<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 26, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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QUOTESMITH.COM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
7375
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION OR CODE NUMBER)
58-1521612
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
8205 SOUTH CASS AVENUE, SUITE 102
DARIEN, ILLINOIS 60561
(630) 515-0170
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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BURKE A. CHRISTENSEN, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
QUOTESMITH.COM, INC.
8205 SOUTH CASS AVENUE, SUITE 102
DARIEN, ILLINOIS 60561
(630) 515-0170
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
ROBERT A. MCWILLIAMS, ESQ.
CRAIG C. BRADLEY, ESQ.
GORDON P. PAULSON, ESQ.
FREEBORN & PETERS
311 SOUTH WACKER DRIVE, SUITE 3000
CHICAGO, IL 60606
(312) 360-6551
(312) 360-6570 (FAX)
LARRY A. BARDEN, ESQ.
JON A. BALLIS, ESQ.
SHARON R. FLANAGAN, ESQ.
SIDLEY & AUSTIN
ONE FIRST NATIONAL PLAZA
CHICAGO, ILLINOIS 60603
(312) 853-7000
(312) 853-7036 (FAX)
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APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement number for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C>
Common Stock, par value $0.001 per share(2)............. $80,000,000.00 $22,240.00
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</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o) under the Securities Act of 1933.
(2) Includes certain associated stock purchase rights issued pursuant to a
Rights Agreement.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE CANNOT
SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES, AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY STATE WHERE SUCH AN OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED , 1999
PROSPECTUS
SHARES
QUOTESMITH LOGO
COMMON STOCK
This is an initial public offering of common stock by Quotesmith.com, Inc.
We are selling shares of our common stock. We estimate that the
initial public offering price will be between $ and $ per share.
------------------------
There is currently no public market for our common stock. We have applied
to have the common stock approved for quotation on the Nasdaq National Market
under the symbol "QUOT."
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<TABLE>
<CAPTION>
PER SHARE TOTAL
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<S> <C> <C>
Initial public offering price............................... $ $
Underwriting discounts and commissions...................... $ $
Proceeds to Quotesmith.com, before expenses................. $ $
</TABLE>
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Quotesmith.com has granted the underwriters an option for a period of 30
days to purchase up to additional shares of common stock. The underwriters are
severally underwriting the shares being offered on a firm commitment basis.
------------------------
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
HAMBRECHT & QUIST
PAINEWEBBER INCORPORATED
ABN AMRO ROTHSCHILD
A DIVISION OF ABN AMRO
INCORPORATED
, 1999
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[PROPOSED GATEFOLD ARTWORK]
GATEFOLD PAGE
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Top of page: Capital Letters, "BUYER-DRIVEN (circular stock photo, fades)
COMMERCE
Headline: Quotesmith.com enables self-directed consumers and business
owners to obtain instant quotes from over 300 insurance
companies. We quarantee the accuracy of every quote. You can
buy from the company of your choice without the involvement of any
commissioned salespeople.
Subheadings: List of available instant quotes by product line in left 1/3
column
Pictures: Quotesmith.com home page, various other pages, right 2/3
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Top of left
page: Instant term life quotes
Headline: With Quotesmith.com's instant term life price comparison service,
you are quaranteed to view the lowest term life premiums- or you
get $500...
Subheadings: Instant quotes are available from more than 120 term life
companies. It's quick and easy to obtain instant quotes and get
answers online to frequently asked questions.
Pictures: Quotesmith.com term life quote page, various other pages as
relate to captions
Bottom of left
page: Instant auto insurance quotes section
Headline: Instant auto insurance quotes
Subheadings: Thanks to click-through agreements with Intuit, Insurance
Services, Inc. and
The Progressive Corporation, we've made it easy to get instant
auto insurance quotes from 45 auto insurance companies. And now
several companies offer the ability to buy online which saves
more time.
Pictures: Quotesmith.com home page, various other pages as relate to
captions
Top of right
page: Instant medical insurance quotes
Headline: Now small businesses, families and individuals can get instant
medical insurance quotes...
Subheadings: Instant quotes are now available from more than 30 medical
insurance companies. We've made it easy to view basic coverage
information, optional coverages and costs and to request an
application online from the company of your choice.
Pictures: Quotesmith.com medical insurance quote page, various other pages
as relate to captions
Bottom of
right page:
Headline: Instant group medical, dental, Medicare supplement, "no-exam"
whole life and annuity quotes
Subheadings: Quotesmith.com offers a wide range of instant quotes on several
popular lines of insurance and offers a complete, "quote to
policy delivery" solution delivered by our customer service
representatives. We keep you in control of your insurance
purchase decisions.
Pictures: Various Quotesmith.com quote pages relating to the caption.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Prospectus Summary.......................................... 3
Risk Factors................................................ 7
Special Note Regarding Forward-Looking Statements........... 18
Use of Proceeds............................................. 19
Dividend Policy............................................. 19
Capitalization.............................................. 20
Dilution.................................................... 21
Selected Financial and Other Data........................... 22
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 23
Business.................................................... 32
Management.................................................. 45
Certain Transactions........................................ 53
Principal Stockholders...................................... 54
Description of Capital Stock................................ 56
Shares Eligible for Future Sale............................. 61
Underwriting................................................ 63
Legal Matters............................................... 65
Experts..................................................... 65
Additional Information...................................... 65
Index to Financial Statements............................... F-1
</TABLE>
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We maintain a Web site on the World Wide Web at www.quotesmith.com. The
reference to our Web site does not constitute incorporation by reference into
this prospectus. Quotesmith.com and the Quotesmith.com logo are service marks of
Quotesmith.com, Inc. All brand names and trademarks appearing in this prospectus
are the property of their respective holders.
-------------------------
This prospectus includes statistical data regarding our company, the
Internet and the insurance industry. Such data are based on our records or are
taken or derived from information published or prepared by various sources,
including International Data Corporation, Forrester Research, Inc., A.M. Best
Company, Inc. and the Life Insurance Marketing Research Association.
2
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PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in the
prospectus. This summary may not contain all of the information that you should
consider before investing in our common stock. You should read the entire
prospectus carefully, including the information under "Risk Factors" beginning
on page 7 and the financial statements beginning on page F-1, before making an
investment decision.
QUOTESMITH.COM
We believe that Quotesmith.com is the most comprehensive Internet-based
insurance service available. The Quotesmith.com service enables consumers and
business owners to obtain instant quotes from over 300 insurance companies, and
we guarantee the accuracy of every quote. Combining the reach and efficiency of
the Internet with our proprietary database and industry expertise developed over
the past 15 years, we provide a complete "quote to policy delivery" insurance
solution without the involvement of any commissioned salespeople.
We have created a model that addresses the challenges faced by traditional
insurance distribution methods in a manner that offers significant benefits to
both consumers and insurance companies. The Quotesmith.com model allows
consumers to: (1) efficiently search for, analyze and compare insurance
products; (2) quickly request and obtain insurance quotes; and (3) easily select
and purchase insurance from the insurance company of their choice. Since we
began providing instant insurance quotes on the Internet in May 1996, we have
delivered more than 27,000 policies.
Insurance premiums paid in the United States in 1998 represented over $1.1
trillion according to A.M. Best. The growing acceptance of the Internet and
electronic commerce presents a significant opportunity for the insurance
industry by allowing self-directed consumers to more efficiently and effectively
research and transact with insurance companies. The fragmentation of the
insurance industry and the significant price and product variation has led
consumers and insurance companies to seek alternative means of purchase and
distribution. According to Forrester Research, Internet-influenced sales of
insurance are expected to grow from $1.5 billion in 1998 to $11.0 billion in
2003. We believe that the vast information sharing and communications power of
the Internet will significantly improve the insurance industry for both
consumers and insurance companies.
While a number of new companies have emerged in an attempt to capitalize on
this online insurance opportunity, we do not believe that any of these efforts
fully addresses the limitations inherent in traditional insurance distribution
or the challenges faced by consumers in effectively purchasing insurance. The
Quotesmith.com solution provides the following principal advantages to both
consumers and insurance companies:
- Comprehensive source of insurance information and products including
insurance quotes from over 300 insurance companies across several types
of insurance and access to what we believe is the largest, most complete
repository of comparative information on insurance products, insurance
pricing and insurance providers.
- Guaranteed-accurate instant quotes for which we offer a $500 cash reward
guarantee that we provide an accurate quote. This Quotesmith.com
guarantee is unmatched by our competitors.
- A no salesperson approach that eliminates face-to-face commissioned
agents from the insurance purchase process and puts consumers in control
of their insurance purchase decisions.
3
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- Convenience for consumers to gather information and compare insurance
products on a single Web site, from any location and on their own time.
- Quote to policy delivery support that provides continued, value-added
service and assistance throughout the insurance purchase process
including answering questions and arranging paramedical examinations.
- Focus on customer service through a highly-trained, experienced and
non-commissioned customer service staff that provides support throughout
the application process and aims to eliminate consumer dissatisfaction
and frustration.
- Fully licensed national insurance agency with the ability to provide
insurance policies to consumers throughout the United States.
- User friendly system that provides service 24 hours a day, 7 days a week
through an easy to use Web site designed for fast viewing and rapid
downloading.
The Quotesmith.com model is unique and distinct from both traditional and
online models. Our Internet-based model provides a complete "quote to policy
delivery" insurance solution that puts consumers in control of their insurance
purchase process. By providing extensive comparative information and responsive
customer service throughout the entire insurance information gathering and
purchase process, our model enhances the consumer experience at each stage and
streamlines the overall process. We are not a lead referral service or an online
distribution channel for a single insurance company, but rather we generate
revenues when our customers have successfully obtained an insurance policy from
the insurance company of their choice through our service.
We strive to be the leading Internet-based service for all insurance needs
of consumers and small businesses. We plan to continue to build the
Quotesmith.com brand, offer additional insurance products, expand the number of
participating insurance companies, leverage our customer base, strengthen and
pursue strategic relationships and continue to focus on customer service.
We incorporated and began our operations in March 1984 with an electronic
quotation and policy information service for insurance agents and brokers. Over
the past 15 years, we have been developing our proprietary insurance price
comparison service technology and industry expertise. In 1993, we became
licensed to offer insurance throughout the United States and in 1994 began
providing quotes directly to consumers. We recently entered into a strategic
agreement with Intuit Insurance Services, Inc., a wholly-owned subsidiary of
Intuit Inc., which licenses our insurance quotation database technologies and
extends our customer service and insurance brokerage capabilities to Intuit
Insurance Services and certain of its affiliated Internet sites.
Our headquarters and principal offices are located at 8205 South Cass
Avenue, Suite 102, Darien, Illinois 60561, and our telephone number is (630)
515-0170.
4
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THE OFFERING
Common stock offered by Quotesmith.com...... shares
Common stock to be outstanding after this
offering.................................... shares
Use of proceeds............................. For general corporate purposes,
including selling, marketing and
brand promotion expenditures and
working capital purposes. See
"Use of Proceeds" on page 19.
Risk factors................................ For a discussion of certain
risks you should consider before
investing in Quotesmith.com
common stock, see "Risk Factors"
beginning on page 7.
Proposed Nasdaq National Market symbol...... QUOT
------------------------
These share numbers are based on shares outstanding as of May 1, 1999, but
exclude:
- 500,000 shares of common stock issuable upon exercise of options
outstanding at May 1, 1999 under our 1997 Stock Option Plan; and
- 1,225,000 shares of common stock available for future grant or issuance
under our 1997 Stock Option Plan and 1999 Employee Stock Purchase Plan.
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Unless otherwise indicated, all information in this prospectus assumes that
the underwriters' over-allotment option will not be exercised.
5
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The statement of operations data and balance sheet data presented below are
derived from our financial statements included at the end of this prospectus
beginning on page F-1. The as adjusted balance sheet data summarized below
reflects the application of the net proceeds from the sale of the shares of
common stock in this offering at an assumed initial public offering price of
$ per share, after deducting estimated underwriting discounts and
commissions and estimated offering expenses.
SUMMARY FINANCIAL AND OTHER INFORMATION
(in thousands, except per share data and selected operating statistics)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------- --------------------
1996 1997 1998 1998 1999
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<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.......................... $3,812 $4,262 $5,576 $1,165 $ 1,463
Expenses(1)....................... 3,446 4,898 5,774 1,077 2,909
Operating income (loss)........... 366 (636) (198) 88 (1,446)
Net income (loss)................. 223 (467) (196) 78 (1,430)
Basic and diluted net income
(loss) per share................ $ 0.02 $(0.04) $(0.02) $ 0.01 $ (0.11)
Weighted average common shares and
equivalents outstanding:
Basic........................ 12,154 11,956 12,258 11,958 13,023
Diluted...................... 12,154 11,956 12,258 11,983 13,023
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1999
--------------------
AS
ACTUAL ADJUSTED
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<S> <C> <C>
BALANCE SHEET DATA:
Cash................................................... $2,946 $
Working capital........................................ 3,316
Total assets........................................... 4,310
Total stockholders' equity............................. 3,734
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------- --------------------
1996 1997 1998 1998 1999
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<S> <C> <C> <C> <C> <C>
SELECTED OPERATING STATISTICS:
Quotes............................ 354,066 591,823 831,291 126,753 335,784
Paid policies..................... 6,701 8,755 10,920 2,455 2,835
</TABLE>
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(1) Since January 1, 1997, our direct response advertising costs no longer
qualify for deferral and are expensed as incurred. If direct response
advertising costs had not been deferred and amortized for any year, expenses
would have been $3.6 million in 1996 and $4.4 million in 1997.
6
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RISK FACTORS
You should consider carefully the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk. Additional risks
and uncertainties that are not yet identified or that we currently think are
immaterial may also harm our business and financial condition in the future. Any
of the following risks could materially harm our business, operating results and
financial condition and could result in a complete loss of your investment.
RISKS RELATED TO OUR BUSINESS
OUR LIMITED ELECTRONIC COMMERCE HISTORY MAKES EVALUATING OUR BUSINESS DIFFICULT
Although we began operations in 1984, we did not begin our Internet
operations until May 1996. Accordingly, we have a limited history in operating
our electronic commerce business on which you can evaluate our company and
prospects. Our prospects must be considered in light of the risks,
uncertainties, expenses and difficulties frequently encountered by companies in
a transitional stage of development, particularly companies in new and rapidly
evolving markets, such as electronic commerce, using new and unproven business
models.
OUR INTERNET-BASED INSURANCE SERVICE HAS NOT BEEN PROFITABLE AND MAY NOT BECOME
PROFITABLE IN THE FUTURE
Our first complete year of focusing on our Internet-based insurance service
was 1997. We incurred operating losses of approximately $636,000 in 1997,
$198,000 in 1998 and $1.4 million for the three months ended March 31, 1999.
Because we plan to continue to significantly increase our operating expenses in
an attempt to increase our consumer base, we will need to generate significantly
higher revenues to achieve profitability. Even if we achieve profitability, we
may not be able to maintain profitability in the future. In addition, as our
business model evolves, we expect to introduce a number of new products and
services that may or may not be profitable for us.
NEARLY ALL OF OUR REVENUES ARE CURRENTLY DERIVED FROM CONSUMERS PURCHASING TERM
LIFE INSURANCE THROUGH US
Because nearly all of our revenues are currently derived from consumers
purchasing term life insurance through us, our current financial condition is
largely dependent on the term life insurance industry and in particular
consumers' demand for term life insurance policies. If sales of term life
insurance decline, whether due to the introduction of new products, shifting
consumer preferences or otherwise, our business would be substantially harmed.
In addition, in recent years, term life insurance premiums have been declining.
This decline has caused our average commission per equivalent face amount of a
policy to decrease and has contributed to our operating losses since 1997. If
term life insurance premiums continue to decline, it may become more difficult
for us to become profitable.
7
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IF THE PURCHASE OF INSURANCE OVER THE INTERNET OR OUR SERVICE OFFERINGS DO NOT
ACHIEVE WIDESPREAD CONSUMER ACCEPTANCE, OUR BUSINESS WILL BE HARMED
Our success will depend in large part on widespread consumer acceptance of
purchasing insurance online. The development of an online market for insurance
has only recently begun, is rapidly evolving and likely will be characterized by
an increasing number of market entrants. Therefore, there is significant
uncertainty with respect to the viability and growth potential of this market.
Our future growth, if any, will depend on the following critical factors:
- the growth of the Internet as a commerce medium generally, and as a
market for consumer financial products and services specifically;
- consumers' willingness to conduct self-directed insurance research;
- our ability to successfully and cost-effectively market our services to a
sufficiently large number of consumers;
- our ability to consistently fulfill application requests on an efficient
and timely basis; and
- our ability to overcome a perception among many consumers that obtaining
insurance online is risky.
There can be no assurance that the market for our services will develop,
that our services will be adopted or that consumers will significantly increase
their use of the Internet for obtaining insurance. If the online market for
insurance fails to develop, or develops more slowly than expected, or if our
services do not achieve widespread market acceptance, our business would be
significantly harmed.
WE MAY GENERATE LIMITED REVENUES BECAUSE CONSUMERS CAN OBTAIN FREE QUOTES AND
OTHER INFORMATION WITHOUT PURCHASING INSURANCE THROUGH OUR WEB SITE
We only generate revenues if a consumer purchases insurance through our
service. Consumers can access our Web site and obtain quotes and other
information free of charge without any obligation to purchase insurance through
us. Because virtually all of the insurance policies quoted at our Web site can
be purchased through sources other than us, consumers may take the quotes and
other information that we provide to them and purchase one of our quoted
policies from the agent or broker of their choice. If consumers only use our Web
site for quote information purposes, we will not generate revenues and our
business would be significantly harmed.
WE MAY EXPERIENCE SIGNIFICANT FLUCTUATIONS IN OUR QUARTERLY RESULTS, WHICH MAKES
IT DIFFICULT FOR INVESTORS TO MAKE RELIABLE PERIOD-TO-PERIOD COMPARISONS AND MAY
CONTRIBUTE TO VOLATILITY IN OUR STOCK PRICE
Our quarterly revenues and operating results have fluctuated significantly
in the past and we expect them to continue to fluctuate significantly in the
future. Causes of such fluctuations have included, among other factors:
- the length of time it takes for an insurance company to verify that an
applicant meets the specified underwriting criteria -- this process can
be lengthy, unpredictable and subject to delays over which we have little
or no control, including underwriting backlogs of the insurance company
and the accuracy of information provided by the applicant; we tend to
place a significant number of policies with the most price-competitive
insurance companies, who, due to volume, have longer and more
unpredictable underwriting time frames;
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- increases in selling and marketing expenses, as well as other operating
expenses;
- volatility in bonus commissions paid to us by insurance companies which
typically are highest in the fourth quarter;
- volatility in renewal commission income;
- the conversion and fulfillment rates of consumers' applications, which
vary according to insurance product;
- new sites, services and products by our competitors;
- price competition by insurance companies in the sale of insurance
policies; and
- the level of Internet usage for insurance products and services.
In addition, we have a very long revenue cycle. As a result, substantial
portions of our expenses, including selling and marketing expenses, are incurred
well in advance of potential revenue generation. If revenues do not meet our
expectations as a result of these selling and marketing expenses, our results of
operations will be harmed.
Any one or more of the above-mentioned factors could harm our business and
results of operations, which makes quarterly predictions difficult and often
unreliable. As a result, we believe that quarter-to-quarter comparisons of our
operating results are not necessarily meaningful and not good indicators of our
future performance. Due to the above-mentioned and other factors, it is possible
that in one or more future quarters our operating results will fall below the
expectations of securities analysts and investors. If this happens, the trading
price of our common stock would likely decrease.
WE MUST FURTHER DEVELOP OUR BRAND RECOGNITION AND SUCCESSFULLY EXPAND INTO
ADDITIONAL PRODUCTS OR OUR BUSINESS WILL SUFFER
There are a growing number of Web sites that offer services that are
competitive with the services we offer. Therefore, we believe that broader
recognition and a favorable consumer perception of the Quotesmith.com brand are
essential to our future success. Accordingly, we intend to continue to pursue an
aggressive brand-enhancement strategy consisting of our traditional print
advertising, as well as national radio and television advertising, online
marketing and promotional efforts. We spent approximately $1.8 million on
selling and marketing during the twelve months ended December 31, 1998 and
$681,000 for the three months ended March 31, 1999. To increase awareness of our
brand we are expecting to spend significantly greater amounts. If these
expenditures do not result in a sufficient increase in revenues to cover such
additional selling and marketing expenses, our business, results of operations
and financial condition would be harmed.
We have recently expanded our product offering to include other types of
insurance in addition to our traditional term life product and may continue to
do so in the future. Expanding our product offering has required significant
expenditures and further expansion, if any, will require additional
expenditures. In addition, a portion of our increased selling and marketing
expenditures will be used to promote these new product offerings. However, to
date we have generated small amounts of revenues from our new product types. If
our new product offerings do not generate sufficient revenues to cover the
related expenditures, our business, results of operations and financial
condition would be harmed.
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PURSUANT TO OUR AGREEMENT WITH INTUIT INSURANCE SERVICES, WE MAY NOT PURSUE
CERTAIN STRATEGIC RELATIONSHIPS OR AGREEMENTS WITHOUT ITS PRIOR CONSENT; INTUIT
INSURANCE SERVICES MAINTAINS A WEB SITE THAT IS COMPETITIVE WITH OUR SERVICE
Pursuant to the service agreement we have with Intuit Insurance Services,
in some situations we may not enter into strategic relationships or agreement
with certain companies, many of whom are significant participants in electronic
commerce, without Intuit Insurance Services' prior consent. This agreement may
preclude us from entering into strategic relationships we find desirable. In
addition, Intuit Insurance Services' Quicken Insuremarket provides online
insurance services similar to ours. Because Intuit Insurance Services operates a
competitive service and Intuit Inc. is one of our significant stockholders, we
may face conflicts of interest with Intuit that could harm our business. For
more information about our relationship with Intuit Inc. and Intuit Insurance
Services refer to "Business -- Strategic Relationships and Agreements -- Intuit
Inc." on page 41.
OUR BUSINESS MAY BE HARMED IF CERTAIN HIGH VOLUME INSURANCE COMPANIES REFUSE TO
APPOINT US AS THEIR AGENT
We generate a significant portion of our revenues in any given year from a
small number of insurance companies. Our top five insurance companies in each
year represented 61.1% of the policies we delivered for the three months ended
March 31, 1999, 64.0% during 1998 and 77.5% in 1997. These insurance companies
that generate large policy volume for us do so principally because they offer
the lowest risk-adjusted premium rates during the relevant period.
We conduct our insurance business pursuant to agency contracts with
insurance companies. We cannot guarantee that we will continue to be appointed
as an agent to offer insurance for these or any other insurance companies. In
addition, these contracts, if entered into, can be terminated with or without
cause and with little or no notice to us. The loss of one or more of these
agency contracts with an insurance company that is charging competitive or low
premium rates could harm our business substantially.
WE DO NOT HAVE AGENCY CONTRACTS WITH ALL OF THE INSURANCE COMPANIES WE QUOTE ON
OUR WEB SITE AND SOME INSURANCE COMPANIES MAY REFUSE TO PARTICIPATE IN OUR
DATABASE OR REFUSE TO DO BUSINESS WITH US
While we obtain the information contained in our database directly from
over 300 insurance companies being quoted and listed at our Web site, we
currently hold agency contracts with 115 insurance companies. We typically seek
formal agency appointment from an insurance company after we receive a purchase
request for that insurance company's product from a consumer. In the past a
number of insurance companies quoted on our Web site have refused to appoint us
as an agent or refused to permit us to publish their quotes for various reasons,
including:
- we do not meet with our customers on a face-to-face basis;
- some insurance companies may have exclusive relationships with other
agents;
- we publicly market our service on a price-oriented basis which is not
compatible with the insurance company's branding efforts; and
- a formal business relationship with us might be perceived negatively by
the insurance company's existing distribution channels.
10
<PAGE> 14
We do not intentionally include in our database insurance companies who
object to their inclusion. If a significant number of insurance companies object
to the inclusion of their information in our database the breadth of our
database would be limited. In addition, we only generate revenues from the 115
insurance companies for whom we are appointed as an agent. If consumers desire
to purchase a material number of policies from insurance companies from whom we
are not appointed as an agent, and these insurance companies refuse to enter
into agency contracts with us, it could harm our business and results of
operations.
OUR STRATEGIC RELATIONSHIPS AND AGREEMENTS DO NOT CURRENTLY, AND MAY NEVER,
GENERATE A MATERIAL AMOUNT OF REVENUES FOR US
As part of our marketing strategy, we recently began to enter into certain
strategic relationships and agreements to increase our access to online
consumers. We currently have strategic agreements with Intuit Insurance
Services, drkoop.com, XOOM.com and The Progressive Corporation. However, to date
we have derived only a minimal amount of revenues from these arrangements. Most
of these strategic agreements permit either party to terminate the agreement
with short notice. As a result, we cannot assure you that any of these
relationships or agreements will generate any material amount of revenues in the
future. If our strategic relationships and agreements do not meet our
expectations regarding revenues and earnings, our business could be harmed.
IF WE DO NOT MANAGE OUR GROWTH EFFECTIVELY OUR BUSINESS COULD BE HARMED
We have expanded our operations significantly since May 1996 and anticipate
that further expansion will be required to realize our growth strategy. Our
operations growth has placed significant demands on our management and other
resources, which is likely to continue. To manage our future growth, we will
need to attract, hire and retain highly skilled and motivated officers, managers
and employees and improve existing systems and/or implement new systems for: (1)
transaction processing; (2) operational and financial management; and (3)
training, integrating and managing our growing employee base. We may not be
successful in managing or expanding our operations or maintaining adequate
management, financial and operating systems and controls.
IF OUR QUOTES ARE INACCURATE AND WE MUST PAY OUT CASH REWARD GUARANTEES, OUR
BUSINESS COULD BE HARMED.
We offer consumers a $500 cash reward guarantee that we provide an accurate
quote. In 1997, we paid $10,000 in cash reward guarantees, in 1998, we paid
$8,500 and for the three months ended March 31, 1999, we paid $4,000. If our
quotes or those of services with respect to which we have click-through
arrangements are inaccurate and we are required to pay a substantial number of
cash reward guarantees, we could be harmed.
IF WE LOSE ANY OF OUR EXECUTIVE OFFICERS OUR BUSINESS MAY SUFFER; CERTAIN OF OUR
EXECUTIVE
OFFICERS AND KEY EMPLOYEES HAVE ONLY RECENTLY BEGUN EMPLOYMENT WITH US
We believe that our success is significantly dependent upon the continued
employment and collective skills of our executive officers, including founder
and chief executive officer, Robert S. Bland, and executive vice president,
William V. Thoms. We maintain key man life insurance policies on Messrs. Bland
and Thoms and both of these officers have entered into employment contracts with
us. The loss of either of these two executives or any of our other executive
officers could harm our company. In addition, Thomas A. Munro, our vice
president and chief financial officer; Burke A. Christensen, our vice president
of operations and general counsel; Richard W. Graeber, our vice president of
Internet operations; and Grant F. Kuphall,
11
<PAGE> 15
our vice president of business development, all began employment with us since
January 1, 1999. These individuals have not previously worked together and may
not work together effectively.
RISKS RELATED TO THE INSURANCE INDUSTRY
OUR BONUS COMMISSION REVENUES ARE HIGHLY UNPREDICTABLE
Our bonus commission revenues relate to the amount of premiums paid for new
insurance policies to a single insurance company. In other words, if consumers
purchase policies from a fewer number of insurance companies our bonus
commissions will be higher than if the same policies were purchased from a
larger number of insurance companies. The decision to purchase a policy from a
particular insurance company typically relates to, among other factors, price of
the policy and rating of the insurance company, both are factors over which we
have no control. Insurance companies often change their prices in the middle of
the year for competitive reasons. This which may reduce the number of policies
placed with that insurance company which may then reduce our potential bonus
commissions. In addition, we have no control over the bonus commission rates
that are set by each individual insurance company. As a result of these factors,
we are unable to control the amount of bonus commission we receive in any
particular quarter or year and such amounts may fluctuate significantly.
THE INSURANCE SALES INDUSTRY IS INTENSELY COMPETITIVE, AND IF WE FAIL TO
SUCCESSFULLY COMPETE IN THIS INDUSTRY OUR MARKET SHARE AND BUSINESS WILL BE
HARMED
The markets for the products and services offered on our service are
intensely competitive and characterized by rapidly changing technology, evolving
regulatory requirements and changing consumer demands. We compete with both
traditional insurance distribution channels, including insurance agents and
brokers, new non-traditional channels such as commercial banks and savings and
loan associations, and a growing number of direct distributors including other
online services, such as Quicken Insuremarket, InsWeb Corporation and
SelectQuote.
We also potentially face competition from a number of large online services
that have expertise in developing online commerce and in facilitating a high
volume of Internet traffic for or on behalf of our competitors. For instance,
certain of our competitors have relationships with major electronic commerce
companies, including Quicken Insuremarket, which has a relationship with America
Online, and InsWeb, which has relationships with Yahoo!, Snap and Infoseek.
Other large companies with strong brand recognition, technical expertise and
experience in online commerce and direct marketing could also seek to compete in
the online insurance market.
There can be no assurance that we will be able to successfully compete with
any of these current or potential insurance providers. For more information
refer to "Business -- Competition" beginning on page 41.
12
<PAGE> 16
RISKS RELATED TO REGULATION
COMPLIANCE WITH THE STRICT REGULATORY ENVIRONMENT APPLICABLE TO THE INSURANCE
INDUSTRY IS COSTLY; IF WE FAIL TO COMPLY WITH THE NUMEROUS LAWS AND REGULATIONS
THAT GOVERN THE INDUSTRY, OUR BUSINESS COULD BE HARMED
We must comply with the complex rules and regulations of each
jurisdiction's insurance department which impose strict and burdensome
guidelines on us regarding our operations. Compliance with these rules and
regulations imposes significant costs on our business. Each jurisdiction's
insurance department typically has the power, among other things, to:
- authorize how, by which personnel and under what circumstances an
insurance premium can be quoted and published;
- approve which entities can be paid commissions from insurance companies;
- license insurance agents and brokers; and
- approve policy forms and regulate certain premium rates.
Due to the complexity, periodic modification and differing statutory
interpretations of these laws, we may not have always been and we may not always
be in compliance with all these laws. Failure to comply with these numerous laws
could result in fines, additional licensing requirements or the revocation of
our license in the particular jurisdiction. Such penalties could significantly
increase our general operating expenses and harm our business. In addition, even
if the allegations in any regulatory action against us turn out to be false,
negative publicity relating to any such allegation could result in a loss of
consumer confidence and significant damage to our brand. We believe that because
many consumers and insurance companies are not yet comfortable with the concept
of purchasing insurance online, the publicity relating to any such regulatory or
legal issues could harm our business. For more information refer to
"Business -- Regulation" beginning on page 43.
REGULATION OF THE SALE OF INSURANCE OVER THE INTERNET AND OTHER ELECTRONIC
COMMERCE IS UNSETTLED, AND FUTURE REGULATIONS COULD HARM OUR BUSINESS
As a company involved in the sale of insurance over the Internet, we are
subject to additional regulatory risk as insurance regulations have not been
fully modified to cover Internet transactions. Currently, many state insurance
regulators are exploring the need for specific regulation of insurance sales
over the Internet. Such regulation could dampen the growth of the Internet as a
means of providing insurance services. Moreover, the laws governing general
commerce on the Internet remain largely unsettled, even in areas where there has
been some legislative action. It may take years to determine whether and how
existing laws such as those governing intellectual property, privacy and
taxation apply to the Internet. In addition, the growth and development of the
market for electronic commerce may prompt calls for more stringent consumer
protection laws that may impose additional burdens on companies conducting
business over the Internet. Any new laws or regulations or new interpretations
of existing laws or regulations relating to the Internet could harm our
business.
WE COULD BE SUBJECT TO LEGAL LIABILITY FOR DISTRIBUTING INFORMATION ON OUR WEB
SITE
Our customers rely upon information we publish regarding insurance quotes,
coverages, exclusions, limitations and ratings. To the extent that the
information we provide is not accurate, we could be liable for damages from both
consumers and insurance companies. These types of claims have been brought,
sometimes successfully, against online services and print publications in the
past. These types of claims could be time-consuming and expensive to
13
<PAGE> 17
defend, divert management's attention, and could cause consumers to lose
confidence in our service. As a result, these types of claims, whether or not
successful, could harm our business, financial condition and results of
operations.
In addition, because we are appointed as an agent for only 115 of the over
300 insurance companies quoted on our Web site, we do not have contractual
authorization to publish information regarding the policies from insurance
companies for whom we are not appointed. Certain of these insurance companies
have in the past demanded that we cease publishing their policy information and
others may do so in the future. In some cases we have published information
despite these demands. If we are required to stop publishing information
regarding some of the insurance policies that we track in our database, it could
harm us.
RISKS RELATED TO THE INTERNET AND ELECTRONIC COMMERCE
ANY FAILURES OF, OR CAPACITY CONSTRAINTS IN, OUR SYSTEMS OR THE SYSTEMS OF THIRD
PARTIES ON WHICH WE RELY COULD HARM OUR BUSINESS
We use both internally-developed and third-party systems to operate our
service. If the number of users of our service increases substantially, we will
need to significantly expand and upgrade our technology, transaction processing
systems and network infrastructure. We do not know whether we will be able to
accurately project the rate or timing of any such increases, or expand and
upgrade our systems and infrastructure to accommodate such increases in a timely
manner. Our ability to facilitate transactions successfully and provide high
quality customer service also depends on the efficient and uninterrupted
operation of our computer and communications hardware systems. Our service has
experienced periodic system interruptions, and it is likely that these
interruptions will continue to occur from time to time. Additionally, our
systems and operations are vulnerable to damage or interruption from human
error, natural disasters, power loss, telecommunication failures, break-ins,
sabotage, computer viruses, acts of vandalism and similar events. We may not
carry sufficient business interruption insurance to compensate for losses that
could occur. Any system failure that causes an interruption in service or
decreases the responsiveness of the our service would impair our
revenue-generating capabilities, and could damage our reputation and our brand
name.
OUR SUCCESS DEPENDS, IN PART, ON OUR ABILITY TO PROTECT OUR PROPRIETARY
TECHNOLOGY
We believe that our success depends, in part, on protecting our
intellectual property. Other than our trademarks, most of our intellectual
property consists of proprietary or confidential information that is not subject
to patent or similar protection. Competitors may independently develop similar
or superior products, software or business models.
We cannot guarantee that we will be able to protect our intellectual
property. There is no way to assure that unauthorized third parties will not try
to copy our products or business model or use our confidential information to
develop competing products. Legal standards relating to the validity,
enforceability and scope of protection of proprietary rights in Internet-
related businesses are uncertain and still evolving. As a result, we cannot
predict the future viability or value of our proprietary rights and those of
other companies within the industry. We also cannot guarantee that our business
activities and products will not infringe upon the proprietary rights of others,
or that other parties will not assert infringement claims against us. Any
infringement claims and resulting litigation, should it occur, could subject us
to significant liability for damages and could result in invalidation of our
proprietary rights. Even if we eventually won, any resulting litigation could be
time-consuming and expensive to defend and could divert our management's
attention.
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<PAGE> 18
WE NEED TO ADAPT TO RAPID TECHNOLOGICAL CHANGE TO REMAIN COMPETITIVE
Our market is characterized by rapidly changing technologies, frequent new
product and service introductions and evolving industry standards. The recent
growth of the Internet and intense competition in our industry exacerbate these
market characteristics. Our future success will depend on our ability to adapt
to rapidly changing technologies by continually improving the features and
reliability of our database and service. We may experience difficulties that
could delay or prevent the successful introduction or marketing of new products
and services. In addition, new enhancements must meet the requirements of our
current and prospective customers and must achieve significant market
acceptance. We could also incur substantial costs if we need to modify our
service or infrastructures or adapt our technology to respond to these changes.
YEAR 2000 PROBLEM MAY HARM OUR BUSINESS
The risks posed by year 2000 issues could adversely affect our business in
a number of significant ways. Although we believe that our internally developed
systems and technology are year 2000 ready, our information technology system
nevertheless could be substantially impaired or cease to operate due to year
2000 problems. Additionally, we rely on information technology supplied by third
parties, and our participating insurance company suppliers are also dependent on
information technology systems and on their own third party vendors' systems.
Year 2000 problems that any third parties or we experience could harm our
business. Additionally, the Internet could face serious disruptions arising from
the year 2000 problem. For more information refer to "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Year 2000
Readiness Disclosure" beginning on page 30.
OUR BUSINESS MAY BE HARMED IF WE ARE UNABLE TO SAFEGUARD THE SECURITY AND
PRIVACY OF OUR CUSTOMER'S INFORMATION
A significant barrier to electronic commerce and online communications has
been the need for secure transmission of confidential information over the
Internet. Our ability to secure the transmission of confidential information
over the Internet is essential in maintaining consumer and insurance company
confidence in our service. In addition, because we handle confidential and
sensitive information about our customers, any security breaches would damage
our reputation and could expose us to litigation and liability. We cannot
guarantee that our systems will prevent security breaches.
OUR BUSINESS ASSUMES THE CONTINUED DEPENDABILITY OF THE INTERNET INFRASTRUCTURE
Our success will depend upon the development and maintenance of the
Internet's infrastructure to cope with its significant growth and increased
traffic. This will require a reliable network backbone with the necessary speed,
data capacity and security, and the timely development of complementary
products, such as high-speed modems, for providing reliable Internet access and
services. The Internet has experienced a variety of outages and other delays as
a result of damage to portions of its infrastructure and could face such outages
and delays in the future. For more information refer to "-- Year 2000 problem
may harm our business" immediately below. Outages and delays are likely to cause
a loss of business by affecting the level of Internet usage and the processing
of insurance quotes and applications requests made through our Web site. We are
unlikely to make up for this loss of business. In addition, the Internet could
lose its viability due to delays in the development or adoption of new standards
to handle increased levels of activity or due to increased government
regulation. The adoption of new standards or government regulation may require
us to incur substantial compliance costs. For more information refer to "--
Regulation of the sale of insurance over
15
<PAGE> 19
the Internet and other electronic commerce is unsettled, and future regulations
could harm our business" on page 13.
RISKS RELATED TO THIS OFFERING AND OWNERSHIP OF OUR COMMON STOCK
BECAUSE OUR SHARES HAVE NOT BEEN PUBLICLY TRADED BEFORE THIS OFFERING, THE
INITIAL PUBLIC OFFERING PRICE MAY NOT ACCURATELY REFLECT THE TRADING PRICE OF
OUR STOCK AND OUR STOCK PRICE MAY BE VOLATILE
Prior to this offering, you could not buy or sell our common stock
publicly. An active public market for our common stock may not develop or be
sustained after this offering. Although the initial public offering price will
be negotiated between the underwriters and us and based on several factors, the
market price after the offering may vary from the initial offering price.
The market price of our common stock is likely to be highly volatile and
could be subject to wide fluctuations. Recently, the stock market has
experienced significant price and volume fluctuations and the market prices of
securities of technology companies, particularly Internet-related companies,
have been highly volatile. Market fluctuations, as well as general political and
economic conditions, such as a recession or interest rate or currency rate
fluctuations, could adversely affect the market price of our common stock. In
addition, the market prices for stocks of Internet-related and technology
companies, particularly following an initial public offering, frequently reach
levels that bear no relationship to the operating performance of such companies.
Such market prices generally are not sustainable and are subject to wide
variations. If our common stock trades to such levels following this offering,
it likely will thereafter experience a material decline.
In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of their
securities. We may in the future be the target of similar litigation. Securities
litigation could result in substantial costs, divert management's attention and
resources, and harm our financial condition and results of operations.
FUTURE SALES OF OUR COMMON STOCK MAY CAUSE OUR STOCK PRICE TO DECLINE
After this offering, we will have shares of common stock
outstanding and we will have an additional 585,000 shares of common stock
reserved for issuance pursuant to outstanding stock options. In addition,
following the consummation of this offering we intend to register for resale up
to 1,225,000 shares of common stock reserved for issuance under our 1997 Stock
Option Plan and 1999 Employee Stock Purchase Plan. The federal securities laws
impose restrictions on the ability of stockholders who acquired their shares
prior to this offering to resell their shares. Also, our directors, officers and
substantially all of our current stockholders have agreed, subject to certain
limited exceptions, not to sell their shares for a period of 180 days after the
date of this prospectus.
We cannot predict if future sales of our common stock, or the availability
of our common stock for sale, will cause the market price of our common stock to
decline.
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<PAGE> 20
CERTAIN OF OUR OFFICERS AND DIRECTORS WILL OWN A MAJORITY OF OUR STOCK AND WILL
CONTINUE TO CONTROL OUR COMPANY AFTER THIS OFFERING; THEIR INTERESTS MAY NOT BE
THE SAME AS OUR PUBLIC STOCKHOLDERS
Following this offering, Robert Bland, our chairman, president and chief
executive officer will directly control % of our outstanding common stock,
and William Thoms, our executive vice president, will directly control % of
our outstanding common stock. As a result, if Messrs. Bland and Thoms act
together, they will be able to take any of the following actions without the
approval of our public stockholders:
- elect our directors;
- amend certain provisions of our charter;
- approve a merger, sale of assets or other major corporate transaction;
- defeat any takeover attempt, even if it would be beneficial to our public
stockholders; and
- otherwise control the outcome of all matters submitted for a stockholder
vote.
This control could discourage others from initiating a potential merger,
takeover or another change of control transaction that could be beneficial to
our public stockholders. As a result, the market price of our common stock could
be harmed.
OUR CHARTER DOCUMENTS AND DELAWARE LAW CONTAIN CERTAIN PROVISIONS THAT MAY
DISCOURAGE TAKEOVER ATTEMPTS WHICH COULD PRECLUDE OUR STOCKHOLDERS FROM
RECEIVING A CHANGE OF CONTROL PREMIUM
Our certificate of incorporation and bylaws and Delaware law contain
anti-takeover provisions that could have the effect of delaying or preventing
changes in control that a stockholder may consider favorable. The provisions in
our charter documents include the following:
- a classified board of directors with three-year staggered terms;
- the ability of our board of directors to issue shares of preferred stock
and to determine the price and other terms, including preferences and
voting rights, of those shares without stockholder approval;
- stockholder action to be taken only at a special or regular meeting; and
- advance notice procedures for nominating candidates to our board of
directors.
Our preferred stock purchase rights would cause substantial dilution to any
person or group who attempts to acquire a significant interest in our company
without advance approval of our board of directors. In addition, our executive
officers have employment agreements that may entitle them to substantial
payments in the event of a change of control.
The foregoing could have the effect of delaying, deferring or preventing a
change in control of our company, discourage bids for our common stock at a
premium over the market price, or harm the market price of, and the voting and
other rights of the holders of, our common stock. We also are subject to certain
Delaware laws that could have similar effects. One of these laws prohibits us
from engaging in a business combination with any significant stockholder for a
period of three years from the date the person became a significant stockholder
unless certain conditions are met. For more information refer to "Description of
Capital Stock -- Delaware Anti-Takeover and Certain Certificate of Incorporation
and By-law Provisions" beginning on page 55.
17
<PAGE> 21
OUR MANAGEMENT TEAM WILL HAVE BROAD DISCRETION OVER THE USE OF PROCEEDS FROM
THIS OFFERING
The net proceeds of this offering are estimated to be approximately
$ at an assumed initial public offering price of $ per share
and after deducting the estimated underwriting discount and estimated offering
expenses. Our management will retain broad discretion as to the allocation of
the proceeds of this offering and we may not be able to invest these proceeds to
yield a significant return. As of the date of this prospectus, we do not intend
to use the proceeds from this offering other than for working capital and
general corporate purposes.
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION
The initial public offering price is expected to be substantially higher
than the net tangible book value of each outstanding share of common stock. If
you purchase common stock in this offering, you will suffer immediate and
substantial dilution. The dilution will be $ per share in the net tangible
book value of the common stock from the expected initial public offering price.
In addition, if outstanding options to purchase shares of common stock are
exercised, there could be further dilution. For more information refer to
"Dilution" on page 20.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere in this prospectus are "forward-looking
statements." These forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, levels of
activity, performance, or achievements to be materially different from any
future results, levels of activity, performance, or achievements expressed or
implied by such forward-looking statements. Such factors include, among other
things, those listed under "Risk Factors" and elsewhere in this prospectus.
In some cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "could," "expects," "plans," "anticipates,"
"believes," "estimates," "predicts," "potential," "intends," or "continue" or
the negative of such terms or other comparable terminology.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance, or achievements. Moreover, we do not assume
responsibility for the accuracy and completeness of such statements. We are
under no duty to update any of the forward-looking statements after the date of
this prospectus.
18
<PAGE> 22
USE OF PROCEEDS
We will receive net proceeds of $ from the sale of the
shares of common stock in this offering, after deducting
estimated offering expenses of $ and estimated underwriting discounts
and commissions at an assumed initial public offering price of $ per share.
If the underwriters exercise their over-allotment option in full, we will
receive net proceeds of $ , after deducting estimated expenses of
$ and estimated underwriting discounts and commissions.
In the 12 months following this offering, we intend to use approximately
$ million of the net proceeds for expansion of our selling and marketing
efforts, including brand promotion. The amounts we actually expend for any of
the foregoing purposes may vary significantly and will depend on a number of
factors, including the amount of our future revenues. We intend to use the
remainder of the net proceeds, over time, for general corporate purposes,
including working capital to fund operating losses, if any, and capital
expenditures. We may also use a portion of the net proceeds currently intended
for general corporate purposes to acquire or invest in complementary businesses,
technologies, products or services, although no specific acquisitions or
investments are planned and no portion of the net proceeds has been allocated
for any such acquisition or investment. Pending such uses, we intend to invest
the net proceeds of this offering in investment-grade, interest-bearing
securities.
Accordingly, we will have broad discretion in the application of the net
proceeds of this offering. Please refer to "Risk Factors -- Our management team
will have broad discretion over the use of proceeds from this offering" on page
18.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock and
do not intend nor expect to pay any cash dividends in the foreseeable future. We
intend to retain future earnings, if any, to finance the expansion of our
business.
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<PAGE> 23
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 1999:
- on an actual basis; and
- on an as adjusted basis to reflect our receipt of the estimated net
proceeds from the sale of the shares of common stock in this offering at
an assumed initial public offering price of $ per share after
deducting the estimated offering expenses and underwriting discounts and
commissions.
The outstanding share information excludes (1) 500,000 shares of common
stock issuable upon the exercise of outstanding stock options at a weighted
average exercise price of $4.62 per share and (2) 1,225,000 shares of common
stock reserved for future grant or issuance under our 1997 Stock Option Plan and
our 1999 Employee Stock Purchase Plan. Upon completion of this offering, options
to purchase 85,000 shares of common stock will be issued to certain directors
and employees at the initial public offering price. For more information please
refer to "Management -- Stock Based Plans" beginning on page 49 and notes 6 and
8 to our financial statements beginning of page F-12.
This information is qualified by, and should be read in conjunction with,
our financial statements and related notes appearing at the end of this
prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1999
----------------------
ACTUAL AS ADJUSTED
------ -----------
(IN THOUSANDS)
<S> <C> <C>
Stockholders' equity:
Preferred stock, $.001 par value, 5,000,000 shares
authorized; no shares issued and outstanding, actual
and as adjusted........................................ $ -- $
Common stock, $.001 par value, 60,000,000 shares
authorized; 13,515,091 shares issued and outstanding,
actual; shares issued and outstanding,
as adjusted............................................ 16
Additional paid-in capital................................ 5,798
Retained-earnings deficit................................. (1,817)
Treasury stock at cost (2,534,000 shares)................. (263)
------- -------
Total stockholders' equity............................. 3,734
------- -------
Total capitalization................................... $ 3,734 $
======= =======
</TABLE>
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<PAGE> 24
DILUTION
Our net tangible book value as of March 31, 1999 was $3,734,344, or $0.28
per share. Net tangible book value per share is determined by dividing the
number of outstanding shares of our common stock into our net tangible book
value (total tangible assets less total liabilities). Dilution in net tangible
book value per share represents the difference between the amount per share paid
by purchasers of shares of common stock in this offering and the net tangible
book value per share of common stock immediately after completion of this
offering. Assuming our sale of the shares of common stock being offered hereby
at an assumed initial public offering price of $ per share and after
deducting the estimated underwriting discounts and commissions and estimated
offering expenses, the net tangible book value of our company as of March 31,
1999 would have been approximately $ , or $ per share. This represents
an immediate increase in net tangible book value of $ per share to existing
stockholders and an immediate dilution of $ per share to new investors
purchasing shares at the initial public offering price. The following table
illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Initial public offering price per share..................... $
Net tangible book value per share before the offering..... $0.28
Increase in net tangible book value attributable to new
investors..............................................
-----
Net tangible book value per share after offering............
-----
Dilution in net tangible book value per share to new
investors................................................. $
=====
</TABLE>
The following table summarizes, as of March 31, 1999, the differences
between the number of shares of common stock purchased from us, the total
consideration paid to us and the average price per share paid by existing
stockholders and by investors purchasing shares of common stock in this offering
at an assumed initial public offering price of $ (before deducting the
estimated underwriting discounts and commissions and estimated offering
expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ -------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders................ % $ % $
New investors........................
-------- --- -------- ---
Total........................... 100% 100%
======== === ======== ===
</TABLE>
The foregoing discussion and tables assume no exercise of any stock options
outstanding as of March 31, 1999. The table excludes an aggregate of 1,475,000
shares of common stock reserved for issuance pursuant to the 1997 Stock Option
Plan and 250,000 shares of common stock reserved for issuance pursuant to the
1999 Employee Stock Purchase Plan. As of the date hereof, there were options
outstanding to purchase a total of 500,000 shares of common stock with a
weighted average exercise price of $4.62 per share. To the extent that any of
these options are exercised, there would be further dilution to new public
investors. For more information please refer to "Capitalization," on page
19,"Management -- Stock Based Plans" beginning on page 49 and notes 6 and 8 to
our financial statements beginning on page F-12.
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<PAGE> 25
SELECTED FINANCIAL AND OTHER DATA
The historical statement of operations data and balance sheet data in the
table below are derived from our financial statements. This data should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" beginning on page 23 and with the financial
statements, related notes, and other financial information beginning on page
F-1. The historical results presented below are not necessarily indicative of
the results to be expected for any future period.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------- ----------------
1994 1995(2) 1996 1997 1998 1998 1999
------ ------- ------ ------ ------ ------ -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues....................... $1,138 $2,243 $3,812 $4,262 $5,576 $1,165 $ 1,463
Expenses:
Selling and
marketing(1)........... 267 266 1,109 2,152 1,791 277 681
Operations................ 538 1,022 1,551 1,794 2,690 534 958
General and
administrative......... 400 472 786 952 1,293 266 1,270
------ ------ ------ ------ ------ ------ -------
Total expenses......... 1,205 1,760 3,446 4,898 5,774 1,077 2,909
Operating income (loss)........ (67) 483 366 (636) (198) 88 (1,446)
Interest income (expense),
net.......................... (16) (10) (14) (41) 2 (10) 16
Deferred income taxes
(credit)..................... -- 81 129 (210) -- -- --
------ ------ ------ ------ ------ ------ -------
Net income (loss).............. $ (83) $ 392 $ 223 $ (467) $ (196) $ 78 $(1,430)
====== ====== ====== ====== ====== ====== =======
Basic and diluted net income
(loss) per share............. $(0.01) $ 0.03 $ 0.02 $(0.04) $(0.02) $ 0.01 $ (0.11)
====== ====== ====== ====== ====== ====== =======
Weighted average common shares
and equivalents outstanding:
Basic..................... 13,706 13,706 12,154 11,956 12,258 11,958 13,023
Diluted................... 13,706 13,706 12,154 11,956 12,258 11,983 13,023
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------
1994 1995 1996 1997 1998 MARCH 31, 1999
------ ------ ------ ------ ------ --------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash.......................... $ 10 $ 34 $ 1 $ 4 $ 518 $2,946
Working capital (deficit)..... (85) 257 734 (121) 749 3,316
Total assets.................. 149 687 869 830 1,806 4,310
Long-term liabilities......... 74 21 146 233 -- --
Total liabilities............. 280 427 636 1,063 817 576
Total stockholders' equity
(deficiency in assets)...... (131) 260 233 (233) 989 3,734
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------- -----------------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SELECTED OPERATING STATISTICS:
Quotes................................. 354,066 591,823 831,291 126,753 335,784
Paid policies.......................... 6,701 8,755 10,920 2,455 2,835
</TABLE>
- -------------------------
(1) Since January 1, 1997, our direct response advertising costs no longer
qualify for deferral and are expensed as incurred. If direct response
advertising costs had not been deferred and amortized for any year, selling
and marketing expenses would have been $621,000 in 1995, $1.2 million in
1996, and $1.7 million in 1997.
(2) As of January 1, 1995, in accordance with a new accounting standard, we
changed our method of accounting for direct response advertising costs and
began to defer those costs and amortize them over the period of expected
future benefits. The change in accounting had the effect of increasing 1995
net income by $274,000 or $0.02 per share.
22
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our financial
statements and the notes thereto and the other financial information appearing
elsewhere in this prospectus. In addition to historical information, the
following discussion and other parts of this prospectus contain forward-looking
information that involves risks and uncertainties. Our actual results could
differ materially from those anticipated by such forward-looking information due
to factors discussed under "Risk Factors" beginning on page 7, "Special Note
Regarding Forward-Looking Statements" on page 19 and elsewhere in this
prospectus.
OVERVIEW
We believe that Quotesmith.com is the most comprehensive Internet-based
insurance service available. The Quotesmith.com service enables consumers and
business owners to obtain instant quotes from over 300 insurance companies, and
we guarantee the accuracy of every quote. Combining the reach and efficiency of
the Internet with our proprietary database and industry expertise developed over
the past 15 years, we provide a complete "quote to policy delivery" insurance
solution without the involvement of any commissioned salespeople.
We have created a model that addresses the challenges faced by traditional
insurance distribution methods in a manner that offers significant benefits to
both consumers and insurance companies. The Quotesmith.com model allows
consumers to: (1) efficiently search for, analyze and compare insurance
products; (2) quickly request and obtain insurance quotes; and (3) easily select
and purchase insurance from the insurance company of their choice.
We incorporated and began our operations in March 1984 and during the
period from 1984 to 1994, we provided an electronic quotation and policy
information service to insurance agents and brokers. During this period, we
built our proprietary database and price comparison technology, and we began
securing key insurance company support and recruiting and training employees.
Throughout this period we were not engaged in the marketing of insurance to
consumers. In 1994, we began focusing our business strategy on marketing term
life insurance to self-directed consumers utilizing our proprietary insurance
price comparison technology. In May 1996, we began providing real time quotes
for term life insurance on the Internet and began receiving online insurance
application requests from consumers. During 1998 and in the first quarter of
1999, we raised $4.7 million through the sale of our common stock to private
investors, including $3.0 million from Intuit.
We are licensed as an agent for life and health insurance throughout the
United States. We recently expanded our Internet service offerings and now
include instant quotes for several types of insurance, including dental,
individual and family medical insurance, Medicare supplement insurance,
"no-exam" whole life insurance, fixed annuity insurance and, through
click-through arrangements with Progressive and Quicken Insuremarket, access to
private passenger automobile insurance quotes. We have also started to offer
small group medical insurance quotes and products to businesses of up to 100
employees.
We generate revenues from the receipt of commissions paid to us by
insurance companies based upon the policy premiums paid by consumers through our
service. These revenues come in the form of first year, bonus and renewal
commissions that vary by company and product. We recognize the full first year
commission revenues after the insurance company approves the policy and accepts
the initial payment. At the time revenue is recognized, an allowance is recorded
based on historical information for estimated commissions that will not be
received
23
<PAGE> 27
due to the non-payment of installment first year premiums. We occasionally
receive bonuses based upon individual criteria set by insurance companies. We
recognize bonus revenues when we receive notification from the insurance company
of the bonus due to us. Bonus revenues are typically higher in the fourth
quarter due to the bonus system used by many life insurance companies. Revenues
for renewal commissions are recognized after we receive notice that the
insurance company has received payment for a renewal premium. Renewal commission
rates are significantly less than first year commission rates and may not be
offered by every insurance company. We also generate a portion of our revenues
from referral fees through our arrangements with Progressive and Intuit
Insurance Services.
The timing between when we submit a consumer's application for insurance to
the insurance company and when we generate revenues has varied over time. The
type of insurance product and the insurance company's backlog are the primary
factors that impact the length of time between submitted applications and
revenue recognition. Over the past three years, the time between application
submission and revenue recognition has averaged approximately four months. Any
changes in the amount of time between submitted application and revenue
recognition, of which a significant part is not under our control, will create
fluctuations in our operating results and could harm our business, operating
results and financial condition.
The insurance industry is heavily regulated and prices are set by the
insurance companies typically after they have registered changes with the state
insurance departments. Insurance agents are precluded from discounting or
rebating commissions, and they are not allowed to set premium or commission
levels.
From May 1, 1996 through March 31, 1999, we have provided over two million
quotes, collected over 110,000 insurance application requests and delivered over
27,000 insurance policies. Over 98% of our revenues in 1998 were derived from
the sale of term life policies. See "Risk Factors -- Nearly all of our revenues
are currently derived from consumers purchasing term life insurance through us"
on page 7. Our top five insurance companies represented 64% of the policies we
delivered during 1998, 77.5% during 1997 and 77.4% during 1996. Of our top ten
insurance companies in 1998, 40% were not in the top ten in 1997. Our top
insurance company for 1998 accounted for 21.8% of the 1998 policies delivered,
but only accounted for 8.2% in 1997 and 1.7% in 1996 of all policies delivered.
See "Risk Factors -- Our business may be harmed if certain high volume insurance
companies refuse to appoint us as their agent" on page 10.
Other revenues are primarily comprised of revenue streams associated with
our historical business of providing electronic quotations and policy
information to insurance agents and brokers. These revenues are recognized when
we receive notification that such revenues have been earned.
Operations expenses are comprised of both variable and semi-variable
expenses, including wages, benefits and expenses associated with processing
insurance applications and maintaining our database and Web site. The historical
lag between the time an application is submitted to the insurance companies and
when we recognize revenues, significantly impacts our operating results as most
of our variable expenses are incurred prior to application submission.
Selling and marketing expenses consist primarily of direct advertising
costs. Beginning in 1994, we initiated a series of magazine advertisements aimed
at consumers and began to provide insurance price comparison reports and
solicitations by mail. During the period from 1994 to 1998, we continued to use
direct advertising as our primary method of marketing. In
24
<PAGE> 28
the foreseeable future, we expect to significantly increase our advertising and
marketing efforts in an attempt to build greater brand awareness.
General and administrative expenses consist primarily of executive
compensation and benefits, financial and legal expenses and office expenses
(rent and utilities). An additional facilities expansion is planned for mid
1999. In 1998, we recorded compensation expense of $150,000 relating to the
issuance of stock options to employees. In the first quarter of 1999, we
recorded compensation expense of $791,000 relating to the issuance of stock
options and common stock sold to employees. These amounts represent the
difference between the deemed value of our common stock for accounting purposes
at the date of grant or amendment of the options as compared to the exercise
price of such options or sales price of the stock. Additional unearned
compensation expense will be amortized over the remaining vesting period of the
applicable options in the amounts of $390,000 for the remainder of 1999,
$190,000 in 2000 and $40,000 in 2001.
RESULTS OF OPERATIONS
The following table sets forth our results of operations expressed as a
percentage of total revenues:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL REVENUES
-----------------------------------------------------
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------- -----------------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues:
Commission................................ 91.7% 96.6% 98.8% 98.1% 99.1%
Other..................................... 8.3 3.4 1.2 1.9 0.9
----- ----- ----- ----- -----
Total revenues....................... 100.0 100.0 100.0 100.0 100.0
Expenses:
Selling and marketing..................... 29.1 50.5 32.1 23.8 46.5
Operations................................ 40.7 42.1 48.2 45.9 65.5
General and administrative................ 20.6 22.3 23.2 22.8 86.8
----- ----- ----- ----- -----
Total expenses....................... 90.4 114.9 103.5 92.5 198.8
----- ----- ----- ----- -----
Operating income (loss)..................... 9.6 (14.9) (3.5) 7.5 (98.8)
Interest income (expense), net.............. (0.4) (1.0) -- (0.8) 1.1
----- ----- ----- ----- -----
Income (loss) before taxes.................. 9.2 (15.9) (3.5) 6.7 (97.7)
Income taxes (credit)....................... 3.4 (5.0) -- -- --
----- ----- ----- ----- -----
Net income (loss)........................... 5.8% (10.9)% (3.5)% 6.7% (97.7)%
===== ===== ===== ===== =====
</TABLE>
25
<PAGE> 29
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
Revenues
Revenues increased 25.6% to $1.5 million for the three months ended March
31, 1999 from $1.2 million for the three months ended March 31, 1998. The growth
in revenues in the first quarter of 1999 was due to a 15.5% growth in the number
of paid policies, a 155.3% increase in bonus and renewal revenues from $62,000
to $159,000, combined with a slight increase in the average first year
commission revenues per policy.
Expenses
Selling and Marketing. Selling and marketing expenses increased 146% to
$681,000 for the three months ended March 31, 1999 from $277,000 for the three
months ended March 31, 1998, and increased as a percentage of revenues to 46.6%
from 23.8%.
Operations. Operations expenses increased 79.2% to $958,000 for the three
months ended March 31, 1999 from $534,000 for the three months ended March 31,
1998, and increased as a percentage of revenues to 65.5% from 45.9%. The
increase was due primarily to a staffing increase of 55.8% over the same period
in 1998 as a result of increased policy processing.
General and Administrative. General and administrative expenses increased
377.5% to $1.3 million for the three months ended March 31, 1999 from $266,000
for the three months ended March 31, 1998 and increased as a percentage of
revenues to 86.8% from 22.8%. This increase included compensation expense of
$791,000 relating to common stock sold and stock options granted in March 1999
as described in note 8 to our financial statements. This increase also reflected
additional executive and financial personnel, increased rent due to the
expansion of facilities and increased legal and accounting fees.
Interest Income (Expense), Net
Interest income, net for the three months ended March 31, 1999 was $16,000
as compared to interest expense, net of $10,000 for the same period last year.
The change is attributable to the retirement of notes payable and the investment
of proceeds from the private sale of common stock since March 31, 1998.
Income Taxes (Credit)
We had no income tax credit for the three months ended March 31, 1999 due
to valuation allowances provided against net deferred tax assets. We had no
income tax provision for the three months ended March 31, 1998 due to the
utilization of operating loss carryforwards.
COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND 1997
Revenues
Revenues increased 30.8% to $5.6 million in 1998 from $4.3 million in 1997.
The growth in revenues in 1998 was primarily driven by an increase in the number
of paid policies, plus bonus and renewal revenues increased 125.3% to $799,000
in 1998 from $355,000 in 1997.
Expenses
Selling and Marketing. Selling and marketing expenses decreased 16.8% to
$1.8 million in 1998 from $2.2 million in 1997, and decreased as a percentage of
revenues to 32.1% from 50.5%. Beginning on January 1, 1997, we no longer
qualified to defer direct response advertising costs. Accordingly, 1997 selling
and marketing expenses included advertising costs incurred in 1997 as
26
<PAGE> 30
well as amortization of previous years' costs that were unamortized as of
December 31, 1996. Adjusting 1997 advertising expenses to eliminate the
amortization of prior period deferrals of advertising costs reduces 1997 selling
and marketing expenses to $1.7 million. Selling and marketing expenses in 1998
increased by 8.0% from adjusted 1997 amounts.
Operations. Operations expenses increased 49.9% to $2.7 million in 1998
from $1.8 million in 1997, and increased as a percentage of revenues to 48.2%
from 42.1%. Operations expenses primarily increased due to an increase in staff
and associated wages and benefits. Postage and other variable costs also
increased, but not as a percentage of revenues.
General and Administrative. General and administrative expenses increased
35.8% to $1.3 million in 1998 from $952,000 in 1997, and increased to 23.2% of
revenues in 1998 from 22.3% of revenues in 1997. The increase in general and
administrative expenses was primarily due to salaries of additional executive
and financial personnel and rent due to the expansion of facilities. In
addition, $150,000 was recorded as compensation expense in 1998 relating to
stock options.
Interest Income (Expense), Net
Interest income, net was $2,000 in 1998 as compared to interest expense,
net of $41,000 in 1997. The change is attributable to the retirement of notes
payable and the investment of proceeds from the private sale of common stock
during 1998.
Income Taxes (Credit)
Due to losses incurred for financial reporting and income tax purposes, we
provided valuation allowances to reduce our net deferred tax assets to zero.
Components of our 1998 and 1997 tax provisions are described in note 3 to our
financial statements.
COMPARISONS OF YEARS ENDED DECEMBER 31, 1997 AND 1996
Revenues
Revenues increased 11.8% to $4.3 million in 1997 from $3.8 million in 1996.
The growth in revenues in 1997 was driven by an increase in the number of paid
policies, partially offset by a decrease in the average first year commission
revenues per policy. Bonus and renewal commission revenues increased 1.1% to
$355,000 in 1997 from $351,000 in 1996.
Expenses
Selling and Marketing. Selling and marketing expenses increased 94.0% to
$2.2 million in 1997 from $1.1 million in 1996, and increased as a percentage of
revenues to 50.5% from 29.1%. Beginning on January 1, 1997, we no longer
qualified to defer our direct response advertising costs. Accordingly, 1997
selling and marketing expenses included advertising costs incurred in 1997 as
well as amortization of previous years' costs that were unamortized as of
December 31, 1996. Adjusting 1997 and 1996 advertising expenses to eliminate the
effect of deferral and amortization of advertising costs reduces 1997 expenses
to $1.7 million and increases 1996 expenses to $1.2 million. As adjusted, 1997
selling and marketing expenses increased by 32.8% over 1996.
Operations. Operations expense increased 15.7% to $1.8 million in 1997 from
$1.6 million in 1996, and increased as a percentage of revenues to 42.1% from
40.7%. Operations expenses primarily increased due to an increase in staff
during 1997.
27
<PAGE> 31
General and Administrative. General and administrative expenses increased
21.0% to $952,000 in 1997 from $786,000 in 1996, and increased as a percentage
of revenues to 22.3% from 20.6% as a result of increased salaries and benefits,
legal and accounting fees and rent.
Interest Income (Expense), Net
Interest expense, net was $41,000 in 1997 and an expense of $14,000 in
1996. The change is attributable to an increase in notes payable.
Income Taxes (Credit)
As described in note 3 to the accompanying financial statements, income
taxes in 1997 reflect an effective tax rate that is less than 1996 due to the
valuation allowances provided against net deferred tax assets in 1997.
SELECTED QUARTERLY OPERATING RESULTS
The following table sets forth certain unaudited statements of operations
data on an absolute basis and as a percentage of revenues for the five most
recent quarters. The information for each of these quarters has been prepared on
substantially the same basis as the audited financial statements included
elsewhere in this prospectus, and, in our opinion, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the results of operations for such periods. Quarterly results
are not necessarily indicative of the results to be expected in the future.
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------
MAR. 31, JUN. 30, SEP. 30, DEC. 31, MAR. 31,
1998 1998 1998 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues..................................... $1,165 $1,391 $1,345 $1,675 $ 1,463
Expenses:
Selling and marketing...................... 277 344 482 688 681
Operations................................. 534 674 734 748 958
General and administrative................. 266 223 283 521 1,270
------ ------ ------ ------ -------
Total expenses..................... 1,077 1,241 1,499 1,957 2,909
------ ------ ------ ------ -------
Operating income (loss)...................... 88 150 (154) (282) (1,446)
Interest income (expense), net............... (10) -- 5 7 16
------ ------ ------ ------ -------
Income (loss) before income taxes............ 78 150 (149) (275) (1,430)
Income taxes (credit)........................ -- 33 (33) -- --
------ ------ ------ ------ -------
Net income (loss)............................ $ 78 $ 117 $ (116) $ (275) $(1,430)
====== ====== ====== ====== =======
</TABLE>
28
<PAGE> 32
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues...................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Expenses:
Selling and marketing....................... 23.8 24.7 35.8 41.1 46.5
Operations.................................. 45.9 48.5 54.6 44.6 65.5
General and administrative.................. 22.8 16.0 21.0 31.1 86.8
----- ----- ----- ----- -----
Total expenses...................... 92.5 89.2 111.4 116.8 198.8
----- ----- ----- ----- -----
Operating income (loss)....................... 7.5 10.8 (11.4) (16.8) (98.8)
Interest income (expense), net................ (0.8) -- 0.4 0.4 1.1
----- ----- ----- ----- -----
Income (loss) before income taxes............. 6.7 10.8 (11.0) (16.4) (97.7)
Income taxes (credit)......................... -- 2.4 (2.4) -- --
----- ----- ----- ----- -----
Net income (loss)............................. 6.7% 8.4% (8.6)% (16.4)% (97.7)%
===== ===== ===== ===== =====
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Since 1995, our primary sources of operating funds have been commissions, a
private financing and bank borrowings. During the first quarter of 1999 and in
1998, we raised our first outside financing through the sale of common stock to
private investors, the proceeds of which were $3.4 million in 1999 and $1.3
million in 1998.
Cash used in operating activities was $755,000 for the three months ended
March 31, 1999, compared to $32,000 for the three months ended March 31, 1998.
The increase in cash used in the 1999 period was primarily a result of a net
loss for the period as well as a decrease in accounts payable and accrued
liabilities. Cash used in operations was $135,000 in 1998 and $10,000 in 1997,
as compared to cash provided by operations of $34,000 in 1996. Such amounts
reflect increasing amounts of cash used for advertising and operations.
Cash used in investing activities was $201,000 for the three months ended
March 31, 1999 and $57,000 for the three months ended March 31, 1998, $186,000
in 1998, $107,000 in 1997, and $51,000 in 1996. These funds were primarily used
for the purchase of furniture, equipment and computer software.
Cash provided by financing activities was $3.4 million for the three months
ended March 31, 1999, attributable to proceeds from private sales of our common
stock, compared to $25,000 for the three months ended March 31, 1998. Cash
provided by financing activities for 1998 was $835,000 as a result of proceeds
from the private sale of our common stock which was partially offset by the
repayment of notes payable. Cash provided by financing activities was $121,000
in 1997 as compared to cash used in financing activities of $17,000 in 1996, and
reflects proceeds from the issuance of notes payable, and in 1996, the purchase
of $250,000 of treasury stock.
We currently expect that the cash proceeds we receive from this offering,
together with our existing cash balances, will be sufficient to meet our
anticipated cash requirements for at least the next 12 months. We may need to
raise additional capital in order to meet competitive pressures, support more
rapid expansion, develop new products, acquire related or complementary
businesses or technologies and or take advantage of unforeseen opportunities.
The timing and amounts of such working capital expenditures are difficult to
predict, and if they vary materially, we may require additional financing sooner
than anticipated. If we require additional equity financing, it may be dilutive
to our stockholders and the equity securities issued in such offering may have
rights or privileges senior to the holders of our common stock. If debt
financing is available, it may require restrictive covenants with respect
29
<PAGE> 33
to dividends, raising capital and other financial and operational matters, which
could impact or restrict our operations. If we cannot obtain adequate financing
on acceptable terms, we may be required to reduce the scope of our marketing or
operations, which could harm our business, results of operations and our
financial condition.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the Accounting Standards Board Executive Committee (AcSEC)
issued Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 requires specific
accounting treatment for internal use software which is effective for fiscal
years beginning after December 15, 1998. Accordingly, we adopted SOP 98-1 in
1999, and do not expect that SOP 98-1 will have a material effect on our
operating results or financial position.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 133, "Accounting for
Derivative Instruments and Hedging Activities," which is effective for fiscal
years beginning after June 15, 1999. We do not expect that the adoption of SFAS
133 will have a material effect on our results of operations or financial
position.
YEAR 2000 READINESS DISCLOSURE
Our State Of Readiness. We have defined year 2000 compliance as follows:
That the information technology time and date data processes,
including, but not limited to, calculating, comparing and sequencing
data from, into and between the 20th and 21st centuries contained in
our products and services offered through our service, will function
accurately, continuously and without degradation in performance and
without requiring intervention or modification in any manner that will
or could harm the performance of such products or the delivery of such
services as applicable at any time hereafter.
We have implemented a year 2000 program to review and assure the year 2000
readiness of our information technology systems that consist of a combination of
internally-developed software and third-party software and hardware.
We have internally developed most of the systems used in the operation of
our business and believe that these systems are year 2000 compliant. We
completed an assessment, remediation, and testing of all of our internally
developed production programs in the first quarter of 1999.
We are also assessing the year 2000 readiness of our third-party supplied
hardware and software. The failure of such hardware and software systems to be
year 2000 compliant could harm our operations as well as the operation of our
Web site. As part of our assessment program, we are contacting third-party
vendors and licensors of software and computer technology to seek assurances
that their products are year 2000 compliant. We expect to complete the
assessment process in the second quarter of 1999. We expect to fix or replace
any noncompliant components by the end of the third quarter of 1999.
We are evaluating our non-information technology systems for year 2000
compliance and have not, to date, discovered any material year 2000 issues with
respect to our non-information technology systems. We expect to complete this
evaluation by July 31, 1999.
We are in the process of contacting our material insurance company
participants whose products or services are sold through our service to
determine if they are year 2000 compliant. We expect to complete this assessment
in the second quarter of 1999.
30
<PAGE> 34
Our customers are individual Internet users, and, therefore, no individual
customer is material to an evaluation of our year 2000 compliance issues.
The Costs To Address Year 2000 Issues. We have expensed and will continue
to expense amounts incurred in connection with year 2000 compliance. To date, we
have expended approximately $50,000, and we expect to expend an additional
$10,000, to become year 2000 ready. The additional costs to make any other
products or services year 2000 compliant by the end of the third quarter of 1999
will be expensed as incurred. We do not expect any additional costs to be
material.
We are not currently aware of any material operational issues or costs
associated with preparing our systems for the year 2000. However, we may
experience unexpected material costs caused by undetected errors or defects in
the technology used in our systems or because of the failure of a material
insurance company participant in our program to be year 2000 compliant.
Risks Associated With Year 2000 Issues. Notwithstanding our year 2000
compliance efforts, the failure of a material system or vendor, including one or
more insurance company participants in our service, or the Internet generally,
to be year 2000 compliant could harm the operation of our service, prevent
certain products and services from being offered through our service, or have
other unforeseen, harmful consequences to us.
Finally, we also are subject to external year 2000-related failures or
disruptions that might generally affect industry and commerce, such as utility
or transportation company year 2000 compliance failures and related service
interruptions. All of these factors could harm our business, financial condition
and results of operations.
Contingency Plans. There is a possibility that an unforeseen year
2000-related event may occur and cause a disruption for which we are not
currently prepared. Our contingency plan for this possibility includes having
our computer programmers and support staff on call or on site to respond to any
disruption of our business during a critical transition date (e.g., September 9,
1999 or January 1, 2000). We will continue to assess our systems and those of
our vendors throughout the remainder of this year. If our contingency plan is
inadequate to prevent or resolve a year 2000 disruption, there could be a
material harmful effect on our business, financial condition and results of
operations.
31
<PAGE> 35
BUSINESS
OVERVIEW
We believe that Quotesmith.com is the most comprehensive Internet-based
insurance service available. The Quotesmith.com service enables consumers and
business owners to obtain instant quotes from over 300 insurance companies, and
we guarantee the accuracy of every quote. Combining the reach and efficiency of
the Internet with our proprietary database and industry expertise developed over
the past 15 years, we provide a complete "quote to policy delivery" insurance
solution without the involvement of any commissioned salespeople.
We have created a model that addresses the challenges faced by traditional
insurance distribution methods in a manner that offers significant benefits to
both consumers and insurance companies. The Quotesmith.com model allows
consumers to: (1) efficiently search for, analyze and compare insurance
products; (2) quickly request and obtain insurance quotes; and (3) easily select
and purchase insurance from the insurance company of their choice.
INDUSTRY BACKGROUND
The Traditional Insurance Market in the United States
The insurance market in the United States represented over $1.1 trillion in
premiums paid in 1998 according to A.M. Best. Insurance products are widely held
by households and businesses. Estimates by the United States Bureau of Labor
Statistics showed that in 1997, the average household paid nearly $4,500 for
personal insurance products, accounting for 12.9% of the average annual
household spending of approximately $35,000.
The United States insurance market is broadly divided into two categories:
life and health insurance and property and casualty insurance. Over 4,500
insurance companies distribute their products through a network of agents and
brokers or sell directly to consumers. There are approximately one million
individuals licensed as agents and brokers to sell insurance in the United
States. A variety of distribution systems have evolved, including "captive"
one-company agents and independent agents and brokers that typically represent
only two to five insurance companies.
Challenges to Purchasing and Delivering Insurance
There are numerous challenges to the informed purchase and delivery of
insurance products. Some of these challenges are due to the specialized nature
of insurance products and other challenges result from the way in which
insurance has been traditionally distributed.
These challenges include:
- Fragmented delivery. Insurance products are available from captive
agents, independent agents and direct distribution channels as well as
new entrants, including banks and other financial institutions. Because
of this fragmentation, there has been no single source of policy coverage
and pricing information from which a consumer can obtain unbiased and
complete information.
- Quantity and variation of products. Insurance policies vary by type of
insurance product, underwriting guidelines, insurance company,
jurisdiction and the particular characteristics and preferences of the
consumer. This creates a complex pricing structure that is not readily
understandable or comparable without the use of technology.
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- Information-intensive underwriting process. The underwriting process
requires consumers to submit, and insurance companies to collect, large
amounts of individualized and personal information. This process is
difficult and time consuming and, if not accurately completed, will delay
the approval of a policy.
- Negative consumer perception. Consumers often believe that they paid too
much for their insurance and were not properly informed by insurance
agents. Face-to-face contact with an insurance agent may convey the sense
of a high-pressure sales environment with a lack of unbiased information.
- Misalignment of interests between insurance agents and
consumers. Commission-based insurance agents represent only a limited
number of insurance companies. Accordingly, they are compensated to
promote and sell a limited range of products, which is in direct conflict
with the consumer's need to obtain insurance at the lowest price.
- Inconvenient and time-consuming purchase. Researching policy coverages,
contacting competing insurance companies, collecting information and
obtaining insurance quotes require large blocks of time usually during
regular working hours. Consumers are often unable to shop for insurance
on their own time and from the convenience of their own home.
Distribution of insurance through traditional agent and broker sales forces
is expensive and inefficient for insurance companies. According to the Life
Insurance Marketing Research Association, total marketing and sales costs are
$144 for every $100 of first year life and health insurance premiums.
Traditional agency distribution methods have high fixed costs associated with
establishing and maintaining numerous branch and local offices, high commission
structures, recurring training costs and high agent turnover. In addition,
insurance companies often do not target certain segments of the population
because of the inability to profitably serve these segments through traditional
distribution channels.
Emergence of the Internet and Electronic Commerce
The Internet has emerged as a global medium for communication, information
and commerce. International Data Corporation estimates that there were 97
million Internet users worldwide at the end of 1998 and anticipates this number
will grow to approximately 320 million users by the end of 2002. The Internet
possesses a number of unique characteristics that differentiate it from
traditional media and other methods of commerce, including:
- companies can reach and serve a large and global group of consumers
electronically from a central location;
- companies can provide personalized, low-cost and real time consumer
interaction;
- users communicate or access information without geographic or temporal
limitations;
- users enjoy greater convenience and privacy and face less sales pressure;
and
- users have an enormous diversity of easily accessible content and
commerce offerings.
As a result of these unique characteristics and the Internet's growing
adoption rate, businesses have an enormous opportunity to conduct commerce over
the Internet. International Data Corporation estimates that commerce over the
Internet will increase from approximately $32 billion worldwide in 1998 to
approximately $426 billion in 2002. The Internet gives companies the opportunity
to develop one-to-one relationships with consumers worldwide without having to
make the significant investments to build and manage a local
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market presence or develop the printing and mailing capabilities associated with
traditional direct marketing activities.
Emergence of the Electronic Service Category
A new category of Internet-based electronic service providers has emerged
that offers a focused range of services with special emphasis on providing
relevant content, information and transaction capabilities. Recent examples
include companies operating as online providers of mortgages, online securities
brokers and automobile referral services. These consumer-focused, one-stop,
information-based destinations provide enhanced, high margin services by acting
as independent intermediaries that facilitate interaction and transaction flow
between buyers and sellers. Consumers benefit because they are able to obtain
value-added information services and transaction capabilities on their own time
schedule. Sellers benefit because they are able to deliver targeted offerings
more effectively to consumers.
Online Insurance Opportunity
The growing acceptance of the Internet and electronic commerce presents a
significant opportunity for the insurance industry by allowing consumers to more
efficiently and effectively research and transact with insurance companies. The
fragmentation of the insurance industry and the significant price and product
variation has led consumers to seek alternative means of purchase and insurance
companies to seek alternative means of distribution. According to Forrester
Research, Internet-influenced sales of insurance are expected to grow from $1.5
billion in 1998 to $11.0 billion in 2003. We believe that the vast information
sharing and communications power of the Internet will significantly improve the
insurance industry for both consumers and insurance companies.
Characteristics of the insurance product that make it particularly well
suited for delivery over the Internet include:
- insurance is an information-based product that needs no physical shipment
or warehousing of merchandise;
- through a single medium consumers can access information and compare a
wide variety of insurance companies' products;
- effective two-way communication flow via the Internet allows insurance
companies to interact with consumers and rapidly collect underwriting
information;
- enhanced convenience, privacy and control over the process of researching
and purchasing insurance without the pressure of a commissioned agent;
and
- ability of insurance companies to target and serve segments of the market
which previously were unprofitable through traditional distribution
channels by reducing the need for large sales staff and costly local
offices.
Many companies are trying to address this significant online insurance
opportunity. Some companies have created "lead referral" Web sites for the
purpose of capturing consumer name and address information to be forwarded, as a
prospective sales lead, to a specified insurance company or its traditional
sales force. Many of these Web sites are paid upfront referral fees, are aligned
with a limited number of insurance companies and often do not reveal many of the
lowest priced insurance policies. Consumers are often still forced to complete
their purchase through a commissioned salesperson. Additionally, these companies
typically do not offer any personalized customer service or insurance
fulfillment capabilities and, therefore, do not offer a complete quote to policy
delivery insurance solution.
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Existing insurance companies and their agents and brokers have created Web
sites to sell their insurance products online as an alternative to their
traditional sales activities. Some companies have created Web sites with the
primary purpose of creating an insurance sale online for a single insurance
company or group of insurance companies with little or no comparative overview
of prices. These companies perpetuate the fragmentation in the industry by not
offering a comprehensive database of pricing and coverage information.
As a result of the shortcomings inherent in the online lead referral and
single company approaches, we believe there exists a significant market
opportunity for the emergence of a large-scale, comprehensive and unbiased
Internet-based insurance service. Self-directed consumers will be attracted to
the broadest selection of insurance companies and a compelling value proposition
based upon price, time and transaction fulfillment.
THE QUOTESMITH.COM SOLUTION
We believe that Quotesmith.com is the most comprehensive Internet-based
insurance service available. The Quotesmith.com service enables consumers and
business owners to obtain instant quotes from over 300 insurance companies, and
we guarantee the accuracy of every quote. Combining the reach and efficiency of
the Internet with our proprietary database and industry expertise developed over
the past 15 years, we provide a complete "quote to policy delivery" insurance
solution without the involvement of any commissioned salespeople.
We have created a model that addresses the challenges faced by traditional
insurance distribution methods in a manner that offers significant benefits to
both consumers and insurance companies. The Quotesmith.com model allows
consumers to: (1) efficiently search for, analyze and compare insurance
products; (2) quickly request and obtain insurance quotes; and (3) easily select
and purchase insurance from the insurance company of their choice.
The Quotesmith.com solution provides the following principal advantages to
both consumers and insurance companies:
Comprehensive Source of Insurance Information and Products. On a single Web
site, we provide insurance quotes from over 300 insurance companies across
several types of insurance including individual term life, private passenger
automobile, dental, individual and family medical, Medicare supplement, small
group medical, "no exam" whole life and fixed annuity. We believe we offer
consumers access to the largest, most complete repository of comparative
information on insurance products, insurance pricing and insurance providers. We
empower consumers with relevant current pricing knowledge, coverage information
and independent rating information so that consumers can make informed buying
decisions.
Guaranteed-Accurate Instant Quotes. Over the past 15 years, we have
developed what we believe to be the most complete, regularly updated database
used to determine insurance quotes. The ability to obtain instant quotes on the
Internet is the first priority for consumers purchasing insurance online,
according to a 1997 survey conducted by Booz-Allen & Hamilton. We obtain and
regularly update all of our pricing, underwriting and policy coverage
information contained in our databases directly from the insurance company to
ensure accuracy. We offer consumers a unique $500 cash reward guarantee that we
provide an accurate quote. In addition, we also offer a $500 cash reward
guarantee that we provide the lowest price quote available with respect to term
life policies. These Quotesmith.com guarantees are unmatched by any competitor.
A No Salesperson Approach. At Quotesmith.com, we provide self-directed
insurance buyers with a "no salesperson" promise. We put consumers in control of
their insurance purchase
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decisions by giving them the ability to efficiently search, analyze and compare
prices of insurance products from multiple insurance companies in complete
privacy, on their own time and free from the pressure to buy associated with
traditional salespeople. Consumers choose from what we believe is the largest
selection of insurance companies using their own preferences regarding price and
insurance company rating. Consumers are able to purchase insurance directly
through us without ever speaking to a commissioned salesperson.
Convenience. Consumers who use Quotesmith.com no longer need to contact
different insurance companies or salespeople, one by one, in order to gather
information to make educated decisions. Unlike traditional agents who only
recommend and promote a limited number of insurance companies' policies, we
provide real time access to a large database of over 300 insurance companies'
products. Our comparison service presents users with a comprehensive listing of
insurance quotes, ranked by price. We believe that this large array of available
insurance providers in a single destination saves consumers time and effort in
searching for and obtaining the most suitable coverage.
Quote to Policy Delivery Support. Consumers purchase insurance directly
through us. Unlike insurance lead referral services, at Quotesmith.com, we do
not abandon the consumer once the insurance company has been selected, but
continue to provide value-added support and service throughout the insurance
purchase process. We facilitate this process by:
- interpreting various pricing, coverage and independent rating information
when asked;
- assisting consumers in completing insurance applications; and
- arranging and monitoring the collection of outside underwriting
information including paramedical examinations, laboratory reports and
medical records.
Focus on Customer Service. Customer service is both our foundation and a
strategic priority. We provide a high level of customer service throughout the
application process and aim to eliminate consumer dissatisfaction and
frustration. Our non-commissioned customer service staff has an average of 11
years of experience in the insurance industry.
We implement our customer service objectives by:
- requiring all new employees to attend "Quotesmith University," a two-week
training course that teaches all of the service tasks we perform for our
customers;
- maintaining our own call center to ensure prompt and consistent responses
to phone, mail and e-mail inquiries;
- providing regular application status reports to our customers on a
consistent basis through policy delivery; and
- offering a 30-day cancellation option on all paid term life policies.
Fully Licensed National Insurance Agency. Unlike traditional insurance
agents who are often only licensed in one or a limited number of states, our
company or one of our employees is licensed to offer life and health insurance
throughout the United States. This allows us to process and offer insurance
policies to consumers nationwide. Over a 15-year period, we have established
vital information-contributor relationships with over 300 insurance companies,
of which we are currently appointed as an authorized agent by 115 insurance
companies. We typically seek and receive formal agency appointment from an
insurance company after we receive a purchase request for that company's product
from a prospective customer.
User Friendly System. At our Web site, www.quotesmith.com, consumers can
access our Internet-based services and initiate purchase requests 24 hours a
day, 7 days a week. Our easy
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to use Web site is designed for fast viewing, rapid downloading and general
compatibility with most commonly used browsers.
OUR STRATEGY
Our strategy is to be the leading Internet-based service for all insurance
needs of individuals and small businesses. The key elements of our strategy
include:
Continue to Build the Quotesmith.com Brand. We believe that building
awareness of the Quotesmith.com brand is critical in our effort to be the
leading Internet-based insurance service. To date, we have focused our consumer
marketing efforts on traditional direct response print advertising in personal
finance and special interest magazines. We have recently begun radio advertising
and entered into strategic online agreements with companies such as Intuit
Insurance Services, drkoop.com and XOOM.com. In order to build our brand, we
plan to add to these strategic online relationships and agreements as well as to
continue to develop our traditional advertising efforts, positive press coverage
and strong word of mouth support.
Offer Additional Insurance Products. We will continue to expand into
additional types of insurance. We expect to leverage our brand, proprietary
database and operational infrastructure to expand the breadth of insurance
products we offer to our customers. While historically our primary product has
been term life insurance, we now offer dental, individual and family medical,
Medicare supplement, small group medical, "no-exam" whole life insurance and
fixed annuity. Additionally, we offer access to private passenger automobile
insurance quotes through click-through arrangements with Quicken Insuremarket
and Progressive. We plan to expand these offerings and add additional life and
health insurance and property and casualty insurance products. We plan to market
these products to both new customers and to our existing customer base.
Expand Number of Participating Insurance Companies. We intend to increase
the number of participating insurance companies in our service. A significant
factor in our success has been our ability to demonstrate to an increasing
number of leading insurance companies that we can generate incremental revenues
for them within their existing pricing structures. We plan to extend this
ability to broaden our relationships with major insurance companies based on
reputation, quality and national presence in order to expand our insurance
product offerings.
Leverage Customer Base. We have expanded our insurance product offerings
and believe there is significant opportunity to leverage our existing customer
base and provide new products to them without significant customer acquisition
costs. We plan to tailor our marketing efforts based on consumer profiles
contained in our database of existing customers.
Strengthen and Pursue Strategic Relationships and Agreements. We believe
that strategic joint ventures and licensing arrangements are attractive methods
of expansion, as they will enable us to combine our expertise in Internet-based
insurance offerings with other brand names, complementary services or
technology. We currently have strategic agreements with Intuit Insurance
Services, drkoop.com, XOOM.com and Progressive. We plan to expand these and
pursue additional relationships and agreements in the future. In addition, we
may seek to acquire complementary technologies or businesses.
Continue to Focus on Customer Service. At Quotesmith.com, we provide
insurance products and services for consumers from initial evaluation through
policy delivery. In order to provide the highest level of service throughout the
insurance buying process, we will monitor feedback from consumers and add new
features designed to increase customer usage and loyalty.
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THE QUOTESMITH.COM BUSINESS MODEL
We have created a model that enables consumers to shop for and purchase
insurance in a manner that we believe is simpler, faster and more convenient
than traditional methods. We provide a complete "quote to policy delivery"
insurance solution using our technology and non-commissioned customer service
staff. Our model:
- allows consumers to specify the desired coverage and range of
substitutability among insurance companies and policy features--for
example, consumers may want to purchase insurance from a company rated
"A" or better by A.M. Best;
- allows consumers to choose the premium range they are prepared to pay for
the policy they want;
- allows consumers to purchase insurance without the involvement of a
commissioned salesperson;
- allows us to monitor and care for applicants through the underwriting
process and policy delivery stage;
- allows us to guarantee the initially quoted premium subject to the
accuracy of the information provided by consumers as compared against
each insurance company's published underwriting guidelines; and
- allows insurance companies to offer additional policies within their
existing pricing structures.
Our customer service representatives are motivated to provide value-added
service and assistance and not to generate insurance purchase requests.
Accordingly, we do not assign consumers to individual employees. Instead, we
rely upon our information processing systems to provide each customer service
representative with access to the customer account and market-related
information necessary to respond to any customer's inquiries. We employ a team
approach. If a customer wishes to initiate an insurance application request or
obtain information concerning an application already in process, each and every
customer service representative is able to provide assistance.
Our process at Quotesmith.com is comprised of four primary stages.
Initial Information Evaluation. Consumers visit our user-friendly Web site
and access our comprehensive database of insurance policy price rates,
underwriting guidelines, policy coverage and exclusion information,
claims-paying ability ratings of over 300 insurance companies. To help consumers
understand the underwriting process, our Web site provides information and
helpful tips on how the underwriting process works.
Search, Retrieval and Comparison. Consumers can quickly obtain a customized
cost comparison report in a single search by completing a brief and confidential
questionnaire at the start of the online session. Each anonymous consumer
inquiry triggers a proprietary cost search and comparison algorithm that sorts
through a database of thousands of insurance options that is updated daily. The
search result, delivered in seconds, is a comprehensive comparison of insurance
policies ranked by the lowest price that matches the consumer's criteria.
Consumers can then click to view:
- specific coverage details about the policy;
- exclusions and guarantees (including policy acceptance guidelines); and
- latest claims-paying ability ratings from five independent rating
services.
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Application Processing. If a consumer desires to purchase a policy, the
consumer selects an insurance company and policy and requests an application for
that policy while online. We accept requests for applications from consumers
throughout the United States, 24 hours a day, 7 days a week. We also provide
toll-free support during business hours. In response to the consumer's request,
we promptly mail insurance applications and state mandated forms to the
consumer. After the consumer receives the application, we provide help in
completing and proofreading the application, which the consumer returns to us to
begin the underwriting process.
Within two business days of receiving a completed application, we call to
thank the consumer and review the application. After this telephone discussion,
we submit the application to the insurance company for underwriting on behalf of
the consumer.
Underwriting. During the underwriting process at Quotesmith.com, we
regularly track the progress of the consumer's outstanding items. We also assist
the insurance company by arranging for a paramedical examination and facilitate
the collection of the driver, medical and credit records. We receive weekly
status reports from the insurance company regarding the application and
regularly communicate this information to the consumer. We review all policies
for accuracy prior to delivery to the consumer.
If an insurance company declines to issue the policy or issues a counter
offer at a higher premium, we send a letter to the consumer stating the reasons
that the policy is not being issued as applied for. In this instance, we also
assist the consumer in finding suitable alternative coverage wherever possible
and whenever asked.
Once a policy has been issued and been paid for by the consumer, we receive
a commission from the insurance company. We do not charge consumers for using
our Quotesmith.com technology and do not currently sell banner advertising at
our Web site.
INSURANCE PRODUCTS
Quotesmith.com historically offered quote and policy-related information
regarding term life insurance. For more information refer to "Risk
Factors -- Nearly all of our revenues are currently derived from consumers
purchasing term life insurance through us" on page 7. We recently began offering
instant quotes and related information on additional insurance products for both
individuals and small businesses. Our current product offerings include:
- Individual term life. This is life insurance coverage that has no cash
value and continues for a fixed period of time such as 15, 20 or 25
years. We have been offering instant quotes and delivering term life
policies since 1993.
- Private passenger automobile. This provides collision and liability
insurance to individuals for private cars and vehicles. We provide access
to instant quotes using click-through arrangements with Progressive and
Quicken Insuremarket. We do not currently deliver automobile insurance
policies.
- Dental. This is generally an add-on product to medical insurance. In
second quarter 1999, we began offering instant quotes from a wide variety
of traditional and managed-care dental plans for individuals, families
and small businesses that employ up to 100 people.
- Individual and family medical. This is also known as comprehensive major
medical insurance. We offer instant quotes, delivered policies and track
traditional plans, PPOs, HMOs and Blue Cross and Blue Shield plans.
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- Medicare supplement. This provides health insurance for people ages 65
and older to fill in coverages not provided by Medicare. We offer instant
quotes and deliver supplemental health policies.
- Small group medical. We define small group medical insurance as those
comprehensive medical plans that are offered to firms that employ up to
100 people. We began offering instant quotes from, and tracking
traditional plans of, PPOs, HMOs and Blue Cross and Blue Shield plans in
second quarter 1999.
- "No-exam" whole life. This provides insurance for persons with adverse
health histories who want life insurance coverage without a paramedical
examination. We offer instant quotes and deliver whole life policies.
- Single premium fixed annuity. This product accumulates a lump-sum cash
payment on a tax-deferred basis at fixed interest rates over time. We
offer instant quotes and deliver fixed annuity products.
The following table shows information with respect to the principal product
types currently available through our services. We obtained the information
regarding United States 1998 annual premiums from A.M. Best.
<TABLE>
<CAPTION>
QUOTESMITH.COM SERVICE
-------------------------------------
UNITED STATES NUMBER OF QUOTED
TYPE OF INSURANCE PRODUCT 1998 ANNUAL PREMIUMS STATES COVERED INSURANCE COMPANIES
------------------------- -------------------- -------------- -------------------
<S> <C> <C> <C>
Individual term life.............. $ 7 billion 50 and D.C. 124
Private passenger automobile...... 119 billion 47 59
Dental............................ 2 billion 50 and D.C. 21
Individual and family medical..... 93 billion 46 and D.C. 33
Supplemental health............... 7 billion 49 and D.C. 66
Small group medical............... 520 billion 25 2
"No exam" whole life.............. -- 50 and D.C. 41
Fixed annuities................... 38 billion 50 and D.C. 83
</TABLE>
TECHNOLOGY
Proprietary Insurance Information Databases. We maintain a proprietary
database of premium rates and policy coverage information from over 300
insurance companies. At Quotesmith.com, we do not rely upon state insurance
departments or any other regulatory agencies to obtain any insurance pricing
information. Instead, we obtain and regularly update all of the pricing,
underwriting and policy coverage information contained in our databases directly
from each quoted insurance company. We obtain claims-paying ability ratings from
A.M. Best, Duff & Phelps Credit Rating Co., Moody's, Standard & Poor's, and
Weiss Ratings, Inc. and hold licenses to re-distribute the copyrighted rating of
each company. Our dedicated staff of seven full-time market reporters regularly
contacts the insurance companies quoted on our service and monitors and updates
our databases as market conditions warrant. Each business day we make several
thousand changes to our database.
Technology Systems. Our systems for processing quotes, purchase requests,
application progress tracking, customer notification and revenue recognition are
highly automated and integrated. Customer service representatives equipped with
online computer terminals can access a customer's account information from our
database on demand. Our core technology systems use a combination of our own
proprietary technologies and commercially available, licensed technologies from
Silicon Graphics, Netscape Communications, Santa Cruz Operation (SCO) and
others. We have internally developed and enhanced our proprietary programs over
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a period of 15 years utilizing scalable tools and platforms to allow us to
rapidly expand our network and computing capacity.
An internal programming and system administration staff supports our
technology. In addition to supporting the systems, our staff continually
enhances our software and hardware and develops new systems and services to
better service our customers and business objectives.
Server Hosting and Backup. Our Web site system hardware is hosted at
AboveNet Communications in San Jose, California and Vienna, Virginia. These
grade "A" telecommunications data centers provide redundant communications lines
to the Internet backbone, emergency power backup, and security, as well as
24-hour monitoring and engineering support. In addition, we have implemented
load balancing systems and our own redundant servers to provide for fault
tolerance. These redundancies permit us to perform scheduled maintenance without
taking our Web site offline. Finally, tape backups are performed nightly to
prevent a loss of data.
MARKETING
At Quotesmith.com, we attract new consumers and communicate the
availability of new products and services primarily through direct response
marketing methods. We have established ourselves as a leading Internet-based
insurance brand through an offline marketing campaign consisting primarily of
magazine advertisements, radio and direct mail. We employ in-house volume media
buying and other strategies to minimize the expenses of broad-based advertising.
Using our proprietary information processing systems and consumer database as
well as other resources, we employ statistical analysis to measure the
effectiveness and efficiency of our marketing efforts.
While our brand awareness to date has been achieved without any affiliation
with an Internet portal or search engine, we have recently entered into several
strategic online relationships and agreements. We intend to increase marketing
expenditures and continue to aggressively pursue a marketing strategy designed
to promote our Quotesmith.com brand and consumer awareness of the benefits of
buying insurance through us. We intend to target households and small
businesses.
Our marketing strategy is to promote our brand and attract self-directed
consumers to our Web site. Our marketing initiatives include:
- utilizing direct response print advertisements placed primarily in
financially-oriented magazines and special interest magazines such as
Kiplinger's Personal Finance, Money Magazine, SmartMoney, Smithsonian,
Flying, Forbes, AOPA, Worth, ABA Journal, Mutual Funds, American
Spectator, Discover and Popular Science;
- advertising via television, radio and direct mail; and
- entering into strategic relationships with other Web sites to increase
our access to online consumers.
STRATEGIC RELATIONSHIPS AND AGREEMENTS
At Quotesmith.com, we selectively pursue strategic relationships and
agreements to expand our access to online consumers, to build our brand name
recognition and to expand our products and services. Recently, we entered into
strategic relationships with drkoop.com and XOOM.com. However, to date we have
not derived a material amount of revenues from these arrangements.
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Intuit Inc. In September 1998, we entered into a service agreement with
Intuit Insurance Services (IIS), pursuant to which we license IIS certain of our
insurance quotation technologies and provide IIS and certain of its affiliated
Internet sites our customer service and insurance brokerage capabilities. This
service agreement is for a term of three years. We will pay a fee to IIS for
Quicken Insuremarket customers who purchase insurance through the Quotesmith.com
service. To date, we have not derived a material amount of revenues from this
service agreement. Recently, we entered into a Web linking agreement with Intuit
to provide customers the ability to click-through to Quicken Insuremarket's
private passenger automobile insurance quotation service. Additionally, Intuit
has made a strategic investment in our company.
The Progressive Corporation. In September 1998, we entered into an
agreement with Progressive, the nation's fifth largest private passenger
automobile insurance company, to provide a click-through to their private
passenger automobile insurance service. As a result of this agreement, visitors
from our Web site may click into Progressive's Web site to obtain instant
automobile insurance quotes from State Farm, Allstate, Progressive and other
automobile insurance companies. Progressive compensates us for this traffic
based upon the number of completed quotes. We do not currently deliver
automobile insurance policies.
COMPETITION
We compete with online and traditional providers of insurance products. The
market for selling insurance products over the Internet is new, rapidly evolving
and intensely competitive. Current and new competitors may be able to launch new
sites at a relatively low cost. There are a number of companies that either sell
insurance online, such as Quicken Insuremarket, or provide lead referral
services online, such as InsWeb Corporation.
We also face competition from the traditional distributors of insurance
such as captive agents, independent brokers and agents and direct distributors
of insurance. Insurance companies and distributors of insurance products are
increasingly competing with banks, securities firms and mutual fund companies
that sell insurance or alternative products to similar consumers. Traditionally,
regulation separated the activity in the financial services industry and
protected insurance companies' markets from competition. However, recent
regulatory changes have begun to permit these financial institutions to also
sell insurance.
We potentially face competition from unanticipated alternatives to our
insurance service from a number of large Internet companies and services that
have expertise in developing online commerce and in facilitating Internet
traffic, including America Online, Microsoft and Yahoo!. These potential
competitors could choose to compete with us directly or indirectly through
affiliations with other electronic commerce companies, including direct
competitors. Other large companies with strong brand recognition, technical
expertise and experience in Internet commerce could also seek to compete with
us. Competition from these and other sources could harm our business, results of
operations and financial condition.
We believe that the principal competitive factors in our markets are price,
brand recognition, Web site accessibility, ability to fulfill customer purchase
requests, customer service, reliability of delivery, ease of use, and technical
expertise and capabilities. Many of our current and potential competitors,
including Internet directories and search engines and traditional insurance
agents and brokers, have longer operating histories, larger consumer bases,
greater brand recognition and significantly greater financial, marketing,
technical and other resources than us. Certain of these competitors may be able
to secure products and services on more favorable terms than we can obtain. In
addition, many of these competitors may be able to devote significantly greater
resources than us for developing Web sites and
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systems, marketing and promotional campaigns, attracting traffic to their Web
sites and attracting and retaining key employees.
Increased competition may result in reduced operating margins, loss of
market share and damage to our brand. We cannot assure you that we will be able
to compete successfully against current and future competitors or that
competition will not harm our business, results of operations and financial
condition.
REGULATION
The insurance industry and the marketers of insurance products are subject
to extensive regulation by state governments and by the District of Columbia.
This regulation extends to the operations of insurance companies, insurance
agents and to our service.
Our products are sold throughout the United States through licenses held by
our company and/or one of our employees as is required by each state's insurance
department. In general, state insurance laws establish supervisory agencies with
broad administrative and supervisory powers to:
- grant and revoke licenses to transact business;
- impose continuing education requirements;
- regulate trade practices;
- require statutory financial statements of the insurance companies;
- approve individuals and entities to whom commissions can be paid;
- regulate methods of transacting business and advertising; and
- approve policy forms, and regulate premium rates for some forms of
insurance.
Moreover, existing state insurance regulations require that a firm (or
individual within that firm) must be licensed in order to quote an insurance
premium. State insurance regulatory authorities regularly make inquiries, hold
investigations and administer market conduct examinations with respect to
compliance with applicable insurance laws and regulations by insurance companies
and their agents. In recent years, a number of insurance agents and the life
insurance companies they represent, have been the subject of regulatory
proceedings and litigation relating to alleged improper life insurance pricing
and sales practices. Some of these agents and insurance companies have incurred
or paid substantial amounts in connection with the resolution of such matters.
We do not currently sell the types of life insurance (primarily cash value life
insurance policies such as universal life) which are the subject of these
actions.
In addition, licensing laws applicable to insurance marketing activities
and the receipt of commissions vary by jurisdiction and are subject to
interpretation as to the application of such requirements to specific activities
or transactions. Our company and/or one of our employees is currently licensed
to sell insurance in every state. We do not permit any of our other personnel
who have contact with customers to act as insurance agents. We monitor the
regulatory compliance of our sales, marketing and advertising practices and the
related activities of our employees. We also provide continuing education and
training to our staff in an effort to ensure compliance with applicable
insurance laws and regulations. However, we cannot assure you that a state
insurance department will not make a determination that one or more of such
activities constitute the solicitation of insurance and that such personnel must
be licensed. Such a determination could harm our business.
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<PAGE> 47
While no regulatory actions are pending against us, we can give you no
assurance that we would deemed to be in compliance with all applicable insurance
licensing requirements of each jurisdiction in which we operate. Nor can we
assure you that we do not need to obtain any additional licenses.
The federal government does not directly regulate the marketing of most
insurance products. However, certain products, such as variable life insurance,
must be registered under federal securities laws and therefore the entities
selling such products must be registered with the NASD. We do not currently sell
any federally regulated insurance products. If we elect to sell such federally
regulated products in the future, we would be required to qualify for and obtain
the required licenses and registrations. We cannot assure you that we will be
able to obtain such licenses.
Further, we are subject to various federal laws and regulations affecting
matters such as pensions, age and sex discrimination, financial services,
securities and taxation. Recently, the Office of the Comptroller of the Currency
has issued a number of rulings that have expanded the ability of banks to sell
certain insurance products. In the past, Congress has considered legislation
that could, among other things, eliminate existing restrictions on the
affiliation of insurance companies, banks and securities firms. Such legislation
and other future federal or state legislation, if enacted, could result in
increased regulation of our business.
The future regulation of insurance sales via the Internet as a part of the
new and rapidly growing electronic commerce business sector is unclear. We
believe that we are currently in compliance with all such regulations. However,
if additional state or federal regulations are adopted, they may have an adverse
impact on us.
LEGAL AND REGULATORY PROCEEDINGS
From time to time we have been, and expect to continue to be, subject to
legal proceedings and claims in the ordinary course of business. Such legal
proceedings and claims include claims of alleged infringement of third party
intellectual property rights and notices from state regulators that we may have
violated state regulations. Such claims, even if without merit, could result in
the significant expenditure of our financial and managerial resources. We are
not aware of any legal proceedings or claims that we believe will have,
individually or in the aggregate, harm our business, financial condition or
results of operations.
EMPLOYEES
As of May 1, 1999, we had 77 employees. We have never had a work stoppage.
A collective bargaining unit does not represent our employees. We consider our
relations with our employees to be good. Our future success will depend, in
part, on our ability to continue to attract, integrate, retain and motivate
highly qualified technical and managerial personnel, for whom competition is
intense.
FACILITIES
Our executive, administrative and operating offices are located in
approximately 16,000 square feet of leased office space in Darien, Illinois
under a lease that expires on December 31, 2003. We anticipate that we may
require additional space within the next 12 months to accommodate our
anticipated growth and that suitable office space will be available on
commercially reasonable terms.
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<PAGE> 48
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS, DIRECTOR NOMINEES AND KEY EMPLOYEES
The following table sets forth certain information regarding our executive
officers and key employees, directors and the individuals who have agreed to
join our board of directors upon the completion of this offering.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert S. Bland (1)..................... 45 Chairman of the Board, President and
Chief Executive Officer
William V. Thoms (1).................... 46 Executive Vice President and Director
Thomas A. Munro......................... 38 Vice President, Chief Financial Officer
and Secretary
Burke A. Christensen.................... 53 Vice President of Operations and General
Counsel
Richard C. Claahsen..................... 36 Vice President of Regulatory Affairs
Richard W. Graeber...................... 34 Vice President of Internet Operations
Grant F. Kuphall........................ 45 Vice President of Business Development
Ronald A. Wozniak....................... 45 Vice President of Information Technology
Bruce J. Rueben (2)(3).................. 46 Director
Timothy F. Shannon (2)(3)............... 44 Director
Jeremiah A. Denton, Jr. (4)............. 74 Director Nominee
Richard F. Gretsch (2)(4)............... 46 Director Nominee
John McCartney (3)(4)................... 46 Director Nominee
</TABLE>
- -------------------------
(1) Will become a member of the executive committee upon completion of this
offering
(2) Will become a member of the compensation committee upon completion of this
offering
(3) Will become a member of the audit committee upon completion of this offering
(4) Will become a director upon the completion of this offering
Robert S. Bland has served as our chairman of the board, president and
chief executive officer since he founded Quotesmith.com in 1984. From 1979 to
1984, Mr. Bland was president and sole stockholder of Security Funding
Corporation, an insurance agency. In March 1984, Mr. Bland sold Security Funding
Corporation in order to raise capital to found our company. Mr. Bland holds a
B.S. in marketing from the University of Colorado.
William V. Thoms has served as our executive vice president since 1994.
From 1988 to 1993, Mr. Thoms was responsible for our operations and customer
service departments. Mr. Thoms is a founding stockholder of Quotesmith.com.
Prior to joining us, Mr. Thoms was a sales manager for Western Dressing, Inc., a
privately held salad dressing manufacturing company, from 1972 to 1987.
Thomas A. Munro has served as our vice president, chief financial officer
and secretary since March 1999. From July 1998 to March 1999, Mr. Munro was
chief financial officer of Bowne Business Solutions, a subsidiary of Bowne & Co.
Prior to joining Bowne & Co., Mr. Munro was chief financial officer of Donnelley
Enterprise Solutions, Inc., a public company. In 1997, Mr. Munro was the
Corporate Controller for Donnelley Enterprise Solutions Inc. From 1995 to 1996,
Mr. Munro was controller at R.R. Donnelly & Sons, Donnelley Business Services
Division, which completed its initial public offering during such time. From
1987 to 1995, Mr. Munro was employed in various financial and management
positions at R.R.
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<PAGE> 49
Donnelley & Sons. Mr. Munro holds a B.S. from Brigham Young University and an
M.B.A. from the University of Chicago.
Burke A. Christensen has served as our vice president of operations and
general counsel since January 1999. From 1997 to 1998, Mr. Christensen was
engaged in the private practice of insurance law with Bell, Boyd & Lloyd, a
Chicago-based law firm. From 1995 to 1997, Mr. Christensen was the vice
president and chief operating officer of A.W. Ormiston & Co. insurance agency.
From 1984 to 1995, Mr. Christensen was vice president and general counsel of the
American Society of Chartered Life Underwriters, Bryn Mawr, Pennsylvania. Mr.
Christensen was awarded the Chartered Life Underwriter designation in 1987. He
holds a B.S. in history from Utah State University and a J.D. from the
University of Utah College of Law.
Richard C. Claahsen has served as our vice president of regulatory affairs
since May 1999. From June 1997 to May 1999, Mr. Claahsen served as our director
of regulatory affairs. From October 1996 to June 1997, he was a special agent
with Northwestern Mutual Life Insurance Company. From 1993 to 1996, Mr. Claahsen
was a litigation paralegal at Templeton & Associates of Chicago, Illinois. In
1999, Mr. Claahsen received his Chartered Life Underwriter designation from The
American College of Bryn Mawr, Pennsylvania. Mr. Claahsen holds a B.A. and an
M.A. in philosophy from the Catholic University of America and a J.D. from ITT
Chicago Kent College of Law.
Richard W. Graeber has served as our vice president of Internet operations
since April 1999 with overall responsibility for our Web site operations. From
1998 to 1999, Mr. Graeber was director of Internet services at Package Software
Associates, a consulting firm specializing in Internet and intranet site
development. From 1996 to 1998, Mr. Graeber was head of Internet technology at
International Bankers School. From 1988 to 1996, Mr. Graeber was manager of
information services at Vector Securities International.
Grant F. Kuphall has served as our vice president of business development
since January 1999. From April 1995 to December 1998, Mr. Kuphall was senior
vice president of Hutchinson, Shockey, Erley & Co., a municipal bond trading and
underwriting firm. From 1987 to 1995, Mr. Kuphall was a principal at Morgan
Stanley & Co. in the municipal bond trading department. Mr. Kuphall holds a B.A.
in economics from Beloit College and an M.B.A. from the University of Chicago.
Ronald A. Wozniak has served as our vice president of information
technology since December 1997. Mr. Wozniak joined us in November 1996 as a
programmer and analyst. From March 1994 to November 1996, Mr. Wozniak was a
senior financial systems analyst at Loyola University Medical Center in Maywood,
Illinois. From September 1993 to February 1994, he was employed as a programmer
and analyst at Data Control and Research, Ltd. Mr. Wozniak holds a B.S. in
management from Northern Illinois University.
Bruce J. Rueben became a director of Quotesmith.com in January 1998. He has
been president of the Minnesota Hospital and Health Care Partnership,
Minnesota's hospital association, since November 1998. From January 1994 to
November 1998, Mr. Rueben was president of the Maine Hospital Association. From
1989 to 1994, Mr. Rueben was senior vice president and assistant treasurer of
the Virginia Hospital Association. Mr. Rueben holds a B.S. from the Virginia
Commonwealth University School of Business and an M.B.A. from the University of
South Carolina.
Timothy F. Shannon became a director of Quotesmith.com in January 1998.
Since 1991, he has been President of Bradner Smith & Company, a subsidiary of
Bradner Central Company. In 1995, he was appointed to the Bradner Central
Company board of directors. Bradner Central
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<PAGE> 50
Company, headquartered in Chicago, is a wholesale paper distribution company
with annual revenues that exceed $300 million. Mr. Shannon holds a B.S. in
Business Administration from the University of Illinois.
Admiral Jeremiah A. Denton, Jr. will become a director of Quotesmith.com
upon the completion of this offering. He currently serves as president of the
National Forum Foundation. Admiral Denton was elected as a United States Senator
from Alabama in 1980, and served from 1981 to 1987. From 1987 to 1989, Admiral
Denton, after being appointed by President Reagan, served as chairman of the
presidential commission on Merchant Marine and Defense. Admiral Denton holds a
B.S. from the United States Naval Academy and an M.A. in international affairs
from George Washington University.
Richard F. Gretsch will become a director of Quotesmith.com upon the
completion of this offering. He currently serves as global offering manager for
AT&T Global Network Services and has held this position since AT&T purchased the
company from IBM Internet Connection Service. Mr. Gretsch had been global
offering manager for IBM Internet Connection Service since 1995. From 1977 to
1995, he was employed with IBM Corporation in various capacities including
advisory instructor, systems engineering, major account development and
securities industry client manager. Mr. Gretsch holds a B.S. in finance and
accounting from the University of Arizona and an M.B.A. from the University of
Notre Dame.
John McCartney will become a director of Quotesmith.com upon the completion
of this offering. Since October 1998, Mr. McCartney has served as vice chairman
of Datatec, Ltd, a global provider of Internet-related products and services.
Datatec, with annual revenues of greater than $1 billion, is headquartered in
Johannesburg, South Africa and publicly traded on the Johannesburg stock
exchange. From June 1997 to March 1998, Mr. McCartney was president of the
client access business unit of 3Com Corporation, which merged with U.S. Robotics
Corporation in 1997. Mr. McCartney served on the board of directors of U.S.
Robotics Corporation from 1985 through 1997. He also served in various executive
capacities at U.S. Robotics Corporation, including as president and chief
executive officer. In addition to serving on the board of directors of Datatec,
Mr. McCartney serves on the board of directors of A.M. Castle Corp. (AMEX) and
Altec Lansing Technologies (privately held). Mr. McCartney holds a B.A. in
philosophy from Davidson College and an M.B.A. from the Wharton School,
University of Pennsylvania.
BOARD COMPOSITION
Our board of directors is currently comprised of four directors and will be
expanded to seven directors prior to the completion of this offering. Following
this offering, our board of directors will be divided into three classes serving
staggered three year terms, except for the first term of Class I directors, who
will serve for a one year term and Class II directors, who will serve for a two
year term. Each year, the directors of one class will stand for election as
their terms of office expire. We expect that, after the offering Messrs. Gretsch
and Rueben will be designated as Class I directors, with their terms of office
expiring in 2000, Messrs. Denton and McCartney will be designated as Class II
directors with their terms of office expiring in 2001, and Messrs. Bland,
Shannon and Thoms will be designated as Class III directors with their terms of
office expiring in 2002.
Each officer is elected by, and serves at the discretion of, our board of
directors. Each of our officers and directors, other than non-employee
directors, devotes his full time to our affairs. Our non-employee directors
devote such time to our affairs as is necessary to discharge their duties. The
are no family relationships among our directors, officers or key employees.
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<PAGE> 51
BOARD COMMITTEES
Currently, our board of directors does not have any committees. Upon the
completion of this offering, our board of directors intends to create an
executive committee, an audit committee and a compensation committee.
We expect that our executive committee will consist of Messrs. Bland, Thoms
and a non-employee director who will be named prior to the completion of this
offering. The executive committee will be authorized to exercise, between
meetings of our board of directors, all of the powers and authority of our board
of directors in the direction and management of our company, except to the
extent (1) prohibited by applicable law or our certificate of incorporation, or
(2) another committee shall have been accorded authority over the matter.
We expect that the audit committee will consist of Messrs. McCartney,
Shannon and Rueben. The audit committee will review our financial statements and
accounting practices, make recommendations to our board of directors regarding
the selection of independent auditors and review the results and scope of the
audit and other services provided by our independent auditors.
We expect that the compensation committee will consist of Messrs. Gretsch,
Shannon and Rueben. The compensation committee will make recommendations to the
board of directors concerning salaries and incentive compensation for our
executive officers and administers certain of our employee benefit plans.
DIRECTOR COMPENSATION
Directors who are also employees of Quotesmith.com receive no compensation
for serving on our board of directors. Non-employee directors receive an annual
stipend of $10,000 per year. In addition, we reimburse non-employee directors
for all travel and other expenses incurred in connection with attending board
and committee meetings. Non-employee directors are also eligible to receive
stock option grants under the 1997 Stock Option Plan. Pursuant to such plan,
Messrs. Rueben and Shannon received grants of 25,000 options each on January 1,
1998. Such options are vested and are exercisable at an exercise price of $1.00
per share. Admiral Denton and Messrs. Gretsch and McCartney will each receive
options to purchase 25,000 shares of common stock upon the completion of the
offering. These options will be fully vested at the time of grant with an
exercise price equal to the initial public offering price.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of our anticipated members of our compensation committee is an officer
or employee of Quotesmith.com. None of our executive officers serves as a member
of the board of directors or compensation committee of any entity that has one
or more executive officers serving on our compensation committee.
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<PAGE> 52
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation we paid
to our chief executive officer and each of our other executive officers
receiving compensation greater than $100,000 in the fiscal year ended December
31, 1998 (the "named executive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL NUMBER OF
COMPENSATION SECURITIES
------------------ UNDERLYING
NAME AND POSITION SALARY BONUS OPTIONS
----------------- ------ ----- ----------
<S> <C> <C> <C>
Robert S. Bland
Chief Executive Officer................................ $192,308 $ -- --
William V. Thoms
Executive Vice President............................... 198,077 -- 25,000
Ronald A. Wozniak
Vice President, Information Technology................. 115,702 5,250 --
</TABLE>
Mr. Munro joined us in March 1999 as our vice president, chief financial
officer and secretary and will be compensated at an annual base salary of
$225,000 during the year ended December 31, 1999. Mr. Christensen joined us in
January 1999 as our vice president of operations and general counsel and will be
compensated at an annual base salary of $150,000 for the year ended December 31,
1999. Mr. Kuphall joined us in January 1999 as our vice president of business
development and will be compensated at an annual base salary of $135,000 during
the year ended December 31, 1999.
STOCK OPTIONS
The following table sets forth certain information regarding options to
acquire our common stock granted to our named executive officers in 1998.
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
PERCENT ASSUMED ANNUAL
NUMBER OF TOTAL RATES OF STOCK PRICE
OF SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(4)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION --------------------
NAME GRANTED 1998(2) SHARE(3) DATE 5% 10%
- ---- ------------- ------------ --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Robert S. Bland............. -- --% $ -- -- $ -- $ --
William V. Thoms(1)......... 25,000 20 2.00 7/31/98 1,250 2,500
Ronald A. Wozniak........... -- -- -- -- -- --
</TABLE>
- -------------------------
(1) Options were fully vested upon receipt with an exercise price of $2.00 per
share.
(2) Based on an aggregate of 125,000 shares subject to options granted in 1998.
(3) All options were granted at an exercise price equal to the fair market value
of our common stock as determined by our board of directors at the time of
grant. In determining the fair market value of our common stock, our board
of directors considered various factors, including our financial condition
and business prospects, our operating
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<PAGE> 53
results, the absence of a market for our common stock and risks regarding our
company. Our common stock was not publicly traded at the time of the grant.
(4) Potential realizable values are net of exercise price, but before taxes
associated with exercise. Amounts represent hypothetical gains that could be
achieved for the options. The assumed 5% and 10% rates of stock appreciation
are provided in accordance with the rules of the Securities and Exchange
Commission and do not represent our estimate or projection of our future
stock price.
OPTION GRANTS IN 1999
In January 1999, we granted Mr. Christensen options, each of which expires
January 1, 2009, to purchase: 25,000 shares of our common stock with an exercise
price of $3.00 per share, vesting as of November 16, 1999; 25,000 shares of our
common stock with an exercise price of $5.00 per share, vesting as of May 16,
2000; 25,000 shares of our common stock with an exercise price of $7.00 per
share, vesting as of November 16, 2000; and 25,000 shares of our common stock at
an exercise price of $9.00 per share, vesting as of November 16, 2001.
In January 1999, we granted Mr. Kuphall options, each of which expires
January 1, 2009, to purchase: 25,000 shares of our common stock with an exercise
price of $5.00 per share, vesting as of January 1, 2000; 25,000 shares of our
common stock with an exercise price of $7.00 per share, vesting as of January 1,
2001; and 25,000 shares of our common stock with an exercise price of $9.00 per
share, vesting as of January 1, 2002.
In March 1999, we granted Mr. Munro options, each of which expires March
29, 2009, to purchase: 30,000 shares of our common stock with an exercise price
of $5.00 per share; 30,000 shares of our common stock with an exercise price of
$7.00 per share; and 30,000 shares of our common stock at $9.00 per share. Each
of Mr. Munro's options will vest over a 36-month period by 2.77% of the total
number of shares optioned each month, however, in the 36th month, such options
will vest by 3.05% of the total number of shares optioned.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information concerning the year-end value of
unexercised options held by our named executive officers.
YEAR-END OPTIONS
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1998 DECEMBER 31, 1998(2)
------------------------------- -------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert S. Bland................... -- -- $ -- $ --
William V. Thoms(1)............... -- -- -- --
Ronald Wozniak.................... 50,000 -- 50,000 --
</TABLE>
- -------------------------
(1) During 1998, Mr. Thoms exercised options to purchase 25,000 shares of our
common stock at an exercise price of $2.00 per share. The deemed value of
the shares at time of exercise was $3.00 per share.
(2) Based upon a deemed value of $3.00 per share.
STOCK BASED PLANS
1997 Stock Option Plan (Amended and Restated). We have established a stock
option plan to provide additional incentive to our employees, officers,
directors and consultants. Pursuant
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<PAGE> 54
to the stock option plan, we may grant incentive stock options to our employees
and officers and non-qualified stock options to our employees, officers,
directors and consultants. Our board of directors or a committee to whom the
board has delegated authority, selects the individuals to whom options are
granted, interprets and adopts rules for the operation of the stock option plan
and specifies the vesting, exercise price and other terms of options. There are
a total of 1,475,000 shares reserved for issuance pursuant to the 1997 Stock
Option Plan of which, as of May 1, 1999, we have granted options to purchase an
aggregate of 500,000 shares of our common stock, at a weighted average exercise
price of $4.62 per share. Upon completion of this offering, options to purchase
85,000 shares of common stock will be issued to certain directors and employees
at the initial public offering price.
The maximum term of an incentive stock option granted under the options is
generally limited to ten years. If an optionee terminates his or her service
with Quotesmith.com, the optionee generally may exercise only those options
vested as of the date of termination of service. Unless otherwise specified in
the option agreement, the optionee must effect such exercise within three months
of termination of service for any reason other than death or disability. The
exercise price of incentive stock options granted under the stock option plan
must be at least equal to the fair market value of our common stock on the date
of grant and in the case of 10% shareholders, 110% of the fair market value.
Payment of the exercise price may be made by such methods as determined by the
plan administrator and may include cash, check, a promissory note, consideration
under a cashless exercise program or, in certain cases, shares of our common
stock owned by the optionee.
In the event we are acquired or merged with another entity or we transfer
all or substantially all of our assets, then immediately prior to such change of
control all outstanding options will be deemed to be vested and exercisable.
1999 Employee Stock Purchase Plan. On March 29, 1999, our board of
directors established the 1999 Employee Stock Purchase Plan under which a total
of 250,000 shares of common stock will be made available for sale to our
employees. The purchase plan, which is intended to qualify as an employee stock
purchase plan within the meaning of Section 423 of the Internal Revenue Code of
1986, as amended, will be administered by our board of directors or by a
committee appointed by our board of directors. Employees are eligible to
participate if they are employed by us for at least 20 hours per week and for
more than five months in any calendar year. The purchase plan permits eligible
employees to purchase common stock through payroll deductions, which may not
exceed 10% of an employee's compensation, subject to certain limitations.
The purchase period will be implemented in a series of consecutive,
overlapping offering periods, each approximately six months in duration.
Purchase periods will begin on the first trading day on or after January 1 and
July 1 of each year and terminate on the last trading day in the period six
months later. However, the first purchase period will begin on the date on which
the registration statement of which this prospectus is a part is declared
effective by the SEC and will terminate on the last trading day in the period
ending December 31, 1999. Each participant will be entitled through a payroll
deduction account to accumulate amounts for the purchase of common stock on the
last date of each purchase period. The purchase price of each share of common
stock under the purchase plan will be set by the administrator of the plan and
will be no less than 85% of the fair market value per share of common stock on
the start date of that purchase period or, if lower, the fair market value on
the last day of the purchase period. Employees may modify or end their
participation in the offering at any time during the offering period.
Participation ends automatically on termination of employment with
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<PAGE> 55
us. The purchase plan will terminate in 2009 unless sooner termination by our
board of directors.
EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS
We have entered into employment agreements with Messrs. Bland, Thoms,
Munro, Christensen and Wozniak. These agreements set forth each executive's base
annual compensation level, eligibility for salary increases, bonuses and options
and level of benefits.
In addition, each of the agreements provides for separation benefits if
such executive is terminated without cause or if the executive terminates his
employment for good reason, including a change of control of our company. In the
event of a termination without cause or for good reason, each of Messrs. Bland,
Thoms and Munro is entitled to receive a lump sum payment equal to two times his
base annual salary. In the event of a termination without cause, Messrs.
Kuphall, Christensen and Wozniak are entitled to receive a lump sum payment
equal to his annual base salary. In connection with such separation payment,
Messrs. Bland, Thoms and Munro are entitled to gross up payments for any excise
taxation incurred. In addition, if Mr. Munro is terminated without cause, the
outstanding options that would vest over the next 12 months will vest and become
immediately exercisable.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
Our certificate of incorporation permits us to indemnify our directors and
officers to the fullest extent permitted under Delaware General Corporation Law.
As permitted by Delaware law, our certificate of incorporation includes a
provision that eliminates the personal liability of our directors for monetary
damages for breach of fiduciary duty as a director, except for liability:
- for any breach of the director's duty of loyalty to the company or our
stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- for liability under section 174 of the Delaware General Corporation Law
regarding unlawful dividends and stock purchases; or
- for any transaction from which the director derived an improper personal
benefit.
Such limitation of liability does not apply to liabilities arising under
the federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or recision.
Further, as permitted by Delaware law, our by-laws provide that we are
required to indemnify our directors and officers to the fullest extent permitted
by Delaware law. In addition, our by-laws provide that:
- we are permitted to indemnify our other employees and agents to the
fullest extent permitted by Delaware law;
- we may advance expenses, as incurred, to our directors and officers in
connection with a legal proceeding; and
- the rights conferred in the certificate of incorporation and by-laws are
not exclusive.
We have or will enter into agreements to indemnify our directors and
executive officers, in addition to indemnification provided for in our
certificate of incorporation and by-laws. These agreements, among other things,
provide for indemnification of our directors and executive officers for certain
expenses, including attorneys fees, judgments, fines and settlement amounts
incurred by such person in any action or proceeding, including any action
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by or in the right of our company or any other company or enterprise to which
the person provides services at our request. We are also required to advance
expenses in certain circumstances. We believe that these provisions and
agreements are necessary to attract and retain qualified persons as directors
and officers.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons pursuant
to the provisions of our certificate of incorporation and by-laws, Delaware law
or the agreements described above, we have been informed that in the opinion of
the SEC such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable.
CERTAIN TRANSACTIONS
Since January 1, 1996, there has not been, nor is there currently proposed,
any transaction or series of similar transactions to which we were or are a
party in which the amount involved exceeds $60,000 and in which any director,
executive officer or holder of more than 5% of our common stock had or will have
a direct or indirect interest other than the transactions described below.
In February 1999, we sold 1,000,000 shares of common stock to Intuit for
aggregate consideration of $3.0 million. As a part of that transaction, we
granted Intuit certain registration rights. For a description of these
registration rights see "Description of Capital Stock -- Registration Rights"
beginning on page 59. We have also entered into a service agreement and a Web
site linking agreement whereby we have agreed to pay a fee to Intuit Insurance
Services for Quicken Insuremarket customers who purchase insurance through the
Quotesmith.com service. Such amounts paid to Intuit Insurance Services have not
to date exceeded $60,000 in any year, but could in future years.
We have entered into compensation arrangements with certain of our
directors and officers. See "Management -- Employment Agreements and Change of
Control Arrangements" on page 51. We have entered into indemnification
agreements with our officers and directors. See "Management -- Indemnification
of Directors and Executive Officers and Limitation of Liability" on page 51.
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<PAGE> 57
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of our common stock as of May 1, 1999, as adjusted to
reflect the sale of shares of common stock in this offering, by:
- each stockholder that is known to us to beneficially own more than 5% of
our common stock;
- each of our directors;
- our chief executive officer and each of the executive officers named in
the summary compensation table; and
- all of our executive officers and directors as a group.
Unless otherwise indicated, the address for each of the named individuals
is c/o Quotesmith.com, Inc., 8205 South Cass Avenue, Suite 102, Darien, Illinois
60561.
Applicable percentage ownership in the table is based upon 13,515,091
shares of common stock outstanding as of May 1, 1999 and shares outstanding
immediately following the completion of this offering. Beneficial ownership is
determined in accordance with the rules of the SEC. Shares of common stock
subject to options presently exercisable or exercisable within 60 days of May 1,
1999 are deemed to be outstanding for the purpose of computing the percentage
ownership of the person or entity holding such options, but are not treated as
outstanding for the purpose of computing the percentage ownership for any other
person or entity. To the extent that any such shares are issued upon the
exercise of options, warrants or other rights to acquire our capital stock that
are presently outstanding or granted in the future or reserved for future
issuance under our stock plans, new public investors will be subject to further
dilution.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
--------------------------------------
PRIOR TO OFFERING AFTER OFFERING
-------------------- --------------
NUMBER PERCENT PERCENT
------ ------- -------
<S> <C> <C> <C>
OUR CEO, NAMED EXECUTIVE OFFICERS AND DIRECTORS
Robert S. Bland....................................... 7,314,334 54.1% %
William V. Thoms...................................... 2,160,000 16.0
Ronald A. Wozniak(1).................................. 50,000 * *
Timothy F. Shannon(2)(3).............................. 33,333 * *
Bruce J. Rueben(2)(4)................................. 27,000 * *
ALL EXECUTIVE OFFICERS AND DIRECTORS AS A GROUP (11
PERSONS)(5)........................................... 9,720,146 71.4
OTHER FIVE PERCENT STOCKHOLDER
Intuit Inc.(6)........................................ 1,000,000 7.4
</TABLE>
- -------------------------
* Less than 1%.
(1) Consists of shares purchasable upon exercise of fully vested options.
(2) Includes options to purchase 25,000 shares that are fully vested.
(3) Mr. Shannon's address is 333 South Desplaines Street, Chicago, Illinois
60661.
(4) Mr. Rueben's address is 2550 University Avenue West, St. Paul, Minnesota
55114.
(5) Includes options to purchase 107,477 shares that are fully vested.
(6) Intuit's address is 2535 Garcia Avenue, Mountain View, California 94043.
54
<PAGE> 58
DESCRIPTION OF CAPITAL STOCK
Upon completion of this offering, our authorized capital stock will consist
of 60,000,000 shares of common stock and 5,000,000 shares of preferred stock.
The following summary of certain provisions of the common stock and preferred
stock is subject to, and qualified in its entirety by, our certificate of
incorporation and by-laws and by the provisions of applicable law.
COMMON STOCK
As of May 1, 1999, we had 13,515,091 shares of common stock outstanding
held of record by 31 stockholders. Subject to preferences that may apply to
shares of preferred stock outstanding at any time, the holders of outstanding
shares of our common stock are entitled to receive dividends out of assets
legally available therefor at such times and in such amounts as the board of
directors may from time to time determine. Each stockholder is entitled to one
vote for each share of common stock held on all matters submitted to a vote of
stockholders. Cumulative voting for the election of directors is not provided
for in our certificate of incorporation, which means that the holders of a
majority of the shares voted can elect all of the directors then standing for
election. Our common stock is not entitled to preemptive rights and is not
subject to conversion or redemption. Upon the occurrence of a liquidation,
dissolution or winding-up of our company, the holders of shares of common stock
would be entitled to share ratably in the distribution of all of our assets
remaining available for distribution after satisfaction of all our liabilities
and the payment of the liquidation preference of any outstanding preferred
stock. Each outstanding share of common stock is, and all shares of common stock
to be outstanding upon completion of this offering will be, fully paid and
non-assessable.
PREFERRED STOCK
As of May 1, 1999, we had no shares of preferred stock outstanding. The
board of directors has the authority, within the limitations and restrictions
stated in the certificate of incorporation, to provide by resolution for the
issuance of shares of preferred stock, in one or more classes or series, and to
fix the rights, preferences, privileges and restrictions thereof, including
dividend rights, conversion rights, voting rights, terms of redemption,
liquidation preferences and the number of shares constituting any series or the
designation of such series. The issuance of preferred stock could have the
effect of decreasing the market price of the common stock and could adversely
affect the voting and other rights of the holders of common stock. See "Risk
Factors -- Our charter documents and Delaware law contain certain provisions
that may discourage takeover attempts which could preclude our stockholders from
receiving a change of control premium" on page 17.
The board of directors has adopted a stockholder rights plan. In connection
with the adoption of the stockholder rights plan, the board of directors has
created one series of preferred stock, consisting of 600,000 shares of Series A
Participating Preferred. No shares of Series A Participating Preferred have been
issued as of the date of this prospectus. Each share of the Series A
Participating Preferred, when and if issued, would entitle the holder to receive
quarterly dividends equal to the greater of $1.00 per share or 100 times the
dividends per share declared with respect to the common stock. Dividends on the
Series A Participating Preferred are cumulative. Holders of the Series A
Participating Preferred would be entitled to exercise 100 votes per share on all
matters submitted to a vote of stockholders and, except as otherwise required by
law, would vote together with the holders of common stock as a single class. In
the event of liquidation, such holders would receive a preference of $1.00 per
share over the
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<PAGE> 59
common stock. In general, each share of the Series A Participating Preferred is
intended to have a value and voting rights equal to 100 shares of common stock,
and appropriate anti-dilutive adjustments will be made in accordance with the
terms of such Series A Participating Preferred in the event of certain changes
in common stock. Except as contemplated in connection with the stockholder
rights plan described below, we have no present plans to issue any of the
preferred stock.
OPTIONS
Under the 1997 Stock Option Plan, as of May 1, 1999 we had granted options
to purchase 500,000 shares of our common stock at a weighted average exercise
price of $4.62 per share. As of such date, 975,000 shares of common stock were
available for future grant or issuance under the plan.
RIGHTS PLAN
Our board of directors has declared a dividend distribution of one
preferred share purchase right for each outstanding share of common stock. The
dividend is payable to stockholders of record on , , 1999,
which is the record date for this distribution and with respect to common stock
issued thereafter until the distribution date. Except as set forth below, each
right, when it becomes exercisable, entitles the registered holder to purchase
from us one one-hundredth of a share of the Series A Participating Preferred at
an exercise price equal to five times the initial offering price of our common
stock, subject to adjustment. The description and terms of the rights are set
forth in a rights agreement between us and Harris Trust and Savings Bank, as
rights agent. A copy of the rights agreement is available to stockholders free
of charge from us upon request directed to our corporate secretary.
Initially, the rights will be attached to all certificates representing
shares of common stock then outstanding, and no separate rights certificates
will be distributed. The rights will separate from the common stock upon a
distribution date, which is the earliest to occur of (1) 10 days following
public announcement that an acquiring person, a person or group of affiliated or
associated persons, has acquired beneficial ownership of 15% or more of the
outstanding common stock or (2) 15 business days or such later date as our board
may determine following the commencement of, or announcement of an intention to
make, a tender offer or exchange offer the consummation of which would result in
a person or group becoming an acquiring person. The definition of an acquiring
person includes a person or group that beneficially owns 15% or more of our
outstanding common stock, but excludes any of our employee benefits plans. Each
of Robert S. Bland and William V. Thoms, their extended family, family trusts
and certain other of their affiliates and associates will not be deemed to be an
acquiring person as long as such persons beneficially own less than % of
our outstanding common stock in the case of Mr. Bland and % in the case of Mr.
Thoms. The date that a person or group becomes an acquiring person is the "share
acquisition date." Until a right is exercised, the holder thereof, as such, will
not have any rights as a stockholder, including the right to vote or receive
dividends thereon.
The rights agreement provides that, until the distribution date, the rights
will be transferred with and only with the common stock. Until the distribution
date (or earlier redemption or expiration of the rights) new common stock
certificates issued after the record date upon transfer or new issuance of
common stock will contain a notation incorporating the rights agreement by
reference. Until the distribution date (or earlier redemption or expiration of
the rights), the surrender for transfer of any certificates for common stock
outstanding as of
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<PAGE> 60
the record date, even without such notation or a copy of the summary of rights
attached thereto, will also constitute the transfer of the rights associated
with the common stock represented by such certificate. As soon as practicable
following the distribution date, separate certificates evidencing the rights
will be mailed to holders of record of the common stock as of the close of
business on the distribution date (and to each initial record holder of certain
common stock issued after the distribution date), and such separate rights
certificates alone will evidence the rights.
The rights are not exercisable until the distribution date and will expire
at the close of business on the tenth anniversary of the effective date of the
plan, unless earlier redeemed by us as described below.
In the event that any person becomes an acquiring person, in lieu of
acquiring preferred stock, each holder of a right (other than an acquiring
person) will thereafter have the right to receive upon payment of the exercise
price, the number of shares of common stock, or, in certain circumstances, cash,
property or other of our securities, having a value equal to two times the
exercise price. Notwithstanding the foregoing, following the occurrence of
triggering events described above or in the paragraph below, all rights that
are, or (under certain circumstances specified in the rights agreement) were,
beneficially owned by any acquiring person or any affiliate or associate thereof
will be null and void.
In the event that, at any time following the share acquisition date, (1) we
are acquired in a merger or other business combination transaction, or (2) more
than 50% of our assets or earning power is sold or transferred to any other
person, then each holder of a right (except rights which previously have been
voided as set forth above) shall thereafter have the right to receive, upon
exercise, common stock of the acquiring company having a value equal to two
times the exercise price of the right.
The exercise price and the number of shares of preferred stock or other
securities or property issuable upon exercise of the rights are subject to
adjustment from time to time to as a result of, among other things, a
subdivision, split (other than a stock dividend on the common stock payable in
shares of common stock), combination, consolidation or reclassification of the
Series A Participating Preferred or the common stock, or a reverse split of the
outstanding shares of Series A Participating Preferred or common stock.
At any time prior to the earlier to occur of (1) a person becoming an
acquiring person or (2) the expiration of the rights, and under certain other
circumstances, we may redeem the rights in whole, but not in part, at a price of
$0.01 per right which redemption shall be effective upon the action of the board
of directors. Additionally, at any time after a triggering event and prior to
the time that a person or group acquires 50% or more of the outstanding common
stock, we may exchange the rights (other than those that have become null and
void), in whole or in part, for shares of common stock at an exchange ratio of
one share of common stock per right (subject to adjustment).
The provisions of the rights agreement may be amended by our board of
directors in order to cure any ambiguity, defect or inconsistency, provided that
after such time as any person becomes an acquiring person, the rights agreement
may not be amended in any manner that would adversely affect the interests of
the holders of the rights.
DELAWARE ANTI-TAKEOVER AND CERTAIN CERTIFICATE OF INCORPORATION AND BY-LAW
PROVISIONS
Certain provisions of Delaware law and our certificate of incorporation and
by-laws could make more difficult the acquisition of our company by means of a
tender offer, a proxy contest, or otherwise, and the removal of incumbent
officers and directors. These provisions are
57
<PAGE> 61
expected to discourage certain types of coercive takeover practices and
inadequate takeover bids and to encourage persons seeking to acquire control of
our company to first negotiate with us. We believe that the benefits of
increased protection of our potential ability to negotiate with the proponent of
an unfriendly or unsolicited proposal to acquire or restructure our company
outweighs the disadvantages of discouraging such proposals. The increased
protection is beneficial even if a proposal is priced above the then-current
market value of our common stock, because negotiation of such proposals could
result in an improvement of their terms.
Section 203 of the Delaware General Corporation Law. We are subject to the
provisions of Section 203 of the Delaware General Corporation Law. This
provision generally prohibits any publicly-held Delaware corporation from
engaging in a business combination with an interested stockholder for a period
of three years after the date of the transaction in which the person became an
interested stockholder, unless:
- the transaction in which the stockholder became an interested stockholder
is approved by the board of directors prior to the date the interested
stockholder attained such status;
- upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction was commenced, excluding those shares owned by persons
who are directors and also officers and stock held by certain employee
stock option plans; or
- on or subsequent to that date, the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least two-thirds of the
outstanding voting stock that is not owned by the interested shareholder.
A business combination includes a merger, asset sale or other transaction
resulting in a financial benefit to the stockholder. For purposes of Section
203, an interested stockholder is defined to include any person that is:
- the owner of 15% or more of the outstanding voting stock of the
corporation;
- an affiliate or associate of the corporation and was the owner of 15% or
more of the voting stock outstanding of the corporation, at any time
within three years immediately prior to the relevant date; and
- an affiliate or associate of the persons described in the foregoing
bullet points.
The restrictions contained in Section 203 do not apply to Mr. Bland, our
chairman, president and chief executive officer, because he was an interested
stockholder before our voting stock was listed on a national securities exchange
or authorized for quotation on the Nasdaq National Market or held by record by
more than 2,000 stockholders.
Stockholders may, by adopting an amendment to the corporation's certificate
of incorporation or bylaws, elect for the corporation not to be governed by
Section 203, effective 12 months after adoption. Neither our certificate of
incorporation nor our by-laws exempt us from the restrictions imposed under
Section 203 of the Delaware General Corporation Law. We anticipate that the
provisions of Section 203 of the Delaware General Corporation Law may encourage
companies interested in acquiring us to negotiate in advance with our board of
directors because the stockholder approval requirement would be avoided if a
majority of the directors then in office approve either the business combination
or the transaction that results in the stockholder becoming an interested
stockholder.
58
<PAGE> 62
Classification and Structure of our Board of Directors. Immediately upon
the completion of this offering, our board of directors will be divided into
three classes of directors serving staggered, three-year terms. The number of
directors will be fixed by resolution of our board of directors consisting of at
least three but not more than nine directors. The size of our board is currently
fixed at four members and will be increased to seven members contemporaneously
with the completion of this offering. The directors shall be elected at the
annual meeting of the stockholders, except for filling vacancies. Directors may
be removed only for cause and only with the approval of the holders of at least
80% of voting power present and entitled to vote at a meeting of stockholders.
Vacancies and newly-created directorships resulting from any increase in the
number of directors may be filled by a majority of the directors then in office,
a sole remaining director, or if a Delaware provision expressly confers power on
stockholders to fill a directorship at a special meeting, by the holders of at
least 80% of the voting power present and entitled to vote at a meeting of
stockholders.
As a result of the classification of our board of directors, approximately
one-third of the members of our board of directors will be elected each year.
When coupled with the provision of our certificate of incorporation authorizing
the board of directors to fill vacant directorships and increase the size of the
board of directors up to nine, these provisions may prevent stockholders from
removing incumbent directors and simultaneously gaining control of the board of
directors by filling the vacancies created by such removals with their own
nominees.
Meetings of Stockholders. Our certificate of incorporation and by-laws
provide that any action required or permitted to be taken by our stockholders
may be effected at a duly called annual or special meeting of our stockholders.
Special meetings of stockholders may be called by the chief executive officer or
by a majority of our board of directors. These provisions may have the effect of
deterring hostile takeovers or delaying changes in control of our management.
Written Consent. Under our certificate of incorporation, our stockholders
will not be allowed to take action in writing outside of an annual or special
meeting of our stockholders.
Advance Notice Requirements for Stockholder Proposals and Director
Nominations. Our by-laws require that timely notice in proper form be provided
by stockholders seeking to bring business before, or to nominate candidates for
election as directors at, the annual meeting of stockholders. Such notice must
be received by us 120 calendar days in advance of the date specified in the
previous year's notice of the annual meeting. These provisions may preclude
stockholders from timely bringing matters before, or from making nominations for
directors at, an annual meeting of stockholders.
Amendment of our Certificate of Incorporation and By-Laws. Generally, our
certificate of incorporation may be amended by the approval of the majority of
our board of directors and a majority of our outstanding voting securities.
However, the approval of at least 80% of voting securities is required to amend
a provision in the certificate of incorporation relating to the liability or
indemnification of our officers and directors, the structure and classification
of our board of directors and stockholder actions. Our board of directors is
authorized to amend our by-laws consistent with Delaware law and our certificate
of incorporation.
59
<PAGE> 63
REGISTRATION RIGHTS
As part of our sale of common stock to Intuit in February 1999, we entered
into an investor rights agreement with Intuit. This agreement provides Intuit
with the following registration rights:
- If Intuit requests that we file a registration statement covering its
shares of common stock, we must make our best efforts to file such a
statement as soon as possible. If, however, we find such registration
would be detrimental to our company, we may postpone the requested filing
for a period of 90 days.
- Intuit may not sell or transfer any of the shares purchased in February
1999 unless either (A) there is a registration statement in effect
covering such shares or (B)(i) the transferee has agreed to be bound by
all the terms and conditions of the investor rights agreement and (ii)
Intuit has provided us with an opinion of counsel stating that the
transfer will not require the registration of its shares.
- We must notify Intuit of our intention to file a registration statement
covering any securities issued by our company as well as allow them to
include its shares in the registration statement.
- If Intuit requests, we must file a short form registration statement
covering its shares. We must make our best efforts to file such a
statement as soon as possible. If, however, we find such registration is
impermissible under the applicable securities laws, or we have effected
two similar registrations within the preceding 12 months, we may refuse
to initiate the requested filing. Furthermore, if we find the requested
registration would be detrimental to the company, we may postpone the
requested filing for a period of 90 days.
Under the investor rights agreement, we will pay all of Intuit's
registration costs and expenses unless Intuit withdraws a requested filing
initiated by us. We will indemnify Intuit to the full extent allowed by law for
any liabilities to which it may become subject as a result of any registration
filed pursuant to the investor rights agreement, provided such liability arises
out of any act or omission of the company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is Harris Trust and
Savings Bank, Chicago, Illinois.
LISTING
We have applied for quotation of the common stock on the Nasdaq National
Market under the trading symbol "QUOT."
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<PAGE> 64
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have outstanding
shares of common stock, based upon shares outstanding on
, 1999. Excluding the shares of our
common stock offered in this offering and assuming no exercise of the
underwriters' over-allotment option, immediately prior to the effective date of
the registration statement, there will be shares of common stock
outstanding. All of these shares are subject to lock-up agreements with the
underwriters pursuant to which the holders of the restricted shares have agreed
not to sell, pledge or otherwise dispose of such shares for a period of at least
180 days after the date of this prospectus. Hambrecht & Quist LLC may release
the shares subject to the lock-up agreements in whole or in part at any time
with or without notice. However, Hambrecht & Quist LLC has no current plans to
do so.
Beginning 180 days after the effective date of the registration statement,
approximately shares will become eligible for sale in the public
market when the underwriter's lock-up agreements expire (unless the underwriters
elect, in their sole discretion, to release these shares from the lock-up
agreements earlier). In addition to the shares described above, after such 180th
day, approximately shares will become available for sale at
various times pursuant to Rule 144.
Certain of the restricted shares that will become available for sale in the
public market beginning 180 days after the effective date will be subject to
certain volume and other resale restrictions pursuant to Rule 144 because the
holders are affiliates of our company. The general provisions of Rule 144 are
described below.
In general, under Rule 144, an affiliate of our company, or a person (or
persons whose shares are aggregated) who has beneficially owned restricted
shares for at least one year, will be entitled to sell in any three-month period
a number of shares that does not exceed the greater of:
- 1% of the then outstanding shares of the common stock (approximately
shares immediately after this offering); or
- the average weekly trading volume during the four calendar weeks
preceding the date on which notice of the sale is filed with the SEC.
Sales pursuant to Rule 144 are subject to certain requirements relating to
manner of sale, notice and availability of current public information about us.
A person (or persons whose shares are aggregated) who is not deemed to have been
an affiliate of ours at any time during the 90 days immediately preceding the
sale and who has beneficially owned his or her shares for at least two years is
entitled to sell such shares pursuant to Rule 144(k) without regard to the
limitations described above.
In addition to the restriction imposed by the securities laws,
of the restricted shares were issued to certain of our officers
and directors pursuant to restricted stock agreements under the 1997 Stock
Option Plan. Pursuant to the provisions of these agreements, we have a
repurchase option on any unvested shares. Our repurchase option with respect to
such shares lapses ratably over time. At the 180th day after the effective date,
approximately of those shares will remain subject to the
repurchase option.
As of May 1, 1999, options to purchase 500,000 shares of our common stock
had been granted and are outstanding under the 1997 Stock Option Plan of which
187,000 options were then exercisable. As of such date, options to purchase an
additional 975,000 shares of common stock were available for future grant or
issuance. Beginning 180 days after the effective date, approximately
shares issuable upon the exercise of vested options will become
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<PAGE> 65
eligible for sale and shares issued pursuant to restricted stock
agreements under the 1997 Stock Option Plan will no longer be subject to a
repurchase option and will be eligible for resale. In addition, as of May 1,
1999, 250,000 shares of common stock were reserved for issuance under our 1999
Employee Stock Purchase Plan.
We intend to file, within 180 days after the date of this prospectus, a
Form S-8 registration statement under the Securities Act to register shares
issued pursuant to restricted stock purchase agreements under the 1997 Stock
Option Plan and the 1999 Employee Stock Purchase Plan, shares issued in
connection with option exercises and shares reserved for issuance under all
stock plans. Shares of common stock issued pursuant to the restricted stock
agreements under the 1997 Stock Option Plan, the 1999 Employee Stock Purchase
Plan or upon exercise of options after the effective date of the Form S-8 will
be available for sale in the public market, subject to Rule 144 volume
limitations applicable to affiliates and lock-up agreements.
LOCK-UP AGREEMENTS
All officers and directors and certain holders of common stock and options
to purchase common stock have agreed pursuant to certain "lock-up" agreements
that they will not offer, sell, contract to sell, pledge, grant any option to
sell, or otherwise dispose of, directly or indirectly, any shares of common
stock or securities convertible or exchangeable for common stock, or warrants or
other rights to purchase common stock for a period of 180 days after the date of
this prospectus without the prior written consent of Hambrecht & Quist LLC.
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<PAGE> 66
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives, Hambrecht & Quist LLC,
PaineWebber Incorporated and ABN AMRO Incorporated, have severally agreed to
purchase from us the numbers of shares of common stock set forth opposite their
names below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Hambrecht & Quist LLC.......................................
PaineWebber Incorporated....................................
ABN AMRO Incorporated.......................................
------
Total..................................................
======
</TABLE>
The underwriting agreement provides that the obligations of the
underwriters are subject to certain conditions precedent. These conditions
precedent include the absence of any material adverse change in our business and
the receipt of certain certificates, opinions and letters from us, our counsel
and our independent auditors. The nature of the underwriters' obligation is that
they are committed to purchase all shares of common stock offered by this
prospectus if any of these shares are purchased.
The following table shows the per share and total underwriting discounts
and commissions we will pay to the underwriters. Such amounts are shown assuming
both no exercise and full exercise of the underwriters' over-allotment option to
purchase additional shares of common stock.
UNDERWRITING DISCOUNTS AND COMMISSIONS PAYABLE BY QUOTESMITH.COM
<TABLE>
<CAPTION>
WITH WITHOUT
OVER-ALLOTMENT EXERCISE OVER-ALLOTMENT EXERCISE
----------------------- -----------------------
<S> <C> <C>
Per Share................................. $ $
Total..................................... $ $
</TABLE>
We estimate that the total expenses of this offering, excluding
underwriting discounts and commissions, will be approximately $ .
The underwriters propose to offer the shares of common stock directly to
the public at the initial public offering price set forth on the cover page of
this prospectus and to certain dealers at that price less a concession not in
excess of $ per share. The underwriters may allow, and these dealers may
reallow, a concession not in excess of $ per share to certain other dealers.
After the initial public offering of the shares has been completed, the
representatives of the underwriters may change the offering price and other
selling terms. The representatives of the underwriters have informed us that the
underwriters do not intend to confirm discretionary sales in excess of 5% of the
shares of common stock offered by this prospectus.
We have granted to the underwriters an option, exercisable no later than 30
days after the date of this prospectus, to purchase up to
additional shares of common stock at the initial public offering
price set forth on the cover page of this prospectus, less the
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<PAGE> 67
underwriting discount. To the extent that the underwriters exercise this option,
each of the underwriters will have a firm commitment to purchase approximately
the same percentage thereof which the number of shares of common stock to be
purchased by it shown in the above table bears to the total number of shares of
common stock offered by this prospectus. We will be obligated, pursuant to the
option, to sell shares to the underwriters to the extent the option is
exercised. The underwriters may exercise this option only to cover over-
allotments made in connection with the sale of shares of common stock offered by
this prospectus.
At the request of Quotesmith.com, the underwriters have reserved for sale,
at the initial public offering price, shares of common stock for certain of our
directors, employees and associates. We cannot assure you that any of the
reserved shares will be so purchased. The number of shares available for sale to
the general public in this offering will be reduced by the number of reserved
shares purchased. Any reserved shares not so purchased will be offered to the
general public on the same basis as the other shares offered hereby.
The offering of the shares is made for delivery when, as and if accepted by
the underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, and to contribute to
payments the underwriters may be required to make in respect thereof.
We and certain of our stockholders including executive officers and
directors, who will collectively own shares of common stock after
this offering, have agreed that they will not, without the prior written consent
of Hambrecht & Quist LLC, offer, sell or otherwise dispose of any shares of
common stock, options or warrants to acquire shares of common stock or
securities exchangeable for or convertible into shares of common stock owned by
them during the 180-day period following the date of this prospectus. We have
agreed that we will not, without the prior written consent of Hambrecht & Quist
LLC, offer, sell or otherwise dispose of any shares of common stock, options or
warrants to acquire shares of common stock or securities exchangeable for or
convertible into shares of common stock during the 180-day period following the
date of this prospectus, except that we may issue shares upon the exercise of
options granted prior to the date hereof, and may grant additional options under
our stock option plans, provided that, without the prior written consent of
Hambrecht & Quist LLC, these additional options shall not be exercisable during
such period.
Prior to this offering, there has been no public market for our common
stock. The initial public offering price for the common stock will be determined
by negotiation among us and the representatives of the several underwriters.
Among the factors to be considered in determining the initial public offering
price of the common stock are:
- prevailing market and economic conditions;
- our revenues and earnings;
- market valuations of other companies engaged in activities similar to us;
- estimates of our business potential and prospects;
- the present state of our business operations;
- our management; and
- other factors we and the representatives of the several underwriters deem
relevant.
64
<PAGE> 68
The estimated initial public offering price range set forth on the cover of
this preliminary prospectus is subject to change as a result of market
conditions or other factors.
Certain persons participating in this offering may over-allot or effect
transactions that stabilize, maintain or otherwise affect the market price of
the common stock at levels above those that might otherwise prevail in the open
market, including by entering stabilizing bids. These transactions may include
entering stabilizing bids, effecting syndicate covering transactions or imposing
penalty bids. A stabilizing bid means the placing of any bid or effecting of any
purchase, for the purpose of pegging, fixing or maintaining the price of the
common stock. A syndicate covering transaction means the placing of any bid on
behalf of the underwriting syndicate or the effecting of any purchase to reduce
a short position created in connection with the offering. A penalty bid means an
arrangement that permits the underwriters to reclaim a selling concession from a
syndicate member in connection with the offering when shares of common stock
sold by the syndicate member are purchased in syndicate covering transactions.
These activities by the underwriters may stabilize, maintain or otherwise affect
the market price of the common stock. As a result, the price of the common stock
may be higher than the price that otherwise might exist in the open market. Such
transactions may be effected on the Nasdaq National Market, in the
over-the-counter market or otherwise. Stabilizing, if commenced, may be
discontinued at any time.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered hereby
will be passed upon for us by Freeborn & Peters, Chicago, Illinois. Certain
legal matters will be passed upon for the underwriters by Sidley & Austin,
Chicago, Illinois.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements at December 31, 1998 and 1997, and for each of the three years in the
period ended December 31, 1998, as set forth in their report. We have included
our financial statements in the prospectus and elsewhere in the registration
statement in reliance on Ernst & Young LLP's report, given on their authority as
experts in accounting and auditing.
ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to the shares of common stock offered hereby. This
prospectus does not contain all of the information set forth in the registration
statement and the exhibits thereto. For further information with respect to our
business and the common stock offered by this prospectus, reference is made to
the registration statement and the exhibits thereto. Statements contained in
this prospectus regarding the contents of any contract or any other document to
which reference is made are not necessarily complete, and, in each instance
where a copy of such contract or other document has been filed as an exhibit to
the registration statement, reference is made to the copy so filed, each such
statement being qualified in all respects by such reference. A copy of the
registration statement and the exhibits thereto may be inspected without charge
at the offices of the SEC at Judiciary Plaza, 450 Fifth Street, Washington, D.C.
20549, and copies of all or any part of the registration statement may be
obtained from the Public Reference Section of the SEC, Washington, D.C. 20549
upon the payment of the fees prescribed by the SEC. Please call the SEC at
1-800-SEC-0330 for further information about the public reference rooms. The SEC
maintains a Web site, http://www.sec.gov, that contains
65
<PAGE> 69
reports, proxy and information statements and other information regarding
registrants, such as us, that file electronically with the SEC.
Upon completion of this offering, we will become subject to the information
and periodic reporting requirements of the Securities Exchange Act of 1934, and,
in accordance therewith, will file periodic reports, proxy statements and other
information with the SEC.
66
<PAGE> 70
QUOTESMITH.COM, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. F-2
Balance Sheets as of December 31, 1997 and 1998 and March
31, 1999.................................................. F-3
Statements of Operations for the Years Ended December 31,
1996, 1997, and 1998, and the Three Months Ended March 31,
1998 and 1999............................................. F-4
Statements of Stockholders' Equity for the Years Ended
December 31, 1996, 1997, and 1998, and the Three Months
Ended March 31, 1999...................................... F-5
Statements of Cash Flows for the Years Ended December 31,
1996, 1997, and 1998, and the Three Months Ended March 31,
1998 and 1999............................................. F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 71
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Quotesmith.com, Inc.
We have audited the accompanying balance sheets of Quotesmith.com, Inc. as
of December 31, 1998 and 1997, and the related statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Quotesmith.com, Inc. at
December 31, 1998 and 1997, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998 in conformity
with generally accepted accounting principles.
As discussed in Note 2 to the financial statements the Company changed its
method of accounting for commission revenues.
ERNST & YOUNG LLP
Chicago, Illinois
February 22, 1999
F-2
<PAGE> 72
QUOTESMITH.COM, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 31,
1997 1998 1999
---- ---- ---------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash................................................ $ 3,809 $ 518,202 $ 2,945,982
Commissions receivable, less allowances
(1997 -- $114,000; 1998 -- $127,000;
1999 -- $136,000) (Note 2)........................ 691,023 1,007,662 916,648
Other assets........................................ 14,184 39,248 29,333
---------- ---------- ------------
Total current assets................................ 709,016 1,565,112 3,891,963
Furniture, equipment, and computer software at cost,
less accumulated depreciation (1997 -- $107,304;
1998 -- $166,102; 1999 -- $189,576)............... 121,420 240,606 418,014
---------- ---------- ------------
Total assets........................................ $ 830,436 $1,805,718 $ 4,309,977
========== ========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities............ $ 630,386 $ 816,327 $ 575,633
Notes payable to bank due in one year (Note 4)...... 200,000 -- --
---------- ---------- ------------
Total current liabilities........................... 830,386 816,327 575,633
Notes payable to bank due after one year (Note 4)... 233,330 -- --
---------- ---------- ------------
Total liabilities................................... 1,063,716 816,327 575,633
Commitments and contingencies (Notes 5, 7, and 8)
Stockholders' equity (deficiency in assets) (Notes
4, 5, 6, and 8):
Common stock, $.001 par value; shares
authorized: 1997 and 1998 -- 35,000,000; 1999
- 60,000,000; shares issued:
1997 -- 14,490,000; 1998 -- 14,921,091;
1999 -- 16,049,091........................... 14,490 14,921 16,049
Additional paid-in capital..................... 206,220 1,624,061 5,797,933
Retained-earnings deficit...................... (190,990) (386,591) (1,816,638)
Treasury stock at cost (2,534,000 shares)...... (263,000) (263,000) (263,000)
---------- ---------- ------------
Total stockholders' equity (deficiency in assets)... (233,280) 989,391 3,734,344
---------- ---------- ------------
Total liabilities and stockholders' equity.......... $ 830,436 $1,805,718 $ 4,309,977
========== ========== ============
</TABLE>
See accompanying notes.
F-3
<PAGE> 73
QUOTESMITH.COM, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------------------- --------------------------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Commission revenues (Note
2)........................ $3,496,805 $ 4,115,809 $ 5,507,596 $ 1,142,269 $ 1,449,563
Other revenue................ 315,331 146,425 68,034 22,516 13,767
---------- ----------- ----------- ----------- -----------
Total revenues................. 3,812,136 4,262,234 5,575,630 1,164,785 1,463,330
Expenses:
Selling and marketing (Note
2)........................ 1,109,283 2,151,996 1,791,145 276,766 681,456
Operations................... 1,550,642 1,794,261 2,689,408 534,431 958,132
General and administrative
(Note 8).................. 786,256 951,519 1,292,481 265,912 1,269,707
---------- ----------- ----------- ----------- -----------
Total expenses................. 3,446,181 4,897,776 5,773,034 1,077,109 2,909,295
---------- ----------- ----------- ----------- -----------
Operating income (loss)........ 365,955 (635,542) (197,404) 87,676 (1,445,965)
Interest income (expense), net
(Note 2)..................... (13,735) (40,851) 1,803 (9,430) 15,918
---------- ----------- ----------- ----------- -----------
Income (loss) before income
taxes........................ 352,220 (676,393) (195,601) 78,246 (1,430,047)
Income taxes (credit) (Note
3)........................... 129,300 (209,800) -- -- --
---------- ----------- ----------- ----------- -----------
Net income (loss).............. $ 222,920 $ (466,593) $ (195,601) $ 78,246 $(1,430,047)
========== =========== =========== =========== ===========
Net income (loss) per common
share, basic and diluted
(Note 2)..................... $ 0.02 $ (0.04) $ (0.02) $ 0.01 $ (0.11)
========== =========== =========== =========== ===========
Weighted average common shares
and equivalents outstanding:
Basic........................ 12,154,493 11,956,000 12,258,064 11,958,093 13,023,265
Diluted...................... 12,154,493 11,956,000 12,258,064 11,983,093 13,023,265
</TABLE>
See accompanying notes.
F-4
<PAGE> 74
QUOTESMITH.COM, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
-------------------- STOCKHOLDERS'
NUMBER OF ADDITIONAL RETAINED EQUITY
SHARES PAR PAID-IN EARNINGS TREASURY (DEFICIENCY
ISSUED VALUE CAPITAL (DEFICIT) STOCK IN ASSETS)
--------- ----- ---------- --------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
1996:
Balance at January 1................... 14,490,000 $14,490 $ 206,220 $ 52,683 $ (13,000) $ 260,393
Net income............................. -- -- -- 222,920 -- 222,920
Purchase of treasury stock (Note 5).... -- -- -- -- (250,000) (250,000)
---------- ------- ---------- ----------- --------- ----------
Balance at December 31................. 14,490,000 14,490 206,220 275,603 (263,000) 233,313
1997:
Net loss............................... -- -- -- (466,593) -- (466,593)
---------- ------- ---------- ----------- --------- ----------
Balance at December 31................. 14,490,000 14,490 206,220 (190,990) (263,000) (233,280)
1998:
Net loss............................... -- -- -- (195,601) -- (195,601)
Proceeds from sale of common stock
(Note 5)............................. 431,091 431 1,267,841 -- -- 1,268,272
Effect of stock options granted (Note
6)................................... -- -- 150,000 -- -- 150,000
---------- ------- ---------- ----------- --------- ----------
Balance at December 31................. 14,921,091 14,921 1,624,061 (386,591) (263,000) 989,391
1999 (unaudited):
Net loss............................... -- -- -- (1,430,047) -- (1,430,047)
Proceeds from sale of common stock
(Note 8)............................. 1,128,000 1,128 3,382,872 -- -- 3,384,000
Effect of common stock sold and stock
options granted (Note 8)............. -- -- 791,000 -- -- 791,000
---------- ------- ---------- ----------- --------- ----------
Balance at March 31 (unaudited)........ 16,049,091 $16,049 $5,797,933 $(1,816,638) $(263,000) $3,734,344
========== ======= ========== =========== ========= ==========
</TABLE>
See accompanying notes.
F-5
<PAGE> 75
QUOTESMITH.COM, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------------- -----------------------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss)................ $ 222,920 $(466,593) $(195,601) $ 78,246 $(1,430,047)
Adjustments to reconcile to
net cash provided (used) by
operating activities:
Depreciation expense..... 30,693 31,204 66,574 10,727 23,472
Accounts payable and
accrued liabilities... (153,062) 516,836 185,941 (58,669) (240,694)
Commissions receivable... (49,515) (383,481) (316,639) (52,736) 91,014
Stock compensation....... -- -- 150,000 50,000 791,000
Deferred taxes
(credit).............. 129,300 (209,800) -- -- --
Amortization of direct-
response advertising
costs................. 848,776 494,074 -- -- --
Deferral of
direct-response
advertising costs..... (988,162) -- -- -- --
Other assets............. (6,670) 7,433 (25,064) 4,407 9,915
--------- --------- --------- -------- -----------
Net cash provided (used) by
operating activities........ 34,280 (10,327) (134,789) 31,975 (755,340)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of furniture,
equipment, and software....... (50,767) (107,454) (185,760) (56,927) (200,880)
--------- --------- --------- -------- -----------
Net cash used by investing
activities.................... (50,767) (107,454) (185,760) (56,927) (200,880)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of common
stock......................... -- -- 1,268,272 75,000 3,384,000
Proceeds from (repayment of)
notes payable................. 232,776 120,830 (433,330) (50,001) --
Purchase of treasury stock....... (250,000) -- -- -- --
--------- --------- --------- -------- -----------
Net cash provided (used) by
financing activities.......... (17,224) 120,830 834,942 24,999 3,384,000
--------- --------- --------- -------- -----------
NET INCREASE (DECREASE) IN CASH.... (33,711) 3,049 514,393 47 2,427,780
CASH AT BEGINNING OF PERIOD........ 34,471 760 3,809 3,809 518,202
--------- --------- --------- -------- -----------
CASH AT END OF PERIOD.............. $ 760 $ 3,809 $ 518,202 $ 3,856 $ 2,945,982
========= ========= ========= ======== ===========
</TABLE>
See accompanying notes.
F-6
<PAGE> 76
QUOTESMITH.COM, INC.
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Quotesmith.com, Inc. (the Company) has developed an Internet-based
insurance service that enables consumers and business owners to obtain instant
quotes from over 300 insurance companies without the involvement of any
commissioned salespeople. The Company's model allows consumers to: (1) search
for, analyze and compare insurance products; (2) request and obtain insurance
quotes; and (3) select and purchase insurance coverage from the insurance
company of their choice.
The Company incorporated and began its operations in March 1984 and during
the period from 1984 to 1994 provided an electronic quotation and policy
information service to insurance agents and brokers. Throughout this period the
Company was not engaged in the marketing of insurance to consumers. In 1994, the
Company began focusing its business strategy on marketing term life insurance to
self-directed consumers utilizing its proprietary insurance price comparison
technology. In May 1996, the Company began providing real-time quotes for term
life insurance on the Internet and began receiving online insurance application
requests from consumers.
Over the last four years, the Company's primary revenue source has been
commissions derived from the sale of individual term life insurance.
Applications are underwritten and commissions are received from numerous life
insurance companies. In 1998, over 50% of the Company's commissions on paid
policies were received from five life insurance companies. Similar
concentrations existed in 1997 and 1996. The Company's business represents one
business segment.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Such estimates and assumptions could change as more
information becomes known which could impact the amounts reported and disclosed
herein.
REVENUE RECOGNITION
The Company recognizes annual first year commissions as revenues when the
policy has been approved by the underwriter and an initial premium payment
(which may be annual, semi-annual, quarterly, or monthly) has been made by the
customer. An allowance is provided for estimated commissions that will not be
received due to the nonpayment of installment first year premiums. In the
accompanying financial statements, the aforementioned method has been applied in
all periods.
In previously reported financial statements, the aforementioned method of
accounting for first year commissions had been applied since January 1, 1997. As
of that date, an accounting change was made, and the cumulative effect of the
change was reported in the 1997 statement of operations. In the previously
reported financial statements, prior to 1997, estimated annual first year
commissions were recognized as revenues, after applying a reserve for expected
"not taken" policies, at the time applications were received by the Company
after substantially all
F-7
<PAGE> 77
QUOTESMITH.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
required brokerage services relating to placement of the insurance had been
provided. The change to the current method was made to better reflect when
revenues are realized.
Since the accompanying financial statements were prepared for the initial
public offering of the Company's common stock, the January 1, 1997 accounting
change was applied retroactively. As a result, the $593,000 ($0.05 per share)
cumulative effect of the accounting change, a reduction of income, was removed
from the 1997 statement of operations. Also, 1996 net income previously reported
was reduced by $263,000 ($0.02 per share).
Revenues for renewal and bonus commissions and other revenues are
recognized when the Company receives notification that such revenues have been
earned.
ADVERTISING COSTS
Selling and marketing expenses in the accompanying financial statements are
comprised of advertising costs. Beginning in 1997, advertising costs are
expensed as incurred. In 1996 and 1995 (but not subsequently), direct response
advertising costs qualified for capitalization and were amortized over the
expected period of future benefits, which resulted in such costs being amortized
principally within one year.
Accordingly, in 1997, advertising expense includes 1997 costs incurred plus
amortization of 1996 costs that were unamortized as of December 31, 1996.
STOCK COMPENSATION
The Company uses the intrinsic value method to measure compensation
expense, if any, relating to stock options. Any compensation expense is
determined at the date of grant, or the date of subsequent modification to
option terms, based on any excess of the fair value of the related shares over
the exercise price, and amortized over the options' vesting periods.
FURNITURE, EQUIPMENT, AND COMPUTER SOFTWARE
Furniture, equipment, and capitalized application development costs of
internal-use computer software are depreciated over useful lives of five to
seven years using an accelerated method of depreciation. Repair and maintenance
costs are charged to expense as incurred. Depreciation expense was $31,000 in
1996 and 1997 and $67,000 in 1998.
TREASURY STOCK
The cost of reacquiring the Company's common stock is reported as a
separate component of stockholders' equity.
INCOME TAXES
Deferred income taxes are determined based on the temporary differences
between financial reporting and tax bases of assets and liabilities and the
effect of net operating loss carryforwards and are measured using enacted tax
rates.
F-8
<PAGE> 78
QUOTESMITH.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FINANCIAL INSTRUMENTS
The fair values of financial instruments, principally commissions
receivable, other assets, accounts payable and accrued liabilities, and notes
payable approximate their December 31, 1998 and 1997 carrying values.
NON-OPERATING INCOME AND EXPENSE
Interest income (expense), net in the accompanying statements of operations
includes the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Interest income.............................. $ -- $ 3,049 $29,531
Interest expense............................. (13,735) (43,900) (27,728)
-------- -------- -------
Interest income (expense), net............... $(13,735) $(40,851) $ 1,803
======== ======== =======
</TABLE>
NET INCOME (LOSS) PER SHARE
Basic net income or loss per share and diluted net loss per share reflect
net income or loss divided by the weighted average number of common shares
outstanding. Diluted net income per share reflects net income divided by the
weighted average number of common shares outstanding plus common share
equivalents, computed using the treasury stock method, due to the dilutive
effect of stock options. Diluted net loss per share does not include the effect
of the common share equivalents because the effect would be antidilutive.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the Accounting Standards Board Executive Committee (AcSEC)
issued Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 requires specific
accounting treatment for internal use software which is effective for fiscal
years beginning after December 15, 1998. Accordingly, the Company has adopted
SOP 98-1 in 1999, and does not expect that SOP 98-1 will have a material effect
on the Company's results of operations or financial position.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 133, "Accounting for
Derivative Instruments and Hedging Activities," which is effective for fiscal
years beginning after June 15, 1999. The Company does not expect the adoption of
SFAS 133 will have a material effect on the Company's results of operations or
financial position.
UNAUDITED INTERIM INFORMATION
The accompanying financial statements and notes as of March 31, 1999 and
for the three months ended March 31, 1998 and 1999 are unaudited. In the opinion
of management, such information contains all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the Company's
financial statements. The results of
F-9
<PAGE> 79
QUOTESMITH.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
operations for the interim period are not necessarily indicative of results that
may be expected for the entire year.
3. INCOME TAXES
A reconciliation of income taxes (credit) based on the federal tax rate to
amounts reported in the statements of operations is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Pre-tax income (loss) times federal rate............ $119,800 $(230,000) $(66,500)
State income taxes (credit)......................... 14,200 (32,500) (9,400)
Increase (decrease) in valuation allowance.......... (9,400) 55,000 56,000
Stock compensation.................................. -- -- 19,400
Other............................................... 4,700 (2,300) 500
-------- --------- --------
Income taxes (credit)............................... $129,300 $(209,800) $ --
======== ========= ========
</TABLE>
The components of the provision (credit) for deferred income taxes are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Federal............................................. $115,100 $(183,800) $ --
State............................................... 14,200 (26,000) --
-------- --------- --------
$129,300 $(209,800) $ --
======== ========= ========
</TABLE>
Deferred income taxes reflect the net tax effect of temporary differences
between the amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes and the effect of net operating
loss carryforwards. Significant components of the Company's deferred tax assets
and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1998
---- ----
<S> <C> <C>
Deferred tax liabilities:
Commissions receivable............................. $ 268,000 $ 391,000
Other assets....................................... 7,000 9,000
--------- ---------
Total deferred tax liabilities....................... 275,000 400,000
Deferred tax assets:
Net operating loss carryforwards................... 123,000 155,000
Accounts payable................................... 207,000 317,000
Stock compensation................................. -- 39,000
--------- ---------
Total gross deferred tax assets...................... 330,000 511,000
Valuation allowance.................................. (55,000) (111,000)
--------- ---------
Net deferred tax assets.............................. 275,000 400,000
--------- ---------
Net deferred tax amounts............................. $ -- $ --
========= =========
</TABLE>
F-10
<PAGE> 80
QUOTESMITH.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. INCOME TAXES (CONTINUED)
As of December 31, 1998, the Company had net operating loss carryforwards
of $400,000 available to offset future taxable income, which expire $76,000 in
2001 and the remainder in 2006 to 2018. There were no income taxes paid or
recovered in 1996, 1997, or 1998.
4. NOTES PAYABLE
Interest paid under a bank line-of-credit agreement amounted to $12,000 in
1996, $43,000 in 1997, and $31,000 in 1998 at an interest rate of 9% payable
monthly. Amounts previously borrowed under the agreement had been repaid as of
December 31, 1998, and the agreement was terminated. Amounts drawn under the
line-of-credit agreement had been collateralized by substantially all the assets
of the Company and guaranteed personally by officers of the Company.
5. STOCKHOLDERS' EQUITY AND RELATED PARTY TRANSACTIONS
During 1998, the Company sold 431,091 shares of its common stock for
proceeds of $1,268,272, resulting in credits to common stock of $431 and
additional paid-in capital of $1,267,841. Also, in 1998, the Company's
stockholders agreed to terminate an agreement under which the Company previously
had commitments and options to purchase its common stock from stockholders.
In September 1998, the Company entered into a three year services agreement
with a third party (the Party) under which the Company will pay a fee to the
Party for its customers who purchase insurance through the Company's service. In
February 1999, the Company sold 1,000,000 shares of its common stock to the
parent company of the Party (the Investor) for proceeds of $3,000,000 and
entered into stockholder agreements with the Investor and other major Company
stockholders. The stockholder agreements give the Investor the right to acquire
any new shares issued by the Company and the right to request the Company to
file a registration statement with the Securities and Exchange Commission
relating to the Investor's shares. The Investor's right to acquire any new
shares issued by the Company terminates upon a public offering of the Company's
common stock.
During 1996, the Company purchased 1,750,000 shares of its common stock at
a cost of $250,000.
As of December 31, 1998, other assets includes $10,000 due from an officer
on which interest was accruing at 10%. The amount was repaid in January 1999.
F-11
<PAGE> 81
QUOTESMITH.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. STOCK OPTIONS
A summary of the Company's common stock option activity with employees and
directors for 1997 and 1998 is as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE PER SHARE
-------------------------------
FAIR VALUE OF
OPTIONS
SHARES EXERCISE PRICE GRANTED
------ -------------- -------------
<S> <C> <C> <C>
1997
Granted and outstanding at December
31, 1997.......................... 75,000 $2.00 $1.09
1998
Granted with exercise price:
Less than stock value............. 50,000 1.00 2.35
Equal to stock value.............. 50,000 2.50 0.05
Greater than stock value.......... 75,000 7.00 --
-------
175,000 4.00 0.40
Exercised............................ (25,000) 2.00
Forfeited............................ (25,000) 2.00
-------
Outstanding at December 31, 1998..... 200,000 3.75
=======
</TABLE>
In 1998, the Company recorded compensation expense, reported in general and
administrative expense, of $150,000 relating to stock options with a
corresponding credit to additional paid-in capital.
The fair value of options granted in the foregoing table was computed using
the minimum value method. Weighted average assumptions used in the computation
include a risk free interest rate of 5% and an expected option life of 5 years.
If stock-based compensation cost in the accompanying financial statements had
been computed using the fair value method, the net loss would have been $248,000
($0.02 per share) in 1998 and unchanged in 1997 and 1996.
F-12
<PAGE> 82
QUOTESMITH.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. STOCK OPTIONS (CONTINUED)
Share and per share information relating to options outstanding is as
follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------- --------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
EXERCISE CONTRACTUAL EXERCISE EXERCISE
AS OF PRICES SHARES LIFE(YEARS) PRICE SHARES PRICE
----- -------- ------ ----------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1997...... $2.00 75,000 7 $2.00 25,000 $2.00
======= =======
December 31, 1998...... 1.00 50,000 9 1.00 50,000 1.00
2.00 50,000 9 2.00 50,000 2.00
3.00 25,000 10 3.00 25,000 3.00
5.00 25,000 10 5.00
7.00 25,000 10 7.00
9.00 25,000 10 9.00
------- -------
1.00-9.00 200,000 8 3.75 125,000 1.80
======= =======
</TABLE>
The unexercisable options become exercisable in one to three years. As of
December 31, 1998, the Company had 500,000 shares reserved for issuance of
options and, accordingly, as of December 31, 1998, had an additional 300,000
options reserved for issuance with varying terms, including expiration dates of
up to ten years from date of grant. See Note 8 for 1999 activity.
7. COMMITMENTS AND CONTINGENCIES
As of December 31, 1998, the Company leases office space under an operating
lease agreement in which the Company is committed to annual rent expense of
approximately $100,000 through 2003. In addition, the Company must pay its
proportionate share of taxes and operating costs. Rent expense was $41,000 in
1996, $61,000 in 1997, and $100,000 in 1998.
The Company has employment agreements with certain of its executives under
which the Company would be required to pay severance of one to two years of
annual salary to terminate those agreements.
The Company is subject to legal proceedings and claims in the ordinary
course of business. The Company is not aware of any legal proceedings or claims
that are believed to have a material effect on the Company's financial position.
8. INTERIM FINANCIAL INFORMATION (UNAUDITED)
COMMON STOCK SOLD AND OPTIONS GRANTED
For the three months ended March 31, 1999, the Company sold 1,128,000
shares of common stock at $3.00 per share for proceeds of $3,384,000. Such sales
included 1,000,000 shares sold to an Investor as described in Note 5 and shares
sold to employees of 100,000 in early January 1999 and 28,000 in March 1999.
In January 1999, the Company issued 175,000 stock options to employees with
an average exercise price of $6.43 per share, and 100,000 stock options with an
average exercise price of
F-13
<PAGE> 83
QUOTESMITH.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. INTERIM FINANCIAL INFORMATION (UNAUDITED) (CONTINUED)
$6.00 per share were forfeited. In March and April 1999, the Company issued
225,000 stock options to employees with an average exercise price of $4.60 per
share.
For common stock sold and stock options granted to employees in March and
April 1999, compensation expense of $1,411,000 has been measured based on an
estimated fair value of the Company's common stock of $10.00 per share.
Compensation expense of $791,000 ($0.06 per share) relating to common stock sold
and vested options granted in March 1999 was charged to general and
administrative expense in the three months ended March 31, 1999, with a
corresponding credit to additional paid-in capital. Unamortized compensation
expense of $270,000 as of March 31, 1999 relating to nonvested stock options
granted in March 1999, along with compensation of $350,000 relating to nonvested
options granted in April 1999, will be amortized over the vesting period of the
options. The expense amortization will be $390,000 in the remainder of 1999,
$190,000 in 2000 and $40,000 in 2001.
The Company has committed to grant 85,000 options to directors and
employees upon completion of the public offering of the Company's common stock.
The options will have an exercise price equal to the initial public offering
price.
Shares reserved for exercise of stock options were increased from 500,000
to 1,500,000 in May 1999.
EMPLOYEE STOCK PURCHASE PLAN
In March 1999, the Company adopted a plan under which employees may
purchase shares of the Company's common stock through payroll deductions of up
to 10% of each employee's compensation. The first offering period during which
shares may be purchased will begin at the effective date of the Company's
initial public offering of its common stock and end on December 31, 1999.
Subsequent offering periods will be in six-month intervals. Shares may be
purchased at 85% of the lower of the fair value of the common stock on the first
or the last day of each offering period. The Company reserved 250,000 shares for
purchase under the plan.
PREFERRED STOCK
In May 1999, the Company authorized 5,000,000 shares of $0.001 par value
preferred stock. No shares have been issued.
STOCKHOLDER RIGHTS PLAN
In May 1999, the Company declared a distribution of one preferred stock
purchase right for each outstanding share of its common stock, and the Company
intends to issue those rights along with future issuances of common shares. The
rights become exercisable only if a person or group acquires or announces the
intent to acquire 15% or more of the Company's common stock. Prior to the rights
becoming exercisable, the Company may redeem the rights for $0.01 per right. If
the rights become exercisable, the Company may exchange each right for one share
of common stock providing that 50% of the Company has not been acquired. The
rights expire in 2009.
If the rights become exercisable and they have not been exchanged, holders
of each right, other than the acquiring person or group, would be entitled to
acquire one hundredth of a share of the Company's preferred stock at an exercise
price equal to five times the initial
F-14
<PAGE> 84
QUOTESMITH.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. INTERIM FINANCIAL INFORMATION (UNAUDITED) (CONTINUED)
offering price of the Company's common stock. If issued, each preferred share
would entitle the holder to cumulative quarterly dividends of the greater of
$1.00 per share or 100 times the common share dividends. The preferred
shareholders would receive 100 votes per share and have a liquidation preference
of $1.00 per share over the common shares.
In lieu of purchasing preferred shares, holders of each right, other than
the acquiring person or group, on payment of the exercise price, would be
entitled to acquire the number of shares of the Company's common stock or other
assets with a value of two times the exercise price. In addition, if 50% of the
Company is acquired, the holders of each right would be entitled to acquire the
number of shares of the acquiring company's common stock having a value of two
times the exercise price.
LEASE AGREEMENT
In April 1999, the Company entered into an operating lease agreement in
which the Company is committed to additional annual rent expense of $100,000
through 2003.
F-15
<PAGE> 85
INSIDE BACK COVER
Top of Page: Capital Letters, "BUYER-DRIVEN (circular stock photo, fades)
COMMERCE
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Subheading: In just four steps, Quotesmith.com customers can search the
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Picture of Quotesmith.com home page
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<PAGE> 86
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES
QUOTESMITH LOGO
COMMON STOCK
------------------------
PROSPECTUS
------------------------
HAMBRECHT & QUIST
PAINEWEBBER INCORPORATED
ABN AMRO ROTHSCHILD
A DIVISION OF ABN AMRO INCORPORATED
------------------------
, 1999
------------------------
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell and seeking offers to buy,
shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock.
No action is being taken in any jurisdiction outside the United States to
permit a public offering of our common stock or possession or distribution of
this prospectus in any such jurisdiction. Persons who come into possession of
this prospectus in jurisdictions outside the United States are required to
inform themselves about and to observe any restrictions as to this offering and
the distribution of this prospectus applicable to that jurisdiction.
Until , 1999, all dealers that buy, sell or trade in our common
stock, whether or not participating in this offering, may be required to deliver
a prospectus. This delivery requirement is in addition to the dealers'
obligation to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 87
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Registrant in connection with
the sale of shares of common stock being registered hereby. All amounts are
estimates except the SEC registration fee, the NASD filing fee and the Nasdaq
National Market Listing Fee.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $22,240
NASD Filing Fee............................................. 8,500
NASDAQ National Market Listing Fee.......................... 95,000
Blue Sky Fees and Expenses.................................. *
Printing and Engraving Expenses............................. *
Legal Fees and Expenses..................................... *
Accounting Fees and Expenses................................ *
Director and Officer Securities Act Liability Insurance..... *
Transfer Agent and Registrar Fees........................... *
Miscellaneous Expenses...................................... *
-------
Total.................................................. $ *
=======
</TABLE>
- -------------------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") authorizes
a corporation's Board of Directors to grant indemnity to directors and officers
in terms sufficiently broad to permit such indemnification under certain
circumstances for liabilities (including reimbursement for expenses incurred)
arising under the Securities Act of 1933, as amended (the "Securities Act").
As permitted by the DGCL, Article Sixth of the Registrant's certificate of
incorporation and Article VI of the Registrant by-laws together provide that (i)
the Registrant shall indemnify its directors and officers to the fullest extent
permitted by the DGCL, subject to certain very limited exceptions; (ii) the
Registrant is permitted to indemnify its other employees to the maximum extent
and in the manner permitted by applicable Delaware law (iii) the Registrant is
required to advance expenses, as incurred, to its directors and officers in
connection with a legal proceeding, subject to certain limited exceptions; and
(iv) the rights conferred in the By-Laws are not exclusive. As permitted by the
DGCL, the Registrant's certificate of incorporation includes a provision that
eliminates the personal inability of its directors for monetary damages for
breach of fiduciary duty as a director, to the fullest extent permitted by
Delaware law. This provision in the certificate of incorporation does not
eliminate the directors' fiduciary duty, and in appropriate circumstances
equitable remedies such as injunctive or other forms of non-monetary relief will
remain available under Delaware law. In addition, each director will continue to
be subject to liability for breach of the director's duty of loyalty to the
Registrant for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends or approval of
stock repurchases or redemptions that are unlawful under Delaware law. The
provision also does not affect a director's responsibilities under any other
law, such as the federal securities laws or state or federal environmental laws.
II-1
<PAGE> 88
The Registrant has entered into indemnification agreements with its
directors. These directorship agreements provide that the directors will be
indemnified against expenses (including attorneys' fees), judgments, fines,
amounts paid in settlement such (if settlement is approved by the Registrant) in
any action or proceeding, including any derivative action, on account of their
service as directors of the Registrant or of any subsidiary of the Registrant or
of any other company or enterprise in which they are serving at the request of
the Registrant. No indemnity will be provided to any director under these
agreements if the director did not act in good faith or in the best interests of
Registrant, or in a criminal action if the Directors had reasonable cause to
believe its conduct was unlawful. In addition, no indemnification will be
provided for which payment is made to or on behalf of the director under any
insurance policy, or in connection with any proceeding initiated by the
director, or if a proceeding was initiated by the director not in good faith or
claims under Section 16(b) of the Securities Exchange Act of 1954, as amended,
or if such indemnification is determined by a court of competent jurisdiction to
be contrary to public policy.
Under Article VI of the Registrant's by-laws, the Registrant is authorized
to insurance covering the Registrant's directors and officers against liability
asserted against them in their capacity as such.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since May 26, 1996, we have sold and issued the following unregistered
securities:
(1) On February 28, 1998, we sold 5,000 shares of common stock to William
V. Thoms for $10,000.
(2) On March 31, 1998, we sold 20,000 shares of our common stock to William
V. Thoms for $40,000.
(3) On March 31, 1998, we sold 8,333.33 shares of common stock to Timothy
Shannon for $25,000.
(4) On April 2, 1998, we sold 4,000 shares of common stock to John M.
Conness, D.D.S. and Mary Lu Conness, as tenants-in-common, for $12,000.
(5) On April 3, 1998, we sold 50,000 shares of common stock to Harris Bank
Palatino as custodian for Gerald F. Fitzgerald for 150,000.
(6) On April 3, 1998, we sold 150,000 shares of common stock to Catholic
Order of Foresters for $450,000.
(7) On April 8, 1998, we sold 8,333 shares of common stock to each of Grace
Reilly, Kevin Reilly, John Reilly and Chris Reilly for aggregate
consideration of $100,000.
(8) On April 8, 1998, we sold 8,333.33 shares of common stock to First
National Bank of LaGrange, IRA #3530, for $25,000.
(9) On April 8, 1998, we sold 91,668 shares of common stock to Reimark
Capital, LLC for $275,000.
(10) On April 13, 1998, we sold 2,000 shares of common stock to Denise D.
Rueben and Bruce J. Rueben, as tenants-in-common, for $6,000.
(11) On April 13, 1998, we sold 16,000 shares of common stock to Kevin
Dolehide, D.O. and Mary Eileen Dolehide, as tenants-in-common, for
$48,000.
(12) On April 20, 1998, we sold 2,000 shares of common stock to Thomas R.
Lang and Electa Lang, as joint tenants with rights of survivorship,
for $6,000.
(13) On May 1, 1998, we sold 3,000 shares of common stock to Williams W.
Hembrough and Jean A. Hembrough, as tenants-in-common, for $9,000.
II-2
<PAGE> 89
(14) On July 21, 1998, we sold 1,666 shares of common stock to James
Haggerty and Noreen Haggerty, as tenants-in-common, for $4,998.
(15) On August 11, 1998, we sold 3,333 shares of common stock to Peter C.
Poisson for $9,999.
(16) On August 20, 1998, we sold 3,000 shares of common stock to John M.
Conness, D.D.S. and Mary Lu Conness, as tenants-in-common, for $9,000.
(17) On August 31, 1998, we sold 15,000 shares of common stock to John
Dolehide, D.O. for $45,000.
(18) On October 31, 1998, we sold 2,425 shares of common stock to Robert C.
and Beth S. Dolehide, as tenants-in-common, for $7,275.
(19) On November 30, 1998, we sold 12,000 shares of common stock to Robert
Chaps and Eileen M. Hayes, as joint tenants with rights of
survivorships, for $36,000.
(20) On January 17, 1999, we sold 100,000 shares of common stock to Grant
F. Kuphall for $300,000.
(21) On February 10, 1999, we sold 1,000,000 shares of common stock to
Intuit, Inc. for $3,000,000.
(22) On March 29, 1999, we sold 28,000 shares of common stock to Thomas A.
Munro and Francis M. Munro, as tenants in common, for $84,000.
The issuances described above in this Item 15 were deemed exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act as transactions by an issuer not involving any public offering.
II-3
<PAGE> 90
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S>
1.1* Form of Underwriting Agreement
3.1 Form of Restated Certificate of Incorporation of Registrant
3.2 Form of Amended and Restated By-Laws of Registrant
4.2 Specimen Certificate for Registrant's common stock
4.3* Form of Rights Agreement
4.4 Investor Rights Agreement, dated February 10, 1999, between
Registrant and Intuit Inc.
5.1* Opinion of Freeborn & Peters
10.1 Form of Quotesmith.com 1997 Stock Option Plan (as amended
and restated March 29, 1999) of Registrant
10.2 Form of Quotesmith.com 1999 Employee Stock Purchase Plan
10.3 Form of Employment Agreement between Registrant and Robert
S. Bland
10.4 Form of Employment Agreement between Registrant and William
V. Thoms
10.5 Form of Employment Agreement between Registrant and Ronald
A. Wozniak
10.6 Form of Employment Agreement between Registrant and Thomas
A. Munro
10.7 Form of Employment Agreement between Registrant and Burke A.
Christensen
10.8 Form of Director Indemnification Agreement
10.9 Lease dated as of August 1994, between Registrant and
LaSalle National Trust N.A.
10.10 Lease Amendment Agreement dated as of November 1995, between
Registrant and LaSalle National Trust N.A.
10.11 Lease Amendment Agreement as of September 1997, between
Registrant and LaSalle National Trust N.A.
10.12 Lease Amendment Agreement dated as of July 1998, between
Registrant and LaSalle National Trust N.A.
23.1 Consent of Ernst & Young LLP
23.2 Consent of Admiral Jeremiah A. Denton, Jr.
23.3 Consent of Richard F. Gretsch
23.4 Consent of John McCartney
24.1 Power of Attorney (See page II-6)
27.1 Financial Data Schedule
</TABLE>
- -------------------------
* To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES:
All schedules have been omitted because the information required to be set
forth therein is not applicable or is shown in the combined financial statements
or notes thereto.
II-4
<PAGE> 91
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby further undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 92
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois, on May 26, 1999.
QUOTESMITH.COM, INC.
By: /s/ ROBERT S. BLAND
------------------------------------
Name: Robert S. Bland,
Title: Chairman, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Robert S. Bland, William V. Thoms and
Thomas A. Munro, and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement (or any
other registration statement for the same offering that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act), and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully and to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof. This power of attorney may be executed
in counterparts.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on May 26, 1999:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ ROBERT S. BLAND Chairman, President and Chief Executive Officer
- --------------------------------------------- (Principal Executive Officer)
/s/ WILLIAM V. THOMS Executive Vice President and Director
- ---------------------------------------------
/s/ THOMAS A. MUNRO Vice President, Chief Financial Officer and
- --------------------------------------------- Secretary (Principal Financial and Officer)
/s/ BRUCE J. RUEBEN Director
- ---------------------------------------------
/s/ TIMOTHY F. SHANNON Director
- ---------------------------------------------
</TABLE>
II-6
<PAGE> 93
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S>
1.1* Form of Underwriting Agreement
3.1 Form of Restated Certificate of Incorporation of Registrant
3.2 Form of Amended and Restated By-Laws of Registrant
4.2 Specimen Certificate for Registrant's common stock
4.3* Form of Rights Agreement
4.4 Investor Rights Agreement, dated February 10, 1999, between
Registrant and Intuit Inc.
5.1* Opinion of Freeborn & Peters
10.1 Form of Quotesmith.com 1997 Stock Option Plan (as amended
and restated March 29, 1999) of Registrant
10.2 Form of Quotesmith.com 1999 Employee Stock Purchase Plan
10.3 Form of Employment Agreement between Registrant and Robert
S. Bland
10.4 Form of Employment Agreement between Registrant and William
V. Thoms
10.5 Form of Employment Agreement between Registrant and Ronald
A. Wozniak
10.6 Form of Employment Agreement between Registrant and Thomas
A. Munro
10.7 Form of Employment Agreement between Registrant and Burke A.
Christensen
10.8 Form of Director Indemnification Agreement
10.9 Lease dated as of August 1994, between Registrant and
LaSalle National Trust N.A.
10.10 Lease Amendment Agreement dated as of November 1995, between
Registrant and LaSalle National Trust N.A.
10.11 Lease Amendment Agreement as of September 1997, between
Registrant and LaSalle National Trust N.A.
10.12 Lease Amendment Agreement dated as of July 1998, between
Registrant and LaSalle National Trust N.A.
23.1 Consent of Ernst & Young LLP
23.2 Consent of Admiral Jeremiah A. Denton, Jr.
23.3 Consent of Richard F. Gretsch
23.4 Consent of John McCartney
24.1 Power of Attorney (See page II-6)
27.1 Financial Data Schedule
</TABLE>
- -------------------------
* To be filed by amendment.
II-7
<PAGE> 1
EXHIBIT 3.1
FORM OF
RESTATED CERTIFICATE OF INCORPORATION
OF
QUOTESMITH.COM, INC.
The name of the corporation is Quotesmith.com, Inc, and the original
Certificate of Incorporation of the corporation was filed with the Secretary of
State of the State of Delaware on May 9, 1984, and was amended on each of March
3, 1998 and October 20, 1998. The original Certificate of Incorporation of the
corporation, as amended, is hereby amended and restated to read in its entirety
as follows:
"FIRST: The name of the corporation is Quotesmith.com, Inc.
SECOND: The registered office of the corporation in the State
of Delaware is located at No. 306 South State Street, in the City of
Dover, County of Kent; and the name of its registered agent at such
address is United States Corporation Company.
THIRD: The purposes of the corporation are to engage in any
lawful act or activity for which corporations may be organized under
the General Corporation Law of the State of Delaware.
FOURTH: (1) The total number of shares of stock which the
Corporation shall have authority to issue is 65 million (65,000,000),
consisting of 60 million (60,000,000) shares of Common Stock, par
value $.001 per share ("Common Stock") and five million (5,000,000) of
Preferred Stock, par value $.001 per share ("Preferred Stock").
(2) Shares of Preferred Stock may be issued in one or more
series, from time to time, with each such series to consist of such
number of shares and to have such voting powers, full or limited, or
no voting powers, and such designations, preferences and relative,
participating, optional or special rights, and the qualifications,
limitations or restrictions thereof, as shall be stated in the
resolution or resolutions providing for the issuance of such series
adopted by the Board of Directors of the corporation (the "Board of
Directors"), and the Board of Directors is hereby expressly vested
with authority, to the full extent now or hereafter provided by law,
to adopt any such resolution or resolutions.
The authority of the Board of Directors with respect to each
series shall include, but not be limited to, determination of the
following:
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(a) the number of shares constituting that series
and the distinctive designation of that series;
(b) the dividend rate on the shares of that series,
whether dividends shall be cumulative, and, if so, from which
date or dates, and the relative rights of priority, if any,
of payment of dividends on shares of that series;
(c) whether that series shall have voting rights, in
addition to the voting rights provided by law, and, if so,
the terms of such voting rights;
(d) whether that series shall have conversion
privileges, and, if so, the terms and conditions of such
conversion, including provision for adjustment of the
conversion rate in such events as the Board of Directors
shall determine;
(e) whether or not the shares of that series shall
be redeemable, and if, so, the terms and conditions of such
redemption, including the date or dates upon or after which
they shall be redeemable, and the amount per share payable in
case of redemption, which amount may vary under different
conditions and at different redemption dates;
(f) whether that series shall have a sinking fund
for the redemption or purchase of shares of that series, and,
if so, the terms and amount of such sinking fund;
(g) the rights of the shares of that series in the
event of voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, and the relative rights of
priority, if any, of payment of shares of that series; and
(h) any other relative rights, preferences and
limitations of that series.
(3) (a) Each holder of Common Stock, as such, shall be
entitled to one vote for each share of Common Stock held of record by
such holder on all matters on which stockholders generally are
entitled to vote; provided, however, that, except as otherwise
required by law, holders of Common Stock, as such, shall not be
entitled to vote on any amendment to this Certificate of Incorporation
(including any certificate of designations relating to any series of
Preferred Stock) that relates solely to the terms of one or more
outstanding series of Preferred Stock if the holders of such affected
series are entitled, either separately or together with the holders of
one or more other such series, to vote thereon pursuant to this
Certificate of Incorporation (including any certificate of
designations relating to any series of Preferred Stock) or pursuant to
the General Corporation Law of the State of Delaware.
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(b) Except as otherwise required by law, holders of
a series of Preferred Stock, as such, shall be entitled only
to such voting rights, if any, as shall expressly be granted
thereto by this Certificate of Incorporation (including any
certificate of designations relating to such series).
(c) Subject to applicable law and the rights, if
any, of the holders of any outstanding series of Preferred
Stock or any class or series of stock having a preference
over or the right to participate with the Common Stock with
respect to the payment of dividends, dividends may be
declared and paid on the Common Stock at such times and in
such amounts as the Board of Directors in its discretion
shall determine.
(d) Upon the dissolution, liquidation or winding up
of the corporation, subject to the rights, if any, of the
holders of any outstanding series of Preferred Stock or any
class or series of stock having a preference over or the
right to participate with the Common Stock with respect to
the distribution of assets of the corporation upon such
dissolution, liquidation or winding up of the corporation,
the holders of the Common Stock, as such, shall be entitled
to receive the assets of the corporation available for
distribution to its stockholders ratably in proportion to the
number of shares held by them.
FIFTH: The Board of Directors shall be authorized to
make, amend, alter, change, add to or repeal the By-Laws of
the corporation in any manner not inconsistent with the laws
of the State of Delaware, subject to the power of the
stockholders to amend, alter, change, add to or repeal the
By-Laws made by the Board of Directors. Notwithstanding
anything contained in this Certificate of Incorporation to
the contrary, the affirmative vote of the holders of at least
80 percent in voting power of all the shares of the
corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be
required in order for the stockholders to alter, amend or
repeal any provision of the By-Laws which is to the same
effect as Article Sixth, Article Seventh, and Article Eighth
of this Certificate of Incorporation or to adopt any
provision inconsistent therewith.
SIXTH: (1) The corporation may indemnify to the
fullest extent permitted by law any person made or threatened
to be made a party to an action or proceeding, whether
criminal, civil, administrative or investigative, by reason
of the fact that the person, or such person's testator or
intestate is or was a director, officer or employee of the
corporation or any predecessor of the corporation or serves
or served at any other enterprise as a director, officer or
employee at the request of the corporation or any predecessor
to the corporation.
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(2) To the fullest extent permitted by Delaware law
as the same exists or as may hereafter be amended, a director
of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for a
breach of fiduciary duty as director.
(3) Neither any amendment nor repeal of this Article
Sixth, nor the adoption of any provision of the corporation's
Certificate of Incorporation inconsistent with this Article
Sixth, shall eliminate or reduce the effect of this Article
Sixth, in respect of any matter occurring, or any action or
proceeding accruing or arising or that, but for this adoption
of an inconsistent provision.
SEVENTH: (1) The business and affairs of the
corporation shall be managed by or under the direction of a
Board of Directors consisting of not less than 3
directors nor more than 9 directors, the exact number of
directors to be determined from time to time by resolution
adopted by affirmative vote of a majority of the Board of
Directors in a manner set forth in the By-Laws of the
corporation. The directors shall be divided into three
classes designated Class I, Class II and Class III. Each
class shall consist, as nearly as possible, of one-third of
the total number of directors constituting the entire Board
of Directors. Class I directors shall be originally elected
for a term expiring at the 2000 annual meeting of
stockholders, Class II directors shall be originally elected
for a term expiring at the 2001 succeeding annual meeting of
stockholders, and Class III directors shall be originally
elected for a term expiring at the 2002 succeeding annual
meeting of stockholders. At each succeeding annual meeting of
stockholders following 2000, successors to the class of
directors whose term expires at that annual meeting shall be
elected for a term expiring at the third succeeding annual
meeting. If the number of directors is changed, any increase
or decrease shall be apportioned among the classes so as to
maintain the number of directors in each class as nearly
equal as possible, and any additional director of any class
elected to fill a newly created directorship resulting from
an increase in such class shall hold office for a term that
shall coincide with the remaining term of that class, but in
no case shall a decrease in the number of directors remove or
shorten the term of any incumbent director. A director shall
hold office until the annual meeting for the year in which
his term expires and until his successor shall be elected and
shall qualify, subject to, however, prior death, resignation,
retirement, disqualification or removal from office. Any
newly created directorship on the Board of Directors that
results from an increase in the number of directors and any
vacancy occurring in the Board of Directors shall be filled
only by a majority of the directors then in office, although
less than a quorum, or by a sole remaining director. If any
applicable provision of the General Corporation Law of the
State of Delaware expressly confers power on stockholders to
fill such a directorship at a special meeting of
stockholders, such a directorship may be filled at such
meeting only by the affirmative vote of at least 80 percent
of the voting power of all shares of the corporation entitled
to vote generally in the election of directors, voting as a
single class. Any director elected to fill a vacancy not
resulting from an increase in the number of directors shall
have the same remaining term as that of his predecessor.
Directors may be removed only for cause, and only by the
affirmative vote of at least 80 percent in voting power of
all shares of the corporation entitled to vote generally in
the election of directors, voting as a single class.
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(2) Notwithstanding the foregoing, whenever the
holders of any one or more series of Preferred Stock issued
by the corporation shall have the right, voting separately as
a series or separately as a class with one or more such other
series, to elect directors at an annual or special meeting of
stockholders, the election, term of office, removal, filling
of vacancies and other features of such directorships shall
be governed by the terms of this Certificate of Incorporation
(including any certificate of designations relating to any
series of Preferred Stock) applicable thereto, and such
directors so elected shall not be divided into classes
pursuant to this Article Seventh unless expressly provided by
such terms.
EIGHTH: Any action required or permitted to be taken
by the holders of the Common Stock of the corporation must be
effected at a duly called annual or special meeting of such
holders and may not be effected by any consent in writing by
such holders. Except as otherwise required by law and subject
to the rights of the holders of any series of Preferred Stock
special meetings of stockholders of the corporation may be
called only by the Chief Executive Officer of the corporation
or by the Board of Directors pursuant to a resolution
approved by the Board of Directors.
NINTH: The Corporation reserves the right at any
time, and from time to time, to amend, alter, change or
repeal any provision contained in this Certificate of
Incorporation, and other provisions authorized by the laws of
the State of Delaware at the time in force may be added or
inserted, in the manner now or hereafter prescribed by law;
and all rights, preferences and privileges of whatsoever
nature conferred upon stockholders, directors or any other
persons whomsoever by and pursuant to this Certificate of
Incorporation in its present form or as hereafter amended are
granted subject to the rights reserved in this article;
provided, however, that the affirmative vote of 80% of the
voting power of the capital stock of the Corporation entitled
to vote thereon shall be required to amend, alter or repeal,
or adopt any provision inconsistent with, whether by
amendment, merger or otherwise, the provisions of Articles
Sixth, Seventh and Eighth."
Quotesmith.com, Inc. does hereby further certify that this Restated
Certificate of Incorporation was duly adopted by the Board of Directors and by
written consent of the stockholders in accordance with the provisions of
Sections 228, 242 and 245 of the General Corporation Law of the State of
Delaware.
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IN WITNESS WHEREOF, QUOTESMITH.COM, INC. has caused its corporate seal
to be hereunto affixed and this certificate to be signed by Robert S. Bland,
its Chairman, President and Chief Executive Officer, this ____ day of
__________, 1999.
QUOTESMITH.COM, INC.
By:
------------------------------------
Name: Robert S. Bland
Title: Chairman, President and
Chief Executive Officer
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EXHIBIT 3.2
FORM OF
AMENDED AND RESTATED
BY-LAWS
OF
QUOTESMITH.COM, INC.,
A DELAWARE CORPORATION
<PAGE> 2
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be fixed in the
Certificate of Incorporation (the "Certificate of Incorporation"), of the
corporation.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place within or outside
the State of Delaware designated by the board of directors. In the absence of
any such designation, stockholders' meetings shall be held at the registered
office of the corporation.
2.2 ANNUAL MEETING
(a) The annual meeting of stockholders shall be held each
year on a date and at a time designated by the board of directors. In the
absence of such designation, the annual meeting of stockholders shall be held
on the third Thursday in May of each year at 10:00 a.m. However, if such day
falls on a legal holiday, then the annual meeting shall be held at the same
time and place on the next succeeding full business day. At the annual meeting,
directors shall be elected, and any other proper business may be transacted.
(b) At an annual meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be: (i)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the board of directors, (ii) otherwise properly brought before
the meeting by or at the direction of the board of directors, or (iii) otherwise
properly brought before the meeting by a stockholder. For business to be
properly brought before an annual meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the secretary of the
corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the corporation not
less than 120 calendar days in advance of the date specified in the
corporation's proxy statement released to stockholders in connection with the
previous year's annual meeting of stockholders; provided, however, that in the
event that no annual meeting was held in the previous year or the date of the
annual meeting has been changed by more than 30 days from the date contemplated
at
<PAGE> 3
the time of the previous year's proxy statement, notice by the stockholder
to be timely must be so received a reasonable time before the solicitation is
made. A stockholder's notice to the secretary shall set forth as to each matter
the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the corporation's books, of the stockholder
proposing such business, (iii) the class and number of shares of the
corporation which are beneficially owned by the stockholder, (iv) any material
interest of the stockholder in such business and (v) any other information that
is required to be provided by the stockholder pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended (the "1934 Act"), in his or her
capacity as a proponent of a stockholder proposal. Notwithstanding the
foregoing, in order to include information with respect to a stockholder
proposal in the proxy statement and form of proxy for a stockholder's meeting,
a stockholder must provide notice as required by the regulations promulgated
under the 1934 Act. Notwithstanding anything in these By-Laws to the contrary,
no business shall be conducted at any annual meeting except in accordance with
the procedures set forth in this paragraph (b). The chairman of the annual
meeting shall, if the facts warrant, determine and declare at the meeting that
business was not properly brought before the meeting and in accordance with the
provisions of this paragraph (b), and, if he or she should so determine, he or
she shall so declare at the meeting that any such business not properly brought
before the meeting shall not be transacted.
(c) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) shall be eligible for election as
directors. Nominations of persons for election to the board of directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the board of directors or by any stockholder of the corporation entitled to
vote in the election of directors at the meeting who complies with the notice
procedures set forth in this paragraph (c). Such nominations, other than those
made by or at the direction of the board of directors, shall be made pursuant
to timely notice in writing to the secretary of the corporation in accordance
with the provisions of paragraph (b) of this Section 2.2. Such stockholder's
notice shall set forth (i) as to each person, if any, whom the stockholder
proposes to nominate for election or re-election as a director: (A) the name,
age, business address and residential address of such person, (B) the principal
occupation or employment of such person, (C) the class and number of shares of
the corporation which are beneficially owned by such person, (D) a description
of all arrangements or understandings between the stockholder and each nominee
and any other person or persons (naming such person or persons) pursuant to
which the nominations are being made by the stockholder, and (E) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for elections of directors, or is otherwise required,
in each case pursuant to Regulation 14A under the 1934 Act (including without
limitation such person's written consent to being named in the proxy statement,
if any, as a nominee and to serving as a director if elected); and (ii) as to
such stockholder giving notice, the information required to be provided
pursuant to paragraph (b) of this Section 2.2. At the request of the board of
directors, any person nominated by a stockholder for election as a director
shall furnish to the secretary of the corporation that information required to
be set forth in the stockholder's notice of nomination that pertains to the
nominee. No person shall be eligible for election as a director of the
corporation unless nominated in accordance with the procedures set forth in
this paragraph (c). The chairman of the meeting shall, if the facts warrant,
determine and
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declare at the meeting that a nomination was not made in accordance with the
procedures prescribed by these By-Laws, and if he or she should so determine,
he or she shall so declare at the meeting, and the defective nomination shall
be disregarded.
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
board of directors pursuant to a resolution duly adopted by the Board of
Directors or the chief executive officer, and such special meetings may not be
called by any other person or persons.
If a special meeting is called by the chief executive officer, the
request shall be in writing, specifying the time of such meeting and the
general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
facsimile transmission to the chairman of the board of directors and the
secretary of the corporation. No business may be transacted at such special
meeting otherwise than specified in such notice. The secretary shall cause
notice to be promptly given to the stockholders entitled to vote, in accordance
with the provisions of Sections 2.5 and 2.6, that a meeting will be held at the
time requested by the person or persons who called the meeting, not less than
10 nor more than 60 days after the receipt of the request. If the notice is not
given within 20 days after the receipt of the request, the chief executive
officer may give the notice. Nothing contained in this paragraph of this
Section 2.3 shall be construed as limiting, fixing, or affecting the time when
a meeting of stockholders may be held when called by action of the board of
directors.
2.4 ORGANIZATION
Meetings of stockholders shall be presided over by the chairman of the
board, if any, or in his or her absence by the vice chairman of the board, if
any, or in his or her absence by the chief executive officer, if any, or in his
or her absence by the president, if any, or in his or her absence a vice
president, or in the absence of the foregoing persons by a chairman designated
by the board of directors, or in the absence of such designation by a chairman
chosen at the meeting. The secretary shall act as secretary of the meeting, but
in his or her absence the chairman of the meeting may appoint any person to act
as secretary of the meeting.
2.5 NOTICE OF STOCKHOLDERS' MEETINGS
Except as set forth in Section 2.3, all notices of meetings of
stockholders shall be sent or otherwise given in accordance with Section 2.6 of
these By-Laws not less than 10 nor more than 60 days before the date of the
meeting. The notice shall specify the place, date, and hour of the meeting and
(i) in the case of a special meeting, the general nature of the business to be
transacted (no business other than that specified in the notice may be
transacted) or (ii) in the case of the annual meeting, those matters which the
board of directors, at the time of giving the notice, intends to present for
action by the stockholders (but any proper matter may be presented at the
meeting for such action). The notice of any meeting at which directors are to
be elected shall include the name of any nominee or nominees who, at the time
of the notice, the board intends to present for election.
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<PAGE> 5
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders shall be given either
personally or by first-class mail or by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the stockholder at the address of that stockholder
appearing on the books of the corporation or given by the stockholder to the
corporation for the purpose of notice. If no such address appears on the
corporation's books or is given, notice shall be deemed to have been given if
sent to that stockholder by mail or telegraphic or other written communication
to the corporation's principal executive office, or if published at least once
in a newspaper of general circulation in the county where that office is
located. Notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by telegram or other means of
written communication.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.7 QUORUM
The presence in person or by proxy of the holders of a majority of the
voting power of the shares entitled to vote thereat constitutes a quorum for
the transaction of business at all meetings of stockholders; provided, however,
that in the case of any vote to be taken by classes, the holders of a majority
of the votes entitled to be cast by the stockholders of a particular class
shall constitute a quorum for the transaction of business by such class. The
stockholders present at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the voting
power of the shares required to constitute a quorum.
2.8 ADJOURNED MEETING; NOTICE
Any stockholders' meeting, annual or special, whether or not a quorum
is present, may be adjourned from time to time by the vote of the majority of
the voting power of the shares represented at that meeting, either in person or
by proxy. In the absence of a quorum, no other business may be transacted at
that meeting except as provided in Section 2.7 of these By-Laws.
When any meeting of stockholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at the meeting at which the
adjournment is taken. However, if a new record date for the adjourned meeting
is fixed or if the adjournment is for more than 30 days from the date set forth
the original meeting, then notice of the adjourned meeting shall be given.
Notice of any such adjourned meeting shall be given to each stockholder of
record entitled to vote at the adjourned meeting in accordance with the
provisions of Sections 2.5 and 2.6 of these By-Laws. At any adjourned meeting
the corporation may transact any business which might have been transacted at
the original meeting.
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<PAGE> 6
2.9 VOTING
Voting at any meeting of stockholders need not be by ballot, unless
otherwise provided in the Certificate of Incorporation.
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.12 of these
By-Laws, subject to the provisions of Sections 217 and 218 of the General
Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors
and joint owners, and to voting trusts and other voting agreements).
Each stockholder shall be entitled to that number of votes for each
share held as is set forth in the Certificate of Incorporation or in the
resolution or resolutions adopted by the board of directors providing for the
issuance of such stock, except as may otherwise be required by law.
Any stockholder entitled to vote on any matter may vote part of the
shares in favor of the proposal and refrain from voting the remaining shares
or, except when the matter is the election of directors, may vote them against
the proposal; but if the stockholder fails to specify the number of shares
which the stockholder is voting affirmatively, it will be conclusively presumed
that the stockholder's approving vote is with respect to all shares which the
stockholder is entitled to vote.
If a quorum is present, the affirmative vote of at least a majority of
the voting power of the shares represented, in person or by proxy, and voting
at a duly held meeting and authorized to vote on the subject matter shall be
the act of the stockholders, unless the vote of a greater number or a vote by
classes is required by law or by the Certificate of Incorporation.
2.10 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT
The transactions at any meeting of stockholders, either annual or
special, however called and noticed, and wherever held, shall be as valid as
though they had been taken at a meeting duly held after regular call and
notice, if a quorum be present either in person or by proxy, and if, either
before or after the meeting, each person entitled to vote, who was not present
in person or by proxy, signs a written waiver of notice or a consent to the
holding of the meeting or an approval of the minutes thereof. The waiver of
notice or consent or approval need not specify either the business to be
transacted or the purpose of any annual or special meeting of stockholders. All
such waivers, consents, and approvals shall be filed with the corporate records
or made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by law to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING
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For purposes of determining the stockholders entitled to notice of any
meeting or to vote thereat or entitled to give consent to corporate action
without a meeting, the board of directors may fix, in advance, a record date,
which shall not be more than 60 days nor less than 10 days before the date of
any such meeting nor more than 60 days before any such action without a
meeting, and in such event only stockholders of record on the date so fixed are
entitled to notice and to vote or to give consents, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation
after the record date.
If the board of directors does not so fix a record date, the record
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the business day preceding
the day on which notice is given, or, if notice is waived, at the close of
business on the business day preceding the day on which the meeting is held.
The record date for any other purpose shall be as provided in Article VIII of
these By-Laws.
2.12 PROXIES
Every person entitled to vote for directors, or on any other matter,
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the Secretary
of the corporation, but no such proxy shall be voted or acted upon after three
(3) years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy
(whether by manual signature, typewriting, telegraphic transmission or
otherwise) by the stockholder or the stockholder's attorney-in-fact. A duly
executed proxy shall be irrevocable if it states that it is irrevocable and if,
and only as long as, it is coupled with an interest sufficient in law to
support an irrevocable power. A stockholder may revoke any proxy that is not
irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed proxy bearing
a later date with the secretary of the corporation.
2.13 INSPECTORS OF ELECTION
Before any meeting of stockholders, the board of directors may appoint
an inspector or inspectors of election to act at the meeting or its
adjournment. If no inspector of election is so appointed, then the chairman of
the meeting may, and on the request of any stockholder or a stockholder's proxy
shall, appoint an inspector or inspectors of election to act at the meeting.
The number of inspectors shall be either one or three. If inspectors are
appointed at a meeting pursuant to the request of one or more stockholders or
proxies, then the holders of a majority of the voting power of shares or their
proxies present at the meeting shall determine whether one or three inspectors
are to be appointed. If any person appointed as inspector fails to appear or
fails or refuses to act, then the chairman of the meeting may, and upon the
request of any stockholder or a stockholder's proxy shall, appoint a person to
fill that vacancy.
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Such inspectors shall:
(a) determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence
of a quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in
any way arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the
election or vote with fairness to all stockholders.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware
and to any limitations in the Certificate of Incorporation or these By-Laws
relating to action required to be approved by the stockholders or by the
outstanding shares, the business and affairs of the corporation shall be
managed and all corporate powers shall be exercised by or under the direction
of the board of directors.
3.2 NUMBER AND TERM OF OFFICE
The authorized number and term of directors shall be as set forth in
the Certificate of Incorporation.
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
If for any cause, the directors shall not have been elected at an annual
meeting, they may be elected as soon thereafter as convenient at a special
meeting of the stockholders called for that purpose in the manner provided in
these By-Laws.
3.3 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the
chairman of the board, the chief executive officer, the secretary or the board
of directors, unless the notice specifies a
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later time for that resignation to become effective. If the resignation of a
director is effective at a future time, the board of directors may elect a
successor to take office when the resignation becomes effective.
Unless otherwise provided in the Certificate of Incorporation or these
By-Laws, vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote
of the stockholders or by court order may be filled only by the affirmative
vote of a majority of the voting power of shares represented and voting at a
duly held meeting at which a quorum is present (which shares voting
affirmatively also constitute a majority of the required quorum), or by the
written consent of a majority of the voting power of shares entitled to vote
thereon. Each director so elected shall hold office until the next annual
meeting of the stockholders and until a successor has been elected and
qualified.
Unless otherwise provided in the Certificate of Incorporation or these
By-Laws:
(i) Vacancies and newly created directorships resulting from
any increase in the authorized number of directors to be elected by all of the
stockholders entitled to vote, voting as a single class, may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the provisions of
the Certificate of Incorporation vacancies and newly created directorships of
such class or classes or series may be filled by a majority of the directors
elected by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a
stockholder, or other fiduciary entrusted with like responsibility for the
person or estate of a stockholder, may call a special meeting of stockholders
in the manner prescribed by the provisions of the Certificate of Incorporation
or these By-Laws, or may apply to the Court of Chancery for a decree summarily
ordering an election as provided in Section 211 of the General Corporation Law
of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least 10% of the total number of the then outstanding shares having
the right to vote for such directors, summarily order an election to be held to
fill any such vacancies or newly created directorships, or to replace the
directors chosen by the directors then in office as aforesaid, which election
shall be governed by the provisions of Section 211 of the General Corporation
Law of Delaware so far as applicable.
3.4 REMOVAL
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Subject to any limitations imposed by law, and unless otherwise
provided in the Certificate of Incorporation the board of directors, or any
individual director, may be removed from office at any time by the affirmative
vote of the holders of at least a majority of the voting power of the then
outstanding shares of the capital stock of the corporation entitled to vote at
an election of directors.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any place
within or outside the State of Delaware that has been designated from time to
time by resolution of the board of directors. In the absence of such a
designation, regular meetings shall be held at the principal executive office
of the corporation. Special meetings of the board of directors may be held at
any place within or outside the State of Delaware that has been designated in
the notice of the meeting or, if not stated in the notice or if there is no
notice, at the principal executive office of the corporation.
Any meeting, regular or special, may be held by conference telephone
or similar communication equipment, so long as all directors participating in
the meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
3.6 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be
held at such time and place as shall be fixed by the vote of the stockholders
at the annual meeting, and no notice of such meeting shall be necessary to the
newly elected directors in order legally to constitute the meeting so long as a
quorum is present at the first meeting of such newly elected board of
directors. In the event of the failure of the stockholders to fix the time or
place of such first meeting of the newly elected board of directors, or in the
event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
3.7 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice
if the dates of such meetings are fixed by the board of directors.
3.8 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, or in the absence of
the chairman of the board by the chief executive officer or by a majority of
the directors then in office.
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Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at the director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least seven days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or telegram, it shall be delivered personally or by telephone or to
the telegraph company at least 48 hours before the time of the holding of the
meeting. Any oral notice given personally or by telephone may be communicated
either to the director or to a person at the office of the director who the
person giving the notice has reason to believe will promptly communicate it to
the director. The notice need not specify the purpose of the meeting. In
addition, if the meeting is to be held at the principal executive office of the
corporation, the notice need not specify the place of the meeting.
3.9 QUORUM
A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn as provided in
Section 3.11 of these By-Laws. Every act or decision done or made by a majority
of the directors present at a duly held meeting at which a quorum is present
shall be regarded as the act of the board of directors, subject to the
provisions of the Certificate of Incorporation and applicable law.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.10 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such directors. All such waivers, consents, and approvals shall be
filed with the corporate records or made part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special meeting
of the board of directors.
3.11 ADJOURNMENT
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting to another time and place.
3.12 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting need not
be given if announced at the meeting at which the adjournment is taken, unless
the meeting is adjourned for more than 24 hours. If the meeting is adjourned
for more than 24 hours, then notice of the time and place of the adjourned
meeting shall be given before the adjourned meeting takes place, in the manner
specified in Section 3.8 of these By-Laws, to the directors who were not
present at the time of the adjournment.
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3.13 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors
may be taken without a meeting, provided that all members of the board of
directors individually or collectively consent in writing to that action. Such
action by written consent shall have the same force and effect as a unanimous
vote of the board of directors. Such written consent and any counterparts
thereof shall be filed with the minutes of the proceedings of the board.
3.14 ORGANIZATION
Meetings of the board of directors shall be presided over by the
chairman of the board, if any, or in his or her absence by the vice chairman of
the board, if any, or in his or her absence by the chief executive officer, or
in their absence by a chairman chosen at the meeting. The secretary shall act
as secretary of the meeting, but in his or her absence the chairman of the
meeting may appoint any person to act as secretary of the meeting.
3.15 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.15 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
3.16 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation
at common law or under any statute.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
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The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one or more committees, each
consisting of two or more directors, to serve at the pleasure of the board of
directors. The board of directors may designate one or more directors as
alternate members of any committee, who may replace any absent member at any
meeting of the committee. The appointment of members or alternate members of a
committee requires the vote of a majority of the authorized number of
directors. Any committee, to the extent provided in the resolution of the
board, shall have all the authority of the board, but no such committee shall
have the power or authority to (i) amend the Certificate of Incorporation
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the board
of directors as provided in Section 151(a) of the General Corporation Law of
Delaware, fix any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other
class or classes of stock of the corporation), (ii) adopt an agreement of
merger or consolidation under Sections 251, 252, 255, 256, 257, 258, 263 or 264
of the General Corporation Law of Delaware, (iii) recommend to the stockholders
the sale, lease or exchange of all or substantially all of the corporation's
property and assets, (iv) recommend to the stockholders a dissolution of the
corporation or a revocation of a dissolution, or (v) amend the By-Laws of the
corporation; and, unless the board resolution establishing the committee, the
By-Laws or the Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend, to authorize
the issuance of stock, or to adopt a certificate of ownership and merger
pursuant to Section 253 of the General Corporation Law of Delaware.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these By-Laws,
Section 3.5 (place of meetings), Section 3.6 (regular meetings), Section 3.7
(special meetings and notice), Section 3.9 (quorum), Section 3.10 (waiver of
notice), Section 3.11 (adjournment), Section 3.12 (notice of adjournment), and
Section 3.13 (action without meeting), with such changes in the context of
those By-Laws as are necessary to substitute the committee and its members for
the board of directors and its members; provided, however, that the time of
regular meetings of committees may be determined either by resolution of the
board of directors or by resolution of the committee, that special meetings of
committees may also be called by resolution of the board of directors, and that
notice of special meetings of committees shall also be given to all alternate
members, who shall have the right to attend all meetings of the committee. The
board of directors may adopt rules for the government of any committee not
inconsistent with the provisions of these By-Laws.
ARTICLE V
OFFICERS
5.1 OFFICERS
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The corporation shall have such officers as determined by the board of
directors, which officers may include a chairman of the board, a chief
executive officer, a president, a secretary, a chief financial officer and a
treasurer. The corporation may also have, at the discretion of the board of
directors, one or more vice presidents, one or more assistant secretaries, one
or more assistant treasurers, and such other officers as may be appointed in
accordance with the provisions of Section 5.3 of these By-Laws. Any number of
offices may be held by the same person.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these By-Laws, shall be chosen by the board of directors, subject to the
rights, if any, of an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the chief executive
officer to appoint, such other officers as the business of the corporation may
require, each of whom shall hold office for such period, have such authority,
and perform such duties as are provided in these By-Laws or as the board of
directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
board of directors at any regular or special meeting of the board or, except in
case of any officer chosen by the board of directors, by any officer upon whom
such power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall not
be necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these By-Laws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall serve
as the corporation's general manager, and shall have general supervision,
direction and control of the corporation's business and its officers, and, if
present, preside at meetings of the stockholders and the board of directors and
exercise and perform such other powers and duties as may from time to time be
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assigned to him or her by the board of directors or as may be prescribed by
these By-Laws. If there is no chief executive officer, then the chairman of the
board shall also be the chief executive officer of the corporation and shall
have the powers and duties prescribed in Section 5.7 of these By-Laws. The
chairman of the board shall report to the board of directors.
5.7 CHIEF EXECUTIVE OFFICER
Subject to such supervisory powers, if any, as may be given by the
board of directors to the chairman of the board, if there be such an officer,
the chief executive officer of the corporation shall, subject to the control of
the board of directors, have general supervision, direction, and control of the
business and the officers of the corporation. He or she shall preside at all
meetings of the stockholders and, in the absence or nonexistence of a chairman
of the board, at all meetings of the board of directors. He shall have the
general powers and duties of management usually vested in the chief executive
officer of a corporation, and shall have such other powers and duties as may be
prescribed by the board of directors or these By-Laws.
5.8 PRESIDENT
The president may assume and perform the duties of the chief executive
officer in the absence or disability of the chief executive officer or whenever
the office of the chief executive officer is vacant. The president of the
corporation shall exercise and perform such powers and duties as may from time
to time be assigned to him or her by the board of directors or as may be
prescribed by these By-Laws. In the absence or nonexistence of the chairman of
the board and chief executive officer, he or she shall preside at all meetings
of the stockholders and at all meetings of the board of directors and shall
perform such other duties as the board of directors may from time to time
determine.
5.9 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform
all the duties of the president and when so acting shall have all the powers
of, and be subject to all the restrictions upon, the president. The vice
presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the board of directors,
these By-Laws, the chairman of the board or the chief executive officer.
5.10 SECRETARY
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the board of
directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors and stockholders. The minutes shall show the
time and place of each meeting, whether regular or special (and, if special,
how authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings, and the proceedings thereof.
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The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names
of all stockholders and their addresses, the number and classes of shares held
by each, the number and date of certificates evidencing such shares, and the
number and date of cancellation of every certificate surrendered for
cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the board of directors required to be given by law
or by these By-Laws. He or she shall keep the seal of the corporation, if one
be adopted, in safe custody and shall have such other powers and perform such
other duties as may be prescribed by the board of directors or by these
By-Laws.
5.11 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all money and other
valuables in the name and to the credit of the corporation with such
depositaries as may be designated by the board of directors. He or she shall
disburse the funds of the corporation as may be ordered by the board of
directors, shall render to the chief executive officer and directors, whenever
they request it, an account of all of his or her transactions as chief
financial officer and of the financial condition of the corporation, and shall
have such other powers and perform such other duties as may be prescribed by
the board of directors or these By-Laws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware, indemnify each of its
directors and officers against expenses (including attorneys' fees), judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with any action, suit or proceeding, whether civil, criminal,
administrative or investigative, arising by reason of the fact that such person
is or was a director, office, employee or agent of the corporation; provided,
however, that the corporation shall not be required to indemnify or advance
expenses to any director or officer in connection with any proceeding brought
or claim made by such person, unless such indemnification or advancement of
expenses is expressly required to be made by law or by contract or the
proceeding or claim
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was authorized in advance by the board of directors of the corporation. The
corporation may modify by contract the extent of the rights provided by this
Section 6.1 and the rights to advancement provided by Section 6.3, provided
that any modification that has the effect of diminishing or restricting such
rights shall be prospective in effect and shall not affect such rights with
respect to conduct occurring prior to the date of the contract. For purposes of
this Section 6.1, a "director" or "officer" of the corporation includes any
person (i) who is or was a director or officer of the corporation, (ii) who is
or was serving at the request of the corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise, or
(iii) who was a director or officer of a corporation which was a predecessor
corporation of the corporation or of another enterprise at the request of such
predecessor corporation.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power to indemnify each of its
employees and agents (other than directors and officers) to the maximum extent
and in the manner permitted by the General Corporation Law of Delaware against
expenses (including attorneys' fees), judgments, fines, settlements and other
amounts actually and reasonably incurred in connection with any proceeding
arising by reason of the fact that such person is or was an agent of the
corporation. For purposes of this Section 6.2, an "employee" or "agent" of the
corporation (other than a director or officer) includes any person (i) who is
or was an employee or agent of the corporation, (ii) who is or was serving at
the request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against any liability asserted against or incurred by him or
her in any capacity, or arising out of his or her status as such, whether or
not the corporation would have power to indemnify him or her against such
liability under the provisions of the General Corporation Law of Delaware. The
corporation may establish alternative arrangements for purposes of funding
indemnification, including, without limitation, trusts, letters of credit,
captive insurance entities and reciprocal risk retention group arrangements.
6.4 ADVANCEMENT OF EXPENSES
The corporation shall advance to any person who was or is a party or
witness or is threatened to be made a party or witness to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal
administrative or investigative by reason of the fact that he or she is or was
a director or officer, as defined in this Article VI, all expenses incurred by
the person in connection with such proceeding. All expenses incurred by such
person in connection with such proceeding shall be paid promptly upon request
therefore, but in any event prior to the ultimate disposition of the
proceeding, provided that an undertaking has been furnished by or on behalf of
the person requesting advancement to repay said amounts if it should be
determined ultimately that he or she is not entitled to be indemnified under
this Article VI or otherwise.
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Notwithstanding the foregoing, no advance shall be made by the
corporation to an officer of the corporation (except by reason of the fact that
such officer is or was also a director of the corporation in which event this
paragraph shall not apply) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, if a determination is reasonably and
promptly made by the board of directors (i) by a majority vote of the directors
who are not parties to the action, suit or proceeding, or (ii) by a committee
of such directors designated by a majority vote of such directors, even though
less than a quorum, or (iii) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, that
the facts known to the determining party(ies) at the time such determination is
made demonstrate clearly and convincingly that such person acted in bad faith
or in a manner that such person did not believe either to be in or not opposed
to the best interests of the corporation.
6.5 NON-EXCLUSIVITY OF RIGHTS
The rights conferred on any person by this By-Law shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the Certificate of Incorporation, By-Laws,
agreement, vote of stockholders or disinterested directors or otherwise, either
as to action in such person's official capacity or as to action in any other
capacity while holding office. The corporation is specifically authorized to
enter into individual contracts with any or all of its directors, officers,
employees and agents respecting indemnification and advances to the fullest
extent not prohibited by the General Corporation Law of Delaware.
6.6 SURVIVAL OF RIGHTS
The rights conferred on any person by this By-Law shall continue as to
a person who has ceased to be a director, officer, employee or other agent and
shall inure to the benefit of the heirs, executors and administrators of such
person.
6.7 AMENDMENTS
Any repeal or modification of this By-Law shall have prospective
effect only, and shall not affect the rights of any person under this By-Law as
in effect at the time of an alleged action or omission to act giving rise to a
proceeding against such person, if such alleged action or omission occurred
prior to the repeal or modification of this By-Law.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
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The corporation shall, either at its principal executive office or at
such place or places as designated by the board of directors, keep (i) a record
of its stockholders listing their names and addresses and the number and class
of shares held by each, (ii) a copy of these By-Laws as amended to date, and
(iii) accounting books and other records.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders and its other books and
records, and to make copies or extracts therefrom. A proper purpose shall mean
a purpose reasonably related to such person's interest as a stockholder. In
every instance where an attorney or other agent is the person who seeks the
right to inspection, a power of attorney or other writing that authorizes the
attorney or other agent to so act on behalf of the stockholder shall accompany
the demand under oath. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
The officer who has charge of the stock ledger of the corporation
shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in the name of such
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
7.2 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the chief executive officer, the president,
any vice president, the chief financial officer, the secretary or assistant
secretary of this corporation, or any other person authorized by the board of
directors or the chief executive officer or the president or a vice president,
is authorized to vote, represent, and exercise on behalf of this corporation
all rights incident to any and all shares of any other corporation or
corporations standing in the name of this corporation. The authority herein
granted may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
ARTICLE VII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the stockholders entitled to receive
payment of any dividend or other distribution of allotment of any rights, or
for purposes of determining the stockholders
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entitled to exercise any rights in respect of any other lawful action (other
than action by stockholders by written consent without a meeting), the board of
directors may fix, in advance, a record date, which shall not be more than 60
days before any such action. In that case, only stockholders of record at the
close of business on the date so fixed are entitled to receive the dividend,
distribution or allotment of rights, or to exercise such rights, as the case
may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date so fixed, except as otherwise provided by
law.
If the board of directors does not fix a record date, then the record
date for determining stockholders for any such purpose shall be at the close of
business on the day on which the board adopts the applicable resolution, or the
60th day before the date of that action, whichever is later.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts,
other orders for payment of money, notes or other evidences of indebtedness
that are issued in the name of or payable to the corporation, and only the
persons so authorized shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
The officers of the corporation enumerated Section 5.1 of these
By-Laws shall have the authority to execute in the name of the corporation
bonds, contracts, deeds, leases and other written instruments to be executed by
the corporation. In addition, the board of directors, except as otherwise
provided in these By-Laws, may authorize any other officer or officers, or
agent or agents, to enter into any contract or execute any instrument in the
name of and on behalf of the corporation; such authority may be general or
confined to specific instances. Unless so authorized or ratified by the board
of directors or within the agency power of an officer, no officer, agent or
employee shall have any power or authority to bind the corporation by any
contract or engagement, or to pledge its credit or render it liable for any
purpose or for any amount.
8.4 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of the corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply
to shares represented by a certificate until such certificate is surrendered to
the corporation. Notwithstanding the adoption of such a resolution by the board
of directors, any holder of uncertificated shares shall, upon request, be
entitled to have a certificate signed by or in the name of the corporation by
the chairman or vice-chairman of the board of directors or the chief executive
officer, the president or a vice-president, and by the chief financial officer,
the secretary or an assistant secretary of the corporation, representing the
number of shares registered in certificate form. Any or all of the signatures
on the certificate may be a facsimile(s). If any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate has ceased to be such officer, transfer agent or registrar before
such certificate is issued, such certificate may be issued by the corporation
with the same effect as if such person were such officer, transfer agent or
registrar at the date of issue.
19
<PAGE> 21
The corporation may issue the whole or any part of its shares as
partly paid and subject to call for the remainder of the consideration to be
paid therefor. Upon the face or back of each stock certificate issued to
represent any such partly paid shares, or upon the books and records of the
corporation in the case of uncertificated partly paid shares, the total amount
of the consideration to be paid therefor and the amount paid thereon shall be
stated. Upon the declaration of any dividend on fully paid shares, the
corporation shall declare a dividend upon partly paid shares of the same class,
but only upon the basis of the percentage of the consideration actually paid
thereon.
8.5 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock
or more than one series of any class pursuant to the Certificate of
Incorporation then the powers, designations, preferences, and relative,
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate that the corporation shall issue to represent such
class or series of stock; provided, however, that, except as otherwise provided
in Section 202 of the General Corporation Law of Delaware, in lieu of the
foregoing requirements there may be set forth on the face or back of such
certificate a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences, and
relative, participation, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.
8.6 LOST CERTIFICATES
Except as provided in this Section 8.6, no new certificates for shares
shall be issued to replace previously issued certificates unless the latter are
surrendered to the corporation and canceled at the same time. The board of
directors may, if any share certificate or certificate for any other security
is lost, stolen or destroyed, authorize the issuance of a replacement
certificate on such terms and conditions as the board of directors may require;
the board of directors may require indemnification of the corporation secured
by a bond or other adequate security sufficient to protect the corporation
against any claim that may be made against it, including any expense or
liability, on account of the alleged loss, theft or destruction of the
certificate or the issuance of the replacement certificate.
8.7 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules
of construction, and definitions in the General Corporation Law of Delaware
shall govern the construction of these By-Laws. Without limiting the generality
of this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
20
<PAGE> 22
ARTICLE IX
AMENDMENTS
Subject to Section 6.7, hereof the By-Laws of the corporation may be
adopted, amended or repealed and new By-Laws adopted by the affirmative vote of
stockholders holding a majority of the voting power of stock entitled to vote,
or by the board of directors.
ARTICLE X
DISSOLUTION
If it should be deemed advisable in the judgment of the board of
directors of the corporation that the corporation be dissolved, the board,
after the adoption of a resolution to that effect by a majority of the whole
board at any meeting called for that purpose, shall cause notice to be mailed
to each stockholder entitled to vote thereon of the adoption of the resolution
and of a meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the voting power of the outstanding stock of the
corporation entitled to vote thereon votes for the proposed dissolution, then a
certificate stating that the dissolution has been authorized in accordance with
the provisions of Section 275 of the General Corporation Law of Delaware and
setting forth the names and residences of the directors and officers shall be
executed, acknowledged, and filed and shall become effective in accordance with
Section 103 of the General Corporation Law of Delaware. Upon such certificate's
becoming effective in accordance with Section 103 of the General Corporation
Law of Delaware, the corporation shall be dissolved.
Whenever all the stockholders entitled to vote on a dissolution
consent in writing, either in person or by duly authorized attorney, to a
dissolution, no meeting of directors or stockholders shall be necessary. The
consent shall be filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such consent's becoming
effective in accordance with Section 103 of the General Corporation Law of
Delaware, the corporation shall be dissolved. If the consent is signed by an
attorney, then the original power of attorney or a photocopy thereof shall b
attached to and filed with the consent. The consent filed with the Secretary of
State shall have attached to it the affidavit of the secretary or some other
officer of the corporation stating that the consent has been signed by or on
behalf of all the stockholders entitled to vote on a dissolution; in addition,
there shall be attached to the consent a certification by the secretary or some
other officer of the corporation setting forth the names and residences of the
directors and officers of the corporation.
ARTICLE XI
21
<PAGE> 23
CUSTODIAN
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may
appoint one or more persons to be custodians and, if the corporation is
insolvent, to be receivers, of and for the corporation when:
(i) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect successors to
directors whose terms have expired or would have expired upon qualification of
their successors; or
(ii) the business of the corporation is suffering or is
threatened with irreparable injury because the directors are so divided
respecting the management of the affairs of the corporation that the required
vote for action by the board of directors cannot be obtained and the
stockholders are unable to terminate this division; or
(iii) the corporation has abandoned its business and has
failed within a reasonable time to take steps to dissolve, liquidate or
distribute its assets.
11.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver
appointed under Section 291 of the General Corporation Law of Delaware, but the
authority of the custodian shall be to continue the business of the corporation
and not to liquidate its affairs and distribute its assets, except when the
Court of Chancery otherwise orders and except in cases arising under Sections
226(a)(3) or 352(a)(2) of the General Corporation Law of Delaware.
22
<PAGE> 1
EXHIBIT 4.2
COMMON STOCK COMMON STOCK
PAR VALUE $.001 PAR VALUE $.001
- ------------------------- -------------------------
CERTIFICATE NUMBER NUMBER OF SHARES
[QUOTESMITH.COM LOGO APPEARS HERE]
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE CUSIP NUMBER
------------------------
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF Quotesmith.com, Inc.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate and the shares represented hereby are issued and
shall be subject to all of the provisions of the Certificate of Incorporation
of the Corporation and its By-Laws, as each shall be amended or restated from
time to time (copies of which are on file at the office of the Corporation), to
all of which the holder by acceptance hereof assents. This certificate is not
valid until countersigned by a Transfer Agent and registered by a Registrar.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated: /s/ Robert S. Bland
-------------------
CHAIRMAN
HARRIS TRUST AND SAVINGS BANK
TRANSFER AGENT AND REGISTRAR
[SEAL APPEARS HERE]
BY:
--------------------------
AUTHORIZED SIGNATURE
<PAGE> 2
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS, THE POWERS, DESIGNATIONS, REFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND
THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR
RIGHTS.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
- ----------------------------------------------------------------------------------------------
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
TEN ENT - as tenants by the entireties (cust) (minor)
JT TEN - as joint tenants with right of under the Uniform Gifts
survivorship and not as tenants in to Minors Act
common (State)
- ----------------------------------------------------------------------------------------------
</TABLE>
Additional abbreviations may also be used though not in the above
list.
For value received, ________________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY NUMBER OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ----------------------------------------
- ----------------------------------------
- -------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE
OF ASSIGNEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
__________________________________________________________________________Shares
stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint
_________________________________ Attorney to transfer the said stock on the
books of the within named Corporation with full power of substitution in the
premises.
Dated
----------------------------
X
---------------------------------------
X
---------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By
------------------------------------
THE SIGNATURE(S) MUST BE GUARANTEED BY
AN ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15
<PAGE> 1
EXHIBIT 4.4
INVESTOR RIGHTS AGREEMENT
This INVESTOR RIGHTS AGREEMENT (the "AGREEMENT") is made and entered
into as of February 10, 1999, by and among QUOTESMITH.COM, INC., a Delaware
corporation (the "CORPORATION"), and INTUIT INC., a Delaware corporation (the
"INVESTOR"), with reference to the following facts:
A. The Corporation proposes to sell and issue One Million (1,000,000)
shares of its Common Stock, par value $.001 per share (the "COMMON STOCK"),
pursuant to that certain Stock Purchase Agreement between the Corporation and
the Investor dated as of the date hereof (the "PURCHASE AGREEMENT").
B. As a condition of entering into the Purchase Agreement, the Investor
has requested that the Corporation extend to the Investor and its assigns
certain registration rights as set forth below.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and in the Purchase Agreement, the parties mutually agree as follows:
SECTION 1. GENERAL
1.1 Definitions As used in this Agreement the following
terms shall have the following respective meanings:
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
"HOLDER" means (i) any person owning of record Registrable Securities
that have not been sold to the public or (ii) any assignee of record of such
Registrable Securities in accordance with Section 2.10 hereof.
"INITIAL OFFERING" means the Corporation's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act and applicable rules and regulations thereunder, and the
declaration or ordering of effectiveness of such registration statement or
document.
"REGISTRABLE SECURITIES" means (i) the Shares (as defined in the
Purchase Agreement) and any other shares of Common Stock issued or transferred
to the Investor pursuant to the Purchase Agreement or the Stockholders' Rights
Agreement (as defined in the Purchase Agreement) and (ii) any Common Stock of
the Corporation issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, any of
the Shares or the shares of Common Stock
-1-
<PAGE> 2
identified in the foregoing clause (i). Notwithstanding the foregoing,
Registrable Securities shall not include any securities sold by a person to the
public either pursuant to a registration statement or Rule 144 or sold in a
private transaction in which the transferror's rights under Section 2 of this
Agreement are not assigned.
"REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number of shares
determined by calculating the total number of shares of the Corporation's Common
Stock that are Registrable Securities and either (1) are then issued and
outstanding or (2) are issuable pursuant to then exercisable or convertible
securities.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Corporation in complying with Sections 2.2, 2.3 and 2.4 hereof, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel for the Corporation, reasonable fees and
disbursements of a single special counsel for the Holders, blue sky fees and
expenses and the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular employees of the
Corporation which shall be paid in any event by the Corporation).
"SEC" or "COMMISSION" means the Securities and Exchange Commission or
any other successor federal agency at the time administering the Securities Act.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any similar successor federal statute and the rules and regulations thereunder,
all as the same shall be in effect from time to time.
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and fees and
disbursements of counsel for any Holder (other than the fees and disbursements
of counsel included in Registration Expenses).
"SHARES" shall mean the shares of the Corporation's Common Stock held
by the Investor and its permitted assigns.
"FORM S-3" means such form under the Securities Act as in effect on the
date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Corporation
with the SEC.
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER
2.1 Restrictions on Transfer
(a) Each Holder agrees not to make any disposition of all or
any portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement
under the Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or
-2-
<PAGE> 3
(ii) (A) The transferee has agreed in writing to be bound
by the terms of this Agreement, (B) such Holder shall have notified the
Corporation of the proposed disposition and shall have furnished the Corporation
with a detailed statement of the circumstances surrounding the proposed
disposition, and (C) such Holder shall have furnished the Corporation with an
opinion of counsel, reasonably satisfactory to the Corporation, that such
disposition will not require registration of such shares under the Securities
Act. It is agreed that the Corporation will not require opinions of counsel for
transactions made pursuant to Rule 144 except in unusual circumstances.
(iii) Notwithstanding the provisions of paragraphs (i) and
(ii) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by Intuit or its permitted transferees hereunder to its
shareholders, members, partners, officers, directors or employees or to one or
more other partnerships, corporations, limited liability companies, trusts or
other organizations which are controlled by, control or are under common control
with Intuit or its permitted transferees hereunder (each an "INTUIT AFFILIATE");
provided that in each case the transferee will be subject to the terms of this
Agreement to the same extent as if such transferee were an original Holder
hereunder.
(b) Each certificate representing Shares or Registrable
Securities shall (unless otherwise permitted by the provisions of the Agreement)
be stamped or otherwise imprinted with a legend substantially similar to the
following (in addition to any legend required under applicable state securities
laws or as provided elsewhere in this Agreement):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR UNLESS THE CORPORATION HAS RECEIVED
AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.
(c) The Corporation shall be obligated to reissue promptly
unlegended certificates at the request of any holder thereof if the holder shall
have obtained an opinion of counsel (which counsel may be counsel to the
Corporation) reasonably acceptable to the Corporation to the effect that the
securities proposed to be disposed of may lawfully be so disposed of without
registration, qualification or legend.
(d) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with respect
to such securities shall be removed upon receipt by the Corporation of an order
of the appropriate blue sky authority authorizing such removal.
-3-
<PAGE> 4
2.2 Demand Registration
(a) Subject to the conditions of this Section 2.2, if the
Corporation shall receive a written request from the Holders of more than
twenty-five (25%) of the Registrable Securities then outstanding (the
"INITIATING HOLDERS") that the Corporation file a registration statement under
the Securities Act covering the registration of Registrable Securities, then the
Corporation shall, within thirty (30) days of the receipt thereof, give written
notice of such request to all Holders, and subject to the limitations of this
Section 2.2, use its best efforts to effect, as soon as practicable, the
registration under the Securities Act of all Registrable Securities that the
Holders request to be registered.
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Corporation as a part of their request made pursuant to
this Section 2.2 or any request pursuant to Section 2.4 and the Corporation
shall include such information in the written notice referred to in Section
2.2(a) or Section 2.4(a), as applicable. In such event, the right of any Holder
to include its Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Holders and such Holder) to
the extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders (which
underwriter or underwriters shall be reasonably acceptable to the Corporation).
Notwithstanding any other provision of this Section 2.2 or Section 2.4, if the
underwriter advises the Corporation that marketing factors require a limitation
of the number of securities to be underwritten (including Registrable
Securities), then the Corporation shall so advise all Holders of Registrable
Securities which would otherwise be underwritten pursuant hereto, and the number
of shares that may be included in the underwriting shall be allocated to the
Holders of such Registrable Securities on a pro rata basis based on the number
of Registrable Securities that have been requested to be registered by all such
Holders (including the Initiating Holders). Unless a majority in interest of the
Initiating Holders shall give their written consent, no other person (including
the Corporation), other than a Holder, shall be permitted to offer securities
under any registration pursuant to this Section 2.2; provided, however, that in
no event may any person (other than a Holder) be permitted to include securities
in a registration pursuant to this Section 2.2 if the effect thereof would be to
cause the exclusion of any Registrable Securities under the preceding sentence.
Any Registrable Securities excluded or withdrawn from such underwriting shall be
withdrawn from the registration.
(c) A registration will not count as a registration under this
Section 2.2 until it has become effective and until:
(i) the Registrable Securities included in such
registration have actually been sold thereunder; or
(ii) the registration has been continuously effective for
a period of nine (9) months.
-4-
<PAGE> 5
(d) The Corporation shall not be required to effect a
registration pursuant to this Section 2.2:
(i) if the request for registration is exercised by the
Holders prior to one hundred eighty (180) days after the Initial Offering; or
(ii) if less than 250,000 Registrable Securities are to be
sold; or
(iii) after the Corporation has effected two (2)
registrations pursuant to this Section 2.2, and such registrations have been
declared or ordered effective; or
(iv) during the period starting with the date of filing
of, and ending on the date one hundred eighty (180) days following the effective
date of the registration statement pertaining to the Initial Offering; provided
that the Corporation makes reasonable good faith efforts to cause such
registration statement to become effective; or
(v) if the Corporation shall furnish to Holders requesting
a registration statement pursuant to this Section 2.2, a certificate signed by
the Chairman of the Board stating that in the good faith judgment of the Board
of Directors of the Corporation, it would be seriously detrimental to the
Corporation and its shareholders for such registration statement to be effected
at such time, in which event the Corporation shall have the right to defer such
filing for a period of not more than ninety (90) days after receipt of the
request of the Initiating Holders; provided that such right to delay a request
shall be exercised by the Corporation not more than once in any twelve (12)
month period.
2.3 Piggyback Registrations. The Corporation shall notify all Holders
of Registrable Securities in writing at least thirty(30) days prior to the
filing of any registration statement under the Securities Act for purposes of a
public offering of securities of the Corporation (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Corporation, but excluding registration statements relating to employee benefit
plans or with respect to mergers, acquisitions, corporate reorganizations or
other transactions under Rule 145 of the Securities Act) and will afford each
such Holder an opportunity to include in such registration statement all or part
of such Registrable Securities held by such Holder. Each Holder desiring to
include in any such registration statement all or any part of the Registrable
Securities held by it shall, within fifteen (15) days after the above-described
notice from the Corporation, so notify the Corporation in writing. Such notice
shall state the intended method of disposition of the Registrable Securities by
such Holder. If a Holder decides not to include all of its Registrable
Securities in any registration statement thereafter filed by the Corporation,
such Holder shall nevertheless continue to have the right to include any
Registrable Securities in any subsequent registration statement or registration
statements as may be filed by the Corporation with respect to offerings of its
securities, all upon the terms and conditions set forth herein.
(a) Underwriting. If the registration statement under which
the Corporation gives notice under this Section 2.3 is for an underwritten
offering, the Corporation shall so advise the Holders of Registrable Securities.
In such event, the right of any such Holder to be included in a registration
pursuant to this Section 2.3 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to
-5-
<PAGE> 6
the extent provided herein. All Holders proposing to distribute their
Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Corporation. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Corporation; second, to the holders of any
preferred stock of the Corporation to whom the Corporation shall have granted
priority registration rights superior to those of the Holders with respect to
the registration at issue ("PREFERRED HOLDERS"), if any; third, to the Holders
on a pro rata basis based on the total number of Registrable Securities that
have been requested to be registered by the Holders; and last, to any other
shareholders of the Corporation holding registration rights with respect to the
registration at issue (other than the Holders and any Preferred Holders) on a
pro rata basis. No such reduction shall (i) reduce the securities being offered
by the Corporation for its own account to be included in the registration and
underwriting or (ii) reduce the amount of securities of the selling Holders
included in the registration below thirty percent (30%) of the total amount of
securities included in such registration, unless (A) such reduction is by reason
of the registration rights of any Preferred Holders or (B) such offering is the
Initial Offering and such registration does not include shares of any other
selling shareholders (other than any Preferred Holders), in which events any or
all of the Registrable Securities of the Holders may be excluded in accordance
with the immediately preceding sentence. In no event will shares of any other
selling shareholder (except for any Preferred Holders) be included in such
registration which would reduce the number of shares which may be included by
Holders without the written consent of Holders of not less than a majority of
the Registrable Securities proposed to be sold in the offering.
(b) Right to Terminate Registration. The Corporation
shall have the right to terminate or withdraw any registration initiated by it
under this Section 2.3 prior to the effectiveness of such registration whether
or not any Holder has elected to include securities in such registration. The
Registration Expenses of such withdrawn registration shall be borne by the
Corporation in accordance with Section 2.5 hereof.
2.4 Form S-3 Registration. In case the Corporation shall receive
from any Holder or Holders of Registrable Securities a written request or
requests that the Corporation effect a registration on Form S-3 (or any
successor to Form S-3) or any similar short-form registration statement and any
related qualification or compliance with respect to all or a part of the
Registrable Securities owned by such Holder or Holders, the Corporation will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders
of Registrable Securities; and
(b) as soon as practicable, effect such registration and
all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a written request
given within fifteen (15) days after receipt of such written notice from the
Corporation; provided, however, that the Corporation shall not be obligated to
effect any such registration, qualification or compliance pursuant to this
Section 2.4:
-6-
<PAGE> 7
(i) if Form S-3 (or any successor or similar
form) is not available for such offering by the Holder; or
(ii) If the Corporation has effected two (2)
registrations pursuant to this Section 2.4 within the preceding twelve (12)
months; or
(iii) if the Holders, together with the holders of
any other securities of the Corporation entitled to inclusion in such
registration, propose to sell Registrable Securities and such other securities
(if any) at an aggregate price to the public of less than $500,000; or
(iv) if the Corporation shall furnish to the
Holders a certificate signed by the Chairman of the Board of Directors of the
Corporation stating that, in the good faith judgment of the Board of Directors
of the Corporation, it would be seriously detrimental to the Corporation and its
stockholders for such Form S-3 Registration to be effected at such time, in
which event the Corporation shall have the right to defer the filing of the Form
S-3 registration statement for a period of not more than one hundred twenty
(120) days after receipt of the request of the Holder or Holders under this
Section 2.4; provided that such right to delay a request shall be exercised by
the Corporation not more than once in any twelve (12) month period; or
(v) in any particular jurisdiction in which the
Corporation would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.
(c) Subject to the foregoing, the Corporation shall file
a Form S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Holders.
2.5 Expenses of Registration. Except as specifically provided
herein, all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration under
Section 2.3 or Section 2.4 herein shall be borne by the Corporation. All Selling
Expenses relating to securities registered by the Holders incurred in connection
with any registrations hereunder shall be borne by the Holders of the securities
so registered pro rata on the basis of the number of shares so registered. The
Corporation shall not, however, be required to pay for expenses of any
registration proceeding begun pursuant to Section 2.2 or 2.4, the request of
which has been subsequently withdrawn by the Initiating Holders unless (a) the
withdrawal is based upon material adverse information concerning the Corporation
of which the Initiating Holders were not aware at the time of such request or
(b) the Holders of a majority of Registrable Securities agree to forfeit their
right to one requested registration pursuant to Section 2.2 or Section 2.4, as
applicable, in which event such right shall be forfeited by all Holders). If the
Holders are required to pay the Registration Expenses, such expenses shall be
borne by the holders of securities (including Registrable Securities) requesting
such registration in proportion to the number of shares for which registration
was requested. If the Corporation is required to pay the Registration Expenses
of a withdrawn offering pursuant to clause (a) above, then the Holders shall not
forfeit their rights pursuant to Section 2.2 or Section 2.4 to a demand
registration.
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2.6 Obligations of the Corporation Whenever required to effect
the registration of any Registrable Securities, the Corporation shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use all reasonable
efforts to cause such registration statement to become effective, and, upon the
request of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to nine (9) months
or, if earlier, until the Holder or Holders have completed the distribution
related thereto.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus 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.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use all 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 the Holders; provided that the Corporation 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.
(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter(s) of such offering. Each
Holder participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered
by such registration statement 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.
(g) Furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable Securities
are delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Corporation for the purposes of such registration, in
form and substance as is customarily given to underwriters in an underwritten
public offering and reasonably satisfactory to a majority in interest of the
Holders requesting registration, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a letter
dated as of such date, from the independent certified public accountants of the
Corporation, in form and substance as is
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<PAGE> 9
customarily given by independent certified public accountants to underwriters in
an underwritten public offering and reasonably satisfactory to a majority in
interest of the Holders requesting registration, addressed to the underwriters,
if any, and if permitted by applicable accounting standards, to the Holders
requesting registration of Registrable Securities.
(h) Use its best efforts to cause the Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
by virtue of the business and operations of the Company to enable the seller or
sellers thereof to consummate the disposition of such Registrable Securities;
(i) Use its best efforts to cause all such Registrable
Securities to be listed on each securities exchange or quotation system on which
similar securities issued by the company are then listed or quoted, in each case
provided that the applicable listing or quotation requirements are satisfied;
(j) Make available for inspection by any seller of
Registrable Securities, any underwriter participating in any disposition
pursuant to such registration statement, and any attorney, accountant, or
another agent retained by any such seller or underwriter (collectively, the
"INSPECTORS"), all financial and other records, pertinent corporate documents,
and properties of the Company (collectively, the "RECORDS") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors, and employees to
supply all information reasonably requested by any such Inspector in connection
with such registration statement. Records which the Company determines, in good
faith, to be confidential shall not be disclosed by the Inspectors unless (i)
the disclosure of such Records is necessary to avoid or correct a misstatement
or omission in the registration statement or (ii) the release of such Records is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction. The seller of Registrable Securities agrees that it will, upon
learning that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at the Company's
expense, to undertake appropriate action to prevent disclosure of the Records
deemed confidential;
(k) Otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its security
holders, as soon a reasonably practicable, an earnings statement covering a
period of twelve (12) months, beginning within three (3) months after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder.
2.7 Termination of Registration Rights A Holder's registration
rights shall expire (i) if (A) the Corporation has completed its Initial
Offering and is subject to the provisions of the Exchange Act and (B) all
Registrable Securities held by and issuable to such Holder (and its affiliates,
members, partners and former partners) may be sold under Rule 144 during any
ninety (90) day period, or (ii) if earlier, five (5) years after the date of the
Initial Offering.
2.8 Delay of Registration; Furnishing Information.
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<PAGE> 10
(a) No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It shall be a condition precedent to the obligations
of the Corporation to take any action pursuant to Section 2.2, 2.3 or 2.4 that
the selling Holders shall furnish to the Corporation such information regarding
themselves, the Registrable Securities held by them and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities.
(c) The Corporation shall have no obligation with respect
to any registration requested pursuant to Section 2.2 or Section 2.4 if, due to
the operation of subsection 2.2(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Corporation's
obligation to initiate such registration as specified in Section 2.2 or Section
2.4, whichever is applicable.
2.9 Indemnification. In the event any Registrable Securities are
included in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Corporation will
indemnify and hold harmless each Holder, the partners, officers and directors of
each Holder, legal counsel, accountants, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the Exchange
Act, against any losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the Securities Act, the Exchange Act or
other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"VIOLATION") by the Corporation: (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading or (iii) any violation or alleged
violation by the Corporation of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by such registration statement; and the Corporation will reimburse each
such Holder, partner, shareholder, member, officer or director, legal counsel,
accountants, underwriter or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided however, that the
indemnity agreement contained in this Section 2.9(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Corporation, which consent
shall not be unreasonably withheld, nor shall the Corporation be liable in any
such case for any such loss, claim, damage, liability or action to the extent
that it arises out of or is based upon a Violation which occurs in reliance upon
and in conformity with written information furnished expressly for use in
connection with such registration by such Holder, partner, shareholder, member,
officer, director, underwriter or controlling person of such Holder.
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(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Corporation, each of its directors, its officers
and each person, if any, who controls the Corporation within the meaning of the
Securities Act, any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's partners,
shareholders, members, directors or officers or any person who controls such
Holder, against any losses, claims, damages or liabilities (joint or several) to
which the Corporation or any such director, officer, controlling person,
underwriter or other such Holder, or partner, shareholder, member, director,
officer or controlling person of such other Holder may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto) arise out
of or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder under an instrument duly executed
by such Holder and stated to be specifically for use in connection with such
registration; and each such Holder will reimburse any legal or other expenses
reasonably incurred by the Corporation or any such director, officer,
controlling person, underwriter or other Holder, or partner, shareholder,
member, officer, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action if it is judicially determined that there was such a
Violation; provided, however, that the indemnity agreement contained in this
Section 2.9(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld;
provided further, that in no event shall any indemnity under this Section 2.9
exceed the net proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.9, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party
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<PAGE> 12
on the one hand and of the indemnified party on the other in connection with the
Violation(s) that resulted in such loss, claim, damage or liability, as well as
any other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by a court
of law by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission; provided that in no event
shall any contribution by a Holder hereunder exceed the proceeds from the
offering received by such Holder.
(e) The obligations of the Corporation and Holders under this
Section 2.9 shall survive completion of any offering of Registrable Securities
in a registration statement and the termination of this agreement. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
2.10 Assignment of Registration Rights The rights to cause the
Corporation to register Registrable Securities pursuant to this Section 2 may be
assigned by a Holder to a transferee or assignee of Registrable Securities which
(i) is an Intuit Affiliate, or (ii) acquires at least fifty thousand (50,000)
shares of Registrable Securities or, if fewer than fifty thousand (50,000)
shares, at least twenty-five percent (25%) of such Holder's Registrable
Securities (in each case as adjusted for stock splits and combinations);
provided, however, (A) the transferor shall, within ten (10) days after such
transfer, furnish to the Corporation written notice of the name and address of
such transferee or assignee and the securities with respect to which such
registration rights are being assigned and (B) such transferee shall agree to be
subject to all restrictions set forth in this Agreement.
2.11 Limitation on Subsequent Registration Rights After the date of
this Agreement, the Corporation shall not, without the prior written consent of
a majority in interest of the Holders, enter into any agreement with any holder
or prospective holder of any securities of the Corporation that would grant such
holder registration rights; provided, however, that the provisions of this
Section 2.11 shall not apply to the grant of registration rights to the
purchasers of any preferred stock of the Corporation if the Corporation has
complied with its obligations to the Investor with respect to the offer and sale
of such preferred stock as set forth in Section 4 of the Stockholders' Rights
Agreement (as defined in the Purchase Agreement).
2.12 "Market Stand-Off" Agreement Each Holder hereby agrees that such
Holder shall not sell or otherwise transfer or dispose of any Registrable
Securities held by such Holder (other than those included in the registration)
for a period specified by the representative of the underwriters of Common Stock
(or other securities) of the Corporation not to exceed one hundred eighty (180)
days following the effective date of a registration statement of the Corporation
filed under the Securities Act; provided that:
(i) such agreement shall apply only to the Initial Offering;
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<PAGE> 13
(ii) all officers, directors and employees holding Common
Stock or options to purchase Common Stock of the Corporation and holders of at
least three percent (3%) of the Corporation's voting securities enter into
similar agreements; and
(iii) such agreement shall provide that any discretionary
waiver or termination of the restrictions of such agreements by the Corporation
or representatives of the underwriters shall apply first to Holders on a pro
rata basis, prior to any waiver or termination of the restrictions on any holder
of securities other than a Holder.
Each Holder agrees to execute and deliver such other agreements as may
be reasonably requested by the Corporation or the underwriter which are
consistent with the foregoing or which are necessary to give further effect
thereto. The obligations described in this Section 2.13 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Corporation may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period. Without limiting the foregoing, it is expressly
agreed that the provisions of this Section 2.12 shall not apply to any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock acquired by a Holder directly from the underwriters in a
registered public offering of the Corporation's securities or in an established
trading market from any party other than the Corporation.
2.13 Rule 144 Reporting With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Corporation agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Corporation for an offering of its
securities to the general public;
(b) File with the SEC, in a timely manner, all reports and
other documents required of the Corporation under the Exchange Act;
(c) So long as a Holder owns any Registrable Securities,
furnish to such Holder forthwith upon request: a written statement by the
Corporation as to its compliance with the reporting requirements of said Rule
144 of the Securities Act, and of the Exchange Act (at any time after it has
become subject to such reporting requirements); a copy of the most recent annual
or quarterly report of the Corporation; and such other reports and documents as
a Holder may reasonably request in availing itself of any rule or regulation of
the SEC allowing it to sell any such securities without registration.
SECTION 3. MISCELLANEOUS.SECTION 3. MISCELLANEOUS.
3.1 Governing Law This Agreement shall be governed by and construed in
accordance with the laws of the State of California without giving effect to the
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<PAGE> 14
principles of conflicts of law. Each of the parties hereto hereby irrevocably
and unconditionally consents to submit to the exclusive jurisdiction of the
courts of the State of California and of the United States of America, in each
case located in the County of San Francisco, for any action, proceeding or
investigation in any court or before any governmental authority ("LITIGATION")
arising out of or relating to this Agreement and the transactions contemplated
hereby (and agrees not to commence any Litigation relating thereto except in
such courts), and further agrees that service of any process, summons, notice or
document by U.S. registered mail to its respective address set forth in this
Agreement shall be effective service of process for any Litigation brought
against it in any such court. Each of the parties hereto hereby irrevocably and
unconditionally waives any objection to the laying of venue of any Litigation
arising out of this Agreement or the transactions contemplated hereby in the
courts of the State of California or the United States of America, in each case
located in the County of San Francisco, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such Litigation brought in any such court has been brought in an
inconvenient forum.
3.2 Successors and Assigns Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Corporation of adequate
written notice of the transfer of any Registrable Securities specifying the full
name and address of the transferee, the Corporation may deem and treat the
person listed as the holder of such shares in its records as the absolute owner
and holder of such shares for all purposes.
3.3 Entire Agreement This Agreement, the Purchase Agreement and the
other documents delivered pursuant thereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and no party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements with respect to the
subject hereof except as specifically set forth herein and therein.
3.4 Severability Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid, but if any
provision of this Agreement is held to be invalid or unenforceable in any
respect, such invalidity or unenforceability shall not render invalid or
unenforceable any other provision of this Agreement.
3.5 Amendment and Waiver
(a) Except as otherwise expressly provided, this Agreement may
be amended or modified only upon the written consent of the Corporation and a
majority in interest of the Holders; provided, however, any amendment of this
Agreement which would adversely affect a Holder in a manner different from other
Holders shall require the consent of such affected Holder.
(b) Except as otherwise expressly provided, the obligations of
the Corporation and the rights of the Holders under this Agreement may be waived
only with the written consent of a majority in interest of the Holders;
provided, however, any waiver of this Agreement which would adversely affect a
Holder in a manner different from other Holders shall require the consent of
such affected Holder.
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<PAGE> 15
Any amendment or waiver effected in accordance with this Section 3.5
shall be binding upon each Holder and the Corporation. By acceptance of any
benefits under this Agreement, Holders hereby agree to be bound by the
provisions hereunder.
3.6 Delays or Omissions It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Corporation under this Agreement shall impair
any such right, power, or remedy, nor shall it be construed to be a waiver of
any such breach, default or noncompliance, or any acquiescence therein, or of
any similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
3.7 Notices All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (iii) five (5) business days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (iv) one (1)
business day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All
communications shall be sent to the party to be notified at the address or
addresses as set forth on the signature pages hereof or at such other address as
such party may designate by ten (10) days advance written notice to the other
parties hereto.
3.8 Attorneys' Fees In the event that any dispute among the parties
to this Agreement should result in litigation, the prevailing party in such
dispute shall be entitled to recover from the losing party all fees, costs and
expenses of enforcing any right of such prevailing party under or with respect
to this Agreement, including without limitation, such reasonable fees and
expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
3.9 Titles and Subtitles The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
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<PAGE> 16
3.10 Counterparts This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this INVESTOR
RIGHTS AGREEMENT as of the date set forth in the first paragraph hereof.
CORPORATION: INVESTOR:
QUOTESMITH.CON, INC., INTUIT INC.,
a Delaware corporation a Delaware corporation
By: \s\ Robert S. Bland By: \s\ Mark Jones
------------------------------- -------------------------------
Title: President and CEO Title: Sr. Vice President
------------------------------- -------------------------------
Address: 8205 S. Class Avenue Address: 2550 Garcia Avenue
Suite 102 Mountain View, CA 94043
Darien, IL 60561 Attention: General Counsel
Attn: Mr. Robert Bland
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<PAGE> 1
EXHIBIT 10.1
FORM OF
QUOTESMITH.COM INC.
1997 STOCK OPTION PLAN
(AS AMENDED AND RESTATED MARCH 29, 1999)
1. Establishment and Purpose.
(a) Establishment. The Quotesmith Corporation 1997 Stock Option Plan,
initially adopted and effective on _____, 1997, is amended and restated in its
entirety hereby and is renamed the Quotesmith.com Inc.1997 Stock Option Plan
(As Amended and Restated March 29, 1999). Options granted under this Plan may
be "incentive stock options" intended to satisfy the requirements of Section
422 of the Code, or "nonqualified options."
(b) Purpose. The purposes of this Plan are to attract and retain the
best available personnel for positions of substantial responsibility, to
provide additional incentive to Employees, Directors and Consultants and to
promote the success of the Company's business. Options granted under the Plan
may be Incentive Stock Options or Nonqualified Stock Options, as determined by
the Administrator at the time of grant.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board of Directors of the Company and/or
Committee appointed by the Board pursuant to Section 4 of the Plan.
(b) "Affiliate" means a parent or subsidiary corporation as defined in
the applicable provisions (currently Section 424(e) and (f), respectively) of
the Code.
(c) "Agreement" means the written agreement between the Company and an
Optionee evidencing the grant of an Option and setting forth the terms and
conditions thereof.
(d) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any other country or jurisdiction where Options are granted under the Plan.
(e) "Board" means the Board of Directors of the Company.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
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<PAGE> 2
(g) "Committee" means a committee appointed by the Board to administer
the Plan in accordance with Section 4 hereof, and to perform the functions set
forth herein.
(h) "Common Stock" means the Common Stock of the Company.
(i) "Company" means Quotesmith.com Incorporated, a Delaware
corporation.
(j) "Consultant" means any person who is engaged by the Company or any
Affiliate to render consulting or advisory services and is compensated for such
services.
(k) "Director" means a member of the Board of Directors of the Company
or any of its Affiliates.
(l) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(m) "Employee" means any person, including Officers and Directors,
employed by the Company or any Affiliate designated by the Administrator as
eligible to receive Options subject to the conditions set forth herein. For
purposes hereof, "Employee" shall also include individuals who have not
commenced employment with the Company but have received an offer of employment
with the Company. A person shall not cease to be an Employee in the case of (i)
any leave approved by the Company or (ii) transfers between locations of the
Company or between the Company and its Affiliates. For purposes of ISOs, no
such leave may exceed ninety (90) days, unless reemployment upon expiration of
such leave is guaranteed by statute or contract. reemployment upon expiration
of a leave of absence as provided by the Company is not so guaranteed, on the
181st day of such leave any ISO held by the Optionee shall cease to be treated
as an ISO and shall be treated for tax purposes as a NQO. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(o) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) if the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the
National Market or SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or
the closing bid, if no sales were reported) as quoted on such exchange
or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable;
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<PAGE> 3
(ii) if the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market
Value shall be the mean between the high bid and low asked prices for
the Common Stock on the last market trading day prior to the day of
determination; or
(iii) in the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith
by the Administrator.
(p) "Incentive Stock Option" or "ISO" means an Option satisfying the
requirements of Section 422 of the Code and designated by the Administrator as
an Incentive Stock Option.
(q) "Nonqualified Stock Option" or "NQO" means an Option that is not
an Incentive Stock Option.
(r) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "Option" means a stock option granted pursuant to the Plan.
(t) "Option Agreement" means an agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
(u) "Optioned Stock" means the Common Stock subject to an Option.
(v) "Optionee" means a person to whom an Option has been granted under
the Plan.
(w) "Parent" means a "parent corporation" within the meaning of
Section 424(e) of the Code, whether now or hereafter existing.
(x) "Plan" means the Quotesmith.com Inc. 1997 Stock Option Plan, as
amended and restated hereby.
(y) "Plan Year" shall be a calendar year.
(z) "Section 16(b)" means Section 16(b) of the Exchange Act.
(aa) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
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<PAGE> 4
(bb) "Subsidiary" means a "subsidiary corporation" within the meaning
of Section 424(f) of the Code, whether now or hereafter existing.
(cc) "Ten-Percent Stockholder" means an Employee, who, at the time an
Incentive Stock Option is to be granted to him or her, owns (within the meaning
of Section 422(b) (6) of the Code) stock possessing more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company, or
any Affiliate.
3. Stock Subject to the Plan. Subject to Section 11 of the Plan, the
maximum aggregate number of Shares which may be subject to options and sold
under the Plan is One Million (1,000,000) Shares.
If an Option expires, is canceled, surrendered (without exercise)
or otherwise become unexercisable for any reason, the Shares allocable to the
canceled, surrendered or otherwise terminated Option may again be the subject
of Options granted hereunder (unless the Plan has terminated). However, Shares
that have actually been issued under the Plan, upon exercise of an Option,
shall not be returned to the Plan and shall not become available for future
distribution under the Plan. Shares that are retained by the Company upon
exercise of an Option in order to satisfy the exercise price for such Option or
any withholding taxes due with respect to such exercise shall be treated as not
issued and shall continue to be available under the Plan.
4. Administration.
(a) Administrator. The Plan shall be administered by the Board
and/or by a duly appointed Committee of the Board having such powers
as shall be specified by the Board. A majority of a quorum of the
Board or Committee, as the case may be, may authorize any action.
(b) Compliance with Section 162(m) of the Code. In the event that
the Company is a "publicly held corporation" as defined in paragraph
(2) of section 162(m) of the Code, as amended, and the regulations
promulgated thereunder ("Section 162(m)"), the Company may establish a
committee of outside directors meeting the requirements of Section
162(m) to approve the grant of Options which might reasonably be
anticipated to result in the payment of employee remuneration that
would otherwise exceed the limit on employee remuneration deductible
for income tax purposes pursuant to Section 162(m).
(c) Powers of the Administrator. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties delegated by
the Board to such Committee, and subject to the approval of any
relevant authorities, the Administrator shall have the authority in
its discretion:
(i) to determine the Fair Market Value;
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<PAGE> 5
(ii) to select Employees, Directors and/or Consultants to whom
Options may from time to time be granted hereunder;
(iii) to determine the terms and conditions of any Option
granted hereunder. Such terms and conditions include, without
limitation, the exercise price, the time when Options may be exercised,
any vesting acceleration or waiver of forfeiture restrictions, and any
restriction or limitation regarding any Option or the Common Stock
relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;
(iv) to determine the number of shares of Common Stock to be
covered by each such Option granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Option granted hereunder;
(vii) to determine whether and under what circumstances an
Option may be settled in cash under Section 9(e) instead of Common
Stock;
(viii) in order to fulfill the purposes of the Plan and without
amending the Plan, to modify grants of Options to participants who are
foreign nationals or employed outside of the United States in order to
recognize differences in local law, tax policies customs;
(ix) to allow Optionees to satisfy withholding tax obligations
as contemplated by Section 10 hereof;
(x) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan and to establish, amend and revoke rules
and regulations for the administration of the Plan, including, but
without limitation, correcting any defect or supplying any omission,
or reconciling any inconsistency in the Plan or in any Agreement, in
the manner and to the extent it shall deem necessary or advisable to
make the Plan fully effective;
(xi) to determine the duration and purposes for leaves of
absence which may be granted to an Optionee on an individual basis
without constituting a termination of employment or service for
purposes of the Plan;
(xii) to exercise its discretion with respect to the powers and
rights granted to it as set forth in the Plan; and
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<PAGE> 6
(xiii) generally, to exercise such powers and to perform such
acts as are deemed necessary or advisable to promote the best
interests of the Company with respect to the Plan.
(d) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final, binding
and conclusive upon the Company and its Affiliates, the Optionees and all other
persons having any interest therein.
(e) Indemnification. The Administrator shall not be liable for any
action, failure to act, determination or interpretation made in good faith with
respect to this Plan or any transaction hereunder, except for liability arising
from his or her own willful misfeasance, gross negligence or reckless disregard
of his or her duties. The Company hereby agrees to indemnity the Administrator
for all costs and expenses and, to the extent permitted by applicable law, any
liability incurred in connection with defending against, responding to,
negotiation for the settlement of or otherwise dealing with any claim, cause of
action or dispute of any kind arising in connection with any actions in
administering this Plan or in authorizing or denying authorization to any
transaction hereunder.
5. Eligibility.
(a) Nonqualified Stock Options may be granted to Employees,
Directors or Consultants. Incentive Stock Options may be granted only to
Employees.
(b) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonqualified Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Affiliate) exceeds $100,000, such Options
shall be treated as Nonqualified Stock Options. For purposes of this Section
5(b), Incentive Stock Options shall be taken into account in the order in which
they were granted. The Fair Market Value of the Shares shall be determined as
of the time the Option with respect to such Shares is granted.
(c) The aggregate number of Options that may be granted to any
Optionee under the Plan shall not exceed fifty percent (50%) of the aggregate
number of Shares referred to in Section 3 hereof.
(d) Neither the Plan nor any Option shall not confer upon any
Optionee any right with respect to continuing the Optionee's relationship as an
Employee, Director or Consultant with the Company, nor shall it interfere in
any way with his or her right or the Company's right to terminate such
relationship at any time, with or without cause.
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<PAGE> 7
6. Term of Plan. The Plan shall become effective upon its adoption by
the Board. It shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 14 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than
ten (10) years from the date it is granted (five (5) years in the case of an
Incentive Stock Option granted to a Ten-Percent Stockholder), or such shorter
term as the Administrator may, subsequent to the granting of any Option,
provide.
8. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be such price as is
determined by the Administrator, but shall be subject to the
following:
(i) In the case of an Incentive Stock Option
(aa) granted to an Employee who is a Ten-Percent
Stockholder, the exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
(bb) granted to any other Employee, the per Share
exercise price shall be no less than 100% of the Fair Market
Value per Share on the date of grant.
(ii) In the case of a Nonqualified Stock Option granted to an
Employee, Director or Consultant, the per Share exercise price
shall be no less than [85%] of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted
with a per Share exercise price other than as required above
pursuant to a merger or other corporate transaction.
(b) Payment of Option Price. The consideration to be paid for the
Shares to be issued upon exercise of an Option, including the method
of payment, shall be determined by the Administrator (and in the case
of an ISO, shall be determined at the time of grant). Such
consideration may consist of: (i) cash, by check, or cash equivalent,
(ii) promissory note, (iii) by tender to the Company of other Shares
owned by the Optionee which (A) in the case of Shares acquired upon
exercise of an Option have been owned by the Optionee for more than
six months on the date of surrender, and (B) have a Fair Market Value,
as determined by the Administrator (but without regard to any
restrictions on transferability applicable to such stock by reason of
federal or state securities laws or agreements with an underwriter for
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<PAGE> 8
the Company), of not less than the option price of the Shares as to
which such Option shall be exercised (provided such tender of stock
would not constitute a violation of the provisions of any law,
regulation and/or agreement restricting the redemption of the Common
Stock), (iv) consideration received by the Company under a cashless
exercise program, (v) authorization for the Company to retain from the
total number of Shares as to which the Option is exercised that number
of Shares having a Fair Market Value on the date of exercise equal to
the exercise price for the total number of Shares as to which the
Option is exercised, or (vi) such other consideration and method of
payment for the issuance of Shares that may be permitted under
Applicable Laws.
The Administrator shall have the authority to permit or require
the Optionee to secure any promissory note used to exercise an Option
with the Shares acquired on exercise of the Option and/or with other
collateral acceptable to the Company. In making its determination as
to the type of consideration to accept, the Administrator shall
consider if acceptance of such consideration may be reasonably
expected to benefit the Company. The Administrator may at any time or
from time to time grant Options which do not permit all of the
foregoing forms of consideration to be used in payment of the option
price and/or which otherwise restrict one or more forms of
consideration.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator, including performance
criteria with respect to the Company and/or the Optionee, and as shall
be permissible under the terms of the Plan. An Option may not be
exercised for a fraction of a Share.
An Option shall be deemed to be exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance
with the Option Agreement) from the person entitled to exercise the
Option and (ii) full payment for the Shares with respect to which the
Option is exercised. Full payment may, as authorized by the
Administrator, consist of any consideration and method of payment
authorized by the Administrator and permitted by the Option Agreement
and the Plan. Shares issued upon exercise of an Option shall be issued
in the name of the Optionee or, if requested by the Optionee, in the
name of the Optionee and his or her spouse. Until the Shares are
issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no
right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue
(or cause to be issued) such stock certificate promptly upon exercise
of the Option. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 11 of the Plan.
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<PAGE> 9
Exercise of an Option in any manner shall result in a decrease
in the number of Shares thereafter available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to
which the Option is exercised.
(b) Termination of Relationship as Employee, Director or
Consultant. If an Optionee ceases to be an Employee, Director or
Consultant, as the case may be, such Optionee may exercise his or her
Option within such period of time as is specified in the Option
Agreement to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of
the Option as set forth in the Option Agreement). In the absence of a
specified time in the Option Agreement, the Option shall remain
exercisable for three (3) months following the Optionee's termination.
If, on the date of termination, the Optionee is not vested as to his
or her entire Option, the Shares covered by the unvested portion of
the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified
by the Administrator, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan. No termination shall
be deemed to occur if (i) the Optionee is a Consultant or Director who
becomes an Employee within the time specified herein; or (ii) the
Optionee is an Employee who becomes a Consultant or Director who is
not also an employee, within the time specified herein.
(c) Disability of Optionee. If an Optionee ceases to be an
Employee, Director or Consultant as a result of Optionee's Disability,
the Optionee may within six (6) months from the date of such
termination (but in no event later than the expiration date of the
term of such Option as set forth in the Option Agreement), exercise an
Option to the extent otherwise entitled to exercise it at the date of
such termination. To the extent that Optionee is not entitled to
exercise the Option on the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate, and the Shares covered
by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while an Employee,
Director or Consultant, the Option may be exercised at any time within
six (6) months following the date of death (but in no event later than
the expiration date of the term of such Option as set forth in the
Option Agreement), to the extent the Optionee was vested on the date
of death. If, at the time of death, Optionee is not vested as to the
entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. The Option may be exercised by the
executor or administrator of the Optionee's estate or, if none, by the
person(s) entitled to exercise the Option under the Optionee's will or
under the laws of descent and distribution. If the Option is not so
exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the
Plan.
(e) Buyout Provisions. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option previously
granted, based on such terms and conditions as the Administrator shall
establish and communicate to the Optionee at the time that such offer
is made.
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<PAGE> 10
10. Withholding to Satisfy Tax Obligations.
(a) Permitted Methods. At the discretion of the Administrator,
Optionees may satisfy withholding obligations as provided in this
Section 10. When an Optionee incurs tax liability in connection with
an Option, which tax liability is subject to tax withholding under
applicable tax laws, and the Optionee is obligated to pay the Company
an amount required to be withheld under applicable tax laws, the
Optionee may satisfy the withholding tax obligation by one or some
combination of the following methods: (i) by cash payment; (ii) out of
Optionee's current compensation; (iii) if permitted by the
Administrator, in its discretion, by surrendering to the Company
Shares that (A) in the case of Shares previously acquired from the
Company, have been owned by the Optionee for more than six months on
the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to or less than Optionee's marginal tax rate times the
ordinary income recognized; or (iv) by electing to have the Company
withhold from the Shares to be issued upon exercise of the Option, if
any, that number of Shares having a Fair Market Value equal to the
amount of withholding due. The Fair Market Value of the Shares to be
withheld shall be determined on the date that the amount of tax to be
withheld is to be determined.
(b) Procedures for Stock Withholding. All elections by an Optionee
to have Shares withheld to satisfy tax withholding obligations shall
be made in writing in a form acceptable to the Administrator and shall
be subject to the following restrictions: (i) the election must be
made on or prior to the applicable tax withholding date; (ii) once
made, the election shall be irrevocable as to the particular Shares of
the Option as to which the election is made; (iii) all elections shall
be subject to the consent or disapproval of the Administrator; (iv) if
the Optionee is an Officer, Director or greater than Ten-Percent
Stockholder within the meaning of Rule 16a-2 under the Exchange Act
("Reporting Person"), the election must comply with the applicable
provisions of Rule 16b-3 and shall be subject to such additional
conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
11. Adjustments upon Changes in Capitalization, Merger or Certain
Other Transactions.
(a) Changes in Capitalization. Subject to any required action
by the shareholders of the Company, the number and class of shares of
Common Stock with respect to which Options may be granted under the
Plan, the number and class of Shares of Common Stock which are subject
to outstanding Options granted under the Plan, and the purchase price
per Share of Common Stock , if applicable, shall be proportionately
adjusted for any increase or decrease in the number of issued Shares
of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock,
or any other increase or decrease in the number of issued Shares of
Common Stock effected without receipt of consideration by the Company.
The conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration."
Any such adjustment in the Shares subject to outstanding Incentive
Stock
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<PAGE> 11
Options (including any adjustments in the purchase price) shall be
made in such manner as not to constitute a modification as defined by
Section 424(h)(3) of the Code and only to the extent otherwise
permitted by Sections 422 and 424 of the Code. Adjustments shall be
made by the Administrator, whose determination in that respect shall
be final, binding and conclusive. If, by reason of a change in
Capitalization, an Optionee shall be entitled to exercise an Option
with respect to new, additional or different shares of stock, such
new, additional or different shares shall thereupon be subject to all
of the conditions which were applicable to the Shares subject to the
Option, as the case may be, prior to such Change in Capitalization.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall
notify each Optionee as soon as practicable prior to the effective
date of such proposed action. The Administrator in its discretion may
provide for an Optionee to have the right to exercise his or her
Option until fifteen (15) days prior to such transaction as to all of
the Optioned Stock covered thereby, including Shares as to which the
Option would not otherwise be exercisable. To the extent it has not
been previously exercised, an Option will terminate immediately prior
to the consummation of such proposed action.
(c) Merger or Sale of Assets. If the Company is to be consolidated
with or acquired by another entity in a merger or other reorganization
in which the holders of the outstanding voting stock of the Company
immediately preceding the consummation of such event, shall,
immediately following such event, hold, as a group, less than a
majority of the voting securities of the surviving or successor
entity, or in the event of a sale of all or substantially all of the
Company's assets or otherwise (each, a "Change-of-Control"), then all
outstanding Options, whether or not then vested or exercisable, shall
be deemed to be vested and exercisable immediately prior to the
Change-of-Control.
(d) Certain Distributions. In the event of any distribution to the
Company's shareholders of securities of any other entity or other
assets (other than dividends payable in cash or stock of the Company)
without receipt of consideration by the Company, the Administrator
may, in its discretion, appropriately adjust the price per share of
Common Stock covered by each outstanding Option to reflect the effect
of such distribution.
12. Non-Transferability of Options. Except as otherwise provided in
this Section, Options may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised or purchased during the lifetime
of the Optionee, only by the Optionee. Notwithstanding the foregoing, the
Administrator may, in its discretion, authorize all or a portion of the Options
to be granted to an Optionee to be transferred by such Optionee to (i) the
spouse, children or grandchildren of such Optionee ("Immediate Family
Members"), (ii) a trust of trusts for the benefit of an Immediate Family
Member, or (iii) a partnership in which Immediate Family Members are the only
partners, provided, that (x) there is no consideration for such transfer, (y)
the Option Agreement expressly provides for
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<PAGE> 12
the transfer of the Options in accordance with this Section, and (z) subsequent
transfers of such Options are prohibited except by or in accordance with the
laws of descent or distribution.
13. Time of Granting Options. The date of grant of an Option shall,
for all purposes, be the date on which the Administrator makes the
determination granting such Option, or such other date as is determined by the
Administrator. Notice of the determination shall be given to each Employee,
Director or Consultant to whom an Option is so granted within a reasonable time
after the date of such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board or the Administrator may
at any time amend, alter, suspend or terminate the Plan.
(b) Shareholder Approval. To the extent necessary and desirable to
comply with Applicable Laws, the Company shall obtain shareholder
approval of any Plan amendment in such a manner and to such a degree
as required.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and
the Administrator, which agreement must be in writing and signed by
the Optionee and the Company. Termination of the Plan shall not affect
the Administrator's ability to exercise the powers granted to it
hereunder with respect to Options granted under the Plan prior to the
date of such termination.
15. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply
with all relevant provisions of law, including, without limitation,
the Securities Act of 1933, as amended, the Exchange Act, the rules
and regulations promulgated thereunder, and the requirements of any
Stock Exchange.
(b) Investment Representations. As a condition to the exercise of
an Option, the Administrator may require the person exercising such
Option to represent and warrant to the Company in writing at the time
of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute
such Shares, and will not be sold or transferred other than pursuant
to an effective registration thereof under the Exchange Act or
pursuant to an exemption applicable under the Securities Act of 1933,
as amended, or the rules and regulations promulgated thereunder. The
certificates evidencing any such Shares shall be appropriately
legended to reflect their status as restricted securities.
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<PAGE> 13
16. Regulations and Other Approvals; Governing Law.
(a) This Plan and the rights of all persons claiming hereunder
shall be construed and determined in accordance with the laws of the
State of Illinois.
(b) The obligation of the Company to sell or deliver Shares with
respect to Options granted under the Plan shall be subject to all
Applicable Laws, and the obtaining of all such approvals by
governmental agencies as may be deemed necessary or appropriate by the
Administrator.
(c) The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the
Company's counsel to be necessary to the lawful issuance and sale of
any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such
requisite authority shall not have been obtained.
(d) The Plan is intended to comply with Rule 16b-3 promulgated
under the Exchange Act and the Administrator shall interpret and
administer the provisions of the Plan or any Agreement in a manner
consistent therewith. Any provisions inconsistent with such Rule shall
be inoperative and shall not affect the validity of the Plan.
(e) The Administrator may make such changes as may be necessary or
appropriate to comply with the rules and regulations of any government
authority, or to obtain for Employees granted Incentive Stock Options
the tax benefits under the applicable provisions of the Code and
regulations promulgated thereunder.
17. Reservation of Shares. The Company, during the term of this Plan,
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. Agreements. Options shall be evidenced by written agreements in
such form as the Administrator shall approve from time to time.
19. Shareholder Approval. The Plan, as amended and restated, shall be
subject to approval by the shareholders of the Company within twelve (12)
months after the date the Plan is so amended and restated. Such shareholder
approval shall be obtained in the degree and manner required under Applicable
Law. All Options issued under the Plan shall become void in the event such
approval is not obtained.
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<PAGE> 1
EXHIBIT 10.2
FORM OF
QUOTESMITH.COM, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose.
The purpose of this Plan is to provide Employees of the Company and its
subsidiaries with an opportunity to acquire a proprietary interest in the
Company through the purchase of shares of Common Stock of the Company and
thereby provide Employees with an additional incentive to contribute to the
prosperity of the Company. It is the intention of the Company that the Plan
qualify as an "Employee Stock Purchase Plan" under Section 423 of the Code. The
provisions of the Plan shall, accordingly, be construed so as to extend and
limit participation in a manner consistent with the requirements of Section 423
of the Code.
2. Definitions.
"Administrator" means the Board of Directors of the Company and/or
Committee appointed by the Board.
"Affiliate" shall mean a parent or subsidiary corporation as defined in
the applicable provisions (currently Section 424(e) and (f),
respectively) of the Code.
"Applicable Laws" means the requirements relating to the administration
of stock purchase plans under U.S. state corporate laws, U.S. federal
and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable
laws of any other country or jurisdiction where Shares are issued under
the Plan.
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the Committee appointed by the Board to
administer the Plan.
"Common Stock" shall mean the Common Stock of the Company.
"Company" shall mean Quotesmith.com, Inc., a Delaware corporation.
"Employee" shall mean any individual who is an employee of the Company,
or of any Affiliate designated by the Administrator as eligible to
participate in the Plan, for purposes of tax withholding under the Code
whose customary employment with the Company is at least twenty (20)
hours per week and more than five (5) months in any calendar year. For
purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave
of absence approved
<PAGE> 2
by the Company or Affiliate. Where the period of leave exceeds ninety
(90) days and the individual's right to reemployment is not guaranteed
by statute or by contract, the employment relationship will be deemed
to have terminated on the ninety first (91) day of such leave.
"Five-Percent Stockholder" shall mean an Employee who owns (or is
deemed to own pursuant to Section 424(d) of the Code, or would own upon
the exercise of any option extended hereunder or any other option,
whether qualified or nonqualified, held by such employee) shares of
capital stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company,
or any subsidiary of the Company.
"Offering Date" shall mean the first business day of each Purchase
Period.
"Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
(i) if the Common Stock is listed on any established stock
exchange or a national market system, including without
limitation the National Market or SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if
no sales were reported) as quoted on such exchange or
system for the last market trading day prior to the time
of determination, as reported in The Wall Street Journal
or such other source as the Administrator deems reliable;
(ii) if the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its
Fair Market Value shall be the mean between the high bid
and low asked prices for the Common Stock on the last
market trading day prior to the day of determination; or
(iii) in the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined
in good faith by the Administrator.
"Participant" shall mean an Employee who is a participant in the Plan.
"Pay" shall mean an Employee's total compensation paid by the Company,
exclusive of any payment in cash or kind under any stock option plan,
deferred compensation plan, or other employee benefit plan or program
of the Company.
"Plan" shall mean this Quotesmith.com, Inc. 1999 Employee Stock
Purchase Plan.
"Plan Year" shall mean a calendar year.
"Purchase Date" shall mean the last business day of each Purchase
Period.
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<PAGE> 3
"Purchase Period" shall mean a six-month period that commences on the
Offering Date and ends on the Purchase Date. The initial period shall
commence on the date the Company's Registration Statement respecting
its public offering is declared effective by the Securities and
Exchange Commission and ending on December 31, 1999, and subsequent
six-month periods thereafter commencing on January 1, 2000, during
which options granted pursuant to the Plan may be exercised.
"Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 8 of the Plan.
"Shareholder" shall mean a record holder of shares entitled to vote
shares of Common Stock.
"Subsidiary" shall mean a subsidiary corporation of the Company within
the meaning of Section 424(f) of the Code, whether now or hereafter
existing.
3. Administration.
The Board shall appoint an Administrator who will serve for such period
of time as the Board may specify and who may be removed by the Board at any
time. The Administrator will have the authority and responsibility for the
day-to-day administration of the Plan, the authority and responsibility
specifically provided in this Plan and any additional duties, responsibility and
authority delegated by the Board. The Administrator may delegate to one or more
individuals the day-to-day administration of the Plan. The Administrator shall
have full power and authority to promulgate any rules and regulations which it
deems necessary for the proper administration of the Plan, to interpret the
provisions and supervise the administration of the Plan, to make factual
determinations relevant to Plan entitlements, and to take all action in
connection with administration of the Plan as it deems necessary or advisable,
consistent with the delegation from the Board, provided, however, the
administration of the Plan shall be consistent with Rule 16b-3 ("Rule 16b-3")
under the Securities Exchange Act of 1934, The administration, interpretation or
application of the Plan by the Administrator shall be final and binding upon all
Participants. The Company shall pay all expenses incurred in the administration
of the Plan. No Board or Committee member shall be liable for any action or
determination made in good faith with respect to the Plan or any option granted
thereunder.
4. Eligibility.
Any Employee employed by either the Company, or by any Affiliate
designated by the Administrator as eligible to participate in the Plan, on a
given Offering Date shall be eligible to participate in the Plan with respect to
the Purchase Period commencing on such Offering Date. Any provisions of the Plan
to the contrary notwithstanding, no Employee shall be granted an option under
the Plan (i) if such Employee is a Five Percent Stockholder, or (ii) if an
Employee who receives Pay paid by the Company or by an Affiliate equal to more
than $125,000 for any calendar year and who is a "highly compensated employee"
within the meaning of Section 414(q) of the Code.
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<PAGE> 4
5. Participation and Withdrawal.
(a) Payroll Deduction Authorization and Plan Enrollment. An eligible
Employee may become a Participant by completing and filing, on a
date prescribed by the Administrator prior to an applicable
Offering Date, a payroll deduction authorization and Plan
enrollment form provided by the Company. Once properly made, an
eligible Employee's election to participate shall be
automatically renewed for each subsequent Offering Period,
subject to any termination or withdrawal as provided in Section
5(c). Payroll deductions for a Participant shall commence on the
first payroll following the Offering Date and shall end on the
last payroll in Purchase Period to which such authorization is
applicable, unless sooner terminated by the Participant as
provided in Section 5(c). An eligible Employee may authorize
payroll deductions at the rate of any whole percentage of the
Employee's Pay, in an amount not exceeding ten percent (10%) of
Pay received by Employee on each payday during the Purchase
Period, and the aggregate of such payroll deductions during the
Purchase Period shall not exceed ten percent (10%) of the
Employee's Pay during the Purchase Period. All payroll
deductions made for a Participant shall be credited to his
account under the Plan and will be withheld in whole percentages
only. A Participant may not make any additional payments into
such account.
(b) Modification of Payroll Deduction. A Participant may decrease
his or her rate of payroll deductions at any time in accordance
with procedures prescribed by the Administrator. A Participant
may increase his or her rate of payroll deductions only
effective on the first payroll date following the next Purchase
Date by filing a new payroll deduction authorization and Plan
enrollment form.
(c) Discontinuance of Participation. A Participant may discontinue
participation in the Plan at any time during a Purchase Period
by completing and filing a new payroll deduction authorization
and Plan enrollment form with the Company.
If a Participant discontinues participation during a Purchase
Period, his or her accumulated payroll deductions will remain in
the Plan for purchase of shares as specified in Section 7 on the
following Purchase Date, but the Participant will not again
participate until he or she re-enrolls in the Plan.
Alternatively, participants may request a cash distribution of
monies accumulated but not yet distributed by following
procedures specified by the Administrator. The Administrator may
(1) establish rules limiting the frequency with which
Participants may discontinue and resume payroll deductions under
the Plan and may impose a waiting period on Participants wishing
to resume payroll deductions following discontinuance, and (2)
change the rules regarding discontinuance of participation or
changes in participation in the Plan.
In the event any Participant terminates employment with the
Company for any reason (including death) prior to the expiration
of a Purchase Period, the Participant's participation in the
Plan shall terminate and all accumulated payroll
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<PAGE> 5
deductions credited to the Participant's account shall be paid
to the Participant or the Participant's estate without interest
(except where required by local law).
(d) Failure to Follow Procedures. If a Participant has not followed
procedures prescribed by the Administrator to change the rate of
payroll deductions or to discontinue the payroll deductions, the
rate of payroll deductions shall continue at the originally
elected rate throughout the Purchase Period and future Purchase
Periods (or any lower maximum rate then in effect).
(e) Tax Withholding. At the time the option is exercised, or at the
time the Company's Common Stock issued under the Plan is
disposed of, the Participant must make adequate provision for
the Company's federal, state, or other tax withholding
obligations, if any, which arise upon the exercise of the option
or the disposition of the Common Stock. At any time, the Company
may, but will not be obligated to, withhold from the
Participant's Pay the amount necessary for the Company to meet
applicable withholding obligations, including any withholding
required to make available to the Company any tax deductions or
benefits attributable to sale or early disposition of Common
Stock by the Employee.
6. Offering.
(a) Maximum Number of Shares. The maximum number of Shares that may
be sold under the Plan is Two Hundred Fifty Thousand (250,000),
subject to adjustment upon changes in capitalization of the
Company as provided in Section 9. Shares sold under the Plan may
be either authorized and unissued Shares or issued Shares
heretofore or hereafter acquired and held as treasury Shares, as
the Administrator may from time to time determine. If on a given
Purchase Date the number of shares with respect to which options
are to be exercised exceeds the number of shares then available
under the Plan, the Company shall make a pro rata allocation of
the shares remaining available for purchase in as uniform a
manner as shall be practicable and as it shall determine to be
equitable.
(b) Purchase Periods. The Plan will operate with successive
semi-annual Purchase Periods after the initial Purchase Period
with a new Purchase Period commencing on the first business day
of July and January of each year, or on such other date as the
Administrator shall determine, and continuing thereafter until
terminated in accordance with Sections 12 or 13 hereof. The
Administrator shall have the power to change the duration of the
Purchase Periods with respect to future offerings without
shareholder approval if such change is announced at least
fifteen (15) days prior to the scheduled beginning of the first
Purchase Period to be affected.
(c) Option to Purchase. With respect to each Purchase Period, each
eligible Employee who has elected to participate as provided in
Section 5(a) shall be granted an option to purchase the number
of shares of Common Stock which may be purchased with the
payroll deductions accumulated in an account maintained on
behalf of such Employee during each Purchase Period at the
purchase price specified in
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<PAGE> 6
subparagraph (d) below, subject to the limitation contained in
this subparagraph (c). No Participant shall have the right to
purchase more than an aggregate of $25,000 of Shares under the
Plan and any other employee stock purchase plan of the Company
described in Section 423 of the Code, in any calendar year,
based upon the Fair Market Value per Share of such Common Stock
(determined at the time such option is granted). The foregoing
sentence shall be interpreted so as to comply with Code Section
423(b)(8).
(d) Option Price. The option price under each option shall be the
lower of: (i) a percentage (not less than eighty-five percent
(85%)) established by the Administrator ("Designated
Percentage") of the Fair Market Value of the Common Stock on the
Offering Date on which an option is granted, or (ii) the
Designated Percentage of the Fair Market Value of the Common
Stock on the Purchase Date. The Administrator may change the
Designated Percentage with respect to any future Purchase
Period, but not below eighty-five percent (85%), and the
Administrator may determine with respect to any prospective
Purchase Period that the option price shall be the Designated
Percentage of the Fair Market Value of the Common Stock on the
Purchase Date.
7. Purchase of Stock.
Upon the expiration of each Purchase Period, a Participant's option
shall be exercised automatically for the purchase of that number of full and
fractional shares of Common Stock which the accumulated payroll deductions
credited to the Participant's account at that time shall purchase at the
applicable price specified in Section 6(d), subject to Section 6(c).
8. Payment and Delivery.
Upon the exercise of an option on each Purchase Date, the Company or
Affiliate shall deliver to the Participant a record of the Common Stock
purchased, except as specified below. Shares to be delivered to a Participant
under the Plan will be registered in the name of the Participant or, if the
Participant so directs by written notice to the Administrator prior to the
Purchase Date, in the names of the Participant and one such other person as may
be designated by the Participant, as joint tenants with rights of survivorship,
to the extent permitted by the Applicable Laws. The Administrator may permit or
require that shares be deposited directly with a broker designated by the
Administrator (or a broker selected by the Administrator) or to a designated
agent of the Company, and the Administrator may utilize electronic or automated
methods of share transfer. The Administrator may require that shares be retained
with such broker or agent for a designated period of time (and may restrict
dispositions during that period) and/or may establish other procedures to permit
tracking of disqualifying dispositions of such shares or to restrict transfer of
such shares. The Administrator may require that shares purchased under the Plan
shall automatically participate in a dividend reinvestment plan or program
maintained by the Company. The Company shall retain the amount of payroll
deductions used to purchase Common Stock as full payment for the Common Stock
and the Common Stock shall then be fully paid and non-assessable. No Participant
shall have any voting, dividend, or other shareholder rights with respect to
shares subject to any option granted under the Plan until the
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<PAGE> 7
shares subject to the option have been purchased and delivered to the
Participant as provided in Section 8.
9. Recapitalization.
(a) If after the grant of an option, but prior to the purchase of
Common Stock under the option, there is any increase or decrease
in the number of outstanding shares of Common Stock because of a
stock split, stock dividend, combination or recapitalization of
shares subject to options, the number of shares to be purchased
pursuant to an option, the share limit of Section 6(c) and the
maximum number of shares specified in Section 6(a) shall be
proportionately increased or decreased, the terms relating to
the purchase price with respect to the option shall be
appropriately adjusted by the Administrator, and the
Administrator shall take any further actions which, in the
exercise of its discretion, may be necessary or appropriate
under the circumstances.
(b) The Administrator, if it so determines in the exercise of its
sole discretion, also may adjust the number of shares specified
in Section 6(a), as well as the price per share of Common Stock
covered by each outstanding option and the maximum number of
shares subject to any individual option, in the event the
Company effects one or more reorganizations, recapitalizations,
spin-offs, split-ups, rights offerings or reductions of shares
of its outstanding Common Stock.
(c) The Administrator's determinations under this Section 9 shall be
conclusive and binding on all parties.
10. Merger, Liquidation, Other Corporation Transactions.
(a) In the event of the proposed liquidation or dissolution of the
Company, the Purchase Period then in progress will terminate
immediately prior to the consummation of such proposed
liquidation or dissolution, unless otherwise provided by the
Administrator in its sole discretion, and all outstanding
options shall automatically terminate and the amounts of all
payroll deductions will be refunded without interest to the
Participants.
(b) In the event of a proposed sale of all or substantially all of
the assets of the Company, or the merger or consolidation of the
Company with or into another corporation, then in the sole
discretion of the Administrator, (1) each option shall be
assumed or an equivalent option shall be substituted by the
successor corporation or parent or subsidiary of such successor
corporation, (2) a date established by the Administrator on or
before the date of consummation of such merger, consolidation or
sale shall be treated as an Exercise Date, and all outstanding
options shall be deemed exercisable on such date or (3) all
outstanding options shall terminate and the accumulated payroll
deductions shall be returned to the Participants, without
interest.
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<PAGE> 8
11. Transferability.
Neither payroll deductions credited to a Participant's account nor any
rights with regard to the exercise of an option or to receive Shares under the
Plan may be voluntarily or involuntarily assigned, transferred, pledged, or
otherwise disposed of in any way other than by will or the laws of descent and
distribution or by a "qualified domestic relations order" under the Code, and
any other attempted assignment, transfer, pledge, or other disposition shall be
null and void and without effect. If a Participant in any manner attempts to
transfer, assign or otherwise encumber his or her rights or interest under the
Plan, other than as permitted by the Code, such act shall be treated as an
election by the Participant to discontinue participation in the Plan pursuant to
Section 5(c). Any option granted to a Participant under the Plan may be
exercised only by the Participant during his or her lifetime.
12. Term of Plan.
The Plan shall continue for a ten year term measured from its Effective
Date, unless previously terminated in accordance with Section 13.
13. Amendment or Termination of the Plan.
The Administrator may, in its sole discretion, insofar as permitted by
law, terminate or suspend the Plan or revise or amend it in any respect
whatsoever. No such termination shall affect options previously granted and
exercised, nor shall any amendment make any change in any option theretofore
granted which would adversely affect the rights of any Participant. No revision
or amendment shall be made without prior approval of the shareholders if such
amendment would:
(a) materially increase the number of shares subject to the Plan,
other than an adjustment under Section 9 of the Plan;
(b) materially modify the requirements as to eligibility for
participation in the Plan, except as otherwise specified in this
Plan;
(c) reduce the purchase price specified in Section 6(d), except as
specified in Section 9; or
(d) extend the term of the Plan beyond the date specified in Section
12.
14. Use of Funds.
All payroll deductions received or held by the Company or Affiliate
under the Plan may be used by the Company or by the Affiliate for any corporate
purpose, and may be commingled with its other corporate funds. No interest shall
be paid or credited to the Participant with respect
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<PAGE> 9
to such payroll deductions except where required by local law as determined by
the Administrator.
15. Local Law.
The Administrator may adopt rules or procedures relating to the
operation and administration of the Plan to accommodate the specific
requirements of local laws and procedures. Without limiting the generality of
the foregoing, the Administrator is specifically authorized to adopt rules and
procedures regarding handling of payroll deductions, payment of interest,
payroll tax, withholding procedures and handling of stock certificates which
vary with local requirements.
16. Securities Laws Compliance.
The Company shall not be under any obligation to issue Common Stock
upon the exercise of any option unless and until the Company has determined
that: (i) it and the Participant have taken all actions required to register the
Common Stock under the Securities Act of 1933, or to perfect an exemption from
the registration requirements thereof; (ii) any applicable listing requirement
of any stock exchange on which the Common Stock is listed has been satisfied;
and (iii) all other applicable provisions of state and federal law have been
satisfied.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such shares if such a
representation is required by Applicable Law.
17. Notices.
All notices or other communications by a Participant to the Company or
Affiliate under or in connection with the Plan shall be deemed to have been
given when received by the Administrator or when received in the form specified
by the Administrator at the location, or by the person, designated by the
Administrator for the receipt thereof.
18. No Enlargement of Employee Rights.
Nothing contained in this Plan shall be deemed to give any Employee the
right to be retained in the employ of the Company or of the Affiliate or to
interfere with the right of the Company or Affiliate to discharge any Employee
at any time.
19. Regulations and Other Approvals; Governing Law.
(a) This Plan and the rights of all persons claiming hereunder shall
be construed and determined in accordance with the laws of the
State of Illinois.
(b) This Plan and the Company's obligation to sell and deliver
Shares under the Plan shall be subject to all Applicable Laws,
and the obtaining of such approvals by
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<PAGE> 10
governmental agencies required in connection with the Plan or
the authorization, issuance, sale, or delivery of stock
hereunder.
20. Notice of Disqualifying Disposition.
The Administrator may require, as a condition of participation in the
Plan, that a Participant agree to promptly notify the Company of any disposition
of Shares acquired pursuant to an option granted under the Plan within two years
of the grant date of the applicable option or within one year of the transfer of
the Shares to him or her (a "disqualifying disposition"), and the number of
Shares disposed of.
21. Effective Date; Shareholder Approval.
This Plan shall become effective upon the effective date of the S-1
registration statement filed by the Company pursuant to an initial public
offering of its Shares, subject to approval by the shareholders of the Company
within twelve (12) months after the date the Plan is adopted by the Board of
Directors ("Effective Date"). Such shareholder approval shall be obtained in the
degree and manner required under Applicable Law. All Shares issued under the
Plan shall become void in the event such approval is not obtained. No options
shall be granted under the Plan prior to such effective date.
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<PAGE> 1
EXHIBIT 10.3
FORM OF
EMPLOYMENT AGREEMENT
Quotesmith.com, Inc., a Delaware corporation (the "Company") and Robert
S. Bland ("Executive") enter into this Employment Agreement as of ______________
____, 1999 (the "Agreement"), effective as of the Effective Date.
WHEREAS, Company is planning an initial public offering of its stock,
and has begun to take the necessary steps in furtherance of this course of
action;
WHEREAS, as a condition to taking the Company public, the parties have
agreed to enter into a new Employment Agreement;
WHEREAS, the Company desires to employ Executive upon the terms and
subject to the conditions of this Agreement; and
WHEREAS, Executive desires to be employed by the Company upon the terms
and subject to the conditions of this Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth below, and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and Executive hereby
covenant and agree as follows:
1. Definitions. For purposes of this Agreement, the following
capitalized terms shall have the following meanings, and all other capitalized
terms used in this Agreement but not defined in this paragraph 1 shall have the
meanings assigned elsewhere in this Agreement:
"Base Salary" means $250,000.
"Cause" means:
(i) Executive's conviction of (or plea of no contest or
similar plea to) a felony;
(ii) Executive's intentional continuing refusal to
substantially perform his obligations and duties under this
Agreement (except by reason of incapacity due to illness or
accident) if he (a) shall have failed to remedy the alleged
breach caused by such conduct within 30 days from the date
written notice is given by the Company demanding that he
remedy the alleged breach caused by such conduct, or (b) shall
have failed to take reasonable steps in good faith to that end
during such 30-day period, provided that after the end of such
30-day period there shall have been delivered to Executive a
certified copy of a resolution of the
<PAGE> 2
Board of Directors of the Company, taken at a meeting of the
Board of Directors at which Executive, together with his
counsel, is given the opportunity to be heard, finding that
Executive was guilty of an intentional continuing refusal to
substantially perform his obligations and duties under this
Agreement and specifying the details thereof, and that
Executive has failed to take reasonable steps in good faith to
remedy the alleged breach caused by such conduct,
(iii) Executive engaged in willful fraud or defalcation,
either of which involved funds or other assets of the Company;
or
(iv) upon Executive's breach of any material term of this
Agreement (including, but not limited to, the noncompete and
confidentiality provisions in paragraphs 7 and 8).
"Change in Control" means and shall be deemed to occur:
(i) in the event any "person" (as such term is used in
paragraphs 13(d) and 14(d) of the Exchange Act) (other than
Robert S. Bland and his affiliates) or more than one such
person acting as a group, other than a trustee or other
fiduciary holding securities under an employee benefit plan of
the Company, is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly,
of the securities of the Company, in a transaction or a series
of transactions, representing thirty percent (30%) or more of
the combined voting power of the Company's then outstanding
securities ordinarily having the right to vote for the
election of directors of the Company;
(ii) during any period of two consecutive years during the
Employment Period, individuals who at the beginning of the
Employment Period constitute the Board of Directors of the
Company cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election
by the Company's stockholders, of each director who was not a
director at the beginning of the Employment Period has been
approved in advance by directors representing at least
two-thirds of the directors then in office who were (A)
directors at the beginning of the Employment Period, or (B)
previously approved in accordance with this subparagraph (ii);
(iii) the Company sells or otherwise disposes of all or
substantially all of its assets; and
(iv) the Company participates in a merger or consolidation
and, immediately following the consummation of such merger or
consolidation, the Company's stockholders prior to such merger
or consolidation do not own 50% or more of the voting shares
of stock of the surviving or successor corporation.
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<PAGE> 3
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor thereto.
"Compensation Committee" means the applicable compensation committee of
the Board of Directors of the Company.
"Disabled" or "Disability" means a determination, made at the request
of Executive or upon the reasonable request of the Company set forth in
a notice to Executive, by a physician selected by the Company and
Executive, that Executive is unable to perform his duties as specified
in this Agreement and in all reasonable medical likelihood such
inability will continue for a period in excess of 180 days, or for
shorter periods aggregating to more than 180 days in any consecutive
nine-month period.
"Effective Date" shall be the closing date of the Company's initial
public offering pursuant to the S-1 Registration Statement with the
Securities and Exchange Commission on May ____, 1999.
"Employment Period" means the term of Executive's employment pursuant
to the provisions of this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any successor thereto.
"Good Reason" means:
(i) a Change in Control of the Company;
(ii) a decrease in the total amount of Executive's Base Salary
below the amount in effect on the date hereof;
(iii) a reduction in Executive's title, a material reduction
in his authority, duties or job responsibilities, a material
adverse change in his working conditions (including the
relocation of Executive's office more than 40 miles from the
Company's present executive offices), without Executive's
consent, as determined by Executive in his reasonable
judgment;
(iv) a failure by the Company to comply with any material
provision of this Agreement if the Company shall have failed
to remedy the alleged breach within 60 days from the date
written notice of such noncompliance is given by Executive to
the Company; or
(v) any purported termination of Executive's employment which
is not effected pursuant to a proper Notice of Termination
(and for purposes of this Agreement no such purported
termination shall be effective).
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<PAGE> 4
"Notice of Termination" means a written notice of either the Company or
Executive, as applicable, setting forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination.
"Termination Date" means the effective date of employment termination.
2. Term of Employment. The Company shall employ Executive, and
Executive shall be employed by the Company and shall provide services to the
Company upon the terms and conditions hereinafter set forth. The initial term of
Executive's employment with the Company shall continue, unless earlier
terminated pursuant to Section 5 hereof, through December 31, 2001 (the
"Employment Period"); provided, however, that after expiration of the initial
term, the Employment Period shall automatically be renewed each January 1 for
successive one-year terms unless the Company or Executive delivers written
notice to the other party at least sixty (60) days preceding the expiration of
the initial term or any one-year extension date of the intention not to extend
the term of this Agreement.
3. Performance of Duties. Executive shall have the titles of Chairman
of the Board of Directors, President and Chief Executive Officer of the Company,
and he shall possess such powers and perform such duties as are normally
incident to such position, as provided in the By-laws of the Company and in
accordance with the General Corporation Law of the State of Delaware. During
this period, Executive agrees that he shall perform his duties faithfully and
efficiently subject to the direction of the Board of Directors of the Company,
and the Company agrees that Executive shall be required to report only to the
Board of Directors.
Executive agrees that during the Employment Period he shall devote substantially
his full business time to business affairs of the Company, provided, however,
that notwithstanding any other provision hereof, Executive may serve in any
capacity with any civic, educational and charitable organization provided, in
each case, such activities do not materially interfere with the performance of
his duties hereunder, and such service is consistent with all Company policies
and procedures regarding such service. Executive shall be entitled to retain all
compensation (whether in the form of cash, equity securities or perquisites)
paid or delivered to Executive in connection with such civic, educational or
charitable activities. Executive agrees that Executive shall not, without the
prior consent of the Board of Directors of the Company (which consent shall not
be unreasonably withheld), agree to serve on any boards of directors other than
the boards of directors upon which Executive presently serves.
4. Compensation. For services rendered by Executive, and upon the
condition that Executive fully and faithfully perform all of his duties and
obligations set forth herein, Executive shall be compensated for his services as
follows:
(a) Base Salary. Executive shall receive an annual salary,
payable in monthly or more frequent installments, in accordance with
the usual payroll practice of the Company, in an amount equal to
$250,000 (the "Base Salary"), less income tax
4
<PAGE> 5
withholdings and other normal employee deductions. The Base Salary
shall be reviewed annually as of the end of each fiscal year commencing
January 1, 2002 by the Compensation Committee, and may, at the sole
discretion of the Compensation Committee, be increased by an amount
that it deems appropriate, If the Base Salary is increased by the
Compensation Committee, it shall not be decreased thereafter during the
Employment Period.
(b) Bonus. Executive shall receive bonus payments in
accordance with any arrangements or bonus plans established by the
Company, in such amounts and upon such terms as are determined by the
Compensation Committee.
(c) Management Stock Option Plan. Should the Company establish
a stock option plan or plans with respect to which senior executives of
the Company participate and which excepts other employees of the
Company generally, Executive shall be entitled to participate in such
plans in the same manner as other senior executives of the Company.
(d) Benefits. During his employment with the Company,
Executive shall be entitled to participate, to the extent he meets all
eligibility requirements of general application, in any and all
employee benefit plans, programs and arrangements which are now or
hereafter adopted by the Company to provide benefits for its employees,
including, but not limited to, medical and hospitalization, group term
life insurance, disability, and retirement plans. Additionally,
Executive shall receive such other benefits as Company may make
generally available to its senior executive officers.
(e) Vacation. Executive shall be entitled to six (6) weeks of
paid vacation, in accordance with the policy of the Company in effect
from time to time, to be taken at times agreeable to both the Executive
and the Company.
(f) Travel and Expenses. The Company shall reimburse Executive
for the reasonable and necessary business expenses incurred by him in
connection with the performance of his duties and obligations as set
forth herein consistent with any existent Company policy with respect
to same. Reimbursement shall be made upon the presentation by Executive
to the Company of reasonably detailed statements of such expenses.
Payment of the Base Salary shall not in any way limit or reduce any other
obligation of the Company pursuant to this Agreement, and no other compensation,
benefit, or payment hereunder shall in any way limit or reduce the obligation of
the Company to pay Executive's Base Salary, except that, for the period
commencing on the date Executive becomes Disabled and ending on the Termination
Date, the Base Salary shall be reduced by any amounts that are payable to
Executive prior to or during such period under any disability benefit plan of
the Company in which Executive participates.
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<PAGE> 6
5. Termination. Executive's employment hereunder shall terminate at the
end of the Employment Period. In addition, the Employment Period may be
terminated at any time as provided herein. After Notice of Termination has been
delivered, and prior to the Termination Date, Executive shall make reasonable
efforts to cooperate with Company in achieving a transition of Executive's
duties and responsibilities.
(a) Cause. The Employment Period may be terminated at the
option of the Company for Cause effective upon the date stated in the
Notice of Termination to Executive.
(b) Death. The Employment Period will terminate automatically
effective upon Executive's death.
(c) Disability. In the event Executive becomes Disabled (as
such term is hereinafter defined) during the Employment Period, and the
Company is unable to make a reasonable accommodation which would enable
Executive to continue to perform the essential functions of his
employment position with the Company, the Employment Period may be
terminated at the option of Executive or the Company effective 30 days
after a Notice of Termination is given (provided that Executive shall
not have returned to the performance of his duties on a full-time basis
during such 30-day period). Unless otherwise agreed by Executive and
the Board of Directors, the determination by the physician selected by
Company and Executive that Executive is Disabled shall be binding upon
the Company and Executive.
(d) Voluntary Resignation. Executive may resign his employment
at any time with or without Good Reason, effective upon Notice of
Termination (which shall state whether such resignation is with Good
Reason) given by Executive to the Company.
(e) Termination without Cause by the Company. The Company may
terminate Executive's employment at any time, effective upon Notice of
Termination (which shall state that such termination is without Cause)
given by the Company to Executive.
If, within 30 days after any Notice of Termination for Cause is given by the
Company, Executive notifies the Company that a dispute exists concerning the
termination, then the Termination Date shall be the date (the "Final
Determination") as determined either by mutual written agreement of the parties,
by a binding and final arbitration award or by a final judgment, order or decree
of a court of competent jurisdiction (the time for appeal therefrom having
expired and no appeal having been perfected). Notwithstanding the foregoing, the
Company shall not be prohibited from removing Executive from his position with
the Company pending the Final Determination provided that such removal is
without prejudice to Executive's rights to receive all benefits from the Company
to which he may be entitled upon the Final Determination.
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<PAGE> 7
6. Separation Benefits. Executive shall be entitled to receive
separation benefits upon such events and in such amounts as are set forth in
this Section 6.
(a) Termination Without Cause or for Good Reason. In the event
that Executive's employment with the Company is terminated at any time
during the Employment Period by the Company without Cause, or by
Executive for Good Reason, then Executive (or if he shall have died
after termination but prior to payment, his surviving spouse, or if he
leaves no spouse, his personal representative, as successor in
interest) shall be paid by the Company an amount equal to the product
of Executive's Base Salary in effect as of the Date of Termination,
multiplied by two, payable in cash in a lump sum on or before the
fifteenth day following the Date of Termination.
(b) Termination Upon Death. If the Employment Period is
terminated by Executive's death, the Company shall pay Executive's
surviving spouse, or if he leaves no spouse, his personal
representative, as successor in interest, (i) an amount equal to the
then current Base Salary (paid in one lump sum payment on or before the
fifteenth day following the date of Executive's death), and (ii) any
death benefit payable under any employee benefit plans, programs and
arrangements of the Company in which Executive is a participant on the
date of his death.
(c) Termination Upon Disability. If the Employment Period is
terminated in accordance with the terms of paragraph 5(c) because of
Executive's Disability, the Company shall pay to Executive (or in the
event of Executive's death after finding of Disability, his surviving
spouse, or if he leaves no spouse, his personal representative, as
successor in interest) all compensation and benefits specified under
paragraph 4 herein, for a period of one year from the Date of
Termination, payable in the same manner as if the Employment Period had
not been terminated.
(d) Additional Separation Benefit. For a period of three years
following (i) the full completion of the Employment Period or (ii)
following the Date of Termination of the Employment Period for any
reason other than termination by the Company for Cause or termination
by Executive for other than Good Reason, the Company shall permit, at
the Company's expense, Executive, his spouse and dependents, as
applicable (the "Benefit Participants"), to participate in all group
medical health insurance plans and employee benefit plans, programs and
arrangements now or hereafter made available to the senior executive
employees of the Company (the "Plans") (including but not limited to
such Plans in which Executive was entitled to participate immediately
prior to the Date of Termination), in the same manner provided to its
other senior executive employees; provided, however, that this
paragraph 6(d) shall not apply in the event that (i) the Company shall
hereafter terminate the applicable Plan, or (ii) the participation of
the Benefit Participants in such Plan is prohibited by law or, if
applicable, would disqualify such Plan as a tax qualified plan pursuant
to the Code, or (iii) the participation of the Benefit Participants
violates the general terms and provisions of such applicable Plan. In
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<PAGE> 8
the event that any of the Benefit Participants' participation in such
Plans is prohibited by law or, if applicable, would disqualify the Plan
as a tax qualified plan, or the participation of the Benefit
Participants violates the general terms and provisions of such
applicable Plan, the Company shall permit the Benefit Participants to
acquire substantially comparable coverage or benefits, at the Company's
expense, from a source of Executive's or his spouse's choosing,
provided, however, that if provision of such coverage or benefit would
result in a cost of excess of 130% of the cost to the Company if
provided under a Company Plan, the Company may satisfy its obligations
under this paragraph 6(d) by contributing to the Benefit Participants
130% of the cost to the Company under the Company Plans.
Notwithstanding the foregoing, in no event will the Benefit
Participants receive from the Company the coverage and benefits
contemplated by this paragraph 6(d) if the Benefit Participants receive
such coverage and benefits from any other source.
(e) Excise Tax Gross-Up. If Executive becomes entitled to one
or more payments (with a "payment" including, but not limited to, the
vesting of an option or other non-cash benefit or property), whether
pursuant to the terms of this Agreement or any other plan, arrangement,
or agreement with the Company or any affiliated company (the "Total
Payments"), which are or become subject to the tax imposed by Section
4999 of the Code (or any similar tax that may hereafter be imposed)
(the "Excise Tax"), the Company shall pay to Executive at the time
specified below an additional amount (the "Gross-Up Payment") (which
shall include, but not be limited to, reimbursement for any penalties
and interest that may accrue in respect of such Excise Tax) such that
the net amount retained by Executive, after reduction for any Excise
Tax (including any penalties or interest thereon) on the Total Payments
and any federal, state and local income or employment tax and Excise
Tax on the Gross-Up Payment provided for by this subparagraph (e), but
before reduction for any federal, state, or local income or employment
tax on the Total Payments, shall be equal to the sum of (a) the Total
Payments, and (b) an amount equal to the product of any deductions
disallowed to Executive for federal, state, or local income tax
purposes because of the inclusion of the Gross-Up Payment in
Executive's adjusted gross income multiplied by the highest applicable
marginal rate of federal, state, or local income taxation,
respectively, for the calendar year in which the Gross-Up Payment is to
be made.
For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such
Excise Tax:
(i) The Total Payments shall be treated as "parachute
payments" within the meaning of Section 280G(b)(2) of the
Code, and all "excess parachute payments" within the meaning
of Section 280G(b)(1) of the Code shall be treated as subject
to the Excise Tax, unless, and except to the extent that, in
the written opinion of independent compensation consultants or
auditors of nationally recognized standing ("Independent
Advisors") selected by the Company and
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<PAGE> 9
reasonably acceptable to Executive, the Total Payments (in
whole or in part) do not constitute parachute payments, or
such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered within
the meaning of Section 280G(b)(4) of the Code in excess of the
base amount within the meaning of Section 280G(b)(3) of the
Code or are otherwise not subject to the Excise Tax;
(ii) The amount of the Total Payments which shall be
treated as subject to the Excise Tax shall be equal to the
lesser of (A) the total amount of the Total Payments or (B)
the total amount of excess parachute payments within the
meaning of Section 280G(b)(1) of the Code (after applying
clause (i) above); and
(iii) The value of any non-cash benefits or any
deferred payment or benefit shall be determined by the
Independent Advisors in accordance with the principles
of Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the
Gross-Up Payment, Executive shall be deemed (A) to pay federal income
taxes at the highest marginal rate of federal income taxation for the
calendar year in which the Gross-Up Payment is to be made; (B) to pay
any applicable state and local income taxes at the highest marginal
rate of taxation for the calendar year in which the Gross-Up Payment is
to be made, net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local taxes if paid
in such year (determined without regard to limitations on deductions
based upon the amount of Executive's adjusted gross income); and (C) to
have otherwise allowable deductions for federal, state, and local
income tax purposes at least equal to those disallowed because of the
inclusion of the Gross-Up Payment in Executive's adjusted gross income.
In the event that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time the Gross-Up
Payment is made, Executive shall repay to the Company at the time that
the amount of such reduction in Excise Tax is finally determined (but,
if previously paid to the taxing authorities, not prior to the time the
amount of such reduction is refunded to Executive or otherwise realized
as a benefit of Executive) the portion of the Gross-Up Payment that
would not have been paid if such Excise Tax had been applied in
initially calculating the Gross-Up Payment, plus interest on the amount
of such repayment at the rate provided in Section 1274(b)(2)(B) of the
Code. In the event that the Excise Tax is determined to exceed the
amount taken into account hereunder at the time the Gross-Up Payment is
made (including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in respect of such
excess (plus any interest and penalties payable with respect to such
excess) at the time that the amount of such excess is finally
determined.
The Gross-Up Payment provided for above shall be paid
on the 30th day (or such earlier date as the Excise Tax becomes due and
payable to the taxing authorities)
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<PAGE> 10
after it has been determined that the Total Payments (or any portion
thereof) are subject to the Excise Tax; provided, however, that if the
amount of such Gross-Up Payment or portion thereof cannot be finally
determined on or before such day, the Company shall pay to Executive on
such day an estimate, as determined by he Independent Advisors, of the
minimum amount of such payments and shall pay the remainder of such
payments (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code), as soon as the amount thereof can be
determined. In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to Executive, payable on
the fifth day after demand by the Company (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code). If more than
one Gross-Up Payment is made, the amount of each Gross-Up Payment shall
be computed so as not to duplicate any prior Gross-Up Payment. The
Company shall have the right to control all proceedings with the
Internal Revenue Service that may arise in connection with the
determination and assessment of any Excise Tax and, at its sole option,
the Company may pursue or forego any and all administrative appeals,
proceedings, hearings, and conferences with any taxing authority in
respect of such Excise Tax (including any interest or penalties
thereon); provided, however, that the Company's control over any
such proceedings shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder, and Executive shall be
entitled to settle or contest any other issue raised by the Internal
Revenue Service or any other taxing authority. Executive shall
cooperate with the Company in any proceedings relating to the
determination and assessment of any Excise Tax and shall not take any
position or action that would materially increase the amount of any
Gross-Up Payment hereunder.
7. Noncompetition. During the Employment Period and continuing until
the second anniversary thereof, Executive shall not, without the prior written
authorization of the Board of Directors of the Company, (i) directly or
indirectly render services of a business, professional or commercial nature
(whether for compensation or otherwise) to any person or entity competitive or
adverse to the Company's business welfare, (ii) engage in any activity, whether
alone, as a partner, or as an officer, director, employee, consultant,
independent contractor, or stockholder in any other corporation, person, or
entity which is competitive with or adverse to the Company's business welfare,
(iii) hire or solicit for hire any of the Company's employees, prospective
employees or consultants (iv) solicit the business of any client of the Company,
or any prospective client of the Company that had been serviced or solicited by
the Company during the two (2) years preceding Executive's termination, or (v)
enter into any agreements with any supplier of the Company regarding the sale or
distribution of products of the supplier.
In the event that Executive's employment with the Company is terminated by
Executive or the Company at any time, for any reason whatsoever, the Company
shall have the right to inform any of Executive's future employers or
prospective employers of the existence of this Section 7 of the Agreement. This
Section 7 shall not, however, prevent Executive from investing in
10
<PAGE> 11
securities issued by any such competitive or adverse corporation provided the
holdings thereof by Executive do not constitute more than three percent of any
one class of such securities.
8. Confidentiality.
(a) Disclosure and Use. Executive shall not disclose or use,
or authorize anyone else to disclose or use, at any time, either during
or after the Employment Period, any trade secrets or other confidential
information of the Company of which Executive is or becomes informed or
aware of prior to or during the Employment Period, except (i) as may be
required for Executive to perform his duties and obligations under this
Agreement, (ii) to the extent such information has been disclosed to
Executive by a third party who is not affiliated with the Company or
which otherwise becomes generally available to the public, (iii)
information which must be disclosed as a result of a subpoena or other
legal process, provided that the Company is given reasonable notice and
an opportunity to obtain a protective order, or (iv) unless Executive
shall first secure the Company's prior written authorization. This
paragraph shall survive the termination of this Employment Period,
whether by lapse of time or otherwise, and shall remain in effect and
be enforceable against Executive for as long as any such Company trade
secrets or confidential information retains commercial value. Executive
shall execute additional agreements and confirmations of his
obligations to the Company concerning such non-disclosure of Company
trade secrets and other confidential information as the Company may
require from time to time, provided that the execution of such
additional agreements and confirmations are (i) reasonable and (ii) are
required of all other senior executive employees of the Company under
similar circumstances.
(b) Return of Materials. Upon termination of his employment
for any reason, Executive (or in the event of termination due to
Executive's death, his surviving spouse or personal representative, as
applicable) shall promptly deliver to the Company all materials of a
secret or confidential nature relating to the Company's business, which
are in the possession or under the control of Executive.
9. Inventions. Executive hereby assigns to the Company all of his
rights, title, and interest in and to all inventions, discoveries, processes,
designs, and other intellectual property, including but not limited to trade
secrets, copyrights, patents, trademarks and trade names (collectively
hereinafter referred to as "Inventions"), and all improvements on existing
Inventions made or discovered by Executive during the term of his employment by
the Company. Promptly upon the development or making of any such Invention or
improvement thereon, Executive shall disclose the same to the Company and shall
execute and deliver to it such reasonable documents as it may request to confirm
the assignment of Executive's rights therein and, if requested, shall assist the
Company in applying for copyright, patent or trademark protection and
prosecuting any patents which may be available in respect thereof. The Company
acknowledges and hereby notifies Executive that this paragraph 9 does not apply
to an Invention for which no equipment, supplies, facility or trade secret
information of the Company was used
11
<PAGE> 12
and which was developed entirely on Executive's own time, unless (a) the
Invention relates to (i) the business of the Company, or (ii) the Company's
actual or demonstrably anticipated research or development, or (b) the Invention
results from any work performed by Executive for the Company.
10. Remedies. If, at any time, Executive violates to any material
extent any of the covenants or agreements set forth in paragraphs 7, 8 or 9, the
Company shall have the right to terminate all of its obligations to make further
payments under this Agreement. Executive acknowledges that the Company would be
irreparably injured by a violation of paragraphs 7, 8 or 9, that damages for
such a breach are not easily calculated, and that any remedy at law would be
inadequate. Therefore, Executive agrees that the Company shall be entitled to an
injunction restraining Executive from any actual or threatened breach of
paragraphs 7, 8 or 9 or to any other appropriate equitable remedy without any
bond or other security being required.
It is expressly understood between the parties that this injunctive or equitable
relief shall not be Employer's exclusive remedy for breach of this Agreement.
Without limitation, in the event of any breach by Executive of paragraphs 7, 8
or 9 of this Agreement, such Executive shall not be entitled to receive any
salary payments or any other compensation beyond the date of such breach to
which he would otherwise be entitled, and Executive shall be obligated to repay
to Employer salary payments received by him at any time after the occurrence of
such breach.
11. Resolution of Disputes.
(a) In the event of any controversy among the parties hereto
arising out of, or relating to, this Agreement (other than a
controversy arising out of or relating to paragraphs 7, 8 or 9 hereof),
which cannot be settled amicably by the parties, such controversy shall
be finally settled by arbitration conducted expeditiously in accordance
with the American Arbitration Association Commercial Arbitration Rules
and the Supplementary Procedures for Large, Complex Disputes, by an
independent arbitrator. Either the Company or Executive may institute
such arbitration proceeding by giving written notice to the other
party. A hearing shall be held by the arbitrator in the City of
Chicago, Illinois, and a decision of the matter submitted to the
arbitrator shall be rendered promptly in accordance with the rules of
the American Arbitration Association. The prevailing party shall be
entitled to all costs and expenses with respect to such arbitration,
including reasonable attorneys' fees. The decision of the arbitrator
shall be final and binding upon all parties hereto. Judgment upon the
award rendered may be entered in any court having jurisdiction thereof.
(b) Notwithstanding the foregoing, Executive acknowledges and
agrees that the Company may seek in a court of competent jurisdiction
an injunction prohibiting Executive's breach or alleged breach of
paragraphs 7, 8 and 9.
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<PAGE> 13
12. Legal Fees. Should any litigation or arbitration be commenced
concerning any provision of this Agreement or Executive's employment or
termination of employment, the prevailing party shall be entitled, in addition
to such other relief as may be granted, to its attorneys' fees and costs
incurred by reason of such litigation or arbitration.
13. Executive's Representations and Warranties. Executive hereby
represents, warrants, and covenants that:
(a) Executive has no actual or potential conflict of interest
performing Executive's obligations and duties hereunder, will avoid any
such conflict during the Employment Period and will immediately report
any such conflict to the Company;
(b) the execution, delivery, and performance of this Agreement
by Executive will not violate any law, order, regulation, agreement,
contract, promise or duty by which Executive is bound;
(c) this Agreement is duly executed and is valid and binding
on Executive in accordance with its terms; and
(d) the Inventions developed by Executive for, or delivered by
Executive to, the Company do not and will not infringe upon any third
party trade secrets, copyrights, patents, trademarks or similar
proprietary rights. Executive hereby indemnifies and holds harmless the
Company and its directors, officers, employees, affiliates, agents,
representatives, successors and assigns for any breach of the foregoing
representation and warranty. The foregoing indemnity shall survive any
termination of this Agreement or the Employment Period for any reason.
14. Amendment and Termination. This Agreement may not be amended or
canceled except by written instrument signed by both parties and approved by the
Board of Directors or a committee thereof.
15. Modification and Waiver of Breach. No waiver or modification of
this Agreement shall be binding unless it is in writing, signed by the parties
hereto. The waiver by Company or Executive of any term or breach of this
Agreement shall not prevent a subsequent enforcement of such term or any other
term and shall not be deemed to be a waiver of any subsequent breach.
16. Notice. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed given or delivered and
received (i) when delivered personally (which shall be deemed to include
delivery via express courier such as Federal Express), or (ii) three days after
having been sent by registered or certified mail, return receipt requested, or
(iii) upon receipt when sent by facsimile, telegram or telex followed by a
confirmation letter sent by registered or certified mail, return receipt
requested, addressed as follows:
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<PAGE> 14
If to the Company: Quotesmith.com, Inc.
8205 South Cass Avenue
Suite 102
Darien, IL 60561
Facsimile: (800) 515-0270
Attention: President
With a Copy to: Craig C. Bradley, Esq.
Freeborn & Peters
311 South Wacker Drive
Suite 3000
Chicago, IL 60606
Facsimile: (312) 360-6573
If to Executive: Robert S. Bland
8205 South Cass Avenue
Suite 102
Darien, IL 60561
Facsimile: (800) 515-0270
Either the Company or Executive may, at any time, by notice to the other,
designate another address for service of notice on such party.
17. Non-assignment. The interests of Executive under this Agreement are
not subject to the claims of his creditors and may not be voluntarily or
involuntarily assigned, alienated or encumbered. Company may assign its rights,
duties or obligations under this Agreement to any person with whom it has merged
or consolidated, or to whom it has transferred all, or substantially all, of its
assets.
18. Severability. If any provision of this Agreement is held invalid or
unenforceable, either in its entirety or by virtue of its scope or application
to given circumstances, such provision shall thereupon be deemed (i) modified
only to the extent necessary to render such provision valid, or (ii) not
applicable to given circumstances, or (iii) excised from this Agreement, as the
situation may require, and this Agreement shall be construed and enforced as if
such provision had been included herein as so modified in scope or application,
or had not been included herein, as the case may be. Should this Agreement, or
any one of more of the provisions hereof, be held to be invalid, illegal or
unenforceable within any governmental jurisdiction or subdivision thereof, the
Agreement or any such provision or provisions shall not as a consequence thereof
be deemed to be invalid, illegal or unenforceable in any other governmental
jurisdiction or subdivision thereof.
19. Successors. This Agreement shall be binding upon, and inure to the
benefit of the parties and their permitted successors and assigns. Nothing in
this Agreement, express or
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<PAGE> 15
implied, is intended or shall be construed to confer upon any person, other than
the parties and their respective successors and assigns permitted by this
Agreement, any right, remedy or claim under, or by reason of, this Agreement.
20. Entire Agreement. This Agreement constitutes the entire agreement
between Company and Executive with respect to the subject matter hereof. This
Agreement supersedes any prior agreement made between the parties.
21. Counterparts. The Agreement may be executed in two or more
counterparts, any one of which shall be deemed an original and all of which
taken together shall constitute a single instrument.
22. Governing Law. This Agreement, and all matters or disputes relating
to the validity, construction, performance or enforcement hereof, shall be
governed, construed and controlled by and under the laws of the State of
Illinois without regard to principles of conflicts of law.
23. Effective Date. This Agreement shall be effective on the Effective
Date. If the initial public offering is not consummated, this Agreement shall be
null and void.
24. EXECUTIVE ACKNOWLEDGES THAT HE HAS READ, UNDERSTOOD AND ACCEPTS THE
PROVISIONS OF THIS AGREEMENT. HE ALSO ACKNOWLEDGES THAT HE HAS HAD THE
OPPORTUNITY TO AND HAS REVIEWED THE TERMS AND CONDITIONS OF THIS AGREEMENT.
[Signature page follows]
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<PAGE> 16
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
as of the date written above.
QUOTESMITH.COM, INC.
By: _____________________________
William V. Thoms
Executive Vice President
EXECUTIVE
By: _____________________________
Robert S. Bland
President and Chief Executive
Officer
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<PAGE> 1
EXHIBIT 10.4
FORM OF
EMPLOYMENT AGREEMENT
Quotesmith.com, Inc., a Delaware corporation (the "Company") and
William V. Thoms ("Executive") enter into this Employment Agreement as of
______________ ____, 1999 (the "Agreement"), effective as of the Effective Date.
WHEREAS, Company is planning an initial public offering of its stock,
and has begun to take the necessary steps in furtherance of this course of
action;
WHEREAS, as a condition to taking the Company public, the parties have
agreed to enter into a new Employment Agreement;
WHEREAS, the Company desires to employ Executive upon the terms and
subject to the conditions of this Agreement; and
WHEREAS, Executive desires to be employed by the Company upon the terms
and subject to the conditions of this Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth below, and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and Executive hereby
covenant and agree as follows:
1. Definitions. For purposes of this Agreement, the following
capitalized terms shall have the following meanings, and all other capitalized
terms used in this Agreement but not defined in this paragraph 1 shall have the
meanings assigned elsewhere in this Agreement:
"Base Salary" means $_______.
"Cause" means:
(i) Executive's conviction of (or plea of no contest or
similar plea to) a felony;
(ii) Executive's intentional continuing refusal to
substantially perform his obligations and duties under this
Agreement (except by reason of incapacity due to illness or
accident) if he (a) shall have failed to remedy the alleged
breach caused by such conduct within 30 days from the date
written notice is given by the Company demanding that he
remedy the alleged breach caused by such conduct, or (b) shall
have failed to take reasonable steps in good faith to that end
during such 30-day period, provided that after the end of such
30-day period there shall have been delivered to Executive a
certified copy of a resolution of the Board of Directors of
the Company, taken at a meeting of the Board of Directors at
which Executive,
<PAGE> 2
together with his counsel, is given the opportunity to be
heard, finding that Executive was guilty of intentional
continuing refusal to substantially perform his obligations
and duties under this Agreement and specifying the details
thereof, and that Executive has failed to take reasonable
steps in good faith to remedy the alleged breach caused by
such conduct,
(iii) Executive engaged in willful fraud or defalcation,
either of which involved funds or other assets of the Company;
or
(iv) upon Executive's breach of any material term of this
Agreement (including, but not limited to, the noncompete and
confidentiality provisions in paragraphs 7 and 8).
"Change in Control" means and shall be deemed to occur:
(i) in the event any "person" (as such term is used in
paragraphs 13(d) and 14(d) of the Exchange Act) (other than
Robert S. Bland and his affiliates) or more than one such
person acting as a group, other than a trustee or other
fiduciary holding securities under an employee benefit plan of
the Company, is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly,
of the securities of the Company, in a transaction or a series
of transactions, representing thirty percent (30%) or more of
the combined voting power of the Company's then outstanding
securities ordinarily having the right to vote for the
election of directors of the Company;
(ii) during any period of two consecutive years during the
Employment Period, individuals who at the beginning of the
Employment Period constitute the Board of Directors of the
Company cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election
by the Company's stockholders, of each director who was not a
director at the beginning of the Employment Period has been
approved in advance by directors representing at least
two-thirds of the directors then in office who were (A)
directors at the beginning of the Employment Period, or (B)
previously approved in accordance with this subparagraph (ii);
(iii) the Company sells or otherwise disposes of all or
substantially all of its assets; and
(iv) the Company participates in a merger or consolidation
and, immediately following the consummation of such merger or
consolidation, the Company's stockholders prior to such merger
or consolidation do not own 50% or more of the voting shares
of stock of the surviving or successor corporation.
2
<PAGE> 3
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor thereto.
"Compensation Committee" means the applicable compensation committee of
the Board of Directors of the Company.
"Disabled" or "Disability" means a determination, made at the request
of Executive or upon the reasonable request of the Company set forth in
a notice to Executive, by a physician selected by the Company and
Executive, that Executive is unable to perform his duties as specified
in this Agreement and in all reasonable medical likelihood such
inability will continue for a period in excess of 180 days, or for
shorter periods aggregating to more than 180 days in any consecutive
nine-month period.
"Effective Date" shall be the closing date of the Company's initial
public offering pursuant to the S-1 Registration Statement with the
Securities and Exchange Commission on May ____, 1999.
"Employment Period" means the term of Executive's employment pursuant
to the provisions of this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any successor thereto.
"Good Reason" means:
(i) a Change in Control of the Company;
(ii) a decrease in the total amount of Executive's Base Salary
below the amount in effect on the date hereof;
(iii) a reduction in Executive's title, a material reduction
in his authority, duties or job responsibilities, a material
adverse change in his working conditions (including the
relocation of Executive's office more than 40 miles from the
Company's present executive offices), without Executive's
consent, as determined by Executive in his reasonable
judgment;
(iv) a failure by the Company to comply with any material
provision of this Agreement if the Company shall have failed
to remedy the alleged breach within 60 days from the date
written notice of such noncompliance is given by Executive to
the Company; or
(v) any purported termination of Executive's employment which
is not effected pursuant to a proper Notice of Termination
(and for purposes of this Agreement no such purported
termination shall be effective).
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"Notice of Termination" means a written notice of either the Company or
Executive, as applicable, setting forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination.
"Termination Date" means the effective date of employment termination.
2. Term of Employment. The Company shall employ Executive, and
Executive shall be employed by the Company and shall provide services to the
Company upon the terms and conditions hereinafter set forth. The initial term of
Executive's employment with the Company shall continue, unless earlier
terminated pursuant to Section 5 hereof, through December 31, 2001 (the
"Employment Period"); provided, however, that after expiration of the initial
term, the Employment Period shall automatically be renewed each January 1 for
successive one-year terms unless the Company or Executive delivers written
notice to the other party at least sixty (60) days preceding the expiration of
the initial term or any one-year extension date of the intention not to extend
the term of this Agreement.
3. Performance of Duties. Executive shall have the title of Executive
Vice President of the Company, and he shall possess such powers and perform such
duties as are normally incident to such position, as provided in the By-laws of
the Company and in accordance with the General Corporation Law of the State of
Delaware. During this period, Executive agrees that he shall perform his duties
faithfully and efficiently subject to the direction of the President and the
Board of Directors of the Company, and the Company agrees that Executive shall
be required to report to the President and to the Board of Directors.
Executive agrees that during the Employment Period he shall devote substantially
his full business time to business affairs of the Company, provided, however,
that notwithstanding any other provision hereof, Executive may serve in any
capacity with any civic, educational and charitable organization provided, in
each case, such activities do not materially interfere with the performance of
his duties hereunder, and such service is consistent with all Company policies
and procedures regarding such service. Executive shall be entitled to retain all
compensation (whether in the form of cash, equity securities or perquisites)
paid or delivered to Executive in connection with such civic, educational or
charitable activities. Executive agrees that Executive shall not, without the
prior consent of the Board of Directors of the Company (which consent shall not
be unreasonably withheld), agree to serve on any boards of directors other than
the boards of directors upon which Executive presently serves.
4. Compensation. For services rendered by Executive, and upon the
condition that Executive fully and faithfully perform all of his duties and
obligations set forth herein, Executive shall be compensated for his services as
follows:
a. Base Salary. Executive shall receive an annual salary,
payable in monthly or more frequent installments, in accordance with
the usual payroll practice of the Company, in an amount equal to
$________ (the "Base Salary"), less income tax withholdings and
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other normal employee deductions. The Base Salary shall be reviewed
annually as of the end of each fiscal year commencing January 1, 2002
by the Compensation Committee, and may, at the sole discretion of the
Compensation Committee, be increased by an amount that it deems
appropriate, If the Base Salary is increased by the Compensation
Committee, it shall not be decreased thereafter during the Employment
Period.
b. Bonus. Executive shall receive bonus payments in accordance
with any arrangements or bonus plans established by the Company, in
such amounts and upon such terms as are determined by the Compensation
Committee.
c. Management Stock Option Plan. Should the Company establish
a stock option plan or plans with respect to which senior executives of
the Company participate and which excepts other employees of the
Company generally, Executive shall be entitled to participate in such
plans in the same manner as other senior executives of the Company.
d. Benefits. During his employment with the Company,
Executive shall be entitled to participate, to the extent he meets all
eligibility requirements of general application, in any and all
employee benefit plans, programs and arrangements which are now or
hereafter adopted by the Company to provide benefits for its employees,
including, but not limited to, medical and hospitalization, group term
life insurance, disability, and retirement plans. Additionally,
Executive shall receive such other benefits as Company may make
generally available to its senior executive officers.
e. Vacation. Executive shall be entitled to _______weeks of
paid vacation, in accordance with the policy of the Company in effect
from time to time, to be taken at times agreeable to both the Executive
and the Company.
f. Travel and Expenses. The Company shall reimburse Executive
for the reasonable and necessary business expenses incurred by him in
connection with the performance of his duties and obligations as set
forth herein consistent with any existent Company policy with respect
to same. Reimbursement shall be made upon the presentation by Executive
to the Company of reasonably detailed statements of such expenses.
Payment of the Base Salary shall not in any way limit or reduce any other
obligation of the Company pursuant to this Agreement, and no other compensation,
benefit, or payment hereunder shall in any way limit or reduce the obligation of
the Company to pay Executive's Base Salary, except that, for the period
commencing on the date Executive becomes Disabled and ending on the Termination
Date, the Base Salary shall be reduced by any amounts that are payable to
Executive prior to or during such period under any disability benefit plan of
the Company in which Executive participates.
5. Termination. Executive's employment hereunder shall terminate at the
end of the Employment Period. In addition, the Employment Period may be
terminated at any time as provided herein. After Notice of Termination has been
delivered, and prior to the Termination Date,
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Executive shall make reasonable efforts to cooperate with Company in achieving a
transition of Executive's duties and responsibilities.
a. Cause. The Employment Period may be terminated at the
option of the Company for Cause effective upon the date stated in the
Notice of Termination to Executive.
b. Death. The Employment Period will terminate automatically
effective upon Executive's death.
c. Disability. In the event Executive becomes Disabled (as
such term is hereinafter defined) during the Employment Period, and the
Company is unable to make a reasonable accommodation which would enable
Executive to continue to perform the essential functions of his
employment position with the Company, the Employment Period may be
terminated at the option of Executive or the Company effective 30 days
after a Notice of Termination is given (provided that Executive shall
not have returned to the performance of his duties on a full-time basis
during such 30-day period). Unless otherwise agreed by Executive and
the Board of Directors, the determination by the physician selected by
Company and Executive that Executive is Disabled shall be binding upon
the Company and Executive.
d. Voluntary Resignation. Executive may resign his employment
at any time with or without Good Reason, effective upon Notice of
Termination (which shall state whether such resignation is with Good
Reason) given by Executive to the Company.
e. Termination without Cause by the Company. The Company may
terminate Executive's employment at any time, effective upon Notice of
Termination (which shall state that such termination is without Cause)
given by the Company to Executive.
If, within 30 days after any Notice of Termination for Cause is given by the
Company, Executive notifies the Company that a dispute exists concerning the
termination, then the Termination Date shall be the date (the "Final
Determination") as determined either by mutual written agreement of the parties,
by a binding and final arbitration award or by a final judgment, order or decree
of a court of competent jurisdiction (the time for appeal therefrom having
expired and no appeal having been perfected). Notwithstanding the foregoing, the
Company shall not be prohibited from removing Executive from his position with
the Company pending the Final Determination provided that such removal is
without prejudice to Executive's rights to receive all benefits from the Company
to which he may be entitled upon the Final Determination.
6. Separation Benefits. Executive shall be entitled to receive
separation benefits upon such events and in such amounts as are set forth in
this Section 6.
a. Termination Without Cause or for Good Reason. In the event
that Executive's employment with the Company is terminated at any time
during the
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<PAGE> 7
Employment Period by the Company without Cause, or by Executive for
Good Reason, then Executive (or if he shall have died after termination
but prior to payment, his surviving spouse, or if he leaves no spouse,
his personal representative, as successor in interest) shall be paid by
the Company an amount equal to the product of Executive's Base Salary
in effect as of the Date of Termination, multiplied by two, payable in
cash in a lump sum on or before the fifteenth day following the Date of
Termination.
b. Termination Upon Death. If the Employment Period is
terminated by Executive's death, the Company shall pay Executive's
surviving spouse, or if he leaves no spouse, his personal
representative, as successor in interest, (i) an amount equal to the
then current Base Salary (paid in one lump sum payment on or before the
fifteenth day following the date of Executive's death), and (ii) any
death benefit payable under any employee benefit plans, programs and
arrangements of the Company in which Executive is a participant on the
date of his death.
c. Termination Upon Disability. If the Employment Period is
terminated in accordance with the terms of paragraph 5(c) because of
Executive's Disability, the Company shall pay to Executive (or in the
event of Executive's death after finding of Disability, his surviving
spouse, or if he leaves no spouse, his personal representative, as
successor in interest) all compensation and benefits specified under
paragraph 4 herein, for a period of one year from the Date of
Termination, payable in the same manner as if the Employment Period had
not been terminated.
d. Additional Separation Benefit. For a period of three years
following (i) the full completion of the Employment Period or (ii)
following the Date of Termination of the Employment Period for any
reason other than termination by the Company for Cause or termination
by Executive for other than Good Reason, the Company shall permit, at
the Company's expense, Executive, his spouse and dependents, as
applicable (the "Benefit Participants"), to participate in all group
medical health insurance plans and employee benefit plans, programs and
arrangements now or hereafter made available to the senior executive
employees of the Company (the "Plans") (including but not limited to
such Plans in which Executive was entitled to participate immediately
prior to the Date of Termination), in the same manner provided to its
other senior executive employees; provided, however, that this
paragraph 6(d) shall not apply in the event that (i) the Company shall
hereafter terminate the applicable Plan, or (ii) the participation of
the Benefit Participants in such Plan is prohibited by law or, if
applicable, would disqualify such Plan as a tax qualified plan pursuant
to the Code, or (iii) the participation of the Benefit Participants
violates the general terms and provisions of such applicable Plan. In
the event that any of the Benefit Participants' participation in such
Plans is prohibited by law or, if applicable, would disqualify the Plan
as a tax qualified plan, or the participation of the Benefit
Participants violates the general terms and provisions of such
applicable Plan, the Company shall permit the Benefit Participants to
acquire substantially comparable coverage or benefits, at the Company's
expense, from a source of Executive's or his spouse's choosing,
provided,
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<PAGE> 8
however, that if provision of such coverage or benefit would result in
a cost of excess of 130% of the cost to the Company if provided under a
Company Plan, the Company may satisfy its obligations under this
paragraph 6(d) by contributing to the Benefit Participants 130% of the
cost to the Company under the Company Plans. Notwithstanding the
foregoing, in no event will the Benefit Participants receive from the
Company the coverage and benefits contemplated by this paragraph 6(d)
if the Benefit Participants receive such coverage and benefits from any
other source.
e. Excise Tax Gross-Up. If Executive becomes entitled to one
or more payments (with a "payment" including, but not limited to, the
vesting of an option or other non-cash benefit or property), whether
pursuant to the terms of this Agreement or any other plan, arrangement,
or agreement with the Company or any affiliated company (the "Total
Payments"), which are or become subject to the tax imposed by Section
4999 of the Code (or any similar tax that may hereafter be imposed)
(the "Excise Tax"), the Company shall pay to Executive at the time
specified below an additional amount (the "Gross-Up Payment") (which
shall include, but not be limited to, reimbursement for any penalties
and interest that may accrue in respect of such Excise Tax) such that
the net amount retained by Executive, after reduction for any Excise
Tax (including any penalties or interest thereon) on the Total Payments
and any federal, state and local income or employment tax and Excise
Tax on the Gross-Up Payment provided for by this subparagraph (e), but
before reduction for any federal, state, or local income or employment
tax on the Total Payments, shall be equal to the sum of (a) the Total
Payments, and (b) an amount equal to the product of any deductions
disallowed to Executive for federal, state, or local income tax
purposes because of the inclusion of the Gross-Up Payment in
Executive's adjusted gross income multiplied by the highest applicable
marginal rate of federal, state, or local income taxation,
respectively, for the calendar year in which the Gross-Up Payment is to
be made.
For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such
Excise Tax:
i. The Total Payments shall be treated as "parachute
payments" within the meaning of Section 280G(b)(2) of the
Code, and all "excess parachute payments" within the meaning
of Section 280G(b)(1) of the Code shall be treated as subject
to the Excise Tax, unless, and except to the extent that, in
the written opinion of independent compensation consultants or
auditors of nationally recognized standing ("Independent
Advisors") selected by the Company and reasonably acceptable
to Executive, the Total Payments (in whole or in part) do not
constitute parachute payments, or such excess parachute
payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning
of Section 280G(b)(4) of the Code in excess of the base amount
within the meaning of Section 280G(b)(3) of the Code or are
otherwise not subject to the Excise Tax;
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ii. The amount of the Total Payments which shall be
treated as subject to the Excise Tax shall be equal to the
lesser of (A) the total amount of the Total Payments or (B)
the total amount of excess parachute payments within the
meaning of Section 280G(b)(1) of the Code (after applying
clause (i) above); and
iii. The value of any non-cash benefits or any
deferred payment or benefit shall be determined by the
Independent Advisors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the
Gross-Up Payment, Executive shall be deemed (A) to pay federal income
taxes at the highest marginal rate of federal income taxation for the
calendar year in which the Gross-Up Payment is to be made; (B) to pay
any applicable state and local income taxes at the highest marginal
rate of taxation for the calendar year in which the Gross-Up Payment is
to be made, net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local taxes if paid
in such year (determined without regard to limitations on deductions
based upon the amount of Executive's adjusted gross income); and (C) to
have otherwise allowable deductions for federal, state, and local
income tax purposes at least equal to those disallowed because of the
inclusion of the Gross-Up Payment in Executive's adjusted gross income.
In the event that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time the Gross-Up
Payment is made, Executive shall repay to the Company at the time that
the amount of such reduction in Excise Tax is finally determined (but,
if previously paid to the taxing authorities, not prior to the time the
amount of such reduction is refunded to Executive or otherwise realized
as a benefit of Executive) the portion of the Gross-Up Payment that
would not have been paid if such Excise Tax had been applied in
initially calculating the Gross-Up Payment, plus interest on the amount
of such repayment at the rate provided in Section 1274(b)(2)(B) of the
Code. In the event that the Excise Tax is determined to exceed the
amount taken into account hereunder at the time the Gross-Up Payment is
made (including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in respect of such
excess (plus any interest and penalties payable with respect to such
excess) at the time that the amount of such excess is finally
determined.
The Gross-Up Payment provided for above shall be paid
on the 30th day (or such earlier date as the Excise Tax becomes due and
payable to the taxing authorities) after it has been determined that
the Total Payments (or any portion thereof) are subject to the Excise
Tax; provided, however, that if the amount of such Gross-Up Payment or
portion thereof cannot be finally determined on or before such day, the
Company shall pay to Executive on such day an estimate, as determined
by he Independent Advisors, of the minimum amount of such payments and
shall pay the remainder of such payments (together with interest at the
rate provided in Section 1274(b)(2)(B) of the Code), as soon as the
amount thereof can be determined. In the event that the amount of the
estimated payments
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exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to Executive, payable on
the fifth day after demand by the Company (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code). If more than
one Gross-Up Payment is made, the amount of each Gross-Up Payment shall
be computed so as not to duplicate any prior Gross-Up Payment. The
Company shall have the right to control all proceedings with the
Internal Revenue Service that may arise in connection with the
determination and assessment of any Excise Tax and, at its sole option,
the Company may pursue or forego any and all administrative appeals,
proceedings, hearings, and conferences with any taxing authority in
respect of such Excise Tax (including any interest or penalties
thereon); provided, however, that the Company's control over any such
proceedings shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder, and Executive shall be entitled to
settle or contest any other issue raised by the Internal Revenue
Service or any other taxing authority. Executive shall cooperate with
the Company in any proceedings relating to the determination and
assessment of any Excise Tax and shall not take any position or action
that would materially increase the amount of any Gross-Up Payment
hereunder.
7. Noncompetition. During the Employment Period and continuing until
the second anniversary thereof, Executive shall not, without the prior written
authorization of the Board of Directors of the Company, (i) directly or
indirectly render services of a business, professional or commercial nature
(whether for compensation or otherwise) to any person or entity competitive or
adverse to the Company's business welfare, (ii) engage in any activity, whether
alone, as a partner, or as an officer, director, employee, consultant,
independent contractor, or stockholder in any other corporation, person, or
entity which is competitive with or adverse to the Company's business welfare,
(iii) hire or solicit for hire any of the Company's employees, prospective
employees or consultants (iv) solicit the business of any client of the Company,
or any prospective client of the Company that had been serviced or solicited by
the Company during the two (2) years preceding Executive's termination, or (v)
enter into any agreements with any supplier of the Company regarding the sale or
distribution of products of the supplier.
In the event that Executive's employment with the Company is terminated by
Executive or the Company at any time, for any reason whatsoever, the Company
shall have the right to inform any of Executive's future employers or
prospective employers of the existence of this Section 7 of the Agreement. This
Section 7 shall not, however, prevent Executive from investing in securities
issued by any such competitive or adverse corporation provided the holdings
thereof by Executive do not constitute more than three percent of any one class
of such securities.
8. Confidentiality.
a. Disclosure and Use. Executive shall not disclose or use, or
authorize anyone else to disclose or use, at any time, either during or
after the Employment Period, any trade secrets or other confidential
information of the Company of which Executive is or becomes informed or
aware of prior to or during the Employment Period, except (i) as may be
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required for Executive to perform his duties and obligations under this
Agreement, (ii) to the extent such information has been disclosed to
Executive by a third party who is not affiliated with the Company or
which otherwise becomes generally available to the public, (iii)
information which must be disclosed as a result of a subpoena or other
legal process, provided that the Company is given reasonable notice and
an opportunity to obtain a protective order, or (iv) unless Executive
shall first secure the Company's prior written authorization. This
paragraph shall survive the termination of this Employment Period,
whether by lapse of time or otherwise, and shall remain in effect and
be enforceable against Executive for as long as any such Company trade
secrets or confidential information retains commercial value. Executive
shall execute additional agreements and confirmations of his
obligations to the Company concerning such non-disclosure of Company
trade secrets and other confidential information as the Company may
require from time to time, provided that the execution of such
additional agreements and confirmations are (i) reasonable and (ii) are
required of all other senior executive employees of the Company under
similar circumstances.
b. Return of Materials. Upon termination of his employment for
any reason, Executive (or in the event of termination due to
Executive's death, his surviving spouse or personal representative, as
applicable) shall promptly deliver to the Company all materials of a
secret or confidential nature relating to the Company's business, which
are in the possession or under the control of Executive.
9. Inventions. Executive hereby assigns to the Company all of his
rights, title, and interest in and to all inventions, discoveries, processes,
designs, and other intellectual property, including but not limited to trade
secrets, copyrights, patents, trademarks and trade names (collectively
hereinafter referred to as "Inventions"), and all improvements on existing
Inventions made or discovered by Executive during the term of his employment by
the Company. Promptly upon the development or making of any such Invention or
improvement thereon, Executive shall disclose the same to the Company and shall
execute and deliver to it such reasonable documents as it may request to confirm
the assignment of Executive's rights therein and, if requested, shall assist the
Company in applying for copyright, patent or trademark protection and
prosecuting any patents which may be available in respect thereof. The Company
acknowledges and hereby notifies Executive that this paragraph 9 does not apply
to an Invention for which no equipment, supplies, facility or trade secret
information of the Company was used and which was developed entirely on
Executive's own time, unless (a) the Invention relates to (i) the business of
the Company, or (ii) the Company's actual or demonstrably anticipated research
or development, or (b) the Invention results from any work performed by
Executive for the Company.
10. Remedies. If, at any time, Executive violates to any material
extent any of the covenants or agreements set forth in paragraphs 7, 8 or 9, the
Company shall have the right to terminate all of its obligations to make further
payments under this Agreement. Executive acknowledges that the Company would be
irreparably injured by a violation of paragraphs 7, 8 or 9, that damages for
such a breach are not easily calculated, and that any remedy at law would be
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inadequate. Therefore, Executive agrees that the Company shall be entitled to an
injunction restraining Executive from any actual or threatened breach of
paragraphs 7, 8 or 9 or to any other appropriate equitable remedy without any
bond or other security being required.
It is expressly understood between the parties that this injunctive or equitable
relief shall not be Employer's exclusive remedy for breach of this Agreement.
Without limitation, in the event of any breach by Executive of paragraphs 7, 8
or 9 of this Agreement, such Executive shall not be entitled to receive any
salary payments or any other compensation beyond the date of such breach to
which he would otherwise be entitled, and Executive shall be obligated to repay
to Employer salary payments received by him at any time after the occurrence of
such breach.
11. Resolution of Disputes.
a. In the event of any controversy among the parties hereto
arising out of, or relating to, this Agreement (other than a
controversy arising out of or relating to paragraphs 7, 8 or 9 hereof),
which cannot be settled amicably by the parties, such controversy shall
be finally settled by arbitration conducted expeditiously in accordance
with the American Arbitration Association Commercial Arbitration Rules
and the Supplementary Procedures for Large, Complex Disputes, by an
independent arbitrator. Either the Company or Executive may institute
such arbitration proceeding by giving written notice to the other
party. A hearing shall be held by the arbitrator in the City of
Chicago, Illinois, and a decision of the matter submitted to the
arbitrator shall be rendered promptly in accordance with the rules of
the American Arbitration Association. The prevailing party shall be
entitled to all costs and expenses with respect to such arbitration,
including reasonable attorneys' fees. The decision of the arbitrator
shall be final and binding upon all parties hereto. Judgment upon the
award rendered may be entered in any court having jurisdiction thereof.
b. Notwithstanding the foregoing, Executive acknowledges and
agrees that the Company may seek in a court of competent jurisdiction
an injunction prohibiting Executive's breach or alleged breach of
paragraphs 7, 8 and 9.
12. Legal Fees. Should any litigation or arbitration be commenced
concerning any provision of this Agreement or Executive's employment or
termination of employment, the prevailing party shall be entitled, in addition
to such other relief as may be granted, to its attorneys' fees and costs
incurred by reason of such litigation or arbitration.
13. Executive's Representations and Warranties. Executive hereby
represents, warrants, and covenants that:
(a) Executive has no actual or potential conflict of interest
performing Executive's obligations and duties hereunder, will avoid any
such conflict during the Employment Period and will immediately report
any such conflict to the Company;
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(b) the execution, delivery, and performance of this Agreement
by Executive will not violate any law, order, regulation, agreement,
contract, promise or duty by which Executive is bound;
(c) this Agreement is duly executed and is valid and binding
on Executive in accordance with its terms; and
(d) the Inventions developed by Executive for, or delivered by
Executive to, the Company do not and will not infringe upon any third
party trade secrets, copyrights, patents, trademarks or similar
proprietary rights. Executive hereby indemnifies and holds harmless the
Company and its directors, officers, employees, affiliates, agents,
representatives, successors and assigns for any breach of the foregoing
representation and warranty. The foregoing indemnity shall survive any
termination of this Agreement or the Employment Period for any reason.
14. Amendment and Termination. This Agreement may not be amended or
canceled except by written instrument signed by both parties and approved by the
Board of Directors or a committee thereof.
15. Modification and Waiver of Breach. No waiver or modification of
this Agreement shall be binding unless it is in writing, signed by the parties
hereto. The waiver by Company or Executive of any term or breach of this
Agreement shall not prevent a subsequent enforcement of such term or any other
term and shall not be deemed to be a waiver of any subsequent breach.
16. Notice. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed given or delivered and
received (i) when delivered personally (which shall be deemed to include
delivery via express courier such as Federal Express), or (ii) three days after
having been sent by registered or certified mail, return receipt requested, or
(iii) upon receipt when sent by facsimile, telegram or telex followed by a
confirmation letter sent by registered or certified mail, return receipt
requested, addressed as follows:
If to the Company: Quotesmith.com, Inc.
8205 South Cass Avenue
Suite 102
Darien, IL 60561
Facsimile: (800) 515-0270
Attention: President
With a Copy to: Craig C. Bradley, Esq.
Freeborn & Peters
311 South Wacker Drive
Suite 3000
Chicago, IL 60606
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Facsimile: (312) 360-6573
If to Executive: William V. Thoms
8205 South Cass Avenue
Suite 102
Darien, IL 60561
Facsimile: (800) 515-0270
Either the Company or Executive may, at any time, by notice to the other,
designate another address for service of notice on such party.
17. Non-assignment. The interests of Executive under this Agreement are
not subject to the claims of his creditors and may not be voluntarily or
involuntarily assigned, alienated or encumbered. Company may assign its rights,
duties or obligations under this Agreement to any person with whom it has merged
or consolidated, or to whom it has transferred all, or substantially all, of its
assets.
18. Severability. If any provision of this Agreement is held invalid or
unenforceable, either in its entirety or by virtue of its scope or application
to given circumstances, such provision shall thereupon be deemed (i) modified
only to the extent necessary to render such provision valid, or (ii) not
applicable to given circumstances, or (iii) excised from this Agreement, as the
situation may require, and this Agreement shall be construed and enforced as if
such provision had been included herein as so modified in scope or application,
or had not been included herein, as the case may be. Should this Agreement, or
any one of more of the provisions hereof, be held to be invalid, illegal or
unenforceable within any governmental jurisdiction or subdivision thereof, the
Agreement or any such provision or provisions shall not as a consequence thereof
be deemed to be invalid, illegal or unenforceable in any other governmental
jurisdiction or subdivision thereof.
19. Successors. This Agreement shall be binding upon, and inure to the
benefit of the parties and their permitted successors and assigns. Nothing in
this Agreement, express or implied, is intended or shall be construed to confer
upon any person, other than the parties and their respective successors and
assigns permitted by this Agreement, any right, remedy or claim under, or by
reason of, this Agreement.
20. Entire Agreement. This Agreement constitutes the entire agreement
between Company and Executive with respect to the subject matter hereof. This
Agreement supersedes any prior agreement made between the parties.
21. Counterparts. The Agreement may be executed in two or more
counterparts, any one of which shall be deemed an original and all of which
taken together shall constitute a single instrument.
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<PAGE> 15
22. Governing Law. This Agreement, and all matters or disputes relating
to the validity, construction, performance or enforcement hereof, shall be
governed, construed and controlled by and under the laws of the State of
Illinois without regard to principles of conflicts of law.
23. Effective Date. This Agreement shall be effective on the Effective
Date. If the initial public offering is not consummated, this Agreement shall be
null and void.
24. EXECUTIVE ACKNOWLEDGES THAT HE HAS READ, UNDERSTOOD AND ACCEPTS THE
PROVISIONS OF THIS AGREEMENT. HE ALSO ACKNOWLEDGES THAT HE HAS HAD THE
OPPORTUNITY TO AND HAS REVIEWED THE TERMS AND CONDITIONS OF THIS AGREEMENT.
[Signature page follows]
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IN WITNESS WHEREOF, the parties have executed this Employment Agreement
as of the date written above.
QUOTESMITH.COM, INC.
By:
-------------------------------------
Robert S. Bland
President and Chief Executive Officer
EXECUTIVE
By:
-------------------------------------
William V. Thoms
Executive Vice President
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<PAGE> 1
EXHIBIT 10.5
FORM OF
EMPLOYMENT AGREEMENT
Quotesmith.com, Inc., a Delaware corporation (the "Company") and Ronald
A. Wozniak ("Executive") enter into this Employment Agreement as of ______, 1999
(the "Agreement"), effective as of the closing date of the Company's initial
public offering pursuant to the S-1 Registration Statement with the Securities
and Exchange Commission on May ___, 1999 (the "Effective Date").
WHEREAS, Company is planning an initial public offering of its stock,
and has begun to take the necessary steps in furtherance of this course of
action;
WHEREAS, as a condition to taking the Company public, the parties have
agreed to enter into a new Agreement; and
WHEREAS, both the Executive and the Company are willing to enter into
this Agreement upon the terms and conditions herein set forth;
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company and
Executive hereby covenant and agree as follows:
1. TERM OF EMPLOYMENT. The Company shall employ Executive, and
Executive shall be employed by the Company for the period that begins effective
as of __________, 1999, and ends on December 31, 2001 or such earlier date as
Executive's employment terminates under Section 3 of this Agreement (the
"Employment Term"). After expiration of the initial term, as set forth herein,
the Employment Term shall automatically be renewed each January 1 for successive
one-year terms unless the Company or Executive delivers written notice to the
other party at least sixty (60) days preceding the expiration of the initial
term or any one-year extension date of the intention not to extend the term of
this Agreement.
2. PERFORMANCE OF DUTIES. Executive shall have the title of Vice
President of Information Systems. Executive will report to the Company's
President and Chief Executive Officer, or such other officer as the Board of
Directors may direct. Executive will have such powers and perform such duties as
are normally incident to the position of Vice President as provided in the
Company's by-laws and in accordance with applicable law. Executive will
discharge his duties subject to and in observance of such reasonable rules,
regulations, policies, directions and restrictions as may be established from
time to time by the Company.
Throughout the Employment Term, Executive shall devote substantially his full
business time, attention, knowledge and skills, faithfully, diligently and to
the best of his ability, to the active performance of his duties and
responsibilities hereunder, and do such traveling as may reasonably be required
in connection with the performance of such duties and responsibilities.
<PAGE> 2
3. COMPENSATION.
(a) BASE SALARY. For services rendered by Executive to the
Company during the Employment Term the Company will pay Executive an annual base
salary payable in monthly or more frequent installments, in accordance with the
usual payroll practice of the Company in an amount equal to $_______ (the "Base
Salary"), less income tax withholdings and other normal employee deductions. The
Base Salary shall not be decreased during the Employment Term but may, at the
sole discretion of the Company, from time to time be increased by an amount
which the Company deems appropriate.
(b) BONUS. At the reasonable determination of the Board, the
Executive shall be eligible to receive an annual bonus based upon the factors
reasonably chosen by the Board, including, without limitation, the profitability
of the Company and performance of, or contribution by, Executive with respect
thereto. Such bonus shall be payable within ninety (90) days after the end of
the fiscal year in which it is earned.
(c) VACATION. Throughout the Employment Term, Executive will
be entitled to take, at such times as are mutually convenient to Executive and
the Company, a total of three (3) weeks of paid vacation annually in accordance
with the Company's policy.
(d) FRINGE BENEFITS. The Company shall make available to
Executive, throughout the Employment Term, such benefits and perquisites as are
generally provided by the Company to its executive employees. Executive shall be
eligible to participate in and receive coverage and benefits under all group
insurance, stock ownership and other employee benefit plans, programs and
arrangements of the Company which are now or hereafter adopted by the Company
for the benefit of its senior executive employees, subject to and on a basis
consistent with the terms, conditions and overall administration of such plans,
programs and arrangements.
(e) BUSINESS EXPENSES. The Company shall reimburse Executive
for the reasonable and necessary business expenses incurred by Executive in
connection with the performance of his employment duties during the Employment
Term. Such expenses shall include, but are not limited to, all expenses of
travel and living expenses while away from home on business or at the request of
and in the service of the Company, provided that such expenses are incurred and
accounted for in accordance with the policies and procedures established by the
Company. Reimbursement shall be made upon the presentation by Executive to the
Company of reasonably detailed statements of such expenses.
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<PAGE> 3
4 TERMINATION.
(a) FOR CAUSE. The Employment Term may be terminated at any
time at the option of the Company for "Cause," as defined in this subsection
(a), effective upon Notice of Termination, as defined in subsection (f), to
Executive. As used in this Agreement, the term "Cause" means: (i) Executive's
conviction of, or plea of nolo contendere to, a felony; (ii) Executive's breach
of any legal duty of loyalty to the Company, misappropriation of the Company's
funds, or dishonest, fraudulent, illegal or unethical business conduct; (iii)
Executive's failure to satisfactorily perform his duties under this Agreement,
which failure continues after notice from the Company and a reasonable cure
period; (iv) Executive's breach of the obligations provided in sections 6, 7 or
8 of this Agreement; (v) Executive's illegal use of controlled substances, (vi)
any material breach of this Agreement by the Executive (other than one
identified above) which shall continue after notice from the Company and a
reasonable cure period. Termination for Cause shall be effective immediately for
those events described in subparagraphs (i), (ii), (iv), and (v). Termination
for Cause shall be effective immediately upon the giving of notice by the
Company to Executive of the continuance of Executive's failure to perform or
comply with respect to the items described in subparagraph (iii) above or the
continuance of a breach described in subparagraph (vi) above. In the event that
the Executive is purportedly terminated for cause and a court, arbitrator, or
other tribunal having jurisdiction determines that Cause was not present, then
such purported termination for Cause shall be deemed a termination without Cause
pursuant to section 4(b) and Executive's rights and remedies will be governed by
section 4(g) hereof, in full satisfaction and in lieu of any and all other or
further remedies the Executive may have.
(b) WITHOUT CAUSE. The Company may terminate the Executive
without Cause and for any reason effective upon Notice of Termination to the
Executive or such later date as may be specified in such notice.
(c) DEATH. The Employment Term shall terminate automatically
effective upon the death of Executive.
(d) DISABILITY. The Employment Term shall terminate
automatically effective upon Notice of Termination to Executive (or such later
date as may be specified in such notice) following a determination by the Board
of Directors that the Executive is unable to perform the essential functions of
his employment position due to a disability of Executive that cannot be
reasonably accommodated by the Company.
(e) TERMINATION BY EXECUTIVE. Executive may terminate the
Employment Term upon Notice of Termination to the Company delivered at least 60
days before the effective date of termination.
(f) NOTICE OF TERMINATION. Any termination of the Employment
Term by the Company or by Executive (other than termination upon Executive's
death) shall be
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<PAGE> 4
communicated by written Notice of Termination to the other party hereto. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Employment Term under the section so
indicated.
(g) TERMINATION DISPUTES. If, within 30 days after any Notice
of Termination is given, the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding and final arbitration
award or by a final judgment, order or decree of a court of competent
jurisdiction (the time for appeal therefrom having expired and no appeal having
been perfected).
5. SEVERANCE BENEFITS.
(a) TERMINATION FOR CAUSE OR BY EXECUTIVE. If the Employment
Term is terminated by the Company for Cause under section 4(a) of this
Agreement, or if the Employment Term is terminated by the Executive under
section 4(e) of this Agreement, the Company shall have no further liability
under this Agreement except to pay Executive (i) the value of any accrued salary
or other compensation due to Executive as of the effective date of such
termination, and (ii) any benefit payable under the employee benefit plans,
programs and arrangements of the Company in which Executive is a participant on
the date of delivery of the Notice of Termination.
(b) TERMINATION WITHOUT CAUSE. If the Employment Term is
terminated by the Company without Cause (other than because of death or
disability) under section 4(b), the Company shall pay Executive (A) the value of
any accrued salary or other compensation due to Executive as of the effective
date of such termination, (B) any benefit payable under the employee benefit
plans, programs and arrangements of the Company in which Executive is a
participant on the date of delivery of Notice of Termination, and (C) severance
benefits in an amount equal to the product of Executive's Base Salary in effect
as of the date of such termination, multiplied by one, payable in a lump sum on
or before the fifteenth date following the date of termination.
(c) COMPENSATION UPON DEATH. If the Employment Term is
terminated by the death of the Executive, the Company shall have no further
liability under this Agreement except to pay Executive (i) the value of any
accrued salary, or other compensation due to Executive as of the date of the
Executive's death, and (ii) any benefit payable under all employee benefit
plans, programs and arrangements of the Company in which Executive is a
participant on the date of his death.
(d) COMPENSATION UPON DISABILITY. If the Employment Term is
terminated by the Company under section 4(d) of this Agreement due to
Executive's disability, the
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<PAGE> 5
Company shall have no further liability under this Agreement except to pay
Executive (i) the value of any accrued salary or other compensation due to
Executive as of the effective date of such termination, and (ii) any benefit
payable under the employee benefit plans, programs and arrangements of the
Company in which Executive is a participant on the date of delivery of the
Notice of Termination, provided, however, that in the event Executive is paid
disability benefits under any disability benefit plan of the Company in which he
participates, any salary payments made to Executive during such period shall be
reduced by the sum of such amounts.
6. CONFIDENTIAL INFORMATION.
(a) DISCLOSURE AND USE. Executive shall not disclose or use at
any time, either during or after Executive's employment with the Company or any
other direct or indirect subsidiary of the Company (collectively referred to
herein as the "Company"), any trade secrets or other confidential information,
whether patentable or not, of the Company, including but not limited to,
technical or non-technical data, a formula, pattern, compilation, program,
device, method, technique, drawing, process, financial data, or list of actual
or potential customers or suppliers, of which Executive is or becomes informed
or aware during his employment, whether or not developed by Executive, except
(i) as may be required for Executive to perform his employment duties with the
Company; (ii) to the extent such information has been disclosed to Executive by
a third party who is not subject to restriction on the dissemination of such
information or becomes generally available to the public other than as a result
of a disclosure by a party who is not subject to restriction on the
dissemination of such information; (iii) information which must be disclosed as
a result of a subpoena or other legal process, after the Company has had the
opportunity to request a suitable protective order for such information, or (iv)
unless Executive shall first secure the Company's prior written authorization.
This covenant shall survive the termination of Executive's employment with the
Company, and shall remain in effect and be enforceable against Executive for so
long as any such Company secret or confidential information retains economic
value, whether actual or potential, from not being generally known to other
persons who can obtain economic value from its disclosure or use. Executive
shall execute such reasonable further agreements of Executive's obligations to
the Company concerning non-disclosure of Company trade secrets and confidential
information as the Company may require from time to time.
(b) RETURN OF MATERIALS. Upon termination of the Employment
Term, Executive (or in the event of termination due to Executive's death, his
estate or devisee, legatee or other designee, as applicable) shall promptly
deliver to the Company all assets of the Company, including materials of a
secret or confidential nature relating to the Company's business, which are in
the possession or under the control of Executive.
7. INVENTIONS AND DISCOVERIES. Executive hereby assigns to the Company
all of his rights, title and interest in and to all inventions, discoveries,
processes, designs and other intellectual property, including without
limitation, copyrights, patents, trademarks and trade names (hereinafter
referred to collectively as the "Inventions"), and all improvements on
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<PAGE> 6
existing Inventions made or discovered by Executive during the Employment Term.
Promptly upon the development or making of any such Invention or improvement
thereon, Executive shall disclose the same to the Company and shall execute and
deliver to the Company such reasonable documents as the Company may request to
confirm the assignment of Executive's rights therein and, if requested by the
Company, shall assist the Company in applying for copyrights and trademark
protection and in applying for and prosecuting any patents which may be
available for said Invention or improvement. The Company acknowledges and hereby
notifies Executive that this section 6 does not apply to an Invention for which
no equipment, supplies, facility or trade secret information of the Company was
used and which was developed entirely on Executive's own time, unless (a) the
Invention relates to (i) the business of the Company, or (ii) the Company's
actual or demonstrably anticipated research or development, or (b) the Invention
results from any work performed by Executive for the Company.
8. RESTRICTIVE COVENANTS.
(a) RESTRICTION ON COMPETITION. During the Employment Term and
for a two-year period following the Employment Term, Executive shall not,
without the prior written authorization of the Board of Directors of the
Company, directly or indirectly render services of a business, professional or
commercial nature (whether for compensation or otherwise) to any person or
entity competitive or adverse to the Company's business welfare or engage in any
activity whether alone, as a partner, or as an officer, director, employee,
consultant, independent contractor, or stockholder in any other corporation,
person, or entity which is competitive with or adverse to the Company's business
welfare. This section 8(a) shall not, however, prohibit Executive from investing
in the publicly traded securities issued by any such competitive or adverse
corporation, provided the holdings thereof by Executive do not constitute more
that two percent of any one class of such securities.
(b) RESTRICTION ON EMPLOYEE SOLICITATION. During the
Employment Term and for a two-year period following the Employment Term,
Executive shall not employ or attempt to employ or assist anyone else to employ
any person who is at such time, or at any time during the preceding year was, an
employee of or consultant to the Company, provided that this clause shall not
restrict Executive from employing a third party vendor who supplies generic
services to the industry. As used in this section 8, the verb "employ" shall
include its variations, for example, retain, engage or conduct business with;
the term the "Company" shall include subsidiaries or affiliates, if any, of the
Company.
(c) REASONABLE SCOPE AND TIME. The parties acknowledge that
the time, scope, and other provisions of this Agreement have been specifically
negotiated by the parties and agree that all such provisions are reasonable
under the circumstances and are given as an integral and essential part of
Executive's employment hereunder. In the event that any covenant
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<PAGE> 7
contained in this Agreement is determined by any court of competent jurisdiction
to be unenforceable by reason of its extending for too great a period of time or
by reason of its being too extensive in any other respect, it shall be
interpreted to extend only over the maximum period of time for which it may be
enforceable and to the maximum intent in all other respects as to which it may
be enforceable, all as determined by such court in such action.
9. SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable, either in its entirety or by virtue of its scope or application
to given circumstances, such provision shall thereupon be deemed (i) modified
only to the extent necessary to render it valid, or (ii) not applicable to given
circumstances, or (iii) excised from this Agreement, as the situation may
require, and this Agreement shall be construed and enforced as if such provision
had been included herein as so modified in scope or application, or had not been
included herein, as the case may be.
10. ARBITRATION OF DISPUTES. Any controversy or claim arising out of or
relating to this Agreement, or the breach of this Agreement, (other than a
controversy arising out of or relating to Sections 6, 7 or 8 hereof), shall be
settled by arbitration in Chicago, Illinois, conducted in accordance with the
American Arbitration Association Commercial Arbitration Rules and the
Supplementary procedures for Large, Complex Disputes, by an independent
arbitrator. Either the Company or Executive may institute such arbitration
proceeding by giving written notice to the other party. The decision of the
arbitrator shall be final and binding upon both parties hereto. Judgment upon
the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof.
11. ENFORCEMENT. Executive hereby acknowledges that the Company would
suffer irreparable injury if the provisions of sections 6, 7, and 8 herein,
which shall survive the termination of this Agreement, were breached and that
the Company's remedies at law would be inadequate in the event of such breach or
threatened breach. Accordingly, Executive hereby agrees that any such breach or
threatened breach may, in addition to any and all other available remedies
(including those remedies provided in section 10), be preliminarily and
permanently enjoined in a court of law or equity by the Company without bond.
12. LEGAL FEES AND EXPENSES. In the event of litigation or arbitration
under this Agreement, the prevailing party shall be entitled, in addition to
such other relief as may be granted, to its attorneys' fees and costs incurred
by reason of such litigation or arbitration.
13. GENERAL PROVISIONS.
(A) NOTICES. Any notice, request, demand or other
communication required or permitted to be given hereunder shall be in writing
and personally delivered or sent by registered or certified mail, return receipt
requested, or by a facsimile, telegram or telex followed by a confirmation
letter sent by registered or certified mail, return receipt requested, addressed
as follows:
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<PAGE> 8
To the Company: Quotesmith.com, Inc.
8205 South Cass
Darien, IL 60561
Attention: President
Fax: (800) 515-0270
with a copy to: Craig C. Bradley, Esq.
Freeborn & Peters
311 South Wacker Drive
Suite 3000
Chicago, Illinois 60606
Fax: (312) 360-6573
To Executive: Mr. Ronald A. Wozniak
8205 South Cass
Darien, IL 60561
Either the Company or Executive may, at any time, by notice to the other,
designate another address for service of notice on such party. When the letter,
facsimile, telegram or telex is dispatched as provided for above, the notice
shall be deemed to be made when the addressee receives the letter, facsimile,
telegram or telex, or within three days after it is sent, whichever is earlier.
(b) AMENDMENTS. Neither this Agreement nor any of the terms or
conditions hereof may be waived, amended or modified except by means of a
written instrument duly executed by the party to be charged therewith.
(c) CAPTIONS AND HEADINGS. The captions and section headings
used in this Agreement are for convenience of reference only, and shall not
affect the construction or interpretation of this Agreement or any of the
provisions hereof.
(d) GOVERNING LAW. This Agreement, and all matters or disputes
relating to the validity, construction, performance or enforcement hereof, shall
be governed, construed and controlled by and under the laws of the State of
Illinois without regard to principles of conflicts of law.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, personal representatives, successors and
permitted assigns.
(f) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original hereof, but all
of which together shall constitute one and the same instrument.
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<PAGE> 9
(g) ENTIRE AGREEMENT. Except as otherwise set forth or
referred to in this Agreement, this Agreement constitutes the sole and entire
agreement and understanding between the parties hereto as to the subject matter
hereof, and supersedes all prior discussions, agreements and understandings of
every kind and nature between them as to such subject matter.
(h) RELIANCE BY THIRD PARTIES. This Agreement is intended for
the sole and exclusive benefit of the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors and permitted
assigns, and no other person or entity shall have any right to rely on this
Agreement or to claim or derive any benefit therefrom absent the express written
consent of the party to be charged with such reliance or benefit.
14. EFFECTIVE DATE. This Agreement shall be effective on the Effective
Date. If the initial public offering is not consummated, this Agreement shall be
null and void.
15. ACKNOWLEDGMENT. EXECUTIVE ACKNOWLEDGES THAT HE HAS READ, UNDERSTOOD
AND ACCEPTS THE PROVISIONS OF THIS AGREEMENT. HE ALSO ACKNOWLEDGES THAT HE HAS
HAD THE OPPORTUNITY TO AND HAS REVIEWED THE TERMS AND CONDITIONS OF THIS
AGREEMENT.
[Signature page follows]
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<PAGE> 10
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
as of the date written above.
QUOTESMITH.COM, INC.
By: ________________________________
Robert S. Bland, President
By:_________________________________
Ronald A. Wozniak
Vice President of Information
Systems
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<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
Quotesmith.com, Inc., a Delaware corporation (the "Company") and Thomas
A. Munro ("Executive") enter into this Employment Agreement as of ______________
____, 1999 (the "Agreement"), effective as of the Effective Date.
WHEREAS, Company is planning an initial public offering of its stock,
and has begun to take the necessary steps in furtherance of this course of
action;
WHEREAS, as a condition to taking the Company public, the parties have
agreed to enter into a new Employment Agreement;
WHEREAS, the Company desires to employ Executive upon the terms and
subject to the conditions of this Agreement; and
WHEREAS, Executive desires to be employed by the Company upon the terms
and subject to the conditions of this Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth below, and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and Executive hereby
covenant and agree as follows:
1. Definitions. For purposes of this Agreement, the following
capitalized terms shall have the following meanings, and all other capitalized
terms used in this Agreement but not defined in this paragraph 1 shall have the
meanings assigned elsewhere in this Agreement:
"Base Salary" means $_______.
"Cause" means:
(i) Executive's conviction of (or plea of no contest or
similar plea to) a felony; or
(ii) Executive's intentional continuing refusal to
substantially perform his obligations and duties under this
Agreement (except by reason of incapacity due to illness or
accident) if he (a) shall have failed to remedy the alleged
breach caused by such conduct within 30 days from the date
written notice is given by the Company demanding that he
remedy the alleged breach caused by such conduct, or (b) shall
have failed to take reasonable steps in good faith to that end
during such 30-day period, provided that after the end of such
30-day period there shall have been delivered to Executive a
certified copy of a resolution of the Board of Directors of
the Company, taken at a meeting of the Board of Directors at
which Executive, together with his counsel, is given the
opportunity to be heard, finding that Executive was guilty of
intentionally refusing to substantially perform his
obligations and duties
<PAGE> 2
under this Agreement and specifying the details thereof, and
that Executive has failed to take reasonable steps in good
faith to remedy the alleged breach caused by such conduct,
(iii) upon a finding that Executive engaged in willful
fraud or defalcation, either of which involved funds or other
assets of the Company; or
(iv) upon Executive's breach of any material term of
this Agreement (including, but not limited to, the noncompete
and confidentiality provisions in paragraphs 7 and 8).
"Change in Control" means and shall be deemed to occur:
(i) in the event any "person" (as such term is used in
paragraphs 13(d) and 14(d) of the Exchange Act) (other than
Robert S. Bland and his affiliates) or more than one such
person acting as a group, other than a trustee or other
fiduciary holding securities under an employee benefit plan of
the Company, is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly,
of the securities of the Company, in a transaction or a series
of transactions, representing thirty percent (30%) or more of
the combined voting power of the Company's then outstanding
securities ordinarily having the right to vote for the
election of directors of the Company;
(ii) during any period of two consecutive years during
the Employment Period, individuals who at the beginning of the
Employment Period constitute the Board of Directors of the
Company cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election
by the Company's stockholders, of each director who was not a
director at the beginning of the Employment Period has been
approved in advance by directors representing at least
two-thirds of the directors then in office who were (A)
directors at the beginning of the Employment Period, or (B)
previously approved in accordance with this subparagraph (ii);
(iii) the Company sells or otherwise disposes of all or
substantially all of its assets; and
(iv) the Company participates in a merger or
consolidation and, immediately following the consummation of
such merger or consolidation, the Company's stockholders prior
to such merger or consolidation do not own 50% or more of the
voting shares of stock of the surviving or successor
corporation.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor thereto.
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"Compensation Committee" means the applicable compensation committee of
the Board of Directors of the Company.
"Disabled" or "Disability" means a determination, made at the request
of Executive or upon the reasonable request of the Company set forth in
a notice to Executive, by a physician selected by the Company and
Executive, that Executive is unable to perform his duties as specified
in this Agreement and in all reasonable medical likelihood such
inability will continue for a period in excess of 180 days, or for
shorter periods aggregating to more than 180 days in any consecutive
nine-month period.
"Effective Date" shall be the closing date of the Company's initial
public offering pursuant to the S-1 Registration Statement with the
Securities and Exchange Commission on May ____, 1999.
"Employment Period" means the term of Executive's employment pursuant
to the provisions of this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any successor thereto.
"Good Reason" means:
(i) a Change in Control of the Company;
(ii) a decrease in the total amount of Executive's Base
Salary below the amount in effect on the date hereof;
(iii) a reduction in Executive's title, a material
reduction in his authority, duties or job responsibilities, a
material adverse change in his working conditions (including
the relocation of Executive's office more than 40 miles from
the Company's present executive offices), without Executive's
consent, as determined by Executive in his reasonable
judgment;
(iv) a failure by the Company to comply with any material
provision of this Agreement if the Company shall have failed
to remedy the alleged breach within 60 days from the date
written notice of such noncompliance is given by Executive to
the Company; or
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(v) any purported termination of Executive's employment
which is not effected pursuant to a proper Notice of
Termination (and for purposes of this Agreement no such
purported termination shall be effective).
"Notice of Termination" means a written notice of either the Company or
Executive, as applicable, setting forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination.
"Termination Date" means the effective date of employment termination.
2. Term of Employment. The Company shall employ Executive, and
Executive shall be employed by the Company and shall provide services to the
Company upon the terms and conditions hereinafter set forth. The initial term of
Executive's employment with the Company shall continue, unless earlier
terminated pursuant to Section 5 hereof, through December 31, 2001 (the
"Employment Period"); provided, however, that after expiration of the initial
term, the Employment Period shall automatically be renewed each January 1 for
successive one-year terms unless the Company or Executive delivers written
notice to the other party at least sixty (60) days preceding the expiration of
the initial term or any one-year extension date of the intention not to extend
the term of this Agreement.
3. Performance of Duties. Executive shall have the titles of Vice
President and Chief Financial Officer of the Company, and he shall possess such
powers and perform such duties as are normally incident to such position, as
provided in the By-laws of the Company and in accordance with the General
Corporation Law of the State of Delaware. During this period, Executive agrees
that he shall perform his duties faithfully and efficiently subject to the
direction of the President and the Board of Directors of the Company, and the
Company agrees that Executive shall be required to report to the President and
to the Board of Directors.
Executive agrees that during the Employment Period he shall devote substantially
his full business time to business affairs of the Company, provided, however,
that notwithstanding any other provision hereof, Executive may serve in any
capacity with any civic, educational and charitable organization provided, in
each case, such activities do not materially interfere with the performance of
his duties hereunder, and such service is consistent with all Company policies
and procedures regarding such service. Executive shall be entitled to retain all
compensation (whether in the form of cash, equity securities or perquisites)
paid or delivered to Executive in connection with such civic, educational or
charitable activities. Executive agrees that Executive shall not, without the
prior consent of the Board of Directors of the Company (which consent shall not
be unreasonably withheld), agree to serve on any boards of directors other than
the boards of directors upon which Executive presently serves.
4. Compensation. For services rendered by Executive, and upon the
condition that Executive fully and faithfully perform all of his duties and
obligations set forth herein, Executive shall be compensated for his services as
follows:
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<PAGE> 5
1. Base Salary. Executive shall receive an annual salary,
payable in monthly or more frequent installments, in accordance with
the usual payroll practice of the Company, in an amount equal to
$________ (the "Base Salary"), less income tax withholdings and other
normal employee deductions. The Base Salary shall be reviewed annually
as of the end of each fiscal year commencing January 1, 2002 by the
Compensation Committee, and may, at the sole discretion of the
Compensation Committee, be increased by an amount that it deems
appropriate. If the Base Salary is increased by the Compensation
Committee, it shall not be decreased thereafter during the Employment
Period.
2. Bonus. Executive shall receive bonus payments in
accordance with any arrangements or bonus plans established by the
Company, in such amounts and upon such terms as are determined by the
Compensation Committee.
(c) Management Stock Option Plan. Should the Company
establish a stock option plan or plans with respect to which senior
executives of the Company participate and which excepts other employees
of the Company generally, Executive shall be entitled to participate in
such plans in the same manner as other senior executives of the
Company.
(d) Benefits. During his employment with the Company,
Executive shall be entitled to participate, to the extent he meets all
eligibility requirements of general application, in any and all
employee benefit plans, programs and arrangements which are now or
hereafter adopted by the Company to provide benefits for its employees,
including, but not limited to, medical and hospitalization, group term
life insurance, disability, and retirement plans. Additionally,
Executive shall receive such other benefits as Company may make
generally available to its senior executive officers.
(e) Vacation. Executive shall be entitled to _______weeks
of paid vacation, in accordance with the policy of the Company in
effect from time to time, to be taken at times agreeable to both the
Executive and the Company.
(f) Travel and Expenses. The Company shall reimburse
Executive for the reasonable and necessary business expenses incurred
by him in connection with the performance of his duties and obligations
as set forth herein consistent with any existent Company policy with
respect to same. Reimbursement shall be made upon the presentation by
Executive to the Company of reasonably detailed statements of such
expenses.
Payment of the Base Salary shall not in any way limit or reduce any other
obligation of the Company pursuant to this Agreement, and no other compensation,
benefit, or payment hereunder shall in any way limit or reduce the obligation of
the Company to pay Executive's Base Salary, except that, for the period
commencing on the date Executive becomes Disabled and ending on the Termination
Date, the Base Salary shall be reduced by any amounts that are payable to
Executive prior to or during such period under any disability benefit plan of
the Company in which Executive participates.
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<PAGE> 6
5. Termination. Executive's employment hereunder shall terminate
at the end of the Employment Period. In addition, the Employment Period may be
terminated at any time as provided herein. After Notice of Termination has been
delivered, and prior to the Termination Date, Executive shall make reasonable
efforts to cooperate with Company in achieving a transition of Executive's
duties and responsibilities.
1. Cause. The Employment Period may be terminated at the
option of the Company for Cause effective upon the date stated in the
Notice of Termination to Executive.
2. Death. The Employment Period will terminate
automatically effective upon Executive's death.
3. Disability. In the event Executive becomes Disabled (as
such term is hereinafter defined) during the Employment Period, and the
Company is unable to make a reasonable accommodation which would enable
Executive to continue to perform the essential functions of his
employment position with the Company, the Employment Period may be
terminated at the option of Executive or the Company effective 30 days
after a Notice of Termination is given (provided that Executive shall
not have returned to the performance of his duties on a full-time basis
during such 30-day period). Unless otherwise agreed by Executive and
the Board of Directors, the determination by the physician selected by
Company and Executive that Executive is Disabled shall be binding upon
the Company and Executive.
4. Voluntary Resignation. Executive may resign his
employment at any time with or without Good Reason, effective upon
Notice of Termination (which shall state whether such resignation is
with Good Reason) given by Executive to the Company.
5. Termination without Cause by the Company. The Company
may terminate Executive's employment at any time, effective upon Notice
of Termination (which shall state that such termination is without
Cause) given by the Company to Executive.
If, within 30 days after any Notice of Termination for Cause is given by the
Company, Executive notifies the Company that a dispute exists concerning the
termination, then the Termination Date shall be the date (the "Final
Determination") as determined either by mutual written agreement of the parties,
by a binding and final arbitration award or by a final judgment, order or decree
of a court of competent jurisdiction (the time for appeal therefrom having
expired and no appeal having been perfected). Notwithstanding the foregoing, the
Company shall not be prohibited from removing Executive from his position with
the Company pending the Final Determination provided that such removal is
without prejudice to Executive's rights to receive all benefits from the Company
to which he may be entitled upon the Final Determination.
6. Separation Benefits. Executive shall be entitled to receive
separation benefits upon such events and in such amounts as are set forth in
this Section 6.
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<PAGE> 7
1. Termination Without Cause or for Good Reason. In the
event that Executive's employment with the Company is terminated at any
time during the Employment Period by the Company without Cause, or by
Executive for Good Reason, then Executive (or if he shall have died
after termination but prior to payment, his surviving spouse, or if he
leaves no spouse, his personal representative, as successor in
interest) shall be paid by the Company an amount equal to the product
of Executive's Base Salary in effect as of the Date of Termination,
multiplied by two, payable in cash in a lump sum on or before the
fifteenth day following the Date of Termination.
2. Termination Upon Death. If the Employment Period is
terminated by Executive's death, the Company shall pay Executive's
surviving spouse, or if he leaves no spouse, his personal
representative, as successor in interest, (i) an amount equal to the
then current Base Salary (paid in one lump sum payment on or before the
fifteenth day following the date of Executive's death), and (ii) any
death benefit payable under any employee benefit plans, programs and
arrangements of the Company in which Executive is a participant on the
date of his death.
3. Termination Upon Disability. If the Employment Period
is terminated in accordance with the terms of paragraph 5(c) because of
Executive's Disability, the Company shall pay to Executive (or in the
event of Executive's death after finding of Disability, his surviving
spouse, or if he leaves no spouse, his personal representative, as
successor in interest) all compensation and benefits specified under
paragraph 4 herein, for a period of one year from the Date of
Termination, payable in the same manner as if the Employment Period had
not been terminated.
4. Additional Separation Benefit. For a period of three
years following (i) the full completion of the Employment Period or
(ii) following the Date of Termination of the Employment Period for any
reason other than termination by the Company for Cause or termination
by Executive for other than Good Reason, the Company shall permit, at
the Company's expense, Executive, his spouse and dependents, as
applicable (the "Benefit Participants"), to participate in all group
medical health insurance plans and employee benefit plans, programs and
arrangements now or hereafter made available to the senior executive
employees of the Company (the "Plans") (including but not limited to
such Plans in which Executive was entitled to participate immediately
prior to the Date of Termination), in the same manner provided to its
other senior executive employees; provided, however, that this
paragraph 6(d) shall not apply in the event that (i) the Company shall
hereafter terminate the applicable Plan, or (ii) the participation of
the Benefit Participants in such Plan is prohibited by law or, if
applicable, would disqualify such Plan as a tax qualified plan pursuant
to the Code, or (iii) the participation of the Benefit Participants
violates the general terms and provisions of such applicable Plan. In
the event that any of the Benefit Participants' participation in such
Plans is prohibited by law or, if applicable, would disqualify the Plan
as a tax qualified plan, or the participation of the Benefit
Participants violates the general terms
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<PAGE> 8
and provisions of such applicable Plan, the Company shall permit the
Benefit Participants to acquire substantially comparable coverage or
benefits, at the Company's expense, from a source of Executive's or his
spouse's choosing, provided, however, that if provision of such
coverage or benefit would result in a cost of excess of 130% of the
cost to the Company if provided under a Company Plan, the Company may
satisfy its obligations under this paragraph 6(d) by contributing to
the Benefit Participants 130% of the cost to the Company under the
Company Plans. Notwithstanding the foregoing, in no event will the
Benefit Participants receive from the Company the coverage and benefits
contemplated by this paragraph 6(d) if the Benefit Participants receive
such coverage and benefits from any other source.
5. Excise Tax Gross-Up. If Executive becomes entitled to
one or more payments (with a "payment" including, but not limited to,
the vesting of an option or other non-cash benefit or property),
whether pursuant to the terms of this Agreement or any other plan,
arrangement, or agreement with the Company or any affiliated company
(the "Total Payments"), which are or become subject to the tax imposed
by Section 4999 of the Code (or any similar tax that may hereafter be
imposed) (the "Excise Tax"), the Company shall pay to Executive at the
time specified below an additional amount (the "Gross-Up Payment")
(which shall include, but not be limited to, reimbursement for any
penalties and interest that may accrue in respect of such Excise Tax)
such that the net amount retained by Executive, after reduction for any
Excise Tax (including any penalties or interest thereon) on the Total
Payments and any federal, state and local income or employment tax and
Excise Tax on the Gross-Up Payment provided for by this subparagraph
(e), but before reduction for any federal, state, or local income or
employment tax on the Total Payments, shall be equal to the sum of (a)
the Total Payments, and (b) an amount equal to the product of any
deductions disallowed to Executive for federal, state, or local income
tax purposes because of the inclusion of the Gross-Up Payment in
Executive's adjusted gross income multiplied by the highest applicable
marginal rate of federal, state, or local income taxation,
respectively, for the calendar year in which the Gross-Up Payment is to
be made.
For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such
Excise Tax:
1. The Total Payments shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2)
of the Code, and all "excess parachute payments" within the
meaning of Section 280G(b)(1) of the Code shall be treated as
subject to the Excise Tax, unless, and except to the extent
that, in the written opinion of independent compensation
consultants or auditors of nationally recognized standing
("Independent Advisors") selected by the Company and
reasonably acceptable to Executive, the Total Payments (in
whole or in part) do not constitute parachute payments, or
such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered within
the meaning of Section
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<PAGE> 9
280G(b)(4) of the Code in excess of the base amount within the
meaning of Section 280G(b)(3) of the Code or are otherwise not
subject to the Excise Tax;
2. The amount of the Total Payments which shall
be treated as subject to the Excise Tax shall be equal to the
lesser of (A) the total amount of the Total Payments or (B)
the total amount of excess parachute payments within the
meaning of Section 280G(b)(1) of the Code (after applying
clause (i) above); and
3. The value of any non-cash benefits or any
deferred payment or benefit shall be determined by the
Independent Advisors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up
Payment, Executive shall be deemed (A) to pay federal income taxes at
the highest marginal rate of federal income taxation for the calendar
year in which the Gross-Up Payment is to be made; (B) to pay any
applicable state and local income taxes at the highest marginal rate of
taxation for the calendar year in which the Gross-Up Payment is to be
made, net of the maximum reduction in federal income taxes which could
be obtained from deduction of such state and local taxes if paid in
such year (determined without regard to limitations on deductions based
upon the amount of Executive's adjusted gross income); and (C) to have
otherwise allowable deductions for federal, state, and local income tax
purposes at least equal to those disallowed because of the inclusion of
the Gross-Up Payment in Executive's adjusted gross income. In the event
that the Excise Tax is subsequently determined to be less than the
amount taken into account hereunder at the time the Gross-Up Payment is
made, Executive shall repay to the Company at the time that the amount
of such reduction in Excise Tax is finally determined (but, if
previously paid to the taxing authorities, not prior to the time the
amount of such reduction is refunded to Executive or otherwise realized
as a benefit of Executive) the portion of the Gross-Up Payment that
would not have been paid if such Excise Tax had been applied in
initially calculating the Gross-Up Payment, plus interest on the amount
of such repayment at the rate provided in Section 1274(b)(2)(B) of the
Code. In the event that the Excise Tax is determined to exceed the
amount taken into account hereunder at the time the Gross-Up Payment is
made (including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in respect of such
excess (plus any interest and penalties payable with respect to such
excess) at the time that the amount of such excess is finally
determined.
The Gross-Up Payment provided for above shall be paid
on the 30th day (or such earlier date as the Excise Tax becomes due and
payable to the taxing authorities) after it has been determined that
the Total Payments (or any portion thereof) are subject to the Excise
Tax; provided, however, that if the amount of such Gross-Up Payment or
portion thereof cannot be finally determined on or before such day, the
Company shall pay to Executive on such day an estimate, as determined
by he Independent Advisors, of the
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<PAGE> 10
minimum amount of such payments and shall pay the remainder of such
payments (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code), as soon as the amount thereof can be
determined. In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to Executive, payable on
the fifth day after demand by the Company (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code). If more than
one Gross-Up Payment is made, the amount of each Gross-Up Payment shall
be computed so as not to duplicate any prior Gross-Up Payment. The
Company shall have the right to control all proceedings with the
Internal Revenue Service that may arise in connection with the
determination and assessment of any Excise Tax and, at its sole option,
the Company may pursue or forego any and all administrative appeals,
proceedings, hearings, and conferences with any taxing authority in
respect of such Excise Tax (including any interest or penalties
thereon); provided, however, that the Company's control over any such
proceedings shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder, and Executive shall be entitled to
settle or contest any other issue raised by the Internal Revenue
Service or any other taxing authority. Executive shall cooperate with
the Company in any proceedings relating to the determination and
assessment of any Excise Tax and shall not take any position or action
that would materially increase the amount of any Gross-Up Payment
hereunder.
7. Noncompetition. During the Employment Period and continuing
until the second anniversary thereof, Executive shall not, without the prior
written authorization of the Board of Directors of the Company, (i) directly or
indirectly render services of a business, professional or commercial nature
(whether for compensation or otherwise) to any person or entity competitive or
adverse to the Company's business welfare, (ii) engage in any activity, whether
alone, as a partner, or as an officer, director, employee, consultant,
independent contractor, or stockholder in any other corporation, person, or
entity which is competitive with or adverse to the Company's business welfare,
(iii) hire or solicit for hire any of the Company's employees, prospective
employees or consultants (iv) solicit the business of any client of the Company,
or any prospective client of the Company that had been serviced or solicited by
the Company during the two (2) years preceding Executive's termination, or (v)
enter into any agreements with any supplier of the Company regarding the sale or
distribution of products of the supplier.
In the event that Executive's employment with the Company is terminated by
Executive or the Company at any time, for any reason whatsoever, the Company
shall have the right to inform any of Executive's future employers or
prospective employers of the existence of this Section 7 of the Agreement. This
Section 7 shall not, however, prevent Executive from investing in securities
issued by any such competitive or adverse corporation provided the holdings
thereof by Executive do not constitute more than three percent of any one class
of such securities.
8. Confidentiality.
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<PAGE> 11
1. Disclosure and Use. Executive shall not disclose or
use, or authorize anyone else to disclose or use, at any time, either
during or after the Employment Period, any trade secrets or other
confidential information of the Company of which Executive is or
becomes informed or aware of prior to or during the Employment Period,
except (i) as may be required for Executive to perform his duties and
obligations under this Agreement, (ii) to the extent such information
has been disclosed to Executive by a third party who is not affiliated
with the Company or which otherwise becomes generally available to the
public, (iii) information which must be disclosed as a result of a
subpoena or other legal process, provided that the Company is given
reasonable notice and an opportunity to obtain a protective order, or
(iv) unless Executive shall first secure the Company's prior written
authorization. This paragraph shall survive the termination of this
Employment Period, whether by lapse of time or otherwise, and shall
remain in effect and be enforceable against Executive for as long as
any such Company trade secrets or confidential information retains
commercial value. Executive shall execute additional agreements and
confirmations of his obligations to the Company concerning such
non-disclosure of Company trade secrets and other confidential
information as the Company may require from time to time, provided that
the execution of such additional agreements and confirmations are (i)
reasonable and (ii) are required of all other senior executive
employees of the Company under similar circumstances.
2. Return of Materials. Upon termination of his employment
for any reason, Executive (or in the event of termination due to
Executive's death, his surviving spouse or personal representative, as
applicable) shall promptly deliver to the Company all materials of a
secret or confidential nature relating to the Company's business, which
are in the possession or under the control of Executive.
9. Inventions. Executive hereby assigns to the Company all of his
rights, title, and interest in and to all inventions, discoveries, processes,
designs, and other intellectual property, including but not limited to trade
secrets, copyrights, patents, trademarks and trade names (collectively
hereinafter referred to as "Inventions"), and all improvements on existing
Inventions made or discovered by Executive during the term of his employment by
the Company. Promptly upon the development or making of any such Invention or
improvement thereon, Executive shall disclose the same to the Company and shall
execute and deliver to it such reasonable documents as it may request to confirm
the assignment of Executive's rights therein and, if requested, shall assist the
Company in applying for copyright, patent or trademark protection and
prosecuting any patents which may be available in respect thereof. The Company
acknowledges and hereby notifies Executive that this paragraph 9 does not apply
to an Invention for which no equipment, supplies, facility or trade secret
information of the Company was used and which was developed entirely on
Executive's own time, unless (a) the Invention relates to (i) the business of
the Company, or (ii) the Company's actual or demonstrably anticipated research
or development, or (b) the Invention results from any work performed by
Executive for the Company.
10. Remedies. If, at any time, Executive violates to any material
extent any of the covenants or agreements set forth in paragraphs 7, 8 or 9, the
Company shall have the right to
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<PAGE> 12
terminate all of its obligations to make further payments under this Agreement.
Executive acknowledges that the Company would be irreparably injured by a
violation of paragraphs 7, 8 or 9, that damages for such a breach are not easily
calculated, and that any remedy at law would be inadequate. Therefore, Executive
agrees that the Company shall be entitled to an injunction restraining Executive
from any actual or threatened breach of paragraphs 7, 8 or 9 or to any other
appropriate equitable remedy without any bond or other security being required.
It is expressly understood between the parties that this injunctive or equitable
relief shall not be Employer's exclusive remedy for breach of this Agreement.
Without limitation, in the event of any breach by Executive of paragraphs 7, 8
or 9 of this Agreement, such Executive shall not be entitled to receive any
salary payments or any other compensation beyond the date of such breach to
which he would otherwise be entitled, and Executive shall be obligated to repay
to Employer salary payments received by him at any time after the occurrence of
such breach.
11. Resolution of Disputes.
1. In the event of any controversy among the parties
hereto arising out of, or relating to, this Agreement (other than a
controversy arising out of or relating to paragraphs 7, 8 or 9 hereof),
which cannot be settled amicably by the parties, such controversy shall
be finally settled by arbitration conducted expeditiously in accordance
with the American Arbitration Association Commercial Arbitration Rules
and the Supplementary Procedures for Large, Complex Disputes, by an
independent arbitrator. Either the Company or Executive may institute
such arbitration proceeding by giving written notice to the other
party. A hearing shall be held by the arbitrator in the City of
Chicago, Illinois, and a decision of the matter submitted to the
arbitrator shall be rendered promptly in accordance with the rules of
the American Arbitration Association. The prevailing party shall be
entitled to all costs and expenses with respect to such arbitration,
including reasonable attorneys' fees. The decision of the arbitrator
shall be final and binding upon all parties hereto. Judgment upon the
award rendered may be entered in any court having jurisdiction thereof.
2. Notwithstanding the foregoing, Executive acknowledges
and agrees that the Company may seek in a court of competent
jurisdiction an injunction prohibiting Executive's breach or alleged
breach of paragraphs 7, 8 and 9.
12. Legal Fees. Should any litigation or arbitration be commenced
concerning any provision of this Agreement or Executive's employment or
termination of employment, the prevailing party shall be entitled, in addition
to such other relief as may be granted, to its attorneys' fees and costs
incurred by reason of such litigation or arbitration.
13. Executive's Representations and Warranties. Executive hereby
represents, warrants, and covenants that:
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<PAGE> 13
(a) Executive has no actual or potential conflict of
interest performing Executive's obligations and duties hereunder, will
avoid any such conflict during the Employment Period and will
immediately report any such conflict to the Company;
(b) the execution, delivery, and performance of this
Agreement by Executive will not violate any law, order, regulation,
agreement, contract, promise or duty by which Executive is bound;
(c) this Agreement is duly executed and is valid and
binding on Executive in accordance with its terms; and
(d) the Inventions developed by Executive for, or
delivered by Executive to, the Company do not and will not infringe
upon any third party trade secrets, copyrights, patents, trademarks or
similar proprietary rights. Executive hereby indemnifies and holds
harmless the Company and its directors, officers, employees,
affiliates, agents, representatives, successors and assigns for any
breach of the foregoing representation and warranty. The foregoing
indemnity shall survive any termination of this Agreement or the
Employment Period for any reason.
14. Amendment and Termination. This Agreement may not be amended
or canceled except by written instrument signed by both parties and approved by
the Board of Directors or a committee thereof.
15. Modification and Waiver of Breach. No waiver or modification
of this Agreement shall be binding unless it is in writing, signed by the
parties hereto. The waiver by Company or Executive of any term or breach of this
Agreement shall not prevent a subsequent enforcement of such term or any other
term and shall not be deemed to be a waiver of any subsequent breach.
16. Notice. Any notice required or permitted to be given under
this Agreement shall be in writing and shall be deemed given or delivered and
received (i) when delivered personally (which shall be deemed to include
delivery via express courier such as Federal Express), or (ii) three days after
having been sent by registered or certified mail, return receipt requested, or
(iii) upon receipt when sent by facsimile, telegram or telex followed by a
confirmation letter sent by registered or certified mail, return receipt
requested, addressed as follows:
If to the Company: Quotesmith.com, Inc.
8205 South Cass Avenue
Suite 102
Darien, IL 60561
Facsimile: (800) 515-0270
Attention: President
With a Copy to: Craig C. Bradley, Esq.
Freeborn & Peters
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311 South Wacker Drive
Suite 3000
Chicago, IL 60606
Facsimile: (312) 360-6573
If to Executive: Thomas A. Munro
8205 South Cass Avenue
Suite 102
Darien, IL 60561
Facsimile: (800) 515-0270
Either the Company or Executive may, at any time, by notice to the other,
designate another address for service of notice on such party.
17. Non-assignment. The interests of Executive under this
Agreement are not subject to the claims of his creditors and may not be
voluntarily or involuntarily assigned, alienated or encumbered. Company may
assign its rights, duties or obligations under this Agreement to any person with
whom it has merged or consolidated, or to whom it has transferred all, or
substantially all, of its assets.
18. Severability. If any provision of this Agreement is held
invalid or unenforceable, either in its entirety or by virtue of its scope or
application to given circumstances, such provision shall thereupon be deemed (i)
modified only to the extent necessary to render such provision valid, or (ii)
not applicable to given circumstances, or (iii) excised from this Agreement, as
the situation may require, and this Agreement shall be construed and enforced as
if such provision had been included herein as so modified in scope or
application, or had not been included herein, as the case may be. Should this
Agreement, or any one of more of the provisions hereof, be held to be invalid,
illegal or unenforceable within any governmental jurisdiction or subdivision
thereof, the Agreement or any such provision or provisions shall not as a
consequence thereof be deemed to be invalid, illegal or unenforceable in any
other governmental jurisdiction or subdivision thereof.
19. Successors. This Agreement shall be binding upon, and inure to
the benefit of the parties and their permitted successors and assigns. Nothing
in this Agreement, express or implied, is intended or shall be construed to
confer upon any person, other than the parties and their respective successors
and assigns permitted by this Agreement, any right, remedy or claim under, or by
reason of, this Agreement.
20. Entire Agreement. This Agreement constitutes the entire
agreement between Company and Executive with respect to the subject matter
hereof. This Agreement supersedes any prior agreement made between the parties.
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<PAGE> 15
21. Counterparts. The Agreement may be executed in two or more
counterparts, any one of which shall be deemed an original and all of which
taken together shall constitute a single instrument.
22. Governing Law. This Agreement, and all matters or disputes
relating to the validity, construction, performance or enforcement hereof, shall
be governed, construed and controlled by and under the laws of the State of
Illinois without regard to principles of conflicts of law.
23. Effective Date. This Agreement shall be effective on the
Effective Date. If the initial public offering is not consummated, this
Agreement shall be null and void.
24. EXECUTIVE ACKNOWLEDGES THAT HE HAS READ, UNDERSTOOD AND
ACCEPTS THE PROVISIONS OF THIS AGREEMENT. HE ALSO ACKNOWLEDGES THAT HE HAS HAD
THE OPPORTUNITY TO AND HAS REVIEWED THE TERMS AND CONDITIONS OF THIS AGREEMENT.
[Signature page follows]
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IN WITNESS WHEREOF, the parties have executed this Employment Agreement
as of the date written above.
QUOTESMITH.COM, INC.
By:
-----------------------------------
Robert S. Bland
President and Chief Executive
Officer
EXECUTIVE
By:
-----------------------------------
Thomas A. Munro
Vice President and Chief
Financial Officer
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<PAGE> 1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
Quotesmith.com, Inc., a Delaware corporation (the "Company") and Burke
A. Christensen ("Executive") enter into this Employment Agreement as of ______,
1999 (the "Agreement"), effective as of the closing date of the Company's
initial public offering pursuant to the S-1 Registration Statement with the
Securities and Exchange Commission on May ___, 1999 (the "Effective Date").
WHEREAS, Company is planning an initial public offering of its stock,
and has begun to take the necessary steps in furtherance of this course of
action;
WHEREAS, as a condition to taking the Company public, the parties have
agreed to enter into a new Agreement; and
WHEREAS, both the Executive and the Company are willing to enter into
this Agreement upon the terms and conditions herein set forth;
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company and
Executive hereby covenant and agree as follows:
1. TERM OF EMPLOYMENT. The Company shall employ Executive, and
Executive shall be employed by the Company for the period that begins effective
as of __________, 1999, and ends on December 31, 2001 or such earlier date as
Executive's employment terminates under Section 3 of this Agreement (the
"Employment Term"). After expiration of the initial term, as set forth herein,
the Employment Term shall automatically be renewed each January 1 for successive
one-year terms unless the Company or Executive delivers written notice to the
other party at least sixty (60) days preceding the expiration of the initial
term or any one-year extension date of the intention not to extend the term of
this Agreement.
2. PERFORMANCE OF DUTIES. Executive shall have the title of
__________Vice President of Operations. Executive will report to the Company's
President and Chief Executive Officer, or such other officer as the Board of
Directors may direct. Executive will have such powers and perform such duties as
are normally incident to the position of Vice President as provided in the
Company's by-laws and in accordance with applicable law. Executive will
discharge his duties subject to and in observance of such reasonable rules,
regulations, policies, directions and restrictions as may be established from
time to time by the Company.
Throughout the Employment Term, Executive shall devote substantially his full
business time, attention, knowledge and skills, faithfully, diligently and to
the best of his ability, to the active performance of his duties and
responsibilities hereunder, and do such traveling as may reasonably be required
in connection with the performance of such duties and responsibilities.
<PAGE> 2
3. COMPENSATION.
(a) BASE SALARY. For services rendered by Executive to the
Company during the Employment Term the Company will pay Executive an annual base
salary payable in monthly or more frequent installments, in accordance with the
usual payroll practice of the Company in an amount equal to $_______ (the "Base
Salary"), less income tax withholdings and other normal employee deductions. The
Base Salary shall not be decreased during the Employment Term but may, at the
sole discretion of the Company, from time to time be increased by an amount
which the Company deems appropriate.
(b) BONUS. At the reasonable determination of the Board, the
Executive shall be eligible to receive an annual bonus based upon the factors
reasonably chosen by the Board, including, without limitation, the profitability
of the Company and performance of, or contribution by, Executive with respect
thereto. Such bonus shall be payable within ninety (90) days after the end of
the fiscal year in which it is earned.
(c) VACATION. Throughout the Employment Term, Executive will
be entitled to take, at such times as are mutually convenient to Executive and
the Company, a total of three (3) weeks of paid vacation annually in accordance
with the Company's policy.
(d) FRINGE BENEFITS. The Company shall make available to
Executive, throughout the Employment Term, such benefits and perquisites as are
generally provided by the Company to its executive employees. Executive shall be
eligible to participate in and receive coverage and benefits under all group
insurance, stock ownership and other employee benefit plans, programs and
arrangements of the Company which are now or hereafter adopted by the Company
for the benefit of its senior executive employees, subject to and on a basis
consistent with the terms, conditions and overall administration of such plans,
programs and arrangements.
(e) BUSINESS EXPENSES. The Company shall reimburse Executive
for the reasonable and necessary business expenses incurred by Executive in
connection with the performance of his employment duties during the Employment
Term. Such expenses shall include, but are not limited to, all expenses of
travel and living expenses while away from home on business or at the request of
and in the service of the Company, provided that such expenses are incurred and
accounted for in accordance with the policies and procedures established by the
Company. Reimbursement shall be made upon the presentation by Executive to the
Company of reasonably detailed statements of such expenses.
4 TERMINATION.
<PAGE> 3
(a) FOR CAUSE. The Employment Term may be terminated at any
time at the option of the Company for "Cause," as defined in this subsection
(a), effective upon Notice of Termination, as defined in subsection (f), to
Executive. As used in this Agreement, the term "Cause" means: (i) Executive's
conviction of, or plea of nolo contendere to, a felony; (ii) Executive's breach
of any legal duty of loyalty to the Company, misappropriation of the Company's
funds, or dishonest, fraudulent, illegal or unethical business conduct; (iii)
Executive's failure to satisfactorily perform his duties under this Agreement,
which failure continues after notice from the Company and a reasonable cure
period; (iv) Executive's breach of the obligations provided in sections 6, 7 or
8 of this Agreement; (v) Executive's illegal use of controlled substances, (vi)
any material breach of this Agreement by the Executive (other than one
identified above) which shall continue after notice from the Company and a
reasonable cure period. Termination for Cause shall be effective immediately for
those events described in subparagraphs (i), (ii), (iv), and (v). Termination
for Cause shall be effective immediately upon the giving of notice by the
Company to Executive of the continuance of Executive's failure to perform or
comply with respect to the items described in subparagraph (iii) above or the
continuance of a breach described in subparagraph (vi) above. In the event that
the Executive is purportedly terminated for cause and a court, arbitrator, or
other tribunal having jurisdiction determines that Cause was not present, then
such purported termination for Cause shall be deemed a termination without Cause
pursuant to section 4(b) and Executive's rights and remedies will be governed by
section 4(g) hereof, in full satisfaction and in lieu of any and all other or
further remedies the Executive may have.
(b) WITHOUT CAUSE. The Company may terminate the Executive
without Cause and for any reason effective upon Notice of Termination to the
Executive or such later date as may be specified in such notice.
(c) DEATH. The Employment Term shall terminate automatically
effective upon the death of Executive.
(d) DISABILITY. The Employment Term shall terminate
automatically effective upon Notice of Termination to Executive (or such later
date as may be specified in such notice) following a determination by the Board
of Directors that the Executive is unable to perform the essential functions of
his employment position due to a disability of Executive that cannot be
reasonably accommodated by the Company.
(e) TERMINATION BY EXECUTIVE. Executive may terminate the
Employment Term upon Notice of Termination to the Company delivered at least 60
days before the effective date of termination.
(f) NOTICE OF TERMINATION. Any termination of the Employment
Term by the Company or by Executive (other than termination upon Executive's
death) shall be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision
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<PAGE> 4
in this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Employment
Term under the section so indicated.
(g) TERMINATION DISPUTES. If, within 30 days after any Notice
of Termination is given, the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding and final arbitration
award or by a final judgment, order or decree of a court of competent
jurisdiction (the time for appeal therefrom having expired and no appeal having
been perfected).
5. SEVERANCE BENEFITS.
(a) TERMINATION FOR CAUSE OR BY EXECUTIVE. If the Employment
Term is terminated by the Company for Cause under section 4(a) of this
Agreement, or if the Employment Term is terminated by the Executive under
section 4(e) of this Agreement, the Company shall have no further liability
under this Agreement except to pay Executive (i) the value of any accrued salary
or other compensation due to Executive as of the effective date of such
termination, and (ii) any benefit payable under the employee benefit plans,
programs and arrangements of the Company in which Executive is a participant on
the date of delivery of the Notice of Termination.
(b) TERMINATION WITHOUT CAUSE. If the Employment Term is
terminated by the Company without Cause (other than because of death or
disability) under section 4(b), the Company shall pay Executive (A) the value of
any accrued salary or other compensation due to Executive as of the effective
date of such termination, (B) any benefit payable under the employee benefit
plans, programs and arrangements of the Company in which Executive is a
participant on the date of delivery of Notice of Termination, and (C) severance
benefits in an amount equal to the product of Executive's Base Salary in effect
as of the date of such termination, multiplied by one, payable in a lump sum on
or before the fifteenth date following the date of termination.
(c) COMPENSATION UPON DEATH. If the Employment Term is
terminated by the death of the Executive, the Company shall have no further
liability under this Agreement except to pay Executive (i) the value of any
accrued salary, or other compensation due to Executive as of the date of the
Executive's death, and (ii) any benefit payable under all employee benefit
plans, programs and arrangements of the Company in which Executive is a
participant on the date of his death.
(d) COMPENSATION UPON DISABILITY. If the Employment Term is
terminated by the Company under section 4(d) of this Agreement due to
Executive's disability, the Company shall have no further liability under this
Agreement except to pay Executive (i) the value of any accrued salary or other
compensation due to Executive as of the effective date of such termination, and
(ii) any benefit payable under the employee benefit plans, programs and
arrangements of the Company in which Executive is a participant on the date of
delivery of the Notice of Termination, provided, however, that in the event
Executive is paid disability benefits under any disability benefit plan of the
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<PAGE> 5
Company in which he participates, any salary payments made to Executive during
such period shall be reduced by the sum of such amounts.
6. CONFIDENTIAL INFORMATION.
(a) DISCLOSURE AND USE. Executive shall not disclose or use at
any time, either during or after Executive's employment with the Company or any
other direct or indirect subsidiary of the Company (collectively referred to
herein as the "Company"), any trade secrets or other confidential information,
whether patentable or not, of the Company, including but not limited to,
technical or non-technical data, a formula, pattern, compilation, program,
device, method, technique, drawing, process, financial data, or list of actual
or potential customers or suppliers, of which Executive is or becomes informed
or aware during his employment, whether or not developed by Executive, except
(i) as may be required for Executive to perform his employment duties with the
Company; (ii) to the extent such information has been disclosed to Executive by
a third party who is not subject to restriction on the dissemination of such
information or becomes generally available to the public other than as a result
of a disclosure by a party who is not subject to restriction on the
dissemination of such information; (iii) information which must be disclosed as
a result of a subpoena or other legal process, after the Company has had the
opportunity to request a suitable protective order for such information, or (iv)
unless Executive shall first secure the Company's prior written authorization.
This covenant shall survive the termination of Executive's employment with the
Company, and shall remain in effect and be enforceable against Executive for so
long as any such Company secret or confidential information retains economic
value, whether actual or potential, from not being generally known to other
persons who can obtain economic value from its disclosure or use. Executive
shall execute such reasonable further agreements of Executive's obligations to
the Company concerning non-disclosure of Company trade secrets and confidential
information as the Company may require from time to time.
(b) RETURN OF MATERIALS. Upon termination of the Employment
Term, Executive (or in the event of termination due to Executive's death, his
estate or devisee, legatee or other designee, as applicable) shall promptly
deliver to the Company all assets of the Company, including materials of a
secret or confidential nature relating to the Company's business, which are in
the possession or under the control of Executive.
7. INVENTIONS AND DISCOVERIES. Executive hereby assigns to the
Company all of his rights, title and interest in and to all inventions,
discoveries, processes, designs and other intellectual property, including
without limitation, copyrights, patents, trademarks and trade names (hereinafter
referred to collectively as the "Inventions"), and all improvements on existing
Inventions made or discovered by Executive during the Employment Term. Promptly
upon the development or making of any such Invention or improvement thereon,
Executive shall disclose the same to the Company and shall execute and deliver
to the Company such reasonable documents as the Company may request to confirm
the assignment of Executive's rights therein and, if requested by the Company,
shall assist the Company in applying for copyrights and trademark protection and
in applying for and prosecuting any patents which may be available for said
Invention or improvement. The Company
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<PAGE> 6
acknowledges and hereby notifies Executive that this section 6 does not apply to
an Invention for which no equipment, supplies, facility or trade secret
information of the Company was used and which was developed entirely on
Executive's own time, unless (a) the Invention relates to (i) the business of
the Company, or (ii) the Company's actual or demonstrably anticipated research
or development, or (b) the Invention results from any work performed by
Executive for the Company.
8. RESTRICTIVE COVENANTS.
(a) RESTRICTION ON COMPETITION. During the Employment Term and
for a two-year period following the Employment Term, Executive shall not,
without the prior written authorization of the Board of Directors of the
Company, directly or indirectly render services of a business, professional or
commercial nature (whether for compensation or otherwise) to any person or
entity competitive or adverse to the Company's business welfare or engage in any
activity whether alone, as a partner, or as an officer, director, employee,
consultant, independent contractor, or stockholder in any other corporation,
person, or entity which is competitive with or adverse to the Company's business
welfare. This section 8(a) shall not, however, prohibit Executive from investing
in the publicly traded securities issued by any such competitive or adverse
corporation, provided the holdings thereof by Executive do not constitute more
that two percent of any one class of such securities.
(b) RESTRICTION ON EMPLOYEE SOLICITATION. During the
Employment Term and for a two-year period following the Employment Term,
Executive shall not employ or attempt to employ or assist anyone else to employ
any person who is at such time, or at any time during the preceding year was, an
employee of or consultant to the Company, provided that this clause shall not
restrict Executive from employing a third party vendor who supplies generic
services to the industry. As used in this section 8, the verb "employ" shall
include its variations, for example, retain, engage or conduct business with;
the term the "Company" shall include subsidiaries or affiliates, if any, of the
Company.
(c) REASONABLE SCOPE AND TIME. The parties acknowledge that
the time, scope, and other provisions of this Agreement have been specifically
negotiated by the parties and agree that all such provisions are reasonable
under the circumstances and are given as an integral and essential part of
Executive's employment hereunder. In the event that any covenant contained in
this Agreement is determined by any court of competent jurisdiction to be
unenforceable by reason of its extending for too great a period of time or by
reason of its being too extensive in any other respect, it shall be interpreted
to extend only over the maximum period of time for which it may be enforceable
and to the maximum intent in all other respects as to which it may be
enforceable, all as determined by such court in such action.
9. SEVERABILITY. If any provision of this Agreement is held
invalid or unenforceable, either in its entirety or by virtue of its scope or
application to given circumstances, such provision
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<PAGE> 7
shall thereupon be deemed (i) modified only to the extent necessary to render it
valid, or (ii) not applicable to given circumstances, or (iii) excised from this
Agreement, as the situation may require, and this Agreement shall be construed
and enforced as if such provision had been included herein as so modified in
scope or application, or had not been included herein, as the case may be.
10. ARBITRATION OF DISPUTES. Any controversy or claim arising out
of or relating to this Agreement, or the breach of this Agreement, (other than a
controversy arising out of or relating to Sections 6, 7 or 8 hereof), shall be
settled by arbitration in Chicago, Illinois, conducted in accordance with the
American Arbitration Association Commercial Arbitration Rules and the
Supplementary procedures for Large, Complex Disputes, by an independent
arbitrator. Either the Company or Executive may institute such arbitration
proceeding by giving written notice to the other party. The decision of the
arbitrator shall be final and binding upon both parties hereto. Judgment upon
the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof.
11. ENFORCEMENT. Executive hereby acknowledges that the Company
would suffer irreparable injury if the provisions of sections 6, 7, and 8
herein, which shall survive the termination of this Agreement, were breached and
that the Company's remedies at law would be inadequate in the event of such
breach or threatened breach. Accordingly, Executive hereby agrees that any such
breach or threatened breach may, in addition to any and all other available
remedies (including those remedies provided in section 10), be preliminarily and
permanently enjoined in a court of law or equity by the Company without bond.
12. LEGAL FEES AND EXPENSES. In the event of litigation or
arbitration under this Agreement, the prevailing party shall be entitled, in
addition to such other relief as may be granted, to its attorneys' fees and
costs incurred by reason of such litigation or arbitration.
13. GENERAL PROVISIONS.
(a) NOTICES. Any notice, request, demand or other
communication required or permitted to be given hereunder shall be in writing
and personally delivered or sent by registered or certified mail, return receipt
requested, or by a facsimile, telegram or telex followed by a confirmation
letter sent by registered or certified mail, return receipt requested, addressed
as follows:
To the Company: Quotesmith.com, Inc.
8205 South Cass
Darien, IL 60561
Attention: President
Fax: (800) 515-0270
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<PAGE> 8
with a copy to: Craig C. Bradley, Esq.
Freeborn & Peters
311 South Wacker Drive
Suite 3000
Chicago, Illinois 60606
Fax: (312) 360-6573
To Executive: Mr. Burke A. Christensen
8205 South Cass
Darien, IL 60561
Either the Company or Executive may, at any time, by notice to the other,
designate another address for service of notice on such party. When the letter,
facsimile, telegram or telex is dispatched as provided for above, the notice
shall be deemed to be made when the addressee receives the letter, facsimile,
telegram or telex, or within three days after it is sent, whichever is earlier.
(b) AMENDMENTS. Neither this Agreement nor any of the terms or
conditions hereof may be waived, amended or modified except by means of a
written instrument duly executed by the party to be charged therewith.
(c) CAPTIONS AND HEADINGS. The captions and section headings
used in this Agreement are for convenience of reference only, and shall not
affect the construction or interpretation of this Agreement or any of the
provisions hereof.
(d) GOVERNING LAW. This Agreement, and all matters or disputes
relating to the validity, construction, performance or enforcement hereof, shall
be governed, construed and controlled by and under the laws of the State of
Illinois without regard to principles of conflicts of law.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, personal representatives, successors and
permitted assigns.
(f) COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original hereof,
but all of which together shall constitute one and the same instrument.
(g) ENTIRE AGREEMENT. Except as otherwise set forth or
referred to in this Agreement, this Agreement constitutes the sole and entire
agreement and understanding between the parties hereto as to the subject matter
hereof, and supersedes all prior discussions, agreements and understandings of
every kind and nature between them as to such subject matter.
(h) RELIANCE BY THIRD PARTIES. This Agreement is intended for
the sole and exclusive benefit of the parties hereto and their respective heirs,
executors, administrators, personal
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<PAGE> 9
representatives, successors and permitted assigns, and no other person or entity
shall have any right to rely on this Agreement or to claim or derive any benefit
therefrom absent the express written consent of the party to be charged with
such reliance or benefit.
14. EFFECTIVE DATE. This Agreement shall be effective on the Effective
Date. If the initial public offering is not consummated, this Agreement shall be
null and void.
15. ACKNOWLEDGMENT. EXECUTIVE ACKNOWLEDGES THAT HE HAS READ, UNDERSTOOD
AND ACCEPTS THE PROVISIONS OF THIS AGREEMENT. HE ALSO ACKNOWLEDGES THAT HE HAS
HAD THE OPPORTUNITY TO AND HAS REVIEWED THE TERMS AND CONDITIONS OF THIS
AGREEMENT.
[Signature page follows]
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<PAGE> 10
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
as of the date written above.
QUOTESMITH.COM, INC.
By:
----------------------------------
Robert S. Bland, President
By:
----------------------------------
Burke A. Christensen
Vice President of Operations
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<PAGE> 1
EXHIBIT 10.8
FORM OF
QUOTESMITH.COM, INC.
DIRECTORSHIP INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT ("Agreement") is made as of this ____
day of May, 1999 by and between QUOTESMITH.COM, INC., a Delaware corporation
(the "Company"), and _________________ ("Indemnitee").
WHEREAS, Indemnitee is currently serving as a director, officer,
employee and/or agent of the Company and/or, at the Company's request, as a
director, officer, employee and/or agent of another corporation, partnership,
joint venture, trust or other enterprise, and the Company wishes Indemnitee to
continue his or her service in such capacity(ies) without concern of unwarranted
personal liability;
WHEREAS, the Company and Indemnitee recognize that litigation against
corporations has increased over past decades and increasingly has subjected
officers and directors personally to the risks and expenses of such litigation;
and
WHEREAS, the Company desires to attract and retain the services of
highly qualified individuals such as Indemnitee to serve as officers and
directors of the Company and to indemnify its officers and directors so as to
provide them with the maximum protection against personal liability permitted by
law; and
WHEREAS, the Restated Certificate of Incorporation (the "Restated
Certificate of Incorporation") authorizes the Corporation to provide
indemnification and to advance expenses to the full extent not prohibited by
Delaware law and the Amended and Restated By-Laws (the "By-Laws") of the Company
provide that the Company shall indemnify its directors and officers, in the
manner and to the fullest extent permitted by the Delaware General Corporation
Law (the "DGCL"); and
WHEREAS, DGCL Section 145(f) expressly recognizes that the
indemnification provisions of the DGCL are not exclusive of any other rights to
which a person seeking indemnification may be entitled under the Restated
Certificate of Incorporation or By-Laws of the Company, or an agreement
providing for indemnification, or a resolution of stockholders or directors, or
otherwise; and both the Restated Certificate of Incorporation and By-Laws each
also expressly recognize that the indemnification provisions of the Restated
Certificate of Incorporation and By-Laws shall not be deemed exclusive of, and
shall not affect, any other rights to which a person seeking indemnification may
be entitled under any agreement;
WHEREAS, the By-Laws also permit the Company to provide directors and
officers liability insurance and other forms of insurance protection to its
directors, officers, employees and agents; and
<PAGE> 2
WHEREAS, the Company and Indemnitee recognize that the cost and
availability of directors' and officers' liability insurance has not only
fluctuated widely over time, but frequently that such insurance frequently
contains express or implied limitations on coverage of specific risks and may
involve protracted claims procedures that prevent the timely payment or
reimbursement of losses incurred by directors and officers in their own defense,
or by the Company on their behalf; and
WHEREAS, the Company wishes therefore to provide Indemnitee with an
independent contractual right to indemnification and advancement of defense
expenses in addition to that provided in the Restated Certificate of
Incorporation and the By-Laws of the Company, in a form generally approved and
authorized by the stockholders of the Company:
NOW THEREFORE, in consideration of the promises, conditions and
representations set forth herein, including without limitation the Indemnitee's
service in his or her capacity as a director, officer, employee, or agent of the
company and/or, at the Company's request, as a director, officer, employee
and/or agent of another corporation, partnership, joint venture, trust or other
enterprise, and in consideration for Indemnitee's services in such capacity, the
Company and Indemnitee hereby agree as follows:
1. Indemnification.
(a) Third Party Proceedings. The Company shall indemnify Indemnitee if
Indemnitee is or was a party or is threatened to be made a party to any
threatened, pending or completed action, suit, proceeding of any kind, including
without limitation any alternative dispute resolution mechanism, in each case,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Company) by reason of the fact that Indemnitee is or
was a director, officer, employee or agent of the Company, or any subsidiary of
the Company, or by reason of the fact that Indemnitee is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines, amounts paid in
settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld), costs of investigation, and costs
of attachment or similar bonds, and actually and reasonably incurred by
Indemnitee in connection with such action, suit or proceeding, if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe Indemnitee's
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that Indemnitee did
not act in good faith and in a manner which Indemnitee reasonably believed to be
in or not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that Indemnitee's
conduct was unlawful.
(b) Proceedings By or in the Right of the Company. The Company shall
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party
<PAGE> 3
to any threatened, pending or completed action or suit by or in the right of the
Company or any subsidiary of the Company to procure a judgment in its favor by
reason of the fact that Indemnitee is or was a director, officer, employee or
agent of the Company, or any subsidiary of the Company, by reason of any action
or inaction on the part of Indemnitee while an officer or director or by reason
of the fact that Indemnitee is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys' fees)
costs of investigation, and, to the fullest extent permitted by law, amounts
paid in settlement actually and reasonably incurred by Indemnitee in connection
with the defense or settlement of such action or suit, if Indemnitee acted in
good faith and in a manner Indemnitee reasonably believed to be in or not
opposed to the best interests of the Company, except that no indemnification
shall be made in respect of any claim, issue or matter as to which Indemnitee
shall have been adjudged to be liable to the Company unless and only to the
extent that the Court of Chancery of the State of Delaware or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
Indemnitee is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery of the State of Delaware or such other court shall
deem proper.
(c) Mandatory Payment of Expenses. To the extent the Indemnitee has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Subsections (a) and (b) of this Section 1, or in
defense of any claim, issue or matter therein, Indemnitee shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
Indemnitee in connection therewith.
2. Agreement to Serve. In consideration of the protection afforded by
this Agreement, if Indemnitee is a director of the Company, he or she agrees to
serve at least for six months after the effective date of this Agreement as a
director and not to resign voluntarily during such period without the written
consent of a majority of the Board of Directors. If Indemnitee is an officer of
the Company not serving under an employment contract, he or she agrees to serve
in such capacity at least for the balance of the current fiscal year of the
Company and not to resign voluntarily during such period without the written
consent of a majority of the Board of Directors. Following the applicable period
set forth above, Indemnitee agrees to continue to serve in such capacity at the
will of the Company (or under separate agreement, if such agreement exists) so
long as he or she is duly appointed or elected and qualified in accordance with
the applicable provisions of the By-Laws of the Company or any subsidiary of the
Company or until such time as he or she tenders his or her resignation in
writing. Nothing contained in this Agreement is intended to create in Indemnitee
any right to continued employment.
<PAGE> 4
3. Expenses; Indemnification Procedure.
(a) Advancement of Expenses. The Company shall advance all expenses
incurred by Indemnitee in connection with the investigation, defense, settlement
or appeal of any civil or criminal action, suit or proceeding referenced in
Section 1(a) or (b) hereof (but not amounts actually paid in settlement of any
such action, suit or proceeding). Indemnitee hereby undertakes to repay such
amounts advanced only if, and to the extent that, it shall ultimately be
determined that Indemnitee is not entitled to be indemnified by the Company as
authorized hereby. The advances to be made hereunder shall be paid by the
Company to Indemnitee with thirty (30) days following delivery of a written
request therefor by Indemnitee to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a condition
precedent to his or her right to be indemnified under this Agreement, give the
Company notice in writing as soon as practicable of any claim made against
Indemnitee for which indemnification will or could be sought under his
Agreement. Notice to the Company shall be directed to the President of the
Company at the address shown on the signature page of this Agreement (or such
other address as the Company shall designate in writing to Indemnitee). Notice
shall be deemed received three business days after the date postmarked if sent
by domestic certified or registered mail, properly addressed; or five business
days if sent by airmail to a country outside of North America; otherwise notice
shall be deemed received when such notice is actually received by the Company.
In addition, Indemnitee shall give the Company such information and cooperation
as it may reasonably require and as shall be within Indemnitee's power.
(c) Procedure. Any payment of indemnification under Section 1 of this
agreement, or any advancement of expenses under Section 3(a) of this Agreement
shall be made no later than thirty (30) days after receipt of the written
request of Indemnitee therefore. If a claim for indemnification or for
advancement of expenses under this Agreement or under any statute, provision of
the Company's Certificate of Incorporation or By-Laws, resolution of the board
of directors or otherwise providing for such indemnification is not paid in full
by the Company within thirty (30) days after a written request for payment
thereof has first been received by the Company, Indemnitee may, at any time
thereafter, bring an action against the Company to recover the unpaid amount of
the claim. Subject to Section 13 of this Agreement, Indemnitee shall also be
entitled to be paid for the expenses (including attorneys' fees) of bringing
such action. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in connection with any action,
suit or proceeding in advance of its final disposition) that Indemnitee has not
met the standards of conduct which make it permissible under applicable law for
the Company to indemnify Indemnitee for the amount claimed. However, Indemnitee
shall be entitled to receive interim payments of expenses pursuant to Subsection
3(a) unless and until such defense may be finally adjudicated by court order or
judgment from which no further right of appeal exists. It is the parties'
intention that if the Company contests Indemnitee's right to indemnification,
the question of Indemnitee's right to indemnification shall be for the court to
decide, and neither the failure of the Company (including its Board of
Directors, any committee or subgroup of the Board of Directors, independent
legal counsel, or its stockholders) to
<PAGE> 5
have made a determination that indemnification of Indemnitee is proper in the
circumstances because Indemnitee has met the applicable standard of conduct
required by applicable law, nor an actual determination by the Company
(including its Board of Directors, any committee or subgroup of the Board of
Directors, independent legal counsel, or its stockholders) that Indemnitee has
not met such applicable standard of conduct, shall create a presumption that
Indemnitee has or has not met the applicable standard of conduct.
(d) Notice to Insurers. If, at the time of the receipt of a notice of a
claim pursuant to Section 3(b) hereof, the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of Indemnitee, all amounts payable as a result of such proceeding in accordance
with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be obligated
under Section 3(a) hereof to advance the expenses of any proceeding against
Indemnitee, the Company, if appropriate, shall be entitled to assume the defense
of such proceeding, with counsel approved by Indemnitee, upon the delivery to
Indemnitee of written notice of its election to request that the Company assume
the defense of such proceeding. After delivery of such notice, approval of such
counsel by Indemnitee and the retention of such counsel by the Company, the
Company shall not be liable to Indemnitee under this Agreement for any fees of
counsel subsequently incurred by Indemnitee with respect to the same proceeding,
provided that (i) Indemnitee shall have the right to employ his or her own
counsel in any such proceeding at Indemnitee's expense; and (ii) if (A) the
employment of counsel by Indemnitee has been previously authorized by the
Company, (B) Indemnitee shall have reasonably concluded that there may be a
material conflict of interest between the Company and Indemnitee in the conduct
of any such defense, or (C) the Company shall not, in fact, have employed
counsel to assume the defense of such proceeding, then the fees and expenses of
Indemnitee's counsel shall be at the expense of the Company.
4. Additional Indemnification Rights; Nonexclusivity.
(a) Scope. Notwithstanding any other provision of this Agreement, the
Company hereby agrees to indemnify Indemnitee to the fullest extent permitted by
law, notwithstanding that such indemnification is not specifically authorized by
the other provisions of this Agreement, the Company's Certificate of
Incorporation, the Company's By-Laws or by statute. In the event of any change,
after the date of this Agreement, in any applicable law, statute, or rule which
expands the right of a Delaware corporation to indemnify a member of its board
of directors or an officer, such changes shall be, ipso facto, within the
purview of Indemnitee's rights and Company's obligations, under this Agreement.
In the event of any change in any applicable law, statute or rule which narrows
the right of a Delaware corporation to indemnify a member of its board of
directors or an officer, such changes, to the extent not otherwise required
<PAGE> 6
by such law, statute or rule to be applied to this Agreement shall have no
effect on this Agreement or the parties' rights and obligations hereunder.
(b) Nonexclusivity. The indemnification provided by this Agreement
shall not be deemed exclusive of any rights to which Indemnitee may be entitled
under the Company's Certificate of Incorporation, its By-Laws, any agreement,
any vote of stockholders or disinterested Directors, the General Corporation Law
of the State of Delaware, or otherwise, both as to action in Indemnitee's
official capacity and as to action in another capacity while holding such
office. The indemnification provided under this Agreement as any action taken or
not taken by Indemnitee while serving in an indemnified capacity shall continue
even though the Indemnitee may have ceased to serve in such capacity at the time
of any such action, suit or other proceeding covered by this agreement.
5. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred by him or her in the investigation, defense, appeal or settlement of
any civil or criminal action, suit or proceeding, but not, however, for the
total amount thereof, the Company shall nevertheless indemnify Indemnitee for
the portion of such expenses, judgments, fines or penalties to which Indemnitee
is entitled.
6. Mutual Acknowledgement. Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or applicable public policy may prohibit
the Company from indemnifying its directors and officers under this Agreement or
otherwise. Indemnitee understands and acknowledges that the Company has
undertaken or may be required in the future to undertake with the Securities and
Exchange Commission to submit the question of indemnification to a court in
certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.
7. Officer and Director Liability Insurance. The Company shall, from
time to time, make a good faith determination whether or not it is practicable
for the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies of
director and officer liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and benefits
as are accorded to the most favorably insured of the Company's directors, if
Indemnitee is a director; or the most favorably insured of the Company's
officers, if Indemnitee is not a director of the Company but is an officer.
Notwithstanding the foregoing, the Company shall have no obligation to obtain or
maintain such insurance if the Company determines in good faith that such
insurance is not reasonably available, if the premium costs for such insurance
are disproportionate to the amount of coverage provided, if the coverage
provided by such insurance is limited by exclusions so as to provide an
insufficient
<PAGE> 7
benefit, or if Indemnitee is covered by similar insurance maintained by a
subsidiary or parent of the Company.
8. Severability. Nothing in this Agreement is intended to require or
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligation under this Agreement shall not constitute a breach of
this Agreement. If the provisions of this Agreement or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify Indemnitee to the fullest extent permitted
by any applicable portion of this Agreement that shall not have been
invalidated, and the balance of this Agreement not so invalidated shall be
enforceable in accordance with its terms.
9. Exceptions. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Claims Initiated by Indemnitee. To indemnify or advance
expenses to Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by Indemnitee and not by way of defense, except with respect
to proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 145 of the Delaware General Corporation Law, but such indemnification or
advancement of expenses may be provided by the Company in specific cases if the
Board of Directors has approved the initiation or bringing of such suit; or
(b) Lack of Good Faith. To indemnify Indemnitee for any
expenses incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous; or
(c) Insured Claims. To indemnify Indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) to the
extent such expenses or liabilities have been paid directly to Indemnitee by an
insurance carrier under a policy of officers' and directors' liability insurance
maintained by the Company, its parent or any of its subsidiaries; or
(d) Claims Under Section 16(b). To indemnify Indemnitee for
expenses and the payment of "short swing profits" arising from the purchase and
sale or the sale and purchase by Indemnitee of securities in violation of
Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar
successor statute.
(e) Public Policy. To indemnify Indemnitee to the extent that
a court of competent jurisdiction has finally determined that such
indemnification would be prohibited as contrary to public policy.
10. Construction of Certain Phrases.
<PAGE> 8
(a) For purposes of this Agreement, references to the "Company" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger with the Company, which constituent corporation, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that if Indemnitee is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, Indemnitee shall stand in the same position under the
provisions of this Agreement with respect to the resulting or surviving
corporation as Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other enterprises"
shall include employee benefit plans; and references to "serving at the request
of the Company" shall include any service as a director, officer, employee or
agent of the Company which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit plan,
its participants, or beneficiaries; and if Indemnitee acted in good faith and in
a manner Indemnitee reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan, Indemnitee shall be
deemed to have acted in a manner "not opposed to the best interests of the
Company" as referred to in this Agreement.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. Successor and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
13. Attorneys' Fees. In the event that an action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement or to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled to
be paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of Indemnitee's material defenses to such
action were made in bad faith or were frivolous.
14. Notice. Except as provided in Section 3(b), all notices, requests,
demands and other communications under this Agreement shall be in writing and
shall be deemed duly given (i) if delivered by hand and receipted for by the
party addressee on the date of such
<PAGE> 9
receipt, or (ii) if mailed by domestic certified or registered mail with postage
prepaid, on the third business day after the date postmarked. Addresses for
notice to either party are as shown on the signature page of this Agreement, or
as subsequently modified by written notice.
15. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the Delaware Court of Chancery, unless
jurisdiction for such action shall be found to lie in another Delaware court.
16. Choice of Law. This Agreement shall be governed by and its provisions
construed in accordance with the laws of the State of Delaware, as applied to
contracts between Delaware residents entered into and to be performed entirely
within Delaware without regard to the conflict of law principles thereof.
17. Period of Limitations. No legal action shall be brought and no cause of
action shall be asserted by or in the right of the Company against Indemnitee,
Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such two-year period; provided, however, that if any shorter
period of limitations is otherwise applicable to any such cause of action, such
shorter period shall govern.
18. Subrogation. In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
19. Amendment and Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless it is in writing signed
by both of the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar), nor shall such wavier constitute a continuing
waiver.
20. Integration and Entire Agreement. This Agreement sets forth the entire
understanding between the parties hereto and supersedes and merges all previous
written and oral negotiations, commitments, understandings and agreements
relating to the subject matter hereof between the parties hereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
QUOTESMITH.COM, INC.
By: ________________________________
Name: Robert S. Bland
Title: Chairman, President and Chief
Executive Officer
Address: 8205 South Cass Avenue
Suite 102
Darien, Illinois 60561
AGREED TO AND ACCEPTED:
INDEMNITEE:
_______________________
_______________________
(signature)
Address:
_______________________
_______________________
_______________________
<PAGE> 1
EXHIBIT 10.9
ALTER SERVICE CENTER
LEASE FORM
NON-JANITORIAL
L E A S E
---------
THIS LEASE MADE and entered into this 30th day of August, 1994, by and
between Quotesmith Corporation (TENANT) and LASALLE NATIONAL TRUST N.A. As
Successor Trustee to LaSalle National Bank, not personally but as Trustee under
Trust Agreement dated the 11th day of March, 1988, and known as Trust Number
113096 (LANDLORD).
W I T N E S S E T H:
--------------------
Demise
------
LANDLORD does hereby lease to TENANT and TENANT hereby lets from LANDLORD
those certain premises (the "PREMISES"), a designated on the plan attached
hereto as Appendix "A" and made a part hereof, which PREMISES comprise
approximately 2,560 square feet and are situated in that certain building (the
"BUILDING") located at 8205 S. Cass Avenue, Suite 102 in Darien, Illinois. The
BUILDING and the real estate on which it is located are hereinafter referred to
as the "Property".
Such letting and hiring is upon and subject to the terms, covenants and
conditions herein set forth and TENANT and LANDLORD covenant as a material part
of the consideration for this Lease to keep and perform each and all of said
terms, covenants and conditions by them to be kept and performed and that this
Lease is made upon the condition of such performance.
1.
Purpose
-------
The PREMISES are to be used for office purposes and for no other purpose
without the prior written consent of the LANDLORD.
2.
Term
----
The term of this Lease shall be for a period of three years and one month
beginning August 1, 1994, and ending August 31, 1997 except as otherwise
expressly provided in this Lease. Rent to commence September 1, 1994.
3.
Possession
----------
If LANDLORD, for any reason whatsoever, cannot deliver possession of the
PREMISES to the TENANT on the date of the commencement of the Term, this Lease
shall not be void or voidable, nor shall the LANDLORD be liable to TENANT for
any loss or damage resulting therefrom. Under the circumstances, the rent
provided for herein shall not commence until possession of the PREMISES is made
available to TENANT and no such failure to give possession on the date of
commencement of the Term shall affect the validity of this Lease or the
obligations of the TENANT hereunder, nor shall the same be construed to extend
the Term.
The PREMISES shall be deemed to be ready for TENANT'S occupancy if only
minor or insubstantial details of construction, decoration or mechanical
adjustments remain to be done in the PREMISES or any part thereof, or if the
delay in the availability of the PREMISES or any part thereof for occupancy
shall be due to special work, changes, alterations, or additions required or
made by TENANT in the layout or finishing of the PREMISES. Whether or not the
PREMISES are ready for occupancy shall be determined by the issuance of a
temporary or permanent certificate of occupancy from the Village of Lombard. It
is further understood that within 48 hours of initial occupancy, the parties
shall jointly inspect
1
<PAGE> 2
the PREMISES and prepare a "punch list" of incomplete items to be completed by
LANDLORD within a reasonable time after occupancy. TENANT agrees to provide a
supplemental "punch list" within thirty (30) days after occupancy encompassing
all items not then completed except for latent defects.
4.
Definitions As Used In This Lease
A. The term "BASE YEAR" means the calendar year in which the term of
this Lease commences.
B. The term "COMMENCEMENT DATE" is the date of the beginning of the Lease
as defined in Section Two (2) of this Lease.
C. The term "COMPARISON YEAR" means each calendar year during the Term
subsequent to the Base Year.
D. The term "TENANT'S PROPORTIONATE SHARE" shall mean 4.35% being the
ratio which the rentable office area of the PREMISES bears to the entire
rentable office area in the Building.
E. The Term "TAXES" means any and all taxes of every kind and nature
whatsoever which LANDLORD shall pay or become obligated to pay during a
calendar year (regardless of whether such taxes were assessed or became a lien
during, prior or subsequent to the calendar year of payment) because of or in
connection with the ownership, leasing and operation of the Property including
without limitation, real estate taxes, personal property taxes, sewer rents,
water rents, special assessments, transit taxes, legal fees and court costs
charged for the protest or reduction of property taxes and/or assessments in
connection with the PREMISES including the Building, any tax or excise on rent
or any other tax (however described) on account of rental received for use and
occupancy of any or all of the Building and/or the PREMISES, whether any such
taxes are imposed by the United States, the State of Illinois, the County of
DuPage, or any local governmental municipality, authority or agency or any
political subdivision of any thereof. TAXES shall not include any net income,
capital stock, estate or inheritance taxes; provided, however, if at any time
during the term hereof a tax or excise on rents or income or other tax however
described (herein called "Rent Tax") is levied or assessed by the United States
or the State of Illinois or any political subdivision thereof on account of the
rents hereunder or the interest of LANDLORD under this Lease, and if such Rent
Tax is in lieu of or as a substitute for, in whole or in part, real estate
taxes or other ad valorem taxes such Rent Tax shall constitute TAXES.
F. The term "OPERATING COSTS" means any and all expenses, costs and
disbursements (other than taxes as defined in Section 4(E) of every kind and
nature whatsoever incurred by LANDLORD in connection with the management,
maintenance, operation and repair of the Property (including, without
limitation, interior and/or exterior Energy Costs, easement maintenance
expenses, including assessments applicable to the Property established by any
Declaration as hereinafter defined, any and all common area expenses in the
development in which the Property is located, including but not limited to
landscaping and other maintenance of properties which benefit the Property,
property management fees, insurance costs and routine repairs, maintenance and
interior and/or exterior decorating, wage and salaries, legal and accounting,
which LANDLORD shall be or become obligated to pay in respect of a calendar
year regardless of when such OPERATING COSTS were incurred), except the
following: (i) costs of capital improvements and cost of curing construction
defects, if any; (ii) depreciation (except on any capital improvements made or
installed after the Base Year for the purpose of saving labor or otherwise
reducing applicable OPERATING COSTS); (iii) interest and principal payments on
mortgages, if any; (iv) real estate brokers' leasing commissions or
compensation; (vi) any cost or expenditure (or portion thereof) for which
LANDLORD is reimbursed, whether by insurance proceeds or otherwise. In the
event during all or any portion of any calendar year the Building is not fully
rented and occupied, LANDLORD may elect to make an appropriate adjustment of
2
<PAGE> 3
TENANT'S PROPORTIONATE SHARE of OPERATING COSTS for such year, employing sound
accounting and management principles, to determine the OPERATING COSTS that
would have been paid or incurred by LANDLORD had the Building been fully rented
and occupied and the amount so determined. For purposes of this subparagraph
"the development in which the Property is located" shall be deemed to refer to
any subdivision or group of subdivisions containing common areas and/or
utilities and/or services benefiting the Property, including any and all
Property encompassed by any declaration of easements, and/or protective
covenants ("Declaration") effecting the Property.
G. "Energy Costs": means the cost to LANDLORD for all electric power
and other utilities furnished by LANDLORD for heating, air conditioning,
cooling, ventilating and lighting all of the Building, including the PREMISES,
not separately metered to and paid for by a specific tenant.
5.
Base Rent
Except as otherwise provided herein, beginning September 1, 1994, TENANT
shall pay as initial Base Rent to LANDLORD the sum of Twenty-One Thousand Five
Hundred Ninety and 00/100 ($21,590.00) DOLLARS per annum in equal monthly
payments of One Thousand Seven Hundred Ninety-Nine and 17/100 ($1,799.17)
DOLLARS in advance on the first day of the first full calendar month and on the
first day of each calendar month thereafter during the Term and at the same
rate for fractions of a month if the Term shall begin on any day except the
first day or shall end on any day except the last day of a calendar month.
Any rent (whether Base Rent or additional rent) or other amount due from
TENANT to LANDLORD under this Lease not paid when due shall bear interest from
the date due until the date paid at the annual rate of TWO (2%) PERCENT above
the prime rate charged by the FIRST NATIONAL BANK OF CHICAGO (also called the
Corporate Base Rate by said Bank) on ninety (90) day commercial loans to its
largest customers from time to time during such period but the payment of such
interest shall not excuse or cure any default by TENANT under this Lease. The
covenants herein to pay rent (both Base Rent and additional rent) shall be
independent of any other covenant set forth in this Lease.
Base Rental and all of the rent provided herein shall be paid without
deduction or off-set in lawful money of the United States of America to Alter
Asset Management, Inc., 1980 Springer Drive, Lombard, IL 60148 ("the Management
Agent") or as designated from time to time by written notice from LANDLORD. The
Management Agent has full and complete authority to act on behalf of LANDLORD
in connection with all dealings with TENANT, provided however, that the
Management Agent shall not have the power to amend or modify the terms of the
within Lease.
6.
Base Rent Adjustment Formula
Base Rent shall be subject to adjustment as hereinafter set forth in this
Section 6 and in Section 7.
Taxes
A. If TAXES (as hereinbefore defined) for the Land and Building during
any calendar year during the Term of this Lease shall be in excess of
Eighty-Three Thousand Nine Hundred Seventeen and 00/100 ($83,917.00) DOLLARS,
TENANT shall pay to LANDLORD, as additional rent for that year, an amount equal
to the TENANT'S PROPORTIONATE SHARE of said excess. TENANT'S PROPORTIONATE SHARE
of such excess shall be paid as of the COMMENCEMENT DATE of the Term for the
first month hereof, and as of the expiration date of the Term for the last year
hereof.
3
<PAGE> 4
Operating Costs
B. If the "Operating Costs" paid or incurred by LANDLORD during any
calendar year shall be in excess of Sixty-Seven Thousand Three Hundred
Forty-Eight and 69/100 ($67,348.69) DOLLARS, TENANT shall pay to LANDLORD as
additional rent for that year, an amount equal to the TENANT'S PROPORTIONATE
SHARE of said excess. TENANT'S PROPORTIONATE SHARE of such excess shall be paid
as of the COMMENCEMENT DATE of the Term for the first month hereof, and as of
the expiration date of the Term for the last year hereof. Such excess OPERATING
COSTS shall be prorated by TENANT as of the COMMENCEMENT DATE of the Term for
the first month hereof, and as of the expiration date of the Term for the last
year hereof.
7.
Base Rent Adjustment Payment
On or before the first day of June of each calendar year after the
Base Year, LANDLORD shall endeavor to furnish to TENANT a written statement
showing in reasonable detail OPERATING COSTS, TAXES and the CPI Index for the
Base Year and for the Comparison Year preceding the year in which such
statement is furnished and showing the amount, if any, of rental adjustment due
from TENANT for such Comparison year.
On the monthly rental payment date (the "adjustment date") next
following TENANT'S receipt of each such annual statement, TENANT shall pay to
LANDLORD as additional rent an amount equal to the sum of (a) the "net rental
adjustment" for the entire preceding calendar year (being the aggregate rental
adjustment shown on each such annual statement less the amount, if any, by
which (i) the total rent paid by TENANT during the preceding calendar year
(including all adjustment to monthly rental as herein provided), exceeded (ii)
the Base Rent and (b) one-twelfth (1/12th) of such "net rental adjustment" for
the present calendar year multiplied by the number of monthly rental payment
dates (including the adjustment date) having elapsed for such present calendar
year. Subsequent monthly rental payments shall thereafter be increased by
one-twelfth (1/12th) of such "net rental adjustment".
In the event that any such settlement required above indicates that
the total rent paid by TENANT during the preceding calendar year exceeds the
aggregate rental payable by TENANT for such calendar year pursuant to Section 6
and Section 7, LANDLORD shall apply such excess on any amounts of additional
rent next falling due under this Lease as long as TENANT is not then in default
of any of the terms and provisions of this Lease.
The annual determination and statement of TAXES and OPERATING COSTS
shall be prepared in accordance with generally acceptable accounting principles.
In the event of any dispute as to any additional rental due hereunder, TENANT
shall have the right to inspect LANDLORD'S accounting records relative to TAXES
and OPERATING COSTS at LANDLORD'S accounting office during normal business hours
at any time within fifteen (15) days following the furnishing by LANDLORD to
TENANT of such statement.
In no event shall any rent adjustment result in a decrease of the Base
Rent as set forth in Section 5 hereof.
In the event of the termination of this Lease by expiration of the
stated term or for any other cause or reason whatsoever prior to the
determination of rental adjustment as hereinabove set forth, TENANT'S agreement
to pay additional rental up to the time of termination shall survive the
expiration or termination of the Lease.
If the lease year of the term of this Lease ends on any day other
than the last day of December, any payment due to TENANT by reason of decrease
in OPERATING COSTS or any payment due to LANDLORD by reason of any increase in
OPERATING COSTS shall be prorated on the basis of which the number of days in
such partial year bears to three hundred sixty-five (365).
4
<PAGE> 5
8.
Holding Over
Should TENANT hold over after the termination of this Lease, by lapse of
time or otherwise, TENANT shall become a tenant from month to month only upon
each and all of the terms herein provided as may be applicable to such month to
month tenancy and any such holding over shall not constitute an extension of
this Lease; provided, however, during such holding over, TENANT shall pay Base
Rent (as adjusted pursuant to Sections 6 and 7, all as estimated by LANDLORD) at
200% of the rate payable for the month immediately preceding said holding over
and in addition, TENANT shall pay LANDLORD all damages, consequential as well as
direct, sustained by reason of TENANT's holding over. Alternatively, at the
election of LANDLORD expressed in a written notice to the TENANT and not
otherwise, such retention of possession shall constitute a renewal of this Lease
for one (1) year at double the rent paid in the last year hereof. The provisions
of this paragraph do not exclude the LANDLORD'S rights of re-entry or any other
right hereunder.
9.
Building Service
(a) LANDLORD shall maintain and keep lighted the exterior common areas of
the Building. LANDLORD shall not be liable for, and TENANT shall not be entitled
to, any abatement or reduction of rental by reason of LANDLORD'S failure to
furnish any of the foregoing, nor shall such failure constitute an eviction, if
such failure is caused by accident, breakage, repairs, energy shortages or
restriction, strikes, lockouts, or other labor disturbances or labor disputes of
any character, riots, civil disturbance or by any other cause, similar or
dissimilar, beyond the reasonable control of LANDLORD, LANDLORD shall not be
liable under any circumstances for loss of or injury to property, however
occurring, through or in connection with or incidental to failure to furnish any
of the foregoing.
Wherever heat generating machines or equipment, including telephone
equipment, are used in the PREMISES which affect the temperature otherwise
maintained by the air conditioning system, LANDLORD reserves the right to
install supplementary air conditioning units or heating units in the PREMISES
and the cost thereof, including the cost of installation, and the cost of
operation and maintenance thereof shall be paid by TENANT to LANDLORD upon
demand by LANDLORD.
(b) Neither LANDLORD nor LANDLORD'S beneficiaries, nor any company, firm
or individual, operating, maintaining, managing or supervising the plant or
facilities furnishing the services included in LANDLORD'S energy costs nor any
of their respective agents, or employees, shall be liable to TENANT, or any of
TENANT'S employees, agents, customers or invitees or anyone claiming through or
under TENANT, for any damages, injuries, losses, expenses, claims or causes of
action, because of any interruption or discontinuance at any time for any reason
in the furnishing of any of such services, or any other service to be furnished
by LANDLORD as set forth herein; nor shall any such interruption or
discontinuance relieve TENANT from full performance of TENANT'S obligations
under this lease.
(c) Electricity shall not be furnished by LANDLORD, but shall be furnished
by the approved electric utility company serving the area. LANDLORD shall permit
the TENANT to receive such service direct from such public utility company at
TENANT'S cost, and shall permit LANDLORD'S wire and conduits, to the extent
available, suitable and safely capable, to be used for such purposes. TENANT
shall make all necessary arrangements with the local utility company for
metering and paying for electric current furnished by it to TENANT and TENANT
shall pay for all charges for electric current consumed on the PREMISES during
TENANT'S occupancy thereof. The electricity used during the making of
alterations or repairs in the PREMISES, and for the operation of the PREMISES
air conditioning system at times other than as provided herein; or the operation
of any special air conditioning systems which may be required for data
processing equipment or for other special equipment or machinery
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installed by TENANT, shall be paid for by TENANT. TENANT shall make no
alterations or additions to the electric equipment and/or appliances without
the prior written consent of the LANDLORD in each instance, which consent shall
not be unreasonably withheld. TENANT also agrees to purchase from the LANDLORD
or its agent all lamps, bulbs after the initial installation thereof, ballasts
and starters used in the PREMISES provided however that the availability
quality and cost of any such items shall be comparable to that available to
TENANT from other suppliers. TENANT covenants and agrees that at all times its
use of electric current shall never exceed the capacity of the feeders to the
Building or the risers or wiring installed thereon. TENANT will not, without
the written consent of LANDLORD, use any apparatus or device in the PREMISES to
connect to electric current (except through existing electrical outlets in the
PREMISES) or water pipes, for the purpose of using electric current or water.
If TENANT shall require water or electric current in excess of that which is
respectively obtainable from existing water pipes or electrical outlets and
normal for use of the PREMISES as general office space, TENANT shall first
procure the consent of LANDLORD, which LANDLORD may not unreasonably refuse. If
LANDLORD consents to such excess water or electric requirements, TENANT shall
pay all costs including but not limited to meter service and installation of
facilities necessary to furnishing such excess capacity.
10.
Condition of the Premises
Subject to "punch lists" referred to in section 3 hereof, by taking
possession of the PREMISES, TENANT shall be deemed to have agreed that the
PREMISES were as of the date of taking possession, in good order, repair and
condition. No promises of the LANDLORD to alter, remodel, decorate, clean or
improve the PREMISES or the Building and no representation or warranty
expressed or implied, respecting the condition of the PREMISES or the Building
has been made by the LANDLORD to TENANT, unless the same is contained herein or
made a part hereof.
TENANT shall, at its own expense, keep the PREMISES in good repair and
tenantable condition and shall promptly and adequately repair all damages to
the PREMISES caused by TENANT or any of its employees, agents or invitees under
the supervision and with the approval of LANDLORD and within a reasonable period
of time as specified by LANDLORD, loss by ordinary wear and tear, fire and
other casualty excepted. If TENANT does not do so promptly and adequately,
LANDLORD may, but need not, make such repairs and TENANT shall pay LANDLORD
immediately upon request by LANDLORD.
11.
Uses Prohibited
TENANT shall not use, or permit the PREMISES or any part thereof to be
used, for any purpose or purposes other than as specified in Section 1 of this
Lease. No use shall be made or permitted to be made of the PREMISES, nor acts
done, which will increase the existing rate of insurance upon the Building, or
cause a cancellation of any insurance policy covering the Building, or any part
thereof, nor shall TENANT sell, or permit to be kept, used or sold, in or about
the PREMISES, any article which may be prohibited by LANDLORD'S insurance
policies. TENANT shall not commit or suffer to be committed, any waste upon the
PREMISES, or any public or private nuisance or other act or thing which may
disturb the quiet enjoyment of any other tenant in the Building, nor, without
limiting the generality of the foregoing, shall TENANT allow the PREMISES to be
used for any improper, immoral, unlawful or objectionable purpose. TENANT agrees
at all times to cause the PREMISES to be operated in compliance with all
federal, state, local or municipal environmental protection agency health and
safety laws, statutes, ordinances, and rules and regulations, so that no
clean-up claim or other obligation or responsibility arises from a violation of
any of the foregoing, and TENANT further agrees to promptly cure any such
violation at its own expense, and shall furthermore defend and indemnify
LANDLORD, beneficiaries, mortgagees, and officers, agents, and employees thereof
respectively, for any and all liability, loss, costs (including
<PAGE> 7
attorneys' fees and expenses), damages, responsibilities or obligations
incurred as a result of any violation of any of the foregoing. TENANT shall
upon request of LANDLORD certify in writing that it is in compliance with
applicable local, state and federal environmental rules, regulations, statutes
and laws for the preceding year. At the request of the LANDLORD, TENANT shall
submit to the LANDLORD, or shall make available for inspection and copying upon
reasonable notice and at reasonable times, any or all of the documents and
materials prepared by or for TENANT pursuant to any environmental law or
regulation or submitted to any governmental regulatory agency in conjunction
therewith. LANDLORD shall have reasonable access to the PREMISES to inspect
the same to confirm that the TENANT is using the PREMISES in accordance with
local, state and federal environmental rules, regulations, statutes and laws.
TENANT shall, at the request of the LANDLORD and at the TENANT's expense,
conduct such testing and analysis as is necessary to ascertain whether the
TENANT is using the PREMISES in compliance with all local, state and federal
environmental rules, regulations, statutes and laws, provided however, LANDLORD
shall not request that TENANT conduct such tests unless LANDLORD has a
reasonable suspicion that TENANT may be in violation of the foregoing rules,
regulations, statutes, or laws. Said tests shall be conducted by qualified
independent experts chosen by the TENANT and subject to LANDLORD's reasonable
approval. Copies of reports of any such tests shall be provided to the
LANDLORD. The provisions within this paragraph shall survive termination of
this Lease and shall be binding upon and shall inure to the benefit of the
parties hereto, their respective successors and assigns, and mortgages thereof.
12.
Compliance With Law
TENANT shall not use the PREMISES or permit anything to be done in or
about the PREMISES which in any way conflict with any law, statute, ordinance
or governmental rule or regulation now in force or which may hereafter be
enacted or promulgated. TENANT shall, at its sole cost and expense, promptly
comply with all laws, statutes, ordinances and governmental rules, regulations
or requirements now in force or which may hereafter be in force and with the
requirements of any board of fire underwriters or other similar body now or
hereafter constituted relating to or affecting the condition, use or occupancy
of the PREMISES, excluding structural changes not related to or affected by
TENANT's improvements or acts. The judgment of any court of competent
jurisdiction or the admission of TENANT in an action against TENANT law,
statute, ordinance or governmental rule, regulation or requirement shall be
conclusive of that fact as between LANDLORD and TENANT.
13.
Alterations and Repairs
TENANT shall keep the PREMISES in good condition and repair ordinary wear
and tear and loss by fire and other casualty excepted, and shall not do any
painting or decorating, or erect any partitions, make any alterations in or
additions, changes or repairs to the PREMISES without the LANDLORD's prior
written approval in each and every instance, such consent not to be
unreasonably withheld. Unless otherwise agreed by LANDLORD and TENANT in
writing, all such work shall be performed either by or under the direction of
LANDLORD, but at the cost of TENANT. During the term of this Lease, no work
shall be performed by or under the direction of TENANT without the express
written consent of LANDLORD. Unless otherwise provided by written agreement,
all alterations, improvements, and changes shall remain upon and be surrendered
with the PREMISES, excepting however that at LANDLORD's option, TENANT shall,
at its expense, when surrendering the PREMISES, remove from the PREMISES and
the Building all such alterations, improvements, and changes and further
provided that TENANT may remove any trade fixtures provided the PREMISES are
restored to a condition reasonably satisfactory to LANDLORD. If TENANT does not
remove said additions, decorations, fixtures, hardware, non-trade fixtures and
improvements after request to do so by LANDLORD, LANDLORD may remove the same
and TENANT shall pay the cost of such removal to LANDLORD upon demand. TENANT
hereby agrees to hold LANDLORD
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and LANDLORD'S beneficiaries, their agents and employees harmless from any and
all liabilities of every kind and description which may arise out of or be
connected in any way with said alterations or additions. Any mechanic's lien
filed against PREMISES, or the Building or the Property, for work claimed to
have been furnished to TENANT shall be discharged of record by TENANT within ten
(10) days thereafter, at TENANT'S expense, provided however TENANT shall have
the right to contest any such lien on the posting of reasonably sufficient
security.
TENANT shall, at the termination of this Lease, surrender the PREMISES to
LANDLORD in as good condition and repair as reasonable and proper use thereof
will permit, loss by ordinary wear and tear, fire or other casualty excepted.
14.
Abandonment
During the term, if TENANT shall abandon, vacate or surrender (whether at
the end of the stated term or otherwise) the PREMISES, or be dispossessed by
process of law, or otherwise, any personal property belonging to TENANT and left
on the PREMISES shall be deemed abandoned, at the option of the LANDLORD.
15.
Assignment and Subletting
TENANT shall not assign this Lease, or any interest therein and shall not
sublet the PREMISES or any part thereof, or any right or privilege appurtenant
thereto, or suffer any other person to occupy or use the PREMISES, or any
portion thereof, without the written consent of LANDLORD first had and obtained.
TENANT shall, by notice in writing, advise LANDLORD of its intention from
on and after a stated date (which shall not be less than sixty (60) days after
the date of TENANT'S notice) to assign or to sublet any such part of all of the
PREMISES for the balance or any part of the Term, and, in such event LANDLORD
shall have the right, to be exercised by giving written notice to TENANT thirty
(30) days after receipt of TENANT'S notice, to recapture the space described in
TENANT'S notice and such recapture notice shall, if given, cancel and terminate
this Lease with respect to the space therein described as of the date stated in
TENANT'S notice. TENANT'S said notice shall state the name and address of the
proposed subtenant and a true and complete copy of the proposed sublease shall
be delivered to LANDLORD with said notice. If TENANT'S notice shall cover all of
the space hereby demised and if LANDLORD shall give the aforesaid recapture
notice with respect thereto, the Term of this Lease shall expire and end on the
date stated in TENANT'S notice as fully and completely as if that date had been
herein definitely fixed for the expiration of the Term. If, however, this Lease
be canceled pursuant to the foregoing with respect to less than the entire
PREMISES, the rental and the escalation percentages herein reserved shall be
adjusted on the basis of the number of square feet retained by TENANT in
proportion to the rent and escalation percentages reserved in this Lease, and
this Lease as so amended shall continue thereafter in full force and effect. If
LANDLORD, upon receiving TENANT'S said notice with respect to any such space,
shall not exercise its right to cancel as aforesaid, LANDLORD will not
reasonably withhold its consent to TENANT'S assigning or subletting the space
covered by its notice, provided; (i) at the time thereof TENANT is not in
default under this Lease; (ii) LANDLORD, in its sole discretion reasonably
exercised, determines that the reputation, business, proposed use of the
PREMISES and financial responsibility of the proposed sublessee or occupant, as
the case may be, of the PREMISES are satisfactory to LANDLORD; (iii) any
assignee or subtenant shall expressly assume all the obligations of this Lease
on TENANT'S part to be performed; (iv) such consent if given shall not release
TENANT of any of its obligations (including, without limitation, its obligation
to pay rent) under this Lease; (v) TENANT agrees specifically to pay over to
LANDLORD, as additional rent, all sums received by TENANT under the terms and
conditions to such assignment or sublease, which are in excess of the amounts
otherwise required to be paid pursuant to the Lease; and (iv) a
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<PAGE> 9
consent to one assignment, subletting occupation or use shall be limited to such
particular assignment, sublease or occupation and shall not be deemed to
constitute LANDLORD'S consent to an assignment or sublease to or occupation by
another person. Any such assignment or subletting without such consent shall be
void and shall, at the option of LANDLORD, constitute a default under this
Lease. TENANT will pay all of LANDLORD'S costs associated with any such
assignment or subletting including but not limited to reasonable legal fees.
16.
Signs
TENANT shall not place or affix any exterior or interior signs
visible from the outside of the PREMISES.
17.
Damage to Property - Injury to Persons
TENANT, as a material part of the consideration to be rendered to
LANDLORD under this Lease, to the extent permitted by law, hereby waives all
claims except claims caused by or resulting from the non-performance of the
LANDLORD, willful and wanton conduct or negligence of LANDLORD, its agents,
servants or employees which TENANT or TENANT'S successor or assigns may have
against LANDLORD, its agents, servants, or employees for loss, theft or damage
to the property and for injuries to persons in, upon or about the PREMISES or
the Building from any cause whatsoever. TENANT will hold LANDLORD, its agents,
servants, and employees exempt and harmless from and on account of any damage or
injury to any person, or to the goods, wares, and merchandise of any person,
arising from the uses of the PREMISES by TENANT or arising from the failure of
TENANT to keep the PREMISES in good condition as herein provided if
non-performance by the LANDLORD or negligence of the LANDLORD, its agents,
servants or employees does not contribute hereto. Neither LANDLORD nor its
agents, servants, employees shall be liable to TENANT for any damage by or from
any act or negligence of any co-tenant or other occupant of the same Building,
or by any owner or occupant of adjoining or contiguous property, provided
however, that the provisions of this paragraph shall not apply to negligence or
willful and wanton misconduct of any such individuals or entities. TENANT agrees
to pay for all damage to the Building or the PREMISES, as well as all damage to
tenants or occupants thereof caused by TENANT'S misuse or neglect of the
PREMISES, its apparatus or appurtenances or caused by any licensee, contractor,
agent or employees of TENANT. Notwithstanding the foregoing provisions, neither
LANDLORD nor TENANT shall be liable to one another for any loss, damage or
injury caused by its act or neglect to the extent that the other party has
recovered the amount of such loss, damage or injury from insurance and the
insurance company is bound by this waiver of liability.
Particularly, but not in limitation of the foregoing paragraph,
all property belonging to TENANT or any occupant of the PREMISES that is in the
Building or the PREMISES shall be there at the risk to TENANT or other person
only, and LANDLORD or its agent, servants, or employees (except in case of
non-performance by the LANDLORD or negligence or willful and wanton conduct of
LANDLORD or its agents, servants, employees) shall not be liable for: damage to
or theft of or misappropriation of such property; nor for any damage to property
entrusted to LANDLORD, its agents, servants, or employees, if any; nor for the
loss or for damage to any property by theft or otherwise, by any means
whatsoever, not for any injury or damage to persons or property resulting from
fire, explosion, falling plaster, steam, gas, electricity, snow, water or rain
which may leak from any part of the Building or from the pipes, appliances or
plumbing works therein or from the roof, street or subsurface or from any other
place or resulting from dampness or any other cause whatsoever; nor for
interference with the light or other incorporeal hereditaments, nor for any
latent defect in the PREMISES or in the Building. TENANT shall give prompt
notice to LANDLORD in case of fire or accidents in the PREMISES or in the
Building or of defects therein or in the fixtures or equipment.
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In case any action or proceeding be brought against LANDLORD by reason of any
obligation on TENANT'S part to be performed under the term of this Lease, or
arising from any act or negligence of the TENANT, or of its agents or employees,
TENANT, upon notice from LANDLORD shall defend the same at TENANT'S expense by
counsel reasonably satisfactory to LANDLORD.
TENANT shall maintain in full force and effect during the term of this
Lease (including any period prior to the beginning of the term during which
TENANT has taken possession and including also any period of extension of the
Term in which TENANT obtains possession), in responsible companies approved by
LANDLORD (i) fire and extended coverage insurance including an endorsement for
vandalism and malicious mischief) covering all TENANT'S property in, on or about
the PREMISES, with full waiver of subrogation rights against LANDLORD in an
amount equal to the full replacement cost of such Property, and (ii) public
liability insurance insuring TENANT against all claims, demands or action for
injury to or death of any one person in an amount of not less than ONE MILLION
($1,000,000.00) DOLLARS and for injury to or death of more than one person in
any one accident in an amount not less than TWO MILLION ($2,000,000.00) DOLLARS
and for damage to property in an amount of not less than ONE HUNDRED THOUSAND
($100,000.00) DOLLARS or such other amounts as LANDLORD may reasonably require
and (iii) rental insurance equal to one year's rent insurance shall be delivered
to all additional parties insured. All liability policies shall cover the entire
demised premises.
All such policies, shall name LANDLORD, any mortgagees of LANDLORD, and all
other parties designated by LANDLORD as additional parties insured. All
insurance policies shall indicate that at least thirty (30) days prior written
notice shall be delivered to all additional parties insured by the insurer prior
to termination of cancellation of such insurance and TENANT shall provide
Certificates of Insurance, not less than ten (10) days prior to the COMMENCEMENT
DATE, evidencing the aforesaid coverage to all insured parties. TENANT shall not
violate or permit a violation of any of the conditions or terms of any such
insurance policies and shall perform and satisfy all reasonable requirements of
the insurance company issuing such policies. With respect to any insurance
policy procured to comply with any financial assurance requirement imposed by
any state or federal law or regulation, or to any other casualty, property, or
environmental impairment insurance purchased by TENANT, such policy or policies
shall name LANDLORD and any mortgagees of LANDLORD as additional parties
insured.
18.
DAMAGE OR DESTRUCTION
In the event the PREMISES or the Building are damaged by fire or other
insured casualty and the insurance proceeds have been made available therefor by
the holder or holders of any mortgages or deeds of trust covering the Building,
the damage shall be repaired by and at the expense of LANDLORD to the extent of
such insurance proceeds available therefor, provided such repairs can, in
LANDLORD'S sole opinion, be made within one hundred twenty (120) days after the
occurrence of such damage without the payment of overtime or other premiums.
Until such repairs are completed, the rent shall be abated in proportion to the
part of the PREMISES which is unusable by TENANT in the conduct of its business.
If repairs cannot, in LANDLORD'S sole opinion be made within one hundred twenty
(120) days, LANDLORD may at its option make these within a reasonable time and,
this Lease shall continue in effect. In the case of repairs, which in LANDLORD'S
opinion cannot be made within one hundred twenty (120) days, LANDLORD shall
notify TENANT within thirty (30) days of the date of occurrence of such damage
as to whether or not LANDLORD elects to make such repairs and if no such notice
is given, LANDLORD shall be deemed to have elected to make such repairs. If
LANDLORD elects not to make such repairs which cannot be made within one hundred
twenty (120) days of notice, then either party may, by written notice to the
other, cancel this Lease as of the date of the occurrence of such damage. Except
as provided in this Section, there shall be no abatement of rent and no
liability of LANDLORD by reason of any injury to or interference with TENANT'S
business or property arising from any such fire or other
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<PAGE> 11
casualty or from the making or not making of any repairs, alterations or
improvements in or to any portion of the Building or the PREMISES or in or to
fixtures, appurtenances and equipment therein. TENANT understands that LANDLORD
will not carry insurance of any kind on TENANT'S furniture or furnishings or on
any fixtures or equipment removable by TENANT under the provisions of this
Lease and that LANDLORD shall not be obliged to repair any damage thereto or
replace the same. LANDLORD shall not be required to repair any injury or damage
caused by fire or other cause, or to make any repairs or replacements to or of
improvements installed in the PREMISES by or for TENANT.
19.
Entry by Landlord
LANDLORD and its agents shall have the right to enter the PREMISES at all
reasonable times for the purpose of examining or inspecting the same, to supply
any service to be provided by LANDLORD to TENANT hereunder, to show the same to
prospective purchasers or tenants of the Building, and make such alterations,
repairs, improvements, or additions, whether structural or otherwise, to the
PREMISES or to the Building as LANDLORD may deem necessary or desirable.
LANDLORD may enter by means of a master key without liability to TENANT except
for any failure to exercise due care for TENANT's property and without
affecting this Lease. LANDLORD shall use reasonable efforts on any such entry
not to unreasonably interrupt or interfere with TENANT'S use and occupancy of
the PREMISES.
20.
Insolvency or Bankruptcy
If at any time during the term demised or prior thereto there shall be
filed by or against TENANT in any court pursuant to any statute, either of the
United States or of any state, a petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver of trustee of all or a
portion of TENANT'S property, and within thirty (30) days thereof TENANT fails
to secure a discharge thereof, or if TENANT makes an assignment for the benefit
of creditors, this Lease, at the option of LANDLORD, exercised within a
reasonable time after notice of the happening of any one or more of such
events, may be cancelled and terminated and in which event neither TENANT nor
any person claiming through or under TENANT by virtue of any statute or of an
order of any court shall be entitled to possession or to remain in possession
of the PREMISES demised but shall forthwith quit and surrender the PREMISES,
and LANDLORD, in addition to the other rights and remedies LANDLORD has by
virtue of any other provision herein or elsewhere in this Lease contained or by
virtue of any statute or rule of law, may retain as liquidated damages any
rent, security deposit or monies received by it from TENANT or others in behalf
of TENANT. Notwithstanding anything to the contrary herein contained, the event
of cancellation of this Lease as provided in this paragraph, LANDLORD shall
upon such termination be entitled to recover damages in an amount equal to the
present value of the rent specified under Section Five (5) and other sections
covering the base rent adjustments of this Lease for the remainder of the
stated term herein less the fair market rental value of the PREMISES for the
stated term.
21.
Default
If any of the following events of default shall occur, to wit:
(a) TENANT defaults for more than five (5) days after notice of default
after the due date therefor in the payment of rent (whether Base Rent
or additional rent) or any other sum required to be paid hereunder, or
any part thereof, or
(b) TENANT defaults in the prompt and full performance of any other (i.e.
other than payment of rent or any other sum) covenant, agreement or
condition of this Lease and such
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other default shall continue for a period of twenty (20) days after
written notice thereof from LANDLORD to TENANT (unless such other
default involves a hazardous condition, in which event it shall be
cured forthwith) or
(c) The leasehold interest of TENANT be levied upon under execution or be
attached by process of law, or if TENANT abandons the PREMISES, or
(d) Bankruptcy or insolvency of TENANT, then in any such event, LANDLORD,
besides other rights or remedies, it may have, shall have the
immediate right of re-entry and may remove all persons and property
from the PREMISES; such Property may be removed and stored in any
other place in the Building in which the PREMISES are situated, or in
any other place, for the account of and at the expense and at the risk
of TENANT.
TENANT hereby waives all claims for damages which may be caused by the
re-entry of LANDLORD and taking possession of the PREMISES or removing or
storing the furniture and property as herein provided, and will save LANDLORD
harmless from any loss, costs, or damages occasioned LANDLORD thereby, and no
such re-entry shall be considered or construed to be a forcible entry.
Should LANDLORD elect to re-enter, as herein provided, or should it take
possession pursuant to legal proceedings or pursuant to any notice provided for
by law; it may either terminate this Lease or it may from time to time, without
terminating this Lease, re-let the PREMISES or any part thereof for such terms
and at such rental or rentals and upon such other terms and conditions as
LANDLORD in its sole discretion may deem advisable, with the right to make
alterations and repairs to the PREMISES.
LANDLORD may elect to apply rentals received by it (i) to the payment of
any indebtedness, other than rent, due hereunder from TENANT to LANDLORD; (ii)
to the payment of any cost of such re-letting including but not limited to any
brokers's commissions or fees in connection therewith; (iii) to the payment of
the cost of any alterations and repairs to the PREMISES: (iv) to the payment of
rent due and unpaid hereunder; and the residue, if any, shall be held by
LANDLORD and applied in payment of future rent as the same may become due and
payable hereunder. Should such rentals received from such re-letting after
application by LANDLORD to the payments described in foregoing clauses (i)
through (iv) during any month be less than that agreed to be paid during that
month by TENANT hereunder, then TENANT shall pay such deficiency to LANDLORD.
Such deficiency shall be calculated and paid monthly on demand by LANDLORD.
In lieu of electing to receive and apply rentals as provided in the
immediately preceding paragraph, LANDLORD may elect to receive from TENANT as
and for LANDLORD'S liquidated damages for TENANT'S default, an amount equal to
the entire amount of Base Rent provided for in this Lease for the remainder of
the Term, which amount shall be forthwith due and payable by TENANT upon its
being advised of such election by LANDLORD.
No such re-entry or taking possession of the PREMISES by LANDLORD shall be
construed as an election on its part to terminate this Lease unless a written
notice of same is given to TENANT or unless the termination thereof be decreed
by a court of competent jurisdiction. Notwithstanding any such re-letting
without termination, LANDLORD may at any time thereafter elect to terminate this
Lease for such previous breach.
Nothing herein contained shall limit or prejudice the right of LANDLORD to
provide for and obtain as damages by reason of any such termination of this
Lease or of possession an amount equal to the maximum allowed by any statute or
rule of law in effect at the time when such termination takes place, whether or
not such amount be greater, equal to or less than the amounts of damages which
LANDLORD may elect to receive as set forth above. Notwithstanding anything to
the contrary herein contained or any other rights exercised by LANDLORD
hereunder, upon the
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occurrence of an event of a monetary or material default by TENANT under the
terms of this Lease, rent which otherwise would be due or would have been due
except for any abatement provided for in this Lease shall be immediately due
and payable.
22.
Rules and Regulations
The rules and regulations attached hereto and marked Appendix "B", as
well as such rules and regulations as may be hereafter adopted by LANDLORD for
the safety, care and cleanliness of the PREMISES and the preservation of good
order thereon, are hereby expressly made a part hereof, and TENANT agrees to
obey all such rules and regulations. The violation of any such rules and
regulations by TENANT shall be deemed a default under this Lease by TENANT,
affording LANDLORD all those remedies set out in Section 21 hereof. LANDLORD
shall not be responsible to TENANT for the non-performance by any other tenant
or occupant of the Building or any of said rules and regulations.
23.
Non Real Estate Taxes
During the term hereof, TENANT shall pay prior to delinquency all
taxes assessed against and levied upon fixtures, furnishings, equipment and all
other personal property of TENANT contained in the PREMISES, and TENANT shall
cause said fixtures, furnishing, equipment and other personal property to be
assessed and billed separately from the real property of LANDLORD. In the event
any or all of the TENANT'S fixtures, furnishings, equipment and other personal
property shall be assessed and taxed with the LANDLORD'S real property, the
TENANT shall pay to LANDLORD its share of such taxes within ten (10) days after
delivery to TENANT by LANDLORD of a statement in writing setting forth the
amount of such taxes applicable to the TENANT'S property.
24.
Personal Property
TENANT hereby conveys to the LANDLORD all the personal property
situated on the leased PREMISES as security for the payment of all rentals due
or to become due hereunder. Said Property shall not be removed therefrom
without the consent of the LANDLORD, until all rent due or to become due
hereunder shall have first been paid and discharged. It is intended by the
parties hereto that this Lease constitutes a security agreement creating a
security interest in and to such property, and LANDLORD, upon default of TENANT
in the payment of rent, shall have all the rights of a secured party as
provided in the Illinois Uniform Commercial Code, as from time to time in
effect.
25.
Eminent Domain
If the Building, or a substantial part thereof or a substantial part
of the PREMISES, shall be lawfully taken or condemned or conveyed in lieu
thereof, (or conveyed under threat of such taking or condemnation), for any
public or quasi-public use or purpose, the term of this Lease shall end upon
and not before the date of the taking of possession by the condemning authority
and without apportionment of the award. TENANT hereby assigns to LANDLORD
TENANT'S interest, if any, in such award and specifically agrees that any such
award shall be the entire property of LANDLORD in which TENANT shall not be
entitled to share. TENANT further waives any right to challenge the right of
the condemning authority to proceed with such taking. Current rent shall be
apportioned as of the date of such termination. If any part of the Building
other than the PREMISES or not constituting a substantial part of the PREMISES,
shall be so taken or condemned (or conveyed under threat of such taking or
condemnation), or if the grade of any street adjacent to the Building is
changed by any competent authority and such taking or change of grade
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makes it necessary or desirable to substantially remodel or restore the
Building, LANDLORD shall have the right to cancel this Lease upon not less
than ninety (90) days notice prior to the date of cancellation designated in
the notice. No money or other consideration shall be payable by LANDLORD to
TENANT for the right of cancellation, and TENANT shall have no right to share
in any condemnation award or in any judgment for damages or in any proceeds of
any sale made under any threat of condemnation or taking. TENANT shall have the
right to separately pursue its own award for relocation expenses in the event
of such condemnation proceedings.
26.
Subordination
LANDLORD has heretofore and may hereafter from time to time execute and
deliver mortgages or trust deeds in the nature of a mortgage, both referred to
herein as "Mortgages" against the Land and Building, or any interest therein.
If requested by the Mortgagee or trustee under any Mortgage, TENANT will either
(a) subordinate its interest in this Lease to said Mortgages, and to any and
all advances made thereunder and to the interest thereon, and to all renewals,
replacements, modifications and extensions thereof, or (b) make TENANT's
interest in this Lease inferior thereto; and TENANT will promptly execute and
deliver such agreement or agreements as may be reasonably required by such
mortgage or trustee under any Mortgage, provided however that any such
subordination shall provide that so long as TENANT is not in default hereunder,
its tenancy shall not be disturbed.
It is further agreed that (a) if any Mortgage shall be foreclosed (i) the
liability of the mortgagee or trustee thereunder or purchaser at such
foreclosure sale or the liability of a subsequent owner designated as LANDLORD
under this Lease shall exist only so long as such trustee, mortgagee, purchaser
or owner is the owner of the Building and such liability shall not continue or
survive after further transfer of ownership; and (ii) upon request of the
mortgagee or trustee, TENANT will attorn, as TENANT under this Lease, to the
purchaser at any foreclosure sale under any mortgage, and TENANT will execute
such instruments as may be necessary or appropriate to evidence such
attornment; and (b) this Lease may not be modified or amended so as to reduce
the rent or shorten the term provided hereunder, or so as to adversely affect
in any other respect to any material extent the rights of the LANDLORD, nor
shall this Lease be cancelled or surrendered without the prior written consent,
in each instance of the mortgagee or trustee under any Mortgage. It is
understood that TENANT'S tenancy shall not be disturbed so long as TENANT is
not in default under this Lease.
LANDLORD is hereby irrevocably appointed and authorized as agent and
attorney-in-fact of TENANT to execute all such subordination instruments in the
event TENANT fails to execute said instruments within five (5) days after notice
from LANDLORD demanding the execution thereof. Said notice may be given in the
manner hereinafter provided for giving notice.
TENANT agrees to give any mortgages and/or trust deed holders, by
registered mail, a copy of any notice of default served upon the LANDLORD by
TENANT provided that prior to such notice TENANT has received notice (by way of
service on TENANT of a copy of an assignment of rents and leases, or otherwise)
of the address of such mortgagees and/or trust deed holders. TENANT further
agrees that if LANDLORD shall have failed to cure such default within the time
provided for in this Lease, then the mortgagees and/or trust deed holders shall
have an additional thirty (30) days after receipt of notice thereof within
which to cure such default or if such default cannot be cured within that time,
then such additional time as may be necessary, if, within such thirty (30)
days, any mortgagee and/or trust deed holder has commenced and is diligently
pursuing the remedies necessary to cure such default (including but not
limited to commencement of foreclosure proceedings, if necessary to effect such
cure). Such period of time shall be extended by any period within which such
mortgagee and/or trust deed holder is prevented from commencing or pursuing
such foreclosure proceedings by reason of LANDLORD's bankruptcy. Until the time
allowed as aforesaid for mortgagee and/or trust deed
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holder to cure such defaults has expired without cure, TENANT shall have no
right to and shall not terminate this Lease on account of default.
No mortgagee and no person acquiring title to the demised premises by
reason of foreclosure of any mortgage or by conveyance in lieu of foreclosure
shall have any obligation or liability to TENANT on account of any security
deposit unless such mortgagee or title holder shall receive such security
deposit in cash.
27.
Waiver
------
The waiver of LANDLORD of any breach of any term, covenant or condition
herein contained shall not be deemed to be a waiver of such term, covenant or
condition or any subsequent breach of the same or any other term, covenant, or
condition herein contained. The acceptance of rent hereunder shall not be
construed to be a waiver of any breach by TENANT of any term, covenant or
condition of this Lease. It is understood and agreed that the remedies herein
given to LANDLORD shall be cumulative, and the exercise of any one remedy by
LANDLORD shall not be to the exclusion of any other remedy. It is also agreed
that after the service of notice or the commencement of a suit or judgment for
possession of the PREMISES, LANDLORD may collect and receive any monies due,
and the payment of said monies shall not waive or affect said notice, suit or
judgment.
28.
Inability To Perform
--------------------
This Lease and the obligation of TENANT to pay rent hereunder and perform
all of the other covenants and agreements hereunder on part of TENANT to be
performed shall not be affected, impaired or excused, nor shall LANDLORD at any
time be deemed to be in default hereunder because LANDLORD is unable to fulfill
any of its obligations under this Lease or to supply or is delayed in supplying
any service expressly or by implication to be supplied or is unable to make, or
is delayed in making any TENANT improvement, repair, additions, alterations, or
decorations or is unable to supply or is delayed in supplying any equipment or
fixtures if LANDLORD is prevented or delayed from so doing by reason of strike
or labor troubles or any outside cause whatsoever beyond the reasonable control
of LANDLORD, including but not limited to riots and civil disturbances or
energy shortages or governmental preemption in connection with a national
emergency or by reason of any rule, order, or regulation of any department or
subdivision thereof any government agency or by reason of the conditions of
supply and demand which have been or are affected by war or other emergency.
29.
Subrogation
-----------
The parties hereto agree to use good faith efforts to have any and all
fire, extended coverage or any and all material damage insurance which may be
carried endorsed with a subrogation clause substantially as follows: "This
insurance shall not be invalidated should the insured waive in writing prior to
a loss any or all right of recovery against any party for loss occurring to the
property described herein"; and each party hereto waives all claims for
recovery from the other party for any loss or damage (whether or not such loss
or damage is caused by negligence of the other party and notwithstanding any
provision or provisions contained in this Lease to the contrary) to any of its
property insured under valid and collectible insurance policies to the extent
of any recovery collectible under such insurance, subject to the limitation
that this waiver shall apply only when it is permitted by the applicable policy
of insurance.
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<PAGE> 16
30.
Sale by Landlord
In the event of a sale or conveyance by LANDLORD of the Building containing
the PREMISES, the same shall operate to release LANDLORD from any future
liability upon any of the covenants or conditions, expressed or implied, herein
contained in favor of TENANT, and in such event TENANT agrees to look solely to
the responsibility of the successor in interest of LANDLORD in and to this
Lease. If any security deposit has been made by TENANT hereunder, LANDLORD may
transfer such security deposit to such successor in interest of LANDLORD and
thereupon LANDLORD shall be released from any further obligations hereunder.
This Lease shall not be affected by any such sale, and the TENANT agrees to
attorn to the Purchaser or assignee.
31.
Rights of Landlord To Perform
All covenants and agreements to be performed by TENANT under any of the
terms of this Lease shall be performed by TENANT at TENANT'S sole cost and
expense and without any abatement of rent. If TENANT shall fail to pay any sum
of money, other than rent, required to be paid it hereunder, or shall fail to
perform any other act on its part to be performed hereunder, and such failure
shall continue for ten (10) days after notice thereof by LANDLORD, LANDLORD
may, but shall not be obligated so to do, and without waiving or release TENANT
from any obligations of TENANT, make any such payment or perform any such other
act on TENANT'S part to be made or performed as in this Lease provided. All
sums so paid by LANDLORD and all necessary incidental costs together with
interest thereon at the rate set forth in Section 5 of this Lease computed from
the date of such payment by LANDLORD shall be payable to LANDLORD and the
LANDLORD shall have (in addition to any other right or remedy of LANDLORD) the
same rights and remedies in the event of the non-payment thereof by TENANT as
in the case of default by TENANT in the payment of rent.
32.
Attorneys' Fees
In the event of any litigation or arbitration between TENANT and LANDLORD
to enforce any provision of this Lease, or any right to either party hereto,
the TENANT, if the unsuccessful party of such litigation or arbitration, shall
pay to the LANDLORD all costs and expenses, including reasonable attorneys'
fees, incurred therein. Moreover, if LANDLORD, without fault is made a party to
any litigation instituted by or against TENANT, TENANT shall indemnify LANDLORD
against and save it harmless from all costs and expenses, including reasonable
attorneys' fees incurred by it in connection therewith.
33.
Estoppel Certificate
TENANT shall at any time and from time to time upon not less than ten
(10) days' prior written notice from LANDLORD execute, acknowledge and deliver
to LANDLORD a statement in writing certifying that this Lease is unmodified and
in full force and effect (or if modified, stating the nature of the
modification and certifying that this Lease, as so modified, is in full force
and effect) and the dates to which the rental and other charges are paid and
acknowledging that there are not, to TENANT'S knowledge, any uncured defaults
on the part of LANDLORD hereunder or specifying such defaults if any are
claimed. It is expressly understood and agreed that any such statement may be
relied upon by any prospective purchaser or encumbrancer of all or any portion
of the real property of which the PREMISES are a part. TENANT'S failure to
deliver such statement within such time shall be conclusive upon TENANT that
this Lease is in full force and effect, without modification
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<PAGE> 17
except as may be represented by LANDLORD, that there are no uncured defaults in
LANDLORD's performance and that not more than two (2) months' rental has been
paid in advance.
34.
Preparation
Notwithstanding anything to the contrary herein contained, it is
understood that the PREMISES are being let on an "as is" basis with no premise
to alter, remodel, decorate, clean, or improve the PREMISES or the Building and
no representation or warranty expressed or implied, respecting the condition of
the PREMISES or the Building having been made.
It is further understood that to the extent that any repairs, replacements
or corrections are required to be made to the PREMISES and/or Building of any
kind whatsoever, to cause same to comply with any applicable law, rule or
regulation, whether federal, state or local, that the cost thereof shall be
fully the responsibility of TENANT.
35.
Notice
Any notice from LANDLORD to TENANT or from TENANT to LANDLORD may be
served personally or by mail. If served by mail, notice shall be deemed served
on the second day after mailing by registered or certified mail, addressed to
TENANT at the PREMISES or to LANDLORD at the place from time to time
established for the payment of rent and a copy thereof shall until further
notice, be served personally or by registered or certified mail to LASALLE
NATIONAL BANK, Trustee under Trust Number 113096, c/o LaSalle National Bank,
135 South LaSalle Street, Chicago, Illinois. In the event of a release or
threatened release of pollutants or contaminants to the environment resulting
from TENANT's activities at the site or in the event any claim, demand, action
or notice is made against the TENANT regarding TENANT's failure or alleged
failure to comply with any local, state and federal environmental rules,
regulations, statutes and laws, the TENANT shall immediately notify the
LANDLORD in writing and shall give to LANDLORD copies of any written claims,
demands or actions, or notices so made.
36.
Deposit
TENANT will deposit with LANDLORD the sum of One Thousand Seven Hundred
Ninety-Nine and 17/100 ($1,799.17) DOLLARS as security for the full and
faithful performance of every provision of this Lease to be performed by
TENANT. If TENANT defaults with respect to any provision of this Lease,
including but not limited to the provisions relating to the payment of rent,
LANDLORD may use, apply or retain all or any part of this security deposit for
the payment of any rent and any other sum in default, or for the payment of
any other amount which LANDLORD may spend or become obligated to spend by
reason of TENANT's default or to compensate LANDLORD for any other loss or
damage which LANDLORD may suffer by reason of TENANT's default. If any portion
of said deposit is to be used or applied, TENANT shall within ten (10) days
after written demand therefor deposit cash with LANDLORD in an amount
sufficient to restore the security deposit to its original amount and TENANT's
failure to do so shall be a material breach of this Lease. LANDLORD shall not
be required to keep this security deposit separate from its general funds and
TENANT shall not be entitled to interest on such deposit. If TENANT shall fully
and faithfully perform every provision of this Lease to be performed by it, the
security deposit or any balance thereof shall be returned to TENANT (or at
LANDLORD's option to the last assignee or TENANT's interest hereunder) at the
expiration of the lease term and upon TENANT's vacation of the PREMISES.
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37.
Rights Reserved
LANDLORD reserves the following rights, exercisable without notice and
without liability to TENANT for damage or injury to property, person or business
and without effecting an eviction, constructive or actual or disturbance of
TENANT'S use of possession or giving rise to any claim for set-off or abatement
of rent:
(a) To change the Building's name or street address;
(b) To install, affix and maintain any and all signs on the exterior
of the Building;
(c) To designate and approve, prior to installation, all types of
window shades, blinds, drapes, awnings, window ventilators and
other similar equipment and to control all lighting interior or
exterior of the Building;
(d) To designate, restrict and control all sources from which TENANT
may obtain sign painting and lettering, drinking water, food and
beverages or other services on the PREMISES, and in general to
designate, limit, restrict and control any service in or to the
Building and its TENANT, provided such services as are designated
by LANDLORD are reasonably competitive as to the rates charged
thereby. No vending or dispensing machines of any kind shall be
placed in or about the PREMISES without the prior written consent
of LANDLORD. Notwithstanding the foregoing, it is understood that
TENANT shall have the right to operate beverage machines,
microwave ovens, and refrigerators for the convenience of its
employees and invitees;
(e) To retain at all times, and to use in appropriate instances, keys
to all doors within and into the PREMISES. No locks or bolts
shall be altered, changed or added without the prior written
consent of LANDLORD;
(f) To decorate or to make repairs, alterations, additions or
improvements, whether structural or otherwise, in and about the
Building, or any part thereof, and for such purpose to enter
upon the PREMISES, and during the continuance of said work to
temporarily close doors, entryways, and public spaces in the
building and to interrupt or temporarily suspend Building
services and facilities;
(g) To prescribe the location and style of the suite number and
identification sign or lettering for the PREMISES occupied by
TENANT;
(h) To enter the PREMISES at reasonable hours for reasonable
purposes, including inspection and supplying any service to be
provided to TENANT hereunder;
(i) To require all persons entering or leaving the Building during
such hours as LANDLORD may from time to time reasonably
determine to identify themselves to watchmen by designation or
otherwise, and to establish their right to enter or leave in
accordance with the provisions of Paragraph 19 hereof. LANDLORD
shall not be liable in damages for any error with respect to
admission to or eviction or exclusion from the Building of any
person. In case of fire, invasion, insurrection, mob, riot, civil
disorder, public excitement or other commotion, or threat
thereof, LANDLORD reserves the right to limit or prevent access
to the Building during the continuance of the same or otherwise
take such action or preventive measures deemed necessary by
LANDLORD for the safety of the tenants or other occupants of the
Building or the protection of the Building and the property in
the Building. TENANT
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agrees to cooperate in any reasonable safety program developed
by LANDLORD;
(j) To control and prevent access to common areas and other
non-general public areas pursuant to Appendix "B" attached to
this Lease;
(k) From time to time to make and adopt such reasonable rules and
regulations, in addition to or other than or by way of amendment
or modification of the rules and regulations contained in
Appendix "B" attached to this Lease or other sections of this
Lease, for the protection and welfare of the Building and its
tenants and occupants, as the LANDLORD may determine, and the
TENANT agrees to abide by all such rules and regulations;
(l) To have and retain a paramount title to the PREMISES free and
clear of any act of TENANT;
(m) To grant to anyone that exclusive right to conduct any business
or render any services in the Building;
(n) To approve the weight, size and location of safes and other heavy
equipment and articles in and about the PREMISES and the
Building, and to require all such items and furniture to be moved
into and out of the Building and the PREMISES only at such times
and in such manner as LANDLORD shall direct in writing. Movements
of TENANT'S property into or out of the Building and within the
Building are entirely at the risk and responsibility of TENANT
and LANDLORD reserves the right to require permits before
allowing any such property to be moved into or out of the
building.
38.
Substitution of Space
At any time hereafter, LANDLORD may substitute for the PREMISES other
Premises (herein referred to as "THE NEW PREMISES") provided:
(a) The new premises shall be similar to the PREMISES in area and use
for TENANT'S purposes and shall be located in the Building or in
any adjacent or contiguous building of LANDLORD and if TENANT is
already in occupancy of the PREMISES, then in addition;
(b) LANDLORD shall pay the expense of TENANT for moving from the
PREMISES to THE NEW PREMISES and for improving THE NEW PREMISES
so they are substantially similar to the PREMISES;
(c) Such move shall be made during evenings, weekends, or otherwise
so as to incur the least inconvenience to TENANT; and
(d) LANDLORD shall first give TENANT at least thirty (30) days'
notice before making such change. If LANDLORD shall exercise his
right hereunder, THE NEW PREMISES shall thereafter be deemed, for
purposes of this Lease, as the PREMISES.
39.
Real Estate Broker
TENANT represents that TENANT had dealt directly with and only with
The Alter Group as broker in connection with this Lease and agrees to indemnify
and hold LANDLORD harmless from all claims or demands of any other broker or
brokers for any commission alleged to be due such broker or brokers in
connection with its participating in the negotiation with TENANT of this Lease.
19.
<PAGE> 20
40.
Miscellaneous Provisions
------------------------
(a) The term "OFFICE" or "OFFICES" wherever used in this Lease, shall not
be construed to mean or permit the PREMISES to be used as a store or
stores, for the sale or display, at any time, of goods, wares, or
merchandise of any kind, or as a restaurant, shop, booth, bootblack,
or other stand, barbershop, or for other similar purposes or for
manufacturing. The words "RE-ENTER" or "RE-ENTRY" as used in this
Lease, are not restricted to their technical legal meaning. The term
"LANDLORD" as used in this Lease means only the LANDLORD from time to
time and upon conveying its interest, such conveying LANDLORD shall be
relieved from any further obligation or liability.
(b) Time is of the essence of this Lease and each and all of its
provisions.
(c) Submission of this instrument for examination or signature by TENANT
does not constitute a reservation or offer or option for lease, and it
is not effective as a lease or otherwise so as to incur the lease
inconvenience to TENANT; and
(d) The invalidity or unenforceability of any provision hereof shall not
affect or impair any other provisions.
(e) This Lease shall be governed by and construed pursuant to the laws of
the State of Illinois.
(f) Should any mortgage require a modification of this Lease, which
modifications will not bring about any increased cost or expense to
TENANT or in any other way substantially change the rights and
obligations of TENANT hereunder, then and in such event, TENANT
agrees that this Lease may be so modified.
(g) TENANT agrees to provide to LANDLORD, upon request, a current
financial statement of TENANT certified by an authorized
representative of TENANT to be true and correct, and further agrees
to provide any other financial information reasonably requested by
LANDLORD.
(h) All rights and remedies of LANDLORD under this Lease, or that may be
provided by law, may be exercised by LANDLORD in its own name
individually, or in its name by its agent, and all legal proceedings
for the enforcement of any such rights or remedies, including
distress for rent, forcible detainer, and any other legal or
equitable proceedings, may be commenced and prosecuted to final
judgment and execution by LANDLORD in its own name individually or in
its name or by its agent. TENANT conclusively agrees that LANDLORD
has full power and authority to execute this Lease and to make and
perform the agreements herein contained and TENANT expressly
stipulates that any rights or remedies available to LANDLORD either
by the provision of this Lease or otherwise may be enforced by
LANDLORD in its own name individually or in its name by agent or
principal.
(i) Any of the covenants and conditions of this Lease shall survive
termination of the Lease.
(j) The marginal headings and titles to the paragraphs of this Lease are
not a part of this Lease and shall have no effect upon the
construction or interpretation of any part hereof.
(k) If TENANT is a corporation and if at any time during the Lease Term
the person or persons who owns a majority of
20
<PAGE> 21
its voting shares at the time of the execution of this Lease cease to
own a majority of such shares (except as a result of transfers by
gift, bequest or inheritance) TENANT shall so notify LANDLORD and
LANDLORD may terminate this Lease by notice to TENANT given within
ninety (90) days thereafter. This Section shall not apply whenever
TENANT is a corporation, the outstanding voting stock of which is
listed on a recognized security exchange or if at least ninety (90%)
percent of its voting stock is owned by another corporation, the
voting stock of which is so listed. For the purposes of this Section,
stock ownership shall be determined in accordance with the principles
set forth in Section 544 of the Internal Revenue Code of 1954 as the
same existed on August 16, 1954, and the term "voting stock" shall
refer to shares of stock regularly entitled to vote for the election
of directors of the corporation.
(l) This Lease includes appendices A, B, and C which are expressly made a
part of this Lease.
(m) Upon termination of the Lease or upon TENANT'S abandonment of the
leasehold, the TENANT shall, at its sole expense, remove any equipment
which may cause contamination of the property, and shall clean up any
existing contamination in compliance with all applicable local, state
and federal environmental rules, regulations, statutes and laws or in
accordance with orders of any governmental regulatory authority.
(n) WAIVER OF RIGHT TO TRIAL BY JURY. LANDLORD and TENANT hereby waive any
right to a trial by jury in any action or proceeding based upon, or
related to, the subject matter of this Lease. This waiver is
knowingly, intentionally, and voluntarily made by each of parties
hereto and each party acknowledges to the other that neither the other
party nor any person acting on its respective behalf has made any
representations to induce this waiver of trial by jury or in any way
to modify or nullify its effect. The parties acknowledge that they
have read and understand the meaning and ramifications of this waiver
provision and have elected same of their own free will.
41.
Tenant-Corporation or Partnership
In case TENANT is a corporation, TENANT represents and warrants that this
Lease has been duly authorized, executed and delivered by and on behalf of the
TENANT and constitutes the valid and binding agreement of the TENANT in
accordance with the terms hereof. In case TENANT is a partnership, TENANT
represents and warrants that all of the persons who are general or managing
partners in said partnership have executed this Lease on behalf of TENANT, or
that this Lease has been executed and delivered pursuant to and in conformity
with a valid and effective authorization therefor by all of the general or
managing partners of such partnership, and is and constitutes the valid and
binding agreement of the partnership and each and every partner therein in
accordance with its terms. Also, it is agreed that each and every present and
future partner in TENANT shall be and remain at all times jointly and severally
liable hereunder and that the death, resignation or withdrawal of any partner
shall not release the liability of such partner under the terms of this Lease
unless and until the LANDLORD shall have consented in writing to such release.
42.
Successors and Assigns
The covenants and conditions herein contained shall apply to and bind the
respective heirs, successors, Executors, administrators, and assigns of the
parties hereto. The terms "LANDLORD" AND "TENANT" shall
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<PAGE> 22
include the successors and assigns of either such party, whether immediate or
remote.
43.
Right of First Refusal
So long as TENANT is not in default hereunder, LANDLORD hereby agrees to
give TENANT the right of first refusal for the adjacent 2,100 square feet as
shown on Appendix "A" as "Contiguous Space." Upon written receipt from LANDLORD
of the Terms and Conditions offered to a third party to lease all or a portion
of such Contiguous Space, TENANT shall have five (5) business days upon which
to accept such terms and conditions to lease said space.
IN WITNESS WHEREOF, the LANDLORD and TENANT have executed this Lease the
day and year first above written.
TENANT: LANDLORD:
QUOTESMITH CORPORATION SEE RIDER ATTACHED HERETO AND MADE A PART OF
LEASE
LASALLE NATIONAL TRUST, N.A. as
Successor Trustee to LaSalle National
Bank Trustee under Trust No. 113096.
AS TRUSTEE AND NOT INDIVIDUALLY
BY: /s/Robert S. Bland BY: /s/ ILLEGIBLE
------------------ ---------------------------------
VICE PRESIDENT
ATTEST: ATTEST: /S/ NANCY A. STACK
-------------- -----------------------------
ASSISTANT SECRETARY
RIDER ATTACHED TO AND MADE A PART OF LEASE DATED 8/30/94
-----------
This LEASE is executed by LA SALLE NATIONAL TRUST, N.A., not personally but as
Trustee as aforesaid, in the exercise of the power and authority conferred upon
and vested in it as such Trustee, and under the express direction of the
beneficiaries of a certain Trust Agreement dated 3/11/88 and known as Trust
-------
No. 113096 at LA SALLE NATIONAL TRUST, N.A., to all provisions of which Trust
------
Agreement this LEASE is expressly made subject. It is expressly understood and
agreed that nothing herein or in said LEASE contained shall be construed as
creating any liability whatsoever against said Trustee personally, and in
particular without limiting the generality of the foregoing, there shall be no
personal liability to pay any indebtedness accruing hereunder or to perform any
covenants, either express or implied, herein contained, or to keep, preserve or
sequester any property of said Trust, and that all personal liability of said
Trustee of every sort, if any, is hereby expressly waived by said Lessee, and
that so far as said Trustee is concerned the owner of any indebtedness or
liability accepting hereunder shall look solely to the premises hereby leased
for the payment thereof. It is further understood and agreed that said Trustee
has no agents or employees and merely holds naked legal title to the property
herein described; that said Trustee has no control over, and under this LEASE
assumes no responsibility for (1) the management or control of such property,
(2) the upkeep, inspection, maintenance or repair of such property (3) the
collection of rents or rental of such property, or (4) the conduct of any
business which is carried on upon such premises. Trustee does not warrant,
indemnify, defend title nor is it responsible for any environmental damage.
44
<PAGE> 23
APPENDIX "A"
[FLOOR PLAN]
<PAGE> 24
APPENDIX "B"
RULES AND REGULATIONS ATTACHED TO
AND MADE PART OF THIS LEASE
1. TENANT shall not place anything or allow anything to be placed near the
glass of any window, door, partition or wall which may in LANDLORD'S judgment
appear unsightly from outside the premises of the Building. LANDLORD shall
furnish and install building standard window blinds at all exterior windows.
2. The sidewalks, passages, exits, and entrances shall not be obstructed by
TENANT or used by TENANT for any purpose other than for ingress to and egress
from the Premises. The passages, exits, entrances, and roof are not for the use
of the general public and the LANDLORD shall in all cases retain the right to
control and prevent access thereto by all persons whose presence in the judgment
of LANDLORD, reasonably exercised, shall be prejudicial to the safety,
character, reputation and interests of the Building. Neither TENANT nor any
employees or invitees of any TENANT shall go upon the roof of the building.
3. The toilet rooms, urinals, wash bowls and other apparatus shall not be
used for any purpose other than that for which they were constructed and no
foreign substance of any kind whatsoever shall be thrown therein and to the
extent caused by TENANT or its employees or invitees, the expense of any
breakage, stoppage or damage resulting from the violation of this rule shall be
borne by TENANT.
4. No cooking shall be done or permitted by TENANT on the Premises, nor
shall the Premises be used for lodging.
5. TENANT shall not bring upon, use or keep in the Premises or the Building
any kerosene gasoline or inflammable or combustible fluid or material, or use
any method of heating or air conditioning other than that supplied by LANDLORD.
6. LANDLORD shall have sole power to direct electricians as to where and
how telephone and other wires are to be introduced. No boring or cutting for
wires will be allowed without the consent of LANDLORD. The location of
telephone, call boxes and other office equipment affixed to the Premises shall
be subject to the approval of LANDLORD.
7. Upon the termination of the tenancy, TENANT shall deliver to the
LANDLORD all keys or electronic key cards and passes for offices, rooms, parking
lot and toilet rooms which shall have been furnished TENANT. In the event of
loss of any keys or electronic key cards so furnished, TENANT shall pay the
LANDLORD therefor. TENANT shall not make or cause to be made any such keys or
electronic key cards and shall order all such keys or electronic key cards
solely from LANDLORD and shall pay LANDLORD for any additional such keys or
electronic key cards over and above the keys furnished by LANDLORD at occupancy.
8. TENANT shall not install linoleum, tile, carpet or other floor coverings
so that the same shall be affixed to the floor of the Premises in any manner
except as approved by the LANDLORD.
9. TENANT shall cause all doors to the Premises to be closed and securely
locked before leaving the Building at the end of the day.
10. Without the prior written consent of LANDLORD, TENANT shall not use the
name of the Building or any picture of the Building in connection with or in
promoting or advertising the business of TENANT except TENANT may use the
address of the Building as the address of its business.
11. TENANT shall refrain from attempting to adjust any heat or air
conditioning controls other than room or system thermostats installed within the
PREMISES for TENANT'S use.
12. TENANT assumes full responsibility for protecting the Premises from
theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to Premises closed and secured.
13. Peddlers, solicitors and beggars shall be reported to the office of the
Building or as LANDLORD otherwise requests.
24
<PAGE> 25
14. TENANT shall not advertise the business, profession or activities of
TENANT conducted in the Building in any manner which violates the letter or
spirit of any code of ethics adopted by any recognized association or
organization pertaining to such business, profession or activities.
15. TENANT shall allow no animals or pets to be brought or to remain in
the Building or any part thereof.
16. TENANT acknowledges that Building security problems may occur which
may require the employment of extreme security measures in the day-to-day
operation of the Building. Accordingly:
(a) LANDLORD may at any time, or from time to time, or for regularly
scheduled time periods, as deemed advisable by LANDLORD and/or
its agents, in their sole discretion, require that persons
entering or leaving the Building identify themselves to watchmen
or other employees designated by LANDLORD by registration,
identification or otherwise.
(b) LANDLORD may at any time, or from time to time or for regularly
scheduled time periods, as deemed advisable by LANDLORD and/or
its agents, in their sole discretion, employ such other security
measures as but not limited to the search of all persons,
parcels, packages, etc., entering and leaving the Building, the
evacuation of the Building and the denial of access of any person
to the Building.
(c) TENANT hereby assents to the exercise of the above discretion of
LANDLORD and its agents, whether done acting under reasonable
belief of cause or for drills, regardless of whether or not such
action shall in fact be warranted and regardless of whether any
such action is applied uniformly or as aimed at specific persons
whose conduct is deemed suspicious.
(d) The exercise of such security measures and the resulting
interruption of service and cessation or loss of TENANT'S
business, if any, shall never be deemed an eviction or
disturbance of TENANT's use and possession of the Premises, or
any part thereof, or render LANDLORD liable to TENANT for damages
or relieve TENANT from TENANT'S obligations under this Lease.
(e) TENANT agrees that it and its employees will cooperate fully with
Building employees in the implementation of any and all security
procedures.
17. In the event carpeting is furnished by LANDLORD, TENANT will be fully
responsible for and upon LANDLORD'S request will pay for any damage to
carpeting caused by lack of protective mats under desk chairs or equipment or
any other abnormal puncture and wearing of carpet.
18. TENANT shall comply with all applicable laws, ordinances, governmental
orders or regulations and applicable orders or directions from any public
office or body having jurisdiction, with respect to the Premises and the use or
occupancy thereof. TENANT shall not make or permit any use of the Premises which
directly or indirectly is forbidden by law, ordinances, governmental
regulations or order or direction of applicable public authority, or which may
be dangerous to person or property.
19. TENANT shall not use or permit to be brought into the Premises or the
Building any flammable oils or fluids, or any explosive or other articles
deemed hazardous to persons or property, or do or permit to be done any act or
thing which will invalidate or which if brought in would be in conflict with
any insurance policy covering the Building or its operation, or the Premises,
or any part of either, and will not do or permit to be done anything in or upon
the Premises, or bring or keep anything therein, which shall not comply with
all rules, orders, regulations or requirements of any organization, bureau,
department or body having jurisdiction with respect thereto (and TENANT shall
at all times comply with all such rules, orders, regulations or requirements),
25
<PAGE> 26
or which shall increase the rate of insurance on the Building, its
appurtenances, contents or operation. The foregoing prohibitions shall include
but not be limited to the discharge of any toxic wastes, or other hazardous
materials in violation of any law, ordinance, statute, rule or insurance
regulation.
20. If TENANT desires signal, communication, alarm or other utility or
similar service connections installed or changed, TENANT shall not install or
change the same without the approval of LANDLORD and then only under direction
of Landlord and at TENANT'S expense. TENANT shall not install in the Premises
any equipment which requires a substantial amount of electrical current without
the advance written consent of the LANDLORD and TENANT shall ascertain from the
LANDLORD the maximum amount of load or demand for or use of electrical current
which can safely be permitted in the Premises, taking into account the capacity
of the electric wiring in the Building and the Premises and the needs of other
tenants of the Building, and shall not in any event connect a greater load than
such safe capacity.
21. Service requirements of TENANT will be attended to only upon
application to management of the Building. Employees of LANDLORD shall not
perform any work or do anything outside of their regular duties unless under
special instruction from LANDLORD.
22. No TENANT shall obtain for use upon the premises ice, drinking water,
towel and other similar services on the Premises, except from persons authorized
by the LANDLORD and at the hours and under regulations fixed by the LANDLORD.
23. LANDLORD reserves the right to exclude or expel from the Building any
person who, in the judgment of LANDLORD is intoxicated or under the influence of
liquor or drugs or who shall in any manner do any act in violation of any of the
rules and regulations of the building.
24. No vending machines of any description shall be installed, maintained
or operated in the Premises without the written consent of LANDLORD.
25. TENANT shall not (i) install or operate any internal combustion
engine, boiler, machinery, refrigerating, heating or air-conditioning apparatus
in or about the Premises; (ii) carry on any mechanical business in or about the
Premises without the written permission of LANDLORD; (iii) exhibit, sell or
offer for sale, use, rent or exchange in the Premises or Building any article,
thing or service except those ordinarily embraced within the permitted use of
the Premises specified in this Lease; (iv) use the Premises for housing, lodging
or sleeping purposes; (v) permit preparation or warming of food in the Premises
or permit food to be brought into the Premises for consumption therein (warming
of coffee and individual lunches of employees excepted) except by express
permission of LANDLORD; (vi) place any radio or television antennae on the roof
or on or in any part of the inside or outside of the Building other than the
inside of the Premises; (vii) operate or permit to be operated any musical or
sound producing instrument or device inside or outside the Premises which may be
heard outside the Premises; (viii) use any illumination or power for the
operation of any equipment or device other than electricity; (ix) operate any
electrical device from which may emanate electrical waves which may interfere
with or impair radio or television broadcasting or reception from or in the
Building or elsewhere; (x) bring or permit to be in the Building any bicycle or
other vehicle, or dog (except in the company of a blind person) or other animal
or bird; (xi) make or permit any objectionable noise or odor to emanate from the
Premises; (xii) disturb, solicit or canvas any occupant of the Building; (xiii)
do anything in or about the Premises tending to create or maintain a nuisance or
do any act tending to injure the reputation of the Building; or (xiv) throw or
permit to be thrown or dropped any article from any window or other opening in
the Building.
26. From time to time LANDLORD reserves the right to amend and modify
these rules and regulations.
26
<PAGE> 1
EXHIBIT 10.10
LEASE AMENDMENT AGREEMENT
Execution of this Lease Amendment Agreement shall amend that certain
Lease dated August 30, 1994, by and between Quotesmith Corporation, TENANT and
LaLalle National Trust, N.A., as Successor Trustee of LaSalle National Bank
under Trust No. 113096, LANDLORD, of the premises located at 8205 S. Cass
Avenue, Darien, Illinois, on all the same terms and conditions except as
follows:
1. The Demised Premises shall be changed to 4,660 square feet from 2,560
square feet.
2. Paragraph 4(D) "Tenant's Proportionate Share" shall be changed to 7.93%
from 4.35%.
3. Paragraph 5 "Base Rent" shall be changed to $39,300.62 per annum in
equal monthly payments of $3,275.05.
4. Paragraph 43, "Right of First Refusal" shall be of no further force or
effect.
5. Appendix "A" shall be changed to Appendix "A-1" (attached).
Dated this 1st day of Nov. 1995.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease
Renewal Agreement the day and year first written above.
Quotesmith Corporation LASALLE NATIONAL TRUST,
N.A., as Successor Trustee to
LASALLE NATIONAL BANK
Trustee under Trust No. 113096.
AND NOT PERSONALLY
By: /s/ Robert S. Bland By: /s/ Nancy A. Stack
------------------- -------------------
Its: PRESIDENT AND CEO Its: ASSISTANT SECRETARY
------------------- -------------------
<PAGE> 2
APPENDIX "A"-1
[FLOOR PLAN OF 4660 SF]
<PAGE> 1
EXHIBIT 10.11
LEASE AMENDMENT
Execution of this Lease Amendment by Tenant and Landlord will amend the certain
lease dated August 30, 1994, and amended November 1, 1995, ("Lease"), wherein
LaSalle National Bank, not personally, but as Successor Trustee Under Trust No.
113096 is the Landlord and Quotesmith Corporation is the Tenant of the Premises
located at 8205 S. Cass Avenue, Darien, Illinois on all the same terms and
conditions except as follows
1. The term of the lease shall be for three (3) years and five (5) months
beginning October 1, 1997, and ending February 28, 2001.
2. The Leased Premises shall be amended to substitute 7,740 square feet
for 4,660 square feet as established herein as Appendix "A."
3. The monthly rent schedule for the new term shall be as follows:
<TABLE>
<CAPTION>
<S> <C>
October 1, 1997 - February 28, 1998 $7,031.45
March 1, 1998 - August 31, 1999 $7,112.67
September 1, 1998 - February 28, 1999 $7,196.08
March 1, 1999 - August 31, 1999 $7,279.34
September 1, 1999 - February 29, 2000 $7,365.26
March 1, 2000 - August 31, 2000 $7,450.60
September 1, 2000 - February 28, 2001 $7,539.09
</TABLE>
4. Tenant's proportionate share shall be amended to substitute 13.17% for
7.93%.
5. So long as tenant is not in default hereunder, Landlord hereby grants
tenant an option to renew the term of the Lease for one (1) additional
three (3) year period based on the same terms and conditions contained
herein, except Monthly Base Rent which shall be adjusted at the time of
renewal to reflect Fair Market Value for the Premises. Said exercise of
option shall be made by Tenant in writing, certified mail, return
receipt requested not less than six months prior to the expiration of
the initial term. Failure to exercise in the manner and time aforesaid
shall render the option null and void and of no further force or
effect.
<PAGE> 2
-2-
6. So long as Tenant is not in default hereunder, Landlord hereby grants
to Tenant the Right of First Refusal to lease the approximately 7,960
SF area indicated as "OBA Midwest, Ltd. Space" on Appendix "A" to this
Lease on the same terms and conditions that the Landlord is prepared to
offer the space to a bona fide third party. This right is subject to
the rights of OBA A Midwest, Ltd., including any right to renew. Tenant
shall have five (5) business days from receipt of notification of such
third party offer from Landlord to exercise its rights hereunder,
provided, however, that failure to so exercise within said time period
by either certified mail, return receipt requested or personal delivery
to Landlord shall render Tenant's rights hereunder null and void,
7. Notwithstanding anything to the contrary herein contained, it is
understood that the Premises are being let on an "as is" basis with no
promise to alter, remodel, decorate, clean, or improve the Premises or
the Building, and no representation or warranty whatsoever, expressed
or implied, regarding the condition of the Premises or the Building is
being made. It is further understood that to the extent that any
repairs, replacements or corrections are required to be made to the
Premises and/or Building of any kind whatsoever, to cause same to
comply with any applicable law, rule or regulation, whether federal,
state or local, that the cost thereof shall be fully the responsibility
of the Tenant.
It is understood that should Tenant install certain tenant
improvements, Tenant shall cause same to comply with any applicable
law, rule or regulation, whether federal, state or local, including,
but not limited to those concerned with accessibility to the disabled
and that the cost thereof shall be fully the responsibility of Tenant.
Further, at law, in equity, or otherwise, including, but not limited to
the cost of defense, brought by any governmental agency to cause
compliance herewith, Landlord shall have the right to reasonably
approve all working drawings.
<PAGE> 3
-3-
Tenant shall provide appropriate contractors' affidavits, waivers of
lien, insurance documentation, building permits and any other documents
required by Alter Asset Management to insure Landlord over pending
mechanics' lien claims and to insure compliance with applicable laws.
Additionally, any work performed in the space by a contractor other
than the Landlord's contractor is subject to Landlord's Facility
Alteration Policy attached herein as Appendix "B" and made a part of
this Lease.
8. Except as specifically modified by the terms hereof, the aforesaid
Lease and subsequent Amendments shall remain in full force and effect.
DATED this 25nd Day of September, 1997.
IN WITNESS HEREOF, Landlord and Tenant have executed this Lease
Amendment by day and year first above written.
TENANT: LANDLORD:
QUOTESMIITH CORPORATION LASALLE NATIONAL BANK,
not personally, but as Trustee
Under Trust No. 113096
BY: /s/ Robert S. Bland BY: /s/ ILLEGIBLE
------------------- ---------------------------
ITS: President and CEO ITS:
------------------- ---------------------------
<PAGE> 4
EXHIBIT A
[Floor Plan of Quotesmith Corporation, The Spargo Group,
OBA Midwest, Ltd. (Rights of First Refusal, 6,320 RSF)]
<PAGE> 5
APPENDIX "B"
FACILITY ALTERATION PROCEDURE
To follow is the approved procedure which is acceptable in the event that you,
as Tenant, should so desire to alter the facility which you occupy, hereafter
referred to as "leased premises" All of the below steps must be completed before
any alterations are performed.
1. A letter requesting approval and describing the proposed alteration to
the leased premises must be sent to Landlord. This letter must be
signed by the original signatory of the lease document or authorized
representative and received by Landlord prior to the commencement of
any work.
2. Copies of all sketches or drawings of the proposed alteration (s) must
be submitted to Alter Asset Management for approval by the Landlord.
Landlord's approval of the plans, specifications and working drawings
for Tenant's alteration shall create no responsibility or liability on
the part of Landlord's for their completeness, design sufficiency, or
compliance with all laws, rules and regulations of governmental
agencies or authorities.
3. It is the sole responsibility of the Tenant to contact local
authorities, secure any necessary permits and to comply with any and
all applicable codes and ordinances. Evidence of this shall be by copy
of any building permit (s) or a letter from local authorities
indicating that same is waived or not necessary.
4. The Contractor's Insurance Certificate naming as Additional Insured
William A. Alter, Alter Asset Management, LaSalle National Bank not
personally but as Successor Trustee Under Trust Agreement Number
113096, dated March 11, 1989, it's agents and beneficiaries thereunder,
shall be on file in our office prior to commencement of any work.
5. TheTenant shall hold the Landlord harmless from any and all liability
resulting from work being performed. A letter stating same must be
directed to Alter Asset Management prior to commencement of any work.
6. No reasonable request for a facility alteration will be denied
providing the structure itself is not altered or endangered, and the
procedure as outlined herein is followed carefully. However, the
decision to approve or deny said alteration lies solely in the hands of
the Landlord.
<PAGE> 6
Facility Alteration Procedure Continued
Page Two
7. Upon receipt of, and providing that items numbered one (1) through five
(5) have been properly submitted, you will be provided with written
approval from Alter Asset Management to proceed with the alteration
requested.
8. To proceed with any facility alteration without complete compliance of
the aforementioned is in direct violation of your industrial/commercial
lease agreement, and could result in litigation.
9. Alter Asset Management must be notified in writing upon completion of
alteration.
10. A copy of the Contractor's Sworn Statement must be submitted to Alter
Asset Management. Upon completion of the work, final waivers of lien
from each subcontractor in accordance with the Contractor's Sworn
Statement must be submitted to Alter Asset Management.
11. It shall be at the sole option of the Landlord to require that any
alteration become a part of the real property, or be restored to its
original condition at such time that Tenant has surrendered said
Premises. Said restoration will be at the expense of the Tenant.
12. Landlord reserves the right to charge Tenant a reasonable construction
management fee for services to review plans and specifications,
supervise work as it progresses, ensure that work in place is
consistent with plans, and prepare a final inspection and punchlist.
The amount of the construction management fee should be agreed upon
amongst the parties prior to commencement of work.
13. It is Tenant's responsibility to furnish to Landlord a Certificate of
Occupancy and/or evidence of passing a Final Inspection of the
Building Department of the Municipality where the Premises are located.
14. Shortly thereafter the Tenant will receive a letter from the Landlord
accepting the alteration or recommending any changes.
<PAGE> 1
EXHIBIT 10.12
LEASE AMENDMENT AGREEMENT
Execution of this Lease Amendment Agreement by Tenant and Landlord will
amend that certain Lease dated August 30, 1994, and heretofore amended November
1, 1995, and September 25, 1997, on the Premises at 8205 S. Cass Avenue, Darien,
Illinois, wherein LaSalle National Bank, not personally, but as Successor
Trustee under Trust No. 113096 is the Landlord and QuoteSmith Corporation is
the Tenant. All of the terms remain the same except as follows:
1. Commencing January 1, 1999, the Premises shall be deemed amended to
further include certain additional Premises ("Additional Premises") of
7,960 RSF which are set forth on Appendix "A-1" attached hereto.
2. The Base Rent shall increased to included Additional Base Rent for the
Additional Premises as follows:
<TABLE>
<CAPTION>
PERIOD MONTHLY AMOUNT
- ------ --------------
<S> <C>
January 1, 1999 through $8,291.67
December 31, 1999
January 1, 2000 through $8,540.42
December 31, 2000
January 1, 2001 through $8,796.63
December 31, 2001
January 1 , 2002 through $9,060.53
December 31, 2002
January 1, 2003 through $9,332.34
December 31, 2003
</TABLE>
3. The term of the Lease is hereby extended to December 31, 2003.
4. Additional rent with respect to Taxes and Operating Costs shall be
deemed amended as follows:
(a) With respect to the Additional Premises, Tenant's Proportionate
Share shall be increased by an additional 13.54%. With respect to
the computations set forth in Paragraphs 6A and 6B of the Lease,
the applicable amount with respect to Taxes shall be $104,749.92
and with respect to Operating Costs shall be $121,569.26 with
respect to the additional Premises only.
<PAGE> 2
5. Notwithstanding anything to the contrary herein contained, it is
understood that the Additional Premises are being let on an "as is"
basis with no promise to alter, remodel, decorate, clean, or improve
the Additional Premises or the Building, and no representation or
warranty whatsoever, expressed or implied, regarding the condition of
the Additional Premises or the Building is being made. It is further
understood that to the extent that any repairs, replacements or
corrections are required to be made to the Additional Premises and/or
the Building of any kind whatsoever, to cause same to comply with any
applicable law, rule or regulation, whether federal, state or local,
that the cost thereof shall be fully the responsibility of Tenant,
Subject to Landlord's approval, Tenant may install tenant improvements
subject to compliance with the Landlord's Facility Alteration Policy
attached herein as Appendix "B" and made a part of this Lease.
6. The Base Rent Schedule for the original Premises for the extended term
shall be as follows:
<TABLE>
<CAPTION>
PERIOD MONTHLY AMOUNT
------ --------------
<S> <C>
March 1, 2001 through $7,765.26
February 28, 2002
March 1, 2002 through $7,998.22
February 28, 2003
March 1, 2003 through $8,238.17
December 31, 2003
</TABLE>
7. The parties further represent to each other that no brokers, other than
The Alter Group, Ltd., were involved in conjunction with the
negotiation of this Agreement.
<PAGE> 3
8. Except as specifically modified by the terms hereof, the aforesaid
Lease and subsequent amendments shall remain in full force and effect.
DATED this 15th Day of July 1998.
IN WITNESS HEREOF, Landlord and Tenant have executed this Lease
Amendment by day and year first above written
TENANT: LANDLORD:
QuoteSmith Corporation LaSalle National Bank, not
personally, but as Successor Trustee
under Trust No. 113096
BY: /s/ Robert S. Bland BY: /s/ ILLEGIBLE
------------------- --------------------
ITS: President and CEO ITS:
------------------ --------------------
<PAGE> 4
EXHIBIT A - 1
[Floor Plan of Quotesmith Corporation (Premises), Quotesmith
Corporation (Additional Premises), The Spargo Group]
<PAGE> 5
APPENDIX "B"
FACILITY ALTERATION PROCEDURE
To follow is the approved procedure which is acceptable in the event that you,
as Tenant, should desire to alter the Premises which you occupy. All of the
below steps must be completed before any alterations are performed
1. A letter requesting approval and describing the proposed alteration to
the Premises must be sent to Landlord. This letter must be signed by
the original signatory of the lease document or another authorized
representative of Landlord and it must be received by Landlord prior to
the commencement of any work.
2. Copies of all sketches or drawings of the proposed alteration (s) must
be submitted to Alter Asset Management, Inc. ("AAM") for approval by
the Landlord. Landlord's approval of the plans, specifications and
working drawings for Tenant's alteration shall create no responsibility
or liability on the part of Landlord for their completeness, design
sufficiency, or compliance with laws, and/or rules and regulations of
governmental agencies or authorities.
3. It is the sole responsibility of the Tenant to contact local
authorities, secure any necessary permits and to comply with any and
all applicable codes and ordinances. Evidence of this shall be by copy
of any building permit(s) or a letter from local authorities indicating
that same is waived or not necessary
4. Insurance: All contractors and all subcontractor of any tier shall
deliver to AAM prior to commencement of any work, a Certificate of
Insurance and the certificate must name the following as Additional
Insureds:
LaSalle National Bank, not personally, but as Successor Trustee
Under Trust Agreement Number 113096, dated 3/11/88, its agents and
beneficiaries thereunder, and Alter Asset Management, Inc., as
managing agent, all as their interests may appear, are additional
insureds
5. The Tenant hereby holds the Landlord, it's agents, beneficiaries, and
AAM, each of them individually and severally harmless from any and all
liability resulting from work being performed.
6. No reasonable request for a facility alteration will be denied
providing the structure itself is not altered or endangered, the
buildings systems are not affected, the roof not penetrated, and the
procedure as outlined herein is fully and completely followed
carefully. However, the decision to approve or deny any alteration lies
solely at the discretion of Landlord. If a roof penetration is required
by Tenant, Tenant must use the Landlord's roof contractor to complete
the work at Tenant's sole cost
<PAGE> 6
7. Upon receipt of complete sets of those items numbered one (1) through
five (5) above, Tenant will be provided with a written response from
AAM as to whether Tenant may proceed with the alteration requested.
8. Proceeding with any alteration to your Premises without complete
compliance with all of the foregoing is in direct violation of your
Lease, and could result in litigation.
9. AAM must be notified in writing upon completion of any approved
alteration.
10. A copy of a Contractor's Sworn Statement must be submitted to AAM prior
to the start of any work. Upon completion of the work, final waivers
of lien from each subcontractor in accordance with the Contractor's
Sworn Statement, including any change orders executed during the course
of the work, must be submitted to AAM. Landlord reserves the right to
require Tenant to post a deposit in an amount determined by Landlord
prior to the start of any work hereunder.
11. It shall be at the sole option of the Landlord to require that any
alteration become a part of the Premises, or be restored to its
original condition at such time that Tenant has surrendered Premises.
If required, said restoration shall be at the sole expense of the
Tenant.
12. Landlord reserves the right to charge Tenant a fee for services to
review plans and specifications, to review work as it progresses, to
evaluate that work in place is consistent with plans, and to prepare a
final inspection and punchlist. The amount of the fee shall be the
greater of two percent (2%) of the cost of the work or at least $104.00
per hour, or such other reasonable rate as may be established from time
to time by Landlord. Such fee shall be established prior to
commencement of the work.
13. It is Tenant's responsibility to furnish to Landlord a Certificate of
Occupancy and/or evidence of passing a final inspection by the building
department of the municipality where the Premises are located.
14. To the extent that the Lease provides for reimbursement to Tenant for
any portion of the cost of any work or improvements made by Tenant,
Landlord shall make such payments to Tenant in accordance with the
terms of the Lease upon Tenant's full compliance with the provisions of
this Facility Alteration Procedure.
<PAGE> 7
TENANT: LANDLORD:
QUOTESMITH CORPORATION LASALLE NATIONAL BANK,
not personally, but as Successor
Trustee Under Trust No. 113096
By: /s/ Robert S. Bland By: /s/ Nancy A Carlen
-------------------------- ------------------
Its: President and CEO Its:
-------------------------- ------------------
Date: 8-31-98 9/22/98
-------------------------- ------------------
Revised: 6/24/98
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 22, 1999 in the Registration Statement on Form
S-1 and the related Prospectus of Quotesmith.com, Inc. dated May 26, 1999.
/s/ ERNST & YOUNG LLP
Chicago, Illinois
May 26, 1999
<PAGE> 1
EXHIBIT 23.2
CONSENT OF DIRECTOR NOMINEE
I hereby consent to the use in the Prospectus constituting part of the
Registration Statement on Form S-1 of the initial public offering of common
stock $0.001 par value per share of Quotesmith.com Inc. (the "Corporation") of
my biographical information and the disclosure of my status as a director
nominee of the Corporation.
/s/ Jeremiah A. Denton, Jr.
---------------------------
Jeremiah A. Denton, Jr.
<PAGE> 1
EXHIBIT 23.3
CONSENT OF DIRECTOR NOMINEE
I hereby consent to the use in the Prospectus constituting part of the
Registration Statement on Form S-1 of the initial public offering of common
stock $0.001 par value per share of Quotesmith.com Inc. (the "Corporation") of
my biographical information and the disclosure of my status as a director
nominee of the Corporation.
/s/ Richard F. Gretsch
--------------------------
Richard F. Gretsch
<PAGE> 1
Exhibit 23.4
CONSENT OF DIRECTOR NOMINEE
I hereby consent to the use in the Prospectus constituting part of the
Registration Statement on Form S-1 of the initial public offering of common
stock $0.001 par value per share of Quotesmith.com Inc. (the "Corporation") of
my biographical information and the disclosure of my status as a director
nominee of the Corporation.
/s/ John McCartney
----------------------------
John McCartney
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<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
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