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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________ .
COMMISSION FILE NUMBER 0-22239
AUTOBYTEL.COM INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 33-0711569
(STATE OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NO.)
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18872 MACARTHUR BOULEVARD
IRVINE, CALIFORNIA 92612-1400
TELEPHONE: (949) 225-4500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL OFFICES)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $0.001 PER SHARE
(TITLE OF CLASS)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Based on the closing sale price of $10.0625 for our common stock on the
Nasdaq National Market System on March 15, 2000, the aggregate market value of
outstanding shares of common stock held by non-affiliates was approximately
$140.6 million. As of March 15, 2000, 20,209,627 shares of our common stock were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of our Definitive Proxy Statement for the 2000 Annual Meeting,
expected to be filed within 120 days of our fiscal year end, are incorporated by
reference into Part III.
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AUTOBYTEL.COM INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
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Index....................................................... 2
PART I
Item 1. Business.................................................... 3
Item 2. Properties.................................................. 29
Item 3. Legal Proceedings........................................... 29
Item 4. Submission of Matters to a Vote of Security Holders......... 30
PART II
Item 5. Market for the Company's Common Equity and Related
Stockholder Matters......................................... 30
Item 6. Selected Financial Data..................................... 31
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 32
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 38
Item 8. Financial Statements and Supplementary Data................. 38
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.................................... 38
PART III
Item 10. Directors and Executive Officers of the Company............. 38
Item 11. Executive Compensation...................................... 39
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 39
Item 13. Certain Relationships and Related Transactions.............. 39
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K......................................................... 40
Signatures.................................................. 41
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PART I
ITEM 1. BUSINESS
Except for historical information, the following description of our
business contains forward-looking statements based on current expectations which
involve risks and uncertainties. Our actual results could differ materially from
those set forth in these forward-looking statements as a result of a number of
factors, including those set forth in this Annual Report under the heading "Risk
Factors." Unless specified otherwise as used herein, the terms "we," "us" or
"our" refer to autobytel.com inc. and its wholly owned subsidiaries.
OVERVIEW
We are an internationally branded online automotive commerce company that
provides consumers with automotive solutions throughout the lifecycle of vehicle
ownership. We own leading, branded Internet sites for new and pre-owned vehicle
information and automotive services that link buyers and sellers in an
information-rich environment. Through our Web sites, www.autobytel.com and the
recently acquired www.carsmart.com (see below), consumers can research pricing,
specifications and other information regarding new and pre-owned vehicles and
purchase, finance, lease, insure, sell or maintain their vehicles. We believe
that our services provide benefits for consumers by supplying them with
information to make informed and intelligent vehicle decisions throughout the
lifecycle of vehicle ownership.
Consumers can purchase new vehicles through our dealer referral network,
our AutobytelDIRECT(SM) service and our auction services. When consumers
indicate they are ready to buy a vehicle, they can be connected to our network
of over 4,900 participating dealers in North America, of which over 3,400 are
Autobytel.com(R) dealers and nearly 1,500 are CarSmart.com(SM) dealers, with
each dealer representing a particular vehicle make. Approximately 400 dealers
subscribe to both the Autobytel.com and CarSmart.com services. 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. Fees
paid by our participating dealers constitute the majority of our revenues.
AutobytelDIRECT is a direct-to-consumer new vehicle buying service offering
a real-time online inventory of thousands of vehicles, instant up-front pricing,
multiple trade-in options, competitive financing and insurance, and at-home or
office delivery. Consumers can search for the vehicle they need, assisted by a
variety of filters, such as make, model, series, engine, transmission and color.
Once consumers locate their vehicle of choice, AutobytelDIRECT's Customer Care
Center assists the consumer in the purchase process.
Our online auction services allow consumers, dealers and consignors to
transact new and pre-owned vehicle purchases in a live "bid" environment. Key
features include AutoSchematic(SM) (developed by us to provide buyers with a
graphic depiction of the exterior, interior and mechanical components of the
vehicle, allowing buyers to identify items that are scratched, broken or in need
of mechanical attention), real-time bid alerts, buyer and seller profiles,
automated inventory uploads for dealers, real-time auction information, and
escrow and transportation services.
Consumers can purchase pre-owned vehicles through our Certified Pre-Owned
CyberStore(R), our auction services and our Classifieds. The Certified Pre-Owned
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. We also provide
classifieds on our site where consumers can post pre-owned vehicles for sale.
Our service.autobytel.com site is designed to empower consumers by
providing cost effective and efficient processes for dealing with common service
and maintenance issues. The site enhances consumer personalization and includes
key components such as access to Autobytel.com Accredited Service Centers, the
ability to schedule service and maintenance appointments online and receive
information such as service reminders and recall information.
Consumers can also apply for and receive insurance, financing, leasing and
warranty proposals as well as other services and information through our Web
sites. Autobytel.com, in partnership with Lending Tree, Inc.
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and Credit Management Solutions, Inc., launched an online consumer banking
center that provides consumers with competitive loan rates from various lenders.
Autobytel.com also provides a link on its Web site so consumers can receive
real-time quotes for insurance coverage from InsurQuote Systems Incorporated and
submit quote applications online. Participants in the program include MetLife(R)
Auto & Home Insurance, The Hartford (Hartford Financial Services Group, Inc.)
and the GE Auto Insurance Program. CarSmart.com has a similar arrangement with
Lending Tree and Credit Management Solutions and provides a link to InsWeb for
insurance quote applications. In addition, our online automotive superstore
offers a broad range of products to consumers, including parts, accessories,
tires, audio and electronics, car care products, tools, books and magazines.
The Autobytel.com dealers use our online information platform, the Dealer
Real Time(R) system. The Dealer Real Time system provides dealers with immediate
purchase request information for new and pre-owned vehicles, the ability to
track customers and purchase requests, automatic uploading of new and pre-owned
vehicle inventory into our database and other features. The CarSmart.com dealers
use a system called SmarTrack.
Autobytel.com introduced its new vehicle purchasing referral services in
May 1995, its Certified Pre-Owned CyberStore in April 1997, its wholesale
auction and consumer auction in April and October 1999, respectively, its
service and maintenance site in June 1999, its online automotive superstore in
December 1999 and its AutobytelDIRECT new vehicle buying service in January
2000.
In 1999 and the first quarter of 2000, we established joint ventures and
entered into licensing agreements in Europe, Japan and Australia and are
exploring additional opportunities in Europe, Asia and Latin America. We receive
fees from each licensing agreement.
In February 2000, Autobytel.com acquired A.I.N. Corporation, the owner of
CarSmart.com, one of the leading online buying sites for new and pre-owned
vehicles, for 1.8 million shares of Autobytel.com common stock and $3 million in
cash. CarSmart.com has nearly 1,500 dealers, established relationships with more
than 200 credit unions and strategic marketing agreements with ten of the top
Internet portals, including AOL.com, Alta Vista, Snap.com, GO2Net and the Go
Network. A.I.N. Corporation is referred to herein as A.I.N. or CarSmart.com. See
Item 7 "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
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 corporate offices are located in
Irvine, California. We completed our initial public offering in March 1999 and
our common stock is listed on the NASDAQ National Market under the symbol
"ABTL."
BACKGROUND
Growth of the Internet and Online Commerce. The Web and online services
have emerged as significant global communications and commercial media enabling
millions of people worldwide to share information, communicate and conduct
business electronically. We believe that the number of Web users will grow based
on a number of factors, including the large and growing base of installed
personal computers in the home and workplace, the decreasing cost of personal
computers, easier, faster and cheaper access to the Internet, the distribution
of broadband applications, the proliferation of Internet 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 over the
telephone.
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The Automotive Vehicle Market. Automotive dealers operate in localized
markets and face significant state regulations and increasing business
pressures. These fragmented markets, with approximately 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 ADT
Automotive Inc., approximately $709 billion and $652 billion was spent on new
and pre-owned vehicles in the United States representing the sale of
approximately 58 million and 56 million vehicles in 1999 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
information-rich Web sites, 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 and increase customer volume.
Benefits to Consumers. Our Web sites provide 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(SM) services which consist of a lease
calculator, a loan calculator to determine monthly payments and a lease or buy
decision tool. Our database of articles allows consumers to perform online
library research by accessing documents such as weekly automotive reports,
consumer reviews and manufacturer brochures. Various automotive information
service providers, such as Edmund's, Kelley Blue Book, Pace Publication's
Carprice.com, and IntelliChoice, are also available 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 within 24 hours. By providing dealers with a large number of
consumers through quality purchase requests or through outsourcing the closing
of vehicle purchases to AutobytelDIRECT for a fixed fee, we believe that we can
help our dealers to lower their operating costs, so that they may offer more
competitive prices to their customers.
We believe we offer consumers a significantly different vehicle purchasing
experience from that of traditional methods. Consumers using our Web sites 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 within 24 hours 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
highest quality dealers within defined territories.
Benefits to Dealers. We believe we benefit dealers by reducing the dealers'
incremental personnel and marketing costs, increasing consumer satisfaction and
increasing sales volume. Through our investment in national advertising and
brand recognition of Autobytel.com and CarSmart.com, we attract consumers to our
Web sites and, based on the consumers' preference, we either direct them to
dealers in their local area or facilitate the purchase process for consumers
through AutobytelDIRECT. We believe this provides dealers
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access to a larger number of prequalified consumers or outsourced purchase
transactions. We believe 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 or provide dealers with
outsourcing of the vehicle purchase process through AutobytelDIRECT. 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 manager. Through our Dealer Real Time
system, Autobytel.com provides 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
our dealers a large number of consumers, which allows them to compete more
effectively. Our solution includes an expanding network of over 4,900
participating dealers in the United States and Canada representing every major
domestic and imported make of vehicles and light trucks.
To incent a dealer to participate in the Autobytel.com or CarSmart.com
network, we allocate each dealer an exclusive geographic territory in such
network 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.
Our Web Sites. 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 and outsourced purchase
transactions of vehicles. For these reasons, we also believe that the Internet
represents the most efficient method of directing purchase requests to local
markets and dealers.
Autobytel.com currently provides the following services on its Web site:
[Chart depicting programs and services accessible to
Internet consumers through Autobytel.com]
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CarSmart.com currently provides the following services on its Web site:
[Chart depicting programs and services accessible to
Internet consumers through CarSmart.com]
STRATEGY
Our primary objective is to connect buyers and sellers in an
information-rich environment throughout the vehicle ownership lifecycle. 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 traditional marketing, we own two of the leading brand names in our
sector. We intend to continue to aggressively market and advertise to enhance
our brand recognition with consumers. We believe that continuing to strengthen
brand awareness of the Autobytel.com and CarSmart.com names among consumers is
critical to attract vehicle buyers, increase purchase requests and outsourced
purchase transactions 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 sites and with our dealers. In order to enhance our appeal to consumers, we
intend to continue developing our Web sites by enhancing vehicle information and
personalization. We formed I-Net Training Technologies LLC with third parties to
provide dealers with more extensive training and tools to facilitate Internet
selling of vehicles. In addition, we plan to continue compiling high quality
content from third party sources on our sites, 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.
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Increase Purchase Requests and Purchases. We believe that increasing the
volume and quality of purchase requests and purchases directed from our Web
sites to our dealer networks is crucial to the long-term growth and success of
our business. By augmenting the volume of quality purchase requests and
purchases, we expect to attract additional dealers to our networks, increase
fees paid by dealers, and solidify our relationships with participating dealers.
Our strategy for increasing traffic to our sites and the number of purchase
requests and purchases includes forming and maintaining online sponsorships and
partnerships with Internet portals, such as Excite, Snap and Alta Vista, 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 sites to
insure that well informed, ready-to-buy consumers are directed to participating
dealers. In addition, we established AutobytelDIRECT to attract consumers who
prefer to complete the purchase of a vehicle with our assistance and limited
dealer contact. The service provides dealers with outsourcing of the purchase
process of a vehicle for a fixed fee and the added convenience to consumers of
completing the purchase process online with our assistance.
Expand and Improve Dealer Network. We believe that strengthening the size
and quality of our dealer networks is important to the success and growth of our
business. Our strategy is to increase the size of our dealer networks by
attracting new dealers and strengthening relationships with existing dealers by:
- increasing the volume and quality of purchase requests and purchases,
- advertising in trade publications aimed at dealers and participating in
industry trade shows,
- maintaining our extensive training and support programs to participating
dealers, and
- providing our Dealer Real Time or SmarTrack systems, as applicable, to
all participating dealers.
Invest in Related Products and Services. We believe that expanding our
products and services to both consumers and dealers is critical to establish
ourselves as the premier provider of online automotive products and services.
Our strategy is to continue to enhance personalization features and invest in
related products and services, such as the CyberStore, online auctions,
maintenance and service, and warranty, finance and insurance services. The
Dealer Real Time and SmarTrack systems will allow us to launch new products and
services for our dealers. We also allow dealers to offer accessories directly
through our Web sites. We expanded the advertising sales on our Web sites in
1999 and recently began to market the information in our database in accordance
with our privacy policy. We expect to further expand these businesses in 2000.
Expand Internationally. We intend to continue our international expansion
through licensing agreements and partnering with local strategic partners. We
established Autobytel.Europe LLC with Inchcape plc, Pon Holdings B.V. and GE
Capital to expand our operations and business throughout Europe. We licensed our
technology, business processes and trade name to Autobytel.Europe on a royalty
free perpetual basis and contributed to Autobytel.Europe our existing license
agreements for the United Kingdom and Scandinavia and Finland. In turn,
Autobytel.Europe intends to license such technology, business processes and
trade name to other national operating companies in European countries.
Autobytel.Europe will usually invest in such national operating companies or
obtain options to acquire equity positions in such companies. Autobytel.Europe
currently has a licensing agreement for The Netherlands, Belgium and Luxembourg
and intends to establish licensing agreements in Germany, France, Spain,
Portugal and Italy as well as certain other countries in Western and Eastern
Europe. We have also established joint ventures in Japan and Australia with
several strategic partners. We are currently exploring additional opportunities
in Asia and Latin America.
PRODUCTS, PROGRAMS AND SERVICES
New Vehicle Purchasing Service. Our new vehicle purchasing service enables
consumers to shop for and select a new vehicle through our Web sites by
providing research on new vehicles such as pricing, features, specifications and
colors. 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
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the dealership's name and phone number and the name of the dedicated 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 their 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.
Our network has grown to over 4,900 dealers as of February 29, 2000, of
which over 3,400 are Autobytel.com dealers and nearly 1,500 are CarSmart.com
dealers. Approximately 400 dealers subscribe to both the Autobytel.com and
CarSmart.com services. These dealers represent every major domestic and imported
make of vehicle and light truck sold in the United States and Canada.
Dealerships are charged initial subscription fees and on-going fees, principally
on a monthly basis.
New Vehicle Direct Service. We launched our direct-to-consumer new vehicle
buying service in January 2000. AutobytelDIRECT is a direct-to-consumer new
vehicle buying service offering a real-time online inventory of thousands of
vehicles, instant up-front pricing, multiple trade-in options, competitive
financing and insurance and at-home or office delivery. Consumers can search for
the vehicle they desire assisted by a variety of filters, such as make, model,
service, engine, transmission and color. Once consumers locate their vehicle of
choice, AutobytelDIRECT's Customer Care Center can assist in the purchase
process.
AutobytelDIRECT allows dealers to outsource the closing of the vehicle
purchase for a fixed fee. In most states, upon the completion of a sale,
AutobytelDIRECT dealers will pay fees ranging from $100-$300, depending on the
gross selling price of the vehicle. As of February 29, 2000, AutobytelDIRECT had
1,030 participating dealers.
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 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 pass a 135-point inspection
and be covered by a 72-hour money-back guarantee and 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.
Online Auction Services. In 1999, we launched our consumer-to-consumer,
dealer-to-consumer and dealer-to-dealer auction services. The auction services
allow dealers, consignors and private sellers and buyers to transact new and
pre-owned vehicle purchases in a live "bid" environment. Key features include
AutoSchematic (developed by us to provide buyers with a graphic depiction of the
exterior, interior and mechanical components of the vehicle, allowing buyers to
identify items that are scratched, broken or in need of mechanical attention),
real-time bid alerts, buyer and seller profiles, automated inventory uploads for
dealers, real-time auction information and escrow and transportation services.
Sellers can post vehicles on auction for a fee. The auction allows for
automated bid and reserve adjustments. Buyers can continue to bid on the vehicle
of their choice without being at the computer by selecting their maximum and
minimum bids and placing bids by proxy.
The wholesale auction service streamlines the process of wholesale buying
and selling pre-owned vehicles. Dealers are able to place online bids for
pre-owned vehicles directly to the wholesaler, eliminating associated
distribution costs.
Service and Maintenance. In June 1999, we launched service.autobytel.com, a
comprehensive site designed to facilitate the service process for consumers. The
site is designed to empower consumers with cost effective and efficient
processes for dealing with common service and maintenance issues. The site
enhances consumer personalization. It includes key components such as access to
Autobytel.com Accredited Service
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Centers and the ability to schedule service and maintenance appointments online.
The site also provides an Electronic Garage where consumers can store and
receive information about their cars and trucks, such as service reminders,
recall information and a lease watch to help keep track of mileage on a leased
vehicle. The site offers "Ask the Expert", a section that offers answers to
frequently asked service and maintenance questions. We plan to launch Online
Automotive Diagnostic Center where consumers could obtain a synopsis of possible
causes and solutions for problems or symptoms their vehicle is displaying and to
feature message boards where Internet consumers can post questions or requests
for advice.
Participating service centers must commit to respond to consumers within 24
hours with competitive no-haggle service prices. The site enables dealers to use
the Internet to further serve their customers. As of February 29, 2000, we had
1,502 Autobytel.com Accredited Service Centers.
Online Automotive Superstore. We launched the Autobytel.com online
automotive superstore in December 1999. The superstore offers a broad range of
products to consumers, including parts, accessories, tires, audio and
electronics, car care products, tools, books and magazines. The superstore is
designed to enhance our consumer relationship by providing a trusted resource
for products that complete or complement the vehicle purchase process. As of
February 29, 2000, providers in the superstore included Wrenchead.com,
CarParts.com, Automotive.com, Autoaccessory.com, TireRack.com, 1StopTools.com
and Amazon.com.
Other Related Products and Services. We offer a number of related products
and services that we market to consumers through our Web sites and the linked
Web sites of participating partners. We make purchase and lease financing
available to consumers through an online consumer banking center established
with Lending Tree, Inc. and Credit Management Solutions, Inc. that allow
consumers to research and apply for vehicle financing online in a secure manner
from multiple lenders. Consumers can apply for a loan or lease online at the
time they submit their purchase request for either a new or pre-owned vehicle.
Consumers are able to arrive at the dealership with their loan pre-approved,
their credit verification documents in hand, and the loan paperwork waiting for
them. We believe that the convenience of pre-approved purchase or lease
financing, combined with a firm, competitive price, enables dealers more easily
to consummate purchase requests. Lending Tree pays us a referral fee and an
origination fee for most loans. Autobytel.com also currently markets financing
through CarFinance.com.
We provide a link on our Autobytel.com Web site so consumers can receive
real-time quotes for insurance coverage from InsurQuote Systems Incorporated and
submit quote applications online. Participants in the program include MetLife(R)
Auto & Home Insurance, The Hartford (Hartford Financial Services Group, Inc.)
and the GE Auto Insurance Program, with eCoverage, Esurance and Avomark
Insurance Company expected to commence participation in the second quarter. As
of February 29, 2000, the service is available to consumers in the following 14
states: Arizona, California, Connecticut, Florida, Illinois, Indiana, Louisiana,
New York, Ohio, Pennsylvania, Texas, Virginia, Washington and Wisconsin.
Autobytel.com receives a marketing fee for every quote application sent to a
participating insurance company or agent from a consumer accessing the
InsurQuote Systems Web site through the Autobytel.com Web site. Carsmart.com
provides a link to InsWeb for insurance quote applications. In addition, we
provide Fireman's Fund warranty products and receive fees per warranty sold.
We offer information concerning all aspects of owning and leasing new and
pre-owned vehicles that we believe makes our Web sites valuable resources to
consumers. AutoBuyTools, a service on the Autobytel.com Web site, consists of a
lease calculator, a loan calculator to determine monthly payments and a lease or
buy decision tool.
Classifieds. We provide classifieds on our sites where consumers can post
pre-owned vehicles for sale. Since inception in August 1999, approximately
14,000 vehicles were posted on Autobytel.com's classifieds.
The Dealer Real Time System. In 1997, we launched a 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.
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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 new and used vehicle inventory information for immediate display to
consumers on Autobytel.com Web pages,
- 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.
CarSmart.com dealers use the SmarTrack system. We are currently evaluating
whether to standardize all of our dealers on a single system.
INTERNATIONAL ACTIVITIES
We have established and intend to further expand our presence in foreign
markets through licensing agreements and by establishing relationships with
vehicle dealers and strategic partners located in foreign markets.
Europe. We established Autobytel.Europe with strategic partners to expand
our operations in Europe. We licensed our technology, business processes and
trade name to Autobytel.Europe on a royalty free perpetual basis and contributed
to Autobytel.Europe our existing license agreements for the United Kingdom and
Scandinavia and Finland. Autobytel.Europe intends to license such technology,
business processes and trade name to national operating companies in European
countries. Autobytel.Europe will generally invest in such national operating
companies or obtain options to acquire equity positions in such companies.
Autobytel.Europe also intends to offer joint services to such companies to
localize the Autobytel.com offerings while building its brand name among
consumers in individual countries as well as on a Pan-European and regional
basis. The strategic partners in Autobytel.Europe are GE Capital, Inchcape plc,
the United Kingdom's largest independent importer and distributor of motor
vehicles, Pon Holdings B.V., a major distributor of vehicles in the Netherlands,
and e-LaSer, a leader in customer services and e-commerce in Europe and a
subsidiary of Galeries Lafayette Group. As of February 29, 2000, total funding
for Autobytel.Europe was $36.7 million. As of such date, we owned 78% of
Autobytel.Europe and the total equity value of Autobytel.Europe, based on the
funding price, was $146.7 million.
The license agreement with Auto-by-Tel UK limited, a subsidiary of Inchcape
plc, is a 20-year exclusive agreement to license our technology, business
processes and trade name in the United Kingdom, as well as provide maintenance
and development for such technology. The license agreement with Auto-By-Tel AB
is a similar 10-year exclusive agreement for Scandinavia and Finland. The United
Kingdom and Swedish sites were launched in April 1999. The sites for Denmark,
Norway and Finland are expected to launch in 2000. Autobytel.com has an option
to purchase up to 20% of the shares of Auto-By-Tel AB. Autobytel.Europe entered
into a license agreement for The Netherlands, Belgium and Luxembourg and intends
to establish licensing agreements in Germany, France, Spain, Portugal and Italy
as well as other countries in Western and Eastern Europe.
Japan. In June 1999 we established Autobytel Japan Kabushiki Kaisha with
six Japanese partners. We entered into a 10-year exclusive agreement with
Autobytel Japan to license our technology, business processes and trade name in
Japan. The strategic partners in Autobytel Japan are ITOCHU Corporation, a
global trading company with over $110 billion in revenue; Intec, Inc., a leading
independent systems integrator and network service provider with its own
infrastructure in Japan; e-solutions, inc., an e-commerce solutions provider
from business plan to implementation; Recruit Co., Ltd., the publisher of
Japan's most widely recognized auto-related magazine; Orient Corporation, a
leading consumer finance company in Japan; and
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TransCosmos, a leading network services company in Japan. GE Capital is also an
investor in Autobytel Japan. Autobytel Japan launched its Web site in November
1999. As of February 29, 2000, we owned 27% of Autobytel Japan and the total
equity value of Autobytel Japan, based on the most recent round of financing,
was $78.4 million.
Australia. In February 2000 we established autobytel Australia Pty Limited
with six Australian partners. We entered into a 10-year exclusive agreement with
Autobytel Australia to license our technology, business processes and trade name
in Australia as well as to localize the Autobytel.com offerings for the
Australian market. The strategic partners in Australia are St. George Bank
Limited, one of Australia's largest banks with over 20 years experience in the
automotive finance industry; Trading Post, Australia's largest print and online
used car market; Astre Automotive, Australia's largest vehicle distributor and
importer; RACV (Royal Automobile Club of Victoria), with approximately 1.3
million members; Fortis Insurance, one of Australia's largest automotive
insurance companies; and Strathfield E-Ventures, a technology based company
specializing in e-commerce sales of auto accessories with extensive automotive
e-commerce knowledge. Autobytel Australia expects to launch its Web site in
mid-2000. As of February 29, 2000, we owned 30% of Autobytel Australia and the
total equity value of Autobytel Australia, based on the initial funding, was
$8.8 million.
Canada. Through our wholly-owned subsidiary, Autobytel.ca inc., we launched
Autobytel.ca in Canada in 1998. As of February 29, 2000, approximately 170
Canadian dealerships belonged to our network.
Expansion Opportunities. We are currently exploring additional
opportunities in Asia and Latin America.
MARKETING AND SALES
Our ability to enhance the recognition of our brand names, domestically and
internationally, and position ourselves as a leading Internet-based vehicle
information and automotive services provider is important to our efforts to
increase the number of vehicle purchase requests, outsourced purchases and
requests for ancillary services, as well as the number and quality of
subscribing dealerships. 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 all major television networks. We
believe that ongoing media coverage is an important element in creating consumer
awareness of our brand names 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 direct traffic to our Web site and
increase purchase requests. Our agreements with automotive information providers
typically have terms ranging from one to four years. The agreement with Kelley
Blue Book is for an indefinite term but can be terminated on 30 days' notice by
either party. Our Kelley Blue Book agreement calls for a monthly payment based
on the number of times their visitors click on our links. Our position with
Kelley Blue Book is not an exclusive arrangement. Therefore, our competitors
have similar relationships with Kelley Blue Book.
In 1997, 1998 and 1999, approximately 49%, 34% and 23%, respectively, of
Autobytel.com's total purchase requests originated from Edmund's. 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 refers visitors to its Web site to
us exclusively, although Edmund's may refer prospective buyers directly to
automotive manufacturers' Web sites and dealer locator services. Edmund's
provides Autobytel.com with the largest number of purchase requests, other than
consumers visiting the Autobytel.com Web site directly. 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.
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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 NBC
Internet that provide as follows:
- We pay AT&T a monthly fee to insert our branded content on their site
which includes a car purchasing link enabling their visitors to send us
purchase requests. We also pay AT&T a fee for each purchase request it
sends us. The agreement is not exclusive and is for an indefinite term
which can be terminated on 30 days' notice by either party.
- Our contract with Classifieds2000 provides that we pay a monthly fee as
well as a fee for each purchase request it sends us for the number of
users who submit purchase requests after having visited its site. It also
includes our pre-owned vehicle inventory in its classified listings. In
return we provide it with a link on our site where owners can list their
cars for sale directly. Our arrangement with Classifieds2000 is
exclusive. The agreement is for an indefinite term which can be
terminated on 30 days' notice by either party.
- Our agreement with Excite covering its auto channel provides that we pay
Excite a set-up fee, an annual fee and a fee for each purchase request it
sends us. The agreement provides us with exclusivity in their auto
channel and expires in September 2000.
- Our agreement with NBC Internet provides for anchor tenancy in the New
Car Center on its Web sites, including Snap.com, Xoom.com and NBCi.com,
as well as other promotions on such Web sites. The agreement also
provides for a co-branded Web site. The agreement is for a term of three
years. We pay NBCi annual and monthly fees.
Autobytel.com's aggregate minimum future payments under its agreements with
Internet portals is $13.1 million.
During 1999, Autobytel.com's total Internet marketing and advertising costs
incurred were $14.3 million, including annual, monthly and variable fees of $2.1
million, $4.7 million and $7.5 million, respectively. No set-up or initial fees
were incurred in 1999.
We supplement our Internet presence with television and traditional print
advertising. 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. We expect to continue to use television advertising to strengthen our
brand awareness. As of December 31, 1999, the aggregate future minimum payments
we are required to make for television advertising was $1.7 million.
In addition to our consumer-oriented marketing activities, we also market
our programs directly to dealerships, participate in trade shows, advertise in
trade publications and major automotive magazines and encourage subscribing
dealerships to recommend our program to other dealerships.
INTELLECTUAL PROPERTY
We have registered service marks, including Auto-By-Tel and Autobytel.com
and have applied for additional service marks and numerous patents. The
Autobytel.com logo is a service mark and trademark for which we have applied for
federal registration. We regard our trademarks, servicemarks and brand names as
important to our business.
DEALER RELATIONSHIPS AND SERVICES
Dealer Network. Dealers participate in our networks by entering into
contracts with us. Since the end of January 1999 and on a going forward basis
Autobytel.com is converting its dealers to new contracts with one-year terms
that are terminable on 30 days' notice by either party. Our dealerships are
located in most major metropolitan areas in the United States and Canada. As of
February 29, 2000, the Autobytel.com participating dealership base totaled over
3,400 dealers. Dealerships pay initiation and monthly fees to subscribe to our
online marketing program. Both the initial and monthly subscription fees are
established in
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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
upon 30 days notice after the first six months of the term. We do not prevent
dealers from entering into agreements with our competitors.
CarSmart.com's dealer agreements are generally for a term of three years
and are terminable on 30 days' notice by CarSmart.com. As of February 29, 2000,
the CarSmart.com participating dealership base totaled nearly 1,500 dealers.
CarSmart.com's dealers pay initial, annual and monthly subscription fees.
CarSmart.com reserves the right to revise fees after six months. Since November
1999 and on a going forward basis CarSmart.com is converting its dealers to new
contracts with one year terms and no annual fees.
As of February 29, 2000, dealers that participated in both the
Autobytel.com and CarSmart.com new vehicle purchasing services totaled
approximately 400.
As of February 29, 2000, 1,030 dealers participated in our AutobytelDIRECT
service. Dealer agreements for the AutobytelDIRECT service provide for a fixed
fee of $100-$300 for each vehicle sold through the service, depending on the
gross sales price of the vehicle. Such agreements are cancelable by either party
upon 30 days notice.
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 generate repeated consumer complaints are 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.
Each dealer agreement obligates the dealers to adhere to our policy of
providing prompt responses to customers, no haggle pricing and full disclosure
regarding vehicle availability, add-ons and related matters. We require each
dealer to have a 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.
Training. We believe that dealers and their employees require specialized
training to learn the skills necessary to serve the Internet user and take full
advantage of our proprietary systems. Therefore, we have developed an extensive
training program for our dealers. We believe that this training is critical to
enhancing our 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. In
October 1999, we formed I-Net Training Technologies LLC with third parties to
provide dealers with more extensive training and tools to facilitate Internet
selling of vehicles. Such services are provided for a fee.
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,
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- the size and effectiveness of the participating dealership base,
- the volume and quality of traffic to and purchase requests and other
transactions 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, automotive brokers and classifieds. With
numerous recent entrants into our market, our competition has substantially
increased. Many of such recent entrants are substantially better financed than
we are. In the Internet-based market, we compete with other entities which
maintain similar commercial Web sites including Autoweb.com, Cendant Membership
Service, Inc.'s AutoVantage, Microsoft Corporation's CarPoint, CarsDirect.com,
CarOrder.com, Cars.com, Driveoff.com, Greenlight.com and AutoTrader.com.
AutoNation, a large consolidator of dealers, has 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 launched online buying
services, such as General Motors Corporation's BuyPower.
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 high-performance and reliable Web sites, enhance
consumer/dealer communications, maintain the highest levels of information
privacy and ensure transactional security. Autobytel.com currently hosts its Web
site at our data center. Our data center includes redundant infrastructure and
network connections and is located at our headquarters in Irvine, California. In
the future, we may host our infrastructure at a leading Application Service
Provider. Our network and computer systems are built on the leading industry
standards. Network security is provided by utilizing standard products.
CarSmart.com's site is hosted by a third party.
System enhancements are primarily intended to accommodate increased traffic
across our Web sites, 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.
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, other than our AutobytelDIRECT service, vehicle brokerage activity in a way
that makes federal and state franchise, motor vehicle dealer, or vehicle broker
licensing laws applicable to us. Through a subsidiary, we are licensed as a
motor vehicle dealer and broker. 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
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manner which may undermine our program's attractiveness to consumers or dealers
or not offer such service or terminate our operations in such a state. As we
introduce new services, we may need to comply with additional licensing
regulations and regulatory requirements.
Our services 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 our programs. 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.
Other countries to which we expand our operations may have laws or be
subject to treaties that regulate the marketing, distribution, and sale of
vehicles. As we consider specific foreign operations, we will need to determine
whether the laws of the countries in which we seek to operate require us to
modify our program or otherwise change the Autobytel.com system or prohibit the
use of the system in such country entirely. In addition, the laws of a foreign
country may impose licensing, bonding or similar requirements on us as a
condition to doing business there.
To date, we have not expended significant resources on lobbying or related
government affairs issues but may be required to do so in the future.
Franchise Classification. If our relationship or written agreement with our
dealers was found to be a " franchise" under federal or state franchise laws, we
could be subjected to additional regulations, including but not limited to
licensing, increased reporting and disclosure requirements. Compliance with
varied laws, regulations, and enforcement characteristics found in each state
may require us to allocate both staff time and monetary resources, each of which
may have an adverse affect on our results of operations. As an 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 upheld by a Federal
Appeals Court in Michigan that ruled our business relationship and our dealer
subscription agreement does not rise to the level of a "franchise" under
Michigan law.
Vehicle Brokerage Activities. We believe that, except in respect of the
AutobytelDIRECT service, state motor vehicles dealer or broker licensing laws do
not apply to us. Through a wholly-owned subsidiary, we are licensed as a motor
vehicle dealer and broker. We may be required to pay administrative fees, fines,
and penalties for failure to comply with such licensing requirements. We believe
that our dealer marketing referral service model does not qualify as an
automobile brokerage activity.
In response to concerns about our marketing referral program raised by the
Texas Department of Transportation, we modified our program in that state to
achieve compliance. These modifications included a unique pricing model under
which all subscribing dealerships in Texas are charged uniform fees based on the
population density of their particular geographic area and opening our program
to all dealerships who wish to apply.
In the event that any other state's regulatory requirements impose state
specific requirements on us or include us within an industry-specific regulatory
scheme, we may be required to modify our marketing programs in such states in a
manner which may undermine the program's attractiveness to consumers or dealers.
In the alternative, if we determine that the licensing and related requirements
are overly burdensome, we may elect to terminate operations in such state. In
each case, our business, results of operations and financial condition could be
materially and adversely affected.
Financing Related Activities. We provide a connection through our Web sites
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. In the
event states require us to be licensed as a financial broker, we intend to
obtain such licenses. We may be unable to comply with a state's regulations
affecting our current operations or newly
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introduced services, or we could be required to incur significant fees and
expenses to license or be compelled to discontinue finance operations in those
states.
Insurance Related Activities. We provide a link on our Autobytel.com Web
site so consumers can receive real time quotes for insurance coverage from
InsurQuote Systems Incorporated and submit quote applications online.
Participants in the program include MetLife(R) Auto & Home Insurance, The
Hartford (Hartford Financial Services Group, Inc.) and the GE Auto Insurance
Program, with eCoverage, Esurance and Avomark Insurance Company expected to
commence participation in the second quarter. Autobytel.com receives a marketing
fee for every quote application sent to a participating insurance company or
agent from a consumer accessing the InsurQuote Systems Web site through the
Autobytel.com Web site. We receive no premiums from consumers nor do we charge
consumers fees for our services. All applications are completed on InsurQuote's
Website. CarSmart.com provides a link to InsWeb for insurance quote
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
uncertainty, we have proactively applied for and currently hold, through a
wholly-owned subsidiary, insurance agent licenses or are otherwise authorized to
transact insurance in 47 states and the District of Columbia. 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 February 29, 2000, we had a total of 255 employees, including 42
employees of CarSmart.com. We also utilize independent contractors as required.
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.
RISK FACTORS
In addition to the factors discussed in the "Overview" and "Liquidity and
Capital Resources" sections of Item 7 "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in this Annual Report on Form
10-K, the following additional factors may affect our future results.
WE HAVE A HISTORY OF NET LOSSES AND EXPECT NET LOSSES FOR THE FORESEEABLE
FUTURE. IF WE CONTINUE TO LOSE MONEY, OUR OPERATIONS WILL NOT BE FINANCIALLY
VIABLE.
We were formed in January 1995 as Auto-By-Tel LLC, and first received
revenues from operations in March 1995. We therefore have a limited operating
history upon which an investor may evaluate our operations and future prospects.
Because of the recent emergence of the Internet-based vehicle information and
purchasing industry, none of our senior 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. Autobytel.com had an
accumulated deficit of $66.6 million and $43.3 million as of December 31, 1999
and 1998, respectively. CarSmart.com had an accumulated deficit of $3.1 million
and $1.8 million as of December 31, 1999 and 1998, 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 sites,
- 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,
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- respond to competitive developments,
- maintain a high degree of customer satisfaction,
- provide secure and easy to use Web sites for customers,
- increase our brand name visibility,
- successfully introduce new products and services,
- continue to attract, retain and motivate qualified personnel, and
- continue to upgrade and enhance our technologies to accommodate expanded
service offerings and increased consumer traffic.
We cannot be certain that we will be successful in achieving these goals.
IF OUR DEALER TURNOVER INCREASES, OUR DEALER NETWORKS AND REVENUES DERIVED FROM
THESE NETWORKS MAY DECREASE.
The majority of our revenues are derived from fees paid by our networks of
subscribing dealers. If dealer turnover increases and we are unable to add new
dealers to mitigate any turnover, our revenues will decrease as our networks of
dealers decreases. If the number of dealers in our networks declines our
revenues may decrease and our business, results of operations and financial
condition will be materially and adversely affected. A material factor affecting
dealer turnover is our ability to provide dealers with high quality purchase
requests. High quality purchase requests are those that result in high closing
ratios. Closing ratio is the ratio of the number of vehicles purchased at a
dealer generated from purchase requests to the total number of purchase requests
sent to that dealer. All of our subscribing dealers have entered into written
marketing agreements with us having a stated term of one year, three years or
five years, but the Autobytel.com dealer agreements are cancelable by the dealer
upon 30 days notice. A significant number of the agreements are for a one year
term. We cannot assure that dealers will not terminate their agreements with us.
Subscribing dealers may terminate their relationship with Autobytel.com for any
reason, including an unwillingness to accept our subscription terms or as a
result of joining alternative marketing programs. Our business is dependent upon
our ability to attract and retain qualified new and pre-owned vehicle dealers.
During 1999, Autobytel.com added 1,508 subscribing dealers to its North American
dealer network and 578 subscribing dealers terminated their affiliation with
Autobytel.com or were terminated by it. During 1999, CarSmart.com added 927
subscribing dealers to its North American dealer network and 242 subscribing
dealers terminated their affiliation with it or were terminated by it. In order
for us to grow or maintain our dealer networks, we may need to reduce dealer
turnover.
WE MAY LOSE SUBSCRIBING DEALERS IF WE RECONFIGURE DEALER TERRITORIES. IF WE LOSE
DEALERS, WE WILL LOSE THE REVENUES ASSOCIATED WITH THOSE DEALERS.
If the volume of purchase requests increases, we may reduce or reconfigure
the exclusive territories currently assigned to dealers in order to serve
consumers more effectively. If a dealer is unwilling to accept a reduction or
reconfiguration of its territory, it may terminate its relationship with us. The
loss of dealers will cause a subsequent reduction in revenues unless we are able
to mitigate this loss by adding new dealers or increasing the fees we receive
from other dealers. A dealer also could sue us to prevent such reduction or
reconfiguration, or collect damages from us. We have experienced one such
lawsuit. A material decrease in the number of dealers subscribing to our network
or litigation with dealers could have a material adverse effect on our business,
results of operations and financial condition.
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WE RELY HEAVILY ON OUR PARTICIPATING DEALERS TO PROMOTE OUR BRAND VALUE BY
PROVIDING HIGH QUALITY SERVICES TO OUR CONSUMERS. IF DEALERS DO NOT PROVIDE OUR
CONSUMERS HIGH QUALITY SERVICES, OUR BRAND VALUE WILL DIMINISH AND THE NUMBER OF
CONSUMERS WHO USE OUR SERVICES MAY DECLINE CAUSING A DECREASE IN OUR REVENUES.
Promotion of our brand value depends on our ability to provide consumers a
high quality experience for purchasing vehicles throughout the purchasing
process. If our dealers do not provide consumers with high quality service, the
value of our brand could be damaged and the number of consumers using our
services may decrease. We devote significant efforts to train participating
dealers 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.
INTENSE COMPETITION COULD REDUCE OUR MARKET SHARE AND HARM OUR FINANCIAL
PERFORMANCE. OUR MARKET IS COMPETITIVE NOT ONLY BECAUSE THE INTERNET HAS MINIMAL
BARRIERS TO ENTRY, BUT ALSO BECAUSE WE COMPETE DIRECTLY WITH OTHER COMPANIES IN
THE OFFLINE ENVIRONMENT.
Our vehicle purchasing services compete against a variety of Internet and
traditional vehicle purchasing services, automotive brokers and classifieds.
Therefore, we are affected by the competitive factors faced by both Internet
commerce companies as well as traditional, offline companies within the
automotive and automotive-related industries. The market for Internet-based
commercial services is new, and competition among commercial Web sites is
expected to increase significantly in the future. With numerous recent entrants
into our market, our competition has substantially increased. Many of such
recent entrants are substantially better financed than we are. Our business is
characterized by minimal barriers to entry, and new competitors can launch a
competitive service at relatively low cost. To compete successfully as an
Internet-based commercial entity, we must significantly increase awareness of
our services and brand name. Failure to achieve these objectives will cause our
revenues to decline and would have a material adverse effect on our business,
results of operations and financial condition.
We compete with other entities which maintain similar commercial Web sites
including Autoweb.com, Cendant Membership Service, Inc.'s AutoVantage, Microsoft
Corporation's Carpoint, CarsDirect.com, CarOrder.com, Driveoff.com,
Greenlight.com and AutoTrader.com. AutoNation, a large consolidator of dealers,
has 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 launched
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 related products and 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
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market share or otherwise may materially and adversely affect our business,
results of operations and financial condition.
OUR QUARTERLY FINANCIAL RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS WHICH
MAY MAKE IT DIFFICULT FOR INVESTORS TO PREDICT OUR FUTURE PERFORMANCE.
Our quarterly operating results may fluctuate due to many factors. Our
expense levels are based in part on our expectations of future revenues which
may vary significantly. We plan our business operations based on increased
revenues and if our revenues do not increase faster than our expenses, our
business, results of operations and financial condition will be materially and
adversely affected. Other factors that may adversely affect our quarterly
operating results include:
- our ability to retain existing dealers, attract new dealers and maintain
dealer and customer satisfaction,
- the announcement or introduction of new or enhanced sites, services and
products by us or our competitors,
- general economic conditions and economic conditions specific to the
Internet, online commerce or the automobile industry,
- 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 sites and other sites that refer traffic
to our Web sites,
- technical difficulties, system downtime or Internet brownouts,
- the amount and timing of operating costs and capital expenditures
relating to expansion of our business, operations and infrastructure,
- governmental regulation, and
- unforeseen events affecting the industry.
SEASONALITY IS LIKELY TO CAUSE FLUCTUATIONS IN OUR OPERATING RESULTS. INVESTORS
MAY NOT BE ABLE TO PREDICT OUR ANNUAL OPERATING RESULTS BASED ON A QUARTER TO
QUARTER COMPARISON OF OUR OPERATING RESULTS.
To date, our quarter to quarter growth in revenues have offset any effects
due to seasonality. However, we expect our business to experience seasonality as
it matures. If this occurs, investors may not be able to predict our annual
operating results based on a quarter to quarter comparison of our operating
results. Seasonality in the automotive industry, Internet and commercial online
service usage and advertising expenditures is likely to cause fluctuations in
our operating results and could have a material adverse effect on our business,
operating results and financial condition. We anticipate that purchase requests
will typically increase during the first and third quarters when new vehicle
models are introduced and will typically decline during the second and fourth
quarters. Internet and commercial online service usage and the growth rate of
such usage typically declines during the summer.
IF ANY OF OUR RELATIONSHIPS WITH INTERNET SEARCH ENGINES OR ONLINE AUTOMOTIVE
INFORMATION PROVIDERS TERMINATES, OUR PURCHASE REQUEST VOLUME COULD DECLINE. IF
OUR PURCHASE REQUEST VOLUME DECLINES, OUR PARTICIPATING DEALERS MAY NOT BE
SATISFIED WITH OUR SERVICES AND MAY TERMINATE THEIR RELATIONSHIP WITH US OR
FORCE US TO DECREASE THE FEES WE CHARGE FOR OUR SERVICE. IF THIS OCCURS, OUR
REVENUES WOULD DECREASE.
We depend on a number of strategic relationships to direct a substantial
amount of purchase requests and traffic to our Web sites. The termination of any
of these relationships or any significant reduction in traffic to
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Web sites on which our services are advertised or offered, or the failure to
develop additional referral sources, would cause our purchase request volume to
decline. Since our dealers would be receiving fewer purchase requests, they may
no longer be satisfied with our service and may terminate their relationships
with us or force us to decrease the fees we charge for our services. If our
dealers terminate their relationship with us or force us to decrease the fees we
charge for our services, our revenues will decline which will have a material
adverse effect on our business, results of operations and financial condition.
We receive a significant number of purchase requests through a limited number of
Internet search engines, such as Excite, and online automotive information
providers, such as Edmund's and Kelley Blue Book. For example, during the years
ended December 31, 1999, 1998 and 1997, approximately 23%, 34% and 49%,
respectively, of Autobytel.com's purchase requests came through Edmund's. Our
exclusive relationship with Edmund's ends on July 31, 2000. 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.
IF WE CANNOT 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 and CarSmart.com brands 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 brands. Our brands may not be able
to gain widespread acceptance among consumers or dealers. Our failure to develop
our brands sufficiently would have a material adverse effect on our business,
results of operations and financial condition.
IF WE LOSE OUR KEY PERSONNEL OR ARE UNABLE TO ATTRACT, TRAIN AND RETAIN
ADDITIONAL HIGHLY QUALIFIED SALES, MARKETING, MANAGERIAL AND TECHNICAL
PERSONNEL, OUR BUSINESS MAY SUFFER.
Our future success depends on our ability to identify, hire, train and
retain highly qualified sales, 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, sales and marketing
personnel could have a material adverse effect on our business, results of
operations and financial condition.
Our business and operations are substantially dependent on the performance
of our executive officers and key employees, some of whom are employed on an
at-will basis and all of whom have worked together for only a short period of
time. We maintain "key person" life insurance in the amount of $3.0 million on
the life of Mark W. Lorimer, our Chief Executive Officer and President. The loss
of the services of Mr. Lorimer or Ann M. Delligatta, Executive Vice President
and Chief Operating Officer, or one or more of our other executive officers or
key employees could have a material adverse effect on our business, results of
operations and financial condition.
WE ARE A NEW BUSINESS IN A NEW INDUSTRY AND NEED TO MANAGE OUR GROWTH AND OUR
ENTRY INTO NEW BUSINESS AREAS IN ORDER TO AVOID INCREASED EXPENSES WITHOUT
CORRESPONDING REVENUES.
We are constantly expanding our operations and introducing new services to
consumers and dealers in order to establish ourselves as a leader in the
evolving market for Internet-based vehicle purchasing and related services. We
also intend to enter into new markets overseas. The growth of our operations
requires us to increase expenditures before we generate revenues. For example,
we need to hire personnel to oversee the introduction of new services before we
generate revenues from these services. Our inability to generate satisfactory
revenues from such expanded services to offset costs could have a material
adverse effect on our
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business, financial condition and results of operations. As of February 29,
2000, we had 255 employees, including 42 employees of CarSmart.com.
We believe establishing industry leadership also requires us to:
- test, introduce and develop new services and products, including
enhancing our Web site,
- expand the breadth of products and services offered,
- expand our market presence through relationships with third parties, and
- acquire new or complementary businesses, products or technologies.
We cannot assure you that we can successfully manage these tasks.
IF FEDERAL OR STATE FRANCHISE LAWS APPLY TO US WE MAY BE REQUIRED TO MODIFY OR
ELIMINATE OUR MARKETING PROGRAMS. IF WE ARE UNABLE TO MARKET OUR SERVICES IN THE
MANNER WE CURRENTLY DO, OUR REVENUES MAY DECREASE AND OUR BUSINESS MAY SUFFER.
We believe that neither our relationship with our dealers nor our dealer
subscription agreements constitute "franchises" under federal or state franchise
laws and that, other than our AutobytelDIRECT service, we are not subject to the
coverage of state and motor vehicle dealer licensing laws. Through a subsidiary,
we are licensed as a motor vehicle dealer and broker. However, if any state's
regulatory requirements relating to franchises or our method of business impose
additional requirements on us or include us within an industry-specific
regulatory scheme, we may be required to modify our marketing programs in such
states in a manner which undermines the program's attractiveness to consumers or
dealers, we may become subject to fines or other penalties or if we determine
that the licensing and related requirements are overly burdensome, we may elect
to terminate operations in such state. In each case, our revenues may decline
and our business, results of operations and financial condition could be
materially and adversely affected.
A Federal court of appeals 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 subject to
other regulations, such as franchise disclosure and registration requirements
and limitations on our ability to effect changes in our relationships without
our dealers. We also believe that, other than our AutobytelDIRECT service, our
dealer marketing service does not qualify as an automobile brokerage activity
and therefore state broker licensing requirements do not apply to us. Through a
subsidiary, we are licensed as a motor vehicle dealer and broker. 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 dealers in
Texas are charged uniform fees based on the population density of their
particular geographic area and to make our program open to all dealers who wish
to apply.
IF FINANCIAL BROKER AND INSURANCE LICENSING REQUIREMENTS APPLY TO US IN STATES
WHERE WE ARE NOT CURRENTLY LICENSED, WE WILL BE REQUIRED TO OBTAIN ADDITIONAL
LICENSES AND OUR BUSINESS MAY SUFFER.
If we are required to be licensed as a financial broker, 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 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 the Autobytel.com Web site so consumers can receive
real time quotes for insurance coverage from InsurQuote Systems Incorporated and
submit quote applications online. Participants in the program include MetLife(R)
Auto & Home Insurance, The Hartford (Hartford Financial Services Group, Inc.)
and The GE Auto Insurance Program. We receive fees from such participants in
connection with this advertising activity.
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We do not believe that the above activities require 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 or are otherwise authorized to transact insurance in 47
states and the District of Columbia.
We have applied for insurance agent licenses in remaining 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.
THERE ARE MANY RISKS ASSOCIATED WITH CONSUMMATED AND POTENTIAL ACQUISITIONS.
We acquired A.I.N. Corporation in February 2000. The closing of the
acquisition was subject to a number of conditions, including a satisfactory
audit of A.I.N. Corporation's financial statements. Acquisitions involve
numerous risks. For example:
- It may be difficult to assimilate the operations and personnel of an
acquired business into our own business;
- Management information and accounting systems of an acquired business
must be integrated into our current systems;
- We may lose dealers participating in both our network as well as that of
the acquired business, if any;
- Our management must devote its attention to assimilating the acquired
business which diverts attention from other business concerns;
- We may enter markets in which we have limited prior experience; and
- We may lose key employees of an acquired business.
We intend to continue to evaluate potential acquisitions which we believe
will complement or enhance our existing business. If we acquire other companies
in the future, it may result in the issuance of equity securities that could
dilute existing stockholders' ownership. We may also incur debt and amortize
expenses related to goodwill and other intangible assets if we acquire another
company, and this could negatively impact our results of operations. We
currently do not have any agreements to acquire any company or business, and we
cannot guarantee that we will be able to identify or complete any acquisition in
the future.
INTERNET COMMERCE HAS YET TO ATTRACT SIGNIFICANT REGULATION. GOVERNMENT
REGULATIONS MAY RESULT IN ADMINISTRATIVE MONETARY FINES, PENALTIES OR TAXES THAT
MAY REDUCE OUR FUTURE EARNINGS.
There are currently few laws or regulations that apply directly to the
Internet. Because our business is dependent on the Internet, the adoption of new
local, state, national or international laws or regulations may decrease the
growth of Internet usage or the acceptance of Internet commerce which could, in
turn, decrease the demand for our services and increase our costs or otherwise
have a material adverse effect on our business, results of operations and
financial condition.
Tax authorities in a number of states are currently reviewing the
appropriate tax treatment of companies engaged in Internet commerce. New state
tax regulations may subject us to additional state sales, use and income taxes.
EVOLVING GOVERNMENT REGULATIONS MAY REQUIRE FUTURE LICENSING WHICH COULD
INCREASE ADMINISTRATIVE COSTS OR ADVERSELY AFFECT OUR REVENUES.
In a regulatory climate that is uncertain, our operations may be subject to
direct and indirect adoption, expansion or reinterpretation of various domestic
and foreign laws and regulations. Compliance with these future laws and
regulations may require us to obtain appropriate licenses at an undeterminable
and possibly
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significant initial monetary and annual expense. These additional monetary
expenditures may increase future overhead, thereby potentially reducing our
future results of operations.
We have identified what we believe are the areas of domestic government
regulation, which if changed, would be costly to us. These laws and regulations
include franchise laws, motor vehicle brokerage licensing laws, insurance
licensing laws, and motor vehicle dealership licensing laws, which are or may be
applicable to aspects of our business as applicable. There could be laws and
regulations applicable to our business which we have not identified or which, if
changed, may be costly to us.
The introduction of new services and expansion of our operations to foreign
countries may require us to comply with additional, yet undetermined, laws and
regulations. Compliance may require obtaining appropriate business licenses,
filing of bonds, appointment of foreign agents and periodic business reporting
activity. The failure to adequately comply with these future laws and
regulations may delay or possibly prevent some of our products or services from
being offered in a particular foreign country, thereby having an adverse affect
on our results of operations.
OUR SUCCESS IS DEPENDENT ON KEEPING PACE WITH ADVANCES IN TECHNOLOGY. IF WE ARE
UNABLE TO KEEP PACE WITH ADVANCES IN TECHNOLOGY, CONSUMERS MAY STOP USING OUR
SERVICES AND OUR REVENUES WILL DECREASE.
The Internet and electronic commerce markets are characterized by rapid
technological change, changes in user and customer requirements, frequent new
service and product introductions embodying new technologies and the emergence
of new industry standards and practices that could render our existing Web sites
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 sites, 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 sites,
Dealer Real Time system, or other proprietary technology to customer
requirements or to emerging industry standards.
WE ARE VULNERABLE TO COMMUNICATIONS SYSTEM INTERRUPTIONS BECAUSE THE MAJORITY OF
OUR PRIMARY SERVERS ARE LOCATED IN A SINGLE LOCATION. IF COMMUNICATIONS TO THAT
LOCATION WERE INTERRUPTED, OUR OPERATIONS COULD BE ADVERSELY AFFECTED.
We host the Autobytel.com Web site and Dealer Real Time system at our
corporate headquarters in Irvine, California. Although offsite backup servers
are available from outside sources, all of Autobytel.com's 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. The CarSmart.com Web
site is hosted by a leading collocation service provider.
INTERNET COMMERCE IS NEW AND EVOLVING WITH FEW PROFITABLE BUSINESS MODELS. WE
CANNOT ASSURE THAT OUR BUSINESS MODEL WILL BE PROFITABLE.
The market for Internet-based purchasing services has only recently begun
to develop and is rapidly evolving. While many Internet commerce companies have
grown in terms of revenues, few are profitable. We can not assure that we will
be profitable. As is typical for a new and rapidly evolving industry, demand and
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market acceptance for recently introduced services and products over the
Internet are subject to a high level of uncertainty and there are few proven
services and products. Moreover, since the market for our services is new and
evolving, it is difficult to predict the future growth rate, if any, and size of
this market.
IF CONSUMERS DO NOT ADOPT INTERNET COMMERCE AS A MAINSTREAM MEDIUM OF COMMERCE,
OUR REVENUES MAY NOT GROW AND OUR EARNINGS MAY SUFFER.
The success of our services will depend upon the adoption of the Internet
by consumers and dealers as a mainstream medium for commerce. While we believe
that our services offer significant advantages to consumers and dealers, there
can be no assurance 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 CONTINUE TO BE VOLATILE, ESPECIALLY
SINCE MARKET PRICES FOR INTERNET-RELATED AND TECHNOLOGY STOCKS HAVE OFTEN BEEN
UNRELATED TO OPERATING PERFORMANCE.
Prior to the initial public offering of our common stock in March 1999,
there was no public market for our common stock. We cannot assure that an active
trading market will 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 continue 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, including actions by automotive manufacturers,
- 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. These broad market factors may adversely affect the market price
of our common stock. In addition, general economic, political and market
conditions such as recessions, interest rates or international currency
fluctuations, may adversely affect the market price of the common stock. In the
past, following periods of volatility in the market price of a company's
securities, securities class action litigation has often been instituted against
companies with publicly traded securities. Such litigation, if instituted, could
result in substantial costs and a diversion of management's attention and
resources, which would have a material adverse effect on our business, results
of operations and financial condition.
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WE FACE UNCERTAINTIES WITH CHANGING LEGISLATION IN THE AUTOMOTIVE INDUSTRY WHICH
COULD REQUIRE INCREASED REGULATORY AND LOBBYING COSTS AND MAY HARM OUR BUSINESS.
Our purchasing services may result in changing the way vehicles are sold
which may be viewed as threatening by new and used vehicle dealers who do not
subscribe to our programs. 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 services promote. Should current laws be changed or new laws passed,
our business, results of operations and financial condition could be materially
and adversely affected. As we introduce new services, we may need to comply with
additional licensing regulations and regulatory requirements.
To date, we have not spent significant resources on lobbying or related
government affairs issues but we may need to do so in the future. A significant
increase in the amount we spend on lobbying or related activities would have a
material adverse effect on our results of operations and financial condition.
OUR INTERNATIONAL EXPANSION MAY REQUIRE US TO COMPLY WITH BURDENSOME REGULATORY,
TARIFF AND LICENSING REQUIREMENTS. OUR NEED TO COMPLY WITH BURDENSOME
GOVERNMENTAL REQUIREMENTS MAY ADVERSELY AFFECT OUR ABILITY TO GROW OUR BUSINESS.
Our licensees have launched Web sites in the United Kingdom, Sweden and
Japan. We intend to expand our brand into other foreign markets through
licensing our technology, business processes and trade names and by establishing
relationships with vehicle dealers and strategic partners located in foreign
markets.
By expanding our operations to various other countries, we may become
subject to laws or treaties that regulate the marketing, distribution and sale
of motor vehicles. We will need to spend our resources to determine whether the
laws of the countries in which we seek to operate require us to modify, or
prohibit the use of, our Autobytel.com system. In addition, the laws of other
countries may impose licensing, bonding or similar requirements on us as a
condition to doing business in these countries.
WE MAY NOT BE SUCCESSFUL IN EXPANDING OUR BUSINESS ABROAD WHICH MAY LIMIT OUR
FUTURE GROWTH.
We have had limited experience in providing our service abroad and we
cannot be certain that we will be successful in introducing or marketing our
services abroad. In addition, there are risks inherent in conducting business in
international markets, such as:
- changes in political conditions,
- regulatory requirements,
- potentially weaker intellectual property protections,
- tariffs and other trade barriers, fluctuations in currency exchange
rates, or 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.
OUR COMPUTER INFRASTRUCTURE MAY BE VULNERABLE TO SECURITY BREACHES. ANY SUCH
PROBLEMS COULD JEOPARDIZE CONFIDENTIAL INFORMATION TRANSMITTED OVER THE
INTERNET, CAUSE INTERRUPTIONS IN OUR OPERATIONS OR CAUSE US TO HAVE LIABILITY TO
THIRD PERSONS.
Our computer infrastructure is potentially vulnerable to physical or
electronic computer break-ins, viruses and similar disruptive problems and
security breaches. Any such problems or security breach could cause us to have
liability to one or more third parties and disrupt all or part of our
operations. Any of these events would
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have a material adverse effect on our business, results of operations and
financial condition. A party who is able to circumvent our security measures
could misappropriate proprietary information, jeopardize the confidential nature
of information transmitted over the Internet or cause interruptions in our
operations. Concerns over the security of Internet transactions and the privacy
of users could also inhibit the growth of the Internet in general, particularly
as a means of conducting commercial transactions. To the extent that our
activities or those of third party contractors involve the storage and
transmission of proprietary information such as personal financial information,
security breaches could expose us to a risk of financial loss, litigation and
other liabilities. Our insurance does not currently protect against such losses.
WE DEPEND ON CONTINUED TECHNOLOGICAL IMPROVEMENTS IN OUR SYSTEMS AND IN THE
INTERNET OVERALL. IF WE ARE UNABLE TO HANDLE AN UNEXPECTEDLY LARGE INCREASE IN
VOLUME OF CONSUMERS USING OUR WEB SITES, WE CANNOT ASSURE OUR CONSUMERS OR
DEALERS THAT PURCHASE REQUESTS WILL BE EFFICIENTLY PROCESSED AND OUR BUSINESS
MAY SUFFER.
If the Internet continues to experience significant growth in the number of
users and the level of use, then the Internet infrastructure may not be able to
continue to support the demands placed on it by such potential growth. The
Internet may not prove to be a viable commercial medium because of inadequate
development of the necessary infrastructure, timely development of complementary
products such as high speed modems, delays in the development or adoption of new
standards and protocols required to handle increased levels of Internet activity
or increased government regulation.
An unexpectedly large increase in the volume or pace of traffic on our Web
sites 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 sites 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.
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 AND HAVE THE ABILITY TO MAKE DECISIONS THAT COULD
ADVERSELY AFFECT STOCKHOLDERS. SUCH DECISIONS COULD ADVERSELY AFFECT OUR STOCK
PRICE.
The control of a large amount of our stock by insiders could have an
adverse effect on the market price of our common stock. As of February 29, 2000,
our executive officers and directors beneficially own or control approximately
5.5 million shares or 24.9% of the outstanding shares of our common stock. In
addition, as of such date, based on information available to us, our founders,
Peter Ellis and John Bedrosian beneficially own or control approximately 9.8%
and 12.4%, respectively, of the outstanding shares of our common stock. Our
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officers, directors, founders and their affiliates, assuming they vote together,
have the ability to control the election of our board of directors and the
outcome of corporate actions requiring stockholder approval, including mergers
and other changes of corporate control, going private transactions and other
extraordinary transactions.
SUBSTANTIAL SALES OR THE PERCEPTION OF FUTURE SALES OF OUR COMMON STOCK MAY
DEPRESS OUR STOCK PRICE. SINCE THE MARKET PRICES FOR INTERNET-RELATED STOCKS ARE
LIKELY TO REMAIN VOLATILE, OUR STOCK PRICE MAY BE MORE ADVERSELY AFFECTED THAN
OTHER COMPANIES BY SUCH FUTURE SALES.
Sale of substantial numbers of shares of common stock in the public market
could adversely affect the market price of our common stock and make it more
difficult for us to raise funds through equity offerings in the future. A
substantial number of outstanding shares of common stock and shares of common
stock issuable upon exercise of outstanding stock options will become available
for resale in the public market at prescribed times. Of the 20,209,016 shares
that were outstanding as of February 29, 2000, approximately 14.0 million shares
are eligible for sale in the public market without restriction and approximately
6.2 million shares are subject to restrictions on sale in the public market in
accordance with the provisions of Rule 144 under the Securities Act of 1933, of
which approximately 1.6 million shares are subject to the volume limitations of
Rule 144 by virtue of Rule 145. In addition, holders of approximately 11.6
million shares of common stock are 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.
WE ARE UNCERTAIN OF OUR ABILITY TO OBTAIN ADDITIONAL FINANCING FOR OUR FUTURE
CAPITAL NEEDS. IF WE ARE UNABLE TO OBTAIN ADDITIONAL FINANCING WE MAY NOT BE
ABLE TO CONTINUE TO OPERATE OUR BUSINESS.
We currently anticipate that our cash, cash equivalents and short-term
investments will be sufficient to meet our anticipated needs for working capital
and other cash requirements at least for the next 12 months. 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 FROM ACQUIRING US OR LIMIT THE PRICE THIRD
PARTIES ARE WILLING TO PAY FOR OUR STOCK.
Provisions of our amended and restated certificate of incorporation and
bylaws relating to our corporate governance could make it difficult for a third
party to acquire us, and could discourage a third party from attempting to
acquire control of us. These provisions allow us to issue preferred stock with
rights senior to those of the common stock without any further vote or action by
the stockholders. These provisions provide that the board of directors is
divided into three classes, which may have the effect of delaying or preventing
changes in control or change in our management because less than a majority of
the board of directors are up for election at each annual meeting. In addition,
these provisions impose various procedural and other requirements which could
make it more difficult for stockholders to effect corporate actions such as a
merger, asset sale or other change of control of us. 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
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<PAGE> 29
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 REPORT.
This Annual Report 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 Annual Report. The cautionary statements made in this Annual
Report should be read as being applicable to all forward-looking statements
wherever they appear in this Annual Report.
ITEM 2. PROPERTIES
Our Autobytel.com operation is located in a single office building in
Irvine, California. We occupy four floors, for a total of approximately 49,000
square feet. Each floor is leased with expiration dates ranging from September
2001 through February 2002. We have options to renew the leases on each floor
for an additional 5-year term. Our CarSmart.com operation occupies approximately
6,500 square feet in a single office building in San Ramon, California. The
lease for this office space expires in March 2003.
ITEM 3. LEGAL PROCEEDINGS
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 canceling 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. In 1999 the action was dismissed on appeal without any liability to
us.
A.I.N. was sued on September 1, 1999 in a lawsuit entitled Robert Martins
v. Michael J. Gorun, A.I.N., Inc., et al., in Los Angeles Superior Court. The
complaint contains causes of action for breach of written and oral contracts,
promissory estoppel, breach of fiduciary duty and fraud, and seeks damages and
equitable relief. The plaintiff contends he is entitled to a 49% ownership
interest in A.I.N.'s CarSmart online business based on a purported agreement for
the formation of a company called CarSmart On-Line Services. The lawsuit is and
will be vigorously contested on behalf of A.I.N. and individual co-defendant
Michael Gorun, President of A.I.N.
The selling shareholders of A.I.N. are obligated to fully indemnify
Autobytel.com for all losses, including attorneys' fees, expenses, settlements
and judgments, arising out of the lawsuit. The indemnification obligation is
secured by 450,000 shares of Autobytel.com common stock transferred to the
selling shareholders as part of the acquisition of A.I.N., as well as $250,000
in cash.
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
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<PAGE> 30
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1999.
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock, par value $0.001 per share, has been quoted on the Nasdaq
National Market under the symbol "ABTL" since March 26, 1999. Prior to this
time, there was no public market for our common stock. The following table sets
forth, for the calendar quarters indicated, the range of high and low closing
sales prices of our common stock as reported on the Nasdaq National Market.
<TABLE>
<CAPTION>
YEAR HIGH LOW
---- ------ ------
<S> <C> <C>
1999
First Quarter (from March 26, 1999)....................... $41.88 $35.38
Second Quarter............................................ $39.94 $15.75
Third Quarter............................................. $23.25 $11.56
Fourth Quarter............................................ $19.50 $11.72
2000
First Quarter (through March 21, 2000).................... $16.88 $ 7.94
</TABLE>
As of February 29, 2000, there were approximately 146 holders of record of
our common stock. We have never declared or paid any 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.
We intend to use the net proceeds of approximately $72.1 million from our
initial public offering for potential acquisitions, investments in businesses
and for general operating expenses.
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<PAGE> 31
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected consolidated financial data should be read in
conjunction with our consolidated financial statements and related notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Annual Report on Form 10-K. The
statement of operations data for the years ended December 31, 1999, 1998, 1997,
1996 and the period from inception (January 31, 1995) to December 31, 1995 and
the balance sheet data as of December 31, 1999, 1998, 1997, 1996 and 1995 are
derived from our consolidated financial statements which have been audited by
Arthur Andersen LLP, independent auditors.
<TABLE>
<CAPTION>
INCEPTION
(JANUARY 31,
YEARS ENDED DECEMBER 31, 1995) TO
---------------------------------------- DECEMBER 31,
1999 1998 1997 1996 1995
-------- -------- -------- ------- ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................... $ 40,298 $ 23,826 $ 15,338 $ 5,025 $ 274
-------- -------- -------- ------- -------
Operating expenses:
Sales and marketing...................... 44,176 30,033 21,454 7,790 930
Product and technology development....... 14,262 8,528 5,448 1,753 99
General and administrative............... 8,595 5,908 5,851 1,641 275
-------- -------- -------- ------- -------
Total operating expenses......... 67,033 44,469 32,753 11,184 1,304
-------- -------- -------- ------- -------
Loss from operations..................... (26,735) (20,643) (17,415) (6,159) (1,030)
Other income, net........................ 3,468 1,280 620 124 --
-------- -------- -------- ------- -------
Loss before provision for income taxes... (23,267) (19,363) (16,795) (6,035) (1,030)
Provision for income taxes............... 53 35 15 -- --
-------- -------- -------- ------- -------
Net loss................................. $(23,320) $(19,398) $(16,810) $(6,035) $(1,030)
======== ======== ======== ======= =======
Basic and diluted net loss per share....... $ (1.48) $ (2.30) $ (2.03) $ (0.73) $ (0.12)
======== ======== ======== ======= =======
Shares used in computing basic and diluted
net loss per share....................... 15,766 8,423 8,291 8,252 8,250
======== ======== ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................. $ 85,457 $ 27,984 $ 15,813 $ 9,062 $ 48
Working capital (deficit)................. 74,756 23,436 10,938 5,977 (1,099)
Total assets.............................. 94,872 34,207 20,513 12,298 285
Accumulated deficit....................... (66,593) (43,273) (23,875) (7,065) (1,030)
Stockholders' equity (deficit)............ 76,706 25,868 13,259 7,996 (990)
</TABLE>
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<PAGE> 32
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
You should read the following discussion of our results of operations and
financial condition in conjunction with our consolidated financial statements
and related notes included elsewhere in this Annual Report on Form 10-K. 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 discussed in the section
entitled "Risk Factors" in Item 1 "Business" in this Annual Report on Form 10-K.
In this Item 7 "Management's Discussion and Analysis of Financial Condition and
Results of Operations," the terms "we," "us" and "our" do not include
Carsmart.com.
OVERVIEW
We are an internationally branded online automotive commerce company that
provides consumers with automotive solutions throughout the lifecycle of vehicle
ownership. We own leading, branded Internet sites for new and pre-owned vehicle
information and automotive services that link buyers and sellers in an
information-rich environment. Through our Web sites, www.autobytel.com, and the
recently acquired www.carsmart.com, consumers can research pricing,
specifications and other information regarding new and pre-owned vehicles and
purchase, finance, lease, insure, sell or maintain their vehicles. We believe
that our services provide benefits for consumers by supplying them with
information to make informed and intelligent vehicle decisions throughout the
lifecycle of vehicle ownership. Consumers can purchase new vehicles through our
dealer referral network, our AutobytelDIRECT service and our auction services.
In addition, consumers can purchase pre-owned vehicles through our Certified
Pre-Owned CyberStore, our auction services and our Classifieds.
In 1999, we expanded our portfolio of online products and services
available to consumers. In the second quarter of 1999, we launched our auction
Web site, wholesale.autobytel.com, and our service Web site,
service.autobytel.com. In the third quarter of 1999, we launched an online
consumer banking center which, in partnership with LendingTree, Inc. and Credit
Management Solutions, Inc., provides consumers with competitive loan rates from
various lenders. Also in the third quarter of 1999, we launched our online
consumer-to-consumer and dealer-to-consumer auction site. In the fourth quarter
of 1999, we launched our online automotive superstore, which allows consumers to
shop for automotive, and non-automotive products and services.
In 1999, we also expanded our international activities. In the second
quarter of 1999 we announced a joint venture with partners in Japan to form
Autobytel Japan Kabushiki Kaisha. The Japanese site launched in November 1999.
In the second quarter of 1999, our licensees in the United Kingdom and Sweden
launched Web sites.
In January 2000, we launched AutobytelDIRECT, a direct-to consumers, new
vehicle buying service offering a real-time, online inventory of thousands of
vehicles, instant up-front pricing, multiple trade-in options, competitive
financing and insurance, and at-home or office delivery. Also, we announced the
formation of Autobytel.Europe, with initial investment from Inchcape plc, Pon
Holdings B.V., GE Capital and e-LaSer. The Netherlands-based Autobytel.Europe
plans to license, invest in and offer joint services to national operating
companies throughout Europe to localize the Autobytel.com offerings. In February
2000, we partnered with St.George Bank Limited and others in the formation of
Autobytel Australia. The Australian partners joining Autobytel.com in the online
venture are Trading Post, Astre Automotive, RACV (Royal Automobile Club of
Victoria), Fortis Insurance and Strathfield E-Ventures.
In February 2000, we acquired A.I.N. Corporation, the owner of
CarSmart.com, a leading online buying site for new and pre-owned vehicles, for
1.8 million shares of Autobytel.com common stock and $3 million in cash.
CarSmart.com has nearly 1,500 dealers, established relationships with more than
200 credit unions and strategic marketing agreements with ten of the top
Internet portals, including AOL.com, Alta Vista, Snap.com, G02Net and the Go
Network. For the years ended December 31, 1999 and 1998 CarSmart.com's unaudited
revenues were $6.3 million and $3.1 million, respectively. For the years ended
December 31, 1999 and 1998, CarSmart.com's operating expenses were $7.6 million
and $4.2 million, respectively. Car-
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<PAGE> 33
Smart.com's unaudited net loss for the years ended December 31, 1999 and 1998
was $1.3 million and $1.2 million, respectively.
We derive the majority of our revenues from fees paid by subscribing
dealers, and we expect to be primarily dependent on our dealer networks for
revenues in the foreseeable future. Dealers using our services pay initial
subscription fees, as well as ongoing monthly fees based, among other things, on
the size of territory, demographics and the transmittal of purchase requests to
them. In addition, in most states dealers who participate in AutobytelDIRECT pay
a fee of between $100 and $300 per vehicle sold through AutobytelDIRECT. The fee
is based on the gross selling price of the vehicle. Average monthly program fees
per dealer were $1,045, $948 and $786 in 1999, 1998 and 1997, respectively. We
also derive a portion of our revenues from related products and services on a
per transaction basis. For 1999, 1998 and 1997, related products and services
were 11%, 4% and 12% of revenues, respectively.
Since mid January 1999 and on a going forward basis, we are converting our
dealers primarily to new contracts with one year terms. The initial subscription
fee from the dealer is recognized ratably over the first twelve months of the
dealer's contract in order to match the costs of integrating and training the
dealer with revenues earned. Amortized revenues from initial subscription fees
were $2.5 million, $2.4 million and $3.5 million in 1999, 1998 and 1997,
respectively. We anticipate that amortized revenues from our initial
subscription fees will decline as a percentage of total revenues 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 revenues are
declining as a percentage of total revenues while monthly fee revenues are
growing. Monthly fees are recognized in the period the service is provided.
Monthly fee revenues were $32.8 million, $18.2 million and $8.9 million in 1999,
1998 and 1997, respectively. The amortized revenues from annual fees were $0.5
million, $2.3 million and $1.1 million in 1999, 1998 and 1997, respectively.
We believe our ability to increase the number of subscribing dealers and
the amount of fees paid by dealers is indirectly related to the volume of
purchase requests routed through our Web sites. Vehicle purchase requests routed
through our online system were approximately 2.1 million, 1.3 million and 0.8
million in 1999, 1998, and 1997, respectively, or an increase of 56%, 74% and
121% sequentially. Since inception we have directed approximately 4.5 million
purchase requests to dealers.
Our revenue growth has been primarily dependent on our ability to:
- deliver quality purchase requests to our dealer network,
- increase the number of dealers,
- improve the sales conversion rate of dealer leads and
- increase the average monthly fees paid by each dealer.
We believe our revenue growth in the foreseeable future will be dependent
on the above factors as well as our ability to generate revenues from
AutobytelDIRECT and related products and services.
Since inception, our dealer network has expanded in each quarter and as of
December 31, 1999 there were 3,403 dealers. Of these dealers, 3,323 dealers, or
98%, pay for our service. Our non-paying 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-paying dealers to ensure
the broadest geographic coverage for every make of vehicle and to increase
consumer satisfaction by offering a complete selection of vehicles.
In 1999, 1,508 dealers were added to our North American dealer network and
578 dealers either terminated their affiliation with us or were terminated by
us. The net number of dealers as of December 31, 1999 increased by 39% over
1998. 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 other Internet commerce sites. The automobiles
requested through our site are sold by dealers; therefore we derive no direct
revenues
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<PAGE> 34
from the sale of a vehicle (other than through the recently introduced
AutobytelDIRECT service) and have no significant cost of goods sold, no
procurement, carrying or shipping costs and no inventory risk.
Sales and marketing costs consist primarily of:
- Internet marketing and advertising expenses,
- fees paid to our Internet purchase request providers,
- promotion and advertising expenses to build our brand awareness and
encourage potential customers to visit our Web sites and
- personnel and other costs associated with sales, marketing, training and
support of our dealer network.
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 such as Edmund's and Kelley Blue Book.
These Internet portals and online automotive information providers charge a
combination of set-up, initial, annual, monthly and variable fees.
- Set-up fees are incurred for the development of the link between
Autobytel.com and the Internet portal or online information provider and
are expensed in the period the link is established.
- Initial fees are amortized over the period they relate to.
- Annual fees are amortized over the period they relate to.
- Monthly fees are expensed in the month they relate to.
- Variable fees are fees paid for purchase requests and are expensed in the
period the purchase requests are received.
Our Internet marketing and advertising costs, including annual, monthly and
variable fees, were $14.3 million, $11.1 million, and $5.8 million in 1999, 1998
and 1997, respectively. There were no set-up or initial fees incurred in 1999.
Also included in 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.
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<PAGE> 35
RESULTS OF OPERATIONS
The following table sets forth our results of operations as a percentage of
revenues:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues Program fees....................................... 89% 96% 88%
Related products and services............................. 11 4 12
--- --- ----
Total revenues.................................... 100 100 100
Operating expenses:
Sales and marketing....................................... 110 126 140
Product and technology development........................ 35 36 36
General and administrative................................ 17 25 31
Stock-based compensation.................................. 3 -- --
Non-recurring expenses.................................... 1 -- 7
--- --- ----
Total operating expenses.......................... 166 187 214
--- --- ----
Loss from operations...................................... (66) (87) (114)
Other income, net........................................... 8 5 4
--- --- ----
Loss before provision for income taxes...................... (58) (81) (110)
Provision for income taxes.................................. -- -- --
--- --- ----
Net loss.................................................. (58)% (81)% (110)%
=== === ====
</TABLE>
1999 COMPARED TO 1998
Revenues. Our revenues increased $16.5 million, or 69%, to $40.3 million in
1999, compared to $23.8 million in 1998. The growth in revenues was primarily
attributable to an increase in the net number of paying dealers and a $97, or
10%, increase in the average monthly program fee charged to paying dealers. The
number of paying dealers increased by 937, or 39%, to 3,323 as of December 31,
1999, compared to 2,386 as of December 31, 1998. Revenues from related products
and services accounted for approximately 11% of revenues in 1999 and 4% of
revenues in 1998.
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. Sales and marketing expense increased by $14.2
million, or 47%, to $44.2 million in 1999 compared to $30.0 million in 1998. The
increase was primarily due to a $3.5 million, or 43%, increase in sales expenses
due to additional sales and dealer support personnel, a $3.2 million, or 29%,
increase in fees related to information search aggregators resulting from a
higher number of purchase requests, a $3.1 million, or 52%, increase in
television and radio advertising, and a $4.4 million, or 89%, increase in other
advertising and marketing expenses to build brand awareness. We expect to
continue to increase our sales, advertising and marketing expenses 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 telecommunications and computer infrastructure.
Product and technology development expense increased by $5.8 million, or 67%, to
$14.3 million in 1999, compared to $8.5 million in 1998. The increase was
primarily due to a $3.6 million, or 68%, increase for additional personnel,
recruiting and retention costs, both domestic and international, a $1.0 million,
or 89%, increase in technological infrastructure costs, a $0.8 million, or 217%,
increase in start up and legal expenses related to the development of
international joint ventures, and a $0.4 million, or 21%, increase related to
the development of new products and services.
General and Administrative. General and administrative expense was $8.6
million and $5.9 million in 1999 and 1998, respectively. General and
administrative expense increased by $2.7 million, or 45%. The
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<PAGE> 36
increase was primarily due to a $1.2 million increase in non-cash compensation
expense associated with stock options granted in the first quarter of 1999 and
the exercise of a warrant in the fourth quarter of 1999, a $0.9 million, or
420%, increase in accounting and other public company infrastructure costs, and
a non-recurring expense of $0.6 million related to the termination of the
agreement to acquire W.G. Nichols.
Equity Losses in Unconsolidated Subsidiary. Equity losses in an
unconsolidated subsidiary represents our share of losses in our Japanese joint
venture. The losses recognized have been limited to the amount of our
investment.
Other Income, Net. Other income consists primarily of interest income. In
1999, interest income of $3.9 million was offset by $0.4 million of costs
related to our Japanese joint venture. Interest income in 1999 increased 486% as
compared to 1998 due to higher cash balances resulting from the sale of
preferred stock late in the fourth quarter of 1998 and the initial public
offering late in the first quarter of 1999.
Income Taxes. No provision for federal income taxes has been recorded as we
incurred net operating losses through December 31, 1999. As of December 31,
1999, we had approximately $55.5 million of federal and $27.9 million of state
net operating loss carryforwards that we believe are available to offset future
taxable income; such carryforwards expire in various years through 2019. Under
the Tax Reform Act of 1986, the amounts of and benefits from our net operating
loss carryforwards will be limited 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 will not have a material adverse effect on our
business, results of operations and financial condition.
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 revenues was primarily
attributable to an increase in the net number of paying dealers and $162, or a
21%, increase in the average monthly program fee charged to paying dealers. The
number of paying 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 $0.2 million in 1998 and $1.5 million in 1997.
Excluding revenues from the sale of computer equipment, revenues increased by
$9.8 million, or 71%, to $23.6 million in 1998 as compared to $13.8 million in
1997. Revenues from related products and services accounted for approximately 4%
in 1998 and 12% in 1997. In 1998, we launched additional ancillary services such
as Web site advertising and warranties.
Sales and Marketing. Sales and marketing expense increased by $8.6 million,
or 40%, to $30.0 million in 1998, compared to $21.5 million in 1997. The
increase was primarily due to a $5.3 million, or 91%, increase in fees related
to information search aggregators resulting from higher purchase requests and a
$4.0 million, or 58%, increase in other advertising and marketing expenses to
build brand awareness. We expect to continue to increase our advertising and
marketing budget in the foreseeable future.
Product and Technology Development. Product and technology development
expense 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 personnel
and expenses related to Auto-by-Tel UK Limited of $1.4 million in 1998.
General and Administrative. General and administrative expense was $5.9
million in 1998 and 1997. Excluding a non-recurring charge of $1.1 million
associated with a proposed initial public offering withdrawn in April 1997,
general and administrative expense increased by $1.1 million, or 23%, to $5.9
million in 1998, compared to $4.8 million in 1997. The increase was primarily
due to additional executive and financial personnel and rent due to expansion of
facilities.
Other Income Net. Other income consists primarily of interest income. Other
income increased by $0.7 million, or 106%, to $1.3 million in 1998, compared to
$0.6 million 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 $0.8 million 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
36
<PAGE> 37
$0.7 million in 1998 as compared to $0.6 million in 1997. Interest income
increased due to higher cash balances from the sale of preferred stock in 1998.
STOCK-BASED COMPENSATION
In the first quarter of 1999, stock options were granted to employees and
directors at exercise prices of $13.20 and $16 per share which were below the
fair market value at the date of grant. In relation to these grants, we will
recognize estimated compensation expense of approximately $2.6 million ratably
over the vesting term of one to four years. Compensation expense of $1.1 million
was classified as general and administrative expense in 1999 and approximately
$0.5 million, $0.5 million, $0.5 million and $40,000 will be classified as
general and administrative expense in the years ending 2000, 2001, 2002 and
2003, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $14.5 million in 1999, $16.3
million in 1998 and $13.5 million in 1997. Net cash used in operating activities
in 1999 resulted primarily from the net loss for the year, increased accounts
receivable and prepaid expenses, partially offset by increased deferred revenues
related to growth in the number of our paying dealers, accounts payable and
accrued expenses for sales and marketing, product and technology development and
general and administrative expenditures, non-cash stock-based compensation
expense related to options granted in March 1999 and depreciation expense.
Net cash used in operating activities in 1998 resulted primarily from the
net loss for the year and increased accounts receivable, partially offset by
depreciation and other non-cash expenses.
Net cash used in operating activities in 1997 resulted primarily from the
net loss for the year and increased accounts receivable, partially offset by
increased deferred revenues, accounts payable and depreciation expense.
Net cash used in investing activities was $0.9 million in 1999, $1.1
million in 1998 and $1.8 million in 1997. Cash for investing activities in 1999,
1998 and 1997 was primarily used for the purchase of property and equipment,
including computer hardware, telecommunications equipment and furniture.
Net cash provided by financing activities was $72.9 million in 1999, $29.6
million in 1998 and $22.0 million in 1997. Cash for financing activities was
primarily provided by the consummation of our initial public offering in March
1999 and the issuance of preferred stock in 1998 and 1997. We intend to use the
net proceeds of approximately $72.1 million from our initial public offering for
potential acquisitions, investments in businesses and for general operating
expenses. Proceeds of $51.5 million from the sale of preferred stock in 1998 and
1997 were used primarily to finance operations prior to the initial public
offering.
In January 2000, we invested $5 million in Autobytel.Europe. In February
2000, we acquired A.I.N. Corporation, the owner of CarSmart.com, an online
automotive purchasing and related services Web site for 1.8 million shares of
common stock and $3.0 million in cash. CarSmart.com's operations to date have
been independently operated.
As of February 29, 2000, we had approximately $112.5 million in cash and
cash equivalents, of which $36.7 million represents the funding of
Autobytel.Europe and is reserved for the operations of Autobytel.Europe. We
believe our current cash and cash equivalents are sufficient to meet our
anticipated cash needs for working capital and capital expenditures for at least
the next 12 months, including those of CarSmart.com.
With respect to years beyond fiscal 2000, we may be required to raise
additional capital to meet our long term operating requirements. Although our
revenues have grown 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.
37
<PAGE> 38
Our cash requirements depend on several factors, including:
- the level of expenditures on marketing and advertising,
- the ability to increase the volume of purchase requests and transactions
related to our Web sites,
- the cost of contractual arrangements with Internet portals, online
information providers, and other referral sources, and
- the cash portion of acquisition transactions.
We cannot predict the timing and amount of our cash requirements. 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 ISSUE
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. As of
the date of this Annual Report, we are not aware of any material problems
resulting from Year 2000 issues, either with our Web sites, the Dealer Real Time
system or with our vendors, consumers or dealers. We will continue to monitor
our computer applications and those of our vendors, consumers and dealers
throughout the year 2000.
RECENT ACCOUNTING PRONOUNCEMENTS
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, 2000 (as amended by SFAS No. 137). SFAS No. 133
establishes accounting and reporting standards for derivative instruments. We do
not have any derivative instruments or undertake any hedging activities,
therefore we do not believe adoption of SFAS No. 133 will have a material effect
on our financial statements.
ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our Balance Sheets as of December 31, 1999 and 1998 and our Statements of
Operations, Stockholders' Equity and Cash Flows for each of the years in the
three-year period ended December 31, 1999, together with the reports of Arthur
Andersen LLP, independent auditors, begin on page F-1 of this Annual Report on
Form 10-K and are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning our directors and executive officers is incorporated
by reference to the sections entitled "Nominees and Election of Class II
Directors (Proposal 1) -- Directors and Executive Officers," "-- Attendance at
Meetings and Board Committees," "-- Nominees for Class II Director" and
"-- Other
38
<PAGE> 39
Directors and Executive Officers" contained in our definitive Proxy Statement
with respect to our 2000 Annual Meeting of Stockholders to be filed with the
Securities and Exchange Commission not later than 120 days after the end of the
fiscal year covered by this Annual Report on Form 10-K (the "Proxy Statement").
Information concerning compliance with Section 16(a) of the Exchange Act of 1934
is incorporated by reference to the section entitled "Nominees and Election of
Class II Directors (Proposal 1) -- Section 16(a) Beneficial Ownership Reporting
Compliance" contained in our Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference to the description under the captions
"Nominees and Election of Class II Directors (Proposal 1) -- Executive
Compensation," "-- Aggregated Option Exercises in 1999 and Year-End Option
Values," "-- Employment Agreements," "-- Non-Employee Director Compensation,"
"-- Compensation Committee Interlocks and Insider Participation," "-- Board
Compensation Committee Report on Executive Compensation," and "-- Stock Price
Performance Graph" in our Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference to the description under the captions
"Nominees and Election of Class II Directors (Proposal 1) -- Security Ownership
of Certain Beneficial Owners and Management" in our Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference to the description under the captions
"Nominees and Election of Class II Directors (Proposal 1) -- Certain
Relationships and Related Transactions" in our Proxy Statement.
39
<PAGE> 40
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this Annual Report:
(1) Financial Statements:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Index....................................................... F-1
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Stockholders' Equity............. F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
(2) Financial Statement Schedules:
All schedules have been omitted since the required information is
presented in the financial statements and the related notes or is not
applicable.
(3) Exhibits:
The exhibits filed as part of this Annual Report are listed in the
Index to Exhibits immediately preceding such exhibits, which Index to
Exhibits is incorporated herein by reference.
(b) Reports on Form 8-K:
The following reports on Form 8-K were filed during the last quarter of the
period covered by this Annual Report:
On October 5, 1999 we filed a Form 8-K under Item 5 notifying W.G.
Nichols Inc. that we had elected not to proceed with the previously
announced acquisition of W.G. Nichols Inc. and a related entity.
On October 15, 1999 we filed a Form 8-K under Item 5 announcing the
execution of an Agreement and Plan of Merger relating to the acquisition of
CarSmart.com.
On October 28, 1999 we filed a Form 8-K under Item 5 announcing our
financial results for the third quarter of 1999.
40
<PAGE> 41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 22nd day of
March 2000.
autobytel.com inc.
By: /s/ MARK W. LORIMER
------------------------------------
Mark W. Lorimer
Chief Executive Officer,
President and Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each of autobytel.com inc., a
Delaware corporation, and the undersigned Directors and Officers of
autobytel.com inc. hereby constitute and appoint Mark W. Lorimer, Hoshi Printer
or Ariel Amir as its, his or her true and lawful attorneys-in-fact and agents,
for it, him or her and in its, his or her name, place and stead, in any and all
capacities, with full power to act alone, to sign any and all amendments to this
report, and to file each such amendment to this report, with all exhibits
thereto, and any and all documents in connection therewith, with the Securities
and Exchange Commission, hereby granting unto said attorneys-in-fact and agents,
and each of them, full power and authority to do and perform any and all acts
and things requisite and necessary to be done in connection therewith, as fully
to all intents and purposes as it, he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ MICHAEL FUCHS Chairman of the Board and Director March 22, 2000
- - ---------------------------------------------
Michael Fuchs
/s/ MARK W. LORIMER Chief Executive Officer, President and March 22, 2000
- - --------------------------------------------- Director (Principal Executive Officer)
Mark W. Lorimer Senior Vice President and Chief
/s/ HOSHI PRINTER Financial Officer (Principal Financial March 22, 2000
- - --------------------------------------------- Officer)
Hoshi Printer
/s/ ANN M. DELLIGATTA Executive Vice President and Chief March 22, 2000
- - --------------------------------------------- Operating Officer
Ann M. Delligatta
/s/ AMIT KOTHARI Vice President and Controller March 22, 2000
- - --------------------------------------------- (Principal Accounting Officer)
Amit Kothari
/s/ JEFFREY H. COATS Director March 22, 2000
- - ---------------------------------------------
Jeffrey H. Coats
/s/ MARK N. KAPLAN Director March 22, 2000
- - ---------------------------------------------
Mark N. Kaplan
</TABLE>
41
<PAGE> 42
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ KENNETH J. ORTON Director March 22, 2000
- - ---------------------------------------------
Kenneth J. Orton
/s/ ROBERT S. GRIMES Executive Vice President and Director March 22, 2000
- - ---------------------------------------------
Robert S. Grimes
/s/ PETER TITZ Director March 22, 2000
- - ---------------------------------------------
Peter Titz
/s/ RICHARD POST Director March 22, 2000
- - ---------------------------------------------
Richard Post
</TABLE>
42
<PAGE> 43
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............. F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 44
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,
1999 and 1998, and the related consolidated statements of operations,
stockholders' equity and cash flows for the years ended December 31, 1999, 1998
and 1997. 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, 1999 and 1998, and the
results of their operations and their cash flows for the years ended December
31, 1999, 1998 and 1997 in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Los Angeles, California
January 24, 2000
F-2
<PAGE> 45
AUTOBYTEL.COM INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents, includes restricted amounts of
$206 and $248, respectively............................ $ 85,457 $ 27,984
Accounts receivable, net of allowance for doubtful
accounts of $439 and $402, respectively................ 4,593 2,315
Prepaid expenses and other current assets................. 2,819 1,353
-------- --------
Total current assets.............................. 92,869 31,652
Property and equipment, net................................. 1,630 2,208
Other assets................................................ 373 347
-------- --------
Total assets...................................... $ 94,872 $ 34,207
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 4,277 $ 2,915
Accrued expenses.......................................... 6,772 915
Deferred revenues......................................... 6,147 4,008
Customer deposits......................................... 716 345
Other current liabilities................................. 201 33
-------- --------
Total current liabilities......................... 18,113 8,216
Deferred rent............................................. 53 123
-------- --------
Total liabilities................................. 18,166 8,339
-------- --------
Commitments and contingencies
Stockholders' equity:
Convertible preferred stock, Series A, $0.001 par value;
1,500,000 shares authorized; no and 1,500,000 shares
issued and outstanding, respectively................... -- 2
Convertible preferred stock, Series B, $0.001 par value;
967,915 shares authorized; no and 967,915 shares issued
and outstanding, respectively.......................... -- 1
Convertible preferred stock, Series C, $0.001 par value;
6,977,272 shares authorized; no and 4,968,738 shares
issued and outstanding, respectively................... -- 4
Common stock, $0.001 par value; 200,000,000 shares
authorized; 18,234,613 and 8,506,455 shares issued and
outstanding, respectively.............................. 18 8
Warrants.................................................. 1,332 1,332
Additional paid-in capital................................ 141,957 67,813
Cumulative translation adjustment......................... (8) (19)
Accumulated deficit....................................... (66,593) (43,273)
-------- --------
Total stockholders' equity........................ 76,706 25,868
-------- --------
Total liabilities and stockholders' equity........ $ 94,872 $ 34,207
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-3
<PAGE> 46
AUTOBYTEL.COM INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1999 1998 1997
----------- ---------- ----------
<S> <C> <C> <C>
Revenues.............................................. $ 40,298 $ 23,826 $ 15,338
Operating expenses:
Sales and marketing................................. 44,176 30,033 21,454
Product and technology development.................. 14,262 8,528 5,448
General and administrative.......................... 8,595 5,908 5,851
----------- ---------- ----------
Total operating expenses.................... 67,033 44,469 32,753
----------- ---------- ----------
Loss from operations................................ (26,735) (20,643) (17,415)
Equity losses in unconsolidated subsidiary............ 126 -- --
Other income, net..................................... 3,342 1,280 620
----------- ---------- ----------
Loss before provision for income taxes.............. (23,267) (19,363) (16,795)
Provision for income taxes............................ 53 35 15
----------- ---------- ----------
Net loss............................................ $ (23,320) $ (19,398) $ (16,810)
=========== ========== ==========
Basic and diluted net loss per share.................. $ (1.48) $ (2.30) $ (2.03)
=========== ========== ==========
Shares used in computing basic and diluted net loss
per share........................................... 15,766,406 8,423,038 8,291,142
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE> 47
AUTOBYTEL.COM INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK
------------------- ------------------- ADDITIONAL CUMULATIVE
NUMBER NUMBER PAID-IN DEFERRED TRANSLATION
OF SHARES AMOUNT OF SHARES AMOUNT WARRANTS CAPITAL COMPENSATION ADJUSTMENT
---------- ------ ---------- ------ -------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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 a 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)
Conversion of Series A, B and C
convertible preferred stock to
common stock................... (7,436,653) (7) 5,852,290 6 -- 1 -- --
Issuance of common stock in
initial public offering, net of
issuance cost.................. -- -- 3,500,000 4 -- 72,080 -- --
Issuance of common stock upon
exercise of stock options...... -- -- 362,630 -- -- 790 -- --
Issuance of common stock under
employee stock purchase plan... -- -- 3,161 -- -- 48 -- --
Compensation expense recorded for
fair market value of warrant in
excess of exercise price....... -- -- 10,077 -- -- 162 -- --
Compensation expense recorded for
fair market value of stock
options in excess of exercise
price.......................... -- -- -- -- -- 1,063 -- --
Foreign currency translation
Adjustment..................... -- -- -- -- -- -- -- 11
Net loss......................... -- -- -- -- -- -- -- --
---------- ----- ---------- ----- ------ -------- ----- --------
Balance, December 31, 1999......... -- $ -- 18,234,613 $ 18 $1,332 $141,957 $ -- $ (8)
========== ===== ========== ===== ====== ======== ===== ========
<CAPTION>
ACCUMULATED
DEFICIT TOTAL
----------- --------
<S> <C> <C>
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 a 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
Conversion of Series A, B and C
convertible preferred stock to
common stock................... -- --
Issuance of common stock in
initial public offering, net of
issuance cost.................. -- 72,084
Issuance of common stock upon
exercise of stock options...... -- 790
Issuance of common stock under
employee stock purchase plan... -- 48
Compensation expense recorded for
fair market value of warrant in
excess of exercise price....... -- 162
Compensation expense recorded for
fair market value of stock
options in excess of exercise
price.......................... -- 1,063
Foreign currency translation
Adjustment..................... -- 11
Net loss......................... (23,320) (23,320)
-------- --------
Balance, December 31, 1999......... $(66,593) $ 76,706
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE> 48
AUTOBYTEL.COM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(23,320) $(19,398) $(16,810)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. 1,298 1,255 860
Provision for bad debt.................................... 189 187 175
Loss on disposal of property and equipment................ 103 1 --
Amortization of deferred compensation..................... -- 1 25
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 warrants in exchange for involvement in
broadband application project........................... -- 540 --
Compensation expense recorded for fair market value of
stock options in excess of exercise price............... 1,063 -- --
Compensation expense recorded for fair market value of
warrant in excess of exercise price..................... 162 -- --
Equity losses in unconsolidated subsidiary................ 126 -- --
Changes in assets and liabilities:
Accounts receivable..................................... (2,467) (1,009) (1,370)
Prepaid expenses and other current assets............... (1,466) (558) 107
Other assets............................................ (26) (252) 516
Accounts payable........................................ 1,362 692 1,572
Accrued expenses........................................ 5,857 (132) 325
Deferred revenue........................................ 2,139 308 1,374
Customer deposits....................................... 371 218 (427)
Other current liabilities............................... 168 (33) 34
Deferred rent........................................... (70) 32 74
-------- -------- --------
Net cash used in operating activities.............. (14,511) (16,291) (13,545)
-------- -------- --------
Cash flows from investing activities:
Acquisition of Internet Development Corporation........... -- -- (100)
Investment in unconsolidated subsidiary................... (126) -- --
Purchases of property and equipment....................... (823) (1,147) (1,652)
-------- -------- --------
Net cash used in investing activities.............. (949) (1,147) (1,752)
-------- -------- --------
Cash flows from financing activities:
Net proceeds from sale of common stock.................... 72,922 182 31
Net proceeds from issuance of Series B convertible
preferred stock......................................... -- -- 9,029
Net proceeds from issuance of Series C convertible
preferred stock......................................... -- 29,446 12,988
Net cash provided by financing activities.......... 72,922 29,628 22,048
-------- -------- --------
Effect of exchange rates on cash............................ 11 (19) --
-------- -------- --------
Net increase in cash and cash equivalents................... 57,473 12,171 6,751
Cash and cash equivalents, at beginning of period........... 27,984 15,813 9,062
-------- -------- --------
Cash and cash equivalents, at end of period................. $ 85,457 $ 27,984 $ 15,813
======== ======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes.............. $ 53 $ 35 $ 15
======== ======== ========
Cash paid during the period for interest.................. $ 2 $ 3 $ --
======== ======== ========
</TABLE>
Supplemental disclosure of non-cash financing activities (See Note 6):
- 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
a broadband application project.
- . In December 1999, a warrant to purchase 33,333 shares of common stock at
$11.25 per share was exercised in a cashless exercise. Under the warrant,
23,235 shares were exchanged for an aggregate fair market value of $375 to
pay for the exercise
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE> 49
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 an internationally branded online
automotive commerce company that provides consumers with automotive solutions
throughout the lifecycle of vehicle ownership. Autobytel.com owns an
internationally branded Internet site for new and pre-owned vehicle information
and automotive services that links buyers and sellers in an information-rich
environment. Through its Web site (www.autobytel.com), consumers can research
pricing, specifications and other information related to new and pre-owned
vehicles and purchase, finance, lease, insure, sell or maintain their vehicles.
When consumers indicate they are ready to buy a vehicle, they can be connected
to Autobytel.com's network of participating dealers in the United States and
Canada, or to other sellers through its classified ads and auction services.
Autobytel.com has also established international joint ventures and/or
licensing agreements to market new and used vehicles in the United Kingdom,
Sweden and Japan.
Since its inception in January 1995, 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 has an
accumulated deficit of $66,593 as of December 31, 1999. Management believes
current cash and cash equivalents are sufficient to meet anticipated cash needs
for working capital and capital expenditures for at least the next 12 months.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Autobytel.com and its wholly and majority owned subsidiaries: Autobytel Services
Corporation, Auto-By-Tel Acceptance Corporation, Auto-By-Tel Insurance Services,
Inc., Autobytel.ca inc., Kre8.net, inc., e-autosdirect.com inc.,
Autobytel.Europe LLC (formerly Auto-By-Tel International LLC), Autobytel.Europe
Investment B.V., Autobytel.Europe Holdings B.V., I-Net Training Technologies,
LLC, Autobytel Acquisition I Corp., Autobytel Acquisition II Corp., 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.
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 fees billed to subscribing
dealers located in the United States and Canada. Autobytel.com generally
requires no
F-7
<PAGE> 50
AUTOBYTEL.COM.INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA.)
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, 1999 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 shorter of the remaining lease
term or the estimated useful lives of the improvements.
Stock-Based Compensation
Autobytel.com accounts for stock-based compensation in accordance with the
provisions of Accounting Principles Board Opinion (APB) No. 25, "Accounting for
Stock Issued to Employees." Under APB No. 25, compensation expense is recognized
over the vesting period based on the excess of the fair market value over the
exercise price on the grant date. (See Note 7.)
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 APB No. 25 and, accordingly,
proforma disclosures required under SFAS No. 123 have been presented. (See Note
7.)
Revenue Recognition
Autobytel.com's revenues primarily consist of fees paid by subscribing
dealers located in the United States and Canada. These fees are comprised of an
initial fee, a monthly fee and, through fiscal 1997, an annual fee. The initial
fee and annual fee are recognized ratably over the service period of 12 months.
The monthly fee is recognized in the period services are provided.
Autobytel.com also derives revenues from license and service agreements
with international licensees. These agreements grant the licensees the right to
use Autobytel.com's proprietary software, technology and other business
procedures to market new and used vehicles in exchange for certain fees.
Revenues from these fees are recognized in accordance with the provisions of
Statement of Position (SOP) 97-2, "Software Revenue Recognition." These fees
include: (i) orientation fees, which are recognized on the effective date of the
license and service agreements, (ii) localization and development fees and
minimum annual maintenance fees, which are recognized as services are provided,
and (iii) minimum annual license fees, which are recognized ratably over a 12
month period beginning on the date the international Web site is launched.
Deferred revenues are comprised of unearned 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> 51
AUTOBYTEL.COM.INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA.)
Sales and Marketing
Sales and marketing expense primarily includes Internet marketing and
advertising expenses, fees paid to purchase request providers, promotion and
advertising expenses to build brand awareness and encourage potential customers
to visit Autobytel.com's Web site and personnel and other costs associated with
sales, marketing, training and support of Autobytel.com's dealer network. Sales
and marketing expense also includes cost of sales associated with the sale of
computers, which was discontinued in February 1998. Sales and marketing costs
are recorded as expenses as incurred. For the years ended December 31, 1999,
1998 and 1997, Internet marketing and advertising costs were $14,288, $11,090
and $5,828 and television advertising expenses were $8,485, $5,296 and $4,048,
respectively.
Product and Technology Development
Product and technology development expense primarily includes personnel
costs relating to the introduction of products and services and the improvement
of Autobytel.com's Web site and its online dealer information platform (DRT). It
also includes expenses associated with Autobytel.com's international start-up
activities and 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, costs related to being a public company
and non-cash compensation charges related to stock options granted in 1999.
Non-cash compensation expense in 1999 was $1,063. (See Note 7.) Non-recurring
charges of $601 associated with a terminated acquisition and $1,100 associated
with a proposed and withdrawn initial public offering were charged to general
and administrative expense in 1999 and 1997, respectively.
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 and Diluted Net Loss Per Share
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. For the years ended December 31, 1999, 1998 and 1997, diluted
net loss per share is equal to basic net loss per share 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.
New Accounting Pronouncements
In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued SOP 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." SOP 98-1, which was adopted by
Autobytel.com in January 1999, provides guidance on accounting for the costs of
computer
F-9
<PAGE> 52
AUTOBYTEL.COM.INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA.)
software developed or obtained for internal use and defines specific criteria
that determine when these costs are required to be expensed, and when they 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." SOP 98-5, which was adopted by Autobytel.com in January
1999, provides guidance on the financial reporting of start-up and organization
costs and require these costs to be expensed as incurred. The adoption of SOP
98-5 did 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, 2000 (as amended by SFAS No. 137). SFAS No. 133
establishes accounting and reporting standards for derivative instruments.
Autobytel.com does not have any derivative instruments as of December 31, 1999.
Management believes that the adoption of SFAS No. 133 will not have a material
effect on Autobytel.com's consolidated financial statements.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1999 1998
------- -------
<S> <C> <C>
Computer software and hardware.............................. $ 3,294 $ 2,800
Furniture and equipment..................................... 1,073 1,206
Leasehold improvements...................................... 558 561
------- -------
4,925 4,567
Less -- Accumulated depreciation and amortization........... (3,295) (2,359)
------- -------
$ 1,630 $ 2,208
======= =======
</TABLE>
4. COMMITMENTS AND CONTINGENCIES
Operating Leases
Autobytel.com leases its facilities and certain office equipment under
operating leases which expire on various dates through 2004. At December 31,
1999, future minimum lease payments are as follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
-------------------------
<S> <C>
2000........................................................ $1,070
2001........................................................ 938
2002........................................................ 87
2003........................................................ 4
2004........................................................ 3
Thereafter.................................................. --
------
$2,102
======
</TABLE>
Rent expense was $756, $509, and $371 for the years ended December 31,
1999, 1998 and 1997, respectively.
F-10
<PAGE> 53
AUTOBYTEL.COM.INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA.)
Marketing and Advertising Agreements
In September 1997, Autobytel.com entered into a three year Internet
marketing agreement with Excite, a company that operates a search engine. The
agreement permits Autobytel.com to maintain certain exclusive promotional rights
and linkage with Excite, and provides for certain advertising. The payments
under the agreement consist of a set-up fee, an annual fee and a variable fee
per purchase request. The set-up fee represents the cost of initiating the link
between Autobytel.com and Excite and was expensed in the period the link was
established. Autobytel.com expenses the annual fee ratably over a 12-month
period and the variable fee in the period purchase requests are received. The
amount of variable fee per purchase request increases as the number of purchase
requests received reaches agreed upon increments. Under the agreement,
Autobytel.com is also to provide Excite with up to three new vehicles in a
12-month period. The agreement grants Autobytel.com the right to terminate the
agreement if the number of purchase requests does not meet the threshold
specified for each year of the term of the agreement. As of December 31, 1999,
the minimum future payments under the agreement amounted to $1,793.
In June 1998, Autobytel.com entered into separate two-year Internet
marketing agreement with Excite. The agreement permitted Autobytel.com to
maintain certain exclusive promotional rights and linkage with NetCenter. Under
the agreement, Autobytel.com was also to provide NetCenter with up to three new
vehicles in a 12-month period. The agreement was terminated in June 1999.
Autobytel.com has agreements with other search engines, Internet service
and automotive information providers, including Lycos, AT&T WorldNet, Edmund's,
Kelley Blue Book and Intellichoice, that make available to consumers vehicle
research data over the Internet. These agreements are generally for a term of
one to four years and require that Autobytel.com pay a combination of set-up,
initial, annual, monthly and variable fees based on the volume of purchase
requests received by Autobytel.com. The set-up fees are expensed as incurred,
the initial fees and annual fees are amortized over the period they relate to.
The monthly fees are expensed in the month they relate to and variable fees are
expensed in the period purchase requests are received. As of December 31, 1999,
the minimum future commitments under these agreements were $674.
Autobytel.com has agreements with network and cable television stations
under which it has the right to purchase television advertising. As of December
31, 1999, the minimum future commitments under these agreements were $1,685.
These amounts are expensed as advertisements are aired.
Employment Agreements
Autobytel.com has employment agreements with Mark W. Lorimer, Chief
Executive Officer, and Ann M. Delligatta, Chief Operating Officer. In the event
of termination without cause or resignation with a good reason, they are
entitled to receive severance payments equal to the base salary that would have
been received by them over the remaining term of the agreements. Mr. Lorimer's
agreement also provides for an additional severance payment in the event of a
change in control as defined in his agreement. The term of the agreements range
from two to three years and have one-year renewals.
Litigation
In the normal course of business, Autobytel.com is involved in various
legal proceedings. Based upon the information presently available, management
believes that the ultimate resolution of any such proceedings will not have a
material adverse effect on Autobytel.com's financial position, liquidity or
results of operations.
5. RETIREMENT SAVINGS PLAN
Autobytel.com has a retirement savings plan which qualifies as a deferred
salary arrangement under Section 401(k) of the Internal Revenue Code (the 401(k)
Plan.) The 401(k) 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
F-11
<PAGE> 54
AUTOBYTEL.COM.INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA.)
90 days. Under the 401(k) 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 401(k) Plan are discretionary. Autobytel.com has made no
contributions since the inception of the 401(k) Plan.
6. STOCKHOLDERS' EQUITY
Initial Public Offering
In March 1999, Autobytel.com consummated its initial public offering and
issued 3,500,000 shares of common stock at a price of $23 per share. An
additional 1,000,000 shares of common stock were offered by selling stockholders
at a price of $23 per share. Autobytel.com received proceeds of approximately
$72,084, net of underwriting discounts, fees and other initial public offering
costs.
At the closing of the offering, outstanding shares of Series A, Series B
and Series C convertible preferred stock were automatically converted to an
aggregate total of 5,852,290 shares of common stock.
In addition, the selling stockholders granted the underwriters a 30-day
option to purchase up to an additional 637,500 shares of common stock to cover
over-allotments. The underwriters exercised this option in April 1999.
Preferred Stock
As of December 31, 1999, 11,445,187 shares of preferred stock with a $0.001
par value were authorized and undesignated.
Common Stock
In July 1999, Autobytel.com's Certificate of Incorporation was amended to
increase the number of authorized shares of common stock with a par value of
$0.001 from 50,000,000 shares to 200,000,000 shares.
Warrants
In November 1998, Autobytel.com issued a warrant to purchase 150,000 shares
of common stock to Invision AG, an investor in its Series C convertible
preferred stock (Series C Preferred), in exchange for their commitment to assist
Autobytel.com with organizational and start-up activities related to a
Pan-European entity in which Autobytel.com may invest with them. The warrant is
exercisable at $13.20 per share and expires in November 2001. The warrant was
valued at $270, which was expensed in 1998, as Invision AG has fulfilled its
commitment and has no further obligation to Autobytel.com.
In December 1998, Autobytel.com issued warrants to purchase 289,800 shares
of common stock to Aureus Private Equity AG (Aureus), an investor in its Series
C Preferred, in exchange for their commitment to assist Autobytel.com with
organizational and start-up activities related to a Pan-European entity in which
Autobytel.com may invest with them. The warrants are exercisable at $13.20 per
share and expire in December 2001. The warrants were valued at $522, which was
expensed in 1998, as Aureus has fulfilled its commitment and has no further
obligation to Autobytel.com.
In December 1998, Autobytel.com issued a warrant to purchase 300,000 shares
of common stock to MediaOne Interactive Services, Inc. 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 was expensed in 1999.
F-12
<PAGE> 55
AUTOBYTEL.COM.INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA.)
The fair value of each of these warrants was estimated using the
Black-Scholes option-pricing model and the following assumptions: (1) no
dividend yield, (2) volatility of 0.10%, (3) risk-free interest rate of 4.90%,
and (4) expected life of three years.
7. 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
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.
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 of incentive stock options
within the meaning of Section 422 of the Code, and for the granting to
employees, directors and consultants of nonstatutory stock options and stock
purchase rights. Autobytel.com has reserved a total of 833,333 shares of common
stock for issuance under the Incentive Plan. The exercise price of stock options
granted under the Incentive Plan cannot be lower than the fair market value of
the common stock, as determined by the Board of Directors, on the date of grant.
With respect to any participants who, at the time of grant, own stock possessing
more than 10% of the voting power of all classes of stock of Autobytel.com, the
exercise price of stock options granted to such person must be at least 110% of
the fair market value on the grant date, and the maximum term of such options is
five years. The term of all other options granted under the Incentive Plan may
be up to 10 years. Stock options granted under the Incentive Plan vest according
to vesting schedules determined by the Board of Directors.
1998 Stock Option Plan
Autobytel.com's 1998 Stock Option Plan (the 1998 Option Plan) was adopted
in December 1998 and amended in September 1999. 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
F-13
<PAGE> 56
AUTOBYTEL.COM.INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA.)
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 certain executives at an exercise
price of $13.20 per share, which represents the fair market value on the date of
grant. These options vest over a seven-year period, but the vesting could be
accelerated based on the performance of Autobytel.com's common stock. The
accelerated vesting schedule provides that the grants will vest in six
installments, one installment vesting each six months over a three-year period
if pre-established average trading prices of the common stock are achieved.
Those installments will vest if the average trading price exceeds the exercise
price by $6.60, $13.20, $19.80, $26.40, $33.00 and $39.60, respectively, in the
applicable six month period after the date of grant. All other stock options
granted under the 1998 Option Plan vest according to vesting schedules
determined by the Board of Directors.
The 1998 Option Plan provides that, unless otherwise provided in the stock
option agreement, in the event of any merger, consolidation, or sale or transfer
of all or any part of Autobytel.com's business or assets, all rights of the
optionee with respect to the unexercised portion of any option will 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.
1999 Stock Option Plan
Autobytel.com's 1999 Stock Option Plan (the 1999 Option Plan) was adopted
in January 1999 and amended in September 1999. 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 will 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 will have a term of 10 years and will be granted at the fair market value
of Autobytel.com's common stock on the date of grant. The 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.
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 Incentive 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 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.
F-14
<PAGE> 57
AUTOBYTEL.COM.INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA.)
1999 Employee and Acquisition Related Stock Option Plan
Autobytel.com's 1999 Employee and Acquisition Related Stock Option Plan
(the Employee and Acquisition Option Plan) was approved by the Board of
Directors in September 1999. Autobytel.com has reserved a total of 1,500,000
shares of common stock for issuance under the Employee and Acquisition Option
Plan. The Employee and Acquisition Option Plan provides for the granting to
employees and acquired employees of incentive stock options within the meaning
of the Code, and for the granting to employees, acquired employees and service
providers of nonstatutory stock options. The exercise price of incentive stock
options granted can not be lower than the fair market value on the date of grant
and the exercise price of nonstatutory stock options can not be less than 85% of
the fair market value of the common stock on the date of grant. The exercise
price of stock options granted to individuals beneficially owning more than 10%
of the voting power of all classes of Autobytel.com stock must be at least 110%
of the fair market value on the grant date and have a maximum term of five
years. The term of all other options granted under the Employee and Acquisition
Option Plan may be up to 10 years. Stock options granted under the Employee and
Acquisition Option Plan vest according to vesting schedules determined by the
Board of Directors.
Stock Option Changes
A summary of the status of Autobytel.com's stock options as of December 31,
1997, 1998 and 1999, and changes during the years then ended is presented below:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
--------- ----------------
<S> <C> <C>
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
Granted................................................ 2,235,598 12.51
Exercised.............................................. (362,630) 2.19
Canceled............................................... (813,747) 13.25
--------- ------
Outstanding at December 31, 1999......................... 3,918,561 $12.12
========= ======
Exercisable at December 31, 1997......................... 858,187 $ 2.78
========= ======
Exercisable at December 31, 1998......................... 738,860 $ 6.42
========= ======
Exercisable at December 31, 1999......................... 1,331,924 $ 8.90
========= ======
Weighted-average fair value of options granted during
1997 (853,504 options)................................. $ 2.73
Weighted-average fair value of options granted during
1998 (1,630,340 options)............................... $ 3.25
Weighted-average fair value of options granted during
1999 (2,235,598 options)............................... $ 3.81
</TABLE>
The fair value of each option granted through December 31, 1999 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
55.90% for the year ended December 31, 1999 and effectively zero for the years
ended December 31, 1998
F-15
<PAGE> 58
AUTOBYTEL.COM.INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA.)
and 1997, (iii) weighted-average risk-free interest rate of approximately 5.36%,
4.80%, and 6.18% for the year ended December 31, 1999, 1998 and 1997,
respectively, and (iv) an expected life of four to seven years.
The following table summarizes information about stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- ----------------------------
WEIGHTED AVERAGE
RANGE OF NUMBER OF REMAINING LIFE WEIGHTED AVERAGE NUMBER OF WEIGHTED AVERAGE
EXERCISE PRICE OPTIONS (IN YEARS) EXERCISE PRICE OPTIONS EXERCISE PRICE
-------------- --------- ---------------- ---------------- --------- ----------------
<S> <C> <C> <C> <C> <C>
$ 0.84 - $ 0.90................... 187,333 6.5 $ 0.85 187,333 $ 0.85
4.50............................ 466,666 6.8 4.50 386,777 4.50
11.25 - 11.56................... 25,443 7.0 11.26 24,443 11.25
13.20 - 13.75................... 2,519,119 8.9 13.24 733,371 13.20
14.13 - 14.88................... 255,500 9.9 14.43 -- --
15.50............................ 162,500 9.6 15.50 -- --
16.00 - 16.75................... 157,000 9.3 16.10 -- --
19.75............................ 145,000 9.6 19.75 -- --
--------- --- ------ --------- ------
$ 0.84 - $19.75................... 3,918,561 8.7 $12.12 1,331,924 $ 8.90
========= === ====== ========= ======
</TABLE>
Stock-Based Compensation
From January to March 1999, Autobytel.com granted stock options to purchase
388,236 shares of common stock under the 1999 Stock Option Plan. These stock
options were granted to employees and directors at exercise prices of $13.20 and
$16.00 per share which were below the fair market value at the date of grant. In
relation to these grants, Autobytel.com will recognize non-cash compensation
expense of approximately $2.6 million ratably over the vesting term of one to
four years. Compensation expense of approximately $1,063 was recognized as
operating expense in 1999.
Pro Forma Disclosure
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,
1999, 1998 and 1997 would approximate the pro forma amounts below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net loss, as reported.............................. $(23,320) $(19,398) $(16,810)
Net loss per share, as reported.................... (1.48) (2.30) (2.03)
Net loss, pro forma................................ (27,850) (21,109) (17,624)
Net loss per share, pro forma...................... (1.77) (2.51) (2.13)
</TABLE>
The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts.
8. STOCK PURCHASE PLAN
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
F-16
<PAGE> 59
AUTOBYTEL.COM.INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA.)
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.
During the year ended December 31, 1999, 3,161 shares of common stock were
issued under the Purchase Plan.
9. INCOME TAXES
No provision for federal income taxes has been recorded as Autobytel.com
incurred net operating losses through December 31, 1999. Provision for income
taxes primarily consists of franchise taxes paid to the state of Delaware. As of
December 31, 1999, Autobytel.com had approximately $55,500 and $27,900 of
federal and state net operating loss carryforwards available to offset future
taxable income. These net operating loss carryforwards expire in various years
through 2019. Under the Tax Reform Act of 1986, the amounts of and benefits from
Autobytel.com's net operating loss carryforwards will be limited under the
provisions of Internal Revenue Code Section 382. Based on estimates, management
believes the effect of such limitation will not have a material adverse effect
on Autobytel.com.
Autobytel.com accounts for income taxes in accordance with 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. Net deferred income tax assets, totaling approximately $24,700
as of December 31, 1999 and $15,800 as of December 31, 1998, consist primarily
of the tax effect of net operating loss carryforwards, 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 uncertainty regarding their realization.
10. RELATED PARTY TRANSACTIONS
Peter R. Ellis
In March 1998, Autobytel.com extended to co-founding member and
stockholder, Peter R. Ellis a $250 loan bearing interest at 8% per annum
compounded quarterly with principal and accrued interest due in full in March
2003. The loan was secured by Mr. Ellis's stock in Autobytel.com. Mr. Ellis
repaid the loan, including accrued interest, in January 2000.
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. In January 2000, Mr. Ellis gave Autobytel.com a 90-day termination
notice of the agreement.
11. BUSINESS SEGMENT
Autobytel.com conducts its business within one business segment, which is
defined as providing online vehicle purchasing and other related services.
F-17
<PAGE> 60
AUTOBYTEL.COM.INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA.)
12. SUBSEQUENT EVENTS (UNAUDITED)
Acquisition of A.I.N. Corporation
In February 2000, Autobytel.com acquired all of the outstanding stock of
A.I.N. Corporation, which operates CarSmart.com, an online buying site for new
and used vehicles, for 1.8 million shares of Autobytel.com common stock and
$3,000 in cash. The acquisition will be accounted for as a purchase.
Formation of Autobytel.Europe LLC
In January 2000, Autobytel.com and strategic partners funded
Autobytel.Europe LLC (Autobytel.Europe) to expand its operations and business in
Europe. Autobytel.com licensed its technology, business processes and trade name
to Autobytel.Europe on a royalty free perpetual basis and contributed to
Autobytel.Europe its existing license agreements for the United Kingdom and
Scandinavia and Finland. As of February 29, 2000, total funding for
Autobytel.Europe was $36.7 million. As of such date, Autobytel.com owned 78% of
Autobytel.Europe.
F-18
<PAGE> 61
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER DESCRIPTION PAGE
- - ------ ----------- ------------
<C> <S> <C>
2.1 Agreement and Plan of Merger dated October 14, 1999, entered
into among autobytel.com inc., Autobytel Acquisition I
Corp., A.I.N. Corporation, and shareholders of A.I.N.
Corporation is incorporated herein by reference to Exhibit
2.1 of the Form 8-K filed with the Securities and Exchange
Commission (the "SEC") on February 15, 2000
2.2 Amendment to Agreement and Plan of Merger dated January 25,
2000, entered into among autobytel.com inc., Autobytel
Acquisition I Corp., A.I.N. Corporation, and shareholders of
A.I.N. Corporation is incorporated herein by reference to
Exhibit 2.2 of the Form 8-K filed with the SEC on February
15, 2000
2.3 Amendment No. 2 to Agreement and Plan of Merger dated
February 14, 2000, entered into among autobytel.com inc.,
Autobytel Acquisition I Corp., A.I.N. Corporation, and
shareholders of A.I.N. Corporation is incorporated herein by
reference to Exhibit 2.3 of the Form 8-K filed with the SEC
on February 15, 2000
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)
is incorporated herein by reference to Exhibit 3.1 of
Amendment No. 2 (filed on March 5, 1999) to autobytel.com
inc.'s Registration Statement on Form S-1 (File No.
333-70621) originally filed with the SEC on January 15, 1999
and declared effective (as amended) on March 25, 1999 (the
"Registration Statement")
3.2 Second Certificate of Amendment of the Fifth Amended and
Restated Certificate of Incorporation is incorporated herein
by reference to Exhibit 3.1 of autobytel.com inc.'s Form
10-Q for the Quarter Ended June 30, 1999 filed with the SEC
on August 12, 1999
3.3 Amended and Restated Bylaws of autobytel.com inc. is
incorporated herein by reference to Exhibit 3.2 of Amendment
No. 2 to the Registration Statement filed with the SEC on
March 5, 1999
4.1 Form of Stock Certificate is incorporated herein by
reference to Exhibit 4.1 of Amendment No. 2 to the
Registration Statement filed with the SEC on March 5, 1999
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 is incorporated herein by reference to Exhibit 4.2
of the Registration Statement filed with the SEC on January
15, 1999
9.1 Voting Proxy dated January 11, 1999 by Peter R. Ellis is
incorporated herein by reference to Exhibit 9.1 of the
Registration Statement filed with the SEC on January 15,
1999
10.1 Form of Indemnification Agreement between autobytel.com inc.
and its directors and officers is incorporated herein by
reference to Exhibit 10.1 of the Registration Statement
filed with the SEC on January 15, 1999
10.2 Employment Agreement dated July 1, 1998 between
autobytel.com inc. and Mark W. Lorimer is incorporated
herein by reference to Exhibit 10.2 of the Registration
Statement filed with the SEC on January 15, 1999
10.3 Employment Agreement dated December 17, 1998 between
autobytel.com inc. and Ann Delligatta is incorporated herein
by reference to Exhibit 10.3 of Amendment No. 3 to the
Registration Statement filed with the SEC on March 22, 1999
</TABLE>
<PAGE> 62
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER DESCRIPTION PAGE
- - ------ ----------- ------------
<C> <S> <C>
10.4 Letter Agreement dated March 7, 1999 between autobytel.com
inc. and Ariel Amir is incorporated herein by reference to
Exhibit 10.37 of Amendment No. 5 to the Registration
Statement filed with the SEC on March 25, 1999
10.5 Letter Agreement dated December 18, 1998 between
autobytel.com inc. and Hoshi Printer is incorporated herein
by reference to Exhibit 10.38 of Amendment No. 5 to the
Registration Statement filed with the SEC on March 25, 1999
10.6 First Amendment dated as of December 31, 1998 to Employment
Agreement between Autobytel.com and Ann Marie Delligatta is
incorporated herein by reference to Exhibit 10.4 of Form
10-Q for the Quarter Ended September 30, 1999 filed with the
SEC on November 12, 1999
10.7 First Amendment dated as of July 31, 1998 to Employment
Agreement between Autobytel.com and Mark W. Lorimer is
incorporated herein by reference to Exhibit 10.5 of Form
10-Q for the Quarter Ended September 30, 1999 filed with the
SEC on November 12, 1999
10.8 Employment Agreement dated as of February 14, 2000 among
A.I.N. Corporation, autobytel.com inc. and Michael Gorun
10.9 1996 Employee Stock Purchase Plan is incorporated herein by
reference to Exhibit 10.7 of Amendment No. 1 to the
Registration Statement filed with the SEC on February 9,
1999
10.10 1998 Stock Option Plan is incorporated herein by reference
to Exhibit 10.8 of Amendment No. 1 to the Registration
Statement filed with the SEC on February 9, 1999
10.11 1999 Stock Option Plan is incorporated herein by reference
to Exhibit 10.30 of Amendment No. 1 to the Registration
Statement filed with the SEC on February 9, 1999
10.12 1999 Employee and Acquisition Related Stock Option Plan is
incorporated herein by reference to Exhibit 10.1 of the
Registration Statement filed on Form S-8 (file no.
333-90045) with the SEC on November 1, 1999
10.13 Amendment No. 1 to the autobytel.com inc. 1998 Stock Option
Plan dated September 22, 1999 is incorporated herein by
reference to Exhibit 10.2 of Form 10-Q for the Quarter Ended
September 30, 1999 filed with the SEC on November 12, 1999
10.14 Amendment No. 1 to the autobytel.com inc. 1999 Stock Option
Plan, dated September 22, 1999 is incorporated herein by
reference to Exhibit 10.1 of Form 10-Q for the Quarter Ended
September 30, 1999 filed with the SEC on November 12, 1999
10.15+ Amendment to Marketing Agreement of February 8, 1996, dated
June 6, 1997 between Edmund Publications Corp. and
autobytel.com inc. is incorporated herein by reference to
Exhibit 10.11 of Amendment No. 1 to the Registration
Statement filed with the SEC on February 9, 1999
10.16 Form of Dealership Agreements are incorporated herein by
reference to Exhibit 10.12 of the Registration Statement
filed with the SEC on January 15, 1999
10.17 Marketing and Application Processing Agreement dated
February 1, 1997 between General Electric Capital Auto
Financial Services, Inc., ABTAC and Auto-By-Tel, Inc., as
guarantor is incorporated herein by reference to Exhibit
10.14 of the Registration Statement filed with the SEC on
January 15, 1999
</TABLE>
<PAGE> 63
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER DESCRIPTION PAGE
- - ------ ----------- ------------
<C> <S> <C>
10.18+ Content License and Channel Sponsorship Term Sheet dated
September 12, 1997 between Excite, Inc. and Auto-By-Tel
10.19+ Data License and Web Site Agreement dated April 1, 1997
between IntelliChoice, Inc. and Auto-By-Tel Marketing
Corporation and the autobytel.com inc. is incorporated
herein by reference to Exhibit 10.16 of the Registration
Statement filed with the SEC on January 15, 1999
10.20+ Kelley Blue Book/Auto-By-Tel Agreement dated November 19,
1997, as amended July 1, 1998, between Kelley Blue Book and
Auto-By-Tel Corp. is incorporated herein by reference to
Exhibit 10.17 of the Registration Statement filed with the
SEC on January 15, 1999
10.21+ Listings Distribution, Sponsorship, Display Advertising and
Network Affiliation Agreement dated May 29, 1997 between
Classifieds2000, Inc. and Auto-By-Tel Corp. is incorporated
herein by reference to Exhibit 10.18 of the Registration
Statement filed with the SEC on January 15, 1999
10.22+ Site Page Sponsorship and Commission Agreement dated June
25, 1997, between Auto-By-Tel Marketing Corporation and AT&T
Corp. is incorporated herein by reference to Exhibit 10.20
of the Registration Statement filed with the SEC on January
15, 1999
10.23+ Sponsorship Agreement, dated as of June 24, 1998, between
Excite, Inc. and Auto-By-Tel Corp. is incorporated herein by
reference to Exhibit 10.22 of Amendment No. 2 to the
Registration Statement filed with the SEC on March 5, 1999
10.24+ License and Services Agreement dated November 23, 1998
between autobytel.com inc. and Auto-by-Tel UK Limited is
incorporated herein by reference to Exhibit 10.24 of the
Registration Statement filed with the SEC on January 15,
1999
10.25+ Share Purchase Agreement dated November 23, 1998 between
autobytel.com inc. and Inchcape Automotive Limited is
incorporated herein by reference to Exhibit 10.25 of the
Registration Statement filed with the SEC on January 15,
1999
10.26+ Procurement and Trafficking Agreement dated September 24,
1998 between DoubleClick Inc. and autobytel.com inc. is
incorporated herein by reference to Exhibit 10.27 of the
Registration Statement filed with the SEC on January 15,
1999
10.27 Advisory Agreement dated August 20, 1998 between
autobytel.com inc. and Peter R. Ellis is incorporated herein
by reference to Exhibit 10.29 of the Registration Statement
filed with the SEC on January 15, 1999
10.28 Form of Gold Term Subscription Agreement is incorporated
herein by reference to Exhibit 10.31 of Amendment No. 1 to
the Registration Statement filed with the SEC on February 9,
1999
10.29 Form of Platinum Term Continuation Rider is incorporated
herein by reference to Exhibit 10.32 of Amendment No. 1 to
the Registration Statement filed with the SEC on February 9,
1999
10.30+ Marketing Agreement dated February 18, 1999 between
autobytel.com inc. and Lycos, Inc. is incorporated herein by
reference to Exhibit 10.33 of Amendment No. 2 to the
Registration Statement filed with the SEC on March 5, 1999
10.31 Amended and Restated Operating Agreement dated as of January
6, 2000 among Autobytel.Europe LLC, autobytel.com inc., GE
Capital Equity Holdings, Inc., Inchcape Overseas Investments
B.V., and Pon Holdings B.V.
</TABLE>
<PAGE> 64
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER DESCRIPTION PAGE
- - ------ ----------- ------------
<C> <S> <C>
10.32 1996 Stock Option Plan and related agreements are
incorporated herein by reference to Exhibit 10.5 of
Amendment No. 1 to the Registration Statement filed with the
SEC on February 9, 1999
10.33 1996 Stock Incentive Plan and related agreements are
incorporated herein by reference to Exhibit 10.6 of
Amendment No. 1 to the Registration Statement filed with the
SEC on February 9, 1999
10.34+ Intercompany Software License Agreement dated as of January
6, 2000 between autobytel.com inc. and Autobytel.Europe LLC
10.35 Form of autobytel.com Gold Term Services Agreement
10.36 Form of CarSmart.com Internet Marketing Agreement
10.37 autobytel.com inc. Retirement Savings Plan is incorporated
herein by reference to the Registration Statement filed on
Form S-8 (file no. 333-33038) with the SEC on March 22, 2000
21.1 Subsidiaries of autobytel.com inc.
23.1 Consent of Arthur Andersen LLP, Independent Public
Accountants
23.2 Consent of ADT Automotive Inc.
24.1 Power of Attorney (reference is made to the signature page)
27.1 Financial Data Schedule
</TABLE>
- - ---------------
+ Confidential treatment has been requested with regard to certain portions of
this document. Such portions were filed separately with the Securities and
Exchange Commission.
<PAGE> 1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into, at
Irvine, California, as of February 14, 2000, by and between A.I.N. Corporation,
a California corporation (the "Company"), with offices at 3170 Crow Canyon
Place, #270, San Ramon; autobytel.com inc., a corporation duly organized under
the laws of the State of Delaware and the sole stockholder of the Company (the
"Parent"), with offices at 18872 MacArthur Blvd., Irvine, California 92612-1400;
and Michael Gorun (hereinafter referred to as the "Executive"), who resides at
2583 Alamo County Circle, Alamo, California 94507.
RECITALS
WHEREAS: Executive desires to be employed and the Company desires to
employ Executive, subject to the following terms and conditions.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and with reference to the above recitals, the parties hereby
agree as follows:
ARTICLE 1
TERM OF EMPLOYMENT
The Company hereby employs the Executive as President of the Company and
the Executive hereby accepts such employment by the Company for a period of
three (3) years (the "Term") commencing from the date hereof (the "Commencement
Date") and expiring upon the third anniversary of the Commencement Date, unless
extended by mutual agreement of the parties.
ARTICLE 2
DUTIES AND OBLIGATIONS
2.1 During the Term of this Agreement, the Executive shall: (i) devote
his full business time, attention and energies to the business of the Company;
(ii) shall use his best efforts to promote the interests of the Company; (iii)
shall perform all functions and services as the President of the Company,
including general management and supervision over the operations of the business
and employees of the Company; (iv) shall act in accordance with the policies and
directives of the Company, as determined from time to time by the Board of
Directors of the Company (the "Board") and by the Chief Executive Officer of the
Parent.
2.2 The Executive covenants and agrees that, while actually employed by
the Company, he shall not engage in any other business duties or pursuits
whatsoever, or directly or indirectly render any services of a business or
commercial nature to any other person or organization, including, but not
limited to,
1
<PAGE> 2
providing services to any business that is in competition with or similar in
nature to the Company or the Parent, whether for compensation or otherwise,
without the prior written consent of the Board. Notwithstanding anything herein
contained to the contrary, this Agreement shall not be construed to prohibit the
Executive from making passive personal investments or conducting personal
business, financial or legal affairs or other personal matters if those
activities do not materially interfere with the services required hereunder.
ARTICLE 3
COMPENSATION
3.1 As compensation for the services to be rendered by the Executive
pursuant to this Agreement, the Company will pay the Executive a base salary
equal to Two Hundred Twenty- Five Thousand Dollars ($225,000) per year during
the Term of this Agreement, which rate shall be reviewed by the Board annually
and may be increased (but not reduced) by the Board in such amounts as the
Board, in its sole discretion, deems appropriate. The base salary shall be paid
in substantially equal bimonthly installments, in accordance with the normal
payroll practices of the Company.
3.2 The Company shall provide the Executive with the opportunity to earn
an annual bonus for each fiscal year of the Company, occurring in whole or in
part during the Term. The annual bonus payable to the Executive shall be in such
amount and based on such criteria for the award as may be established by the
Board from time to time. Any bonus shall be paid as promptly as practicable
following the end of the preceding fiscal year. The Executive shall participate
in all other employee benefit plans in which other senior executives of the
Company are eligible collectively to participate from time to time.
3.3 As further consideration for the services rendered by the Executive
during the Term, the Executive shall be granted a stock option to purchase
shares of the Parent's common stock on the terms and conditions set forth in the
Stock Option Agreement attached as Exhibit A (the "Option").
3.4 The Company shall have the right to deduct or withhold from the
compensation due to the Executive hereunder any and all sums required for
federal income and employee social security taxes and all state or local income
taxes now applicable or that may be enacted and become applicable during the
Term.
2
<PAGE> 3
ARTICLE 4
EMPLOYEE BENEFITS
4.1 The Company agrees that the Executive shall be entitled to all
ordinary and customary perquisites afforded to executive employees of the
Company.
4.2 The Executive shall be entitled to three (3) weeks of paid vacation
for each year of his employment hereunder.
ARTICLE 5
BUSINESS EXPENSES
5.1 The Company shall pay or reimburse the Executive for all reasonable
and authorized business expenses incurred by the Executive during the Term; such
payment or reimbursement shall not be unreasonably withheld so long as said
business expenses have been incurred for and promote the business of the Company
and are incurred in accordance with the Company's expense reimbursement
policies.
5.2 As a condition to reimbursement under this Article 5, the Executive
shall furnish to the Company adequate records and other documentary evidence
required by federal and state statutes and regulations for the substantiation of
each expenditure. The Executive acknowledges and agrees that failure to furnish
the required documentation may result in the Company denying all or part of the
expense for which reimbursement is sought.
ARTICLE 6
TERMINATION OF EMPLOYMENT
6.1 Termination for Cause. The Board may, during the Term, without
notice to the Executive, terminate this Agreement and discharge the Executive
for Cause, whereupon the respective rights and obligations of the parties
hereunder shall terminate; provided, however, that the Company shall pay the
Executive any amount due and owing pursuant to Articles 3, 4, and 5, prorated to
the date of termination. As used herein, the term "for Cause" shall refer to the
termination of the Executive's employment as a result of any one or more of the
following: (i) Executive commits any willful breach or gross neglect of his
duties under this Agreement after written notice to Executive specifying such
breach or neglect and if possible a reasonable opportunity to cure such of not
less than ten (10) days, (ii) Executive is convicted of a felony or charged with
a misdemeanor involving a moral turpitude, or (iii) Executive breaches the
covenants contained in Article 8 hereof.
6.2 Termination Without Cause. The Company in its sole and absolute
discretion may elect to terminate this Agreement without Cause or prior warning
immediately upon written notice to Executive, in which event the Company's only
obligations shall be to pay to Executive
3
<PAGE> 4
(i) any amount due and owing pursuant to Articles 3, 4, and 5, prorated to the
date of termination and (ii) the Executive's salary for an additional One
Hundred Eighty (180) days following the termination.
6.3 Termination for Death or Disability. The Executive's employment
shall terminate automatically upon the Executive's death during the Term. If the
Company determines in good faith that the Disability (as defined below) of the
Executive has occurred during the Term, it shall give written notice to the
Executive of its intention to terminate his employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive, provided that, within the
thirty (30) days after such receipt, the Executive shall not have returned to
full-time performance of his duties.
For purposes of this Agreement, "Disability" shall mean the inability
of the Executive to perform his duties under this Agreement on account of
physical or mental illness or incapacity for a period of one hundred twenty
(120) consecutive calendar days, or for a period of one hundred eighty (180)
calendar days, whether or not consecutive, during any three hundred sixty-five
(365) day period.
6.4 Termination for Good Cause. The Executive may terminate his
employment with the Company due to the Company's relocation of the Executive's
principal business office more than 50 miles outside San Ramon, California
without his consent, in which event the Company's only obligations shall be to
pay to Executive (i) any amount due and owing pursuant to Articles 3, 4, and 5,
prorated to the date of termination and (ii) the Executive's salary for an
additional One Hundred Eighty (180) days following the termination.
ARTICLE 7
INDEMNIFICATION
7.1 If the Executive is a party or is threatened to be made a party to
any threatened, pending or completed claim, action, suit or proceeding, or
appeal therefrom, whether civil, criminal, administrative, investigative or
otherwise, because he is or was an officer or director of the Company, the
Company shall indemnify the Executive against any reasonable expenses (including
attorneys' fees and disbursements), and any judgments, fines and amounts paid in
settlement incurred by him in connection with such claim, action, suit,
proceeding or appeal therefrom to the extent such expenses, judgments, fines and
amounts paid in settlement were not advanced by the Company on his behalf
pursuant to Section 7.2 below, to the fullest extent permitted by law.
7.2 Provided that Executive shall first have agreed in writing to repay
such amounts advanced if it is determined by an arbitrator or court of competent
jurisdiction that the Executive
4
<PAGE> 5
was not entitled to indemnification, upon the written request of the Executive
specifying the amount of a requested advance and the intended use thereof, the
Company shall indemnify Executive for his expenses (including attorneys' fees
and disbursements), judgments, fines and amounts paid in settlement incurred by
him in connection with such claim, action, suit, proceeding or appeal whether
civil, criminal, administrative, investigative or otherwise, in advance of the
final disposition of any such claim, action, suit, proceeding or appeal
therefrom to the fullest extent permitted by law.
ARTICLE 8
RESTRICTIVE COVENANTS
8.1 Covenant Not to Disclose Confidential Information. During the Term
and following termination of this Agreement, the Executive agrees that, without
the Company's prior written consent authorized by the Board, he will not use or
disclose to any person, firm, association, partnership, entity or corporation,
any confidential information concerning: (i) the business operations or internal
structure of the Company, the Parent or any of their subsidiaries, joint
ventures, other operations, affiliates or investments (collectively, the
Business") ; (ii) the customers of the Business; (iii) the financial condition
of the Business; and (iv) other confidential information pertaining to the
Business, 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 agreements concerning the Business;
provided, however, that the Executive shall be entitled to disclose such
information: (i) to the extent the same shall have otherwise become publicly
available (unless made publicly available by the Executive); (ii) during the
course of or in connection with any actual or potential litigation, arbitration,
or other proceeding based upon or in connection with the subject matter of this
Agreement; (iii) as may be necessary or appropriate to conduct his duties
hereunder, provided the Executive is acting in good faith and in the best
interest of the Company; or (iv) as may be required by law or judicial process.
8.2 Covenant Not to Compete. The Executive acknowledges that he has
established and will continue to establish favorable relations with the
customers, clients and accounts of the Business and will have access to trade
secrets concerning the Business. Therefore, in consideration of such relations
and to further protect trade secrets, directly or indirectly, of the Company and
the Parent, the Executive agrees that during the Term, the Executive will not,
directly or indirectly, without the express written consent of the Board own or
have any interest in or act as an officer, director, partner, principal,
employee, agent, representative, consultant or independent contractor of, or in
any way assist in, any business which is engaged, directly or indirectly, in any
business competitive with the Business in the United States at any time during
the Term, or become associated with or render services to any person, firm,
corporation or other entity so engaged ("Competitive Businesses"); provided,
however; that the Executive may own without the express written consent of the
Company not more than one percent (1%) of the issued and outstanding securities
of any company or enterprise whose securities are listed on a
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national securities exchange or actively traded in the over-the-counter market.
Notwithstanding the foregoing, if any court determines that the covenant not to
compete, or any part thereof, is unenforceable because of the duration of such
provision or the geographic area or scope covered thereby, such court shall have
the power to reduce the duration, area or scope of such provision to the extent
necessary to make the provision enforceable and, in its reduced form, such
provision shall then be enforceable and shall be enforced;
8.3 Nonsolicitation. The Executive acknowledges that he has established
and will continue to establish favorable relations with the customers, clients
and accounts of the Business and will have access to trade secrets concerning
the Business. Therefore, in consideration of such relations and to further
protect trade secrets, directly or indirectly, of the Company and the Parent,
the Executive agrees that during the Term and two (2) years thereafter, the
Executive will not, directly or indirectly, without the express written consent
of the Board
(i) solicit clients, customers or accounts of the Company for,
on behalf of or otherwise related to the Business or any products or
services related thereto for any other person or entity; or
(ii) solicit any person who is or shall be in the employ or
service of the Business (or within 12 months of any such solicitation
was in the employ or service of the Business) to leave such employ or
service to become employed with any other business.
8.4 Specific Performance. Recognizing that irreparable damage will
result to the Company and the Parent in the event of the breach or threatened
breach of any of the foregoing covenants and assurances by the Executive
contained in this Article 8, and that the Company's and Parent's remedies at law
for any such breach or threatened breach may be inadequate, the Company and the
Parent and their successors and assigns, in addition to such other remedies
which may be available to them, shall be entitled to an injunction to be issued
by any court of competent jurisdiction ordering compliance with this Agreement
or enjoining and restraining the Executive, and each and every person, firm or
company acting in concert or participation with him, from the continuation of
such breach. The obligations of the Executive and rights of the Company and the
Parent pursuant to this Article 8 shall survive the termination of this
Agreement. The covenants and obligations of the Executive set forth in this
Article 8 are in addition to and not in lieu of or exclusive of any other
obligations and duties the Executive owes to the Company, whether expressed or
implied in fact or law.
ARTICLE 9
GENERAL PROVISIONS
9.1 This Agreement and any attached schedules or exhibits (which are
incorporated herein and shall be treated as a part of this Agreement) are
intended to be the final, complete and
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exclusive agreement between the parties relating to the employment of the
Executive by the Company and all prior or contemporaneous understandings,
representations and statements, oral or written, are merged herein. No
modification waiver, amendment, discharge or change of this Agreement shall be
valid unless the same is in writing and signed by the party against which the
enforcement thereof is or may be sought.
9.2 No waiver, by conduct or otherwise, by any party of any term,
provision, or condition of this Agreement, shall be deemed or construed as a
further or continuing waiver of any such term, provision, or condition nor as a
waiver of a similar or dissimilar condition or provision at the same time or at
any prior or subsequent time.
9.3 The rights under this Agreement, or by law or equity, shall be
cumulative and may be exercised at any time and from time to time. No failure by
any party to exercise, and no delay in exercising, any rights shall be construed
or deemed to be a waiver thereof, nor shall any single or partial exercise by
any party preclude any other or future exercise thereof or the exercise of any
other right.
9.4 Except as otherwise provided in this Agreement, any notice,
approval, consent, waiver or other communication required or permitted to be
given or to be served upon any person in connection with this Agreement shall be
in writing. Such notice shall be personally served, sent by telegram, tested
telex, fax or cable, or sent prepaid by either registered or certified mail with
return receipt requested or Federal Express and shall be deemed given (i) if
personally served or by Federal Express, when delivered to the person to whom
such notice is addressed, (ii) if given by telegram, telex, fax or cable, when
sent, or (ii) if given by mail, two (2) business days following deposit in the
United States mail. Any notice given by telegram, telex, fax or cable shall be
confirmed in writing by overnight mail or Federal Express within forty-eight
(48) hours after being sent. Such notices shall be addressed to the party to
whom such notice is to be given at the party's address set forth below or as
such party shall otherwise direct.
If to the Parent or: autobytel.com inc.
the Company 18872 MacArthur Blvd., Second Floor
Irvine, California 92612-1400
Attn: General Counsel
Facsimile: (949) 862-1323
With a copy to: Thomas Pollock, Esq.
Paul, Hastings, Janofsky & Walker LLP
345 California Street, 29th Floor
San Francisco, California 94104
Facsimile: (415) 217-5333
If to the Executive: Michael Gorun
2583 Alamo County Circle
Alamo, California 94507
Facsimile: (925) 277-0260
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With a copy to: Paul Lion, Esq.
Morrison & Foerster LLP
755 Page Mill Road
Palo Alto, California 94304
Facsimile: (650) 494-0792
9.5 The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the successors and assigns of the parties hereto.
9.6 This Agreement shall be construed and enforced in accordance with
the laws of the State of California, without giving effect to the principles of
conflict of laws thereof.
9.7 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which shall constitute one
instrument.
9.8 The provisions of this Agreement are agreed to be severable, and if
any provision, or application thereof, is held invalid or unenforceable, then
such holding shall not effect any other provision or application.
9.9 As used herein, and as the circumstances require, the plural term
shall include the singular, the singular shall include the plural, the neuter
term shall include the masculine and feminine genders, and the masculine term
shall include the neuter and the feminine genders.
9.10 Any controversy or claim arising out of, or related to, this
Agreement, or the breach thereof, shall be settled by binding arbitration in the
City of Irvine, California, in accordance with the rules then in effect of the
American Arbitration Association, and the arbitrator's decision shall be binding
and final, and judgment upon the award rendered may be entered in any court
having jurisdiction thereof. Each party hereto shall pay its or their own
expenses incident to the negotiation, preparation and resolution of any
controversy or claim arising out of, or related to, this Agreement, or the
breach thereof, provided, however, the Company shall pay and be solely
responsible for any attorneys' fees and expenses and court or arbitration costs
incurred by the Executive as a result of a claim that the Company has breached
or otherwise failed to perform this Agreement or any provision hereof to be
performed by the Company if the Executive prevails in the contest in whole or in
part.
[Signatures on Next Page]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
AIN CORPORATION
By: /s/ Michael Gorun
--------------------------------------
Name: Michael Gorun
-----------------------------------
Title: President and Secretary
----------------------------------
AUTOBYTEL.COM INC.
By /s/ Ariel Amir
--------------------------------------
Name: Ariel Amir
-----------------------------------
Title: Vice-President and General Cousnel
----------------------------------
/s/ Michael Gorun
-----------------------------------------
MICHAEL GORUN
[Remainder of page intentionally left blank]
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EXHIBIT 10.18
[*] 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 12th day of September,
1997 ("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.
<PAGE> 2
c) In the event that Excite intends to enter into an agreement
with a third party with respect to sponsorship of the Excite
Automotive Channel before the expiration of the term of the
Agreement, Excite will deliver to Auto-By-Tel a written notice
describing the relevant opportunity. Although Excite will not
be required to disclose any information in violation of any
nondisclosure agreement between Excite and any third party,
the notice will include information sufficient to permit
Auto-By-Tel to evaluate the requirements for meeting the
competing offer for sponsorship of the Excite Automotive
Channel and to formulate a meaningful response. Auto-By-Tel
will have ten (10) days after receipt of such written notice
to provide notice to Excite that it is prepared to enter into
an agreement with Excite on the same terms and conditions as
Excite proposes to accept from such third party. Excite and
Auto-By-Tel will then promptly commence good faith
negotiations to conclude the agreement. If Auto-By-Tel rejects
said offer or fails to notify Excite of its acceptance within
the ten (10) day period, Excite shall have the right to enter
into the agreement with such third party, provided the terms
and conditions of the agreement are not less favorable to
Excite than previously offered by Auto-By-Tel.
2. MARKETING AND PROMOTION
a) Excite will feature Auto-By-Tel in the Auto Buying Services
department of the Excite Automotive Channel for the term of
the Agreement.
b) Excite will conduct three (3) two-week car give away
promotions on the Excite home page promoting Auto-By-Tel
during the first year of the Agreement, with one promotion
coinciding with the launch of Auto-By-Tel's sponsorship and
the other two to be mutually scheduled. Excite will conduct
similar promotions in years two and three of the Agreement.
Auto-By-Tel will provide the cars to be given away through
these promotions.
c) Auto-By-Tel will purchase banner advertising on the Excite
Network in Year One of the Agreement in the amounts described
in Exhibit A. Auto-By-Tel will purchase banner advertising on
the Excite Network in Year Two and Year Three in amounts
substantially comparable to the amounts agreed upon in Exhibit
B.
d) Excite will deliver a minimum of [*] 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 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
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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 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.
c) Auto-By-Tel will have sole responsibility for providing, at
its expense, the Content to Excite.
d) 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 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) Separate and apart from the set-up fee, sponsorship and
advertising fees will be due to Excite as follows:
Year 1 Year 2 Year 3
------ ------ ------
Sponsorship [*] [*] [*]
Banners - US [*] [*] [*]
Banners - WebTV/
International [*] [*] [*]
Total [*] [*] [*]
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
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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.
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.
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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 of three (3) years.
b) Auto-By-Tel will have the option to cancel the Agreement if,
at the end of the first year of the Agreement, users referred
to the Auto-By-Tel Site from the Excite Network do not submit
[*] unique purchase requests.
c) Excite will have the option to cancel the Agreement if, at the
end of the second year under the term of the Agreement, Excite
has not received an aggregate amount of [*] in Bounty.
d) 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, with the following
exceptions:
(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.
e) All payments that have accrued prior to the termination or
expiration of this Agreement will be payable in full within
thirty (30) days thereof.
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f) 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.
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.
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
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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 "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;
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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, 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.
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 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.
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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 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 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
9
<PAGE> 10
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.
Auto-By-Tel Excite, Inc.
By: /s/ Mark W. Lorimer By: /s/ Robert C. Hood
--------------------------- ----------------------------------
Name: Mark W. Lorimer Name: Robert C. Hood
--------------------------- ----------------------------------
Title: Title: EVP - CFO
--------------------------- ----------------------------------
10
<PAGE> 1
EXHIBIT 10.31
----------------------
Autobytel.Europe LLC
----------------------
AMENDED AND RESTATED
OPERATING AGREEMENT
----------------------
Dated as of January 6, 2000
<PAGE> 2
<TABLE>
<CAPTION>
Page
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<S> <C>
I DEFINITIONS .......................................................... 1
1.1 "ABT Contribution" ............................................. 2
1.2 "Act"........................................................... 2
1.3 "Adjusted Capital Account Deficit".............................. 2
1.4 "Affiliate"..................................................... 2
1.5 "Agreement"..................................................... 2
1.6 "Assets"........................................................ 2
1.7 "Authorized Person"............................................. 2
1.8 "Business"...................................................... 2
1.9 "Business Day".................................................. 2
1.10 "Capital Account"............................................... 3
1.11 "Capital Contribution".......................................... 3
1.12 "Certificate"................................................... 3
1.13 "Code".......................................................... 3
1.14 "Company"....................................................... 3
1.15 "Expiration Date"............................................... 3
1.16 "Fair Market Value"............................................. 3
1.17 "Fiscal Year"................................................... 3
1.18 "Majority in Interest".......................................... 3
1.19 "Members"....................................................... 4
1.20 "Member Nonrecourse Debt"....................................... 4
1.21 "Member Nonrecourse Debt Minimum Gain".......................... 4
1.22 "Member Nonrecourse Deductions"................................. 4
1.23 "NASDAQ"........................................................ 4
1.24 "NOC"........................................................... 4
1.25 "Non-ABT Units"................................................. 4
1.26 "Observer"...................................................... 4
1.27 "Original Eligible Owner"....................................... 4
1.28 "Ownership Percentage".......................................... 4
1.29 "Person"........................................................ 4
1.30 "Profit or Loss"................................................ 4
1.31 "Securities Act"................................................ 5
1.32 "Tax Matters Partner"........................................... 5
1.33 "Treasury Regulations".......................................... 5
1.34 "Units"......................................................... 5
II. THE COMPANY........................................................... 5
2.1 Formation of the Company........................................ 5
2.2 Company Name and Office......................................... 6
</TABLE>
i
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<TABLE>
<CAPTION>
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<S> <C>
2.3 Purposes of the Company......................................... 6
2.4 Term of the Company............................................. 6
2.5 Title to Property............................................... 6
III. CAPITAL CONTRIBUTIONS................................................. 6
3.1 Initial Capital Contribution.................................... 6
3.2 No Further Contributions or Loans............................... 6
3.3 Dilution........................................................ 7
IV. VOTING AGREEMENT...................................................... 7
4.1 Board of Managers of the Company................................ 7
4.2 Member Voting................................................... 9
4.3 Vacancies/Removals.............................................. 9
4.4 No Voting or Conflicting Agreements............................. 9
4.5 Actions Consistent with Agreement............................... 9
4.6 Amendments to Organizational Documents.......................... 9
4.7 Expiration of Rights............................................ 9
V. MANAGEMENT AND OPERATIONS OF THE COMPANY.............................. 9
5.1 Management Generally............................................ 9
5.2 Meetings of the Board of Managers.............................. 10
5.3 Powers of the Board of Managers................................. 10
5.4 Duties and Obligations of the Board of Managers................. 11
5.5 No Compensation for the Board of Managers....................... 11
5.6 Reimbursement of Expenses....................................... 11
5.7 Officers........................................................ 12
VI. POWERS AND WARRANTIES OF THE MEMBERS; ADMISSION OF NEW MEMBERS ....... 12
6.1 Powers of the Members........................................... 12
6.2 Meetings of Members............................................. 12
6.3 Examination of Company Records.................................. 12
6.4 Admission of New Members........................................ 13
VII. RIGHTS AND RESTRICTIONS ON TRANSFERS BY THE MEMBERS................... 13
7.1 Restrictions on Transfers Generally............................. 13
7.2 Right of First Offer............................................ 13
7.3 Tag Along Right................................................. 14
7.4 Drag Along Right................................................ 15
7.5 Transfers to Affiliates......................................... 15
</TABLE>
ii
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<TABLE>
<CAPTION>
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<S> <C>
7.6 Transfer by ABT to Pon.......................................... 15
7.7 Transferees Subject to Agreement................................ 16
7.8 Exchange Rights................................................. 16
7.9 Participation Rights............................................ 16
7.10 Preemptive Rights............................................... 17
7.11 Expiration of Rights and Restrictions........................... 18
7.12 ABT Ownership................................................... 18
7.13 Redemption Right................................................ 18
VIII. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS..................... 18
8.1 Member Representation........................................... 18
8.2 Company Representation.......................................... 20
8.3 Non-Solicitation; Non-Hire...................................... 21
8.4 Disclosure of Member Identity................................... 22
8.5 Annual Budget................................................... 22
8.6 IPO Intent...................................................... 22
8.7 Insurance....................................................... 22
8.8 Right to Offer Products and Services to NOCs.................... 22
IX. DISTRIBUTIONS......................................................... 23
9.1 Distributions................................................... 23
9.2 Establishment of Reserves....................................... 23
9.3 Liquidating Distributions....................................... 23
X. MAINTENANCE OF CAPITAL ACCOUNTS; ALLOCATIONS.......................... 23
10.1 Allocations of Profit or Loss................................... 23
10.2 Tax Allocations; Certain Book/Tax Differences................... 24
10.3 Special Allocations............................................. 24
10.4 Allocations Upon Transfer of Units in the Company .............. 25
XI. ACCOUNTING PROCEDURE; TAX MATTERS..................................... 26
11.1 Fiscal Year..................................................... 26
11.2 Books of Account................................................ 26
11.3 Preparation and Filing of Income Tax Returns and Other
Writings........................................................ 26
11.4 Controversies with the Internal Revenue Service................. 27
XII. LIMITATIONS ON LIABILITIES; INDEMNIFICATION; RIGHT TO CONDUCT
OTHER BUSINESS........................................................ 27
12.1 Liability of Members............................................ 27
12.2 Indemnification................................................. 27
</TABLE>
iii
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<TABLE>
<CAPTION>
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<S> <C>
12.3 Right to Conduct Other Business................................. 28
XIII. POWER OF ATTORNEY..................................................... 28
13.1 Authority to Execute Documents.................................. 28
13.2 Survival of Power............................................... 28
XIV. AMENDMENT AND DISSOLUTION............................................. 29
14.1 Amendment....................................................... 29
14.2 Dissolution..................................................... 29
14.3 Distributions Upon Dissolution.................................. 30
14.4 No Obligation to Restore Deficit Capital Accounts............... 31
XV. MISCELLANEOUS......................................................... 31
15.1 Injunctive Relief............................................... 31
15.2 Further Assurances.............................................. 31
15.3 Governing Law; Dispute Resolution............................... 31
15.4 Entire Agreement................................................ 32
15.5 Binding Effect.................................................. 32
15.6 Invalidity of Provision......................................... 32
15.7 Notices......................................................... 32
15.8 Headings........................................................ 32
15.9 Gender and Number............................................... 32
15.10 Counterparts and Execution...................................... 32
15.11 Consents and Waivers............................................ 33
15.12 Rights and Remedies Cumulative.................................. 33
15.13 Waiver of Right to Partition.................................... 33
Schedule A Capital Contribution and Ownership Percentages..............S-1
Exhibit 1 Intercompany Software License Agreement.....................E-1
Exhibit 2 Legal Opinion...............................................E-2
</TABLE>
iv
<PAGE> 6
---------------------
AMENDED AND RESTATED
OPERATING AGREEMENT
---------------------
THIS AMENDED AND RESTATED OPERATING AGREEMENT (this "Agreement")
is dated as of January 6, 2000 by and among Autobytel.Europe LLC, a Delaware
limited liability company (the "COMPANY"), autobytel.com inc., a Delaware
company ("ABT"), GE Capital Equity Holdings, Inc., a Delaware corporation
("GE"), Inchcape Overseas Investments B.V., a Netherlands corporation
("INCHCAPE"), Pon Holdings B.V., a Netherlands corporation ("PON") and any other
Person who shall execute this Agreement or a counterpart thereof and become a
Member (as defined below) on and after the date hereof.
RECITALS
WHEREAS, on or about August 28, 1997, a Certificate of Formation
was filed for the Company with the office of the Secretary of State of the State
of Delaware under the name Auto-By-Tel International LLC.
WHEREAS, on or about March 8, 1999, the name of the Company was
changed to Autobytel.Europe LLC by filing with the Secretary of State of the
State of Delaware an amendment to the Certificate of Formation.
WHEREAS, the parties desire to enter into an agreement with
respect to the management of the Company, the transfer or other disposition of
the Units (as defined below) by any of the Members and certain other matters.
NOW, THEREFORE, in consideration of the mutual premises,
agreements and covenants set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending legally to be bound, hereby agree as follows:
TERMS OF AGREEMENT
I. DEFINITIONS
<PAGE> 7
The following terms when used in this Agreement, including its
preamble and recitals, shall have the following meanings, such meanings to be
equally applicable to the singular and plural forms thereof:
1.1 "ABT CONTRIBUTION" shall have the meaning ascribed to such
term in footnote 1 to Schedule A.
1.2 "ACT" shall mean the Limited Liability Company Act, Delaware
Code Annotated, Title 6, Sections 18-101 et seq., as from time to time amended.
1.3 "ADJUSTED CAPITAL ACCOUNT DEFICIT" shall mean, with respect
to any Member for any Fiscal Year, the deficit balance, if any, in such Member's
Capital Account as of the end of such Fiscal Year after giving effect to the
following adjustments: (a) crediting to such Capital Account any amounts that
such Member is obligated to restore as described in the penultimate sentences of
Treasury Regulation Sections 1.704-2(g)(1) and 1.704-2(i)(5) and (b) debiting to
such Capital Account the items described in Treasury Regulation Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6). The foregoing definition of "Adjusted
Capital Account Deficit" is intended to comply with the provisions of Treasury
Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
1.4 "AFFILIATE" shall mean, with respect to any Person, any
Person that, directly or indirectly, controls, is controlled by, or is under
common control with, such Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of (i) the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise, and (ii) more than 50%
of the equity interest entitled to vote for the election of directors or
equivalent governing body.
1.5 "AGREEMENT" shall have the meaning ascribed to such term in
the preamble hereto.
1.6 "ASSETS" shall mean any real, personal or other property,
whether tangible or intangible, acquired or owned by the Company at any time.
1.7 "AUTHORIZED PERSON" shall mean and refer to an authorized
agent of the Members, who is authorized under this Agreement to form the Company
under and pursuant to the Act by filing the Certificate on behalf of the Members
and to be an "authorized person" within the meaning of the Act, with the
authority upon approval by the managers to execute, deliver and file any
certificates (and amendments and restatements thereof) with the Delaware
Secretary of State.
2
<PAGE> 8
1.8 "BUSINESS" shall mean any electronic commerce relating to
any automotive-related product or service including, without limitation, the
sale or lease of any new or used vehicle, any related financing, insurance or
warranty product or service, and any after-market product or service.
1.9 "BUSINESS DAY" shall mean any day except Saturday, Sunday or
other day on which commercial banks located in California are authorized by law
to be closed for business.
1.10 "CAPITAL ACCOUNT" shall mean, with respect to each Member,
the account established for such Member on the books of the Company which shall
be (a) increased by (i) the total amount of money and Fair Market Value of
property contributed to the Company by such Member, and (ii) the amount of
Company income and gain attributable to and allocated to such Member pursuant to
this Agreement, and (b) decreased by (i) the amount of cash and the Fair Market
Value of property distributed by the Company to such Member (net of any
liability secured by such property that the Member is considered to assume or
take subject to pursuant to Section 752 of the Code) pursuant to Articles IX and
XIV hereof, and (ii) the amount of Company losses and deductions allocated to
such Member pursuant to this Agreement. Each Member's Capital Account shall be
maintained and adjusted in accordance with Treasury Regulation Sections
1.704-1(b) and 1.704-2.
1.11 "CAPITAL CONTRIBUTION" shall mean, with respect to any
Member, a contribution to the capital (whether in cash or otherwise) of the
Company made by such Member.
1.12 "CERTIFICATE" shall mean that certain Certificate of
Formation of the Company filed with the Office of the Secretary of State of the
State of Delaware, as the same may be amended from time to time.
1.13 "CODE" shall mean the Internal Revenue Code of 1986, as
amended, or any corresponding provision of any succeeding law.
1.14 "COMPANY" shall have the meaning ascribed to such term in
the recitals hereto.
1.15 "EXPIRATION DATE" shall mean the first to occur of (i) the
effective date of an IPO or (ii) excluding the sale and issuance by the Company
of Units prior to January 31, 2000, the effective date of any transaction, which
when aggregated with all other transactions, results in a sale, exchange or
other transfer of more than fifty (50%) percent of the Units for shares or other
interests in a publicly-traded entity that is not an Affiliate of any Member.
1.16 "FAIR MARKET VALUE" shall mean the commercially reasonable
value as determined by the board of managers and confirmed by independent
appraisal performed by an investment banking firm with international expertise
and reputation selected by ABT and consented
3
<PAGE> 9
to by the Members holding at least fifty (50%) percent of the total Non-ABT
Units, which consent shall not be unreasonably withheld.
1.17 "FISCAL YEAR" shall mean the twelve (12) month period
ending December 31.
1.18 "IPO" shall mean a public offering, which when aggregated
with all prior public offerings, constitutes an offering registered under the
Securities Act or other foreign securities laws of more than twenty (20%)
percent of the Units, excluding any registration of securities offered pursuant
to any employee benefit plan.
1.19 "MAJORITY IN INTEREST" shall mean any Member or group of
Members holding an aggregate of more than 50% of the total number of Units
outstanding.
1.20 "MEMBERS" shall mean GE, Inchcape, Pon, ABT and each Person
hereafter admitted to the Company as a Member as provided in this Agreement.
1.21 "MEMBER NONRECOURSE DEBT" shall have the meaning set forth
in Treasury Regulation Section 1.704-2(b)(4).
1.22 "MEMBER NONRECOURSE DEBT MINIMUM GAIN" shall mean an
amount, with respect to each Member Nonrecourse Debt, equal to Company Minimum
Gain that would result if such Member Nonrecourse Debt were treated as a
nonrecourse liability, determined in accordance with Treasury Regulation Section
1.704-2(i)(3).
1.23 "MEMBER NONRECOURSE DEDUCTIONS" shall have the meaning set
forth in Treasury Regulation Section 1.704-2(i).
1.24 "NASDAQ" shall mean the Nasdaq National Market System.
1.25 "NOC" shall mean any business operating in Europe which
licenses or sublicenses ABT's brand name, technology or business methodologies
and know-how.
1.26 "NON-ABT UNITS" shall mean Units owned or controlled by
Persons other than ABT or its Affiliates.
1.27 "OBSERVER" shall have the meaning ascribed to such term in
Section 4.1 hereof.
1.28 "ORIGINAL ELIGIBLE OWNER" shall mean each Member, other
than ABT, who becomes a Member and owns at least 10,000 Units of the Company on
January 31, 2000.
4
<PAGE> 10
1.29 "OWNERSHIP PERCENTAGE" shall mean, as to each Member, such
Member's allocable share of all income, gains, losses, deductions and credits of
the Company as set forth on SCHEDULE A hereto, as may be amended from time to
time hereafter.
1.30 "PERSON" shall mean and include an individual, a
corporation, a limited liability company, an association, a partnership, a joint
venture, a trust or estate, a government or any department or agency thereof, or
any other entity or governmental body.
1.31 "PROFIT OR LOSS" shall mean, for each Fiscal Year or
portion thereof, an amount equal to the Company's taxable income or loss for
such Fiscal Year or portion thereof, determined in accordance with Section
703(a) of the Code (for this purpose, all items of income, gain, loss, deduction
or credit required to be stated separately pursuant to Section 703(a)(1) of the
Code shall be included in taxable income or loss) with the following
adjustments:
(a) any income of the Company that is attributable to an
Asset and is exempt from federal income tax and not otherwise taken into account
in computing Profits or Losses pursuant to this definition of "Profits" or
"Losses" shall be added to such taxable income or loss;
(b) any expenditures of the Company that are described
in Section 705(a)(2)(B) of the Code or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(i), and
not otherwise taken into account computing Profits or Losses pursuant to this
definition of "Profits" or "Losses," shall be subtracted from such taxable
income or loss;
(c) gain or loss resulting from any disposition of an
Asset with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the accounting book basis of the
property disposed of, notwithstanding that the adjusted tax basis of such
property differs from its accounting book basis;
(d) any increase or decrease to Assets as a result of
any adjustment to the accounting book basis of Company assets pursuant to
Treasury Regulation Section 1.704-1(b)(2)(iv)(f) shall be added to or subtracted
from, as the case may be, such taxable income or loss;
(e) in lieu of the depreciation, amortization, and other
cost recovery deductions taken into account in computing such taxable income or
loss, there shall be taken into account depreciation for such Fiscal Year or
portion thereof, computed in accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(g), if applicable; and
(f) any items specially allocated pursuant to Sections
10.2(b) and 10.3 hereof shall not be considered in determining Profit or Loss.
5
<PAGE> 11
If such Profit or Loss as calculated hereby is a positive number, it shall
sometimes be referred to herein as "Profit," and if such Profit or Loss as
calculated hereby is a negative number, it shall sometimes be referred to herein
as "Loss."
1.32 "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
1.33 "TAX MATTERS PARTNER" shall have the meaning ascribed to
such term in SECTION 11.4 hereof.
1.34 "TREASURY REGULATIONS" shall mean the income tax
regulations promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
1.35 "UNITS" shall mean equal units of the entire ownership
interest of all Members of the Company, and all rights and liabilities
associated therewith, at any particular time, including, without limitation,
rights to distributions (liquidating or otherwise), allocations, information,
and consent or approval.
II. THE COMPANY
2.1 FORMATION OF THE COMPANY. ABT, as the initial Member, has
authorized the Authorized Person to act as organizer and to form the Company
under and pursuant to the Act by filing the Certificate on behalf of the
Members. This Agreement is subject to, and governed by, the Act and the
Certificate. In the event of a direct conflict between the provisions of this
Agreement and either the mandatory provisions of the Act or the Certificate,
such mandatory provisions of the Act or the Certificate (as the case may be)
will be controlling.
2.2 COMPANY NAME AND OFFICE. The name of the Company shall be
"Autobytel.Europe LLC." The Company shall maintain a registered office in
Delaware, and the name and address of the Company's registered agent in Delaware
is The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware
19801. Such office and such agent may be changed from time to time by the board
of managers. If the registered agent is changed, the Certificate shall be
amended to reflect such change. The principal office of the Company is currently
located at 18872 MacArthur Boulevard, Irvine, California 92612, but may be
relocated to a different address by the board of managers. The Company may
maintain such additional offices as may be designated from time to time by the
board of managers for the purpose of carrying out the business of the Company.
2.3 PURPOSES OF THE COMPANY. The purpose of the Company shall be
to engage in all lawful activities (including, without limitation, entering
into, exercising the rights and enjoying the benefits of the Company under, and
discharging the obligations of the Company under, all lawful
6
<PAGE> 12
contracts, agreements and documents) that may be necessary, appropriate,
advisable or convenient to the Company.
2.4 TERM OF THE COMPANY. The term of the Company commenced on
the date of the filing of the Certificate as required by Section 18-201 of the
Act and shall continue in existence until the dissolution (and subsequent
termination of the Company after the winding up of its affairs) as provided in
this Agreement.
2.5 TITLE TO PROPERTY. Legal title to all Assets of the Company
shall be taken and at all times held in the name of the Company or any
subsidiary thereof. Attached hereto as Exhibit 1 is an Intercompany Software
License Agreement (the "LICENSE AGREEMENT"), between the Company and ABT dated
January 6, 2000.
III. CAPITAL CONTRIBUTIONS
3.1 INITIAL CAPITAL CONTRIBUTION On or prior to the date hereof,
each Member shall have contributed or cause to be contributed to the Company the
assets specified on Schedule A in exchange for a proportionate share of Units.
No interest shall be paid by the Company on any Capital Contribution. No Member
shall be entitled to withdraw from the Company, or demand the return of any part
of its Capital Contribution or any balance in its Capital Account, or to receive
any distribution, except in accordance with the terms of this Agreement.
3.2 NO FURTHER CONTRIBUTIONS OR LOANS. The liability of the
Members to the Company, in their capacity as Members, is limited to their
initial Capital Contributions made to the Company. Such initial Capital
Contributions constitute the only funds that the Members are required to furnish
to the Company, whether by way of contribution of capital, loan, or otherwise.
Unless agreed to by a Majority in Interest, the Members may not make any
additional Capital Contributions to the Company.
3.3 DILUTION. The initial Ownership Percentage of the Members is
set forth on Schedule A hereto. Upon (i) the admission of a new Member to the
Company, or (ii) the making of additional Capital Contributions to the Company
by an existing Member, the Ownership Percentages set forth on Schedule A hereto
shall be adjusted to reflect any decrease or increase in such Ownership
Percentages caused by such events.
7
<PAGE> 13
IV. VOTING AGREEMENT
4.1 BOARD OF MANAGERS OF THE COMPANY.
(a) Prior to the Expiration Date, the board of managers
shall be constituted as follows:
(i) ABT, so long as it, with its Affiliates,
owns (x) a Majority in Interest or (y) at least twice the number of Units held
by any other Member and at least thirty-three and one-third percent (331/3%) of
all Units, shall appoint that number of persons equal to one (1) more than a
majority of the managers of the Company at any given time;
(ii) each Original Eligible Owner shall appoint
one person as a manager of the Company; and
(iii) the Chief Executive Officer of the Company
shall serve as a manager of the Company. Initially, ABT will appoint Robert
Grimes, Mark Lorimer, Joshua McCarter, Ariel Amir and another individual as
managers, GE and Inchcape will each appoint an individual as a manager. Mark
Lorimer will serve initially as chairman of the board of managers.
Notwithstanding the foregoing:
(i) each Original Eligible Owner shall have the
option to appoint an observer ("Observer") in lieu of a manager who shall have
the right to receive all notices, information and other materials provided to
the board of managers and to participate in meetings of the board of managers,
but shall not have the right to vote on any matter as a manager;
(ii) the board of managers may revoke any
Original Eligible Owner's right to appoint a manager if such Member sells (other
than to an Affiliate thereof) more than 50% of the Units such Member was issued;
provided however, that the board of managers may not revoke the right of any
Original Eligible Owner that invested more than $15 million to appoint a manager
unless and until such Member sells more than 67% of the Units such Member was
issued; and
(iii) by unanimous vote of the managers
appointed by ABT and the Original Eligible Owners, the board of mangers may
increase the number of managers on the board beyond the number provided in the
foregoing sentence and appoint managers to fill the new positions.
(b) The presence, in person or by proxy, of a majority
of the managers shall constitute a quorum for the transaction of business by the
board of managers. At a meeting of
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<PAGE> 14
the managers in which a quorum is present, the affirmative vote of a majority of
the managers present at the meeting, in person or by proxy, shall constitute a
valid decision of the board of managers.
(c) Except as provided in Section 4.1(d), the written
consent or vote of a majority of both (i) the ABT appointed managers and (ii)
the holders of Non-ABT Units (with each of clauses (i) and (ii) voting
separately) will be required for any decision with respect to:
(i) a material change to, or the Company's
termination of, the License Agreement;
(ii) the issuance of new Units of the Company if
such issuance would dilute the value of the Units (or other equity interests) of
any Member other than ABT or would create Units with rights that are superior in
any material respect to the rights of the Units of any existing Member;
(iii) the payment of any dividend or a change in
any dividend policy that results in any dividend being paid other than on a pro
rata basis;
(iv) any investment in a NOC in an amount
greater than $5 million in United States dollars;
(v) any expense greater than $200,000 in United
States dollars, other than an investment in a NOC or an expense for which an NOC
is obligated to reimburse the Company, where such expense aggregated with other
non-reimbursed expenses for that calendar year in that expense category exceeds
one hundred twenty-five (125%) of the annual budget for that expense category
previously approved by the board of managers;
(vi) any loan in an amount greater than ten
(10%) percent of the Company's gross revenues for the preceding twelve (12)
months;
(vii) any offering of Units pursuant to a
registration statement under the Securities Act of 1933 or the securities laws
of any jurisdiction in the European Community;
(viii) a sale or other disposition of (a) all or
substantially all of the assets of the Company or (b) a portion of the assets of
the Company at a price greater than $20 million in United States dollars;
(ix) a consolidation, reorganization or merger
of the Company with any other entity which would result in the Members
immediately prior to such consolidation, reorganization or merger owning less
than 50% of the resulting entity;
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(x) any other transaction between ABT or any of
its Affiliates controlled by ABT, other than Affiliates controlled by the
Company, and the Company, exclusive of the License Agreement, provided that the
vote of non-ABT appointed managers with regard to such transactions not be
unreasonably withheld; or
(xi) engaging in any business outside the scope
of the Business.
(d) Notwithstanding Section 4.1(c), the written consent
or vote of neither a majority of the ABT appointed managers, nor the holders of
Non-ABT Units, will be required for any decision concerning the Company's
acquisition of all or substantially all of the business of, or merger with,
Auto-By-Tel AB, a Sweedish corporation ("ABT AB"), provided, that (i) such
transaction is completed in the calendar year 2000, (ii) ABT AB has at least
$4.0 million in cash and $4.0 million in shareholders' equity on the closing
date of such transaction and (iii) no more than 16,500 Units are issued to ABT
AB as consideration for such acquisition or merger.
(e) Notwithstanding Section 4.1(b), any action by the
board of managers concerning the enforcement of a contract between the Company
and ABT shall be decided by a vote of a majority of the non-ABT appointed
managers.
4.2 MEMBER VOTING. The presence, in person or by proxy, of a
Majority in Interest shall constitute a quorum for the transaction of business
by the Members. Except as otherwise stated in this Agreement, the affirmative
vote or written consent of a Majority in Interest shall constitute a valid
decision of the Members.
4.3 VACANCIES/REMOVALS. Each Member shall have the right to
remove from the board of managers of the Company, with or without cause, any
person or persons appointed solely by such Member as a manager.
4.4 NO VOTING OR CONFLICTING AGREEMENTS. Each Member agrees that
it will not and will not permit any Affiliate to grant any proxy or enter into
or agree to be bound by any voting trust with respect to its Units or to enter
into any member agreements or arrangements of any kind with any Person with
respect to its Units in any such case in a manner that is inconsistent with the
provisions of this Agreement.
4.5 ACTIONS CONSISTENT WITH AGREEMENT. The managers and Members
shall not take any action inconsistent with the provisions of this Agreement.
4.6 AMENDMENTS TO ORGANIZATIONAL DOCUMENTS. Except as provided
in Section 4.1(c)(ii) hereof, each Member agrees to vote all of its Units in
favor of amending or changing this Agreement or the Certificate as may be
required, in the opinion of the board of managers, to consummate an initial
public offering.
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4.7 EXPIRATION OF RIGHTS. On and after the Expiration Date,
Sections 4.1(a) and (c), 4.4 and 4.6 shall expire and be of no further force and
effect and the Members shall elect not less than seven persons to serve as the
board of managers.
V. MANAGEMENT AND OPERATIONS OF THE COMPANY
5.1 MANAGEMENT GENERALLY. Subject to the provisions of this
Agreement and the Act, the business and affairs of the Company shall be managed
under the sole direction of the board of managers. All powers of the Company may
be exercised by the board of managers, except as conferred on or reserved to the
Members by the Act or this Agreement. The board of managers shall not, except by
a vote of Majority in Interest, take any action on behalf of or in the name of
the Company or enter into any commitment or obligation binding upon the Company,
except for actions authorized under or within the scope of the authority granted
to the board of managers pursuant to this Agreement and the Act.
5.2 MEETINGS OF THE BOARD OF MANAGERS. Meetings of the board of
managers shall be held quarterly or at such other time as the board of managers
may determine by vote of a majority of the managers. Meetings shall be held at
the principal place of business of the Company or at such other place as may be
designated in the notice or waivers of notice of such meeting as determined by
the board of managers. Notice of any meeting of the board of managers shall be
given no fewer than ten (10) Business Days and no more than twenty (20) Business
Days prior to the date of the meeting. The attendance of a manager at any
meeting shall constitute a waiver of notice of such meeting, except where a
manager attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened. Unless specifically prohibited by the Certificate or the Act, any
action required to be taken at a meeting of the board of managers, or any other
action which may be taken at a meeting of the board of managers, may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by (i) the managers having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting if
five (5) days prior written notice of action to be taken by written consent was
delivered to all members of the board of managers or (ii) by all members of the
board of managers. Any such consent signed by the managers having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting shall have the same effect as if such action had been taken
at a duly called meeting of the managers and may be stated as such in any
document filed with the Secretary of State of the State of Delaware or with
anyone else. Any manager may participate in and act at any meeting through the
use of a conference telephone or other communications equipment by means of
which all persons participating in the meeting can hear and speak with each
other.
5.3 POWERS OF THE BOARD OF MANAGERS. Without in any way limiting
the generality of the foregoing, but subject to the express provisions of this
Agreement, the board of managers shall
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have, on behalf of the Company, all rights and powers that may be possessed by a
manager under the Act, to the extent granted by this Agreement, to manage and
administer the Company in accordance with the terms of this Agreement and to
perform all acts which it may, in its sole discretion, deem necessary or
desirable, including, but not limited to, the power to:
(a) Carry out all of the transactions contemplated
hereunder.
(b) Perform all acts, exercise all rights, and make all
decisions for and on behalf of the Company required or permitted to be taken by
the Company.
(c) Acquire, manage and dispose of any and all property,
real or personal, whether tangible or intangible, on behalf of the Company,
including through foreclosure or otherwise.
(d) Borrow money on behalf of the Company from any
Person (including, without limitation, from any Member or any Affiliate of any
Member) or cause the Company to lend money to any Person (including, without
limitation, to any Member or any Affiliate of any Member), and sell, assign,
exchange, transfer, pledge, grant a security interest in, or otherwise encumber
or dispose of, any and all of the Assets of any nature whatsoever.
(e) Compromise, arbitrate or otherwise adjust claims in
favor of or against the Company and initiate, prosecute and defend any
litigation relating to any Company business.
(f) Employ, engage, or subcontract with attorneys,
accountants, bookkeepers, underwriters, escrow agents, depositories, agents for
collection, banks, builders, and any other service provider as the board of
managers may determine to be appropriate, and to terminate the services of any
such entities, all at such time or times as the board of managers may determine.
(g) Negotiate, execute, deliver and perform any and all
contracts and other documents on behalf of the Company, including, but not
limited to, promissory notes, security agreements, contracts of purchase and
sale, deeds and assignments, and to take any and all other action, as the board
of managers deems appropriate, to effectuate any such transaction.
(h) Acquire and enter into any contract of insurance for
the Company that the board of managers deems necessary and proper for the
protection of the Company, either for the conservation of its Assets or for any
purpose convenient or beneficial to the Company.
(i) With reasonable notice and at a mutually agreed time
during regular business hours, to examine the Company's financial records,
including any NOC financial records in the possession of the Company, and
discuss the Company's accounting practices with its independent public
accountants.
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5.4 DUTIES AND OBLIGATIONS OF THE BOARD OF MANAGERS.
(a) The board of managers shall take all reasonable
action that may be necessary or appropriate for the continuation of the
Company's valid existence as a limited liability company under the laws of the
State of Delaware and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Members or to enable the
Company to conduct the business in which it is engaged.
(b) The board of managers shall use its best efforts to
at all times conduct the affairs of the Company and its Affiliates in such a
manner that the Members shall limit their liability with respect to any Company
liability or obligation to their respective Capital Contributions.
5.5 NO COMPENSATION FOR THE BOARD OF MANAGERS. No manager shall
receive from the Company any cash or other compensation for the services he/she
shall provide to the Company for his/her services as manager under this
Agreement.
5.6 REIMBURSEMENT OF EXPENSES. Notwithstanding SECTION 5.5
above, each manager shall be entitled to reimbursement from the Company for the
reasonable expenses that he/she pays for or incurs directly on behalf of the
Company in his/her role as a manager.
5.7 OFFICERS. The officers of the Company shall consist of
Robert S. Grimes as President, Ariel Amir as Secretary, a Chief Executive
Officer to be appointed by the board of managers and such other officers as may
be designated by the board of managers. The officers shall be appointed by, and
shall exercise such powers and perform such duties as are prescribed by, the
board of managers. Each officer shall hold office for the term for which he or
she is appointed and until his or her successors are elected and qualified. The
Company may compensate each officer for such officer's services in such amounts
as are determined by the board of managers in its sole and absolute discretion.
The board of managers may remove any officer at any time, with or without cause.
VI. POWERS AND WARRANTIES OF THE MEMBERS;
ADMISSION OF NEW MEMBERS
6.1 POWERS OF THE MEMBERS. Except as expressly provided in this
Agreement, the Members shall take no part in the management of the business or
transact any business for the Company and shall have no power to sign for or
bind the Company solely in their capacity as Members; provided, however, that
the Members shall have the approval and consent rights provided under the Act
and this Agreement.
6.2 MEETINGS OF MEMBERS. A meeting of the Members may be called
by (i) the holders of at least thirty-three percent (33%) of the Units, except
as otherwise provided by the Act,
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(ii) a majority of the managers, (iii) the President of the Company or (iv) two
(2) or more Original Eligible Owners who in the aggregate own at least twenty
(20%) percent of the Units. Meetings shall be held at the principal place of
business of the Company or at such other place as may be designated in the
notice or waivers of notice of such meeting as determined by the Members. Notice
of any meeting of the Members shall be given no fewer than ten (10) Business
Days and no more than twenty (20) Business Days prior to the date of the
meeting. The attendance of any Member at any meeting shall constitute a waiver
of notice of such meeting, except where such Member attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Unless specifically prohibited by
the Certificate or the Act, any action required to be taken at a meeting of the
Members, or any other action which may be taken at a meeting of the Members, may
be taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by (i) holders of Units having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which the holders of all the Interests were present and voting if
five (5) days prior written notice of action to be taken was delivered to all
Members or (ii) by all of the Members. Any such consent shall have the same
effect as if such action had been taken at a duly called meeting of the Members
and may be stated as such in any document filed with the Secretary of State of
the State of Delaware or with anyone else. Any Member may participate in and act
at any meeting through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other.
6.3 EXAMINATION OF COMPANY RECORDS. Each Member or its
representative may, during regular business hours, examine and copy (at such
Member's expense) the minutes of the meetings of Members or the board of
managers and the list of Members (where such records are maintained) of the
Company.
6.4 ADMISSION OF NEW MEMBERS. Except as provided in Section
4.1(b)(ii) hereof, the Company, with the approval of the board of managers may,
admit additional Persons to the Company as Members from time to time and create
and sell and issue Units to those Persons without approval of the existing
Members. Any new Member, prior to its admission as a Member, shall be required
to execute this Agreement or a counterpart to this Agreement, which evidences
such new Member's agreement to be bound to the terms and conditions of this
Agreement.
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VII. RIGHTS AND RESTRICTIONS ON TRANSFERS BY THE MEMBERS
7.1 RESTRICTIONS ON TRANSFERS GENERALLY. Each Member hereby
agrees that such Member shall not, and shall not permit any of its Affiliates
to, directly or indirectly, sell, transfer or otherwise dispose of all or any
part of its Units except: (i) pursuant to the terms and conditions of this
Article VII; (ii) pursuant to an exemption from registration under the
Securities Act and any state securities or blue sky laws; (iii) if the
transferee agrees in writing to be bound by the terms hereof and be deemed to be
a Member under this Agreement; (iv) after the third anniversary of the date of
this Agreement, provided, however, that prior thereto a Member may transfer all
or any part of its Units by offering its Units to each other Member on a
pro-rata basis, based on the percentage of Units owned by each Member electing
to participate in the purchase of such Units; and (v) if to any Person or
Affiliate of any Person that is in competition with ABT, the Company or any
Affiliate of ABT or the Company, with the written consent of ABT.
7.2 RIGHT OF FIRST OFFER.
(a) If a Member desires to sell, transfer or otherwise
dispose of any of its Units (other than to an Affiliate thereof), the Member
(the "SELLER") shall first deliver a written notice to each other Member of such
proposed sale, transfer or other disposition (the "FIRST OFFER NOTICE"). The
First Offer Notice shall contain (i) the proposed purchase price, (ii) the
number of Units proposed to be sold or transferred and (iii) the terms of
payment and other material terms and conditions of the Seller's offer.
(b) Each Member shall have the right, exercisable upon
written notice to the Seller within fifteen (15) days after receipt of the First
Offer Notice, to either: (i) purchase, on the terms and conditions as set forth
in the First Offer Notice all, but not less than all, of the Units that is the
subject of the First Offer Notice on a pro rata basis based on the percentage of
Units owned by each Member electing to participate in the right of first offer
(the "FIRST PURCHASE RIGHT") or (ii) notify the Seller in writing of a price per
share (the "MEMBER STATED PRICE") at which such Member would be willing to
purchase the number of Units specified in the First Offer Notice on the terms
and conditions as set forth in the First Offer Notice other than price (the
"ALTERNATIVE MEMBER OFFER") at the Member Stated Price included in such
Alternative Member Offer. Each Member electing to exercise the First Purchase
Right shall notify the Seller in writing of such election (the "NOTICE OF FIRST
OFFER ACCEPTANCE") and shall complete the First Purchase Right within sixty (60)
days after delivery of the Notice of First Offer Acceptance.
(c) If no Member elects to exercise the First Purchase
Right pursuant to Section 7.2(b) above, the Seller may, not later than one
hundred twenty (120) days following the expiration of the Members' First
Purchase Rights, transfer the Units that were the subject of the First Offer
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Notice on substantially the same terms and conditions as those described in the
First Offer Notice other than price to either (i) the Member that delivered the
Alternative Member Offer with the highest Member Stated Price (an "ALTERNATIVE
MEMBER OFFER SALE") at the Member Stated Price included in such Alternative
Member Offer or (ii) to a third party at a price per share that is at least ten
percent (10%) greater than the highest Member Stated Price, if any (a "PERMITTED
THIRD PARTY SALE"); provided, however, that ABT and its Affiliates must also
comply with the terms of Section 7.3 before transferring Units pursuant to a
Permitted Third Party Sale. Any proposed transfer on terms and conditions
materially different or at a lower price than one hundred ten percent (110%) of
the highest Member Stated Price, as well as any proposed transfer more than one
hundred twenty (120) days following the expiration of the First Purchase Right,
shall again be subject to the First Purchase Right of the other Members as set
forth in this Section 7.2 and shall require compliance with the procedures as
described in this Section 7.2.
7.3 TAG ALONG RIGHT.
(a) If a Permitted Third Party Sale would cause ABT and
its Affiliates (the "SELLING MEMBER") collectively to own less than a Majority
in Interest, then prior to transferring such Units pursuant to such Permitted
Third Party Sale, the Selling Member shall notify each other Member in writing
(the "TAG ALONG NOTICE") of such proposed transfer identifying (i) the name and
address of the proposed buyer and (ii) the proposed purchase price, the terms of
payment and other material terms and conditions of the proposed buyer's offer.
Within fifteen (15) days of receipt of a Tag Along Notice, each Member shall
notify (the "TAG ALONG ELECTION NOTICE") the Selling Member if it elects to
participate in such transfer (the "TAG ALONG RIGHT") and shall state the number
of its Units that such Member desires to sell. Each Member electing to
participate in the Tag Along Right (a "TAG ALONG MEMBER") may elect to sell up
to such number of Units as is equal to the total number of Units held by such
Tag Along Member multiplied by a fraction, the numerator of which shall be the
number of Units proposed to be sold by such Selling Member and the denominator
of which shall be the aggregate number of Units held by such Selling Member.
Each Tag Along Member shall have the right and be obligated to (i) sell to the
proposed buyer, at the same price and on the same terms as the Selling Member,
the number of Units stated in its Tag Along Election Notice and (ii) enter into
a purchase agreement substantially similar in form and substance to the purchase
agreement the Selling Member executes. The number of Units that the Selling
Member may sell will be reduced by the number of Units sold b(a)aby the Tag
Along Members.
(b) In the event that the proposed buyer does not
purchase the portion of the Units that the Tag Along Member elects to sell
pursuant to the foregoing on the same terms and conditions as the Units
purchased from the Selling Member, then the Selling Member shall not be
permitted to sell any Units to the proposed buyer. If no Tag Along Election
Notice is received within fifteen (15) days of the receipt of the Tag Along
Notice, the Selling Member shall have the right for a period of one hundred
twenty (120) days thereafter to transfer the Units to the proposed buyer on
terms and conditions no more favorable to the Selling Member than those stated
in the Tag Along Notice.
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7.4 DRAG ALONG RIGHT.
(a) If ABT and its Affiliates propose to sell in a bona
fide arm's length Permitted Third Party Sale or an Alternative Member Offer Sale
all Units collectively owned by ABT and its Affiliates (the "TRANSFERRING
MEMBER") to any Person or Persons who are not Affiliates of ABT and in which ABT
does not have a five (5%) percent or greater equity interest in (the "PROPOSED
TRANSFEREE"), the Transferring Member shall have the right (the "DRAG ALONG
RIGHT"), subject to applicable law and compliance with any other restrictions
applicable to such transfer, to require all Members to sell all Units then held
by the other Members to the Proposed Transferee, on the same terms and
conditions as are applicable to the Transferring Member.
(b) The Drag Along Right may be exercised only after the
third anniversary of this Agreement, and if prior to the Expiration Date, only
with the written consent of a majority of Non-ABT Units.
(c) To exercise a Drag Along Right, the Transferring
Member shall give each Member (each, a "DRAG ALONG MEMBER"), at least fifteen
(15) days prior to the proposed transfer to the Proposed Transferee, a written
notice (the "DRAG ALONG NOTICE") containing (i) the name and address of the
Proposed Transferee and (ii) the proposed purchase price, the terms of payment
and other material terms and conditions of the Proposed Transferee's offer. Each
Drag Along Member shall thereafter be obligated to (i) sell to the Proposed
Transferee all Units owned by such Drag Along Member and (ii) enter into a
purchase agreement on the same economic terms and substantially similar in form
and substance to the purchase agreement the Transferring Member executes;
provided, however, that in no event shall the purchase agreement provide for an
indemnity payable by a Drag Along Member greater than the proceeds received by
that Drag Along Member from the Proposed Transferee. If the sale is not
consummated within a period of one hundred twenty (120) days following the date
of the Drag Along Notice, then each Drag Along Member shall no longer be
obligated to sell such Member's Units pursuant to such Drag Along Right but
shall remain subject to the provisions of this Section 7.4 with respect to any
subsequent proposed transfer described in this Section 7.4.
7.5 TRANSFERS TO AFFILIATES. Notwithstanding anything to the
contrary contained in this ARTICLE VII, any Member ("TRANSFEROR") may transfer
any or all of its Units to an Affiliate (each a "PERMITTED TRANSFEREE"),
provided, however, that in each case such transfer shall be subject to the
Transferor and Permitted Transferee agreeing in writing, for the benefit of the
Company and the other Members (who shall be third party beneficiaries of such
agreement) that the Transferor will repurchase such Units in the event such
Permitted Transferee ceases to be an Affiliate; and provided, further, that the
Permitted Transferee may only transfer its Units to the Transferor from whom it
received such Units or any of such Transferor's Permitted Transferees or
otherwise in accordance with the terms hereof.
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7.6 TRANSFER BY ABT TO PON. Notwithstanding anything to the
contrary contained in this ARTICLE VII, ABT may transfer up to 1,300 Units to
Pon within six (6) months after the date of this Agreement.
7.7 TRANSFEREES SUBJECT TO AGREEMENT. Any transferor of any
Units shall, as a condition of the consummation of such transfer, sale or other
disposition, require the transferee to agree in writing to be subject to and
bound by the terms of this Agreement as a Member under this Agreement (it being
understood that the transferee shall be subject to the obligations of the
transferor but shall not be entitled to the rights of the transferor unless the
transferor expressly assigns such rights and, with respect to which, if
assigned, the transferor shall cease to be entitled, to the extent of such
assignment). Any transfer made in violation of this Section 7.7 shall be null
and void.
7.8 EXCHANGE RIGHTS.
(a) ABT shall have the right to exchange shares of its
common stock or pay cash, or any combination thereof, for all or any portion of
the Units held by any Member that is not an Original Eligible Owner (the
"EXCHANGE RIGHTS"); provided, however, that within one hundred twenty (120) days
of the Exchange Rights Notice (as defined below), ABT shall file a registration
statement with the United States Securities and Exchange Commission (the "SEC")
to register under the Securities Act any ABT common stock that has been
exchanged pursuant to this Section 7.8. The Company will use its commercially
reasonable best efforts to have such registration statement declared effective
by the SEC as soon thereafter as possible. The Exchange Rights may be exercised
multiple times with respect to the Units of one or more Members, but may not be
exercised prior to the second anniversary date of the effective date of this
Agreement.
(b) To exercise any Exchange Rights, ABT shall give the
relevant Member (each an "EXCHANGE RIGHTS MEMBER") a written notice of ABT's
exercise of the Exchange Rights (the "EXCHANGE RIGHTS NOTICE") stating (i) the
Fair Market Value of the Units of the Exchange Rights and (ii) the number of
shares of ABT common stock and/or the amount of cash to be paid. The value of
ABT common stock shall be based on the ten (10) day average price of ABT common
stock as quoted on NASDAQ immediately prior to the date of delivery of the
Exchange Rights Notice.
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7.9 PARTICIPATION RIGHTS.
(a) Except with respect to (i) a registration relating
solely to employee benefit plans, (ii) a registration relating solely to a
transaction pursuant to Rule 145 of the Securities Act, or (iii) an initial
public offering, if at any time the Company determines to register under the
Securities Act any of its Units in an offering in the United States or any
jurisdiction in Europe and if at such time any Member is not able to transfer or
sell its Units without registration by the Company due to restrictions placed on
such transfer or sale by the securities laws of that jurisdiction (a "Restricted
Member"), the Company will:
(i) give each Restricted Member 20 days prior
written notice of such registration (a "Registration Notice"); and
(ii) include in such registration (and any
related qualification under blue sky laws or other compliance requirement), and
in any underwriting involved therein, all the Units specified in a written
request received by the Company within 15 days after the Company's delivery of
the Registration Notice.
(b) If the registration of which the Company gives
notice is for an offering involving an underwriting, the Company shall so advise
the Restricted Members as part of the Registration Notice. In such event, the
right of any Restricted Member to participate in the registration will be
conditioned upon the Restricted Member's participation in such underwriting and
the inclusion of such Restricted Member's Units in the underwriting to the
extent provided herein. All Restricted Members proposing to distribute their
securities through such underwriting shall (together with the Company) enter
into an underwriting agreement in customary form with the managing underwriter
selected by the Company; provided, however, that in no event shall the
underwriting agreement provide for an indemnity payable by a Restricted Member
greater than the proceeds received by that Restricted Member from the offering.
(c) Notwithstanding any other provision of this Section
7.9, if the managing underwriter determines that marketing factors require
limitation of the number of Units to be underwritten, the managing underwriter
may exclude some or all Units requested to be included in such registration by
the Restricted Members. In the event the managing underwriter determines to
exclude some or all Units, the number of Units held by Restricted Members that
may be included in the registration and underwriting shall be allocated among
all Restricted Members who have requested to be included in the registration in
proportion, as nearly as practicable, to the respective amounts of Units held by
all such requesting Restricted Members at the time of the registration.
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7.10 PREEMPTIVE RIGHTS.
(a) If at any time the Company determines to issue
additional Units (or other equity interests) in the Company, exclusive of the
Company's issuance to Pon of up to six thousand seven hundred (6,700) Units at
no less than ONE THOUSAND DOLLARS ($1,000) per Unit on or prior to January 31,
2000, to any Member (the "PURCHASING MEMBER") it shall deliver a written notice
to each other Member of such proposed issuance (the "PREEMPTIVE NOTICE"). The
Preemptive Notice shall contain (i) the proposed issuance price, (ii) the total
number of Units proposed to be issued, (iii) the identity of the Purchasing
Member, and (iv) any other material terms and conditions of the issuance.
(b) Each other Member shall have the right, exercisable
upon written notice to the Company within fifteen (15) days after receipt of the
Preemptive Notice (the "PREEMPTIVE RIGHTS NOTICE PERIOD"), to purchase, on the
terms and conditions as set forth in the Preemptive Notice the Units (or other
equity interests) proposed to be issued on a pro rata basis based on the
percentage of Units owned by each other Member electing to participate in the
preemptive right (the "PREEMPTIVE RIGHT"). Any and all Members electing to
exercise the Preemptive Right within the Preemptive Rights Notice Period shall
enter into a purchase agreement with the Company and the Purchasing Member
within sixty (60) days following the date of the Preemptive Notice on
substantially similar terms and conditions as described in the Preemptive
Notice.
(c) If no other Member exercises the Preemptive Right
within the Preemptive Rights Notice Period, the Company may, not later than
sixty (60) days following expiration of the Preemptive Rights, conclude the
issuance of Units (or other equity interests) to the Purchasing Member on the
same economic terms and substantially the same terms and conditions as described
in the Preemptive Notice. Any proposed issuance of Units (or other equity
interests) to a Purchasing Member on terms and conditions materially different
from those described in the Preemptive Notice or any proposed issuance more than
sixty (60) days following the expiration of the Preemptive Right, shall again be
subject to the Preemptive Right of the other Members as set forth in this
Section 7.10 and shall require compliance with the procedures as described in
this Section 7.10.
7.11 EXPIRATION OF RIGHTS AND RESTRICTIONS. The provisions set
forth in Article VII hereof, shall expire and be of no further force and effect
on and after the Expiration Date to the extent permitted by law, except that the
provisions of Sections 7.2, 7.3, 7.4, 7.8 and 7.9 shall survive the Expiration
Date. In addition, the rights under Sections 7.2, 7.3, 7.8, 7.9 and 7.10 shall
expire and be of no further force and effect as to each Member on the date such
Member sells, transfers or otherwise disposes, other than to an Affiliate of
such Member, of more than:
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(a) twenty (20%) percent of the aggregate number of
Units it was issued, if the aggregate Capital Contribution it made was less than
$5 million;
(b) thirty (30%) percent of the aggregate number of
Units it was issued, if the aggregate Capital Contribution it made was $5
million or more but less than $10 million;
(c) forty (40%) percent of the aggregate number of Units
it was issued, if the aggregate Capital Contribution it made was $10 million or
more but less than $15 million; or
(d) sixty (60%) percent of the aggregate number of Units
it was issued, if the aggregate Capital Contribution it made was $15 million or
more.
7.12 ABT OWNERSHIP. Without the prior written consent of ABT,
the Company shall not issue Units to cause ABT to own less than fifty-five
percent (55%) of all Units.
7.13 REDEMPTION RIGHT.
(a) Each Original Eligible Owner may elect to redeem its
Units at the price it paid for such Units pursuant to the procedure set forth in
Section 7.13(b) if (i) there has been a change of control (as defined in Section
7.13(c)) of ABT and (ii) there has not been an IPO of the Company prior to the
third anniversary of the date of this Agreement.
(b) In order to exercise its redemption right described
in Section 7.13(a) above, an Original Eligible Owner must give written notice of
that election to the Company within five (5) days after the third anniversary of
the date of this Agreement. If the Company receives proper notice of an Original
Eligible Owner's election to redeem its Units, the Company shall redeem such
Units within eighteen (18) months of receiving such notice.
(c) As used in Section 7.13(a), a "change of control"
shall occur if more than fifty (50) percent of ABT's outstanding shares are
owned, acquired by, sold, or otherwise transferred to any person or group within
the meaning of Section 13(d) of the Securities Exchange Act of 1934, excluding
GE and any Affiliates thereof, within two years after the date of this
Agreement.
VIII. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 MEMBER REPRESENTATION. As of the date hereof, each Member
represents, warrants and covenants as to itself to the Company as follows:
(a) No Other Agreement Concerning Units. It is not,
after giving effect to the transactions occurring on or as of the date hereof, a
party to any other agreement with respect
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to the holding, voting, acquisition or disposition of any Units, except as
contemplated by this Agreement;
(b) Experience; Risk. It has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of the purchase of the Units pursuant to this Agreement and
of protecting its interests in connection herewith. It has the ability to bear
the economic risk of the investment, including complete loss of the investment.
It is experienced in evaluating and investing in new companies such as the
Company;
(c) Investment. It is acquiring the Units for its own
account, not as a nominee or agent, and not with a view to, or for resale in
connection with, any distribution thereof, and it has no present intention of
selling, granting any participation in, or otherwise distributing the same. It
understands that the Units have not been registered under the Securities Act by
reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of its representations as expressed
herein;
(d) Restricted Securities. It understands and
acknowledges that the Units are characterized as "restricted securities" under
United States federal securities laws inasmuch as they are being acquired from
the Company in a transaction not involving a public offering and that under such
laws and applicable regulations the Units may be resold without registration
under the Securities Act or other applicable foreign securities laws only in
certain limited circumstances. It acknowledges that the Units must be held
indefinitely unless subsequently registered under the Securities Act or other
applicable foreign securities laws or an exemption from such registration is
available;
(e) No Public Market. It understands and acknowledges
that no public market now exists for any of the securities issued by the Company
and that there can be no assurance that a public market will ever exist for the
Units;
(f) Authorization. It has the full right, power and
authority to enter into and perform its obligations under this Agreement and,
when executed and delivered by it, this Agreement will constitute its valid and
binding obligation, enforceable in accordance with its terms, subject to the
laws of general application relating to bankruptcy, insolvency and the relief of
debtors, rules of law governing specific performance, injunctive relief and
other equitable remedies;
(g) Government Consents. No consent, approval or
authorization of or designation, declaration or filing with any state, federal,
or any foreign governmental authority on the part of the Member is required in
connection with the valid execution and delivery of this Agreement by the
Member, and the consummation by the Member of the transactions contemplated
hereby;
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(h) Legends. It is understood that each certificate
representing the Units and any securities issued in respect thereof or exchange
therefor shall bear the legends below in substantially the following form (in
addition to any legend required under applicable securities laws).
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT"). NO SALE OR DISPOSITION OF THESE SECURITIES MAY
BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR
RECEIPT OF A NO ACTION LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO, AND
MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH AN AGREEMENT AMONG THE
COMPANY AND THE HOLDER OF THESE SECURITIES AND CERTAIN OTHER
HOLDERS OF THE COMPANY'S SECURITIES, A COPY OF WHICH IS ON FILE AT
THE PRINCIPAL OFFICE OF THE COMPANY.
(i) Accredited Investor Status. It presently
qualifies as an "accredited investor" within the meaning of Regulation D (17
C.F.R. 230.501) of the rules and regulations promulgated under the Securities
Act;
(j) Brokers or Finders. It has not incurred, and will
not incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or any similar charges in connection with this Agreement
or any transaction contemplated hereby;
(k) Market Standoff. It agrees that if so requested by
the Company or any representative of the underwriters in connection with
registration of the initial public offering or any secondary offering of any
securities of the Company under the Securities Act or under applicable foreign
securities laws, it shall not sell or otherwise transfer any Units or other
securities of the Company during the 180 day period following the effective date
of such registration statement or other applicable document so long as at least
ninety percent (90%) of all non-ABT Members are similarly restricted. The
Company may impose stop transfer instructions with respect to securities subject
to the foregoing restrictions until the end of such 180 day period; and
(l) Access to Information. It has had the opportunity to
ask questions of, and to receive answers from, appropriate executive officers of
the Company with respect to the terms and conditions of the transactions
contemplated hereby and with respect to the business, affairs, financial
condition and results of operations of the Company. It has had access to such
financial and other information as is necessary in order for it to make a fully
informed decision as to investment
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in the Company, and has had the opportunity to obtain any additional information
necessary to verify any of such information to which it has had access;
8.2 COMPANY REPRESENTATION. As of the date hereof, the Company
represents, warrants and covenants to each Member as follows:
(a) No Other Agreement Concerning Units. Except for this
Agreement, the Company is not a party to any other agreement with respect to the
holding, voting, acquisition or disposition of any Units;
(b) Valid Issuance. The Units when issued in accordance
with the provisions of this Agreement will be validly issued, fully paid and
nonassessable Units of the Company; provided, however, that such Units may be
subject to restrictions on transfer under United States' state and/or federal
securities laws or other foreign securities laws as set forth herein;
(c) Governmental Consent, etc. No consent, approval or
authorization of or designation, declaration or filing with any state or federal
governmental authority on the part of the Company is required in connection with
the valid offer, sale or issuance of the Units, except the qualification under
the California Corporate Securities Law or other applicable state securities
laws, of the offer and sale of the Units, which filing and qualification, if
required, will be effected in a timely manner
(d) Brokers and Finders. The Company has not incurred,
and will not incur, directly or indirectly, any liability for brokerage or
finders' fees or agents' commissions or any similar charges in connection with
this Agreement or any transactions contemplated hereby;
(e) Authorization. The Company has the full right, power
and authority to enter into and perform its obligations under this Agreement
and, when executed and delivered by it, this Agreement will constitute its valid
and binding obligation, enforceable in accordance with its terms, subject to the
laws of general application relating to bankruptcy, insolvency and the relief of
debtors, rules of law governing specific performance, injunctive relief and
other equitable remedies;
(f) Financial Statements. The Company shall maintain,
for each quarter and each fiscal year, statements of income, stockholder's
equity, cash flow and balance sheets of the Company setting forth, in each case,
in comparative form, corresponding consolidated figures from the preceding
fiscal year or corresponding quarter of the preceding fiscal year, as
applicable, all in accordance with generally accepted accounting principles
("GAAP"); and
(g) No Conflicts. Neither the execution and delivery by
the Company of this Agreement nor the consummation of the transactions
contemplated hereby will conflict with or
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result in a breach in any material respect of any agreement or instrument to
which the Company is a party.
(h) Legal Opinion. There shall have been delivered to
each Original Eligible Owner an opinion of Paul, Hastings, Janofsky & Walker
LLP, counsel to the Company, in substantially the form attached hereto as
Exhibit 2.
(i) Compliance with Law and Regulation. The Company is
and will continue to be in compliance with all applicable laws, statutes,
ordinances, regulations, rules, and other requirements imposed by any United
States federal, state, or local governmental authority ("Governmental
Authority") which could have a material adverse affect on the Company. The
Company has not received any written notice to the effect, or has otherwise been
advised, that it is not in compliance with any of such laws, statutes,
ordinances, regulations, rules or other requirements imposed by an Governmental
Authority.
8.3 NON-SOLICITATION; NON-HIRE. Each Member other than ABT, for
so long as such Member holds the largest equity interest in any NOC and for one
year thereafter, agrees not to directly or indirectly, on its own behalf or on
behalf of or in conjunction with any Person, recruit, solicit, or induce or
attempt to recruit, solicit, hire or induce any employee of the Company, ABT,
any NOC or any subsidiary of the Company, ABT or any NOC (or any Person who was
an employee of the Company, ABT, any NOC or any subsidiary of the Company, ABT
or any NOC within twelve (12) months of the date of solicitation) to become
employed by or to be engaged in a business which is competitive or may be
competitive with the Company, ABT, any NOC or any subsidiary of the Company, ABT
or any NOC.
8.4 DISCLOSURE OF MEMBER IDENTITY. The Company and the Members
will not disclose the terms and conditions of each Member's investment in the
Company without the prior written consent of the affected Member; provided,
however, that the Company and any Member may disclose (i) the name of each
Member to the public, (ii) the terms and conditions of any Member's investment
in the Company to its Affiliates or any other potential Member, and (iii) any
information to the extent required by law.
8.5 ANNUAL BUDGET. By December 31 of each year, the Chief
Executive Officer of the Company shall propose and the board of managers shall
approve an annual budget detailing the expenses of the Company for the following
year.
8.6 IPO INTENT. The Members and the Company currently
contemplate that it is in the best interest of the Company to have an IPO of the
equity of the Company within the next three (3) years, and the parties agree in
good faith to consider proposals for such IPO.
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8.7 INSURANCE. The Company shall maintain insurance covering
actions and omissions by the officers and directors of the Company pursuant to
customary terms approved by the board of managers, to the extent such insurance
is available to the Company.
8.8 RIGHT TO OFFER PRODUCTS AND SERVICES TO NOCS.
(a) The Company shall include a provision in each
license agreement or other agreement between the Company and each NOC (other
than NOCs in the United Kingdom, Sweden, Norway, Denmark and Finland in respect
to which the Company shall use commercially reasonable efforts to accomplish the
following) that each Original Eligible Owner will have the right to offer
automotive-related products and services on the website of each NOC, on a
nonexclusive arm's length commercial basis provided that:
(i) the entity selling such products or services
is an Original Eligible Owner or a bona fide Affiliate thereof;
(ii) an Original Eligible Owner may nominate
only one entity to offer such products and services per country or territory for
such preferred access;
(iii) the offered products or services will not
include the sale or lease of new or used vehicles or detract from the
functionality or user friendliness of the website; and
(iv) the terms and conditions for each NOC will
be substantially the same as those offered other entities providing similar
products or services on such NOC website.
(b) Should the Company either directly or indirectly
(other than through NOCs) operate websites in Europe, then each Original
Eligible Owner will have the right to offer automotive-related products and
services on such websites pursuant to the terms and conditions set out in
SECTION 8.8(A) above.
IX. DISTRIBUTIONS
9.1 DISTRIBUTIONS. Except as provided in SECTION 14.3 hereof, in
connection with the dissolution and liquidation of the Company, the Company
shall make distributions to the Members, in accordance with, and in proportion
to, their respective Ownership Percentages, out of the available net cash flow
(after the establishment of reserves under SECTION 9.2 hereof) within three (3)
months after the end of each calendar year, unless the board of managers
determines, in its sole and absolute discretion, otherwise. Notwithstanding
anything in this Agreement to the contrary, neither the Company nor any person
on behalf of the Company shall make any distributions except to the extent
permitted under the Act or other applicable law.
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9.2 ESTABLISHMENT OF RESERVES. Notwithstanding anything to the
contrary in SECTION 9.1 hereof, the board of managers may retain an amount of
cash it deems reasonably necessary to satisfy the obligations of the Company on
an annual net operating basis including, without limitation, debt payments,
legal fees and expenses, audit costs and unforeseen contingencies. Other Company
funds that the board of managers determines are not needed for Company reserves
or operations shall be distributed to the Members from time to time in the board
of managers' sole and absolute discretion in accordance with SECTION 9.1 hereof.
9.3 LIQUIDATING DISTRIBUTIONS. Notwithstanding SECTIONS 9.1 and
9.2 hereof, cash or other property of the Company available for distribution
upon the dissolution and liquidation of the Company (including cash received
upon the sale or other disposition of the Assets in anticipation of
liquidation), shall be distributed as provided in accordance with the provisions
of SECTION 14.3 hereof.
X. MAINTENANCE OF CAPITAL ACCOUNTS; ALLOCATIONS
10.1 ALLOCATIONS OF PROFIT OR LOSS.
(a) Profit. The Company shall establish for each Member
on the books of the Company a Capital Account. For each Fiscal Year or portion
thereof, Profit shall be allocated among the Members (after giving effect to the
allocations contained in Sections 10.2 and 10.3) first in the proportion and to
the extent that Losses have been allocated to the Members pursuant to Section
10.1(b)(i); and thereafter to the Members in accordance with their respective
Ownership Percentages.
(b) Losses. The Company shall allocate Losses.
(i) first, to the Members, other than ABT, to
the extent of and in accordance with their respective positive Capital Account
balance; and
(ii) thereafter, to the Members in accordance
with their respective Ownership Percentages.
(c) Notwithstanding the foregoing, except in connection
with a sale or disposition of the ABT Contribution, any Profit or Loss
attributable to any appreciation or depreciation in the ABT Contribution shall
be allocated to ABT; provided, however, that for purposes of this Section
10.1(c), a disposition or sale of the ABT Contribution shall not include an
assignment of any such Assets to ABT.
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10.2 TAX ALLOCATIONS; CERTAIN BOOK/TAX DIFFERENCES.
(a) All items of income, gain, loss, deduction and
credit shall be allocated in the manner that the corresponding item of Profit or
Loss was allocated pursuant to Section 10.1.
(b) In accordance with Section 704(c) of the Code and
the applicable Treasury Regulations thereunder, income, gain, loss, deduction
and tax depreciation with respect to any Asset contributed to the capital of the
Company or otherwise revalued on the books of the Company shall, solely for
income tax purposes, be allocated among the Members so as to take into account
any variation between the adjusted tax basis of such property to the Company and
the fair market value of such property as determined at the time of the
contribution or revaluation. In addition, the board of managers, in its sole
discretion, may make, or not make, "curative" or "remedial" allocations (within
the meaning of the Treasury Regulations under Section 704(c) of the Code) in any
manner that reasonably reflects the purpose and intention of this Agreement,
including (i) "curative" allocations which offset the effect of the "ceiling
rule" for a prior taxable year (within the meaning of Treasury Regulation
Section 1.704-3(c)(3)(ii)) and (ii) "curative" allocations from the disposition
of contributed property (within the meaning of Treasury Regulation Section
1.704-3(c)(3)(iii)(B)). The foregoing allocations made pursuant to this Section
10.2(b) shall be as determined by the board of managers in accordance with any
permissible method under Section 704(c) of the Code and any applicable Treasury
Regulations thereunder.
10.3 SPECIAL ALLOCATIONS. The following special allocations
shall be made in the following order of priority:
(a) Minimum Gain Chargeback. Except as otherwise
provided in Treasury Regulations Section 1.704-2(f), notwithstanding any other
provision of this Article X, if there is a net decrease in Company Minimum Gain
during any Fiscal Year, each Member shall be specially allocated items of
Company income and gain for such period in proportion to and to the extent of an
amount equal to the portion of such Member's share of the net decrease in
Company Minimum Gain, determined in accordance with Treasury Regulations
Sections 1.704-2(f) and 2(g). The items so allocated shall be determined in
accordance with Treasury Regulation Sections 1.704-2(f)(6) and 1.704-2(j)(2).
This Section 10.3(a) is intended to comply with the minimum gain chargeback
requirement in Treasury Regulation Section 1.704(f) and shall be interpreted
consistently therewith.
(b) Qualified Income Offset. If any Member unexpectedly
receives an adjustment, allocation or distribution described in Treasury
Regulation Section 1.704-l(b)(2)(ii)(d)(4), (5) or (6), items of Company income
and gain shall be specially allocated to such Member in an amount and manner
sufficient to eliminate, to the extent required by Treasury Regulation Section
1.704-1(b)(2)(ii)(d), the Adjusted Capital Account Deficit of such Member as
quickly as possible, provided that an allocation pursuant to this Section
10.3(b) shall be made only
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if and to the extent that such Member would have an Adjusted Capital Account
Deficit after all other allocations provided for in this Article X have been
tentatively made as if this Section 10.3(b) were not in this Agreement. This
Section 10.3(b) is intended to comply with the "qualified income offset"
provision of such Treasury Regulation Section and shall be interpreted
consistent therewith.
(c) Special Income Allocation. In the event any Member
has a deficit Capital Account balance at the end of any Fiscal Year or portion
thereof that is in excess of the amount such Member is obligated to restore
pursuant to Treasury Regulations Sections 1.704-2(g) and 1.704-2(i)(5), each
such Member shall be specially allocated items of Company income and gain in the
amount of such excess as quickly as possible, provided that an allocation
pursuant to this Section 10.3(c) shall be made only if and to the extent that
such Member would have an Adjusted Capital Account Deficit after all other
allocations provided for in this Agreement have been tentatively made as if this
Section 10.3(c) were not in this Agreement.
(d) Nonrecourse Deductions. Nonrecourse Deductions for
any Fiscal Year or portion thereof in respect of an Asset shall be allocated (as
nearly as possible) under Treasury Regulation Section 1.704-2 among the Members
in accordance with their relative Ownership Percentages in the case of
Nonrecourse Deductions in respect of an Asset.
(e) Member Nonrecourse Deductions. Any Member
Nonrecourse Deductions for any Fiscal Year or other period shall be allocated to
the Member that potentially bears an economic risk of loss with respect to the
Member Nonrecourse Debt to which such Member Nonrecourse Deductions are
attributable in accordance with the principles set forth in Treasury Regulation
Section 1.704-2(i).
(f) Member Minimum Gain Chargeback. Except as otherwise
provided in Treasury Regulation Section 1.704-2(i), if there is a net decrease
in Member Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse
Debt during any Fiscal Year or portion thereof, each Member who has a share of
the Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse
Debt, determined in accordance with Treasury Regulation Section 1.704-2(i)(5),
shall be specially allocated items of Company income and gain for such Fiscal
Year (and if necessary, subsequent Fiscal Years) in an amount equal to such
Member's share of the net decrease in Member Nonrecourse Debt, determined in
accordance with Treasury Regulations Section 1.704-2(i)(4). Allocations pursuant
to the previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Member pursuant thereto. The items to be so
allocated shall be determined in accordance with Treasury Regulations Sections
1.704-2(i)(4) and 1.704-2(j)(2). This Section 10.3(f) is intended to comply with
the minimum gain chargeback requirement in Treasury Regulation Section
1.704-2(i)(4) and shall be interpreted consistently therewith.
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10.4 ALLOCATIONS UPON TRANSFER OF UNITS IN THE COMPANY. In the
event of a transfer of any Units in the Company permitted under this Agreement,
all items of income, gain, loss, deduction and credit for the Fiscal Year in
which the transfer occurs shall be allocated for Federal income tax purposes
between the transferor and the transferee on the basis of the ownership of the
Units at the time the particular item is taken into account by the Company for
Federal income tax purposes, except to the extent otherwise required by law.
Distributions made on or after the effective date of transfer shall be made to
the transferee, regardless of when such distributions accrued on the books of
the Company. The effective date of the transfer shall be (a) in the case of a
voluntary transfer, the actual date the transfer is recorded on the books of the
Company, or (b) in the case of an involuntary transfer, the date of the
operative event.
XI. ACCOUNTING PROCEDURE; TAX MATTERS
11.1 FISCAL YEAR. The fiscal year of the Company shall begin on
January 1 and shall end on December 31 of each year.
11.2 BOOKS OF ACCOUNT. At all times during the existence and
continuance of the Company, the board of managers shall cause to be kept
accurate, complete, and proper books, records, and accounts pertaining to the
Company's affairs, including: (a) a list of all Members and their Capital
Contributions, Units, Ownership Percentages, and Capital Accounts, (b) a copy of
the Certificate and all amendments thereto and all powers of attorney pursuant
to which any Certificate has been executed, (c) an original copy of this
Agreement and all amendments thereto, (d) copies of the Company's federal, state
and local tax returns and financial statements, and (e) the Company's books and
records. Such books and records shall be kept on the accrual basis of accounting
in conformity with generally accepted accounting principles. The method of
accounting followed by the Company for Federal income tax purposes shall be the
accrual method. All books, records, and accounts of the Company shall be kept at
its principal office or at such other office as the board of managers may
designate for such purpose.
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11.3 PREPARATION AND FILING OF INCOME TAX RETURNS AND OTHER
WRITINGS.
ABT shall cause the preparation and timely filing of all Company
tax returns, shall on behalf of the Company make such tax elections (including,
without limitation, any election under Section 754 of the Code, which Section
754 election may be made in the Tax Matters Partners' discretion, upon the
written request of any Member), determinations, and allocations which he, in his
sole and absolute discretion, deems to be appropriate, and shall timely make all
other filings required by any governmental authority having jurisdiction to
require such filing, the cost of which shall be borne by the Company. ABT will
furnish copies of such returns to each Member. ABT shall also cause to be
delivered to the Members, within ninety (90) days after the expiration of each
tax year of the Company, a Form K-1 prepared by the Company or the Company's
accountant. This form shall show the allocation of Profit or Loss of the Company
for Federal income tax purposes, including all separately stated items, to each
Member. No election shall be made by the Company or any Member to be excluded
from the application of the provisions of subchapter K of the Code or from any
similar provision of state and local tax laws.
11.4 CONTROVERSIES WITH THE INTERNAL REVENUE SERVICE. In the
event of any controversy with the Internal Revenue Service or any other taxing
authority involving the Company or any individual Member or Members, the outcome
of which may adversely affect the Company, directly or indirectly, or the amount
of the allocation of income, gain, loss, deduction, or credit of the Company to
such Member, the Company may, at its option, incur expenses it deems necessary
or advisable in the interest of the Company in connection with any such
controversy, including, without limitation, reasonable attorneys' and
accountants' fees. ABT is hereby designated by the Members as the "TAX MATTERS
PARTNER" of the Company as defined in Section 6231(a)(7) of the Code and in such
capacity shall represent the Company in any disputes, controversies or
proceedings with the Internal Revenue Service. The Company will promptly send to
each Member a copy of all correspondence sent to or received from the Internal
Revenue Service by the Company.
XII. LIMITATIONS ON LIABILITIES; INDEMNIFICATION;
RIGHT TO CONDUCT OTHER BUSINESS
12.1 LIABILITY OF MEMBERS. The operating or other losses of the
Company shall be solely the liability of the Company, and no Member shall be
obligated personally for any such operating or other loss solely by reason of
being a Member. In no event shall the liability of a Member exceed, in the
aggregate, the amount of its Capital Contributions and no creditors shall have
the right to attach or garnish or compel the contribution by any Member of any
additional sums of capital.
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12.2 INDEMNIFICATION. The Company shall, to the fullest extent
permitted by applicable law, indemnify and hold harmless, the board of managers,
and any manager thereof, any Observer, any Authorized Person and agent, officer,
representative and employee thereof or Person who is deemed to control either
the board of managers or an Authorized Person (hereinafter collectively referred
to as the "INDEMNITEES") from and against any losses, claims, damages,
liabilities or actions, joint or several, to which such Indemnitees may be
subject by virtue of any act performed by such Indemnitee, or omitted to be
performed by any such Indemnitee, in connection with the business of the Company
or its formation and shall reimburse each such Indemnitee for any legal or other
expenses reasonably incurred by such Person in connection with investigating,
defending or preparing to defend any such loss, claim, damage, liability or
action; provided, however, that the Company shall not be liable to any
Indemnitee to the extent that in the final non-appealable judgment of a court of
competent jurisdiction such loss, claim, damage, liability or action is found to
arise from such Indemnitee's gross negligence or willful misconduct. Expenses
incurred by an Indemnitee in defending a civil or criminal action, suit or
proceeding arising out of or in connection with this Agreement or the Company's
business or affairs shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
the Indemnitee to repay such amount plus reasonable interest in the event that
it shall ultimately be determined that the Indemnitee was not entitled to be
indemnified by the Company in connection with such action. The foregoing rights
of indemnification shall not be exclusive of any other rights to which such
Indemnitee may be entitled. No amendment of this Agreement shall limit or
eliminate the right to indemnification provided hereunder with respect to acts
or omissions occurring prior to such amendment or repeal. The Company may carry
insurance protecting it and potential Indemnitees from liabilities to third
parties, to the extent practicable.
12.3 RIGHT TO CONDUCT OTHER BUSINESS. Except as provided in
SECTIONS 7.1, 7.2, 7.3, 8.3 AND 8.8 hereof, nothing contained in this Agreement
shall be deemed to restrict in any way the freedom of each Member, the board of
managers, and any manager thereof, and their Affiliates, including any director,
officer, or employee of such person, to conduct any other business or any other
activity whatsoever, including without limitation, the acquisition, holding and
disposing of real estate, securities or assets of any entity without having or
incurring any obligation to offer any interest therein to the Company or any
other Member.
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XIII. POWER OF ATTORNEY
13.1 AUTHORITY TO EXECUTE DOCUMENTS. During the life of the
Company and (to the extent a manager remains) during any additional period
authorized in accordance with this Agreement to dissolve, liquidate and wind up
its affairs of the Company, each of the undersigned Members hereby irrevocably
designates and appoints Robert S. Grimes and Ariel Amir, and each of them, and
any successors of such managers, and any duly appointed agent of such managers,
with full power of substitution, to be the Member's true and lawful
attorney-in-fact with the power from time to time in the name, place and stead
of the Member to do any ministerial act necessary to qualify the Company to do
business under the laws of any jurisdiction in which it is necessary to file any
instrument in writing in connection with such qualification, and to make,
execute, swear to and acknowledge, amend, file, record, deliver and publish in
conformance with the provisions of this Agreement (i) the Certificate for the
Company, (ii) a counterpart of this Agreement or of any amendment hereto for the
purpose of filing or recording such counterpart in any jurisdiction in which the
Company may own property or transact business, (iii) all certificates and other
instruments necessary to qualify or continue the Company as a limited liability
company in Delaware or in any jurisdiction where the Company may own property or
be doing business, (iv) any fictitious or assumed name certificate required or
permitted to be filed by or on behalf of the Company, (v) any other instrument
that is now or may hereafter be required by law to be filed for or on behalf of
the Company, (vi) any other instruments or documents that the board of managers
deems necessary to conduct the operation of the Com13.1abpany; provided, that,
such instrument or document is not inconsistent with the terms of this Agreement
in effect at that time and does not result in a material liability to such
Member, (vii) any amendment to this Agreement adopted pursuant to SECTION 14.1
hereof and (viii) a certificate or other instrument evidencing the dissolution
or termination of the Company when such shall be appropriate in Delaware and
each other jurisdiction in which the Company shall own property or do business.
13.2 SURVIVAL OF POWER. The existence of this power of attorney
shall not preclude execution of any such instrument by a Member individually on
any such matter. This limited power of attorney shall not be revoked and shall
survive the assignment or transfer by a Member of all or part of its Units in
the Company and, being coupled with an interest, shall survive the death,
incapacity or dissolution of the Member to the extent that it may legally
contract for such survival. Any person dealing with the Company may conclusively
presume and rely upon the fact that any such instrument executed by such agent
and attorney-in-fact is authorized, regular and binding without further inquiry.
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XIV. AMENDMENT AND DISSOLUTION
14.1 AMENDMENT. Any provision of this Agreement may be amended
by the consent of the holders of at least eighty-five percent (85%) of all
Units; provided, however, that no amendment of this Agreement shall, without the
consent of the affected Member, (i) increase the liability of a Member beyond
the liability of such Member expressly set forth in this Agreement or otherwise
modify or affect the limited liability of such Member, (ii) change the method or
calculation of distributions or allocations made under the provisions of
ARTICLES IX AND X hereof to any Member (except as otherwise provided in this
Agreement), (iii) eliminate an Original Eligible Owner's right to appoint a
manager except as provided in Section 4.1(a) or (iv) amend the rights of
Original Eligible Owners granted under Section 8.8.
14.2 DISSOLUTION.
(a) The Company shall be dissolved and its business
wound up and terminated on the earlier of:
(i) The date on which at least eighty percent
(80%) of the Company's Units as of January 1 of any year are transferred (other
than to Affiliates of Members), or all of the Assets (excluding the ABT
Contribution) have been disposed of and, to the extent legally available, the
net proceeds therefrom distributed to the Members; provided, however, such
transfer of Units or disposition of Assets will not be deemed a dissolution of
the Company or an event triggering dissolution or winding up of the Company if
such event is pursuant to a merger, sale, reorganization, reformation or similar
restructuring in which after such event the Members prior to such transaction
collectively own at least 50% of the equity of the entity that owns or controls
substantially all of the Assets after such transaction;
(ii) The date on which the Company is dissolved
by operation of law or judicial decree;
(iii) The date on which all of the Members agree
to terminate the Company; or
(iv) The occurrence of any other event causing
the dissolution of a limited liability company under the Act.
(b) Upon dissolution of the Company created hereunder,
the board of managers shall give written notice of such dissolution to the
Members which shall state that the Assets are to be liquidated in an orderly
fashion with appropriate reserves maintained for then existing and potential
obligations and contingent liabilities of the Company. Upon dissolution for
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any reason whatsoever, the Company shall thereafter engage in no further
business other than that necessary to wind up the business and to distribute the
Assets.
14.3 DISTRIBUTIONS UPON DISSOLUTION.
(a) Upon dissolution of the Company, (i) the ABT
Contribution shall be assigned back to ABT and (ii) the board of managers shall
act as liquidating trustee regarding the disposition of the Assets (excluding
the ABT Contribution, the "Remaining Assets") for cash, to pay and discharge all
liabilities and obligations of the Company and to distribute all cash remaining
and any Remaining Assets which cannot be disposed of to the Members as described
below. The liquidating trustee shall be under no liability with respect to the
Remaining Assets held by the Company upon dissolution except to hold and
maintain the same in the Company until disposed of in accordance with the terms
of this Agreement and the Act. Unless agreed to by all Members, and to the
extent commercially reasonable, every reasonable effort shall be made to dispose
of the Remaining Assets so that the liquidating distributions to the Members
shall be made in cash. If any non-cash Remaining Assets must be distributed in
kind, the liquidating trustee shall ascertain the fair market value of such
Remaining Assets by appraisal or other reasonable means of such Remaining Assets
remaining unsold and each Member's Capital Account shall be charged or credited,
as the case may be, as if such Remaining Assets had been sold at such fair
market value and the net gain or net loss realized thereby had been allocated to
and among the Members in accordance with SECTION 10.2 hereof. All of the
Remaining Assets, including, without limitation, all cash and property, if any,
then on hand in the Company, shall be applied and distributed, with reference to
the fair market value thereof, by the liquidating trustee. A reasonable time
shall be allowed for the orderly liquidation of the Remaining Assets and the
discharge of liabilities to creditors so as to minimize any losses attendant
upon a liquidation. The proceeds from the liquidation, to the extent sufficient
t(a)abherefor, shall be applied and distributed in the following order:
(i) To the creditors of the Company, whether by
payment or the making of an agreement for payment;
(ii) To setting up the reserves that the
liquidating trustee may deem necessary or reasonable for contingent or
unforeseen liabilities or obligations of the Company or of the liquidating
trustee arising out of or in connection with the Company or its liquidation;
(iii) To the non-ABT Members in proportion to,
and to the extent of, each Member's positive Capital Account balance, after
giving effect to all contributions, distributions and allocations for all
periods.
(iv) Thereafter, to ABT and the non-ABT Members
in proportion to, and to the extent of, their positive remaining Capital Account
balances.
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(b) All reasonable attempts shall be made to cause any
distributions to Members under this ARTICLE XIV upon liquidation to be made by
the end of the taxable year in which the liquidation of the Company occurs.
(c) The liquidating trustee shall comply with the terms
of this Agreement and any requirements of the Act or other applicable law
pertaining to the winding up of a limited liability company, at which time the
Company shall stand liquidated.
(d) The liquidating trustee shall be under no liability
with respect to the Assets held by the Company upon dissolution except to hold
and maintain the same in the Company until disposed of in accordance with the
terms of this Agreement and the Act. The Members shall look solely to the Assets
for the return of their respective Capital Contributions and, if the Assets
remaining after the payment or discharge of the debts and liabilities of the
Company are insufficient to return their Capital Contributions, they shall have
no recourse against the liquidating trustee or any Member for that purpose.
14.4 NO OBLIGATION TO RESTORE DEFICIT CAPITAL ACCOUNTS. No
Member with a deficit balance in its Capital Account shall have any obligation
to the Company or any other Member to restore said deficit balance. In addition,
except as expressly provided by agreement or relevant documentation, no venturer
or partner in any Member shall have any liability to the Company or any other
Member for any deficit balance in such venturer's or partner's capital account
in the Member in which it is a partner or venturer. Furthermore, a deficit
Capital Account balance of a Member (or a capital account of a partner or
venturer in a Member) shall not be deemed to be a liability of such Member (or
of such venturer or partner in such Member) or an Asset of the Company or any
Member.
XV. MISCELLANEOUS
15.1 INJUNCTIVE RELIEF. The parties acknowledge that it will be
impossible to measure in money the damages that would be suffered if the parties
fail to comply with certain of the obligations imposed on them by this
Agreement, including without limitation those obligations set forth in ARTICLES
IV, VII AND VIII and that in the event of any such failure, an aggrieved Person
will be irreparably damaged and will not have an adequate remedy at law. Any
such Person shall, therefore, in addition and not in lieu of any other remedy
available to an aggrieved Person, be entitled to injunctive relief and/or
specific performance to enforce such obligations, and if any action is brought
in equity to enforce any of such provisions of this Agreement, none of the
parties hereto shall raise the defense that there is an adequate remedy at law.
15.2 FURTHER ASSURANCES. Each party hereto shall do and perform
or cause to be done and performed all such further acts and things and shall
execute and deliver all such other
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agreements, certificates, instruments and documents as any other party hereto
reasonably may request in order to carry out the intent and accomplish the
purposes of this Agreement.
15.3 GOVERNING LAW; DISPUTE RESOLUTION. This Agreement shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of Delaware without regard to principles
of conflict of laws.
(a) If a dispute arises under this Agreement, it should
be referred to the president or chief executive officer of each Member for
resolution, and such persons shall use their best efforts to resolve the matter
for no less than thirty (30) days. Any matter such persons are unable to resolve
within such period must be submitted to the dispute resolution procedure set
forth in Section 15.3(b).
(b) Any dispute or claim arising out of or in connection
with this Agreement not resolved by Section 15.3(a) above, must be finally
settled by binding arbitration under the Rules of Conciliation and Arbitration
of the American Arbitration Association (the "RULES") by one (1) arbitrator
appointed in accordance with such Rules within a period of ninety (90) days from
the date such dispute is submitted to arbitration. Judgment on the award
rendered may be entered in any court having jurisdiction thereof. The place of
arbitration shall be New York, New York. Any monetary award must be calculated
and denominated in United States dollars and the arbitration must be conducted
in the English language. Notwithstanding the other provisions of this Section
15.3, either party may apply to any court of competent jurisdiction for
injunctive or equitable relief.
15.4 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof,
and supersedes all prior and contemporaneous agreements and understandings of
the parties with respect thereto, including the Operating Agreement of the
Company dated September 30, 1997.
15.5 BINDING EFFECT. This Agreement shall be binding on and
inure to the benefit of the parties hereto and, subject to the terms and
provisions hereof, their respective, heirs, administrators, executors, legal
representatives, successors and permitted assigns.
15.6 INVALIDITY OF PROVISION. The invalidity or unenforceability
of any provision of this Agreement in any jurisdiction shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of this Agreement, including that
provision, in any other jurisdiction.
15.7 NOTICES. All notices and other communications given or made
hereunder shall be in writing and, unless otherwise provided herein, shall be
deemed to have been given when received by the party to whom such notice is to
be given (i) by an overnight delivery service or by mail at its address set
forth on the signature pages hereto, or such other address for the party as
shall be specified by notice given pursuant hereto, (ii) by electronic facsimile
(fax) to such party at the facsimile number set forth on the signature pages
hereto, or such other facsimile number for the party as shall
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<PAGE> 43
be specified by notice given pursuant hereto, or (iii) by e-mail at the e-mail
address set forth on the signature pages hereto, or such other e-mail address
for the party as shall be specified by notice given pursuant hereto.
15.8 HEADINGS. The descriptive headings of the several sections
of this Agreement are inserted for convenience only and do not constitute part
of this Agreement.
15.9 GENDER AND NUMBER. Whenever required by the context, as
used in this Agreement, the singular number shall include the plural, the neuter
shall include the masculine or the feminine gender and the masculine gender
shall include the neuter or the feminine gender.
15.10 COUNTERPARTS AND EXECUTION. This Agreement may be executed
in multiple counterparts, each of which shall be deemed an original agreement
and all of which shall constitute one agreement among each of the parties
hereto, notwithstanding that all of the parties are not signatories to the
original or the same counterpart, to be effective as of the day and year first
set forth above.
15.11 CONSENTS AND WAIVERS. A Member's waiver, consent, failure
to object, failure to seek redress, course of conduct or failure to insist upon
the strict performance of any covenant or condition of this Agreement shall not
be considered or construed as a waiver or consent for subsequent matters or
other obligations or rights of the Member. No waiver of any term or provision of
this Agreement shall be effective unless in writing signed by the party to be
charged.
15.12 RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies
provided by this Agreement are cumulative and the use of any one right or remedy
by any party shall not preclude or waive its right to use any or all other
remedies. Such rights and remedies are given in addition to any other rights the
parties may have by law, statute, ordinance, or otherwise.
15.13 WAIVER OF RIGHT TO PARTITION. Each of the parties hereto
irrevocably waives during the term of the Company any right that it may have to
maintain any action for partition with respect to an Asset.
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<PAGE> 44
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
AUTOBYTEL.EUROPE LLC
By: /s/ Mark W. Lorimer
---------------------------------
Name: Mark W. Lorimer
Title: Chairman
Notice Information:
Autobytel.Europe LLC
c/o autobytel.com inc.
18872 MacArthur Boulevard
Irvine, California 92612
U.S.A.
Attention: Ariel Amir, Esq.
Facsimile: 949-862-1323
E-mail: [email protected]
MEMBERS:
AUTOBYTEL.COM INC.
By: /s/ Robert S. Grimes
---------------------------------
Name: Robert S. Grimes
Title: Executive Vice President
Notice Information:
autobytel.com inc.
18872 MacArthur Boulevard
Irvine, California 92612
U.S.A.
Attention: Ariel Amir, Esq.
Facsimile: 949-862-1323
E-mail: [email protected]
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<PAGE> 45
GE CAPITAL EQUITY HOLDINGS, INC.
By: /s/ Brian S. Graff
---------------------------------
Name: Brian S. Graff
Title: Vice President
Notice Information:
GE Equity
120 Long Ridge Road
Stamford, CT 06927
Attention: John Flannery
Facsimile: (203) 961-2088
E-mail: [email protected]
INCHCAPE OVERSEAS INVESTMENTS B.V.
By: /s/ Peter W. Johnson
---------------------------------
Name: Peter W. Johnson
Title:
Notice Information:
Inchcape Motors International plc
33 Cavendish Square
London W1M 9HF United Kingdom
Attention: Peter W. Johnson
Facsimile: 011 44 171 546 8441
E-mail: [email protected]
PON HOLDINGS B.V.
By: /s/ Henk Rottinghuis
---------------------------------
Name: Henk Rottinghuis
Title: Director
Notice Information:
Pon AutomobieHandel B.V.
Zujderinslag 2
3833 BP Leusden
Netherlands
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<PAGE> 46
Attention: Henk Rottinghuis
Facsimile: 011 33 133 494 8714
E-mail: [email protected]
41
<PAGE> 1
EXHIBIT 10.34
[*] Confidential Treatment has been requested for certain portions of this
exhibit
INTERCOMPANY SOFTWARE LICENSE AGREEMENT
This INTERCOMPANY SOFTWARE LICENSE AGREEMENT is made as of January 6,
2000 (the "EFFECTIVE DATE") by and between autobytel.com inc., a Delaware
corporation with offices at 18872 MacArthur Blvd, 2nd Floor, Irvine, California
92612 ("ABT/US") and AUTOBYTEL.EUROPE LLC, a Delaware limited liability company
with offices at 18872 MacArthur Blvd, 2nd Floor, Irvine, California 92612
("ABT/E").
WHEREAS, ABT/US is engaged in an Internet-based marketing business for
new and used vehicles in North America that provides Internet users with fast,
haggle-free, and courteous purchasing and related services designed to improve
consumers' overall vehicle buying experience (which includes such business as
now engaged in by ABT/US and as may be engaged in by ABT/US during the term of
this Agreement, and which includes but is not limited to the activities
described in section 1.24 of Exhibit A) (the "ABT/US BUSINESS"), and in
connection with such business has developed certain software, certain end user
documentation associated therewith and certain proprietary business procedures;
and
WHEREAS, the parties wish ABT/E to be able to carry on a similar
Internet-based marketing business in Europe through dealers or directly to users
for its own account or license NOCs (as defined below) to do the same on ABT/E's
behalf.
NOW, THEREFORE, the parties agree as follows:
1. LICENSE OF SOFTWARE, DOCUMENTATION, BUSINESS PROCEDURES AND
TRADEMARKS.
1.1 LICENSE.
(a) ABT/US hereby grants to ABT/E the perpetual, exclusive
right to (i) use the Software (in source code and object code format), Business
Procedures, Documentation and ABT Brand as described in Section 1.1(c); and (ii)
grant sublicenses ("SUBLICENSES") in substantially the form set forth in EXHIBIT
A for the purpose of operating a Local Business in one or more entire countries
in Europe (the "TERRITORY"). For avoidance of doubt, ABT/E may, in its
discretion, deliver the Software under each Sublicense in source code format,
object code format, or both. ABT/E may complete any blanks or "TBD" information
in each such Sublicense and attach the attachments contemplated therein, in each
case, in any way that is not directly in conflict with this Agreement and make
any other changes as may be requested by NOCs that are reasonable and customary,
provided such changes do not impose any material obligations or liabilities upon
ABT/US and that the resulting Sublicense is at least as protective of ABT/US'
intellectual property rights as EXHIBIT A. A "LOCAL BUSINESS" has the meaning
set forth in EXHIBIT A, with respect to any Territory in Europe. The word
"exclusive," as used in this Section 1, means that ABT/US shall not use in
connection with a Local Business for its own account, nor grant to any third
party the right to use or license the Software, Documentation, Business
Procedures or ABT Marks in connection with the operation of a Local Business in
the Territory, except as expressly provided in this Agreement;
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<PAGE> 2
(b) ABT/US hereby grants to ABT/E the exclusive right to
use the Software, Documentation and Business Procedures for the purpose of
providing technical, end user and sales support to NOCs, and to copy the
Software, Documentation and Business Procedures solely as necessary to do so.
(c) ABT/E may, in its sole discretion, elect to use the
Software, Documentation, Business Procedures and ABT Marks to operate a Local
Business in one or more entire countries in the Territory for its own account
(in lieu of granting a Sublicense to an NOC). In such case, ABT/E shall abide by
the obligations of Licensee under EXHIBIT A with respect thereto. For avoidance
of doubt, the ABT Marks shall be used only in connection with the use of the
Software, Documentation and Business Procedures for purposes of operating a
Local Business and shall not be used for purposes of marketing the Software,
Documentation and Business Procedures. The parties acknowledge that the
Software, Documentation, Business Procedures and ABT Marks, as currently in
existence, only have an established or known commercial value in connection with
the automotive industry.
(d) EXISTING AGREEMENTS. The license grants set forth in
this Section 1.1 are subject to any rights granted in the Existing Agreements.
The parties acknowledge that they will enter into a side letter or other
agreement (in addition to this Agreement) under which ABT/E will assume the
rights and obligations of ABT/US under the Existing Agreements.
1.2 DEFINITIONS. As used in this Agreement, the following words
have the following meanings:
(a) "SOFTWARE" means all the proprietary software products
used by ABT/US in the operation of the ABT/US Business during the term of this
Agreement. Software will include without limitation any Software delivered by
ABT/US under Section 1.3.
(b) "DOCUMENTATION" means all the electronic instructions,
manuals or other materials, including without limitation on-line help files,
regarding the development or use of the Software used by ABT/US in the operation
of the ABT/US Business during the term of this Agreement. Documentation will
include without limitation any Documentation delivered by ABT/US under Section
1.3.
(c) "BUSINESS PROCEDURES" means all the proprietary
business procedures for operating the ABT/US Business used by ABT/US in the
operation of the ABT/US Business during the term of this Agreement. Business
Procedures will include without limitation any Business Procedures delivered by
ABT/US under Section 1.3.
(d) "ABT MARKS" means all the trademarks, service marks
and logos used by ABT/US in the operation of the ABT/US Business during the term
of this Agreement, including without limitation the "Auto-By-Tel" and
"autobytel" marks, but excluding the marks "DealerSites.com" or "kre8.net".
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<PAGE> 3
(e) "NOC" is a national operating company that operates or
intends to operate a Local Business through dealers or directly to users in one
or more entire countries in Europe pursuant to a Sublicense.
(f) "EXISTING AGREEMENTS" means the NOC agreements entered
into by ABT/US prior to the Effective Date, to wit, the License and Services
Agreements dated as of August 7, 1998 between ABT/US and Auto-By-Tel AB (with
respect to the territory of Sweden, Norway, Finland and Denmark) and the License
and Services Agreements dated as of November 28, 1998 between ABT/US and
AutobyTel UK Ltd. (with respect to the territory of the United Kingdom).
1.3 DELIVERY OF UPDATES AND UPGRADES. ABT/US shall promptly
deliver to ABT/E any and all releases or versions of the Software (in source
code and object code form to the extent available to ABT/US), Business
Procedures, or Documentation used by ABT/US in the operation of the ABT/US
Business during the term of this Agreement, including without limitation all
Error Corrections, Updates or Upgrades as such terms are used in EXHIBIT A.
2. DISCLAIMER AND RESERVATION OF RIGHTS. ABT/US hereby reserves all
rights not granted hereunder. ABT/US HEREBY DISCLAIMS ANY AND ALL WARRANTIES,
EXPRESS, IMPLIED, OR STATUTORY, WITH RESPECT TO THE SOFTWARE AND BUSINESS
PROCEDURES except as are expressly provided for in this Agreement. ABT/US hereby
reserves all rights not explicitly granted under this Agreement.
3. SUPPORT. As between the parties, ABT/E will have the sole
responsibility to provide technical and end user support to NOCs. ABT/US will
have no obligation under this Agreement to provide any such support to ABT/E or
any NOC.
4. CONSIDERATION. In consideration of the exclusive, perpetual licenses
granted in Section 1, ABT/E shall issue to ABT/US certain shares of the equity
securities of ABT/E, pursuant to that certain Amended and Restated Operating
Agreement among ABT/E and certain other parties of even date herewith, and ABT/E
shall use its best efforts to maximize revenue from exploiting the rights
granted to ABT/E hereunder.
5. LICENSE BACK. ABT/E hereby grants to ABT/US, a perpetual,
irrevocable, exclusive license, to the extent of and under any and all rights
owned, or possessed or exercisable by ABT/E, to make, use, sell, import,
reproduce, perform, display, transmit, prepare derivative works of and otherwise
exploit, outside the Territory: (a) any and all Localized Versions (as such term
is defined in EXHIBIT A) (i) assigned or licensed to ABT/E under any Sublicense;
or (ii) prepared by or for ABT/E under Section 1.1(c); and (b) any and all
Extensions (as such term is defined in EXHIBIT A) (i) assigned or licensed to
ABT/E under any Sublicense or (ii) prepared by or for ABT/E under Section
1.1(c). ABT/E shall promptly upon completion or receipt of any such Derivative
Work or Extension, disclose such Derivative Work or Extension to ABT/US, in any
form reasonably requested by ABT/US.
6. TERM AND TERMINATION.
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<PAGE> 4
6.1 TERM. The term of this Agreement will commence on the
Effective Date and continue in perpetuity, unless earlier terminated pursuant to
this Section 6.
6.2 TERMINATION FOR DEFAULT. If either party materially defaults
in the performance of any of its material obligations hereunder and if any such
default is not corrected within 30 days after notice in writing, then the
non-defaulting party, at its option, may, in addition to any other remedies it
may have, thereupon terminate this Agreement by giving written notice of
termination to the defaulting party; provided however, no party will be deemed
to be in breach of this Agreement, and there shall be no termination for
default, during such time that a party makes diligent efforts to correct a
default which is capable of correction.
6.3 TERMINATION AND ASSIGNMENT IN THE EVENT OF CESSATION OF
BUSINESS OF ABT/E. In the event ABT/E (a) winds up or terminates its business,
or ceases business in the ordinary course; (b) admits in writing its inability
to pay its debts as they mature, makes an assignment for the benefit of
creditors, or becomes subject to direct control of a trustee, receiver or
similar authority; or (c) becomes subject to any bankruptcy or insolvency
proceeding under federal, foreign, or state statutes, ABT/US shall immediately
assume all rights and obligations under all of the Sublicenses, and this
Agreement will immediately terminate.
6.4 EFFECT OF TERMINATION. The terms and conditions of Sections
2, 5, 8.1(d), 9, 10 and 11 will survive any termination or expiration of this
Agreement.
7. ENFORCEMENT. ABT/E shall promptly take all actions reasonably
requested by ABT/US in writing to enforce all Sublicenses with NOCs granted
hereunder, which actions include without limitation any lawsuits necessary or
appropriate to enforce any such Sublicense.
8. WARRANTIES.
8.1 ABT/US WARRANTY.
(a) PERFORMANCE. ABT/US represents and warrants to ABT/E
that during the term of this Agreement, the Software in the form delivered to
ABT/E will perform in substantial accordance with the Documentation in the form
delivered to ABT/E.
(b) YEAR 2000. ABT/US represents and warrants to ABT/E
that the Software in the form delivered to ABT/E is Year 2000 Compliant. "YEAR
2000 COMPLIANT" means that the Software, when used in accordance with the
Documentation and with the hardware and operating systems approved by ABT/US,
will: (i) initiate and operate; (ii) correctly store, represent and process
dates; and (iii) not cause or result in an abnormal termination or ending or
degradation of performance; when processing data containing dates in the year
2000 and in any preceding and following years, including leap years; provided
that there shall be no breach of this representation and warranty where the
failure of the Software to be Year 2000 Compliant is caused by or relates to any
third party products that exchange data with the Software.
(c) VIRUSES. ABT/US represents and warrants to ABT/E that
the Software, in the form delivered to ABT/E and on the media delivered to
ABT/E, does not contain any virus,
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<PAGE> 5
codes, commands or instructions that alter, delete, erase, damage, disable,
disrupt, or otherwise interfere with ABT/E's use of, the Software.
(d) REMEDY. If the Software does not perform as warranted
under Sections 8.1(a), 8.1(b), or 8.1(c), ABT/US shall, at no charge to ABT/E,
use reasonable efforts to correct the Software in accordance with ABT/US'
then-current escalation procedures, and deliver to ABT/E a corrected version of
the Software. The foregoing are ABT/E's sole and exclusive remedies for breach
of warranties. The warranty will apply only if the then-current version of the
Software has been properly installed and used at all times and in accordance
with the Documentation.
(e) AUTHORITY. ABT/US represents and warrants to ABT/E
that ABT/US has full power, right and authority to enter into this Agreement, to
carry out its obligations under this Agreement and to grant the rights granted
to ABT/E herein. ABT/US represents and warrants to ABT/E that the execution and
performance of this Agreement by ABT/US will not conflict with any other
obligation of ABT/US.
8.2 ABT/E WARRANTY. ABT/E represents and warrants to ABT/US that
ABT/E has full power, right and authority to enter into this Agreement, to carry
out its obligations under this Agreement and to grant the rights granted to
ABT/US herein. ABT/E represents and warrants to ABT/US that the execution and
performance of this Agreement by ABT/E will not conflict with any other
obligation of ABT/E.
8.3 DISCLAIMER. EXCEPT FOR THE EXPRESS LIMITED WARRANTY SET FORTH
IN SECTION 8.1 ABOVE, THE SOFTWARE, DOCUMENTATION, BUSINESS PROCEDURES AND ABT
MARKS ARE PROVIDED "AS-IS" AND WITHOUT WARRANTY OF ANY KIND, WHETHER EXPRESS,
IMPLIED, STATUTORY OR OTHERWISE. ABT/US HEREBY DISCLAIMS ANY WARRANTY THAT THE
OPERATION OF THE SOFTWARE WILL BE UNINTERRUPTED OR ERROR-FREE. ABT/US
SPECIFICALLY DISCLAIMS ALL IMPLIED WARRANTIES OF NONINFRINGEMENT,
MERCHANTABILITY, AND FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE
SOFTWARE, DOCUMENTATION, BUSINESS PROCEDURES, ABT MARKS AND ANY PRODUCTS,
MATERIALS, OR SERVICES PROVIDED BY ABT/US HEREUNDER.
9. LIMITATION OF LIABILITY
EXCEPT FOR LIABILITY FOR THIRD PARTY CLAIMS ARISING OUT OF SECTION
10, IN NO EVENT WILL EITHER PARTY HAVE ANY LIABILITY FOR ANY INDIRECT,
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY
OF LIABILITY, WHETHER FOR BREACH OF CONTRACT, TORT OR OTHERWISE, ARISING OUT OF
OR RELATED TO THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO, LOSS OF ANTICIPATED
PROFITS, LOSS OF DATA, OR LOSS OF USE, EVEN IF SUCH PARTY HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES.
10. INDEMNIFICATION FOR INFRINGEMENT
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10.1 ABT/US INDEMNITY FOR INFRINGEMENT. ABT/US shall, at its
expense, defend or settle any claim, action or allegation brought against ABT/E
that the Software, Documentation, or Business Procedures, or the copying or use
thereof infringe any copyright, patent, trademark, or trade secret right of any
third party in the Territory, and shall pay any final judgments awarded or
settlements entered into; provided that ABT/E gives prompt written notice to
ABT/US of any such claim, action or allegation of infringement and gives ABT/US
the authority to proceed as contemplated herein. ABT/US will have the exclusive
right to defend any such claim, action or allegation and make settlements
thereof in its own discretion, and ABT/E may not settle or compromise such
claim, action or allegation, except with the prior written consent of ABT/US.
ABT/E shall give such assistance and information as ABT/US may reasonably
require to settle, or oppose such claims. In the event any such infringement,
claim, action or allegation is brought or threatened, ABT/US shall:
(a) at its sole option and expense, procure for ABT/E the
right to continue copying, using and sublicensing of the Software,
Documentation, or Business Procedures as described in Section 1; or
(b) at its sole option and expense, modify or amend the
Software, Documentation or Business Procedures or infringing part thereof, or
replace the Software, Documentation or Business Procedures or infringing part
thereof with other Software, Documentation or Business Procedures having
substantially the same or better capabilities.
The foregoing obligations will not apply to the extent the infringement
arises as a result of modifications to the Software, Documentation, or Business
Procedures not made by ABT/US, or the combination of the Software with any
materials or technology not supplied by ABT/US. The foregoing states the entire
liability of ABT/US with respect to infringement of any patent, copyright,
trademark, trade secret or other proprietary right.
10.2 ABT/E INDEMNITY. ABT/E shall, at its expense, defend or
settle any claim, action or allegation brought against ABT/US (to the extent not
covered by Section 10.1) arising from the act or omission of ABT/E or any NOC,
where a third party alleges fraud, misrepresentation, or unfair business
practices arising from the operation of ABT/E or the Local Business of any NOC,
or those that arise from a third party allegation that any Localized Version or
Extension infringes any copyright, trade secret, patent or trademark right of
any third party, and shall pay any final judgments awarded or settlements
entered into; provided that ABT/US gives prompt written notice to ABT/E of any
such claim, action or allegation of infringement and gives ABT/E the authority
to proceed as contemplated herein. ABT/E will have the exclusive right to defend
any such claim, action or allegation and make settlements thereof in its own
discretion, and ABT/US may not settle or compromise such claim, action or
allegation, except with the prior written consent of ABT/E. ABT/US shall give
such assistance and information as ABT/E may reasonably require to settle or
oppose such claims. In the event any such infringement, claim, action or
allegation is brought or threatened, ABT/E may, at its sole option and expense:
(a) procure for ABT/US the right to continue use of the
Localized Version or Extension or infringing part thereof; or
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(b) modify or amend the Localized Version or Extension or
infringing part thereof, or replace the Localized Version or Extension or
infringing part thereof with other materials having substantially the same or
better capabilities.
10.3 PROSECUTION OF INFRINGERS. ABT/US and ABT/E shall give each
other written notice of any acts of infringement by third parties involving
intellectual property rights relating to the Localized Version, Extensions,
Software, Documentation, Business Procedures, or ABT Marks anywhere in the
Territory of which ABT/US or ABT/E has knowledge, and the parties shall consult
together with a view to determine the course of action, if any, to be taken in
such circumstances. ABT/US will have the right to take action to enforce such
rights. If the parties are unable to agree on any such course of action to be
taken, then ABT/US shall authorize ABT/E to take such actions as ABT/E considers
necessary or appropriate and ABT/E will be entitled to take such actions at
ABT/E's expense. Each party shall render to the other any assistance requested
by the other in proceedings against an infringer within the Territory, at the
other party's expense. Any damage that might be awarded will, after deduction of
actual costs, be awarded to the party that undertakes legal action.
11. NON-DISCLOSURE.
11.1 DEFINITION. "CONFIDENTIAL INFORMATION" means any information
disclosed by either party to the other party, either directly or indirectly, in
writing, orally or by inspection of tangible objects (including without
limitation documents, prototypes, samples, plant and equipment), which is
designated as "Confidential," "Proprietary" or some similar designation.
Information communicated orally will be considered Confidential Information if
such information is confirmed in writing as being Confidential Information
within a reasonable time after the initial disclosure. Confidential Information
may also include information disclosed to a disclosing party by third parties.
Confidential Information will not, however, include any information which (i)
was publicly known and made generally available in the public domain prior to
the time of disclosure by the disclosing party; (ii) becomes publicly known and
made generally available after disclosure by the disclosing party to the
receiving party through no action or inaction of the receiving party; (iii) is
already in the possession of the receiving party at the time of disclosure by
the disclosing party as shown by the receiving party's files and records
immediately prior to the time of disclosure; (iv) is obtained by the receiving
party from a third party without a breach of such third party's obligations of
confidentiality; (v) is independently developed by the receiving party without
use of or reference to the disclosing party's Confidential Information, as shown
by documents and other competent evidence in the receiving party's possession;
or (vi) is required by law, court order, or other legal process to be disclosed
by the receiving party, provided, to the extent practicable, that the receiving
party gives the disclosing party prompt written notice of such requirement prior
to such disclosure and assistance in seeking an order protecting the information
from public disclosure. Confidential Information of each party will include
without limitation the Software, Documentation, and Business Procedures, whether
or not so marked.
11.2 MAINTENANCE OF CONFIDENTIALITY. Each party agrees not to
disclose any Confidential Information of the other party to third parties,
except with such other party's prior written consent. The foregoing will not
prohibit ABT/E from disclosing information that it is
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required to disclose under any Sublicense. Each party shall take reasonable
measures to protect the secrecy of and avoid disclosure of the Confidential
Information of the other party. Without limiting the foregoing, each party shall
take at least those measures that it takes to protect its own most highly
confidential information and shall ensure that its employees who have access to
Confidential Information disclosed by the other party have signed a
non-disclosure agreement in content similar to the provisions hereof, prior to
any disclosure of Confidential Information to such employees.
12. MISCELLANEOUS. No amendment or modification hereof will be valid or
binding upon the parties unless made in writing and signed by the duly
authorized representatives of both parties. The relationship of the parties
hereunder is that of independent contractors, and this Agreement will not be
construed to imply that either party is the agent, employee, or joint venturer
of the other. In the event that any provision or provisions of this Agreement is
be held to be unenforceable, this Agreement will continue in full force and
effect without said provision and will be interpreted to reflect the original
intent of the parties. This Agreement will be governed by the laws of the State
of California, without regard to its conflict of laws principles. The parties
consent to the personal and exclusive jurisdiction of courts located in
California. ABT/E may not assign or otherwise transfer this Agreement (by
operation of law or otherwise) without the prior written consent of ABT/US;
however, ABT/E may assign all rights and obligations under this Agreement to a
wholly-owned subsidiary of ABT/E, and ABT/E hereby guarantees the performance by
such wholly-owned subsidiary of the obligations of this Agreement. Any
prohibited assignment or sublicense will be null and void. Subject to the
foregoing, this Agreement will be binding upon and will inure to the benefit of
the parties' permitted successors and/or assignees. Waiver by either party of a
breach of any provision of this Agreement or the failure by either party to
exercise any right hereunder will not operate or be construed as a waiver of any
subsequent breach of that right or as a waiver of any other right.
The parties have executed this Agreement below to indicate their
acceptance of its terms:
AUTOBYTEL.COM INC. AUTOBYTEL.EUROPE LLC
By: /s/ Robert S. Grimes By: /s/ Mark W. Lorimer
Title: Executive Vice President Title: Chairman
Print Name: Robert S. Grimes Print Name: Mark W. Lorimer
Date: January 6, 2000 Date: January 6, 2000
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EXHIBIT A
ABT EUROPE LLC
LICENSE AND SERVICES AGREEMENT
This LICENSE AND SERVICES AGREEMENT (this "AGREEMENT") is entered into
as of _______________, _______, (the "EFFECTIVE DATE") by and between
Autobytel.Europe LLC, a Delaware limited liability company with offices at
offices at 18872 MacArthur Blvd, 2nd Floor, Irvine, California 92612 ("ABT"),
and _______________________, a corporation organized under the laws of
__________________ with offices at _____________ ("LICENSEE").
BACKGROUND
WHEREAS, autobytel.com inc. is engaged in an Internet-based marketing
business for new and used vehicles that provides Internet users with fast,
haggle-free, and courteous purchasing and related services designed to improve
consumers' overall vehicle buying experience, and has granted to ABT the right
to grant sublicenses of certain software, documentation and business procedures
useful in the operation of such a business to ABT's licensees in Europe;
WHEREAS, Licensee desires to engage in the operation of a Local Business
(as defined below) in the Territory (as defined below) using the Software,
Documentation and Business Procedures of autobytel.com inc. (all as defined
below).
NOW, THEREFORE, in consideration of the mutual promises and upon the
terms and conditions set forth below, the parties agree as follows:
1. Definitions
1.1 "ABT BRAND" means the "Auto-By-Tel" and "autobytel"
trademarks, service mark and logo, and the Licensee Domain, and does not include
the mark "DealerSites.com" or "kre8.net."
1.2 "AFFILIATE" of a party means (i) any entity controlled by,
controlling, or under common control with such party, where "control" means
ownership, either direct or indirect, of more than 50% of the equity interest
entitled to vote for the election of directors or equivalent governing body
and/or (ii) any entity of which such party has possession, either direct or
indirect, of the power to direct or cause the direction of management and
policies of the entity through ownership of voting securities, by contract or
otherwise. Notwithstanding the above, ABT shall not be deemed an Affiliate of
Licensee and vice versa.
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1.3 "BANNER ADVERTISEMENT" means any image displayed on a web
page associated with the Local Business that is intended to serve as an
advertisement for a product, service or web page.
1.4 "BUSINESS PROCEDURES" means the proprietary business
procedures for operating the Local Business described on ATTACHMENT B, and any
updates or new revisions thereof provided by ABT from time to time in its sole
discretion.
1.5 "COMMERCE BUTTON" means any image displayed on a web page
associated with the Local Business that points to an electronic commerce site
through which a User can purchase goods or services.
1.6 "CONFIDENTIAL INFORMATION" means this Agreement and all its
Attachments, any addenda hereto signed by both parties, all Software listings,
Documentation, information, data, drawings, benchmark tests, specifications,
trade secrets, object code and machine-readable copies of the Software, Business
Procedures, and any other proprietary information disclosed by one party to the
other.
1.7 "CONSUMER PRICE INDEX" means the Consumer Price Index, for
All Urban Consumers, Subgroup ?All Items?, for the Los Angeles-Riverside-Orange
County Area (Base Year 1982-84=100), which is currently being published by the
United States Department of Labor, Bureau of Labor Statistics. If, however, this
Consumer Price Index is changed so that the base year is altered from that used
as of the Commencement Date, then the Consumer Price Index will be converted in
accordance with the conversion factor published by the United States Department
of Labor, Bureau of Labor Statistics, to obtain the same results that would have
been obtained had the base year not been changed. If no conversion factor is
available or if the Consumer Price Index is otherwise changed, revised or
discontinued for any reason, the term "Consumer Price Index" will thereafter
refer to the most nearly comparable official price index of the United States
Government to obtain substantially the same result as would have been obtained
had the original Consumer Price Index not been changed, revised or discontinued.
1.8 "CONTRACT MONTH" means a period of 1 month which period
commences upon the Effective Date; or the same day of each month thereafter
during the Term.
1.9 "CONTRACT YEAR" means a period of 4 consecutive three-month
periods commencing on the Effective Date or the anniversary thereof.
1.10 "DERIVATIVE WORK" means a derivative work within the meaning
of 17 U.S.C. Section 101 of the U.S. copyright law.
1.11 "DOCUMENTATION" means any electronic instructions, manuals
or other materials, including without limitation on-line help files, regarding
the development or use of the Software provided by ABT under this Agreement.
1.12 "DRT" means the Dealer Real Time System (i.e., ABT's online
dealer communication system) portion of the Software.
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1.13 "ERROR CORRECTION" means a release or version of the
Software containing corrections or fixes of Errors which may be indicated by a
change in the numeric identifier to the Software in the digit to the right of
the decimal.
1.14 "ERROR" means a material, reproducible failure of the
Software to perform in substantial conformity with the functional specifications
in the Documentation.
1.15 "FEES" mean all fees payable to ABT hereunder. Fees include
the following: Initial Transfer Fee, Minimum Annual License Fees, Minimum
Maintenance Fees, Localization and Development Fees, Data Center Fees, and
Product Management Fees, all as defined in Section 5.
1.16 "MINIMUM ANNUAL FEES" are the Minimum Annual License Fees
plus the Minimum Annual Maintenance Fees.
1.17 "FISCAL QUARTER" means a period of 3 consecutive calendar
months which period commences upon the Launch Date, or 3, 6, or 9 months
thereafter; or the anniversary of any of the foregoing.
1.18 "FISCAL YEAR" means a period of 4 consecutive Fiscal
Quarters commencing on the Launch Date or the anniversary thereof.
1.19 "GLOBAL BRAND PROTOCOLS" means the procedures for use of the
ABT Brand set forth on ATTACHMENT C, along with any revisions thereof provided
by ABT from time to time in its sole discretion.
1.20 "GROSS REVENUES" means all payments actually received by
Licensee with regard to the Local Business, including without limitation fees
received from dealers for participating in the Internet referral system,
payments received from dealers as a result of Internet inquiries referred to
them, sums received as payments for advertising on internet sites which are part
of the Local Business, gross revenues from providing maintenance of, and
training regarding, the DRT, and all other revenues arising directly out of the
Local Business.
1.21 "INITIAL TRANSFER FEE" means the fee so described in
ATTACHMENT A.
1.22 "LAUNCH DATE" means the first date Licensee makes the World
Wide Web site for the Local Business generally available on the World Wide Web;
but in no event later than __________.
1.23 "LICENSEE DOMAIN" means the Uniform Resource Locator
"____________."
1.24 "LOCAL BUSINESS" means an internet-based business operated
in the Territory under the Business Procedures that performs the following
functions and provides the following information, products, and services related
to new and pre-owned vehicles in the Territory:
- - - Enrolling Participating Dealers;
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- - - Providing information regarding: (a) pricing, (b) vehicle specifications,
(b) after-market items, (c) financial, insurance, and warranty products, (d)
ancillary products or services, and (e) other information;
- - - Allowing Users to submit purchase requests for the sale or lease of
vehicles;
- - - Routing Users' purchase requests to Participating Dealers;
- - - Routing Users' requests for: (a) after-market items, (b) financial,
insurance, or warranty products, or (c) ancillary products or services to
Participating Dealers or Participating Vendors, as applicable, for
fulfillment;
- - - Providing auctions that allow Users and/or Participating Dealers to
purchase, sell, or lease vehicles;
- - - Allowing Users or Participating Dealers to submit requests for the purchase,
sale, or lease of fleets of vehicles; and
- - - Issuing service notices, whether electronically or otherwise, to remind
Users who purchase or lease vehicles through the Local Business that the
vehicle is due for servicing.
- - - The Local Business also shall include any additional automotive-related
functions, information, products, or services authorized by ABT in its sole
discretion.
1.25 "LOCALIZE, or LOCALIZATION" means any modifications to the
Software, Documentation or Business Procedures necessary to facilitate the
operation and functionality of the Software, Documentation on the operating
systems or platforms within the Territory, or the modification of the Business
Procedures to meet local custom or technological or regulatory requirements.
1.26 "LOCALIZED VERSION" means a Derivative Work of the Software
and Business Procedures that implements the core functionality of the Software
and Business Procedures, but incorporates the language, currency and functional
variations for the Territory, which Derivative Works are in each case created
for use of Licensee.
1.27 "NOC" means a national operating company that operates or
intends to operate a Local Business through dealers or directly to users in a
territory in Europe pursuant to a license similar to this Agreement.
1.28 "PARTICIPATING DEALER" means a vehicle dealer with showrooms
and/or vehicle lots located in the Territory, who meets the criteria set forth
in the Business Procedures and is bound by a subscription agreement.
1.29 "PARTICIPATING VENDOR" means an individual or entity
authorized by ABT to provide: (a) after-market items, (b) financial, insurance,
or warranty products, or (c) other products or services in the Territory.
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1.30 "SOFTWARE" means the proprietary software products specified
on ATTACHMENT A hereto, in the form existing as of the Effective Date, together
with any Error Corrections, Updates or Upgrades thereof provided to Licensee
pursuant to this Agreement.
1.31 "TERRITORY" means ____________ as constituted on the
Effective Date.
1.32 "UPDATE" means a release or version of the Software,
containing minor functional enhancements, extensions, error corrections or
fixes, which may be indicated by a change in the numeric identifier to the
Software in the digit to the right of the decimal.
1.33 "UPGRADE" means any version of the Software, designated as
such by ABT, which contains new functionality or significantly enhanced
operation and may be indicated by a change in the numeric identifier to the
Software in the digit to the left of the decimal.
1.34 "USER" means an individual or entity who uses the World Wide
Web site of the Local Business.
2. GRANT OF LICENSE
2.1 LICENSE. Subject to the terms and conditions of this
Agreement, ABT hereby grants to Licensee:
(a) an exclusive, non-transferable license in the
Territory to copy and create Derivative Works of the Software, Documentation,
Business Procedures and Derivative Works thereof, in each case solely for the
development of a Localized Version. In this Section 2.1(a), "exclusive" means
that ABT shall not for its own account, nor grant to any third party in the
Territory a license to create Derivative Works of the Software, Business
Procedures or Documentation in order to create a Localized Version in connection
with the operation of a Local Business.
(b) an exclusive, non-transferable license to use the
Software, Documentation, or Business Procedures in connection with the operation
of the Local Business; provided, however, that Licensee will not have the right
to use the Software with respect to vehicle dealers outside the Territory; and
provided that Licensee operates the Local Business solely in accordance with the
Business Procedures. In this Section 2.1(b), "exclusive" means that ABT shall
not for its own account, nor grant to any third party in the Territory a license
to, use the Software, Documentation, or Business Procedures in connection with
the operation of a Local Business.
(C) LICENSING OF DRT. The parties acknowledge that, for
the avoidance of doubt, notwithstanding the exclusive license grants herein, ABT
reserves the right to license the right to use the DRT to any third party.
2.2 SUBLICENSES. Licensee may grant non-exclusive sublicenses to vehicle
dealers in the Territory to use copies of the DRT in object code format, solely
for use in connection with the Local Business, and solely in connection with an
end user license in substantially the form set forth
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in ATTACHMENT F. Licensee may not grant sublicenses of the rights granted in
Section 2.1 except with the prior written approval of ABT.
2.3 COPIES. ABT shall deliver to Licensee, as soon as
practicable, one copy of the Software, one copy of the related Documentation and
one (1) copy of the Business Procedures. Licensee will be entitled: (a) to make
one copy of the Software solely for backup or archival purposes, (b) to retain
one copy of the Software for production purposes, and (c) to make and retain
such copies of the Software as reasonably necessary for Licensee to use the
Software in connection with the Local Business; provided, however, that Licensee
shall immediately advise ABT of any such copies made and their location. Except
as otherwise set forth herein, Licensee may not copy, distribute, reproduce, use
or allow access to the Software, Documentation, or Business Procedures. Whenever
Licensee is permitted to copy or reproduce all or any part of the Software,
Documentation, or Business Procedures, all titles, trademark symbols, copyright
symbols and legends, and other proprietary markings must be reproduced. Licensee
shall not alter or remove any of ABT's trademarks, copyright notices or other
proprietary notices affixed to the Software, Documentation, or Business
Procedures by ABT.
2.4 OWNERSHIP. As between the parties, ABT owns all right, title
and interest in and to the Software, Documentation, or Business Procedures,
together with any Localized Version or other modifications to the Software,
Documentation, or Business Procedures made by ABT in connection with
Localization of the Software, Documentation, or Business Procedures. The
licenses granted herein transfer to Licensee neither title, nor any proprietary
or intellectual property rights to the Software, Business Procedures, or
Documentation, or any copyrights, patents, or trademarks, embodied or used in
connection therewith, except for the rights expressly granted herein. Effective
upon development of any Localized Version by Licensee, Licensee hereby grants to
ABT an exclusive, irrevocable license in such modifications, which includes the
right to transfer, sublicense and to create Derivative Works. Upon termination
of this Agreement and the license granted to Licensee in this Agreement, the
above license will become non-exclusive and perpetual. Except as otherwise set
forth in the applicable Work Order for the Localization services (as such term
is defined in the "SERVICES AGREEMENT" in ATTACHMENT D), with respect to any
modifications that are not Derivative Works of the Software or Business
Procedures and that contain no part of the Software or Business Procedures (such
modifications to be referred to as "EXTENSIONS"), effective upon development of
any Extension, Licensee hereby grants to ABT an exclusive, irrevocable license
in such Extensions, which includes the right to transfer, sublicense and to
create Derivative Works. Upon termination of this Agreement, the above license
will become non-exclusive and perpetual.
2.5 SOFTWARE AND BUSINESS PROCEDURE LOCALIZATIONS AND EXTENSIONS.
As between the parties, Licensee is responsible for any changes to the Software,
Documentation, or Business Procedures necessary to Localize them in accordance
with the operation of the Local Business. All such Localization changes, and the
development of any Extensions, must be approved by ABT prior to development and
implementation, as set forth in this Section. Except as otherwise agreed by the
parties, all such Localization changes and the development of any Extensions
must be performed by ABT in accordance with Section 3.2. Upon completion of any
Localized Version or Extension (other
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than by ABT), Licensee must disclose to ABT a copy of such Localized Version or
Extension. Any such disclosure of Localized Software or Extension must be in
source code format.
2.6 UPDATES AND UPGRADES. During the Term, and subject to
Licensee's payment to ABT of the Minimum Maintenance Fees and Maintenance and
Support Fees set forth in Sections 5.3 and 6.2 below, ABT will deliver to
Licensee any Error Corrections, Updates or Upgrades to the Software or Business
Procedures that it releases to any of ABT's other NOCs. Licensee shall implement
all Error Corrections, Updates, or Upgrades provided by ABT under this
Agreement, no later than 6 months after delivery thereof to Licensee.
Notwithstanding the above, ABT will not be obligated to provide such Error
Corrections, Updates or Upgrades during the period during which, in the
reasonable discretion of ABT's project manager, they are in release for testing
purposes or otherwise not suitable for release outside the United States.
2.7 LICENSE RESTRICTIONS. Licensee shall not:
(a) sell, lease, license, sublicense or distribute the
Software, Documentation, or Business Procedures except in accordance with this
Agreement;
(b) provide, disclose, divulge or make available to, or
permit use of the Software, Documentation, or Business Procedures by any third
party without ABT's prior written consent, except as specifically authorized by
this Agreement; or
(c) use the Software, Documentation or Business Procedures
for any purpose except as expressly provided for in this Agreement.
2.8 THIRD PARTY TECHNOLOGY. The parties acknowledge that certain
software, equipment, or technology of third parties, including, without
limitation, server equipment, server software, and database software, may be
required to operate the Software. ABT shall cooperate reasonably with Licensee
to identify any such third-party technology, but ABT will not be obligated to
provide any such third party technology to Licensee.
2.9 SCOPE OF LOCAL BUSINESS. Licensee acknowledges that the
licenses granted in this Agreement apply only to the Local Business as defined
herein, and as operated according to the Business Procedures, and that Licensee
does not receive under this Agreement the right to use the ABT Brand, Software,
Documentation, Business Procedures, and Derivative Works thereof in connection
with any other activities. Licensee shall operate the Local Business solely in
accordance with the definition herein. In the event that ABT adds activities
("ADDITIONAL ACTIVITIES") to the definition of the Local Business, ABT shall
notify Licensee, and Licensee shall promptly implement the Additional
Activities; provided, however, that ABT may waive such obligation in its sole
discretion.
3. OBLIGATIONS.
3.1 DELIVERY. No later than ______ days after the Effective Date,
ABT shall deliver to Licensee one (1) copy of the Software, Business Procedures,
and Documentation, in the form such materials exist as of the Effective Date.
For avoidance of doubt, Licensee acknowledges that such
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materials will not be Localized before delivery, and nothing in this Agreement
will obligate ABT to deliver any Localized Software, Business Procedures, or
Documentation, prior to or after the Launch Date, unless and until so agreed by
the parties hereto under Section 3.2.
3.2 SERVICES. Upon mutual agreement, ABT may, from time to time,
perform services and provide support to Licensee that will be subject to the
"SERVICES AGREEMENT" set forth in ATTACHMENT D. Such services may include
Localization services; however, the parties acknowledge that the business
requirements and web functionality for the Local Business must be determined by
Licensee prior to commencement of the Localization services, if any.
(a) In addition to the compensation set forth in the
Services Agreement, Licensee shall reimburse ABT for the reasonable actual
travel and living expenses of ABT's personnel engaged in performing the Services
at locations other than ABT's facilities, together with other reasonable
out-of-pocket expenses incurred in connection with the performance of such
Services, subject to ABT's adherence to any travel policy reasonably promulgated
by Licensee.
(b) Licensee shall pay ABT for any Services provided under
this Section 3.2 in accordance with the payment terms set forth in the "SERVICES
AGREEMENT" in ATTACHMENT D.
3.3 SCOPE OF SERVICES. The parties currently anticipate that the
Services that may be performed in accordance with Section 3.2 may include the
following. However, nothing in this Section 3.3 will be deemed to create any
binding obligation on either party.
(a) Hardware selection and configuration consulting
services;
(b) Business model conversion support for software systems
and operating procedures;
(c) Marketing, sales and information technology training;
(d) Support for training of vehicle dealers in the use of
the DRT portions of the Software; and
(e) Business Procedures marketing support, including
support regarding know-how, cooperative advertising or other co-marketing
activities.
3.4 LICENSEE OBLIGATIONS. Licensee shall operate the Local
Business solely in accordance with the Business Procedures. Licensee shall
operate the Local Business solely in accordance with the laws, regulations, and
other requirements of the Territory. During the Term, Licensee will devote
sufficient resources and personnel to the Local Business to market, promote and
operate the Local Business. Licensee will be responsible for training vehicle
dealers in the use of the DRT portions of the Software and will be solely
responsible for all costs and expenses related to the marketing, promotion and
operation of the Local Business and for performing its obligations hereunder.
Licensee will ensure that only properly trained and qualified persons perform
Licensee's technical obligations under this Agreement.
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3.5 HYPERLINKS. On and after the first date Licensee makes the
World Wide Web site for the Local Business generally available on the World Wide
Web: (a) ABT shall display a hypertext link on its Web page at the location
where ABT provides links to the NOCs, pointing toward Licensee's home Web page
for the Local Business; and (b) Licensee shall display a hypertext link on the
home Web page for the Local Business pointing to such location.
3.6 TERRITORY AND SALES. The parties acknowledge that Licensee
may from time to time receive inquiries or orders for sales of products or
services from persons outside the Territory. In such case, Licensee shall refer
such inquiries only to ABT, and shall not act on such inquiries except upon
ABT's instructions. ABT shall prepare guidelines, whose content will be
determined in ABT's sole discretion, to address any such inquiries, and shall
apply the guidelines generally to its licensees. ABT intends that such
guidelines will be prepared in accordance with applicable national law and
European Community law and with the goal of maximizing consumer satisfaction for
customers of ABT's licensees. ABT shall instruct its licensees to respond to
such inquiries in accordance with such guidelines.
3.7 REPORTS.
(a) LICENSEE. No less frequently than each month, as
reasonably requested by ABT, Licensee will provide to ABT, in a format
reasonably acceptable to ABT, a summary report of business data regarding
Licensee's operation of the Local Business. Such data will include, but is not
limited to, purchase request and finance request information (including the
number of such requests received), other consumer information (including without
limitation name, address, e-mail address, phone number, and the like, in the
form and to the extent known to Licensee), Web statistics, and revenue data, as
required for the ABT global data warehouse and reporting system.
(b) ABT. In conjunction with ABT's payment obligations
under Section 3.8 and on the schedule set forth therein, ABT shall provide
Licensee with a report of revenues generated by the sale of Banner Advertising
and Commerce Buttons related to the Local Business.
3.8 BANNER ADVERTISING AND COMMERCE BUTTONS. The rights and
obligations related to Banner Advertising and Commerce Buttons will be allocated
between ABT and Licensee as follows: The parties agree that the solicitation of
Banner Advertising and Commerce Buttons by ABT on behalf of all Autobytel web
sites worldwide is likely to be more efficient and generate more revenue than
the solicitation of Banner Advertising by the parties individually. Therefore,
Licensee hereby appoints ABT as its exclusive agent to solicit all sales of
Banner Advertising and Commerce Buttons, which appointment includes without
limitation the power to engage advertising agents or sales representatives to
solicit such advertising. ABT will use reasonable efforts to maximize the
revenue generated by such sales. As between the parties, ABT shall collect all
revenues for such sales. No later than 45 days after the end of each Fiscal
Quarter ABT shall pay to Licensee ____% of revenues received from the sale of
such Banner Advertising and Commerce Buttons related to the Local Business and
received by ABT, net of commissions, taxes, and out-of-pocket expenses for such
Fiscal Quarter. ABT may use any unsold Banner Advertising inventory on hand five
days prior to the commencement of each calendar month to advertise ABT, its
Affiliates or other licensees of ABT.
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3.9 DATA. Subject to local law, Licensee shall collect data
regarding visitors to the World Wide Web site for the Local Business, and their
use of such site, as reasonably requested by ABT. Both Licensee and ABT may use
and disclose such data, subject to applicable law and the provisions of this
Section 3.9, for its own account or for the account of third parties. Licensee
shall report such data to ABT on a monthly basis. Such reporting will be in a
reasonable format. If ABT provides data to any third party, ABT shall pay to
Licensee a percentage of the net amounts received by ABT therefor, as follows:
(a) AGGREGATED DATA. For data that is disclosed in
aggregate, i.e., in such a fashion that the individual visitor is not identified
by name, ABT shall pay Licensee 50% of net revenues received by ABT that is
applicable to the Local Business; however, in the event that such aggregated
data includes data provided by a party or parties other than Licensee, ABT may
pro-rate the fees payable to Licensee and such other party in a reasonable
fashion.
(b) DISAGGREGATED DATA. For data that is not disclosed in
aggregate, i.e., in such a fashion that the individual visitor is identified by
name, ABT shall pay Licensee 66.6% of net revenues received by ABT that is
applicable to the Local Business; however, in the event that data with respect
to an individual visitor is identified by a party or parties other than
Licensee, ABT may pro-rate the fees payable to Licensee and such other party in
a reasonable fashion.
3.10 CONSUMER DATA. Without limiting the provisions in Section
10, Licensee shall not disclose to any vehicle manufacturer those customers of
the Local Business who have made purchase requests for vehicles of another
vehicle manufacturer in such a fashion that the disclosure identifies the
customer's name, address, or other identifying information.
3.11 PRODUCTS AND SERVICES OF CERTAIN SHAREHOLDERS OF ABT. Each
member of ABT that becomes a member of ABT and owns at least 10,000 units of ABT
on January 31, 2000 (each, an "ABT Owner") will have the right to offer
automotive-related products and services on the website of Licensee, on a
nonexclusive arm's-length commercial basis, provided that:
(a) the entity selling such products or services is an ABT
Owner or a bona fide Affiliate thereof;
(b) an ABT Owner may nominate only one entity to offer
such products and services for the Territory or each country in the Territory,
to the extent the Territory includes more than one country, for such preferred
access;
(c) the offered products or services will not include the
sale or lease of new or used vehicles or detract from the functionality or user
friendliness of the website of Licensee; and
(d) the terms and conditions for Licensee will be
substantially the same as those offered other entities providing similar
products or services on the website of Licensee.
4. WARRANTY AND DISCLAIMER
4.1 ABT WARRANTY.
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(a) PERFORMANCE. ABT represents and warrants to Licensee
that during the Term, the Software in the form delivered to Licensee will
perform in substantial accordance with the Documentation.
(b) YEAR 2000. ABT represents and warrants to Licensee
that the Software in the form delivered to Licensee is Year 2000 Compliant.
"YEAR 2000 COMPLIANT" means that the Software, when used in accordance with the
Documentation and with the hardware and operating systems approved by ABT, will:
(i) initiate and operate; (ii) correctly store, represent and process dates; and
(iii) not cause or result in an abnormal termination or ending or degradation of
performance; when processing data containing dates in the Year 2000 and in any
preceding and following years, including leap years; provided that all third
party products that exchange date data with the Software do so in a form and
format compatible with the Software.
(c) VIRUSES. ABT represents and warrants to Licensee that
the Software, in the form delivered to Licensee and on the media delivered to
Licensee, does not contain any virus, codes, commands or instructions that
alter, delete, erase, damage, disable, disrupt, or otherwise interfere with
Licensee's use of, the Software.
(d) REMEDY. If the Software does not perform as warranted
under Sections 4.1(a), 4.1(b), or 4.1(c), ABT shall, at no charge to Licensee,
use reasonable efforts to correct the Software in accordance with the escalation
procedures in ATTACHMENT E, and include the correction thereof in the next Error
Correction released by ABT and provided to Licensee under Section 6.2. The
foregoing are Licensee's sole and exclusive remedies for breach of warranties.
The warranty will apply only if the then-current version of the Software has
been properly installed and used at all times and in accordance with the
Documentation.
(e) AUTHORITY. ABT represents and warrants to Licensee
that ABT has full power, right and authority to enter into this Agreement, to
carry out its obligations under this Agreement and to grant the rights granted
to Licensee herein.
(f) SERVICES. ABT represents and warrants to Licensee that
all Services performed by ABT under this Agreement will be performed in a
professional manner consistent with industry standards. In the event of a breach
of such warranty, ABT shall re-perform the non-conforming services at no charge.
The foregoing is Licensee's sole and exclusive remedy for breach of such
warranty.
4.2 LICENSEE WARRANTY. Licensee represents and warrants to ABT
that Licensee has full power, right and authority to enter into this Agreement,
to carry out its obligations under this Agreement and to grant the rights
granted to ABT herein. Licensee represents and warrants to ABT that Licensee is
sufficiently capitalized to undertake the business transaction contemplated
hereunder.
4.3 DISCLAIMER. EXCEPT FOR THE EXPRESS LIMITED WARRANTY SET FORTH
IN SECTION 4.1 ABOVE, THE SOFTWARE, DOCUMENTATION AND BUSINESS PROCEDURES ARE
PROVIDED "AS-IS" AND WITHOUT WARRANTY OF ANY KIND, WHETHER EXPRESS, IMPLIED,
STATUTORY OR OTHERWISE. ABT HEREBY
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DISCLAIMS ANY WARRANTY THAT THE OPERATION OF THE SOFTWARE WILL BE UNINTERRUPTED
OR ERROR-FREE. ABT SPECIFICALLY DISCLAIMS ALL IMPLIED WARRANTIES OF
NONINFRINGEMENT, MERCHANTABILITY, AND FITNESS FOR A PARTICULAR PURPOSE WITH
RESPECT TO THE SOFTWARE, DOCUMENTATION, BUSINESS PROCEDURES AND ANY SERVICES
PROVIDED BY ABT HEREUNDER.
4.4 ADDITIONAL DISCLAIMER. The success of the business venture
contemplated to be undertaken by Licensee by virtue of this Agreement is
speculative and depends, to a large extent, upon the ability of Licensee as an
independent business operator and the active participation of Licensee in the
daily affairs of the Local Business, as well as other factors. ABT does not make
any representation or warranty, express, or implied, as to the potential success
of the business venture contemplated by this Agreement.
5. COMPENSATION.
5.1 MINIMUM ANNUAL LICENSE FEE. In consideration of the licenses
granted herein, Licensee shall pay to ABT the minimum license fee specified on
ATTACHMENT A ("MINIMUM ANNUAL LICENSE FEE"). The Minimum Annual License Fee will
be payable as indicated in ATTACHMENT A.
5.2 ADDITIONAL LICENSE FEES. In consideration of the licenses
granted herein, no later than 90 days after the end of each calendar quarter
during the Term, Licensee shall pay to ABT [*] of any Gross Revenues booked by
Licensee during such quarter ("ADDITIONAL LICENSE Fees"). Licensee may credit,
against any fees due under this Section 5.2 for a given Fiscal Quarter, the
Minimum Annual License Fees already paid by Licensee for such Fiscal Quarter.
5.3 MAINTENANCE FEE. In consideration of the services to be
provided by ABT under Section 6, Licensee shall pay to ABT the maintenance fee
specified on ATTACHMENT A (the "MINIMUM ANNUAL MAINTENANCE FEE"). The Minimum
Maintenance Fee will be payable in equal monthly installments in advance. ABT
may increase the Minimum Maintenance Fee after the first year of the Term, in
proportion to any increase in the Consumer Price Index over the previous year.
5.4 INITIAL TRANSFER FEE. A portion of the Minimum Annual License
Fee is designated as the "Initial Transfer Fee." The parties acknowledge that
the Initial Transfer Fee is in consideration of ABT's efforts prior to the
Launch Date, including without limitation assisting Licensee in assessing the
technical requirements for operating the Local Business, and installing the
Software.
5.5 DATA CENTER FEES. Licensee shall pay to ABT the Data Center
Fees indicated on ATTACHMENT A. Data Center Fees will be payable as indicated in
ATTACHMENT A. The parties acknowledge that the Data Center Fees are in
consideration of ABT's ongoing efforts on behalf of all NOCs to maintain the
data center hardware and software and to implement minor improvements to the
World Wide Web site for the Local Business. Such efforts include, but are not
limited to: (a) coordinating IT communication on NOCs' behalf with autobytel.com
inc., (b) receiving initial software transfer for NOCs, and (c) providing
additional customization services.
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5.6 PRODUCT MANAGEMENT FEES. Licensee shall pay to ABT the
Product Management Fees indicated on ATTACHMENT A. Product Management Fees will
be payable as indicated in ATTACHMENT A. The parties acknowledge that the
Product Management Fees are in consideration of ABT's ongoing efforts to make
employees available who assist in providing product support and developing new
products, as well as assisting with training and marketing efforts for the NOCs.
Such efforts may relate to, but are not limited to, the following areas: (a) New
Car Program, (b) Used Car Program, (c) Dealer Real Time, and (d) Auction
Programs.
5.7 TAXES. All charges and Fees provided for in this Agreement do
not include any taxes, duties, or similar charges imposed by any government.
Licensee shall pay or reimburse ABT for all federal, state, dominion,
provincial, or local sales, use, personal property, excise or other taxes, fees,
or duties arising out of this Agreement or the transactions contemplated by this
Agreement (other than taxes on the net income of ABT).
5.8 PAYMENT. Licensee shall calculate, denominate, and make all
payments in Euros by wire transfer to an account designated by ABT. Any payments
due under this Agreement which are not paid when due will bear interest, to the
extent permitted by applicable law, at the prime rate as reported by the Chase
Manhattan Bank, New York, New York, beginning on the date such payment is due,
plus an additional 3%, calculated on the number of days such payment is
delinquent. This Section 5.9 will not limit any other remedies available to any
party.
5.9 RECORDS AND AUDITS. Licensee shall make and maintain, an
accounting and record keeping system, including the basic accounting information
necessary to prepare sufficient financial statements and a general ledger in
accordance with the United States Generally Accepted Accounting Principles
(GAAP) with adequate and verifiable records and supporting documentation,
including, without limitation, invoices, payroll records, check registers, sales
tax records, cash receipts and disbursements journals, and general ledgers in
order to calculate and confirm Licensee's payment obligations hereunder. At a
minimum, Licensee will maintain such records until the expiration of 3 years
after the year to which such records pertain. ABT will have the right, at its
own expense, to inspect, through either its employees or agents, and upon
reasonable notice in writing, and during regular business hours, such records,
as well as the physical plant, operations, and business practices of Licensee,
to verify the accuracy of fees paid by Licensee under the terms of this
Agreement, and to otherwise verify Licensee's compliance with the terms of this
Agreement; provided, however, that any third party auditors must sign a
non-disclosure agreement reasonably acceptable to Licensee. If any such
examination discloses a shortfall in the fees due to ABT hereunder, Licensee
shall reimburse ABT for the full amount of such shortfall plus interest and if
the amount of the underpayment for any period is more than 5% Licensee shall pay
ABT's costs of performing that audit with respect to such period.
6. MAINTENANCE AND SUPPORT.
6.1 SUPPORT. ABT shall provide Maintenance and Support as
described in Section 6.2 below. ABT's provision of Maintenance and Support to
Licensee will commence upon payment of the Maintenance Fee and will continue for
as long as Licensee continues to pay the annual Maintenance Fee.
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6.2 MAINTENANCE AND SUPPORT SERVICES. For purposes of this
Agreement, "MAINTENANCE AND SUPPORT" means that ABT shall: (a) use reasonably
diligent efforts to correct and resolve Errors that Licensee reports to ABT in
accordance with the escalation procedures set forth in ATTACHMENT E; and (b)
provide Error Corrections, Updates and Upgrades, if any, to the Software,
Business Procedures and Documentation that ABT releases during the current
period covered by the Minimum Maintenance Fee, in accordance with Section 2.6;
and (c) provide up to ______ hours of support services per year, in English,
pursuant to the escalation procedures in ATTACHMENT E. The parties acknowledge
that such services may include not only technical support, but also any
help-desk, marketing support, training, information technology consulting,
Business Procedure consulting, or any other services performed by ABT or its
Affiliates at Licensee's request. In addition, such services may include a
pro-rated portion of the services of ABT personnel serving Licensee as well as
other licensees of ABT; provided, however, that ABT shall pro-rate such services
in a reasonable fashion based on the time of such personnel spent assisting
Licensee. ABT shall provide Licensee with a monthly report of the hours of
support services provided under this Section 6.2. Each month, ABT shall invoice
Licensee in arrears for Fees for any Maintenance and Support services in excess
of one-twelfth of the allotted _______ hours for the year, in reasonable detail
showing such additional hours to the nearest quarter hour, and Licensee shall
pay such Fees no later than 15 days after the invoice date. Any such additional
Maintenance and Support services will be billed at a rate equal to [*] per
hour. ABT may increase such rate after the first year of the Term, in proportion
to any increase in the Consumer Price Index over the previous year, or the
equivalent European price index, as applicable.
6.3 PROJECT MANAGERS AND STAFF. Each party shall designate a
project manager to administer Maintenance and Support under this Agreement. The
parties shall coordinate all Maintenance and Support work under this Agreement
through such project managers. Each party may change its project manager upon
written notice. ABT will ensure that only properly trained and qualified persons
perform its technical obligations under this Agreement.
7. TRADEMARKS AND DOMAIN NAMES.
7.1 TRADEMARKS. ABT hereby grants to Licensee the exclusive right
to use the ABT Brand in connection with a Local Business in the Territory. The
above license will include, without limitation, the right to indicate to the
public that Licensee is an authorized licensee of ABT and to advertise
Licensee's products and services in connection with the Local Business under the
ABT Brand. Licensee shall fully comply with the Global Brand Protocols in
relation to Licensee's use of the ABT Brand. All representations of the ABT
Brand that Licensee intends to use must first be submitted to ABT for approval
of design, color and other details, subject to the following limitations: (a)
ABT's approval will not be unreasonably withheld or delayed; (b) such approval,
once given, will not be unreasonably withdrawn; and (c) once ABT has approved a
particular use, Licensee need not re-submit for approval any substantially
similar use.
7.2 RESTRICTIONS. Except as set forth in this Section 7, nothing
contained in this Agreement will grant or will be deemed to grant to Licensee
any right, title or interest in or to the ABT Brand. Licensee shall not
challenge or assist others to challenge the ABT Brand (except to the extent such
restriction is expressly prohibited by applicable law) or the registration
thereof or attempt
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to register any trademarks, marks trade names, Uniform Resource Locators, or
other designations confusingly similar to those of ABT. If Licensee, in the
course of exercising its rights hereunder, acquires any goodwill or reputation
in the ABT Brand, all such goodwill or reputation will automatically vest in ABT
when and as, on an on-going basis, such acquisition of goodwill or reputation
occurs, as well as at the expiration or termination of this Agreement, without
any separate payment or other consideration of any kind to Licensee, and
Licensee agrees to take all such actions necessary to effect such vesting,
including without limitation the transfer to ABT of rights in any filings or
registrations made under Section 7.3, and including without limitation the
transfer from Licensee to ABT the Licensee Domain upon termination of this
Agreement. Upon termination of this Agreement, Licensee shall immediately cease
to use the ABT Brand and the Licensee Domain. Licensee also shall change its
corporate name and trade name and otherwise ensure that such names may not
reasonably be confused with the name, initials, trademark, service mark, or logo
of ABT or its Affiliates or any variation of such names, initials, trademarks,
service marks, or logos.
7.3 TRADEMARK REGISTRATIONS IN THE TERRITORY. Licensee shall
advise ABT regarding the appropriate registrations or filings necessary to
protect the use of the ABT Brand in the Territory. To the extent permitted by
law, ABT shall make such registrations or filings with the appropriate
authorities. Licensee shall pay all costs or fees associated with such filing.
7.4 REGISTERED USER AGREEMENTS. Licensee shall cooperate with ABT
to make any registrations or filings with the appropriate authorities referenced
in Section 7.3, including without limitation entering into registered user
agreements with respect to the ABT Brand pursuant to applicable trademark law
requirements in the Territory. Licensee will be responsible for proper filing of
registered user agreements with appropriate government authorities, and Licensee
shall pay all costs or fees associated with such filing.
7.5 NAME BRANDING; PRODUCT PROTECTION. On any promotional
materials used or disseminated by Licensee relating to the Local Business,
Licensee shall display the ABT Brand. Where both Licensee's marks and the ABT
Brand are displayed, the marks will be presented equally legibly, and in a size
and style in accordance with ABT's then-current Global Brand Protocols.
7.6 DOMAIN NAMES. ABT hereby grants to Licensee the right to use
the Licensee Domain, solely for the operation of a Local Business. ABT shall,
prior to the first date Licensee makes the World Wide Web site for the Local
Business generally available on the World Wide Web, register the Licensee Domain
name with InterNIC or its successor Internet name assignment authority, and
shall pay the registration fees for one year. Thereafter, Licensee shall in a
timely fashion renew such registration with such authority at its own expense
each time such registration becomes due during the Term.
8. LIMITATION OF LIABILITY
EXCEPT FOR LIABILITY FOR THIRD PARTY CLAIMS ARISING OUT OF SECTIONS 9 OR
10, (A) IN NO EVENT WILL EITHER PARTY'S TOTAL LIABILITY ARISING OUT OF OR
RELATED TO THIS AGREEMENT EXCEED THE TOTAL AMOUNTS PAID OR PAYABLE BY LICENSEE
TO ABT UNDER THIS AGREEMENT, AND (B) IN NO EVENT WILL EITHER PARTY HAVE ANY
LIABILITY FOR ANY INDIRECT, INCIDENTAL,
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SPECIAL OR CONSEQUENTIAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY,
WHETHER FOR BREACH OF CONTRACT, TORT OR OTHERWISE, ARISING OUT OF OR RELATED TO
THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO, LOSS OF ANTICIPATED PROFITS, LOSS
OF DATA, OR LOSS OF USE, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES.
9. INDEMNIFICATION FOR INFRINGEMENT
9.1 ABT INDEMNITY FOR INFRINGEMENT. ABT shall, at its expense,
defend or settle any claim, action or allegation brought against Licensee that
the Software, or any Localization or Extension developed by ABT, infringes any
copyright, trademark or trade secret right in the Territory of any third party,
or that any Localization or Extension not developed by Licensee infringes such
rights as a necessary result of specifications required by ABT, and shall pay
any final judgments awarded or settlements entered into; provided that Licensee
gives prompt written notice to ABT of any such claim, action or allegation of
infringement and gives ABT the authority to proceed as contemplated herein. ABT
will have the exclusive right to defend any such claim, action or allegation and
make settlements thereof in its own discretion, and Licensee may not settle or
compromise such claim, action or allegation, except with the prior written
consent of ABT. Licensee shall give such assistance and information as ABT may
reasonably require to settle, or oppose such claims. In the event any such
infringement, claim, action or allegation is brought or threatened, ABT shall,
at its sole option and expense:
(a) procure for Licensee the right to continue use of the
Software, Documentation, or Business Procedures or infringing part thereof;
(b) modify or amend the Software, Documentation or
Business Procedures or infringing part thereof, or replace the Software,
Documentation or Business Procedures or infringing part thereof with other
Software, Documentation or Business Procedures having substantially the same or
better capabilities; or if neither (a) nor (b) is reasonably possible,
(c) terminate this Agreement and repay to Licensee a
portion of the Minimum Annual License Fee equal to the amount paid by Licensee
less an amount equal to 1/12 of the total Minimum Annual License Fee for each
month or portion thereof of the current one year term to account for use by
Licensee.
The foregoing obligations will not apply to the extent the infringement
arises as a result of modifications to the Software not made by or for ABT. The
foregoing states the entire liability of ABT with respect to infringement of any
patent, copyright, trademark, trade secret or other proprietary right.
9.2 LICENSEE INDEMNITY. Licensee shall, at its expense, defend or
settle any claim, action or allegation brought against ABT (to the extent not
covered by Section 9.1) arising from the act or omission of Licensee, where a
third party alleges fraud, misrepresentation, or unfair business practices
arising from the operation of the Local Business, or those that arise from a
third party allegation that a Localized Version or Extension infringes any
copyright, trade secret or other intellectual property right in the Territory of
any third party, or that any Localization or Extension
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developed by Licensee infringes such rights as a necessary result of
specifications required by Licensee, and shall pay any final judgments awarded
or settlements entered into; provided that ABT gives prompt written notice to
Licensee of any such claim, action or allegation of infringement and gives
Licensee the authority to proceed as contemplated herein. Licensee will have the
exclusive right to defend any such claim, action or allegation and make
settlements thereof in its own discretion, and ABT may not settle or compromise
such claim, action or allegation, except with the prior written consent of
Licensee. ABT shall give such assistance and information as Licensee may
reasonably require to settle or oppose such claims. In the event any such
infringement, claim, action or allegation is brought or threatened, Licensee
may, at its sole option and expense:
(a) procure for ABT the right to continue use of the
Localized Version or Extension or infringing part thereof; or
(b) modify or amend the Localized Version or Extension or
infringing part thereof, or replace the Localized Version or Extension or
infringing part thereof with other materials having substantially the same or
better capabilities.
9.3 PROSECUTION OF INFRINGERS. ABT and Licensee shall give each
other written notice of any acts of infringement by third parties involving
intellectual property rights relating to the Localized Version, Extensions,
Software, Documentation, Business Procedures, or ABT Brand anywhere in the
Territory of which ABT or Licensee has knowledge, and the parties shall consult
together with a view to determine the course of action, if any, to be taken in
such circumstances. ABT will have the right to take action to enforce such
rights. If the parties are unable to agree on any such course of action to be
taken, then ABT shall authorize Licensee to take such actions as Licensee
considers necessary or appropriate and Licensee will be entitled to take such
actions at Licensee's expense. Each party shall render to the other any
assistance requested by the other in proceedings against an infringer within the
Territory, at the other party's expense. Any damage that might be awarded will,
after deduction of actual costs, be awarded to the party that undertakes legal
action.
10. CONFIDENTIAL INFORMATION
10.1 OBLIGATIONS. The parties acknowledge and agree that the
Confidential Information disclosed by one party (the "DISCLOSING PARTY") to the
other party (the "RECEIVING PARTY") directly or indirectly (which information is
marked as "proprietary" or "confidential" or, if disclosed orally, is designated
as confidential or proprietary at the time of disclosure) hereunder constitutes
the confidential and proprietary information of the Disclosing Party. The
Receiving Party shall retain in strict confidence and not disclose to any third
party any Confidential Information without the Disclosing Party's express
written consent, and the Receiving Party shall not use such Confidential
Information except to exercise the rights and perform its obligations under this
Agreement. Without limiting the foregoing, the Receiving Party shall use at
least the same procedures and degree of care which it uses to protect its own
Confidential Information of like importance, and in no event less than
reasonable care.
10.2 EXCEPTIONS. The Receiving Party will be relieved of this
obligation of confidentiality to the extent it can demonstrate that any such
information is: publicly available,
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already in the Receiving Party's possession at the time of disclosure and not
subject to a confidentiality obligation, obtained by the Receiving Party from
third parties without restrictions on disclosure, independently developed by the
Receiving Party without reference to Confidential Information, or required to be
disclosed by order of a court or other governmental entity or stock exchange, or
disclosed to business or legal advisors acting under a duty of confidentiality.
10.3 SOURCE CODE PROTECTIONS. Licensee shall not under any
circumstances distribute the source code for the Software in any manner.
Licensee shall reproduce and shall not obscure or remove any marking on any copy
or Derivative Work of the source code for the Software. In addition, each copy
or Derivative Work of the source code for the Software must be marked as the
confidential and proprietary property of ABT to which access is restricted, and
Licensee shall keep and use the source code for the Software solely at
Licensee's secure development facilities under password protection. Licensee
agrees to limit access to the source code for the Software 24 hours a day, and
strictly to those employees or Contractors to whom access is reasonably
necessary in order to carry out the permitted uses of the source code for the
Software hereunder. Licensee shall keep records of all persons who have access
to the source code for the Software. At ABT's request, Licensee agrees to
provide such records to ABT for review.
10.4 CONTRACTORS. Subject to Section 2.5, Licensee may appoint a
third party contractor ("CONTRACTOR") to assist Licensee in Licensee's
modification or implementation of the Localized Version as authorized hereunder;
provided, however, that any such Contractor's access to and use of the Software
(including the Localized Version): (a) will only be permitted pursuant to a
signed written agreement between Licensee and such Contractor that contains
terms at least as restrictive as those set forth in this Section 10, (b)
protects ABT's proprietary rights in the Software to the degree set forth in
this Agreement, and (c) grants the Contractor no rights in the Localized Version
beyond those expressly granted hereunder ("CONTRACTOR AGREEMENT"). Such
agreement must be approved in writing by ABT prior to its execution. Licensee
shall indemnify and hold harmless ABT against any breach of such Contractor
Agreement by such Contractor.
10.5 NOTIFICATION OF SECURITY BREACH. Licensee shall notify ABT
promptly in the event of any breach of its security of which Licensee becomes
aware, under conditions in which it would appear that the trade secrets
contained in the source code for the Software or the Localized Version were
prejudiced or exposed to loss. Licensee shall, upon request of ABT, take all
other reasonable steps necessary to recover any compromised trade secrets
disclosed to or placed in the possession of Licensee by virtue of this
Agreement. The cost of taking such steps will be borne solely by Licensee.
10.6 INJUNCTIVE RELIEF. In the event of breach of the provisions
of Section 10.1 or 10.3, the non-breaching party will have no adequate remedy at
law and will be entitled to immediate injunctive and other equitable relief,
without the necessity of showing actual money damages.
11. TERM AND TERMINATION
11.1 TERM. This Agreement will be effective as of the Effective
Date and will continue in full force and effect for a term of 10 years (the
"TERM") after the earlier of the Launch Date or , unless terminated as set forth
in this Section 11.
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11.2 TERMINATION. This Agreement may be terminated only as
follows, if any of the following events ("TERMINATION EVENTS") occur:
(a) NONPAYMENT OF FEES. In the event that: (i) Licensee
fails to pay the Fees as they become due; and (ii) fails to do so after 10 days
written notice thereof, ABT may terminate this Agreement upon written notice to
Licensee.
(b) DEFAULT. In the event that either party defaults in
the performance of a material non-monetary obligation under this Agreement
(other than nonpayment of Fees as set forth in Section 11.2(a)(i)) above, then
the non-defaulting party may provide written notice to the defaulting party
indicating: (i) the nature and basis of such default with reference to the
applicable provisions of this Agreement; and (ii) the non-defaulting party's
intention to terminate this Agreement. If such default is amenable to cure
within 30 days, the non-defaulting party may seek to terminate this Agreement
under this Section 11.2(b) in the event that such material default is not cured
within such 30 day period. If such default is not amenable to cure within 30
days, then the non-defaulting party may seek to terminate this Agreement if the
defaulting party has not made significant and ongoing attempts to cure such
default within 30 days, or if the defaulting party has not cured such default as
soon as possible thereafter. In either case, upon the expiration of such cure
periods the non-defaulting party may initiate an arbitration proceeding to
terminate this Agreement in accordance with Section 15.13(b). The parties shall
instruct the arbitrators to make a determination as to whether a material
default has occurred within 30 days after the arbitration proceeding is
initiated. If the arbitrators determine that a material default has occurred,
the non-defaulting party may terminate this Agreement immediately upon written
notice.
(c) ABT may terminate this Agreement immediately upon
written notice if Licensee: (i) terminates or suspends its business; (ii) admits
in writing its inability to pay its debts as they mature, makes an assignment
for the benefit of creditors, or becomes subject to direct control of a trustee,
receiver or similar authority; or (iii) becomes subject to any bankruptcy or
insolvency proceeding under federal, foreign, or state statutes.
(d) In the event ABT: (i) winds up or terminates its
business; (ii) admits in writing its inability to pay its debts as they mature,
makes an assignment for the benefit of creditors, or becomes subject to direct
control of a trustee, receiver or similar authority; or (iii) becomes subject to
any bankruptcy or insolvency proceeding under federal, foreign, or state
statutes; ABT shall assign the all rights and obligations of ABT under this
Agreement to autobytel.com inc. ABT hereby represents and warrants that ABT has
entered into an agreement with autobytel.com inc. consenting to such assignment.
11.3 EFFECT OF TERMINATION.
(a) SURVIVAL. Upon termination of this Agreement in
accordance with the above provisions, the rights and licenses granted under this
Agreement will immediately terminate except as otherwise stated herein. The
terms and conditions of the following Sections will survive termination or
expiration of this Agreement: 1, 2.4, 2.7, 4.3, 4.4, 5.9, 7.2, 8, 9, 10, 11.3,
13 and 15, as well as any payment obligations in accordance with Section 5 which
accrued prior to expiration or termination hereof.
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<PAGE> 28
(b) RETURN OF MATERIALS. Within 30 days after the date of
termination or discontinuance of this Agreement for any reason whatsoever,
Licensee shall, at ABT's option, return or destroy any copies of the Software,
Documentation, Business Procedures and any other Confidential Information in its
possession that is in tangible form. Licensee shall furnish ABT with a
certificate signed by an executive officer of Licensee verifying that the same
has been done.
(c) NON-COMPETITION. If this Agreement is terminated by
ABT under Section 11.2(b) or (c) before the end of the Term, then during the
period between termination of this Agreement and one year after termination of
the Agreement, Licensee shall not operate a Local Business. If Licensee assigns
this Agreement to another party in accordance with the terms of Section 12, this
obligation will run to Licensee, and to such assignee.
11.4 LICENSE IF ABT ENTERS BANKRUPTCY. If, at any time during the
Term, ABT: (a) files a voluntary petition in bankruptcy under Chapter 7 of 11
United States Code (the "BANKRUPTCY CODE"); or (b) has an involuntary petition
in bankruptcy filed against it under Chapter 7 of the Bankruptcy Code, which
petition is not dismissed within 90 days, Licensee may elect to retain its right
in the licenses granted in this Agreement, subject to the terms of this
Agreement, in accordance with Chapter 3, Section 365(n) of the Bankruptcy Code.
The licenses granted in this Agreement will be deemed licenses of "intellectual
property" under Section 365(n) of the Bankruptcy Code.
12. NONASSIGNMENT/BINDING AGREEMENT. Neither this Agreement, nor any
rights under this Agreement, may be assigned or otherwise transferred by
Licensee, in whole or in part, whether voluntary, or by operation of law,
including by way of sale of assets, merger or consolidation, without the prior
written consent of ABT. ABT may assign all its rights and obligations under this
Agreement in accordance with Section 11.2(d), or otherwise to an Affiliate of
ABT. Any permitted assignee must agree in writing to be bound by all the terms
and conditions of this Agreement. Subject to the foregoing, this Agreement will
be binding upon and inure to the benefit of the parties and their respective
successors and assigns.
13. NON-SOLICITATION. Each party acknowledges and agrees that the
technical and development employees and consultants of the other party are a
valuable asset of such party and are difficult to replace. Accordingly, each
party agrees that, for the Term and for a period of 2 years thereafter, it will
not offer employment as an employee, independent contractor, or consultant to
any such employee or consultant of the other party. In the event of a breach of
the provisions of this Section 13, the parties agree that it would be difficult
to determine the amount of actual damages that would result from such breach.
The parties further agree that in the event of a breach of the provisions of
this Section 13, the breaching party shall pay the non-breaching party
liquidated damages of $50,000 for each such breach, which is the parties' good
faith estimate of the amount of damages to the non-breaching party from such
breach.
14. NOTICES. Any notice, submission, or communication required or
permitted under the terms of this Agreement, or required by law, whether or not
so required elsewhere in this Agreement, must be in writing and must be: (a)
delivered in person, (b) sent by first class registered mail, return receipt
requested, or air mail, as appropriate, or (c) sent by overnight air courier; in
each case
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<PAGE> 29
properly posted and fully prepaid to the appropriate address set forth below.
Either party may change its address for notice by notice to the other party
given in accordance with this Section 14. Notices will be considered to have
been given at the time of the earlier of: (p) actual delivery in person, (q) the
date of a receipt of such notice signed by an authorized representative of the
party being notified, (r) the date of a written confirmation of receipt by the
party being notified, or (s) 30 days after deposit in the mail as set forth
above.
15. MISCELLANEOUS
15.1 FORCE MAJEURE. Neither party will incur any liability to the
other party on account of any loss or damage resulting from any delay or failure
to perform all or any part of this Agreement if such delay or failure is caused,
in whole or in part, by embargoes, floods, acts of civil or military authority,
fuel crisis, acts of God, strikes, lockouts, riots, acts of war, fires and
explosions ("FORCE MAJEURE"), but the inability to meet financial obligations is
expressly excluded. The time for performance will be extended for a period equal
to the duration of the delay, but in no event longer than 90 days. If, as a
result of a Force Majeure, a party is unable to resume performance within such
90 day period, the other party will have the right to terminate this Agreement.
15.2 NO WAIVER; AMENDMENT. Any waiver of the provisions of this
Agreement or of a party's rights or remedies under this Agreement must be in
writing to be effective. Failure, neglect, or delay by a party to enforce the
provisions of this Agreement or its rights or remedies at any time will not be
construed and will not be deemed to be a waiver of such party's rights under
this Agreement and will not in any way affect the validity of the whole or any
part of this Agreement or prejudice such party's right to take subsequent
action. This Agreement may not be amended, except by a writing signed by both
parties.
15.3 SEVERABILITY. If any term, condition, or provision of this
Agreement is found to be invalid, unlawful or unenforceable to any extent, the
parties shall endeavor in good faith to agree to such amendments that will
preserve, as far as possible, the intentions expressed in this Agreement. If the
parties fail to agree on such an amendment, such invalid term, condition or
provision will be severed from the remaining terms, conditions and provisions,
which will continue to be valid and enforceable to the fullest extent permitted
by law.
15.4 ENTIRE AGREEMENT. This Agreement (including the Attachments
hereto) contains the entire agreement of the parties with respect to the subject
matter of this Agreement and supersedes all previous communications,
representations, understandings and agreements, either oral or written, between
the parties with respect to said subject matter.
15.5 NO CONFLICTING PROVISIONS. No terms, provisions or
conditions of any purchase order, acknowledgment or other business form that
either party may use in connection with this Agreement have any effect on the
rights, duties or obligations of the parties under, or otherwise modify, this
Agreement, regardless of any failure of the other party to object to such terms,
provisions or conditions.
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<PAGE> 30
15.6 CONSENT. Unless expressly provided otherwise in this
Agreement, any prior consent of ABT that is required before Licensee may take an
action may be granted or withheld in ABT's sole and absolute discretion.
15.7 EXPORT RESTRICTIONS. Licensee understands that ABT is
subject to regulation by agencies of the U.S. government, including, but not
limited to, the U.S. Department of Commerce, which prohibit export or diversion
of certain technical products to certain countries. Licensee warrants that it
will comply in all respects with the Export Administration Regulations and all
other export or re-export restrictions applicable to the Software and
Documentation licensed hereunder. Further, Licensee shall cooperate as requested
by ABT to ensure compliance with any export restrictions or licenses relating to
the Software and Documentation.
15.8 PRESS RELEASES. Neither party shall disclose to any third
party the terms and conditions of this Agreement, except as required by the law,
of any relevant jurisdiction, or to any securities exchange or regulatory
authority or governmental body to which either party is subject, wherever
situated whether or not the requirement has force of law, in which case the
party making such disclosure shall take all such steps as are reasonable and
practicable in the circumstances to agree upon the contents of such disclosure
with the other party before marking such disclosure. Either party may disclose
the terms and conditions of this Agreement to their respective legal or business
advisors with a need to know acting under a duty of confidentiality.
Notwithstanding the above, at a mutually agreed time, as soon as possible but no
later than 30 days after the Effective Date, ABT and Licensee shall issue a
mutually acceptable joint press release announcing the relationship contemplated
by this Agreement.
15.9 RIGHTS AND REMEDIES. No exercise or enforcement by either
party of any right or remedy under this Agreement will preclude the enforcement
by such party of any other right or remedy under this Agreement or that such
party is entitled by law to enforce.
15.10 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which so executed will be deemed to be an original and
such counterparts together will constitute one and the same agreement.
15.11 GOVERNING LAW. This Agreement will be interpreted and
construed in accordance with the laws of the State of California and the United
States of America, without regard to conflict of law principles and excluding
the 1980 United Nations Convention on Contracts for the International Sale of
Goods.
15.12 LANGUAGE. This Agreement is in the English language only,
which language shall be controlling in all respects, and all versions hereof in
any other language shall not be binding on the parties hereto. All
communications and notices to be made or given pursuant to this Agreement shall
be in the English language.
15.13 DISPUTE RESOLUTION.
(a) ESCALATION. If a dispute otherwise arises under this
Agreement, it should be referred to the President of each of the parties for
resolution, and such persons shall use their best
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<PAGE> 31
efforts to resolve the matter for no less than 30 days. Any matter such persons
are unable to resolve within such period may be submitted to the dispute
resolution procedure set forth in Section 15.13 (b) or (c), as applicable.
(b) ARBITRATION. Any dispute or claim arising out of or in
relation to this Agreement not resolved by Sections 15.13(a) must be settled by
binding arbitration under the Rules of Conciliation and Arbitration of the
International Chamber of Commerce as presently in force ("RULES") and by one
arbitrator appointed in accordance with said Rules. Judgment on the award
rendered may be entered in any court having jurisdiction thereof. The place of
arbitration will be Orange County, California, U.S.A. Any monetary award must be
calculated and denominated in U.S. dollars and the arbitration must be conducted
in the English language. Notwithstanding the above, either party may apply to
any court of competent jurisdiction for injunctive or equitable relief.
15.14 LEGAL EXPENSES. If there is a successful action by one
party against the other party to enforce this Agreement or obtain damages as a
result of any breach of this Agreement, then the prevailing party shall be
entitled to recover from the other party, in addition to any damages, all costs
and expenses incurred by the prevailing party in connection with the action,
including reasonable attorneys' fees and court costs.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by duly authorized representatives on the dates set forth below.
AUTOBYTEL. EUROPE LLC ("ABT") ("Licensee")
By: By:
-------------------------------- -------------------------------------
Name: Name:
------------------------------ -----------------------------------
Title: Title:
----------------------------- ----------------------------------
Date: Date:
------------------------------ -----------------------------------
Address: Address:
--------------------------- --------------------------------
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<PAGE> 32
ATTACHMENT A
SOFTWARE:
The Software will include the following core business applications:
[TO BE PROVIDED AS APPROPRIATE FOR EACH NOC]
FEES[DESCRIBE THE FOLLOWING FEES:]
MINIMUM ANNUAL LICENSE FEE.
ADDITIONAL LICENSE FEES.
MAINTENANCE FEE.
INITIAL TRANSFER FEE.
DATA CENTER AND PRODUCT MANAGEMENT FEES:
The Autobytel.Europe concept has as one if its core tenets the ability
to achieve pan-European cost leadership through centralizing both Data Center
and Product Management functions. It is proposed that such centralization will
reduce costs to the NOC's which, without such centralization, would be forced to
re-create the same systems and support functions on a country by country basis.
A. THE FOLLOWING PROVIDES NON-EXHAUSTIVE EXAMPLES OF THE FUNCTIONS
ASSIGNED TO THE DATA CENTER AND PRODUCT MANAGEMENT GROUPS:
Data Center
Coordinate IT communication on NOC's behalf with Autobytel.com
Receive initial software transfer for NOC's
Develop or cause to be developed necessary Localization, Derivative
Works, Extensions, and/or Updates & Upgrades (such developments will be
subject to additional charges)
Host all NOC websites
Provide additional customization requested by NOC's (such customization
will be subject to an additional charge)
B. PRODUCT MANAGEMENT WILL BE PROVIDED FOR THE FOLLOWING ABT PRODUCT
LINES:
[TBD]
<PAGE> 33
The costs incurred to provide these support services, excluding senior
management support and oversight, will be billed on a pro-rata basis to the
NOC's (based upon vehicle registration or an alternative measurement standard
agreeable to the NOC's). Provided, however, if the NOC has special service
requirements, ABT will attempt to provide such services at an additional charge.
The NOC's will, after the first year of operation, project their usage
requirements for the various support functions and will submit these estimates
to ABT. ABT, in turn, will consolidate the requests and will determine the
appropriate staffing, systems, etc. that will be required to deliver such
services to the NOC's. ABT will present the budget to each NOC, who, in turn
will approve the budget for the following year. In the event the NOC's are
unable to collectively agree on the budget, then the CEO of ABT shall decide the
final budget after consultation with the board of ABT.
The parties shall negotiate in good faith any changes to the above terms
that may be necessary as a result of any change in the Business Procedures.
<PAGE> 34
ATTACHMENT B
[ATTACH BUSINESS PROCEDURES AS OF EFFECTIVE DATE ]
ATTACHMENT C
[ATTACH BRANDING PROTOCOLS AS OF EFFECTIVE DATE ]
ATTACHMENT D
[ATTACH SERVICES AGREEMENT]
ATTACHMENT E
[ATTACH ESCALATION PROCEDURES AS OF EFFECTIVE DATE ]
<PAGE> 35
ATTACHMENT F
DRT END USER LICENSE
DRT
DEALER REAL TIME ACCESS AGREEMENT
THIS AGREEMENT IS ENTERED INTO THIS____,DAY OF ______ BETWEEN
_____________, AND _____________, A(N) __________ LIMITED LIABILITY CORPORATION,
WITH ITS PRINCIPAL PLACE OF BUSINESS LOCATED AT __________________________
("LICENSEE").
WHEREAS, LICENSEE HAS EXECUTED AN AUTOBYTEL.COM INC. NEW CAR
SUBSCRIPTION AGREEMENT AND/OR "USED CAR CYBERSTORE(TM)" SUBSCRIPTION AGREEMENT;
AND
WHEREAS, LICENSOR HAS DEVELOPED AND OWNS THE RIGHT TO LICENSE CERTAIN
PROPRIETARY SOFTWARE PROGRAMS COMMONLY REFERRED TO AS THE AUTO-BY-TEL DEALER
REAL TIME (DRT) PROGRAM AS WELL AS RELATED INFORMATION AND DOCUMENTATION
CURRENTLY RESIDING EXCLUSIVELY WITH LICENSOR; AND
WHEREAS, LICENSEE HAS REPRESENTED TO LICENSOR THAT THEY WILL PROVIDE
FOR THEMSELVES A PERSONAL COMPUTER, AND CERTAIN ANCILLARY EQUIPMENT RELATED
THERETO WHICH MEETS THE MINIMUM SPECIFICATIONS SET FORTH HEREIN (TOGETHER, THE
"EQUIPMENT") FOR USE IN CONNECTION WITH DRT AND
WHEREAS, LICENSOR WILL PROVIDE DATA ACCESS, PROGRAM MAINTENANCE,
UPDATING AND HELP-LINE TECHNICAL SERVICES TO LICENSEE TO ASSIST LICENSEE IN THE
USE OF THE PROGRAMS;
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS AND PREMISES
HEREIN RECITED AND FOR OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED, THE PARTIES, INTENDING TO BE
LEGALLY BOUND HEREBY, WARRANT, COVENANT AND AGREE AS FOLLOWS:
GRANT OF LICENSE. LICENSOR HEREBY GRANTS TO LICENSEE A NON-EXCLUSIVE,
NON-TRANSFERABLE LICENSE TO ACCESS AND USE THE DRT PROPRIETARY PROGRAM AND ANY
RELATED INFORMATION AND DOCUMENTATION SUPPLIED BY LICENSOR SUBJECT TO THE TERMS
AND CONDITIONS CONTAINED IN THIS AGREEMENT.
TERM OF THIS AGREEMENT: EXCEPT AS PROVIDED HEREIN, THE RIGHTS AND
OBLIGATIONS CONFERRED BY THIS AGREEMENT SHALL RUN CONCURRENTLY WITH THE TERM OF
THE ABT MASTER SUBSCRIPTION AGREEMENT EXECUTED BETWEEN THE PARTIES. LICENSOR MAY
IMMEDIATELY TERMINATE THIS AGREEMENT IN THE EVENT OF A MATERIAL BREACH BY
LICENSEE OF ANY PROVISION OF THIS AGREEMENT, OR ANY OTHER AGREEMENT BETWEEN
LICENSEE AND LICENSOR OR ANY OF THEIR RESPECTIVE AFFILIATES, INCLUDING WITHOUT
LIMITATION THE ABT MASTER SUBSCRIPTION AGREEMENT. EITHER PARTY MAY VOLUNTARILY
TERMINATE THIS AGREEMENT UPON 30 DAYS' WRITTEN NOTICE TO THE OTHER PARTY. UPON
TERMINATION OF THIS AGREEMENT FOR ANY REASON, LICENSEE SHALL PROMPTLY
DISCONTINUE USE OF THE PROGRAMS, DELETE ALL COPIES OF THE DRT PROGRAM, IF ANY,
IN WHATEVER FORM, RESIDING ON ITS COMPUTERS, STORAGE MEDIA AND/OR ON HARD COPY.
RIGHT OF USE. DURING THE TERM OF THIS AGREEMENT, LICENSEE SHALL HAVE THE
RIGHT TO ACCESS THE DRT PROGRAM IN CONNECTION WITH THE INTERNAL OPERATION AND
MANAGEMENT OF
<PAGE> 36
LICENSEE'S OWN BUSINESS. LICENSEE IS PROHIBITED FROM RESELLING OR OTHERWISE
ALLOWING ACCESS BY THIRD PARTIES NOT AFFILIATED WITH LICENSEE'S AUTO DEALERSHIP
BUSINESS.
LICENSE FEE. LICENSEE SHALL PAY LICENSOR THE INITIAL SUM OF_____________
DOLLAR ($_________) AS CONSIDERATION FOR THE LICENSE GRANTED HEREUNDER.
MONTHLY ACCESS FEE. LICENSEE SHALL PAY LICENSOR A MONTHLY ACCESS FEE OF
ONE HUNDRED AND FIFTY DOLLARS ($150.00) AND BE ENTITLED TO AN ACCESS VIA UNIQUE
PASSWORD(S) ALLOWING SIMULTANEOUS LOG-ON FOR A MAXIMUM OF TWO USERS PER SESSION.
SYSTEM REQUIREMENTS. DEALER SHALL PROVIDE AT THEIR OWN EXPENSE A
PERSONAL COMPUTER AND RELATED EQUIPMENT THAT MEETS OR EXCEEDS THE FOLLOWING
MINIMUM SPECIFICATIONS:
133 PENTIUM PROCESSOR; 32MB RAM; 33.6 MODEM (THE FASTER THE BETTER!);
2GB HARD DRIVE; WINDOWS '95; ISP (INTERNET SERVICE PROVIDER - IE: AT & T,
NETCOM, MCI....); NETSCAPE NAVIGATOR WEB BROWSER SOFTWARE (VERSION 3.0 OR
LATER).
TECHNICAL SUPPORT. LICENSOR SHALL MAINTAIN FOR THE BENEFIT OF THE
LICENSEE A TECHNICAL SUPPORT HELP-LINE. LICENSOR SHALL ESTABLISH AND STAFF SUCH
HELP-LINE WITH PERSONS KNOWLEDGEABLE ABOUT THE DRT PROGRAM. THE HOURS OF
AVAILABILITY SHALL BE BETWEEN 6:00 A.M. AND 5:00 P.M. PST, EXCLUDING SATURDAYS
AND SUNDAYS. TECHNICIANS WILL PROVIDE ASSISTANCE TO LICENSEE WITH RESPECT TO
ACCESSING AND USING THE DRT PROGRAM ONLY. TECHNICAL ASSISTANCE AND SUPPORT
REGARDING COMPUTER OR RELATED HARDWARE ARE BEYOND THE SCOPE OF THIS AGREEMENT
AND WILL NOT BE PROVIDED BY LICENSOR. THE HOURS OF THE AVAILABILITY OF THE
HELP-LINE ARE SUBJECT TO CHANGE AT THE SOLE DISCRETION OF THE LICENSOR.
COVENANTS OF LICENSEE. DURING THE TERM OF THIS AGREEMENT:
LICENSEE SHALL ADOPT AND ENFORCE SUCH INTERNAL POLICIES, PROCEDURES AND
MONITORING MECHANISMS AS ARE NECESSARY TO ENSURE THAT THE DRT PROGRAM IS USED
ONLY IN ACCORDANCE WITH THIS AGREEMENT AND THAT ALL STEPS NECESSARY TO ENSURE
THAT NO PERSON OR ENTITY WILL HAVE UNAUTHORIZED ACCESS TO THE PROGRAMS ARE
TAKEN.
LICENSEE SHALL NOT: ASSIGN, SUBLICENSE, LEASE, ENCUMBER OR OTHERWISE
TRANSFER OR ATTEMPT TO TRANSFER THE DRT PROGRAM OR ANY PORTION THEREOF; PERMIT
ANY THIRD PARTY OTHER THAN THE LICENSEE OR ITS AUTHORIZED AGENT ACTING IN BEHALF
OF LICENSEE, TO HAVE ACCESS TO THE DRT PASSWORDS OR TO USE PROGRAMS, WHETHER BY
TIMESHARING, NETWORKING, OR ANY OTHER MEANS; DUPLICATE, MODIFY, TRANSLATE,
REVERSE, ENGINEER, DECOMPILE OR DISASSEMBLE THE DRT PROGRAM; POSSESS OR USE THE
PROGRAMS OR ANY PORTION THEREOF, OTHER THAN IN MACHINE READABLE OBJECT CODE;
REMOVE ANY COPYRIGHT, TRADEMARK, PATENT OR OTHER PROPRIETARY NOTICES FROM THE
DRT PROGRAM(S), OR ANY PORTION THEREOF WITHOUT THE EXPRESS WRITTEN CONSENT OF
LICENSOR.
PROGRAM MODIFICATIONS: ONLY THE LICENSOR SHALL MAKE PROGRAM
MODIFICATIONS. LICENSOR SHALL FROM TIME TO TIME PROVIDE UPGRADES AND/OR
MODIFICATIONS TO THE DRT PROGRAM TO LICENSEE. LICENSEE SHALL ACCEPT ANY UPGRADES
OR OTHER MODIFICATION MADE BY LICENSOR TO THE PROGRAMS.
NO WARRANTY. THE PROGRAMS ARE PROVIDED ON AN "AS-IS" BASIS. LICENSOR
MAKES NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, INCLUDING BUT NOT
LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
LIMITATION OF REMEDIES. REGARDLESS OF WHETHER ANY REMEDY SET FORTH
HEREIN FAILS OF ITS ESSENTIAL PURPOSE, IN NO EVENT WILL THE LICENSOR BE LIABLE
THE DAMAGES TO THE LICENSEE FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT OR SIMILAR
DAMAGES, INCLUDING ANY LOST PROFITS OR LOST DATA BEYOND THE ACCESS FEE PAID FOR
THE MONTH IN WHICH THEY OCCURRED,
<PAGE> 37
ARISING OUT OF THE USE OR INABILITY TO USE THE DRT PROGRAM OR ANY DATA SUPPLIED
THEREWITH.
PROPRIETARY DATA. LICENSEE ACKNOWLEDGES THAT THE PROGRAMS ARE
PROPRIETARY TO LICENSOR AND THAT IT HAS (AND WILL HAVE) NO INTEREST THEREIN OR
IN ANY MODIFICATIONS OR IMPROVEMENTS THERETO, AND HEREBY ASSIGNS TO LICENSOR ALL
RIGHTS IN ANY SUCH MODIFICATIONS OR IMPROVEMENTS MADE BY OR ON BEHALF OF
LICENSEE.
CONFIDENTIALITY. FOR THE PURPOSE OF THIS AGREEMENT, CONFIDENTIAL
INFORMATION INCLUDES THE DRT PROGRAMS AND ALL OTHER INFORMATION PROVIDED BY
LICENSOR MARKED "CONFIDENTIAL." INFORMATION SHALL NOT BE DEEMED CONFIDENTIAL
INFORMATION AND LICENSEE AND LICENSEE'S EMPLOYEES SHALL HAVE NO OBLIGATION WITH
RESPECT TO ANY SUCH INFORMATION IF SUCH INFORMATION: (A) IS OR FALLS INTO THE
PUBLIC DOMAIN THROUGH NO WRONGFUL ACT OF LICENSEE OR THE LICENSEE'S EMPLOYEES;
(B) IS RIGHTFULLY RECEIVED FROM A THIRD PARTY WHO IS WITHOUT RESTRICTION AND
WITHOUT BREACH OF THIS AGREEMENT; (C) IS APPROVED FOR RELEASE BY WRITTEN
AUTHORIZATION OF AN OFFICER OF LICENSOR; OR (D) IS DISCLOSED PURSUANT TO THE
REQUIREMENTS OF A GOVERNMENTAL AGENCY OR OPERATION OF LAW.
SHOULD THE LICENSEE OR LICENSEE'S EMPLOYEES LEARN OF CONFIDENTIAL INFORMATION
FROM LICENSOR OR ANY OTHER SOURCE, NEITHER LICENSEE NOR LICENSEE'S EMPLOYEES
SHALL, AT ANY TIME DURING THE TERM, OR FOR ONE YEAR THEREAFTER, DISCLOSE SUCH
INFORMATION TO ANY INDIVIDUAL, AGENCY, COMPANY OR OTHER ENTITY. LICENSEE SHALL
NOT USE SUCH CONFIDENTIAL INFORMATION FOR LICENSEE'S OWN ADVANTAGE OTHER THAN AS
PERMITTED BY THIS AGREEMENT.
BOTH PARTIES RECOGNIZE AND ACKNOWLEDGE THAT BREACH OF THIS SECTION 13
WOULD CAUSE IRREPARABLE INJURY INADEQUATELY COMPENSABLE IN DAMAGES. ACCORDINGLY,
LICENSOR MAY SEEK AND OBTAIN INJUNCTIVE RELIEF AGAINST A BREACH OR THREATENED
BREACH HEREOF, IN ADDITION TO ANY OTHER LEGAL REMEDIES THAT MAY BE AVAILABLE AT
LAW OR IN EQUITY.
14. ASSIGNMENT. EXCEPT FOR ASSIGNMENTS TO AFFILIATES, PROVIDED EACH SUCH
AFFILIATE AGREES TO BE BOUND BY THE TERMS HEREOF, LICENSEE MAY NOT, WITHOUT
LICENSOR'S PRIOR WRITTEN CONSENT, ASSIGN ITS RIGHTS OR DELEGATE ITS OBLIGATIONS
UNDER THIS AGREEMENT.
SEVERABILITY. IF ANY PROVISION OF THIS AGREEMENT SHALL BE HELD TO BE
INVALID, ILLEGAL OR ENFORCEABLE, SUCH DETERMINATION SHALL IN NOR WAY ALTER OR
IMPAIR THE VALIDITY, LEGALITY AND ENFORCEABILITY OF THE REMAINING PROVISIONS OF
THIS AGREEMENT.
GOVERNING LAW. THE FORMATION AND PERFORMANCE OF THIS AGREEMENT SHALL BE
GOVERNED AND INTERPRETED IN ACCORDANCE WITH THE LAWS IN EFFECT IN THE STATE OF
CALIFORNIA.
ENTIRE AGREEMENT. THIS AGREEMENT AND ITS PREAMBLE CONSTITUTE THE ENTIRE
AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND
SHALL SUPERSEDE ALL PREVIOUS ORAL AND WRITTEN PROPOSALS, NEGOTIATIONS,
REPRESENTATIONS, COMMITMENTS AND OTHER COMMUNICATIONS BETWEEN THE PARTIES. THIS
AGREEMENT MAY NOT BE RELEASED, DISCHARGED, CHANGED OR MODIFIED EXCEPT BY A
WRITTEN INSTRUMENT THAT IS SIGNED BY DULY AUTHORIZED REPRESENTATIVES OF EACH
PARTY AND THAT EXPRESSLY INTENDS SUCH RELEASE, DISCHARGE, CHANGE OR
MODIFICATION.
INDEPENDENT CONTRACTORS. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR
CONSTRUED BY THE PARTIES OR ANY THIRD PERSON TO CREATE A FRANCHISE, AGENCY,
PARTNERSHIP OR JOINT VENTURE BETWEEN LICENSOR AND LICENSEE.
WAIVER. A FAILURE OF THIS LICENSOR TO ENFORCE AT ANY TIME ANY PROVISION
OF THIS AGREEMENT SHALL IN NO WAY AFFECT THE FULL RIGHT OF THE LICENSOR TO
ENFORCE SUCH PROVISION AT ANY TIME THEREAFTER.
<PAGE> 1
GOLD TERM SERVICES AGREEMENT
WELCOME to autobytel.com inc.'s family of accredited motor vehicle dealers. This
Agreement is entered into by and between autobytel.com inc., a Delaware
Corporation, with its principal place of business at 18872 MacArthur Blvd.,
Irvine, California 92612 ("ABT" or "Us" or "We" or "Our") and [LEGAL_NAME],
a(n) [INC_ST] [ENTITY] dba [DBA] with its principal place of business at
[ADDRESS], [CITY], [ST] [ZIP] ("Dealer" or "You" or "Your"). (ABT and
Dealer, each a "Party" hereunder are sometimes collectively referred to herein
as the "Parties.")
In consideration of the following mutual promises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, ABT and Dealer, on their own behalf and on behalf of each of their
"d.b.a." operation(s) set forth in Appendix "A" attached hereto, intending to be
legally bound hereby, warrant, covenant and agree as follows:
I. OUR COMMITMENT TO YOU:
1. ABT promises to provide an Internet-based marketing program and Online
services to attract potential purchasers to http//www.autobytel.com, (THE
"WEBSITE"); The term Purchase Request(s) as utilized in this Agreement,
refers to vehicle purchase or lease referral requests originating from the
Website. Nothing in this section shall be construed to include direct
vehicle orders or locating services.
2. ABT promises to use reasonable efforts to promptly forward to You
information regarding an identified potential purchaser whose purchase/lease
request originating through the Website from within Your assigned Primary
Market Area (PMA);
3. ABT promises to provide You with technical support during regular business
hours (Pacific Standard Time) to assist You and/or Your representative(s) in
the use of Our products and services. Except where otherwise informed by the
technical support staff at the time services are requested, this service is
included in your monthly subscription fees. As some services require
substantial time and effort to complete, ABT reserves the right to institute
supplemental charges for some services without prior notification;
4. We promise to provide consumers with assistance and support through Our
Customer WOW! Program, during normal business hours (Pacific Standard Time);
5. We agree, subject to individual state law restrictions, to continue to
develop, maintain, and enforce uniform Customer Service Standards that will
be implemented by Our subscribing dealers. To meet such a commitment, ABT
reserves the right to amend the Customer Service Standards from time to time
to modify, eliminate or impose additional Customer Service Standards as the
law or the changing business climate may dictate;
6. We promise to promptly notify Dealer in writing of any revisions to the
Customer Service Standards outlined herein. We will not impose amendments or
additions to Our Customer Service Standards unless they are applied to all
subscribing dealers within Your state;
7. We promise to use reasonable efforts to effectively communicate mutually
beneficial information relating to the ABT products and services provided
during the term of this Services;
8. ABT shall use its reasonable efforts to provide prompt transmission of data
to Dealer. Except as otherwise provided for in paragraph I (16) below, ABT
shall not be liable for any loss of data, delays or errors in transmitting
data or any loss of business due to electrical power source failure,
telephone transmission failure, unforeseen criminal acts of others, Natural
Disaster, acts of God, or any other conditions beyond our control.
9. We are responsible to maintain Our own equipment at Our sole expense and
will assume all responsibility for loss, damage, and maintenance to Our own
equipment;
10. We hereby grant to You a nonexclusive, non-transferable license that will
allow up to two simultaneous users to access Our proprietary Dealer Real
Time (DRT) information communications system to receive Purchase Requests;
11. NEW VEHICLE EXCLUSIVE PRIMARY MARKET ASSIGNMENT ("PMA"): You have been
assigned an exclusive market area for the subscribed new vehicle franchises
of [FRANCHISES]. This exclusive area effects new vehicle Purchase Requests
originating from Our Website only. The U.S. Postal Code description of this
PMA assignment is set forth in Exhibit "A" attached to this Agreement and
incorporated herein by this reference. ABT has sole and complete authority
to define Your PMA. Except in the case of a holdover as set forth in
paragraph 13 below, Your exclusive PMA will remain in effect for six (6)
months without the possibility of adjustment except by the mutual consent of
both . ABT reserves the right to conduct a market representation study to
determine the effectiveness of Your PMA during the term of this Agreement.
ABT in their sole discretion may use the results of these studies to among
other things, evaluate the market value of Your PMA and Your effectiveness
in servicing purchase requests from Your PMA. ABT reserves the right to
adjust Your PMA should the U.S. Postal service make any changes to the zip
codes represented or as necessary following a market study. ABT will provide
You with not less than thirty-(30) days written notice of the pending
change; ABT shall not be held liable for any unnoticed changes in Your PMA
as a result of U.S. Postal Service mandated zip code alteration(s).
12. TERM: This Agreement shall be for a term of twelve (12) months, unless
terminated earlier pursuant to section Section I (13) or II 20. Upon the
consent of ABT this Agreement may be extended at twelve (12) month
intervals, up to a maximum of five (5) successive terms . All renewal
confirmations and consent by ABT shall be evidenced in writing and delivered
to Dealer in accordance with section III 4. In the event services are
continued without written extension, this agreement and all non-conflicting
terms therein shall be deemed as a holdover contract and extended on
reoccurring a month-to-month basis until terminated by either party or by
breach of any part of this Agreement.
13. ABT MAY TERMINATE THIS AGREEMENT:
a) immediately for any breach of this Agreement by You which is not
cured within ten (10) days after You receive written notice of
the breach from Us;
b) immediately if any fees due ABT under this Agreement are unpaid
and outstanding more than thirty (30) days after ABT makes a
written request for payment;
c) immediately, if Dealer is guilty of willful misconduct in the
performance of its duties under this Agreement;
d) immediately upon a finding of Dealer's violation of state or
Federal law or conviction for such violation, whether
administratively, civilly, or criminally;
e) Immediately upon discovery of Dealers' sale or transfer of all or
substantially all of its dealership assets and/or management and
control.
f) immediately if an order for liquidation against You is entered
and not stayed in a bankruptcy proceeding;
g) upon sixty (60) days (30 days in the case of a holdover term)
written notice to You.
14. TAXES: We shall be responsible for paying all taxes imposed upon Us by
reason of the compensation paid to Us for providing services to You under
this Agreement.
15. INDEMNIFICATION: We promise to indemnify and hold harmless You and Your
subsidiaries and/or affiliates and Your respective members, managers,
directors, officers, employees, and agents against any and all losses,
liabilities, claims, awards, damages, judgments, settlements, and costs,
including fees and expenses, arising out of or related to Our negligence or
wrongful conduct, or arising out of any third-party claim. In the event We
are served with notification of action or suit against You, We will promptly
notify You of such claim.
We promise to defend at Our sole cost and expense, all such claims, actions,
lawsuits, or proceedings. In all events, You, in your sole discretion, shall
have the right to participate in the defense of any such action through
counsel of your own choosing at Your sole expense. In the event We are
served with notification of action or suit against You, We promise to
promptly notify You of such claim(s), and Dealer, in Your sole discretion,
shall defend all such actions or suits through counsel of Your own choosing.
II. YOUR COMMITMENT TO US:
1. At all times during the term of this Agreement, You and/or Your designated
representatives will abide by the terms of this Agreement and will perform
the duties as set forth herein, in accordance with the terms of this
Agreement.
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2. Your Dealer Principal and General Manager will actively participate in the
application, implementation, and operation of the ABT service system within
the dealership(s).
3. You understand and agree that You are responsible for all internal costs, if
any, associated with implementation of Our systems and services within Your
facilities.
4. You will dedicate at least one (1) key employee to be responsible for the
new vehicle program and at least one (1) key employee to be responsible for
the Certified Pre-Owned CyberStore program, if so elected. This person(s)
will be empowered to act as a liaison between ABT and Dealer. This person(s)
shall be referred to as the "ABT Manager." You promise to notify Us in
writing within ten (10) days with the identity of any newly designated ABT
Manager.
5. You will make Your ABT Manager(s) available to Us for training upon
reasonable request and notice, Your Dealer Principal and General Manager
agree to participate in at least one (1) ABT-U Basic Training program or
other similar program affiliated with ABT, offered by ABT either at the
Dealer's facility or at an offsite facility offered by ABT, within One
Hundred Twenty (120) days from the date of this Agreement. ABT shall reserve
for You, free of tuition costs, two (2) seats for ABT Manager Training and
one seat per Dealer Manager per franchise per year at an ABT-U Basic
Training course or other similar program affiliated with ABT. Additional
seats may be purchased at a cost of Two Thousand Five Hundred Dollars
($2,500.00) per seat. Dealer will ensure that each ABT Manager will attend
at least one ABT Phone Training Session prior to activating our services and
(1) ABT-U Basic training course or other similar program affiliated with ABT
within ninety (90) days from the date of this Agreement. Dealer understands
that ABT will not forward Purchase Requests under this Agreement until such
time as The ABT Manager Phone Training has been completed. ABT may suspend
Purchase Requests in the event all ABT-U Basic Training or other similar
program affiliated with ABT has not been completed by the qualified ABT
Manager(s), Dealer, and GM within the time frames stated herein. Until such
time as Dealer's compliance with this term has been confirmed by ABT, ABT is
hereby granted express authority and permission to re-route any Purchase
Requests received from Dealer's PMA to the nearest qualified ABT subscribing
dealer or in the alternative, a manufacturer for the vehicle type requested
with whom ABT has a business relationship for secondary marketing of the
subject vehicle make, without prior notice to Dealer.
6. You will set aside and designate a work area within Your dealership wherein
the ABT Manager(s) may perform his/her/their duties under this Agreement.
7. When working with each Purchase Requester provided to You through Our
service system, You will, at all times, act in good faith and in accordance
with state and federal laws.
8. You promise to reasonably participate in ABT's program offerings, including
any programs or services developed in the future.
9. CUSTOMER SERVICE STANDARDS:
A Dealer shall contact one hundred percent (100%) of the Potential
Purchasers within one (1) business day of Dealer's receipt of the
inquiry from ABT. ABT retains the right to re-route to another
accredited ABT dealer, at any time, any Purchase Requester(s) not
contacted by You, without prior notice; and
B Dealer's initial response shall be by telephone or e-mail and shall
confirm receipt of the Purchase Request. Dealer shall at the same
time, but in no event more than two (2) business days following
receipt of the Purchase Request, disclose all of the following
information (the "Dealer Information"):
a) the availability of the vehicle inquired about;
b) the manufacturer's suggested retail price (MSRP) of the
vehicle;
c) availability of all requested options;
d) the complete price that You will sell or lease the vehicle
to the Potential Purchaser, including all options
requested, preparation fees, destination fees and/or
advertising costs or charges not otherwise included in the
vehicle price;
e) all relevant financing terms and conditions which may
apply to the purchase or lease transaction requested;
f) all other terms, costs and conditions required by law to
be disclosed to prospective purchasers; and
g) ABT retains the right to re-route any Purchase Request(s)
to another accredited ABT Dealer in the event the
information called for in this section II(9)(B) are not
completely disclosed to a Purchase Requester(s).
C You agree to maintain an Overall Satisfaction Index (OSI) score as
measured by ABT at a level that is equal to or above the regional
average for comparable make dealers in Your PMA area. OSI is a
quarterly scoring method which measures and ranks performance by
comparing Dealer's average Purchase Request contact ratio, actual
sales completed from Purchase Requests provided, the number of
finance transactions completed through ABT, and customer service
ratings as provided by customer surveys, with those of other
similarly situated Dealers within a region. ABT in their sole
discretion may extend the term of this Gold Term Services Agreement
as specified in Section Section I(12) herein.
D You promise that all Dealer Information, including the price, that
You transmitted to a Potential Purchaser shall be valid and be
binding on Dealer for a period of seven (7) days after its
transmittal, provided the identified vehicle still remains available
for sale. If You relied on a manufacturer sponsored program when
quoting Your pricing, terms, incentives or availability of vehicles,
the time period in which the Dealer Information must be valid shall
coincide with the termination date of the Manufacturer's program or
seven (7) days, whichever is less. If the offer time is less than
seven (7) days for the above reason, You promise to include a
statement in the Dealer Information informing the Prospective
Purchaser of any reduction in the time period as set forth above. You
agree that any claim for damages or loss arising out of Your failure
to inform Potential Purchasers of all Dealer Information required by
this section shall be borne solely by You and not ABT.
E Unless otherwise agreed to in writing between the Parties hereto, You
promise to adopt and abide by revisions to any Customer Service
Standard no later than thirty (30) days following notification of a
change, even though they may require additional work or expense to
implement.
10. You promise to use reasonable efforts to effectively communicate to ABT
mutually beneficial information relating to the ABT products and services
provided during the term of this Services.
11. You agree to update, on a weekly basis, Your sales data in the Dealer Real
Time(R) System indicating the number and names of Potential Purchasers who
purchased or leased vehicles from You through Our system. You agree to
include in Your data, the number of those vehicles financed and amount
financed and such other related data as may from time to time be requested.
12. You agree to provide at Your own expense, dedicated access to an IBM
compatible personal computer with Internet access and related equipment that
meets or exceeds the minimum specifications published from time to time, by
ABT. You are solely responsible for ensuring that your computer system is in
compliance with all-relevant "Year 2000" specifications. Upon request, you
agree to provide Us with written assurances regarding your compliance with
this provision.
13. In addition to the personal computer outlined above, You agree to provide at
Your own expense, a dedicated workstation that is at a minimum, comprised of
a desk, a compatible printer, telephone, and other office supplies and
equipment as may be necessary to receive and properly implement at Your
dealership, the services contemplated by this Agreement.
14. You are responsible to maintain Your own equipment at Your sole expense and
will assume all responsibility for loss, damage, and maintenance to Your own
equipment.
15. You understand that ABT services are free of charge to a Purchase Requester.
You or any employee/agent of You, are expressly prohibited from representing
to any Purchase Requester, in any manner, either orally or in writing, the
existence of any charge or fee to be paid to You or to You on behalf of ABT
by reason of their using Our services to facilitate the Purchase or Lease of
any vehicle from You.
16. DEALER REAL TIME SYSTEM(U.S.PAT.PEND.) (DRT): You agree to actively utilize
the DRT information system in the daily implementation of the services
contemplated by this Agreement. As an express condition of the license
hereby granted to You by ABT, You are prohibited from reselling, loaning or
otherwise sharing the use of Your password with anyone not subject to this
contract.
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17. CERTIFIED PRE-OWNED CYBERSTORE(R) PARTICIPATION ELECTION (OPTIONAL): Your
participation in Our Pre-Owned vehicle program is optional and there is an
additional charge for this service. The terms and conditions of Your
participation in this program are set forth separately in Appendix "B"
attached to this Agreement and incorporated herein by this reference.
18. AFTERMARKET ACCESSORIES (OPTIONAL): Your participation in Our Aftermarket
Accessory program is optional and there is an additional charge. If you are
electing to participate in this program at this time, the terms and
conditions of Your participation in this program are set forth separately in
attached Appendix "C" to this Agreement and incorporated herein by this
reference.
19. COMPENSATION TO ABT: You promise to pay ABT a monetary fee for services
rendered as follows:
[SIGN_UP_FEE_WRITTEN] ([SIGN_UP_FEE_]) as an initial start-up fee which
You paid at the time of your original application for services. Of this
fee, [DRT_LIC_FEE_WRITTEN] ([DRT_LIC_FEE_]) has been allocated to the
DRT initial start-up fee. As additional ongoing consideration, You
agree to pay ABT the amount of [MONTHLY_FEE_WRITTEN] ([MONTHLY_FEE_])
as a total monthly Services fee, which is due and payable in advance on
the first day of every calendar month. The total monthly amount due
shall be allocated as follows: DRT Access Fee, [DRT_MONTHLY__];
Certified Pre-Owned CyberStore [UCC_MONTHLY_], and [MAKE_1],
[MAKE_1_MONTHLY_] [MAKE_2] [MAKE_2_MONTHLY_] [MAKE_3] [MAKE_3_MONTHLY_]
[MAKE_4] [MAKE_4_MONTHLY_] [MAKE_5] [MAKE_5_MONTHLY_] [MAKE__6]
[MAKE_6_MONTHLY_] [MAKE__7] [MAKE_7_MONTHLY_]
For the purpose of this agreement the term "services" shall mean the
forwarding of the Purchase Requests only by ABT to Dealer. Services are
deemed rendered at the time a Purchase Request is forwarded by ABT to
Dealer, and is not contingent upon an actual sale being consummated. The
amount of fees charged for your Services is determined by several factors,
including but not limited to your geographical location, the franchise make
of vehicle you offer through this Service, population concentrations, per
capita vehicle registrations for your PMA, and ABT's Seasonal Annual
Adjusted Rate (SAAR) percentage share of national retail vehicle sales for
the year in question. ABT, in Our sole discretion, may change the amount of
the fees charged to You upon thirty-(30) days prior written notice. The
parties agree however, that in no event shall more than two (2) increases be
made to the amount of the fee within the initial twelve-(12) month period.
ABT however, reserves the right to change the structure, method and/or basis
of the fee at any time during the term of this Agreement and any extensions
thereof including, without limitation, charging a fee per Purchase Request
or changing the structure to combine a flat service fee and a per Purchase
Request fee billing format. Any of the foregoing changes shall be effective
upon thirty-(30) days written notice to You and shall NOT require an
affirmative response or any further action by the parties. The parties
hereto agree that a change to the fee structure shall not count as a change
in the amount of the fee for the purposes of this section or section
II(20)(f) below. Payments received more than thirty (30) days following the
invoice date shall be subject to a late fee of $25.00 and shall incur
interest charges on the balance due at an annual percentage rate of eighteen
(18.0%) percent per annum. ABT reserves the right to suspend services for
any payment sixty-(60) days or more past due until the account is brought
current.
The first month's total fee and initial sign-up fee is due and payable
concurrently with the execution of this Agreement, receipt of which is
hereby acknowledged. All fees paid to ABT under this Agreement are deemed
earned upon the execution of this Agreement or delivery of services
whichever occurs first. All fees paid to ABT pursuant to this Agreement are
non-refundable regardless of circumstances.
20. DEALER MAY TERMINATE THIS AGREEMENT :
a) immediately, if an order for liquidation against ABT is entered
and not stayed in a bankruptcy proceeding;
b) immediately, if ABT is guilty of willful misconduct in the
performance of its duties under this Agreement; or
c) immediately for any breach of this Agreement by US which is not
cured within ten (10) days after You provide written notice of
the breach to Us; or
d) immediately upon a finding of ABT's violation of state or Federal
law or conviction for such violation, whether administratively,
civilly, or criminally;
e) upon thirty (30) days written notice in accordance with Section
Section III(4) of this Agreement following the effective date of
any adjustment in Dealer's PMA pursuant to Section Section I(11)
of this Agreement;
f) upon thirty (30) days written notice in accordance with Section
Section III (4) of this Agreement following the effective date of
any increase in Dealer's monthly Services fee pursuant to Section
Section II(19) of this Agreement;
g) for all new vehicle programs, for any reason on or after the last
day of the sixth (6) month from the date of this Agreement, upon
thirty (30) days written notice in accordance with Section
Section III(4) of this Agreement. Cancellation prior to the last
day of the sixth month of the subscription shall be accepted only
upon the written consent of ABT and full payment of the monthly
subscription fees charged from the date of cancellation to the
sixth month anniversary.
h) Certified Pre-Owned Cyberstore can be canceled at any time with
30 day written notice.
i) under any of the circumstances above, You shall remain
responsible for all fees due and payable up through the effective
date of the cancellation.
21. TAXES: You are solely responsible for paying all taxes (local, state and
federal) imposed as a result of the sale or lease of any vehicle(s). In the
event We are required to collect and/or pay any taxes by reason of a
consumer's purchase or lease of a vehicle from You through the services ABT
provides to You, You agree to promptly reimburse Us for those taxes We were
required to pay within ten (10) days following receipt of written
notification from ABT.
22. INDEMNIFICATION: You promise to indemnify and hold harmless ABT and Our
subsidiaries and/or affiliates and Our respective members, managers,
directors, officers, employees, and agents against any and all losses,
liabilities, claims, awards, damages, judgments, settlements, and costs,
including fees and expenses, arising out of or related to Your negligence or
wrongful conduct, or arising out of any third-party claim. In the event You
are served with notification of action or suit against ABT, You will
promptly notify ABT of such claim.
You promise to defend at Your sole cost and expense, all such claims,
actions, lawsuits, or proceedings. In all events, ABT, in Our sole
discretion, shall have the right to participate in the defense of any such
action through counsel of Our own choosing at Our sole expense. In the event
We are served with notification of action or suit against You, We promise to
promptly notify You of such claim(s), and You, in Your sole discretion,
shall defend all such actions or suits through counsel of Your own choosing.
III. GENERAL TERMS & CONDITIONS:
1. WARRANTY LIMITATION: ABT does not guarantee or warranty the performance of
the services provided hereunder including but not limited to the number of
Purchase Requests or vehicle sales/leases Dealer may receive from Our
service. You specifically waive all warranties, expressed or implied,
arising out of or in connection with the services to be provided by ABT
hereunder. Specifically excluded are all warranties, expressed or implied,
including but not limited to, merchantability and fitness for a particular
purpose. In no event shall ABT be liable for any loss of business profits or
for any consequential, incidental, punitive or similar damages, or for any
third-party claims of damages, even if advised of the possibility of such
damages.
2. NO WAIVER: The failures of either Party to exercise in any respect any right
provided for herein shall not be deemed a waiver of any right hereunder.
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3. INDEPENDENT CONTRACTOR ARRANGEMENT. The relationship created by this
Agreement between ABT and Dealer is intended to be and shall for all
purposes hereunder be considered as an independent contractor. Nothing
contained in this Agreement and/or any Appendices or Amendments hereto shall
be construed as intending, creating or constituting a franchise,
partnership, agency, or joint venture between ABT and Dealer.
4. NOTICES: All notices and requests in connection with this Agreement and/or
any Appendices and/or Amendments hereto shall be given or made upon the
respective Parties in writing signed by an officer or other dually
authorized agent of the corporation and shall be deemed given by any of the
following means 1) on the day deposited in the U.S. mail, postage prepaid,
and addressed as designated at the top of this Agreement, or to such address
as the Party to receive the notice or request so designates by written
notice to the other. 2) by Facsimile which shall be deemed received on the
day sent when a confirming notice from the sending facsimile machine has
been generated. Or 3) by overnight delivery service or courier, which shall
be deemed received on the day of physical delivery.
5. ASSIGNMENT: This Agreement and the rights and duties hereunder, including
any Appendices or Amendments hereto shall not be assignable by Dealer,
except upon written consent of ABT. This Agreement and the rights and duties
hereunder shall be assignable by ABT without restriction upon ten (10) days
written notice to Dealer.
6. PRESS RELEASES: Unless We agree in writing to the contrary, You are
prohibited from issuing any press release(s) or making any public
announcement(s) regarding Your business relationship with ABT or ABT's
services or programs provided to You. You may however, make references to
Your affiliation with autobytel.com inc. in any advertisement published by
You for Your own benefit.
7. GOVERNING LAW AND JURISDICTION: This Agreement and the performance hereunder
shall be governed and construed in accordance with the laws of the State of
California. Any dispute or claim arising between the Parties hereto brought
by Dealer against ABT shall be brought in a court of competent jurisdiction
within the state of California, in and for the county of Orange. Any dispute
or claim arising between the Parties hereto brought by ABT against Dealer
shall be brought in a court of competent jurisdiction within the state and
county in which the Dealership resides.
8. ATTORNEY FEES AND COSTS: In the event any action shall be instituted to
resolve a dispute between the Parties regarding this Agreement or to enforce
the terms of this Agreement, the prevailing Party in such action shall be
entitled to reasonable attorneys fees and costs incurred as a result. As
used in this section, the word "action" includes but is not limited to any
act requiring legal counsel involvement up to and including a formal
litigation filed in a court of competent jurisdiction.
9. CONFIDENTIALITY: Each of the Parties hereto, on behalf of themselves and
their employees, agree to keep all non-public information gained as a result
of the business dealings contemplated in this Agreement confidential. Each
Party may however, use such confidential information for their internal use
only to further their performance under this Agreement. Dealer understands
and agrees that the sale or unauthorized use or disclosure of any trade
secrets or other confidential information, including but not limited to
private information provided by Purchase Requester constitutes theft and
will greatly damage ABT and is prohibited unless consented to in writing by
the purchase requestor. Dealer shall not impart ABT's services or the
concept thereof to any person or entity other than Dealer's key employee(s)
without the previous written consent of ABT. ABT reserves the right to
transmit pertinent vehicle information to consumers making inquiries
concerning the terms of purchase and financing or leasing of motor vehicles.
Notwithstanding the foregoing, if either Party is required to produce any
such information by order of any government agency, court of competent
jurisdiction, or other regulatory body, it may, upon not less than five-(5)
days written notice to the other Party, release the required information.
10. TITLE TO SYSTEM, TRADEMARKS: To the extent permitted by law, the services to
be provided under this Agreement and any Appendices or Amendments are
proprietary to ABT, and title thereto remains in ABT. All proprietary title
and rights held by ABT extends to any extension of this Agreement and any
Appendices and Amendments, together with all copies thereof. All applicable
rights to patents, copyrights, trademarks, and trade secrets in the System
and in the name "Autobytel.com" and its logo, now and in the future, belong
exclusively to ABT. Any and all trademarks and service marks associated with
ABT are and shall forever remain the exclusive property of ABT. Upon the
written consent of ABT, Dealer is permitted to use the trademark and service
mark for inclusion on business cards, and media advertisements that
communicate Your association with ABT. You may request, in writing, a copy
of ABT's logo, trademarks, artwork, and other printed material for use in
Your advertisements. This authority to use ABT's name, logo, and other
artwork is revocable at any time by ABT. ABT reserves the right to review
such uses and if determined to be abusive of this privilege, revoke Your
permission to use the trademark in the future.
11. CONTROLLING AGREEMENT: This Agreement and all Appendices and Amendments
hereto supersedes any and all Agreements, oral or written, between the
Parties, and contains all of the representations, covenants, and Agreements
between the Parties with respect to services described in this Agreement.
Each Party to this Agreement acknowledges that no representations,
inducements, promises, or agreements, orally or otherwise, have been made by
any Party, or anyone acting on behalf of any Party, which are not contained
in this Agreement and/or any Appendices and/or Amendments hereto. No other
agreement(s), statement(s), or promise(s) not contained in this Agreement or
Appendices or Amendments hereto will be valid or binding.
12. MODIFICATIONS TO AGREEMENT: Except where otherwise set forth in this
Agreement, all modifications or amendments to this Agreement shall be in
writing, properly noticed in accordance with the notice provisions of this
Agreement. Any amendment, change or modification of this Agreement will be
effective only when in writing and signed by the Party to be charged. Such
signature shall not be unreasonably withheld by the Party to be charged and
shall be returned to the maker not more than ten (10) calendar days after
receipt. Except where otherwise reserved in this Agreement, including
without limitation, section II(19) hereof, the Parties agree that any
unilateral changes, amendments or modifications made by one Party are
invalid against the other Party unless ratified in writing by the Party to
be charged.
13. APPENDICES & AMENDMENTS: All Appendices and subsequent Amendments hereto are
incorporated into this Agreement by this reference as through fully set
forth herein.
14. SEVERABILITY: If any provision of this Agreement shall be held to be
invalid, illegal or unenforceable, such determination shall in no way alter
or impair the validity, legality, and enforceability of the remaining
provisions of this Agreement and any Appendices and/or Amendments
15. REQUISITE AUTHORITY: The undersigned hereby represents that he or she is
authorized on behalf of their respective corporations to enter into this
Agreement, and that each corporation is in good standing under the laws of
the state of their incorporation.
This Agreement is executed this ______day of _________________________, 2000.
Dealer: [LEGAL_NAME] autobytel.com inc
By: _________________________________ By: _________________________________
Name: [AA_1ST_NAME] [AA_LAST_NAME] Name: Ann Delligatta
Title: [AA_TITLE] Title: Chief Operating Officer
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APPENDIX "B"
CERTIFIED PRE-OWNED CYBERSTORE ELECTION
The undersigned Dealer elects to participate in the Certified Pre-Owned
CyberStore(R) services program and agrees to the following terms and conditions,
in addition to those set forth in the Gold Term Services Agreement:
1. MONTHLY SUBSCRIPTION FEE: You promise to pay ABT a monthly subscription fee
of [UCC_MONTHLY_] in addition to all other fees due under the terms of this
Agreement. All fees paid to ABT under this agreement are deemed earned upon the
execution of this agreement or delivery of services whichever occurs first. All
fees are due and payable on the first day of each calendar month. All fees paid
to ABT pursuant to this agreement are non-refundable regardless of
circumstances. ABT, in our sole discretion, may change the fee charged to you
upon thirty- (30) days written notice.
2. CUSTOMER SERVICE GUIDELINES
Dealer agrees to abide by Certified Pre-Owned CyberStore(R) Customer
Service Guidelines ("Guidelines"). ABT in their sole discretion may, from time
to time, amend the Guidelines, or impose additional Guidelines on thirty-(30)
days' notice to Dealer. Dealer acknowledges that following the Guidelines are
crucial to the value of ABT's services and agrees to follow them and any
amendments or additions to it even though they may require extra work or
expense. The Guidelines include the following:
(i) LIMITED WARRANTY: Dealer will establish and offer a limited
warranty ("warranty") all vehicles sold through the Certified Pre-Owned
CyberStore(R). Offering vehicles through the Certified Pre-Owned CyberStore(R)
on an "as-is" or "implied warranty only" basis is specifically prohibited. The
warranty coverage shall be in addition to any implied warranties prescribed by
the laws of the state in which You are located. In all cases Your limited
warranty offering shall not be less favorable to the purchaser than the law of
the jurisdiction where Dealer is located, and as a minimum will be for a
duration of not less than Three (3) months or 3,000 miles, whichever comes
first. The warranty will cover all mechanical and safety systems required by law
as well as any additional vehicle systems You specifically promise to cover in
Your warranty documentation. Dealer will provide each Purchase Requestor a
written document at the time of contracting that explains in detail, the terms
and conditions of Your warranty on the vehicle being purchased or leased. Dealer
will indemnify ABT for any third-party claims arising under any warranty.
Nothing in this section shall be interpreted as preventing dealer from
purchasing independent warranty coverage from a legitimate third party provider
as long as the terms and conditions shall meet or exceed the minimum
requirements set forth herein and on the ABT Website.
(ii) VEHICLE PRICING: Dealer will provide prices ("Posted Prices") and
vehicle information for display on the ABT Website of all vehicles posted to the
Certified Pre-Owned CyberStore(R). Dealer agrees to price vehicles competitively
within the market region in which they are located and to honor those prices as
required by law. Dealer agrees and assumes all responsibility for educating
dealership staff and sales personnel of the amount and duration of the
advertised prices. Dealer, and not ABT, shall be solely responsible for the
quality and accuracy of such information. ABT reserves the right to monitor the
quality of the photos and information submitted. Dealer shall promptly correct
any information or photo(s) deemed by ABT to be inaccurate or below necessary
quality levels set forth in this Agreement. If Dealer fails to correct such
photo image(s) or information within 72 hours of ABT's written notification
thereof, ABT may remove the photo image(s) and/or information from its Website.
(iii) VEHICLE RETURN POLICY: Except where expressly prohibited by law,
Dealer will offer, in writing, a return option allowing a purchaser to return a
vehicle to Dealer within 72 hours or 300 miles, whichever comes first. Provided
there has been no damage to the vehicle, Dealer will refund 100% of the amount
paid by the purchaser to the Dealer for the vehicle. In the event the vehicle is
returned damaged, where permitted by state law, Dealer may withhold from the
purchase price refund that amount that Dealer can prove was actually expended to
repair the vehicle. Any tax or licensing charges as a result of withholding
these funds shall be the sole responsibility of Dealer. Dealer will provide each
purchaser the name and phone number of the Dealer employee to contact to
exercise the repurchase option. Dealer will facilitate the purchaser's exercise
of the option in good faith, and will use its reasonable efforts to maximize the
purchaser's satisfaction with the repurchase experience. Dealer agrees to refund
all amounts due to the purchaser within ten (10) business days. Nothing in this
section shall prohibit the exchange of a vehicle for another vehicle of equal or
greater value provided dealer and Purchaser shall mutually agree to such
exchange.
(iv) OUT OF AREA REPAIRS: Dealer will participate in the emergency
repair system established by ABT. Nothing in this section shall be construed to
prohibit Dealer or Purchase Requestor from abiding by the terms and conditions
set forth in a third party provider warranty so long as terms and conditions of
the Warranty coverage do not fall below the minimum standards set forth under
this Agreement. Absent any third party coverage to the contrary, during the
warranty period, the emergency repair system allows a purchaser of a Certified
Pre-Owned CyberStore(R) vehicle who is more than 100 miles from their residence
and encounters a situation where the vehicle is not operational (i.e. cannot be
driven), to contact the nearest Certified Pre-Owned CyberStore(R) Dealer (the
"Repairing Dealer") and have the Repairing Dealer perform any warranted service
or repair. The Repairing Dealer or the Purchase Requestor must contact the
dealership where the purchaser acquired the vehicle (the "Selling Dealer") prior
to any repairs being performed and obtain authorization to repair the vehicle
from the Selling Dealer. For covered items other than those that disabled the
vehicle, the owner should return to the Selling Dealer. Where acceptable
independent third party warranty coverage is not available to the Purchase
Requestor, in the interest of customer satisfaction and improved inter-dealer
relations, the resulting repair charges should be calculated on a negotiated
basis between the involved dealers but in no event shall such costs to the
selling dealer exceed an internal basis of "cost plus 25%" for parts and labor
in all states, except for those states with higher mandates, in which states the
applicable law will govern. In the event of a "major" repair (i.e. engine or
transmission), the Selling Dealer will have the option of providing alternate
transportation to the customer, retrieving the affected unit, and repairing the
vehicle at the Selling Dealer's service location.
3. DIGITAL IMAGES
For each vehicle posted to the Certified PreOwned CyberStore(R), Dealer
shall publish one digital image together with relevant information in accordance
with this Agreement. Dealer may publish an unlimited number of used vehicle
images on the Certified Pre-Owned CyberStore(R). Dealer shall produce such
images in accordance with the specifications and guidelines set forth in
Paragraph 5 below. Placement of new vehicle images on the Certified Pre-Owned
CyberStore(R) is prohibited.
4. DIGITAL CAMERAS
At all time herein, Dealer shall provide and use a digital camera of the
make and type compatible with ABT's computerized image uploading
characteristics. In the event dealer does not own a digital camera, ABT shall
provide one for dealer's use. In circumstances where ABT has provided dealer
with a digital camera, if Dealer shall cancel this Agreement before the sixth
(6th) month anniversary and only in such event, Dealer shall promptly pay ABT
the sum of Six Hundred Dollars ($600.00) in exchange for such camera. ABT will
not accept a return of the camera in lieu of such payment unless the camera is
returned unused, with its original packaging intact.
5. SPECIFICATIONS AND GUIDELINES
All vehicles placed on the Certified Pre-Owned CyberStore(R) shall be no
more than seven (7) model years in age and have legitimate operating miles of
75,000 miles or less. All vehicle images shall (i) contain the vehicle as the
sole subject matter of the image, and shall not contain any people, images of
people, graphics, photos, artwork, overlays, signs, numbers, banners, balloons
or any form of visual advertisement, or any other image that would have the
effect of distracting from the vehicle; (ii) be side or angular photographs; and
(iii) be true and correct images of the vehicle, without retouching,
modification, manipulation, or enhancement. ABT reserves the right to eliminate,
without prior notice to Dealer, any vehicle image from the Certified Pre-Owned
CyberStore(R) that does not meet the above criteria. Dealer and not ABT shall be
solely responsible for any loss or damage to ABT or third parties resulting from
dealer's failure to comply with the terms of this section.
Accepted: [LEGAL_NAME]
Dealer Principal: _________________________________ Date: ______________________
[AA_1ST_NAME] [AA_LAST_NAME]
[AA_TITLE]
5
<PAGE> 6
ATTENTION DEALER: THIS IS A SUGGESTED SAMPLE USED VEHICLE BUYERS GUIDE FORM.
OTHER THAN THE DURATION AND MILEAGE REQUIREMENT, THE SELLING DEALER SETS
THE ACTUAL TERMS OF THE WARRANTY. PLEASE USE FTC APPROVED FORMS THAT
INCLUDE ALL STATE-MANDATED DISCLOSURES, ETC.
FRONT SIDE OF FORM
- - --------------------------------------------------------------------------------
LIMITED WARRANTY
___FULL X LIMITED WARRANTY.
The dealer will pay 100% of the labor and 100% of the parts for the covered
systems that fail during the warranty period. See reverse side of this form for
the explanation of warranty coverage, exclusions, and the dealer's repair
obligations.
SYSTEMS COVERED: Duration:
Engine Power steering 90 days or 3000 miles
Transmission Power brakes whichever occurs first.
Transaxle Air Conditioning
Drive line Electrical Rear end
*See below for systems and parts coverage.
TRAVEL REPAIR PROVISION. Absent independent third party warranty coverage to the
contrary, a vehicle purchased through the Certified Pre-Owned CyberStore(R) that
becomes inoperative when traveling over 100 miles from the originating dealer
will be eligible for repair at Autobytel.com accredited dealerships. Travel
repair service will be available throughout the U.S. and Canada via the
Autobytel.com accredited dealer network. On major repairs, the selling dealer
has the option of providing the customer with alternate transportation and
repairing the unit at the selling dealer's location. A vehicle that is
non-operational will be repaired sufficiently to return to the originating
dealer where additional repairs can be completed. To take advantage of the
Travel Repair Provision, customers may contact the originating dealer who will
direct them to the nearest Autobytel.com accredited dealership, or inquire
through the Autobytel.com Website for instructions and directions:
www.autobytel.com. PLEASE NOTE: Appearance and convenience items will not be
covered by the Travel Repair Provision, nor will light bulbs, fuses, alignments,
adjustments, switches, oil filters, and other maintenance items. Failure to
strictly comply with the terms and conditions of this limited warranty will
cause this limited warranty to become null & void.
SERVICE CONTRACT. A service contract is available at an extra charge on this
vehicle. Ask Your Dealer for details as to coverage, deductible, price, and
exclusions.
PRE PURCHASE INSPECTION: Ask the dealer if You may have this vehicle inspected
by Your mechanic either on or off the lot.
_____________ ________ ___________________ _____ __________
vehicle make model dealer stock number year vin number
- - --------------------------------------------------------------------------------
6
<PAGE> 7
BACK SIDE OF SUGGESTED SAMPLE FORM
- - --------------------------------------------------------------------------------
___FULL X LIMITED WARRANTY.
The dealer will pay 100% of the labor and 100% of the parts for the covered
systems that fail during the warranty period. The following is the entire
representation of coverage; no other systems or parts are suggested or implied.
State law may give you additional rights.
Systems Covered: Parts Covered:
Engine: All internally lubricated parts including timing chains, gears and
cover, timing belt, pulleys and cover, oil pump and gears, water pump, valve
covers, oil pan, manifolds, flywheel, harmonic balancer, engine mounts seals and
gaskets, engine block, cylinder heads and turbocharger housing if damaged by the
failure of internally lubricated parts.
Transmission/Transfer Case: All internally lubricated parts, torque converter,
vacuum modulator, transmission mounts, seals and gaskets. (Manual clutch
assembly and component parts are not covered)
Front wheel Drive: All internally lubricated parts, axle shafts, output shafts,
and constant velocity joints, front hub bearings, seals and gaskets.
Rear wheel Drive: All internally lubricated parts, propeller shafts, supports
and U-joints, drive shafts, axle shafts and bearings, seals and gaskets.
Brakes: Master cylinder, power booster, wheel cylinders, calipers, hydraulic
lines and fittings. (ABS component parts are not covered.)
Steering: Steering gear housing and all internal parts, power steering pump,
valve body and rack.
Electrical: Alternator, generator, and starter.
Air Conditioner Compressor, evaporator core, condenser.
ALL SYSTEMS AND PARTS LISTED ABOVE ARE COVERED 90 DAYS
FROM PURCHASE OR 3000 MILES, WHICHEVER OCCURS FIRST.
NOTE: This Agreement is exclusively between the selling dealer and the customer.
By accepting this Limited Warranty, Customer agrees to release autobytel.com
inc. from all obligations with respect to the acquisition, service, or repair of
the covered vehicle. Customer's failure to strictly adhere to the terms and
conditions of this Limited Warranty shall result in loss of coverage.
_________________________________________ _______________________________
Autobytel.com Accredited Dealer/Date Customer Signature/Date
- - --------------------------------------------------------------------------------
7
<PAGE> 8
135 POINT CERTIFIED PRE-OWNED CYBERSTORE(R) VEHICLE CHECKLIST (SAMPLE)
<TABLE>
====================================================================================================================================
<S> <C> <C> <C> <C>
ADDRESS/LOCATION:
====================================================================================================================================
YR: MAKE: MODEL: BODY TYPE: ENGINE: 4 6 8 CYL TRANS:
- - ------------------------------------------------------------------------------------------------------------------------------------
VIN: COLOR: LICENSE PLATE NO: MILEAGE:
====================================================================================================================================
CIRCLE OPTIONS: WHEELS:
RADIO: AM/FM CASSETTE EQUALIZER CD CUSTOM:__________________________ ALLOY CUSTOM:_____________
- - ------------------------------------------------------------------------------------------------------------------------------------
INTERIOR: VINYL CLOTH LEATHER AIR BAGS 1 OR 2 SUN ROOF AIR CONDITION: YES NO
- - ------------------------------------------------------------------------------------------------------------------------------------
POWER: WINDOWS LOCKS SEATS STEERING BRAKES/ABS TILT CRUISE REAR DEFROSTER
- - ------------------------------------------------------------------------------------------------------------------------------------
MAINTENANCE ITEMS: MECHANICAL AREA: [X] OK OR DESCRIBE DAMAGE CIRCLE ONE DOLLAR
====================================================================================================================================
ENGINE OIL LOW DIRTY BURNED LEAKS STARTING Repair $
Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
TRANS FLUID LOW DIRTY BURNED LEAKS ENGINE Repair $
Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
BRAKE FLUID LOW DIRTY BURNED LEAKS TRANSMISSION Repair $
Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
COOLANT LOW RUSTY BURNED LEAKS DRIVE LINE Repair $
Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
PWR STEERING LOW DIRTY BURNED LEAKS STEERING Repair $
Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
BATTERY CORRODED LOW CHARGE BRAKES 50% LINING Repair $
Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
BELTS SERPENTINE WORN CLIMATE CONTROL Repair $
Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
HOSES WORN SUSPENSION Repair $
Replace
====================================================================================================================================
BODY AREA: [X] OK OR DESCRIBE DAMAGE CIRCLE ONE DOLLAR ELECTRICAL AREA: [X] OK OR DESCRIBE DAMAGE CIRCLE ONE DOLLAR
====================================================================================================================================
WINDSHIELD Repair $ TAIL Repair $
Replace LIGHTS Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
HOOD/COWL Repair $ PARKING Repair $
Replace LIGHTS Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
GRILL Repair $ TURN Repair $
Replace SIGNALS Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
FRONT BUMPER Repair $ INTERIOR Repair $
Replace LIGHTS Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
REAR BUMPER Repair $ HORN Repair $
Replace Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
HEADLIGHT ASSY'S Repair $ POWER Repair $
Replace WINDOWS Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
RIGHT FENDER Repair $ POWER Repair $
Replace LOCKS Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
RIGHT SIDE GLASS Repair $ POWER Repair $
Replace SEATS Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
RIGHT DOORS Repair $ MEMORY Repair $
Replace SEAT Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
RIGHT QUARTER Repair $ POWER Repair $
Replace MIRROR Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
REAR GLASS Repair $ MEMORY Repair $
Replace MIRROR Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
DECK LID Repair $ RADIO Repair $
Replace AM/FM Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
LEFT QUARTER Repair $ TAPE Repair $
Replace PLAYER Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
LEFT DOORS Repair $ CD Repair $
Replace PLAYER Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
LEFT SIDE GLASS Repair $ CLOCK Repair $
Replace Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
LEFT FENDER Repair $ KEYLESS Repair $
Replace ENTRY Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
ROOF Repair $ ANTI-THEFT Repair $
Replace Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
WHEELS/COVERS Repair $ WINDSHIELD Repair $
Replace Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
TIRES 5/32" TREAD Repair $ WINDSHIELD Repair $
Replace WIPER Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
SPARE TIRE W/JACK Repair $ HOOD Repair $
Replace RELEASE Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
FRONT/REAR SEATS Repair $ TRUNK Repair $
Replace RELEASE Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
INTERIOR/DASH Repair $ GAS Repair $
Replace DOOR Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
EXTERIOR PAINT Repair $ SPEEDOMETER Repair $
Replace Replace
- - ------------------------------------------------------------------------------------------------------------------------------------
OTHER: Repair $ ODOMETER Repair $
Replace Replace
====================================================================================================================================
CIRCLE CHOICE: TOTAL: $
THIS VEHICLE ______ WAS/WAS NOT TEST DRIVEN OVERALL CONDITION: GOOD FAIR POOR
====================================================================================================================================
</TABLE>
8
<PAGE> 1
EXHIBIT 10.36
CARSMART.COM
INTERNET MARKETING AGREEMENT
CARSMART(R)IS A REGISTERED TRADEMARK OF A.I.N. CORPORATION
A.I.N. CORPORATION * 3170 Crow Canyon Place, Suite 270 * San Ramon, CA 94583
Tel. (925) 277-0900 * Fax (925) 277-0260
THIS AGREEMENT, dated _____________ is entered into by A.I.N. Corporation, a
California Corporation ("AIN"), and ________________________________("Dealer").
PURPOSE OF AGREEMENT: This agreement sets forth the terms and conditions of
Dealer's participation in the CarSmart.com(R) Internet Marketing & Advertising
Program (herein referred to as Program) and the mutual obligation of Dealer and
A.I.N. in connection therewith.
OBLIGATIONS OF AIN: In consideration of Dealer's fulfilling all of the
obligations herein set forth, AIN agrees, for the term of this agreement, to
include Dealer as a Participating Dealer in the CarSmart.Com Internet Marketing
Program. The Program may from time-to-time be redefined and changed by AIN to
afford Dealer the promotional, training, advertising and other benefits of
participation therein. AIN shall provide a marketing program on the Internet and
within traditional media to attract potential buyers and shall forward
information regarding the potential buyers identified for the make(s) set forth
below and in the territory (defined below) of the Dealer. Additionally, AIN
will:
a) filter or screen all customers, to ensure accuracy, prior to
providing Dealer with consumer information.
b) provide dealer with an exclusive territory (except in the State of
Texas).
c) allow Dealer to list new vehicles on the CarSmart.com Network.
d) provide dealer with a "business card" web page within CarSmart.com
participating dealer pages.
e) provide direct Internet Sales training to dealer. (In most cases
training will be conducted locally at an off-site location)
f) grant Dealer a non-exclusive license that will allow dealer access
to an automated customer tracking and communications system called
Smart-Trac.
g) use reasonable efforts to forward consumer information to Dealer
within 60 minutes of receipt from consumer.
AIN warrants that it is the lawful holder of the federally registered trademark
CarSmart(R) and that it is the owner and operator of the CarSmart(R) web site
located at URL www.carsmart.com. The services to be provided hereunder by AIN,
together with any modifications and/or improvements therein made by AIN or
Dealer during the term of this agreement, or any extensions thereof, and all
copies thereof, are proprietary to AIN and title thereto remains in AIN. All
applicable rights to patents, copyrights, trademarks and trade secrets in the
Program and in the name "CarSmart" and its logos are and shall remain sole
property of AIN.
OBLIGATIONS OF DEALER: Dealer understands and agrees that the Program is
intended to identify for Internet Consumers (hereafter referred to as
Prospective Buyers), ethical automobile dealers who are ready, willing, and able
to provide new vehicles at a fair price and without the anxiety and hassle
frequently associated with the process of acquiring a new vehicle. Dealer agrees
and warrants that all of Dealer's dealings hereunder will be completely fair and
in accordance with the highest ethical standards.
Dealer agrees:
1. to provide a bonafide price quote to all CarSmart customers via
telephone, fax or e-mail.
2. to provide price quote within 6-8 business hours after receiving
request.
3. to extend to Prospective Buyers, courteous, ethical service in
connection with the purchase of vehicles.
4. to price any vehicle included in the program lower than that which a
knowledgeable and diligent buyer can generally obtain for the same
model, similarly equipped, from the Dealer or from other dealers
within the Dealer's marketing area.
Page 1
CarSmart(R) ONLINE NETWORK AGREEMENT
<PAGE> 2
5. to offer any dealer-installed optional equipment or service,
including extended service contracts, that the customer wishes to
purchase with the automobile at a fair mark-up, so as not to exceed
Dealer's average selling price for that equipment or service.
6. that Prospective Buyers may special-order models covered by the
Program at the same discount price.
7. that all of the terms and conditions contained in Dealer information
transmitted to Prospective Buyers shall remain in full force and
effect and be binding upon Dealer for a period of seven (7) days
after its transmittal (including transmittal by e-mail or
facsimile), provided the identified vehicle remains available for
sale.
8. to offer Prospective Buyers the better of dealer-advertised price
and the pre-arranged price set in the price quoted or transmitted to
Prospective Buyers.
9. not to interfere with the Prospective Buyers' choice of financing
institution, and the benefits to Prospective Buyers afforded under
the Program shall not in any way be dependent upon financing the
purchase or lease through any particular financing institution.
Dealer further agrees not to solicit financing from any Credit Union
member utilizing the program. Dealer acknowledges violation of this
term will cause immediate termination of agreement.
10. to appraise all trade-ins at, and to credit all trade-ins at, or
above, their ACTUAL CASH VALUE notwithstanding the discount being
afforded under this Agreement.
11. at its sole cost and expense, to provide the computer and other
office equipment necessary to use and receive the services to be
provided hereunder by AIN.
12. that it is an independent contractor and not an agent or employee of
AIN and that AIN does not have, nor shall it exercise, any right of
control as to the personnel, manner, methods or means employed by
the Dealer. Dealer at all times shall act in the capacity of an
independent contractor and shall be exclusively responsible for its
acts.
13. to have a minimum of one (1) CarSmart trained representative on
staff. Dealer agrees to send dealership representative off-site to a
CarSmart conducted Internet Sales skills training seminar when
conducted in Dealer's local geographic area.
TERRITORY OF DEALER. Subject to the terms and conditions set forth in the
Agreement, AIN hereby grants to Dealer the exclusive, non-transferable right to
use the services of the Program to be performed by AIN, as contemplated by this
agreement, within the geographical area (zip code, county descriptions
preferable), defined as: _______________________________________________________
________________________________________________________________________________
________________________________________________________________________________
AUTOMATED INVENTORY RETRIEVAL OPTION: Dealer may elect to use an automated
inventory loading option, at an additional monthly charge (service limited to
ADP and R&R systems only). Upon selection of this option Dealer agrees to allow
telephone/modem computer access to host and will provide a login/user ID for
this purpose only.
[ ] I elect to use the automated inventory retrieval system (See Fee Schedule)
[ ] I elect to use a non-automated inventory retrieval option (A Free Service)
[ ] I elect not to post my inventory online at this time.
INDEMNIFICATION: Dealer agrees to indemnify and hold AIN, its agents, employees,
affiliates, directors, officers, and managers free and harmless from all
liability for any debts, obligations or claims including fees and expenses
arising from or connected with the operation of the business of the Dealer.
FEES and Payment:
1. Dealer agrees to pay AIN: A $ ___________ territory exclusivity fee
with Dealer's execution of this agreement.
Page 2
CarSmart(R) ONLINE NETWORK AGREEMENT
<PAGE> 3
2. Dealer shall pay AIN the amount of $ __________ as a monthly marketing
fee which is due and payable monthly (billed 30 days in advance, Terms
net 10) on the first day of each calendar month.
3. The total first quarter fee including exclusivity fee of $ _________ is
due upon the signing of this agreement and subsequent monthly fees of
$__________ are due each month starting _______ assures Dealer's
participation.
The first quarter total marketing fee and exclusivity is due and
payable concurrently with the execution of this agreement.
AIN reserves the right to change the structure, method and or basis of the fee
at any time during the term of this Agreement. In the event AIN chooses to
change the fee structure it must notify the Dealer, in writing, 30 days prior to
the effective change. Upon notification of the fee structure change the dealer
has the option to terminate this Agreement. In the event Dealer chooses to
terminate, Dealer must notify AIN, in writing within 10 days of receipt of the
new fee structure terms. AIN shall not require an affirmative response from
dealer in the event Dealer chooses to accept new fee structure.
TERM: This agreement shall be for a term of (12) months, commencing upon the
date hereof and terminating on _____________, unless sooner terminated according
to the provisions hereof. Upon mutual consent of the Dealer and AIN this
agreement may be extended at twelve (12) month intervals, up to a maximum of
three (3) successive terms. All renewal requests and consent shall be evidenced
in writing and signed by each party hereto. In the event services are continued
without written extension of this agreement and all non-conflicting terms
therein shall be deemed as a holdover contract and extended on a re-occurring
month to month basis until terminated by either party or by breach of any part
of this agreement. AIN reserves the right to redefine the Dealer's territory and
monthly rate based upon the quantity of referrals forwarded to Dealer anytime
after initial six month participation. The parties agree however, that in no
event shall more than one (1) increase be made to the amount of the fee within
the initial twelve (12) month period.
TERMINATION: AIN may terminate this agreement:
a) immediately for any breach of this agreement by Dealer which is not
cured within ten (10) days after Dealer receives written notice of
the breach from AIN.
b) immediately if any fees due AIN under this agreement are unpaid and
outstanding more than (30) days after AIN makes a written request
for payments.
c) immediately upon the Dealers' sale or transfer of all, or
substantially all, of its dealership assets and or management and
control.
d) upon sixty (60) days written notice to Dealer (30 days in the case
of a holdover term).
e) immediately upon a finding of Dealer's violation of state or federal
law or conviction for such violation.
f) immediately if an order for liquidation against Dealer is entered
into.
In the event that AIN terminates this agreement as a result of Dealer's breach
of any provision of this agreement, whether material or otherwise, Dealer shall
forfeit all fees previously paid, and such forfeiture shall not be in limitation
of, but shall be in addition to, any other remedy which may be available to AIN
as the result of such breach.
DEALER'S OBLIGATION UPON EXPIRATION OR TERMINATION: Upon expiration or
termination of this agreement regardless of the circumstances, AIN shall have no
further obligation to Dealer under this agreement and Dealer's participation in
the Program shall cease. Dealer shall remain liable to AIN for any and all
unpaid obligations due hereunder until paid in full.
ATTORNEYS FEES and COSTS: If any legal action is necessary to enforce the terms
of this agreement, the prevailing party shall be entitled to reasonable
attorney's fees and costs in addition to any damages and other relief to which
such party may be entitled.
GOVERNING LAW and JURISDICTION: This agreement shall be governed by the laws of
the State of California, in the county of Contra Costa. Any dispute or claim
arising between the parties hereto brought by
Page 3
CarSmart(R) ONLINE NETWORK AGREEMENT
<PAGE> 4
AIN against the Dealer shall be brought in a court of competent jurisdiction
within the state and county in which the Dealership resides.
COMPLIANCE: Dealer agrees that it will meet all legal requirements of the city
and county in which it operates. Dealer also agrees to comply with all federal,
state and local laws regulating Dealer's business.
WARRANTY and LIMITATION OF LIABILITY: AIN makes no warranty regarding the
performance of its services hereunder and Dealer specifically waives all
warranties, expressed or implied arising out of, or in connection with, the
services to be provided under this agreement by AIN. In no event shall AIN be
liable for any loss of business profits, or any consequential, incidental,
punitive or similar damages, or for the claims of damages made by any third
party.
PERFORMANCE: The failure by either party at any time to require performance by
the other party of any provisions of this agreement shall not affect the right
to require such performance at any time thereafter, nor shall the waiver by
either party of a breach of any provision of this agreement be taken or held to
be a waiver of the provision itself.
NOTICES: All notices, requests and consents given under this Agreement shall be
in writing and shall be delivered by hand or certified mail to:
If to AIN:
- - ----------
A.I.N. CORPORATION
CarSmart(R) ONLINE NETWORK
3170 Crow Canyon Place, Suite 270
San Ramon, CA 94583
If to Dealer:
- - -------------
At the address shown below
ACCEPTANCE. This agreement becomes valid and binding upon acceptance by AIN.
This agreement shall remain available for acceptance by AIN for a period of 14
days following the agreement date set forth at the beginning of the agreement.
Upon acceptance, AIN shall immediately mail a copy of the fully executed
agreement to Dealer.
REQUISITE AUTHORITY. The undersigned hereby represents that he or she is
authorized on behalf of their respective corporations to enter into this
agreement, and that each corporation is in good standing under the laws of the
state of their incorporation and/or physical residence.
Additional Terms, If Any _______________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
ENTIRE AGREEMENT: This agreement contains the entire agreement between AIN and
the Dealer and no modification or supplement to the terms hereof shall be
binding unless in writing and signed by both parties.
Page 4
CarSmart(R) ONLINE NETWORK AGREEMENT
<PAGE> 5
DEALER: PLEASE VERIFY FOR PRINT ACCURACY:
DATA FOR DEALERSHIP'S LISTINGS AGREEMENT
Enter Clearly and Completely
----------------------------
Dealer's Name Categories No. of Listings
1)
2)
3)
4)
5)
6)
7)
Address Telephone No.
Fax No.
City Reps for Program
1)
State 2)
Zip
Dealership e-mail address Dealership Authorized Signature for
Agreement and Data
@
By:
Computer system type
1) Print Name and Corporate Title
2)
[ ] Check if payment is enclosed or received.
Accepted By: __________________________
A.I.N. Corporation
Page 5
CarSmart(R) ONLINE NETWORK AGREEMENT
<PAGE> 6
CARSMART DEALERSHIP ENROLLMENT INFORMATION
THIS FORM MUST BE COMPLETED AND FAXED BACK WITH CONTRACT
Dealership Name:
- - --------------------------------------------------------------------------------
Address:
- - --------------------------------------------------------------------------------
City:
- - --------------------------------------------------------------------------------
State:
- - --------------------------------------------------------------------------------
Phone Number: ( ) - Ext. No.
- - --------------------------------------------------------------------------------
Fax Number: ( ) - (who will receive the leads)
- - --------------------------------------------------------------------------------
E-mail Address:
- - --------------------------------------------------------------------------------
E-mail Address #2:
- - --------------------------------------------------------------------------------
Dealership Web-site: http://
- - --------------------------------------------------------------------------------
DEALERSHIP SALES
- - ----------------
CarSmart Designated Rep(s):
- - --------------------------------------------------------------------------------
Accounts Payable Contact:
- - --------------------------------------------------------------------------------
Inventory Contact:
- - --------------------------------------------------------------------------------
Dealer Principal (Send monthly reports to):
- - --------------------------------------------------------------------------------
Person(s) Authorized to make changes on account:
- - --------------------------------------------------------------------------------
Hours of Operation: Mon-Fri to Sat to Sun to
- - --------------------------------------------------------------------------------
Dealership Slogan:
- - --------------------------------------------------------------------------------
Marketing Message:
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Page 6
CarSmart(R) ONLINE NETWORK AGREEMENT
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of autobytel.com inc.:
Autobytel Services Corporation, a Delaware corporation.
Auto-By-Tel Acceptance Corporation, a Delaware corporation.
Auto-By-Tel Insurance Services, Inc., a Delaware corporation.
Autobytel.ca inc., a Delaware corporation.
Kre8.net, Inc., a Delaware corporation.
Auto Visions Communications, Inc., a Delaware corporation.
Autobytel.Europe LLC, a limited liability company organized under the laws of
Delaware.
Autobytel Acquisitions I Corp., a Delaware corporation.
A.I.N. Corporation, a California corporation, doing business as
"CarSmart.com."
Autobytel.Europe Holdings B.V., a corporation organized under the laws of the
Netherlands.
Autobytel.Europe Investment B.V., a corporation organized under the laws of the
Netherlands.
I-Net Training Technologies, LLC, a limited liability company organized under
the laws of Delaware.
e-autosdirect.com inc., a Delaware corporation, doing business as
"autobyteldirect.com."
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports included in this Form 10-K, into the Company's previously filed
Registration Statements File No. 333-90045, File No. 333-77943 and File No.
333-33038 on Form S-8.
/s/ Arthur Andersen LLP
- - ---------------------------------------
Arthur Andersen LLP
March 23, 2000
Los Angeles, California
<PAGE> 1
EXHIBIT 23.2
March 9, 2000 ADT Automotive, Inc.
435 Metroplex Drive
Nashville, Tennessee 37211
Ariel Amir
Vice President and General Counsel Telephone: (615) 333-1400
autobytel.com inc. Fax: (615) 832-9152
18872 MacArthur Boulevard Online: www.adtauto.com
Irvine, California 92612-1400
Dear Mr. Amir:
This letter will serve as permission to use our statistics, with proper
identification, in your Annual Report on Form 10-K for the fiscal year ended
December 31, 1999.
As reflected in the attached, the size of the U.S. automotive market (new and
used) in 1998 and 1999 was $652 billion and $709 billion, respectively.
Sincerely,
Don Reig
Vice President, Strategic Planning
A TYCO INTERNATIONAL LTD. COMPANY
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1999 AND THE CONSOLIDATED
STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS ON FORM
10-K.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 85,457
<SECURITIES> 0
<RECEIVABLES> 5,032
<ALLOWANCES> 439
<INVENTORY> 31
<CURRENT-ASSETS> 92,869
<PP&E> 4,925
<DEPRECIATION> 3,295
<TOTAL-ASSETS> 94,872
<CURRENT-LIABILITIES> 18,113
<BONDS> 0
0
0
<COMMON> 18
<OTHER-SE> 76,688
<TOTAL-LIABILITY-AND-EQUITY> 94,872
<SALES> 40,298
<TOTAL-REVENUES> 40,298
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 67,033
<LOSS-PROVISION> 189
<INTEREST-EXPENSE> 4
<INCOME-PRETAX> (23,267)
<INCOME-TAX> 53
<INCOME-CONTINUING> (23,320)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (23,320)
<EPS-BASIC> (1.48)
<EPS-DILUTED> (1.48)
</TABLE>
