive due to an overabundance of dealers.
A significant number of dealers not only compete against dealers franchised by
other manufacturers, but against dealers located in the same geographical area
who are affiliated with the same manufacturer. In addition, the typical
business model of a new vehicle dealership is capital intensive, requiring
significant investments in inventory, and is characterized by an expensive
sales cost structure and significant pressure to increase per unit gross
profit. These factors have fostered industry consolidation resulting in a 27%
decrease in the number of dealerships in the last 25 years. According to J.D.
Power and Associates, a recognized automobile industry market research firm,
this consolidation trend is likely to continue in the future.
The historic abundance of dealerships and the resulting intense competition
have led to the development of high-pressure sales methods designed not only
to complete the sale of new vehicles, but also to increase per unit gross
profit from additional product sales to the same consumer, such as vehicle
accessories, financing, insurance and extended service contracts. These high-
pressure sales methods have resulted in low consumer satisfaction and low
sales productivity. According to NADA, the productivity of a typical retail
salesperson has essentially remained unchanged over the past 18 years. In
order to overcome this low productivity, a dealership must generate more sales
leads by spending significant amounts to market its franchise, maintain a
large selection of vehicles and improve the physical premises to attract
consumers. These efforts are often accompanied by high priced print and
television advertising. These factors, combined with the high cost of
attracting and retaining the numerous sales personnel required to effect
vehicle sales utilizing current sales methods, have significantly increased
the average cost per new vehicle sold. According to NADA, average labor and
overhead costs incurred per vehicle sold in 1995 totaled approximately $1,120
and average marketing and advertising cost per vehicle sold in 1995 totaled
$399. Increased costs contributed to an average loss to dealers of $22 per new
vehicle sold in 1995.
Low consumer satisfaction and the inefficient nature of traditional vehicle
retailing have left both consumers and retailers seeking an alternative means
of buying and selling automobiles and light duty trucks.
THE AUTO-BY-TEL SOLUTION
Auto-By-Tel is establishing a nationally branded Internet-based marketing
service for new and used vehicle purchasing and related consumer services.
Using the Internet, consumers in the United States and Canada submit
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purchase requests on the Company's and its partners' Web site. Each purchase
request is then forwarded to the Auto-By-Tel dealership located in the
consumer's geographic area. The dealership then telephones the consumer with a
firm, competitive price. By providing an Internet-based alternative to
traditional vehicle retailing, Auto-By-Tel provides the following benefits:
Benefits to Consumers. Using Auto-By-Tel's Internet-based marketing program,
consumers benefit from the convenience and privacy of shopping from their home
or office; online access to a wide range of up-to-date information about
vehicle models, options and dealer costs; receipt of a competitive price
without the need to haggle; and quick and courteous delivery of the vehicle.
Benefits to Dealers. One of the goals of the Auto-By-Tel program is to
significantly reduce dealers' labor and marketing costs attributable to a
vehicle sale. The Company provides participating dealers a high-volume of
quality purchase requests at a low cost. These requests are submitted by
consumers who have indicated their level of purchase commitment and who, in
most cases, have already conducted research on their desired vehicle. As a
result, dealers can complete the sales process more quickly and efficiently
under the Auto-By-Tel program than via traditional sales methods, thereby
reducing a dealer's labor costs. In addition, participating dealers can reduce
their average per vehicle marketing costs by gaining access to a large number
of serious purchasers without incurring the expense of incremental
advertising.
STRATEGY
The Company is committed to being the premier nationally branded, Internet-
based marketing service for new and used vehicles and related consumer
services. Key elements of the Company's strategy include:
Enhancing the Strength of Auto-By-Tel Brand Name. The Company believes that
enhancing the strength of the Auto-By-Tel brand name and positioning itself as
the industry standard for Internet-based, consumer friendly, low cost vehicle
purchasing and related consumer services is critical in its efforts to attract
vehicle buyers and to increase the size of its subscribing dealership base.
The Company further believes that the early stage of Internet commerce and the
Company's leadership in the development of the Internet-based vehicle
purchasing market provide it with an opportunity to establish a level of
branding not typically available to newer companies. A key element of the
Company's strategy is to devote significant management and financial resources
to brand name-building activities, including advertising in online and
traditional print and television media, public relations initiatives and
participation in industry conferences and trade shows. The Company
aggressively promotes awareness of its brand name primarily through (i)
strategic marketing relationships with Internet-based automotive information
providers including AutoSite, Edmund's and Microsoft CarPoint, (ii) Internet
advertising (sometimes on an exclusive or preferred basis) on online search
engines, such as Excite, Magellan, and WebCrawler, (iii) online service
providers, such as America Online's Digital Cities, CompuServe and Prodigy and
(iv) in popular automotive and Internet related magazines. Recently, the
Company began to place advertisements in a number of additional leading
magazines and on television in order to reach a wider audience, strengthen the
awareness of the Auto-By-Tel brand name and drive consumer traffic to the
Company's Web site.
Maintaining, Strengthening and Expanding Online and Internet
Relationships. Contractual agreements with online services, Internet search
engine companies, and other service providers which recommend and refer
consumers to the Company or allow consumers to complete purchase requests on
their Web sites are critical to increasing the Company's visibility on the
Internet, enhancing the strength of its brand name and generating a high
volume of purchase requests. For example, the Company has exclusive or
preferred position on Web sites maintained by AutoSite, Edmund's and Microsoft
CarPoint. The Company intends to strengthen its relationships with existing
Internet referral sources and continue to seek exclusive or preferred
arrangement with such sources. In addition, the Company continues to seek
opportunities to promote its services on other Web sites or to enter into
strategic alliances with or acquisitions of complementary service providers.
Continuing to Expand and Upgrade Technology Infrastructure. The Company
believes that its future success is significantly dependent on its ability to
continuously improve the speed and reliability of its Web site, accommodate
increasing traffic and enhance communication functionality with its consumers
and dealers. The
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Company has recently added the capability to communicate with dealers online
and upload information, including photographs on a weekly basis about their
used vehicle inventory, to the Company's used vehicle database. The Company
plans to continue to expand its technological infrastructure, enhance the
security and reliability of the Company's Web site and develop additional
sophisticated software applications and user interfaces to accommodate planned
services.
Expanding Dealership Base and Improving Dealer Service. The Company believes
that the size and quality of its participating dealership base is critical to
the success of its business. The Company intends to capitalize on its
marketing and advertising programs to further the expansion of its dealership
base. This expansion would provide the Company with the ability to increase
its geographic penetration and improve its ability to service the purchase
requests of a greater number of consumers. In addition, the Company believes
that increased consumer satisfaction with the vehicle purchasing experience is
essential to the success and differentiation of its services. Accordingly, the
Company maintains an extensive training program for its participating
dealerships which includes the initial and ongoing training of dealership
representatives and emphasizes rapid response times, a firm competitive price
quote and fair and honest treatment of its consumers. The Company regularly
solicits consumer feedback and monitors dealership compliance with the Auto-
By-Tel program.
Leveraging Existing Auto-By-Tel Brand Name and Marketing Model with
Additional Services. The Company continually evaluates opportunities to
leverage the Auto-By-Tel brand name and its Internet-based vehicle purchasing
model by introducing new and complementary services. For example, the Company
has an alliance with AIG to offer the Company's consumers high-quality and
price competitive vehicle insurance and an agreement with Chase Manhattan to
provide competitive new and used vehicle financing to consumers with prime
credit ratings. The Company is negotiating similar relationships with several
leading financial institutions to provide new and used vehicle leasing
services and vehicle loans to sub-prime credit consumers. The Company also
plans to introduce used vehicle marketing services and an affinity program to
further penetrate its potential consumer base. The Company currently expects
these new service offerings to be launched in the first half of 1997.
Pursuing International Growth Opportunities. The Internet and online service
providers enable the Company to market its services internationally. The
Company believes that its vehicle purchasing model can be adapted for use in
countries in which the vehicle retailing industry faces structural
inefficiencies and consumer dissatisfaction similar to that experienced in the
United States. The Company recently introduced its service in Canada and as of
December 31, 1996, had a subscribing dealership base of 72 Canadian franchises
and, in the fourth quarter of 1996, processed over 3,000 purchase requests
from Canadian consumers.
Leveraging Proprietary Consumer Information. The Company's growing database
may, in the future, have the potential to provide dealers and manufacturers
with improved information regarding consumer preferences which they may
utilize to streamline purchasing and production decisions.
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PRODUCTS AND SERVICES
The Company's existing and currently planned Internet-based services
include:
<TABLE>
<CAPTION>
EXISTING
SERVICES LAUNCH DATE DESCRIPTION
-------- ------------ ---------------------------------------------------
<S> <C> <C>
New vehicle March 1995 This service offers a cost-effective new vehicle
marketing purchasing method which allows consumers to submit
service purchase requests to local dealers who promptly
contact the consumer with a firm, competitive price
over the telephone.
Insurance August 1996 The Company entered into a marketing agreement with
marketing AIG in August 1996, to provide a vehicle insurance
service service through the Company's Web site. This
service allows users to submit insurance
applications online and rapidly receive automobile
insurance at competitive rates.
<CAPTION>
ANTICIPATED
PLANNED SERVICES LAUNCH DATE DESCRIPTION
---------------- ------------ ---------------------------------------------------
<S> <C> <C>
Used vehicle Q1-Q2 1997 This service will allow consumers to purchase high-
marketing quality used vehicles available at local area
service dealerships by searching an extensive database of
used vehicles which have been certified to meet
certain Auto-By-Tel standards.
Financing and leasing services In October 1996, the Company entered into an
New vehicles agreement with Chase Manhattan, pursuant to which
. Prime credit Q1 1997 Chase Manhattan will receive online credit
. Sub-prime credit Q2 1997 applications from consumers referred by the
. Leasing Q2 1997 Company. In addition, the Company is negotiating
Used vehicle with several leading financial institutions to
. Prime credit Q2 1997 offer financing to new and used vehicle consumers
. Sub-prime credit Q2 1997 with sub-prime credit ratings, as well as new and
. Leasing Q2 1997 used vehicle leasing services.
Credit union Q2 1997 The Company intends to launch a customized
program marketing service to credit unions to assist their
members in purchasing new and used vehicles through
Auto-By-Tel participating dealerships.
Affinity program Q3 1997 Consumers may join the Company's affinity program,
(ABT Mobilist) which will provide discounted services, including
roadside assistance programs, discounted travel
products and special credit card programs.
</TABLE>
New vehicle marketing service. Consumers who purchase new vehicles through
the Company's Web site complete a purchase request over the Internet which
specifies the type of vehicle and accessories the consumer desires, along with
the consumer's phone number, e-mail address and zip code. The purchase request
is then forwarded to the Auto-By-Tel participating dealership located in the
consumer's geographic area and the Company promptly returns an e-mail message
to the consumer informing the consumer of the dealership's name and phone
number and the name of the Auto-By-Tel manager at the dealership. Typically,
the consumer is contacted by the dealership by telephone within 48 hours with
a firm, competitive quote for the vehicle, eliminating the unwelcome and time
consuming task of negotiating with the dealer and thus facilitating completion
of the sale. Consumers usually complete their purchase and take delivery of
their vehicles at the dealership showroom. Generally, within 10 days of the
submission of the consumer's purchase request, the Company contacts the
consumer by e-mail requesting completion of a quality assurance survey on the
Company's Web site that is used by the Company and its dealers to improve the
quality of dealer service and allows the Company to evaluate the sales process
at participating dealerships.
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The Auto-By-Tel network of subscribing dealerships has grown from 367
franchises as of December 31, 1995 to 1,715 franchises as of December 31,
1996. 230 dealers were participating in the Auto-By-Tel program on a non-
paying trial basis as of December 31, 1996.
Insurance marketing services. According to Best Executive Data Service, the
United States' market for total written personal auto insurance premiums
totalled $104 billion in 1995. In August 1996, the Company began offering
vehicle insurance to its consumers through an online program with AIG. The
Company's Web site currently offers a direct hyperlink to the AIG Web site
which enables consumers to fill out applications and, when the service is
fully implemented, be approved for insurance online. The Company's agreement
with AIG provides for fees to the Company to be calculated as a percentage of
the net premiums earned and collected by AIG on policies issued to Auto-By-Tel
consumers.
Used vehicle marketing service. The market for used vehicles in the United
States was estimated by NADA to be $370 billion in 1995, of which $182 billion
represented sales of used vehicles by new vehicle franchised dealers. This
market has been growing rapidly, due primarily to increasing prices for new
vehicles and the large supply of high-quality, late model used vehicles
created by the recent trend toward short-term leasing. Used vehicle
departments at many dealers are more profitable than new vehicle departments.
The Company intends to leverage its brand name and new vehicle dealership
network by launching similar marketing services for used vehicles during the
first half of 1997. Unlike existing Internet services which act as unwieldy
electronic classified ads, the Auto-By-Tel used vehicle program will display
to consumers a wide selection of vehicles available in the consumer's specific
locale, tailored to their individualized search parameters. This display will
eventually provide warranty and price information on the used vehicle,
including updated retail and wholesale prices and the Auto-By-Tel dealership
price, and, when available, a digital photograph of the used vehicle.
Consumers could then place a purchase request for the used vehicle and would
be contacted by the dealer to conclude the sale.
To ensure that the used vehicles being sold through the service are of the
highest quality, dealers are required to certify that their used vehicles meet
Auto-By-Tel certification standards and to provide a nationwide, limited 90
day warranty. Consumers also receive a 72-hour, money-back guarantee on their
purchases which any dealership in the Auto-By-Tel used vehicle program will be
required to honor. Only dealers participating in the new vehicle program will
be eligible to participate in the used vehicle program.
The Company will charge each new vehicle subscribing dealership that wishes
to participate in the Company's used vehicle program a separate and additional
signup and annual fee per franchise. The Company anticipates that these fees
would initially be lower than those charged in the new vehicle program. In
addition, the Company intends to charge daily listing fees for each used
vehicle marketed on the service which will be priced according to the number
of used vehicles a dealer lists with the Auto-By-Tel program.
Finance and leasing services. The Company intends to make financing
available to consumers purchasing new and used vehicles through the Auto-By-
Tel programs. The Auto-By-Tel financing program will be economical, convenient
and private. Vehicle buyers will be able to apply for a loan online at the
time they submit their purchase request for either a new or used vehicle. The
Company believes that the loans and leases offered through its service will be
competitive with those currently available through major financial
institutions.
The Auto-By-Tel financing program will benefit lenders, lessors, consumers,
and dealers. Finance companies and dealers will benefit from reduced paperwork
and processing costs. Consumers will be able to arrive at the dealership with
their loan pre-approved, their credit verification documents in hand, and the
loan paperwork waiting for them. This will enable immediate delivery and allow
the dealer to be more rapidly paid by the lender, thereby accelerating the
dealer's cash flow. The Company believes that the convenience of attractive
financing, combined with a firm, competitive price, will increase the closing
rates on sales attributable to Auto-By-Tel purchase request referrals.
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In October 1996, the Company entered into an agreement with Chase Manhattan
to receive credit application for new vehicle financing from consumers with
prime credit ratings who submit purchase requests. The agreement has a term of
three years but may be terminated sooner by Chase Manhattan with six months'
notice or in the event that certain ongoing conditions are not satisfied. The
Company anticipates that, when the service is implemented, consumers will be
able to access Chase Manhattan's credit applications through the Company's Web
site, submit their loan applications online and, depending on the
creditworthiness of the consumer, have their loan requests approved
electronically while they wait. All responses will be routed simultaneously to
the subscribing dealership. The Auto-By-Tel financing program will enable
consumers to receive up front, competitive loans from the privacy of their
home or office, eliminating the need to negotiate a loan with the traditional
car dealership's F&I (finance and insurance) department or visit their local
bank or credit union. Chase Manhattan will pay the Company an origination fee
for most loans and the dealership will be compensated for each loan made to an
Auto-By-Tel consumer. The Company anticipates that this service will be
implemented during the first half of 1997.
The Company is negotiating with several financial institutions to offer new
and used vehicle leasing programs and financing programs for new and used
vehicle purchasers with sub-prime credit ratings. The Company believes that
origination fees will vary depending on the credit qualifications of
applicants. The Company currently expects to launch a financing program for
consumers with sub-prime credit ratings in the second quarter of 1997. The
Company expects to begin offering leasing for new and used vehicles by the end
of the second quarter of 1997.
Credit Union Program. Auto-By-Tel believes that credit unions, which assist
their members in acquiring and financing new and used vehicles, represent an
attractive market for its marketing services. There are presently about 11,800
credit unions in the U.S. with about 70 million members according to Callahan
and Associates, a recognized authority on the credit union industry. Credit
unions account for $80 billion in vehicle loans outstanding as of June 30,
1996. The Company intends to launch a customized program for credit unions to
assist their members in purchasing new and used vehicles through Auto-By-Tel
participating dealers.
The Company's program is designed to ensure that credit union members
receive the same competitive price and courteous service as the Company's
direct Internet customers, through access to Auto-By-Tel's participating
dealers, while allowing credit unions to provide for the financing needs of
their members. The Company's program will offer several Internet-based
solutions targeted toward credit union members.
Affinity program (ABT Mobilist). In order to offer Auto-By-Tel consumers
additional services and encourage them to regularly revisit the Auto-By-Tel
Web site after purchasing their vehicles, the Company intends to begin
offering an Internet-based affinity program during the third quarter of 1997.
This program, which has been developed in conjunction with an affinity
consulting organization, may include various services, including an affinity
credit card, discount travel products, concierge services, discount cellular
phone service, entertainment services and special promotional offerings on
items such as auto parts. Members will accumulate credits to be applied
towards the purchase of automobiles or trucks through an Auto-By-Tel
subscribing dealer. The Company currently expects that consumers will pay an
annual fee for such programs as well as a small commission each time certain
services are utilized. The Company currently anticipates that the annual fee
to subscribers will range from approximately $39 to $59 depending upon the
level of membership.
In order to generate additional revenues, attract more consumers to its Web
site and dealerships to its program and remain competitive, the Company must
successfully develop, market and introduce new services. The Company believes
that to achieve its objectives it will need to generate a substantial portion
of its future revenues from new services. None of these new services has been
fully developed and, in some cases, their introduction has been delayed due to
difficulties encountered in software development encountered by the Company's
Internet partners. There can be no assurance that the Company will
successfully develop or introduce these new services, that such services will
achieve market acceptance or that subscribing dealerships will not view such
new services as competitive to services already offered by such dealerships.
For example, consumers may be reticent to purchase insurance or procure
vehicle financing online. Also, it may be more difficult to
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<PAGE>
educate consumers as to the value of locating used vehicles for purchase
through the Internet since used vehicle purchases are generally thought to
require a greater level of hands-on involvement in the inspection and purchase
of a used vehicle. The Company intends to incur additional expenses to develop
and successfully market such services. To the extent that revenues generated
by such additional services are insufficient to cover such expenses, the
Company's operating results would be adversely affected. Should the Company
fail to develop and successfully market these services, or should competitors
successfully introduce competing services, the Company's business, results of
operations, and financial condition may be materially and adversely affected.
MARKETING AND SALES
The Company believes that enhancing its national brand name recognition and
position as a leading Internet-based marketing service is critical to its
efforts to increase the number of purchase requests and subscribing
dealerships. The growing number of Web sites which offer competing services
and the relatively low barriers to entry in providing Internet services
increase the importance of establishing and maintaining brand name
recognition.
In order to enhance brand name awareness, the Company aggressively markets
its services to vehicle consumers and Internet users by advertising on the
Internet, in print media and on television. The Company has established
marketing programs with many of the leading automotive information providers
on the Internet, including AutoSite, Edmund's and Microsoft CarPoint, and
maintains marketing programs with major online services, such as America
Online's Digital Cities, CompuServe and Prodigy. Auto-By-Tel continues to
position itself as the leading vehicle and related consumer services marketing
program with major Internet search engine companies such as Excite, Magellan,
and Web Crawler. The Company believes that its comprehensive coverage of these
Internet sites helps to increase purchase request volume and will remain a
critical element of the Company's future business.
The Company supplements its coverage of Internet referral sources with
traditional print advertising. The Company has historically focused on
computer user and hobbyist publications and major automotive magazines. The
Company advertises in publications such as Car & Driver, Motor Trend, Road &
Track, and their respective buyers guides, as well as magazines such as
Internet World, OnLine Access and CompuServe to direct traffic to its Web
site. The Company has begun to expand this marketing with a campaign to
accelerate awareness of the Auto-By-Tel brand name and drive traffic to its
Web site through television ads featured on the CNN and MSNBC networks and
C/NET television programs. In the fourth quarter of 1996, the Company
commenced advertising on cable television and, in the first quarter of 1997,
launched national network television advertising (including a 30 second
commercial during the broadcast of the Super Bowl).
The revolutionary nature of the Company's program compared to traditional
vehicle sales methods has also resulted in a significant amount of unpaid
media coverage. To date, the Company has been the subject of over 500
newspaper, magazine, radio and television stories. Articles about the
Company's new vehicle program have appeared in BusinessWeek, Fortune, Time,
and the Wall Street Journal. Television stories featuring the Company have
been aired on the NBC Nightly News and CNN. The Company believes that the
initial media coverage has been an important element in creating consumer
awareness of the Auto-By-Tel program and contributed to early dealership
subscriptions to the program.
In addition to its consumer-oriented marketing activities, which help to
attract participating dealerships, the Company also markets its programs
directly to dealerships by soliciting targeted dealerships, participating in
trade shows, advertising in trade publications, and encouraging subscribing
dealerships to recommend the Auto-By-Tel program to other dealerships.
34
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DEALERSHIP NETWORK AND TRAINING
(GRAPH)
The top half of this page includes a bar graph depicting the information set
forth in the table following immediately thereafter. This data is the number
of paying and non-paying dealers participating in the Auto-By-Tel program from
each of the eight quarters ended December 31, 1996.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Paying Franchises 0 38 111 253 546 728 978 1,206
Non-Paying Franchises 0 15 43 114 308 380 474 509
--- --- --- --- --- ----- ----- -----
*Total Subscribing 0 53 154 367 854 1,108 1,452 1,715
=== === === === === ===== ===== =====
</TABLE>
- --------
* Does not include dealers who were participating on a trial basis. As of
December 31, 1996, the Company had approximately 230 non-paying, trial
dealers.
As of December 31, 1996 the Company's participating dealership base
consisted of (i) 1,206 paying franchises of subscribing dealerships, (ii) 509
non-paying franchises affiliated with paying subscribing dealerships and (iii)
approximately 230 "trial dealers." A subscribing dealership is comprised of
one or more franchises with typically high volume vehicle sales (such as Ford
or Toyota). A subscribing dealership may sell vehicles from multiple
manufacturers and therefore have multiple subscribing dealer franchises.
Dealerships pay initial, annual and monthly fees per franchise to subscribe to
the Company's online marketing program. Non-paying franchises are typically
associated with lower-volume vehicle manufacturers (such as Audi, Saab or
Suzuki) and receive purchase request referrals without paying fees to Auto-By-
Tel. The Company enters into informal arrangements with potential dealership
participants on a trial basis in order to assist the Company and the
dealership in evaluating the effectiveness of the Auto-By-Tel program at such
dealerships. The Company refers consumers to trial dealerships but does not
collect fees. As of December 31, 1996, approximately 230 dealerships were
participating on a trial basis. In order to better serve consumers, the
Company intends to significantly increase the number of participating North
American dealership franchises by the end of fiscal 1998, but there can be no
assurance that it will be able to do so.
35
<PAGE>
Although the number of the Company's subscribing dealerships has increased
in every quarter since the Company's inception, the Company periodically
terminates agreements or relationships with subscribing dealerships when the
Company receives repeated complaints from consumers regarding dealer sales
practices that conflict with the Auto-By-Tel marketing program. Currently,
less than half of subscribing dealerships have entered into written agreements
with the Company. Dealership marketing agreements have a five year term but
are cancelable by either party with 30 days notice. In fiscal 1996, the loss
of dealerships due to terminations by the Company and cancellations by
dealerships totaled 104 and 90 franchises, respectively. These losses were
more than offset by new subscribing dealerships during the same period.
In December 1996, the Company commenced an effort to have all subscribing
dealerships execute written marketing agreements with the Company which have
been revised to provide, among other things, that such dealerships will not
participate with any other program with attributes similar to those of the
Auto-By-Tel program. At the same time, the Company has begun a program to have
all subscribing dealerships enter into written marketing agreements relating
to the Auto-By-Tel financing program. As of January 30, 1997, 1996,
approximately 24% and 13% of all paying subscribing dealerships had signed the
revised marketing agreement and the financing agreement, respectively. The
Company believes that some of its dealers may resist signing written
agreements and there can be no assurance that the Company will be able to
convince subscribing dealerships to enter into written agreements with the
Company or revise their existing agreements or that the Company's efforts to
cause subscribing dealerships to revise their agreements will not result in
subscribing dealerships terminating their relationship with Auto-By-Tel.
In addition, should the volume of purchase requests increase, the Company
anticipates that it will need to reduce the size of the exclusive territories
currently allocated to dealerships in order to serve consumers more
effectively. Dealers may be unwilling to accept reductions in the size of
their territories and may, therefore, terminate their relationship, refuse to
execute formal agreements with the Company or decide not to join the Company's
marketing program. A material decrease in the number of subscribing
dealerships, or slower than expected growth in the number of subscribing
dealerships, could have a material adverse effect on the Company's business,
results of operations or financial condition. The Company may also become
unable to refer an adequate number of consumers to participating dealerships.
There can be no assurance that the Company will be able to continue to attract
additional dealerships and retain existing dealerships.
Auto-By-Tel dealerships are located in every major metropolitan area in the
United States and Canada. In December 1996, the Company's computer systems
were able to match and electronically route 92% of total purchase requests to
participating dealerships. The remaining 8% of purchase requests were received
from consumers in unassigned territories and were manually assigned and
subsequently electronically routed to dealers. Auto-By-Tel dealerships are
often leaders in their respective markets. Of the ten largest dealership
holding companies (according to the Automotive News 1996 Data Book), nine
participate in the Company's new vehicle marketing program at some level. Size
is not always a sufficient criterion, however, in the selection of Auto-By-Tel
participating dealers. Auto-By-Tel is only interested in establishing
relationships with dealers which share the Company's commitment to improving
consumer service in the vehicle retailing industry. To meet this goal, the
Company requests that participating dealerships have their representatives
trained in the Auto-By-Tel marketing program, dedicate electronic and human
resources to the Auto-By-Tel system and comply with the Auto-By-Tel guidelines
of rapid consumer response, full disclosure, competitive and up-front pricing
communicated by telephone and the selection of an employee to be the dedicated
Auto-By-Tel manager. To further increase consumer satisfaction and reduce
dealership costs, the Company discourages dealerships from using commissioned
salespersons and the accompanying layers of personnel to interface with Auto-
By-Tel consumers.
The Company trains Auto-By-Tel dealers over the telephone, via satellite
seminars, at the Company's headquarters in Irvine, California, at regional
training centers and at dealerships' premises. The Company's staff strives to
shift dealer salespersons away from traditional vehicle selling techniques and
to the Auto-By-Tel approach. Special emphasis is placed upon telephone skills
and addressing consumer questions and concerns. Generally, within ten days of
the submission of a vehicle purchase request, the Company contacts the
consumer by e-mail requesting completion of a quality assurance survey on the
Company's Web site that is used by the
36
<PAGE>
Company and dealers to improve the quality of dealer service and allows the
Company to evaluate the sales process at participating dealers. Dealerships
that fail to abide by the Auto-By-Tel program or who receive repeated consumer
complaints are terminated from the Auto-By-Tel program.
Auto-By-Tel participating dealerships are assigned exclusive territories
based upon specific zip codes. Auto-By-Tel assigned regions tend to be larger
than the traditional dealership region assigned by automobile manufacturers,
in order to allow the Company to generate sufficiently high volume to the
subscribing dealership to make participation in the Auto-By-Tel program
attractive. Pursuant to an agreement with the Texas Department of
Transportation, Auto-By-Tel cannot effectively guarantee exclusive territories
to dealerships located in Texas, and dealership sign-up and annual fees in
Texas are required to be uniform while monthly fees are based solely on
population density in a given zip code.
COMPETITION
The Company's vehicle purchasing services compete against a variety of
Internet and traditional vehicle buying services and automotive brokers. In
the Internet-based market, the Company competes for attention with other
entities which maintain similar commercial Web sites. The Company also
competes indirectly against vehicle brokerage firms and affinity programs
offered by several companies, including Price Costco and Wal-Mart. Like the
Company's services, the services offered by competing Web sites, automotive
brokerage firms and affinity programs seek to increase consumer satisfaction
and reduce vehicle purchasing costs.
Although the Company does not currently compete directly with vehicle
dealers and manufacturers, such competition would arise in the future if
dealers and manufacturers introduced competing Web sites or developed
cooperative relationships among themselves or with online automotive
information providers. Moreover, the Company's ability to achieve its
objectives would be adversely affected if dealers and manufacturers adopted a
low cost, firm price sales model similar to that facilitated by the Auto-By-
Tel program.
The market for Internet-based commercial services is new and competition
among commercial Web sites is expected to increase significantly in the
future. The Internet is characterized by minimal barriers to entry, and
current and new competitors can launch new Web sites at relatively low cost.
Potential competitors could include, but are not limited to, automotive
information service providers, vehicle manufacturers and new and used vehicle
dealers. In order to compete successfully as an Internet commerce entity, the
Company must significantly increase awareness of the Company and its brand
name, effectively market its services and successfully differentiate its Web
site. Many of the Company's current and potential competitors have longer
operating histories, greater name recognition and significantly greater
financial and marketing resources than the Company. Such competitors could
undertake more aggressive and costly marketing campaigns than the Company
which may adversely affect the Company's marketing strategies which could have
a material adverse effect on the Company's business, results of operations or
financial condition.
In addition, as the Company introduces new services, it will compete
directly with a greater number of companies, including vehicle insurers,
lenders and lessors as well as used vehicle superstores, such as CarMax and
Auto Nation. Such companies may already maintain or may introduce Web sites
which compete with that of the Company. There can be no assurance that the
Company can continue to compete successfully against current or future
competitors nor can there be any assurance that competitive pressures faced by
the Company will not result in increased marketing costs, decreased Internet
traffic or loss of market share or otherwise will not materially adversely
affect its business, results of operations and financial condition.
The Company believes that the principal competitive factors affecting the
market for Internet-based vehicle marketing services are the speed and quality
of service execution, the size and effectiveness of the participating
dealership base, competitive dealer pricing, successful marketing and
establishment of national brand name recognition, positioning itself as a
leading Internet-based marketing service, the volume and quality of traffic to
and purchase requests from a Web site and the ability to introduce new
services in a timely and cost-effective manner. Although the Company believes
that it currently competes favorably with respect to such factors, there can
be no assurance that the Company will be able to compete successfully against
current or future competitors with respect to any of these factors.
37
<PAGE>
OPERATIONS AND TECHNOLOGY; FACILITIES
The Company believes that its future success is significantly dependent on
its ability to continuously improve the speed and reliability of its Web site,
enhance communications functionality with its consumers and dealers and
maintain the highest-level of information privacy and transactional security.
The Company maintains all of its own Web server hosting functions and, to
accelerate connectivity, has installed two 1.54 Mbps T-1 lines for outbound
traffic and a 6 Mbps fractional DS/3 line for inbound traffic. The Company has
also recently upgraded its routers and has installed firewall technology to
protect its private network. Continuous system enhancements are primarily
intended to accommodate increased traffic across the Company's Web site,
improve the speed with which purchase requests are processed and heighten Web
site security which will be increasingly important as the Company offers new
services such as vehicle insurance and financing. System enhancements entail
the implementation of sophisticated new technology and system processes and
there can be no assurance that such continuous enhancements may not result in
unanticipated system disruptions. In addition, since launching its first Web
site in July 1995, the Company has experienced system downtime for limited
periods of up to a few hours due to power loss and telecommunications
failures, and there can be no assurance that interruptions will not recur.
Although the Company maintains redundant local offsite backup servers, all of
the Company's primary servers are located at its corporate headquarters and
are vulnerable to interruption by damage from fire, earthquake, power loss,
telecommunications failure and other events beyond the Company's control. The
Company is in the process of developing comprehensive out-of-state disaster
recovery plans to safeguard dealer and consumer information. The Company's
business interruption insurance may not be sufficient to compensate the
Company for all losses that may occur. In the event that the Company
experienced significant system disruptions, the Company's business, results of
operations or financial condition could be materially and adversely affected.
The Company recently implemented its proprietary Dealer Realtime System, a
personal computer-based network which allows participating dealers to receive
consumer purchase requests online shortly after submission by consumers.
Historically, all purchase requests were transmitted through the Company's fax
server to dealers. By complementing the fax server process, the Dealer
Realtime System, is designed to shorten dealer response time to consumers. The
successful implementation of the Dealer Realtime System requires the active
support of the Company's dealership base. To receive consumer purchase
requests online, dealers must purchase or lease the Dealer Realtime System and
train, under the Company's guidance, their personnel. There can be no
assurance that all or most dealerships will acquire the Dealer Realtime System
or adopt the skills necessary to effectively use this system.
In addition, the Company has developed and intends to further develop its
proprietary client/server database applications which allow consumers to
search and display used vehicle information. Such database applications allow
Auto-By-Tel dealerships to upload their inventory, including digitized
photographs of vehicles, to the Company's used vehicle database. Dealerships
participating in the Company's Dealer Realtime System will already have
acquired the equipment necessary to participate in the used vehicle marketing
program. As of January 30, 1997, 118 subscribing dealerships have acquired the
Dealer Realtime System. There can be no assurance that Auto-By-Tel dealerships
will agree to invest in the Dealer Realtime System, or pay the associated
monthly maintenance charges on a timely basis, or at all.
The Company has developed and intends to further enhance systems which allow
consumers to complete and securely transmit online loan applications which
will be forwarded by the Company to the appropriate lender. The Company
anticipates launching these services during the first quarter of 1997.
In addition, the Company is currently in the process of completing a
conversion to a redundant client/server SQL database platform which involves
the integration of several different internal databases used to handle the
Company's consumer and dealer information and transmission requirements as
well as the Company's financial, accounting and record-keeping requirements.
In addition to increasing the overall efficiency of the Company's operations,
the Company anticipates that these new integrated systems could enable Auto-
By-Tel to develop and market new and strategically targeted database services.
No assurance can be given that the implementation of this new platform will
not result in disruptions to the Company's business, such as the loss of data,
errors in
38
<PAGE>
purchase request transmissions, delays in the Company's ability to effect
periodic closings of its accounting records and other similar problems. Any
such disruptions or any failure to successfully implement this new information
system in a timely manner could have a material adverse effect on the
Company's business, results of operations or financial condition.
The Company's services may be vulnerable to break-ins and similar disruptive
problems caused by Internet users. Further, weaknesses in the Internet may
compromise the security of confidential electronic information exchanged
across the Internet. This includes, but is not limited to, the security of the
physical network and security of the physical machines used for the
information transfer. Any such flaws in the Internet or the end-user
environment, or weaknesses or vulnerabilities in the Company's services or the
licensed technology incorporated in such service, would jeopardize the
confidential nature of information transmitted over the Internet and could
require the Company to expend significant financial and human resources to
protect against future breaches, if any, in order to alleviate or mitigate
problems caused by such security breaches. Concerns over the security of
Internet transactions and the privacy of users may also inhibit the growth of
the Internet generally, particularly as a means of conducting commercial
transactions. To the extent that activities of the Company, or third party
contractors, involve the storage and transmission of proprietary information
(such as personal financial information or credit card numbers), security
breaches could expose the Company to a risk of financial loss or litigation or
other liabilities. Any such occurrence could reduce consumer satisfaction in
the Company's services and could have a material adverse effect on the
Company's business, results of operations or financial condition.
The Company's success and ability to compete is dependent in part upon its
proprietary systems and technology. While the Company relies on trademark,
trade secret and copyright laws to protect its proprietary rights, the Company
believes that the technical and creative skills of its personnel, continued
development of its proprietary systems and technology, brand name recognition
and reliable Web site maintenance are more essential in establishing and
maintaining a leadership position. Despite the Company's efforts to protect
its proprietary rights, unauthorized parties may attempt to copy aspects of
the Company's services or to obtain and use information that the Company
regards as proprietary. Policing unauthorized use of the Company's proprietary
rights is difficult. In addition, litigation may be necessary in the future to
enforce or protect the Company's intellectual property rights or to defend
against claims of infringement or invalidity. Misappropriation of the
Company's intellectual property or potential litigation could have a material
adverse effect on the Company's business, results of operations or financial
condition.
All of the Company's operations are centrally located in approximately
13,700 square feet of office space in Irvine, California. Approximately 12,300
square feet is leased through August 1, 2001, and the Company has the option
to renew this lease for an additional five-year period. Approximately 1,400
square feet is separately leased under a sublease through April 30, 1997.
GOVERNMENT REGULATION
The Company believes that its dealer marketing service does not qualify as a
brokerage activity and, therefore, that the Company does not need to comply
with state broker licensing requirements. In Texas, however, the Company was
required to modify its marketing program to include a pricing model under
which subscribing dealerships are charged uniform fees based on the population
density of their particular geographic area and to make its program open to
all dealerships who wish to apply. In the event that individual state
regulatory requirements change or additional requirements are imposed on the
Company, the Company may be required to modify its marketing programs in such
states in a manner which may undermine the program's attractiveness to
consumers or dealers. In addition, in the event that a state deems that the
Company is acting as a broker, the Company may be required to comply with
burdensome licensing requirements of such state or terminate operations in
such state. In each case, the Company's business, results of operations or
financial condition could be materially and adversely affected.
The Company's marketing service may result in changes in the way new and
used vehicles are sold which may be deemed to be threatening by new and used
vehicle dealers who do not subscribe to the Auto-By-Tel program. Such
businesses are often represented by influential lobbying organizations, and
such organizations
39
<PAGE>
may seek to introduce legislation which may impact the evolving marketing and
distribution model which the Company's service promotes. Should legislative or
legal challenges be brought successfully by such organizations, the Company's
business, results of operations or financial condition could be materially and
adversely affected.
As the Company introduces new services, the Company may need to comply with
additional licensing regulations and regulatory requirements. For example, the
Company recently obtained an insurance brokerage license in California and has
begun procuring insurance brokerage licenses in other states to ensure
compliance with applicable insurance regulations, if any, of such states. In
addition, the Company is currently in the process of applying for financial
brokers' licenses in those states in which the Company believes such licenses
are required. Becoming licensed may be an expensive and time-consuming process
which could divert the efforts of management. In the event that the Company
does not successfully become licensed under applicable state insurance or
lending rules or otherwise comply with regulations necessitated by changes in
current regulations or the introduction of new services, the Company's
business, results of operations or financial condition could be materially and
adversely affected.
Additionally, there are currently few laws or regulations directly
applicable to access to or commerce on the Internet. However, due to the
increasing popularity and use of the Internet, it is likely that a number of
laws and regulations may be adopted at the local, state, national or
international levels with respect to commerce over the Internet, potentially
covering issues such as pricing of services and products, advertising, user
privacy and expression, intellectual property, information security, anti-
competitive practices or the convergence of traditional distribution channels
with Internet commerce. In addition, 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 the Company to
additional state sales and income taxes. The adoption of any such laws or
regulations may decrease the growth of Internet usage or the acceptance of
Internet commerce which could, in turn, decrease the demand for the Company's
services and increase the Company's costs or otherwise have a material adverse
effect on the Company's business, results of operations or financial
condition.
EMPLOYEES
The Company experienced significant growth in employment during 1996, and as
of December 31, 1996, the Company had a total of 73 employees (including two
in Canada), compared to 17 employees as of December 31, 1995. Employees as of
December 31, 1996 included nine in management, 41 in marketing, selling,
training and support, 11 engaged in technical activities and 12 administrative
employees. The Company also employs independent contractors for software and
hardware development, which totaled 19 people as of December 31, 1996. None of
the Company's employees is represented by a labor union. The Company has not
experienced any work stoppages and considers its relations with its employees
to be good.
The Company's rapid growth has placed, and is expected to continue to place,
a significant strain on the Company's managerial and technical resources. The
Company's future success depends in significant part upon the continued
service of its key technical and senior management personnel and its
continuing ability to attract and retain qualified sales, marketing, technical
and managerial personnel. As the Company introduces new services, it will need
to hire a significant number of additional managerial, sales, marketing and
technical personnel. Competition for qualified personnel is intense and there
can be no assurance that the Company will be able to retain its key employees
or that it will be able to attract and retain additional highly qualified
personnel in the future.
The Company's performance is substantially dependent on the performance of
its executive officers and key employees, all of whom are employed on an at-
will basis and many of whom have worked together for only a short period of
time. The Company maintains "key person" life insurance in the amount of $7.5
million on the life of Peter R. Ellis, the Company's President and Chief
Executive Officer. However, the loss of the services of Mr. Ellis or one or
more of the Company's other executive officers or key employees would likely
have a material adverse effect on the business, results of operations and
financial condition of the Company. See "Management."
40
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND OTHER KEY EMPLOYEES
The following table sets forth certain information with respect to the
executive officers, directors and other key employees of the Company.
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS AND
DIRECTORS AGE POSITION
---------------------- --- --------
<S> <C> <C>
Peter R. Ellis.......... 50 President, Chief Executive Officer and Director
John C. Bedrosian....... 61 Chairman of the Board
W. Randolph Ellspermann. 50 Senior Vice President of the Company and Chief Operating Officer
of Auto-By-Tel Acceptance Corporation
Robert S. Grimes........ 53 Executive Vice President and Director
Mark W. Lorimer......... 37 Vice President, General Counsel and Secretary
Michael J. Lowell....... 38 Senior Vice President of the Company and Chief Operating Officer
of Auto-By-Tel Marketing Corporation
Brian B. MacDonald...... 39 Vice President Finance and Treasurer
John M. Markovich....... 40 Senior Vice President Finance and Chief Financial Officer
Jeffrey H. Coats (1)(2). 39 Director
Michael Fuchs(1)(2)..... 50 Director
<CAPTION>
OTHER KEY EMPLOYEES
-------------------
<S> <C> <C>
Thomas J. Ciresa........ 55 Director of Used Vehicle Development and Canada Operations
Jacqueline A. Dufort.... 34 Chief Technology Officer
John P. Honiotes........ 49 National Sales Director
</TABLE>
- --------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Peter R. Ellis co-founded the Company and has been President and Chief
Executive Officer since its inception. Mr. Ellis has extensive experience in
the automobile retailing industry. From June 1993 to December 1993, Mr. Ellis
served as Chairman of PEAC Corporation, a retail used vehicle business. From
August 1973 to May 1991, Mr. Ellis was a controlling stockholder and served as
President of P.R. Ellis Corp. (formerly known as CAJ Corporation), a holding
corporation for several companies which owned and operated automobile
dealerships and related businesses in Northern and Southern California and
Arizona. Mr. Ellis' corporations guaranteed in the ordinary course of business
loans made to vehicle purchasers, and, in 1985, the principal amount
outstanding under such guaranteed loans reached an aggregate of approximately
$80 million. As a result of higher than industry standard defaults by vehicle
purchasers in subsequent years, Mr. Ellis' corporations, which then owned
three dealerships, were required to expend significant cash to satisfy these
guarantees. In the early 1990's, vehicle sales decreased significantly as a
result of the then ongoing recession in California. The effects of the
recession, when combined with poor working capital, had a severe impact on Mr.
Ellis' dealership operations. During this period, Mr. Ellis personally
guaranteed additional capital and inventory loans with an aggregate principal
amount in excess of $40 million on behalf of three dealerships. In 1991, Mr.
Ellis closed the three remaining dealerships due to ongoing financial
difficulties. As a result, certain company loans were defaulted. Subsequently,
in response to a creditor's proceedings, Mr. Ellis declared personal
bankruptcy under Chapter 7 of the United States Bankruptcy Code in January
1994. All outstanding debts were discharged in August 1994 by order of the
Bankruptcy Court.
John C. Bedrosian co-founded the Company and has been Chairman of the Board
since its inception. Since September 1993, Mr. Bedrosian has been engaged in
personal investing activities. From August 1985 to September 1993, Mr.
Bedrosian was Senior Executive Vice President of National Medical Enterprises
("NME"), a hospital management company. Mr. Bedrosian holds a B.S. from the
University of California, Los Angeles and an LL.B. from the University of
Southern California. Mr. Bedrosian also served on the Board of
41
<PAGE>
NME from 1976 to September 1994. In 1992, the U.S. Attorney's office commenced
an investigation of a subsidiary of NME for alleged Medicare and Medicaid
billing improprieties. In June 1994, NME reached an out of court settlement
with the U.S. Department of Justice paying fines and penalties of $379
million. Mr. Bedrosian was not involved in these proceedings. In addition, in
1995, the Securities and Exchange Commission (the "SEC") commenced an
examination into potential improper disclosures made by NME in its periodic
reports filed in 1991. Mr. Bedrosian and eight former employees appeared
before the SEC to give testimony relating to the exercise of employee stock
options and disposition of the underlying shares during this period. To date,
the SEC has taken no further action.
W. Randolph Ellspermann joined the Company in July 1996 as Chief Operating
Officer of Auto-By-Tel Acceptance Corporation and, in January 1997, was
appointed a Senior Vice President of the Company. Mr. Ellspermann also serves
as Chief Operating Officer of Auto-By-Tel Insurance Services, Inc. From
November 1993 to June 1996, Mr. Ellspermann was employed by Mark III
Industries, a van conversion company, where he last served as Chief Operating
and Financial Officer. From June 1986 to June 1993, Mr. Ellspermann served at
subsidiaries of Security Pacific Corporation, including five years as Chief
Executive Officer of Security Pacific Information Services and two years as
Chief Financial Officer of Security Pacific Auto Finance. Mr. Ellspermann's
background also includes 13 years with Ford Motor Company and Ford Motor
Credit Company in a variety of finance and management positions.
Mr. Ellspermann holds a B.S. in Industrial Management from Purdue University
and a Masters of Business Administration from the University of Michigan.
Robert S. Grimes has been a director of the Company 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., an 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 LL.B. from the
University of Pennsylvania Law School.
Mark W. Lorimer joined the Company in December 1996 as Vice President,
General Counsel and Secretary. 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. Mr. Lorimer holds a B.S. in Speech from
Northwestern University and a J.D. from the Fordham University School of Law.
Michael J. Lowell joined the Company in October 1996 as Chief Operating
Officer of Auto-By-Tel Marketing Corporation and, in January 1997, was also
appointed a Senior Vice President of the Company. From March 1995 to November
1996, Mr. Lowell served as Vice President and Chief Financial Officer of Alpha
Microsystems, a publicly-held computer hardware and software developer. From
February 1990 to March 1995, Mr. Lowell held various financial and management
positions, most recently as Vice President and Chief Financial Officer, with
Wahlco Environmental Systems, Inc. ("Wahlco"), a publicly-held manufacturer of
environment control equipment. From February 1987 to February 1990, Mr. Lowell
served in various management and financial positions, most recently as Vice
President and Treasurer, with Pacific Diversified Capital Company, a
diversified holding company, the investments of which included a controlling
interest in Wahlco. Prior to working with Wahlco, Mr. Lowell held various
positions with Ducommun, Inc., a publicly-held manufacturer and distributor of
electronic components. Mr. Lowell holds a B.S. in Finance from California
State University at Long Beach and a Masters of Business Administration from
the University of San Diego.
Brian B. MacDonald joined the Company in October 1995 as Chief Financial
Officer and Manager, was appointed Vice President in May 1996 and was
appointed Vice President Finance and Treasurer in January 1997. From April
1990 to October 1994, Mr. MacDonald served as Controller for all of the
subsidiaries of Long Beach Bank, F.S.B. and from December 1992 to October 1994
also managed the operations of the bank's insurance subsidiary. From September
1983 to January 1990, Mr. MacDonald worked at Price Waterhouse L.L.P. in a
variety of divisions, including their audit and high-technology divisions. Mr.
MacDonald holds a B.S. in Business from the University of Southern California.
John M. Markovich joined the Company in January 1997 as Senior Vice
President Finance and Chief Financial Officer. From April 1995 to January
1997, Mr. Markovich served as Vice President Finance and Chief Financial
Officer of Optical Coating Laboratory, Inc., a publicly-held manufacturer of
thin film coated optical products. From May 1993 to February 1995, Mr.
Markovich served as Vice President Finance and Chief
42
<PAGE>
Financial Officer of Electrosci, Inc., an early stage environmental technology
company, and from July 1992 to May 1993, he was Vice President and Chief
Financial Officer of the Norden Fruit Company. From August 1987 to February
1992, Mr. Markovich served as Vice President and Treasurer of Western Digital
Corporation, a publicly-held multinational electronics manufacturer.
Previously, Mr. Markovich worked for Citibank, N.A. as a corporate banking
officer in the bank's high technology group. Mr. Markovich holds a B.S. in
General Business from Miami University and a Masters of Business
Administration from Michigan State University.
Jeffrey H. Coats was elected a director of the Company on August 27, 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
shareholder in the Company, since April 1996. He was also a 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
Industrial 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 is currently in the process of formulating a plan of reorganization. Mr.
Coats is a member of the board of directors of Krause's Furniture, Inc., a
publicly-held company.
Michael Fuchs was elected as a director of the Company on September 25,
1996. Mr. Fuchs was Chairman and Chief Executive Officer of Home Box Office
("HBO"), the world's largest pay-television company, from October 1984 until
November 1995, and Chairman and Chief Executive Officer of Warner Music Group
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 Marvel Entertainment Group, an entertainment and
publishing company, and IMAX Corp., an entertainment film and technology
company. On December 27, 1996, Marvel Entertainment Group filed a voluntary
petition under Chapter 11 of the Bankruptcy Code and is currently in the
process of formulating its plan of reorganization.
Thomas J. Ciresa joined the Company in May 1995 as a regional director and
subsequently launched the customer service and training departments. Since
March 1996 Mr. Ciresa has served as Director of Used Vehicle Development and
Canada Operations. From March 1993 to June 1994, Mr. Ciresa served as Western
Regional Operations Manager for Kia Motors America. From November 1991 to
March 1993, Mr. Ciresa worked as National Sales Manager of Agency Rent-A-Car
and from September 1988 to November 1991 owned and operated a Toyota
franchised vehicle dealership in Eugene, Oregon. From June 1965 to September
1988, Mr. Ciresa served in senior management positions with a variety of
vehicle manufacturers, including Hyundai Auto Canada, Porsche Cars, N.A. and
Toyota Motor Sales, U.S.A., Inc. Mr. Ciresa holds a B.E. from the University
of Miami, Florida.
Jaqueline A. Dufort joined the Company in April 1996 as Director of
Information Technology. Since October 1996, Ms. Dufort has served as Chief
Technology Officer of the Company. From September 1990 to April 1996, Ms.
Dufort served as Director of Information Technology Strategic Planning for
Long Beach Mortgage Company, formerly known as Long Beach Bank, F.S.B. From
November 1986 to August 1990, Ms. Dufort served as Senior Project Manager for
Salomon Brothers Inc. Ms. Dufort holds a B.S. in Computer Science from Embry-
Riddle Aeronautical University and a Masters of Business Administration from
New York University.
John P. Honiotes joined the Company in May 1995 as National Sales Director.
From October 1993 to October 1994, Mr. Honiotes served as regional director of
ABAC, a sub-par lender and from October 1994 to April 1995 as an independent
consultant, in each case developing sub-par programs and systems for use by
automobile dealerships to determine more efficiently the eligibility of sub-
prime credit consumers under the rules of a large number of financing
institutions. From June 1991 to October 1993, Mr. Honiotes served as Director
of Sales at Cush Automotive Group, Escondido, California, an automotive
dealership group, and, from June 1990
43
<PAGE>
to June 1991, as Chief Executive Officer and President of Presidential/AMS.
From August 1988 to May 1990, Mr. Honiotes served as President of After-Market
Profit Plus, Inc., prior to which he served as Senior Vice President, National
Sales Director of AutoMax, an automotive affinity card program. Mr. Honiotes
holds a B.S. in Marketing from Northern Illinois University.
The Board of Directors has currently authorized five members. Members of the
Board of Directors are elected each year at the Company's annual meeting of
stockholders, and serve until the following annual meeting of stockholders or
until their respective successors have been elected and qualified. In
connection with the Series A Preferred Stock financing, Mr. Coats was elected
to the Board of Directors pursuant to the Company's Amended and Restated
Certificate of Incorporation. The provision providing for the Series A
Preferred Stock nominee to the Board of Directors will terminate upon the
closing of the Offering.
Director Compensation
The Company's non-employee directors do not currently receive any cash
compensation for service on the Company's Board of Directors or any committee
thereof, but directors may be reimbursed for certain expenses incurred in
connection with attendance at Board and committee meetings. The Company's 1996
Stock Incentive Plan provides for automatic grants of stock options to non-
employee directors commencing upon the closing of this offering. See "Stock
Plans--1996 Stock Incentive Plan."
Officers of the Company are appointed by the Board of Directors and serve at
its discretion. The Company has entered into indemnification agreements with
each member of the Board of Directors and certain of its officers providing
for the indemnification of such person to the fullest extent authorized,
permitted or allowed by law.
EXECUTIVE COMPENSATION
Summary Compensation. The following table sets forth in summary form the
compensation paid by the Company during the year ended December 31, 1996 to
the Company's Chief Executive Officer and the four most highly paid executive
officers (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
------------------------ ------------
SECURITIES
NAME AND PRINCIPAL UNDERLYING ALL OTHER
POSITION YEAR SALARY ($) (1) BONUS ($) OPTIONS(#) COMPENSATION ($) (2)
------------------ ---- -------------- --------- ------------ --------------------
<S> <C> <C> <C> <C> <C>
Peter R. Ellis.......... 1996 $122,502 $321,167 -- $11,301
W. Randolph Ellspermann. 1996 50,000 -- 125,000 --
Robert S. Grimes........ 1996 90,000 -- 250,000 --
Michael J. Lowell....... 1996 15,000 -- 166,666 --
Brian B. MacDonald...... 1996 85,000 50,000 125,000 1,776
</TABLE>
- --------
(1) Salary data reflect amounts paid for the year ended December 31, 1996 for
the Chief Executive Officer and the Named Officers. Mr. Grimes began
receiving cash compensation on August 1, 1996. The current annualized base
salaries of the Chief Executive Officer and the Named Officers are as
follows: Mr. Ellis--$275,000; Mr. Ellspermann--$120,000; Mr. Grimes--
$180,000; Mr. Lowell--$120,000; and Mr. MacDonald--$120,000.
(2) Includes the following amounts: Mr. Ellis--$3,150 in health benefits, $369
in life insurance payments and $7,782 in automobile expenses; and Mr.
MacDonald--$1,776 in health benefits.
44
<PAGE>
OPTION GRANTS DURING FISCAL 1996
The following table sets forth for the Chief Executive Officer and the Named
Officers and certain information concerning stock options granted during
fiscal 1996. The Company did not grant SARs during fiscal 1996.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(5)
---------------------------------------------------- ---------------------
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(1)(#) FISCAL 1996(2) ($/SHARE)(3) DATE(4) 5%($) 10%($)
---- ------------- -------------- ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Peter R. Ellis.......... -- -- -- -- -- --
W. Randolph Ellspermann. 125,000 5.3% $ 0.60 7/03/06 47,167 119,531
Robert S. Grimes........ 250,000 10.7 0.60 7/03/06 94,334 239,062
Michael J. Lowell....... 166,666 7.1 3.00 10/23/06 314,446 796,868
Brian B. MacDonald ..... 125,000 5.3 0.60 7/03/06 47,167 119,531
</TABLE>
- -------
(1) Represent options granted under the Company's 1996 Stock Option Plan and
the 1996 Stock Incentive Plan. On October 23, 1996, the Board of Directors
terminated the 1996 Stock Option Plan, and no further options may be
granted thereunder.
(2) Based on an aggregate 2,352,066 shares subject to options granted to
employees during fiscal 1996.
(3) Options were granted at an exercise price equal to the estimated fair
market value of the Company's Common Stock at the date of grant. In
determining the fair market value of the Company's Common Stock, the Board
of Directors considered various factors, including the Company's financial
condition and business prospects, its operating results, the absence of a
market for its Common Stock and the risks normally associated with
investments in companies engaged in similar businesses. For accounting
purposes only, the Company recorded deferred compensation expense in
connection with the grant of the options to Mr. Grimes. See Note 7 of
Notes to Consolidated Financial Statements.
(4) The term of each option granted under the 1996 Stock Option Plan is
generally ten years from the date of grant. Options may terminate before
their expiration dates, however, if the optionee's status as an employee
or a consultant is terminated or upon the optionee's death or disability.
Options granted under the Company's 1996 Stock Option Plan and 1996 Stock
Incentive Plan must generally be exercised within 30 days of the
termination of the optionee's status as an employee or consultant of the
Company, or within twelve months after such optionee's death or
disability.
(5) 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 the Company's estimate or projection of the Company's future
Common Stock prices.
45
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN 1996 AND FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth for each of the Named Officers certain
information concerning options exercised during fiscal 1996 and the number of
shares subject to both exercisable and unexercisable stock options as of
December 31, 1996. Also reported are values for "in-the-money" options that
represent the positive spread between the respective exercise prices of
outstanding options and the fair market value of the Company's Common Stock as
of December 31, 1996. The Company has never issued stock appreciation rights
("SARs").
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED OPTIONS/ IN-THE-MONEY OPTIONS/SARS
SHARES SARS AT DECEMBER 31, 1996(#) AT DECEMBER 31, 1996 ($)(2)
ACQUIRED ON VALUE ------------------------------- ------------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- --------------- ---------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Peter R. Ellis.......... -- -- -- -- -- --
W. Randolph Ellspermann. 41,667 $308,328 0 83,333 $ 0 $616,656
Robert S. Grimes........ -- -- 125,000 125,000 925,000 925,000
Michael J. Lowell....... -- -- 0 166,666 0 833,330
Brian B. MacDonald ..... -- -- 41,666 83,333 308,328 616,656
</TABLE>
- --------
(1) The amount set forth represents the difference between the fair market
value of the shares at the time of exercise, as determined by the Board of
Directors, and the exercise price of the option, multiplied by the
applicable number of options.
(2) Calculated by determining the difference between the fair market value of
the securities underlying the option as of December 31, 1996 ($8.00 per
share as determined by the Board of Directors) and the exercise price of
the Named Officer's options. In determining the fair market value of the
Company's Common Stock, the Board of Directors considered various factors,
including the Company's financial condition and business prospects, its
operating results, the absence of a market for its Common Stock and the
risks normally associated with technology companies.
STOCK PLANS
1996 Stock Option Plan. The Company's 1996 Stock Option Plan (the "Option
Plan") was approved by the Board of Directors and the stockholders on May 18,
1996. The Option Plan provides for the granting to employees of incentive
stock options within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code") and for the grant to employees, consultants
and directors of nonstatutory stock options. Under the Option Plan, the
exercise price of all incentive stock options granted under the Option Plan
cannot be lower than the fair market value of the Common Stock 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 the
Company, 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
1996 Option Plan may be up to 10 years. The Option Plan may be administered by
the Board of Directors or a committee of the Board (the "Administrator"). Any
options granted under the Option Plan are exercisable at such times as
determined by the Administrator, but in no case at a rate of less than 20% per
year over five years from the grant date. A majority of the outstanding
options vest and become 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 Option Plan must be exercised within 30
days following termination of the optionee's status as an employee or
consultant of the Company, or within 12 months following such optionee's
termination by death or disability. The Board of Directors may at anytime
amend, suspend or discontinue the Option Plan, but no amendment, suspension or
discontinuation shall be made which would impair the rights of any optionee,
without his or her consent. If so requested by the Company or any
representative of the underwriters, the optionee shall not sell or transfer
any shares of the Company 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 of 1933 (the "Securities
Act"). On October 23, 1996, the Board of Directors terminated the Option Plan
and no further options may be granted thereunder. On October 23, 1996, options
to purchase an aggregate of 1,305,833 shares of Common Stock at an exercise
price of $0.60 per share were outstanding under the Option Plan.
46
<PAGE>
1996 Stock Incentive Plan. The Company's 1996 Stock Incentive Plan (the
"Incentive Plan") provides for the granting to employees 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 ("SPRs"). The Incentive Plan was approved by the Board of
Directors on October 23, 1996, amended by the Board of Directors on November
24, 1996 and approved by the stockholders on January 16, 1997. A total of
2,268,333 shares of Common Stock are currently reserved for issuance under the
Incentive Plan. Shares available for future grant under the Incentive Plan
will be increased as of the first day of each new fiscal year during the term
of the Incentive Plan by the number of shares issuable upon exercise of
options granted thereunder in the previous fiscal year, net of returns. This
increase may not exceed 1,250,000 in any fiscal year. No option holder may be
granted options to purchase more than 500,000 shares in any fiscal year;
provided, however, that an option holder may be granted an additional 500,000
shares in connection with his or her initial service with the Company.
The Incentive Plan may be administered by the Board of Directors or a
committee of the Board (the "Committee"), which Committee will, in the case of
options intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Code, consist of two or more "outside
directors" within the meaning of Section 162(m) of the Code. The Committee has
the power to determine the terms of the options or SPRs granted, including the
exercise price, the number of shares subject to each option or SPR, the
exercisability thereof, and the form of consideration payable upon such
exercise. In addition, the Committee has the authority to amend, suspend or
terminate the Incentive Plan, provided that no such action may affect any
share of Common Stock previously issued and sold or any option previously
granted under the Incentive Plan.
Options and SPRs granted under the Incentive Plan are not generally
transferable by the optionee, and each option and SPR is exercisable during
the lifetime of the optionee only by such optionee. Options granted under the
Incentive Plan must generally be exercised within three months of the end of
optionee's status as an employee or consultant of the Company, or within
twelve months after such optionee's termination by death or disability, but in
no event later than the expiration of the option's ten year term. In the case
of SPRs, unless the Committee determines otherwise, the Restricted Stock
Purchase Agreement will grant the Company a repurchase option exercisable upon
the voluntary or involuntary termination of the purchaser's employment with
the Company for any reason (including death or disability). The purchase price
for Shares repurchased pursuant to the Restricted Stock Purchase Agreement
will be the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to the Company. The
repurchase option shall lapse at a rate determined by the Committee. The
exercise price of all incentive stock options granted under the Incentive Plan
must be at least equal to the fair market value of the Common Stock on the
date of grant. The exercise price of nonstatutory stock options and SPRs
granted under the Incentive Plan is determined by the Committee, but with
respect to nonstatutory stock options intended to qualify as "performance-
based compensation" within the meaning of Section 162(m) of the Code, the
exercise price must at least be equal to the fair market value of the Common
Stock on the date of grant. With respect to any participant who owns stock
possessing more than 10% of the voting power of all classes of the Company's
outstanding capital stock, the exercise price of any incentive stock option
granted must equal at least 110% of the fair market value on the grant date
and the term of such incentive stock option must not exceed five years. The
term of all other options granted under the Incentive Plan may not exceed ten
years.
The Incentive Plan provides that in the event of a merger of the Company
with or into another corporation, a sale of substantially all of the Company's
assets or a like transaction involving the Company, 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 shall provide for the Optionee to have the
right to exercise the option or SPR as to all of the optioned stock, including
shares as to which it would not otherwise be exercisable. If the Administrator
makes an option or SPR exercisable in full in the event of a merger or sale of
assets, the Administrator will notify the optionee that the option or SPR will
be fully exercisable for a period of 15 days from the date of such notice, and
the option or SPR will terminate upon the expiration of such period.
47
<PAGE>
Non-employee directors are entitled to participate in the Company's
Incentive Plan. The Incentive Plan provides for an automatic grant of an
option to purchase 16,666 shares of Common Stock (the "First Option") to each
non-employee director on the date on which the Incentive Plan becomes
effective or, if later, on the date on which the person first becomes a non-
employee director. After the First Option is granted to the non-employee
director, he or she will automatically be granted an option to purchase 4,166
shares (a "Subsequent Option") 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. Twenty-five percent
of the shares subject to the First Option shall vest on the date twelve months
after the grant date of the option, and 1/48 of the shares subject to the
First Option and each Subsequent Option shall become exercisable each month
thereafter, provided that the optionee continues to serve as a director on
such dates. The exercise price of the First Option and each Subsequent Option
cannot have an exercise price lower be 100% of the fair market value per share
of the Company's Common Stock on the date of the grant of the option.
1996 Employee Stock Purchase Plan. The Company's 1996 Employee Stock
Purchase Plan (the "Purchase Plan") was adopted by the Board of Directors on
November 18, 1996 and approved by the stockholders on January 16, 1997. The
Company has reserved a total of 666,666 shares of Common Stock for issuance
under the Purchase Plan. Shares available for future issuance under the
Purchase Plan will be increased as of the first day of each new fiscal year
during the term of the Purchase Plan by the number of shares issued thereunder
in the prior fiscal year. The Purchase Plan, which is intended to qualify
under Section 423 of the Code, as amended, permits eligible employees of the
Company to purchase shares of Common Stock through payroll deductions of up to
ten percent of their compensation, up to a maximum of $21,250 for all purchase
periods ending within any calendar year. The Purchase Plan will be implemented
in a series of successive 6-month offering periods. However, the initial
offering period will begin on the effective date of this offering and will end
on the last trading day in the period ending June 1997.
Individuals who are eligible employees on the start day of any offering
period may enter the Purchase Plan on that start date or on any subsequent
quarterly entry date (January 1, April 1, July 1 or October 1). 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 the Company 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 the Company. 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. The Board may amend or modify the Purchase
Plan at any time. The Purchase Plan will terminate on the last business day in
October 2006, unless sooner terminated by the Board.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No interlocking relationship exists between the Company's 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 Messrs. Coats and Fuchs.
48
<PAGE>
EMPLOYMENT AGREEMENTS
The Company does not presently have any employment contracts in effect with
the Chief Executive Officer or any of the Named Officers, except for Mr.
Lowell. Mr. Lowell has an employment offer letter which provides that he is
entitled to continue to receive his salary for a period of six months as
severance if he is terminated without cause within one year from the
commencement of his employment. Mr. Markovich also has an offer letter which
entitles him to receive a severance payment equal to six months' salary if he
is terminated without cause within one year of the commencement of his
employment. In addition, Mr. Lorimer has an offer letter which entitles him to
receive a severance payment equal to one year's salary (payable monthly) and
an acceleration of all outstanding options, if he is terminated without cause,
dies, becomes disabled or there occurs a change in control of the Company.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Amended and Restated Certificate of Incorporation limits the
liability of directors to the maximum extent permitted by Delaware law.
Delaware law provides that a corporation's certificate of incorporation may
contain a provision eliminating or limiting the personal liability of a
director for monetary damages for breach of their fiduciary duties as
directors, except for liability (i) for any breach of their duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General Corporation Law
or (iv) for any transaction from which the director derived an improper
personal benefit.
The Company's Restated Bylaws provide that the Company shall indemnify its
directors and officers and may indemnify its employees and agents to the
fullest extent permitted by law. The Company believes that indemnification
under its Restated Bylaws covers at least negligence and gross negligence on
the part of indemnified parties.
The Company has entered into agreements to indemnify its directors and
officers, in addition to the indemnification provided for in the Company's
Restated Bylaws. These agreements, among other things, indemnify the Company's
directors and officers for certain expenses (including attorneys' fees),
judgments, fines and settlement amounts incurred by any such person in any
action or proceeding, including any action by or in the right of the Company,
arising out of such person's services as a director or officer of the Company,
any subsidiary of the Company or any other company or enterprise to which the
person provides services at the request of the Company. The Company believes
that these provisions and agreements are necessary to attract and retain
qualified directors and officers.
49
<PAGE>
CERTAIN TRANSACTIONS
Pursuant to a Contribution Agreement and Plan of Reorganization dated May
31, 1996 among the Company, Auto-By-Tel, LLC, ABT Acceptance Company, LLC,
Peter R. Ellis, John C. Bedrosian, the John C. Bedrosian and Judith D.
Bedrosian Revocable Trust (the "Trust"), and Robert S. Grimes, the Company
issued to the Trust, Mr. Ellis and Mr. Grimes 5,354,166, 6,187,500 and 833,333
shares of Common Stock of the Company, respectively, in exchange for the
transfer to the Company of their respective membership interests in Auto-By-
Tel, LLC and ABT Acceptance Company, LLC.
On July 31, 1996, the Company issued to Robert S. Grimes, a director,
officer and significant stockholder of the Company, an option to purchase
250,000 shares of Common Stock of the Company at an exercise price of $0.60
per share, which option vests over two years.
From time to time, the Company has advanced funds to Peter R. Ellis, the
Company's President and Chief Executive Officer. At no time did Mr. Ellis'
indebtedness to the Company exceed $30,000. As of January 30, 1997, no
advances to Mr. Ellis were outstanding.
From May 31, 1996 through June 28, 1996, John C. Bedrosian, a director and
significant stockholder of the Company made loans to the Company in the
aggregate principal amount of $1,081,000. These loans were repaid in full on
August 28, 1996 and all promissory notes evidencing such debt were canceled.
In connection with the Company's lease of its principal offices, the Company
was required to establish a $175,000 letter of credit. On June 19, 1996, Mr.
Bedrosian co-signed this letter of credit and pledged a certificate of deposit
as collateral. Mr. Bedrosian has also personally guaranteed the Company's
Merchant Card Agreement, and has provided a personal guarantee to the
financial institution that issued the Company's corporate credit cards,
guaranteeing the payment of all outstanding indebtedness under these credit
facilities.
On August 23, 1996, the Company issued 1,500,000 shares of Series A
Preferred Stock at $10.00 per share in a private placement transaction. The
holders of such Series A Preferred Stock are entitled to certain registration
rights with respect to the shares of Common Stock issued or issuable upon
conversion thereof. See "Description of Capital Stock--Registration Rights."
Each share of Series A Preferred Stock will convert on a five-for-three basis
into an aggregate of 2,500,000 shares of Common Stock (at a conversion price
of $6.00 per share) on or immediately prior to the closing of this offering.
Investors in this financing consisted of General Electric Capital Corporation
(800,000 shares of Series A Preferred Stock), National Union Fire Insurance
Company of Pittsburgh, PA (an affiliate of American International Group
("AIG") (400,000 shares of Series A Preferred Stock), ContiTrade Services
L.L.C. (200,000 shares of Series A Preferred Stock) and Michael Fuchs (100,000
shares of Series A Preferred Stock).
From July 9, 1996 through August 13, 1996, Michael Fuchs, made loans to the
Company 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 the
Company's Board of Directors.
On January 30, 1997, the Company issued 967,915 shares of Series B Preferred
Stock at $9.35 per share in a private placement transaction. The holders of
such Series B Preferred Stock are entitled to certain registration rights with
respect to the shares of Common Stock issued or issuable upon conversion
thereof. See "Description of Capital Stock--Registration Rights." Each share
of Series B Preferred Stock will convert on a one-for-one basis into an
aggregate of 967,915 shares of Common Stock on or immediately prior to the
closing of the Offering. Investors in this financing consisted of General
Electric Capital Corporation (534,760 shares of Series B Preferred Stock),
National Union Fire Insurance Company of Pittsburgh, PA (an affiliate of
American International Group ("AIG") (267,380 shares of Series B Preferred
Stock), ContiTrade Services L.L.C. (133,690 shares of Series B Preferred
Stock) and Michael Fuchs (32,085 shares of Series B Preferred Stock).
In 1996, the Company paid approximately $120,000 in legal fees and expenses
to Dewey Ballantine. Mr. Lorimer was a partner at Dewey Ballantine during
fiscal 1996 when he joined Auto-By-Tel as Vice President, General Counsel and
Secretary.
50
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of January 31, 1997 and
as adjusted to reflect the sale of Common Stock offered hereby for (i) each
person or entity who is known by the Company to beneficially own five percent
or more of the outstanding Common Stock of the Company, (ii) each of the
Company's directors, (iii) each of the Named Officers, and (iv) all directors
and executive officers of the Company as a group:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY
PRIOR TO OFFERING(1) NUMBER OWNED AFTER OFFERING(1)
------------------------- OF SHARES -----------------------
NAME OR GROUP OF BENEFICIAL OWNERS NUMBER PERCENT OFFERED NUMBER PERCENT
- ---------------------------------- --------------- ------- --------- --------------- -------
<S> <C> <C> <C> <C> <C>
Peter R. Ellis(2).................... 6,075,167 38.2% 400,000 5,675,167 --
c/o Auto-By-Tel Corporation
18872 MacArthur Boulevard, Suite 200
Irvine, California 92612-1400
John C. Bedrosian(3)................. 5,354,166 33.7 -- 5,354,166 --
c/o Auto-By-Tel Corporation
18872 MacArthur Boulevard, Suite 200
Irvine, California 92612-1400
Jeffrey H. Coats(4).................. 1,868,093 11.8 -- 1,868,093 --
General Electric Capital Corporation
260 Long Ridge Road
Stamford, Connecticut 06927
Robert S. Grimes(5).................. 958,333 6.0 -- 958,333 --
152 West 57th Street
New York, NY 10019
National Union Fire Insurance........ 934,046 5.9 -- 934,046 --
Company of Pittsburgh, PA
200 Liberty Street
19th Floor
New York, New York 10281
W. Randolph Ellspermann(6)........... 41,666 * -- 41,666 *
Mark W. Lorimer(6)................... 0 0 -- 0 0
Michael J. Lowell(6)................. 0 0 -- 0 0
Brian B. MacDonald(6)................ 41,666 * -- 41,666 *
John M. Markovich(6)................. 0 0 -- 0 0
Michael Fuchs(7)..................... 198,751 1.3 -- 198,751 *
All directors and executive officers
as a group (8 persons)(8)........... 14,537,842 91.5 400,000 14,137,842 --
</TABLE>
- --------
* Less than 1%
(1) Assumes no exercise of the Underwriters' over-allotment option. 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 held by that person that are currently exercisable
or exercisable within 60 days of January 31, 1997 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 pursuant to 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.
(2) Includes 33,333 shares held by certain irrevocable trusts established for
family members of Mr. Ellis as to which Mr. Ellis' spouse maintains sole
voting power. Excludes 108,333 shares held by family members of Mr. Ellis
as to which Mr. Ellis disclaims beneficial ownership.
(3) All shares are held in The John C. Bedrosian and Judith D. Bedrosian
Revocable Trust in which Mr. Bedrosian maintains shared voting powers.
(4) Shares held by General Electric Capital Corporation. Mr. Coats is a
managing director of GE Equity Capital Group, Inc., an affiliate thereof,
and is a director of the Company. Excludes 16,666 shares subject to options
granted to Mr. Coats, and subsequently assigned to General Electric Capital
Corporation, none of which are exercisable within 60 days of January 31,
1997.
(5) Includes 125,000 shares subject to options exercisable within 60 days of
January 31, 1997. Includes an aggregate of 8,333 shares held in irrevocable
trusts as to which Mr. Grimes' spouse maintains sole voting power.
(6) Represents shares subject to options exercisable within 60 days of January
31, 1997. Excludes 93,333, 500,000, 166,666, 83,333, and 200,000 shares
subject to outstanding options granted to Messrs. Ellspermann, Lorimer,
Lowell, MacDonald and Markovich, respectively, none of which are
exercisable within 60 days of January 31, 1997.
(7) Excludes 16,666 shares subject to options granted to Mr. Fuchs, none of
which are exercisable within 60 days of January 31, 1997.
(8) Includes 166,666 shares subject to options exercisable within 60 days of
January 31, 1997 to Mr. Markovich.
51
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, the outstanding Common Stock of the
Company will consist of shares, $0.001 par value. As of January 31,
1997, there were 15,895,136 shares of Common Stock outstanding (assuming the
conversion of all outstanding shares of Preferred Stock) held of record by
approximately 26 stockholders.
COMMON STOCK
A total of 50,000,000 shares of Common Stock of the Company will be
authorized upon the closing of the Offering. Holders of Common Stock are
entitled to one vote per share in all matters to be voted on by the
stockholders. Subject to 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 Policy." In the event of a liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share ratably in all assets remaining after payment of
liabilities, subject to prior distribution rights 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 non-assessable, and the shares of Common Stock to be
issued upon completion of the Offering will be fully paid and non-assessable.
PREFERRED STOCK
Pursuant to the Company's Amended and Restated Certificate of Incorporation,
the Board of Directors has the authority, without further action by the
stockholders, to issue up to 5,000,000 shares of Preferred Stock in one or
more series and to fix the designations, powers, preferences, privileges, and
relative participating, optional or special rights and the qualifications,
limitations or restrictions thereof, including dividend rights, conversion
rights, voting rights, terms of redemption and liquidation preferences, any or
all of which may be greater than the rights of the Common Stock. The Board of
Directors, without stockholder approval, can issue Preferred Stock with
voting, conversion or other rights that could adversely affect the voting
power and other 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 the Company 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 the Company
has no plans to issue any of the Preferred Stock.
REGISTRATION RIGHTS
Pursuant to an agreement between the Company and the holders (the "Holders")
of approximately 15,322,248 shares of Common Stock and securities convertible
into Common Stock (collectively, and as converted, the "Registrable
Securities"), the Holders are entitled to certain rights with respect to the
registration of such shares under the Act. If the Company proposes to register
any of its securities under the Act, either for its own account or for the
account of other Holders exercising registration rights, the Holders are
entitled to notice of such registration and are entitled to include shares of
Registrable Securities therein. Additionally, the Holders are also entitled to
certain demand registration rights pursuant to which they may require the
Company to file a registration statement under the Act at the Company's
expense with respect to their shares of Registrable Securities, and the
Company is required to use its best efforts to effect such registration. All
of these registration rights are subject to certain conditions and
limitations, among them the right of the underwriters of an offering to limit
the number of shares included in such registration and the right of the
Company not to effect a requested registration within one year of an initial
public offering of the Company's securities, such as the Offering made hereby,
or if such requested registration would have an anticipated aggregate offering
to the public of less than $30,000,000.
52
<PAGE>
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
Anti-Takeover Law
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. 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 certain 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 stockholder. Subject to
certain exceptions, 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
The Company's Amended and Restated Certificate of Incorporation and Bylaws
contain certain provisions relating to the limitation of liability and
indemnification of directors and officers. The Company's Amended and Restated
Certificate of Incorporation provides that directors of the Company may not be
held personally liable to the Company or its stockholders for a breach of
fiduciary duty, except for liability (i) for any breach of the director's duty
of loyalty to the Company or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation
of the law, (iii) under Section 174 of the Delaware General Corporation Law,
relating to prohibited dividends, distributions and repurchases or redemptions
of stock, or (iv) for any transaction from which the director derives an
improper benefit. In addition, the Company's Amended and Restated Certificate
of Incorporation and Bylaws provide that the Company shall indemnify its
directors and officers to the fullest extent authorized by Delaware law.
No Stockholder Action by Written Consent
Prior to the closing of the Offering, the Company's Amended and Restated
Certificate of Incorporation will provide that the stockholders can take
action only at a duly called annual or special meeting of stockholders.
Accordingly, stockholders of the Company 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
the Company.
TRANSFER AGENT AND REGISTRAR
ChaseMellon Shareholder Services, L.L.C. has been appointed as the transfer
agent and registrar for the Company's Common Stock. Its telephone number for
such purposes is (818) 971-4758.
53
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no market for the Common Stock of the
Company. 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, based upon shares outstanding as of January 31,
1997, the Company will have outstanding an aggregate of shares of
Common Stock, assuming no exercise of the Underwriters' over-allotment option
and no exercise of outstanding options. Of these shares, the 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 the Company, as that term is defined in Rule 144 of the
Securities Act ("Affiliates"), may generally only be sold in compliance with
the limitations of Rule 144 described below.
SALES OF RESTRICTED SHARES
The remaining 15,495,136 shares of Common Stock held by existing
stockholders are "restricted securities" under Rule 144 ("Restricted Shares").
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 which 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
Montgomery Securities. On the date of this Prospectus, no shares other than
the offered hereby will be eligible for sale. In addition, 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
two year holding periods.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned Restricted Shares for at least two years (including
the holding period of any prior owner, except if the prior owner was an
Affiliate) would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of: (i) one percent of the number of
shares of Common Stock then outstanding (which will equal approximately
shares immediately after the Offering); or (ii) 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. Sales under Rule 144 are also subject to certain manner of sale
provisions and notice requirements and to the availability of current public
information about the Company. Under Rule 144(k), a person who is not deemed
to have been an Affiliate of the Company at any time during the 90 days
preceding a sale, and who has beneficially owned the shares proposed to be
sold for at least three years (including the holding period of any prior owner
except an Affiliate), 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 the Offering. All of the Restricted
Shares, however, will have been held for less than one year upon completion of
the Offering.
Upon completion of the Offering, the holders of 15,322,248 shares of Common
Stock, or their transferees, will be entitled to certain rights with respect
to the registration of such shares under the Securities Act. See "Description
of Capital 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
The Company intends to file a registration statement under the Securities
Act covering shares of Common Stock reserved for issuance for options
outstanding under the Option Plan and the Incentive Plan and reserved for
issuance under the Purchase Plan. See "Management--Stock Plans." Such
registration statement is expected to be filed and become effective as soon as
practicable after the effective date of this offering. Accordingly, shares
registered under such registration statement will, subject 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 the
54
<PAGE>
Company or the lock-up agreements described above. A total of 4,197,500 shares
have been reserved for issuance under the Option Plan, the Incentive Plan and
the Purchase Plan. As of January 31, 1997, options to purchase 2,471,231
shares of Common Stock were issued and outstanding under the Option Plan and
no options had been granted under the Incentive Plan. See "Management--Stock
Plans."
In addition, under Rule 701 of the Securities Act as currently in effect,
any employee, consultant or advisor of the Company who purchased shares from
the Company in connection with 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 in reliance on Rule 144, but without
compliance with certain restrictions, including the holding period, contained
in Rule 144.
LOCK-UP AGREEMENTS
All officers, directors, and other stockholders of the Company have agreed
not to sell, offer, contract or grant any option to sell, make any short sale,
pledge, transfer, establish an open "put equivalent position" within the
meaning of the Rule 16a-1(h) under the Securities Exchange Act of 1934, as
amended, or otherwise dispose of any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock for a period
of 180 days after the date of this Prospectus, without the prior written
consent of Montgomery Securities. In addition, under the terms of the Option
Plan and Incentive Plan, holders of options to purchase Common Stock are
obligated not to sell or transfer any shares of the Company during such 180-
day period if so requested by the Company or the underwriters. See
"Underwriting."
55
<PAGE>
UNDERWRITING
The Underwriters named below, represented by Montgomery Securities, Cowen &
Company and Robertson, Stephens & Company LLC (the "Representatives"), have
severally agreed, subject to the terms and conditions set forth in the
Underwriting Agreement, to purchase from the Company the number of shares of
Common Stock indicated below opposite their respective names at the initial
public offering price less the underwriting discount set forth on the cover
page of this Prospectus. The Underwriting Agreement provides that the
obligations of the Underwriters are subject to certain conditions precedent,
and that the Underwriters are committed to purchase all of such shares, if any
are purchased.
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
Montgomery Securities.......................................
Cowen & Company.............................................
Robertson, Stephens & Company LLC...........................
---------
Total.....................................................
=========
</TABLE>
The Representatives have advised the Company that the Underwriters initially
propose to offer the Common Stock to the public on the terms set forth on the
cover page of this Prospectus. The Underwriters may allow to selected dealers
a concession of not more than $[ ] per share, and the Underwriters may allow,
and such dealers may reallow, a concession of not more than $[ ] per share to
certain other dealers. After the initial public offering, the offering price
and other selling terms may be changed by the Representatives. The shares of
Common Stock are offered subject to receipt and acceptance by the
Underwriters, and to certain other conditions, including the right to reject
orders in whole or in part.
The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to a
maximum of additional shares of Common Stock to cover over-allotments, if
any, at the same price per share as the initial shares of Common Stock to be
purchased by the Underwriters. To the extent the Underwriters exercise this
option, each of the Underwriters will be committed to purchase such additional
shares in approximately the same proportion as set forth in the above table.
The Underwriters may purchase such shares only to cover over-allotments made
in connection with the offering.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including civil liabilities under
the Securities Act, or will contribute to payments the Underwriters may be
required to make in respect thereof.
The shares of Common Stock offered hereby have not been and will not be
qualified for distribution under the securities legislation of any of the
provinces of Canada. Accordingly, the shares of Common Stock offered hereby
may not be distributed in Canada, except pursuant to a prospectus exemption
under applicable securities legislation. Each Underwriter has agreed that it
will not distribute any shares of Common Stock in Canada except in accordance
with a prospectus exemption under applicable securities legislation.
All of the Company's officers, directors and stockholders have agreed that
they will not, without the prior written consent of Montgomery Securities
(which consent may be withheld in its sole discretion) and subject to certain
limited exceptions, directly or indirectly, sell, offer, contract or grant any
option to sell, make any short sale, pledge, transfer, establish an open "put
equivalent position" within the meaning of the Rule 16a-1(h) under the
Securities Exchange Act of 1934, as amended, or otherwise dispose of any
shares of Common Stock, options or warrants to acquire Common Stock, or
securities exchangeable or exercisable for or convertible into Common Stock
currently owned either of record or beneficially by them for a period
commencing on the date of this Prospectus and continuing to a date 180 days
after the first date any of the shares of Common Stock offered hereby are
released by the Underwriters for sale to the public. Montgomery Securities
may, in its sole discretion and at any time without notice, release all or any
portion of the securities subject to these lock-up agreements. In
56
<PAGE>
addition, the Company has agreed that, for a period of 180 days after the date
of this Prospectus, it will not, without the consent of Montgomery Securities,
issue, offer, sell or grant options to purchase or otherwise dispose of any
equity securities or securities convertible into or exchangeable for equity
securities except for (i) the shares of Common Stock offered hereby, (ii)
shares of Common Stock issued pursuant to the exercise of outstanding options
and (iii) options to purchase shares of Common Stock granted pursuant to the
Incentive Plan and shares of Common Stock issued pursuant to the exercise of
such options. See "Management--Stock Plans" and "Shares Eligible for Future
Sale."
Prior to the Offering, there has been no public market for the Common Stock.
Consequently, the initial public offering price will be determined by
negotiations between the Company and the Representatives. Among the factors to
be considered in such negotiations are the history of, and prospects for, the
Company and the industry in which it competes, an assessment of the Company's
management, its past and present operations and financial performance, the
prospects for future earnings of the Company, the present state of the
Company's development, the general condition of the securities markets at the
time of the Offering, the market prices of and demand for publicly traded
common stocks of companies in recent periods and other factors deemed
relevant.
The Representatives have informed the Company that the Underwriters do not
expect to make sales to accounts over which they exercise discretionary
authority in excess of 5% of the number of shares of Common Stock offered
hereby.
The Company and the Selling Stockholder have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act.
57
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Wilson Sonsini Goodrich & Rosati, Palo Alto,
California. Certain legal matters in connection with the Common Stock offered
hereby will be passed upon for the Underwriters by Skadden, Arps, Slate,
Meagher & Flom LLP, Los Angeles, California.
EXPERTS
The consolidated financial statements as of and for the period from
inception (January 31, 1995) to December 31, 1995 and as of and for the year
ended December 31, 1996 appearing in this Prospectus and Registration
Statement have been audited by Arthur Andersen LLP, independent public
accountants, as set forth in their report with respect thereto and are
included herein in reliance upon the authority of said firm as experts in
giving said report.
ADDITIONAL INFORMATION
A Registration Statement on Form S-1, including amendments thereto, relating
to the Common Stock offered hereby has been filed by the Company with the
Securities and Exchange Commission (the "Commission"), Washington, D.C. This
Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. 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. For further information with respect to the
Company and the Common Stock offered hereby, 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 Commission'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
thereof, including any exhibit thereto, may be obtained from the Commission
upon the payment of certain fees prescribed by the Commission. The Commission
maintains a World Wide Web Site that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the Commission. The address of the site is
http://www.sec.gov.
58
<PAGE>
AUTO-BY-TEL CORPORATION
AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants................................ F-2
Consolidated Balance Sheets............................................. F-3
Consolidated Statements of Operations................................... F-4
Consolidated Statements of Stockholders' Equity......................... F-5
Consolidated Statements of Cash Flows................................... F-6
Notes to Consolidated Financial Statements.............................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Auto-By-Tel Corporation:
We have audited the accompanying consolidated balance sheets of Auto-By-Tel
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1995
and 1996, and the related consolidated statements of operations, stockholders'
equity and cash flows for the period from inception (January 31, 1995) to
December 31, 1995 and the year ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 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 financial statements referred to above present fairly,
in all material respects, the financial position of Auto-By-Tel Corporation
and subsidiaries as of December 31, 1995 and 1996, and the results of their
operations and their cash flows for the period from inception (January 31,
1995) to December 31, 1995 and the year ended December 31, 1996 in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Orange County, California
January 22, 1997,
(except Note 8, as to which the date is January 30, 1997)
F-2
<PAGE>
AUTO-BY-TEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
------------------------ STOCKHOLDERS' EQUITY
1995 1996 DECEMBER 31, 1996
----------- ----------- ---------------------
(UNAUDITED)
(NOTE 8.C.)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents,
includes restricted amounts
of $0 and $985,000,
respectively................ $ 48,000 $ 9,062,000
Accounts receivable, net of
allowance for doubtful
accounts of $20,000 and
$162,000, respectively...... 14,000 298,000
Prepaid advertisement........ -- 716,000
Other........................ 114,000 186,000
----------- -----------
Total current assets....... 176,000 10,262,000
Property and equipment, net.... 102,000 1,425,000
Other assets................... 7,000 611,000
----------- -----------
Total assets............... $ 285,000 $12,298,000
=========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable............. $ 87,000 $ 651,000
Deferred revenue............. 356,000 2,326,000
Customer deposits............ -- 554,000
Other current liabilities.... 16,000 771,000
Due to shareholder........... 816,000 --
----------- -----------
Total current liabilities.. 1,275,000 4,302,000
----------- -----------
Commitments and contingencies
Stockholders' equity:
Convertible preferred stock,
Series A, $0.001 par value,
1,500,000 shares authorized;
none issued and outstanding
at December 31, 1995;
1,500,000 shares issued and
outstanding at December 31,
1996, aggregate liquidation
preference of $15,000,000
(5,000,000 shares
authorized, none issued and
outstanding, pro forma)..... -- 2,000 $ --
Common stock, $0.001 par
value; 16,666,666 shares
authorized; none issued and
outstanding at December 31,
1995; 12,427,221 shares
issued and outstanding at
December 31, 1996
(50,000,000 shares
authorized, 14,927,221
shares issued and
outstanding, pro forma)..... -- 12,000 16,000
Members' interests/additional
paid-in capital............. 40,000 15,073,000 24,121,000
Deferred compensation........ -- (26,000) (26,000)
Accumulated deficit.......... (1,030,000) (7,065,000) (7,065,000)
----------- ----------- -----------
Total stockholders' equity
(deficit)................. (990,000) 7,996,000 $17,046,000
----------- ----------- -----------
Total liabilities and
stockholders' equity...... $ 285,000 $12,298,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE>
AUTO-BY-TEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
INCEPTION
(JANUARY 31, 1995)
TO YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
Revenues.................................. $ 274,000 $ 5,025,000
----------- -----------
Operating expenses:
Marketing and advertising............... 476,000 4,439,000
Selling, training and support........... 454,000 3,193,000
Technology development.................. 99,000 1,393,000
General and administrative.............. 275,000 2,159,000
----------- -----------
1,304,000 11,184,000
----------- -----------
Loss from operations.................. (1,030,000) (6,159,000)
----------- -----------
Other income (expense):
Interest income......................... -- 148,000
Interest expense........................ -- (24,000)
----------- -----------
-- 124,000
----------- -----------
Net loss.............................. $(1,030,000) $(6,035,000)
=========== ===========
Net loss per common and common equivalent
share.................................... $ (.07) $ (.38)
=========== ===========
Weighted average common and common
equivalent shares outstanding............ 15,270,154 15,800,184
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE>
AUTO-BY-TEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SERIES A
CONVERTIBLE
PREFERRED STOCK COMMON STOCK
---------------- ------------------
MEMBERS'
INTEREST/
ADDITIONAL
NUMBER OF NUMBER OF PAID-IN DEFERRED ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION DEFICIT EQUITY (DEFICIT)
--------- ------ ---------- ------- ----------- ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, Inception
(January 31, 1995)..... -- $ -- -- $ -- $ -- $ -- $ -- $ --
Sale of members'
interest in ABT for
cash.................. -- -- -- -- 40,000 -- -- 40,000
Net loss............... -- -- -- -- -- -- (1,030,000) (1,030,000)
--------- ------ ---------- ------- ----------- -------- ----------- ----------
Balance, December 31,
1995................... -- -- -- -- 40,000 -- (1,030,000) (990,000)
--------- ------ ---------- ------- ----------- -------- ----------- ----------
Sale of members'
interest in ABTAC for
cash.................. -- -- -- -- 50,000 -- -- 50,000
Issuance of Common
Stock in exchange for
members' interest..... -- -- 12,374,999 12,000 (12,000) -- -- --
Issuance of Common
Stock options with an
exercise price of
$0.60 per share....... -- -- -- -- 87,000 (87,000) -- --
Issuance of Series A
Preferred Stock at
$10.00 per share for
cash, net of costs of
$135,000.............. 1,450,000 2,000 -- -- 14,363,000 -- -- 14,365,000
Issuance of Series A
Preferred Stock at
$10.00 per share upon
conversion of debt.... 50,000 -- -- -- 500,000 -- -- 500,000
Issuance of Common
Stock for services in
August 1996........... -- -- 10,000 -- 20,000 -- -- 20,000
Issuance of Common
Stock upon exercise of
stock options......... -- -- 42,222 -- 25,000 -- -- 25,000
Amortization of
deferred compensation. -- -- -- -- -- 61,000 -- 61,000
Net loss............... -- -- -- -- -- -- (6,035,000) (6,035,000)
--------- ------ ---------- ------- ----------- -------- ----------- ----------
Balance, December 31,
1996................... 1,500,000 $2,000 12,427,221 $12,000 $15,073,000 $(26,000) $(7,065,000) $7,996,000
========= ====== ========== ======= =========== ======== =========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE>
AUTO-BY-TEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
INCEPTION
(JANUARY 31, 1995) YEAR ENDED
TO DECEMBER 31, 1995 DECEMBER 31, 1996
-------------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.............................. $(1,030,000) $(6,035,000)
Adjustments to reconcile net loss to
net cash used in operating
activities--
Depreciation and amortization....... 25,000 178,000
Provision for bad debt.............. 20,000 145,000
Amortization of deferred
compensation....................... -- 61,000
Changes in assets and liabilities:
Increase in accounts receivable... (34,000) (429,000)
Increase in prepaid advertisement. -- (716,000)
Increase in other current assets.. (114,000) (72,000)
Increase in other assets.......... (7,000) (604,000)
Increase in accounts payable...... 87,000 564,000
Increase in deferred revenue...... 356,000 1,970,000
Increase in customer deposits..... -- 554,000
Increase in other current
liabilities...................... 16,000 775,000
----------- -----------
Net cash used in operating
activities..................... (681,000) (3,609,000)
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment... (127,000) (1,501,000)
----------- -----------
Cash flows from financing activities:
Proceeds from sale of common stock.... -- 25,000
Proceeds from sale of members'
interest in ABT...................... 40,000 --
Proceeds from sale of members'
interest in ABTAC.................... -- 50,000
Proceeds from issuance of Series A
Preferred Stock, net................. -- 14,365,000
Proceeds from issuance of notes
payable.............................. 816,000 765,000
Repayments of notes payable........... -- (1,081,000)
----------- -----------
Net cash provided by financing
activities..................... 856,000 14,124,000
----------- -----------
Net increase in cash and cash
equivalents............................ 48,000 9,014,000
Cash and cash equivalents, at beginning
of period.............................. -- 48,000
----------- -----------
Cash and cash equivalents, at end of
period................................. $ 48,000 $ 9,062,000
=========== ===========
Supplemental disclosures of cash flow
information:
Cash paid during the period for income
taxes................................ $ 2,000 $ 4,000
=========== ===========
Cash paid during the period for
interest............................. $ -- $ 24,000
=========== ===========
Supplemental disclosure of noncash
activities:
During August 1996, 50,000 shares of
Series A Preferred Stock were issued
in exchange for $500,000 previously
advanced to the Company under three
notes payable.
During September 1996, 10,000 shares
of Common Stock with a fair market
value of $20,000 were issued for
consulting services
During May 1996, 12,374,999 shares of
Common Stock were issued to founding
shareholders in exchange for members'
interests
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
AUTO-BY-TEL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. The Company
Auto-By-Tel Corporation (the Company) is establishing a nationally branded
Internet-based marketing service for new and used vehicles and related
consumer services. The Company's Web site (www.autobytel.com) enables
consumers to gather information on automobiles and light duty trucks
(vehicles) and shop for vehicles and related consumer services from their home
or office. The Company's services are free to consumers and, to date, the
Company has derived substantially all of its revenues from fees paid by
subscribing dealerships located in the United States and Canada.
The business commenced operations as a limited liability company (See Note
5.b.).
b. Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company, its predecessors (See Note 5.b.) and its wholly-owned
subsidiaries: Auto-By-Tel Marketing Corporation, Auto-By-Tel Acceptance
Corporation, Auto-By-Tel Insurance Services, Inc. and Auto-By-Tel Canada,
Inc.. All intercompany transactions and balances have been eliminated.
c. Cash and Cash Equivalents
All highly liquid investments with a maturity of three months or less when
purchased are considered to be cash equivalents and those with maturities
greater than three months are considered to be short-term investments.
d. 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. Leasehold improvements are stated at cost.
Amortization is provided using the straight-line method over the lesser of the
lease term or the estimated useful lives of the respective assets.
e. Revenue Recognition
Substantially all revenues to date have consisted of marketing fees paid by
franchises of subscribing dealerships. These marketing fees are comprised of
an initial fee, a monthly fee and an annual fee. The initial fee and annual
fee are recognized ratably over the service period of 12 months. The monthly
fee is recognized in the period the service is provided. Deferred revenue is
comprised of unamortized initial and annual fees.
f. Advertising and Promotion Costs
Advertising and promotion costs consist primarily of fees paid to automotive
information providers, online services providers, online search engines and
print advertising. Advertising and promotion costs are recorded as expense in
the period that the advertisement appears or the service is provided.
g. Technology Development
Technology development expenses consist primarily of personnel and related
compensation costs and contract labor to support software development and
configuration and implementation of the Company's Internet, telecommunications
and support system infrastructure. Technology development expenditures are
charged to expense as incurred.
F-7
<PAGE>
AUTO-BY-TEL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
h. Stock-Based Compensation
The Company accounts for stock-based compensation issued to employees using
the intrinsic value based method as prescribed by APB Opinion No. 25
"Accounting for Stock Issued to Employees" (APB No. 25). Under the intrinsic
value based method, compensation is the excess, if any, of the fair value of
the stock at grant date or other measurement date over the amount an employee
must pay to acquire the stock. Compensation, if any, is recognized over the
applicable service period, which is usually the vesting period.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123). This standard, if fully adopted, changes the
methods of accounting for employee stock-based compensation plans to the fair
value based method. For stock options, fair value is determined using an
option-pricing model that takes into account the stock price at the grant
date, the exercise price, the expected life of the option, the volatility of
the underlying stock (not applicable for private entities), expected dividends
and the risk-free interest rate over the expected life of the option.
Compensation expense, if any, is recognized over the applicable service
period, which is usually the vesting period.
The adoption of the accounting methodology of SFAS No. 123 is optional and
the Company has elected to continue accounting for stock-based compensation
issued to employees using APB No. 25; however, pro forma disclosures as if the
Company adopted the cost recognition requirements under SFAS No. 123 are
required to be presented (See Note 7).
i. Income Taxes
The Company accounts for income taxes using the asset and liability method
as prescribed by SFAS No. 109, "Accounting for Income Taxes" (SFAS No. 109).
Under the asset and liability method, deferred income tax assets and
liabilities are determined based on the differences between the financial
reporting and tax basis of assets and liabilities and are measured using the
currently enacted tax rates and laws.
Prior to May 31, 1996, the business operated as limited liability companies
taxed as partnerships under the provisions of the Internal Revenue Code of
1986 (Internal Revenue Code). Under those provisions, the Company was not
subject to corporate income taxes on its taxable income. Instead, the
Company's taxable income or loss prior to May 31, 1996 is includable in the
individual income tax returns of its members.
Effective May 31, 1996, as a result the reorganization under the terms of a
Contribution Agreement and Plan of Organization, the business was reorganized
as a C Corporation under the provisions of the Internal Revenue Code (See Note
5.b.). The reorganization required that the Company record the cumulative tax
effect of temporary differences between book income and taxable income as
deferred tax assets and deferred tax liabilities (net of valuation allowance)
in accordance with SFAS No. 109. At May 31, 1996, the cumulative tax effect of
these temporary differences was immaterial.
j. Use of Estimates
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.
k. Fair Value of Financial Instruments
The carrying amount of the Company's financial instruments approximates fair
value.
F-8
<PAGE>
AUTO-BY-TEL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
l. Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of cash and cash equivalents,
and accounts receivable. Substantially all of the Company's cash and cash
equivalents are invested in one money market fund with underlying assets
consisting primarily of commercial paper.
To date, accounts receivable have been derived from marketing fees billed to
franchises of subscribing dealerships located in the United States and Canada.
The Company generally requires no collateral. The Company maintains reserves
for potential credit losses; historically, such losses have been minor and
within management's expectations. From inception (January 31, 1995) through
December 31, 1996, no subscribing dealership franchise accounted for greater
than 10% of the accounts receivable or revenue of the Company.
The Company conducts its business within one industry segment within the
United States and Canada. 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.
m. Foreign Currency Translation
Assets and liabilities of the Canadian operations are remeasured from
Canadian dollars into U.S. dollars in accordance with Financial Accounting
Standards Board Statement No. 52. Revenues and expenses are translated at
average monthly exchange rates prevailing during the period. Resulting
translation adjustments are immaterial.
n. New Accounting Pronouncements
The Company adopted SFAS No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed of" on January 1, 1996.
This standard requires that long-lived assets and certain identifiable
intangibles held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. The adoption of this standard did not have a
material impact on the consolidated financial statements.
o. Net Loss Per Share
Net loss per share is computed based on the weighted average number of
shares of common stock outstanding and common equivalent shares from stock
options (under the treasury stock method, if dilutive). In accordance with
certain SEC Staff Accounting Bulletins, such computations include all common
equivalent shares (using the treasury stock method and the anticipated public
offering price) issued twelve months prior to the filing of the Initial Public
Offering (IPO) as if they were outstanding for all periods presented.
Furthermore, common equivalent shares from convertible preferred stock that
will automatically convert upon the completion of the Company's proposed IPO
are included in the calculation for all periods presented as if converted
using the treasury stock method.
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
-------- ----------
<S> <C> <C>
Computer hardware.................................. $ 88,000 $1,125,000
Furniture and equipment............................ 39,000 412,000
Leasehold improvements............................. -- 77,000
-------- ----------
127,000 1,614,000
Less--Accumulated depreciation and amortization.... (25,000) (189,000)
-------- ----------
$102,000 $1,425,000
======== ==========
</TABLE>
F-9
<PAGE>
AUTO-BY-TEL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(3) DUE TO SHAREHOLDER
During 1995 and 1996, the Company's Chairman and co-founder advanced funds
to the Company totaling $1,081,000. During 1996, these advances were converted
to notes that were payable on demand and bore interest at a rate of 8% per
annum. These notes were paid in full using the proceeds of the Series A
Preferred Stock offering (See Note 5.a).
(4) INCOME TAXES
No provision for federal and state income taxes has been recorded as the
Company incurred net operating losses through December 31, 1996. As of
December 31, 1996, the Company had approximately $4.7 million of federal and
state net operating loss carryforwards available to offset future taxable
income; such carryforwards expire in various years through 2011. Under the Tax
Reform Act of 1986, the amounts of and benefits from net operating losses
carried forward may be impaired or limited in certain circumstances. Events
which may cause limitations in the amount of net operating losses that the
Company may utilize in any one year include, but are not limited to, a
cumulative ownership change of more than 50% over a three year period. As of
December 31, 1996, the effect of such limitation, if imposed, has not been
determined.
Net deferred income tax assets, totaling approximately $2.0 million at
December 31, 1996, consist primarily of the tax effect of net operating loss
carryforwards, reserves and accrued expenses which are not yet deductible for
tax purposes. The Company has provided a full valuation allowance on these
deferred income tax assets because of the uncertainty regarding their
realization.
(5) STOCKHOLDERS' EQUITY
a. Series A Convertible Preferred Stock
On August 22, 1996, the Board of Directors of the Company authorized
1,500,000 shares of Series A Convertible Preferred Stock (Series A Preferred).
On August 23, 1996, the Company 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 $500,000 previously advanced to the Company under three notes
payable. In addition, $1,081,000 of the proceeds were used to repay notes due
to the Company's Chairman and co-founder.
Each share of Series A Preferred will be automatically converted into 1.67
shares of common stock upon the earliest of (i) the closing of an underwritten
public offering of the Company's common stock with a minimum per share price
of $9.00 per share, and minimum aggregate proceeds of $30 million; (ii) the
written consent of two-thirds of the holders of Series A Preferred; or (iii)
when fewer than 300,000 shares of Series A Preferred remain outstanding. Each
share of Series A Preferred is also convertible into 1.67 shares of common
stock at the option of the holder. The Company has reserved 2,500,000 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, shall be entitled to elect one director (to be
increased to two directors if the authorized number of total directors is
increased to greater than five members). Each share of Series A 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 A Preferred shall be declared at an annual rate
of $0.80 per share. As of December 31, 1996, no dividends have been declared.
F-10
<PAGE>
AUTO-BY-TEL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In the event of liquidation, the Series A Preferred has preference over the
common stock in the amount of $10.00 per share, plus declared but unpaid
dividends.
b. Common Stock
Auto-By-Tel LLC (ABT), a California limited liability company, was organized
in January 1995 and began operations in March 1995. ABT Acceptance Company LLC
(ABTAC), an affiliated Company under common control, was formed in February
1996. ABT and ABTAC (the LLC's) were reorganized as of May 31, 1996 pursuant
to the terms of a Contribution Agreement and Plan of Organization (the
Agreement) entered into by all of the members of the LLC's. Under the terms of
the Agreement, the interests of the members were transferred to Auto-By-Tel
Corporation, a Delaware corporation, in a tax-free transaction. As the LLC's
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 the Company at their historical cost. In
consideration for their respective ownership interests, the members of ABT and
ABTAC received 12,374,999 shares of common stock of the Company.
c. Stock Split and Increase of Authorized Shares
On November 24, 1996, the Board of Directors authorized a 5-for-3 stock
split (the Stock Split) of the Company's Common Stock. All references in the
financial statements to number of shares, per share amounts and market prices
of the Company's common stock have been retroactively restated to reflect the
effect of the Stock Split. The Board of Directors has also approved, effective
upon the completion of the IPO, a recapitalization that would increase the
total of authorized shares of Common Stock to 50,000,000 and an increase in
the total number of authorized shares of preferred stock to 7,467,915.
(6) COMMITMENTS
a. Operating Leases
The Company has an operating lease for its corporate office facilities which
expires in 2001. At December 31 , 1996, future minimum lease payments under
this noncancelable, five year operating lease are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1997............................................................. $142,000
1998............................................................. 184,000
1999............................................................. 204,000
2000............................................................. 218,000
2001............................................................. 150,000
--------
$898,000
========
</TABLE>
Rent expense was $22,000 and $92,000 for the period from inception (January
31, 1995) to December 31, 1995 and the year ended December 31, 1996,
respectively.
b. Marketing Agreements
The Company has multi-year agreements with automotive information providers
that make available to consumers vehicle research data over the Internet. Such
agreements are generally for a term of three to five years and require that
the Company pay fees to these companies based on the volume of information
received by the Company from these services. The minimum annual commitments
under these agreements aggregate to $120,000.
F-11
<PAGE>
AUTO-BY-TEL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
c. Letter of Credit
In connection with the Company's lease of its principal offices, the
Company's Chairman co-signed a letter of credit and pledged a personal
certificate of deposit as collateral. The Company's chairman has also
personally guaranteed the Company's Merchant Card Agreement, and has provided
a personal guarantee to the financial institution that issued the Company's
corporate credit cards, guaranteeing the payment of all outstanding
indebtedness under these credit facilities.
As of December 31, 1996, the Company had total outstanding letters of credit
of approximately $1.0 million collateralized by restricted cash balances of
approximately $985,000.
d. Advertisement Purchase Commitment
In November 1996, the Company entered into a commitment to purchase
approximately $1.0 million in a television advertisement to be aired during
the Super Bowl in January 1997. Such costs will be expensed in the first
quarter of 1997, when the advertisement appears.
(7) STOCK PLANS
1996 Stock Option Plan. The Company's 1996 Stock Option Plan (the Option
Plan) was approved by the Board of Directors and the stockholders on May 18,
1996. The Option Plan provides for the granting to employees of incentive
stock options within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code") and for the grant to employees, consultants
and directors of nonstatutory stock options. Under the Option Plan, the
exercise price of all incentive stock options granted under the Option Plan
cannot be lower than the fair market value of the Common Stock 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 the
Company, 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
1996 Option Plan may be up to 10 years. On October 23, 1996, the Board of
Directors terminated the Option Plan and no further options may be granted
thereunder. Upon termination, options to purchase an aggregate of 1,305,833
shares of Common Stock at an exercise price of $0.60 per share were
outstanding under the Option Plan.
1996 Stock Incentive Plan. The Company's 1996 Stock Incentive Plan (the
Incentive Plan) provides for the granting to employees 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 (SPRs). The Incentive Plan was approved by the Board of
Directors on October 23, 1996, amended by the Board of Directors on November
24, 1996 and approved by the stockholders on January 16, 1997. A total of
2,268,333 shares of Common Stock are currently reserved for issuance under the
Incentive Plan. Shares available for future grant under the Incentive Plan
will be increased as of the first day of each new fiscal year during the term
of the Incentive Plan by the number of shares issuable upon exercise of
options granted thereunder in the previous fiscal year, net of returns.
F-12
<PAGE>
AUTO-BY-TEL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Non-employee directors are entitled to participate in the Company's
Incentive Plan. The Incentive Plan provides for an automatic grant of an
option to purchase 16,666 shares of Common Stock to each non-employee director
on the date on which the Incentive Plan becomes effective or, if later, 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 4,166 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 ten years. Such options vest at various rates
over 36 months and the exercise price per share shall be 100% of the fair
market value of the Company's Common Stock on the date of the grant of the
option.
1996 Employee Stock Purchase Plan. The Company's 1996 Employee Stock
Purchase Plan (the Purchase Plan) was adopted by the Board of Directors on
November 18, 1996 and approved by the stockholders on January 16, 1997. The
Company has reserved a total of 666,666 shares of Common Stock for issuance
under the Purchase Plan. Shares available for future issuance under the
Purchase Plan will be increased as of the first day of each new fiscal year
during the term of the Purchase Plan by the number of shares issued thereunder
in the prior fiscal year. The Purchase Plan, which is intended to qualify
under Section 423 of the Code, as amended, permits eligible employees of the
Company to purchase shares of Common Stock through payroll deductions of up to
ten percent of their compensation, up to a certain maximum amount for all
purchase periods ending within 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 the Company. 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.
During the year ended December 31, 1996, the Company granted options under
the aforementioned plans to purchase an aggregate of 2,352,066 shares of
Common Stock at various exercise prices ranging from $0.60 to $7.50 per share.
During the year ended December 31, 1996, the Company has recorded, based upon
an independent appraisal obtained by the Company's Board of Directors, $87,000
of deferred compensation expense relating to certain options. This amount will
be amortized over the vesting periods of the options, which is generally one
to three years. Amortization of deferred compensation for the year ended
December 31, 1996 was $61,000.
F-13
<PAGE>
AUTO-BY-TEL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A summary of the status of the Company's stock options as of December 31,
1996 and changes during the period is presented below:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
EXERCISE
OPTIONS PRICE
--------- ---------
<S> <C> <C>
Outstanding at December 31, 1995...................... -- --
Granted............................................... 2,352,066 $ 2.16
Exercised............................................. (42,222) 0.60
Canceled.............................................. (29,029) 0.60
--------- ------
Outstanding at December 31, 1996...................... 2,280,815 $ 2.21
========= ======
Options exercisable at December 31, 1996.............. 586,111 $ 0.60
========= ======
Options available for future grant.................... 1,250,000
=========
Weighted-average fair value of options granted during
the year whose exercise price is less than the market
price of the stock on the grant date (254,167
options)............................................. $ 1.63 $ 0.60
========= ======
Weighted-average fair value of options granted during
the year whose exercise price exceeds the market
price of the stock on the grant date (2,097,899
options)............................................. $ 0.77 $ 2.35
========= ======
</TABLE>
The fair value of each option granted during 1996 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
(required for public companies only), (iii) weighted-average risk-free
interest rate of approximately 6.70%, and (iv) expected life of 6 years.
The following table summarizes information about stock options outstanding
at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------- --------------------------
WEIGHTED-AVERAGE NUMBER
EXERCISE PRICE NUMBER OUTSTANDING CONTRACTUAL LIFE EXERCISABLE EXERCISE PRICE
-------------- ------------------ ---------------- ----------- --------------
<S> <C> <C> <C> <C>
$0.60 1,262,482 9.5 years 586,111 $0.60
$3.00 741,667 9.8 years -- --
$6.00 12,500 9.9 years -- --
$7.50 264,166 9.9 years -- --
</TABLE>
Had compensation cost for the Company's 1996 grants for its stock-based
compensation plan been determined consistent with SFAS No. 123, the Company's
net loss, and net loss per common share for the year ended December 31, 1996
would approximate the pro forma amounts below:
<TABLE>
<CAPTION>
AS REPORTED PRO FORMA
----------- -----------
<S> <C> <C>
Net loss.......................................... $(6,035,000) $(6,270,000)
=========== ===========
Net loss per common share......................... $ (.38) $ (0.40)
=========== ===========
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts.
F-14
<PAGE>
AUTO-BY-TEL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(8) SUBSEQUENT EVENTS AND PRO FORMA PRESENTATION
a. Series B Convertible Preferred Stock Sale
On January 24, 1997, the Board of Directors of the Company authorized
967,915 shares of Series B Convertible Preferred Stock (Series B Preferred).
On January 30, 1997, the Company completed the sale of 967,915 shares of
Series B Preferred at $9.35 per share through a private placement offering.
Each share of Series B Preferred will be automatically converted into one
share of common stock upon the earliest of (i) the closing of an underwritten
public offering of the Company's common stock with a minimum per share price
of $9.00 per share, and minimum aggregate proceeds of $30 million; (ii) the
written consent of two-thirds of the holders of Series B Preferred; or (iii)
when fewer than 300,000 shares of Series B Preferred remain outstanding. Each
share of Series B Preferred is also convertible into one share of common stock
at the option of the holder. The Company has reserved 1,309,686 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
except with respect to election of directors, whereby the holders, voting
separately as a class, shall be entitled to elect one director (to be
increased to two directors if the authorized number of total directors is
increased to greater than five members). 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 $0.75 per share. 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.
b. On January 24, 1997 the Company granted options to various employees to
purchase 190,398 shares of common stock at an exercise price of $8.80 per
share, the estimated fair market value as determined by the Board of
Directors.
c. Unaudited Pro Forma Presentation
On January 24, 1997, the Board of Directors authorized the filing of a
registration statement with the Securities and Exchange Commission permitting
the Company to sell shares of its common stock in connection with an IPO. If
the offering is consummated under the terms presently anticipated, each share
of Series A and Series B Convertible Preferred Stock outstanding at January
30, 1997 will automatically convert to 1.67 and 1.0 shares, respectively, of
common stock upon closing of the IPO. The effect of the sale of the Series B
Preferred discussed above and the conversion of Series A Preferred outstanding
at December 31, 1996 (See Note 5.a) has been reflected in the accompanying
unaudited pro forma balance sheet as of December 31, 1996.
F-15
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesperson or other person has been authorized to give any
information or to make any representations in connection with this offering
other than those contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as having been
authorized by the Company or any of the Underwriters. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any securities
other than the shares of Common Stock to which it relates or an offer to, or a
solicitation of, any person in any jurisdiction where such an offer or
solicitation would be unlawful. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any implication that
there has been no change in the affairs of the Company or that the information
contained herein is correct as of any time subsequent to the date hereof.
---------------------
TABLE OF CONTENTS
---------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary......................................................... 3
Risk Factors............................................................... 6
Use of Proceeds............................................................ 17
Dividend Policy............................................................ 17
Capitalization............................................................. 18
Dilution................................................................... 19
Selected Consolidated Financial Data....................................... 20
Management's Discussion and Analysis of Financial
Condition and Results of Operations....................................... 21
Business................................................................... 27
Management................................................................. 41
Certain Transactions....................................................... 50
Principal and Selling Stockholders......................................... 51
Description of Capital Stock............................................... 52
Shares Eligible for Future Sale............................................ 54
Underwriting............................................................... 56
Legal Matters.............................................................. 58
Experts.................................................................... 58
Additional Information..................................................... 58
Index to Consolidated Financial Statements................................. F-1
</TABLE>
Until , 1997 (25 days after the date of this Prospectus) all dealers
effecting transactions in the registration securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES
[LOGO]
COMMON STOCK
---------------
PROSPECTUS
---------------
MONTGOMERY SECURITIES
COWEN & COMPANY
ROBERTSON, STEPHENS & COMPANY
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses, other than underwriting
discounts and commissions, payable by the Company in connection with the sale
of the Common Shares being registered. All of the amounts shown are estimates
except for the SEC registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC Registration Fee.............................................. $16,728
NASD Filing Fee................................................... 6,020
Nasdaq National Market Listing Fee................................ *
Blue Sky Qualification Fees and Expenses.......................... *
Printing and Engraving Expenses................................... *
Legal Fees and Expenses........................................... *
Accounting Fees and Expenses...................................... *
Transfer Agent and Registrar Fees................................. *
Directors' and Officers' Insurance................................ *
Miscellaneous..................................................... *
-------
Total........................................................... $ *
=======
</TABLE>
- --------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Underwriters have agreed to indemnify the Company, its directors and
each person who controls it within the meaning of Section 15 of the Securities
Act with respect to any statement in or omission from the Registration
Statement or the Prospectus or any amendment or supplement thereto if such
statement or omission was made in reliance upon information furnished in
writing to the Company by the Underwriters specifically for or in connection
with the preparation of the Registration Statement, the Prospectus, or any
such amendment or supplement thereto.
Section 145 of the Delaware General Corporation Law empowers a corporation
to indemnify its directors and officers and to purchase insurance with respect
to liability arising out of their capacity or status as directors and officers
provided that this provision shall not eliminate or limit the liability of a
director: (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders; (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law; (iii)
arising under Section 174 of the Delaware General Corporation Law; or (iv) for
any transaction from which the director derived an improper personal benefit.
The Delaware General Corporation Law provides further that the
indemnification permitted thereunder shall not be deemed exclusive of any
other rights to which the directors and officers may be entitled under the
corporation's bylaws, any agreement, vote of stockholders or otherwise.
Article IX of the Company's Amended and Restated Certificate of Incorporation
eliminates the personal liability of directors and officers to the fullest
extent permitted by the laws of the state of Delaware.
The effect of the foregoing is to require the Company to indemnify the
officers and directors of the Company for any claim arising against any such
person in their official capacities if such person acted in good faith and in
a manner that he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since the Company's inception, the Company has made the following sales of
securities that were not registered under the Securities Act:
1. On May 31, 1996, the Company issued and sold 12,374,999 shares of Common
Stock in exchange for membership interests in Auto-By-Tel LLC and Auto-By-
Tel Acceptance Corporation LLC, in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act.
2. During the period from July 3, 1996 through January 30, 1997, the Company
issued options to purchase an aggregate of 2,542,464 shares of Common Stock
pursuant to the Option Plan in reliance on Rule 701 promulgated under the
Securities Act.
3. On August 23, 1996, the Company issued and sold 1,500,000 shares of Series
A Preferred Stock in a private placement for an aggregate consideration of
$15,000,000 million in cash and cancellation of indebtedness. In connection
with such financing, the Company issued (i) 200,000 shares to ContiTrade
Services L.L.C. in exchange for $2,000,000 in cash, (ii) 400,000 shares to
National Union Fire Insurance Company of Pittsburgh, PA in exchange for
$4,000,000 in cash, (iii) 800,000 shares to General Electric Capital
Corporation in exchange for $8,000,000 in cash, and (iv) 100,000 Michael
Fuchs in exchange for $1,000,000 in cash and cancellation of indebtedness.
Sales of Series A Preferred Stock were made in reliance on the exemption
from registration provided by Section 4(2) of the Securities Act.
4. On August 27, 1996, the Company issued and sold 6,000 shares to a
consultant of the Company in reliance on Rule 701 promulgated under the
Securities Act.
5. On January 30, 1997, the Company 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, the Company
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, and (iv) 32,085 shares to Michael Fuchs in exchange
for $300,000 in cash. Sales of Series B Preferred Stock were made in
reliance on the exemption from registration provided by Section 4(2) of the
Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement (draft of January 24, 1997)
3.1 Restated Certificate of Incorporation of the Company certified by
the Secretary of State of the State of Delaware
3.2 Restated Bylaws of Auto-By-Tel Corporation adopted October 23, 1996
4.1+ Form of Stock Certificate
4.2 Amended and Restated Investors' Rights Agreement dated January 30,
1997 among Registrant and the Investors named in Exhibit A thereto
5.1+ Opinion and Consent of Wilson Sonsini Goodrich & Rosati
Form of Indemnification Agreement between the Company and its
10.1 directors and officers
10.2 Employment Offer Letter dated October 24, 1996 from Registrant to
Mark W. Lorimer
10.3 Employment Offer Letter dated December 16, 1996 from Registrant to
John M. Markovich
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.4 Employment Offer Letter dated October 20, 1996 from Registrant to
Michael 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* Marketing Agreement dated July 22, 1996 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
10.9* Marketing Agreement dated March 27, 1996 between Registrant and
Microsoft Corporation
10.10* Advertising Agreement dated October 15, 1996 between Registrant
and Digital City Inc.
10.11* Marketing Agreement dated February 8, 1996 between Registrant and
Edmund Publications Corporation
10.12* Referral Agreement dated September 6, 1996 between Registrant and
Automotive Information Center
10.13(a)-(h) Forms of Dealership Subscription Agreements
10.14 Lease Agreement dated June 1996 between Registrant and McDonnell
Douglas Realty Company
10.15 Sublease Agreement dated October 31, 1996 between Registrant and
Silicon Valley Bank
10.16* Financing Inquiry Referral Agreement dated October 25, 1996 among
Registrant, as obligor, Auto-By-Tel Acceptance Corporation and
Chase Manhattan Automotive Financial Corporation
10.17+* Service Agreement dated as of February 1, 1997 between Registrant
and Integrated Warranty Services, Inc.
11.1 Statement Regarding Computation of Per Share Earnings
21.1 Subsidiaries of the Company
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants
(see Page II-5)
23.2+ Consent of Wilson Sonsini Goodrich & Rosati (included in Exhibit
5.1)
24.1 Power of Attorney (see Page II-6)
27.1 Financial Data Schedule
</TABLE>
- --------
+ To be filed by amendment.
* Confidential treatment has been requested for certain portions which have
been blacked out in the copy of the exhibit filed with the Commission. The
omitted information has been filed separately with the Commission pursuant
to the application for confidential treatment.
(b) FINANCIAL STATEMENT SCHEDULES
Schedule II--Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreement
certificates in such denominations and registered in such names as required
by the underwriter to permit prompt delivery to each purchaser.
II-3
<PAGE>
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted 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 Securities Act and will be governed by
the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities 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 by the Company pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective; and
(ii) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Orange County, California
January 30, 1997
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT ON FORM S-1 TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF IRVINE,
STATE OF CALIFORNIA, ON THE 30TH DAY OF JANUARY, 1997.
Auto-by-Tel Corporation
By: /s/ John M. Markovich
------------------------------------------
JOHN M. MARKOVICH
CHIEF FINANCIAL OFFICER
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW HEREBY CONSTITUTES AND APPOINTS PETER R. ELLIS, JOHN C. BEDROSIAN, JOHN
M. MARKOVICH AND MARK W. LORIMER AND EACH OF THEM ACTING INDIVIDUALLY, AS HIS
ATTORNEY-IN-FACT, EACH WITH FULL POWER OF SUBSTITUTION, FOR HIM IN ANY AND ALL
CAPACITIES, TO SIGN AND ALL AMENDMENTS TO THIS REGISTRATION STATEMENT
(INCLUDING POST-EFFECTIVE AMENDMENTS), AND TO SIGN ANY REGISTRATION STATEMENT
FOR THE SAME OFFERING COVERED BY THIS REGISTRATION STATEMENT THAT IS TO BE
EFFECTIVE UPON FILING PURSUANT TO RULE 462(B) PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AND ALL POST-EFFECTIVE AMENDMENTS THERETO, AND TO FILE THE SAME,
WITH EXHIBITS THERETO AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE
SECURITIES AND EXCHANGE COMMISSION, HEREBY RATIFYING AND CONFIRMING OUR
SIGNATURES AS THEY MAY BE SIGNED BY OUR SAID ATTORNEY TO ANY AND ALL
AMENDMENTS TO SAID REGISTRATION STATEMENT.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Peter R. Ellis President Chief January 30,
_________________________________ Executive Officer 1997
PETER R. ELLIS (Principal Executive
Officer) and Director
/s/ John C. Bedrosian Chairman of the Board January 30,
_________________________________ 1997
JOHN C. BEDROSIAN
/s/ John M. Markovich Chief Financial Officer January 30,
_________________________________ (Principal Financial 1997
JOHN M. MARKOVICH and Accounting Officer)
/s/ Robert S. Grimes Executive Vice President January 30,
_________________________________ and Director 1997
ROBERT S. GRIMES
/s/ Jeffrey H. Coats Director January 30,
_________________________________ 1997
JEFFREY H. COATS
/s/ Michael Fuchs Director January 30,
_________________________________ 1997
MICHAEL FUCHS
II-6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE II
To the Board of Directors and Shareholders
of Auto-By-Tel Corporation:
We have audited in accordance with generally accepted auditing standards the
consolidated financial statements of Auto-By-Tel Corporation and subsidiaries
included in this registration statement and have issued our report thereon
dated January 22, 1997. Our audit was made for the purpose of forming an
opinion on those statements taken as a whole. The schedule listed at S-2 is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Orange County, California
January 22, 1997
S-1
<PAGE>
AUTO-BY-TEL CORPORATION AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
---------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER AT END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
----------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
For the period from
inception (January 31,
1995)
to December 31, 1995:
Allowance for doubtful
accounts............. $ -- $ 25,000 $ -- $ -- $ 25,000
======= ======== ===== ====== ========
For the year ended
December 31, 1996:
Allowance for doubtful
accounts............. $25,000 $145,000 $ -- $8,000 $162,000
======= ======== ===== ====== ========
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
------------ -----------
<C> <S>
1.1 Form of Underwriting Agreement (draft of January 24, 1997)
3.1 Restated Certificate of Incorporation of the Company certified by
the Secretary of State of the State of Delaware
3.2 Restated Bylaws of Auto-By-Tel Corporation adopted October 23,
1996
4.1+ Form of Stock Certificate
4.2 Amended and Restated Investors' Rights Agreement dated January
30, 1997 among Registrant and the Investors named in Exhibit A
thereto
5.1+ Opinion and Consent of Wilson Sonsini Goodrich & Rosati
10.1 Form of Indemnification Agreement between the Company and its di-
rectors and officers
10.2 Employment Offer Letter dated October 24, 1996 from Registrant to
Mark W. Lorimer
10.3 Employment Offer Letter dated December 16, 1996 from Registrant
to John M. Markovich
10.4 Employment Offer Letter dated October 20, 1996 from Registrant to
Michael 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* Marketing Agreement dated July 22, 1996 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
10.9* Marketing Agreement dated March 27, 1996 between Registrant and
Microsoft Corporation
10.10* Advertising Agreement dated October 15, 1996 between Registrant
and Digital City Inc.
10.11* Marketing Agreement dated February 8, 1996 between Registrant and
Edmund Publications Corporation
10.12* Referral Agreement dated September 6, 1996 between Registrant and
Automotive Information Center
10.13(a)-(h) Forms of Dealership Subscription Agreements
10.14 Lease Agreement dated June 1996 between Registrant and McDonnell
Douglas Realty Company
10.15 Sublease Agreement dated October 31, 1996 between Registrant and
Silicon Valley Bank
10.16* Financing Inquiry Referral Agreement dated October 25, 1996 among
Registrant, as obligor, Auto-By-Tel Acceptance Corporation and
Chase Manhattan Automotive Financial Corporation
10.17+* Service Agreement dated as of February 1, 1997 between Registrant
and Integrated Warranty Services, Inc.
11.1 Statement Regarding Computation of Per Share Earnings
21.1 Subsidiaries of the Company
23.1 Consents of Arthur Andersen LLP, Independent Public Accountants
(see Page II-5)
23.2+ Consent of Wilson Sonsini Goodrich & Rosati (included in Exhibit
5.1)
24.1 Power of Attorney (see Page II-6)
27.1 Financial Data Schedule
</TABLE>
- --------
+ To be filed by amendment.
* Confidential treatment has been requested for certain portions which have
been blacked out in the copy of the exhibit filed with the Commission. The
omitted information has been filed separately with the Commission pursuant
to the application for confidential treatment.
<PAGE>
EXHIBIT 1.1
[___________] SHARES
AUTO-BY-TEL CORPORATION
COMMON STOCK
UNDERWRITING AGREEMENT
[__________], 1997
MONTGOMERY SECURITIES
COWEN & COMPANY
ROBERTSON, STEPHENS, & COMPANY LLC
As Representatives of the several Underwriters
c/o Montgomery Securities
600 Montgomery Street
San Francisco, California 94111
Dear Sirs:
SECTION 1. Introductory. Auto-By-Tel Corporation, a Delaware
------------
corporation (the "Company"), proposes to issue and sell [__________] shares of
its authorized but unissued common stock (the "Common Stock"), and Peter R.
Ellis (the "Selling Stockholder") proposes to sell [__________] shares of the
issued and outstanding Common Stock, to the several underwriters named in
Schedule A annexed hereto (the "Underwriters"), for whom you are acting as
Representatives. Said aggregate of [__________] shares are herein called the
"Firm Common Shares." In addition, the Company proposes to grant to the
Underwriters an option to purchase up to [__________] additional shares of
Common Stock (the "Optional Common Shares"), as provided in Section 5 hereof.
The Firm Common Shares and, to the
<PAGE>
extent such option is exercised, the Optional Common Shares are hereinafter
collectively referred to as the "Common Shares."
You have advised the Company and the Selling Stockholder that the
Underwriters propose to make a public offering of their respective portions of
the Common Shares on the effective date of the registration statement
hereinafter referred to, or as soon thereafter as in your judgment is advisable.
The Company and the Selling Stockholder hereby confirm their
respective agreements with respect to the purchase of the Common Shares by the
Underwriters as follows:
SECTION 2. Representations and Warranties of the Company and
-------------------------------------------------
the Selling Stockholder. The Company and the Selling Stockholder represent and
- -----------------------
warrant to the several Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-___) with
respect to the Common 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. The Company has prepared and has filed or proposes to file prior to
the effective date of such registration statement an amendment or amendments to
such registration statement, which amendment or amendments have been or will be
similarly prepared. There have been delivered to you four signed copies of such
registration statement and amendments, together with four copies of each exhibit
filed therewith. Conformed copies of such registration statement and amendments
(but without exhibits) and of the related preliminary prospectus have been
delivered to you in such reasonable quantities as you have requested for each of
the Underwriters. The Company will next file with the Commission one of the
following: (i) prior to effectiveness of such registration statement, a further
amendment thereto, including the form of final prospectus, (ii) a final
prospectus in accordance with Rules 430A and
2
<PAGE>
424(b) of the Rules and Regulations or (iii) a term sheet (the "Term Sheet") as
described in and in accordance with Rules 434 and 424(b) of the Rules and
Regulations. As filed, the final prospectus, if one is used, or the Term Sheet
and Preliminary Prospectus, if a final prospectus is not used, shall include all
Rule 430A Information and, except to the extent that you shall agree in writing
to a modification, shall be in all substantive respects in the form furnished to
you prior to the date and time that this Agreement was executed and delivered by
the parties hereto, or, to the extent not completed at such date and time, shall
contain only such specific additional information and other changes (beyond that
contained in the latest Preliminary Prospectus) as the Company shall have
previously advised you in writing would be included or made therein.
The term "Registration Statement" as used in this Agreement shall mean
such registration statement at the time such registration statement becomes
effective and, in the event any post-effective amendment thereto becomes
effective prior to the First Closing Date (as hereinafter defined), shall also
mean such registration statement as so amended; provided, however, that such
term shall also include (i) all Rule 430A Information deemed to be included in
such registration statement at the time such registration statement becomes
effective as provided by Rule 430A of the Rules and Regulations and (ii) any
registration statement filed pursuant to Rule 462(b) of the Rules and
Regulations relating to the Common Shares. The term "Preliminary Prospectus" as
used in this Agreement shall mean any preliminary prospectus referred to in the
preceding paragraph and any preliminary prospectus included in the Registration
Statement at the time it becomes effective that omits Rule 430A Information.
The term "Prospectus" as used in this Agreement shall mean (i) the prospectus
relating to the Common Shares in the form in which it is first filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations, (ii) if a Term
Sheet is not used and no filing pursuant to Rule 424(b) of the Rules and
Regulations is required, the form of final prospectus included in the
Registration Statement at the time such registration statement becomes effective
or (iii) if a Term Sheet is used, the Term Sheet in the form in which it is
first filed with the Commission pursuant to Rule 424(b) of
3
<PAGE>
the Rules and Regulations, together with the Preliminary Prospectus included in
the Registration Statement at the time it becomes effective. The term "Rule 430A
Information" as used in this Agreement means information with respect to the
Common Shares and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A of the
Rules and Regulations.
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus, and each Preliminary Prospectus has
conformed in all material respects to the requirements of the Act and the Rules
and Regulations and, as of its date, has not included any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and at the time the Registration Statement becomes
effective, and at all times subsequent thereto up to and including each Closing
Date hereinafter mentioned, the Registration Statement and the Prospectus, and
any amendments or supplements thereto, will contain all material statements and
information required to be included therein by the Act and the Rules and
Regulations and will in all material respects conform to the requirements of the
Act and the Rules and Regulations, and neither the Registration Statement nor
the Prospectus, nor any amendment or supplement thereto, will include any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, no representation or warranty contained in this subsection
(b) shall be applicable to information contained in or omitted from any
Preliminary Prospectus, the Registration Statement, 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,
directly or through the Representatives, specifically for use in the preparation
thereof.
(c) The Company does not own or control, directly or indirectly, any
corporation, association or other entity other than the subsidiaries listed in
Exhibit 22 to the Registration Statement. The Company and each
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of its subsidiaries have been duly incorporated and are validly existing as
corporations in good standing under the laws of their respective jurisdictions
of incorporation, with full power and authority (corporate and other) to own and
lease their properties and conduct their respective businesses as described in
the Prospectus; the Company owns all of the outstanding capital stock of its
subsidiaries free and clear of all claims, liens, charges and encumbrances; the
Company and each of its subsidiaries are in possession of and operating in
compliance with all authorizations, licenses, permits, consents, certificates
and orders material to the conduct of their respective businesses, all of which
are valid and in full force and effect; the Company and each of its subsidiaries
are duly qualified to do business and in good standing as foreign corporations
in each jurisdiction in which the ownership or leasing of properties or the
conduct of their respective businesses requires such qualification, except for
jurisdictions in which the failure to so qualify would not have a material
adverse effect upon the Company or the subsidiary; and no proceeding has been
instituted in any such jurisdiction, revoking, limiting or curtailing, or
seeking to revoke, limit or curtail, such power and authority or qualification.
(d) The Company has an authorized and outstanding capital stock as
set forth under the heading "Capitalization" in the Prospectus; the issued and
outstanding shares of Common Stock have been duly authorized and validly issued,
are fully paid and nonassessable, have been issued in compliance with all
federal and state securities laws, were not issued in violation of or subject to
any preemptive rights or other rights to subscribe for or purchase securities,
and conform to the description thereof contained in the Prospectus. All issued
and outstanding shares of capital stock of each subsidiary of the Company have
been duly authorized and validly issued and are fully paid and nonassessable.
Except as disclosed in or contemplated by the Prospectus and the financial
statements of the Company, and the related notes thereto, included in the
Prospectus, neither the Company nor any subsidiary has outstanding any options
to purchase, or any preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into,
5
<PAGE>
or any contracts or commitments to issue or sell, shares of its capital stock or
any such options, rights, convertible securities or obligations. The description
of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and exercised thereunder,
set forth in the Prospectus accurately and fairly presents the information
required to be shown with respect to such plans, arrangements, options and
rights.
(e) The Common Shares to be sold by the Company have been duly
authorized and, when issued, delivered and paid for in the manner set forth in
this Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, and will conform to the description thereof contained in the
Prospectus. No preemptive rights or other rights to subscribe for or purchase
exist with respect to the issuance and sale of the Common Shares by the Company
pursuant to this Agreement. No stockholder of the Company has any right which
has not been waived to require the Company to register the sale of any shares
owned by such stockholder under the Act in the public offering contemplated by
this Agreement. No further approval or authority of the stockholders or the
Board of Directors of the Company will be required for the transfer and sale of
the Common Shares to be sold by the Selling Stockholder or the issuance and sale
of the Common Shares to be sold by the Company as contemplated herein.
(f) The Company has full legal right, power and authority to enter
into this Agreement and perform the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Company and
constitutes a valid and binding obligation of the Company in accordance with its
terms. The making and performance of this Agreement by the Company and the
consummation of the transactions herein contemplated will not violate any
provisions of the certificate of incorporation or bylaws, or other
organizational documents, of the Company or any of its subsidiaries, and will
not conflict with, result in the breach or violation of, or constitute, either
by itself or upon notice or the passage of time or both, a default under any
agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit
or other instrument to which the
6
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Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or any of its respective properties may be bound or affected,
any statute or any authorization, judgment, decree, order, rule or regulation of
any court or any regulatory body, administrative agency or other governmental
body applicable to the Company or any of its subsidiaries or any of its
respective properties. No consent, approval, authorization or other order of any
court, regulatory body, administrative agency or other governmental body is
required for the execution and delivery of this Agreement or the consummation of
the transactions contemplated by this Agreement, except for compliance with the
Act, the Blue Sky laws applicable to the public offering of the Common Shares by
the several Underwriters and the clearance of such offering with the National
Association of Securities Dealers, Inc. (the "NASD").
(g) Arthur Andersen LLP, who have expressed their opinion with
respect to the financial statements [and schedules] filed with the Commission as
a part of the Registration Statement and included in the Prospectus and in the
Registration Statement, are independent accountants as required by the Act and
the Rules and Regulations.
(h) The financial statements [and schedules] of the Company, and the
related notes thereto, included in the Registration Statement and the Prospectus
present fairly the financial position of the Company as of the respective dates
of such financial statements [and schedules], and the results of operations and
changes in financial position of the Company for the respective periods covered
thereby. Such statements[, schedules] and related notes have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis as certified by the independent accountants named in subsection (g) of
this Section 2. No other financial statements or schedules are required to be
included in the Registration Statement. The selected financial data set forth
in the Prospectus under the captions "Capitalization" and "Selected Financial
Data" fairly present the information set forth therein on the basis stated in
the Registration Statement.
7
<PAGE>
(i) Except as disclosed in the Prospectus, and except as to defaults
which individually or in the aggregate would not be material to the Company,
neither the Company nor any of its subsidiaries is in violation or default of
any provision of its certificate of incorporation or bylaws, or other
organizational documents, or is in breach of or default with respect to any
provision of any agreement, judgment, decree, order, mortgage, deed of trust,
lease, franchise, license, indenture, permit or other instrument to which it is
a party or by which it or any of its properties are bound; and there does not
exist any state of facts which constitutes an event of default on the part of
the Company or any such subsidiary as defined in such documents or which, with
notice or lapse of time or both, would constitute such an event of default.
(j) There are no contracts or other documents required to be
described in the Registration Statement or to be filed as exhibits to the
Registration Statement by the Act or by the Rules and Regulations which have not
been described or filed as required. The contracts so described in the
Prospectus are accurate and complete; all such contracts are in full force and
effect on the date hereof; and neither the Company nor any of its subsidiaries,
nor to the best of the Company's knowledge, any other party is in breach of or
default under any of such contracts.
(k) There are no legal or governmental actions, suits or proceedings
pending or, to the best of the Company's knowledge, threatened to which the
Company or any of its subsidiaries is or may be a party or of which property
owned or leased by the Company or any of its subsidiaries is or may be the
subject, or related to environmental or discrimination matters, which actions,
suits or proceedings might, individually or in the aggregate, prevent or
adversely affect the transactions contemplated by this Agreement or result in a
material adverse change in the condition (financial or otherwise), properties,
business, results of
8
<PAGE>
operations or prospects of the Company and its subsidiaries; and no labor
disturbance by the employees of the Company or any of its subsidiaries exists or
is imminent which might be expected to affect adversely such condition,
properties, business, results of operations or prospects. Neither the Company
nor any of its subsidiaries is a party or subject to the provisions of any
material injunction, judgment, decree or order of any court, regulatory body,
administrative agency or other governmental body.
(l) The Company or the applicable subsidiary has good and marketable
title to all the properties and assets reflected as owned in the financial
statements hereinabove described (or elsewhere in the Prospectus), subject to no
lien, mortgage, pledge, charge or encumbrance of any kind except (i) those, if
any, reflected in such financial statements (or elsewhere in the Prospectus), or
(ii) those which are not material in amount and do not adversely affect the use
made and proposed to be made of such property by the Company and its
subsidiaries. The Company or the applicable subsidiary holds its leased
properties under valid and binding leases, with such exceptions as are not
materially significant in relation to the business of the Company. Except as
disclosed in the Prospectus, the Company owns or leases all such properties as
are necessary to its operations as now conducted or as proposed to be conducted.
(m) Since the respective dates as of which information is given in
the Registration Statement and Prospectus, and except as described in or
specifically contemplated by the Prospectus: (i) the Company and its
subsidiaries have not incurred any material liabilities or obligations,
indirect, direct or contingent, or entered into any material verbal or written
agreement or other transaction which is not in the ordinary course of business
or which could result in a material reduction in the future earnings of the
Company and its subsidiaries; (ii) the Company and its subsidiaries have not
sustained any material loss or interference with their respective businesses or
properties from fire, flood, windstorm, accident or other calamity, whether or
not covered by insurance; (iii) the Company has not paid or declared any
dividends or other distributions with respect to its capital stock and the
Company and its subsidiaries are not in default in the payment of principal or
interest on any outstanding debt obligations; (iv) there has not been any change
in the capital stock (other than upon the sale of
9
<PAGE>
the Common Shares hereunder and upon the exercise of options and warrants
described in the Registration Statement) or indebtedness material to the Company
and its subsidiaries (other than in the ordinary course of business); and (v)
there has not been any material adverse change in the condition (financial or
otherwise), business, properties, results of operations or prospects of the
Company and its subsidiaries.
(n) Except as disclosed in or specifically contemplated by the
Prospectus, the Company and its subsidiaries have sufficient trademarks, trade
names, patent rights, mask works, copyrights, licenses, approvals and
governmental authorizations to conduct their businesses as now conducted; the
expiration of any trademarks, trade names, patent rights, mask works,
copyrights, licenses, approvals or governmental authorizations would not have a
material adverse effect on the condition (financial or otherwise), business,
results of operations or prospects of the Company or its subsidiaries; and the
Company has no knowledge of any material infringement by it or its subsidiaries
of trademark, trade name rights, patent rights, mask works, copyrights,
licenses, trade secret or other similar rights of others, and there is no claim
being made against the Company or its subsidiaries regarding trademark, trade
name, patent, mask work, copyright, license, trade secret or other infringement
which could have a material adverse effect on the condition (financial or
otherwise), business, results of operations or prospects of the Company and its
subsidiaries.
(o) The Company has not been advised, and has no reason to believe,
that either it or any of its subsidiaries is not conducting business in
compliance with all applicable laws, rules and regulations of the jurisdictions
in which it is conducting business, including, without limitation, all
applicable local, state and federal environmental laws and regulations; except
where failure to be so in compliance would not materially adversely affect the
condition (financial or otherwise), business, results of operations or prospects
of the Company and its subsidiaries.
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<PAGE>
(p) The Company and its subsidiaries have filed all necessary
federal, state and foreign income and franchise tax returns and have paid all
taxes shown as due thereon; and the Company has no knowledge of any tax
deficiency which has been or might be asserted or threatened against the Company
or its subsidiaries which could materially and adversely affect the business,
operations or properties of the Company and its subsidiaries.
(q) The Company is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
(r) The Company has not distributed and will not distribute prior to
the First Closing Date any offering material in connection with the offering and
sale of the Common Shares other than the Prospectus, the Registration Statement
and the other materials permitted by the Act.
(s) Each of the Company and its subsidiaries maintain insurance of
the types and in the amounts generally deemed adequate for its business,
including, but not limited to, insurance covering real and personal property
owned or leased by the Company and its subsidiaries against theft, damage,
destruction, acts of vandalism and all other risks customarily insured against,
all of which insurance is in full force and effect.
(t) Neither the Company nor any of its subsidiaries has at any time
during the last five years (i) made any unlawful contribution to any candidate
for foreign office, or failed to disclose fully any contribution in violation of
law, or (ii) made any payment to any federal or state governmental officer or
official, or other person charged with similar public or quasi-public duties,
other than payments required or permitted by the laws of the United States or
any jurisdiction thereof.
(u) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might be reasonably expected to cause
or result in stabilization or manipulation of the price of the Common
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<PAGE>
Stock to facilitate the sale or resale of the Common Shares.
SECTION 3. Representations, Warranties and Covenants of the
------------------------------------------------
Selling Stockholder.
- -------------------
(a) The Selling Stockholder represents and warrants
to, and agrees with, the several Underwriters that:
(i) The Selling Stockholder has, and on the First
Closing Date hereinafter mentioned will have, good and marketable title to the
Common Shares proposed to be sold by him hereunder on the First Closing Date and
full right, power and authority to enter into this Agreement and to sell,
assign, transfer and deliver such Common Shares hereunder, free and clear of all
voting trust arrangements, liens, encumbrances, equities, security interests,
restrictions and claims whatsoever; and upon delivery of and payment for such
Common Shares hereunder, the Underwriters will acquire good and marketable title
thereto, free and clear of all liens, encumbrances, equities, claims,
restrictions, security interests, voting trusts or other defects of title
whatsoever.
(ii) The Selling Stockholder agrees that the Common
Shares to be sold by him are subject to the interests of the Company and the
Underwriters and that the obligations of the Selling Stockholder hereunder shall
not be terminated, except as provided in this Agreement, by any act of the
Selling Stockholder, by operation of law, by the death or incapacity of the
Selling Stockholder or by the occurrence of any other event. If the Selling
Stockholder should die or become incapacitated, or if any other event should
occur, before the delivery of the Common Shares hereunder, documents evidencing
Common Shares shall be delivered by the heirs, assignees, successors or legal
representatives of the Selling Stockholder, as the case may be, in accordance
with the terms and conditions of this Agreement as if such death, incapacity or
other event had not occurred. This Agreement has been duly executed and
delivered by the Selling Stockholder.
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<PAGE>
(iii) The performance of this Agreement and the
consummation of the transactions contemplated hereby will not result in a breach
or violation by the Selling Stockholder of any of the terms or provisions of, or
constitute a default by the Selling Stockholder under, any indenture, mortgage,
deed of trust, trust (constructive or other), loan agreement, lease, franchise,
license or other agreement or instrument to which the Selling Stockholder is a
party or by which the Selling Stockholder or any of his properties is bound, any
statute, or any judgment, decree, order, rule or regulation of any court or
governmental agency or body applicable to the Selling Stockholder or any of his
properties.
(iv) The 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 stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Common Shares.
(b) The Selling Stockholder agrees with the Company and the
Underwriters not to offer to sell, sell or contract to sell or otherwise dispose
of any shares of Common Stock or securities convertible into or exchangeable for
any shares of Common Stock, for a period of 180 days after the first date that
any of the Common Shares are released by you for sale to the public, without the
prior written consent of Montgomery Securities, which consent may be withheld at
the sole discretion of Montgomery Securities.
SECTION 4. Representations and Warranties of the Underwriters.
--------------------------------------------------
The Representatives, on behalf of the several Underwriters, represent and
warrant to the Company and to the Selling Stockholder that the information set
forth (i) on the cover page of the Prospectus with respect to price,
underwriting discounts and commissions and terms of offering and (ii) under
"Underwriting" in the Prospectus was furnished to the Company by and on behalf
of the Underwriters for use in connection with the preparation of the
Registration Statement and the Prospectus and is correct in all material
respects. The Representatives represent and warrant that they have been
authorized by
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<PAGE>
each of the other Underwriters as the Representatives to enter into this
Agreement on its behalf and to act for it in the manner herein provided.
SECTION 5. Purchase, Sale and Delivery of Common Shares. On
--------------------------------------------
the basis of the representations, warranties and agreements herein contained,
but subject to the terms and conditions herein set forth, (i) the Company agrees
to issue and sell to the Underwriters [_________] of the Firm Common Shares and
(ii) the Selling Stockholder agrees to sell to the Underwriters [_______] of the
Firm Common Shares. The Underwriters agree, severally and not jointly, to
purchase from the Company and the Selling Stockholder, respectively, the number
of Firm Common Shares described below. The purchase price per share to be paid
by the several Underwriters to the Company and to the Selling Stockholder,
respectively, shall be $[___] per share.
The obligation of each Underwriter to the Company shall be to purchase
from the Company that number of full shares which (as nearly as practicable, as
determined by you) bears to [__________] the same proportion as the number of
shares set forth opposite the name of such Underwriter in Schedule A hereto
bears to the total number of Firm Common Shares. The obligation of each
Underwriter to the Selling Stockholder shall be to purchase from the Selling
Stockholder that number of full shares which (as nearly as practicable, as
determined by you) bears to [__________] the same proportion as the number of
shares set forth opposite the name of such Underwriter in Schedule A hereto
bears to the total number of Firm Common Shares.
Delivery of certificates for the Firm Common Shares to be purchased by
the Underwriters and payment therefor shall be made at the offices of Montgomery
Securities, 600 Montgomery Street, San Francisco, California (or such other
place as may be agreed upon by the Company and the Representatives) at such time
and date, not later than the third (or, if the Firm Common Shares are priced, as
contemplated by Rule 15c6-1(c) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), after 4:30 P.M. Washington D.C. time, the fourth)
full business day following the first date that any of the
14
<PAGE>
Common Shares are released by you for sale to the public, as you shall designate
by at least 48 hours' prior notice to the Company or at such other time and
date, not later than one week after such third or fourth, as the case may be,
full business day as may be agreed upon by the Company and the Representatives
(the "First Closing Date"); provided, however, that if the Prospectus is at any
time prior to the First Closing Date recirculated to the public, the First
Closing Date shall occur upon the later of the third or fourth, as the case may
be, full business day following the first date that any of the Common Shares are
released by you for sale to the public or the date that is 48 hours after the
date that the Prospectus has been so recirculated.
Delivery of certificates for the Firm Common Shares shall be made by
or on behalf of the Company and the Selling Stockholder to you, for the
respective accounts of the Underwriters with respect to the Firm Common Shares
to be sold by the Company and the Selling Stockholder against payment by you,
for the accounts of the several Underwriters, of the purchase price therefor by
a wire transfer of immediately available funds to an account designated by the
Company and by the Selling Stockholder in proportion to the number of Firm
Common Shares to be sold by the Company and the Selling Stockholder,
respectively. The certificates for the Firm Common Shares shall be registered
in such names and denominations as you shall have requested at least two full
business days prior to the First Closing Date, and shall be made available for
checking and packaging on the business day preceding the First Closing Date at a
location in New York, New York, as may be designated by you. Time shall be of
the essence, and delivery at the time and place specified in this Agreement is a
further condition to the obligations of the Underwriters.
In addition, on the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company hereby grants an option to the several Underwriters to
purchase, severally and not jointly, up to an aggregate of [________] Optional
Common Shares at the purchase price per share to be paid for the Firm Common
Shares, for use solely in covering any over-allotments made by you for the
account
15
<PAGE>
of the Underwriters in the sale and distribution of the Firm Common Shares. The
option granted hereunder may be exercised at any time (but not more than once)
within 30 days after the first date that any of the Common Shares are released
by you for sale to the public, upon notice by you to the Company setting forth
the aggregate number of Optional Common Shares as to which the Underwriters are
exercising the option, the names and denominations in which the certificates for
such shares are to be registered and the time and place at which such
certificates will be delivered. Such time of delivery (which may not be earlier
than the First Closing Date), being herein referred to as the "Second Closing
Date," shall be determined by you, but if at any time other than the First
Closing Date shall not be earlier than three nor later than five full business
days after delivery of such notice of exercise. The number of Optional Common
Shares to be purchased by each Underwriter shall be determined by multiplying
the number of Optional Common Shares to be sold by the Company pursuant to such
notice of exercise by a fraction, the numerator of which is the number of Firm
Common Shares to be purchased by such Underwriter as set forth opposite its name
in Schedule A and the denominator of which is [__________] (subject to such
adjustments to eliminate any fractional share purchases as you in your
discretion may make). Certificates for the Optional Common Shares will be made
available for checking and packaging on the business day preceding the Second
Closing Date at a location in New York, New York, as may be designated by you.
The manner of payment for and delivery of the Optional Common Shares shall be
the same as for the Firm Common Shares purchased from the Company as specified
in the two preceding paragraphs. At any time before lapse of the option, you may
cancel such option by giving written notice of such cancellation to the Company.
If the option is cancelled or expires unexercised in whole or in part, the
Company will register under the Act the number of Option Shares as to which the
option has not been exercised.
You have advised the Company and the Selling Stockholder that each
Underwriter has authorized you to accept delivery of its Common Shares and to
make payment and receipt therefor. You, individually and not as the
Representatives of the Underwriters, may (but shall not be
16
<PAGE>
obligated to) make payment for any Common Shares to be purchased by any
Underwriter whose funds shall not have been received by you by the First Closing
Date or the Second Closing Date, as the case may be, for the account of such
Underwriter, but any such payment shall not relieve such Underwriter from any of
its obligations under this Agreement.
Subject to the terms and conditions hereof, the Underwriters propose
to make a public offering of their respective portions of the Common Shares as
soon after the effective date of the Registration Statement as in the judgment
of the Representatives is advisable and at the public offering price set forth
on the cover page of and on the terms set forth in the final prospectus, if one
is used, or on the first page of the Term Sheet, if one is used.
SECTION 6. Covenants of the Company. The Company covenants
------------------------
and agrees that:
(a) The Company will use its best efforts to cause the Registration
Statement and any amendment thereof, if not effective at the time and date that
this Agreement is executed and delivered by the parties hereto, to become
effective. If the Registration Statement has become or becomes effective
pursuant to Rule 430A of the Rules and Regulations, or the filing of the
Prospectus is otherwise required under Rule 424(b) of the Rules and Regulations,
the Company will file the Prospectus, properly completed, pursuant to the
applicable paragraph of Rule 424(b) of the Rules and Regulations within the time
period prescribed and will provide evidence satisfactory to you of such timely
filing. The Company will promptly advise you in writing (i) of the receipt of
any comments of the Commission, (ii) of any request of the Commission for
amendment or supplement to the Registration Statement (either before or after it
becomes effective), any Preliminary Prospectus or the Prospectus or for
additional information, (iii) when the Registration Statement shall have become
effective, and (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the institution
of any proceedings for that purpose. If the Commission shall
17
<PAGE>
enter any such stop order at any time, the Company will use its best efforts to
obtain the lifting of such order at the earliest possible moment. The Company
will not file any amendment or supplement to the Registration Statement (either
before or after it becomes effective), any Preliminary Prospectus or the
Prospectus of which you have not been furnished with a copy a reasonable time
prior to such filing or to which you reasonably object or which is not in
compliance with the Act and the Rules and Regulations.
(b) The Company will prepare and file with the Commission, promptly
upon your request, any amendments or supplements to the Registration Statement
or the Prospectus which in your judgment may be necessary or advisable to enable
the several Underwriters to continue the distribution of the Common Shares and
will use its best efforts to cause the same to become effective as promptly as
possible. The Company will fully and completely comply with the provisions of
Rule 430A of the Rules and Regulations with respect to information omitted from
the Registration Statement in reliance upon such Rule.
(c) If at any time within the nine-month period referred to in
Section 10(a)(3) of the Act during which a prospectus relating to the Common
Shares is required to be delivered under the Act any event occurs, as a result
of which the Prospectus, including any amendments or supplements, would include
an untrue statement of a material fact, or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, or if it is necessary at any time to amend the Prospectus, including
any amendments or supplements, to comply with the Act or the Rules and
Regulations, the Company will promptly advise you thereof and will promptly
prepare and file with the Commission, at its own expense, an amendment or
supplement which will correct such statement or omission or an amendment or
supplement which will effect such compliance and will use its best efforts to
cause the same to become effective as soon as possible; and, in case any
Underwriter is required to deliver a prospectus after such nine-month period,
the Company upon request, but at the expense of such Underwriter, will promptly
prepare such amendment or amendments to the Registration Statement and such
Prospectus or Prospec-
18
<PAGE>
tuses as may be necessary to permit compliance with the requirements of Section
10(a)(3) of the Act.
(d) As soon as practicable, but not later than 45 days after the end
of the first quarter ending after one year following the "effective date of the
Registration Statement" (as defined in Rule 158(c) of the Rules and
Regulations), the Company will make generally available to its security holders
an earnings statement (which need not be audited) covering a period of 12
consecutive months beginning after the effective date of the Registration
Statement which will satisfy the provisions of the last paragraph of Section
11(a) of the Act.
(e) During such period as a prospectus is required by law to be
delivered in connection with sales by an Underwriter or dealer, the Company, at
its expense, but only for the nine-month period referred to in Section 10(a)(3)
of the Act, will furnish to you and the Selling Stockholder or mail to your and
the Selling Stockholder's orders copies of the Registration Statement, the
Prospectus, the Preliminary Prospectus and all amendments and supplements to any
such documents in each case as soon as available and in such quantities as you
and the Selling Stockholder may request, for the purposes contemplated by the
Act.
(f) The Company shall cooperate with you and your counsel in order
to qualify or register the Common Shares for sale under (or obtain exemptions
from the application of) the Blue Sky laws of such jurisdictions as you
designate, will comply with such laws and will continue such qualifications,
registrations and exemptions in effect so long as reasonably required for the
distribution of the Common Shares. The Company shall not be required to qualify
as a foreign corporation or to file a general consent to service of process in
any such jurisdiction where it is not presently qualified or where it would be
subject to taxation as a foreign corporation. The Company will advise you
promptly of the suspension of the qualification or registration of (or any such
exemption relating to) the Common Shares for offering, sale or trading in any
jurisdiction or any initiation or threat of any proceeding for any such purpose,
and in the event of the issuance of
19
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any order suspending such qualification, registration or exemption, the Company,
with your cooperation, will use its best efforts to obtain the withdrawal
thereof.
(g) During the period of five years hereafter, the Company will
furnish to the Representatives and, upon request of the Representatives, to each
of the other Underwriters: (i) as soon as practicable after the end of each
fiscal year, copies of the Annual Report of the Company containing the balance
sheet of the Company as of the close of such fiscal year and statements of
income, stockholders' equity and cash flows for the year then ended and the
opinion thereon of the Company's independent public accountants; (ii) as soon as
practicable after the filing thereof, copies of each proxy statement, Annual
Report on Form 10-K, Quarterly Report on Form 10-Q, Report on Form 8-K or other
report filed by the Company with the Commission, the NASD or any securities
exchange; and (iii) as soon as available, copies of any report or communication
of the Company mailed generally to holders of its Common Stock.
(h) During the period of 180 days after the first date that any of
the Common Shares are released by you for sale to the public, without the prior
written consent of either Montgomery Securities or each of the Representatives
(which consent may be withheld at the sole discretion of Montgomery Securities
or the Representatives, as the case may be), the Company will not (other than
pursuant to outstanding options and warrants described in the Registration
Statement) issue, offer, sell, grant options to purchase or otherwise dispose of
any of the Company's equity securities or any other securities convertible into
or exchangeable with Common Stock or any other equity security of the Company.
(i) The Company will apply the net proceeds of the sale of the
Common Shares sold by it substantially in accordance with the statements under
the caption "Use of Proceeds" in the Prospectus.
(j) The Company will use its best efforts to qualify or register the
Common Stock for sale in non-issuer transactions under (or obtain exemptions
from the
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application of) the Blue Sky laws of the State of California (and thereby permit
market making transactions and secondary trading in the Common Stock in
California), will comply with such Blue Sky laws and will continue such
qualifications, registrations and exemptions in effect for a period of five
years after the date hereof.
(k) The Company will use its best efforts to designate the Common
Stock for quotation as a national market system security on the NASD Automated
Quotation System.
(l) Not later than 4:00 P.M. on the business day following the date
Common Shares are released by the Underwriters for sale to the public, the
Company shall deliver or cause to be delivered copies of the Prospectus in such
quantities and at such places as the Representatives shall request.
You, on behalf of the Underwriters, may, in your sole discretion,
waive in writing the performance by the Company of any one or more of the
foregoing covenants or extend the time for their performance.
SECTION 7. Payment of Expenses. Whether or not the transactions
-------------------
contemplated hereunder are consummated or this Agreement becomes effective or is
terminated, the Company and, unless otherwise paid by the Company, the Selling
Stockholder agree to pay all costs, fees and expenses incurred in connection
with the performance of their obligations hereunder and in connection with the
transactions contemplated hereby, including without limiting the generality of
the foregoing, (i) all expenses incident to the issuance and delivery of the
Common Shares (including all printing and engraving costs), (ii) all fees and
expenses of the registrar and transfer agent of the Common Stock, (iii) all
necessary issue, transfer and other stamp taxes in connection with the issuance
and sale of the Common Shares to the Underwriters, (iv) all fees and expenses of
the Company's counsel and the Company's independent accountants, (v) all costs
and expenses incurred in connection with the preparation, printing, filing,
shipping and distribution of the Registration Statement, each Preliminary
Prospectus and the Prospectus
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(including all exhibits and financial statements) and all amendments and
supplements provided for herein, this Agreement, the Agreement Among
Underwriters, the Selected Dealers Agreement, the Underwriters' Questionnaire,
the Underwriters' Power of Attorney and the Blue Sky memorandum, (vi) all filing
fees, attorneys' fees and expenses incurred by the Company or the Underwriters
in connection with qualifying or registering (or obtaining exemptions from the
qualification or registration of) all or any part of the Common Shares for offer
and sale under the Blue Sky laws, (vii) the filing fee of the NASD, and (viii)
all other fees, costs and expenses referred to in Item 13 of the Registration
Statement. The Underwriters may deem the Company to be the primary obligor with
respect to all costs, fees and expenses to be paid by the Company and by the
Selling Stockholder hereunder. Except as provided in this Section 7, Section 9
and Section 11 hereof, the Underwriters shall pay all of their own expenses,
including the fees and disbursements of their counsel (excluding those relating
to qualification, registration or exemption under the Blue Sky laws and the Blue
Sky memorandum referred to above). This Section 7 shall not affect any agreement
between the Company and the Selling Stockholder relating to the payment of
expenses.
The Selling Stockholder will pay (directly or by reimbursement) all
fees and expenses incident to the performance of his obligations under this
Agreement which are not otherwise specifically provided for herein, including
but not limited to (i) any fees and expenses of counsel for the Selling
Stockholder and (ii) all expenses and taxes incident to the sale and delivery of
the Common Shares to be sold by the Selling Stockholder to the Underwriters
hereunder.
SECTION 8. Conditions of the Obligations of the Underwriters.
-------------------------------------------------
The obligations of the several Underwriters to purchase and pay for the Firm
Common Shares on the First Closing Date and the Optional Common Shares on the
Second Closing Date shall be subject to the accuracy of the representations and
warranties on the part of the Company and the Selling Stockholder herein set
forth as of the date hereof and as of the First Closing Date or the Second
Closing Date, as the case may be, to the accuracy of the
22
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statements of Company officers and the Selling Stockholder made pursuant to the
provisions hereof, to the performance by the Company and the Selling Stockholder
of their respective obligations hereunder, and to the following additional
conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 P.M. (or, in the case of a registration statement filed pursuant
to Rule 462(b) of the Rules and Regulations relating to the Common Shares, not
later than 10:00 P.M.), Washington, D.C. time, on the date of this Agreement, or
at such later time as shall have been consented to by you; if the filing of the
Prospectus, or any supplement thereto, is required pursuant to Rule 424(b) of
the Rules and Regulations, the Prospectus shall have been filed in the manner
and within the time period required by Rule 424(b) of the Rules and Regulations;
and prior to such Closing Date, no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or shall be pending or, to the knowledge of
the Company, the Selling Stockholder or you, shall be contemplated by the
Commission; and any request of the Commission for inclusion of additional
information in the Registration Statement, or otherwise, shall have been
complied with to your satisfaction.
(b) You shall be satisfied that since the respective dates as of
which information is given in the Registration Statement and Prospectus, (i)
there shall not have been any change in the capital stock (other than pursuant
to the exercise of outstanding options and warrants described in the
Registration Statement) of the Company or any of its subsidiaries or any
material change in the indebtedness (other than in the ordinary course of
business) of the Company or any of its subsidiaries, (ii) except as set forth or
contemplated by the Registration Statement or the Prospectus, no material oral
or written agreement or other transaction shall have been entered into by the
Company or any of its subsidiaries, which is not in the ordinary course of
business or which could result in a material reduction in the future earnings of
the Company and its subsidiaries, (iii) no loss or damage (whether or not
insured) to the property of the
23
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Company or any of its subsidiaries shall have been sustained which materially
and adversely affects the condition (financial or otherwise), business, results
of operations or prospects of the Company and its subsidiaries, (iv) no legal or
governmental action, suit or proceeding affecting the Company or any of its
subsidiaries which is material to the Company and its subsidiaries or which
affects or may affect the transactions contemplated by this Agreement shall have
been instituted or threatened, and (v) there shall not have been any material
change in the condition (financial or otherwise), business, management, results
of operations or prospects of the Company and its subsidiaries which makes it
impractical or inadvisable in the judgment of the Representatives to proceed
with the public offering or purchase the Common Shares as contemplated hereby.
(c) There shall have been furnished to you, as Representatives of
the Underwriters, on each Closing Date, in form and substance satisfactory to
you, except as otherwise expressly provided below:
(i) An opinion of Wilson Sonsini Goodrich & Rosati, counsel
for the Company and the Selling Stockholder, addressed to the Underwriters and
dated the First Closing Date or the Second Closing Date (in the latter case with
respect to the Company only), as the case may be, to the effect that:
(1) Each of the Company and each of its subsidiaries has
been duly incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, is duly qualified to do
business as a foreign corporation and is in good standing in all other
jurisdictions where the ownership or leasing of properties or the conduct of its
business requires such qualification, except for jurisdictions in which the
failure to so qualify would not have a material adverse effect on the Company
and its subsidiaries, and has full corporate power and authority to own its
properties and conduct its business as described in the Registration Statement;
(2) The authorized, issued and outstanding capital stock
of the Company is as set forth
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<PAGE>
under the caption "Capitalization" in the Prospectus; all necessary and proper
corporate proceedings have been taken in order to authorize validly such
authorized Common Stock; all outstanding shares of Common Stock (including the
Firm Common Shares and any Optional Common Shares) have been duly and validly
issued, are fully paid and nonassessable, have been issued in compliance with
federal and state securities laws, were not issued in violation of or subject to
any preemptive rights or other rights to subscribe for or purchase any
securities and conform to the description thereof contained in the Prospectus;
without limiting the foregoing, there are no preemptive or other rights to
subscribe for or purchase any of the Common Shares to be sold by the Company
hereunder;
(3) All of the issued and outstanding shares of the
Company's subsidiaries have been duly and validly authorized and issued, are
fully paid and nonassessable and are owned beneficially by the Company free and
clear of all liens, encumbrances, equities, claims, security interests, voting
trusts or other defects of title whatsoever;
(4) The certificates evidencing the Common Shares to be
delivered hereunder are in due and proper form under Delaware law, and when duly
countersigned by the Company's transfer agent and registrar, and delivered to
you or upon your order against payment of the agreed consideration therefor in
accordance with the provisions of this Agreement, the Common Shares represented
thereby will be duly authorized and validly issued, fully paid and
nonassessable, will not have been issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities and
will conform in all respects to the description thereof contained in the
Prospectus;
(5) Except as disclosed in or specifically contemplated
by the Prospectus, to the best of such counsel's knowledge, there are no
outstanding options, warrants or other rights calling for the issuance of, and
no commitments, plans or arrangements to issue, any shares of capital stock of
the Company or any security convertible into or exchangeable for capital stock
of the Company;
25
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(6) The Registration Statement has become effective under
the Act, and, to the best of such counsel's knowledge, no stop order suspending
the effectiveness of the Registration Statement or preventing the use of the
Prospectus has been issued and no proceedings for that purpose have been
instituted or are pending or contemplated by the Commission; any required filing
of the Prospectus and any supplement thereto pursuant to Rule 424(b) of the
Rules and Regulations has been made in the manner and within the time period
required by such Rule 424(b);
(7) The Registration Statement, the Prospectus and each
amendment or supplement thereto (except for the financial statements and
schedules included therein as to which such counsel need express no opinion)
comply as to form in all material respects with the requirements of the Act and
the Rules and Regulations;
(8) To the best of such counsel's knowledge, there are no
franchises, leases, contracts, agreements or documents of a character required
to be disclosed in the Registration Statement or Prospectus or to be filed as
exhibits to the Registration Statement which are not disclosed or filed, as
required;
(9) To the best of such counsel's knowledge, there are no
legal or governmental actions, suits or proceedings pending or threatened
against the Company which are required to be described in the Prospectus which
are not described as required;
(10) The Company has full right, power and authority to
enter into this Agreement and to sell and deliver the Common Shares to be sold
by it to the several Underwriters; this Agreement has been duly and validly
authorized by all necessary corporate action by the Company, has been duly and
validly executed and delivered by and on behalf of the Company, and is a valid
and binding agreement of the Company in accordance with its terms, except as
enforceability may be limited by general equitable principles, bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally and except as to those provisions relating to
26
<PAGE>
indemnity or contribution for liabilities arising under the Act as to which no
opinion need be expressed; and no approval, authorization, order, consent,
registration, filing, qualification, license or permit of or with any court,
regulatory, administrative or other governmental body is required for the
execution and delivery of this Agreement by the Company or the consummation of
the transactions contemplated by this Agreement, except such as have been
obtained and are in full force and effect under the Act and such as may be
required under applicable Blue Sky laws in connection with the purchase and
distribution of the Common Shares by the Underwriters and the clearance of such
offering with the NASD;
(11) The execution and performance of this Agreement and
the consummation of the transactions herein contemplated will not conflict with,
result in the breach of, or constitute, either by itself or upon notice or the
passage of time or both, a default under, any agreement, mortgage, deed of
trust, lease, franchise, license, indenture, permit or other instrument known to
such counsel to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or any of its or their property may
be bound or affected which is material to the Company and its subsidiaries, or
violate any of the provisions of the certificate of incorporation or bylaws, or
other organizational documents, of the Company or any of its subsidiaries or, so
far as is known to such counsel, violate any statute, judgment, decree, order,
rule or regulation of any court or governmental body having jurisdiction over
the Company or any of its subsidiaries or any of its or their property;
(12) Neither the Company nor any subsidiary is in
violation of its certificate of incorporation or bylaws, or other organizational
documents, or to the best of such counsel's knowledge, in breach of or default
with respect to any provision of any agreement, mortgage, deed of trust, lease,
franchise, license, indenture, permit or other instrument known to such counsel
to which the Company or any such subsidiary is a party or by which it or any of
its properties may be bound or affected, except where such default would not
materially
27
<PAGE>
adversely affect the Company and its subsidiaries; and, to the best of such
counsel's knowledge, the Company and its subsidiaries are in compliance with all
laws, rules, regulations, judgments, decrees, orders and statutes of any court
or jurisdiction to which they are subject, except where noncompliance would not
materially adversely affect the Company and its subsidiaries;
(13) To the best of such counsel's knowledge, no holders
of securities of the Company have rights which have not been waived to the
registration of shares of Common Stock or other securities, because of the
filing of the Registration Statement by the Company or the offering contemplated
hereby;
(14) To the best of such counsel's knowledge, this
Agreement has been duly authorized, executed and delivered by or on behalf of
the Selling Stockholder; and the performance of this Agreement and the
consummation of the transactions herein contemplated by the Selling Stockholder
will not result in a breach of, or constitute a default under, any indenture,
mortgage, deed of trust, trust (constructive or other), loan agreement, lease,
franchise, license or other agreement or instrument to which the Selling
Stockholder is a party or by which the Selling Stockholder or any of his
property may be bound, or violate any statute, judgment, decree, order, rule or
regulation known to such counsel of any court or governmental body having
jurisdiction over the Selling Stockholder or any of his property; and to the
best of such counsel's knowledge, no approval, authorization, order or consent
of any court, regulatory body, administrative agency or other governmental body
is required for the execution and delivery of this Agreement or the consummation
by the Selling Stockholder of the transactions contemplated by this Agreement,
except such as have been obtained and are in full force and effect under the Act
and such as may be required under the rules of the NASD and applicable Blue Sky
laws;
(15) To the best of such counsel's knowledge, the Selling
Stockholder has full right, power and authority to enter into this Agreement and
to sell, transfer and deliver the Common Shares to be sold on the
28
<PAGE>
First Closing Date by the Selling Stockholder hereunder, and good and marketable
title to such Common Shares so sold, free and clear of all liens, encumbrances,
equities, claims, restrictions, security interests, voting trusts, or other
defects of title whatsoever, will be transferred to the Underwriters (whom
counsel may assume to be bona fide purchasers) who purchase such Common Shares
hereunder;
(16) To the best of such counsel's knowledge, this
Agreement is a valid and binding agreement of the Selling Stockholder,
enforceable against the Selling Stockholder in accordance with its terms except
as enforceability may be limited by general equitable principles, bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally and except with respect to those provisions relating to indemnities or
contributions for liabilities under the Act, as to which no opinion need be
expressed; and
(17) No transfer taxes are required to be paid in
connection with the sale and delivery of the Common Shares to the Underwriters
hereunder.
In rendering such opinion, such counsel may rely, as to matters of
local law, on opinions of local counsel and, as to matters of fact, on
certificates of the Selling Stockholder and of officers of the Company and of
governmental officials, in which case their opinion is to state that they are so
doing and that the Underwriters are justified in relying on such opinions or
certificates and copies of said opinions or certificates are to be attached to
the opinion. Such counsel shall also include a statement to the effect that
nothing has come to such counsel's attention that would lead such counsel to
believe that either at the effective date of the Registration Statement or at
the applicable Closing Date the Registration Statement or the Prospectus, or any
amendment or supplement thereto, contains any untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
29
<PAGE>
(ii) Such opinion or opinions of Skadden, Arps, Slate,
Meagher & Flom LLP, counsel for the Underwriters, dated the First Closing Date
or the Second Closing Date, as the case may be, with respect to the
incorporation of the Company, the sufficiency of all corporate proceedings and
other legal matters relating to this Agreement, the validity of the Common
Shares, the Registration Statement and the Prospectus and other related matters
as you may reasonably require, and the Company and the Selling Stockholder shall
have furnished to such counsel such documents and shall have exhibited to them
such papers and records as they may reasonably request for the purpose of
enabling them to pass upon such matters. In connection with such opinions, such
counsel may rely on representations or certificates of officers of the Company
and governmental officials.
(iii) A certificate of the Company executed by the
Chairman of the Board or President and the chief financial or accounting officer
of the Company, dated the First Closing Date or the Second Closing Date, as the
case may be, to the effect that:
(1) The representations and warranties of the
Company set forth in Section 2 of this Agreement are true and correct as of the
date of this Agreement and as of the First Closing Date or the Second Closing
Date, as the case may be, and the Company has complied with all the agreements
and satisfied all the conditions on its part to be performed or satisfied on or
prior to such Closing Date;
(2) The Commission has not issued any order
preventing or suspending the use of the Prospectus or any Preliminary Prospectus
filed as a part of the Registration Statement or any amendment thereto; no stop
order suspending the effectiveness of the Registration Statement has been
issued; and to the best of the knowledge of the respective signers, no
proceedings for that purpose have been instituted or are pending or contemplated
under the Act;
(3) Each of the respective signers of the
certificate has carefully examined the
30
<PAGE>
Registration Statement and the Prospectus; in his opinion and to the best of his
knowledge, the Registration Statement and the Prospectus and any amendments or
supplements thereto contain all statements required to be stated therein
regarding the Company and its subsidiaries; and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto includes
any untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading;
(4) Since the initial date on which the
Registration Statement was filed, no agreement, written or oral, transaction or
event has occurred which should have been set forth in an amendment to the
Registration Statement or in a supplement to or amendment of any prospectus
which has not been disclosed in such a supplement or amendment;
(5) Since the respective dates as of which
information is given in the Registration Statement and the Prospectus, and
except as disclosed in or contemplated by the Prospectus, there has not been any
material adverse change or a development involving a material adverse change in
the condition (financial or otherwise), business, properties, results of
operations, management or prospects of the Company and its subsidiaries; and no
legal or governmental action, suit or proceeding is pending or threatened
against the Company or any of its subsidiaries which is material to the Company
and its subsidiaries, whether or not arising from transactions in the ordinary
course of business, or which may adversely affect the transactions contemplated
by this Agreement; since such dates and except as so disclosed, neither the
Company nor any of its subsidiaries has entered into any oral or written
agreement or other transaction which is not in the ordinary course of business,
or which could result in a material reduction in the future earnings of the
Company, or incurred any material liability or obligation, direct, contingent or
indirect, made any change in its capital stock, made any material change in its
short-term debt or funded debt or repurchased or otherwise acquired any of the
Company's capital stock; and the Company has not declared or paid any dividend,
or made any other distribution, upon
31
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its outstanding capital stock payable to stockholders of record on a date prior
to the First Closing Date or Second Closing Date; and
(6) Since the respective dates as of which
information is given in the Registration Statement and the Prospectus and except
as disclosed in or contemplated by the Prospectus, the Company and its
subsidiaries have not sustained a material loss or damage by strike, fire,
flood, windstorm, accident or other calamity (whether or not insured).
(iv) On the First Closing Date, a certificate, dated
the First Closing Date and addressed to you, signed by the Selling Stockholder
to the effect that the representations and warranties of the Selling Stockholder
in this Agreement are true and correct, as if made at and as of the First
Closing Date, and the Selling Stockholder has complied with all the agreements
and satisfied all the conditions on his part to be performed or satisfied prior
to the First Closing Date.
(v) On the date before this Agreement is executed and
also on the First Closing Date and the Second Closing Date, a letter addressed
to you, as Representatives of the Underwriters, from Arthur Andersen LLP,
independent accountants, the first one to be dated the day before the date of
this Agreement, the second one to be dated the First Closing Date and the third
one (in the event of a Second Closing) to be dated the Second Closing Date, in
form and substance satisfactory to you.
(vi) On or before the First Closing Date, letters from
the Selling Stockholder, each holder of the Common Stock and each director and
officer of the Company, in form and substance satisfactory to you, confirming
that for a period of 180 days after the first date that any of the Common Shares
are released by you for sale to the public, such person will not, without the
prior written consent of Montgomery Securities (which consent may be withheld in
its sole discretion), directly or indirectly, sell, offer, contract or grant any
option to sell, make any short sale (including without limitation any "short vs.
the box"), pledge, transfer, establish an open
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"put equivalent position" within the meaning of Rule 16a-1(h) of the Exchange
Act or otherwise dispose of any shares of Common Stock, options or warrants to
acquire Common Stock, or securities exchangeable or exercisable for or
convertible into Common Stock.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are satisfactory to you and
to Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Underwriters. The
Company shall furnish you with such manually signed or conformed copies of such
opinions, certificates, letters and documents as you request. Any certificate
signed by any officer of the Company and delivered to the Representatives or to
counsel for the Underwriters shall be deemed to be a representation and warranty
by the Company to the Underwriters as to the statements made therein.
If any condition to the Underwriters' obligations hereunder to be
satisfied prior to or at the First Closing Date is not so satisfied, this
Agreement at your election will terminate upon notification by you as
Representatives to the Company and the Selling Stockholder without liability on
the part of any Underwriter, the Company or the Selling Stockholder, except for
the expenses to be paid or reimbursed by the Company and the Selling Stockholder
pursuant to Sections 7 and 9 hereof and except to the extent provided in Section
11 hereof.
SECTION 9. Reimbursement of Underwriters' Expenses.
---------------------------------------
Notwithstanding any other provisions hereof, if this Agreement shall be
terminated by you pursuant to Section 8 hereof, or if the sale to the
Underwriters of the Common Shares at the First Closing is not consummated
because of any refusal, inability or failure on the part of the Company or the
Selling Stockholder to perform any agreement herein or to comply with any
provision hereof, the Company agrees to reimburse you and the other Underwriters
upon demand for all out-of-pocket expenses that shall have been reasonably
incurred by you and them in connection with the proposed purchase and the sale
of the Common Shares, including but not limited to fees and disbursements of
counsel, printing expenses, travel expenses, postage, telegraph charges and
telephone charges
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relating directly to the offering contemplated by the Prospectus. Any such
termination shall be without liability of any party to any other party except
that the provisions of this Section 9, Section 7 and Section 11 hereof shall at
all times be effective and shall apply.
SECTION 10. Effectiveness of Registration Statement. You, the
---------------------------------------
Company and the Selling Stockholder will use your, its and his best efforts to
cause the Registration Statement to become effective, to prevent the issuance of
any stop order suspending the effectiveness of the Registration Statement and,
if such stop order be issued, to obtain as soon as possible the lifting thereof.
SECTION 11. Indemnification.
---------------
(a) The Company and the Selling Stockholder agree, jointly and
severally, 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, liabilities or expenses, joint or several, to which
such Underwriter or such controlling person may become subject, under the Act,
the Exchange Act, or other federal or state statutory law or regulation, or at
common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of the Company), insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof
as contemplated below) arise out of or are based upon 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 arise out of or are based upon the omission or alleged
omission to state in any of them a material fact required to be stated therein
or necessary to make the statements in any of them not misleading, or arise out
of or are based in whole or in part on any inaccuracy in the representations and
warranties of the Company or the Selling Stockholder contained herein or any
failure of the Company or the Selling Stockholder to perform their respective
obligations hereunder or under law; and will reimburse each Underwriter and each
such controlling person for any legal and other expenses as such expenses are
reasonably incurred by such
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Underwriter or such controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action; provided, however, that neither the Company nor
the Selling Stockholder will be liable in any such case to the extent that any
such loss, claim, damage, liability or expense 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 any amendment or supplement thereto in reliance upon and in conformity with
the information furnished to the Company pursuant to Section 4 hereof. In
addition to their other obligations under this Section 11(a), the Company and
the Selling Stockholder agree that, as an interim measure during the pendency of
any claim, action, investigation, inquiry or other proceeding arising out of or
based upon any statement or omission, or any alleged statement or omission, or
any inaccuracy in the representations and warranties of the Company or the
Selling Stockholder herein or failure to perform its obligations hereunder, all
as described in this Section 11(a), they will reimburse each Underwriter on a
quarterly basis for all reasonable legal or other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the Company's
or the Selling Stockholder's obligation to reimburse each Underwriter for such
expenses and the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, each Underwriter
shall promptly return it to the Company together with interest, compounded
daily, determined on the basis of the prime rate (or other commercial lending
rate for borrowers of the highest credit standing) announced from time to time
by Bank of America NT&SA, San Francisco, California (the "Prime Rate"). Any such
interim reimbursement payments which are not made to an Underwriter within 30
days of a request for reimbursement shall bear interest at the Prime Rate from
the date of such request. This indemnity agreement will be in addition to any
liability which the Company or the Selling Stockholder may otherwise have.
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(b) Each Underwriter will severally indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement, each person, if any, who controls the Company within the meaning of
the Act and the Selling Stockholder against any losses, claims, damages,
liabilities or expenses to which the Company, any such director, officer, or
controlling person or the Selling Stockholder may become subject, under the Act,
the Exchange Act, or other federal or state statutory law or regulation, or at
common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of such Underwriter), insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof as contemplated below) arise out of or are based upon any untrue 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 arise out of or are based upon 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, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, in reliance upon and in conformity with the information
furnished to the Company pursuant to Section 4 hereof; and will reimburse the
Company, any such director, officer or controlling person or the Selling
Stockholder for any legal and other expense reasonably incurred by the Company,
any such director, officer or controlling person or the Selling Stockholder in
connection with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability, expense or action. In addition to its
other obligations under this Section 11(b), each Underwriter severally agrees
that, as an interim measure during the pendency of any claim, action,
investigation, inquiry or other proceeding arising out of or based upon any
statement or omission, or any alleged statement or omission, described in this
Section 11(b) which relates to information furnished to the Company pursuant to
Section 4 hereof, it will reimburse the Company (and, to the extent applicable,
each such officer, director or controlling person or the
36
<PAGE>
Selling Stockholder) on a quarterly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
Underwriters' obligation to reimburse the Company (and, to the extent
applicable, each such officer, director or controlling person or the Selling
Stockholder) for such expenses and the possibility that such payments might
later be held to have been improper by a court of competent jurisdiction. To the
extent that any such interim reimbursement payment is so held to have been
improper, the Company (and, to the extent applicable, each such officer,
director and controlling person and the Selling Stockholder) shall promptly
return it to the Underwriters together with interest, compounded daily,
determined on the basis of the Prime Rate. Any such interim reimbursement
payments which are not made to the Company within 30 days of a request for
reimbursement shall bear interest at the Prime Rate from the date of such
request. This indemnity agreement will be in addition to any liability which
such Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under this
Section, notify the indemnifying party in writing of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party for contribution or
otherwise than under the indemnity agreement contained in this Section or to the
extent it is not prejudiced as a proximate result of such failure. In case any
such action is brought against any indemnified party and such indemnified party
seeks or intends to seek indemnity from an indemnifying party, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with all other indemnifying parties similarly notified, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party;
provided, however, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have
37
<PAGE>
reasonably concluded that there may be a conflict between the positions of the
indemnifying party and the indemnified party in conducting the defense of any
such action or that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of its election so to assume the defense of such action and approval by
the indemnified party of counsel, the indemnifying party will not be liable to
such indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed such counsel in
connection with the assumption of legal defenses in accordance with the proviso
to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel, approved by the Representatives in the case of paragraph (a),
representing the indemnified parties who are parties to such action) or (ii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action, in each of which cases the fees
and expenses of counsel shall be at the expense of the indemnifying party.
(d) If the indemnification provided for in this Section 11 is
required by its terms but is for any reason held to be unavailable to or
otherwise insufficient to hold harmless an indemnified party under paragraphs
(a), (b) or (c) in respect of any losses, claims, damages, liabilities or
expenses referred to herein, then each applicable indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of any losses, claims, damages, liabilities or expenses referred to herein (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Company, the Selling Stockholder and the Underwriters from the offering
of the Common Shares or (ii) if the
38
<PAGE>
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company, the
Selling Stockholder and the Underwriters in connection with the statements or
omissions or inaccuracies in the representations and warranties herein which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The respective relative benefits
received by the Company, the Selling Stockholder and the Underwriters shall be
deemed to be in the same proportion, in the case of the Company and the Selling
Stockholder, as the total price paid to the Company and the Selling Stockholder,
respectively, for the Common Shares sold by them to the Underwriters (net of
underwriting commissions but before deducting expenses) bears to the total price
to public set forth on the cover of the Prospectus and, in the case of the
Underwriters, as the underwriting commissions received by them bears to the
total price to public set forth on the cover of the Prospectus. The relative
fault of the Company, the Selling Stockholder and the Underwriters 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 or the inaccurate or the alleged inaccurate representation
and/or warranty relates to information supplied by the Company, the Selling
Stockholder or the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in subsection (c) of this Section
11, any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim. The provisions
set forth in subsection (c) of this Section 11 with respect to notice of
commencement of any action shall apply if a claim for contribution is to be made
under this subsection (d); provided, however, that no additional notice shall be
required with respect to any action for which notice has been given under such
subsection (c) for purposes of indemnification. The Company, the Selling
39
<PAGE>
Stockholder and the Underwriters agree that it would not be just and equitable
if contribution pursuant to this Section 11 were determined solely 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 in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 11, no Underwriter shall be
required to contribute any amount in excess of the amount of the total
underwriting commissions received by such Underwriter in connection with the
Common Shares underwritten by it and distributed to the public. 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. The Underwriters' obligations to contribute
pursuant to this Section 11 are several in proportion to their respective
underwriting commitments and not joint.
(e) It is agreed that any controversy arising out of the operation of
the interim reimbursement arrangements set forth in subsections (a) and (b) of
this Section 11, including the amounts of any requested reimbursement payments
and the method of determining such amounts, shall be settled by arbitration
conducted under the provisions of the Constitution and Rules of the Board of
Governors of the New York Stock Exchange, Inc. or pursuant to the Code of
Arbitration Procedure of the NASD. Any such arbitration must be commenced by
service of a written demand for arbitration or written notice of intention to
arbitrate, therein electing the arbitration tribunal. In the event the party
demanding arbitration does not make such designation of an arbitration tribunal
in such demand or notice, then the party responding to said demand or notice is
authorized to do so. Such an arbitration would be limited to the operation of
the interim reimbursement provisions contained in subsections (a) and (b) of
this Section 11 and would not resolve the ultimate propriety or enforceability
of the obligation to reimburse expenses which is created by the provisions of
such subsections (a) and (b).
40
<PAGE>
SECTION 12. Default of Underwriters. It shall be a condition
-----------------------
to this Agreement and the obligations of the Company and the Selling Stockholder
to sell and deliver the Common Shares hereunder, and of each Underwriter to
purchase the Common Shares in the manner as described herein, that, except as
provided in this paragraph, each of the Underwriters shall purchase and pay for
all the Common Shares agreed to be purchased by such Underwriter hereunder upon
tender to the Representatives of all such shares in accordance with the terms
hereof. If any Underwriter or Underwriters default in their obligations to
purchase Common Shares hereunder on either the First Closing Date or the Second
Closing Date and the aggregate number of Common Shares which such defaulting
Underwriter or Underwriters agreed but failed to purchase on such Closing Date
does not exceed 10% of the total number of Common Shares which the Underwriters
are obligated to purchase on such Closing Date, the non-defaulting Underwriters
shall be obligated severally, in proportion to their respective commitments
hereunder, to purchase the Common Shares which such defaulting Underwriters
agreed but failed to purchase on such Closing Date. If any Underwriter or
Underwriters so default and the aggregate number of Common Shares with respect
to which such default occurs is more than the above percentage and arrangements
satisfactory to the Representatives and the Company for the purchase of such
Common Shares by other persons are not made within 48 hours after such default,
this Agreement will terminate without liability on the part of any non-
defaulting Underwriter, the Company or the Selling Stockholder, except for the
expenses to be paid by the Company and the Selling Stockholder pursuant to
Section 7 hereof and except to the extent provided in Section 11 hereof.
In the event that Common Shares to which a default relates are to be
purchased by the non-defaulting Underwriters or by another party or parties, the
Representatives or the Company shall have the right to postpone the First
Closing Date or the Second Closing Date, as the case may be, for not more than
five business days in order that the necessary changes in the Registration
Statement, Prospectus and any other documents, as well as any other
arrangements, may be effected. As used in this Agreement, the term
"Underwriter" includes any person substituted for
41
<PAGE>
an Underwriter under this Section. Nothing herein will relieve a defaulting
Underwriter from liability for its default.
SECTION 13. Effective Date. This Agreement shall become
--------------
effective immediately as to Sections 7, 9, 11, 14 and 16 and, as to all other
provisions, (i) if at the time of execution of this Agreement the Registration
Statement has not become effective, at 2:00 P.M., California time, on the first
full business day following the effectiveness of the Registration Statement, or
(ii) if at the time of execution of this Agreement the Registration Statement
has been declared effective, at 2:00 P.M., California time, on the first full
business day following the date of execution of this Agreement; but this
Agreement shall nevertheless become effective at such earlier time after the
Registration Statement becomes effective as you may determine on and by notice
to the Company or by release of any of the Common Shares for sale to the public.
For the purposes of this Section 13, the Common Shares shall be deemed to have
been so released upon the release for publication of any newspaper advertisement
relating to the Common Shares or upon the release by you of telegrams (i)
advising Underwriters that the Common Shares are released for public offering,
or (ii) offering the Common Shares for sale to securities dealers, whichever may
occur first.
SECTION 14. Termination. Without limiting the right to
-----------
terminate this Agreement pursuant to any other provision hereof:
(a) This Agreement may be terminated by the Company by notice
to you and the Selling Stockholder, or by you by notice to the Company and the
Selling Stockholder, at any time prior to the time this Agreement shall become
effective as to all its provisions, and any such termination shall be without
liability on the part of the Company or the Selling Stockholder to any
Underwriter (except for the expenses to be paid or reimbursed by the Company and
the Selling Stockholder pursuant to Sections 7 and 9 hereof and except to the
extent provided in Section 11 hereof) or of any Underwriter to the Company or
the Selling Stockholder (except to the extent provided in Section 11 hereof).
42
<PAGE>
(b) This Agreement may also be terminated by you prior to the
First Closing Date by notice to the Company (i) if additional material
governmental restrictions, not in force and effect on the date hereof, shall
have been imposed upon trading in securities generally or minimum or maximum
prices shall have been generally established on the New York Stock Exchange or
on the American Stock Exchange or in the over the counter market by the NASD, or
trading in securities generally shall have been suspended on either such
exchange or in the over the counter market by the NASD, or a general banking
moratorium shall have been established by federal, New York or California
authorities, (ii) if an outbreak of major hostilities or other national or
international calamity or any substantial change in political, financial or
economic conditions shall have occurred or shall have accelerated or escalated
to such an extent, as, in the judgment of the Representatives, to affect
adversely the marketability of the Common Shares, (iii) if any adverse event
shall have occurred or shall exist which makes untrue or incorrect in any
material respect any statement or information contained in the Registration
Statement or Prospectus or which is not reflected in the Registration Statement
or Prospectus but should be reflected therein in order to make the statements or
information contained therein not misleading in any material respect, or (iv) if
there shall be any action, suit or proceeding pending or threatened, or there
shall have been any development or prospective development involving
particularly the business or properties or securities of the Company or any of
its subsidiaries or the transactions contemplated by this Agreement, which, in
the reasonable judgment of the Representatives, may materially and adversely
affect the Company's business or earnings and makes it impracticable or
inadvisable to offer or sell the Common Shares. Any termination pursuant to this
subsection (b) shall be without liability on the part of any Underwriter to the
Company or the Selling Stockholder or on the part of the Company or the Selling
Stockholder to any Underwriter (except for expenses to be paid or reimbursed by
the Company and the Selling Stockholder pursuant to Sections 7 and 9 hereof and
except to the extent provided in Section 11 hereof.
43
<PAGE>
(c) This Agreement shall also terminate at 5:00 P.M.,
California time, on the tenth full business day after the Registration Statement
shall have become effective if the initial public offering price of the Common
Shares shall not then as yet have been determined as provided in Section 5
hereof. Any termination pursuant to this subsection (c) shall be without
liability on the part of any Underwriter to the Company or the Selling
Stockholder or on the part of the Company or the Selling Stockholder to any
Underwriter (except for expenses to be paid or reimbursed by the Company and the
Selling Stockholder pursuant to Sections 7 and 9 hereof and except to the extent
provided in Section 11 hereof.
SECTION 15. Failure of the Selling Stockholder to Sell and
----------------------------------------------
Deliver. If the Selling Stockholder shall fail to sell and deliver to the
- -------
Underwriters the Common Shares to be sold and delivered by him at the First
Closing Date under the terms of this Agreement, then the Underwriters may at
their option, by written notice from you to the Company and the Selling
Stockholder, either (i) terminate this Agreement without any liability on the
part of any Underwriter or, except as provided in Sections 7, 9 and 11 hereof,
the Company or the Selling Stockholder, or (ii) purchase the shares which the
Company has agreed to sell and deliver in accordance with the terms hereof. In
the event of a failure by the Selling Stockholder to sell and deliver as
referred to in this Section 15, either you or the Company shall have the right
to postpone the Closing Date for a period not exceeding seven business days in
order that the necessary changes in the Registration Statement, Prospectus and
any other documents, as well as any other arrangements, may be effected.
SECTION 16. Representations and Indemnities to Survive Delivery.
---------------------------------------------------
The respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers, of the Selling Stockholder and of
the several Underwriters set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation made by or on
behalf of any Underwriter or the Company or any of its or their partners,
officers or directors or any controlling person or the Selling Stockholder, as
the case may be, and will survive
44
<PAGE>
delivery of and payment for the Common Shares sold hereunder and any termination
of this Agreement.
SECTION 17. Notices. All communications hereunder shall be in
-------
writing and, if sent to the Representatives shall be mailed, delivered or
telegraphed and confirmed to you at 600 Montgomery Street, San Francisco,
California 94111, Attention: James C. Hale, with a copy to Skadden, Arps,
Slate, Meagher & Flom LLP, 300 South Grand Avenue, Los Angeles, California
90071, Attention: Rod A. Guerra, Jr.; and if sent to the Company or the Selling
Stockholder shall be mailed, delivered or telegraphed and confirmed to the
Company at 18872 MacArthur Boulevard, Suite 200, Irvine, California 92612,
Attention: Peter R. Ellis, with a copy to Wilson Sonsini Goodrich & Rosati, 650
Page Mill Road, Palo Alto, California 94304, Attention: Richard J. Char. The
Company, the Selling Stockholder or you may change the address for receipt of
communications hereunder by giving notice to the others.
SECTION 18. Successors. This Agreement will inure to the
----------
benefit of and be binding upon the parties hereto, including any substitute
Underwriters pursuant to Section 12 hereof, and to the benefit of the officers
and directors and controlling persons referred to in Section 11 hereof, and in
each case their respective successors, personal representatives and assigns, and
no other person will have any right or obligation hereunder. No such assignment
shall relieve any party of its obligations hereunder. The term "successors"
shall not include any purchaser of the Common Shares as such from any of the
Underwriters merely by reason of such purchase.
SECTION 19. Representation of Underwriters. You will act as
------------------------------
Representatives for the several Underwriters in connection with all dealings
hereunder, and any action under or in respect of this Agreement taken by you
jointly or by Montgomery Securities, as Representatives, will be binding upon
all the Underwriters.
SECTION 20. Partial Unenforceability. The invalidity or
------------------------
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
45
<PAGE>
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
SECTION 21. Applicable Law. This Agreement shall be governed
--------------
by and construed in accordance with the internal laws (and not the laws
pertaining to conflicts of laws) of the State of California.
SECTION 22. General. This Agreement constitutes the entire
-------
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in
several counterparts, each one of which shall be an original, and all of which
shall constitute one and the same document.
In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be amended
or modified, and the observance of any term of this Agreement may be waived,
only by a writing signed by the Company, the Selling Stockholder and you.
46
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed copies hereof, whereupon it
will become a binding agreement among the Company, the Selling Stockholder and
the several Underwriters, including you, all in accordance with its terms.
Very truly yours,
AUTO-BY-TEL CORPORATION
By:__________________________
Title:
_____________________________
PETER R. ELLIS
The foregoing Underwriting Agreement
is hereby confirmed and accepted by
us in San Francisco, California as of
the date first above written.
MONTGOMERY SECURITIES
COWEN & COMPANY
ROBERTSON, STEPHENS, & COMPANY LLC
Acting as Representatives of the
several Underwriters named in
the attached Schedule A.
By: MONTGOMERY SECURITIES
By:______________________________
Title: Partner
47
<PAGE>
SCHEDULE A
Number of Firm
Common Shares
Name of Underwriter to Be Purchased
- ------------------- ---------------
Montgomery Securities . . . . . . . . . . . . . . . . . . . . . . .
Cowen & Company . . . . . . . . . . . . . . . . . . . . . . . . . .
Robertson, Stephens & Company LLC . . . . . . . . . . . . . . . . .
_________
TOTAL . . . . . . . . . . . . . . . . . . . . .
=========
48
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
OF AUTO-BY-TEL CORPORATION
(Pursuant to Section 228, 242 and 245 of the
General Corporation Law of the State of Delaware)
Auto-By-Tel Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Delaware General
Corporation Law")
DOES HEREBY CERTIFY:
FIRST: That this Corporation was originally incorporated on May 17, 1996
under the name of Auto-By-Tel Corporation, pursuant to the Delaware General
Corporation Law.
SECOND: That the Board of Directors has duly adopted resolutions proposing
to amend and restate the Restated Certificate of Incorporation of this
Corporation filed with the Secretary of State of Delaware on August 23, 1996,
declaring said amendment and restatement to be advisable and in the best
interests of this corporation and its stockholders, and authorizing the
appropriate officers of this Corporation to solicit the consent of the
stockholders therefor which resolution setting forth the proposed amendment and
restatement is as follows:
RESOLVED, that the Restated Certificate of Incorporation of this
Corporation be amended and restated in its entirety as follows:
"ARTICLE I
The name of the Corporation is Auto-By-Tel Corporation (the "Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle, zip code 19801. The name of its registered agent at such
address is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the Delaware General Corporation
Law.
ARTICLE IV
<PAGE>
(A) Classes of Stock. This Corporation is authorized to issue two classes
----------------
of stock, to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares that this Corporation is authorized to issue is fifty
seven million four hundred sixty-seven thousand nine hundred fifteen
(57,467,915). The number of shares of Preferred Stock authorized to be issued is
seven million four hundred sixty-seven thousand nine hundred fifteen
(7,467,915), par value $0.001 per share, one million five hundred thousand
(1,500,000) of which have been designated Series A Preferred Stock (the "Series
A Preferred Stock"), nine hundred sixty seven thousand nine hundred fifteen
(967,915) of which have been designated Series B Preferred Stock (the "Series B
Preferred Stock") and five million (5,000,000) of which shall be undesignated.
The number of shares of Common Stock authorized to be issued is fifty million
(50,000,000), par value $.001 per share. Upon the filing of this Amended and
Restated Certificate of Incorporation, each three shares of Common Stock of the
Corporation shall be reconstituted as and converted into five shares of Common
Stock (the "Stock Split).
(B) Rights, Preferences and Restrictions of the Preferred Stock.
-----------------------------------------------------------
The undesignated shares of Preferred Stock may be issued from time to time
in one or more series pursuant to a resolution or resolutions providing for such
issue duly adopted by the Board of Directors (authority to do so being hereby
expressly vested in the Board). The Board of Directors is further authorized to
determine or alter the rights, preferences, privileges and restrictions granted
to or imposed upon any wholly unissued series of Preferred Stock and, to fix the
number of shares of any series of Preferred Stock and the designation of any
such series of Preferred Stock. The Board of Directors, within the limits and
restrictions stated in any resolution or resolutions of the Board of Directors
originally fixing the number of shares constituting any series, may increase or
decrease (but not below the number of shares in any such series then
outstanding) the number of shares of any series subsequent to the issue of
shares of that series.
The rights, preferences, privileges, and restrictions granted to and
imposed on the Preferred Stock are as set forth below in this Article IV(B).
Section 1. Dividends.
---------
(a) The holders of outstanding shares of Series A Preferred Stock
shall be entitled to receive, when and as declared by the Board of Directors out
of funds legally available therefor, payable in preference and priority to any
declaration or payment of any dividend on the Series B Preferred Stock or Common
Stock of the Corporation, dividends in cash at an annual rate of $.80 per share
of Series A Preferred Stock. The holders of outstanding shares of Series B
Preferred Stock shall be entitled to receive, when and as declared by the Board
of Directors out of funds legally available therefor, payable in preference and
priority to any declaration or payment of any dividend on the Common Stock of
the Corporation, dividends in cash at an annual rate of $.80 per share of Series
B Preferred Stock. The right to such dividends shall not be cumulative and no
right to such dividends shall accrue to holders of Series A Preferred Stock or
Series B Preferred Stock by reason of the fact that dividends on such shares are
not declared in any prior year. No dividend or other distribution shall be made
with respect to the Series B Preferred Stock in any fiscal year until full
dividends at the rate set forth in this Section 1(a) have been paid on the
Series A Preferred Stock. No dividend or other distribution
-2-
<PAGE>
shall be made with respect to the Common Stock in any fiscal year until full
dividends at the rate set forth in this Section 1(a) have been paid on the
Series A Preferred Stock and Series B Preferred Stock.
(b) Definition of Distribution. For purposes of this Section 1,
--------------------------
unless the context otherwise requires, a "distribution" shall mean the transfer
of cash or other property without consideration whether by way of dividend or
otherwise, payable other than in Common Stock, or the purchase or redemption of
shares of the Corporation (other than repurchases at cost of Common Stock issued
to or held by employees, officers, directors or consultants of the Corporation
or its subsidiaries upon termination of their employment or services pursuant to
agreements providing for the right of said repurchase) for cash or property.
Section 2. Liquidation Preference.
----------------------
(a) In the event of any liquidation, dissolution, or winding up of the
Corporation, either voluntary or involuntary, the holders of Series A Preferred
Stock shall be entitled to receive, prior and in preference to any distribution
of any of the assets or surplus funds of the Corporation to the holders of the
Series B Preferred Stock or Common Stock, an amount equal to $10.00 per share
for each share of Series A Preferred Stock then held by them (as adjusted for
any stock split, combination, consolidation, or stock distributions or stock
dividends effected with respect to such shares after the Original Issue Date)
plus all declared but unpaid dividends, if any (the "Series A Liquidation
Preference"); provided that upon the occurrence of any event described in
Section 2 (d) below, the holders of Series A Preferred Stock shall be entitled
to receive, at their option, either the Series A Liquidation Preference
described above or the consideration, if any, which would be payable to such
holders as of they had converted their shares of Series A Preferred Stock into
Common Stock immediately prior to such event. If the assets and funds thus
distributed among the holders of Series A Preferred Stock shall be insufficient
to permit the payment to such holders of the full aforesaid preferential amount,
then the entire assets and surplus funds of the Corporation legally available
for distribution shall be distributed ratably among the holders of the Series A
Preferred Stock in proportion to the number of shares of Series A Preferred
Stock then held by them.
(b) After payment has been made to the holders of Series A Preferred
Stock of the full amounts to which they shall be entitled as set forth in
subparagraph (a) of this Section 2, the holders of Series B Preferred Stock
shall be entitled to receive, prior and in preference to any distribution of any
of the assets or surplus funds of the Corporation to the holders of Common
Stock, an amount equal to $9.35 per share for each share of Series B Preferred
Stock then held by them (as adjusted for any stock split, combination,
consolidation, or stock distributions or stock dividends effected with respect
to such shares after the Original Issue Date) plus all declared but unpaid
dividends, if any (the "Series B Liquidation Preference"); provided that upon
the occurrence of any event described in Section 2(d) below, the holders of
Series B Preferred Stock shall be entitled to receive, at their option, either
the Series B Liquidation Preference described above or the
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consideration, if any, which would be payable to such holders as of they had
converted their shares of Series B Preferred Stock into Common Stock immediately
prior to such event. If the assets and funds thus distributed among the holders
of Series B Preferred Stock shall be insufficient to permit the payment to such
holders of the full aforesaid preferential amount, then the entire assets and
surplus funds of the Corporation legally available for distribution to the
holders of Series B Preferred Stock shall be distributed ratably among the
holders of the Series B Preferred Stock in proportion to the number of shares of
Series B Preferred Stock then held by them.
(c) After payment has been made to the holders of Series A Preferred
Stock and Series B Preferred Stock of the full amounts to which they shall be
entitled as set forth in subparagraphs (a) and (b) of this Section 2, then the
entire remaining assets and surplus funds of the Corporation legally available
for distribution, if any, shall be distributed ratably among the holders of
Common Stock based upon the number of shares of Common Stock then held by them.
(d) A merger or consolidation of the Corporation with or into any
other corporation or corporations, or the merger of any other corporation or
corporations into the Corporation, in which the stockholders of the Corporation
receive distributions in cash or securities of another corporation or
corporations as a result of such consolidation or merger and in which the
stockholders of the Corporation do not own at least 50% of the voting power of
the surviving corporation after the consolidation or merger, or a sale of all or
substantially all of the assets of the Corporation, shall be treated as a
liquidation, dissolution or winding up of the Corporation within the meaning of
this Section 2.
Section 3. Conversion. The holders of the Series A Preferred Stock and
----------
Series B Preferred Stock shall have conversion rights (the "Conversion Rights")
as follows:
(a) Right to Convert. Each share of Series A Preferred Stock and
----------------
Series B Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such share, at the office of
this Corporation or any transfer agent for the Preferred Stock, into such number
of fully paid and nonassessable shares of Common Stock as is determined by
dividing $10.00 in the case of the Series A Preferred Stock, or $9.35 in the
case of the Series B Preferred Stock, by the Conversion Price, determined as
hereinafter provided, in effect for such series of Preferred Stock at the time
of conversion. The initial Conversion Price per share of the Series A Preferred
Stock shall be $10.00 and the initial Conversion Price for the Series B
Preferred Stock shall be $9.35, provided, however, that in the event that the
-------- -------
Corporation has not consummated an initial public offering of its Common Stock
on or prior to July 31, 1997, then the initial Conversion Price of the Series B
Preferred Stock shall be deemed to be $6.91 for all purposes under this Article
IV. The Conversion Price per share of the Series A Preferred Stock and Series B
Preferred Stock shall be subject to adjustment as hereinafter provided. Upon
conversion, all declared and unpaid dividends on the Series A Preferred Stock
and Series B Preferred Stock shall be paid in cash, to the extent legally
permitted and in accordance with Section 4(B)(1)(a) hereof.
(b) Automatic Conversion.
--------------------
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<PAGE>
(i) Each share of Series A Preferred Stock and Series B
Preferred Stock shall, with notice to the holders thereof delivered promptly
thereafter, automatically be converted into shares of Common Stock at the
applicable Conversion Price then in effect upon the earlier of (A) the date upon
which this Corporation obtains the consent of the holders of two-thirds of the
then outstanding shares of Series A Preferred Stock and Series B Preferred
Stock, voting together as a single class, (B) (1) in the case of Series A
Preferred Stock, the date on which fewer than 300,000 shares of Series A
Preferred Stock (appropriately adjusted for any stock splits, combinations,
consolidations, or stock distributions or dividends effected with respect to
such shares after the Original Issue Date) remain outstanding, or (2) in the
case of Series B Preferred Stock, the date on which fewer than 200,000 shares of
Series B Preferred Stock (appropriately adjusted for any stock splits,
combinations, consolidations, or stock distributions or dividends effected with
respect to such shares after the Original Issue Date) remain outstanding, or (C)
the closing of an underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock for the account of the Corporation to the
public at a price per share (before deduction of underwriter discounts and
commissions and offering expenses) of not less than $9.00 per share
(appropriately adjusted for any stock splits, combinations, consolidations, or
stock distributions or dividends effected with respect to such shares after the
Original Issue Date) and an aggregate offering price to the public of not less
than $30,000,000 (the "Initial Public Offering").
(ii) In the event of the automatic conversion of the Series A
Preferred Stock and Series B Preferred Stock as set forth in Section 3(b)(i)(C)
above, the person(s) entitled to receive the Common Stock issuable upon such
conversion shall not be deemed to have converted such shares until immediately
prior to the closing of such sale of securities.
(c) Mechanics of Conversion. No fractional shares of Common Stock
-----------------------
shall be issued upon conversion of Preferred Stock. In lieu of any fractional
shares to which the holder would otherwise be entitled, the Corporation shall
pay cash equal to such fraction multiplied by the then current fair value of the
Common Stock, as determined in good faith by the Board of Directors. Before any
holder of Preferred Stock shall be entitled to convert the same into full shares
of Common Stock and to receive certificates therefor, such holder shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the Corporation or of any transfer agent for the Preferred Stock, and shall
give written notice to the Corporation at such office of the election to convert
the same and shall state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued; provided, however,
that in the event of an automatic conversion pursuant to Section 3(b)(i), the
outstanding shares of Preferred Stock shall be converted automatically without
any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Corporation or its
transfer agent. The Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such automatic conversion
unless the certificates evidencing such shares of Preferred Stock are either
delivered to the Corporation or its transfer agent as provided above, or the
holder notifies the Corporation or its transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement satisfactory to
the Corporation to indemnify the Corporation from any loss incurred by
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<PAGE>
it in connection with such certificates. The Corporation shall, as soon as
practicable after such delivery, or such agreement and indemnification in the
case of a lost certificate, issue and deliver at such office to such holder of
Preferred Stock, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled as aforesaid and a check
payable to the holder in the amount of any cash amounts payable as the result of
a conversion into fractional shares of Common Stock. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Preferred Stock to be converted, or in the
case of automatic conversion on the record date for such conversion, which shall
not be earlier than the date notice of conversion is received by holders, and
the person or persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date.
(d) Adjustments to Conversion Price for Stock Splits, Distributions
---------------------------------------------------------------
and Recapitalizations.
- --- -----------------
(i) Stock Splits, Subdivisions, Dividends and Distributions.
-------------------------------------------------------
In the event this Corporation should at any time or from time to time after the
Original Issue Date (as defined below), fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price in effect for each series of Preferred Stock shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion of
each share of Preferred Stock shall be increased in proportion to such increase
of the aggregate of shares of Common Stock outstanding and those issuable with
respect to such Common Stock Equivalents. The Stock Split effected by Section
IV(A) of this Amended and Restated Certificate of Incorporation shall not cause
any adjustment to the Conversion Price of the Series B Preferred Stock.
(ii) Combinations. If the number of shares of Common Stock
------------
outstanding at any time after the Original Issue Date is decreased by a
combination of the outstanding shares of Common Stock, then, following the
record date of such combination (or the date of such combination if no record
date is fixed), the Conversion Price in effect for each series of Preferred
Stock shall be appropriately increased so that the number of shares of Common
Stock issuable on conversion of each share of Preferred Stock shall be decreased
in proportion to such decrease in outstanding shares.
(iii) Other Distributions. In the event this Corporation shall at
-------------------
any time or from time to time after the Original Issue Date, fix a record date
for the determination of holders of Common Stock entitled to receive a
distribution payable in securities of the Corporation or other persons,
evidences of indebtedness issued by this Corporation or other persons, assets or
options or
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<PAGE>
rights not referred to in Section 3(d)(i), then, in each such case for the
purpose of this Section 3(d)(iii), the holders of shares of Preferred Stock
shall, as of such record date, be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the Corporation into which their shares of Preferred Stock are
convertible as of such record date.
(iv) Recapitalization. If at any time or from time to time there
----------------
shall be a recapitalization of the Common Stock whereby the Common Stock
issuable upon conversion of the Preferred Stock shall be changed into the same
or a different number of shares of any other class or classes of stock, whether
by reorganization, reclassification or otherwise, (other than a subdivision,
dividend, combination or merger or sale of assets transaction provided for
elsewhere in this Section 3), provision shall be made so that the holders of the
Preferred Stock shall thereafter be entitled to receive upon conversion of the
shares of Preferred Stock the number of shares of stock or other securities or
property of the Corporation which a holder of Common Stock deliverable upon
conversion would have been entitled to receive on such recapitalization. In any
such case, appropriate adjustment shall be made in the application of the
provisions of this Section 3 with respect to the rights of the holders of
Preferred Stock after the recapitalization to the end that the provisions of
this Section 3 (including adjustment of the Conversion Price then in effect for
each series of Preferred Stock and the number of shares issuable upon conversion
of shares of Preferred Stock) shall be applicable after that event as nearly
equivalent as may be practicable.
(e) Adjustments to Conversion Price. Subject to the terms of Section
-------------------------------
6 hereof, the Conversion Price in effect from time to time for each series of
Preferred Stock shall be subject to adjustment in certain cases as follows:
(i) Special Definitions. For purposes of this Section 3, the
-------------------
following definitions shall apply:
(A) "Options" shall mean rights, options or warrants to
-------
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
(B) "Original Issue Date" shall mean the date on which the
-------------------
first share of such series of Preferred Stock was first issued.
(C) "Convertible Securities" shall mean any evidences of
----------------------
indebtedness, Preferred Stock or other securities convertible into or
exchangeable for Common Stock.
(D) "Additional Shares of Common" shall mean all shares of
----------------------------
Common Stock issued (or, pursuant to Section 3(e)(iii), deemed to be issued) by
the Corporation after the Original Issue Date, other than shares of Common Stock
issued or issuable:
(1) upon conversion of shares of Series A Preferred Stock
or Series B Preferred Stock;
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<PAGE>
(2) up to a maximum of 3,530,833 shares (as appropriately
adjusted for any stock splits, combinations, consolidations, or stock
distributions or dividends with respect to such shares) to officers, directors
or employees of, or consultants to, the Corporation (other than Peter Ellis or
John Bedrosian) pursuant to a stock grant, stock option plan or stock purchase
plan or other stock incentive agreement or arrangement approved by the Board of
Directors;
(3) as a dividend or distribution on Series A Preferred
Stock or Series B Preferred Stock;
(4) in connection with any transaction for which
adjustment is made pursuant to Section 3(d) hereof;
(5) upon the exercise of warrants granted incidental to a
bona fide commercial transaction (unless the grant of such warrant is opposed by
the holders of more than two-thirds of the Series A Preferred Stock and Series B
Preferred Stock, voting together as a single class, following notice from the
Corporation to the holders of Series A Preferred Stock and Series B Preferred
Stock to be delivered to such holders at least ten (10) business days prior to
such grant; provided further that no notice need be given and the holders of the
Series A Preferred Stock and Series B Preferred Stock shall not have the right
to object to the issuance of warrants to purchase up to a maximum of 5,000
shares so long as they are granted incidental to a bona fide commercial
transaction and approved by the Board of Directors); and
(6) any shares of Common Stock issued, issuable or,
pursuant to Section 3(e)(iii), deemed to be issued, if the holders of a majority
of the Series A Preferred Stock and Series B Preferred Stock, voting together as
a class, agree in writing that such shares shall not constitute Additional
Shares of Common.
(ii) No Adjustment of Conversion Price. Subject to the terms of
---------------------------------
Section 6 hereof, no adjustment in the Conversion Price for each series of
Preferred Stock shall be made in respect of the issuance of Additional Shares of
Common unless the consideration per share for an Additional Share of Common
issued or deemed to be issued by the Corporation is less than the Conversion
Price for such Series in effect on the date of, and immediately prior to, such
issue.
(iii) Options and Convertible Securities. In the event the
----------------------------------
Corporation at any time or from time to time after the Original Issue Date shall
issue any Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number, including
provisions designed to protect against dilution) of Common Stock issuable upon
the exercise of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible Securities,
shall be deemed to be Additional Shares of Common issued as of the time of such
issue or, in case such a record date shall have been fixed, as of the close of
business on such record date, provided that Additional Shares
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<PAGE>
of Common shall not be deemed to have been issued unless the consideration per
share (determined pursuant to Section 3(e)(v) hereof) of such Additional Shares
of Common would be less than the Conversion Price for such series of Preferred
Stock in effect on the date of, and immediately prior to, such issue, or such
record date, as the case may be, and provided further that in any such case in
which Additional Shares of Common are deemed to be issued:
(A) no further adjustment in the Conversion Price for a
series of Preferred Stock shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities;
(B) if such Options or Convertible Securities by their terms
provide, with the passage of time, by reason of antidilution provisions or
otherwise, for any change in the consideration payable to the Corporation, or
change in the number of shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof, the Conversion Price computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon any such change
becoming effective, be recomputed to reflect an appropriate increase or decrease
reflecting such change insofar as it affects such Options or the rights of
conversion or exchange under such Convertible Securities; provided, however,
that no such adjustment of the Conversion Price shall affect Common Stock
previously issued upon conversion of the Preferred Stock;
(C) upon the expiration or cancellation of any such Options
or any rights of conversion or exchange under such Convertible Securities which
shall not have been exercised, the Conversion Price computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon such expiration or
cancellation, be recomputed as if:
(1) in the case of Convertible Securities or Options for
Common Stock, the only Additional Shares of Common issued were shares of Common
Stock, if any, actually issued upon the exercise of such Options or the
conversion or exchange of such Convertible Securities and the consideration
received therefor was the consideration actually received by the Corporation for
the issue of all such Options, whether or not exercised, plus the consideration
actually received by the Corporation upon such exercise, or for the issue of all
Convertible Securities which were actually converted or exchanged plus the
additional consideration, if any, actually received by the Corporation upon such
conversion or exchange; and
(2) in the case of Options for Convertible Securities,
only the Convertible Securities, if any, actually issued upon the exercise
thereof were issued at the time of issue of such Options, and the consideration
received by the Corporation for the Additional Shares of Common deemed to have
been then issued was the consideration actually received the Corporation for the
issue of all such Options, whether or not exercised, plus the consideration
deemed to have been received by the Corporation upon the issue of the
Convertible Securities with respect to which such
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<PAGE>
Options were actually exercised; and
(D) no readjustment pursuant to clause (B) or (C) above
shall have the effect of increasing the Conversion Price to an amount which
exceeds the lower of (1) the applicable Conversion Price on the original
adjustment date, or (2) the applicable Conversion Price that would have resulted
from any issuance of Additional Shares of Common between the original adjustment
date and such readjustment date.
(iv) Adjustment of Conversion Price Upon Issuance of Additional
----------------------------------------------------------
Shares of Common. In the event this Corporation shall issue Additional Shares
- ----------------
of Common (including Additional Shares of Common deemed to be issued pursuant to
Section 3(e)(iii)) for a consideration per share less than the Conversion Price
for a particular series of Preferred Stock in effect on the date of, and
immediately prior to, such issue, then and in such event, the Conversion Price
of such series of Preferred Stock shall be reduced, concurrently with such
issue, to a price (calculated to the nearest cent) determined by multiplying
such Conversion Price by a fraction, (x) the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issue
plus the number of shares of Common Stock which the aggregate consideration
received by the Corporation for the total number of Additional Shares of Common
so issued would purchase at such Conversion Price, and (y) the denominator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issue plus the number of such Additional Shares of Common so
issued; provided, that, for the purposes of this Section 3(e)(iv), all shares of
Common Stock issuable upon exercise, conversion or exchange of outstanding
Options or Convertible Securities or Preferred Stock shall be deemed to be
outstanding; and, further provided, that immediately after any Additional Shares
of Common are deemed issued pursuant to Section 3(e)(iii), such Additional
Shares of Common shall be deemed to be outstanding.
(v) Determination of Consideration. For purposes of this
------------------------------
Section 3(e), the consideration received by the Corporation for the issue of any
Additional Shares of Common shall be computed as follows:
(A) Such consideration shall:
(1) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Corporation excluding amounts paid or
payable for accrued interest or accrued dividends;
(2) insofar as it consists of property other than cash,
be computed at the fair value thereof at the time of such issue, as determined
in good faith in the exercise of reasonable business judgment by the Board of
Directors of the Corporation; and
(3) in the event Additional Shares of Common are issued
together with other shares or securities or other assets of the Corporation for
consideration which covers both, be the proportion of such consideration so
received, computed as provided in clauses (1)
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<PAGE>
and (2) above, as determined in good faith by the Board of Directors of the
Corporation.
(B) Options and Convertible Securities.
----------------------------------
(1) The consideration per share received by the
Corporation for Additional Shares of Common deemed to have been issued pursuant
to Section 3(e)(iii) shall be the sum of (x) the total amount, if any, received
or receivable by the Corporation as consideration for the issue of such Options
or Convertible Securities plus (y) the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration, including any provisions designed to protect against dilution)
payable to the Corporation upon the exercise of such Options or the conversion
or exchange of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible Securities.
(2) The number of Additional Shares of Common deemed to
have been issued pursuant to Section 3(e)(iii) hereof shall be the maximum
number of shares of Common Stock (as set forth in the instruments relating
thereto, without regard to any provision contained therein for a subsequent
adjustment of such number, including any provisions designed to protect against
dilution) issuable upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
(f) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price in effect for a series of
Preferred Stock pursuant to this Section 3, the Corporation at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and furnish to each holder of shares of such series of Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Corporation
shall, upon the written request at any time of any holder of Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting forth
(i) such adjustments and readjustments, (ii) the Conversion Price at the time in
effect, and (iii) the number of shares of Common Stock and the amount, if any,
of other property which at the time would be received upon the conversion of a
share of such series of Preferred Stock.
Section 4. Redemption. The Preferred Stock shall not be redeemable.
----------
Section 5. Voting Rights.
-------------
(a) General. Except as otherwise required by law or as set
-------
forth herein, each holder of shares of Preferred Stock shall be entitled to vote
in all matters for which shareholders are entitled to vote, that number of votes
equal to the whole number of shares of the Corporation's Common Stock issued or
issuable upon the conversion of such holder's shares of Preferred Stock
immediately after the close of business on the record date fixed for a
shareholder meeting or the effective date of such written consent.
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<PAGE>
(b) Board of Directors. The authorized number of directors of
------------------
the Corporation shall be set forth in the Bylaws of the Corporation and may be
increased or decreased by an amendment to such Bylaws in accordance with their
provisions. As long as 600,000 or more of the shares of Series A Preferred Stock
originally issued remain outstanding, the holders of shares of Series A
Preferred Stock, voting separately as a class, shall be entitled to elect one
(1) director of the Corporation at each annual election of directors (and to
fill any vacancies with respect thereto); provided that if the authorized number
of directors is increased to greater than five (5) members, the holders of
shares of Series A Preferred Stock, voting separately as a class, shall be
entitled to elect two (2) directors at each annual election of directors (and to
fill any vacancies with respect thereto).
Section 6. Covenants. In addition to any other rights provided by law,
---------
so long as at least an aggregate of 600,000 shares of Preferred Stock are
outstanding, this Corporation shall not, without first obtaining the affirmative
vote or written consent of the holders of two-thirds of the outstanding shares
of the Preferred Stock, voting as a single class:
(a) amend or repeal any provision of, or add any provision to, this
Corporation's Certificate of Incorporation or Bylaws if such action would alter
or change the preferences, rights, privileges, or powers of, or the restrictions
provided for the benefit of, any series of Preferred Stock in an adverse manner;
(b) increase the number of directors to greater than ten (10) members;
(c) increase the number of authorized shares of any series of
Preferred Stock;
(d) sell any shares for consideration other than cash or the
forgiveness of debt;
(e) authorize any new shares or reclassify any Common Stock into
shares of any class of stock having any preference or priority as to dividends,
redemption rights, liquidation preferences, conversion rights, voting rights or
rights otherwise superior to or on a parity with any such preference or priority
of any series of Preferred Stock;
(f) sell or otherwise dispose of all or substantially all of the
assets or business of the Corporation;
(g) effect a consolidation, reorganization or merger (including,
without limitation, the issuance of any shares of stock, or rights to acquire
shares of stock, which would result in the stockholders of the Corporation
immediately prior to such issuance owning less than two-thirds of the voting
power of the Corporation on a fully diluted basis after such issuance) of the
Corporation with or into any other corporation;
(h) declare or pay any dividends, in cash or otherwise, or make any
distributions to its shareholders, or purchase, redeem or otherwise acquire any
of its outstanding capital stock, or set
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<PAGE>
apart assets for a sinking or other analogous fund for the purchase, redemption,
retirement or other acquisition of, any shares of its capital stock;
(i) purchase, acquire or agree to purchase or acquire or invest in the
business, property or assets of, or any securities of, any other company or
business, except that the Corporation may (A) invest its excess cash in Cash
Equivalents and (B) make such purchase, acquisition or investment with respect
to a wholly-owned subsidiary of the Corporation to the extent otherwise
permitted hereunder;
(j) create, assume, incur, issue, guarantee or otherwise become
directly or indirectly liable in respect of any Indebtedness;
(k) without the approval of the director or directors designated by
the holders of the Preferred Stock, enter into any compensation or benefit
arrangement with any employee, officer or director which would result in total
taxable compensation from the Corporation and its subsidiaries of greater than
$150,000 per annum; provided, however, that the Corporation may hire two (2)
additional executive officers at annual taxable compensation from the
Corporation and its subsidiaries of up to $250,000 each without complying with
the provisions of this Section 6; or
(l) sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any properties or assets from, or enter
into any contract, agreement, understanding, loan, advance or guarantee with, or
for the benefit of, any Affiliate other than in the ordinary course of business.
For purposes of this Section 6:
(1) the term "Cash Equivalents" means (i) securities issued or
directly and fully guaranteed or insured by the United States government or any
agency or instrumentality thereof having maturities of not more than six months
from the date of acquisition, (ii) certificates of deposit or Eurodollar time
deposits having maturities of six months or less from the date of acquisition,
bankers' acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500 million and a Keefe Bank Watch Rating of "B" or
better, (iii) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (i) and (ii) entered
into with any financial institution meeting the qualifications described in
clause (ii) above, and (iv) commercial paper of any person that is not a
subsidiary or an Affiliate of the Corporation having the highest rating
obtainable from Moody's Investors Service, Inc. or Standard & Poor's Ratings
Group, and maturing within six months after the date of acquisition;
(2) the term "Indebtedness" means, with respect to any person or
entity, calculated without duplication, any indebtedness of such person or
entity, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or bankers' acceptances or
representing capital lease obligations or the balance deferred and unpaid of the
purchase price of any
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<PAGE>
property, or guarantees of any of the foregoing, except any such balance that
constitutes an accrued expense or trade payable to the extent that any such
accrued expense or trade payable is not more than 90 days overdue or is
otherwise being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted; and
(3) the term "Affiliate" means, with respect to any person or
entity, any other person or entity directly or indirectly controlling,
controlled by or under direct or indirect common control with, such person or
entity (for purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling," "controlled by" and "under common control
with") means the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a person or entity, whether
through the ownership of voting securities, by agreement or otherwise); provided
that no holder of Preferred Stock (or Common Stock issued upon conversion
thereof) shall be deemed to be an Affiliate.
Notwithstanding the foregoing, the Corporation may undertake an initial
public offering unless the initial public offering is opposed in writing by the
holders of two-thirds of the Preferred Stock, voting as a single class,
following notice to such holders at least 30 days prior to the filing of a
registration statement with the Securities and Exchange Commission relating to
such initial public offering. In addition, in connection with any such initial
public offering, unless the holders of two-thirds of the Preferred Stock shall
have opposed such initial public offering as aforesaid, the holders of the
Preferred Stock shall not have a separate vote as a single class with respect to
amendments to the Certificate of Incorporation in connection with such initial
public offering to increase the authorized Common Stock, create a class of
undesignated Preferred Stock, or effect a stock split, which amendments are
proposed in connection with such initial public offering.
Notwithstanding any other provision herein, the requirement of the approval
of the holders of two-thirds of the holders of Preferred Stock in this Section 6
shall not be amended or modified without the unanimous approval of the holders
of Preferred Stock.
Section 7. Reacquired Shares. Any shares of Preferred Stock purchased
-----------------
or otherwise acquired by the Corporation in any manner whatsoever shall be
retired and canceled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred Stock to be
created by resolution or resolutions of the Board of Directors, subject to the
conditions and restrictions on issuance set forth herein.
Section 8. Status of Converted or Redeemed Stock. In the event any
-------------------------------------
shares of Preferred Stock shall be redeemed or converted, the shares so
converted or redeemed shall be canceled and shall not have the status of
authorized but unissued shares of Preferred and shall not be issuable by the
corporation and the Certificate of Incorporation of this corporation shall be
amended to effect the corresponding reduction in the corporation's capital
stock.
ARTICLE V
-14-
<PAGE>
The Corporation is to have perpetual existence.
ARTICLE VI
The election of directors need not be by written ballot unless a
stockholder demands election by written ballot at a meeting of stockholders and
before voting begins or unless the Bylaws of the Corporation shall so provide.
ARTICLE VII
The number of directors which constitute the whole Board of Directors of
the Corporation shall be designated in the Bylaws of the Corporation.
ARTICLE VIII
In furtherance and not in limitation of the powers conferred by the laws of
the State of Delaware, the Board of Directors is expressly authorized to adopt,
alter, amend or repeal the Bylaws of the Corporation.
ARTICLE IX
(A) No director shall be personally liable to the Corporation or any
stockholder for monetary damages for breach of fiduciary duty as a director,
except for any matter in respect of which such director (1) shall be liable
under Section 174 of the General Corporation Law of the State of Delaware or any
amendment thereto or successor provision thereto, or (2) shall be liable by
reason that, in addition to any and all other requirements for liability, he:
(i) shall have breached his duty of loyalty to the Corporation
or its stockholders;
(ii) shall not have acted in good faith or, in failing to act,
shall not have acted in good faith;
(iii) shall have acted in a manner involving intentional
misconduct or a knowing violation of law or, in failing to act, shall have acted
in a manner involving intentional misconduct or a knowing violation of law; or
(iv) shall have derived an improper personal benefit.
If the General Corporation Law of the State of Delaware is amended
after the date hereof to authorize corporate action further eliminating or
limiting the personal liability of directors,
-15-
<PAGE>
then the liability of a director of the Corporation shall be eliminated or
limited to the fullest extent permitted by the General Corporation Law of the
State of Delaware, as so amended.
(B) The Corporation shall indemnify to the fullest extent permitted
under and in accordance with the laws of the State of Delaware any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
(C) Expenses incurred in defending a civil, criminal, administrative
or investigative action, suit or proceeding shall (in the case of any action,
suit or proceeding against a director of the Corporation) or may (in the case of
any action, suit or proceeding against an officer, employee or agent) be paid by
the Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board upon receipt of an undertaking by or on
behalf of the indemnified person to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article IX.
(D) The indemnification and other rights set forth in this Article IX
shall not be exclusive of any provisions with respect thereto in the By-Laws or
any other contract or agreement between the Corporation and any officer,
director, employee or agent of the Corporation.
(E) Neither the amendment nor repeal of this Article IX, paragraph
(B), (C) or (D), nor the adoption of any provision of this Certificate of
Incorporation inconsistent with Article IX, paragraph (B), (C) or (D), shall
eliminate or reduce the effect of this Article IX, paragraphs (B), (C) or (D),
in respect of any matter occurring before such amendment, repeal or adoption of
an inconsistent provision or in respect of any cause of action, suit or claim
relating to any such matter which would have given rise to a right of
indemnification or right to receive expenses pursuant to this Article IX,
paragraph (B), (C) or (D), if such provision had not been so amended or repealed
or if a provision inconsistent therewith had not been so adopted.
ARTICLE X
At the election of directors of the Corporation, each holder of stock of
any class or series shall be entitled to one vote for each share held. No
stockholder will be permitted to cumulate votes at any election of directors.
ARTICLE XI
-16-
<PAGE>
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the laws of the State of Delaware)
outside of the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the Bylaws of the Corporation.
ARTICLE XII
Effective upon the Initial Public Offering (as defined in Article IV
Section 3(b)(i) above), the stockholders of the corporation may not take action
by written consent without a meeting but must take such action at a duly called
annual or special meeting of stockholders.
ARTICLE XIII
Subject to the limitations set forth herein, the Corporation reserves the
right to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, in the manner now or hereafter prescribed by the
laws of the State of Delaware, and all rights conferred herein are granted
subject to this reservation."
***
THIRD: The foregoing amendment was approved by the holders of the
requisite number of shares of said Corporation in accordance with Section 228 of
the Delaware General Corporation Law.
FOURTH: That said amendments were duly adopted in accordance with the
provisions of Sections 242 and 245 of the Delaware General Corporation Law.
We hereby further declare and certify under penalty of perjury under the
laws of the State of Delaware that the facts set forth in the foregoing
certificate are true and correct of our own knowledge and that this certificate
is our act and deed.
-17-
<PAGE>
IN WITNESS WHEREOF, we have executed and subscribed to this Certificate and
do hereby affirm the foregoing as true under the penalties of perjury this ____
day of January, 1997.
-----------------------------------
Peter R. Ellis, President
-----------------------------------
Mark W. Lorimer, Secretary
<PAGE>
EXHIBIT 3.2
RESTATED BYLAWS
OF
AUTO-BY-TEL CORPORATION
(A DELAWARE CORPORATION)
ADOPTED OCTOBER 23, 1996
<PAGE>
RESTATED BYLAWS OF
AUTO-BY-TEL CORPORATION
(a Delaware corporation)
TABLE OF CONTENTS
Page
----
ARTICLE I
CORPORATE OFFICES................................................. 1
-----------------
1.1 REGISTERED OFFICE........................................... 1
-----------------
1.2 OTHER OFFICES............................................... 1
-------------
ARTICLE II
MEETINGS OF STOCKHOLDERS.......................................... 1
------------------------
2.1 PLACE OF MEETINGS........................................... 1
-----------------
2.2 ANNUAL MEETING.............................................. 1
--------------
2.3 SPECIAL MEETING............................................. 2
---------------
2.4 NOTICE OF STOCKHOLDERS' MEETINGS............................ 2
--------------------------------
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND
------------------------------------------
STOCKHOLDER BUSINESS........................................ 2
--------------------
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE................ 3
--------------------------------------------
2.7 QUORUM...................................................... 3
------
2.8 ADJOURNED MEETING; NOTICE................................... 3
-------------------------
2.9 VOTING...................................................... 4
------
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING..... 4
-------------------------------------------------------
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING.................. 4
------------------------------------------
2.12 PROXIES..................................................... 5
-------
2.13 ORGANIZATION................................................ 5
------------
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE....................... 5
-------------------------------------
ARTICLE III
DIRECTORS......................................................... 6
---------
3.1 POWERS...................................................... 6
------
3.2 NUMBER OF DIRECTORS......................................... 6
-------------------
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS.................... 6
----------------------------------------
3.4 RESIGNATION AND VACANCIES................................... 6
-------------------------
-i-
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
----
3.5 REMOVAL OF DIRECTORS........................................ 7
--------------------
3.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.................... 8
----------------------------------------
3.7 FIRST MEETINGS.............................................. 8
--------------
3.8 REGULAR MEETINGS............................................ 8
----------------
3.9 SPECIAL MEETINGS; NOTICE.................................... 8
------------------------
3.10 QUORUM...................................................... 9
------
3.11 WAIVER OF NOTICE............................................ 9
----------------
3.12 ADJOURNMENT................................................. 9
-----------
3.13 NOTICE OF ADJOURNMENT....................................... 9
---------------------
3.14 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING........... 10
-------------------------------------------------
3.15 FEES AND COMPENSATION OF DIRECTORS.......................... 10
----------------------------------
3.16 APPROVAL OF LOANS TO OFFICERS............................... 10
-----------------------------
3.17 SOLE DIRECTOR PROVIDED BY CERTIFICATE OF INCORPORATION...... 10
------------------------------------------------------
3.18 NOMINATION OF DIRECTORS; STOCKHOLDER BUSINESS AT
------------------------------------------------
ANNUAL MEETINGS............................................. 10
---------------
ARTICLE IV
COMMITTEES........................................................ 12
----------
4.1 COMMITTEES OF DIRECTORS..................................... 12
-----------------------
4.2 MEETINGS AND ACTION OF COMMITTEES........................... 13
---------------------------------
4.3 COMMITTEE MINUTES........................................... 13
-----------------
ARTICLE V
OFFICERS.......................................................... 14
--------
5.1 OFFICERS.................................................... 14
--------
5.2 ELECTION OF OFFICERS........................................ 14
--------------------
5.3 SUBORDINATE OFFICERS........................................ 14
--------------------
5.4 REMOVAL AND RESIGNATION OF OFFICERS......................... 14
-----------------------------------
5.5 VACANCIES IN OFFICES........................................ 15
--------------------
5.6 CHAIRMAN OF THE BOARD....................................... 15
---------------------
5.7 PRESIDENT................................................... 15
---------
5.8 VICE PRESIDENTS............................................. 15
---------------
5.9 SECRETARY................................................... 16
---------
5.10 CHIEF FINANCIAL OFFICER..................................... 16
-----------------------
5.11 ASSISTANT SECRETARY......................................... 16
-------------------
-ii-
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
----
5.12 ADMINISTRATIVE OFFICERS..................................... 17
-----------------------
5.13 AUTHORITY AND DUTIES OF OFFICERS............................ 17
--------------------------------
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS 17
------------------------------------------------------------------
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS................... 17
-----------------------------------------
6.2 INDEMNIFICATION OF OTHERS................................... 18
-------------------------
6.3 INSURANCE................................................... 19
---------
ARTICLE VII
RECORDS AND REPORTS............................................... 19
-------------------
7.1 MAINTENANCE AND INSPECTION OF RECORDS....................... 19
-------------------------------------
7.2 INSPECTION BY DIRECTORS..................................... 19
-----------------------
7.3 ANNUAL STATEMENT TO STOCKHOLDERS............................ 20
--------------------------------
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.............. 20
----------------------------------------------
7.5 CERTIFICATION AND INSPECTION OF BYLAWS...................... 20
--------------------------------------
ARTICLE VIII
GENERAL MATTERS................................................... 20
---------------
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING....... 20
-----------------------------------------------------
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS................... 21
-----------------------------------------
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED.......... 21
--------------------------------------------------
8.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES............ 21
------------------------------------------------
8.5 SPECIAL DESIGNATION ON CERTIFICATES......................... 22
-----------------------------------
8.6 LOST CERTIFICATES........................................... 22
-----------------
8.7 TRANSFER AGENTS AND REGISTRARS.............................. 22
------------------------------
8.8 CONSTRUCTION; DEFINITIONS................................... 23
-------------------------
8.9 RESTRICTIONS ON TRANSFER OF SHARES.......................... 23
----------------------------------
ARTICLE IX
AMENDMENTS........................................................ 24
----------
-iii-
<PAGE>
BYLAWS
------
OF
--
AUTO-BY-TEL CORPORATION
-----------------------
(a Delaware corporation)
ARTICLE I
CORPORATE OFFICES
-----------------
1.1 REGISTERED OFFICE
-----------------
The registered office of the corporation shall be fixed in the Certificate
of Incorporation of the corporation.
1.2 OTHER OFFICES
-------------
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
2.1 PLACE OF MEETINGS
-----------------
Meetings of stockholders shall be held at any place within or outside the
State of Delaware designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
--------------
The annual meeting of stockholders shall be held each year on a date and at
a time designated by the board of directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the third
Friday in June in each year at 3:00 p.m. However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding full business day. At the meeting, directors shall be elected, and
any other proper business may be transacted.
<PAGE>
2.3 SPECIAL MEETING
---------------
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president, or by
one or more stockholders holding shares in the aggregate entitled to cast not
less than fifty percent (50%) of the votes of all shares of stock owned by
stockholders entitled to vote at that meeting.
If a special meeting is called by any person or persons other than the
board of directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the chairman of the board, the president, any vice president or
the secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the stockholders entitled to vote, in accordance
with the provisions of Sections 2.4 and 2.6 of these bylaws, that a meeting will
be held at the time requested by the person or persons calling the meeting, so
long as that time is not less than thirty-five (35) nor more than sixty (60)
days after the receipt of the request. If the notice is not given within twenty
(20) days after receipt of the request, then the person or persons requesting
the meeting may give the notice. Nothing contained in this paragraph of this
Section 2.3 shall be construed as limiting, fixing or affecting the time when a
meeting of stockholders called by action of the board of directors may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
--------------------------------
All notices of meetings of stockholders shall be sent or otherwise given in
accordance with Section 2.5 of these bylaws not less than ten (10) nor more than
sixty (60) days before the date of the meeting. The notice shall specify the
place, date and hour of the meeting and (i) in the case of a special meeting,
the purpose or purposes for which the meeting is called (no business other than
that specified in the notice may be transacted) or (ii) in the case of the
annual meeting, those matters which the board of directors, at the time of
giving the notice, intends to present for action by the stockholders (but any
proper matter may be presented at the meeting for such action). The notice of
any meeting at which directors are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the board intends to present
for election.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
---------------------------------------------------------------
To be properly brought before an annual meeting or special meeting,
nominations for the election of directors or other business must be (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the board of directors, (b) otherwise properly brought before
the meeting by or at the direction of the board of directors or (c) otherwise
properly brought before the meeting by a stockholder.
2
<PAGE>
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
--------------------------------------------
Written notice of any meeting of stockholders shall be given either
personally or by first-class mail or by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the stockholder at the address of that stockholder
appearing on the books of the corporation or given by the stockholder to the
corporation for the purpose of notice. Notice shall be deemed to have been
given at the time when delivered personally or deposited in the mail or sent by
telegram or other means of written communication.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.7 QUORUM
------
The holders of a majority in voting power of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum is not present or
represented at any meeting of the stockholders, then either (i) the chairman of
the meeting or (ii) the stockholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting in accordance
with Section 2.7 of these bylaws.
When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which, by express provision of the laws of the State of Delaware or
of the certificate of incorporation or these bylaws, a different vote is
required, in which case such express provision shall govern and control the
decision of the question.
If a quorum be initially present, the stockholders may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken is approved by a
majority of the stockholders initially constituting the quorum.
2.8 ADJOURNED MEETING; NOTICE
-------------------------
When a meeting is adjourned to another time and place, unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
3
<PAGE>
2.9 VOTING
------
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint
owners, and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of incorporation or
these bylaws, each stockholder shall be entitled to one vote for each share of
capital stock held by such stockholder.
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------------
Any action required or permitted to be taken at any annual or special
meeting of stockholders may be taken without a meeting, without prior notice and
without a vote, if a consent or consents in writing setting forth the action so
taken shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Such consents shall be delivered to the corporation by delivery to
it registered office in the state of Delaware, its principal place of business,
or an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested.
Effective upon the closing of a firm commitment underwritten initial public
offering of any of the corporation's securities pursuant to a registration
statement on Form S-1 filed under the Securities Act of 1933, as amended, the
stockholders of the corporation may not take action by written consent without a
meeting but must take any such actions at a duly called annual or special
meeting.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING
------------------------------------------
For purposes of determining the stockholders entitled to notice of any
meeting or to vote thereat, the board of directors may fix, in advance, a record
date, which shall not precede the date upon which the resolution fixing the
record date is adopted by the board of directors and which shall not be more
than sixty (60) days nor less than ten (10) days before the date of any such
meeting, and in such event only stockholders of record on the date so fixed are
entitled to notice and to vote, notwithstanding any transfer of any shares on
the books of the corporation after the record date.
If the board of directors does not so fix a record date, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the business day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting
unless the board of directors fixes a new
4
<PAGE>
record date for the adjourned meeting, but the board of directors shall fix a
new record date if the meeting is adjourned for more than thirty (30) days from
the date set for the original meeting.
The record date for any other purpose shall be as provided in Section 8.1
of these bylaws.
2.12 PROXIES
-------
Every person entitled to vote for directors, or on any other matter, shall
have the right to do so either in person or by one or more agents authorized by
a written proxy signed by the person and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission, telefacsimile or
otherwise) by the stockholder or the stockholder's attorney-in-fact. The
revocability of a proxy that states on its face that it is irrevocable shall be
governed by the provisions of Section 212(e) of the General Corporation Law of
Delaware.
2.13 ORGANIZATION
------------
The president, or in the absence of the president, the chairman of the
board, shall call the meeting of the stockholders to order, and shall act as
chairman of the meeting. In the absence of the president, the chairman of the
board, and all of the vice presidents, the stockholders shall appoint a chairman
for such meeting. The chairman of any meeting of stockholders shall deter mine
the order of business and the procedures at the meeting, including such matters
as the regulation of the manner of voting and the conduct of business. The
secretary of the corporation shall act as secretary of all meetings of the
stockholders, but in the absence of the secretary at any meeting of the
stockholders, the chairman of the meeting may appoint any person to act as
secretary of the meeting.
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
-------------------------------------
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
5
<PAGE>
ARTICLE III
DIRECTORS
---------
3.1 POWERS
------
Subject to the provisions of the General Corporation Law of Delaware and to
any limitations in the certificate of incorporation or these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
-------------------
The board of directors shall consist of five (5) members. The number of
directors may be changed by an amendment to this bylaw, duly adopted by the
board of directors or by the stockholders, or by a duly adopted amendment to the
certificate of incorporation.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
----------------------------------------
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Each director, including a director elected or appointed to fill
a vacancy, shall hold office until the expiration of the term for which elected
and until a successor has been elected and qualified.
3.4 RESIGNATION AND VACANCIES
-------------------------
Any director may resign effective on giving written notice to the chairman
of the board, the president, the secretary or the board of directors, unless the
notice specifies a later time for that resignation to become effective. If the
resignation of a director is effective at a future time, the board of directors
may elect a successor to take office when the resignation becomes effective.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote of
the stockholders or by court order may be filled only by the affirmative vote of
a majority of the shares represented and voting at a duly held meeting at which
a quorum is present (which shares voting affirmatively also constitute a
majority of the required quorum). Each director so elected shall hold office
until the next annual meeting of the stockholders and until a successor has been
elected and qualified.
6
<PAGE>
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten (10) percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office as aforesaid, which
election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 REMOVAL OF DIRECTORS
--------------------
Unless otherwise restricted by statute, by the certificate of incorporation
or by these bylaws, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors; provided, however, that, if and so
long as stockholders of the corporation are entitled to cumulative voting, if
less than the entire board is to be removed, no director may be removed without
cause if the votes cast against his removal would be sufficient to elect him if
then cumulatively voted at an election of the entire board of directors.
Effective upon the closing of a firm commitment underwritten public
offering of any of the corporation's securities pursuant to a registration
statement on Form S-1 under the Securities Act of 1933, as amended, any director
may be removed from office by the stockholders of the corporation
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only for cause.
3.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
----------------------------------------
Regular meetings of the board of directors may be held at any place within
or outside the State of Delaware that has been designated from time to time by
resolution of the board. In the absence of such a designation, regular meetings
shall be held at the principal executive office of the corporation. Special
meetings of the board may be held at any place within or outside the State of
Delaware that has been designated in the notice of the meeting or, if not stated
in the notice or if there is no notice, at the principal executive office of the
corporation.
Any meeting of the board, regular or special, may be held by conference
telephone or similar communication equipment, so long as all directors
participating in the meeting can hear one another; and all such participating
directors shall be deemed to be present in person at the meeting.
3.7 FIRST MEETINGS
--------------
The first meeting of each newly elected board of directors shall be held at
such time and place as shall be fixed by the vote of the stockholders at the
annual meeting. In the event of the failure of the stockholders to fix the time
or place of such first meeting of the newly elected board of directors, or in
the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
3.8 REGULAR MEETINGS
----------------
Regular meetings of the board of directors may be held without notice at
such time as shall from time to time be determined by the board of directors.
If any regular meeting day shall fall on a legal holiday, then the meeting shall
be held at the same time and place on the next succeeding full business day.
3.9 SPECIAL MEETINGS; NOTICE
------------------------
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail,
telecopy or telegram, charges prepaid, addressed to each director at that
director's address as it is shown on the records of the corporation. If the
notice is mailed, it shall be deposited in the United States mail at least four
(4) days before the time of the holding of the meeting. If the notice is
delivered personally or by telephone, telecopy or telegram, it
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shall be delivered personally or by telephone or to the telegraph company at
least forty-eight (48) hours before the time of the holding of the meeting. Any
oral notice given personally or by telephone may be communicated either to the
director or to a person at the office of the director who the person giving the
notice has reason to believe will promptly communicate it to the director. The
notice need not specify the purpose or the place of the meeting, if the meeting
is to be held at the principal executive office of the corporation.
3.10 QUORUM
------
A majority of the authorized number of directors shall constitute a quorum
for the transaction of business, except to adjourn as provided in Section 3.12
of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of the
certificate of incorporation and applicable law.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the quorum for that meeting.
3.11 WAIVER OF NOTICE
----------------
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice, whether before or after the meeting, or (ii) who attends the
meeting other than for the express purposed of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. All such waivers shall be filed with the corporate records
or made part of the minutes of the meeting. A waiver of notice need not specify
the purpose of any regular or special meeting of the board of directors.
3.12 ADJOURNMENT
-----------
A majority of the directors present, whether or not constituting a quorum,
may adjourn any meeting of the board to another time and place.
3.13 NOTICE OF ADJOURNMENT
---------------------
Notice of the time and place of holding an adjourned meeting of the board
need not be given unless the meeting is adjourned for more than twenty-four (24)
hours. If the meeting is adjourned for more than twenty-four (24) hours, then
notice of the time and place of the adjourned meeting shall be given before the
adjourned meeting takes place, in the manner specified in Section 3.9 of these
bylaws, to the directors who were not present at the time of the adjournment.
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3.14 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------
Any action required or permitted to be taken by the board of directors may
be taken without a meeting, provided that all members of the board individually
or collectively consent in writing to that action. Such action by written
consent shall have the same force and effect as a unanimous vote of the board of
directors. Such written consent and any counterparts thereof shall be filed with
the minutes of the proceedings of the board of directors.
3.15 FEES AND COMPENSATION OF DIRECTORS
----------------------------------
Directors and members of committees may receive such compensation, if any,
for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.15 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
3.16 APPROVAL OF LOANS TO OFFICERS
-----------------------------
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or any of its
subsidiaries, including any officer or employee who is a director of the
corporation or any of its subsidiaries, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.17 SOLE DIRECTOR PROVIDED BY CERTIFICATE OF INCORPORATION
------------------------------------------------------
In the event only one director is required by these bylaws or the
certificate of incorporation, then any reference herein to notices, waivers,
consents, meetings or other actions by a majority or quorum of the directors
shall be deemed to refer to such notice, waiver, etc., by such sole director,
who shall have all the rights and duties and shall be entitled to exercise all
of the powers and shall assume all the responsibilities otherwise herein
described as given to the board of directors.
3.18 NOMINATION OF DIRECTORS; STOCKHOLDER BUSINESS AT ANNUAL MEETINGS
----------------------------------------------------------------
Subject to the rights of holders of any class or series of stock having a
preference over the Comon Stock as to dividends or upon liquidation, nominations
for the election of directors may be made by the board of directors or any
nominating committee appointed by the board of directors or by any stockholder
entitled to vote in the election of directors generally. However, a stockholder
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generally entitled to vote in the election of directors may nominate one or more
persons for election as directors at a meeting only of written notice of such
stockholder's intent to make such nomination or nominations has been given,
either by personal delivery or by United States mail, postage prepaid, to the
secretary of the corporation not later than (i) with respect to an election to
be held at an annual meeting of stockholders, 60 days in advance of such meeting
and (ii) with respect to an election to be held at a special meeting of
stockholders for the election of directors, the close of business on the seventh
day following the date on which notice of such meeting is first given to
stockholders. Each such notice shall set forth the following information: (a)
the name and address of the stockholder who intends to make the nomination and
of the person or persons to be nominated; (b) a representation that the
stockholder is a holder of record of stock of the corporation entitled to vote
at such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (c) a description of all
arrangements or understandings between the stockholder, each nominee or any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder; (d) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission, had the nominee been nominated, or
intended to be nominated, by the board of directors of the corporation; and (e)
the consent of each nominee to serve as a director of the corporation if so
elected. At the request of the board of directors any person nominated by the
board of directors for election as a director shall furnish to the secretary of
the corporation that information required to be set forth in a stockholder's
notice of nomination which pertains to the nominee. No person shall be
eligible for election as a director of the corporation unless nominated in
accordance with the procedures set forth herein. A majority of the board of
directors may reject any nomination by a stockholder not timely made or
otherwise not in accordance with the terms of this Section 3.18. If a majority
of the board of directors reasonably determines that the information provided in
a stockholder's notice does not satisfy the informational requirements of this
Section 3.18 in any material respect, the secretary of the corporation shall
promptly notify such stockholder of the deficiency in writing. The stockholder
shall have an opportunity to cure the deficiency by providing additional
information to the secretary within such period of time, not to exceed ten days
from the date such deficiency notice is given to the stockholder, as a majority
of the board of directors shall reasonably determine. If the deficiency is not
cured within such period, or if a majority of the board of directors reasonably
determines that the additional information provided by the stockholder, together
with the information previously provided, does not satisfy the requirements of
this Section 3.18 in any material respect, then a majority of the board of
directors may reject such stockholder's nomination. The secretary of the
corporation shall notify a stockholder in writing whether the stockholder's
nomination has been made in accordance with the time and information
requirements of this Section 3.18.
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting (i) by or at the
direction of the chairman of the meeting or (ii) by any stockholder of the
corporation who complies with the notice procedures set forth in this Section
3.18. For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the secretary of the corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of
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the corporation not less than 60 days prior to the meeting; provided, however,
that in the event that less than 70 days notice or prior public disclosure of
the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be received not later than the close of business
on the tenth day following the earlier of the day on which such notice of the
date of the annual meeting was mailed or such public disclosure was made. A
stockholder's notice to the secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting the following
information: (a) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (b) the name and address, as they appear on the corporation's
books, of the stockholder proposing such business, (c) the class and number of
shares of the corporation which are beneficially owned by the stockholder and
(d) any material direct or indirect interest, financial or otherwise of the
stockholder or its affiliates or associates in such business. The board of
directors may reject any stockholder proposal not timely made in accordance with
this Section 3.18. If the board of directors determines that the information
provided in a stockholder's notice does not satisfy the informational
requirements hereof, the secretary of the corporation shall promptly notify such
stockholder of the deficiency in the notice. The stockholder shall then have an
opportunity to cure the deficiency by providing additional information to the
secretary within such period of time, not to exceed ten days from the date such
deficiency notice is given to the stockholder, as the board of directors shall
determine. If the deficiency is not cured within such period, or if the board of
directors determines that the additional information provided by the
stockholder, together with the information previously provided, does not satisfy
the requirements of this Section 3.18, then the board of directors may reject
such stockholder's proposal. The secretary of the corporation shall notify a
stockholder in writing whether the stockholder's proposal has been made in
accordance with the time and information requirements hereof.
This provision shall not prevent the consideration and approval or
disapproval at an annual meeting of reports of officers, directors and
committees of the board of directors, but in connection therewith no new
business shall be acted upon at any such meeting unless stated, filed and
received as herein provided. Notwithstanding anything in these bylaws to the
contrary, no business shall be conducted at an annual meeting except in
accordance with procedures set forth in this Section 3.18.
ARTICLE IV
COMMITTEES
----------
4.1 COMMITTEES OF DIRECTORS
-----------------------
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of two or more directors, to serve at the pleasure of the board. The
board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. The appointment of members or alternate members of a committee
requires the vote of a
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majority of the authorized number of directors. Any committee, to the extent
provided in the resolution of the board, shall have and may exercise all the
powers and authority of the board, but no such committee shall have the power or
authority to (i) amend the certificate of incorporation (except that a committee
may, to the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the board of directors as provided in
Section 151(a) of the General Corporation Law of Delaware, fix the designations
and any of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the corporation or the
conversion into, or the exchange of such shares for, shares of any other class
or classes or any other series of the same or any other class or classes of
stock of the corporation), (ii) adopt an agreement of merger or consolidation
under Sections 251 or 252 of the General Corporation Law of Delaware, (iii)
recommend to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, (iv) recommend to
the stockholders a dissolution of the corporation or a revocation of a
dissolution or (v) amend the bylaws of the corporation; and, unless the board
resolution estab lishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 MEETINGS AND ACTION OF COMMITTEES
---------------------------------
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the following provisions of Article III of these bylaws:
Section 3.6 (place of meetings; meetings by telephone), Section 3.8 (regular
meetings), Section 3.9 (special meetings; notice), Section 3.10 (quorum),
Section 3.11 (waiver of notice), Section 3.12 (adjournment), Section 3.13
(notice of adjournment) and Section 3.14 (board action by written consent
without meeting), with such changes in the context of those bylaws as are
necessary to substitute the committee and its members for the board of directors
and its members; provided, however, that the time of regular meetings of
committees may be determined either by resolution of the board of directors or
by resolution of the committee, that special meetings of committees may also be
called by resolution of the board of directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the com mittee. The board of directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws.
4.3 COMMITTEE MINUTES
-----------------
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
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ARTICLE V
OFFICERS
--------
5.1 OFFICERS
--------
The Corporate Officers of the corporation shall be a president, a secretary
and a chief financial officer. The corporation may also have, at the discretion
of the board of directors, a chairman of the board, one or more vice presidents
(however denominated), one or more assistant secretaries, one or more assistant
treasurers, and such other officers as may be appointed in accordance with the
provisions of Section 5.3 of these bylaws. Any number of offices may be held by
the same person.
In addition to the Corporate Officers of the Company described above, there
may also be such Administrative Officers of the corporation as may be designated
and appointed from time to time by the president of the corporation in
accordance with the provisions of Section 5.12 of these bylaws.
5.2 ELECTION OF OFFICERS
--------------------
The Corporate Officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these bylaws, shall be chosen by the board of directors, subject to the rights,
if any, of an officer under any contract of employment, and shall hold their
respective offices for such terms as the board of directors may from time to
time determine.
5.3 SUBORDINATE OFFICERS
--------------------
The board of directors may appoint, or may empower the president to
appoint, such other Corporate Officers as the business of the corporation may
require, each of whom shall hold office for such period, have such power and
authority, and perform such duties as are provided in these bylaws or as the
board of directors may from time to time determine.
The president may from time to time designate and appoint Administrative
Officers of the corporation in accordance with the provisions of Section 5.12 of
these bylaws.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
-----------------------------------
Subject to the rights, if any, of a Corporate Officer under any contract of
employment, any Corporate Officer may be removed, either with or without cause,
by the board of directors at any regular or special meeting of the board or,
except in case of a Corporate Officer chosen by the board of directors, by any
Corporate Officer upon whom such power of removal may be conferred by the board
of directors.
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Any Corporate Officer may resign at any time by giving written notice to
the corporation. Any resignation shall take effect at the date of the receipt
of that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall not
be necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the Corporate
Officer is a party.
Any Administrative Officer designated and appointed by the president may be
removed, either with or without cause, at any time by the president. Any
Administrative Officer may resign at any time by giving written notice to the
president or to the secretary of the corporation.
5.5 VACANCIES IN OFFICES
--------------------
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
---------------------
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise such other
powers and perform such other duties as may from time to time be assigned to him
by the board of directors or as may be prescribed by these bylaws. If there is
no president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
---------
Subject to such supervisory powers, if any, as may be given by the board of
directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction and control of the business and the officers of the corporation. He
or she shall preside at all meetings of the stockholders and, in the absence or
nonexistence of a chairman of the board, at all meetings of the board of
directors. He or she shall have the general powers and duties of management
usually vested in the office of president of a corporation, and shall have such
other powers and perform such other duties as may be prescribed by the board of
directors or these bylaws.
5.8 VICE PRESIDENTS
---------------
In the absence or disability of the president, and if there is no chairman
of the board, the vice presidents, if any, in order of their rank as fixed by
the board of directors or, if not ranked, a vice president designated by the
board of directors, shall perform all the duties of the president and when so
acting shall have all the powers of, and be subject to all the restrictions
upon, the president. The vice presidents shall have such other powers and
perform such other duties as from time to time may be prescribed for them
respectively by the board of directors, these bylaws, the president or the
chairman of the board.
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5.9 SECRETARY
---------
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of the board of directors,
committees of directors and stockholders. The minutes shall show the time and
place of each meeting, whether regular or special (and, if special, how
authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the board of directors required to be given by law or by
these bylaws. He or she shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
-----------------------
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings and shares. The books of account shall at all reasonable
times be open to inspection by any director for a purpose reasonably related to
his position as a director.
The chief financial officer shall deposit all money and other valuables in
the name and to the credit of the corporation with such depositaries as may be
designated by the board of directors. He or she shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his or
her transactions as chief financial officer and of the financial condition of
the corporation, and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or these bylaws.
5.11 ASSISTANT SECRETARY
-------------------
The assistant secretary, if any, or, if there is more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his or her inability or refusal
to
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act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
5.12 ADMINISTRATIVE OFFICERS
-----------------------
In addition to the Corporate Officers of the corporation as provided in
Section 5.1 of these bylaws and such subordinate Corporate Officers as may be
appointed in accordance with Section 5.3 of these bylaws, there may also be
such Administrative Officers of the corporation as may be designated and
appointed from time to time by the president of the corporation. Administrative
Officers shall perform such duties and have such powers as from time to time may
be determined by the president or the board of directors in order to assist the
Corporate Officers in the furtherance of their duties. In the performance of
such duties and the exercise of such powers, however, such Administrative
Officers shall have limited authority to act on behalf of the corporation as the
board of directors shall establish, including but not limited to limitations on
the dollar amount and on the scope of agreements or commitments that may be made
by such Administrative Officers on behalf of the corporation, which limitations
may not be exceeded by such individuals or altered by the president without
further approval by the board of directors.
5.13 AUTHORITY AND DUTIES OF OFFICERS
--------------------------------
In addition to the foregoing powers, authority and duties, all officers of
the corporation shall respectively have such authority and powers and perform
such duties in the management of the business of the corporation as may be
designated from time to time by the board of directors.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
-------------------------------------------------
AND OTHER AGENTS
----------------
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
The corporation shall, to the maximum extent and in the manner permitted by
the General Corporation Law of Delaware as the same now exists or may hereafter
be amended, indemnify any person against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement actually and reasonably
incurred in connection with any threatened, pending or completed action, suit,
or proceeding in which such person was or is a party or is threatened to be made
a party by reason of the fact that such person is or was a director or officer
of the corporation. For purposes of this Section 6.1, a "director" or "officer"
of the corporation shall mean any person (i) who is or was a director or officer
of the corporation, (ii) who is or was serving at the request of the corporation
as a director or officer of another corporation, partnership, joint venture,
trust or other enterprise, or
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(iii) who was a director or officer of a corporation which was a predecessor
corporation of the corporation or of another enterprise at the request of such
predecessor corporation.
The corporation shall be required to indemnify a director or officer in
connection with an action, suit, or proceeding (or part thereof) initiated by
such director or officer only if the initiation of such action, suit, or
proceeding (or part thereof) by the director or officer was authorized by the
board of Directors of the corporation.
The corporation shall pay the expenses (including attorney's fees) incurred
by a director or officer of the corporation entitled to indemnification
hereunder in defending any action, suit or proceeding referred to in this
Section 6.1 in advance of its final disposition; provided, however, that payment
of expenses incurred by a director or officer of the corporation in advance of
the final disposition of such action, suit or proceeding shall be made only upon
receipt of an undertaking by the director or officer to repay all amounts
advanced if it should ultimately be determined that the director or officer is
not entitled to be indemnified under this Section 6.1 or otherwise.
The rights conferred on any person by this Article shall not be exclusive
of any other rights which such person may have or hereafter acquire under any
statute, provision of the corporation's Certificate of Incorporation, these
bylaws, agreement, vote of the stockholders or disinterested directors or
otherwise.
Any repeal or modification of the foregoing provisions of this Article
shall not adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such repeal or
modification.
6.2 INDEMNIFICATION OF OTHERS
-------------------------
The corporation shall have the power, to the maximum extent and in the
manner permitted by the General Corporation Law of Delaware as the same now
exists or may hereafter be amended, to indemnify any person (other than
directors and officers) against expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred in
connection with any threatened, pending or completed action, suit, or
proceeding, in which such person was or is a party or is threatened to be made a
party by reason of the fact that such person is or was an employee or agent of
the corporation. For purposes of this Section 6.2, an "employee" or "agent" of
the corporation (other than a director or officer) shall mean any person (i) who
is or was an employee or agent of the corporation, (ii) who is or was serving at
the request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
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6.3 INSURANCE
---------
The corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability under the provisions of the General Corporation Law of
Delaware.
ARTICLE VII
RECORDS AND REPORTS
-------------------
7.1 MAINTENANCE AND INSPECTION OF RECORDS
-------------------------------------
The corporation shall, either at its principal executive office or at
such place or places as designated by the board of directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books and other records of its business and properties.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
7.2 INSPECTION BY DIRECTORS
-----------------------
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders and its other books and records for a purpose
reasonably related to his or her position as a director.
19
<PAGE>
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
--------------------------------
The board of directors shall present at each annual meeting, and at
any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
----------------------------------------------
The chairman of the board, if any, the president, any vice president,
the chief financial officer, the secretary or any assistant secretary of this
corporation, or any other person authorized by the board of directors or the
president or a vice president, is authorized to vote, represent and exercise on
behalf of this corporation all rights incident to any and all shares of the
stock of any other corporation or corporations standing in the name of this
corporation. The authority herein granted may be exercised either by such person
directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.
7.5 CERTIFICATION AND INSPECTION OF BYLAWS
--------------------------------------
The original or a copy of these bylaws, as amended or otherwise
altered to date, certified by the secretary, shall be kept at the corporation's
principal executive office and shall be open to inspection by the stockholders
of the corporation, at all reasonable times during office hours.
ARTICLE VIII
GENERAL MATTERS
---------------
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
-----------------------------------------------------
For purposes of determining the stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the board of directors may fix, in advance, a record date, which shall not
precede the date upon which the resolution fixing the record date is adopted and
which shall not be more than sixty (60) days before any such action. In that
case, only stockholders of record at the close of business on the date so fixed
are entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided by law.
If the board of directors does not so fix a record date, then the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the board of directors adopts the
applicable resolution.
20
<PAGE>
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
-----------------------------------------
From time to time, the board of directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts, other
orders for payment of money, notes or other evidences of indebtedness that are
issued in the name of or payable to the corporation, and only the persons so
authorized shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
--------------------------------------------------
The board of directors, except as otherwise provided in these bylaws,
may authorize and empower any officer or officers, or agent or agents, to enter
into any contract or execute any instrument in the name of and on behalf of the
corporation; such power and authority may be general or confined to specific
instances. Unless so authorized or ratified by the board of directors or within
the agency power of an officer, no officer, agent or employee shall have any
power or authority to bind the corporation by any contract or engagement or to
pledge its credit or to render it liable for any purpose or for any amount.
8.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES
------------------------------------------------
The shares of the corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply
to shares represented by a certificate until such certificate is surrendered to
the corporation. Notwithstanding the adoption of such a resolution by the board
of directors, every holder of stock represented by certificates and, upon
request, every holder of uncertificated shares, shall be entitled to have a
certificate signed by, or in the name of the corporation by, the chairman or
vice-chairman of the board of directors, or the president or vice-president, and
by the treasurer or an assistant treasurer, or the secretary or an assistant
secretary of such corporation representing the number of shares registered in
certificate form. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate has ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if he or she were such
officer, transfer agent or registrar at the date of issue.
Certificates for shares shall be of such form and device as the board
of directors may designate and shall state the name of the record holder of the
shares represented thereby; its number; date of issuance; the number of shares
for which it is issued; a summary statement or reference to the powers,
designations, preferences or other special rights of such stock and the
qualifications, limitations or restrictions of such preferences and/or rights,
if any; a statement or summary of liens, if any; a conspicuous notice of
restrictions upon transfer or registration of transfer, if any; a statement as
to any applicable voting trust agreement; if the shares be assessable, or, if
assessments are collectible by personal action, a plain statement of such facts.
21
<PAGE>
Upon surrender to the secretary or transfer agent of the corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, or upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.5 SPECIAL DESIGNATION ON CERTIFICATES
-----------------------------------
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences and the relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.6 LOST CERTIFICATES
-----------------
Except as provided in this Section 8.6, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
8.7 TRANSFER AGENTS AND REGISTRARS
------------------------------
The board of directors may appoint one or more transfer agents or
transfer clerks, and one or more registrars, each of which shall be an
incorporated bank or trust company -- either domestic or
22
<PAGE>
foreign, who shall be appointed at such times and places as the requirements of
the corporation may necessitate and the board of directors may designate.
8.8 CONSTRUCTION; DEFINITIONS
-------------------------
Unless the context requires otherwise, the general provisions, rules of
construction and definitions in the General Corporation Law of Delaware shall
govern the construction of these bylaws. Without limiting the generality of this
provision, as used in these bylaws, the singular number includes the plural, the
plural number includes the singular, and the term "person" includes both an
entity and a natural person.
8.9 RESTRICTIONS ON TRANSFER OF SHARES
----------------------------------
Before there can be a valid sale or transfer for consideration of any
of the shares (the term "shares" shall include any securities convertible into
shares) of the corporation by any holder thereof, such holder shall first offer
those shares to the corporation or its designee in the following manner:
(a) The offering stockholder shall deliver a notice in writing by mail or
otherwise to the secretary of the corporation stating the price, terms, and
conditions of such proposed sale or transfer, the number of shares to be sold or
transferred, and such stockholder's intention so to sell or transfer the shares.
Within ten (10) days thereafter, the corporation shall have the prior right to
purchase all (but not less than all unless this requirement is waived by the
seller) of the shares offered at the price and upon the terms and conditions
stated in such notice. Should the corporation fail to purchase all of said
shares, then, at the expiration of said ten (10) day period or prior thereto
upon the determination of the corporation to purchase none of such shares so
offered, the offering stockholder may sell or transfer to any person or persons
all shares of stock referred to in such stockholder's notice to the secretary
that were not purchased by the corporation, but only with a period of one
hundred twenty (120) days from the date of such stockholder's first notice;
provided, however, that such stockholder shall not sell or transfer such shares
at a lower price or on terms more favorable to the purchaser or transferee than
those specified in the notice to the secretary. After said 120-day period, the
foregoing procedure for first offering shares to the corporation shall again
apply.
(b) Within the limitations herein provided, the corporation may purchase
the shares of this corporation from any offering stockholder; provided, however,
that at no time shall the corporation be permitted to purchase all of its
outstanding voting shares. Any sale or transfer or purported sale or transfer
of the shares of the corporation shall be null and void unless the terms,
conditions, and provisions of this Section 8.9 are strictly observed and
followed.
(c) The corporation shall place an appropriate legend on all certificates
for its shares referring to the provisions of this Section 8.9 restricting the
transfer of shares.
(d) Effective upon the closing of a firm commitment underwritten
initial public offering of any of the corporation's securities pursuant to a
registration statement on Form S-1 filed under the
23
<PAGE>
Securities Act of 1933, as amended, the stockholders shall no longer be subject
to the restrictions on transfer provided by this Section 8.9
ARTICLE IX
AMENDMENTS
----------
The original or other bylaws of the corporation may be adopted,
amended or repealed by the stockholders entitled to vote; provided, however,
that the corporation may, in its certificate of incorporation, confer the power
to adopt, amend or repeal bylaws upon the directors. The fact that such power
has been so conferred upon the directors shall not divest the stockholders of
the power, nor limit their power to adopt, amend or repeal bylaws.
Whenever an amendment or new bylaw is adopted, it shall be copied in
the book of bylaws with the original bylaws, in the appropriate place. If any
bylaw is repealed, the fact of repeal with the date of the meeting at which the
repeal was enacted or the filing of the operative written consent(s) shall be
stated in said book.
24
<PAGE>
EXHIBIT 4.2
AUTO-BY-TEL CORPORATION
------------------------------------------------
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
DATED AS OF JANUARY 30, 1997
------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 - Definitions................................................. 1
ARTICLE 2 - Requested Registration...................................... 2
2.1 Request for Registration........................................ 2
2.2 Underwriting.................................................... 3
ARTICLE 3 - Company Registration........................................ 4
3.1 Notice of Registration to Holders............................... 4
3.2 Underwriting.................................................... 5
ARTICLE 4 - Registration on Form S-3.................................... 5
4.1 Request for S-3 Registration.................................... 5
4.2 Underwriting.................................................... 6
ARTICLE 5 - Expenses of Registration.................................... 7
ARTICLE 6 - Registration Procedures..................................... 7
6.1 Filings; Information............................................ 7
ARTICLE 7 - Indemnification............................................. 11
ARTICLE 8 - Lockup Agreement............................................ 13
ARTICLE 9 - Information by Holder....................................... 13
ARTICLE 10 - Rule 144 Reporting......................................... 14
ARTICLE 11 - Co-Sale Rights; Drag-Along Rights.......................... 14
11.1 Co-Sale Rights.................................................. 14
11.2 Drag-Along Rights............................................... 15
11.3 Compliance...................................................... 16
11.4 Improper Transfers Ineffective.................................. 16
11.5 No Transfer to Competitors...................................... 16
11.6 Transfer of Registration Rights................................. 16
11.7 Legends......................................................... 16
11.8 Termination of Rights........................................... 17
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 12 - Termination of Registration Rights......................... 17
ARTICLE 13 - Limitations on Registration Rights Granted to
Other Securities........................................... 17
ARTICLE 14 - Miscellaneous.............................................. 18
14.1 Waivers and Amendments.......................................... 18
14.2 Governing Law................................................... 18
14.3 Successors and Assigns.......................................... 18
14.4 Entire Agreement................................................ 18
14.5 Notices......................................................... 18
14.6 Severability.................................................... 19
14.7 Titles and Subtitles............................................ 19
14.8 Counterparts.................................................... 19
ARTICLE 15 - Aggregation................................................ 19
</TABLE>
-ii-
<PAGE>
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
This Amended and Restated Investors' Rights Agreement (the "Agreement") is
made and entered into as of January 30, 1997 by and among Auto-By-Tel
Corporation, a Delaware corporation (the "Company"), the undersigned holders of
the capital stock of the Company ("Holders"), and those other persons and
entities who have or shall have executed this Agreement and whose names appear
on the Schedule of Investors' Rights Holders attached hereto as Exhibit A, as
---------
such Schedule may be amended from time to time pursuant to Section 13 hereof.
RECITALS
A. The Company has issued and sold shares of its Series A Preferred Stock
to the persons and entities whose names appear on the Schedule of Investors'
Rights Holders attached as Exhibit A hereto under the caption "Series A
---------
Investors," and in consideration thereof, has granted to the Series A Investors
and certain other stockholders certain rights pursuant to an Investors' Rights
Agreement dated as of August 23, 1996 (the "August 1996 Agreement").
B. In connection with the Company's sale of Series B Preferred Stock to
the investors whose names appear on Exhibit A hereto under the caption "Series B
---------
Investors" (the "Series B Investors"), the parties to the August 1996 Agreement
desire to amend and restate such agreement. The parties to the August 1996
Agreement also wish to add the Series B Investors as parties to this Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, the parties hereto agree to amend and
restate the August 1996 Agreement as follows:
ARTICLE 1
Definitions
-----------
As used herein, the following terms shall have the following respective
meanings:
1.1 "Commission" shall mean the Securities and Exchange Commission or any
----------
other federal agency at the time administering the Securities Act.
1.2 "Executive Stockholders" shall mean John Bedrosian, Robert Grimes and
-----------------------
Peter Ellis.
1.3 "Holders" shall mean and include any person or persons who have
-------
executed this Agreement and whose names appear on the Schedule of Investors'
Rights Holders or who shall, pursuant to Article 13 hereof, become parties
hereto, and any qualifying transferees under Article 11 hereof who hold
Registrable Securities.
<PAGE>
1.4 "Initiating Holders" shall mean any Holder or Holders (exclusive of
------------------
John Bedrosian, Robert Grimes and Peter Ellis) who in the aggregate own at least
40% of the Registrable Securities (exclusive of shares held by John Bedrosian,
Robert Grimes and Peter Ellis) which have not been previously resold to the
public in a registered public offering.
1.5 "Initial Public Offering" shall mean the closing of a firm commitment
-----------------------
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), covering
the offer and sale of common stock of the Company (the "Common Stock") to the
public at an aggregate offering price to the public of at least thirty million
dollars ($30,000,000) at a per share price of not less than nine dollars ($9.00)
per share.
1.6 The terms "register," "registered" and "registration" refer to a
-------- ---------- ------------
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
1.7 "Registrable Securities" means shares of (i) any and all Common Stock
----------------------
of the Company issued or issuable to John Bedrosian, Peter Ellis or Robert
Grimes, and (ii) any and all Common Stock of the Company issued or issuable upon
conversion of shares of the Series A Preferred Stock or Series B Preferred Stock
of the Company.
1.8 "Registration Expenses" shall mean all expenses incurred by the
---------------------
Company in complying with Articles 2, 3 and 4 hereof, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, listing fees, fees and disbursements of legal counsel for the
Company, fees and disbursements of separate legal counsel for the Holders (up to
a maximum of $10,000), blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company which shall be paid in any
event by the Company).
1.9 "Securities Act" shall mean the Securities Act of 1933, as amended, or
--------------
any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
ARTICLE 2
Requested Registration
----------------------
2.1 Request for Registration. In case the Company shall receive from the
------------------------
Initiating Holders a written request that the Company effect any registration
with respect to all or a part of the Registrable Securities, the Company will:
(a) within ten (10) days after its receipt thereof give written
notice of the proposed registration to all other Holders; and
-2-
<PAGE>
(b) as soon as practicable, use its best efforts to effect such
registration (including, without limitation, preparation of a registration
statement and prospectus complying as to form with the requirements of the
Securities Act, the execution of an undertaking to file post-effective
amendments, appropriate qualifications under the applicable blue sky or other
state securities laws and appropriate compliance with exemptive regulations
issued under the Securities Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Holder's or Holders' Registrable
Securities as is specified in such request, together with all or such portion of
the Registrable Securities of any Holder or Holders joining in such request as
are specified in a written request given within 20 days after receipt of such
written notice from the Company; provided, that the Company shall not be
obligated to take any action to effect such registration pursuant to this
Section 2.1 under the following circumstances:
(1) Prior to the earlier of (i) July 1, 1998, or (ii) one year
following the effective date of the Company's Initial Public Offering; or
(2) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration; or
(3) After the Company has effected two such registrations
pursuant to this Subsection 2.1(b) and such registrations have been declared or
ordered effective; or
(4) If the Registrable Securities to be registered have an
anticipated offering price to the public of less than $30,000,000.
Subject to the foregoing clauses (1) through (4), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as possible, but in any event, within ninety (90) days after
receipt of the request or requests of the Initiating Holders; provided, however,
that if the Company shall furnish to such Holders a certificate signed by the
President or Chief Executive Officer of the Company stating that in the good
faith judgment of the Board of Directors it has been determined that (i) such a
filing would adversely affect any proposed financing or acquisition by the
Company, or (ii) such a filing would otherwise represent undue hardship for or
would impose undue potential liability on the Company, the Company shall be
entitled to delay the filing of such registration statement for an additional
period up to one hundred twenty (120) days after receipt of the request of the
Initiating Holders.
2.2 Underwriting. If the Initiating Holders intend to distribute the
------------
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
Section 2.1 and the Company shall include such information in the written notice
referred to in Subsection 2.1(a). The right of any Holder to registration
pursuant to Section 2.1 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Securities in
the underwriting (unless otherwise mutually agreed by a majority in interest of
the Initiating Holders and such Holder) to the extent provided herein.
-3-
<PAGE>
(a) The Company shall (together with all Holders proposing to
distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by a majority in interest of the Initiating
Holders, provided, however, that the managing underwriter shall be of nationally
recognized standing and must be approved by the Company, which approval shall
not be unreasonably withheld. Notwithstanding any other provision of this
Section 2.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, the Initiating Holders shall so advise all Holders of Registrable
Securities who have elected to participate in such offering, and the number of
shares of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all such Holders thereof in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities held
by such Holders.
(b) If any Holder of Registrable Securities disapproves of the terms
of the underwriting, he may elect to withdraw therefrom by written notice to the
Company, the underwriter and the Initiating Holders. Any Registrable Securities
which are excluded from the underwriting by reason of the underwriter's
marketing limitation or withdrawn by a Holder of Registrable Securities from
such underwriting shall be withdrawn from such registration. If the underwriter
has not limited the number of Registrable Securities to be underwritten, the
Company, employees of the Company and other holders of the Company's Common
Stock may include securities for its (or their) own account in such registration
if the underwriter so agrees and if the number of Registrable Securities which
would otherwise have been included in such registration and underwriting will
not thereby be limited by the underwriter and the proposed price at which the
securities will be offered to the public is not reduced.
(c) Inclusion of Shares by Company. If the managing underwriter has
------------------------------
not limited the number of Registrable Securities to be underwritten, the Company
may include securities for its own account or for the account of others in such
registration if the managing underwriter so agrees and if the number of
Registrable Securities held by Initiating Holders which would otherwise have
been included in such registration and underwriting will not thereby be limited.
The inclusion of such shares shall be on the same terms as the registration of
shares held by the Initiating Holders. In the event that the underwriters
exclude some of the securities to be registered, the securities to be sold for
the account of the Company and any other holders shall be excluded in their
entirety prior to the exclusion of any Registrable Securities.
ARTICLE 3
Company Registration
--------------------
3.1 Notice of Registration to Holders. If at any time or from time to
---------------------------------
time the Company shall determine to register any of its securities, either for
its own account or the account of a security holder or holders, other than (i) a
registration relating solely to employee benefit plans or (ii) a registration
relating solely to a Commission Rule 145 transaction, the Company will:
(a) give to each Holder 20 days' prior written notice thereof; and
-4-
<PAGE>
(b) include in such registration (and any related qualification under
blue sky laws or other compliance requirements), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within 15 days after receipt of such written notice from the
Company, by any Holder or Holders.
3.2 Underwriting. If the registration of which the Company gives notice
------------
is for a registered public offering involving an underwriting, the Company shall
so advise the Holders as a part of the written notice given pursuant to Section
3.1(a). In such event, the right of any Holder to registration pursuant to this
Article 3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company)
enter into an underwriting agreement in customary form with the managing
underwriter selected for such underwriting by the Company.
Notwithstanding any other provision of this Article 3, if the managing
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the underwriter may (i) in the case of the
Company's Initial Public Offering, exclude some or all Registrable Securities;
provided, however, that no Registrable Securities may be excluded if any
securities other than Registrable Securities are included and (ii) in the case
of any other offering, reduce the number of Registrable Securities proposed to
be registered to not less than 25% of the total shares originally proposed to be
underwritten. The Company shall so advise all Holders and all the other holders
distributing their securities through such underwriting of such exclusions or
reductions, and (subject to the foregoing sentence) the number of Registrable
Securities held by Holders that may be included in the registration and
underwriting shall be allocated among all Holders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by all
such Holders at the time of filing the registration statement. If any Holder
disapproves of the terms of any such underwriting, such Holder may elect to
withdraw therefrom by written notice to the Company and the managing
underwriter. Any securities excluded or withdrawn from such underwriting shall
be withdrawn from such registration, but the Holder shall continue to be bound
by Article 8 hereof.
ARTICLE 4
Registration on Form S-3
------------------------
4.1 Request for S-3 Registration. The Company shall use its best efforts
----------------------------
to qualify for registration on Form S-3 or any successor form to Form S-3.
After the Company has qualified for the use of Form S-3, Holders of the
outstanding Registrable Securities shall have the right to request two
registrations on Form S-3. The number of shares of Registrable Securities that
may be included on the Form S-3 shall be allocated among all Holders in
proportion to the respective amounts of Registrable Securities entitled to
inclusion in such registration at the time of filing the registration statement.
Notwithstanding the foregoing:
-5-
<PAGE>
(a) The Company shall not be required to effect a registration
pursuant to this Article 4 within 180 days following the effective date of any
registration statement filed pursuant to Article 2 or 3 hereof.
(b) The Company shall not be required to effect a registration
pursuant to this Article 4 unless the shares of Registrable Securities for which
the Holder or Holders are requesting registration have a reasonably anticipated
aggregate price to the public (before deduction of underwriting discounts and
expenses) of at least $5,000,000.
(c) The Company shall not be required to effect more than one
registration pursuant to this Article 4 in any consecutive 12-month period.
The Company shall promptly give written notice to all Holders of
Registrable Securities of the receipt of a request for registration pursuant to
this Article 4 and shall provide a reasonable opportunity for other Holders to
participate in the registration, provided that if the registration is for an
underwritten offering, the terms of Section 4.2 shall apply to all participants
in such offering. Subject to the foregoing, the Company will use its best
efforts to file a registration statement on Form S-3 covering the Registrable
Securities so requested to be registered as soon as practicable after receipt of
the request of the Holders, but in any event within 90 days after receipt of the
request or requests of the Initiating Holders.
4.2 Underwriting. If the Holders intend for the distribution of the
------------
Registrable Securities covered by the registration on Form S-3 to be effected by
means of a firm commitment underwriting, they shall so advise the Company. In
such event, the right of any Holder to registration pursuant to this Article 4
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting.
(a) The Company (together with all Holders proposing to distribute
their securities through such underwriting) shall enter into an underwriting
agreement in customary form with a managing underwriter of nationally recognized
standing selected for such underwriting by a majority in interest of the Holders
requesting registration on Form S-3 and approved by the Company, which approval
shall not unreasonably be withheld. Notwithstanding any other provision of this
Article 3, if the managing underwriter advises the Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the underwriters may exclude some or all of the shares
requested to be included in such registration, and the number of shares of
Registrable Securities that may be included in the registration and underwriting
shall be allocated among all Holders thereof in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders at the time of filing the registration statement. No Registrable
Securities excluded from the underwriting by reason of the managing
underwriter's marketing limitation shall be included in such registration.
(b) If any Holder of Registrable Securities disapproves of the terms
of the underwriting, such person may elect to withdraw therefrom by written
notice to the Company, the managing underwriter and the Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration; provided, however, that if by the withdrawal of
such
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<PAGE>
Registrable Securities a greater number of Registrable Securities held by other
Holders may be included in such registration (up to the maximum of any
limitation imposed by the underwriters), then the Company shall offer to all
Holders who have included Registrable Securities in the registration the right
to include additional Registrable Securities in the same proportion used in
determining the underwriter limitation in this Section 4.2(b).
(c) Inclusion of Shares by Company. If the managing underwriter has
------------------------------
not limited the number of Registrable Securities to be underwritten, the Company
may include securities for its own account or for the account of others in such
registration if the managing underwriter so agrees and if the number of
Registrable Securities held by Holders requesting registration on Form S-3 which
would otherwise have been included in such registration and underwriting will
not thereby be limited. The inclusion of such shares shall be on the same terms
as the registration of shares held by the Initiating Holders. In the event that
the underwriters exclude some of the securities to be registered on Form S-3,
the securities to be sold for the account of the Company and any other holders
shall be excluded in their entirety prior to the exclusion of any Registrable
Securities.
ARTICLE 5
Expenses of Registration
------------------------
All Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Articles 2, 3 and 4 hereof shall be
borne by the Company (exclusive of underwriting discounts and commissions). All
underwriting discounts and commissions relating to securities registered by the
Holders shall be borne by the holders of such securities pro rata on the basis
--- ----
of the number of shares so registered.
ARTICLE 6
Registration Procedures
-----------------------
6.1 Filings; Information. Whenever the Company is required to effect or
--------------------
cause the registration of Registrable Securities pursuant to this Agreement, the
Company will use its best efforts to effect the registration and the sale of
such Registrable Securities in accordance with the intended method of
disposition thereof as quickly as practicable, and in connection with any such
request:
(a) The Company will as expeditiously as possible prepare and file
with the Commission a registration statement on any form for which the Company
then qualifies or which counsel for the Company shall deem appropriate and which
form shall be available for the sale of the Registrable Securities to be
registered thereunder in accordance with the intended method of distribution
thereof, and use its best efforts to cause such filed registration statement to
become and remain effective for a period of not less than 180 days (or shorter
period as is required to complete the distribution of the securities);
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provided that the Company may postpone the filing of a registration statement in
accordance with Section 2.1 hereof.
(b) The Company will as expeditiously as possible prepare and file
with the Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary to
keep such registration statement effective for a period of not less than 180
days or such shorter period which will terminate when all securities covered by
such registration statement have been sold (but not before the expiration of the
90-day period referred to in Section 4(3) of the Securities Act and Rule 174
thereunder, if applicable) and comply with the provisions if the Securities Act
with respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by each Selling Holder thereof set forth in such registration
statement;
(c) The Company will, prior to filing a registration statement or
prospectus or any amendment or supplement thereto, furnish each Holder, one
counsel representing all such Holders to be selected by a majority-in-interest
of such Holders, and each underwriter, if any, of the Registrable Securities
covered by such registration statement copies of such registration statement as
proposed to be filed, together with exhibits thereto, which documents will be
subject to review and approval by the foregoing within five days after delivery,
and thereafter furnish to such Holders, counsel and underwriters, if any, for
their review and comments such number of copies of such registration statement,
each amendment and supplement thereto (in each case including all exhibits
thereto and documents incorporated by reference therein), the prospectus
included in such registration statement (including each preliminary prospectus)
and such other documents or information as such Holder, counsel or underwriters
may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Holders;
(d) After the filing of the registration statement, the Company will
promptly notify each Holder of Registrable Securities covered by such
registration statement of any stop order issued or threatened by the Commission
and take all reasonable actions required to prevent the entry of such stop order
or to remove it if entered;
(e) The Company will use its best efforts to (i) register or qualify
the Registrable Securities under such other securities or blue sky laws of such
jurisdictions in the United States as any Holder reasonably (in light of such
Holder's intended plan of distribution) requests, and (ii) cause such
Registrable Securities to be registered with or approved by such other
governmental agencies or authorities in the United States as may be necessary by
virtue of the business and operations of the Company and do any and all other
acts and things that may be reasonably necessary or advisable to enable such
Holder to consummate the disposition of the Registrable Securities owned by such
Holder; provided that the Company will not be required to (A) qualify generally
--------
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this paragraph (e), (B) subject itself to taxation in any such
jurisdiction or (C) consent to general service of process in any such
jurisdiction;
(f) The Company will immediately notify each Holder of such
Registrable Securities, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the
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<PAGE>
occurrence of an event requiring the preparation of a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain an untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and promptly make
available to each Holder any such supplement or amendment;
(g) The Company will enter into customary agreements (including, if
applicable, an underwriting agreement in customary form and which is reasonably
satisfactory to the Company) and take such other actions as are reasonably
required in order to expedite or facilitate the disposition of such Registrable
Securities and the Holders may, at their option, require that any or all of the
representations, warranties and covenants of the Company or to or for the
benefit of such underwriters also be made to and for the benefit of such
Holders.
(h) The Company will make available to each Holder of such
Registrable Securities (and will deliver to their counsel) and each underwriter,
if any, subject to restrictions imposed by the United States federal government
or any agency or instrumentality thereof, copies of all correspondence between
the Commission and the Company, its counsel or auditors and will also make
available for inspection by any Holder of such Registrable Securities, any
underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other professional retained by any
such Holder or underwriter (collectively, the "Inspectors"), all financial and
other records, pertinent corporate documents and properties of the Company
(collectively, the "Records") as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause the Company's officers
and employees to supply all information reasonably requested by any Inspectors
in connection with such registration statement. Records which the Company
determines, in good faith, to be confidential and which it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless (i)
the disclosure of such Records is necessary to avoid or correct a misstatement
or omission in such registration statement or (ii) the disclosure or release of
such Records is requested or required pursuant to oral questions,
interrogatories, requests for information or documents or a subpoena or other
order from a court of competent jurisdiction or other process; provided that
--------
prior to any disclosure or release pursuant to clause (ii), the Inspectors shall
provide to the Company with prompt notice of any such request or requirement so
that the Company may seek an appropriate protective order or waive such
Inspectors' obligation not to disclose such Records; and, provided, further that
-------- -------
if failing the entry of a protective order or the waiver by the Company
permitting the disclosure or release of such Records, the Inspectors, upon
advice of counsel, are compelled to disclose such Records, the Inspectors may
disclose that portion of the Records which counsel has advised the Inspectors
that the Inspectors are compelled to disclose. Each Holder of such Registrable
Securities agrees that information obtained by it solely as a result of such
inspections (not including any information obtained from a third party who,
insofar as is known to the Holder after reasonable inquiry, is not prohibited
from providing such information by contractual, legal or fiduciary obligation to
the Company) shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Company or its
Affiliates unless and until such information is made generally available to the
public. Each Holder of such Registrable Securities further agrees that it will,
upon learning that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at its expense,
to undertake appropriate action to prevent disclosure of the Records deemed
confidential;
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<PAGE>
(i) The Company will furnish to each Holder and to each underwriter,
if any, a signed counterpart, addressed to such Holder or underwriter, of (i) an
opinion or opinions of counsel to the Company, and (ii) a comfort letter or
comfort letters from the Company's independent public accountants, each in
customary form and covering such matters of the type customarily covered by
opinions or comfort letters, as the case may be, as the Holders of Registrable
Securities included in such offering or the managing underwriter thereof
reasonably requests;
(j) The Company will otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and make available to
its securityholders, as soon as reasonably practicable, an earnings statement
covering a period of 12 months, beginning within three months after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act;
(k) The Company will use its best efforts (a) to cause all such
Registrable Securities to be listed on a national securities exchange (if such
Registrable Securities are not already so listed) and on each additional
national securities exchange on which similar securities issued by the Company
are then listed (if any), if the listing of such Registrable Securities is then
permitted under the rules of such exchange or (b) to secure designation of all
such Registrable Securities covered by such registration statement as a NASDAQ
"national market system security" within the meaning of Rule 11Aa2-1 of the
Commission or, failing that, to secure NASDAQ authorization for such Registrable
Securities and, without limiting the generality of the foregoing, to arrange for
at least two market makers to register as such with respect to such Registrable
Securities with the NASD;
(l) The Company will appoint a transfer agent and registrar for all
such Registrable Securities covered by such registration statement not later
than the effective date of such registration statement; and
(m) In connection with an underwritten offering, the Company will
participate, to the extent reasonably requested by the managing underwriter for
the offering or the Holders, in customary efforts to sell the securities under
the offering, including, without limitation, participating in "road shows";
provided, that the Company shall not be obligated to participate in more than
one such offering in any 12-month period.
The Company may require each Holder of Registrable Securities to promptly
furnish in writing to the Company such information regarding the distribution of
the Registrable Securities as the Company may from time to time reasonably
request and such other information as may be legally required in connection with
such registration including, without limitation, all such information as may be
requested by the Commission or the NASD. The Company may exclude from such
registration any Holder who fails to provide such information.
Each Holder agrees that, upon receipt of any notice from the Company of any
happening of any event of the kind described in Section 6.1(f) hereof, such
Holder will forthwith discontinue disposition of Registrable Securities until
such Holder's receipt of the copies of the supplemented or amended
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<PAGE>
prospectus contemplated by Section 6.1(f) hereof, and, if so directed by the
Company, such Holder will deliver to the Company all copies, other than
permanent file copies then in such Holder's possession, of the most recent
prospectus covering such Registrable Securities at the time of receipt of such
notice. In the event the Company shall give such notice, the Company shall
extend the period during which such registration statement shall be maintained
effective (including the period referred to in Section 6.1(a) hereof) by the
number of days during the period from and including the date of giving of notice
pursuant to Section 6.1(f) hereof to the date when the Company shall make
available to the Holders of the Registrable Securities covered by such
registration statement a prospectus supplemented or amended to conform with the
requirements of Section 6.1(f) hereof.
ARTICLE 7
Indemnification
---------------
7.1 The Company will indemnify each Holder and each underwriter, if any,
and each of their respective officers, directors, partners, representatives and
agents and such Holder's legal counsel and independent accountants, if any, and
each person controlling any such persons within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act against all expenses, claims,
losses, damages and liabilities (or actions in respect thereof), including any
of the foregoing incurred in settlement of any litigation, commenced or
threatened, provided such settlement is effected with the written consent of the
Company (which consent shall not be unreasonably withheld), arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any 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 any violation by
the Company of any rule or regulation promulgated under the Securities Act or
any state securities laws applicable to the Company and relating to action or
inaction by the Company in connection with any such registration, qualification
or compliance, and will reimburse each such Holder and each underwriter, if any,
and each of their respective officers, directors, partners, representatives and
agents and such Holder's legal counsel and independent accountants, and each
person controlling any such persons, for any legal and any other expenses
reasonably incurred in connection with investigating, preparing or defending any
such claim, loss, damage, liability or action, provided that the Company will
not be liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Company by such Holder and
stated to be specifically for use therein.
7.2 Each Holder will, if Registrable Securities held by such Holder are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers and its legal counsel and independent accountants, each underwriter, if
any, of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act,
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<PAGE>
and each other such Holder, each of its officers, directors, partners, legal
counsel and independent accountants, if any, and each person controlling such
Holder within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, provided such settlement is effected with
the written consent of the Holder (which consent shall not be unreasonably
withheld), arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or any amendment or supplement
thereto, incident to any such registration, qualification or compliance or based
on any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Company, such Holders, such directors, officers,
partners, legal counsel, independent accountants, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating, preparing or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular,
other document or amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by such Holder; provided,
however, that notwithstanding any other provision contained herein the
obligations of such Holders hereunder shall be limited to an amount equal to the
proceeds to each such Holder of Registrable Securities sold as contemplated
herein.
7.3 Each party entitled to indemnification under this Article 7 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld). The Indemnified Party may participate in such defense at such
party's expense; provided, however, that the Indemnifying Party shall bear the
expense of such defense of the Indemnified Party if representation of both
parties by the same counsel would be inappropriate due to actual or potential
conflicts of interest. The failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Agreement, unless such failure is prejudicial to the ability of the
Indemnifying Party to defend the action. No Indemnifying Party, in the defense
of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect of such claim or litigation.
7.4 If the indemnification provided for in this Article 7 is unavailable
to an Indemnified Party or insufficient in respect of any losses, claims,
damages or liabilities referred to therein, then each Indemnifying Party under
such paragraph, in lieu of indemnifying such Indemnified Party thereunder, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and by the
Holders from the offering of the Registrable Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to
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<PAGE>
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company and the Holders in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Holders in connection with the
offering of the Registrable Securities shall be deemed to be in the same
respective proportions as the net proceeds from the offering of the Registrable
Securities as set forth in the table on the cover of the Prospectus, bear to the
aggregate public offering price of the Registrable Securities. The relative
fault of the Company and of the Holders 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 or by the Holders and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Holders' respective obligations to contribute
pursuant to this Article 7 are several in proportion to the respective number of
Registrable Securities they sell, and not joint.
ARTICLE 8
Lockup Agreement
----------------
In consideration for the Company agreeing to its obligations under this
Agreement, each Holder agrees in connection with the Company's Initial Public
Offering, upon the request of the underwriters managing the underwritten
offering of the Company's securities, not to sell, make any short sale of, loan,
grant any option for the purchase of, or otherwise dispose of any Registrable
Securities (other than those included in the registration) without the prior
written consent of such underwriters for such period of time (not to exceed one
hundred and eighty (180) days) from the effective date of such registration as
the underwriters may specify; provided, however, that (i) such Holder shall have
no obligation to enter into the agreement described herein unless all executive
officers and directors and holders of more than 10% of the Company's voting
power of the Company enter into similar agreements, and (ii) nothing herein
shall prevent any Holder that is a corporation from making a distribution of
Registrable Securities to the shareholders thereof that is otherwise in
compliance with applicable securities laws.
ARTICLE 9
Information by Holder
---------------------
The Holder or Holders of Registrable Securities included in any
registration shall furnish in writing to the Company such information regarding
such Holder or Holders and the distribution proposed by such Holder or Holders
as the Company may request in writing and as shall be required in connection
with any registration, qualification or compliance referred to in this
Agreement.
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<PAGE>
ARTICLE 10
Rule 144 Reporting
------------------
With a view to making available the benefits of certain rules and
regulations of the Commission which may at any time permit the sale of
securities of the Company to the public without registration, the Company agrees
to:
10.1 Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the Company's Initial Public Offering; and
10.2 Use its best efforts to then file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (at any time after it has become subject to such reporting
requirements); and
10.3 So long as a Holder owns any Registrable Securities, furnish to the
Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 (at any time after
ninety (90) days following the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
of the Company as a Holder may reasonably request in availing itself of any rule
or regulation of the Commission allowing a Holder to sell any such securities
without registration.
ARTICLE 11
Co-Sale Rights; Drag-Along Rights
---------------------------------
11.1 Co-Sale Rights.
--------------
(a) If any Executive Stockholder proposes to sell, exchange,
transfer or in any other manner dispose of his Registrable Securities other than
to an affiliate of such Executive Stockholder, such Executive Stockholder shall
first give notice in writing (the "Co-Sale Notice") to the Company and each
other Holder setting forth the terms and conditions of the proposed sale and the
name and address of the proposed purchaser.
(b) Each other Holder shall have the right, exercisable by written
notice to the Executive Stockholder and the Company given within 30 days after
the receipt of the Co-Sale Notice, to elect to participate in the proposed sale
given. Each Holder that so notifies the Executive Stockholder and the Company
shall have the right to sell an amount of Registrable Securities equal to the
product obtained by multiplying (i) the total number of shares of Common Stock
or Preferred Stock owned by such Holder by (ii) a fraction, the numerator of
which is the aggregate number of shares of Common
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Stock or Preferred Stock proposed to be purchased by the proposed purchaser and
the denominator of which is the aggregate number of shares of Common Stock or
Preferred Stock owned by the Executive Stockholder and all Holders electing to
exercise their rights under this Section 11.1. Such purchase shall be made at
the highest price per share and on the same terms and conditions specified in
the Co-Sale Notice.
(c) The closing of the proposed sale shall be held at the time and
place designated by the proposed purchaser, but in any event within 30 days of
the later to occur of (i) receipt of notice from each Holder as to whether he
elects to participate in the proposed sale or (ii) expiration of the 15-day co-
sale period if the notice has not been provided by all Holders. Each Holder
participating in the proposed sale shall deliver at the closing his shares of
Common Stock or Preferred Stock to the purchaser free and clear of all liens,
pledges and other encumbrances and accompanied by stock transfer powers duly
endorsed for transfer.
11.2 Drag-Along Rights.
-----------------
(a) If at any time and from time to time after the date of this
Agreement, Holders holding at least 50% of the Registrable Securities (the
"Control Holders") wish to sell or exchange in a bona fide arm's-length
transaction all the shares of Common Stock or Preferred Stock then owned by
them, the Control Holders shall have the right (the "Drag-Along Right") to
require all of the Holders to sell all of the shares of Common Stock or
Preferred Stock then owned by such Shareholders for the same per share
consideration, and otherwise on the same terms received by the Control Holders,
to the proposed purchaser; provided, however, that no Holder shall be obligated
to sell any shares of Common Stock or Preferred Stock then owned by such Holder
unless such Holder shall realize an internal rate of return on such Holder's
investment in the Company of at least 30%.
(b) To exercise a Drag-Along Right, the Control Holder shall first
give notice in writing (the "Drag-Along Notice") to each Holder and the Company
setting forth (i) the name and address of the proposed purchaser and (ii) the
proposed purchase price, terms of payment and other material terms and
conditions of the proposed purchaser's offer. Each Holder shall thereafter be
obligated to sell all of his shares of Common Stock or Preferred Stock subject
to such Drag-Along Notice; provided, however, that no Holder shall be obligated
to sell any shares of Common Stock or Preferred Stock then owned by such Holder
unless such Holder shall realize an internal rate of return on such Holder's
investment in the Company of at least 30%.
(c) The closing of the proposed sale shall be held at the time and
place designated by the proposed purchaser, but in any event within 30 days from
receipt by all the Holders and the Company of the Drag-Along Notice. Each
Holder shall deliver at the closing his shares of Common Stock or Preferred
Stock to the proposed purchaser free and clear of all liens, pledges
encumbrances and accompanied by stock transfer powers duly endorsed for
transfer. If the sale is not consummated within such 30-day period, then no
Holder shall be obligated to sell his Common Stock or Preferred Stock pursuant
to that specific Drag-Along Right, but each Holder shall remain subject to the
provisions of this Section 11.2.
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(d) Nothing in this Section 11.2 shall limit the Company's ability to
undertake a merger or reorganization in accordance with the Delaware General
Corporation Law and the Company's Restated Certificate of Incorporation.
11.3 Compliance. Any sale, exchange, transfer or other disposition must
----------
comply with provisions of this Agreement, and the prospective transferee must
agree to be bound by this Agreement and execute a counterpart hereof (and/or
such further documents as may be necessary in the opinion of the Company to make
it a party hereto), after which such prospective transferee shall be deemed to
be a Holder for purposes of this Agreement.
11.4 Improper Transfers Ineffective. Any purported sale, exchange,
------------------------------
transfer or other disposition of shares of Common Stock or Preferred Stock which
is in violation of the provisions of this Agreement shall be void and of no
force and effect whatsoever, and the Company shall not record any such event on
its books or treat any such transferee as the owner of such shares for any
purpose.
11.5 No Transfer to Competitors. From the date hereof through September
--------------------------
15, 1997, no Registrable Securities or Common Stock issued upon the conversion
thereof may be sold or transferred to a competitor of the Company. A
"competitor" shall be any person or entity engaged in (or who has announced
plans to engage in) the selling, leasing, marketing or manufacturing of
automobiles, automobile financing or automobile insurance, or the provision of
advisory or marketing services related thereto of the Company, or to an
"affiliate" (within the meaning of Rule 144 (17 C.F.R. (S)230.144) of the rules
and regulations promulgated under the Securities Act, an "Affiliate") of a
Competitor. Notwithstanding the foregoing, any Holder may at any time sell,
transfer, assign or otherwise dispose of any shares of Series A Preferred or
Common Stock issued upon conversion of the Series A Preferred to (i) any
executor, administrator of such Holder's estate, ancestors, descendants,
siblings, or spouse, (ii) any Affiliate of the Holder, (iii) any other Holder or
any of its affiliates, or (iv) in the case of any Holder that is a partnership,
to any constituent of such Holder or any affiliate of any such constituent.
Following September 15, 1997, all restrictions on transfer set forth in the
first two sentences of this Section 11.5 shall be of no further force and
effect.
11.6 Transfer of Registration Rights. The rights to cause the Company to
-------------------------------
register securities granted to Holders under Articles 2, 3 and 4 hereof may only
be assigned in connection with a Transfer of the Holder's Shares accomplished in
accordance with the provisions of this Section 11. All transferees and
assignees of the rights to cause the Company to register securities granted
Holders under Articles 2, 3 and 4 hereof, as a condition to the transfer of such
rights, shall agree in writing to be bound by the agreements set forth herein.
11.7 Legends. All certificates or instruments representing Transfer
-------
Shares, whether now outstanding or subsequently issued, shall be surrendered to
the Company for endorsement or be endorsed by the Company prior to their
issuance with the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO, AND
MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH, AN AGREEMENT AMONG THE
COMPANY AND THE HOLDERS
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OF THESE SECURITIES AND CERTAIN OTHER HOLDERS OF THE COMPANY'S STOCK,
A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY."
The Company shall not transfer any of the Transfer Shares on its books
without first ascertaining compliance with all of the applicable provisions of
this Agreement with respect to such transfer.
11.8 Termination of Rights. This rights granted in this Article 11 shall
---------------------
terminate on the earliest of (i) the closing of the Company's Initial Public
Offering, (ii) the date on which the Company first becomes subject to filing
reports under Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act), (iii) the date on which quotations for the Common
Stock of the Company are reported on the automated quotation system of the
National Association of Securities Dealers, Inc. or on an equivalent quotation
system or shares of the Common Stock of the Company are listed on a national
securities exchange registered under the Exchange Act, and (iv) the merger or
consolidation of the Company with or into any other corporation or entity, other
than a wholly-owned subsidiary of the Company, or a sale of all or substantially
all of the assets of the Company, as a result of which the stockholders of the
Company immediately prior to such transaction hold less than 50% of the voting
power of the surviving corporation.
ARTICLE 12
Termination of Registration Rights
----------------------------------
Following the Company's Initial Public Offering, the rights granted
pursuant to this Agreement shall terminate as to any Holder at such time as such
Holder may sell all such Holder's shares under Rule 144, or a successor rule, in
any three month period.
ARTICLE 13
Limitations on Registration Rights Granted to Other Securities
--------------------------------------------------------------
The parties hereto agree that additional holders may be added as parties to
this Agreement with respect to any or all securities of the Company held by
them; provided, however, that from and after the date of this Agreement, the
Company shall not without the prior written consent of the Holders of two-thirds
of the Registrable Securities then outstanding, enter into any agreement with
any holder or prospective holder of any securities of the Company providing for
the grant to such holder of registration rights superior to those granted
herein. Any additional parties shall execute a counterpart of this Agreement,
and upon execution by such additional parties and by the Company, shall be
considered Holders for purposes of this Agreement, and shall be added to the
Schedule of Investors' Rights Holders.
-17-
<PAGE>
ARTICLE 14
Miscellaneous
-------------
14.1 Waivers and Amendments. With the written consent of the Company and
----------------------
the holders of two-thirds of the then outstanding Series A Preferred Stock and
Series B Preferred Stock, any shares of Common Stock issued upon conversion of
the Preferred Stock, and the Common Stock held by the Executive Stockholders,
all voting together as a class on an as-converted basis, the obligations and
rights of the Company and the Holders under this Agreement may be waived (either
generally or in a particular instance, either retroactively or prospectively,
and either for a specified period of time or indefinitely) or amended; provided,
however, that no such waiver or amendment shall reduce the aforesaid number of
shares, the Holders of which are required to consent to any waiver or amendment,
without the consent of all the Holders. Upon the effectuation of each such
waiver or amendment, the Company shall promptly give written notice thereof to
any Holders who have not previously consented thereto in writing. This
Agreement or any provision hereof may be amended, waived, discharged or
terminated only by a statement in writing signed by the party against which
enforcement of the amendment, waiver, discharge or termination is sought, except
to the extent provided in this Section 14.1. Notwithstanding any other
provision herein, the requirement of the approval of the holders of two-thirds
of the Registrable Securities to amend this Agreement or waive rights hereunder
shall not be amended or modified without the unanimous approval of the holders
of the Series A Preferred Stock and Series B Preferred Stock, voting as a single
class.
14.2 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of New York as such laws are applied to contracts
made and to be fully performed entirely within that state between residents of
that state. Each party hereto hereby submits to the nonexclusive jurisdiction
of the United States District Court for California and of any California state
court sitting in Orange County, California (and of the appropriate appellate
courts) for the purposes of all legal proceedings arising out of or relating to
this Agreement or the transactions contemplated hereby and irrevocably waives,
to the fullest extent permitted by applicable law, any objection to venue laid
therein. Process in any such proceeding may be served on such party anywhere in
the world, whether within or without the State of California. Each party hereto
hereby waives, to the fullest extent permitted by applicable law, any right it
may have to a trial by jury in respect of any matter directly or indirectly
arising out of or relating to this Agreement.
14.3 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
14.4 Entire Agreement. This Agreement constitutes the full and entire
----------------
understanding and agreement between the parties with regard to the subject
matter hereof.
14.5 Notices. All notices and other communications required or permitted
-------
hereunder shall be in writing and shall be deemed effectively given upon
personal delivery; upon confirmed transmission by telecopy; or three (3) days
following deposit with the United States Post Office, by certified mail, postage
-18-
<PAGE>
prepaid, addressed (i) if to a Holder, to such address as such Holder shall have
furnished to the Company in writing, or (ii) if to the Company, to 18872
MacArthur Blvd., Irvine, California, to the attention of the General Counsel, or
to such other address as the Company shall have furnished to the Holders in
writing.
14.6 Severability. In case any provision of this Agreement shall be
------------
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
14.7 Titles and Subtitles. The titles of the sections and subsections of
--------------------
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
14.8 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
constitute one instrument.
ARTICLE 15
Aggregation
-----------
Shares of capital stock of the Company owned by partnerships and
corporations having substantially common ownership interests or managed by the
same principals and owned by individual investors affiliated with one another
may be aggregated for the purposes of calculating the aggregate percentage of
capital stock of the Company owned by any Holder and any permitted transferee
hereunder.
-19-
<PAGE>
The foregoing Agreement is hereby executed as of the date first above
written.
"COMPANY"
AUTO-BY-TEL CORPORATION
By:
-----------------------------
Peter R. Ellis, President
"HOLDER"
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
<PAGE>
The foregoing Agreement is hereby executed as of the date first above
written.
"COMPANY"
AUTO-BY-TEL CORPORATION
By:
-----------------------------
Peter R. Ellis, President
"HOLDER"
CONTITRADE SERVICES L.L.C.
By:
-----------------------------
Name:
----------------------------
Title:
---------------------------
<PAGE>
The foregoing Agreement is hereby executed as of the date first above
written.
"COMPANY"
AUTO-BY-TEL CORPORATION
By:
------------------------------
Peter R. Ellis, President
"HOLDER"
NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
<PAGE>
The foregoing Agreement is hereby executed as of the date first above
written.
"COMPANY"
AUTO-BY-TEL CORPORATION
By:
------------------------------
Peter R. Ellis, President
"HOLDER"
GENERAL ELECTRIC CAPITAL
CORPORATION
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
<PAGE>
The foregoing Agreement is hereby executed as of the date first above
written.
"COMPANY"
AUTO-BY-TEL CORPORATION
By:
------------------------------
Peter R. Ellis, President
"HOLDER"
MICHAEL FUCHS
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
<PAGE>
EXHIBIT A
---------
SCHEDULE OF INVESTORS' RIGHTS HOLDERS
Name
- ----------------------------------------------------------------
Series A Investors
- ------------------
ContiTrade Services L.L.C.
National Union Fire Insurance Company of Pittsburgh, PA
General Electric Capital Corporation
Michael Fuchs
Executive Stockholders
- ----------------------
John Bedrosian
Peter Ellis
Robert Grimes
Series B Investors
- ------------------
ContiTrade Services L.L.C.
National Union Fire Insurance Company of Pittsburgh, PA
General Electric Capital Corporation
Michael Fuchs
<PAGE>
EXHIBIT 10.1
AUTO-BY-TEL CORPORATION
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("AGREEMENT") is entered into as of the ___
day of ______________, 1997 by and between Auto-By-Tel Corporation, a Delaware
corporation (the "COMPANY") and _______________________________ ("Indemnitee").
RECITALS
--------
A. The Company and Indemnitee recognize the continued difficulty in
obtaining liability insurance for its directors, officers, employees, agents and
fiduciaries, the significant increases in the cost of such insurance and the
general reductions in the coverage of such insurance.
B. The Company and Indemnitee further recognize the substantial increase
in corporate litigation in general, subjecting directors, officers, employees,
agents and fiduciaries to expensive litigation risks at the same time as the
availability and coverage of liability insurance has been severely limited.
C. Indemnitee does not regard the current protection available as adequate
under the present circumstances, and Indemnitee and other directors, officers,
employees, agents and fiduciaries of the Company may not be willing to continue
to serve in such capacities without additional protection.
D. The Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and, in part, in
order to induce Indemnitee to continue to provide services to the Company,
wishes to provide for the indemnification and advancing of expenses to
Indemnitee to the maximum extent permitted by law.
E. In view of the considerations set forth above, the Company desires that
Indemnitee be indemnified by the Company as set forth herein.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. Indemnification.
---------------
(a) Indemnification of Expenses. The Company shall indemnify
---------------------------
Indemnitee to the fullest extent permitted by Delaware law if Indemnitee was or
is or becomes a party to or witness or other participant in, or is threatened to
be made a party to or witness or other participant in, any threatened, pending
or completed action, suit, proceeding or alternative dispute resolution
mechanism, or any hearing, inquiry or investigation that Indemnitee in good
faith believes might lead to the institution of any such action, suit,
proceeding or alternative dispute resolution mechanism, whether civil, criminal,
<PAGE>
administrative, investigative or other (hereinafter a "CLAIM") by reason of (or
arising in part out of) any event or occurrence related to the fact that
Indemnitee is or was a director, officer, employee, agent or fiduciary of the
Company, or any subsidiary of the Company, or is or was serving at the request
of the Company as a director, officer, employee, agent or fiduciary of another
corporation, partnership, joint venture, trust or other enterprise, or by reason
of any action or inaction on the part of Indemnitee while serving in such
capacity (hereinafter an "INDEMNIFIABLE EVENT") against any and all expenses
(including attorneys' fees and all other costs, expenses and obligations
incurred in connection with investigating, defending, being a witness in or
participating in (including on appeal), or preparing to defend, be a witness in
or participate in, any such action, suit, proceeding, alternative dispute
resolution mechanism, hearing, inquiry or investigation), judgments, fines,
penalties and amounts paid in settlement (if such settlement is approved in
advance by the Company, which approval shall not be unreasonably withheld) of
such Claim and any federal, state, local or foreign taxes imposed on Indemnitee
as a result of the actual or deemed receipt of any payments under this Agreement
(collectively, hereinafter "EXPENSES"), including all interest, assessments and
other charges paid or payable in connection with or in respect of such Expenses.
Such payment of Expenses shall be made by the Company as soon as practicable but
in any event no later than five days after written demand by Indemnitee therefor
is presented to the Company.
(b) Reviewing Party. Notwithstanding the foregoing, (i) the obligations
---------------
of the Company under Section 1(a) shall be subject to the condition that the
Reviewing Party (as described in Section 10(e) hereof) shall not have determined
(in a written opinion, in any case in which the Independent Legal Counsel
referred to in Section 1(c) hereof is involved) that Indemnitee would not be
permitted to be indemnified under applicable law, and (ii) the obligation of the
Company to make an advance payment of Expenses to Indemnitee pursuant to Section
2(a) (an "EXPENSE ADVANCE") shall be subject to the condition that, if, when and
to the extent that the Reviewing Party determines that Indemnitee would not be
permitted to be so indemnified under applicable law, the Company shall be
entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the
Company) for all such amounts theretofore paid; provided, however, that if
Indemnitee has commenced or thereafter commences legal proceedings in a court of
competent jurisdiction to secure a determination that Indemnitee should be
indemnified under applicable law, any determination made by the Reviewing Party
that Indemnitee would not be permitted to be indemnified under applicable law
shall not be binding and Indemnitee shall not be required to reimburse the
Company for any Expense Advance until a final judicial determination is made
with respect thereto (as to which all rights of appeal therefrom have been
exhausted or lapsed). Indemnitees' obligation to reimburse the Company for any
Expense Advance shall be unsecured and no interest shall be charged thereon. If
there has not been a Change in Control (as defined in Section 10(c) hereof), the
Reviewing Party shall be selected by the Board of Directors, and if there has
been such a Change in Control (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control), the Reviewing Party shall be the
Independent Legal Counsel referred to in Section 1(c) hereof. Indemnitee shall
have the right, within 60 days of a determination by the Reviewing Party that
Indemnitee substantively would not be permitted to be indemnified in whole or in
part under applicable law, or within 30 days or Indemnitee's request for payment
if there has been no determination by the Reviewing Party, to commence
litigation in any court of competent jurisdiction, or seek an award in
-2-
<PAGE>
arbitration to be conducted by a single arbitrator pursuant to the rules of the
American Arbitration Association, which award shall be deemed final,
unappealable and binding, to determine whether Indemnitee should be indemnified
under applicable law, or to challenge any such determination by the Reviewing
Party or any aspect thereof, including the legal or factual bases therefor. Any
such court or arbitrator, as the case ma be, shall thereupon have the exclusive
authority to make such determination unless and until such court or arbitrator
dismisses or otherwise terminates such action without having made a
determination. The Company hereby consents to service of process and to appear
in any such proceeding. In any such action before the court or arbitrator,
Indemnitee shall be presumed to be entitled to indemnification and the Company
shall have the burden of proving that indemnification is not required under this
Agreement. All fees and expenses of any arbitrator pursuant to this provision
and all reasonable fees and expenses of counsel retained by Indemnitee in
connection with any court or arbitration finding an obligation greater than that
assumed by the Company prior to commencement of such court action or arbitration
shall be paid by the Company. Any determination by the Reviewing Party
otherwise shall be conclusive and binding on the Company and Indemnitee.
(c) Change in Control. The Company agrees that if there is a Change
-----------------
in Control of the Company (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control) then, with respect to all matters
thereafter arising concerning the rights of Indemnitees to payments of Expenses
and Expense Advances under this Agreement or any other agreement or under the
Company's Certificate of Incorporation or Bylaws as now or hereafter in effect,
Independent Legal Counsel (as defined in Section 10(d) hereof) shall be selected
by Indemnitee. Such counsel, among other things, shall render its written
opinion to the Company and Indemnitee as to whether and to what extent
Indemnitee would be permitted to be indemnified under applicable law and the
Company agrees to abide by such opinion. The Company agrees to pay the
reasonable fees of the Independent Legal Counsel referred to above and to fully
indemnify such counsel against any and all expenses (including attorneys' fees),
claims, liabilities and damages arising out of or relating to this Agreement or
its engagement pursuant hereto.
(d) Mandatory Payment of Expenses. Notwithstanding any other
-----------------------------
provision of this Agreement other than Section 9 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
action, suit, proceeding, inquiry or investigation referred to in Section (1)(a)
hereof or in the defense of any claim, issue or matter therein, Indemnitee shall
be indemnified against all Expenses incurred by Indemnitee in connection
therewith.
2. Expenses; Indemnification Procedure.
-----------------------------------
(a) Advancement of Expenses. The Company shall advance all Expenses
-----------------------
incurred by Indemnitee. The advances to be made hereunder shall be paid by the
Company to Indemnitee as soon as practicable but in any event no later than five
days after written demand by Indemnitee therefor to the Company.
-3-
<PAGE>
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a condition
--------------------------------
precedent to Indemnitees' right to be indemnified under this Agreement, give the
Company notice in writing as soon as practicable of any Claim made against
Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the Chief Executive
Officer of the Company at the address shown on the signature page of this
Agreement (or such other address as the Company shall designate in writing to
Indemnitee). In addition, Indemnitee shall give the Company such information
and cooperation as it may reasonably require and as shall be within Indemnitees'
power.
(c) No Presumptions; Burden of Proof. For purposes of this Agreement, the
--------------------------------
termination of any Claim by judgment, order, settlement (whether with or without
court approval) or conviction, or upon a plea of nolo contendere, or its
---------------
equivalent, shall not create a presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court has
determined that indemnification is not permitted by applicable law. In
addition, neither the failure of the Reviewing Party to have made a
determination as to whether Indemnitee has met any particular standard of
conduct or had any particular belief, nor an actual determination by the
Reviewing Party that Indemnitee has not met such standard of conduct or did not
have such belief, prior to the commencement of legal proceedings by Indemnitee
to secure a judicial determination that Indemnitee should be indemnified under
applicable law, shall be a defense to Indemnitee's claim or create a presumption
that Indemnitee has not met any particular standard of conduct or did not have
any particular belief. In connection with any determination by the Reviewing
Party or otherwise as to whether Indemnitee is entitled to be indemnified
hereunder, the burden of proof shall be on the Company to establish that
Indemnitee is not so entitled.
(d) Notice to Insurers. If, at the time of the receipt by the Company
------------------
of a notice of a Claim pursuant to Section 2(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of such Claim to the insurers in accordance
with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of Indemnitee, all amounts payable as a result of such action, suit,
proceeding, inquiry or investigation in accordance with the terms of such
policies.
(e) Selection of Counsel. In the event the Company shall be obligated
--------------------
hereunder to pay the Expenses of any Claim, the Company shall be entitled to
assume the defense of such Claim with counsel approved by Indemnitee, which
approval shall not be unreasonably withheld, upon the delivery to Indemnitee of
written notice of its election so to do. After delivery of such notice,
approval of such counsel by Indemnitee and the retention of such counsel by the
Company, the Company will not be liable to Indemnitee under this Agreement for
any fees of counsel subsequently incurred by Indemnitee with respect to the same
Claim; provided that, (i) Indemnitee shall have the right to employ Indemnitees'
counsel in any such Claim at Indemnitee expense and (ii) if (A) the employment
of counsel by Indemnitee has been previously authorized by the Company, (B)
Indemnitee shall have reasonably concluded that there is a conflict of interest
between the Company and Indemnitee in the conduct of any such defense, or (C)
the Company shall not continue to retain such counsel to defend such Claim, then
the fees and expenses of Indemnitee counsel shall be at the expense of the
Company. The Company shall have the
-4-
<PAGE>
right to conduct such defense as it sees fit in its sole discretion, including
the right to settle any claim against Indemnitee without the consent of the
Indemnitee provided the Company holds the Indemnitee harmless in connection with
any such settlement.
3. Additional Indemnification Rights; Nonexclusivity.
-------------------------------------------------
(a) Scope. The Company hereby agrees to indemnify Indemnitee to the
-----
fullest extent permitted by law, notwithstanding that such indemnification is
not specifically authorized by the other provisions of this Agreement, the
Company's Restated Certificate of Incorporation, the Company's Bylaws or by
statute. In the event of any change after the date of this Agreement in any
applicable law, statute or rule which expands the right of a Delaware
corporation to indemnify a member of its Board of Directors or an officer,
employee, agent or fiduciary, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater benefits afforded by such
change. In the event of any change in any applicable law, statute or rule which
narrows the right of a Delaware corporation to indemnify a member of its Board
of Directors or an officer, employee, agent or fiduciary, such change, to the
extent not otherwise required by such law, statute or rule to be applied to this
Agreement, shall have no effect on this Agreement or the parties' rights and
obligations hereunder except as set forth in Section 8(a) hereof.
(b) Amendment to Indemnification Rights. The Company shall not adopt
-----------------------------------
any amendment to its Restated Certificate of Incorporation, as amended (the
"Certificate") or By-Laws the effect of which would be to deny, diminish or
encumber Indemnitee's rights to indemnity pursuant to the Restated Certificate
of Incorporation, By-Laws, the Delaware General Corporation Law or any other
applicable law as applied to any act or failure to act occurring in whole or in
part prior to the date (the "Effective Date") upon which the amendment was
approved by the Company's Board of Directors or stockholders, as the case may
be. In the event that the Company shall adopt any amendment to its Restated
Certificate of Incorporation or By-Laws the effect of which is to change
Indemnitee's rights to indemnity under such instruments, such amendment shall
apply only to acts or failures to act occurring entirely after the Effective
Date thereof. The Company shall give written notice to Indemnitee of any
proposal which respect to any such amendment no later than the date such
amendment is first presented to the Board of Directors (or any committee
thereof) for consideration, and shall provide a copy of any such amendment to
Indemnitee promptly after its adoption.
(c) Nonexclusivity. The indemnification provided by this Agreement
--------------
shall be in addition to any rights to which Indemnitee may be entitled under the
Company's Certificate of Incorporation, its Bylaws, any agreement, any vote of
stockholders or disinterested directors, the General Corporation Law of the
State of Delaware, or otherwise. The indemnification provided under this
Agreement shall continue as to Indemnitee for any action Indemnitee took or did
not take while serving in an indemnified capacity even though Indemnitee may
have ceased to serve in such capacity.
4. No Duplication of Payments. The Company shall not be liable
--------------------------
under this Agreement to make any payment in connection with any Claim made
against Indemnitee to the extent Indemnitee has
-5-
<PAGE>
otherwise actually received payment (under any insurance policy, Certificate of
Incorporation, Bylaw or otherwise) of the amounts otherwise indemnifiable
hereunder.
5. Partial Indemnification. If Indemnitee is entitled under any provision
-----------------------
of this Agreement to indemnification by the Company for some or a portion of
Expenses incurred in connection with any Claim, but not, however, for all of the
total amount thereof, the Company shall nevertheless indemnify Indemnitee for
the portion of such Expenses to which Indemnitee are entitled.
6. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
---------------------
that in certain instances, Federal law or applicable public policy may prohibit
the Company from indemnifying its directors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.
7. Liability Insurance.
-------------------
(a) Except as provided in (b) below, the Company hereby agrees to use
its best efforts to obtain and maintain directors and officers liability
insurance for Indemnitee so long as Indemnitee shall continue to serve as a
director, officer or key employee of the Company, and, thereafter, so long as
Indemnitee shall be subject to any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that Indemnitee was a director, officer or
key employee of the Company.
(b) The Company shall have no obligation hereunder to obtain or
maintain directors and officers liability insurance if, in the reasonable
business judgment of the Board of Directors of the Company, such insurance is
not reasonably available, the premium costs for such insurance are
disproportionate to the amount of coverage provided, or the coverage provided by
such insurance is limited, by exclusions or otherwise, so as to provide an
insufficient benefit.
(c) To the extent the Company maintains liability insurance applicable
to directors, officers, employees, agents or fiduciaries, Indemnitee shall be
covered by such policies in such a manner as to provide Indemnitee the same
rights and benefits as are accorded to the most favorably insured of the
Company's directors, if Indemnitee is a director; or of the Company's officers,
if Indemnitee is not a director of the Company but is an officer; or of the
Company's key employees, agents or fiduciaries, if Indemnitee is not an officer
or director but is a key employee, agent or fiduciary.
(d) The Company shall give prompt written notice to Indemnitee of any
amendment or other change or modification, or any proposed amendment change or
modification, to any policy of directors and officers liability insurance
maintained by the Company and covering Indemnitee.
-6-
<PAGE>
8. Exceptions. Any other provision herein to the contrary notwithstanding,
----------
the Company shall not be obligated pursuant to the terms of this Agreement:
(a) Excluded Action or Omissions. To indemnify Indemnitee for
----------------------------
Indemnitee's acts, omissions or transactions from which Indemnitee or the
Indemnitee may not be relieved of liability under applicable law;
(b) Claims Initiated by Indemnitee. To indemnify or advance expenses
------------------------------
to Indemnitee with respect to Claims initiated or brought voluntarily by
Indemnitee and not by way of defense, except (i) with respect to actions or
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other agreement or insurance policy or under the Company's
Certificate of Incorporation or Bylaws now or hereafter in effect relating to
Claims for Indemnifiable Events, (ii) in specific cases if the Board of
Directors has approved the initiation or bringing of such Claim, or (iii) as
otherwise required under Section 145 of the Delaware General Corporation Law,
regardless of whether Indemnitee ultimately is determined to be entitled to such
indemnification, advance expense payment or insurance recovery, as the case may
be;
(c) Lack of Good Faith. To indemnify Indemnitee for any expenses
------------------
incurred by Indemnitee with respect to any proceeding instituted by Indemnitee
to enforce or interpret this Agreement, if a court of competent jurisdiction
determines that each of the material assertions made by Indemnitee in such
proceeding was not made in good faith or was frivolous; or
(d) Claims Under Section 16(b). To indemnify Indemnitee for expenses
--------------------------
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
9. Period of Limitations. No legal action shall be brought and no cause
---------------------
of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such two-year period; provided, however, that if any shorter
-------- -------
period of limitations is otherwise applicable to any such cause of action, such
shorter period shall govern.
10. Construction of Certain Phrases.
-------------------------------
(a) For purposes of this Agreement, references to the "Company" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees, agents or
fiduciaries, so that if Indemnitee is or was a director, officer, employee,
agent or fiduciary of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee, agent
or fiduciary of another corporation, partnership, joint venture, employee
benefit plan, trust or other
-7-
<PAGE>
enterprise, Indemnitee shall stand in the same position under the provisions of
this Agreement with respect to the resulting or surviving corporation as
Indemnitee would have with respect to such constituent corporation if its
separate existence had continued.
(b) For purposes of this Agreement, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on Indemnitee with respect to an employee benefit plan;
and references to "serving at the request of the Company" shall include any
service as a director, officer, employee, agent or fiduciary of the Company
which imposes duties on, or involves services by, such director, officer,
employee, agent or fiduciary with respect to an employee benefit plan, its
participants or its beneficiaries; and if Indemnitee acted in good faith and in
a manner Indemnitee reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan, Indemnitee shall be
deemed to have acted in a manner "not opposed to the best interests of the
Company" as referred to in this Agreement.
(c) For purposes of this Agreement a "Change in Control" shall be
deemed to have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than
a trustee or other fiduciary holding securities under an employee benefit plan
of the Company or a corporation owned directly or indirectly by the stockholders
of the Company in substantially the same proportions as their ownership of stock
of the Company, (A) who is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 10% or more of the
combined voting power of the Company's then outstanding Voting Securities,
increases his beneficial ownership of such securities by 5% or more over the
percentage so owned by such person, or (B) becomes the "beneficial owner" (as
defined in Rule 13d-3 under said Act), directly or indirectly, of securities of
the Company representing more than 20% of the total voting power represented by
the Company's then outstanding Voting Securities, (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company and any new director whose election by the
Board of Directors or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof, or (iii) the stockholders of the Company approve
a merger or consolidation of the Company with any other corporation other than a
merger or consolidation which would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series of
transactions) all or substantially all of the Company's assets.
(d) For purposes of this Agreement, "Independent Legal Counsel" shall
mean an attorney or firm of attorneys, selected in accordance with the
provisions of Section 1(c) hereof, who shall not have otherwise performed
services for the Company or Indemnitee within the last three years (other
-8-
<PAGE>
than with respect to matters concerning the rights of Indemnitee under this
Agreement, or of other indemnitees under similar indemnity agreements).
(e) For purposes of this Agreement, a "Reviewing Party" shall mean any
appropriate person or body consisting of a member or members of the Company's
Board of Directors or any other person or body appointed by the Board of
Directors who is not a party to the particular Claim for which Indemnitee are
seeking indemnification, or Independent Legal Counsel.
(f) For purposes of this Agreement, "Voting Securities" shall mean any
securities of the Company that vote generally in the election of directors.
11. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall constitute an original.
12. Binding Effect; Successors and Assigns. This Agreement shall be binding
--------------------------------------
upon and inure to the benefit of and be enforceable by the parties hereto and
their respective successors, assigns, including any direct or indirect successor
by purchase, merger, consolidation or otherwise to all or substantially all of
the business and/or assets of the Company, spouses, heirs, and personal and
legal representatives. The Company shall require and cause any successor
(whether direct or indirect by purchase, merger, consolidation or otherwise) to
all, substantially all, or a substantial part, of the business and/or assets of
the Company, by written agreement in form and substance satisfactory to
Indemnitee, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession had taken place. This Agreement shall continue in effect with
respect to Claims relating to Indemnifiable Events regardless of whether
Indemnitee continues to serve as a director, officer, employee, agent or
fiduciary of the Company or of any other enterprise at the Company's request.
13. Attorneys' Fees. In the event that any action is instituted by
---------------
Indemnitee under this Agreement or under any liability insurance policies
maintained by the Company to enforce or interpret any of the terms hereof or
thereof, Indemnitee shall be entitled to be paid all Expenses incurred by
Indemnitee with respect to such action, regardless of whether Indemnitee is
ultimately successful in such action, and shall be entitled to the advancement
of Expenses with respect to such action, unless, as a part of such action, a
court of competent jurisdiction over such action determines that each of the
material assertions made by Indemnitee as a basis for such action was not made
in good faith or was frivolous. In the event of an action instituted by or in
the name of the Company under this Agreement to enforce or interpret any of the
terms of this Agreement, Indemnitee shall be entitled to be paid all Expenses
incurred by Indemnitee in defense of such action (including costs and expenses
incurred with respect to Indemnitee counterclaims and cross-claims made in such
action), and shall be entitled to the advancement of Expenses with respect to
such action, unless, as a part of such action, a court having jurisdiction over
such action determines that each of Indemnitee material defenses to such action
was made in bad faith or was frivolous.
-9-
<PAGE>
14. Notice. All notices and other communications required or permitted
------
hereunder shall be in writing, shall be effective when given, and shall in any
event be deemed to be given (a) five (5) days after deposit with the U.S. Postal
Service or other applicable postal service, if delivered by first class mail,
postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day
after the business day of deposit with Federal Express or similar overnight
courier, freight prepaid, or (d) one day after the business day of delivery by
facsimile transmission, if delivered by facsimile transmission, with copy by
first class mail, postage prepaid, and shall be addressed if to Indemnitee, at
the Indemnitee address as set forth beneath Indemnitee signatures to this
Agreement and if to the Company at the address of its principal corporate
offices (attention: Secretary) or at such other address as such party may
designate by ten days' advance written notice to the other party hereto.
15. Consent to Jurisdiction. The Company and Indemnitee each hereby
-----------------------
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the Court of
Chancery of the State of Delaware in and for New Castle County, which shall be
the exclusive and only proper forum for adjudicating such a claim.
16. Severability. The provisions of this Agreement shall be severable in
------------
the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including, without limitations, each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
17. Choice of Law. This Agreement shall be governed by and its provisions
-------------
construed and enforced in accordance with the laws of the State of Delaware, as
applied to contracts between Delaware residents, entered into and to be
performed entirely within the State of Delaware, without regard to the conflict
of laws principles thereof.
18. Subrogation. In the event of payment under this Agreement, the Company
-----------
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee who shall execute all documents required and shall do all
acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
19. Amendment and Termination. No amendment, modification, termination or
-------------------------
cancellation of this Agreement shall be effective unless it is in writing signed
by both the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.
-10-
<PAGE>
20. Integration and Entire Agreement. This Agreement sets forth the entire
--------------------------------
understanding between the parties hereto and supersedes and merges all previous
written and oral negotiations, commitments, understandings and agreements
relating to the subject matter hereof between the parties hereto.
21. No Construction as Employment Agreement. Nothing contained in this
---------------------------------------
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
AUTO-BY-TEL CORPORATION
By:
------------------------------------
Title:
---------------------------------
Address:
-------------------------------
-------------------------------
AGREED TO AND ACCEPTED BY:
- --------------------------------------
Name:
--------------------------------
Address:
------------------------------
------------------------------
-11-
<PAGE>
EXHIBIT 10.2
AUTO-BY-TEL CORPORATION
18872 MACARTHUR BLVD.
IRVINE, CALIFORNIA 92612-1400
as of October 24, 1996
Mark W. Lorimer
20 Ridgewood Terrace
Maplewood, New Jersey 07040
Dear Mark:
You have asked us to confirm the agreement we made on October 23, 1996
concerning your employment by Auto-By-Tel Corporation ("ABT"). We agreed,
subject only to the commencement of your employment, to the terms set forth in
this letter. You will be employed for 42 months (subject to extension as we may
agree) as General Counsel of ABT with the responsibilities customarily
associated with such position and your position will not diminish during your
employment. You will be paid an annual base salary of no less than $200,000
(plus any bonuses awarded by the board in their discretion). You will be granted
10-year stock options, under ABT's 1996 Stock Incentive Plan, to purchase
300,000 shares of ABT common stock at an exercise price of $5.00 per share (the
"Options") -- which will become exercisable as follows: 100,000 on the six month
anniversary of this letter, 66,666 at the end of each of the two successive
twelve-month periods thereafter and 66,668 at the end of the following twelve
month period (resulting in full exercisability at the end of 42 months). The
Options will not preclude you from consideration for other equity grants in the
discretion of the board. You will be entitled to participation in all of the
employee benefit plans, programs and policies in effect while employed which are
generally available to senior executives of ABT, including health insurance
coverage for you (and availability of health insurance coverage for your
immediate family through the plan at your cost) (none of which shall be
diminished during your employment). ABT will promptly reimburse you for all
business expenses you incur while employed.
If you are terminated due to willful fraud in connection with your job, or
the deliberate or intentional repeated failure to substantially perform your
duties that materially harms ABT, or are convicted for, or plead nolo contendere
---- ----------
to, a charge of commission of a felony (such items are called "Cause"), you will
receive no severance and all non-exercisable Options will be forfeit. If you
are terminated without Cause, or if you die, or become permanently disabled, all
of the Options shall automatically be exercisable, and you will receive one
year's base salary (payable monthly) as "Severance Pay," but your salary at any
new job shall reduce, or eliminate, ABT's obligation to pay further Severance
Pay. If you quit after ABT breaches this Agreement, or there is an agreement
made to sell or merge or consolidate ABT with another entity which changes the
ownership of ABT by more than 50%, or ABT insists you relocate, it will be
treated as though you were terminated without Cause. You may make and manage
passive personal business investments of your choice and serve on the board of
directors of other companies and serve in any capacity with any civic,
educational or charitable organization, or any trade association, without
seeking or obtaining approval by the board, so long as such activities don't
prevent
<PAGE>
you from doing your job. ABT will indemnify and hold you harmless as much as it
can for any good faith act you take in performance of your job.
ABT will pay your reasonable out-of-pocket moving expenses, including the
cost of no more than three househunting trips with your wife and kids to Orange
County, moving your belongings and selves and the brokerage commission you incur
in selling your house. ABT will also make up any tax consequences you suffer,
at the time they become due, because of the costs paid by ABT pursuant to this
paragraph. Until you move to California, which you promise to do as soon as you
reasonably can, we will work out the arrangements for your working out of your
house, and/or working for a couple of weeks in the office here, or commuting;
and your expenses will be reimbursed.
I have received all of the approvals I need to bind ABT to this letter
agreement, so, if you believe this correctly describes our agreement, please
confirm by signing below.
Very truly yours,
-----------------------------------
Peter Ellis, President and CEO
Auto-By-Tel Corporation
Confirmed:
- ------------------------
Mark W. Lorimer
-2-
<PAGE>
EXHIBIT 10.3
AUTO-BY-TEL CORPORATION
18872 MacArthur Blvd.
Irvine, California 92612-1400
December 16, 1996
Mr. John M. Markovich
5108 Middlebrook Court
Santa Rosa, CA 95404
Dear John:
This letter will confirm our agreement concerning your employment by
Auto-By-Tel Corporation ("ABT"). We agreed, subject only to the commencement of
your employment (the date of such commencement, (the "Start Date")), to the
terms set forth in this letter. You will be employed in the position of Chief
Financial Officer of ABT and will report to the President of ABT. During the
term of your employment, you will discharge your assigned duties in good faith
and to the best of your abilities. You will devote all of your working time to
ABT and your duties thereto, although you may manage passive investments and
perform such charitable functions as you desire, so long as they do not
interfere with your duties to ABT. During the first six months of your
employment, you will be paid a monthly salary of $10,000 and thereafter you will
be paid on the basis of an annual base salary of no less than $150,000 (plus any
bonuses awarded in the discretion of ABT). You will be granted stock options,
under ABT's 1996 Stock Incentive Plan, to purchase 120,000 shares of ABT common
stock at an exercise price to be established by ABT's Board of Directors, but in
no event to exceed $12.50 (the "Options"). The Options will vest as follows:
30,000 on each of the six, eighteenth, thirtieth and forty-second month
anniversary dates of the Start Date. You will be entitled to participate in all
of the employee benefit plans, programs and policies in effect while employed
which are generally available to senior executives of ABT, subject to the terms,
conditions and limitations of such plans, programs and policies.
If you quit, or are terminated due to (i) willful fraud or the
deliberate or intentional repeated failure to substantially perform your job, or
(ii) conviction for, or plea of no contest to, a felony charge, then you will
receive no severance and all non-exercisable Options will be forfeit. If you are
terminated for any other reason prior to the first anniversary date of the Start
Date, then you shall receive six (6) months severance pay at the rate you would
have received if you had not been so terminated (and presuming no raise or
bonus). Any amounts you earn from a subsequent employer while receiving
severance pay from ABT shall reduce the amount of severance pay due from ABT by
a like amount.
<PAGE>
Mr. John M. Markovich
December 16, 1996; p.2
ABT will pay your reasonable out of pocket moving expenses, which you
estimate to be $12,000. ABT will pay the brokerage commission you incur in
selling your house together with a tax gross-up on such amount to be paid when
you incur the cost. ABT will pay up to $1,500 per month, for a maximum of three
(3) months for temporary housing costs pending the sale of your house. All
expenses reimbursable pursuant to the terms of this letter shall be paid against
evidence of their incurrence.
If we have any dispute during the term of your employment, it shall be
submitted only to binding arbitration to be held in Orange County under the
rules of the American Arbitration Association, from whose arbitrated decision,
we both agree there shall be no judicial appeal.
If you believe that this correctly describes our agreement, please
confirm by signing the enclosed copy of this letter in the space provided below
and returning same to me.
Very truly yours,
/s/ PETER ELLIS
---------------------------
Peter Ellis, President
Auto-By-Tel Corporation
CONFIRMED AS OF THE
DATE FIRST ABOVE WRITTEN
/s/ JOHN M. MARKOVICH
- --------------------------
John M. Markovich
<PAGE>
EXHIBIT 10.4
LETTER OF AGREEMENT
10-20-96
Auto-By-Tel Corp. has verbally entered into an agreement for the employment of
Mike Lowell as COO of Auto-By-Tel Marketing Corp. The scope of responsibilities
cover the entire management of the operations of the ABT Marketing Company. The
COO will report directly to the President and CEO of the parent company, Auto-
By-Tel Corp. The duties include the overall management of the dealer sales
organization, information and technology development, legal and financial.
The starting agreed upon salary will be $120,000 per year. Bonus plan for 1996
is not currently considered. Bonus plan for 1997 will be acted upon by Board of
Directors and its compensation committee and no promises or guarantees are made
as of this agreement. Additionally 100,000 shares of Auto-By-Tel Corp. common
shall be made available under the employee stock option plan under the following
terms.
25,000 shares vested 6 months after start date of employment
25,000 shares one year after vested in first option
25,000 shares second year after vested in first option
25,000 shares third year after vested in first option
The vesting price will be determined by legal consul and is to be the lowest
possible responsible option price at time of this agreement. In consideration
is undervalued stock options and the affect on earnings. The amount is
anticipated to be a maximum of 80% of [the price was determined to be $5 per
share on 10/27/96] the lower range of the initial listing price of the
anticipated IPO of ABT Corp. The option dollar amount should be known to
employee prior to actual start date.
Mike Lowell will receive, in the event of a termination without cause, a six
month continuation of salary if terminated within one (1) year from start date.
The continuation of salary stops if he accepts employment with another company
during the six month period.
/s/ PETE ELLIS
- ---------------
Pete Ellis
President
Auto-By-Tel
<PAGE>
EXHIBIT 10.5
AUTO-BY-TEL CORPORATION
1996 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
--------------------
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or nonstatutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees
-------------
appointed pursuant to Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to the
---------------
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code and the applicable laws of any
foreign country or jurisdiction where Options will be or are being granted under
the Plan.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means a Committee appointed by the Board of
---------
Directors in accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
------------
(g) "Company" means Auto-By-Tel Corporation, a Delaware corporation.
-------
(h) "Consultant" means any person who is engaged by the Company or
----------
any Parent or Subsidiary to render consulting or advisory services and is
compensated for such services, and any director of the Company whether
compensated for such services or not. If and in the event the Company
registers any class of any equity security pursuant to the Exchange Act, the
term Consultant shall thereafter not include directors who are not compensated
for their services or are paid only a director's fee by the Company.
(i) "Continuous Status as an Employee or Consultant" means that the
----------------------------------------------
employment or consulting relationship with the Company, any Parent, or
Subsidiary, is not interrupted or terminated. Continuous Status as an Employee
or Consultant shall not be considered interrupted in
<PAGE>
the case of (i) any leave of absence approved by the Company or (ii) transfers
between locations of the Company or between the Company, its Parent, any
Subsidiary, or any successor. A leave of absence approved by the Company shall
include sick leave, military leave, or any other personal leave approved by an
authorized representative of the Company. For purposes of Incentive Stock
Options, no such leave may exceed 90 days, unless reemployment upon expiration
of such leave is guaranteed by statute or contract, including Company
policies. If reemployment upon expiration of a leave of absence approved by
the Company is not so guaranteed, on the 181st day of such leave any Incentive
Stock Option held by the Optionee shall cease to be treated as an Incentive
Stock Option and shall be treated for tax purposes as a Nonstatutory Stock
Option.
(j) "Employee" means any person, including Officers and directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(l) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system
for the last market trading day prior to the time of determination, as
reported in The Wall Street Journal or such other source as the Administrator
deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common
Stock on the last market trading day prior to the day of determination, or;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(m) "Incentive Stock Option" means an Option intended to qualify as
----------------------
an incentive stock option within the meaning of Section 422 of the Code.
(n) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(o) "Officer" means a person who is an officer of the Company
-------
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(p) "Option" means a stock option granted pursuant to the Plan.
------
(q) "Optioned Stock" means the Common Stock subject to an Option.
--------------
<PAGE>
(r) "Optionee" means an Employee or Consultant who receives an
--------
Option.
(s) "Parent" means a "parent corporation", whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(t) "Plan" means this 1996 Stock Option Plan.
----
(u) "Section 16(b)" means Section 16(b) of the Securities Exchange
-------------
Act of 1934, as amended.
(v) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 11 below.
(w) "Subsidiary" means a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 1,075,000 Shares. The Shares may be authorized, but unissued,
or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an option exchange program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated); provided,
--------
however, that Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if unvested Shares are repurchased by the Company at
their original purchase price, and the original purchaser of such Shares did not
receive any benefits of ownership of such Shares, such Shares shall become
available for future grant under the Plan. For purposes of the preceding
sentence, voting rights shall not be considered a benefit of Share ownership.
4. Administration of the Plan.
--------------------------
(a) Initial Plan Procedure. Prior to the date, if any, upon which
the Company becomes subject to the Exchange Act, the Plan shall be
administered by the Board or a committee appointed by the Board.
(b) Plan Procedure after the Date, if any, upon Which the Company
-------------------------------------------------------------
becomes Subject to the Exchange Act.
- -----------------------------------
(i) Administration with Respect to Directors and Officers. With
-----------------------------------------------------
respect to grants of Options to Employees who are also Officers or directors
of the Company, the Plan shall be administered by (A) the Board if the Board
may administer the Plan in compliance with the rules under Rule 16b-3
promulgated under the Exchange Act or any successor thereto ("Rule 16b-3")
relating to the disinterested administration of employee benefit plans under
which Section 16(b) exempt discretionary grants and awards of equity
securities are to be made, or (B) a Committee designated by the Board to
administer the Plan, which Committee shall be constituted to comply with
<PAGE>
the rules under Rule 16b-3 relating to the disinterested administration of
employee benefit plans under which Section 16(b) exempt discretionary grants
and awards of equity securities are to be made. Once appointed, such Committee
shall continue to serve in its designated capacity until otherwise directed by
the Board. From time to time the Board may increase the size of the Committee
and appoint additional members thereof, remove members (with or without cause)
and appoint new members in substitution therefor, fill vacancies, however
caused, and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the rules under Rule 16b-3
relating to the disinterested administration of employee benefit plans under
which Section 16(b) exempt discretionary grants and awards of equity
securities are to be made.
(ii) Multiple Administrative Bodies. If permitted by Rule
------------------------------
16b-3, the Plan may be administered by different bodies with respect to
directors, non-director Officers and Employees who are neither directors nor
Officers.
(iii) Administration With Respect to Consultants and Other
----------------------------------------------------
Employees. With respect to grants of Options to Employees or Consultants who
- ---------
are neither directors nor Officers of the Company, the Plan shall be
administered by (A) the Board or (B) a committee designated by the Board,
which committee shall be constituted in such a manner as to satisfy Applicable
Laws. Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board
may increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(c) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and, in the case of a Committee, the specific duties delegated by the
Board to such Committee, and subject to the approval of any relevant
authorities, including the approval, if required, of any stock exchange upon
which the Common Stock is listed, the Administrator shall have the authority,
in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(l) of the Plan;
(ii) to select the Consultants and Employees to whom Options
may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are
granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions of any award granted
hereunder;
<PAGE>
(vii) to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(f) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted; and
(ix) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
(d) Effect of Administrator's Decision. All decisions,
----------------------------------
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. Eligibility.
-----------
(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if otherwise
eligible, be granted additional Options.
(b) Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(c) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his or her right or the
Company's right to terminate his or her employment or consulting relationship
at any time, with or without cause.
(d) Upon the Company or a successor corporation issuing any class of
common equity securities required to be registered under Section 12 of the
Exchange Act or upon the Plan being assumed by a corporation having a class of
common equity securities required to be registered under Section 12 of the
Exchange Act, the following limitations shall apply to grants of Options to
Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than 25,000 Shares.
(ii) In connection with his or her initial employment, an
Employee may be granted Options to purchase up to an additional 100,000 Shares
which shall not count against the limit set forth in subsection (i) above.
<PAGE>
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization
as described in Section 11.
(iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 11), the cancelled Option will be counted against the
limit set forth in subsection (i) above. For this purpose, if the exercise
price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company, as described in Section 17 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 13 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
---------------------------------------
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant
of such Incentive Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in the preceding paragraph, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the grant of
such Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 110% of the Fair Market Value
per Share on the date of the grant.
<PAGE>
(B) granted to any person, the per Share exercise price
shall be no less than 85% of the Fair Market Value per Share on the date of
grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option have been owned by the Optionee for more
than six months on the date of surrender and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator
and the broker, if applicable, shall require to effect an exercise of the
Option and delivery to the Company of the sale or loan proceeds required to
pay the exercise price, or (6) any combination of the foregoing methods of
payment. In making its determination as to the type of consideration to
accept, the Administrator shall consider if acceptance of such consideration
may be reasonably expected to benefit the Company.
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with
respect to the Company and/or the Optionee, and as shall be permissible under
the terms of the Plan, but in no case at a rate of less than 20% per year over
five (5) years from the date the Option is granted.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. Full payment may, as authorized by the Administrator, consist of
any consideration and method of payment allowable under Section 8(b) of the
Plan. Until the issuance (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company) of the
stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such stock certificate promptly upon exercise of
the Option. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is issued, except
as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes
of the Plan and for sale under the Option, by the number of Shares as to which
the Option is exercised.
(b) Termination of Employment or Consulting Relationship. In the
----------------------------------------------------
event of termination of an Optionee's Continuous Status as an Employee or
Consultant with the Company (but
<PAGE>
not in the event of an Optionee's change of status from Employee to Consultant
(in which case an Employee's Incentive Stock Option shall automatically convert
to a Nonstatutory Stock Option on the date three (3) months and one day from the
date of such change of status) or from Consultant to Employee), such Optionee
may, but only within such period of time as is determined by the Administrator,
of at least thirty (30) days, with such determination in the case of an
Incentive Stock Option not exceeding three (3) months after the date of such
termination (but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement), exercise his or her Option to the
extent that Optionee was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of such termination, or if Optionee does not exercise such Option to
the extent so entitled within the time specified herein, the Option shall
terminate.
(c) Disability of Optionee. In the event of termination of an
----------------------
Optionee's consulting relationship or Continuous Status as an Employee as a
result of his or her disability, Optionee may, but only within twelve (12)
months from the date of such termination (and in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it
at the date of such termination; provided, however, that if such disability is
not a "disability" as such term is defined in Section 22(e)(3) of the Code, in
the case of an Incentive Stock Option such Incentive Stock Option shall
automatically convert to a Nonstatutory Stock Option on the day three months and
one day following such termination. To the extent that Optionee is not entitled
to exercise the Option at the date of termination, or if Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee,
-----------------
the Option may be exercised at any time within twelve (12) months following the
date of death (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or inheritance,
but only to the extent that the Optionee was entitled to exercise the Option at
the date of death. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall immediately revert to the Plan. If, after death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Rule 16b-3. Options granted to persons subject to Section 16(b)
----------
of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer to
-----------------
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
<PAGE>
10. Non-Transferability of Options. Options may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization or Merger.
----------------------------------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Administrator, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify the
Optionee at least fifteen (15) days prior to such proposed action. To the extent
it has not been previously exercised, the Option will terminate immediately
prior to the consummation of such proposed action.
(c) Merger. In the event of a merger of the Company with or into
------
another corporation, the Option may be assumed or an equivalent option may be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation. If, in such event, the Option is not assumed or
substituted, the Option shall terminate as of the date of the closing of the
merger. For the purposes of this paragraph, the Option shall be considered
assumed if, following the merger, the option confers the right to purchase, for
each Share of Optioned Stock subject to the Option immediately prior to the
merger, the consideration (whether stock, cash, or other securities or property)
received in the merger by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger was not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of the Option for
each Share of Optioned Stock subject to the Option to be solely common stock of
the successor corporation or its Parent equal in fair market value to the per
share consideration received by holders of Common Stock in the merger.
<PAGE>
12. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted, and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Administrator, which agreement must be in writing and signed by the Optionee
and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
15. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
16. Agreements. Options shall be evidenced by written agreements in such
----------
form as the Administrator shall approve from time to time.
<PAGE>
17. Shareholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under Applicable Laws and the rules of any
stock exchange upon which the Common Stock is listed.
18. Information to Optionees and Purchasers. The Company shall provide to
---------------------------------------
each Optionee, not less frequently than annually, copies of annual financial
statements. The Company shall also provide such statements to each individual
who acquires Shares pursuant to the Plan while such individual owns such Shares.
The Company shall not be required to provide such statements to key employees
whose duties in connection with the Company assure their access to equivalent
information.
<PAGE>
AUTO-BY-TEL CORPORATION
1996 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
XIX. NOTICE OF STOCK OPTION GRANT
----------------------------
FIELD(1)
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Date of Grant FIELD(2)
Vesting Commencement Date FIELD(2)
Exercise Price per Share $FIELD(3)
Total Number of Shares Granted FIELD(4)
Total Exercise Price $FIELD(5)
Type of Option: XX Incentive Stock Option
--
Nonstatutory Stock Option
--
Term/Expiration Date: FIELD(6)
Vesting Schedule:
----------------
You may exercise this Option, in whole or in part, according to the
following vesting schedule:
One-third (1/3) of the Shares subject to the Option shall vest on October
31, 1996, one-third (1/3) of the Shares subject to the Option shall vest one
year from the Vesting Commencement Date, and the remaining one-third (1/3) of
the Shares subject to the Option shall vest two years from the Vesting
Commencement Date.
Termination Period:
------------------
<PAGE>
You may exercise this Option for three months after your employment or
consulting relationship with the Company terminates, or for such longer period
upon your death or disability as provided in the Plan. If your status changes
from Employee to Consultant or Consultant to Employee, this Option Agreement
shall remain in effect. In no case may you exercise this Option after the
Term/Expiration Date as provided above.
XX. AGREEMENT
---------
1. Grant of Option. Auto-By-Tel Corporation, a Delaware corporation (the
---------------
"Company"), hereby grants to the Optionee named in the Notice of Grant (the
"Optionee"), an option (the "Option") to purchase the total number of shares of
Common Stock (the "Shares") set forth in the Notice of Grant, at the exercise
price per share set forth in the Notice of Grant (the "Exercise Price") subject
to the terms, definitions and provisions of the 1996 Stock Plan (the "Plan")
adopted by the Company, which is incorporated herein by reference. Unless
otherwise defined herein, the terms defined in the Plan shall have the same
defined meanings in this Option Agreement.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds
the $100,000 rule of Code Section 422(d), this Option shall be treated as a
Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
------------------
(a) Right to Exercise. This Option shall be exercisable during its
-----------------
term in accordance with the Vesting Schedule set out in the Notice of Grant and
with the applicable provisions of the Plan and this Option Agreement. In the
event of Optionee's death, disability or other termination of the employment or
consulting relationship, this Option shall be exercisable in accordance with the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by written
------------------
notice (in the form attached as Exhibit A) which shall state the election to
exercise the Option, the number of Shares in respect of which the Option is
being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such shares of Common Stock as may be
required by the Company pursuant to the provisions of the Plan. Such written
notice shall be signed by the Optionee and shall be delivered in person or by
certified mail to the Secretary of the Company. The written notice shall be
accompanied by payment of the Exercise Price. This Option shall be deemed to be
exercised upon receipt by the Company of such written notice accompanied by the
Exercise Price.
No Shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of law
and the requirements of any stock exchange upon which the Shares may then be
listed. Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
<PAGE>
3. Optionee's Representations. In the event the Shares purchasable
--------------------------
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, if required by the Company, concurrently with the exercise of
all or any portion of this Option, deliver to the Company his or her Investment
Representation Statement in the form attached hereto as Exhibit B, and shall
read the applicable rules of the Commissioner of Corporations attached to such
Investment Representation Statement.
4. Lock-Up Period. Optionee hereby agrees that if so requested by the
--------------
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Optionee shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day period (or such
longer period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "Market Standoff Period") following
the effective date of a registration statement of the Company filed under the
Securities Act; provided, however, that such restriction shall apply only to
the first registration statement of the Company to become effective under the
Securities Act that includes securities to be sold on behalf of the Company to
the public in an underwritten public offering under the Securities Act. The
Company may impose stop-transfer instructions with respect to securities subject
to the foregoing restrictions until the end of such Market Standoff Period.
5. Method of Payment. Payment of the Exercise Price shall be by any of
-----------------
the following, or a combination thereof, at the election of the Optionee:
(a) cash;
(b) check;
(c) surrender of other shares of Common Stock of the Company which
(A) in the case of Shares acquired pursuant to the exercise of a Company option,
have been owned by the Optionee for more than six (6) months on the date of
surrender, and (B) have a Fair Market Value on the date of surrender equal to
the Exercise Price of the Shares as to which the Option is being exercised; or
(d) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the Exercise Price.
6. Restrictions on Exercise. This Option may not be exercised until such
------------------------
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board.
<PAGE>
7. Termination of Relationship. In the event an Optionee's Continuous
---------------------------
Status as an Employee or Consultant terminates, Optionee may, to the extent
otherwise so entitled at the date of such termination (the "Termination Date"),
exercise this Option during the Termination Period set out in the Notice of
Grant. To the extent that Optionee was not entitled to exercise this Option at
the date of such termination, or if Optionee does not exercise this Option
within the time specified herein, the Option shall terminate.
8. Disability of Optionee. Notwithstanding the provisions of Section 6
----------------------
above, in the event of termination of an Optionee's consulting relationship or
Continuous Status as an Employee as a result of his or her disability, Optionee
may, but only within twelve (12) months from the date of such termination (and
in no event later than the expiration date of the term of such Option as set
forth in the Option Agreement), exercise the Option to the extent otherwise
entitled to exercise it at the date of such termination; provided, however, that
if such disability is not a "disability" as such term is defined in Section
22(e)(3) of the Code, in the case of an Incentive Stock Option such Incentive
Stock Option shall cease to be treated as an Incentive Stock Option and shall be
treated for tax purposes as a Nonstatutory Stock Option on the day three months
and one day following such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
9. Death of Optionee. In the event of termination of Optionee's
-----------------
Continuous Status as an Employee or Consultant as a result of the death of
Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the date of expiration
of the term of this Option as set forth in Section 10 below), by Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent the Optionee could exercise the Option at
the date of death.
10. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
11. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. The limitations set out
in Section 7 of the Plan regarding Options designated as Incentive Stock Options
and Options granted to more than ten percent (10%) shareholders shall apply to
this Option.
12. Tax Consequences. Set forth below is a brief summary as of the date
----------------
of this Option of some of the federal and state tax consequences of exercise of
this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE
SHARES.
<PAGE>
(a) Exercise of ISO. If this Option qualifies as an ISO, there will
---------------
be no regular federal income tax liability or state income tax liability upon
the exercise of the Option, although the excess, if any, of the Fair Market
Value of the Shares on the date of exercise over the Exercise Price will be
treated as an adjustment to the alternative minimum tax for federal tax purposes
and may subject the Optionee to the alternative minimum tax in the year of
exercise.
(b) Exercise of ISO Following Disability. If the Optionee's
------------------------------------
Continuous Status as an Employee or Consultant terminates as a result of
disability that is not total and permanent disability as defined in Section
22(e)(3) of the Code, to the extent permitted on the date of termination, the
Optionee must exercise an ISO within three months of such termination for the
ISO to be qualified as an ISO.
(c) Exercise of Nonstatutory Stock Option. There may be a regular
-------------------------------------
federal income tax liability and state income tax liability upon the exercise of
a Nonstatutory Stock Option. The Optionee will be treated as having received
compensation income (taxable at ordinary income tax rates) equal to the excess,
if any, of the Fair Market Value of the Shares on the date of exercise over the
Exercise Price. If Optionee is an Employee or a former Employee, the Company
will be required to withhold from Optionee's compensation or collect from
Optionee and pay to the applicable taxing authorities an amount in cash equal to
a percentage of this compensation income at the time of exercise, and may refuse
to honor the exercise and refuse to deliver Shares if such withholding amounts
are not delivered at the time of exercise.
(d) Disposition of Shares. In the case of an NSO, if Shares are held
---------------------
for at least one year, any gain realized on disposition of the Shares will be
treated as long-term capital gain for federal and state income tax purposes. In
the case of an ISO, if Shares transferred pursuant to the Option are held for at
least one year after exercise and are disposed of at least two years after the
Date of Grant, any gain realized on disposition of the Shares will also be
treated as long-term capital gain for federal and state income tax purposes. If
Shares purchased under an ISO are disposed of within such one-year period or
within two years after the Date of Grant, any gain realized on such disposition
will be treated as compensation income (taxable at ordinary income rates) to the
extent of the difference between the Exercise Price and the lesser of (1) the
Fair Market Value of the Shares on the date of exercise, or (2) the sale price
of the Shares. Any additional gain will be taxed as capital gain, short-term or
long-term depending on the period that the ISO Shares were held.
(e) Notice of Disqualifying Disposition of ISO Shares. If the Option
-------------------------------------------------
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
13. Entire Agreement; Governing Law. The Plan is incorporated herein by
-------------------------------
reference. The Plan and this Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely
<PAGE>
to the Optionee's interest except by means of a writing signed by the Company
and Optionee. This agreement is governed by Delaware law except for that body
of law pertaining to conflict of laws.
AUTO-BY-TEL CORPORATION
a Delaware corporation
By:
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL
OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
<PAGE>
Optionee acknowledges receipt of a copy of the Plan and represents that he
is familiar with the terms and provisions thereof, and hereby accepts this
Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Optionee further agrees to notify the Company upon any change in the residence
address indicated below.
Dated:
Optionee
Residence Address:
<PAGE>
EXHIBIT A
---------
1996 STOCK PLAN
EXERCISE NOTICE
Auto-By-Tel Corporation
18872 MacArthur Boulevard, Suite 200
Irvine, CA 92612-1400
Attention: Secretary
1. Exercise of Option. Effective as of today, 19
------------------ ---------------- --,
the undersigned ("Optionee") hereby elects to exercise Optionee's option to
purchase shares of the Common Stock (the "Shares") of
---------------
Auto-By-Tel Corporation (the "Company") under and pursuant to the 1996 Stock
Option Plan (the "Plan") and the [_] Incentive [_] Nonstatutory Stock Option
Agreement dated , 19 (the "Option Agreement").
------------------------- ---
2. Representations of Optionee. Optionee acknowledges that Optionee has
---------------------------
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
3. Rights as Shareholder. Until the stock certificate evidencing such
---------------------
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 12 of the Plan.
Optionee shall enjoy rights as a shareholder until such time as
Optionee disposes of the Shares or the Company and/or its assignee(s) exercises
the Right of First Refusal hereunder. Upon such exercise, Optionee shall have
no further rights as a holder of the Shares so purchased except the right to
receive payment for the Shares so purchased in accordance with the provisions of
this Agreement, and Optionee shall forthwith cause the certificate(s) evidencing
the Shares so purchased to be surrendered to the Company for transfer or
cancellation.
4. Company's Right of First Refusal. Before any Shares held by Optionee
--------------------------------
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this Section (the
"Right of First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall
---------------------------
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or
<PAGE>
otherwise transfer such Shares; (ii) the name of each proposed purchaser or
other transferee ("Proposed Transferee"); (iii) the number of Shares to be
transferred to each Proposed Transferee; and (iv) the bona fide cash price or
other consideration for which the Holder proposes to transfer the Shares (the
"Offered Price"), and the Holder shall offer the Shares at the Offered Price to
the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty
----------------------------------
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.
(c) Purchase Price. The purchase price ("Purchase Price") for the
--------------
Shares purchased by the Company or its assignee(s) under this Section shall be
the Offered Price. If the Offered Price includes consideration other than cash,
the cash equivalent value of the non-cash consideration shall be determined by
the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
-------
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in the
--------------------------
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section, then the Holder may
sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 120 days after the date of the Notice and provided further
that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, a new Notice shall be
given to the Company, and the Company and/or its assignees shall again be
offered the Right of First Refusal before any Shares held by the Holder may be
sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary
--------------------------------------
contained in this Section notwithstanding, the transfer of any or all of the
Shares during the Optionee's lifetime or on the Optionee's death by will or
intestacy to the Optionee's immediate family or a trust for the benefit of the
Optionee's immediate family shall be exempt from the provisions of this Section.
"Immediate Family" as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.
-2-
<PAGE>
(g) Termination of Right of First Refusal. The Right of First
-------------------------------------
Refusal shall terminate as to any Shares 90 days after the first sale of Common
Stock of the Company to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended.
5. Tax Consultation. Optionee understands that Optionee may suffer
----------------
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
6. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. Optionee understands and agrees that the Company shall
-------
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by the Company or by state or
federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY COUNSEL
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE
ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN
THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH
MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER
RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF
THESE SHARES.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS
OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S
RULES.
-3-
<PAGE>
Optionee understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached to Exhibit B, the Investment Representation Statement.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
7. Successors and Assigns. The Company may assign any of its rights
----------------------
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.
8. Interpretation. Any dispute regarding the interpretation of this
--------------
Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the Plan,
which shall review such dispute at its next regular meeting. The resolution of
such a dispute by the Board or committee shall be final and binding on the
Company and on Optionee.
9. Governing Law; Severability. This Agreement shall be governed by and
---------------------------
construed in accordance with the laws of the State of Delaware excluding that
body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
10. Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
11. Further Instruments. The parties agree to execute such further
-------------------
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
12. Delivery of Payment. Optionee herewith delivers to the Company the
-------------------
full Exercise Price for the Shares.
-4-
<PAGE>
13. Entire Agreement. The Plan and Notice of Grant/Option Agreement are
----------------
incorporated herein by reference. This Agreement, the Plan, the Option
Agreement and the Investment Representation Statement constitute the entire
agreement of the parties with respect to the subject matter hereof and supersede
in their entirety all prior undertakings and agreements of the Company and
Optionee with respect to the subject matter hereof, and may not be modified
adversely to the Optionee's interest except by means of a writing signed by the
Company and Optionee
Submitted by: Accepted by:
OPTIONEE: FIELD(1) Auto-By-Tel Corporation
By:
- ----------------------------------- ----------------------------------
(Signature)
Title:
-------------------------------
Address: Address:
- ------- -------
- ----------------------------------- 18872 MacArthur Boulevard, Suite 200
Irvine, CA 92612-1400
- -----------------------------------
-5-
<PAGE>
EXHIBIT B
---------
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE : FIELD(1)
COMPANY : AUTO-BY-TEL CORPORATION
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Securities. Optionee
is acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the Securities. Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company, a legend prohibiting their
transfer without the consent of the Commissioner of Corporations of the State of
California and any other legend required under applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule
144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to
<PAGE>
the satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of the grant of the Option to the Optionee,
the exercise will be exempt from registration under the Securities Act. In the
event the Company becomes subject to the reporting requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or
such longer period as any market stand-off agreement may require) the Securities
exempt under Rule 701 may be resold, subject to the satisfaction of certain of
the conditions specified by Rule 144, including: (1) the resale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of
certain public information about the Company, (3) the amount of Securities being
sold during any three month period not exceeding the limitations specified in
Rule 144(e), and (4) the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time
of grant of the Option, then the Securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the resale
to occur not less than two years after the later of the date the Securities were
sold by the Company or the date the Securities were sold by an affiliate of the
Company, within the meaning of Rule 144; and, in the case of acquisition of the
Securities by an affiliate, or by a non-affiliate who subsequently holds the
Securities less than three years, the satisfaction of the conditions set forth
in sections (1), (2), (3) and (4) of the paragraph immediately above.
(e) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that
any such other registration exemption will be available in such event.
(f) Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities without the consent of the Commissioner of Corporations of
California. Optionee has read the applicable Commissioner's Rules with respect
to such restriction, a copy of which is attached.
Signature of Optionee:
------------------------------------
Date: , 19
----------------------- --
-2-
<PAGE>
ATTACHMENT 1
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
----------------------------------------------------
Title 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: Restriction on Transfer. (a) The issuer of any security
---------- -----------------------
upon which a restriction on transfer has been imposed pursuant to Sections
260.102.6, 260.141.10 or 260.534 shall cause a copy of this section to be
delivered to each issuee or transferee of such security at the time the
certificate evidencing the security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate
a sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102
of the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the
transferor's ancestors, descendants, or spouse; or to a transferee by a
trustee or custodian for the account of the transferee or the
transferee's ancestors, descendants or spouse;
(5) to holders of securities of the same class of the same
issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either
acting as such or as a finder) to a resident of a foreign state,
territory or country who is neither domiciled in this state to the
edge of the broker-dealer, nor actually present in this state if the
sale of such securities is not in violation of any securities law of the
foreign state, territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate
or selling group;
(9) if the interest sold or transferred is a pledge or other lien
given by the purchaser to the seller upon a sale of the security for
which the Commissioner's written consent is obtained or under this rule
not required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113
or 25121 of the Code, of the securities to be transferred, provided that
no order under Section 25140 or subdivision (a) of Section 25143 is in
effect with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or
25113 of the Code, provided that no order under Section 25140 or
subdivision (a) of Section 25143 is in effect with respect to such
qualification;
(13) between residents of foreign states, territories or countries
who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property
Law or to the administrator of the unclaimed property law of another
state; or
(15) by the State Controller pursuant to the Unclaimed Property
Law or by the administrator of the unclaimed property law of another
state if, in either such case, such person (i) discloses to potential
purchasers at the sale that transfer of the securities is restricted
under this rule, (ii) delivers to each purchaser a copy of this rule,
and (iii) advises the Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does
not involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of
Section 25110 of the Code but exempt from that qualification require
ment by subdivision (f) of Section 25102; provided that any such
transfer is on the condition that any certificate evidencing the
security issued to such transferee shall contain the legend required by
this section.
(c) The certificates representing all such securities subject to such
a restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY,
OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE
COMMISSIONER'S RULES."
<PAGE>
EXHIBIT 10.6
AUTO-BY-TEL CORPORATION
1996 STOCK INCENTIVE PLAN
1. Purposes of the Plan. The purposes of this Stock Incentive Plan are:
--------------------
. to attract and retain the best available personnel for positions
of substantial responsibility;
. to provide additional incentive to Employees, Directors and
Consultants; and
. to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees as
-------------
shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
---------------
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means a committee of Directors appointed by the
---------
Board in accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
------------
(g) "Company" means Auto-By-Tel Corporation.
-------
(h) "Consultant" means any person, including an advisor, engaged by
----------
the Company or a Parent or Subsidiary to render services and who is compensated
for such services.
(i) "Director" means a member of the Board.
--------
<PAGE>
(j) "Disability" means total and permanent disability as defined in
----------
Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. Neither
service as a Director nor payment of a director's fee by the Company shall be
sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(m) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) the last reported sale price of the Common Stock of the
Company on the Nasdaq National Market or, if no such reported sale takes place
on any such day, the average of the closing bid and asked prices, or
(ii) if such Common Stock shall then be listed on a national
securities exchange (other than the Nasdaq National Market), the last reported
sale price or, if no such reported sale takes place on any such day, the average
of the closing bid and asked prices on the principal national securities
exchange on which the Common Stock is listed or admitted to trading, or
(iii) if such Common Stock shall not be quoted on such
National Market System nor listed or admitted to trading on a national
securities exchange, then the average of the closing bid and asked prices, as
reported by The Wall Street Journal for the over-the-counter market, or
(iv) if none of the foregoing is applicable, then the Fair
Market Value of a share of Common Stock shall be determined by the Board in its
discretion.
(n) "Incentive Stock Option" means an Option intended to qualify as
----------------------
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "Inside Director" means a Director who is an Employee.
---------------
(p) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(q) "Notice of Grant" means a written or electronic notice
---------------
evidencing certain terms and conditions of an individual Option or Stock
Purchase Right grant. The Notice of Grant is part of the Option Agreement.
(r) "Officer" means a person who is an officer of the Company
-------
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
-2-
<PAGE>
(s) "Option" means a stock option granted pursuant to the Plan.
------
(t) "Option Agreement" means an agreement between the Company and
----------------
an Optionee evidencing the terms and conditions of an individual Option grant.
The Option Agreement is subject to the terms and conditions of the Plan.
(u) "Option Exchange Program" means a program whereby outstanding
-----------------------
options are surrendered in exchange for options with a lower exercise price.
(v) "Optioned Stock" means the Common Stock subject to an Option or
--------------
Stock Purchase Right.
(w) "Optionee" means the holder of an outstanding Option or Stock
--------
Purchase Right granted under the Plan.
(x) "Outside Director" means a Director who is not an Employee.
----------------
(y) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(z) "Plan" means this 1996 Stock Incentive Plan.
----
(aa) "Restricted Stock" means shares of Common Stock acquired
----------------
pursuant to a grant of Stock Purchase Rights under Section 11 below.
(bb) "Restricted Stock Purchase Agreement" means a written agreement
-----------------------------------
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
(cc) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
----------
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(dd) "Service Provider" means an Employee, Director or Consultant.
An individual shall not cease to be a Service Provider by virtue of (i) any
leave of absence approved by the Company or (ii) transfers between locations of
the Company or between the Company, its Parent, any Subsidiary, or any
successor. For purposes of Incentive Stock Options, no such leave may exceed
ninety days, unless reemployment upon expiration of such leave is guaranteed by
statute or contract. If reemployment upon expiration of a leave of absence
approved by the Company is not so guaranteed, on the 181st day of such leave any
Incentive Stock Option held by the Optionee shall cease to be treated as an
Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory
Stock Option.
-3-
<PAGE>
(ee) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 14 of the Plan.
(ff) "Stock Purchase Right" means the right to purchase Common Stock
--------------------
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(gg) "Subsidiary" means a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 14
-------------------------
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is Shares, increased annually on the first day of
---------
each of the Company's fiscal years during the term of the Plan in an amount
equal to _% of the Company's common stock issued and outstanding at the close of
business on the last day of the immediately preceding fiscal year (the "Annual
Replenishment"), with only the initial shares and subsequent annual
---------
increases in an amount equal to the lesser of (i) shares, or (ii) the
---------
number of shares subject to the Annual Replenishment to be available for
issuance as "incentive stock options" qualified under Section 422 of the Code.
All of the shares issuable under the Plan may be authorized, but unissued, or
reacquired Common Stock. The Shares may be authorized, but unissued, or
reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
--------
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. Administration of the Plan.
--------------------------
(a) Procedure.
---------
(i) Multiple Administrative Bodies. The Plan may be
------------------------------
administered by different Committees with respect to different groups of Service
Providers.
(ii) Section 162(m). To the extent that the Administrator
--------------
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
-4-
<PAGE>
(iii) Rule 16b-3. To the extent desirable to qualify
----------
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.
(iv) Other Administration. Other than as provided above, the
--------------------
Plan shall be administered by (A) the Board or (B) a Committee, which committee
shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and
Stock Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Option or Stock Purchase Right granted
hereunder. Such terms and conditions include, but are not limited to, the
exercise price, the time or times when Options or Stock Purchase Rights may be
exercised (which may be based on performance criteria), any vesting acceleration
or waiver of forfeiture restrictions, and any restriction or limitation
regarding any Option or Stock Purchase Right or the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;
(vi) to reduce the exercise price of any Option or Stock
Purchase Right to the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
-5-
<PAGE>
(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 16(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined. All elections by an
Optionee to have Shares withheld for this purpose shall be made in such form and
under such conditions as the Administrator may deem necessary or advisable and
shall be subject to the consent or disapproval of the Administrator;
(xii) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
----------------------------------
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may
-----------
be granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
6. Limitations.
-----------
(a) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
-6-
<PAGE>
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year
of the Company, Options to purchase more than 500,000 Shares.
(ii) In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional 500,000 Shares
which shall not count against the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 14.
(iv) If an Option is canceled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 14), the canceled Option will be counted against the limits
set forth in subsections (i) and (ii) above. For this purpose, if the exercise
price of an Option is reduced, the transaction will be treated as a cancellation
of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 20 of the Plan, the Plan shall
------------
become effective upon the date on which the Securities and Exchange Commission
declares the Company's Registration Statement effective. It shall continue in
effect for a term of ten (10) years unless terminated earlier under Section 16
of the Plan.
8. Term of Option. The term of each Option shall be stated in the Option
--------------
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Incentive
Stock Option shall be five (5) years from the date of grant or such shorter term
as may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
---------------------------------------
(a) Exercise Price. The per share exercise price for the Shares to
--------------
be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
-7-
<PAGE>
(B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per
Share exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted
with a per Share exercise price of less than 100% of the Fair Market Value per
Share on the date of grant pursuant to a merger or other corporate transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is
---------------------------------
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised.
(c) Form of Consideration. The Administrator shall determine the
---------------------
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired
upon exercise of an option, have been owned by the Optionee for more than six
months on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(v) consideration received by the Company under a formal
cashless exercise program adopted by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to
the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vii) any combination of the foregoing methods of payment; or
-8-
<PAGE>
(viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 14 of the Plan.
Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Relationship as a Service Provider. If an
-------------------------------------------------
Optionee ceases to be a Service Provider, other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option was
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
----------------------
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option at any time within
-9-
<PAGE>
twelve (12) months from the date of termination, but only to the extent that the
Option was vested on the date of termination (and in no event later than the
expiration of the term of the Option as set forth in the Option Agreement). If,
on the date of termination, the Optionee is not vested as to his or her entire
Option, the Shares covered by the unvested portion of the Option shall revert to
the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service
-----------------
Provider, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Notice of Grant), by the Optionee's
estate or by a person who acquires the right to exercise the Option by bequest
or inheritance, but only to the extent that the Optionee was vested in the
Option at the date of death plus as to one year's additional vesting (up to a
maximum of 100% vesting in the Shares subject to the Option). If, at the time of
death, the Optionee is not vested in his or her entire Option, the Shares
covered by the unvested portion of the Option shall immediately revert to the
Plan. The Option may be exercised by the executor or administrator of the
Optionee's estate or, if none, by the person(s) entitled to exercise the Option
under the Optionee's will or the laws of descent or distribution. If the Option
is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to
-----------------
buy out for a payment in cash or Shares, an Option previously granted based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
11. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. Stock Purchase Rights may be issued either
------------------
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including the number of
Shares that the offeree shall be entitled to purchase, the price to be paid, and
the time within which the offeree must accept such offer. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines
-----------------
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.
-10-
<PAGE>
(c) Other Provisions. The Restricted Stock Purchase Agreement shall
----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Stockholder. Once the Stock Purchase Right is
-----------------------
exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 14
of the Plan.
12. Automatic Option Grants to Outside Directors.
--------------------------------------------
(a) First Option. Each Outside Director who becomes an Outside
------------
Director after the effective date of this Plan shall be automatically granted an
Option to purchase [ ] Shares (the "First Option") on the date on which
----------
such person first becomes an Outside Director, whether through election by the
stockholders of the Company or appointment by the Board to fill a vacancy;
provided, however, that an Inside Director who ceases to be an Inside Director
but who remains a Director shall not receive a First Option.
(b) Subsequent Option. Each Outside Director shall be automatically
-----------------
granted an Option to purchase [_________] Shares (a "Subsequent Option") on
September 1 of each year; provided that he or she is then an Outside Director
--------
and, provided further, that as of such date, he or she shall have served on the
-------- -------
Board for at least the preceding six (6) months.
(c) Terms of Options. The terms of First Options and Subsequent
----------------
Options granted hereunder shall be as follows:
(A) the term of the Option shall be ten (10) years.
(B) the exercise price per Share shall be 100% of the
Fair Market Value per Share on the date of grant. In the event that the date of
grant is not a trading day, the exercise price per Share shall be the Fair
Market Value on the next trading day immediately following the date of grant.
(C) [25%] of the Shares subject to the Option shall vest
twelve months after the date of grant, and [1/48] of the Shares subject to the
Option shall vest each month thereafter so that 100% of the Shares subject to
the Option shall be vested [four (4)] years from the grant date, subject to the
Optionee remaining a Service Provider as of such vesting dates.]
13. Non-Transferability of Options and Stock Purchase Rights. Unless
--------------------------------------------------------
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the
-11-
<PAGE>
Optionee. If the Administrator makes an Option or Stock Purchase Right
transferable, such Option or Stock Purchase Right shall contain such additional
terms and conditions as the Administrator deems appropriate.
14. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
------------------------------------------------------------------
Asset Sale.
----------
(a) Changes in Capitalization. Subject to any required action by
-------------------------
the stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable.
-12-
<PAGE>
If an Option or Stock Purchase Right becomes fully vested and exercisable in
lieu of assumption or substitution in the event of a merger or sale of assets,
the Administrator shall notify the Optionee in writing or electronically that
the Option or Stock Purchase Right shall be fully vested and exercisable for a
period of fifteen (15) days from the date of such notice, and the Option or
Stock Purchase Right shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option or Stock Purchase Right shall be
considered assumed if, following the merger or sale of assets, the option or
right confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option or Stock Purchase Right, for each Share
of Optioned Stock subject to the Option or Stock Purchase Right, to be solely
common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the
merger or sale of assets.
15. Date of Grant. The date of grant of an Option or Stock Purchase
-------------
Right shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.
16. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or terminate the Plan.
(b) Stockholder Approval. The Company shall obtain stockholder
--------------------
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
17. Conditions Upon Issuance of Shares.
----------------------------------
(a) Legal Compliance. Shares shall not be issued pursuant to the
----------------
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the
-13-
<PAGE>
issuance and delivery of such Shares shall comply with Applicable Laws and shall
be further subject to the approval of counsel for the Company with respect to
such compliance.
(b) Investment Representations. As a condition to the exercise of
--------------------------
an Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
18. Inability to Obtain Authority. The inability of the Company to obtain
-----------------------------
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
19. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
20. Stockholder Approval. The Plan shall be subject to approval by the
--------------------
stockholders of the Company within twelve (12) months after the date the Plan is
adopted. Such stockholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
-14-
<PAGE>
1996 STOCK INCENTIVE PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Date of Grant _________________________
Vesting Commencement Date _________________________
Exercise Price per Share $________________________
Total Number of Shares Granted _________________________
Total Exercise Price $________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: _________________________
Vesting Schedule:
----------------
This Option may be exercised, in whole or in part, in accordance with the
following schedule:
One-third of the Shares subject to the Option shall vest twelve months
after the Vesting Commencement Date, and 1/36 of the Shares subject to the
Option shall vest each month thereafter, subject to the Optionee continuing to
be a Service Provider on such dates.
<PAGE>
Termination Period:
------------------
This Option may be exercised for 3 months after Optionee ceases to be a
Service Provider. Upon the death or Disability of the Optionee, this Option may
be exercised for such longer period as provided in the Plan. In no event shall
this Option be exercised later than the Term/Expiration Date as provided above.
II. AGREEMENT
---------
1. Grant of Option. The Plan Administrator of the Company hereby grants
---------------
to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee") an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price"), subject to the terms and
conditions of the Plan, which is incorporated herein by reference. Subject to
Section 15(c) of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Option Agreement,
the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
------------------
(a) Right to Exercise. This Option is exercisable during its term in
-----------------
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an
------------------
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be completed
by the Optionee and delivered to Chief Financial Officer of the Company. The
Exercise Notice shall be accompanied by payment of the aggregate Exercise Price
as to all Exercised Shares. This Option shall be deemed to be exercised upon
receipt by the Company of such fully executed Exercise Notice accompanied by
such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.
-2-
<PAGE>
3. Method of Payment. Payment of the aggregate Exercise Price shall be
-----------------
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash; or
(b) check; or
(c) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan; or
(d) surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares; or
(e) with the Administrator's consent, delivery of Optionee's
promissory note (the "Note") in the form attached hereto as Exhibit C, in the
amount of the aggregate Exercise Price of the Exercised Shares together with the
execution and delivery by the Optionee of the Security Agreement attached hereto
as Exhibit B. The Note shall bear interest at the "applicable federal rate"
prescribed under the Code and its regulations at time of purchase, and shall be
secured by a pledge of the Shares purchased by the Note pursuant to the Security
Agreement.
4. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The
terms of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
5. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.
6. Tax Consequences. Some of the federal tax consequences relating to
----------------
this Option, as of the date of this Option, are set forth below. THIS SUMMARY
IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO
CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION
OR DISPOSING OF THE SHARES.
(a) Exercising the Option.
---------------------
(i) Nonstatutory Stock Option. The Optionee may incur regular
-------------------------
federal income tax liability upon exercise of a NSO. The Optionee will be
treated as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price. If
-3-
<PAGE>
the Optionee is an Employee or a former Employee, the Company will be required
to withhold from his or her compensation or collect from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.
(ii) Incentive Stock Option. If this Option qualifies as an ISO,
----------------------
the Optionee will have no regular federal income tax liability upon its
exercise, although the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price will be
treated as an adjustment to alternative minimum taxable income for federal tax
purposes and may subject the Optionee to alternative minimum tax in the year of
exercise. In the event that the Optionee ceases to be an Employee but remains a
Service Provider, any Incentive Stock Option of the Optionee that remains
unexercised shall cease to qualify as an Incentive Stock Option and will be
treated for tax purposes as a Nonstatutory Stock Option on the date three (3)
months and one (1) day following such change of status.
(b) Disposition of Shares.
---------------------
(i) NSO. If the Optionee holds NSO Shares for at least one year,
---
any gain realized on disposition of the Shares will be treated as long-term
capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at least one year
---
after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the lesser of (A) the difference
between the Fair Market Value of the Shares acquired on the date of exercise and
the aggregate Exercise Price, or (B) the difference between the sale price of
such Shares and the aggregate Exercise Price. Any additional gain will be taxed
as capital gain, short-term or long-term depending on the period that the ISO
Shares were held.
(c) Notice of Disqualifying Disposition of ISO Shares. If the
-------------------------------------------------
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
an ISO on or before the later of (i) two years after the grant date, or (ii) one
year after the exercise date, the Optionee shall immediately notify the Company
in writing of such disposition. The Optionee agrees that he or she may be
subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.
7. Entire Agreement; Governing Law. The Plan is incorporated herein by
-------------------------------
reference. The Plan and this Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely
-4-
<PAGE>
to the Optionee's interest except by means of a writing signed by the Company
and Optionee. This agreement is governed by the internal substantive laws, but
not the choice of law rules, of California.
8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES
---------------------------------
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
CAUSE.
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: AUTO-BY-TEL CORPORATION
_______________________________ ______________________________________
Signature By
_______________________________ ______________________________________
Print Name Title
_______________________________
Residence Address
_______________________________
CONSENT OF SPOUSE
-----------------
-5-
<PAGE>
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Option Agreement. In consideration of the
Company's granting his or her spouse the right to purchase Shares as set forth
in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
_______________________________________
Spouse of Optionee
-6-
<PAGE>
EXHIBIT A
---------
1996 STOCK INCENTIVE PLAN
EXERCISE NOTICE
AUTO-BY-TEL CORPORATION
18872 MacArthur Boulevard, Suite 200
Irvine, CA 92612
Attention: Chief Financial Officer
1. Exercise of Option. Effective as of today, ________________, 199__,
------------------
the undersigned ("Purchaser") hereby elects to purchase ______________ shares
(the "Shares") of the Common Stock of Auto-By-Tel Corporation (the "Company")
under and pursuant to the 1996 Stock Incentive Plan (the "Plan") and the Stock
Option Agreement dated _____________, 19___ (the "Option Agreement"). The
purchase price for the Shares shall be $_____________, as required by the Option
Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
-------------------
full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser
----------------------------
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance (as evidenced by the
---------------------
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 14 of the
Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
----------------
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
-------------------------------
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
-7-
<PAGE>
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.
Submitted by: Accepted by:
PURCHASER: AUTO-BY-TEL CORPORATION
_____________________________ ___________________________________
Signature By
_____________________________ ___________________________________
Print Name Chief Financial Officer
Address: Address:
- ------- -------
_____________________________ AUTO-BY-TEL CORPORATION
_____________________________ 18872 MacArthur Boulevard, Suite 200
Irvine, CA 92612
_____________________________
Date Received
-8-
<PAGE>
EXHIBIT B
---------
SECURITY AGREEMENT
This Security Agreement is made as of __________, 19___ between Auto-By-Tel
Corporation, a Delaware corporation ("Pledgee"), and ______________ ("Pledgor").
Recitals
--------
Pursuant to Pledgor's election to purchase Shares under the Option
Agreement dated ________ (the "Option"), between Pledgor and Pledgee under
Pledgee's 1996 Stock Incentive Plan, and Pledgor's election under the terms of
the Option to pay for such shares with his promissory note (the "Note"), Pledgor
has purchased _________ shares of Pledgee's Common Stock (the "Shares") at a
price of $________ per share, for a total purchase price of $__________. The
Note and the obligations thereunder are as set forth in Exhibit C to the Option.
NOW, THEREFORE, it is agreed as follows:
1. Creation and Description of Security Interest. In consideration of
---------------------------------------------
the transfer of the Shares to Pledgor under the Option Agreement, Pledgor,
pursuant to the California Commercial Code, hereby pledges all of such Shares
(herein sometimes referred to as the "Collateral") represented by certificate
number ______, duly endorsed in blank or with executed stock powers, and
herewith delivers said certificate to the Secretary of Pledgee ("Pledgeholder"),
who shall hold said certificate subject to the terms and conditions of this
Security Agreement.
The pledged stock (together with an executed blank stock assignment for use
in transferring all or a portion of the Shares to Pledgee if, as and when
required pursuant to this Security Agreement) shall be held by the Pledgeholder
as security for the repayment of the Note, and any extensions or renewals
thereof, to be executed by Pledgor pursuant to the terms of the Option, and the
Pledgeholder shall not encumber or dispose of such Shares except in accordance
with the provisions of this Security Agreement.
2. Pledgor's Representations and Covenants. To induce Pledgee to enter
---------------------------------------
into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
a. Payment of Indebtedness. Pledgor will pay the principal sum of the
-----------------------
Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.
b. Encumbrances. The Shares are free of all other encumbrances,
------------
defenses and liens, and Pledgor will not further encumber the Shares without the
prior written consent of Pledgee.
<PAGE>
c. Margin Regulations. In the event that Pledgee's Common Stock is
------------------
now or later becomes margin-listed by the Federal Reserve Board and Pledgee is
classified as a "lender" within the meaning of the regulations under Part 207 of
Title 12 of the Code of Federal Regulations ("Regulation G"), Pledgor agrees to
cooperate with Pledgee in making any amendments to the Note or providing any
additional collateral as may be necessary to comply with such regulations.
3. Voting Rights. During the term of this pledge and so long as all
-------------
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
4. Stock Adjustments. In the event that during the term of the pledge
-----------------
any stock dividend, reclassification, readjustment or other changes are declared
or made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder shall
cooperate and execute such documents as are reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
5. Options and Rights. In the event that, during the term of this
------------------
pledge, subscription Options or other rights or options shall be issued in
connection with the pledged Shares, such rights, Options and options shall be
the property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
6. Default. Pledgor shall be deemed to be in default of the Note and of
-------
this Security Agreement in the event:
a. Payment of principal or interest on the Note shall be delinquent
for a period of 10 days or more; or
b. Pledgor fails to perform any of the covenants set forth in the
Option or contained in this Security Agreement for a period of 10 days after
written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall have
the right to accelerate payment of the Note upon notice to Pledgor, and Pledgee
shall thereafter be entitled to pursue its remedies under the California
Commercial Code.
7. Release of Collateral. Subject to any applicable contrary rules under
---------------------
Regulation G, there shall be released from this pledge a portion of the pledged
Shares held by Pledgeholder here
-2-
<PAGE>
under upon payments of the principal of the Note. The number of the pledged
Shares which shall be released shall be that number of full Shares which bears
the same proportion to the initial number of Shares pledged hereunder as the
payment of principal bears to the initial full principal amount of the Note.
8. Withdrawal or Substitution of Collateral. Pledgor shall not sell,
----------------------------------------
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
9. Term. The within pledge of Shares shall continue until the payment of
----
all indebtedness secured hereby, at which time the remaining pledged stock shall
be promptly delivered to Pledgor, subject to the provisions for prior release of
a portion of the Collateral as provided in paragraph 7 above.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
----------
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
11. Pledgeholder Liability. In the absence of willful or gross
----------------------
negligence, Pledgeholder shall not be liable to any party for any of his acts,
or omissions to act, as Pledgeholder.
12. Invalidity of Particular Provisions. Pledgor and Pledgee agree that
-----------------------------------
the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
13. Successors or Assigns. Pledgor and Pledgee agree that all of the
---------------------
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.
14. Governing Law. This Security Agreement shall be interpreted and
-------------
governed under the internal substantive laws, but not the choice of law rules,
of California.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"PLEDGOR" _________________________________
Signature
_________________________________
Print Name
Address: _________________________________
_________________________________
"PLEDGEE" AUTO-BY-TEL CORPORATION,
a Delaware corporation
________________________________
Signature
________________________________
Print Name
________________________________
Title
"PLEDGEHOLDER" ________________________________
Secretary of
Auto-By-Tel Corporation
-4-
<PAGE>
EXHIBIT C
---------
NOTE
$_______________ Irvine, CA
______________, 19___
FOR VALUE RECEIVED, _______________ promises to pay to Auto-By-Tel
Corporation, a Delaware corporation (the "Company"), or order, the principal sum
of _______________________ ($_____________), together with interest on the
unpaid principal hereof from the date hereof at the rate of _______________
percent (____%) per annum, compounded semiannually.
Principal and interest shall be due and payable on __________, 19___.
Payment of principal and interest shall be made in lawful money of the United
States of America.
The undersigned may at any time prepay all or any portion of the principal
or interest owing hereunder.
This Note is subject to the terms of the Option, dated as of
________________. This Note is secured in part by a pledge of the Company's
Common Stock under the terms of a Security Agreement of even date herewith and
is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the undersigned,
and shall not be required to proceed against the collateral securing this Note
in the event of default.
In the event the undersigned shall cease to be an employee, director or
consultant of the Company for any reason, this Note shall, at the option of the
Company, be accelerated, and the whole unpaid balance on this Note of principal
and accrued interest shall be immediately due and payable.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
____________________________________
____________________________________
<PAGE>
EXHIBIT 10.7
AUTO-BY-TEL CORPORATION
1996 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1996 Employee Stock
Purchase Plan of Auto-By-Tel Corporation.
1. Purpose. The purpose of the Plan is to provide employees of the
-------
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
-----------
(a) "Board" shall mean the Board of Directors of the
-----
Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
----
amended.
(c) "Common Stock" shall mean the Common Stock of the
------------
Company.
(d) "Company" shall mean Auto-By-Tel Corporation and any
-------
Designated Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross
------------
earnings and commissions, but exclusive of payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiary" shall mean the Subsidiary which
---------------------
have been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee
--------
of the Company for tax purposes whose customary employment with the Company is
at least twenty (20) hours per week and more than five (5) months in any
calendar year. For purposes of the Plan, the employment relationship shall be
treated as continuing intact while the individual is on sick leave or other
leave of absence approved by the Company. Where the period of leave exceeds 90
days and the individual's right to reemployment is not guaranteed either by
statute or by contract, the employment relationship shall be deemed to have
terminated on the 91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each
---------------
Offering Period.
<PAGE>
(i) "Exercise Date" shall mean the last day of each Purchase
-------------
Period.
(j) "Fair Market Value" shall mean, as of any date, the
-----------------
value of Common Stock determined as follows:
(1) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable, or;
(2) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock on the date of such determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable, or;
(3) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Board.
(4) For purposes of the Enrollment Date of the first
Offering Period under the Plan, the Fair Market Value shall be the initial price
to the public as set forth in the final prospectus included within the
registration statement in Form S-1 filed with the Securities and Exchange
Commission for the initial public offering of the Company's Common Stock (the
"Registration Statement").
(k) "Offering Periods" shall mean the periods of
----------------
approximately six (6) months during which an option granted pursuant to the Plan
may be exercised, commencing on the first Trading Day on or after January 1 and
July 1 of each year and terminating on the last Trading Day in the periods
ending six months later; provided, however, that the first Offering Period under
the Plan shall commence with the first Trading Day on or after the date on which
the Securities and Exchange Commission declares the Company's Registration
Statement effective and ending on the last Trading Day on or after June 30,
1997. The duration and timing of Offering Periods may be changed pursuant to
Section 4 of this Plan.
(l) "Plan" shall mean this Employee Stock Purchase Plan.
----
(m) "Purchase Price" shall mean an amount equal to 85% of
--------------
the Fair Market Value of a share of Common Stock on the Enrollment Date or on
the Exercise Date, whichever is lower.
(n) "Purchase Period" shall mean the approximately six month
---------------
period commencing after one Exercise Date and ending with the next Exercise
Date, except that the first Purchase Period of any Offering Period shall
commence on the Enrollment Date and end with the next Exercise Date.
-2-
<PAGE>
(o) "Reserves" shall mean the number of shares of Common
--------
Stock covered by each option under the Plan which have not yet been exercised
and the number of shares of Common Stock which have been authorized for issuance
under the Plan but not yet placed under option.
(p) "Subsidiary" shall mean a corporation, domestic or
----------
foreign, of which not less than 50% of the voting shares are held by the Company
or a Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock
-----------
exchanges and the Nasdaq System are open for trading.
3. Eligibility.
-----------
(a) Any Employee who shall be employed by the Company on a
given Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) to
the extent that, immediately after the grant, such Employee (or any other person
whose stock would be attributed to such Employee pursuant to Section 424(d) of
the Code) would own capital stock of the Company and/or hold outstanding options
to purchase such stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of the capital stock of the
Company or of any Subsidiary, or (ii) to the extent that his or her rights to
purchase stock under all employee stock purchase plans of the Company and its
subsidiaries accrues at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the fair market value of the shares at
the time such option is granted) for each calendar year in which such option is
outstanding at any time.
4. Offering Periods. The Plan shall be implemented by consecutive,
----------------
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after January 1 and July 1 each year, or on such other date as
the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or after
June 31, 1997. The Board shall have the power to change the duration of Offering
Periods (including the commencement dates thereof) with respect to future
offerings without shareholder approval if such change is announced at least five
(5) days prior to the scheduled beginning of the first Offering Period to be
affected thereafter.
-3-
<PAGE>
5. Participation.
-------------
(a) An eligible Employee may become a participant in the
Plan by completing a subscription agreement authorizing payroll deductions in
the form of Exhibit A to this Plan and filing it with the Company's payroll
office prior to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on
the first payroll following the Enrollment Date and shall end on the last
payroll in the Offering Period to which such authorization is applicable, unless
sooner terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
------------------
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding ten (10%) of the
Compensation which he or she receives on each pay day during the Offering
Period.
(b) All payroll deductions made for a participant shall be
credited to his or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(c) A participant may discontinue his or her participation
in the Plan as provided in Section 10 hereof, or may increase or decrease the
rate of his or her payroll deductions during the Offering Period by completing
or filing with the Company a new subscription agreement authorizing a change in
payroll deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary
to comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a
participant's payroll deductions may be decreased to zero percent (0%) at any
time during a Purchase Period. Payroll deductions shall recommence at the rate
provided in such participant's subscription agreement at the beginning of the
first Purchase Period which is scheduled to end in the following calendar year,
unless terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in
part, or at the time some or all of the Company's Common Stock issued under the
Plan is disposed of, the participant must make adequate provision for the
Company's federal, state, or other tax withholding obligations, if any, which
arise upon the exercise of the option or the disposition of the Common Stock. At
any time, the
-4-
<PAGE>
Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering
---------------
Period, each eligible Employee participating in such Offering Period shall be
granted an option to purchase on each Exercise Date during such Offering Period
(at the applicable Purchase Price) up to a number of shares of the Company's
Common Stock determined by dividing such Employee's payroll deductions
accumulated prior to such Exercise Date and retained in the Participant's
account as of the Exercise Date by the applicable Purchase Price; provided that
in no event shall an Employee be permitted to purchase during each Purchase
Period more than Thirty Thousand (30,000) shares (subject to any adjustment
pursuant to Section 19), and provided further that such purchase shall be
subject to the limitations set forth in Sections 3(b) and 12 hereof and in
Section 423(b)(8) of the Code. Exercise of the option shall occur as provided in
Section 8 hereof, unless the participant has withdrawn pursuant to Section 10
hereof. The option shall expire on the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the
------------------
Plan as provided in Section 10 hereof, his or her option for the purchase of
shares shall be exercised automatically on the Exercise Date, and the maximum
number of full shares subject to option shall be purchased for such participant
at the applicable Purchase Price with the accumulated payroll deductions in his
or her account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier with drawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date
--------
on which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal.
----------
(a) A participant may withdraw all but not less than all the
payroll deductions credited to his or her account and not yet used to exercise
his or her option under the Plan at any time by giving written notice to the
Company in the form of Exhibit B to this Plan. All of the participant's payroll
deductions credited to his or her account shall be paid to such participant
promptly after receipt of notice of withdrawal and such participant's option for
the Offering Period shall be automatically terminated, and no further payroll
deductions for the purchase of shares shall be made for such Offering Period. If
a participant withdraws from an Offering Period, payroll deductions shall
-5-
<PAGE>
not resume at the beginning of the succeeding Offering Period unless the
participant delivers to the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall
not have any effect upon his or her eligibility to participate in any similar
plan which may hereafter be adopted by the Company or in succeeding Offering
Periods which commence after the termination of the Offering Period from which
the participant withdraws.
11. Termination of Employment.
-------------------------
Upon a participant's ceasing to be an Employee, for any reason,
he or she shall be deemed to have elected to withdraw from the Plan and the
payroll deductions credited to such participant's account during the Offering
Period but not yet used to exercise the option shall be returned to such
participant or, in the case of his or her death, to the person or persons
entitled thereto under Section 15 hereof, and such participant's option shall be
automatically terminated. The preceding sentence notwithstanding, a participant
who receives payment in lieu of notice of termination of employment shall be
treated as continuing to be an Employee for the participant's customary number
of hours per week of employment during the period in which the participant is
subject to such payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of
--------
a participant in the Plan.
13. Stock.
-----
(a) The maximum number of shares of the Company's Common
Stock which shall be made available for sale under the Plan shall be 400,000
shares, increased annually on the first day of each of the Company's fiscal
years during the term of the Plan in an amount equal to (i) 400,000 shares minus
(ii) the number of shares available for issuance under the Plan as of such date,
all of which share numbers are subject to adjustment upon changes in
capitalization of the Company as provided in Section 19 hereof. The Shares may
be authorized, but unissued, or reacquired Common Stock. If, on a given Exercise
Date, the number of shares with respect to which options are to be exercised
exceeds the number of shares then available under the Plan, the Company shall
make a pro rata allocation of the shares remaining available for purchase in as
uniform a manner as shall be practicable and as it shall determine to be
equitable.
(b) The participant shall have no interest or voting right
in shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan
shall be registered in the name of the participant or in the name of the
participant and his or her spouse.
-6-
<PAGE>
14. Administration. The Plan shall be administered by the Board or
--------------
a committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. Designation of Beneficiary.
--------------------------
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such partici pant's death
subsequent to an Exercise Date on which the option is exercised but prior to
delivery to such participant of such shares and cash. In addition, a participant
may file a written designation of a beneficiary who is to receive any cash from
the participant's account under the Plan in the event of such participant's
death prior to exercise of the option. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required for
such designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
16. Transferability. Neither payroll deductions credited to a
---------------
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the
------------
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each
-------
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
-7-
<PAGE>
19. Adjustments Upon Changes in Capitalization, Dissolution,
-------------------------------------------------------
Liquidation, Merger or Asset Sale.
---------------------------------
(a) Changes in Capitalization. Subject to any required
-------------------------
action by the shareholders of the Company, the Reserves, as well as the price
per share and the number of shares of Common Stock covered by each option under
the Plan which has not yet been exercised, shall be proportionately adjusted for
any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other increase or decrease in
the number of shares of Common Stock effected without receipt of consideration
by the Company; provided, however, that conversion of any convertible securities
of the Company shall not be deemed to have been "effected without receipt of
consideration". Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the
--------------------------
proposed dissolution or liquidation of the Company, the Offering Periods shall
terminate immediately prior to the consummation of such proposed action, unless
otherwise provided by the Board.
(c) Merger or Asset Sale. In the event of a proposed sale
--------------------
of all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, any Purchase Periods then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date") and
any Offering Periods then in progress shall end on the New Exercise Date. The
New Exercise Date shall be before the date of the Company's proposed sale or
merger. The Board shall notify each participant in writing, at least ten (10)
business days prior to the New Exercise Date, that the Exercise Date for the
participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.
20. Amendment or Termination.
------------------------
(a) The Board of Directors of the Company may at any time
and for any reason terminate or amend the Plan. Except as provided in Section 19
hereof, no such termination can affect options previously granted, provided that
an Offering Period may be terminated by the Board of Directors on any Exercise
Date if the Board determines that the termination of the Plan is in the best
interests of the Company and its shareholders. Except as provided in Section 19
hereof, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Section 423 of the Code (or any successor rule or provision or any
other applicable law, regulation or stock exchange rule), the Company shall
obtain shareholder approval in such a manner and to such a degree as required.
-8-
<PAGE>
(b) Without shareholder consent and without regard to
whether any participant rights may be considered to have been "adversely
affected," the Board (or its committee) shall be entitled to change the Offering
Periods, limit the frequency and/or number of changes in the amount withheld
during an Offering Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll withholding in
excess of the amount designated by a participant in order to adjust for delays
or mistakes in the Company's processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or accounting
and crediting procedures to ensure that amounts applied toward the purchase of
Common Stock for each participant properly correspond with amounts withheld from
the participant's Compensation, and establish such other limitations or
procedures as the Board (or its committee) determines in its sole discretion
advisable which are consistent with the Plan.
21. Notices. All notices or other communications by a participant
-------
to the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
with respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may
require the person exercising such option to represent and warrant at the time
of any such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier
------------
to occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
24. Automatic Transfer to Low Price Offering Period. To the extent
-----------------------------------------------
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.
-9-
<PAGE>
EXHIBIT A
---------
AUTO-BY-TEL CORPORATION
1996 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. _____________________________________________________ hereby elects to
participate in the Auto-By-Tel Corporation 1996 Employee Stock Purchase
Plan (the "Employee Stock Purchase Plan") and subscribes to purchase shares
of the Company's Common Stock in accordance with this Subscription
Agreement and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (from 1 to 10%) during the Offering
Period in accordance with the Employee Stock Purchase Plan. (Please note
that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in
all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is subject
to shareholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only):
___________________________________________________________________________
____________.
6. I understand that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after the
Exercise Date, I will be treated for federal income tax purposes as having
received ordinary income at the time of such disposition in an amount equal
to the excess of the fair market value of the shares at the time such
shares were purchased by me over the price which I paid for the shares. I
-
hereby agree to notify the Company in writing
---------------------------------------------
<PAGE>
within 30 days after the date of any disposition of my shares and I will
------------------------------------------------------------------------
make adequate provision for Federal, state or other tax withholding
-------------------------------------------------------------------
obligations, if any, which arise upon the disposition of the Common Stock.
-------------------------------------------------------------------------
The Company may, but will not be obligated to, withhold from my
compensation the amount necessary to meet any applicable withholding
obligation including any withholding necessary to make available to the
Company any tax deductions or benefits attributable to sale or early
disposition of Common Stock by me. If I dispose of such shares at any time
after the expiration of the 2-year and 1-year holding periods, I understand
that I will be treated for federal income tax purposes as having received
income only at the time of such disposition, and that such income will be
taxed as ordinary income only to the extent of an amount equal to the
lesser of (1) the excess of the fair market value of the shares at the time
of such disposition over the purchase price which I paid for the shares, or
(2) 15% of the fair market value of the shares on the first day of the
Offering Period. The remainder of the gain, if any, recognized on such
disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)______________________________________________
(First) (Middle) (Last)
____________________________ ______________________________________________
Relationship
______________________________________________
(Address)
-2-
<PAGE>
Employee's Social
Security Number: ____________________________________
Employee's Address: ____________________________________
____________________________________
____________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_________________________ ________________________________________
Signature of Employee
________________________________________
Spouse's Signature (If beneficiary other than
spouse)
-3-
<PAGE>
EXHIBIT B
---------
AUTO-BY-TEL CORPORATION
-----------------------
1996 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Auto-By-Tel
Corporation 1996 Employee Stock Purchase Plan which began on ____________,
19____ (the "Enrollment Date") hereby notifies the Company that he or she hereby
withdraws from the Offering Period. He or she hereby directs the Company to pay
to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Offering Period. The
undersigned understands and agrees that his or her option for such Offering
Period will be automatically termi nated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant:
________________________________
________________________________
________________________________
Signature:
________________________________
Date:__________________________
<PAGE>
EXHIBIT 10.8
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
[*] Confidential Treatment has been requested for certain portions of this
exhibit.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<S> <C>
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
9. POLICIES......................................................... 9
Section 9.1 Product Control................................. 9
Section 9.2 Underwriting and Administration................. 9
Section 9.3 Policy and Quote Records........................ 9
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
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
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
</TABLE>
ii
<PAGE>
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:
[*] Confidential Treatment has been requested for certain portions of this
exhibit.
<PAGE>
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:
(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.
2
<PAGE>
(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 [*] (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
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. [*]
(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
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date as AIC and ABTAC agree (cooperatively and in good faith) which date is
expected to be [*] 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 [*]
Section 2.2 Preparation of Marketing Materials. 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").
(b) 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 [*] 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 [*] for the development of the
-----------------
Insurance Marketing Materials; provided, however, that the parties hereto agree
-------- -------
that AIC's obligations to pay [*]
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.
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Section 3.2 Initial Product Offering. AIC shall initially offer only
------------------------
automobile insurance, but shall use its best efforts to offer all Products by
[*] 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. 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 [*] hours per day on weekdays and
[*] 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 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. 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 [*] pay ABTAC for [*] in connection with the
development of the electronic transmission mechanism contemplated by Phase 2.
Section 3.8 Books and Records; Auditing. 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
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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 [*] 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 [*] 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.
Section 4.3 Hyperlink Development; Costs. 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.
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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. The parties hereto shall have an exclusive
-----------
arrangement for the [*] of the Initial Term (as defined in Section 14.1 of this
Agreement) (such [*] 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 [*] period beyond the Initial Exclusivity Period,
and thereafter for successive [*] periods, unless one party shall give the other
party written notice not less than [*] 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 [*] 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 [*] 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 [*] 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 [*]
days prior written notice thereof.
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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 [*] days after the end of the month they become due. For the
services to be 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 [*] 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.
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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.
(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 [*] 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
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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.
11. USE OF NAMES/TRADEMARKS.
Section 11.1 Limitation on Use of AIC Marks. 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.
10
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(b) Waive a forfeiture.
(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 [*] from the effective date ("Initial Term"). This Agreement shall
automatically renew for subsequent [*] ("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
[*] 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.
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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.
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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.
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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. COLOGNA
--------------------------
John G. Colona, Vice President
AUTO-BY-TEL ACCEPTANCE CORPORATION
By: /S/ PETER R. ELLIS
-------------------------
Peter Ellis, President
AUTO-BY-TEL, INC., as Guarantor
By: /S/ PETER R. ELLIS
-------------------------
Peter Ellis, President
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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
<PAGE>
SCHEDULE B
[*]
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EXAMPLE # 1
[*]
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EXAMPLE # 2
[*]
[*] Confidential Treatment Requested
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EXAMPLE # 3
[*]
[*] Confidential Treatment Requested
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EXAMPLE # 4
[*]
[*] Confidential Treatment Requested
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EXAMPLE # 5
[*]
[*] Confidential Treatment Requested
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EXAMPLE # 6
[*]
[*] Confidential Treatment Requested
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SCHEDULE C
AIGM COMPENSATION FROM AIC
[*]
[*] Confidential Treatment Requested
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PROFIT SHARING CONTINGENCY CHART
--------------------------------
[*]
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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.
<PAGE>
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
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
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SCHEDULE A
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[*]
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ADDITIONAL COMPENSATION CHART
-----------------------------
[*]
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EXHIBIT 10.9
MICROSOFT ONLINE MARKETING AGREEMENT
THIS ONLINE MARKETING AGREEMENT ("Agreement") is made and entered into
as of the later of the two signature dates below (the "Effective Date") by and
between AUTO-BY-TEL, LLC ("ABT"), a California limited liability company, and
MICROSOFT CORPORATION ("MS"), a Washington, U.S.A. corporation.
Recitals
--------
i. MS has established an online service for the Microsoft Network
called "CarSource" that includes research materials and other useful information
about Automobiles (as defined below) and accessories.
ii. ABT operates an Automobile marketing company which has
subscribing dealers throughout the United States. ABT plans to expand
operations with subscribing dealers in other territories outside the United
States.
iii. MS and ABT wish to enter into a business relationship to develop
and implement an Automobile marketing service on CarSource for persons
interested in purchasing Automobiles in the United States, Canada, and other
territories subject to all the terms and conditions of this Agreement.
NOW, THEREFORE, the parties agree as follows:
Agreement
---------
1. DEFINITIONS. In addition to the terms defined elsewhere in this
-----------
Agreement, the following terms, when used herein, shall have the following
meanings:
1.1 "Automobile" shall mean any kind of motor vehicle, including, but
not limited to, passenger vehicles, trucks, and vans.
1.2 "CarSource" shall mean the MS-sponsored service on the Microsoft
Network ("MSN") that includes information and materials related to Automobiles,
including any successor products and/or services that appear on MSN or the
Internet's World Wide Web.
1.3 "Person" or "Persons" shall mean an individual, corporation,
partnership, unincorporated association, trust, joint venture or other
organization or entity.
1.4 "Dealer" shall mean an independently operated retail seller of
Automobiles that is located in the United States, Canada or other territories
and is a subscribing member to ABT's marketing program.
[*] Confidential Treatment has been requested for portions of this exhibit.
<PAGE>
2. ONLINE MARKETING SERVICE
------------------------
2.1 Within a reasonable period after the Effective Date, MS shall,
with the assistance of ABT, develop and post a digital page or portion thereof
on CarSource featuring information about ABT's auto marketing and financing
services and an interactive electronic order form in substantially the form of
Exhibit A hereto (an "E-form"). At least [*] during the term of this Agreement,
- ---------
MS or its representatives shall download all E-forms that have been completed by
CarSource users and transmit them to ABT via electronic mail or other reasonable
means to ensure prompt delivery to ABT. No later than [*] after receiving each
E-form, ABT shall forward the E-form to one of its subscribing Dealers who will
call the CarSource user with information regarding the price and availability of
the vehicle request.
2.2 ABT may offer information regarding Automobile financing and
leasing options to CarSource users in response to an E-form request for such
information.
2.3 ABT shall at all times conduct its operations with respect to the
marketing program described above in a reasonable and professional manner in
accordance with all applicable laws and regulations.
2.4 The rights set forth in Sections 2.1 and 2.2 above are granted on
a non-exclusive basis; provided, that MS shall not grant such rights to any
other party during the term of this Agreement on terms and conditions that are
more favorable than the terms and conditions of this Agreement.
3. TERM. The term of this Agreement shall be [*] from the Effective Date
----
unless terminated earlier in accordance with Section 12.
4. FEES.
----
4.1 Marketing Fees. ABT shall pay MS a fee of [*]
--------------
for [*] whether or not the CarSource users purchase an Automobile through ABT or
its Dealers. MS shall not forward any incomplete E-forms to ABT. No marketing
fee shall be paid or incurred by ABT for [*] ABT shall not deduct or withhold
any amounts from such payments, except for any applicable taxes which are
required to be withheld or deducted by applicable law.
4.2 Finance & Leasing Fees. ABT shall pay to MS [*]
----------------------
that ABT receives from each Third Party in connection with such a financing or
leasing transaction. The parties understand and agree that at the time of
signing this Agreement, the [*] fees that ABT expects to pay to MS are as
follows: [*]. ABT shall not deduct or withhold any
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amounts from such payments, except for any applicable taxes which are required
to be withheld or deducted by applicable law. ABT shall at all times act in good
faith with respect to the calculation and payment of such fees and shall not
attempt to limit such fees by restructuring its financial arrangement with
lending institutions so as to avoid payment of the fees described in this
Section. In addition to the fees described in this Section 4, ABT shall pay MS
the fees described in Section 10.2.
5. PAYMENT SCHEDULE. Within [*] days after the end of each
----------------
[*] with respect to which ABT owes MS any fees pursuant to Section 4 and/or
10.2, ABT shall furnish MS a statement together with payment for any amount
shown thereby to be due to MS. The fee statement shall contain information about
(a) the number of E-forms received from MS during the period, (b) the total
marketing fee payment to MS, (c) the number of CarSource users referred by ABT
to financing entities during the period, (d) the number of CarSource users who
completed a financing transaction for an Automobile with a financing entity
referred by ABT during the period, (e) the total amount of financing origination
fees received by ABT during the period, pursuant to this Agreement (f) the total
amount of the financing origination fee payment to MS, (g) the amount of any
deductions from amounts payable to MS and the method of calculating such
deductions, (h) the number of CarSource users who completed a user survey
authorized under Section 10.2, (i) the number of CarSource users who registered
for the affinity program described in Section 10.2, (j) the amount of any fees
payable to MS pursuant to Section 10.2, and (k) any other information that is
relevant to the payment terms described in this Agreement.
6. HYPERLINK. During the term of this Agreement, ABT shall prominently
---------
feature a hyperlink to the uniform resource locator for MS CarSource on ABT's
World Wide Web home page in the manner set forth on Exhibit B hereto. ABT shall
---------
not materially modify the placement, size, presentation or layout of the
hyperlink to MS CarSource without the written consent of MS, which shall not be
unreasonably withheld. In addition, ABT shall not place hyperlinks to World Wide
Web home pages of on-line services that compete with CarSource (e.g., Edmunds,
Autoinfocenter, Autolink) on the same level as the hyperlink to CarSource. MS
hereby consents to the use of the "Microsoft" and "CarSource" trademarks for the
limited purposes described in this Section 6.
7. USE OF TRADEMARKS. ABT hereby grants MS the right to use and
-----------------
publish in connection with the promotion of the services described in Section 2
of this Agreement the following unregistered trademarks and trade names which
are associated with ABT ("ABT's Trademarks"):
Auto-by-Tel
Auto-by-Tel, LLC
MS shall add the appropriate trademark symbol or designation (i.e., (TM) or R),
as shown above wherever ABT's Trademarks are first mentioned in CarSource. ABT
shall promptly notify MS in the event that any person shall challenge its right
to use such Trademarks in connection with the Business (defined below). The
rights granted by this section shall not preclude MS from creating, developing,
applying for and obtaining and otherwise using and enjoying any logos,
trademarks and trade names of its own with respect to any products or services,
nor applying for and obtaining copyright and/or trademark protection therefor.
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8. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF ABT. ABT hereby
-------------------------------------------------
represents, warrants, and covenants to MS that:
8.1 ABT has the full and exclusive right and power to enter into and
perform according to the terms of this Agreement. Without limiting the
foregoing, ABT warrants that (i) to the best of ABT's knowledge, ABT has the
full and exclusive right to grant MS the licenses granted herein to use the
trademarks and trade names and, to the best of ABT's knowledge, the use of such
trademarks and tradenames by MS as provided under this Agreement will not
violate any trademark, or other proprietary right of any third party, and (ii)
it shall not violate any rights of privacy of any third party in providing the
services described in Section 2.
8.2 Personnel of ABT shall be available to consult with respect to
the matters governed by this Agreement with MS and its personnel, at such times
and for such periods as MS may reasonably request.
8.3 ABT and its officers, directors, employees, contractors, agents
and representatives shall conduct all activities related to this Agreement in
compliance with all applicable laws or regulations including, but not limited to
the laws and regulations relating to the sale and brokerage of automobiles,
telemarketing, consumer credit, and tax laws.
8.4 ABT has obtained standard form general liability insurance from a
nationally-recognized insurance provider and such policy has limits of [*] and
coverage of [*] and ABT shall maintain such insurance (or comparable replacement
insurance) at all times during the term of this Agreement and for a period of
one year thereafter.
The representations, warranties, and covenants contained in this Section 8 are
continuous in nature and shall survive termination or expiration of this
Agreement except as expressly stated in Section 8.4.
9. INDEMNITY.
---------
9.1 ABT hereby agrees to indemnify, pay the defense costs of, and
hold MS harmless from any and all claims, demands, costs, liabilities, losses,
expenses and damages (including attorneys' fees, costs, and expert witnesses'
fees) arising out of or in connection with any claim which, taking the
claimant's allegations to be true, (a) would result in a breach by ABT of any of
ABT's warranties and covenants set forth in this Agreement, or (b) would
constitute a violation of any applicable law or regulation governing the
business of ABT. ABT shall reimburse MS on demand for any payment made by MS in
respect of any liability or claim to which the foregoing indemnity relates, and
which has resulted in an adverse judgment against MS or has been settled with
the written consent of ABT. Prompt notice shall be given to ABT of any claim to
which the foregoing indemnity relates. The indemnity provisions hereof shall
survive any termination or expiration of this Agreement.
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9.2 MS hereby agrees to indemnify, pay the defense costs of, and hold
ABT harmless from any and all claims, demands, costs, liabilities, losses,
expenses and damages (including attorneys' fees, costs, and expert witnesses'
fees) arising out of or in connection with any claim which is related to MS's
operation of CarSource, except for claims, demands, costs, liabilities, losses,
expenses and damages arising out of or in connection with any claim related to
the business of ABT and such other claims as ABT has an obligation to indemnify
MS pursuant to Section 9.1 of this Agreement. MS shall reimburse ABT on demand
for any payment made by ABT in respect of any liability or claim to which the
foregoing indemnity relates, and which has resulted in an adverse judgment
against ABT or has been settled with the written consent of MS. Prompt notice
shall be given to MS of any claim to which the foregoing indemnity relates. The
indemnity provisions hereof shall survive any termination or expiration of this
Agreement.
10. NONDISCLOSURE AGREEMENT.
-----------------------
10.1 Each party expressly undertakes to retain in confidence and to
require its distributors, resellers and all other contractors to retain in
confidence all information and know-how transmitted to such party that the
disclosing party has identified as being proprietary and/or confidential or
which, by the nature of the circumstances surrounding the disclosure, ought in
good faith to be treated as proprietary and/or confidential. Without limiting
the foregoing, the existence and all terms and conditions of this Agreement
shall be considered confidential and shall not be disclosed (except to either
party's attorneys and accountants on a need-to-know basis or under order from a
court of competent jurisdiction) without the prior written consent of the other
party. Except as specifically provided for in this Agreement, ABT shall not use
the information about individual CarSource users (including information
disclosed on E-forms) or disclose such information to any third party except as
specifically authorized by MS in this Agreement or consented to in writing by
MS; by way of illustration and not limitation, ABT agrees that it shall not
disclose information about individual CarSource users to any on-line service
provider, on-line marketing company, automobile magazine publisher, or
automobile company without the express written permission of MS.
10.2 ABT may conduct follow up surveys to CarSource users who submit
requests to ABT. These surveys shall be sent via email within one week of the
original request submission. The primary purpose of such surveys will be to
measure customer satisfaction with the ABT auto marketing and finance services,
the performance of individual Dealers, type of vehicle purchased, etc. As part
of the email survey, ABT may offer to CarSource users free membership in an ABT
affinity program of auto-related discounts, products, and services. For every
CarSource user who accepts ABT's offer to join the affinity program, ABT shall
pay to MS a fee of [*]. This fee is in addition to any Marketing Fees or Finance
and Leasing fees earned with respect to said CarSource user pursuant to Section
5 of this Agreement.
11. AUDITS
------
11.1 ABT agrees to keep all proper records and books of account and
all proper entries therein relating to the referral of prospective Automobile
purchasers and the financing of Automobiles purchased by CarSource users
referred to ABT by MS and MS' fees therefrom.
[*] Confidential Treatment Requested
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11.2 MS may cause an audit to be made, at its expense, of ABT's
applicable records in order to verify statements rendered hereunder; provided,
that if there is a greater than [*] discrepancy between the amounts paid by ABT
to MS and the amounts that should have been paid, according to the statements,
as audited, then ABT shall pay MS, in addition to any unpaid fees, the cost of
such audit. Any such audit shall be conducted only by a nationally-recognized
independent certified public accountant (other than on a contingency fee basis)
who is not the primary internal auditor for either ABT or MS, upon thirty (30)
days prior written notice to ABT, and shall be conducted during regular business
hours at ABT's offices and in such a manner as not to interfere with ABT's
normal business activities. The results of any such audit shall be subject to
the nondisclosure obligations set forth in Section 10.
12. TERMINATION. MS may terminate this Agreement by written notice to ABT
-----------
at any time if it determines [*] that the services provided by ABT and/or its
Dealers jeopardize MS's good name or brands or expose MS to financial or legal
risks that are unacceptable to MS, as determined by MS in its sole discretion.
In addition, MS may terminate this Agreement for any other cause or no cause
upon [*] advance written notice.
13. RIGHTS AND OBLIGATIONS UPON EXPIRATION OR TERMINATION. MS shall cease
-----------------------------------------------------
all transmission of the E-form and references to ABT in CarSource on or before
[*] after the date of expiration or termination of this Agreement. ABT shall
cease all references to CarSource and its hyperlink to CarSource on or before
[*] after the termination or expiration of this Agreement.
14. DELIVERY OF LEGAL NOTICES. During the term of this Agreement, ABT
-------------------------
shall promptly deliver to MS, and in no event less than ten (10) days after
receipt by ABT, copies of any and all (a) letters from third parties, including
governmental agencies, that relate to the potential commencement of legal or
administrative proceedings against ABT in connection with the business described
in this Agreement (the "business"), and (b) all summons, complaints, and
petitions served by third parties upon ABT in connection with legal or
administrative proceedings arising out of the Business, except to the extent
that such disclosure would be prevented by the terms of a protective order of a
court or governmental entity.
15. GOVERNING LAW, VENUE, ATTORNEYS' FEES
-------------------------------------
15.1 This Agreement shall be construed and controlled by the laws
of the State of Washington, and ABT further consents to jurisdiction by the
state or federal courts sitting in the State of Washington. Process may be
served on either party by U.S. Mail, postage prepaid, certified or registered,
return receipt requested, or by such other method as is authorized by law.
15.2 If either MS or ABT employs attorneys to enforce any rights
arising out of or relating to this Agreement, the prevailing party shall be
entitled to recover reasonable attorneys' fees and costs, including expert
witness fees.
[*] Confidential Treatment Requested
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<PAGE>
16. NOTICES AND REQUESTS. All notices and requests in connection with
--------------------
this Agreement shall be deemed given as of the day they are (i) deposited in the
U.S. mails, postage prepaid, certified or registered, return receipt requested;
or (ii) sent by overnight courier, charges prepaid, with a confirming fax; and
addressed as follows:
COMPANY: AUTO-BY-TEL., LLC
2711 E. Coast Highway
Suite 203
Corona Del Mar, CA 92625
Attention: President
Fax: (714) 675-4062
Phone: (714) 675-7171
MS: MICROSOFT CORPORATION
One Microsoft Way
Redmond, WA 98052-6399
Attention: Vice President, Worldwide Consumer Division
with a cc to: MICROSOFT CORPORATION
One Microsoft Way
Redmond, WA 98052-6399
Attention: Law & Corporate Affairs Department
Fax: U.S. Legal Group
(206) 936-7329
or to such other address as the party to receive the notice or request so
designates by written notice to the other.
17. NO ASSIGNMENT. Neither party may assign this Agreement, or any
-------------
portion thereof, to any third party unless the other party expressly consents to
such assignment in writing. Any attempted assignment without such consent shall
give the non-assigning party the right to terminate this Agreement effective
upon written notice.
18. LEGAL RELATIONSHIP. This Agreement is intended solely as a services
------------------
agreement, and no partnership, joint venture, employment, agency, franchise, or
other form of Agreement or relationship is intended.
19. SEVERABILITY. In the event that any provision of this Agreement is
------------
found invalid or unenforceable pursuant to judicial decree or decision, the
remainder of this Agreement shall remain valid and enforceable according to its
terms. The parties intend that the provisions of this Agreement be enforced to
the fullest extent permitted by applicable law.
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<PAGE>
20. ENTIRE AGREEMENT/MODIFICATION/OFFER. The parties hereto agree that
-----------------------------------
this Agreement constitutes the entire Agreement between the parties with respect
to the subject matter hereof and merges all prior and contemporaneous
communications. It shall not be modified except by a written agreement dated
subsequent hereto signed on behalf of ABT and MS by their duly authorized
representatives. Neither this Agreement nor any written or oral statements
related hereto constitute an offer, and this Agreement shall not be legally
binding until executed by both parties hereto.
21. BINDING EFFECT. Subject to the limitations herein before expressed,
--------------
this Agreement will inure to the benefit of and be binding upon the parties,
their successors, administrators, heirs, and permitted assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the dates indicated below.
MICROSOFT CORPORATION AUTO-BY-TEL, LLC.
/S/ GARTH HITCHINS /S/ PETER R. ELLIS
- ---------------------------- ----------------------------
By By
GARTH HITCHINS PETER R. ELLIS
- ---------------------------- ----------------------------
Name (Print) Name (Print)
PRODUCT UNIT MANAGER PRESIDENT
- ---------------------------- ----------------------------
Title Title
MARCH 27, 1996 MARCH 11, 1996
- ---------------------------- ----------------------------
Date Date
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<PAGE>
EXHIBIT A
---------
ELECTRONIC ORDER FORM
---------------------
A completed Electronic Order Form will contain the following information:
First Name
Last Name
Street Address, Apt./Suite #
City
State
Zip Code
Phone Number
Year, Make, and Model of Vehicle Requested
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EXHIBIT B
---------
ABT Screen Shot
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<PAGE>
EXHIBIT 10.10
ADVERTISING AGREEMENT
---------------------
This Agreement, effective as of October 15, 1996, is made and entered
into by Digital City, Inc. ("DCI"), a Delaware corporation with its principal
offices at 8619 Westwood Center Drive, Vienna, VA 22182, and Auto-By-Tel
("Advertiser"), with its principal offices or address at 18872 MacArthur Blvd.,
Suite 200, Irvine, California 92612-1400.
INTRODUCTION
------------
DCI is a subsidiary of America Online, Inc. that operates the Digital City(SM)
brand service (the "DCI Service") which assembles, packages and markets local
interactive consumer content and services for particular metropolitan or other
local areas throughout the United States and the World through the America
Online(R) Service ("AOL"), the World Wide Web and other distribution partners.
Auto-By-Tel Inc. is an online marketing program that, among other things,
assists consumers in buying or leasing new automobiles via electronic purchase
requests on the Internet.
Advertiser wishes to include an advertising icon (the "Icon") consisting of logo
identification and a prominent photo or graphic with caption on the Main screen,
the Main Auto screen, and various other screens of the DCI Service markets
listed in Exhibit C hereto (the "Markets") which, when activated, will provide
access to an Advertiser site on the DCI Service (the "Advertising Site").
Advertiser's involvement with the Digital City web-site on the World Wide Web is
not addressed in this contract and will be addressed at a later date when it
becomes available.
TERMS
1. Duties of DCI.
1.1 During the Term, DCI shall create and display the Icon and the
Advertising Site. Subscribers to the DCI Service may click on the Icon in order
to activate a link to the Advertising Site. The design, contents, rotation, and
placement of the Icon and Advertising site shall be as mutually agreed upon by
DCI and Advertiser and are specified in Exhibit A hereto.
1.2 Exclusivity.
During the Term, DCI agrees that it will not sell advertising in any of the
Markets to marketing programs where electronic new car lease or purchase
requests are routed to a marketing company, to new car brokers or to automobile
manufacturers. Exclusivity does not effect individual dealer or automobile
manufacturer advertisements, used car sales, or classified sections of Digital
City Markets. DCI subscribers may solicit price quotes by telephone or by email
directly from automobile dealers and manufacturers provided that the advertising
icon appearing on the DCI Service, if any, connected to such dealers and
manufacturers does not directly invite DCI subscribers to receive a price quote.
This Section 1.2 shall have no affect on advertising sold into the Markets prior
to the commencement of this Agreement.
[*] Confidential Treatment has been requested for certain portions of this
exhibit
<PAGE>
1.3 Advertiser will be given two keywords for promotion within the
DCI Service. They are AUTOBYTEL and AUTO-BY-TEL.
1.4 Overhead Account. DCI shall grant [*] on AOL, for which the
----------------
standard subscription and usage charges will be waived during the Term
("Overhead Accounts") for the exclusive purpose of enabling Advertiser and its
agents to perform Advertiser's duties under this Agreement. Advertiser shall be
responsible for the actions taken under or through its Overhead Accounts, which
actions are subject to (i) DCI's applicable rules and policies; (ii) any
surcharges, including, without limitation, all premium charges, transaction
charges, and any applicable communication surcharges incurred by any Overhead
Account issued to Advertiser; and (iii) the AOL Terms of Service. Upon the
termination of this Agreement, such Overhead Account, related screen names and
any associated usage credits or similar rights, shall automatically terminate.
DCI shall have no liability for loss of any data or content related to the
proper termination of any such Overhead Account.
1.5 Advertiser will be provided with a Plus Group to monitor the
performance of the Advertising Site. A Plus Group is the traffic measurement
system used to analyze online activity within the DCI Service. Nielsen audited
traffic information will be provided as it becomes available.
1.6 DCI is obligated to provide Production of [*] Rainman [*] for
Advertiser which [*] the introduction of the product and links to the
Advertiser web site.
1.7 DCI will provide Advertiser with up to [*] production changes in
artwork for the Icon at no cost. Subsequently, Advertiser will be subject to
negotiated rates for production.
2. Duties of Advertiser.
2.1 Advertiser is obligated to purchase each Market within [*] launch
of such Market.
2.2 Advertiser shall respond promptly and professionally to
questions, comments, complaints and other reasonable requests from DCI
subscribers regarding the Advertising Site.
2.3 Advertiser will provide for the timely delivery of automotive
price quotes to DCI consumers.
2.4 Advertiser agrees to pay DCI according to section 5 below,
"Revenues To DCI".
3. Rights of DCI.
3.1 Advertiser agrees that (i) DCI has the right to market, display,
transmit and promote the Advertising Site as provided above and (ii) subscribers
to the DCI Service have the right
[*] Confidential Treatment Requested
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<PAGE>
to access and use the Advertising Site and the content and services contained
therein (including any of the Advertiser's trademarks, trade names and service
marks included within the Advertising Site).
3.2 Subject to Sections 1.2 and 1.3, DCI will retain the right to
distribute automotive content of all types in the DCI automotive areas online.
4. Performance Clause.
4.1 The [*] of advertising will be given to Advertiser at [*]. The
[*] will begin upon activation of the affinity button in each Market. The
affinity button is a button on the welcome screen of America Online that links
to local Digital City markets.
4.2 After the [*] provided in Section 4.1 above, there will be a [*]
"start up" period.
4.3 In each Market, after the [*] period set forth in Sections 4.1
and 4.2 above has ended, a measurement figure of [*] will take effect for the
remainder of the Term. If the [*] in which [*] Advertiser may terminate this
Agreement by written notice to DCI [*] prior to the desired termination date.
Advertiser will make verified "Purchase Request" figures available to DCI prior
to any termination by Advertiser pursuant to this Section 4.3. For purposes of
this Agreement, "Purchase Request" shall mean that a user of the DCI Service has
requested a price quote online from Advertiser.
5. Revenue to DCI.
5.1 Advertiser will pay to DCI according to the [*] as set forth in
Exhibits B, C, and D.
5.2 Advertiser will make a [*] payment of [*] for the first amounts
due in respect of this Agreement upon execution of this Agreement.
5.3 Advertiser will be billed for new Digital City markets at the
beginning of the [*] month after the market has been activated.
6. Confidential Information. Each Party acknowledges that all information
disclosed pursuant to this Agreement, including the terms of this Agreement,
shall be considered confidential (collectively, "Confidential Information").
Each Party agrees that it shall take reasonable steps, at least substantially
equivalent to the steps it takes to protect its own proprietary information,
during the term of this Agreement and for a period of [*] following expiration
or termination of this Agreement, to prevent the duplication or disclosure of
Confidential Information. Notwithstanding the foregoing, Confidential
Information shall not include materials or information that (i) are already, or
[*] Confidential Treatment Requested
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<PAGE>
otherwise become, generally known by third parties as a result of no act or
omission of the disclosing party; (ii) subsequent to disclosure hereunder are
lawfully received by the disclosing party from a third party having the right
to disseminate the information and without restriction on disclosure; (iii)
are generally furnished to others by any party without restriction on
disclosure; (iv) were already known by the disclosing party and were not
received from a third party in breach of that third party's obligations of
confidentiality; (v) are required to be disclosed by applicable law, rule or
regulation of any government or governmental agency or by court order; or (vi)
are independently developed by the disclosing party without the use of
Confidential Information.
7. Term. The initial term of this Agreement is for [*] from execution
date of the Agreement (the "Initial Term") and shall be automatically extended
for an additional period equal to the length of the Initial Term (the "Renewal
Term") unless this Agreement has been terminated in accordance with Section 4.3
or unless Advertiser notifies DCI in writing of its election to have the
Agreement expire at least thirty (30) days in advance of the Initial Term.
8. If Advertiser wishes to make any changes to the Icon, Advertiser must
request such changes in writing. There will be one icon used for all Markets.
Advertiser may change the Icon twice per month at no cost. Any changes must be
approved by DCI.
9. Advertiser represents and warrants that neither the Icon nor the
Advertising Site in any respect: (i) infringes on any copyright, trademark, U.S.
patent or any other proprietary right of any third party; (ii) violates any
applicable law or regulation; or (iii) violates the Terms of Service of AOL.
10. Each party shall promptly inform the other party of any event or
circumstance, and shall provide such party with all relevant information,
related to the Icon and/or Advertising Site which could reasonably lead to a
claim, demand, or liability of or against such party/or its affiliates by any
third party.
11. UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR
INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES (EVEN IF SUCH
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES), ARISING FROM ANY
ASPECT OF THE TRANSACTION DESCRIBED HEREIN. NEITHER PARTY SHALL IN ANY EVENT BE
LIABLE TO THE OTHER FOR MORE THAN THE AMOUNTS PAID TO DCI BY ADVERTISER
HEREUNDER.
12. NEITHER PARTY MAKES AND EACH PARTY HEREBY SPECIFICALLY DISCLAIMS ANY
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE DCI SERVICE AND
AOL OR ANY PORTION THERETO, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE AND IMPLIED WARRANTIES ARISING FROM COURSE OF
DEALING OR COURSE OF PERFORMANCE. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, DCI SPECIFICALLY DISCLAIMS ANY WARRANTY REGARDING (I) THE
[*] Confidential Treatment Requested
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<PAGE>
NUMBER OF PERSONS WHO WILL ACCESS THE ICON AND (II) ANY BENEFIT ADVERTISER
MIGHT OBTAIN INCLUDING THE ICON WITHIN THE DCI SERVICE.
13. Each Party will defend, indemnify, save and hold harmless the other
party and the officers, directors, agents, affiliates, distributors, franchisees
and employees of the other party from any and all third party claims, demands,
liabilities, costs or expenses, including reasonable outside and in-house
attorneys' fees ("Liabilities"), resulting from the indemnifying party's breach
of any material obligation, duty, representation or warranty of this Agreement,
except where Liabilities result from the gross negligence or knowing and willful
misconduct of the other Party.
14. Either party may terminate this Agreement at any time in the event of
a material breach of this Agreement by the other party.
15. In addition, DCI shall have the right, at any time, to remove the Icon
if DCI determines, in its sole discretion, that any part of the Icon or the
Advertising Site violates the Terms of Service of AOL. In the event that DCI
exercises its rights under this Section 15, DCI shall refund to Advertiser a pro
rata portion of the fee which Advertiser has paid to DCI for display of the
Icon.
16. The Parties to this Agreement are independent contractors. Neither
Party is an agent, representative, or partner of the other Party. This
Agreement shall not be interpreted or construed to create an association,
agency, joint venture or partnership between the Parties or to impose any
liability attributable to such a relationship upon either Party. The failure of
either Party to insist upon or enforce strict performance by the other Party of
any provision of this Agreement or to exercise any right under this Agreement
shall not be construed as a waiver or relinquishment to any extent of such
Party's right to assert or rely upon any such provision or right in that or any
other instance. DCI reserves the right to review any press releases,
advertising materials, etc, that mention DCI or include DCI's logo.
17. Sections 6, 10, 11, 12, 13 and 16 shall survive the completion,
expiration, termination or cancellation of this Agreement.
18. This Agreement sets forth the entire agreement between the Parties,
and supersedes any and all prior agreements of the Parties with respect to the
transactions set forth herein. Neither Party shall be bound by, and each Party
specifically objects to any term, condition or other provision which is
different from or in addition to the provisions of this Agreement, unless such
change, amendment or modification of any provision of this Agreement is set
forth in a subsequent written instrument duly signed by both Parties. In the
event that any provision of this Agreement conflicts with the law under which
this Agreement is to be construed or if any such provision is held invalid by a
court with jurisdiction over the Parties, such provision shall be deemed to be
restated to reflect as nearly as possible the original intentions of the Parties
in accordance with applicable law, and the remainder of this Agreement shall
remain in full force and effect. This Agreement shall be interpreted, construed
and enforced in all respects in accordance with the laws of the Commonwealth
of Virginia except for its conflicts of laws principles.
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19. This Agreement may be executed in counterparts, each of which shall be
deemed an original and all of which together shall constitute one and the same
document.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
DIGITAL CITY, INC. AUTO-BY-TEL, INC.
By: /S/ RJ SMITH By: /S/ PETER R. ELLIS
--------------------------------- -------------------------------
Print Name: RJ SMITH Print Name: PETER R. ELLIS
------------------------- ----------------------------
Title: VICE-PRESIDENT/GENERAL MANAGER Title: PRESIDENT
------------------------------ ---------------------------------
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<PAGE>
EXHIBIT A
ICON AND ADVERTISING SITE
-------------------------
1. The Icon.
The Icon may consist of the Advertiser logo or another marketing icon that is
mutually agreed upon by DCI and Advertiser. The Icon must fit the dimensions
consistent with DCI screen format.
Placement and Rotation
A. Digital City -Main Screens.
The Advertising Icon shall have placement on the Main screen of each Digital
City Market for the equivalent of [*] of the front screen views for [*]
B. Digital City- Auto Screens.
The Advertiser Icon will have permanent placement on the Front Auto screens of
Digital City for the duration of this Agreement in [*]
C. Integrated Marketing.
The Advertiser Icon will be incorporated into a rotation that provides placement
on a variety of other screens throughout the Digital City service in each
participating city for the duration of this contract. This will include exposure
in the different sections of Digital City, headline slots, and mentions on the
Digital City welcome screens.
2. The Advertiser site on AOL.
When clicked, the Advertiser Icon will link to an Advertiser page developed for
the America Online environment. The design of this page will be determined and
mutually agreed upon by the Advertiser creative staff and Digital City. This
page will be produced by Digital City and will be integrated with the Advertiser
web-site on the Internet. Additional pages must be approved by DCI. Upon mutual
agreement and under a separate contract Advertiser will also be able to
incorporate third party automotive information into the Advertising Site subject
to Advertiser paying the DCI negotiated rates for production. DCI retains all
rights to review and approve of the third party material and to distribute it's
own third party automotive content in the DCI automotive areas; provided that
any material appearing on the Advertising Site on the execution date of this
Agreement shall be deemed to be approved by DCI.
[*] Confidential Treatment Requested
<PAGE>
EXHIBIT B
COST BREAKDOWN
--------------
[*]
[*] Confidential Treatment Requested
<PAGE>
EXHIBIT C
ROLL-OUT AND PRICING SCHEDULE
-----------------------------
[*]
[*] Confidential Treatment Requested
<PAGE>
EXHIBIT D
CONTRACT TOTALS
---------------
[*]
[*] Confidential Treatment Requested
<PAGE>
EXHIBIT 10.11
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.
[*] Confidential Treatment has been requested for certain portions of this
exhibit
<PAGE>
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 [*] 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 [*] Edmund's may terminate this Agreement on not less than [*]
given to ABT on or before [*]. 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 [*]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
---------------
Edmund's shall recommend ABT on the "Edmund's Site" as a dealer-based
purchasing/leasing program for new automobiles and trucks. This recommendation
shall be approved as to form and content by ABT, such approval not to be
unreasonably withheld. This recommendation shall be exclusive and Edmund's
shall not recommend any dealers (sellers/lessors) of automobiles and trucks or
other marketing programs for automobiles and trucks of like nature to ABT,
except with the written consent of ABT. (By way of example, Edmund's may
recommend or refer Consumers directly to automobile and truck manufacturers,
since manufacturers do not offer a marketing program which is "of like nature"
to ABT's marketing program. Edmund's shall mirror ABT's Internet Form on
Edmund's Internet Site (or other like text and graphics approved by ABT).
Edmund's and ABT shall work together to develop and maintain a file transfer
process where both parties can determine whether the ABT Purchase Requests have
been originated by Edmund's.
4. Fees to be Paid to Edmund's
---------------------------
a. ABT shall pay Edmund's [*] which is received directly from
Edmund's either from the "Edmund's Site" [*] [*] in any calendar year, ABT shall
pay Edmund's [*]. However, for purposes of
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calculating the amount of fees to be paid to Edmund's, [*]
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 [*] of the signing of this Agreement.
2. ABT shall pay Edmund's [*] which it received as a result of [*]
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 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.
[*] Confidential Treatment Requested
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2. Non-Competition
---------------
For the term of this Agreement and for [*] 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
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.
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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 of 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 sub paragraphs
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
----------------
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,
-5-
<PAGE>
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:__________________________________ By:___________________________________
Title:_______________________________ Title:________________________________
-6-
<PAGE>
EXHIBIT 10.12
AUTOMOTIVE INFORMATION CENTER REFERRAL AGREEMENT
THIS REFERRAL AGREEMENT ("Agreement") is entered into as of the 6 day of
-
Sept 1996, ("Effective Date") by and between Automotive Information Center
- ---- --
("AIC"), a New York General Partnership whose address is 360 Massachusetts
Avenue, Acton, MA 01720, and Auto-By-Tel Corporation ("ABT"),whose address is
2711 East Coast Highway, Suite 203, Corona Del Mar, CA, 92625.
W I T N E S S E T H:
WHEREAS AIC has developed a site on the World Wide Web portion of the
Internet ("AutoSite"), a service on CompuServe ("AutoSite on CIS"), and a
service on CompuServe's WOW! ("AutoSite on WOW!") (collectively, the "Sites"),
and wishes to provide to ABT a referral service whereby users of the Sites may
submit Purchase Request Forms to ABT, in consideration of the payments described
herein.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
AIC and ABT (collectively, the "Parties") hereby agree as follows:
I. DEFINITIONS.
As used in this Agreement, these terms, whether in singular or plural, have
the following meanings:
(a) "AutoSite" - AIC's World Wide Web site having the URL www.autosite.com.
(b) "AutoSite on CIS" - AIC's vehicle information service hosted on
CompuServe Information Service.
(c) "AutoSite on WOW!" - AIC's vehicle information hosted on CompuServe's
WOW! service.
(d) "Completed Form" - An ABT Purchase Request Form available online at the
Sites which has been filled out by a user of one of the Sites and which may
contain, at ABT's option, include an application for financing. In order for
the form to be a Completed Form, all fields designated in advance by ABT as
mandatory fields must be completed by the a user.
(e) "Buy It Here!" page - a promotional page, hosted at AutoSite and on
AutoSite on WOW! (but not at AutoSite on CIS) and maintained and controlled by
AIC, which will contain promotional information about ABT and links to the ABT
Purchase Request Forms and ABT Promotional Page.
(f) "ABT promotional page" - a page hosted at AutoSite and on AutoSite on
WOW! (but not at AutoSite on CIS) which contains promotional information and/or
images about ABT, supplied to AIC by ABT. This page will have a link to the ABT
Purchase Request Form.
II. SERVICES.
(a) Services provided at AutoSite and at AutoSite on WOW!.
(i) AIC agrees to list ABT on its "Buy It Here!" page at AutoSite and
at AutoSite on WOW!, and to incorporate links to the ABT Purchase Request Form,
to be hosted at AutoSite and at AutoSite on
[*] Confidential Treatment has been requested for portions of this exhibit.
<PAGE>
WOW!, on its "Buy It Here!" page. The "Buy It Here!" page will be linked to from
pages in the New Car Showroom area on AutoSite and on AutoSite on WOW!, which
may include the following:
<TABLE>
<CAPTION>
PAGE TYPE DESCRIPTION APPROXIMATE # OF PAGES
<S> <C>
[*]
</TABLE>
AIC reserves the right to change the structure and functionality of
AutoSite and of AutoSite on WOW! and the pages contained within AutoSite and
within AutoSite on WOW! at any time and at its sole discretion, but will use
best efforts to link to the "Buy It Here!" page from prominent pages on AutoSite
and on AutoSite on WOW!. AIC shall notify ABT promptly of changes to AutoSite
or to AutoSite on WOW! on pages which promote ABT services.
(ii) AIC agrees to incorporate an ABT promotional page at AutoSite and
on AutoSite on WOW!, with links from the "Buy It Here!" page and to/from each
ABT Purchase Request Form.
(iii) AIC agrees to process the input from the ABT Purchase Request
Forms on AutoSite and on AutoSite on WOW! and to write such processed input to
an ASCII-format file, which shall be placed at 15-minute intervals on an FTP
site where ABT may retrieve it at its convenience.
(b) Services provided at AutoSite on CIS.
(i) AIC agrees to incorporate a button in its AutoSite on CIS menu
which will lead to an ABT Purchase Request Form.
(ii) AIC agrees to include a limited amount of text, as determined by
AIC, promoting ABT in the "Buying Your Car" section in each report on AutoSite
on CIS.
(iii) AIC agrees to exercise its best efforts to process the input
from the Purchase Request Forms on AutoSite on CIS programmatically into an
ASCII text file once each business day, and to make that file electronically
available to ABT for retrieval at its convenience. However, AIC shall not be
responsible for lack of access to said input due to circumstances beyond its
control.
[*] Confidential Treatment Requested
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<PAGE>
(iv) All efforts described in this Section II.(b) are subject to
approval by CompuServe.
III. LIMITED EXCLUSIVITY.
AIC and ABT agree that for the term of this agreement, AIC will not offer
services described in [*] to other buying services, provided however that if AIC
determines [*] AIC may terminate this agreement, in which case AIC agrees that
it will not offer a similar referral service to other buying services before the
balance of the term.
IV. NO FULFILLMENT OBLIGATIONS.
AIC shall have no responsibility or obligations with respect to the
fulfillment of goods or services ordered via the Sites from or through ABT, and
all fulfillment-related tasks shall be performed by or cause to be performed by
ABT.
V. ABT PROMOTIONAL PAGE AND PURCHASE REQUEST FORM DESIGN.
Within [*] of the execution of this Agreement, ABT shall deliver to AIC any
text and images it may wish to incorporate into its Promotional Page and
Purchase Request Form, including specifications detailing which fields on the
Purchase Request Form are mandatory. Within [*] of receiving these components,
AIC will deliver to ABT for ABT's approval a sample Promotional Page and a
sample Purchase Request Form. Upon such written approval, AIC will complete and
install these pages on AutoSite. In addition, AIC shall exercise its best
efforts to install the Purchase Request Form on AutoSite on CIS and on AutoSite
on WOW! as quickly as is reasonably possible, but shall not be responsible for
delays beyond its control. ABT recognizes that AIC has no control over timing of
installation of pages on AutoSite on CIS or AutoSite on WOW!.
VI. TERM.
The term of this Agreement ("Initial Term") shall be [*] from the date on
which the ABT Promotional Page and the ABT Purchase Request Form have first been
installed on AutoSite (the "Commencement Date"), which shall be not later than
[*]. This Agreement shall be automatically renewed for up to [*] ("Renewal
Periods") without further notice unless the Agreement is terminated by written
notice from either party to the other at [*] prior to the end of the then-
current Initial Term or Renewal Period.
VII. FEES.
In consideration of the above, ABT agrees to pay AIC its stated Marketing
Fee and a Purchase Referral Fee as defined in the attached and hereby
incorporated Automotive Information Center Referral Rate Card.
(a) The Marketing Fee will be due on the first of each month, in advance,
for the month to come.
(b) The Purchase Referral Fee for Completed Forms will be due on the [*]
for referrals from [*] AIC will send ABT a statement in the [*] detailing the
number of Completed Forms processed by AIC on behalf of ABT during [*] and the
amount owed for such Completed Forms. AIC shall maintain adequate records of
Completed Forms to verify billings for a period of not less than one year after
the term of this Agreement. Any failure by AIC to submit statements to
[*] Confidential Treatment Requested
-3-
<PAGE>
ABT, or the late submittal of such statements, shall not be construed as a
waiver of any obligation of ABT to pay Purchase Referral Fees to AIC.
VIII. LIMITED WARRANTY.
AIC does not warrant and specifically disclaims any representations that
[*] If AIC has prior knowledge of planned interruptions of service on any of the
Sites it will use reasonable best efforts to notify ABT of such interruptions.
AIC represents and warrants, subject to II.b.4., that (i) it has power,
authority and authorization to enter into this agreement and perform its
obligations hereunder and that the person executing this Agreement on behalf of
AIC is empowered to do so, (ii) neither the execution of this Agreement nor the
performance of AIC's obligations hereunder conflict with any other agreement to
which AIC is a party, including any agreements pertaining or related to the
Sites. ABT represents and warrants that (i) it has power, authority and
authorization to enter into this agreement and perform its obligations hereunder
and that the person executing this Agreement on behalf of ABT is empowered to do
so, (ii) neither the execution of this Agreement nor the performance of ABT's
obligations hereunder conflict with any other agreement to which ABT is a party.
Nothing contained herein shall be construed to mean that AIC is responsible in
any way for the contents of ABT's Purchase Request Form or any promotional text
concerning ABT. ABT is entirely responsible for such contents and all
obligations with respect to ABT's customers or potential customers. ABT agrees
that it shall include any and all proprietary notices of third parties in
materials supplied to AIC. EXCEPT AS EXPRESSLY SET FORTH IN THIS PARAGRAPH, AIC
DISCLAIMS ALL OTHER EXPRESS WARRANTIES AND ALL WARRANTIES, DUTIES AND
OBLIGATIONS IMPLIED IN LAW, INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. AIC'S LIMITED WARRANTY SET
FORTH HEREIN IS IN LIEU OF ALL LIABILITIES OR OBLIGATIONS OF AIC FOR DAMAGES
ARISING OUT OF OR IN CONNECTION WITH THE SITES OR THE SERVICES.
IX. LIMITATION OF LIABILITY.
AIC WILL NOT BE RESPONSIBLE TO ABT OR ANY THIRD PARTIES UNDER ANY
CIRCUMSTANCES FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL PUNITIVE, OR
EXEMPLARY DAMAGES OR LOSSES WHICH ABT MAY INCUR IN CONNECTION WITH THE SERVICES
OR OTHERWISE REGARDLESS OF THE TYPE OF CLAIM OR THE NATURE OF THE CAUSE OF
ACTION, EVEN IF AIC HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE OR LOSS.
IN NO EVENT SHALL AIC'S LIABILITY FOR DIRECT DAMAGES INCURRED IN ANY TERM FOR
ANY REASON AND UPON ANY CAUSE OF ACTION ARISING FROM OR RELATING TO THE
AGREEMENT OR THE SUBJECT MATTER HEREOF EXCEED THE FEES PAID TO AIC BY ABT
HEREUNDER IN SAID TERM IN WHICH THE DAMAGES ARE INCURRED.
X. CONFIDENTIALITY.
AIC covenants and agrees that it will not disclose the identities or
addresses of persons who complete ABT's Purchase Request Form with the Sites to
any third party, or use such information for AIC's own purposes, provided,
however, that AIC reserves the right to disclose general information regarding
numbers of hits and demographics of persons accessing the Sites or any portion
thereof.
[*] Confidential Treatment Requested
-4-
<PAGE>
XI. PROPRIETARY RIGHTS: INDEMNIFICATION
ABT agrees and acknowledges that AIC and its suppliers own all rights,
title and interest in and to the Sites, subject solely to ABT's rights in and to
the information and content supplied to AIC by ABT hereunder. Nothing in this
Agreement or otherwise shall be construed to convey to ABT any interest
whatsoever in the Sites, including, without limitation, any HTML, JAVA, CGI
programs, or any other custom programs or scripts developed hereunder. ABT
represents and warrants to AIC that ABT owns or otherwise has the right to
convey to AIC the information and content provided to AIC and that such
information and content does not infringe intellectual property rights of any
third party. ABT represents and warrants that it has obtained, and currently
has, any and all grants of rights from third parties which may be required to
display text, graphics or other materials in its Promotional Page and its
Purchase Request Form as specified by ABT. ABT represents and warrants that it
has set forth or described in the Agreement any and all requirements of ABT's
suppliers, if any, including, without limitation, ABT's obligations set forth in
Section IV, with respect to content and form of materials to be used in any ABT
Promotional Page and ABT Purchase Request Form, including, without limitation,
any requirements with respect to intellectual property rights and/or notices.
AIC reserves the right not to exhibit on the Sites any image or text for which
AIC determines inadequate information has been provided. ABT agrees to defend
and indemnify and hold harmless AIC and its owners, proprietors, officers,
shareholders, directors, employees, affiliates and subsidiaries from and against
any and all claims, proceedings, damages, injuries, liability, losses, costs and
expenses (including, without limitation, reasonable attorneys' fees) arising out
of or relating to any acts by ABT undertaken in connection with the Sites,
including, without limitation, those arising out of or related to any breach of
any ABT warranty, or any ABT Promotional Page or ABT Purchase Request Form, or
information or content which ABT supplies to AIC hereunder. [*]
XII. OPERATION OF THE SITES.
AIC shall have sole discretion to determine all aspects of the operation of
the Sites, and, except where otherwise expressly provided in this Agreement in
Section V, all matters relating to the content, structure, and sequence of
material appearing in the Sites, including, but not limited to, the navigational
and functional standards for the Sites. AIC shall have the right, at its
discretion at any time, to reject, exclude, or remove from the Sites any
material which in its reasonable judgement is objectionable, obscene, or
defamatory.
XIII. SEVERABILITY.
In the event that any provision of this Agreement becomes or is declared by
a court of competent jurisdiction to be illegal, unenforceable or void, then
this Agreement shall continue in full force and effect without said provision;
provided, however, that no such severability shall be effective if it materially
changes the economic benefit of this Agreement to any party.
XIV. GENERAL.
(a) This Agreement shall be governed by and construed and enforced in
accordance with the laws of the Commonwealth of Massachusetts, and ABT hereby
agrees to the jurisdiction of its courts.
(b) The section headings contained herein are for reference purposes only,
and shall not in any way affect the meaning or interpretation of this Agreement.
[*] Confidential Treatment Requested
-5-
<PAGE>
(c) This Agreement sets forth the entire agreement and understanding of the
parties hereto concerning the subject matter hereof, and supersedes all prior
agreements, arrangements, and understandings between the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
Automotive Information Center Auto-By-Tel
By: /s/ WAYNE R. LILLEY By: /s/ PETE ELLIS
-------------------------- ---------------------------
Name: Wayne R. Lilley Name: Pete Ellis
Title: Chief Executive Officer Title:
------------------------
Federal Tax ID:
---------------
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<PAGE>
Automotive Information Center Referral Rates
I. PURCHASE REFERRAL FEE.
The rate stated below (the "Purchase Referral Fee") applies to each
Completed Form (including, at ABT's option, application for financing), as
defined in the Automotive Information Center Referral Agreement submitted by any
user [*]
[*]
II. MARKETING FEE.
[*]
[*] Confidential Treatment Requested
-7-
<PAGE>
EXHIBIT 10.13(a)
ABT SUBSCRIPTION AGREEMENT
--------------------------
THIS AGREEMENT made this ((Ck_RcvdTxt)) 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
((Dealer_Corp)), a(n) ((STTxt)) ((Entity)), d.b.a. ((Dealer_DBA)), with its
principal place of business at ((Bill_Addr)), ((City)) ((ST)) ((Dlr_Zip)).
RECITALS
--------
WHEREAS, ABT is in the business of locating persons interested in purchasing
and/or leasing automobiles and/or trucks primarily through electronic media
("Potential Purchasers"):
WHEREAS, Dealer is a dealer of automobiles and/or trucks who wishes to
participate in a program where ABT provides certain information about Potential
Purchasers to Dealer which will facilitate Dealer's sales of automobiles to
Potential Purchasers and thereby decrease marketing costs which, in turn, will
allow Dealer to offer automobiles and trucks at a competitive price;
WHEREAS, ABT has invested considerable amounts of money in order to acquire
relevant information about Potential Purchasers from the Internet and on-line
computer services; and
WHEREAS, ABT wishes to ensure that Dealer will provide a high level of service
to Potential Purchasers provided to the Dealer through their participation in
this program.
NOW THEREFORE, in consideration of the mutual covenants and promises contained
herein, ABT AND DEALER AGREE AS FOLLOWS:
1. SERVICES TO BE PERFORMED.
------------------------
ABT shall provide a marketing program on the Internet and Online
Services to attract Potential Purchasers and shall forward information
regarding the Potential Purchasers identified for the make subscribed and
in the zip code area subscribed to the Dealer.
2. USE OF SERVICES.
---------------
(a) Dealer Participation. Dealer agrees to abide by ABT's Customer
--------------------
Service Standards as more fully described in Paragraph 10 below, which may be
revised from time to time by ABT. Dealer shall designate one key employee to be
provided instructions by ABT or its authorized agent. Dealer shall notify ABT
within ten (10) days of any change in the assignment of any designated key
employee. Dealer shall be responsible for costs, if any, associated with the
training of its key employees to use ABT's services. Dealer shall promptly sign
any confidentiality agreements submitted by ABT to protect ABT's proprietary
rights. ABT shall notify Dealer in writing of any revisions or additions to the
Customer Service Standards, and such revisions shall take effect immediately
upon Dealer's receipt thereof. Without limiting the generality of the
foregoing, Dealer acknowledges that Auto-By-Tel will institute a financing
program whereby customers may receive low-cost financing from sources provided
by Auto-By-Tel through its web site (the "Financing Arrangements"). Dealer
agrees with ABT that low-cost Financing Arrangements pursuant to which customers
would (i) receive a financing proposal in conjunction with their receipt of a
vehicle price quote, and (ii) close both the vehicle acquisition and financing
quickly through Dealer, would be viewed by customers as an improvement in the
Auto-By-Tel program, consequently increasing the attractiveness of the ABT
program and its value to Dealer. Dealer agrees to cooperate fully with the
Financing Arrangements instituted by ABT through its web site, including without
limitation entering into customary closing administration arrangements with
finance companies as requested by ABT, and to take such actions as reasonably
requested by such finance companies or ABT to ensure that customers receive a
high level of service and satisfaction in connection with the Financing
Arrangements. After ABT commences the Financing Arrangements, Dealer
acknowledges that changes in the Customer Services Guidelines may from time to
time pertain to such Financing Arrangements.
(b) Use of System and Modifications. It is agreed to by the parties that
-------------------------------
the use of ABT's services is restricted solely to Dealer and its designated
employees and other duly authorized licensees of ABT. Dealer shall not compete
with ABT in providing the services herein discussed.
3. EQUIPMENT.
---------
(a) ABT Equipment. ABT warrants that it possesses or has access to and
-------------
the right to use computer equipment and other office equipment necessary for ABT
to perform its services contemplated by this Agreement.
(b) Dealer Equipment. Dealer, at its sole cost and expense, shall provide
----------------
the computer and other office equipment specified from time to time by ABT to
use and receive the services to be provided hereunder by ABT.
(c) Equipment Maintenance, Risk of Loss. Dealer shall maintain all of
-----------------------------------
their computer and office equipment in good and proper working order and repair.
Dealer shall assume all responsibility for loss or damage to Dealer's equipment
in the utilization of the services to be provided hereunder by ABT.
4. TITLE TO SYSTEM, TRADEMARKS.
---------------------------
The services to be provided hereunder by ABT, together with any
modifications and/or improvements therein made by ABT or Dealer during the term
of this Agreement, or any extensions thereof, and all copies thereof are
proprietary to ABT and title thereto remains in ABT. All applicable rights to
patents, copyrights, trademarks and trade secrets in the System and in the name
"Auto-By-Tel" and its logo are and shall remain solely in 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 who shall also 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.
5. ASSIGNMENT OF TERRITORY.
-----------------------
Subject to the terms and conditions set forth in this Agreement, ABT hereby
grants to Dealer the non-transferable right to use the services to be performed
by ABT, as contemplated by this Agreement, within the geographic area
designated by the following zip codes: ((Territory)) and for the following make
of motor vehicles: ((Franchise)) (the "Territory"). ABT may change the Dealer's
Territory upon thirty (30) days written notice.
Notwithstanding the foregoing, ABT retains the right, directly or through
other dealerships, to market and use its System and services in all areas other
than Dealer's Territory, and within Dealer's Territory for all makes of motor
vehicles not listed above.
6. SUBSCRIPTION FEES.
-----------------
(a) Dealer shall pay ABT ((Amt_Text)) dollar(s) (((Amount))) as an initial
start-up fee concurrently with Dealer's execution of this Agreement.
(b) Dealer shall pay ABT the amount of ((Monthly)) as a monthly
subscription fee which is due and payable on the first day of every
month. ABT may change this monthly subscription fee upon thirty (30)
days written notice of the increased price to the dealer.
(c) Dealer shall pay ABT an annual fee on the first anniversary date of
this Agreement and each anniversary thereafter. A notice indicating
the amount of the annual fee will be sent to the Dealer prior to the
anniversary date of this Agreement.
(d) If ABT terminates this Agreement pursuant to Section 8(b)(ii) for no
reason or Dealer terminates this Agreement pursuant to Section
8(c)(iii), ABT shall refund a prorated amount of fees paid under this
Agreement for the remaining portion of the period with respect to
which such fees had been paid, except that the monthly fees due for
the month in which the Agreement is terminated shall not be refunded
or prorated. (The startup fee shall be deemed to have been paid for
the first year this Agreement is in effect.) In no other circumstances
shall any amounts paid under this Agreement be refundable.
7. TAXES.
-----
Dealer shall, in addition to any other amounts payable under this
Agreement, pay all taxes - federal, state, local or otherwise, excluding income
taxes attributable to the income of ABT however designated which are levied or
imposed by reason of the services provided under this Agreement. Without
limiting the foregoing, Dealer shall promptly pay to ABT an amount equal to any
such items actually paid or required to be collected or paid by ABT.
8. TERM AND TERMINATION.
--------------------
(a) This Agreement shall be for a term of three (3) years, provided that
ABT, in its sole discretion, may extend the term of this Agreement for an
additional two (2) years.
(b) ABT may terminate this Agreement:
(i) immediately if Dealer does not adhere to the Customer Service
Standards in effect, or any fees due ABT pursuant to Section 6
are outstanding more than thirty (30) days, or if any amount
payable to ABT under Sections 7 or 13 are outstanding more than
thirty (30) days after ABT makes a written request therefor, or
any other breach by Dealer of this Agreement is not cured
within ten (10) days after written notification by ABT of such
breach; or
(ii) at any other time, for any reason or for no reason, upon thirty
(30) days written notice to the Dealer.
(c) Dealer may terminate this Agreement:
(i) immediately, if an order for liquidation against ABT is entered
and not stayed in a bankruptcy proceeding;
(ii) immediately, if ABT is guilty of willful misconduct in the
performance of its duties under this Agreement;
(iii) upon thirty (30) days written notice delivered within ten (10)
days of the effective date of any shrinkage of Dealer's
Territory pursuant to Section 5; or
(iv) at any other time, in its sole discretion, upon thirty (30)
days written notice to ABT.
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
paragraphs 2b, 4, 12, 13, 14, 15, & 21.
9. PERIODIC OPERATIONS REPORTS.
---------------------------
<PAGE>
(a) Reports. ABT shall furnish to Dealer, on a quarterly basis, an
-------
operations report which shall include the number of inquiries received by ABT
from Potential Purchasers in Dealer's Territory. Dealer shall report to ABT on
a monthly basis the number and names of Potential Purchasers who purchased motor
vehicles from Dealer, the number of vehicles financed and the amounts financed
and such other information as ABT may from time to time request.
(b) Duty of Care. ABT shall not be liable for any loss of data, delays
------------
and/or errors in transmitting data occurring for any reason or for any damages
arising as a consequence thereof.
Page 1
((ABT_DLRN)) ((Dealer_ID)) Parent ID ((Parent_ID)) ((Franchise))
10. CUSTOMER SERVICE STANDARDS.
--------------------------
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 receipt of the inquiry from ABT. Dealer's initial response shall be by
telephone and shall disclose (i) the availability of the vehicle inquired about,
(ii) the manufacturer's suggested retail price of the vehicle, (iii) all
requested options, (iv) the price at which the Dealer will sell/lease the
vehicle with all requested options to the Potential Purchaser, and (v) all other
terms and costs required by law to be disclosed to prospective purchasers (all
such information, the "Dealer Information"). In order to improve the services
offered by ABT while maintaining uniform delivery of such services, ABT may,
from time to time, amend the Customer Service Standards, or impose additional
Customer Service Standards upon thirty (30) days notice to Dealer. Dealer
acknowledges that maintenance of the ABT Customer Service Standards is crucial
to the value of ABT's services and agrees to adopt such amendments or additions,
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.
11. DEALER'S COVENANTS.
------------------
Dealer hereby covenants and agrees that all of the terms and conditions
contained in Dealer Information transmitted to a Potential Purchaser shall
remain in full force and effect and be binding upon Dealer for a period of seven
(7) days after its transmittal provided the identified vehicle still remains
available for sale, and Dealer agrees to include a statement to such effect in
the Dealer Information.
12. CONFIDENTIALITY.
---------------
ABT agrees to treat all records and other information provided by Dealer,
with respect to terms of sale, financing or leasing of motor vehicles,
confidential, except that this information may be transmitted to consumers
making inquiries concerning the terms of purchase, financing or leasing of motor
vehicle(s). Dealer, on behalf of itself and its employees, agrees to keep all
information with respect to ABT's services confidential and, without the
previous written consent of ABT, Dealer shall not impart ABT's services, or the
concept thereof, to any person or entity whatsoever other than employees of
Dealer. 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 days
written notice to the other party, release required information. 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 acknowledges and agrees that it will keep such trade
secrets confidential, and the sale or unauthorized use or disclosure of any of
ABT's trade secrets constitutes theft and will greatly damage ABT.
13. INDEMNIFICATION.
---------------
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 any third party claim (including, but not limited to, any
claim for damages by any person or entity who purchases, leases and/or finances
a motor vehicle(s) from Dealer through the utilization of ABT's services)
resulting from the use of ABT's services provided hereunder. Dealer shall
defend and settle, at its sole cost and expense, all suits or proceedings
arising out of any of the foregoing, provided ABT gives Dealer prompt notice of
any such claim of which it learns. In all events, ABT shall have the right to
participate in the defense of any such suit or proceedings through counsel of
its own choosing. ABT shall be without liability to Dealer with respect to
anything done, or ordered to be done, in accordance with the terms of this
Agreement or instructions properly received pursuant hereto, if done in good
faith and without gross negligence or willful or wanton misconduct.
14. EXCLUSIVITY.
-----------
Dealer acknowledges that the value to Dealer of this agreement is based on
the unique package of services marketed to automobile customers by ABT and ABT's
reputation for delivering such services on a consistent basis. Dealer agrees
that certain key elements of the ABT package of services are: (i) electronic
transmission of customer purchase or lease requests; (ii) rapid response by
dealers to consumer pricing or lease pricing requests, including immediate
telephone contact with upfront, firm pricing provided over the phone on such
call; (iii) customer paperwork completed or nearly completed prior to customer
arrival at the dealership for pickup so as to ensure the customer spends as
little time as possible at the dealership for pickup; and (iv) Dealer training
and support to implement the ABT package of services and to maintain the style
and reputation of the ABT package of services (collectively the "Key Elements').
Dealer acknowledges that ABT has spent, and will spend, considerable time and
money developing its package of services and training Dealer to deliver such
services in a consistent way which maintains ABT's distinctive market presence
and reputation. Accordingly, Dealer agrees that during the Term of this
Agreement (and for one (1) year thereafter if this Agreement is terminated
unless it is terminated by the Dealer pursuant to section 8(c)(iii)), Dealer and
its affiliates will not, directly or indirectly, participate with any third
party in any arrangement or agreement which involves any or all of the Key
Elements, and will not, directly or indirectly, participate with any third party
in any arrangement or agreement which involves any or all of the Key Elements,
and will not participate in any pricing, credit or financing, insurance or
information service involving or made available on the Internet, online or by
other electronic means. Without contradicting the foregoing, Dealer may
establish and maintain its own web site and/or participate in any factory direct
program.
Notwithstanding any other provisions of this Agreement, in the event Dealer
breaches this Section 14, the provisions of this Section shall remain in full
force and effect for one (1) year after such breach is cured. Dealer
acknowledges that the provisions of this Section 14 were a material inducement
to ABT in entering into this Agreement, and that ABT would not have entered into
this Agreement with Dealer in the absence of such provisions.
Dealer acknowledges and agrees that compliance with the provisions of
Sections 12 and 14 is necessary to protect the business and good will of ABT,
and that any breach of Sections 12 or 14 will result in irreparable and
continuing damage to ABT, for which money damages may not provide adequate
relief. Accordingly, Dealer agrees that during the "Exclusivity Period" (as
defined below), Dealer and its affiliates will not directly or indirectly,
participate with any third party in any arrangement or agreement which involves
any or all of the Key Elements, and will not participate in any pricing, credit
or financing, insurance or information service involving or made available on
the Internet, online or by other electronic means. For purposes of this Section
14, the "Exclusivity Period" commences on the date of this Agreement, and
terminates one year after the date of termination; provided, however, that if
-----------------
this Agreement is terminated any time after the first anniversary of the date
hereof, then the Exclusivity Period terminates six months after the date of
termination; provided, further, however, that if this Agreement is terminated by
--------------------------
Dealer pursuant to Section 8(c)(iii) hereof, then the Exclusivity Period
terminates on the date of termination of the Agreement.
15. WARRANTY LIMITATION.
-------------------
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 UNDER THIS AGREEMENT BY
ABT. SPECIFICALLY EXCLUDED ARE ALL WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING
BUT NOT LIMITED TO IMPLIED WARRANTIES OF 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 THE CLAIMS OF DAMAGES MADE BY ANY THIRD PARTY EVEN IF IT HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES.
16. ADVERTISEMENTS.
--------------
From time to time, ABT may provide Dealer with camera-ready and other
logos, trademarks, artwork and materials for the limited purpose of inclusion,
at Dealer's option, within Dealer print and television advertisements to promote
the association of Dealer with the ABT program. ABT shall grant Dealer a
revocable, limited license to use such materials for such limited purposes, and
Dealer shall use such materials in no other manner. Any such materials shall
remain at all times the property of ABT, they shall be returned upon request,
and the limited license herein granted may be revoked at any time by written
notice to Dealer.
17. 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 to such address as the party to receive the notice or request
so designates by written notice to the other.
18. ASSIGNMENT.
----------
This Agreement and the rights and duties hereunder shall not be assignable
by the Dealer except upon written consent of ABT. This Agreement and the rights
and duties hereunder shall be assignable by ABT.
19. INDEPENDENT CONTRACTORS.
-----------------------
The relationship between ABT and Dealer created by this Agreement shall be
that of independent contractor. Nothing contained in this Agreement shall be
construed as creating or constituting a partnership, agency, or joint venture
between ABT and Dealer.
20. NO WAIVER.
---------
The failure of either party to exercise in any respect any right provided
for herein shall not be deemed a waiver of any right hereunder.
21. SEVERABILITY, GOVERNING LAW AND JURISDICTION.
--------------------------------------------
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. This
Agreement and the performance hereunder shall be governed and construed in
accordance with the laws of the
<PAGE>
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.
22. COOPERATION.
-----------
Upon the request of ABT, Dealer agrees to confirm in writing, in form
satisfactory to ABT and provided by ABT at its own expense, any amendment,
modification, change in original terms or other action which alters the terms of
this Agreement and which was taken or initiated by ABT pursuant to rights
granted to, or reserved by, ABT hereunder.
23. OTHER AGREEMENTS.
----------------
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 with respect to the rendering of the 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 that no other agreement, statement, or promise
not contained in this Agreement will be valid or binding. Any modification of
this Agreement will be effective only if it is in a writing signed by the party
to be charged.
Auto-By-Tel Corporation, a Delaware Corporation Dealer: ((Dealer_Corp))
By: By:
-------------------------- --------------------------
Name: Peter Ellis Name: ((Sirname)) ((Dlr_First)) ((Dlr_Last))
Title: President Title: ((Dlr_Title))
Page
((ABT_DlrN)) ((Dealer_ID)) Parent ID ((Parent_ID)) ((Franchise))
<PAGE>
EXHIBIT 10.13(b)
ABT SUBSCRIPTION AGREEMENT
--------------------------
THIS AGREEMENT made this ((Ck_RcvdTxt)) by and between Auto-By-Tel
Marketing Corporation, a Delaware Corporation, with its principal place of
business at 2711 E. Coast Highway, Corona Del Mar, California 92625 ("ABT"), and
((Dealer_Corp)), a(n) ((STTxt)) ((Entity)), d.b.a. ((Dealer_DBA)), with its
principal place of business at ((Bill_Addr)), ((City)) ((ST)) ((Dlr_Zip.)).
RECITALS
--------
WHEREAS, ABT is in the business of locating persons interested in purchasing
and/or leasing automobiles and/or trucks primarily through electronic media
("Potential Purchasers");
WHEREAS, Dealer is a dealer of automobiles and/or trucks who wishes to
participate in a program where ABT provides certain information about Potential
Purchasers to Dealer which will facilitate Dealer's sales of automobiles to
Potential Purchasers and thereby decrease marketing costs which, in turn, will
allow Dealer to offer automobiles and trucks at a competitive price;
WHEREAS, ABT has invested considerable amounts of money in order to acquire
relevant information about Potential Purchasers from the Internet and on-line
computer services; and
WHEREAS, ABT wishes to ensure that Dealer will provide a high level of service
to Potential Purchasers provided to the Dealer through their participation in
this program.
NOW THEREFORE, in consideration of the mutual covenants and promises contained
herein, ABT AND DEALER AGREE AS FOLLOWS:
1. SERVICES TO BE PERFORMED
------------------------
ABT shall provide a marketing program on the Internet and Online
Services to attract Potential Purchasers and shall forward information regarding
the Potential Purchasers identified for the make subscribed and in the zip code
area subscribed to the Dealer.
2. USE OF SERVICES.
---------------
(a) Dealer Participation. Dealer agrees to abide by ABT's Customer
--------------------
Service Standards as more fully described in Paragraph 10 below, which may be
revised from time to time. Dealer shall designate one key employee to be
provided instructions by ABT or its authorized agent. Should the assignment of
any designated key employee change, Dealer shall notify ABT. Dealer shall be
responsible for costs, if any, associated with the training of its key employees
to use ABT's services. Dealer shall sign any necessary confidentiality
agreements to protect ABT's propriety rights.
(b) Use of System and Modifications. It is agreed to by the parties that
-------------------------------
the use of ABT's services is restricted solely to Dealer and its designated
employees and other duly authorized licensees of ABT. Dealer shall not compete
with ABT in providing the services herein discussed.
3. EQUIPMENT.
---------
(a) ABT Equipment. ABT warrants that it possesses or has access to and
-------------
the right to use computer equipment and other office equipment necessary for ABT
to perform its services contemplated by this Agreement.
(b) Dealer Equipment. Dealer, at its sole cost and expense, shall provide
----------------
the computer and other office equipment necessary to use and receive the
services to be provided hereunder by ABT.
(c) Equipment Maintenance, Risk of Loss. Dealer shall maintain all of
-----------------------------------
their computer and office equipment necessary for the utilization of the
services to be provided hereunder by ABT in good and proper working order and
repair. Dealer shall assume all responsibility for loss or damage to Dealer's
equipment in the utilization of the services to be provided hereunder by ABT.
4. TITLE TO SYSTEM.
---------------
The services to be provided hereunder by ABT, together with any
modifications and/or improvements therein made by ABT or Dealer during the term
of this Agreement, or any extensions thereof, and all copies thereof are
proprietary to ABT and title thereto remains in ABT. All applicable rights to
patents, copyrights, trademarks and trade secrets in the System and in the name
"Auto-By-Tel" and its logo are and shall remain solely in ABT.
5. ASSIGNMENT OF TERRITORY
-----------------------
Subject to the terms and conditions set forth in this Agreement, ABT
hereby grants to Dealer the exclusive, non-transferable right to use the
services to be performed by ABT, as contemplated by this Agreement, within the
geographic area designated by the following zip codes: ((Territory)) and for the
following make of motor vehicles: ((Franchise)) (the "Territory").
Notwithstanding the foregoing, ABT retains the right, directly or
through other dealerships, to market and use its System and services in all
areas other than Dealer's Territory, and within Dealer's Territory for all makes
of motor vehicles not listed above.
6. SUBSCRIPTION FEES.
-----------------
(a) Dealer shall pay ABT ((Amt_Text)) dollar(s) (((Amount))) as an
initial start-up fee concurrently with Dealer's execution of this Agreement.
(b) Dealer shall pay ABT the amount of ((Monthly)) as a monthly
subscription fee which is due and payable on the first day of every month. ABT
may change this monthly subscription fee upon thirty (30) days written notice of
the increased price to the dealer.
(c) Dealer shall pay ABT an annual fee on the first anniversary date of
this Agreement and each anniversary thereafter. A notice indicating the amount
of the annual fee will be sent to the Dealer 60 days prior to the anniversary
date of this Agreement.
7. TAXES.
-----
Dealer shall, in addition to any other amounts payable under this
Agreement, pay all taxes - federal, state, local or otherwise - however
designated which are levied or imposed by reason of the services provided under
this Agreement. Without limiting the foregoing, Dealer shall promptly pay to
ABT an amount equal to any such items actually paid or required to be collected
or paid by ABT.
8. TERM.
----
This Agreement shall be for a term of five (5) years, commencing upon
the date hereof and terminating on ((Term_DateTxt)) unless sooner terminated
according to the provisions hereof. Either party may terminate this Agreement,
at their sole option and for any reason whatsoever, at any time by providing the
other party 30 days written notice. This Agreement may be terminated by ABT
immediately and without notice in the event that Dealer does not adhere to ABT's
Customer Service Standards or in the event that any fees due ABT are outstanding
more than 30 days. 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 paragraphs 2b, 4, 12, 13, 15, and 22.
9. PERIODIC OPERATIONS REPORTS
---------------------------
(a) Reports. ABT shall furnish to Dealer, on a quarterly basis, an
-------
operations report which shall include die number of inquiries received by ABT
from consumers in Dealer's exclusive Territory. Dealer shall report to ABT on a
monthly basis the number and names of Potential Purchasers who purchased motor
vehicles from Dealer, the number of vehicles financed and the amounts financed
and such other information as ABT may from time to time request.
<PAGE>
(b) Duty of Care. ABT shall not be liable for any loss of data, delays
------------
and/or errors in transmitting data occurring by reason of circumstances beyond
its reasonable control or for any damages rising as a consequence thereof.
10. CUSTOMER SERVICE STANDARDS
--------------------------
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 receipt of the inquiry from ABT, exclusive of Saturdays,
Sundays and holidays recognized by the federal government. Dealer's initial
response shall be by telephone and shall disclose the availability of the
vehicle inquired about, the manufacturers suggested retail price of the vehicle
and all requested options and the price at which the Dealer will sell/lease the
vehicle with all requested options to the Potential Purchaser. In addition,
Dealer shall provide information as to all other terms and costs required by law
to be disclosed to prospective purchasers (the "Dealer Information").
11. DEALER'S COVENANTS.
------------------
Dealer hereby covenants and agrees that all of the terms and
conditions contained in Dealer Information transmitted to consumer shall remain
in full force and effect and be binding upon Dealer for a period of seven (7)
days after its transmittal provided the identified vehicle remains available for
sale.
12. CONFIDENTIALITY.
---------------
ABT agrees to treat all records and other information provided by
Dealer, with respect to terms of sale, financing or leasing of motor vehicles,
confidential, except that this information may be transmitted to consumers
making inquiries concerning the terms of purchase, financing or leasing of motor
vehicle(s). Dealer, on behalf of itself and its employees, agrees to keep all
information with respect to ABT's services confidential and, without the
previous written consent of ABT, Dealer shall not impart ABT's services, or the
concept thereof, to any person or entity whatsoever other than employees of
Dealer. 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 days
written notice to the other party, release required information.
13. INDEMNIFICATION.
---------------
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 any third party claim (including, but not limited to, any
claim for damages by any person or entity who purchases, leases and/or finances
a motor vehicle(s) from Dealer through the utilization of ABT's services)
resulting from the use of ABT's services provided hereunder. Dealer shall
defend and settle, at its sole cost and expense, all suits or proceedings
arising out of any of the foregoing, provided ABT gives Dealer prompt notice of
any such claim of which it learns. In all events, ABT shall have the right to
participate in the defense of any such suit or proceedings through counsel of
its own choosing. ABT shall be without liability to Dealer with respect to
anything done, or omitted to be done, in accordance with the terms of this
Agreement or instructions properly received pursuant hereto, if done in good
faith and without negligence or willful or wanton misconduct.
14. TRADE SECRETS.
-------------
(a) 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.
(b) Dealer acknowledges and agrees that the sale or unauthorized use or
disclosure of any of ABT's trade secrets constitutes unfair competition.
15. WARRANTY LIMITATION.
-------------------
ABT MAKES NO WARRANTY REGARDING THE PERFORMANCE OF THE SERVICES
HEREUNDER AND DEALER SPECIFICALLY WAIVES ALL WARRANTEES, EXPRESSED OR IMPLIED,
ARISING OUT OF OR IN CONNECTION WITH THE SERVICES TO BE PROVIDED UNDER THIS
AGREEMENT BY ABT. SPECIFICALLY EXCLUDED ARE ALL WARRANTIES, EXPRESSED OR
IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF 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 THE CLAIMS OF DAMAGES MADE BY ANY THIRD PARTY EVEN IF IT HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
16. TRADEMARKS AND SERVICE MARKS.
----------------------------
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
who shall also 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.
17. ADVERTISEMENTS.
--------------
In all new car display print advertisements which are equal to or
greater than 14 column inches, Dealer shall also include ABT's service mark as
well as its Internet address in one of the formats depicted in Exhibit A such
that the ABT service mark and Internet address are clearly legible.
18. 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 to such address as the party to receive the notice or request
so designates by written notice to the other.
19. ASSIGNMENT.
----------
This Agreement and the rights and duties hereunder shall not be
assignable by the Dealer except upon written consent of ABT. This Agreement and
the rights and duties hereunder shall be assignable by ABT.
20. INDEPENDENT CONTRACTORS.
-----------------------
The relationship between ABT and Dealer created by this Agreement
shall be that of independent contractor. Nothing contained in this Agreement
shall be construed as creating or constituting a partnership, agency, or joint
venture between ABT and Dealer.
21. NO WAIVER.
---------
The failure of either party to exercise in any respect any right
provided for herein shall not be deemed a waiver of any right hereunder.
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
validity, legality and enforceability of the remaining provisions of this
Agreement.
23. 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.
-2-
<PAGE>
24. OTHER AGREEMENTS.
----------------
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 with respect to the rendering of the 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 that no other agreement, statement, or promise
not contained in this Agreement will be valid or binding. Any modification of
this Agreement will be effective only if it is in a writing signed by the party
to be charged.
Auto-By-Tel Marketing Corporation, Dealer: ((Dealer_Corp))
a Delaware Corporation
By:___________________________ By:__________________________________________
Name: Mr. Pete Ellis Name: ((Sirname)) ((Dlr_First)) ((Dlr_Last))
Title: President Title: ((Dlr_Title))
-3-
<PAGE>
EXHIBIT 10.13(c)
ABT SUBSCRIPTION AGREEMENT
THIS AGREEMENT made this ((Ck_RcvdTxt)), by and between Auto-By-Tel Marketing
Corporation, a Delaware Corporation, with its principal place of business at
2711 E. Coast Highway, Corona Del Mar, California 92625 ("ABT"), and , a(n)
((STTxt)) ((Entity)), with its principal place of business at ((Bill_Addr)),
((City)), ((ST)) ((Dlr_Zip)). ("Dealer").
WHEREAS ABT is in the business of locating persons interested in purchasing or
leasing automobiles or trucks primarily through electronic media ("Potential
Purchasers");
WHEREAS Dealer is a dealer of automobiles and/or trucks who wishes to
participate in a program where ABT provides certain information about Potential
Purchasers to Dealer which will facilitate Dealer's sales of automobiles to
Potential Purchasers and thereby decrease marketing costs which, in turn, will
allow Dealer to offer automobiles and trucks at a competitive price;
WHEREAS ABT has invested considerable amounts of money in order to acquire
relevant information about Potential Purchasers from the Internet and Online
computer services; and
WHEREAS ABT wishes to ensure that Dealer will provide a high level of service to
Potential Purchasers provided to Dealer through their participation in this
program.
NOW THEREFORE, in consideration of the mutual covenants and promises contained
herein, ABT and Dealer agree as follows:
1. Services to be Performed
------------------------
ABT shall provide a marketing program on the Internet and Online Services to
attract Potential Purchasers and shall forward information regarding Potential
Purchasers identified for the vehicle make subscribed and in the postal code
area assigned to Dealer.
2. Use of Services
---------------
(a) Dealer Participation. Dealer agrees to abide by ABT's Customer Service
--------------------
Standards as more fully described in Paragraph 10 below, which may be
revised from time to time. Dealer shall designate one key employee to be
provided instructions by ABT or its authorized agent. Should the
assignment of any designated key employee change, Dealer shall notify ABT.
Dealer shall be responsible for costs, if any, associated with the training
of its key employees to use ABT's services. Dealer shall sign any
necessary confidentiality agreements to protect ABT's proprietary rights.
(b) Use of System and Modifications. It is agreed to by the parties that the
-------------------------------
use of ABT's services is restricted solely to Dealer and its
designated employees and other duly authorized licensees of ABT. Dealer
shall not compete with ABT in providing the services herein discussed.
3. Equipment
---------
(a) ABT Equipment. ABT warrants that it possesses or has access to and the
-------------
right to use computer equipment and other office equipment necessary for
ABT to provide the services contemplated by this Agreement.
(b) Dealer Equipment. Dealer, at its sole cost and expense, shall provide the
----------------
computer and other office equipment necessary to use and receive the
services to be provided hereunder by ABT.
(c) Equipment Maintenance, Risk of Loss. Dealer shall maintain all of its
-----------------------------------
computer and office equipment necessary for the utilization of the services
to be provided hereunder by ABT in good and proper working order and
repair. Dealer shall assume all responsibility for loss or damage to
Dealer's equipment in the utilization of the services to be provided
hereunder by ABT.
4. Title to System
---------------
The services to be provided hereunder by ABT, together with any modifications or
improvements therein made by ABT or Dealer during the term of this Agreement, or
any extensions thereof, and all copies thereof are proprietary to ABT and title
thereto remains in ABT. All applicable rights to patents, copyrights,
trademarks and trade secrets in the System and in the name "Auto-By-Tel" and its
logo are and shall remain solely in ABT.
5. Assignment of Territory
-----------------------
Subject to the terms and conditions set forth in this Agreement, ABT hereby
grants to Dealer the exclusive, non-transferable right to use the services to be
performed by ABT as contemplated by this Agreement, within the geographic area
designated by the following postal code: and for the following make of motor
vehicles: ((Franchise)) the "Territory").
Notwithstanding the foregoing, ABT retains the right, directly or through other
dealerships, to market and use its System and services in all areas other than
Dealer's Territory, and within Dealer's Territory for all makes of motor
vehicles not listed above.
6. Subscription Fees
-----------------
(a) Dealer shall pay ABT the amount of (((Amount)) plus G.S.T. as an initial
start-up fee concurrently with Dealer's execution of this Agreement.
(b) Dealer shall pay ABT the amount of ((Monthly)), plus G.S.T. as a monthly
subscription fee which is due and payable on the first day of every month.
ABT may change this monthly subscription fee upon thirty (30) days written
notice of the increased price to the dealer.
(c) Dealer shall pay ABT an annual fee plus G.S.T. on the first anniversary
date of this Agreement and each anniversary thereafter. A notice
indicating the amount of the annual fee will be sent to the Dealer sixty
(60) days prior to the anniversary date of this Agreement.
7. Taxes
-----
Dealer shall, in addition to any other amounts payable under this Agreement, pay
all taxes - federal, provincial, local or otherwise - however designated which
are levied or imposed by reason of the services provided under this Agreement.
Without limiting the foregoing, Dealer shall promptly pay to ABT an amount equal
to any such items actually paid or required to be collected or paid by ABT.
8. Term
----
This Agreement shall be for a term of five (5) years, commencing upon the date
hereof and terminating on ((Term_DateTxt)) unless sooner terminated according to
the provisions hereof. Either party may terminate this Agreement, at their sole
option and for any reason whatsoever, at any time by providing the other party
thirty (30) days written notice. This Agreement may be terminated by ABT
immediately and without notice in the event that Dealer does not adhere to ABT's
Customer Service ,Standards, or in the event that any fees due to ABT are
outstanding more than thirty (30) days. 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 Paragraph 2b, 4, 12, 13, 15, and 22.
9. Periodic Operations Reports
---------------------------
(a) Reports. ABT shall furnish to Dealer, on a quarterly basis, an operations
-------
report which shall include the number of inquiries received by ABT from
consumers in Dealer's exclusive Territory. Dealer shall report to ABT on a
monthly basis the number and names of individuals who purchased motor
vehicles from Dealer, the number of vehicles financed and the amounts
financed and such other information as ABT may from time to time request.
(b) Duty of Care. ABT shall not be liable for any loss of data, delays and/or
------------
errors in transmitting data occurring by reason of circumstances beyond its
reasonable control or for any damages arising as a consequence thereof.
10. Customer Service Standards
--------------------------
Dealer shall relay to Potential Purchasers a full and complete response to the
Potential Purchasers' inquiries transmitted by ABT to Dealer within twenty-four
(24) hours of receipt of the inquiry from ABT, exclusive of Saturdays, Sundays
and statutory holidays, Dealer's initial response shall be by telephone and
shall disclose the availability of the vehicle inquired about, the
manufacturer's suggested retail price of the vehicle and all requested options
and the price at which Dealer will sell/lease the vehicle with all requested
options to the Potential Purchaser. In addition, Dealer shall provide
information as to all other terms and costs required by law to be disclosed to
the Potential Purchaser (the "Dealer Information").
<PAGE>
11. Dealer's Covenants
------------------
Dealer hereby covenants and agrees that all of the terms and conditions
contained in Dealer Information transmitted to Potential Purchasers shall remain
in full force and effect and be binding upon Dealer for a period of seven (7)
days after its transmittal provided the identified vehicle remains available for
sale.
12. Confidentiality
---------------
ABT agrees to treat all records and other information provided by Dealer with
respect to terms of sale, financing or leasing of motor vehicles confidential
except that this information may be transmitted to consumers making inquiries
concerning the terms of purchase, financing or leasing of motor vehicle(s).
Dealer, on behalf of itself and its employees, agrees to keep all information
with respect to ABT's services confidential and, without the previous written
consent of ABT, Dealer shall not impart information about ABT's services, or the
concept thereof, to any person or entity whatsoever other than employees of
Dealer and Potential Purchasers. 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 days' written notice to the other party, release required information.
13. Indemnification.
---------------
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, judgements, settlements, and costs, including fees and expenses,
arising out of or related to any third party claim (including, but not limited
to, any claim for damages by any person or entity who purchases, leases and/or
finances a motor vehicle(s) from Dealer through the utilization of ABT's
services) resulting from the use of ABT's services provided hereunder. Dealer
shall defend and settle, at its sole cost and expense, all suits or proceedings
arising out of any of the foregoing, provided ABT gives Dealer prompt notice of
any such claim of which it learns. ln all events, ABT shall have the right to
participate in the defense of any such suit or proceedings through counsel of
its own choosing. ABT shall be without liability to Dealer with respect to
anything done, or omitted to be done, in accordance with the terms of this
Agreement or instructions properly received pursuant hereto, if done in good
faith and without negligence or wilful or wanton misconduct.
14. Trade Secrets
-------------
(a) 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.
(b) Dealer acknowledges and agrees that the sale or unauthorized use or
disclosure of any of ABT's trade secrets constitutes a breach of section 12
of this Agreement.
15. Warranty Limitation
-------------------
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 UNDER THIS AGREEMENT BY ABT.
SPECIFICALLY EXCLUDED ARE ALL WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING BUT
NOT LIMITED TO IMPLIED WARRANTIES OF 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 THE CLAIMS OF DAMAGES MADE BY ANY THIRD PARTY EVEN IF IT HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES.
16. Trademarks and Services Marks
-----------------------------
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, Dealer acknowledges that all fights to
such trademark belong to ABT who shall also bear the costs of such registration.
Dealer is permitted to use such trademark and service marks only as set forth
herein or only as authorized in writing by ABT.
17. Advertisements
--------------
In all print advertisements for Dealer automobiles, services, or other goods
which are equal to or greater than fourteen (14) column inches, Dealer shall
also include ABT's service mark as well as its Internet address in one of the
formats depicted in Rider A such that the ABT service mark and Internet address
are clearly legible.
18. 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 Canadian or 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.
19. Assignment
----------
This Agreement and the rights and duties hereunder shall not be assignable by
Dealer except upon written consent of ABT. This Agreement and the rights and
duties hereunder may be assigned by ABT at its sole discretion.
20. Independent Contractors
-----------------------
The relationship between ABT and Dealer created by this Agreement shall be that
of independent contractor. Nothing contained in this Agreement shall be
construed as creating or constituting a partnership, agency, or joint venture
between ABT and Dealer.
21. No Waiver
---------
The failure of either party to exercise in any respect any right provided for
herein shall not be deemed a waiver of any right hereunder.
22. Severability
------------
If any provision of this Agreement shall be held to be invalid, illegal or
unenforceable, this shall in no way alter or impair the validity, legality and
enforceability of the remaining provisions of this Agreement.
23. 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 attorn to the jurisdiction of the courts of California.
24. Other Agreements
----------------
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 with respect to the rendering of the 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 that no other agreement, statement, or promise
not contained in this Agreement will be valid or binding. Any modification of
this Agreement will be effective only if it is in writing signed by the party to
be charged.
Auto-By-Tel Marketing Corporation,
a Delaware Corporation DEALER: ((DEALER_CORP))
Per: Per:
------------------------------- -------------------------------
Name: Pete Ellis Name: ((Sirname)) ((Dlr_Flrst))((Dir_Last))
Title: President Title: ((Dir_Title))
canagr.doc
<PAGE>
EXHIBIT 10.13(d)
ABT SUBSCRIPTION AGREEMENT
--------------------------
THIS AGREEMENT made this ((Ck_RcvdTxt)). by and between Auto-By-Tel Marketing
Corporation, a Delaware Corporation, with its principal place of business at
2711 E. Coast Highway, Corona Del Mar, California 92625 ("ABT"), and
((Dealer_Corp)), a(n) ((STTxt)) ((Entity)), d.b.a.((-Dealer_DBA.)), with its
principal place of business at ((Bill_Addr.)), ((City)) ((ST)) ((Dlr_zip)).
RECITALS
--------
WHEREAS, ABT is in the business of operating advertising programs primarily
through electronic media;
WHEREAS, Dealer is a dealer of automobiles and/or trucks who wishes to
participate in said program;
WHEREAS, ABT has invested considerable amounts of money in order to operate the
program on the Internet and on-line computer services; and
WHEREAS, Dealer agrees to provide a high level of service to members of the
public reached through the program.
NOW THEREFORE, in consideration of the mutual covenants and promises contained
herein, ABT AND DEALER AGREE AS FOLLOWS:
1. Services to be Performed.
------------------------
ABT shall provide an advertising program on the Internet and Online
Services to the public and shall forward information regarding inquiries made
for the make subscribed and in the zip code area subscribed to by Dealer.
2. Use of Services.
---------------
(a) Dealer Participation. Dealer agrees to abide by ABT's Customer
--------------------
Service Standards as more fully described in Paragraph 10 below, which may be
revised from time to time. Dealer shall designate one key employee to be
provided instructions by ABT or its authorized agent. Should the assignment of
any designated key employee change, Dealer shall notify ABT. Dealer shall be
responsible for costs, if any, associated with the training of its key employees
to use ABT's services. Dealer shall sign any necessary confidentiality
agreements to protect ABT's rights.
(b) Use of System and Modifications. It is agreed to by the parties that
-------------------------------
the use of ABT's program is restricted solely to Dealer and its designated
employees and other duly authorized licensees of ABT. Dealer shall not compete
with ABT in providing the services herein discussed.
3. Equipment.
---------
(a) ABT Equipment. ABT warrants that it possesses or has access to and
-------------
the right to use computer equipment and other office equipment necessary
for ABT to perform its services contemplated by this Agreement.
(b) Dealer Equipment. Dealer, at its sole cost and expense, shall provide
----------------
the computer and other office equipment necessary to use and receive the
services to be provided hereunder by ABT.
(c) Equipment Maintenance, Risk of Loss. Dealer shall maintain all of
-----------------------------------
their computer and office equipment necessary for the utilization of the
services to be provided hereunder by ABT in good and proper working order and
repair. Dealer shall assume all responsibility for loss or damage to Dealer's
equipment in the utilization of the services to be provided hereunder by ABT.
4. Title to System.
---------------
The services to be provided hereunder by ABT, together with any
modifications and/or improvements therein made by ABT or Dealer during the term
of this Agreement, or any extensions thereof, and all copies thereof are
proprietary to ABT and title thereto remains in ABT. All applicable rights to
patents, copyrights, trademarks and trade secrets in the System and in the name
"Auto-By-Tel" and its logo are and shall remain solely in ABT.
5. Assignment of Territory.
-----------------------
(a) Subject to the terms and conditions set forth in this Agreement,
Dealer subscribes to utilize the program within the geographic area designated
by the following zip codes: ((Territory)) and for the following make of motor
vehicles: ((Franchise)) (the "Territory").
(b) Notwithstanding the foregoing, ABT retains the right to reassign or
revise Dealers zip code area and subscription fees as necessary to accommodate
entry of additional dealers into the program .
6. Subscription Fees.
------------------
Subject to the provisions of paragraph 5. b:
(a) Dealer shall pay ABT ((Amt_Text)) dollar(s) ((Amount)) as an initial
start-up fee concurrently with Dealer's execution of this Agreement.
(b) Dealer shall pay ABT the amount of ((Monthly)). as a monthly
subscription fee which is due and payable on the first day of every
month. ABT may change this monthly subscription fee upon thirty (30)
days written notice of the increased price to the dealer.
(c) Dealer shall pay ABT an annual fee on the first anniversary date of
this Agreement and each anniversary thereafter. A notice indicating
the amount of the annual fee will be sent to the Dealer 60 days prior
to the anniversary date of this Agreement.
7. Taxes.
-----
Dealer shall, in addition to any other amounts payable under this
Agreement, pay all taxes - federal, state, local or otherwise - however
designated which are levied or imposed by reason of the services provided under
this Agreement. Without limiting the foregoing, Dealer shall promptly pay to
ABT an amount equal to any such items actually paid or required to be collected
or paid by ABT.
8. Term.
----
This Agreement shall be for a term of five (5) years, commencing upon the
date hereof and terminating on ((Term_DateTxt)) unless sooner terminated or
revised according to the provisions hereof. Either party may terminate this
Agreement, at their sole option and for any reason whatsoever, at any time by
providing the other party 30 days written notice. This Agreement may be
terminated by ABT immediately and without notice in the event that Dealer does
not adhere to ABT's Customer Service Standards or in the event that any fees due
ABT are outstanding more than 30 days. 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 paragraphs 2b, 4, 12, 13, 15, and 22.
9. Periodic Operations Reports.
---------------------------
(a) Reports. ABT shall furnish to Dealer, on a quarterly basis, an
-------
operations report which shall include the number of inquiries received by
ABT from Dealer's zip code area. Dealer shall report to ABT on a monthly
basis the number and names of Potential Purchasers who purchased motor vehicles
from Dealer, the number of vehicles financed and the amounts financed and such
other information as ABT may from time to time request.
(b) Duty of Care. ABT shall not be liable for any loss of data, delays
-------------
and/or errors in transmitting data occurring by reason of circumstances beyond
its reasonable control or for any damages arising as a consequence thereof.
10. Customer Service Standards.
--------------------------
Dealer shall relay full and complete response to the inquiries transmitted
by ABT to Dealer within 24 hours of receipt of the inquiry from ABT, exclusive
of Saturdays, Sundays and holidays recognized by the federal government.
Dealer's initial response shall be by telephone and shall disclose the
availability of the vehicle inquired about, the manufacturers suggested retail
price of the vehicle and all requested options and the price at which the Dealer
will sell the vehicle with all requested options. In addition, Dealer shall
provide information as to all other terms and costs required by law to be
disclosed (the "Dealer Information").
<PAGE>
11. Dealer's Covenants.
------------------
Dealer hereby covenants and agrees that all of the terms and conditions
contained in Dealer Information transmitted shall remain in full force and
effect and be binding upon Dealer for a period of seven (7) days after its
transmittal provided the identified vehicle remains available for sale.
12. Confidentiality.
---------------
ABT agrees to treat all records and other information provided by Dealer,
with respect to terms of sale, financing or leasing of motor vehicles,
confidential. Dealer, on behalf of itself and its employees, agrees to keep all
information with respect to ABT's services confidential and, without the
previous written consent of ABT, Dealer shall not impart ABT's services, or the
concept thereof, to any person or entity whatsoever other than employees of
Dealer. 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 days
written notice to the other party, release required information.
13. Indemnification.
---------------
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 any third party claim (including, but not limited to, any
claim for damages by any person or entity who purchases, leases and/or finances
a motor vehicle(s) from Dealer through the utilization of ABT's services)
resulting from the use of ABT's services provided hereunder. Dealer shall
defend and settle, at its sole cost and expense, all suits or proceedings
arising out of any of the foregoing, provided ABT gives Dealer prompt notice of
any such claim of which it learns. In all events, ABT shall have the right to
participate in the defense of any such suit or proceedings through counsel of
its own choosing. ABT shall be without liability to Dealer with respect to
anything done, or omitted to be done, in accordance with the terms of this
Agreement or instructions properly received pursuant hereto, if done in good
faith and without negligence or willful or wanton misconduct.
14. Trade Secrets.
-------------
(a) 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.
(b) Dealer acknowledges and agrees that the sale or unauthorized use or
disclosure of any of ABT's trade secrets constitutes unfair
competition.
15. Warranty Limitation.
-------------------
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 UNDER THIS AGREEMENT BY
ABT. SPECIFICALLY EXCLUDED ARE ALL WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING
BUT NOT LIMITED TO IMPLIED WARRANTIES OF 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 THE CLAIMS OF DAMAGES MADE BY ANY THIRD PARTY EVEN IF IT HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES.
16. Trademarks and Service Marks.
----------------------------
Any and all trademarks and service marks associated with ABT are and shall
remain the exclusive property of ABT. lf during the term of this Agreement, a
trademark registration is filed by ABT, all rights belong to ABT who shall also
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.
17. Advertisements.
--------------
In all new car display print advertisements which are equal to or greater
than 14 column inches, Dealer shall also include ABT's service mark as well as
its Internet address in one of the formats depicted in Exhibit A such that the
ABT service mark and Internet address are clearly legible.
18. 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 to such address as the party to receive the notice or request
so designates by written notice to the other.
19. Assignment.
----------
This Agreement and the rights and duties hereunder shall not be assignable
by the Dealer except upon written consent of ABT. This Agreement and the rights
and duties hereunder shall be assignable by ABT.
20. Independent Contractors.
-----------------------
The relationship between ABT and Dealer created by this Agreement shall be
that of independent contractor. Nothing contained in this Agreement shall be
construed as creating or constituting a partnership, agency, or joint venture
between ABT and Dealer.
21. No Waiver.
---------
The failure of either party to exercise in any respect any right provided
for herein shall not be deemed a waiver of any right hereunder.
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.
23. Governing Law and Jurisdiction.
------------------------------
This Agreement and the performance hereunder shall be governed and
construed in accordance with the laws of the State of Texas. Any dispute or
claim arising between the parties hereto shall be brought in a court of
competent jurisdiction located in the County of Travis in the State of Texas and
the parties hereto agree to jurisdiction in Texas.
24. Other Agreements.
----------------
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 with respect to the rendering of the 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 that no other agreement, statement, or promise
not contained in this Agreement will be valid or binding. Any modification of
this Agreement will be effective only if it is in a writing signed by the party
to be charged.
Auto-By-Tel Marketing Corporation, a Delaware Corporation Dealer:
((Dealer_Corp))
By:____________________________ By:_________________________________________
Name: Mr. Pete Ellis Name: ((Surname)) ((Dir_First)) ((Dir_Last))
Title: President Title: ((Dir_Title))
abt-tx.doc
<PAGE>
EXHIBIT 10.13(e)
ABT SUBSCRIPTION AGREEMENT
--------------------------
THIS AGREEMENT made this ((Ck_RcvdTxt)) 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
((Dealer_Corp)), a(n) ((STTxt)) ((Entity)), d.b.a. ((Dealer_DBA)), with its
principal place of business at ((Bill_Addr)), ((City)) ((ST)) ((Dlr_Zip)).
RECITALS
--------
WHEREAS, ABT is in the business of locating persons interested in purchasing
and/or leasing automobiles and/or trucks primarily through electronic media
("Potential Purchasers"):
WHEREAS, Dealer is a franchised dealer of new automobiles and/or trucks who
wishes to participate in a program where ABT provides certain information about
Potential Purchasers to Dealer which will facilitate Dealer's sales of
automobiles to Potential Purchasers and thereby decrease marketing costs which,
in turn, will allow Dealer to offer automobiles and trucks at a competitive
price;
WHEREAS, ABT has invested considerable amounts of money in order to acquire
relevant information about Potential Purchasers from the Internet and on-line
computer services; and
WHEREAS, ABT wishes to ensure that Dealer will provide a high level of service
to Potential Purchasers provided to the Dealer through their participation in
this program.
NOW THEREFORE, in consideration of the mutual covenants and promises contained
herein, ABT AND DEALER AGREE AS FOLLOWS:
1. SERVICES TO BE PERFORMED.
------------------------
ABT shall provide a marketing program on the Internet and Online Services to
attract Potential Purchasers and shall forward information regarding the
Potential Purchasers identified for the make subscribed and in the zip code area
subscribed to the Dealer.
2. USE OF SERVICES.
---------------
(a) Dealer Participation. Dealer agrees to abide by ABT's Customer Service
--------------------
Standards as more fully described in Paragraph 10 below, which may be revised
from time to time by ABT. Dealer shall designate one key employee to be
provided instructions by ABT or its authorized agent. Dealer shall notify ABT
within ten (10) days of any change in the assignment of any designated key
employee. Dealer shall be responsible for costs, if any, associated with the
training of its key employees to use ABT's services. Dealer shall promptly sign
any confidentiality agreements submitted by ABT to protect ABT's proprietary
rights. ABT shall notify Dealer in writing of any revisions or additions to the
Customer Service Standards, and such revisions shall take effect immediately
upon Dealer's receipt thereof. Without limiting the generality of the
foregoing, Dealer acknowledges that Auto-By-Tel will institute a financing
program whereby customers may receive low-cost financing from sources provided
by Auto-By-Tel through its web site (the "Financing Arrangements"). Dealer
agrees with ABT that low-cost Financing Arrangements pursuant to which customers
would (i) receive a financing proposal in conjunction with their receipt of a
vehicle price quote, and (ii) close both the vehicle acquisition and financing
quickly through Dealer, would be viewed by customers as an improvement in the
Auto-By-Tel program, consequently increasing the attractiveness of the ABT
program and its value to Dealer. Dealer agrees to cooperate fully with the
Financing Arrangements instituted by ABT through its web site, including without
limitation entering into customary closing administration arrangements with
finance companies as requested by ABT, and to take such actions as reasonably
requested by such finance companies or ABT to ensure that customers receive a
high level of service and satisfaction in connection with the Financing
Arrangements. After ABT commences the Financing Arrangements, Dealer
acknowledges that changes in the Customer Services Guidelines may from time to
time pertain to such Financing Arrangements.
(b) Use of System and Modifications. It is agreed to by the parties that the
-------------------------------
use of ABT's services is restricted solely to Dealer and its designated
employees and other duly authorized licensees of ABT. Dealer shall not compete
with ABT in providing the services herein discussed.
3. EQUIPMENT.
---------
(a) ABT Equipment. ABT warrants that it possesses or has access to and the
-------------
right to use computer equipment and other office equipment necessary for ABT to
perform its services contemplated by this Agreement.
(b) Dealer Equipment. Dealer, at its sole cost and expense, shall provide
----------------
the computer and other office equipment specified from time to time by ABT to
use and receive the services to be provided hereunder by ABT.
(c) Equipment Maintenance, Risk of Loss. Dealer shall maintain all of their
-----------------------------------
computer and office equipment in good and proper working order and repair.
Dealer shall assume all responsibility for loss or damage to Dealer's equipment
in the utilization of the services to be provided hereunder by ABT.
4. TITLE TO SYSTEM, TRADEMARKS.
---------------------------
The services to be provided hereunder by ABT, together with any
modifications and/or improvements therein made by ABT or Dealer during the term
of this Agreement, or any extensions thereof, and all copies thereof are
proprietary to ABT and title thereto remains in ABT. All applicable rights to
patents, copyrights, trademarks and trade secrets in the System and in the name
"Auto-By-Tel" and its logo are and shall remain solely in 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 who shall also 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.
5. ASSIGNMENT OF TERRITORY.
-----------------------
Subject to the terms and conditions set forth in this Agreement, ABT hereby
grants to Dealer the non-transferable right to use the services to be performed
by ABT, as contemplated by this Agreement, within the geographic area designated
by the following zip codes: ((Territory)) and for the following make of motor
vehicles: ((Franchise)) (the "Territory"). ABT may change the Dealer's Territory
upon thirty (30) days written notice.
Notwithstanding the foregoing, ABT retains the right, directly or through
other dealerships, to market and use its System and services in all areas other
than Dealer's Territory, and within Dealer's Territory for all makes of motor
vehicles not listed above.
6. SUBSCRIPTION FEES.
-----------------
(a) Dealer shall pay ABT ((Amt_Text)) (((Amount))) as an initial start-up
fee concurrently with Dealer's execution of this Agreement.
(b) Dealer shall pay ABT the amount of ((Nu_Fee)) as a monthly subscription
fee which is due and payable on the first day of every month. ABT may
change this monthly subscription fee upon thirty (30) days written
notice of the increased price to the dealer.
(c) Dealer shall pay ABT an annual fee on the first anniversary date of this
Agreement and each anniversary thereafter. A notice indicating the
amount of the annual fee will be sent to the Dealer prior to the
anniversary date of this Agreement.
(d) If ABT terminates this Agreement pursuant to Section 8(b)(ii) for no
reason or Dealer terminates this Agreement pursuant to Section
8(c)(iii), ABT shall refund a prorated amount of fees paid under this
Agreement for the remaining portion of the period with respect to which
such fees had been paid, except that the monthly fees due for the month
in which the Agreement is terminated shall not be refunded or prorated.
(The startup fee shall be deemed to have been paid for the first year
this Agreement is in effect.) In no other circumstances shall any
amounts paid under this Agreement be refundable.
7. TAXES.
-----
Dealer shall, in addition to any other amounts payable under this Agreement,
pay all taxes - federal, state, local or otherwise, excluding income taxes
attributable to the income of ABT - however designated which are levied or
imposed by reason of the services provided under this Agreement. Without
limiting the foregoing, Dealer shall promptly pay to ABT an amount equal to any
such items actually paid or required to be collected or paid by ABT.
8. TERM AND TERMINATION.
--------------------
(a) This Agreement shall be for a term of five (5) years unless terminated
earlier pursuant to this Section 8.
(b) ABT may terminate this Agreement:
(i) immediately if Dealer does not adhere to its obligations under
Sections 2(a) and 10, or if any fees due ABT pursuant to Section 6
are outstanding more than thirty (30) days, or if any amount payable
to ABT under Sections 7 or 13 are outstanding more than thirty (30)
days after ABT makes a written request therefor, or any other breach
by Dealer of this Agreement is not cured within ten (10) days after
written notification by ABT of such breach; or
(ii) at any other time, for any reason or for no reason, upon thirty (30)
days written notice to the Dealer.
(c) Dealer may terminate this Agreement:
(i) immediately, if an order for liquidation against ABT is entered and
not stayed in a bankruptcy proceeding;
(ii) immediately, if ABT is guilty of willful misconduct in the
performance of its duties under this Agreement;
(iii) upon thirty (30) days written notice delivered within ten (10) days
of the effective date of any shrinkage of Dealer's Territory
pursuant to Section 5; or
(iv) at any other time, in its sole discretion, upon thirty (30) days
written notice to ABT.
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
paragraphs 2b, 4, 12, 13, 14, 15, & 21.
9. PERIODIC OPERATIONS REPORTS.
---------------------------
(a) Reports. ABT shall furnish to Dealer, on a quarterly basis, an
-------
operations report which shall include the number of inquiries received by ABT
from Potential Purchasers in Dealer's Territory. Dealer shall report to ABT on a
monthly basis the number and names of Potential Purchasers who purchased motor
vehicles from Dealer, the number of vehicles financed and the amounts financed
and such other information as ABT may from time to time request.
(b) Duty of Care. ABT shall not be liable for any loss of data, delays
------------
and/or errors in transmitting data occurring for any reason or for any damages
arising as a consequence thereof.
<PAGE>
10. CUSTOMER SERVICE STANDARDS.
--------------------------
In addition to those obligations set out in 2(a) above, 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 receipt of
the inquiry from ABT. Dealer's initial response shall be by telephone and shall
disclose (i) the availability of the vehicle inquired about, (ii) the
manufacturer's suggested retail price of the vehicle, (iii) all requested
options, (iv) the price at which the Dealer will sell/lease the vehicle with all
requested options to the Potential Purchaser, and (v) all other terms and costs
required by law to be disclosed to prospective purchasers (all such information,
the "Dealer Information"). In order to improve the services offered by ABT while
maintaining uniform delivery of such services, ABT may, from time to time, amend
the Customer Service Standards, or impose additional Customer Service Standards
upon thirty (30) days notice to Dealer. Dealer acknowledges that maintenance of
the ABT Customer Service Standards is crucial to the value of ABT's services and
agrees to adopt such amendments or additions, 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.
11. DEALER'S COVENANTS.
------------------
Dealer hereby covenants and agrees that all of the terms and conditions
contained in Dealer Information transmitted to a Potential Purchaser shall
remain in full force and effect and be binding upon Dealer for a period of seven
(7) days after its transmittal provided the identified vehicle still remains
available for sale, and Dealer agrees to include a statement to such effect in
the Dealer Information.
12. CONFIDENTIALITY.
---------------
ABT agrees to treat all records and other information provided by Dealer,
with respect to terms of sale, financing or leasing of motor vehicles,
confidential, except that this information may be transmitted to consumers
making inquiries concerning the terms of purchase, financing or leasing of motor
vehicle(s). Dealer, on behalf of itself and its employees, agrees to keep all
information with respect to ABT's services confidential and, without the
previous written consent of ABT, Dealer shall not impart ABT's services, or the
concept thereof, to any person or entity whatsoever other than employees of
Dealer. 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 days
written notice to the other party, release required information. 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 acknowledges and agrees that it will keep such trade
secrets confidential, and the sale or unauthorized use or disclosure of any of
ABT's trade secrets constitutes theft and will greatly damage ABT.
13. INDEMNIFICATION.
---------------
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 any third party claim (including, but not limited to, any
claim for damages by any person or entity who purchases, leases and/or finances
a motor vehicle(s) from Dealer through the utilization of ABT's services)
resulting from the use of ABT's services provided hereunder. Dealer shall defend
and settle, at its sole cost and expense, all suits or proceedings arising out
of any of the foregoing, provided ABT gives Dealer prompt notice of any such
claim of which it learns. In all events, ABT shall have the right to participate
in the defense of any such suit or proceedings through counsel of its own
choosing. ABT shall be without liability to Dealer with respect to anything
done, or omitted to be done, in accordance with the terms of this Agreement or
instructions properly received pursuant hereto, if done in good faith and
without gross negligence or willful or wanton misconduct.
14. EXCLUSIVITY.
-----------
Dealer acknowledges that the value to Dealer of this agreement is based on
the unique package of services marketed to automobile customers by ABT and ABT's
reputation for delivering such services on a consistent basis. Dealer agrees
that certain key elements of the ABT package of services are: (i) electronic
transmission of customer purchase or lease requests; (ii) rapid response by
dealers to consumer pricing or lease pricing requests, including immediate
telephone contact with upfront, firm pricing provided over the phone on such
call; (iii) customer paperwork completed or nearly completed prior to customer
arrival at the dealership for pickup so as to ensure the customer spends as
little time as possible at the dealership for pickup; and (iv) Dealer training
and support to implement the ABT package of services and to maintain the style
and reputation of the ABT package of services (collectively the "Key Elements").
Dealer acknowledges that ABT has spent, and will spend, considerable time and
money developing its package of services and training Dealer to deliver such
services in a consistent way which maintains ABT's distinctive market presence
and reputation. Accordingly, Dealer agrees that during the Term of this
Agreement (and for one (1) year thereafter if this Agreement is terminated
unless it is terminated by the Dealer pursuant to section 8(c)(iii)), Dealer and
its affiliates will not, directly or indirectly, participate with any third
party in any arrangement or agreement which involves any or all of the Key
Elements, and will not, directly or indirectly, participate with any third party
in any arrangement or agreement which involves any or all of the Key Elements,
and will not participate in any pricing, credit or financing, insurance or
information service involving or made available on the Internet, online or by
other electronic means. Without contradicting the foregoing, Dealer may
establish and maintain its own web site and/or participate in any factory direct
program.
Notwithstanding any other provisions of this Agreement, in the event Dealer
breaches this Section 14, the provisions of this Section shall remain in full
force and effect for one (1) year after such breach is cured. Dealer
acknowledges that the provisions of this Section 14 were a material inducement
to ABT in entering into this Agreement, and that ABT would not have entered into
this Agreement with Dealer in the absence of such provisions.
Dealer acknowledges and agrees that compliance with the provisions of
Sections 12 and 14 is necessary to protect the business and good will of ABT,
and that any breach of Sections 12 or 14 will result in irreparable and
continuing damage to ABT, for which money damages may not provide adequate
relief. Accordingly, Dealer agrees that during the "Exclusivity Period" (as
defined below), Dealer and its affiliates will not, directly or indirectly,
participate with any third party in any arrangement or agreement which involves
any or all of the Key Elements, and will not participate in any pricing, credit
or financing, insurance or information service involving or made available on
the Internet, online or by other electronic means. For purposes of this Section
14, the "Exclusivity Period" commences on the date of this Agreement, and
terminates one year after the date of termination; provided, however, that if
-----------------
this Agreement is terminated any time after the first anniversary of the date
hereof, then the Exclusivity Period terminates six months after the date of
termination; provided, further, however, that if this Agreement is terminated by
--------------------------
Dealer pursuant to Section 8(c)(iii) hereof, then the Exclusivity Period
terminates on the date of termination of the Agreement.
15. WARRANTY LIMITATION.
-------------------
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 UNDER THIS AGREEMENT BY
ABT. SPECIFICALLY EXCLUDED ARE ALL WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING
BUT NOT LIMITED TO IMPLIED WARRANTIES OF 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 THE CLAIMS OF DAMAGES MADE BY ANY THIRD PARTY EVEN IF IT HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES.
16. ADVERTISEMENTS.
--------------
From time to time, ABT may provide Dealer with camera-ready and other
logos, trademarks, artwork and materials for the limited purpose of inclusion,
at Dealer's option, within Dealer print and television advertisements to promote
the association of Dealer with the ABT program. ABT shall grant Dealer a
revocable, limited license to use such materials for such limited purposes, and
Dealer shall use such materials in no other manner. Any such materials shall
remain at all times the property of ABT, they shall be returned upon request,
and the limited license herein granted may be revoked at any time by written
notice to Dealer.
17. 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 to such address as the party to receive the notice or request
so designates by written notice to the other.
18. ASSIGNMENT.
----------
This Agreement and the rights and duties hereunder shall not be assignable
by the Dealer except upon written consent of ABT. This Agreement and the rights
and duties hereunder shall be assignable by ABT.
19. INDEPENDENT CONTRACTORS.
-----------------------
The relationship between ABT and Dealer created by this Agreement shall be
that of independent contractor. Nothing contained in this Agreement shall be
construed as creating or constituting a partnership, agency, or joint venture
between ABT and Dealer.
20. NO WAIVER.
---------
The failure of either party to exercise in any respect any right provided
for herein shall not be deemed a waiver of any right hereunder.
21. SEVERABILITY, GOVERNING LAW AND JURISDICTION.
--------------------------------------------
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. 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.
22. COOPERATION.
-----------
Upon the request of ABT, Dealer agrees to confirm in writing, in form
satisfactory to ABT and provided by ABT at its own expense, any amendment,
modification, change in original terms or other action which alters the terms of
this Agreement and which was taken or initiated by ABT pursuant to rights
granted to, or reserved by, ABT hereunder.
Page 2
<PAGE>
23. OTHER AGREEMENTS.
----------------
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 with respect to the rendering of the 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 that no other agreement, statement, or promise
not contained in this Agreement will be valid or binding. Any modification of
this Agreement will be effective only if it is in a writing signed by the party
to be charged.
Auto-By-Tel Marketing Corporation
By: _____________________________________________
Name: Peter Ellis
Title: President
Dealer: ((Dealer_Corp))
By: _______________________________________________
Name: ((Dlr_First)) ((Dlr_Last))
Title: ((Dlr_Title))
<PAGE>
EXHIBIT 10.13(f)
ABT SUBSCRIPTION AGREEMENT
--------------------------
THIS AGREEMENT made this ((Ck_RcvdTxt)) 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
((Dealer_Corp)), a(n) ((STTxt)) ((Entity)), d.b.a. ((Dealer_DBA)), with its
principal place of business at ((Bill_Addr)), ((City)) ((ST)) ((Dlr_Zip)).
RECITALS
--------
WHEREAS, ABT is in the business of operating advertising programs primarily
through electronic media:
WHEREAS, Dealer is a dealer of automobiles and/or trucks who wishes to
participate in said program;
WHEREAS, ABT has invested considerable amounts of money in order to operate the
program on the Internet and on-line computer services; and
WHEREAS, Dealer agrees to provide a high level of service to members of the
public reached through the program.
NOW THEREFORE, in consideration of the mutual covenants and promises contained
herein, ABT AND DEALER AGREE AS FOLLOWS:
1. SERVICES TO BE PERFORMED.
------------------------
ABT shall provide an advertising program on the Internet and Online Services
to the public and shall forward information regarding inquiries made for the
make subscribed and in the zip code area subscribed to by Dealer.
2. USE OF SERVICES.
---------------
(a) Dealer Participation. Dealer agrees to abide by ABT's Customer Service
--------------------
Standards as more fully described in Paragraph 10 below, which may be revised
from time to time. Dealer shall designate one key employee to be provided
instructions by ABT or its authorized agent. Should the assignment of any
designated key employee change, Dealer shall notify ABT. Dealer shall be
responsible for costs, if any, associated with the training of its key employees
to use ABT's services. Dealer shall sign any necessary confidentiality
agreements to protect ABT's rights.
(b) Use of System and Modifications. It is agreed to by the parties that the
-------------------------------
use of ABT's program is restricted solely to Dealer and its designated employees
and other duly authorized licensees of ABT. Dealer shall not compete with ABT
in providing the services herein discussed.
3. EQUIPMENT.
---------
(a) ABT Equipment. ABT warrants that it possesses or has access to and the
-------------
right to use computer equipment and other office equipment necessary for ABT to
perform its services contemplated by this Agreement.
(b) Dealer Equipment. Dealer, at its sole cost and expense, shall provide
----------------
the computer and other office equipment necessary to use and receive the
services to be provided hereunder by ABT.
(c) Equipment Maintenance, Risk of Loss. Dealer shall maintain all of their
-----------------------------------
computer and office equipment necessary for the utilization of the services to
be provided hereunder by ABT in good and proper working order and repair.
Dealer shall assume all responsibility for loss or damage to Dealer's equipment
in the utilization of the services to be provided hereunder by ABT.
4. TITLE TO SYSTEM.
---------------
The services to be provided hereunder by ABT, together with any
modifications and/or improvements therein made by ABT or Dealer during the term
of this Agreement, or any extensions thereof, and all copies thereof are
proprietary to ABT and title thereto remains in ABT. All applicable rights to
patents, copyrights, trademarks and trade secrets in the System and in the name
"Auto-By-Tel" and its logo are and shall remain solely in ABT.
5. ASSIGNMENT OF TERRITORY.
-----------------------
(a) Subject to the terms and conditions set forth in this Agreement, Dealer
subscribes to utilize the program within the geographic area designated by the
following zip codes: ((Territory)) and for the following make of motor vehicles:
((Franchise)) (the "Territory").
(b) Notwithstanding the foregoing, ABT retains the right to reassign or
revise Dealers zip code area and subscription fees as necessary to accommodate
entry of additional dealers into the program.
6. SUBSCRIPTION FEES.
-----------------
Subject to the provisions of paragraph 5.b:
(a) Dealer shall pay ABT ((Amt_Text)) (((Amount))) as an initial start-up
fee concurrently with Dealer's execution of this Agreement.
(b) Dealer shall pay ABT the amount of ((Monthly)) as a monthly
subscription fee which is due and payable on the first day of every
month. ABT may change this monthly subscription fee upon thirty (30)
days written notice of the increased price to the dealer.
(c) Dealer shall pay ABT an annual fee on the first anniversary date of
this Agreement and each anniversary thereafter. A notice indicating the
amount of the annual fee will be sent to the Dealer 60 days prior to
the anniversary date of this Agreement.
7. TAXES.
-----
Dealer shall, in addition to any other amounts payable under this Agreement,
pay all taxes - federal, state, local or otherwise - however designated which
are levied or imposed by reason of the services provided under this Agreement.
Without limiting the foregoing, Dealer shall promptly pay to ABT an amount equal
to any such items actually paid or required to be collected or paid by ABT.
8. TERM.
----
This Agreement shall be for a term of five (5) years, commencing upon the
date hereof and terminating on the ((Term_DateTxt)) unless sooner terminated or
revised according to the provisions hereof. Either party may terminate this
Agreement, at their sole option and for any reason whatsoever, at any time by
providing the other party 30 days written notice. This Agreement may be
terminated by ABT immediately and without notice in the event that Dealer does
not adhere to ABT's Customer Service Standards or in the event that any fees due
ABT are outstanding more than 30 days. 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 paragraphs 2b, 4, 12, 13, 15, and 22.
9. PERIODIC OPERATIONS REPORTS.
---------------------------
(a) Reports. ABT shall furnish to Dealer, on a quarterly basis, an
-------
operations report which shall include the number of inquiries received by ABT
from Dealer's zip code area. Dealer shall report to ABT on a monthly basis the
number and names of Potential Purchasers who purchased motor vehicles from
Dealer, the number of vehicles financed and the amounts financed and such other
information as ABT may from time to time request.
(b) Duty of Care. ABT shall not be liable for any loss of data, delays
------------
and/or errors in transmitting data occurring by reason of circumstances beyond
its reasonable control or for any damages arising as a consequence thereof.
10. CUSTOMER SERVICE STANDARDS.
--------------------------
Dealer shall relay full and complete response to the inquiries transmitted
by ABT to Dealer within 24 hours of receipt of the inquiry from ABT, exclusive
of Saturdays, Sundays and holidays recognized by the federal government.
Dealer's initial response shall be by telephone and shall disclose the
availability of the vehicle inquired about, the manufacturers suggested retail
price of the vehicle and all requested options and the price at which the Dealer
will sell the vehicle with all requested options. In addition, Dealer shall
provide information as to all other terms and costs required by law to be
disclosed (the "Dealer Information").
Page 1
<PAGE>
11. DEALER'S COVENANTS.
------------------
Dealer hereby covenants and agrees that all of the terms and conditions
contained in Dealer Information transmitted shall remain in full force and
effect and be binding upon Dealer for a period of seven (7) days after its
transmittal provided the identified vehicle remains available for sale.
12. CONFIDENTIALITY.
----------------
ABT agrees to treat all records and other information provided by Dealer,
with respect to terms of sale, financing or leasing of motor vehicles,
confidential. Dealer, on behalf of itself and its employees, agrees to keep all
information with respect to ABT's services confidential and, without the
previous written consent of ABT, Dealer shall not impart ABT's services, or the
concept thereof, to any person or entity whatsoever other than employees of
Dealer. 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 days
written notice to the other party, release required information.
13. INDEMNIFICATION.
----------------
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 any third party claim (including, but not limited to, any
claim for damages by any person or entity who purchases, leases and/or finances
a motor vehicle(s) from Dealer through the utilization of ABT's services)
resulting from the use of ABT's services provided hereunder. Dealer shall defend
and settle, at its sole cost and expense, all suits or proceedings arising out
of any of the foregoing, provided ABT gives Dealer prompt notice of any such
claim of which it learns. In all events, ABT shall have the right to participate
in the defense of any such suit or proceedings through counsel of its own
choosing. ABT shall be without liability to Dealer with respect to anything
done, or omitted to be done, in accordance with the terms of this Agreement or
instructions properly received pursuant hereto, if done in good faith and
without negligence or willful or wanton misconduct.
14. TRADE SECRETS.
-------------
(a) 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.
(b) Dealer acknowledges and agrees that the sale or unauthorized use or
disclosure of any of ABT's trade secrets constitutes unfair
competition.
15. WARRANTY LIMITATION.
-------------------
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 UNDER THIS AGREEMENT BY
ABT. SPECIFICALLY EXCLUDED ARE ALL WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING
BUT NOT LIMITED TO IMPLIED WARRANTIES OF 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 THE CLAIMS OF DAMAGES MADE BY ANY THIRD PARTY EVEN IF IT HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES.
16. TRADEMARKS AND SERVICE MARKS.
----------------------------
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 who shall also
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.
17. ADVERTISEMENTS.
---------------
In all new car display print advertisements which are equal to or greater
than 14 column inches, Dealer shall also include ABT's service mark as well as
its Internet address in one of the formats depicted in Exhibit A such that the
ABT service mark and Internet address are clearly legible.
18. 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 to such address as the party to receive the notice or request
so designates by written notice to the other.
19. ASSIGNMENT.
----------
This Agreement and the rights and duties hereunder shall not be assignable
by the Dealer except upon written consent of ABT. This Agreement and the rights
and duties hereunder shall be assignable by ABT.
20. INDEPENDENT CONTRACTORS.
-----------------------
The relationship between ABT and Dealer created by this Agreement shall be
that of independent contractor. Nothing contained in this Agreement shall be
construed as creating or constituting a partnership, agency, or joint venture
between ABT and Dealer.
21. NO WAIVER.
---------
The failure of either party to exercise in any respect any right provided
for herein shall not be deemed a waiver of any right hereunder.
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.
23. GOVERNING LAW AND JURISDICTION.
------------------------------
This Agreement and the performance hereunder shall be governed and construed
in accordance with the laws of the State of Texas. Any dispute or claim arising
between the parties hereto shall be brought in a court of competent jurisdiction
located in the County of Travis in the State of Texas and the parties hereto
agree to jurisdiction in Texas.
24. OTHER AGREEMENTS.
----------------
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 with respect to the rendering of the 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 that no other agreement, statement, or promise
not contained in this Agreement will be valid or binding. Any modification of
this Agreement will be effective only if it is in a writing signed by the party
to be charged.
Auto-By-Tel Marketing Corporation, a Delaware Corporation
By: _____________________________________________________
Name: Mr. Pete Ellis
Title: President
Dealer: ((Dealer_Corp))
By: _____________________________________________________
Name: ((Sirname)) ((Dlr_First)) ((Dlr_Last))
Title: ((Dlr_Title))
Page 2
<PAGE>
EXHIBIT 10.13(g)
ABT USED CAR CYBERSTORE SUBSCRIPTION AGREEMENT
----------------------------------------------
THIS AGREEMENT made this ((CyberStDate)) by and between Auto-By-Tel
Marketing Corporation, a Delaware corporation, with its principal place of
business at 18872 MacArthur Blvd., Irvine, CA 92612-1400 ("ABT"), and
((DealerCorp)) "Dealer"), a ((StateofInc)) ((Entity)), with its principal place
of business at ((BillingAddress)), ((City)), ((StateOrProvince)) ((PostalCode)).
RECITALS
--------
WHEREAS, ABT is in the business of, among other things, locating persons
interested in purchasing and/or leasing used automobiles and/or trucks
("vehicles") primarily through electronic media ("Potential Purchasers"), and
has created a Web site application and related technology and services pursuant
to which Dealer may publish information concerning and pictures of used vehicles
(the "Cyberstore") to enable Potential Purchasers to locate and consider
purchases thereof;
WHEREAS, Dealer is a dealer of used vehicles and is a franchised dealer of
new automobiles and/or trucks that subscribes to ABT's new car program and is a
licensee of ABT's proprietary software programs (the "Dealer Real Time System");
WHEREAS, Dealer wishes to participate in a program where ABT provides
certain information about Potential Purchasers to Dealer which will facilitate
Dealer's sales of used vehicles to Potential Purchasers and thereby decrease
marketing costs which, in turn, will allow Dealer to offer used vehicles at
competitive prices;
WHEREAS, ABT has invested considerable amounts of money in order to acquire
relevant information about Potential Purchasers from the internet and on-line
computer services and to develop the relevant technology and know-how for the
Cyberstore; and ABT wishes to ensure that Dealer will provide a high level of
service to Potential Purchasers provided to the Dealer through their
participation in this program.
NOW, THEREFORE, in consideration for the mutual covenants and promises
contained herein, ABT and Dealer agree as follows:
1. ABT Cyberstore Marketing Program.
--------------------------------
(a) ABT Obligations. ABT shall provide a marketing program on the
---------------
internet and online services to attract Potential Purchasers under the service
mark "ABT Used Car Cyberstore." ABT shall establish and maintain a database
permitting Dealer to publish information on "ABT Certified" (as described below)
vehicles and permitting access to internet users to information contained
therein through the ABT Web site. The database shall be accessible by Potential
Purchasers who shall search the database for used vehicles by make, model and
option specification. Purchase requests shall be routed to dealers with the
appropriate used vehicle in the database in accordance with geographic and other
parameters established by ABT from time to time.
Page 1
<PAGE>
(b) Certification Program. Only vehicles that are "ABT Certified" may
---------------------
be offered for sale through the Cyberstore. "ABT Certified" vehicles shall be
those which meet all checklist requirements specified by ABT from time to time.
The requirement shall be set forth on a form (the "Checklist") which will be
provided to Dealer from time to time, which may contain 130 or more areas of
compliance to be met before any vehicle is ABT Certified, and which may be
amended by ABT from time to time. ABT shall specify the methodology of
inspection for compliance with the Checklist, which may include contracting with
a third party service provider ("Inspectors"), chosen by ABT, to inspect
vehicles which Dealer may wish to offer for sale through the Cyberstore. Dealer
agrees to cooperate fully with the Inspectors and to answer any questions asked
by the Inspectors with full and complete information. Dealer agrees to provide
ABT or the Inspectors with all information a reasonable vehicle purchaser would
want to know in evaluating a purchase of any vehicle. Dealer shall indemnify
ABT for all liabilities for customary third party claims arising in connection
with vehicles dealer certifies pursuant to the ABT certification program.
(c) Service Support. ABT shall provide or cause to be provided a
---------------
service allowing Dealer to upload used vehicle information and images to the
Cyberstore database on a periodic basis, and, at Dealer's expense, shall make
available training resources to facilitate the use of the equipment, software
and other aspects of the Cyberstore program. Dealer will permit access to ABT,
or its agents or contractors, as requested to photograph, inspect and gather
data for input to the Cyberstore database through use of the ABT Real Time
System. ABT, or its agents, will, on two occasions, provide on-site service
support and assist Dealer personnel in uploading vehicle information to the
Cyberstore, as well as adding and deleting vehicles from the system. Subsequent
service support shall be available from ABT at per diem rates established by ABT
from time to time.
(d) ABT Equipment. ABT warrants that it possesses or has access to
-------------
and the right to use computer equipment and other office equipment necessary for
ABT to perform its services contemplated by this agreement.
(e) ABT Reports. ABT shall furnish to Dealer, on a quarterly basis,
-----------
an operations report which shall include the number of inquiries from
Potential Purchasers of used vehicles forwarded to Dealer.
2. Dealer Participation and Obligations.
------------------------------------
(a) Dealer Participation. Dealer shall designate at least one and no
--------------------
more than three key employees who shall be the ABT contact persons for purposes
of being provided instructions by ABT or its authorized agent. Dealer shall
notify ABT within ten (10) days of any change in the assignment of any
designated key employee. Dealer shall be responsible for costs, if any,
associated with the training of its key employees to use ABT's services. Dealer
shall promptly sign, and shall cause all designated key employees to sign, any
confidentiality agreements submitted by ABT to protect ABT's proprietary rights.
(b) Customer Service Standards. Dealer agrees to abide by ABT's Used
--------------------------
Car Cyberstore Customer Service Standards designed to insure the quality of the
ABT programs and the quality and consistency of Dealer's participation in such
programs. ABT may, from time to time, amend the Used Car Cyberstore Customer
Service Standards, or impose additional Used
Page 2
<PAGE>
Car Cyberstore Customer Service Standards upon thirty (30) days notice to
Dealer. Dealer acknowledges that maintenance of the Used Car Cyberstore Customer
Service Standards is crucial to the value of ABT's services and agrees to adopt
such amendments or additions, even through they may require more work or expense
to implement. The Used Car Cyberstore Customer Service Standards include the
following:
i) Dealer will warranty all vehicles purchased from Dealer through
the services of the Cyberstore. The coverage of the warranty
shall be no less favorable to the purchaser than the law of the
state in which Dealer is located, and in no event shall be less
favorable than "Three months or 3,000 miles, whichever comes
first." The warranty shall cover all matters governed by
applicable law and by the form of warranty attached hereto.
Dealer will indemnify ABT for any third party claims arising
under any warranty.
ii) Dealer will provide prices for display on the ABT Web site of all
vehicles posted to the Cyberstore. Dealer will price such
vehicles competitively, but there shall be no maximum price
specified by ABT.
iii) Dealer will offer, and inform each purchaser in writing of, a
repurchase option, enabling any purchaser to return a purchased
vehicle to Dealer within 72 hours or 300 miles, whichever comes
first. Dealer will refund 100% of the monies collected by Dealer
with respect to any repurchased vehicle, provided there has been
no damage to the vehicle. Dealer will provide each purchaser the
name and phone number of the Dealer employee to contact to
exercise the repurchase option. Dealer shall facilitate the
exercise of such option in good faith using its best efforts to
maximize the purchaser's satisfaction with the repurchase
experience, and in any event shall refund such monies within five
(5) business days.
iv) Dealer will participate in any emergency repair system
established by ABT, which system will permit any 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 such
Repairing Dealer perform any warranted service or repair. The
Repairing Dealer will contact the dealership through which the
purchaser acquired its vehicle (the "Selling Dealer") and receive
an irrevocable purchase order (an "R.O.") from the Selling Dealer
to appropriately repair the vehicle. For other covered items,
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 such unit at the selling
dealer's service location. In
Page 3
<PAGE>
the event of any dispute between the Selling Dealer and the
Repairing Dealer, ABT will act as arbiter and ABT's decisions
will be final and binding upon Dealer.
v) Dealer will participate in financing programs offered through
Auto-By-Tel Acceptance Corporation ("ABTAC"). Dealer agrees that
low-cost financing arrangements pursuant to which customers would
(i) receive a financing proposal, and (ii) close both the vehicle
acquisition and financing quickly through Dealer, would be viewed
by Potential Purchasers as an improvement in the Auto-By-Tel
Program, consequently increasing the attractiveness of the Used
Car Cyberstore and its value to Dealer. Dealer agrees to
cooperate fully with the financing arrangements instituted by
ABTAC through the ABT Web site, including without limitation
entering into customary closing administration arrangements with
finance companies as requested by ABTAC, and to take such actions
as reasonably requested by such finance companies or ABTAC to
ensure that customers receive a high level of service and
satisfaction in connection with the finance arrangements. After
ABTAC institutes its financing program, Dealer acknowledges that
changes in the Used Car Cyberstore Customer Service Guidelines
may from time to time pertain to such financing programs.
(vi) Dealer agrees to adopt ABT sales procedures on used vehicle
transactions, including, without limitation, firm phone price
quotes, advanced paperwork preparation, minimization of purchaser
time spent closing transactions, and "no hassle" sales. Dealer
shall relay to Potential Purchasers a full and complete response
to the Potential Purchasers' inquiries transmitted by ABT to
Dealer within 24 hours for receipt of the inquiry from ABT.
Dealer's initial response shall be by telephone and shall
disclose (i) the availability of the vehicles inquired about,
(ii) all requested options, (iii) the price at which the Dealer
will sell/lease the vehicle with all requested options to the
Potential Purchasers, and (iv) all other terms and costs required
by law to be disclosed to prospective purchasers, or from time to
time specified by ABT to be disclosed to Potential Purchasers
(all such information, the "Dealer Information"). Dealer hereby
covenants and agrees that all of the terms and conditions
contained in Dealer information transmitted to a Potential
Purchaser shall remain in full force and effect and be binding
upon Dealer for a period of seven (7) days after its transmittal
provided the identified vehicle still remains available for sale,
and Dealer agrees to include a statement to such effect in the
Dealer Information.
(vii) Dealer agrees to cooperate fully with ABT and its agents and
contractors with respect to all systems aspects and inspections
concerning the Cyberstore, as such systems and inspections are
specified by ABT from time to time.
(c) Use of System and Modifications. It is agreed to by the parties
-------------------------------
that the use of ABT's services is restricted solely to Dealer and its designated
employees and other duly
Page 4
<PAGE>
authorized licensees of ABT. Dealer shall not compete with ABT in providing the
services herein discussed.
(d) Dealer Equipment. In order to assure high quality service
----------------
delivered consistently by all dealers participating in the Cyberstore, ABT
shall, from time to time, specify the equipment and software required by Dealer
to participate in the Cyberstore. Dealer, at its sole cost and expense, shall
provide the computer and other office equipment specified from time to time by
ABT to use and receive the services to be provided hereunder by ABT, including,
without limitation, the ABT Dealer Real Time Program personal computer and
software. Dealer shall maintain all of their computer and office equipment in
good and proper working order and repair. Dealer shall 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 in connection therewith.
(e) Dealer Report. Dealer shall report to ABT on a monthly basis the
-------------
number and names of Potential Purchasers who purchased used vehicles from
Dealer, the number of used vehicles financed and the amounts financed and such
other information as ABT may from time to time request.
(f) Advertising; Press Releases. From time to time ABT may provide
---------------------------
Dealer with camera-ready copy and other logos, trademarks, artwork and materials
for the limited purpose of inclusion, at Dealer's option, within Dealer print
and television advertisements to promote the association of Dealer with the ABT
program. ABT shall grant Dealer a revocable, limited license to use such
materials for such limited purposes, and Dealer shall use such materials for
such limited purposes, and Dealer shall use such materials in no other manner.
Any such materials shall remain at all times the property of ABT, and they shall
be returned upon request, and the limited license herein granted may be revoked
at any time by written notice to Dealer. Dealer shall not issue any press
releases or make any public announcements of any of the transactions
contemplated by this Agreement except as may be mutually agreed to in writing by
Dealer and ABT.
3. Title to System, Trademarks. The services to be provided hereunder by
---------------------------
ABT, together with any modifications and/or improvements therein made by ABT or
Dealer during the term of this Agreement, or any extensions thereof, and all
copies thereof are proprietary to ABT and title thereto remains in ABT. All
applicable rights to patents, copyrights, trademarks and trade secrets in the
System and in the name "Auto-By-Tel" and its logo are and shall remain solely in
ABT. Any and all trademarks and service marks associated with ABT, including
"Used Car Cyberstore," are and shall remain the exclusive property of ABT. If,
during the term of this Agreement, trademark registrations are filed by ABT, all
rights belong to ABT, and ABT shall bear the costs for such registration(s).
Dealer is permitted to use the trademarks and service marks only as set forth
herein or only as authorized in writing by ABT.
4. Subscription Fees.
-----------------
(a) Dealer shall pay ABT ((FirstCyberSignupAmt)) ($2500.00 for a
single franchise dealer (one used location supporting one new car franchise),
and $3500.00 for a multi-franchise dealer (a single used vehicle location
supporting multiple new car franchises)) as an initial start-up fee concurrently
with Dealer's execution of this Agreement.
Page 5
<PAGE>
(b) Dealer shall pay ABT the amount of ((CyberMthFee)) as a monthly
subscription fee which is due and payable on the first day of every month. ABT
may change this monthly subscription fee upon thirty (30) days written notice of
the increased price to the Dealer.
(c) Dealer shall pay ABT an annual fee on the first anniversary date
of this Agreement and each anniversary thereafter. A notice indicating the
amount of the annual fee will be sent to the Dealer sixty (60) days prior to
each anniversary date of this Agreement.
(d) Dealer shall pay ABT a per vehicle fee with respect to all
vehicles offered for sale by Dealer through the Cyberstore in accordance with
Schedule A attached hereto. Such fee shall be payable with respect to each day
any vehicle is identified on the ABT Web site as available for purchase.
(e) If ABT terminates this Agreement pursuant to Section 6(b)(ii) for
no reason, ABT shall refund a prorated amount of fees paid under this Agreement
for the remaining portion of the period with respect to which such fees had been
paid, except that the monthly fees due for the month in which the Agreement is
terminated shall not be refunded or prorated. (The startup fee shall be deemed
to have been paid for the first year this Agreement is in effect.) In no other
circumstances shall any amounts paid under this Agreement be refundable.
5. Taxes. Dealer shall, in addition to any other amounts payable under
-----
this Agreement, pay all taxes -- federal, state, local or otherwise, excluding
income taxes attributable to the income of ABT -- however designated which are
levied or imposed by reason of the services provided under this Agreement.
Without limiting the foregoing, Dealer shall promptly pay to ABT an amount equal
to any such items actually paid or required to be collected or paid by ABT.
6. Term and Termination.
--------------------
(a) This Agreement shall be for a term of five (5) years, unless
terminated sooner pursuant to this Section 6.
(b) ABT may terminate this Agreement (i) immediately if Dealer does
not adhere to the Used Car Cyberstore Customer Service Standards in effect, or
any amounts due ABT pursuant to Section 4 are outstanding more than thirty (30)
days, or, if any amount payable to ABT under Sections 5 or 8 are outstanding
more than thirty (30) days after ABT makes a written request therefor, or any
other breach by Dealer of this Agreement is not cured within ten (10) days after
written notification by ABT of such breach or Dealer is in breach of any other
Agreement to which ABT (or any of its affiliates) and Dealer are both parties;
or (ii) at any other time, for any reason or for no reason, upon thirty (30)
days written notice to the Dealer; or (iii) immediately, if Dealer is in default
under any other agreement between ABT (or any of its affiliates), on the one
hand, and Dealer (or any of its affiliates) on the other, or if Dealer ceases
for any reason to participate in the ABT Real Time Program or the ABT new car
purchase program, or any ABTAC financing program.
(c) Dealer may terminate this Agreement (i) immediately, if an order
for liquidation against ABT is entered and not stayed in a bankruptcy
proceeding; (ii) immediately,
Page 6
<PAGE>
if ABT is guilty of willful misconduct in the performance of its duties under
this Agreement; or (iii) at any other time, in its sole discretion, upon thirty
(30) days written notice to ABT.
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 paragraphs 2(f), 3, 5, 6, 7, 8, 9, 10, 11 and 12.
7. Confidentiality. ABT agrees to treat all records and other information
---------------
provided by Dealer, with respect to terms of sale, financing or leasing of
vehicles, confidential, except that this information may be transmitted to
consumers making inquiries concerning the terms of purchase, financing or
leasing of used vehicle(s). Dealer, on behalf of itself and its employees,
agree to keep all information with respect to ABT's services confidential and,
without the previous written consent of ABT, Dealer shall not impart ABT's
services, or the concept thereof, to any person or entity whatsoever other than
the designated key employees of the Dealer. Notwithstanding the foregoing, if
either party is required to produce any such information by or 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 required
information. 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 acknowledges and
agrees that it will keep such trade secrets confidential, and the sale or
unauthorized use or disclosure of any of ABT's trade secrets will greatly damage
ABT. In the event of the termination of this Agreement in accordance with its
terms, Dealer will, upon request of ABT, promptly deliver to ABT all software
and other written information and documents provided in connection with this or
any other Agreement between ABT and Dealer, in the possession of Dealer, or any
personnel thereof, including all copies, reproductions, summaries, analyses and
extracts thereof or based thereon.
8. Indemnification. Dealer agrees to indemnify and hold harmless ABT and
---------------
its subsidiaries and/or affiliates and their respective 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 any third party claim (including, but not limited to, any
claim for damages by any person or entity who purchases, leases, and/or finances
a used vehicle(s) from Dealer through utilization of ABT's services) resulting
from the use of ABT's services provided hereunder. Dealer shall defend and
settle, at its sole cost and expense, all suits or proceedings arising out of
any of the foregoing, provided ABT gives Dealer prompt notice of any such claim
of which it learns. In all events, ABT shall have the right to participate in
the defense of any such suit or proceedings through counsel of its own choosing.
ABT shall be without liability to Dealer with respect to anything done, or
omitted to be done, in connection with this Agreement or instructions received
pursuant hereto, if done without gross negligence or willful or wanton
misconduct.
9. Exclusivity. Dealer acknowledges that the value to Dealer of this
-----------
Agreement is based on the unique package of services marketed to Potential
Purchasers of used vehicles by ABT and ABT's reputation for delivering such
services on a consistent basis. Dealer agrees that certain key elements of the
ABT packages of services are (i) electronic transmission of customer purchase or
lease requests; (ii) rapid response by dealers to consumer pricing or lease
pricing request, including immediate telephone contact with up-front, firm
pricing provided over the
Page 7
<PAGE>
phone on such call; (iii) customer paperwork completed or nearly completed prior
to customer arrival at the dealership for pickup so as to ensure the customer
spends as little time as possible at the dealership for pickup; and (iv) Dealer
training and support to implement the ABT package of services and to maintain
the style and reputation of the ABT sales program and package of services; and
(v) the provision of any service pursuant to which a Potential Purchaser may
search a database containing vehicles posted by more than one dealer
(collectively, the "Key Elements"). Dealer acknowledges that ABT has spent, and
will spend, considerable time and money developing its package of services and
training Dealer to deliver such services in a consistent way which maintains
ABT's distinctive market presence and reputation. Accordingly, Dealer agrees
that during the "Exclusivity Period" (as defined below), Dealer and its
affiliates will not, directly or indirectly, participate with any third party in
any arrangement or agreement which involves any or all of the Key Elements, and
will not participate in any pricing, credit or financing, insurance or
information service involving or made available on the Internet, online or by
other electronic means. For purposes of this Section 9, the "Exclusivity Period"
commences on the date of this Agreement, and terminates one year after the date
of termination; provided, however, that if this Agreement is terminated anytime
-----------------
after the first anniversary of the date hereof, then the Exclusivity Period
terminates six months after the date of termination. Without contradicting the
foregoing, Dealer may establish and maintain its own Web site and/or participate
in any factory direct program.
Notwithstanding any other provisions of this Agreement, in the event Dealer
breaches this Section 9, the provisions of this Section shall remain in full
force and effect for one (1) year after such breach is cured. Dealer
acknowledges that the provisions of this Section 9 were a material inducement to
ABT in entering into this Agreement, and that ABT would not have entered into
this Agreement with Dealer in the absence of such provisions. Dealer
acknowledges and agrees that compliance with the provisions of Sections 7 and 9
is necessary to protect the business and good will of ABT, and that any breach
of Sections 7 or 9 will result in irreparable and continuing damage to ABT, for
which money damages may not provide adequate relief. Accordingly, Dealer agrees
that in the event Dealer shall breach or threaten to breach Sections 7 and 9, in
addition to any other relief to which ABT may be entitled, ABT shall be
entitled to temporary, preliminary or permanent injunctive relief, without proof
of actual damages that have been or may be sustained by ABT as a result of such
breach, and recovery of all reasonable sums expended and costs, including
reasonable attorneys' fees, incurred by ABT to enforce the provisions of
Sections 7 and 9 hereof.
10. Warranty Limitation. 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 UNDER THIS AGREEMENT BY ABT. SPECIFICALLY EXCLUDED ARE ALL WARRANTIES,
EXPRESSED OR IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF
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 THE CLAIMS OF DAMAGES MADE BY ANY THIRD
PARTY EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. ABT SHALL
NOT BE LIABLE FOR ANY LOSS OF DATA, DELAYS AND/OR ERRORS IN TRANSMITTING DATA
OCCURRING FOR ANY REASON OR FOR ANY DAMAGES ARISING AS A CONSEQUENCE THEREOF.
Page 8
<PAGE>
11. 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 to such address as the party to
receive the notice or request so designates by written notice to the other.
12. Miscellaneous.
-------------
(a) Assignment. This Agreement and the rights and duties hereunder
----------
shall not be assignable by the Dealer except upon written consent of ABT. This
Agreement and the rights and duties hereunder shall be assignable by ABT.
(b) Independent Contractors. The relationship between ABT and Dealer
-----------------------
created by this Agreement shall be that of independent contractor. Nothing
contained in this Agreement shall be construed as creating or constituting a
partnership, agency, or joint venture between ABT and Dealer.
(c) No Waiver. The failure of either party to exercise in any respect
---------
any right provided for herein shall not be deemed a waiver of any right
hereunder.
(d) Severability Clause. Any part, provision, representation or
-------------------
warranty of this Agreement that is prohibited or that is held to be void or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any
part, provision, representation or warranty of this Agreement that is prohibited
or unenforceable or is held to be void or unenforceable in any jurisdiction
shall be ineffective, as to such jurisdiction, to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. To
the extent permitted by applicable law, the parties hereto waive any provision
of law that prohibits or renders void or unenforceable any provision hereof. If
the invalidity of any part, provision, representation or warranty of this
Agreement shall deprive any Person of the economic benefit intended to be
conferred by this Agreement, the parties shall negotiate, in good faith, to
develop a structure, the economic effect of which is as close as possible to the
economic effect of this Agreement, without regard to such invalidity.
(e) Governing Law; Consent to Forum. This Agreement has been
-------------------------------
negotiated, executed and delivered at and shall be deemed to have been made in
California. This Agreement shall be governed by and construed in accordance
with the laws of the State of California without giving effect to the conflict
of laws rules therein. The parties hereto hereby consent and agree that the
California state courts, or at ABT's option, the United States District Courts
sitting in California, shall have exclusive jurisdiction to hear and determine
any claims or disputes between the parties hereto pertaining to this Agreement
or to any matter arising out of or related to this Agreement. The parties
hereto expressly submit and consent in advance to such jurisdiction in any
action or suit commenced in any such court, and hereby waive any objection which
it may have based upon lack of personal jurisdiction, improper venue or forum
non conveniens and hereby consent to the granting for such legal or equitable
relief as is deemed appropriate by such court. Nothing in this Agreement shall
be deemed or operate to affect the right of either party to serve legal process
in any other manner permitted by law, or to preclude
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<PAGE>
the enforcement by either party of any judgment or order obtained in such forum
or the taking of any action under this Agreement to enforce same in any other
appropriate forum or jurisdiction.
(f) WAIVER OF TRIAL BY JURY. EACH PARTY HERETO WAIVES THE RIGHT TO
-----------------------
TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND
ARISING OUT OF OR RELATED TO THIS AGREEMENT. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
(g) Cooperation. Upon the request of ABT, Dealer agrees to confirm in
-----------
writing, in form satisfactory to ABT and provided by ABT at its own expense, any
amendment, modification, change in original terms or other action which alters
the terms of this Agreement and which was taken or initiated by ABT pursuant to
rights granted to, or reserved by, ABT hereunder.
(h) Judicial Interpretation. Should any provision of this Agreement
-----------------------
require judicial interpretation, it is agreed that a court interpreting or
construing the same shall not apply a presumption that the terms hereof shall be
more strictly construed against any party by reason of the rule of construction
that a document is to be construed more strictly against the party who itself or
through its agent prepared the same, it being agreed that all parties hereto
have participated in the preparation of this Agreement.
(i) Counterparts. This Agreement may be executed simultaneously in
------------
any number of counterparts. Each counterpart shall be deemed to be an original,
and all such counterparts shall constitute one and the same instrument.
(j) Advice from Independent Counsel. The parties hereto understand
-------------------------------
that this Agreement is a legally binding agreement that affects such party's
rights. Each party represents to the other that it has received legal advice
from counsel of its choice regarding the meaning and legal significance of this
Agreement, and that it is satisfied with its legal counsel and the advice
received from it.
(k) Other Agreements. 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 with respect to
the rendering of the 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 that no
other agreement, statement, or promise not contained in this Agreement will be
valid or binding. Any modification of this Agreement will be effective only if
it is in a writing signed by the party to be charged.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
representatives to set their hands as of the date first above written.
Auto-By-Tel Marketing Corporation
By ______________________________
Name: Peter R. Ellis
Title: President
((DealerCorp))
By _______________________________
Name: ((DealerFirstName)) ((DealerLastName))
Title: ((DealerTitle))
Page 11
<PAGE>
SCHEDULE A
- ----------
ABT CYBERSTORE SUBSCRIPTION AGREEMENT
Daily Charges Based on Per Unit Per Day
---------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
0-25 $2.00 Per Day Per Unit
26-49 $1.75 Per Day Per Unit
50-75 $1.50 Per Day Per Unit
76+ $1.25 Per Day Per Unit
</TABLE>
Page 12
<PAGE>
EXHIBIT 10.13(h)
ABTAC FINANCE PROGRAM PARTICIPATION AND POWER OF ATTORNEY
---------------------------------------------------------
AGREEMENT
---------
This ABTAC FINANCE PROGRAM PARTICIPATION AND POWER OF ATTORNEY AGREEMENT
("Agreement") is entered into as of the ((FinanceStDate)) between AUTO-BY-TEL
ACCEPTANCE CORPORATION, a Delaware corporation ("ABTAC"), and ((Dealer_Corp))
dba ((Dealer_DBA)) ("Dealer").
WITNESSETH:
----------
WHEREAS, Dealer and Auto-By-Tel Marketing Corporation are parties to one or
more subscription agreements governing the forwarding of purchase requests
through the Website of its affiliate Auto-By-Tel Corporation, which agreement(s)
contemplate the provision by ABTAC of certain financial services as part and
parcel of the Auto-By-Tel customer service program;
WHEREAS, ABTAC has entered into arrangements with certain companies to make
available to Auto-By-Tel customers through Auto-By-Tel subscribing dealers
certain financial services, and ABTAC intends to enter into further such
arrangements;
WHEREAS, to facilitate such arrangements, Dealer has agreed to grant ABTAC
a power-of-attorney to execute and deliver the dealer agreements related to such
arrangements on behalf of Dealer;
WHEREAS, to facilitate such arrangements, ABTAC has requested that Dealer
instruct ABTAC to specify to each financing source a binding amount of "dealer
participation" or with respect to the sale of certain retail installment
contracts and lease financing agreements, which amount Dealer will be paid
directly by the financing source;
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, ABTAC and Dealer agree as follows:
1. Dealer Participation. Dealer hereby instructs ABTAC to inform each
--------------------
and every finance company which becomes one of the financing sources available
to Auto-By-Tel customers, that Dealer agrees that it will accept as compensation
for financing transactions the amounts computed in accordance with the formulas
set forth on Schedule A, subject to customary conditions and terms (including
those in the applicable dealer agreement or similar arrangement). Dealer agrees
to return an executed copy of Schedule A to ABTAC forthwith, and agrees that if
it fails to so return the Schedule, then the Dealer Election set forth on
Schedule A shall be deemed to be "Flat Fee Program: No Rate Increase." Dealer
shall have the right, on thirty (30) days written notice, to amend the
participation election percentage, provided Dealer does not amend such election
--------
more frequently than once every ninety (90) days, and provided that Dealer's
election is within the parameters established on Schedule A.
2. Power of Attorney. Dealer hereby agrees to deliver to ABTAC, together
-----------------
with this Agreement, a power of attorney in the form attached hereto as Exhibit
A empowering ABTAC to enter
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<PAGE>
into Auto-By-Tel Acceptance Corporation Master Retail Sales and Lease Financing
Agreements (the "Dealer Agreements") substantially in the form of Exhibit B,
with such terms as are incorporated from the Auto-By-Tel Acceptance Corporation
Master Retail Sale and Lease Financing Standard Provisions set forth on Exhibit
C, together with the additional terms as ABTAC may determine are necessary and
proper and customary in the industry, the execution of a Dealer Agreement by
ABTAC on behalf of Dealer constituting conclusive evidence of such
determination.
3. Term of Agreement. The term of this Agreement shall run concurrently
-----------------
with that of the Subscription Agreement between Dealer and Auto-By-Tel Marketing
Corporation.
4. Miscellaneous. ANY DISPUTE OR CLAIM ARISING HEREUNDER MAY BE BROUGHT
-------------
ONLY TO A COURT OF COMPETENT JURISDICTION LOCATED IN ORANGE COUNTY IN THE STATE
OF CALIFORNIA, AND THE PARTIES HERETO AGREE TO THE JURISDICTION OF SUCH COURT
AND WAIVE ANY JURY TRIAL. This Agreement and the rights and duties hereunder
may be assigned by ABTAC, and may be assigned by the Dealer only upon written
consent of ABTAC. The failure of either party to exercise any right provided
for herein shall not be deemed a waiver. If any provision of this Agreement
shall be held to be invalid, illegal or unenforceable, the rest of this
Agreement shall remain valid and enforceable. This Agreement shall be governed
and construed in accordance with the internal laws of the State of California.
This Agreement supersedes any and all agreements and understandings between the
parties and contains all terms between the parties with respect to the subject
matter hereof. Any modifications of this Agreement will be effective only if in
writing and signed by both parties.
IN WITNESS WHEREOF, each of the parties hereto have caused its duly
authorized representative to execute this Agreement on its behalf as of the date
first written above.
AUTO-BY-TEL ACCEPTANCE
CORPORATION
By: _____________________________
W. Randolph Ellspermann
Chief Operating Officer
Date: ____________________________
((Dealer_Corp))
- -------------
dba ((Dealer_DBA))
By: _____________________________
Signature of ((Dlr_First)) ((Dlr_Last))
Title: ((Dlr_Title))
Date: ____________________________
Page 2
<PAGE>
SCHEDULE A
----------
ABTAC DEALER RETAIL PLAN FEATURES ELECTION
------------------------------------------
RETAIL INSTALLMENT SALE FINANCING PARTICIPATION
-----------------------------------------------
A. Flat Fee Program
----------------
If dealer elects NOT to increase the customer financing rate (APR) over the
finance source buy rate (minimum rate), the following fee schedule will be
paid to dealer directly by finance source, subject to the charge back
provisions of the lender per the dealer agreement.
<TABLE>
<CAPTION>
Amount Financed Dealer Fee
--------------- ----------
<S> <C>
$25,000 + $75
15,001 - 25,000 50
less than $15,000 25
</TABLE>
B. Rate Participation Program
--------------------------
If dealer elects to INCREASE the customer rate over financing source buy
rate, dealer will be paid up front 76% of the contract interest rate markup
directly by finance source, subject to the charge back provisions of the
lender per the dealer agreement. (The finance source shall pay from the
Flat Fee Program if the calculated amount under the Rate Participation
Program is less than the Flat Fee Program.)
C. DEALER ELECTION (CIRCLE ONE)
Flat Fee Program: No rate increase
Rate Participation Program: 0.25 % increase
0.50 % increase
0.75 % increase
1.00 % increase
I understand that each ABTAC finance contract will be pre-approved at the
----
finance source buy rate plus the dealer participation rate shown above, if any,
----
and that both the customer and dealer will be notified of the customer finance
rate (APR) by Auto-By-Tel. An exception to this practice will be for sub-prime
borrowers, when the lender may not permit the indicated markup, in which case
dealer will receive maximum permissible amount.
Dealer Principal: ________________________________________ Date: __________
Signature of ((Dlr_First)) ((Dlr_Last))
Page 3
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EXHIBIT A (PAGE 1 OF 2)
POWER OF ATTORNEY
((Dealer_Corp)) dba ((Dealer_DBA)) a ((Entity)) organized and existing
under the laws of the State of ((STTxt)) (the "Dealer"), hereby grants to AUTO-
BY-TEL ACCEPTANCE CORPORATION ("ABTAC"), a power of attorney (this "Power of
Attorney"), with full power of substitution and delegation, to take any and all
actions in the name and on behalf of the Dealer, which ABTAC determines, in its
sole and unreviewable discretion, are necessary or desirable to negotiate,
execute, deliver and bind Dealer to one or more Auto-By-Tel Acceptance
Corporation Master Retail Sales and Lease Financing Agreements (each, an
"Agreement") with one or more finance companies (each, a "FinCo"), or to amend
any provision of any Agreement previously executed and to otherwise act in my
behalf with respect to all matters in connection with or related to the
Agreement.
The Dealer hereby acknowledges receipt of a copy of the Agreement,
which is in all respects acceptable to the Dealer.
The Dealer hereby acknowledges that ABTAC is given rights to make all
decisions, including the determination of any provisions of any Exhibit C to the
Agreement and give and receive certain notices with respect to the Agreement.
The Dealer hereby expressly agrees to such provisions, and agrees to be bound by
any notice or decision given, received or made by ABTAC pursuant to any
Agreement.
The Dealer agrees that it will not question the sufficiency of any
instrument executed by ABTAC, attorney-in-fact pursuant to this Power of
Attorney, notwithstanding that this instrument and/or the Agreement fails to
recite the consideration therefor or recites merely a nominal consideration; any
person dealing with the subject matter of such instrument may do so as if full
consideration therefor had been expressed therein. I hereby ratify and confirm
all that ABTAC, my attorney-in-fact has or shall lawfully do or cause to be done
by virtue hereof.
This Power of Attorney cannot be changed orally. It shall not be
affected, except for prospective revocation, by the subsequent disability,
incompetence, bankruptcy, liquidation or other circumstance of the principal.
This Power of Attorney may be revoked by the Dealer upon written notice to ABTAC
and to each FinCo with which the Dealer has entered into a Agreement, either by
its own signature or through the power herein granted, but such revocation shall
not effect any Agreement binding upon the Dealer prior to such revocation, which
Agreements shall remain binding upon the Dealer in all respects.
IN WITNESS WHEREOF, the undersigned a duly authorized representative
of the Dealer hereunto sets his hand as of this _______ day of
_______________________, 199_____.
((Dealer_Corp))
dba ((Dealer_DBA))
By: _______________________________
Name: ((Dlr_First)) ((Dlr_Last))
Title: ((Dlr_Title))
Page 4
<PAGE>
EXHIBIT A (PAGE 2 OF 2)
STATE OF ______________)
: ss.:
COUNTY OF ______________ )
BE IT REMEMBERED, that on this ___ day of __________, 199__, before me
the undersigned, a Notary Public in and for the County and State aforesaid, came
______________, the ((Dlr_Title)) _______________ of ((Dealer_Corp)) dba
((Dealer_DBA)) a ((Entity)) duly organized, incorporated and existing under and
by virtue of the laws of ((STTxt)), who is personally known to me to be such
officer, and who is personally known to me to be the same person who executed,
as such officer, the within instrument on behalf of said company, and such
person duly acknowledged the execution of the same to be the act and deed of
said company.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal, the day and year last above written.
____________________________________
Notary Public
My commission expires:
_____________________
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<PAGE>
EXHIBIT B
AUTO-BY-TEL ACCEPTANCE CORPORATION
MASTER RETAIL SALES AND LEASE
FINANCING AGREEMENT
THIS AGREEMENT AMONG the automobile dealer identified below ("Dealer") having
its principal place of business at the address identified below, and the finance
company identified below ("FinCo") having its principal place of business at the
address identified below, sets out the terms under which FinCo will purchase
retail installment contracts and/or leases and leased vehicles from Dealer and
the rights and obligations between Dealer and FinCo with regard to such retail
installment contracts and/or leases and leased vehicles.
PARAGRAPH A. INCORPORATION BY REFERENCE
--------------------------
PARTS I [INSERT II AND/OR III AND/OR IV] of the Auto-By-Tel Acceptance
Corporation Retail Sales and Lease Financing Agreement Standard Provisions
(herein called the "Standard Provisions"), a copy of which are attached hereto
as Annex A, are hereby incorporated herein by reference with the same force and
effect as though fully set out herein.
PARAGRAPH B. ADDITIONAL PROVISIONS
---------------------
Each of the following provisions, which constitute part of this Agreement,
is numbered to conform with the format of the Standard Provisions:
((DEALER_CORP))
DBA ((DEALER_DBA))
Dated:__________________________ , 199____ .
[FINCO] ((Dealer_Corp))
By:
----------------------------
Authorized Signature - Title
((Dealer_DBA))
---------------------------- ((Address))
Street Address of Dealer
((City)) ((ST)) ((Dlr_Zip))
----------------------------
City and State
By: AUTO-BY-TEL ACCEPTANCE
CORPORATION, as
Attorney-In-Fact
By:
-----------------------
Name:
Title:
Page 6
<PAGE>
EXHIBIT C
AUTO-BY-TEL ACCEPTANCE CORPORATION
MASTER RETAIL SALES AND LEASE
FINANCING AGREEMENT
STANDARD PROVISIONS
PART I -- PROVISIONS OF GENERAL APPLICABILITY
1. DEALER'S GENERAL WARRANTIES.
For the term of this Agreement, Dealer warrants and agrees that:
(a) Dealer has the power and authorization to enter into this Agreement,
and the person signing this Agreement binds Dealer to this Agreement.
(b) Dealer is duly organized under the laws of the state of its
organization, and it is and will remain in good standing in the state of its
organization.
(c) At the time that Dealer enters into a retail installment contract
("Contract") or lease which is submitted to FinCo and at the time such Contract
or lease and related leased vehicle (together, a "Lease Transaction")
(hereinafter, the term "Financing Contract" is used to describe Contracts or a
Lease Transactions, or, as the context requires, both) is assigned by Dealer to
FinCo, Dealer is properly licensed and authorized to enter into the Financing
Contract and sell such Financing Contract to FinCo. Dealer has all other
licenses required to conduct its business as presently conducted, and is in
compliance with all applicable laws, rules and regulations, including without
limitation, (i) all applicable laws relating to doing business under a trade
name or as a partnership, and (ii) all applicable requirements of the Fair
Credit Reporting Act and the Equal Credit Opportunity Act and all other federal,
state and local laws, rules and regulations applicable to the extension of
credit and consumer protection or otherwise applicable to the sale or lease of a
vehicle, including, without limitation, so called "fair lending rules".
(d) All documents and financial statements of Dealer, and any guarantors
of Dealer's obligations to FinCo, provided to FinCo pursuant hereto, either
prior to or after signing this Agreement, are accurate.
(e) If, after FinCo purchases a Financing Contract, Dealer receives any
payments due thereunder, Dealer shall promptly deliver the payments to FinCo.
(f) Dealer will not submit to FinCo credit information with respect to an
applicant if Dealer believes, or has reason to believe, such applicant did not
authorize the submission of such Application (defined below) to FinCo.
(g) Dealer has complied with all applicable transaction reporting
requirements including, without limitation, the requirement under Section 60501
of the Internal Revenue Code, as may be amended from time to time and its
implementing regulations, to report cash receipts of more than $10,000.
(h) Dealer will promptly forward to the proper authorities all federal,
state and local fees and taxes, including, without limitation, all applicable
federal luxury taxes due in connection with the sale of a vehicle relating to a
Financing Contract (each, a "Vehicle").
(i) Dealer does not charge its customers (each, a "Buyer") for filing fees
or other costs paid by Dealer to public officials to perfect FinCo's security
interest in the Vehicle, except where allowed by law, nor does Dealer make any
type of charge, including documentary or processing charges, which Dealer does
not make in any other cash transaction.
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<PAGE>
2. DEALER LIABILITY.
(a) If any Dealer representation, warranty or covenant made in this
Agreement to FinCo is breached or untrue or FinCo reasonably believes is
breached or untrue prior to purchasing the Contract, FinCo may choose not to
purchase such Financing Contract. Dealer will indemnify and hold FinCo harmless
from any claim, suit, loss, liability or expense, including court costs and
attorneys' fees, incurred by FinCo in connection with such Financing Contract
which FinCo did not purchase.
(b) Upon Dealer's payment of the unpaid balance of a Financing Contract,
such Financing Contract shall be assigned and/or endorsed by FinCo to Dealer
without recourse and without warranties of any kind and sent by certified mail
to Dealer.
(c) If Dealer breaches this Agreement or any other agreement with FinCo
relating to a Financing Contract, Dealer shall pay FinCo upon demand all losses
and expenses incurred by FinCo as a result thereof, including attorney's fees
and costs of litigation.
3. ADVERTISING.
Dealer agrees not to identify FinCo in any advertising placed in any medium
(including signs on Dealer's premises) without prior written approval of FinCo.
Dealer shall indemnify FinCo for any losses or expenses, including attorney's
fees and costs of litigation, suffered by FinCo in any judicial or
administrative proceeding because of any claim or defense asserted against FinCo
as a result of any advertising placed by Dealer, regardless of FinCo's consent
to such advertising.
4. OFFSET.
FinCo may deduct from any deposit, security, funds, or obligation due
Dealer any amount Dealer owes FinCo under this Agreement or any other agreement
between FinCo and Dealer.
5. TERMINATION.
FinCo or Dealer may terminate the Agreement upon written notice to the
other party at the address specified below, Agreement, or such other address as
FinCo or Dealer may notify the other party from time to time. The termination
of this Agreement shall not release FinCo or Dealer from any obligations
incurred with regard to any Financing Contract purchased, or with regard to any
Financing Contract which FinCo has indicated it would purchase upon receipt of
satisfactory documentation. The indemnification, representations, warranties
and covenants provisions contained in this Agreement shall survive the
termination of this Agreement.
6. LAW GOVERNING.
The Agreement shall be governed by the laws of the state in which FinCo is
located, as set forth on the front of the Agreement. Should any part of this
Agreement be determined to be unenforceable by a court, such unenforceability
shall not affect the rest of this Agreement.
7. NOTICES.
Notices hereunder must be in writing addressed to the respective party at
the appropriate address set forth on the signature page of the Agreement or such
other address of which the party may give the other notice and will be mailed,
U.S. mail with first class postage prepaid. Notices will be effective two (2)
days after mailing. Each party will provide the other notice of a change in
such first party's address.
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<PAGE>
8. MISCELLANEOUS.
No modification or waiver of any term of the Agreement or any amendments to
this Agreement shall be binding unless made by written agreement signed by an
authorized representative of Dealer and an authorized officer of FinCo. No
failure or delay by either party in exercising any right or remedy hereunder
shall operate as a waiver thereof. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law. If any provision of this
Agreement is found invalid, the remaining provisions of this Agreement shall
survive. Neither this Agreement nor any of the activities contemplated hereby
shall be deemed to create any partnership, joint venture, agency or employer-
employee relationship between Dealer and FinCo. Dealer is not granted any
express or implied right to bind FinCo in any manner whatsoever. The Agreement
shall be binding upon the parties, their representatives, heirs, beneficiaries,
successors and assigns; provided, however, that this Agreement shall not be
-------- -------
assigned by Dealer without the prior written approval of FinCo. The Agreement
shall be effective only upon execution or acceptance by an authorized
representative of FinCo in the state in which FinCo is located as identified on
the front of this Agreement.
9. AMENDMENTS.
This Agreement may be amended only by (a) a separate writing which is dated
and executed by both FinCo and Dealer, or (b) a separate writing which is
received by Dealer from FinCo in which case the amendments in the writing
received by Dealer shall be deemed accepted without qualification by Dealer upon
submission of the first Financing Contract application to FinCo following
Dealer's receipt of the writing.
10. ASSIGNMENT.
Dealer cannot assign this Agreement or any rights under it without FinCo's
prior written permission. FinCo can assign this Agreement and its rights under
it without notice to or permission from Dealer. To the extent allowed by law,
FinCo can use and assign any information about leases and leased vehicles
purchased by FinCo.
11. ADDITIONAL DOCUMENTS AND SHOWINGS.
Dealer agrees to provide FinCo with such additional information and
documents as FinCo may reasonably request, including, but not limited to,
evidence of compliance by Dealer with all of Dealer's obligations hereunder,
evidence relating to all warranties and representations of Dealer hereunder, and
the most recent financial statements for Dealer and any guarantors of Dealer's
obligations to FinCo. Dealer hereby authorizes FinCo to investigate Dealer's
creditworthiness.
12. ACTIONS BY FINCO.
Dealer understands and agrees that FinCo may without notice to Dealer
extend the due dates of rental or installment payments due or to become due
under any Financing Contract, amend any Financing Contract by agreement with the
Buyer or otherwise deal with the Buyer or any other party obligated to FinCo in
connection with the transaction in whatever manner FinCo deems reasonable and
appropriate, without affecting Dealer's obligations to FinCo under this
Agreement. Dealer understands that FinCo reserves the right from time to time
to change its policy as to the type of Financing Contracts it will purchase.
The temporary or permanent discontinuance of the purchases of one of more types
of Financing Contracts shall not affect the terms of this Agreement which apply
to previously purchased Financing Contracts of any type.
13. LEGAL PROCEEDINGS.
If either party institutes legal proceedings to enforce any of the terms of
this agreement, the prevailing party in such proceeding shall be entitled to
recover its attorneys' fees and court costs incurred in the action.
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<PAGE>
PART II -- PROVISIONS GOVERNING RETAIL INSTALLMENT CONTRACTS
1. SALE AND PURCHASE OF CONTRACTS.
(a) If a potential Buyer has been referred to FinCo pursuant to this
Agreement, wishes to enter into a retail installment contract ("Contract") with
Dealer, Dealer may solicit credit information concerning Buyer from Buyer,
provided it is provided to FinCo. Such information shall include a credit
application ("Application") completed by Buyer, an outline of the proposed terms
of the transaction, and such additional information as FinCo may request. FinCo
in its sole discretion will make a decision in the state in which the FinCo is
located as to whether it will purchase a Contract if documentation satisfactory
to FinCo is received. If FinCo decides it will purchase the Contract upon
receipt of such documentation, Dealer will execute an assignment of the Contract
to FinCo and send the Contract, together with the assignment, to FinCo.
(b) If all documentation referred to in Section 1(a) is received, FinCo
will purchase in the state in which the FinCo is located the Contract and pay
Dealer the amount financed as shown on the Contract.
2. ADDITIONAL PAYMENTS TO DEALER.
FinCo will determine the amount payable to Dealer in connection with the
purchase of a Contract pursuant to the provisions it shall provide Dealer from
time to time (the "Retail Plan Features"). Any such amount will be paid to
Dealer less any obligations of Dealer to FinCo. If the credits due Dealer are
insufficient to cover amounts owed to FinCo, the shortage will be paid promptly
by Dealer.
3. DEALER SUBVENTION
(a) From time to time Dealer may wish to offer its customers lower retail
rates and/or higher residual values (i.e., the "balloon" value, or last
scheduled payment amount under "Balloon Financings") than those ordinarily
offered by FinCo in connection with Contracts and Balloon Financings. In
addition, from time to time Dealer may wish to participate in automobile
manufacturers' programs which offer customers special finance interest rates
and/or higher residual values than those ordinarily offered by FinCo in
connection with Contracts and Balloon Financings. FinCo may be willing from
time to time to acquire Contracts and Balloon Financings originated through
Dealer pursuant to this Agreement which are subject to such rates and/or
residual values in accordance with the terms of this Agreement and the Retail
Plan Features.
(b) FinCo will announce its standard rates for Contracts and Balloon
Financings and residual values for Balloon Financings from time to time as
contemplated by this Agreement. If Dealer chooses to offer a Contract or
Balloon Financing using a lower rate and/or a higher residual value than FinCo
would ordinarily accept under this Agreement and if Dealer wishes that FinCo
acquire such Contract or Balloon Financing, Dealer will pay FinCo by check a
subsidy ("Support Payment") equal to, in the case of a residual enhancement, the
result of the calculations provided in the work sheet as FinCo may specify from
time to time, or in the case of a rate subsidy, the difference between what the
customer's scheduled total of payments would have been at FinCo's minimum rate
for such Contract or Balloon Financing and the actual total of payments stated
in that Contract or Balloon Financing. In the case of a manufacturer's program,
FinCo may make arrangements directly with the manufacturer for receipt of the
Support Payment. Dealer will also otherwise comply with such procedures as
FinCo may establish from time to time. Dealer will present the required Support
Payment to FinCo at the time the Contract or Balloon Financing is presented to
FinCo for funding, and if no Support Payment is submitted, FinCo will have no
obligation to fund that Contract or Balloon Financing. In the case of a
residual enhancement, Dealer will complete the appropriate work sheet and
include it with the documentation presented to FinCo for funding. In all other
respects, FinCo will acquire subsidized Contracts and Balloon Financings in
accordance with FinCo's standard procedures, including credit underwriting and
documentation requirements and, except as expressly provided herein, such
transactions will be subject to the
Page 10
<PAGE>
provisions of this Agreement. Dealer acknowledges that no portion of the Support
Payment will be refunded by FinCo to Dealer in the event of early termination of
a Contract or Balloon Financing or otherwise.
(c) Despite any Support Payment, Dealer agrees that the cash price of the
Vehicle stated in each Contract or Balloon Financing and/or in the related
purchase order will be no higher than the price that the customer would pay in a
purchase solely for cash. Dealer will not directly or indirectly cause or allow
the Support Payment to be charged or passed along to any retail customer.
Dealer will comply with any laws requiring disclosure of the Support Payment as
part of the finance charge or requiring disclosure that the Support Payment may
affect the cash price. Dealer will treat the Support Payment as general
dealership overhead and will not charge it separately to credit customers.
Dealer will not discriminate against any customer on a basis prohibited by law
in making retail financing available at a reduced rate of finance charge, at a
higher residual value or otherwise. Dealer will not offer a subsidized rate on
a Contract or Balloon Financing if FinCo's loan documentation in Dealer's state
would require FinCo to offer a refinancing of the obligation at maturity at the
same rate and/or payment.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS.
Dealer represents, warrants and covenants with respect to each Contract and
the assignment to FinCo thereof that:
(a) to the best of Dealer's knowledge (i) no statements made or furnished
to FinCo by Buyer, Dealer or any other person are untrue or incomplete; (ii)
Buyer has not financed the down payment of the Vehicle; (iii) Buyer is a bona
fide applicant having legal capacity to enter into the Contract; (iv) the
signature of Buyer on all documents is genuine; and (v) the amount stated in the
Contract to be due will in fact be due and payable at the time or times provided
therein free of any claims, defenses, setoffs or counterclaims; and (vi) Buyer
has never violated any laws concerning liquor or narcotics;
(b) Dealer has sold the Vehicle described in the Contract and the proceeds
of the Contract are to be used to pay for such Vehicle and related items;
(c) Dealer had indefeasible title to the Vehicle immediately prior to the
purchase by Buyer, and the right and authority to sell the Vehicle to Buyer,
free and clear of all liens and encumbrances;
(d) Dealer has, and has assigned to FinCo, good and sole title to the
Contract, free and clear of all liens and encumbrances;
(e) Dealer will secure and perfect for FinCo a security interest in the
Vehicle free and clear of any liens or encumbrances, and deliver to FinCo
written evidence satisfactory to FinCo of such security interest within six
months of the date of the Contract;
(f) the description of the Vehicle is true and complete in the Contract
and the Vehicle will be or has been duly delivered to and accepted without
revocation by Buyer;
(g) insurance or other coverage provided or arranged by Dealer does not
violate any applicable law or regulation and insurance documentation and rebates
of unearned premiums, if any, will be delivered to Buyer within the time
required by law;
(h) the Vehicle is insured by a company acceptable to FinCo against fire,
theft and collision, FinCo is loss payee and written evidence of such insurance
has been or will promptly be provided to FinCo;
(i) all optional credit insurance sold by Dealer to Buyer is for the full
term of the Contract and is limited to coverage of Buyer, including any co-
buyer;
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(j) Dealer has provided Buyer, and each co-buyer, with a completed
Contract and any other document as required by applicable law, and the
information filled in thereon by Dealer is accurate;
(k) each other instrument in connection with the Contract giving rights to
Dealer, including guaranties, and all signatures thereon are genuine, each such
instrument has been duly authorized and executed, all parties hereto are adults
with full legal capacity to contract and each such instrument is valid, binding
and enforceable in accordance with its terms and against all parties thereto
except as enforcement may be affected by bankruptcy and similar laws affected
creditors' rights generally;
(l) all agreements and warranties of Dealer relative to the Vehicle, other
than agreements relative to its acquisition by Dealer, are contained either in
the Contract or in this Agreement, and Dealer has made all disclosures required
by applicable law to be made in connection with the Contract including
disclosures required in any advertisement of the sale transaction and any
related purchase order;
(m) the conduct of Dealer in developing the sale transaction shall not
subject FinCo to suit or administrative proceeding under any state or federal
law, rule or regulation including, without limitation, the Federal Truth in
Lending Act the Federal Equal Credit Opportunity Act and the California Rees-
Levering Act;
(n) the Contract is not in default;
(o) except for monies which FinCo has agreed are to be retained by Dealer,
Dealer has not received any monies which Dealer shall not have transferred to
FinCo with the Contract, properly endorsed to FinCo where appropriate, and
Dealer has not loaned any of such sums to the Buyer;
(p) Dealer has furnished FinCo all credit information received by Dealer
relative to the contract and such information is, to the best of Dealer's
knowledge, true, complete and accurate;
(q) the Buyer is not an employee of Dealer or a member of such an
employee's immediate family; and
(r) possession of the Vehicle was not obtained by the Buyer's use of a
fraudulent scheme, trick or devise not otherwise covered elsewhere by these
warranties.
To the extent that any representation, warranty or covenant made by Dealer in
this Agreement differs from or is in conflict with any representation, warranty
or covenant made by Dealer in the assignment of any Contract, the
representation, warranty or covenant of this Agreement shall control.
5. FINCO'S REMEDIES UPON DEALER DEFAULT OR BREACH OF WARRANTY.
FinCo's purchase, or acceptance for purchase, of a Contract does not
prevent FinCo from exercising its rights against Dealer for a breach of the
requirements in Sections 1 and 2 or the warranties in Section 4 with respect to
such Contract. If Dealer breaches a warranty in this Agreement, or defaults in
the performance of an obligation in this Agreement, or a Contract purchased by
FinCo does not meet the requirements in Sections 1 and 2, then Dealer shall
repurchase from FinCo the Contract which is subject to the breach, default, or
failure to meet requirements. The repurchase shall be at the price and in the
manner described in Section 6. In addition to repurchase, FinCo shall have all
other rights and remedies available under applicable law and all of those
available under this Agreement. All of FinCo's rights and remedies are
cumulative. Should suit be initiated by FinCo to enforce any provision of this
Agreement, FinCo shall be entitled to an award of all reasonable costs incurred,
including attorney's fees. Any funds, leases, vehicles, or other property of
any kind of Dealer which comes into FinCo's possession secure Dealer's
obligations to FinCo and can be liquidated by FinCo and applied to Dealer's
obligations to FinCo. If Dealer breaches a warranty in this Agreement or
defaults in the performance of an obligation in this Agreement, FinCo is not
obligated to purchase any more Contracts from Dealer whether or not FinCo
approved the Contract before the default or breach.
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6. DEALER REPURCHASE OF CONTRACTS.
For each Contract which Section 5 requires Dealer to repurchase, Dealer
shall promptly pay FinCo, upon receipt of FinCo's demand, any or all of the
following amounts at the election of FinCo: (i) the unpaid balance of the
Contract affected by such breach or untruth; (ii) all losses and expenses
incurred by FinCo as a result of such breach or untruth; and (iii) out-of-pocket
expenses paid or incurred by FinCo in connection with the collection of any
amount due under any such Contract, including attorney's fees and costs of
litigation, whether by or against FinCo, and expenses with respect to
repossessing, storing, repairing and selling the Vehicle. In addition, Dealer
shall indemnify FinCo for any losses and expenses, including attorneys' fees and
costs of litigation, suffered by FinCo in any judicial or administrative
proceeding because of any claim or defense asserted against FinCo as a result of
any act or omission on the part of Dealer, including, at the election of FinCo,
the unpaid balance of such Contract.
PART III -- PROVISIONS GOVERNING LEASES AND LEASED VEHICLES
1. PURCHASE OF LEASES AND LEASED VEHICLES.
(a) FinCo shall purchase from Dealer each lease, and the leased vehicle,
that Dealer submits to FinCo for purchase if Dealer has provided FinCo with all
documentation and any other information which FinCo may require in connection
with the Lease Transaction, Lessee has the insurance required by the lease, and
the Lease Transaction (i) is documented with a lease contract form provided by
FinCo, (ii) has been properly executed by lessee and Dealer, (iii) has been
properly assigned by Dealer to FinCo, (iv) has been approved by FinCo no more
than 60 days before FinCo's receipt of the properly executed and assigned lease
from Dealer, and (v) complies with FinCo's purchase criteria and procedures,
including those in the handbooks, bulletins and other documents provided by
FinCo to Dealer.
(b) For each lease and leased vehicle purchased by FinCo from Dealer, the
purchase price shall be an amount agreed on by Dealer and FinCo, consistent with
FinCo's purchase criteria. The purchase price shall be payable by FinCo to
Dealer within ten (10) days after FinCo accepts a lease for purchase. At the
time Dealer submits a lease to FinCo for purchase, Dealer shall inform FinCo if
anyone is owed money for the leased vehicle. FinCo may pay the purchase price
either (i) jointly to Dealer and the person who is owed money for the vehicle;
or (ii) directly to such person, to the extent money is owed, and pay the
remainder to Dealer. FinCo may deduct from the purchase price payment any
amounts Dealer owes FinCo.
(c) To the extent not done at the time Dealer submits a lease to FinCo for
purchase, Dealer hereby assigns to FinCo all of its rights, title and interest
in and with respect to the lease and leased vehicle. Dealer hereby appoints
FinCo as Dealer's attorney in fact to act in Dealer's name to complete any
assignment, including the signing of Dealer's name on a lease and any vehicle
transfer and registration documents. Dealer authorizes FinCo to retain and
endorse any payments to Dealer received by FinCo which FinCo is entitled to in
connection with an assigned lease and leased vehicle. FinCo can assign to a
qualified intermediary FinCo's right to purchased leased vehicles from Dealer.
Without FinCo's prior consent, Dealer shall not facilitate any sublease or
assignment of a lease and leased vehicle purchased by FinCo.
2. SERVICE CONTRACTS.
(a) A leased vehicle submitted to FinCo for purchase can be covered by a
service contract if the form, administrator, and underwriter of the contract are
approved by FinCo and the contract is cancelable by the lessee and FinCo. The
lessee may pay Dealer in full for the service contract at the time the lease is
signed, or the cost to the lessee for the service contract may be included in
the capitalized cost of the lease to the extent allowed by FinCo's purchase
criteria.
(b) When Dealer becomes aware that a lessee has canceled a service
contract, Dealer shall immediately notify FinCo. In the event of any type of
cancellation of a service contract, the lessee shall be entitled to a refund of
the
Page 13
<PAGE>
unearned portion of the service contract price as provided in the service
contract or the lease or as otherwise required by law, which ever provides for
the largest refund. Dealer shall be responsible for the payment of the refund up
to the amount Dealer collected or otherwise received in connection with the sale
of the service contract. Dealer shall remit payment of the refund to the lessee
or FinCo as instructed by FinCo. If so provided in the lease, the refund will be
subject to FinCo's security interest.
3. NO RECOURSE TO DEALER FOR LESSEE DEFAULT.
Unless otherwise agreed to by Dealer in writing, FinCo's purchase of leases
shall be without recourse to Dealer for the Lessee's failure to perform the
Lessee's obligations under the lease.
4. DEALER'S SPECIFIC WARRANTIES FOR EACH LEASE AND LEASED VEHICLE.
As to each lease and leased vehicle purchased by FinCo, Dealer warrants
that as of the date FinCo purchases the lease and leased vehicle:
(a) Dealer has, and has assigned to FinCo, good and sole title to the
lease and leased vehicle both of which are free and clear from all liens, claims
and encumbrances;
(b) Dealer has complied with all applicable state, federal and local laws
and regulations applicable to the Lease Transaction;
(c) Dealer has completed the lease contract form correctly. Dealer has
not made any oral or written promise, affirmation, warranty or representation to
any lessee that is not contained in the lease. The lessee is not in default
under the lease. All information provided or delivered by Dealer regarding the
leased vehicle is true, including but not limited to the description of the
vehicle and the installation of optional equipment. The lessee has no right to
revoke the lease and no offsets or counterclaims regarding, or defenses to, the
enforcement of the lease. The lessee has accepted the vehicle with all options
Dealer agreed to have installed and with the vehicle in good operating order and
in the condition represented by Dealer;
(d) Dealer has titled and registered the leased vehicle, or has made
application therefor, as instructed by FinCo;
(e) the Lease Transaction complies with the requirements in Section 1 and
Section 4;
(f) the lessee has paid to the Dealer all amounts payable to Dealer by the
lessee for the Lease Transaction. Dealer has paid, or will pay when due, all
taxes due for Dealer's sale and ownership of the leased vehicle, except to the
extent that FinCo informs Dealer in writing that FinCo will remit the sales tax;
(g) Dealer has accurately explained the lease provisions to the lessee.
Dealer has negotiated and explained the lease in English, unless Dealer complied
with applicable laws for non-English transactions and notified FinCo in writing;
(h) all credit information provided or delivered by Dealer as to the
lessee is true, complete and accurate to the best of Dealer's information and
belief. Dealer has verified that the lessee named on the lease is the person
who signed the lease and is the person identified in, and who signed, the credit
application as the applicant. Dealer does not know of any facts not told to
FinCo in writing which indicate that the lease will be uncollectible or
unenforceable or that the lessee will not be the principal driver of the leased
vehicle;
(i) the lease and all signatures thereon are genuine, the lease has been
duly authorized and executed by the lessee, the lessee is an adult with full
legal capacity to contract and the lease is valid and binding upon the lessee;
Page 14
<PAGE>
(j) each other instrument executed in connection with the lease giving
rights to Dealer, including guaranties, and all signatures thereon are genuine,
each such instrument has been duly authorized and executed, all parties thereto
are adults with full legal capacity to contract and each such instrument is
valid, binding and enforceable in accordance with its terms and against all
parties thereto except as enforcement may be affected by bankruptcy and similar
laws affecting creditor's rights generally;
(k) all agreements and warranties of Dealer relative to the vehicle, other
than agreements relative to its acquisition by Dealer, are contained either in
the lease or in this Agreement, and Dealer has made all disclosures required by
applicable law to be made in connection with the lease including disclosures
required in any advertisement of the Lease Transaction and any related purchase
order;
(l) an exact, completely filled-in legible copy of the lease was delivered
to the lessee prior to the time of its execution;
(m) the vehicle has not been delivered to the lessee but shall have been
delivered to the lessee together with all accessories and opinions agreed by
Dealer to be delivered with the vehicle and accepted for purposes of the lease
prior to transmittal of the lease to FinCo;
(n) Dealer has orally verified that the lessee has in effect insurance
providing the coverages required under the lease and providing FinCo the rights
contemplated to be available to the lessor under the lease (and such coverages
and rights will be in effect for at least 30 days after delivery to the lessee
of the vehicle);
To the extent that any representation, warranty or covenant made by Dealer
in this Agreement differs from or is in conflict with any representation,
warranty or covenant made by Dealer in the assignment of any Lease Transaction,
the representation, warranty or covenant of this Agreement shall control.
5. FINCO'S REMEDIES UPON DEALER DEFAULT OR BREACH OF WARRANTY.
FinCo's purchase, or acceptance for purchase, of a lease and leased vehicle
does not prevent FinCo from exercising its rights against Dealer for a breach of
the requirements in Section 1 or the warranties in Section 4 with respect to
such Lease Transaction. If Dealer breaches a warranty in this Agreement, or
defaults in the performance of an obligation in this Agreement, or a Lease
Transaction purchased by FinCo does not meet the requirements in Section 1 or
the warranties in Section 4, then Dealer shall repurchase from FinCo the Lease
Transaction which is subject to the breach, default, or failure to meet
requirements. The repurchase shall be at the price and in the manner described
in Section 6. In addition to repurchase, FinCo shall have all other rights and
remedies available under applicable law and all of those available under this
Agreement. All of FinCo's rights and remedies are cumulative. Should suit be
initiated by FinCo to enforce any provision of this Agreement, FinCo shall be
entitled to an award of all reasonable costs incurred, including attorney's
fees. Any funds, leases, vehicles, or other property of any kind of Dealer
which comes into FinCo's possession secure Dealer's obligations to FinCo and can
be liquidated by FinCo and applied to Dealer's obligations to FinCo. If Dealer
breaches a warranty in this Agreement or defaults in the performance of an
obligation in this Agreement, FinCo is not obligated to purchase any more leases
or leased vehicles from Dealer whether or not FinCo approved the Lease
Transaction before the default or breach.
6. DEALER REPURCHASE OF LEASES.
(a) For each Lease Transaction which Section 5 requires Dealer to
repurchase, the purchase price shall be the sum of (1) all amounts past due
under the lease, (2) the depreciation portion of the remaining unpaid monthly
payments, (3) the residual value of the leased vehicle, and (4) any rate
participation paid by FinCo to Dealer. In addition to the repurchase price,
Dealer shall pay FinCo (i) the amount of any tax assessed on the repurchase, and
(ii) any amounts for fees and taxes which the lease requires the lessee to pay.
Page 15
<PAGE>
(b) Dealer shall pay the repurchase price, and applicable taxes within ten
(10) days after FinCo's request. Dealer shall pay the repurchase price
regardless of whether or not the leased vehicle is available to Dealer or the
payment obligations in the lease have been modified. Payment of the repurchase
price shall assign to Dealer, without recourse and "AS IS WHERE IS", all of
FinCo's right, title and interest in and to the lease and leased vehicle. If
Dealer acquires any rights in the vehicle before paying FinCo the repurchase
price, FinCo shall have a security interest in those rights to secure payment of
the repurchase price.
7. MAINTENANCE OF VEHICLES.
FinCo shall have no obligation to service any leased vehicle purchased by
FinCo from Dealer. Dealer shall service each leased vehicle purchased by FinCo
from Dealer at the Lessee's or FinCo's request to the extent of Dealer's best
servicing capabilities and at prices consistent with prices charged to other
customers of Dealer. Dealer shall perform applicable warranty service for each
leased vehicle purchased by FinCo from Dealer. If a leased vehicle purchased by
FinCo is returned to Dealer in connection with an early termination or scheduled
termination of the lease Dealer shall within two (2) business days notify FinCo
and safe keep the leased vehicle until recovered by FinCo.
8. ADDITIONAL PAYMENTS TO DEALER.
FinCo will determine the amount payable to Dealer in connection with Lease
Transactions pursuant to the provisions it shall provide Dealer from time to
time (the "Retail Plan Features"). Any such amount will be paid to Dealer less
any obligations of Dealer to FinCo. If the credits due Dealer are insufficient
to cover amounts owed to FinCo, the shortage will be paid promptly by Dealer.
9. LEASE CONTRACT FORMS.
FinCo shall provide Dealer with fill-in-the-blanks lease contract forms for
Lease Transactions to be submitted by Dealer. The preprinted part of the
contract forms will meet FinCo's purchase criteria for acceptable lease contract
forms. FinCo makes no representations or warranties of any kind, express or
implied, as to the form, substance or enforceability of any such lease contract
forms. Dealer acknowledges that if it enters into a lease using a lease
contract form provided by FinCo, then the lease will be binding on Dealer and
the lessee to the extent required by law, whether or not FinCo purchases the
lease.
Page 16
<PAGE>
EXHIBIT 10.11
GRUBB & ELLIS
SUMMARY OF LEASE
<TABLE>
<S> <C> <C>
1. LANDLORD: McDonnell Douglas Realty Company, a California Corporation
2. LANDLORD'S ADDRESS: 4060 Lakewood Boulevard, 6th Floor
Long Beach, California 90808-1700
3. TENANT'S ADDRESS: 18872 MacArthur Blvd, #200
Irvine, California 92715
4. RENTABLE SQUARE FEET: 12,280 Square Feet
5. USE: General office use.
6. TARGET
COMMENCEMENT DATE: August 1, 1996
7. TERMINATION DATE: July 31, 2001
8. LEASE TERM: 60 Months
9. BASE NET RENT PER RSF: Months Rental Rate/RSF
-------- ---------------
01 - 12 $0.85 FSG
13 - 24 $1.20 FSG
25 - 36 $1.35 FSG
37 - 48 $1.45 FSG
49 - 60 $1.53 FSG
10. TENANT'S
PROPORTIONATE SHARE: 26.81%
11. BASE YEAR: 1996
12. SECURITY DEPOSIT: $20,600.00 (to be delivered to Landlord prior to the start of the
36th month of the lease term).
13. HOLD OVER: 150% of last months rent.
14. ASSIGNMENT
& SUBLEASING: Landlord shall not unreasonably withhold.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
15. PARKING: 40 unreserved spaces, 4 reserved spaces. Tenant shall be allowed
to use an additional 5 stalls, as available and a location to be
determined by Landlord at no additional charge to Tenant
throughout
16. OPTION TO CANCEL: None
17. RENEWAL OPTION: Tenant shall have one (1), five (5) year option at fair market
value. Tenant must provide at least six (6) months and not sooner
than nine (9) months prior written notice. (See addendum).
18. TENANT IMPROVEMENTS: Landlord grants Tenant a "Tenant Allowance" of Twenty Dollars
($20.00) per usable square foot.
19. TENANT INSURANCE: See Exhibit "I".
20. SIGNAGE: Tenant, at Tenant's sole cost if approved by the city, shall be
entitled to monument signage.
21. KEY PHONE NUMBERS: ASSET MANAGEMENT
----------------
Prentiss Properties
18881 Von Karman Avenue, Suite 200
Irvine, California 92715
Phone: (714) 833-2133
BROKER
------
Mr. Carl Johnson
Grubb & Ellis Company
4000 MacArthur Blvd. Suite 1500
Newport Beach, California 92660
(714) 833-2900
Fax - (714) 833-8037
</TABLE>
THE INFORMATION CONTAINED HEREIN WAS OBTAINED FROM THIRD PARTIES, AND IT HAS
BEEN INDEPENDENTLY VERIFIED BY THE REAL ESTATE BROKERS. BUYERS/TENANTS SHOULD
HAVE THE EXPERTS OF THEIR CHOICE INSPECT THE PROPERTY AND VERIFY ALL
INFORMATION. REAL ESTATE BROKERS ARE NOT QUALIFIED TO ACT AS OR SELECT EXPERTS
WITH RESPECT TO LEGAL, TAX, ENVIRONMENTAL BUILDING CONSTRUCTION, SOILS-DRAINAGE
OR OTHER SUCH MATTERS.
<PAGE>
OFFICE BUILDING LEASE
BETWEEN
MCDONNELL DOUGLAS REALTY COMPANY
LANDLORD
AND
AUTO-BY-TEL CORPORATION,
A DELAWARE CORPORATION
TENANT
<PAGE>
TABLE OF CONTENTS
PAGE
----
BASIC LEASE TERMS.................................................. 1
Landlord...................................................... 1
Landlord's Address............................................ 1
Tenant........................................................ 1
Tenant's Address.............................................. 1
Project....................................................... 1
Building...................................................... 1
Premises...................................................... 1
Tenant's Percentage........................................... 1
Target Commencement Date...................................... 1
Commencement Date............................................. 1
Initial Monthly Base Rent..................................... 2
Adjustment to Monthly Base Rent............................... 2
Option Term Rent.............................................. 2
Security Deposit.............................................. 2
Tenant Improvements........................................... 2
Tenant Improvement Allowance.................................. 2
Permitted Use................................................. 2
Parking Spaces................................................ 2
Initial Monthly Parking Rent.................................. 2
Base Year..................................................... 2
Broker(s)..................................................... 2
Interest Rate................................................. 2
Guarantor(s).................................................. 3
Exhibits...................................................... 3
Addendum...................................................... 3
PREMISES AND COMMON AREAS.......................................... 3
Premises...................................................... 3
Mutual Covenants.............................................. 3
Tenant's Use of Common Areas.................................. 3
Landlord's Reservation of Rights.............................. 3
TERM; COMMENCEMENT DATE............................................ 4
POSSESSION......................................................... 4
Delivery of Possession........................................ 4
Condition of Premises......................................... 4
Use and Occupancy Prior to Commencement Date.................. 4
RENT............................................................... 4
Monthly Base Rent............................................. 4
Additional Rent............................................... 4
Late Payments................................................. 5
OPERATING EXPENSES................................................. 5
Operating Expenses............................................ 5
Base Year Operating Expenses.................................. 5
Estimate Statement............................................ 5
Actual Statement.............................................. 5
Miscellaneous................................................. 5
After-Hours HVAC.............................................. 6
Tenant's Audit Rights......................................... 6
SECURITY DEPOSIT................................................... 6
-i-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
USE................................................................ 7
Tenant's Use of the Premises.................................. 7
Compliance.................................................... 7
Hazardous Materials........................................... 7
NOTICES............................................................ 8
BROKERS............................................................ 8
SURRENDER; HOLDING OVER............................................ 8
Surrender..................................................... 8
Holding Over.................................................. 8
TAXES ON TENANT'S PROPERTY......................................... 8
ALTERATIONS........................................................ 9
REPAIRS............................................................ 10
Landlord's Obligations........................................ 10
Tenant's Obligations.......................................... 10
Tenant's Failure to Repair.................................... 10
LIENS.............................................................. 11
ENTRY BY LANDLORD.................................................. 11
UTILITIES AND SERVICES............................................. 11
WAIVER AND INDEMNIFICATION......................................... 11
Tenant's Waiver............................................... 11
Tenant's Indemnification of Landlord.......................... 12
Survival; No Release of Insurers.............................. 12
INSURANCE.......................................................... 12
Tenant's Insurance............................................ 12
Supplemental Tenant Insurance Requirements.................... 13
Tenant's Use.................................................. 13
Cancellation of Landlord's Policies........................... 14
Mutual Waiver of Subrogation.................................. 14
DAMAGE OR DESTRUCTION.............................................. 14
Partial Destruction........................................... 14
Substantial Destruction....................................... 14
Notice........................................................ 14
Tenant's Termination Rights................................... 14
Tenant's Costs and Insurance Proceeds......................... 15
Abatement of Rent............................................. 15
Damage Near End of Term....................................... 15
Waiver of Termination Right................................... 15
Termination................................................... 15
-ii-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
EMINENT DOMAIN..................................................... 15
Substantial Taking............................................ 15
Partial Taking; Abatement of Rent............................. 15
Condemnation Award............................................ 16
Temporary Taking.............................................. 16
DEFAULTS AND REMEDIES.............................................. 16
Default By Tenant............................................. 16
Notices....................................................... 17
Landlord's Remedies; Termination.............................. 17
Landlord's Remedies; Re-Entry Rights.......................... 17
Landlord's Remedies Re-Letting................................ 17
Landlord's Remedies Performance for Tenant.................... 18
Late Payment.................................................. 18
Lien for Rent................................................. 18
Rights and Remedies Cumulative................................ 18
LANDLORD'S DEFAULT................................................. 18
ASSIGNMENT AND SUBLETTING.......................................... 18
Restriction on Transfer....................................... 18
Corporate and Partnership Transfers........................... 19
Permitted Controlled Transfers................................ 19
Transfer Notice............................................... 19
Landlord's Options............................................ 19
Reasonable Disapproval........................................ 19
Additional Conditions......................................... 20
Excess Rent................................................... 20
Termination Rights............................................ 20
No Release.................................................... 20
Administrative and Attorneys' Fees............................ 21
SUBORDINATION...................................................... 21
ESTOPPEL CERTIFICATE............................................... 21
Tenant's Obligations.......................................... 21
Tenant's Failure to Deliver................................... 21
BUILDING PLANNING.................................................. 22
RULES AND REGULATIONS.............................................. 22
MODIFICATION AND CURE RIGHT OF LANDLORD'S MORTGAGEES AND LESSORS... 22
Modifications................................................. 22
Cure Rights................................................... 22
DEFINITION OF LANDLORD............................................. 22
WAIVER............................................................. 22
-iii-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
PARKING............................................................ 23
Grant of Parking Rights....................................... 23
Visitor Parking............................................... 23
Use of Parking Spaces......................................... 23
General Provisions............................................ 23
Cooperation with Traffic Mitigation Measures.................. 24
Parking Rules and Regulations................................. 24
FORCE MAJEURE...................................................... 24
SIGNS.............................................................. 24
LIMITATION ON LIABILITY............................................ 24
FINANCIAL STATEMENTS............................................... 25
QUIET ENJOYMENT.................................................... 25
MISCELLANEOUS...................................................... 25
Conflict of Laws.............................................. 25
Successors and Assigns........................................ 25
Professional Fees and Costs................................... 25
Terms and Headings............................................ 25
Time.......................................................... 25
Prior Agreements Amendments................................... 25
Separability.................................................. 25
Recording..................................................... 26
Counterparts.................................................. 26
Nondisclosure of Lease Terms.................................. 26
Use of Project or Building Name............................... 26
No Light and Air Easement..................................... 26
RESOLUTION OF DISPUTES............................................. 26
Reference of Dispute.......................................... 26
Cooperation................................................... 27
Allocation of Costs........................................... 27
EXECUTION OF LEASE................................................. 27
Joint and Several Obligations................................. 27
Tenant as Corporation or Partnership.......................... 27
Examination of Lease.......................................... 27
-iv-
<PAGE>
OFFICE BUILDING LEASE
---------------------
THIS OFFICE BUILDING LEASE ("Lease") is entered into as of the _____
day of June, 1996 by and between McDonnell Douglas Realty Company, a California
corporation ("Landlord"), and AUTO-BY-TEL CORPORATION, a Delaware corporation
("Tenant").
1. BASIC LEASE TERMS. For purposes of this Lease, the following
-----------------
terms have the following definitions and meanings:
(a) LANDLORD: McDonnell Douglas Realty Company, a California
--------
corporation.
(b) LANDLORD'S ADDRESS:
------------------
McDonnell Douglas Realty Company
4060 Lakewood Boulevard
6th Floor
Long Beach, CA 90808-1700
Attention: Lease Administrator
with a copy to:
Prentiss Properties
18881 Von Karman Avenue, Suite 220
Irvine, CA 92715
Attention: Property Manager
or such other place(s) as Landlord may from time to time designate by notice to
Tenant.
(c) TENANT: AUTO-BY-TEL CORPORATION, a Delaware corporation
------
(d) TENANT'S ADDRESS:
----------------
After the Commencement Date, to the Premises or to:
To the Premises, attention: Brian MacDonald
Prior to the Commencement Date:
2711 East Coast Highway
Suite 203
Corona Del Mar, California 92625
Attention: Brian MacDonald
(e) PROJECT: The real property commonly known as Douglas Plaza
-------
and located in the City of Irvine ("City"), County of Orange ("County"), State
of California ("State"), as shown on the site plan attached hereto as
Exhibit "A".
- -----------
(f) BUILDING: The office building located within the
--------
Development, containing approximately 45,802 rentable square feet, with the
street address of 18872 MacArthur Boulevard, Irvine, California.
(g) PREMISES: The premises outlined on the floor plan attached
--------
hereto as Exhibit "B", located on the second floor of the Building, in Suite
-----------
200, containing 12,280 rentable square feet and 11,767 usable square feet.
(h) TENANT'S PERCENTAGE: Tenant's percentage of the Building on
-------------------
a rentable square foot basis, which initially is 26.81%.
(i) TERM: 5 Lease Years.
----
(j) TARGET COMMENCEMENT DATE: August 1, 1996.
------------------------
(k) COMMENCEMENT DATE: The earlier to occur of (i) the date
-----------------
Landlord notifies Tenant that the Tenant Improvements are Substantially Complete
(as defined in Exhibit "C" attached hereto), or (ii) the date Tenant occupies
-----------
all or a portion of the Premises for any purpose.
<PAGE>
(l) INITIAL MONTHLY BASE RENT: $10,438.00 (based on $0.85 per
-------------------------
rentable square foot), subject to adjustment/abatement as provided in SUBSECTION
1(m), and as otherwise provided in this Lease.
(m) ADJUSTMENT TO MONTHLY BASE RENT: Monthly Base Rent will be
-------------------------------
adjusted in accordance with the following:
LEASE YEAR OR MONTHS MONTHLY BASE RENT
-------------------- ---------------------------------
Months 13-24 $14,736.00, based on $1.20 per
rentable square foot.
Months 25-36 $16,578.00, based on $1.35 per
rentable square foot.
Months 37-48 $17,806.00, based on $1.45 per
rentable square foot.
Months 49-60 $18,788.40, based on $1.53 per
rentable square foot.
(n) OPTION TERM RENT: See Addendum.
----------------
(o) SECURITY DEPOSIT: $20,600.00, to be delivered to Landlord
----------------
prior the start of the 36th month of the Term. See Addendum for Letter of Credit
requirements.
(p) TENANT IMPROVEMENTS: All tenant improvements installed or
-------------------
to be installed by Landlord or Tenant within the Premises to prepare the
Premises for occupancy pursuant to the terms of the Work Letter Agreement
attached hereto as Exhibit "C".
-----------
(q) TENANT IMPROVEMENT ALLOWANCE: Up to $20.00 per usable
----------------------------
square foot, to be provided and applied as set forth in the Work Letter
Agreement attached hereto as Exhibit "C".
-----------
(r) PERMITTED USE: General office use in compliance with
-------------
applicable laws, and no other use without the express written consent of
Landlord, which consent Landlord may withhold in its sole and absolute
discretion.
(s) PARKING SPACES: 40 unreserved spaces
-------------- 4 reserved spaces
Tenant shall be allowed to use an additional 5 stalls, as available and in a
location to be determined by Landlord at no additional charge to Tenant
throughout the term of the lease.
(t) INITIAL MONTHLY PARKING RENT:
----------------------------
No charge per unreserved space
No charge per reserved space
After the initial Term, the rate for Monthly Parking Rent
shall be subject to adjustment per Section 32.
(u) BASE YEAR: 1996.
---------
(v) BROKER(S):
---------
Tenant's Broker: Professional Real Estate Services
---------------------------------
Landlord's Broker: Prentiss Property Services
(w) INTEREST RATE: shall mean the greater of ten percent (10%)
-------------
per annum or two percent (2%) in excess of the prime lending or reference rate
of Wells Fargo Bank N.A. or any successor bank in effect on the twenty-fifth
(25th) day of the calendar month immediately prior to the event giving rise to
the Interest Rate imposition; provided, however, the Interest Rate will in no
event exceed the maximum interest rate permitted to be charged by applicable
law.
-2-
<PAGE>
(x) GUARANTOR(S): N/A.
------------
(y) EXHIBITS: A through I, inclusive, which Exhibits are
--------
attached to this Lease and incorporated herein by this reference. As provided in
SECTION 3, a completed version of Exhibit "D" will be delivered to Tenant after
-----------
Landlord delivers possession of the Premises to Tenant.
(z) ADDENDUM: The Addendum attached to this Lease and
--------
incorporated herein by this reference.
This SECTION 1 represents a summary of the basic terms and definitions
of this Lease. In the event of any inconsistency between the terms contained in
this SECTION 1 and any specific provision of this Lease, the terms of the more
specific provision shall prevail.
2. PREMISES AND COMMON AREAS
-------------------------
(a) PREMISES. Landlord hereby leases to Tenant and Tenant
--------
hereby leases from Landlord, without representation or warranty, express or
implied, the Premises described in SUBSECTION 1(g). The rentable square feet and
usable square feet of the Premises and the Building set forth above in SECTION 1
shall be deemed to be the rentable square feet and usable square feet of the
Premises and Building for all purposes, whether the actual rentable square feet
or usable square feet may be more or less than the amounts set forth above. In
that regard, Landlord and Tenant have each been given an opportunity to measure
or re-measure the square footage of the Premises prior to execution of this
Lease and Landlord and Tenant each hereby waive any rights they may have
following execution of this Lease to remeasure the Premises or Building or claim
that the rentable square feet or usable square feet of the Premises or Building
is other than as set forth in SECTION 1; provided, however, that Landlord shall
have the right to remeasure the Premises square footage and the Building square
footage following any alterations, additions or improvements thereto.
(b) MUTUAL COVENANTS. Landlord and Tenant agree that the
----------------
letting and hiring of the Premises is upon and subject to the terms, covenants
and conditions contained in this Lease and each party covenants as a material
part of the consideration for this Lease to keep and perform their respective
obligations under this Lease.
(c) TENANT'S USE OF COMMON AREAS. During the Term of this
----------------------------
Lease, Tenant shall have the nonexclusive right to use in common with Landlord
and all persons, firms and corporations conducting business in the Project and
their respective customers, guests, licensees, invitees, subtenants, employees
and agents (collectively, "Project Occupants"), subject to the terms of this
Lease, the Rules and Regulations referenced in SECTION 32 and all covenants,
conditions and restrictions now or hereafter affecting the Project, the
following common areas of the Building and/or the Project (collectively, the
"Common Areas"), all of which shall be subject to Landlord's sole management and
control and shall be operated and maintained in such manner as Landlord in its
discretion shall determine:
(i) The Building's common entrances, hallways, lobbies,
public restrooms on multi-tenant floors, elevators, stairways and accessways,
loading docks, ramps, drives and platforms and any passageways and serviceways
thereto, and the common pipes, conduits, wires and appurtenant equipment within
the Building which serve the Premises (collectively, "Building Common Areas");
and
(ii) The parking facilities of the Project which serve the
Building (subject to the provisions of Exhibit "H"), loading and unloading
-----------
areas, trash areas, roadways, sidewalks, walkways, parkways, driveways,
landscaped areas, plaza areas, fountains and similar areas and facilities
situated within the Project and appurtenant to the Building which are not
reserved for the exclusive use of any Project Occupants (collectively, "Project
Common Areas").
(d) LANDLORD'S RESERVATION OF RIGHTS. Provided Tenant's use of
--------------------------------
and access to the Premises and parking to be provided to Tenant under this Lease
is not interfered with in an unreasonable manner, Landlord reserves for itself
and for all other owner(s) and operator(s) of the Project Common Areas and the
balance of the Project, the right from time to time to: (i) install, use,
maintain, repair, replace and relocate pipes, ducts, conduits, wires and
appurtenant meters and equipment above the ceiling surfaces, below the floor
surfaces, within the walls and in the central core areas of the Building; (ii)
make changes to the design and layout of the Project, including, without
limitation, changes to buildings, driveways, entrances, loading and unloading
areas, direction of traffic, landscaped areas and walkways, and, subject to the
parking provisions contained in SECTION 32 and Exhibit "H", parking spaces and
-----------
parking areas; and (iii) use or close temporarily the Building Common Areas, the
Project Common Areas and/or other portions of the Project while engaged in
making improvements, repairs or alterations to the Building, the Project, or any
portion thereof.
-3-
<PAGE>
3. TERM; COMMENCEMENT DATE. The term of this Lease ("Term") will be
-----------------------
for the period designated in SUBSECTION L(i), commencing on the Commencement
Date, and ending as of midnight on the last day of the month in which the
expiration of such period occurs (the "Expiration Date"), unless terminated
earlier as provided herein. Each consecutive twelve (12) month period of the
Term of this Lease, commencing on the Commencement Date, will be referred to
herein as a "Lease Year". Landlord's Notice of Lease Term Dates and Tenant's
Percentage ("Notice"), in the form of Exhibit "D" attached hereto, will set
-----------
forth the Commencement Date, the date upon which the Term of this Lease shall
end, the rentable square feet within the Premises and the Building, and Tenant's
Percentage and will be delivered to Tenant after Landlord delivers possession of
the Premises to Tenant. The Notice will be binding upon Tenant unless Tenant
objects to the Notice in writing within five (5) days of Tenant's receipt of the
Notice.
4. POSSESSION.
----------
(a) DELIVERY OF POSSESSION. Landlord agrees to deliver
----------------------
possession of the Premises to Tenant in accordance with the terms of the Work
Letter Agreement attached hereto as Exhibit "C". Notwithstanding the foregoing,
-----------
Landlord will not be obligated to deliver possession of the Premises to Tenant
until Landlord has received from Tenant all of the following: (i) a copy of this
Lease fully executed by Tenant and the Letter of Credit described in the
Addendum; (ii) the first installment of Monthly Base Rent; (iii) executed copies
of policies of insurance or certificates thereof as required under SECTION 19 of
this Lease; (iv) copies of all governmental permits and authorizations, if any,
required in connection with Tenants operation of its business within the
Premises; and (v) if Tenant is a corporation or partnership, such evidence of
due formation, valid existence and authority as Landlord may reasonably require,
which may include, without limitation, a certificate of good standing,
certificate of secretary, articles of incorporation, statement of partnership,
or other similar documentation.
(b) CONDITION OF PREMISES. By taking possession of the
---------------------
Premises, Tenant will be deemed to have accepted the Premises in its condition
on the date of delivery of possession and to have acknowledged that the Tenant
Improvements have been installed as required by the Work Letter Agreement and
that there are no additional items needing work or repair. Tenant acknowledges
that neither Landlord nor any agent of Landlord has made any representation or
warranty with respect to the Premises, the Building, the Project or any portions
thereof or with respect to the suitability of same for the conduct of Tenant's
business and Tenant further acknowledges that Landlord has no obligation to
construct or complete any additional buildings or improvements within the
Project.
(c) USE AND OCCUPANCY PRIOR TO COMMENCEMENT DATE. If Tenant
--------------------------------------------
shall for any reason use or occupy the Premises in any way prior to the
Commencement Date, then during such prior use or occupancy Tenant shall be a
tenant of Landlord and shall be subject to the covenants and agreements set
forth in this Lease other than provisions pertaining to the payment of Monthly
Base Rent. Nothing herein shall be construed as Landlord's consent to Tenant's
use or occupancy of the Premises for any reason prior to the Commencement Date.
5. RENT.
----
(a) MONTHLY BASE RENT. Tenant agrees to pay Landlord the
-----------------
Monthly Base Rent for the Premises (subject to adjustment as hereinafter
provided) in advance on the first day of each calendar month during the Term,
except that Tenant agrees to pay the Monthly Base Rent for the first full
calendar month of the Term directly to Landlord concurrently with Tenant's
delivery of the executed Lease to Landlord. If the Term of this Lease commences
on a day other than the first day of a calendar month, then the rent for such
period will be prorated in the proportion that the number of days this Lease is
in effect during such period bears to the number of days in such month. All rent
must be paid to Landlord, without any deduction or offset, in lawful money of
the United States of America, at the address designated by Landlord (and if no
such address is designated, at the address first set forth in SUBSECTION 1(b))
or to such other person or at such other place as Landlord may from time to time
designate in writing. Monthly Base Rent will be adjusted during the Term of this
Lease as provided in SUBSECTION l(m). All monthly installments of Monthly Base
Rent shall be due and payable as aforesaid whether or not Landlord shall have
given Tenant any prior written notice or bill with respect thereto, and Landlord
shall have no obligation whatsoever to give Tenant any written notice or bill
with respect to any Monthly Base Rent installment.
(b) ADDITIONAL RENT. All amounts and charges to be paid by
---------------
Tenant hereunder, including, without limitation, payments for Operating
Expenses, insurance, repairs, parking and after-hours HVAC charges, will be
considered "Additional Rent" for purposes of this Lease. Monthly Base Rent and
Additional Rent and all other sums payable by Tenant under this Lease
(collectively, "Rent") shall be deemed to be and shall be treated as rent and
shall be payable and recoverable as rent, and Landlord shall have all rights
against Tenant for default in any payment of Additional Rent or such other sum
as in the case of non-payment of Monthly Base Rent.
-4-
<PAGE>
(c) LATE PAYMENTS. Late payments of Monthly Base Rent and/or
-------------
any item of additional rent will be subject to interest and a late charge as
provided in SUBSECTION 22(f).
6. OPERATING EXPENSES.
------------------
(a) OPERATING EXPENSES. In addition to Monthly Base Rent,
------------------
throughout the Term of this Lease, Tenant agrees to pay Landlord as additional
rent in accordance with the terms of this SECTION 6, Tenants Percentage (as
defined in SUBSECTION 1(h) of Operating Expenses (as defined in Exhibit "E"
-----------
attached hereto) to the extent Tenant's Percentage of Operating Expenses exceeds
Tenant's Percentage of the Base Year Operating Expenses (as hereinafter
defined).
(b) BASE YEAR OPERATING EXPENSES. "Base Year Operating
----------------------------
Expenses" shall mean the actual Operating Expenses for the Base Year set forth
in SUBSECTION 1(u).
(c) ESTIMATE STATEMENT. As soon as practicable after the
------------------
expiration of the Base Year, and as soon as practicable after January 1st of
each subsequent calendar year during the Term of this Lease, Landlord will
endeavor to deliver to Tenant a statement ("Estimate Statement') wherein
Landlord will estimate both the Operating Expenses and Tenant's Percentage of
Operating Expenses for the then current calendar year. If the estimate of
Tenants Percentage of Operating Expenses in the Estimate Statement exceeds
Tenant's Percentage of Base Year Operating Expenses, Tenant agrees to pay
Landlord, as Additional Rent, one-twelfth (1/12th) of such excess each month
thereafter, beginning with the next installment of rent due, until such time as
Landlord issues a revised Estimate Statement or the Estimate Statement for the
succeeding calendar year; except that, concurrently with the regular monthly
rent payment next due following the receipt of each such Estimate Statement,
Tenant agrees to pay Landlord an amount equal to one monthly installment of such
excess (less any applicable Operating Expenses already paid) multiplied by the
number of months from January, in the current calendar year, to the month of
such rent payment next due, all months inclusive. If at any time and from time
to time during the Term of this Lease, Landlord reasonably determines that
Tenant's Percentage of Operating Expenses for the current calendar year will be
greater than the amount set forth in the then current Estimate Statement,
Landlord may issue a revised Estimate Statement and Tenant agrees to pay
Landlord, within ten (10) days of receipt of the revised Estimate Statement, the
difference between the amount owed by Tenant under such revised Estimate
Statement and the amount owed by Tenant under the original Estimate Statement
for the portion of the then current calendar year which has expired. Thereafter
Tenant agrees to pay Tenant's Percentage of Operating Expenses based on such
revised Estimate Statement until Tenant receives the next calendar year's
Estimate Statement or a new revised Estimate Statement for the current calendar
year. In the event Tenant's Percentage of Operating Expenses for any calendar
year is less than Tenant's Percentage of Base Year Operating Expenses, Tenant
will not be entitled to a credit against any rent, additional rent or Tenant's
Percentage of future Operating Expenses payable hereunder.
(d) ACTUAL STATEMENT. As soon as practicable after expiration
----------------
of the calendar year following the Base Year, and as soon as practicable after
expiration of each subsequent calendar year during the Term of this Lease,
Landlord will also endeavor to deliver to Tenant a statement ("Actual
Statement') which states the actual Operating Expenses for the preceding
calendar year. If the Actual Statement reveals that Tenant's Percentage of the
actual Operating Expenses is more than the total Additional Rent paid by Tenant
for Operating Expenses on account of the preceding calendar year, Tenant agrees
to pay Landlord the difference in a lump sum within ten (10) days of receipt of
the Actual Statement. If the Actual Statement reveals that Tenant's Percentage
of the actual Operating Expenses is less than the Additional Rent paid by Tenant
for Operating Expenses on account of the preceding calendar year, Landlord will
credit any overpayment toward the next monthly installment(s) of Tenant's Rent
due under this Lease.
(e) MISCELLANEOUS. Any delay or failure by Landlord in
-------------
delivering any Estimate Statement or Actual Statement pursuant to this SECTION 6
will not constitute a waiver of its right to require an increase in rent nor
will it relieve Tenant of its obligations pursuant to this SECTION 6, except
that Tenant will not be obligated to make any payments based on such Estimate
Statement or Actual Statement until ten (10) days after receipt of such Estimate
Statement or Actual Statement. Even though the Term has expired and Tenant has
vacated the Premises, when the final determination is made of Tenant's
Percentage of the actual Operating Expenses for the year in which this Lease
terminates, Tenant agrees to promptly pay any increase due over the estimated
expenses paid and, conversely, any overpayment made in the event said expenses
decrease shall promptly be rebated by Landlord to Tenant. Prior to the
expiration or sooner termination of the Lease Term and Landlord's acceptance of
Tenant's surrender of the Premises, Landlord will have the right to estimate the
actual Operating Expenses for the then current Lease Year and to collect from
Tenant prior to Tenant's surrender of the Premises, Tenant's Percentage of any
excess of such actual Operating Expenses over the estimated Operating Expenses
paid by Tenant in such Lease Year. Notwithstanding anything to the contrary set
forth in Exhibit "E", when calculating the Base Year Operating Expenses, such
-----------
Operating Expenses shall not include any increase in Real Property Taxes and
Assessments attributable to special assessments, charges, costs, or fees, or due
to
-5-
<PAGE>
modifications or changes in governmental laws or regulations, including but not
limited to the institution of a split tax roll, and Base Year Operating Expenses
shall exclude market-wide labor-rate increases due to extraordinary
circumstances, including, but not limited to, boycotts and strikes, and utility
rate increases due to extraordinary circumstances including, but not limited to,
conservation surcharges, boycotts, embargoes or other shortages and amortized
costs relating to capital improvements. If, in any Lease Year, the amount of
Real Property Taxes and Assessments attributable to the Project, inclusive of
tenant improvements, decreases, then for purposes of all subsequent calendar
years, including the calendar year in which such decrease in Real Property Taxes
and Assessments occurred, Base Year Operating Expenses shall be decreased by an
amount equal to the decrease in Real Property Taxes and Assessments.
(f) AFTER-HOURS HVAC. In addition to Monthly Base Rent and
----------------
Tenant's Percentage of Operating Expenses, Tenant agrees to pay Landlord the
cost charged by Landlord from time to time for after-hours HVAC (currently
$17/hour) used by or attributable to Tenant, plus any costs to maintain the HVAC
system due to Tenants after-hours HVAC usage. If such after-hours HVAC is not
separately metered, Landlord may allocate to Tenant its share of the after-hours
HVAC costs, as Landlord may equitably determine. Landlord shall provide Tenant a
monthly invoice of the HVAC costs payable by Tenant, and Tenant shall pay for
such costs within ten (10) days of receiving each invoice.
(g) TENANT'S AUDIT RIGHTS. The information set out in the
---------------------
statements submitted to Tenant pursuant to this SECTION 6 shall be binding on
Tenant unless Tenant gives written notice to Landlord within thirty (30) days
after Landlord's submission of such statement stating that Tenant intends to
cause Landlord's books and records with respect to the preceding calendar year
to be audited by a certified public accountant ("CPA") acceptable to Landlord,
identifying the statement in question and setting out in reasonable detail the
reason why such statement should not be binding on Tenant. If Tenant does not
timely exercise its right to have Landlord's books and records audited, or does
not cause such audit to be accomplished within ninety (90) days after notice of
its election to do so, Tenant's right to object to any such statement shall
lapse. Tenant shall pay all costs of such audit (including, without limitation,
any and all copying costs), unless the actual amount of Additional Rent for the
calendar year in question is determined by the CPA to be seven percent (7%) less
than the amount of Additional Rent for the same calendar year set forth in the
statement submitted to Tenant by Landlord, in which event Landlord shall pay for
the audit. Any such audit shall occur only in such offices and such location as
Landlord shall designate. The amount of Additional Rent payable by Tenant to
Landlord shall be appropriately adjusted on the basis of such audit and, if the
audit shows that Landlord has overcharged Tenant, Landlord shall credit such
overcharge against the next installment of Rent coming due hereunder.
28. SECURITY DEPOSIT. Concurrently with Tenant's execution of this
----------------
Lease, Tenant will deliver to Landlord the Letter of Credit as described in, and
in accordance with, the Addendum. In addition, prior to the start of the 36th
month of the Term, Tenant will deposit with Landlord the Security Deposit
designated in SUBSECTION 1(o). The Security Deposit is in an amount equal to one
hundred ten percent (110%) of the highest Monthly Base Rent amount anticipated
for the initial Lease Term. The Security Deposit will be held by Landlord as
security for the full and faithful performance by Tenant of all of the terms,
covenants, and conditions of this Lease to be kept and performed by Tenant
during the Term hereof. If Tenant fully and faithfully performs its obligations
under this Lease, including, without limitation, surrendering the Premises upon
the expiration or sooner termination of this Lease in compliance with SUBSECTION
11(a), the Security Deposit or any balance thereof will be returned to Tenant
(or, at Landlord's option, to the last assignee of Tenants interest hereunder)
within thirty (30) days following the expiration of the Lease Term or as
required under applicable law, provided that Landlord may retain the Security
Deposit until such time as any outstanding rent or additional rent amount has
been determined and paid in full. The Security Deposit is not, and may not be
construed by Tenant to constitute, rent for the last month or any portion
thereof. If Tenant defaults with respect to any provisions of this Lease
including, but not limited to, the provisions relating to the payment of rent or
additional rent, Landlord may (but will not be required to) use, apply or retain
all or any part of the Security Deposit for the payment of any rent or any other
sum in default, or for the payment of any other amount which Landlord may spend
or become obligated to spend by reason of Tenant's default or to compensate
Landlord for any loss or damage which Landlord may suffer by reason of Tenant's
default. If any portion of the Security Deposit is so used or applied, Tenant
agrees, within ten (10) days after Landlord's written demand therefor, to
deposit cash with Landlord in an amount sufficient to restore the Security
Deposit to its original amount and Tenant's failure to do so shall constitute a
default under this Lease. Landlord is not required to keep Tenant's Security
Deposit separate from its general funds, and Tenant is not entitled to interest
on such Security Deposit. Should Landlord sell its interest in the Premises
during the Term hereof and deposit with the transferee thereof the then
unappropriated Security Deposit funds, Landlord will be discharged from any
further liability with respect to such Security Deposit.
-6-
<PAGE>
8. USE.
---
(a) TENANT'S USE OF THE PREMISES. The Premises may be used for
----------------------------
the use or uses set forth in SUBSECTION 1(r) only, and Tenant will not use or
permit the Premises to be used for any other purpose without the prior written
consent of Landlord, which consent Landlord may withhold in its sole and
absolute discretion. Nothing in this Lease will be deemed to give Tenant any
exclusive right to such use in the Building or the Project.
(b) COMPLIANCE. At Tenant's sole cost and expense, Tenant
----------
agrees to procure, maintain and hold available for Landlord's inspection, all
governmental licenses and permits required for the proper and lawful conduct of
Tenant's business from the Premises, if any. Tenant agrees not to use, alter or
occupy the Premises or allow the Premises to be used, altered or occupied in
violation of, and Tenant, at its sole cost and expense, agrees to use and occupy
the Premises and cause the Premises to be used and occupied in compliance with:
(i) any and all laws, statutes, zoning restrictions, ordinances, rules,
regulations, orders and rulings now or hereafter in force and any requirements
of any insurer, insurance authority or duly constituted public authority having
jurisdiction over the Premises, the Building or the Project now or hereafter in
force, (ii) the requirements of the Board of Fire Underwriters and any other
similar body, (iii) the Certificate of Occupancy issued for the Building, and
(iv) any recorded covenants, conditions and restrictions and similar regulatory
agreements, if any, which affect the use, occupation or alteration of the
Premises, the Building and/or the Project. Tenant agrees to comply with the
Rules and Regulations referenced in SECTION 28. Tenant agrees not to do or
permit anything to be done in or about the Premises which will in any manner
obstruct or interfere with the rights of other tenants or occupants of the
Project, or injure or unreasonably annoy them, or use or allow the Premises to
be used for any unlawful or unreasonably objectionable purpose. Tenant agrees
not to cause, maintain or permit any nuisance or waste in or about the Premises
or elsewhere within the Project. Tenant agrees not to place a load upon the
Premises exceeding the average pounds of live load per square foot of floor area
specified for the Building by Landlord's architect, with the partitions to be
considered a part of the live load. Landlord reserves the right to reasonably
prescribe the weight and positions of safes, files and heavy equipment which
Tenant desires to place in the Premises so as to distribute properly the weight
thereof. Tenant agrees to install, maintain and use Tenant's business machines
and mechanical equipment which may cause vibration or noise that may be
transmitted to the Building structure or to any other space in the Building in a
manner so as to eliminate or minimize such vibration or noise. Tenant will be
responsible for all structural engineering required to determine structural
load, as well as the expense thereof. Notwithstanding anything contained in this
Lease to the contrary, all transferable development rights related in any way to
the Project are and will remain vested in Landlord, and Tenant hereby waives any
rights thereto. Without limiting the foregoing or any other provisions of this
Lease, Tenant shall be solely responsible for and shall comply with, at Tenant's
sole cost and expense, all requirements of Title III of the Americans with
Disabilities Act of 1990 (the "ADA") applicable to Tenant's use and occupancy of
the Premises, including, without limitation, those provisions of the ADA
applicable to the operational policies and activities of Tenant in the Premises
and those applicable to the non-structural design and construction elements of
any improvements in or to the Premises constructed by or on behalf of or paid
for by Tenant (i.e., excluding only those improvements existing within the
----
Premises prior to the date of this Lease unless applicable thereto as a result
of additional improvements or alterations constructed by or on behalf of or paid
for by Tenant).
(c) HAZARDOUS MATERIALS. Except for ordinary and general office
-------------------
supplies typically used in the ordinary course of business within office
buildings, such as copier toner, liquid paper, glue, ink and common household
cleaning materials (some or all of which may constitute "Hazardous Materials" as
defined in this Lease), Tenant agrees not to cause or permit any Hazardous
Materials to be brought upon, stored, used, handled, generated, released or
disposed of on, in, under or about the Premises, the Building, the Common Areas
or any other portion of the Project by Tenant, its agents, employees,
subtenants, assignees, contractors or invitees (collectively, "Tenant's
Parties"), without the prior written consent of Landlord, which consent Landlord
may withhold in its sole and absolute discretion. Upon the expiration or sooner
termination of this Lease, Tenant agrees to remove from the Premises, the
Building and the Project, at its sole cost and expense, any and all Hazardous
Materials, including any equipment or systems containing Hazardous Materials
which are installed, brought upon, stored, used, generated or released upon, in
or under the Premises, the Building and/or the Project or any portion thereof by
Tenant or any of Tenant's Parties. To the fullest extent permitted by law,
Tenant agrees to promptly indemnify, protect, defend and hold harmless Landlord
and Landlord's partners, officers, directors, employees, agents, successors and
assigns (collectively, "Landlord Indemnified Parties") from and against any and
all claims, damages, judgments, suits, causes of action, losses, liabilities,
penalties, fines, expenses and costs (including, without limitation, clean-up,
removal, remediation and restoration costs, sums paid in settlement of claims,
attorneys' fees, consultant fees and expert fees and court costs) which arise or
result from the presence of Hazardous Materials on, in or about the Premises,
the Building or any other portion of the Project and which are caused or
permitted by Tenant or any of Tenant's Parties. Tenant agrees to promptly notify
Landlord of any release of Hazardous Materials in the Premises, the Building or
any other portion of the Project which Tenant becomes aware of during the Term
of this Lease, whether caused by Tenant or any other persons or entities. In the
event of any release of Hazardous Materials caused or permitted by Tenant or any
of Tenant's Parties, Landlord shall have the right to cause Tenant to
immediately take all steps Landlord deems necessary or
-7-
<PAGE>
appropriate to remediate such release and prevent any similar future release to
the satisfaction of Landlord and Landlord's mortgagee(s). As used in this Lease,
the term "Hazardous Materials" shall mean and include any hazardous or toxic
materials, substances or wastes as now or hereafter designated under any law,
statute, ordinance, rule, regulation, order or ruling of any agency of the
State, the United States Government or any local governmental authority,
including, without limitation, asbestos, petroleum, petroleum hydrocarbons and
petroleum based products, urea formaldehyde foam insulation, polychlorinated
biphenyls ("PCBs"), and freon and other chlorofluorocarbons. The provisions of
this Subsection 8(c) will survive any termination of this Lease.
9. NOTICES. Any notice required or permitted to be given hereunder
-------
must be in writing and may be given by personal delivery (including delivery by
overnight courier or an express mailing service) or by mail, if sent by
registered or certified mail. Notices to Tenant shall be sufficient if delivered
to Tenant at the Premises and notices to Landlord shall be sufficient if
delivered to Landlord at the addresses) designated in Subsection l(b). Either
party may specify a different address for notice purposes by written notice to
the other, except that the Landlord may in any event use the Premises as
Tenant's address for notice purposes.
10. BROKERS. The parties acknowledge that the broker(s) who
-------
negotiated this Lease are stated in SUBSECTION l(v). Each party represents and
warrants to the other, that, to its knowledge, no other broker, agent or finder
(a) negotiated or was instrumental in negotiating or consummating this Lease on
its behalf, and (b) is or might be entitled to a commission or compensation in
connection with this Lease. Landlord and Tenant each agree to promptly
indemnify, protect, defend and hold harmless the other from and against any and
all claims, damages, judgments, suits, causes of action, losses, liabilities,
penalties, fines, expenses and costs (including attorneys' fees and court costs)
resulting from any breach by the indemnifying party of the foregoing
representation, including, without limitation, any claims that may be asserted
by any broker, agent or finder undisclosed by the indemnifying party. The
foregoing mutual indemnity shall survive the expiration or earlier termination
of this Lease.
11. SURRENDER; HOLDING OVER.
-----------------------
(a) SURRENDER. The voluntary or other surrender of this Lease
---------
by Tenant, or a mutual cancellation thereof, shall not constitute a merger, and
shall, at the option of Landlord, operate as an assignment to Landlord of any or
all subleases or subtenancies. Upon the expiration or sooner termination of this
Lease, Tenant agrees to peaceably surrender the Premises to Landlord broom clean
and in a state of first-class order, repair and condition, ordinary wear and
tear and casualty damage (if this Lease is terminated as a result thereof
pursuant to SECTION 20) excepted, with all of Tenant's personal property and
Alterations (as defined in SECTION 13) removed from the Premises to the extent
required under SECTION 13 and all damage caused by such removal repaired as
required by SECTION 13. Prior to the date Tenant is to actually surrender the
Premises to Landlord, Tenant agrees to give Landlord reasonable prior notice of
the exact date Tenant will surrender the Premises so that Landlord and Tenant
can schedule a walk-through of the Premises to review the condition of the
Premises and identify the Alterations and personal property which Tenant is to
remove and any repairs Tenant is to make upon surrender of the Premises. The
delivery of keys to any employee of Landlord or to Landlord's agent or any
employee thereof alone will not be sufficient to constitute a termination of
this Lease or a surrender of the Premises.
(b) HOLDING OVER. Tenant will not be permitted to hold over
------------
possession of the Premises after the expiration or earlier termination of the
Term without the express written consent of Landlord, which consent Landlord may
withhold in its sole discretion. If Tenant holds over after the expiration or
earlier termination of the Term, Landlord may, at its option, treat Tenant as a
tenant at sufferance only, and such continued occupancy by Tenant shall be
subject to all of the terms, covenants and conditions of this Lease, so far as
applicable, except that the Monthly Base Rent for any such holdover period shall
be equal to the greater of (i) one hundred fifty percent (150%) of the Monthly
Base Rent in effect under this Lease immediately prior to such holdover, or (ii)
the then currently scheduled rental rate for comparable space in the Building,
in either event prorated on a daily basis; Acceptance by Landlord of rent after
such expiration or earlier termination will not result in a renewal of this
Lease. The foregoing provisions of this SECTION 11 are in addition to and do not
affect Landlord's right of re-entry or any rights of Landlord under this Lease
or as otherwise provided by law. If Tenant fails to surrender the Premises upon
the expiration of this Lease in accordance with the terms of this SECTION 11
despite demand to do so by Landlord, Tenant agrees to promptly indemnify,
protect, defend and hold Landlord harmless from all claims, damages, judgments,
suits, causes of action, losses, liabilities, penalties, fines, expenses and
costs (including attorneys' fees and costs), including, without limitation,
costs and expenses incurred by Landlord in returning the Premises to the
condition in which Tenant was to surrender it and claims made by any succeeding
tenant founded on or resulting from Tenant's failure to surrender the Premises.
12. TAXES ON TENANT'S PROPERTY. Tenant agrees to pay before
--------------------------
delinquency all taxes and assessments (real and personal) levied against (a) any
personal property or trade fixtures placed by Tenant in or about the Premises
(including any increase in the assessed value of the Premises based upon the
value of any such
-8-
<PAGE>
personal property or trade fixtures); and (b) any Tenant Improvements or
Alterations (as defined in SECTION 13) in the Premises (whether installed and/or
paid for by Landlord or Tenant) to the extent such items are assessed at a
valuation higher than the valuation at which tenant improvements conforming to
Landlord's building standard tenant improvements are assessed. If any such taxes
or assessments are levied against Landlord or Landlord's property, Landlord may,
after written notice to Tenant (and under proper protest if requested by Tenant)
pay such taxes and assessments, in which event Tenant agrees to reimburse
Landlord all amounts paid by Landlord within ten (10) business days after demand
by Landlord.
13. ALTERATIONS. After installation of the initial Tenant
-----------
Improvements for the Premises pursuant to Exhibit "C", Tenant may, at its sole
-----------
cost and expense, make alterations, additions, improvements and decorations to
the Premises (collectively, "Alterations") subject to and upon the following
terms and conditions:
(a) Tenant may not make any Alterations which: (i) affect any
area outside the Premises; (ii) affect the Building's structure, equipment,
services or systems, or the proper functioning thereof, or Landlord's access
thereto; (iii) affect the outside appearance, character or use of the Building
or the Building Common Areas; (iv) in the reasonable opinion of Landlord, lessen
the value of the Building; or (v) will violate or require a change in any
occupancy certificate applicable to the Premises.
(b) Before proceeding with any Alterations which are not
prohibited in SUBSECTION 13(a), Tenant must first obtain Landlord's written
approval of the plans, specifications and working drawings for such Alterations,
which approval Landlord will not unreasonably withhold or delay; provided,
however, Landlord's prior approval will not be required for any such Alterations
which are not prohibited by SUBSECTION 13(a) and which cost less than Two
Thousand Five Hundred Dollars ($2,500) as long as (i) Tenant delivers to
Landlord notice and a copy of any final plans, specifications and working
drawings for any such Alterations at least ten (10) days prior to commencement
of the work thereof, and (ii) the other conditions of this SECTION 13 are
satisfied, including, without limitation, conforming to Landlord's rules,
regulations and insurance requirements which govern contractors. Landlord's
approval of plans, specifications and/or working drawings for Alterations will
not create any responsibility or liability on the part of Landlord for their
completeness, design sufficiency, or compliance with applicable permits, laws,
rules and regulations of governmental agencies or authorities. In approving any
Alterations, Landlord reserves the right to require Tenant to increase its
Security Deposit to provide Landlord with additional reasonable security for the
proper installation and removal of such Alterations by Tenant as may be required
by this Lease.
(c) Alterations may be made or installed only by contractors
and subcontractors which have been approved by Landlord, which approval Landlord
will not unreasonably withhold or delay; provided, however, Landlord reserves
the right to require that Landlord's designated contractor(s) for the Building
be given the first opportunity to bid for any Alteration work. Before proceeding
with any Alterations, Tenant agrees to provide Landlord with ten (10) days'
prior written notice and Tenant's contractors must obtain, on behalf of Tenant
and at Tenant's sole cost and expense: (i) all necessary governmental permits
and approvals for the commencement and completion of such Alterations; and (ii)
if requested by Landlord, a completion and lien indemnity bond, or other surety,
reasonably satisfactory to Landlord for such Alterations. Throughout the
performance of any Alterations, Tenant agrees to obtain, or cause its
contractors to obtain, workers compensation insurance and general liability
insurance in compliance with the provisions of SECTION 19 of this Lease.
(d) All Alterations must be performed: (i) in accordance with
the approved plans, specifications and working drawings; (ii) in a lien-free and
first-class and workmanlike manner; (iii) in compliance with all applicable
permits, laws, statutes, ordinances, rules, regulations, orders and rulings now
or hereafter in effect and imposed by any governmental agencies and authorities
which assert jurisdiction; (iv) in such a manner so as not to interfere with the
occupancy of any other tenant in the Building, nor impose any additional expense
upon nor delay Landlord in the maintenance and operation of the Building; and
(v) at such times, in such manner, and subject to such rules and regulations as
Landlord may from time to time reasonably designate.
(e) The Tenant Improvements, including, without limitation, all
affixed sinks, dishwashers and other fixtures, and all Alterations will become
the property of Landlord and will remain upon and be surrendered with the
Premises at the end of the Term of this Lease; provided, however, Tenant shall,
prior to the end of the Term, remove such of the Alterations in the Premises as
Landlord shall direct to be removed by written notice to Tenant. Landlord may
also require Tenant to remove Alterations which Landlord did not have the
opportunity to approve as provided in this SECTION 13. If Landlord requires
Tenant to remove any Alterations, Tenant, at its sole cost, agrees to remove the
identified Alterations on or before the expiration or sooner termination of this
Lease and repair any damage to the Premises caused by such removal (or, at
Landlord's option, Tenant agrees to pay to Landlord all of Landlord's costs of
such removal and repair).
-9-
<PAGE>
(f) Tenant agrees to pay Landlord, as additional rent, the
reasonable costs of professional services and costs for general conditions of
Landlord's third party consultants if utilized by Landlord for review of all
plans, specifications and working drawings for any Alterations, within ten (10)
business days after Tenant's receipt of invoices either from Landlord or such
consultants. In addition, Tenant agrees to pay Landlord, within ten (10)
business days after completion of any Alterations, a fee to cover Landlord's
costs of supervising and administering the installation of such Alterations, in
the amount of ten percent (10%) of the cost of such Alterations, but in no event
less than Two Hundred Fifty Dollars ($250.00).
(g) All articles of personal property owned by Tenant or
installed by Tenant at its expense in the Premises (including Tenant's business
and trade fixtures, furniture, movable partitions and equipment (such as
telephones, copy machines, computer terminals, refrigerators and facsimile
machines]) will be and remain the property of Tenant, and must be removed by
Tenant from the Premises, at Tenant's sole cost and expense, on or before the
expiration or sooner termination of this Lease. Tenant agrees to repair any
damage caused by such removal at its cost on or before the expiration or sooner
termination of this Lease.
(h) If Tenant fails to remove by the expiration or sooner
termination of this Lease all of its personal property, or any Alterations
identified by Landlord for removal, Landlord may (without liability to Tenant
for loss thereof) treat such failure as a hold-over pursuant to SUBSECTION
11(b), and/or treat such personal property and/or Alterations as abandoned and,
at Tenant's sole cost and in addition to Landlord's other rights and remedies
under this Lease, at law or in equity: (a) remove and store such items; and/or
(b) upon ten (10) days' prior notice to Tenant, sell, discard or otherwise
dispose of all or any such items at private or public sale for such price as
Landlord may obtain or by other commercially reasonable means. Tenant shall be
liable for all costs of disposition of Tenant's abandoned property and Landlord
shall have no liability to Tenant with respect to any such abandoned property.
Landlord agrees to apply the proceeds of any sale of any such property to any
amounts due to Landlord under this Lease from Tenant (including Landlord's
attorneys' fees and other costs incurred in the removal, storage and/or sale of
such items), with any remainder to be paid to Tenant.
35. REPAIRS.
-------
(a) LANDLORD'S OBLIGATIONS. Landlord agrees to repair and
----------------------
maintain the structural portions of the Building and the plumbing, heating,
ventilating, air conditioning, elevator and electrical systems installed or
furnished by Landlord, unless such maintenance and repairs are (i) attributable
to items installed in Tenant's Premises which are above standard interior
improvements (such as, for example, custom lighting, special HVAC and/or
electrical panels or systems, kitchen or restroom facilities and appliances
constructed or installed within Tenants Premises) or (ii) caused in part or in
whole by the act, neglect or omission of any duty by Tenant, its agents,
servants, employees or invitees, in which case Tenant will pay to Landlord, as
additional rent, the reasonable cost of such maintenance and repairs. Landlord
will not be liable for any failure to make any such repairs or to perform any
maintenance unless such failure shall persist for an unreasonable time after
written notice of the need of such repairs or maintenance is given to Landlord
by Tenant. Except as provided in SECTION 20, Tenant will not be entitled to any
abatement of rent and Landlord will not have any liability by reason of any
injury to or interference with Tenant's business arising from the making of any
repairs, alterations or improvements in or to any portion of the Building or the
Premises or in or to fixtures, appurtenances and equipment therein. Tenant
waives the right to make repairs at Landlord's expense under any law, statute,
ordinance, rule, regulation, order or ruling (including, without limitation, the
provisions of California Civil Code Sections 1941 and 1942 and any successor
statutes or laws of a similar nature).
(b) TENANT'S OBLIGATIONS. Tenant agrees to keep, maintain and
--------------------
preserve the Premises in first class condition and repair and, when and if
needed, at Tenant's sole cost and expense, to make all repairs to the Premises
and every part thereof. Any such maintenance and repairs will be performed by
Landlord's contractor, or at Landlord's option, by such contractor or
contractors as Tenant may choose from an approved list to be submitted by
Landlord. Tenant agrees to pay all costs and expenses incurred in such
maintenance and repair within seven (7) days after billing by Landlord or such
contractor or contractors. Tenant agrees to cause any mechanics' liens or other
liens arising as a result of work performed by Tenant or at Tenant's direction
to be eliminated as provided in SECTION 15. Except as provided in SUBSECTION
14(a), Landlord has no obligation to alter, remodel, improve, repair, decorate
or paint the Premises or any part thereof.
(c) TENANT'S FAILURE TO REPAIR. If Tenant refuses or neglects
--------------------------
to repair and maintain the Premises properly as required hereunder to the
reasonable satisfaction of Landlord, Landlord, at any time following ten (10)
days from the date on which Landlord makes a written demand on Tenant to effect
such repair and maintenance, may enter upon the Premises and make such repairs
and/or maintenance, and upon completion thereof, Tenant agrees to pay to
Landlord as additional rent, Landlord's costs for making such repairs plus an
amount not to exceed ten percent (10%) of such costs for overhead, within ten
(10) days of receipt from Landlord of a written itemized bill therefor. Any
amounts not reimbursed by Tenant within such ten (10) day period will bear
interest at the Interest Rate until paid by Tenant.
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<PAGE>
15. LIENS. Tenant agrees not to permit any mechanic's, materialmen's
-----
or other liens to be filed against all or any part of the Project, the Building
or the Premises, nor against Tenant's leasehold interest in the Premises, by
reason of or in connection with any repairs, alterations, improvements or other
work contracted for or undertaken by Tenant or any other act or omission of
Tenant or Tenant's agents, employees, contractors, licensees or invitees. At
Landlord's request, Tenant agrees to provide Landlord with enforceable,
conditional and final lien releases (or other evidence reasonably requested by
Landlord to demonstrate protection from liens) from all persons furnishing labor
and/or materials at the Premises. Landlord will have the right at all reasonable
times to post on the Premises and record any notices of non-responsibility which
it deems necessary for protection from such liens. If any such liens are filed,
Tenant will, at its sole cost, promptly cause such liens to be released of
record or bonded so that it no longer affects title to the Project, the Building
or the Premises. If Tenant fails to cause any such liens to be so released or
bonded within ten (10) days after filing thereof, such failure will be deemed a
material breach by Tenant under this Lease without the benefit of any additional
notice or cure period described in Section 22, and Landlord may, without waiving
its rights and remedies based on such breach, and without releasing Tenant from
any of its obligations, cause such liens to be released by any means it shall
deem proper, including payment in satisfaction of the claims giving rise to such
liens. Tenant agrees to pay to Landlord within ten (10) days after receipt of
invoice from Landlord, any sum paid by Landlord to remove such liens, together
with interest at the Interest Rate from the date of such payment by Landlord.
16. ENTRY BY LANDLORD. Landlord and its employees and agents will at
-----------------
all times have the right to enter the Premises to inspect the same, to supply
janitorial service and any other service to be provided by Landlord to Tenant
hereunder, to show the Premises to prospective purchasers or tenants, to post
notices of nonresponsibility, and/or to repair the Premises as permitted or
required by this Lease. In exercising such entry rights, Landlord will endeavor
to minimize, as reasonably practicable, the interference with Tenants business,
and will provide Tenant with reasonable advance notice of any such entry (except
in emergency situations). Landlord may, in order to carry out such purposes,
erect scaffolding and other necessary structures where reasonably required by
the character of the work to be performed. Landlord will at all times have and
retain a key with which to unlock all doors in the Premises, excluding Tenant's
vaults and safes. Landlord will have the right to use any and all means which
Landlord may reasonably deem proper to open said doors in an emergency in order
to obtain entry to the Premises. Any entry to the Premises obtained by Landlord
by any of said means, or otherwise, will not be construed or deemed to be a
forcible or unlawful entry into the Premises, or an eviction of Tenant from the
Premises. Landlord will not be liable to Tenant for any damages or losses for
any entry by Landlord.
17. UTILITIES AND SERVICES. Landlord agrees to furnish or cause to
----------------------
be furnished to the Premises the utilities and services described in the
Standards for Utilities and Services attached hereto as Exhibit "F", subject to
-----------
the conditions and in accordance with the standards set forth therein. Landlord
may require Tenant from time to time to provide Landlord with a list of Tenant's
employees and/or agents which are authorized by Tenant to subscribe on behalf of
Tenant for any additional services which may be provided by Landlord. Any such
additional services will be provided to Tenant at Tenant's cost. Landlord will
not be liable to Tenant for any failure to furnish any of the foregoing
utilities and services if such failure is caused by all or any of the following:
(i) accident, breakage or repairs; (ii) strikes, lockouts or other labor
disturbance or labor dispute of any character; (iii) governmental regulation,
moratorium or other governmental action or inaction; (iv) inability despite the
exercise of reasonable diligence to obtain electricity, water or fuel; or (v)
any other cause beyond Landlord's reasonable control. In addition, in the event
of any stoppage or interruption of services or utilities, Tenant shall not be
entitled to any abatement or reduction of rent (except as expressly provided in
Exhibit "F" and, except as expressly provided in SUBSECTION 20(f) or SUBSECTION
21(b), if such failure results from a damage or taking described therein), no
eviction of Tenant will result from such failure and Tenant will not be relieved
from the performance of any covenant or agreement in this Lease because of
such failure. In the event of any failure, stoppage or interruption thereof,
Landlord agrees to diligently attempt to resume service promptly. If Tenant
requires or utilizes more water or electrical power than is considered
reasonable or normal by Landlord, as described under Exhibit "F", Landlord may
at its option require Tenant to pay, as additional rent, the cost, as fairly
determined by Landlord, incurred by such extraordinary usage and/or Landlord may
install separate meter(s) for the Premises, at Tenant's sole expense, and Tenant
agrees thereafter to pay all charges of the utility providing service and
Landlord will make an appropriate adjustment to Tenant's Operating Expenses
calculation to account for the fact Tenant is directly paying such metered
charges, provided Tenant will remain obligated to pay its proportionate share of
Operating Expenses subject to such adjustment.
18. WAIVER AND INDEMNIFICATION.
--------------------------
(a) TENANT'S WAIVER. Tenant, as a material part of the
---------------
consideration to Landlord, hereby agrees that neither Landlord nor any Landlord
Indemnified Parties (as hereinafter defined) will be liable to Tenant for, and
Tenant expressly waives any and all claims it may have against Landlord or any
Landlord Indemnified Parties with respect to, any and all loss or damage to
property or injury to persons in, upon or about the Premises, the Building or
the Project resulting from any cause whatsoever, including, without limitation,
any such loss, damage or injury caused by other tenants or persons in or about
the Building or the Project, caused to property
-11-
<PAGE>
entrusted to employees of the Building, caused by theft or otherwise, or
resulting from any casualty, explosion, falling plaster or other masonry or
glass, steam, gas, electricity, water or rain which may leak from any part of
the Building or any other portion of the Project or from the pipes, appliances
or plumbing works therein or from the roof, street or subsurface or from any
other place, or resulting from dampness; provided, however, that Landlord shall
nevertheless be responsible to the extent and in the proportion that any such
loss, damage or injury is ultimately determined to be caused by Landlord's gross
negligence or willful misconduct; provided, further, however, that
notwithstanding the foregoing or anything to the contrary contained in this
Lease, neither Landlord nor any Landlord Indemnified Parties will be liable for
consequential damages arising out of any loss of the use of the Premises or any
equipment or facilities therein by Tenant or any Tenant Parties or for
interference with light or other incorporeal hereditaments. Tenant agrees to
give prompt notice to Landlord in case of fire or accidents in the Premises or
the Building, or of defects therein or in the fixtures or equipment. Without
limitation on the generalities of the foregoing, Tenant acknowledges that
Landlord has agreed not to require Tenant to maintain business interruption or
loss of income insurance and, in consideration of such agreement, Tenant
specifically waives any and all claims against Landlord or any Landlord
indemnified parties with respect to any and all loss or damage which would have
been covered under such insurance.
(b) TENANT'S INDEMNIFICATION OF LANDLORD. Tenant will be liable
------------------------------------
for, and agrees to promptly indemnify, protect, defend and hold harmless
Landlord and Landlord's affiliates, partners, officers, directors, employees,
agents, successors and assigns (collectively, "Landlord Indemnified Parties"),
from and against, any and all claims, damages, judgments, suits, causes of
action, losses, liabilities, penalties, fines, expenses and costs, including
attorneys' fees and court costs (collectively, "Indemnified Claims"), arising or
resulting from (i) any act or omission of Tenant or any of Tenant's agents,
employees, contractors, subtenants, assignees, licensees or invitees
(collectively, "Tenant Parties"); (ii) the use of the Premises and Common Areas
and conduct of Tenant's business by Tenant or any Tenant Parties, or any other
activity, work or thing done by Tenant or any Tenant Parties, in or about the
Premises, the Building or elsewhere within the Project; and/or (iii) any default
by Tenant of any obligations on Tenant's part to be performed under the terms of
this Lease. Notwithstanding the foregoing, Tenant shall not be liable to the
extent and in the proportion that damage or injury is ultimately determined to
be caused by the gross negligence or willful misconduct of Landlord. In case any
action or proceeding is brought against Landlord or any Landlord Indemnified
Parties by reason of any such Indemnified Claims, Tenant, upon notice from
Landlord, agrees to defend the same at Tenant's expense by counsel approved in
writing by Landlord, which approval Landlord will not unreasonably withhold.
(c) SURVIVAL; NO RELEASE OF INSURERS. Tenants indemnification
--------------------------------
obligations under SUBSECTION 18(b) will survive the expiration or earlier
termination of this Lease. Tenant's covenants, agreements and indemnification
obligation in SUBSECTION 18(a) and SUBSECTION 18(b), are not intended to and
will not relieve any insurance carrier of its obligations under policies
required to be carried by Tenant pursuant to the provisions of this Lease.
19. INSURANCE.
---------
(a) TENANT'S INSURANCE. On or before the earlier to occur of
------------------
(i) thirty (30) days after Tenant executes the Lease, or (ii) the date Tenant
commences any work of any type in the Premises pursuant to this Lease (which may
be prior to the Commencement Date), and continuing throughout the entire Term
hereof and any other period of occupancy, Tenant agrees to keep in full force
and effect, at its sole cost and expense, the following insurance:
(i) Property insurance coverage written on the broadest
available "all risk" (special-causes-of-loss) policy form or an
equivalent form acceptable to Landlord, including at least the following
perils: fire and extended coverage, smoke damage, vandalism, malicious
mischief, sprinkler leakage. This insurance policy must be upon all
property owned by Tenant, for which Tenant is legally liable, or which
is installed at Tenant's expense, and which is located in the Building
including, without limitation, any Tenant Improvements which satisfy the
foregoing qualification and any Alterations, and all furniture,
fittings, installations, fixtures and any other personal property of
Tenant, in an amount not less than the full replacement cost thereof.
(ii) Commercial General Liability Insurance or
Comprehensive General Liability Insurance (on an occurrence form)
insuring bodily injury, personal injury and property damage including
the following divisions and extensions of coverage: Premises and
Operations; Owners and Contractors protective; blanket contractual
liability (including coverage for Tenant's indemnity obligations under
this Lease); products and completed operations; liquor liability (if
Tenant serves alcohol on the Premises); and fire legal liability in an
amount not less than $250,000. Such insurance must have the following
minimum limits of liability: bodily injury, personal injury and property
damage - $2,000,000 each occurrence, provided that if liability coverage
is provided by a Commercial General Liability policy the general
aggregate limit shall apply separately and in total to this location
only (per location general
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<PAGE>
aggregate), and provided further, such minimum limits of liability may
be adjusted from year to year to reflect increases in coverages as
recommended by Landlord's insurance carrier as being prudent and
commercially reasonable for tenants of first class office buildings
comparable to the Building, rounded to the nearest five hundred thousand
dollars.
(iii) Comprehensive Automobile Liability insuring bodily
injury and property damage arising from all owned, non-owned and hired
vehicles, if any, with minimum limits of liability of $1,000,000 per
accident.
(iv) Workers Compensation as required by the laws of the
State of California with the following minimum limits of liability:
Coverage A -statutory benefits; Coverage B -$1,000,000 per accident and
disease.
(v) Any other form or forms of insurance as Tenant or
Landlord or any mortgagees of Landlord may reasonably require from time
to time in form, in amounts, and for insurance risks against which, a
prudent tenant would protect itself, but only to the extent coverage for
such risks and amounts are available in the insurance market at
commercially acceptable rates. Landlord makes no representation that the
limits of liability required to be carried by Tenant under the terms of
this Lease are adequate to protect Tenant's interests and Tenant should
obtain such additional insurance or increased liability limits as Tenant
deems appropriate.
(b) SUPPLEMENTAL TENANT INSURANCE REQUIREMENTS.
------------------------------------------
(i) All policies must be in a form reasonably
satisfactory to Landlord and issued by an insurer admitted to do
business in the State of California.
(ii) All policies must be issued by insurers with a
policyholder rating of not lower than "B" and a financial rating of not
less than "IX" in the most recent version of Best's Key Rating Guide.
(iii) All policies must contain a requirement to notify
Landlord (and Landlord's property manager and any mortgagees or ground
lessors of Landlord who are named as additional insureds, if any) in
writing not less than thirty (30) days prior to any material change,
reduction in coverage, cancellation or other termination thereof. Tenant
agrees to deliver to Landlord, as soon as practicable after placing the
required insurance, but in any event within the time frame specified in
SUBSECTION 19(a), certificate(s) of insurance and/or if required by
Landlord, certified copies of each policy evidencing the existence of
such insurance and Tenant's compliance with the provisions of this
SECTION 19. Tenant agrees to cause replacement policies or certificates
to be delivered to Landlord not less than thirty (30) days prior to the
expiration of any such policy or policies. If any such initial or
replacement policies or certificates are not furnished within the
time(s) specified herein, Tenant will be deemed to be in material
default under this Lease without the benefit of any additional notice or
cure period provided in SUBSECTION 22(a)(iii), and Landlord will have
the right, but not the obligation, to procure such insurance as Landlord
deems necessary to protect Landlord's interests at Tenant's expense. If
Landlord obtains any insurance that is the responsibility of Tenant
under this SECTION 19, Landlord agrees to deliver to Tenant a written
statement setting forth the cost of any such insurance and showing in
reasonable detail the manner in which it has been computed and Tenant
agrees to promptly reimburse Landlord for such costs as additional rent.
(iv) General Liability and Automobile Liability policies
under SUBSECTION 19(a)(iii) and SUBSECTION 19(a)(iv) must name Landlord
and Landlord's property manager (and at Landlord's request, Landlord's
mortgagees and ground lessors of which Tenant has been informed in
writing) as additional insureds and must also contain a provision that
the insurance afforded by such policy is primary insurance and any
insurance carried by Landlord and Landlord's property manager or
Landlord's mortgagees or ground lessors, if any, will be excess over and
non-contributing with Tenant's insurance.
(c) TENANT'S USE. Tenant will not keep, use, sell or offer for
------------
sale in or upon the Premises any article which may be prohibited by any
insurance policy periodically in force covering the Building or the Project
Common Areas. If Tenant's occupancy or business in, or on, the Premises, whether
or not Landlord has consented to the same, results in any increase in premiums
for the insurance periodically carried by Landlord with respect to the Building
or the Project Common Areas or results in the need for Landlord to maintain
special or additional insurance, Tenant agrees to pay Landlord the cost of any
such increase in premiums or special or additional coverage as additional rent
within ten (10) days after being billed therefor by Landlord. In determining
whether increased premiums are a result of Tenant's use of the Premises, a
schedule issued by the organization computing the insurance rate on the
Building, the Project Common Areas or the Tenant Improvements showing
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<PAGE>
the various components of such rate, will be conclusive evidence of the several
items and charges which make up such rate. Tenant agrees to promptly comply with
all reasonable requirements of the insurance authority or any present or future
insurer relating to the Premises.
(d) CANCELLATION OF LANDLORD'S POLICIES. If any of Landlord's
-----------------------------------
insurance policies are canceled or cancellation is threatened or the coverage
reduced or threatened to be reduced in any way because of the use of the
Premises or any part thereof by Tenant or any assignee or subtenant of Tenant or
by anyone Tenant permits on the Premises and, if Tenant fails to remedy the
condition giving rise to such cancellation, threatened cancellation, reduction
of coverage, threatened reduction of coverage, increase in premiums, or
threatened increase in premiums, within forty-eight (48) hours after notice
thereof, Tenant will be deemed in material default of this Lease and Landlord
may, at its option, either terminate this Lease or enter upon the Premises and
attempt to remedy such condition, and Tenant shall promptly pay Landlord the
reasonable costs of such remedy as additional rent. If Landlord is unable, or
elects not to remedy such condition, then Landlord will have all of the remedies
provided for in this Lease in the event of a default by Tenant.
(e) MUTUAL WAIVER OF SUBROGATION. Landlord and Tenant each
----------------------------
hereby waive any and all rights of recovery against the other, and against the
partners, officers, employees, agents or representatives of the other, for loss
of or damage to its property or the property of others under its control, to the
extent such loss or damage is covered by any insurance policy in force (whether
or not described in this Lease) or would have been covered by any insurance
policy required to be carried under the provisions of this Lease, at the time of
such loss or damage. Each of the parties hereto, on behalf of their respective
insurance companies insuring the property of either Landlord or Tenant against
any such loss, to the extent of the amount of any recovery under such insurance,
hereby waives any right of subrogation that it may have against the other. Upon
obtaining the required policies of insurance, Landlord and Tenant shall give
notice to the insurance carriers of this mutual waiver of subrogation. Such
waiver shall be expressly included in, and shall comply with the requirements
of, the respective insurance policies.
20. DAMAGE OR DESTRUCTION.
---------------------
(a) PARTIAL DESTRUCTION. If the Premises or the Building are
-------------------
damaged by fire or other casualty to an extent not exceeding twenty-five percent
(25%) of the full replacement cost thereof, and Landlord's contractor reasonably
estimates in a writing delivered to Landlord and Tenant that the damage thereto
may be repaired, reconstructed or restored to substantially its condition
immediately prior to such damage within one hundred eighty (180) days from the
date of such casualty, and Landlord will receive insurance proceeds sufficient
to cover the costs of such repairs, reconstruction and restoration (including
proceeds from Tenant and/or Tenant's insurance which Tenant is required to
deliver to Landlord pursuant to SUBSECTION 20(e) to cover Tenant's obligation
for the costs of repair, reconstruction and restoration of any portion of the
Tenant Improvements and any Alterations for which Tenant is responsible under
this Lease), then Landlord agrees to commence and proceed diligently with the
work of repair, reconstruction and restoration and this Lease shall continue in
full force and effect.
(b) SUBSTANTIAL DESTRUCTION. Any damage or destruction to the
-----------------------
Premises or the Building which Landlord is not obligated to repair pursuant to
SUBSECTION 20(a) shall be deemed a substantial destruction. In the event of a
substantial destruction, Landlord may elect to either:
(i) repair, reconstruct and restore the portion of the
Building or the Premises - damaged by such casualty, in which case this
Lease shall continue in full force and effect, subject to Tenant's
termination right contained in SUBSECTION 20(d); or
(ii) terminate this Lease effective as of the date which
is thirty (30) days after Tenant's receipt of Landlord's election to so
terminate.
(c) NOTICE. Under any of the conditions of SUBSECTION 20(a) or
------
SUBSECTION 20(b), Landlord agrees to give written notice to Tenant of its
intention to repair or terminate, as permitted in such Subsections, within the
earlier of sixty (60) days after the occurrence of such casualty, or fifteen
(15) days after Landlord's receipt of the estimate from Landlord's contractor
(the applicable time period to be referred to herein as the "Notice Period").
(d) TENANT'S TERMINATION RIGHTS. If Landlord elects to repair,
---------------------------
reconstruct and restore pursuant to Subsection 20(b)(i), and if Landlord's
contractor estimates that as a result of such damage, Tenant cannot be given
reasonable use of and access to the Premises within two hundred seventy (270)
days after the date of such damage, then Tenant may terminate this Lease
effective upon delivery of written notice to Landlord within ten (10) days
after Landlord delivers notice to Tenant of its election to so repair,
reconstruct or restore.
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<PAGE>
(e) TENANT'S COSTS AND INSURANCE PROCEEDS. In the event of any
-------------------------------------
damage or destruction of all or any part of the Premises, Tenant agrees to
immediately (i) notify Landlord thereof, and (ii) deliver to Landlord all
property insurance proceeds received by Tenant with respect to any Tenant
Improvements and any Alterations, but excluding proceeds for Tenant's furniture,
fixtures, equipment and other personal property, whether or not this Lease is
terminated as permitted in this SECTION 20, and Tenant hereby assigns to
Landlord all rights to receive such insurance proceeds. If, for any reason
(including Tenant's failure to obtain insurance for the full replacement cost of
any Tenant Improvements and any Alterations from any and all casualties), Tenant
fails to receive insurance proceeds covering the full replacement cost of any
Tenant Improvements and any Alterations which are damaged, Tenant will be deemed
to have self-insured the replacement cost of such items, and upon any damage or
destruction thereto, Tenant agrees to immediately pay to Landlord the full
replacement cost of such items, less any insurance proceeds actually received by
Landlord from Landlord's or Tenant's insurance with respect to such items.
(f) ABATEMENT OF RENT. In the event of any damage, repair,
-----------------
reconstruction and/or restoration described in this SECTION 20, rent will be
abated or reduced, as the case may be, in proportion to the degree to which
Tenant's use of the Premises is impaired during such period of repair until such
use is restored. Except for such abatement of rent, Tenant will not be entitled
to any compensation or damages for loss of, or interference with, Tenants
business or use or access of all or any part of the Premises resulting from any
such damage, repair, reconstruction or restoration.
(g) INABILITY TO COMPLETE. Notwithstanding anything to the
---------------------
contrary contained in this SECTION 20, if Landlord is obligated or elects to
repair, reconstruct and/or restore the damaged portion of the Building or the
Premises pursuant to SUBSECTION 20(a) or SUBSECTION 20(b)(i), but is delayed
from completing such repair, reconstruction and/or restoration beyond the date
which is one hundred eighty (180) days after the date estimated by Landlord's
contractor for completion thereof by reason of any causes (other than delays
caused by Tenant, its subtenants, employees, agents or contractors) which are
beyond the reasonable control of Landlord as described in Section 33, then
either Landlord or Tenant may elect to terminate this Lease upon ten (10) days'
prior written notice given to the other after the expiration of such one hundred
eighty (180) day period.
(h) DAMAGE NEAR END OF TERM. Landlord and Tenant shall each
-----------------------
have the right to terminate this Lease if any damage to the Premises or the
Building occurs during the last twelve (12) months of the Term of this Lease
where Landlord's contractor estimates in a writing delivered to Landlord and
Tenant that the repair, reconstruction or restoration of such damage cannot be
completed within sixty (60) days after the date of such casualty. If either
party desires to terminate this Lease under this SUBSECTION 20(h), it shall
provide written notice to the other party of such election within ten (10) days
after receipt of Landlord's contractors repair estimates.
(i) WAIVER OF TERMINATION RIGHT. Landlord and Tenant agree that
---------------------------
the foregoing provisions of this SECTION 20 are to govern their respective
rights and obligations in the event of any damage or destruction and supersede
and are in lieu of the provisions of any applicable law, statute, ordinance,
rule, regulation, order or ruling now or hereafter in force which provide
remedies for damage or destruction of leased premises (including, without
limitation, the provisions of California Civil Code Section 1932, Subsection 2,
and Section 1933, Subsection 4 and any successor statute or laws of a similar
nature).
(j) TERMINATION. Upon any termination of this Lease under any
-----------
of the provisions of this SECTION 20, the parties will be released without
further obligation to the other from the date possession of the Premises is
surrendered to Landlord except for items which have accrued and are unpaid as of
the date of termination and matters which are to survive any termination of this
Lease as provided in this Lease.
21. EMINENT DOMAIN.
--------------
(a) SUBSTANTIAL TAKING. If the whole of the Premises, or such
------------------
part thereof as shall substantially interfere with Tenant's use and occupancy of
the Premises, as contemplated by this Lease, is taken for any public or quasi-
public purpose by any lawful power or authority by exercise of the right of
appropriation, condemnation or eminent domain, or sold to prevent such taking,
either party will have the right to terminate this Lease effective as of the
date possession is required to be surrendered to such authority.
(b) PARTIAL TAKING; ABATEMENT OF RENT. In the event of a taking
---------------------------------
of a portion of the Premises which does not substantially interfere with
Tenant's use and occupancy of the Premises, then, neither party will have the
right to terminate this Lease and Landlord will thereafter proceed to make a
functional unit of the remaining portion of the Premises (but only to the extent
Landlord receives proceeds therefor from the condemning authority), and rent
will be abated with respect to the part of the Premises which Tenant is deprived
of on account of such taking. Notwithstanding the immediately preceding sentence
to the contrary, if any part of the floor area of the Building or the Project is
taken (whether or not such taking substantially interferes with
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Tenant's use of the Premises), Landlord may terminate this Lease upon thirty
(30) days' prior written notice to Tenant if Landlord also terminates the leases
of the other tenants of the Building which are leasing comparably sized space
for comparable lease terms.
(c) CONDEMNATION AWARD. In connection with any taking of the
------------------
Premises or the Building, Landlord will be entitled to receive the entire amount
of any award which may be made or given in such taking or condemnation, without
deduction or apportionment for any estate or interest of Tenant, it being
expressly understood and agreed by Tenant that no portion of any such award will
be allowed or paid to Tenant for any so-called bonus or excess value of this
Lease, and such bonus or excess value will be the sole property of Landlord.
Tenant agrees not to assert any claim against Landlord or the taking authority
for any compensation because of such taking (including any claim for bonus or
excess value of this Lease); provided, however, if any portion of the Premises
is taken, Tenant will have the right to recover from the condemning authority
(but not from Landlord) any compensation as may be separately awarded or
recoverable by Tenant for the taking of Tenant's furniture, fixtures, equipment
and other personal property within the Premises, for Tenant's relocation
expenses, and for any loss of goodwill or other damage to Tenant's business by
reason of such taking.
(d) TEMPORARY TAKING. In the event of taking of the Premises or
----------------
any part thereof for temporary use, (i) this Lease will remain unaffected
thereby and rent will not abate, and (ii) Tenant will be entitled to receive
such portion or portions of any award made for such use with respect to the
period of the taking which is within the Term, provided that if such taking
remains in force at the expiration or earlier termination of this Lease, Tenant
will then pay to Landlord a sum equal to the reasonable cost of performing
Tenant's obligations under SECTION 11 with respect to surrender of the Premises
and upon such payment Tenant will be excused from such obligations. For purpose
of this SUBSECTION 21(D), a temporary taking shall be defined as a taking for a
period of ninety (90) days or less.
43. DEFAULTS AND REMEDIES.
---------------------
(a) DEFAULT BY TENANT. The occurrence of any one or more of the
-----------------
following events will be deemed a default by Tenant:
(i) The abandonment of the Premises by Tenant, which for
purposes of this Lease means any absence by Tenant from the Premises for
five (5) business days or longer while in default of any other provision
of this Lease, or use of the Premises for any purpose other than general
offices.
(ii) The failure by Tenant to make any payment of rent or
additional rent or any other payment required to be made by Tenant
hereunder, as and when due, where such failure continues for a period of
three (3) days after written notice thereof from Landlord to Tenant;
provided, however, that any such notice will be in lieu of, and not in
addition to, any notice required under applicable law (including,
without limitation, the provisions of California Code of Civil Procedure
Section 1161 regarding unlawful detainer actions or any successor
statute or law of a similar nature).
(iii) The failure by Tenant to observe or perform any of
the express or implied covenants or provisions of this Lease to be
observed or performed by Tenant, other than as specified in Subsection
22(a)(1) or Subsection 22(a)(ii), where such failure continues for a
period of thirty (30) days after written notice thereof from Landlord to
Tenant. The provisions of any such notice will be in lieu of, and not in
addition to, any notice required under applicable law (including,
without limitation, California Code of Civil Procedure Section 1161
regarding unlawful detainer actions and any successor statute or similar
law). If the nature of Tenant's default is such that more than thirty
(30) days are reasonably required for its cure, then Tenant will not be
deemed to be in default if Tenant commences such cure within such thirty
(30) day period and thereafter diligently prosecutes such cure to
completion; provided, however, if the nature of Tenant's default is such
that it is not reasonably susceptible of cure (for example, by way of
illustration and not limitation, material misrepresentations in Tenant's
financial statements), no cure periods shall be provided.
(iv) (A) The making by Tenant or any Guarantor of any
general assignment for the benefit of creditors; (B) the filing by or
against Tenant or any Guarantor of a petition to have Tenant or such
Guarantor adjudged a bankrupt or a petition for reorganization or
arrangement under any law relating to bankruptcy (unless, in the case of
a petition filed against Tenant, the same is dismissed within sixty (60)
days); (C) the appointment of a trustee or receiver to take possession
of substantially all of Tenant's assets located at the Premises or of
Tenant's interest in this Lease, where possession is not restored to
Tenant within thirty (30) days; or (D) the attachment, execution or
other judicial seizure of substantially all of Tenant's assets located
at the Premises or of Tenant's interest in this Lease where such seizure
is not discharged within thirty (30) days.
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<PAGE>
(b) NOTICES. Notices given under this SECTION 22 shall specify
-------
the default and one or more applicable Lease provisions, and shall demand that
Tenant perform the provisions of this Lease or pay the rent that is in arrears,
as the case may be, within the applicable period of time, or quit the Premises.
No such notice shall be deemed a forfeiture or a termination of this Lease
unless Landlord so elects in the notice.
(c) LANDLORD'S REMEDIES; TERMINATION. In the event of any
--------------------------------
default by Tenant, in addition to any other remedies available to Landlord at
law or in equity under applicable law (including, without limitation, the
remedies of Civil Code Section 1951.4 and any successor statute or similar law),
Landlord will have the immediate right and option to terminate this Lease and
all rights of Tenant hereunder. If Landlord elects to terminate this Lease then,
to the extent permitted under applicable law, Landlord may recover from Tenant:
(i) the worth at the time of award of any unpaid rent
which had been earned at the time of such termination; plus
(ii) the worth at the time of award of the amount by which
the unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rent loss that Tenant proves
could have been reasonably avoided; plus
(iii) the worth at the time of award of the amount by which
the unpaid rent for the balance of the Term after the time of award
exceeds the amount of such rent loss that Tenant proves could be
reasonably avoided; plus
(iv) any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which, in the ordinary course of things,
results therefrom including, but not limited to: attorneys' fees and
costs; brokers' commissions; the costs of refurbishment, alterations,
renovation and repair of the Premises, and removal (including the repair
of any damage caused by such removal) and storage (or disposal) of
Tenant's personal property, equipment, fixtures, Alterations, the Tenant
Improvements and any other items which Tenant is required under this
Lease to remove but does not remove, as well as the unamortized value of
the Tenant Improvements. The unamortized value of the Tenant
Improvements shall be determined by taking the total value of the Tenant
Improvements and multiplying such value by a fraction, the numerator of
which is the number of months of the Lease Term not yet elapsed as of
the date on which the Lease is terminated, and the denominator of which
is the total number of months of the Lease Term.
As used in SUBSECTION 22(b)(i) and SUBSECTION 22(b)(ii), the
"worth at the time of award" is computed by allowing interest at the Interest
Rate. As used in SUBSECTION 22(b)(iii), the "worth at the time of award" is
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent (1%).
(d) LANDLORD'S REMEDIES; RE-ENTRY RIGHTS. In the event of any
------------------------------------
default by Tenant, in addition to any other remedies available to Landlord under
this Lease, at law or in equity, Landlord will also have the right, with or
without terminating this Lease, to re-enter the Premises and remove all persons
and property from the Premises; such property may be removed and stored in a
public warehouse or elsewhere and/or disposed of at the cost of and for the
account of Tenant in accordance with the provisions of SUBSECTION 13(i) of this
Lease or any other procedures permitted by applicable law. No re-entry or taking
possession of the Premises by Landlord pursuant to this SUBSECTION 22(c) will be
construed as an election to terminate this Lease unless a written notice of such
intention is given to Tenant or unless the termination thereof is decreed by a
court of competent jurisdiction.
(e) LANDLORD'S REMEDIES RE-LETTING. In the event of the
------------------------------
vacation or abandonment of the Premises by Tenant or in the event that Landlord
elects to re-enter the Premises or takes possession of the Premises pursuant to
legal proceeding or pursuant to any notice provided by law, then if Landlord
does not elect to terminate this Lease, Landlord may from time to time, without
terminating this Lease, either recover all rent as it becomes due or relet the
Premises or any part thereof on terms and conditions as Landlord in its sole
discretion may deem advisable with the right to make alterations and repairs to
the Premises in connection with such reletting. If Landlord elects to relet the
Premises, then rents received by Landlord from such reletting will be applied:
first, to the payment of any indebtedness other than rent due hereunder from
Tenant to Landlord; second, to the payment of any cost of such reletting; third,
to the payment of the cost of any alterations and repairs to the Premises
incurred in connection with such relenting; fourth, to the payment of rent due
and unpaid hereunder and the residue, if any, will be held by Landlord and
applied to payment of future rent as the same may become due and payable
hereunder. Should that portion of such rents received from such reletting during
any month, which is applied to the payment of rent hereunder, be less than the
rent payable during that month by Tenant hereunder,
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<PAGE>
then Tenant agrees to pay such deficiency to Landlord immediately upon demand
therefor by Landlord. Such deficiency will be calculated and paid monthly.
(f) LANDLORD'S REMEDIES; PERFORMANCE FOR TENANT. All covenants
-------------------------------------------
and agreements to be performed by Tenant under any of the terms of this Lease
are to be performed by Tenant at Tenant's sole cost and expense and without any
abatement of rent. If Tenant fails to pay any sum of money owed to any party
other than Landlord, for which it is liable under this Lease, or if Tenant fails
to perform any other act on its part to be performed hereunder, Landlord may,
without notice to Tenant, and without waiving or releasing Tenant from its
obligations, but shall not be obligated to, make any such payment or perform any
such other act to be made or performed by Tenant. Landlord's election to make
any such payment or perform any such act on Tenant's part shall not give rise to
any responsibility of Landlord to continue making the same or similar payments
or performing the same on similar acts. Tenant agrees to reimburse Landlord upon
demand for all sums so paid by Landlord and all necessary incidental costs,
together with interest thereon at the Interest Rate from the date of such
payment by Landlord until reimbursed by Tenant. This remedy shall be in addition
to any other right or remedy of Landlord set forth in this Section 22.
(g) LATE PAYMENT. If Tenant fails to pay any installment of
------------
rent or any other payment for which Tenant is obligated under this Lease within
five (5) days of when due, such late amount will accrue interest at the Interest
Rate and Tenant agrees to pay Landlord as additional rent such interest on such
amount from the date such amount becomes due until such amount is paid. In
addition, Tenant agrees to pay to Landlord concurrently with such late payment
amount, as additional rent, a late charge equal to five percent (5%) of the
amount due to compensate Landlord for the extra costs Landlord will incur as a
result of such late payment. The parties agree that (i) it would be impractical
and extremely difficult to fix the actual damage Landlord will suffer in the
event of Tenant's late payment, (ii) such interest and late charge represents a
fair and reasonable estimate of the detriment that Landlord will suffer by
reason of late payment by Tenant, and (iii) the payment of interest and late
charges are distinct and separate in that the payment of interest is to
compensate Landlord for the use of Landlord's money by Tenant, while the payment
of late charges is to compensate Landlord for Landlord's processing,
administrative and other costs incurred by Landlord as a result of Tenant's
delinquent payments. Acceptance of any such interest and late charge will not
constitute a waiver of the Tenant's default with respect to the overdue amount,
or prevent Landlord from exercising any of the other rights and remedies
available to Landlord. Notwithstanding the foregoing, Landlord shall not impose
a late charge or interest on a late installment of rent pursuant to the
foregoing unless Landlord has notified Tenant within the previous twenty-four
(24) months that an installment of rent was not paid when due. If Tenant incurs
a late charge more than three (3) times in any period of twelve (12) months
during the Lease Term, then, notwithstanding that Tenant cures the late payments
for which such late charges are imposed, Landlord will have the right to require
Tenant thereafter to pay all installments of Monthly Base Rent quarterly in
advance throughout the remainder of the Lease Term, and the Security Deposit
held by Landlord shall be increased and Tenant shall immediately pay to Landlord
the amount necessary to increase the Security Deposit to no less than three (3)
months Rent (whether or not any Security Deposit was previously required
hereunder).
(h) LIEN FOR RENT. [Intentionally Omitted.]
-------------
(i) RIGHTS AND REMEDIES CUMULATIVE. All rights, options and
------------------------------
remedies of Landlord contained in this Lease will be construed and held to be
cumulative, and no one of them will be exclusive of the other, and Landlord
shall have the right to pursue any one or all of such remedies or any other
remedy or relief which may be provided by law or in equity, whether or not
stated in this Lease. Nothing in this SECTION 22 will be deemed to limit or
otherwise affect Tenant's indemnification of Landlord pursuant to any provision
of this Lease.
44. LANDLORD'S DEFAULT. Landlord will not be in default in the
------------------
performance of any obligation required to be performed by Landlord under this
Lease unless Landlord fails to perform such obligation within thirty (30) days
after the receipt of written notice from Tenant specifying in detail Landlord's
failure to perform; provided however, that if the nature of Landlord's
obligation is such that more than thirty (30) days are required for performance,
then Landlord will not be deemed in default if it commences such performance
within such thirty (30) day period and thereafter diligently pursues the same to
completion. Upon any default by Landlord, Tenant may exercise any of its rights
provided at law or in equity, subject to the limitations on liability set forth
in SECTION 35 of this Lease.
24. ASSIGNMENT AND SUBLETTING.
-------------------------
(a) RESTRICTION ON TRANSFER. Except as expressly provided in
-----------------------
this SECTION 24, Tenant will not, either voluntarily or by operation of law,
assign or encumber this Lease or any interest herein or sublet the Premises or
any part thereof, or permit the use or occupancy of the Premises by any party
other than Tenant (any such assignment, encumbrance, sublease or the like is
hereinafter generally referred to as a "Transfer'), without the prior written
consent of Landlord, which consent Landlord will not unreasonably withhold.
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<PAGE>
(b) CORPORATE AND PARTNERSHIP TRANSFERS. For purposes of this
-----------------------------------
SECTION 24. If Tenant is a corporation, partnership or other entity, any
transfer, assignment, encumbrance or hypothecation of twenty-five percent (25%)
or more (individually or in the aggregate) of any stock or other ownership
interest in such entity, and/or any transfer, assignment, hypothecation or
encumbrance of any controlling ownership or voting interest in such entity, will
be deemed a Transfer and will be subject to all of the restrictions and
provisions contained in this SECTION 24. Notwithstanding the foregoing, the
immediately preceding sentence will not apply to any transfers of stock of
Tenant if Tenant is a publicly-held corporation and such stock is transferred
publicly over a recognized security exchange or over-the-counter market.
(c) PERMITTED CONTROLLED TRANSFERS. Notwithstanding the
------------------------------
provisions of this SECTION 24 to the contrary, Tenant may assign this Lease or
sublet the Premises or any portion thereof ("Permitted Transfer"), without
Landlord's consent and without extending any sublease termination option to
Landlord, to any parent, subsidiary or affiliate corporation which controls, is
controlled by or is under common control with Tenant, or to any corporation
resulting from a merger or consolidation with Tenant, or to any person or entity
which acquires all the assets of Tenant's business as a going concern, provided
that: (i) at least twenty (20) days prior to such assignment or sublease, Tenant
delivers to Landlord the financial statements and other financial and background
information of the assignee or sublessee described in Subsection 24(d); (ii) if
an assignment, the assignee assumes, in full, the obligations of Tenant under
this Lease (or if a sublease, the sublessee of a portion of the Premises or Term
assumes, in full, the obligations of Tenant with respect to such portion); (iii)
the financial net worth of the assignee or sublessee as of the time of the
proposed assignment or sublease equals or exceeds that of Tenant as of the date
of execution of this Lease; (iv) Tenant remains fully liable under this Lease;
and (v) the use of the Premises under SECTION 8 remains unchanged.
(d) TRANSFER NOTICE. If Tenant desires to effect a Transfer,
---------------
then at least thirty days prior to the date when Tenant desires the Transfer to
be effective (the "Transfer Date"), Tenant agrees to give Landlord a notice (the
"Transfer Notice"), stating the name, address and business of the proposed
assignee, sublessee or other transferee (sometimes referred to hereinafter as
"Transferee"), reasonable information (including references) concerning the
character, ownership, and financial condition of the proposed Transferee, the
Transfer Date, any ownership or commercial relationship between Tenant and the
proposed Transferee, and the consideration and all other material terms and
conditions of the proposed Transfer, all in such detail as Landlord may
reasonably require. If Landlord reasonably requests additional detail, the
Transfer Notice will not be deemed to have been received until Landlord receives
such additional detail, and Landlord may withhold consent to any Transfer until
such information is provided to it.
(e) LANDLORD'S OPTIONS. Within fifteen (15) days of Landlord's
------------------
receipt of any Transfer Notice, and any additional information requested by
Landlord concerning the proposed Transferee's financial responsibility, Landlord
will elect to do one of the following:
(i) consent to the proposed Transfer;
(ii) refuse such consent, which refusal shall be on
reasonable grounds including, without limitation, those set forth in
SUBSECTION 24(f); or
(iii) terminate this Lease as to all or such portion of the
Premises which is proposed to be sublet or assigned and recapture all or
such portion of the Premises for reletting by Landlord.
(f) REASONABLE DISAPPROVAL. Landlord and Tenant hereby
----------------------
acknowledge that Landlord's disapproval of any proposed Transfer pursuant to
SUBSECTION 24(e) will be deemed reasonably withheld if based upon any reasonable
factor, including, without limitation, any or all of the following factors: (i)
if the Building is less than eighty percent (80%) occupied, if the net effective
rent payable by the Transferee (adjusted on a rentable square foot basis) is
less than the net effective rent then being quoted by Landlord for new leases in
the Building for comparable size space for a comparable period of time; (ii) the
proposed Transferee is a governmental entity; (iii) the portion of the Premises
to be sublet or assigned is irregular in shape with inadequate means of ingress
and egress; (iv) the use of the Premises by the Transferee (A) is not permitted
by the use provisions in SECTION 8 hereof, or (B) violates any exclusive use
granted by Landlord to another tenant in the Building; (v) the Transfer would
likely result in a significant and inappropriate increase in the use of the
parking areas or Project Common Areas by the Transferee's employees or visitors,
and/or significantly increase the demand upon utilities and services to be
provided by Landlord to the Premises; (vi) the Transferee does not have the
financial capability to fulfill the obligations imposed by the Transfer and this
Lease; or (vii) the Transferee is not in Landlord's reasonable opinion
consistent with Landlord's desired tenant mix. In the event Landlord withholds
or conditions its consent and Tenant or any proposed Transferee claims that
Landlord has unreasonably withheld or delayed its consent under SUBSECTION 24(f)
or otherwise has breached or acted unreasonably under this SECTION 24, their
sole remedies shall be a declaratory judgment and an injunction for the relief
sought without any monetary damages, and Tenant hereby waives all other remedies
on its own behalf and, to the extent permitted under all applicable
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laws, on behalf of the proposed Transferee. In any such action, each party shall
bear its own attorneys' fees. Tenant shall indemnify, defend and hold harmless
Landlord from any and all liability, losses, claims, damages, costs, expenses,
causes of action and proceedings involving any third party or parties (including
without limitation Tenant's proposed subtenant or assignee) who claim they were
damaged by Landlord's wrongful withholding or conditioning of Landlord's
consent.
(g) ADDITIONAL CONDITIONS. A condition to Landlord's consent to
---------------------
any Transfer of this Lease will be the delivery to Landlord of a true copy of
the fully executed instrument of assignment, sublease, transfer or
hypothecation, and, in the case of an assignment, the delivery to Landlord of an
agreement executed by the Transferee in form and substance reasonably
satisfactory to Landlord, whereby the Transferee assumes and agrees to be bound
by all of the terms and provisions of this Lease and to perform all of the
obligations of Tenant hereunder. As a condition for granting its consent to any
assignment or sublease, Landlord may require that the assignee or sublessee
remit directly to Landlord on a monthly basis, all monies due to Tenant by said
assignee or sublessee. As a condition to Landlord's consent to any sublease,
such sublease must provide that it is subject and subordinate to this Lease and
to all mortgages; that Landlord may enforce the provisions of the sublease,
including collection of rent; that in the event of termination of this Lease for
any reason, including without limitation a voluntary surrender by Tenant, or in
the event of any reentry or repossession of the Premises by Landlord, Landlord
may, at its option, either (i) terminate the sublease, or (ii) take over all of
the right, title and interest of Tenant, as sublessor, under such sublease, in
which case such sublessee will attorn to Landlord, but that nevertheless
Landlord will not (1) be liable for any previous act or omission of Tenant under
such sublease, (2) be subject to any defense or offset previously accrued in
favor of the sublessee against Tenant, or (3) be bound by any previous
modification of any sublease made without Landlord's written consent, or by any
previous prepayment by sublessee of more than one month's rent.
(h) EXCESS RENT. If Landlord consents to any Transfer, Tenant
-----------
agrees to pay to Landlord, as additional rent, fifty percent (50%) of all sums
and other consideration payable to and for the benefit of Tenant by the
Transferee on account of the Transfer, less reasonable brokerage commissions,
attorneys' fees and advertising costs actually expended by Tenant in connection
with the Transfer, as and when such sums and other consideration are due and
payable by the Transferee to or for the benefit of Tenant (or, if Landlord so
requires, and without any release of Tenant's liability for the same, Tenant
agrees to instruct the Transferee to pay such sums and other consideration
directly to Landlord). If for any proposed sublease Tenant receives rent or
other consideration, either initially or over the term of the sublease, in
excess of the rent fairly allocable to the portion of the Premises which is
subleased based on square footage, Tenant agrees to pay to Landlord as
additional rent 50% of the excess of each such payment of rent or other
consideration received by Tenant promptly after its receipt. In calculating
excess rent or other consideration which may be payable to Landlord under this
SUBSECTION 24(h), Tenant shall not be entitled to deduct any amounts expended or
incurred by Tenant in connection with such Transfer other than as specified
above.
(i) TERMINATION RIGHTS. If Tenant requests Landlord's consent
------------------
to any assignment or subletting of all or a portion of the Premises, Landlord
will have the right, as provided in SUBSECTION 24(e), to terminate this Lease as
to all or such portion of the Premises which is proposed to be sublet or
assigned effective as of the date Tenant proposes to sublet or assign all or
less than all of the Premises. Landlord's right to terminate this Lease as to
less than all of the Premises proposed to be sublet or assigned will not
terminate as to any future additional subletting or assignment as a result of
Landlord's consent to a subletting of less than all of the Premises or
Landlord's failure to exercise its termination right with respect to any
subletting or assignment. Landlord will exercise such termination right, if at
all, by giving written notice to Tenant within thirty (30) days of receipt by
Landlord of the financial responsibility information required by this Section
24. Tenant understands and acknowledges that the option, as provided in this
Section 24, to terminate this Lease as to all or such portion of the Premises
which is proposed to be sublet or assigned rather than approve the subletting or
assignment of all or a portion of the Premises, is a material inducement for
Landlord's agreeing to lease the Premises to Tenant upon the terms and
conditions herein set forth. In the event of any such termination with respect
to less than all of the Premises, the cost of segregating the recaptured space
from the balance of the Premises will be paid by Tenant and Tenant's future
monetary obligations under this Lease will be reduced proportionately on a
square footage basis to correspond to the balance of the Premises which Tenant
continues to lease.
(j) NO RELEASE. No Transfer will release Tenant of Tenant's
----------
obligations under this Lease or alter the primary liability of Tenant to pay the
rent and to perform all other obligations to be performed by Tenant hereunder.
Landlord may require that any Transferee remit directly to Landlord on a monthly
basis, all monies due Tenant by said Transferee. However, the acceptance of rent
by Landlord from any other person will not be deemed to be a waiver by Landlord
of any provision hereof. Consent by Landlord to one Transfer will not be deemed
consent to any subsequent Transfer. In the event of default by any Transferee of
Tenant or any successor of Tenant in the performance of any of the terms hereof,
Landlord may proceed directly against Tenant without the necessity of exhausting
remedies against such Transferee or successor. Landlord may consent to
subsequent assignments of this Lease or sublettings or amendments or
modifications to this Lease with assignees of Tenant,
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without notifying Tenant, or any successor of Tenant, and without obtaining its
or their consent thereto and any such actions will not relieve Tenant of
liability under this Lease.
(k) ADMINISTRATIVE AND ATTORNEYS' FEES. If Tenant effects a
----------------------------------
Transfer or requests the consent of Landlord to any Transfer (whether or not
such Transfer is consummated), then, upon demand, Tenant agrees to pay Landlord
a non-refundable administrative fee of Two Hundred Fifty Dollars ($250.00), plus
any reasonable attorneys' and paralegal fees incurred by Landlord in connection
with such Transfer or request for consent (whether attributable to Landlord's
in-house attorneys or paralegals or otherwise). Acceptance of the Two Hundred
Fifty Dollar ($250.00) administrative fee and/or reimbursement of Landlord's
attorneys' and paralegal fees will in no event obligate Landlord to consent to
any proposed Transfer.
25. SUBORDINATION. At the election of Landlord or any mortgagee or
-------------
beneficiary with a deed of trust encumbering the Building or the Project or any
portion thereof, or any lessor of a ground or underlying lease with respect to
the Building or the Project or any portion thereof, this Lease will be subject
and subordinate at all times to: (i) all ground leases or underlying leases
which may now exist or hereafter be executed affecting the Building; and (ii)
the lien of any mortgage or deed of trust or any other hypothecation for
security now or hereafter placed upon the Project, the Building or any portion
thereof, or Landlord's interest and estate in any of same, and to any and all
advances made on the security thereof and to all renewals, modifications,
consolidations, replacements and extensions thereof which may now exist or
hereafter be executed. Notwithstanding the foregoing, if any mortgagee, trustee
or ground lessor shall elect to have this Lease prior to the lien of its
mortgage or deed of trust or to its ground lease, and shall give written notice
thereof to Tenant at any time prior to the transfer of the Premises in
foreclosure or by deed in lieu of foreclosure of such lien or otherwise (or at
any time prior to the termination of the ground lease, as the case may be),
then, notwithstanding any prior subordination, this Lease shall be deemed prior
to such mortgage, deed of trust, or ground lease, whether this Lease is dated
prior or subsequent to the date of said mortgage, deed of trust or ground lease
or the date of recording thereof. Notwithstanding the foregoing provisions of
this Section 25, the transferee of the Premises upon any foreclosure sale or
pursuant to any deed in lieu of foreclosure or other transfer (or the ground
lessor in the event of a termination of a ground lease) shall have the right,
whether or not this Lease has been terminated by or in connection with such
transfer or termination of ground lease (whether voluntarily, involuntarily or
by operation of law), to require Tenant to enter into a new lease of the
Premises (with the transferee or ground lessor as landlord) on terms and
conditions identical to those as set forth in the Lease, except that the term of
the new lease shall expire on the date specified herein for the expiration of
the term of this Lease. The provisions hereof are intended to be self-executing
and do not require the necessity of any additional document being executed by
Tenant for the purpose of effecting same. Tenant nevertheless agrees to execute
and deliver to Landlord, within ten (10) days after request therefor, any
documents reasonably requested by Landlord to effectuate or evidence any
subordination or attornment, to make this Lease prior to the lien of any
mortgage, deed of trust or ground lease or to enter into a new lease, each as
described above in this SECTION 25, and failing to do so: (i) Tenant shall be in
default hereunder with no right to further notice or cure, and (ii) Tenant
hereby irrevocably appoints Landlord as Tenant's attorney-in-fact to execute and
deliver such documents for Tenant, such power, being coupled with an interest
and being irrevocable. Without limitation on any of the foregoing, Tenant hereby
waives its rights under any law which gives or purports to give Tenant any right
to terminate or otherwise adversely affect this Lease and the obligations of
Tenant hereunder in the event of any such foreclosure proceeding, sale or
termination of ground lease.
26. ESTOPPEL CERTIFICATE.
--------------------
(a) TENANT'S OBLIGATIONS. Within ten (10) days following any
--------------------
written request which Landlord may make from time to time, Tenant agrees to
execute and deliver to Landlord a statement, in a form substantially similar to
the form of Exhibit "G" attached hereto or as may reasonably be required by
-----------
Landlord's lender, certifying: (i) the Commencement Date of this Lease; (ii) the
fact that this Lease is unmodified and in full force and effect (or, if there
have been modifications, that this Lease is in full force and effect, and
stating the date and nature of such modifications); (iii) the date to which the
rent and other sums payable under this Lease have been paid; (iv) that there are
no current defaults under this Lease by either Landlord or Tenant except as
specified in Tenant's statement; and (v) such other matters reasonably requested
by Landlord. Landlord and Tenant intend that any statement delivered pursuant to
this SECTION 26 may be relied upon by any mortgagee, beneficiary, purchaser or
prospective purchaser of the Building or any interest therein.
(b) TENANT'S FAILURE TO DELIVER. Tenant's failure to deliver
---------------------------
such statement within such time will be conclusive upon Tenant (i) that this
Lease is in full force and effect, without modification except as may be
represented by Landlord, (ii) that there are no uncured defaults in Landlord's
performance, and (iii) that not more than one (1) month's rent has been paid in
advance. Without limiting the foregoing, if Tenant fails to deliver any such
statement within such ten (10) day period, Landlord may deliver to Tenant an
additional request for such statement and Tenant's failure to deliver such
statement to Landlord within ten (10) days after delivery of such additional
request will constitute a default under this Lease. Tenant agrees to indemnify
and protect
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Landlord from and against any and all claims, damages, losses, liabilities and
expenses (including attorneys' fees and costs) attributable to any failure by
Tenant to timely deliver any such estoppel certificate to Landlord as required
by this SECTION 26.
27. BUILDING PLANNING. [Intentionally Omitted.].
-----------------
28. RULES AND REGULATIONS. Tenant agrees to faithfully observe and
---------------------
comply with the "Rules and Regulations," a copy of which is attached hereto and
marked Exhibit "H", and all reasonable and nondiscriminatory modifications
-----------
thereof and additions thereto from time to time put into effect by Landlord.
Landlord will not be responsible to Tenant for the violation or non-performance
by any other tenant or occupant of the Building of any of the Rules and
Regulations.
29. MODIFICATION AND CURE RIGHTS OF LANDLORD'S MORTGAGEES AND
---------------------------------------------------------
LESSORS.
-------
(a) MODIFICATIONS. If, in connection with Landlord's obtaining
-------------
or entering into any financing or ground lease for any portion of the Building
or the Project, the lender or ground lessor requests modifications to this
Lease, Tenant, within ten (10) days after request therefor, agrees to execute an
amendment to this Lease incorporating such modifications, provided such
modifications are reasonable and do not increase the obligations of Tenant under
this Lease or adversely affect the leasehold estate created by this Lease.
(b) CURE RIGHTS. In the event of any default on the part of
-----------
Landlord, Tenant will give notice by registered or certified mail to any
beneficiary of a deed of trust or mortgage covering the Premises or ground
lessor of Landlord whose address has been furnished to Tenant, and Tenant agrees
to offer such beneficiary, mortgagee or ground lessor a reasonable opportunity
to cure the default (including with respect to any such beneficiary or
mortgagee, time to obtain possession of the Premises, subject to this Lease and
Tenant's rights hereunder, by power of sale or a judicial foreclosure, if such
should prove necessary to effect a cure).
30. DEFINITION OF LANDLORD. The term "Landlord," as used in this
----------------------
Lease, so far as covenants or obligations on the part of Landlord are concerned,
means and includes only the owner or owners, at the time in question, of the fee
title of the Premises or the lessee(s) under any ground lease, if any. In the
event of any transfer, assignment or other conveyance or transfers of any such
title (other than a transfer for security purposes only, but including any
transfer to a purchaser at a foreclosure sale or by deed in lieu of foreclosure,
subject to the provisions of SECTION 25), Landlord herein named (and in case of
any subsequent transfers or conveyances, the then grantor) shall be and is
automatically relieved from and after the date of such transfer, assignment or
conveyance of all liability as respects the performance of any covenants or
obligations on the part of Landlord contained in this Lease thereafter to be
performed, and the transferee shall be deemed, without any further agreement
between the parties or their successors in interest or between the parties and
any such transferee, to have assumed and agreed to carry out any and all the
covenants and obligations of the Landlord arising under this Lease after the
date of such transfer. Subject to the provisions of SECTION 25 hereof, Tenant
agrees to attorn to and recognize such transferee and shall be deemed to have
attorned to and recognized such transferee without any further agreement between
the parties or their successors in interest or between the parties and any such
transferee, unless this Lease is terminated pursuant to specific provisions
relating thereto or contained herein. Landlord and Landlord's transferees and
assignees have the absolute right to transfer all or any portion of their
respective title and interest in the Project, the Building, the Premises and/or
this Lease without the consent of Tenant, and such transfer or subsequent
transfer will not be deemed a violation on Landlord's part of any of the terms
and conditions of this Lease. If any Security Deposit has been made by Tenant,
Landlord may transfer such Security Deposit to the transferee and thereupon
Landlord shall be discharged from any further liability in reference thereto.
31. WAIVER. The waiver by either party of any breach of any term,
------
covenant or condition herein contained will not be deemed to be a waiver of any
subsequent breach of the same or any other term, covenant or condition herein
contained, nor will any custom or practice which may develop between the parties
in the administration of the terms hereof be deemed a waiver of or in any way
affect the right of either party to insist upon performance in strict accordance
with said terms. The subsequent acceptance of rent or any other payment
hereunder by Landlord will not be deemed to be a waiver of any preceding breach
by Tenant of any term, covenant or condition of this Lease, other than the
failure of Tenant to pay the particular rent so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
rent. No acceptance by Landlord of a lesser sum than the basic rent and
additional rent or other sum then due will be deemed to be other than on account
of the earliest installment of such rent or other amount due, nor will any
endorsement or statement on any check or any letter accompanying any check be
deemed an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such installment
or other amount or pursue any other remedy provided in this Lease. The consent
or
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approval of Landlord to or of any act by Tenant requiring Landlord's consent
or approval will not be deemed to waive or render unnecessary Landlord's consent
or approval to or of any subsequent similar acts by Tenant.
32. PARKING.
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(a) GRANT OF PARKING RIGHTS. So long as this Lease is in effect
-----------------------
and provided Tenant is not in default hereunder, Landlord grants to Tenant and
Tenant's Authorized Users (as defined below) a license to use the number and
type of parking spaces designated in SUBSECTION 1(s) subject to the terms and
conditions of this SECTION 32 and the Rules and Regulations regarding parking
contained in Exhibit "H" attached hereto. As consideration for the use of such
-----------
parking spaces, Tenant agrees to pay to Landlord or, at Landlord's election,
directly to Landlord's parking operator, as additional rent under this Lease,
the parking rate set forth in SUBSECTION 1(t) or, if no rate is specified in
SUBSECTION 1(t) or the rate therein ceases to be applicable, then at the
prevailing parking rate for each such parking space as established by Landlord
in its discretion from time to time; provided, however, the parties agree that
the parking spaces designated in SUBSECTION l(s) shall be provided free of
charge for the initial Term. Tenant agrees that all parking charges will be
payable on a monthly basis concurrently with each monthly payment of Monthly
Base Rent. Tenant agrees to submit to Landlord or, at Landlord's election,
directly to Landlord's parking operator with a copy to Landlord, written notice
in a form reasonably specified by Landlord containing the names, home and office
addresses and telephone numbers of those persons who are authorized by Tenant to
use Tenant's parking spaces on a monthly basis ("Tenant's Authorized Users") and
shall use its best efforts to identify each vehicle of Tenant's Authorized Users
by make, model and license number. Tenant agrees to deliver such notice prior to
the beginning of the Term of this Lease and to periodically update such notice
as well as upon specific request by Landlord or Landlord's parking operator to
reflect changes to Tenant's Authorized Users or their vehicles.
(b) VISITOR PARKING. So long as this Lease is in effect,
---------------
Tenant's visitors and guests will be entitled to use those specific parking
areas which are designated for short term visitor parking and which are located
within the surface parking area(s), if any, and/or within the parking
structure(s) which serve the Building. Visitor parking will be made available at
a charge to Tenant's visitors and guests, with the rate being established by
Landlord in its discretion from time to time. Tenant, at its sole cost and
expense, may elect to validate such parking for its visitors and guests. All
such visitor parking will be on a non-exclusive, in common basis with all other
visitors and guests of the Project.
(c) USE OF PARKING SPACES. Tenant will not use or allow any of
---------------------
Tenant's Authorized Users to use any parking spaces which have been specifically
assigned by Landlord to other tenants or occupants or for other uses such as
visitor parking or which have been designated by any governmental entity as
being restricted to certain uses. Tenant will not be entitled to increase or
reduce its parking privileges applicable to the Premises during the Term of the
Lease except as follows: If at any time Tenant desires to increase or reduce the
number of parking spaces allocated to it under the terms of this Lease, Tenant
must notify Landlord in writing of such desire and Landlord will have the right,
in its sole and absolute discretion, to either (a) approve such requested
increase in the number of parking spaces allocated to Tenant (with an
appropriate increase to the additional rent payable by Tenant for such
additional spaces based on the then prevailing parking rates), (b) approve such
requested decrease in the number of parking spaces allocated to Tenant (with an
appropriate reduction in the additional rent payable by Tenant for such
eliminated parking spaces based on the then prevailing parking rates), or (c)
disapprove such requested increase or decrease in the number of parking spaces
allocated to Tenant. Promptly following receipt of Tenant's written request,
Landlord will provide Tenant with written notice of its decision including a
statement of any adjustments to the additional rent payable by Tenant for
parking under the Lease, if applicable. No parking stalls will be allocated to
Tenant with respect to any space leased by Tenant under the Lease which consists
of less than the full incremental amounts of rentable square footage, if any,
required for parking stalls.
(d) GENERAL PROVISIONS. Except as otherwise set forth herein,
------------------
Landlord reserves the right to set and increase monthly fees and/or daily and
hourly rates for parking privileges from time to time during the Term of the
Lease. Landlord may assign any unreserved and unassigned parking spaces and/or
make all or any portion of such spaces reserved, if Landlord reasonably
determines that it is necessary for orderly and efficient parking or for any
other reasonable reason. Failure to pay the rent for any particular parking
spaces or failure to comply with any terms and conditions of this Lease
applicable to parking may be treated by Landlord as a default under this Lease
and, in addition to all other remedies available to Landlord under the Lease, at
law or in equity, Landlord may elect to recapture such parking spaces for the
balance of the Term of this Lease if Tenant does not cure such failure within
the applicable cure period set forth in Section 22 of this Lease. In such event,
Tenant and Tenant's Authorized Users will be deemed visitors for purposes of
parking space use and will be entitled to use only those parking areas
specifically designated for visitor parking subject to all provisions of this
Lease applicable to such visitor parking use. Tenant's parking rights and
privileges described herein are personal to Tenant and may not be assigned or
transferred, or otherwise conveyed, without Landlord's prior written consent,
which consent Landlord may withhold in its sole and absolute discretion. In any
event, under no circumstances
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<PAGE>
may Tenant's parking rights and privileges be transferred, assigned or otherwise
conveyed separate and apart from Tenant's interest in this Lease.
(e) COOPERATION WITH TRAFFIC MITIGATION MEASURES. Tenant agrees
--------------------------------------------
to use its reasonable, good faith efforts to cooperate in traffic mitigation
programs which may be undertaken by Landlord independently, or in cooperation
with local municipalities or governmental agencies or other property owners in
the vicinity of the Building. Such programs may include, but will not be limited
to, carpools, vanpools and other ridesharing programs, public and private
transit, flexible work hours, preferential assigned parking programs and
programs to coordinate tenants within the Project with existing or proposed
traffic mitigation programs.
(f) PARKING RULES AND REGULATIONS. Tenant and Tenant's
-----------------------------
Authorized Users shall comply with all rules and regulations regarding parking
set forth in Exhibit "H" attached hereto and Tenant agrees to cause its
-----------
employees, subtenants, assignees, contractors, suppliers, customers and invitees
to comply with such rules and regulations. Landlord reserves the right from time
to time to modify and/or adopt such other reasonable and non-discriminatory
rules and regulations for the parking facilities as it deems reasonably
necessary for the operation of the parking facilities.
33. FORCE MAJEURE. If either Landlord or Tenant is delayed, hindered
-------------
in or prevented from the performance of any act required under this Lease by
reason of strikes, lock-outs, labor troubles, inability to procure standard
materials, failure of power, restrictive governmental laws, regulations or
orders or governmental action or inaction (including failure, refusal or delay
in issuing permits, approvals and/or authorizations which is not the result of
the action or inaction of the party claiming such delay), riots, insurrection,
war, fire, earthquake, flood or other natural disaster, unusual and
unforeseeable delay which results from an interruption of any public utilities
(e.g., electricity, gas, water, telephone) or other unusual and unforeseeable
delay not within the reasonable control of the party delayed in performing work
or doing acts required under the provisions of this Lease, then performance of
such act will be excused for the period of the delay and the period for the
performance of any such act will be extended for a period equivalent to the
period of such delay. The provisions of this SECTION 33 will not operate to
excuse Tenant from prompt payment of rent or any other payments required under
the provisions of this Lease; provided, however, that the foregoing shall not
affect Tenant's rights to rental abatement following a casualty as provided in
SUBSECTION 20(f).
34. SIGNS. Landlord will designate the location on the Premises, if
-----
any, for one or more Tenant identification sign(s). Tenant agrees to have
Landlord install and maintain Tenant's identification sign(s) in such designated
location in accordance with this SECTION 34 at Tenant's sole cost and expense.
Tenant has no right to install Tenant identification signs in any other location
in, on or about the Premises or the Project and will not display or erect any
other signs, displays or other advertising materials that are visible from the
exterior of the Building or from within the Building in any interior or exterior
common areas. The size, design, color and other physical aspects of any and all
permitted sign(s) will be subject to (i) Landlord's written approval prior to
installation, which approval may be withheld in Landlord's discretion, (ii) any
covenants, conditions or restrictions governing the Premises, and (iii) any
applicable municipal or governmental permits and approvals. Tenant will be
responsible for all costs for installation, maintenance, repair and removal of
any Tenant identification sign(s). If Tenant fails to remove Tenant's sign(s)
upon termination of this Lease and repair any damage caused by such removal,
Landlord may do so at Tenant's expense. Tenant agrees to reimburse Landlord for
all costs incurred by Landlord to effect any installation, maintenance or
removal on Tenant's account, which amount will be deemed additional rent, and
may include, without limitation, all sums disbursed, incurred or deposited by
Landlord including Landlord's costs, expenses and actual attorneys' fees with
interest thereon at the Interest Rate from the date of Landlord's demand until
paid by Tenant. Any sign rights granted to Tenant under this Lease are personal
to Tenant and may not be assigned, transferred or otherwise conveyed to any
assignee or subtenant of Tenant without Landlord's prior written consent, which
consent Landlord may withhold in its sole and absolute discretion.
35. LIMITATION ON LIABILITY. In consideration of the benefits
-----------------------
accruing hereunder, Tenant on behalf of itself and all successors and assigns of
Tenant covenants and agrees that, in the event of any actual or alleged failure,
breach or default hereunder by Landlord:
(a) Tenant's recourse against Landlord for monetary damages
will be limited to the lesser of (i) Landlord's interest in the Building
including, subject to the prior rights of any Mortgagee, Landlord's interest in
the rents of the Building, or (ii) the equity interest Landlord would have in
and to the Building if the Building were encumbered by debt in an amount equal
to eighty percent (80%) of the value of the Building, and any insurance proceeds
payable to Landlord;
(b) Except as may be necessary to secure jurisdiction of the
partnership, no partner of Landlord shall be sued or named as a party in any
suit or action and no service of process shall be made against any partner of
Landlord;
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<PAGE>
(c) No partner of Landlord shall be required to answer or
otherwise plead to any service of process;
(d) No judgment will be taken against any partner of Landlord
and any judgment taken against any partner of Landlord may be vacated and set
aside at any time after the fact;
(e) No writ of execution will be levied against the assets of
any partner of Landlord;
(f) The obligations under this Lease do not constitute personal
obligations of the individual partners, directors, officers or shareholders of
Landlord, and Tenant shall not seek recourse against the individual partners,
directors, officers or shareholders of Landlord or any of their personal assets
for satisfaction of any liability in respect to this Lease;
(g) These covenants and agreements are enforceable both by
Landlord and also by any partner of Landlord.
36. FINANCIAL STATEMENTS. Prior to the execution of this Lease by
--------------------
Landlord and at any time during the Term of this Lease upon ten (10) days prior
written notice from Landlord, Tenant agrees to provide Landlord with a current
financial statement for Tenant and any guarantors of Tenant and financial
statements for the two (2) years prior to the current financial statement year
for Tenant and any guarantors of Tenant. Such statements are to be prepared in
accordance with generally accepted accounting principles and certified by the
chief financial officer of Tenant and, if such is the normal practice of Tenant,
audited by an independent certified public accountant.
37. QUIET ENJOYMENT. Landlord covenants and agrees with Tenant that
---------------
upon Tenant paying the rent required under this Lease and paying all other
charges and performing all of the covenants and provisions on Tenant's part to
be observed and performed under this Lease, Tenant may peaceably and quietly
have, hold and enjoy the Premises in accordance with this Lease.
38. MISCELLANEOUS.
-------------
(a) CONFLICT OF LAWS. This Lease shall be governed by and
----------------
construed pursuant to the laws of the State of California.
(b) SUCCESSORS AND ASSIGNS. Except as otherwise provided in
----------------------
this Lease, all of the covenants, conditions and provisions of this Lease shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and assigns.
(c) PROFESSIONAL FEES AND COSTS. If either Landlord or Tenant
---------------------------
should bring suit against the other with respect to this Lease, then all costs
and expenses, including without limitation, actual professional fees and costs
such as appraisers', accountants' and attorneys' fees and costs, incurred by the
prevailing party therein shall be paid by the other party, which obligation on
the part of the other party shall be deemed to have accrued on the date of the
commencement of such action and shall be enforceable whether or not the action
is prosecuted to judgment.
(d) TERMS AND HEADINGS. The words "Landlord" and "Tenant" as
------------------
used herein shall include the plural as well as the singular. Words used in any
gender include other genders. The section and subsection headings of this Lease
are not a part of this Lease and shall have no effect upon the construction or
interpretation of any part hereof.
(e) TIME. Time is of the essence with respect to the
----
performance of every provision of this Lease in which time of performance is a
factor.
(f) PRIOR AGREEMENTS; AMENDMENTS. This Lease constitutes and is
----------------------------
intended by the parties to be a final, complete and exclusive statement of their
entire agreement with respect to the subject matter of this Lease. This Lease
supersedes any and all prior and contemporaneous agreements and understandings
of any kind relating to the subject matter of this Lease. There are no other
- -----------
agreements, understandings, representations, warranties, or statements, either
oral or in written form, concerning the subject matter of this Lease. No
alteration, modification, amendment or interpretation of this Lease shall be
binding on the parties unless contained in a writing which is signed by both
parties.
(g) SEPARABILITY. Any provision of this Lease which shall prove
------------
to be invalid, void or illegal in no way affects, impairs or invalidates any
other provision hereof, and such other provisions shall remain in full force and
effect.
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<PAGE>
(h) RECORDING. Neither Landlord nor Tenant shall record this
---------
Lease nor a short form memorandum thereof without the consent of the other.
(i) COUNTERPARTS. This Lease may be executed in one or more
------------
counterparts, each of which shall constitute an original and all of which shall
be one and the same agreement.
(j) NONDISCLOSURE OF LEASE TERMS. Tenant acknowledges and
----------------------------
agrees that the terms of this Lease are confidential and constitute proprietary
information of Landlord. Disclosure of the terms could adversely affect the
ability of Landlord to negotiate other leases and impair Landlord's relationship
with other tenants. Accordingly, Tenant agrees that it, and its partners,
officers, directors, employees and attorneys, shall not intentionally and
voluntarily disclose the terms and conditions of this Lease to any newspaper or
other publication or any other tenant or apparent prospective tenant of the
Building or other portion of the Project, or real estate agent, either directly
or indirectly, without the prior written consent of Landlord, provided, however,
that Tenant may disclose the terms to prospective subtenants or assignees under
this Lease.
(k) USE OF PROJECT OR BUILDING NAME. Tenant may use the Project
-------------------------------
or Building name in Tenant's advertising in connection with Tenant's business at
the Premises and for no other purpose, except with Landlord's prior written
consent. Tenant shall not have or acquire any property right or interest in the
Project name or Building name. Landlord reserves the right to change the name,
title, or address of the Project, Building or Premises at any time, and Tenant
waives all claims for damages arising from or in connection with any such
change; provided, however, that Landlord shall notify Tenant of the name change
as soon as reasonably practicable following its implementation.
(l) NO LIGHT AND AIR EASEMENT. Any diminution or shutting off
-------------------------
of light or air by any structure which may be erected at the Project or on lands
adjacent to the Building shall in no way affect this Lease, abate rent or
otherwise impose any liability on Landlord. Neither does this Lease confer any
right with regard to the subsurface of the land on which the Project or Building
is situated.
39. RESOLUTION OF DISPUTES. Landlord and Tenant have agreed on the
----------------------
following mechanisms in order to obtain prompt and expeditious resolution of all
controversies, claims or disputes arising out of or in connection with the
performance or non-performance of any terms of the Lease and on the equitable
and fair allocation as to Landlord's and Tenant's obligations hereunder;
provided, however, that nothing contained herein shall prevent Landlord from
seeking and/or obtaining summary relief under applicable unlawful detainer
statutes.
(a) REFERENCE OF DISPUTE. Any dispute seeking damages,
--------------------
interpretation of this Lease and any dispute seeking equitable relief, such as
but not limited to specific enforcement of any provision hereof, shall be heard
and determined by a referee pursuant to California Code of Civil Procedure
Section 638, subdivision 1. The venue of any proceeding hereunder shall be in
the County, unless changed by order of the referee.
(i) PROCEDURE FOR APPOINTMENT. The party seeking to
-------------------------
resolve the dispute shall file in court and serve on the other party a
complaint describing the matters in dispute. Service of the complaint
shall be as prescribed by California law. At any time after service of
the complaint, any party may request the designation of a referee to try
the dispute. Thereafter the Landlord and Tenant shall use their best
efforts to agree upon the selection of a referee from among the
available referees at Judicial Arbitration and Mediation Service
("JAMS"). If Landlord and Tenant are unable to agree upon a referee
within ten days after a written request to do so by any party, then
either may petition the judge of the Superior Court to whom the case is
then assigned to appoint a referee from JAMS. For the guidance of the
judge making the appointment of said referee, Landlord and Tenant agree
that the person so appointed shall be a retired judge from JAMS
experienced in the subject matter of the dispute.
(ii) STANDARDS FOR DECISION. To the extent consistent with
----------------------
the terms of this Agreement, the provisions of California Code of Civil
Procedure, Sections 642, 643, 644 and 645 shall be applicable to dispute
resolution by a referee hereunder. In an effort to clarify and amplify
the provisions of California Code of Civil Procedure, Sections 644 and
645, Landlord and Tenant agree that the referee shall decide issues of
fact and law submitted by Landlord and Tenant for decision in the same
manner as required for a trial by court as set forth in California Code
of Civil Procedure, Sections 631.8 and 632, and California Rules of
Court, Rule 232. The referee shall try and decide the dispute according
to all of the substantive and procedural law of the State of California,
unless Landlord and Tenant stipulate to the contrary. When the referee
has decided the dispute, the referee shall also cause the preparation of
a judgment based on said decision. The judgment to be entered by the
Superior Court will be based upon the decision of the referee. Landlord
and Tenant agree that the referee's decision shall be appealable in the
same manner as if the judge signing the judgment had tried the case.
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(b) COOPERATION. Landlord and Tenant shall diligently cooperate
-----------
with one another and the person appointed to resolve the dispute, and shall
perform such acts as may be necessary to obtain a prompt and expeditious
resolution of the dispute. If either party refuses to diligently cooperate, the
other party, after first giving notice of its intent to rely on the provisions
of this Section 39, incurs additional expenses or attorneys' fees solely as a
result of such failure to diligently cooperate, the referee may award such
additional expenses and attorneys' fees to the party giving such notice, even if
such party is not the prevailing party in the dispute.
(c) ALLOCATION OF COSTS. The cost of the proceeding shall
-------------------
initially be borne equally by Landlord and Tenant, but, subject to Subsection
39(b), the Prevailing Party in such proceeding shall be entitled to recover, in
addition to reasonable attorneys' fees and all other costs, its contribution for
the reasonable cost of the referee as an item of recoverable costs. The referee
shall include such costs in his judgment or award.
40. EXECUTION OF LEASE.
------------------
(a) JOINT AND SEVERAL OBLIGATIONS. If more than one person
-----------------------------
executes this Lease as Tenant, their execution of this Lease will constitute
their covenant and agreement that (i) each of them is jointly and severally
liable for the keeping, observing and performing of all of the terms, covenants,
conditions, provisions and agreements of this Lease to be kept, observed and
performed by Tenant, and (ii) the term "Tenant" as used in this Lease means and
includes each of them jointly and severally. The act of or notice from, or
notice or refund to, or the signature of any one or more of them, with respect
to the tenancy of this Lease, including, but not limited to, any renewal,
extension, expiration, termination or modification of this Lease, will be
binding upon each and all of the persons executing this Lease as Tenant with the
same force and effect as if each and all of them had so acted or so given or
received such notice or refund or so signed.
(b) TENANT AS CORPORATION OR PARTNERSHIP. If Tenant executes
------------------------------------
this Lease as a corporation or partnership, then Tenant and the persons
executing this Lease on behalf of Tenant represent and warrant that such entity
is duly qualified and in good standing to do business in California and that the
individuals executing this Lease on Tenant's behalf are duly authorized to
execute and deliver this Lease on its behalf, and in the case of a corporation,
in accordance with a duly adopted resolution of the board of directors of
Tenant, a copy of which is to be delivered to Landlord on execution hereof, if
requested by Landlord, and in accordance with the by-laws of Tenant, and, in the
case of a partnership, in accordance with the partnership agreement and the most
current amendments thereto, if any, copies of which are to be delivered to
Landlord on execution hereof, if requested by Landlord, and that this Lease is
binding upon Tenant in accordance with its terms.
(c) EXAMINATION OF LEASE. Submission of this instrument by
--------------------
Landlord to Tenant for examination or signature by Tenant does not constitute a
reservation of or option for lease, and it is not effective as a lease or
otherwise until execution by and delivery to both Landlord and Tenant.
IN WITNESS WHEREOF, the parties have caused this Lease to be
duly executed by their duly authorized representatives as of the date first
above written.
LANDLORD:
McDONNELL DOUGLAS REALTY COMPANY, a
California corporation
By: /S/ THOMAS A. OVERTURF
-----------------------------------------
Name: Thomas A. Overturf
Title: V.P. Development
TENANT:
AUTO-BY-TEL CORPORATION, a Delaware corporation
By: /S/ PETER R. ELLIS
-----------------------------------------
Name: Peter R. Ellis
Title: President
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EXHIBIT "C"
WORK LETTER AGREEMENT
---------------------
This Exhibit C is attached to and made a part of that certain Second
Amendment to Lease amending that certain Douglas Plaza Lease (as amended, the
"Lease") between MCDONNELL DOUGLAS REALTY COMPANY, a California corporation
("Landlord") and AUTO-BY-TEL CORPORATION, a Delaware corporation ("Tenant"),
covering certain premises (the "Premises") more particularly described in
Exhibit "B" to the Lease. Capitalized terms used and not otherwise defined
herein shall have the meanings given in the Second Amendment.
1. TENANT IMPROVEMENTS
Reference herein to "Tenant Improvements" shall include all work to be
done in the Premises pursuant to the Tenant Improvement Plans described in
Paragraph 2 below, including, but not limited to, partitioning, doors, ceilings,
floor coverings, wall finishes (including paint and wallcovering), electrical
(including lighting, switching, telephones, outlets, cabling, life safety
systems, etc.), plumbing, heating, ventilating and air conditioning, fire
protection, cabinets and other millwork.
2. TENANT IMPROVEMENT PLANS
Landlord's architect, after meeting with Tenant, shall prepare
preliminary plans for the construction of Tenant Improvements at the Premises,
which shall include, without limitation, sketches and/or drawings showing
locations of doors, partitioning and other requirements (the "Preliminary
Plans") and has submitted same to Landlord for Landlord's approval. Following
Landlord's approval, Landlord's architect shall prepare working drawings (the
"Tenant Improvement Plans") based on the Preliminary Plans. Within a reasonable
period after Landlord's and Tenant's approval of the Tenant Improvement Plans
(Tenants approval shall be given within three (3) days after Landlord provides
Tenant with a copy of same) and selection of the general contractor, Landlord
will furnish to Tenant a work cost based upon the Tenant Improvement Plans
("Cost Quotation") and an estimated Tenant Improvement construction schedule
(the "Work Schedule") prepared by the general contractor selected for the Tenant
Improvement Work as described below. The Cost Quotation shall include
construction costs and, without limitation, costs of design, architectural and
engineering fees, permitting and other governmental agency fees, Landlord's
general contractors overhead and supervision fees, general conditions costs and
Landlord's agent's administration fees (Landlord, through its agent, will
provide construction management and will charge an administration fee of four
percent (4%)). Selection of the general contractor shall proceed as follows:
Within a reasonable time after approval of the Tenant Improvement Plans,
Landlord shall submit a bid package based on the Tenant Improvement Plans to
Ticon Construction and to another qualified, licensed and bonded general
contractor selected by Landlord. After receiving and reviewing both bids,
Landlord shall select one of such contractors to construct the Tenant
Improvements. If the Cost Quotation prepared by such contractor is not greater
than the Tenant Allowance (as hereinafter defined), the Cost Quotation shall be
deemed approved and Landlord shall authorize construction to commence subject to
Paragraph 3 below.
If the Cost Quotation is greater than the Tenant Allowance, Landlord
shall notify Tenant and Tenant shall have five (5) business days in which to
give notice to Landlord of Tenant's acceptance or rejection of the Cost
Quotation. If Tenant rejects the Cost Quotation, Tenant shall meet with
Landlord, its space planner and the selected contractor within five (5) business
days to make revisions to the Tenant Improvement Plans in an effort to reduce
costs. All costs of Tenant initiated changes requiring such revisions including
charges for attending the meeting shall be included in the cost of the Tenant
Improvements. Following such revisions, Landlord shall submit to Tenant, as soon
as reasonably practicable, a new Cost Quotation, and the same procedure will be
followed as set forth above until the Cost Quotation is not greater than the
Tenant Allowance or Tenant has approved the Cost Quotation. Immediately
thereafter, Tenant shall forthwith deposit with Landlord an amount equal to
fifty percent (50%) of the difference, if any, between the Tenant Allowance and
the approved Cost Quotation (with the remaining 50% payable as set forth below).
Landlord shall not authorize construction to commence until Landlord has
received the initial payment described above. Any time consumed in revising the
Tenant Improvement Plans or revising the Cost Quotation in excess of five (5)
business days shall be considered a Tenant Delay and shall not delay the
Commencement Date of the Lease.
3. FINAL PRICING
After the Cost Quotation has been approved, the Tenant Improvement Plans
shall be submitted to the appropriate governmental body by Landlord's architect
for plan checking and the issuance of a building permit, if necessary. Landlord,
with Tenant's cooperation, shall cause to be made any changes in the plans and
specifications necessary to obtain all necessary building permits. Concurrently
therewith, Landlord shall have prepared a final pricing (which shall be subject
to Tenant's reasonable approval if greater than the Tenant
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Allowance and materially greater than the approved Cost Quotation) in accordance
with the Work Schedule, taking into account any modifications which may be
required to reflect changes in the plans and specifications required by
governmental agencies. All Tenant Improvements to be constructed or installed in
the Premises shall be performed by Landlord's designated general contractor in
accordance with the Tenant Improvement Plans. No work shall commence until all
required building permits, if any, have been obtained. Landlord shall have no
obligation to Tenant for defects in design, workmanship or materials, but shall
use its reasonable efforts to enforce the contractor's obligations therefor. Any
changes to the construction work may be made only upon written request by Tenant
approved in writing by Landlord, or as may be required by any governmental
agency, or as may be required due to structural or unanticipated field
conditions, in each instance evidenced by a written change order describing the
change.
In the event Tenant desires any work in addition to the Tenant
Improvements in accordance with the Tenant Improvement Plans to be performed in
the Premises (the "Additional Tenant Work"), Tenant, at Tenant's expense, shall
cause plans and specifications for such work to be prepared, at Tenant's cost,
by arranging therefor with Landlord's architect and paying for time and monies
extended by Landlord's construction manager to review and approve such
Additional Tenant Work. All plans and specifications for Additional Tenant Work
shall be subject to review and approval by Landlord to verify, among other
things, that the work is compatible with all other construction and all
electrical and mechanical systems within the Building. Upon such written
request, and approval of same by Landlord, Landlord shall submit to Tenant, for
approval, a field order describing the change, cost proposal and Work Schedule
adjustment. Tenant shall approve the change order, in writing, within five (5)
business days following receipt thereof, and together with said approval shall
pay Landlord the cost of such agreed upon change. Landlord may refuse to make
any changes until Tenant so approves in writing the description thereof, the
cost proposal and the Work Schedule adjustment, and until Tenant makes such
payment. In the event Tenant fails to approve same within the five (5) business
day period, then Landlord may elect (i) to agree to the foregoing on Tenant's
behalf, Tenant to promptly pay the required amounts to Landlord; (ii) to
withdraw the change request on Tenant's behalf; or (iii) to proceed with the
Tenant Improvements, delaying any portion as reasonably necessary to accommodate
the change request. Any time consumed for changes to the Tenant Improvements, or
delays pursuant to clause (iii) above, shall be considered a Tenant Delay and
shall not delay the Commencement Date of the Lease. Tenant shall be responsible
for and shall immediately pay Landlord for the cost of any change orders,
including any and all change orders required to comply with any governmental
and/or code requirements affecting the Premises, and no deviation shall be
permitted from Landlord's standards for the Building with respect thereto,
provided the same must not require additional Building services, delay the Work
Schedule, or be of a nature of quality inconsistent with Landlord's overall plan
or objective for the Building. All supervision of construction and
subcontractors shall be performed by the general contractor. Tenant shall not
engage its own contractor or subcontractor to perform any Tenant Improvement
construction.
4. CONSTRUCTION OF TENANT IMPROVEMENTS
After the final pricing has been approved and all necessary building
permits, if any, for the Tenant Improvements have been issued, Landlord shall
enter into a construction contract with the selected contractor for the
installation of the Tenant Improvements in accordance with the Tenant
Improvement Plans. Landlord shall use its reasonable efforts to secure
substantial completion of the work in accordance with the Work Schedule. The
cost of such work shall be paid as provided in Paragraph 5 hereof. Landlord
shall not be liable for any direct or indirect damages as a result of delays in
construction, including, but not limited to, acts of God, inability to secure
governmental approvals or permits, governmental restrictions, strikes,
availability of materials or labor or delays by Tenant or its architect or
anyone performing services on behalf of Tenant.
5. PAYMENT OF COST OF THE TENANT IMPROVEMENTS
a. Landlord hereby grants to Tenant a "Tenant Allowance" of up to
Twenty Dollars ($20.00) per square foot of usable area leased by Tenant
exclusive of the square footage attributable to the common area bathrooms on the
floor on which the Premises are located, for a total Tenant Allowance of up to
$235,340.00. Such Tenant Allowance shall be used only for:
1. Payment of Landlord's design, engineering or plan check costs,
including, without limitation, the architectural costs incurred by Landlord in
connection with Landlord's architect's preparation of the Tenant Improvement
Plans. Subject to the foregoing, the Tenant Allowance will not be used for the
payment of any of Tenant's consultants, designers or architects.
2. The payment of plan check, permit and license fees, if any,
relating to construction of the Tenant Improvements.
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<PAGE>
3. Construction of the Tenant Improvements, including, without
limitation, the following:
(a) Demolition of existing improvements and installation within
the Premises of all partitioning, doors, floor coverings, ceilings, wall
coverings and painting, millwork and similar items.
(b) All electrical wiring (to include computer cabling), lighting
fixtures, outlets and switches, and other electrical work to be installed within
the Premises.
(c) The furnishing and installation of all duct work, terminal
boxes, diffusers and accessories required for the completion of the heating,
ventilation and air conditioning systems within the Premises, including the cost
of meters and key controls, if any.
(d) Any additional Tenant requirements including, but not limited
to, odor control, special heating, ventilation and air conditioning, noise or
vibration control or other special systems.
(e) All fire and life safety control systems such a fire walls,
sprinklers, halon, fire alarms, including piping, wiring and accessories
installed within the Premises.
(f) All plumbing, fixtures, pipes and accessories to be installed
within the Premises.
(g) Testing and inspection costs.
(h) Contractor's fees, including but not limited to any fees based
on general conditions.
(i) Landlord's agent's administration fee.
b. The cost of each item shall be charged against the Tenant
Allowance. In the event that the cost of installing the Tenant Improvements, as
established by Landlord's final pricing schedule, shall exceed the Tenant
Allowance, or if any of the Tenant Improvements are not to be paid out of the
Tenant Allowance as provided above, fifty percent (50%) of the excess shall be
paid by Tenant to Landlord prior to the commencement of construction of the
Tenant Improvements and the remainder upon Landlord's notice of substantial
completion of fifty percent (50%) of the Tenant Improvements. If, after Tenant
Improvement Plans have been prepared and a price therefor established by
Landlord, Tenant shall require any changes or substitutions to the Tenant
Improvement plans, any additional costs thereof shall be paid by Tenant to
Landlord prior to the commencement of such work. Landlord shall have the right
to decline Tenant's request for a change to the Tenant Improvement plans if such
changes are inconsistent with this above, or if the change would, in Landlord's
opinion, unreasonably delay construction of the Tenant Improvements.
6. COMPLETION
The Tenant Improvements shall be deemed substantially complete
notwithstanding the fact that minor details of construction, mechanical
adjustments or decorations which do not materially interfere with Tenant's use
and enjoyment of the Premises remain to be performed (items normally referred to
as "punch list' items). Tenant acknowledges that the Tenant Improvement Work
will be performed during normal business hours and may disrupt, interfere with
or otherwise adversely affect Tenant's business operations at the Premises.
Tenant hereby waives any and all claims against Landlord and Landlord's
employees, contractors and agents arising out of or in connection with such
disruption, interference or adverse affect, and agrees that Tenant shall not be
entitled to any abatement of rent as a result thereof, nor shall the same be
deemed an eviction of Tenant. Without limitation on the foregoing, Tenant shall
not interfere with, delay or hinder Landlord, its agents, contractors or
subcontractors or the Tenant Improvement Work, and shall fully cooperate with
Landlord in the prosecution of the Tenant Improvement Work.
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EXHIBIT "D"
NOTICE OF LEASE TERM
DATES AND TENANT'S PERCENTAGE
-----------------------------
To: _______________________________ Date: ______________________
_______________________________
_______________________________
Re: Lease dated ______________, 19__ (the "Lease"), between McDonnell
Douglas Realty Company, a California corporation ("Landlord"), and
___________________________________, a ________________ ("Tenant'), concerning
Suite ______ located at ______________________________________________________
(the "Premises").
To Whom It May Concern:
In accordance with the subject Lease, we wish to advise and/or confirm
as follows:
1. That the Premises have been accepted by the Tenant as being
substantially complete in accordance with the subject Lease and that there is no
deficiency in construction except as may be indicated on the "Punch-List"
prepared by Landlord and Tenant, a copy of which is attached hereto.
2. That the Tenant has possession of the subject Premises and
acknowledges that under the provisions of the Lease the Commencement Date is
_____________________________, and that the Term of the Lease will expire on
___________________________________________.
3. That in accordance with the Lease, Monthly Base Rent commenced
to accrue on _________________________.
4. If the Commencement Date of the Lease is other than the first
day of the month, the first billing will contain a pro rata adjustment. Each
billing thereafter will be for the full amount of the monthly installment as
provided for in the Lease.
5. Rent is due and payable in advance on the first day of each and
every month during the Term of the Lease. Your rent checks should be made
payable to __________________________________________________ at
__________________________________________________.
6. The number of Rentable Square Feet within the Premises is
________________ square feet as determined by Landlord in accordance with the
terms of the Lease.
7. The number of Rentable Square Feet within the Building is
_________________ square feet as determined by Landlord in accordance with the
terms of the Lease.
8. Tenant's Percentage, as adjusted based upon the number of
Rentable Square Feet within the Premises, is ____________%.
LANDLORD:
________________________________________
By:_____________________________________
Printed Name:___________________________
Title:__________________________________
TENANT:
________________________________________
By:_____________________________________
Printed Name:___________________________
Title:__________________________________
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EXHIBIT "E"
DEFINITION OF OPERATING EXPENSES
--------------------------------
A. ITEMS INCLUDED IN OPERATING EXPENSES. The term "Operating Expenses" as
------------------------------------
used in the Lease to which this Exhibit "E" is attached means: all direct costs
-----------
and expenses of operation, maintenance and repair of the Building and the Common
Areas (as such terms are defined in the Lease), including without limitation any
expansion of same, as determined by standard accounting practices, calculated
assuming the Building is ninety-five percent (95%) occupied in the event it is
occupied in a lesser percentage, including the following costs by way of
illustration but not limitation, but excluding those items specifically
described as exceptions to Operating Expenses therein or in Section 3 below:
1. Real Property Taxes and Assessments (as defined in Section 2
below), and any and all impositions and assessments imposed with respect to the
Building pursuant to any covenants, conditions and restrictions affecting the
Project, the Common Areas or the Building;
2. water and sewer charges and the costs of electricity, heating,
ventilating, air conditioning and other utilities, including, without
limitation, utilities surcharges and any other costs, levies or assessments
resulting from statutes or regulations promulgated by any government or quasi-
government authority, in connection with the use, occupancy or alteration of the
Building or the Premises or the parking facilities serving the Building or the
Premises;
3. costs of insurance obtained by Landlord pursuant to Section 19
of the Lease;
4. Costs of all maintenance agreements for the Project and Common
Areas and the equipment thereon, including, but not limited to, costs of
security, exterior window cleaning, elevator, waste disposal, trash removal and
janitorial services, plumbing, heating, ventilation and air conditioning,
engineers, landscaping, gardeners and signage (other than signs of tenants of
the Building);
5. costs incurred in connection with management of the Project and
Building, including, without limitation: (i) wages and salaries of all employees
engaged in the operation, maintenance or security of the Building or Common
Areas, including payroll taxes, insurance and benefits relating thereto; (ii)
the rental cost and overhead (including, without limitation, cost of supplies)
of any office and storage space used to provide management services, and (iii) a
management fee for the Project property manager (including Landlord if Landlord
manages the Project) determined as a percentage of the annual gross revenues of
the Building, and an administrative fee for Landlord's administration of the
Project (including a third-party administrator if Landlord elects to contract
for such services) determined as a percentage of Operating Expenses;
6. cost of supplies, materials, equipment and tools used in
operation, repair and maintenance of the Project and Common Areas, including
rental of personal property used for same and depreciation on a straight line
basis of personal property purchased for same;
7. costs and expenses of repairs, resurfacing, repairing and other
upkeep of Common Areas, maintenance, painting, lighting, cleaning and similar
items, including appropriate reserves.
8. cost of accounting, audit, verification, legal and other
consulting services and any additional services, whether or not provided to the
Project or Common Areas at the Commencement Date but thereafter provided by
Landlord in its management of the Project and Common Areas;
9. cost of repairs and maintenance (including, without limitation,
repairs, replacements and alterations to cause the Building and the Common Areas
to comply with any law, statute or ordinance in effect after the date hereof),
and reserves reasonably deemed desirable by Landlord; any such expenditures that
constitute capital improvements shall be amortized as set forth in Subsection
(1) below;
10. cost of repairs and maintenance of structural portions of the
Building, including the plumbing, air conditioning, heating, ventilating, and
electrical systems installed or furnished by Landlord; any such expenditures
that constitute capital improvements shall be amortized as set forth in
Subsection (1) below; and
11. cost of implementing and administering any transportation
management program applicable to substantially all of the Building which may be
required by any law, statute or ordinance now or hereafter in effect.
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12. cost of any capital improvements made to the Building and Common
Areas after the Commencement Date, and cost of replacement of any building
equipment needed to operate the Building or the Common Areas at the same quality
levels as prior to the replacement, each amortized over such reasonable period
as Landlord shall reasonably determine, together with interest at the Interest
Rate on the unamortized balance;
Tenant shall pay within ten (10) days of receipt of an invoice
from Landlord the cost of additional or extraordinary services provided to
Tenant and not paid or payable by Tenant pursuant to other provisions of this
Lease. Landlord shall have the right to establish and collect on an ongoing
basis reasonable reserves for items of periodic maintenance, repair and
replacement properly includable in Operating Expenses that customarily are not
incurred each year, in amounts calculated to provide sufficient funds to pay for
such items when necessary.
B. REAL PROPERTY TAXES AND ASSESSMENTS. The term "Real Property Taxes and
-----------------------------------
Assessments", as used in this Exhibit "E" and the Lease, means: any form of
-----------
assessment, license fee, license tax, business license fee, commercial rental
tax, levy, charge, improvement bond, tax or similar imposition imposed by any
authority having the direct power to tax, including any city, county, state or
federal government, or any school, agricultural, lighting, drainage or other
improvement or special assessment district thereof, as against any legal or
equitable interest of Landlord in the Premises, Building, Common Areas or the
Project (as such terms are defined in the Lease), adjusted to reflect an
assumption that the Building is fully assessed for real property tax purposes as
a completed building ready for occupancy, including the following by way of
illustration but not limitation:
1. any tax on Landlord's "right" to rent or "right" to other income
from the Premises or as against Landlord's business of leasing the Premises;
2. any assessment, tax, fee, levy or charge in substitution,
partially or totally, of any assessment, tax, fee, levy or charge previously
included within the definition of real property tax, it being acknowledged by
Tenant and Landlord that Proposition 13 was adopted by the voters of the State
of California in the June, 1978 election and that assessments, taxes, fees,
levies and charges may be imposed by governmental agencies for such services as
fire protection, street, sidewalk and road maintenance, refuse removal and for
other governmental services formerly provided without charge to property owners
or occupants;
3. any assessment, tax, fee, levy or charge allocable to or
measured by the area of the Premises or other premises in the Building or the
rent payable by Tenant hereunder or other tenants of the Building, including,
without limitation, any gross receipts tax or excise tax levied by state, city
or federal government, or any political subdivision thereof, with respect to the
receipt of such rent, or upon or with respect to the possession, leasing,
operation, management, maintenance, alteration, repair, use or occupancy by
Tenant of the Premises, or any portion thereof but not on Landlord's other
operations;
4. any assessment, tax, fee, levy or charge upon this transaction
or any document to which Tenant is a party, creating or transferring an interest
or an estate in the Premises; and/or
5. any assessment, tax, fee, levy or charge by any governmental
agency related to any transportation plan, fund or system (including assessment
districts) instituted within the geographic area of which the Building is a
part.
C. ITEMS EXCLUDED FROM OPERATING EXPENSES. Notwithstanding the provisions
--------------------------------------
of Section 1 and Section 2 above to the contrary, "Operating Expenses" shall not
include:
1. Landlord's federal or state income, franchise, inheritance or
estate taxes;
2. any ground lease rental;
3. costs incurred by Landlord for the repair of damage to the
Building to the extent that Landlord is reimbursed by insurance or condemnation
proceeds or by tenants, warrantors or other third persons;
4. depreciation, amortization and interest payments, except as
specifically provided herein, and except on materials, tools, supplies and
vendor-type equipment purchased by Landlord to enable Landlord to supply
services Landlord might otherwise contract for with a third party, where such
depreciation, amortization and interest payments would otherwise have been
included in the charge for such third party's services, all as determined in
accordance with standard accounting practices;
5. brokerage commissions, finders' fees, attorneys' fees, space
planning costs and other costs incurred by Landlord in leasing or attempting to
lease space in the Building;
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6. interest, principal, points and fees on debt or amortization on
any mortgage, deed of trust or other debt encumbering the Building or the
Project;
7. costs, including permit, license and inspection costs, incurred
with respect to the installation of tenant improvements for tenants in the
Building (including the original Tenant Improvements for the Premises), or
incurred in renovating or otherwise improving, decorating, painting or
redecorating space for tenants or other occupants of the Building, including
space planning and interior design costs and fees;
8. attorneys' fees and other costs and expenses incurred in
connection with negotiations or disputes with present or prospective tenants or
other occupants of the Building; provided, however, that Operating Expenses will
include those attorneys' fees and other costs and expenses incurred in
connection with negotiations, disputes or claims relating to items of Operating
Expenses, enforcement of rules and regulations of the Building, and such other
matters relating to the maintenance of standards required of Landlord under the
Lease;
9. except for the administrative/management fees described in
Section 1 above, costs of Landlord's general corporate overhead;
10. all items and services for which Tenant or any other tenant in
the Building reimburses Landlord (other than through operating expense pass-
through provisions);
11. electric power costs for which any tenant directly contracts
with the local public service company; and
12. costs arising from Landlord's charitable or political
contributions.
13. costs of any extraordinary services provided to other tenants of
the Project but not to Tenant;
14. executive salaries of off-site personnel employed by Landlord,
except for the charge (or pro rata share) of the Project manager;
15. costs of reconstructing, modifying, altering or repairing any
structural portions of the Building due to defective original construction; and
16. overhead and profit increment paid to a subsidiary, affiliate or
other entity related to Landlord for services (other than management services)
to the extent the same exceed competitive costs (taking into account the quality
of service provided in maintaining a Class-A office building) of such services
were they not so rendered by a subsidiary, affiliate or other Landlord-related
entity.
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EXHIBIT "F"
STANDARDS FOR UTILITIES AND SERVICES
------------------------------------
The following standards for utilities and services are in effect.
Landlord reserves the right to adopt nondiscriminatory modifications and
additions thereto. Tenant shall promptly notify Landlord, in writing, of any
conflict between the Rules and Regulations and any laws, statutes or ordinances
applicable to Tenant's particular use or manner of use or occupancy of the
Premises or the Building and Landlord and Tenant shall reasonably cooperate in
the lawful and timely resolution of such conflict.
Provided Tenant remains in occupancy of the Premises, and is not in
default beyond applicable notice and cure periods under any of the terms,
covenants, conditions, provisions or agreements of the Lease, Landlord will
provide or make available the following utilities and services, subject to the
terms, conditions and limitations set forth herein and in the Lease:
A. Elevator Facilities. Non-attended automatic elevator facilities Monday
-------------------
through Friday, except holidays, from 8 a.m. to 6 p.m., with at least one
elevator available for Tenant's use at all other times.
B. Heating, Ventilating, Air Conditioning. Heating, Ventilating, Air
-----------------------------------------------------------------
Conditioning. On Monday through Friday, except holidays, from 8 a.m. to 6 p.m.
- ------------
and on Saturday from 9 a.m. to 1:00 p.m. (and at other times for an additional
charge to be fixed by Landlord), ventilation, air conditioning or heating on
such days and hours, when in the reasonable judgment of Landlord it may be
required for the comfortable occupancy of the Premises. Tenant agrees to
cooperate fully at all times with Landlord, and to abide by all reasonable
regulations and requirements which Landlord may prescribe for the proper
function and protection of said air conditioning system, including keeping
window coverings in the Premises extended to the full length of the window
opening and adjusted as directed by Landlord whenever the system is in
operation. Tenant agrees not to connect any apparatus, device, conduit or pipe
to the chilled and hot water air conditioning supply lines of the Building.
Tenant further agrees that neither Tenant nor its servants, employees, agents,
visitors, licensees or contractors shall at any time enter the mechanical
installations or facilities of the Building or the Project or adjust, tamper
with, touch or otherwise in any manner affect said installations or facilities.
The cost of maintenance and service calls to adjust and regulate the air
conditioning system will be charged to Tenant if the need for maintenance work
results from either Tenants adjustment of room thermostats or Tenant's failure
to comply with its obligations hereunder. Such work will be charged at hourly
rates equal to then-current journeyman's wages for air conditioning mechanics.
When heat generating machines, equipment, fixtures or other devices of any
nature whatsoever, including by way of illustration but not by way of
limitation, computer and other electronic data processing equipment, are used in
the Premises by Tenant which affect the temperature otherwise maintained by the
air conditioning system, Landlord shall have the right, but not the obligation,
to install supplementary air conditioning units in the Premises, and the cost
thereof, including the cost of installation and the cost of maintenance thereof,
shall be paid by Tenant to Landlord upon demand by Landlord.
C. Electricity. Electric current to the Premises, 24 hours per day, seven
-----------
days a week, during the usual business hours on business days, as required by
the Building standard office lighting and fractional horsepower office business
machines including copiers, personal computers and data processing equipment
used by Tenant in the ordinary course of its business which use 110/220 volt
electrical power, in an amount not to exceed three (3) watts per square foot per
normal business day. Tenant agrees, should its electrical installation or
electrical consumption be in excess of the aforesaid quantity or extend beyond
normal business hours, to reimburse Landlord monthly for the measured
consumption at the average cost per kilowatt hour charged to the Building during
the period. If a separate meter is not installed at Tenant's cost, such excess
cost will be established by an estimate reasonably determined by Landlord or by
an engineer selected in Landlord's reasonable discretion, whose fee shall be
shared equally by Landlord and Tenant. Tenant agrees not to use any apparatus or
device in, upon or about the Premises (other than standard office business
machines, personal computers and data processing equipment used in the ordinary
course of Tenant's business) which may in any way increase the amount of such
services usually furnished or supplied to said Premises, and Tenant further
agrees not to connect any apparatus or device with wires, conduits or pipes, or
other means by which such services are supplied, for the purpose of using
additional or unusual amounts of such services without the written consent of
Landlord. Should Tenant use the same to excess, the refusal on the part of
Tenant to pay upon demand of Landlord the amount established by Landlord for
such excess charge will constitute a breach of the obligation to pay rent under
this Lease and will entitle Landlord to the rights therein granted for such
breach. Tenant's use of electric current shall not exceed the capacity of the
feeders to the Building, or the risers or wiring installation and Tenant shall
not install or use or permit the installation or use of any computer or
electronic data processing equipment in the Premises (except standard office
business machines, personal computers and data processing equipment) without the
prior written consent of Landlord.
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D. Water. Water will be available in public areas for drinking and lavatory
-----
purposes only, but if Tenant requires, uses or consumes water for any purpose in
addition to ordinary drinking and lavatory purposes, of which fact Tenant
constitutes Landlord to be the sole judge, Landlord may install a water meter
and thereby measure Tenant's water consumption for all purposes. Tenant agrees
to pay Landlord for the cost of the meter and the cost of the installation
thereof and throughout the duration of Tenant's occupancy Tenant will keep said
meter and installation equipment in good working order and repair at Tenant's
own cost and expense, in default of which Landlord may cause such meter and
equipment to be replaced or repaired and collect the cost thereof from Tenant.
Tenant agrees to pay for water consumed, as shown on such meter, as and when
bills are rendered, and on default in making such payment, Landlord may pay such
charges and collect the same from Tenant. Any such costs or expenses incurred,
or payments made by Landlord for any of the reasons or purposes hereinabove
stated will be deemed to be additional rent payable by Tenant and collectible by
Landlord as such.
E. Janitorial Service. Landlord shall provide janitorial service during the
------------------
time and in the manner that janitorial service is customarily furnished in Class
A office buildings in the vicinity of the Building, provided the same are used
exclusively as offices, and are kept reasonably in order by Tenant. Unless
otherwise agreed to by Landlord and Tenant, no one other than persons approved
by Landlord shall be permitted to enter the Premises for such purposes. Tenant
shall pay to Landlord as additional rent the cost of removal of any of Tenant's
refuse and rubbish to the extent that the same exceeds the refuse and rubbish
usually attendant upon the use of the Premises as offices.
F. Miscellaneous. Landlord also shall provide for replacement of Building
-------------
standard lighting and Building standard toilet supplies.
G. Interruption of Utilities or Services. Landlord reserves the right to
-------------------------------------
stop service of the elevator, plumbing, ventilation, air conditioning and
electrical systems, and any other services, when necessary, by reason of
accident or emergency or for repairs, alterations or improvements, when in the
judgment of Landlord such actions are desirable or necessary to be made, until
said repairs, alterations or improvements shall have been completed, and
Landlord will have no responsibility or liability for failure to supply elevator
facilities, plumbing, ventilating, air conditioning or electric service or other
services, when prevented from so doing by strike or accident or by any cause
beyond Landlord's reasonable control, or by laws, rules, orders, ordinances,
directions, regulations or by reason of the requirements of any federal, state,
county or municipal authority or failure of gas, oil or other suitable fuel
supply or inability by exercise of reasonable diligence to obtain gas, oil or
other suitable fuel supply. It is expressly understood and agreed that any
covenants on Landlord's part to furnish any services pursuant to any of the
terms, covenants, conditions, provisions or agreements of this Lease, or to
perform any act or thing for the benefit of Tenant, will not be deemed breached
if Landlord is unable to furnish or perform the same by virtue of a strike or
labor trouble or any other cause whatsoever beyond Landlord's control. No
failure or interruption of utilities or services shall entitle Tenant to
terminate this Lease or abate the rent or other charges hereunder and Tenant
shall not be relieved from the performance of any covenant in this Lease because
of such failure. In the event any municipal, state, federal or other regulatory
body (whether judicial, executive or legislative) imposes mandatory controls on
Landlord or the Building or Common Areas relating to the use or conservation of
energy or water, gas, light or electricity or the reduction of automobile use or
automobile and other emissions, Landlord may comply (and Tenant shall comply)
with such mandatory controls to the extent it can control the use of energy or
light, gas, water or electricity or the reduction of automobiles, or automobile
or other emissions on the Property or in the Building and Common Areas.
Compliance with any of the above shall not in any event constitute a partial or
complete eviction of Tenant hereunder, nor shall it entitle Tenant to any
abatement or mitigation of rent or other charges, nor shall Landlord in any way
be liable for damages or injury caused thereby to Tenant, Tenant's property,
business, employees, customers or suppliers. Notwithstanding the foregoing, if
Tenant is prevented from using, and does not use, the Premises or any material
portion thereof, for five (5) consecutive business days because of an
interruption or discontinuance of utilities or services caused by the wrongful
acts or omissions of Landlord, and Tenant shall have given Landlord written
notice respecting such interruption or discontinuance, then Tenant's base
monthly rent shall be abated or reduced, as the case may be, after expiration of
the applicable period of time described above ("Eligibility Period"), if any,
for such time that Tenant continues to be so prevented from using, and does not
use the rentable area of the portion of the Premises that Tenant is prevented
from using, and does not use, based on the ratio that the unusable portion bears
to the total rentable area of the Premises; provided however, if Tenant
reoccupies and conducts its business from any portion of the Premises during
such period, the rent allocable to such reoccupied portion, based on the
proportion that the rentable area of such reoccupied portion of the Premises
bears to the total rentable area of the Premises, shall be payable by Tenant
from the date such business operations commence; and provided further that the
rent abatement described above shall in no event continue after the time such
utilities or services are restored.
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EXHIBIT "G"
ESTOPPEL CERTIFICATE
--------------------
The undersigned, ___________________________, with a mailing address c/o
_________________ ("Tenant"), hereby certifies to McDonnell Douglas Realty
Company, a California corporation ("Landlord") and _____________________, as
follows:
A. Attached hereto is a true, correct and complete copy of that certain
lease dated _____________, 19__, between Landlord and Tenant (the "Lease"),
regarding the premises located at __________________ (the "Premises"). The Lease
is now in full force and effect and has not been amended, modified or
supplemented, except as set forth in Section 4 below.
B. The Term of the Lease commenced on _____________ 19__.
C. The Term of the Lease shall expire on _____________ 19__.
D. The Lease has: (initial one)
(____) not been amended, modified, supplemented, extended,
renewed or assigned.
(____) been amended, modified, supplemented, extended, renewed
or assigned by the following described terms or agreements,
copies of which are attached hereto:
E. Tenant has accepted and is now in possession of the Premises.
Tenant and Landlord acknowledge that Landlord's interest in the Lease
will be assigned to ___________ ________________ and that no modification,
adjustment, revision or cancellation of the Lease or amendments thereto shall be
effective unless written consent of ________________________ is obtained, and
that until further notice, payments under the Lease may continue as heretofore.
F. The amount of Monthly Base Rent is $__________________.
G. The amount of security deposits (if any) is $_________________. No other
security deposits have been made except as follows:
H. Tenant is paying the full lease rental which has been paid in full as of
the date hereof. No rent or other charges under the Lease have been paid for
more than thirty (30) days in advance of its due date except as follows:
___________________________________________________.
I. All work required to be performed by Landlord under the Lease has been
completed except as follows:
___________________________________________________.
J. There are no defaults on the part of the Landlord or Tenant under the
Lease except as follows:
___________________________________________________.
K. Neither Landlord nor Tenant has any defense as to its obligations under
the Lease and claims no set-off or counterclaim against the other party except
as follows:
________________________________________________________________________________
____________________________________________________.
L. Tenant has no right to any concession (rental or otherwise) or similar
compensation in connection with renting the space it occupies other than as
provided in the Lease except as follows:
____________________________________________________.
All provisions of the Lease and the amendments thereto (if any) referred to
above are hereby ratified.
The foregoing certification is made with the knowledge that
_______________________ is about to fund a loan to Landlord or
_________________________________ is about to purchase the Project (or part
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<PAGE>
thereof) from Landlord and that __________________________ is relying upon the
representations herein made in funding such loan or in purchasing the Project
(or part thereof).
IN WITNESS WHEREOF, this certificate has been duly executed and
delivered by the authorized officers of the undersigned as of _____________,
19__.
TENANT:
By: ________________________________________
Printed Name:_______________________________
Title:______________________________________
SAMPLE ONLY
[NOT FOR EXECUTION]
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EXHIBIT "H"
RULES AND REGULATIONS
---------------------
A. General Rules and Regulations. The following rules and
-----------------------------
regulations govern the use of the Building and the Project Common Areas. Tenant
will be bound by such rules and regulations and agrees to cause Tenant's
Authorized Users, its employees, subtenants, assignees, contractors, suppliers,
customers and invitees to observe the same.
1. Except as specifically provided in the Lease to which
these Rules and Regulations are attached, no sign, placard, picture,
advertisement, name or notice may be installed or displayed on any part of the
outside or inside of the Building or the Project without the prior written
consent of Landlord. Landlord will have the right to remove, at Tenant's expense
and without notice, any sign installed or displayed in violation of this rule.
All approved signs or lettering on doors and walls are to be printed, painted,
affixed or inscribed at the expense of Tenant and under the direction of
Landlord by a person or company designated or approved by Landlord.
2. If Landlord objects in writing to any curtains, blinds,
shades, screens or hanging plants or other similar objects attached to or used
in connection with any window or door of the Premises, or placed on any window
sill, which is visible from the exterior of the Premises, Tenant will
immediately discontinue such use. Tenant agrees not to place anything against or
near glass partitions or doors or windows which may appear unsightly from
outside the Premises including from within any interior common areas.
3. Tenant will not obstruct any sidewalks, halls, passages,
exits, entrances, elevators, escalators, or stairways of the Project. The halls,
passages, exits, entrances, elevators and stairways are not open to the general
public, but are open, subject to reasonable regulations, to Tenant's business
invitees. Landlord will in all cases retain the right to control and prevent
access thereto of all persons whose presence in the reasonable judgment of
Landlord would be prejudicial to the safety, character, reputation and interest
of the Project and its tenants, provided that nothing herein contained will be
construed to prevent such access to persons with whom any tenant normally deals
in the ordinary course of its business, unless such persons are engaged in
illegal or unlawful activities. No tenant and no employee or invitee of any
tenant will go upon the roof of the Building.
4. Tenant will not obtain for use on the Premises ice,
drinking water, food, food vendors, beverage, towel or other similar services or
accept barbering or bootblacking service upon the Premises, except at such
reasonable hours and under such reasonable regulations as may be fixed by
Landlord. Landlord expressly reserves the right to absolutely prohibit
solicitation, canvassing, sales and displays of products, goods and wares in all
portions of the Project except for such activities as may be expressly requested
by a tenant and conducted solely within such requesting tenant's premises.
Landlord reserves the right to restrict and regulate the use of the common areas
of the Project and Building by invitees of tenants providing services to tenants
on a periodic or daily basis including food and beverage vendors. Such
restrictions may include limitations on time, place, manner and duration of
access to a tenant's premises for such purposes. Without limiting the foregoing,
Landlord may require that such parties use service elevators, halls, passageways
and stairways for such purposes to preserve access within the Building for
tenants and the general public.
5. Landlord reserves the right to require tenants to
periodically provide Landlord with a written list of any and all business
invitees which periodically or regularly provide goods and services to such
tenants at the premises. Landlord reserves the right to preclude all vendors
from entering or conducting business within the Building and the Project if such
vendors are not listed on a tenant's list of requested vendors.
6. Landlord reserves the right to exclude from the Building
between the hours of 6 p.m. and 8 a.m. the following business day, or such other
hours as may be established from time to time by Landlord, and on Sundays and
legal holidays, any person unless that person is known to the person or employee
in charge of the Building or has a pass or is properly identified. Tenant will
be responsible for all persons for whom it requests passes and will be liable to
Landlord for all acts of such persons. Landlord will not be liable for damages
for any error with regard to the admission to or exclusion from the Building of
any person. Landlord reserves the right to prevent access to the Building in
case of invasion, mob, riot, public excitement or other commotion by closing the
doors or by other appropriate action.
7. The directory of the Building or the Project will be
provided exclusively for the display of the name and location of tenants only
and Landlord reserves the right to exclude any other names therefrom.
8. All cleaning and janitorial services for the Project and
the Premises will be provided exclusively through Landlord, and except with the
written consent of Landlord, no person or persons other than
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those approved by Landlord will be employed by Tenant or permitted to enter the
Project for the purpose of cleaning the same. Tenant will not cause any
unnecessary labor by carelessness or indifference to the good order and
cleanliness of the Premises.
9. Landlord will furnish Tenant, free of charge, with two
keys to each suite entry door lock to the Premises. Landlord may make a
reasonable charge for any additional keys. Tenant shall not make or have made
additional keys, and Tenant shall not alter any lock or install any new
additional lock or bolt on any door of the Premises. Tenant, upon the
termination of its tenancy, will deliver to Landlord the keys to all doors which
have been furnished to Tenant, and in the event of loss of any keys so
furnished, will pay Landlord therefor.
10. If Tenant requires telegraphic, telephonic, burglar
alarm, satellite dishes, antennae or similar services, it will first obtain
Landlord's approval, and comply with, Landlord's reasonable rules and
requirements applicable to such services, which may include separate licensing
by, and fees paid to, Landlord.
11. Freight elevator(s) will be available for use by all
tenants in the Building, subject to such reasonable scheduling as Landlord, in
its discretion, deems appropriate. No equipment, materials, furniture, packages,
supplies, merchandise or other property will be received in the Building or
carried in the elevators except between such hours and in such elevators as may
be designated by Landlord. Tenants initial move in and subsequent deliveries of
bulky items, such as furniture, safes and similar items will, unless otherwise
agreed in writing by Landlord, be made during the hours of 6:00 p.m. to 6:00
a.m. or on Saturday or Sunday. Deliveries during normal office hours shall be
limited to normal office supplies and other small items. No deliveries will be
made which impede or interfere with other tenants or the operation of the
Building.
12. Tenant will not place a load upon any floor of the
Premises which exceeds the load per square foot which such floor was designed to
carry and which is allowed by law. Landlord will have the right to prescribe the
weight, size and position of all equipment, materials, furniture or other
property brought into the Building. Heavy objects will, if considered necessary
by Landlord, stand on such platforms as determined by Landlord to be necessary
to properly distribute the weight, which platforms will be provided at Tenant's
expense. Business machines and mechanical equipment belonging to Tenant, which
cause noise or vibration that may be transmitted to the structure of the
building or to any space therein to such a degree as to be objectionable to any
tenants in the Building or Landlord, are to be placed and maintained by Tenant,
at Tenant's expense, on vibration eliminators or other devises sufficient to
eliminate noise or vibration. The persons employed to move such equipment in or
out of the Building must be reasonably acceptable to Landlord. Landlord will not
be responsible for loss of, or damage to, any such equipment or other property
from any cause, and all damage done to the Building by maintaining or moving
such equipment or other property will be repaired at the expense of Tenant.
13. Tenant will not use or keep in the Premises any
kerosene, gasoline or inflammable or combustible fluid or material other than
those limited quantities necessary for the operation or maintenance of office
equipment. Tenant will not use or permit to be used in the Premises any foul or
noxious gas or substance, or permit or allow the Premises to be occupied or used
in a manner offensive or objectionable to Landlord or other occupants of the
Building by reason of noise, odors or vibrations, nor will Tenant bring into or
keep in or about the Premises any birds or animals.
14. Tenant will not use any method of heating or air
conditioning other than that supplied by Landlord without Landlord's prior
written consent.
15. Tenant will not waste electricity, water or air
conditioning and agrees to cooperate fully with Landlord to assure the most
effective operation of the Building's heating and air conditioning and to comply
with any governmental energy-saving rules, laws or regulations of which Tenant
has actual notice, and will refrain from attempting to adjust controls. Tenant
will keep corridor doors closed, and shall keep all window coverings pulled
down.
16. Landlord reserves the right, exercisable without notice
and without liability to Tenant, to change the name and street address of the
Building. Without the written consent of Landlord, Tenant will not use the name
of the Building or the Project in connection with or in promoting or advertising
the business of Tenant except as Tenant's address.
17. Tenant will close and lock the doors of its Premises and
entirely shut off all water faucets or other water apparatus, and lighting or
gas before Tenant and its employees leave the Premises. Tenant will be
responsible for any damage or injuries sustained by other tenants or occupants
of the Building or by Landlord for noncompliance with this rule.
18. The toilet rooms, toilets, urinals, wash bowls and other
apparatus will not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever
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shall be thrown therein. The expense of any breakage, stoppage or damage
resulting from any violation of this rule will be borne by the tenant who, or
whose employees or invitees, break this rule. Cleaning of equipment of any type
is prohibited. Shaving is prohibited.
19. Tenant will not sell, or permit the sale at retail of
magazines, newspapers, periodicals, theater tickets or any other goods or
merchandise to the general public in or on the Premises. Tenant will not make
any room-to-room solicitation of business from other tenants in the Project.
Tenant will not use the Premises for any business or activity other than that
specifically provided for in this Lease. Canvassing, soliciting and distribution
of handbills or any other written material, and peddling in the Project are
prohibited, and Tenant will cooperate with Landlord to prevent such activities.
20. Tenant will not install any radio or television antenna,
loudspeaker, satellite dishes or other devices on the roof(s) or exterior walls
of the Building or the Project. Tenant will not interfere with radio or
television broadcasting or reception from or in the Project or elsewhere.
21. Except for the ordinary hanging of pictures and wall
decorations, Tenant will not mark, drive nails, screw or drill into the
partitions, woodwork or plaster or in any way deface the Premises or any part
thereof, except in accordance with the provisions of the Lease pertaining to
alterations. Landlord reserves the right to direct electricians as to where and
how telephone and telegraph wires are to be introduced to the Premises. Tenant
will not cut or bore holes for wires. Tenant will not affix any floor covering
to the floor of the Premises in any manner except as approved by Landlord.
Tenant shall repair any damage resulting from noncompliance with this rule.
22. Tenant will not install, maintain or operate upon the
Premises any vending machines without the written consent of Landlord.
23. Landlord reserves the right to exclude or expel from the
Project any person who, in Landlord's judgment, is intoxicated or under the
influence of liquor or drugs or who is in violation of any of the Rules and
Regulations of the Building.
24. Tenant will store all its trash and garbage within its
Premises or in other facilities provided by Landlord. Tenant will not place in
any trash box or receptacle any material which cannot be disposed of in the
ordinary and customary manner of trash and garbage disposal. All garbage and
refuse disposal is to be made in accordance with directions issued from time to
time by Landlord.
25. The Premises will not be used for lodging or for the
storage of merchandise held for sale to the general public, or for lodging or
for manufacturing of any kind, nor shall the Premises be used for any improper,
immoral or objectionable purpose. No cooking will be done or permitted on the
Premises without Landlord's consent, except the use by Tenant of Underwriters'
Laboratory approved equipment for brewing coffee, tea, hot chocolate and similar
beverages shall be permitted, and the use of a microwave oven for employees use
will be permitted, provided that such equipment and use is in accordance with
all applicable federal, state, county and city laws, codes, ordinances, rules
and regulations.
26. Neither Tenant nor any of its employees, agents,
customers and invitees may use in any space or in the public halls of the
Building or the Project any hand truck except those equipped with rubber fires
and side guards or such other material-handling equipment as Landlord may
approve. Tenant will not bring any other vehicles of any kind into the Building.
27. Tenant agrees to comply with all safety, fire protection
and evacuation procedures and regulations established by Landlord or any
governmental agency.
28. Tenant assumes any and all responsibility for protecting
its Premises from theft, robbery and pilferage, which includes keeping doors
locked and other means of entry to the Premises closed.
29. To the extent Landlord reasonably deems it necessary to
exercise exclusive control over any portions of the Common Areas for the mutual
benefit of the tenants in the Building or the Project, Landlord may do so
subject to reasonable, non-discriminatory additional rules and regulations.
30. Landlord may prohibit smoking in the Building and may
require Tenant and any of its employees, agents, clients, customers, invitees
and guests who desire to smoke, to smoke within designated smoking areas within
the Project.
31. Tenant's requirements will be attended to only upon
appropriate application to Landlord's asset management office for the Project by
an authorized individual of Tenant. Employees of
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Landlord will not perform any work or do anything outside of their regular
duties unless under special instructions from Landlord.
These Rules and Regulations are in addition to, and will not be
construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of the Lease. Landlord may waive any one or
more of these Rules and Regulations for the benefit of Tenant or any other
tenant, but no such waiver by Landlord will be construed as a waiver of such
Rules and Regulations in favor of Tenant or any other tenant, nor prevent
Landlord from thereafter enforcing any such Rules and Regulations against any or
all of the tenants of the Project.
Landlord reserves the right to make such other and reasonable and non-
discriminatory Rules and Regulations as, in its judgment, may from time to time
be needed for safety and security, for care and cleanliness of the Project and
for the preservation of good order therein. Tenant agrees to abide by all such
Rules and Regulations hereinabove stated and any additional reasonable and non-
discriminatory rules and regulations which are adopted. Tenant is responsible
for the observance of all of the foregoing rules by Tenant's employees, agents,
clients, customers, invitees and guests.
B. Parking Rules and Regulations. The following rules and
-----------------------------
regulations govern the use of the parking facilities which serve the Building.
Tenant will be bound by such rules and regulations and agrees to cause its
employees, subtenants, assignees, contractors, suppliers, customers and invitees
to observe the same:
1. Tenant will not permit or allow any vehicles that belong
to or are controlled by Tenant or Tenant's employees, subtenants, customers or
invitees to be loaded, unloaded or parked in areas other than those designated
by Landlord for such activities. No vehicles are to be left in the parking areas
overnight and no vehicles are to be parked in the parking areas other than
normally sized passenger automobiles, motorcycles and pick-up trucks. No
extended term storage of vehicles is permitted.
2. Vehicles must be parked entirely within painted stall
lines of a single parking stall.
3. All directional signs and arrows must be observed.
4. The speed limit within all parking areas shall be five
(5) miles per hour.
5. Parking is prohibited:
in areas not striped for parking;
in aisles or on ramps; where "no parking" signs are
posted;
in cross-hatched areas; and
in such other areas as may be designated from time to
time by Landlord or Landlord's parking operator.
6. Landlord reserves the right, without cost or liability
to Landlord, to tow any vehicle if such vehicle's audio theft alarm system
remains engaged for an unreasonable period of time.
7. Washing, waxing, cleaning or servicing of any vehicle in
any area not specifically reserved for such purpose is prohibited.
8. Landlord may refuse to permit any person to park in the
parking facilities who violates these rules with unreasonable frequency, and any
violation of these rules shall subject the violator's car to removal, at such
car ownee's expense. Tenant agrees to use its best efforts to acquaint its
employees, subtenants, assignees, contractors, suppliers, customers and invitees
with these parking provisions, rules and regulations.
9. Parking stickers, access cards, or any other device or
form of identification supplied by Landlord as a condition of use of the parking
facilities shall remain the property of Landlord. Parking identification
devices, if utilized by Landlord, must be displayed as requested and may not be
mutilated in any manner. The serial number of the parking identification device
may not be obliterated. Parking identification devices, if any, are not
transferable and any device in the possession of an unauthorized holder will be
void. Landlord reserves the right to refuse the sale of monthly stickers or
other parking identification devices to Tenant or any of its agents, employees
or representatives who willfully refuse to comply with these rules and
regulations and all unposted city, state or federal ordinances, laws or
agreements.
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10. Loss or theft of parking identification devices or
access cards must be reported to the management office in the Project
immediately, and a lost or stolen report must be filed by the Tenant or user of
such parking identification device or access card at the time. Landlord has the
right to exclude any vehicle from the parking facilities that does not have a
parking identification device or valid access card. Any parking identification
device or access card which is reported lost or stolen and which is subsequently
found in the possession of an unauthorized person will be confiscated and the
illegal holder will be subject to prosecution.
11. All damage or loss claimed to be the responsibility of
Landlord must be reported, itemized in writing and delivered to the management
office located within the Project within ten (10) business days after any
claimed damage or loss occurs. Any claim not so made is waived. Landlord is not
responsible for damage by water or fire, or for the acts or omissions of others,
or for articles left in vehicles. In any event, the total liability of Landlord,
if any, is limited to Two Hundred Fifty Dollars ($250.00) for all damages or
loss to any car. Landlord is not responsible for loss of use.
12. The parking operators, managers or attendants are not
authorized to make or allow any exceptions to these rules and regulations,
without the express written consent of Landlord. Any exceptions to these rules
and regulations made by the parking operators, managers or attendants without
the express written consent of Landlord will not be deemed to have been approved
by Landlord.
13. Landlord reserves the right, without cost or liability
to Landlord, to tow any vehicles which are used or parked in violation of these
rules and regulations.
14. Landlord reserves the right from time to time to modify
and/or adopt such other reasonable and nondiscriminatory rules and regulations
for the parking facilities as it deems reasonably necessary for the operation of
the parking facilities.
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<PAGE>
EXHIBIT "I"
TENANT'S INSURANCE REQUIREMENTS
-------------------------------
This outlines the insurance requirements of your Lease. To assure
compliance with these terms, we suggest you send a copy of this Exhibit to your
insurer or agent. Initial certificates of insurance evidencing compliance with
these terms and payment of premiums therefor must be provided to Landlord by the
earlier of (i) thirty (30) days after execution of the Lease, and (ii) entry by
Tenant or any of its agents, contractors, representatives, employees, invitees
or licensees. Renewals must be provided to Landlord at least thirty (30) days
before expiration of the policy in question.
1. McDonnell Douglas Realty Company should be named as certificate
holder.
2. Both McDonnell Douglas Realty Company and Prentiss Properties
----
Limited, Inc. must be listed as additional insureds.
3. Comprehensive or Commercial General Liability Insurance:
$2,000,000 Combined Single Limit, each occurrence
$2,000,000 Aggregate (minimum) this location
$2,000,000 Products/Completed Operations Aggregate
$250,000 Fire Legal Liability Limit, per fire
Bodily Injury, Property Damage, Personal Injury and Advertising
Injury; Blanket Contractual Liability - Covering Indemnity
Section 15; Products and Completed Operations Liability; and
endorsements covering: Landlord as an additional insured;
severability of interest; cross-liability among insured; and
stating that Tenant's insurance is primary and non-contributing
with any insurance carried by Landlord.
4. Tenant's Property Insurance:
"All Risks" (special-causes-of-loss) coverage of Property owned
by Tenant or for which the Tenant is legally liable and Tenant
Improvements; full replacement cost basis.
5. Tenant's Workers' Compensation as required by law and Employers
Liability Insurance (if requested) in the amount of $1,000,000.00.
6. Tenant's Automobile Insurance (if requested):
$1,000,000 Combined Limit per accident; covering all owned, non-
owned, hired autos (any auto).
All insurance is to be with licensed insurers having a Best's rating of "BIX" or
better, and must include the following: waiver of subrogation in favor of
Landlord, and thirty (30) day pre-notice of cancellation/material change/non
renewal to Landlord. SEND CERTIFICATE TO: McDonnell Douglas Realty Company, c/o
Prentiss Properties, 18881 Von Karman, Suite 220, Irvine, CA 92715 Attention:
Property Manager.
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<PAGE>
ADDENDUM TO LEASE
THIS ADDENDUM is made this _____________ day of June, 1996 by and between
McDONNELL DOUGLAS REALTY COMPANY, a California corporation ("LANDLORD") AUTO-BY-
TEL CORPORATION, a Delaware corporation ("TENANT").
Upon execution by Landlord, this Addendum shall constitute a part of and
be incorporated in the Douglas Plaza Office Lease dated May __, 1996 (the
"Lease"). In the event of any conflict between this Addendum and provisions of
the Lease, this Addendum shall prevail.
1. OPTION TO EXTEND: Tenant shall have one (1) five (5) year option (the
----------------
"Extension Option") to extend the initial term of the Lease upon and subject to
the terms and conditions set forth herein. The Extension Option shall be
exercised by Tenant, if at all, by written notice irrevocably exercising the
Extension Option delivered to Landlord not sooner than nine (9) months and at
least six (6) months prior to the expiration of the Initial Term. If Tenant
exercises the Extension Option, each of the terms, covenants and conditions of
the Lease shall apply during the extended Term except that the Monthly Base Rent
to be paid at the commencement of the extended Term shall be determined by
Landlord and Tenant as follows: by the date which is two weeks after the last
date on which Tenant may exercise the Extension Option, Landlord shall notify
Tenant of the fair market rental rate for the Premises, taking into
consideration all applicable factors, which shall be the Monthly Base Rent
payable during the extended Term ("Landlord's Rent"). If Tenant accepts
Landlord's rent, then Tenant and Landlord shall enter into a written memorandum
agreeing to same within two (2) weeks after Landlord notifies Tenant of
Landlord's Rent, and Tenant's Extension Option shall be deemed to be effective.
If Tenant does not accept Landlord's Rent, then Landlord and Tenant shall
negotiate in good faith towards an agreement on Monthly Base Rent for the
extended Term. If Landlord and Tenant do not agree in writing on or before two
(2) weeks after Landlord notifies Tenant of Landlord's Rent on the Monthly Base
Rent during the extended Term, then the Extension Option shall be deemed to be
void and Landlord may market the Premises for lease for the period after the
expiration of the initial Term. Notwithstanding anything contained herein to
the contrary, if Tenant shall have been ten (10) or more days late in the
payment of rent more than a total of five (5) times during the initial Term, or
if at the time Tenant exercises the Extension Option or immediately prior to the
commencement date of the extended Term Tenant is in material default under any
other term, covenant or condition of the Lease, then Landlord shall have the
right, in addition to all of Landlord's other rights and remedies provided in
the Lease, to terminate the Extension Option already exercised by Tenant upon
notice to Tenant, in which event the Term of the Lease shall end as if the
Extension Option was never exercised and all future options, if any, shall
automatically expire. The Extension Option is personal to the original Tenant
executing this Lease and may not be assigned or exercised after any transfer,
assignment or sublease of any portion of the Lease or the Premises,
excluding, however, transfers, assignments or subleases which are expressly
permitted under the Lease without Landlord's prior written consent, if any.
2. SIGNAGE: Standard signage shall be made available to Tenant at tenant's
-------
cost, in the form of suite signage and building directory strips, subject to
Building standard sign criteria. In addition, In the event Landlord is able, at
no out of pocket cost to Landlord, to obtain approval from the City of Irvine,
and any other approvals from other governmental or quasi governmental agencies
as may be required, for a new monument sign for the subject building of which of
Premises are a part, Tenant shall, subject to all applicable codes and
ordinances, have the non-exclusive right to have Landlord supply and install, at
Tenant's sole expense, one (1) sign (identifying Tenant) on a proportionate
amount of said monument sign. All expenses associated with the installation, all
related electrical costs, if any, all maintenance and repairs required to keep
said sign in good repair throughout the entire lease term, and for its removal
upon Tenant's vacancy of the Premises and the restoration of the monument sign
to its original condition, shall be borne by Tenant. Prior to installation of
said signage, Tenant shall submit an illustration of any and all signs for
Landlord's approval showing the size, type, style, materials, color and method
of installation. This signage is personal to Tenant and shall apply only if
Tenant is continuously leasing and occupying at least one (1) full floor in the
Building.
3. PARKING VALIDATIONS: Tenant shall be entitled to a fifty percent (50%)
-------------------
discount on the first $100.00 of validation stamps for visitor and guest parking
Tenant purchases each month.
4. LETTER OF CREDIT. Tenant shall deposit with Landlord on or prior to the
----------------
Commencement Date an unconditional, irrevocable letter of credit (such letter of
credit and any substitution therefor or renewal or replacement thereof in
accordance with the terms thereof or hereof being herein called the "Letter of
----------
Credit"), in substantially the form attached to this Addendum, in the amount of
- -------
One Hundred Seventy-Five Thousand Dollars ($175,000) (the "Security Amount")
valid for the period commencing on the opening thereof and ending at least one
year after the anniversary thereof, in favor of Landlord and drawn upon a bank
reasonably satisfactory to Landlord, as security for the full and punctual
performance by Tenant of all of the terms of the Lease. The Letter
-45-
<PAGE>
of Credit shall provide that it shall be automatically renewed annually for the
then face amount in effect, for consecutive years of one (1) year each unless
the issuing bank shall terminate the Letter of Credit upon any anniversary of
the issuance thereof by giving Landlord notice at least thirty (30) days prior
to any such anniversary, in which case Landlord may draw the entire face or
principal amount of the Letter of Credit during the ten (10) days immediately
preceding the then current expiration date of the Letter of Credit and hold the
proceeds as described below. If an Event of Default occurs and is continuing
under the Lease, Landlord may draw upon the Letter of Credit in full and the
amount so drawn shall be held by Landlord subject to and in accordance with this
Addendum. Landlord may then use, apply and retain the whole or any part of the
security for the payment of any rental or for any sum which Landlord may expend
or may be required to expend by reason of Tenant's default, including any
damages or deficiency in any re-letting of the Premises, whether accruing before
or after summary proceedings or other re-entry by Landlord. In the case of every
such use, application or retention, Tenant shall, on demand, pay to Landlord
cash, or deposit with Landlord a replacement letter of credit, in an amount
equal to the sum so used, applied or retained which shall be added to the
security deposit so that the same shall be replenished to its former amount. If
Tenant shall comply with all of the terms of the Lease for the first full 36
calendar months of the Lease, or if Tenant satisfies the net worth requirements
hereinafter described, the Letter of Credit, without interest, shall be returned
to Tenant promptly thereafter by Landlord. If Landlord shall be holding a Letter
of Credit as security, then in the event of (i) a sale or lease of the Building
by Landlord or other change in the identity of Landlord or (ii) the transfer of
the Building by foreclosure or deed in lieu of foreclosure, Tenant will, upon
ten (10) days' notice, at its expense, deliver a substitute letter of credit or
endorsement to said letter of credit, naming the new landlord as the new
beneficiary thereof. In the event Tenant shall default in respect of such
obligation, Landlord may draw upon the Letter of Credit and transfer the
proceeds thereof to the new landlord. Tenant, at its sole cost and expense,
shall renew or replace the Letter of Credit at least thirty (30) days prior to
its expiration with a similar Letter of Credit in the same amount issued by a
bank which shall be satisfactory to Landlord. In the event the Letter of Credit
or any substitute Letter of Credit is not renewed or replaced so that at all
times the Letter of Credit held by Landlord hereunder is valid for a period in
excess of thirty (30) days, Landlord may draw upon the Letter of Credit and hold
the proceeds thereof subject to and in accordance with this Addendum. In the
event of a sale or lease of the Building, Landlord shall have the right to
transfer any monies held as security to the vendee or lessee, and in the event
of such transfer and the assumption of this Lease by the transferee, Landlord
shall ipso facto be released by Tenant from all liability for the return of such
----------
monies, and Tenant agrees to look solely to the new landlord for the return of
said security. It is agreed that the foregoing shall apply to every transfer or
assignment of the security to a new landlord. Tenant shall not assign or
encumber or attempt to assign or encumber the Letter of Credit or monies
deposited as security and Landlord shall not be bound by such assignment,
encumbrance or attempted assignment or encumbrance.
Anything contained herein to the contrary notwithstanding, the Letter of
Credit (if not previously drawn upon in accordance with the provisions hereof
shall be released by Landlord to Tenant upon the first to occur of either of the
following events: (a) Tenant has a net worth of $2,000,000 for four consecutive
quarters as shown by then current financial statements, at least one of which
has been audited by an independent certified public accountant acceptable to
Landlord in accordance with generally accepted accounting principles
consistently applied, which financial statements shall show as assets only
tangible assets and no intangible assets of any kind or nature including without
limitation goodwill and shall show tangible assets only at cost after
depreciation in accordance with generally accepted accounting principles
consistently applied; or (b) Tenant is not then in default and has not been in
monetary default beyond applicable notice and cure periods under the Lease at
any time during the first 36 months of the Term.
-46-
<PAGE>
LETTER OF CREDIT
[Letterhead of the Bank]
_____________, 19__
Irrevocable Letter of Credit No .
---------------------------------------------
Gentlemen:
We hereby issue our Irrevocable Letter of Credit No. ("Letter of Credit"
------------------
in your favor, for the account of ____________________ for an amount not to
exceed ____________________ ($___________ ), available from time to time on or
after the date hereof and not later than the close of business on [INSERT A DATE
WHICH IS NOT LESS THAN ONE YEAR AFTER THE COMMENCEMENT DATE] or such later date
through which this credit may be automatically extended and renewed as set forth
below. Drawings under this Letter of Credit shall be by one or more sight
drafts, in the form of Exhibit 1 hereto, presented at our office, bearing this
Letter of Credit number and accompanied by the original of this Letter of Credit
and a statement by you, or the last transferee of this Letter of Credit, as the
case may be, that "the amount of this drawing represents an application of the
security deposit in accordance with the Lease dated _____________ by and between
_______________________ as Landlord, and ____________________ as Tenant, as
amended, modified or supplemented from time to time".
Partial drawings under this Letter of Credit are permitted. We will,
immediately after each presentation of this Letter of Credit, return the same to
you, marking this Letter of Credit to show the amount paid by us and the date of
such payment.
This Letter of Credit may be transferred or assigned one or more times
without our consent and without cost to you upon presentation to us of (i) a
duly completed transfer instruction in the form of Exhibit 2 to this Letter of
Credit and (ii) the original of this Letter of Credit. No other documents or
presentations will be required by us in connection with any such transfer or
assignment of this Letter of Credit.
WE HEREBY AGREE WITH EACH DRAWER, ENDORSER AND BONA FIDE HOLDER OF ANY
DRAFT DRAWN UNDER AND IN COMPLIANCE WITH THE TERMS OF THIS LETTER OF CREDIT THAT
SUCH DRAFT WILL BE DULY HONORED ON DUE PRESENTATION TO US. OUR OBLIGATIONS
HEREUNDER SHALL BE ABSOLUTE AND UNCONDITIONAL AND SHALL NOT BE SUBJECT TO ANY
DEFENSE BY REASON OF THE ACTUAL OR ALLEGED INVALIDITY, ILLEGALITY OR
UNENFORCEABILITY OF THE LEASE OR OTHERWISE.
It is a condition of this Letter of Credit that it shall automatically
be extended and renewed for additional periods of one year from the then current
expiration date hereof for the face amount then in effect. However, this Letter
of Credit shall not be automatically extended and renewed if, at least thirty
(30) days prior to any such expiration date, we notify you in writing at your
address set forth above (or in any transfer instruction, if applicable), by
certified mail, return receipt requested, that we elect not to so extend and
renew this Letter of Credit. In the event we shall have so notified you of our
election not to so extend and renew this Letter of Credit, then the entire face
or principal amount of this Letter of Credit (as the same may have been reduced
as set forth above) may be drawn upon at any time during the ten (10) days
immediately preceding the then current expiration date of this Letter of Credit
upon the presentation by you of only a sight draft bearing this Letter of Credit
number and the original of this Letter of Credit. This Letter of Credit, if
automatically extended and renewed, shall continue as set forth herein, except
that the expiration date hereof shall be the first anniversary of the then
current expiration date of this Letter of Credit.
Subject to the last paragraph of this Letter of Credit, this Letter of
Credit sets forth the full terms of our undertaking, and such undertaking shall
not in any way be modified, amended or amplified by reference to any document,
instrument or agreement referred to in this Letter of Credit or in which this
Letter of Credit is referred
-47-
<PAGE>
to or to which this Letter of Credit relates; and any such reference shall not
be deemed to incorporate herein the terms of any such referenced document,
instrument or agreement.
THIS LETTER OF CREDIT SHALL EXPIRE AT THE CLOSE OF BUSINESS ON [INSERT A
DATE WHICH IS NOT LESS THAN ONE YEAR AFTER THE COMMENCEMENT DATE] or such later
date through which this Letter of Credit may be automatically extended and
renewed as set forth above.
All drafts, documents, instructions and communications pertinent to this
Letter of Credit must be presented to our office located at _____________,
_____________, Attention: Letter of Credit Department, or at any other office in
_______________________________________ which may be designated by our written
notice delivered to you.
We represent, warrant and covenant to and with you that this Letter of
Credit is duly, validly and lawfully issued and that the reimbursement
obligation of the account party owing to the drawee is not, and at no time
during the term of this Letter of Credit will such reimbursement obligation be,
directly or indirectly secured by a security interest, or other collateral
security arrangement, in any of the assets, real or personal, of the account
party.
This Letter of Credit is issued subject to the Uniform Customs and
Practice for Documentary Credits (1993 revision), International Chamber of
Commerce Publication No. 500, and any amendments thereof. This Letter of Credit
shall be deemed to be a contract made under the laws of the State of California
and shall, as to matters not governed by said Uniform Customs and Practice for
Documentary Credits, be governed by and construed in accordance with the laws of
said State.
Yours very truly,
[Name of Issuing Bank]
By:___________________________________
Authorized Signature
By:___________________________________
Authorized Signature
-48-
<PAGE>
Exhibit 1
---------
DRAFT
-----
Letter of Credit No.: _____________________
Date of Letter Credit: _____________________
Date of this Draft: _____________________
_____________, 199__
To the Order of _____________________
Pay ________________($_________) Dollars At Sight
For value received under Letter of Credit No. ____________
To: [Insert name and address of Issuing Bank]
This Draft is payable only at: [Insert name and address of
Issuing Bank]
_____________________
By:________________________
Title:_____________________
<PAGE>
EXHIBIT 2 To Letter of Credit No. ___________
______________, 199__
INSTRUCTION TO TRANSFER IN FULL
Attention: Letter of Credit Division
Re: Your Irrevocable Letter of Credit No.
-----------------------------------------------
Gentlemen:
The undersigned beneficially irrevocably transfers all rights of the
undersigned beneficiary to draw under the above Letter of Credit to:
(Name of Transferee)
(Address of Transferee)
By this transfer all rights of the undersigned beneficiary in such
Letter of Credit are transferred to the transferee.
The above Letter of Credit is returned herewith, and in accordance
therewith we ask you to issue a new irrevocable Letter of Credit in favor of the
above-named transferee in the amount of $__________ and with other provisions
consistent with the above Letter of Credit.
Very truly yours,
__________________________________
By:_______________________________
Authorized Signature
<PAGE>
Exhibit I
---------
DRAFT
-----
Letter of Credit No.: _____________________
Date of Letter Credit: ____________________
Date of this Draft: _______________________
_____________, 199__
To the Order of _____________________
Pay_______________($_________) Dollars At Sight
For value received under Letter of Credit No. ___________________
To: [Insert name and address of Issuing Bank]
This Draft is payable only at: [Insert name and address of Issuing Bank]
_____________________
By:
Title:
<PAGE>
EXHIBIT 10.15
SUBLEASE AGREEMENT
DATED OCTOBER 31, 1996
BETWEEN REGISTRANT AND
SILICON VALLEY BANK
<PAGE>
OFFICE BUILDING LEASE
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. BASIC LEASE TERMS........................................ 1
2. PREMISES AND COMMON AREAS................................ 1
(a) Premises........................................ 1
(b) Mutual Covenants................................ 1
(c) Tenant's Use of Common Areas.................... 1
(d) Landlord's Reservation of Rights................ 2
3. TERM; COMMENCEMENT DATE.................................. 2
4. POSSESSION............................................... 2
(a) Delivery of Possession.......................... 2
(b) Condition of Premises........................... 2
5. RENT..................................................... 3
(a) Monthly Base Rent............................... 3
(b) Additional Rent................................. 3
(c) Late Payments................................... 3
6. OPERATING EXPENSES....................................... 3
(a) Operating Expenses.............................. 3
(b) Base Year Operating Expenses.................... 3
(c) Estimate Statement.............................. 3
(d) Actual Statement................................ 4
(e) Miscellaneous................................... 4
(f) After-Hours HVAC................................ 5
(g) Tenant's Audit Rights........................... 5
7. SECURITY DEPOSIT......................................... 5
8. USE...................................................... 5
(a) Tenant's Use of the Premises.................... 5
(b) Compliance...................................... 6
9. NOTICES.................................................. 7
10. BROKERS.................................................. 7
11. SURRENDER; HOLDING OVER.................................. 8
(a) Surrender....................................... 8
(b) Holding Over.................................... 8
12. TAXES ON TENANT'S PROPERTY............................... 8
13. ALTERATIONS.............................................. 8
-i-
</TABLE>
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
14. REPAIRS.................................................. 10
(a) Landlord's Obligations.......................... 10
(b) Tenant's Obligations............................ 10
(c) Tenant's Failure to Repair...................... 11
15. LIENS.................................................... 11
16. ENTRY BY LANDLORD........................................ 11
18. ASSUMPTION OF RISK AND INDEMNIFICATION................... 12
(a) Tenant's Assumption of Risk and Waiver.......... 12
(b) Indemnification................................. 12
(c) Survival; No Release of Insurers................ 13
19. INSURANCE................................................ 13
(a) Tenant's Insurance.............................. 13
(b) Supplemental Tenant Insurance Requirements...... 14
(c) Tenant's Use.................................... 14
(d) Cancellation of Landlord's Policies............. 15
(e) Mutual Waiver of Subrogation.................... 15
20. DAMAGE OR DESTRUCTION.................................... 15
(a) Partial Destruction............................. 15
(b) Substantial Destruction......................... 15
(c) Notice.......................................... 15
(d) Tenant's Termination Rights..................... 16
(e) Tenant's Costs and Insurance Proceeds........... 16
(f) Abatement of Rent............................... 16
(g) Inability to Complete........................... 16
(h) Damage Near End of Term......................... 16
(i) Waiver of Termination Right..................... 16
(j) Termination..................................... 17
21. EMINENT DOMAIN........................................... 17
(a) Substantial Taking.............................. 17
(b) Partial Taking; Abatement of Rent............... 17
(c) Condemnation Award.............................. 17
(d) Temporary Taking................................ 17
22. DEFAULTS AND REMEDIES.................................... 17
(a) Default By Tenant.................................... 17
(b) Notices.............................................. 18
(c) Landlord's Remedies; Termination..................... 18
(d) Landlord's Remedies: Re-Entry Rights................. 19
(e) Landlord's Remedies: Re-Letting...................... 19
(f) Landlord's Remedies; Performance for Tenant.......... 19
(g) Late Payment......................................... 19
(h) Intentionally omitted................................ 20
-ii-
</TABLE>
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
(i) Rights and Remedies Cumulative....................... 20
23. LANDLORD'S DEFAULT....................................... 20
24. ASSIGNMENT AND SUBLETTING................................ 20
(a) Restriction on Transfer......................... 20
(b) Corporate and Partnership Transfers............. 20
(c) Permitted Controlled Transfers.................. 20
(d) Transfer Notice................................. 21
(e) Landlord's Options.............................. 21
(f) Reasonable Disapproval.......................... 21
(g) Additional Conditions........................... 21
(h) Excess Rent..................................... 22
(i) Intentionally omitted........................... 22
(j) No Release...................................... 22
(k) Administrative and Attorneys' Fees.............. 22
25. SUBORDINATION............................................ 23
26. ESTOPPEL CERTIFICATE..................................... 23
(a) Tenant's Obligations............................ 23
(b) Tenant's Failure to Deliver..................... 24
27. Intentionally omitted.................................... 24
28. RULES AND REGULATIONS.................................... 24
29. MODIFICATION AND CURE RIGHTS OF LANDLORD'S MORTGAGEES
AND LESSORS.............................................. 24
(a) Modifications................................... 24
(b) Cure Rights..................................... 24
30. DEFINITION OF LANDLORD................................... 24
31. WAIVER................................................... 25
32. PARKING.................................................. 25
(a) Grant of Parking Rights......................... 25
(b) Visitor Parking................................. 25
(c) Use of Parking Spaces........................... 25
(d) General Provisions.............................. 26
(e) Cooperation with Traffic Mitigation Measures.... 26
(f) Parking Rules and Regulations................... 26
33. FORCE MAJEURE............................................ 26
34. SIGNS.................................................... 27
35. LIMITATION ON LIABILITY.................................. 27
-iii-
</TABLE>
<PAGE>
TABEL OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
36. FINANCIAL STATEMENTS..................................... 28
37. QUIET ENJOYMENT.......................................... 28
38. MISCELLANEOUS............................................ 28
(a) Conflict of Laws................................ 28
(b) Successors and Assigns.......................... 28
(c) Professional Fees and Costs..................... 28
(d) Terms and Headings.............................. 28
(e) Time............................................ 28
(f) Prior Agreement; Amendments..................... 28
(g) Separability.................................... 28
(h) Recording....................................... 28
(i) Counterparts.................................... 28
(j) Nondisclosure of Lease Terms.................... 28
(k) Use of Project or Building Name................. 29
(l) No Light and Air Easement....................... 29
39. RESOLUTION OF DISPUTES................................... 29
(a) Reference of Dispute............................ 29
(b) Cooperation..................................... 30
(c) Allocation of Costs............................. 30
40. EXECUTION OF LEASE....................................... 30
(a) Joint and Several Obligations................... 30
(b) Tenant as Corporation or Partnership............ 30
(c) Examination of Lease............................ 30
</TABLE>
EXHIIBITS:
A Site Plan
B Floor Plan
C Work Letter Agreement
D Notice of Lease Term Dates and Tenant's Percentage
E Definition of Operation Expenses
F Standards of Utilities and Services
G Estoppel Certificate
H Rules and Regulations
I Tenant's Insurance Requirements
-iv-
<PAGE>
EXHIBIT 10.15
SUBLEASE
This sublease (the "Sublease") is made on October 31, 1996, between
Silicon Valley Bank ("Sublandlord"), whose address is 3003 Tasman Drive, Santa
Clara, CA 95054 and AUTO-BY-TEL CORP. ("Subtenant"), whose address is 18872
MacArthur Boulevard, Suite 200, Irvine, CA 92612, who agree as follows:
1. Recitals. This Sublease is made with reference to the following facts
--------
and objectives:
(a) The Provider Fund, as successor in interest to McDonnell Douglas
Realty Company, as Landlord ("Master Landlord"), and Sublandlord, as Tenant,
have entered into a written lease dated December 4, 1995, as amended by a first
amendment entered into as of March 29, 1996 and a second amendment entered into
as of June 1, 1996 (as amended, the "Master Lease"), regarding that certain real
property located on 18872 MacArthur Boulevard (the "Building"), Suites 100 and
150, Irvine, CA 92612, as more particularly described therein (the "Premises").
A copy of the Master Lease is attached hereto as Exhibit "A".
(b) Subtenant desires to sublet the portion of the Premises commonly
referred to as Suite 150 ("Suite 150"), from Sublandlord on the provisions
contained in this Sublease. A floor plan of Suite 150 is attached as Exhibit
"B".
2. Premises. Sublandlord hereby leases to Subtenant and Subtenant hereby
--------
leases from Sublandlord Suite 150. Suite 150, located on the first floor of the
Building, containing 1,361 rentable square feet and 1,237 usable square feet.
Subtenant's Percentage of the 45,454 square foot Building on a rentable square
foot basis, is 2.99%.
3. Permitted Use. Subtenant may use Suite 150 for general office
-------------
purposes, and no other use.
4. Term; Possession. The term shall commence on November 1, 1996, and
----------------
shall expire April 30, 1997. If Sublandlord is unable to deliver possession of
Suite 150 by the date specified for the commencement of the term as a result of
causes beyond its reasonable control, Sublandlord shall not be liable for any
damage caused for failing to deliver possession, provided, however, that
Subtenant shall then have the right to terminate this Sublease. Subtenant shall
not be liable for any charges hereunder until Sublandlord delivers possession of
Suite 150 to Subtenant, but the term shall not be extended by any delay.
Subtenant shall have no right to extend the term beyond April 30, 1997;
provided, however, that, if Subtenant not less than forty-five (45) days prior
to the expiration date of the term, requests Sublandlord to extend the term for
an additional thirty (30) day period, Sublandlord shall use its best efforts to
respond to Subtenant's request within fifteen (15) days of receipt of the
request. Any failure by Sublandlord to respond to the request within the
fifteen (15) day period shall not be deemed an acceptance. Any such thirty (30)
day extensions shall be at Sublandlord's sole discretion and shall otherwise be
in accordance with the terms and conditions set forth herein.
5. Rent. Subtenant agrees to pay Sublandlord One Thousand Nine Hundred
----
Five and 40/100 Dollars ($1,905.40) rent (the "Monthly Base Rent") for Suite 150
in advance on the first day of each calendar month during the Term. All rent
must be paid to Sublandlord, without any deduction or offset, in lawful money of
the United States of America, at 3003 Tasman Drive, NC 822, Santa Clara, CA
95054, Attn: Shawn Street, or to such other person or at such other place as
Sublandlord may from time to time designate in writing.
6. Security Deposit. On execution of this Sublease, Subtenant shall
----------------
deposit with Sublandlord Two Thousand Ninety-Five and 45/100 Dollars ($2,095.45)
as a security deposit for the performance by Subtenant of the provisions of this
Sublease. If Subtenant is in default, Sublandlord can use the security deposit,
or any portion of it, to cure the default or to compensate Sublandlord for all
damage sustained by Sublandlord resulting from Subtenant's default. Subtenant
shall immediately on demand pay to Sublandlord a sum equal to the portion of the
security deposit expended or applied by Sublandlord as provided in this
paragraph so as to maintain the security deposit in the sum initially
<PAGE>
deposited with Sublandlord. If Subtenant is not in default at the expiration or
termination of this Sublease, Sublandlord shall return the security deposit to
Subtenant. Sublandlord's obligations with respect to the security deposit are
those of a debtor and not a trustee. Sublandlord can maintain the security
deposit separate and apart from Sublandlord's general funds or can commingle the
security deposit with Sublandlord's general and other funds. Sublandlord shall
not be required to pay Subtenant interest on the security deposit.
7. Incorporation by Reference; Assumption. The Master Lease is
--------------------------------------
incorporated by reference into, and made a part of, this Sublease to the extent
applicable to Suite 150, except for the following paragraphs:
Paragraphs 3, 4(a) and (b), 5(a), 6(g), 7, 10, 24(b)-(k), 32, Exhibits A-D,
Exhibit 1, Addendum to Lease
Subtenant shall assume and perform to Sublandlord the Tenant's obligations
to the Landlord under the foregoing Master Lease provisions to the extent that
the provisions are applicable to Suite 150 under this Sublease. To the extent
any of the provisions set forth in the Master Lease conflict with any of the
provisions set forth in this Sublease, the provisions of this Sublease shall
control.
Sublandlord does not assume the obligations of the Master Landlord under
the provisions of the Master Lease, but shall exercise due diligence in
attempting to cause the Master Landlord to perform its obligations under the
Master Lease for the benefit of Subtenant. If such obligations are not
performed and materially affect Subtenant's tenancy, Subtenant may terminate
this Sublease by written notice to Sublandlord.
8. Operating Expenses. Subtenant agrees to the following modifications
------------------
to Paragraph 6 of the Master Lease:
In addition to Monthly Base Rent, throughout the Term of this
Sublease, Subtenant agrees to pay Sublandlord as additional rent in
accordance with the terms of this Sublease, Subtenant's Percentage of
Operating Expenses (as defined in Exhibit "E" to the Master Lease) to the
extent Subtenant's Percentage of Operating Expenses exceeds Subtenant's
Percentage of the Base Year Operating Expenses for 1996.
9. Insurance. Subtenant agrees to the following modifications to
---------
Paragraph 19 of the Master Lease:
The minimum limits of Commercial Public Liability Insurance or
Comprehensive General Liability Insurance coverage referred to in Paragraph
19(a)(iii) and of Comprehensive Automobile Liability referred to in
Paragraph 19(a)(iv) shall not be less than $1,000,000. In addition to
Sublandlord, Master Landlord shall also be named as an additional insured.
Subtenant's insurance shall be primary insurance. Any other insurance
maintained by Sublandlord or Master Landlord shall be excess only and not
contributing with Subtenant's insurance.
10. Covenant of Quiet Enjoyment. Sublandlord represents that the Master
---------------------------
Lease is in full force and effect and that there are no defaults on
Sublandlord's part under it as of the commencement of the term of this Sublease.
Subject to this Sublease terminating as provided in Paragraphs 20 and 21 of
the Master Lease, and Paragraph 11 of this Sublease, Sublandlord represents
that, if Subtenant performs all the provisions in this Sublease to be performed
by Subtenant, Subtenant shall have and enjoy throughout the term of this
Sublease the quiet and undisturbed possession of the premises.
11. Master Lease. This Sublease is subject to all the provisions of the
------------
Master Lease, and Subtenant shall not permit any act or omission to act that
will violate any of the provisions of the Master Lease.
-2-
<PAGE>
If the Master Lease terminates, this Sublease shall terminate and the
parties shall be relieved from all liabilities and obligations under this
Sublease; except that if this Sublease terminates as a result of a default of
one of the parties under this Sublease or the Master Lease, or both, the
defaulting party shall be liable to the nondefaulting party for all damage
suffered by the nondefaulting party as a result of termination.
12. Attorneys Fees; Jury Trial Waiver; Integration.
----------------------------------------------
(a) In the event any dispute arises in connection with this Sublease,
the prevailing party shall be entitled to recover all of its costs and expenses,
including reasonable attorneys fees.
(b) This Sublease shall be governed by, and construed in accordance
with, the internal laws of the State of California, without regard to principles
of conflicts of law. Each of Sublandlord and Subtenant hereby submits to the
exclusive jurisdiction of the state and Federal courts located in the County of
Los Angeles, State of California. SUBLANDLORD AND SUBTENANT EACH HEREBY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS SUBLEASE, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY
RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR IT TO ENTER INTO THIS SUBLEASE. EACH PARTY REPRESENTS AND
WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.
(c) This Sublease cannot be amended or terminated except by a writing
signed by Sublandlord and Subtenant. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Sublease, if any, are merged into this
Sublease.
13. Landlord's Approval. The effectiveness of this Sublease shall be
-------------------
expressly conditioned upon the prior written consent of this Sublease by Master
Landlord in strict accordance with the terms and conditions of Paragraph 24 of
the Master Lease. Subtenant shall promptly reimburse Sublandlord for any costs
and expenses incurred by Sublandlord in connection with obtaining the Master
Landlord's consent.
Sublandlord Subtenant
SILICON VALLEY BANK AUTO-BY-TEL CORP.
By: ______________________________ By: _______________________________
Its: _____________________________ Its: ______________________________
Above is acknowledged and agreed:
THE PROVIDER FUND
By: ______________________________
Its: _____________________________
-3-
<PAGE>
EXHIBIT "A"
OFFICE BUILDING LEASE
BETWEEN
McDONNELL DOUGLAS REALTY COMPANY
LANDLORD
AND
SILICON VALLEY BANK
TENANT
<PAGE>
OFFICE BUILDING LEASE
---------------------
THIS OFFICE BUILDING LEASE ("Lease") is entered into as of the _____ day of
_______________, 1995 by and between McDonnell Douglas Realty Company, a
California corporation ("Landlord"), and Silicon Valley Bank ("Tenant").
1. BASIC LEASE TERMS. For purposes of this Lease, the following terms
-----------------
have the following definitions and meanings:
2. PREMISES AND COMMON AREAS.
-------------------------
(a) Premises. Landlord hereby leases to Tenant and Tenant hereby
--------
leases from Landlord, without representation or warranty, express or implied,
the Premises described in Subsection 1(g). The rentable square feet and usable
square feet of the Premises and the Building set forth above in Section 1 shall
be deemed to be the rentable square feet and usable square feet of the Premises
and Building for all purposes, whether the actual rentable square feet or usable
square feet may be more or less than the amounts set forth above. In that
regard, Landlord and Tenant have each been given an opportunity to measure or
re-measure the square footage of the Premises prior to execution of this Lease
and Landlord and Tenant each hereby waive any rights they may have following
execution of this Lease to measure or remeasure the Premises or Building or
claim that the rentable square feet or usable square feet of the Premises or
Building is other than as set forth in Section 1.
(b) Mutual Covenants. Landlord and Tenant agree that the letting and
----------------
hiring of the Premises is upon and subject to the terms, covenants and
conditions contained in this Lease and each party covenants as a material part
of the consideration for this Lease to keep and perform their respective
obligations under this Lease.
(c) Tenant's Use of Common Areas. During the Term of this Lease,
----------------------------
Tenant shall have the nonexclusive right to use in common with Landlord and all
persons, firms and corporations conducting business in the Project and their
respective customers, guests, licensees, invitees, subtenants, employees and
agents (collectively, "Project Occupants"), subject to the terms of this Lease,
the Rules and Regulations referenced in Section 32 and all covenants, conditions
and restrictions now or hereafter affecting the Project, the following common
areas of the Building and/or the Project (collectively, the "Common Areas"), all
of which shall be subject to Landlord's sole management and control and shall be
operated and maintained in such manner as Landlord in its sole but good faith
discretion shall determine:
(i) The Building's common entrances, hallways, lobbies, public
restrooms on multi-tenant floors, elevators, stairways and accessways,
loading docks, ramps, drives and platforms and any passageways and
serviceways thereto, and the common pipes, conduits, wires and appurtenant
equipment within the Building which serve the Premises (collectively,
"Building Common Areas"); and
(ii) The parking facilities of the Project which serve the
Building (subject to the provisions of Exhibit "H"), loading and unloading
-----------
areas, trash areas, roadways, sidewalks, walkways, parkways, driveways,
landscaped areas, plaza areas, fountains and similar areas and facilities
situated within the Project and appurtenant to the Building which are not
reserved for the exclusive use of any Project Occupants (collectively,
"Project Common Areas"),
provided, however, that Landlord shall use reasonable efforts to minimize
interference with Tenant's use of and access to the Premises; and provided,
further, that if Tenant is prevented from using, and does not use, the Premises
or any material portion thereof, for three (3) consecutive business days because
of Landlord's unreasonable interference with Tenant's use of and access to the
Premises and Tenant shall have given Landlord written notice respecting such
interference, then Tenant's Monthly Base Rent shall be abated or reduced, as the
case may be, after expiration of the applicable period of time described above
for such time that Tenant continues to be so prevented from using, and does not
use, the rentable area of the portion of the Premises that Tenant is prevented
from using, and does not
<PAGE>
use, based on the ratio that the unusable portion bears to the total rentable
area of the Premises; provided, however, if Tenant reoccupies and conducts its
business from any portion of the Premises during such period, the rent allocable
to such reoccupied portion, based on the proportion that the rentable area of
such reoccupied portion of the Premises bears to the total rentable area of the
Premises, shall be payable by Tenant from the date such business operations
commence; and provided further that the rent abatement described above shall in
no event continue after the time such unreasonable interference ceases.
(d) Landlord's Reservation of Rights. Provided Tenant's use of and
--------------------------------
access to the Premises and parking to be provided to Tenant under this Lease is
not interfered with in an unreasonable manner, Landlord reserves for itself and
for all other owner(s) and operator(s) of the Project Common Areas and the
balance of the Project, the right from time to time to: (i) install, use,
maintain, repair, replace and relocate pipes, ducts, conduits, wires and
appurtenant meters and equipment above the ceiling surfaces, below the floor
surfaces, within the walls and in the central core areas of the Building; (ii)
make changes to the design and layout of the Project, including, without
limitation, changes to buildings, driveways, entrances, loading and unloading
areas, direction of traffic, landscaped areas and walkways, and, subject to the
parking provisions contained in Section 32 and Exhibit "H", parking spaces and
-----------
parking areas; and (iii) use or close temporarily the Building Common Areas, the
Project Common Areas and/or other portions of the Project while engaged in
making improvements, repairs or alterations to the Building, the Project, or any
portion thereof; provided, however, that Landlord shall use its best efforts to
provide Tenant with reasonable advance notice of any closure of such areas.
3. TERM; COMMENCEMENT DATE. The term of this Lease ("Term") will be for
-----------------------
the period designated in Subsection 1(i), commencing on the Commencement Date,
and ending as of midnight on the last day of the month in which the expiration
of such period occurs (the "Expiration Date"), unless terminated earlier as
provided herein. Each consecutive twelve (12) month period of the Term of this
Lease, commencing on the Commencement Date, will be referred to herein as a
"Lease Year". Landlord's Notice of Lease Term Dates and Tenant's Percentage
("Notice"), in the form of Exhibit "D" attached hereto, will set forth the
-----------
Commencement Date, the date upon which the Term of this Lease shall end, the
rentable square feet within the Premises and the Building, and Tenant's
Percentage and will be delivered to Tenant after Landlord delivers possession of
the Premises to Tenant. The Notice will be binding upon Tenant unless Tenant
objects to the Notice in writing within five (5) business days of Tenant's
receipt of the Notice.
4. POSSESSION.
----------
(a) Delivery of Possession. Landlord agrees to deliver possession of
----------------------
the Premises to Tenant in accordance with the terms of the Work Letter Agreement
attached hereto as Exhibit "C". Notwithstanding the foregoing, Landlord will
-----------
not be obligated to deliver possession of the Premises to Tenant until Landlord
has received from Tenant all of the following: (i) a copy of this Lease fully
executed by Tenant and the guaranty of Tenant's obligations under this Lease, if
any, executed by the Guarantor(s); (ii) the Security Deposit and the first
installment of Monthly Base Rent; (iii) executed copies of policies of insurance
or certificates thereof as required under Section 19 of this Lease; (iv) copies
of all governmental permits and authorizations, if any, required in connection
with Tenant's operation of its business within the Premises; and (v) if Tenant
is a corporation or partnership, such evidence of due formation, valid existence
and authority as Landlord may reasonably require, which may include, without
limitation, a certificate of good standing, certificate of secretary, articles
of incorporation, statement of partnership, or other similar documentation.
(b) Condition of Premises. By taking possession of the Premises,
---------------------
Tenant will be deemed to have accepted the Premises in its condition, subject to
any written punch list items to be performed by Landlord pursuant to the Work
Letter Agreement, on the date of delivery of possession and to have acknowledged
that the Tenant Improvements have been installed as required by the Work Letter
Agreement and that there are no additional items needing work or repair. Tenant
acknowledges that neither Landlord nor any agent of Landlord has made any
representation or warranty with respect to the Premises, the Building, the
Project or any portions thereof or with respect to the suitability of same for
the conduct of Tenant's business and Tenant further acknowledges that
-2-
<PAGE>
Landlord has no obligation to construct or complete any additional buildings or
improvements within the Project.
(c) Use and Occupancy Prior to Commencement Date. If Tenant shall
--------------------------------------------
for any reason use or occupy the Premises in any way prior to the Commencement
Date, then during such prior use or occupancy Tenant shall be a tenant of
Landlord and shall be subject to the covenants and agreements set forth in this
Lease other than provisions pertaining to the payment of Monthly Base Rent.
Nothing herein shall be construed as Landlord's consent to Tenant's use or
occupancy of the Premises for any reason prior to the Commencement Date.
5. RENT.
----
(a) Monthly Base Rent. Tenant agrees to pay Landlord the Monthly
-----------------
Base Rent for the Premises (subject to adjustment as hereinafter provided) in
advance on the first day of each calendar month during the Term, except that
Tenant agrees to pay the Monthly Base Rent for the first full calendar month of
the Term directly to Landlord concurrently with Tenant's delivery of the
executed Lease to Landlord. If the Term of this Lease commences on a day other
than the first day of a calendar month, then the rent for such period will be
prorated in the proportion that the number of days this Lease is in effect
during such period bears to the number of days in such month and the excess
rent, if any, paid in advance by Tenant, shall be credited toward the rent due
for the next calendar month. All rent must be paid to Landlord, without any
deduction or offset, in lawful money of the United States of America, at the
address designated by Landlord (and if no such address is designated, at the
address first set forth in Subsection 1(b)) or to such other person or at such
other place as Landlord may from time to time designate in writing. Monthly Base
Rent will be adjusted during the Term of this Lease as provided in Subsection
1(m). All monthly installments of Monthly Base Rent shall be due and payable as
aforesaid whether or not Landlord shall have given Tenant any prior written
notice or bill with respect thereto, and Landlord shall have no obligation
whatsoever to give Tenant any written notice or bill with respect to any Monthly
Base Rent installment.
(b) Additional Rent. All amounts and charges to be paid by Tenant
---------------
hereunder, including, without limitation, payments for Operating Expenses,
insurance, repairs, parking and After-Hours HVAC charges, will be considered
"Additional Rent" for purposes of this Lease. Monthly Base Rent and Additional
Rent and all other sums payable by Tenant under this Lease (collectively,
"Rent") shall be deemed to be and shall be treated as rent and shall be payable
and recoverable as rent, and Landlord shall have all rights against Tenant for
default in any payment of Additional Rent or such other sum as in the case of
non-payment of Monthly Base Rent.
(c) Late Payments. Late payments of Monthly Base Rent and/or any
-------------
item of additional rent will be subject to interest and a late charge as
provided in Subsection 22(f).
6. OPERATING EXPENSES.
------------------
(a) Operating Expenses. In addition to Monthly Base Rent,
-------------------
throughout the Term of this Lease, Tenant agrees to pay Landlord as additional
rent in accordance with the terms of this Section 6, Tenant's Percentage (as
defined in Subsection 1(h) of Operating Expenses (as defined in Exhibit "E"
------------
attached hereto) to the extent Tenant's Percentage of Operating Expenses exceeds
Tenant's Percentage of the Base Year Operating Expenses (as hereinafter
defined).
(b) Base Year Operating Expenses. "Base Year Operating Expenses"
----------------------------
shall mean the actual Operating Expenses for the Base Year set forth in
Subsection 1(u).
(c) Estimate Statement. As soon as practicable after the expiration
------------------
of the Base Year, and as soon as practicable after January 1st of each
subsequent calendar year during the Term of this Lease, Landlord will endeavor
to deliver to Tenant a statement ("Estimate Statement") wherein Landlord will
estimate both the Operating Expenses and Tenant's Percentage of Operating
Expenses for the then current calendar year. If the estimate of Tenant's
Percentage of Operating Expenses in the Estimate Statement exceeds Tenant's
Percentage of Base Year Operating Expenses, Tenant agrees to pay Landlord, as
Additional Rent, one-twelfth (1/12th) of such excess each month thereafter,
beginning with the next installment of rent due, until such time as Landlord
issues a revised
-3-
<PAGE>
Estimate Statement or the Estimate Statement for the succeeding calendar year,
except that, concurrently with the regular monthly rent payment next due
following the receipt of each such Estimate Statement, Tenant agrees to pay
Landlord an amount equal to one monthly installment of such excess (less any
applicable Operating Expenses already paid) multiplied by the number of months
from January, in the current calendar year, to the month of such rent payment
next due, all months inclusive. If at any time and from time to time during the
Term of this Lease, Landlord reasonably determines that Tenant's Percentage of
Operating Expenses for the current calendar year will be greater than the amount
set forth in the then current Estimate Statement, Landlord may issue a revised
Estimate Statement and Tenant agrees to pay Landlord, within twenty (20) days of
receipt of the revised Estimate Statement the difference between the amount owed
by Tenant under such revised Estimate Statement and the amount owed by Tenant
under the original Estimate Statement for the portion of the then current
calendar year which has expired. Thereafter Tenant agrees to pay Tenant's
Percentage of Operating Expenses based on such revised Estimate Statement until
Tenant receives the next calendar year's Estimate Statement or a new revised
Estimate Statement for the current calendar year. In the event Tenant's
Percentage of Operating Expenses for any calendar year is less than Tenant's
Percentage of Base Year Operating Expenses, Tenant will not be entitled to a
credit against any rent, additional rent or Tenant's Percentage of future
Operating Expenses payable hereunder.
(d) Actual Statement. As soon as practicable after expiration of the
----------------
calendar year following the Base Year, and as soon as practicable after
expiration of each subsequent calendar year during the Term of this Lease,
Landlord will also endeavor to deliver to Tenant a statement ("Actual
Statement") which states the actual Operating Expenses for the preceding
calendar year. If the Actual Statement reveals that Tenant's Percentage of the
actual Operating Expenses is more than the total Additional Rent paid by Tenant
for Operating Expenses on account of the preceding calendar year, Tenant agrees
to pay Landlord the difference in a lump sum within thirty (30) days of receipt
of the Actual Statement. If the Actual Statement reveals that Tenant's
Percentage of the actual Operating Expenses is less than the Additional Rent
paid by Tenant for Operating Expenses on account of the preceding calendar year,
Landlord will credit any overpayment toward the next monthly installment(s) of
Tenant's Percentage of the Operating Expenses due under this Lease.
(e) Miscellaneous. Any delay or failure by Landlord in delivering
-------------
any Estimate Statement or Actual Statement pursuant to this Section 6 will not
constitute a waiver of its right to require an increase in rent nor will it
relieve Tenant of its obligations pursuant to this Section 6, except that Tenant
will not be obligated to make any payments based on such Estimate Statement or
Actual Statement until twenty (20) days after receipt of such Estimate Statement
or Actual Statement. Even though the Term has expired and Tenant has vacated
the Premises, when the final determination is made of Tenant's Percentage of the
actual Operating Expenses for the year in which this Lease terminates, Tenant
agrees to promptly pay any increase due over the estimated expenses paid and,
conversely, any overpayment made in the event said expenses decrease shall
promptly be rebated by Landlord to Tenant. Prior to the expiration or sooner
termination of the Lease Term and Landlord's acceptance of Tenant's surrender of
the Premises, Landlord will have the right to estimate the actual Operating
Expenses for the then current Lease Year and to collect from Tenant prior to
Tenant's surrender of the Premises, Tenant's Percentage of any excess of such
actual Operating Expenses over the estimated Operating Expenses paid by Tenant
in such Lease Year. Notwithstanding anything to the contrary set forth in
Exhibit "E", when calculating the Base Year Operating Expenses, such Operating
- -----------
Expenses shall not include any increase in Real Property Taxes and Assessments
attributable to special assessments, charges, costs, or fees, or due to
modifications or changes in governmental laws or regulations, including but not
limited to the institution of a split tax roll, and Base Year Operating Expenses
shall exclude market-wide labor-rate increases due to extraordinary
circumstances, including, but not limited to, boycotts and strikes, and utility
rate increases due to extraordinary circumstances including, but not limited to,
conservation surcharges, boycotts, embargoes or other shortages and amortized
costs relating to capital improvements. If, in any Lease Year, the amount of
Real Property Taxes and Assessments attributable to the Project inclusive of
tenant improvements, decreases, then for purposes of all subsequent calendar
years, including the calendar year in which such decrease in Real Property Taxes
and Assessments occurred, Base Year Operating Expenses shall be decreased by an
amount equal to the decrease in Real Property Taxes and Assessments.
-4-
<PAGE>
(f) After-Hours HVAC. In addition to Monthly Base Rent and Tenant's
----------------
Percentage of Operating Expenses, Tenant agrees to pay Landlord the cost charged
by Landlord from time to time (which cost as of the date of this Lease is $17.00
per hour) for After-Hours HVAC used by Tenant, plus any costs to maintain the
HVAC system due to Tenants After-Hours HVAC usage. Landlord shall provide Tenant
a monthly invoice of the HVAC costs payable by Tenant, and Tenant shall pay for
such costs within twenty (20) days of receiving each invoice.
(g) Tenant's Audit Rights. The information set out in the statements
---------------------
submitted to Tenant pursuant to this Section 6 shall be binding on Tenant unless
Tenant gives written notice to Landlord within one hundred twenty (120) days
after Landlord's submission of such statement stating that Tenant intends to
cause Landlord's books and records (which shall include applicable back-up
information) with respect to the preceding calendar year to be audited by a
certified public accountant ("CPA"), or other qualified specialist approved in
advance by Landlord, qualified to audit said statements and reasonably
acceptable to Landlord, identifying the statement in question and setting out in
reasonable detail the reason why such statement should not be binding on Tenant.
If Tenant does not timely exercise its right to have Landlord's books and
records audited, or does not cause such audit to be accomplished within ninety
(90) days after notice of its election to do so, Tenant's right to object to any
such statement shall lapse. Tenant shall pay all costs of such audit
(including, without limitation, any and all copying costs), unless the actual
amount of Additional Rent for the calendar year in question is properly
determined by the CPA to be five percent (5%) less than the amount of Additional
Rent for the same calendar year set forth in the statement submitted to Tenant
by Landlord, in which event Landlord shall pay the reasonable cost of such
audit. Any such audit shall occur only in such offices and such location as
Landlord shall designate. The amount of Additional Rent payable by Tenant to
Landlord shall be appropriately adjusted on the basis of such audit and, if the
audit shows that Landlord has overcharged Tenant, Landlord shall credit such
overcharge against the next installment of Additional Rent coming due hereunder.
7. SECURITY DEPOSIT. Concurrently with Tenants execution of this Lease,
----------------
Tenant will deposit with Landlord the Security Deposit designated in Subsection
1(o). The Security Deposit is in an amount equal to one hundred ten percent
(110%) of the highest Monthly Base Rent amount anticipated for the initial Lease
Term. The Security Deposit will be held by Landlord as security for the full
and faithful performance by Tenant of all of the terms, covenants, and
conditions of this Lease to be kept and performed by Tenant during the Term
hereof. If Tenant fully and faithfully performs its obligations under this
Lease, including, without limitation, surrendering the Premises upon the
expiration or sooner termination of this Lease in compliance with Subsection
11(a), the Security Deposit or any balance thereof will be returned to Tenant
(or, at Landlord's option, to the last assignee of Tenant's interest hereunder)
within thirty (30) days following the expiration of the Lease Term or as
required under applicable law, provided that Landlord may retain the Security
Deposit until such time as any outstanding rent or additional rent amount has
been determined and paid in full. The Security Deposit is not, and may not be
construed by Tenant to constitute, rent for the last month or any portion
thereof. If Tenant defaults with respect to any provisions of this Lease
including, but not limited to, the provisions relating to the payment of rent or
additional rent, Landlord may (but will not be required to) use, apply or retain
all or any part of the Security Deposit for the payment of any rent or any other
sum in default, or for the payment of any other amount which Landlord may spend
or become obligated to spend by reason of Tenant's default or to compensate
Landlord for any loss or damage which Landlord may suffer by reason of Tenant's
default. If any portion of the Security Deposit is so used or applied, Tenant
agrees, within ten (10) days after Landlord's written demand therefor, to
deposit cash with Landlord in an amount sufficient to restore the Security
Deposit to its original amount and Tenant's failure to do so shall constitute a
default under this Lease. Landlord is not required to keep Tenant's Security
Deposit separate from its general funds, and Tenant is not entitled to interest
on such Security Deposit. Should Landlord sell its interest in the Premises
during the Term hereof and deposit with the transferee thereof the then
unappropriated Security Deposit funds, Landlord will be discharged from any
further liability with respect to such Security Deposit, upon the assumption by
such Transferee of Landlord's obligations under this Lease.
8. USE.
---
(a) Tenant's Use of the Premises. The Premises may be used for the
----------------------------
use or uses set forth in Subsection 1(r) only, and Tenant will not use or permit
the Premises to be used for any
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<PAGE>
other purpose without the prior written consent of Landlord, which consent
Landlord may withhold in its sole and absolute discretion. Nothing in this
Lease will be deemed to give Tenant any exclusive right to such use in the
Building or the Project
(b) Compliance. At Tenant's sole cost and expense, Tenant agrees to
----------
procure, maintain and hold available for Landlord's inspection, all governmental
licenses and permits required for the proper and lawful conduct of Tenant's
business from the Premises, if any. Tenant agrees not to use, alter or occupy
the Premises or allow the Premises to be used, altered or occupied in violation
of, and Tenant, at its sole cost and expense, agrees to use and occupy the
Premises and cause the Premises to be used and occupied in compliance with: (i)
any and all laws, statutes, zoning restrictions, ordinances, rules, regulations,
orders and rulings now or hereafter in force and any requirements of any
insurer, insurance authority or duly constituted public authority having
jurisdiction over the Premises, the Building or the Project now or hereafter in
force, (ii) the requirements of the Board of Fire Underwriters and any other
similar body, (iii) the Certificate of Occupancy issued for the Building, and
(iv) any recorded covenants, conditions and restrictions and similar regulatory
agreements, if any, which affect the use, occupation or alteration of the
Premises, the Building and/or the Project Notwithstanding the foregoing,
Tenant's obligation to use and occupy the Premises in compliance with items (i)
through (iv) above shall not apply with respect to any noncompliance of the
Premises with items (i) through (iv) above existing on the date of delivery of
possession of the Premises to Tenant. Landlord shall be responsible for
rectifying any such pre-existing noncompliance at Landlord's expense. In
addition, Landlord shall construct the Tenant Improvements as described in
Exhibit "C" in conformity with all applicable codes and regulations of
- -----------
governmental authorities having jurisdiction over the Building and Premises and
with all valid building permits and other authorizations from appropriate
governmental agencies when required. Tenant agrees to comply with the Rules and
Regulations referenced in Section 28. Tenant agrees not to do or permit
anything to be done in or about the Premises which will in any manner obstruct
or interfere with the rights of other tenants or occupants of the Project, or
injure or unreasonably annoy them, or use or allow the Premises to be used for
any unlawful or unreasonably objectionable purpose. Tenant agrees not to cause,
maintain or permit any nuisance or waste in or about the Premises or elsewhere
within the Project. Tenant agrees not to place a load upon the Premises
exceeding the average pounds of live load per square foot of floor area
specified for the Building by Landlord's architect with the partitions to be
considered a part of the live load. Landlord reserves the right to reasonably
prescribe the weight and positions of safes, files and heavy equipment which
Tenant desires to place in the Premises so as to distribute properly the weight
thereof. Tenant agrees to install, maintain and use Tenant's business machines
and mechanical equipment which may cause vibration or noise that may be
transmitted to the Building structure or to any other space in the Building in a
manner so as to eliminate or minimize such vibration or noise. Tenant will be
responsible for all structural engineering required to determine structural
load, as well as the expense thereof. Notwithstanding anything contained in
this Lease to the contrary, all transferable development rights related in any
way to the Project are and will remain vested in Landlord, and Tenant hereby
waives any rights thereto. Without limiting the foregoing or any other
provisions of this Lease, Tenant shall be solely responsible for and shall
comply with, at Tenant's sole cost and expense, all requirements of Title III of
the Americans with Disabilities Act of 1990 (the "ADA") applicable to Tenant's
use and occupancy of the Premises, including, without limitation, those
provisions of the ADA applicable to the operational policies and activities of
Tenant in the Premises and those applicable to the non-structural design and
construction elements of any improvements in or to the Premises constructed by
or on behalf of Tenant after delivery of possession of the Premises (i.e.,
excluding only the initial Tenant Improvements to be constructed by Landlord
pursuant to Exhibit "C" and other improvements existing within the Premises
-----------
prior to the date of delivery of possession of the Premises to Tenant unless
applicable thereto as a result of additional improvements or alterations
constructed by or on behalf of Tenant).
(c) Hazardous Materials. Except for ordinary and general office
-------------------
supplies typically used in the ordinary course of business within office
buildings, such as copier toner, liquid paper, glue, ink and common household
cleaning materials (some or all of which may constitute "Hazardous Materials" as
defined in this Lease), Tenant agrees not to cause or permit any Hazardous
Materials to be brought upon, stored, used, handled, generated, released or
disposed of on, in, under or about the Premises, the Building, the Common Areas
or any other portion of the Project by Tenant, its agents, employees,
subtenants, assignees, contractors or invitees (collectively, "Tenant's
Parties"), without the prior written consent of Landlord, which consent Landlord
may withhold in its sole and absolute
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<PAGE>
discretion. Upon the expiration or sooner termination of this Lease, Tenant
agrees to remove from the Premises, the Building and the Project, at its sole
cost and expense, any and all Hazardous Materials, including any equipment or
systems containing Hazardous Materials which are installed, brought upon,
stored, used, generated or released upon, in or under the Premises, the Building
and/or the Project or any portion thereof by Tenant or any of Tenant's Parties.
To the fullest extent permitted by law, Tenant agrees to promptly indemnify,
protect, defend and hold harmless Landlord and Landlord's partners, officers,
directors, employees, agents, successors and assigns (collectively, "Landlord
Indemnified Parties") from and against any and all claims, damages, judgments,
suits, causes of action, losses, liabilities, penalties, fines, expenses and
costs (including, without limitation, clean-up, removal, remediation and
restoration costs, sums paid in settlement of claims, attorneys' fees,
consultant fees and expert fees and court costs) which arise or result from the
presence of Hazardous Materials on, in or about the Premises, the Building or
any other portion of the Project and which are caused or permitted by Tenant or
any of Tenant's Parties. Tenant agrees to promptly notify Landlord of any
release of Hazardous Materials in the Premises, the Building or any other
portion of the Project which Tenant becomes aware of during the Term of this
Lease, whether caused by Tenant or any other persons or entities. In the event
of any release of Hazardous Materials caused or permitted by Tenant or any of
Tenant's Parties, Landlord shall have the right to cause Tenant to immediately
take all steps Landlord deems necessary or appropriate to remediate such release
and prevent any similar future release to the satisfaction of Landlord and
Landlord's mortgagee(s). As used in this Lease, the term "Hazardous Materials"
shall mean and include any hazardous or toxic materials, substances or wastes as
now or hereafter designated under any law, statute, ordinance, rule, regulation,
order or ruling of any agency of the State, the United States Government or any
local governmental authority, including, without limitation, asbestos,
petroleum, petroleum hydrocarbons and petroleum based products, urea
formaldehyde foam insulation, polychlorinated biphenyls ("PCBs"), and freon and
other chlorofluorocarbons. The provisions of this Subsection 8(c) will survive
any termination of this Lease.
9. NOTICES. All notices required or permitted by this Lease shall be in
-------
writing and may be delivered (a) in person (by hand, by messenger or by courier
service), (b) by U.S. Postal Service Express Mail, Federal Express or other
overnight courier, or (c) by facsimile transmission, and shall be deemed
sufficiently given if served in a manner specified in this Section 9. The
addresses set forth in Subsections l(b) and l(d) of this Lease shall be the
address of each party for notice purposes. Landlord or Tenant may by written
notice to the other specify a different address for notice purposes, except that
upon Tenant's taking possession of the Premises, the Premises shall constitute
Tenant's address for the purpose of mailing or delivering notices to Tenant;
provided, however, that a copy of such notice shall also be sent to the address
for copies specified in Subsection 1(d). A copy of all notices required or
permitted to be given to Landlord hereunder shall be concurrently transmitted to
such party or parties at such addresses as Landlord may from time to time
hereinafter designate by written notice to Tenant. Notices delivered by U.S.
Express Mail, Federal Express or other courier shall be deemed given on the date
delivered by the carrier to the appropriate party's address for notice purposes.
If any notice is transmitted by facsimile transmission, the notice shall be
deemed delivered upon telephone confirmation of receipt of the transmission
thereof at the appropriate party's address for notice purposes. If notice is
received on Saturday, Sunday or a legal holiday, it shall be deemed received on
the next business day. Nothing contained herein shall be construed to limit
Landlord's right to serve any notice to pay rent or quit or similar notice by
any method permitted by applicable law, and any such notice shall be effective
if served in accordance with any method permitted by applicable law whether or
not the requirements of this Section have been met.
10. BROKERS. The parties acknowledge that the broker(s) who negotiated
-------
this Lease are stated in Subsection l(v). Each party represents and warrants to
the other, that to its knowledge, no other broker, agent or finder (a)
negotiated or was instrumental in negotiating or consummating this Lease on its
behalf, and (b) is or might be entitled to a commission or compensation in
connection with this Lease. Landlord and Tenant each agree to promptly
indemnify, protect, defend and hold harmless the other from and against any and
all claims, damages, judgments, suits, causes of action, losses, liabilities,
penalties, fines, expenses and costs (including attorneys' fees and court costs)
resulting from any breach by the indemnifying party of the foregoing
representation, including, without limitation, any claims that may be asserted
by any broker, agent or finder undisclosed by the indemnifying party. The
foregoing mutual indemnity shall survive the expiration or earlier termination
of this Lease.
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<PAGE>
11. SURRENDER; HOLDING OVER.
-----------------------
(a) Surrender. The voluntary or other surrender of this Lease by
---------
Tenant, or a mutual cancellation thereof, shall not constitute a merger, and
shall, at the option of Landlord, operate as an assignment to Landlord of any or
all subleases or subtenancies. Upon the expiration or sooner termination of
this Lease, Tenant agrees to peaceably surrender the Premises to Landlord broom
clean and in a state of first-class order, repair and condition, ordinary wear
and tear and casualty damage (if this Lease is terminated as a result thereof
pursuant to Section 20) excepted, with all of Tenant's personal property and
Alterations (as defined in Section 13) removed from the Premises to the extent
required under Section 13 and all damage caused by such removal repaired as
required by Section 13. Prior to the date Tenant is to actually surrender the
Premises to Landlord, Tenant agrees to give Landlord reasonable prior notice of
the exact date Tenant will surrender the Premises so that Landlord and Tenant
can schedule a walk-through of the Premises to review the condition of the
Premises and identify the Alterations and personal property which Tenant is to
remove and any repairs Tenant is to make upon surrender of the Premises. The
delivery of keys to any employee of Landlord or to Landlord's agent or any
employee thereof alone will not be sufficient to constitute a termination of
this Lease or a surrender of the Premises.
(b) Holding Over. Tenant will not be permitted to hold over
------------
possession of the Premises after the expiration or earlier termination of the
Term without the express written consent of Landlord, which consent Landlord may
withhold in its sole discretion. If Tenant holds over after the expiration or
earlier termination of the Term, Landlord may, at its option, treat Tenant as a
tenant at sufferance only, and such continued occupancy by Tenant shall be
subject to all of the terms, covenants and conditions of this Lease, so far as
applicable, except that the Monthly Base Rent for any such holdover period shall
be equal to one hundred twenty five percent (125%) of the Monthly Base Rent in
effect under this Lease immediately prior to such holdover, prorated on a daily
basis; Acceptance by Landlord of rent after such expiration or earlier
termination will not result in a renewal of this Lease. The foregoing
provisions of this Section 11 are in addition to and do not affect Landlord's
right of re-entry or any rights of Landlord under this Lease or as otherwise
provided by law. If Tenant fails to surrender the Premises upon the expiration
of this Lease in accordance with the terms of this Section 11 despite demand to
do so by Landlord, Tenant agrees to promptly indemnify, protect, defend and hold
Landlord harmless from all claims, damages, judgments, suits, causes of action,
losses, liabilities, penalties, fines, expenses and costs (including attorneys'
fees and costs), including, without limitation, costs and expenses incurred by
Landlord in returning the Premises to the condition in which Tenant was to
surrender it and claims made by any succeeding tenant founded on or resulting
from Tenant's failure to surrender the Premises.
12. TAXES ON TENANT'S PROPERTY. Tenant agrees to pay before delinquency
--------------------------
all taxes and assessments (real and personal) levied against (a) any personal
property or trade fixtures placed by Tenant in or about the Premises (including
any increase in the assessed value of the Premises based upon the value of any
such personal property or trade fixtures); and (b) any Tenant Improvements or
Alterations (as defined in Section 13) in the Premises (whether installed and/or
paid for by Landlord or Tenant) to the extent such items are assessed at a
valuation higher than the valuation at which tenant improvements conforming to
Landlord's building standard tenant improvements are assessed. If any such
taxes or assessments are levied against Landlord or Landlord's property,
Landlord may, after written notice to Tenant (and under proper protest if
requested by Tenant) pay such taxes and assessments, in which event Tenant
agrees to reimburse Landlord all amounts paid by Landlord within ten (10)
business days after demand by Landlord. Landlord shall promptly deliver to
Tenant a copy of any tax or assessment bill received by Landlord that sets forth
amounts owing by Tenant pursuant to this Section 12.
13. ALTERATIONS. After installation of the initial Tenant Improvements
-----------
for the Premises pursuant to Exhibit "C", Tenant may, at its sole cost and
-----------
expense, make alterations, additions, improvements and decorations to the
Premises (collectively, "Alterations") subject to and upon the following terms
and conditions:
(a) Except as set forth in the approved Plans for the Tenant
Improvements pursuant to Exhibit "C", Tenant may not make any Alterations
-----------
(without Landlord's prior written consent which may be withheld in Landlord's
sole discretion), which: (i) affect any area outside the
-8-
<PAGE>
Premises; (ii) affect the Building's structure, equipment, services or systems,
or the proper functioning thereof, or Landlord's access thereto; (iii) affect
the outside appearance, character or use of the Building or the Building Common
Areas; (iv) in the reasonable opinion of Landlord, lessen the value of the
Building; or (v) will violate or require a change in any occupancy certificate
applicable to the Premises.
(b) Before proceeding with any Alterations which are not prohibited
in Subsection 13(a), Tenant must first obtain Landlord's written approval of the
plans, specifications and working drawings for such Alterations, which approval
Landlord will not unreasonably withhold or delay; provided, however, Landlord's
prior approval will not be required for any such Alterations which are not
prohibited by Subsection 13(a) and which cost less than Seven Thousand Five
Hundred Dollars ($7,500) as long as (i) Tenant delivers to Landlord notice and a
copy of any final plans, specifications and working drawings for any such
Alterations at least ten (10) days prior to commencement of the work thereof,
and (ii) the other conditions of this Section 13 are satisfied, including,
without limitation, conforming to Landlord's rules, regulations and insurance
requirements which govern contractors. Landlord's approval of plans,
specifications and/or working drawings for Alterations will not create any
responsibility or liability on the part of Landlord for their completeness,
design sufficiency, or compliance with applicable permits, laws, rules and
regulations of governmental agencies or authorities, and (iii) such alterations
are nonstructural and primarily of a cosmetic nature such as (without
limitation) painting or carpeting. In approving any Alterations, Landlord
reserves the right to reasonably require Tenant to increase its Security Deposit
to provide Landlord with additional reasonable security for the proper
installation and removal of such Alterations by Tenant as may be required by
this Lease.
(c) Alterations may be made or installed only by contractors and
subcontractors which have been approved by Landlord, which approval Landlord
will not unreasonably withhold or delay; provided, however, Landlord reserves
the right to require that Landlord's designated contractor(s) for the Building
be given the first opportunity to bid for any Alteration work. Before
proceeding with any Alterations, Tenant agrees to provide Landlord with ten (10)
days' prior written notice and Tenant's contractors must obtain, on behalf of
Tenant and at Tenant's sole cost and expense: (i) all necessary governmental
permits and approvals for the commencement and completion of such Alterations;
and (ii) if reasonably requested by Landlord, a completion and lien indemnity
bond, or other surety, reasonably satisfactory to Landlord for such Alterations.
Throughout the performance of any Alterations, Tenant agrees to obtain, or cause
its contractors to obtain, workers compensation insurance and general liability
insurance in compliance with the provisions of Section 19 of this Lease.
(d) All Alterations must be performed: (i) in accordance with the
approved plans, specifications and working drawings; (ii) in a lien-free and
first-class and workmanlike manner, (iii) in compliance with all applicable
permits, laws, statutes, ordinances, rules, regulations, orders and rulings now
or hereafter in effect and imposed by any governmental agencies and authorities
which assert jurisdiction; (iv) in such a manner so as not to interfere with the
occupancy of any other tenant in the Building, nor impose any additional expense
upon nor delay Landlord in the maintenance and operation of the Building; and
(v) at such times, in such manner, and subject to such rules and regulations as
Landlord may from time to time reasonably designate.
(e) The Tenant Improvements, including, without limitation, all
affixed sinks, dishwashers and other fixtures, and all Alterations will become
the property of Landlord and will remain upon and be surrendered with the
Premises at the end of the Term of this Lease; provided, however, Tenant shall,
prior to the end of the Term, remove such of the Alterations in the Premises as
Landlord shall direct to be removed by Tenant by written notice provided that
Landlord notified Tenant at the time Tenant requested approval for the
Alteration in question that removal thereof would be required at the end of the
Term. Landlord may also require Tenant to remove Alterations which Landlord did
not have the opportunity to approve as provided in this Section 13. If Landlord
requires Tenant to remove any Alterations, which Landlord has the right to
request to remove as set forth above, Tenant, at its sole cost, agrees to remove
the identified Alterations on or before the expiration or sooner termination of
this Lease and repair any damage to the Premises caused by such removal.
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<PAGE>
(f) Tenant agrees to pay Landlord, as additional rent, the reasonable
costs of professional services and costs for general conditions of Landlord's
third party consultants if utilized by Landlord for review of all plans,
specifications and working drawings for any Alterations, within ten (10)
business days after Tenant's receipt of invoices either from Landlord or such
consultants. In addition, Tenant agrees to pay Landlord, within twenty (20)
days after completion of any Alterations, a fee to cover Landlord's costs of
supervising and administering the installation of such Alterations (provided
Landlord actually supervises or administers such installation), in the amount of
five percent (5%) of the cost of such Alterations.
(g) All articles of personal property owned by Tenant or installed by
Tenant at its expense in the Premises (including Tenant's business and trade
fixtures, furniture, movable partitions and equipment (such as telephones, copy
machines, computer terminals, refrigerators and facsimile machines) will be and
remain the property of Tenant and must be removed by Tenant from the Premises,
at Tenant's sole cost and expense, on or before the expiration or sooner
termination of this Lease. Tenant agrees to repair any damage caused by such
removal at its cost on or before the expiration or sooner termination of this
Lease.
(h) If Tenant fails to remove by the expiration or sooner termination
of this Lease all of its personal property, or any Alterations identified by
Landlord for removal, Landlord may (without liability to Tenant for loss thereto
treat such failure as a hold-over pursuant to Subsection 11(b), and/or treat
such personal property and/or Alterations as abandoned and, at Tenant's sole
cost and in addition to Landlord's other rights and remedies under this Lease
at law or in equity: (a) remove and store such items; and/or (b) upon twenty
(20) days' prior notice to Tenant, sell, discard or otherwise dispose of all or
any such items at private or public sale for such price as Landlord may obtain
or by other commercially reasonable means. Tenant shall be liable for all costs
of disposition of Tenant's abandoned property and Landlord shall have no
liability to Tenant with respect to any such abandoned property. Landlord
agrees to apply the proceeds of any sale of any such property to any amounts due
to Landlord under this Lease from Tenant (including Landlord's attorneys' fees
and other costs incurred in the removal, storage and/or sale of such items),
with any remainder to be paid to Tenant
14. REPAIRS.
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(a) Landlord's Obligations. Landlord agrees to repair and maintain
----------------------
the structural portions of the Building and the plumbing, heating, ventilating,
air conditioning, elevator and electrical systems installed or furnished by
Landlord, unless such maintenance and repairs are (i) attributable to items
installed in Tenant's Premises which are above standard interior improvements
(such as, for example, custom lighting, special HVAC and/or electrical panels or
systems, kitchen or restroom facilities and appliances constructed or installed
within Tenant's Premises) or (ii) caused in part or in whole by the act, neglect
or omission of any duty by Tenant, its agents, servants, employees or invitees,
in which case Tenant will pay to Landlord, as additional rent, the reasonable
cost of such maintenance and repairs. Landlord will not be liable for any
failure to make any such repairs or to perform any maintenance unless such
failure shall persist for an unreasonable time after written notice of the need
of such repairs or maintenance is given to Landlord by Tenant. Except as
provided in Section 20, Tenant shall not be entitled to any abatement of rent
and Landlord will not have any liability by reason of any injury to or
interference with Tenant's business arising from the making of any repairs,
alterations or improvements in or to any portion of the Building or the Premises
or in or to fixtures, appurtenances and equipment therein. Tenant waives the
right to make repairs at Landlord's expense under any law, statute, ordinance,
rule, regulation, order or ruling (including, without limitation, the provisions
of California Civil Code Sections 1941 and 1942 and any successor statutes or
laws of a similar nature).
(b) Tenant's Obligations. Except for matters which are Landlord's
--------------------
obligation as specified in Subsection 14(a), Tenant agrees to keep, maintain and
preserve the Premises in first class condition and repair, normal wear and tear
excepted, and, when and if needed, at Tenant's sole cost and expense, to make
all repairs to the Premises and every part thereof. Any such maintenance and
repairs will be performed by Landlord's contractor, or at Landlord's option, by
such contractor or contractors as Tenant may choose from an approved list to be
submitted by Landlord. Tenant agrees to pay all costs and expenses incurred in
such maintenance and repair within twenty (20) days after
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<PAGE>
billing by Landlord or such contractor or contractors. Tenant agrees to cause
any mechanics' liens or other liens arising as a result of work performed by
Tenant or at Tenant's direction to be eliminated as provided in Section 15.
Except as provided in Subsection 14(a), Landlord has no obligation to alter,
remodel, improve, repair, decorate or paint the Premises or any part thereof.
(c) Tenant's Failure to Repair. If Tenant refuses or neglects to
--------------------------
repair and maintain the Premises properly as required hereunder to the
reasonable satisfaction of Landlord, Landlord, at any time following ten (10)
days from the date on which Landlord makes a written demand on Tenant to effect
such repair and maintenance, may enter upon the Premises and make such repairs
and/or maintenance, and upon completion thereof, Tenant agrees to pay to
Landlord as additional rent Landlord's costs for making such repairs plus an
amount not to exceed ten percent (10%) of such costs for overhead, within twenty
(20) days of receipt from Landlord of a written demised bill therefor. Any
amounts not reimbursed by Tenant within such twenty (20) day period will bear
interest at the Interest Rate until paid by Tenant.
15. LIENS. Tenant agrees not to permit any mechanic's, materialmen's or
-----
other liens to be filed against all or any part of the Project, the Building or
the Premises, nor against Tenant's leasehold interest in the Premises, by reason
of or in connection with any repairs, alterations, improvements or other work
contracted for or undertaken by Tenant or any other act or omission of Tenant or
Tenant's agents, employees, contractors, licensees or invitees. At Landlord's
request Tenant agrees to provide Landlord with enforceable, conditional and
final lien releases (or other evidence reasonably requested by Landlord to
demonstrate protection from liens) from all persons furnishing labor and/or
materials at the Premises. Landlord will have the right at all reasonable times
to post on the Premises and record any notices of non-responsibility which it
deems necessary for protection from such liens. If any such liens are filed,
Tenant will, at its sole cost, promptly cause such liens to be released of
record or bonded so that it no longer affects title to the Project, the Building
or the Premises. If Tenant fails to cause any such liens to be so released or
bonded within thirty (30) days after notice of the filing thereof, such failure
will be deemed a material breach by Tenant under this Lease without the benefit
of any additional notice or cure period described in Section 22, and Landlord
may, without waiving its rights and remedies based on such breach, and without
releasing Tenant from any of its obligations, cause such liens to be released by
any means it shall deem proper, including payment in satisfaction of the claims
giving rise to such liens. Tenant agrees to pay to Landlord within ten (10)
days after receipt of invoice from Landlord, any sum paid by Landlord to remove
such liens, together with interest at the Interest Rate from the date of such
payment by Landlord.
16. ENTRY BY LANDLORD. Landlord and its employees and agents will at all
-----------------
times, upon 24 hours prior notice except in emergencies, have the right to enter
the Premises to inspect the same, to supply janitorial service and any other
service to be provided by Landlord to Tenant hereunder, to show the Premises to
prospective purchasers or tenants, to post notices of nonresponsibility, and/or
to repair the Premises as permitted or required by this Lease. In exercising
such entry rights, Landlord will endeavor to minimize, as reasonably
practicable, the interference with Tenant's business, and will provide Tenant
with reasonable advance notice of any such entry (except in emergency
situations). Landlord may, in order to carry out such purposes, erect
scaffolding and other necessary structures where reasonably required by the
character of the work to be performed. Landlord will at all times have and
retain a key with which to unlock all doors in the Premises, excluding Tenant's
vaults and safes. Landlord will have the right to use any and all means which
Landlord may reasonably deem proper to open said doors in an emergency in order
to obtain entry to the Premises. Any entry to the Premises obtained by Landlord
by any of said means, or otherwise, will not be construed or deemed to be a
forcible or unlawful entry into the Premises, or an eviction of Tenant from the
Premises. Landlord will not be liable to Tenant for any damages or losses for
any entry by Landlord.
17. UTILITIES AND SERVICES. Landlord agrees to furnish or cause to be
----------------------
furnished to the Premises the utilities and services described in the Standards
for Utilities and Services attached hereto as Exhibit "F", subject to the
-----------
conditions and in accordance with the standards set forth therein. Landlord may
require Tenant from time to time to provide Landlord with a list of Tenant's
employees and/or agents which are authorized by Tenant to subscribe on behalf of
Tenant for any additional services which may be provided by Landlord. Any such
additional services will be provided to Tenant
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<PAGE>
at Tenant's cost. Landlord will not be liable to Tenant for any failure to
furnish any of the foregoing utilities and services if such failure is caused by
all or any of the following: (i) accident, breakage or repairs; (ii) strikes,
lockouts or other labor disturbance or labor dispute of any character, (iii)
governmental regulation, moratorium or other governmental action or inaction;
(iv) inability despite the exercise of reasonable diligence to obtain
electricity, water or fuel; or (v) any other cause beyond Landlord's reasonable
control. In addition, in the event of any stoppage or interruption of services
or utilities, Tenant shall not be entitled to any abatement or reduction of rent
(except as expressly provided in Exhibit "F" and, except as expressly provided
-----------
in Subsection 20(f) or Subsection 21(b), if such failure results from a damage
or taking described therein), no eviction of Tenant will result from such
failure and Tenant will not be relieved from the performance of any covenant or
agreement in this Lease because of such failure. In the event of any failure,
stoppage or interruption thereof, Landlord agrees to diligently attempt to
resume service promptly. If Tenant requires or utilizes more water or
electrical power than is considered reasonable or normal by Landlord, as
described under Exhibit "F", Landlord may at its option require Tenant to pay,
-----------
as additional rent, the cost, as fairly determined by Landlord, incurred by such
extraordinary usage and/or Landlord may install separate meter(s) for the
Premises, at Tenant's sole expense, and Tenant agrees thereafter to pay all
charges of the utility providing service and Landlord will make an appropriate
adjustment to Tenant's Operating Expenses calculation to account for the fact
Tenant is directly paying such metered charges, provided Tenant will remain
obligated to pay its proportionate share of Operating Expenses subject to such
adjustment.
18. ASSUMPTION OF RISK AND INDEMNIFICATION.
--------------------------------------
(a) Tenant's Assumption of Risk and Waiver. Tenant as a material
--------------------------------------
part of the consideration to Landlord, hereby agrees that neither Landlord nor
any Landlord Indemnified Parties (as hereinafter defined) will be liable to
Tenant for, and Tenant expressly assumes the risk of and waives any and all
claims it may have against Landlord or any Landlord Indemnified Parties with
respect to, any and all loss or damage to property or injury to persons in, upon
or about the Premises, the Building or the Project resulting from any cause
whatsoever, including, without limitation, any such loss, damage or injury
caused by other tenants or persons in or about the Building or the Project,
caused to property entrusted to employees of the Building, caused by theft or
otherwise, or resulting from any casualty, explosion, falling plaster or other
masonry or glass, steam, gas, electricity, water or rain which may leak from any
part of the Building or any other portion of the Project or from the pipes,
appliances or plumbing works therein or from the roof, street or subsurface or
from any other place, or resulting from dampness; provided, however, that
Landlord shall nevertheless be responsible to the extent and in the proportion
that any such loss, damage or injury is ultimately determined to be caused by
Landlord's gross negligence or willful misconduct; provided, further, however,
that notwithstanding anything to the contrary contained in this Lease, neither
Landlord nor any Landlord Indemnified Parties will be liable for consequential
damages arising out of any loss of the use of the Premises or any equipment or
facilities therein by Tenant or any Tenant Parties or for interference with
light or other incorporeal hereditaments. Tenant agrees to give prompt notice
to Landlord in case of fire or accidents in the Premises or the Building, or of
defects therein or in the fixtures or equipment.
(b) Indemnification. Tenant will be liable for, and agrees to
---------------
promptly indemnity, protect, defend and hold harmless Landlord and Landlord's
affiliates, partners, officers, directors, employees, agents, successors and
assigns (collectively, "Landlord Indemnified Parties"), from and against any and
all claims, damages, judgments, suits, causes of action, losses, liabilities,
penalties, fines, expenses and costs, including attorneys' fees and court costs
(collectively, "Indemnified Claims"), arising or resulting from (i) any act or
omission of Tenant or any of Tenant's agents, employees, contractors,
subtenants, assignees, licensees or invitees (collectively, "Tenant Parties");
(ii) the use of the Premises and Common Areas and conduct of Tenant's business
by Tenant or any Tenant Parties, or any other activity, work or thing done,
permitted or suffered by Tenant or any Tenant Parties, in or about the Premises,
the Building or elsewhere within the Project; and/or (iii) any default by Tenant
of any obligations on Tenant's part to be performed under the terms of this
Lease. Notwithstanding the foregoing, Tenant shall not be liable to the extent
and in the proportion that damage or injury is ultimately determined to be
caused by the gross negligence or willful misconduct of Landlord. In case any
action or proceeding is brought against Landlord or any Landlord Indemnified
Parties by reason of any such Indemnified Claims, Tenant, upon notice from
Landlord,
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agrees to defend the same at Tenant's expense by counsel approved in writing by
Landlord, which approval Landlord will not unreasonably withhold. Landlord shall
indemnify, defend and hold harmless Tenant and its affiliates, partners,
officers, directors, employees, agents, successors and assigns from and against
any and all claims, damages, judgments, suits, causes of action, losses,
liabilities, penalties, fines, expenses and costs, including attorneys' fees and
court costs arising or resulting from injuries to or death of any person or
damage to any property arising out of any occurrence on or in the Common Areas,
to the extent proximately caused by the gross negligence or willful misconduct
of Landlord.
(c) Survival; No Release of Insurers. Landlord's and Tenant's
--------------------------------
indemnification obligations under Subsection 18(b) will survive the expiration
or earlier termination of this Lease. Landlord's and Tenant's covenants,
agreements and indemnification obligation in Subsection 18(a) and Subsection
18(b), are not intended to and will not relieve any insurance carrier of its
obligations under policies carried or required to be carried by Tenant pursuant
to the provisions of this Lease.
19. INSURANCE.
---------
(a) Tenant's Insurance. On or before the earlier to occur of (i)
------------------
thirty (30) days after Tenant executes the Lease, or (ii) the date Tenant
commences any work of any type in the Premises pursuant to this Lease (which may
be prior to the Commencement Date), and continuing throughout the entire Term
hereof and any other period of occupancy, Tenant agrees to keep in full force
and effect, at its sole cost and expense, the following insurance:
(i) "All Risks" property insurance including at least the
following perils: fire and extended coverage, smoke damage, vandalism,
malicious mischief, sprinkler leakage (including earthquake sprinkler
leakage). This insurance policy must be upon all property owned by Tenant,
for which Tenant is legally liable, or which is installed at Tenant's
expense, and which is located in the Building including, without
limitation, any Tenant Improvements which satisfy the foregoing
qualification and any Alterations, and all furniture, fittings,
installations, fixtures and any other personal property of Tenant in an
amount not less than the full replacement cost thereof. If there is a
dispute as to full replacement cost, the decision of Landlord or any
mortgagee of Landlord will be presumptive.
(ii) One (1) year insurance coverage for business interruption
and loss of income and extra expense insuring the same perils described in
Subsection 19(a)(i), in such amounts as will reimburse Tenant for any
direct or indirect loss of earnings attributable to any such perils
including prevention of access to the Premises, Tenant's parking areas or
the Building as a result of any such perils.
(iii) Commercial Public Liability Insurance or Comprehensive
General Liability Insurance (on an occurrence form) insuring bodily injury,
personal injury and property damage including the following divisions and
extensions of coverage: Premises and Operations; Owners and Contractors
protective; blanket contractual liability (including coverage for Tenant's
indemnity obligations under this Lease); products and completed operations;
liquor liability (if Tenant serves alcohol on the Premises); and fire and
water damage legal liability in an amount sufficient to cover the
replacement value of the Premises, including Tenant Improvements, that are
rented under the terms of this Lease. Such insurance must have the
following minimum limits of liability: bodily injury, personal injury and
property damage - $2,000,000 each occurrence, provided that if liability
coverage is provided by a Commercial General Liability policy the general
aggregate limit shall apply separately and in total to this location only
(per location general aggregate), and provided further, such minimum limits
of liability may be adjusted from year to year to reflect increases in
coverages as recommended by Landlord's insurance carrier as being prudent
and commercially reasonable for tenants of first class office buildings
comparable to the Building, rounded to the nearest five hundred thousand
dollars.
(iv) Comprehensive Automobile Liability insuring bodily injury
and property damage arising from all owned, non-owned and hired vehicles,
if any, with minimum limits of liability of $2,000,000 per accident.
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(v) Worker's Compensation as required by the laws of the State
of California with the following minimum limits of liability: Coverage A -
statutory benefits; Coverage B - $1,000,000 per accident and disease.
(vi) Any other form or forms of insurance as Tenant or Landlord
or any mortgagees of Landlord may reasonably require from time to time in
form, in amounts, and for insurance risks against which, a prudent tenant
would protect itself, but only to the extent coverage for such risks and
amounts are available in the insurance market at commercially acceptable
rates. Landlord makes no representation that the limits of liability
required to be carried by Tenant under the terms of this Lease are adequate
to protect Tenant's interests and Tenant should obtain such additional
insurance or increased liability limits as Tenant deems appropriate.
(b) Supplemental Tenant Insurance Requirements.
------------------------------------------
(i) All policies must be in a form reasonably satisfactory to
Landlord and issued by an insurer admitted to do business in the State of
California.
(ii) All policies must be issued by insurers with a
policyholder rating of "A" and a financial rating of "X" in the most recent
version of Bests Key Rating Guide.
(iii) All policies must contain a requirement to notify Landlord
(and Landlord's property manager and any mortgagees or ground lessors of
Landlord who are named as additional insureds, if any) in writing not less
than thirty (30) days prior to any material change, reduction in coverage,
cancellation or other termination thereof. Tenant agrees to deliver to
Landlord, as soon as practicable after placing the required insurance, but
in any event within the time frame specified in Subsection 19(a),
certificate(s) of insurance and/or if required by Landlord, certified
copies of each policy evidencing the existence of such insurance and
Tenant's compliance with the provisions of this Section 19. Tenant agrees
to cause replacement policies or certificates to be delivered to Landlord
not less than thirty (30) days prior to the expiration of any such policy
or policies. If any such initial or replacement policies or certificates
are not furnished within the time(s) specified herein, Tenant will be
deemed to be in material default under this Lease without the benefit of
any additional notice or cure period provided in Subsection 22(a)(iii), and
Landlord will have the right, but not the obligation, to procure such
insurance as Landlord deems necessary to protect Landlord's interests at
Tenant's expense. If Landlord obtains any insurance that is the
responsibility of Tenant under this Section 19, Landlord agrees to deliver
to Tenant a written statement setting forth the cost of any such insurance
and showing in reasonable detail the manner in which it has been computed
and Tenant agrees to promptly reimburse Landlord for such costs as
additional rent.
(iv) General Liability and Automobile Liability policies under
Subsection 19(a)(iii) and Subsection 19(a)(iv) must name Landlord and
Landlord's property manager (and at Landlord's request Landlord's
mortgagees and ground lessors of which Tenant has been informed in writing)
as additional insureds and must also contain a provision that the insurance
afforded by such policy is primary insurance and any insurance carried by
Landlord and Landlord's property manager or Landlord's mortgagees or ground
lessors, if any, will be excess over and non-contributing with Tenant's
insurance.
(c) Tenant's Use. Tenant will not keep, use, sell or offer for sale
------------
in or upon the Premises any article which may be prohibited by any insurance
policy periodically in force covering the Building or the Project Common Areas.
If Tenant's occupancy or business in, or on, the Premises, whether or not
Landlord has consented to the same, results in any increase in premiums for the
insurance periodically carried by Landlord with respect to the Building or the
Project Common Areas or results in the need for Landlord to maintain special or
additional insurance, Tenant agrees to pay Landlord the cost of any such
increase in premiums or special or additional coverage as additional rent within
ten (10) days after being billed therefor by Landlord. In determining whether
increased premiums are a result of Tenant's use of the Premises, a schedule
issued by the organization computing the insurance rate on the Building, the
Project Common Areas or the Tenant
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<PAGE>
Improvements showing the various components of such rate, will be conclusive
evidence of the several items and charges which make up such rate. Tenant
agrees to promptly comply with all reasonable requirements of the insurance
authority or any present or future insurer relating to the Premises.
(d) Cancellation of Landlord's Policies. If any of Landlord's
-----------------------------------
insurance policies are canceled or cancellation is threatened or the coverage
reduced or threatened to be reduced in any way because of any use of the
Premises or any part thereof by Tenant or any assignee or subtenant of Tenant or
by anyone Tenant permits on the Premises which is inconsistent with the
permitted use thereof, and, if Tenant fails to remedy the condition giving rise
to such cancellation, threatened cancellation, reduction of coverage, threatened
reduction of coverage, increase in premiums, or threatened increase in premiums,
within forty-eight (48) hours after notice thereof, Tenant will be deemed in
material default of this Lease and Landlord may, at its option, either terminate
this Lease or enter upon the Premises and attempt to remedy such condition, and
Tenant shall promptly pay Landlord the reasonable costs of such remedy as
additional rent. If Landlord is unable, or elects not to remedy such
condition, then Landlord will have all of the remedies provided for in this
Lease in the event of a default by Tenant.
(e) Mutual Waiver Of Subrogation. Landlord and Tenant each hereby
----------------------------
waive any and all rights of recovery against the other, and against the
partners, officers, employees, agents or representatives of the other, for loss
of or damage to its property or the property of others under its control, to the
extent such loss or damage is covered by any insurance policy in force (whether
or not described in this Lease) or would have been covered by any insurance
policy required to be carried under the provisions of this Lease, at the time of
such loss or damage. Each of the parties hereto, on behalf of their respective
insurance companies insuring the property of either Landlord or Tenant against
any such loss, to the extent of the amount of any recovery under such insurance,
hereby waives any right of subrogation that it may have against the other. Upon
obtaining the required policies of insurance, Landlord and Tenant shall give
notice to the insurance carriers of this mutual waiver of subrogation. Such
waiver shall be expressly included in, and shall comply with the requirements
of, the respective insurance policies.
20. DAMAGE OR DESTRUCTION.
---------------------
(a) Partial Destruction. If the Premises or the Building are damaged
-------------------
by fire or other casualty to an extent not exceeding twenty-five percent (25%)
of the full replacement cost thereof, and Landlord's contractor reasonably
estimates in a writing delivered to Landlord and Tenant that the damage thereto
may be repaired, reconstructed or restored to substantially its condition
immediately prior to such damage within one hundred twenty (120) days from the
date of such casualty, and Landlord will receive insurance proceeds sufficient
---
to cover the costs of such repairs, reconstruction and restoration (including
proceeds from Tenant and/or Tenant's insurance which Tenant is required to
deliver to Landlord pursuant to Subsection 20(e) to cover Tenant's obligation
for the costs of repair, reconstruction and restoration of any portion of the
Tenant Improvements and any Alterations for which Tenant is responsible under
this Lease), then Landlord agrees to commence and proceed diligently with the
work of repair, reconstruction and restoration and this Lease shall continue in
full force and effect.
(b) Substantial Destruction. Any damage or destruction to the
-----------------------
Premises or the Building which Landlord is not obligated to repair pursuant to
Subsection 20(a) shall be deemed a substantial destruction. In the event of a
substantial destruction, Landlord may elect to either
(i) repair, reconstruct and restore the portion of the
Building or the Premises damaged by such casualty, in which case this Lease
shall continue in full force and effect, subject to Tenant's termination
right contained in Subsection 20(d); or
(ii) terminate this Lease effective as of the date of
substantial destruction.
(c) Notice. Under any of the conditions of Subsection 20(a) or
------
Subsection 20(b), Landlord agrees to give written notice to Tenant of its
intention to repair or terminate, as permitted in such Subsections, within the
earlier of thirty (30) days after the occurrence of such casualty, or fifteen
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<PAGE>
(15) days after Landlord's receipt of the estimate from Landlord's contractor
(the applicable time period to be referred to herein as the "Notice Period").
(d) Tenant's Termination Rights. If Landlord elects to repair,
---------------------------
reconstruct and restore pursuant to Subsection 20(b)(i), and if Landlord's
contractor estimates that as a result of such damage, Tenant cannot be given
reasonable use of and access to the Premises within one hundred eighty (180)
days after the date of such damage, then Tenant may terminate this Lease
effective upon delivery of written notice to Landlord within ten (10) days after
Landlord delivers notice to Tenant of its election to so repair, reconstruct or
restore. Said termination shall be effective as of the date of substantial
destruction.
(e) Tenant's Costs and Insurance Proceeds. In the event of any
-------------------------------------
damage or destruction of all or any part of the Premises, Tenant agrees to
immediately (i) notify Landlord thereof, and (ii) deliver to Landlord all
property insurance proceeds received by Tenant with respect to any Tenant
Improvements and any Alterations, but excluding proceeds for Tenant's furniture,
fixtures, equipment and other personal property, whether or not this Lease is
terminated as permitted in this Section 20, and Tenant hereby assigns to
Landlord all rights to receive such insurance proceeds. If, for any reason
(including Tenant's failure to obtain insurance for the full replacement cost of
any Tenant Improvements and any Alterations from any and all casualties), Tenant
fails to receive insurance proceeds covering the full replacement cost of any
Tenant Improvements and any Alterations which are damaged, Tenant will be deemed
to have self-insured the replacement cost of such items, and upon any damage or
destruction thereto, Tenant agrees to immediately pay to Landlord the full
replacement cost of such items, less any insurance proceeds actually received by
Landlord from Landlord's or Tenant's insurance with respect to such items.
(f) Abatement of Rent. In the event of any damage, repair,
-----------------
reconstruction and/or restoration described in this Section 20, rent will be
abated or reduced, as the case may be, in proportion to the degree to which
Tenant's use of the Premises is impaired during such period of repair until such
use is restored. Except for such abatement of rent, Tenant will not be entitled
to any compensation or damages for loss of, or interference with, Tenant's
business or use or access of all or any part of the Premises resulting from any
such damage, repair, reconstruction or restoration.
(g) Inability to Complete. Notwithstanding anything to the contrary
---------------------
contained in this Section 20, if Landlord is obligated or elects to repair,
reconstruct and/or restore the damaged portion of the Building or the Premises
pursuant to Subsection 20(a) or Subsection 20(b)(1), but is delayed from
completing such repair, reconstruction and/or restoration beyond the date which
is ninety (90) days after the date estimated by Landlord's contractor for
completion thereof by reason of any causes (other than delays caused by Tenant,
its subtenants, employees, agents or contractors) which are beyond the
reasonable control of Landlord as described in Section 33, then either Landlord
or Tenant may elect to terminate this Lease upon ten (10) days' prior written
notice given to the other after the expiration of such ninety (90) day period.
(h) Damage Near End of Term. Landlord and Tenant shall each have the
-----------------------
right to terminate this Lease if any damage to the Premises or the Building
occurs during the last twelve (12) months of the Term of this Lease where
Landlord's contractor estimates in a writing delivered to Landlord and Tenant
that the repair, reconstruction or restoration of such damage cannot be
completed within sixty (60) days after the date of such casualty. If either
party desires to terminate this Lease under this Subsection 20(h), it shall
provide written notice to the other party of such election within ten (10) days
after receipt of Landlord's contractor's repair estimates.
(i) Waiver of Termination Right. Landlord and Tenant agree that the
---------------------------
foregoing provisions of this Section 20 are to govern their respective rights
and obligations in the event of any damage or destruction and supersede and are
in lieu of the provisions of any applicable law, statute, ordinance, rule,
regulation, order or ruling now or hereafter in force which provide remedies for
damage or destruction of leased premises (including, without limitation, the
provisions of California Civil Code Section 1932, Subsection 2, and Section
1933, Subsection 4 and any successor statute or laws of a similar nature).
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<PAGE>
(j) Termination. Upon any termination of this Lease under any of the
-----------
provisions of this Section 20, the parties will be released without further
obligation to the other from the date possession of the Premises is surrendered
to Landlord except for items which have accrued and are unpaid as of the date of
termination and matters which are to survive any termination of this Lease as
provided in this Lease.
21. EMINENT DOMAIN.
--------------
(a) Substantial Taking. If the whole of the Premises, or such part
------------------
thereof as shall substantially interfere with Tenant's use and occupancy of the
Premises, as contemplated by this Lease, is taken for any public or quasi-public
purpose by any lawful power or authority by exercise of the right of
appropriation, condemnation or eminent domain, or sold to prevent such taking,
either party will have the right to terminate this Lease effective as of the
date possession is required to be surrendered to such authority.
(b) Partial Taking; Abatement of Rent. In the event of a taking of a
---------------------------------
portion of the Premises which does not substantially interfere with Tenant's use
and occupancy of the Premises, then, neither party will have the right to
terminate this Lease and Landlord will thereafter proceed to make a functional
unit of the remaining portion of the Premises (but only to the extent Landlord
receives proceeds therefor from the condemning authority), and rent will be
abated with respect to the part of the Premises which Tenant is deprived of on
account of such taking.
(c) Condemnation Award. In connection with any taking of the Premises
------------------
or the Building, Landlord will be entitled to receive the entire amount of any
award which may be made or given in such taking or condemnation, without
deduction or apportionment for any estate or interest of Tenant, it being
expressly understood and agreed by Tenant that no portion of any such award will
be allowed or paid to Tenant for any so-called bonus or excess value of this
Lease, and such bonus or excess value will be the sole property of Landlord.
Tenant agrees not to assert any claim against Landlord or the taking authority
for any compensation because of such taking (including any claim for bonus or
excess value of this Lease); provided, however, if any portion of the Premises
is taken, Tenant will have the right to recover from the condemning authority
(but not from Landlord) any compensation as may be separately awarded or
recoverable by Tenant for the taking of Tenant's furniture, fixtures, equipment
and other personal property within the Premises, for Tenant's relocation
expenses, and for any loss of goodwill or other damage to Tenant's business by
reason of such taking.
(d) Temporary Taking. In the event of taking of the Premises or any
----------------
part thereof for temporary use, (i) this Lease will remain unaffected thereby
and rent will abate proportionately, and (ii) Landlord will be entitled to
receive such portion or portions of any award made for such use with respect to
the period of the taking which is within the Term. For purpose of this
Subsection 21(d), a temporary taking shall be defined as a taking for a period
of sixty (60) days or less.
22. DEFAULTS AND REMEDIES.
---------------------
(a) Default By Tenant. The occurrence of any one or more of the
-----------------
following events will be deemed a default by Tenant:
(i) The failure by Tenant to make any payment of rent or
additional rent or any other payment required to be made by tenant
hereunder, as and when due, where such failure continues for a period of
five (5) business days after written notice thereof from Landlord to Tenant
provided, however, that any such notice will be in lieu of, and not in
addition to, any notice required under applicable law (including, without
limitation, the provisions of California Code of Civil Procedure Section
1161 regarding unlawful detainer actions or any successor statute or law of
a similar nature).
(ii) The failure by Tenant to observe or perform any of the
express or implied covenants or provisions of this Lease to be observed or
performed by Tenant, other than as specified in Subsection 22(a)(i) or
Subsection 22(a)(11), where such failure continues for a period of thirty
(30) days after written notice thereof from Landlord to Tenant. The
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<PAGE>
provisions of any such notice will be in lieu of, and not in addition to,
any notice required under applicable law (including, without limitation,
California Code of Civil Procedure Section 1161 regarding unlawful detainer
actions and any successor statute or similar law). If the nature of
Tenant's default is such that more than thirty (30) days are reasonably
required for its cure, then Tenant will not be deemed to be in default if
Tenant commences such cure within such thirty (30) day period and
thereafter diligently prosecutes such cure to completion; provided,
however, if the nature of Tenant's default is such that it is not
reasonably susceptible of cure (for example, by way of illustration and not
limitation, material misrepresentations in Tenant's financial statements),
no cure periods shall be provided.
(iii) (A) The making by Tenant or any guarantor of any general
assignment for the benefit of creditors; (B) the filing by or against
Tenant or any guarantor of a petition to have Tenant or such guarantor
adjudged a bankrupt or a petition for reorganization or arrangement under
any law relating to bankruptcy (unless, in the case of a petition filed
against Tenant, the same is dismissed within sixty (60) days); (C) the
appointment of a trustee or receiver to take possession of substantially
all of Tenant's assets located at the Premises or of Tenant's interest in
this Lease, where possession is not restored to Tenant within thirty (30)
days; or (D) the attachment, execution or other judicial seizure of
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease where such seizure is not discharged within thirty
(30) days.
(b) Notices. Notices given under this Section 22 shall specify the
-------
default and one or more applicable Lease provisions, and shall demand that
Tenant perform the provisions of this Lease or pay the rent that is in arrears,
as the case may be, within the applicable period of time, or quit the Premises.
No such notice shall be deemed a forfeiture or a termination of this Lease
unless Landlord so elects in the notice.
(c) Landlord's Remedies; Termination. In the event of any default by
--------------------------------
Tenant, in addition to any other remedies available to Landlord at law or in
equity under applicable law (including, without limitation, the remedies of
Civil Code Section 1951.4 and any successor statute or similar law), Landlord
will have the immediate right and option to terminate this Lease and all rights
of Tenant hereunder. If Landlord elects to terminate this Lease then, to the
extent permitted under applicable law, Landlord may recover from Tenant:
(i) the worth at the time of award of any unpaid rent which had
been earned at the time of such termination; plus
(ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time
of award exceeds the amount of such rent loss that Tenant proves could have
been reasonably avoided; plus
(iii) the worth at the time of award of the amount by which the
unpaid rent for the balance of the Term after the time of award exceeds the
amount of such rent loss that Tenant proves could be reasonably avoided;
plus
(iv) any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which, in the ordinary course of things,
results therefrom including, but not limited to: reasonable attorneys' fees
and costs; brokers' commissions; the costs of refurbishment alterations,
renovation and repair of the Premises, and removal (including the repair of
any damage caused by such removal) and storage (or disposal) of Tenant's
personal property, equipment, fixtures, Alterations, the Tenant
Improvements and any other items which Tenant is required under this Lease
to remove but does not remove, as well as the unamortized value of any
Tenant Improvement costs (less any reasonable residual value of the Tenant
Improvements) incurred by Landlord pursuant to this Lease. The unamortized
value of such costs shall be determined by taking the total of such costs
and multiplying such value by a fraction, the numerator of which is the
number of months of the Lease Term not yet elapsed as of the date on which
the Lease is terminated. and the denominator of which is the total number
of months of the Lease Term.
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As used in Subsection 22(b)(i) and Subsection 22(b)(ii), the "worth at the
time of award" is computed by allowing interest at the Interest Rate. As used
in Subsection 22(b)(iii), the "worth at the time of award" is computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award plus one percent (1%).
(d) Landlord's Remedies: Re-Entry Rights. In the event of any default
------------------------------------
by Tenant in addition to any other remedies available to Landlord under this
Lease, at law or in equity, Landlord will also have the right, with or without
terminating this Lease, to re-enter the Premises and remove all persons and
property from the Premises; such property may be removed and stored in a public
warehouse or elsewhere and/or disposed of at the cost of and for the account of
Tenant in accordance with the provisions of Subsection 13(h) of this Lease or
any other procedures permitted by applicable law. No re-entry or taking
possession of the Premises by Landlord pursuant to this Subsection 22(d) will be
construed as an election to terminate this Lease unless a written notice of such
intention is given to Tenant or unless the termination thereof is decreed by a
court of competent jurisdiction.
(e) Landlord's Remedies: Re-Letting. In the event of the vacation or
-------------------------------
abandonment of the Premises by Tenant or in the event that Landlord elects to
re-enter the Premises or takes possession of the Premises pursuant to legal
proceeding or pursuant to any notice provided by law, then if Landlord does not
elect to terminate this Lease, Landlord may from time to time, without
terminating this Lease, either recover all rent as it becomes due or relet the
Premises or any part thereof on terms and conditions as Landlord in its sole
discretion may deem advisable with the right to make alterations and repairs to
the Premises in connection with such reletting. If Landlord elects to relet the
Premises, then rents received by Landlord from such reletting will be applied:
first, to the payment of any indebtedness other than rent due hereunder from
Tenant to Landlord; second, to the payment of any reasonable cost of such
reletting; third, to the payment of the reasonable cost of any alterations and
repairs to the Premises incurred in connection with such reletting; fourth, to
the payment of rent due and unpaid hereunder and the residue, if any, will be
held by Landlord and applied to payment of future rent as the same may become
due and payable hereunder. Should that portion of such rents received from such
reletting during any month, which is applied to the payment of rent hereunder,
be less than the rent payable during that month by Tenant hereunder, then Tenant
agrees to pay such deficiency to Landlord immediately upon demand therefor by
Landlord. Such deficiency will be calculated and paid monthly.
(f) Landlord's Remedies; Performance for Tenant. Except as otherwise
-------------------------------------------
expressly specified herein, all covenants and agreements to be performed by
Tenant under any of the terms of this Lease are to be performed by Tenant at
Tenant's sole cost and expense and without any abatement of rent. If Tenant
fails to pay any sum of money owed to any party other than Landlord, for which
it is liable under this Lease, or if Tenant fails to perform any other act on
its part to be performed hereunder, Landlord may, without prior notice to
Tenant, and without waiving or releasing Tenant from its obligations, but shall
not be obligated to, make any such payment or perform any such other act to be
made or performed by Tenant Landlord's election to make any such payment or
perform any such act on Tenant's part shall not give rise to any responsibility
of Landlord to continue making the same or similar payments or performing the
same on similar acts. Tenant agrees to reimburse Landlord upon demand for all
sums so paid by Landlord and all necessary incidental costs, together with
interest thereon at the Interest Rate from the date of such payment by Landlord
until reimbursed by Tenant. This remedy shall be in addition to any other right
or remedy of Landlord set forth in this Section 22.
(g) Late Payment. If Tenant fails to pay any installment of rent or
------------
any other payment for which Tenant is obligated under this Lease within five (5)
business days of when due, such late amount will accrue interest at the Interest
Rate and Tenant agrees to pay Landlord as additional rent such interest on such
amount from the date such amount becomes due until such amount is paid. In
addition, Tenant agrees to pay to Landlord concurrently with such late payment
amount, as additional rent, a late charge equal to five percent (5%) of the
amount due to compensate Landlord for the extra costs Landlord will incur as a
result of such late payment The parties agree that (i) it would be impractical
and extremely difficult to fix the actual damage Landlord will suffer in the
event of Tenant's late payment, (ii) such interest and late charge represents a
fair and reasonable estimate of the detriment that Landlord will suffer by
reason of late payment by Tenant, and (iii) the payment of interest and late
charges are distinct and separate in that the payment of interest is to
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compensate Landlord for the use of Landlord's money by Tenant, while the payment
of late charges is to compensate Landlord for Landlord's processing,
administrative and other costs incurred by Landlord as a result of Tenant's
delinquent payments. Acceptance of any such interest and late charge will not
constitute a waiver of the Tenant's default with respect to the overdue amount,
or prevent Landlord from exercising any of the other rights and remedies
available to Landlord. Notwithstanding the foregoing, Landlord shall not ignore
a late charge or interest on a late installment of rent pursuant to the
foregoing unless Landlord has notified Tenant within the previous twelve (12)
months that an installment of rent was not paid within five (5) business days of
when due; and Landlord shall not impose a late charge or interest on any other
late payment pursuant to the foregoing unless Landlord has notified Tenant
within the previous twelve (12) months that a payment (other than a rental
installment) was not paid within five (5) business days of when due. If Tenant
incurs a late charge more than three (3) times in any period of twelve (12)
months during the Lease Term, then, notwithstanding that Tenant cures the late
payments for which such late charges are imposed, Landlord will have the right
to require Tenant thereafter to pay all installments of Monthly Base Rent
quarterly in advance throughout the remainder of the Lease Term, and the
Security Deposit held by Landlord shall be increased and Tenant shall
immediately pay to Landlord the amount necessary to increase the Security
Deposit to no less than three (3) months Rent (whether or not any Security
Deposit was previously required hereunder).
(h) Intentionally omitted.
(i) Rights and Remedies Cumulative. All rights, options and remedies
------------------------------
of Landlord contained in this Lease will be construed and held to be cumulative,
and no one of them will be exclusive of the other, and Landlord shall have the
right to pursue any one or all of such remedies or any other remedy or relief
which may be provided by law or in equity, whether or not stated in this Lease.
Nothing in this Section 22 will be deemed to limit or otherwise affect Tenant's
indemnification of Landlord pursuant to any provision of this Lease.
23. LANDLORD'S DEFAULT. Landlord will not be in default in the
------------------
performance of any obligation required to be performed by Landlord under this
Lease unless Landlord fails to perform such obligation within thirty (30) days
after the receipt of written notice from Tenant specifying in detail Landlord's
failure to perform; provided however, that if the nature of Landlord's
obligation is such that more than thirty (30) days are required for performance,
then Landlord will not be deemed in default if it commences such performance
within such thirty (30) day period and thereafter diligently pursues the same to
completion. Upon any default by Landlord, Tenant may exercise any of its rights
provided at law or in equity, subject to the limitations on liability set forth
in Section 35 of this Lease.
24. ASSIGNMENT AND SUBLETTING.
-------------------------
(a) Restriction on Transfer. Except as expressly provided in this
-----------------------
Section 24, Tenant will not, either voluntarily or by operation of law, assign
or encumber this Lease or any interest herein or sublet the Premises or any part
thereof, or permit the use or occupancy of the Premises by any party other than
Tenant (any such assignment, encumbrance, sublease or the like will sometimes be
referred to as a "Transfer"), without the prior written consent of Landlord,
which consent Landlord will not unreasonably withhold.
(b) Corporate and Partnership Transfers. For purposes of this Section
-----------------------------------
24, if Tenant is a corporation, partnership or other entity, any transfer,
assignment, encumbrance or hypothecation of fifty percent (50%) or more
(individually or in the aggregate) of any stock or other ownership interest in
such entity, and/or any transfer, assignment, hypothecation or encumbrance of
any controlling ownership or voting interest in such entity, will be deemed a
Transfer and will be subject to all of the restrictions and provisions contained
in this Section 24. Notwithstanding the foregoing, the immediately preceding
sentence will not apply to any transfers of stock of Tenant if Tenant is a
publicly-held corporation and such stock is transferred publicly over a
recognized security exchange or over-the-counter market.
(c) Permitted Controlled Transfers. Notwithstanding the provisions of
------------------------------
this Section 24 to the contrary, Tenant may assign this Lease or sublet the
Premises or any portion thereof
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<PAGE>
("Permitted Transfer"), without Landlord's consent and without extending any
sublease termination option to Landlord, to any parent, subsidiary or affiliate
corporation which controls, is controlled by or is under common control with
Tenant, or to any corporation resulting from a merger or consolidation with
Tenant or to any person or entity which acquires all or substantially all the
assets of Tenant's business as a going concern, provided that (i) at least
twenty (20) days prior to such assignment or sublease, Tenant delivers to
Landlord the financial statements and other financial and background information
of the assignee or sublessee described in Subsection 24(d); (ii) if an assign-
ment, the assignee assumes, in full, the obligations of Tenant under this Lease
(or if a sublease, the sublessee of a portion of the Premises or Term assumes,
in full, the obligations of Tenant with respect to such portion); (iii) the
financial net worth of the assignee or sublessee as of the time of the proposed
assignment or sublease equals or exceeds the lesser of $10,000,000 or that of
Tenant as of the date of execution of this Lease; and (iv) the use of the
Premises under Section 8 remains unchanged.
(d) Transfer Notice. Except for Permitted Transfers, if Tenant
---------------
desires to effect a Transfer, then at least thirty (30) days prior to the date
when Tenant desires the Transfer to be effective (the "Transfer Date"), Tenant
agrees to give Landlord a notice (the "Transfer Notice"), stating the name,
address and business of the proposed assignee, sublessee or other transferee
(sometimes referred to hereinafter as "Transferee"), reasonable information
(including references) concerning the character, ownership, and financial
condition of the proposed Transferee, the Transfer Date, any ownership or
commercial relationship between Tenant and the proposed Transferee, and the
consideration and all other material terms and conditions of the proposed
Transfer, all in such detail as Landlord may reasonably require. If Landlord
reasonably requests additional detail, the Transfer Notice will not be deemed to
have been received until Landlord receives such additional detail, and Landlord
may withhold consent to any Transfer until such information is provided to it.
(e) Landlord's Options. Within fifteen (15) days of Landlord's
------------------
receipt of any Transfer Notice, and any additional information reasonably
requested by Landlord concerning the proposed Transferee's financial
responsibility, Landlord will elect to do one of the following:
(i) consent to the proposed Transfer, or
(ii) refuse such consent which refusal shall be on reasonable
grounds including, without limitation, those set forth in Subsection 24(f).
(f) Reasonable Disapproval. Landlord and Tenant hereby acknowledge
----------------------
that Landlord's disapproval of any proposed Transfer pursuant to Subsection
24(e) will be deemed reasonably withheld if based upon any reasonable factor,
including, without limitation, any or all of the following factors: (i) the
proposed Transferee is a governmental entity; (ii) the portion of the Premises
to be sublet or assigned is irregular in shape with inadequate means of ingress
and egress; (iii) the use of the Premises by the Transferee (A) is not permitted
by the use provisions in Section 8 hereof, or (B) violates any exclusive use
granted by Landlord to another tenant in the Building; (iv) the Transfer would
likely result in a significant and inappropriate increase in the use of the
parking areas or Project Common Areas by the Transferee's employees or visitors,
and/or significantly increase the demand upon utilities and services to be
provided by Landlord to the Premises or (v) the Transferee does not have the
financial capability to fulfill the obligations imposed by the Transfer and this
Lease. In the event Landlord withholds or conditions its consent and Tenant or
any proposed Transferee claims that Landlord has unreasonably withheld or
delayed its consent under Subsection 24(f) or otherwise has breached or acted
unreasonably under this Section 24, their sole remedies shall be a declaratory
judgment and an injunction for the relief sought without any monetary damages,
and Tenant hereby waives all other remedies on its own behalf and, to the extent
permitted under all applicable laws, on behalf of the proposed Transferee. In
any such action, each party shall bear its own attorneys' fees.
(g) Additional Conditions. A condition to Landlord's consent to any
---------------------
Transfer of this Lease will be the delivery to Landlord of a true copy of the
fully executed instrument of assignment, sublease, transfer or hypothecation
(provided, however, that Tenant may submit for Landlord's conditional consent
the unexecuted but substantially final form of the transfer document in
question), and, in the case of an assignment the delivery to Landlord of an
agreement executed by the Transferee
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in form and substance reasonably satisfactory to Landlord, whereby the
Transferee assumes and agrees to be bound by all of the terms and provisions of
this Lease and to perform all of the obligations of Tenant hereunder. As a
condition for granting its consent to any assignment or sublease, Landlord may
require that the assignee or sublessee remit directly to Landlord on a monthly
basis, all monies due to Tenant by said assignee or sublessee, except any excess
rent to which Tenant may be entitled under Subsection 24(h). As a condition to
Landlord's consent to any sublease, such sublease must provide that it is
subject and subordinate to this Lease and to all mortgages; that Landlord may
enforce the provisions of the sublease, including collection of rent; that in
the event of termination of this Lease for any reason, including without
limitation a voluntary surrender by Tenant, or in the event of any reentry or
repossession of the Premises by Landlord, Landlord may, at its option, either
(i) terminate the sublease, or (ii) take over all of the right, title and
interest of Tenant, as sublessor, under such sublease, in which case such
sublessee will attorn to Landlord, but that nevertheless Landlord will not (1)
be liable for any previous act or omission of Tenant under such sublease, (2) be
subject to any defense or offset previously accrued in favor of the sublessee
against Tenant, or (3) be bound by any previous modification of any sublease
made without Landlord's written consent, or by any previous prepayment by
sublessee of more than one month's rent.
(h) Excess Rent. If Landlord consents to any Transfer, Tenant agrees
-----------
to pay to Landlord, as additional rent fifty (50%) of all the "Profits" payable
by the sublessee or assignee pursuant to any approved sublease or assignment.
As used herein, "Profits" shall mean the gross revenue and all other
consideration payable for, or by reason of the assignment or sublease,
including, but not limited to, any sums paid for personal property, goodwill,
Tenant's business or services in excess of the fair market value thereof, sums
paid for tenant improvements or fixtures, and any rental amounts paid, less: (a)
the rental amounts paid to Landlord by Tenant during the period of the sublease
term or during the assignment allocable to the portion of the Premises in
question; (b) any reasonable improvement allowance or other reasonable economic
concession actually paid by Tenant to sublessee or assignee, (c) customary
brokers' commissions actually paid by Tenant; (d) reasonable attorneys' fees
paid by Tenant to prepare and/or review the transfer documents in connection
with the assignment or sublease; and (e) reasonable costs actually incurred by
Tenant to advertise the space for such sublease or assignment Tenant and
Landlord acknowledge and agree that it shall not be unreasonable for Landlord
to require, as a condition for its consent to a proposed assignment or
subletting, a written agreement between Tenant, Landlord and the proposed
assignee or sublessee stating that 50% of the Profits shall be the property of
Landlord and agreeing that such amounts shall, at Landlord's option, be payable
to Landlord by Tenant or directly to Landlord by the assignee or sublessee.
(i) Intentionally omitted.
(j) No Release. No Transfer will release Tenant of
-----------
Tenant's obligations under this Lease or alter the primary liability of Tenant
to pay the rent and to perform all other obligations to be performed by Tenant
hereunder. However, the acceptance of rent by Landlord from any other person
will not be deemed to be a waiver by Landlord of any provision hereof. Consent
by Landlord to one Transfer will not be deemed consent to any subsequent
Transfer. In the event of default by any Transferee of Tenant or any successor
of Tenant in the performance of any of the terms hereof, Landlord may proceed
directly against Tenant without the necessity of exhausting remedies against
such Transferee or successor. Landlord may consent to subsequent assignments of
this Lease or sublettings or amendments or modifications to this Lease with
assignees of Tenant, without notifying Tenant, or any successor of Tenant and
without obtaining its or their consent thereto and any such actions will not
relieve Tenant of liability under this Lease. The dissolution of the original
Tenant hereunder following a Permitted Transfer that is a merger, consolidation
or asset purchase in compliance with Section 24(a) shall not require Landlord's
consent provided the successor Tenant fully assumes all of the original Tenant's
obligations under this Lease from and after the date of this Lease.
(k) Administrative and Attorneys' Fees. If Tenant effects a Transfer
----------------------------------
or requests the consent of Landlord to any Transfer (whether or not such
Transfer is consummated), then, upon demand, Tenant agrees to pay Landlord a
non-refundable administrative fee of Two Hundred Fifty Dollars ($250.00), plus
any reasonable attorneys' and paralegal fees incurred by Landlord, not to exceed
$1,000, in connection with such Transfer or request for consent (whether
attributable to
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Landlord's in-house attorneys or paralegals or otherwise). Acceptance of the Two
Hundred Fifty Dollar ($250.00) administrative fee and/or reimbursement of
Landlord's attorneys' and paralegal fees will in no event obligate Landlord to
consent to any proposed Transfer.
25. SUBORDINATION. At the election of Landlord or any mortgagee or
-------------
beneficiary with a deed of trust encumbering the Building or the Project or any
portion thereof, or any lessor of a ground or underlying lease with respect to
the Building or the Project or any portion thereof, this Lease will be subject
and subordinate at all times to: (i) all ground leases or underlying leases
which may now exist or hereafter be executed affecting the Building; and (ii)
the lien of any mortgage or deed of trust or any other hypothecation for
security now or hereafter placed upon the Project, the Building or any portion
thereof, or Landlord's interest and estate in any of same, and to any and all
advances made on the security thereof and to all renewals, modifications,
consolidations, replacements and extensions thereof which may now exist or
hereafter be executed. Notwithstanding the foregoing, if any mortgagee, trustee
or ground lessor shall elect to have this Lease prior to the lien of its
mortgage or deed of trust or to ground lease, and shall give written notice
thereof to Tenant at any time prior to the transfer of the Premises in
foreclosure or by deed in lieu of foreclosure of such lien or otherwise (or at
any time prior to the termination of the ground lease, as the case may be),
then, notwithstanding any prior subordination, this Lease shall be deemed prior
to such mortgage, deed of trust, or ground lease, whether this Lease is dated
prior or subsequent to the date of said mortgage, deed of trust or ground lease
or the date of recording thereof. Notwithstanding the foregoing provisions of
this Section 25, the transferee of the Premises upon any foreclosure sale or
pursuant to any deed in lieu of foreclosure or other transfer (or the ground
lessor in the event of a termination of a ground lease) shall have the right,
whether or not this Lease has been terminated by or in connection with such
transfer or termination of ground lease (whether voluntarily, involuntarily or
by operation of law), and provided that such transferee shall not disturb
Tenant's rights under this Lease so long as Tenant is not in default to require
Tenant to attorn to such transferee and/or to enter into a new lease of the
Premises (with the transferee or ground lessor as landlord) on terms and
conditions identical to those as set forth in the Lease, except that the term of
the new lease shall expire on the date specified herein for the expiration of
the term of this Lease. The provisions hereof are intended to be self-executing
and do not require the necessity of any additional document being executed by
Tenant for the purpose of effecting same. Tenant nevertheless agrees to execute
and deliver to Landlord, within ten (10) business days after receipt of
Landlord's request therefor, any documents reasonably requested by Landlord to
effectuate or evidence any subordination or adornment, to make this Lease prior
to the lien of any mortgage, deed of trust or ground lease or to enter into a
new lease, each as described above in this Section 25, provided, however, that
if Tenant fails to execute and deliver to Landlord any such subordination or
attornment documents within such period, Landlord shall make a second request of
Tenant to provide such documents, and Tenant shall then have ten (10) additional
business days from the date of Tenant's receipt of Landlord's request for such
documents to execute and deliver them to Landlord, and failing to do so: (i)
Tenant shall be in default hereunder with no right to further notice or cure,
and (ii) Tenant hereby irrevocably appoints Landlord as Tenant's attorney-in-
fact to execute and deliver such documents for Tenant, such power, being coupled
with an interest and being irrevocable. Without limitation on any of the
foregoing, Tenant hereby waives its rights under any law which gives or purports
to give Tenant any right to terminate or otherwise adversely affect this Lease
and the obligations of Tenant hereunder in the event of any such foreclosure
proceeding, sale or termination of ground lease.
26. ESTOPPEL CERTIFICATE.
--------------------
(a) Tenant's Obligations. Within ten (10) business days following
--------------------
receipt of any written request which Landlord may make from time to time, Tenant
agrees to execute and deliver to Landlord a statement in a form substantially
similar to the form of Exhibit "G" attached hereto or as may reasonably be
-----------
required by Landlord's lender, certifying: (i) the Commencement Date of this
Lease; (ii) the fact that this Lease is unmodified and in full force and effect
(or, if there have been modifications, that this Lease is in full force and
effect, and stating the date and nature of such modifications); (iii) the date
to which the rent and other sums payable under this Lease have been paid; (iv)
that there are no current defaults under this Lease by either Landlord or Tenant
except as specified in Tenant's statement; and (v) such other matters reasonably
requested by Landlord. Landlord and Tenant intend that any statement delivered
pursuant to this Section 26 may be relied
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<PAGE>
upon by any mortgagee, beneficiary, purchaser or prospective purchaser of the
Building or any interest therein.
(b) Tenant's Failure to Deliver. Tenant's failure to deliver such
---------------------------
statement within such time will be conclusive upon Tenant (i) that this Lease is
in full force and effect, without modification except as may be represented by
Landlord, (ii) that there are no uncured defaults in Landlord's performance, and
(iii) that not more than one (1) month's rent has been paid in advance.
Without limiting the foregoing, if Tenant fails to deliver any such statement
within such ten (10) business day period, Landlord may deliver to Tenant an
additional request for such statement and Tenant's failure to deliver such
statement to Landlord within ten (10) business days after delivery of such
additional request will constitute a default under this Lease.
27. Intentionally omitted.
28. RULES AND REGULATIONS. Tenant agrees to faithfully observe and comply
---------------------
with the "Rules and Regulations," a copy of which is attached hereto and marked
Exhibit "H" and all reasonable and nondiscriminatory modifications thereof and
- -----------
additions thereto from time to time put into effect by Landlord. Landlord will,
upon request by Tenant notify other tenants of the Building of clear violations
by such tenants of the Rules and Regulations that adversely affect Tenant's use
of the Premises, but Landlord will in no event be responsible to Tenant for the
violation or non-performance by any other tenant or occupant of the Building of
any of the Rules and Regulations.
29. MODIFICATION AND CURE RIGHTS OF LANDLORD'S MORTGAGEES AND LESSORS.
------------------------------------------------------------------
(a) Modifications. If, in connection with Landlord's obtaining or
-------------
entering into any financing or ground lease for any portion of the Building or
the Project, the lender or ground lessor requests modifications to this Lease,
Tenant, within ten (10) days after request therefor, agrees to execute an
amendment to this Lease incorporating such modifications, provided such
modifications are reasonable and do not increase the obligations of Tenant under
this Lease or adversely affect the leasehold estate created by this Lease.
(b) Cure Rights. In the event of any default on the part of Landlord,
-----------
Tenant will give notice by registered or certified mail to any beneficiary of a
deed of trust or mortgage covering the Premises or ground lessor of Landlord
whose address has been furnished to Tenant, and Tenant agrees to offer such
beneficiary, mortgagee or ground lessor a reasonable opportunity to cure the
default (including with respect to any such beneficiary or mortgagee, time to
obtain possession of the Premises, subject to this Lease and Tenant's rights
hereunder, by power of sale or a judicial foreclosure, if such should prove
necessary to effect a cure).
30. DEFINITION OF LANDLORD. The term "Landlord," as used in this Lease,
----------------------
so far as covenants or obligations on the part of Landlord are concerned, means
and includes only the owner or owners, at the time in question, of the fee title
of the Premises or the lessee(s) under any ground lease, if any. In the event
of any transfer, assignment or other conveyance or transfers of any such title
(other than a transfer for security purposes only, but including any transfer to
a purchaser at a foreclosure sale or by deed in lieu of foreclosure, subject to
the provisions of Section 25), Landlord herein named (and in case of any
subsequent transfers or conveyances, the then grantor) shall be and is
automatically relieved from and after the date of such transfer, assignment or
conveyance of all liability as respects the performance of any covenants or
obligations on the part of Landlord contained in this Lease thereafter to be
performed, and the transferee shall be deemed, without any further agreement
between the parties or their successors in interest or between the parties and
any such transferee, to have assumed and agreed to carry out any and all the
covenants and obligations of the Landlord arising under this Lease after the
date of such transfer. Subject to the provisions of Section 25 hereof, Tenant
agrees to attorn to and recognize such transferee and shall be deemed to have
attorned to and recognized such transferee without any further agreement between
the parties or their successors in interest or between the parties and any such
transferee. Landlord and Landlord's transferees and assignees have the absolute
right to transfer all or any portion of their respective title and interest in
the Project, the Building, the Premises and/or this Lease without the consent of
Tenant and such transfer or subsequent transfer will not be deemed a violation
on Landlord's part of any of
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<PAGE>
the terms and conditions of this Lease. If any Security Deposit has been made by
Tenant, Landlord may transfer such Security Deposit to the transferee, and upon
the assumption of such transferee of Landlord's obligations under this Lease,
Landlord shall be discharged from any further liability in reference thereto.
31. WAIVER. The waiver by either party of any breach of any term,
------
covenant or condition herein contained will not be deemed to be a waiver of any
subsequent breach of the same or any other term, covenant or condition herein
contained, nor will any custom or practice which may develop between the parties
in the administration of the terms hereof be deemed a waiver of or in any way
affect the right of either party to insist upon performance in strict accordance
with said terms. The subsequent acceptance of rent or any other payment
hereunder by Landlord will not be deemed to be a waiver of any preceding breach
by Tenant of any term, covenant or condition of this Lease, other than the
failure of Tenant to pay the particular rent so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
rent. No acceptance by Landlord of a lesser sum than the basic rent and
additional rent or other sum then due will be deemed to be other than on account
of the earliest installment of such rent or other amount due, nor will any
endorsement or statement on any check or any letter accompanying any check be
deemed an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such installment
or other amount or pursue any other remedy provided in this Lease. The consent
or approval of Landlord to or of any act by Tenant requiring Landlord's consent
or approval will not be deemed to waive or render unnecessary Landlord's consent
or approval to or of any subsequent similar acts by Tenant.
32. PARKING.
-------
(a) Grant of Parking Rights. So long as this Lease is in effect and
-----------------------
provided Tenant is not in default hereunder, Landlord grants to Tenant and
Tenant's Authorized Users (as defined below) a license to use the number and
type of parking spaces designated in Subsection 1(s) subject to the terms and
conditions of this Section 32 and the Rules and Regulations regarding parking
contained in Exhibit "H" attached hereto. As consideration for the use of such
-----------
parking spaces, Tenant agrees to pay to Landlord or, at Landlord's election,
directly to Landlord's parking operator, as additional rent under this Lease,
the parking rate set forth in Subsection 1(t) or, if no rate is specified in
Subsection 1(t) or the rate therein ceases to be applicable, then at the
prevailing parking rate for each such parking space as established by Landlord
in its discretion from time to time, provided, however, that Tenant's employee
parking consisting of up to four (4) spaces per every 1,000 usable square feet
of space leased by Tenant, shall be free of charge for the initial Term of the
Lease. Tenant agrees that all parking charges will be payable on a monthly
basis concurrently with each monthly payment of Monthly Base Rent. Tenant
agrees to submit to Landlord or, at Landlord's election, directly to Landlord's
parking operator with a copy to Landlord, written notice in a form reasonably
specified by Landlord containing the names, home and office addresses and
telephone numbers of those persons who are authorized by Tenant to use Tenant's
parking spaces on a monthly basis ("Tenant's Authorized Users") and shall use
its best efforts to identify each vehicle of Tenant's Authorized Users by make,
model and license number. Tenant agrees to deliver such notice prior to the
beginning of the Term of this Lease and to periodically update such notice upon
specific request by Landlord or Landlord's parking operator to reflect changes
to Tenant's Authorized Users or their vehicles.
(b) Visitor Parking. So long as this Lease is in effect,
---------------
Tenant's visitors and guests will be entitled to use those specific parking
areas which are designated for short term visitor parking and which are located
within the surface parking area(s), if any, and/or within the parking
structure(s) which serve the Building. Visitor parking will be made available
at a charge to Tenant's visitors and guests, with the rate being established by
Landlord in its discretion from time to time at such rates being charged to
other tenants in the Building without special arrangements as to parking rates.
Tenant, at its sole cost and expense, may elect to validate such parking for its
visitors and guests. All such visitor parking will be on a non-exclusive, in
common basis with all other visitors and guests of the Project.
(c) Use of Parking Spaces. Tenant will not use or allow any of
---------------------
Tenant's Authorized Users to use any parking spaces which have been specifically
assigned by Landlord to
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<PAGE>
other tenants or occupants or for other uses such as visitor parking or which
have been designated by any governmental entity as being restricted to certain
uses. Tenant will not be entitled to increase or reduce its parking privileges
applicable to the Premises during the Term of the Lease except as follows: If at
any time Tenant desires to increase or reduce the number of parking spaces
allocated to it under the terms of this Lease, Tenant must notify Landlord in
writing of such desire and Landlord will have the right in its good faith but
sole discretion, to either (a) approve such requested increase in the number of
parking spaces allocated to Tenant (with an appropriate increase to the
additional rent payable by Tenant for such additional spaces based on the then
prevailing parking rates), (b) approve such requested decrease in the number of
parking spaces allocated to Tenant (with an appropriate reduction in the
additional rent payable by Tenant for such eliminated parking spaces based on
the then prevailing parking rates), or (c) disapprove such requested increase or
decrease in the number of parking spaces allocated to Tenant. Promptly following
receipt of Tenant's written request, Landlord will provide Tenant with written
notice of its decision including a statement of any adjustments to the
additional rent payable by Tenant for parking under the Lease, if applicable. No
parking stalls will be allocated to Tenant with respect to any space leased by
Tenant under the Lease which consists of less than the full incremental amounts
of rentable square footage, if any, required for parking stalls, calculated on a
1 stall for each 250 usable square feet basis.
(d) General Provisions. Except as otherwise provided in this
------------------
Paragraph 32 and in the Addendum, Landlord reserves the right to set and
increase monthly fees and/or daily and hourly rates for parking privileges from
time to time during the Term of the Lease. Landlord may assign any unreserved
and unassigned parking spaces and/or make all or any portion of such spaces
reserved, if Landlord reasonably determines that it is necessary for orderly and
efficient parking or for any other reasonable reason. Failure to pay the rent
for any particular parking spaces or failure to comply with any terms and
conditions of this Lease applicable to parking may be treated by Landlord as a
default under this Lease and, in addition to all other remedies available to
Landlord under the Lease, at law or in equity, Landlord may elect to recapture
such parking spaces for the balance of the Term of this Lease if Tenant does not
cure such failure within the applicable cure period set forth in Section 22 of
this Lease. In such event, Tenant and Tenant's Authorized Users will be deemed
visitors for purposes of parking space use and will be entitled to use only
those parking areas specifically designated for visitor parking subject to all
provisions of this Lease applicable to such visitor parking use. Tenant's
parking rights and privileges described herein are personal to Tenant and may
not be assigned or transferred, or otherwise conveyed, without Landlord's prior
written consent, which consent Landlord may withhold in its sole and absolute
discretion. In any event under no circumstances may Tenant's parking rights
and privileges be transferred, assigned or otherwise conveyed separate and apart
from Tenant's interest in this Lease.
(e) Cooperation with Traffic Mitigation Measures. Landlord and Tenant
--------------------------------------------
agree to use their reasonable, good faith efforts to cooperate in traffic
mitigation programs which may be undertaken by Landlord independently, or in
cooperation with local municipalities or governmental agencies or other property
owners in the vicinity of the Building. Such programs may include, but will not
be limited to, carpools, vanpools and other ridesharing programs, public and
private transit. flexible work hours, preferential assigned parking programs and
programs to coordinate tenants within the Project with existing or proposed
traffic mitigation programs.
(f) Parking Rules and Regulations. Tenant and Tenant's Authorized
-----------------------------
Users shall comply with all rules and regulations regarding parking set forth in
Exhibit "H" attached hereto and Tenant agrees to cause its employees,
- -----------
subtenants, assignees, contractors, suppliers, customers and invitees to comply
with such rules and regulations. Landlord reserves the right from time to time
to modify and/or adopt such other reasonable and non-discriminatory rules and
regulations for the parking facilities as it deems reasonably necessary for the
operation of the parking facilities.
33. FORCE MAJEURE. If either Landlord or Tenant is delayed, hindered in
-------------
or prevented from the performance of any act required under this Lease by reason
of strikes, lock-outs, labor troubles, inability to procure standard materials,
failure of power, restrictive governmental laws, regulations or orders or
governmental action or inaction (including failure, refusal or delay in issuing
permits, approvals and/or authorizations which is not the result of the action
or inaction of the party claiming such delay), riots, insurrection, war, fire,
earthquake, flood or other natural disaster, unusual and unforeseeable delay
which results from an interruption of any public utilities (e.g., electricity,
gas,
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<PAGE>
water, telephone) or other unusual and unforeseeable delay not within the
reasonable control of the party delayed in performing work or doing acts
required under the provisions of this Lease, then performance of such act will
be excused for the period of the delay and the period for the performance of
any such act will be extended for a period equivalent to the period of such
delay. The provisions of this Section 33 will not operate to excuse Tenant from
prompt payment of rent or any other payments required under the provisions of
this Lease.
34. SIGNS. Subject to the, provisions of Paragraph 4 of the Addendum,
-----
Landlord will designate the location on the Premises, if any, for one or more
Tenant identification sign(s). Tenant agrees to have Landlord install and
maintain Tenant's identification sign(s) in such designated location in
accordance with this Section 34 at Tenant's sole cost and expense. Tenant has
no right to install Tenant identification signs in any other location in, on or
about the Premises or the Project and will not display or erect any other signs,
displays or other advertising materials that are visible from the exterior of
the Building or from within the Building in any interior or exterior common
areas. The size, design, color and other physical aspects of any and all
permitted sign(s) will be subject to (i) Landlord's written approval prior to
installation, which approval may be withheld in Landlord's discretion, (ii) any
covenants, conditions or restrictions governing the Premises, and (iii) any
applicable municipal or governmental permits and approvals. Tenant will be
responsible for all costs for installation, maintenance, repair and removal of
any Tenant identification sign(s). If Tenant fails to remove Tenant's sign(s)
upon termination of this Lease and repair any damage caused by such removal,
Landlord may do so at Tenant's expense. Tenant agrees to reimburse Landlord for
all costs incurred by Landlord to effect any installation, maintenance or
removal on Tenant's account, which amount will be deemed additional rent, and
may include, without limitation, all sums disbursed, incurred or deposited by
Landlord including Landlord's costs, expenses and actual attorneys' fees with
interest thereon at the Interest Rate from the date of Landlord's demand until
paid by Tenant. Any sign rights granted to Tenant under this Lease are personal
to Tenant and may not be assigned, transferred or otherwise conveyed to any
assignee or subtenant of Tenant without Landlord's prior written consent, which
consent Landlord may withhold in its sole and absolute discretion. In the event
of any conflict between the provisions of this Section 34 and those of Paragraph
4 of the Addendum, the provisions of Paragraph 4 of the Addendum shall control.
35. LIMITATION ON LIABILITY. In consideration of the benefits accruing
-----------------------
hereunder, Tenant on behalf of itself and all successors and assigns of Tenant
covenants and agrees that, in the event of any actual or alleged failure, breach
or default hereunder by Landlord:
(a) Tenant's recourse against Landlord for monetary damages will be
limited to Landlord's interest in the Building including, subject to the prior
rights of any Mortgagee, Landlord's interest in the rents of the Building, and
any insurance proceeds payable to Landlord;
(b) Except as may be necessary to secure jurisdiction of the
partnership, no partner of Landlord shall be sued or named as a party in any
suit or action and no service of process shall be made against any partner of
Landlord;
(c) No partner of Landlord shall be required to answer or otherwise
plead to any service of process;
(d) No judgment will be taken against any partner of Landlord and any
judgment taken against any partner of Landlord may be vacated and set aside at
any time after the fact;
(e) No writ of execution will be levied against the assets of any
partner of Landlord;
(f) The obligations under this Lease do not constitute personal
obligations of the individual partners, directors, officers or shareholders of
Landlord, and Tenant shall not seek recourse against the individual partners,
directors, officers or shareholders of Landlord or any of their personal assets
for satisfaction of any liability in respect to this Lease;
(g) These covenants and agreements are enforceable both by Landlord
and also by any partner of Landlord.
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<PAGE>
36. FINANCIAL STATEMENTS. Prior to the execution of this Lease by
--------------------
Landlord and at any time during the Term of this Lease upon ten (10) business
days prior written notice from Landlord, Tenant agrees to provide Landlord with
a current financial statement for Tenant and any guarantors of Tenant and
financial statements for the two (2) years prior to the current financial
statement year for Tenant and any guarantors of Tenant. Such statements are to
be prepared in accordance with generally accepted accounting principles and, if
such is the normal practice of Tenant, audited by an independent certified
public accountant.
37. QUIET ENJOYMENT. Landlord covenants and agrees with Tenant that upon
---------------
Tenant paying the rent required under this Lease and paying all other charges
and performing all of the covenants and provisions on Tenant's part to be
observed and performed under this Lease, Tenant may peaceably and quietly have,
hold and enjoy the Premises in accordance with this Lease.
38. MISCELLANEOUS.
-------------
(a) Conflict of Laws. This Lease shall be governed by and construed
----------------
pursuant to the laws of the State.
(b) Successors and Assigns. Except as otherwise provided in this
----------------------
Lease, all of the covenants, conditions and provisions of this Lease shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and assigns.
(c) Professional Fees and Costs. Subject to the provisions of Article
---------------------------
39, if either Landlord or Tenant should bring suit against the other with
respect to this Lease, then all reasonable costs and expenses, including without
limitation, actual professional fees and costs such as appraisers', accountants'
and reasonable attorneys' fees and costs, incurred by the prevailing party
therein shall be paid by the other party, which obligation on the part of the
other party shall be deemed to have accrued on the date of the commencement of
such action.
(d) Terms and Headings. The words "Landlord" and "Tenant" used herein
------------------
shall include the plural as well as the singular. Words used in any gender
include other genders. The Section and subsection headings of this Lease are
not a part of this Lease and shall have no effect upon the construction or
interpretation of any part hereof.
(e) Time. Time is of the essence with respect to the performance of
----
every provision of this Lease in which time of performance is a factor.
(f) Prior Agreement; Amendments. This Lease constitutes and is
---------------------------
intended by the parties to be a final, complete and exclusive statement of their
entire agreement with respect to the subject matter of this Lease. This Lease
supersedes any and all prior and contemporaneous agreements and understandings
of any kind relating to the subject matter of this Lease. There are no other
- -----------
agreements, understandings, representations, warranties, or statements, either
oral or in written form, concerning the subject matter of this Lease. No
alteration, modification, amendment or interpretation of this Lease shall be
binding on the parties unless contained in a writing which is signed by both
parties.
(g) Separability. Any provision of this Lease which shall prove to be
------------
invalid, void or illegal in no way affects, impairs or invalidates any other
provision hereof, and such other provisions shall remain in full force and
effect.
(h) Recording. Neither Landlord nor Tenant shall record this Lease
---------
nor a short form memorandum thereof without the consent of the other.
(i) Counterparts. This Lease may be executed in one or more
------------
counterparts, each of which shall constitute an original and all of which shall
be one and the same agreement.
(j) Nondisclosure of Lease Terms. Tenant acknowledges and agrees that
----------------------------
the terms of this Lease are confidential and constitute proprietary information
of Landlord. Disclosure of the terms could adversely affect the ability of
Landlord to negotiate other leases and impair
-28-
<PAGE>
Landlord's relationship with other tenants. Accordingly, Tenant agrees that ft,
and its partners, officers, directors, employees and attorneys, shall not
intentionally and voluntarily disclose the terms and conditions of this Lease to
any newspaper or other publication or any other tenant or apparent prospective
tenant of the Building or other portion of the Project, or real estate agent
other than CB Madison or another agent exclusively serving Tenant, either
directly or indirectly, without the prior written consent of Landlord, provided,
however, that Tenant may disclose the terms to prospective subtenants or
assignees under this Lease.
(k) Use of Project or Building Name. Tenant may use the Project or
-------------------------------
Building name in Tenant's advertising in connection with Tenant's business at
the Premises and for no other purpose, except with Landlord's prior written
consent Tenant shall not have or acquire any property right or interest in the
Project name or Building name. Landlord reserves the right to change the name
or title of the Project. Building or Premises at any time, and Tenant waives
all claims for damages arising from or in connection with any such change;
provided, however, that Landlord shall notify Tenant of the name change as soon
as reasonably practicable following its implementation.
(l) No Light and Air Easement. Any diminution or shutting off of
-------------------------
light or air by any structure which may be erected at the Project or on lands
adjacent to the Building shall in no way affect this Lease, abate rent or
otherwise impose any liability on Landlord. Neither does this Lease confer any
right with regard to the subsurface of the land on which the Project or Building
is situated.
39. RESOLUTION OF DISPUTES. Landlord and Tenant have agreed on the
----------------------
following mechanisms in order to obtain prompt and expeditious resolution of all
controversies, claims or disputes arising out of or in connection with the
performance or non-performance of any terms of the Lease and on the equitable
and fair allocation as to Landlord's and Tenant's obligations hereunder,
provided, however, that nothing contained herein shall prevent Landlord from
seeking and/or obtaining summary relief under applicable unlawful detainer
statutes.
(a) Reference of Dispute. Any dispute seeking damages, interpretation
--------------------
of this Lease and any dispute seeking equitable relief, such as but not limited
to specific enforcement of any provision hereof, shall be heard and determined
by a referee pursuant to California Code of Civil Procedure Section 638,
subdivision 1. The venue of any proceeding hereunder shall be in the County,
unless changed by order of the referee.
(i) Procedure for Appointment. The party seeking to resolve the
-------------------------
dispute shall file in court and serve on the other party a complaint
describing the matters in dispute. Service of the complaint shall be as
prescribed by California law. At any time after service of the complaint,
any party may request the designation of a referee to try the dispute.
Thereafter the Landlord and Tenant shall use their best efforts to agree
upon the selection of a referee from among the available referees at
Judicial Arbitration and Mediation Service ("JAMS"). If Landlord and
Tenant are unable to agree upon a referee within ten days after a written
request to do so by any party, then either may petition the judge of the
Superior Court to whom the case is then assigned to appoint a referee from
JAMS. For the guidance of the judge making the appointment of said
referee, Landlord and Tenant agree that the person so appointed shall be a
retired judge from JAMS experienced in the subject matter of the dispute.
(ii) Standards for Decision. To the extent consistent with the
----------------------
terms of this Agreement, the provisions of California Code of Civil
Procedure, Sections 642, 643, 644 and 645 shall be applicable to dispute
resolution by a referee hereunder. In an effort to clarify and amplify the
provisions of California Code of Civil Procedure, Sections 644 and 645,
Landlord and Tenant agree that the referee shall decide issues of fact and
law submitted by Landlord and Tenant for decision in the same manner as
required for a trial by court as set forth in California Code of Civil
Procedure, Sections 631.8 and 632, and California Rules of Court Rule 232.
The referee shall try and decide the dispute according to all of the
substantive and procedural law of the State of California, unless Landlord
and Tenant stipulate to the contrary. When the referee has decided the
dispute, the referee shall also cause the preparation of a judgment based
on said decision. The judgment to be entered by the Superior Court will be
based upon the decision of the referee. Landlord and Tenant agree that the
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<PAGE>
referee's decision shall be appealable in the same manner as if the judge
signing the judgment had tried the case.
(b) Cooperation. Landlord and Tenant shall diligently cooperate with
-----------
one another and the person appointed to resolve the dispute, and shall perform
such acts as may be necessary to obtain a prompt and expeditious resolution of
the dispute. If either party refuses to diligently cooperate, the other party,
after first giving notice of its intent to rely on the provisions of this
Section 39, incurs additional expenses or attorneys' fees solely as a result of
such failure to diligently cooperate, the referee may award such additional
expenses and attorneys' fees to the party giving such notice, even if such party
is not the prevailing party in the dispute.
(c) Allocation of Costs. The cost of the proceeding shall initially
-------------------
be borne equally by Landlord and Tenant, but, subject to Subsection 39(b), the
Prevailing Party in such proceeding shall be entitled to recover, in addition to
reasonable attorneys' fees and all other costs, its contribution for the
reasonable cost of the referee as an item of recoverable costs. The referee
shall include such costs in his judgment or award.
40. EXECUTION OF LEASE.
------------------
(a) Joint and Several Obligations. Intentionally omitted.
-----------------------------
(b) Tenant as Corporation or Partnership. If Tenant executes this
------------------------------------
Lease as a corporation or partnership, then Tenant and the persons executing
this Lease on behalf of Tenant represent and warrant that such entity is duly
qualified and in good standing to do business in California and that the
individuals executing this Lease on Tenant's behalf are duly authorized to
execute and deliver this Lease on its behalf, and in the case of a corporation,
in accordance with a duly adopted resolution of the board of directors of Tenant
a copy of which is to be delivered to Landlord on execution hereof, if requested
by Landlord, and in accordance with the by-laws of Tenant, and, in the case of a
partnership, in accordance with the partnership agreement and the most current
amendments thereto, if any, copies of which are to be delivered to Landlord on
execution hereof, if requested by Landlord, and that this Lease is binding upon
Tenant in accordance with its terms.
(c) Examination of Lease. Submission of this instrument by Landlord
--------------------
to Tenant for examination or signature by Tenant does not constitute a
reservation of or option for lease, and it is not effective as a lease or
otherwise until execution by and delivery to both Landlord and Tenant.
IN WITNESS WHEREOF, the parties have caused this Lease to be duly executed
by their duly authorized representatives as of the date first above written.
LANDLORD:
MCDONNELL DOUGLAS REALTY
COMPANY, a California corporation
By:
---------------------------------
Name:
--------------------------
Title:
-------------------------
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<PAGE>
TENANT:
SILICON VALLEY BANK
By:
---------------------------------
Name:
--------------------------
Title:
-------------------------
By:
---------------------------------
Name:
--------------------------
Title:
-------------------------
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<PAGE>
EXHIBIT "E"
DEFINITION OF OPERATING EXPENSES
--------------------------------
1. Items Included In Operating Expenses. The term "0perating Expenses"
------------------------------------
as used in the Lease to which this Exhibit "E" is attached means: all direct
-----------
costs and expenses of operation, maintenance and repair of the Building and the
Common Areas (as such terms are defined in the Lease), including without
limitation any expansion of same, as determined by standard accounting
practices, calculated assuming the Building is ninety-five percent (95%)
occupied in the event it is occupied in a lesser percentage, including the
following costs by way of illustration but not limitation, but excluding those
items specifically described as exceptions to Operating Expenses therein or in
Section 3 below:
(a) Real Property Taxes and Assessments (as defined in Section 2
below), and any and all impositions and assessments imposed with respect to the
Building pursuant to any covenants, conditions and restrictions affecting the
Project, the Common Areas or the Building;
(b) Water and sewer charges and the costs of electricity, healing,
ventilating, air conditioning and other utilities including, without limitation,
utilities surcharges and any other costs, levies or assessments resulting from
statutes or regulations promulgated by any government or quasi-government
authority, in connection with the use, occupancy or alteration of the Building
or the Premises or the parking facilities serving the Building or the Premises;
(c) Costs of insurance obtained by Landlord pursuant to Section 19 of
the Lease; provided, however, that Operating Expenses shall not include costs
arising from earthquake insurance when included in the Base Year or, if
subsequently obtained, imputed into the Base Year;
(d) Costs of all maintenance agreements for the Project and Common
Areas and the equipment thereon, including, but not limited to, costs of
security, exterior window cleaning, elevator, waste disposal, trash removal and
janitorial services, plumbing, healing, ventilation and air conditioning,
engineers, landscaping, gardeners and signage (other than signs of tenants of
the Building);
(e) Costs incurred in connection with management of the Project and
Building, including, without limitation: (i) wages and salaries of all employees
engaged in the operation, maintenance or security of the Building or Common
Areas, including payroll taxes, insurance and benefits relating thereto;
provided, however, that to the extent such employees' work relates to other
properties in addition to the Building, such costs shall be reasonably allocated
by Landlord between the Building and such other properties, and provided,
further, that Operating Expenses shall not include the costs of any concierge
unless included in the Base Year or, if subsequently incurred, imputed into the
Base Year; (ii) the rental cost and overhead (including, without limitation,
cost of supplies) of any office and storage space used to provide management
services, and (ii) a management fee for the Project property manager (including
Landlord if Landlord manages the Project) consistent with management fees being
charged to tenants of space comparable in size to the Premises in other first
class office buildings in the John Wayne Airport area of Orange County,
California, determined as a percentage of Operating Expenses; provided, however,
that such management fees shall not exceed 10% of Operating Expenses;
(f) Cost of supplies, materials, equipment and tools used in
operation, repair and maintenance of the Project and Common Areas, including
rental of personal property used for same and depreciation on a straight line
basis of personal property purchased for same;
(g) Costs and expenses of repairs, resurfacing, repairing and other
upkeep of Common Areas, maintenance, painting, lighting, cleaning and similar
items, including appropriate reserves.
(h) Cost of accounting, audit, verification, legal and other
consulting services and any additional services, whether or not provided to the
Project or Common Areas at the Commencement Date but thereafter provided by
Landlord in its management of the Project and Common Areas;
<PAGE>
(i) Cost of repairs and maintenance (including, without limitation,
repairs, replacements and alterations to cause the Building and the Common Areas
to comply with any law, statute or ordinance in effect after the date hereof),
and reserves reasonably deemed desirable by Landlord; any such expenditures that
constitute capital improvements shall be amortized as set forth below;
(j) Cost of repairs and maintenance of structural portions of the
Building, including the plumbing, air conditioning, heating, ventilating, and
electrical systems installed or furnished by Landlord; any such expenditures
that constitute capital improvements shall be amortized as set forth below; and
(k) Cost of implementing and administering any transportation
management program applicable to substantially all of the Building which may be
required by any law, statute or ordinance now or hereafter in effect.
(l) Cost of capitalized expenditures which are (i) reasonably intended
to produce a reduction in Operating Expenses or energy consumption, but only to
the extent of the reduction; or (ii) required under any governmental law or
regulation that was not applicable to the Building at the time it was originally
constructed; or (iii) for replacement of any Building equipment or improvements
needed to operate the Building at the same quality levels as prior to the
replacement, each amortized over such reasonable period as Landlord shall
reasonably determine, together with interest at the Interest Rate on the
unamortized balance.
Tenant shall pay within twenty (20) days of receipt of an invoice from
Landlord the cost of additional or extraordinary services provided to Tenant and
not paid or payable by Tenant pursuant to other provisions of this Lease.
Landlord shall have the right to establish and collect on an ongoing basis
reasonable reserves for items of periodic maintenance, repair and replacement
properly includable in Operating Expenses that customarily are not incurred each
year, in amounts calculated to provide sufficient funds to pay for such items
when necessary.
2. Real Property Taxes and Assessments. The term "Real Property Taxes
-----------------------------------
and Assessments", as used in this Exhibit "E" and the Lease, means: any form of
-----------
assessment, license fee, license tax, business license fee, commercial rental
tax, levy, charge, improvement bond, tax or similar imposition imposed by any
authority having the direct power to tax, including any city, county, state or
federal government, or any school, agricultural, lighting, drainage or other
improvement or special assessment district thereof, as against any legal or
equitable interest of Landlord in the Premises, Building, Common Areas or the
Project (as such terms are defined in the Lease), adjusted to reflect an
assumption that the Building is fully assessed for real property tax purposes as
a completed building ready for occupancy, including the following by way of
illustration but not limitation:
(a) any tax on Landlord's "right" to rent or "right" to other income
from the Premises or as against Landlord's business of leasing the Premises;
(b) any assessment, tax, fee, levy or charge in substitution,
partially or totally, of any assessment, tax, fee, levy or charge previously
included within the definition of real property tax, it being acknowledged by
Tenant and Landlord that Proposition 13 was adopted by the voters of the State
of California in the June, 1978 election and that assessments, taxes, fees,
levies and charges may be imposed by governmental agencies for such services as
fire protection, street, sidewalk and road maintenance, refuse removal and for
other governmental services formerly provided without charge to property owners
or occupants;
(c) any assessment, tax, fee, levy or charge allocable to or measured
by the area of the Premises or other premises in the Building or the rent
payable by Tenant hereunder or other tenants of the Building, including, without
limitation, any gross receipts tax or excise tax levied by state, city or
federal government, or any political subdivision thereof, with respect to the
receipt of such rent, or upon or with respect to the possession, leasing,
operation, management, maintenance, alteration, repair, use or occupancy by
Tenant of the Premises, or any portion thereof but not on Landlord's other
operations;
-2-
<PAGE>
(d) any assessment, tax, fee, levy or charge upon this transaction or
any document to which Tenant is a party, creating or transferring an interest or
an estate in the Premises; and/or
(e) any assessment, tax, fee, levy or charge by any governmental
agency related to any transportation plan, fund or system (including assessment
districts) instituted within the geographic area of which the Building is a
part.
3. Items Excluded From Operating Expenses. Notwithstanding the
--------------------------------------
provisions of Section 1 and Section 2 above to the contrary, "Operating
Expenses" shall not include:
(a) Landlord's federal or state income, franchise, inheritance or
estate taxes;
(b) any ground lease rental;
(c) costs incurred by Landlord for the repair of damage to the
Building to the extent that Landlord is reimbursed by insurance or condemnation
proceeds or by tenants, warrantors or other third persons;
(d) depreciation, amortization and interest payments, except as
specifically provided herein, and except on materials, tools, supplies and
vendor-type equipment purchased by Landlord to enable Landlord to supply
services Landlord might otherwise contract for with a third party, where such
depreciation, amortization and interest payments would otherwise have been
included in the charge for such third party's services, all as determined in
accordance with standard accounting practices;
(e) brokerage commissions, finders' fees, attorneys' fees, space
planning costs and other costs incurred by Landlord in leasing or attempting to
lease space in the Building;
(f) interest, principal, points and fees on debt or amortization on
any mortgage, deed of trust or other debt encumbering the Building or the
Project;
(g) costs, including permit, license and inspection costs, incurred
with respect to the installation of tenant improvements for tenants in the
Building (including the original Tenant Improvements for the Premises), or
incurred in renovating or otherwise improving, decorating, painting or
redecorating space for tenants or other occupants of the Building, including
space planning and interior design costs and fees;
(h) attorneys' fees and other costs and expenses incurred in
connection with negotiations or disputes with present or prospective tenants or
other occupants of the Building; provided, however, that Operating Expenses will
include those reasonable attorneys' fees and other costs and expenses incurred
in connection with negotiations, disputes or claims relating to items of
Operating Expenses, enforcement of rules and regulations of the Building, and
such other matters relating to the maintenance of standards required of Landlord
under the Lease, except to the extent Landlord recovers such fees directly from
Tenant or other tenants pursuant to their lease or other agreement in question;
(i) except for the administrative/management fees described in Section
1 above, costs of Landlord's general corporate overhead;
(j) all items and services for which Tenant or any other tenant in the
Building reimburses Landlord (other than through operating expense pass-through
provisions);
(k) electric power costs for which any tenant directly contracts with
the local public service company;
(l) costs arising from Landlord's charitable or political
contributions;
(m) costs of any extraordinary services provided to other tenants of
the Project but
not to Tenant;
-3-
<PAGE>
(n) executive salaries of off-site personnel employed by Landlord,
except for the charge (or pro rata share) of the Project manager or asset
manager;
(o) costs of reconstructing, modifying, altering or repairing any
structural portions of the Building due to defective original construction;
(p) overhead and profit increment paid to a subsidiary, affiliate or
other entity related to Landlord for services (other than management services)
to the extent the same exceed competitive costs (taking into account the quality
of service provided in maintaining a Class-A office building) of such services
were they not so rendered by a subsidiary, affiliate or other Landlord-related
entity; and
(q) costs incurred by Landlord for replacements which are considered
capital improvements under generally accepted accounting practices, except as
expressly permitted in Section 1 above.
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<PAGE>
EXHIBIT "F"
STANDARDS FOR UTILITIES AND SERVICES
------------------------------------
The following standards for utilities and services are in effect. Landlord
reserves the right to adopt nondiscriminatory modifications and additions
thereto. Tenant shall promptly notify Landlord, in writing, of any conflict
between the Rules and Regulations and any laws, statutes or ordinances
applicable to Tenant's particular use or manner of use or occupancy of the
Premises or the Building and Landlord and Tenant shall reasonably cooperate in
the lawful and timely resolution of such conflict.
Provided Tenant remains in occupancy of the Premises, and is not in default
beyond applicable notice and cure periods under any of the terms, covenants,
conditions, provisions or agreements of the Lease, Landlord will provide or make
available the following utilities and services, subject to the terms, conditions
and limitations set forth herein and in the Lease:
1. Elevator Facilities. Non-attended automatic elevator facilities
-------------------
Monday through Friday, except holidays, from 8 a.m. to 6 p.m.
2. Heating, Ventilating, Air Conditioning. On Monday through Friday,
--------------------------------------
except holidays, from 8:00 a.m. to 6:00 p.m. and on Saturday from 9:00 a.m. to
1:00 p.m. (and at other times for an additional standard hourly charge to be
fixed by Landlord, which hourly charge is currently $17.00 per hour),
ventilation, air conditioning or heating on such days and hours, when in the
reasonable judgment of Landlord it may be required for the comfortable occupancy
of the Premises. Tenant agrees to cooperate fully at all times with Landlord,
and to abide by all reasonable regulations and requirements which Landlord may
prescribe for the proper function and protection of the air conditioning system.
Tenant agrees not to connect any apparatus, device, conduit or pipe to the air
conditioning system. Tenant further agrees that neither Tenant nor its
servants, employees, agents, visitors, licensees or contractors shall at any
time enter the mechanical installations or facilities of the Building or the
Project or adjust, tamper with, touch or otherwise in any manner affect said
installations or facilities. The cost of maintenance and service calls to
adjust and regulate the air conditioning system will be charged to Tenant if the
need for maintenance work results from either Tenant's adjustment of room
thermostats or Tenant's failure to comply with its obligations hereunder. Such
work will be charged at hourly rates equal to then-current journeyman's wages
for air conditioning mechanics. When heat generating machines, equipment,
fixtures or other devices of any nature whatsoever, including by way of
illustration but not by way of limitation, computer and other electronic data
processing equipment, are used in the Premises by Tenant which affect the
temperature otherwise maintained by the air conditioning system, Landlord shall
have the right, but not the obligation, after prior written notice to Tenant to
install supplementary air conditioning units in the Premises, and the cost
thereof, including the commercially reasonable cost of installation and the
commercially reasonable cost of maintenance thereof, shall be paid by Tenant to
Landlord upon demand by Landlord, which demand shall be accompanied by
reasonable notice of the amount owing.
3. Electricity. Electric current to the Premises, 24 hours per day,
-----------
seven days a week, during the usual business hours on business days, as required
by the Building standard office lighting and fractional horsepower office
business machines including copiers, personal computers and word processing
equipment which use 110 volt electrical power, in an amount not to exceed three
(3) watts per square foot per normal business day. Tenant agrees, should its
electrical installation or electrical consumption be in excess of the aforesaid
quantity or extend beyond normal business hours, to reimburse Landlord monthly
for the measured consumption at the average cost per kilowatt hour charged to
the Building during the period. If a separate meter is not installed at
Tenant's cost, such excess cost will be established by an estimate reasonably
determined by Landlord or by an engineer selected in Landlord's reasonable
discretion, whose fee shall be shared equally by Landlord and Tenant. Tenant
agrees not to use any apparatus or device in, upon or about the Premises (other
than standard office business machines, personal computers and word processing
equipment) which may in any way increase the amount of such services usually
furnished or supplied to said Premises, and Tenant further agrees not to connect
any apparatus or device with wires, conduits or pipes, or other means by which
such services are supplied, for the purpose of using additional or unusual
amounts of such services without the written consent of Landlord which shall not
be unreasonably withheld. Should Tenant use the same to excess, the refusal on
the part of Tenant to pay upon demand of Landlord the amount established by
Landlord for such excess charge will constitute a breach of the
<PAGE>
obligation to pay rent under this Lease and will entitle Landlord to the rights
therein granted for such breach. Tenant's use of electric current shall not
exceed the capacity of the feeders to the Building, or the risers or wiring
installation and Tenant shall not install or use or permit the installation or
use of any computer or electronic data processing equipment in the Premises
(except standard office business machines, personal computers and word
processing equipment) without the prior written consent of Landlord which will
not be unreasonably withheld.
4. Water. Water will be available in public areas for drinking and
-----
lavatory purposes only, but if Tenant requires, uses or consumes water for any
purpose in addition to ordinary drinking and lavatory purposes, Landlord may,
after written notice to Tenant, install a water meter and thereby measure
Tenant's water consumption for all purposes. Tenant agrees to pay Landlord for
the cost of the meter and the cost of the installation thereof and throughout
the duration of Tenant's occupancy Tenant will keep said meter and installation
equipment in good working order and repair at Tenant's own cost and expense, in
default of which Landlord may cause such meter and equipment to be replaced or
repaired and collect the cost thereof from Tenant. Tenant agrees to pay for
water consumed, as shown on such meter, as and when bills are rendered, and on
default in making such payment, Landlord may, after written notice to Tenant,
pay such charges and collect the same from Tenant. Any such costs or expenses
incurred, or payments made by Landlord for any of the reasons or purposes
hereinabove stated will be deemed to be additional rent payable by Tenant and
collectible by Landlord as such.
5. Janitorial Service. Landlord shall provide janitorial service during
------------------
the time and in the manner that janitorial service is customarily furnished in
Class A office buildings in the vicinity of the Building, provided the same are
used exclusively as offices, and are kept reasonably in order by Tenant. Unless
otherwise agreed to by Landlord and Tenant, no one other than persons approved
by Landlord shall be permitted to enter the Premises for such purposes. Tenant
shall pay to Landlord as additional rent the cost of removal of any of Tenant's
refuse and rubbish to the extent that the same exceeds the refuse and rubbish
usually attendant upon the use of the Premises as offices.
6. Miscellaneous. Landlord also shall provide for replacement of
-------------
Building standard lighting and Building standard toilet supplies.
7. Interruption of Utilities or Services. Landlord reserves the right to
-------------------------------------
stop service of the elevator, plumbing, ventilation, air conditioning and
electrical systems, and any other services, when necessary, by reason of
accident or emergency or for reasonable repairs, alterations or improvements,
when in the reasonable judgment of Landlord such actions are desirable or
necessary to be made (provided that in such instance Landlord shall endeavor to
provide reasonable advance notice and to minimize interference with Tenant's
business), until said repairs, alterations or improvements shall have been
completed, and Landlord will have no responsibility or liability for failure to
supply elevator facilities, plumbing, ventilating, air conditioning or electric
service or other services, when prevented from so doing by strike or accident or
by any cause beyond Landlord's reasonable control, or by laws, rules, orders,
ordinances, directions, regulations or by reason of the requirements of any
federal, state, county or municipal authority or failure of gas, oil or other
suitable fuel supply or inability by exercise of reasonable diligence to obtain
gas, oil or other suitable fuel supply. It is expressly understood and agreed
that any covenants on Landlord's part to furnish any services pursuant to any of
the terms, covenants, conditions, provisions or agreements of this Lease, or to
perform any act or thing for the benefit of Tenant, will not be deemed breached
if Landlord is unable to furnish or perform the same by virtue of a strike or
labor trouble or any other cause whatsoever beyond Landlord's control. No
failure or interruption of utilities or services shall entitle Tenant to
terminate this Lease or abate the rent or other charges hereunder and Tenant
shall not be relieved from the performance of any covenant in this Lease because
of such failure. In the event any municipal, state, federal or other regulatory
body (whether judicial, executive or legislative) imposes mandatory controls on
Landlord or the Building or Common Areas relating to the use or conservation of
energy or water, gas, light or electricity or the reduction of automobile use or
automobile and other emissions, Landlord may comply (and Tenant shall comply)
with such mandatory controls to the extent it can control the use of energy or
light, gas, water or electricity or the reduction of automobiles, or automobile
or other emissions on the Property or in the Building and Common Areas.
Compliance with any of the above shall not in any event constitute a partial or
complete eviction of Tenant hereunder, nor shall it entitle Tenant to any
abatement or mitigation of rent or other charges,
-2-
<PAGE>
nor shall Landlord in any way be liable for damages or injury caused thereby to
Tenant, Tenant's property, business, employees, customers or suppliers.
Notwithstanding the foregoing, if Tenant is prevented from using, and does not
use, the Premises or any material portion thereof, for five (5) consecutive
business days because of an interruption or discontinuance of utilities or
services caused by the wrongful acts or omissions of Landlord, and Tenant shall
have given Landlord written notice respecting such interruption or
discontinuance, then Tenant's base monthly rent shall be abated or reduced, as
the case may be, after expiration of the applicable period of time described
above ("Eligibility Period"), if any, for such time that Tenant continues to be
so prevented from using, and does not use, the rentable area of the portion of
the Premises that Tenant is prevented from using, and does not use, based on the
ratio that the unusable portion bears to the total rentable area of the
Premises; provided however, if Tenant reoccupies and conducts its business from
any portion of the Premises during such period, the rent allocable to such
reoccupied portion, based on the proportion that the rentable area of such
reoccupied portion of the Premises bears to the total rentable area of the
Premises, shall be payable by Tenant from the date such business operations
commence; and provided further that the rent abatement described above shall in
no event continue after the time such utilities or services are restored.
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<PAGE>
EXHIBIT "G"
ESTOPPEL CERTIFICATE
--------------------
The undersigned, ________________________________________, with a mailing
address c/o _________________________________________ ("Tenant"), hereby
certifies to McDonnell Douglas Realty Company, a California corporation
("Landlord") and __________________________________, as follows:
1. Attached hereto is a true, correct and complete copy of that certain
lease dated ______________________, 19___, between Landlord and Tenant (the
"Lease"), regarding the premises located at __________________________________
(the "Premises"). The Lease is now in full force and effect and has not been
amended, modified or supplemented, except as set forth in Section 4 below.
2. The Term of the Lease commenced on _______________, 19___.
3. The Term of the Lease shall expire on _______________, 19___.
4. The Lease has: (initial one)
(_____) not been amended, modified, supplemented, extended, renewed or
assigned.
(_____) been amended, modified, supplemented, extended, renewed or
assigned by the following described terms or agreements, copies of
which are attached hereto:
5. Tenant has accepted and is now in possession of the Premises.
Tenant and Landlord acknowledge that Landlord's interest in the Lease will
be assigned to ________________ and that no modification, adjustment, revision
or cancellation of the Lease or amendments thereto shall be effective unless
written consent of ___________________________ is obtained, and that until
further notice, payments under the Lease may continue as heretofore.
6. The amount of Monthly Base Rent is $_____________________.
7. The amount of security deposits (if any) is $ ________________. No
other security deposits have been made except as follows:
___________________________________________________________
8. Tenant is paying the full lease rental which has been paid in full as
of the date hereof. No rent or other charges under the Lease have been paid for
more than thirty (30) days in advance of its due date except as follows:
___________________________________________________________
9. All work required to be performed by Landlord under the Lease has been
completed except as follows:
___________________________________________________________
10. There are no defaults on the part of the Landlord or Tenant under the
Lease except as follows:
___________________________________________________________
11. Neither Landlord nor Tenant has any defense as to its obligations
under the Lease and claims no set-off or counterclaim against the other party
except as follows:
___________________________________________________________
___________________________________________________________
<PAGE>
12. Tenant has no right to any concession (rental or otherwise) or similar
compensation in connection with renting the space it occupies other than as
provided in the Lease except as follows:
___________________________________________________________. All provisions of
the Lease and the amendments thereto (if any) referred to above are hereby
ratified.
The foregoing certification is made with the knowledge that
__________________________ __________________________ is about to fund a loan to
Landlord or _________________ is about to purchase the Project (or part thereof)
from Landlord and that _____________________________ is relying upon the
representations herein made in funding such loan or in purchasing the Project
(or part thereof).
IN WITNESS WHEREOF, this certificate has been duly executed and delivered
by the authorized officers of the undersigned as of _______________, 19___.
TENANT:
By:________________________________________
Printed Name:_________________________
Title:________________________________
SAMPLE ONLY
[NOT FOR EXECUTION]
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<PAGE>
EXHIBIT "H"
RULES AND REGULATIONS
---------------------
A. General Rules and Regulations. The following rules and regulations
-----------------------------
govern the use of the Building and the Project Common Areas. Tenant will be
bound by such rules and regulations and agrees to cause Tenants Authorized
Users, its employees, subtenants, assignees, contractors, suppliers, customers
and invitees to observe the same.
1. Except as specifically provided in the Lease to which these Rules
and Regulations are attached, no sign, placard, picture, advertisement, name or
notice may be installed or displayed on any part of the outside or inside of the
Building or the Project without the prior written consent of Landlord. Landlord
will have the right to remove, at Tenants expense and without notice, any sign
installed or displayed in violation of this rule. All approved signs or
lettering on doors and walls are to be printed, painted, affixed or inscribed at
the expense of Tenant and under the direction of Landlord by a person or company
designated or approved by Landlord.
2. If Landlord reasonably objects in writing to any curtains,
blinds, shades, screens or hanging plants or other similar objects attached to
or used in connection with any window or door of the Premises, or placed on any
window sill, which is visible from the exterior of the Premises, Tenant will
immediately discontinue such use. Tenant agrees not to place anything against
or near glass partitions or doors or windows which may appear unsightly from
outside the Premises including from within any interior common areas.
3. Tenant will not obstruct any sidewalks, halls, passages, exits,
entrances, elevators, escalators, or stairways of the Project. The halls,
passages, exits, entrances, elevators and stairways are not open to the general
public, but are open, subject to reasonable regulations, to Tenant's business
invitees. Landlord will in all cases retain the right to control and prevent
access thereto of all persons whose presence in the reasonable judgment of
Landlord would be prejudicial to the safety, character, reputation and interest
of the Project and its tenants, provided that nothing herein contained will be
construed to prevent such access to persons with whom any tenant normally deals
in the ordinary course of its business, unless such persons are engaged in
illegal or unlawful activities. No tenant and no employee or invitee of any
tenant will go upon the roof of the Building.
4. Tenant will not obtain for use on the Premises ice, drinking
water, food, food vendors, beverage, towel or other similar services upon the
Premises, except under such reasonable regulations as may be fixed by Landlord;
provided, however, that nothing herein shall be deemed to permit Landlord to
prohibit Tenant from obtaining pizza delivery, lunch catering, coffee and water
services and the like. Landlord expressly reserves the right to absolutely
prohibit solicitation, canvassing, sales and displays of products, goods and
wares in all portions of the Project except for such activities as may be
expressly requested by a tenant and conducted solely within such requesting
tenant's premises. Landlord reserves the right to restrict and regulate the use
of the common areas of the Project and Building by invitees of tenants providing
services to tenants on a periodic or daily basis including food and beverage
vendors. Such restrictions may include reasonable limitations on time, place,
manner and duration of access to a tenant's premises for such purposes. Without
limiting the foregoing, Landlord may require that such parties use service
elevators, halls, passageways and stairways for such purposes to preserve access
within the Building for tenants and the general public.
5. Landlord reserves the right to require tenants to periodically
provide Landlord with a written list of any and all business invitees which
regularly provide goods and services to such tenants at the premises.
6. Landlord reserves the right to exclude from the Building between
the hours of 6 p.m. and 8 a.m. the following business day, or such other hours
as may be established from time to time by Landlord, and on Sundays and legal
holidays, any person unless that person is known to the person or employee in
charge of the Building or has a pass or is properly identified. Tenant will be
responsible for all persons for whom it requests passes and will be liable to
Landlord for all acts of such persons. Landlord will not be liable for damages
for any error with regard to the admission to or exclusion from the Building of
any person. Landlord reserves the right to prevent access to the
<PAGE>
Building in case of invasion, mob, riot, public excitement or other commotion by
closing the doors or by other appropriate action.
7. The directory of the Building or the Project will be provided
exclusively for the display of the name and location of tenants only and
Landlord reserves the right to exclude any other names therefrom.
8. All cleaning and janitorial services for the Project and the
Premises will be provided exclusively through Landlord, and except with the
written consent of Landlord, no person or persons other than those approved by
Landlord will be employed by Tenant or permitted to enter the Project for the
purpose of cleaning the same. Tenant will not cause any unnecessary labor by
carelessness or indifference to the good order and cleanliness of the Premises.
9. Landlord will furnish Tenant, free of charge, with two keys to
each door lock in the Premises. Landlord may make a reasonable charge, not to
exceed $4.00 per key, for any additional keys. Tenant shall not make or have
made additional keys, and Tenant shall not alter any lock or install any new
additional lock or bolt on any door of the Premises. Tenant, upon the
termination of its tenancy, will deliver to Landlord the keys to all doors which
have been furnished to Tenant and in the event of loss of any keys so furnished,
will pay Landlord therefor.
10. If Tenant requires telegraphic, telephonic, burglar alarm,
satellite dishes, antennae or similar services, it will first obtain Landlord's
approval, and comply with, Landlord's reasonable rules and requirements
applicable to such services, which may include separate licensing by, and fees
paid to, Landlord. Landlord acknowledges that alarm systems installed in
connection with Tenant's operation of a banking branch office and maintenance of
a safe are deemed approved, subject to compliance with the Lease provisions
regarding Alteration.
11. Freight elevator(s) will be available for use by all tenants in
the Building, subject to such reasonable scheduling as Landlord, in its
discretion, deems appropriate. No equipment, materials, furniture, packages,
supplies, merchandise or other property will be received in the Building or
carried in the elevators except between such hours and in such elevators as may
be designated by Landlord. Tenant's initial move in and subsequent deliveries
of bulky items, such as furniture, safes and similar items will, unless
otherwise agreed in writing by Landlord, be made during the hours of 6:00 p.m.
to 6:00 a.m. or on Saturday or Sunday. Deliveries during normal office hours
shall be limited to normal office supplies and other small items. No deliveries
will be made which impede or interfere with other tenants or the operation of
the Building.
12. Tenant will not place a load upon any floor of the Premises which
exceeds the load per square foot which such floor was designed to carry and
which is allowed by law. Landlord will have the right to prescribe the weight,
size and position of all equipment, materials, furniture or other property
brought into the Building. Heavy objects will, if considered necessary by
Landlord, stand on such platforms as determined by Landlord to be necessary to
properly distribute the weight, which platforms will be provided at Tenant's
expense. Business machines and mechanical equipment belonging to Tenant, which
cause noise or vibration that may be transmitted to the structure of the
building or to any space therein to such a degree as to be objectionable to any
tenants in the Building or Landlord, are to be placed and maintained by Tenant,
at Tenant's expense, on vibration eliminators or other devises sufficient to
eliminate noise or vibration. The persons employed to move such equipment in or
out of the Building must be reasonably acceptable to Landlord. Landlord will
not be responsible for loss of, or damage to, any such equipment or other
property from any cause, and all damage done to the Building by maintaining or
moving such equipment or other property will be repaired at the expense of
Tenant.
13. Tenant will not use or keep in the Premises any kerosene,
gasoline or inflammable or combustible fluid or material other than those
limited quantities necessary for the operation or maintenance of office
equipment. Tenant will not use or permit to be used in the Premises any foul or
noxious gas or substance, or permit or allow the Premises to be occupied or used
in a manner offensive or objectionable to Landlord or other occupants of the
Building by reason of noise, odors or vibrations, nor will Tenant bring into or
keep in or about the Premises any birds or animals.
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<PAGE>
14. Tenant will not use any method of heating or air conditioning
other than that supplied by Landlord without Landlord's prior written consent.
15. Tenant will not waste electricity, water or air conditioning and
agrees to cooperate fully with Landlord to assure the most effective operation
of the Building's heating and air conditioning and to comply with any
governmental energy-saving rules, laws or regulations of which Tenant has actual
notice, and will refrain from attempting to adjust controls. Tenant will keep
corridor doors closed, and shall keep all window coverings pulled down.
16. Landlord reserves the right, exercisable without notice and
without liability to Tenant, to change the name of the Building. Without the
written consent of Landlord, Tenant will not use the name of the Building or the
Project in connection with or in promoting or advertising the business of Tenant
except as Tenant's address.
17. Tenant will close and lock the doors of its Premises and entirely
shut off all water faucets or other water apparatus, and lighting or gas before
Tenant and its employees leave the Premises. Tenant will be responsible for any
damage or injuries sustained by other tenants or occupants of the Building or by
Landlord for noncompliance with this rule.
18. The toilet rooms, toilets, urinals, wash bowls and other
apparatus will not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be thrown
therein. The expense of any breakage, stoppage or damage resulting from any
violation of this rule will be borne by the tenant who, or whose employees or
invitees, break this rule. Cleaning of equipment of any type is prohibited.
19. Tenant will not sell, or permit the sale at retail of magazines,
newspapers, periodicals, theater tickets or any other goods or merchandise to
the general public in or on the Premises. Tenant will not make any room-to-room
solicitation of business from other tenants in the Project. Tenant will not use
the Premises for any business or activity other than that specifically provided
for in this Lease. Canvassing, soliciting and distribution of handbills or any
other written material, and peddling in the Project are prohibited, and Tenant
will cooperate with Landlord to prevent such activities.
20. Tenant will not install any radio or television antenna,
loudspeaker, satellite dishes or other devices on the roof(s) or exterior walls
of the Building or the Project. Tenant will not interfere with radio or
television broadcasting or reception from or in the Project or elsewhere.
21. Except for the ordinary hanging of pictures and wall decorations,
Tenant will not mark, drive nails, screw or drill into the partitions, woodwork
or plaster or in any way deface the Premises or any part thereof, except in
accordance with the provisions of the Lease pertaining to alterations. Landlord
reserves the right to direct electricians as to where and how telephone and
telegraph wires are to be introduced to the Premises. Tenant will not cut or
bore holes for wires. Tenant will not affix any floor covering to the floor of
the Premises in any manner except as approved by Landlord. Tenant shall repair
any damage resulting from noncompliance with this rule.
22. Tenant will not install, maintain or operate upon the Premises
any vending machines without the written consent of Landlord which will not be
unreasonably withheld.
23. Landlord reserves the right to exclude or expel from the Project
any person who, in Landlord's judgment, is intoxicated or under the influence of
liquor or drugs or who is in violation of any of the Rules and Regulations of
the Building.
24. Tenant will store all its trash and garbage within its Premises
or in other facilities provided by Landlord. Tenant will not place in any trash
box or receptacle any material which cannot be disposed of in the ordinary and
customary manner of trash and garbage disposal. All garbage and refuse disposal
is to be made in accordance with directions issued from time to time by
Landlord.
-3-
<PAGE>
25. The Premises will not be used for lodging or for the storage of
merchandise held for sale to the general public, or for lodging or for
manufacturing of any kind, nor shall the Premises be used for any improper,
immoral or objectionable purpose. No cooking will be done or permitted on the
Premises without Landlord's consent, except the use by Tenant of Underwriters'
Laboratory approved equipment for brewing coffee, tea, hot chocolate and similar
beverages shall be permitted, and the use of a microwave oven for employees use
will be permitted, provided that such equipment and use is in accordance with
all applicable federal, state, county and city laws, codes, ordinances, rules
and regulations.
26. Neither Tenant nor any of its employees, agents, customers and
invitees may use in any space or in the public halls of the Building or the
Project any hand truck except those equipped with rubber tires and side guards
or such other material-handling equipment as Landlord may approve. Tenant will
not bring any other vehicles of any kind (except for motorized wheelchairs) into
the Building.
27. Tenant agrees to comply with all safety, fire protection and
evacuation procedures and regulations established by Landlord or any
governmental agency.
28. Tenant assumes any and all responsibility for protecting its
Premises from theft, robbery and pilferage, which includes keeping doors locked
and other means of entry to the Premises closed.
29. To the extent Landlord reasonably deems it necessary to exercise
exclusive control over any portions of the Common Areas for the mutual benefit
of the tenants in the Building or the Project, Landlord may do so subject to
reasonable, non-discriminatory additional rules and regulations.
30. Landlord may prohibit smoking in the Building and may require
Tenant and any of its employees, agents, clients, customers, invitees and guests
who desire to smoke, to smoke within designated smoking areas within the
Project.
31. Tenant's requirements will be attended to only upon appropriate
application to Landlord's asset management office for the Project by an
authorized individual of Tenant. Employees of Landlord will not perform any
work or do anything outside of their regular duties unless under special
instructions from Landlord.
These Rules and Regulations are in addition to, and will not be
construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of the Lease. Landlord may waive any one
or more of these Rules and Regulations for the benefit of Tenant or any other
Tenant, but no such waiver by Landlord will be construed as a waiver of such
Rules and Regulations in favor of Tenant or any other tenant, nor prevent
Landlord from thereafter enforcing any such Rules and Regulations against any or
all of the tenants of the project.
Landlord reserves the right to make such other reasonable and non-
discriminatory Rules and Regulations as, in its judgment, may from time to time
be needed for safety and security, for care and cleanliness of the Project and
for the preservation of good order therein. Tenant agrees to abide by all such
Rules and Regulations hereinabove stated and any additional reasonable and non-
discriminatory rules and regulations which are adopted. Tenant is responsible
for the observance of all of the foregoing rules by Tenant's employees, agents,
clients, customers, invitees and guests.
B. Parking Rules and Regulations. The following rules and regulations
-----------------------------
govern the use of the parking facilities which serve the Building. Tenant will
be bound by such rules and regulations and agrees to cause its employees,
subtenants, assignees, contractors, suppliers, customers and invitees to observe
the same:
1. Tenant will not permit or allow any vehicles that belong to or
any controlled by Tenant or Tenant's employees, subtenants, customers or
invitees to be loaded, unloaded or parked in areas other than those designed by
Landlord for such activities. No vehicles are to be left in the parking areas
overnight and no vehicles are to be parked in the parking areas other than
normally
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<PAGE>
sized passenger automobiles, motorcycles and pick-up trucks. No extended term
storage of vehicles is permitted.
2. Vehicles must be parked entirely within painted stall lines of a
single parking stall.
3. All directional signs and arrows must be observed.
4. The speed limit within all parking areas shall be five (5) miles
per hour.
5. Parking is prohibited:
in areas not striped for parking;
in aisles or on ramps;
WHERE "no parking" signs are posted;
in cross-hatched areas; and
in such other areas as may be designated from time to time by
Landlord or Landlord's parking operator.
6. Landlord reserves the right, without cost or liability to
Landlord, to tow any vehicle if such vehicle's audio theft alarm system remains
engaged for an unreasonable period of time.
7. Washing, waxing, cleaning or servicing of any vehicle in any area
not specifically reserved for such purpose is prohibited.
8. Landlord may refuse to permit any person to park in the parking
facilities who violates these rules with unreasonable frequency, and any
violation of these rules shall subject the violator's car to removal, at such
car owner's expense. Tenant agrees to use its best efforts to acquaint its
employees, subtenants, assignees, contractors, suppliers, customers and invitees
with these parking provisions, rules and regulations.
9. Parking stickers, access cards, or any other device or form or
identification supplied by Landlord as a condition of use of the parking
facilities shall remain the property of Landlord. Parking identification
devices, if utilized by Landlord, must be displayed as requested and may not be
mutilated in any manner. The serial number of the parking identification device
may not be obliterated. Parking identification devices, if any, are not
transferable and any device in the possession of an unauthorized holder will be
void. Landlord reserves the right to refuse the sale of monthly stickers or
other parking identification devices to Tenant or any of its agents, employees
or representatives who willfully refuse to comply with these rules and
regulations and all unposted city, state or federal ordinances, laws or
agreements.
10. Loss or theft of parking identification devices or access cards
must be reported to the management office in the Project immediately, and a lost
or stolen report must be filed by the Tenant or user of such parking
identification device or access card at the time. Landlord has the right to
exclude any vehicle from the parking facilities that does not have a parking
identification device or valid access card. Any parking identification device
or access card which is reported lost or stolen and which is subsequently found
in the possession of an unauthorized person will be confiscated and the illegal
holder will be subject to prosecution.
11. All damage or loss claimed to be the responsibility of Landlord
must be reported, itemized in writing and delivered to the management office
located within the Project within ten (10) business days after any claimed
damage or loss occurs. Any claim not so made is waived. Landlord is not
responsible for damage by water or fire, or for the acts or omissions of others,
or for articles left in vehicles. In any event, the total liability of
Landlord, if any, is limited to Two Hundred Fifty Dollars ($250.00) for all
damages or loss to any car. Landlord is not responsible for loss of use.
-5-
<PAGE>
12. The parking operators, managers or attendants are not authorized
to make or allow any exceptions to these rules and regulations, without the
express written consent of Landlord. Any exceptions to these rules and
regulations made by the parking operators, managers or attendants without the
express written consent of Landlord will not be deemed to have been approved by
Landlord.
13. Landlord reserves the right, without cost or liability to
Landlord, to tow any vehicles which are used or parked in violation of these
rules and regulations.
14. Landlord reserves the right from time to time to modify and/or
adopt such other reasonable and non-discriminatory rules and regulations for the
parking facilities as it deems reasonably necessary for the operation of the
parking facilities.
-6-
<PAGE>
EXHIBIT "B"
18872 MacArthur Blvd.
#150 1,361 RSF
<PAGE>
OFFICE BUILDING LEASE
---------------------
THIS OFFICE BUILDING LEASE ("Lease") is entered into as of the ___ day of
__________, 1995 by and between McDonnell Douglas Realty Company, a California
corporation ("Landlord"), and Silicon Valley Bank ("Tenant").
1. BASIC LEASE TERMS. For purposes of this Lease, the following terms
-----------------
have the following definitions and meanings:
(a) Landlord: McDonnell Douglas Realty Company, a California
--------
corporation.
(b) Landlord's Address:
------------------
McDonnell Douglas Realty Company
4060 Lakewood Boulevard
6th Floor
Long Beach, CA 90808-1700
Attention: Lease Administrator
with a copy to:
Prentiss Properties
18881 Von Karman Avenue, Suite 1225
Irvine, CA 92715
Attention: Property Manager
or such other place(s) as Landlord may from time to time designate by notice to
Tenant.
(c) Tenant: Silicon Valley Bank
------
(d) Tenant's Address:
----------------
After the Commencement Date, to the Premises
with a copy to:
Glen G. Simmons, Executive Vice President
Human Resources & Administration
Silicon Valley Bank
3003 Tasman Drive, NC 830
Santa Clara, California 95054
Prior to the Commencement Date:
4600 Campus Drive
Suite 105
Newport Beach, California 92660
(e) Project: The real property commonly known as Douglas Plaza and
-------
located in the City of Irvine ("City"), County of Orange ("County"), State of
California ("State"), as shown on the site plan attached hereto as Exhibit "A".
-----------
(f) Building: The office building located within the Development,
--------
containing approximately 45,454 rentable square feet, with the street address of
18872 MacArthur Boulevard, Irvine, California 92715.
(g) Premises: The premises outlined on the floor plan attached hereto
--------
as Exhibit "B", located on the first floor of the Building, in Suite 100
-----------
containing 8,197 rentable square feet and 7,452 usable square feet.
(h) Tenant's Percentage: Tenant's percentage of the Building on a
-------------------
rentable square foot basis, which initially is 17.90%.
<PAGE>
(i)
(j) Target Commencement Date: March 1, 1996.
------------------------
(k) Commencement Date: The earlier to occur of (i) the date Landlord
-----------------
notifies Tenant that the Tenant Improvements are Substantially Completed (as
defined in Exhibit "C" attached hereto), or (ii) the date Tenant occupies all or
-----------
a portion of the Premises for the purpose of conducting Tenant's business.
(l) Initial Monthly Base Rent:
-------------------------
(m) Adjustment to Monthly Base Rent: Monthly Base Rent will be
-------------------------------
adjusted in accordance with the following:
LEASE YEAR OR MONTHS MONTHLY BASE RENT
-------------------- -----------------
(n) Option Term Rent:
----------------
(o) Security Deposit:
----------------
(p) Tenant Improvements: All tenant improvements installed or to be
-------------------
installed by Landlord or Tenant within the Premises to prepare the Premises for
occupancy pursuant to the terms of the Work Letter Agreement attached hereto as
Exhibit "C".
- -----------
(q) Tenant Improvement Allowance: See Work Letter Agreement attached
----------------------------
hereto as Exhibit "C".
-----------
(r) Permitted Use: General office, banking and/or related uses in
-------------
compliance with applicable laws, and no other use without the express written
consent of Landlord, which consent Landlord may withhold in its sole and
absolute discretion.
(s) Parking Spaces:
--------------
(t) Initial Monthly Parking Rent:
----------------------------
(u) Base Year: 1996.
---------
(v) Broker(s):
---------
Tenant's Broker: C8/Madison, Jeff Shepard
Landlord's Broker: Prentiss Properties Limited, Inc.
(w) Interest Rate: shall mean the greater of ten percent (10%) per
-------------
annum or two percent (2%) in excess of the prime lending or reference rate of
Wells Fargo Bank N.A. or any successor bank in effect on the twenty-fifth (25th)
day of the calendar month immediately prior to the event giving rise to the
Interest Rate imposition; provided, however, the Interest Rate will in no event
exceed the maximum Interest Rate permitted to be charged by applicable law.
(x) Guarantor(s): n/a
------------
-2-
<PAGE>
(y) Exhibits: A through I, inclusive, which Exhibits are attached to
--------
this Lease and incorporated herein by this reference. As provided in Section 3,
a completed version of Exhibit "D" will be delivered to Tenant after Landlord
delivers possession of the Premises to Tenant.
(z) Addendum: The Addendum, if any, attached to this Lease and
--------
incorporated herein by this reference.
2. PREMISES AND COMMON AREAS.
-------------------------
(a) Premises. Landlord hereby leases to Tenant and Tenant hereby
--------
leases from Landlord, without representation or warranty, express or implied,
the Premises described in Subsection 1(g). The rentable square feet and usable
square feet of the Premises and the Building set forth above in Section 1 shall
be deemed to be the rentable square feet and usable square feet of the Premises
and Building for all purposes, whether the actual rentable square feet or usable
square feet may
-3-
<PAGE>
AMENDMENT NO. 1 TO LEASE
------------------------
This Amendment to Lease (this "Amendment") is entered into as of March 29,
1996 between MCDONNELL DOUGLAS REALTY COMPANY, a California corporation
("Landlord") and SILICON VALLEY BANK, a California corporation ("Tenant").
RECITALS
--------
A. Tenant is the tenant under that certain Douglas Plaza Office lease
dated, December 1, 1995 (the "Lease") covering certain premises (the "Premises")
within the building (the "Building") commonly known as 18872 MacArthur
Boulevard, City of Irvine, County of Orange, California, which Premises are
describe as Suite 100 on the first floor of the Building containing
approximately 8,197 rentable square feet, all as more particularly set forth in
the Lease.
B. Tenant desires to modify the Premises by adding thereto a portion of
the first floor of the Building, consisting of approximately 227 rentable square
feet, and Landlord has agreed to do so on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Landlord and Tenant agree as follows (capitalized
terms used and not otherwise defined herein shall have the meanings given in the
Lease).
AGREEMENT
---------
1. Modification of Premises. Upon the terms and conditions set forth in
------------------------
this Amendment No. 1, effective as of the Effective Date (as hereinafter
defined), the Premises shall be and hereby are amended to add and include 227
rentable square feet, as depicted on Exhibit A attached hereto and incorporated
---------
herein and to the Lease by this reference. From and after the Effective Date,
all references herein and in the Lease to the "Premises" shall mean, unless the
context clearly indicates to the contrary, the Premises described in the Lease
together with the additional 227 rentable square footage as described herein.
The Premises, as amended hereby, contains in the aggregate approximately 8,424
rentable square feet.
2. Tenant Improvements. The Plans identified in Schedule 1 to the Work
-------------------
Letter Agreement attached as Exhibit "C" to the Lease are hereby amended to
include the revisions thereto dated February 7, 1996 prepared by Landlord's
architect, incorporating the additional square footage described above. It is
expressly understood that any changes to the Plans requested by Tenant
subsequent to the exception of the Lease and this subsequent Amendment shall be
treated as a change (and Tenant Lease shall be treated as a change) (and Tenant
shall be responsible for all costs attributable thereto) as described in the
above referenced Work Letter Agreement.
3. Base Rent; Operating Expenses. The Base Rent and Tenant's
-----------------------------
proportionate share of Operating Expenses set forth in the Lease shall be
increased to reflect the additional square footage added to the Premises
pursuant to this Amendment. Accordingly, Subsection 1.(l) and 1.(h) of the Base
Lease Provisions are hereby replaced with the following:
"(i) Initial Monthly Base Rent:
-------------------------
"(h) Tenant's Percentage: Tenant's percentage of the Building on a
-------------------
rentable square foot basis, which initially is 18.53%."
4. Security Deposit: The parties acknowledge that Landlord currently is
----------------
holding a ________ Security Deposit from Tenant. Concurrently with the
execution of this Amendment, Tenant shall provide Landlord with additional
security in the amount of _____ for a total Security Deposit of ________________
and agrees that Landlord shall retain the total of such above amounts as
security for the Lease, which shall be governed by the provisions in the Lease
with respect to Security Deposit.
<PAGE>
5. Confirmations. Tenant hereby certifies and confirms to Landlord that
-------------
as of Tenant's execution and delivery hereof, Landlord is not in default under
the Lease and Tenant has no claims, defense or offset with respect to the Lease.
6. Entire Agreement. The Lease, as affected by this Amendment, contains
----------------
the entire agreement of Landlord and Tenant and is hereby reaffirmed, and the
provisions thereof, as so affected, shall remain in full force and effect.
Without limiting the generality of the foregoing, all provisions of the Lease
which could be reasonably and logically construed as applicable to this
Amendment shall apply to this Amendment as well as the Lease, and those
provisions of the Lease which are specifically superseded by or clearly
inconsistent with the provisions of this Amendment shall have no further
application.
7. Further Assurances. Tenant shall, upon request by Landlord, execute
------------------
and deliver such documentation and information and take such action as may be
action as may be reasonably necessary to effectuate the intent of this Amendment
or to implement the provisions hereof.
IN WITNESS WHEREOF, the parties have entered into this Amendment as of the
day and year first written above.
Landlord: MCDONNELL DOUGLAS REALTY COMPANY,
a California corporation
By:
--------------------------------
Stephen J. Barker
Director of Business Operations
Tenant: SILICON VALLEY BANK,
a California corporation
By:
--------------------------------
Print Name:
------------------------
Its:
--------------------------
-2-
<PAGE>
EXHIBIT A
---------
DEPICTION OF ADDITION TO PREMISES
-3-
<PAGE>
AMENDMENT NO. 2 TO LEASE
------------------------
This Amendment No. 2 to Lease (this "Amendment") is entered into as of June
1, 1996, (the "Effective Date") between MCDONNELL DOUGLAS REALTY COMPANY, a
California corporation ("Landlord") and SILICON VALLEY BANK, a California
corporation ("Tenant").
RECITALS
--------
A. Tenant is the tenant under that certain Douglas Plaza Office Lease
dated, December 1, 1995 and Amendment No. 1 to Lease dated March 29, 1996
(collectively the "Lease") covering certain premises (the "Premises") within the
building (the "Building") commonly known as 18872 MacArthur Boulevard, City of
Irvine, County of Orange, California, which Premises are described as Suite 100
on the first floor of the Building containing approximately 8,424 rentable
square feet, all as more particularly set forth in the Lease.
B. Tenant desires to amend the Lease to, among other things, (i) expand
the Premises to include the remainder of the first floor of the Building to be
known as Suite 100, consisting of approximately 1,361 rentable square feet and
1,237 usable square feet, as generally depicted on Exhibit A attached hereto
(the "Additional Premises"); and (ii) provide for certain additional amendments
and modifications to the Lease occasioned by the addition of the Additional
Premises.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Landlord and Tenant agree as follows (capitalized
terms used and not otherwise defined herein shall have the meanings given in the
Lease).
AGREEMENT
---------
1. Modification of Premises. Upon the terms and conditions set forth in
------------------------
this Amendment No. 2, effective as of the Effective Date the Premises shall be
and hereby are amended to add and include the Additional Premises. From and
after the Effective Date, all references herein and in the Lease to the
"Premises" shall mean, unless the context clearly indicates to the contrary, the
Premises described in the Lease together with the Additional Premises
(containing in the aggregate approximately 9,785 rentable square feet and 8,895
usable square feet) and Exhibit A shall mean Exhibit A to the Lease together
--------- ---------
with Exhibit A to this Amendment.
---------
2. Condition of Premises. Tenant acknowledge and agrees that (i) Tenant
---------------------
has inspected the Premises and accepts them as being in good and sanitary order,
condition and repaid, (ii) Landlord has made no representation and has given no
warranty to Tenant regarding the Premises, including, without limitation, any
representation or warranty regarding the fitness of the Premises for Tenant's
intended use or for any other purpose, and (iii) Tenant shall accept and occupy
the premises in its "AS IS" condition and "WITH ALL FAULTS."
3. Base Rent; Operating Expenses. The Base Rent and Tenant's
-----------------------------
proportionate share of Operating Expenses set forth in the Lease shall be
increased to reflect the additional square footage added to the Premises
pursuant to this Amendment. Accordingly, Subsection 1.(h) and 1.(i) of the Base
Lease Provisions are hereby replaced with the following:
"(h) Tenant's Percentage: Tenant's percentage of the Building on a
-------------------
rentable square foot basis, which initially is 21.53%."
"(i) Initial Monthly Base Rent:
-------------------------
4. Security Deposit. The parties acknowledge that Landlord currently is
----------------
holding a ________ Security Deposit from Tenant. Concurrently with the
execution of this Amendment, Tenant shall provide Landlord with additional
security in the amount of _____ (for a total Security Deposit of
_______________) and agrees that Landlord shall retain the total of such above
amounts as security for the Lease, which shall be governed by the provisions in
the Lease with respect to Security Deposit.
<PAGE>
5. Parking.
-------
6. Confirmations. Tenant hereby certifies and confirms to Landlord that
-------------
as of Tenant's execution and delivery hereof, Landlord is not in default under
the Lease and Tenant has no claims, defense or offset with respect to the Lease.
7. Entire Agreement. The Lease, as affect by this Amendment, contains
----------------
the entire agreement of Landlord and Tenant and is hereby reaffirmed, and the
provisions thereof, as so affected, shall remain in full force and effect.
Without limiting the generality of the foregoing, all provisions of the Lease
which could be reasonably and logically construed as applicable to this
Amendment shall apply to this Amendment as well as the Lease, and those
provisions of the Lease which are specifically superseded by or clearly
inconsistent with the provisions of this Amendment shall have no further
application.
8. Further Assurances. Landlord and Tenant shall, upon request of the
------------------
other, execute and deliver such documentation and information and take such
other action as may be reasonably mecessary to effectuate the intent of this
Amendment or to implement the provisions hereof.
IN WITNESS WHEREOF, the parties have entered into this Amendment as of the
day and year first written above.
Landlord: MCDONNELL DOUGLAS REALTY COMPANY,
a California corporation
By:
--------------------------------
--------------------------------
--------------------------------
Tenant: SILICON VALLEY BANK,
a California corporation
By:
--------------------------------
Print Name:
------------------------
Its:
--------------------------
-2-
<PAGE>
EXHIBIT A
---------
18872 MacArthur Blvd.
#150 1,361 RSF
-3-
<PAGE>
EXHIBIT 10.16
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
[*] Confidential Treatment has been requested for certain portions of this
exhibit.
<PAGE>
in writing and with reasonable notice, 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 [*] (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, [*]
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
of such rate raise determined in accordance with the
[*] Confidential Treatment Requested
2
<PAGE>
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 [*] 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, [*] 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.
(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
[*] Confidential Treatment Requested
3
<PAGE>
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 [*] of the Applications within
the two (2) business hours after electronic receipt of the Application and a
further [*] of such time. Compliance with these performance standards shall be
measured on a monthly basis. If CAF fails to comply with
[*] Confidential Treatment Requested
4
<PAGE>
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 [*] 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 [*] 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.
[*] Confidential Treatment Requested
5
<PAGE>
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 [*] 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 [*] 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 [*] then CAF shall
reimburse ABTAC for the full cost of the audit.
SECTION 7. REPORTS
(a) [*] 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 [*] 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 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,
[*] Confidential Treatment Requested
6
<PAGE>
the report shall identify each Application by name of applicant. CAF 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) [*]
[*] Confidential Treatment Requested
7
<PAGE>
[*]
(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) [*]
(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 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
[*] Confidential Treatment Requested
8
<PAGE>
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 [*] from
the date hereof unless terminated by either party upon [*] 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 [*]
after written notice thereof from the other party (or, if such breach is curable
and requires more than [*] to cure, if such cure is not commenced within [*] 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 [*] 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 [*] written notice if, on the first business day of any calendar
month, the Exclusivity Conditions have not been met during the most recently
completed [*], 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.
[*] Confidential Treatment Requested
9
<PAGE>
(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
<PAGE>
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/ JAMES B. BREW
----------------------------------------------
Title:
AUTO-BY-TEL ACCEPTANCE CORPORATION
By: /S/ W. RANDOLPH ELLSPERMANN
-----------------------------------------
Title: CHIEF OPERATING OFFICER
--------------------------------
AUTO BY-TEL, INC., as Guarantor
By: /S/ PETER R. ELLIS
-----------------------------------------------
Title: /S/ PRESIDENT
---------------------------------------------
11
<PAGE>
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 [*] to the Agreement:
[*]
[*] Confidential Treatment Requested
<PAGE>
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 2 of 1
<PAGE>
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
<PAGE>
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
Schedule 2 - Page 1 of 3
<PAGE>
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 (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 been duly authorized by all necessary and appropriate
and corporate action on the part of CAF.
Schedule 2 - Page 2 of 3
<PAGE>
(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
<PAGE>
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 order
Schedule 3 - Page 1 of 3
<PAGE>
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 it, obligations hereunder in accordance
with all applicable laws, rules and regulations now or hereafter in effect.
(g) Arbitration. The parties acknowledge that the Agreement evidences
-----------
a transaction involving interstate commerce. Any controversy or claim arising
out of or
Schedule 3 - Page 2 of 3
<PAGE>
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
<PAGE>
AUTO-BY-TEL CORPORATION AND SUBSIDIARIES
EXHIBIT 11.1--STATEMENT RE: COMPUTATION OF LOSS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
INCEPTION
(JANUARY 31,
1995) TO YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1996
------------ ------------
<S> <C> <C>
Net loss............................................. $(1,030,000) $(6,035,000)
=========== ===========
Shares used in computing loss per share:
Weighted average common shares outstanding......... 12,406,816 12,406,816
Net effect of Convertible Preferred Stock--using
the as-converted method........................... 1,063,396 1,593,426
Net effect of stock options issued at less than the
IPO price within twelve months, based on the
treasury stock method............................. 1,799,942 1,799,942
----------- -----------
15,270,154 15,800,184
=========== ===========
Net loss per common and equivalent share............. $ (0.07) $ (0.38)
=========== ===========
</TABLE>
<PAGE>
EXHIBIT 21.1
AUTO-BY-TEL CORPORATION
Subsidiaries of the Company
Auto-By-Tel Canada, Inc
Auto-By-Tel Marketing Corporation
Auto-By-Tel Acceptance Corporation
Auto-By-Tel Insurance Services, Inc.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 11-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-31-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 DEC-31-1996
<CASH> 48,000 9,062,000
<SECURITIES> 0 0
<RECEIVABLES> 34,000 460,000
<ALLOWANCES> 20,000 162,000
<INVENTORY> 0 0
<CURRENT-ASSETS> 176,000 10,262,000
<PP&E> 127,000 1,614,000
<DEPRECIATION> 25,000 189,000
<TOTAL-ASSETS> 285,000 12,298,000
<CURRENT-LIABILITIES> 1,275,000 4,302,000
<BONDS> 0 0
0 0
0 2,000<F2>
<COMMON> 0 12,000<F1>
<OTHER-SE> 990,000 7,982,000<F3>
<TOTAL-LIABILITY-AND-EQUITY> 285,000 12,298,000
<SALES> 274,000 5,025,000
<TOTAL-REVENUES> 274,000 5,025,000
<CGS> 0 0
<TOTAL-COSTS> 1,304,000 11,184,000
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 24,000
<INCOME-PRETAX> 1,030,000 6,035,000
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,030,000 6,035,000
<EPS-PRIMARY> 0 0
<EPS-DILUTED> (.07) (.38)
<FN>
<F1>COMMON STOCK, $0.001 PAR VALUE; 16,666,667 SHARES AUTHORIZED; NONE ISSUED AND
OUTSTANDING AT DECEMBER 31, 1995; 12,427,221 SHARES ISSUED AND OUTSTANDING AT
DECEMBER 31, 1996 (50,000,000 SHARES AUTHORIZED, 15,895,136 SHARES ISSUED AND
OUTSTANDING, PRO FORMA)
<F2>CONVERTIBLE PREFERRED STOCK, SERIES A, $0.001 PAR VALUE, 1,500,000 SHARES
AUTHORIZED; NONE ISSUED AND OUTSTANDING AT DECEMBER 31, 1995; 1,500,000 SHARES
ISSUED AND OUTSTANDING AT DECEMBER 31, 1996, AGGREGATE LIQUIDATION PREFERENCE
OF $15,000,000 (5,000,000 SHARES AUTHORIZED, NONE ISSUED AND OUTSTANDING, PRO
FORMA)
<F3>INCLUDES MEMBERS' INTERESTS/ADDITIONAL PAID-IN CAPITAL, DEFERRED
COMPENSATION, AND ACCUMULATED DEFICIT.
</FN>
</TABLE>
