<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 5, 1999.
REGISTRATION NO. 333-70621
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AUTOBYTEL.COM INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7375 33-0711569
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
18872 MACARTHUR BOULEVARD
IRVINE, CALIFORNIA 92612-1400
(949) 225-4500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MARK W. LORIMER, CHIEF EXECUTIVE OFFICER AND PRESIDENT
AUTOBYTEL.COM INC.
18872 MACARTHUR BOULEVARD
IRVINE, CALIFORNIA 92612-1400
(949) 225-4500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
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<S> <C>
THOMAS R. POLLOCK, ESQ. CHRISTOPHER L. KAUFMAN, ESQ.
BRIGITTE LIPPMANN, ESQ. LAURA I. BUSHNELL, ESQ.
PAUL, HASTINGS, JANOFSKY & WALKER LLP LATHAM & WATKINS
399 PARK AVENUE 135 COMMONWEALTH DRIVE
NEW YORK, NEW YORK 10022 MENLO PARK, CALIFORNIA 94025
(212) 318-6000 (650) 328-4600
</TABLE>
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement of the earlier effective registration statement for the
same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
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PROPOSED MAXIMUM PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2) REGISTRATION FEE(3)
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Common Stock, par value $.001
per share...................... 5,175,000 Shares $18.00 $93,150,000 $25,895.70
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</TABLE>
(1) Includes 675,000 shares that may be sold upon exercise of the underwriters'
over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933, as amended.
(3) Of this registration fee, $23,018.40 has been previously paid.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION
MARCH 5, 1999
4,500,000 SHARES
LOGO
AUTOBYTEL.COM INC.
COMMON STOCK
We are offering 3,500,000 shares of our common stock. The selling stockholders
identified in this prospectus are offering an additional 1,000,000 shares. We
will not receive any of the proceeds from the sale of shares by the selling
stockholders. There is currently no public market for our common stock. We
expect that the public offering price will be between $16.00 and $18.00 per
share. The market price of our common stock after this offering may be higher or
lower than the actual price at which the shares of our common stock will be sold
in this offering.
Our common stock has been approved for quotation on the Nasdaq National Market
under the symbol "ABTL."
INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 6.
Autobytel.com has received from international strategic investors indications of
interest for the purchase of up to 250,000 shares at the initial public offering
price. The sale of these shares will not be subject to the underwriting
agreement between Autobytel.com and the underwriters. Accordingly, no
underwriting discounts will apply to the sale of these shares.
<TABLE>
<CAPTION>
PER SHARE TOTAL
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<S> <C> <C>
Public Offering Price................................ $ $
Underwriting Discounts............................... $ $
Proceeds, before expenses, to Autobytel.com.......... $ $
Proceeds, before expenses, to the selling
stockholders....................................... $ $
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The selling stockholders have granted the underwriters a 30-day option to
purchase up to an additional 675,000 shares of common stock to cover any
over-allotments. If the underwriters exercise the over-allotment option in full,
these stockholders will receive $ from the proceeds.
BT ALEX. BROWN
LEHMAN BROTHERS
PAINEWEBBER INCORPORATED
, 1999
<PAGE> 3
GATEFOLD
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Purchase Request Process utilizes easy-to-use online forms that enable consumers
to choose their desired vehicle and options. The purchase request is then routed
to the nearest Autobytel.com participating dealer, whom we expect to promptly
contact the customer with a haggle-free, competitive offer.
Research allows consumers to empower themselves by gathering up-to-date, useful
information regarding vehicles, vehicle pricing and other related topics from
Autobytel.com's comprehensive network of automobile information sources.
Dealer Real Time(tm) is a extranet used exclusively by Autobytel.com and its
participating dealers that delivers the purchase requests from consumers to
Autobytel.com dealers in real time. It notifies dealers when new purchase
requests have been received, enables dealers to efficiently manage the purchase
process and allows dealers to load their pre-owned vehicle inventories directly
to the network.
Pre-Owned Vehicle Purchasing is simplified through Autobytel.com's Pre-Owned
CyberStore, which enables consumers to search for vehicles according to specific
search parameters such as the price, make, model, mileage, year and location of
the vehicle. CyberStore locates and displays the description, location and
actual photograph of all vehicles that satisfy the search parameters.
INSIDE COVER
- ------------
New Cars
Consumers can shop for and select a new vehicle that specifically fits their
needs using Autobytel.com.
Pre-Owned CyberStore
Consumers can search for, view and select a certified, pre-owned vehicle through
CyberStore.
Research
Pricing information, consumer reports, "test drives" and up-to-date automotive
industry information help consumers make informed and intelligent buying
decisions.
Finance
Consumers can research loan and leasing information and receive online approval.
Insure
Consumers can receive insurance quotes and obtain approval online.
Rewards
Mobalist Rewards and its affiliate programs allow members to earn credits toward
the purchase of a new or pre-owned car through Autobytel.com.
Warranty
Consumers can purchase extended warranty and mechanical breakdown insurance
through our online affiliates.
My Area
Consumers can keep track of their current cars, watch expenses and plan future
"dream car" purchases through this personalized homepage.
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PROSPECTUS SUMMARY
In addition to this summary, you should read the more detailed information
appearing elsewhere in this prospectus, including the "Risk Factors" section and
the Consolidated Financial Statements and Notes thereto.
AUTOBYTEL.COM
We are a leading, branded Internet site for new and pre-owned vehicle
information and purchasing services. Through our Web site, www.autobytel.com,
consumers can research pricing, specifications and other information regarding
new and pre-owned vehicles. When consumers indicate they are ready to buy, they
can be connected to Autobytel.com's network of over 2,700 dealers in North
America, with each dealer representing a franchise for a particular vehicle
make. Dealers participate in our network by entering into non-exclusive
contracts with us. We expect our dealers to provide a haggle-free, competitive
offer. We provide our services free of charge to consumers and derive
substantially all of our revenues from fees paid by participating dealers.
We believe our services benefit both consumers and participating dealers in
the following ways:
- we supply consumers with information they can use to make an informed and
intelligent vehicle purchasing decision,
- we provide consumers a convenient buying experience,
- we provide consumers access to a broad range of related services such as
insurance, financing and leasing through our Web site,
- we reduce our participating dealers' costs by directing to them large
volumes of potential automotive buyers, and
- we train our dealers to appropriately deal with knowledgeable Internet
consumers.
We introduced our new vehicle purchasing services in May 1995 and our
Certified Pre-Owned CyberStore program in April 1997. Our new vehicle purchasing
service enables consumers to shop for and select a new vehicle through our Web
site by providing research on new vehicles such as pricing, features,
specifications and colors. When consumers indicate they are ready to buy, they
can complete a purchase request online. A purchase request is an online inquiry
a consumer makes to receive a price quote for a specific vehicle from one of the
dealers in our network. The CyberStore allows consumers to search for a
pre-owned vehicle according to the price, make, model, color, year and location
of the vehicle. The CyberStore locates and displays the descriptions, locations
and actual photographs of all vehicles that satisfy the consumers' search
parameters.
According to CNW Marketing/Research, an independent research organization,
United States consumers spent over $657 and $667 billion on new and pre-owned
vehicles representing the sale of over 60.0 and 60.3 million vehicles in 1997
and 1998, respectively. Although automotive retailing attracts significant
consumer dollars, we believe that consumers associate the traditional vehicle
buying experience with high-pressure sales tactics. In the United States, new
vehicles are traditionally sold through face-to-face, negotiated transactions at
approximately 49,000 dealerships franchised by manufacturers. Approximately 40%
of pre-owned vehicles are also sold through these dealerships. Our company was
founded with the objective of significantly improving the purchasing process for
consumers and dealers.
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Since inception, we have successfully expanded our dealer network to over
2,700 dealers and have directed approximately 2.5 million purchase requests to
our dealer network. During 1998, we directed over 1.3 million purchase requests
to our dealers. We believe that our dealer network experiences a high closing
ratio due to the quality of purchase requests generated through our Web site,
our high quality dealer network, and our dealer training and support. The
dealers in our network use our online information platform, the Dealer Real Time
system. The Dealer Real Time system is an Internet-based communications platform
that provides dealers with immediate purchase request information, the ability
to track customers and purchase requests, and other value-added features,
including automatic uploading of pre-owned vehicle inventory into our database.
We believe that the Dealer Real Time system gives dealers a competitive
advantage compared to delivering purchase requests by fax.
We have developed strategic marketing, advertising, development and
distribution affiliations with other companies, including:
- Internet search engine providers, such as Excite, Inc.,
- cable service providers, such as MediaOne Interactive Services, Inc.,
- international automotive distributors, such as Inchcape Automotive
Limited and Bilia AB,
- Internet providers of vehicle pricing and specification information, such
as Edmund's Publications Corp., Kelley Blue Book, Pace Publications, Inc.
and IntelliChoice, Inc., and
- financing and insurance providers, such as Chase Manhattan Automotive
Finance Corporation, General Electric Capital Auto Financial Services,
Inc. and New Hampshire Insurance Corporation, a member company of the
American International Group.
We have received indications of interest from strategic investors,
including companies with international automotive operations, for the purchase
of up to 250,000 shares at the initial public offering price. We are seeking to
enter into agreements with these companies to provide for, among other things,
the organization and establishment of our international operations through the
formation of joint ventures and licenses for the use of our name and systems in
international locations.
We are a Delaware corporation incorporated on May 17, 1996. We were
previously formed in Delaware in January 1995 as a limited liability company
under the name Auto-By-Tel LLC. Our principal executive offices are located at
18872 MacArthur Boulevard, Irvine, California 92612-1400, and our telephone
number is (949) 225-4500. Our Web site is located at www.autobytel.com.
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THE OFFERING
The information below is stated as of December 31, 1998. Investors should
be aware that the aggregate number of shares of common stock to be outstanding
after the offering does not include 2,859,340 shares subject to outstanding
options and 773,133 shares subject to outstanding warrants.
<TABLE>
<S> <C>
Common stock offered by Autobytel.com... 3,500,000 shares
Common stock offered by the selling
stockholders.......................... 1,000,000 shares
Common stock to be outstanding after the
offering.............................. 17,858,745 shares
Use of proceeds......................... For working capital and general
corporate purposes
Nasdaq National Market symbol........... "ABTL"
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
We have calculated pro forma net loss per share assuming the conversion on
their date of issuance of the outstanding preferred stock into common stock. The
as adjusted for the offering column reflects the receipt by Autobytel.com of the
estimated net proceeds of $53.8 million from our sale of common stock offered
hereby.
<TABLE>
<CAPTION>
INCEPTION
(JANUARY 31,
1995) TO YEARS ENDED DECEMBER 31,
DECEMBER 31, -----------------------------
1995 1996 1997 1998
------------ ------- -------- --------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATION DATA:
Revenues................................ $ 274 $ 5,025 $ 15,338 $ 23,826
======= ======= ======== ========
Loss from operations.................... (1,030) (6,159) (17,415) (20,643)
------- ------- -------- --------
Net loss................................ $(1,030) $(6,035) $(16,810) $(19,398)
======= ======= ======== ========
Basic net loss per share................ $ (0.12) $ (0.73) $ (2.03) $ (2.30)
======= ======= ======== ========
Shares used in computing basic net loss
per share............................. 8,250 8,252 8,291 8,423
Pro forma basic net loss per share...... $ (0.12) $ (0.68) $ (1.53) $ (1.49)
======= ======= ======== ========
Shares used in computing pro forma basic
net loss per share.................... 8,250 8,849 10,967 13,008
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
---------------------------
AS ADJUSTED
ACTUAL FOR THE OFFERING
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<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 27,984 $ 81,754
Working capital........................................... 23,436 77,206
Total assets.............................................. 34,207 87,977
Accumulated deficit....................................... (43,273) (43,273)
Stockholders' equity...................................... 25,868 79,638
</TABLE>
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RISK FACTORS
You should read the following risk factors carefully before purchasing our
common stock.
WE HAVE A HISTORY OF NET LOSSES AND EXPECT NET LOSSES FOR THE FORESEEABLE
FUTURE.
We were formed in January 1995 as Auto-By-Tel LLC, and first received
revenues from operations in March 1995. We therefore have a limited operating
history upon which you may evaluate our operations and future prospects. Because
of the recent emergence of the Internet-based vehicle information and purchasing
industry, none of our executives has significant experience in the industry.
This limited operating history and management experience means it is difficult
for us to predict future operating results. We have incurred losses every
quarter since inception and expect to continue to incur losses for the
foreseeable future. We had an accumulated deficit of $43.3 million and $23.9
million as of December 31, 1998 and 1997, respectively. Our potential for future
profitability must be considered in light of the risks, uncertainties, expenses
and difficulties frequently encountered by companies in the early stages of
development, particularly companies in new and rapidly evolving markets, such as
the market for Internet commerce. To achieve profitability, we must, among other
things:
- generate increased vehicle buyer traffic to our Web site,
- continue to send new and pre-owned vehicle purchase requests to dealers
that result in sufficient dealer transactions to justify our fees,
- continue to expand the number of dealers in our network and enhance the
quality of dealers,
- respond to competitive developments,
- increase our brand name visibility,
- successfully introduce new services,
- continue to attract, retain and motivate qualified personnel, and
- continue to upgrade and enhance our technologies to accommodate expanded
service offerings and increased consumer traffic.
We cannot be certain that we will be successful in achieving these goals.
WE MAY NEED TO REDUCE OUR PARTICIPATING DEALER TURNOVER.
Substantially all of our revenues are derived from fees paid by subscribing
dealerships under written marketing agreements with us having terms of one year
or five years. These marketing agreements are cancelable at the option of either
party upon 30 days notice. We cannot assure that dealers will not terminate
their agreements with us. Subscribing dealers may terminate their relationship
with us for any reason, including an unwillingness to accept our subscription
terms or in order to join alternative marketing programs. Our business is
dependent upon our ability to attract and retain qualified new and pre-owned
vehicle dealers. During 1998, 556 subscribing dealers in the United States
terminated their affiliation with us or were terminated by us. During 1998 we
also added 1,323 subscribing dealers to our dealership network. In order for us
to grow or maintain our dealer network, we may need to reduce dealer turnover.
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WE MAY LOSE SUBSCRIBING DEALERS IF WE RECONFIGURE DEALER TERRITORIES.
If the volume of purchase requests increases, we may need to reduce or
reconfigure the exclusive territories currently assigned to dealerships in order
to serve consumers more effectively. If a dealer is unwilling to accept a
reduction or reconfiguration of its territory, it may terminate its relationship
with us and could sue us to prevent such reduction or reconfiguration, or
collect damages from us. We have experienced one such lawsuit -- for more
details, see the section in this prospectus entitled "Business -- Litigation." A
material decrease in the number of dealers subscribing to our network, slower
than expected growth in the number of subscribing dealers, or litigation with
dealers could have a material adverse effect on our business, results of
operations and financial condition.
WE RELY HEAVILY ON OUR PARTICIPATING DEALERS TO PROMOTE OUR BRAND VALUE.
We devote significant efforts to train participating dealerships in
practices that are intended to increase consumer satisfaction. Our inability to
train dealers effectively, or the failure by participating dealers to adopt
recommended practices, respond rapidly and professionally to vehicle inquiries,
or sell and lease vehicles in accordance with our marketing strategies, could
result in low consumer satisfaction, damage our brand name and could materially
and adversely affect our business, results of operations and financial
condition.
OUR QUARTERLY FINANCIAL RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS.
Our quarterly operating results may fluctuate due to many factors. Our
expense levels are based in part on our expectations of future revenues which
may vary significantly. We plan our business operations based on increased
revenues and if our revenues do not increase faster than our expenses, our
business, results of operations and financial condition will be materially and
adversely affected. Other factors that may adversely affect our quarterly
operating results include:
- our ability to retain existing dealers, attract new dealers and maintain
dealer and customer satisfaction,
- the announcement or introduction of new or enhanced sites, services and
products by us or our competitors,
- general economic conditions and economic conditions specific to the
Internet, online commerce or the automobile industry,
- a decline in the usage levels of online services and consumer acceptance
of the Internet and commercial online services for the purchase of
consumer products and services such as those offered by us,
- our ability to upgrade and develop our systems and infrastructure and to
attract new personnel in a timely and effective manner,
- the level of traffic on our Web site and other sites that refer traffic
to our Web site,
- technical difficulties, system downtime or Internet brownouts,
- the amount and timing of operating costs and capital expenditures
relating to expansion of our business, operations and infrastructure,
- governmental regulation, and
- unforeseen events affecting the industry.
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SEASONALITY IS LIKELY TO CAUSE FLUCTUATIONS IN OUR OPERATING RESULTS.
To date, our quarter to quarter growth in revenues have offset any effects
due to seasonality. However, we expect our business to experience seasonality as
it matures. Seasonality in the automotive industry, Internet and commercial
online service usage and advertising expenditures is likely to cause
fluctuations in our operating results and could have a material adverse effect
on our business, operating results and financial condition. We anticipate that
purchase requests will typically increase during the first and third quarters
when new vehicle models are introduced and will typically decline during the
second and fourth quarters. Internet and commercial online service usage and the
growth rate of such usage typically declines during the summer.
WE ARE IN AN INTENSELY COMPETITIVE MARKET.
Our vehicle purchasing services compete against a variety of Internet and
traditional vehicle purchasing services and automotive brokers. The market for
Internet-based commercial services is new, and competition among commercial Web
sites is expected to increase significantly in the future. Failure to achieve
our competitive objectives would have a material adverse effect on our business,
results of operations and financial condition. The Internet is characterized by
minimal barriers to entry, and new competitors can launch new Web sites at
relatively low cost. To compete successfully as an Internet-based commercial
entity, we must significantly increase awareness of our services and brand name.
We compete with other entities which maintain similar commercial Web sites
including Autoweb.com, Cendant Membership Service, Inc.'s AutoVantage, Microsoft
Corporation's Carpoint and Stoneage Corporation. Republic Industries, Inc., a
large consolidator of dealers, has announced its intention to launch a Web site
for marketing vehicles. We also compete indirectly against vehicle brokerage
firms and affinity programs offered by several companies, including Costco
Wholesale Corporation and Wal-Mart Stores, Inc. In addition, all major vehicle
manufacturers have their own Web sites and many have recently launched or
announced plans to launch online buying services, such as General Motors
Corporation's BuyPower. We also compete with vehicle insurers, lenders and
lessors as well as other dealers that are not part of our network. Such
companies may already maintain or may introduce Web sites which compete with
ours.
We believe that the principal competitive factors in the online market are:
- brand recognition,
- speed and quality of fulfillment,
- variety of value-added services,
- ease of use,
- customer satisfaction,
- quality of service, and
- technical expertise.
We cannot assure that we can compete successfully against current or future
competitors, many of which have substantially more capital, existing brand
recognition, resources and access to additional financing. In addition,
competitive pressures may result in increased marketing costs, decreased Web
site traffic or loss of market share or
8
<PAGE> 10
otherwise may materially and adversely affect our business, results of
operations and financial condition.
IF ANY OF OUR RELATIONSHIPS WITH KEY VENDORS TERMINATES, OUR PURCHASE REQUEST
VOLUME COULD DECLINE.
We depend on a number of strategic relationships to direct a substantial
amount of purchase requests and traffic to our Web site. The termination of any
of these relationships or any significant reduction in traffic to Web sites on
which our services are advertised or offered, or the failure to develop
additional referral sources, would have a material adverse effect on our
business, results of operations and financial condition. We receive a
significant number of purchase requests through a limited number of Internet
search engines, such as Excite, and online automotive information providers,
such as Edmund's and Kelley Blue Book. For example, in 1997 and 1998,
approximately 49% and 34%, respectively, of our purchase requests came through
Edmund's. We may not be able to maintain our relationship with Edmund's or other
online service providers or find alternative, comparable marketing partners
capable of originating significant numbers of purchase requests on terms
satisfactory to us. In addition, we periodically negotiate revisions to existing
agreements and these revisions could increase our costs in future periods. A
number of our agreements with online service providers may be terminated without
cause. Also, our agreement with Excite relating to our sponsorship of Netscape
Communications Corporation's NetCenter Auto Channel is conditioned on Excite's
NetCenter agreement with Netscape remaining in effect. The NetCenter agreement
between Excite and Netscape can be terminated in the event of a change in
control which may be triggered if America Online's proposed acquisition of
Netscape occurs.
IF WE CAN NOT BUILD STRONG BRAND LOYALTY OUR BUSINESS MAY SUFFER.
We believe that the importance of brand recognition will increase as more
companies engage in commerce over the Internet. Development and awareness of the
Autobytel.com brand will depend largely on our ability to obtain a leadership
position in Internet commerce. If dealers do not perceive us as an effective
channel for increasing vehicle sales, or consumers do not perceive us as
offering reliable information concerning new and pre-owned vehicles, as well as
referrals to high quality dealers, in a user-friendly manner that reduces the
time spent for vehicle purchases, we will be unsuccessful in promoting and
maintaining our brand. Our brand may not be able to gain widespread acceptance
among consumers or dealers. Our failure to develop our brand sufficiently would
have a material adverse effect on our business, results of operations and
financial condition.
WE ARE DEPENDENT ON KEY PERSONNEL.
Our future success depends on our ability to identify, hire, train and
retain highly qualified sales and marketing, managerial and technical personnel.
In addition, as we introduce new services we will need to hire a significant
number of personnel. Competition for such personnel is intense, and we may not
be able to attract, assimilate or retain such personnel in the future. The
inability to attract and retain the necessary managerial, technical and sales
and marketing personnel could have a material adverse effect on our business,
results of operations and financial condition.
Our business and operations are substantially dependent on the performance
of our executive officers and key employees, some of whom are employed on an
at-will basis and all of whom have worked together for only a short period of
time. We maintain "key person" life insurance in the amount of $3.0 million on
the life of Mark W. Lorimer, our
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<PAGE> 11
Chief Executive Officer and President. The loss of the services of Mr. Lorimer
or Ann Marie Delligatta, Executive Vice President and Chief Operating Officer,
or one or more of our other executive officers or key employees could have a
material adverse effect on our business, results of operations and financial
condition.
WE NEED TO MANAGE OUR GROWTH AND OUR ENTRY INTO NEW BUSINESS AREAS.
We are expanding our operations in order to establish ourselves as a leader
in the evolving market for Internet-based vehicle purchasing services. We may
not be able to expand our operations in a cost-effective or timely manner or
increase overall market acceptance. As of December 31, 1998, we had 180
employees, compared to 159 employees as of December 31, 1997, and 73 employees
as of December 31, 1996. We believe establishing industry leadership requires us
to:
- test, introduce and develop new services and products, including
enhancing our Web site,
- expand the breadth of products and services offered,
- expand our market presence through relationships with third parties, and
- acquire new or complementary businesses, products or technologies.
Our inability to generate satisfactory revenues from such expanded services
or products to offset their cost could have a material adverse effect on our
business, financial condition and results of operations.
WE FACE RISKS ASSOCIATED WITH FEDERAL OR STATE FRANCHISE LAWS.
We believe that neither our relationship with our dealers nor our dealer
subscription agreements constitute "franchises" under federal or state franchise
laws and that we are not subject to the coverage of state and motor vehicle
dealer licensing laws. However, in the event that any state's regulatory
requirements relating to franchises or our method of business impose additional
requirements on us or include us within an industry-specific regulatory scheme,
we may be required to modify our marketing programs in such states in a manner
which undermines the program's attractiveness to consumers or dealers, we may
become subject to fines or other penalties or if we determine that the licensing
and related requirements are overly burdensome, we may elect to terminate
operations in such state. In each case, our business, results of operations and
financial condition could be materially and adversely affected.
A Federal district court in Michigan has ruled that our dealer subscription
agreement is not a "franchise" under Michigan law. However, if our relationship
or written agreement with our dealers were found to be a "franchise" under
federal or state franchise laws, then we could be subjected to other
regulations, such as franchise disclosure and registration requirements and
limitations on our ability to effect changes in our relationships with our
dealers. We also believe that our dealer marketing service does not qualify as
an automobile brokerage activity and therefore state broker licensing
requirements do not apply to us. In response to Texas Department of
Transportation concerns, we modified our marketing program in that state to
include a pricing model under which all subscribing dealerships in Texas are
charged uniform fees based on the population density of their particular
geographic area and to make our program open to all dealerships who wish to
apply.
10
<PAGE> 12
WE FACE RISKS ASSOCIATED WITH STATE LICENSING REQUIREMENTS.
We currently hold financial broker licenses in the states of Florida,
Indiana, Rhode Island and Wisconsin and have applied for renewals in the states
of California and Colorado. We believe these are the only states that require us
to have licenses in order to market our vehicle financing operations. If we are
required to be licensed elsewhere, it may result in an expensive and
time-consuming process that could divert the effort of management away from
day-to-day operations. In the event other states require us to be licensed and
we are unable to do so, or are otherwise unable to comply with regulations
required by changes in current operations or the introduction of new services,
we could be subject to fines or other penalties, and our business, results of
operations and financial condition could be materially and adversely affected.
We provide a link on our Web site to an online insurance application
program offered by the American International Group. We receive fees from a
member company of the American International Group in connection with this
advertising activity. We do not believe that this activity requires us to be
licensed under state insurance laws. The use of the Internet in the marketing of
insurance products, however, is a relatively new practice. It is not clear
whether or to what extent; state insurance licensing laws apply to activities
similar to ours. Given these uncertainties, we currently hold, through a
wholly-owned subsidiary, insurance agent licenses in California, Indiana,
Nebraska, New Jersey, and Utah. We have applied for insurance agent licenses in
the remaining thirty-two states that issue corporate licensing and are awaiting
approval. In the event other states require us to be licensed and we are unable
to do so, or are otherwise unable to comply with regulations required by changes
in current operations or the introduction of new services, we could be subject
to fines or other penalties, and our business, results of operations and
financial condition could be materially and adversely affected.
EVOLVING GOVERNMENT REGULATIONS MAY REQUIRE FUTURE LICENSING OR RESULT IN
ADMINISTRATIVE MONETARY FINES OR PENALTIES THAT MAY REDUCE OUR FUTURE EARNINGS.
General Business: There are currently few laws or regulations that apply
directly to the Internet. Because our business is dependent on the Internet, the
adoption of new local, state, national or international laws or regulations may
decrease the growth of Internet usage or the acceptance of Internet commerce
which could, in turn, decrease the demand for our services and increase our
costs or otherwise have a material adverse effect on our business, results of
operations and financial condition.
Tax authorities in a number of states are currently reviewing the
appropriate tax treatment of companies engaged in Internet commerce. New state
tax regulations may subject us to additional state sales, use and income taxes.
Licensing Risks: In a regulatory climate that is uncertain, our operations
may be subject to direct and indirect adoption, expansion or reinterpretation of
various domestic and foreign laws and regulations. Compliance with these future
laws and regulations may require us to obtain appropriate licenses at an
undeterminable and possibly significant initial monetary and annual expense.
These additional monetary expenditures may increase future overhead, thereby
potentially reducing our future results of operations.
11
<PAGE> 13
We have identified what we believe are the areas of domestic government
regulation, which if changed, would be costly to us. These laws and regulations
include federal and/or state franchise laws; motor vehicle brokerage licensing
laws; insurance licensing laws; motor vehicle dealership licensing laws; and/or
related consumer protection liability laws applicable to aspects of our
business.
Introduction of new services and/or expansion of our operations to foreign
countries may require us to comply with additional, yet undetermined, laws and
regulations. Compliance may require obtaining appropriate business licenses,
filing of bonds, appointment of foreign agents and periodic business reporting
activity. The failure to adequately comply with these future laws and
regulations may delay or possibly prevent some of our products or services from
being offered in a particular foreign country, thereby having an adverse affect
on our results of operations.
OUR SUCCESS IS DEPENDENT ON OUR KEEPING PACE WITH ADVANCES IN TECHNOLOGY.
The Internet and electronic commerce markets are characterized by rapid
technological change, changes in user and customer requirements, frequent new
service and product introductions embodying new technologies and the emergence
of new industry standards and practices that could render our existing Web site
and technology obsolete. If we are unable to adapt to changing technologies, our
business, results of operations and financial condition could be materially and
adversely affected. Our performance will depend, in part, on our ability to
continue to enhance our existing services, develop new technology that addresses
the increasingly sophisticated and varied needs of our prospective customers,
license leading technologies and respond to technological advances and emerging
industry standards and practices on a timely and cost-effective basis. The
development of our Web site, Dealer Real Time system and other proprietary
technology entails significant technical and business risks. We may not be
successful in using new technologies effectively or adapting our Web site,
Dealer Real Time system, or other proprietary technology to customer
requirements or to emerging industry standards.
WE ARE VULNERABLE TO INTERRUPTIONS OF OUR COMMUNICATIONS SYSTEMS.
We host our Web site and Dealer Real Time system at our corporate
headquarters in Irvine, California. Although we maintain redundant local offsite
backup servers, all of our primary servers are located at our corporate
headquarters and are vulnerable to interruption by damage from fire, earthquake,
flood, power loss, telecommunications failure, break-ins and other events beyond
our control. In the event that we experience significant system disruptions, our
business, results of operations and financial condition would be materially and
adversely affected. We have, from time to time, experienced periodic systems
interruptions and anticipate that such interruptions will occur in the future.
We maintain business interruption insurance which pays up to $6 million for the
actual loss of business income sustained due to the suspension of operations as
a result of direct physical loss of or damage to property at our offices.
However, in the event of a prolonged interruption, this business interruption
insurance may not be sufficient to fully compensate us for the resulting losses.
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<PAGE> 14
IF THE GROWTH IN THE USE OF THE INTERNET DECLINES, OUR BUSINESS MAY DECLINE.
The market for Internet-based purchasing services has only recently begun
to develop and is rapidly evolving. While many Internet commerce companies have
grown in terms of revenue, few are profitable. We can not assure that we will be
profitable. As is typical for a new and rapidly evolving industry, demand and
market acceptance for recently introduced services and products over the
Internet are subject to a high level of uncertainty and there are few proven
services and products. Moreover, since the market for our services is new and
evolving, it is difficult to predict the future growth rate, if any, and size of
this market.
The success of our services will depend upon the adoption of the Internet
by consumers and dealers as a mainstream medium for commerce. While we believe
that our services offer significant advantages to consumers and dealers, there
can be no assurance that widespread acceptance of Internet commerce in general,
or of our services in particular, will occur. Our success assumes that consumers
and dealers who have historically relied upon traditional means of commerce to
purchase or lease vehicles, and to procure vehicle financing and insurance, will
accept new methods of conducting business and exchanging information. In
addition, dealers must be persuaded to adopt new selling models and be trained
to use and invest in developing technologies. Moreover, critical issues
concerning the commercial use of the Internet, such as, ease of access,
security, reliability, cost, and quality of service, remain unresolved and may
impact the growth of Internet use. If the market for Internet-based vehicle
marketing services fails to develop, develops slower than expected or becomes
saturated with competitors, or if our services do not achieve market acceptance,
our business, results of operations and financial condition will be materially
and adversely affected.
THE PUBLIC MARKET FOR OUR COMMON STOCK MAY BE VOLATILE.
Prior to this offering, there has been no public market for our common
stock. We cannot assure that an active trading market will develop or be
sustained or that the market price of the common stock will not decline. Even if
an active trading market does develop, the market price of the common stock is
likely to be highly volatile and could be subject to wide fluctuations in
response to factors such as:
- actual or anticipated variations in our quarterly operating results,
- announcements of new product or service offerings,
- technological innovations,
- competitive developments,
- changes in financial estimates by securities analysts,
- conditions and trends in the Internet and electronic commerce industries,
- adoption of new accounting standards affecting the automotive industry,
and
- general market conditions and other factors.
Further, the stock markets, and in particular the Nasdaq National Market,
have experienced extreme price and volume fluctuations that have particularly
affected the market prices of equity securities of many technology companies and
have often been unrelated or disproportionate to the operating performance of
such companies. The trading prices of many technology companies' stocks are at
or near historical highs. We cannot assure that such high trading prices will be
sustained. These broad market factors may adversely affect the market price of
our common stock. In addition, general economic, political and market conditions
such as recessions, interest rates or international currency fluctuations, may
adversely affect the market price of the common stock. In the past,
13
<PAGE> 15
following periods of volatility in the market price of a company's securities,
securities class action litigation has often been instituted against companies
with public traded securities. Such litigation, if instituted, could result in
substantial costs and a diversion of management's attention and resources, which
would have a material adverse effect on our business, results of operations and
financial condition.
WE HAVE RISKS ASSOCIATED WITH CHANGING LEGISLATION IN THE AUTOMOTIVE INDUSTRY.
Our purchasing service may result in changing the way vehicles are sold
which may be viewed as threatening by new and pre-owned vehicle dealers who do
not subscribe to the Autobytel.com program. Such businesses are often
represented by influential lobbying organizations, and such organizations or
other persons may propose legislation which could impact the evolving marketing
and distribution model which our service promotes. Should current laws be
changed or new laws passed, our business, results of operations and financial
condition could be materially and adversely affected. As we introduce new
services, we may need to comply with additional licensing regulations and
regulatory requirements.
To date, we have not spent significant resources on lobbying or related
government affairs issues but we may need to do so in the future. A significant
increase in the amount we spend on lobbying or related activities would have a
material adverse effect on our results of operations and financial condition.
WE HAVE RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION.
We intend to expand our new vehicle purchasing service to foreign markets
through licensing our technology, business processes and tradenames and by
establishing relationships with vehicle dealers and strategic partners located
in foreign markets.
However, we have had limited experience in providing our Internet-based
marketing service abroad and we cannot be certain that we will be successful in
introducing or marketing our services abroad. In addition, there are certain
risks inherent in conducting business in international markets, such as:
- changes in political conditions,
- regulatory requirements,
- potentially weaker intellectual property protections,
- tariffs and other trade barriers, fluctuations in currency exchange
rates, potentially adverse tax consequences,
- difficulties in managing or overseeing foreign operations, and
- educating consumers and dealers who may be unfamiliar with the benefits
of online marketing and commerce.
One or more of such factors may have a material adverse effect on our current or
future international operations and, consequently, on our business, results of
operations and financial condition.
By expanding our operations to various other countries, we may become
subject to laws or treaties that regulate the marketing, distribution and sale
of motor vehicles. We will need to spend our resources to determine whether the
laws of the countries in which we seek to operate require us to modify, or
prohibit the use of, our Autobytel.com system. In addition, the laws of other
countries may impose licensing, bonding or similar requirements on us as a
condition to doing business therein.
14
<PAGE> 16
WE COULD FACE LIABILITY OR DISRUPTION FROM SECURITY BREACHES AND OTHER
ELECTRONIC PROBLEMS.
Our computer infrastructure is potentially vulnerable to physical or
electronic computer break-ins, viruses and similar disruptive problems and
security breaches. Any such problems or security breach could cause us to have
liability to one or more third parties and disrupt all or part of our
operations. Any of these events would have a material adverse effect on our
business, results of operations and financial condition. A party who is able to
circumvent our security measures could misappropriate proprietary information,
jeopardize the confidential nature of information transmitted over the Internet
or cause interruptions in our operations. Concerns over the security of Internet
transactions and the privacy of users could also inhibit the growth of the
Internet in general, particularly as a means of conducting commercial
transactions. To the extent that our activities or those of third party
contractors involve the storage and transmission of proprietary information such
as personal financial information, security breaches could expose us to a risk
of financial loss, litigation and other liabilities. Our insurance does not
currently protect against such losses.
WE DEPEND ON CONTINUED IMPROVEMENTS IN OUR SYSTEMS AND IN THE INTERNET.
If the Internet continues to experience significant growth in the number of
users and the level of use, then the Internet infrastructure may not be able to
continue to support the demands placed on it by such potential growth. The
Internet may not prove to be a viable commercial medium because of inadequate
development of the necessary infrastructure, timely development of complementary
products such as high speed modems, delays in the development or adoption of new
standards and protocols required to handle increased levels of Internet activity
or increased government regulation.
An unexpectedly large increase in the volume or pace of traffic on our Web
site or the number of orders placed by customers may require us to expand and
further upgrade our technology, transaction-processing systems and network
infrastructure. We may not be able to accurately project the rate or timing of
increases, if any, in the use of our Web site or expand and upgrade our systems
and infrastructure to accommodate such increases. In addition, we cannot assure
that our dealers will efficiently process purchase requests.
WE HAVE NO SPECIFIC PLAN FOR THE PROCEEDS OF THE OFFERING.
We currently have no specific plans for the net proceeds of the offering.
As a consequence, our management will have the discretion to allocate this
portion of the net proceeds of this offering to uses that the stockholders may
not deem desirable. We may not be able to invest these proceeds to yield a
significant return. Substantially all of the proceeds of the offering will be
invested in short-term, interest-bearing, investment grade securities for an
indefinite period of time.
OUR BUSINESS COULD BE INTERRUPTED BY YEAR 2000 PROBLEMS.
Because many computer applications have been written using two digits
rather than four to define the applicable year, date-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. This
"Year 2000 issue" could result in system failures or miscalculations causing
disruptions of operations, including disruptions of our Web site, the Dealer
Real Time system or normal business activities.
We cannot predict the extent to which the Year 2000 issue will affect our
vendors, consumers or dealers, or the extent to which we would be vulnerable if
such parties fail to
15
<PAGE> 17
resolve any Year 2000 issues on a timely basis. The failure of such parties
subject to the Year 2000 issue to convert their systems on a timely basis or
effect a conversion that is compatible with our systems could have a material
adverse effect on us. In addition, to the extent our customers are unable to
access our Web site or dealers are unable to access the Dealer Real Time system,
such failures would have a material adverse effect on our business, results of
operations, or financial condition.
The worst-case scenario related to the Year 2000 issue would be an overall
failure of the national Internet and telecommunications infrastructure. If this
failure were to prevent users and dealers from accessing the Internet, we would
attempt to provide alternative means to allow users to connect to our servers.
Any national disruption to the telecommunications systems used by our business
will have a material adverse effect on our business, results of operations, or
financial condition.
MISAPPROPRIATION OF OUR INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS COULD
IMPAIR OUR COMPETITIVE POSITION.
Our ability to compete depends upon our proprietary systems and technology.
While we rely on trademark, trade secret and copyright law, confidentiality
agreements and technical measures to protect our proprietary rights, we believe
that the technical and creative skills of our personnel, continued development
of our proprietary systems and technology, brand name recognition and reliable
Web site maintenance are more essential in establishing and maintaining a
leadership position and strengthening our brand. Despite our efforts to protect
our proprietary rights, unauthorized parties may attempt to copy aspects of our
services or to obtain and use information that we regard as proprietary.
Policing unauthorized use of our proprietary rights is difficult. We cannot
assure that the steps taken by us will prevent misappropriation of technology or
that the agreements entered into for that purpose will be enforceable.
Misappropriation of our intellectual property or potential litigation would have
a material adverse effect on our business, results of operations and financial
condition. Effective trademark, service mark, copyright and trade secret
protection may not be available in every country in which our products and
services are made available online. In addition, litigation may be necessary in
the future to enforce or protect our intellectual property rights or to defend
against claims or infringement or invalidity. As part of our confidentiality
procedures, we generally enter into agreements with our employees and
consultants and limit access to our trade secrets and technology.
OUR FOUNDERS, OFFICERS AND DIRECTORS AND THEIR AFFILIATES HAVE SUBSTANTIAL
CONTROL OF OUR VOTING STOCK.
The control of a large amount of our stock by insiders could have an
adverse effect on the market price of our common stock. Following this offering,
our executive officers and directors will beneficially own or control
approximately 5,753,954 shares or 30% of the outstanding shares of our common
stock. In addition, after this offering, our founders, Peter Ellis and John
Bedrosian will beneficially own or control approximately 20% and 17%,
respectively, of the outstanding shares of our common stock. If the
underwriters' over-allotment option is exercised in full, our founders will
beneficially own or control approximately 18% and 15%, respectively, of the
outstanding shares of our common stock. Our officers, directors, founders and
their affiliates will have the ability to control the election of our board of
directors and the outcome of corporate actions requiring stockholder approval,
including mergers and other changes of corporate control, going private
transactions and other extraordinary transactions.
16
<PAGE> 18
FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.
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 us to raise funds through equity offerings in the future. A
substantial number of outstanding shares of common stock and shares of common
stock issuable upon exercise of outstanding stock options will become available
for resale in the public market at prescribed times. Of the 17,858,745 shares to
be outstanding after the offering, the 4,500,000 shares offered hereby will be
eligible for immediate sale in the public market without restriction. Other
outstanding shares of common stock are subject to 180-day lock-up agreements
with the underwriters, and 6,565,112 shares held by the selling stockholders are
subject to 270-day lock-up agreements with the underwriters. Upon the expiration
of these lock-up agreements, such shares of common stock will become eligible
for sale in the public market, subject to the provisions of Rules 144 and 701
under the Securities Act, and any contractual restrictions on their transfer. BT
Alex. Brown Incorporated may, in its sole discretion and at any time without
notice, release all or any portion of the shares subject to lock-up agreements.
Upon completion of the offering, the holders of approximately 12,997,957 shares
of common stock will be entitled to certain registration rights with respect to
such shares until such time as the holders of such common stock may sell such
shares under Rule 144 of the Securities Act. In addition, we intend to register
the shares of common stock reserved for issuance under our 1996 Stock Option
Plan, 1996 Stock Incentive Plan, 1996 Employee Stock Purchase Plan, 1998 Stock
Option Plan and 1999 Stock Option Plan after the offering.
WE ARE UNCERTAIN OF OUR ABILITY TO OBTAIN ADDITIONAL FINANCING FOR OUR FUTURE
CAPITAL NEEDS.
We currently anticipate that the net proceeds of this offering, together
with our cash, cash equivalents and short-term investments, will be sufficient
to meet our anticipated needs for working capital and other cash requirements
for at least twelve months following the effective date of this prospectus. We
may need to raise additional funds sooner, however, in order to fund more rapid
expansion, to develop new or enhance existing services or products, to respond
to competitive pressures or to acquire complementary products, businesses or
technologies. There can be no assurance that additional financing will be
available on terms favorable to us, or at all. If adequate funds are not
available or are not available on acceptable terms, our ability to fund our
expansion, take advantage of potential acquisition opportunities, develop or
enhance services or products or respond to competitive pressures would be
significantly limited. Such limitation could have a material adverse effect on
our business, results of operations, financial condition and prospects.
OUR CERTIFICATE OF INCORPORATION AND BYLAWS AND DELAWARE LAW CONTAIN PROVISIONS
THAT COULD DISCOURAGE A THIRD PARTY ACQUISITION OF US.
Provisions of our amended and restated certificate of incorporation and
bylaws relating to our corporate governance could make it difficult for a third
party to acquire, and could discourage a third party from attempting to acquire
control of us. These provisions allow us to issue preferred stock with rights
senior to those of the common stock without any further vote or action by the
stockholders. These provisions, effective upon the closing of this offering,
provide that the board of directors will be divided into three classes, which
may have the effect of delaying or preventing changes in control or change in
our management because less than a majority of the board of directors are up for
election at each annual meeting. In addition, these provisions impose various
procedural and other
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<PAGE> 19
requirements which could make it more difficult for stockholders to effect
certain corporate actions. Such charter provisions could limit the price that
certain investors might be willing to pay in the future for shares of our common
stock and may have the effect of delaying or preventing a change in control. The
issuance of preferred stock also could decrease the amount of earnings and
assets available for distribution to the holders of common stock or could
adversely affect the rights and powers, including voting rights, of the holders
of the common stock.
We are also subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law. In general, the statute prohibits a publicly
held Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. For purposes of Section
203, a "business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the interested stockholder, and an
"interested stockholder" is a person who, together with affiliates and
associates, owns or did own 15% or more of the corporation's voting stock.
OUR ACTUAL RESULTS COULD DIFFER FROM FORWARD-LOOKING STATEMENTS IN THIS
PROSPECTUS.
This prospectus contains forward-looking statements based on current
expectations which involve risks and uncertainties. Our actual results could
differ materially from those anticipated in these forward-looking statements as
a result of many factors, including the risk factors set forth above and
elsewhere in this prospectus. The cautionary statements made in this prospectus
should be read as being applicable to all forward-looking statements wherever
they appear in this prospectus.
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<PAGE> 20
USE OF PROCEEDS
We estimate that the proceeds from the sale by us of the 3.5 million shares
of common stock offered hereby at an assumed initial public offering price of
$17.00 per share, after deducting estimated underwriting discounts and estimated
offering expenses, will be approximately $53.8 million. The selling stockholders
will receive $15.8 million from the sale of one million shares of common stock,
after deducting estimated underwriting discounts, and an additional $10.7
million if the underwriters' over-allotment option is exercised in full. We will
not receive any proceeds from the sale of common stock by the selling
stockholders. We intend to use all of the net proceeds from the offering for
general corporate purposes, which may include online and traditional advertising
programs designed to strengthen the Autobytel.com brand name, information
technology investments to support and further develop our Web site and Dealer
Real Time system and new products and services. We may use a portion of the
proceeds from the offering for possible acquisitions of or investments in
businesses, the introduction of products or technologies that expand, complement
or are otherwise related to our current or planned services. We have no current
plans, agreements or commitments with respect to any such transaction, and we
are not currently engaged in any negotiations with respect to any such
transaction. Pending such uses, we will invest the proceeds in short-term,
investment grade, interest-bearing securities.
DIVIDEND POLICY
We have never declared or paid cash dividends on our common stock. We
intend to retain all of our future earnings, if any, for use in our business,
and therefore we do not expect to pay any cash dividends on our common stock in
the foreseeable future.
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<PAGE> 21
CAPITALIZATION
The following table sets forth the actual capitalization of Autobytel.com
derived from our audited financial statements as of December 31, 1998. The as
adjusted capitalization of Autobytel.com as of December 31, 1998 set forth in
the following table reflects the conversion of all outstanding shares of
preferred stock into 5,852,290 shares of common stock and the sale by us of
3,500,000 shares of common stock pursuant to the offering at an assumed public
offering price of $17.00 net of estimated underwriting discounts and offering
expenses. The capitalization information set forth in the table below is
qualified by the more detailed Consolidated Financial Statements and Notes
thereto included elsewhere in this prospectus and should be read in conjunction
with such Consolidated Financial Statements and Notes. Our stated number of
common shares outstanding does not include 2,859,340 shares of common stock
issuable upon exercise of options at a weighted average exercise price of $10.87
per share and 773,133 shares of common stock issuable upon exercise of warrants
outstanding at a weighted average exercise price of $13.12 per share.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
--------------------------
AS
ACTUAL ADJUSTED
-------------- --------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents............................. $ 27,984 $ 81,754
======== ========
Stockholders' equity:
Convertible preferred stock, $0.001 par value;
11,445,187 shares authorized, 7,436,653 shares
issued and outstanding, actual; 11,445,187 shares
authorized, no shares issued and outstanding, as
adjusted............................................ 7 --
Common stock, $0.001 par value; 50,000,000 shares
authorized, 8,506,455 shares issued and outstanding,
actual; 50,000,000 shares authorized, 17,858,745
shares issued and outstanding, as adjusted(1)....... 8 18
Warrants.............................................. 1,332 1,332
Additional paid-in capital............................ 67,813 121,580
Cumulative translation adjustment..................... (19) (19)
Accumulated deficit................................... (43,273) (43,273)
-------- --------
Total stockholders' equity............................ 25,868 79,638
======== ========
Total capitalization.................................. $ 25,868 $ 79,638
======== ========
</TABLE>
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<PAGE> 22
DILUTION
The pro forma net tangible book value of Autobytel.com as of December 31,
1998 was $25.8 million or $1.80 per share of common stock. Pro forma net
tangible book value per share is equal to Autobytel.com's total tangible assets
less its total liabilities, divided by the number of shares of common stock
outstanding on a pro forma basis after giving effect to the conversion of the
preferred stock into 5,852,290 shares of common stock concurrent with the
closing of the offering. After giving effect to the sale of shares of common
stock offered hereby at an assumed initial public offering price of $17.00 and
the receipt by Autobytel.com of the estimated net proceeds therefrom, after
deducting estimated underwriting discounts and offering expenses, the pro forma
net tangible book value of Autobytel.com at December 31, 1998 would have been
$79.6 million, or $4.46 per share. This represents an immediate increase in pro
forma net tangible book value of $2.66 per share to existing stockholders and an
immediate dilution of $12.54 per share to new investors. The following table
illustrates this per share dilution:
<TABLE>
<S> <C>
Assumed initial public offering price per share............. $17.00
Pro forma net tangible book value per share before the
offering.................................................. $ 1.80
Increase per share attributable to purchases of common stock
offered hereby............................................ 2.66
------
Pro forma net tangible book value per share after the
offering.................................................. 4.46
Dilution per share to purchasers of common stock offered
hereby.................................................... $12.54
======
</TABLE>
The following table summarizes, as of December 31, 1998, the number of
shares of common stock purchased from Autobytel.com, the total consideration
paid to Autobytel.com and the average price per share paid by existing
stockholders and by the investors purchasing shares of common stock in this
offering, before deducting estimated underwriting discounts and estimated
offering expenses at an assumed public offering price of $17.00 per share:
<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE
-------------------- ---------------------- PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders........... 14,358,745 80.4 $ 68,033,000 53.3 $ 4.74
New investors................... 3,500,000 19.6 59,500,000 46.7 17.00
---------- ----- ------------ ----- ------
Total......................... 17,858,745 100.0 $127,533,000 100.0 $ 7.14
========== ===== ============ ===== ======
</TABLE>
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<PAGE> 23
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE 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, the
years ended December 31, 1996, 1997 and 1998 and the balance sheet data as of
December 31, 1995, 1996, 1997 and 1998 are derived from the Consolidated
Financial Statements of Autobytel.com which have been audited by Arthur Andersen
LLP, independent auditors, and are included elsewhere in this prospectus. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." We have calculated pro forma basic net loss per share assuming the
conversion of the outstanding preferred stock on their issue date into common
stock. The general and administrative expenses include a non-recurring $1.1
million charge associated with a proposed initial public offering that was
withdrawn in March 1997.
<TABLE>
<CAPTION>
INCEPTION
(JANUARY 31,
1995) TO YEARS ENDED DECEMBER 31,
DECEMBER 31, -------------------------------
1995 1996 1997 1998
------------- ------- -------- --------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................................... $ 274 $ 5,025 $ 15,338 $ 23,826
------- ------- -------- --------
Operating expenses:
Sales and marketing.............................. 930 7,790 21,454 30,033
Product and technology development............... 99 1,753 5,448 8,528
General and administrative....................... 275 1,641 5,851 5,908
------- ------- -------- --------
Total operating expenses...................... 1,304 11,184 32,753 44,469
------- ------- -------- --------
Loss from operations............................. (1,030) (6,159) (17,415) (20,643)
Other income, net................................ -- 124 620 1,280
------- ------- -------- --------
Loss before provision for income taxes........... (1,030) (6,035) (16,795) (19,363)
Provision for income taxes....................... -- -- 15 35
------- ------- -------- --------
Net loss......................................... $(1,030) $(6,035) $(16,810) $(19,398)
======= ======= ======== ========
Basic net loss per share........................... $ (0.12) $ (0.73) $ (2.03) $ (2.30)
======= ======= ======== ========
Shares used in computing basic net loss per
share............................................ 8,250 8,252 8,291 8,423
Pro forma basic net loss per share................. $ (0.12) $ (0.68) $ (1.53) $ (1.49)
======= ======= ======== ========
Shares used in computing pro forma basic net loss
per share........................................ 8,250 8,849 10,967 13,008
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
1998
DECEMBER 31,
--------------------------------------------- AS ADJUSTED
1995 1996 1997 1998 FOR THE OFFERING
------- ------- -------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................. $ 48 $ 9,062 $ 15,813 $ 27,984 $ 81,754
Working capital............................ (1,099) 5,977 10,938 23,436 77,206
Total assets............................... 285 12,298 20,513 34,207 87,977
Accumulated deficit........................ (1,030) (7,065) (23,875) (43,273) (43,273)
Stockholders' equity (deficit)............. (990) 7,996 13,259 25,868 79,638
</TABLE>
22
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONDITION
AND RESULTS OF OPERATIONS
The following discussion of the results of operations and financial
condition of Autobytel.com should be read in conjunction with our Consolidated
Financial Statements and Notes thereto included elsewhere in this Prospectus.
This discussion contains forward-looking statements based on current
expectations that involve risks and uncertainties. Actual results and the timing
of certain events may differ significantly from those projected in such
forward-looking statements due to a number of factors, including those set forth
in the section entitled "Risk Factors" and elsewhere in this Prospectus.
OVERVIEW
We are a leading, branded Internet site for new and pre-owned vehicle
information and purchasing services connecting consumers to our network of 2,718
participating dealers, as of December 31, 1998, in the United States and Canada.
Through our Web site, www.autobytel.com, consumers can research pricing,
specifications and other information regarding new and pre-owned vehicles. When
consumers indicate they are ready to buy, they can be connected to
Autobytel.com's network. In addition, we are continuing to develop ancillary
programs for consumers such as financing, insurance and warranty services. We
introduced our new vehicle marketing service in 1995, and in 1997 commenced our
CyberStore program.
Our revenues have increased from $274,000 in 1995 to $23.8 million in 1998.
We derive substantially all of our revenues from fees paid by subscribing
dealers, and we expect to be primarily dependent on our dealer network for
revenues in the foreseeable future. Dealers using our services pay an initial
subscription fee, as well as ongoing monthly fees based on the aggregation and
transmittal to them of purchase requests. Average monthly program fees per
dealer were $947, $785 and $557 in 1998, 1997 and 1996, respectively. We also
derive some revenue on a per transaction basis from facilitating transactions
between consumers and other third parties, primarily lenders and insurance
companies. We reserve the right to raise our fees to dealers after 30 days
notice.
Initial subscription fees from dealers are recognized ratably over the
first twelve months of each dealer's contract in order to match the costs of
integrating and training dealers with revenues earned. The monthly fee is
recognized in the period the service is provided. Amortized revenues from
initial subscription fees were $4.7 million, $4.9 million and $2.2 million in
1998, 1997 and 1996, respectively. We anticipate that our initial subscription
fee amortization revenue will decline as a percentage of total revenue over time
as monthly fee revenues continue to grow. As our dealer network grows in
absolute terms, the number of new dealers added as a percentage of total dealers
is growing at a slower pace. Therefore initial subscription fee revenue is
declining as a percentage of total revenue while monthly fee revenues is
growing. From October 1996 to February 1998, our revenues also included revenues
from sales of personal computers to our dealers, a practice we discontinued in
the first quarter of 1998. Our financial statements include revenues derived
from computer equipment sales of $197,000 in 1998, $1.5 million in 1997, and
$147,000 in 1996. Excluding these revenues, our revenues would have been $23.6
million, $13.8 million and $4.9 million in 1998, 1997 and 1996, respectively.
Although we do not derive any direct revenue from the volume of purchase
requests, we believe our ability to increase the number of subscribing dealers
and the amount of fees paid by dealers is related to the volume of purchase
requests routed through our Web site. Vehicle purchase requests routed through
our online system increased from approximately
23
<PAGE> 25
345,000 in 1996 to approximately 761,000 in 1997, an increase of 121%, and to
1.3 million in 1998, an increase of 71% over the previous year. Since inception
we have directed approximately 2.5 million purchase requests to dealers.
We believe that our revenue growth has been and will continue to be
primarily dependent on our ability to continue to drive a significant number of
purchase requests to our dealer network, increase the number of dealers and
increase the average fees paid by each dealer. Since inception, our dealer
network has expanded in each quarter and as of December 31, 1998 there were
2,718 dealers. Of these dealers, 2,386 dealers pay for our service and we call
them core dealers and 332 dealers do not pay for our service and we call them
non-core dealers. Our non-core dealers are generally associated with lower
volume vehicle manufacturers such as Jaguar or Suzuki or are located in remote,
low volume territories and receive purchase request referrals without paying
fees to us. We enter into agreements with non-core dealers to ensure the
broadest geographic coverage possible for every make of vehicle. Although the
net number of our dealers in the United States increased by 51% during 1998, 556
of our dealers were terminated or canceled during the same period. We believe
that the principal reasons for the dealer terminations were due to our
enforcement of our dealer network agreements and the cancellation of our fax
delivery of purchase requests in conjunction with the implementation of the
Dealer Real Time system. Our inability or failure to reduce dealer turnover
could have a material adverse effect on our business, results of operations and
financial condition.
Because our primary revenue source is from program fees, our business model
is significantly different from many existing Internet commerce sites. The
automobiles requested through our site are sold by individual dealers; therefore
we derive no direct revenue from the sale of a vehicle and have no significant
cost of goods sold, no procurement, carrying or shipping costs and no inventory
risk. The only cost of goods sold incurred by us since our inception was the
cost of computer equipment sold to dealers. We discontinued selling computer
equipment in the first quarter of 1998.
Sales and marketing costs consist primarily of promotion and advertising to
build brand awareness and encourage potential customers to go to our Web site.
Our sales and marketing expenses were $30.0 million, $21.5 million and $7.8
million in 1998, 1997 and 1996, respectively. We use Internet advertising, as
well as traditional media, such as television, radio and print. The majority of
our Internet advertising is comprised of sponsorship and partnership agreements
with Internet portals and advertising and marketing affiliations with online
automotive information providers. Also included in the sales and marketing
expenses are the costs associated with signing up new dealers and their ongoing
training and support. Sales and marketing costs are recorded as an expense in
the period the service is provided. Sales and marketing expenses have
historically fluctuated quarter-to-quarter due to varied levels of marketing and
advertising and we believe this will continue in the future.
24
<PAGE> 26
RESULTS OF OPERATIONS
The following table sets forth our results of operations as a percentage of
revenues:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................................... 100% 100% 100%
Operating expenses:
Sales and marketing.................................. 155 140 126
Product and technology development................... 35 36 36
General and administrative........................... 33 38 25
---- ---- ----
Total operating expenses..................... 223 214 187
---- ---- ----
Loss from operations................................. (123) (114) (87)
---- ---- ----
Other income, net...................................... 2 4 5
Loss before provision for income taxes............... (120) (110) (81)
---- ---- ----
Provision for income taxes............................. -- -- --
---- ---- ----
Net loss............................................. (120)% (110)% (81)%
==== ==== ====
</TABLE>
1998 COMPARED TO 1997
Revenues. Our revenues increased by $8.5 million, or 56%, to $23.8 million
in 1998, compared to $15.3 million in 1997. The growth in revenue in 1998 was
primarily attributable to an increase in the net core dealer count and a 21%
increase in the average fee charged to subscribing dealers. The net number of
core dealers increased by 743, or 45%, to 2,386 as of December 31, 1998,
compared to 1,643 as of December 31, 1997. Our financial statements include
revenues derived from computer sales, a practice we discontinued in the first
quarter of 1998, of $197,000 in 1998 and $1.5 million in 1997. Excluding our
revenue from the sale of computer equipment, our revenues increased by $9.8
million, or 71%, to $23.6 million in 1998 as compared to $13.8 million in 1997.
In 1998, we launched additional ancillary services such as Web site advertising
and warranties.
Sales and Marketing. Sales and marketing expenses primarily include
advertising and marketing expenses paid to our purchase request providers and
for developing our brand equity, as well as personnel and other costs associated
with sales, training and support of our dealer network. Sales and marketing
expense increased by $8.6 million, or 40%, to $30.0 million in 1998, compared to
$21.5 million in 1997. The increase was primarily due to a 91% increase in fees
related to information search aggregators resulting from higher purchase
requests and a 58% increase in other advertising to build brand awareness. We
expect to continue to increase our advertising and marketing budget in the
foreseeable future.
Product and Technology Development. Product and technology development
expense primarily includes personnel costs relating to enhancing the features,
content and functionality of our Web site and Dealer Real Time system, as well
as expenses associated with our telecommunications and computer infrastructure.
Product and technology development expense increased by $3.1 million, or 57%, to
$8.5 million in 1998, compared to $5.4 million in 1997. The increase was
primarily due to the additional staff and expenses related to Auto-By-Tel UK
Limited of $1.4 million in 1998.
25
<PAGE> 27
General and Administrative. General and administrative expense primarily
consists of executive, financial and legal personnel expenses and related costs.
General and administrative expense was $5.9 million in 1998 and 1997. Excluding
a non-recurring charge of $1.1 million associated with a proposed initial public
offering withdrawn in March 1997, general and administrative expense increased
by $1.1 million, or 23%, to $5.9 million in 1998, compared to $4.8 million in
1997. This increase is primarily due to additional executive and financial
personnel and rent due to expansion of facilities.
Other Income. Other income consists primarily of interest income. Other
income increased by $660,000, or 106%, to $1.3 million in 1998, compared to
$620,000 in 1997. This increase is primarily due to a $1.4 million gain realized
from the sale of Auto-by-Tel UK Limited to Inchcape Automotive Limited in
November 1998, offset in part by a $792,000 charge for the value of warrants
issued to Invision AG and Aureus Private Equity AG. Excluding these
non-recurring items, other income increased by $44,000, or 7%, to $664,000 in
1998 as compared to $620,000 in 1997. Interest income increased due to higher
cash balances from the sale of preferred stock in 1998.
Income Taxes. No provision for federal income taxes has been recorded as we
incurred net operating losses through December 31, 1998. As of December 31,
1998, we had approximately $37.1 million of federal and $18.4 million of state
net operating loss carry forwards that we believe are available to offset future
taxable income; such carry forwards expire in various years through 2018. Under
the Tax Reform Act of 1986, the amounts of and benefits from our net operating
losses carry forwards will likely be limited upon the completion of the initial
public offering due to a cumulative ownership change of more than 50% over a
three year period. Based on preliminary estimates, we believe the effect of such
limitation, if imposed, will not have a material adverse effect on our business,
results of operations and financial condition.
1997 COMPARED TO 1996
Revenues. Our revenues increased by $10.3 million, or 206%, to $15.3
million in 1997, compared to $5.0 million in 1996. The significant growth in
revenue in 1997 was primarily attributable to an increase in the net core dealer
count and a 41% increase in the average fee charged to subscribing dealers. The
number of core dealers increased by 437, or 36%, to 1,643 as of December 31,
1997, compared to 1,206 as of December 31, 1996. We started selling computer
equipment to our dealers during the last quarter of 1996 and these revenues were
$1.5 million in 1997 and $147,000 in 1996. Excluding our revenue from the sale
of computer equipment, our revenues increased by $9.0 million, or 184%, to $13.8
million in 1997, compared to $4.9 million in 1996. Also, we launched several new
ancillary services in 1997, including leasing, financing, credit union services
and the Mobalist Rewards program, which cumulatively represented less than 3% of
total revenues during 1997.
Sales and Marketing. Sales and marketing expense increased by $13.7
million, or 176%, to $21.5 million in 1997, compared to $7.8 million in 1996.
This increase is attributable primarily to the increase in advertising and
marketing costs associated with driving the growth of purchase requests. The
number of purchase requests increased by 121%. To a lesser degree this increase
was also due to growth in personnel and other expenses associated with sales
training and maintenance of our dealer channel.
Product and Technology Development. Product and technology development
expense increased by $3.7 million, or 206%, to $5.4 million in 1997, compared to
$1.8 million in
26
<PAGE> 28
1996. The increase in product and technology development expense was primarily
associated with adding additional product and technical staff.
General and Administrative. General and administrative expense increased by
$4.2 million, or 263%, to $5.9 million in 1997, compared to $1.6 million in
1996. The increase was primarily due to additional executive, financial and
legal personnel and related costs, as well as a non-recurring $1.1 million
charge associated with a withdrawn initial public offering in 1997. Excluding
this non-recurring charge, general and administrative expense increased by $3.1
million, or 194%, to $4.8 million in 1997, compared to $1.6 million in 1996.
Other Income. Other income, which primarily consists of interest income,
increased by $496,000, or 400%, to $620,000 in 1997, compared to $124,000 in
1996. Interest income increased due to higher cash balances from the sale of
preferred stock in 1997.
27
<PAGE> 29
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth quarterly statement of operations data for
the eight quarters ended December 31, 1998. This quarterly information has been
derived from our unaudited financial statements and, in our opinion, includes
all adjustments necessary for a fair presentation of the information for the
periods covered. The quarterly data should be read in conjunction with our
Consolidated Financial Statements and the notes thereto. The operating results
for any quarter are not necessarily indicative of the operating results for any
future period.
INCOME STATEMENT FOR THE THREE MONTHS ENDED
(unaudited in thousands)
<TABLE>
<CAPTION>
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1997 1997 1997 1998 1998 1998 1998
-------- -------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES.......................... $ 3,063 $ 3,414 $ 4,293 $ 4,568 $ 4,632 $ 5,405 $ 6,462 $ 7,327
Operating expenses:
Sales and marketing............. 6,675 4,683 4,436 5,660 8,459 5,470 8,320 7,784
Product and technology
development................... 1,103 1,394 1,496 1,455 1,895 1,969 2,352 2,312
General and administrative...... 1,823 1,216 1,079 1,733 1,346 1,190 1,480 1,892
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses...... 9,601 7,293 7,011 8,848 11,700 8,629 12,152 11,988
------- ------- ------- ------- ------- ------- ------- -------
Loss from operations............ (6,538) (3,879) (2,718) (4,280) (7,068) (3,224) (5,690) (4,661)
------- ------- ------- ------- ------- ------- ------- -------
Other income, net................. 165 114 147 194 185 163 153 779
Loss before provision for income
taxes......................... (6,373) (3,765) (2,571) (4,086) (6,883) (3,061) (5,537) (3,882)
------- ------- ------- ------- ------- ------- ------- -------
Provision for income taxes........ 11 4 -- -- 15 10 6 4
------- ------- ------- ------- ------- ------- ------- -------
Net loss........................ $(6,384) $(3,769) $(2,571) $(4,086) $(6,898) $(3,071) $(5,543) $(3,886)
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
PERCENTAGE OF REVENUE FOR THE THREE MONTHS ENDED
(unaudited)
<TABLE>
<CAPTION>
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1997 1997 1997 1998 1998 1998 1998
-------- -------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues........................... 100% 100% 100% 100% 100% 100% 100% 100%
Operating expenses:
Sales and marketing.............. 218 137 103 124 183 101 129 106
Product and technology
development.................... 36 41 35 32 41 36 36 32
General and administrative....... 60 36 25 38 29 22 23 26
---- ---- --- --- ---- --- --- ---
Total operating expenses....... 313 214 163 194 253 160 188 164
---- ---- --- --- ---- --- --- ---
Loss from operations............. (213) (114) (63) (94) (153) (60) (88) (64)
---- ---- --- --- ---- --- --- ---
Other income, net.................. 5 3 3 4 4 3 2 11
Loss before provision for income
taxes.......................... (208) (110) (60) (89) (149) (57) (86) (53)
---- ---- --- --- ---- --- --- ---
Provision for income taxes......... -- -- -- -- -- -- -- --
---- ---- --- --- ---- --- --- ---
Net loss......................... (208)% (110)% (60)% (89)% (149)% (57)% (86)% (53)%
==== ==== === === ==== === === ===
</TABLE>
Revenues. Growth in our dealer network and increases in fees and the sale
of ancillary products and services have resulted in a compounded quarterly
growth in revenue of 13% over the last eight quarters of operations. Revenue
growth is primarily associated with program fees and, to a lesser extent, new
product offerings. Between the quarters ended December 31, 1996 and March 31,
1998, we recognized revenues associated with computer systems sold to dealers.
After the introduction of the current Dealer Real Time system in February 1998,
we discontinued the sale of computer equipment. Our financial statements include
non-recurring revenue for the Dealer Real Time system hardware sales
28
<PAGE> 30
and other non-recurring items of $147,000 in 1996, $2.2 million in 1997, and
$197,000 in 1998.
Sales and Marketing. We have increased spending on sales and marketing
every year since our inception. The increase in sales and marketing spending
accelerated after we completed our Series A preferred stock offering of $15.0
million in August 1996. We launched an aggressive advertising campaign, and in
the quarters ended March 31, 1997 and 1998, we aired a television advertisement
during the Super Bowl at a cost of approximately $1.3 million and $1.5 million,
respectively. Additionally, in the quarter ended December 31, 1997, we entered
into several Internet branding and purchase request generation contracts,
including contracts with Excite. From October 1996 through February 1998, we
incurred expenses of approximately $1.6 million associated with the sale of
computer equipment to support the old Dealer Real Time system. Such expenses
were included in sales and marketing. These computer sales were discontinued in
February 1998. We have generally increased the number of sales and marketing
personnel each quarter.
Product and Technology Development. Product and technology development has
generally risen on a dollar basis since our inception. The primary cause for the
increase in product and technology development expenses is the addition of
personnel to develop the technology infrastructure and new programs for our
dealers and Internet consumers.
General and Administrative. The quarter ended March 31, 1997 includes
approximately $1.1 million in previously capitalized legal, accounting and other
direct costs associated with a proposed initial public offering that was
withdrawn in March 1997. In the quarter ended December 31, 1997, general and
administrative expenses included legal, severance and bonuses incurred during
the period.
To date, quarter to quarter growth in our revenues have offset any effects
due to seasonality. However, we expect our business to experience seasonality as
it matures, reflecting seasonal fluctuations in the automotive industry,
Internet and commercial online service usage and advertising expenditures. We
anticipate that purchase requests will typically increase during the first and
third quarters when new vehicle models are introduced and will typically decline
during the second and fourth quarters. Internet and commercial online service
usage and the growth rate of such usage may be expected typically to decline
during the summer. In addition, our advertising costs in traditional media, such
as broadcast and cable television, generally decline in the first and third
quarters of each year. Depending on the extent to which the Internet and
commercial online services are accepted as an advertising medium, seasonality in
the level of advertising expenditures could become more pronounced for
Internet-based advertising. Seasonality in the automotive industry, Internet and
commercial online service usage, and advertising expenditures is likely to cause
fluctuations in our operating results and could have a material adverse effect
on our business, operating results and financial condition.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations primarily from the
issuance of shares of preferred stock, which through December 31, 1998 totaled
$67.9 million, comprised of $15.0 million raised in August 1996, $9.1 million
raised in January 1997, $13.0 million raised in October 1997, $0.5 million
issued in exchange for advertising in April 1998, $5.0 million raised in May
1998, $0.6 million issued in exchange for advertising in October 1998, $5
million raised in November 1998 and $19.7 million raised in December 1998. As of
December 31, 1998, we had approximately $28.0 million in cash and cash
equivalents.
29
<PAGE> 31
Net cash used in operating activities increased to $16.3 million in 1998
from $13.5 million in 1997 and $3.6 million in 1996. The increases in the net
cash used in operating activities resulted primarily from increased sales and
marketing, product development and general and administrative expenditures
related to expanding our infrastructure. Also, working capital was used to
finance accounts receivable, prepaid expenditures and other assets, offset
partially by increased deferred revenue.
Net cash used in investing activities decreased to $1.1 million in 1998
from $1.8 million in 1997 and increased to $1.8 million in 1997 from $1.5
million in 1996. The net cash used in investing activities resulted primarily
from purchases of property and equipment consisting of computer hardware,
telecommunications equipment, furniture and leasehold improvements.
Net cash provided by financing activities increased to $29.6 million in
1998 from $22.0 million in 1997 and $14.1 million in 1996. The net cash provided
by financing resulted primarily from the issuance of preferred stock.
We believe our current cash and cash equivalents, excluding proceeds from
this offering, will be sufficient to meet our anticipated cash needs for working
capital and capital expenditures for at least the next 12 months. With respect
to years beyond fiscal 1999, we may be required to raise additional capital to
meet our long term operating requirements. Although we have grown our revenues
consistently since inception, our expenses have continued to and in the
foreseeable future are expected to exceed our revenues. Accordingly, we do not
expect to be able to fund our operations from internally generated funds for the
foreseeable future. Our cash requirements depend on several factors, including
the level of expenditures on marketing and advertising, the rate of market
acceptance, the ability to expand our customer base and increase the volume of
purchase requests, the cost of contractual arrangements with online information
providers, search engines and other referral sources, and other factors. The
timing and amount of such working capital requirements cannot accurately be
predicted. If capital requirements vary materially from those currently planned,
we may require additional financing sooner than anticipated. We have no
commitments for any additional financing, and there can be no assurance that any
such commitments can be obtained on favorable terms, if at all. Any additional
equity financing may be dilutive to our stockholders, and debt financing, if
available, may involve restrictive covenants with respect to dividends, raising
capital and other financial and operational matters which could restrict our
operations or finances. If we are unable to obtain additional financing as
needed, we may be required to reduce the scope of our operations or our
anticipated expansion, which could have a material adverse effect on our
business, results of operations and financial condition.
YEAR 2000 ISSUES
Because many computer applications have been written using two digits
rather than four to define the applicable year, some date-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. This
"Year 2000 issue" could result in system failures or miscalculations causing
disruptions of operations, including disruptions of our Web site, the Dealer
Real Time system or normal business activities.
We do not believe that we have material exposure to the Year 2000 issue
with respect to our own information systems since our existing systems correctly
define the Year 2000 with four digits. We are currently taking two actions to
mitigate the risk and exposure of the Year 2000 issue:
30
<PAGE> 32
1. We are in the process of obtaining confirmation from all of our
third-party vendors that they have resolved their Year 2000 issues.
These third-party vendors can be categorized as follows:
A. information technology systems
- computer hardware vendors
- computer software vendors
- network communications vendors
- data suppliers vendors
B. non-information technology systems
- landlord who oversees the facilities and utilities
- building security company
We expect to receive replies to our Year 2000 requests from third-party
vendors by second quarter 1999. Approximately 10% of the third-party
vendors have responded with a statement of compliance either displayed on
their Web site or furnished in hard copy format. These vendors who have
already responded represent the most critical vendors in our business.
2. We are implementing a test lab environment to simulate the Year 2000
rollover with hardware, software, network communications vendors and
certain key data suppliers.
Based on the test results, if any vendor was found to be non-compliant, our
contingency plan is to first attempt to find a replacement vendor, and if no
replacement can be found, to assist such vendor in becoming Year 2000 compliant.
If we cannot effectively assist such vendor in becoming Year 2000 compliant, we
plan to set up a front-end application to screen all non-compliant data or to
receive the data and modify it so that the data is Year 2000 compliant. We plan
to establish our front-end application screen in the third quarter of 1999.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." This statement, adopted by us in the first quarter of
1998, requires companies to report a new measurement of income. Comprehensive
income (loss) is to include foreign currency translation gains and losses and
other unrealized gains and losses that have historically been excluded from net
income (loss) and reflected instead in equity. Currently, no material
differences exist between our net income or loss and comprehensive net income or
loss.
In March 1998, the American Institute of Certified Public Accounts (AICPA)
issued Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained For Internal Use," which is effective for fiscal
years beginning after December 15, 1998. SOP No. 98-1 provides guidance on
accounting for the costs of computer software developed or obtained for internal
use and defines specific criteria that determine when such costs are required to
be expensed, and when such costs may be capitalized. Management believes the
adoption of SOP 98-1 will not have a material effect on our consolidated
financial statements.
In April 1998, the AICPA issued SOP 98-5, "Reporting the Costs of Start-up
Activities," which will be adopted by us in the beginning of our fiscal year
beginning January 1, 1999. SOP No. 98-5 provides guidance on the financial
reporting of start-up
31
<PAGE> 33
costs and organization costs and requires such costs to be expensed as incurred.
We believe the adoption of SOP 98-5 will not have a material effect on our
financial statements.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which will be adopted by us in our fiscal
year beginning January 1, 2000. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments by requiring every derivative
instrument to be recorded in the balance sheet as a liability or an asset at
fair market value. Any changes to a derivatives fair market value must be
recognized currently in earnings unless specific hedge accounting criteria are
met. We do not have any derivative instruments or undertake any hedging
activities and do not anticipate doing so, therefore the adoption of SFAS No.
133 will not have a material effect on our financial statements.
32
<PAGE> 34
BUSINESS
OVERVIEW
We are a leading, branded Internet site for new and pre-owned vehicle
information and purchasing services. Through our Web site, www.autobytel.com,
consumers can research pricing, specifications and other information regarding
new and pre-owned vehicles. When consumers indicate they are ready to buy, they
can be connected to Autobytel.com's network of over 2,700 participating dealers
in North America, with each dealer representing a particular vehicle make.
Dealers participate in our network by entering into non-exclusive contracts with
us. We expect our dealers to promptly provide a haggle-free, competitive offer.
In addition, consumers can apply for and receive insurance, financing, leasing
and warranty proposals as well as other services and information through our Web
site. We believe that our services provide benefits for consumers by supplying
them with information to make an informed and intelligent vehicle purchasing
decision and by directing consumers to dealers, whom we expect to provide a
competitive price. In addition, our services are intended to reduce our dealers'
costs by directing to them large volumes of purchase requests from potential
consumers who have already indicated their intent to buy, thereby enabling
dealers to lower their marketing, advertising and personnel costs while
enhancing sales productivity. We provide our services free of charge to
consumers and derive substantially all of our revenues from fees paid by
participating dealers.
We introduced our new vehicle purchasing services in May 1995 and our
Certified Pre-Owned CyberStore in April 1997. Our new vehicle purchasing service
enables consumers to shop for and select a new vehicle through our Web site by
providing research on new vehicles such as pricing, features, specifications and
colors. When consumers indicate they are ready to buy, they can complete a
purchase request online. The CyberStore allows consumers to search for a
pre-owned vehicle according to the price, make, model, color, year and location
of the vehicle. The CyberStore locates and displays the description, location
and actual photograph of all vehicles that satisfy the consumer's search
parameters. The dealers in our network use our online information platform, the
Dealer Real Time system, which provides dealers with immediate purchase request
information for new and pre-owned vehicles, the ability to track customers and
purchase requests, and other value-added features, including automatic uploading
of pre-owned vehicle inventory into our database. In addition, Autobytel.com
offers a number of automotive finance and insurance services in conjunction with
strategic partners, including automobile financing through Chase, GE Capital and
Provident Bank, automotive insurance through member companies of the American
International Group and extended warranty service through New Hampshire
Insurance Company, a member company of the American International Group.
BACKGROUND
Growth of the Internet and Online Commerce. The Web and online services
have emerged as significant global communications and commercial media enabling
millions of people worldwide to share information, communicate and conduct
business electronically. International Data Corporation estimates that the
number of Web users worldwide will grow from approximately 69 million in 1997 to
approximately 320 million by 2002. This growth is driven by a number of factors
including the large and growing base of installed personal computers in the home
and workplace, the decreasing cost of personal computers, easier, faster and
cheaper access to the Internet, the distribution of broadband applications,
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the proliferation of Internet content and the increasing familiarity and
acceptance of the Internet by businesses and consumers.
The growth in the use of the Internet has also led to a rapid growth of
online commerce. Web commerce sites are enabling businesses to target and manage
a broad customer base and establish and maintain ongoing direct customer
relationships. As a growing number of businesses and information providers have
begun marketing on the Web, it has rapidly become a medium in which consumers
can access a vast amount of information regarding the pricing, quality and
specification of products. Additionally, online transactions can be faster, less
expensive and more convenient than transactions conducted in person or even over
the telephone. According to International Data Corporation, the total value of
goods and services purchased worldwide over the Internet will increase from
approximately $12.4 billion in 1997 to approximately $425 billion in 2002.
The Automotive Vehicle Market. Automotive dealers operate in localized
markets and face significant state regulations and increasing business
pressures. These fragmented markets, with over 49,000 dealers in aggregate, are
characterized by:
- a perceived overabundance of dealerships,
- competitive sales within regional markets,
- increasing advertising and marketing costs that continue to reduce dealer
profits,
- high-pressure sales tactics with consumers, and
- large investments by dealers in real estate, construction, personnel and
other overhead expenses.
In addition, consumers have traditionally entered into the highly
negotiated sales process with relatively little information regarding
manufacturer's costs, leasing costs, financing costs, relative specifications
and other important information. Buying a vehicle is considered to be one of the
most significant purchases a United States consumer makes. According to CNW
Marketing/Research, over $657 billion and $667 billion was spent on new and
pre-owned vehicles in the United States representing the sale of over 60.0 and
60.3 million vehicles in 1997 and 1998, respectively. Although automotive
retailing attracts significant consumer dollars, we believe that consumers
associate the traditional vehicle buying experience with high-pressure sales
tactics.
THE AUTOBYTEL.COM SOLUTION
We believe that our online products and services improve the vehicle
purchasing process for both consumers and dealers. We offer consumers an
information-rich Web site, numerous tools to configure this information, and a
quality fulfillment experience. As part of the fulfillment experience, we expect
our dealers to provide competitive price quotes for new and pre-owned vehicles.
We believe our services enable dealers to reduce personnel and marketing costs,
increase consumer satisfaction, increase customer volume, and expand dealer
territories.
Benefits to Consumers. Our Web site provides consumers free of charge
up-to-date specifications and pricing information on vehicles. In addition, our
consumers gain easy access to valuable automotive information, such as dealer
invoice pricing and the AutoBuyTools(TM) services which consist of a lease
calculator, a loan calculator to determine monthly payments and a lease or buy
decision tool. Our database of articles allows consumers to perform online
library research by accessing documents such as weekly
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automotive reports, consumer reviews and manufacturer brochures. Various
automotive information service providers, such as Edmund's, Kelley Blue Book,
Pace Publication's Carprice.com, and IntelliChoice, are also aggregated on
Autobytel.com's Web site to assist consumers with specific vehicle and related
automotive decisions such as insurance and financing. Armed with such
information, the consumer should be more confident and capable of making an
informed and intelligent vehicle buying decision.
We expect our dealers to provide competitive price quotes for new and
pre-owned vehicles. By providing dealers with a large number of consumers
through quality purchase requests, we believe that we can help our dealers to
lower their operating costs due to higher sales volume. We believe that lowering
their operating costs allows dealers to offer more competitive prices.
We believe we offer consumers a significantly different vehicle purchasing
experience from that of traditional methods. Consumers using the Autobytel.com
system are able to shop for a vehicle, and make financing and insurance
decisions from the convenience of their own home or office. We expect dealers to
provide consumers a haggle-free price quote and a high level of customer
service. We form our dealer relationships after careful analysis of automotive
sales and demographic data in each region. We seek to include in our dealer
network the largest and highest quality dealers within defined territories. Our
strategy to be the leading Internet-based vehicle information and purchasing
service depends on our ability to provide consumers with a quality experience.
Benefits to Dealers. Autobytel.com benefits dealers by reducing the
dealers' incremental personnel and marketing costs, increasing consumer
satisfaction and increasing consumer volume. Through our investment in national
advertising and brand recognition of Autobytel.com, we attract consumers to our
Web site and direct them to dealers in their local area. We believe this
provides dealers access to a larger number of prequalified consumers without
increasing their advertising costs. Dealers' personnel costs should be reduced
because we provide dealers access to potential purchasers who have completed
their research and should be ready to buy or lease a vehicle. As a result,
reaching these consumers and selling or leasing them vehicles costs the dealer
little or no additional overhead expense other than the fees paid to us and the
personnel costs of a dedicated Autobytel.com manager. Through our Dealer Real
Time system, we provide dealers with on-site technology to better track sales,
inventory, customer solicitations, responses and other communications.
By providing consumers a quality fulfillment experience, we seek to provide
Autobytel.com dealers a large number of consumers, allowing them to compete more
effectively. Our solution includes an expanding network of over 2,700
participating dealers in the United States and Canada representing every major
domestic and imported make of vehicles and light trucks. Because a single
dealership location may hold multiple manufacturer franchises, the dealership
may represent more than one dealer in the Autobytel.com network.
To increase each dealer's incentive to participate in the Autobytel.com
system, we allocate each dealer an exclusive geographic territory based upon
specific vehicle make. A territory allocated by us to a dealer is generally
larger than a territory assigned to a dealer by a manufacturer. By granting
dealers exclusivity within a geographic area, we intend to assure dealers of a
large enough volume of quality purchase requests to lower their operating costs.
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Our Web Site. Because Web sites can be continually updated and provide a
large quantity of quality information, we believe the Internet offers the most
efficient medium for consumers to learn about and shop for vehicles. The
Internet's global reach to consumers allows us to leverage our investment in
branding and marketing across a very large national and international audience
to create qualified purchase requests for vehicles. For these reasons, we also
believe that the Internet represents the most efficient method of directing
purchase requests to local markets and dealers.
We currently provide the following services on our Web site:
[Chart depicting programs and services accessible to Internet consumers through
Autobytel.com]
STRATEGY
Our primary objective is to be the leading global Internet brand for
vehicle information and purchasing services. We intend to achieve this objective
through the following principal strategies:
Continue to Build Brand Equity. We believe that due to our focus on both
online and offline marketing, we have created one of the leading brand names in
our sector. We intend to continue aggressively to market and advertise to
enhance our brand recognition with consumers. We believe that continuing to
strengthen brand awareness of the Autobytel.com name among consumers is critical
to attract vehicle buyers, increase purchase requests and, in turn, increase the
size of our dealer base. We intend to continue advertising on the Internet and
through traditional media, such as television, radio and printed publications.
Ensure the Highest Quality Consumer Experience. We believe that consumer
satisfaction and loyalty is heavily influenced by the consumer's experience with
our site and with our dealers. In order to enhance our appeal to consumers, we
intend to continue
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developing our Web site by enhancing vehicle information, as well as building
new features such as personalization, auto maintenance reminders and consumer
reviews. As part of our continuing effort to enhance our Web site technology and
features, we have entered into strategic co-development relationships, with
Intel and Cow Inc. to improve our interactive dealer training. In addition, we
plan to continue compiling high quality content from third party sources on our
site, including information from Edmund's, IntelliChoice, Carprices.com and
Kelley Blue Book. We believe that consumer satisfaction with the vehicle
purchasing experience is also essential to our success and the differentiation
of our services from those of our competitors. We intend to continue to invest
in our dealer training and support services to ensure a consistent, high-quality
alternative to the traditional vehicle buying process.
Increase Purchase Requests. We believe that increasing the volume and
quality of purchase requests directed from our Web site to our dealer network is
crucial to the long-term growth and success of our business. By augmenting the
volume of quality purchase requests, we expect to attract additional dealers to
our network, increase fees paid by dealers, and solidify our relationships with
participating dealers. Our strategy for increasing traffic to our site and the
number of purchase requests includes forming and maintaining online sponsorships
and partnerships with Internet portals, such as Excite, and with Internet
automotive information providers, such as Edmund's. As part of our strategy to
improve the quality of purchase requests, we continue to expand the breadth and
depth of information and services available through our Web site to insure that
well informed, ready-to-buy consumers are directed to participating dealers.
Expand and Improve Dealer Network. We believe that strengthening the size
and quality of our dealer network is important to the success and growth of our
business. We believe our network of over 2,700 dealers is one of the largest in
the Internet-based vehicle purchasing industry. Our strategy is to increase the
size of our dealer network by attracting new dealers and strengthening
relationships with existing dealers by:
- increasing the volume and quality of purchase requests,
- advertising in trade publications aimed at dealers and participating in
industry trade shows,
- maintaining our extensive training and support program to participating
dealers, and
- providing our Dealer Real Time system to all participating dealers.
Invest in Ancillary Online Services. We believe that expanding our services
to both consumers and dealers will be critical to establishing ourselves as the
premier provider of online automotive services in the future. Our strategy is to
continue to invest in ancillary services, particularly in the CyberStore and
warranty, finance and insurance services. We also intend to use the Dealer Real
Time system to launch value added services for our dealer network, including
allowing dealers to offer accessories and aftermarket products directly through
the Autobytel.com Web site. We have recently begun to sell advertising on our
Web site and expect to expand this business during 1999. We plan to launch an
auction-based, online program for our dealers who sell pre-owned vehicles. We
are also seeking opportunities to market the information contained in our
databases.
Expand Internationally. We intend to continue our international expansion
through licensing agreements and partnering with local strategic partners. We
have established licensing arrangements with strategic partners such as Inchcape
Motors and Bilia AB in the United Kingdom and Scandinavia, respectively. In
addition, we have entered into
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agreements with Invision AG and Aureus Private Equity AG to obtain their
assistance in meeting potential strategic partners who will assist us in
establishing national operating companies throughout the rest of Europe using
Autobytel.com vehicle marketing systems. We are currently exploring additional
opportunities in Asia and Latin America.
PRODUCTS, PROGRAMS AND SERVICES
New Vehicle Purchasing Service. Our new vehicle marketing service enables
consumers to shop for and select a new vehicle through our Web site by providing
research on new vehicles such as pricing, features, specifications, colors, etc.
When consumers indicate they are ready to buy, a consumer can complete a
purchase request online, which specifies the type of vehicle and accessories the
consumer desires, along with the consumer's contact information. The purchase
request is then routed by us to the nearest participating dealer that sells the
type of vehicle requested, and we promptly return an e-mail message to the
consumer with the dealership's name and phone number and the name of the
Autobytel.com manager at the dealership. Dealers agree in their contracts to
contact the consumer within 24 hours of receiving the purchase request with a
firm, haggle-free price quote for the requested vehicle. When consumers complete
a purchase, they usually take delivery of their vehicle at the dealership
showroom. Generally, within ten days of the submission of a consumer's purchase
request, we contact the consumer again by e-mail to conduct a quality assurance
survey that allows us to evaluate the sales process at participating dealers and
improve the quality of dealer service.
The Autobytel.com network has grown to 2,718 dealers as of December 31,
1998. These dealers represent every major domestic and imported make of vehicle
and light truck sold in the United States and Canada. Core dealerships are
charged initial subscription fees and on-going fees, principally on a monthly
basis, to participate in our dealer network.
Certified Pre-Owned CyberStore. We launched our CyberStore program in April
1997. The CyberStore allows consumers to search for a pre-owned vehicle
according to specific search parameters such as the price, make, model, mileage,
year and location of the vehicle. CyberStore locates and displays the
description, location and actual digital photograph of all vehicles that satisfy
the search parameters. The consumer can then complete a formal purchase request
for a specific vehicle and is contacted by the dealer to conclude the sale. To
be listed in the CyberStore a pre-owned vehicle must first pass a 135-point
inspection, be covered by a 72-hour money-back guarantee and be covered by a
three-month, 3,000-mile warranty, which is honored nationally by all CyberStore
dealers. We charge each vehicle dealer that participates in the CyberStore
program a separate additional monthly fee. The CyberStore program uses the
Dealer Real Time system to provide participating dealers online purchase
requests shortly after submission by consumers as well as the ability to track
their inventory on a real-time basis.
Ancillary Customer Services. We offer a number of ancillary services that
we market to consumers through our Web site and the linked Web sites of
participating partners such as Chase, GE Capital, Provident Bank and member
companies of the American International Group. We make purchase and lease
financing available to consumers through various Autobytel.com financing
programs offered by Chase, GE Capital and Provident Bank that allow consumers to
research and apply for vehicle financing online in a secure manner. Consumers
can apply for a loan or lease online at the time they submit their purchase
request for either a new or pre-owned vehicle. Consumers are able to arrive at
the dealership with their loan pre-approved, their credit verification documents
in hand, and the loan paperwork waiting for them. We believe that the
convenience of pre-approved
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purchase or lease financing, combined with a firm, competitive price, enables
dealers more easily to consummate purchase requests. Lenders to whom
Autobytel.com refers customers pay us an origination fee for most loans and the
dealership is compensated by the lender for each loan made to an Autobytel.com
consumer through either an origination fee or a limited rate participation fee.
We currently market financing through Chase, GE Capital and Provident Bank.
We provide a link on our Web site to an online insurance application
program offered by the American International Group on behalf of its member
companies through which consumers submit requests for insurance quotes and
obtain approval. The types of insurance products offered through this link
include automobile liability and property damage coverage. Our agreement with
the American International Group provides that we receive fees based on a
percentage of the net premiums earned and collected by the member companies of
the American International Group on all policies issued to Autobytel.com
consumers who obtain insurance through our Web site link.
We offer critical information concerning all aspects of owning and leasing
new and pre-owned vehicles that we believe makes our Web site a valuable
resource to consumers. AutoBuyTools(TM), a service on our Web site, consists of
a lease calculator, a loan calculator to determine monthly payments and a lease
or buy decision tool.
The Dealer Real Time System. In 1997, we launched a new, proprietary
technology and software system called the Dealer Real Time system. The Dealer
Real Time system is an Internet-based communications platform that gives dealers
a competitive advantage compared to delivering purchase requests by fax. A
fax-based system has the following inherent inefficiencies: it is susceptible to
system delays, has a less effective purchase request and inventory tracking
system and it is difficult to control the distribution of purchase requests.
Such inefficiencies include the delay of delivering faxes to salesmen and the
uncertainty of response time to consumers related to this delivery.
Using Internet technology, the Dealer Real Time system enables the dealer
to:
- instantaneously access a consumer's vehicle purchase request as soon as
the consumer submits it online,
- track all interaction with the consumer,
- send e-mail to consumers using a variety of predetermined templates,
- input used vehicle inventory information for immediate display to
consumers on the Autobytel.com web page,
- track dealership performance through a series of reports available
online,
- access Autobytel.com "news" and product information online, and
- contact Autobytel.com technical support personnel via e-mail links.
In March 1998, as part of our new Dealer Agreement, we began requiring our
dealers to use the Dealer Real Time system, and have converted substantially all
of our dealers to the Dealer Real Time system.
Loyalty Rewards Program (ABT Mobalist). To attract new customers prior to
their next vehicle purchase and encourage repeat business from our existing
customers, we began to offer consumers in April 1998 an affinity program called
Mobalist Rewards. To date, our affinity marketing partners include Virtual
Vineyards, Inc. and Uniglobe Travel Online, Inc. This program allows members to
earn credits toward the purchase price of a new or pre-owned vehicle through our
service. Members earn credits by purchasing products and services from
Autobytel.com's retail partners and also by using a credit card
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co-branded with the Autobytel.com trademark to make purchases. We earn a
commission each time these services or the affinity program services are used.
Planned Online Auction Services. We plan to launch an auction-based
program designed to streamline the process of wholesale buying and selling of
pre-owned vehicles over the next year. Through this program, we expect that our
dealers will be able to place online bids for pre-owned vehicles directly to the
wholesaler, eliminating associated distribution costs.
INTERNATIONAL ACTIVITIES
We intend to expand our new vehicle marketing service to foreign markets
through licensing agreements and by establishing relationships with vehicle
dealers and strategic partners located in foreign markets. As of December 31,
1998, approximately 161 Canadian dealerships belonged to our network. We have
entered into an agreement with Auto-By-Tel UK Limited, an affiliate of Inchcape
Motors, the United Kingdom's largest independent automobile distributor, to
license our technology, business processes and trade names in the United
Kingdom, as well as provide maintenance and development for such technology. We
have also entered into similar arrangements with Auto-By-Tel AB, an affiliate of
Bilia AB, to license our technology, business processes, and trade names in
Sweden, Norway, Denmark and Finland. Under the terms of our agreement with
Auto-by-Tel UK Limited and Auto-By-Tel AB we received an annual maintenance fee
and will receive an initial license fee. We intend to enter into similar
relationships with strategic partners in other countries that have attractive
automobile markets. In addition, we have entered into agreements with Aureus
Private Equity AG and Invision AG to obtain their assistance in meeting
potential strategic partners who will assist us in establishing national
operating companies throughout the rest of Europe using Autobytel.com vehicle
marketing systems.
MARKETING AND SALES
Our ability to enhance our brand name recognition, domestically and
internationally, and position ourselves as a leading Internet-based vehicle
information and purchasing services provider is critical to our efforts to
increase the number of vehicle purchase requests and requests for ancillary
services, as well as the number and quality of subscribing dealerships. We have
invested approximately $60 million to date in sales, marketing and
communications activities. Over the past several years, we have been the subject
of numerous newspaper, magazine, radio and television stories. Articles about
our new vehicle program have appeared in Business Week, Fortune, Forbes, Time,
and the Wall Street Journal, among other publications. Television stories
featuring us have been aired nationally on NBC Today, NBC Nightly News and CNN.
We believe that ongoing media coverage is an important element in creating
consumer awareness of the Autobytel.com brand name and has contributed to
dealership awareness of, and participation in, our programs.
We have established marketing and advertising programs with many of the
leading automotive information providers on the Internet, including Edmund's,
IntelliChoice and Kelley Blue Book which help direct traffic to our Web site and
increase purchase requests. Our agreements with automotive information providers
typically have terms ranging from one to five years. Our Kelly Blue Book
agreement calls for a monthly payment based on the number of times their
visitors click on our links. Our position with Kelly Blue Book is not an
exclusive arrangement.
Edmund's is our single largest referral service. In 1997 and 1998,
approximately 49% and 34%, respectively, of our total purchase requests
originated from Edmund's. This
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percentage decreased to 29% for the last quarter of 1998. Our agreement with
Edmund's, pursuant to which we receive referrals from Edmund's Web site, is
scheduled to expire July 31, 2000. Edmund's has agreed to recommend or refer
visitors to its Web site only to us and no other competitive online marketing
program with respect to new vehicles, although Edmund's may refer prospective
buyers directly to automotive manufacturers' Web sites and dealer locator
services. We expect Edmund's Web site to account for a significant number of
purchase requests for the foreseeable future. We pay Edmund's a monthly fee
based on a per purchase request basis. We pay IntelliChoice both a monthly fee
for the use of its data and a fee for each purchase request. Our arrangement
with them is not exclusive, as they provide data to other Web sites.
We endeavor to position ourselves as the leading vehicle and related
services purchasing program by affiliating ourselves with online services and
Internet portals. We believe that our presence on these Internet sites helps to
increase purchase request volume and will remain a key element of our future
business. For example, we have agreements with AT&T Corp., Classifieds2000,
Excite and Lycos that provide as follows:
- We pay AT&T a monthly fee to insert our branded content on their site
which includes a car purchasing link enabling their visitors to send us
purchase requests.
- Our contract with Classifieds2000 provides that we pay a monthly fee as
well as a fee for each purchase request it sends us for the number of
users who submit purchase requests after having visited its site.
Moreover, it includes our pre-owned vehicle inventory in its classified
listings. In return we provide it with a link on our site where owners
can list their cars for sale directly. Our arrangement with
Classifieds2000 is exclusive.
- Our agreement with Excite covering its auto channel provides that we pay
Excite a monthly fee as well as a fee for each purchase request it sends
us. The agreement provides us with exclusivity in their Auto channel. Our
agreement with Netscape's NetCenter auto channel is through Excite which
manages NetCenter for Netscape. The payment terms are similar in nature
to our deal directly with Excite's auto channel.
- Our agreement with Lycos in its "New" automotive channel is based on a
quarterly fee. The agreement provides us with exclusivity in their "New"
automotive area.
We are also working with MediaOne to develop and deliver our broadband
service offering. Broadband allows the Internet to deliver content and services
at faster speeds through high capacity coaxial cable networks. We believe that
the broadband opportunity is becoming an increasingly important focus within the
Internet industry, and we intend to enhance our presence using this technology.
We supplement our Internet presence with television and traditional print
advertising. Our initial marketing focus was on computer user and hobbyist
publications and major automotive magazines. In late 1996, we began to broaden
our marketing efforts with a campaign to accelerate consumer awareness of the
Autobytel.com brand name and drive traffic to our Web site through cable
television advertisements featured on CNN and CNET, Inc. and network television
advertisements featured on NBC and MSNBC. As part of our branding efforts, we
aired a 30-second commercial during the broadcast of the Super Bowl in both 1997
and 1998. We expect to continue to use television advertising to strengthen our
brand awareness.
In addition to our consumer-oriented marketing activities, we also market
our programs directly to dealerships, participate in trade shows, advertise in
trade publications
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and major automotive magazines and encourage subscribing dealerships to
recommend our program to other dealerships.
INTELLECTUAL PROPERTY
We have the registered service mark Auto-By-Tel and have applied for the
registered service marks Autobytel.com, AutoBuyTools, Certified Pre-Owned
CyberStore, Kre8.net and Dealer Real Time. The Autobytel.com logo is a service
mark and trademark for which we have applied for federal registration.
DEALER RELATIONSHIPS AND SERVICES
Dealer Network. Dealers participate in our network by entering into
contracts with us. Our dealerships are located in most major metropolitan areas
in the United States and Canada and we believe they are generally leaders in
their respective markets. As of December 31, 1998, our participating dealership
base totaled 2,718 dealers, consisting of 2,386 core dealers and 332 non-core
dealers. Core dealerships are franchises with typically high volume vehicle
sales such as Ford or Toyota. These dealerships pay initiation and monthly fees
to subscribe to our online marketing program. Both the initial and monthly
subscription fees are established in the contract and are based upon many
business factors including the type and location of the franchise. We reserve
the right to raise our fees to dealers after 30 days notice. Non-core dealers
are typically franchises of lower-volume vehicle manufacturers such as Jaguar or
Suzuki or are located in remote, low volume territories, and receive purchase
request referrals from us without paying us either initial or monthly
subscription fees. We enter into agreements with non-core dealers to ensure the
broadest geographic coverage possible for the make of vehicle represented by the
non-core dealer. We do not prevent dealers from entering into agreements with
our competitors.
Customer Support. We actively monitor subscribing dealers through ongoing
customer surveys, and research conducted by our internal dealer support group.
Generally, within ten days after a consumer submits a purchase request through
our Web site, we re-contact the consumer by e-mail requesting completion of a
quality assurance survey on our Web site that allows us to evaluate the sales
process at participating dealers. Dealerships that fail to abide by our program
guidelines or who receive repeated consumer complaints are generally reviewed
and, if appropriate, terminated. In return for requiring a high level of
consumer service, we assign participating dealerships exclusive territories. We
try to assign dealers attractive territories in order to increase participation
in our program.
Our dealer agreements are cancelable by either party on 30 days notice.
Each dealer agreement obligates the dealers to adhere to our policy of providing
prompt responses to customers, no haggle pricing practices and full disclosure
regarding vehicle availability, add-ons and related matters. We require each
dealer to have an Autobytel.com manager whose principal responsibility is
supervising our system, similar to the way in which most dealers have a new
vehicle sales manager, pre-owned vehicle sales manager and service and parts
department managers who are responsible for those dealership functions. We
reserve the right to reduce or modify each dealer's assigned territory after the
first six months, although there can be no assurance that a dealer whose
territory is reduced or modified will not contest such a change or terminate its
subscription. In addition, dealers whose territories are reduced or modified by
us may sue us in an effort to prevent the change or recover damages. We have
experienced one such suit. See "-- Litigation."
Training. We believe that traditional dealers and their employees require
specialized training to learn the skills necessary to serve the Internet user
and take full advantage of
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our proprietary Dealer Real Time system. Therefore, we have developed an
extensive training program for our dealers. We believe that this training is
critical to enhancing the Autobytel.com brand and reputation. We require
participating dealerships to have their representatives trained on our system.
Training is conducted at our headquarters in Irvine, California, at regional
training centers and at dealerships' premises. Training is currently provided to
the dealers at no additional cost. In training our dealers, we de-emphasize
traditional vehicle selling techniques and emphasize the Autobytel.com approach.
To increase consumer satisfaction and reduce costs, we seek to discourage
dealerships from using commissioned and multiple salespersons to interface with
our customers.
COMPETITION
We believe that the principal competitive factors affecting the market for
Internet-based vehicle marketing services include:
- successful marketing and establishment of national brand name
recognition,
- ease of use, speed and quality of service execution,
- the size and effectiveness of the participating dealership base,
- the volume and quality of traffic to and purchase requests from a Web
site,
- the ability to introduce new services in a timely and cost-effective
manner.
- technical expertise,
- customer satisfaction, and
- competitive dealer pricing.
Our vehicle purchasing services compete against a variety of Internet and
traditional vehicle buying services and automotive brokers. In the
Internet-based market, we compete with other entities which maintain similar
commercial Web sites including Autoweb.com, Cendant's AutoVantage, General
Motors' BuyPower, Microsoft's CarPoint and Stoneage Corporation. Republic
Industries has also announced its intention to create a Web site for marketing
vehicles. We also compete indirectly against vehicle brokerage firms and
affinity programs offered by several companies, including Costco Wholesale
Corporation and Wal-Mart Stores, Inc.
We compete with vehicle insurers, lenders and lessors as well as individual
dealerships. Such companies may already maintain or may introduce Web sites
which compete with ours. We cannot assure that we can compete successfully
against current or future competitors, many of which have substantially more
capital, resources and access to additional financing than we do, nor can there
be any assurance that competitive pressures faced by us will not result in
increased marketing costs, decreased Web site traffic or loss of market share or
otherwise will not materially and adversely affect our business, results of
operations and financial condition. We compete primarily on brand name
recognition acquired through early entry into the Internet-based automotive
purchase referral market and through customer and dealer satisfaction.
OPERATIONS AND TECHNOLOGY
We believe that our future success is significantly dependent upon our
ability to continue to deliver a high-performance and reliable Web site, enhance
consumer/dealer communications, maintain the highest levels of information
privacy and ensure transactional security. We host our Web site at our corporate
headquarters in Irvine, California. We currently contract the services of two
nationally established Internet service providers to connect our systems with
the Internet. Our primary provider supplies two-thirds of our capacity to
connect with the Internet and our secondary provider supplies the remaining
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<PAGE> 45
third. Our primary servers are housed in one climate-controlled, raised floor
computer room with back-up power systems. We use industry-standard computers and
equipment in our network. Network security is provided by utilizing standard
products.
System enhancements are primarily intended to accommodate increased traffic
across our Web site, improve the speed in which purchase requests are processed
and introduce new and enhanced products and services. System enhancements entail
the implementation of sophisticated new technology and system processes.
FACILITIES
Our operations are principally located in a single office building in
Irvine, California. We occupy three full floors, each consisting of
approximately 12,000 square feet, which are leased through August 2001. We have
options to renew the leases on each floor for an additional 5-year term. We also
lease office space in Houston, Texas, consisting of less than 5,000 square feet
through one of our subsidiaries, Kre8.net, Inc., an Internet software company
for dealer Web site design and systems backup. In order to replace their
existing leased space, we have recently entered into a lease agreement for
office space in Houston consisting of 9,000 square feet, which Kre8.net plans to
move into in the second quarter of 1999.
GOVERNMENT REGULATION
Currently few laws or regulations have been adopted that apply directly to
Internet business activities. The adoption of additional local, state, national
or international laws or regulations may decrease the growth of Internet usage
or the acceptance of Internet commerce.
We believe that our dealer marketing services do not constitute franchising
or vehicle brokerage activity in such a way that subjects us to federal and
state franchise, motor vehicle dealer, or vehicle broker licensing laws.
However, if individual state regulatory requirements change or additional
requirements are imposed on us, we may be required to modify our service
programs in such a state in a manner which may undermine our program's
attractiveness to consumers or dealers.
If we are required by a state to be licensed as a vehicle broker and we
determine that the licensing and related requirements are overly burdensome, we
may elect to terminate operations in such a state.
In the event a state deems that we are acting as a vehicle broker, we may
be required to comply with burdensome licensing requirements of such state or
terminate operations in such state. As we introduce new services, we may need to
comply with additional licensing regulations and regulatory requirements.
Our marketing service may result in changes in the way vehicles are
currently sold or may be viewed as threatening by new and pre-owned vehicle
dealers who do not subscribe to the Autobytel.com program. Such businesses are
often represented by influential lobbying organizations, and such organizations
or other persons may propose legislation that, if adopted, could impact our
evolving marketing and distribution model, which our service promotes.
We expect to expand our operations to other countries that may have laws or
be subject to treaties that regulate the marketing, distribution, and sale of
vehicles. As we consider specific foreign operations, we will need to determine
whether the laws of the countries in which we seek to operate require us to
modify our program or otherwise change the Autobytel.com system or prohibit the
use of the system in such country
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<PAGE> 46
entirely. In addition, the laws of a foreign country may impose licensing,
bonding or similar requirements on us as a condition to doing business there.
To date, we have not expended significant resources on lobbying or related
government affairs issues but may be required to do so in the future.
Franchise Classification. If our relationship or written agreement with our
dealers was found to be a "franchise" under federal or state franchise laws, we
could be subjected to additional regulations, including but not limited to
licensing, increased reporting and disclosure requirements. Compliance with
varied laws, regulations, and enforcement characteristics found in each state
may require us to allocate both staff time and monetary resources, each of which
may have an adverse affect on our results of operations. As an additional risk,
if our dealer relationship or subscription agreement is determined to establish
a franchise, we may be subject to limitations on our ability to quickly and
efficiently effect changes in our dealer relationships in response to changing
market trends, which may negatively impact our ability to compete in the
marketplace.
We believe that neither our relationship with our subscribing dealers nor
our dealer subscription agreements themselves constitute "franchises" under
federal or state franchise laws. This belief has been challenged but upheld by a
Federal District Court in Michigan that ruled our business relationship and our
dealer subscription agreement does not rise to the level of a "franchise" under
Michigan law.
Vehicle Broker. If government licensing and enforcement authorities
determine our business operations to be subject to state motor vehicle brokering
laws, we may be required to apply for and obtain a motor vehicle brokers
license. As additional risk, we may be subject to administrative monetary fees,
fines, and penalties for failure to comply with such licensing requirements.
We believe that we are not subject to the coverage of state and motor
vehicles dealer or broker licensing laws. We believe that our dealer marketing
service model does not qualify as an automobile brokerage activity and therefore
state broker licensing requirements do not apply to us.
In response to concerns about our marketing program raised by the Texas
Department of Transportation, we modified our marketing program in that state to
achieve compliance. These modifications included a unique pricing model under
which all subscribing dealerships in Texas are charged uniform fees based on the
population density of their particular geographic area and to make our program
open to all dealerships who wish to apply.
In the event that any other state's regulatory requirements impose state
specific requirements on us or include us within an industry-specific regulatory
scheme, we may be required to modify our marketing programs in such states in a
manner which may undermine the program's attractiveness to consumers or dealers.
In the alternative, if we determine that the licensing and related requirements
are overly burdensome, we may elect to terminate operations in such state. In
each case, our business, results of operations and financial condition could be
materially and adversely affected.
Loan Broker. We provide a connection through our Web site that allows a
consumer to obtain finance information and loan approval. We do not demand nor
do we receive any fees from consumers for this service. We do receive fees from
participating lenders. We currently hold financial broker licenses in the states
of Florida, Indiana, Rhode Island, and Wisconsin and have applied for renewals
in California and Colorado. In the event other
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<PAGE> 47
states require us to be licensed, we intend to obtain such licenses. We may be
unable to comply with a state's regulations affecting our current operations or
newly introduced services, or we could be required to incur significant fees and
expenses to license or be compelled to discontinue finance operations in those
states.
Insurance Agent. We provide access through a link from our Web site to a
Web site owned and maintained by American International Group. Persons visiting
our Web site whom access the Web site maintained by American International Group
may obtain insurance directly from its member companies. We receive fees from
American International Group for allowing the American International Group's Web
site to be accessed from ours. We receive no premiums from consumers nor do we
charge consumers fees for our services. All applications are completed on
American International Group's Web site and at no time do we receive the secure
data found on the applications.
We do not believe that our activity requires us to be licensed under state
insurance laws. The use of the Internet in the marketing of insurance products,
however, is a relatively new practice. It is not clear whether or to what extent
state insurance licensing laws apply to activities similar to ours. Given this
aforementioned uncertainty, we elected to proactively apply for and currently
hold insurance agent licenses in California, Indiana, Nebraska, New Jersey, and
Utah. We have also applied for insurance agent licenses in all remaining states
that license corporations as insurance agents and are awaiting approvals.
EMPLOYEES
As of December 31, 1998, we had a total of 180 employees. We also utilize
independent contractors for software and hardware development and certain
administrative activities. None of our employees are represented by a labor
union. We have not experienced any work stoppages and consider our employee
relations to be good.
LITIGATION
Jerome-Duncan Ford, a Michigan dealership, first subscribed to our new
vehicle marketing program in June 1996. In January 1997, we sought to replace
the existing agreement with our new standard subscription services agreement and
realign Jerome-Duncan Ford territory. Jerome-Duncan Ford objected to the
realignment and ceased payment of its monthly subscription fee to us. Unable to
resolve the matter, we terminated Jerome-Duncan Ford's subscription Dealer
Agreement. Jerome-Duncan Ford then sued us in Michigan State Court and sought an
injunction to prevent us from cancelling Jerome-Duncan Ford's subscription
services agreement. Jerome-Duncan Ford based its action on Michigan franchise
law which prohibits a franchiser from terminating a franchisee without good
cause. We removed the case to federal court. In late June 1997, the federal
district court ruled in favor of us and denied the injunction. The court held
that Jerome-Duncan Ford showed insufficient evidence of a likelihood of success
on the merits involving claims of breach of Michigan franchise law. The Court
found that no franchise existed. We thereafter moved for summary judgment on the
franchise issues.
In late 1997, the court granted our motion for summary judgment and held
that our subscription services agreement and method of operation did not
constitute a franchise under Michigan state law. The plaintiffs have appealed
the ruling.
Halrec, Inc., a California based Toyota dealership, first subscribed to our
new vehicle marketing program in October 1996 and subsequently to our financing
program. On November 13, 1998, Halrec sued us in Superior Court, County of Santa
Clara, California for, among other things, restraint of trade, intentional
misrepresentation and unfair
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<PAGE> 48
competition claiming that we wrongfully awarded to other car dealers geographic
territories that were contractually the property of Halrec. We believe Halrec's
claims are without merit and are vigorously defending ourselves against their
claims.
From time to time, we are involved in other litigation matters relating to
claims arising out of the ordinary course of business. We are involved in at
least one such case currently, including one seeking punitive damages. We
believe that there are no claims or actions pending or threatened against us,
the ultimate disposition of which would have a material adverse effect on our
business, results of operations and financial condition. However, if a court or
jury rules against us and the ruling is ultimately sustained on appeal and
damages are awarded against us that include punitive damages, such ruling could
have a material and adverse effect on our business, results of operations and
financial condition.
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<PAGE> 49
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information with respect to the
executive officers and directors of Autobytel.com. Our audit committee consists
of Mr. Fuchs, Mr. Coats and Mr. Kaplan. Our compensation committee consists of
Mr. Fuchs, Mr. Coats and Mr. Orton.
<TABLE>
<CAPTION>
OFFICERS AND DIRECTORS AGE POSITION
---------------------- --- --------
<S> <C> <C>
Michael J. Fuchs.......................... 52 Chairman of the Board and Director
Mark W. Lorimer........................... 39 Chief Executive Officer, President and
Director
Robert S. Grimes.......................... 54 Executive Vice President and Director
Hoshi Printer............................. 57 Senior Vice President and Chief
Financial Officer
Ann M. Delligatta......................... 51 Executive Vice President and Chief
Operating Officer
Jeffrey H. Coats.......................... 41 Director
Mark N. Kaplan............................ 69 Director
Kenneth J. Orton.......................... 47 Director
Peter Titz................................ 45 Director
Richard A. Post........................... 40 Director
</TABLE>
Michael J. Fuchs was elected as a director of Autobytel.com in September
1996 and became Chairman in June 1998. Mr. Fuchs was Chairman and Chief
Executive Officer of Home Box Office, a Division of TimeWarner Entertainment
Company, L.P., a leading pay-television company, from October 1984 until
November 1995, and Chairman and Chief Executive Officer of Warner Music Group, a
Division of Time Warner Inc., from May 1995 to November 1995. Mr. Fuchs holds a
B.A. from Union College and a J.D. from the New York University School of Law.
Mr. Fuchs is a member of the board of directors of IMAX Corp., Wink
Communications, Inc. and Consolidated Cigar Holdings Inc.
Mark W. Lorimer joined Autobytel.com in December 1996 as Vice President,
General Counsel and Secretary, and was promoted to Executive Vice President and
Chief Operating Officer in May 1997. In May 1998, Mr. Lorimer was promoted to
President. He was elected a director and appointed Chief Executive Officer of
Autobytel.com in June 1998. From January 1996 to November 1996, Mr. Lorimer was
a partner and, from March 1989 to January 1996, was an associate with the law
firm of Dewey Ballantine LLP. Mr. Lorimer is a member of the board of directors
of IMC Mortgage Company. Mr. Lorimer holds a B.S. in Speech from Northwestern
University and a J.D. from the Fordham University School of Law.
Robert S. Grimes has been a director of Autobytel.com since inception and
has served as Executive Vice President since July 1996. Since September 1987,
Mr. Grimes has been President of R.S. Grimes & Co., Inc., a private investment
company. From April 1981 to March 1987, Mr. Grimes was a partner with the
investment firm of Cowen & Company. Mr. Grimes holds a B.S. from the Wharton
School of Commerce and Finance at the University of Pennsylvania and an L.L.B.
from the University of Pennsylvania Law School. Mr. Grimes has served on the
board of directors of Philips International Realty Corp., a New York Stock
Exchange listed company, since April 1998.
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<PAGE> 50
Hoshi Printer joined Autobytel.com in January 1999 as Senior Vice President
and Chief Financial Officer. From June 1996 to December 1998, Mr. Printer served
as Vice President, Finance and Administration, Chief Financial Officer and
Secretary of Peerless Systems Corporation, a software technology company. From
July 1995 to May 1996, Mr. Printer was Chief Financial Officer of Neuron Data
Inc., a software technology company. From July 1994 to June 1995 Mr. Printer
served as Chief Financial Officer of Soane Technologies Inc., a polymer
technology company. From January 1990 to June 1994, Mr. Printer was Chief
Financial Officer of Catalytica Inc., an environmental technology company. Mr.
Printer also worked at Xerox Corporation for over 17 years as Vice President of
Finance and in 1976 served as a consultant to the White House for the
President's Reorganization project on cash management. Mr. Printer holds a B.E.
in mechanical engineering and a B.E. in electrical engineering from Poona
University in India, an M.S. in industrial engineering from Oklahoma State
University and an M.B.A. from Stanford University.
Ann M. Delligatta joined Autobytel.com in June 1997 as Senior Vice
President and Chief Technology Officer and was promoted to Executive Vice
President and Chief Operating Officer in July 1998. From September 1996 to June
1997, Ms. Delligatta was President and Chief Executive Officer of the Pharos
Group, an information technology consulting organization. From January 1987 to
September 1996, Ms. Delligatta held a number of managerial positions at TRW
Inc.'s TRW Information Systems and Services Group, most recently as Vice
President and General Manager/Information Technology Services. Ms. Delligatta
attended Mount St. Mary's College and was named by McGraw-Hill Companies as one
of the "Top 100 Women in Computing in 1996" in recognition of her success in the
alignment of business and technology strategies.
Jeffrey H. Coats was elected a director of Autobytel.com in August 1996.
Mr. Coats has served as Managing Director of GE Equity Capital Group, Inc., a
wholly-owned subsidiary of General Electric Capital Corporation, a significant
stockholder in us, since April 1996. He has also held various positions, most
recently as Managing Director, of GE Capital Corporate Finance Group, Inc., a
wholly-owned subsidiary of General Electric Capital Corporation, from June 1987
to April 1993. From March 1994 to April 1996, Mr. Coats served as President of
Maverick Capital Equity Partners, LLC, and from April 1993 to January 1994, Mr.
Coats was a partner with Veritas Capital, Inc., both of which are investment
firms. Mr. Coats holds a B.B.A. in Finance from the University of Georgia and a
Masters in International Management in Finance from the American Graduate School
of International Management. Mr. Coats is a director and Chairman of the Board
of The Hastings Group, Inc., a privately-held clothing retailer, which on
October 23, 1995, filed a voluntary petition under Chapter 11 of the Bankruptcy
Code and confirmed a plan of liquidation in late 1997. Mr. Coats became a
director of The Hastings Group in connection with Maverick Capital Equity
Partners' purchase of the assets of the predecessor of The Hastings Group in a
previous bankruptcy proceeding. Mr. Coats is a member of the board of directors
of Wink Communications, Inc. and of Krause's Furniture, Inc., a publicly-held
company.
Mark N. Kaplan was elected as a director of Autobytel.com in June 1998. Mr.
Kaplan has been a member of the law firm Skadden, Arps, Slate, Meagher & Flom
LLP since 1979. Mr. Kaplan serves on the board of directors of the following
companies whose shares are publicly traded: American Biltrite, Inc., Congoleum
Corporation, Inc., DRS Technologies, Inc., Grey Advertising, Inc., MovieFone,
Inc., REFAC Technology Development Corporation, and Volt Information Services,
Inc. Mr. Kaplan holds an A.B. from Columbia College and a J.D. from Columbia Law
School.
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<PAGE> 51
Kenneth J. Orton was elected a director of Autobytel.com in June 1998. Mr.
Orton is currently a director, and through February 1999 Mr. Orton was the
President and Chief Executive Officer, of Preview Travel, Inc., which he joined
in April 1994 as President and Chief Operating Officer. From September 1989 to
March 1994, Mr. Orton was Vice President and General Manager of the San
Francisco division of Epsilon, a database marketing firm and a wholly owned
subsidiary of American Express Company. Prior to his employment with Epsilon,
Mr. Orton was Vice President of MARC Inc., a market research and database
marketing company, and Vice President of Sales and Marketing for Future
Computing. Mr. Orton also serves as a director of ONSALE, Inc., a publicly-held
company. Mr. Orton received a B.A. from California State University, Fullerton.
Peter Titz was elected a director of Autobytel.com in January 1999. Mr.
Titz is a manager of Metro International Dienstleistung Beteiligungs AG and
Invision AG. Before joining Metro and Invision AG in 1989, Mr. Titz was managing
director of various institutions in the financial service sector including
American Express in Frankfurt where he was responsible for the introduction of
automatic teller machines and the installation of POS systems in Europe. Mr.
Titz received a degree in engineering from the University of Aachen and a degree
in economics from the University of Bonn. Mr. Titz is President of the board of
directors of Aureus Private Equity AG and Deutsche Media AG and is a member of
the board of directors of Teleclip AG.
Richard A. Post was elected a director of Autobytel.com in February 1999.
Mr. Post is Executive Vice President and Chief Financial Officer of MediaOne
Group, Inc. and president of MediaOne Capital Corp., a subsidiary of MediaOne
Group, Inc. Mr. Post joined US WEST Financial Services in April 1988 as manager
of Corporate Development and was promoted in 1990, first to executive director,
and then to vice president, responsible for all Capital Asset Group businesses.
From June 1996 to January 1997, he was president of Corporate Development at US
WEST, Inc. where he had responsibility for corporate development efforts at US
WEST Communications, as well as US WEST, Inc. US WEST, Inc. has since split into
two separate corporations, MediaOne Group, Inc. and US WEST. From December 1995
to June 1996, he served as vice president of Corporate Development for US WEST
Media Group, a division of the former US WEST, Inc. Mr. Post holds both a
business administration degree and an MBA from Delta State University. Mr. Post
is a member of the board of directors of Financial Security Assurance Holdings,
Inc., a financial guaranty company based in New York.
BOARD COMPOSITION
The board of directors has currently authorized eight members of whom two
are to be elected by the holders of series A preferred stock pursuant to
Autobytel.com's certificate of incorporation. Mr. Coats and Mr. Fuchs are the
designees of the series A preferred stock to the board of directors. The rights
of the series A preferred stockholders will expire upon the consummation of this
offering. Members of the board of directors are elected each year at our annual
meeting of stockholders, and serve until the following annual meeting of
stockholders or until their respective successors have been elected and
qualified.
In accordance with the terms of Autobytel.com's restated certificate of
incorporation, effective upon the closing of this offering, the terms of office
of the board of directors will be divided into three classes: the Class I term
will expire at the annual meeting of stockholders to be held in 1999; the Class
II term will expire at the annual meeting of stockholders to be held in 2000;
and the Class III term will expire at the annual meeting of stockholders to be
held in 2001. The Class I directors will be Mr. Lorimer, Mr. Titz
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<PAGE> 52
and Mr. Post, the Class II directors will be Mr. Kaplan and Mr. Orton and the
Class III directors will be Mr. Grimes, Mr. Fuchs and Mr. Coats. At each annual
meeting of stockholders after the initial classification, the successors to
directors whose term will then expire will be elected to serve from the time of
election and qualification until the third annual meeting following election. In
addition, our restated certificate of incorporation provides that the authorized
number of directors shall be designated by the bylaws of Autobytel.com. Any
additional directorships resulting from an increase in the number of directors
will be distributed among the three classes so that, as nearly as possible, each
class will consist of one-third of the directors. This classification of the
board of directors may have the effect of delaying or preventing changes in
control or management of Autobytel.com. Directors of Autobytel.com may be
removed, with or without cause, by the affirmative vote of the holders of a
majority of the shares entitled to vote at an election of directors. There are
no family relationships among any of the directors and executive officers of
Autobytel.com.
BOARD COMMITTEES
The audit committee consists of Mr. Coats, Mr. Fuchs and Mr. Kaplan. The
audit committee makes recommendations to the board of directors regarding the
selection of independent public accountants, reviews the results and scope of
the audit and other services provided by Autobytel.com's independent public
accountants and reviews and evaluates our control functions.
The compensation committee consists of Mr. Coats, Mr. Fuchs and Mr. Orton.
The compensation committee administers the issuance of stock under
Autobytel.com's 1996 Stock Incentive Plan, 1996 Stock Option Plan, 1996 Employee
Stock Purchase Plan, 1998 Stock Option Plan and 1999 Stock Option Plan, makes
recommendations regarding various incentive compensation and benefit plans and
determines salaries for the executive officers and incentive compensation for
employees and consultants of Autobytel.com.
DIRECTOR COMPENSATION
Our non-employee directors do not currently receive any cash compensation
for service on Autobytel.com's board of directors or any committee thereof, but
directors may be reimbursed for certain expenses incurred in connection with
attendance at board and committee meetings. Our 1999 Stock Option Plan provides
for automatic grants of stock options to non-employee directors. See "Stock
Plans -- 1999 Stock Option Plan."
We have entered into indemnification agreements with each member of the
board of directors and its officers providing for the indemnification of such
person to the fullest extent authorized, permitted or allowed by law.
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<PAGE> 53
EXECUTIVE COMPENSATION
The following table sets forth information regarding the compensation
(rounded to the nearest thousand) paid during each of our last three completed
fiscal years to our Chief Executive Officer and each of our other five most
highly compensated executive officers as of December 31, 1998. Mr. Ellis
resigned as our Chief Executive Officer in June 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------
FISCAL COMPENSATION OTHER SECURITIES
NAME AND PRINCIPAL YEAR ENDED ------------------- ANNUAL UNDERLYING
POSITION DECEMBER 31, SALARY BONUS COMPENSATION OPTIONS(#)
------------------ ------------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Peter R. Ellis............. 1998 $219,000 $ -- $522,000(1) --
Former Chief Executive 1997 275,000 100,000 15,000 --
Officer and President 1996 123,000 321,000 11,000 --
Mark W. Lorimer............ 1998 316,000 150,000 9,000 750,000(2)
Chief Executive Officer
and 1997 200,000 100,000 70,000(3) 100,000
President 1996 8,000 -- -- 333,333
Robert S. Grimes........... 1998 220,000 75,000 -- 125,000
Executive Vice President 1997 180,000 -- -- 116,667
1996 90,000 -- -- 166,667
Ann M. Delligatta.......... 1998 177,000 100,000 -- 316,667(4)
Executive Vice President 1997 88,000 -- -- 83,334
and Chief Operating
Officer
Michael J. Lowell.......... 1998 190,000 -- -- 16,667
Senior Vice President, 1997 139,000 50,000 -- 50,000
Development 1996 15,000 -- -- 111,111
Anne Benvenuto............. 1998 150,000 -- -- 16,667
Senior Vice President, 1997 13,000 5,000 15,000(3) 33,333
Marketing
</TABLE>
- -------------------------
(1) Represents a one-time payment of $500,000, $14,000 car allowance and $8,000
legal expenses. See "Certain Transactions."
(2) 500,000 shares of such securities underlying options are contingent on the
performance of our market trading price after the closing of the offering.
(3) Relocation expense reimbursement.
(4) 200,000 shares of such securities underlying options are contingent on the
performance of our market trading price after the closing of the offering.
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<PAGE> 54
OPTION GRANTS DURING 1998
The following table sets forth the five most highly compensated officers
and certain information concerning stock options granted to them during 1998. We
have never issued stock appreciation rights. Options were granted at an exercise
price equal to the fair market value of the common stock at the date of grant.
In determining the fair market value of the common stock, the board of directors
considered various factors, including recent arms' length transactions, our
financial condition and business prospects, operating results, the absence of a
market for the common stock and the risks normally associated with investments
in companies engaged in similar businesses. The term of each option granted is
generally ten years from the date of grant. Options may terminate before their
expiration dates, if the optionee's status as an employee or a consultant is
terminated or upon the optionee's death or disability. We have not included
disclosure on Mr. Ellis as he resigned as our Chief Executive Officer in June
1998 and did not receive any option grants in 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
---------------------------------------------------------- OF ASSUMED ANNUAL RATES
NUMBER OF PERCENT OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM(3)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------------
NAME GRANTED(#)(1) 1998(2) ($/SHARE) DATE(4) 5%($) 10%($)
---- ------------- -------------- ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Mark W. Lorimer...... 200,000 12.3% $13.20 12/17/08 $1,660,282 $ 4,207,480
500,000 30.7% 13.20 12/17/08 4,150,705 10,518,700
50,000 3.1% 13.20 06/21/08 415,070 1,051,870
Robert S. Grimes..... 125,000 7.7% 13.20 12/17/08 1,037,676 2,629,675
Ann M. Delligatta.... 100,000 6.1% 13.20 12/17/08 830,141 2,103,740
200,000 12.3% 13.20 12/17/08 1,660,282 4,207,480
16,667 1.0% 13.20 06/21/08 138,360 350,630
Anne Benvenuto....... 16,667 1.0% 13.20 06/21/08 138,360 350,630
Michael J. Lowell.... 16,667 1.0% 13.20 06/21/08 138,360 350,630
</TABLE>
- -------------------------
(1) Represents options granted under our Amended and Restated 1996 Stock
Incentive Plan and the 1998 Stock Option Plan.
(2) Based on an aggregate 1,630,340 shares of our common stock subject to
options granted to employees during fiscal 1998.
(3) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission and do not
represent our estimate or projection of our future common stock prices.
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<PAGE> 55
AGGREGATED OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES
The following table sets forth for each of the five most highly compensated
officers certain information concerning options exercised during fiscal 1998 and
the number of shares subject to both exercisable and unexercisable stock options
as of December 31, 1998. The values for "in-the-money" options are calculated by
determining the difference between the fair market value of the securities
underlying the options as of December 31, 1998 ($13.20 per share as determined
by the board of directors) and the exercise price of the officer's options. In
determining the fair market value of the common stock, the board of directors
considered various factors, including recent arms' length transactions, our
financial condition and business prospects, its operating results, the absence
of a market for the common stock and the risks normally associated with
investments in companies engaged in similar businesses. Autobytel.com has never
issued stock appreciation rights. We have not included disclosure on Mr. Ellis
as he resigned as our Chief Executive Officer in June 1998 and holds no options.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
NUMBER OF OPTIONS AT THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1998 DECEMBER 31, 1998($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark W. Lorimer........ -- $ -- 209,999 973,334 $1,609,491 $1,290,506
Michael J. Lowell...... -- -- 104,861 72,917 725,006 241,660
Robert S. Grimes....... -- -- 245,834 162,500 2,060,004 --
Ann M. Delligatta...... -- -- 29,165 370,836 -- --
Anne Benvenuto......... -- -- 8,333 41,667 -- --
</TABLE>
STOCK PLANS
Since our inception the board of directors has granted stock options in
order to attract, retain and motivate employees. Our board of directors
considers many factors in granting stock options. For example, among other
factors, our board of directors considers competitive market conditions for
employees and the risk associated with working for a development stage Internet
company.
1996 Stock Option Plan. Autobytel.com's 1996 Stock Option Plan was approved
by the board of directors on May 18, 1996 and the stockholders on May 31, 1996.
The 1996 Option Plan was terminated by a resolution of the board of directors on
October 23, 1996, at which time over 800,000 options had been issued.
The 1996 Option Plan provided for the granting to employees and directors
of stock options intended to qualify as incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended, and for
the grant to employees, consultants and directors of nonstatutory stock options.
The Company reserved 1,194,444 shares of common stock for issuance under the
1996 Option Plan. Under the 1996 Option Plan, the exercise price of any
incentive stock options granted under the 1996 Option Plan were not less than
the fair market value of the common stock on the date of grant, and the exercise
price of any non-statutory stock option granted under the 1996 Option Plan were
not less than 85% of the fair market value of the common stock at the date of
the grant. The term of all options granted under the 1996 Option Plan did not
exceed 10 years. The administrator of the options granted under the 1996 Option
Plan is the board of directors or a committee of the board of directors. Any
options granted under the 1996 Option Plan are exercisable at such times as
determined by the administrator, but in no case at a rate
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of less than 20% per year over five years from the grant date. A majority of the
outstanding options vest and became exercisable as to one third of the grant on
October 31, 1996, and as to an additional one third of the grant at each
successive October 31. Options granted under the 1996 Option Plan generally must
be exercised within 30 days following termination of the optionee's status as an
employee, directors or consultant of Autobytel.com, or within 12 months
following such optionee's termination by death or disability. Any optionee
holding options granted under the 1996 Option Plan cannot sell or transfer any
shares of common stock during the 180 day period following the effective date of
the registration statement relating to an initial public offering of securities
filed pursuant to the Securities Act.
1996 Stock Incentive Plan. The Incentive Plan was approved by the board of
directors on October 23, 1996, amended and restated by the board of directors on
November 24, 1996 and approved by the stockholders on January 16, 1997. The
Company's 1996 Stock Incentive Plan provides for the granting to employees and
directors of stock options intended to qualify as incentive stock options within
the meaning of Section 422 of the Code, and for the granting to employees,
directors and consultants of nonstatutory stock options and stock purchase
rights.
As approved by the stockholders, Autobytel.com reserved 833,333 shares of
common stock for issuance under the Incentive Plan. Options with respect to all
of the common stock reserved for issuance have been issued and are either
incentive stock options or nonstatutory stock options.
Options granted under the Incentive Plan are not generally transferable by
the optionee, and each option 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 the optionee's status as an
employee or consultant of Autobytel.com, 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.
The exercise price of nonstatutory stock options granted under the
Incentive Plan was determined by the board of directors, and in all cases, was
the fair market value of the common stock on the date of grant. The term of all
options granted under the Incentive Plan did not exceed ten years. Stock options
granted under the Incentive Plan vest according to vesting schedules determined
by the administrator.
The Incentive Plan provides that in the event of a merger of Autobytel.com
with or into another corporation, a sale of substantially all of Autobytel.com's
assets or a like transaction involving Autobytel.com, each option will be
assumed or an equivalent option substituted by the successor corporation. If the
outstanding options are not assumed or substituted as described in the preceding
sentence, the committee of the board of directors shall provide for each
optionee to have the right to exercise the option as to all of the optioned
stock, including shares as to which it would not otherwise be exercisable. If
the administrator makes an option exercisable in full in the event of a merger
or sale of assets, the administrator will notify the optionee that the option
will be fully exercisable for a period of 15 days from the date of such notice,
and the option will terminate upon the expiration of such period.
1996 Employee Stock Purchase Plan. Autobytel.com's 1996 Employee Stock
Purchase Plan was adopted by the board of directors on November 18, 1996 and
approved by the stockholders on January 16, 1997. The maximum number of shares
of common stock available for sale is 444,444. Currently the plan has not been
implemented but will
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be on consummation of our offering. The Purchase Plan, which is intended to
qualify under Section 423 of the Code, permits eligible employees of
Autobytel.com to purchase shares of common stock through payroll deductions of
up to ten percent of their compensation for all purchase periods ending within
any calendar year.
Individuals who are eligible employees on the start day of any offering
period may enter the Purchase Plan on that start date. Individuals who become
eligible employees after the start date of the offering period may join the
Purchase Plan on any subsequent quarterly entry date within that period.
Employees are eligible to participate if they are customarily employed by
Autobytel.com or any designated subsidiary for at least 20 hours per week and
for more than five months in any calendar year.
The price of common stock purchased under the Purchase Plan will be 85% of
the lower of the fair market value of the common stock on the first or last day
of each six month purchase period. Employees may end their participation in the
Purchase Plan at any time during an offering period, and they will be paid their
payroll deductions to date. Participation ends automatically upon termination of
employment with Autobytel.com. Rights granted under the Purchase Plan are not
transferable by a participant other than by will, the laws of descent and
distribution, or as otherwise provided under the plan.
The Purchase Plan will be administered by the board of directors or by a
committee appointed by the board of directors. The board of directors may amend
or modify the Purchase Plan at any time. The Purchase Plan will terminate 10
years from the date of its adoption.
1998 Stock Option Plan. Our 1998 Stock Option Plan was adopted by the
board of directors in December 1998. The Plan provides that an aggregate of
1,500,000 shares of our common stock is available to be granted subject to
options to key employees of Autobytel.com and its parent or subsidiary
corporations, if any. If any stock option expires or terminates for any reason
without having been exercised in full, new stock options may be granted covering
the shares of our common stock originally set aside for the unexercised portion
of such expired or terminated stock option.
Under the 1998 Option Plan, eligible key employees of Autobytel.com may
receive incentive stock options within the meaning of Section 422 of the Code or
nonstatutory stock options. No eligible employee shall receive stock options
with respect to more than 700,000 shares of our common stock during any one
calendar year. Incentive stock options granted under the 1998 Option Plan must
have an exercise price that is no less than the fair market value of our common
stock as of the time the option is granted and generally may not be exercised
more than ten years after the date of grant. With respect to any optionee who
beneficially owns more than 10% of the total combined voting power of all
classes of outstanding shares of capital stock of Autobytel.com, any incentive
stock option must have an exercise price that is no less than 110% of the fair
market value of our common stock as of the time the option is granted and may
not be exercised more than five years after the date of grant. To the extent
that the aggregate fair market value of stock exercisable by an optionee for the
first time in any one calendar year under the 1998 Option Plan and all other
stock plans of Autobytel.com exceeds $100,000, options for such shares shall not
be considered incentive stock options but instead shall be considered
nonstatutory stock options.
Nonstatutory stock options granted under the 1998 Option Plan must have an
exercise price that is no less than 85% of the fair market value of our common
stock as of the time the option is granted and may not be exercised more than 10
years after the date they are
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granted. Under the 1998 Option Plan, certain nonstatutory stock options relating
to vest over a time period determined by the administrator, however, the vesting
could accelerate based on the performance of our common stock. All other stock
options granted under the 1998 Option Plan vest according to time-based vesting
schedules determined by the administrator; provided, that an optionee who is not
an officer, director or consultant shall have the right to exercise at least 20%
of the options granted per year over 5 years from the date of grant. Options
granted under the 1998 Option Plan are nontransferable, other than by will or
the laws of descent and distribution.
The 1998 Option Plan provides that, unless otherwise provided in the stock
option agreement, upon any merger, consolidation, or sale or transfer of all or
any part of our business or assets, all rights of the optionee with respect to
the unexercised portion of any option shall become immediately vested and may be
exercised immediately, except to the extent that any agreement or undertaking of
any party to any such merger, consolidation, or sale or transfer of assets,
makes specific provisions for the assumption of the obligations of Autobytel.com
with respect to the 1998 Option Plan. In addition, unless otherwise provided in
the stock option agreement for any given option, upon any liquidation or
dissolution of Autobytel.com, all rights of the optionee with respect to the
unexercised portion of any option will terminate and all options will be
canceled at the time of any such liquidation or dissolution, except to the
extent that any plan pursuant to which such liquidation or dissolution is
effected, makes specific provisions with respect to the 1998 Option Plan. The
holder of any option granted under the 1998 Option Plan has the right
immediately prior to the effective date of such merger, consolidation, sale or
transfer of assets, liquidation or dissolution to exercise such option without
regard to any vesting provision of such option. In no event may any incentive
stock options be exercised later than the date preceding the tenth anniversary
date of the grant thereof.
The 1998 Option Plan will be administered by the board of directors or by a
committee of the board of directors acting as the administrator. The
administrator shall select the eligible key employees who are to be granted
options, determine the number of shares to be subject to options to be granted
to each optionee and designate such options as incentive stock options or
nonstatutory stock options. The board of directors may at any time amend or
modify the 1998 Option Plan, except that the board of directors may not, without
approval of the stockholders of Autobytel.com, (1) increase the number of shares
issued under the 1998 Option Plan, (2) modify the requirements as to eligibility
for participation in the 1998 Option Plan or (3) change the option price
provisions of the 1998 Option Plan so as to have a material adverse effect on
Autobytel.com other than to conform with any applicable provisions of the Code
or regulations or rulings thereunder. Unless terminated earlier, the 1998 Option
Plan terminates ten years from the date it is adopted by the board of directors.
1999 Stock Option Plan. Our 1999 Stock Option Plan was adopted by the board
of directors on January 14, 1999. The plan provides that an aggregate of
1,800,000 shares of our common stock are available to be granted subject to
options to employees of Autobytel.com; provided that after March 31, 1999, not
more than 1,000,000 options may be granted under the plan. The 1999 Option Plan
provides that, unless otherwise provided in the stock option agreement, upon any
merger, consolidation, or sale or transfer of all or any part of our business or
assets, all rights of the optionee with respect to the unexercised portion of
any option shall become immediately vested and may be exercised immediately,
except to the extent that any agreement or undertaking of any party to any such
merger, consolidation, or sale or transfer of assets, makes specific provisions
for the assumption of the obligations of Autobytel.com with respect to the 1999
Option Plan.
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Non-employee directors are entitled to participate in our 1999 Stock Option
Plan. The 1999 Stock Option Plan provides for an automatic grant of a first
option to purchase 20,000 shares of common stock to each non-employee director
on the date on which the person first becomes a non-employee director; provided,
that if any person serving as a non-employee director before January 14, 1999
received less than 20,000 shares on the date such person became a member of the
board of directors, such person will be granted an option to purchase a number
of shares equal to the difference between 20,000 shares and the shares actually
granted. After the first option is granted to the non-employee director, he or
she will automatically be granted a subsequent option to purchase 5,000 shares
on November 1 of each subsequent year provided he or she is then a non-employee
director and, provided further, that on such date he or she has served on the
Board for at least six months. First options and each subsequent option will
have a term of ten years. The shares subject to the first option and each
subsequent option vest in their entirety and becomes exercisable on the first
anniversary of the grant date, provided that the optionee continues to serve as
a director on such dates. The exercise price of shares subject to the first
option and each subsequent option shall be 100% of the fair market value per
share of the common stock on the date of the grant of the option.
The 1999 Stock Option Plan is identical in all other material respects to
the 1998 Stock Option Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No interlocking relationship exists between the board of directors or
compensation committee and the board of directors or compensation committee of
any other company, nor has any such interlocking relationship existed in the
past. The compensation committee of the board of directors currently consists of
Mr. Fuchs, Mr. Coats and Mr. Orton.
EMPLOYMENT AGREEMENTS
On July 1, 1998, we entered into a three year employment agreement with Mr.
Mark W. Lorimer, our President and Chief Executive Officer. Under this
agreement, Mr. Lorimer is entitled to a base salary of $325,000, a bonus in such
amounts and based on such criteria as may be established by the board of
directors from time to time, 200,000 options which vest over two years, 500,000
performance options which vest over seven years unless accelerated upon the
earlier accomplishment of stock price goals, and all ordinary and customary
perquisites such as any medical, dental welfare plans, insurance coverages and
any death benefit and disability benefit plans afforded to executive employees
of Autobytel.com. If Mr. Lorimer's employment is terminated without cause or if
Mr. Lorimer terminates his employment with good reason, Mr. Lorimer is entitled
to a lump sum payment equal to the aggregate annual base salary, which annual
base salary shall be the highest annual base salary in effect during the term of
his employment, that would have been received by Mr. Lorimer if he had remained
employed by Autobytel.com for the greater of (1) the remaining balance of the
three year term or (2) two years. In the event of a change of control of
Autobytel.com prior to January 1, 2000, and while Mr. Lorimer remains employed
by Autobytel.com, the term of the agrement shall automatically extend for a
period of three years from the date of the change of control.
In addition to the above, in the event Lorimer's employment is terminated
during the six month period prior to (or the first thirty-six months following)
a change of control by Mr. Lorimer for good reason or by Autobytel.com other
than for cause, disability or death, Mr. Lorimer is entitled to a lump sum
payment equal to twice the highest bonus paid to
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Mr. Lorimer in the last three fiscal years plus the amount of the cost of all
benefits for the greater of the remaining balance of the term or two years.
In the event of a change of control while Mr. Lorimer is employed by
Autobytel.com or if Lorimer's employment is terminated by Autobytel.com without
cause or by Mr. Lorimer for good reason during the six month period prior to a
change of control, unvested performance-based options shall become vested and
exercisable to the extent performance targets are met. In the event of the death
or disability of Mr. Lorimer during the term of this employment agreement,
Autobytel.com shall provide Mr. Lorimer or his successors, heirs, designees or
assigns, with continued payment of Mr. Lorimer's then current base salary and
all benefits for a period of two years.
On December 17, 1998, Autobytel.com entered into a three year employment
agreement with Ms. Ann Marie Delligatta, our Executive Vice President and Chief
Operating Officer. Under this agreement, Ms. Delligatta is entitled to a base
salary of $225,000, a bonus in such amounts and based on such criteria as may be
established by the board of directors from time to time, 100,000 options which
vest fully by June 2000, 200,000 performance options which vest over seven years
unless accelerated upon the earlier accomplishment of stock price goals, and all
ordinary and customary perquisites such as any medical, dental welfare plans,
insurance coverages and any death benefit and disability benefit plans afforded
to executive employees of Autobytel.com. If Ms. Delligatta's employment is
terminated without cause or if Ms. Delligatta terminates her employment for good
reason, Ms. Delligatta is entitled to a lump sum payment equal to the base
salary that would have been received by Ms. Delligatta if she had remained
employed by Autobytel.com for the remaining balance of the three year term. Ms.
Delligatta's employment with Autobytel.com shall terminate automatically in the
event of death or upon 30 days' written notice of termination by Autobytel.com
in the event of a disability.
On March 4, 1999, we entered into an employment and severance agreement
with Mr. Michael J. Lowell, our Senior Vice President, Development. Under this
agreement, Mr. Lowell is entitled to a base salary of $140,000 per year and to
all ordinary and customary perquisites such as any medical, dental welfare
plans, insurance coverages and any death benefit and disability benefit plans
afforded to executive employees of Autobytel.com. If Mr. Lowell's employment is
terminated without cause, he is entitled to a lump sum severance payment in
varying amounts depending on the date of termination. The maximum severance
payment is $232,501, payable if the effective date of termination occurs during
March 1999, and the minimum severance payment is $90,000, payable if the
effective date of termination occurs after January 2000.
INDEMNIFICATION AND LIMITATION OF DIRECTOR AND OFFICER LIABILITY
We have entered into agreements to indemnify our directors and officers, in
addition to the indemnification provided for in our bylaws. These agreements,
among other things, indemnify our directors and officers for expenses including
attorneys' fees, judgments, fines and settlement amounts incurred by any such
person in any action or proceeding, including any action by or in the right of
Autobytel.com, arising out of such person's services as a director or officer of
us, any subsidiary of us or any other company or enterprise to which the person
provides services at our request. Notwithstanding the foregoing, our directors
and officers shall not be entitled to indemnity pursuant to these agreements if
a reviewing party appointed by the board of directors determines that such
person is not entitled to be indemnified thereunder under applicable law. In
addition, our directors and officers may
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not be indemnified for expenses reasonably incurred, in connection with any
claim related to the fact that such person was a director or officer of
Autobytel.com:
- if the expenses result from acts, omissions or transactions for which
such person is prohibited from receiving indemnification;
- with respect to claims initiated or brought voluntarily by the indemnitee
and not by way of defense, counterclaim or cross claim; or
- with respect to any claim instituted by the indemnitee, on behalf of
himself or us or by us to enforce or interpret the indemnity agreement if
a court has jurisdiction over such matter determines that the defenses or
assertions made by the indemnitee were made in bad faith or was
frivolous. We believe that these agreements are necessary to attract and
retain qualified directors and officers.
To the extent indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling us as
discussed above, we have been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable.
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FINANCINGS AND RELATED PARTY TRANSACTIONS
Series A Preferred Stock
On August 23, 1996, in a private placement transaction, we issued 1,500,000
shares of series A preferred stock at $10.00 per share convertible into common
stock at the conversion price per share of $9.00. The number of shares of common
stock into which each share of series A preferred stock will convert is 1.11
shares. The holders of such series A preferred stock are entitled to certain
registration rights with respect to the shares of common stock issued or
issuable upon conversion thereof. See "Description of Capital
Stock--Registration Rights." All shares of series A preferred stock will
automatically convert into shares of common stock upon the closing of the
offering. We have never declared or paid dividends on the series A preferred
stock.
From July 9, 1996 through August 13, 1996, Mr. Fuchs made loans to us in
the aggregate principal amount of $500,000. These loans, along with accrued
interest, converted into series A preferred stock on August 23, 1996 at $10.00
per share. In September 1996, Mr. Fuchs was appointed to our board of directors.
The holders of series A preferred stock have the right to elect two members
of the board of directors. Because General Electric Capital Corporation holds
more than a majority of the shares of series A preferred stock it has the right
to designate on behalf of all holders of series A preferred stock such
directors. To date, General Capital Electric Corporation has designated Mr.
Fuchs and Mr. Coats to the board of directors.
Series B Preferred Stock
On January 30, 1997, in a private placement transaction we issued 967,915
shares of series B preferred stock at $9.35 per share convertible into common
stock at the conversion price per share of $10.37. The number of shares of
common stock into which each share of series B preferred stock will convert is
0.90 shares. The holders of such series B preferred stock are entitled to
certain registration rights with respect to the shares of common stock issued or
issuable upon conversion thereof. See "Description of Capital Stock--
Registration Rights." All shares of series B preferred stock will automatically
convert into shares of common stock upon the closing of the offering. We have
never declared or paid dividends on the series B preferred stock.
Series C Preferred Stock
On October 21, 1997, April 30, 1998, May 7, 1998, October 30, 1998,
November 10, 1998, December 16, 1998, December 21, 1998 and December 24, 1998,
in private placement transactions, we issued a total of 4,968,738 shares of
series C preferred stock at $8.80 per share convertible into common stock at the
conversion price per share of $13.20. The number of shares of common stock into
which each share of series C preferred stock will convert is 0.67 shares. The
holders of such series C preferred stock are entitled to certain registration
rights with respect to the shares of common stock issued or issuable upon
conversion thereof. See "Description of Capital Stock--Registration Rights". All
shares of series C preferred stock will automatically convert into shares of
common stock upon the closing of the offering. National Broadcasting Company
acquired its shares by providing national spot advertising to Autobytel.com. We
have never declared or paid dividends on the series C preferred stock.
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The following chart lists the holders of Autobytel.com's preferred stock
and the number and class of shares held by such holders as of March 1, 1999.
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C
NAME OF STOCKHOLDER PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK
------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
General Electric Capital
Corporation.......................... 800,000 534,760 681,819
National Union Fire Insurance Company
of Pittsburgh, PA, an affiliate of
AIG.................................. 400,000 267,380 227,273
ContiTrade Services L.L.C............ 200,000 133,690
Michael Fuchs........................ 100,000 32,085
Tozer Kemsley and Millbourn
Automotive, Ltd., a unit of Inchcape
Motors............................... 568,182
Bilia AB............................. 568,182
National Broadcasting Company, Inc.,
an affiliate of General Electric
Capital Corporation.................. 121,009
Invision AG.......................... 568,182
Aureus Private Equity AG............. 1,097,727
MediaOne Interactive Services,
Inc.................................. 1,136,364
</TABLE>
Other Transactions
From time to time, Autobytel.com has advanced funds to Peter R. Ellis, the
former Chairman of the board of directors and Chief Executive Officer of
Autobytel.com. As of December 31, 1998, Mr. Ellis was indebted to us in the
amount of $250,000 plus accrued interest at the rate of 8% per year compounded
quarterly. The principal amount of the loan is due and payable on or before
March 1, 2003. The Company has received a pledge of 100,657 of Mr. Ellis' shares
of common stock to secure this loan.
Autobytel.com and John M. Markovich, our former Senior Vice President and
Chief Financial Officer, are parties to a severance and general release
agreement dated January 30, 1998. Pursuant to the terms of the severance
agreement, in connection with his resignation from Autobytel.com, we paid to Mr.
Markovich a severance payment of $75,000, extended Mr. Markovich's health
coverage through July 30, 1998, paid certain outplacement expenses of $10,000
and granted Mr. Markovich a warrant to purchase 33,333 shares of common stock at
$11.25 per share. The warrant granted to Mr. Markovich expires on January 30,
2003 unless exercised prior thereto.
Autobytel.com and Mr. Ellis, our former Chief Executive Officer and
Chairman of the board of directors are parties to a two year advisory agreement
dated as of August 20, 1998. Under the advisory agreement, Mr. Ellis received
$500,000 on the date of execution and commencing on the thirteenth month
anniversary of this agreement, Mr. Ellis is entitled to receive $5,000 per
month. Mr. Ellis is entitled to participate in all employee health plans and
receives a car allowance of $1,000 per month until April 30, 1999. The advisory
agreement may be terminated by us for cause or upon 30 days prior written notice
without cause. In the event the advisory agreement is terminated without cause
by Autobytel.com or due to his death or disability, Mr. Ellis will still be
entitled to receive his
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base salary and health benefits through the remainder of the term of the of the
agreement. Mr. Ellis has the right to terminate the advisory agreement on 90
days prior written notice to Autobytel.com. A majority of disinterested
directors approved the advisory agreement and such other transaction between
autobytel.com and Mr. Ellis.
In addition, on January 11, 1999, in consideration of us waiving our right
of first refusal permitting the sale of $1.4 million of our common stock to
certain "accredited investors" as such term is defined under Rule 501 of the
Securities Act, Mr. Ellis transferred to us the voting power of 593,175 shares
of common stock of Autobytel.com owned by Mr. Ellis for a period that is the
earlier of five years from the date thereof or until such time as Mr. Ellis
sells the such shares to a person not affiliated with Mr. Ellis. Mr. Ellis sold
these shares at $11.88 per share.
Pursuant to a marketing and application processing agreement dated February
1, 1997, among GE Capital, Auto-By-Tel Acceptance Corporation and Autobytel.com,
Auto-By-Tel Acceptance Corporation and Autobytel.com agreed to refer customers
seeking vehicle financing with favorable credit ratings to GE Capital. In
return, GE Capital agreed to pay Auto-By-Tel Acceptance Corporation a marketing
fee of $100.00 for each financing consummated by GE Capital under this
agreement. GE Capital is an affiliate of General Electric Capital Corporation,
which beneficially owns 1,831,903 shares of common stock. As of December 31,
1998, Auto-By-Tel Acceptance Corporation had referred customers to GE Capital to
whom GE Capital extended financing in an aggregate amount of approximately
$307,000 and received approximately $1,200 in marketing fees since the inception
of this relationship.
In addition, General Electric Capital Corporation is an affiliate of
PaineWebber Incorporated, one of the underwriters taking part in this offering.
As a result, BT Alex. Brown Incorporated will act as a qualified independent
underwriter to establish the price of the shares offered by this prospectus.
Auto-By-Tel Acceptance Corporation, member companies of the American
International Group, and Autobytel.com entered into a marketing agreement dated
July 22, 1996. Pursuant to this agreement, Autobytel.com, through Auto-By-Tel
Acceptance Corporation, authorizes and provides the American International Group
access to its Internet server, for the publication, display, and exhibition of
the American International Group's member companies' direct response automobile
insurance sales materials to our users. In return, Auto-By-Tel Acceptance
Corporation is paid compensation based on a flat fee on the basis of the premium
collected.
On November 10, 1998, we issued to Invision AG a warrant to purchase an
aggregate of 150,000 shares of our common stock at an exercise price of $13.20
per share. This warrant is exercisable as of the date thereof and expires on
November 10, 2001.
On December 16, 1998 and December 23, 1998, we issued to Aureus Private
Equity AG warrants to purchase 169,800 and 120,000 shares, respectively, of our
common stock at an exercise price of $13.20 per share. Each of these warrants
are exercisable as of the date thereof and expires on December 16, 2001 and
December 23, 2001, respectively. In January 1999, Peter Titz, a manager of
Invision AG and a director of Aureus Private Equity AG, was appointed to our
board of directors.
On December 21, 1998, we issued to MediaOne Interactive Services, Inc. a
warrant to purchase an aggregate of 300,000 shares of common stock of
Autobytel.com at an exercise
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price of $13.20 per share. This warrant is exercisable as of the date thereof
and expires on December 21, 2001. In February 1999, Richard Post, a director of
MediaOne Interactive Services, Inc., was appointed to Autobytel.com's board of
directors.
All future transactions between Autobytel.com and interested directors and
stockholders, if any, will be approved by the disinterested directors or
stockholders, as appropriate in accordance with Delaware law and our certificate
of incorporation and bylaws.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of the common stock as of December 31, 1998, as adjusted to reflect
the conversion of the preferred stock into common stock concurrently with the
offering and sale of common stock offered hereby for (1) each person or entity
who is known by Autobytel.com to beneficially own five percent or more of the
outstanding common stock, (2) each of our directors, (3) each of the five most
highly compensated officers in 1998, (4) each stockholder who is selling shares
of common stock in this offering, and (5) all directors and executive officers
of Autobytel.com as a group. As of December 31, 1998, there were 14,358,745
shares of common stock outstanding.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options or warrants held by that person that
are currently exercisable or exercisable within 60 days of December 31, 1998 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. The following table assumes no exercise of the underwriters'
over-allotment option.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO OFFERING NUMBER OF AFTER OFFERING
------------------- SHARES BEING -------------------
NUMBER PERCENT OFFERED NUMBER PERCENT
--------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
Peter R. Ellis(1)................... 4,020,667 28.0% 500,000 3,520,667 19.7%
c/o Autobytel.com
18872 MacArthur Boulevard
Irvine, California 92612-1400
John C. Bedrosian(2)................ 3,569,445 24.9% 500,000 3,069,445 17.2%
c/o Autobytel.com
18872 MacArthur Boulevard
Irvine, California 92612-1400
General Electric Capital
Corporation(3).................... 1,831,903 12.8% 1,831,903 10.3%
260 Long Ridge Road
Stamford, Connecticut 06927
Peter Titz(4)....................... 1,550,406 10.5% 1,550,406 8.5%
c/o Aureus Private Equity AG
Zugerstrasse 76b
CH-6340 Baar
Switzerland
MediaOne Interactive Services,
Inc.(5)........................... 1,057,576 7.2% 1,057,576 5.8%
9000 E. Nichols Avenue
Englewood, Colorado 80112
Aureus Private Equity AG(4)......... 1,021,618 7.0% 1,021,618 5.6%
Zugerstrasse 76b
CH-6340 Baar
Switzerland
National Union Fire Insurance
Company of Pittsburgh, PA......... 837,157 5.8% 837,157 4.7%
200 Liberty Street
New York, New York 10281
Robert S. Grimes(6)................. 803,472 5.5% 803,472 4.4%
c/o R.S. Grimes & Co., Inc.
152 West 57th Street
New York, NY 10019
Mark W. Lorimer(7).................. 214,165 1.5% 214,165 1.2%
Michael J. Fuchs(8)................. 146,130 1.0% 146,130 *
</TABLE>
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<PAGE> 67
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO OFFERING NUMBER OF AFTER OFFERING
------------------- SHARES BEING -------------------
NUMBER PERCENT OFFERED NUMBER PERCENT
--------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
Michael J. Lowell(9)................ 106,944 * 106,944 *
Ann M. Delligatta(10)............... 32,637 * 32,637 *
Anne Benvenuto(11).................. 9,721 * 9,721 *
Mark N. Kaplan...................... 1,000 * 1,000 *
Kenneth J. Orton.................... -- * -- *
Hoshi Printer....................... -- * -- *
All directors and executive officers
as a group (13 persons)(12)....... 9,774,621 62.2% 9,274,621 48.2%
</TABLE>
- ---------------
* Less than 1%
(1) Includes 46,110 shares held by certain trusts established for family
members of Mr. Ellis as to which Mr. Ellis' spouse maintains sole voting
power. Includes 118,635 shares Mr. Ellis sold on January 11, 1999 and
593,175 shares as to which Mr. Ellis granted voting power to Autobytel.com
pursuant to a voting proxy dated January 11, 1999. See "Certain
Transactions." If the underwriters' over-allotment option were exercised in
full, the number of shares beneficially owned by Peter Ellis after the
offering would be 3,183,167 and the percentage would be 17.8%.
(2) All shares are held in the John C. Bedrosian and Judith D. Bedrosian
Revocable Trust in which Mr. Bedrosian maintains shared voting powers. If
the underwriters' over-allotment option were exercised in full, the number
of shares beneficially owned by Mr. Bedrosian after the offering would be
2,731,945 and the percentage would be 15.3%.
(3) Mr. Jeffrey Coats is a managing director of GE Equity Capital Group, Inc.,
an affiliate of General Electric Capital Corporation, and is a director of
Autobytel.com. Includes 888,889 shares held by General Electric Capital
Corporation (GE) following the conversion of the series A preferred stock,
482,393 shares held by GE following the conversion of the series B
preferred stock, and 454,546 shares held by GE following the conversion of
the series C preferred stock. Also includes 6,075 shares issuable upon
exercise of options exercisable within 60 days of December 31, 1998 which
were granted to Mr. Coats, and subsequently assigned to General Electric
Capital Corporation. Mr. Coats disclaims beneficial ownership of such 6,075
shares.
(4) Mr. Peter Titz is a director of Aureus Private Equity AG, a manager of
Invision AG, and a director of Autobytel.com. Includes 731,818 shares
following the conversion of the series C preferred stock and 289,800 shares
issuable upon exercise of warrants held by Aureus Private Equity AG. Also
includes 378,788 shares following the conversion of the series C preferred
stock and 150,000 shares issuable upon exercise of warrants held by
Invision AG.
(5) Mr. Richard Post is a director of MediaOne Interactive Services, Inc. and a
director of Autobytel.com. Includes 757,576 shares held by MediaOne
Interactive Services, Inc. following the conversion of the series C
preferred stock and 300,000 shares issuable upon exercise of warrants.
MediaOne Interactive Services, Inc., is an indirect, wholly owned
subsidiary of MediaOne Group, Inc. As a result, MediaOne Group, Inc., may
be deemed to indirectly, beneficially own the shares reported as
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<PAGE> 68
being directly beneficially owned by MediaOne Interactive Services, Inc.
MediaOne Group, Inc., disclaims such beneficial ownership.
(6) Includes an aggregate of 5,554 shares held in irrevocable trusts as to
which Mr. Grimes' spouse maintains sole voting power. Includes 247,917
shares issuable upon exercise of options exercisable within 60 days of
December 31, 1998.
(7) Represents 214,165 shares issuable upon exercise of options exercisable
within 60 days of December 31, 1998.
(8) Includes 6,076 shares issuable upon exercise of options exercisable within
60 days of December 31, 1998 and 111,111 shares held by Mr. Fuchs following
the conversion of the series A preferred stock and 28,943 shares following
the conversion of the series B preferred stock.
(9) Represents 106,944 shares issuable upon exercise of options exercisable
within 60 days of December 31, 1998.
(10) Represents 32,637 shares issuable upon exercise of options exercisable
within 60 days of December 31, 1998.
(11) Represents 9,721 shares issuable upon exercise of options exercisable
within 60 days of December 31, 1998.
(12) Includes 623,535 shares issuable upon exercise of options and 739,800
shares issuable upon exercise of warrants exercisable within 60 days of
December 31, 1998. Peter Ellis resigned as Chief Executive Officer of
Autobytel.com in June 1998. If Mr. Ellis' shares are not included in the
number of shares beneficially owned by all directors and executive officers
as a group, the number of shares owned by the directors and executive
officers prior to the offering is 5,753,954 shares or 36.6% of the shares
of common stock outstanding, and after the offering would be 5,753,954
shares or 29.9% of the shares of common stock outstanding.
DESCRIPTION OF CAPITAL STOCK
Upon the closing of the offering, the outstanding shares of common stock
will consist of 17,858,745 shares, $0.001 par value. As of December 31, 1998,
there were 8,506,455 shares of common stock outstanding held of record by 70
stockholders.
COMMON STOCK
Autobytel.com is authorized to issue a total of 50,000,000 shares of common
stock. Holders of common stock are entitled to one vote per share in all matters
to be voted on by the stockholders. 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 Autobytel.com, the holders of common
stock are entitled to share ratably in all assets remaining after payment of
liabilities, subject to prior distribution rights of shares of preferred stock
then outstanding, if any. The common stock has no preemptive or conversion
rights or other subscription rights. There are no redemption or sinking fund
provisions applicable to the common stock. All outstanding shares of common
stock are fully paid and nonassessable, and the shares of common stock to be
issued upon completion of the offering will be fully paid and non-assessable.
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<PAGE> 69
PREFERRED STOCK
Pursuant to our amended and restated certificate of incorporation, the
board of directors has the authority, without further action by the
stockholders, to issue up to 11,445,187 shares of preferred stock in one or more
series 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
Autobytel.com or make removal of management more difficult. Additionally, the
issuance of preferred stock may have the effect of decreasing the market price
of the common stock, and may adversely affect the voting and other rights of the
holders of common stock. Upon the closing of the offering, no shares of
preferred stock will be outstanding and Autobytel.com has no plans to issue any
of the preferred stock. See "Financings and Related Party Transactions."
REGISTRATION RIGHTS
Pursuant to the Amended and Restated Investors' Rights Agreement, dated
October 21, 1997, among Autobytel.com and the holders of approximately
13,854,322 shares of common stock and securities convertible into common stock,
the holders are entitled to certain rights as described below with respect to
the registration of such registrable securities under the Act. If Autobytel.com
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 demand registration rights pursuant to which they may require us to
file a registration statement under the Act at our expense with respect to their
shares of registrable securities, and Autobytel.com is required to use its best
efforts to effect such registration. All of these registration rights are
subject to 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 Autobytel.com not to effect a requested registration within one
year of an initial public offering of our 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 million. The holders have waived all
such rights in connection with the offering.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
Anti-Takeover Law
Autobytel.com 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"
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<PAGE> 70
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
Our amended and restated certificate of incorporation and bylaws contain
certain provisions relating to the limitation of liability and indemnification
of directors and officers. Our amended and restated certificate of incorporation
provides that our directors may not be held personally liable to us or our
stockholders for a breach of fiduciary duty, except for liability:
- for any breach of the director's duty of loyalty to us or our
stockholders,
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of the law,
- under Section 174 of the Delaware General Corporation Law, relating to
prohibited dividends, distributions and repurchases or redemptions of
stock, and
- for any transaction from which the director derives an improper benefit.
In addition, our amended and restated certificate of incorporation and bylaws
provide that we will indemnify directors and officers to the fullest extent
authorized by Delaware law.
No Stockholder Action by Written Consent
Our amended and restated certificate of incorporation provides that the
stockholders can take action only at a duly called annual or special meeting of
stockholders. Accordingly, stockholders of Autobytel.com will not be able to
take action by written consent in lieu of a meeting. This provision may have the
effect of deterring hostile takeovers or delaying changes in control or
management of Autobytel.com.
Staggered Board of Directors
Our amended and restated certificate of incorporation provides that upon
the closing of this offering, the terms of office of the board of directors will
be divided into three classes, such that the terms of Class I, Class II and
Class III directors shall expire at the annual meeting of stockholders to be
held in 1999, 2000 and 2001, respectively. The number of directors will be
distributed among the three classes so that, as nearly as possible, each class
will consist of one-third of the directors of the directors. This provision may
have the effect of delaying or preventing changes in control or change in our
management because less than a majority of the board of directors are up for
election at each annual meeting.
TRANSFER AGENT AND REGISTRAR
U.S. Stock Transfer Corporation, Glendale, California, has been appointed
as the transfer agent and registrar for the common stock. Its telephone number
for such purposes is (818) 502-1404.
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<PAGE> 71
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the offering, there has been no market for the common stock.
Future sales of substantial amounts of common stock in the public market could
adversely affect market prices prevailing from time to time. Upon completion of
the offering, Autobytel.com will have outstanding an aggregate of 17,858,745
shares of common stock, assuming no exercise of outstanding options or warrants.
Of these shares, the 4,500,000 shares sold in the offering will be freely
tradeable without restriction or further registration under the Securities Act,
except that any shares purchased by "affiliates" of Autobytel.com, as that term
is defined in Rule 144 of the Securities Act, may generally only be sold in
compliance with the limitations of Rule 144 described below.
SALES OF RESTRICTED SHARES
The remaining 13,358,745 shares of common stock held by existing
stockholders are "restricted securities" under Rule 144. The number of shares of
common stock available for sale in the public market is limited by restrictions
under the Securities Act and lock-up agreements under 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 BT Alex. Brown Incorporated, and the
selling shareholders have agreed to the same lock-up except that they have
agreed to a 270-day lock-up. On the date of this prospectus, no shares other
than the shares 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 respective
holding periods (approximately 11,287,358 of such shares will have been held for
more than one year at the end of such 180-day period).
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 one year, 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: (1) one percent of the number of
shares of common stock then outstanding; or (2) the average weekly trading
volume of the common stock on the Nasdaq National Market during the four
calendar weeks preceding the filing of a notice on Form 144 with respect to such
sale. One percent of the number of shares of common stock outstanding after the
offering equals approximately 178,587 shares. Sales under Rule 144 are also
subject to certain manner of sale provisions and notice requirements and to the
availability of current public information about Autobytel.com. Under Rule
144(k), a person who is not deemed to have been an affiliate of Autobytel.com at
any time during the 90 days preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years, including the holding period
of any prior owner except if the prior owner was 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
this offering.
Upon completion of the offering, the holders of 12,997,957 shares of common
stock, or their transferees, will be entitled to certain rights with respect to
the registration of such shares under the Act until such time as the holders of
such common stock may sell such shares under the Rule 144 of the Securities Act.
See "Description of Capital Stock -- Registration Rights." Registration of such
shares under the Securities Act would result in
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<PAGE> 72
such shares becoming freely tradeable without restriction under the Securities
Act, except for shares purchased by affiliates, immediately upon the
effectiveness of such registration.
OPTIONS AND RESTRICTED STOCK
We intend to file a registration statement under the Securities Act
covering shares of common stock reserved for issuance under the 1999 Stock
Option Plan, 1998 Stock Option Plan, 1996 Stock Incentive Plan, the 1996 Stock
Option Plan and the 1996 Employee Stock Purchase Plan. Such registration
statement is expected to be filed and become effective as soon as practicable
after the effective date of the offering. Accordingly, shares registered under
such registration statement will, 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 Autobytel.com or the lock-up
agreements described above. A total of 3,723,433 shares have been reserved for
issuance under such plans. As of March 1, 1999, 737,191 options have been
granted under the 1999 Stock Option Plan, 1,125,000 options have been granted
under the 1998 Stock Option Plan, no shares have been purchased under the 1996
Employee Stock Purchase Plan, options to purchase 833,333 shares of common stock
have been granted under the 1996 Stock Incentive Plan, options to purchase
889,163 shares of common stock have been granted under the 1996 Stock Option
Plan and no shares have been purchased under the 1996 Employee Stock Purchase
Plan. See "Management -- Stock Plans."
In addition, under Rule 701 of the Securities Act as currently in effect,
any employee, consultant or advisor of Autobytel.com who is not an affiliate who
purchased shares from us 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, subject to all provisions of Rule 144 except
its minimum holding period.
LOCK-UP AGREEMENTS
All officers, directors, and certain other stockholders of Autobytel.com
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
BT Alex. Brown Incorporated, and the selling stockholders have agreed to the
same lock-up period except for a period of 270 days after the date of this
prospectus. See "Underwriting." In addition, under the terms of the 1999 Stock
Option Plan, the 1996 Stock Option Plan and the Amended and Restated 1996
Incentive Plan, holders of options to purchase common stock are obligated not to
sell or transfer any shares of Autobytel.com during such 180-day period if so
requested by us or the underwriters.
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CERTAIN UNITED STATES TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS
GENERAL
The following is a general discussion of the principal United States
federal income and estate tax consequences of the ownership and disposition of
common stock by a Non-United States Holder, as defined below. As used herein,
the term "Non-U.S. Holder" is any person or entity that, for United States
federal income tax purposes, is either a non-resident alien individual, a
foreign corporation, a foreign partnership or a foreign trust in each case not
subject to United States federal income tax on a net basis in respect of income
or gain with respect to the common stock of the Company.
This discussion does not address all aspects of United States federal
income and estate taxes that may be relevant to a particular Non-U.S. Holder in
light of the holder's particular circumstances, and is not intended to be
applicable in all respects to all categories of Non-U.S. Holders, some of whom
may be subject to special treatment under United States federal income tax laws
and does not address United States state or local or foreign tax consequences.
Furthermore, this discussion is based on provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), existing and proposed regulations promulgated
thereunder and administrative and judicial interpretations thereof, in effect on
and as of the date hereof and all of which are subject to change, possibly with
retroactive effect or different interpretations. The following summary is
included herein for general information. ACCORDINGLY, PROSPECTIVE INVESTORS ARE
URGED TO CONSULT THEIR TAX ADVISERS REGARDING THE UNITED STATES FEDERAL, STATE,
LOCAL AND NON-UNITED STATES INCOME AND OTHER TAX CONSEQUENCES OF ACQUIRING,
HOLDING AND DISPOSING OF SHARES OF COMMON STOCK.
An individual may be deemed to be a resident alien, as opposed to a
nonresident alien, by virtue of being present in the United States for at least
31 days in the calendar year and for an aggregate of at least 183 days during a
three-year period ending in the current calendar year. In determining whether an
individual is present in the United States for at least 183 days, all of the
days present in the current year, one-third of the days present in the
immediately preceding year and one-sixth of the days present in the second
preceding year are counted. Resident aliens are subject to United States federal
income and estate tax in the same manner as United States citizens and
residents.
LIMITATION ON NET OPERATING LOSS CARRYFORWARDS
We have approximately $37.1 million federal net operating loss
carryforwards as of December 31, 1998 which may be available to reduce the
amount of United States federal income taxes payable by Autobytel.com in the
future. However, if Autobytel.com undergoes an "ownership change" within the
meaning of Section 382 of the Code, an annual limitation will be imposed on
Autobytel.com's use of its net operating loss carryforwards. If an "ownership
change" occurs, Section 382 of the Code limits the amount of net operating
losses that may be carried over from pre-ownership change years to offset
Autobytel.com's taxable income in any post-ownership change year to an amount
equal to (1) the value of Autobytel.com's capital stock (as adjusted) at the
time of the ownership change multiplied by (2) the long-term bond rate for the
month of the ownership change (the "Section 382 Limitation").
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Autobytel.com believes that it will undergo an ownership change for
purposes of Section 382 of the Code. As a result, the use of Autobytel.com's
pre-ownership change net operating loss carryforwards will be limited annually
by Section 382 of the Code pursuant to the rules described above. Based on an
estimated company value of $321 million, Autobytel.com will be limited to $15
million of losses per year based on a long-term tax exempt rate of 4.7% and a
share price of $18.
DIVIDENDS
Autobytel.com does not anticipate paying cash dividends on its capital
stock in the foreseeable future. See "Dividend Policy." In the event, however,
that dividends are paid on shares of common stock, dividends paid to a Non-U.S.
Holder of common stock generally will be subject to United States withholding
tax at a 30% rate, (or such lower rate as may be provided by an applicable
income tax treaty). Non-U.S. Holders should consult their tax advisors regarding
their entitlement to benefit under a relevant income tax treaty.
Currently the applicable United States Treasury regulations presume, absent
actual knowledge to the contrary, that dividends paid to an address in a foreign
country are paid to a resident of such country for purposes of the 30%
withholding tax discussed above. However, the final United States Treasury
regulations provide that, in the case of dividends paid after December 31, 1999,
Non-U.S. Holders generally will be subject to United States backup withholding
tax at a 31% rate, if specified certification procedures and requirements (or,
in the case of payments made outside the United States with respect to an
offshore account, specific documentary evidence procedures) are not satisfied,
directly or through an intermediary.
The Final Regulations also provide special rules for dividend payments made
to foreign intermediaries, United States or foreign wholly owned entities that
are disregarded for United States federal income tax purposes and entities that
are treated as fiscally transparent in the United States, the applicable income
tax treaty jurisdiction, or both. In addition, recently enacted legislation,
effective August 4, 1997, denies income tax treaty benefits to foreign partners
receiving income derived through a partnership (or otherwise fiscally
transparent entity) if the foreign partner does not certify as to its Non-U.S.
Holder status and the partnership does not provide required information
including a United States taxpayer identification number. Prospective investors
should consult with their own tax advisers concerning the effect, if any, of
these Final Regulations and the recent legislation on an investment in the
common stock.
A Non-U.S. Holder of common stock that is eligible for a reduced rate of
United States withholding tax pursuant to an income tax treaty may obtain a
refund of any excess amounts withheld by filing an appropriate claim for a
refund with the IRS.
Dividends that are effectively connected with: a Non-U.S. Holder's (1)
conduct of a trade or business, (2) permanent establishment or (3) fixed base in
the United States ("United States trade or business income"), generally are
subject to United States federal income tax on a net income basis at regular
graduated rates, but are not subject to the 30% withholding tax if the Non-U.S.
Holder files Form 4224 (or successor form) with the payor or, after December 31,
1999, such holder provides its United States taxpayer identification number to
the payor.
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Any United States trade or business income received by a Non-U.S. Holder
that is a corporation also may be subject to an additional "branch profits tax"
at a 30% rate or such lower rate as may be specified by an applicable income tax
treaty.
GAIN ON DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to United States federal
income or withholding tax in respect of gain recognized on a disposition of
common stock unless:
(1) the gain is effectively connected with the conduct of a trade or
business (or, if an income tax treaty applies, is attributable to a
"permanent establishment," as defined therein) of the Non-U.S. Holder
within the United States or of a partnership, trust or estate in which
the Non-U.S. Holder is a partner or beneficiary within the United
States,
(2) the Non-U.S. Holder is an individual who holds the common stock as a
capital asset within the meaning of Section 1221 of the Code
(generally, property held for investment), is present in the United
States for 183 or more days in the taxable year of the disposition and
meets other tax law requirements,
(3) the Non-U.S. Holder is a United States expatriate subject to tax
pursuant to the provisions of the United States tax law, or
(4) Autobytel.com is or has been a "United States real property holding
corporation" for federal income tax purposes at any time during the
shorter of the five-year period preceding such disposition or the
period that the Non-U.S. Holder holds the common stock.
Generally, a corporation is a "United States real property holding
corporation" if the fair market value of its "United States real property
interests" equals or exceeds 50% of the sum of the fair market value of its
worldwide real property interests plus its other assets used or held for use in
a trade or business.
Autobytel.com believes that it is not, has not been and does not anticipate
becoming a "United States real property holding corporation" for United States
federal income tax purposes. However, even if Autobytel.com were to become a
"United States real property holding corporation," any gain realized by a
Non-U.S. Holder still would not be subject to United States federal income tax
if the shares of Autobytel.com are "regularly traded" (within the meaning of the
applicable regulations) on an established securities market (for example, New
York Stock Exchange or NASDAQ Stock Market). Autobytel.com believes that its
common stock is "regularly traded on an established securities market." If,
however, Autobytel.com's common stock is not so treated, on a sale or
disposition by a Non-U.S. Holder of the common stock the transferee of such
stock will be required to withhold 10% of the proceeds unless Autobytel.com
certifies that either it is not (and has not been) a United States real property
holding company or another exemption from withholding applies.
If a Non-U.S. Holder who is an individual is subject to tax under clauses
(1) or (3) above, such individual generally will be taxed on the net gain
derived from a sale of common stock under regular graduated United States
federal income tax rates. If an individual Non-U.S. Holder is subject to tax
under clause (2) above, such individual generally will be subject to a flat 30%
tax on the gain derived from a sale, which may be offset by certain United
States capital losses (notwithstanding the fact that such individual is not
considered a resident alien of the United States). Thus, individual Non-United
74
<PAGE> 76
States Holders who have spent (or expect to spend) more than a de minimis period
of time in the United States in the taxable year in which they contemplate a
sale of common stock are urged to consult their tax advisers prior to the sale
concerning the United States federal income tax consequences of such sale.
If a Non-U.S. Holder that is a foreign corporation is subject to tax under
clause (1) above it generally will be taxed on its net gain under regular
graduated United States federal income tax rates and, in addition, will be
subject to the branch profit tax equal to 30% of its "effectively connected
earnings and profits," within the meaning of the Code for the taxable year, as
adjusted for certain items, unless it qualifies for a lower rate under an
applicable tax treaty.
FEDERAL ESTATE TAX
Common stock owned or treated as owned by an individual who is neither a
United States citizen nor a United States resident (as defined for United States
federal estate tax purposes) at the time of death will be included in the
individual's gross estate for United States federal estate tax purposes unless
an applicable estate tax or other treaty provides otherwise and, therefore, may
be subject to United States federal estate tax.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
Under United States Treasury regulations, Autobytel.com must report
annually to the IRS and to each Non-U.S. Holder the amount of dividends paid to
such holder and the tax withheld with respect to such dividends. These
information reporting requirements apply regardless of whether withholding is
required. Copies of the information returns reporting such dividends and
withholding may also be made available to the tax authorities in the country in
which the Non-U.S. Holder is a resident under the provisions of an applicable
income tax treaty or agreement.
Currently, United States backup withholding (which generally is a
withholding tax imposed at the rate of 31%) generally will not apply (1) to
dividends paid to Non-U.S. Holders that are subject to the 30% withholding
discussed above (or that are not so subject because a tax treaty applies that
reduces such 30% withholding) or (2) before January 1, 2000, to dividends paid
to a Non-U.S. Holder at an address outside of the United States unless the payor
has actual knowledge that the payee is a United States Holder. Backup
withholding and information reporting generally will apply to dividends paid to
addresses inside the United States on shares of common stock to beneficial
owners that are not "exempt recipients" and that fail to provide, in the manner
required, identifying information.
The Final Regulations do not generally significantly alter the foregoing
substantive withholding and information reporting requirements but do alter the
procedures for claiming the benefits of an income tax treaty with respect to,
and the certification procedures relating to the receipt by intermediaries of,
dividends paid after December 31, 1999. These regulations generally presume a
Non-U.S. Holder is subject to backup withholding at the rate of 31% and
information reporting unless Autobytel.com receives certification of such
holder's Non-U.S. status. Depending on the circumstances, this certification
will need to be provided (1) directly by the Non-United States Holder, (2) in
the case of a Non-U.S. Holder that is treated as a partnership or other fiscally
transparent entity, by the partners, shareholders or other beneficiaries of such
entity, or (3) by qualified financial institutions or other qualified entities
on behalf of the Non-U.S. Holder.
75
<PAGE> 77
The payment of the proceeds of the disposition of common stock by a holder
to or through the United States office of a broker or through a non-United
States branch of a United States broker generally will be subject to information
reporting and backup withholding at a rate of 31% unless the holder either
certifies its status as a Non-United States Holder under penalties of perjury or
otherwise establishes an exemption. The payment of the proceeds of the
disposition by a Non-U.S. Holder of common stock to or through a non-United
States office of a non-United States broker will not be subject to backup
withholding or information reporting unless the non-United States broker has a
connection to the United States as specified in the tax law.
In the case of the payment of proceeds from the disposition of common stock
effected by a foreign office of a broker that is a United States person or a
"United States related person", existing regulations require information
reporting on the payment unless (1) the broker receives a statement from the
owner, signed under penalty of perjury, certifying its non-United States status
or the broker has documentary evidence in its files as to the Non-U.S. Holder's
foreign status, and the broker has no actual knowledge to the contrary, and
other United States federal tax law conditions are met or (2) the beneficial
owner otherwise establishes an exemption. For this purpose, a "United States
related person" is either (1) a "controlled foreign corporation" for United
States federal income tax purposes; or (2) a foreign person 50% or more of whose
gross income from all sources for the three-year period ending with the close of
its taxable year preceding the payment (or for such part of the period that the
broker has been in existence) is derived from activities that are effectively
connected with the conduct of a United States trade or business.
After December 31, 1999, the Final Regulations will impose information
reporting and backup withholding on payments of the gross proceeds from the
sales or redemptions of common stock that are effected through foreign offices
of brokers having any of a broader class of specified connections with the
United States. Such information reporting and backup withholding may be avoided,
however, if the applicable IRS certification requirements are complied with.
Prospective investors should consult with their own tax advisers regarding the
Final Regulations and in particular with respect to whether the use of a
particular broker would subject the investor to these rules.
Any amounts withheld under the backup withholding rules from a payment to a
Non-United States Holder will be refunded (or credited against the holder's
United States federal income tax liability, if any) provided that the required
information is furnished to the Internal Revenue Service.
76
<PAGE> 78
UNDERWRITING
Subject to the terms of an underwriting agreement, the underwriters named
below, through their representatives, BT Alex. Brown Incorporated, Lehman
Brothers Inc. and PaineWebber Incorporated, have severally agreed to purchase
from Autobytel.com the following respective number of shares of common stock at
the public offering price less the underwriting discount set forth on the cover
page of this prospectus.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
BT Alex. Brown Incorporated.................................
Lehman Brothers Inc.........................................
PaineWebber Incorporated....................................
--------
Total............................................. 4,250,000
========
</TABLE>
The underwriting agreement provides that the obligations of the
underwriters are subject to certain conditions precedent and that the
underwriters will purchase all of the shares of common stock offered hereby if
any of such shares are purchased.
Autobytel.com and the selling stockholders have been advised by the
representatives that the underwriters propose to offer the shares of common
stock to the public at the public offering price set forth on the cover page of
this prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The underwriters may allow, and such dealers may
re-allow, a concession not in excess of $ per share to certain other
dealers. After the initial public offering, the offering price and other selling
terms may be changed by the representatives of the underwriters.
Selling stockholders have granted the underwriters an option, exercisable
not later than 30 days after the date of this prospectus, to purchase up to
675,000 additional shares of common stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
prospectus. To the extent that the underwriters exercise such option, each of
the underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of common stock to be purchased by
it in the above table bears to 3,500,000, and the stockholders will be
obligated, pursuant to the option to sell such shares to the underwriters. The
underwriters may exercise such option only to cover over-allotments made in
connection with the sale of the common stock offered hereby. If purchased, the
underwriters will offer such additional shares on the same terms as those on
which the 3,500,000 shares are being offered.
Autobytel.com and the selling stockholders have agreed to indemnify the
underwriters against certain liabilities, including liabilities under the
Securities Act.
Each of the officers and directors and certain stockholders of
Autobytel.com, holding in the aggregate 13,181,223 shares of common stock, have
agreed not to offer, sell, contract to sell or otherwise dispose of (or enter
into any transaction which is designed to, or could be expected to, result in
the disposition of any portion of) any common stock for
77
<PAGE> 79
a period of 180 days after the date of our public offering, without the prior
written consent of BT Alex. Brown Incorporated, and the selling stockholders
have agreed to a lock-up for a period of 270 days after the date of
Autobytel.com's public offering. Such consent may be given at any time without
public notice and may be given for certain stock holders and not others. We have
entered into a similar agreement, except that we may issue, and grant options or
warrants to purchase, shares of common stock or any securities convertible into,
exercisable for or exchangeable for shares of common stock, pursuant to the
exercise of outstanding options and warrants and our issuance of options and
stock granted under the existing stock and stock purchase plans.
The representatives have advised Autobytel.com that the underwriters do not
intend to confirm sales to any account over which they exercise discretionary
authority.
In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
market price of the common stock. Specifically, the underwriters may over-allot
shares of the common stock in connection with this offering, thereby creating a
short position in the common stock for their own account. Additionally, to cover
such over-allotments or to stabilize the market price of the common stock, the
underwriters may bid for, and purchase, shares of the common stock in the open
market. Finally, the representatives, on behalf of the underwriters, also may
reclaim selling concessions allowed to an underwriter or dealer if the
underwriting syndicate repurchases shares distributed by that underwriter or
dealer. Any of these activities may maintain the market price of our common
stock at a level above that which might otherwise prevail in the open market.
The underwriters are not required to engage in these activities and, if
commenced, may end any of these activities at any time.
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to 450,000 shares for officers, employees, business
associates, and other related persons of Autobytel.com. The number of shares of
common stock available for sale to the general public will be reduced to the
extent these people purchase such reserved shares. Any reserved shares which are
not so purchased will be offered by the underwriters to the general public on
the same basis as the other shares offered hereby.
In addition, we are reserving 250,000 shares to be offered at the public
offering price to strategic international investors. We expect that these
strategic investors will enter into agreements not to sell any of the shares
purchased by them for a period of at least 180 days following the completion of
this offering. These shares are not subject to the underwriting agreement and
the underwriters will not receive any fees or commissions in connection with the
sale of these shares.
PaineWebber Incorporated is affiliated with General Electric Capital
Corporation which is also an affiliate of GE Capital. The Rules of Conduct of
the National Association of Securities Dealers, Inc. would not permit
PaineWebber Incorporated to participate in the offering unless the offering is
made in accordance with Section 2720 of the Rules of Conduct. In particular, the
public offering price of the common stock can be no higher than that recommended
by a "qualified independent underwriter" meeting the standards of the Rules of
Conduct. In accordance with this requirement, BT Alex. Brown Incorporated will
serve in such capacity and will recommend the public offering price in
compliance with the requirements of Rule 2720. In its role as qualified
independent underwriter, BT Alex. Brown Incorporated, has participated in due
diligence investigations and reviewed
78
<PAGE> 80
and participated in the preparation of this prospectus and the registration
statement of which this prospectus forms a part.
PRICING OF THIS OFFERING
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for our common stock will
be determined by negotiation among representatives of the underwriters and
Autobytel.com. Among the factors to be considered in determining the public
offering price will be:
- prevailing market conditions;
- our results of operations in recent periods;
- our present stage of development;
- the market capitalizations and stages of development of other companies
which we and the representatives of the underwriters believe to be
comparable to us; and
- estimates of our business potential.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for Autobytel.com by Paul, Hastings, Janofsky & Walker LLP, New York, New
York and for the underwriters by Latham & Watkins, Menlo Park, California.
EXPERTS
The consolidated financial statements as of December 31, 1997 and 1998 and
for the years ended December 31, 1996, 1997 and 1998 appearing in this
prospectus and the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as set forth in their report 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 Autobytel.com with
the Securities and Exchange Commission, Washington, D.C. This prospectus does
not contain all of the information set forth in the registration statement and
the exhibits and schedules 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 Autobytel.com 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 SEC's principal office, 450 Fifth Street, N.W.,
Washington, D.C. 20549, the New York Regional Office located at 7 World Trade
Center, 13th Floor, New York, NY 10048, and the Chicago Regional Office located
at Northwestern Atrium Center, 500 West Madison Street, Chicago, IL 60661, and
copies of all or any part thereof, including any exhibit thereto,
79
<PAGE> 81
may be obtained from the SEC upon the payment of certain fees prescribed by the
SEC. The public may obtain information on the operation of the Public Reference
room by calling the SEC at 1-800-SEC-0330. The SEC maintains a World Wide Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of the site is http://www.sec.gov.
80
<PAGE> 82
AUTOBYTEL.COM INC.
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 (Deficit)... F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 83
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of autobytel.com inc.:
We have audited the accompanying consolidated balance sheets of
autobytel.com inc. (a Delaware corporation) and subsidiaries as of December 31,
1997 and 1998, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for the years ended December 31,
1996, 1997 and 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
autobytel.com inc. and subsidiaries as of December 31, 1997 and 1998, and the
results of their operations and their cash flows for the years ended December
31, 1996, 1997 and 1998 in conformity with generally accepted accounting
principles.
/s/ ARTHUR ANDERSEN LLP
Los Angeles, California
February 3, 1999
F-2
<PAGE> 84
AUTOBYTEL.COM INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents, includes restricted amounts of
$248 and $248, respectively............................. $ 15,813 $ 27,984
Accounts receivable, net of allowance for doubtful
accounts of $337 and $402, respectively................. 1,493 2,315
Prepaid expenses and other current assets................. 795 1,353
-------- --------
Total current assets............................... 18,101 31,652
Property and equipment, net................................. 2,317 2,208
Other assets................................................ 95 347
-------- --------
Total assets....................................... $ 20,513 $ 34,207
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 2,223 $ 2,915
Accrued expenses.......................................... 1,047 915
Deferred revenue.......................................... 3,700 4,008
Customer deposits......................................... 127 345
Other current liabilities................................. 66 33
-------- --------
Total current liabilities.......................... 7,163 8,216
Deferred rent............................................. 91 123
-------- --------
Total liabilities.................................. 7,254 8,339
-------- --------
Commitments and contingencies
Stockholders' equity:
Convertible preferred stock, Series A, $0.001 par value;
aggregate liquidation preference of $15,000 at December
31, 1998; 1,500,000 shares authorized; 1,500,000 shares
issued and outstanding at December 31, 1997 and 1998.... 2 2
Convertible preferred stock, Series B, $0.001 par value;
aggregate liquidation preference of $9,050 at December
31, 1998; 967,915 shares authorized 967,915 shares
issued and outstanding at December 31, 1997 and 1998.... 1 1
Convertible preferred stock, Series C, $0.001 par value;
aggregate liquidation preference of $43,725 at December
31, 1998; 6,977,272 shares authorized; 1,477,274 shares
issued and outstanding at December 31, 1997; 4,968,738
shares issued and outstanding at December 31, 1998...... 1 4
Common stock, $0.001 par value; 50,000,000 shares
authorized; 8,324,443 shares issued and outstanding
December 31, 1997; 8,506,455 shares issued and
outstanding at December 31, 1998........................ 8 8
Warrants.................................................. -- 1,332
Additional paid-in capital................................ 37,123 67,813
Deferred compensation..................................... (1) --
Cumulative translation adjustment......................... -- (19)
Accumulated deficit....................................... (23,875) (43,273)
-------- --------
Total stockholders' equity......................... 13,259 25,868
-------- --------
Total liabilities and stockholders' equity......... $ 20,513 $ 34,207
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-3
<PAGE> 85
AUTOBYTEL.COM INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share data)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1996 1997 1998
---------- ----------- -----------
<S> <C> <C> <C>
Revenues............................... $ 5,025 $ 15,338 $ 23,826
---------- ----------- -----------
Operating expenses:
Sales and marketing.................. 7,790 21,454 30,033
Product and technology development... 1,753 5,448 8,528
General and administrative........... 1,641 5,851 5,908
---------- ----------- -----------
Total operating expenses.......... 11,184 32,753 44,469
---------- ----------- -----------
Loss from operations................. (6,159) (17,415) (20,643)
Other income, net...................... 124 620 1,280
---------- ----------- -----------
Loss before provision for income
taxes............................. (6,035) (16,795) (19,363)
Provision for income taxes............. -- 15 35
---------- ----------- -----------
Net loss............................. $ (6,035) $ (16,810) $ (19,398)
========== =========== ===========
Basic net loss per share............... $ (0.73) $ (2.03) $ (2.30)
========== =========== ===========
Shares used in computing basic net loss
per share............................ 8,252,325 8,291,142 8,423,038
========== =========== ===========
Pro forma basic net loss per share..... $ (0.68) $ (1.53) $ (1.49)
========== =========== ===========
Shares used in computing pro forma
basic net loss per share............. 8,848,864 10,966,633 13,008,090
========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE> 86
AUTOBYTEL.COM INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(Amounts in thousands, except share and per share data)
<TABLE>
<CAPTION>
CONVERTIBLE MEMBERS'
PREFERRED STOCK COMMON STOCK INTEREST/
------------------ ------------------ ADDITIONAL DEFERRED CUMULATIVE
NUMBER OF NUMBER OF PAID-IN COMPEN- TRANSLATION
SHARES AMOUNT SHARES AMOUNT WARRANTS CAPITAL SATION ADJUSTMENT
--------- ------ --------- ------ -------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995............. -- $-- -- $-- $ -- $ 40 $ -- $ --
Sale of members' interest in ABT
Acceptance Company, LLC............ -- -- -- -- -- 50 -- --
Issuance of common stock in exchange
for members' interest.............. -- -- 8,250,000 8 -- (8) -- --
Issuance of common stock options with
an exercise price of $0.90 per
share.............................. -- -- -- -- -- 87 (87) --
Issuance of Series A convertible
preferred stock at $10.00 per
share.............................. 1,450,000 2 -- -- -- 14,363 -- --
Issuance of Series A convertible
preferred stock at $10.00 per share
upon conversion of debt............ 50,000 -- -- -- -- 500 -- --
Issuance of common stock in exchange
for services....................... -- -- 6,667 -- -- 20 -- --
Issuance of common stock upon
exercise of stock options.......... -- -- 28,148 -- -- 25 -- --
Amortization of deferred
compensation....................... -- -- -- -- -- -- 61 --
Net loss............................. -- -- -- -- -- -- -- --
--------- -- --------- -- ------ ------- ---- ----
Balance, December 31, 1996............. 1,500,000 2 8,284,815 8 -- 15,077 (26) --
Issuance of Series B convertible
preferred stock at $9.35 per
share.............................. 967,915 1 -- -- -- 9,028 -- --
Issuance of Series C convertible
preferred stock at $8.80 per
share.............................. 1,477,274 1 -- -- -- 12,987 -- --
Issuance of common stock upon
exercise of stock options.......... -- -- 39,628 -- -- 31 -- --
Amortization of deferred
compensation....................... -- -- -- -- -- -- 25 --
Net loss............................. -- -- -- -- -- -- -- --
--------- -- --------- -- ------ ------- ---- ----
Balance, December 31, 1997............. 3,945,189 4 8,324,443 8 -- 37,123 (1) --
Issuance of Series C convertible
preferred stock at $8.80 per
share.............................. 3,370,455 3 -- -- -- 29,443 -- --
Issuance of Series C convertible
preferred stock at $8.80 per share
in exchange for advertising........ 121,009 -- -- -- -- 1,065 -- --
Issuance of warrants in exchange for
start-up costs for a Pan-European
entity............................. -- -- -- -- 792 -- -- --
Issuance of warrant in exchange for
involvement in broadband
application project................ -- -- -- -- 540 -- -- --
Issuance of common stock upon
exercise of stock options.......... -- -- 181,012 -- -- 169 -- --
Issuance of common stock at $13.20
per share.......................... -- -- 1,000 -- -- 13 -- --
Amortization of deferred
compensation....................... -- -- -- -- -- -- 1 --
Foreign currency translation
adjustment......................... -- -- -- -- -- -- -- (19)
Net loss............................. -- -- -- -- -- -- -- --
--------- -- --------- -- ------ ------- ---- ----
Balance, December 31, 1998............. 7,436,653 $7 8,506,455 $8 $1,332 $67,813 $ -- $(19)
========= == ========= == ====== ======= ==== ====
<CAPTION>
ACCUM-
ULATED
DEFICIT TOTAL
-------- --------
<S> <C> <C>
Balance, December 31, 1995............. $ (1,030) $ (990)
Sale of members' interest in ABT
Acceptance Company, LLC............ -- 50
Issuance of common stock in exchange
for members' interest.............. -- --
Issuance of common stock options with
an exercise price of $0.90 per
share.............................. -- --
Issuance of Series A convertible
preferred stock at $10.00 per
share.............................. -- 14,365
Issuance of Series A convertible
preferred stock at $10.00 per share
upon conversion of debt............ -- 500
Issuance of common stock in exchange
for services....................... -- 20
Issuance of common stock upon
exercise of stock options.......... -- 25
Amortization of deferred
compensation....................... -- 61
Net loss............................. (6,035) (6,035)
-------- --------
Balance, December 31, 1996............. (7,065) 7,996
Issuance of Series B convertible
preferred stock at $9.35 per
share.............................. -- 9,029
Issuance of Series C convertible
preferred stock at $8.80 per
share.............................. -- 12,988
Issuance of common stock upon
exercise of stock options.......... -- 31
Amortization of deferred
compensation....................... -- 25
Net loss............................. (16,810) (16,810)
-------- --------
Balance, December 31, 1997............. (23,875) 13,259
Issuance of Series C convertible
preferred stock at $8.80 per
share.............................. -- 29,446
Issuance of Series C convertible
preferred stock at $8.80 per share
in exchange for advertising........ -- 1,065
Issuance of warrants in exchange for
start-up costs for a Pan-European
entity............................. -- 792
Issuance of warrant in exchange for
involvement in broadband
application project................ -- 540
Issuance of common stock upon
exercise of stock options.......... -- 169
Issuance of common stock at $13.20
per share.......................... -- 13
Amortization of deferred
compensation....................... -- 1
Foreign currency translation
adjustment......................... -- (19)
Net loss............................. (19,398) (19,398)
-------- --------
Balance, December 31, 1998............. $(43,273) $ 25,868
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE> 87
AUTOBYTEL.COM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands, except share and per share data)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(6,035) $(16,810) $(19,398)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 178 860 1,255
Provision for bad debt.................................. 145 175 187
Loss on disposal of property and equiptment............. -- -- 1
Amortization of deferred compensation................... 61 25 1
Issuance of common stock in exchange for services....... 20 -- --
Issuance of Series C convertible preferred stock in
exchange for advertising............................... -- -- 1,065
Issuance of warrants in exchange for start-up costs for
a Pan-European entity.................................. -- -- 792
Issuance of warrant in exchange for involvement in
broadband application project.......................... -- -- 540
Changes in assets and liabilities:
Accounts receivable................................... (429) (1,370) (1,009)
Prepaid expenses and other current assets............. (788) 107 (558)
Other assets.......................................... (604) 516 (252)
Accounts payable...................................... 564 1,572 692
Accrued expenses...................................... 722 325 (132)
Deferred revenue...................................... 1,970 1,374 308
Customer deposits..................................... 554 (427) 218
Other current liabilities............................. 16 34 (33)
Deferred rent......................................... 17 74 32
------- -------- --------
Net cash used in operating activities............... (3,609) (13,545) (16,291)
------- -------- --------
Cash flows from investing activities:
Acquisition of Internet Development Corporation........... -- (100) --
Purchases of property and equipment....................... (1,501) (1,652) (1,147)
------- -------- --------
Net cash used in investing activities............... (1,501) (1,752) (1,147)
------- -------- --------
Cash flows from financing activities:
Proceeds from sale of common stock........................ 25 31 182
Proceeds from sale of members' interest in ABT Acceptance
Company, LLC............................................ 50 -- --
Net proceeds from issuance of Series A convertible
preferred stock......................................... 14,365 -- --
Net proceeds from issuance of Series B convertible
preferred stock......................................... -- 9,029 --
Net proceeds from issuance of Series C convertible
preferred stock......................................... -- 12,988 29,446
Proceeds from issuance of notes payable................... 765 -- --
Repayments of notes payable............................... (1,081) -- --
------- -------- --------
Net cash provided by financing activities........... 14,124 22,048 29,628
------- -------- --------
Effect of exchange rates on cash............................ -- -- (19)
------- -------- --------
Net increase in cash and cash equivalents................... 9,014 6,751 12,171
Cash and cash equivalents, at beginning of period........... 48 9,062 15,813
------- -------- --------
Cash and cash equivalents, at end of period................. $ 9,062 $ 15,813 $ 27,984
======= ======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes.............. $ 4 $ 15 $ 35
======= ======== ========
Cash paid during the period for interest.................. $ 24 $ -- $ 3
======= ======== ========
</TABLE>
Supplemental disclosure of non-cash financing activities (See Note 7):
* In May 1996, 8,250,000 shares of common stock were issued to founding
stockholders in exchange for members' interests in a predecessor limited
liability company.
* In August 1996, 50,000 shares of Series A convertible preferred stock were
issued in exchange for $500 previously advanced to the Company under three
notes payable.
* In September 1996, 6,667 shares of common stock with a fair market value of
$20 were issued for services.
* In April 1998, 56,776 shares of Series C convertible preferred stock with a
fair market value of $8.80 per share convertible into common stock at the
conversion price of $13.20 per share were issued for advertising.
* In October 1998, 64,233 shares of Series C convertible preferred stock with a
fair market value of $8.80 per share convertible into common stock at the
conversion price of $13.20 per share were issued for advertising.
* In November and December 1998, warrants to purchase 439,800 shares of common
stock at $13.20 per share were issued to investors in Series C convertible
preferred stock in exchange for a commitment to fund start-up activities of a
Pan-European entity in which the Company may invest with the investors.
* In December 1998, a warrant to purchase 300,000 shares of common stock at
$13.20 per share was issued to an investor in exchange for involvement in
broadband application project.
The accompanying notes are an integral part of these consolidated
statements.
F-6
<PAGE> 88
AUTOBYTEL.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data.)
1. ORGANIZATION AND OPERATIONS OF AUTOBYTEL.COM
autobytel.com inc. (Autobytel.com) is a branded Internet site for new and
pre-owned vehicle information and purchasing services. Through its Web site
(www.autobytel.com), consumers can research pricing, specifications and other
information related to new and pre-owned vehicles and, when consumers indicate
they are ready to buy, can be connected to Autobytel.com's network of
participating dealers. Autobytel.com also provides other related services such
as financing, leasing, vehicle warranties and insurance. Autobytel.com's
services are free to consumers and, to date, Autobytel.com has derived
substantially all of its revenues from fees paid by subscribing dealers located
in the United States and Canada.
Auto-By-Tel, LLC (ABT), Autobytel.com's predecessor, was organized in
January 1995 and commenced operations as a California limited liability company
in March 1995. ABT Acceptance Company, LLC (ABTAC), an affiliated company under
common control, was formed in February 1996. ABT and ABTAC (the LLCs) were
reorganized in May 1996 as a Delaware corporation pursuant to the terms of a
Contribution Agreement and Plan of Organization (the Plan of Organization)
entered into by all of the members of the LLCs (See Note 7). As the LLCs were
under common control, the reorganization was accounted for in a manner similar
to a pooling-of-interests, whereby the assets and liabilities of ABT and ABTAC
were transferred to Autobytel.com at their historical cost.
Since inception, Autobytel.com has invested the majority of its efforts in
marketing its brand name and developing infrastructure to support anticipated
future operating growth. As a result, Autobytel.com has experienced significant
operating losses and had an accumulated deficit of $43,273 at December 31, 1998.
To date, such losses have been financed primarily through private placements of
preferred stock (See Note 7).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Autobytel.com, its predecessors (See Note 1) and its wholly-owned subsidiaries:
Autobytel Services Corporation, Autobytel Acceptance Corporation, Autobytel
Insurance Services, Inc., Autobytel.ca Inc., Kre8.net, Inc., Auto-By-Tel
International LLC, Auto-by-Tel UK Limited and AutoVisions Communications, Inc.
All intercompany transactions and balances have been eliminated.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-7
<PAGE> 89
AUTOBYTEL.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Cash and Cash Equivalents
For the purposes of the consolidated balance sheets and the consolidated
statements of cash flows, Autobytel.com considers all highly liquid investments
with an original maturity of three months or less to be cash equivalents.
Concentration of Credit Risk
Financial instruments that potentially subject Autobytel.com to significant
concentrations of credit risk consist primarily of accounts receivable. To date,
accounts receivable have primarily been derived from marketing fees billed to
subscribing dealers located in the United States and Canada. Autobytel.com
generally requires no collateral to support customer receivables. Autobytel.com
maintains reserves for potential credit losses. Historically, such losses have
been minor and within management's expectations. As of December 31, 1997 and
1998, no subscribing dealer accounted for greater than 10% of accounts
receivable.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the respective
assets, generally three years. Amortization of leasehold improvements is
provided using the straight-line method over the lesser of the remaining lease
term or the estimated useful lives of the improvements.
Stock-Based Compensation
In 1996, Autobytel.com adopted Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation." Autobytel.com has elected to continue accounting for
stock-based compensation issued to employees using Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and, accordingly,
pro forma disclosures required under SFAS No. 123 have been presented (See Note
8).
Revenue Recognition
Substantially all revenues to date consist of fees paid by subscribing
dealers. These fees are comprised of an initial fee, a monthly fee and, through
fiscal 1997, an annual fee. In January 1998, Autobytel.com started to eliminate
annual fees and increase monthly fees to subscribing dealers. The initial fee
and annual fee are recognized ratably over the service period of 12 months. The
monthly fee is recognized in the period services are provided. Deferred revenue
is comprised of unamortized fees.
Risks Due to Concentration of Significant Customers and Export Sales
For all periods presented in the accompanying consolidated statements of
operations, no subscribing dealer accounted for greater than 10% of revenues.
Autobytel.com conducts its business within one industry segment. Revenues
from customers outside of the United States were less than 10% of total revenues
for all periods presented in the accompanying consolidated statements of
operations.
F-8
<PAGE> 90
AUTOBYTEL.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Sales and Marketing
Sales and marketing expense primarily includes advertising and marketing
expenses paid to purchase request providers and developing Autobytel.com's brand
equity, as well as personnel and other costs associated with sales, training and
support of its dealer network. Sales and marketing expense also includes cost of
sales associated with the sale of computers, which was discontinued in February
1999. Sales and marketing costs are recorded as expenses as incurred. For the
years ended December 31, 1996, 1997 and 1998, Internet marketing and advertising
costs were $1,838, $5,828, and $11,090 and television advertising expenses were
$396, $4,048, and $5,296, respectively.
Product and Technology Development
Product and technology development expense primarily includes personnel
costs relating to enhancing the features, content and functionality of
Autobytel.com's Web site and its online dealer information platform (DRT), as
well as expenses associated with its telecommunications and computer
infrastructure. Product and technology development expenditures are expensed as
incurred.
General and Administrative
General and administrative expense primarily consists of executive,
financial and legal personnel expenses and related costs. General and
administrative expense for the year ended December 31, 1997 includes a
non-recurring $1.1 million charge associated with a proposed and withdrawn
initial public offering in March 1997.
Foreign Currency Translation
The functional currency of Autobytel.com's subsidiaries is the local
currency. Accordingly, all assets and liabilities are translated into United
States dollars at the current exchange rate as of the applicable balance sheet
date. Revenues and expenses are translated at the average exchange rate
prevailing during the period. Gains and losses resulting from the translation of
the financial statements are reported as a separate component of stockholders'
equity.
Computation of Basic Net Loss Per Share and Pro Forma Basic Net Loss Per
Share
Historical net loss per share has been calculated under SFAS No. 128,
"Earnings per Share." SFAS No. 128 requires companies to compute earnings per
share under two different methods (basic and diluted). Basic net loss per share
is calculated by dividing the net loss by the weighted average shares of common
stock outstanding during the period. No diluted loss per share information has
been presented in the accompanying consolidated statements of operations since
potential common shares from the conversion of preferred stock, stock options
and warrants are antidilutive. Autobytel.com evaluated the requirements of the
Securities and Exchange Commission Staff Accounting Bulletin (SAB) No. 98, and
concluded that there are no nominal issuances of common stock or potential
common stock which would be required to be shown as outstanding for all periods
as outlined in SAB No. 98.
F-9
<PAGE> 91
AUTOBYTEL.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Pro forma basic net loss per share has been calculated assuming the
conversion of the outstanding preferred stock into common stock, as if the
shares had been converted on the dates of their issuance.
New Accounting Pronouncements
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and presentation of
comprehensive income. SFAS No. 130, which was adopted by Autobytel.com in the
first quarter of 1998, requires companies to report a new measurement of income.
Comprehensive income (loss) is to include foreign currency translation gains and
losses and other unrealized gains and losses that have historically been
excluded from net income (loss) and reflected instead in equity. The only
comprehensive income included in the accompanying stockholders' equity is
foreign currency translation loss of $19 for the year ended December 31, 1998.
As this amount is not material, comprehensive income (loss) is not presented in
the accompanying consolidated financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." The Company adopted SFAS No. 131 in the
fourth quarter of 1998 (See Note 12).
In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," which is effective
for fiscal years beginning after December 15, 1998. SOP 98-1 provides guidance
on accounting for the costs of computer software developed or obtained for
internal use and defines specific criteria that determine when such costs are
required to be expensed, and when such costs may be capitalized. Autobytel.com
currently expenses software development costs as incurred. Management
anticipates that it will continue to incur such development costs. However,
management expects that, as a percentage of revenues, such costs will remain
consistent.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-up Activities," which is effective for fiscal years beginning after
December 15, 1998. SOP 98-5 provides guidance on the financial reporting of
start-up cost and organization costs and require such costs to be expensed as
incurred. Management believes that the adoption of SOP 98-5 will not have a
material effect on Autobytel.com's consolidated financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for fiscal years
beginning after June 15, 1999. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments. The statement requires that every
derivative instrument be recorded in the balance sheet as either an asset or
liability measured at its fair value, and that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. Autobytel.com does not have any derivative instruments as of
December 31, 1998. Management believes that the adoption of SFAS No. 133 will
not have a material effect on Autobytel.com's consolidated financial statements.
F-10
<PAGE> 92
AUTOBYTEL.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. BUSINESS ACQUISITION
In May 1997, one of Autobytel.com's subsidiaries, Kre8.net, Inc., entered
into an asset purchase agreement with Internet Development Corporation to
purchase certain assets and to assume certain liabilities of the business. The
combined entity develops Web sites for automobile and other industries. The
purchase price for the net assets was $100 in cash.
The acquisition was accounted for by the purchase method. Accordingly, the
purchase price was allocated to the assets acquired and liabilities assumed
based on their estimated fair market values whose fair value equaled book value
at the closing date. The excess of purchase price over the estimated fair value
of net assets acquired was $93, and is being amortized using the straight-line
method over a period of three years. The results of operations of the acquired
business are included in the accompanying consolidated statements of operations
and in Autobytel.com's accumulated deficit beginning in May 1997. Internet
Development Corporation's revenues and results of operations since the date of
acquisition are immaterial.
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1998
------- -------
<S> <C> <C>
Computer software and hardware..................... $ 2,104 $ 2,800
Furniture and equipment............................ 892 1,206
Leasehold improvements............................. 427 561
------- -------
3,423 4,567
Less -- Accumulated depreciation and
amortization..................................... (1,106) (2,359)
------- -------
$ 2,317 $ 2,208
======= =======
</TABLE>
5. COMMITMENTS AND CONTINGENCIES
Operating Leases
Autobytel.com leases its facilities and certain office equipment under
operating leases which expire on various dates through 2001. At December 31,
1998, future minimum lease payments are as follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
-------------------------
<S> <C>
1999................................................... $ 619
2000................................................... 649
2001................................................... 501
2002................................................... --
2003................................................... --
Thereafter............................................. --
------
$1,769
======
</TABLE>
F-11
<PAGE> 93
AUTOBYTEL.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Rent expense was $92, $247, and $491 for the years ended December 31, 1996,
1997 and 1998, respectively.
Marketing and Advertising Agreements
In September 1997, Autobytel.com entered into a three year Internet
marketing agreement with a company that operates a search engine. The agreement
permits Autobytel.com to maintain certain exclusive promotional rights and
linkage with the search engine, and provides for certain advertising. As of
December 31, 1998, the agreement requires minimum future payments of $3.6
million. These amounts are expensed on a straight-line basis over the term of
the agreement.
In June 1998, Autobytel.com entered into a two year Internet marketing
agreement with another company that operates a search engine. The agreement
permits Autobytel.com to maintain certain exclusive promotional rights and
linkage with the search engine. As of December 31, 1998, the agreement requires
minimum future payments of $1.2 million. These amounts are expensed on a
straight-line basis over the term of the agreement.
Autobytel.com also has multi-year agreements with other automotive
information providers that make available to consumers vehicle research data
over the Internet. Such agreements are generally for a term of one to three
years and require that Autobytel.com pay fees to these companies based on the
volume of referrals received by Autobytel.com from these services. As of
December 31, 1998, the minimum future commitments under these agreements were
$0.7 million. These amounts are expensed on a straight-line basis over the terms
of the agreements.
Autobytel.com has agreements with network and cable television stations
under which it has the right to purchase television advertising. As of December
31, 1998, the minimum future commitments under these agreements were $1.7
million. These amounts are expensed as advertising is aired.
For the years ended December 31, 1996, 1997 and 1998, Autobytel.com paid
$2,721, $8,474 and $15,540, respectively, under these marketing and advertising
agreements.
Employment Agreements
Autobytel.com has employment agreements with certain executives under
which, in the event of termination without cause or resignation with a good
reason, the executives are entitled to receive severance payments equal to the
base salary that would have been received by the executives over the remaining
term of the agreements. One of these agreements also provides for an additional
severance payment in the event of a change in control as defined in the
agreement. The term of the agreements range from two to three years.
Litigation
In the normal course of business, Autobytel.com is involved in various
legal proceedings. Based upon the information presently available, management
believes that the
F-12
<PAGE> 94
AUTOBYTEL.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ultimate resolution of any such proceedings will not have a material adverse
effect on Autobytel.com's financial position, liquidity or results of
operations.
6. RETIREMENT SAVINGS PLAN
Autobytel.com has a Retirement Savings Plan (the Retirement Plan) which
qualifies as a deferred salary arrangement under Section 401(k) of the Internal
Revenue Code. The Retirement Plan covers all full time employees of
Autobytel.com who are over 21 years of age and have worked for Autobytel.com for
at least 90 days. Under the Retirement Plan, participating employees are allowed
to defer up to 15% of their pretax salaries up to a maximum of $10,000 per year.
Company contributions to the Retirement Plan are discretionary. Autobytel.com
has made no contributions since the inception of the Retirement Plan.
7. STOCKHOLDERS' EQUITY
Series A Convertible Preferred Stock
In August 1996, the Board of Directors authorized 1,500,000 shares of
Series A convertible preferred stock (Series A Preferred), and Autobytel.com
completed the sale of 1,500,000 shares of Series A Preferred at $10.00 per share
through a private placement offering. Of the total shares sold, 50,000 shares
were issued to an individual in exchange for $500 previously advanced to
Autobytel.com under three notes payable. In addition, $1,081 of the proceeds
were used to repay notes due to Autobytel.com's former Chairman and co-founder.
The Series A Preferred will be automatically converted into 1,666,667
shares of common stock at the conversion ratio of approximately 1:1.11 upon the
earliest of (i) the closing of an underwritten public offering of
Autobytel.com's common stock with a minimum per share price of $13.50 per share,
and minimum aggregate offering price of $30 million; (ii) the consent of
two-thirds of the holders of preferred stock; or (iii) when fewer than 300,000
shares of Series A Preferred remain outstanding. The Series A Preferred is also
convertible into 1,666,667 shares of common stock at the option of the holder.
Autobytel.com has reserved 1,666,667 shares of common stock to permit the
conversion of the Series A Preferred.
Holders of Series A Preferred are entitled to one vote for each share of
common stock into which such shares of Series A Preferred may be converted
except with respect to election of directors, whereby the holders, voting
separately as a class, are entitled to elect two directors. Each share of Series
A Preferred entitles the holder to receive non-cumulative dividends, if and when
declared by the Board of Directors, prior to any dividend paid on Series B
Preferred or the common stock. Dividends, if any, on Series A Preferred shall be
declared at an annual rate of $0.80 per share. As of December 31, 1998, no
dividends have been declared.
In the event of liquidation, the Series A Preferred has preference over
Series B Preferred and the common stock in the amount of $10.00 per share, plus
declared but unpaid dividends.
F-13
<PAGE> 95
AUTOBYTEL.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Series B Convertible Preferred Stock
In January 1997, the Board of Directors authorized 967,915 shares of Series
B convertible preferred stock (Series B Preferred), and Autobytel.com completed
the sale of 967,915 shares of Series B Preferred at $9.35 per share through a
private placement offering.
The Series B Preferred will be automatically converted into 873,131 shares
of common stock at the conversion ratio of approximately 1:0.90 upon the
earliest of (i) the closing of an underwritten public offering of
Autobytel.com's common stock with a minimum per share price of $13.50 per share,
and minimum aggregate offering price of $30 million; (ii) the consent of
two-thirds of the holders of preferred stock; or (iii) when fewer than 200,000
shares of Series B Preferred remain outstanding. The Series B Preferred is also
convertible into 873,131 shares of common stock at the option of the holder.
Autobytel.com has reserved 873,131 shares of common stock to permit the
conversion of the Series B Preferred.
Holders of Series B Preferred are entitled to one vote for each share of
common stock into which such shares of Series B Preferred may be converted. Each
share of Series B Preferred entitles the holder to receive noncumulative
dividends, if and when declared by the Board of Directors, prior to any dividend
paid on the common stock. Dividends, if any, on Series B Preferred shall be
declared at an annual rate of $0.80 per share. As of December 31, 1998, no
dividends have been declared.
In the event of liquidation, the Series B Preferred has preference over the
common stock in the amount of $9.35 per share, plus declared but unpaid
dividends.
Series C Convertible Preferred Stock
In October 1997, the Board of Directors authorized 2,840,909 shares of
Series C convertible preferred stock (Series C Preferred), and Autobytel.com
completed the sale of 1,477,274 shares of Series C Preferred at $8.80 per share
through a private placement offering. The Board of Directors authorized an
additional 1,136,363 and 3,000,000 shares of Series C Preferred in February and
December 1998, respectively.
In April 1998, Autobytel.com issued 56,776 shares of its Series C Preferred
in payment of television advertising with an estimated fair market value of
$500. The majority of the advertising was aired and expensed in the three months
ended March 31, 1998.
In May 1998, Autobytel.com sold 568,182 shares of the Series C Preferred at
$8.80 per share through a private placement.
In October 1998, Autobytel.com issued 64,233 shares of Series C Preferred
in payment of television advertising with an estimated fair market value of
$565. The amount was expensed in the three months ended December 31, 1998.
In November 1998, Autobytel.com sold 568,182 shares of Series C Preferred
at $8.80 per share through a private placement.
In December 1998, Autobytel.com sold 2,234,091 shares of Series C Preferred
at $8.80 per share through private placements. Of these shares, 1,136,364 shares
were issued
F-14
<PAGE> 96
AUTOBYTEL.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
to an investor with whom Autobytel.com entered into a Directed Proceeds
Agreement. Under the Directed Proceeds Agreement, Autobytel.com is committed to
expend up to $1,000 for the development of technology for broadband
applications. In addition, Autobytel.com issued a warrant for 300,000 shares of
common stock in exchange for the right to participate in the development of this
technology and the warrant holder's agreement to use commercially reasonable
efforts to involve Autobytel.com in other broadband application projects. The
fair value of the warrant ($540) has been recorded as a prepaid expense at
December 31, 1998.
The Series C Preferred will be automatically converted into 3,312,492
shares of common stock at the conversion ratio of approximately 1:0.67 upon the
earliest of (i) the closing of an underwritten public offering of
Autobytel.com's common stock with a minimum per share price of $13.50 per share,
and minimum aggregate offering price of $30 million; (ii) the consent of
two-thirds of the holders of preferred stock; or (iii) when fewer than 250,000
shares of Series C Preferred remain outstanding. The Series C Preferred is also
convertible into 3,312,492 shares of common stock at the option of the holder.
Autobytel.com has reserved 3,312,492 shares of common stock to permit the
conversion of the Series C Preferred.
Holders of Series C Preferred are entitled to one vote for each share of
common stock into which such shares of Series C Preferred may be converted. Each
share of Series C Preferred entitles the holder to receive non-cumulative
dividends, if and when declared by the Board of Directors, prior to any dividend
paid on Series A and Series B Preferred and the common stock. Dividends, if any,
on Series C Preferred shall be declared at an annual rate of $0.80 per share. As
of December 31, 1998, no dividends have been declared.
In the event of liquidation, the Series C Preferred has preference over
Series A and Series B Preferred and the common stock in the amount of $8.80 per
share, plus declared but unpaid dividends.
As of December 31, 1998, 2,000,000 shares of preferred stock were
undesignated.
Common Stock
Under the terms of the Plan of Organization, the interests of the members
of the LLCs were transferred to autobytel.com inc. in a tax-free transaction. In
consideration for their respective ownership interests, the members of ABT and
ABTAC received 8,250,000 shares of common stock of Autobytel.com.
Warrants
In November 1998, Autobytel.com issued a warrant to purchase 150,000 shares
of common stock to an investor in its Series C Preferred in exchange for the
investor's commitment to fund organizational and start-up activities related to
a Pan-European entity in which Autobytel.com may invest with the investor. The
warrant is exercisable at $13.20 per share and expires in November 2001. The
warrant was valued at $270, which was expensed in the three months ended
December 31, 1998.
In December 1998, Autobytel.com issued warrants to purchase 289,800 shares
of common stock to another investor in its Series C Preferred in exchange for
the investor's
F-15
<PAGE> 97
AUTOBYTEL.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
commitment to fund organizational and start-up activities related to
Pan-European entity in which Autobytel.com may invest with the investor. The
warrants are exercisable at $13.20 per share and expire in December 2001. The
warrants were valued at $522, which was expensed in the three months ended
December 31, 1998.
In December 1998, Autobytel.com issued a warrant to purchase 300,000 shares
of common stock to an investor in exchange for the right to participate in the
development of broadband application technology. The warrant is exercisable at
$13.20 per share and expires in December 2001. The warrant was valued at $540,
and is recorded as a prepaid expense at December 31, 1998.
8. STOCK OPTION PLANS
1996 Stock Option Plan
Autobytel.com's 1996 Stock Option Plan (the Option Plan) was approved by
the Board of Directors in May 1996. The Option Plan was terminated by a
resolution of the Board of Directors in October 1996, at which time 870,555
options had been issued. The Option Plan provided for the granting to employees
and directors of incentive stock options within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the Code), and for the granting
to employees, consultants and directors of nonstatutory stock options.
Autobytel.com reserved 1,194,444 shares of common stock for exercise of stock
options under the Option Plan. The exercise price of incentive stock options
granted under the Option Plan could not be lower than the fair market value of
the common stock, and the exercise price of nonstatutory stock options could not
be less than 85% of the fair market value of the common stock, as determined by
the Board of Directors, on the date of grant. With respect to any participants
who, at the time of grant, owned stock that possessed more than 10% of the
voting power of all classes of stock of Autobytel.com, the exercise price of any
stock option granted to such person was to be at least 110% of the fair market
value on the grant date, and the maximum term of such option was five years. The
term of all other options granted under the Option Plan did not exceed 10 years.
Stock options granted under the Option Plan vest according to vesting schedules
determined by the Board of Directors. As of December 31, 1998, options to
purchase an aggregate of 206,388 shares of common stock at an exercise price
ranging from $0.84 to $0.90 per share were outstanding under the Option Plan.
1996 Stock Incentive Plan
Autobytel.com's 1996 Stock Incentive Plan (the Incentive Plan) was approved
by the Board of Directors in October 1996, and was amended in November 1996. The
Incentive Plan provides for the granting to employees and directors of incentive
stock options within the meaning of Section 422 of the Code, and for the
granting to employees, directors and consultants of nonstatutory stock options
and stock purchase rights. Autobytel.com has reserved a total of 833,333 shares
of common stock for issuance under the Incentive Plan. The exercise price of
stock options granted under the Incentive Plan cannot be lower than the fair
market value of the common stock, as determined by the Board of Directors, on
the date of grant. With respect to any participants who, at the time of grant,
own stock possessing more than 10% of the voting power of all classes of stock
of Autobytel.com, the exercise price of stock options granted to such person
must be at least 110% of the fair
F-16
<PAGE> 98
AUTOBYTEL.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
market value on the grant date, and the maximum term of such options is five
years. The term of all other options granted under the Incentive Plan may be up
to 10 years. Stock options granted under the Incentive Plan vest according to
vesting schedules determined by the Board of Directors.
1998 Stock Option Plan
In December 1998, Autobytel.com adopted the 1998 Stock Option Plan (the
1998 Option Plan). Autobytel.com has reserved 1,500,000 shares under the 1998
Option Plan. The 1998 Option Plan provides for the granting to employees of
incentive stock options within the meaning of the Code, and for the granting to
employees of nonstatutory stock options. The exercise price of non-statutory
options granted under the 1998 Option Plan cannot be lower than 85% of the fair
market value of the common stock on the date of grant. The exercise price of all
incentive stock options granted cannot be lower than the fair market value on
the grant date. With respect to any participants who beneficially own more than
10% of the voting power of all classes of stock of Autobytel.com, the exercise
price of any stock option granted to such person must be at least 110% of the
fair market value on the grant date, and the maximum term of such option is five
years. The term of all other options granted under the 1998 Option Plan may be
up to 10 years. Under the 1998 Option Plan, certain nonstatutory stock options
(Performance Options) vest over a time period determined by the Board of
Directors, however, the vesting could be accelerated based on the performance of
Autobytel.com's common stock. In December 1998, the Board of Directors granted
Performance Options to purchase 700,000 shares of common stock to its executives
at an exercise price of $13.20 per share, which represents the fair market value
on the date of grant. These options vest over a seven-year period, but the
vesting could be accelerated based on the performance of Autobytel.com's common
stock. All other stock options granted under the 1998 Option Plan vest according
to vesting schedules determined by the Board of Directors.
The 1998 Option Plan provides that, unless otherwise provided in the stock
option agreement, in the event of any merger, consolidation, or sale or transfer
of all or any part of Autobytel.com's business or assets, all rights of the
optionee with respect to the unexercised portion of any option shall become
immediately vested and may be exercised immediately, except to the extent that
any agreement or undertaking of any party to any such merger, consolidation, or
sale or transfer of assets makes specific provisions for the assumption of the
obligations of Autobytel.com with respect to the 1998 Option Plan.
During the year ended December 31, 1996, Autobytel.com granted options
under the aforementioned plans to purchase an aggregate of 1,568,059 shares of
common stock at various exercise prices ranging from $0.90 to $11.25 per share.
During the year ended December 31, 1996, Autobytel.com recorded, based upon an
independent appraisal obtained by Autobytel.com's Board of Directors, $87 of
deferred compensation expense relating to certain options. This amount was
amortized over the vesting periods of the options. Amortization of deferred
compensation for the years ended December 31, 1996, 1997 and 1998 was $61, $25
and $1, respectively.
During the year ended December 31, 1997, Autobytel.com granted options to
various employees to purchase 853,504 shares of common stock at an exercise
price of $13.20 per share.
F-17
<PAGE> 99
AUTOBYTEL.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
During the year ended December 31, 1998, Autobytel.com granted options to
various employees to purchase 1,630,340 shares of common stock at an exercise
price of $13.20 per share.
In January 1999, Autobytel.com granted options to Hoshi Printer, Senior
Vice President and Chief Financial Officer, to purchase 150,000 shares of common
stock at an exercise price of $13.20 per share.
1996 Employee Stock Purchase Plan
Autobytel.com's 1996 Employee Stock Purchase Plan (the Purchase Plan) was
adopted by the Board of Directors in November 1996. The Purchase Plan, which is
intended to qualify under Section 423 of the Code, permits eligible employees of
Autobytel.com to purchase shares of common stock through payroll deductions of
up to ten percent of their compensation, up to a certain maximum amount for all
purchase periods ending within any calendar year. Autobytel.com has reserved a
total of 444,444 shares of common stock for issuance under the Purchase Plan.
The price of common stock purchased under the Purchase Plan will be 85% of the
lower of the fair market value of the common stock on the first or last day of
each six month purchase period. Employees may end their participation in the
Purchase Plan at any time during an offering period, and they will be paid their
payroll deductions to date. Participation ends automatically upon termination of
employment with Autobytel.com. There have been no stock purchases under the
Purchase Plan. In January 1999, the Board of Directors ratified the suspension
of the Purchase Plan.
F-18
<PAGE> 100
AUTOBYTEL.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A summary of the status of Autobytel.com's stock options as of December 31,
1996, 1997 and 1998, and changes during such periods is presented below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
OPTIONS PRICE
---------- --------
<S> <C> <C>
Outstanding at December 31, 1995................ -- $ --
Granted......................................... 1,568,059 3.24
Exercised....................................... (28,148) 0.90
Canceled........................................ (19,353) 0.90
---------- ------
Outstanding at December 31, 1996................ 1,520,558 3.32
Granted......................................... 853,504 13.20
Exercised....................................... (39,629) 0.90
Canceled........................................ (156,688) 7.88
---------- ------
Outstanding at December 31, 1997................ 2,177,745 6.92
Granted......................................... 1,630,340 13.20
Exercised....................................... (181,012) 0.94
Canceled........................................ (767,733) 6.93
---------- ------
Outstanding at December 31, 1998................ 2,859,340 $10.87
========== ======
Exercisable at December 31, 1996................ 362,958 $ 0.89
========== ======
Exercisable at December 31, 1997................ 858,187 $ 2.78
========== ======
Exercisable at December 31, 1998................ 738,860 $ 6.42
========== ======
Weighted-average fair value of options granted
during 1996 whose exercise price is less than
the market price of the stock on the grant
date (169,445 options)........................ $ 2.45
======
Weighted-average fair value of options granted
during 1996 whose exercise price exceeds the
market price of the stock on the grant date
(1,398,614 options)........................... $ 1.16
======
Weighted-average fair value of options granted
during 1997 whose exercise price equals the
market price of the stock on the grant date
(853,504 options)............................. $ 2.73
======
Weighted-average fair value of options granted
during 1998 whose exercise price equals the
market price of the stock on the grant date
(1,630,340 options)........................... $ 3.25
======
</TABLE>
The fair value of each option granted through December 31, 1998 is
estimated using the Black-Scholes option-pricing model on the date of grant
using the following assumptions: (i) no dividend yield, (ii) volatility of
effectively zero, (iii) weighted-average risk-free interest rate of
approximately 6.70%, 6.18%, and 4.80% for the years ended December 31, 1996,
1997 and 1998, respectively, and (iv) expected life of six years for the years
ended December 31, 1996 and 1997 and four to seven years for the year ended
December 31, 1998.
F-19
<PAGE> 101
AUTOBYTEL.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table summarizes information about stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------- --------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
NUMBER OF REMAINING LIFE AVERAGE NUMBER OF AVERAGE
EXERCISE PRICE OPTIONS (IN YEARS) EXERCISE PRICE OPTIONS EXERCISE PRICE
- -------------- --------- -------------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C>
0$.84......... 166,667 7.5 $ 0.84 166,667 $ 0.84
0.90......... 39,721 7.5 0.90 39,442 0.90
4.50......... 466,666 7.8 4.50 279,444 4.50
11.25........ 24,443 7.9 11.25 16,294 11.25
13.20........ 2,161,843 9.5 13.20 237,013 13.20
--------- --- ------ ------- ------
0$.84-$13.20.. 2,859,340 9.1 $10.87 738,860 $ 6.42
========= === ====== ======= ======
</TABLE>
Had compensation cost for Autobytel.com's stock option grants for its
stock-based compensation plans been determined consistent with SFAS No. 123,
Autobytel.com's net loss and net loss per share for the years ended December 31,
1996, 1997 and 1998 would approximate the pro forma amounts below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
------- -------- --------
<S> <C> <C> <C>
Net loss, as reported.................. $(6,035) $(16,810) $(19,398)
Net loss per share, as reported........ (0.73) (2.03) (2.30)
Net loss, pro forma.................... (6,270) (17,624) (21,109)
Net loss per share, pro forma.......... (0.76) (2.13) (2.51)
</TABLE>
The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts.
9. SALE OF AUTO-BY-TEL UK LIMITED
In November 1998, Autobytel.com entered into an agreement with Inchcape
Automotive Limited to sell 100 percent of its United Kingdom operations for a
nominal cash amount and assumption of liabilities of $1,794. The sale resulted
in a gain of $1,408, which is included in other income in the accompanying
consolidated statements of operations. In addition, Autobytel.com entered into a
License and Service Agreement with Auto-By-Tel UK Limited, under which it will
grant a license to use its proprietary software, technology and other business
procedures and provide maintenance and support in exchange for minimum annual
license and maintenance payments of $850 and $250, respectively, over a 20-year
period. No revenues were recognized under the License and Service Agreement in
the year ended December 31, 1998. License revenue will be recognized ratably
over the term of the agreement. Maintenance revenue will be recognized ratably
over the service period. Revenue attributable to significant support will be
based on the price charged or derived value of the undelivered elements and will
be recognized ratably over the term of the agreement.
F-20
<PAGE> 102
AUTOBYTEL.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. INCOME TAXES
Through May 1996, the LLCs were taxed as partnerships under the provisions
of the Internal Revenue Code of 1986 (Internal Revenue Code). Under those
provisions, Autobytel.com was not subject to corporate income taxes on its
taxable income. Instead, Autobytel.com's taxable income or loss was included in
the individual income tax returns of its members. Effective May 31, 1996, under
the terms of the Plan of Organization, the LLCs were reorganized as a C
Corporation under the provisions of the Internal Revenue Code (See Note 1). The
reorganization required that Autobytel.com adopt SFAS No. 109, "Accounting for
Income Taxes." Under SFAS No. 109, deferred income tax assets and liabilities
are determined based on the differences between the book and tax basis of assets
and liabilities and are measured using the currently enacted tax rates and laws.
The cumulative tax effect of these temporary differences was immaterial at the
time of the reorganization.
No provision for federal income taxes has been recorded as Autobytel.com
incurred net operating losses through December 31, 1998. Provision for income
taxes included in the accompanying consolidated statements of operations
primarily consists of franchise taxes paid to the state of Delaware. As of
December 31, 1998, Autobytel.com had approximately $37.1 million and $18.4
million of federal and state net operating loss carryforwards available to
offset future taxable income; such carry forwards expire in various years
through 2018. Under the Tax Reform Act of 1986, the amounts of and benefits from
Autobytel.com's net operating loss carryforwards will likely be limited upon the
completion of the initial public offering due to a cumulative ownership change
of more than 50% over a three year period. Based on preliminary estimates,
management believes the effect of such limitation, if imposed, will not have a
material adverse effect on Autobytel.com.
Net deferred income tax assets, totaling approximately $6.3 million at
December 31, 1997 and $15.8 million at December 31, 1998, consist primarily of
the tax effect of net operating loss carry forwards, reserves and accrued
expenses which are not yet deductible for tax purposes. Autobytel.com has
provided a full valuation allowance on these deferred income tax assets because
of the uncertainty regarding their realization.
11. RELATED PARTY TRANSACTIONS
Peter R. Ellis
In March 1998, Autobytel.com extended a $250 loan to co-founding member and
stockholder, Peter R. Ellis. The loan bears interest at 8% per annum compounded
annually and principal and accrued interest are due in full in March 2003. The
loan is secured by Mr. Ellis's stock in Autobytel.com. In June 1998, Mr. Ellis
resigned from Autobytel.com as Chief Executive Officer. In August 1998,
Autobytel.com executed a two year agreement with Mr. Ellis to provide advisory
services. Under the agreement, Mr. Ellis received $500 in the first year and is
entitled to receive $5 per month in the second year of the agreement term. The
amounts paid to Mr. Ellis under this agreement are included in operating
expenses in the accompanying consolidated statements of operations.
F-21
<PAGE> 103
AUTOBYTEL.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. BUSINESS SEGMENT
Autobytel.com conducts its business within one business segment, which is
defined as providing online vehicle purchasing and other related services.
13. SUBSEQUENT EVENTS
Proposed Initial Public Offering
In January 1999, the Board of Directors authorized the filing of a
registration statement with the Securities and Exchange Commission to permit
Autobytel.com to sell shares of its common stock in connection with the proposed
initial public offering (IPO). If the offering is consummated under the terms
presently anticipated, the Series A, the Series B and the Series C Preferred
(collectively Preferred Stock) outstanding at December 31, 1998 will
automatically convert to common stock upon closing of the IPO (See Note 7).
1999 Stock Option Plan
In January 1999, the Board of Directors adopted the 1999 Stock Option Plan
(the 1999 Option Plan). Autobytel.com has reserved 1,800,000 shares under the
1999 Option Plan. The 1999 Option Plan provides for the granting of stock
options to key employees of Autobytel.com. Under the 1999 Option Plan, not more
than 1,000,000 shares may be granted after March 31, 1999. The 1999 Option Plan
provides for an automatic grant of an option to purchase 20,000 shares of common
stock to each non-employee director on the date on which the person first
becomes a non-employee director. In each successive year the non-employee
director shall automatically be granted an option to purchase 5,000 shares on
November 1 of each subsequent year provided the non-employee director has served
on the Board for at least six months. Each option shall have a term of 10 years.
Such options vest in their entirety and become exercisable on the first
anniversary of the grant date, provided that the optionee continues to serve as
a director on such date and the exercise price per share shall be 100% of the
fair market value of Autobytel.com's common stock on the date of grant. The 1999
Option Plan is identical in all other material respects to the 1998 Option Plan.
Rescission Offer for Stock Options Granted in Excess of the 1996 Incentive
Plan Limit
From May 1997 to January 1999, Autobytel.com issued grants of incentive
stock options in excess of the plan limit of 833,333 shares. Subsequent to
December 31, 1998, Autobytel.com offered to exchange the affected options for a
cash payment or a new grant of incentive stock options under the 1999 Option
Plan. In 1999, Autobytel.com has resolved this matter without a material impact
on its financial statements. Total cash payments were less than $10. The new
stock options were granted at the fair market value at the date of the new
grant, which equaled the exercise price of the original options. All other
significant provisions associated with the options remained the same.
[The inside back cover of the prospectus depicts a map of the United States with
dots generally representing the territories covered by United States dealers
participating in the Autobytel.com network.]
F-22
<PAGE> 104
- ------------------------------------------------------
- ------------------------------------------------------
YOU MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS
PROSPECTUS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR SALE OF COMMON STOCK
MEANS THAT INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AFTER THE DATE OF
THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR SOLICITATION OF AN
OFFER TO BUY THESE SHARES OF COMMON STOCK IN ANY CIRCUMSTANCES UNDER WHICH THE
OFFER OR SOLICITATION IS UNLAWFUL.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary...................... 3
Risk Factors............................ 6
Use of Proceeds......................... 19
Dividend Policy......................... 19
Capitalization.......................... 20
Dilution................................ 21
Selected Consolidated Financial Data.... 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 23
Business................................ 33
Management.............................. 48
Financings and Related Party
Transactions.......................... 61
Principal and Selling Stockholders...... 65
Description of Capital Stock............ 67
Shares Eligible for Future Sale......... 70
Certain United States Tax Considerations
for Non-U.S. Holders.................. 72
Underwriting............................ 77
Legal Matters........................... 79
Experts................................. 79
Additional Information.................. 79
Index to Consolidated Financial
Statements............................ F-1
</TABLE>
------------------
UNTIL , 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
THAT BUY, SELL OR TRADE THESE SHARES OF COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
4,500,000 SHARES
LOGO
AUTOBYTEL.COM INC.
COMMON STOCK
-------------------
PROSPECTUS
-------------------
BT ALEX. BROWN
LEHMAN BROTHERS
PAINEWEBBER INCORPORATED
------------------
, 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 105
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, to be paid in connection with the sale
of the common stock being registered, all of which will be paid by the
Registrant. All amounts are estimates except the SEC registration, NASD and
Nasdaq filing fees.
<TABLE>
<S> <C>
SEC Registration fee....................................... $ 26,000
NASD filing fee............................................ 9,000
Nasdaq National Market listing fee......................... 95,000
Blue Sky fees and expenses................................. 5,000
Accounting fees and expenses............................... 453,000
Legal fees and expenses.................................... 585,000
Transfer agent and registrar fees.......................... 15,000
Printing and engraving expenses............................ 300,000
Miscellaneous expenses..................................... 77,000
----------
Total............................................ $1,565,000
==========
</TABLE>
- -------------------------
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware Law General Law ("Delaware Law") and
Autobytel.com's certificate of incorporation provide for indemnification of
Autobytel.com's directors and officers in a variety of circumstances which may
include liabilities under the Securities Act. Article IX of Autobytel.com's
certificate of incorporation provides that Autobytel.com shall indemnify to the
full extent permitted by the laws of Delaware, as from time to time in effect,
the persons described in Section 145 of Delaware Law.
The general effect of the provisions in our certificate of incorporation
and Delaware Law is to provide that we shall indemnify our directors and
officers against all liabilities and expenses actually and reasonably incurred
in connection with the defense or settlement of any judicial or administrative
proceedings in which they have become involved by reason of their status as
corporate directors or officers, if they acted in good faith and in the
reasonable belief that their conduct was neither unlawful (in the case of
criminal proceedings) nor inconsistent with the best interests of Autobytel.com.
With respect to legal proceedings by or in the right of Autobytel.com in which a
director or officer is adjudged liable for improper performance of his duty to
Autobytel.com or another enterprise which such person served in a similar
capacity at the request of Autobytel.com, indemnification is limited by such
provisions to that amount which is permitted by the court.
We will maintain officers' and directors' liability insurance which will
insure against liabilities that our officers and directors may incur in such
capacities. We have also entered into indemnification agreements with its
directors and officers.
Reference is made to the Proposed Form of Underwriting Agreement filed as
Exhibit 1.1 which provides for indemnification of the directors and officers of
Autobytel.com signing the Registration Statement and certain controlling persons
of
II-1
<PAGE> 106
Autobytel.com against certain liabilities, including those arising under the
Securities Act in certain instances, of the Underwriters.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since Autobytel.com's inception, Autobytel.com has made the following sales
of securities that were not registered under the Securities Act:
1. On May 31, 1996, Autobytel.com issued and sold 8,250,000 shares of
common stock in exchange for membership interests in Autobytel LLC and
Autobytel Acceptance Corporation LLC.
2. During the period from May 18, 1996 through December 31, 1998,
Autobytel.com granted options to purchase an aggregate of 2,847,496 shares
of common stock pursuant to the 1996 Stock Option Plan, 1996 Stock
Incentive Plan and 1998 Stock Option Plan of which 248,788 options have
been exercised.
3. On August 20, 1996, Autobytel.com issued and sold 1,500,000 shares
of series A preferred stock in a private placement for an aggregate
consideration of $15.0 million in cash and cancellation of indebtedness. In
connection with such financing, Autobytel.com issued (i) 200,000 shares to
ContiTrade Services L.L.C. in exchange for $2.0 million in cash, (ii)
400,000 shares to National Union Fire Insurance company of Pittsburgh, PA
in exchange for $4.0 million in cash, (iii) 800,000 shares to General
Electric Capital Corporation in exchange for $8.0 million in cash, and (iv)
100,000 shares to Michael Fuchs in exchange for $1.0 million in cash and
cancellation of indebtedness.
4. On August 26, 1996, Autobytel.com issued and sold 6,667 shares to
a consultant of Autobytel.com.
5. On January 30, 1997, Autobytel.com issued and sold 967,915 shares
of series B preferred stock in a private placement for an aggregate
consideration of $9.05 million in cash. In connection with such financing,
Autobytel.com issued (i) 133,690 shares to ContiTrade Services L.L.C. in
exchange for $1.25 million in cash, (ii) 267,380 shares to National Union
Fire Insurance Company of Pittsburgh, PA in exchange for $2.5 million in
cash, (iii) 534,760 shares to General Electric Capital Corporation in
exchange for $5.0 million in cash, (iv) 32,085 shares to Michael Fuchs in
exchange for $300 thousand in cash.
6. On October 21, 1997, Autobytel.com issued and sold 1,477,274
shares of series C preferred stock in a private placement for an aggregate
consideration of $13.0 million in cash. In connection with such financing,
Autobytel.com issued (i) 681,819 shares to General Electric Capital
Corporation in exchange for approximately $6.0 million in cash; (ii)
227,273 shares to National Union Fire Insurance Company of Pittsburgh in
exchange for approximately $2.0 million in cash; and (iii) 568,182 shares
to Tozer Kemsley and Millbourn Automotive Ltd., a unit of Inchcape Motors
International plc in exchange for approximately $5.0 million in cash.
7. On January 30, 1998, Autobytel.com issued to John M. Markovich a
warrant to purchase 33,333 shares of common stock of Autobytel.com (after
adjustment for the Reverse Split) at an exercise price of $11.25 per share.
The warrant expires on January 30, 2003.
8. On April 20, 1998, Autobytel.com entered into a transaction with
National Broadcasting Company, Inc. ("NBC") whereby Autobytel.com issued
and sold 56,776
II-2
<PAGE> 107
shares of series C preferred stock in exchange for prime time advertisement
spots with a fair market value of not less than $499,629.
9. On May 7, 1998 Autobytel.com issued and sold 568,182 shares of
series C preferred stock to Bilia AB in a private placement for a total
consideration of approximately $5.0 million in cash.
10. On October 30, 1998, Autobytel.com entered into another
transaction with NBC whereby Autobytel.com issued and sold 64,233 shares of
Series C Stock in exchange for prime time advertisement spots with a fair
market value of not less than $565,250.
11. On November 10, 1998, Autobytel.com issued and sold 568,182 shares
of Series C Stock to Invision AG for a total consideration of approximately
$5,000,000 in cash.
12. On November 10, 1998, Autobytel.com issued to Invision AG a
warrant to purchase an aggregate of 150,000 shares of common stock of
Autobytel.com at an exercise price of $13.20 per share. This warrant
expires on November 10, 2001.
13. On December 16, 1998, Autobytel.com issued and sold 643,182 shares
of Series C Stock to Aureus Private Equity AG for a total consideration of
approximately $5,660,000 in cash.
14. On December 16, 1998, Autobytel.com issued to Aureus Private
Equity AG a warrant to purchase an aggregate of 169,800 shares of common
stock of Autobytel.com at an exercise price of $13.20 per share. This
warrant expires on December 16, 2001.
15. On December 21, 1998, Autobytel.com issued and sold 1,136,364
shares of Series C Stock to MediaOne Interactive Services, Inc. for a total
consideration of approximately $10,000,000 in cash.
16. On December 21, 1998, Autobytel.com issued to MediaOne Interactive
Services, Inc. a warrant to purchase an aggregate of 300,000 shares of
common stock of Autobytel.com at an exercise price of $13.20 per share.
This warrant expires on December 21, 2001.
17. On December 23, 1998, Autobytel.com issued an additional warrant
to Aureus Private Equity AG to purchase 120,000 shares of common stock of
Autobytel.com at an exercise price of $13.20 per share. This warrant
expires on December 23, 2001.
18. On December 24, 1998, Autobytel.com issued and sold an additional
454,545 shares of Series C Stock to Aureus Private Equity AG for a total
consideration of approximately $4,000,000 in cash.
19. On December 30, 1998, Autobytel.com issued and sold 1,000 shares
of Common Stock to Mr. Kaplan for a total consideration of $13,200 in cash.
None of the foregoing transactions involved any underwriters, underwriting
discounts or commissions, or any public offering, and Autobytel.com believes
that each transaction was exempt from the registration requirements of the
Securities Act by virtue of Section 4(2) thereof, Regulation D promulgated
thereunder or Rule 701 pursuant to compensatory benefit plans and contracts
relating to compensation as provided under Rule 701. We did not engage in any
general solicitation in connection with such sales and, other than Rule 701
issuances, believe that each acquiror qualifies as an "accredited
II-3
<PAGE> 108
investor" under Rule 501. In addition, the recipients in such transaction
represented their intention to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof, and
appropriate legends were affixed to the share certificates and instruments
issued in such transactions.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
a. Exhibits
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<S> <C>
1.1* Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation of
autobytel.com inc. certified by the Secretary of State of
Delaware (filed December 14, 1998 and amended March 1, 1999)
3.2 Amended and Restated Bylaws of autobytel.com inc.
4.1 Form of Stock Certificate
4.2** Amended and Restated Investors' Rights Agreement dated
October 21, 1997, as amended from time to time, between
autobytel.com inc. and the Investors named in Exhibit A
thereto
4.3 Form of Lock-Up Agreement
5.1** Opinion and Consent of Paul, Hastings, Janofsky & Walker LLP
9.1** Voting Proxy dated January 11, 1999 by Peter R. Ellis
10.1** Form of Indemnification Agreement between autobytel.com inc.
and its directors and officers
10.2** Employment Agreement dated July 1, 1998 between
autobytel.com inc. and Mark W. Lorimer
10.3* Employment Agreement dated December 17, 1998 between
autobytel.com inc. and Anne Delligatta
10.4 Amended and Restated Employment and Severance Agreement
dated March 4, 1999 between autobytel.com inc. and Michael
J. Lowell
10.5** 1996 Stock Option Plan and related agreements
10.6** 1996 Stock Incentive Plan and related agreements
10.7** 1996 Employee Stock Purchase Plan
10.8** 1998 Stock Option Plan
10.9** Marketing Agreement dated July 22, 1996, as amended on July
23, 1996, by and among Auto-By-Tel Acceptance Corporation, a
subsidiary of the Registrant ("ABTAC"), the Registrant, as
guarantor of the obligations of ABTAC, and AIU Insurance
Company, American International South Insurance Company,
American Home Assurance Company, American International
Insurance Company, American International Insurance Company
of California, Inc., Illinois National Insurance Company,
Minnesota Insurance Company, National Union Fire Insurance
Company of Pittsburgh, PA and the Insurance Company of the
State of Pennsylvania
10.10** Marketing Agreement dated February 8, 1996 between
Auto-By-Tel, LLC and Edmund Publications Corp.
10.11** Amendment to Marketing Agreement dated February 8, 1996
between Edmund Publications Corp. and the Registrant
10.12** Form of Dealership Agreements
</TABLE>
II-4
<PAGE> 109
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<S> <C>
10.13** Financing Inquiry Referral Agreement dated October 25, 1996
among Auto-By-Tel, Inc, as guarantor, Auto-By-Tel Acceptance
Corporation and Chase Manhattan Automotive Finance
Corporation
10.14** Marketing and Application Processing Agreement dated
February 1, 1997 between General Electric Capital Auto
Financial Services, Inc., Auto-By-Tel Acceptance Corporation
("ABTAC") and Auto-By-Tel, Inc., as guarantor
10.15 Content License and Channel Sponsorship Term Sheet dated
September 12, 1997 between Excite, Inc. and Auto-By-Tel
10.16** Data License and Web Site Agreement dated April 1, 1997
between IntelliChoice, Inc. and Auto-By-Tel Marketing
Corporation and the Registrant
10.17** Kelley Blue Book/Auto-By-Tel Agreement dated November 19,
1997, as amended July 1, 1998, between Kelley Blue Book and
Auto-By-Tel Corporation
10.18** Listings Distribution, Sponsorship, Display Advertising and
Network Affiliation Agreement dated May 29, 1997 between
Classifieds2000, Inc. and Auto-By-Tel Corporation
10.19** License Agreement dated June 4, 1998 among J.D. Power and
Associates, Auto-By-Tel Marketing Corporation, and the
Registrant
10.20** Site Page Sponsorship and Commission Agreement dated June
25, 1997, between Auto-By-Tel Marketing Corporation and AT&T
Corporation
10.21** Letter agreement dated April 1, 1997, between Auto-By-Tel
Marketing Corporation and NBC Multimedia Inc.
10.22 Sponsorship Agreement, dated as of June 24, 1998, between
Excite, Inc. and Auto-By-Tel Corporation
10.23** License and Services Agreement dated August 7, 1998 between
autobytel.com inc. and Auto-By-Tel AB
10.24** License and Services Agreement dated November 23, 1998
between autobytel.com inc. and Auto-by-Tel UK Limited
10.25** Share Purchase Agreement dated November 23, 1998 between
autobytel.com inc. and Inchcape Automotive Limited
10.26** Financing Inquiry Referral Agreement dated December 31, 1998
between Provident Bank, Auto-By-Tel Acceptance Corporation
and autobytel.com inc., as guarantor
10.27** Procurement and Trafficking Agreement dated September 24,
1998 between DoubleClick Inc. and autobytel.com inc.
10.28** Loan Agreement dated November 18, 1998 between Ann Benvenuto
and autobytel.com inc.
10.29** Advisory Agreement dated August 20, 1998 between
autobytel.com inc. and Peter R. Ellis
10.30** 1999 Stock Option Plan
10.31** Form of Gold Term Subscription Agreement
10.32** Form of Platinum Term Continuation Rider
10.33 Marketing Agreement dated February 18, 1999 between
autobytel.com inc. and Lycos, Inc.
</TABLE>
II-5
<PAGE> 110
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<S> <C>
11.1** Statement Regarding Computation of Per Share Earnings
21.1 Subsidiaries of autobytel.com inc.
23.1 Consent of Arthur Andersen LLP, Independent Public
Accountants
23.2** Consent of Paul, Hastings, Janofsky & Walker LLP (reference
is made to Exhibit 5.1)
23.3* Consent of CNW Marketing Research
24.1 Power of Attorney (reference is made to the signature page)
27.1** Financial Data Schedule
</TABLE>
- -------------------------
* To be filed by Amendment.
** Previously filed.
(b) Financial Statement Schedules
ITEM 17. UNDERTAKINGS
(a) The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted against the
Registrant by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
(c) The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed as part of this Registration Statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act (sec.
230.424(b)(1) or (4) or 230.497(h)) shall be deemed to be part of this
Registration Statement as of the time the Commission declared it effective.
(2) For purposes of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement for the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-6
<PAGE> 111
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 2 to the Registration Statement to
be signed on its behalf by the undersigned, hereunto duly authorized, in the
City of Irvine, State of California, on March 5, 1999.
autobytel.com inc.
By: /s/ MARK W. LORIMER
-----------------------------------
Name: Mark W. Lorimer
Title: Chief Executive Officer,
President and
Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that Richard Post constitutes and
appoints Mark W. Lorimer and Hoshi Printer, and each of them, as his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for Richard Post and in his name, place and stead, in any and
all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission and any other regulatory authority, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as
Richard Post might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or either of them, or their or such
person's substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
<TABLE>
<C> <S> <C>
/s/ RICHARD POST Director March 5, 1999
- ------------------------------------------------
Richard Post
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 2 to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
* Chairman of the Board March 5, 1999
- ------------------------------------------------ and Director
Michael Fuchs
* Director March 5, 1999
- ------------------------------------------------
Jeffrey H. Coats
* Director March 5, 1999
- ------------------------------------------------
Mark N. Kaplan
</TABLE>
II-7
<PAGE> 112
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
* Director March 5, 1999
- ------------------------------------------------
Kenneth J. Orton
* Executive Vice March 5, 1999
- ------------------------------------------------ President and Director
Robert S. Grimes
/s/ MARK W. LORIMER Chief Executive March 5, 1999
- ------------------------------------------------ Officer, President and
Mark W. Lorimer Director (Principal
Executive Officer)
/s/ HOSHI PRINTER Senior Vice President March 5, 1999
- ------------------------------------------------ and Chief Financial
Hoshi Printer Officer (Principal
Financial Officer and
Principal Accounting
Officer)
* Executive Vice March 5, 1999
- ------------------------------------------------ President and Chief
Ann M. Delligatta Operating Officer
* Director March 5, 1999
- ------------------------------------------------
Peter Titz
/s/ RICHARD POST Director March 5, 1999
- ------------------------------------------------
Richard Post
*By: /s/ HOSHI PRINTER
---------------------------------------
Hoshi Printer, Attorney-in-Fact
</TABLE>
II-8
<PAGE> 113
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
PAGE
NUMBER DESCRIPTION NUMBER
------ ----------- ------------
<S> <C> <C>
1.1* Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation of
autobytel.com inc. certified by the Secretary of State
of Delaware (filed December 14, 1998 and amended March
1, 1999)
3.2 Amended and Restated Bylaws of autobytel.com inc.
4.1 Form of Stock Certificate
4.2** Amended and Restated Investors' Rights Agreement dated
October 21, 1997 as amended from time to time, between
autobytel.com inc. and the Investors named in Exhibit
A thereto
4.3 Form of Lock-Up Agreement
5.1** Opinion and Consent of Paul, Hastings, Janofsky &
Walker LLP
9.1** Voting Proxy dated January 11, 1999 by Peter R. Ellis
10.1** Form of Indemnification Agreement between
autobytel.com inc. and its directors and officers
10.2** Employment Agreement dated July 1, 1998 between
autobytel.com inc. and Mark W. Lorimer
10.3* Employment Agreement dated December 17, 1998 between
autobytel.com.inc. and Anne Delligatta
10.4 Amended and Restated Employment and Severance
Agreement dated March 5, 1999 between
autobytel.com.inc. and Michael J. Lowell
10.5** 1996 Stock Option Plan and related agreements
10.6** 1996 Stock Incentive Plan and related agreements
10.7** 1996 Employee Stock Purchase Plan
10.8** 1998 Stock Option Plan
10.9** Marketing Agreement dated July 22, 1996, as amended on
July 23, 1996, by and among Auto-By-Tel Acceptance
Corporation, a subsidiary of the Registrant ("ABTAC"),
the Registrant, as guarantor of the obligations of
ABTAC, and AIU Insurance Company, American
International South Insurance Company, American Home
Assurance Company, American International Insurance
Company, American International Insurance Company of
California, Inc., Illinois National Insurance Company,
Minnesota Insurance Company, National Union Fire
Insurance Company of Pittsburgh, PA and the Insurance
Company of the State of Pennsylvania
10.10** Marketing Agreement dated February 8, 1996 between
Auto-By-Tel, LLC and Edmund Publications Corp.
</TABLE>
<PAGE> 114
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
PAGE
NUMBER DESCRIPTION NUMBER
------ ----------- ------------
<S> <C> <C>
10.11** Amendment to Marketing Agreement dated February 8,
1996 between Edmund Publications Corp. and the
Registrant
10.12** Form of Dealership Agreements
10.13** Financing Inquiry Referral Agreement dated October 25,
1996 among Auto-By-Tel, Inc, as guarantor, Auto-By-Tel
Acceptance Corporation and Chase Manhattan Automotive
Finance Corporation
10.14** Marketing and Application Processing Agreement dated
February 1, 1997 between General Electric Capital Auto
Financial Services, Inc., Auto-By-Tel Acceptance
Corporation ("ABTAC") and Auto-By-Tel, Inc., as
guarantor
10.15 Content License and Channel Sponsorship Term Sheet
dated September 12, 1997 between Excite, Inc. and
Auto-By-Tel
10.16** Data License and Web Site Agreement dated April 1,
1997 between IntelliChoice, Inc. and Auto-By-Tel
Marketing Corporation and the Registrant
10.17** Kelley Blue Book/Auto-By-Tel Agreement dated November
19, 1997, as amended July 1, 1998, between Kelley Blue
Book and Auto-By-Tel Corporation
10.18** Listings Distribution, Sponsorship, Display
Advertising and Network Affiliation Agreement dated
May 29, 1997 between Classifieds2000, Inc. and
Auto-By-Tel Corporation
10.19** License Agreement dated June 4, 1998 among J.D. Power
and Associates, Auto-By-Tel Marketing Corporation, and
the Registrant
10.20** Site Page Sponsorship and Commission Agreement dated
June 25, 1997, between Auto-By-Tel Marketing
Corporation and AT&T Corporation
10.21** Letter agreement dated April 1, 1997, between
Auto-By-Tel Marketing Corporation and NBC Multimedia
Inc.
10.22 Sponsorship Agreement, dated as of June 24, 1998,
between Excite, Inc. and Auto-By-Tel Corporation
10.23** License and Services Agreement dated August 7, 1998
between autobytel.com inc. and Auto-By-Tel AB
10.24** License and Services Agreement dated November 23, 1998
between autobytel.com inc. and Auto-by-Tel UK Limited
10.25** Share Purchase Agreement dated November 23, 1998
between autobytel.com inc. and Inchcape Automotive
Limited
10.26** Financing Inquiry Referral Agreement dated December
31, 1998 between Provident Bank, Auto-By-Tel
Acceptance Corporation and autobytel.com inc., as
guarantor
</TABLE>
<PAGE> 115
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
PAGE
NUMBER DESCRIPTION NUMBER
------ ----------- ------------
<S> <C> <C>
10.27** Procurement and Trafficking Agreement dated September
24, 1998 between DoubleClick Inc. and autobytel.com
inc.
10.28** Loan Agreement dated November 18, 1998 between Ann
Benvenuto and autobytel.com inc.
10.29** Advisory Agreement dated August 20, 1998 between
autobytel.com inc. and Peter R. Ellis
10.30** 1999 Stock Option Plan
10.31** Form of Gold Term Subscription Agreement
10.32** Form of Platinum Term Continuation Rider
10.33 Marketing Agreement dated February 18, 1999 between
autobytel.com inc. and Lycos, Inc.
11.1** Statement Regarding Computation of Per Share Earnings
21.1 Subsidiaries of autobytel.com inc.
23.1 Consent of Arthur Andersen LLP, Independent Public
Accountants
23.2** Consent of Paul, Hastings, Janofsky & Walker LLP
(reference is made to Exhibit 5.1)
23.3* Consent of CNW Marketing Research
24.1 Power of Attorney (reference is made to the signature
page)
27.1** Financial Data Schedule
</TABLE>
- -------------------------
* To be filed by Amendment.
** Previously filed.
<PAGE> 1
EXHIBIT 3.1
AUTOBYTEL.COM INC.
FIFTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Autobytel.com inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), hereby
certifies under penalty of perjury under the laws of the State of Delaware as
follows:
FIRST: That this Corporation was originally incorporated on May 17,
1996 under the name of Auto-By-Tel Corporation, pursuant to the General
Corporation Law of the State of Delaware (the "Delaware General Corporation
Law").
SECOND: That pursuant to Section 141 and 242 of the Delaware General
Corporation Law, the Board of Directors has duly adopted resolutions proposing
to amend and restate the Amended and Restated Certificate of Incorporation filed
with the Secretary of State of Delaware on April 16, 1998, as amended on July
22, 1998, declaring said amendment and restatement to be advisable and in the
best interests of this Corporation and its stockholders.
THIRD: That pursuant to Section 228 and 242 of the Delaware General
Corporation Law, the changes to be effected by this Fifth Amended and Restated
Certificate of Incorporation have been duly approved by the holders of the
requisite number of shares of this Corporation.
FOURTH: That pursuant to Section 242 and 245 of the General
Corporation Law of the State of Delaware, this Fifth Amended and Restated
Certificate of Incorporation restates and amends the provisions of this
Corporation's Amended and Restated Certificate of Incorporation.
FIFTH: That the text of the Amended and Restated Certificate of
Incorporation is hereby restated and amended in its entirety as set forth in
Exhibit A attached hereto.
<PAGE> 2
IN WITNESS WHEREOF, this Fifth Amended and Restated Certificate of
Incorporation has been signed this 14th day of December, 1998.
AUTOBYTEL.COM INC.
By: /s/ Mark W. Lorimer
-------------------------------
Title: President
ATTEST:
By: /s/ Craig S. Frost
-------------------------------
Title: Secretary
2
<PAGE> 3
Exhibit A
---------
FIFTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
AUTOBYTEL.COM INC.
A Delaware Corporation
ARTICLE I
The name of the corporation is autobytel.com inc. (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
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 sixty-one million four hundred forty-five thousand one hundred eighty-seven
(61,445,187). The number of shares of Preferred Stock authorized to be issued is
eleven million four hundred forty-five thousand one hundred eighty-seven
(11,445,187), 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"), six million nine hundred seventy-seven thousand two hundred
seventy-two (6,977,272) of which have been designated Series C Preferred Stock
(the "Series C Preferred Stock") and two million (2,000,000) of which shall be
undesignated. The Series A Preferred Stock, the Series B Preferred Stock and the
Series C Preferred Stock shall be hereinafter referred to collectively as the
"Preferred Stock." The number of shares of Common Stock authorized to be issued
is fifty million (50,000,000), par value $0.001 per share.
3
<PAGE> 4
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 C 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 A Preferred Stock, Series B
Preferred Stock or Common Stock of the Corporation, dividends in cash at an
annual rate of $0.80 per share of Series C Preferred Stock. 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 $0.80 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 $0.80 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 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 C Preferred Stock and Series A Preferred Stock. No
dividend or other distribution shall be made with respect to the Series A
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 C Preferred Stock. No dividend or
other distribution 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 Preferred Stock.
4
<PAGE> 5
(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 C
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 A Preferred Stock, Series B Preferred Stock or Common
Stock, an amount equal to $8.80 per share for each share of Series C 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 C Liquidation Preference"); provided that upon
the occurrence of any event described in Section 2(e) below, the holders of
Series C Preferred Stock shall be entitled to receive, at their option, either
the Series C Liquidation Preference described above or the consideration, if
any, which would be payable to such holders as if they had converted their
shares of Series C Preferred Stock into Common Stock immediately prior to such
event. If the assets and funds thus distributed among the holders of Series C
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 C Preferred Stock in proportion to the
number of shares of Series C Preferred Stock then held by them.
(b) After payment has been made to the holders of Series C
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 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 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(e) 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 if they had
converted their shares of Series A Preferred Stock into Common Stock immediately
prior to such event.
5
<PAGE> 6
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 to the holders of Series A
Preferred Stock 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.
(c) After payment has been made to the holders of Series C
Preferred Stock and Series A Preferred Stock of the full amounts to which they
shall be entitled as set forth in subparagraphs (a) and (b) 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(e) 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 consideration, if any, which would be payable to such holders as if
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.
(d) After payment has been made to the holders of Preferred Stock
of the full amounts to which they shall be entitled as set forth in
subparagraphs (a), (b) and (c) 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.
(e) 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.
6
<PAGE> 7
Section 3. Conversion. The holders of the Preferred Stock shall have
conversion rights (the "Conversion Rights") as follows:
(a) Right to Convert. Each share of 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, $9.35 in the case of the Series B Preferred Stock, or $8.80 in
the case of the Series C 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 shall be $9.00 for the
Series A Preferred Stock, $10.36 for the Series B Preferred Stock and $13.20 for
the Series C Preferred Stock. The Conversion Price per share of the Series A
Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock
shall be subject to adjustment as hereinafter provided. Upon conversion, all
declared and unpaid dividends on the 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.
(i) Each share of 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 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, (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, (3) in the case of Series C Preferred
Stock, the date on which fewer than 250,000 shares of Series C 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 $13.50 per share (appropriately adjusted for any stock splits,
combinations, consolidations, or stock distributions or dividends effected with
respect to such shares after the date of the filing of this Certificate of
Incorporation) and an aggregate offering price to the public of not less than
$30,000,000 (the "Initial Public Offering").
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(ii) In the event of the automatic conversion of the
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 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
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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.
(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 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
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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, Series B Preferred Stock or Series C Preferred Stock;
(2) up to a maximum of 3,333,333 shares (as
appropriately adjusted for any stock splits, combinations, consolidations, or
stock distributions or dividends effected with respect to such shares after the
date of the filing of this Certificate of Incorporation) 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, Series B Preferred Stock or Series C Preferred Stock;
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(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 Preferred Stock, voting
together as a single class, following notice from the Corporation to the holders
of 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 Preferred Stock shall not have the right to object to the
issuance of warrants to purchase up to a maximum of 3,333 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 and Series C
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 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:
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(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 Options were actually
exercised; and
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(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
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consideration which covers both, be the proportion of such consideration so
received, computed as provided in clauses (1) 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.
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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.
(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 (appropriately adjusted for
any stock splits, combinations, consolidations, or stock distributions or
dividends effected with respect to such shares after the Original Issue Date) of
Series A Preferred Stock 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 outstanding Preferred Stock;
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(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 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) 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;
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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 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.
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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 Stock 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
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;
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(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 Delaware General Corporation Law is amended after the
date hereof to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, 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
19
<PAGE> 20
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
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."
20
<PAGE> 21
CERTIFICATE OF AMENDMENT
OF THE
FIFTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
AUTOBYTEL.COM INC.
A Delaware Corporation
Autobytel.com inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), hereby
certifies under penalty of perjury under the laws of the State of Delaware as
follows:
FIRST: That this Corporation was originally incorporated on May 17,
1996 under the name of Auto-By-Tel Corporation, pursuant to the General
Corporation Law of the State of Delaware (the "Delaware General Corporation
Law").
SECOND: That pursuant to Sections 141 and 242 of the Delaware General
Corporation Law, the Board of Directors of this Corporation has duly adopted
resolutions proposing to amend and restate the Fifth Amended and Restated
Certificate of Incorporation filed with the Secretary of State of Delaware on
December 14, 1998, declaring said amendment to be advisable and in the best
interests of this Corporation and its stockholders.
THIRD: That pursuant to Sections 228 and 242 of the Delaware General
Corporation Law, the changes to be effected by this Amendment to the Fifth
Amended and Restated Certificate of Incorporation have been duly approved by the
holders of the requisite number of shares of this Corporation.
FOURTH: That pursuant to Section 242 and 245 of the General Corporation
Law of the State of Delaware, this Amendment to the Fifth Amended and Restated
Certificate of Incorporation amends the Fifth Amended and Restated Certificate
of Incorporation of the Corporation as follows:
The following sentence shall be added to the end of Section 3(b)(ii) of
Article IV, B:
"In addition, immediately prior to the closing of an underwritten public
offering as described in Section 3(b)(i)(C) above, all designated but unissued
shares of Series C Preferred Stock shall be retired and restored to the status
of authorized, undesignated and unissued shares of Preferred Stock."
<PAGE> 22
Section 8 of Article IV, B shall be deleted and inserted therefor shall
be the following provisions:
"Section 8. Status of Converted or Redeemed Preferred Stock. In the
event all shares of any class or series of Preferred Stock shall be redeemed or
converted including, without limitation, in connection with an underwritten
public offering as described in Section 3(b)(i)(C) of Article IV, B hereof, the
shares so converted or redeemed shall be deemed to be retired and shall resume
the status of authorized, undesignated and unissued shares of Preferred Stock."
The second sentence of Section 3 of Article IV, B shall be amended and
restated to read as follows:
"The initial Conversion Price per share shall be $9.00 for the Series A
Preferred Stock, $10.37 for the Series B Preferred Stock and $13.20 for the
Series C Preferred Stock."
Article VII shall be amended by adding the following provisions
thereto:
"Effective upon the consummation of an underwritten public offering as
described in Section 3(b)(i)(C) of Article IV, B hereof, the terms of office of
the Board of Directors will be divided into three classes: the Class I term will
expire at the annual meeting of stockholders to be held in 1999; the Class II
term will expire at the annual meeting of stockholders to be held in 2000; and
the Class III term will expire at the annual meeting of stockholders to be held
in 2001. At each annual meeting of stockholders after the initial
classification, the successors to directors whose term will then expire will be
elected to serve from the time of election and qualification until the third
annual meeting following election. The directorships will be distributed among
the three classes so that, as nearly as possible, each class will consist of
one-third of the directors."
<PAGE> 23
IN WITNESS WHEREOF, this Certificate of Amendment of the Fifth Amended
and Restated Certificate of Incorporation has been signed this 1st day of March,
1999.
AUTOBYTEL.COM INC.
By: /s/ Mark W. Lorimer
---------------------------------
Name: Mark W. Lorimer
Title: President and CEO
ATTEST:
By: /s/ Craig S. Frost
---------------------------------
Name: Craig S. Frost
Title: Secretary
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
AUTOBYTEL.COM INC.
A DELAWARE CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I OFFICES 2
Section 1.01 REGISTERED OFFICE 2
Section 1.02 PRINCIPAL OFFICE 2
Section 1.03 OTHER OFFICES 2
ARTICLE II MEETINGS OF STOCKHOLDERS 2
Section 2.01 ANNUAL MEETINGS 2
Section 2.02 SPECIAL MEETINGS 2
Section 2.03 PLACE OF MEETINGS 3
Section 2.04 NOTICE OF MEETINGS 3
Section 2.05 QUORUM 3
Section 2.06 VOTING 4
Section 2.07 LIST OF STOCKHOLDERS 5
Section 2.08 INSPECTOR OF ELECTION 5
Section 2.09 STOCKHOLDER ACTION WITHOUT MEETINGS 5
Section 2.10 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS. 6
Section 2.11 ADJOURNED MEETING; NOTICE. 6
Section 2.12 ORGANIZATION. 6
ARTICLE III BOARD OF DIRECTORS 6
Section 3.01 GENERAL POWERS 6
Section 3.02 NUMBER 6
Section 3.03 ELECTION OF DIRECTORS 6
Section 3.04 RESIGNATIONS 7
Section 3.05 VACANCIES 7
Section 3.06 PLACE OF MEETING; TELEPHONE CONFERENCE MEETING 8
Section 3.07 FIRST MEETING 8
Section 3.08 REGULAR MEETINGS 8
Section 3.09 SPECIAL MEETINGS 8
Section 3.10 QUORUM AND ACTION 9
Section 3.11 ACTION BY CONSENT 9
Section 3.12 COMPENSATION 9
Section 3.13 COMMITTEES 9
Section 3.14 MEETINGS AND ACTIONS OF COMMITTEES. 10
Section 3.15 OFFICERS OF THE BOARD 10
ARTICLE IV OFFICERS 11
Section 4.01 OFFICERS 11
Section 4.02 ELECTION 11
Section 4.03 SUBORDINATE OFFICERS 11
Section 4.04 REMOVAL AND RESIGNATION 11
Section 4.05 VACANCIES 11
Section 4.06 CHIEF EXECUTIVE OFFICER 12
Section 4.07 PRESIDENT 12
Section 4.08 CHIEF OPERATING OFFICER. 12
Section 4.09 CHIEF FINANCIAL OFFICER. 12
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Section 4.10 VICE PRESIDENT 13
Section 4.11 SECRETARY 13
Section 4.12 ASSISTANT SECRETARY. 13
ARTICLE V CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC. 14
Section 5.01 EXECUTION OF CONTRACTS 14
Section 5.02 CHECKS, DRAFTS, ETC 14
Section 5.03 DEPOSIT 14
Section 5.04 GENERAL AND SPECIAL BANK ACCOUNTS 14
ARTICLE VI SHARES AND THEIR TRANSFER 15
Section 6.01 CERTIFICATES FOR STOCK 15
Section 6.02 TRANSFER OF STOCK 15
Section 6.03 REGULATIONS 16
Section 6.04 LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES 16
Section 6.05 RECORD DATE 16
Section 6.06 REPRESENTATION OF SHARES OF OTHER CORPORATIONS 16
Section 6.07 SPECIAL DESIGNATION ON CERTIFICATES. 17
ARTICLE VII INDEMNIFICATION 17
Section 7.01 ACTIONS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION 17
Section 7.02 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION 18
Section 7.03 DETERMINATION OF RIGHT OF INDEMNIFICATION 18
Section 7.04 INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY 18
Section 7.05 ADVANCE OF EXPENSES 18
Section 7.06 OTHER RIGHTS AND REMEDIES 19
Section 7.07 INSURANCE 19
Section 7.08 CONSTITUENT CORPORATIONS 19
Section 7.09 EMPLOYEE BENEFIT PLANS 19
Section 7.10 BROADEST LAWFUL INDEMNIFICATION 20
Section 7.11 TERM 21
Section 7.12 SEVERABILITY 21
Section 7.13 AMENDMENTS 21
ARTICLE VIII RECORDS AND REPORTS 21
Section 8.01 MAINTENANCE OF RECORDS. 21
Section 8.02 INSPECTION BY DIRECTORS. 21
ARTICLE IX MISCELLANEOUS 22
Section 9.01 SEAL 22
Section 9.02 WAIVER OF NOTICES. 22
Section 9.03 LOANS AND GUARANTIES 22
Section 9.04 GENDER. 22
Section 9.05 AMENDMENTS. 22
CERTIFICATE OF SECRETARY 23
</TABLE>
<PAGE> 4
BYLAWS
OF
AUTOBYTEL.COM INC.
A DELAWARE CORPORATION
ARTICLE I
OFFICES
Section 1.01 REGISTERED OFFICE. The registered office of autobytel.com
inc. (hereinafter called the "Corporation") shall be at such place in the State
of Delaware as shall be designated by the Board of Directors (hereinafter called
the "Board").
Section 1.02 PRINCIPAL OFFICE. The principal office for the transaction
of the business of the Corporation shall be at such location, within or without
the State of Delaware, as shall be designated by the Board.
Section 1.03 OTHER OFFICES. The Corporation may also have an office or
offices at such other place or places, either within or without the State of
Delaware, as the Board may from time to time determine or as the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.01 ANNUAL MEETINGS. Annual meetings of the stockholders of the
Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings shall be held each
year at such time, date and place as the Board shall determine by resolution. In
the absence of such designation, the annual meeting of stockholders shall be
held at 3:00 p.m., on the third Thursday in June at the principal office of the
Corporation. 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.
Section 2.02 SPECIAL MEETINGS. Special meetings of the stockholders of
the Corporation for any purpose or purposes may be called at any time by the
Board, or by a committee of the Board which has been duly designated by the
Board and whose powers and authority, as provided in a resolution of the Board
or in the Bylaws, include the power to call such meetings, or by the Chairman of
the Board, or by the President, but such special meetings may not be called by
any other person or persons; provided, however, that if and to the extent that
any special meeting of stockholders may be called by any other person or persons
specified in any provisions of the Certificate of Incorporation or any amendment
thereto or any certificate filed under Section 151(g) of the General Corporation
Law of Delaware (or its successor statute as in effect from time to time
hereafter), then such special meeting may also be called by the person or
persons, in the manner, at the time and for the purposes so specified.
<PAGE> 5
Section 2.03 PLACE OF MEETINGS. All meetings of the stockholders shall
be held at such places, within or without the State of Delaware, as designated
by the Board of Directors and specified in the respective notices or waivers of
notice thereof. In the absence of any such designation, stockholders' meetings
shall be held at the principal executive office of the Corporation.
Section 2.04 NOTICE OF MEETINGS. Except as otherwise required by law,
notice of each meeting of the stockholders, whether annual or special, shall be
given not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder of record entitled to vote at such meeting by
delivering a typewritten or printed notice thereof to him personally, or by
depositing such notice in the United States mail or nationally recognized
overnight courier, in a postage prepaid envelope, directed to him at his address
furnished by him to the Secretary of the Corporation for such purpose or, if he
shall not have furnished to the Secretary his address for such purpose, then at
his address as it appears on the registrar of the Corporation, or by
transmitting a notice thereof to him at such address by telegraph, facsimile
transmission, cable or wireless. Except as otherwise expressly required by law,
no publication of any notice of a meeting of the stockholders shall be required.
Every notice of a meeting of the stockholders shall state the place, date and
hour of the meeting, and, in the case of a special meeting shall also state the
purpose or purposes for which the meeting is called (no business other than that
specified in the notice may be transacted). 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.
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.
Section 2.05 QUORUM. Except as otherwise provided by statute or by the
certificate of incorporation, the holders of record of a majority in voting
interest of the shares of stock of the Corporation entitled to be voted, present
in person or by proxy, shall constitute a quorum for the transaction of business
at any meeting of the stockholders of the Corporation or any adjournment
thereof. The stockholders present at a duly called or held meeting at which a
quorum is present may continue to do business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. In the
absence of a quorum at any meeting or any adjournment thereof, a majority in
voting interest of the stockholders present in person or by proxy and entitled
to vote thereat or, in the absence therefrom of all the stockholders, any
officer entitled to preside at or to act as secretary of such meeting may
adjourn such meeting from time to time. At any such adjourned meeting at which a
quorum is present any business may be transacted which might have been
transacted at the meeting as originally called.
<PAGE> 6
Section 2.06 VOTING.
(a) At each meeting of the stockholders, each stockholder shall
be entitled to vote in person or by proxy each share or fractional share of the
stock of the Corporation which has voting rights on the matter in question and
which shall have been held by him and registered in his name on the books of the
Corporation:
(i) on the date fixed pursuant to Section 6.05 of these
Bylaws as the record date for the determination of stockholders entitled to
notice of and to vote at such meeting, or
(ii) if no such record date shall have been so fixed, then
(A) at the close of business on the day next preceding the day on which notice
of the meeting shall be given or (B) if notice of the meeting shall be waived,
at the close of business on the day next preceding the day on which the meeting
shall be 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 fixes a new record date for the adjourned meeting, but
the Board 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.
(b) Shares of its own stock belonging to the Corporation or to
another corporation, if a majority of the shares entitled to vote in the
election of directors in such other corporation is held, directly or indirectly,
by the Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity shall
be entitled to vote such stock. Persons whose stock is pledged shall be entitled
to vote, unless in the transfer by the pledgor on the books of the Corporation
he shall have expressly empowered the pledgee to vote thereon, in which case
only the pledgee, or his proxy, may represent such stock and vote thereon. Stock
having voting power standing of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants, tenants in common,
tenants by the entirety or otherwise, or with respect to which two or more
persons have the same fiduciary relationship, shall be voted in accordance with
the provisions of the General Corporation Law of Delaware.
(c) Any such voting rights may be exercised by the stockholder
entitled thereto in person or by his proxy appointed by an instrument in
writing, subscribed by such stockholder or by his attorney thereunto authorized
and delivered to the secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date unless said proxy
shall provide for a longer period. The attendance at any meeting of a
stockholder who may theretofore have given a proxy shall not have the effect of
revoking the same unless he shall in writing so notify the secretary of the
meeting prior to the voting of the proxy. At any meeting of the stockholders all
matters, except as otherwise provided in the Certificate of Incorporation, in
these Bylaws or by law, shall be decided by the vote of a majority in voting
interest of the stockholders present in person or by proxy and entitled to vote
thereat and thereon. The stockholders present at a duly called or held meeting
at which a quorum is
<PAGE> 7
present may continue to do business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum. The vote at any
meeting of the stockholders on any question need not be by ballot, unless so
directed by the chairman of the meeting. On a vote by ballot, each ballot shall
be signed by the stockholder voting, or by his proxy if there be such proxy, and
it shall state the number of shares voted. 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.
Section 2.07 LIST OF STOCKHOLDERS. The Secretary 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 entire duration thereof, and may be inspected by any stockholder who
is present.
Section 2.08 INSPECTOR OF ELECTION. If at any meeting of the
stockholders a vote by written ballot shall be taken on any question, the
chairman of such meeting may appoint an inspector or inspectors of election to
act with respect to such vote. Each inspector so appointed shall first subscribe
an oath faithfully to execute the duties of an inspector at such meeting with
strict impartiality and according to the best of his ability. Such inspectors
shall decide upon the qualification of the voters and shall report the number of
shares represented at the meeting and entitled to vote on such question, shall
conduct and accept the votes, and, when the voting is completed, shall ascertain
and report the number of shares voted respectively for and against the question.
Reports of the inspectors shall be in writing and subscribed and delivered by
them to the Secretary of the Corporation. Inspectors need not be stockholders of
the Corporation, and any officer of the Corporation may be an inspector on any
question other than a vote for or against a proposal in which he shall have a
material interest.
Section 2.09 STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by
the General Corporation Law of Delaware to be taken at any annual or special
meeting of the stockholders, or any action which may be taken at any annual or
special meeting of the stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent 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. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. This Section 2.09 shall no
longer be effective once the Corporation shall be subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended.
<PAGE> 8
Section 2.10 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, (b) otherwise properly brought before the meeting by
or at the direction of the Board or (c) otherwise properly brought before the
meeting by a stockholder.
Section 2.11 ADJOURNED MEETING; NOTICE. When a meeting is adjourned to
another time and place, unless the 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. 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.
Section 2.12 ORGANIZATION. The Chief Executive Officer, or in the
absence of the Chief Executive Officer, 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 Chief Executive Officer, 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 determine
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.
ARTICLE III
BOARD OF DIRECTORS
Section 3.01 GENERAL POWERS. The property, business and affairs of the
Corporation shall be managed by or under the direction of the Board, which may
exercise all of the powers of the Corporation, except such as are by the
Certificate of Incorporation, by these Bylaws or by law conferred upon or
reserved to the stockholders.
Section 3.02 NUMBER. The authorized number of directors of the
Corporation shall be eight (8) members until changed by an amendment of this
Section 3.02. Directors need not be stockholders in the Corporation.
Section 3.03 ELECTION OF DIRECTORS. The directors shall be elected by
the stockholders of the Corporation, and at each election the persons receiving
the greatest number of votes, up to the number of directors then to be elected,
shall be the persons then elected. The election of directors is subject to any
provisions contained in the Certificate of Incorporation relating thereto,
including any provisions for a classified board.
<PAGE> 9
Except as provided in Sections 3.04 and 3.05 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.
Section 3.04 RESIGNATIONS. Any director of the Corporation may resign at
any time by giving written notice to the Board or to the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time is not specified, it shall take effect immediately upon
its receipt; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 3.05 VACANCIES. Except as otherwise provided in the Certificate
of Incorporation, any vacancy in the Board, whether because of death,
resignation, disqualification, an increase in the number of directors, or any
other cause, may be filled by vote of the majority of the remaining directors,
although less than a quorum, or by a sole remaining director. Each director so
chosen to fill a vacancy shall hold office until his successor shall have been
elected and shall qualify or until he shall resign or shall have been removed.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of his term of office.
Upon the resignation of one or more directors from the Board, effective
at a future date, a majority of the directors then in office, including those
who have so resigned, shall have the power to fill such vacancy or vacancies,
the vote thereon to take effect when such resignation or resignations shall
become effective, and each director so chosen shall hold office as provided
hereinabove in the filling of other vacancies.
Unless otherwise provided in the Certificate of Incorporation or the
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
<PAGE> 10
Chancery for a decree summarily ordering an election as provided in Section 211
of the General Corporation Law of Delaware.
Section 3.06 PLACE OF MEETING; TELEPHONE CONFERENCE MEETING. The Board
may hold any of its meetings at such place or places within or without the State
of Delaware as the Board may from time to time by resolution designate or as
shall be designated by the person or persons calling the meeting or in the
notice or waiver of notice of any such meeting. Directors may participate in any
regular or special meeting of the Board by means of conference telephone or
similar communications equipment pursuant to which all persons participating in
the meeting of the Board can hear each other, and such participation shall
constitute presence in person at such meeting.
Section 3.07 FIRST MEETING. The Board shall meet as soon as practicable
after each annual election of directors and notice of such first meeting shall
not be required.
Section 3.08 REGULAR MEETINGS. Regular meetings of the Board may be held
at such times as the Board shall from time to time by resolution determine. If
any day fixed for a meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting shall be held at the same hour and place
on the next succeeding business day which is not a legal holiday. Except as
provided by law, notice of regular meetings need not be given.
Section 3.09 SPECIAL MEETINGS. Special meetings of the Board may be
called at any time by the Chairman of the Board or the President or by any three
(3) directors, to be held at the principal office of the Corporation, or at such
other place or places, within or without the State of Delaware, as the person or
persons calling the meeting may designate.
Notice of the time and place of special meetings shall be given to each
director either (i) by mailing or otherwise sending to him a written notice of
such meeting, charges prepaid, addressed to him at his address as it is shown
upon the records of the Corporation, or if it is not so shown on such records or
is not readily ascertainable, at the place in which the meetings of the
directors are regularly held, at least seventy-two (72) hours prior to the time
of the holding of such meeting; or (ii) by orally communicating the time and
place of the special meeting to him at least forty-eight (48) hours prior to the
time of the holding of such meeting. Either of the notices as above provided
shall be due, legal and personal notice to such director. 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.
Whenever notice is required to be given, either to a stockholder or a
director, under any provision of the General Corporation Law of Delaware, the
Certificate of Incorporation or these Bylaws, a written waiver thereof, signed
by the person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting, whether in person or by proxy, shall constitute a waiver of notice of
such meeting, except when the person attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or
<PAGE> 11
convened. Neither the business to be transacted at nor the purpose of any
regular or special meeting of directors or committee of directors need be
specified in any written waiver of notice.
All such waivers shall be filed with the corporate records or made a
part of the minutes of the meeting.
Section 3.10 QUORUM AND ACTION. Except as otherwise provided in these
Bylaws or by law, the presence of a majority of the authorized number of
directors shall be required to constitute a quorum for the transaction of
business at any meeting of the Board, and all matters shall be decided at any
such meeting, a quorum being present, by the affirmative votes of a majority of
the directors present. In the absence of a quorum, a majority of directors
present at any meeting may adjourn the same from time to time until a quorum
shall be present. 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 meetings takes place, in the manner specified in
Section 3.09 of these Bylaws, to the directors who were not present at the time
of adjournment. The directors shall act only as a Board, and the individual
directors shall have no power as such. 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.
Section 3.11 ACTION BY CONSENT. Any action required or permitted to be
taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or such committee. Such
action by written consent shall have the same force and effect as the unanimous
vote of such directors.
Section 3.12 COMPENSATION. No stated salary need be paid to directors,
as such, for their services but, as fixed from time to time by resolution of the
Board, the directors may receive directors' fees, compensation (including
without limitation cash compensation and/or the grant of stock options or stock)
and reimbursement for expenses for attendance at directors' meetings, for
serving on committees and for discharging their duties; provided that nothing
herein contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 3.13 COMMITTEES. The Board may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. The Board will
establish and maintain an Audit Committee and a Compensation Committee. Any such
committee, to the extent provided in the resolution of the Board, shall have and
may exercise all the powers and authority of the Board in the management of the
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it, but no such
committee shall have any 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
<PAGE> 12
by the Board 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 establishing 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. Any such committee shall keep written minutes of
its meetings and report the same to the Board when required.
In the absence of any member of any such committee, the members thereof
present at any meeting and not disqualified from voting, whether or not they
constitute a quorum, may appoint another member of the Board to act at the
meeting in the place of such absent member.
A majority of the members, or replacements thereof, of any such
committee shall constitute a quorum for the transaction of business. Every act
or decision done or made by a majority of the members, or replacements thereof,
of any such committee shall be regarded as the act or decision of the entire
committee.
Section 3.14 MEETINGS AND ACTIONS 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 3.06 (place of
meetings; meetings by telephone), Section 3.08 (regular meetings), Section 3.09
(special meetings; notice), Section 3.10 (quorum and action), and Section 3.11
(action by consent), with such changes in the context of those Bylaws as are
necessary to substitute the committee and its members for the Board and its
members; provided, however, that the time of regular meetings of committees may
be determined either by resolution of the Board or by resolution of the
committee, that special meetings of committees may also be called by resolution
of the Board, 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 committee. The Board may adopt rules for the government of any committee
not inconsistent with the provisions of these Bylaws.
Section 3.15 CHAIRMAN OF THE BOARD. The Board may elect a Chairman of
the Board and may have one or more Vice Chairmen. The Chairman of the Board and
the Vice Chairmen shall be appointed from time to time by the Board and shall
have such powers and duties as shall be designated by the Board.
<PAGE> 13
ARTICLE IV
OFFICERS
Section 4.01 OFFICERS. The officers of the Corporation shall be a Chief
Executive Officer, a President, a Chief Operating Officer, a Secretary and a
Chief Financial Officer (who will be the Treasurer). The Corporation may also
have, at the discretion of the Board, one or more Vice Presidents (who may
include a Chief Accounting Officer), one or more Assistant Vice Presidents, one
or more Assistant Secretaries, and such other officers as may be appointed in
accordance with the provisions of Section 4.03 of these Bylaws. One person may
hold two or more offices, except that the Secretary may not also hold the office
of President. The salaries of all officers of the Corporation above the rank of
Vice President shall be fixed by the Board, unless at the discretion of the
Board, the Board elects to fix the salaries of officers at or below the rank of
vice president.
Section 4.02 ELECTION. The officers of the Corporation, except such
officers as may be appointed in accordance with the provisions of Section 4.03
or Section 4.05 of these Bylaws, shall be chosen annually by the Board, and each
shall hold his office until he shall resign or shall be removed or otherwise
disqualified to serve, or until his successor shall be elected and qualified.
Section 4.03 SUBORDINATE OFFICERS. The Board may appoint, or may
authorize the Chief Executive Officer to appoint, such other officers as the
business of the Corporation may require, including without limitation Vice
Presidents and Assistant Secretaries, each of whom shall have such authority and
perform such duties as are provided in these Bylaws or as the Board or the
President from time to time may specify, and shall hold office until he shall
resign or shall be removed or otherwise disqualified to serve.
Section 4.04 REMOVAL AND RESIGNATION. Any officer may be removed, with
or without cause (subject to any right such officer may have under an employment
contract with the Corporation), by a majority of the directors at the time in
office, at any regular or special meeting of the Board, or, except in case of an
officer chosen by the Board, by the Chief Executive Officer upon whom such power
of removal may be conferred by the Board.
Any officer may resign at any time by giving written notice to the
Board, the Chairman of the Board, the President or the Secretary of the
Corporation. Any such resignation shall take effect at the date of the receipt
of such notice or at any later time specified therein; and unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective; provided that this provision shall not supercede any powers
of the Board or the Chief Executive Officer pursuant to Section 4.04.
Section 4.05 VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the Bylaws for the regular appointments to such office.
<PAGE> 14
Section 4.06 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the
Corporation shall, subject to the control of the Board, have general
supervision, direction and control of the business and affairs of the
Corporation. He shall preside at all meetings of stockholders and the Board. He
shall have the general powers and duties of management usually vested in the
chief executive officer of a corporation, and shall have such other powers and
duties with respect to the administration of the business and affairs of the
Corporation as may from time to time be assigned to him by the Board or as
prescribed by the Bylaws. In the absence or disability of the President, the
Chief Executive Officer, in addition to his assigned duties and powers, shall
perform all the duties of the President and when so acting shall have all the
powers and be subject to all restrictions upon the President.
Section 4.07 PRESIDENT. The President shall exercise and perform such
powers and duties with respect to the administration of the business and affairs
of the Corporation as may from time to time be assigned to him by the Chief
Executive Officer (unless the President is also the Chief Executive Officer) or
by the Board or as is prescribed by the Bylaws. In the absence or disability of
the Chief Executive Officer, the President shall perform all of the duties of
the Chief Executive Officer and when so acting shall have all the powers and be
subject to all the restrictions upon the Chief Executive Officer.
Section 4.08 CHIEF OPERATING OFFICER. The Chief Operating Officer shall
exercise and perform such powers and duties with respect to the administration
of the business and affairs of the Corporation as may from time to time be
assigned to him by the Chief Executive Officer or by the Board. In the absence
or disability of both the Chief Executive Officer and the President, the Chief
Operating Officer shall perform all of the duties of the Chief Executive Officer
and when so acting shall have all the powers and be subject to all the
restrictions upon the Chief Executive Officer.
Section 4.09 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 director. The Chief
Financial Officer shall also be the Treasurer.
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. He shall disburse the funds of the Corporation as
may be ordered by the Board, shall render to the President and directors,
whenever they request it, an account of all of his 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 or the Bylaws.
<PAGE> 15
Section 4.10 VICE PRESIDENT. The Vice President(s), if any, shall
exercise and perform such powers and duties with respect to the administration
of the business and affairs of the Corporation as from time to time may be
assigned to each of them by the President, by the Chief Executive Officer, by
the Board or as is prescribed by the Bylaws. A Vice President may also be
designated as a "Senior Vice President" or "Executive Vice President." In the
absence or disability of the President, the Vice Presidents, in order of their
rank as fixed by the Board, or if not ranked, the Vice President designated by
the Board, shall perform all of the duties of the President and when so acting
shall have all of the powers of and be subject to all the restrictions upon the
President. A Vice President may be designated the Chief Accounting Officer who
may be the Chief Financial Officer, and any person so designated shall have such
powers as is customary for a Chief Accounting Officer.
Section 4.11 SECRETARY. The Secretary shall keep, or cause to be kept, a
book of minutes at the principal office for the transaction of the business of
the Corporation, or such other place as the Board may order, of all meetings of
directors and stockholders, with the time and place of holding, whether regular
or special, and if special, how authorized and the notice thereof given, the
names of those present at directors' 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 office
for the transaction of the business of the Corporation or at the office of the
Corporation's transfer agent, a share register, or a duplicate share register,
showing the names of the stockholders and their addresses, the number and
classes of shares held by each, the number and date of certificates issued for
the same, 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 the
meetings of the stockholders and of the Board required by these Bylaws or by law
to be given, and he shall keep the seal of the Corporation in safe custody, and
shall have such other powers and perform such other duties as may be prescribed
by the Board or these Bylaws. If for any reason the Secretary shall fail to give
notice of any special meeting of the Board called by one or more of the persons
identified in Section 3.09 of these Bylaws, or if he shall fail to give notice
of any special meeting of the stockholders called by one or more of the persons
identified in Section 2.02 of these Bylaws, then any such person or persons may
give notice of any such special meeting.
Section 4.12 ASSISTANT SECRETARY. The Assistant Secretary, if any, or,
if there is more than one, the Assistant Secretaries in the order determined by
the Board (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
inability or refusal to 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 may from time to time prescribe.
<PAGE> 16
ARTICLE V
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
Section 5.01 EXECUTION OF CONTRACTS. The Board, except as otherwise
provided in these Bylaws, may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in the name and on
behalf of the Corporation, and such authority may be general or confined to
specific instances; and unless so authorized by the Board or by these Bylaws or
in the case of the Chief Executive Officer, Chief Operating Officer or Chief
Financial Officer, within the agency power of such 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 in any amount. Unless so authorized or ratified by the Board 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.
Section 5.02 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
payment of money, notes or other evidence of indebtedness, issued in the name of
or payable to the Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board. Each such person shall give such bond, if any, as the
Board may require.
Section 5.03 DEPOSIT. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board may select, or
as may be selected by any officer or officers, assistant or assistants, agent or
agents, attorney or attorneys, of the Corporation to whom such power shall have
been delegated by the Board. For the purpose of deposit and for the purpose of
collection for the account of the Corporation, the President, the Chief
Executive Officer, the Chief Financial Officer, or any Vice President(or any
other officer or officers, assistant or assistants, agent or agents, or attorney
or attorneys of the Corporation who shall be determined by the Board from time
to time) may endorse, assign and deliver checks, drafts and other orders for the
payment of money which are payable to the order of the Corporation.
Section 5.04 GENERAL AND SPECIAL BANK ACCOUNTS. The Board from time to
time may authorize the opening and keeping of general and special bank accounts
with such banks, trust companies or other depositories as the Board may select
or as may be selected by an officer or officers, assistant or assistants, agent
or agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. The Board may make such special rules and
regulations with respect to such bank accounts, not inconsistent with the
provisions of these Bylaws, as it may deem expedient.
<PAGE> 17
ARTICLE VI
SHARES AND THEIR TRANSFER
Section 6.01 CERTIFICATES FOR STOCK. The shares of the Corporation shall
be represented by certificates, provided that the Board 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,
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, or the President or Vice-President, and by the Treasurer or Secretary or
an Assistant Secretary of the 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
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
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.
A record shall be kept of the respective names of the persons, firms or
corporations owning the stock represented by such certificates, the number and
class of shares represented by such certificates, respectively, and the
respective dates thereof, and in case of cancellation, the respective dates of
cancellation. Every certificate surrendered to the Corporation for exchange or
transfer shall be canceled, and no new certificate or certificates shall be
issued in exchange for any existing certificate until such existing certificate
shall have been so canceled, except in cases provided for in Section 6.04 of
these Bylaws.
Section 6.02 TRANSFER OF STOCK. Transfer of shares of stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, or with a transfer clerk or a
transfer agent appointed as provided in Section 6.03 of these Bylaws, and upon
surrender of the certificate or certificates for such shares properly endorsed
and the payment of all taxes thereon. The person in whose name shares of stock
stand on the books of the Corporation shall be deemed the owner thereof for all
purposes as regards the Corporation. Whenever any transfer of shares shall be
made for collateral security, and not absolutely, such fact shall be stated
expressly in the entry of transfer if, when the certificate or certificates
shall be presented to the Corporation for transfer, both the transferor and the
transferee request the Corporation to do so.
<PAGE> 18
Section 6.03 REGULATIONS. The Board may make such rules and regulations
as it may deem expedient, not inconsistent with these Bylaws, concerning the
issue, transfer and registration of certificates for shares of the stock of the
Corporation. The Board may appoint, or authorize any officer or officers to
appoint, one or more transfer clerks or one or more transfer agents and one or
more registrars, and may require all certificates for stock to bear the
signature or signatures of any of them.
Section 6.04 LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES. In any
case of loss, theft, destruction, or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction,
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sums as the Board may direct and in the case of
mutilation, upon surrender of the mutilated certificate; provided, however, that
a new certificate may be issued without requiring any bond when, in the judgment
of the Board, it is proper to do so.
Section 6.05 RECORD DATE. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of the
stockholders or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any other change, conversion or exchange of
stock or for the purpose of any other lawful action, the Board may fix, in
advance, a record date, which shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action. If, in any case involving the determination of
stockholders for any purpose other than notice of or voting at a meeting of
stockholders, the Board shall not fix such a record date, the record date for
determining stockholders for such purpose shall be the close of business on the
day on which the Board shall adopt the resolution relating thereto. A
determination of stockholders entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of such meeting; provided, however,
that the Board may fix a new record date for the adjourned meeting.
Section 6.06 REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
President or any Vice President and the Secretary or any Assistant Secretary of
this Corporation are authorized to vote, represent and exercise on behalf of
this Corporation all rights incident to all shares of any other corporation or
corporations standing in the name of this Corporation. The authority herein
granted to said officers to vote or represent on behalf of this Corporation any
and all shares held by this Corporation in any other corporation or corporations
may be exercised either by such officers in person or by any person authorized
so to do by proxy or power of attorney duly executed by said officers.
<PAGE> 19
Section 6.07 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
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.
ARTICLE VII
INDEMNIFICATION
Section 7.01 ACTIONS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION.
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 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 (other than an action
by or in the right of the Corporation) 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 or as
a member of any committee or similar body, 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. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which 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, that he had reasonable cause to believe that his
conduct was unlawful.
<PAGE> 20
Section 7.02 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. 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 who was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor 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, or as a member of any committee or similar
body, against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit 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, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
Section 7.03 DETERMINATION OF RIGHT OF INDEMNIFICATION. Any
indemnification under Section 7.01 or 7.02 of these Bylaws (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in Sections 7.01 and 7.02 of these Bylaws. Such
determination shall be made (i) by the Board by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or proceeding,
or (ii) if such a quorum is not obtainable, or, even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (iii) by the stockholders.
Section 7.04 INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY.
Notwithstanding the other provisions of this Article VII, to the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Section 7.01 or 7.02 of these Bylaws, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
Section 7.05 ADVANCE OF EXPENSES. Expenses incurred by an officer or
director in defending a civil or criminal action, suit or proceeding shall 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 director or officer, 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 VII. Such expenses incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the Board deems
appropriate.
<PAGE> 21
Section 7.06 OTHER RIGHTS AND REMEDIES. The indemnification and
advancement of expenses provided by, or granted pursuant to, the other Sections
of this Article VII shall not be deemed exclusive and are declared expressly to
be nonexclusive of any other rights to which those seeking indemnification or
advancements of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
Section 7.07 INSURANCE. Upon resolution passed by the Board, 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 or as a member of any committee or similar body against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article VII.
Section 7.08 CONSTITUENT CORPORATIONS. For the purposes of this Article
VII, references to "the Corporation" 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 and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise or as a member of any committee or similar body shall
stand in the same position under the provisions of this Article VII with respect
to the resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
Section 7.09 EMPLOYEE BENEFIT PLANS. For the purposes of this Article
VII, references to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving at the request
of the Corporation" shall include any service as a director, officer, employee
or agent of the Corporation which imposes duties on, or involves services by,
such director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good faith
and in a manner he reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article VII.
<PAGE> 22
Section 7.10 BROADEST LAWFUL INDEMNIFICATION. In addition to the
foregoing, the Corporation shall, to the broadest and maximum extent permitted
by Delaware law, as the same exists from time to time (but, in case of any
amendment to or change in Delaware law, only to the extent that such amendment
or change permits the Corporation to provide broader rights of indemnification
than is permitted to the Corporation prior to such amendment or change),
indemnify each 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 or officer 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. In addition, the Corporation shall, to the broadest
and maximum extent permitted by Delaware law, as the same may exist from time to
time (but, in case of any amendment to or change in Delaware law, only to the
extent that such amendment or change permits the Corporation to provide broader
rights of payment of expenses incurred in advance of the final disposition of an
action, suit or proceeding than is permitted to the Corporation prior to such
amendment or change), pay to such person any and all expenses (including
attorneys' fees) incurred in defending or settling any such action, suit or
proceeding in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer, to repay such amount if it shall ultimately be determined by a final
judgment or other final adjudication that he is not entitled to be indemnified
by the Corporation as authorized in this Section 7.10. The first sentence of
this Section 7.10 to the contrary notwithstanding, the Corporation shall not
indemnify any such person with respect to any of the following matters: (i)
remuneration paid to such person if it shall be determined by a final judgment
or other final adjudication that such remuneration was in violation of law; or
(ii) any accounting of profits made from the purchase or sale by such person of
the Corporation's securities within the meaning of Section 16(b) of the
Securities Exchange Act of 1934 and amendments thereto or similar provisions of
any federal, state or local statutory law; or (iii) actions brought about or
contributed to by the dishonesty of such person, if a final judgment or other
final adjudication adverse to such person establishes that acts of active and
deliberate dishonesty were committed or attempted by such person with actual
dishonest purpose and intent and were material to the adjudication; or (iv)
actions based on or attributable to such person having gained any personal
profit or advantage to which he was not entitled, in the event that a final
judgment or other final adjudication adverse to such person establishes that
such person in fact gained such personal profit or other advantage to which he
was not entitled; or (v) any matter in respect of which a final decision by a
court with competent jurisdiction shall determine that indemnification is
unlawful; provided, however, that the Corporation shall perform its obligations
under the second sentence of this Section 7.10 on behalf of such person until
such time as it shall be ultimately determined by a final judgment or other
final adjudication that he is not entitled to be indemnified by the Corporation
as authorized by the first sentence of this Section 7.10 by virtue of any of the
preceding clauses (i), (ii), (iii), (iv) or (v).
<PAGE> 23
Section 7.11 TERM. The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article VII shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Section 7.12 SEVERABILITY. If any part of this Article VII shall be
found, in any action, suit or proceeding or appeal therefrom or in any other
circumstances or as to any particular officer, director, employee or agent to be
unenforceable, ineffective or invalid for any reason, the enforceability, effect
and validity of the remaining parts or of such parts in other circumstances
shall not be affected, except as otherwise required by applicable law.
Section 7.13 AMENDMENTS. The foregoing provisions of this Article VII
shall be deemed to constitute an agreement between the Corporation and each of
the persons entitled to indemnification hereunder, for as long as such
provisions remain in effect. Any amendment to the foregoing provisions of this
Article VII which limits or otherwise adversely affects the scope of
indemnification or rights of any such persons hereunder shall, as to such
persons, apply only to claims arising, or causes of action based on actions or
events occurring, after such amendment and delivery of notice of such amendment
is given to the person or persons so affected. Until notice of such amendment is
given to the person or persons whose rights hereunder are adversely affected,
such amendment shall have no effect on such rights of such persons hereunder.
Any person entitled to indemnification under the foregoing provisions of this
Article VII shall, as to any act or omission occurring prior to the date of
receipt of such notice, be entitled to indemnification to the same extent as had
such provisions continued as Bylaws of the Corporation without such amendment.
ARTICLE VIII
RECORDS AND REPORTS
Section 8.01 MAINTENANCE OF RECORDS. The Corporation shall, either, at
its principal executive office or at such place or places as designated by the
Board, 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.
Section 8.02 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.
<PAGE> 24
ARTICLE IX
MISCELLANEOUS
Section 9.01 SEAL. The Board shall provide a corporate seal, which shall
be in the form of a circle and shall bear the name of the Corporation and words
and figures showing that the Corporation was incorporated in the State of
Delaware and showing the year of incorporation.
Section 9.02 WAIVER OF NOTICES. Whenever notice is required to be given
by these Bylaws or the Certificate of Incorporation or by law, the person
entitled to said notice may waive such notice in writing, either before or after
the time stated therein, and such waiver shall be deemed equivalent to notice.
Section 9.03 LOANS AND GUARANTIES. The Corporation may lend money to, or
guarantee any obligation of, and otherwise assist any officer or other employee
of the Corporation or of its subsidiaries, including any officer who is a
director, whenever, in the judgment of the Board, 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 shall approve, including,
without limitation, a pledge of shares of stock of the Corporation. Nothing
contained in this Section 9.03 shall be deemed to deny, limit or restrict the
powers of guaranty or warranty of the Corporation at common law or under any
statute.
Section 9.04 GENDER. All personal pronouns used in these Bylaws shall
include the other genders, whether used in the masculine, feminine or neuter
gender, and the singular shall include the plural, and vice versa, whenever and
as often as may be appropriate.
Section 9.05 AMENDMENTS. These Bylaws, or any of them, may be rescinded,
altered, amended or repealed, and new Bylaws may be made (i) by the Board, by
vote of a majority of the number of directors then in office as directors,
acting at any meeting of the Board or (ii) by the stockholders, by the vote of a
majority of the outstanding shares of voting stock of the Corporation, at an
annual meeting of stockholders, without previous notice, or at any special
meeting of stockholders, provided that notice of such proposed amendment,
modification, repeal or adoption is given in the notice of special meeting;
provided, however, that Section 2.02 of these Bylaws can only be amended if that
Section as amended would not conflict with the Corporation's Certificate of
Incorporation. Any Bylaw made or altered by the stockholders may be altered or
repealed by the Board or may be altered or repealed by the stockholders.
<PAGE> 25
CERTIFICATE OF SECRETARY
The undersigned certifies:
(1) That the undersigned is duly elected and acting Secretary of
autobytel.com inc., a Delaware corporation; and
(2) That the foregoing Bylaws constitute the Bylaws of the
Corporation as duly adopted by unanimous action of the Board of Directors dated
the _____day of March, 1999.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of the Corporation this ____ day of March 1999.
------------------------------------
Craig S. Frost, Secretary
[SEAL]
<PAGE> 1
EXHIBIT 4.1
[AUTOBYTEL.COM STOCK CERTIFICATE]
COMMON STOCK COMMON STOCK
autobytel.com
INCORPORATED UNDER THE LAWS SEE REVERSE FOR
OF THE STATE OF DELAWARE CERTAIN DEFINITIONS
CUSIP 05275N 10 6
This Certifies that
is the record holder of
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $.001 PAR VALUE, OF
autobytel.com inc.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid until countersigned and registered by
the Transfer Agent and Registrar.
IN WITNESS WHEREOF the Corporation has caused this Certificate to be
signed in facsimile by its duly authorized officers and a facsimile of the
corporate seal.
Dated:
[SEAL]
/s/ HOSHI PRINTER /s/ MARK LORIMER
TREASURER PRESIDENT
COUNTERSIGNED AND REGISTERED:
U.S. STOCK TRANSFER CORPORATION
TRANSFER AGENT AND REGISTRAR
By
AUTHORIZED SIGNATURE
<PAGE> 2
The Corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and 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. Such requests shall be made to the Corporations's Secretary at the
principal office of the Corporation.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, OR
DESTROYED THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO
THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNF GIFT MIN ACT -- ___________ Guardian ________________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants
in common Act__________________________________
(State)
UNIF TRF MIN ACT -- ___________ Custodian (until age ___)
(Cust)
_____________ under Uniform Transfers
(Minor)
to Minors Act________________________
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ____________________ hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
_________________________________________________________________________ Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ____________________________________
X ___________________________________
X ___________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAMES AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By ________________________________________________
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS,
SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS
WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM, PURSUANT TO SEC RULE 17Ad-15.
<PAGE> 1
EXHIBIT 4.3
February __, 1999
BT Alex. Brown Incorporated
Lehman Brothers
PaineWebber Incorporated
C/o BT Alex. Brown Incorporated
One South Street
Baltimore, Maryland 21202
Ladies and Gentlemen:
The undersigned understands that BT Alex. Brown Incorporated ("BT Alex.
Brown"), Lehman Brothers, and PaineWebber Incorporated as representatives (the
"Representatives") of the several underwriters (the "Underwriters"), propose to
enter into an Underwriting Agreement (the "Underwriting Agreement") with
autobytel.com inc. (the "Company") and the Selling Stockholders named therein
providing for the public offering by the Underwriters, including the
Representatives, of common stock (the "Common Stock") of the Company ("the
"Public Offering").
In order to induce the Underwriters to enter into the Underwriting
Agreement, the undersigned covenants and agrees, except as otherwise provided in
the Underwriting Agreement, with the several Underwriters that the undersigned
will not make any offering, sale, short sale or other disposition of any shares
of Common Stock of the Company or other capital stock of the Company or other
securities convertible, exchangeable or exercisable for Common Stock or
derivative of Common Stock owned by the undersigned (collectively the "Shares")
or request the registration for the offer or sale of any of the Shares (or as to
which the entity has the right to direct the disposition of) for a period of 180
days after the effective date of the Public offering (the "Lock-Up Period"),
directly or indirectly, by the undersigned otherwise than (i) with prior written
consent of BT Alex. Brown or (ii) in a disposition of shares of Common Stock by
transfer to any affiliate of the undersigned, including any trust, or to any
other transferee in a private transaction not requiring registration under the
Securities Act of 1933, as amended, or by any bona fide pledge of such shares of
Common Stock, provided that such affiliate, trustee or other transferee and/or
lender or creditor acknowledges in writing that it is bound by the provisions of
this Lock-up Letter.
Without limiting the restrictions herein, any disposition by the
undersigned shall remain at all times subject to applicable securities laws.
The undersigned agrees that the Company may (i) respect to any Shares for
which the undersigned is the record holder, instruct the transfer agent for the
Company to note stop transfer instructions with respect to such Shares on the
transfer books and records of the Company and (ii) with respect to any Shares
for which the undersigned is the beneficial holder but not the record holder,
cause the record holder of such Shares to instruct the transfer agent for the
<PAGE> 2
Company to note stop transfer instructions with respect to such Shares on the
transfer books and records of the Company.
The undersigned understands that the Company, the Underwriters and the
Representatives will proceed with the Public Offering in reliance on this
Lock-up Letter.
If for any reason the Underwriting Agreement is not entered into on or
before June 30, 1999 or if entered into by such date and is thereafter
terminated prior to the Closing Date (as defined in the Underwriting
Agreement), the agreement set forth above shall likewise be terminated without
further action on the part of any party.
Very truly yours,
----------------------------------------
Signature
By:
-----------------------------------
(Name and Title of Signatory, if
Stockholder is an entity)
Accepted as of the Date Hereof:
BT ALEX. BROWN INCORPORATED
LEHMAN BROTHERS
PAINEWEBBER INCORPORATED
On behalf of each of the underwriters
By: BT Alex. Brown Incorporated
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
<PAGE> 1
EXHIBIT 10.4
AMENDED AND RESTATED EMPLOYMENT AND SEVERANCE AGREEMENT
This Employment and Severance Agreement ("Agreement") is made and
entered into at Irvine, California, as of the 4th day of March 1999, between
autobytel.com inc., a corporation duly organized under the laws of the State of
Delaware (the "Company"), with offices at 18872 MacArthur Blvd, Irvine,
California, 92612-1400 and Michael J. Lowell (hereinafter referred to as
"Lowell" or "Employee"), domiciled at 32942 Barque Way, Dana Point, California
92629.
RECITALS
WHEREAS: Employee and the Company entered into a Severance Agreement
dated January 1, 1998 (the "Severance Agreement".)
WHEREAS: Each of the Employee and the Company desire to terminate the
Severance Agreement and agree that Employee shall hereafter be
employed as the Senior Vice President, Development, subject to
the following terms and conditions.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and with reference to the above recitals, the parties hereby
agree as follows:
ARTICLE 1
TERM OF EMPLOYMENT
The Company hereby employs Lowell as Senior Vice President Development
of the Company and Lowell hereby accepts such employment by the Company
commencing from the date of this Agreement (the "Commencement Date").
ARTICLE 2
DUTIES AND OBLIGATIONS
2.1 During the Term of this Agreement, Lowell shall: (i) devote his
entire time, attention and energies to the business of the Company; (ii) shall
use his best efforts to promote the interests of the Company; (iii) shall
perform all functions and services as Senior Vice President Development of the
Company; and (iv) shall act in accordance with the policies and directives of
the Company as determined from time to time by its President and Chief Executive
Officer.
<PAGE> 2
2.2 Lowell covenants and agrees that he shall not engage in any other
business duties or pursuits whatsoever, or directly or indirectly render any
services of a business, commercial, or professional nature to any other person
or organization, including, but not limited to, providing services to any
business that is in competition with or similar in nature to the Company,
whether for compensation or otherwise, without the prior written consent of the
President and Chief Executive Officer of the Company. However, the expenditure
of reasonable amounts of time for educational, charitable, or professional
activities shall not be deemed a breach of this Agreement, if those activities
do not materially interfere with the services required under this Agreement, and
shall not require the prior written consent of the Company's Board of Directors.
Notwithstanding anything herein contained to the contrary, this Agreement shall
not be construed to prohibit Lowell from making passive personal investments or
conducting private business affairs if those activities do not materially
interfere with the services required hereunder.
ARTICLE 3
COMPENSATION
3.1 As compensation for the services to be rendered by Lowell pursuant
to this Agreement, the Company hereby agrees to pay Lowell a salary at the rate
of One Hundred and forty Thousand Dollars ($140,000.00) per year, payable in
twenty-six (26) equal bimonthly installments of Seven Thousand Three Hundred and
Seven Dollars and Seventy Cents ($5,384.62), each at such times or on such dates
that employees of the Company are regularly and customarily paid. In the event
of termination of this Agreement pursuant to Article 6 hereof (other than a
termination pursuant to Section 6.2), Lowell shall be entitled to receive only
that portion of the yearly salary earned by Lowell up to the date of termination
and applicable accrued vacation.
3.2 The Company shall have the right to deduct or withhold from the
compensation due to Lowell hereunder any and all sums required for federal
income and social security taxes and all state or local taxes now applicable or
that may be enacted and become applicable during the Term.
ARTICLE 4
EMPLOYEE BENEFITS
4.1 The Company agrees that Lowell shall be entitled to all ordinary and
customary perquisites afforded to employees of the Company, at the Company's
sole expense (except to the extent employee contribution may be required under
the Company's benefit plans as they may now or hereafter exist).
4.2 Lowell shall be entitled to the greater of: (a) two (2) weeks of
paid vacation for each year of his employment hereunder, or (b) the number of
vacation days provided for under the Company's then-current vacation policy;
provided, however, that any accrued but unused vacation time shall accumulate
and carry over into
2
<PAGE> 3
successive years of employment with the Company, for a period not to exceed two
(2) successive years of employment hereunder.
4.3 Lowell shall be entitled to one-half (1/2) day per month, or six (6)
days per year, of paid sick leave for each year of his employment hereunder;
provided, however, that any unused sick leave shall not accumulate and carry
over into successive years of employment with the Company.
ARTICLE 5
BUSINESS EXPENSES
5.1 The Company shall promptly pay or reimburse Lowell for all
reasonable and authorized business expenses incurred by Lowell during the Term;
such payment or reimbursement shall not be unreasonably withheld so long as said
business expenses have been incurred for and promote the business of the Company
and are normally and customarily incurred by employees in comparable positions
at other comparable businesses in the same or similar market.
5.2 The Company shall reimburse Lowell for the use of his personal
vehicle for business-related mileage at the reimbursement rate approved by the
United States Internal Revenue Service, as such rate may change from time to
time. Notwithstanding the foregoing, the Company shall not reimburse Lowell for
mileage traveled to the Company's office from Lowell's residence, or from the
Company's office to Lowell's residence. Nothing contained in this Section 5.2
shall be construed as requiring the Company to reimburse Lowell for the cost of
gasoline, maintenance, or other expense relating to his motor vehicle.
5.3 As a condition to reimbursement, Lowell shall furnish to the Company
adequate records and other documentary evidence required by federal and state
statutes and regulations for the substantiation of each expenditure as an income
tax deduction. Lowell acknowledges and agrees that failure to furnish the
required documentation may result in the Company denying all or part of the
expense for which reimbursement is sought.
ARTICLE 6
TERMINATION OF EMPLOYMENT
6.1 Termination for Cause. The Company may, during the Term, without
notice to Lowell, terminate this Agreement and discharge Lowell for cause,
whereupon the respective rights and obligations of the parties hereunder shall
terminate; provided, however, that the Company shall immediately pay Lowell any
amount due and owing pursuant to Articles 3, 4, and 5, prorated to the date of
termination. As used herein, the
3
<PAGE> 4
term "for cause" shall refer to the termination of Lowell's employment as a
result of any one or more of the following:
6.1.1 Any conviction of Lowell for a felony or any crime
involving moral turpitude, in which event Lowell agrees to resign from
employment with the Company and to release the Company from all further
obligations under this Agreement, except for those obligations set forth in
Article 6 herein above;
6.1.2 Breach of his fiduciary duties to the Company for the
purpose of and inuring to his own pecuniary benefit;
6.1.3 Failure to consistently and competently discharge his
duties under this Agreement or as assigned by the Company from time to time
which failure continues for thirty (30) days following written notice from the
Company detailing the Company's expectations of Lowell's performance and the
area or areas in which such expectations have not been met.
6.2 Termination Without Cause. Anything in this Agreement to the
contrary notwithstanding, the Company shall have the right, at any time in its
sole and subjective discretion, to terminate this Agreement without cause upon
prior written notice to Lowell in accordance with Section 6.4 herein below. The
term "termination without cause" shall mean the termination of Lowell's
employment for any reason other than those expressly set forth in Section 6.1,
or no reason at all, and shall also mean (i) the permanent or quasi-permanent
assignment to duties grossly inappropriate for a senior vice president and (ii)
the Company's decision to relocate Lowell from the Company's offices located at
18872 MacArthur Boulevard, Irvine, California, to 92612-1400 to any other
location in excess of fifty (50) miles beyond the geographic limits of Irvine,
California, without Lowell's consent.
6.3 Severance Amount. In the event the Company shall exercise the
termination right granted pursuant to Section 6.2 herein above, the Company
shall, within Thirty (30) Days of notice of termination to Lowell, pay to
Lowell, in a single lump-sum payment, the amount set forth below corresponding
to the effective date of any such termination (the "Severance Amount"):
i. If the effective date of termination occurs during January 1999,
then the Severance Amount shall be two hundred and sixty four
thousand one hundred and sixty seven dollars ($264,167.00) less
any applicable Federal and State taxes;
ii. If the effective date of termination occurs during February 1999,
then the Severance Amount shall be two hundred and forty eight
thousand, three hundred and thirty four dollars ($248,334.00)
less any applicable Federal and State taxes;
iii.If the effective date of termination occurs during March 1999,
then the Severance Amount shall be two hundred and thirty two
thousand, five hundred and one dollars ($232,501.00) less any
applicable Federal and State taxes;
4
<PAGE> 5
iv. If the effective date of termination occurs during April 1999,
then the Severance Amount shall be two hundred and sixteen
thousand, six hundred and sixty eight dollars ($216,668.00) less
any applicable Federal and State taxes;
v. If the effective date of termination occurs during May 1999, then
the Severance Amount shall be two hundred thousand, eight hundred
and thirty five dollars ($200,835.00) less any applicable Federal
and State taxes;
vi. If the effective date of termination occurs during June 1999,
then the Severance Amount shall be one hundred and eighty five
thousand and two dollars ($185, 002.00) less any applicable
Federal and State taxes;
vii.If the effective date of termination occurs during July 1999,
then the Severance Amount shall be one hundred and sixty nine
thousand, one hundred and sixty nine dollars ($169, 169.00) less
any applicable Federal and State taxes;
viii. If the effective date of termination August 1999, then the
Severance Amount shall be one hundred and fifty three thousand,
three hundred and thirty six dollars ($153,336.00) any applicable
Federal and State taxes;
ix. If the effective date of termination occurs during September
1999, then the Severance Amount shall be one hundred and thirty
seven thousand, five hundred and three dollars ($137,503.00) less
any applicable Federal and State taxes;
x. If the effective date of termination occurs during October 1999,
then the Severance Amount shall be one hundred and twenty one
thousand, six hundred and seventy dollars ($121,670.00) less any
applicable Federal and State taxes;
xi. If the effective date of termination occurs during November 1999,
then the Severance Amount shall be one hundred and five thousand,
eight hundred and thirty seven dollars, ($105,837.00) less any
applicable Federal and State taxes;
xii.If the effective date of termination occurs during December
1999, then the Severance Amount shall be ninety thousand and four
dollars ($90,004.00) less any applicable Federal and State taxes;
xiii. If the effective date of termination is after January 1, 2000
and prior to the end of the Term of this Agreement, the Severance
Amount shall be ninety thousand dollars ($90,000.00) less any
applicable Federal and State taxes.
5
<PAGE> 6
6.4 Notice of Termination. In the event that the Company elects to
exercise its rights to terminate Lowell's employment without cause pursuant to
Section 6.2 of the Agreement, the Company shall provide notice of such
termination as follows:
i. Should termination occur prior to May 1, 1999, the Company shall
provide one hundred and eighty (180) days written notice.
ii. Should termination occur between May 1, 1999, and July 1, 1999,
the Company shall provide ninety (90) days written notice.
iii.Should termination occur between July 1, 1999 and September 30,
1999, the Company shall provide sixty (60) days written notice.
iv. Should termination occur on October 1, 1999 or thereafter for the
remainder of the Term of this Agreement, the Company shall
provide thirty (30) days written notice.
6.5 Death or Disability. Anything in this Agreement to the contrary
notwithstanding, upon the death or disability of Lowell, the Company shall pay
to Lowell or his successors, heirs, designees, or assigns, the amount that would
have been due and owing to Lowell for the remainder of the Term.
ARTICLE 7
RESTRICTIVE COVENANTS
7.1 During the Term and following termination of this Agreement, Lowell
agrees that, without the Company's prior written consent, he will not use or
disclose to any person, firm, association, partnership, entity or corporation,
other than in the course of his employment hereunder acting for and on behalf of
the Company, any information concerning: (a) the business operations or internal
structure of the Company; (b) the customers of the Company; (c) the financial
condition of the Company; and (d) other confidential information pertaining to
the Company, including without limitation, trade secrets, technical data,
marketing analyses and studies, operating procedures, customer and/or inventor
lists, or the existence or nature of any of the Company's agreements; provided,
however, that Lowell shall be entitled to disclose such information: (a) to the
extent the same shall have otherwise become publicly available (unless made
publicly available by Lowell); or (b) during the course of or in connection with
any litigation, arbitration, or other proceeding based upon or in connection
with the subject matter of this Agreement.
6
<PAGE> 7
7.2 Employee acknowledges that a breach or violation of the covenants
contained in Section 7.1 above will cause severe and irreparable harm to the
Company and that recovery of monetary damages by the Company may not constitute
an adequate remedy. Accordingly, in the event of any breach or violation of such
covenants by Employee, the Company reserves the right to specifically enforce
Section 7.1 of this Agreement, or at its election, to seek an injunction
enjoining any such acts, without requirement of bond or showing of actual
damages, provided that nothing contained herein shall limit or restrict any
other rights or remedies that the Company may have at law or in equity. Each of
the rights and remedies of the Company enumerated in this Section shall be
independent of the other, and shall be in addition to, and not in lieu of, any
other rights and remedies available to the Company under law or in equity.
ARTICLE 8
GENERAL PROVISIONS
8.1 This Agreement is intended to be the final, complete and exclusive
agreement between the parties relating to the employment of Lowell by the
Company and all prior or contemporaneous understandings, representations and
statements, oral or written, are merged herein and that the Severance Agreement
between Employee and the Company dated January 1, 1998 is terminated and of no
further force or effect.
8.2 No waiver, by conduct or otherwise, by any party of any term,
provision, or condition of this Agreement, shall be deemed or construed as a
further or continuing waiver of any such term, provision, or condition.
8.3 No modification, waiver, amendment, discharge or change of this
Agreement shall be valid unless the same is in writing and signed by the party
against whom enforcement of such modification, waiver, amendment, discharge, or
change is sought.
8.4 The rights under this Agreement, or by law or equity, shall be
cumulative and may be exercised at any time and from time to time. No failure by
any party to exercise, and no delay in exercising, any rights shall be construed
or deemed to be a waiver thereof, nor shall any single or partial exercise by
any party preclude any other or future exercise thereof or the exercise of any
other right.
8.5 Except as otherwise provided in this Agreement, any notice,
approval, consent, waiver or other communication required or permitted to be
given or to be served upon any person in connection with this Agreement shall be
in writing. Such notice shall be personally served, sent by telegram, tested
telex or cable, or sent prepaid by registered or certified mail with return
receipt requested and shall be deemed given (i) if personally served, when
delivered to the person to whom such notice is addressed, (ii) if given by
telegram, telex or cable, when sent, or (iii) if given by mail, four (4)
business days following deposit in the United States mail. Any notice given by
telegram, telex or cable shall be confirmed in writing within forty-eight (48)
hours after being sent. Such notices
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shall be addressed to the party to whom such notice is to be given at the
party's address set forth below or as such party shall otherwise direct.
If to the Company: auytobytel.com inc.
18872 MacArthur Boulevard
Irvine, California 92612-1400
Attn: Chief Executive Officer
If to Employee: Michael J. Lowell
32942 Barque Way
Dana Point, CA 92629
8.6 Dispute Resolution, Forum. ANY DISPUTE OR CLAIM ARISING HEREUNDER
SHALL BE SUBMITTED TO BINDING ARBITRATION, and conducted in accordance with the
National Rules for the Resolution of Employment Disputes as published by the
American Arbitration Association, ("AAA"). The parties hereunder further agree:
(i) Any request for arbitration shall be made in writing and must be made within
a reasonable time after the claim, dispute or other matter in question has
arisen; (ii) the arbitrator or arbitrators appointed must be former or retired
judges or attorneys at law with at least ten (10) years experience in the area
employment law; (iii) all proceedings involving the parties shall be reported by
a certified shorthand reporter and written transcripts of any such proceedings
shall be prepared and made available to the parties (iv) the arbitrator or
arbitrators decision must be made within ninety (90) days from the date the
arbitration proceedings are initiated; (v) the prevailing parties shall be
awarded reasonable attorney's fees, expert and non-expert witness costs, and
expenses and other costs incurred in connection with the arbitration, unless the
arbitrator or arbitrators, for good cause, determine otherwise, (vii) costs and
fees of the arbitrator or arbitrators shall be borne by the non-prevailing
party, unless the arbitrator or arbitrators determine otherwise, (viii) the
award or decision of the arbitrator or arbitrators, which may include equitable
relief, shall be final and judgment may be entered on such award in accordance
with applicable law in any court having jurisdiction over the matter. The
parties agree that in connection with any such arbitration, that the General
Principles of Evidence, as enacted or hereafter amended, beginning at Section
1856 and continuing to Section 1866, of the California Code of Civil Procedure;
and all provisions of the Civil Discovery Act, as enacted or hereafter amended,
beginning at Section 2016, et seq., of the California Code of Civil Procedure
shall apply.
8.7 The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the successors and assigns of the parties hereto.
8.8 This Agreement shall be construed and enforced in accordance with
the laws of the State of California.
8.9 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which shall constitute one
instrument.
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8.10 The provisions of this Agreement are agreed to be severable, and if
any provision or application thereof, is held invalid or unenforceable, then
such holding shall not affect any other provision or application.
8.11 As used herein, and as the circumstances require, the plural term
shall include the singular, the singular shall include the plural, the neuter
term shall include the masculine and feminine genders, and the feminine term
shall include the neuter and the masculine genders.
8.12 Each party hereto shall pay its or their own expenses incident to
the negotiation, preparation and consummation of this Agreement, including all
fees and expenses of its or their respective counsel.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
COMPANY
AUTOBYTEL.COM INC.
By: /s/ MARK W. LORIMER
--------------------------------
Mark W. Lorimer
President
Chief Executive Officer
EMPLOYEE
/s/ MICHAEL J. LOWELL
-----------------------------------
Michael J. Lowell
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<PAGE> 1
EXHIBIT 10.15
[*] Confidential Treatment has been requested for certain portions of this
exhibit.
CONTENT LICENSE AND CHANNEL SPONSORSHIP TERM SHEET
This agreement ("Agreement") is entered into as of the [*] ("Effective Date"),
by and between Excite, Inc., a California corporation, located at 555 Broadway,
Redwood City, California 94063 ("Excite"), and Auto-By-Tel, a California
corporation, located at 18872 MacArthur Blvd., #200, Irvine, California,
92612-1400 ("Auto-By-Tel").
RECITALS
A. Excite maintains a site on the Internet at http://www.excite.com and owns
and/or manages related Web sites worldwide (collectively, the "Excite
Network") which, among other things, allow its users to search for and
access content and other sites on the Internet.
B. Within the Excite Network, Excite currently organizes certain content into
topical channels, including the Excite Automotive Channel.
C. Excite also maintains and/or manages certain Web pages which may be
delivered to users via email, desktop "channels" or Internet "push"
technologies (collectively, "Broadcast Pages") which may incorporate
content supplied to Excite by third parties for the purpose of providing
value to Excite users and providing access to the content, products and/or
services of such third parties.
D. Auto-By-Tel owns or has the right to distribute certain content relating to
online automobile buying and maintains a related site on the Internet at
http://www.autobytel.com (the "Auto-By-Tel Site") for which it wishes to
generate increased traffic.
E. Auto-By-Tel wishes to promote use of the Auto-By-Tel Site to Excite's users
by sponsoring the Excite Automotive Channel and purchasing banner
advertising on the Excite Network.
Therefore, the parties agree as follows:
1. SPONSORSHIP OF EXCITE AUTOMOTIVE CHANNEL
a) Auto-By-Tel will be the exclusive online automobile buying service
sponsor of the Excite Automotive Channel, located at
http://www.excite.com.
b) During the term of the Agreement, Excite will not display any banner
advertising or promotional placements for any of Auto-By-Tel's direct
competitors (listed in Exhibit C) in the Excite Automotive Channel.
Not more than once per quarter, Auto-By-Tel may update this list of
competitors.
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[*] Confidential Treatment Requested
c) In the event that Excite intends to enter into an agreement with a
third party with respect to sponsorship of the Excite Automotive
Channel before the expiration of the term of the Agreement, Excite
will deliver to Auto-By-Tel a written notice describing the relevant
opportunity. Although Excite will not be required to disclose any
information in violation of any nondisclosure agreement between Excite
and any third party, the notice will include information sufficient to
permit Auto-By-Tel to evaluate the requirements for meeting the
competing offer for sponsorship of the Excite Automotive Channel and
to formulate a meaningful response. Auto-By-Tel will have ten (10)
days after receipt of such written notice to provide notice to Excite
that it is prepared to enter into an agreement with Excite on the same
terms and conditions as Excite proposes to accept from such third
party. Excite and Auto-By-Tel will then promptly commence good faith
negotiations to conclude the agreement. If Auto-By-Tel rejects said
offer or fails to notify Excite of its acceptance within the ten (10)
day period, Excite shall have the right to enter into the agreement
with such third party, provided the terms and conditions of the
agreement are not less favorable to Excite than previously offered by
Auto-By-Tel.
2. MARKETING AND PROMOTION
a) Excite will feature Auto-By-Tel in the Auto Buying Services department
of the Excite Automotive Channel for the term of the Agreement.
b) Excite will conduct three (3) two-week car give away promotions on the
Excite home page promoting Auto-By-Tel during the first year of the
Agreement, with one promotion coinciding with the launch of
Auto-By-Tel's sponsorship and the other two to be mutually scheduled.
Excite will conduct similar promotions in years two and three of the
Agreement. Auto-By-Tel will provide the cars to be given away through
these promotions.
c) Auto-By-Tel will purchase banner advertising on the Excite Network in
Year One of the Agreement in the amounts described in Exhibit A.
Auto-By-Tel will purchase banner advertising on the Excite Network in
Year Two and Year Three in amounts substantially comparable to the
amounts agreed upon in Exhibit B.
d) Excite will deliver a minimum of [*] impressions of Auto-By-Tel
promotional placements during the term of the Agreement, including the
placement in the Auto Buying Services department of the Excite
Automotive Channel, the car give-away promotions and the banner
advertisements described above, the display of Auto-By-Tel's content
described below and other promotional placements that may be
determined by the parties.
e) Neither party will make any public statement, press release or other
announcement relating to the terms of or existence of this Agreement
without
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[*] Confidential Treatment Requested
the prior written approval of the other. Notwithstanding the
foregoing, Auto-By-Tel hereby grants to Excite the right to issue an
initial press release, the timing and wording of which will be subject
to Auto-By-Tel's reasonable approval, regarding the relationship
between Excite and Auto-By-Tel.
3. CONTENT PROVIDED TO EXCITE
a) Auto-By-Tel will provide to Excite mutually agreed upon content
relating to online automobile buying such as AutoSite and The Bank
Rate Monitor (the "Content") which is described in Exhibit D. Excite
may display the Content in the Excite Automotive Channel and in other
locations in the Excite Network. Excite will determine the "look and
feel" of the Excite Automotive Channel and the Excite Network.
b) Auto-By-Tel will not provide the Content to any of Excite's
competitors during the term of the Agreement, including, but not
limited to, AltaVista, HotBot, Infoseek, Lycos, Search.com and Yahoo,
or any other Web site promoting itself as a provider of Internet
search and navigation services. Not more than once per quarter, Excite
may update this list of competitors.
c) Auto-By-Tel and Excite will determine mutually agreeable methods for
the transmission and incorporation of updates to the Content. Other
than updates to the Content or revisions as needed to reflect changes
to Auto-By-Tel's name and/or brand, Auto-By-Tel will not alter the
Content without Excite's prior consent.
d) Auto-By-Tel will ensure that the Content will at all times feature the
full array of content and functionality as made generally available by
Auto-By-Tel at the Auto-By-Tel Site, through any other means of
distribution of Auto-By-Tel's own branded service or through any other
third-party relationship.
e) Auto-By-Tel will have sole responsibility for providing, at its
expense, the Content to Excite.
f) Reasonable excerpts or portions of the Content may be incorporated
into "Broadcast Pages" delivered by Excite via email, desktop
"channels" or Internet "push" technologies. Excite will determine the
"look and feel" of the Broadcast Pages.
4. SPONSORSHIP AND ADVERTISING FEES AND REVENUE SHARING
a) A "set-up fee" of [*] will be due to Excite upon execution of the
Agreement as compensation for exclusivity, costs of initiating access
to the Excite Network, programming costs associated with the
incorporation of the Content into the Excite Network, set-up costs and
other expenses associated
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[*] Confidential Treatment Requested
with Excite's initiation of the links, placements, advertisements and
promotions contemplated by this Agreement.
b) Separate and apart from the set-up fee, sponsorship and advertising
fees will be due to Excite as follows:
<TABLE>
<CAPTION>
Year 1 Year 2 Year 3
---------- ---------- ----------
<S> <C> <C> <C>
Sponsorship [*] [*] [*]
Banners - US [*] [*] [*]
Banners - WebTV/ [*] [*] [*]
International
Total [*] [*] [*]
</TABLE>
In the event that Excite is unable to deliver the agreed-upon amount
of banner advertising in the WebTV and/or International rotations,
Excite will provide the undelivered amounts in rotation on its primary
Web site.
c) Auto-By-Tel will pay Excite a bounty per unique purchase request
submitted by users referred to the Auto-By-Tel Site from the Excite
Network of [*] for the first [*] unique purchase requests in
each year of the Agreement, [*] for the second [*] unique
purchase requests in each year of the Agreement and [*] for each
unique purchase request in excess of [*] in each year of the
Agreement. [*].
d) If the number of unique purchase requests submitted by users referred
directly to the Auto-By-Tel Site from the Excite Network in any year
of the Agreement exceeds [*], the bounty increases to [*] for
the first [*] unique purchase requests in the following year of
the Agreement, [*] for the second [*] unique purchase requests
In the following year of the Agreement and [*] for each unique
purchase request in excess of [*] in the following year of the
Agreement.
e) The set-up, sponsorship and advertising fees are gross amounts and do
not reflect any agency commissions to be paid by Auto-By-Tel. The
bounty payment amounts are net of any agency commissions to be paid by
Auto-By-Tel.
f) Sponsorship and advertising fees will be paid in twelve equal monthly
installments commencing on the execution of the Agreement. Bounty
payments will be made quarterly. The parties will conduct annual
reviews to ensure accurate payments and accounting.
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[*] Confidential Treatment Requested
g) Auto-By-Tel will maintain accurate records with respect to the
calculation of all payments due under this Agreement. Excite may, upon
no less than thirty (30) days prior written notice to Auto-By-Tel,
cause an independent Certified Public Accountant to inspect the
records of Auto-By-Tel reasonably related to the calculation of such
payments during Auto-By-Tel's normal business hours. The fees charged
by such Certified Public Accountant in connection with the inspection
will be paid by Excite unless the payments made to Excite are
determined to have been less than ninety-five percent (95%) of the
payment owed to Excite, in which case Auto-By-Tel will be responsible
for the payment of the reasonable fees for such inspection.
5. CUSTOMER INFORMATION
a) Auto-By-Tel will retain all rights to customers acquired pursuant to
the Agreement.
b) Once per quarter, in connection with Auto-By-Tel's bounty payments,
Auto-By-Tel will provide Excite with all of the customer information
it acquires through the purchase requests submitted by users referred
directly to Auto-By-Tel's Web site from the Excite Network. This
customer information will be deemed to be the joint property of the
parties. Under no circumstances will Excite sell, provide or transfer
this customer information to any third party.
6. OPERATIONAL SUPPORT
a) Excite will provide, at its sole expense, Account Management support
of the Auto Buying Services department of the Excite Automotive
Channel sufficient to support for the level of sales and marketing
contemplated by the Agreement.
b) The parties will hold formal reviews on a monthly basis to maintain
anticipated results according to the sponsorship objectives.
Advertising and sponsorship placements will be adjusted monthly by
mutual agreement.
7. TERM AND TERMINATION
a) The Agreement will have an initial term [*].
b) Auto-By-Tel will have the option to cancel the Agreement if, at the
end of the first year of the Agreement, users referred to the
Auto-By-Tel Site from the Excite Network do not submit [*] unique
purchase requests.
c) Either party may terminate this Agreement it the other party
materially breaches its obligations hereunder and such breach remains
uncured for thirty (30) days following the notice to the breaching
party of the breach, with the following exceptions:
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(i) In the event of three or more errors, failures or outages of the
Content in any thirty (30) day period, Excite may elect to
immediately terminate this Agreement upon written notice to
Auto-By-Tel and enter into an other arrangements for the
acquisition of similar content; or
(ii) Auto-By-Tel will ensure that the Content will at all times be at
least comparable to any other source of similar topical content
available on the Internet in terms of the following factors,
taken as a whole: (i) breadth and depth of coverage, (ii)
timeliness of content updates and (iii) reputation and ranking
based on a cross-section of third party reviewers in terms of
features, functionality, quality and other qualitative factors.
In the event that Auto-By-Tel fails to meet these quality
criteria, Excite may terminate this agreement on thirty (30) days
written notice and enter into an other arrangements for the
acquisition of similar content.
d) All payments that have accrued prior to the termination or expiration
of this Agreement will be payable in full within thirty (30) days
thereof.
e) The provisions of Section 10 (Confidentiality), Section 11 (Warranty
and Indemnity), Section 12 (Limitation of Liability) and Section 13
(Dispute Resolution) will survive any termination or expiration of
this Agreement.
8. CONTENT OWNERSHIP AND LICENSE
a) Auto-By-Tel will retain all right, title and interest in and to the
Content worldwide (including, but not limited to, ownership of all
copyrights and other intellectual property rights therein). Subject to
the terms and conditions of this Agreement, Auto-By-Tel hereby grants
to Excite a royalty-free, nonexclusive, worldwide license to use,
reproduce, distribute, transmit and publicly display the Content in
accordance with this Agreement and to sublicense the Content to
Excite's wholly-owned subsidiaries or to joint ventures in which
Excite participates for the sole purpose of using, reproducing,
distributing, transmitting and publicly displaying the Content in
accordance with this Agreement.
b) Excite will retain all right, title, and interest in and to the Excite
Network and the Broadcast Pages worldwide (including, but not limited
to, ownership of all copyrights, look and feel and other intellectual
property rights therein).
9. TRADEMARK OWNERSHIP AND LICENSE
a) Auto-By-Tel will retain all right, title and interest in and to its
trademarks, service marks and trade names worldwide, subject to the
limited license granted to Excite hereunder.
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b) Excite will retain all right, title and interest in and to its
trademarks, service marks and trade names worldwide, subject to the
limited license granted to Auto-By-Tel hereunder.
c) Each party hereby grants to the other a non-exclusive, limited license
to use its trademarks, service marks or trade names only as
specifically described in this Agreement. All such use shall be in
accordance with each party's reasonable policies regarding advertising
and trademark usage as established from time to time.
d) Upon the expiration or termination of this Agreement, each party will
cease using the trademarks, service marks and/or trade names of the
other except:
i) As the parties may agree in writing; or
ii) To the extent permitted by applicable law.
10. CONFIDENTIALITY
a) For the purposes of this Agreement, "Confidential Information" means
information about the disclosing party's (or its suppliers') business
or activities that is proprietary and confidential, which shall
include all business, financial, technical and other information of a
party marked or designated by such party as "confidential" or
"proprietary"; or information which, by the nature of the
circumstances surrounding the disclosure, ought in good faith to be
treated as confidential.
b) Confidential Information will not include information that (i) is in
or enters the public domain without breach of this Agreement, (ii) the
receiving party lawfully receives from a third party without
restriction on disclosure and without breach of a nondisclosure
obligation or (iii) the receiving party knew prior to receiving such
information from the disclosing party or develops independently.
c) Each party agrees (i) that it will not disclose to any third party or
use any Confidential Information disclosed to it by the other except
as expressly permitted in this Agreement and (ii) that it will take
all reasonable measures to maintain the confidentiality of all
Confidential Information of the other party in its possession or
control, which will in no event be less than the measures it uses to
maintain the confidentiality of its own information of similar
importance.
d) Notwithstanding the foregoing, each party may disclose Confidential
Information (i) to the extent required by a court of competent
jurisdiction or other governmental authority or otherwise as required
by law or (ii) on a
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"need-to-know" basis under an obligation of confidentiality to its
legal counsel, accountants, banks and other financing sources and
their advisors.
e) The information contained in the Usage Reports provided by each party
hereunder will be deemed to be the Confidential Information of the
disclosing party.
f) The terms and conditions of this Agreement will be deemed to be the
Confidential Information of each party and will not be disclosed
without the written consent of the other party.
11. WARRANTY AND INDEMNITY
a) Auto-By-Tel warrants that it owns, or has obtained the right to
distribute and make available as specified in this Agreement, any and
all content provided to Excite or made available to third parties in
connection with this Agreement.
b) Auto-By-Tel warrants that the Content will comply with the description
and technical specifications contained in Exhibit D.
c) Auto-By-Tel will indemnify, defend and hold harmless Excite, its
affiliates, officers, directors, employees, consultants and agents
from any and all third party claims, liability, damages and/or costs
(including, but not limited to, attorneys fees) arising from:
i) The breach of any warranty, representation or covenant in this
Agreement;
ii) Any claim that the Content infringes or violates any third
party's copyright, patent, trade secret, trademark, right of
publicity or right of privacy or contains any defamatory content;
or
iii) Any claim arising from content displayed on the Auto-By-Tel Site.
Excite will promptly notify Auto-By-Tel of any and all such claims and
will reasonably cooperate with Auto-By-Tel with the defense and/or
settlement thereof; provided that, it any settlement requires an
affirmative obligation of, results in any ongoing liability to or
prejudices or detrimentally impacts Excite in any way and such
obligation, liability, prejudice or impact, can reasonably be expected
to be material, then such settlement shall require Excite's written
consent (not to be unreasonably withheld or delayed) and Excite may
have its own counsel in attendance at all proceedings and substantive
negotiations relating to such claim,
d) EXCEPT AS SPECIFIED IN THIS AGREEMENT, NEITHER PARTY MAKES ANY
WARRANTY IN CONNECTION WITH THE SUBJECT MATTER OF THIS AGREEMENT AND
HEREBY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES, INCLUDING ALL IMPLIED
WARRANTIES OF
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MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE REGARDING SUCH
SUBJECT MATTER.
12. LIMITATION OF LIABILITY
EXCEPT UNDER SECTION 11(c), IN NO EVENT WILL EITHER PARTY BE LIABLE TO
THE OTHER FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER
BASED ON BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE,
WHETHER OR NOT THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGE. THE LIABILITY OF EXCITE FOR DAMAGES OR ALLEGED DAMAGES HEREUNDER,
WHETHER IN CONTRACT, TORT OR ANY OTHER LEGAL THEORY, IS LIMITED TO, AND
WILL NOT EXCEED, THE AMOUNTS ACTUALLY PAID BY AUTO-BY-TEL TO EXCITE
HEREUNDER.
13. DISPUTE RESOLUTION
a) The parties agree that any breach of either of the parties'
obligations regarding trademarks, service marks or trade names and/or
confidentiality would result in irreparable injury for which there is
no adequate remedy at law. Therefore, in the event of any breach or
threatened breach of a party's obligations regarding trademarks,
service marks or trade names or confidentiality, the aggrieved party
will be entitled to seek equitable relief in addition to its other
available legal remedies in a court of competent jurisdiction. For the
purposes of this section only, the parties consent to venue in either
the state courts of the county in which Excite has its principal place
of business or the United States District Court for the Northern
District of California.
b) In the event of disputes between the parties arising from or
concerning in any manner the subject matter of this Agreement, other
than disputes arising from or concerning trademarks, service marks or
trade names and/or confidentiality, the parties will first attempt to
resolve the dispute(s) through good faith negotiation. In the event
that the dispute(s) cannot be resolved through good faith negotiation,
the parties will refer the dispute(s) to a mutually acceptable
mediator for hearing in the county in which Excite has its principal
place of business.
c) In the event that disputes between the parties arising from or
concerning in any manner the subject matter of this Agreement, other
than disputes arising from or concerning trademarks, service marks or
trade names and/or confidentiality, cannot be resolved through good
faith negotiation and mediation, the parties will refer the dispute(s)
to the American Arbitration Association for resolution through binding
arbitration by a single arbitrator pursuant to the American
Arbitration Association's rules applicable to
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commercial disputes. The arbitration will be held in the county in
which Excite has its principal place of business.
14. GENERAL
a) Assignment. Neither party may assign this Agreement, in whole or in
part, without the other party's written consent (which will not be
unreasonably withheld), except that no such consent will be required
in connection with a merger, reorganization or sale of all, or
substantially all, of such party's assets. Any attempt to assign this
Agreement other than as permitted above will be null and void.
b) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of California, notwithstanding
the actual state or country of residence or incorporation of
Auto-By-Tel.
c) Notice. Any notice under this Agreement will be in writing and
delivered by personal delivery, express courier, confirmed facsimile,
confirmed email or certified or registered mail, return receipt
requested, and will be deemed given upon personal delivery, one (1)
day after deposit with express courier, upon confirmation of receipt
of facsimile or email or five (5) days after deposit in the mail.
Notices will be sent to a party at its address set forth below or such
other address as that party may specify in writing pursuant to this
Section.
d) No Agency. The parties are independent contractors and will have no
power or authority to assume or create any obligation or
responsibility on behalf of each other. This Agreement will not be
construed to create or imply any partnership, agency or joint venture.
e) Force Majeure. Any delay in or failure of performance by either party
under this Agreement will not be considered a breach of this Agreement
and will be excused to the extent caused by any occurrence beyond the
reasonable control of such party including, but not limited to, acts
of God, power outages and governmental restrictions.
f) Severability. In the event that any of the provisions of this
Agreement are held by to be unenforceable by a court or arbitrator,
the remaining portions of the Agreement will remain in full force and
effect.
g) Entire Agreement. This Agreement is the complete and exclusive
agreement between the parties with respect to the subject matter
hereof, superseding any prior agreements and communications (both
written and oral) regarding such subject matter. This Agreement may
only be modified, or any rights under it waived, by a written document
executed by both parties.
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Auto-By-Tel Excite, Inc.
By: /s/ Mark W. Lorimir By: /s/ Robert C. Hood
-------------------------------- ------------------------------
Name: Mark W. Lorimir Name: Robert C. Hood
------------------------------ ----------------------------
Title: EVP & COO Title: EVP & CFO
------------------------------ ----------------------------
Date: ______________________________ Date: ____________________________
[ADDRESS] 555 Broadway
Redwood City, California 94063
415.568.6000 (voice)
415.568.6030 (fax)
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EXHIBIT C
AUTO-BY-TEL LIST OF COMPETITORS
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EXHIBIT D
CONTENT DESCRIPTION AND TECHNICAL SPECIFICATIONS
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[*] Confidential Treatment Requested
CONTENT LICENSE AND CHANNEL SPONSORSHIP TERM SHEET
This term sheet describes the basic points regarding a proposed transaction
between Excite, Inc. ("Excite") and Auto-By-Tel. The parties will enter into a
definitive agreement ("Agreement") incorporating the terms and conditions
contained in this term sheet as soon as reasonably possible. Until the execution
of the Agreement, the parties will be bound by the terms and conditions
contained in this term sheet.
1. SPONSORSHIP OF EXCITE AUTOMOTIVE CHANNEL
a) Auto-By-Tel will be the exclusive online automobile buying service
sponsor of the Excite Automotive Channel, located at
http://www.excite.com. If, based upon customer feedback, Excite
reasonably establishes that the user traffic level on this channel is
not being optimized due to a lack of diversity in the user experience,
the parties will work together in good faith to test enhancements for
the user experience and to generate optimum traffic.
b) During the term of the Agreement, Excite will not display any banner
advertising or promotional placements for any of Auto-By-Tel's direct
competitors in the Excite Automotive Channel.
c) Auto-By-Tel will have a right of first refusal to renew its
sponsorship of the Excite Automotive Channel upon the expiration of
the Agreement.
2. MARKETING AND PROMOTION
a) Excite will feature Auto-By-Tel in the Auto Buying Services department
of the Excite Automotive Channel for the term of the Agreement.
b) Excite will conduct three (3) two-week car give away promotions on the
Excite home page promoting Auto-By-Tel during the [*] of the
Agreement, with one promotion coinciding with the launch of
Auto-By-Tel's sponsorship and the other two to be mutually scheduled.
Excite will conduct similar promotions three (3) times per year in
years [*] of the Agreement. Auto-By-Tel will provide the cars to be
given away through these promotions.
c) Auto-By-Tel will purchase banner advertising on the Excite Network in
the amounts described below,
d) Excite will deliver an annual minimum of [*] impressions of
Auto-By-Tel promotional placements during the term of the Agreement,
including the placement in the Auto Buying Services department of the
Excite Automotive Channel, the car give-away promotions and the banner
advertisements described above, the display of Auto-By-Tel's Content
(described below) and
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[*] Confidential Treatment Requested
other promotional placements that may be agreed upon by the parties.
Attached Exhibits A and B are examples of a Year One Promotional Plan
and a [*] Promotional Plan, respectively.
e) The parties will issue an initial, mutually agreed upon press release.
3. CONTENT PROVIDED TO EXCITE
a) Auto-By-Tel will provide to Excite mutually agreed upon content
relating to online automobile buying such as AutoSite and The Bank
Rate Monitor (the "Content"). Excite may display the Content in the
Excite Automotive Channel and in other locations in the Excite
Network. Excite will determine the "look and feel" of the Excite
Automotive Channel and the Excite Network.
b) Auto-By-Tel and Excite will determine mutually agreeable methods for
the transmission and incorporation of updates to the Content.
c) Reasonable excerpts or portions of the Content may be incorporated
into "Broadcast Pages" delivered by Excite via email, desktop
"channels" or Internet "Push" technologies. Excite will determine the
"look and feel" of the Broadcast Pages.
4. SPONSORSHIP AND ADVERTISING FEES AND REVENUE SHARING
a) A set-up fee of [*] will be due to Excite upon execution of the
Agreement as compensation for exclusivity, costs of initiating access
to the Excite Network, programming costs associated with the
incorporation of the Content into the Excite Network, set-up costs and
other expenses associated with Excite's initiation of the links,
placements, advertisements and promotions contemplated by this
Agreement.
b) Sponsorship and advertising fees will be due to Excite as follows:
<TABLE>
<CAPTION>
Year 1 Year 2 Year 3
---------- ---------- ----------
<S> <C> <C> <C>
Sponsorship [*] [*] [*]
Banners - US [*] [*] [*]
Banners - WebTV/ [*] [*] [*]
International
Total [*] [*] [*]
</TABLE>
In the event that Excite is unable to deliver the agreed-upon amount
of banner advertising in the WebTV and/or international rotations,
Excite will provide the undelivered amounts in rotation on its primary
Web site.
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[*] Confidential Treatment Requested
c) Auto-By-Tel will pay Excite a bounty per unique auto purchase request
(the "Bounty") submitted by users referred to Auto-By-Tel's Web site
from the Excite Network. The Bounty will be payments of [*] for the
first [*] unique auto purchase requests in each year of the
Agreement, [*] for the second [*] unique auto purchase requests
in each year of the Agreement and [*] for each unique auto purchase
request in excess of [*] in each year of the Agreement. For the
purposes of the Agreement, a "unique auto purchase request" is
one new-automobile purchase or lease request submitted by any
particular user in a sixty (60) day period, as measured by
Auto-By-Tel.
d) If the number of unique auto purchase requests submitted by users
referred to Auto-By-Tel's Web site from the Excite Network in any year
of the Agreement exceeds [*], the Bounty increases to [*] for
the first [*] unique auto purchase requests In the subsequent
year(s) of the Agreement, [*] for the second [*] unique auto
purchase requests in the subsequent year(s) of the Agreement and
[*] for each unique auto purchase request in excess of [*] in
the subsequent year(s) of the Agreement.
e) The set-up, sponsorship and advertising fees are gross amounts and do
not reflect any agency commissions to be paid by Auto-By-Tel. The
Bounty payment amounts are net of any agency commissions to be paid by
Auto-By-Tel.
f) Sponsorship and advertising fees will be paid in twelve equal monthly
installments commencing on the execution of the Agreement. Bounty
payments will be made quarterly. The parties will conduct annual
reviews to ensure accurate payments and accounting.
5. CUSTOMER INFORMATION
a) Auto-By-Tel will retain all rights to customers acquired pursuant to
the Agreement.
b) Once per quarter, in connection with Auto-By-Tel's Bounty payments,
Auto-By-Tel will provide Excite with all of the customer information
it acquires through the purchase requests submitted by users referred
directly to Auto-By-Tel's Web site from the Excite Network. This
customer information will be deemed to be the joint property of the
parties. Under no circumstances will Excite sell, provide or transfer
this customer information to any third party.
6. OPERATIONAL SUPPORT
a) Excite will provide. at its sole expense, Account Management support
of the Auto Buying Services department of the Excite Automotive
Channel sufficient
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[*] Confidential Treatment Requested
to support for the level of sales and marketing contemplated by the
Agreement.
b) The parties will hold formal reviews on a monthly basis to maintain
anticipated results according to the sponsorship objectives.
Advertising and sponsorship placements will be adjusted monthly by
mutual agreement,
7. TERM AND TERMINATION
a) The Agreement will have an initial term [*].
b) Auto-By-Tel will have the option to cancel the Agreement it, at the
end of the first year under the term of the Agreement, users referred
to Auto-By-Tel's Web site from the Excite Network do not submit
[*] unique AUTO purchase requests.
c) Excite will have the option to cancel the Agreement if. at the end of
the [*] under the term of the Agreement, Excite has not received an
aggregate of [*] million in Bounty.
d) Either party may terminate if the other party breaches the Agreement
and the breach remains uncured for thirty (30) days.
8. CONTENT OWNERSHIP AND LICENSE
Auto-By-Tel will retain all right, title and interest in and to the
Content worldwide, subject to a limited license necessary to perform
the Agreement. Excite will retain all right, title, and interest in
and to the Excite Network, the Excite Automotive Channel and the
Broadcast Pages worldwide.
9. TRADEMARK OWNERSHIP AND LICENSE
Auto-By-Tel and Excite will retain all right, title and Interest in
and to their trademarks, service marks and trade names worldwide,
subject to limited cross-licenses necessary to perform the Agreement.
10. CONFIDENTIALITY
The terms and conditions of the Agreement will be confidential.
11. WARRANTY AND INDEMNITY
Auto-By-Tel will indemnify Excite from third party claims that the
Content infringes or violates any third party's copyright, patent,
trade secret, trademark. right of publicity or right of privacy or
contains any defamatory content,
12. LIMITATION OF LIABILITY
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Except for liability for indemnity, neither Party will have liability
for any damages other than direct damages. Excite's liability will be
limited to the amounts actually paid by Auto-By-Tel.
13. DISPUTE RESOLUTION
Disputes about trademarks, service marks, trade names and
confidentiality can be resolved in court. All other disputes must be
resolved through mediation and then binding arbitration. All
proceedings will be held in the county in which Excite has its
principal place of business.
14. GENERAL
The Agreement will be governed by California law.
Excite, Inc. Auto-By-Tel
By: [SIG] By: /s/ MARK W. LORIMER
-------------------------- --------------------------
Name: [ILLEGIBLE] Name. Mark W. Lorimer
------------------------ ------------------------
Title: Pres. and CEO Title: EVP & COO
----------------------- -----------------------
Date: 9/10/97 Date: 9/12/97
------------------------ ------------------------
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[*] Confidential Treatment Requested
AUTO-BY-TEL AND EXCITE
[*] PROMOTIONAL PLAN
EXHIBIT A
<TABLE>
<CAPTION>
[COLUMN HEADS ILLEGIBLE]
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BASE PAYMENT 10/1 Base payment excluding Purchase Y [*]
requests
EXCITE AUTOMOTIVE CHANNEL
Sole buying service 10/1 Link under "Buying Services" to Y [*] [*] [*]
sponsorship with link off custom area
home page to Custom area Link under "Used Cars": Search ABT's Y
Used Car Cyberstore
Link under "News": Weekly Automotive Y
Report
Link under "Insurance & Finance": Y
Generic
Text/graphic on all pages Y
KEYWORDS*
Excite (Auto brand, keyword) 10/1 Minimum 12.5% "Gen'l Auto"* per month Y** [*] [*] [*]
Integrated Search [*]
------
[*]
Webcrawler (Auto brand, 10/1 Minimum 15% "Gen'l Auto"* per month N [*] [*] [*]
keyword)
LIFESTYLE DIRECTORIES/GEN'L
Various & Specific 10/1 Business & Investing N [*] [*] [*]
preferences Shopping
Computers & Internet
General Rotation 10/1 Various keyword results N [*] [*] [*]
AUTOMOTIVE SHOPPING*** 10/1 Graphic link N [*] [*]
[*] imp's/year
EXCITE HOME PAGE SPONSOR***
2 Weeks on Home Page (3X/yr.) 10/1 Car giveaway [*] Y [*] [*]
[*] imp's/wk. subsequent years)
ABT to provide cars [*] retail
value per car)
WEB TV, EUROPE, CANADA
Programs TBD 10/1 25% Auto keywords on Web TV/possible Y [*] [*] [*]
in Auto area
Auto Keywords (Europe/Canada) TBD
TOTAL [*] [*] [*]
PURCHASE REQUEST PROGRAM
[*] Unique requests annual 10/1 Net: [*] up to [*], [*] up to [*], N/A [*]
guarantee [*] after [*].
[*] [*], [*], [*]
GRAND TOTAL [*] [*] [*]
</TABLE>
* Keywords: Car(s), Auto(s), Automobile(s), Automotive, Dealer, Incentive,
Buyer(s)
** Category Exclusivity on the [*] Keywords listed above only, not Auto brand
words
*** impressions included within Autochannel
<PAGE> 20
[*] Confidential Treatment Requested
AUTO-BY-TEL AND EXCITE
[*] PROMOTIONAL PLAN
EXHIBIT B
<TABLE>
<CAPTION>
Date of Impression Negotiate
Content Area Description
<S> <C> <C> <C> <C> <C>
BASE PAYMENT Base payment excluding Purchase requests Y [*] [*]
EXCITE AUTOMOTIVE CHANNEL
Sole buying service sponsorship Link under "Buying Services" to Custom area Y [*] [*] [*] [*]
with link off home page to "Used Cars": Search ABT's Used Car Cyberstore Y
custom area Link under "News": Weekly Automotive Report Y
Link under "Insurance & Finance". Generic Y
Text/graphic on all pages Y
KEYWORDS*
Excite (Auto brand, keyword) Minimum 12.5% "Gen'l Auto"* Y [*] [*] [*] [*]
Integrated Search
Webcrawler (Auto brand,
keyword) Minimum 15% "Gen'l Auto"* per month N [*] [*] [*] [*]
LIFESTYLE DIRECTORIES/GEN'L
Various Specific Preferences Business Investing N [*] [*] [*]
Shopping
Computers & Internet
General Position Various keyword results N [*] [*] [*] [*]
AUTOMOTIVE SHOPPING*** Graphic link N [*] [*] [*]
[*] imp's/year
EXCITE HOME PAGE SPONSOR***
2 weeks on Home Page [*] Car giveaway [*] in 1997 [*] subsequent years Y [*] [*] [*]
[*] imp's/wk. ABT to provide cars ([*] retail value per
car)
WEB TV, EUROPE, CANADA
Programs TBD 25% Auto keywords on Web TV/possible in Auto area Y [*] [*] [*] [*]
Auto Keywords (Europe/Canada) 100
TOTAL [*] [*] [*] [*]
PURCHASE REQUEST PROGRAM
[*] Unique requests Net [*] illegible to [*], $?? after [*] N/A [*] [*]
annual guarantee Years ??? illegible
GRAND TOTAL [*] [*] [*] [*]
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
BASE PAYMENT Base payment excluding Purchase (requests) Y
[*] [*]
EXCITE AUTOMOTIVE CHANNEL
Sole buying service sponsorship Link under "Buying Services" to Custom area Y [*] [*] [*] [*]
with link off home page to "Used Cars": Search ABT's Used Car Cyberstore Y
custom area Link under "News": Weekly Automotive Report Y
Link under "Insurance & Finance" Generic Y
Text/graphic on all pages Y
KEYWORDS*
Excite (Auto brand, keyword) Minimum 12.5% "Gen'l Auto"* Y [*] [*] [*] [*]
Integrated Search
Webcrawler (Auto brand, [*] [*] [*] [*]
keyword) Minimum 15% "Gen'l Auto"* per month N
LIFESTYLE DIRECTORIES/GEN'L [*] [*] [*] [*]
Various Specific Preferences Business Investing N
Shopping
Computers & Internet
[*] [*] [*] [*]
General Position Various keyword results N
[*] [*] [*] [*]
AUTOMOTIVE SHOPPING*** Graphic link N
[*] imp's/year
EXCITE HOME PAGE SPONSOR*** [*] [*] [*] [*]
2 weeks on Home Page (3x/yr.) Car giveaway (1X in 1997 [*] subsequent years Y
[*] imp's/wk. ABT to provide cars ([*] retail value per
car)
WEB TV, EUROPE, CANADA [*] [*] [*] [*]
Programs TBD 25% Auto keywords on Web TV/possible in Auto area Y
Auto Keywords (Europe/Canada) 100
[*] [*] [*] [*]
TOTAL
PURCHASE REQUEST PROGRAM
[*] Unique requests Net [*] up to [*], [*] up to [*], [*] after ? [*] [*]
annual guarantee [*]. Years 2 & 3: [*], [*], [*]
GRAND TOTAL [*] [*] [*] [*]
</TABLE>
*Keywords: Car(1), Auto(2), Automobile(3), AutoCenter, Dealer Incentive,
Buyer(s).
**Category Exclusivity on the [*] keywords rated above only, not auto brand
words.
***impressions included within Autochannel number.
<PAGE> 21
[*] Confidential Treatment Requested
Auto-By-Tel and Excite
[*] Promotional Plan
EXHIBIT A
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Material Start Date of Impression Negotiate
Content Area Closing Date Date Description ??????? ???????? ?????? GBM
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BASE PAYMENT 10/1 Base payment excluding Purchase requests Y [*]
EXCITE AUTOMOTIVE CHANNEL
Sole buying service sponsorship 10/1 Link under "Buying Services" to custom area Y [*] [*] [*]
with link off home page to Custom area Link under "Used Cars": Search ABT's Used
Car Cyberstore Y
Link under "News": Weekly Automotive Report Y
Link under "Insurance & Finance": Generic Y
Text/graphic on all pages Y
KEYWORDS*
Excite (Auto brand, keyword) 10/1 Minimum 12.5% "Gen'l Auto"* per month Y** [*] [*] [*]
Integrated Search [*]
--------
[*]
Webcrawler (Auto brand, keyword) 10/1 Minimum 15% "Gen'l Auto"* per month N [*] [*] [*]
LIFESTYLE DIRECTORIES/GEN'L
Various & Specific preferences 10/1 Business & Investing N [*] [*] [*]
Shopping
Computers & Internet
General Rotation 10/1 Various keyword results N [*] [*] [*]
AUTOMOTIVE SHOPPING*** 10/1 Graphic link N [*] [*]
[*] imp's/year
EXCITE HOME PAGE SPONSOR***
2 Weeks on Home Page (3X/yr.) 10/1 Car giveaway (1X in 1997 3X/yr
subsequent years) Y [*] [*]
[*] imp's/wk. ABT to provide cars ([*] retail
value per car)
WEB TV, EUROPE, CANADA
Programs TBD 10/1 25% Auto keywords on Web TV/ possible Y [*] [*] [*]
in Auto area
Auto Keywords (Europe/Canada) TBD
TOTAL [*] [*] [*]
PURCHASE REQUEST PROGRAM
[*] Unique requests annual guarantee 10/1 Net: [*] up to [*], [*] up to [*], [*]
after [*]. N/A [*]
[*] [*], [*], [*]
GRAND TOTAL [*] [*] [*]
</TABLE>
*Keywords: Car(s), Auto(s), Automobile(s), Automotive, Dealer, Inventive,
Buyer(s).
**Category Exclusively on the [*] Keywords listed above only not Auto
brand words.
***impressions included within Autochannel number.
<PAGE> 22
[*] Confidential Treatment Requested
AUTO-BY-TEL AND EXCITE
[*] PROMOTIONAL PLAN
EXHIBIT B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
BASE PAYMENT Base payment excluding Purchase requests Y [*] [*]
EXCITE AUTOMOTIVE CHANNEL
Sole buying service sponsorship Link under "Buying Services" to custom area Y [*] [*] [*] [*]
with link off home page to Link under "Used Cars": Search ABT's Used Y
Custom area Car Cyberstore Y
Link under "News": Weekly Automotive Report Y
Link under "Insurance & Finance": Generic Y
Text/graphic on all pages
KEYWORDS*
Excite (Auto brand, keyword) Minimum 12.5% "Gen'l Auto"* per month Y** [*] [*] [*] [*]
Integrated Search
Webcrawler (Auto brand, keyword) Minimum 15% "Gen'l Auto"* per month N [*] [*] [*] [*]
LIFESTYLE DIRECTORIES/GEN'L
Various & Specific preferences Business & Investing N [*] [*] [*] [*]
Shopping
Computers & Internet
General Rotation Various keyword results N [*] [*] [*] [*]
AUTOMOTIVE SHOPPING*** Graphic link N [*] [*] [*]
[*] imp's/year
EXCITE HOME PAGE SPONSOR***
2 Weeks on Home Page [*] Car giveaway(1x in 1997, 3X/yr subsequent Y [*] [*] [*]
[*] imp's/wk years) ABT to provide cars ([*] retail
value per car)
WEB TV, EUROPE, CANADA
Programs TBD 25% Auto keywords on Web TV/possible in Y [*] [*] [*] [*]
Auto area TBD
TOTAL Auto Keyword (Europe Canada) [*] [*] [*] [*]
PURCHASE REQUEST PROGRAM
[*] Unique requests annual Net: [*] up to [*], [*], up to [*] N/A [*] [*]
guarantee [*].
[*] [*], [*], [*]
GRAND TOTAL [*] [*] [*] [*]
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
BASE PAYMENT Base payment excluding Purchase requests [*] [*]
EXCITE AUTOMOTIVE CHANNEL
Sole buying service sponsorship Link under "Buying Services" to custom area [*] [*] [*] [*]
with link off home page to Link under "Used Cars": Search ABT's Used
Custom area Car Cyberstore
Link under "News": Weekly Automotive Report
Link under "Insurance & Finance": Generic
Text/graphic on all pages
KEYWORDS*
Excite (Auto brand, keyword) Minimum 12.5% "Gen'l Auto"* per month [*] [*] [*] [*]
Integrated Search
Webcrawler (Auto brand, keyword) Minimum 15% "Gen'l Auto"* per month [*] [*] [*] [*]
LIFESTYLE DIRECTORIES/GEN'L
Various & Specific preferences Business & Investing [*] [*] [*] [*]
Shopping
Computers & Internet
General Rotation Various keyword results [*] [*] [*] [*]
AUTOMOTIVE SHOPPING*** Graphic link [*] [*] [*]
[*] imp's/year
EXCITE HOME PAGE SPONSOR***
2 Weeks on Home Page (3X/yr.) Car giveaway [*] in 1997, [*] subsequent [*] [*] [*]
[*] imp's/wk years) ABT to provide cars ([*] retail
value per car)
WEB TV, EUROPE, CANADA
Programs TBD 25% Auto keywords on Web TV/possible in [*] [*] [*] [*]
Auto area
TOTAL Auto Keyword (Europe Canada) [*] [*] [*] [*]
PURCHASE REQUEST PROGRAM
[*] Unique requests annual Net: [*] [*], [*], [*] [*]
guarantee [*]
Years 2 & 3: [*], [*], [*]
GRAND TOTAL [*] [*] [*] [*]
</TABLE>
* Keywords: Car(s), Auto(s), Automobile(s), Automotive, Dealer, Incentive,
Buyer(s).
** Category Exclusivity on the [*] Keywords listed above only, not Auto brand
words.
*** impressions included within Autochannel number.
<PAGE> 1
EXHIBIT 10.22
[*] Confidential Treatment has been requested for certain portions of this
exhibit.
CONFIDENTIAL
------------
SPONSORSHIP AGREEMENT
This agreement ("Agreement") is entered into as of the 24th day of June, 1998
("Effective Date"), by and between Excite, Inc., a California corporation,
located at 555 Broadway, Redwood City, California 94063 ("Excite"), and
Auto-By-Tel Corporation, a California corporation, located at 18872 MacArthur
Boulevard, #200, Irvine, California 92612-1400 ("Client").
RECITALS
A. Excite has obtained the right to program certain content and sell and
display advertising on the site on the Internet maintained by Netscape
Communications Corporation ("Netscape") located at
http://home.netscape.com and/or other URLs or locations designated by
Netscape (the "Excite Portion of the Netscape Site") pursuant to an
agreement dated April 29, 1998 ("the Netcenter Agreement"), which, among
other things, allow Netscape's users to search for and access content
and other sites on the Internet.
B. Within the Excite Portion of the Netscape Site, Excite plans to organize
certain content into topical channels (each, a "Channel") and to provide
an Internet search service ("Netscape Search").
C. Client is engaged in the business of, among other things, (i) providing
online information and data to prospective purchasers of motor vehicles
through its Web site located at http://www.autobytel.com (the "Client
Site") and facilitating the acquisition of vehicles through a network of
dealer subscribers; (ii) offering to any such purchaser vehicle
financing and leasing programs, insurance programs and after market
products, and (iii) offering an incentive "rewards" based membership
program featuring a co-branded credit card, roadside assistance and
select retail providers (the "Mobalist" Program).
D. Client wishes to promote its business to Netscape's users through
promotions, content and advertising in the Excite Portion of the
Netscape Site.
Therefore, the parties agree as follows:
1. SPONSORSHIP OF THE AUTOS CHANNEL
(a) Client acknowledges that Excite's right to display promotional
placements on the Excite Portion of the Netscape Site is
conditioned on the Netcenter Agreement remaining in effect.
However, Excite represents that it will, in good faith, perform
all of its obligations under the Netcenter Agreement and do all
other commercially
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CONFIDENTIAL
------------
reasonable acts necessary to keep such Agreement in place,
subject at all times to Netscape's rights to terminate the
Netcenter Agreement for reasons unrelated to Excite's performance
or breach. Therefore, subject to the Netcenter Agreement
remaining in effect, commencing on the Launch Date (as defined
below), Client will be promoted in the Autos Channel of the
Excite Portion of the Netscape Site:
(i) A link to the Client Site (consistent with the format used
on similar links on the same page) will be displayed in
the Autos Channel home page for the duration of the term
of the Agreement.
(ii) A link to the Client Site (consistent with the format used
on similar links on the same page) will be displayed in
the "Buy A Car Online" department of the Autos Channel (or
a similar portion of the Autos Channel featuring
comparable content) for the duration of the term of the
Agreement.
(iii) A link to the Client Site (consistent with the format used
on similar links on the same page) will be displayed in
the "Take a Test Drive" department of the Autos Channel
(or a similar portion of the Autos Channel featuring
comparable content) for the duration of the term of the
Agreement.
(iv) A link to the Client Site (consistent with the format used
on similar links on the same page) will be displayed in
the "Auto Makers" promotional area in the "SUV," "Truck,"
"Cars" and "Luxury Cars" departments of the Autos Channel
(or a similar portion of the Autos Channel featuring
comparable content) for the duration of the term of the
Agreement.
(b) Client acknowledges that Excite's right to display content on the
Excite Portion of the Netscape Site is conditioned on the
Netcenter Agreement remaining in effect. Therefore, subject to
the Netcenter Agreement remaining in effect, commencing of the
Launch Date (as defined below), motor vehicle related content
supplied by Client ("Client Content") will be promoted in the
Autos Channel of the Excite Portion of the Netscape Site:
(i) Client Content from Bank Rate Monitor, Edmunds,
Auto-By-Tel, and/or AIG (subject to approval by Excite)
will be displayed in the Autos Channel for the duration of
the term of the Agreement. The selection and placement of
Client Content to appear in the Autos Channel will be
subject to Excite's discretion.
(ii) A module containing text and graphics links of less than
6K in file size, the pixel dimensions to be mutually
determined by the parties, featuring Client's "Mobalist"
program which will be displayed in the Autos Channel for
the
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CONFIDENTIAL
------------
duration of the term of the Agreement. The placement of
the "Mobalist" module in the Autos Channel will be subject
to Excite's discretion and continued positive user
feedback.
(iii) All Client Content will link to the Client Site. The
"Mobalist" module will link to http://www.mobalist.com;
unless, upon reasonable notice, Client directs Excite to
link the Mobalist module to an additional or alternative
address.
(iv) Client and Excite will determine mutually agreeable
methods for the transmission and incorporation of updates
to the Client Content and "Mobalist" module. Other than
updates to the Client Content and "Mobalist" module,
Client will not alter the Client Content or "Mobalist"
module without Excite's prior consent.
(v) Netscape and Excite, on the one hand, and Client, on the
other, will cooperate in good faith regarding the "look
and feel" of the "Mobalist" module, but Netscape and
Excite will have final decision authority over of the
"look and feel" of the Client Content, the "Mobalist"
module and the Autos Channel.
(vi) Client will have sole responsibility for providing, at its
expense, the Client Content and "Mobalist" module to
Excite.
2. SWEEPSTAKES
(a) Every [*] months, Client, at its sole expense, will supply Excite
with up to [*] new motor vehicles to be used by Excite as
sweepstakes prizes offered to Netscape users. The parties agree
that the aggregate suggested manufacturer's retail price for the
vehicle(s) selected by Excite though Client shall not exceed [*]
in any twelve-month period.
(b) Client and Excite will cooperate in good faith to identify
appropriate opportunities to promote these sweepstakes and Client
in the Excite Portion of the Netscape Site during the term of the
Agreement.
(c) Other than the motor vehicles supplied by Client, Excite will
assume all expenses involved in administering and promoting these
sweepstakes.
(d) Either party may issue press releases regarding the sweepstakes,
the timing and wording of which will be mutually agreed upon. Any
such press releases will
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CONFIDENTIAL
------------
identify Excite as the host of the sweepstakes and Client as the
provider of the prize vehicle.
3. ADVERTISING ON THE EXCITE PORTION OF THE NETSCAPE SITE
(a) Client acknowledges that Excite's right to display advertising on
the Excite Portion of the Netscape Site is conditioned on the
Netcenter Agreement remaining in effect. Therefore, subject to
the Netcenter Agreement remaining in effect, commencing of the
Launch Date (as defined below), Excite will display Client's
banner advertising in rotation on the Channels on the Excite
Portion of the Netscape Site for the term of the Agreement.
(b) Subject to the Netcenter Agreement remaining in effect, Excite
guarantees the display of [*] of Client's advertising banners,
which shall be distributed evenly and equitably per month, during
the term of the Agreement.
4. EXCLUSIVITY
(a) For the term of the Agreement, Excite will not enter into any
agreement to display and shall not display on the Autos, Arts &
Leisure, Auctions, Education, Games, Lifestyle, Real Estate or
Shopping Channels of the Excite Portion of the Netscape Site
content created by Excite promoting Client's "Competitors,"
content created by Client's Competitors or promotional placements
and/or advertising banners from Client's Competitors.
(b) For the purposes of this Agreement, "Competitors" means those
merchants whose primary business is (i) the online referral of
new motor vehicle purchase and/or leasing requests or the online
referral of used motor vehicle purchase requests to a nationwide
network of automobile dealers, (but does not include Excite's
subsidiary, Classifieds2000, Inc. ("Classifieds2000")), together
with the offering of ancillary motor vehicle products in
connection with any such purchase or lease including financing,
insurance and aftermarket products as well as (ii) the offering
of a rewards-based incentive program targeted to motorists
featuring a co-branded credit card, roadside assistance and
select retail dealers (but does not include any rewards-based
incentive program offered by Excite under the "Excite" brand).
(c) Notwithstanding the foregoing, Excite may display links to
Client's Competitors in Excite's general directory of Web sites
that appears on the Netscape Site, in search results displayed in
"Jango" shopping search services, in Netscape Search results
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pages and in classified advertising listings, subject to any
agreement entered into by Client and Classifieds2000, pursuant to
Section 5 below.
5. RIGHT OF FIRST NEGOTIATION FOR CLASSIFIEDS CHANNEL
(a) Client will have a right of first negotiation with
Classifieds2000 for an exclusive sponsorship of the Classifieds
Channel of the Excite Portion of the Netscape Site.
(b) Excite will not propose, solicit or negotiate offers from
entities other than Client for any exclusive sponsorships of the
Classifieds Channel of the Excite Portion of the Netscape Site by
any of Client's Competitors, if at all, prior to fifteen (15)
business days from the Effective Date.
(c) Classifieds2000 will negotiate with Client in good faith with
respect to the terms and conditions under which Client would
become the exclusive online seller of new motor vehicles
sponsoring the Classifieds Channel of the Excite Portion of the
Netscape Site. If Client and Classifieds2000 have not entered
into a written sponsorship agreement by close of business on the
fifteenth business day from the Effective Date, Excite and/or
Classifieds2000 may enter into negotiations with any third party
with respect to exclusive sponsorships of the Classifieds Channel
of the Excite Portion of the Netscape Site.
6. LAUNCH DATE AND REPORTING
(a) Client and Excite will use reasonable efforts to implement the
display of the promotional placements, content and advertising
described in the Agreement by July 1, 1998 (the "Launch Date").
The parties recognize that the scheduled Launch Date can be met
only if Client provides final versions of all graphics, text,
keywords, banner advertising, promotional placements, other
promotional media and valid URL links necessary to implement the
promotional placements, content and advertising described in the
Agreement (collectively, "Impression Material") to Excite five
(5) days prior to scheduled Launch Date.
(b) In the event that Client fails to provide the Impression Material
to Excite five (5)days in advance of the scheduled Launch Date,
Excite may, at its sole discretion (i) reschedule the Launch Date
at the earliest practicable date according to the availability of
Excite's engineering resources after delivery of the complete
Impression Material or (ii) commence delivery of Impressions
based on Impression Material in Excite's possession at the time
and/or reasonable placeholders created by Excite.
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(c) Excite will provide Client with monthly reports substantiating
the number of impressions of Client's advertising banners,
content and promotional placements displayed on the Excite
Portion of the Netscape Site.
7. SPONSORSHIP, ADVERTISING AND TRANSACTION FEES
(a) Client will pay Excite sponsorship and advertising fees of [*]
in the first year of the term of the Agreement. These fees will
be paid in equal monthly installments of [*]. The first monthly
payment will be due upon the display of the first of the
promotional placements and advertising described in the
Agreement. Subsequent installments will be due on a monthly basis
thereafter.
(b) Client will pay Excite sponsorship and advertising fees of [*] in
the second year of the term of the Agreement. These fees will be
paid in equal monthly installments of [*]. The first monthly
payment will be due upon the first anniversary of the display of
the first of the promotional placements and advertising described
in the Agreement. Subsequent installments will be due on a
monthly basis thereafter.
(c) Separate and apart from the sponsorship and advertising fees,
Client will pay Excite for each "Unique Purchase Request"
completed by users referred to the Client Site from the Excite
Portion of the Netscape Site during the first year of the term of
the Agreement. For the purposes of this Agreement, a "Unique
Purchase Request" shall be a new car purchase request electronic
form with all data fields deemed mandatory by Client completed by
the user, which has been received by Client from Excite, and for
which Client has not, within the previous [*] period, received a
duplicate new car purchase request from the Excite Portion of
the Netscape Site for the same or similar vehicle, as determined
by the year, make and model; from the same user, as identified by
the same name, zip code and/or the same e-mail address. Client
will pay Excite for each Unique Purchase Request during the first
year of the term of the Agreement as follows:
(i) [*] per Unique Purchase Request up to the first [*] Unique
Purchase Requests;
(ii) [*] per Unique Purchase Request for between [*] and [*]
Unique Purchase Requests; and
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(iii) [*] per Unique Purchase Request in excess of [*] Unique
Purchase Requests.
(d) Separate and apart from the sponsorship and advertising fees,
Client will pay Excite for each Unique Purchase Request completed
by users referred to the Client Site from the Excite Portion of
the Netscape Site during the second year of the term of the
Agreement as follows:
(i) [*] per Unique Purchase Request up to the first [*] Unique
Purchase Requests;
(ii) [*] per Unique Purchase Request for between [*] and [*]
Unique Purchase Requests; and
(iii) [*] per Unique Purchase Request in excess of [*] Unique
Purchase Requests.
(e) The sponsorship fees and transaction payments are net of any
agency commissions to be paid by Client.
(f) Client will provide Excite with monthly reports of the number of
"Unique Purchase Requests." It is currently Client's goal to
provide these reports to Excite on or about the fifth business
day after the close of the preceding month. Client shall pay
Excite the transaction payments within [*] days after Excite's
receipt of Client's report of the number of "Unique Purchase
Requests" each month. In the event that Client does not pay the
transaction payments within [*] days after Excite's receipt of
Client's report of the number of "Unique Purchase Requests" for
any month, that month shall be deemed to be a "Late Payment
Month" for the purposes of this Agreement. In the event that
there are [*] Late Payment Months in any [*] period during the
term of the Agreement, Client will increase by [*] the monthly
payment otherwise due for the second and any other Late Payment
Month that occurs in the [*] period.
(g) Client will provide complete reports to Excite within thirty (30)
days of each month describing the month's transaction activity by
users referred to the Client Site from the Excite Portion of the
Netscape Site including, but not limited to, the total number of
purchase requests submitted and the number of Unique Purchase
Requests completed. Client will make good faith efforts to
develop tracking and reporting capabilities to correlate this
transaction information to the various promotional placements,
content and advertising banners on the Excite Portion of the
Netscape
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Site in order to facilitate optimization of Client's sponsorship
program. Client's reports will be delivered to Excite in a
mutually agreed-upon electronic format to an email address or URL
designated by Excite. In the event that Client does not provide
the required reports to Excite within sixty (60) days after the
end of any month, that month shall be deemed to be a "Late
Reporting Month" for the purposes of this Agreement. In the event
that there are [*] Late Reporting Months in any [*] month period
during the term of the Agreement, Client will increase by [*] the
monthly payment otherwise due for the second and any other Late
Reporting Month that occurs in the [*] month period. To
the extent that interim reports regarding the quality of the
performance of Client's sponsorship program on the Excite Portion
of the Netscape Site, as described in Section 9(b)(i), are
available more frequently than quarterly, Client will make good
faith efforts to supply such interim reports to Excite as soon as
reasonably practical.
(h) Client will maintain accurate records with respect to the
calculation of all transaction payments and reporting due under
this Agreement. Once per year, the parties will review these
records to verify the accuracy and appropriate accounting of all
payments made pursuant to the Agreement. In addition, Excite may,
upon no less than thirty (30) days prior written notice to
Client, cause an independent Certified Public Accountant to
inspect the records of Client reasonably related to the
calculation of such payments during Client's normal business
hours. The fees charged by such Certified Public Accountant in
connection with the inspection will be paid by Excite unless the
payments made to Excite are determined to have been less than [*]
of the payments actually owed to Excite, in which case Client
will be responsible for the payment of the reasonable fees for
such inspection.
8. PUBLICITY
Unless required by law, neither party will make any public statement,
press release or other announcement relating to the terms of or
existence of this Agreement without the prior written approval of the
other. Notwithstanding the foregoing, the parties agree to issue an
initial press release regarding the relationship between Excite and
Client, the timing and wording of which will be mutually agreed upon.
9. TERM AND TERMINATION
(a) The term of this Agreement will begin on the Launch Date and will
end at the earlier of [*] or the expiration or termination of the
Netcenter Agreement. In the event that the Netcenter Agreement
expires or is terminated prior to [*]
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[*] Client and Excite will negotiate in good faith to resolve
all outstanding promotional and financial issues.
(b) Despite Excite's performance of its obligations hereunder, Client
may terminate this Agreement under the following limited
conditions:
(i) Client and Excite will meet once per quarter throughout
the term of the Agreement to review the performance of
Client's sponsorship program on the Excite Portion of the
Netscape Site. At the quarterly meeting, refers to the
Client Site generated on the Excite Portion of the
Netscape Site will be evaluated for quality and compared
to an index (the "Performance Index") based on the
performance of refers to the Client Site from the
excite.com Web site (the "Excite Site"). The Parties agree
that the Performance Index shall use June 1998 performance
results of the Excite Site as its baseline, which shall be
deemed "100%" for the purposes of comparison to the Excite
Portion of the Netscape Site. Quality performance will be
monitored and provided by Client's independent auditors
(currently, Arthur Andersen).
This information will be shared with Excite at the
quarterly performance meetings.
(ii) In the event that purchase request quality performance
from the Excite Portion of the Netscape Site is materially
below that from the Excite Site during any ninety (90) day
period during the term of the Agreement, Client will
notify Excite in writing of the poor performance. Excite
will undertake commercially reasonable efforts to remedy
the poor performance.
(iii) In the first year of the term of the Agreement only, if
Excite's efforts do not materially improve performance
after a reasonable period of time after receiving Client's
written notice of poor performance pursuant to Section
9(b)(ii), then, no later than forty-five (45) days prior
to the end of the first year of the term of the Agreement,
Client can give written notice to Excite of termination of
the Agreement at the end of the first year due to the
purchase request quality performance from the Excite
Portion of the Netscape Site being materially below that
from the Excite Site. This written termination notice must
include supporting reports or analysis by the accredited
neutral third party. Client may not terminate the
Agreement prior to the end of the first year of the term
of the Agreement under Sections 9(b)(ii) or 9(b)(iii).
(iv) In the event that purchase request quality performance
from the Excite Portion of the Netscape Site is materially
below that from the Excite Site
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during any ninety (90) day period during the [*]
[*] of the Agreement and Excite's efforts do not
materially improve performance after a reasonable period
of time after receiving Client's notice of poor
performance then, in any quarterly meeting in the second
year of the term of the Agreement, Client may give notice
to Excite that Excite has sixty (60) days to remedy the
poor performance or the Agreement will be subject to
termination. Should Excite not be able to remedy purchase
request quality performance within the sixty (60) day
period, Client may give Excite written notice that the
Agreement will be terminated in thirty (30) additional
days.
(v) In the event that Client receives less than [*] Unique
Purchase Requests from users referred to the Client Site
from the Excite Portion of the Netscape Site in the first
year of the term of the Agreement, Client can terminate
the Agreement upon written notice to Excite.
Notwithstanding Section 7(c), within thirty (30) days of
any such termination, Client will pay Excite the
difference between (i) [*] and (ii) the amounts previously
paid to Excite pursuant to 7(c)(i) for the Unique Purchase
Requests from users referred to the Client Site from the
Excite Portion of the Netscape Site in the first year of
the term of the Agreement under the [*] minimum.
(vi) As soon as it becomes reasonably apparent that Client is
likely to pay Excite [*] for Unique Purchase Requests from
users referred to the Client Site from the Excite Portion
of the Netscape Site within the next sixty (60) days,
Excite and Client will meet to discuss Client's plans to
continue or terminate the Agreement. After that meeting,
Client may, in its sole discretion, give Excite written
notice terminating the Agreement effective thirty (30)
days after Client has paid to Excite [*] for Unique
Purchase Requests from users referred to the Client Site
from the Excite Portion of the Netscape Site. Once Client
gives written notice to Excite of its election to
terminate the Agreement under this Section 9(b)(vi),
Excite will be free to commence negotiations for
replacement advertising and/or sponsorships of the Excite
Portion of the Netscape Site with any third party,
including Client's Competitors.
(c) Either party may terminate this Agreement if the other party
materially breaches its obligations hereunder and such breach
remains uncured for thirty (30) days following the notice to the
breaching party of the breach.
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(d) All undisputed payments that have accrued prior to the
termination or expiration of this Agreement will be payable in
full within thirty (30) days thereof.
(e) The provisions of Section 12 (Confidentiality), Section 13
(Indemnity), Section 14 (Limitation of Liability) and Section 15
(Dispute Resolution) will survive any termination or expiration
of this Agreement.
10. TRADEMARK OWNERSHIP AND LICENSE
(a) Client will retain all right, title and interest in and to its
trademarks, service marks and trade names worldwide, subject to
the limited license granted to Excite hereunder.
(b) Excite will retain all right, title and interest in and to its
trademarks, service marks and trade names worldwide, subject to
the limited license granted to Client hereunder.
(c) Each party hereby grants to the other a revocable, royalty-free,
nonexclusive, limited license to use its trademarks, service
marks or trade names only as specifically described in this
Agreement. All such use shall be in accordance with each party's
reasonable policies regarding advertising and trademark usage as
established from time to time.
(d) Upon the expiration or termination of this Agreement, each party
will cease using the trademarks, service marks and/or trade names
of the other except as the parties may agree in writing.
11. CONTENT OWNERSHIP AND LICENSE
(a) Client will retain all right, title and interest in and to the
Client Site worldwide including, but not limited to, ownership of
all copyrights and other intellectual property rights therein.
(b) Client will retain all right, title and interest in and to the
Client Content and the content of the "Mobalist" module worldwide
(including, but not limited to, ownership of all copyrights and
other intellectual property rights therein). Subject to the terms
and conditions of this Agreement, Client hereby grants to Excite
a revocable, royalty-free, non-exclusive, worldwide license to
use, reproduce, distribute, transmit and publicly display the
Client Content and "Mobalist" module in accordance with this
Agreement and to sub-license the Client Content and "Mobalist"
module to Excite's wholly-owned subsidiaries or to joint ventures
in
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which Excite participates for the sole purpose of using,
reproducing, distributing, transmitting and publicly displaying
the Client Content and "Mobalist" module in accordance with this
Agreement
(c) Netscape and Excite will retain all right, title, and interest in
and to the Excite Portion of the Netscape Site worldwide
including, but not limited to, ownership of all copyrights, look
and feel and other intellectual property rights therein.
12. CONFIDENTIALITY AND USER DATA
(a) For the purposes of this Agreement, "Confidential Information"
means information about the disclosing party's (or its
suppliers') business or activities that is proprietary and
confidential, which shall include all business, financial,
technical and other information of a party marked or designated
by such party as "confidential or "proprietary" or information
which, by the nature of the circumstances surrounding the
disclosure, ought in good faith to be treated as confidential.
(b) Confidential Information will not include information that (i) is
in or enters the public domain without breach of this Agreement,
(ii) the receiving party lawfully receives from a third party
without restriction on disclosure and without breach of a
nondisclosure obligation, (iii) the receiving party knew prior to
receiving such information from the disclosing party or (iv) the
receiving party develops independent of any information
originating from the disclosing party.
(c) Each party agrees (i) that it will not disclose to any third
party or use any Confidential Information disclosed to it by the
other except as expressly permitted in this Agreement and (ii)
that it will take all reasonable measures to maintain the
confidentiality of all Confidential Information of the other
party in its possession or control, which will in no event be
less than the measures it uses to maintain the confidentiality of
its own information of similar importance.
(d) The usage reports provided by Excite to Client hereunder will be
deemed to be the Confidential Information of Excite. The reports
provided to Excite under Section 7(g) will be deemed to be the
Confidential Information of Client.
(e) The terms and conditions of this Agreement will be deemed to be
Confidential Information and will not be disclosed without the
written consent of the other party.
(f) The parties acknowledge that Client is in the process of
obtaining access to data base marketing capabilities and that it
is Client's current goal to enable such data base marketing
capabilities on or about January 1999. The parties will cooperate
in good
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faith to develop a program whereby Excite may leverage
Client's data base marketing opportunities under the following
guidelines:
(i) Excite will not have direct access to any user data
collected on the Client Site;
(ii) Excite will have the right to market Excite's own services
and/or products to Client's users coming through the
Excite Portion of the Netscape Site, by specifying a
profile of the target audience (e.g., male, 25 - 40 years
old, etc.);
(iii) Excite will deliver any marketing material to Client.
Client will then arrange for delivery of the marketing
material to the target audience;
(iv) Excite will bear all direct expenses in connection with
the creation and delivery of the marketing material.
Client will not charge Excite for usage of Client's user
data;
(v) Excite's marketing plans and the results of Excite's
marketing efforts through Client will be "Confidential
Information" of Excite under this Agreement; and
(vi) Excite will not conduct such marketing through Client on
behalf of Client's Competitors.
(g) Client will not use User Data to directly or indirectly target
for solicitations any Excite users as a unique subset of Client's
user data base (except as specifically provided in this Agreement
or except to encourage the continued use of Client's own products
and/or services) either individually or in the aggregate during
the term of this Agreement and for a period of twelve (12) months
following the expiration or termination of this Agreement (except
to encourage the continued use of Client's own products and/or
services).
(h) Neither party will sell, disclose, transfer or rent any user data
obtained from users referred to the Client Site from the Excite
Portion of the Netscape Site which could reasonably be used to
identify a specific named individual ("Individual Data") to any
third party nor will either party use Individual Data on behalf
of any third party without the express permission of the
individual user. Where user permission for dissemination of
Individual Data to third parties has been obtained, each party
will use commercially reasonable efforts to require the third
party recipients of Individual Data to provide an "unsubscribe"
feature in any email communications generated by, or on behalf
of, the third party recipients of Individual Data.
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(i) Notwithstanding the foregoing, each party may disclose
Confidential Information or user data obtained from users
referred to the Client Site from the Excite Portion of the
Netscape Site (i) to the extent required by a court of competent
jurisdiction or other governmental authority or otherwise as
required by law or (ii) on a "need-to-know" basis under an
obligation of confidentiality to its legal counsel, accountants,
banks and other financing sources and their advisors.
Notwithstanding the foregoing, Excite may disclose Confidential
Information or user data obtained from users referred to the
Client Site from the Excite Portion of the Netscape Site to
Netscape as required under the terms of the Netcenter Agreement.
13. INDEMNITY
(a) Client will indemnify, defend and hold harmless Excite, its
affiliates, officers, directors, employees, consultants and
agents from any and all third party claims, liability, damages
and/or costs (including, but not limited to, attorneys fees)
arising from:
(i) The breach of any representation or covenant in this
Agreement; or
(ii) Any claim that Client's Impression Material, the Client
Content or the content of the "Mobalist" module infringe
or violate any third party's copyright, patent, trade
secret, trademark, right of publicity or right of privacy
or contain any defamatory content; or
(iii) Any claim arising from content displayed on the Client
Site.
Excite will promptly notify Client of any and all such claims and
will reasonably cooperate with Client with the defense and/or
settlement thereof; provided that, if any settlement requires an
affirmative obligation of, results in any ongoing liability to or
prejudices or detrimentally impacts Excite in any way and such
obligation, liability, prejudice or impact can reasonably be
expected to be material, then such settlement shall require
Excite's written consent (not to be unreasonably withheld or
delayed) and Excite may have its own counsel in attendance at all
proceedings and substantive negotiations relating to such claim.
(b) Excite will indemnify, defend and hold harmless Client, its
affiliates, officers, directors, employees, consultants and
agents from any and all third party claims, liability, damages
and/or costs (including, but not limited to, attorneys fees)
arising from:
(i) The breach of any representation or covenant in this
Agreement; or
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(ii) Any claim arising from the Excite Portion of the Netscape
Site other than content or services provided by Client.
Client will promptly notify Excite of any and all such claims and
will reasonably cooperate with Excite with the defense and/or
settlement thereof; provided that, if any settlement requires an
affirmative obligation of, results in any ongoing liability to or
prejudices or detrimentally impacts Client in any way and such
obligation, liability, prejudice or impact can reasonably be
expected to be material, then such settlement shall require
Client's written consent (not to be unreasonably withheld or
delayed) and Client may have its own counsel in attendance at all
proceedings and substantive negotiations relating to such claim.
(c) EXCEPT AS SPECIFIED IN THIS AGREEMENT, NEITHER PARTY MAKES ANY
WARRANTY IN CONNECTION WITH THE SUBJECT MATTER OF THIS AGREEMENT
AND HEREBY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES, INCLUDING
ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE REGARDING SUCH SUBJECT MATTER.
14. LIMITATION OF LIABILITY
EXCEPT UNDER SECTIONS 13(a) AND 13(b), IN NO EVENT WILL EITHER
PARTY BE LIABLE TO THE OTHER FOR ANY SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES, WHETHER BASED ON BREACH OF CONTRACT, TORT
(INCLUDING NEGLIGENCE) OR OTHERWISE, WHETHER OR NOT THAT PARTY
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. EXCEPT UNDER
SECTIONS 13(a) AND 13(b), THE LIABILITY OF EITHER PARTY FOR
DAMAGES OR ALLEGED DAMAGES HEREUNDER, WHETHER IN CONTRACT, TORT
OR ANY OTHER LEGAL THEORY, IS LIMITED TO, AND WILL NOT EXCEED,
THE AMOUNTS TO BE PAID BY CLIENT TO EXCITE HEREUNDER.
15. DISPUTE RESOLUTION
(a) The parties agree that any breach of either of the parties'
obligations regarding trademarks, service marks or trade names,
confidentiality and/or User Data would result in irreparable
injury for which there is no adequate remedy at law. Therefore,
in the event of any breach or threatened breach of a party's
obligations regarding trademarks, service marks or trade names or
confidentiality, the aggrieved party will be entitled to seek
equitable relief in addition to its other available legal
remedies in a court of competent jurisdiction.
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(b) In the event of disputes between the parties arising from or
concerning in any manner the subject matter of this Agreement,
other than disputes arising from or concerning trademarks,
service marks or trade names, confidentiality and/or User Data,
the parties will first attempt to resolve the dispute(s) through
good faith negotiation. In the event that the dispute(s) cannot
be resolved through good faith negotiation, the parties will
refer the dispute(s) to a mutually acceptable mediator.
(c) In the event that disputes between the parties arising from or
concerning in any manner the subject matter of this Agreement,
other than disputes arising from or concerning trademarks,
service marks or trade names, confidentiality and/or User Data,
cannot be resolved through good faith negotiation and mediation,
the parties will refer the dispute(s) to the American Arbitration
Association for resolution through binding arbitration by a
single arbitrator pursuant to the American Arbitration
Association's rules applicable to commercial disputes.
16. GENERAL
(a) Assignment. Neither party may assign this Agreement, in whole or
in part, without the other party's written consent (which will
not be unreasonably withheld), except that no such consent will
be required in connection with (i) a merger, reorganization or
sale of all, or substantially all, of such party's assets or (ii)
either party's assignment and/or delegation of its rights and
responsibilities hereunder to a wholly-owned subsidiary or joint
venture in which the assigning party holds an interest. Any
attempt to assign this Agreement other than as permitted above
will be null and void.
(b) Governing Law. This Agreement will be governed by and construed
in accordance with the laws of the State of California,
notwithstanding the actual state or country of residence or
incorporation of Excite or Client.
(c) Notice. Any notice under this Agreement will be in writing and
delivered by personal delivery, express courier, confirmed
facsimile, confirmed email or certified or registered mail,
return receipt requested, and will be deemed given upon personal
delivery, one (1) day after deposit with express courier, upon
confirmation of receipt of facsimile or email or five (5) days
after deposit in the mail. Notices will be sent to a party at its
address set forth in this Agreement or such other address as that
party may specify in writing pursuant to this Section.
(d) No Agency. The parties are independent contractors and will have
no power or authority to assume or create any obligation or
responsibility on behalf of each other.
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This Agreement will not be construed to create or imply any
partnership, agency or joint venture.
(e) Force Majeure. Any delay in or failure of performance by either
party under this Agreement will not be considered a breach of
this Agreement and will be excused to the extent caused by any
occurrence beyond the reasonable control of such party including,
but not limited to, acts of God, power outages and governmental
restrictions.
(f) Severability. In the event that any of the provisions of this
Agreement are held to be unenforceable by a court or arbitrator,
the remaining portions of the Agreement will remain in full force
and effect.
(g) Entire Agreement. This Agreement is the complete and exclusive
agreement between the parties with respect to the subject matter
hereof, superseding any prior agreements and communications (both
written and oral) regarding such subject matter. This Agreement
may only be modified, or any rights under it waived, by a written
document executed by both parties.
(h) Counterparts. This Agreement may be executed in counterparts,
each of which will serve to evidence the parties' binding
agreement.
Auto-By-Tel Corporation Excite, Inc.
By: /s/ Anne Benvenuto By: /s/ Tod C. Harmon
------------------------- -------------------------
Name: Anne Benvenuto Name: Tod C. Harmon
------------------------- -------------------------
Title: Senior V.P., Marketing Title: Dir. Financial Planning
------------------------- -------------------------
Date: June 25, 1998 Date: June 29, 1998
------------------------- -------------------------
18872 MacArthur Blvd., #200 555 Broadway
Irvine, California 92612-1400 Redwood City, California 94063
949-225-4500 (Voice) 650-566-6000 (Voice)
949-662-1323 (Fax) 650-566-6030 (Fax)
17
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EXHIBIT 10.33
[*] Confidential treatment has been requested for certain portions of this
exhibit.
AGREEMENT
This Agreement, dated as of February 18, 1999 (the "Effective Date"), is
made by and between Lycos, Inc., a Delaware corporation with a principal place
of business at 400-2 Totten Pond Road, Waltham, MA 02154 ("Lycos") and
autobytel.com, Inc., a Delaware corporation with a principal place of business
at 18872 MacArthur Blvd., Suite 200, Irvine, CA, 92612. ("autobytel")
Recitals
A. Lycos is the owner or licensee of certain Web services (collectively,
the "Lycos Services"), which are accessible through the URLs www.lycos.com (the
"Lycos Site"), www.tripod.com (the "Tripod Site"), www.whowhere.com (the
"WhoWhere Site"), and www.mailcity.com (the "Mailcity Site") (all of the
above-named sites are referred to collectively as the "Lycos Network").
B. autobytel is the operator of a Web site accessible through the URL
www.autobytel.com (the "autobytel Site") on which autobytel promotes information
about car purchases, and provides referrals to, among others, new car dealers
(all the content and information on the autobytel Site shall be referred to
herein as the "Content").
C. Lycos and autobytel wish to establish a relationship through which
Lycos will integrate links throughout the Lycos Network to a co-branded version
of the autobytel Site (the "Linked Site").
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Lycos and autobytel hereby agree
as follows:
Terms
1. Linked Site.
a. Serving and Hosting. autobytel shall launch the Linked Site on
or before [*] (the "Launch Date"). Each page on the Linked Site that is related
to new car buying shall identify Lycos by the placement of the Lycos logo in a
prominent position substantially in the form and dimensions as set forth on the
attached EXHIBIT C. The Lycos logo shall serve as a hyperlink to contextually
relevant pages of Lycos' choice on the Lycos Site. autobytel will operate and
serve the Linked Site in a manner consistent with the present quality standards
of Lycos and which meets response performance standards for Lycos users at least
as good as those of the Lycos Site. In addition, autobytel will be responsible
for system operation software costs, hardware costs, and network costs.
Additional services and functionality that are developed by autobytel for the
autobytel Site (or any successor to it) will be provided by autobytel at no cost
so that the Linked Site is maintained at a level substantially equal to the
<PAGE> 2
[*] Confidential treatment requested.
autobytel Site as it appears from time to time. Lycos shall have the right to
provide online access to the Linked Site to Lycos' subsidiaries, joint venture
partners of Lycos, and licensees of the Lycos Services.
b. Branding. The Linked Site will have the autobytel "look and
feel" but with Lycos' logo displayed on the home page and each page related to
new car buying. Branding for Lycos on the Linked Site shall consist of a "Back
to Lycos" button in substantially the form illustrated on the attached EXHIBIT
C, incorporated herein by reference, unless otherwise agreed to by both parties.
c. Referrals. autobytel and the entities to which autobytel
refers car-buyers shall be responsible for all aspects of purchase requests
generated from the Linked Site, including, without limitation, taking orders,
processing payments, ordering and stocking inventory, etc. Lycos shall take no
part in, and have no responsibility or liability for, the actual transactions.
2. Lycos Network Integration. During the Term, commencing on the
Launch Date, Lycos shall provide autobytel with a total of [*] on the Lycos
Network (including [*] in yet-to-be-determined, mutually agreed, contextually
relevant areas of sites within the Lycos Network). Each impression shall link
directly to the Linked Site. Such impressions shall conform with the Placement
Summary, attached hereto as EXHIBIT D, and shall consist of the following number
of links displayed in the following places:
a. Lycos Site. Lycos shall provide autobytel with links (i) on
Web search results pages generated by queries of mutually agreed keywords and
phrases (including, without limitation, those keywords and phrases listed on the
attached Exhibit A, incorporated herein by reference) ([*]), (ii) in the Autos
Web Guide ([*]), (iii) in the Lycos Classifieds section ([*]), (iv) in the Lycos
Roadmaps section ([*]), (v) in the Lycos Sports Web Guide ([*]), (vi) in the
Lycos Investing section ([*]), and (vii) within the Shopping Network (no
guaranteed impression level).
b. Tripod Site. Lycos shall provide autobytel with links from the
Car & Truck Zone ([*]).
c. WhoWhere Site. Lycos shall provide autobytel with a text link
from the home page of WhoWhere for new car buying ([*]).
d. MailCity. Lycos shall provide autobytel with links from those
places on the MailCity Site that, at Lycos' discretion, target the automotive
profile (as determined by user input upon registration) ([*]).
e. Redesigning of the Lycos Site. autobytel acknowledges that,
consistent with Lycos' need for editorial discretion, Lycos may redesign, delete
or replace the pages on which the impressions described in this Section 2 will
be displayed or may redesign or
<PAGE> 3
[*] Confidential treatment requested.
replace the type of links and banners described above; provided, that Lycos will
use good faith efforts to provide autobytel with comparable links and banners on
any re-designed or replacement pages.
f. Redesigning of the autobytel.com Site. Lycos acknowledges
that, consistent with autobytel's need for editorial discretion, autobytel may
redesign all or part of its Site, provided, that autobytel will use good faith
efforts to provide Lycos with comparable links on any re-designed areas of the
Site subject to this Agreement.
g. Reporting. Lycos shall provide autobytel with weekly reports
regarding the impressions outlined in this Sections 2.
h. autobytel Audit Rights. autobytel will have the right, at its
expense to audit Lycos' books and records for the purpose of verifying
impressions. Such audits will be made not more than [*] per year, on not less
than [*] written notice, during regular business hours, by auditors reasonably
acceptable to Lycos. If the auditor's figures reflect impressions lower than
those reported by Lycos, Lycos will provide autobytel with [*]. If the auditor's
figures vary more than [*] from the figures provided by Lycos, Lycos will also
pay [*].
3. Standard Terms and Conditions. Any standard advertising products
provided pursuant to this Agreement will be subject to the Terms and Conditions
outlined in the attached Exhibit B, which Terms and Conditions are incorporated
herein by reference. Throughout the Term, all advertising banners must meet the
Lycos specification found at http://adreporting.lycos.com/specs.html, as they
appear from time to time.
4. autobytel' Implementation Obligations. autobytel shall provide
Lycos with any assistance requested by Lycos in establishing the links between
the Lycos Network and the Linked Site, and with all artwork (subject to Lycos'
approval) for the advertising banners and links. autobytel also shall provide
and implement affiliate management software with which to track traffic and
transactions from the Lycos Network sites to the Linked Site.
5. [*]. autobytel shall be the [*] new car referral service
featured on those areas of the Lycos Network on which the links described in
Section 2 above appear. Notwithstanding the foregoing, the terms of the
[*] granted herein shall not prevent Lycos from displaying banners,
advertisements or hyperlinks to new car manufacturers, provided however, that
any such banners, advertisements or hyperlinks shall not promote, display or
feature any on-line service for the purposes of selling new vehicles directly to
consumers or distributing referrals for the purchase of new vehicles. Neither
autobytel's promotional links (including, without limitation, banner ads) nor
autobytel's "Fast Track" units (functional showcase boxes) on the Lycos Network
and Linked Sites shall include information on, or promotion of, used cars, auto
insurance, or financing/leasing options.
6. Fees and Royalties.
a. Lycos Network Integration Fees. autobytel shall pay Lycos
[*],
<PAGE> 4
[*] Confidential treatment requested.
payable as follows: (i) [*].
b. Lycos Transaction Royalties. In addition to the integration
fees outlined above, during the Term, autobytel shall pay Lycos [*] for each
Purchase Request over [*] Purchase Requests submitted from the Linked Site by
users who click through on any of the impressions outlined in Section 2 above. A
"Purchase Request" is submitted when a user completes all reasonably required
fields on a referral form, submits that form, and receives a confirmation from
autobytel. Payment will be made in the month following the month in which the
user submits such Purchase Request.
c. Reporting. autobytel shall provide Lycos with monthly reports
regarding the number of unique Purchase Requests submitted by users who click
through on any of the impressions outlined in Section 2 above. For the purposes
of this Agreement, a "Unique Purchase Request" shall be a purchase request
deemed valid by autobytel in accordance with its standard de-duping policy as
presently in effect, or as amended from time to time during the term of this
Agreement. A copy of the current de-duping policy in effect is attached hereto,
marked EXHIBIT E. autobytel shall reconcile and confirm or correct (as is
appropriate) such reports on a monthly basis.
d. Lycos Audit Rights. Lycos will have the right, at its expense
to audit autobytel's books and records relating to reports and data provided
hereunder for the purpose of verifying Purchase Requests. Such audits will be
made not more than [*] per year, on not less than [*] written notice, during
regular business hours, by auditors reasonably acceptable to autobytel. If the
auditor's figures reflect Purchase Requests higher than those reported by
autobytel, and if the auditor's figures reflect more than [*] Purchase Requests,
autobytel will pay Lycos an amount equal to [*] multiplied by the difference;
provided, however, that autobytel shall not pay for any Purchase Requests below
the [*] threshold. If the auditor's figures vary more than [*] from the figures
provided by autobytel, autobytel will also pay the [*].
7. Customer Profile Data. Subject to the provisions of Section 14
below, autobytel shall provide Lycos with a brief write-up that provides a
profile of autobytel's customer profile analysis created from actual purchase
requests processed through autobytel's system or the results from autobytel's
most recent research in effect.
8. Licenses. To the extent access to the Linked Site is deemed a
use, public display, transmission, distribution or reproduction of the Content,
or to the extent the Content is actually used, publicly displayed, transmitted,
distributed or reproduced on the Lycos Network sites, autobytel hereby grants
Lycos limited, revocable, non-transferable (except as provided herein),
royalty-free (except as provided herein), worldwide licenses to use, publicly
display, transmit, distribute and reproduce the Linked Site and the Content
during the Term solely for the purposes described herein.
<PAGE> 5
[*] Confidential treatment requested.
9. Term: The term ("Term") of this Agreement shall commence on the
Effective Date and continue until the [*] anniversary of the Launch Date,
unless terminated earlier as provided in Section 15 below.
10. Marks: Lycos hereby grants to autobytel a non-exclusive,
non-transferable license to reproduce and display Lycos' and Tripod's
trademarks, service marks, logos and the like solely for the purposes specified
in this Agreement. autobytel hereby grants Lycos a non-exclusive,
non-transferable license to reproduce and display autobytel's trademarks,
service marks, logos and the like solely for the purposes specified in this
Agreement. Except as expressly stated herein, neither party shall make any other
use of the other party's marks. Upon request of either party, the other party
shall provide appropriate attribution of the use of the requesting party's
marks. (e.g., "Go Get It(R) is a registered service mark of Lycos, Inc. All
Rights Reserved."). Such licenses shall terminate automatically upon the
effective date of expiration or termination of this Agreement.
11. Representations and Warranties: Each party hereby represents and
warrants as follows:
a. Corporate Power. Such party is duly organized and validly
existing under the laws of the state of its incorporation and has full corporate
power and authority to enter into this Agreement and to carry out the provisions
hereof.
b. Due Authorization. Such party is duly authorized to execute
and deliver this Agreement and to perform its obligations hereunder.
c. Binding Agreement. This Agreement is a legal and valid
obligation binding upon it and enforceable with its terms. The execution,
delivery and performance of this Agreement by such party does not conflict with
any agreement, instrument or understanding, oral or written, to which it is a
party or by which it may be bound, nor violate any law or regulation of any
court, governmental body or administrative or other agency having jurisdiction
over it.
d. Intellectual Property Rights.
i. autobytel has the full and exclusive right to grant or
otherwise permit Lycos to access the autobytel Site and the Linked Site, and to
use autobytel's intellectual property, and autobytel is aware of no claims by
any third parties adverse to any of such intellectual property rights.
ii. Lycos has the full and exclusive right to grant or
otherwise permit autobytel to access the Lycos Network and to use Lycos'
intellectual property, and Lycos is aware of no claims by any third parties
adverse to any of such intellectual property rights.
iii. If either party's (the "Infringing Party") intellectual
property rights are alleged or held to infringe the intellectual property rights
of a third party, the Infringing Party
<PAGE> 6
shall, at its own expense, and in its sole discretion, (1) procure for the
non-Infringing Party the right to continue to use the allegedly infringing
intellectual property or (2) replace or modify the intellectual property to make
it non-infringing; provided, however, if neither option is possible or
economically feasible and if the inability to use such intellectual property
would cause a material breach of this Agreement (as determined by the
non-Infringing Party), the Infringing Party may terminate this Agreement.
The representations and warranties and covenants in this Section 11 are
continuous in nature and shall be deemed to have been given by each party at
execution of this Agreement and at each stage of performance hereunder. These
representations, warranties and covenants shall survive termination or
expiration of this Agreement.
12. Limitation of Warranty. EXCEPT AS EXPRESSLY WARRANTED IN
SECTION 11 ABOVE, EACH PARTY EXPRESSLY DISCLAIMS ANY FURTHER WARRANTIES,
EXPRESS, IMPLIED, OR STATUTORY, INCLUDING BUT NOT LIMITED TO, THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, LYCOS MAKES NO EXPRESS OR IMPLIED
WARRANTIES OR REPRESENTATIONS WITH RESPECT TO THE LYCOS NETWORK, THE LINKED
SITE, AND LYCOS SHALL NOT BE LIABLE FOR THE CONSEQUENCES OF ANY INTERRUPTIONS OR
ERRORS RELATED THERETO. LYCOS SPECIFICALLY DISCLAIMS ALL LIABILITY FOR THE
COMPANY SITE, THE LINKED SITE, AND THE CONTENT THEREIN, AND COMPANY SPECIFICALLY
DISCLAIMS ALL LIABILITY FOR THE LYCOS NETWORK AND THE CONTENT THEREIN. EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT, LYCOS MAKES NO EXPRESS OR IMPLIED
WARRANTIES OR REPRESENTATIONS WITH RESPECT TO ANY PRODUCTS OFFERED OR SOLD
THROUGH THE LYCOS NETWORK, THE COMPANY SITE OR THE LINKED SITE (INCLUDING,
WITHOUT LIMITATION, WARRANTIES OF FITNESS, MERCHANTABILITY, NON-INFRINGEMENT OR
ANY IMPLIED WARRANTIES ARISING OUT OF A COURSE OF PERFORMANCE, DEALING OR TRADE
USAGE).
13. Indemnification.
a. autobytel Indemnity. autobytel will at all times defend,
indemnify and hold harmless Lycos and its officers, directors, shareholders,
employees, accountants, attorneys, agents, successors and assigns from and
against any and all third party claims, damages, liabilities, costs and
expenses, including reasonable legal fees and expenses, arising out of or
related to any breach of any warranty, representation, covenant or agreement
made by autobytel in this Agreement or the development, operation or maintenance
of the autobytel Site or the Linked Site, including the Content thereon. Lycos
shall give autobytel prompt written notice of any claim, action or demand for
which indemnity is claimed. autobytel shall have the right, but not the
obligation, to control the defense and/or settlement of any claim in which it is
named as a party and which arises as a result of autobytel's breach of any
warranty, representation, covenant or agreement under this Agreement. Lycos
shall have the right to participate in any defense of a
<PAGE> 7
claim by autobytel with counsel of Lycos' choice at Lycos' own expense. The
foregoing indemnity is conditioned upon: prompt written notice by Lycos to
autobytel of any claim, action or demand for which indemnity is claimed;
complete control of the defense and settlement thereof by autobytel; and such
reasonable cooperation by Lycos in the defense as autobytel may request.
b. Lycos Indemnity. Lycos will at all times defend, indemnify
and hold harmless autobytel and its officers, directors, shareholders,
employees, accountants, attorneys, agents, successors and assigns from and
against any and all third party claims, damages, liabilities, costs and
expenses, including reasonable legal fees and expenses, arising out of or
related to any breach of any warranty, representation, covenant or agreement
made by Lycos in this Agreement or the development, operation or maintenance of
the Lycos Network, including the content thereon (but specifically excluding any
content posted by users and appearing in search results, chat or bulletin
boards). autobytel shall give Lycos prompt written notice of any claim, action
or demand for which indemnity is claimed. Lycos shall have the right, but not
the obligation, to control the defense and/or settlement of any claim in which
it is named as a party. autobytel shall have the right to participate in any
defense of a claim by Lycos with counsel of autobytel's choice at autobytel's
own expense. The foregoing indemnity is conditioned upon; prompt written notice
by autobytel to Lycos of any claim, action or demand for which indemnity is
claimed; complete control of the defense and settlement thereof by Lycos; and
such reasonable cooperation by autobytel in the defense as Lycos may request.
c. Settlement. Neither party shall, without the prior written
consent of the other party, settle, compromise or consent to the entry of any
judgment with respect to any pending or threatened claim unless the settlement,
compromise or consent provides for and includes an express, unconditional
release of all claims, damages, liabilities, costs and expenses, including
reasonable legal fees and expenses, against the indemnified party.
14. Confidentiality, Press Releases.
a. Non-Disclosure Agreement. The parties agree and acknowledge
that, as a result of negotiating, entering into and performing this Agreement,
each party has and will have access to certain of the other party's Confidential
Information (as defined below). Each party also understands and agrees that
misuse and/or disclosure of that information could adversely affect the other
party's business. Accordingly, the parties agree that, during the Term of this
Agreement and thereafter, each party shall use and reproduce the other party's
Confidential Information only for purposes of this Agreement and only to the
extent necessary for such purpose and shall restrict disclosure of the other
party's Confidential Information to its employees, consultants or independent
contractors with a need to know and shall not disclose the other party's
Confidential Information to any third party without the prior written approval
of the other party . Notwithstanding the foregoing, it shall not be a breach of
this Agreement for either party to disclose Confidential Information of the
other party if required to do so under law or in a judicial or other
governmental investigation or proceeding, provided the other party has been
given prior notice and the disclosing party has sought all available safeguards
against widespread dissemination prior to such disclosure.
<PAGE> 8
[*] Confidential treatment requested.
b. Confidential Information Defined. As used in this Agreement,
the term "Confidential Information" refers to: (i) the terms and conditions of
this Agreement; (ii) each party's trade secrets, business plans, strategies,
methods and/or practices; (iii) any and all information relating to Purchase
Requests submitted through the Linked Site, including reports produced pursuant
to Section 6(c) of this Agreement; and (iv) other information relating to either
party that is not generally known to the public, including information about
either party's personnel, products, customers, marketing strategies, services or
future business plans. Notwithstanding the foregoing, the term "Confidential
Information" specifically excludes (A) information that is now in the public
domain or subsequently enters the public domain by publication or otherwise
through no action or fault of the other party; (B) information that is known to
either party without restriction, prior to receipt from the other party under
this Agreement, from its own independent sources as evidenced by such party's
written records, and which was not acquired, directly or indirectly, from the
other party; (C) information that either party receives from any third party
reasonably known by such receiving party to have a legal right to transmit such
information, and not under any obligation to keep such information confidential;
and (D) information independently developed by either party's employees or
agents provided that either party can show that those same employees or agents
had no access to the Confidential Information received hereunder.
c. Press Releases. Lycos and autobytel may jointly prepare
press releases concerning the existence of this Agreement and the terms hereof.
Otherwise, no public statements concerning the existence or terms of this
Agreement shall be made or released to any medium except with the prior approval
of Lycos and autobytel or as required by law.
15. Termination. Either party may terminate this Agreement if (a) the
other party files a petition for bankruptcy or is adjudicated bankrupt; (b) a
petition in bankruptcy is filed against the other party and such petition is not
dismissed within [*] of the filing date; (c) the other party becomes insolvent
or makes an assignment for the benefit of its creditors pursuant to any
bankruptcy law; (d) a receiver is appointed for the other party or its business;
(e) upon the occurrence of a material breach of a material provision by the
other party if such breach is not cured within [*] after written notice is
received by the breaching party identifying the matter constituting the material
breach; (f) upon [*] written notice if the other party's service or product
viewed as a whole, ceases to be competitive with substantially similar services
then being offered by third parties; or (g) by mutual consent of the parties;
(h) Lycos may terminate this Agreement upon [*] written notice to autobytel; (i)
In addition, if autobytel fails to pay to Lycos any amount due Lycos under this
Agreement when such amount is due, Lycos may terminate this Agreement
immediately upon the sending of written notice in accordance with Section 26.
The Parties agree that in the event that this Agreement is terminated prior to
the expiration of this Agreement by autobytel pursuant to Subsection (e) or by
Lycos pursuant to Subsection (h), above, any and all unearned fees or royalties
due Lycos hereunder shall be returned to autobytel.com on a pro-rata basis on or
before the effective date of termination.
16. Force Majeure. In the event that either party is prevented from
performing,
<PAGE> 9
or is unable to perform, any of its obligations under this Agreement due to any
cause beyond the reasonable control of the party invoking this provision, the
affected party's performance shall be excused and the time for performance shall
be extended for the period of delay or inability to perform due to such
occurrence.
17. Relationship of Parties. autobytel and Lycos are independent
contractors under this Agreement, and nothing herein shall be construed to
create a partnership, joint venture or agency relationship between autobytel and
Lycos. Neither party has authority to enter into agreements of any kind on
behalf of the other.
18. Assignment, Binding Effect. Neither Lycos nor autobytel may
assign this Agreement or any of its rights or delegate any of its duties under
this Agreement without the prior written consent of the other. Notwithstanding
the foregoing, Lycos may assign this Agreement to any successor of Lycos upon
reasonable notice to autobytel.
19. Choice of Law and Forum. This Agreement, its interpretation,
performance or any breach thereof, shall be construed in accordance with, and
all questions with respect thereto shall be determined by, the laws of the
Commonwealth of Massachusetts applicable to contracts entered into and wholly to
be performed within said state. autobytel hereby consents to the personal
jurisdiction of the Commonwealth of Massachusetts, acknowledges that venue is
proper in any state or Federal court in the Commonwealth of Massachusetts,
agrees that any action related to this Agreement must be brought in a state or
Federal court in the Commonwealth of Massachusetts, and waives any objection
autobytel has or may have in the future with respect to any of the foregoing.
20. Good Faith. The parties agree to act in good faith with respect
to each provision of this Agreement and any dispute that may arise related
hereto.
21. Additional Documents/Information. The parties agree to sign
and/or provide such additional documents and/or information as may reasonably be
required to carry out the intent of this Agreement and to effectuate its
purposes.
22. Counterparts and Facsimile Signatures. This Agreement may be
executed in multiple counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same
instrument. Facsimile signatures will be considered original signatures.
23. No Waiver. The waiver by either party of a breach or a default of
any provision of this Agreement by the other party shall not be construed as a
waiver of any succeeding breach of the same or any other provision, nor shall
any delay or omission on the part of either party to exercise or avail itself of
any right, power or privilege that it has, or may have hereunder, operate as a
waiver of any right, power or privilege by such party.
24. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
successors and assigns; provided however
<PAGE> 10
that this Agreement shall immediately terminate should any successor or assign
of this Agreement own or operate a service deemed competitive with a party
hereto.
25. Severability. Each provision of this Agreement shall be severable
from every other provision of this Agreement for the purpose of determining the
legal enforceability of any specific provision.
26. Notices. All notice required to be given under this Agreement
must be given in writing and delivered either in hand, by certified mail, return
receipt requested, postage pre-paid, or by Federal Express or other recognized
overnight delivery service, all delivery charges pre-paid, and addressed:
If to Lycos: Lycos, Inc.
400-2 Totten Pond Road
Waltham, MA 02154
Fax No.: (781) 370-2600
Attention: General Counsel
With a copy to: Lycos, Inc.
400-2 Totten Pond Road
Waltham, MA 02154
Fax No.: (781) 370-2600
Attention: Chief Financial Officer
If to autobytel: autobytel.com inc.
18872 MacArthur Boulevard
Irvine, CA 92612-1400
Fax No.: (949) 862-1323
Attention: General Counsel
27. Entire Agreement. This Agreement contains the entire
understanding of the parties hereto with respect to the transactions and matters
contemplated hereby, supersedes all previous agreements between Lycos and
autobytel concerning the subject matter, and cannot be amended except by a
writing signed by both parties. No party hereto has relied on any statement,
representation or promise of any other party or with any other officer, agent,
employee or attorney for the other party in executing this Agreement except as
expressly stated herein.
28. LIMITATIONS OF LIABILITY. UNDER NO CIRCUMSTANCES SHALL EITHER
PARTY BE LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL,
SPECIAL OR EXEMPLARY DAMAGES (EVEN IF SUCH DAMAGES ARE FORSEEABLE OR THAT PARTY
HAS BEEN ADVISED OR HAS CONSTRUCTIVE KNOWLEDGE OF THE POSSIBILITY OF SUCH
DAMAGES), ARISING FROM SUCH PARTY'S PERFORMANCE OR NON-PERFORMANCE PURSUANT TO
ANY PROVISION OF THIS AGREEMENT OR THE OPERATION OF SUCH PARTY'S SITE (INCLUDING
SUCH DAMAGES INCURRED BY THIRD
<PAGE> 11
PARTIES), SUCH AS, BUT NOT LIMITED TO, LOSS OF REVENUE OR ANTICIPATED PROFITS OR
LOST BUSINESS. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR DAMAGES IN EXCESS OF
THE AMOUNT RECEIVED BY SUCH PARTY UNDER THIS AGREEMENT. NOTWITHSTANDING ANYTHING
HEREIN TO THE CONTRARY, HOWEVER, THIS SECTION SHALL NOT LIMIT EITHER PARTY'S
LIABILITY TO THE OTHER FOR (A) WILLFUL AND MALICIOUS MISCONDUCT; (B) DIRECT
DAMAGES TO REAL OR TANGIBLE PERSONAL PROPERTY; (C) BODILY INJURY OR DEATH CAUSED
BY NEGLIGENCE; OR (D) INDEMNIFICATION OR CONFIDENTIALITY OBLIGATIONS HEREUNDER.
29. Survival. All terms of this Agreement which by their nature
extend beyond its termination remain in effect until fulfilled, and apply to
respective successors and assigns.
IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement
as of the date set forth above.
autobytel.com inc. LYCOS, INC.
By: /s/ ANNE BENVENUTO By: /s/ DAVID PETERSON
------------------------------- -----------------------------
Name: Anne Benvenuto Name: David Peterson
------------------------------- -----------------------------
Title: Senior Vice President Marketing Title: Vice President Sales
------------------------------- -----------------------------
Date: 2-18-99 Date: 2-25-99
------------------------------- -----------------------------
<PAGE> 12
EXHIBIT A
4x4
trucks
accord
acura
alfaromeo
alfa romeo
alfa romero
audi
auto
auto nation
autobytel
autobytell
automobile
automobiles
autonation
autos
beemer
benz
bmw
bodyshop
buick
buying cars
cabriolet
cadillac
camaro
car
cars
cherokee
chevrolet
chevy
convertible
convertibles
corolla
corvette
cougar
daewo
daihatsu
delorean
explorer
ferrari
ford
general motors
gm trucks
honda
hondas
hummer
hummers
infinity
<PAGE> 13
isuzu
jaguar
jeep
kia
landcruiser
land rover
landrover
lexus
limousine
lincoln
M3
maserati
mazda
mechanics
mercedes
mercedes benz
mercury
mgb
minivan
minivans
mitsubishi
motorcycle
motorcycles
mustang
new vehicles
nissan
pickup
truck
plymouth
pontiac
range rover
rangerover
renault
rolls royce
rollsroyce
saab
saturn
sedan
sedans
sentra
station wagons
stationwagon
stationwagons
sting ray
stingray
subaru
suburban
suburban
suv
suzuki
taurus
thunderbird
toyota
<PAGE> 14
toyotas
trans am
truck
trucks
used cars
used pickup
van
vans
vans
vehicle
vehicle prices
vehicles
viper
volkswagon
volvo
vw
<PAGE> 15
EXHIBIT B
ADDITIONAL ADVERTISING TERMS
1. CHANGES AND CANCELLATIONS. All artwork must be received at least five days in
advance of publication date. Cancellations or copy changes will not be accepted
after the published closing date of the update to the Lycos site. Changes to
artwork must be received by Lycos at least five days in advance of requested
change date. Lycos' ad banner specifications are accessible through the URL
adreporting.lycos.com/specs.html; Lycos reserves the right to change any of its
ad banner specifications at any time. Any cancellations or change orders must be
made in writing and acknowledged by Lycos. Change orders cannot be submitted any
more frequently than once every fourteen days.
2. LICENSES AND INDEMNIFICATION. autobytel represents that it is the owner or is
licensed to use the entire contents and subject matter contained in its
advertising and collateral information, including, without limitation, (a) the
names and/or pictures of persons; (b) any copyrighted material, trademarks,
service marks, logos, and/or depictions of trademarked or service marked goods
or services; and (c) any testimonials or endorsements contained in any
advertisement submitted to Lycos. In consideration of Lycos' acceptance of such
advertisements and information for publication, autobytel will jointly and
severally indemnify and hold Lycos harmless against all loss, liability, damage
and expense of any nature (including attorney's fees) arising out of Lycos'
performance under this contract or the copying, printing, distributing, or
publishing of autobytel's advertisements. If autobytel possesses any preexisting
copyright interests in the advertisements, advertiser grants Lycos the right to
use, reproduce, and distribute the advertisements.
3. KEY WORDS AND PHRASES. Each advertiser may be given a "first right" to its
exact company name and trademarks for keyword/phrase advertising. Lycos may
pre-empt an existing key word/phrase advertiser by submitting a three-month
advertising contract. The existing contract-holder for the key word/phrase will
be provided with a two-week notification of preemption and will receive a
pro-rated refund for any unfulfilled number of guaranteed impressions. If two or
more advertisers have the same name or trademark, the allocation will be on a
first-come basis and the existing contract will take precedence.
4. REJECTIONS. Lycos reserves the right, without liability, to reject, omit or
exclude any advertisement or to reject or terminate any links for any reason at
any time, with or without notice to autobytel, and whether or not such
advertisement or link was previously acknowledged, accepted, or published.
5. LIMITATION OF LIABILITY. Lycos shall not be liable for any errors in content
or omissions. Should an error appear in an advertisement, Lycos' liability will
be limited to the cost of the advertisement (prorated for the publishing
completed).
<PAGE> 16
EXHIBIT C
MOCK-UP OF THE LINKED SITE
[GRAPHIC OF A WEB PAGE]
<PAGE> 17
[*] Confidential treatment requested
EXHIBIT D
LYCOS PLACEMENT SUMMARY
<TABLE>
<CAPTION>
=================================================================================================================================
AREA/COMPONENT SECTION/CHANNEL UNIT/ITEM EXCLUSIVITY
=================================================================================================================================
<S> <C> <C> <C>
[*]
IMPRESSIONS
TOTAL ANNUAL IMPRESSIONS [*] [*]
AUTO IMPRESSIONS [*] [*]
NON-AUTO IMPRESSIONS [*] [*]
NOTE:
ENCBS = Exclusive New Car Buying Service
ECBS = Exclusive Car Buying Service
Non-Excl. = Non-Exclusive
</TABLE>
<PAGE> 18
EXHIBIT E
UNIQUE PURCHASE REQUEST
A Unique Purchase Request shall be defined as follows:
i. The Purchase Request is the product of an end user visiting the linked
site.
ii. A Purchase Request which has been received by ABT from the linked site
for which autobytel has not, within the previous ninety (90) day period,
received a Purchase Request for the same or similar Vehicle from a
person identified by the same name and/or the same e-mail address; and
iii. The end user indicates his or her intention to purchase the desired
vehicle within forty-eight (48) hours; two (2) weeks or thirty (30) days
as prompted on the autobytel purchase request form.
iv. All fields in the present Purchase Request form presently deemed
mandatory by autobytel which are the fields currently employed in such
form, have been completed by the user including but not limited to name,
address, phone number and valid email address.
v. The end user provides a valid USPS zip code.
<PAGE> 1
EXHIBIT 21.1
Subsidiary List pursuant to Regulation S-K Item 601
All of the following entities are corporations organized in the state of
Delaware. The names of the entities are:
Autobytel Services Corporation
Auto-By-Tel Insurance Services, Inc.
Auto-By-Tel Acceptance Corporation
Autobytel.ca, Inc.
Kre8.net, Inc.
AutoVisions Communications, Inc.
Auto-By-Tel Europe LLC
<PAGE> 1
EXHIBIT 23.1
[ARTHUR ANDERSEN LLP LETTERHEAD]
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the inclusion in
this registration statement on Amendment No. 2 to Form S-1 (Registration No.
333-70621) of our report dated February 3, 1999 on our audits of the
consolidated balance sheets of autobytel.com inc. and subsidiaries as of
December 31, 1997 and 1998, and the related consolidated statements of
operations, stockholders' equity (deficit), and cash flows for the years ended
December 31, 1996, 1997 and 1998. We also consent to the reference to our firm
under the caption "Experts".
/s/ ARTHUR ANDERSEN LLP
-----------------------------------
ARTHUR ANDERSEN LLP
Los Angeles, California
March 3, 1999
