<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] 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: 000-25577
_____________
AUTOWEB.COM, INC.
(Exact name of Registrant as specified in its charter)
Delaware 77-0412737
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
3270 Jay Street
Santa Clara, California 95054
(Address of principal executive offices, including zip code)
(408) 554-9552
(Registrant's telephone number, including area code)
_____________
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 and Exchange Act
of 1934 during the preceding 12 month (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 [ ]
As of April 30, 2000, there were 29,421,508 shares of the Registrant's common
stock outstanding.
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<PAGE>
AUTOWEB.COM, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
PART I. FINANCIAL INFORMATION
<S> <C> <C>
ITEM 1: Condensed Financial Statements:
Condensed Balance Sheets as of March 31, 2000 and December 31, 1999.................................. 1
Condensed Statements of Operations for the three months ended
March 31, 2000 and 1999.............................................................................. 2
Condensed Statements of Cash Flows for the three months ended March 31, 2000 and 1999................ 3
Notes to Condensed Financial Statements.............................................................. 4
ITEM 2: Management's Discussion and Analysis of Financial Condition and Results of Operations................ 7
ITEM 3: Quantitative and Qualitative Disclosures About Market Risk........................................... 20
PART II. OTHER INFORMATION
ITEM 1: Legal Proceedings.................................................................................... 20
ITEM 2: Changes in Securities and Use of Proceeds............................................................ 20
ITEM 3: Defaults upon Senior Securities...................................................................... 20
ITEM 4: Submission of Matters to a Vote of Security Holders.................................................. 20
ITEM 5: Other Information.................................................................................... 21
ITEM 6: Exhibits and Reports on Form 8-K..................................................................... 21
Signatures ..................................................................................................... 22
</TABLE>
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1: CONDENSED FINANCIAL STATEMENTS
AUTOWEB.COM, INC.
CONDENSED BALANCE SHEETS
<TABLE>
March 31, December 31,
2000 1999
--------------- --------------
(in thousands)
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents................................................................. $ 22,701 $ 9,387
Restricted cash........................................................................... 2,550 2,550
Short-term investments.................................................................... --- 20,897
Accounts receivable, net.................................................................. 10,971 8,415
Prepaid expenses and other current assets................................................. 10,387 8,988
-------- --------
Total current assets................................................................... 46,609 50,237
Property and equipment, net................................................................. 2,465 2,462
Purchased technology and other intangible assets, net....................................... 16,703 18,448
Deposits and other assets................................................................... 176 530
-------- --------
Total assets........................................................................... $ 65,953 $ 71,677
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Account payable and other accrued expenses................................................ $ 8,408 $ 6,787
Accrued payroll and related expenses...................................................... 1,605 2,582
Deferred revenue.......................................................................... 1,051 935
Current portion of notes and capital lease obligations payable............................ 341 326
-------- --------
Total current liabilities.............................................................. 11,405 10,630
Notes payable and capital lease obligations, net of current portion......................... 266 361
-------- --------
Total liabilities...................................................................... 11,671 10,991
-------- --------
Stockholders' equity:
Common stock.............................................................................. 22 22
Additional paid-in capital................................................................ 103,764 104,233
Notes receivable from stockholder......................................................... (786) (786)
Unearned stock-based compensation......................................................... (5,708) (7,002)
Accumulated deficit....................................................................... (43,010) (35,781)
-------- --------
Total stockholders' equity............................................................. 54,282 60,686
-------- --------
Total liabilities and stockholders' equity............................................. $ 65,953 $ 71,677
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
AUTOWEB.COM, INC.
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------------
2000 1999
--------------- -----------------
(in thousands, except per share amounts)
(unaudited)
<S> <C> <C>
Net revenues....................................................................... $15,794 $ 5,744
Cost of net revenues............................................................... 1,661 648
------- -------
Gross profit.................................................................... 14,133 5,096
------- -------
Operating expenses:
Sales and marketing............................................................. 14,667 5,051
Product development............................................................. 1,926 555
General and administrative...................................................... 2,922 1,305
Amortization of intangible assets............................................... 1,745 -
Stock-based compensation........................................................ 419 664
------- -------
Total operating expenses................................................... 21,679 7,575
------- -------
Loss from operations............................................................... (7,546) (2,479)
Interest and other income, net..................................................... 318 39
------- -------
Net loss........................................................................... $(7,228) $(2,440)
======= =======
Net loss per share:
Basic and diluted............................................................... $(0.28) $(0.25)
======= =======
Weighted average shares--basic and diluted...................................... 25,503 9,789
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
AUTOWEB.COM, INC.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------
2000 1999
------------- ---------------
(in thousands)
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................................................. $(7,228) $(2,440)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization........................................................ 471 205
Amortization of purchased technology and other intangible assets..................... 1,745 --
Provision for doubtful accounts...................................................... 421 43
Stock-based compensation expense for employee options granted........................ 419 664
Issuance of common stock options/warrants in exchange for services................... -- 181
Change in assets and liabilities:
Accounts receivable............................................................... (2,977) (768)
Prepaid expenses and other current assets......................................... (1,399) (338)
Deposits and other assets......................................................... 354 --
Accounts payable and other accrued expenses....................................... 1,621 2,176
Accrued payroll and related expenses.............................................. (977) 220
Deferred revenue.................................................................. 116 399
------- -------
Net cash provided by (used in) operating activities............................ (7,434) 342
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments...................................................... -- (8,788)
Maturity of short-term investments....................................................... 20,897 --
Acquisition of property and equipment.................................................... (475) (227)
------- -------
Net cash provided by (used in) investing activities............................ 20,422 (9,015)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under notes payable and capital lease obligations..................... (80) (85)
Proceeds from borrowing under debt facilities............................................ -- 90
Proceeds from issuance of common stock, net of costs..................................... 406 71,289
------- -------
Net cash provided by financing activities...................................... 326 71,294
------- -------
Net increase in cash and cash equivalents................................................... 13,314 62,621
Cash and cash equivalents, at the beginning of year......................................... 9,387 2,714
------- -------
Cash and cash equivalents, at end of period................................................. $22,701 $65,335
======= =======
Supplemental disclosure of noncash investing and financing activities:
Unearned stock-based compensation (cancellations) related to employee stock
option grants.......................................................................... $ (875) $3 ,456
Revenue and advertising expense from barter transactions................................. $ 69 $ 292
Issuance of common stock in exchange for note receivable................................. $ -- $ 786
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
AUTOWEB.COM, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 1--The Company
Autoweb.com, Inc. (the "Company") was incorporated in California on October 3,
1995 as Downtown Web, Inc. and reincorporated in Delaware on March 16, 1999. The
Company provides a Web site that centralizes an extensive collection of
automotive-related commerce, content and community offerings to assist consumers
in researching, evaluating and buying vehicles and automotive-related products
and services such as insurance and financing. In addition, the Company provides
automotive content, and sales automation services to vehicle manufacturers,
dealers and online partners. Also, for consumers and automotive professionals,
the Company provides Autosite.com, an online vehicle buyer's guide and related
services information and original automotive editorial content. The Company
markets and sells its services primarily in North America and operates in one
business segment.
Note 2--Summary of Significant Accounting Policies
Basis of Preparation
The accompanying condensed financial statements as of March 31, 2000, and for
the three months ended March 31, 2000 and 1999, are unaudited. These unaudited
interim condensed financial statements have been prepared on the same basis as
the annual financial statements and, in the opinion of management, reflect all
adjustments, which include only normal recurring adjustments, necessary to
present fairly the Company's financial position, results of operations and cash
flows as of March 31, 2000 and for the three months ended March 31, 2000 and
1999. These unaudited interim condensed financial statements and notes thereto
should be read in conjunction with the Company's financial statements included
in the Company's 1999 10-K filed with the Securities and Exchange Commission on
March 30, 2000. The results for the three months ended March 31, 2000 are not
necessarily indicative of the expected results for the year ending December 31,
2000 or any other future period.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to a concentration
of credit risk consist of cash and cash equivalents, restricted cash and
accounts receivable. Cash and cash equivalents and restricted cash are
deposited with six high credit quality financial institutions in the United
States. The Company maintains allowances for potential credit losses, and such
losses have been within management's expectation.
Fair Value of Financial Instruments
Carrying amounts of certain of the Company's financial instruments, including
cash and cash equivalents, restricted cash, accounts receivable, accounts
payable and other accrued liabilities, approximate fair value due to their
relatively short maturities.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original
maturities of ninety days or less to be cash equivalents. Cash equivalents
consist primarily of deposits in money market funds.
4
<PAGE>
AUTOWEB.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Stock-Based Compensation
In 1997, the Company adopted the disclosure provisions of Financial Accounting
Standards Board ("FASB") Statement of Financial Accounting Standards ("SFAS")
No. 123, "Accounting for Stock-based Compensation." The Company has elected to
continue accounting for stock-based compensation issued to employees using
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees." Under APB No. 25, compensation expense is based on the
difference, if any, on the date of the grant between the fair value of the
Company's stock and the exercise price. Stock issued to non-employees has been
accounted for in accordance with SFAS No. 123 and valued using the Black-Scholes
option pricing model.
Net Loss Per Share
The Company computes net loss per share in accordance with SFAS No. 128,
"Earning per Share". Under the provisions of SFAS No. 128, basic net loss per
share is computed by dividing the net loss available to common stockholders for
the period by the weighted average number of common shares outstanding during
the period. Diluted net loss per share is computed by dividing the net loss for
the period by the weighted average number of common and common equivalent shares
outstanding during the period. Common equivalent shares, composed of unvested
restricted common stock and incremental common shares issuable upon the exercise
of stock options and warrants and for the period ended March 31, 1999, common
shares issuable upon conversion of Series A, Series B and Series C mandatorily
redeemable convertible preferred stock, are included in the diluted net loss per
share computation to the extent such shares are dilutive.
<TABLE>
<CAPTION>
Three Months Ended,
March 31,
--------------------------------------
2000 1999
--------------- --------------
(In thousands, except per share amounts)
<S> <C> <C>
Numerator:
Net loss........................................... $(7,228) $(2,440)
======= =======
Denominator:
Weighted average shares--basic and diluted......... 25,503 9,789
======= =======
Net loss per share--basic and diluted.............. $ (0.28) $ (0.25)
======= =======
</TABLE>
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133, as
amended, is effective for all fiscal quarters of all years beginning after June
15, 2000. SFAS No. 133 requires companies to record derivatives on the balance
sheet as assets or liabilities, measured at fair market value. Under SFAS No.
133, gains or losses resulting from changes in the values of derivatives are to
be reported in the statement of operations or as a deferred item, depending on
the use of the derivatives and whether they qualify for hedge accounting. The
Company is required to adopt SFAS No. 133 in the first quarter of 2001. To date,
the Company has not engaged in any hedging activity and does not expect adoption
of this new standard to have a significant impact on the Company.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin ("SAB") 101, "Revenue Recognition," which provides guidance
on the recognition, presentation and disclosure of revenue in financial
statements filed with the SEC. SAB 101 outlines the basic criteria that must be
met to recognize revenue and provides guidance for disclosure related to revenue
recognition policies. The Company believes that they currently comply with SAB
101.
In March 2000, the FASB issued Interpretation No. 44, ("FIN 44"), Accounting
for Certain Transactions Involving Stock Compensation - an Interpretation of APB
25. This Interpretation clarifies (a) the definition of employee for purposes of
applying Opinion 25, (b) the criteria for determining whether a plan qualifies
as a non-compensatory plan, (c) the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and (d)
the accounting for an exchange of stock compensation awards in a business
combination. This Interpretation is effective July 1, 2000, but certain
conclusions in this Interpretation cover specific events that occur after either
December 15, 1998, or January 12, 2000. To the extent that this Interpretation
covers events occurring during the period after December 15, 1998, or January
12, 2000, but before the effective date of July 1, 2000, the effects of applying
this Interpretation are recognized on a prospective basis from July 1, 2000.
The Company has not yet determined the impact, if any, of adopting this
Interpretation.
5
<PAGE>
AUTOWEB.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 3--Common Stock
Unearned Stock-Based Compensation
In connection with certain employee stock option grants during the three
months ended March 31, 2000 and 1999, the Company recognized unearned
compensation and related amortization expense as displayed in the table below.
Amortization expense is being recognized over the vesting periods of the related
options.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Unearned compensation (cancellations)......................................... $(875) $3,456
Amortization expense.......................................................... $ 419 $ 664
</TABLE>
Note 4--Related Party Transactions
At March 31, 2000, the Company had full recourse promissory notes receivable
in the amount of approximately $960,000, approximately $922,000 of which is from
Dean DeBiase, our Chief Executive Officer and approximately $38,000 of which is
from Samuel Hedgpeth, our President and Chief Operating Officer. Of this amount,
approximately $174,000 is included in "prepaid expenses and other current
assets" and approximately $786,000 is included in stockholders' equity as "notes
receivable from stockholders." Notes receivable totaling approximately $922,000
are interest free and collateralized by 395,661 shares of common stock and the
remaining note receivable for approximately $38,000 bears interest at a rate of
5.59% per annum and is collateralized by 177,012 shares of common stock.
In March 2000, the Company entered into a contract with CarsDirect.com, Inc.
("CarsDirect") providing for a wide-ranging alliance whereby the Company derives
revenues primarily from variable fees received on consumer inquiries delivered
to and vehicles sold by CarsDirect. The Company is to receive $10.0 million from
CarsDirect in to exchange for a four year limited exclusivity arrangement
payable in CarsDirect capital stock. Additionally, CarsDirect is to purchase
750,000 shares of the Company's common stock in exchange for approximately $8.0
million in cash. In April 2000, the Company received approximately $8.0 million
in cash from CarsDirect in connection with the 750,000 share purchase of the
Company's common stock (See Note 6).
In March 2000, the Company and Lycos, Inc. ("Lycos") entered into a four
year agreement under which a co-branded version of the Autoweb Web site would
be accessable across Lycos' network and all its Web properties. Major elements
of the agreement include regularly scheduled payments to Lycos for
impressions, integration, and exclusivity. The agreement calls for a split of
net advertising revenue on the co-branded site that is varied depending on the
amount of gross revenue earned on the site and varies from year to year. The
Company will also receive a percentage of revenue from the placement of
advertising on the Lycos Network in areas and on properties other than the co-
branded site for customers that the Company may refer to Lycos. Lycos will
share in a fixed amount of revenue per transaction on the co-branded site
after the aggregate of transactions on the site exceeds a minimum threshold
dollar amount. In April 2000, the Company and Lycos entered into a stock
purchase agreement under which Lycos acquired 3,035,025 shares of the
Company's common stock for approximately $21.8 million in cash (See Note 6).
See also Note 5.
Note 5--Commitments
Through March 31, 2000, the Company entered into agreements with three global
Internet media companies to maintain certain exclusive promotional rights and
linkage with the media companies and to provide for certain advertising.
Commitments under these three agreements total $80.5 million and expire in
January 2001, August 2001 and March 2004. Through March 31, 2000, the Company
paid $16.6 million under the terms of these agreements. As of March 31, 2000,
the agreements require remaining minimum future payments of $63.9 million. The
Company expenses all amounts ratably over the term of the agreement.
6
<PAGE>
Note Note 6--Subsequent Event
In April 2000, the Company received approximately $8.0 million in cash from
CarsDirect in connection with the 750,000 share purchase of the Company's common
stock.
In April 2000, the Company and Lycos entered into a stock purchase
agreement under which Lycos acquired 3,035,025 shares of the Company's common
stock for approximately $21.8 million in cash.
In April 2000, the Company and America Online expanded their relationship by
entering into a four year marketing and technology integration agreement. The
agreement includes regularly scheduled payments to America Online for
impressions at rates consistent with the previous agreement.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This document contains forward-looking statements, the accuracy of which
involves risk and uncertainties. We use words such as "anticipates," "believes,"
"plans," "expects," "future" and "intends" and similar expressions to identify
forward-looking statements. You should not place undue reliance on these
forward-looking statements, which apply only as of the date of this document.
Our actual results could differ materially from those anticipated in our
forward-looking statements for many reasons, including the risks described in
"Risk Factors" included in our Annual Report on Form 10-K filed with the
Securities and Exchange Commission and elsewhere in this document.
Overview
Autoweb.com is a leading consumer automotive Internet service. Our Web site
centralizes an extensive collection of automotive-related commerce, content and
community offerings to assist consumers in researching, evaluating and buying
vehicles and automotive-related products and services such as insurance and
financing. In addition, we provide automotive content and sales automation
services to vehicle manufacturers, dealers and online partners. Also, for
consumers and automotive professionals, through our acquisition of AIC, we
provide Autosite.com, a 20,000-page online vehicle buyer's guide and rich suite
of related services and information, and original automotive editorial content.
We began selling our services to automobile dealers and launched the Autoweb.com
Web site for consumer use in October 1995. Since that time, we have increased
our network to over 5,000 member dealers (where each franchise and pre-owned
location for a particular vehicle manufacturer is defined as a member dealer).
We derive the majority of our revenues from fees charged to our member dealers
in exchange for qualified purchase inquiries and expect to continue to do so for
the foreseeable future. The revenue related to each fee is recognized in the
month the qualified purchase inquiry is provided to the member dealer. We
maintain a returns reserve against purchase inquiries that are later deemed not
to have been "qualified." We also provide online advertising space on the
Autoweb.com site. Revenues from advertising contracts, which typically have
terms of less than three months, are recognized as the contracts are fulfilled.
In addition, we offer automotive-related services on the Autoweb.com site
through agreements with third-party category partners. We derive revenues
whereby a third party pays us for the right to provide its consumer services,
such as automobile financing and insurance, on our Web site. Revenues from these
agreements are generally recognized ratably over the terms of the agreements.
We incurred net losses of $2.4 million and $7.2 million in the three months
ended March 31, 1999 and 2000, respectively. We intend to increase our focus and
spending on brand development, marketing and promotion, site content
development, strategic relationships and technology and operating infrastructure
development. Our limited operating history makes it difficult to forecast future
operating results. Although our net revenues have increased in recent quarters,
we cannot be certain that net revenues will increase at a rate sufficient to
achieve and maintain profitability. Even if we were to achieve profitability in
any period, we might fail to sustain or increase that profitability on a
quarterly or annual basis.
7
<PAGE>
Results of Operations
The following table sets forth, for the periods presented, certain data
derived from our unaudited condensed statements of operations as a percentage of
net revenues. The operating results for the three months ended March 31, 2000
are not necessarily indicative of the results that may be expected for any
future period.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------
2000 1999
------------ -----------
<S> <C> <C>
Net revenues................................................................ 100% 100%
Cost of net revenues........................................................ 11 11
----- ----
Gross profit................................................................ 89 89
----- ----
Operating expenses:
Sales and marketing...................................................... 93 88
Product development...................................................... 12 10
General and administrative............................................... 18 23
Amortization of intangible assets........................................ 11 --
Stock-based compensation................................................. 3 11
----- ----
Total operating expenses............................................. 137 132
----- ----
Loss from operations........................................................ (48) (43)
Interest and other income, net.............................................. 2 --
----- ----
Net loss.................................................................... (46)% (43)%
===== ====
</TABLE>
Net Revenues
Our net revenues increased to $15.8 million in the three months ended March
31, 2000, from $5.7 million in the three months ended March 31, 1999, an overall
increase of 177%. Approximately 75% of the increase in net revenues was due to
higher levels of net dealer fee revenues. Approximately 12% of the increase in
net revenues was due to higher levels of advertising revenues. Increased
revenues from manufacturers related to the October 1999 acquisition of
Automotive Information Center (AIC) accounted for most of the remaining increase
in net revenues for this period.
Cost of Net Revenues
Cost of net revenues increased to $1.7 million in the first quarter of 2000
from $648,000 in the first quarter of 1999. Approximately 60% of the increase
represented revenue-sharing expenses related to the operation of our co-branded
and affiliate sites. Approximately 29% of the increase was due to increased
costs of Web site operations, including personnel, equipment, depreciation, and
occupancy cost. The remainder of the increase resulted from increased cost of
providing site content.
Sales and Marketing
Our sales and marketing expenses increased to $14.7 million in the first
quarter of 2000 from $5.1 million in the first quarter of 1999. Approximately
41% of the increase in sales and marketing expenses was due to higher offline
advertising. Approximately 36% of the increase in sales and marketing expenses
was due to increased online advertising. Increased spending on public relations
accounted for approximately 5% of the increase in sales and marketing expenses.
The remainder of the increase came from additions to headcount, primarily
salespersons focused on enrolling member dealers.
Product Development
Our product development expenses increased to $1.9 million in the first
quarter of 2000 from $555,000 in the first quarter of 1999. These expenses
increased primarily as a result of increased hiring of product development
personnel and, to a lesser extent, as a result of increased occupancy costs.
8
<PAGE>
General and Administrative
Our general and administrative expenses increased to $2.9 million in the first
quarter of 2000 from $1.3 million in the first quarter of 1999. Approximately
56% of the increase in general and administrative expenses was due to increases
in personnel costs resulting from the recruiting and increased hiring of
administrative personnel. Approximately 27% of the increase was due to increases
in information technology support related to administrative functions and
occupancy costs.
Amortization of Intangible Assets
Our amortization of intangible assets expense was $1.7 million in the first
quarter of 2000. There was no amortization of intangible assets expense in the
first quarter of 1999. In July 1999, the Company entered into an agreement with
SalesEnhancer.com, LLC (SalesEnhancer) to acquire certain technology and other
assets and certain liabilities for $3.7 million in cash. In October 1999, the
Company entered into an agreement with The Gale Group, Inc., a subsidiary of the
Thompson Company, Inc., to acquire certain assets and liabilities of AIC for
$19.3 million in cash and common stock.
Stock-Based Compensation
Our stock-based compensation expense decreased to $419,000 in the first
quarter of 2000 from $664,000 in the first quarter of 1999. We recorded no
unearned stock-based compensation charges in the first quarter of 2000 and
reflected cancellations of previously recorded unearned stock based compensation
charges of $875,000. We recorded $3.5 million of unearned stock-based
compensation charges in the first quarter of 1999.
Interest and Other Income, Net
Our interest and other income, net, increased to $318,000 in the first quarter
of 2000 from $39,000 in the first quarter of 1999. The increase represents
interest income earned on greater levels of cash, cash equivalents, and short-
term investment balances, partially offset by interest expense on borrowings
under capital leases and our credit facilities.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133, as
amended, is effective for all fiscal quarters of all years beginning after June
15, 2000. SFAS No. 133 requires companies to record derivatives on the balance
sheet as assets or liabilities, measured at fair market value. Under SFAS No.
133, gains or losses resulting from changes in the values of derivatives are to
be reported in the statement of operations or as a deferred item, depending on
the use of the derivatives and whether they qualify for hedge accounting. The
Company is required to adopt SFAS No. 133 in the first quarter of 2001. To date,
the Company has not engaged in any hedging activity and does not expect adoption
of this new standard to have a significant impact on the Company.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin ("SAB") 101, "Revenue Recognition," which provides guidance
on the recognition, presentation and disclosure of revenue in financial
statements filed with the SEC. SAB 101 outlines the basic criteria that must be
met to recognize revenue and provides guidance for disclosure related to revenue
recognition policies. The Company believes that they currently comply with SAB
101.
In March 2000, the FASB issued Interpretation No. 44, ("FIN 44"), Accounting
for Certain Transactions Involving Stock Compensation - an Interpretation of APB
25. This Interpretation clarifies (a) the definition of employee for purposes of
applying Opinion 25, (b) the criteria for determining whether a plan qualifies
as a non-compensatory plan, (c) the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and (d)
the accounting for an exchange of stock compensation awards in a business
combination. This Interpretation is effective July 1, 2000, but certain
conclusions in this Interpretation cover specific events that occur after either
December 15, 1998, or January 12, 2000. To the extent that this Interpretation
covers events occurring during the period after December 15, 1998, or January
12, 2000, but before the effective date of July 1, 2000, the effects of applying
this Interpretation are recognized on a prospective basis from July 1, 2000.
The Company has not yet determined the impact, if any, of adopting this
Interpretation.
Liquidity and Capital Resources
Prior to March 1999, we financed our operations primarily from sales of
preferred stock and borrowings under a long-term debt facility. In March 1999,
we raised $71.1 million (net of underwriters' discounts and commissions and
other costs) in our initial public offering.
Net cash used in operating activities was $7.4 million in the three months
ended March 31, 2000 compared to net cash provided by operations of $342,000 in
the three months ended March 31, 1999. Net cash used in operating activities in
the three months ended March 31, 2000 was primarily due to the net loss for the
period and increases in accounts receivable, prepaid expenses and other current
assets, and the decrease in accrued payroll and related expenses, partially
offset by depreciation and amortization expense, stock-based compensation
expense, and the increase in accounts payable and other accrued expenses. Net
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cash provided by operations for the three months ended March 31, 1999 was
primarily provided by increases in accounts payable and accrued expenses,
partially offset by the net loss and the increase in accounts receivable. The
increase in prepaid expenses and other current assets for the three months ended
March 31, 2000 was primarily caused by advance payments that we were required to
make under the terms of our on line advertising agreements.
Net cash provided by investing activities was $20.4 million in the first three
months of 2000 and was primarily the result of sales of short-term investments
as they matured. Net cash used in investing activities of $9.0 million in the
first three months of 1999 was primarily due to the purchase of short-term
investments as we continued to invest the proceeds of our initial public
offering.
Net cash provided by financing activities was $326,000 for the first three
months of 2000 and was due primarily to the issuance of common stock through the
Company's Employee Stock Purchase Plan. Net cash provided by financing
activities was $71.3 million in the first three months of 1999 and was due
almost entirely to the proceeds of the initial public offering completed in
March 1999.
At March 31, 2000, the total of our cash and cash equivalents and restricted
cash was $25.3 million. In March 2000, the Company entered into a contract with
CarsDirect providing for a wide-ranging alliance whereby the Company derives
revenues primarily from variable fees received on consumer inquiries delivered
to and vehicles sold by CarsDirect. As part of this agreement, in April 2000,
the Company received approximately $8.0 million in cash from CarsDirect in
connection with the 750,000 share purchase of the Company's common stock. In
March 2000, the Company entered into a contract with Lycos for certain
promotional rights, linkage, and certain advertising. As part of this agreement,
in April 2000, the Company and Lycos, Inc. entered into a stock purchase
agreement under which Lycos acquired 3,035,025 shares of the Company's common
stock for approximately $21.8 million in cash. We believe that our current cash
position together with anticipated future revenues will be sufficient to meet
our cash requirements for at least the next 12 months. Depending on our rate of
growth and cash requirements, we may require additional equity or debt financing
to meet future working capital or capital expenditure needs. There can be no
assurance that such additional financing will be available or, if available,
that such financing can be obtained on terms satisfactory to us.
RISKS THAT COULD AFFECT OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We are an early stage company
We were incorporated in October 1995. Therefore, we have a limited operating
history upon which to base an evaluation of our current business and prospects.
Moreover, our business model is evolving and depends on our ability to generate
revenues from multiple sources through our Web site. Before investing, you
should evaluate the risks, expenses and problems frequently encountered by
companies such as ours that are in the early stages of development and that are
entering new and rapidly changing markets like the Internet. In particular, to
address these risks we face the following challenges:
. maintaining and increasing our consumer base;
. maintaining and increasing our network of member dealers;
. managing the quality of services delivered by member dealers, vehicle
manufacturers and category partners;
. generating continuing revenues through our Web site from consumers,
member dealers and category partners;
. competing effectively with existing and potential competitors;
. developing further our unproven business model;
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. developing further Autoweb.com awareness and brand loyalty;
. anticipating and adapting to the evolving e-commerce market;
. continuing to develop our technology infrastructure to handle greater
Internet traffic efficiently;
. managing expanding operations;
. broadening our service offerings and attracting and retaining additional
category partners and content providers to enable us to expand our
service offerings; and
. attracting and retaining qualified personnel.
We may not successfully implement any of our strategies or successfully
address these risks and uncertainties.
Our operating results are likely to fluctuate significantly
Our results of operations have varied widely in the past, and we expect that
they will continue to vary significantly from quarter to quarter due to a number
of factors described below and elsewhere in this Form 10-Q:
Our revenue growth rates may not be sustainable. Any shortfall in our revenues
would immediately increase our operating losses and would adversely affect the
market price of our common stock. We expect to be substantially dependent on
member dealer fees. Therefore, our quarterly revenues and operating results are
likely to be particularly affected by the level of member dealer fees in each
quarter. We plan to increase our operating expenses significantly, based on our
expectations of future revenues. If revenues fall below our expectations, we
will not be able to reduce our spending rapidly in response to such a shortfall.
This will adversely affect our operating results.
We believe that we may experience seasonality in our business. The seasonal
patterns of Internet usage and vehicle purchasing do not completely overlap.
Internet usage typically declines during the summer and certain holiday periods,
while vehicle purchasing in the United States is strongest in the late spring
and summer months. Because of our limited operating history, we do not know
which seasonal pattern, if any, will dominate.
Due to the foregoing factors and factors described elsewhere in this Form 10-
Q, we believe that quarter-to-quarter comparisons of our results of operations
are not a good indication of our future performance. It is likely that our
results of operations in some future quarter may be below the expectations of
public market analysts and investors. In this event, the price of our common
stock is likely to decline.
We have a history of net losses and expect net losses for the foreseeable future
We have incurred net losses in each fiscal year since our inception, including
a net loss of $18.2 million in 1999. We had an accumulated deficit of $43.0
million as of March 31, 2000. The size of future net losses will depend, in
part, on the rate of growth in our revenues from member dealer fees, category
partners fees, advertising sales and other e-commerce activities. It is critical
to our success that we continue to expend financial and management resources to
develop Autoweb.com brand awareness and loyalty through marketing and promotion,
expansion of our member dealer network, development of our online content and
expansion of our other services. As a result, we expect that our operating
expenses will increase significantly during the next several years, especially
in sales and marketing. With increased expenses, we will need to generate
significant additional revenues to achieve profitability. As a result, we may
never achieve or sustain profitability, and, if we do achieve profitability in
any period, we may not be able to sustain or increase profitability on a
quarterly or annual basis.
We have a new and unproven business model
The manner in which we conduct our business and charge for our services is new
and unproven. The model depends upon our ability to generate revenue streams
from multiple sources through our Web site, including:
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. fees paid by member dealers for consumer referrals;
. fees paid by companies in industries related to vehicles such as insurance
and financing;
. advertising fees paid by vehicle manufacturers and other companies that
want access to vehicle purchasers;
. fees paid by vehicle manufacturers, dealers and online companies that want
access to automotive content; and
. fees paid by individuals who want to advertise their vehicles for sale.
In order for us to be successful, we must have consumers visit our Web site
regularly to increase the likelihood that they will use our service when they
are interested in buying a vehicle or a related product or service. Therefore,
we must not only develop services that directly generate revenue, but also
provide information and community offerings that attract consumers to our Web
site frequently. We will need to develop new offerings in each of these areas as
consumer preferences change and new competitors emerge. We cannot assure you
that we will be able to provide consumers with an acceptable blend of services,
information and community offerings. We provide information and community
offerings without charge, and we may not be able to generate sufficient service
revenues to pay for these offerings. Accordingly, we are not sure our business
model will be successful or that we can sustain revenue growth or be profitable.
Our business is dependent on the economic strength of the automotive industry
The economic strength of the automotive industry significantly impacts the
revenues we derive from our member dealers, vehicle manufacturers and category
partners, advertising revenues and consumer traffic to our Web site. The
automotive industry is cyclical, with vehicle sales fluctuating due to changes
in national and global economic forces. Since our incorporation, vehicle sales
in the United States have been at historically high levels. We cannot assure you
that vehicle sales will stay at their current levels, and a decrease in the
current level of vehicle sales could have a material adverse effect on our
business, results of operations and financial condition.
We rely heavily on member dealers
We derive the majority of our revenues from member dealer fees (payments from
member dealers for each purchase inquiry that we provide to them), and we expect
to continue to do so for the foreseeable future. Member dealer fees represented
approximately 85%, 70%, and 66% of our net revenues in 1997, 1998, and 1999,
respectively and 73% of our net revenues for the three months ended March 31,
2000. Consequently, our business is highly dependent on consumers' use of
Autoweb.com to purchase vehicles so that member dealers will achieve a
satisfactory return on their investment in the Autoweb.com program.
The success of our business strategy depends on our member dealers' adherence
to the Autoweb.com purchase process, including responding to consumer purchase
inquiries within 24 hours, providing a competitive, firm quote to consumers
during the initial communication, explaining the Autoweb.com purchase process to
the consumer and answering any consumer questions. We devote significant efforts
and resources to certifying and supporting participating member dealers in these
practices that are intended to increase consumer satisfaction. Our inability to
certify and support member dealers effectively, or member dealers' failure to
adopt such practices, respond rapidly and professionally to vehicle purchase
inquiries, or sell vehicles in accordance with our marketing strategies, could
result in low consumer satisfaction and materially adversely affect our
business, results of operations and financial condition.
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We must reduce our high member dealer turnover
To maintain and increase our network of member dealers, we must reduce the
rate of turnover of our member dealers. Commencing in February 1998, we
introduced a new "pay for performance" pricing model and began actively to
convert our existing member dealers to this model. Prior to that time, all of
our member dealers were on a subscription model under which they paid a fixed
amount per month regardless of the number of purchase inquiries that we provided
to them. During 1998, we lost approximately 60% of the member dealers that we
had at the beginning of the year and converted approximately 30% to the new
pricing model. During 1998, we lost approximately 22% of the performance-based
member dealers that we converted or with which we first entered into a contract
in 1998. During 1999, we lost approximately 31% of the performance-based member
dealers that we had at the beginning of the year or first entered into a
contract during the year.
Attrition remains unacceptably high. We believe that we can reduce our
attrition rate over time as our member dealer network stabilizes due to the
efforts of our dealer development and support group and due to reduced
conversion activity. We are undertaking several initiatives to reduce our
attrition. These initiatives include the recent purchase of customer
relationship management software, the sale of proprietary internet lead
management software to our member dealers and an increase in dealer training.
Nevertheless, we cannot assure you that we will be able to reduce the level of
this attrition, and our failure to do so could materially and adversely affect
our business, results of operations and financial condition.
We need to build strong brand loyalty
We believe that establishing and maintaining our brand loyalty is critical to
attract consumers, member dealers, vehicle manufacturers, category partners and
advertisers. Furthermore, we believe that the importance of brand loyalty will
increase as low barriers to entry encourage the proliferation of Web sites. In
order to attract and retain consumers, member dealers, advertisers and category
partners, and in response to competitive pressures, we intend to increase
spending substantially to create and maintain brand loyalty among these groups.
We plan to accomplish this by expanding our current online advertising campaigns
and by conducting advertising campaigns in traditional forms of media, such as
newspaper, radio and television. We believe that advertising rates, and the cost
of our online advertising campaigns in particular, could increase substantially
in the future. If our branding efforts are not successful, our business, results
of operations and financial condition will be materially and adversely affected.
Promotion and enhancement of the Autoweb.com brand will also depend, in part,
on our success in consistently providing a high-quality consumer experience for
purchasing vehicles and related products, relevant and useful information and a
quality "community experience." If consumers, other Internet users, member
dealers, vehicle manufacturers, category partners and advertisers do not
perceive the Autoweb.com service offerings to be of high quality, or if we
introduce new services or enter into new business ventures that are not
favorably received by such groups, the value of our brand could be impaired or
diluted. Such brand impairment or dilution could decrease the attractiveness of
Autoweb.com to one or more of these groups, which could materially and adversely
affect our business, results of operations and financial condition.
We depend on third-party relationships
We have entered into agreements with various category partners, some of which
require us to feature them exclusively in certain sections of our Web site. For
example, we have entered into an agreement with Intuit's Quicken Insuremarket
("Quicken"), pursuant to which Quicken has the exclusive right to offer
insurance services on our Web site through October 15, 2002. Existing and future
exclusive arrangements may prevent us from entering into other content
agreements, advertising or sponsorship arrangements or other commercial
relationships. Many companies that we may pursue for a commercial relationship
may also offer competing services. As a result, these competitors may be
reluctant to enter into commercial relationships with us. Our business could be
adversely affected if we do not maintain our existing commercial relationships
on terms as favorable as currently in effect, if we do not establish additional
commercial relationships on commercially reasonable terms or if our commercial
relationships do not result in the expected increased use of our Web site.
Additionally, our sale of automotive content, Web hosting and development
services and sales automation services to vehicle manufacturers and online
partners is dependent upon a few primary relationships, including competitive
online automotive car buying services and various vehicle manufacturers.
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We also depend on establishing and maintaining a number of commercial
relationships with high-traffic Web sites to increase traffic on Autoweb.com. We
currently have agreements with America Online and its related properties, Yahoo!
and Lycos. There is intense competition for placements on these sites, and in
the future we may not be able to enter into distribution relationships on
commercially reasonable terms or at all. Even if we enter into distribution
relationships with these Web sites, they themselves may not attract significant
numbers of consumers. Therefore, our Web site may receive less than the number
of additional consumers we expect from these relationships. Moreover, we may
have to pay significant fees to establish or renew these relationships.
We also depend on establishing and maintaining a number of commercial
relationships with other companies. Our current relationships include:
. New Car Test Drive and ASE, under which we purchase content for use by our
consumers;
. America Online's Digital City, iWon.com and Citibank, under which we share
the revenue generated from automotive and related purchase inquiries
submitted by consumers and directed to our Web site through links between
our Web site and the other company's Web site; and
. members of the Autoweb.com Affiliates Program, each of which receives a
commission from us for each new or pre-owned vehicle purchase inquiry or
classified ad delivered to us through a link to the affiliate's Web site.
We cannot assure you that we will be able to establish new agreements or
maintain existing agreements or that the above agreements can be renewed on
commercially acceptable terms.
We also may not be able to maintain relationships with third parties that
supply us with software or products that are crucial to our success, and the
vendors of these software or products may not be able to sustain any third-party
claims or rights against their use. Furthermore, we cannot assure you that the
software, services or products of those companies that provide access or links
to our services or products will achieve market acceptance or commercial
success. In addition, we cannot assure you that our existing relationships will
result in sustained business arrangements, successful service or product
offerings or the generation of significant revenues for us. Failure of one or
more of our relationships to achieve or maintain market acceptance or commercial
success or the termination of one or more relationship could have a material
adverse effect on our business, results of operations and financial condition.
We need to continue to develop Autoweb.com content and service offerings
To remain competitive we must continue to enhance and improve the ease of use,
responsiveness, functionality and features of the Autoweb.com site and develop
new services in addition to continuing to improve the consumer purchasing
experience. These efforts may require the development or licensing of
increasingly complex technologies. We may not be successful in developing or
introducing new features, functions and services, and these features, functions
and services may not achieve market acceptance or enhance our brand loyalty. If
we fail to develop and introduce new features, functions or services
effectively, it could have a material adverse effect on our business, results of
operations and financial condition.
We need to manage our growth
Our recent growth has placed, and is expected to continue to place, a
significant strain on our managerial, operational and financial resources. In
August 1999, Dean DeBiase, our Chief Executive Officer and director since
joining the Company in December 1998 was promoted to Chairman of the Board of
Directors and Chief Executive Officer. In November 1999 we had several
management changes. Samuel Hedgpeth, our Chief Financial Officer since joining
the Company in September 1997 was promoted to President and Chief Operating
Officer; Thomas Stone, who joined the Company in January 1998, was promoted from
Vice President, Finance to Chief Financial Officer and James Wolfe, our Director
of Marketing since joining the Company in August 1999 was promoted to Vice
President, Marketing. Additionally, Fred Ruffin joined our Company as Vice
President, Human Resources in January 2000 and Jerome Karr joined the Company as
its Chief Technology Officer in April 2000. Any inability to manage growth
effectively could have a material adverse effect on our business, results of
operations and financial condition.
We are dependent on certain key personnel
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Our future success is substantially dependent on our senior management and key
technical personnel. If one or more of our key employees decided to leave us,
join a competitor or otherwise compete directly or indirectly with us, this
could have a material adverse effect on our business, results of operations and
financial condition.
Our future success depends on our continuing ability to retain and attract
highly qualified technical and managerial personnel. As of March 31, 2000, we
had 230 full-time employees, and we anticipate that the number of employees will
increase significantly during the next 12 months. Wages for managerial and
technical employees are increasing and are expected to continue to increase in
the foreseeable future due to the competitive nature of the current employment
market, particularly in Northern California, the location of our headquarters.
We may be unable to retain key technical and managerial personnel or to attract
and retain additional highly qualified technical and managerial personnel in the
future. We have experienced difficulty from time to time attracting the
personnel necessary to support the growth of our business, and we may experience
similar difficulty in the future. Inability to attract and retain the technical
and managerial personnel necessary to support the growth of our business could
have a material adverse effect upon our business, results of operations and
financial condition.
We face risks associated with possible regulation under state or federal
franchise laws
If our relationships or written agreements with our member dealers are found
to constitute "franchises" under federal or state franchise laws, we would be
subject to regulations, such as franchise disclosure, registration requirements
and limitations on our ability to effect changes in our relationships with our
member dealers. We believe that neither our relationship with our member
dealers nor our member dealer subscription agreements constitute "franchises"
under state or federal franchise laws. However, we have not received legal
advice on this matter.
In May 1998, the Texas Department of Transportation notified us that, in their
opinion, our performance-based pricing model is illegal, because it makes us a
broker under Texas law. They have taken the position that the fee paid to us by
member dealers for each qualified purchase inquiry is equivalent to a broker's
fee and that we are arranging for two persons to meet and enter into a
transaction that involves the sale of a motor vehicle. In September 1999 the
Texas Department of Transportation sent a letter to the same effect to our Texas
member dealers, and as a result one of our largest member dealer groups severed
its business relationship with us. Shortly after the Department's letter was
sent to our Texas member dealers, we modified our pricing model. To date the
Department has taken no other action against us or our member dealers based on
our pricing model. A proposal to modify the regulations governing how the Texas
brokering law is enforced passed in February 2000. We have received written
notice from the Texas Department of Transportation that our newly revised
pricing model conforms to the new regulations.
We generally face risks associated with possible regulation under vehicle
brokerage, insurance, financing or other laws
Other states, substantially all of which have laws that broadly define
brokerage activities, could determine that we are acting as a broker. If this
occurs, we may be required to comply with burdensome licensing requirements or
terminate our operations in those states. In either case, our business, results
of operations and financial condition could be materially and adversely
affected. We believe that our service does not qualify as a vehicle brokerage
activity and therefore that state broker licensing requirements do not apply to
us. However, we have not sought a legal opinion regarding whether our service,
in general, or our performance-based pricing, in particular, would qualify us as
a vehicle brokerage activity in any state. State regulatory requirements may
also include us within an industry-specific regulatory scheme, such as those for
the vehicle insurance or vehicle financing industries. In the event that
individual states' regulatory requirements change or additional requirements are
imposed on us, we may be required to modify aspects of our business in those
states in a manner that might undermine the attractiveness of the Autoweb.com
purchase process to consumers, member dealers, vehicle manufacturers, category
partners or advertisers or require us to terminate operations in that state,
either of which could have a material adverse effect on our business, results of
operations and financial condition.
There are numerous state laws regarding the sale of vehicles. In addition,
government authorities may take the position that state or federal insurance
licensing laws, motor vehicle dealer laws or related consumer protection or
product liability laws apply to aspects of our business. As we introduce new
services and expand our operations to other countries, we will need to comply
with additional licensing and regulatory requirements.
We face risks associated with government regulation and legal uncertainties
associated with the Internet
A number of legislative and regulatory proposals under consideration by
federal, state, local and foreign governmental organizations may lead to laws or
regulations concerning various aspects of the Internet, including, but not
limited to, online content, user privacy, taxation, access charges, liability
for third-party activities and jurisdiction. Additionally, it is uncertain as to
how existing laws will be applied to the Internet. The adoption of new laws or
the application of existing laws may decrease the growth in the use of the
Internet, which could in turn decrease the demand for our services, increase our
cost of doing business or otherwise have a material adverse effect on our
business, results of operations and financial condition.
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The tax treatment of the Internet and e-commerce is currently unsettled. A
number of proposals have been made at the federal, state and local level and by
certain foreign governments that could impose taxes on the sale of goods and
services and certain other Internet activities. Recently, the Internet Tax
Information Act was signed into law placing a three-year moratorium on new state
and local taxes on Internet commerce. However, we cannot assure you that future
laws imposing taxes or other regulations on commerce over the Internet would not
substantially impair the growth of e-commerce and as a result have a material
adverse effect on our business, results of operations and financial condition.
Certain local telephone carriers have asserted that the increasing popularity
and use of the Internet has burdened the existing telecommunications
infrastructure, and that many areas with high Internet use have begun to
experience interruptions in telephone service. These carriers have petitioned
the Federal Communications Commission to impose access fees on Internet service
providers and online service providers. If such access fees are imposed, the
costs of communicating on the Internet could increase substantially, potentially
slowing the increasing use of the Internet, which could in turn decrease demand
for our services or increase our cost of doing business, and thus have a
material adverse effect on our business, results of operations and financial
condition.
We depend on increased use of the Internet
Our future success and revenue growth depends substantially upon continued
growth in the use of the Internet. Consumers and businesses will likely widely
accept and adopt the Internet for conducting business and exchanging information
only if the Internet provides these consumers and businesses with greater
efficiencies and improvements in commerce and communication. In addition, e-
commerce generally, and the purchase of automotive and automotive related
products and services on the Internet in particular, must become widespread. The
Internet may prove not to be a viable commercial marketplace generally, or, in
particular, for vehicles and related products and services. If use of the
Internet does not continue to increase, our business, results of operations and
financial condition would be materially and adversely affected.
We depend on continued improvements in our systems and the Internet
infrastructure
Our ability to retain and attract consumers, member dealers, vehicle
manufacturers, category partners and advertisers, and to achieve market
acceptance of our services and our brand, depends significantly upon the
performance of our systems and network infrastructure. Any system or network
failure that causes interruption or slower response time of our services could
result in less traffic to our Web site and, if sustained or repeated, could
reduce the attractiveness of our services to consumers, member dealers, category
partners and advertisers. An increase in the volume of our Web site traffic
could strain the capacity of our technical infrastructure, which could lead to
slower response times or system failures. This would cause the number of
purchase inquiries, advertising impressions, other revenue producing e-commerce
offerings and our information and community offerings to decline, any of which
could hinder our revenue growth and our brand loyalty. In addition, if traffic
increases, we cannot assure you that our technical infrastructure, such as a
reliable network backbone with the necessary speed and data capacity and the
development of complementary products such as high-speed modems, will be able to
increase accordingly, and we face risks related to our ability to scale up to
expected consumer levels while maintaining performance. Further, security and
authentication concerns regarding the transmission of confidential information
over the Internet, such as credit card numbers, may continue. Any failure of our
server and networking systems ability to handle current or higher volumes of
traffic would have a material adverse effect on our business, results of
operations and financial condition.
The recent growth in Internet traffic has caused frequent periods of decreased
performance, requiring Internet service providers and users of the Internet to
upgrade their infrastructures. If Internet usage continues to increase rapidly,
the Internet infrastructure may not be able to support the demands placed on it
by this growth and its performance and reliability may decline. If outages or
delays on the Internet occur frequently, overall Internet usage or usage of our
Web site could increase more slowly or decline. Our ability to increase the
speed with which we provide services to consumers and to increase the scope of
such services is limited by and dependent upon the speed and reliability of the
Internet. Consequently, the emergence and growth of the market for our services
is dependent on future improvements to the entire Internet.
In addition, our operations depend upon our ability to maintain and protect
our computer systems, some of which are located at our corporate headquarters in
Santa Clara, California. We do have a backup disaster recovery program and fully
redundant systems for our service at an off-site location hosted by Exodus
Communications, Inc. While this offsite location does provide a significant
amount of security and scalability there is no guarantee that the system is not
vulnerable to damage from fire, floods, earthquakes, power loss,
telecommunications failures and similar events. Although we maintain insurance
against fires, floods,
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earthquakes and general business interruptions, the amount of coverage may not
be adequate in any particular case. The occurrence of such an event could have a
material adverse effect on our business, results of operations and financial
condition.
The Internet industry is characterized by rapid technological change
Rapid technological developments, evolving industry standards and consumer
demands, and frequent new product introductions and enhancements characterize
the market for Internet products and services. These market characteristics are
exacerbated by the emerging nature of the market and the fact that many
companies are expected to introduce new Internet products and services in the
near future. Our future success will significantly depend on our ability to
continually improve the vehicle purchasing experience, the addition of new and
useful services and content to our Web site, and the performance, features and
reliability of our Web site. In addition, the widespread adoption of developing
multimedia-enabling technologies could require fundamental and costly changes in
our technology and affect the nature, viability and measurability of Internet-
based advertising, which could adversely affect our business, results of
operations and financial condition.
We could face liability for information retrieved from or transmitted over the
Internet and liability for products sold over the Internet
We could be exposed to liability with respect to third-party information that
may be accessible through our Web site, or content and materials that may be
posted by consumers through our AutoTalk or car review services. Such claims
might assert, among other things, that, by directly or indirectly providing
links to Web sites operated by third parties, we should be liable for copyright
or trademark infringement or other wrongful actions by such third parties
through such Web sites. It is also possible that, if any third-party content
information provided on our Web site contains errors, consumers could make
claims against us for losses incurred in reliance on such information.
We also enter into agreements with other companies under which any revenue
that results from the purchase of services through direct links to or from our
Web site is shared. Such arrangements may expose us to additional legal risks
and uncertainties, including local, state, federal and foreign government
regulation and potential liabilities to consumers of these services, even if we
do not provide the services ourselves. We cannot assure you that any
indemnification provided to us in our agreements with these parties, if
available, will be adequate.
Even to the extent such claims do not result in liability to us, we could
incur significant costs in investigating and defending against such claims. The
imposition upon us for potential liability of information carried on or
disseminated through our system could require us to implement measures to reduce
our exposure to such liability, which might require the expenditure of
substantial resources or limit the attractiveness of our services to consumers,
member dealers, category partners and others.
Our general liability insurance and our communications liability insurance may
not cover all potential claims to which we are exposed and may not be adequate
to indemnify us for all liability that may be imposed. Any imposition of
liability that is not covered by insurance or is in excess of insurance coverage
could have a material adverse effect on our business, results of operations and
financial condition.
Our intellectual property protection may be inadequate
Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related businesses are
uncertain and still evolving, and we can give no assurance regarding the future
viability or value of any of our proprietary rights. Despite the precautions we
have taken, it may be possible for a third party to copy or otherwise obtain and
use our proprietary information without authorization or to develop similar
technology independently.
We are aware that the mark "Autoweb" is a federally registered trademark of
another party and that other parties have registered the mark internationally;
the mark is already in use in several regions in the United States and
internationally. We have applied for a U.S. and a foreign trademark registration
for "Autoweb" associated with the services we provide; however, we cannot
guarantee that we will receive the applied-for registrations or be able to
continue to use the name "Autoweb" in the future. As a result, we cannot
guarantee that we will be able to continue to use the name "Autoweb" in the
future. If in the future we were required to change our name and adopt a new
trademark, we would incur significant expenses related to marketing a
replacement trademark, and such a change would likely have a material adverse
effect on our business, results of operations and financial condition.
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We face risks associated with litigation
Litigation may be necessary in the future to enforce our intellectual property
rights, to protect our trade secrets or trademarks or to determine the validity
and scope of the proprietary rights of others. Such litigation might result in
substantial costs and diversion of resources and management attention.
Furthermore, our business activities may infringe upon the proprietary rights of
others and other parties may assert infringement claims against us, including
patent claims or claims that arise from directly or indirectly providing
hyperlink text links to Web sites operated by third parties. Moreover, from time
to time, we may be subject to claims of alleged infringement by us or our member
dealers of the trademarks, service marks, patents and other intellectual
property rights of third parties. Such claims and any resultant litigation,
should it occur, might subject us to significant liability for damages, might
result in invalidation of our proprietary rights and, even if not meritorious,
could result in substantial costs and diversion of resources and management
attention and have a material adverse effect on our business, results of
operations and financial condition.
We depend on third party technology
We currently license from third parties certain technologies and information
incorporated into our Web site. As we continue to introduce new services that
incorporate new technologies and information, we may be required to license
additional technology and information from others. We cannot assure you that
these third-party technology and information licenses will continue to be
available to us on commercially reasonable terms, if at all. Additionally, we
cannot assure you that the third parties from which we currently license our
technology and information will be able to defend their proprietary rights
successfully against claims of infringement. Any failure to obtain any of these
technology and information licenses could result in delays or reductions in the
introduction of new features, functions or services. It could also adversely
affect the performance of our existing services until equivalent technology or
information can be identified, obtained and integrated.
We may particularly be affected by general economic conditions
Purchases of new vehicles are typically discretionary for consumers and may be
particularly affected by negative trends in the general economy. The success of
our operations depends to a significant extent upon a number of factors relating
to discretionary consumer spending, including economic conditions (and
perceptions by consumers) affecting disposable consumer income (such as
employment, wages and salaries, business conditions, interest rates,
availability of credit and taxation) for the economy as a whole and in regional
and local markets where we operate. In addition, because the purchase of a
vehicle is a significant investment and is relatively discretionary, any
reduction in disposable income in general may affect us more significantly than
companies in other industries. In addition, our business strategy relies on
advertising by and agreements with other Internet companies. Any significant
deterioration in general economic conditions that adversely affects these
companies could also have a material adverse effect on our business, results of
operations and financial condition.
We have security risks
On occasion, some experienced programmers ("hackers") have attempted to
penetrate our network security. We expect that these attempts, some of which
have succeeded, will continue to occur from time to time. Because a hacker who
penetrates our network security could misappropriate proprietary information or
cause interruptions in our services, we might be required to expend significant
capital and resources to protect against, or to alleviate, problems caused by
hackers. Additionally, we may not have a timely remedy against a hacker who is
able to penetrate our network security. In addition to purposeful security
breaches, the inadvertent transmission of computer viruses could expose us to
litigation or to a material risk of loss. Such security breaches and inadvertent
transmissions could have a material adverse effect on our business, results of
operations and financial condition.
In offering certain online payment services, we may increasingly rely on
technology licensed from third parties to provide the security and
authentication necessary to effect secure transmission of confidential
information, such as consumer credit card numbers. Advances in computer
capabilities, new discoveries in the field of cryptography, or other events or
developments may result in a compromise or breach of the algorithms that we use
to protect our consumers' transaction data or our software vendors' products.
Any well-publicized compromise of security could deter use of the Internet in
general or use of the Internet to conduct transactions that involve transmitting
confidential information or downloading sensitive materials.
18
<PAGE>
We have risks associated with international operations and expansions
A part of our long-term strategy is to establish Autoweb.com in international
markets. However, the Internet, or our commerce, content and community services
model, may not become widely accepted in any market. In addition, we expect that
the success of any additional foreign operations we initiate will be
substantially dependent upon our member dealers, category partners and content
services. We may experience difficulty in managing international operations as a
result of failure to identify an effective foreign partner, competition,
technical problems, local laws and regulations, distance and language and
cultural differences. Our international partners may not be able to successfully
market and operate our community model in foreign markets. There are also
certain risks inherent in doing business internationally, including:
. cultural and business practices differences;
. fluctuations in currency exchange rates;
. political issues;
. legal and economic instability;
. seasonal reductions in business activity in certain other parts of the
world; and
. potentially adverse tax consequences.
One or more of such factors could have a material adverse effect on our future
international operations and, consequently, on our business, results of
operations and financial condition.
Our Certificate of Incorporation and Bylaws and Delaware law contain provisions
that could discourage a takeover.
Certain provisions of Delaware law and our Certificate of Incorporation and
Bylaws could have the effect of delaying or preventing a change in control.
19
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We considered the provisions of Financial Reporting Release No. 48,
"Disclosure of Accounting Policies for Derivative Financial Instruments and
Derivative Commodity Instruments, and Disclosure of Quantitative and Qualitative
Information about Market Risk Inherent in Derivative Financial Instruments,
Other Financial Instruments and Derivative Commodity Instruments." We had no
holdings of derivative financial or commodity instruments at March 31, 2000.
However, we are exposed to financial market risks, including changes in foreign
currency exchange rates and interest rates. The majority of our revenue,
expenses and capital expenditures are transacted in U. S. dollars.
At March 31, 2000, we had no assets classified as short-term investments. The
objectives of our investment policy are the safety and preservation of invested
funds, and liquidity of investments that is sufficient to meet cash flow
requirements. Our policy is to place our cash, cash equivalents, and investments
available for sale with high credit quality financial institutions, commercial
companies, and government agencies in order to limit the amount of credit
exposure. Our investment policy also provides that our investment portfolio must
not have an average portfolio maturity of beyond one year and that we must
maintain liquidity positions. Our investment policy prohibits investments in
industries and speculative activities and requires investments be denominated in
U.S. dollars.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
20
<PAGE>
(a) The following exhibits are filed as part of this report:
10.33* Strategic Co-Marketing Agreement dated March 16, 2000
between Registrant and CarsDirect.com, Inc.
10.34* Agreement dated March 26, 2000 between Registrant and
Lycos, Inc.
10.35 Stock Purchase Agreement dated April 12, 2000 between
Registrant and Lycos, Inc.
27.01 Financial Data Schedule (EDGAR version only)
---------------
*Confidential treatment has been requested for portions of this
exhibit.
(b) Form 8-K
Not applicable.
21
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AUTOWEB.COM, INC.
Date: May 15, 2000 By: /s/ Samuel M. Hedgpeth III
-------------------------------------
Samuel M. Hedgpeth III
President and Chief Operating Officer
Date: May 15, 2000 By: /s/ Thomas L. Stone
-------------------------------------
Thomas L. Stone
Chief Financial Officer
22
<PAGE>
Confidential treatment has been requested for portions of this exhibit. The
copy filed herewith omits the information subject to the confidentiality
request. Omissions are designated as [*]. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.
EXHIBIT 10.33
STRATEGIC CO-MARKETING AGREEMENT
THIS AGREEMENT ("Agreement") is made effective as of this 16th day of March
2000 ("Effective Date") by and between Autoweb.com, Inc. ("Autoweb") a Delaware
corporation having its principal place of business at 3270 Jay Street, Santa
Clara, CA 95054, and CarsDirect.com, Inc., a Delaware corporation having its
principal place of business at 10567 Jefferson Boulevard, Culver City, CA, 90232
("CarsDirect"). Autoweb and CarsDirect may be referred to individually as a
"Party" and collectively as the "Parties." Capitalized terms used but not
defined in the body of this Agreement are as defined on Exhibit B hereto.
RECITALS
WHEREAS, Autoweb is a consumer automotive Internet service;
WHEREAS, CarsDirect is a consumer automotive Internet service;
WHEREAS, the Parties desire to create a long-term commercial and strategic
relationship which leverages Autoweb's ability to generate a significant number
of "buy" oriented consumers and CarsDirect's ability to offer consumers a
valuable online automotive e-commerce transaction experience;
NOW, THEREFORE, in reliance upon the foregoing facts, for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, and
in consideration of the mutual agreements hereinafter set forth, the Parties
agree as follows:
AGREEMENT
1. EXCLUSIVITY AND NONCOMPETITION
1.1. For a period of [*] immediately following the Effective Date (the
"Twelve-Month Period"), CarsDirect will not consummate a CarsDirect
Prohibited Transaction. Notwithstanding the foregoing, during the
period commencing on the [*] of the Effective Date through the [*] of
the Effective Date (the "Level 2 Exclusivity Period"), CarsDirect
shall be permitted to enter any type of promotion, linking, strategic,
co-marketing or website-framing relationship with Excluded Party. In
the event that CarsDirect consummates such a transaction with Excluded
Party at any time during the Level 2 Exclusivity Period, both Parties'
[*] contained in this Section 1 shall be of no force or effect
(however, all other terms and requirements of this Agreement shall
remain in full force and effect). Notwithstanding the immediately
foregoing sentence, CarsDirect may enter into a content or technology
relationship, whether through a joint venture, marketing venture or
otherwise, with Excluded Party at any time during the Term provided
that such relationships do not promote or reference the Direct
Transaction Business Model of CarsDirect or its wholly owned
subsidiaries on or through the Excluded Party website.
For the period from the expiration of the [*] CarsDirect shall be
permitted to consummate a CarsDirect Prohibited Transaction with any
Person, except for Persons designated on Exhibit G attached
1
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
hereto, as may be modified by Autoweb as provided below (collectively,
the "Restricted Referral Businesses"). In the event that a Restricted
Referral Business enters into a definitive agreement with respect to a
Change of Control, such Person shall no longer be deemed a Restricted
Referral Business and Autoweb may add a Replacement.
At the beginning of each six-month period beginning at the end of the
Twelve-Month Period and subject to CarsDirect's approval, which shall
not be unreasonably withheld, Autoweb shall have the right to replace
no more than two (2) Persons from the list of Restricted Referral
Businesses with alternative Persons (each a "Replacement") subject to
the following conditions:
1. Once Autoweb replaces a Restricted Referral Business,
Autoweb shall not be permitted to designate such Person as a
Restricted Referral Business at a later time.
2. Autoweb may not designate a Person as a Restricted Referral
Business if as of the beginning of the given six-month
period CarsDirect (i) is engaged in active discussions with
such Person in connection with a pending transaction or (ii)
has a contractual relationship with such Person.
3. Any Restricted Referral Business must be a Referral
Business.
4. Any Replacement shall be subject to CarsDirect's prior
approval which shall not be unreasonably withheld.
1.2 During the Term, the Direct Transaction Business Model available on
the CarsDirect Site shall be the exclusive Direct Transaction Business
Model available on or promoted or referenced through the Autoweb Site
and Autoweb's wholly owned subsidiaries' sites.
1.3 Exceptions for Certain Business Models and Persons. Notwithstanding
anything to the contrary contained in this Agreement:
(i) Either or both Parties may offer their respective Visitors
Automobile auctions, reverse auctions, classified listings or
other purchase methods other than the Direct Transaction
Business Model;
(ii) Either or both Parties may maintain a database of dealer
inventory for the purpose of facilitating purchase methods
other than the Direct Transaction Business Model;
(iii) CarsDirect may offer a "build-to-order" business method to any
Automobile manufacturer;
(iv) In addition to its referral of Visitors residing in Dark States
to Autoweb under Paragraph 4 below (i.e., a Referral Business
Model transaction), CarsDirect Site may offer to any of the ten
(10) largest dealer groups nationally a modified form of the
Direct Transaction Business Model (i.e. a Referral Business
Model with a credit card) so long as CarsDirect's business
model is offered only to such dealers located in Dark States.
(v) Autoweb or CarsDirect may enter into merger, consolidation, or
other acquisition transactions of all, or substantially all
asset-purchase or stock-
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<PAGE>
AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
purchase with Persons providing either the Direct Transaction
Business Model or the Referral Business Model.
2. REFERRAL OF CONSUMERS TO CARSDIRECT
2.1 Referrals. Each quarter during the Term, Autoweb shall deliver to
---------
CarsDirect no more than the D1 Lead Maximum and no less than the D2
Lead Minimum. Attached hereto as Exhibit A/Part II is a schedule of
CarsDirect's geographic Lead referral parameters and as Exhibit A/Part
III is a schedule of CarsDirect's make and model Lead referral
parameters (collectively "Lead Criteria"). Leads that do not satisfy
the Lead Criteria or those Leads that are inaccurate (e.g. omissions,
misstatements, false information, duplicates within a twenty-four hour
period, etc.) that materially reduces CarsDirect's ability to convert
the D1 Leads) shall be referred to as "Undesirable Leads." The Parties
may update such Undesirable Leads as described in section 10,
Quarterly Review. CarsDirect will only pay for Leads as consistent
with Lead Criteria. The Parties will work together to reduce
Undesirable Leads. If such Undesirable Leads equal or exceed [*] of D1
Leads or more for a given quarter, Autoweb will make good within the
next two (2) subsequent quarters by delivering to CarsDirect a number
of D1 Leads that satisfy the Lead Criteria in an amount equal to the
number of Undesirable Leads Delivered in the quarter(s) in question.
2.2. Referral Fees. CarsDirect will pay to Autoweb, prior to the start
-------------
of each quarter, Lead Fees based on Exhibit A/Part I. This payment
will be net of any adjustments (including decreasing of payments for
under-delivery of D1 Leads and increasing of payments for over-
delivery of D2 Leads and decreased D1 Lead Fees pursuant to section
10.4, if any) for previous periods. Separately, during the second
month of each quarter, CarsDirect will pay to Autoweb any amounts by
which the Automobile Purchase Marketing Fees for the previous quarter
are greater than the preceding quarter's Lead Fees.
2.3. Fee Adjustments. D1 Lead Fees shall be reduced in a
---------------
proportionate amount each month, if necessary, based upon the amount
by which the D2 Lead Minimum exceeds the D2 Leads generated in a given
month. Subject to section 10.4, the minimum D1 Lead Fee shall be [*]
per D1.
2.4. Lead Initiation. CarsDirect will start receiving Leads on March
---------------
27, 2000, and will receive up to the D1 Lead Maximum. By March 17,
2000, Autoweb will provide CarsDirect with a mutually agreed to
Delivery Plan (to be updated as described in Quarterly Review, which
will include make and model restrictions supplied by CarsDirect)
according to Lead Criteria (defined as the initial rollout plan and
ongoing State level delivery schedule for D1 and D2 Leads).
2.5. Conversion Adjustment. The Parties expect that the Direct Flow
---------------------
(as described in Exhibit D hereto and incorporated herein) will change
over the Term of this Agreement. The Parties agree that there will be
an introductory period for Direct Flow changes (including the
introduction of new products) during which time Autoweb will evaluate
the effect on D2 Leads. To the extent that such changes (e.g., moving
"Payment Options" toward the beginning, adding parts sales, etc.)
materially reduces conversion to D2 Leads (e.g., adds profit margin
which Autoweb does not participate in and reduces conversion), the
Parties will work together in good faith to optimize D2 Lead
conversions.
3
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
3. PHASE IN OF REFERRAL PROGRAM AND ACCESS TO CONFIGURATOR AND SITE
CONTENTS
The Parties agree to implement a program to generate D1 Leads and D2 Leads
in phases as follows:
3.1 Level One Referral.
------------------
. As shown in Exhibit A and subject to Quarterly Reviews,
CarsDirect agrees to accept D1 Leads in accordance with the
agreed upon quantities set forth in Exhibit A/Part I. Parties
will develop and implement in accordance with mutually agreed
upon specifications, the data exchange format for passing such D1
Leads from Autoweb to CarsDirect during Phase One, and the
Parties will mutually agree upon other executional elements;
provided, however, (i) CarsDirect shall control the text and user
interface elements and (ii) the Parties shall mutually agree as
to the branding of the Auto Response Email messages to such
consumers.
3.2 Level Two; Commencement of D2 Lead Delivery.
--------------------------------------------
. Phase One: Beginning upon the date of the Launch of the Co-
Branded Site and ending upon the commencement of Level Two, Phase
Two, consumers who on the Autoweb Site select the Direct
Transaction Business Model will be re-directed to the Co-Branded
Site, at which time they will have the opportunity to configure,
receive pricing information about, and submit a CarsDirect
Purchase Request. The Parties shall develop the necessary
technical interfaces and other requirements necessary for the
CarsDirect Site to accept such consumers after they have selected
vehicle make, model, and trim using the current Autoweb
Configurator.
. Phase Two: Autoweb shall develop, with the cooperation of
CarsDirect, software and systems that: (i) employ the Autoweb
Configurator to permit Visitors to the Autoweb Site who select
the Direct Transaction Business Model to configure and receive
pricing information about an Automobile in substantially the same
manner and format with respect to Automobile preference and
consumer information as does CarsDirect. Autoweb shall have
integrated all CarsDirect pricing, financing, insurance,
warranty, roadside assistance and configuration constraints to
CarsDirect's reasonable approval, such approval not to be
unreasonably withheld or delayed. Autoweb's developed software
and systems shall be integrated in a manner which complies with
all Autoweb contractual obligations existing as of the Effective
Date copies of which have been provided to CarsDirect. The
functionality described in the preceding two sentences shall be
referred to as the "CarsDirect Functionality"; (ii) fully employ
the Autoweb Configurator and the CarsDirect application program
interface (including syntax and semantics) to communicate with
and deliver full CarsDirect Functionality to the CarsDirect
computer systems (including but not limited to CarsDirect's lead
application system, pricing and accounting systems and Automobile
sourcing and locating systems) in a manner fully compatible with
the CarsDirect Configurator. Upon agreement of the Parties,
operation of
4
<PAGE>
AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
the Co-Branded Site and redirection of Visitors to the Autoweb
Site to such site shall cease.
. Interim Solutions. To the extent that the full integration
-----------------
described above is delayed, the Parties will work together to
develop interim alternative integration solutions (e.g., passing
make, model. Year and trim detail).
. To the extent that CarsDirect develops alternative integration
facilities made available to third parties, such alternative
integration facilities will also be made available to Autoweb.
4. REFERRAL TO AUTOWEB OF PURCHASE REQUEST TRAFFIC
In connection with the Tracked Links that CarsDirect will establish on the
CarsDirect Site and the Autos Site, Autoweb will pay CarsDirect a fee for
each qualified Autoweb Purchase Request that is submitted to the Autoweb
Site through Tracked Links. Such fee shall be equal to [*] of Autoweb's
average net revenue from such Autoweb Purchase Request, net revenue defined
as gross revenue less any reserve for loss contingencies. Autoweb shall pay
to CarsDirect such fee on a monthly basis no later than forty-five (45)
days from the end of the month.
5. FRAMED AND CO-BRANDED SERVICES
5.1 Autoweb Site; Promotion of CarsDirect and Branding. For the Term of
--------------------------------------------------
this Agreement, Autoweb will prominently promote its Direct
Transaction Business Model throughout the Autoweb Site. Each promotion
shall be at least as prominent as any other transaction business model
on the Autoweb Site. When a Visitor to the Autoweb Site chooses the
Direct Transaction Business Model, Autoweb will control the relative
prominence of all branding on pages up to and including the Autoweb
Jump Pages. The Parties agree to joint control of the user interface
and text and graphic content on the Autoweb Jump Pages, excluding the
aforementioned branding elements. The Co-Branded Site will have a
permanent "Back to Autoweb" link. CarsDirect will have design
approval rights for all uses of its trademarks and branding.
Notwithstanding the foregoing, the branding scheme with respect to the
promotion and the process of the Direct Transaction shall position
CarsDirect as the principal in the transaction.
5.2 CarsDirect Site and Autos Site; Branding. For the Term of this
----------------------------------------
Agreement, CarsDirect will provide links to the Autoweb Site on such
pages within the CarsDirect Site and the Autos Site, with the location
of such links to be agreed by the Parties. The Parties agree that the
CarsDirect Jump Pages will be co-branded with each brand receiving
equal prominence. When a CarsDirect or Autos.com Visitor chooses the
Autoweb Referral Business Model, CarsDirect will control the relative
prominence of all branding including the CarsDirect Jump Pages. The
Autoweb Site will have a permanent "Back to Autos.com" link. The
Parties agree to joint control of the user interface on the CarsDirect
Jump Pages, excluding the aforementioned branding elements. Except as
otherwise provided for herein, each party retains the right to control
its user interface on its respective site(s).
5.3 Design Guidelines. When CarsDirect hosts pages, it will design the
-----------------
co-branded area of each page based on Autoweb design guideline
templates and co-branding requirements as may be updated from time to
time. Autoweb shall have the right to change or modify its
5
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
design guideline templates and co-branding requirements over the term.
Mutually agreed upon consumer communications from CarsDirect will be
co-branded with Autoweb and CarsDirect.
5.4 CarsDirect Site; Promotion of Autoweb. Autoweb will be prominently
-------------------------------------
promoted (including a permanent placement) as the [*] new Referral
Business Model and the [*] used Referral Business Model on the Autos
Site. Autoweb will have permanently placed links on the Autos Site
located at a minimum on its New and Used category pages. Autoweb's
used Automobile and trade-in services shall be offered on the
CarsDirect Site and the Autos Site as an option available to new
Automobile Purchasers.
5.5 Further, in the event that in the reasonable opinion of CarsDirect
counsel CarsDirect should not provide its new Automobile purchasing
services to CarsDirect Visitors in certain States ("Regulatory
Adjustment; thus rendering such States as Dark States), Autoweb will
be positioned as the exclusive new Automobile Referral Business Model
on the CarsDirect Site to such CarsDirect Visitors, except where OEM
and Dealer Group programs are allowed as stated in section 1.3/parts
(iii) and (iv). In the event that CarsDirect places links on the
CarsDirect Site that navigate Visitors to the CarsDirect Site to
unrelated online entities that enable the purchase of a new
Automobile, CarsDirect shall offer Autoweb link placement
substantially similar to such links. Further, the Parties will work in
good faith to identify possible link placements on each other's sites.
6. GRANT OF CARSDIRECT COMMON STOCK TO AUTOWEB
As further consideration for Autoweb entering into the Agreement and the
exclusivities granted herein, CarsDirect agrees to issue and deliver to
Autoweb 576,701 shares of CarsDirect Stock valued at $10,000,000 (such
shares may consist of common stock, preferred stock or a combination
thereof at the sole discretion of CarsDirect) to Autoweb (the "CarsDirect
Shares"). Autoweb agrees to enter into an investment agreement (including
a standard 180 day lockup) with CarsDirect with respect to the issuance of
the CarsDirect Shares within twenty-one business days following the
Effective Date and shall deliver the Shares to Autoweb within twenty (20)
days following the execution of such investment agreement.
7. PURCHASE OF AUTOWEB COMMON STOCK BY CARSDIRECT
Within five (5) business days following the Effective Date CarsDirect
agrees to purchase 750,000 shares of Autoweb Common Stock (the "Autoweb
Shares") for a per share purchase price equal to the average of the closing
price for the thirty (30) trading days prior to the Effective Date, or
$7.93 per share, multiplied by 1.35 (for a per share price of $10.616).
CarsDirect agrees to enter into an investment agreement with Autoweb with
respect to the purchase and sale of the Autoweb Shares within twenty-one
(21) business days following the Effective Date.
8. RECORDING OF TRAFFIC
To the extent feasible, CarsDirect will authorize both Media Metrix and
Nielsen/NetRatings to record all page views from the Co-branded Site as
Autoweb.com traffic. CarsDirect shall count all unique Visitors to the Co-
branded Site as CarsDirect unique Visitors. Should alternative reporting
means become available which allow for Autoweb and CarsDirect each to be
credited with traffic (page views and unique Visitors), the Parties shall
agree to comply with such reporting means.
6
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
9. REPORTING
CarsDirect Reporting Responsibilities. CarsDirect shall implement sales
-------------------------------------
management software with which to track Automobile Purchases sufficiently
soon after the Effective Date to timely and accurately compute the basis of
its payment obligations to Autoweb.
As soon as reasonably feasible, CarsDirect shall provide Autoweb with daily
reports regarding the number of Leads received by CarsDirect. Further,
CarsDirect shall provide Autoweb with weekly and quarterly reports as per
Exhibit C hereto. If CarsDirect's records show activity from the Direct
Transaction Placement or the Auto Response Email that CarsDirect determines
is inconsistent with valid information requests, or is otherwise unusual,
then CarsDirect will pay the minimum amount that is calculated as due
pending an investigation of that activity by the Parties and resolution of
the Dispute (if any). CarsDirect will notify Autoweb reasonably promptly
in this event.
Autoweb Review Rights. Subject to the confidentiality obligations herein,
---------------------
Autoweb has the right, at its expense to have reviewed CarsDirect's
directly relevant books and records for the purpose of verifying the number
of Automobile Purchases. Such review will be made not more than twice per
year, on not less than fifteen (15) business days written notice, during
regular business hours, by a nationally recognized accounting firm which is
reasonably acceptable to CarsDirect. CarsDirect will provide reasonable
accommodation thereof. In no event shall Autoweb review the same time
period (or any portion thereof) more than once. If such review reflects
Automobile Purchasers greater than those reported by CarsDirect, CarsDirect
will provide Autoweb with prompt payment for the deficiency. If such review
indicates underpayments of greater than 10% but not less than $10,000 from
the figures provided by CarsDirect, CarsDirect will also pay all reasonable
costs of such review.
Autoweb Reporting Responsibilities. Autoweb shall implement lead
----------------------------------
management software with which to track Leads delivered to CarsDirect. As
soon as reasonably feasible, Autoweb shall provide CarsDirect with daily
reports regarding the number of Leads delivered to CarsDirect.
CarsDirect Review Rights. Subject to the confidentiality obligations
------------------------
herein, CarsDirect will have the right, at its expense to have reviewed
Autoweb's directly relevant books and records for the purpose of verifying
the number of Leads delivered to CarsDirect. Such review will be made not
more than twice per year, on not less than fifteen (15) business days
written notice, during regular business hours, by a nationally recognized
accounting firm which is reasonably acceptable to Autoweb. Autoweb will
provide reasonable accommodation thereof. In no event shall CarsDirect
review the same time period (or any portion thereof) more than once. If
such review reflects Leads delivered to CarsDirect less than those reported
by Autoweb, Autoweb will provide CarsDirect with prompt payment for the
deficiency. If such review indicates a discrepancy of greater than 10% from
the figures provided by Autoweb, Autoweb will also pay all reasonable costs
of such review.
10. QUARTERLY REVIEW
10.1 Prior to the end of every calendar quarter, a representative of each
of Autoweb and CarsDirect will meet to determine any adjustments to
D1 Leads and D2 Leads for the following quarter. At such quarterly
review meeting, CarsDirect may request an increase in the D1 Leads
Maximum. If Autoweb agrees to provide such additional D1 Leads, then
7
<PAGE>
AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
all incremental D1 Leads provided in excess of the D1 Lead Maximums
in Exhibit A/Part I for such quarter will be [*] per D1 Lead,
regardless of the number of D2 Leads provided during the same
period.
10.2 CarsDirect will notify Autoweb of Regulatory Adjustments as soon as
reasonably practicable after CarsDirect becomes aware of a likely
Regulatory Adjustment. Upon such notice and the request of
CarsDirect, Autoweb will stop delivering Leads from such new Dark
States and the Parties shall collaborate to reallocate the Leads.
There shall be no Fee Adjustments (defined in section 2.3) due to
Regulatory Adjustments. Any Regulatory Adjustments will
proportionately affect D1 Lead Maximums.
10.3 CarsDirect agrees and acknowledges that there may be a pool of
Visitors to the Autoweb Site who have filled out Autoweb Purchase
Requests that will not be sold to CarsDirect ("Potential D1 Leads")
and that the number of such Potential D1 Leads will increase and
decrease, based on adjustments authorized herein. CarsDirect agrees
and acknowledges that, subject to Autoweb's obligations to
CarsDirect hereunder with respect to D1 Leads, Autoweb has the right
to sell such Potential D1 Leads to any third party.
10.4. The Parties will work together, as appropriate, to adjust D1 Leads
to improve CarsDirect revenues related to Automobile Purchases. The
Parties shall work together to ensure that the conversion rate from
D1 Leads to Automobile Purchase shall be at least [*]. In the event
that such rate is below [*] for the quarter under review ("Under-
delivered Quarter"), principally in the subsequent quarter the
Parties will either increase Leads (without cost to CarsDirect),
decrease the D1 Lead Fees, or provide other mutually agreed to
modifications ("Make Goods") that ensure the target acquisition cost
per Automobile is less than or equal to [*] for the Under-delivered
Quarter. The calculation of acquisition cost for the quarter under
review shall exclude Make Goods.
10.5. Autoweb will reflect all agreed upon adjustments to an updated
Delivery Plan (as defined in 2.4).
11. AUTOWEB LICENSING TO AUTOS.COM
11.1 Within 90 days from the Effective Date, Autoweb and CarsDirect will
identify and document services and content licenses that Autoweb
will provide with respect to the Autos Site, and negotiate in good
faith the terms of a definitive agreement for the implementation of
such services and the licensing of such content. In the event that
the Parties mutually execute a definitive agreement with respect to
the above-referenced relationship, Autoweb will, among other things,
serve as a premiere infrastructure partner for Autos.com, assisting
in the development of user interface, the development of new content
and tools, and the integration of commerce and content partners into
the Autos.com web site. Such services work will be performed on a
time and materials basis with an agreed upon mark-up for general
overhead and operating expenses.
11.2 Subject to inventory supplied by CarsDirect, CarsDirect hereby
authorizes Autoweb to (i) include the Autos Site in Autoweb's auto
industry advertising rate card; and (ii) sell Autos.com advertising
and sponsorship inventory. The Parties will share equally in the
gross revenue from such Autos.com inventory that Autoweb sells.
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AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
12. CARSDIRECT LICENSE TO AUTOWEB; CONFIGURATION AND PRICING TOOLS
Pursuant to the terms and conditions of a content license agreement to be
entered into by the Parties, CarsDirect shall license to Autoweb, on a
royalty-free basis, effective upon Autoweb's preparations for development
of Level Two, Phase Two and continuing through the Term, the data, tools,
and software necessary solely for use in connection with consumers choosing
a DirectTransaction to enter into a Direct Transaction. If the Parties
shall hereafter agree to adopt a configuration tool on the Autoweb Site
that includes elements of the CarsDirect Configurator, CarsDirect shall
license such technology and tools to Autoweb on a royalty-free basis and
pursuant to terms and conditions of a content license agreement to be
entered into by the Parties. The term of such license shall be coterminous
with this Agreement. The Parties agree that such technology and tools
shall have the functionality to facilitate a Direct Transaction as
contemplated in this Agreement.
13. COOPERATIVE DEALER AND OEM NETWORKS
Subject to contractual limitations between CarsDirect and Automobile
dealers and Automobile dealer groups and consolidators, Autoweb shall have
the right to offer to its current and future franchised Automobile dealers
participating in the Autoweb network the opportunity to participate in the
Direct Transaction program contemplated herein and as further described in
Exhibit F hereto, provided each such Dealer executes a CarsDirect Dealer
Agreement with CarsDirect and continues to meet the standards for such
inclusion, as may be amended from time to time. Such standards may include
but not be limited to (i) maintaining a dedicated Internet department, (ii)
meeting certain inventory and geographic criteria and (iii) meeting
minimum CSI standards. CarsDirect shall have the right to offer to its
current and future Dealers the opportunity to participate in the Autoweb
Dealer Referral program contemplated herein, provided such inclusion meets
mutually determined standards for such inclusion.
14. COMMERCE PARTNERS AND PRODUCTS
Autoweb reserves the right to enter into commercial relationships with
commerce partners, including but not limited to those providing finance,
insurance, roadside assistance, warranty products, and certain forms of
purchasing Automobiles, provided such agreements are consistent with the
terms and conditions of this Agreement and the exclusivities provided
herein. CarsDirect will retain the right to offer to Leads financing,
insurance, warranty, roadside assistance and other products. The Parties
will negotiate regarding a possible commercial relationship in the future
whereby CarsDirect products are promoted on the Autoweb Site and Autoweb
products are offered on the CarsDirect Site. Neither Party shall be
obligated to enter into such a relationship.
15. ADVERTISING
Autoweb shall have the right to sell and serve all advertising, revenue
generating, and promotional positions (including sponsorships) on pages of
the Autoweb Site. CarsDirect shall have the right to sell and serve all
advertising, revenue generating, and promotional positions (including
sponsorships) on pages of the Co-Branded Site and the CarsDirect Site, if
any. Neither Party shall display or exhibit on any page of the Co-Branded
Site or any Autoweb Jump Page any graphic or textual link, advertisements
or other promotions that in any manner or fashion reference, promote or
feature, or provide any link to a site identified with or controlled by any
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AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
CarsDirect Competitor or Autoweb Competitor or other Internet Automobile
buying service. Further, at such point that an Autoweb Site Visitor who
has chosen a Direct Transaction begins to submit her contact information,
Autoweb agrees not to serve advertisements with respect to products or
services which are competitive to those offered by CarsDirect.
16. AUTOWEB CONSUMER BENEFITS
Subject to applicable laws, Autoweb, at its expense, may offer automotive
specials and promotional offers for Visitors to the Autoweb Site. Subject
to applicable laws, CarsDirect will use commercially reasonable efforts to
integrate such specials or promotional offers in the Autoweb Direct
offering where appropriate where such specials or offers do not conflict
with CarsDirect's product and service offerings. CarsDirect will not
disadvantage Visitors to the Autoweb Site who choose a Direct Transaction
as it pertains to specials, offers, incentives, and promotions that are
generally available on the CarsDirect Site. CarsDirect will collaborate
with Autoweb to create and implement special offers to Visitors to the
Autoweb Site that choose to effect a Direct Transaction.
17. TERM AND TERMINATION
17.1 Term - This Agreement shall commence on the Effective Date and shall
----
remain in effect for [*] from the Effective Date (the " Initial Term")
unless terminated sooner as provided below. The Parties may elect to
renew the Agreement for an additional [*] term on mutually agreeable
terms (the "Renewal Term"). The Initial Term and the Renewal Term, if
any, shall be referred to collectively herein as the "Term".
17.2 Termination for Breach - Notwithstanding anything to the contrary
----------------------
stated herein, either of CarsDirect and Autoweb shall have the right
to terminate this the other Party. A material breach of Autoweb
includes but is not limited to, the failure by Autoweb to achieve
either (i) [*] or more of the D2 Lead Minimum in two consecutive
quarters or (ii) [*] or more of the D2 Lead Minimum in any given
quarter. Each Party has the right to terminate at any time for
material breach of the other Party after thirty days from the
effective date of written notice specifying the alleged breach,
provided that the breaching Party fails to remedy said breach to the
non-breaching Party's reasonable satisfaction within thirty (30) days
of its receipt of said notice of breach. A material breach of
CarsDirect includes but is not limited to CarsDirect's designation of
Dark States such that over two consecutive quarters CarsDirect
declines to accept [*] or more of Autoweb's Total Lead Allocation. The
Total Lead Allocation shall be defined as the collection of state
allocations associated with Purchase Requests submitted to Autoweb
during the quarter prior to said two consecutive quarters. A material
breach of either party includes but is not limited a breach of the
Exclusivity and Noncompetition provisions of section 1 of this
Agreement.
17.3 Termination on Business Discontinuation or Bankruptcy. Either Party
-----------------------------------------------------
shall have the right to terminate this Agreement immediately upon
notice to the other Party if at any time the other Party discontinues
business or is adjudicated as bankrupt, files a voluntary, or is the
subject of an involuntary petition in bankruptcy or reorganization.
17.4 Effect of Termination - In the event of expiration or termination of
---------------------
this Agreement, each Party shall use its best efforts to return any
property provided by the other Party for the
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AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
purposes of this Agreement, and particularly Confidential
Information (as defined below), to the other Party. All amounts owing
under this Agreement for services rendered prior to termination shall
--------
become immediately due and payable. Upon termination, all rights of
CarsDirect to use Autoweb's trademarks shall immediately cease and all
rights of Autoweb to use CarsDirect's trademarks licensed content or
technology shall immediately cease.
18. CONFIDENTIALITY
18.1 The Parties agree and acknowledge that, as a result of negotiating,
entering into and performing this Agreement each will have contact
with the other's information of substantial value which is not
generally known in the trade and which gives each Party an advantage
over its competitors who do not know or use such information,
including, but not limited to sales and customer information and
business and financial information, techniques, processes, inventions,
and developments relating to the business, products, practices or
techniques of the Parties (hereinafter referred to as "Confidential
Information"). The Parties hereto shall at all times, regard and
preserve as confidential such Confidential Information obtained by the
other from whatever source, whether oral or written, and regardless of
whether same is labeled "confidential," and will not, during the
period of this Agreement or thereafter, publish or disclose any part
of such Confidential Information in any manner, or use the same except
on behalf of the other Party, without the prior written consent of the
other Party. Provided further it shall not be a breach of this
Agreement if this Agreement is filed or its terms are disclosed as
required in connection with a registration statement or report filed
with the Securities and Exchange Commission pursuant to the Securities
Act of 1933, as amended or the Securities Exchange Act of 1934, as
amended and the regulations promulgated thereunder, as applicable,
provided that the Party making such filing or disclosures consults
with the other Party prior to any such filing or disclosure.
18.2 Each Party hereby agrees that all notes, data, sketches, drawings and
other documents and records, and all material and physical items of
any kind, including reproductions and copies thereof, which relate in
any way to the business, products, practices or techniques of the
other Party, or contain Confidential Information made by the other
Party or that come into the possession of either such Party from or on
behalf of the other Party by reason of this Agreement, shall remain
the property of the other Party and shall promptly be surrendered to
the other Party at the expiration or termination of this Agreement.
18.3 The Parties agree they will not disclose to the other, or induce the
other to use, any invention or confidential information belonging to
any third Party, if such disclosure or use violates Intellectual
Property Rights of, or confidentiality obligations between the Party
disclosing or inducing, and such third Party.
18.4 A Party's obligations under this Paragraph shall not apply to any
particular portion of the Confidential Information when that Party can
document that: (i) the portion was in the public domain at the time
of communication thereof to the other; (ii) the portion was developed
by employees or agents of each Party independently of and without
reference to any Confidential Information or other information that
the other Party has disclosed in confidence to any third Party; (iii)
the portion was communicated to the Parties by a third Party free of
any obligation of confidence; or (iv) disclosure of the portion is
required by law, provided that the disclosing Party gives the other
Party prompt notice of the request
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AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
for disclosure, cooperates with the other Party in obtaining a
protective order or other remedy, and discloses only that portion of
the Confidential Information which it is legally compelled to
disclose.
19. PRIVACY OF CONSUMER DATA
Privacy. Each Party represents and warrants that it has effective privacy
-------
policies and procedures in place for the protection of consumers. Each
Party further represents and warrants that it will comply with all
applicable privacy laws. Further privacy considerations are discussed in
Exhibit C.
20. MUTUAL PERFORMANCE STANDARDS
Both CarsDirect and Autoweb will provide an acceptable 24x7 technical
support plan with minimum bandwidth, and performance standards to be
mutually agreed upon.
21. NOTICES
Any notices to be given hereunder shall be given in writing via facsimile
or by registered or certified mail, postage prepaid with return receipt
requested. Mailed notices shall be addressed at the addresses appearing
below, but each Party may change its address by written notice to the other
Party in accordance with this Paragraph. Notices shall be deemed effective
as of actual receipt.
To Autoweb.com: Autoweb.com, Inc.
3270 Jay Street
Santa Clara, CA 95054
Attn: Dean A. DeBiase
With a copy to: General Counsel
To CarsDirect.com: CarsDirect.com, Inc.
10567 Jefferson Blvd.
Culver City, CA 90232
Attn: Robert N. Brisco
With a copy to: General Counsel
22. NO WAIVER OF RIGHTS
All waivers hereunder must be made in writing. Failure by either Party
hereto at any time to require the other Party's performance of any
obligation under this Agreement shall not affect the right subsequently to
require performance of that obligation. The waiver, delay or failure of
either Party to exercise any right provided for herein or any remedy for
any default or breach of this Agreement shall not be deemed a waiver of any
other or subsequent right or remedy hereunder.
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AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
23. REPRESENTATIONS AND WARRANTIES
23.1 General. Each Party represents and warrants to the other Party that:
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(i) such Party has the full corporate right, power and authority to
enter into this Agreement and to perform the acts required of it
hereunder; (ii) the execution of this Agreement by such Party, and the
performance by such Party of its obligations and duties hereunder, do
not and shall not violate any agreement to which such Party is a Party
or by which it is otherwise bound; (iii) when executed and delivered
this Agreement is enforceable against such Party in accordance with
its terms; and (iv) such Party acknowledges that the other Party makes
no representations, warranties or agreements, related to the subject
matter hereof that are not expressly provided for in this Agreement.
23.2 Intellectual Property Rights. Each Party further represents and
----------------------------
warrants that to the best of its knowledge, it owns, or has the right
to use under valid and enforceable agreements, all Intellectual
Property Rights reasonably necessary and related to the operation of
its respective Site(s). The operation of each Party's respective
Site(s) as presently conducted or proposed to be conducted does not,
to the Parties' knowledge, infringe or violate any material
Intellectual Property Rights of any other person. Each Party
represents that other than Trilogy Software, Inc., et al. v.
CarsDirect.com, Inc., et.al. pending in the United States District
Court for the Western District of Texas, it has not received any
charge, complaint, claim, demand or notice alleging any such
infringement or violation. To each Party's best knowledge, no other
Person has any right to or interest in any inventions, improvement,
discoveries or other confidential information used by such Party that
relate to the operation of that Party's Site(s), except for licenses
of technologies.
23.3 Geographic Adjustments. Each Party shall notify the other Party of any
-----------------------
enforcement action, administrative order, inquiry or examination
against it by any governmental authority relative to its services
performed under this Agreement.
23.4 Performance. Each Party represents and warrants that the services it
-----------
may provide under this Agreement shall be performed in a professional
manner and will conform in all material respects to the standards set
forth in this Agreement.
23.5 WARRANTY DISCLAIMERS. EXCEPT AS OTHERWISE SET FORTH IN THIS
AGREEMENT, THE PARTIES' RESPECTIVE SITE(S), SERVICES, PAGES, AND THE
CO-BRANDED PAGES ARE PROVIDED "AS IS" AND THE INFORMATION CONTAINED
THEREIN IS NOT WARRANTED TO BE ERROR FREE. EACH PARTY DISCLAIMS ALL
WARRANTIES, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO,
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE, AND IMPLIED WARRANTIES ARISING FROM THE COURSE OF DEALING OR
COURSE OF PERFORMANCE WITH RESPECT TO THE PARTIES SITE(S), SERVICES,
PAGES AND THE CO-BRANDED PAGES.
23.6 LIMITATION OF LIABILITY. EXCEPT AS OTHERWISE PROVIDED, UNDER NO
CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR
INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES
(EVEN IF THAT PARTY HAS BEEN ADVISED OF THE
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AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
POSSIBILITY OF SUCH DAMAGES), ARISING FROM BREACH OF THE AGREEMENT,
THE SALE OF SERVICES, THE USE OR INABILITY TO USE ANY SERVICE, SITES,
THE JUMP PAGES, OR ARISING FROM ANY OTHER PROVISION OF THIS AGREEMENT,
SUCH AS, BUT NOT LIMITED TO, LOSS OF REVENUE OR ANTICIPATED PROFITS OR
LOST BUSINESS (COLLECTIVELY, "DISCLAIMED DAMAGES"); PROVIDED THAT EACH
PARTY SHALL REMAIN LIABLE TO THE OTHER PARTY TO THE EXTENT ANY
DISCLAIMED DAMAGES ARE CLAIMED BY A THIRD PARTY AND ARE SUBJECT TO
INDEMNIFICATION HEREIN. EXCEPT AS PROVIDED HeREIN, (I) LIABILITY
ARISING UNDER THIS AGREEMENT SHALL BE LIMITED TO DIRECT, OBJECTIVELY
MEASURABLE DAMAGES, AND EXCEPT WITH RESPECT TO SECTION EIGHTEEN HEREIN
(II) THE MAXIMUM LIABILITY OF ONE PARTY TO THE OTHER PARTY FOR ANY
CLAIMS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL NOT EXCEED ONE
MILLION DOLLARS ($1,000,000).
24. INDEMNIFICATION
24.1 Indemnity. Each Party shall defend, indemnify, save and hold harmless
---------
the other Party and the officers, directors, agents, affiliates,
distributors, franchisees and employees of the other Party from any
and all third Party claims, demands, liabilities, costs of expenses,
including reasonable attorneys' fees ("Liabilities"), resulting from
(i) the indemnifying Party's material breach of any duty,
representation, or warranty under this Agreement or (ii) the failure
by either Party to possess or maintain any material approval, consent,
license, permit, certificate or other right and permission now or
hereafter required to provide its services to consumers under this
Agreement.
24.2 Claims. If a Party entitled to indemnification hereunder (the
-------
"Indemnified Party") becomes aware of any matter it believes is
indemnifiable hereunder involving any claim, action, suit,
investigation, arbitration or other proceeding against the Indemnified
Party by any third Party (each an "Action"); the Indemnified Party
shall give the other Party (the "Indemnifying Party") prompt written
notice of such Action. Such notice shall (i) provide the basis on
which indemnification is being asserted and (ii) be accompanied by
copies of all relevant pleadings, demands, and other papers related to
the Action and in the possession of the Indemnified Party. The
Indemnifying Party shall have a period of ten (10) days after delivery
of such notice to respond. If the Indemnifying Party elects to defend
the Action or does not respond within the requisite ten (10) day
period, the Indemnifying Party shall be obligated to defend the
Action, at its own expense, and by counsel reasonably satisfactory to
the Indemnified Party. The Indemnified Party shall cooperate, at the
expense of the Indemnifying Party, with the Indemnifying Party and its
counsel in the defense and the Indemnified Party shall have the right
to participate fully, at its own expense, in the defense of such
Action. If the Indemnifying Party responds within the required ten
(10) day period and elects not to defend such Action, the Indemnified
Party shall be free, without prejudice to any of the Indemnified
Party's rights hereunder, to compromise or defend (and control the
defense of) such Action at the
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AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
Indemnifying Party's expense. In such case, the Indemnifying Party
shall cooperate, at its own expense, with the Indemnified Party and
its counsel in the defense against such Action and the Indemnifying
Party shall have the right to participate fully, at its own expense,
in the defense of such Action. Any compromise or settlement of an
Action shall require the prior written consent of both Parties
hereunder, such consent not to be unreasonably withheld or delayed.
25. ASSIGNMENT
Neither Party shall assign or attempt to assign any of its rights or
obligations hereunder without the prior written consent of the other Party,
which shall not be unreasonably withheld. Without such consent, any
attempted assignment will be void.
26. AMENDMENT AND MODIFICATION
No amendment or modification of this Agreement shall be binding unless
executed in writing by both Parties.
27. SURVIVAL
Any terms of this Agreement, which by their nature extend beyond its
termination, shall remain in full force and effect until fulfilled and
apply to permitted successors and assignees.
28. CHANGE OF CONTROL OF AUTOWEB
Autoweb shall deliver one-half of the CarsDirect Shares, as adjusted for
forward and reverse stock splits to CarsDirect at no cost to CarsDirect if
a Change of Control of Autoweb involving a CarsDirect Competitor occurs
during the twelve-month period following the Effective Date. Further, in
the event of such a Change of Control, neither CarsDirect nor Autoweb shall
be bound by the exclusivity restrictions contained in Paragraph 1 of this
Agreement. In the event of such a Change of Control of Autoweb, this
Agreement will otherwise continue in full force and effect, including but
not limited to the Parties' respective obligations to promote each other
with similar prominence to other competitive offerings that may be added to
each other's sites.
29. SEVERABILITY
If any paragraph, sentence, clause, word or combination thereof in this
Agreement is judicially or administratively interpreted or construed as
being in violation of any such provision of any jurisdiction, such
paragraph, sentence, word, clause or combination thereof shall be
inoperative in each such jurisdiction and the remainder of this Agreement
shall remain binding upon the Parties hereto in each such jurisdiction and
the Agreement as a whole shall be unaffected elsewhere.
30. HEADINGS FOR CONVENIENCE
Paragraph headings herein are for the convenience of the Parties only, and
are not be given any substantive meaning in the interpretation of this
Agreement.
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AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
31. LAW TO GOVERN
The validity, construction and enforceability of this Agreement shall be
governed in all respects by the internal laws of the State of California
and the United States of America. If either Party institutes any lawsuit
to enforce its rights hereunder, the prevailing Party in any such suit, as
determined by the court, shall be entitled to recover from the other its
costs, including a reasonable attorney's fee and the costs of any
prevailing appeals therefrom.
32. DISPUTE RESOLUTION
Any dispute, controversy, claim or disagreement between the parties hereto
arising from, relating to or in connection herewith, or the relationships
of the Parties, excluding any dispute, controversy, claim, disagreement or
document related to the ownership or right to use any Intellectual Property
Rights, but including questions regarding the interpretation, meaning or
performance of this Agreement and including non-Intellectual Property
Rights claims based on contract, tort, common law, equity statute,
regulation, order or otherwise ("Dispute") shall be resolved in accord with
Exhibit E.
33. TRADEMARKS
33.1 Trademark License. Each Party shall be entitled to use the trade
-----------------
names, trademarks and service marks of the other Party for which the
other Party holds all rights necessary for use in connection with
this Agreement (the "Marks"); provided that a Party: (i) shall not
---------
create a unitary composite mark involving a Mark of the other Party
without the prior written approval of such other Party; or (ii) shall
display symbols and notices clearly and sufficiently indicating the
trademark status and ownership of the other Party's Marks in
accordance with applicable trademark law and practice.
33.2 Ownership of Trademarks. Each Party acknowledges the ownership right
-----------------------
of the other Party in the Marks of such other Party and agrees that
all use of the other Party's Marks shall inure to the benefit, and be
on behalf, of the other Party. Each Party acknowledges that is
utilization of the other Party's Marks shall not create in it, nor
shall it represent it has, any right, title, or interest in or to such
Marks other than the licenses expressly granted herein. Each Party
agrees not to do anything contesting or impairing the trademark rights
of the other Party.
33.3 Quality Standards. Each Party agrees that the nature and quality of
-------------------
its products and services supplied in connection with the other
Party's Marks shall conform to quality standards set by the other
Party. Each Party agrees to supply the other Party, upon request,
with a reasonable number of samples of any Materials publicly
disseminated by such Party which utilize the other Party's Marks.
Each Party shall comply with all applicable laws, regulations, and
customs and obtain any required government approvals pertaining to use
of the other Party's marks.
33.4 Infringement Proceedings. Each Party agrees to promptly notify the
-------------------------
other Party of any unauthorized use of the other Party's Marks of
which it has actual knowledge. Each Party shall have the sole right
and discretion to bring proceedings alleging infringement of its Marks
or unfair competition related thereto; provided, however, that each
Party agrees to provide the other Party with its reasonable
cooperation and assistance with respect to any such infringement
proceedings.
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AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
34. PROVISION OF PERSONNEL AND MATERIALS
There are no third Party beneficiaries of this Agreement. Each Party shall
be financially responsible for the personnel, equipment and materials
needed to perform its obligations hereunder.
35. PUBLICITY
The Parties will jointly prepare and issue mutually agreed upon press
releases concerning their relationship, the existence of this Agreement and
the terms hereof. The press release(s) shall include but not be limited to
the following points:
. Autoweb will place a direct option on its site to allow consumers to visit
CarsDirect to configure and purchase a vehicle. CarsDirect is the Direct
infrastructure partner for Autoweb, jointly offering a direct sale option
to Autoweb's consumers.
. CarsDirect and Autos.com will place exclusive links on their sites to
Autoweb.com
. Visitors to the CarsDirect site will also have an option to link to
Autoweb.com to list their used cars for sale.
. Autoweb and CarsDirect agree to explore ways in which Autoweb could be a
premier infrastructure partner for CarsDirect jointly building out
Autos.com and marketing it into the automotive industry.
Otherwise, no public statements concerning the existence or terms of this
Agreement shall be made or released by a party to any medium except with
the prior approval of the other party or as required by law.
36. FORCE MAJEURE
Except as otherwise provided herein, each Party shall be excused for any
defaults or delays in the performance of its obligations hereunder if and
to the extent such default or delay is caused, directly or indirectly, by
fire, flood, earthquake, elements of nature or acts of God, acts of war,
terrorism, riots, civil disorders, rebellions or revolutions in the United
States, strikes, lockouts, or labor difficulties, or any other act clearly
beyond the reasonable control of such Party. In such event, the affected
Party will be excused from any further performance or observance of the
obligation(s) so affected for as long as such event continues; provided
that such Party gives the other Party prompt notice of such force majeure
event and of the anticipated delay, and the affected Party is diligent in
attempting to remove or cure such cause and to mitigate the delay.
Performance shall be excused only for the duration of the force majeure
event.
37. COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall be
deemed an original and all of which together shall constitute one
instrument.
38. SCOPE
This Agreement is intended to apply only to the United States of America
and shall not apply in or to any foreign jurisdictions or countries.
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AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
39. WEBSITE CONTROL
The Parties shall bear the risks and liabilities associated with errors and
omissions arising from their respective websites.
40. ENTIRE AGREEMENT
This Agreement, including each Exhibit attached hereto, and the investment
agreement referenced in Paragraphs 6 and 7, constitutes the complete and
exclusive agreement between the Parties and supersedes all prior
representations, understanding, and communications, oral and written,
between the Parties relating to the subject matter thereof.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
day and year first above written.
CARSDIRECT.COM, INC. AUTOWEB.COM, INC.
By: __________________________ By: __________________________
Robert N. Brisco Dean A. DeBiase
Title: Chief Executive Officer Title: Chief Executive Officer
Date: March 16, 2000 Date: March 16, 2000
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AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
EXHIBIT A
SEE ATTACHED DOCUMENT
[*]
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AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
EXHIBIT B
DEFINITIONS
The following definitions shall apply to this Agreement:
1. "Affiliate(s)" means any Person that, directly or indirectly, through one
or more intermediaries, (a) owns or controls another Person, (b) is owned
or controlled by another Person, or (c) is under common control or
ownership with another Person. As used herein, "control" means the power to
direct the management of affairs of a Person, and "ownership" means the
direct or indirect beneficial ownership of more than 50% of the equity
securities of a Person, or in the case of a Person that is not a
corporation, more than 50% of the voting and/or equity interest.
2. "Automobile" means any new motor vehicle designed for use on public
roadways, including but not limited to standard passenger cars, sport
utility vehicles, vans and minivans and light trucks
3. "Automobile Purchase" means (i) a purchase or lease of an Automobile by an
Automobile Purchaser; (ii) for which CarsDirect has received and reported
as revenue the purchase or lease price therefrom. Provided further, an
Automobile Purchase shall be deemed to be consummated upon delivery of an
Automobile to the Automobile Purchaser who is purchasing or leasing such
Automobile and the confirmation of such delivery (and acceptance thereof)
by CarsDirect in accordance with its standard practices.
4. "Automobile Purchase Marketing Fees" means the "Price Per Car Sold" set
forth on Exhibit A.
5. "Automobile Purchaser" means a D1 or D2 Lead that completes an Automobile
Purchase with CarsDirect.
6. "Auto Response Email" shall mean the email sent by CarsDirect to D1 Leads
(the content of which shall be determined by CarsDirect but branding of
which will be mutually agreed by the Parties per Paragraph 3.1) that allows
such D1 Leads to access the Co-Branded Site.
7. "Autos Site" means the web site owned by CarsDirect located at the URL
http://www.autos.com.
--------------------
8. "Autoweb Competitor" means any Person principally engaged in the Referral
Business Model.
9. "Autoweb Configurator" means the data, tools and logic designed and
produced by Autoweb and its division, Automotive Information Center, which
allows a consumer to dynamically and correctly specify all options and
packages for a specific vehicle (year, make, model, trim). Such tool may
include pricing (MSRP, Invoice and other) associated with specific option
and package selections.
10. "Autoweb Jump Page(s)" means the page(s) to be designed and produced by
Autoweb and CarsDirect and hosted by Autoweb or CarsDirect to which Leads
will link until Level 2 Phase Two and that shall also be linked to the
CarsDirect Site.
11. "Autoweb Site" means the consumer automotive Internet site located at the
URL http:// www.autoweb.com.
---------------
20
<PAGE>
AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
12. "CarsDirect Competitor" shall mean [*].
13. "CarsDirect Configurator" means the data, tools and logic designed and
produced by CarsDirect which allows a consumer to dynamically and correctly
specify all options and packages for a specific vehicle (year, make, model,
trim). Such tool may include pricing (MSRP, Invoice and CarsDirect)
associated with specific option and package selections.
14. "CarsDirect Jump Page(s)" means the page(s) to be designed and produced by
CarsDirect and Autoweb and hosted by CarsDirect or Autoweb to which
Referrals will link and that shall also be linked to the Autoweb Site.
15. "CarsDirect Prohibited Transaction" means [*].
16. "CarsDirect Purchase Request" means (i) a request under the Direct
Transaction Business Model to purchase a specified Automobile submitted at
the Co-Branded Site by a Visitor to the Autoweb Site who arrives at the Co-
branded Site via a link from the Autoweb Site; (ii) for which all mandatory
fields have been completed, including but not limited to, name, address,
phone number and valid e-mail address; (iii) for which CarsDirect has not
received within the previous thirty (30) day period, a request for a
similar Automobile from a person identified by the same name and/or e-mail
address; and (iv) which is accompanied by the required Purchase Request
deposit.
17. "CarsDirect Site" means the consumer automotive Internet buying service
site located as www.carsdirect.com.
------------------
18. "Change of Control" means the transfer of Control from the Person or
Persons who hold such Control on the Effective Date.
19. "Control" means possessing, directly or indirectly, the power to direct or
cause the direction of the management and policies of any entity, whether
through ownership of voting securities, by contract or otherwise. For
purposes of the preceding sentence, "ownership" means the direct or
indirect beneficial ownership of more than 50% of the equity securities of
a Person, or in the case of a Person that is not a corporation, more than
50% of the voting and/or equity interest.
20. "Co-Branded Site" means a version of the CarsDirect Site that is branded
with CarsDirect and Autoweb logos and trademarks, and the Autoweb frame
(which is currently in development) when technically feasible and
commercially reasonable The Co-Branded Site shall consist either of a set
of web pages that are separate and distinct from those that otherwise
constitute the remainder of the CarsDirect Site or, at the election of
CarsDirect, shall be a set of web pages that are dynamically created for
presentation to visitors to the Co-Branded Site in a manner that is
consistent with (I) this definition, and (II) the other provisions of this
Agreement that describe the content of the web pages that are to constitute
the Co-Branded Site.
21
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
21. "D1 Lead" means a Visitor to the Autoweb Site that (i) submits to Autoweb a
Purchase Request, (ii) is referred to the Autoweb Jump Page and (iii)
receives the Auto Response Email from CarsDirect; and (iv) is uniquely sold
to CarsDirect.
22. "D1 Lead Fee" shall have the meaning set forth on Exhibit A.
23. "D1 Lead Maximum" shall have the meaning set forth on Exhibit A
24. "D2 Lead" means a Visitor to the Autoweb Site that chooses the Direct
Transaction Business Model and completes the Direct Flow as defined in
Exhibit D.
25. "D2 Lead Fee" shall have the meaning set forth on Exhibit A.
26. "D2 Lead Minimum" shall have the meaning set forth on Exhibit A.
27. "Dark State(s)" means those U.S. States from where CarsDirect declines to
accept D1 or D2 Leads, as per the Lead Criteria on Exhibit A.
28. "Direct Transaction" means the pursuit by a consumer of an Automobile
Purchase by way of the Direct Transaction Business Model.
29. "Direct Transaction Business Model" means the method of doing business for
an Automobile Purchase over the Internet in which a consumer configures a
new Automobile, receives an up front selling price (as distinct from "MSRP"
or "Invoice Price") for the configured vehicle and facilitates the
transaction in some manner. In general, this includes models which are
similar to those employed by [*].
30. "Direct Transaction Placement" shall mean the prominently displayed fixed
placement pages on the Autoweb Site that shall offer Visitors to the
Autoweb Site the ability to initiate a Direct Transaction. The Parties
shall collaborate on the design, layout and posting of the Direct
Transaction Placement.
31. "Dispute" has the meaning given to it in Paragraph 31.
32. "Excluded Party" means [*].
33. "Intellectual Property Rights" means any patents, inventions, invention
disclosures, Marks (as defined hereinafter), material trade secrets, know-
how, formulae and processes, software programs (except off-the-shelf
commercial programs licensed from third Parties), proprietary data and
databases, copyrights and all other similar items of intellectual property,
whether registered or unregistered, including any rights created by use
thereof. "Marks" shall mean all right, title and interest in and to any
United States or foreign trademarks, service marks and trade names,
including any registration or application for registration of any
trademarks and service marks in the United States Patent and Trademark
Office or the equivalent thereof in any state of the United States or in
any foreign country, as well as any unregistered marks, and any trade dress
(including logos, designs, company names, business names, fictitious names
and other business identifiers) in the United States or any foreign
country.
34. "Launch" means activation of the Co-Branded Site, and the Direct
Transaction Placement for purposes other than testing for availability to
the general public.
22
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
35. "Leads" means individually or collectively the D1 Leads and the D2 Leads.
36. "Lead Criteria" means those parameters for Leads described on Exhibit A.
37. "Lead Fees" means individually or collectively the D1 Lead Fees and the D2
Lead Fees.
38. "Person" means any natural person, corporation, partnership, limited
liability company or other entity.
23
<PAGE>
AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
39. "Purchase Request" means the process and information in which a consumer
provides basic information on the features and attributes of the Automobile
he desires, has the opportunity to research further information on the
desired Automobile, and provides his personal information (including
Automobile make, Automobile model, Automobile trim, Automobile exterior and
exterior color, Automobile engine, Automobile options, name, address, email
address, phone number, purchase method information, expected Automobile
Purchase time, trade in status, and any other information generally
collected by Autoweb from Visitors to the Autoweb Site who submit Purchase
Requests) for a third party (such as a dealer, manufacturer or other) to
contact the consumer to negotiate the consumer's Automobile Purchase.
Purchase Requests are used only in the Referral Business Model.
40. "Referral Business Model" and "Referral Business" means a company that is
(i) the principal in and (ii) is principally engaged in the referral of
Purchase Requests for new Automobiles to new car franchised Automobile
dealers and Automobile manufacturers and provided that such Referral
Business has a minimum of 400 Automobile dealers (with the dealerships and
franchises of each "consolidator group", dealer group and mega-dealer
counted together as one Automobile dealer); provided, however, the Persons
or classes of Persons listed on Exhibit H shall not be deemed a Referral
Business.
41. "Tracked Links" means a link from the CarsDirect Site or Autos.com to the
Autoweb Site.
42. "Undesirable Leads" has the meaning given to it in paragraph 2.1
43. "Visitor" means a consumer who visits a website.
24
<PAGE>
AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
EXHIBIT C
[*]
25
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
###
EXHIBIT D
[*]
26
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
EXHIBIT E
[*]
27
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
[*]
28
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
[*]
29
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
EXHIBIT F
[*]
30
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
EXHIBIT G
[*]
31
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
AUTOWEB AND CARSDIRECT STRATEGIC AGREEMENT
EXHIBIT H
---------
[*]
32
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
Confidential treatment has been requested for portions of this exhibit. The
copy filed herewith omits the information subject to the confidentiality
request. Omissions are designated as [*]. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.
Exhibit 10.34
AGREEMENT
This Agreement, dated as of March 26, 2000 (the "Effective Date"), is made
-- --------------
by and between Lycos, Inc., a Delaware corporation with a principal place of
business at 400-2 Totten Pond Road, Waltham, MA 02451 ("Lycos") and Autoweb.com,
-----
Inc., a Delaware corporation with a principal place of business at 3270 Jay
Street, Santa Clara, California 95054 ("Autoweb").
-------
Recitals
--------
WHEREAS Lycos is the owner or licensee of certain Web services
(collectively, the "Lycos Services"), which are accessible through the URLs
--------------
www.lycos.com (the "Lycos Site"), www.hotbot.com, www.tripod.com,
- ------------- ----------
www.angelfire.com, www.whowhere.com, www.mailcity.com, www.quote.com,
www.sonique.com, and www.gamesville.com (all Lycos-owned sites, including other
properties not listed above acquired by Lycos after the Effective Date shall be
referred to collectively as the "Lycos Network", provided, however, that, (i) to
-------------
the extent that following the Effective Date, Lycos acquires any properties
which, prior to such acquisition, have exclusive contractual relationships with
other suppliers of content, tools, services, or information substantially
similar to the Content (as defined below), such properties shall not be included
in the definition of the Lycos Network for purposes of this Agreement except as
thereafter mutually agreed, and (ii) to the extent that following the Effective
Date, Lycos acquires any properties which, prior to such acquisition, have non-
exclusive contractual relationships with other suppliers of content, tools,
services, or information substantially similar to the Content (as defined
below), such properties shall be included in the definition of the Lycos Network
on a non-exclusive basis (i.e., the provisions of Section 2.1 below shall not
extend or apply with respect to such properties, except as thereafter mutually
agreed); and
WHEREAS Autoweb is the operator of a Web site accessible through the URL
www.autoweb.com (the "Autoweb Site") on which Autoweb supplies certain
------------
automotive content for consumers (i.e. prospective car purchasers), car buying
services, and related tools, information, and technology (collectively, the
"Content"); and
-------
WHEREAS Lycos and Autoweb wish to continue and to enhance their existing
relationship through which a co-branded version of the Autoweb Site shall become
a destination for Internet users and the premier source of such Content for
users of the Lycos Network (the "Co-branded Site") in the United States; and
---------------
WHEREAS Lycos and Autoweb desire that, as part of their relationship, Lycos
will integrate links throughout the Lycos Network to the Co-branded Site; and
WHEREAS Lycos and Autoweb further desire to strengthen their relationship
to market and promote certain of the Content in co-branded form (the "Co-branded
Content"), the Co-branded Site, and the Lycos Network to third parties; and
WHEREAS, Lycos and Autoweb wish their previous Agreement to be superseded
by this Agreement;
WHEREAS Lycos and Autoweb further desire that, as part of their
relationship, Lycos shall have an ownership interest in Autoweb;
Lycos Confidential
1
<PAGE>
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Lycos and Autoweb hereby agree as
follows:
Terms
-----
1. Co-branded Site.
---------------
1.1 Serving and Hosting. Autoweb will operate and serve the Co-branded
-------------------
Site in a manner consistent with the then-current quality standards of Lycos and
which meets response performance standards for Lycos users at least as good as
those of the Lycos Site and in accordance with the specifications set forth in
Exhibit A to this Agreement. In addition, except as provided in this Agreement,
Autoweb will be responsible for system operation software costs, hardware costs,
and network costs, and shall integrate ad serving software designated by Lycos
at Lycos' request. Autoweb shall provide Lycos with a contact at Autoweb who
shall be available to assist Lycos twenty-four hours a day, seven days a week
regarding operation of the Co-branded Site. Autoweb will generate daily traffic
reports and provide Lycos with audited traffic reports on a monthly basis.
Except as specifically set forth in Section 1.4, Section 3, Section 6, and
Section 8, Autoweb shall not, without Lycos' prior approval; (i) sell or place
advertisements or sponsorships on any page of the Co-branded Site for any entity
or person; (ii) sell merchandise or other items on any page of the Co-branded
Site; (iii) place a link on the Co-branded Site to the Autoweb Site or any
other site; or (iv) host or conduct a game, promotion or sweepstakes on the Co-
branded Site. To the extent permitted by Autoweb's pre-existing contractual
relationships with third parties, Autoweb shall provide additional services,
functionality, and Content that are developed by or on behalf of Autoweb for the
Autoweb Site (or any successor to the Autoweb Site) at no additional cost so
that the Co-branded Site is maintained at a level substantially equal to the
Autoweb Site as it appears from time to time. The parties shall jointly review
the desirability of the addition of any such additional services, functionality
and/or Content on a quarterly basis, provided, however, that under no
circumstances shall Lycos be required to include on the Co-branded Site any
services, functionality, offerings, and/or Content (a) that feature, display,
or promote illegal, unlawful, pornographic, or obscene materials or activities,
tobacco, or alcohol, or (b) the advertising for or inclusion of which on the
Lycos Network, including the Co-branded Site, would contravene Lycos' pre-
existing contractual restrictions (collectively, "Prohibited Content"). Lycos
------------------
shall have the right to allow its subsidiaries, joint venture partners, and
licensees of the Lycos Services to link to the Co-branded Site.
1.2 Launch Date. Autoweb shall launch the Co-branded Site on or before
-----------
April 15, 2000 (the "Launch Date"). The parties shall work together to support
-----------
the Launch and shall provide each other with such reasonable assistance as
necessary to enable each to perform their respective obligations to achieve the
Launch.
1.3 Branding. The Co-branded Site will have the Lycos Network branding
--------
bar on each page and the Lycos Network "look and feel" surrounding the pages of
the Co-branded Site, which shall otherwise bear Autoweb's logo and branding in a
form and manner substantially as reflected on the Autoweb Site. The URL of the
Co-branded Site will be substantially similar to www.autoweb.lycos.com.
---------------------
1.4 Content.
-------
1.4.1 Content on the Co-branded Site. The Content on the Co-branded Site
------------------------------
shall include, at a minimum, (a) the Co-branded Content, which shall consist of
all of the Content on the Autoweb Site as it appears from time to time during
the Term, except for (i) any Prohibited Content, which shall not be
2
<PAGE>
included on the Co-branded Site in any case, and (ii) such Content as Lycos
reasonably and specifically identifies as objectionable or which is otherwise
excluded pursuant to Section 6.1 hereof, (b) such Lycos tools and content as are
necessary to provide users with relevant search, chat, message board, and
instant messaging functionality to the extent mutually agreed upon by the
parties (collectively, "Lycos Community Content"), and (c) such other content as
-----------------------
the parties mutually agree upon from time to time. In the event that Lycos
reasonably identifies as objectionable Content which Autoweb has already
included on the Co-branded Site, the parties shall, as soon thereafter as
possible (and no later than three (3) business days thereafter), meet to address
Lycos' objections to such Content. In the event that, following such meeting,
Lycos elects to have such Content removed, Autoweb shall remove such Content as
soon as commercially reasonable, and in all events, within fifteen (15) days
following the meeting described in the preceding sentence. Lycos shall reimburse
Autoweb on a reasonable time and materials basis for the work required to be
performed under the preceding sentence.
1.4.2 Lycos Community Resources. In conjunction with Lycos' provision of
-------------------------
the Lycos Community Content, Lycos shall dedicate such resources as are
necessary to jointly prepare, offer, and support on the Co-branded Site the
Lycos Community Content. At Autoweb's election, and to the extent permitted by
Lycos' pre-existing contractual restrictions, Lycos shall also make the Lycos
Community Content available for use by users of the Autoweb Site on a royalty
free basis during the Term. All such offerings on the Autoweb Site shall bear
Lycos ingredient branding, and be subject to Lycos' rules, policies, and
conditions governing use of such offerings. Autoweb shall provide such
assistance as reasonably requested by Lycos in connection with such offerings.
1.4.3 Co-branded Network Content. During the Term, Autoweb shall provide
--------------------------
to Lycos such portions of the Co-branded Content as selected by Lycos which
Lycos may display throughout the Lycos Network (the "Co-branded Network
------------------
Content") and/or through wireless offerings ("Co-branded Wireless Content").
- -------
Autoweb shall deliver the Co-branded Network Content and the Co-branded Wireless
Content to Lycos in a format that is mutually acceptable to the parties. When
Lycos displays any such Co-branded Network Content on the Lycos Network, or the
Co-branded Wireless Content through wireless offerings, the placements shall be
subject to the parties' mutual agreement. During the first year of the Term,
the number of impressions displayed through wireless offerings shall not be
included for purposes of satisfying the Impressions Guarantee (set forth in
Section 2.2). Thereafter, the parties shall, in good faith, negotiate the
manner in which such impressions shall be counted towards the Impressions
Guarantee.
1.5 Premier Portal Partner. During the Term, Autoweb shall not enter
----------------------
into any agreement with any Lycos Competitor ("Lycos Competitor" shall refer to
----------------
those companies listed on Exhibit C) that provides for a co-branded offering of
substantially all of the Content offered on the Autoweb Site or otherwise
provides for a co-branded offering of all of the Co-branded Content to the
extent such content is supplied by Autoweb. This Section shall not be
interpreted so as to prohibit Autoweb from entering into substantially different
or other forms of commercial relationships with such companies.
2. Lycos Network Integration.
-------------------------
2.1 Exclusivity. Except as provided below, Autoweb shall be the
-----------
exclusive supplier of all automotive content for consumers (i.e., prospective
car purchasers), car buying services and related tools, information, and
technology (the "Exclusive Content") for the Lycos Auto Guide. The term "Lycos
Auto Guide" as used herein shall refer to the principal location anywhere on the
Lycos Network (except classifieds areas) featuring the aggregation of automotive
content for consumers (i.e., prospective car
3
<PAGE>
purchasers), car buying services and related tools, information, and technology
in whatever form such location appears from time to time during the Term.
Autoweb shall, through links to and from the Co-branded Site, supply all of the
Exclusive Content displayed to users via the Lycos Auto Guide, and Lycos shall
not, by link or otherwise, integrate substantially similar Exclusive Content of
any other automobile-related supplier within the Lycos Auto Guide except through
the Co-branded Site, except following the procedures provided in Section 2.1.1
below. Further, following the Effective Date, Lycos will not, during the Term,
enter into agreements for the promotion or display of advertisements on the
Lycos Auto Guide, in the Lycos Autos Directory in connection with relevant Auto
search queries on the Lycos Network, or in other areas of the Lycos Network
(except classified areas) targeted to the sales of automobiles for the
following: (i) Any entity listed on Exhibit E attached hereto, which may be
updated quarterly in Autoweb's reasonable exercise of its discretion through the
addition and deletion of similarly situated entities so long as the overall
number of entities listed thereon remains constant, or (ii) any other person
whose primary business is to supply consumers with automotive content ( i.e.,
in connection with sales of autos) or automotive buying tools or related
technology.
2.1.1 Quarterly Content Reviews. On a quarterly basis, Lycos and Autoweb
-------------------------
shall meet to review the Co-branded Content offering of the Lycos Auto Guide,
and shall identify any additional Co-branded Content that the parties mutually
desire to add to the Lycos Auto Guide. To the extent that Lycos seeks to
display additional Content on the Lycos Auto Guide that is not included by
Autoweb in the Co-branded Content, the parties shall confer about the inclusion
of such content at the next quarterly Content review. In the event that,
following such review, Autoweb elects not to provide the additional Content
identified by Lycos, Lycos shall thereafter have the right to obtain such
additional Content for inclusion in the Lycos Auto Guide by link to a site
hosted by Lycos or a third party.
2.1.2 Program Managers. Each party shall assign a program manager to
----------------
serve as the principal contact to the other with respect to the parties'
relationship and shall be available twenty-four hours per day, seven days per
week, as reasonably requested (the "Program Managers"). The Program Managers
shall work closely together to try to make the relationship reflected in the
Agreement successful, and shall, without limitation, monitor and/or oversee all
aspects of the relationship, receive and respond to requests for assistance and
approvals, and, on an ongoing basis, seek to identify and implement commercially
reasonable enhancements to the relationship.
2.2 Impressions. Appropriate representatives of Lycos and Autoweb shall
-----------
meet within fifteen (15) days following the Effective Date to mutually agree
upon a plan and schedule for the delivery, placement, and form of impressions to
be displayed across the Lycos Network (the "Impressions Plan"). The goal of the
----------------
Impressions Plan shall be to drive and direct users to the Co-branded Site as a
destination for on-line content, tools, and services relating to the purchase of
automobiles. The parties shall memorialize the Impressions Plan in writing and
attach it to this Agreement as Exhibit B2. Impression plan to be memorialized in
Exhibit B2 shall include but not be limited to the following data: i)
screenshots showing example placement of all advertising products (such as
buttons and banners and showcase boxes); ii) pixel sizes for all advertising
products; iii) a list of key words and search terms; and iv) a make-good plan
for impressions for advertising products not delivered within each semi-annual
period, excluding the first such period following the Launch Date, such make
good period to last for ninety days. The parties' meeting referenced in the
first sentence of this section shall include consideration of quarterly
objectives. If the parties cannot agree on the Impressions Plan, then, at a
minimum, Lycos shall display no fewer than 500 million impressions across the
Lycos Network each year of the Term substantially in the form and manner set
forth in Exhibit B1 attached hereto (the "Impressions Guarantee"); provided,
---------------------
however, that in the event that Lycos fails to deliver during any year of the
Term a number of impressions equal to or greater than the Impressions Guarantee,
then Lycos shall have an additional 90 days thereafter
4
<PAGE>
to meet the Impressions Guarantee for such year. Any impressions delivered by
Lycos during such make good period towards the satisfaction of the preceding
years' Impression Guarantee shall not be counted toward the following year's
Impressions Guarantee. In no event, during any year of the Term, including the
make good period, shall Lycos deliver fewer than the number of impressions set
forth in the Impressions Guarantee, unless agreed by both parties in writing.
The purpose of Lycos' delivery of the impressions to be supplied by Lycos
pursuant to Exhibit B1 or B2, as applicable, shall be to attempt to drive user
traffic to the Co-branded Site. All impressions shall bear links to the Co-
branded Site. Except as otherwise agreed by the parties, to the extent that
Lycos displays multiple impressions on any page, Lycos shall not count more than
two (2) such impressions per page, except that Lycos may count three (3)
impressions per page for up to fifteen percent (15%) maximum of the Impressions
Guarantee. In addition, each impression on a page counted towards the
Impressions Guarantee shall contain a different creative execution. As Lycos re-
designs pages and sites within the Lycos Network from time to time, Lycos may
make reasonable substitutions for such placement and types of impressions
delivered in connection with the Impressions Plan and/or the Impressions
Guarantee. Autoweb shall provide Lycos with any assistance requested by Lycos in
establishing the links between the Lycos Network and the Co-branded Site, and
with all artwork (subject to Lycos' approval) for all Impressions.
2.2.1 Incremental Positioning and Placement. The parties agree and
-------------------------------------
acknowledge that prominent and persistent promotion of the Co-branded Site by
Lycos is a material aspect of this Agreement. As such, Lycos shall promote the
Co-branded Site throughout the Lycos Network in a manner incremental to the
Impression Guarantee set forth in Section 2.2 above, and consistent with the
goal of maximizing the commercial benefits to both parties, including through
the placement of prominent and persistent auto links on all Lycos Network sites.
If the parties mutually determine that (i) user traffic to the Co-branded Site
is insufficient; or (ii) that revenue derived from the Co-branded Site is
insufficient; or (iii) the parties have not maximized the commercial benefits of
the relationship, then the parties will work together (subject to Section 2.1.1
of this Agreement) to increase such traffic and revenues.
2.3 Standard Terms and Conditions. The advertising products outlined in
-----------------------------
Exhibits B1 or B2 will be provided pursuant to the Terms and Conditions outlined
- -----------------
in attached Exhibit D, which Terms and Conditions are incorporated herein by
---------
reference. Throughout the Term, all advertising banners must meet the Lycos
specifications found at http://adreporting.lycos.com/specs.html, as they appear
---------------------------------------
from time to time.
3. Strategic Sales and Marketing.
-----------------------------
3.1 Advertising Products on Co-branded Site. Within fifteen (15) days
---------------------------------------
following the Effective Date and regularly thereafter under paragraph 3.3, the
parties shall meet to develop joint marketing materials for the sale of the
Advertising Products (as defined below) (the "Joint Marketing Materials"). The
parties may jointly and/or separately present the Joint Marketing Materials to
prospective customers. As between the parties, Lycos shall have final right to
accept or reject all advertising, sponsorships, and promotions offered on the
Co-branded Site ("Advertising Products"). All revenues derived from such sales
will be payable to Lycos for distribution pursuant to Section 4.
3.2 Introduction and Marketing of Lycos Network. Autoweb shall introduce
-------------------------------------------
the Co-branded Site and the Lycos Network in all (100%) of its sales efforts,
whether for sales of the Advertising Products or otherwise, during the Term.
5
<PAGE>
3.2.1 Introduction of Autoweb to Lycos Joint Ventures. Lycos shall
-----------------------------------------------
introduce the Co-branded Site and Autoweb to each of Lycos' joint ventures
requested by Autoweb, including without limitation Lycos' Canadian joint
venture.
3.3 Strategic Plan Meetings. Within fifteen (15) days following the
-----------------------
Effective Date, and thereafter on at least a monthly basis, appropriate
representatives from Lycos and Autoweb shall meet (i) to formulate joint
marketing and development strategies designed to promote the Co-branded Site and
revenue generating opportunities in connection therewith, including but not
limited to in connection with sales of the Advertising Products and mutually
agreed upon quarterly inventory commitments therewith, (ii) to review all sales
and marketing efforts to date, (iii) to review Direct Referrals and Direct
Referral Revenue (as defined in Section 5), and (iv) to discuss such other
matters as the parties mutually agree upon, including without limitation as
contemplated by Section 3.1.
3.4 Development for Specific Strategic Partner. To the extent that,
------------------------------------------
specifically as part of their joint marketing and development strategies, Lycos
and Autoweb agree to develop, for the Co-branded Site, additional Co-branded
Content, Lycos shall reimburse Autoweb for direct expenses associated therewith
on a reasonable time and materials basis. Autoweb shall license to Lycos such
additional content, tools, and services during the Term on a royalty-free basis,
and Autoweb shall have the right to offer such additional content, tools, and
services on the Autoweb Site.
4. Advertising Product Revenue Sharing. The cumulative annual Net
-----------------------------------
Advertising Revenue from all sales during the Term of Advertising Products will
be split as follows:
(a) First [*] in Gross Revenue:
Lycos: [*] of Net Advertising Revenue
Autoweb: [*] of Net Advertising Revenue
(b) From [*] to [*] in Gross Revenue:
Lycos: [*] of Net Advertising Revenue
Autoweb: [*] of Net Advertising Revenue
(c) From [*] to [*] in Gross Revenue:
Lycos: [*] of Net Advertising Revenue
Autoweb: [*] of Net Advertising Revenue
(d) Gross Revenue in excess of [*]
Lycos: [*] of Net Advertising Revenue
Autoweb: [*] of Net Advertising Revenue
6
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
"Gross Revenue" shall refer to all revenues actually received by Lycos from
-------------
sales of the Advertising Products. "Net Advertising Revenue" means Gross
------------------------
Revenue less Lycos' costs of serving and processing (which shall be deemed to be
a flat [*] of Gross Revenue). Payment will be made to Autoweb within forty (45)
days following the calendar quarter in which Lycos actually receives the
revenue.
5. Direct Referrals. Autoweb shall have the right to refer customers
----------------
to Lycos for placement of sales of advertising products elsewhere on the Lycos
Network (i.e., other than through the Co-branded Site), provided that Lycos
shall have no obligation to accept or complete any such sales ("Direct
Referrals"). To the extent such Direct Referrals result in sales of advertising
products and/or promotions placed on the Lycos Network other than on the Co-
branded Site, and Lycos receives gross revenues from such sales in amounts
greater than [*] per year ("Qualifying Direct Referrals"), the Direct
---------------------------
Referral Revenue shall be split as follows:
Lycos: [*] Net Direct Referral Revenue
Autoweb: [*] Net Direct Referral Revenue
"Net Direct Referral Revenue" shall mean gross revenues actually received by
---------------------------
Lycos from all Qualifying Direct Referrals, less Lycos' costs (which shall be
deemed to be a flat [*]% of such gross revenues). Lycos shall pay Autoweb its
share of Net Direct Referral Revenue forty-five days after the close of the
calendar quarter in which it is received.
6. Transactions on Co-branded Site.
-------------------------------
6.1 Permitted Transactions. Lycos and Autoweb shall mutually agree
----------------------
upon the types of transactions permitted to be performed on or through the Co-
branded Site("Permitted Transactions"). The Permitted Transactions shall
include, at a minimum (a) all forms of transactions offered on the Autoweb Site
as of the Effective Date, (b) such transactions as are currently offered on the
Autoweb Site in alternative forms as they may change from time to time on the
Autoweb Site, and (c) any new automotive buying models. Subsections (b) and (c)
shall be specifically subject to the prohibitions of Section 1.1 regarding
Prohibited Content, and shall also be subject to the procedures and prohibitions
concerning objectionable content set forth in Section 1.4.1. Notwithstanding
anything to the contrary in this Section the Co-branded Site shall not, directly
or indirectly, include offerings for the provision of [*] or [*] except as
mutually agreed by the parties. In the event that Lycos and Autoweb hereafter
during the Term mutually determine to include offerings for the provision of [*]
or [*], through operation of Section 6.5 or otherwise, the additional provisions
of this Section 6 shall be equally applicable to such offerings.
6.1.1 Sales. Autoweb shall be responsible for all aspects of sales
-----
generated from the Co-branded Site, including, without limitation, taking
orders, processing payments, shipping orders, ordering and stocking inventory,
processing returns, refunds and credits, insuring shipments (if customary in
Autoweb's shipment of product sold other than via the Web), etc. Lycos shall
take no part in, and have no responsibility or liability for, the actual sales
transactions.
6.2 Revenue From Transactions on Co-branded Site. The revenue generated
--------------------------------------------
from transactions conducted on or through the Co-branded Site shall be shared as
follows:
7
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
6.2.1 Years 1-3. During the first, second, and third Year of the Term,
Autoweb shall retain all revenues generated from transactions on, through, or
from the Co-branded Site, including without limitation transactions resulting
directly or indirectly in sales of automobiles regardless of the selling
channel, (collectively, "Transaction Revenue") up to [*] per Year (the
-------------------
"Threshold"). Following the generation of Transaction Revenue in excess of the
Threshold, Autoweb shall pay Lycos [*] for every Qualifying Lead originating
---------------
from the Lycos Network (a "Qualifying Lead" shall mean each user that completes
an on-line registration form (each, a "Purchase Request") on the Co-branded Site
----------------
and submits a deposit with a valid credit card account in connection with the
potential purchase of a product or service on or through the Co-branded Site).
To the extent that, following generation of Transaction Revenue in excess of the
Threshold, Autoweb generates Transaction Revenue through sales methods other
than through the supply of Qualifying Leads, Autoweb and Lycos shall share such
Transaction Revenue in a manner to be mutually agreed upon.
6.2.2 Year 4. During the fourth Year of the Term, Autoweb shall retain
------
all Transaction Revenue up to [*] (the "Year 4 Threshold"). Following the
generation of Transaction Revenue in excess of the Year 4 Threshold, Autoweb
shall pay Lycos [*] for every Qualifying Lead originating from the Lycos
Network. To the extent that, following generation of Transaction Revenue in
excess of the Year 4 Threshold, Autoweb generates Transaction Revenue through
sales methods other than through the supply of Qualifying Leads, Autoweb and
Lycos shall share such Transaction Revenue in a manner to be mutually agreed
upon.
6.3 Payment. The payments to Lycos described in Section 6.2 shall be
-------
referred to, collectively, as "Transaction Revenue Payments." Autoweb shall pay
to Lycos any Transaction Revenue Payments within forty-five (45) days following
the close of the quarter in which the Transaction Revenues were generated.
6.4 Reporting. Autoweb shall provide Lycos with weekly reports on a
---------
monthly basis regarding: (i) click-throughs to the Co-branded Site, and (ii) the
number of Purchase Requests completed and the number of Qualifying Leads. Lycos
shall provide to Autoweb at a minimum Lycos'standard daily reports on a weekly
basis regarding: (i) page views and (ii) click-throughs.
6.5 Three-Month Anniversary. Upon the three-month anniversary of the
-----------------------
Launch Date, or, at Lycos' discretion upon any earlier date, Lycos shall make an
election whether or not to integrate on the Co-branded Site offerings
substantially in the form offered by Autoweb on the Autoweb Site or as otherwise
agreed by the parties, and Lycos shall so inform Autoweb.
7. Lycos Network Integration Fees. Subject to the provisions of Section
------------------------------
20, Autoweb shall make guaranteed payments for the placements, integration,
exclusivity, and other services described herein in the amount of [*] per Year
of the Term, for a total amount of [*] in guaranteed payments (the "Guaranteed
----------
Payments"). Autoweb shall pay the Guaranteed Payments according to the following
- --------
schedule:
7.1 Year 1.
------
Within seven (7) business days of
the Effective Date: [*]
90 days following Effective Date: [*]
8
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
180 days following Effective Date: [*]
270 days following Effective Date: [*]
7.2 Year 2.
------
1/st/ Anniversary of Effective Date: [*]
90 days following 1/st/ Anniversary: [*]
180 days following 1/st/ Anniversary: [*]
270 days following 1/st/ Anniversary: [*]
7.3 Year 3.
------
2nd Anniversary of Effective Date: [*]
90 days following 2nd Anniversary: [*]
180 days following 2/nd/ Anniversary: [*]
270 days following 2/nd/ Anniversary: [*]
7.4 Year 4.
------
3rd Anniversary of Effective Date: [*]
90 days following 3/rd/ Anniversary: [*]
180 days following 3/rd/ Anniversary: [*]
270 days following 3/rd/ Anniversary: [*]
7A. Autoweb Securities and Lycos Investment. Within ten (10) days
---------------------------------------
following execution of this Agreement, Autoweb will issue and sell to Lycos a
number of shares of common stock (the "Securities") representing ten percent
(10%) of the outstanding shares of capital stock of Autoweb, as calculated on a
fully diluted basis outstanding on the Effective Date, for an aggregate purchase
price equal to the average market closing price per share of common stock of
Autoweb for the last thirty trading days prior to the Effective Date, multiplied
by the number of shares to be issued and sold hereunder (the "Lycos
Investment"). These terms and conditions of the Lycos Investment shall be
reflected in a Stock Purchase Agreement to be executed by both parties, but
which will provide that the Securities will be unregistered and not be saleable
for one year from date of issuance. However, Autoweb must take all necessary
steps so that the Securities are fully registered and saleable under the
conditions of this Agreement on the one year anniversary of the conveyance the
Securities. .After the expiration of such one year period and subject to
Autoweb's trading windows, Lycos may sell no more than fifteen per cent
9
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
(15)% of the Lycos Investment in any given quarter, and two per cent (2)% on any
given day; provided, however, that if Autoweb becomes sixty (60) or more days in
arrears on amounts owing to Lycos under section 7 of this Agreement, then the
volume restrictions of this sentence shall not apply. Autoweb's failure to
execute a Stock Purchase Agreement consistent with the terms of this Agreement,
or Autoweb's failure to convey the Securities pursuant to the Stock Purchase
Agreement shall each constitute incurable material breaches of this Agreement
for which Lycos shall have the right to terminate this Agreement immediately.
8. Page Views. The parties will take all necessary steps and actions,
----------
other than changing the URL of the Co-branded Site, in order to request the
Media Metrix and Nielsen/NetRatings organizations, and any additional Internet
ratings organizations identified by either party, to credit each party, on a
monthly basis, with at least 50% of all page views of the Co-branded Site.
8.1. Automobile Services. In the event that Lycos elects not to
-------------------
exercise its election as described in Section 6.5 by the Three Month Anniversary
of the Launch Date, then Lycos agrees that, notwithstanding any other provisions
of this Section 8 or elsewhere in this Agreement, (i) the top level page of the
Co-branded Site shall include links from Co-branded Content concerning
automobile services to pages served by Autoweb from the Autoweb Site provided
that such pages (i.e., the "Services Pages") do not provide offerings or
advertising of or for Prohibited Content. Nothing in this Agreement shall
restrict Autoweb's placement of links on the Services Pages to any other page of
the Autoweb Site. Autoweb shall receive page view credit for all page views of
the Autoweb Site.
9. Audit Rights. Each party shall maintain complete and accurate
------------
records with respect to the calculation of all payments due under this
Agreement. Each party shall have the right, at its expense (except as provided
below) to audit the other party's books and records for the purpose of verifying
payment amounts. Such audits shall be made not more than once per year, on not
less than ten (10) days written notice, during regular business hours, by
auditors reasonably acceptable to the party being audited. If the auditor's
figures reflect payment due under this Agreement other than that reported by the
party being audited, then the party being audited shall pay the amount owed (if
such amount is higher than reported), or the party conducting the audit shall
reimburse the difference (if such amount is lower than reported), as the case
may be. If the auditor's figures vary by more than 10% from the figures provided
by the party being audited, then the party being audited shall also pay the
reasonable cost of the audit.
10. No Click-Through Guarantee. Neither Lycos nor Autoweb represents,
--------------------------
promises, or commits that the parties will obtain or achieve via the Impressions
or otherwise any specific level of click-through by users to the Co-branded Site
("Click-Through"). The parties agree and acknowledge that there are many factors
-------------
that contribute to achievement of any particular Click-Through rate, and that
many such factors are not subject to the control of either or both parties.
Accordingly, the parties agree and acknowledge that achievement of any specific
Click-Through rate is not a material provision of this Agreement, nor a
requirement of the Agreement. Furthermore, the parties agree and acknowledge
that failure to achieve any specific Click-Through rate shall not constitute a
breach of the Agreement, and shall not serve as a basis, justification, or
excuse for Autoweb's failure or refusal to pay any or part of the Guaranteed
Fees or any other fees hereunder.
11. User Information. Autoweb shall manage the user information database
----------------
on the Co-branded Site, which shall include, subject to each parties' privacy
policies as they appear from time to time but otherwise without limitation, any
and all personally identifiable information, and any and all additional
information maintained by Autoweb specific to individual users, provided by
users (the "User
----
10
<PAGE>
Information") on the Co-branded Site. Lycos and Autoweb shall jointly and
- -----------
severally own all User Information obtained on the Co-branded Site, provided
that such ownership of all User Information gathered during the Term shall be
remain subject, both during and following the Term, to each parties' privacy
policies as they appeared at the time such information was obtained. In
addition, Autoweb shall take such steps as are reasonably necessary to integrate
user registration processes on the Co-branded Site with Lycos' universal
registration system, including so that Lycos shall itself host and serve all
registration pages for the Co-branded Site. Lycos shall supply such registration
information to Autoweb as is necessary to access the Co-branded Content.
Notwithstanding anything to the contrary elsewhere in this Section, neither
Lycos nor Autoweb may, either during the Term or after the Term, without the
users' permission, sell or otherwise transfer the User Information or
registration information to any third party (other than by merger, consolidation
or sale of all or substantially all of the assets of such party). In addition,
Lycos and Autoweb agree that all communications with users (excluding all
automobile transaction-related communications between users and Autoweb or its
fulfillment partners in connection with transactions initiated by users through
the Co-branded Site) shall be (i) in mutually agreed upon, co-branded form, (ii)
only with the user's prior consent, and (iii) consistent with both parties'
privacy policies as they appear from time to time. Both Autoweb and Lycos agree
that the sharing of any such User Information or registration information and
the use thereof, either during or after the Term, shall be consistent with the
parties' privacy policies disclosed to the users when the information is
collected. Autoweb further agrees that it will place a link to each parties'
privacy policy (the "Privacy Links") on all pages of the Co-branded Site where
-------------
users are prompted to provide, and users provide, User Information, and Lycos
agrees that it shall place the Privacy Links on registration pages for the Co-
branded Site. The placement of such Privacy Links shall be subject to the mutual
agreement of the parties. In addition, Autoweb agrees to perform any and all
acts necessary to ensure that the Co-branded Site, including, without
limitation, the collection of User Information thereon, is in full compliance
with The Children's Online Privacy Protection Act and all other applicable laws
and regulations. On a monthly basis, Autoweb shall provide Lycos with all User
Information obtained on the Co-branded Site within ten (10) days after the end
of each month in a form and manner reasonably requested by Lycos.
12. Licenses; Approvals. To the extent creation of or access to the Co-
-------------------
branded Site is deemed a use, public display, public performance, transmission,
distribution, reproduction, or creation of a derivative work of the Content, or
to the extent the Content is actually used, publicly displayed, publicly
performed, transmitted, distributed or reproduced on the Lycos Network, either
in original form or in the form of a derivative work, Autoweb hereby grants
Lycos a non-transferable (except as provided herein), royalty-free (except as
provided herein), worldwide license to create derivative works from the Content,
and to use, publicly display, publicly perform, transmit, distribute, and
reproduce the Content and Autoweb's advertisements, during the Term solely for
the purposes described herein so that each party may exercise their rights and
perform their obligations hereunder. To the extent creation of or access to the
Co-branded Site is deemed a use, public display, public performance,
transmission, distribution, reproduction, or creation of a derivative work of
the Lycos Community Content, Lycos hereby grants Autoweb, for the duration of
the Term, a non-transferable, royalty-free (except as provided herein),
worldwide license to use, publicly display, publicly perform, transmit,
distribute, and reproduce the Lycos Community Content on the Co-branded Site
only.
13. Term. The term ("Term") of this Agreement shall commence on the
----- ----
Effective Date and continue for four (4) years following the Effective Date
unless terminated earlier as provided in this Agreement.
14. Marks. Lycos hereby grants to Autoweb a non-exclusive, non-
-----
transferable license to reproduce and display Lycos' trademarks, service marks,
logos and the like solely for the purposes
11
<PAGE>
specified in this Agreement and in accordance with Lycos' established trademark
usage policies and procedures. Autoweb hereby grants Lycos a non-exclusive, non-
transferable license to reproduce and display Autoweb's trademarks, service
marks, logos and the like solely for the purposes specified in this Agreement
and in accordance with Autoweb's established trademark usage policies and
procedures. Except as expressly stated herein, neither party shall make any
other use of the other party's marks. Upon request of either party, the other
party shall provide appropriate attribution of the use of the requesting party's
marks (e.g., "Go Get It(R) is a registered service mark of Lycos, Inc. All
Rights Reserved.") or immediately cease using such requesting party's marks. In
connection with the licenses granted hereunder, each party shall have the
unilateral right to establish such quality standards and additional terms and
conditions concerning the use of its trademarks as such party deems necessary to
reasonably protect its trademarks. Such licenses shall terminate automatically
upon the effective date of expiration or termination of this Agreement.
15. Representations and Warranties.
------------------------------
15.1 Of Both Parties. Each party hereby represents and warrants as
---------------
follows:
15.1.1 Corporate Power. Such party is duly organized and validly
---------------
existing under the laws of the state of its incorporation and has full corporate
power and authority to enter into this Agreement and to carry out the provisions
hereof.
15.1.2 Due Authorization. Such party is duly authorized to execute and
-----------------
deliver this Agreement and to perform its obligations hereunder.
15.1.3 Binding Agreement. This Agreement is a legal and valid obligation
-----------------
binding upon it and enforceable with its terms, and that the execution, delivery
and performance of this Agreement by such party does not conflict with any
agreement, instrument or understanding, oral or written, to which it is a party
or by which it may be bound, nor violate any law or regulation of any court,
governmental body or administrative or other agency having jurisdiction over it.
15.2 By Autoweb. Autoweb represents and warrants that:
----------
15.2.1 Intellectual Property Rights and Other Rights. (i) It has the
---------------------------------------------
full and exclusive right to grant or otherwise permit Lycos to access the
Autoweb Site and the Co-branded Site, and to use Autoweb's intellectual
property, including, without limitation, its trademarks, service marks and
logos, as necessary for Lycos to perform its obligations under this Agreement,
and Autoweb is aware of no claims by any third parties adverse to any of such
intellectual property rights; (ii) the Content will not violate or infringe upon
the patent, copyright, literary, privacy, publicity, trademark, service mark or
any other personal or property right of any person, nor will same constitute a
libel or defamation of any person or entity; (iii) it has obtained all necessary
licenses, consents and approvals relating to all Content provided by a third
party and that it is responsible for obtaining any such licenses, consents and
approvals during the Term; and (iv) it is the owner or is licensed to use the
entire contents and subject matter contained in its advertising and collateral
information, including, without limitation, (1) the names and/or pictures of
persons; (2) any copyrighted material, trademarks, service marks, logos, and/or
depictions of trademarked or service marked goods or services; and (3) any
testimonials or endorsements contained in any advertisement submitted to Lycos.
15.3 By Lycos. Lycos represents and warrants that:
--------
12
<PAGE>
15.3.1 Intellectual Property and Other Rights. (i) It has the full and
--------------------------------------
exclusive right to grant or otherwise permit Autoweb to access the Lycos Network
and to use Lycos' intellectual property, including, without limitation, its
trademarks, service marks and logos, as necessary for Autoweb to perform its
obligations under this Agreement, and Lycos is aware of no claims by any third
parties adverse to any of such intellectual property rights; (ii) the content on
the Lycos Network (other than content placed on such site by a third party, of
which Lycos does not have actual knowledge) will not infringe upon the patent,
copyright, literary, privacy, publicity, trademark, service mark or any other
personal or property right of any person, nor will same constitute a libel or
defamation of any person or entity; (iii) Lycos has obtained all necessary
licenses, consents and approvals relating to all Lycos Services displayed on the
Co-branded Site provided by a third party and that it is responsible for
obtaining any such licenses, consents and approvals during the Term; and (iv) it
is the owner or is licensed to use the entire contents and subject matter
contained in its advertising and collateral information displayed on the Co-
branded Site, including, without limitation, (1) the names and/or pictures of
persons; (2) any copyrighted material, trademarks, service marks, logos, and/or
depictions of trademarked or service marked goods or services; and (3) any
testimonials or endorsements contained in any advertisement submitted to Lycos.
The representations and warranties and covenants in this Section 15 are
continuous in nature and shall be deemed to have been given by each party at
execution of this Agreement and at each stage of performance hereunder. These
representations, warranties and covenants shall survive termination or
expiration of this Agreement.
16. Limitation of Warranty. EXCEPT AS EXPRESSLY WARRANTED ABOVE, EACH
----------------------
PARTY EXPRESSLY DISCLAIMS ANY FURTHER WARRANTIES, EXPRESS, IMPLIED, OR
STATUTORY, INCLUDING BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY, TITLE, AND FITNESS FOR A PARTICULAR PURPOSE. WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, NEITHER PARTY MAKES ANY EXPRESS OR IMPLIED
WARRANTIES OR REPRESENTATIONS WITH RESPECT TO THE LYCOS NETWORK AND THE AUTOWEB
SITE OR THE CO-BRANDED SITE, AND NEITHER PARTY SHALL BE LIABLE FOR THE
CONSEQUENCES OF ANY INTERRUPTIONS OR ERRORS RELATED THERETO. LYCOS SPECIFICALLY
DISCLAIMS ALL LIABILITY FOR THE AUTOWEB SITE, THE CO-BRANDED SITE, AND THE
CONTENT THEREIN, AND AUTOWEB SPECIFICALLY DISCLAIMS ALL LIABILITY FOR THE LYCOS
NETWORK, (EXCLUDING THE CO-BRANDED SITE) AND THE CONTENT THEREIN EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT, EACH PARTY MAKES NO EXPRESS OR IMPLIED
WARRANTIES OR REPRESENTATIONS WITH RESPECT TO ANY PRODUCTS OR SERVICES OFFERED
OR SOLD THROUGH THE LYCOS NETWORK, THE AUTOWEB SITE OR THE CO-BRANDED SITE
(INCLUDING, WITHOUT LIMITATION, WARRANTIES OF FITNESS, MERCHANTABILITY, NON-
INFRINGEMENT OR ANY IMPLIED WARRANTIES ARISING OUT OF A COURSE OF PERFORMANCE,
DEALING OR TRADE USAGE).
17. Indemnification; Insurance.
--------------------------
17.1 Indemnification.
---------------
17.1.1 Autoweb Indemnity. Autoweb will at all times defend, indemnify and
-----------------
hold harmless Lycos and its officers, directors, shareholders, employees,
accountants, attorneys, agents, affiliates, subsidiaries, successors and assigns
from and against any and all third party claims, damages, liabilities, costs and
expenses, including reasonable legal fees and expenses, arising out of or
related to: (i) any breach of any
13
<PAGE>
warranty, representation, covenant or agreement made by Autoweb in this
Agreement; (ii) the development, operation or maintenance of the Autoweb Site or
the Co-branded Site, including the Content thereon, except to the extent
supplied by Lycos; (iii) the sale of any products or services through the
Autoweb Site or the Co-branded Site, including without limitation the purchase,
acceptance, use or misuse of such products and service by any customer or user;
and (iv) all text, graphics, images or other content that constitute the
Impressions and the copying, printing, display, distributing, or publishing of
Autoweb's advertisements. Lycos shall give Autoweb prompt written notice of any
claim, action or demand for which indemnity is claimed. Autoweb shall have the
right, but not the obligation, to control the defense and/or settlement of any
claim in which it is named as a party and which arises as a result of Autoweb's
breach of any warranty, representation, covenant or agreement under this
Agreement. Lycos shall have the right to participate in any defense of a claim
by Autoweb with counsel of Lycos' choice at Lycos' own expense. The foregoing
indemnity is conditioned upon: prompt written notice by Lycos to Autoweb of any
claim, action or demand for which indemnity is claimed; complete control of the
defense and settlement thereof by Autoweb; and such reasonable cooperation by
Lycos in the defense as Autoweb may request.
17.1.2 Lycos Indemnity. Lycos will at all times defend, indemnify and
---------------
hold harmless Autoweb and its officers, directors, shareholders, employees,
accountants, attorneys, agents, affiliates, subsidiaries, successors and assigns
from and against any and all third party claims, damages, liabilities, costs and
expenses, including reasonable legal fees and expenses, arising out of or
related to any breach of any warranty, representation, covenant or agreement
made by Lycos in this Agreement or the development, operation or maintenance of
the Lycos Network (but specifically excluding the Co-branded Site and any
content posted there by Autoweb or third parties). Autoweb shall give Lycos
prompt written notice of any claim, action or demand for which indemnity is
claimed. Lycos shall have the right, but not the obligation, to control the
defense and/or settlement of any claim in which it is named as a party. Autoweb
shall have the right to participate in any defense of a claim by Lycos with
counsel of Autoweb's choice at Autoweb's own expense. The foregoing indemnity
is conditioned upon; prompt written notice by Autoweb to Lycos of any claim,
action or demand for which indemnity is claimed; complete control of the defense
and settlement thereof by Lycos; and such reasonable cooperation by Autoweb in
the defense as Lycos may request.
17.1.3 Settlement. Neither party shall, without the prior written consent
----------
of the other party, settle, compromise or consent to the entry of any judgment
with respect to any pending or threatened claim unless the settlement,
compromise or consent provides for and includes an express, unconditional
release of all claims, damages, liabilities, costs and expenses, including
reasonable legal fees and expenses, against the indemnified party.
17.2 Insurance. For the length of the Term, Autoweb shall cause Lycos
---------
to be included as an "additional insured" on all of Autoweb's relevant insurance
policies that provide coverage of any kind relating to or regarding the services
or content provided by or the goods and products sold by Autoweb in accordance
with the terms of this Agreement.
18. Confidentiality.
---------------
18.1 Non-Disclosure Agreement. The parties agree and acknowledge that,
------------------------
as a result of negotiating, entering into and performing this Agreement, each
party has and will have access to certain of the other party's Confidential
Information (as defined below). Each party also understands and agrees that
misuse and/or disclosure of that information could adversely affect the other
party's business. Accordingly, the parties agree that, during the Term of this
Agreement and thereafter, each party shall use
14
<PAGE>
and reproduce the other party's Confidential Information only for purposes of
this Agreement and only to the extent necessary for such purpose and shall
restrict disclosure of the other party's Confidential Information to its
employees, consultants or independent contractors with a need to know and shall
not otherwise disclose the other party's Confidential Information to any third
party without the prior written approval of the other party. Notwithstanding the
foregoing, it shall not be a breach of this Agreement for either party to
disclose Confidential Information of the other party if required to do so under
law or in a judicial or other governmental investigation or proceeding, provided
the other party has been given prior notice and the disclosing party has sought
all available safeguards against widespread dissemination prior to such
disclosure.
18.2 Confidential Information Defined. As used in this Agreement, the
--------------------------------
term "Confidential Information" refers to: (i) the terms and conditions of this
------------------------
Agreement; (ii) each party's trade secrets, business plans, strategies, methods
and/or practices; and (iii) other information relating to either party that is
not generally known to the public, including information about either party's
personnel, products, customers, marketing strategies, services or future
business plans. Notwithstanding the foregoing, the term "Confidential
------------
Information" specifically excludes (A) information that is now in the public
- -----------
domain or subsequently enters the public domain by publication or otherwise
through no action or fault of the other party; (B) information that is known to
either party without restriction, prior to receipt from the other party under
this Agreement, from its own independent sources as evidenced by such party's
written records, and which was not acquired, directly or indirectly, from the
other party; (C) information that either party receives from any third party
reasonably known by such receiving party to have a legal right to transmit such
information, and not under any obligation to keep such information confidential;
and (D) information independently developed by either party's employees or
agents provided that either party can show that those same employees or agents
had no access to the Confidential Information received hereunder.
19. Press Releases; Off-line Promotion.
----------------------------------
19.1 Press Releases. No public statements concerning the existence or
--------------
terms of this Agreement shall be made or released to any medium except with the
prior approval of Lycos and Autoweb or as required by law.
19.2 Off-line Promotion. In a majority of Autoweb's offline promotion
------------------
(including, but not limited to, print, radio and television), marketing
materials, and the like (collectively, the "Advertising Materials") and subject
---------------------
to Lycos' prior written approval, Autoweb shall include the following statement:
"Autoweb at Lycos" or such other statement as the parties shall hereafter
mutually agree (the "Reference"). In a majority of Lycos' offline promotion
---------
relating to automobiles (including, but not limited to, print, radio and
television, marketing materials, and the like (collectively, the "Advertising
-----------
Materials") and subject to Autoweb's prior written approval, Lycos shall include
- ---------
the following statement: "Autoweb at Lycos" or such other statement as the
parties shall hereafter mutually agree (the "Reference"). All References shall
---------
be at least the same size and prominence of any similar statements or promotions
for other third parties mentioned or promoted in such Advertising Materials, and
the form of the Reference shall be subject to Lycos prior approval. Autoweb
hereby agrees, represents, and warrants that it shall not include the reference
in any materials or publication in a form or manner so as to denigrate or
disparage Lycos, its products, or otherwise. The obligations of this Section
shall not commence until September 2000.
20. Termination. Either party may terminate this Agreement if (a) the
-----------
other party files a petition for bankruptcy or is adjudicated bankrupt; (b) a
petition in bankruptcy is filed against the other
15
<PAGE>
party and such petition is not dismissed within sixty (60) days of the filing
date; (c) the other party becomes insolvent or makes an assignment for the
benefit of its creditors pursuant to any bankruptcy law; (d) a receiver is
appointed for the other party or its business; (e) upon the occurrence of a
material breach of a material provision by the other party if such breach is not
cured within thirty (30) days after written notice is received by the breaching
party identifying the matter constituting the material breach; or (f) by mutual
consent of the parties. In addition, after the first anniversary of the
Effective Date, Lycos may terminate this Agreement in the event that Autoweb's
Content becomes substantially uncompetitive with other content, tools, services,
information, and technology as is otherwise available, if such condition is not
cured within (90) days written notice to Autoweb. In addition, Lycos may
terminate this Agreement in accordance with the applicable provisions of Section
20.1.
20.1 Change of Control. In the event that a company identified on
-----------------
Exhibit C acquires all or substantially all of the assets of Autoweb, acquires a
majority of the outstanding voting securities of Autoweb, merges with or into
Autoweb or causes a corporate affiliate to do so, or otherwise obtains effective
voting control of Autoweb's board of directors, either directly, in combination,
or through its designees, then Lycos shall have the right to (a) terminate the
Agreement effective immediately, in which case Lycos shall refund to Autoweb any
unused pro rata portion of the Guaranteed Fees as calculated on a calendar basis
(i.e., each installment set forth in Section 7 shall be, for purposes of this
Section only, construed as full payment for each 90 days of performance), (b),
at Lycos' option, for two years following notice, to the extent permitted by
Autoweb's contractual obligations with third parties, operate the Co-branded
Site on its own behalf utilizing the Co-branded Content under Lycos branding
alone, and Autoweb will assist Lycos in securing all needed permissions for
Lycos to do so, and Autoweb shall dedicate proper and sufficient resources to
facilitate an orderly transition, including sufficient training for Lycos
personnel as requested by Lycos (for which Lycos shall compensate Autoweb on a
reasonable time and materials basis), for a period of three months, in which
case Lycos shall pay to Autoweb an aggregate fee of $10 million per year, or (c)
continue performance under this Agreement without change.
21. Force Majeure. In the event that either party is prevented from
-------------
performing, or is unable to perform, any of its obligations under this Agreement
due to any cause beyond the reasonable control of the party invoking this
provision, the affected party's performance shall be excused and the time for
performance shall be extended for the period of delay or inability to perform
due to such occurrence.
22. Relationship of Parties. Autoweb and Lycos are independent
-----------------------
contractors under this Agreement, and nothing herein shall be construed to
create a partnership, joint venture or agency relationship between Autoweb and
Lycos. Neither party has authority to enter into agreements of any kind on
behalf of the other.
23. Assignment, Binding Effect. Neither Lycos nor Autoweb may assign
--------------------------
this Agreement or any of its rights or delegate any of its duties under this
Agreement without the prior written consent of the other. Notwithstanding the
foregoing, Lycos may assign this Agreement as a whole to any successor of Lycos,
and, subject to the provisions of Section 20.1, Autoweb may assign this
Agreement as a whole to any successor of Autoweb.
24. Choice of Law and Forum. This Agreement, its interpretation,
-----------------------
performance or any breach thereof, shall be construed in accordance with,
governed by, and all questions with respect thereto shall be determined by, the
laws of the Commonwealth of Massachusetts applicable to contracts entered into
and wholly to be performed within said state.
24.1 Dispute Resolution.
------------------
16
<PAGE>
Level 1 Dispute Review. Upon the written request of either Party, each
-----------------------
Party shall appoint a designated representative whose task shall be to meet the
other party's designated representative (by conference telephone call or in
person at a mutually agreeable site) in an endeavor to resolve any Dispute
("Level 1 Dispute Review"). The designated representatives shall meet as often
as the parties reasonably deem necessary to discuss the Dispute and negotiate in
good faith in an effort to resolve the Dispute without the necessity of any
formal proceeding.
Level 2 Dispute Review. If resolution of the Dispute cannot be resolved
-----------------------
within the earlier of (a) fifteen (15) days of the first Level 1 Dispute Review
meeting and (b) such time as when either party gives the other notice of an
impasse ("Level 1 Dispute Termination Date"), a chief executive officer (or a
functional equivalent) of each Party shall meet (by conference telephone call or
in person at a mutually agreeable site) within 72 hours after the Level 1
Dispute Termination Date for the purpose of resolving such unresolved Dispute
("Level 2 Dispute Review").
Submission of Dispute to Mediation. If the Parties are unable to resolve
----------------------------------
the Dispute within five (5) days after commencement of the Level 2 Dispute
Review, either party may serve the other with notice of the existence of a
continuing impasse (the date on which both Parties are in receipt of such
notice, the "Level 2 Dispute Termination Date") and the parties shall thereafter
immediately submit the Dispute to mediation in accordance with the Commercial
Mediation Rules of the American Arbitration Association ("AAA") and shall bear
equally the costs of the mediation. The Parties will act in good faith to
jointly appoint a mutually acceptable mediator, seeking assistance in such
regard from the AAA within fifteen (15) days of the Level 2 Termination Date.
The Parties agree to participate in good faith in the mediation and negotiations
related thereto for a period of thirty (30) days commencing with the selection
of the mediator and any extension of such period as the Parties may mutually
agree.
Arbitration. (a) If the parties agree to a mediator within fifteen (15)
-----------
days of the Level 2 Dispute Termination Date or if the Dispute is not resolved
within thirty (30) days after the beginning of the mediation and any extension
of such periods as the Parties may mutually agree, the Dispute shall be
submitted to, and finally determined by, binding arbitration in accordance with
the following provisions of this Exhibit, regardless of the amount in
controversy or whether such Dispute would otherwise be considered justifiable or
ripe for resolution by a court or arbitration panel.
(b) Any such arbitration shall be conducted by the AAA in accordance with
its Commercial Arbitration Rules (the "AAA Rules"), except to the extent that
the AAA Rules conflict with the provisions of this Exhibit, in which event the
provisions of this Section shall control.
(c) The arbitration panel (the "Panel") shall consist of one neutral
arbitrator (the "Arbitrator"), who shall be an attorney having five or more
years experience in the primary area of law as to which the Dispute relates, and
shall be appointed in accordance with the AAA Rules (the "Basic
Qualifications").
(d) Should an Arbitrator refuse or be unable to proceed with arbitration
proceedings as called for by this Section, a substitute Arbitrator possessing
the Basic Qualifications shall be appointed by the AAA. If an Arbitrator is
replaced after the arbitration hearing has commenced, then a rehearing shall
take place in accordance with the provisions of this Exhibit and the AAA Rules.
(e) The arbitration shall be conducted in Boston Massachusetts; provided
--------
that the Panel may from time to time convene, carry on hearings, inspect
property or documents and take evidence at any location which the Panel deems
appropriate.
17
<PAGE>
(f) The Panel may in its discretion order a pre-exchange of information
including production of documents, exchange of summaries of testimony or
exchange of statements of position and shall schedule promptly all discovery and
other procedural steps and otherwise assume case management initiative and
control to effect an efficient and expeditious resolution of the Dispute.
(g) At any oral hearing of evidence in connection with any arbitration
conducted pursuant to this Exhibit, each party and its legal counsel shall have
the right to examine its witnesses and to cross-examine the witnesses of the
other party. No testimony of any witness shall be presented in written form
unless the opposing parties shall have the opportunity to cross-examine such
witness, except as the parties otherwise agree in writing and except under
extraordinary circumstances where, in the opinion of the Panel, the interests of
justice require a different procedure.
(h) Within fifteen (15) days after the closing of the arbitration hearing,
the Panel shall prepare and distribute to the Parties a written award. The
Panel shall have the authority to award interest on any monetary award from the
date that the loss or expense was incurred by the prevailing party. In
addition, the Panel shall have the authority to decide issues relating to the
interpretation, meaning or performance of this Agreement, any agreement,
certificate or other document referred to herein or delivered in connection
herewith, or the relationships of the parties hereunder or thereunder, even if
such decision would constitute an advisory opinion in a court proceeding or if
the issues would otherwise not be ripe for resolution in a court proceeding, any
and any such decision shall bind the parties in their performance of this
Agreement and such other documents.
(i) Except as necessary in court proceedings to enforce this arbitration
provision or an award rendered hereunder, to obtain interim relief, or as
otherwise required by law, no Party nor any arbitrator shall disclose the
existence, content or results of any arbitration conducted hereunder without
the prior written consent of the other Party.
(j) To the extent that the relief or remedy granted in an award by the
Panel is relief or a remedy on which a court could enter judgment, a judgment
upon the award rendered by the Panel may be entered in any court having
jurisdiction thereof. Otherwise, the award shall be binding on the Parties in
connection with their obligations under this Agreement and in any subsequent
arbitrator or judicial proceedings among any of the parties.
(k) The Parties agree to share equally the cost of any arbitration,
including the administrative fee, the compensation of the arbitrator and the
costs of any neutral witnesses or proof produced at the direct request of the
Panel.
(l) Each Party hereto agrees that references to the Parties in this
Section 24.1 shall also include their respective Affiliates, who shall be
subject to the dispute resolution procedures of this Section 24.1 to the same
extent as the Parties.
24.2 Recourse to Courts and Other Remedies. Notwithstanding the dispute
--------------------------------------
resolution procedures set forth in Section 24.1, any Party may apply to any
court having jurisdiction (a) to enforce the provisions of Section 24.1, (b) to
seek injunctive relief or any other equitable remedy to enforce any provision of
this Agreement, or to maintain the status quo until the arbitration award is
rendered or the Dispute is otherwise resolved, (c) to avoid the expiration of
any applicable limitation period, (d) to preserve a superior position with
respect to other creditors, (e) to challenge or vacate any final judgment,
award or decision of the Panel, or (f) to enforce the indemnification
obligations set forth in the Agreement
18
<PAGE>
or to recover damages based thereon. Each party hereby consents to the personal
jurisdiction of the Commonwealth of Massachusetts, acknowledges that venue is
proper in any state or Federal court in the Commonwealth of Massachusetts,
agrees that any action arising out of or related to this Agreement contemplated
by this Section 24.2 must be brought exclusively in a state or Federal court in
the Commonwealth of Massachusetts, and waives any objection it has or may have
in the future with respect to any of the foregoing.
24.3 Attorneys' Fees. If any action, suit, or proceeding is commenced to
---------------
establish, maintain, or enforce any right or remedy under this Agreement, the
Party not prevailing therein shall pay, in addition to any damages or other
award, all reasonable attorney's fees and litigation expenses incurred therein
by the prevailing Party.
25. Good Faith. The parties agree to act in good faith with respect to
----------
each provision of this Agreement and any dispute that may arise related hereto.
26. Counterparts and Facsimile Signatures. This Agreement may be
-------------------------------------
executed in multiple counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same
instrument. Facsimile signatures will be considered original signatures.
27. No Waiver. The waiver by either party of a breach or a default of
---------
any provision of this Agreement by the other party shall not be construed as a
waiver of any succeeding breach of the same or any other provision, nor shall
any delay or omission on the part of either party to exercise or avail itself of
any right, power or privilege that it has, or may have hereunder, operate as a
waiver of any right, power or privilege by such party.
28. Successors and Assigns. Except as provided in Section 20.1, this
----------------------
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, successors and assigns.
29. Severability. Each provision of this Agreement shall be severable
------------
from every other provision of this Agreement for the purpose of determining the
legal enforceability of any specific provision.
30. Notices. All notice required to be given under this Agreement must
-------
be given in writing and delivered either in hand, by certified mail, return
receipt requested, postage pre-paid, or by Federal Express or other recognized
overnight delivery service, all delivery charges pre-paid, and addressed:
If to Lycos:
Lycos, Inc.
400-2 Totten Pond Road
Waltham, MA 02451
Fax No.: (781) 370-2600
Attention: General Counsel
19
<PAGE>
If to Autoweb:
Autoweb, Inc.
3270 Jay Street
Santa Clara, CA 95054
Fax No: (408) 588-9776
Attention: President
Cc: General Counsel
31. Entire Agreement. This Agreement constitutes the entire
----------------
understanding of the parties hereto with respect to the transactions and matters
contemplated hereby, supersedes all previous agreements between Lycos and
Autoweb concerning the subject matter, except that to the extent either party
owes the other any other obligation of performance or payment as of the
Effective Date such obligations shall be satisfied according to the terms of any
pre-existing agreement between them. This Agreement cannot be amended except by
a writing signed by authorized representatives of both parties. No party hereto
has relied on any statement, representation or promise of any other party or
with any other officer, agent, employee or attorney for the other party in
executing this Agreement except as expressly stated herein.
32. Limitations Of Liability. UNDER NO CIRCUMSTANCES SHALL EITHER PARTY
------------------------
BE LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR
EXEMPLARY DAMAGES (EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES), ARISING FROM PERFORMANCE UNDER OR FAILURE OF PERFORMANCE OF ANY
PROVISION OF THIS AGREEMENT (INCLUDING SUCH DAMAGES INCURRED BY THIRD PARTIES),
SUCH AS, BUT NOT LIMITED TO, LOSS OF REVENUE OR ANTICIPATED PROFITS OR LOST
BUSINESS. IN ADDITION, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR DAMAGES IN
EXCESS OF THE VALUE RECEIVED BY SUCH PARTY UNDER THIS AGREEMENT.
NOTHWITHSTANDING THE FOREGOING, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
LIMITATIONS OF LIABILITY SET FORTH IN THE PRECEDING SENTENCE SHALL NOT APPLY IN
THE EVENT OF A BREACH OR BREACHES OF SECTIONS OF THIS AGREEMENT REGARDING
CONFIDENTIALITY, AMOUNTS PAYABLE, AND/OR INDEMNIFICATION.
33. Survival. All terms of this Agreement, which by their nature extend
--------
beyond its termination, remain in effect until fulfilled, and apply to
respective successors and assigns.
20
<PAGE>
AGREEMENT
IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement
as of the date set forth above.
AUTOWEB ______________
By: ______________________________
Name: ____________________________
Title: ___________________________
LYCOS, INC.
By: ______________________________
Name: ____________________________
Title: ___________________________
Lycos Confidential
21
<PAGE>
EXHIBIT A
Operations Requirements for Remote Service Providers
Introduction
The following introduction comes from the Lycos, Inc. "Operations Change
Management" document. As it relates to service-providers external to Lycos, Inc.
owned and operated data-centers, Operations and Operations personnel will refer
to the systems, network, and applications support personnel of the service-
provider in question. This document addresses Lycos, Inc.'s expectations as
consistent with industry practice related to availability and functionality, and
problem escalation and resolution procedures as they extend between Lycos
Operations and a remote service-provider.
Availability and Functionality
The Lycos, Inc. Operations group works to guarantee 99.999% availability and
functionality of all Lycos Services, and expects remote service-providers to
work towards the same. To this end, the following requirements have been
established for such service-providers:
. Provide physical- and application-layer redundancy such that hard loss of
any one application server or physical platform will not result in loss of
availability or functionality of the product or service. This redundancy
will apply to network services platforms (e.g., routers), production
servers, production support servers (e.g., monitoring application servers),
etc. In the case of the firewall and certain other supporting application
servers, where currently automatic fail-over is not available, within
thirty minutes an engineer will be working to correct the problem. Within
three months, a redundant firewall solution will be in place.
. Provide monitoring of all Lycos-related servers and applications such that
problems are detected before or within 15 minutes of occurrence. Further,
when possible, provide the ability to monitor these servers and
applications remotely.
. Guarantee appropriate capacity monitoring and growth such that systems run
below an average of 75% consumption of potential resources during peak
operating hours for any 15 minute interval.
. Guarantee appropriate application, system, and network capacity and
resources (within the service provider's systems only) such that the
average server response to any given user page request over any one (1)
hour period is not more than five seconds (within the framework of the
availability framework described above).
. Commit to pre- arranged, after-hours (defined as those periods during which
traffic is lowest) change and planned maintenance windows, and provide
ample (i.e., no less than five business days) notice before these windows
are utilized for Lycos-branded services. Exceptions to this practice may be
made as required for emergency situations and Lycos shall be notified of
such emergency situations as soon as possible.
Problem Escalation and Resolution for Critical Problems
For purposes of this section, a "Critical Problem" shall mean any problem that
results in either the Co-branded Site being unavailable or inaccessible to users
or the inability to serve advertisements on the Co-branded Site. The Lycos, Inc.
Operations Group maintains an internal problem escalation and resolution process
designed to provide a means to resolve service-related Critical Problems quickly
and efficiently, while maximizing communication of problem status. This process
is available to Lycos, Inc. personnel, and to the Operations personnel of remote
service-providers should the need arise.
To meet the expectations upon which the Problem Escalation and Resolution
process are based, Operations will provide the following:
A 24x7, single point of contact for Critical Problem escalation.
Initials: _____ Initials: ______
22
<PAGE>
A guaranteed 30-minute response time to have personnel actively working on the
reported Critical Problems, with the understanding that to date no Critical
Problems have gone unattended more than 15 minutes, and that Operations will
exert best efforts to have personnel actively working on the problem in 15
minutes or less.
A guarantee of timely (hourly) updates during extended (defined as more than 1
hour) Lycos-specific Critical Problem incidents.
A guarantee of 15 minute notification upon Critical Problem resolution.
A guarantee of Critical Problem summary within 24 business hours of Critical
Problem resolution.
Other Items of Note:
While Lycos, Inc. Operations will assign a both a primary technical analyst and
a technical manager to handle issues related to the remote service, it is
expected that non-emergency communication between a remote service provider and
Lycos Operations will be negotiated by and through a Lycos, Inc. Product
Manager.
For critical or emergency issues the Lycos, Inc. Operations group can be reached
at the Lycos Operations Hotline: [*].
Initials: _____ Initials: ______
23
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
EXHIBIT B1
[*]
24
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
EXHIBIT B2IMPRESSIONS PLAN
EXHIBIT C
[*]
25
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
EXHIBIT D
1. Changes and Cancellations. All artwork must be received at least five days
-------------------------
in advance of publication date. Cancellations or copy changes will not be
accepted after the published closing date of the update to the Lycos site.
Lycos must receive changes to artwork at least five days in advance of requested
change date. Lycos' ad banner specifications are accessible through the URL
adreporting.lycos.com/specs.html; Lycos reserves the right to change any of its
ad banner specifications at any time. Any cancellations or change orders must
be made in writing and acknowledged by Lycos. Change orders cannot be submitted
any more frequently than once every fourteen days, with the exception of broken
links or faulty creative executions.
2. Licenses and Indemnification. Autoweb represents that it is the owner or is
----------------------------
licensed to use the entire contents and subject matter contained in its
advertising and collateral information, including, without limitation, (a) the
names and/or pictures of persons; (b) any copyrighted material, trademarks,
service marks, logos, and/or depictions of trademarked or service marked goods
or services; and (c) any testimonials or endorsements contained in any
advertisement submitted to Lycos. In consideration of Lycos' acceptance of such
advertisements and information for publication, Autoweb will jointly and
severally indemnify and hold Lycos harmless against all loss, liability, damage
and expense of any nature (including attorney's fees) arising out of Lycos'
copying, printing, distributing, or publishing of Autoweb's advertisements,
including, but not limited to, the Newsletter Products. If Autoweb possesses any
preexisting copyright interests in the advertisements, advertiser grants Lycos
the right to use, reproduce, and distribute the advertisements.
3. Key Words and Phrases. Each advertiser may be given a "first right" to its
---------------------
exact company name and trademarks for keyword/phrase advertising. Lycos may
pre-empt an existing key word/phrase advertiser by submitting a three-month
advertising contract. The existing contract-holder for the key word/phrase will
be provided with a two-week notification of preemption and will receive a
comparable number, form and content. of impressions for any unfulfilled number
of guaranteed impressions. If two or more advertisers have the same name or
trademark, the allocation will be on a first-come basis and the existing
contract will take precedence.
4. Rejections. Lycos reserves the right, without liability, to reject, omit or
----------
exclude any advertisement or to reject or terminate any links for any reason at
any time, with or without notice to Autoweb, , subject to exceptions below and
whether or not such advertisement or link was previously acknowledged, accepted,
or published. In cases where such rejection, omission or exclusion is not caused
by broken links, prohibited content, or, more generally, a material degradation
in the consumer experience, Lycos will provide commercially reasonable notice to
Autoweb of rejection and will allow Autoweb to remedy such exclusions within 10
days. Under all cases, Lycos shall replace any exclusions with mutually agreed
upon replacement impressions and links
5. Limitation of Liability. Lycos shall not be liable for any errors in
-----------------------
content or omissions. Should an error appear in an advertisement, Lycos'
liability will be limited to making good the number, form and content of the
lost impressions if the error is Lycos'.
Initials: _____ Initials: ______
26
<PAGE>
Exhibit E
---------
[*]
27
[*] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
Exhibit 10.35
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of April 12, 2000, by and between
Lycos, Inc., a Delaware corporation (the "Buyer") and Autoweb.com, Inc., a
-----
Delaware corporation (the "Company").
-------
WHEREAS, pursuant to the terms and conditions set forth herein, the Buyer
desires to purchase, and the Company desires to sell, shares of the Company's
Common Stock, $.001 par value per share (the "Common Stock") for an aggregate
------------
purchase price of $21,846,109.95.
NOW, THEREFORE, in consideration of the respective undertakings, covenants
and agreements of the parties set forth herein, the parties hereby agree as
follows:
1. Purchase and Sale. At the Closing (as defined below) the Company shall
-----------------
sell to the Buyer, and the Buyer shall purchase from the Company, 3,035,025
shares of Common Stock (the "Shares") at a price of $ 7.198 per share; such
------
price is equal to the average closing price of Buyer Common Stock for the 30
consecutive trading days ending on March 24, 2000. The Shares represent 10% of
the fully-diluted capital stock of the Company as of March 26, 2000, not taking
into effect the issuance of the Shares.
2. Closing. The closing of the purchase and sale of the Common Stock (the
-------
"Closing") shall take place at 10 a.m. on the date hereof at the offices of
-------
Lycos, Inc., 400-2 Totten Pond Road, Waltham, MA 02451 or at such other time or
place as the parties hereto may mutually agree. At the Closing, the Company
shall deliver to the Buyer a stock certificate evidencing the Common Stock to be
purchased by the Buyer, registered in the Buyer's name, upon payment of the
purchase price thereof by wire transfer of immediately available funds to an
account designated by the Company.
3. Conditions to Closing. The obligations of Buyer to purchase and pay
---------------------
for the Shares at Closing, and of the Company to register and deliver the stock
certificates, is subject to receipt at the Closing of the following documents:
(a) Opinion. Buyer shall have received, in form and substance
-------
reasonably satisfactory to Buyer, an opinion of counsel as is set forth on
Exhibit A hereto.
- ---------
(b) Board Approval. The Company's Board of Directors has consented to
--------------
the transaction contemplated herein; such resolution is set forth as Exhibit B
---------
hereto.
(c) Certain Stockholder Approval. The terms of Section 7A herein
----------------------------
shall have been consented to by the holders of at least a majority in interest
of the Registrable Securities (as such term is defined in the Amended and
Restated Rights Agreement dated as of October 16, 1998 by and among the
Investors, the Founders, the Shareholders (as such terms are defined therein)
and the Company); such consent is set forth as Exhibit C hereto.
---------
<PAGE>
-2-
(d) E-commerce Agreement. The E-commerce Agreement between the
--------------------
Company and the Buyer, dated as of March 26, 2000 (the "E-Commerce Agreement")
shall be in full force and effect.
4. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to the Buyer as follows as of the date hereof:
4.1 Ownership of Shares. The Shares are duly authorized, fully paid
-------------------
and nonassessable, and are free and clear of all liens, encumbrances,
restrictions on transfer or issuance, preemptive rights, charges and claims of
every kind.
4.2 Organization, Good Standing and Authority of the Company. The
--------------------------------------------------------
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, and has the requisite power and
authority to own all of its properties and assets and to carry on its businesses
as they are now being conducted. The Company is duly qualified to do business
and is in good standing in each jurisdiction in which it owns or leases property
or engages in any activity which would require it to qualify to do business as a
foreign corporation and in which the failure to qualify could have a material
adverse effect upon the business or operations of the Company.
4.3 Authorization. The Company has full corporate power and
-------------
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of the Company and no other corporate proceedings or actions on the
part of the Company (including any consents or waivers required for the issuance
of the Shares) are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement constitutes the valid and binding
obligation of the Company, enforceable in accordance with its terms, except as
enforcement hereof may be limited by bankruptcy, insolvency, moratorium or other
similar laws relating to or affecting the rights of creditors generally and
subject to the fact that equitable remedies are discretionary and may not be
granted by a court of competent jurisdiction. The copies of the Company's
charter documents and bylaws which have been filed with the SEC from time to
time reflect all amendments made thereto at anytime prior to the date of this
Agreement and are correct and complete.
4.4 No Default. The execution, delivery and performance of this
----------
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby do not and will not constitute a default under any of the
terms, conditions or provisions of the Certificate of Incorporation or By-Laws
of the Company, or any material contract, agreement or arrangement to which the
Company is a party or by which it is bound.
4.5 Capital Stock of Company. The authorized, issued and outstanding
------------------------
capital stock of the Company on March 26, 2000 is as set forth on Attachment 1
------------
hereto; the Shares represent, as of the date thereof, 10% of the fully-diluted
capital stock of the Company, not taking into effect the issuance of the Shares.
Except as set forth on Attachment 1, there are no outstanding options,
------------
convertible securities, warrants, agreements, restrictions, preemptive rights or
rights of first refusal, contracts, or commitments of any character which
entitle any person to acquire or otherwise relate to the issuance of any shares
of capital stock of the Company or
<PAGE>
-3-
which restrict or otherwise relate to or provide for the transfer of any
outstanding shares of capital stock of the Company.
4.6 Compliance with Laws. The Company holds all material licenses,
--------------------
approvals, certificates, permits, authorizations, copyrights, trademarks,
patents, service marks, trade names, or applications or registrations thereto,
necessary for the lawful conduct of its business and is in material compliance
with all applicable federal, state and local laws, rules, regulations and
ordinances.
4.7 Litigation. There is no action, suit, proceeding at law or in
----------
equity, arbitration or administrative or other proceeding by or before (or to
the best knowledge, information and belief of the Company any investigation by)
any governmental or other instrumentality or agency, pending, or, to the best
knowledge, information and belief of the Company, threatened against or
affecting the Company, or any of its properties or rights which could materially
and adversely affect the right or ability of the Company to carry on its
business as now conducted, or which could materially and adversely affect the
condition, whether financial or otherwise, or properties of the Company; and the
Company does not know of any valid basis for any such action, proceeding or
investigation. The Company is not subject to any judgment, order or decree
entered in any lawsuit or proceeding which may have a material adverse effect on
any of its operations, or on its ability to acquire any property or conduct
business in any area, and the Company has not received any opinion or memorandum
or legal advice from legal counsel to the effect that it is exposed, from a
legal standpoint, to any liability or disadvantage which may be material to its
business.
4.8 Tax Matters. The Company has filed all tax returns which it is
-----------
required to file under applicable laws and regulations; all such tax returns are
complete and correct in all material respects and have been prepared in
compliance with all applicable laws and regulations in all material respects;
the Company has paid all taxes due and owing by it (whether or not such taxes
are required to be shown on a tax return) and has withheld and paid over to the
appropriate taxing authority all taxes which it is required to withhold from
amounts paid or owing to any employee, stockholder, creditor or other third
party.
4.9 Contracts and Commitments. All of the contracts, agreements and
-------------------------
instruments to which the Company is a party to or bound are valid, binding and
enforceable in accordance with their respective terms. The Company has performed
all obligations required to be performed by it and is not in default under or in
breach of nor in receipt of any claim of default or breach under any contract,
agreement or instrument to which the Company is subject; no event has occurred
which with the passage of time or the giving of notice or both would result in a
default, breach, or event of noncompliance by the Company under any contract,
agreement or instrument to which the Company is subject; the Company does not
have any present expectation or intention of not fully performing all such
obligations; the Company has no knowledge of any breach or anticipated breach by
the other parties to any contract, agreement, instrument or commitment to which
it is a party.
4.10 Brokerage. There are no claims for brokerage commissions,
---------
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement binding
upon the Company. The Company shall pay,
<PAGE>
-4-
and hold the Buyer harmless against, any liability, loss or expense (including,
without limitation, reasonable attorneys' fees and out of pocket expenses)
arising in connection with any such claim.
4.11 Governmental Consent. No permit, consent, approval or
--------------------
authorization of, or declaration to or filing with, any governmental authority
is required in connection with the execution, delivery and performance by the
Company of this Agreement.
4.12 Compliance with Laws. The Company has not violated in any
--------------------
material manner any law or any governmental regulation or requirement, and the
Company has not received notice of any such violation. The Company is not
subject to, and has no reason to believe it may become subject to, any liability
(contingent or otherwise) or corrective or remedial obligation arising under any
federal, state, local or foreign law, rule or regulation (including the common
law) relating to or regulating health, safety, pollution or the protection of
the environment.
4.13 Disclosure. There is no fact (including any disclosed herein)
----------
which the Company has not disclosed to the Buyer in writing and of which any of
its officers, directors or executive employees is aware and which has had or
would reasonably be expected to have a material adverse effect upon the existing
or expected financial condition, operating results, assets, customer or supplier
relations, employee relations or business prospects of the Company.
5. Representations and Warranties of the Buyer. The Buyer represents and
-------------------------------------------
warrants to the Company as follows:
5.1 Organization, Good Standing and Authority of the Buyer. The
------------------------------------------------------
Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the Commonwealth of Massachusetts, and has the requisite power
and authority to own all of its properties and assets and to carry on its
businesses as they are now being conducted.
5.2 Authorization. The Buyer has full corporate power and authority
-------------
to enter into this Agreement and to carry out its obligations hereunder. This
Agreement constitutes the valid and binding obligation of the Buyer, enforceable
in accordance with its terms, except as enforcement hereof may be limited by
bankruptcy, insolvency, moratorium or other similar laws relating to or
affecting the rights of creditors generally and subject to the fact that
equitable remedies are discretionary and may not be granted by a court of
competent jurisdiction.
5.3 No Default. The execution, delivery and performance of this
----------
Agreement by the Buyer and the consummation by the Buyer of the transactions
contemplated hereby do not and will not constitute a default under any of the
terms, conditions or provisions of the Certificate of Incorporation or By-Laws
of the Buyer, or any material contract, agreement or arrangement to which the
Buyer is a party or by which it is bound.
5.4 Investment. The Buyer is acquiring the Shares for its own
----------
account, for investment purposes only, and not with a view to the sale,
assignment, transfer or other distribution thereof. The Buyer recognizes that
the Shares have not been registered under the Securities Act of 1933, as amended
(the "Securities Act"), and the Buyer agrees that it will not
--------------
<PAGE>
-5-
sell, assign, transfer, or otherwise distribute the Shares in violation of the
Securities Act. The Buyer is "accredited" as such term is defined under the
Securities Act.
5.5 Investigation. The Buyer is knowledgeable and experienced in the
-------------
making of investments, is aware that the Company is a newly-formed company and
is able to bear the economic risk of loss of its investment in the Company. The
foregoing representation shall not be construed in any way so as to limit,
define or in any way affect the Company's liability arising from the warranties
and representations of the Company in this or any other agreement with the Buyer
or any affiliate of the Buyer.
5.6 Reliance. The Buyer has been advised that the Shares have not
--------
been and are not being registered under the Securities Act or under the "blue
sky" laws of any jurisdiction and that the Company in issuing the Shares is
relying upon, among other things, the representations and warranties of the
Buyer contained in this Section 5 in concluding that such issuance is a "private
offering" and does not require compliance with the registration provisions of
the Securities Act.
5.7 Brokerage. There are no claims for brokerage commissions,
---------
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement binding
upon the Buyer. The Buyer shall pay, and hold the Company harmless against, any
liability, loss or expense (including, without limitation, reasonable attorneys'
fees and out of pocket expenses) arising in connection with any such claim.
6. Legends. The Buyer understands and agrees that each certificate
-------
representing the Shares delivered to the Buyer hereunder shall bear legends
substantially as follows:
"The shares represented hereby have not been registered under the Securities Act
of 1933, as amended, and may not be sold or transferred unless the registration
provisions of said Act have been complied with or unless in the opinion of
counsel satisfactory to the Company both as to opinion and counsel compliance
with such provisions is not required."
7. Affirmative Covenants of the Company.
------------------------------------
A(a) The Company covenants that, on or before the date which is nine
months from the date hereof Company shall file with the Securities and Exchange
Commission ("SEC") a Registration Statement on Form S-3 (a "Form S-3") (or any
successor form to Form S-3) for a public resale offering of the Shares and shall
use reasonable best efforts to cause such registration statement to become
effective on the date which is no more than one year from the date hereof (the
"Effective Date"), and to remain effective for the period ending on the first to
occur of (x) the date the resale of all shares registered thereunder is complete
or (y) the three year anniversary of the Effective Date if the Shares then held
by Buyer represent more than five percent of the outstanding Common Stock of the
Company or (z) the two year anniversary of the Effective Date if the Shares then
held by Buyer represent more five percent or less of the outstanding Common
Stock of the Company. If for any reason Company is not eligible to file such
registration statement on Form S-3 (or any successor form to Form S-3), Company
shall effect such registration using such form as Company is then eligible to
use.
<PAGE>
-6-
(b) In the case of any registration pursuant to this Section 7A, Company
shall keep Lycos advised of the initiation and completion of such registration.
At its expense, Company will promptly:
(i) Prepare and file with the SEC the registration statement
described in Section 7A(a) above and thereafter use commercially reasonable
efforts to cause such registration statement to become effective;
(ii) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectuses used in connection with
such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(iii) Furnish to Lycos such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the Securities Act, and such other documents as Lycos may reasonably
request in order to facilitate the disposition of the securities covered by
such registration statement;
(iv) Use commercially reasonable efforts to register and qualify the
securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by Lycos, provided that Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such states or
jurisdictions;
(v) Notify Lycos at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing;
(vi) Cause all such Shares to be listed on each securities exchange
or market system on which similar securities issued by the Company are then
listed; and
(vii) Provide a transfer agent and registrar for all such Shares not
later than the effective dates of such registration statements.
(c) Lycos shall provide Company with all necessary and reasonable
assistance in the preparation and filing of the registration statement required
to be prepared and filed by Company and all other obligations of Company under
this Section 7A. Company's obligations under this Section 7A is conditioned in
all respects on the provision of all necessary and reasonable assistance to
Company by Lycos.
(d) Company shall pay the expenses incurred by it in complying with its
obligations under this Section 7A, including all registration and filing fees,
<PAGE>
-7-
exchange listing fees, fees and expenses of counsel for Company, and fees and
expenses of accountants for Company (but excluding all legal expenses,
commissions and discounts of Lycos).
(e) Company shall have the right, upon the advice of the Board of
Directors of Company (the "Board"), upon giving written notice to Lycos of the
exercise of such right, to require Lycos not to sell any shares pursuant to the
registration statement filed pursuant to Section 7A(a) for a reasonable period
(as determined in good faith by the Board) from the date on which such notice is
given (a "black-out period"), if (i)(A) Company is engaged in or proposes to
engage within ten days in discussions or negotiations with respect to, or has
proposed or taken a substantial step to commence, or there otherwise is pending,
any merger, acquisition, other form of business combination, divestiture, tender
offer, financing or other transaction, or there is an event or state of facts
relating to Company, in each case which is material to Company (as reasonably
determined by the Board) (any such negotiation, step, event or state of facts
being herein called "Material Activity"), (B) in the reasonable judgment of the
Board, after consultation with and acting upon the advice of outside counsel,
disclosure of such Material Activity would be necessary or advisable under
applicable securities laws and (C) such disclosure would, in the reasonable
judgment of the Board, be adverse to the interests of Company, or (ii) the
Board, in its reasonable judgment, deems it necessary to file a post-effective
amendment to such registration statement or to prepare a supplement to, or
otherwise amend, the form of prospectus contained therein. During any such
black-out period, Lycos agrees not to sell any Shares under such registration
statement for such period of time as the Board, acting on the advice of outside
counsel, may in good faith deem advisable; provided, however, that no single
black-out period will be longer than forty-five (45) calendar days and, in the
aggregate, all black-out periods in any twelve (12) month period shall not
include more than one hundred twenty (120) calendar days. The period of
effectiveness of any registration statement in effect at the time of a black-out
period and the termination period under Section 7A(a) shall be extended for a
period equal to the black-out period.
(f) The Company will indemnify and hold harmless Lycos, its officers,
directors, partners, members, shareholders, employees, affiliates and agents
(collectively, "Agents") each person who participates as an underwriter and
their respective Agent and each other person, if any, who controls such seller
or underwriter within the meaning of the Securities Act and their respective
Agents, against any and all losses, claims, damages or liabilities, joint or
several, actions or proceedings (whether commenced or threatened) in respect
thereof, and expenses (as incurred or suffered and including, but not limited
to, any and all expenses incurred in investigating, preparing or defending any
litigation or proceeding, whether commenced or threatened, and the reasonable
fees, disbursements and other charges of legal counsel) in respect thereof
(collectively, "Claims"), insofar as such Claims arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in any registration statement or any prospectus or any preliminary prospectus
forming a part of such registration statement or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided, however, that
-------- -------
the Company will not be liable in any such case if and to the extent that any
such Claim arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished by Lycos, any such underwriter or any such controlling person in
writing specifically for use in such registration statement or prospectus,
<PAGE>
-8-
and, provided, further, that the Company shall not be liable to any person to
-------- -------
the extent that any such Claim arises out of a seller's or underwriter's failure
to send or give a copy of the final prospectus, as the same may be then
supplemented or amended, to the person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Shares to such person if such statement or omission
was corrected in such final prospectus. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of any
person who may be entitled to indemnification pursuant to this Section and shall
survive the transfer of Shares by Lycos or underwriter.
(g) Lycos will indemnify and hold harmless the Company, its Agents, each
person who participates as an underwriter and their respective Agents and each
other person, if any, who controls the Company or any such underwriter within
the meaning of the Securities Act and their respective Agents, against any and
all Claims, insofar as such Claims arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement or any prospectus or any preliminary prospectus forming a
part of such registration statement or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by Lycos expressly for use therein; provided, however,
-------- -------
that the liability of Lycos hereunder shall be limited to the net proceeds
received by Lycos upon the sale of Shares pursuant to the registration statement
giving rise to such Claims. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such indemnified party
and shall survive the transfer of Shares by Lycos or underwriter.
(h) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 7A and shall only relieve
it from any liability which it may have to such indemnified party under this
Section 7A if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof (which notice shall be given within 20 days from receipt of the
notice provided to the indemnifying party by the indemnified party), the
indemnifying party shall not be liable to such indemnified party under this
Section 7A for any legal expenses subsequently incurred by such indemnified
party in connection with the defense thereof other than reasonable costs of
investigation and of liaison with counsel so selected, provided, however, that,
-------- -------
if the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be reasonable defenses available to it which are different from
or additional to those available to the indemnifying party or if the interests
of the indemnified party reasonably may be deemed to conflict with the interests
of the indemnifying party, the indem-
<PAGE>
-9-
nified party shall have the right to select a separate counsel and to assume
such legal defenses and otherwise to participate in the defense of such action,
with the expenses and fees of such separate counsel and other expenses related
to such participation to be reimbursed by the indemnifying party as incurred. No
indemnifying party shall be liable for any settlement or any such claim or
action effected without its written consent, which consent shall not be
unreasonably withheld.
(i) In any case in which indemnification provided for in sections (f) or
(g) is unavailable to an indemnified party hereunder in respect of any Claim,
then the indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such Claim (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying person on the one hand and the
indemnified person, on the other from the distribution of Shares or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the indemnifying
person on the one hand and of the indemnified person on the other in connection
with the statements or omissions (or alleged statements or omissions) which
resulted in such expense, loss, damage or liability, as well as any other
relevant equitable considerations; provided that the foregoing contribution
--------
agreement shall not inure to the benefit of any indemnified party if
indemnification would be unavailable to such indemnified party by reason of the
provisions contained in Section (f), and in no event shall the obligation of any
indemnifying party to contribute under this Section (i) exceed the amount that
such indemnifying party would have been obligated to pay by way of
indemnification if the indemnification provided for under Sections (f) or (g)
had been available under the circumstances.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section (i) were determined by pro rata allocation
or by any other method of allocation which does not take into account the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by a party as a result of any Claim referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth in Section (h), any legal or other fees, costs or expenses
reasonably incurred by such party in connection with any investigation or
proceeding. No person or entity guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such fraudulent
misrepresentation.
(j) Notwithstanding this Section 7A, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with any underwritten offering contemplated by this
Agreement are in conflict with the provisions of this Section 7A, the provisions
of such underwriting agreement shall be controlling.
(k) The indemnification and contribution required by this Section 7A
shall be made by periodic payments of the amount thereof during the course of
any investigation or defense, as and when bills are received or any expense,
loss, damage or liability is incurred.
<PAGE>
-10-
B The Company covenants to make and keep public information
available, as those terms are understood and defined in Rule 144 under the
Securities Act; to use its commercially reasonable best efforts to file with the
SEC in a timely manner all reports and other documents required of the Company
under the Securities Act and the Exchange Act; and to furnish to Lycos (and
permitted assignees) forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of such Rule 144 and of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed
by the Company as Lycos may reasonably request in availing itself of any rule or
regulation of the SEC allowing Lycos to sell any Common Stock without
registration.
8. Affirmative Covenants of Buyer. Buyer covenants that it will, in
------------------------------
selling Shares pursuant to the registration statement described in 7A(a),
(i)comply with all trading windows as they are then applicable to Company
employees (provided such restrictions are provided to Buyer in writing at least
twenty days prior to any such restricted period), (ii) not sell, in any quarter,
more than _____ [15%] Shares, (iii) not sell, on any day, more than ______[2%]
Shares, and (iv) not sell any Shares until the date which is one year from the
date hereof; provided, however, the foregoing restrictions (ii) and (iii) shall
no longer be applicable if the Company (x) becomes 60 days in arrears on amounts
owing to Buyer under Section 7 of the E-Commerce Agreement, (y) if the E-
Commerce Agreement is otherwise no longer in force and effect, or (z) at any
time when the Form S-3 is not effective pursuant to 7A(a).
9. Remedies. Any person having rights under any provision of this
--------
Agreement shall be entitled to enforce such rights specifically, to recover
damages caused by reason of any breach of any provision of this Agreement, and
to exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
10. Successors and Assigns. All covenants and agreements in this
----------------------
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not, except that neither party hereto shall have the
right to assign any of its rights hereunder or any interest herein without
obtaining the written consent of the other to such assignment; provided,
however, that a party shall be able to assign its rights hereunder without
necessity of consent of the other party in connection with any (i)
reorganization, consolidation or merger (or similar transaction or series of
transactions) of the party with or into any other corporation or corporations in
which the holders of such assigning party's outstanding stock immediately before
such transaction or series of related transactions do not, immediately after
such transaction or series of related transactions, retain stock representing a
majority of the voting power of the surviving corporation (or its parent
corporation if the surviving corporation is wholly owned by the parent
corporation) of such transaction or series of related transactions; or (ii) a
sale of all or substantially all of the assets of such assigning party.
<PAGE>
-11-
11. Survival of Representations and Warranties. All representations and
------------------------------------------
warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby for a period of nine
months, regardless of any investigation made by the party or on its behalf.
12. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but the Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
13. Entire Agreement. Except as otherwise expressly set forth herein,
----------------
this document embodies the complete agreement and understanding among the
parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
14. Notices. All notices, requests, consents and other communications
-------
hereunder shall be in writing and shall be delivered in person, mailed by
certified or registered mail, return receipt requested, or by overnight courier,
addressed as follows:
if to the Company, to
Autoweb.com, Inc.
Attention: General Counsel
3270 Jay Street
Santa Clara, CA 95054
Phone: 408-855-3377
if to Lycos, to
LYCOS, INC.
Attention: General Counsel
400-2 Totten Pond Road
Waltham, MA 02451
Phone: 781-370-2700
15. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
16. Amendment and Waiver. Except as otherwise provided herein, no
--------------------
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or the Buyer unless such modification, amendment
or waiver is approved in writing by the
<PAGE>
-12-
Company and the Buyer. The failure of any party to enforce any of the provisions
of this Agreement shall in no way be construed as a waiver of such provisions
and shall not affect the right of such party thereafter to enforce each and
every provision of this Agreement in accordance with its terms.
17. Governing Law. This Agreement and the respective rights and
-------------
obligations of the parties hereto shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, without giving
effect to principles of conflicts of laws.
18. Descriptive Headings. The descriptive headings in this Agreement are
--------------------
inserted for convenience only and do not constitute a part of this Agreement.
19. 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 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 and the consummation of the
transactions contemplated hereby.
[Remainder of page intentionally left blank]
<PAGE>
-13-
IN WITNESS WHEREOF, the Company and the Buyer have executed this Stock
Purchase Agreement as of the date first set forth above.
AUTOWEB.COM, INC.
By: _________________________________
Name:
Title:
LYCOS, INC.
By: ________________________________
Name:
Title:
<PAGE>
-14-
ATTACHMENT 1
CAPITALIZATION
Fully-diluted capital stock (common stock and outstanding options) to be used
in calculation of Shares to be purchased by Buyer: 30,350,250
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-2000
<PERIOD-START> JAN-01-1999 JAN-01-2000
<PERIOD-END> MAR-31-1999 MAR-31-2000
<CASH> 65,335 22,701
<SECURITIES> 8,788 2,550
<RECEIVABLES> 3,413 12,535
<ALLOWANCES> (541) (1,564)
<INVENTORY> 0 0
<CURRENT-ASSETS> 78,495 46,609
<PP&E> 2,139 4,825
<DEPRECIATION> (955) (2,360)
<TOTAL-ASSETS> 79,679 65,953
<CURRENT-LIABILITIES> 8,060 11,405
<BONDS> 617 266
0 0
0 0
<COMMON> 18 22
<OTHER-SE> 70,984 54,260
<TOTAL-LIABILITY-AND-EQUITY> 79,679 65,953
<SALES> 5,744 15,794
<TOTAL-REVENUES> 5,744 15,794
<CGS> 648 1,661
<TOTAL-COSTS> 648 1,661
<OTHER-EXPENSES> 7,575 21,679
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (39) (318)
<INCOME-PRETAX> (2,440) (7,228)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,440) (7,228)
<EPS-BASIC> (0.25) (0.28)
<EPS-DILUTED> 0 0
</TABLE>
