1
 
   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 14, 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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                               autobytel.com inc.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
                                                            
            DELAWARE                           7375                          33-0711569
  (STATE OR OTHER JURISDICTION     (PRIMARY STANDARD INDUSTRIAL            (IRS EMPLOYER
      OF INCORPORATION OR          CLASSIFICATION CODE NUMBER)         IDENTIFICATION NUMBER)
         ORGANIZATION)
18872 MACARTHUR BOULEVARD IRVINE, CALIFORNIA 92612-1400 (949) 225-4500 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) MARK W. LORIMER, CHIEF EXECUTIVE OFFICER AND PRESIDENT AUTOBYTEL.COM INC. 18872 MACARTHUR BOULEVARD IRVINE, CALIFORNIA 92612-1400 (949) 225-4500 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ COPIES TO: THOMAS R. POLLOCK, ESQ. CHRISTOPHER L. KAUFMAN, ESQ. BRIGITTE LIPPMANN, ESQ. LAURA I. BUSHNELL, ESQ. PAUL, HASTINGS, JANOFSKY & WALKER LLP LATHAM & WATKINS 399 PARK AVENUE 135 COMMONWEALTH DRIVE NEW YORK, NEW YORK 10022 MENLO PARK, CALIFORNIA 94025 (212) 318-6000 (650) 328-4600
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [ ] ------------------------ CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF REGISTERED REGISTERED(1) SHARE(2) PRICE(2) REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------------- Common Stock, par value $0.001 per share....... 5,175,000 Shares $16.00 $82,800,000 $23,018.40 - ------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------
(1) Includes 675,000 shares issuable upon exercise of the underwriters' over-allotment option. (2) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457 under the Securities Act of 1933, as amended. ------------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION JANUARY 14, 1999 4,500,000 SHARES [LOGO] autobytel.com inc. COMMON STOCK We are offering 3,500,000 shares of common stock in this offering. The selling stockholders identified in this prospectus are offering an additional 1,000,000 shares. We will not receive any of the proceeds from the sale of shares by the selling stockholders. There is currently no public market for our common stock. We expect that the public offering price will be between $ and $ per share. The market price of our common stock after this offering may be higher or lower than the actual price at which the shares of our common stock will be sold in this offering. We have applied to list the common stock on the Nasdaq National Market under the symbol "ABTL." INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 7.
PER SHARE TOTAL --------- -------- Public Offering Price............................ $ $ Underwriting Discounts........................... $ $ Proceeds, before expenses, to Autobytel.com...... $ $ Proceeds, before expenses, to the selling stockholders................................... $ $
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The selling stockholders have granted the underwriters a 30-day option to purchase up to an additional 675,000 shares of common stock to cover any over-allotments. If the underwriters exercise the over-allotment option in full, these stockholders will receive $ from the proceeds. BT ALEX. BROWN LEHMAN BROTHERS PAINEWEBBER INCORPORATED , 1999 3 We have the registered service mark Auto-By-Tel and have applied for the registered service marks Autobytel.com, Certified Pre-Owned CyberStore, Kre8.net and Dealer Real Time. The Autobytel.com logo is a service mark and trademark for which we have applied for federal registration. This prospectus also includes trademarks and tradenames of companies other than autobytel.com inc. 2 4 PROSPECTUS SUMMARY In addition to this summary, you should read the more detailed information appearing elsewhere in this prospectus, including the "Risk Factors" section and the Consolidated Financial Statements and Notes thereto. Except as otherwise noted or where the context otherwise requires, all information in this prospectus assumes: - no exercise of 2,825,410 options to purchase our common stock outstanding as of December 31, 1998 under our 1996 Stock Option Plan, Amended and Restated 1996 Stock Incentive Plan and 1998 Stock Option Plan, - no exercise of 773,133 warrants to purchase our common stock as of December 31, 1998, - no exercise of the underwriters' over-allotment option, and - the conversion of all our outstanding shares of preferred stock into shares of common stock upon closing of the offering. AUTOBYTEL.COM We are a leading, branded Internet site for new and pre-owned vehicle information and purchasing services. Through our Web site, www.autobytel.com, consumers can research pricing, specifications and other information regarding new and pre-owned vehicles. When consumers indicate they are ready to buy, they can be connected to Autobytel.com's network of over 2,700 participating dealers in North America, with each dealer representing a franchise for a particular vehicle make. We expect our dealers to provide a haggle-free, competitive offer. We provide our services free of charge to consumers and derive substantially all of our revenues from fees paid by participating dealers. We believe our services benefit both consumers and participating dealers in the following ways: - we supply consumers with information they can use to make an informed and intelligent vehicle purchasing decision, - we provide consumers a convenient buying experience, - we provide consumers access to a broad range of related services such as insurance, financing and leasing through our Web site, - we reduce our participating dealers' costs by directing to them large volumes of potential automotive buyers, and - we train our dealers to appropriately deal with knowledgeable Internet consumers. We introduced our new vehicle purchasing services in May 1995 and our Certified Pre-Owned CyberStore program in April 1997. Our new vehicle purchasing service enables consumers to shop for and select a new vehicle through our Web site by providing research on new vehicles (e.g., pricing, features, specifications, colors, etc.). When consumers indicate they are ready to buy, they can complete a purchase request online. A purchase request is an online inquiry a consumer makes to receive a price quote for a specific vehicle from one of the dealers in our network. The CyberStore allows consumers to 3 5 search for a pre-owned vehicle according to the price, make, model, color, year and location of the vehicle. The CyberStore locates and displays the descriptions, locations and actual photograph of all vehicles that satisfy the consumer's search parameters. According to CNW Marketing/Research, an independent research organization, U.S. consumers spent over $670 billion on new and pre-owned vehicles in 1997, representing the sale of over 50 million vehicles. Although automotive retailing attracts significant consumer dollars, we believe that consumers associate the traditional vehicle buying experience with high-pressure sales tactics. In the United States, new vehicles are traditionally sold through face-to-face, negotiated transactions at approximately 49,000 dealerships franchised by manufacturers. Approximately 40% of pre-owned vehicles are also sold through these dealerships. Our company was founded with the objective of significantly improving the purchasing process for consumers and dealers. Since inception, we have successfully expanded our dealer network to over 2,700 dealers and have directed approximately 2.5 million purchase requests to our dealer network. During 1998, we directed over 1.3 million purchase requests to our dealers. According to a survey released by J.D. Power & Associates in September 1998, our dealer network experienced the highest sales closing rate per purchase request in the online vehicle purchasing industry. We believe that our dealer network experiences a high closing ratio due to the quality of purchase requests generated through our Web site, our high quality dealer network, and our dealer training and support. The dealers in our network use our online information platform, the Dealer Real Time (DRT) system, which provides dealers with immediate purchase request information, the ability to track customers and purchase requests, and other value-added features, including automatic uploading of pre-owned vehicle inventory into our database. We believe that the DRT system gives dealers a competitive advantage compared to delivering purchase requests by fax. We have developed strategic marketing, advertising, development and distribution affiliations with other companies, including: - Internet portals, such as Excite, Inc., - broadband service providers, such as MediaOne Interactive Services, Inc., - international automotive distributors, such as Inchcape Automotive Limited and Bilia AB, - Internet providers of vehicle pricing and specification information, such as Edmund's Publications Corp., Kelley Blue Book, Pace Publications, Inc. and IntelliChoice, Inc. and - financing and insurance providers, such as Chase Manhattan Automotive Finance Corporation, General Electric Capital Auto Financial Services, Inc. and New Hampshire Insurance Corporation, a member company of the American International Group. 4 6 Our primary objective is to be the leading global Internet brand for vehicle information and purchasing services. Our strategy to achieve this objective includes the following: - build brand equity to drive incremental traffic to our Web site, - assure consumers a quality experience by aggregating relevant information and providing a convenient alternative to the traditional vehicle buying process, - increase the number of purchase requests and, in turn, attract additional dealers, - expand and improve the dealer network through technology-based tools (such as the DRT system) and continued training and support programs, - expand and enrich our breadth of online automotive information, products and services for consumers in the United States and abroad, - invest in ancillary products and services, and - expand internationally through relationships with strategic partners. We are a Delaware corporation incorporated on May 17, 1996. We were formerly incorporated in Delaware in January 1995 as a limited liability company under the name Auto-By-Tel LLC. Our principal executive offices are located at 18872 MacArthur Boulevard, Irvine, California 92612-1400, and our telephone number is (949) 225-4500. Our Web site is located at www.autobytel.com. THE OFFERING Common stock offered by Autobytel.com....................... 3,500,000 shares Common stock offered by the selling stockholders........................ 1,000,000 shares Common stock to be outstanding after the offering(1)..................... 17,858,745 shares Use of proceeds....................... For working capital and general corporate purposes Proposed Nasdaq National Market symbol.............................. "ABTL"
- --------------- (1) Based on shares outstanding as of December 31, 1998. Excludes (a) 2,825,410 shares of common stock issuable upon exercise of options as of December 31, 1998 at a weighted average exercise price of $10.84 per share, (b) 773,133 shares of common stock issuable upon exercise of warrants outstanding as of December 31, 1998 at a weighted average exercise price of $13.12 per share, and (c) 3,723,433 shares of common stock reserved for issuance under all stock option grants. 5 7 SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA)
INCEPTION (JANUARY 31, YEARS ENDED NINE MONTHS ENDED 1995) TO DECEMBER 31, SEPTEMBER 30, DECEMBER 31, ------------------ ----------------------- 1995 1996 1997 1997 1998 ------------ ------- -------- ----------- --------- (UNAUDITED) (AUDITED) STATEMENT OF OPERATION DATA: Revenues.................... $ 274 $ 5,025 $ 15,338 $ 10,770 $ 16,499 ======= ======= ======== ======== ======== Loss from operations........ (1,030) (6,159) (17,415) (13,135) (15,982) ------- ------- -------- -------- -------- Net loss.................... $(1,030) $(6,035) $(16,810) $(12,724) $(15,512) ======= ======= ======== ======== ======== Basic net loss per share.... $ (0.12) $ (0.73) $ (2.03) $ (1.54) $ (1.85) ======= ======= ======== ======== ======== Shares used in computing basic net loss per share..................... 8,250 8,252 8,291 8,283 8,396 Pro forma basic net loss per share(1).................. $ (0.12) $ (0.68) $ (1.53) $ (1.19) $ (1.22) ======= ======= ======== ======== ======== Shares used in computing pro forma basic net loss per share(1).................. 8,250 8,849 10,967 10,730 12,753
SEPTEMBER 30, 1998 ------------------------ PRO FORMA ACTUAL AS ADJUSTED(2) ------- -------------- BALANCE SHEET DATA: Cash and cash equivalents............................... $10,488 Working capital......................................... 956 Total assets............................................ 15,473 Accumulated deficit..................................... (39,387) Stockholders' equity.................................... 3,384
- ------------------------- (1) Pro forma net loss per share has been calculated assuming the conversion of the outstanding preferred stock into common stock, as if the shares had been converted on the dates of their issuance. (2) Reflects the conversion of all outstanding shares of preferred stock concurrent with the closing of the offering and receipt by Autobytel.com of the estimated net proceeds of $ million from the sale of 3,500,000 shares of common stock offered hereby at an assumed initial public offering price of $ per share net of estimated underwriting discount and estimated offering expenses. 6 8 RISK FACTORS You should read the following risk factors carefully before purchasing our common stock. This prospectus contains certain forward-looking statements based on current expectations which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors, including the risk factors set forth below and elsewhere in this prospectus. The cautionary statements made in this prospectus should be read as being applicable to all forward-looking statements wherever they appear in this prospectus. RISK DUE TO OUR LIMITED OPERATING HISTORY AND CONTINUED LOSSES We were formed in January 1995 as Auto-By-Tel LLC, and first received revenues from operations in March 1995. We therefore have a limited operating history upon which you may evaluate our operations and future prospects. Because of the recent emergence of the Internet-based vehicle information and purchasing industry, none of our executives has significant experience in the industry. This limited operating history and management experience means it is difficult for us to predict future operating results. We have incurred losses every quarter since inception and expect to continue to incur losses for the foreseeable future. We had an accumulated deficit of $23.9 million and $39.4 million as of December 31, 1997 and September 30, 1998, respectively. Our potential for future profitability must be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies in the early stages of development, particularly companies in new and rapidly evolving markets, such as the market for Internet commerce. To achieve profitability, we must, among other things: - generate increased vehicle buyer traffic to our Web site, - continue to send new and pre-owned vehicle purchase requests to dealers that result in sufficient dealer transactions to justify our fees, - continue to expand the number of dealers in our network and enhance the quality of dealers, - respond to competitive developments, - increase our brand name visibility, - successfully introduce new services, - continue to attract, retain and motivate qualified personnel, and - continue to upgrade and enhance our technologies to accommodate expanded service offerings and increased consumer traffic. We cannot be certain that we will be successful in achieving these goals. DEALER TURNOVER AND DEPENDENCE ON RELATIONSHIPS WITH SUBSCRIBING DEALERS Substantially all of our revenues are derived from fees paid by subscribing dealerships under five-year written marketing agreements with us. These marketing agreements are cancelable at the option of either party upon 30 days notice. Subscribing dealers may terminate their relationship with us for any reason, including an unwillingness to accept our subscription terms or in order to join alternative marketing programs. Our business is 7 9 dependent upon our ability to attract and retain qualified new and pre-owned vehicle dealers. During 1998, 556 subscribing dealers in the United States terminated their affiliation with us or were terminated by us. During 1998 we also added 1,323 subscribing dealers to our dealership network. In order for us to grow or maintain our dealer network, we may need to reduce dealer turnover. We cannot assure that dealers will not terminate their agreements with us. In addition, if the volume of purchase requests increases, we may need to reduce or reconfigure the exclusive territories currently assigned to dealerships in order to serve consumers more effectively. If a dealer is unwilling to accept a reduction or reconfiguration of its territory, it may terminate its relationship with us and could sue us to prevent such reduction or reconfiguration, or collect damages from us. We have experienced one such lawsuit -- for more details, see the section in this prospectus entitled "Business -- Litigation." A material decrease in the number of dealers subscribing to our network, or slower than expected growth in the number of subscribing dealers, or litigation with dealers could have a material adverse effect on our business, results of operations and financial condition. In addition, we devote significant efforts to train participating dealerships in practices that are intended to increase consumer satisfaction. Our inability to train dealers effectively, or the failure by participating dealers to adopt recommended practices, respond rapidly and professionally to vehicle inquiries, or sell and lease vehicles in accordance with our marketing strategies, could result in low consumer satisfaction, damage our brand name and could materially and adversely affect our business, results of operations and financial condition. POTENTIAL FLUCTUATIONS AND SEASONALITY IN OUR QUARTERLY OPERATING RESULTS Our quarterly operating results may fluctuate due to many factors. Our expense levels are based in part on our expectations of future revenues which may vary significantly. We plan our business operations based on increased revenues and if our revenues do not increase faster than our expenses, our business, results of operations and financial condition will be materially and adversely affected. Other factors that may adversely affect our quarterly operating results include: - our ability to retain existing dealers, attract new dealers and maintain dealer and customer satisfaction, - the announcement or introduction of new or enhanced sites, services and products by us or our competitors, - general economic conditions and economic conditions specific to the Internet, online commerce or the automobile industry, - the usage levels of online services and consumer acceptance of the Internet and commercial online services for the purchase of consumer products and services such as those offered by us, - our ability to upgrade and develop our systems and infrastructure and to attract new personnel in a timely and effective manner, - the level of traffic on our Web site and other sites that refer traffic to our Web site, - technical difficulties, system downtime or Internet brownouts, 8 10 - the amount and timing of operating costs and capital expenditures relating to expansion of our business, operations and infrastructure, - governmental regulation, and - unforeseen events affecting the industry. To date, our quarter to quarter growth in revenues have offset any effects due to seasonality. However, we expect our business to experience seasonality as it matures, reflecting seasonal fluctuations in the automotive industry, Internet and commercial online service usage and advertising expenditures. We anticipate that purchase requests will typically increase during the first and third quarters when new vehicle models are introduced and will typically decline during the second and fourth quarters. Internet and commercial online service usage and the growth rate of such usage typically declines during the summer. Seasonality in the automotive industry, Internet and commercial online service usage, and advertising expenditures is likely to cause fluctuations in our operating results and could have a material adverse effect on our business, operating results and financial condition. SIGNIFICANT COMPETITION IN OUR INDUSTRY Our vehicle purchasing services compete against a variety of Internet and traditional vehicle purchasing services and automotive brokers. The market for Internet-based commercial services is new, and competition among commercial Web sites is expected to increase significantly in the future. The Internet is characterized by minimal barriers to entry, and new competitors can launch new Web sites at relatively low cost. To compete successfully as an Internet-based commercial entity, we must significantly increase awareness of our services and brand name. If we do not achieve our competitive objectives, such failure may have a material adverse effect on our business, results of operations and financial condition. We compete with other entities which maintain similar commercial Web sites including Autoweb.com, Cendant Membership Service, Inc.'s AutoVantage, Microsoft Corporation's Carpoint and Stoneage Corporation. Republic Industries, Inc., a large consolidator of dealers, has announced its intention to launch a Web site for marketing vehicles. We also compete indirectly against vehicle brokerage firms and affinity programs offered by several companies, including Costco Wholesale Corporation and Wal-Mart Stores, Inc. In addition, all major vehicle manufacturers have their own Web sites and many have recently launched or announced plans to launch online buying services, such as General Motors Corporation's BuyPower. We also compete with vehicle insurers, lenders and lessors as well as other dealers that are not part of our network. Such companies may already maintain or may introduce Web sites which compete with ours. We believe that the principal competitive factors in the online market are: - brand recognition, - speed and quality of fulfillment, - variety of value-added services, - ease of use, - customer satisfaction, 9 11 - quality of service, and - technical expertise. We cannot assure that we can compete successfully against current or future competitors, many of which have substantially more capital, existing brand recognition, resources and access to additional financing. In addition, competitive pressures may result in increased marketing costs, decreased Web site traffic or loss of market share or otherwise may materially and adversely affect our business, results of operations and financial condition. DEPENDENCE ON STRATEGIC RELATIONSHIPS We depend on a number of strategic relationships to direct a substantial amount of traffic to our Web site. These include online automotive information providers, such as Edmund's and Kelley Blue Book, and Internet portals, such as Excite. A number of our agreements with online service providers may be terminated without cause. In addition, our agreement with Excite relating to our sponsorship of Netscape Communications Corporation's Netcenter Auto Channel is conditioned on Excite's Netcenter agreement with Netscape remaining in effect. The Netcenter agreement between Excite and Netscape can be terminated in the event of certain changes in control which may be triggered if America Online's proposed acquisition of Netscape occurs. We cannot be certain that such online service providers will not terminate their agreements with us. In addition, we periodically negotiate revisions to existing agreements and these revisions could increase our costs in future periods. We receive a significant number of purchase requests through a limited number of such Web sites. In 1997 and 1998, approximately 49% and 34%, respectively, of our purchase requests came through Edmund's. Our agreement with Edmund's extends to July 31, 2000 and provides that we are the only online vehicle marketing service to which Edmund's will refer prospective buyers of new vehicles, although Edmund's may refer prospective buyers directly to automotive manufacturers' Web sites, which in many cases include dealer locator services. We may not be able to maintain our relationship with Edmund's or other online service providers or find alternative, comparable marketing partners capable of originating significant numbers of purchase requests on terms satisfactory to us. The termination of any of these relationships or any significant reduction in traffic to Web sites on which our services are advertised or offered, or the failure to develop additional referral sources would have a material adverse effect on our business, results of operations and financial condition. As a part of our strategy, we develop new services by entering into alliances with other companies engaged in complementary businesses, such as vehicle financing and leasing, and insurance. Some of our relationships prohibit or limit us from referring consumers to other potential sources of financing, such as our agreements with Chase. We are therefore dependent on those companies with which we have developed strategic relationships. We cannot assure that the relationship with Chase, or any other strategic relationships will continue or that we will be able to develop new strategic relationships. 10 12 UNCERTAIN ACCEPTANCE OF OUR BRAND We believe that the importance of brand recognition will increase as more companies engage in commerce over the Internet. Development and awareness of the Autobytel.com brand will depend largely on our ability to obtain a leadership position in Internet commerce. If dealers do not perceive us as an effective channel for increasing vehicle sales, or consumers do not perceive us as offering reliable information concerning new and pre-owned vehicles, as well as referrals to high quality dealers, in a user-friendly manner that reduces the time spent for vehicle purchases, we will be unsuccessful in promoting and maintaining our brand. Our brand may not be able to gain widespread acceptance among consumers or dealers. Our failure to develop our brand sufficiently would have a material adverse effect on our business, results of operations and financial condition. INABILITY TO HIRE AND RETAIN HIGHLY QUALIFIED PERSONNEL Our future success depends on our ability to identify, hire, train and retain highly qualified sales and marketing, managerial and technical personnel. In addition, as we introduce new services we will need to hire a significant number of personnel. Competition for such personnel is intense, and we may not be able to attract, assimilate or retain such personnel in the future. The inability to attract and retain the necessary managerial, technical and sales and marketing personnel could have a material adverse effect on our business, results of operations and financial condition. Our business and operations are substantially dependent on the performance of our executive officers and key employees, some of whom are employed on an at-will basis and all of whom have worked together for only a short period of time. We maintain "key person" life insurance in the amount of $3.0 million on the life of Mark W. Lorimer, our Chief Executive Officer and President. The loss of the services of Mr. Lorimer or Ann Marie Delligatta, Executive Vice President and Chief Operating Officer, or one or more of our other executive officers or key employees could have a material adverse effect on our business, results of operations and financial condition. INABILITY TO MANAGE GROWTH AND ENTRY INTO NEW BUSINESS AREAS We are expanding our operations in order to establish ourselves as a leader in the evolving market for Internet-based vehicle purchasing services. As of December 31, 1998, we had 177 employees, compared to 159 employees as of December 31, 1997, and 73 employees as of December 31, 1996. We believe establishing industry leadership requires us to: - test, introduce and develop new services and products, including enhancing our Web site, - expand the breadth of products and services offered, - expand our market presence through relationships with third parties, and - acquire new or complementary businesses, products or technologies. We may not be able to expand our operations in a cost-effective or timely manner or increase overall market acceptance. Our inability to generate satisfactory revenues from such expanded services or products to offset their cost could have a material adverse effect on our business, financial condition and results of operations. 11 13 REGULATORY UNCERTAINTIES AND GOVERNMENT REGULATION Our operations may be subject, both directly and indirectly, to various laws and regulations. Government authorities may also take the position that federal and/or state franchise laws, automobile brokerage laws, insurance licensing laws, motor vehicle dealership laws or related consumer protection or product liability laws apply to aspects of our business. As we introduce new services and expand our operations to other countries, we will need to comply with additional licensing and regulatory requirements. Due to the increasing popularity and use of the Internet, it is possible that a number of new laws and regulations may be adopted with respect to this rapidly developing environment for conducting business. We believe that neither our relationship with our dealers nor our dealer subscription agreements constitute "franchises" under federal or state franchise laws and that we are not subject to the coverage of state motor vehicle dealer licensing laws. A Federal district court in Michigan has ruled that our dealer subscription agreement is not a "franchise" under Michigan law. However, if our relationship or written agreement with our dealers were found to be a "franchise" under federal or other state franchise laws, then we could be subjected to other regulations, such as franchise disclosure and registration requirements and limitations on our ability to effect changes in our relationships with our dealers. We also believe that our dealer marketing service does not qualify as an automobile brokerage activity and therefore state broker licensing requirements do not apply to us. In response to Texas Department of Transportation concerns, we modified our marketing program in that state to include a pricing model under which all subscribing dealerships in Texas are charged uniform fees based on the population density of their particular geographic area and to make our program open to all dealerships who wish to apply. In the event that any state's regulatory requirements impose additional requirements on us or include us within an industry-specific regulatory scheme, we may be required to modify our marketing programs in such states in a manner which may undermine the program's attractiveness to consumers or dealers, or, in the alternative, if we determine that the licensing and related requirements are overly burdensome, we may elect to terminate operations in such state. In each case, our business, results of operations and financial condition could be materially and adversely affected. We are currently in the process of applying for financial broker licenses in Indiana and have been approved for such license in Rhode Island. We believe these are the only states which require us to have licenses in order to market our vehicle financing operations. It may be an expensive and time-consuming process which could divert the efforts of management from day-to-day operations if we are required to be licensed elsewhere. In the event other states require us to be licensed and we are unable to do so, or are otherwise unable to comply with regulations required by changes in current operations or the introduction of new services, our business, results of operations and financial condition could be materially and adversely affected. We market insurance online, offered by New Hampshire Insurance Corporation, a member company of the American Insurance Group (AIG), and receive referral fees from AIG in connection with this activity. We do not believe that this activity requires us to be licensed under state insurance laws. The use of the Internet in the marketing of insurance products, however, is a relatively new practice. It is not clear whether or to what extent state insurance licensing laws apply to activities similar to ours. If we were required to comply with such licensing laws, compliance could be costly or not possible. This could have a material adverse effect on our business, results of operations or financial condition. 12 14 There are currently few laws or regulations which apply directly to the Internet. Due to the increasing popularity of the Internet, however, it is likely that a number of laws and regulations may be adopted at the local, state, national or international levels with respect to commerce over the Internet, potentially covering issues such as the pricing of services and products, advertising, user privacy, intellectual property, information security, or anti- competitive practices. In addition, tax authorities in a number of states are currently reviewing the appropriate tax treatment of companies engaged in Internet commerce. New state tax regulations may subject us to additional state sales, use and income taxes. Because our business is dependent on the Internet, the adoption of any such laws or regulations may decrease the growth of Internet usage or the acceptance of Internet commerce which could, in turn, decrease the demand for our services and increase our costs or otherwise have a material adverse effect on our business, results of operations and financial condition. To date, we have not spent significant resources on lobbying or related government affairs issues but we may need to do so in the future. DEPENDENCE ON CHANGING TECHNOLOGY The Internet and electronic commerce markets are characterized by rapid technological change, changes in user and customer requirements, frequent new service and product introductions embodying new technologies and the emergence of new industry standards and practices that could render our existing Web site and technology obsolete. Our performance will depend, in part, on our ability to continue to enhance our existing services, develop new technology that addresses the increasingly sophisticated and varied needs of our prospective customers, license leading technologies and respond to technological advances and emerging industry standards and practices on a timely and cost-effective basis. The development of our Web site, DRT system and other proprietary technology entails significant technical and business risks. We may not be successful in using new technologies effectively or adapting our Web site, DRT system, or other proprietary technology to customer requirements or to emerging industry standards. If we are unable to adapt to changing technologies, our business, results of operations and financial condition could be materially and adversely affected. SYSTEMS INTERRUPTIONS We host our Web site and DRT system at our corporate headquarters in Irvine, California. Although we maintain redundant local offsite backup servers, all of our primary servers are located at our corporate headquarters and are vulnerable to interruption by damage from fire, earthquake, flood, power loss, telecommunications failure, break-ins and other events beyond our control. We have, from time to time, experienced periodic systems interruptions and anticipate that such interruptions will occur in the future. We maintain business interruption insurance which pays up to $6 million for the actual loss of business income sustained due to the suspension of operations as a result of direct physical loss of or damage to property at our offices. However, in the event of a prolonged interruption, this business interruption insurance may not be sufficient to fully compensate us for the resulting losses. In the event that we experience significant system disruptions, our business, results of operations and financial condition would be materially and adversely affected. 13 15 DEPENDENCE ON GROWTH AND ACCEPTANCE OF INTERNET COMMERCE The market for Internet-based purchasing services has only recently begun to develop and is rapidly evolving. While many Internet commerce companies have grown in terms of revenue, few are profitable. We can not assure that we will be profitable. As is typical for a new and rapidly evolving industry, demand and market acceptance for recently introduced services and products over the Internet are subject to a high level of uncertainty and there are few proven services and products. Moreover, since the market for our services is new and evolving, it is difficult to predict the future growth rate, if any, and size of this market. The success of our services will depend upon the adoption of the Internet by consumers and dealers as a mainstream medium for commerce. While we believe that our services offer significant advantages to consumers and dealers, there can be no assurance that widespread acceptance of Internet commerce in general, or of our services in particular, will occur. Our success assumes that consumers and dealers who have historically relied upon traditional means of commerce to purchase or lease vehicles, and to procure vehicle financing and insurance, will accept new methods of conducting business and exchanging information. In addition, dealers must be persuaded to adopt new selling models and be trained to use and invest in developing technologies. Moreover, critical issues concerning the commercial use of the Internet (including ease of access, security, reliability, cost, and quality of service) remain unresolved and may impact the growth of Internet use. If the market for Internet-based vehicle marketing services fails to develop, develops slower than expected or becomes saturated with competitors, or if our services do not achieve market acceptance, our business, results of operations and financial condition will be materially and adversely affected. Our purchasing service may result in changing the way vehicles are sold which may be viewed as threatening by new and pre-owned vehicle dealers who do not subscribe to the Autobytel.com program. Such businesses are often represented by influential lobbying organizations, and such organizations or other persons may propose legislation which could impact the evolving marketing and distribution model which our service promotes. Should current laws be changed or new laws passed, our business, results of operations and financial condition could be materially and adversely affected. As we introduce new services, we may need to comply with additional licensing regulations and regulatory requirements. RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION We intend to expand our new vehicle purchasing service to foreign markets through licensing our technology, business processes and tradenames and by establishing relationships with vehicle dealers and strategic partners located in certain foreign markets. As of December 31, 1998, approximately 161 Canadian dealerships belonged to our network. We have entered into a licensing relationship with Auto by Tel UK Limited, an affiliate of Inchcape Motors, the United Kingdom's largest independent automobile distributor. We have also entered an agreement with Auto-By-Tel Nordic, an affiliate of Bilia, AB, to launch Autobytel.com-licensed Web sites in Sweden, Norway, Denmark and Finland. In addition, we have entered into an arrangement with affiliates of METRO Holding AG, a Swiss-based finance and holding company, relating to the establishment of Web sites using Autobytel.com's vehicle marketing systems throughout the rest of Europe. We intend to enter into similar relationships in other countries with strong automobile markets. However, we have had limited experience in providing our Internet-based 14 16 marketing service abroad and we cannot be certain that we will be successful in introducing or marketing our services abroad. In addition, there are certain risks inherent in doing business in international markets, such as changes in political conditions, regulatory requirements, potentially weaker intellectual property protections, tariffs and other trade barriers, fluctuations in currency exchange rates, potentially adverse tax consequences, difficulties in managing or overseeing foreign operations, seasonal reductions in business activities during summer months in Europe and other areas, and educating consumers and dealers who may be unfamiliar with the benefits of online marketing and commerce. One or more of such factors may have a material adverse effect on our current or future international operations and, consequently, on our business, results of operations and financial condition. By expanding our operations to various other countries, we may become subject to laws or treaties that regulate the marketing, distribution and sale of motor vehicles. We will need to spend our resources to determine whether the laws of the countries in which we seek to operate require us to modify, or prohibit the use of, our Autobytel.com system. In addition, the laws of other countries may impose licensing, bonding or similar requirements on us as a condition to doing business therein. RISKS ASSOCIATED WITH SECURITY BREACHES INVOLVING CONFIDENTIAL INFORMATION TRANSMITTED VIA THE INTERNET We rely on technology licensed from third parties that is designed to facilitate the secure transmission of confidential information. Nevertheless, our computer infrastructure is potentially vulnerable to physical or electronic computer break-ins, viruses and similar disruptive problems. A party who is able to circumvent our security measures could misappropriate proprietary information, jeopardize the confidential nature of information transmitted over the Internet or cause interruptions in our operations. Concerns over the security of Internet transactions and the privacy of users could also inhibit the growth of the Internet in general, particularly as a means of conducting commercial transactions. To the extent that our activities or those of third party contractors involve the storage and transmission of proprietary information (such as personal financial information), security breaches could expose us to a risk of financial loss, litigation and other liabilities. Our insurance does not currently protect against such losses. Any such security breach would have a material adverse effect on our business, results of operations and financial condition. INTERNET CAPACITY CONSTRAINTS Our success will depend, in large part, upon a robust communications industry and infrastructure for providing Internet access and carrying Internet traffic. The Internet may not prove to be a viable commercial medium because of inadequate development of the necessary infrastructure (e.g., reliable network backbone), timely development of complementary products (e.g., high speed modems), delays in the development or adoption of new standards and protocols required to handle increased levels of Internet activity or increased government regulation. If the Internet continues to experience significant growth in the number of users and the level of use, then the Internet infrastructure may not be able to continue to support the demands placed on it by such potential growth. An unexpectedly large increase in the volume or pace of traffic on our Web site or the number of orders placed by customers may require us to expand and further upgrade our 15 17 technology, transaction-processing systems and network infrastructure. We may not be able to accurately project the rate or timing of increases, if any, in the use of our Web site or expand and upgrade our systems and infrastructure to accommodate such increases. In addition, we cannot assure that our dealers will efficiently process purchase requests. NO SPECIFIC PLAN FOR SIGNIFICANT PORTION OF PROCEEDS We currently have no specific plans for a significant portion of the net proceeds of the offering. As a consequence, our management will have the discretion to allocate this portion of the net proceeds of this offering to uses that the stockholders may not deem desirable. We may not be able to invest these proceeds to yield a significant return. Substantially all of the proceeds of the offering will be invested in short-term, interest-bearing, investment grade securities for an indefinite period of time. RISKS ASSOCIATED WITH THE YEAR 2000 Because many computer applications have been written using two digits rather than four to define the applicable year, date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This "Year 2000 issue" could result in system failures or miscalculations causing disruptions of operations, including disruptions of our Web site, the Dealer Real Time (DRT) system or normal business activities. We do not believe that we have material exposure to the Year 2000 issue with respect to our own information systems since our existing systems correctly define the Year 2000 with four digits. We are currently taking two actions to mitigate the risk and exposure of the Year 2000 issue: - We are in the process of obtaining Year 2000 compliance confirmation from our third-party vendors (including hardware, software, network communications, facility/utility vendors, and data suppliers) as well as our Autobytel.com accredited dealers. We expect to receive a reply to our Year 2000 requests from third party vendors and accredited dealers in early 1999. - We are implementing a test lab environment to simulate the Year 2000 rollover with hardware, software, network communications vendors and certain key data suppliers. In the event we decide any of our vendors are not Year 2000 compliant, our contingency plan is to first attempt to find a replacement vendor, and if no replacement can be found, to assist such vendor in becoming Year 2000 compliant. If we cannot effectively assist such vendor in becoming Year 2000 compliant, we plan to set up a front-end gate to screen all non-compliant data or to receive the data and modify it so that the data is Year 2000 compliant. We may spend up to $116,000 towards addressing the Year 2000 issue in fiscal year 1999. We cannot predict the extent to which the Year 2000 issue will affect our vendors, consumers or dealers, or the extent to which we would be vulnerable if such parties fail to resolve any Year 2000 issues on a timely basis. The failure of such parties subject to the Year 2000 issue to convert their systems on a timely basis or effect a conversion that is compatible with our systems could have a material adverse effect on us. In addition, to the extent our customers are unable to access our Web site or dealers are unable to access the 16 18 DRT system, such failures would have a material adverse effect on our business, results of operations, or financial condition. PROTECTION OF INTELLECTUAL PROPERTY Our ability to compete depends upon our proprietary systems and technology. While we rely on trademark, trade secret and copyright law, confidentiality agreements and technical measures to protect our proprietary rights, we believe that the technical and creative skills of our personnel, continued development of our proprietary systems and technology, brand name recognition and reliable Web site maintenance are more essential in establishing and maintaining a leadership position and strengthening our brand. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our services or to obtain and use information that we regard as proprietary. Policing unauthorized use of our proprietary rights is difficult. Effective trademark, service mark, copyright and trade secret protection may not be available in every country in which our products and services are made available online. In addition, litigation may be necessary in the future to enforce or protect our intellectual property rights or to defend against claims or infringement or invalidity. As part of our confidentiality procedures, we generally enter into agreements with our employees and consultants and limit access to our trade secrets and technology. We cannot assure that the steps taken by us will prevent misappropriation of technology or that the agreements entered into for that purpose will be enforceable. Misappropriation of our intellectual property or potential litigation could have a material adverse effect on our business, results of operations and financial condition. NO PUBLIC MARKET FOR THE COMMON STOCK AND POSSIBLE VOLATILITY OF STOCK PRICE Prior to this offering, there has been no public market for our common stock. We cannot assure that an active trading market will develop or be sustained or that the market price of the common stock will not decline. Even if an active trading market does develop, the market price of the common stock is likely to be highly volatile and could be subject to wide fluctuations in response to factors such as: - actual or anticipated variations in our quarterly operating results, - announcements of new product or service offerings, - technological innovations, - competitive developments, - changes in financial estimates by securities analysts, - conditions and trends in the Internet and electronic commerce industries, - adoption of new accounting standards affecting the automotive industry, and - general market conditions and other factors. Further, the stock markets, and in particular the Nasdaq National Market, have experienced extreme price and volume fluctuations that have particularly affected the market prices of equity securities of many technology companies and have often been unrelated or disproportionate to the operating performance of such companies. The trading prices of many technology companies' stocks are at or near historical highs. We cannot assure that such high trading prices will be sustained. These broad market factors may 17 19 adversely affect the market price of our common stock. In addition, general economic, political and market conditions such as recessions, interest rates or international currency fluctuations, may adversely affect the market price of the common stock. In the past, following periods of volatility in the market price of a company's securities, securities class action litigation has often been instituted against such a company. Such litigation, if instituted, could result in substantial costs and a diversion of management's attention and resources, which would have a material adverse effect on our business, results of operations and financial condition. SUBSTANTIAL CONTROL BY OUR FOUNDERS, OFFICERS AND DIRECTORS AND THEIR AFFILIATES Following this offering, our executive officers and directors will beneficially own or control approximately 3,145,972 shares or 17% of the outstanding shares of our common stock. If the underwriters' over-allotment option is exercised in full, our executive officers and directors will beneficially own or control approximately 35% of the outstanding shares of our common stock. In addition, after this offering, our founders, Peter Ellis and John Bedrosian will beneficially own or control approximately 20% and 17%, respectively, of the outstanding shares of our common stock. If the underwriters' over-allotment option is exercised in full, our founders will beneficially own or control approximately 18% and 15%, respectively, of the outstanding shares of our common stock. Our officers, directors, founders and their affiliates will have the ability to control the election of our Board of Directors and the outcome of corporate actions requiring stockholder approval, including mergers and other changes of corporate control, going private transactions and other extraordinary transactions. This control could have an adverse effect on the market price of our common stock. EFFECT ON MARKET PRICE OF FUTURE SHARES BEING AVAILABLE Sale of substantial numbers of shares of common stock in the public market could adversely affect the market price of the common stock and make it more difficult for us to raise funds through equity offerings in the future. A substantial number of outstanding shares of common stock and shares of common stock issuable upon exercise of outstanding stock options will become available for resale in the public market at prescribed times. Of the 17,858,745 shares to be outstanding after the offering, the 4,500,000 shares offered hereby will be eligible for immediate sale in the public market without restriction. other outstanding shares of common stock are subject to 180-day lock-up agreements with the underwriters, and shares held by the selling stockholders are subject to 270-day lock-up agreements with the underwriters. Upon the expiration of these lock-up agreements, such shares of common stock will become eligible for sale in the public market, subject to the provisions of Rules 144(k), 144 and 701 under the Securities Act of 1933, as amended, and any contractual restrictions on their transfer. BT Alex. Brown Incorporated may, in its sole discretion and at any time without notice, release all or any portion of the shares subject to lock-up agreements. Upon completion of the offering, the holders of approximately 14,737,757 shares of common stock will be entitled to certain registration rights with respect to such shares until such time as the holders of such common stock may sell such shares under Rule 144 of the Securities Act. In addition, we intend to register the shares of common stock reserved for issuance under our 1996 Stock Option Plan, 1996 Stock Incentive Plan, 1996 Employee Stock Purchase Plan and 1998 Stock Option Plan after the offering. 18 20 UNCERTAINTY OF ADDITIONAL FINANCING FOR FUTURE CAPITAL NEEDS We currently anticipate that the net proceeds of this offering, together with our cash, cash equivalents and short-term investments, will be sufficient to meet our anticipated needs for working capital and other cash requirements for at least twelve months following the effective date of this prospectus. We may need to raise additional funds sooner, however, in order to fund more rapid expansion, to develop new or enhance existing services or products, to respond to competitive pressures or to acquire complementary products, businesses or technologies. There can be no assurance that additional financing will be available on terms favorable to us, or at all. If adequate funds are not available or are not available on acceptable terms, our ability to fund our expansion, take advantage of potential acquisition opportunities, develop or enhance services or products or respond to competitive pressures would be significantly limited. Such limitation could have a material adverse effect on our business, results of operations, financial condition and prospects. EFFECT OF ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS Certain provisions of our Amended and Restated Certificate of Incorporation and Bylaws could make it difficult for a third party to acquire, and could discourage a third party from attempting to acquire control of us. Certain of these provisions allow us to issue preferred stock with rights senior to those of the common stock without any further vote or action by the stockholders. Certain of these provisions, effective upon the closing of this offering, provide that the Board of Directors will be divided into three classes, which may have the effect of delaying or preventing changes in control or change in our management because less than a majority of the Board of Directors are up for election at each annual meeting. In addition, these provisions impose various procedural and other requirements which could make it more difficult for stockholders to effect certain corporate actions. Such charter provisions could limit the price that certain investors might be willing to pay in the future for shares of our common stock and may have the effect of delaying or preventing a change in control. The issuance of preferred stock also could decrease the amount of earnings and assets available for distribution to the holders of common stock or could adversely affect the rights and powers, including voting rights, of the holders of the common stock. We are also subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law. In general, the statute prohibits a publicly held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. For purposes of Section 203, a "business combination" includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder, and an "interested stockholder" is a person who, together with affiliates and associates, owns (or within three years prior, did own) 15% or more of the corporation's voting stock. RISK RELATING TO STOCK OPTIONS Our Amended and Restated 1996 Stock Incentive Plan has a grant limit of 833,333 shares of Common Stock. From October 1996 to December 1998 we purported to grant 1,047,679 incentive stock options above the 833,333 share limit to employees. We have determined that these grants were not made under the Incentive Plan and do not qualify as incentive stock options. We are notifying all affected optionholders that they hold 19 21 nonqualified stock options. We have adopted, subject to shareholder approval, the 1999 Stock Option Plan pursuant to which we may re-grant to affected optionholders incentive stock options. We will seek liability waivers from affected optionholders in exchange for re-grants. We are unable to determine if any of the affected optionholders will accept our proposal to rectify their situation and waive any liability we may have to them and we cannot assure that our liability to affected optionholders would not be material. Our inability to obtain waivers of liability from affected optionholders could have a material adverse effect on our business, results of operations, and financial condition. USE OF PROCEEDS We estimate that the proceeds from the sale by us of the 3.5 million shares of common stock offered hereby at an assumed initial public offering price of $ per share (the mid-point of the anticipated range of between $ and $ per share), after deducting estimated underwriting discounts and estimated offering expenses, will be approximately $ million. The selling stockholders will receive $ million from the sale of one million shares of common stock, after deducting estimated underwriting discounts, and approximately $ million if the underwriters' over-allotment option is exercised in full. We will not receive any proceeds from the sale of common stock by the selling stockholders. We intend to use substantially all of the net proceeds from the offering for general corporate purposes, including online and traditional advertising programs designed to strengthen the Autobytel.com brand name, information technology investments to support and further develop our Web site and DRT system and new products and services. We may use a portion of the proceeds from the offering for possible acquisitions of or investments in businesses, the introduction of products or technologies that expand, complement or are otherwise related to our current or planned services. We have no current plans, agreements or commitments with respect to any such transaction, and we are not currently engaged in any negotiations with respect to any such transaction. Pending such uses, we will invest the proceeds in short-term, investment grade, interest-bearing securities. DIVIDEND POLICY We have never declared or paid cash dividends on our common stock. We intend to retain all of our future earnings, if any, for use in our business, and therefore we do not expect to pay any cash dividends on our common stock in the foreseeable future. 20 22 CAPITALIZATION The following table sets forth (i) actual capitalization of Autobytel.com derived from its audited financial statements as of September 30, 1998, and (ii) as adjusted capitalization of Autobytel.com to reflect (a) the conversion of all outstanding shares of Preferred Stock into 3,941,286 shares of common stock and (b) the sale by Autobytel.com of 3.5 million shares of common stock pursuant to the offering at an assumed public offering price of $ (the mid-point of the anticipated range of between $ and $ per share) and the receipt by Autobytel.com of the estimated net proceeds therefrom, after deducting estimated underwriting discounts and estimated offering expenses. The capitalization information set forth in the table below is qualified by the more detailed Consolidated Financial Statements and Notes thereto included elsewhere in this prospectus and should be read in conjunction with such Consolidated Financial Statements and Notes.
SEPTEMBER 30, 1998 -------------------------- AS ACTUAL ADJUSTED -------------- -------- (IN THOUSANDS) Cash and cash equivalents.............................. $ 10,488 $ ======== ======= Stockholders' equity: Convertible preferred stock, $0.001 par value; 11,445,187 shares authorized, 4,570,147 shares issued and outstanding, actual; 11,445,187 shares authorized, no shares issued and outstanding, as adjusted............................................. 5 -- Common stock, $0.001 par value; 50,000,000 shares authorized, 8,490,192 shares issued and outstanding, actual; 50,000,000 shares authorized, 15,931,478 shares issued and outstanding, as adjusted(1)........ 8 Additional paid-in capital............................. 42,783 Cumulative translation adjustment...................... (25) Accumulated deficit.................................... (39,387) -------- ------- Total stockholders' equity............................. 3,384 ======== ======= Total capitalization................................... $ 3,384 ======== =======
- --------------- (1) Reflects the conversion of all outstanding shares of preferred stock concurrent with the closing of the offering and receipt by Autobytel.com of the estimated net proceeds of $ million from the sale of 3,500,000 shares of common stock offered hereby at an assumed initial public offering price of $ per share net of estimated underwriting discount and estimated offering expenses. 21 23 DILUTION The pro forma net tangible book value of the Company as of September 30, 1998 was $3.4 million or 0.27 per share of common stock. Pro forma net tangible book value per share is equal to the Company's total tangible assets less its total liabilities, divided by the number of shares of common stock outstanding on a pro forma basis after giving effect to the conversion of the Preferred Stock into 3,941,286 shares of common stock concurrent with the closing of the offering. After giving effect to the sale of shares of common stock offered hereby at an assumed initial public offering price of $ (the mid-point in the anticipated range of between $ and $ per share) and the receipt by Autobytel.com of the estimated net proceeds therefrom, after deducting estimated underwriting discounts and offering expenses, the pro forma net tangible book value of Autobytel.com at September 30, 1998 would have been $ million, or $ per share. This represents an immediate increase in pro forma net tangible book value of $ per share to existing stockholders and an immediate dilution of $ per share to new investors. The following table illustrates this per share dilution: Assumed initial public offering price per share.... $ Pro forma net tangible book value per share before the offering..................................... $ 0.27 Increase per share attributable to purchases of common stock offered hereby...................... -------- -------- Pro forma net tangible book value per share after the offering..................................... Dilution per share to purchasers of common stock offered hereby................................... $ ========
The following table summarizes, on a pro forma basis (as described above) as of September 30, 1998, the number of shares of common stock purchased from Autobytel.com, the total consideration paid to Autobytel.com and the average price per share paid by existing stockholders and by the investors purchasing shares of common stock in this offering (before deducting estimated underwriting discounts and estimated offering expenses):
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE --------------------- -------------------- PRICE PER NUMBER PERCENT AMOUNT PERCENT SHARE ----------- ------- ---------- ------- ---------- Existing stockholders..... 12,431,478 78.0 $ $ New investors............. 3,500,000 22.0 ----------- ------- ---------- ------- ---------- Total................... 15,931,478 100.0 $ $ =========== ======= ========== ======= ==========
22 24 SELECTED CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) The following selected consolidated financial data should be read in conjunction with the Consolidated Financial Statements and related notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing elsewhere in this prospectus. The statement of operations data for the period from inception (January 31, 1995) to December 31, 1995, the years ended December 31, 1996 and 1997 and the nine months ended September 30, 1998 and the balance sheet data as of December 31, 1996, 1997 and as of September 30, 1998 are derived from the Consolidated Financial Statements of the Company which have been audited by Arthur Andersen LLP, independent auditors, and are included elsewhere in this prospectus. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
INCEPTION (JANUARY 31, YEARS ENDED NINE MONTHS ENDED 1995) TO DECEMBER 31, SEPTEMBER 30, DECEMBER 31, ------------------- ----------------------- 1995 1996 1997 1997 1998 ------------- ------- -------- ----------- -------- (UNAUDITED) STATEMENT OF OPERATIONS DATA: Revenues................................ $ 274 $ 5,025 $ 15,338 $ 10,770 $ 16,499 ------- ------- -------- -------- -------- Operating expenses: Sales and marketing................... 930 7,790 21,454 15,794 22,249 Product and technology development.... 99 1,753 5,448 3,993 6,216 General and administrative............ 275 1,641 5,851(2) 4,118(2) 4,016 ------- ------- -------- -------- -------- Total operating expenses........... 1,304 11,184 32,753 23,905 32,481 ------- ------- -------- -------- -------- Loss from operations.................. (1,030) (6,159) (17,415) (13,135) (15,982) Other income, net..................... -- 124 620 426 501 Loss before provision for income taxes.............................. (1,030) (6,035) (16,795) (12,709) (15,481) Provision for income taxes............ -- -- 15 15 31 ------- ------- -------- -------- -------- Net loss.............................. $(1,030) $(6,035) $(16,810) $(12,724) $(15,512) ======= ======= ======== ======== ======== Basic net loss per share................ $ (0.12) $ (0.73) $ (2.03) $ (1.54) $ (1.85) ======= ======= ======== ======== ======== Shares used in computing basic net loss per share............................. 8,250 8,252 8,291 8,283 8,396 Pro forma basic net loss per share (1)................................... $ (0.12) $ (0.68) $ (1.53) $ (1.19) $ (1.22) ======= ======= ======== ======== ======== Shares used in computing pro forma basic net loss per share(1)................. 8,250 8,849 10,967 10,730 12,753
DECEMBER 31, AS OF ------------------- SEPTEMBER 30, 1996 1997 1998 AS ADJUSTED(3) ------- -------- -------------- -------------- BALANCE SHEET DATA: Cash and cash equivalents..................... $ 9,062 $ 15,813 $ 10,488 Working capital............................... 5,977 10,938 956 Total assets.................................. 12,298 20,513 15,473 Accumulated deficit........................... (7,065) (23,875) (39,387) Stockholders' equity.......................... 7,996 13,259 3,384
- ------------------------- (1) Pro forma basic net loss per share has been calculated assuming the conversion of the outstanding preferred stock into common stock, as if the shares had been converted on the dates of their issuance. (2) The amounts include a non-recurring $1.1 million charge associated with a proposed initial public offering that was withdrawn in March 1997. (3) As adjusted for the offering. 23 25 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of the results of operations and financial condition of the Company should be read in conjunction with our Consolidated Financial Statements and Notes thereto included elsewhere in this Prospectus. This discussion contains forward-looking statements based on current expectations that involve risks and uncertainties. Actual results and the timing of certain events may differ significantly from those projected in such forward-looking statements due to a number of factors, including those set forth in the section entitled "Risk Factors" and elsewhere in this Prospectus. OVERVIEW We are a leading, branded Internet site for new and pre-owned vehicle information and purchasing services connecting consumers to our exclusive network of 2,718 participating dealers, as of December 31, 1998, in the United States and Canada. Through our Web site, www.autobytel.com, consumers can research pricing, specifications and other information regarding new and pre-owned vehicles. When consumers indicate they are ready to buy, they can be connected to Autobytel.com's network. In addition, we are continuing to develop ancillary programs for consumers such as financing, insurance and warranty services. We introduced our new vehicle marketing service in 1995, and in 1997 commenced our CyberStore program. We were formerly incorporated in January 1995 under the name Auto-By-Tel LLC, and first recognized revenues from operations in March 1995. Accordingly, we have only a limited operating history to evaluate our future prospects. As a result of our limited operating history, period-to-period comparisons of our financial results are not necessarily meaningful and you should not rely on them as an indication of our future performance. We have incurred losses every quarter since inception and expect to continue to incur losses for the foreseeable future. We had an accumulated deficit as of December 31, 1997 and September 30, 1998 of $23.9 million and $39.4 million, respectively. Our prospects must be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies in the early stages of development, particularly companies in new and rapidly evolving markets, such as the market for Internet commerce. To achieve profitability, we must, among other things, generate increased consumer traffic to our Web site and continue to send vehicle purchase requests to our dealers that result in adequate dealer sales (or leases) to justify fees, and continue to expand the number of dealers in our network and enhance the quality of our participating dealers so that our brand recognition with consumers continues to grow. There can be no assurance that we will successfully generate sufficient revenues from these services to achieve profitability. Although we have experienced revenue growth in recent periods, historical growth rates may not be sustainable and are not indicative of future operating results, and there can be no assurance that we will achieve or maintain profitability. Our revenues have increased from $274,000 in 1995 to $15.3 million in 1997, and for the nine months ended September 30, 1998, revenues were $16.5 million. We derive substantially all of our revenues from fees paid by subscribing dealers, and we expect to be primarily dependent on our dealer network for revenues in the foreseeable future. Dealers using our services pay an initial subscription fee, as well as ongoing monthly fees based on the aggregation and transmittal to them of purchase requests. We also derive some revenue on a per transaction basis from facilitating transactions between consumers and other third 24 26 parties, primarily lenders and insurance companies. We reserve the right to raise our fees to dealers after 30 days notice. Initial subscription fees from dealers are recognized ratably over the first twelve months of each dealer's contract in order to match the costs of integrating and training dealers with revenues earned. The monthly fee is recognized in the period the service is provided. Amortized revenues from initial subscription fees were $3.5 million, $3.6 million, $4.9 million and $2.2 million for the nine months ended September 30, 1998 and 1997, and for the years ended December 31, 1997 and 1996, respectively. We anticipate that our initial subscription fee amortization revenue will decline as a percentage of total revenue over time as monthly fee revenues continue to grow. From October 1996 to February 1998, our revenues also included revenues from sales of personal computers to our dealers, a practice we discontinued in the first quarter of 1998. Our financial statements include revenues derived from computer equipment sales of $147,000 in 1996, $1.5 million in 1997, and $194,000 in the first nine months of 1998. Excluding these revenues, our revenues would have been $4.9 million, $13.8 million and $16.3 million in 1996, 1997 and the first nine months of 1998, respectively. Although we do not derive any direct revenue from the volume of purchase requests, we believe our ability to increase the number of subscribing dealers and the amount of fees paid by dealers is related to the volume of purchase requests coming to our Web site. Vehicle purchase requests routed through our online system increased from approximately 345,000 in 1996 to approximately 761,000 in 1997, an increase of 121%, and to 1.3 million in 1998, an increase of 71% over the previous year. Since inception we have directed approximately 2.5 million purchase requests to dealers. We believe that our revenue growth has been and will continue to be primarily dependent on our ability to increase the number of dealers and the average fees paid by each dealer and our ability to continue to drive a significant number of purchase requests to our dealer network. Since inception, our dealer network has expanded in each quarter and as of December 31, 1998 there were 2,718 dealers. Of these dealers, 2,386 dealers pay for our service (Core Dealers) and 332 dealers are affiliated with Core Dealers (Non-core Dealers) in North America. Non-core Dealers are generally associated with lower volume vehicle manufacturers (such as Jaguar or Suzuki) or are located in remote, low volume territories and receive purchase request referrals without paying fees to us. We enter into agreements with non-core dealers to ensure the broadest geographic coverage possible for every make of vehicle. Although the net number of our dealers in North America increased by 45% during 1998, 556 of our dealers were terminated or canceled in the United States during the same period. We believe that the principal reasons for the dealer terminations were due to our enforcement of our dealer network agreements and the cancellation of our fax delivery of purchase requests in conjunction with the implementation of the DRT system. Our inability or failure to reduce dealer turnover could have a material adverse effect on our business, results of operations and financial condition. Because our primary revenue source is from program fees, our business model is significantly different from many existing Internet commerce sites. The automobiles requested through our site are sold by individual dealers; therefore we derive no direct revenue from the sale of a vehicle and have no significant cost of goods sold, no procurement, carrying or shipping costs and no inventory risk. The only cost of goods sold incurred by us since our inception was the cost of computer equipment sold to dealers, a practice we discontinued in the first quarter of 1998. 25 27 Sales and marketing costs consist primarily of promotion and advertising to build brand awareness and encourage potential customers to go to our Web site. Our sales and marketing expenses were $22.2 million, $21.5 million and $7.8 million for the nine months ended September 30, 1998, and in 1997 and 1996, respectively. We use Internet advertising, as well as traditional media, such as television, radio and print. The majority of our Internet advertising is comprised of sponsorship and partnership agreements with Internet portals and advertising and marketing affiliations with online automotive information providers. Also included in the sales and marketing expenses are the costs associated with signing up new dealers and their ongoing training and support. Sales and marketing costs are recorded as an expense in the period the service is provided. Sales and marketing expenses have historically fluctuated quarter-to-quarter due to varied levels of marketing and advertising. RESULTS OF OPERATIONS The following table sets forth our results of operations as a percentage of revenues:
JANUARY 31, 1995 YEARS ENDED NINE MONTHS ENDED (DATE OF INCEPTION) DECEMBER 31, SEPTEMBER 30, TO DECEMBER 31, ------------ ----------------------- 1995 1996 1997 1997 1998 ------------------- ---- ---- ----------- --------- (UNAUDITED) (AUDITED) STATEMENT OF OPERATIONS DATA: Revenues..................... 100% 100% 100% 100% 100% ---- ---- ---- ---- --- Operating expenses: Sales and marketing........ 339 155 140 147 135 Product and technology development............. 36 35 36 37 38 General and administrative.......... 100 33 38 38 24 ---- ---- ---- ---- --- Total operating expenses.............. 476 223 214 222 197 ---- ---- ---- ---- --- Loss from operations....... (376) (123) (114) (122) (97) ---- ---- ---- ---- --- Other income, net............ -- 2 4 4 3 ---- ---- ---- ---- --- Loss before provision for income taxes............ (376) (120) (110) (118) (94) ---- ---- ---- ---- --- Provision for income taxes... -- -- -- -- -- ---- ---- ---- ---- --- Net loss................... (376)% (120)% (110)% (118)% (94)% ==== ==== ==== ==== ===
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1997 Revenues. Our revenues increased by $5.7 million, or 53%, to $16.5 million for the nine months ended September 30, 1998, compared to $10.8 million for the nine months ended September 30, 1997. The growth in revenue was primarily attributable to an increase in the net Core Dealer count and an increase in the average fee charged to subscribing dealers. The number of Core Dealers increased by 617, or 39%, to 2,208 as of September 30, 1998, compared to 1,591 as of September 30, 1997. Our financial statements include revenues derived from computer sales, a practice we discontinued in the first quarter of 1998, of $194,000 for the nine months ended September 30, 1998 and $1.4 million for the nine months ended September 30, 1997. Excluding our revenue from the sale of computer equipment, our revenues would have increased by $6.9 million, or 26 28 73%, to $16.3 million for the nine months ended September 30, 1998 as compared to $9.4 million for the nine months ended September 30, 1997. During the nine months ended September 30, 1998, we launched new ancillary services such as Web site advertising and warranties. Sales and Marketing. Sales and marketing expenses primarily include advertising and marketing expenses paid to our purchase request providers and for developing our brand equity, as well as personnel and other costs associated with sales, training and support of our dealer network. Sales and marketing expense increased by $6.4 million, or 41%, to $22.2 million for the nine months ended September 30, 1998, compared to $15.8 million for the nine months ended September 30, 1997. The increase was primarily due to higher numbers of purchase requests provided by strategic referral relationships and higher expenses developing our brand equity. We expect to continue to increase our marketing and advertising budget in the foreseeable future. Product and Technology Development. Product and technology development expense primarily includes personnel costs relating to enhancing the features, content and functionality of our Web site and DRT system, as well as expenses associated with our telecommunications and computer infrastructure. Product and technology development expense increased by $2.2 million, or 55%, to $6.2 million for the nine months ended September 30, 1998, compared to $4.0 million for the nine months ended September 30, 1997. The increase was primarily due to the hiring and training of additional product and technology development support staff. General and Administrative. General and administrative expense primarily consists of executive, financial and legal personnel expenses and related costs. General and administrative expense decreased by $102,000, or 2%, to $4.0 million for the nine months ended September 30, 1998, compared to $4.1 million for the nine months ended September 30, 1997. The decrease was primarily due to a non-recurring $1.1 million charge associated with a proposed initial public offering withdrawn in March 1997. Excluding this non-recurring charge, general and administrative expense increased by $1.0 million, or 33%, to $4.0 million for the nine months ended September 30, 1998, compared to $3.0 million for the nine months ended September 30, 1997. This increase is primarily due to additional executive and financial personnel, along with increased legal, rent and depreciation expenses. Other Income. Other income consists of interest income. Such income increased by $75,000, or 18%, to $501,000 for the nine months ended September 30, 1998, compared to $426,000 for the nine months ended September 30, 1997. Cash balances in 1998 were higher due to the sales of the Series C Preferred Stock in 1998. Income Taxes. No provision for federal income taxes has been recorded as we incurred net operating losses through December 31, 1997. As of September 30, 1998, we had approximately $35.7 million of federal and state net operating loss carry forwards that we believe are available to offset future taxable income; such carry forwards expire in various years through 2013. Under the Tax Reform Act of 1986, the amounts of and benefits from our net operating losses carry forwards will likely be limited upon the completion of the initial public offering due to a cumulative ownership change of more than 50% over a three year period. Based on preliminary estimates, we believe the effect of such limitation, if imposed, will not have a material adverse effect on our business, results of operations and financial condition. 27 29 1997 COMPARED TO 1996 Revenues. Our revenues increased by $10.3 million, or 206%, to $15.3 million in 1997, compared to $5.0 million in 1996. The significant growth in revenue in 1997 was primarily attributable to an increase in the net Core Dealer count and an increase in the average fee charged to subscribing dealers. The number of Core Dealers increased by 437, or 36%, to 1,643 as of December 31, 1997, compared to 1,206 as of December 31, 1996. We started selling computer equipment to our dealers during the last quarter of 1996 and these revenues were $147,000 in 1996 and $1.5 million in 1997. Excluding our revenue from the sale of computer equipment, our revenues increased by $9.0 million, or 184%, to $13.8 million in 1997, compared to $4.9 million in 1996. Also, we launched several new ancillary services in 1997, including leasing, financing, credit union services and the Mobalist Rewards Program, which cumulatively represented less than 3% of total revenues during 1997. Sales and Marketing. Sales and marketing expense increased by $13.7 million, or 176%, to $21.5 million in 1997, compared to $7.8 million in 1996. This increase is attributable primarily to the increase in advertising and marketing costs associated with driving the growth of purchase requests. To a lesser degree this increase was also due to growth in personnel and other expenses associated with sales training and maintenance of our dealer channel. Product and Technology Development. Product and technology development expense increased by $3.7 million, or 206%, to $5.4 million in 1997, compared to $1.8 million in 1996. The increase in product and technology development expense was primarily associated with adding additional product and technical staff. General and Administrative. General and administrative expense increased by $4.2 million, or 263%, to $5.9 million in 1997, compared to $1.6 million in 1996. The increase was primarily due to additional executive, financial and legal personnel and related costs, as well as a non-recurring $1.1 million charge associated with a withdrawn initial public offering in 1997. Excluding this non-recurring charge, general and administrative expense increased by $3.1 million, or 194%, to $4.8 million in 1997, compared to $1.6 million in 1996. Other Income. Other income, which primarily consists of interest income, increased by $496,000, or 400%, to $620,000 in 1997, compared to $124,000 in 1996. Cash balances were higher due to the sales of Series B and Series C Preferred Stock in 1997. 1996 COMPARED TO 1995 REVENUES Revenues. Revenues increased by $4.8 million to $5.0 million in 1996, compared to $274,000 for the period from inception (January 31, 1995) to December 31, 1995. We first recognized revenues in March 1995 when we commenced offering our vehicle marketing service. The total number of Core Dealers as of December 31, 1996 and 1995 was 1,206 and 253, respectively. The increase in revenues was primarily attributable to an increase in the number of Core Dealers and increases in fees charged to them. EXPENSES Sales and Marketing. Sales and marketing expense increased by $6.9 million to $7.8 million in 1996, compared to $930,000 for the period from inception to December 31, 1995. This increase was primarily due to increased expenditures on Internet advertising, 28 30 the establishment of relationships with information providers, online services and Internet portals. In addition, we increased spending on advertising in traditional media such as television and print. Product and Technology Development. Product and technology development expense increased by $1.7 million to $1.8 million in 1996, compared to $99,000 for the period from inception to December 31, 1995. The increase was primarily associated with adding technical staff and our efforts in 1996 to improve Web site content and functionality. General and Administrative. General and administrative expense increased by $1.4 million to $1.6 million in 1996, compared to $275,000 for the period from inception to December 31, 1995. The increase was primarily due to recruiting executive management, hiring additional financial and legal personnel, moving to new facilities and incurring legal fees. QUARTERLY RESULTS OF OPERATIONS The following table sets forth quarterly statement of operations data for the eight quarters ended September 30, 1998. This quarterly information has been derived from our unaudited financial statements and, in our opinion, includes all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the information for the periods covered. The quarterly data should be read in conjunction with our Consolidated Financial Statements and the notes thereto. The operating results for any quarter are not necessarily indicative of the operating results for any future period. INCOME STATEMENT FOR THE THREE MONTHS ENDING (unaudited in thousands)
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, 1996 1997 1997 1997 1997 1998 1998 1998 -------- -------- -------- --------- -------- -------- -------- --------- REVENUES.......................... $ 2,203 $ 3,063 $ 3,414 $ 4,293 $ 4,568 $ 4,632 $ 5,405 $ 6,462 ------- ------- ------- ------- ------- ------- ------- ------- Operating expenses: Sales and marketing............. 3,519 6,675 4,683 4,436 5,660 8,459 5,470 8,320 Product and technology development................... 1,114 1,103 1,394 1,496 1,455 1,895 1,969 2,352 General and administrative...... 804 1,823 1,216 1,079 1,733 1,346 1,190 1,480 ------- ------- ------- ------- ------- ------- ------- ------- Total operating expenses...... 5,437 9,601 7,293 7,011 8,848 11,700 8,629 12,152 ------- ------- ------- ------- ------- ------- ------- ------- Loss from operations............ (3,234) (6,538) (3,879) (2,718) (4,280) (7,068) (3,224) (5,690) Other income, net................. 108 165 114 147 194 185 163 153 ------- ------- ------- ------- ------- ------- ------- ------- Loss before provision for income taxes......................... (3,126) (6,373) (3,765) (2,571) (4,086) (6,883) (3,061) (5,537) ------- ------- ------- ------- ------- ------- ------- ------- Provision for income taxes........ -- 11 4 -- -- 15 10 6 ------- ------- ------- ------- ------- ------- ------- ------- Net loss:....................... $(3,126) $(6,384) $(3,769) $(2,571) $(4,086) $(6,898) $(3,071) $(5,543) ======= ======= ======= ======= ======= ======= ======= =======
PERCENTAGE OF REVENUE FOR THE THREE MONTHS ENDING (unaudited)
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, 1996 1997 1997 1997 1997 1998 1998 1998 -------- -------- -------- --------- -------- -------- -------- --------- Revenues........................... 100% 100% 100% 100% 100% 100% 100% 100% ---- ---- ---- --- --- ---- --- --- Operating expenses: Sales and marketing.............. 160 218 137 103 124 183 101 129 Product and technology development.................... 51 36 41 35 32 41 36 36 General and administrative....... 36 60 36 25 38 29 22 23 ---- ---- ---- --- --- ---- --- --- Total operating expenses....... 247 313 214 163 194 253 160 188 ---- ---- ---- --- --- ---- --- --- Loss from operations............. (147) (213) (114) (63) (94) (153) (60) (88) Other income, net.................. 5 5 3 3 4 4 3 2 ---- ---- ---- --- --- ---- --- --- Loss before provision for income taxes.......................... (142) (208) (110) (60) (89) (149) (57) (86) ---- ---- ---- --- --- ---- --- --- Provision for income taxes......... -- -- -- -- -- -- -- -- ---- ---- ---- --- --- ---- --- --- Net loss......................... (142)% (208)% (110)% (60)% (89)% (149)% (57)% 86% ==== ==== ==== === === ==== === ===
29 31 Revenues. Growth in our dealer network and increases in fees and the sale of ancillary products and services have resulted in a compounded quarterly growth in revenue of 17% over the last eight quarters of operations. Revenue growth is primarily associated with program fees and, to a lesser extent, new product offerings. Between the quarters ended December 31, 1996 and March 31, 1998, we recognized revenues associated with computer systems sold to dealers. After the introduction of the current DRT system in February 1998, we discontinued the sale of computer equipment. In the third and fourth quarters of 1997, we recognized non-recurring revenue of $250,000 received from First USA Bank in connection with our customer rewards program and we recognized revenue received from charging CyberStore initial subscription fees, a practice we discontinued in the fourth quarter of 1997. Our financial statements include non-recurring revenue for the DRT system hardware sales, CyberStore initial fees and fees paid by First USA in connection with the Mobalist program (our Internet customer rewards program) in the amount of $147,000 in revenue in 1996, $2.2 million in 1997, and $194,000 in the first nine months of 1998. Sales and Marketing. We have increased spending on sales and marketing every year since our inception. The increase in sales and marketing spending accelerated after we completed our Series A preferred stock offering of $15.0 million in August 1996. We launched an aggressive advertising campaign, and in the quarters ended March 31, 1997 and 1998, we aired a television advertisement during the Super Bowl at a cost of approximately $1.3 million and $1.5 million, respectively. Additionally, in the quarter ended December 31, 1997, we entered into several Internet branding and purchase request generation contracts, including contracts with Excite. From October 1996 through February 1998, we incurred expenses of approximately $1.6 million associated with the sale of computer equipment to support the old DRT system. Such expenses were included in sales and marketing. These computer sales were discontinued in February 1998 when we started selling the current DRT system. We have generally increased the number of sales and marketing personnel each quarter. Product and Technology Development. Product and technology development has generally risen on a gross dollar basis since our inception. The primary cause for the increase in product and technology development expenses is the addition of personnel to develop the technology infrastructure and new programs for our dealers and Internet consumers. General and Administrative. The quarter ended March 31, 1997 includes approximately $1.1 million in previously capitalized legal, accounting and other direct costs associated with a proposed initial public offering that was withdrawn in March 1997. In the quarter ended December 31, 1997, general and administrative expenses included legal, severance and bonuses incurred during the period. POTENTIAL FLUCTUATIONS AND SEASONALITY IN QUARTERLY OPERATING RESULTS Our quarterly operating results may fluctuate due to many factors and therefore we cannot assure future financial results. In addition, our expense levels are based in part on our expectations of future revenues which may vary significantly. If our revenues do not increase as projected against our increase in expenses our business, results of operations and financial condition will be materially and adversely affected. Other factors that may adversely affect our quarterly operating results include, but are not limited to (i) our ability to retain existing dealers, attract new dealers and maintain dealer and customer satisfaction, (ii) the announcement or introduction of new or enhanced sites, services and products by us or our competitors, (iii) general economic conditions and economic conditions specific to the Internet, online commerce or the automobile industry, (iv) the 30 32 level of use of online services and consumer acceptance of the Internet and commercial online services for the purchase of consumer products and services such as those offered by us, (v) our ability to upgrade and develop our systems and infrastructure and to attract new personnel in a timely and effective manner, (vi) the level of traffic on our online sites and other sites that refer traffic to our Web site, (vii) technical difficulties, system downtime or Internet brownouts, (viii) the amount and timing of operating costs and capital expenditures relating to expansion of our business, operations and infrastructure, (ix) governmental regulation, and (x) unforeseen events affecting the industry. To date, quarter to quarter growth in our revenues have offset any effects due to seasonality. However, we expect our business to experience seasonality as it matures, reflecting seasonal fluctuations in the automotive industry, Internet and commercial online service usage and advertising expenditures. We anticipate that purchase requests will typically increase during the first and third quarters when new vehicle models are introduced and will typically decline during the second and fourth quarters. Internet and commercial online service usage and the growth rate of such usage may be expected typically to decline during the summer. In addition, our advertising costs in traditional media, such as broadcast and cable television, generally decline in the first and third quarters of each year. Depending on the extent to which the Internet and commercial online services are accepted as an advertising medium, seasonality in the level of advertising expenditures could become more pronounced for Internet-based advertising. Seasonality in the automotive industry, Internet and commercial online service usage, and advertising expenditures is likely to cause fluctuations in our operating results and could have a material adverse effect on our business, operating results and financial condition. LIQUIDITY AND CAPITAL RESOURCES Since inception, we have financed our operations primarily from the issuance of shares of preferred stock, which through September 30, 1998 totaled $42.5 million, comprising of $15.0 million raised in August 1996, $9.0 million raised in January 1997, $13.0 million raised in October 1997, $0.5 million issued in exchange for advertising in May 1998 and $5.0 million raised in May 1998. As of September 30, 1998, we had approximately $10.5 million in cash and cash equivalents. During the quarter ended December 31, 1998, we raised $25.2 million through the issuance of Series C Preferred Stock, including $0.5 million issued in exchange for advertising. We had approximately $27.8 million in cash and cash equivalents at December 31, 1998. Net cash used in operating activities increased to $10.5 million for the nine months ended September 30, 1998 from $9.9 million for the nine months ended September 30, 1997 and increased to $13.5 million in 1997 from $3.6 million in 1996. In 1995 net cash used in operating activities was $681,000. The increases in the net cash used in operating activities resulted primarily from increased sales and marketing, product development and general and administrative expenditures related to expanding our infrastructure. Also, working capital was used to finance accounts receivable, prepaid expenditures and other assets, offset partially by increased deferred revenue. Net cash used in investing activities decreased to $780,000 for the nine months ended September 30, 1998 from $1.6 million for the nine months ended September 30, 1997 and increased to $1.8 million in 1997 from $1.5 million in 1996. In 1995 net cash used in investing activities was $127,000. The net cash used in investing activities resulted primarily from purchases of property and equipment consisting of computer hardware, telecommunications equipment, furniture and leasehold improvements. 31 33 Net cash provided by financing activities decreased to $5.9 million for the nine months ended September 30, 1998 from $9.1 million for the nine months ended September 30, 1997 and increased to $22.0 million in 1997 from $14.1 million in 1996. In 1995 net cash provided by financing activities was $856,000. The net cash provided by financing resulted primarily from the issuance of preferred stock. We believe our current cash and cash equivalents, excluding proceeds from this offering, will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next 12 months. However, our cash requirements depend on several factors, including the level of expenditures on marketing and advertising, the rate of market acceptance, the ability to expand our customer base and increase the volume of purchase requests, the cost of contractual arrangements with online information providers, search engines and other referral sources, and other factors. The timing and amount of such working capital requirements cannot accurately be predicted. If capital requirements vary materially from those currently planned, we may require additional financing sooner than anticipated. We have no commitments for any additional financing, and there can be no assurance that any such commitments can be obtained on favorable terms, if at all. Any additional equity financing may be dilutive to our stockholders, and debt financing, if available, may involve restrictive covenants with respect to dividends, raising capital and other financial and operational matters which could restrict our operations or finances. If we are unable to obtain additional financing as needed, we may be required to reduce the scope of our operations or our anticipated expansion, which could have a material adverse effect on our business, results of operations and financial condition. YEAR 2000 ISSUES Because many computer applications have been written using two digits rather than four to define the applicable year, date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This "Year 2000 issue" could result in system failures or miscalculations causing disruptions of operations, including disruptions of our Web site, the DRT system or normal business activities. We do not believe that we have material exposure to the Year 2000 issue with respect to our own information systems since our existing systems correctly define the Year 2000 with four digits. We are currently taking two actions to mitigate the risk and exposure of the Year 2000 issue: - We are in the process of obtaining Year 2000 compliance confirmation from our third-party vendors (including, but not limited to, hardware, software, network communications, facility/utility vendors, and data suppliers) as well as our Autobytel.com accredited dealers. We expect to receive a reply to our Year 2000 requests from third party vendors and accredited dealers in early 1999. - We are implementing a test lab environment to simulate the Year 2000 rollover with hardware, software, network communications vendors and certain key data suppliers. In the event we decide any of our vendors are not Year 2000 compliant, our contingency plan is to first attempt to find a replacement vendor, and if no replacement can be found, to assist such vendor in becoming Year 2000 compliant. If we cannot effectively assist such vendor in becoming Year 2000 compliant, we plan to set up a front-end gate to screen all non-compliant data or to receive the data and modify it so that the 32 34 data is Year 2000 compliant. We may spend up to $116,000 towards addressing the Year 2000 issue in fiscal year 1999. We cannot predict the extent to which the Year 2000 issue will affect our vendors, consumers or dealers, or the extent to which we would be vulnerable if such parties fail to resolve any Year 2000 issues on a timely basis. The failure of such parties subject to the Year 2000 issue to convert their systems on a timely basis or effect a conversion that is compatible with our systems could have a material adverse effect on us. In addition, to the extent our customers are unable to access our Web site or dealers are unable to access the DRT system, such failures would have a material adverse effect on our business, results of operations, or financial condition. RECENT ACCOUNTING PRONOUNCEMENTS In June 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income." This statement, adopted by us in the first quarter of 1998, requires companies to report a new measurement of income. Comprehensive income (loss) is to include foreign currency translation gains and losses and other unrealized gains and losses that have historically been excluded from net income (loss) and reflected instead in equity. Currently, no material differences exist between our net income or loss and comprehensive net income or loss. In March 1998, the American Institute of Certified Public Accounts (AICPA) issued Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed or Obtained For Internal Use," which is effective for fiscal years beginning after December 15, 1998. SOP No. 98-1 provides guidance on accounting for the costs of computer software developed or obtained for internal use and defines specific criteria that determine when such costs are required to be expensed, and when such costs may be capitalized. Management believes the adoption of SOP 98-1 will not have a material effect on our consolidated financial statements. In April 1998, the AICPA issued SOP 98-5, "Reporting the Costs of Start-up Activities," which will be adopted by us in the beginning of our fiscal year beginning January 1, 1999. SOP No. 98-5 provides guidance on the financial reporting of start-up costs and organization costs and requires such costs to be expensed as incurred. We believe the adoption of SOP 98-5 will not have a material effect on our financial statements. In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, which will be adopted by us in our fiscal year beginning January 1, 2000. SFAS No. 133 establishes accounting and reporting standards for derivative instruments by requiring every derivative instrument to be recorded in the balance sheet as a liability or an asset at fair market value. Any changes to a derivatives fair market value must be recognized currently in earnings unless specific hedge accounting criteria are met. We do not have any derivative instruments or undertake any hedging activities and do not anticipate doing so, therefore the adoption of SFAS No. 133 will not have a material effect on our financial statements. 33 35 BUSINESS OVERVIEW We are a leading, branded Internet site for new and pre-owned vehicle information and purchasing services. Through our Web site, www.autobytel.com, consumers can research pricing, specifications and other information regarding new and pre-owned vehicles. When consumers indicate they are ready to buy, they can be connected to Autobytel.com's network of over 2,700 participating dealers in North America, with each dealer representing a particular vehicle make. We expect our dealers to promptly provide a haggle-free, competitive offer. In addition, consumers can apply for and receive insurance, financing, leasing and warranty proposals as well as other services and information through our Web site. We believe that our services provide benefits for consumers by supplying them with information to make an informed and intelligent vehicle purchasing decision and by directing consumers to dealers, whom we expect to provide a competitive price. In addition, our services are intended to reduce our dealers' costs by directing to them large volumes of highly qualified purchase requests, thereby enabling them to lower their marketing, advertising and personnel costs while enhancing sales productivity. We provide our services free of charge to consumers and derive substantially all of our revenues from fees paid by participating dealers. We introduced our new vehicle purchasing services in May 1995 and our Certified Pre-Owned CyberStore in April 1997. Our new vehicle purchasing service enables consumers to shop for and select a new vehicle through our Web site by providing research on new vehicles (e.g., pricing, features, specifications, colors, etc.). When consumers indicate they are ready to buy, they can complete a purchase request online. The CyberStore allows consumers to search for a pre-owned vehicle according to the price, make, model, color, year and location of the vehicle. The CyberStore locates and displays the description, location and actual photograph of all vehicles that satisfy the consumer's search parameters. The dealers in our network use our online information platform, the DRT system, which provides dealers with immediate purchase request information for new and pre-owned vehicles, the ability to track customers and purchase requests, and other value-added features, including automatic uploading of pre-owned vehicle inventory into our database. In addition, the Company offers a number of automotive finance and insurance services in conjunction with strategic partners, including automobile financing through Chase, GE Capital and Provident Bank and automotive insurance through New Hampshire Insurance Company, a member company of the American Insurance Group. BACKGROUND Growth of the Internet and Online Commerce The Web and online services have emerged as significant global communications and commercial media enabling millions of people worldwide to share information, communicate and conduct business electronically. International Data Corporation (IDC) estimates that the number of Web users worldwide will grow from approximately 69 million in 1997 to approximately 320 million by 2002. This growth is driven by a number of factors including the large and growing base of installed personal computers in the home and workplace, the decreasing cost of personal computers, easier, faster and cheaper access to the Internet, the distribution of broadband applications, the proliferation of Internet content and the increasing familiarity and acceptance of the Internet by businesses and consumers. 34 36 The growth in the use of the Internet has also led to a rapid growth of online commerce. Web commerce sites are enabling businesses to target and manage a broad customer base and establish and maintain ongoing direct customer relationships. As a growing number of businesses and information providers have begun marketing on the Web, it has rapidly become a medium in which consumers can access a vast amount of information regarding the pricing, quality and specification of products. Additionally, online transactions can be faster, less expensive and more convenient than transactions conducted in person or even over the telephone. According to IDC, the total value of goods and services purchased worldwide over the Web will increase from approximately $12.4 billion in 1997 to approximately $425 billion in 2002. The Automotive Vehicle Market Automotive dealers operate in localized markets and face significant state regulations and increasing business pressures. These fragmented markets, with over 49,000 dealers in aggregate, are characterized by (i) a perceived overabundance of dealerships, (ii) competitive sales within regional markets, (iii) increasing advertising and marketing costs that continue to reduce dealer profits, (iv) high-pressure sales tactics with consumers, and (v) large investments by dealers in real estate, construction, personnel and other overhead expenses. In addition, consumers have traditionally entered into the highly negotiated sales process with relatively little information regarding manufacturer's costs, leasing costs, financing costs, relative specifications and other important information. Buying a vehicle is considered to be one of the most significant purchases a U.S. consumer makes. According to CNW Marketing/Research, over $670 billion was spent on new and pre-owned vehicles in the United States in 1997, representing the sale of over 50 million vehicles. Although automotive retailing attracts significant consumer dollars, we believe that consumers associate the traditional vehicle buying experience with high-pressure sales tactics. THE AUTOBYTEL.COM SOLUTION We believe that our online products and services improve the vehicle purchasing process for both consumers and dealers. We offer consumers an information-rich Web site, numerous tools to configure this information, and a quality fulfillment experience. As part of the fulfillment experience, we expect our dealers to provide competitive price quotes for new and pre-owned vehicles. We believe our services enable dealers to reduce personnel and marketing costs, increase consumer satisfaction, increase customer volume, and expand dealer territories. Benefits to Consumers. Our Web site provides consumers free of charge up-to-date specifications and pricing information on vehicles. In addition, our consumers gain easy access to valuable automotive information, such as dealer invoice pricing and the AutoBuyTools(TM) services which consist of a lease calculator, a loan calculator to determine monthly payments and a lease or buy decision tool. Our database of articles allows consumers to perform online library research by accessing documents such as weekly automotive reports, consumer reviews and manufacturer brochures. Various automotive information service providers, such as Edmund's, Kelley Blue Book, Pace Publication's Carprice.com and IntelliChoice, are also aggregated on the Company's Web site to assist consumers with specific vehicle and related automotive decisions such as insurance and financing. Armed with such information, the consumer should be more confident and capable of making an informed and intelligent vehicle buying decision. 35 37 We expect our dealers to provide competitive price quotes for new and pre-owned vehicles. By providing dealers with a large number of consumers through quality purchase requests, we believe that we can help our dealers to lower their operating costs due to higher sales volume. We believe that lowering their operating costs allows dealers to offer more competitive prices. We believe we offer consumers a significantly different vehicle purchasing experience from that of traditional methods. Consumers using the Autobytel.com system are able to shop for a vehicle, and make financing and insurance decisions from the convenience of their own home or office. We expect dealers to provide consumers a haggle-free price quote and a high level of customer service. We form our dealer relationships after careful analysis of automotive sales and demographic data in each region. We seek to include in our dealer network the largest and highest quality dealers within defined territories. Our strategy to be the leading Internet-based vehicle information and purchasing service depends on our ability to provide consumers with a quality experience. Benefits to Dealers. Autobytel.com benefits dealers by reducing the dealers' incremental personnel and marketing costs, increasing consumer satisfaction and increasing consumer volume. Through our investment in national advertising and brand recognition of Autobytel.com, we attract consumers to our Web site and direct them to dealers in their local area. We believe this provides dealers access to a larger number of prequalified consumers without increasing their advertising costs. Dealers' personnel costs should be reduced because we provide dealers access to potential purchasers who have completed their research and should be ready to buy or lease a vehicle. As a result, reaching these consumers and selling or leasing them vehicles costs the dealer little or no additional overhead expense other than the fees paid to us and the personnel costs of a dedicated Autobytel.com manager. Through our DRT system, we provide dealers with on-site technology to better track sales, inventory, customer solicitations, responses and other communications. By providing consumers a quality fulfillment experience, we seek to provide Autobytel.com dealers a large number of consumers, allowing them to compete more effectively. Our solution includes an expanding network of over 2,700 participating dealers in the United States and Canada representing every major domestic and imported make of vehicles and light trucks. Because a single dealership location may hold multiple manufacturer franchises, the dealership may represent more than one dealer in the Autobytel.com network. To increase each dealer's incentive to participate in the Autobytel.com system, we allocate each dealer an exclusive geographic territory based upon specific vehicle make. A territory allocated by us to a dealer is generally larger than a territory assigned to a dealer by a manufacturer. By granting dealers exclusivity within a geographic area, we intend to assure dealers of a large enough volume of quality purchase requests to lower their operating costs. Our Web Site. Because Web sites can be continually updated and provide a large quantity of quality information, we believe the Internet offers the most efficient medium for consumers to learn about and shop for vehicles. The Internet's global reach to consumers allows us to leverage our investment in branding and marketing across a very large national and international audience to create qualified purchase requests for vehicles. For these reasons, we also believe that the Internet represents the most efficient method of directing purchase requests to local markets and dealers. 36 38 We provide the following services on our Web site: [Chart depicting programs and services accessible to Internet consumers through Autobytel.com] STRATEGY Our primary objective is to be the leading global Internet brand for vehicle information and purchasing services. We intend to achieve this objective through the following principal strategies: Continue to Build Brand Equity. We believe that due to our focus on both online and offline marketing, we have created one of the leading brand names in our sector. We intend to continue aggressively to market and advertise to enhance our brand recognition with consumers. We believe that continuing to strengthen brand awareness of the Autobytel.com name among consumers is critical to attract vehicle buyers, increase purchase requests and, in turn, increase the size of our dealer base. We intend to continue advertising on the Internet and through traditional media, such as television, radio and printed publications. Ensure the Highest Quality Consumer Experience. We believe that consumer satisfaction and loyalty is heavily influenced by the consumer's experience with our site and with our dealers. In order to enhance our appeal to consumers, we intend to continue developing our Web site by enhancing vehicle information, as well as building new features such as personalization, auto maintenance reminders and consumer reviews. As part of our continuing effort to enhance our Web site technology and features, we have entered into strategic co-development relationships, with Intel and Cow Inc. to improve our interactive dealer training. In addition, we plan to continue compiling high quality content from third party sources on our site, including information from Edmund's, IntelliChoice, Carprices.com and Kelley Blue Book. We believe that consumer satisfaction with the 37 39 vehicle purchasing experience is also essential to our success and the differentiation of our services from those of our competitors. We intend to continue to invest in our dealer training and support services to ensure a consistent, high-quality alternative to the traditional vehicle buying process. Increase Purchase Requests. We believe that increasing the volume and quality of purchase requests directed from our Web site to our dealer network is crucial to the long-term growth and success of our business. By augmenting the volume of quality purchase requests, we expect to attract additional dealers to our network, increase fees paid by dealers, and solidify our relationships with participating dealers. Our strategy for increasing traffic to our site and the number of purchase requests includes forming and maintaining online sponsorships and partnerships with Internet portals, such as Excite, and with Internet automotive information providers, such as Edmund's. As part of our strategy to improve the quality of purchase requests, we continue to expand the breadth and depth of information and services available through our Web site to insure that well informed, ready-to-buy consumers are directed to participating dealers. Expand and Improve Dealer Network. We believe that strengthening the size and quality of our dealer network is important to the success and growth of our business. We believe our network of over 2,700 dealers is one of the largest in the Internet-based vehicle purchasing industry. Our strategy is to increase the size of our dealer network by attracting new dealers and strengthening relationships with existing dealers by (i) increasing the volume and quality of purchase requests, (ii) advertising in trade publications aimed at dealers and participating in industry trade shows, (iii) maintaining our extensive training and support program to participating dealers, and (iv) providing our DRT system to all participating dealers. Invest in Ancillary Online Services. We believe that expanding our services to both consumers and dealers will be critical to establishing ourselves as the premier provider of online automotive services in the future. Our strategy is to continue to invest in ancillary services, particularly in the CyberStore and warranty, finance and insurance services. We also intend to use the DRT system to launch value added services for our dealer network, including allowing dealers to offer accessories and aftermarket products directly through the Autobytel.com Web site. We have recently begun to sell advertising on our Web site and expect to expand this business during 1999. We are also seeking opportunities to market the information contained in our databases. Expand Internationally. We intend to continue our international expansion through licensing agreements and partnering with local strategic partners. We have established these arrangements with strategic partners such as Inchcape Motors, Bilia AB and affiliates of Metro Holdings to launch international automotive information and purchasing services throughout the United Kingdom, Scandinavia and the rest of Europe, respectively. We are exploring additional opportunities in Asia and Latin America. PRODUCTS, PROGRAMS AND SERVICES New Vehicle Purchasing Service. Our new vehicle marketing service enables consumers to shop for and select a new vehicle through our Web site by providing research on new vehicles (e.g., pricing, features, specifications, colors, etc.). When consumers indicate they are ready to buy, a consumer can complete a purchase request online, which specifies the type of vehicle and accessories the consumer desires, along with the consumer's contact information. The purchase request is then routed by us to the nearest participating dealer that sells the type of vehicle requested, and we promptly return an e- 38 40 mail message to the consumer with the dealership's name and phone number and the name of the Autobytel.com manager at the dealership. Dealers agree in their contracts to contact the consumer within 24 hours of receiving the purchase request with a firm, haggle-free price quote for the requested vehicle. When consumers complete a purchase, they usually take delivery of their vehicle at the dealership showroom. Generally, within ten days of the submission of a consumer's purchase request, we contact the consumer again by e-mail to conduct a quality assurance survey that allows us to evaluate the sales process at participating dealers and improve the quality of dealer service. The Autobytel.com network has grown to 2,718 dealers as of December 31, 1998. These dealers represent every major domestic and imported make of vehicle and light truck sold in the United States and Canada. Core dealerships are charged initial subscription fees and on-going fees, principally on a monthly basis, to participate in our dealer network. Certified Pre-Owned CyberStore. We launched our CyberStore program in April 1997. The CyberStore allows consumers to search for a pre-owned vehicle according to specific search parameters such as the price, make, model, color, year and location of the vehicle. CyberStore locates and displays the description, location and actual photograph of all vehicles that satisfy the search parameters. The consumer can then complete a formal purchase request for a specific vehicle and is contacted by the dealer to conclude the sale. To be listed in the CyberStore, a pre-owned vehicle must first pass a 135-point inspection and be covered by a 72-hour money-back guarantee and three-month, 3,000-mile warranty which is honored nationally by all CyberStore dealers. We charge each new vehicle dealer that participates in the CyberStore program a separate additional monthly fee. The CyberStore program uses the DRT system to provide participating dealers online purchase requests shortly after submission by consumers as well as the ability to track their inventory on a real-time basis. Ancillary Customer Services. We offer a number of ancillary services that we market to consumers through our Web site and the linked Web sites of participating partners. We make purchase and lease financing available to consumers through various Autobytel.com financing programs offered by third parties that allow consumers to research and apply for vehicle financing online in a secure manner. Consumers can apply for a loan or lease online at the time they submit their purchase request for either a new or pre-owned vehicle. Consumers are able to arrive at the dealership with their loan pre-approved, their credit verification documents in hand, and the loan paperwork waiting for them. We believe that the convenience of pre-approved purchase or lease financing, combined with a firm, competitive price, enables dealers more easily to consummate purchase requests. Lenders to whom Autobytel.com refers customers pay us an origination fee for most loans and the dealership is compensated by the lender for each loan made to an Autobytel.com consumer through either an origination fee or a limited rate participation fee. We currently market financing through Chase and GE Capital. We market vehicle accident, extended warranty and mechanical breakdown insurance to consumers through New Hampshire Insurance Company, a member company of the American Insurance Group (AIG). Our Web site currently features a direct hyperlink to the specific Web site for AIG member companies through which consumers submit requests for insurance quotes and obtain approval. Our agreement with AIG provides that AIG pay us fees based on a percentage of the net premiums earned and collected by AIG on all policies issued to Autobytel.com referred consumers. 39 41 We offer critical information concerning all aspects of owning and leasing new and pre-owned vehicles that we believe makes our Web site a valuable resource to consumers. AutoBuyTools(TM), a service on our Web site, consists of a lease calculator, a loan calculator to determine monthly payments and a lease or buy decision tool. The Dealer Real Time System. In 1997, we launched a new, proprietary technology and software system called the DRT system. We believe the DRT system gives dealers a competitive advantage compared to delivering purchase requests by fax. A fax-based system has the following inherent inefficiencies: it is susceptible to system delays, has a less effective purchase request and inventory tracking system and it is difficult to control the distribution of purchase requests. Such inefficiencies include the delay of delivering faxes to salesmen and the uncertainty of response time to consumers related to this delivery. The DRT system is designed to enable dealers to communicate in real time with potential customers, better track their inventory and customer contacts and perform related tasks. In March 1998, as part of our new Dealer Agreement, we began requiring our dealers to use the DRT system, and have converted substantially all of our dealers to the DRT system. Loyalty Rewards Program (ABT Mobalist). To attract new customers prior to their next vehicle purchase and encourage repeat business from our existing customers, we began to offer consumers in April 1998 an affinity program called Mobalist Rewards. To date, our affinity marketing partners include Virtual Vineyards, Inc. and Uniglobe Travel Online, Inc. This program allows members to earn credits toward the purchase price of a new or pre-owned vehicle through our service. Members earn credits by purchasing products and services from Autobytel.com's retail partners and also by using a credit card co-branded with the Autobytel.com trademark to make purchases. We earn a commission each time these services or the affinity program services are used. INTERNATIONAL ACTIVITIES We intend to expand our new vehicle marketing service to foreign markets through licensing agreements and by establishing relationships with vehicle dealers and strategic partners located in foreign markets. As of December 31, 1998, approximately 161 Canadian dealerships belonged to our network. We have entered into an agreement with Inchcape Motors, the United Kingdom's largest independent automobile distributor, to license our technology, business processes and trade names in the United Kingdom, as well as provide maintenance and development for such technology. We have also entered into similar arrangements with Auto-By-Tel Nordic, an affiliate of Bilia AB, to license our technology, business processes, and trade names in Sweden, Norway, Denmark and Finland. In addition, we have entered into an arrangement with Aureus Private Equity AG and Invision AG, affiliates of Metro Holdings, a Swiss-based investment holding company, relating to the establishment of Web sites using Autobytel.com's vehicle marketing systems throughout the rest of Europe. We intend to enter into similar relationships with strategic partners in other countries that have attractive automobile markets. MARKETING AND SALES Our ability to enhance our brand name recognition, domestically and internationally, and position ourselves as a leading Internet-based vehicle information and purchasing services provider is critical to our efforts to increase the number of vehicle purchase and ancillary service requests, as well as the number and quality of subscribing dealerships. We have invested significant resources to date in marketing and communications activities. 40 42 Over the past several years, we have been the subject of numerous newspaper, magazine, radio and television stories. Articles about our new vehicle program have appeared in Business Week, Fortune, Forbes, Time, and the Wall Street Journal, among other publications. Television stories featuring us have been aired nationally on NBC Today, NBC Nightly News and CNN. We believe that ongoing media coverage is an important element in creating consumer awareness of the Autobytel.com brand name and has contributed to dealership awareness of, and participation in, our programs. We have established marketing and advertising programs with many of the leading automotive information providers on the Internet, including Edmund's, IntelliChoice and Kelley Blue Book which help direct traffic to our Web site and increase purchase requests. Our agreements with automotive information providers typically have terms ranging from one to five years. The agreement with Kelley Blue Book, however, is cancelable by Kelley Blue Book on 60 days notice. Under the agreements, we typically pay the automotive information provider a monthly fee based on the number of users who submit purchase requests after having visited the provider's Web site. Edmund's is our single largest referral service. In 1997 and 1998, approximately 49% and 34%, respectively, of our total purchase requests originated from Edmund's. This percentage decreased to 29% for the last quarter of 1998. Our agreement with Edmund's, pursuant to which we receive referrals from Edmund's Web site, is scheduled to expire July 31, 2000, unless terminated earlier by either party on 90 days notice. Edmund's has agreed to recommend or refer visitors to its Web site only to us and no other competitive online marketing program with respect to new vehicles, although Edmund's may refer prospective buyers directly to automotive manufacturers' Web sites and dealer locator services. We expect Edmund's Web site to account for a significant number of purchase requests for the foreseeable future. We endeavor to position ourselves as the leading vehicle and related services purchasing program by affiliating ourselves with online services and Internet portals. For example, we have agreements with AT&T Corp. and CLASSIFIEDS2000 and exclusive relationships with Excite and, through Excite, the automotive channel of Netscape's NetCenter. We believe that our presence on these Internet sites helps to increase purchase request volume and will remain a key element of our future business. We are also working with MediaOne to develop and deliver our broadband service offering. Broadband allows the Internet to deliver content and services at faster speeds through high capacity coaxial cable networks. We believe that the broadband opportunity is becoming an increasingly important focus within the Internet industry, and we intend to enhance our presence using this technology. We supplement our Internet presence with television and traditional print advertising. Our initial marketing focus was on computer user and hobbyist publications and major automotive magazines. In late 1996, we began to broaden our marketing efforts with a campaign to accelerate consumer awareness of the Autobytel.com brand name and drive traffic to our Web site through cable television advertisements featured on CNN and CNET, Inc. and network television advertisements featured on NBC and MSNBC. As part of our branding efforts, we aired a 30-second commercial during the broadcast of the Super Bowl in both 1997 and 1998. We expect to continue to use television advertising during 1999 to strengthen our brand awareness. In addition to our consumer-oriented marketing activities, we also market our programs directly to dealerships, participate in trade shows, advertise in trade publications and major automotive magazines and encourage subscribing dealerships to recommend our program to other dealerships. 41 43 DEALER RELATIONSHIPS AND SERVICES Dealer Network. Our dealerships are located in most major metropolitan areas in the United States and Canada and we believe they are generally leaders in their respective markets. As of December 31, 1998, our participating dealership base totaled 2,718 dealers, consisting of 2,386 core dealers and 332 non-core dealers. Core dealerships are franchises with typically high volume vehicle sales (such as Ford or Toyota). These dealerships pay initiation and monthly fees to subscribe to our online marketing program. Non-core dealers are typically franchises of lower-volume vehicle manufacturers (such as Jaguar or Suzuki) or are located in remote, low volume territories, and receive purchase request referrals from us without paying monthly subscription fees to the Company. We enter into agreements with non-core dealers to ensure the broadest geographic coverage possible for the make of vehicle represented by the non-core dealer. Customer Support. We actively monitor subscribing dealers through ongoing customer surveys, and research conducted by our internal dealer support group. Generally, within ten days after a consumer submits a purchase request through our Web site, we re-contact the consumer by e-mail requesting completion of a quality assurance survey on our Web site that allows us to evaluate the sales process at participating dealers. Dealerships that fail to abide by the Autobytel.com program guidelines or who receive repeated consumer complaints are generally reviewed and, if appropriate, terminated. In return for requiring a high level of consumer service, we assign participating dealerships exclusive territories. We try to assign dealers attractive territories in order to increase participation in our program. Our dealer agreements typically have a five-year term but are cancelable by either party on 30 days notice. Each dealer agreement obligates the dealers to adhere to our policy of providing prompt responses to customers, no haggle pricing practices and full disclosure regarding vehicle availability, add-ons and related matters. We require each dealer to have an Autobytel.com manager whose principal responsibility is supervising the Autobytel.com system, similar to the way in which most dealers have a new vehicle sales manager, pre-owned vehicle sales manager and service and parts department managers who are responsible for those dealership functions. We reserve the right to reduce or modify each dealer's assigned territory after the first six months, although there can be no assurance that a dealer whose territory is reduced or modified will not contest such a change or terminate its subscription. In addition, dealers whose territories are reduced or modified by us may sue us in an effort to prevent the change or recover damages. We have experienced one such suit. See "-- Litigation." Training. We believe that traditional dealers and their employees require specialized training to learn the skills necessary to serve the Internet user and take full advantage of our proprietary DRT system. Therefore, we have developed an extensive training program for our dealers. We believe that this training is critical to enhancing the Autobytel.com brand and reputation. We require participating dealerships to have their representatives trained on the Autobytel.com system. Training is conducted at our headquarters in Irvine, California, at regional training centers and at dealerships' premises. Training is currently provided to the dealers at no additional cost. In training our dealers, we de-emphasize traditional vehicle selling techniques and emphasize the Autobytel.com approach. To increase consumer satisfaction and reduce costs, we seek to discourage dealerships from using commissioned and multiple salespersons to interface with our customers. 42 44 COMPETITION We believe that the principal competitive factors affecting the market for Internet-based vehicle marketing services include: - successful marketing and establishment of national brand name recognition, - ease of use, speed and quality of service execution, - the size and effectiveness of the participating dealership base, - the volume and quality of traffic to and purchase requests from a Web site, - the ability to introduce new services in a timely and cost-effective manner. - technical expertise, - customer satisfaction, and - competitive dealer pricing. Our vehicle purchasing services compete against a variety of Internet and traditional vehicle buying services and automotive brokers. In the Internet-based market, we compete with other entities which maintain similar commercial Web sites including Autoweb.com, Cendant's AutoVantage, General Motors' BuyPower, Microsoft's CarPoint and Stoneage Corporation. Republic Industries has also announced its intention to create a Web site for marketing vehicles. We also compete indirectly against vehicle brokerage firms and affinity programs offered by several companies, including Costco Wholesale Corporation and Wal-Mart Stores, Inc. We compete with vehicle insurers, lenders and lessors as well as individual dealerships. Such companies may already maintain or may introduce Web sites which compete with ours. We cannot assure that we can compete successfully against current or future competitors, many of which have substantially more capital, resources and access to additional financing than we do, nor can there be any assurance that competitive pressures faced by us will not result in increased marketing costs, decreased Web site traffic or loss of market share or otherwise will not materially and adversely affect our business, results of operations and financial condition. We compete primarily on brand name recognition acquired through early entry into the Internet-based automotive purchase referral market and through customer and dealer satisfaction. OPERATIONS AND TECHNOLOGY We believe that our future success is significantly dependent upon our ability to continue to deliver a high-performance and reliable Web site, enhance consumer/dealer communications, maintain the highest levels of information privacy and ensure transactional security. We host our Web site at our corporate headquarters in Irvine, California. We currently contract the services of two Tier I Internet Service Providers utilizing four T-1 lines (approximately 6 Mbps capacity) with our primary provider and two T-1 lines (3 Mbps) with the secondary provider. Our primary servers are housed in one climate-controlled, raised floor computer room with back-up power systems. We use industry-standard servers and routers in our network. We have also installed industry-standard firewall products to secure our entire network nationwide. System enhancements are primarily intended to accommodate increased traffic across our Web site, improve the speed in which purchase requests are processed and introduce new and enhanced products and services. System enhancements entail the implementation of sophisticated new technology and system processes and there can be no assurance that such enhancements will prevent or not cause unanticipated system disruptions. Although we maintain local offsite system backups, all of our primary servers are located at our corporate headquarters 43 45 and are vulnerable to interruption and damage from fire, earthquake, flood, power loss, telecommunications failure and other events beyond our control. We have implemented an out-of-state disaster recovery plan to safeguard dealer and consumer information. We maintain business interruption insurance which pays up to $6 million for the actual loss of business income sustained due to the suspension of operations as a result of direct physical loss of or damage to property at our offices. FACILITIES Our operations are principally located in a single office building in Irvine, California. We occupy three full floors, each consisting of approximately 12,000 square feet, which are leased through August 2001. We have options to renew the leases on each floor for an additional 5-year term, and also hold an option to lease additional floor space in the building. We also lease office space in Houston, Texas, consisting of less than 5,000 square feet through Kre8.net, Inc., an Internet software company for dealer Web site design and systems backup. GOVERNMENT REGULATION We believe that our dealer marketing service does not constitute franchising or qualify as a brokerage activity which would subject us to federal and state franchise, motor vehicle dealer or broker licensing laws. A federal court in Michigan has ruled that our dealer subscription services agreement is not a "franchise" under Michigan law. If our relationship or written agreement with our dealers were found to be a "franchise" under federal or other state franchise laws, we could be subjected to, among other items, franchise disclosure and registration requirements and limitations on our ability to effectuate changes to our relationships with our dealers. Pursuant to an agreement with the Texas Department of Transportation, we cannot grant exclusive territories to its Texas dealers. In addition, we are required to modify our marketing program in Texas to include a pricing model under which all subscribing dealerships in Texas are charged uniform fees based on the population density of their geographic area and to make its program open to all dealerships who wish to apply. The Department also requires us to configure our Texas dealers' territories in such a way that each dealer's territory has at least 250,000 residents. If individual state regulatory requirements change or additional requirements are imposed on us, we may be required to modify our marketing programs in such states in a manner which may undermine the program's attractiveness to consumers or dealers. If we determine that the licensing and related requirements are overly burdensome, we may elect to terminate operations in such state. In addition, in the event that a state deems that we are acting as a broker, we may be required to comply with burdensome licensing requirements of such state or terminate operations in such state. In each case, our business, results of operations and financial condition could be materially and adversely affected. Our marketing service may result in changes in the way vehicles are sold or may be viewed as threatening by new and pre-owned vehicle dealers who do not subscribe to the Autobytel.com program. Such businesses are often represented by influential lobbying organizations, and such organizations or other persons may propose legislation which could impact the evolving marketing and distribution model which our service promotes. Should current laws be changed or new laws passed, our business, results of operations and financial condition could be materially and adversely affected. As we introduce new services, we may need to comply with additional licensing regulations and regulatory requirements. 44 46 We expect to expand our operations to various other countries that may have laws or be subject to treaties that regulate the marketing, distribution and sale of motor vehicles. As we consider specific foreign operations, we will be required to expend the resources necessary to determine whether the laws of the countries in which we seek to operate require us to modify our program or otherwise change the Autobytel.com system or prohibit the use of the system in such country entirely. In addition, the laws of other countries may impose licensing, bonding or similar requirements on us as a condition to doing business therein. To date, we have not expended significant resources on lobbying or related government affairs issues but may be required to do so in the future. EMPLOYEES As of December 31, 1998, we had a total of 177 employees. We also utilize independent contractors for software and hardware development and certain administrative activities. None of our employees are represented by a labor union. We have not experienced any work stoppages and consider our employee relations to be good. LITIGATION Jerome-Duncan Ford (JDF), a Michigan dealership, first subscribed to our new vehicle marketing program in June 1996. In January 1997, we sought to replace the existing agreement with our new standard subscription services agreement and realign JDF's territory. JDF objected to the realignment and ceased payment of its monthly subscription fee to us. Unable to resolve the matter, we terminated JDF's subscription Dealer Agreement. JDF then sued us in Michigan State Court and sought an injunction to prevent us from cancelling JDF's subscription services agreement. JDF based its action on Michigan franchise law which prohibits a franchiser from terminating a franchisee without good cause. We removed the case to federal court. In late June 1997, the federal district court ruled in favor of us and denied the injunction. The court held that JDF showed insufficient evidence of a likelihood of success on the merits involving claims of breach of Michigan franchise law. The Court found that no franchise existed. We thereafter moved for summary judgment on the franchise issues. In late 1997, the court granted our motion for summary judgment and held that our subscription services agreement and method of operation did not constitute a franchise under Michigan state law. The plaintiffs have appealed the ruling. Halrec, Inc. (Halrec), a California based Toyota dealership, first subscribed to our new vehicle marketing program in October 1996 and subsequently to our financing program. On November 13, 1998, Halrec sued Auto-By-Tel Marketing Corporation in Superior Court, County of Santa Clara, California for, among other things, restraint of trade, intentional misrepresentation and unfair competition claiming that we wrongfully awarded certain geographic territories that were contractually the property of Halrec to other car dealers. We believe Halrec's claims are without merit and are in negotiations to resolve this lawsuit. In January 1999, we extended a settlement offer that would grant Halrec a new territory. From time to time, we are involved in other litigation matters relating to claims arising out of the ordinary course of business. We believe that there are no other claims or actions pending or threatened against us, the ultimate disposition of which would have a material adverse effect on our business, results of operations and financial condition. 45 47 MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS The following table sets forth certain information with respect to the executive officers and directors of the Company.
OFFICERS AND DIRECTORS AGE POSITION ---------------------- --- -------- Michael J. Fuchs(1)(2)(3)................. 52 Chairman of the Board and Director Mark W. Lorimer........................... 39 Chief Executive Officer, President and Director Robert S. Grimes.......................... 54 Executive Vice President and Director Hoshi Printer............................. 56 Senior Vice President and Chief Financial Officer Ann M. Delligatta......................... 51 Executive Vice President and Chief Operating Officer Jeffrey H. Coats(1)(2)(3)................. 41 Director Mark N. Kaplan(1)......................... 68 Director Kenneth J. Orton(2)....................... 47 Director
- ------------------------- (1) Member of the Audit Committee. (2) Member of the Compensation Committee. (3) Designated Director of the holders of Series A Preferred Stock. Michael J. Fuchs was elected as a director of the Company in September 1996 and became Chairman in June 1998. Mr. Fuchs was Chairman and Chief Executive Officer of Home Box Office, a Division of TimeWarner Entertainment Company, L.P., a leading pay-television company, from October 1984 until November 1995, and Chairman and Chief Executive Officer of Warner Music Group, a Division of Time Warner Inc., from May 1995 to November 1995. Mr. Fuchs holds a B.A. from Union College and a J.D. from the New York University School of Law. Mr. Fuchs is a member of the Board of Directors of IMAX Corp., Wink Communications, Inc. and Consolidated Cigar Holdings Inc. Mark W. Lorimer joined the Company in December 1996 as Vice President, General Counsel and Secretary, and was promoted to Executive Vice President and Chief Operating Officer in May 1997. In May 1998, Mr. Lorimer was promoted to President. He was elected a director and appointed Chief Executive Officer of the Company in June 1998. From January 1996 to November 1996, Mr. Lorimer was a partner and, from March 1989 to January 1996, was an associate with the law firm of Dewey Ballantine LLP. Mr. Lorimer is a member of the Board of Directors of IMC Mortgage Company. Mr. Lorimer holds a B.S. in Speech from Northwestern University and a J.D. from the Fordham University School of Law. Robert S. Grimes has been a director of the Company since inception and has served as Executive Vice President since July 1996. Since September 1987, Mr. Grimes has been President of R.S. Grimes & Co., Inc., a private investment company. From April 1981 to March 1987, Mr. Grimes was a partner with the investment firm of Cowen & Company. Mr. Grimes holds a B.S. from the Wharton School of Commerce and Finance at the University of Pennsylvania and an L.L.B. from the University of Pennsylvania Law School. Mr. Grimes has served on the Board of Directors of Philips International Realty Philips Corp., a New York Stock Exchange listed company, since April 1998. 46 48 Hoshi Printer joined the Company in January 1999 as Senior Vice President and Chief Financial Officer. From June 1996 to December 1998, Mr. Printer served as Vice President, Finance and Administration, Chief Financial Officer and Secretary of Peerless Systems Corporation, a software technology company. From July 1995 to May 1996, Mr. Printer was Chief Financial Officer of Neuron Data Inc., a software technology company. From July 1994 to June 1995 Mr. Printer served as Chief Financial Officer of Soane Technologies Inc., a polymer technology company. From January 1990 to June 1994, Mr. Printer was Chief Financial Officer of Catalytica Inc., an environmental technology company. Mr. Printer also worked at Xerox Corporation for over 17 years as Vice President of Finance and in 1976 served as a consultant to the White House for the President's Reorganization project on cash management. Mr. Printer holds a B.E. in mechanical engineering and a B.E. in electrical engineering from Poona University in India, an M.S. in industrial engineering from Oklahoma State University and an M.B.A. from Stanford University. Ann M. Delligatta joined the Company in June 1997 as Senior Vice President and Chief Technology Officer and was promoted to Executive Vice President and Chief Operating Officer in July 1998. From September 1996 to June 1997, Ms. Delligatta was President and Chief Executive Officer of the Pharos Group, an information technology consulting organization. From January 1987 to September 1996, Ms. Delligatta held a number of managerial positions at TRW Inc.'s TRW Information Systems and Services Group, most recently as Vice President and General Manager/Information Technology Services. Ms. Delligatta attended Mount St. Mary's College and was named by McGraw-Hill Companies as one of the "Top 100 Women in Computing in 1996" in recognition of her success in the alignment of business and technology strategies. Jeffrey H. Coats was elected a director of the Company in August 1996. Mr. Coats has served as Managing Director of GE Equity Capital Group, Inc., a wholly-owned subsidiary of General Electric Capital Corporation, a significant stockholder in the Company, since April 1996. He has also held various positions, most recently as Managing Director, of GE Capital Corporate Finance Group, Inc., a wholly-owned subsidiary of General Electric Capital Corporation, from June 1987 to April 1993. From March 1994 to April 1996, Mr. Coats served as President of Maverick Capital Equity Partners, LLC, and from April 1993 to January 1994, Mr. Coats was a partner with Veritas Capital, Inc., both of which are investment firms. Mr. Coats holds a B.B.A. in Finance from the University of Georgia and a Masters in International Management in Finance from the American Graduate School of International Management. Mr. Coats is a director and Chairman of the Board of The Hastings Group, Inc., a privately-held clothing retailer, which on October 23, 1995, filed a voluntary petition under Chapter 11 of the Bankruptcy Code and confirmed a plan of liquidation in late 1997. Mr. Coats is a member of the board of directors of Wink Communications, Inc. and of Krause's Furniture, Inc., a publicly-held company. Mark N. Kaplan was elected as a director of the Company in June 1998. Mr. Kaplan has been a member of the law firm Skadden, Arps, Slate, Meagher & Flom LLP since 1980. Mr. Kaplan serves on the Board of Directors of the following companies whose shares are publicly traded: American Biltrite, Inc., Congoleum Corporation, Inc., DRS Technologies, Inc., Grey Advertising, Inc., MovieFone, Inc., REFAC Technology Development Corporation, and Volt Information Services, Inc. Mr. Kaplan holds an A.B. and J.D. from Columbia College. 47 49 Kenneth J. Orton was elected a director of the Company in June 1998. Mr. Orton is the President and Chief Executive Officer and a director of Preview Travel, Inc., which he joined in April 1994 as President and Chief Operating Officer. From September 1989 to March 1994, Mr. Orton was Vice President and General Manager of the San Francisco division of Epsilon, a database marketing firm and a wholly owned subsidiary of American Express Company. Prior to his employment with Epsilon, Mr. Orton was Vice President of M/A/R/C Inc., a market research and database marketing company, and Vice President of Sales and Marketing for Future Computing. Mr. Orton also serves as a director of ONSALE, Inc., a publicly-held company. Mr. Orton received a B.A. from California State University, Fullerton. BOARD COMPOSITION The Board of Directors has currently authorized eight members of whom two are to be elected by the holders of Series A Preferred Stock pursuant to the Company's Certificate of Incorporation. Messrs. Coats and Fuchs are the designees of the Series A Preferred Stock to the Board of Directors. The rights of the Series A Preferred stockholders will expire upon the consummation of this offering. Members of the Board of Directors are elected each year at the Company's annual meeting of stockholders, and serve until the following annual meeting of stockholders or until their respective successors have been elected and qualified. In accordance with the terms of the Company's Restated Certificate of Incorporation, effective upon the closing of this offering, the terms of office of the Board of Directors will be divided into three classes: the Class I term will expire at the annual meeting of stockholders to be held in 1999; the Class II term will expire at the annual meeting of stockholders to be held in 2000; and the Class III term will expire at the annual meeting of stockholders to be held in 2001. The Class I directors will be Mr. Lorimer, the Class II directors will be Messrs. Kaplan and Orton and the Class III directors will be Messrs. Grimes, Fuchs and Coats. At each annual meeting of stockholders after the initial classification, the successors to directors whose term will then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. In addition, the Company's Restated Certificate of Incorporation provides that the authorized number of directors shall be designated by the Bylaws of the Company. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. This classification of the Board of Directors may have the effect of delaying or preventing changes in control or management of the Company. Directors of the Company may be removed, with or without cause, by the affirmative vote of the holders of a majority of the shares entitled to vote at an election of directors. There are no family relationships among any of the directors and executive officers of the Company. BOARD COMMITTEES The Audit Committee consists of Messrs. Coats, Fuchs and Kaplan. The Audit Committee makes recommendations to the Board of Directors regarding the selection of independent public accountants, reviews the results and scope of the audit and other services provided by the Company's independent public accountants and reviews and evaluates the Company's control functions. The Compensation Committee consists of Messrs. Coats, Fuchs and Orton. The Compensation Committee administers the issuance of stock under the Company's 48 50 Amended and Restated 1996 Stock Incentive Plan, 1996 Stock Option Plan, 1996 Employee Stock Purchase Plan and 1998 Stock Option Plan, makes recommendations regarding the Company's various incentive compensation and benefit plans and determines salaries for the executive officers and incentive compensation for employees and consultants of the Company. DIRECTOR COMPENSATION The Company's non-employee directors do not currently receive any cash compensation for service on the Company's Board of Directors or any committee thereof, but directors may be reimbursed for certain expenses incurred in connection with attendance at Board and committee meetings. The Company's Amended and Restated 1996 Stock Incentive Plan provides for automatic grants of stock options to non-employee directors. See "Stock Plans -- Amended and Restated 1996 Stock Incentive Plan." The Company has entered into indemnification agreements with each member of the Board of Directors and its officers providing for the indemnification of such person to the fullest extent authorized, permitted or allowed by law. EXECUTIVE COMPENSATION The following table sets forth information regarding the compensation (rounded to the nearest thousand) paid during each of the Company's last three completed fiscal years to the Chief Executive Officer of the Company and each of the other five most highly compensated executive officers of the Company as of December 31, 1998 (collectively, the Named Officers). SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION AWARDS ANNUAL ------------ FISCAL COMPENSATION OTHER SECURITIES NAME AND PRINCIPAL YEAR ENDED ------------------- ANNUAL UNDERLYING POSITION DECEMBER 31, SALARY BONUS COMPENSATION OPTIONS(#) ------------------ ------------ -------- -------- ------------ ------------ Peter R. Ellis(1).......... 1998 $219,000 $ -- $522,000(2) -- Former Chief Executive 1997 275,000 100,000 15,000(3) -- Officer and President 1996 123,000 321,000 11,000(4) -- Mark W. Lorimer............ 1998 316,000 150,000 9,000(3) 750,000(5) Chief Executive Officer and 1997 200,000 100,000 70,000(6) 100,000 President 1996 8,000 -- -- 333,333 Robert S. Grimes........... 1998 220,000 75,000 -- 125,000 Executive Vice President 1997 180,000 -- -- 116,667 1996 90,000 -- -- 166,667 Ann M. Delligatta.......... 1998 177,000 100,000 -- 316,667(7) Executive Vice President 1997 88,000 -- -- 83,334 and Chief Operating Officer Michael J. Lowell.......... 1998 190,000 -- -- 16,667 Senior Vice President, 1997 139,000 50,000 -- 50,000 Development 1996 15,000 -- -- 111,111 Anne Benvenuto............. 1998 150,000 -- -- 16,667 Senior Vice President, 1997 13,000 5,000 15,000(6) 33,333 Marketing
- ------------------------- (1) Resigned as Chief Executive Officer in June 1998. 49 51 (2) Represents $500,000 severance pay, $14,000 car allowance and $8,000 legal expenses. See "Certain Transactions." (3) Car allowance and lease payments. (4) Represents certain health benefits, insurance payments and $5,000 car allowance and lease payments. (5) 500,000 shares of such securities underlying options are contingent on the performance of the Company's market trading price after the closing of the offering. (6) Relocation expense reimbursement. (7) 200,000 shares of such securities underlying options are contingent on the performance of the Company's market trading price after the closing of the offering. OPTION GRANTS DURING 1998 The following table sets forth the Named Officers and certain information concerning stock options granted to them during 1998. The Company has never issued stock appreciation rights ("SARs").
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE ---------------------------------------------------------- OF ASSUMED ANNUAL RATES NUMBER OF PERCENT OF OF STOCK PRICE SECURITIES TOTAL OPTIONS APPRECIATION FOR OPTION UNDERLYING GRANTED TO EXERCISE TERM(5) OPTIONS EMPLOYEES IN PRICE EXPIRATION -------------------------- NAME GRANTED(#)(1) 1998(2) ($/SHARE)(3) DATE(4) 5%($) 10%($) ---- ------------- -------------- ------------ ---------- ----------- ------------ Mark W. Lorimer...... 200,000 12.5% $13.20 12/17/08 $1,660,282 $ 4,207,480 500,000 31.3% 13.20 12/17/08 4,150,705 10,518,700 50,000 3.1% 13.20 06/21/08 415,070 1,051,870 Robert S. Grimes..... 125,000 7.8% 13.20 12/17/08 1,037,676 2,629,675 Ann M. Delligatta.... 100,000 6.3% 13.20 12/17/08 830,141 2,103,740 200,000 12.5% 13.20 12/17/08 1,660,282 4,207,480 16,667 1.0% 13.20 06/21/08 138,360 350,630 Anne Benvenuto....... 16,667 1.0% 13.20 06/21/08 138,360 350,630 Michael J. Lowell.... 16,667 1.0% 13.20 06/21/08 138,360 350,630 Peter R. Ellis....... -- -- -- -- -- --
- ------------------------- (1) Represents options granted under the Company's Amended and Restated 1996 Stock Incentive Plan and the 1998 Stock Option Plan. (2) Based on an aggregate 1,597,007 shares of Company common stock subject to options granted to employees during fiscal 1998. (3) Options were granted at an exercise price equal to the fair market value of the common stock at the date of grant. In determining the fair market value of the common stock, the Board of Directors considered various factors, including the Company's financial condition and business prospects, operating results, the absence of a market for the common stock and the risks normally associated with investments in companies engaged in similar businesses. (4) The term of each option granted is generally ten years from the date of grant. Options may terminate before their expiration dates, if the optionee's status as an employee or a consultant is terminated or upon the optionee's death or disability. (5) The 5% and 10% assumed annual rates of compounded stock price appreciation are mandated by rules of the Securities and Exchange Commission and do not represent the Company's estimate or projection of the Company's future common stock prices. 50 52 AGGREGATED OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES The following table sets forth for each of the Named Officers certain information concerning options exercised during fiscal 1998 and the number of shares subject to both exercisable and unexercisable stock options as of December 31, 1998. Also reported are values for "in-the-money" options that represent the positive spread between the respective exercise prices of outstanding options and the fair market value of the common stock as of December 31, 1998. The Company has never issued SARs.
NUMBER OF SECURITIES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN- NUMBER OF OPTIONS AT THE-MONEY OPTIONS AT SHARES DECEMBER 31, 1998 DECEMBER 31, 1998($)(1) ACQUIRED ON VALUE --------------------------- --------------------------- NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ---- ----------- ----------- ----------- ------------- ----------- ------------- Mark W. Lorimer........ -- -- 209,999 973,334 1,609,491 1,290,506 Michael J. Lowell...... -- -- 104,861 72,917 725,006 241,660 Robert S. Grimes....... -- -- 245,834 162,500 2,060,004 -- Ann M. Delligatta...... -- -- 29,165 370,836 -- -- Anne Benvenuto......... -- -- 8,333 41,667 -- -- Peter R. Ellis......... -- -- -- -- -- --
- ------------------------- (1) Calculated by determining the difference between the fair market value of the securities underlying the options as of December 31, 1998 ($13.20 per share as determined by the Board of Directors) and the exercise price of the officer's options. In determining the fair market value of the common stock, the Board of Directors considered various factors, including the Company's financial condition and business prospects, its operating results, the absence of a market for the common stock and the risks normally associated with investments in companies engaged in similar businesses. STOCK PLANS 1996 Stock Option Plan. The Company's 1996 Stock Option Plan (the Option Plan) was approved by the Board of Directors on May 18, 1996 and the stockholders on May 31, 1996. The Option Plan was terminated by a resolution of the Board of Directors on October 23, 1996, at which time over 800,000 options had been issued. The Option Plan provided for the granting to employees and directors of stock options intended to qualify as incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the Code), and for the grant to employees, consultants and directors of nonstatutory stock options. The Company reserved 1,194,444 shares of common stock for issuance under the Option Plan. Under the Option Plan, the exercise price of any incentive stock options granted under the Option Plan were not less than the fair market value of the common stock on the date of grant, and the exercise price of any non-statutory stock option granted under the Option Plan were not less than 85% of the fair market value of the common stock at the date of the grant. The term of all options granted under the 1996 Option Plan did not exceed 10 years. Options granted under the Option Plan are administered by the Board of Directors or a committee of the Board (the "Administrator"). Any options granted under the Option Plan are exercisable at such times as determined by the Administrator, but in no case at a rate of less than 20% per year over five years from the grant date. A majority of the outstanding options vest and became exercisable as to one third of the grant on October 31, 1996, and as to an additional one third of the grant at each successive October 31. Options granted under the Option Plan generally must be exercised within 30 days following termination of the optionee's status as an employee, directors or consultant of the Company, or within 12 months following such optionee's termination by death or disability. Any optionee 51 53 holding options granted under the Option Plan cannot sell or transfer any shares of common stock during the 180 day period following the effective date of the registration statement relating to an initial public offering of securities filed pursuant to the Securities Act. Amended and Restated 1996 Stock Incentive Plan. The Incentive Plan was approved by the Board of Directors on October 23, 1996, amended and restated by the Board of Directors on November 24, 1996 and approved by the stockholders on January 16, 1997. The Company's Amended and Restated 1996 Stock Incentive Plan (the Incentive Plan) provides for the granting to employees and directors of stock options intended to qualify as incentive stock options within the meaning of Section 422 of the Code, and for the granting to employees, directors and consultants of nonstatutory stock options and stock purchase rights. As approved by the stockholders, the Company reserved 833,333 shares of common stock for issuance under the Incentive Plan. Options with respect to all of the common stock reserved for issuance have been issued and are either incentive stock options or nonstatutory stock options. Options granted under the Incentive Plan are not generally transferable by the optionee, and each option is exercisable during the lifetime of the optionee only by such optionee. Options granted under the Incentive Plan must generally be exercised within three months of the end of the optionee's status as an employee or consultant of the Company, or within twelve months after such optionee's termination by death or disability, but in no event later than the expiration of the option's ten year term. The exercise price of nonstatutory stock options granted under the Incentive Plan was determined by the Board of Directors, and in all cases, was the fair market value of the common stock on the date of grant. The term of all options granted under the Incentive Plan did not exceed ten years. The Incentive Plan provides that in the event of a merger of the Company with or into another corporation, a sale of substantially all of the Company's assets or a like transaction involving the Company, each option will be assumed or an equivalent option substituted by the successor corporation. If the outstanding options are not assumed or substituted as described in the preceding sentence, the Committee shall provide for each optionee to have the right to exercise the option as to all of the optioned stock, including shares as to which it would not otherwise be exercisable. If the Administrator makes an option exercisable in full in the event of a merger or sale of assets, the Administrator will notify the optionee that the option will be fully exercisable for a period of 15 days from the date of such notice, and the option will terminate upon the expiration of such period. Non-employee directors are entitled to participate in the Company's Incentive Plan. The Incentive Plan provides for an automatic grant of an option to purchase 13,333 shares of common stock (the First Option) to each non-employee director on the date on which the Incentive Plan becomes effective or, if later, on the date on which the person first becomes a non-employee director. After the First Option is granted to the non-employee director, he or she will automatically be granted an option to purchase 3,333 shares (a Subsequent Option) on November 1 of each subsequent year provided he or she is then a non-employee director and, provided further, that on such date he or she has served on the Board for at least six months. First Options and each Subsequent Option will have a term of ten years. The shares subject to the First Option and each subsequent option vest in their entirety and becomes exercisable on the first anniversary of the grant date, provided 52 54 that the optionee continues to serve as a director on such dates. The exercise price of shares subject to the First Option and each Subsequent Option shall be 100% of the fair market value per share of the common stock on the date of the grant of the option. From October 1996 to December 1998, the Company purported to grant incentive stock options covering 1,047,679 shares of the Company's common stock to employees, which grants exceeded the Incentive Plan limit of 833,333 shares. Of these 1,047,679 shares, 837,401 shares are still outstanding. Because these grants exceed the plan's limit, they do not qualify as incentive stock options. The Company is notifying all affected optionholders that the options they hold are not incentive stock options, but nonqualified stock options. We have adopted, subject to shareholder approval, the 1999 Stock Option Plan pursuant to which we may re-grant to affected optionholders incentive stock options. We will seek liability waivers from affected optionholders in exchange for re-grants. At this time the Company is unable to determine what liability, if any, the Company will have to the optionholders in the event that the Company does not obtain waivers from all affected optionholders. 1996 Employee Stock Purchase Plan. The Company's 1996 Employee Stock Purchase Plan (the Purchase Plan) was adopted by the Board of Directors on November 18, 1996 and approved by the stockholders on January 16, 1997. The maximum number of shares of common stock available for sale is 444,444. Currently the plan has not been implemented. The Purchase Plan, which is intended to qualify under Section 423 of the Code, permits eligible employees of the Company to purchase shares of common stock through payroll deductions of up to ten percent of their compensation for all purchase periods ending within any calendar year. Individuals who are eligible employees on the start day of any offering period may enter the Purchase Plan on that start date. Individuals who become eligible employees after the start date of the offering period may join the Purchase Plan on any subsequent quarterly entry date within that period. Employees are eligible to participate if they are customarily employed by the Company or any designated subsidiary for at least 20 hours per week and for more than five months in any calendar year. The price of common stock purchased under the Purchase Plan will be 85% of the lower of the fair market value of the common stock on the first or last day of each six month purchase period. Employees may end their participation in the Purchase Plan at any time during an offering period, and they will be paid their payroll deductions to date. Participation ends automatically upon termination of employment with the Company. Rights granted under the Purchase Plan are not transferable by a participant other than by will, the laws of descent and distribution, or as otherwise provided under the plan. The Purchase Plan will be administered by the Board of Directors or by a committee appointed by the Board. The Board may amend or modify the Purchase Plan at any time. The Purchase Plan will terminate 10 years from the date of its adoption. 1998 Stock Option Plan. The Company's 1998 Stock Option Plan (the 1998 Option Plan) was adopted by the Board of Directors in December 1998. The Plan provides that an aggregate of 1,500,000 shares of the Company's common stock is available to be granted subject to options to key employees of the Company (and its parent or subsidiary corporations, if any). If any stock option expires or terminates for any reason without having been exercised in full, new stock options may be granted covering the shares of the Company's common stock originally set aside for the unexercised portion of such expired or terminated stock option. Under the 1998 Option Plan, eligible key employees of the 53 55 Company may receive incentive stock options within the meaning of Section 422 of the Code or nonstatutory stock options. No eligible employee shall receive stock options with respect to more than 833,333 shares of the Company's common stock during any one calendar year. Incentive stock options granted under the 1998 Option Plan must have an exercise price that is no less than the fair market value of the Company's common stock as of the time the option is granted and generally may not be exercised more than ten years after the date of grant. With respect to any optionee who beneficially owns more than 10% of the total combined voting power of all classes of outstanding shares of capital stock of the Company, any incentive stock option must have an exercise price that is no less than 110% of the fair market value of the Company's common stock as of the time the option is granted and may not be exercised more than five years after the date of grant. To the extent that the aggregate fair market value of stock exercisable by an optionee for the first time in any one calendar year under the 1998 Option Plan and all other stock plans of the Company exceeds $100,000, options for such shares shall not be considered incentive stock options but instead shall be considered nonstatutory stock options. Nonstatutory stock options granted under the 1998 Option Plan must have an exercise price that is no less than 50% of the fair market value of the Company's common stock as of the time the option is granted and may not be exercised more than 10 years after the date they are granted. Options granted under the 1998 Option Plan are nontransferable, other than by will or the laws of descent and distribution. The 1998 Option Plan provides that, unless otherwise provided in the stock option agreement, upon any merger, consolidation, or sale or transfer of all or any part of the Company's business or assets, all rights of the optionee with respect to the unexercised portion of any option shall become immediately vested and may be exercised immediately, except to the extent that any agreement or undertaking of any party to any such merger, consolidation, or sale or transfer of assets, makes specific provisions for the assumption of the obligations of the Company with respect to the 1998 Option Plan. In addition, unless otherwise provided in the stock option agreement for any given option, upon any liquidation or dissolution of the Company, all rights of the optionee with respect to the unexercised portion of any option will terminate and all options will be canceled at the time of any such liquidation or dissolution, except to the extent that any plan pursuant to which such liquidation or dissolution is effected, makes specific provisions with respect to the 1998 Option Plan. The holder of any option granted under the 1998 Option Plan has the right immediately prior to the effective date of such merger, consolidation, sale or transfer of assets, liquidation or dissolution to exercise such option without regard to any vesting provision of such option. In no event may any incentive stock options be exercised later than the date preceding the tenth anniversary date of the grant thereof. The 1998 Option Plan will be administered by the Board of Directors or by a committee of the Board of Directors acting as the administrator. The administrator shall select the eligible key employees who are to be granted options, determine the number of shares to be subject to options to be granted to each optionee and designate such options as incentive stock options or nonstatutory stock options. The Board of Directors may at any time amend or modify the 1998 Option Plan, except that the Board of Directors may not, without approval of the stockholders of the Company, (i) increase the number of shares issued under the 1998 Option Plan, (ii) modify the requirements as to eligibility for participation in the 1998 Option Plan or (iii) change the option price provisions of the 1998 Option Plan so as to have a material adverse effect on the Company other than to conform with any applicable provisions of the Code or regulations or rulings thereunder. 54 56 Unless terminated earlier, the 1998 Option Plan terminates ten years from the date it is adopted by the Board of Directors. 1999 Stock Option Plan. The Company's 1999 Stock Option Plan was adopted by the Board of Directors on January 14, 1999. The plan provides that an aggregate of 1,800,000 shares of the Company's common stock are available to be granted subject to options to key employees of the Company; provided that after March 31, 1999, not more than 1,000,000 options may be granted under the plan. The 1999 Stock Option Plan is identical in all other material respects to the 1998 Stock Option Plan. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION No interlocking relationship exists between the Board of Directors or Compensation Committee and the board of directors or compensation committee of any other company, nor has any such interlocking relationship existed in the past. The Compensation Committee of the Board of Directors currently consists of Mr. Orton, Mr. Coats and Mr. Fuchs. EMPLOYMENT AGREEMENTS On January 1, 1998, the Company entered into a two year severance agreement with Mr. Michael J. Lowell, the Company's Senior Vice President. Under this agreement, Mr. Lowell is entitled to a base salary of $190,000 per year and to all ordinary and customary perquisites afforded to executive employees of the Company and, if Mr. Lowell's employment is terminated without cause, he is entitled to a lump sum severance payment equal to two years' salary. In the event of death or disability, Mr. Lowell's successors, heirs, designees or assigns are entitled to the amount that would have been due to Mr. Lowell for the remainder of the term of the agreement. On July 1, 1998, the Company entered into a three year employment agreement with Mr. Mark W. Lorimer, the Company's President and Chief Executive Officer. Under this agreement, Mr. Lorimer is entitled to a base salary of $325,000, a bonus and all ordinary and customary perquisites afforded to executive employees of the Company and, if Mr. Lorimer's employment is terminated without cause or if Mr. Lorimer terminates his employment with good reason, Mr. Lorimer is entitled to a lump sum payment equal to the aggregate annual base salary, which annual base salary shall be the highest annual base salary in effect during the term of his employment, that would have been received by Mr. Lorimer if he had remained employed by the Company for the greater of (i) the remaining balance of the three year term or (ii) two years. In the event of a change of control of the Company prior to January 1, 2000, and while Mr. Lorimer remains employed by the Company, the term of the agrement shall automatically extend for a period of three years from the date of the change of control. In addition to the above, in the event Lorimer's employment is terminated during the six month period prior to (or the first thirty-six months following a change of control by Mr. Lorimer for good reason or by the Company other than for cause, disability or death, Mr. Lorimer is entitled to (i) a lump sum payment equal to twice the highest bonus paid to Mr. Lorimer in the last three fiscal years plus the amount of the cost of all benefits for the greater of the remaining balance of the term of two years. In the event of a change of control while Mr. Lorimer is employed by the Company or if Lorimer's employment is terminated by the Company without cause or by Mr. Lorimer for good reason during the six month period prior to a change of control, certain unvested performance-based options shall become vested and 55 57 exercisable to the extent certain performance targets are met. In the event of the death or disability of Mr. Lorimer during the term of this employment agreement, the Company shall provide Mr. Lorimer or his successors, heirs, designees or assigns, with continued payment of Mr. Lorimer's then current base salary and all benefits for a period of two years. On December 17, 1998, the Company entered into a three year employment agreement with Ms. Ann Marie Delligatta, the Company's Executive Vice President and Chief Operating Officer. Under this agreement, Ms. Delligatta is entitled to a base salary of $225,000, a bonus as and all ordinary and customary perquisites afforded to executive employees of the Company and, if Ms. Delligatta's employment is terminated without cause or if Ms. Delligatta terminates her employment for good reason, Ms. Delligatta is entitled to a lump sum payment equal to the base salary that would have been received by Ms. Delligatta if she had remained employed by the Company for the remaining balance of the three year term. Ms. Delligatta's employment with the Company shall terminate automatically in the event of death or upon 30 days' written notice of termination by the Company in the event of a disability. On August 20, 1998, the Company entered into a two year Advisory Agreement with Mr. Peter R. Ellis, the former Chairman and Chief Executive Officer of the Company. Under this agreement, Mr. Ellis serves as Special Advisor to the Chief Executive Officer, and is entitled to participate in all employee welfare benefit plans for the term of the agreement and car allowance in the amount of $1,000 dollars per month until April 30, 1999. In consideration for entering the Advisory Agreement, Mr. Ellis was paid a one time $500,000 lump sum payment and the Company has agreed to pay Mr. Ellis $5,000 per month beginning on the thirteenth month anniversary of the date of this agreement. Upon the death or disability of Mr. Ellis, the Company shall pay to Ellis or his successors, heirs, designees or assigns, the amount that would have been due and owing to Ellis for the remainder of the Term. INDEMNIFICATION AND LIMITATION OF DIRECTOR AND OFFICER LIABILITY The Company's Amended and Restated Certificate of Incorporation limits the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that a corporation's certificate of incorporation may contain a provision eliminating or limiting the personal liability of a director for monetary damages for breach of their fiduciary duties as directors, except for liability (i) for any breach of their duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived an improper personal benefit. The Company's Amended and Restated Bylaws provide that the Company shall indemnify its directors and officers and may indemnify its employees and agents to the fullest extent permitted by law. The Company believes that indemnification under its Amended and Restated Bylaws covers at least negligence and gross negligence on the part of indemnified parties. The Company has entered into agreements to indemnify its directors and officers, in addition to the indemnification provided for in the Company's Amended and Restated Bylaws. These agreements, among other things, indemnify the Company's directors and officers for certain expenses (including attorneys' fees), judgments, fines and settlement 56 58 amounts incurred by any such person in any action or proceeding, including any action by or in the right of the Company, arising out of such person's services as a director or officer of the Company, any subsidiary of the Company or any other company or enterprise to which the person provides services at the request of the Company. The Company believes that these provisions and agreements are necessary to attract and retain qualified directors and officers. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, the Company has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable. 57 59 CERTAIN TRANSACTIONS Series A Preferred Stock On August 23, 1996, in a private placement transaction, the Company issued 1,500,000 shares of Series A Preferred Stock at $10.00 per share convertible into common stock at the conversion price per share of $9.00. The number of shares of common stock into which each share of Series A Preferred Stock will convert is 1.11 shares. The holders of such Series A Preferred Stock are entitled to certain registration rights with respect to the shares of common stock issued or issuable upon conversion thereof. See "Description of Capital Stock--Registration Rights." All shares of Series A Preferred Stock will automatically convert into shares of common stock upon the closing of the offering. Investors in this financing consisted of General Electric Capital Corporation (800,000 shares of Series A Preferred Stock), National Union Fire Insurance Company of Pittsburgh, PA, an affiliate of AIG (400,000 shares of Series A Preferred Stock), ContiTrade Services L.L.C. (200,000 shares of Series A Preferred Stock) and Michael Fuchs (100,000 shares of Series A Preferred Stock). From July 9, 1996 through August 13, 1996, Michael Fuchs made loans to the Company in the aggregate principal amount of $500,000. These loans, along with accrued interest, converted into Series A Preferred Stock on August 23, 1996 at $10.00 per share. In September 1996, Mr. Fuchs was appointed to the Company's Board of Directors. The holders of Series A Preferred Stock have the right to elect two members of the Board of Directors. Because General Electric Capital Corporation holds more than a majority of the shares of Series A Preferred Stock it has the right to designate on behalf of all holders of Series A Preferred Stock such directors. To date, General Capital Electric Corporation has designated Michael Fuchs and Jeffrey Coats to the Board of Directors. Series B Preferred Stock On January 30, 1997, in a private placement transaction the Company issued 967,915 shares of Series B Preferred Stock at $9.35 per share convertible into common stock at the conversion price per share of $10.37. The number of shares of common stock into which each share of Series B Preferred Stock will convert is 0.90 Shares. The holders of such Series B Preferred Stock are entitled to certain registration rights with respect to the shares of common stock issued or issuable upon conversion thereof. See "Description of Capital Stock--Registration Rights." All shares of Series B Preferred Stock will automatically convert into shares of common stock upon the closing of the offering. Investors in this financing consisted of General Electric Capital Corporation (534,760 shares of Series B Preferred Stock), National Union Fire Insurance Company of Pittsburgh, PA, an affiliate of AIG (267,380 shares of Series B Preferred Stock), ContiTrade Services L.L.C. (133,690 shares of Series B Preferred Stock) and Michael Fuchs (32,085 shares of Series B Preferred Stock). Series C Preferred Stock On October 21, 1997, April 30, 1998, May 7, 1998, October 30, 1998, November 10, 1998, December 16, 1998, December 21, 1998 and December 24, 1998, in private placement transactions, the Company issued a total of 4,968,738 shares of Series C Preferred Stock at $8.80 per share convertible into common stock at the conversion price per share of $13.20. The number of shares of common stock into which each share of Series C Preferred Stock will convert is 0.667 shares. The holders of such Series C 58 60 Preferred Stock are entitled to certain registration rights with respect to the shares of common stock issued or issuable upon conversion thereof. See "Description of Capital Stock--Registration Rights". All shares of Series C Preferred Stock will automatically convert into shares of common stock upon the closing of the offering. Investors in these financings consisted of General Electric Capital Corporation (681,819 shares of Series C Preferred Stock), National Union Fire Insurance Company of Pittsburgh, PA, an affiliate of AIG (227,273 shares of Series C Preferred Stock), Tozer Kimsley and Millbourn Automotive, Ltd., a unit of Inchcape Motors (568,182 shares of Series C Preferred Stock), Bilia (568,182 shares of Series C Preferred Stock), National Broadcasting Company, Inc., an affiliate of General Electric Capital Corporation (121,009 shares of Series C Preferred Stock), Invision (568,182 shares of Series C Preferred Stock), Aureus, an affiliate of Invision (1,097,727 shares of Series C Preferred Stock) and MediaOne, (1,136,364 shares of Series C Preferred Stock). NBC acquired its shares by providing national spot advertising to the Company. Other Transactions From time to time, the Company has advanced funds to Peter R. Ellis, the former Chairman of the Board and Chief Executive Officer of the Company. As of December 31, 1998, Mr. Ellis was indebted to the Company in the amount of $250,000 plus accrued interest at the rate of 8% per year compounded quarterly. The principal amount of the loan is due and payable on or before March 1, 2003. The Company has received a pledge of 100,657 of Mr. Ellis' shares of common stock to secure this loan. The Company and John M. Markovich, the Company's former Senior Vice President and Chief Financial Officer, are parties to a Severance and General Release Agreement dated January 30, 1998 (the Severance Agreement). Pursuant to the terms of the Severance Agreement, in connection with his resignation from the Company, the Company paid to Mr. Markovich a severance payment of $75,000, extended Mr. Markovich's health coverage through July 30, 1998, paid certain outplacement expenses of $10,000 and granted Mr. Markovich a warrant to purchase 33,333 shares of common stock at $11.25 per share. The warrant granted to Mr. Markovich expires on January 30, 2003 unless exercised prior thereto. The Company and Mr. Ellis, the Company's former Chief Executive Officer and Chairman of the Board are parties to an advisory agreement dated as of August 20, 1998 (the Ellis Advisory Agreement). The Ellis Advisory Agreement has a term of two years and provides that Mr. Ellis is to receive $500,000 on the date thereof and commencing on the thirteenth month anniversary of this agreement, $5,000 per month. Mr. Ellis is entitled to participate in all employee health plans and receives a car allowance of $1,000 per month until April 30, 1999. Mr. Ellis' advisory agreement may be terminated by the Company for cause (as defined in such agreement) or upon 30 days prior written notice without cause. In the event Mr. Ellis' advisory agreement is terminated without cause by the Company or due to his death or disability, Mr. Ellis will still be entitled to receive his base salary and health benefits through the remainder of the term of the of the agreement. Mr. Ellis has the right to terminate his advisory agreement on 90 days prior written notice to the Company. In addition, on January 11, 1999, in consideration of the Company permitting the sale of $1.4 million of common stock of the Company to certain "accredited investors" as such term is defined under Rule 501 of the Securities Act, Mr. Ellis transferred to the Company the voting power of 593,175 shares (the Proxy Shares) of common stock of the 59 61 Company owned by Mr. Ellis for a period that is the earlier of five years from the date thereof or until such time as Mr. Ellis sells the Proxy Shares to a person not affiliated with Mr. Ellis. Pursuant to a Marketing and Application Processing Agreement dated February 1, 1997, among GE Capital, Auto-By-Tel Acceptance Corporation (ABTAC) and the Company, ABTAC and the Company agreed to refer customers seeking vehicle financing with favorable credit ratings to GE Capital. In return, GE Capital agreed to pay ABTAC a marketing fee of $100.00 for each financing consummated by GE Capital under this agreement. GE Capital is an affiliate of General Electric Capital Corporation which beneficially owns 1,825,828 shares of common stock. As of December 31, 1998, ABTAC had referred customers to GE Capital to whom GE Capital extended financing in an aggregate amount of approximately $307,000 and received approximately $1,200 in marketing fees since the inception of this relationship. Pursuant to a Marketing Agreement dated July 22, 1996, among Auto-By-Tel Acceptance Corporation (ABTAC), AIG and the Company, the Company, through ABTAC, authorizes and provides AIG access to its Internet server, for the publication, display, and exhibition of AIG's direct response automobile insurance sales materials to the Company's users. In return, ABTAC is paid compensation based on a flat fee on the basis of the premium collected. On November 10, 1998, the Company issued to Invision AG, a subsidiary of Metro Holdings, a warrant to purchase an aggregate of 150,000 shares of common stock of the Company at an exercise price of $13.20 per share. This warrant is exercisable as of the date thereof and expires on November 10, 2001. On December 16, 1998 and December 23, 1998, the Company issued to Aureus Private Equity AG, a subsidiary of Metro Holdings, warrants to purchase 169,800 and 120,000 shares, respectively, of common stock of the Company at an exercise price of $13.20 per share. Each of these warrants are exercisable as of the date thereof and expires on December 16, 2001 and December 23, 2001, respectively. On December 21, 1998, the Company issued to MediaOne Interactive Services, Inc. a warrant to purchase an aggregate of 300,000 shares of common stock of the Company at an exercise price of $13.20 per share. This warrant is exercisable as of the date thereof and expires on December 21, 2001. All future transactions between the Company and interested directors and stockholders, if any, will be approved by the disinterested directors or stockholders, as appropriate in accordance with Delaware law and the Company's Certificate of Incorporation and Bylaws. 60 62 PRINCIPAL AND SELLING STOCKHOLDERS The following table sets forth certain information with respect to the beneficial ownership of the common stock as of December 31, 1998, as adjusted to reflect the conversion of the Preferred Stock into common stock concurrently with the offering and sale of common stock offered hereby for (i) each person or entity who is known by the Company to beneficially own five percent or more of the outstanding common stock, (ii) each of the Company's directors, (iii) each of the Named Officers, (iv) each stockholder who is selling shares of common stock in this offering, and (v) all directors and executive officers of the Company as a group. As of December 31, 1998, there were 14,358,745 shares of common stock outstanding.
SHARES BENEFICIALLY SHARES BENEFICIALLY OWNED OWNED PRIOR TO OFFERING(1) NUMBER OF AFTER OFFERING(1) --------------------- SHARES BEING ------------------- NUMBER PERCENT OFFERED(2) NUMBER PERCENT ---------- -------- ------------ --------- ------- Peter R. Ellis(3)............... 4,020,667 28.0% 500,000 3,520,667 19.7% c/o Autobytel.com 18872 MacArthur Boulevard Irvine, California 92612-1400 John C. Bedrosian(4)............ 3,569,445 24.9% 500,000 3,069,445 17.2% c/o Autobytel.com 18872 MacArthur Boulevard Irvine, California 92612-1400 General Electric Capital Corporation(5)................ 1,831,903 12.8% 1,831,903 10.3% 260 Long Ridge Road Stamford, Connecticut 06927 Metro Holdings(6)............... 1,550,406 10.5% 1,550,406 8.5% Neuhofstrasse 4 CH-6341 Baar Switzerland MediaOne Interactive Services(7)................... 1,057,576 7.2% 1,057,576 5.8% 9000 E. Nichols Avenue Englewood, Colorado 80112 Robert S. Grimes(8)............. 803,472 5.5% 803,472 4.4% c/o R.S. Grimes & Co., Inc. 152 West 57th Street New York, NY 10019 National Union Fire Insurance Company of Pittsburgh, PA..... 837,157 5.8% 837,157 4.7% 200 Liberty Street New York, New York 10281 Mark W. Lorimer(9).............. 214,165 1.5% 214,165 1.2% Michael J. Fuchs(10)............ 146,130 1.0% 146,130 * Michael J. Lowell(11)........... 106,944 * 106,944 * Ann M. Delligatta(12)........... 32,637 * 32,637 * Anne Benvenuto(13).............. 9,721 * 9,721 * Mark N. Kaplan.................. 1,000 * 1,000 * Kenneth J. Orton................ -- * -- * All directors and executive officers as a group (10 persons)(14).................. 7,166,639 47.8% 6,666,639 36.1%
- --------------- * Less than 1% 61 63 (1) Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options held by that person that are currently exercisable or exercisable within 60 days of December 31, 1998 are deemed outstanding. Such shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of each other person. Except as indicated in the footnotes to this table and pursuant to applicable community property laws, each stockholder named in the table has sole voting and investment power with respect to the shares set forth opposite such stockholder's name. (2) Assumes no exercise of the underwriters' over-allotment option. (3) Includes 46,110 shares held by certain trusts established for family members of Mr. Ellis as to which Mr. Ellis' spouse maintains sole voting power. Includes 118,635 shares Mr. Ellis sold on January 11, 1999 and 593,175 shares as to which Mr. Ellis granted voting power to the Company pursuant to a Voting Proxy dated January 11, 1999. See "Certain Transactions." If the underwriters' over-allotment option were exercised in full, the number of shares beneficially owned by Peter Ellis after the offering would be 3,183,167 and the percentage would be 17.8%. (4) All shares are held in the John C. Bedrosian and Judith D. Bedrosian Revocable Trust in which Mr. Bedrosian maintains shared voting powers. If the underwriters' over-allotment option were exercised in full, the number of shares beneficially owned by Mr. Bedrosian after the offering would be 2,731,945 and the percentage would be 15.3%. (5) Includes 888,889 shares held by General Electric Capital Corporation (GE) following the conversion of the Series A Preferred Stock, 482,393 shares held by GE following the conversion of the Series B Preferred Stock, and 454,546 shares held by GE following the conversion of the Series C Preferred Stock. Mr. Coats is a managing director of GE Equity Capital Group, Inc., an affiliate of General Electric Capital Corporation, and is a director of the Company. Also includes 6,075 shares issuable upon exercise of options exercisable within 60 days of December 31, 1998 which were granted to Mr. Coats, and subsequently assigned to General Electric Capital Corporation. Mr. Coats disclaims beneficial ownership of such 6,075 shares. (6) Includes 378,788 shares held by Invision AG, a subsidiary of Metro Holdings, following the conversion of the Series C Preferred Stock and 731,818 shares held by Aureus, a subsidiary of Metro Holdings, following the conversion of the Series C Preferred Stock. Also includes 150,000 shares held by Invision AG, issuable upon exercise of warrants and 289,800 shares held by Aureus Private Equity AG, issuable upon exercise of warrants. (7) Includes 757,576 shares held by MediaOne following the conversion of the Series C Preferred Stock and 300,000 shares issuable upon exercise of warrants. (8) Includes an aggregate of 5,554 shares held in irrevocable trusts as to which Mr. Grimes' spouse maintains sole voting power. Includes 247,917 shares issuable upon exercise of options exercisable within 60 days of December 31, 1998. (9) Represents 214,165 shares issuable upon exercise of options exercisable within 60 days of December 31, 1998. 62 64 (10) Includes 6,076 shares issuable upon exercise of options exercisable within 60 days of December 31, 1998 and 111,111 shares held by Mr. Fuchs following the conversion of the Series A Preferred Stock and 28,943 shares following the conversion of the Series B Preferred Stock. (11) Represents 106,944 shares issuable upon exercise of options exercisable within 60 days of December 31, 1998. (12) Represents 32,637 shares issuable upon exercise of options exercisable within 60 days of December 31, 1998. (13) Represents 9,721 shares issuable upon exercise of options exercisable within 60 days of December 31, 1998. (14) Includes 623,535 shares issuable upon exercise of options exercisable within 60 days of December 31, 1998. Peter Ellis resigned as Chief Executive Officer of the Company in June 1998. If Mr. Ellis' shares are not included in the number of shares beneficially owned by all directors and executive officers as a group, the number of shares owned by the directors and executive officers prior to the offering is 3,145,972 shares or 21.0% of the shares of common stock outstanding, and after the offering would be 3,145,972 shares or 17.0% of the shares of common stock outstanding. DESCRIPTION OF CAPITAL STOCK Upon the closing of the Offering, the outstanding shares of common stock will consist of approximately 17,858,745 shares, $0.001 par value. As of December 31, 1998, there were 8,506,455 shares of common stock outstanding held of record by 38 stockholders. COMMON STOCK The Company is authorized to issue a total of 50,000,000 shares of common stock. Holders of common stock are entitled to one vote per share in all matters to be voted on by the stockholders. Subject to the preferences of the Preferred Stock, holders of common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available for payment. See "Dividend Policy." In the event of a liquidation, dissolution or winding up of the Company, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of shares of Preferred Stock then outstanding, if any. The common stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock are fully paid and nonassessable, and the shares of common stock to be issued upon completion of the offering will be fully paid and non-assessable. PREFERRED STOCK Pursuant to the Company's Amended and Restated Certificate of Incorporation, the Board of Directors has the authority, without further action by the stockholders, to issue up to 11,445,187 shares of Preferred Stock in one or more series and to fix the designations, powers, preferences, privileges, and relative participating, optional or special rights and the qualifications, limitations or restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights of the common stock. The Board of Directors, without stockholder approval, can issue Preferred Stock with voting, conversion or other rights that could adversely affect the voting power and other rights of the holders of 63 65 common stock. Preferred Stock could thus be issued quickly with terms calculated to delay or prevent a change in control of the Company or make removal of management more difficult. Additionally, the issuance of Preferred Stock may have the effect of decreasing the market price of the common stock, and may adversely affect the voting and other rights of the holders of common stock. Upon the closing of the Offering, no shares of Preferred Stock will be outstanding and the Company has no plans to issue any of the Preferred Stock. REGISTRATION RIGHTS Pursuant to the Amended and Restated Investors' Rights Agreement, dated May 7, 1998, among the Company and the holders (the "Holders") of approximately 14,737,757 shares of common stock and securities convertible into common stock (collectively, and as converted, the "Registrable Securities"), the Holders are entitled to certain rights with respect to the registration of such shares under the Act. If the Company proposes to register any of its securities under the Act, either for its own account or for the account of other Holders exercising registration rights, the Holders are entitled to notice of such registration and are entitled to include shares of Registrable Securities therein. Additionally, the Holders are also entitled to certain demand registration rights pursuant to which they may require the Company to file a registration statement under the Act at the Company's expense with respect to their shares of Registrable Securities, and the Company is required to use its best efforts to effect such registration. All of these registration rights are subject to certain conditions and limitations, among them the right of the underwriters of an offering to limit the number of shares included in such registration and the right of the Company not to effect a requested registration within one year of an initial public offering of the Company's securities, such as the Offering made hereby, or if such requested registration would have an anticipated aggregate offering to the public of less than $30 million. The Holders have waived all such rights in connection with the Offering. DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS Anti-Takeover Law The Company is subject to the provisions of Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a publicly-held Delaware corporation from engaging in a business combination with an "interested stockholder" for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner or unless the interested stockholder acquired at least 85% of the corporation's voting stock (excluding shares held by certain designated stockholders) in the transaction in which it became an interested stockholder. For purposes of Section 203, a "business combination" includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder. Subject to certain exceptions, an "interested stockholder" is a person who, together with affiliates and associates, owns, or within the previous three years did own, 15% or more of the corporation's voting stock. Limitation of Director and Officer Liability The Company's Amended and Restated Certificate of Incorporation and Bylaws contain certain provisions relating to the limitation of liability and indemnification of directors and officers. The Company's Amended and Restated Certificate of Incorporation provides that directors of the Company may not be held personally liable to the Company 64 66 or its stockholders for a breach of fiduciary duty, except for liability (i) for any breach of the director's duty of loyalty to the Company or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, (iii) under Section 174 of the Delaware General Corporation Law, relating to prohibited dividends, distributions and repurchases or redemptions of stock, (iv) for any transaction from which the director derives an improper benefit. In addition, the Company's Amended and Restated Certificate of Incorporation and Bylaws provide that the Company shall indemnify directors and officers to the fullest extent authorized by Delaware law. No Stockholder Action by Written Consent The Company's Amended and Restated Certificate of Incorporation provides that the stockholders can take action only at a duly called annual or special meeting of stockholders. Accordingly, stockholders of the Company will not be able to take action by written consent in lieu of a meeting. This provision may have the effect of deterring hostile takeovers or delaying changes in control or management of the Company. Staggered Board of Directors The Company's Amended and Restated Certificate of Incorporation provides that upon the closing of this offering, the terms of office of the Board of Directors will be divided into three classes, such that the terms of Class I, Class II and Class III directors shall expire at the annual meeting of stockholders to be held in 1999, 2000 and 2001, respectively. The number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors of the directors. This provision may have the effect of delaying or preventing changes in control or change in our management because less than a majority of the Board of Directors are up for election at each annual meeting. TRANSFER AGENT AND REGISTRAR U.S. Stock Transfer Corporation, Glendale, California, has been appointed as the transfer agent and registrar for the common stock. Its telephone number for such purposes is (818) 502-1404. SHARES ELIGIBLE FOR FUTURE SALE Prior to the Offering, there has been no market for the common stock. Future sales of substantial amounts of common stock in the public market could adversely affect market prices prevailing from time to time. Upon completion of the Offering, the Company will have outstanding an aggregate of 17,858,745 shares of common stock, assuming no exercise of the underwriters' over-allotment option and no exercise of outstanding options or warrants. Of these shares, the 4,500,000 shares sold in the Offering will be freely tradeable without restriction or further registration under the Act, except that any shares purchased by "affiliates" of the Company, as that term is defined in Rule 144 of the Act ("Affiliates"), may generally only be sold in compliance with the limitations of Rule 144 described below. SALES OF RESTRICTED SHARES The remaining 13,358,745 shares of common stock held by existing stockholders are "restricted securities" under Rule 144 ("Restricted Shares"). The number of shares of 65 67 common stock available for sale in the public market is limited by restrictions under the Act and lock-up agreements under which the holders of such shares have agreed not to sell or otherwise dispose of any of their shares for a period of 180 days after the date of this prospectus (the "lock-up period") without the prior written consent of BT Alex. Brown Incorporated, and the selling shareholders have agreed to the same lock-up except that they have agreed to a 270-day lock-up. On the date of this prospectus, no shares other than the shares offered hereby will be eligible for sale. In addition, following the expiration of the lock-up period, none of the Restricted Shares will become available for sale in the public market until the expiration of their respective holding periods (approximately of such shares will have been held for more than one year at the end of such 180-day period). In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus, a person (or persons whose shares are aggregated) who has beneficially owned Restricted Shares for at least one year (including the holding period of any prior owner, except if the prior owner was an Affiliate) would be entitled to sell within any three-month period a number of shares that does not exceed the greater of: (i) one percent of the number of shares of common stock then outstanding (which will equal approximately 178,587 shares immediately after the Offering); or (ii) the average weekly trading volume of the common stock on the Nasdaq National Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale. Sales under Rule 144 are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about the Company. Under Rule 144(k), a person who is not deemed to have been an Affiliate of the Company at any time during the 90 days preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years (including the holding period of any prior owner except if the prior owner was an Affiliate), is entitled to sell such shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144; therefore, unless otherwise restricted, "144(k) shares" could be sold immediately upon the completion of this offering. Upon completion of the Offering, the holders of 14,737,757 shares of common stock, or their transferees, will be entitled to certain rights with respect to the registration of such shares under the Act until such time as the holders of such common stock may sell such shares under the Rule 144 of the Securities Act. See "Description of Capital Stock -- Registration Rights." Registration of such shares under the Act would result in such shares becoming freely tradeable without restriction under the Act (except for shares purchased by Affiliates) immediately upon the effectiveness of such registration. OPTIONS AND RESTRICTED STOCK The Company intends to file a registration statement under the Act covering shares of common stock reserved for issuance under the 1999 Stock Option Plan, 1998 Stock Option Plan, the Amended and Restated 1996 Stock Incentive Plan, the 1996 Stock Option Plan and the 1996 Employee Stock Purchase Plan. Such registration statement is expected to be filed and become effective as soon as practicable after the effective date of the offering. Accordingly, shares registered under such registration statement will, subject to Rule 144 volume limitations applicable to Affiliates, be available for sale in the open market, unless such shares are subject to vesting restrictions with the Company or the lock-up agreements described above. A total of 3,723,433 shares have been reserved for issuance under such plans. As of December 31, 1998, no options have been granted under the 1999 Stock Option Plan, 1,125,000 options have been granted under the 1998 Stock Option Plan, 66 68 options to purchase 833,333 shares of common stock have been granted under the Amended and Restated 1996 Stock Incentive Plan, options to purchase 889,163 shares of common stock have been granted under the 1996 Stock Option Plan and no options have been granted under the 1996 Employee Stock Purchase Plan. See "Management -- Stock Plans." In addition, under Rule 701 of the Act as currently in effect, any employee, consultant or advisor of the Company who is not an Affiliate who purchased shares from the Company in connection with a compensatory stock or option plan or other written agreement is eligible to resell such shares 90 days after the effective date of the Offering, subject to all provisions of Rule 144 except its minimum holding period. LOCK-UP AGREEMENTS All officers, directors, and certain other stockholders of the Company have agreed not to sell, offer, contract or grant any option to sell, make any short sale, pledge, transfer, establish an open "put equivalent position" within the meaning of the Rule 16a-1(h) under the Securities Exchange Act of 1934, as amended, or otherwise dispose of any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock for a period of 180 days after the date of this prospectus, without the prior written consent of BT Alex. Brown Incorporated, and the selling stockholders have agreed to the same lock-up period except for a period of 270 days after the date of this prospectus. In addition, under the terms of the 1996 Option Plan and the Amended and Restated 1996 Incentive Plan, holders of options to purchase common stock are obligated not to sell or transfer any shares of the Company during such 180-day period if so requested by the Company or the underwriters. See "Underwriting." 67 69 CERTAIN UNITED STATES TAX CONSIDERATIONS FOR NON-UNITED STATES HOLDERS GENERAL The following is a general discussion of the principal United States federal income and estate tax consequences of the ownership and disposition of common stock by a Non-U.S. Holder, as defined below. As used herein, the term "Non-U.S. Holder" means a holder that for United States federal income tax purposes is an individual or entity other than (i) a citizen or individual resident of the United States, (ii) a corporation or partnership created or organized in or under the laws of the United States or of any political subdivision thereof (other than a partnership treated as foreign under U.S. Treasury regulations), (iii) an estate, the income of which is subject to U.S. federal income taxation regardless of its source, or (iv) a trust if both (A) a U.S. court is able to exercise primary supervision over the administration of the trust and (B) one or more U.S. persons have the authority to control all substantial decisions of the trust. This discussion does not address all aspects of United States federal income and estate taxes that may be relevant to Non-U.S. Holders in light of their personal circumstances (including the fact that in the case of a Non-U.S. Holder that is a partnership, the U.S. tax consequences of holding and disposing of shares of common stock may be affected by certain determinations made at the partner level), or to certain types of Non-U.S. Holders which may be subject to special treatment under United States federal income tax laws (for example, insurance companies, tax-exempt organizations, financial institutions, dealers in securities and holders of securities held as part of a "straddle", "hedge", or "conversion transaction") and does not address U.S. state or local or foreign tax consequences. Furthermore, this discussion is based on provisions of the Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed regulations promulgated thereunder and administrative and judicial interpretations thereof, all as of the date hereof and all of which are subject to change, possibly with retroactive effect. The following summary is included herein for general information. ACCORDINGLY, PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISERS REGARDING THE UNITED STATES FEDERAL, STATE, LOCAL AND NON-U.S. INCOME AND OTHER TAX CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING OF SHARES OF COMMON STOCK. An individual may, subject to certain exceptions, be deemed to be a resident alien (as opposed to a nonresident alien) by virtue of being present in the United States for at least 31 days in the calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year (counting for such purposes all of the days present in the current year, one-third of the days present in the immediately preceding year and one-sixth of the days present in the second preceding year). Resident aliens are subject to U.S. federal tax as if they were U.S. citizens. LIMITATION ON NET OPERATING LOSS CARRYFORWARDS The Company has net operating loss ("NOL") carryforwards as of September 30, 1998 which may, depending upon the circumstances, be available to reduce U.S. federal income taxes payable by the Company in the future. However, if the Company undergoes an "ownership change" within the meaning of Section 382 of the Code, the Company's utilization of its NOL carryforwards could be subject to limitation. In general, an ownership change under Section 382 of the Code will occur if, over a three-year period (or 68 70 over a shorter period if there has been a prior ownership change within the immediately preceding three-year period), certain stockholders who own directly or indirectly 5% or more of the capital stock of the corporation (including the so-called "public group") increase their percentage ownership by more than 50 percentage points in the aggregate. In general, if such an ownership change occurs, Section 382 of the Code limits the amount of NOLs carried over from pre-ownership change years that can be used in any post-ownership change year to an amount equal to the product obtained by multiplying (1) the value of the Company's capital stock (with certain adjustments) at the time of the ownership change and (2) an interest rate determined by the Internal Revenue Service for the month of the ownership change (the "Section 382 Limitation"). The Company believes that it will undergo an ownership change for purposes of Section 382 of the Code. As a result, the use of the Company's pre-ownership change NOL carryforwards will be limited annually by the Section 382 Limitation pursuant to the rules described above. DIVIDENDS The Company does not anticipate paying cash dividends on its capital stock in the foreseeable future. See "Dividend Policy." In the event, however, that dividends are paid on shares of common stock, dividends paid to a Non-U.S. Holder of common stock generally will be subject to withholding of United States federal income tax at a 30% rate, or such lower rate as may be provided by an income tax treaty between the United States and a foreign country if the Non-U.S. Holder is treated as a resident of such foreign country within the meaning of the applicable treaty. Non-U.S. Holders should consult their tax advisors regarding their entitlement to benefit under a relevant income tax treaty. Under currently applicable U.S. Treasury regulations, dividends paid to an address in a foreign country are presumed (absent actual knowledge to the contrary) to be paid to a resident of such country for purposes of the withholding discussed above and for purposes of determining the applicability of a tax treaty rate. However, under recently finalized U.S. Treasury regulations (the "Final Regulations"), in the case of dividends paid after December 31, 1999, a Non-U.S. Holder generally would be subject to U.S. backup withholding tax at a 31% rate under the backup withholding rules described below, rather than at a 30% rate or a reduced rate under an income tax treaty, unless certain certification procedures (or, in the case of payments made outside the U.S. with respect to an offshore account, certain documentary evidence procedures) are satisfied, directly or through an intermediary. Further, under the Final Regulations, a Non-U.S. Holder of common stock who wishes to claim the benefit of an applicable treaty rate and to avoid backup withholding as discussed below, for dividends paid after December 31, 1999 generally will be required to satisfy applicable certification and other requirements. In addition, under the Final Regulations, in the case of common stock held by a foreign partnership, (i) the certification requirement will generally be applied to the partners of the partnership and (ii) the partnership will be required to provide certain information, including a United States taxpayer identification number. The Final Regulations also provide look-through rules for tiered partnerships. The Final Regulations also provide special rules for dividend payments made to foreign intermediaries, U.S. or foreign wholly owned entities that are disregarded for U.S. federal income tax purposes and entities that are treated as fiscally transparent in the United States, the applicable income tax treaty jurisdiction, or both. In addition, recently enacted legislation, effective August 4, 1997, denies income tax treaty benefits to foreigners 69 71 receiving income derived through a partnership (or otherwise fiscally transparent entity) in certain circumstances. Prospective investors should consult with their own tax advisers concerning the effect, if any, of these Final Regulations and the recent legislation on an investment in the common stock. A Non-U.S. Holder of common stock that is eligible for a reduced rate of U.S. withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by filing an appropriate claim for a refund with the IRS. Dividends that are effectively connected with: (i) a Non-U.S. Holder's conduct of a trade or business in the United States (or, if an income tax treaty applies, attributable to a permanent establishment), or, in the case of the individual, a "fixed base" in the United States ("U.S. trade or business income"), are generally subject to U.S. federal income tax on a net income basis at regular graduated rates, but are not generally subject to the 30% withholding tax if the Non-U.S. Holder files the appropriate U.S. Internal Revenue Service ("IRS") form with the payor (currently Form 4224). However, under the Final Regulations the Non-U.S. Holder will be required to provide a U.S. taxpayer identification number. Any U.S. trade or business income received by a Non-U.S. Holder that is a corporation may also, under certain circumstances, be subject to an additional "branch profits tax" at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. GAIN ON DISPOSITION OF COMMON STOCK A Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax in respect of gain recognized on a disposition of common stock unless: (i) the gain is effectively connected with the conduct of a trade or business (or, if an income tax treaty applies, is attributable to a "permanent establishment," as defined therein) of the Non-U.S. Holder within the U.S. or of a partnership, trust or estate in which the Non-U.S. Holder is a partner or beneficiary within the U.S., (ii) the Non-U.S. Holder is an individual who holds the common stock as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment), is present in the United States for 183 or more days in the taxable year of the disposition and meets certain other requirements, (iii) the Non-U.S. Holder is subject to tax pursuant to the provisions of the U.S. tax law applicable to certain United States expatriates, or (iv) the Company is or has been a "U.S. real property holding corporation" for federal income tax purposes at any time during the shorter of the five-year period preceding such disposition or the period that the Non-U.S. Holder holds the common stock. Generally, a corporation is a "U.S. real property holding corporation" if the fair market value of its "U.S. real property interests" equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. The Company believes that it has not been, is not currently, and does not anticipate becoming, a "U.S. real property holding corporation" for U.S. federal income tax purposes. The tax with respect to stock in a "U.S. real property holding corporation" does not apply to a Non-U.S. Holder whose holdings, direct and indirect, at all times during the applicable period, constitute 5% or less of the common stock, provided that the common stock was regularly traded on an established securities market for U.S. federal income tax purposes. If the Company were, or were to become, a U.S. real property holding corporation, the Company believes that the common stock would be treated as "regularly traded on an established securities market." If the common stock were not so treated, on a sale or disposition of the common stock, the transferee of such stock would be required to withhold 10% of the proceeds of such dispositions unless the Company was to provide 70 72 certification that it is not (and has not been during a specific period) a United States real property holding company or another exemption applied. If a Non-U.S. Holder who is an individual is subject to tax under clauses (i) or (iii) above, such individual generally will be taxed on the net gain derived from a sale of common stock under regular graduated United States federal income tax rates. If an individual Non-U.S. Holder is subject to tax under clause (ii) above, such individual generally will be subject to a flat 30% tax on the gain derived from a sale, which may be offset by certain United States capital losses (notwithstanding the fact that such individual is not considered a resident alien of the United States). Thus, individual Non-U.S. Holders who have spent (or expect to spend) more than a de minimis period of time in the United States in the taxable year in which they contemplate a sale of common stock are urged to consult their tax advisers prior to the sale concerning the U.S. tax consequences of such sale. If a Non-U.S. Holder that is a foreign corporation is subject to tax under clause (i) above it generally will be taxed on its net gain under regular graduated United States federal income tax rates and, in addition, will be subject to the branch profit tax equal to 30% of its "effectively connected earnings and profits," within the meaning of the Code for the taxable year, as adjusted for certain items, unless it qualifies for a lower rate under an applicable tax treaty. FEDERAL ESTATE TAX Common stock owned or treated as owned by an individual who is neither a United States citizen nor a United States resident (as defined for United States federal estate tax purposes) at the time of death will be included in the individual's gross estate for United States federal estate tax purposes unless an applicable estate tax or other treaty provides otherwise and, therefore, may be subject to United States federal estate tax. INFORMATION REPORTING AND BACKUP WITHHOLDING TAX Under United States Treasury regulations, the Company must report annually to the IRS and to each Non-U.S. Holder the amount of dividends paid to such holder and the tax withheld with respect to such dividends. These information reporting requirements apply regardless of whether withholding is required. Copies of the information returns reporting such dividends and withholding may also be made available to the tax authorities in the country in which the Non-U.S. Holder is a resident under the provisions of an applicable income tax treaty or agreement. Currently, United States backup withholding (which generally is a withholding tax imposed at the rate of 31% on certain payments to persons that fail to furnish certain information under the United States information reporting requirements) generally will not apply (i) to dividends paid to Non-U.S. Holders that are subject to the 30% withholding discussed above (or that are not so subject because a tax treaty applies that reduces such 30% withholding) or (ii) before January 1, 2000, to dividends paid to a Non-U.S. Holder at an address outside of the United States unless the payor has actual knowledge that the payee is a U.S. Holder. Backup withholding and information reporting generally will apply to dividends paid to addresses inside the United States on shares of common stock to beneficial owners that are not "exempt recipients" and that fail to provide, in the manner required, certain identifying information. The Final Regulations alter the foregoing rules in certain respects for dividends paid after December 31, 1999. Among other things, such regulations provide certain 71 73 presumptions under which a Non-U.S. Holder is subject to backup withholding at the rate of 31% and information reporting unless the Company receives certification from the holder of Non-U.S. status. Depending on the circumstances, this certification will need to be provided (i) directly by the Non-U.S. Holder, (ii) in the case of a Non-U.S. Holder that is treated as a partnership or other fiscally transparent entity, by the partners, shareholders or other beneficiaries of such entity, or (iii) by certain qualified financial institutions or other qualified entities on behalf of the Non-U.S. Holder. The payment of the proceeds of the disposition of common stock by a holder to or through the U.S. office of a broker or through a non-U.S. branch of a U.S. broker generally will be subject to information reporting and backup withholding at a rate of 31% unless the holder either certifies its status as a Non-U.S. Holder under penalties of perjury or otherwise establishes an exemption. The payment of the proceeds of the disposition by a Non-U.S. Holder of common stock to or through a non-U.S. office of a non-U.S. broker will not be subject to backup withholding or information reporting unless the non-U.S. broker has certain U.S. relationships. In the case of the payment of proceeds from the disposition of common stock effected by a foreign office of a broker that is a U.S. person or a "U.S. related person", existing regulations require information reporting on the payment unless (i) the broker receives a statement from the owner, signed under penalty of perjury, certifying its non-U.S. status or the broker has documentary evidence in its files as to the Non-U.S. Holder's foreign status, and the broker has no actual knowledge to the contrary, and certain other conditions are met or (ii) the beneficial owner otherwise establishes an exemption. For this purpose, a "U.S. related person" is (i) a "controlled foreign corporation" for U.S. federal income tax purposes or (ii) a foreign person 50% or more of whose gross income from all sources for the three-year period ending with the close of its taxable year preceding the payment (or for such part of the period that the broker has been in existence) is derived from activities that are effectively connected with the conduct of a U.S. trade or business. Further, after December 31, 1999, under the Final Regulations referred to above, information reporting and backup withholding may apply to payments of the gross proceeds from the sale or redemption of the common stock effected through foreign offices of brokers having any of a broader class of connections with the U.S. unless certain IRS certification requirements are complied with. Prospective investors should consult with their own tax advisers regarding the Final Regulations and in particular with respect to whether the use of a particular broker would subject the investor to these rules. Any amounts withheld under the backup withholding rules from a payment to a Non-U.S. Holder will be refunded (or credited against the holder's U.S. federal income tax liability, if any) provided that the required information is furnished to the IRS. 72 74 UNDERWRITING Subject to the terms of the Underwriting agreement (the "Underwriting Agreement"), the underwriters named below (the Underwriters), through their representatives BT Alex. Brown Incorporated, Lehman Brothers Inc. and PaineWebber Incorporated (the Representatives), have severally agreed to purchase from the Company the following respective number of shares of common stock at the public offering price less the underwriting discount set forth on the cover page of this Prospectus.
NUMBER OF UNDERWRITERS SHARES ------------ --------- BT Alex. Brown Incorporated................................. Lehman Brothers Inc......................................... PaineWebber Incorporated.................................... -------- Total............................................. ========
The Underwriting Agreement provides that the obligations of the Underwriters are subject to certain conditions precedent and that the Underwriters will purchase all of the shares of common stock offered hereby if any of such shares are purchased. Autobytel.com and the Selling Stockholders have been advised by the Representatives that the Underwriters propose to offer the shares of common stock to the public at the public offering price set forth on the cover page of this Prospectus and to certain dealers at such price less a concession not in excess of $ per share. The Underwriters may allow, and such dealers may re-allow, a concession not in excess of $ per share to certain other dealers. After the initial public offering, the offering price and other selling terms may be changed by the Representatives. Selling Stockholders have granted the Underwriters an option, exercisable not later than 30 days after the date of this Prospectus, to purchase up to 675,000 additional shares of common stock at the public offering price less the underwriting discounts and commissions set forth on the cover page of this Prospectus. To the extent that the Underwriters exercise such option, each of the Underwriters will have a firm commitment to purchase approximately the same percentage thereof that the number of shares of common stock to be purchased by it in the above table bears to 4,500,000, and the stockholders will be obligated, pursuant to the option to sell such shares to the Underwriters. The Underwriters may exercise such option only to cover over-allotments made in connection with the sale of the common stock offered hereby. If purchased, the Underwriters will offer such additional shares on the same terms as those on which the 4,500,000 shares are being offered. The Company and the Selling Stockholders have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act. Each of the officers and directors and certain stockholders of the Company, holding in the aggregate shares of common stock, have agreed not to offer, sell, contract to sell or otherwise dispose of (or enter into any transaction which is designed to, or could be expected to, result in the disposition of any portion of) any common stock for a period of 180 days after the date of the Company's public offering, without the prior written consent of BT Alex. Brown Incorporated, and the selling stockholders have agreed to a lock-up for a period of 270 days after the date of the Company's public offering. Such consent may be given at any time without public notice and may be given for certain stock holders and not others. The Company has entered into a similar agreement, except 73 75 that it may issue, and grant options or warrants to purchase, shares of common stock or any securities convertible into, exercisable for or exchangeable for shares of common stock, pursuant to the exercise of outstanding options and warrants and the Company's issuance of options and stock granted under the existing stock and stock purchase plans. The Representatives have advised the Company that the Underwriters do not intend to confirm sales to any account over which they exercise discretionary authority. In order to facilitate the offering of the common stock, the Underwriters may engage in transactions that stabilize, maintain or otherwise affect the market price of the common stock. Specifically, the Underwriters may over-allot shares of the common stock in connection with this offering, thereby creating a short position in the common stock for their own account. Additionally, to cover such over-allotments or to stabilize the market price of the common stock, the Underwriters may bid for, and purchase, shares of the common stock in the open market. Finally, the representatives, on behalf of the Underwriters, also may reclaim selling concessions allowed to an Underwriter or dealer if the underwriting syndicate repurchases shares distributed by that Underwriter or dealer. Any of these activities may maintain the market price of our common stock at a level above that which might otherwise prevail in the open market. The Underwriters are not required to engage in these activities and, if commenced, may end any of these activities at any time. LEGAL MATTERS The validity of the shares of common stock offered hereby will be passed upon for the Company by Paul, Hastings, Janofsky & Walker LLP, New York, New York. Certain legal matters in connection with the common stock offered hereby will be passed upon for the Underwriters by Latham & Watkins, Menlo Park, California. EXPERTS The consolidated financial statements as of and for the period from inception (January 31, 1995) to December 31, 1995 and as of and for the years ended December 31, 1996 and 1997 and as of and for the nine months ended September 30, 1998 appearing in this prospectus and the Registration Statement have been audited by Arthur Andersen LLP, independent public accountants, as set forth in their report with respect thereto and are included herein in reliance upon the authority of said firm as experts in giving said report. ADDITIONAL INFORMATION A Registration Statement on Form S-1, including amendments thereto, relating to the common stock offered hereby has been filed by the Company with the Securities and Exchange Commission (the Commission), Washington, D.C. This prospectus does not contain all of the information set forth in the Registration Statement and the exhibits and schedules thereto. Statements contained in this prospectus as to the contents of any contract or other document referred to are not necessarily complete and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. For further information with respect to the Company and the common stock offered hereby, reference is made to such Registration Statement, exhibits and schedules. 74 76 A copy of the Registration Statement may be inspected by anyone without charge at the Commission's principal office, 450 Fifth Street, N.W., Washington, D.C. 20549, the New York Regional Office located at 7 World Trade Center, 13th Floor, New York, NY 10048, and the Chicago Regional Office located at Northwestern Atrium Center, 500 West Madison Street, Chicago, IL 60661, and copies of all or any part thereof, including any exhibit thereto, may be obtained from the Commission upon the payment of certain fees prescribed by the Commission. The public may obtain information on the operation of the Public Reference room by calling the SEC at 1-800-SEC-0330. The Commission maintains a World Wide Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The address of the site is http://www.sec.gov. 75 77 AUTOBYTEL.COM INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- Report of Independent Public Accountants.................... F-2 Consolidated Balance Sheets................................. F-3 Consolidated Statements of Operations....................... F-4 Consolidated Statements of Stockholders' Equity (Deficit)... F-5 Consolidated Statements of Cash Flows....................... F-6 Notes to Consolidated Financial Statements.................. F-7
F-1 78 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders of autobytel.com inc.: We have audited the accompanying consolidated balance sheets of autobytel.com inc. (a Delaware corporation) and subsidiaries as of December 31, 1996 and 1997 and September 30, 1998, and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for the period from inception (January 31, 1995) to December 31, 1995, the years ended December 31, 1996 and 1997 and the nine months ended September 30, 1998. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of autobytel.com inc. and subsidiaries as of December 31, 1996 and 1997 and September 30, 1998, and the results of their operations and their cash flows for the period from inception (January 31, 1995) to December 31, 1995, the years ended December 31, 1996 and 1997 and the nine months ended September 30, 1998 in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Los Angeles, California January 6, 1999 F-2 79 AUTOBYTEL.COM INC. CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except share and per share data) ASSETS
DECEMBER 31, ------------------ SEPTEMBER 30, 1996 1997 1998 ------- ------- ------------- Current assets: Cash and cash equivalents, includes restricted amounts of $985, $248 and $248, respectively....................... $ 9,062 $15,813 $10,488 Accounts receivable, net of allowance for doubtful accounts of $162, $337 and $416, respectively........... 298 1,493 1,826 Prepaid expenses and other current assets................. 902 795 612 ------- ------- ------- Total current assets................................ 10,262 18,101 12,926 Property and equipment, net................................. 1,425 2,317 2,197 Other assets................................................ 611 95 350 ------- ------- ------- Total assets........................................ $12,298 $20,513 $15,473 ======= ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Loan payable to stockholder............................... $ -- $ -- $ 776 Accounts payable.......................................... 651 2,223 5,343 Accrued expenses.......................................... 722 1,047 1,012 Deferred revenue.......................................... 2,326 3,700 4,413 Customer deposits......................................... 554 127 367 Other current liabilities................................. 32 66 59 ------- ------- ------- Total current liabilities........................... 4,285 7,163 11,970 Deferred rent............................................... 17 91 119 ------- ------- ------- Total liabilities................................... 4,302 7,254 12,089 ------- ------- ------- Commitments and contingencies Stockholders' equity: Convertible preferred stock, Series A, $0.001 par value; aggregate liquidation preference of $15,000 at September 30, 1998; 1,500,000 shares authorized; 1,500,000 shares issued and outstanding at December 31, 1996 and 1997 and September 30, 1998...................................... 2 2 2 Convertible preferred stock, Series B, $0.001 par value; aggregate liquidation preference of $9,050 at September 30, 1998; 967,915 shares authorized; none issued and outstanding at December 31, 1996; 967,915 shares issued and outstanding at December 31, 1997 and September 30, 1998.................................................... -- 1 1 Convertible preferred stock, Series C, $0.001 par value; aggregate liquidation preference of $18,500 at September 30, 1998; 3,977,272 shares authorized; none issued and outstanding at December 31, 1996; 1,477,274 shares issued and outstanding at December 31, 1997; 2,102,232 shares issued and outstanding at September 30, 1998..... -- 1 2 Common stock, $0.001 par value; 50,000,000 shares authorized; 8,284,815 shares issued and outstanding at December 31, 1996; 8,324,443 shares issued and outstanding December 31, 1997; 8,490,192 shares issued and outstanding at September 30, 1998................... 8 8 8 Additional paid-in capital................................ 15,077 37,123 42,783 Deferred compensation..................................... (26) (1) -- Cumulative translation adjustment......................... -- -- (25) Accumulated deficit....................................... (7,065) (23,875) (39,387) ------- ------- ------- Total stockholders' equity.......................... 7,996 13,259 3,384 ------- ------- ------- Total liabilities and stockholders' equity.......... $12,298 $20,513 $15,473 ======= ======= =======
The accompanying notes are an integral part of these consolidated statements. F-3 80 AUTOBYTEL.COM INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except share and per share data)
INCEPTION YEARS ENDED NINE MONTHS ENDED (JANUARY 31, 1995) DECEMBER 31, SEPTEMBER 30, TO ------------------------ ------------------------- DECEMBER 31, 1995 1996 1997 1997 1998 ------------------ ---------- ----------- ----------- ----------- (UNAUDITED) Revenues................... $ 274 $ 5,025 $ 15,338 $ 10,770 $ 16,499 ---------- ---------- ----------- ----------- ----------- Operating expenses: Sales and marketing...... 930 7,790 21,454 15,794 22,249 Product and technology development............ 99 1,753 5,448 3,993 6,216 General and administrative......... 275 1,641 5,851 4,118 4,016 ---------- ---------- ----------- ----------- ----------- Total operating expenses............. 1,304 11,184 32,753 23,905 32,481 ---------- ---------- ----------- ----------- ----------- Loss from operations..... (1,030) (6,159) (17,415) (13,135) (15,982) Other income, net.......... -- 124 620 426 501 ---------- ---------- ----------- ----------- ----------- Loss before provision for income taxes........... (1,030) (6,035) (16,795) (12,709) (15,481) Provision for income taxes.................... -- -- 15 15 31 ---------- ---------- ----------- ----------- ----------- Net loss................. $ (1,030) $ (6,035) $ (16,810) $ (12,724) $ (15,512) ========== ========== =========== =========== =========== Basic net loss per share... $ (0.12) $ (0.73) $ (2.03) $ (1.54) $ (1.85) ========== ========== =========== =========== =========== Shares used in computing basic net loss per share.................... 8,250,000 8,252,325 8,291,142 8,282,521 8,395,797 ========== ========== =========== =========== =========== Pro forma basic net loss per share................ $ (0.12) $ (0.68) $ (1.53) $ (1.19) $ (1.22) ========== ========== =========== =========== =========== Shares used in computing pro forma basic net loss per share................ 8,250,000 8,848,864 10,966,633 10,729,569 12,752,920 ========== ========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated statements. F-4 81 AUTOBYTEL.COM INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (Amounts in thousands, except share and per share data)
CONVERTIBLE MEMBERS' PREFERRED STOCK COMMON STOCK INTEREST/ ------------------ ------------------ ADDITIONAL DEFERRED CUMULATIVE ACCUM- NUMBER NUMBER PAID-IN COMPEN- TRANSLATION ULATED OF SHARES AMOUNT OF SHARES AMOUNT CAPITAL SATION ADJUSTMENT DEFICIT TOTAL --------- ------ --------- ------ ---------- -------- ----------- -------- -------- Balance, Inception (January 31, 1995)................. -- $ -- -- $ -- $ -- $ -- $ -- $ -- $ -- Sale of members' interest in Auto-By-Tel, LLC..... -- -- -- -- 40 -- -- -- 40 Net loss.................. -- -- -- -- -- -- -- (1,030) (1,030) --------- ---- --------- ---- ------- ---- ---- -------- -------- Balance, December 31, 1995...................... -- -- -- -- 40 -- -- (1,030) (990) Sale of members' interest in ABT Acceptance Company, LLC............ -- -- -- -- 50 -- -- -- 50 Issuance of common stock in exchange for members' interest................ -- -- 8,250,000 8 (8) -- -- -- -- Issuance of common stock options with an exercise price of $0.90 per share................... -- -- -- -- 87 (87) -- -- -- Issuance of Series A convertible preferred stock at $10.00 per share................... 1,450,000 2 -- -- 14,363 -- -- -- 14,365 Issuance of Series A convertible preferred stock at $10.00 per share on conversion of debt.................... 50,000 -- -- -- 500 -- -- -- 500 Issuance of common stock in exchange for services................ -- -- 6,667 -- 20 -- -- -- 20 Issuance of common stock upon exercise of stock options................. -- -- 28,148 -- 25 -- -- -- 25 Amortization of deferred compensation............ -- -- -- -- -- 61 -- -- 61 Net loss.................. -- -- -- -- -- -- -- (6,035) (6,035) --------- ---- --------- ---- ------- ---- ---- -------- -------- Balance, December 31, 1996...................... 1,500,000 2 8,284,815 8 15,077 (26) -- (7,065) 7,996 Issuance of Series B convertible preferred stock at $9.35 per share................... 967,915 1 -- -- 9,028 -- -- -- 9,029 Issuance of Series C convertible preferred stock at $8.80 per share................... 1,477,274 1 -- -- 12,987 -- -- -- 12,988 Issuance of common stock upon exercise of stock options................. -- -- 39,628 -- 31 -- -- -- 31 Amortization of deferred compensation............ -- -- -- -- -- 25 -- -- 25 Net loss.................. -- -- -- -- -- -- -- (16,810) (16,810) --------- ---- --------- ---- ------- ---- ---- -------- -------- Balance, December 31, 1997...................... 3,945,189 4 8,324,443 8 37,123 (1) -- (23,875) 13,259 Issuance of Series C convertible preferred stock at $8.80 per share................... 568,182 1 -- -- 5,008 -- -- -- 5,009 Issuance of Series C convertible preferred stock at $8.80 per share in exchange for advertising............. 56,776 -- -- -- 500 -- -- -- 500 Issuance of common stock upon exercise of stock options................. -- -- 165,749 -- 152 -- -- -- 152 Amortization of deferred compensation............ -- -- -- -- -- 1 -- -- 1 Foreign currency translation adjustment.............. -- -- -- -- -- -- (25) -- (25) Net loss.................. -- -- -- -- -- -- -- (15,512) (15,512) --------- ---- --------- ---- ------- ---- ---- -------- -------- Balance, September 30, 1998...................... 4,570,147 $ 5 8,490,192 $ 8 $42,783 $ -- $(25) $(39,387) $ 3,384 ========= ==== ========= ==== ======= ==== ==== ======== ========
The accompanying notes are an integral part of these consolidated statements. F-5 82 AUTOBYTEL.COM INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands, except share and per share data)
INCEPTION (JANUARY 31, 1995) YEARS ENDED NINE MONTHS ENDED TO DECEMBER 31, SEPTEMBER 30, DECEMBER 31, ------------------ ---------------------- 1995 1996 1997 1997 1998 ------------------ ------- -------- ----------- -------- (UNAUDITED) Cash flows from operating activities: Net loss............................................ $(1,030) $(6,035) $(16,810) $(12,724) $(15,512) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization................... 25 178 860 619 900 Provision for bad debt.......................... 20 145 175 348 188 Amortization of deferred compensation........... -- 61 25 24 1 Issuance of common stock in exchange for services...................................... -- 20 -- -- -- Issuance of Series C convertible preferred stock in exchange for advertising................... -- -- -- -- 500 Changes in assets and liabilities: Accounts receivable........................... (34) (429) (1,370) (1,589) (521) Prepaid expenses and other current assets..... (114) (788) 107 311 183 Other assets.................................. (7) (604) 516 502 (255) Accounts payable.............................. 87 564 1,572 1,307 3,120 Accrued expenses.............................. -- 722 325 (45) (35) Deferred revenue.............................. 356 1,970 1,374 930 713 Customer deposits............................. -- 554 (427) 172 240 Other current liabilities..................... 16 16 34 138 (7) Deferred rent................................. -- 17 74 63 28 ------- ------- -------- -------- -------- Net cash used in operating activities....... (681) (3,609) (13,545) (9,944) (10,457) ------- ------- -------- -------- -------- Cash flows from investing activities: Acquisition of Internet Development Corporation..... -- -- (100) -- -- Purchases of property and equipment................. (127) (1,501) (1,652) (1,550) (780) ------- ------- -------- -------- -------- Net cash used in investing activities....... (127) (1,501) (1,752) (1,550) (780) ------- ------- -------- -------- -------- Cash flows from financing activities: Proceeds from sale of common stock.................. -- 25 31 27 152 Proceeds from sale of members' interest in Auto-By-Tel, LLC.................................. 40 -- -- -- -- Proceeds from sale of members' interest in ABT Acceptance Company, LLC....................... -- 50 -- -- -- Net proceeds from issuance of Series A convertible preferred stock................................... -- 14,365 -- -- -- Net proceeds from issuance of Series B convertible preferred stock................................... -- -- 9,029 9,029 -- Net proceeds from issuance of Series C convertible preferred stock................................... -- -- 12,988 -- 5,009 Proceeds from issuance of notes payable............. 816 765 -- -- 776 Repayments of notes payable......................... -- (1,081) -- -- -- ------- ------- -------- -------- -------- Net cash provided by financing activities... 856 14,124 22,048 9,056 5,937 ------- ------- -------- -------- -------- Effect of exchange rates on cash...................... -- -- -- -- (25) ------- ------- -------- -------- -------- Net increase (decrease) in cash and cash equivalents......................................... 48 9,014 6,751 (2,438) (5,325) Cash and cash equivalents, at beginning of period..... -- 48 9,062 9,062 15,813 ------- ------- -------- -------- -------- Cash and cash equivalents, at end of period........... $ 48 $ 9,062 $ 15,813 $ 6,624 $ 10,488 ======= ======= ======== ======== ======== Supplemental disclosure of cash flow information: Cash paid during the period for income taxes........ $ 2 $ 4 $ 15 $ 15 $ 31 ======= ======= ======== ======== ======== Cash paid during the period for interest............ $ -- $ 24 $ -- $ -- $ 1 ======= ======= ======== ======== ========
Supplemental disclosure of non-cash financing activities: * In May 1996, 8,250,000 shares of common stock were issued to founding stockholders in exchange for members' interests. * In August 1996, 50,000 shares of Series A convertible preferred stock were issued in exchange for $500 previously advanced to the Company under three notes payable. * In September 1996, 6,667 shares of common stock with a fair market value of $20 were issued for services. * In April 1998, 56,776 shares of Series C convertible preferred stock with a fair market value of $8.80 per share convertible into common stock at the conversion price of $13.20 per share were issued for advertising. The accompanying notes are an integral part of these consolidated statements. F-6 83 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except share and per share data. Information for the nine months ended September 30, 1997 is unaudited.) 1. ORGANIZATION AND OPERATIONS OF THE COMPANY autobytel.com inc. (the Company) is a branded Internet site for new and pre-owned vehicle information and purchasing services. Through its Web site (www.autobytel.com), consumers can research pricing, specifications and other information related to new and pre-owned vehicles and, when consumers indicate they are ready to buy, can be connected to the Company's network of participating dealers. The Company also provides other related services such as financing, leasing, vehicle warranties and insurance. The Company's services are free to consumers and, to date, the Company has derived substantially all of its revenues from fees paid by subscribing dealers located in the United States and Canada. Auto-By-Tel, LLC (ABT), the Company's predecessor, was organized in January 1995 and commenced operations as a California limited liability company in March 1995. ABT Acceptance Company, LLC (ABTAC), an affiliated company under common control, was formed in February 1996. ABT and ABTAC (the LLCs) were reorganized in May 1996 as a Delaware corporation pursuant to the terms of a Contribution Agreement and Plan of Organization (the Plan of Organization) entered into by all of the members of the LLCs (See Note 6). As the LLCs were under common control, the reorganization was accounted for in a manner similar to a pooling-of-interests, whereby the assets and liabilities of ABT and ABTAC were transferred to the Company at their historical cost. Since inception, the Company has invested the majority of its efforts in marketing the Company's brand name and developing infrastructure to support anticipated future operating growth. As a result, the Company has experienced significant operating losses and had an accumulated deficit of $39,387 at September 30, 1998. To date, such losses have been financed primarily through private placements of preferred stock (See Notes 6 and 10). 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company, its predecessors (See Note 1) and its wholly-owned subsidiaries: Autobytel Services Corporation, Autobytel Acceptance Corporation, Autobytel Insurance Services, Inc., Autobytel.ca Inc., Kre8.net, Inc., Auto-By-Tel International LLC, Auto by Tel UK Limited and AutoVisions Communications, Inc. All intercompany transactions and balances have been eliminated. Unaudited Information The accompanying financial information for the nine months ended September 30, 1997 is unaudited and has been prepared on substantially the same basis as the audited consolidated financial statements. In the opinion of management, the unaudited information contains all adjustments (consisting of normal recurring adjustments) necessary to F-7 84 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) present fairly the financial position and the results of operations as of such date and for such period in accordance with generally accepted accounting principles. Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents For the purposes of the consolidated balance sheets and the consolidated statements of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Concentration of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of accounts receivable. To date, accounts receivable have primarily been derived from marketing fees billed to subscribing dealers located in the United States and Canada. The Company generally requires no collateral to support customer receivables. The Company maintains reserves for potential credit losses. Historically, such losses have been minor and within management's expectations. As of December 31, 1996 and 1997 and September 30, 1998, no subscribing dealer accounted for greater than 10% of accounts receivable. Property and Equipment Property and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the respective assets, generally three years. Amortization of leasehold improvements is provided using the straight-line method over the lesser of the remaining lease term or the estimated useful lives of the improvements. Stock-Based Compensation In 1996, the Company adopted Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation." The Company has elected to continue accounting for stock-based compensation issued to employees using Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and, accordingly, pro forma disclosures required under SFAS No. 123 have been presented (See Note 7). Revenue Recognition Substantially all revenues to date consist of fees paid by subscribing dealers. These fees are comprised of an initial fee, a monthly fee and, through fiscal 1997, an annual fee. In January 1998, the Company started to eliminate annual fees and increase monthly fees to subscribing dealers. The initial fee and annual fee are recognized ratably over the F-8 85 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) service period of 12 months. The monthly fee is recognized in the period services are provided. Deferred revenue is comprised of unamortized fees. Risks due to Concentration of Significant Customers and Export Sales For all periods presented in the accompanying consolidated statements of operations, no subscribing dealer accounted for greater than 10% of revenues. The Company conducts its business within one industry segment within the United States, Canada and the United Kingdom. Revenues from customers outside of the United States were less than 10% of total revenues for all periods presented in the accompanying consolidated statements of operations. Sales and Marketing Sales and marketing expense primarily includes advertising and marketing expenses paid to purchase request providers and developing the Company's brand equity, as well as personnel and other costs associated with sales, training and support of the Company's dealer network. Sales and marketing expense also includes cost of sales associated with the sale of computers. Sales and marketing costs are recorded as expenses in the period services are provided. For the period from inception (January 31, 1995) to December 31, 1995, the years ended December 31, 1996 and 1997 and the nine months ended September 30, 1997 and 1998, Internet marketing and advertising costs were $216, $1,838, $5,828, $3,613 and $8,060 and television advertising expenses were $0, $396, $4,048, $3,521 and $4,204, respectively. Product and Technology Development Product and technology development expense primarily includes personnel costs relating to enhancing the features, content and functionality of the Company's Web site and its online dealer information platform, as well as expenses associated with the Company's telecommunications and computer infrastructure. Product and technology development expenditures are expensed as incurred. General and Administrative General and administrative expense primarily consists of executive, financial and legal personnel expenses and related costs. General and administrative expense for the year ended December 31, 1997 includes a non-recurring $1.1 million charge associated with a proposed and withdrawn initial public offering in March 1997. Foreign Currency Translation The functional currency of the Company's subsidiaries is the local currency. Accordingly, all assets and liabilities are translated into U.S. dollars at the current exchange rate as of the applicable balance sheet date. Revenues and expenses are translated at the average exchange rate prevailing during the period. Gains and losses resulting from the translation of the financial statements are reported as a separate component of stockholders' equity. F-9 86 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Computation of Basic Net Loss Per Share and Pro Forma Basic Net Loss Per Share Historical net loss per share has been calculated under SFAS No. 128, "Earnings per Share." SFAS No. 128 requires companies to compute earnings per share under two different methods (basic and diluted). Basic net loss per share is calculated by dividing net loss by the weighted average shares of common stock outstanding during the period. No diluted loss per share information has been presented in the accompanying consolidated statements of operations since potential common shares from the conversion of preferred stock, stock options and warrants are antidilutive. The Company evaluated the requirements of the Securities and Exchange Commission Staff Accounting Bulletin (SAB) No. 98, and concluded that there are no nominal issuances of common stock or potential common stock which would be required to be shown as outstanding for all periods as outlined in SAB No. 98. Pro forma basic net loss per share has been calculated assuming the conversion of the outstanding preferred stock into common stock, as if the shares had been converted on the dates of their issuance. New Accounting Pronouncements In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income," which establishes standards for reporting and presentation of comprehensive income. SFAS No. 130, which was adopted by the Company in the first quarter of 1998, requires companies to report a new measurement of income. Comprehensive income (loss) is to include foreign currency translation gains and losses and other unrealized gains and losses that have historically been excluded from net income (loss) and reflected instead in equity. The only comprehensive income included in the accompanying stockholders' equity is foreign currency translation gain of $25 for the nine months ended September 30, 1998. As this amount is not material, comprehensive income (loss) is not presented in the accompanying consolidated financial statements. In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 131 is effective for fiscal years beginning after December 15, 1997, with earlier adoption permitted. Management does not believe that adoption of these standards will have a material effect on the Company's consolidated financial statements. In March 1998, the American Institute of Certified Public Accountants (AICPA) issued Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," which is effective for fiscal years beginning after December 15, 1998. SOP 98-1 provides guidance on accounting for the costs of computer software developed or obtained for internal use and defines specific criteria that determine when such costs are required to be expensed, and when such costs may be capitalized. The Company expenses software development costs as incurred. Management believes that the adoption of SOP 98-1 will not have a material effect on the Company's consolidated financial statements. In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-up Activities," which is effective for fiscal years beginning after December 15, 1998. SOP 98-5 provides guidance on the financial reporting of start-up cost and organization F-10 87 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) costs and require such costs to be expensed as incurred. Management believes that the adoption of SOP 98-5 will not have a material effect on the Company's consolidated financial statements. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which is effective for fiscal years beginning after June 15, 1999. SFAS No. 133 establishes accounting and reporting standards for derivative instruments. The statement requires that every derivative instrument be recorded in the balance sheet as either an asset or liability measured at its fair value, and that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. The Company does not have any derivative instruments as of September 30, 1998. Management believes that the adoption of SFAS No. 133 will not have a material effect on the Company's consolidated financial statements. 3. BUSINESS ACQUISITION In May 1997, one of the Company's subsidiaries, Kre8.net, Inc., entered into an asset purchase agreement with Internet Development Corporation (IDC) to purchase certain assets and to assume certain liabilities of the business. The combined entity develops Web sites for automobile and other industries. The purchase price for the net assets was $100 in cash. The acquisition was accounted for by the purchase method. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair market values whose fair value equaled book value at the closing date. The excess of purchase price over the estimated fair value of net assets acquired was $93, and is being amortized using the straight-line method over a period of three years. The results of operations of the acquired business are included in the accompanying consolidated statements of operations and in the Company's accumulated deficit beginning in May 1997. IDC's revenues and results of operations since the date of acquisition are immaterial. 4. PROPERTY AND EQUIPMENT Property and equipment consists of the following:
DECEMBER 31, ---------------- SEPTEMBER 30, 1996 1997 1998 ------ ------- -------------- Computer software and hardware........... $1,125 $ 2,104 $ 2,617 Furniture and equipment.................. 412 892 1,131 Leasehold improvements................... 77 427 455 ------ ------- ------- 1,614 3,423 4,203 Less--Accumulated depreciation and amortization........................... (189) (1,106) (2,006) ------ ------- ------- $1,425 $ 2,317 $ 2,197 ====== ======= =======
F-11 88 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 5. COMMITMENTS AND CONTINGENCIES Operating Leases The Company leases its facilities and certain office equipment under operating leases which expire on various dates through 2001. At September 30, 1998, future minimum lease payments are as follows:
YEARS ENDING DECEMBER 31, ------------------------- 1998 (Three months).................................... $ 148 1999................................................... 619 2000................................................... 649 2001................................................... 501 2002................................................... -- Thereafter............................................. -- ------ $1,917 ======
Rent expense was $22, $92, $247, and $336 for the period from inception (January 31, 1995) to December 31, 1995, the years ended December 31, 1996 and 1997 and the nine months ended September 30, 1998, respectively. Marketing Agreements In September 1997, the Company entered into a three year Internet marketing agreement with Excite, Inc. (Excite). The agreement permits the Company to maintain certain exclusive promotional rights and linkage with Excite, and provides for certain advertising. As of September 30, 1998, the agreement requires minimum future payments of $4.3 million. The Company expenses these amounts as services are provided. In June 1998, the Company entered into a two year Internet marketing agreement, through Excite, with the automotive channel of Netscape Communication Corporation's NetCenter (NetCenter). The agreement permits the Company to maintain certain exclusive promotional rights and linkage with NetCenter. As of September 30, 1998, the agreement requires minimum future payments of $1.9 million. The Company expenses these amounts as services are provided. The Company also has multi-year agreements with other automotive information providers that make available to consumers vehicle research data over the Internet. Such agreements are generally for a term of one to three years and require that the Company pay fees to these companies based on the volume of referrals received by the Company from these services. As of September 30, 1998, the minimum future commitments under these agreements aggregate to $1.2 million. The Company expenses these amounts as services are provided. Litigation In the normal course of business, the Company is involved in various legal proceedings. Based upon the information presently available, including discussion with outside legal counsel, management believes that the ultimate resolution of any such F-12 89 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) proceedings will not have a material adverse effect on the Company's financial position, liquidity or results of operations. 6. STOCKHOLDERS' EQUITY Series A Convertible Preferred Stock In August 1996, the Board of Directors of the Company authorized 1,500,000 shares of Series A convertible preferred stock (Series A Preferred), and the Company completed the sale of 1,500,000 shares of Series A Preferred at $10.00 per share through a private placement offering. Of the total shares sold, 50,000 shares were issued to an individual in exchange for $500 previously advanced to the Company under three notes payable. In addition, $1,081 of the proceeds were used to repay notes due to the Company's former Chairman and co-founder. The Series A Preferred will be automatically converted into 1,666,667 shares of common stock at the conversion ratio of approximately 1:1.11 upon the earliest of (i) the closing of an underwritten public offering of the Company's common stock with a minimum per share price of $13.50 per share, and minimum aggregate offering price of $30 million; (ii) the consent of two-thirds of the holders of preferred stock; or (iii) when fewer than 300,000 shares of Series A Preferred remain outstanding. The Series A Preferred is also convertible into 1,666,667 shares of common stock at the option of the holder. The Company has reserved 1,666,667 shares of common stock to permit the conversion of the Series A Preferred. Holders of Series A Preferred are entitled to one vote for each share of common stock into which such shares of Series A Preferred may be converted except with respect to election of directors, whereby the holders, voting separately as a class, are entitled to elect two directors. Each share of Series A Preferred entitles the holder to receive non-cumulative dividends, if and when declared by the Board of Directors, prior to any dividend paid on Series B Preferred or the common stock. Dividends, if any, on Series A Preferred shall be declared at an annual rate of $0.80 per share. As of September 30, 1998, no dividends have been declared. In the event of liquidation, the Series A Preferred has preference over Series B Preferred and the common stock in the amount of $10.00 per share, plus declared but unpaid dividends. Series B Convertible Preferred Stock In January 1997, the Board of Directors of the Company authorized 967,915 shares of Series B convertible preferred stock (Series B Preferred), and the Company completed the sale of 967,915 shares of Series B Preferred at $9.35 per share through a private placement offering. The Series B Preferred will be automatically converted into 873,131 shares of common stock at the conversion ratio of approximately 1:0.90 upon the earliest of (i) the closing of an underwritten public offering of the Company's common stock with a minimum per share price of $13.50 per share, and minimum aggregate offering price of $30 million; (ii) the consent of two-thirds of the holders of preferred stock; or (iii) when fewer than 200,000 shares of Series B Preferred remain outstanding. The Series B F-13 90 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Preferred is also convertible into 873,131 shares of common stock at the option of the holder. The Company has reserved 873,131 shares of common stock to permit the conversion of the Series B Preferred. Holders of Series B Preferred are entitled to one vote for each share of common stock into which such shares of Series B Preferred may be converted. Each share of Series B Preferred entitles the holder to receive noncumulative dividends, if and when declared by the Board of Directors, prior to any dividend paid on the common stock. Dividends, if any, on Series B Preferred shall be declared at an annual rate of $0.80 per share. As of September 30, 1998, no dividends have been declared. In the event of liquidation, the Series B Preferred has preference over the common stock in the amount of $9.35 per share, plus declared but unpaid dividends. Series C Convertible Preferred Stock In October 1997, the Board of Directors of the Company authorized 2,840,909 shares of Series C convertible preferred stock (Series C Preferred), and the Company completed the sale of 1,477,274 shares of Series C Preferred at $8.80 per share through a private placement offering. In February 1998, the Board of Directors of the Company extended the offering and authorized an additional 1,136,363 shares of Series C Preferred. In April 1998, the Company issued 56,776 shares of its Series C Preferred in payment of television advertising with an estimated fair market value of $500. The majority of the advertising aired and was expensed in the three months ended March 31, 1998. In May 1998, the Company sold 568,182 shares of the Series C Preferred at $8.80 per share through a private placement offering. The Series C Preferred will be automatically converted into 1,401,488 shares of common stock at the conversion ratio of approximately 1:0.67 upon the earliest of (i) the closing of an underwritten public offering of the Company's common stock with a minimum per share price of $13.50 per share, and minimum aggregate offering price of $30 million; (ii) the consent of two-thirds of the holders of preferred stock; or (iii) when fewer than 250,000 shares of Series C Preferred remain outstanding. The Series C Preferred is also convertible into 1,401,488 shares of common stock at the option of the holder. The Company has reserved 1,401,488 shares of common stock to permit the conversion of the Series C Preferred. Holders of Series C Preferred are entitled to one vote for each share of common stock into which such shares of Series C Preferred may be converted. Each share of Series C Preferred entitles the holder to receive non-cumulative dividends, if and when declared by the Board of Directors, prior to any dividend paid on Series A and Series B Preferred and the common stock. Dividends, if any, on Series C Preferred shall be declared at an annual rate of $0.80 per share. As of September 30, 1998, no dividends have been declared. In the event of liquidation, the Series C Preferred has preference over Series A and Series B Preferred and the common stock in the amount of $8.80 per share, plus declared but unpaid dividends. F-14 91 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) As of September 30, 1998, 5,000,000 shares of preferred stock were undesignated. In December 1998, the Board of Directors approved the designation of 3,000,000 additional shares of Series C Preferred. Common Stock Under the terms of the Plan of Organization, the interests of the members of the LLCs were transferred to autobytel.com inc. in a tax-free transaction. In consideration for their respective ownership interests, the members of ABT and ABTAC received 8,250,000 shares of common stock of the Company. 7. STOCK OPTION PLANS 1996 Stock Option Plan The Company's 1996 Stock Option Plan (the Option Plan) was approved by the Board of Directors in May 1996. The Option Plan was terminated by a resolution of the Board of Directors in October 1996, at which time 870,555 options had been issued. The Option Plan provided for the granting to employees and directors of incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the Code), and for the granting to employees, consultants and directors of nonstatutory stock options. The Company reserved 1,194,444 shares of common stock for exercise of stock options under the Option Plan. The exercise price of incentive stock options granted under the Option Plan could not be lower than the fair market value of the common stock, and the exercise price of nonstatutory stock options could not be less than 85% of the fair market value of the common stock, as determined by the Board of Directors, on the date of grant. With respect to any participants who, at the time of grant, owned stock that possessed more than 10% of the voting power of all classes of stock of the Company, the exercise price of any stock option granted to such person was to be at least 110% of the fair market value on the grant date, and the maximum term of such option was five years. The term of all other options granted under the Option Plan did not exceed 10 years. Stock options granted under the Option Plan vest according to vesting schedules determined by the Board of Directors. As of September 30, 1998, options to purchase an aggregate of 221,388 shares of common stock at an exercise price ranging from $0.84 to $0.90 per share were outstanding under the Option Plan. 1996 Stock Incentive Plan The Company's 1996 Stock Incentive Plan (the Incentive Plan) was approved by the Board of Directors in October 1996, and was amended in November 1996. The Incentive Plan provides for the granting to employees and directors of incentive stock options within the meaning of Section 422 of the Code, and for the granting to employees, directors and consultants of nonstatutory stock options and stock purchase rights (SPRs). The Company has reserved a total of 833,333 shares of common stock for issuance under the Incentive Plan. Shares available for future grant under the Incentive Plan are increased annually in an amount equal to 833,333 shares less the number of shares available for issuance under the Incentive Plan on the last day of the immediately preceding fiscal year. The increase may not exceed 833,333 in any fiscal year. The exercise price of incentive stock options granted under the Incentive Plan cannot be lower than the fair market value of the F-15 92 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) common stock, as determined by the Board of Directors, on the date of grant. With respect to any participants who, at the time of grant, own stock possessing more than 10% of the voting power of all classes of stock of the Company, the exercise price of incentive stock options granted to such person must be at least 110% of the fair market value on the grant date, and the maximum term of such options is five years. The term of all other options granted under the Incentive Plan may be up to 10 years. Non-employee directors are entitled to participate in the Company's Incentive Plan. The Incentive Plan provides for an automatic grant of an option to purchase 13,333 shares of common stock to each non-employee director on the date on which the Incentive Plan becomes effective or, if later, on the date on which the person first becomes a non-employee director. In each successive year the non-employee director shall automatically be granted an option to purchase 3,333 shares on November 1 of each subsequent year provided the non-employee director has served on the Board for at least six months. Each option shall have a term of 10 years. Such options vest in their entirety and become exercisable on the first anniversary of the grant date, provided that the optionee continues to serve as a director on such dates and the exercise price per share shall be 100% of the fair market value of the Company's common stock as determined by the Board of Directors on the date of the grant of the option. From October 1996 to September 1998, the Company approved grants of incentive stock options in excess of the Incentive Plan limit of 833,333 shares. Of these grants, certain shares are still outstanding. The Company is in negotiations with the affected option holders to rectify any adverse impact to them. The Company has adopted the 1999 Stock Option Plan under which re-grants of the incentive stock options, if required, can be made (See Note 10). During the year ended December 31, 1996, the Company granted options under the aforementioned plans to purchase an aggregate of 1,568,059 shares of common stock at various exercise prices ranging from $0.90 to $11.25 per share. During the year ended December 31, 1996, the Company recorded, based upon an independent appraisal obtained by the Company's Board of Directors, $87 of deferred compensation expense relating to certain options. This amount was amortized over the vesting periods of the options. Amortization of deferred compensation for the years ended December 31, 1996 and 1997 and the nine months ended September 30, 1998 was $61, $25 and $1, respectively. During the year ended December 31, 1997, the Company granted options to various employees to purchase 853,504 shares of common stock at an exercise price of $13.20 per share. During the nine months ended September 30, 1998, the Company granted options to various employees to purchase 445,007 shares of common stock at an exercise price of $13.20 per share. 1996 Employee Stock Purchase Plan The Company's 1996 Employee Stock Purchase Plan (the Purchase Plan) was adopted by the Board of Directors in November 1996. The Purchase Plan, which is intended to qualify under Section 423 of the Code, permits eligible employees of the Company to purchase shares of common stock through payroll deductions of up to ten percent of their compensation, up to a certain maximum amount for all purchase periods ending within any calendar year. The Company has reserved a total of 444,444 shares of F-16 93 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) common stock for issuance under the Purchase Plan. The price of common stock purchased under the Purchase Plan will be 85% of the lower of the fair market value of the common stock on the first or last day of each six month purchase period. Employees may end their participation in the Purchase Plan at any time during an offering period, and they will be paid their payroll deductions to date. Participation ends automatically upon termination of employment with the Company. There have been no stock purchases under the Purchase Plan. In January 1999, the Board of Directors ratified the suspension of the Purchase Plan. A summary of the status of the Company's stock options as of December 31, 1996 and 1997 and September 30, 1998, and changes during such periods is presented below:
WEIGHTED AVERAGE NUMBER OF EXERCISE OPTIONS PRICE --------- -------- Outstanding at December 31, 1995................... -- $ -- Granted............................................ 1,568,059 3.24 Exercised.......................................... (28,148) 0.90 Canceled........................................... (19,353) 0.90 --------- ------ Outstanding at December 31, 1996................... 1,520,558 3.32 Granted............................................ 853,504 13.20 Exercised.......................................... (39,629) 0.90 Canceled........................................... (156,688) 7.88 --------- ------ Outstanding at December 31, 1997................... 2,177,745 6.92 Granted............................................ 445,007 13.20 Exercised.......................................... (165,749) 0.92 Canceled........................................... (660,259) 5.89 --------- ------ Outstanding at September 30, 1998.................. 1,796,744 $ 9.39 ========= ====== Exercisable at December 31, 1996................... 362,958 $ 0.89 ========= ====== Exercisable at December 31, 1997................... 858,187 $ 2.78 ========= ====== Exercisable at September 30, 1998.................. 650,741 $ 5.69 ========= ====== Weighted-average fair value of options granted during 1996 whose exercise price is less than the market price of the stock on the grant date (169,445 options)................................ $ 2.45 ====== Weighted-average fair value of options granted during 1996 whose exercise price exceeds the market price of the stock on the grant date (1,398,614 options).............................. $ 1.16 ====== Weighted-average fair value of options granted during 1997 whose exercise price equals the market price of the stock on the grant date (853,504 options)................................ $ 2.73 ====== Weighted-average fair value of options granted during 1998 whose exercise price equals the market price of the stock on the grant date (445,007 options)................................ $ 2.61 ======
F-17 94 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The fair value of each option granted through September 30, 1998 is estimated using the Black-Scholes option-pricing model on the date of grant using the following assumptions: (i) no dividend yield, (ii) volatility of effectively zero, (iii) weighted-average risk-free interest rate of approximately 6.70%, 6.18%, and 5.50% for the years ended December 31, 1996 and 1997 and the nine months ended September 30, 1998, respectively, and (iv) expected life of 6 years. The following table summarizes information about stock options outstanding at September 30, 1998:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------------------------------- -------------------------- WEIGHTED AVERAGE WEIGHTED WEIGHTED NUMBER OF REMAINING LIFE AVERAGE NUMBER OF AVERAGE EXERCISE PRICE OPTIONS (IN YEARS) EXERCISE PRICE OPTIONS EXERCISE PRICE - -------------- --------- -------------- -------------- --------- -------------- $ 0.84 166,667 7.8 $ 0.84 166,667 $ 0.84 0.90 54,721 7.8 0.90 54,442 0.90 4.50 466,666 8.1 4.50 246,110 4.50 11.25 29,998 8.2 11.25 9,996 11.25 13.20 1,078,692 9.2 13.20 173,526 13.20 --------- --- ------ ------- ------ $0.84-$13.20 1,796,744 8.7 $ 9.39 650,741 $ 5.69 ========= === ====== ======= ======
Had compensation cost for the Company's stock option grants for its stock-based compensation plans been determined consistent with SFAS No. 123, the Company's net loss and net loss per share for the years ended December 31, 1996 and 1997 and the nine months ended September 30, 1998 would approximate the pro forma amounts below:
YEARS ENDED NINE MONTHS DECEMBER 31, ENDED ------------------ SEPTEMBER 30, 1996 1997 1998 ------- -------- ------------- Net loss, as reported................... $(6,035) $(16,810) $(15,512) Net loss per share, as reported......... (0.73) (2.03) (1.85) Net loss, pro forma..................... (6,270) (17,624) (16,329) Net loss per share, pro forma........... (0.76) (2.13) (1.94)
The effects of applying SFAS No. 123 in this pro forma disclosure are not indicative of future amounts. 8. INCOME TAXES Through May 1996, the LLCs were taxed as partnerships under the provisions of the Internal Revenue Code of 1986 (Internal Revenue Code). Under those provisions, the Company was not subject to corporate income taxes on its taxable income. Instead, the Company's taxable income or loss was included in the individual income tax returns of its members. Effective May 31, 1996, under the terms of the Plan of Organization, the LLCs were reorganized as a C Corporation under the provisions of the Internal Revenue Code (See Note 1). The reorganization required that the Company adopt SFAS No. 109, F-18 95 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) "Accounting for Income Taxes." Under SFAS No. 109, deferred income tax assets and liabilities are determined based on the differences between the book and tax basis of assets and liabilities and are measured using the currently enacted tax rates and laws. The cumulative tax effect of these temporary differences was immaterial at the time of the reorganization. No provision for federal income taxes has been recorded as the Company incurred net operating losses through September 30, 1998. Provision for income taxes included in the accompanying consolidated statements of operations primarily consists of franchise taxes paid to the state of Delaware. As of September 30, 1998, the Company had approximately $35.7 million and $17.7 million of federal and state net operating loss carryforwards available to offset future taxable income; such carry forwards expire in various years through 2018. Under the Tax Reform Act of 1986, the amounts of and benefits from the Company's net operating loss carryforwards will likely be limited upon the completion of the initial public offering due to a cumulative ownership change of more than 50% over a three year period. Based on preliminary estimates, management believes the effect of such limitation, if imposed, will not have a material adverse effect on the Company. Net deferred income tax assets, totaling approximately $2.0 million at December 31, 1996, $6.3 million at December 31, 1997 and $14.4 million at September 30, 1998, consist primarily of the tax effect of net operating loss carry forwards, reserves and accrued expenses which are not yet deductible for tax purposes. The Company has provided a full valuation allowance on these deferred income tax assets because of the uncertainty regarding their realization. 9. RELATED PARTY TRANSACTIONS Peter R. Ellis In March 1998, the Company extended a $250 loan to co-founding member and stockholder, Peter R. Ellis. The loan bears interest at 8% per annum compounded annually and principal and accrued interest are due in full in March 2003. The loan is secured by Mr. Ellis's stock in the Company. In June 1998, Mr. Ellis resigned from the Company as Chief Executive Officer. In August 1998, the Company executed a two year agreement with Mr. Ellis to provide advisory services. Under the agreement, Mr. Ellis is entitled to receive $500 in the first year and $5 per month in the second year of the agreement term. The amounts paid to Mr. Ellis under this agreement are included in operating expenses in the accompanying consolidated statements of operations. Inchcape Motors International plc As of September 30, 1998, the Company had a loan payable of $776 (L457) to Inchcape Motors International plc (Inchcape), a stockholder. The amount represents cash advances to the Company to fund its United Kingdom operations. The loan was due on demand and bore no interest. Subsequent to September 30, 1998, the loan was assumed by an affiliate of Inchcape (See Note 10). F-19 96 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 10. SUBSEQUENT EVENTS Issuance of Series C Preferred Subsequent to September 30, 1998, the Company raised additional capital of $25.2 million through issuance of Series C Preferred as follows: In October 1998, the Company issued 64,233 shares of Series C Preferred in payment of television advertising with an estimated fair market value of $565. The amount was expensed in the three months ended December 31, 1998. In November 1998, in a private placement, the Company issued 568,182 shares of Series C Preferred to Invision AG (Invision) at $8.80 per share convertible into 378,788 shares of common stock at $13.20 per share. The Company also issued a warrant to purchase 150,000 shares of common stock to Invision. The warrant is exercisable at $13.20 per share and expires in November 2001. The warrant was issued in exchange for Invision's commitment to fund organizational and start-up activities related to a Pan-European entity in which the Company may invest with Invision. The value of the warrant will be charged to operations during the period such activities occur. In connection with these transactions, the Company has agreed to appoint a person designated by Invision to serve on the Board of Directors of the Company. In December 1998, in private placements, the Company issued a total of 1,097,727 shares of Series C Preferred to Aureus Private Equity AG (Aureus), an affiliate of Invision, at $8.80 per share convertible into 731,818 shares of common stock at $13.20 per share. The Company also issued warrants to purchase a total of 289,800 shares of common stock to Aureus. The warrants are exercisable at $13.20 per share and expire in December 2001. The warrants were issued in exchange for Aureus' commitment to fund organizational and start-up activities related to a Pan-European entity in which the Company may invest with Aureus. The value of the warrants will be charged to operations during the period such activities occur. In December 1998, in a private placement, the Company issued 1,136,364 shares of Series C Preferred to MediaOne Interactive Services, Inc. (MediaOne) at $8.80 per share convertible into 757,576 shares of common stock at $13.20 per share. The Company also issued a warrant to purchase 300,000 shares of its common stock to MediaOne. The warrant is exercisable at $13.20 per share and expires in December 2001. MediaOne is not obligated to perform any services in connection with the issuance of the warrant, and the value of the warrant will be accounted for as an equity transaction. The Company has agreed to appoint a person designated by MediaOne to serve on the Board of Directors of the Company. Proposed Initial Public Offering In June 1998, the Board of Directors authorized the filing of a registration statement with the Securities and Exchange Commission to permit the Company to sell shares of its common stock in connection with the proposed initial public offering (IPO). If the offering is consummated under the terms presently anticipated, the Series A, the Series B and the Series C Preferred (collectively Preferred Stock) outstanding at September 30, 1998 will automatically convert to common stock upon closing of the IPO (See Note 6). F-20 97 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Sale of Auto by Tel UK In November 1998, the Company entered into an agreement with Inchcape Automotive Limited to sell 100 percent of its United Kingdom operations for a nominal cash amount and assumption of liabilities of $1,794, which includes the $776 to an affiliate of Inchcape Automotive Limited outstanding at September 30, 1998 (See Note 9). The sale resulted in a gain of $1,408. In addition, the Company entered into a License and Service Agreement under which it is entitled to minimum annual license and maintenance payments of $850 and $250, respectively, over a 20-year period. 1998 Stock Option Plan In December 1998, the Company adopted the 1998 Stock Option Plan (the 1998 Option Plan). The Company has reserved 1,500,000 shares under the 1998 Option Plan. The 1998 Option Plan provides for the granting to employees of incentive stock options within the meaning of the Code, and for the granting to employees of nonstatutory stock options. The exercise price of non-statutory options granted under the 1998 Option Plan cannot be lower than 50% of the fair market value of the common stock, as determined by the Board of Directors, on the date of grant. The exercise price of all incentive stock options granted cannot be lower than the fair market value on the grant date. With respect to any participants who beneficially own more than 10% of the voting power of all classes of stock of the Company, the exercise price of any stock option granted to such person must be at least 110% of the fair market value on the grant date, and the maximum term of such option is five years. The term of all other options granted under the 1998 Option Plan may be up to 10 years. Under the 1998 Option Plan, the vesting of certain nonstatutory stock options (Performance Options) is subject to restrictions related to the performance of the Company's common stock and the employment period of the optionee. Grants of Stock Options In December 1998, in connection with an employment agreement with Mark W. Lorimer, President and Chief Executive Officer, the Company granted options to purchase 200,000 shares of the Company's common stock and Performance Options to purchase 500,000 shares of the common stock under the 1998 Option Plan. In December 1998, in connection with an employment agreement with Ann M. Delligatta, Executive Vice President and Chief Operating Officer, the Company granted options to purchase 100,000 shares of the common stock and Performance Options to purchase 200,000 shares of the common stock under the 1998 Option Plan. These stock options and Performance Options have a term of 10 years, and the exercise price of such options is equal to the fair market value of the common stock, as determined by the Board of Directors, on the date of grant. F-21 98 AUTOBYTEL.COM INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Employment Agreement with Ann M. Delligatta In January 1999, the Company entered into a three year employment agreement with Ann M. Delligatta, Executive Vice President and Chief Operating Officer. Under this agreement, in the event her employment is terminated without cause or she terminates her employment with good reason, she is entitled to a lump sum payment equal to the base salary that would have been received by her if she had remained employed by the Company for the remaining balance of the three year term. 1999 Stock Option Plan In January 1999, the Board of Directors adopted the 1999 Stock Option Plan (the 1999 Option Plan). The Company has reserved 1,800,000 shares under the 1999 Option Plan. The 1999 Option Plan provides for the granting of stock options to key employees of the Company. Under the 1999 Option Plan, not more than 1,000,000 shares may be granted after March 31, 1999. The 1999 Option Plan is identical in all other material respects to the 1998 Option Plan. F-22 99 - ------------------------------------------------------ - ------------------------------------------------------ YOU MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR SALE OF COMMON STOCK MEANS THAT INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AFTER THE DATE OF THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY THESE SHARES OF COMMON STOCK IN ANY CIRCUMSTANCES UNDER WHICH THE OFFER OR SOLICITATION IS UNLAWFUL. ------------------ TABLE OF CONTENTS
PAGE ---- Prospectus Summary...................... 3 Risk Factors............................ 7 Use of Proceeds......................... 20 Dividend Policy......................... 20 Capitalization.......................... 21 Dilution................................ 22 Selected Consolidated Financial Data.... 23 Management's Discussion and Analysis of Financial Condition and Results of Operations............................ 24 Business................................ 34 Management.............................. 46 Certain Transactions.................... 58 Principal and Selling Stockholders...... 61 Description of Capital Stock............ 63 Shares Eligible for Future Sale......... 65 Certain United States Tax Considerations for Non-United States Holders......... 68 Underwriting............................ 73 Legal Matters........................... 74 Experts................................. 74 Additional Information.................. 74 Index to Consolidated Financial Statements............................ F-1
------------------ UNTIL , 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS THAT BUY, SELL OR TRADE THESE SHARES OF COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ SHARES [LOGO] autobytel.com inc. COMMON STOCK ------------------- PROSPECTUS ------------------- BT ALEX. BROWN LEHMAN BROTHERS PAINEWEBBER INCORPORATED ------------------ , 1999 - ------------------------------------------------------ - ------------------------------------------------------ 100 PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the costs and expenses, other than underwriting discounts and commissions, to be paid in connection with the sale of the common stock being registered, all of which will be paid by the Registrant. All amounts are estimates except the SEC registration, NASD and Nasdaq filing fees. SEC Registration fee........................................ $23,018 NASD filing fee............................................. 8,780 Nasdaq National Market listing fee.......................... 95,000 Blue Sky fees and expenses.................................. 5,000 Accounting fees and expenses................................ * Legal fees and expenses..................................... * Transfer agent and registrar fees........................... * Printing and engraving expenses............................. * Miscellaneous expenses...................................... * ------- Total............................................. $ * =======
- ------------------------- * To be completed by amendment. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the Delaware Law General Law ("Delaware Law") and the Company's Certificate of Incorporation provide for indemnification of the Company's directors and officers in a variety of circumstances which may include liabilities under the Act. Article IX of the Company's Certificate of Incorporation provides that the Company shall indemnify to the full extent permitted by the laws of Delaware, as from time to time in effect, the persons described in Section 145 of Delaware Law. The general effect of the provisions in the Company's Certificate of Incorporation and Delaware Law is to provide that the Company shall indemnify its directors and officers against all liabilities and expenses actually and reasonably incurred in connection with the defense or settlement of any judicial or administrative proceedings in which they have become involved by reason of their status as corporate directors or officers, if they acted in good faith and in the reasonable belief that their conduct was neither unlawful (in the case of criminal proceedings) nor inconsistent with the best interests of the Company. With respect to legal proceedings by or in the right of the Company in which a director or officer is adjudged liable for improper performance of his duty to the Company or another enterprise which such person served in a similar capacity at the request of the Company, indemnification is limited by such provisions to that amount which is permitted by the court. The Company will maintain officers' and directors' liability insurance which will insure against liabilities that officers and directors of the Company may incur in such capacities. The Company has also entered into indemnification agreements with its directors and officers. Reference is made to the Proposed Form of Underwriting Agreement filed as Exhibit 1.1 which provides for indemnification of the directors and officers of the Company signing the Registration Statement and certain controlling persons of the Company against II-1 101 certain liabilities, including those arising under the Act in certain instances, of the Underwriters. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES Since the Company's inception, the Company has made the following sales of securities that were not registered under the Act: 1. On May 31, 1996, the Company issued and sold 8,250,000 shares of common stock in exchange for membership interests in Autobytel LLC and Autobytel Acceptance Corporation LLC, in reliance on the exemption from registration provided by Section 4(2) of the Securities Act. 2. During the period from May 18, 1996 through December 31, 1998, the Company granted options to purchase an aggregate of 2,847,496 shares of common stock pursuant to the 1996 Stock Option Plan, 1996 Stock Incentive Plan and 1998 Stock Option Plan of which 248,788 options have been exercised and issued by the Company in reliance on Rule 701 promulgated under the Act. 3. On August 20, 1996, the Company issued and sold 1,500,000 shares of Series A Preferred Stock in a private placement for an aggregate consideration of $15.0 million in cash and cancellation of indebtedness. In connection with such financing, the Company issued (i) 200,000 shares to ContiTrade Services L.L.C. in exchange for $2.0 million in cash, (ii) 400,000 shares to National Union Fire Insurance company of Pittsburgh, PA in exchange for $4.0 million in cash, (iii) 800,000 shares to General Electric Capital Corporation in exchange for $8.0 million in cash, and (iv) 100,000 shares to Michael Fuchs in exchange for $1.0 million in cash and cancellation of indebtedness. Sales of Series A Preferred Stock were made in reliance on the exemption from registration provided by Section 4(2) of the Act. 4. On August 26, 1996, the Company issued and sold 6,667 shares to a consultant of the Company in reliance on Rule 701 promulgated under the Act. 5. On January 30, 1997, the Company issued and sold 967,915 shares of Series B Preferred Stock in a private placement for an aggregate consideration of $9.05 million in cash. In connection with such financing, the Company issued (i) 133,690 shares to ContiTrade Services L.L.C. in exchange for $1.25 million in cash, (ii) 267,380 shares to National Union Fire Insurance Company of Pittsburgh, PA in exchange for $2.5 million in cash, (iii) 534,760 shares to General Electric Capital Corporation in exchange for $5.0 million in cash, (iv) 32,085 shares to Michael Fuchs in exchange for $300 thousand in cash. Sales of Series B Preferred Stock were made in reliance on the exemption from registration provided by Section 4(2) of the Act. 6. On October 21, 1997, the Company issued and sold 1,477,274 shares of Series C Preferred Stock in a private placement for an aggregate consideration of $13.0 million in cash. In connection with such financing, the Company issued (i) 681,819 shares to General Electric Capital Corporation in exchange for approximately $6.0 million in cash; (ii) 227,273 shares to National Union Fire Insurance Company of Pittsburgh in exchange for approximately $2.0 million in cash; and (iii) 568,182 shares to Tozer Kemsley and Millbourn Automotive Ltd., a unit of Inchcape Motors International plc in exchange for approximately $5.0 million in cash. II-2 102 Sales of Series C Preferred Stock were made in reliance on the exemption from registration provided by Section 4(2) of the Act. 7. On January 20, 1998, the Company issued to John M. Markovich a warrant to purchase 33,333 shares of common stock of the Company (after adjustment for the Reverse Split) at an exercise price of $7.50 per share. The warrant expires on January 20, 2003. 8. On April 20, 1998, the Company entered into a transaction with National Broadcasting Company, Inc. ("NBC") whereby the Company issued and sold 56,776 shares of Series C Preferred Stock in exchange for prime time advertisement spots with a fair market value of not less than $499,629. The sale of Series C Preferred Stock was made in reliance on the exemption from registration provided by Section 4(2) of the Securities Act. 9. On May 7, 1998 the Company issued and sold 568,182 shares of Series C Preferred Stock to Bilia AB in a private placement for a total consideration of approximately $5.0 million in cash. The sale of Series C Preferred Stock was made in reliance on the exemption from registration provided by Section 4(2) of the Act. 10. On October 30, 1998, the Company entered into another transaction with NBC whereby the Company issued and sold 64,233 shares of Series C Stock in exchange for prime time advertisement spots with a fair market value of not less than $565,250. The sale of Series C Preferred Stock was made in reliance on the exemption from registration provided by Section 4(2) of the Securities Act. 11. On November 10, 1998, the Company issued and sold 568,182 shares of Series C Stock to Invision AG for a total consideration of approximately $5,000,000 in cash. The sale of Series C Preferred Stock was made in reliance on the exemption from registration provided by Section 4(2) of the Securities Act. 12. On November 10, 1998, the Company issued to Invision AG a warrant to purchase an aggregate of 150,000 shares of common stock of the Company at an exercise price of $13.20 per share. This warrant expires on November 10, 2001. 13. On December 16, 1998, the Company issued and sold 643,182 shares of Series C Stock to Aureus Private Equity AG for a total consideration of approximately $5,660,000 in cash. The sale of Series C Preferred Stock was made in reliance on the exemption from registration provided by Section 4(2) of the Securities Act. 14. On December 16, 1998, the Company issued to Aureus Private Equity AG a warrant to purchase an aggregate of 169,800 shares of common stock of the Company at an exercise price of $13.20 per share. This warrant expires on December 16, 2001. 15. On December 21, 1998, the Company issued and sold 1,136,364 shares of Series C Stock to MediaOne Interactive Services, Inc. for a total consideration of approximately $10,000,000 in cash. The sale of Series C Preferred Stock was made in reliance on the exemption from registration provided by Section 4(2) of the Securities Act. 16. On December 21, 1998, the Company issued to MediaOne Interactive Services, Inc. a warrant to purchase an aggregate of 300,000 shares of common stock of the Company at an exercise price of $13.20 per share. This warrant expires on December 21, 2001. II-3 103 17. On December 23, 1998, the Company issued an additional warrant to Aureus Private Equity AG to purchase 120,000 shares of common stock of the Company at an exercise price of $13.20 per share. This warrant expires on December 23, 2001. 18. On December 24, 1998, the Company issued and sold an additional 454,545 shares of Series C Stock to Aureus Private Equity AG for a total consideration of approximately $4,000,000 in cash. The sale of Series C Preferred Stock was made in reliance on the exemption from registration provided by Section 4(2) of the Securities Act. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES a. Exhibits
NUMBER DESCRIPTION ------ ----------- 1.1* Form of Underwriting Agreement 3.1* Amended and Restated Certificate of Incorporation of autobytel.com inc. certified by the Secretary of State of Delaware (filed January , 1999) 3.2* Amended and Restated Bylaws of autobytel.com inc. (adopted January , 1999) 4.1* Form of Stock Certificate 4.2 Amended and Restated Investors' Rights Agreement dated May 7, 1998 and the Investors named in Exhibit A thereto 4.3* Form of Lock-Up Agreement 5.1* Opinion and Consent of Paul, Hastings, Janofsky & Walker LLP 9.1 Voting Proxy dated January 11, 1999 by Peter R. Ellis 10.1 Form of Indemnification Agreement between autobytel.com inc. and its directors and officers 10.2 Employment Agreement dated July 1, 1998 between autobytel.com inc. and Mark W. Lorimer 10.3* Employment Agreement dated January , 1999 between autobytel.com and Anne Delligatta 10.4* Severance Agreement dated January 1, 1998 between Auto-By-Tel Corporation and Michael J. Lowell 10.5* 1996 Stock Option Plan and related agreements 10.6* 1996 Stock Incentive Plan and related agreements 10.7* 1996 Employee Stock Purchase Plan 10.8* 1998 Stock Option Plan 10.9 Marketing Agreement dated July 22, 1996, as amended on July 23, 1996, by and among Auto-By-Tel Acceptance Corporation, a subsidiary of the Registrant ("ABTAC"), the Registrant, as guarantor of the obligations of ABTAC, and AIU Insurance Company, American International South Insurance Company, American Home Assurance Company, American International Insurance Company, American International Insurance Company of California, Inc., Illinois National Insurance Company, Minnesota Insurance Company, National Union Fire Insurance Company of Pittsburgh, PA and the Insurance Company of the State of Pennsylvania 10.10* Marketing Agreement dated February 8, 1996 between Auto-By-Tel, LLC and Edmund Publications Corp. 10.11* Amendment to Marketing Agreement dated February 8, 1996 between Edmund Publications Corp. and the Registrant
II-4 104
NUMBER DESCRIPTION ------ ----------- 10.12 Form of Dealership Agreements 10.13 Financing Inquiry Referral Agreement dated October 25, 1996 among Auto-By-Tel, Inc, as guarantor, Auto-By-Tel Acceptance Corporation and Chase Manhattan Automotive Finance Corporation 10.14 Marketing and Application Processing Agreement dated February 1, 1997 between General Electric Capital Auto Financial Services, Inc., Auto-By-Tel Acceptance Corporation ("ABTAC") and Auto-By-Tel, Inc., as guarantor 10.15* Content License and Channel Sponsorship Term Sheet dated September 12, 1997 between Excite, Inc. and Auto-By-Tel 10.16 Data License and Web Site Agreement dated April 1, 1997 between IntelliChoice, Inc. and Auto-By-Tel Marketing Corporation and the Registrant 10.17 Kelley Blue Book/Auto-By-Tel Agreement dated November 19, 1997, as amended July 1, 1998, between Kelley Blue Book and Auto-By-Tel 10.18 Listings Distribution, Sponsorship, Display Advertising and Network Affiliation Agreement dated May 29, 1997 between Classifieds2000, Inc. and Auto-By-Tel 10.19 License Agreement dated June 4, 1998 among J.D. Power and Associates, Auto-By-Tel Marketing Corporation, and the Registrant 10.20 Site Page Sponsorship and Commission Agreement dated June 25, 1997, between Auto-By-Tel Marketing Corporation and AT&T Corporation 10.21 Letter agreement dated April 1, 1997, between Auto-By-Tel Marketing Corporation and NBC Multimedia Inc. 10.22* Sponsorship Agreement, dated as of June 24, 1998, between Excite, Inc. and Auto-By-Tel Corporation 10.23 License and Services Agreement dated August 7, 1998 between autobytel.com inc. and Auto-By-Tel AB 10.24 License and Services Agreement dated November 23, 1998 between autobytel.com inc. and Auto by Tel UK Limited 10.25 Share Purchase Agreement dated November 23, 1998 between autobytel.com inc. and Inchcape Automotive Limited 10.26 Financing Inquiry Referral Agreement dated December 31, 1998 between Provident Bank, Auto-By-Tel Acceptance Corporation and autobytel.com inc., as guarantor 10.27 Procurement and Trafficking Agreement dated September 24, 1998 between DoubleClick Inc. and autobytel.com inc. 10.28 Loan Agreement dated November 18, 1998 between Ann Benvenuto and autobytel.com inc. 10.29 Advisory Agreement dated August 20, 1998 between autobytel.com inc. and Peter R. Ellis 10.30* 1999 Stock Option Plan 11.1 Statement Regarding Computation of Per Share Earnings 21.1 Subsidiaries of the Company 23.1 Consent of Arthur Andersen LLP, Independent Public Accountants 23.2* Consent of Paul, Hastings, Janofsky & Walker LLP (reference is made to Exhibit 5.1)
II-5 105
NUMBER DESCRIPTION ------ ----------- 24.1 Power of Attorney (reference is made to the signature page) 27.1 Financial Data Schedule
- ------------------------- * To be filed by Amendment. (b) Financial Statement Schedules ITEM 17. UNDERTAKINGS (a) The Registrant hereby undertakes to provide to the Underwriters at the closing specified in the Underwriting Agreement, certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser. (b) Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted against the Registrant by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (c) The Registrant hereby undertakes that: (1) For purposes of determining any liability under the Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act (sec. 230.424(b)(1) or (4) or 230.497(h)) shall be deemed to be part of this Registration Statement as of the time the Commission declared it effective. (2) For purposes of determining any liability under the Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement for the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-6 106 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, hereunto duly authorized, in the City of Irvine, State of California, on January 14, 1999. autobytel.com inc. By: /s/ MARK W. LORIMER ----------------------------------- Name: Mark W. Lorimer Title: Chief Executive Officer, President and Director POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Mark W. Lorimer and Hoshi Printer, and each of them, as such person's true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission and any other regulatory authority, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or such person's substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated:
NAME TITLE DATE ---- ----- ---- /s/ MICHAEL FUCHS Chairman of the Board January 14, 1999 - ------------------------------------------------ and Director Michael Fuchs /s/ JEFFREY H. COATS Director January 14, 1999 - ------------------------------------------------ Jeffrey H. Coats /s/ MARK N. KAPLAN Director January 14, 1999 - ------------------------------------------------ Mark N. Kaplan /s/ KENNETH J. ORTON Director January 14, 1999 - ------------------------------------------------ Kenneth J. Orton
II-7 107
NAME TITLE DATE ---- ----- ---- /s/ ROBERT S. GRIMES Executive Vice January 14, 1999 - ------------------------------------------------ President and Director Robert S. Grimes /s/ MARK W. LORIMER Chief Executive January 14, 1999 - ------------------------------------------------ Officer, President and Mark W. Lorimer Director (Principal Executive Officer) /s/ HOSHI PRINTER Senior Vice President January 14, 1999 - ------------------------------------------------ and Chief Financial Hoshi Printer Officer (Principal Financial Officer and Principal Accounting Officer) /s/ ANN M. DELLIGATTA Executive Vice January 14, 1999 - ------------------------------------------------ President and Chief Ann M. Delligatta Operating Officer
II-8 108 EXHIBIT INDEX
SEQUENTIALLY NUMBERED PAGE NUMBER DESCRIPTION NUMBER ------ ----------- ------------ 1.1* Form of Underwriting Agreement 3.1* Amended and Restated Certificate of Incorporation of autobytel.com inc. certified by the Secretary of State of Delaware (filed January , 1999) 3.2* Amended and Restated Bylaws of autobytel.com inc. (adopted January , 1999) 4.1* Form of Stock Certificate 4.2 Amended and Restated Investors' Rights Agreement dated May 7, 1998 and the Investors named in Exhibit A thereto 4.3* Form of Lock-Up Agreement 5.1* Opinion and Consent of Paul, Hastings, Janofsky & Walker LLP 9.1 Voting Proxy dated January 11, 1999 by Peter R. Ellis 10.1 Form of Indemnification Agreement between autobytel.com inc. and its directors and officers 10.2 Employment Agreement dated July 1, 1998 between autobytel.com inc. and Mark W. Lorimer 10.3* Employment Agreement dated January , 1999 between autobytel.com and Anne Delligatta 10.4* Severance Agreement dated January 1, 1998 between Auto-By-Tel Corporation and Michael J. Lowell 10.5* 1996 Stock Option Plan and related agreements 10.6* 1996 Stock Incentive Plan and related agreements 10.7* 1996 Employee Stock Purchase Plan 10.8* 1998 Stock Option Plan 10.9 Marketing Agreement dated July 22, 1996, as amended on July 23, 1996, by and among Auto-By-Tel Acceptance Corporation, a subsidiary of the Registrant ("ABTAC"), the Registrant, as guarantor of the obligations of ABTAC, and AIU Insurance Company, American International South Insurance Company, American Home Assurance Company, American International Insurance Company, American International Insurance Company of California, Inc., Illinois National Insurance Company, Minnesota Insurance Company, National Union Fire Insurance Company of Pittsburgh, PA and the Insurance Company of the State of Pennsylvania 10.10* Marketing Agreement dated February 8, 1996 between Auto-By-Tel, LLC and Edmund Publications Corp. 10.11* Amendment to Marketing Agreement dated February 8, 1996 between Edmund Publications Corp. and the Registrant 10.12 Form of Dealership Agreements 10.13 Financing Inquiry Referral Agreement dated October 25, 1996 among Auto-By-Tel, Inc, as guarantor, Auto-By-Tel Acceptance Corporation and Chase Manhattan Automotive Finance Corporation
109
SEQUENTIALLY NUMBERED PAGE NUMBER DESCRIPTION NUMBER ------ ----------- ------------ 10.14 Marketing and Application Processing Agreement dated February 1, 1997 between General Electric Capital Auto Financial Services, Inc., Auto-By-Tel Acceptance Corporation ("ABTAC") and Auto-By-Tel, Inc., as guarantor 10.15* Content License and Channel Sponsorship Term Sheet dated September 12, 1997 between Excite, Inc. and Auto-By-Tel 10.16 Data License and Web Site Agreement dated April 1, 1997 between IntelliChoice, Inc. and Auto-By-Tel Marketing Corporation and the Registrant 10.17 Kelley Blue Book/Auto-By-Tel Agreement dated November 19, 1997, as amended July 1, 1998, between Kelley Blue Book and Auto-By-Tel 10.18 Listings Distribution, Sponsorship, Display Advertising and Network Affiliation Agreement dated May 29, 1997 between Classifieds2000, Inc. and Auto-By-Tel 10.19 License Agreement dated June 4, 1998 among J.D. Power and Associates, Auto-By-Tel Marketing Corporation, and the Registrant 10.20 Site Page Sponsorship and Commission Agreement dated June 25, 1997, between Auto-By-Tel Marketing Corporation and AT&T Corporation 10.21 Letter agreement dated April 1, 1997, between Auto-By-Tel Marketing Corporation and NBC Multimedia Inc. 10.22* Sponsorship Agreement, dated as of June 24, 1998, between Excite, Inc. and Auto-By-Tel Corporation 10.23 License and Services Agreement dated August 7, 1998 between autobytel.com inc. and Auto-By-Tel AB 10.24 License and Services Agreement dated November 23, 1998 between autobytel.com inc. and Auto by Tel UK Limited 10.25 Share Purchase Agreement dated November 23, 1998 between autobytel.com inc. and Inchcape Automotive Limited 10.26 Financing Inquiry Referral Agreement dated December 31, 1998 between Provident Bank, Auto-By-Tel Acceptance Corporation and autobytel.com inc., as guarantor 10.27 Procurement and Trafficking Agreement dated September 24, 1998 between DoubleClick Inc. and autobytel.com inc. 10.28 Loan Agreement dated November 18, 1998 between Ann Benvenuto and autobytel.com inc. 10.29 Advisory Agreement dated August 20, 1998 between autobytel.com inc. and Peter R. Ellis 10.30* 1999 Stock Option Plan 11.1 Statement Regarding Computation of Per Share Earnings 21.1 Subsidiaries of the Company 23.1 Consent of Arthur Andersen LLP, Independent Public Accountants
110
SEQUENTIALLY NUMBERED PAGE NUMBER DESCRIPTION NUMBER ------ ----------- ------------ 23.2* Consent of Paul, Hastings, Janofsky & Walker LLP (reference is made to Exhibit 5.1) 24.1 Power of Attorney (reference is made to the signature page) 27.1 Financial Data Schedule
- ------------------------- * To be filed by Amendment.
   1
                                                                    EXHIBIT  4.2



                             AUTO-BY-TEL CORPORATION



                ------------------------------------------------

                AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
                          Dated as of October 21, 1997

                ------------------------------------------------



   2

                                TABLE OF CONTENTS


PAGE ---- ARTICLE I - Definitions ....................................................... 1 ARTICLE 2 - Requested Registration ............................................ 3 2.1 Request for Registration ................................................ 3 2.2 Underwriting ............................................................ 4 ARTICLE 3 - Company Registration .............................................. 5 3.1 Notice of Registration to Holders ....................................... 5 3.2 Underwriting ............................................................ 5 ARTICLE 4 - Registration on Form S3 ........................................... 6 4.1 Request for S3 Registration ............................................. 6 4.2 Underwriting ............................................................ 6 ARTICLE 5 - Expenses of Registration .......................................... 7 ARTICLE 6 - Registration Procedures ........................................... 8 6.1 Filings; Information .................................................... 8 ARTICLE 7 - Indemnification ................................................... 11 ARTICLE 8 - Lockup Agreement .................................................. 13 ARTICLE 9 - Information by Holder ............................................. 14 ARTICLE 10 - Rule 144 Reporting ............................................... 14 ARTICLE 11 - CoSale Rights; DragAlong Rights .................................. 15 11.1 CoSale Rights .......................................................... 15 11.2 DragAlong Rights ....................................................... 15 11.3 Compliance ............................................................. 16 11.4 Improper Transfers Ineffective ......................................... 16 11.5 No Transfer to Competitors ............................................. 16 11.6 Transfer of Registration Rights ........................................ 17 11.7 Legends ................................................................ 17 11.8 Termination of Rights .................................................. 17 ARTICLE 12 - Termination of Registration Rights ............................... 18
3 TABLE OF CONTENTS (CONTINUED)
PAGE ---- ARTICLE 13 - Limitations on Registration Rights Granted to Other Securities ... 18 ARTICLE 14 - Miscellaneous .................................................... 18 14.1 Waivers and Amendments ................................................. 18 14.2 Governing Law .......................................................... 19 14.3 Successors and Assigns ................................................. 19 14.4 Entire Agreement ....................................................... 19 14.5 Notices ................................................................ 19 14.6 Severability ........................................................... 19 14.7 Titles and Subtitles ................................................... 19 14.8 Counterparts ........................................................... 19 ARTICLE 15 - Aggregation ...................................................... 20
4 AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT This Amended and Restated Investors' Rights Agreement (the "Agreement") is made and entered into as of October 21, 1997 by and among Auto-By-Tel Corporation, a Delaware corporation (the "Company"), the undersigned holders of the capital stock of the Company ("Holders"), and those other persons and entities who have or shall have executed this Agreement and whose names appear on the Schedule of Investors' Rights Holders attached hereto as Exhibit A, as such Schedule may be amended from time to time pursuant to Section 13 hereof. RECITALS A. The Company has issued and sold shares of its Series A Preferred Stock and Series B Preferred Stock to the persons and entities whose names appear on the Schedule of Investors' Rights Holders attached as Exhibit A hereto under the caption "Series A Investors" and "Series B Investors" respectively, and in consideration thereof, has granted to the Series A Investors and Series B Investors, and certain other stockholders certain rights pursuant to the Amended and Restated Investors' Rights Agreement dated as of January 30, 1997 (the "Prior Agreement"). B. In connection with the Company's sale of Series C Preferred Stock to the investors whose names appear on Exhibit A hereto under the caption "Series C Investors" (the "Series C Investors"), the parties to the Prior Agreement desire to amend and restate such agreement. The parties to the Prior Agreement also wish to add the Series C Investors as parties to this Agreement. NOW, THEREFORE, in consideration of the foregoing and of the mutual promises and covenants contained herein, the parties hereto agree to amend and restate the Prior Agreement as follows: ARTICLE 1 Definitions As used herein, the following terms shall have the following respective meanings: 1.1 "Commission" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. 1.2 "Executive Stockholders" shall mean John Bedrosian, Robert Grimes and Peter Ellis. 1.3 "Holders" shall mean and include any person or persons who have executed this Agreement and whose names appear on the Schedule of Investors' Rights Holders or who shall, pursuant to Article 13 hereof, become parties hereto, and any qualifying transferees under Article 11 hereof who hold Registrable Securities. 5 1.3 "Holders" shall mean and include any person or persons who have executed this Agreement and whose names appear on the Schedule of Investors' Rights Holders or who shall, pursuant to Article 13 hereof, become parties hereto, and any qualifying transferees under Article 11 hereof who hold Registrable Securities. 1.4 "Initiating Holders" shall mean any Holder or Holders (exclusive of John Bedrosian, Robert Grimes and Peter Ellis) who in the aggregate own at least 40% of the Registrable Securities (exclusive of shares held by John Bedrosian, Robert Grimes and Peter Ellis) which have not been previously resold to the public in a registered public offering. 1.5 "Initial Public Offering" shall mean the closing of a firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "Securities Act"), covering the offer and sale of common stock of the Company (the "Common Stock") to the public at an aggregate offering price to the public of at least thirty million dollars ($30,000,000) at a per share price of not less than nine dollars ($9.00) per share. 1.6 The terms "register," "registered" and "registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement. 1.7 "Registrable Securities" means shares of (i) any and all Common Stock of the Company issued or issuable to John Bedrosian, Peter Ellis or Robert Grimes, and (ii) any and all Common Stock of the Company issued or issuable upon conversion of shares of the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock of the Company. 1.8 "Registration Expenses" shall mean all expenses incurred by the Company in complying with Articles 2, 3 and 4 hereof, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, listing fees, fees and disbursements of legal counsel for the Company, fees and disbursements of separate legal counsel for the Holders (up to a maximum of $10,000), blue sky fees and expenses, and the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company which shall be paid in any event by the Company). 1.9 "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. -2- 6 ARTICLE 2 Requested Registration 2.1 Request for Registration. In case the Company shall receive from the Initiating Holders a written request that the Company effect any registration with respect to all or a part of the Registrable Securities, the Company will: (a) within ten (10) days after its receipt thereof give written notice of the proposed registration to all other Holders; and (b) as soon as practicable, use its best efforts to effect such registration (including, without limitation, preparation of a registration statement and prospectus complying as to form with the requirements of the Securities Act, the execution of an undertaking to file post-effective amendments, appropriate qualifications under the applicable blue sky or other state securities laws and appropriate compliance with exemptive regulations issued under the Securities Act and any other governmental requirements or regulations) as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder's or Holders' Registrable Securities as is specified in such request, together with all or such portion of the Registrable Securities of any Holder or Holders joining in such request as are specified in a written request given within 20 days after receipt of such written notice from the Company; provided, that the Company shall not be obligated to take any action to effect such registration pursuant to this Section 2.1 under the following circumstances: (1) Prior to the earlier of (i) March 1, 1999, or (ii) one year following the effective date of the Company's Initial Public Offering; or (2) In any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration; or (3) After the Company has effected two such registrations pursuant to this Subsection 2.1(b) and such registrations have been declared or ordered effective; or (4) If the Registrable Securities to be registered have an anticipated offering price to the public of less than $30,000,000. Subject to the foregoing clauses (1) through (4), the Company shall file a registration statement covering the Registrable Securities so requested to be registered as soon as possible, but in any event, within ninety (90) days after receipt of the request or requests of the Initiating Holders; provided, however, that if the Company shall furnish to such Holders a certificate signed by the President or Chief Executive Officer of the Company stating that in the good faith judgment of the Board of Directors it has been determined that (i) such a filing would adversely affect any proposed financing or acquisition by the Company, or (ii) such a filing would otherwise represent undue hardship for or would impose undue potential liability on the Company, the Company shall be entitled to delay the filing of such registration -3- 7 statement for an additional period up to one hundred twenty (120) days after receipt of the request of the Initiating Holders. 2.2 Underwriting. If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to Section 2.1 and the Company shall include such information in the written notice referred to in Subsection 2.1(a). The right of any Holder to registration pursuant to Section 2.1 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. (a) The Company shall (together with all Holders proposing to distribute their securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by a majority in interest of the Initiating Holders, provided, however, that the managing underwriter shall be of nationally recognized standing and must be approved by the Company, which approval shall not be unreasonably withheld. Notwithstanding any other provision of this Section 2.2, if the underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, the Initiating Holders shall so advise all Holders of Registrable Securities who have elected to participate in such offering, and the number of shares of Registrable Securities that may be included in the registration and underwriting shall be allocated among all such Holders thereof in proportion, as nearly as practicable, to the respective amounts of Registrable Securities held by such Holders. (b) If any Holder of Registrable Securities disapproves of the terms of the underwriting, he may elect to withdraw therefrom by written notice to the Company, the underwriter and the Initiating Holders. Any Registrable Securities which are excluded from the underwriting by reason of the underwriter's marketing limitation or withdrawn by a Holder of Registrable Securities from such underwriting shall be withdrawn from such registration. If the underwriter has not limited the number of Registrable Securities to be underwritten, the Company, employees of the Company and other holders of the Company's Common Stock may include securities for its (or their) own account in such registration if the underwriter so agrees and if the number of Registrable Securities which would otherwise have been included in such registration and underwriting will not thereby be limited by the underwriter and the proposed price at which the securities will be offered to the public is not reduced. (c) Inclusion of Shares by Company. If the managing underwriter has not limited the number of Registrable Securities to be underwritten, the Company may include securities for its own account or for the account of others in such registration if the managing underwriter so agrees and if the number of Registrable Securities held by Initiating Holders which would otherwise have been included in such registration and underwriting will not thereby be limited. The inclusion of such shares shall be on the same terms as the registration of shares held by the Initiating Holders. In the event that the underwriters exclude some of the securities to be registered, the securities to be sold for the account of the Company and any other holders shall be excluded in their entirety prior to the exclusion of any Registrable Securities. -4- 8 ARTICLE 3 Company Registration 3.1 Notice of Registration to Holders. If at any time or from time to time the Company shall determine to register any of its securities, either for its own account or the account of a security holder or holders, other than (i) a registration relating solely to employee benefit plans or (ii) a registration relating solely to a Commission Rule 145 transaction, the Company will: (a) give to each Holder 20 days' prior written notice thereof, and (b) include in such registration (and any related qualification under blue sky laws or other compliance requirements), and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests, made within 15 days after receipt of such written notice from the Company, by any Holder or Holders. 3.2 Underwriting If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Holders as a part of the written notice given pursuant to Section 3.1(a). In such event, the right of any Holder to registration pursuant to this Article 3 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company) enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Company. Notwithstanding any other provision of this Article 3, if the managing underwriter determines that marketing factors require a limitation of the number of shares to be underwritten, the underwriter may (i) in the case of the Company's Initial Public Offering, exclude some or all Registrable Securities; provided, however, that no Registrable Securities may be excluded if any securities other than Registrable Securities are included and (ii) in the case of any other offering, reduce the number of Registrable Securities proposed to be registered to not less than 25% of the total shares originally proposed to be underwritten. In the event that the underwriter determines to exclude some or all Registrable Securities, the Company shall so advise all Holders and all the other holders distributing their securities through such underwriting of such exclusions or reductions, and the number of Registrable Securities held by Holders that may be included in the registration and underwriting shall be allocated among all Holders in proportion, as nearly as practicable, to the respective amounts of Registrable Securities held by all such Holders at the time of filing the registration statement. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the managing underwriter. Any securities excluded or withdrawn from such underwriting shall be withdrawn from such registration but the Holder shall continue to be bound by Article 8 hereof. -5- 9 ARTICLE 4 Registration on Form S-3 4.1 Request for S-3 Registration. The Company shall use its best efforts to qualify for registration on Form S-3 or any successor form to Form S-3. After the Company has qualified for the use of Form S-3, Holders of the outstanding Registrable Securities shall have the right to request two registrations on Form S-3. The number of shares of Registrable Securities that may be included on the Form S-3 shall be allocated among all Holders in proportion to the respective amounts of Registrable Securities entitled to inclusion in such registration at the time of filing the registration statement. Notwithstanding the foregoing: (a) The Company shall not be required to effect a registration pursuant to this Article 4 within 180 days following the effective date of any registration statement filed pursuant to Article 2 or 3 hereof. (b) The Company shall not be required to effect a registration pursuant to this Article 4 unless the shares of Registrable Securities for which the Holder or Holders are requesting registration have a reasonably anticipated aggregate price to the public (before deduction of underwriting discounts and expenses) of at least $5,000,000. (c) The Company shall not be required to effect more than one registration pursuant to this Article 4 in any consecutive 12-month period. The Company shall promptly give written notice to all Holders of Registrable Securities of the receipt of a request for registration pursuant to this Article 4 and shall provide a reasonable opportunity for other Holders to participate in the registration, provided that if the registration is for an underwritten offering, the terms of Section 4.2 shall apply to all participants in such offering. Subject to the foregoing, the Company will use its best efforts to file a registration statement on Form S-3 covering the Registrable Securities so requested to be registered as soon as practicable after receipt of the request of the Holders, but in any event within 90 days after receipt of the request or requests of the Initiating Holders. 4.2 Underwriting. If the Holders intend for the distribution of the Registrable Securities covered by the registration on Form S-3 to be effected by means of a firm commitment underwriting, they shall so advise the Company. In such event, the right of any Holder to registration pursuant to this Article 4 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting. (a) The Company (together with all Holders proposing to distribute their securities through such underwriting) shall enter into an underwriting agreement in customary form with a managing underwriter of nationally recognized standing selected for such underwriting by a majority in interest of the Holders requesting registration on Form S-3 and approved by the Company, which -6- 10 approval shall not unreasonably be withheld. Notwithstanding any other provision of this Article 3, if the managing underwriter advises the Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the underwriters may exclude some or all of the shares requested to be included in such registration, and the number of shares of Registrable Securities that may be included in the registration and underwriting shall be allocated among all Holders thereof in proportion, as nearly as practicable, to the respective amounts of Registrable Securities held by such Holders at the time of filing the registration statement. No Registrable Securities excluded from the underwriting by reason of the managing underwriter's marketing limitation shall be included in such registration. (b) If any Holder of Registrable Securities disapproves of the terms of the underwriting, such person may elect to withdraw therefrom by written notice to the Company, the managing underwriter and the Holders. The Registrable Securities and/or other securities so withdrawn shall also be withdrawn from registration; provided, however, that if by the withdrawal of such Registrable Securities a greater number of Registrable Securities held by other Holders may be included in such registration (up to the maximum of any limitation imposed by the underwriters), then the Company shall offer to all Holders who have included Registrable Securities in the registration the right to include additional Registrable Securities in the same proportion used in determining the underwriter limitation in this Section 4.2(b). (c) Inclusion of Shares by Company. If the managing underwriter has not limited the number of Registrable Securities to be underwritten, the Company may include securities for its own account or for the account of others in such registration if the managing underwriter so agrees and if the number of Registrable Securities held by Holders requesting registration on Form S-3 which would otherwise have been included in such registration and underwriting will not thereby be limited. The inclusion of such shares shall be on the same terms as the registration of shares held by the Initiating Holders. In the event that the underwriters exclude some of the securities to be registered on Form S-3, the securities to be sold for the account of the Company and any other holders shall be excluded in their entirety prior to the exclusion of any Registrable Securities. ARTICLE 5 Expenses of Registration All Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to Articles 2, 3 and 4 hereof shall be borne by the Company (exclusive of underwriting discounts and commissions). All underwriting discounts and commissions relating to securities registered by the Holders shall be borne by the holders of such securities pro rata on the basis of the number of shares so registered. -7- 11 ARTICLE 6 Registration on Procedures 6.1 Filings: Information. Whenever the Company is required to effect or cause the registration of Registrable Securities pursuant to this Agreement, the Company will use its best efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof as quickly as practicable, and in connection with any such request: (a) The Company will as expeditiously as possible prepare and file with the Commission a registration statement on any form for which the Company then qualifies or which counsel for the Company shall deem appropriate and which form shall be available for the sale of the Registrable Securities to be registered thereunder in accordance with the intended method of distribution thereof, and use its best efforts to cause such filed registration statement to become and remain effective for a period of not less than 180 days (or shorter period as is required to complete the distribution of the securities); provided that the Company may postpone the filing of a registration statement in accordance with Section 2.1 hereof, (b) The Company will as expeditiously as possible prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period of not less than 180 days or such shorter period which will terminate when all securities covered by such registration statement have been sold (but not before the expiration of the 90-day period referred to in Section 4(3) of the Securities Act and Rule 174 thereunder, if applicable) and comply with the provisions if the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by each Selling Holder thereof set forth in such registration statement; (c) The Company will, prior to filing a registration statement or prospectus or any amendment or supplement thereto, furnish each Holder, one counsel representing all such Holders to be selected by a majority-in-interest of such Holders, and each underwriter, if any, of the Registrable Securities covered by such registration statement copies of such registration statement as proposed to be filed, together with exhibits thereto, which documents will be subject to review and approval by the foregoing within five days after delivery, and thereafter furnish to such Holders, counsel and underwriters, if any, for their review and comments such number of copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein), the prospectus included in such registration statement (including each preliminary prospectus) and such other documents or information as such Holder, counsel or underwriters may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Holders; (d) After the filing of the registration statement, the Company will promptly notify each Holder of Registrable Securities covered by such registration statement of any stop order issued -8- 12 or threatened by the Commission and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered; (e) The Company will use its best efforts to (i) register or qualify the Registrable Securities under such other securities or blue sky laws of such jurisdictions in the United States as any Holder reasonably (in light of such Holder's intended plan of distribution) requests, and (ii) cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities in the United States as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be reasonably necessary or advisable to enable such Holder to consummate the disposition of the Registrable Securities owned by such Holder; provided, that the Company will not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph (e), (B) subject itself to taxation in any such jurisdiction or (C) consent to general service of process in any such jurisdiction; (f) The Company will immediately notify each Holder of such Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and promptly make available to each Holder any such supplement or amendment; (g) The Company will enter into customary agreements (including, if applicable, an underwriting agreement in customary form and which is reasonably satisfactory to the Company) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities and the Holders may, at their option, require that any or all of the representations, warranties and covenants of the Company or to or for the benefit of such underwriters also be made to and for the benefit of such Holders; (h) The Company will make available to each Holder of such Registrable Securities (and will deliver to their counsel) and each underwriter, if any, subject to restrictions imposed by the United States federal government or any agency or instrumentality thereof, copies of all correspondence between the Commission and the Company, its counsel or auditors and will also make available for inspection by any Holder of such Registrable Securities, any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other professional retained by any such Holder or underwriter (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the "Records") as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company's officers and employees to supply all information reasonably requested by any Inspectors in connection with such registration statement. Records which the Company determines, in good faith, to be confidential and which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such -9- 13 registration statement or (ii) the disclosure or release of such Records is requested or required pursuant to oral questions, interrogatories, requests for information or documents or a subpoena or other order from a court of competent jurisdiction or other process; provided that prior to any disclosure or release pursuant to clause (ii), the Inspectors shall provide to the Company with prompt notice of any such request or requirement so that the Company may seek an appropriate protective order or waive such Inspectors' obligation not to disclose such Records; and, provided, further that if failing the entry of a protective order or the waiver by the Company permitting the disclosure or release of such Records, the Inspectors, upon advice of counsel, are compelled to disclose such Records, the Inspectors may disclose that portion of the Records which counsel has advised the Inspectors that the Inspectors are compelled to disclose. Each Holder of such Registrable Securities agrees that information obtained by it solely as a result of such inspections (not including any information obtained from a third party who, insofar as is known to the Holder after reasonable inquiry, is not prohibited from providing such information by contractual, legal or fiduciary obligation to the Company) shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the Company or its Affiliates unless and until such information is made generally available to the public. Each Holder of such Registrable Securities further agrees that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential; (i) The Company will furnish to each Holder and to each underwriter, if any, a signed counterpart, addressed to such Holder or underwriter, of (i) an opinion or opinions of counsel to the Company, and (ii) a comfort letter or comfort letters from the Company's independent public accountants, each in customary form and covering such matters of the type customarily covered by opinions or comfort letters, as the case may be, as the Holders of Registrable Securities included in such offering or the managing underwriter thereof reasonably requests; (j) The Company will otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its securityholders, as soon as reasonably practicable, an earnings statement covering a period of 12 months, beginning within three months after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act; (k) The Company will use its best efforts (a) to cause all such Registrable Securities to be listed on a national securities exchange (if such Registrable Securities are not already so listed) and on each additional national securities exchange on which similar securities issued by the Company are then listed (if any), if the listing of such Registrable Securities is then permitted under the rules of such exchange or (b) to secure designation of all such Registrable Securities covered by such registration statement as a NASDAQ "national market system security" within the meaning of Rule 11Aa2-1 of the Commission or, failing that, to secure NASDAQ authorization for such Registrable Securities and, without limiting the generality of the foregoing, to arrange for at least two market makers to register as such with respect to such Registrable Securities with the NASD; -10- 14 (l) The Company will appoint a transfer agent and registrar for all such Registrable Securities covered by such registration statement not later than the effective date of such registration statement; and (m) In connection with an underwritten offering, the Company will participate, to the extent reasonably requested by the managing underwriter for the offering or the Holders, in customary efforts to sell the securities under the offering, including, without limitation, participating in "road shows"; provided, that the Company shall not be obligated to participate in more than one such offering in any 12-month period. The Company may require each Holder of Registrable Securities to promptly furnish in writing to the Company such information regarding the distribution of the Registrable Securities as the Company may from time to time reasonably request and such other information as may be legally required in connection with such registration including, without limitation, all such information as may be requested by the Commission or the NASD. The Company may exclude from such registration any Holder who fails to provide such information. Each Holder agrees that, upon receipt of any notice from the Company of any happening of any event of the kind described in Section 6.1(f) hereof, such Holder will forthwith discontinue disposition of Registrable Securities until such Holder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 6.1(f) hereof, and, if so directed by the Company, such Holder will deliver to the Company all copies, other than permanent file copies then in such Holder's possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. In the event the Company shall give such notice, the Company shall extend the period during which such registration statement shall be maintained effective (including the period referred to in Section 6.1(a) hereof) by the number of days during the period from and including the date of giving of notice pursuant to Section 6.1(f) hereof to the date when the Company shall make available to the Holders of the Registrable Securities covered by such registration statement a prospectus supplemented or amended to conform with the requirements of Section 6.1(f) hereof ARTICLE 7 Indemnification 7.1 The Company will indemnify each Holder and each underwriter, if any, and each of their respective officers, directors, partners, representatives and agents and such Holder's legal counsel and independent accountants, if any, and each person controlling any such persons within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against all expenses, claims, losses, damages and liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened, provided such settlement is effected with the written consent of the Company (which consent shall not be unreasonably withheld), arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any -11- 15 registration statement, prospectus, offering circular or other document, or any amendment or supplement thereto, incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein, a material fact required to be stated therein or necessary to make the statements therein, not misleading, or any violation by the Company of any rule or regulation promulgated under the Securities Act or any state securities laws applicable to the Company and relating to action or inaction by the Company in connection with any such registration, qualification or compliance, and will reimburse each such Holder and each underwriter, if any, and each of their respective officers, directors, partners, representatives and agents and such Holder's legal counsel and independent accountants, and each person controlling any such persons, for any legal and any other expenses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with written information furnished to the Company by such Holder and stated to be specifically for use therein. 7.2 Each Holder will, if Registrable Securities held by such Holder are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Company, each of its directors and officers and its legal counsel and independent accountants, each underwriter, if any, of the Company's securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, and each other such Holder, each of its officers, directors, partners, legal counsel and independent accountants, if any, and each person controlling such Holder within the meaning of Section 15 of the Securities Act, against all expenses, claims, losses, damages and liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened, provided such settlement is effected with the written consent of the Holder (which consent shall not be unreasonably withheld), arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document, or any amendment or supplement thereto, incident to any such registration, qualification or compliance or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company, such Holders, such directors, officers, partners, legal counsel, independent accountants, underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular, other document or amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such Holder; provided, however, that notwithstanding any other provision contained herein the obligations of such Holders hereunder shall be limited to an amount equal to the proceeds to each such Holder of Registrable Securities sold as contemplated herein. 7.3 Each party entitled to indemnification under this Article 7 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after -12- 16 such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld). The Indemnified Party may participate in such defense at such party's expense; provided, however, that the Indemnifying Party shall bear the expense of such defense of the Indemnified Party if representation of both parties by the same counsel would be inappropriate due to actual or potential conflicts of interest. The failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Agreement, unless such failure is prejudicial to the ability of the Indemnifying Party to defend the action. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect of such claim or litigation. 7.4 If the indemnification provided for in this Article 7 is unavailable to an Indemnified Party or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Party under such paragraph, in lieu of indemnifying such Indemnified Party thereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and by the Holders from the offering of the Registrable Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Holders in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Holders in connection with the offering of the Registrable Securities shall be deemed to be in the same respective proportions as the net proceeds from the offering of the Registrable Securities as set forth in the table on the cover of the Prospectus, bear to the aggregate public offering price of the Registrable Securities. The relative fault of the Company and of the Holders shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Holders and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Holders' respective obligations to contribute pursuant to this Article 7 are several in proportion to the respective number of Registrable Securities they sell, and not joint. ARTICLE 8 Lockup Agreement In consideration for the Company agreeing to its obligations under this Agreement, each Holder agrees in connection with the Company's Initial Public Offering, upon the request of the underwriters -13- 17 managing the underwritten offering of the Company's securities, not to sell, make any short sale of, loan, grant any option for the purchase of or otherwise dispose of any Registrable Securities (other than those included in the registration) without the prior written consent of such underwriters for such period of time (not to exceed one hundred and eighty (180) days) from the effective date of such registration as the underwriters may specify; provided, however, that (i) such Holder shall have no obligation to enter into the agreement described herein unless all executive officers and directors and holders of more than 10% of the Company's voting power of the Company enter into similar agreements, and (ii) nothing herein shall prevent any Holder that is a corporation from making a distribution of Registrable Securities to the shareholders thereof that is otherwise in compliance with applicable securities laws. ARTICLE 9 Information by Holder The Holder or Holders of Registrable Securities included in any registration shall furnish in writing to the Company such information regarding such Holder or Holders and the distribution proposed by such Holder or Holders as the Company may request in writing and as shall be required in connection with any registration, qualification or compliance referred to in this Agreement. ARTICLE 10 Rule 144 Reporting With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of securities of the Company to the public without registration, the Company agrees to: 10.1 Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times after the Company's Initial Public Offering; and 10.2 Use its best efforts to then file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act") (at any time after it has become subject to such reporting requirements); and 10.3 So long as a Holder owns any Registrable Securities, furnish to the Holder forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of said Rule 144 (at any time after ninety (90) days following the effective date of the first registration statement filed by the Company for an offering of its securities to the general public), and of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the -14- 18 Company as a Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such securities without registration. ARTICLE 11 Co-Sale Rights; Drag-Along Rights 11.1 Co-Sale Rights. (a) If any Executive Stockholder proposes to sell, exchange, transfer or in any other manner dispose of his Registrable Securities other than to an affiliate of such Executive Stockholder, such Executive Stockholder shall first give notice in writing (the "Co-Sale Notice") to the Company and each other Holder setting forth the terms and conditions of the proposed sale and the name and address of the proposed purchaser. (b) Each other Holder shall have the right, exercisable by written notice to the Executive Stockholder and the Company given within 30 days after the receipt of the Co-Sale Notice, to elect to participate in the proposed sale given. Each Holder that so notifies the Executive Stockholder and the Company shall have the right to sell an amount of Registrable Securities equal to the product obtained by multiplying (i) the total number of shares of Common Stock or Preferred Stock owned by such Holder by (ii) a fraction, the numerator of which is the aggregate number of shares of Common Stock or Preferred Stock proposed to be purchased by the proposed purchaser and the denominator of which is the aggregate number of shares of Common Stock or Preferred Stock owned by the Executive Stockholder and all Holders electing to exercise their rights under this Section 11.1. Such purchase shall be made at the highest price per share and on the same terms and conditions specified in the Co-Sale Notice. (c) The closing of the proposed sale shall be held at the time and place designated by the proposed purchaser, but in any event within 30 days of the later to occur of (i) receipt of notice from each Holder as to whether he elects to participate in the proposed sale or (ii) expiration of the 15-day co-sale period if the notice has not been provided by all Holders. Each Holder participating in the proposed sale shall deliver at the closing his shares of Common Stock or Preferred Stock to the purchaser free and clear of all liens, pledges and other encumbrances and accompanied by stock transfer powers duly endorsed for transfer. 11.2 Drag-Along Rights. (a) If at any time and from time to time after the date of this Agreement, Holders holding at least 50% of the Registrable Securities (the "Control Holders") wish to sell or exchange in a bona fide arm's- length transaction all the shares of Common Stock or Preferred Stock then owned by them, the Control Holders shall have the right (the "Drag-Along Right") to require all of the Holders to sell all of the shares of Common Stock or Preferred Stock then owned by such Shareholders for the -15- 19 same per share consideration, and otherwise on the same terms received by the Control Holders, to the proposed purchaser; provided, however, that no Holder shall be obligated to sell any shares of Common Stock or Preferred Stock then owned by such Holder unless such Holder shall realize an internal rate of return on such Holder's investment in the Company of at least 30%. (b) To exercise a Drag-Along Right, the Control Holder shall first give notice in writing (the "Drag-Along Notice") to each Holder and the Company setting forth (i) the name and address of the proposed purchaser and (ii) the proposed purchase price, terms of payment and other material terms and conditions of the proposed purchaser's offer. Each Holder shall thereafter be obligated to sell all of his shares of Common Stock or Preferred Stock subject to such Drag-Along Notice; provided, however, that no Holder shall be obligated to sell any shares of Common Stock or Preferred Stock then owned by such Holder unless such Holder shall realize an internal rate of return on such Holder's investment in the Company of at least 30%. (c) The closing of the proposed sale shall be held at the time and place designated by the proposed purchaser, but in any event within 30 days from receipt by all the Holders and the Company of the Drag-Along Notice. Each Holder shall deliver at the closing his shares of Common Stock or Preferred Stock to the proposed purchaser free and clear of all liens, pledges encumbrances and accompanied by stock transfer powers duly endorsed for transfer. If the sale is not consummated within such 30-day period, then no Holder shall be obligated to sell his Common Stock or Preferred Stock pursuant to that specific Drag-Along Right, but each Holder shall remain subject to the provisions of this Section 11.2 (d) Nothing in this Section 11.2 shall limit the Company's ability to undertake a merger or reorganization in accordance with the Delaware General Corporation Law and the Company's Restated Certificate of Incorporation. 11.3 Compliance. Any sale, exchange, transfer or other disposition must comply with provisions of this Agreement, and the prospective transferee must agree to be bound by this Agreement and execute a counterpart hereof (and/or such further documents as may be necessary in the opinion of the Company to make it a party hereto), after which such prospective transferee shall be deemed to be a Holder for purposes of this Agreement. 11.4 Improper Transfers Ineffective. Any purported sale, exchange, transfer or other disposition of shares of Common Stock or Preferred Stock which is in violation of the provisions of this Agreement shall be void and of no force and effect whatsoever, and the Company shall not record any such event on its books or treat any such transferee as the owner of such shares for any purpose. 11.5 No Transfer to Competitors. Except pursuant to Section 11.2 or in the event the Company enters into a definitive agreement to sell the Company to a competitor of the Company or to merge the Company with a competitor of the Company, from the date hereof through September 15, 1998, no Registrable Securities or Common Stock issued upon the conversion thereof may be sold or transferred to a competitor of the Company. A "competitor" shall be any person or entity engaged in -16- 20 (or who has announced plans to engage in) the selling, leasing, marketing or manufacturing of automobiles, automobile financing or automobile insurance, or the provision of advisory or marketing services related thereto of the Company, or to an "affiliate" (within the meaning of Rule 144 (17 C.F.R. Section 230.144) of the rules and regulations promulgated under the Securities Act, an "Affiliate") of a Competitor. Notwithstanding the foregoing, any Holder may at any time sell, transfer, assign or otherwise dispose of any shares of Preferred Stock or Common Stock issued upon conversion of the Preferred Stock to (i) any executor, administrator of such Holder's estate, ancestors, descendants, siblings, or spouse, (ii) any Affiliate of the Holder, (iii) any other Holder or any of its affiliates, or (iv) in the case of any Holder that is a partnership, to any constituent of such Holder or any affiliate of any such constituent. Following September 15, 1998, all restrictions on transfer set forth in the first two sentences of this Section 11.5 shall be of no further force and effect. 11.6 Transfer of Registration Rights. The rights to cause the Company to register securities granted to Holders under Articles 2, 3 and 4 hereof may only be assigned in connection with a Transfer of the Holder's Shares accomplished in accordance with the provisions of this Section 11. All transferees and assignees of the rights to cause the Company to register securities granted Holders under Articles 2, 3 and 4 hereof, as a condition to the transfer of such rights, shall agree in writing to be bound by the agreements set forth herein. 11.7 Legends. All certificates or instruments representing Transfer Shares, whether now outstanding or subsequently issued, shall be surrendered to the Company for endorsement or be endorsed by the Company prior to their issuance with the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO, AND MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH, AN AGREEMENT AMONG THE COMPANY AND THE HOLDERS OF THESE SECURITIES AND CERTAIN OTHER HOLDERS OF THE COMPANY'S STOCK, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY." The Company shall not transfer any of the Transfer Shares on its books without first ascertaining compliance with all of the applicable provisions of this Agreement with respect to such transfer. 11.8 Termination of Rights. This rights granted in this Article 11 shall terminate on the earliest of (i) the closing of the Company's Initial Public Offering, (ii) the date on which the Company first becomes subject to filing reports under Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (iii) the date on which quotations for the Common Stock of the Company are reported on the automated quotation system of the National Association of Securities Dealers, Inc. or on an equivalent quotation system or shares of the Common Stock of the Company are listed on a national securities exchange registered under the Exchange Act, and (iv) the merger or consolidation of the Company with or into any other corporation or entity, other than a wholly-owned subsidiary of the Company, or a sale of all or substantially all of the assets of the Company, as a result -17- 21 of which the stockholders of the Company immediately prior to such transaction hold less than 50% of the voting power of the surviving corporation. ARTICLE 12 Termination of Registration Rights Following the Company's Initial Public Offering, the rights granted pursuant to this Agreement shall terminate as to any Holder at such time as such Holder may sell all such Holder's shares under Rule 144, or a successor rule, in any three month period. ARTICLE 13 Limitations on Registration Rights Granted to Other Securities The parties hereto agree that additional holders may be added as parties to this Agreement with respect to any or all securities of the Company held by them; provided, however, that from and after the date of this Agreement, the Company shall not without the prior written consent of the Holders of two-thirds of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company providing for the grant to such holder of registration rights superior to those granted herein. Any additional parties shall execute a counterpart of this Agreement, and upon execution by such additional parties and by the Company, shall be considered Holders for purposes of this Agreement, and shall be added to the Schedule of Investors' Rights Holders. ARTICLE 14 Miscellaneous 14.1 Waivers and Amendments. With the written consent of the Company and the holders of two-thirds of the then outstanding Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, any shares of Common Stock issued upon conversion of the Preferred Stock, and the Common Stock held by the Executive Stockholders, all voting together as a class on an as-converted basis, the obligations and rights of the Company and the Holders under this Agreement may be waived (either generally or in a particular instance, either retroactively or prospectively, and either for a specified period of time or indefinitely) or amended; provided, however, that no such waiver or amendment shall reduce the aforesaid number of shares, the Holders of which are required to consent to any waiver or amendment, without the consent of all the Holders. Upon the effectuation of each such waiver or amendment, the Company shall promptly give written notice thereof to any Holders who have not previously consented thereto in writing. This Agreement or any provision hereof may be amended, waived, discharged or terminated only by a statement in writing signed by the party against which -18- 22 enforcement of the amendment, waiver, discharge or termination is sought, except to the extent provided in this Section 14. 1. Notwithstanding any other provision herein, the requirement of the approval of the holders of two-thirds of the Registrable Securities to amend this Agreement or waive rights hereunder shall not be amended or modified without the unanimous approval of the holders of the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, voting as a single class. 14.2 Governing Law. This Agreement shall be governed by and construed under the laws of the State of New York as such laws are applied to contracts made and to be fully performed entirely within that state between residents of that state. Each party hereto hereby submits to the nonexclusive jurisdiction of the United States District Court for California and of any California state court sitting in Orange County, California (and of the appropriate appellate courts) for the purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby and irrevocably waives, to the fullest extent permitted by applicable law, any objection to venue laid therein. Process in any such proceeding may be served on such party anywhere in the world, whether within or without the State of California. Each party hereto hereby waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any matter directly or indirectly arising out of or relating to this Agreement. 14.3 Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto. 14.4 Entire Agreement. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subject matter hereof 14.5 Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be deemed effectively given upon personal delivery; upon confirmed transmission by telecopy; or three (3) days following deposit with the United States Post Office, by certified mail, postage prepaid, addressed (i) if to a Holder, to such address as such Holder shall have furnished to the Company in writing, or (ii) if to the Company, to 18872 MacArthur Blvd., Irvine, California, to the attention of the Chief Operating Officer, or to such other address as the Company shall have furnished to the Holders in writing. 14.6 Severability. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby. 14.7 Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. 14.8 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together constitute one instrument. -19- 23 ARTICLE 15 Aggregation Shares of capital stock of the Company owned by partnerships and corporations having substantially common ownership interests or managed by the same principals and owned by individual investors affiliated with one another may be aggregated for the purposes of calculating the aggregate percentage of capital stock of the Company owned by any Holder and any permitted transferee hereunder. -20- 24 [AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT] The foregoing Agreement is hereby executed as of the date first above written. "COMPANY" AUTO-BY-TEL CORPORATION By: /s/ PETER R. ELLIS ------------------------------- Peter R. Ellis, President "HOLDER" By: /s/ PETER R. ELLIS ------------------------------- Peter R. Ellis 25 [AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT] The foregoing Agreement is hereby executed as of the date first above written. "COMPANY" AUTO-BY-TEL CORPORATION By: ------------------------------- Peter R. Ellis, President "HOLDER" NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA By: /s/ DAVID B. PINKERTON -------------------------------- Name: David B. Pinkerton ------------------------------ Title: Vice President ----------------------------- 26 [AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT] The foregoing Agreement is hereby executed as of the date first above written. "COMPANY" AUTO-BY-TEL CORPORATION By: /s/ PETER R. ELLIS ------------------------------- Peter R. Ellis, President "HOLDER" By: -------------------------------- Name: ------------------------------ Title: ----------------------------- 27 [AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT] The foregoing Agreement is hereby executed as of the date first above written. "COMPANY" AUTO-BY-TEL CORPORATION By: ------------------------------- Peter R. Ellis, President "HOLDER" CONTITRADE SERVICES L.L.C. By: /s/ GLENN GOLMAN -------------------------------- Name: Glenn Golman ------------------------------ Title: Authorized Signatory ----------------------------- By: /s/ JEROME M. PERELSON -------------------------------- Name: Jerome M. Perelson ------------------------------ Title: Authorized Signatory ----------------------------- 28 [AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT] The foregoing Agreement is hereby executed as of the date first above written. "COMPANY" AUTO-BY-TEL CORPORATION By: --------------------------------- Peter R. Ellis, President "HOLDER" NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA By: /s/ DAVID B. PINKERTON --------------------------------- Name: David B. Pinkerton ------------------------------- Title: Vice President ------------------------------- 29 [AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT] The foregoing Agreement is hereby executed as of the date first above written. "COMPANY" AUTO-BY-TEL CORPORATION By: --------------------------------- Peter R. Ellis, President "HOLDER" GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ MICHAEL S. PFEFFER --------------------------------- Name: Michael S. Pfeffer ------------------------------- Title: Department Operations Manager ------------------------------- 30 [AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT] The foregoing Agreement is hereby executed as of the date first above written. "COMPANY" AUTO-BY-TEL CORPORATION By: --------------------------------- Peter R. Ellis, President "HOLDER" By: /s/ MICHAEL FUCHS --------------------------------- Name: Michael Fuchs ------------------------------- Title: ------------------------------- 31 [AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT] The foregoing Agreement is hereby executed as of the date first above written. "COMPANY" AUTO-BY-TEL CORPORATION By: --------------------------------- Peter R. Ellis, President "HOLDER" By: /s/ JOHN C. BEDROSIAN --------------------------------- Name: John C. Bedrosian ------------------------------- Title: Chairman of the Board ------------------------------- 32 [AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT] The foregoing Agreement is hereby executed as of the date first above written. "COMPANY" AUTO-BY-TEL CORPORATION /s/ PETER R. ELLIS By: --------------------------------- Peter R. Ellis, President "HOLDER" By: /s/ PETER R. ELLIS --------------------------------- Peter R. Ellis 33 [AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT] The foregoing Agreement is hereby executed as of the date first above written. "COMPANY" AUTO-BY-TEL CORPORATION By: --------------------------------- Peter R. Ellis, President "HOLDER" By: /s/ ROBERT GRIMES --------------------------------- Robert Grimes 34 [AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT] The foregoing Agreement is hereby executed as of the date first above written. "COMPANY" AUTO-BY-TEL CORPORATION By: --------------------------------- Peter R. Ellis, President "HOLDER" TOZER KEMSLEY AND MILLBORN AUTOMOTIVE LTD. By: /s/ P. JOHNSON --------------------------------- Name: P. Johnson ------------------------------- Title: Chief Exec. ------------------------------- 35 The foregoing Agreement is hereby executed as of the date first above written. "COMPANY" AUTO-BY-TEL CORPORATION By: /s/ PETER R. ELLIS ------------------------------ Peter R. Ellis, President "HOLDER" BILIA AB By: ------------------------------ Name: ---------------------------- Title: --------------------------- 36 [AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT] The foregoing Agreement is hereby executed as of the date first above written. "COMPANY" AUTO-BY-TEL CORPORATION By: ------------------------------ Name: Peter R. Ellis Title: President "PURCHASER" BILIA AB COMPANY, INC. By: /s/ MATS JANSSON ------------------------------ Name: Mats Jansson Title: President 37 EXHIBIT A SCHEDULE OF INVESTORS' RIGHTS HOLDERS Name Series A Investors - ------------------ ContiTrade Services L.L.C. National Union Fire Insurance Company of Pittsburgh, PA General Electric Capital Corporation Michael Fuchs Executive Stockholders - ---------------------- John Bedrosian Peter Ellis Robert Grimes Series B Investors - ------------------ ContiTrade Services L.L.C. National Union Fire Insurance Company of Pittsburgh, PA General Electric Capital Corporation Michael Fuchs Series C Investors - ------------------ General Electric Capital Corporation National Union Fire Insurance Company of Pittsburgh, PA Tozer Kemsley and Millborn Automotive Ltd. (a unit of Inchape Motors International plc) National Broadcasting Company, Inc. Bilia AB 38 [AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT] The foregoing Agreement is hereby executed as of the date first above written. "COMPANY" AUTO-BY-TEL CORPORATION By: /s/ PETER R. ELLIS ------------------------------ Peter R. Ellis, President "HOLDER" By: ------------------------------ Name: ---------------------------- Title: --------------------------- 39 [AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT] The foregoing Agreement is hereby executed as of the date first above written. "COMPANY" AUTO-BY-TEL CORPORATION By: ------------------------------ Peter R. Ellis, President "HOLDER" CONTITRADE SERVICES L.L.C. By: /s/ GLENN GOLMAN ------------------------------ Name: Glenn Golman ---------------------------- Title: Authorized Signatory --------------------------- By: /s/ JEROME M. PERELSON ------------------------------ Name: Jerome M. Perelson ---------------------------- Title: Authorized Signatory --------------------------- 40 [AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT] The foregoing Agreement is hereby executed as of the date first above written. "COMPANY" AUTO-BY-TEL CORPORATION By: ------------------------------ Peter R. Ellis, President "HOLDER" NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA By: /s/ DAVID B. PINKERTON ------------------------------ Name: David B. Pinkerton ---------------------------- Title: Vice President --------------------------- 41 [AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT] The foregoing Agreement is hereby executed as of the date first above written. "COMPANY" AUTO-BY-TEL CORPORATION By: ------------------------------ Peter R. Ellis, President "HOLDER" GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ MICHAEL S. PFEFFER ---------------------------------- Name: Michael S. Pfeffer -------------------------------- Title: Department Operations Manager ------------------------------- 42 [AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT] The foregoing Agreement is hereby executed as of the date first above written. "COMPANY" AUTO-BY-TEL CORPORATION By: ------------------------------ Peter R. Ellis, President "HOLDER" By: /s/ MICHAEL FUCHS ------------------------------ Name: Michael Fuchs ---------------------------- Title: --------------------------- 43 [AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT] The foregoing Agreement is hereby executed as of the date first above written. "COMPANY" AUTO-BY-TEL CORPORATION By: ------------------------------ Peter R. Ellis, President "HOLDER" By: /s/ JOHN C. BEDROSIAN ------------------------------ Name: John C. Bedrosian ---------------------------- Title: Chairman of the Board --------------------------- 44 [AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT] The foregoing Agreement is hereby executed as of the date first above written. "COMPANY" AUTO-BY-TEL CORPORATION By: /s/ PETER R. ELLIS ------------------------------ Peter R. Ellis, President "HOLDER" By: /s/ PETER R. ELLIS ------------------------------ Peter R. Ellis 45 [AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT] The foregoing Agreement is hereby executed as of the date first above written. "COMPANY" AUTO-BY-TEL CORPORATION By: ------------------------------ Peter R. Ellis, President "HOLDER" By: /s/ ROBERT GRIMES ------------------------------ Robert Grimes 46 [AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT] The foregoing Agreement is hereby executed as of the date first above written. "COMPANY" AUTO-BY-TEL CORPORATION By: ------------------------------- Peter R. Ellis, President "HOLDER" TOZER KEMSLEY AND MILLBORN AUTOMOTIVE LTD. By: /s/ P. JOHNSON -------------------------------- Name: P. Johnson ------------------------------ Title: Chief Exec. ----------------------------- 47 [AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT] The foregoing Agreement is hereby executed as of the date first above written. "COMPANY" AUTO-BY-TEL CORPORATION By: /s/ PETER R. ELLIS ------------------------------- Peter R. Ellis, President "HOLDER" NATIONAL BROADCASTING COMPANY, INC. By: -------------------------------- Name: ------------------------------ Title: ----------------------------- 48 [AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT] The foregoing Agreement is hereby executed as of the date first above written. "COMPANY" AUTO-BY-TEL CORPORATION By: ------------------------------- Name: Peter R. Ellis Title: President "HOLDER" NATIONAL BROADCASTING COMPANY, INC. By: /s/ WILLIAM CAULFIELD -------------------------------- Name: William Caulfield Title: Vice President 49 EXHIBIT A SCHEDULE OF INVESTORS' RIGHTS HOLDERS NAME Series A Investors - ------------------ ContiTrade Services, L.L.C. National Union Fire Insurance Company of Pittsburgh, PA General Electric Capital Corporation Michael Fuchs Executive Stockholders - ---------------------- John Bedrosian Peter Ellis Robert Grimes Series B Investors - ------------------ ContiTrade Services, L.L.C. National Union Fire Insurance Company of Pittsburgh, PA General Electric Capital Corporation Michael Fuchs Series C Investors - ------------------ General Electric Capital Corporation National Union Fire Insurance Company of Pittsburgh, PA Tozer Kemsley and Millborn Automotive Ltd. (a unit of Inchape Motors International plc) National Broadcasting Company, Inc.
   1

                                                                     EXHIBIT 9.1

                                  VOTING PROXY

     In consideration of autobytel.com inc. (the "Company") permitting the sale 
of $4 million of common stock of the Company by Peter R. Ellis, and for $10.00 
paid in hand and other good and valuable consideration, the receipt and 
sufficiency of which is hereby acknowledged, Mr. Ellis hereby irrevocably 
appoints Mark Lorimer as Chief Executive Officer of the Company or any 
successor of his as Chief Executive Officer and/or Ann Delligatta as Chief 
Operating Officer of the Company or any successor of hers as Chief Operating 
Officer (each a "Proxy" and, collectively, the "Proxies") with power of 
substitution, agents and proxies of Mr. Ellis to represent Mr. Ellis with 
respect to 593,175 shares (the "Proxy Shares") of the common stock of the 
Company (i) at the annual or any special meeting of stockholders of the Company 
and at any and all adjournments of said meetings or (ii) in any written consent 
of stockholders without a meeting of the stockholders of the Company and to 
vote all of the Proxy Shares as either Proxy deems in his or her sole 
discretion appropriate or desirable on all matters and business as may properly 
come before any meeting of stockholders of the Company or any adjournments 
thereof or in any written consent of stockholders without a meeting and to take 
such other actions and exercise such other powers as Mr. Ellis, in his capacity 
as a stockholder of the Company, may do. This Voting Proxy is coupled with an 
interest and is irrevocable so long as Mr. Ellis owns any shares of common 
stock of the Company. This Voting Proxy shall terminate on the earlier of (a) 
the third anniversary of the date hereof or (b) at such time as Mr. Ellis sells 
the Proxy Shares to a person not affiliated with Mr. Ellis.

Dated: January 11, 1999                  
                                        /s/ Peter R. Ellis
                                        -----------------------------------
                                        Peter R. Ellis


*Please sign exactly as your name appears on the certificate or certificates 
representing your shares of common stock of the Company.
   1
                                                                   EXHIBIT 10.1


                             AUTO-BY-TEL CORPORATION

                            INDEMNIFICATION AGREEMENT

     This Indemnification Agreement ("AGREEMENT") is entered into as of the ___
day of ______________, 19___ by and between Auto-By-Tel Corporation, a Delaware
corporation (the "COMPANY") and _______________________________ ("INDEMNITEE").

                                    RECITALS


     A. The Company and Indemnitee recognize the continued difficulty in
obtaining liability insurance for its directors, officers, employees, agents and
fiduciaries, the significant increases in the cost of such insurance and the
general reductions in the coverage of such insurance.

     B. The Company and Indemnitee further recognize the substantial increase in
corporate litigation in general, subjecting directors, officers, employees,
agents and fiduciaries to expensive litigation risks in addition to the
availability and coverage of liability insurance being severely limited.

     C. Indemnitee does not regard the current protection available as adequate
under the present circumstances, and Indemnitee and other directors, officers,
employees, agents and fiduciaries of the Company may not be willing to continue
to serve in such capacities without additional protection.

     D. The Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and, in part, in
order to induce Indemnitee to continue to provide services to the Company,
wishes to provide for the indemnification and advancing of expenses to
Indemnitee to the maximum extent permitted by law.

     E. In view of the considerations set forth above, the Company desires that
Indemnitee be indemnified by the Company as set forth herein.

     NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:

     1.  Indemnification.

         (a)  Indemnification of Expenses.  The Company shall indemnify
Indemnitee to the fullest extent permitted by Delaware law if Indemnitee was or
is or becomes a party to or witness or




   2

other participant in, or is threatened to be made a party to or witness or other
participant in, any threatened, pending or completed action, suit, proceeding or
alternative dispute resolution mechanism, or any hearing, inquiry or
investigation that Indemnitee in good faith believes might lead to the
institution of any such action, suit, proceeding or alternative dispute
resolution mechanism, whether civil, criminal, administrative, investigative or
other (hereinafter a "CLAIM") by reason of (or arising in part out of) any event
or occurrence related to the fact that Indemnitee is or was a director, officer,
employee, agent or fiduciary of the Company, or any subsidiary of the Company,
or is or was serving at the request of the Company as a director, officer,
employee, agent or fiduciary of another corporation, partnership, joint venture,
trust or other enterprise, or by reason of any action or inaction on the part of
Indemnitee while serving in such capacity (hereinafter an "INDEMNIFIABLE EVENT")
against any and all expenses (including attorneys' fees and all other costs,
expenses and obligations incurred in connection with investigating, defending,
being a witness in or participating in (including on appeal), or preparing to
defend, be a witness in or participate in, any such action, suit, proceeding,
alternative dispute resolution mechanism, hearing, inquiry or investigation),
judgments, fines, penalties and amounts paid in settlement (if such settlement
is approved in advance by the Company, which approval shall not be unreasonably
withheld) of such Claim and any federal, state, local or foreign taxes imposed
on Indemnitee as a result of the actual or deemed receipt of any payments under
this Agreement (collectively, hereinafter "EXPENSES"), including all interest,
assessments and other charges paid or payable in connection with or in respect
of such Expenses. Such payment of Expenses shall be made by the Company as soon
as practicable but in any event no later than five days after written demand by
Indemnitee therefor is presented to the Company.

     (b)  Reviewing Party.  Notwithstanding the foregoing, (i) the obligations
of the Company under Section 1(a) shall be subject to the condition that the
Reviewing Party (as described in Section 10(e) hereof) shall not have determined
(in a written opinion, in any case in which the Independent Legal Counsel
referred to in Section 1(c) hereof is involved) that Indemnitee would not be
permitted to be indemnified under applicable law, and (ii) the obligation of the
Company to make an advance payment of Expenses to Indemnitee pursuant to Section
2(a) (an "EXPENSE ADVANCE") shall be subject to the condition that, if, when and
to the extent that the Reviewing Party determines that Indemnitee would not be
permitted to be so indemnified under applicable law, the Company shall be
entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the
Company) for all such amounts theretofore paid; provided, however, that if
Indemnitee has commenced or thereafter commences legal proceedings in a court of
competent jurisdiction to secure a determination that Indemnitee should be
indemnified under applicable law, any determination made by the Reviewing Party
that Indemnitee would not be permitted to be indemnified under applicable law
shall not be binding and Indemnitee shall not be required to reimburse the
Company for any Expense Advance until a final judicial determination is made
with respect thereto (as to which all rights of appeal therefrom have been
exhausted or lapsed). Indemnitees' obligation to reimburse the Company for any
Expense Advance shall be unsecured and no interest shall be charged thereon. If
there has not been a Change in Control (as defined in Section 10(c) hereof), the
Reviewing Party shall be selected by the Board of Directors, and if there has
been such a Change in Control (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors




                                       2
   3

immediately prior to such Change in Control), the Reviewing Party shall be the
Independent Legal Counsel referred to in Section 1(c) hereof. Indemnitee shall
have the right, within 60 days of a determination by the Reviewing Party that
Indemnitee substantively would not be permitted to be indemnified in whole or in
part under applicable law, or within 30 days or Indemnitee's request for payment
if there has been no determination by the Reviewing Party, to commence
litigation in any court of competent jurisdiction, or seek an award in
arbitration to be conducted by a single arbitrator pursuant to the rules of the
American Arbitration Association, which award shall be deemed final,
unappealable and binding, to determine whether Indemnitee should be indemnified
under applicable law, or to challenge any such determination by the Reviewing
Party or any aspect thereof, including the legal or factual bases therefor. Any
such court or arbitrator, as the case ma be, shall thereupon have the exclusive
authority to make such determination unless and until such court or arbitrator
dismisses or otherwise terminates such action without having made a
determination. The Company hereby consents to service of process and to appear
in any such proceeding. In any such action before the court or arbitrator,
Indemnitee shall be presumed to be entitled to indemnification and the Company
shall have the burden of proving that indemnification is not required under this
Agreement. All fees and expenses of any arbitrator pursuant to this provision
and all reasonable fees and expenses of counsel retained by Indemnitee in
connection with any court or arbitration finding an obligation greater than that
assumed by the Company prior to commencement of such court action or arbitration
shall be paid by the Company. Any determination by the Reviewing Party otherwise
shall be conclusive and binding on the Company and Indemnitee.

         (c) Change in Control. The Company agrees that if there is a Change
in Control of the Company (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control) then, with respect to all matters
thereafter arising concerning the rights of Indemnitees to payments of Expenses
and Expense Advances under this Agreement or any other agreement or under the
Company's Certificate of Incorporation or Bylaws as now or hereafter in effect,
Independent Legal Counsel (as defined in Section 10(d) hereof) shall be selected
by Indemnitee. Such counsel, among other things, shall render its written
opinion to the Company and Indemnitee as to whether and to what extent
Indemnitee would be permitted to be indemnified under applicable law and the
Company agrees to abide by such opinion. The Company agrees to pay the
reasonable fees of the Independent Legal Counsel referred to above and to fully
indemnify such counsel against any and all expenses (including attorneys' fees),
claims, liabilities and damages arising out of or relating to this Agreement or
its engagement pursuant hereto.

         (d)  Mandatory Payment of Expenses.  Notwithstanding any other
provision of this Agreement other than Section 9 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
action, suit, proceeding, inquiry or investigation referred to in Section (1)(a)
hereof or in the defense of any claim, issue or matter therein, Indemnitee shall
be indemnified against all Expenses incurred by Indemnitee in connection
therewith.



                                       3

   4

    2.   Expenses; Indemnification Procedure.

         (a)  Advancement of Expenses.  The Company shall advance all Expenses
incurred by Indemnitee. The advances to be made hereunder shall be paid by the
Company to Indemnitee as soon as practicable but in any event no later than five
days after written demand by Indemnitee therefor to the Company.

     (b)  Notice/Cooperation by Indemnitee.  Indemnitee shall, as a condition
precedent to Indemnitees' right to be indemnified under this Agreement, give the
Company notice in writing as soon as practicable of any Claim made against
Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the Chief Executive
Officer of the Company at the address shown on the signature page of this
Agreement (or such other address as the Company shall designate in writing to
Indemnitee). In addition, Indemnitee shall give the Company such information and
cooperation as it may reasonably require and as shall be within Indemnitees'
power.

     (c)  No Presumptions; Burden of Proof.  For purposes of this Agreement, the
termination of any Claim by judgment, order, settlement (whether with or without
court approval) or conviction, or upon a plea of nolo contendere, or its
equivalent, shall not create a presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court has
determined that indemnification is not permitted by applicable law. In addition,
neither the failure of the Reviewing Party to have made a determination as to
whether Indemnitee has met any particular standard of conduct or had any
particular belief, nor an actual determination by the Reviewing Party that
Indemnitee has not met such standard of conduct or did not have such belief,
prior to the commencement of legal proceedings by Indemnitee to secure a
judicial determination that Indemnitee should be indemnified under applicable
law, shall be a defense to Indemnitee's claim or create a presumption that
Indemnitee has not met any particular standard of conduct or did not have any
particular belief. In connection with any determination by the Reviewing Party
or otherwise as to whether Indemnitee is entitled to be indemnified hereunder,
the burden of proof shall be on the Company to establish that Indemnitee is not
so entitled.

     (d) Notice to Insurers. If, at the time of the receipt by the Company
of a notice of a Claim pursuant to Section 2(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of such Claim to the insurers in accordance
with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of Indemnitee, all amounts payable as a result of such action, suit,
proceeding, inquiry or investigation in accordance with the terms of such
policies.

     (e) Selection of Counsel. In the event the Company shall be obligated
hereunder to pay the Expenses of any Claim, the Company shall be entitled to
assume the defense of such Claim with counsel approved by Indemnitee, which
approval shall not be unreasonably withheld, upon the




                                       4
   5

delivery to Indemnitee of written notice of its election so to do. After
delivery of such notice, approval of such counsel by Indemnitee and the
retention of such counsel by the Company, the Company will not be liable to
Indemnitee under this Agreement for any fees of counsel subsequently incurred by
Indemnitee with respect to the same Claim; provided that, (i) Indemnitee shall
have the right to employ Indemnitees' counsel in any such Claim at Indemnitee
expense and (ii) if (A) the employment of counsel by Indemnitee has been
previously authorized by the Company, (B) Indemnitee shall have reasonably
concluded that there is a conflict of interest between the Company and
Indemnitee in the conduct of any such defense, or (C) the Company shall not
continue to retain such counsel to defend such Claim, then the fees and expenses
of Indemnitee counsel shall be at the expense of the Company. The Company shall
have the right to conduct such defense as it sees fit in its sole discretion,
including the right to settle any claim against Indemnitee without the consent
of the Indemnitee provided the Company holds the Indemnitee harmless in
connection with any such settlement.

     3.  Additional Indemnification Rights; Nonexclusivity.

         (a)  Scope.  The Company hereby agrees to indemnify Indemnitee to the
fullest extent permitted by law, notwithstanding that such indemnification is
not specifically authorized by the other provisions of this Agreement, the
Company's Restated Certificate of Incorporation, the Company's Bylaws or by
statute. In the event of any change after the date of this Agreement in any
applicable law, statute or rule which expands the right of a Delaware
corporation to indemnify a member of its Board of Directors or an officer,
employee, agent or fiduciary, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater benefits afforded by such
change. In the event of any change in any applicable law, statute or rule which
narrows the right of a Delaware corporation to indemnify a member of its Board
of Directors or an officer, employee, agent or fiduciary, such change, to the
extent not otherwise required by such law, statute or rule to be applied to this
Agreement, shall have no effect on this Agreement or the parties' rights and
obligations hereunder except as set forth in Section 8(a) hereof.

         (b)  Amendment to Indemnification Rights.  The Company shall not adopt
any amendment to its Restated Certificate of Incorporation, as amended (the
"Certificate") or By-Laws the effect of which would be to deny, diminish or
encumber Indemnitee's rights to indemnity pursuant to the Restated Certificate
of Incorporation, By-Laws, the Delaware General Corporation Law or any other
applicable law as applied to any act or failure to act occurring in whole or in
part prior to the date (the "Effective Date") upon which the amendment was
approved by the Company's Board of Directors or stockholders, as the case may
be. In the event that the Company shall adopt any amendment to its Restated
Certificate of Incorporation or By-Laws the effect of which is to change
Indemnitee's rights to indemnity under such instruments, such amendment shall
apply only to acts or failures to act occurring entirely after the Effective
Date thereof. The Company shall give written notice to Indemnitee of any
proposal which respect to any such amendment no later than the date such
amendment is first presented to the Board of Directors (or any committee
thereof) for consideration, and shall provide a copy of any such amendment to
Indemnitee promptly after its adoption.



                                       5
   6

         (c) Nonexclusivity. The indemnification provided by this Agreement
shall be in addition to any rights to which Indemnitee may be entitled under the
Company's Certificate of Incorporation, its Bylaws, any agreement, any vote of
stockholders or disinterested directors, the General Corporation Law of the
State of Delaware, or otherwise. The indemnification provided under this
Agreement shall continue as to Indemnitee for any action Indemnitee took or did
not take while serving in an indemnified capacity even though Indemnitee may
have ceased to serve in such capacity.

     4.  No Duplication of Payments.  The Company shall not be liable
under this Agreement to make any payment in connection with any Claim made
against Indemnitee to the extent Indemnitee has otherwise actually received
payment (under any insurance policy, Certificate of Incorporation, Bylaw or
otherwise) of the amounts otherwise indemnifiable hereunder.

     5.  Partial Indemnification.  If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of
Expenses incurred in connection with any Claim, but not, however, for all of the
total amount thereof, the Company shall nevertheless indemnify Indemnitee for
the portion of such Expenses to which Indemnitee are entitled.

     6.  Mutual Acknowledgment.  Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or applicable public policy may prohibit
the Company from indemnifying its directors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.

     7.  Liability Insurance.

         (a) Except as provided in (b) below, the Company hereby agrees to use
its best efforts to obtain and maintain directors and officers liability
insurance for Indemnitee so long as Indemnitee shall continue to serve as a
director, officer or key employee of the Company, and, thereafter, so long as
Indemnitee shall be subject to any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that Indemnitee was a director, officer or
key employee of the Company.

         (b) The Company shall have no obligation hereunder to obtain or
maintain directors and officers liability insurance if, in the reasonable
business judgment of the Board of Directors of the Company, such insurance is
not reasonably available, the premium costs for such insurance are
disproportionate to the amount of coverage provided, or the coverage provided by
such insurance is limited, by exclusions or otherwise, so as to provide an
insufficient benefit.




                                       6
   7

         (c) To the extent the Company maintains liability insurance applicable
to directors, officers, employees, agents or fiduciaries, Indemnitee shall be
covered by such policies in such a manner as to provide Indemnitee the same
rights and benefits as are accorded to the most favorably insured of the
Company's directors, if Indemnitee is a director; or of the Company's officers,
if Indemnitee is not a director of the Company but is an officer; or of the
Company's key employees, agents or fiduciaries, if Indemnitee is not an officer
or director but is a key employee, agent or fiduciary.

         (d) The Company shall give prompt written notice to Indemnitee of any
amendment or other change or modification, or any proposed amendment change or
modification, to any policy of directors and officers liability insurance
maintained by the Company and covering Indemnitee.


     8.  Exceptions. Any other provision herein to the contrary notwithstanding,
the Company shall not be obligated pursuant to the terms of this Agreement:

         (a)  Excluded Action or Omissions.  To indemnify Indemnitee for
Indemnitee's acts, omissions or transactions from which Indemnitee or the
Indemnitee may not be relieved of liability under applicable law;

         (b)  Claims Initiated by Indemnitee.  To indemnify or advance expenses
to Indemnitee with respect to Claims initiated or brought voluntarily by
Indemnitee and not by way of defense, except (i) with respect to actions or
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other agreement or insurance policy or under the Company's
Certificate of Incorporation or Bylaws now or hereafter in effect relating to
Claims for Indemnifiable Events, (ii) in specific cases if the Board of
Directors has approved the initiation or bringing of such Claim, or (iii) as
otherwise required under Section 145 of the Delaware General Corporation Law,
regardless of whether Indemnitee ultimately is determined to be entitled to such
indemnification, advance expense payment or insurance recovery, as the case may
be;

         (c)  Lack of Good Faith.  To indemnify Indemnitee for any expenses
incurred by Indemnitee with respect to any proceeding instituted by Indemnitee
to enforce or interpret this Agreement, if a court of competent jurisdiction
determines that each of the material assertions made by Indemnitee in such
proceeding was not made in good faith or was frivolous; or

         (d)  Claims Under Section 16(b).  To indemnify Indemnitee for expenses
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.

     9. Period of Limitations. No legal action shall be brought and no cause
of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and




                                       7

   8

deemed released unless asserted by the timely filing of a legal action within
such two-year period; provided, however, that if any shorter period of
limitations is otherwise applicable to any such cause of action, such shorter
period shall govern.

    10.  Construction of Certain Phrases.

         (a) For purposes of this Agreement, references to the "Company" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees, agents or
fiduciaries, so that if Indemnitee is or was a director, officer, employee,
agent or fiduciary of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee, agent
or fiduciary of another corporation, partnership, joint venture, employee
benefit plan, trust or other enterprise, Indemnitee shall stand in the same
position under the provisions of this Agreement with respect to the resulting or
surviving corporation as Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.

         (b) For purposes of this Agreement, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on Indemnitee with respect to an employee benefit plan;
and references to "serving at the request of the Company" shall include any
service as a director, officer, employee, agent or fiduciary of the Company
which imposes duties on, or involves services by, such director, officer,
employee, agent or fiduciary with respect to an employee benefit plan, its
participants or its beneficiaries; and if Indemnitee acted in good faith and in
a manner Indemnitee reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan, Indemnitee shall be
deemed to have acted in a manner "not opposed to the best interests of the
Company" as referred to in this Agreement.

         (c) For purposes of this Agreement a "Change in Control" shall be
deemed to have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than
a trustee or other fiduciary holding securities under an employee benefit plan
of the Company or a corporation owned directly or indirectly by the stockholders
of the Company in substantially the same proportions as their ownership of stock
of the Company, (A) who is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 10% or more of the
combined voting power of the Company's then outstanding Voting Securities,
increases his beneficial ownership of such securities by 5% or more over the
percentage so owned by such person, or (B) becomes the "beneficial owner" (as
defined in Rule 13d-3 under said Act), directly or indirectly, of securities of
the Company representing more than 20% of the total voting power represented by
the Company's then outstanding Voting Securities, (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company and any new director whose election by the
Board of Directors or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of the period



                                       8

   9

or whose election or nomination for election was previously so approved, cease
for any reason to constitute a majority thereof, or (iii) the stockholders of
the Company approve a merger or consolidation of the Company with any other
corporation other than a merger or consolidation which would result in the
Voting Securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into Voting Securities of the surviving entity) at least 80% of the total voting
power represented by the Voting Securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of (in one
transaction or a series of transactions) all or substantially all of the
Company's assets.

         (d) For purposes of this Agreement, "Independent Legal Counsel" shall
mean an attorney or firm of attorneys, selected in accordance with the
provisions of Section 1(c) hereof, who shall not have otherwise performed
services for the Company or Indemnitee within the last three years (other than
with respect to matters concerning the rights of Indemnitee under this
Agreement, or of other indemnitees under similar indemnity agreements).

         (e) For purposes of this Agreement, a "Reviewing Party" shall mean any
appropriate person or body consisting of a member or members of the Company's
Board of Directors or any other person or body appointed by the Board of
Directors who is not a party to the particular Claim for which Indemnitee are
seeking indemnification, or Independent Legal Counsel.

         (f) For purposes of this Agreement, "Voting Securities" shall mean any
securities of the Company that vote generally in the election of directors.

     11. Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.

     12. Binding Effect; Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the parties hereto and
their respective successors, assigns, including any direct or indirect successor
by purchase, merger, consolidation or otherwise to all or substantially all of
the business and/or assets of the Company, spouses, heirs, and personal and
legal representatives. The Company shall require and cause any successor
(whether direct or indirect by purchase, merger, consolidation or otherwise) to
all, substantially all, or a substantial part, of the business and/or assets of
the Company, by written agreement in form and substance satisfactory to
Indemnitee, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession had taken place. This Agreement shall continue in effect with
respect to Claims relating to Indemnifiable Events regardless of whether
Indemnitee continues to serve as a director, officer, employee, agent or
fiduciary of the Company or of any other enterprise at the Company's request.



                                       9

   10

     13. Attorneys' Fees.  In the event that any action is instituted by
Indemnitee under this Agreement or under any liability insurance policies
maintained by the Company to enforce or interpret any of the terms hereof or
thereof, Indemnitee shall be entitled to be paid all Expenses incurred by
Indemnitee with respect to such action, regardless of whether Indemnitee is
ultimately successful in such action, and shall be entitled to the advancement
of Expenses with respect to such action, unless, as a part of such action, a
court of competent jurisdiction over such action determines that each of the
material assertions made by Indemnitee as a basis for such action was not made
in good faith or was frivolous. In the event of an action instituted by or in
the name of the Company under this Agreement to enforce or interpret any of the
terms of this Agreement, Indemnitee shall be entitled to be paid all Expenses
incurred by Indemnitee in defense of such action (including costs and expenses
incurred with respect to Indemnitee counterclaims and cross-claims made in such
action), and shall be entitled to the advancement of Expenses with respect to
such action, unless, as a part of such action, a court having jurisdiction over
such action determines that each of Indemnitee material defenses to such action
was made in bad faith or was frivolous.


     14. Notice.  All notices and other communications required or permitted
hereunder shall be in writing, shall be effective when given, and shall in any
event be deemed to be given (a) five (5) days after deposit with the U.S. Postal
Service or other applicable postal service, if delivered by first class mail,
postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day
after the business day of deposit with Federal Express or similar overnight
courier, freight prepaid, or (d) one day after the business day of delivery by
facsimile transmission, if delivered by facsimile transmission, with copy by
first class mail, postage prepaid, and shall be addressed if to Indemnitee, at
the Indemnitee address as set forth beneath Indemnitee signatures to this
Agreement and if to the Company at the address of its principal corporate
offices (attention: Secretary) or at such other address as such party may
designate by ten days' advance written notice to the other party hereto.

     15. Consent to Jurisdiction.  The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the Court of
Chancery of the State of Delaware in and for New Castle County, which shall be
the exclusive and only proper forum for adjudicating such a claim.

     16. Severability.  The provisions of this Agreement shall be severable in
the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including, without limitations, each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.



   11

     17. Choice of Law.  This Agreement shall be governed by and its provisions
construed and enforced in accordance with the laws of the State of Delaware, as
applied to contracts between Delaware residents, entered into and to be
performed entirely within the State of Delaware, without regard to the conflict
of laws principles thereof.

     18. Subrogation.  In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee who shall execute all documents required and shall do all
acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.

     19. Amendment and Termination.  No amendment, modification, termination or
cancellation of this Agreement shall be effective unless it is in writing signed
by both the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.

     20. Integration and Entire Agreement.  This Agreement sets forth the entire
understanding between the parties hereto and supersedes and merges all previous
written and oral negotiations, commitments, understandings and agreements
relating to the subject matter hereof between the parties hereto.

     21. No Construction as Employment Agreement.  Nothing contained in this
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.

                                    AUTO-BY-TEL CORPORATION

                                    By:
                                       ------------------------------------

                                    Title:
                                          ---------------------------------

                                    Address: 18872 MacArthur Blvd., #200
                                            -------------------------------
                                             Irvine, CA 92612-1400
                                            -------------------------------

AGREED TO AND ACCEPTED BY:

- --------------------------------------

Name:
      --------------------------------

Address:
        ------------------------------

        ------------------------------


   1
                                                                    EXHIBIT 10.2

                              EMPLOYMENT AGREEMENT

         This Employment Agreement ("Agreement") is made and entered into, at
Irvine, California, as of the first day of July 1998, by and between
autobytel.com,inc., a corporation duly organized under the laws of the State of
Delaware (the "Company"), with offices at 18872 MacArthur Blvd., Second Floor,
Irvine, California, 92612-1400, and Mark W. Lorimer (hereinafter referred to as
the "Executive"), who resides at 2624 Calle Onice, San Clemente, California
92673.

                                    RECITALS

         WHEREAS: The Company currently employs and desires to continue to
employ the Executive as President and Chief Executive Officer.

         WHEREAS: The Executive is currently employed and desires to continue to
be so employed by the Company, subject to the following terms and conditions.

         NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and with reference to the above recitals, the parties hereby
agree as follows:


                                    ARTICLE 1

                               TERM OF EMPLOYMENT

         The Company hereby employs the Executive as President and Chief
Executive Officer of the Company and the Executive hereby accepts such
employment by the Company for a period of three (3) years (the "Term")
commencing from July 1, 1998 (the "Commencement Date") and expiring upon the
third anniversary of the Commencement Date, unless extended at the mutual option
of the parties. Notwithstanding the above, in the event of a Change of Control
of the Company prior to January 1, 2001 and while the Executive remains employed
by the Company, the Term shall automatically extend for a period of three (3)
years commencing from the date of the Change of Control. For purposes of this
Agreement "Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation but not including any initial or secondary public
offering) in one or a series of related transactions of all or substantially all
of the assets of the Company taken as a whole to any person (a "Person") or
group of persons acting together (a "Group") (other than any of the Company's
wholly-owned subsidiaries, any Company employee pension or benefits plan, or any
person or entity owning at least five (5) percent of the common stock of the
Company as of October 1, 1998), (ii) the adoption of a plan relating to the
liquidation or dissolution of the Company, (iii) the consummation of any
transactions (including any stock or other purchase, sale, acquisition,
disposition, merger or consolidation, but not including any initial or secondary
public offering) the result of which is that any Person or Group (other than any
of the Company's wholly-owned subsidiaries, any Company employee pension or
benefits plan, or any person or entity owning at least five (5) percent of the
common stock of the Company as of October 1, 1998), becomes the beneficial
owners of more than 40 percent of the aggregate voting power of all classes of
stock of the Company having the right to elect directors under ordinary
circumstances; or (iv) the first day on which a majority of the members of the
board of directors of the Company (the "Board") are not individuals who were
nominated for election or elected to the Board with the approval of two-thirds
of the members of the Board just prior to the time of such nomination or
election.



                                       1
   2
                                    ARTICLE 2

                             DUTIES AND OBLIGATIONS

         2.1 During the Term of this Agreement, the Executive shall: (i) devote
his full business time, attention and energies to the business of the Company;
(ii) shall use his best efforts to promote the interests of the Company; (iii)
shall perform all functions and services as the President and Chief Executive
Officer of the Company, including general management and supervision over the
operations of the business and employees of the Company; (iv) shall act in
accordance with the policies and directives of the Company as determined from
time to time by its Board and communicated to the Executive in writing; and (v)
shall report directly to the Board.

         2.2 The Executive covenants and agrees that, while actually employed by
the Company, he shall not engage in any other business duties or pursuits
whatsoever, or directly or indirectly render any services of a business or
commercial nature to any other person or organization, including, but not
limited to, providing services to any business that is in competition with or
similar in nature to the Company, whether for compensation or otherwise, without
the prior written consent of the Board. However, the expenditure of reasonable
amounts of time for educational, charitable, or professional activities shall
not be deemed a breach of this Agreement, if those activities do not materially
interfere with the services required under this Agreement, and shall not require
the prior written consent of the Board. Notwithstanding anything herein
contained to the contrary, this Agreement shall not be construed to prohibit the
Executive from making passive personal investments or conducting personal
business, financial or legal affairs or other personal matters if those
activities do not materially interfere with the services required hereunder. In
addition to the foregoing, notwithstanding anything contained herein to the
contrary, this Agreement shall not be construed to prohibit the Executive from
serving as a director or board member of any other corporation, company, or
other business entity, and such service shall not require approval by the Board.

         2.3 The principal location in which the Executive's services are to be
performed will be the Irvine, California area. The Executive shall not be
required to change such principal location without his consent.

                                    ARTICLE 3

                                  COMPENSATION

         3.1 As compensation for the services to be rendered by the Executive
pursuant to this Agreement, the Company hereby agrees to pay the Executive a
base salary equal to at least Three Hundred Twenty Five Thousand Dollars
($325,000.00) per year during the Term of this Agreement, which rate shall be
reviewed by the Board at least annually and may be increased (but not reduced)
by the Board in such amounts as the Board deems appropriate. The base salary
shall be paid in substantially equal bimonthly installments, in accordance with
the normal payroll practices of the Company.

         3.2 The Company shall provide the Executive with the opportunity to
earn an annual bonus for each fiscal year of the Company, occurring in whole or
in part during the Term. The annual bonus payable to the Executive shall be in
such amount and based on such criteria for the award as may be established by
the Board from time to time. Any bonus shall be paid as promptly as practicable
following the end of the preceding fiscal year. The Executive shall participate
also in all other short-term and long-term bonus or incentive plans or
arrangements in which other senior executives of the Company are eligible to
participate from time to time. The provisions of this Section 3.2 shall be
subject to the provisions of Section 3.5.



                                       2
   3

         3.3 As further consideration for the services rendered by the Executive
during the Term, the Executive shall be granted stock options to purchase shares
of the Company's common stock on the terms and conditions set forth in the
attached Schedule A (each an "Option").

         3.4 The Company shall have the right to deduct or withhold from the
compensation due to the Executive hereunder any and all sums required for
federal income and employee social security taxes and all state or local income
taxes now applicable or that may be enacted and become applicable during the
Term.

         3.5 In the event the Company becomes a "publicly held corporation"
within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), the Company may provide for shareholder approval of any
performance based compensation provided herein which is first created after the
Company becomes so "publicly held," and may provide for the establishment of a
compensation committee to establish any applicable performance goals and
determine whether such performance goals have been met.


                                    ARTICLE 4

                                EMPLOYEE BENEFITS

         4.1 The Company agrees that the Executive shall be entitled to all
ordinary and customary perquisites afforded to executive employees of the
Company, at the Company's sole expense (except to the extent employee
contribution may be required under the Company's benefit plans as they may now
or hereafter exist), which shall in no event be less than the benefits afforded
to the Executive on the date hereof and the other executive employees of the
Company as of the date hereof or from time to time, but in any event shall
include any qualified or non-qualified pension, profit sharing and savings
plans, any death benefit and disability benefit plans, life insurance coverages,
any medical, dental, health and welfare plans or insurance coverages and any
stock purchase programs that are approved by the Board on terms and conditions
at least as favorable as provided to the Executive on the date hereof and other
senior executives of the Company as of the date hereof or from time to time.

         4.2 The Executive shall be entitled to four (4) weeks of paid vacation
for each year of his employment hereunder (including four weeks for 1998),
which, to the extent unused in any given year, may be carried over in accordance
with the policies of the Company then in effect. Notwithstanding anything to the
contrary, however, the Executive shall be entitled to carry over any unused
vacation for a period not less than two (2) years.

         4.3 The Executive shall be entitled to a car allowance of One Thousand
Five Hundred Dollars ($1,500) per month during the Term.

         4.4 The Company shall reimburse the Executive for all reasonable fees
and costs incurred for his health club membership, work-out sessions with a
trainer and the purchase and installation of a home computer, printer and fax
machine. All amounts paid pursuant to this Section 4.4 shall be equal on a net
after tax basis to the fees incurred by the Executive, provided, however, that,
as a condition to such reimbursement, the Executive shall furnish to the Company
adequate records and other documentary evidence substantiating each expenditure.




                                       3
   4

                                    ARTICLE 5

                                BUSINESS EXPENSES

         5.1 The Company shall pay or reimburse the Executive for all reasonable
and authorized business expenses incurred by the Executive during the Term; such
payment or reimbursement shall not be unreasonably withheld so long as said
business expenses have been incurred for and promote the business of the Company
and are normally and customarily incurred by employees in comparable positions
at other comparable businesses in the same or similar market. Notwithstanding
the above, and except as otherwise provided in Section 4.4 hereof, the Company
shall not pay or reimburse the Executive for the costs of any membership fees or
dues for private clubs, civic organizations, and similar organizations or
entities, unless such organizations and the fees and costs associated therewith
have first been approved in writing by the Board.

         5.2 The Company shall reimburse the Executive for expenses incurred
with business-related travel. Notwithstanding the above, the Company shall not
pay or reimburse the Executive for the costs of any business-related travel to
the extent such costs exceed the cost of Business Class.

         5.3 As a condition to reimbursement under this Article 5, the Executive
shall furnish to the Company adequate records and other documentary evidence
required by federal and state statutes and regulations for the substantiation of
each expenditure. The Executive acknowledges and agrees that failure to furnish
the required documentation may result in the Company denying all or part of the
expense for which reimbursement is sought.


                                       4
   5

                                    ARTICLE 6

                            TERMINATION OF EMPLOYMENT

         6.1 Termination for Cause. The Board may, during the Term, without
notice to the Executive, terminate this Agreement and discharge the Executive
for Cause, whereupon the respective rights and obligations of the parties
hereunder shall terminate; provided, however, that the Company shall immediately
pay the Executive any amount due and owing pursuant to Articles 3, 4, and 5,
prorated to the date of termination; provided, further, however, that no
termination for Cause may occur without the Executive having the right to a
hearing with the Executive's counsel present. As used herein, the term "for
Cause" shall refer to the termination of the Executive's employment as a result
of any one or more of the following: (i) any conviction of the Executive for a
felony; (ii) the gross willful misconduct of the Executive which has a direct
and material injurious effect on the business or reputation of the Company; or
(iii) the gross dishonesty of the Executive which is directly and materially
injurious to the business and reputation of the Company. For purposes of this
Section 6.1, no act or failure to act, on the part of the Executive, shall be
considered "willful" if it is done, or omitted to be done, by the Executive in
good faith or with reasonable belief that his action or omission was in the best
interest of the Company. The Executive shall have the opportunity to cure any
such acts or omissions (other than item (i) above) within fifteen (15) days of
the Executive's receipt of a resolution adopted by the Board finding that, in
the good faith opinion of the Board, the Executive is guilty of acts or
omissions constituting "Cause," which resolution has been duly adopted by an
affirmative vote of a majority of the Board (excluding the Executive and any
individual alleged to have participated in the acts constituting "Cause"). Any
such vote shall be taken at a meeting of the Board called and held for such
purpose, after reasonable written notice is provided to the Executive setting
forth in reasonable detail the facts and circumstances claimed to provide a
basis of termination for Cause and the Executive is given an opportunity,
together with his counsel, to be heard before the Board.

         6.2 Termination Without Cause. Anything in this Agreement to the
contrary notwithstanding, the Board shall have the right, at any time in its
sole and subjective discretion, to terminate this Agreement without Cause upon
not less than thirty (30) days prior written notice to the Executive. The term
"termination without Cause" shall mean the termination of the Executive's
employment for any reason other than those expressly set forth in Section 6.1,
or no reason at all, and shall also mean the Executive's decision to terminate
this Agreement by reason of any act, decision or omission by the Company or the
Board that: (A) materially modifies, reduces, changes, or restricts the
Executive's salary, bonus opportunities, options or other compensation benefits
or perquisites, or the Executive's authority, functions, services, duties,
rights, and privileges as, or commensurate with the Executive's position as,
President and Chief Executive Officer of the Company as described in Section 2.1
hereof; (B) relocates the Executive without his consent from the Company's
offices located at 18872 MacArthur Boulevard, Irvine, California, 92612-1400 to
any other location in excess of fifty (50) miles beyond the geographic limits of
Irvine, California; (C) deprives the Executive of his titles and positions of
President and Chief Executive Officer of the Company and/or his position as a
member of the Board; or (D) involves or results in any failure by the Company to
comply with any provision of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive (each a "Good Reason"). In the event the Company or the Executive
shall exercise the termination right granted pursuant to this Section 6.2, the
Company shall, within thirty (30) days of notice of termination to or from the
Executive (as the case may be), pay to the Executive in a single lump-sum
payment the base salary that would have been received by the Executive if he had
remained employed by the Company for the greater of (A) the remaining balance of
the Term or (B) two (2) years; provided, however, that for purposes of
calculating the payment pursuant to this sentence, the Executive's base salary
per year shall be the highest rate in effect during the Term. The Company also
shall (i) continue to provide to the Executive and his beneficiaries, at its
sole cost, the insurance coverages referred to in Section 4.1 above, and (ii)
pay to the Executive in a single lump-sum payment the aggregate cost of the
benefits (other than insurance coverages)


                                       5
   6

under Section 4.1 hereof, in each case to the extent he would have received such
insurance coverages and benefits had he remained employed by the Company for the
greater of (A) the remaining balance of the Term or (B) two (2) years.

         6.3 Termination for Death or Disability. The Executive's employment
shall terminate automatically upon the Executive's death during the Term. If the
Company determines in good faith that the Disability (as defined below) of the
Executive has occurred during the Term, it shall give written notice to the
Executive of its intention to terminate his employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive, provided that, within the
thirty (30) days after such receipt, the Executive shall not have returned to
full-time performance of his duties.

                  Anything in this Agreement to the contrary notwithstanding,
upon the death or Disability of the Executive, the Company shall provide the
Executive or his successors, heirs, designees, or assigns, with continued
payment of the Executive's then current base salary and all benefits under
Article 4 hereof for two (2) years. For purposes of this Agreement, "Disability"
shall mean the inability of the Executive to perform his duties to the Company
on account of physical or mental illness or incapacity for a period of one
hundred eighty (180) consecutive calendar days, or for a period of two hundred
ten (210) calendar days, whether or not consecutive, during any three hundred
sixty-five (365) day period.





                                       6
   7

         6.4 Termination Without Good Reason. Anything in this Agreement to the
contrary notwithstanding, the Executive shall have the right, at any time in his
sole and subjective discretion, to terminate this Agreement without Good Reason
upon not less than thirty (30) days prior written notice to the Company. In the
event the Executive voluntarily terminates his employment hereunder other than
for Good Reason, the respective rights and obligations of the parties hereunder
shall terminate; provided, however, that the Company shall immediately pay the
Executive any amount due and owing pursuant to Articles 3, 4, and 5, prorated to
the date of termination.

         6.5 Termination Prior to or Following a Change of Control.
Notwithstanding, the foregoing, in the event the employment of the Executive is
terminated during the six (6) month period immediately prior to, or the first
thirty-six (36) months following, a Change of Control either (i) by the
Executive for Good Reason or (ii) by the Company other than for Cause,
Disability or death, then, in addition to the payments and benefits provided in
Section 6.2 hereof, the Company shall, within thirty (30) days of notice of
termination to the Executive, pay to the Executive in a single lump-sum payment
(i) an amount equal to (A) the highest annual bonus paid by the Company to the
Executive during the three (3) fiscal years prior to termination, multiplied by
(B) two (2); and (ii) an amount equal to the cost of all other benefits under
Article 4 hereof for the greater of (A) the remaining balance of the Term or (B)
two (2) years. For purposes of this Section 6.5, "Term" shall be the period of
time of this Agreement as defined by Article 1 hereof, which includes any
extension thereof by reason of a Change of Control prior to January 1, 2001.

         6.6 Anything in this Agreement to the contrary notwithstanding, upon
the Executive's termination under this Article 6, the Company's obligations with
respect to any stock option to purchase shares of the Company's common stock
granted to the Executive shall be determined by the terms and conditions of such
option as set forth in the Executive's written option agreement regarding such
option, which shall be fully consistent with the terms and conditions set forth
in attached Schedule A with respect to the options described therein.


                                    ARTICLE 7

                             PARACHUTE TAX INDEMNITY

         7.1      Gross-Up Payment.

         (a) If it shall be determined that any amount paid, distributed or
treated as paid or distributed by the Company to or for the benefit of the
Executive (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Article 7) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code or any interest or
penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, being hereinafter
collectively referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Executive of all federal, state and local taxes
(including any interest or penalties imposed with respect to such taxes),
including without limitation, any income taxes (including any interest or
penalties imposed with respect thereto) and Excise Tax imposed on the Gross-up
Payment, the Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments, provided, however, that in no event will
the amount of the Gross-Up Payment payable pursuant to this Article 7 exceed
Five Million Dollars ($5,000,000.00).



                                       7
   8

          (b) The determinations of whether and when a Gross-Up Payment is
required under this Article 7 shall be made by independent tax counsel (the "Tax
Counsel") based on its good faith interpretation of applicable law. The amount
of such Gross-Up Payment and the valuation assumptions to be utilized in
arriving at such determination shall be made by an independent nationally
recognized accounting firm (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. The Tax Counsel and
Accounting Firm shall initially be appointed by the Company after consultation
in good faith with the Executive and subject to the approval of the Executive
(which approval shall not be unreasonably withheld), provided, however, that if
the potential amount of the Gross-Up Payment (but for the limit in Section
7.1(a) above) could exceed Five Million Dollars, the Executive shall have the
opportunity to appoint a new Tax Counsel and Accounting Firm after consultation
in good faith with the Company. If the Tax Counsel and Accounting Firm selected
by the Company determine that the amount of the Gross-Up Payment is less than $5
million, but Executive provides an opinion of a second independent Tax Counsel
that the Gross-Up Payment (but for the limit in Section 7.1(a) above) could be
greater than $5 million, then Executive shall be entitled to appoint the Tax
Counsel and the Accounting Firm after consultation in good faith with the
Company and subject to the approval of the Company (which approval shall not be
unreasonably withheld). All fees and expenses of any Tax Counsels and Accounting
Firms referred to above shall be borne by the Company. Any Gross-Up Payment, as
determined pursuant to this Article 7, shall be paid by the Company to the
Executive within ten (10) days of the receipt of the Accounting Firm's
determination. Any determinations by the Tax Counsel and Accounting Firm shall
be binding upon the Company and the Executive, provided, however, if it is later
determined that there has been an underpayment of Excise Tax and that Executive
is required to make an additional Excise Tax payment(s) on any Payment or
Gross-Up Payment, the Company shall provide a similar full gross-up on such
additional liability, subject to the overall $5 million limit set forth in
Section 7.1(a) above.

         (c) For purposes of any determinations made by any Tax Counsel and
Accounting Firm acting under Section 7.1(b) above:

                  (i)      All Payments and Gross-Up Payments with respect to
                           Executive shall be deemed to be "parachute Payments"
                           under Section 280G(b)(2) of the Code and to be
                           "excess parachute payments" under Section 280G(b)(1)
                           of the Code that are fully subject to the Excise Tax
                           under Section 4999 of the Code, except to the extent
                           (if any) that such Tax Counsel determines in writing
                           in good faith that a Payment in whole or in part does
                           not constitute a "parachute payment" or otherwise is
                           not subject to Excise Tax;

                  (ii)     The value of any non-cash benefits or deferred or
                           delayed payments or benefits shall be determined in a
                           manner consistent with the principles of Section 280G
                           of the Code; and

                  (iii)    Executive shall be deemed to pay federal, state and
                           local income taxes at the actual marginal rate
                           applicable to individuals in the calendar year in
                           which the Gross-Up Payment is made, net of any
                           applicable reduction in federal income taxes for any
                           state and local taxes paid on the amounts in
                           question.





                                       8
   9

         7.2 Claims and Proceedings. The Executive shall notify the Company in
writing of any Excise Tax claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of a Gross-Up Payment. Such
notification shall be given as soon as practicable but no later then twenty (20)
business days after the Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on which such claim
is to be paid. The Executive shall not pay such claim prior to the expiration of
the 30-day period following the date on which it gives such notice to the
Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to contest such
Excise Tax claim, the Executive shall: (i) give the Company any information
reasonably requested by the Company relating to such claim; (ii) take such
action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably
selected by the Company after consultation in good faith with Executive and
subject to approval by Executive (which approval shall not be unreasonably
withheld) under the circumstances set forth in Section 7.1; (iii) cooperate with
the Company in good faith in order to effectively contest such claim; and (iv)
permit the Company to participate in any proceeding relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expense. Without limitation of the foregoing provisions of
this Article 7, if the Gross-Up Payment payable hereunder (determined on the
basis of the amount being contested), together with any previous Gross-Up
Payment made by the Company to the Executive hereunder (collectively the
"Aggregate Gross-Up Payment"), would not exceed Five Million Dollars
($5,000,000) (determined without regard to the $5 million limit in Section
7.1(a)), the Company shall control the Excise Tax portion of any proceedings
taken in connection with such contest and, at its sole option, may pursue or
forego any and all administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such Excise Tax claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the Excise Tax claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine. If the Company directs the
Executive to pay such Excise Tax claim and sue for a refund, the Company shall
advance the amount of such payment to the Executive, on an interest-free basis,
and shall indemnify and hold the Executive harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest and penalties) imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and provided, however, that any Company-directed extension of the
statute of limitations relating to payment of taxes for the Executive's taxable
year with respect to which such contested Excise Tax amount is claimed to be due
shall be effective only if it can be and is limited to the contested Excise Tax
liability. Notwithstanding anything to the contrary herein, the Executive shall
control the settlement or contest, as the case may be, of all non-Excise Tax
issues and of any Excise Tax issues with respect to which the Aggregate Gross-Up
Payment payable hereunder (but for the limit in Section 7.1(a) above) would
exceed Five Million Dollars ($5,000,000). The Executive shall be entitled to
settle or contest, as the case may be, any non-Excise Tax issue raised by the
Internal Revenue Service or any other taxing authority, so long as such action
does not have a material adverse effect on an Excise Tax contest being pursued
by and under the control of the Company.





                                       9
   10

         7.3 Refunds. If, after the Executive's receipt of an amount advanced by
the Company pursuant to this Article 7 for payment of Excise Taxes, the
Executive files an Excise Tax refund claim and receives any refund with respect
to such claim, the Executive shall (subject to the Company's complying with the
requirements of this Article 7) except as provided below, promptly pay to the
Company the amount of any such refund of Excise Tax (together with any interest
paid or credited thereon, but after any and all taxes applicable thereto), plus
the amount (after any and all taxes applicable thereto) of the refund (if any is
applied for and received) of any income tax paid by Executive with respect to
and as a result of his prior receipt of any previously pai Gross-Up Payment
indemnifying Executive with respect to any such Excise Tax later so refunded. In
the event Executive files for a refund of the Excise Tax and such request would,
if successful, require Executive to refund any amount to the Company pursuant to
this provision, then Executive shall be required to seek a refund of the Income
Tax portion of any corresponding Gross-Up Payment so long as such refund request
would not have a material adverse effect on Executive (which determination shall
be made by independent tax counsel selected by Executive after good faith
consultation with the Company and subject to approval of the Company, which
approval shall not be unreasonably withheld). Notwithstanding the above,
Executive shall have no obligation to pay any portion of any such tax refund(s)
to the Company if and to the extent that the Excise Tax to which such refund
relates was not eligible for a Gross-Up Payment by reason of the $5 million
limit in Section 7.1(a) above. For this purpose, if the total Excise Tax paid
with respect to Executive exceeds the maximum amount eligible for Gross-Up
Payment coverage by reason of the $5 million limit in Section 7.1 (a) above, any
subsequent Excise Tax refunds shall first be applied against the portion of any
Excise Tax payments that are not covered by the Gross-Up Payments provided under
this Article 7. If, after the Executive's receipt of an amount advanced by the
Company pursuant to this Article 7, a determination is made that the Executive
shall not be entitled to any refund with respect to such claim and the Company
does not notify the Executive in writing of its intent to contest such denial of
refund prior to the expiration of thirty (30) days after such determination,
then such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount of
the Gross-Up Payment required to be paid.


                                    ARTICLE 8

                       NO MITIGATION OR OFFSET; INSURANCE

         8.1 No Mitigation or Offset. The Executive shall not be required to
seek other employment or to reduce any severance benefit payable to him under
Article 6 hereof, and no severance benefit shall be reduced on account of any
compensation received by the Executive from other employment. The Company's
obligation to pay severance benefits under this Agreement shall not be reduced
by any amount owed by the Executive to the Company.


                                       10
   11

         8.2      Indemnification; Insurance.

                  (a) If the Executive is a party or is threatened to be made a
         party to any threatened, pending or completed claim, action, suit or
         proceeding, or appeal therefrom, whether civil, criminal,
         administrative, investigative or otherwise, because he is or was an
         officer of the Company, or at the express request of the Company is or
         was serving, for purposes reasonably understood by him to be for the
         Company, as a director, officer, partner, employee, agent or trustee
         (or in any other capacity of an association, corporation, general or
         limited partnership, joint venture, trust or other entity), the Company
         shall indemnify the Executive against any reasonable expenses
         (including attorneys' fees and disbursements), and any judgments, fines
         and amounts paid in settlement incurred by him in connection with such
         claim, action, suit, proceeding or appeal therefrom to the extent such
         expenses, judgments, fines and amounts paid in settlement were not
         advanced by the Company on his behalf pursuant to subsection (b) below,
         to the fullest extent permitted under Delaware law. The Company shall
         provide Executive with D&O insurance coverage at least as favorable to
         Executive as what the Company maintains as of the date hereof or such
         greater coverage as the Company may maintain from time to time.

                  (b) Upon the written request of the Executive specifying the
         amount of a requested advance and the intended use thereof, the Company
         shall indemnify Executive for his expenses (including attorneys' fees
         and disbursements), judgments, fines and amounts paid in settlement
         incurred by him in connection with such claim, action, suit, proceeding
         or appeal whether civil, criminal, administrative, investigative or
         otherwise, in advance of the final disposition of any such claim,
         action, suit, proceeding or appeal therefrom to the fullest extent
         permitted under Delaware law.

                                    ARTICLE 9

                              RESTRICTIVE COVENANTS

         9.1 Covenant Not to Disclose Confidential Information. During the Term
and following termination of this Agreement, the Executive agrees that, without
the Company's prior written consent, he will not use or disclose to any person,
firm, association, partnership, entity or corporation, any confidential
information concerning: (i) the business operations or internal structure of the
Company; (ii) the customers of the Company; (iii) the financial condition of the
Company; and (iv) other confidential information pertaining to the Company,
including without limitation, trade secrets, technical data, marketing analyses
and studies, operating procedures, customer and/or inventor lists, or the
existence or nature of any of the Company's agreements (other than this
Agreement and any other option or compensation related agreements involving the
Executive); provided, however, that the Executive shall be entitled to disclose
such information: (i) to the extent the same shall have otherwise become
publicly available (unless made publicly available by the Executive); (ii)
during the course of or in connection with any actual or potential litigation,
arbitration, or other proceeding based upon or in connection with the subject
matter of this Agreement; (iii) as may be necessary or appropriate to conduct
his duties hereunder, provided the Executive is acting in good faith and in the
best interest of the Company; or (iv) as may be required by law or judicial
process.





                                       11
   12

         9.2 Covenant Not to Compete. The Executive acknowledges that he has
established and will continue to establish favorable relations with the
customers, clients and accounts of the Company and will have access to trade
secrets of the Company. Therefore, in consideration of such relations and to
further protect trade secrets, directly or indirectly, of the Company, the
Executive agrees that during the Term and for a period of one (1) year from the
date of termination of the Executive, the Executive will not, directly or
indirectly, without the express written consent of the Board:

                  (i) own or have any interest in or act as an officer,
         director, partner, principal, employee, agent, representative,
         consultant or independent contractor of, or in any way assist in, any
         business which is engaged, directly or indirectly, in any business
         competitive with the Company in those automotive markets and/or
         automotive products lines in which the Company competes within the
         United States at any time during the Term, or become associated with or
         render services to any person, firm, corporation or other entity so
         engaged ("Competitive Businesses"); provided, however; that the
         Executive may own without the express written consent of the Company
         not more than two (2) percent of the issued an outstanding securities
         of any company or enterprise whose securities are listed on a national
         securities exchange or actively traded in the over the counter market;

                  (ii) solicit clients, customers or accounts of the Company
         for, on behalf of or otherwise related to any such Competitive
         Businesses or any products related thereto; or

                  (iii) solicit any person who is or shall be in the employ or
         service of the Company to leave such employ or service for employment
         with the Executive or an affiliate of the Executive.

Notwithstanding the foregoing, if any court determines that the covenant not to
compete, or any part thereof, is unenforceable because of the duration of such
provision or the geographic area or scope covered thereby, such court shall have
the power to reduce the duration, area or scope of such provision to the extent
necessary to make the provision enforceable and, in its reduced form, such
provision shall then be enforceable and shall be enforced.

         9.3 Specific Performance. Recognizing the irreparable damage will
result to the Company in the event of the breach or threatened breach of any of
the foregoing covenants and assurances by the Executive contained in Sections
9.1 and 9.2 hereof, and that the Company's remedies at law for any such breach
or threatened breach may be inadequate, the Company and its successors and
assigns, in addition to such other remedies which may be available to them,
shall be entitled to an injunction to be issued by any court of competent
jurisdiction ordering compliance with this Agreement or enjoining and
restraining the Executive, and each and every person, firm or company acting in
concert or participation with him, from the continuation of such breach. The
obligations of the Executive and rights of the Company pursuant to this Article
9 shall survive the termination of this Agreement. The covenants and obligations
of the Executive set forth in this Article 9 are in addition to and not in lieu
of or exclusive of any other obligations and duties the Executive owes to the
Company, whether expresses or implied in fact or law.







                                       12
   13

                                   ARTICLE 10

                               GENERAL PROVISIONS

         10.1 This Agreement and attached schedules (which are incorporated
herein and shall be treated as part of hereof) are intended to be the final,
complete and exclusive agreement between the parties relating to the employment
of the Executive by the Company with respect to the Term and all prior or
contemporaneous understandings, representations and statements, oral or written,
are merged herein. Notwithstanding anything to the contrary, the terms and
conditions of any stock option agreements signed by the Executive prior to the
date hereof shall remain in effect. No modification waiver, amendment, discharge
or change of this Agreement shall be valid unless the same is in writing and
signed by the party against which the enforcement thereof is or may be sought.

         10.2 No waiver, by conduct or otherwise, by any party of any term,
provision, or condition of this Agreement, shall be deemed or construed as a
further or continuing waiver of any such term, provision, or condition nor as a
waiver of a similar or dissimilar condition or provision at the same time or at
any prior or subsequent time.

         10.3 The rights under this Agreement, or by law or equity, shall be
cumulative and may be exercised at any time and from time to time. No failure by
any party to exercise, and no delay in exercising, any rights shall be construed
or deemed to be a waiver thereof, nor shall any single or partial exercise by
any party preclude any other or future exercise thereof or the exercise of any
other right.

         10.4 Except as otherwise provided in this Agreement, any notice,
approval, consent, waiver or other communication required or permitted to be
given or to be served upon any person in connection with this Agreement shall be
in writing. Such notice shall be personally served, sent by telegram, tested
telex, fax or cable, or sent prepaid by either registered or certified mail with
return receipt requested or Federal Express and shall be deemed given (i) if
personally served or by Federal Express, when delivered to the person to whom
such notice is addressed, (ii) if given by telegram, telex, fax or cable, when
sent, or (ii) if given by mail, two (2) business days following deposit in the
United States mail. Any notice given by telegram, telex, fax or cable shall be
confirmed in writing by overnight mail or Federal Express within forty-eight
(48) hours after being sent. Such notices shall be addressed to the party to
whom such notice is to be given at the party's address set forth below or as
such party shall otherwise direct.

         If to the Company:           autobytel.com,inc.
                                      18872 MacArthur Blvd., Second Floor
                                      Irvine, California 92612-1400
                                      Attn: Mr. Craig S. Frost, Esq.

         If to the Executive:         Mark W. Lorimer
                                      2624 Calle Onice
                                      San Clemente, California 92673

         With a copy to:              [to be added]

         10.5 The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the successors and assigns of the parties hereto.



                                       13
   14

         10.6 This Agreement shall be construed and enforced in accordance with
the laws of the State of California, without giving effect to the principles of
conflict of laws thereof, except that the indemnification provisions of Section
8.2 shall be governed by Delaware law without regard to conflict of laws
principles.

         10.7 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which shall constitute one
instrument.

         10.8 The provisions of this Agreement are agreed to be severable, and
if any provision, or application thereof, is held invalid or unenforceable, then
such holding shall not effect any other provision or application.

         10.9 As used herein, and as the circumstances require, the plural term
shall include the singular, the singular shall include the plural, the neuter
term shall include the masculine and feminine genders, and the feminine term
shall include the neuter and the masculine genders.

         10.10 Any controversy or claim arising out of, or related to, this
Agreement, or the breach thereof, shall be settled by binding arbitration in the
City of Irvine, California, in accordance with the rules then in effect of the
American Arbitration Association, and the arbitrator's decision shall be binding
and final, and judgment upon the award rendered may be entered in any court
having jurisdiction thereof. Each party hereto shall pay its or their own
expenses incident to the negotiation, preparation and resolution of any
controversy or claim arising out of, or related to, this Agreement, or the
breach thereof, provided, however, the Company shall pay and be solely
responsible for any attorneys' fees and expenses and court or arbitration costs
incurred by the Executive as a result of a claim that the Company has breached
or otherwise failed to perform this Agreement or any provision hereof to be
performed by the Company if the Executive prevails in the contest in whole or in
part.





                                       14
   15

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.


                                        autobytel.com,inc.


                                        By       /s/ Michael J. Fuchs
                                                 -------------------------------
                                        Name:    Michael J. Fuchs
                                        Its:     Chairman of the Board



                                        /s/ Mark W. Lorimer
                                        ----------------------------------------
                                        Mark W. Lorimer








                  [Remainder of page intentionally left blank]







                                       15
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                                   SCHEDULE A

         As further consideration for the services rendered by the Executive
during the Term, the Executive shall be granted Options on the terms and
conditions set forth below, effective as of December 17, 1998. Each such Option
shall be effective upon such grant effective date.

         1. Regular 1998 Options. The Executive shall be granted Options to
purchase two hundred thousand (200,000) shares of the Company's common stock
(the "Regular 1998 Options") under the Company's 1998 Stock Incentive Plan. The
Regular 1998 Options shall have a ten (10) year term (the " Regular 1998 Option
Term") of exercise and, except as otherwise provided herein, shall remain
exercisable following vesting for the full term. The exercise price of an Option
granted as a Regular 1998 Option shall be equal to the fair market value per
share of the Company's common stock (as determined by the Company) as of the
date such Option is granted.

         (a) Vesting. The Regular 1998 Options shall vest based on the continued
employment of the Executive (which shall include the Executive's membership on
the Board) in equal installments of fifty (50) percent of the number of subject
shares on each of June 1, 1999 and June 1, 2000.

         (b) Payment Upon Exercise. Payment for the shares subject to any
Regular 1998 Option may be tendered in cash or by certified, bank cashier's or
teller's check or by shares of the Company's common stock (valued at fair market
value (as determined by the Company) as of the date of tender) already owned by
the Executive, or some combination of the foregoing or such other form of
consideration which has been approved by the Board, including any approved
cashless exercise mechanism or a promissory note given by the Executive.

         (c) Termination for Cause. As of the date of the Executive's
termination for Cause under Section 6.1 of this Agreement, any unvested or
unexercised portion of the Regular 1998 Options shall terminate immediately and
shall be of no further force or effect.

         (d) Termination Without Cause or for Good Reason. As of the date of the
Executive's termination by the Company without Cause or by the Executive for
Good Reason under Section 6.2 of this Agreement, any unvested portion of the
Regular 1998 Options shall become immediately and fully vested and exercisable
from such termination of employment until the date that is two (2) years
following the termination date.

         (e) Termination due to Death or Disability. As of the date of the
Executive's termination due to death or Disability under Section 6.3 of this
Agreement, any unvested portion of the Regular 1998 Options shall become
immediately and fully vested and exercisable. Any previously vested but
unexercised Regular 1998 Options shall remain exercisable from the date of such
termination of employment until the end of the Regular 1998 Option Term or, if
earlier, the date that is two (2) years following the termination date.

          (f) Termination Without Good Reason. As of the date of any voluntary
termination of employment with the Company by the Executive other than due to
death or Disability, and other than for Good Reason, any unvested portion of the
Regular 1998 Options shall terminate immediately and shall be of no further
force or effect. Any previously vested but unexercised Regular 1998 Options
shall remain exercisable from the date of such termination of employment until
the end of the Regular 1998 Option Term or, if earlier, the date that is one (1)
year following the termination date.



                                       16
   17

         (g) Termination Prior to or Following a Change of Control. In the event
of a Change of Control while the Executive is employed by the Company, or the
Executive's employment is terminated by the Company without Cause or by the
Executive for Good Reason within six (6) months prior to a Change of Control
during the Term, any unvested installment of the Regular 1998 Options shall
immediately vest and become exercisable from the date of such Change of Control,
or if earlier the date of termination, until the date that is two (2) years
following (i) the Change of Control date, or (ii) if earlier the date of
termination.

         2. 1998 Performance Options. The Executive also shall be granted
Options to purchase five hundred thousand (500,000) shares of the Company's
common stock (the "1998 Performance Options") under the Company's 1998 Stock
Incentive Plan. The 1998 Performance Options shall be granted in six (6)
installments with eighty thousand (80,000) shares subject to each of the first
and second installment grants and eighty-five thousand (85,000) shares subject
to each of the third, fourth, fifth and sixth installment grants. The 1998
Performance Options shall have a ten (10) year term (the "1998 Performance
Option Term") of exercise and, except as otherwise provided herein shall remain
exercisable following vesting for the full term. The exercise price of an Option
granted as a 1998 Performance Option shall be equal to the fair market value (as
determined by the Company) per share of the Company's common stock as of the
date such Option is granted (the "Exercise Price").

         (a) Vesting. Each installment grant of 1998 Performance Options shall
vest based on the continued employment of the Executive through the seventh
anniversary of the date the installment of 1998 Performance Options was granted;
provided, however, that following an effective initial public offering by the
Company (the "IPO") and based on the continued employment of the Executive the
vesting of the 1998 Performance Options shall accelerate as follows:

                  (i) the first installment grant will vest immediately and
         fully upon the first six (6) month anniversary of the date of grant, or
         any six month anniversary of such date thereafter, following the IPO if
         the average trading price (as determined by averaging either the
         closing price or bid-ask midpoint) of the Company's common stock for
         the ten trading days (the "Average Trading Price") preceding any such
         anniversary date exceeds the Exercise Price by at least Six Dollars and
         Sixty Cents ($6.60) ;

                  (ii) the second installment grant will vest immediately and
         fully upon the first one (1) year anniversary of the date of grant, or
         any six month anniversary of such date thereafter, following the IPO if
         the Average Trading Price preceding any such anniversary date exceeds
         the Exercise Price by at least Thirteen Dollars and Twenty Cents
         ($13.20);

                   (iii) the third installment grant will vest immediately and
         fully upon the first eighteen (18) month anniversary of the date of
         grant, or any six month anniversary of such date thereafter, following
         the IPO if the Average Trading Price preceding any such anniversary
         date exceeds the Exercise Price by at least Nineteen Dollars and Eighty
         Cents ($19.80);

                  (iv) the fourth installment grant will vest immediately and
         fully upon the first two (2) year anniversary of the date of grant, or
         any six month anniversary of such date thereafter, following the IPO if
         the Average Trading Price preceding any such anniversary date exceeds
         the Exercise Price by at least Twenty-Six Dollars and Forty Cents
         ($26.40);





                                       17
   18

                  (v) the fifth installment grant will vest immediately and
         fully upon the first two and half year anniversary of the date of
         grant, or any six month anniversary of such date thereafter, following
         the IPO if the Average Trading Price preceding any such anniversary
         date exceeds the Exercise Price by at least Thirty-three Dollars
         ($33.00); and

                  (vi) the sixth installment grant will vest immediately and
         fully upon the first three (3) year anniversary of the date of grant,
         or any six month anniversary of such date thereafter, following the IPO
         if the Average Trading Price preceding any such anniversary date
         exceeds the Exercise Price by at least Thirty-nine Dollars and Sixty
         Cents ($39.60).

         (b) Payment Upon Exercise. Payment for the shares subject to any 1998
Performance Option may be tendered in cash or by certified, bank cashier's or
teller's check or by shares of the Company's common stock (valued at fair market
value (as determined by the Company) as of the date of tender) already owned by
the Executive, or some combination of the foregoing or such other form of
consideration which has been approved by the Board, including any approved
cashless exercise mechanism or a promissory note given by the Executive.

         (c) Termination for Cause. As of the date of the Executive's
termination for Cause under Section 6.1 of this Agreement, any unvested or
unexercised portion of the 1998 Performance Options shall terminate immediately
and shall be of no further force or effect.

          (d) Termination Without Cause or for Good Reason. If the Company has
not effected an IPO as of the date of the Executive's termination by the Company
without Cause or by the Executive for Good Reason under Section 6.2 of this
Agreement, any unvested portion of the 1998 Performance Options shall become
immediately and fully vested and exercisable as of the date of such termination.
Any shares subject to the 1998 Performance Options that become vested and
exercisable in accordance with the foregoing and any previously vested but
unexercised 1998 Performance Options shall remain exercisable from the date of
such termination of employment until the date that is one (1) year following the
termination date. If the Company has effected an IPO as of the date of the
Executive's termination by the Company without Cause or by the Executive for
Good Reason under Section 6.2 of this Agreement, any unvested portion of the
1998 Performance Options shall become immediately and fully vested and
exercisable to the extent the stock price targets in Paragraph 2.(a)(i)-(vi)
above are met on the termination date or as of the immediately preceding six (6)
month anniversary of the date of grant, or as of the six (6) month anniversary
of the grant date following such termination. Any shares subject to the 1998
Performance Options that become vested and exercisable in accordance with the
foregoing and any previously vested but unexercised 1998 Performance Options
shall remain exercisable from the date of such termination of employment until
the date that is one (1) year following the termination date, provided, however,
that if the Average Trading Price as of the date of termination exceeds the
Company's IPO initial offering price by at least thirty (30) percent, the vested
and unexercised 1998 Performance Options shall remain exercisable until the date
that is two (2) years following the termination date.





                                       18
   19

         (e) Due to Death or Disability. If the Company has not effected an IPO
as of the date of the Executive's termination due to death or Disability under
Section 6.3 of this Agreement, as of the date of such termination of the
Executive any unvested portion of the 1998 Performance Options shall become
immediately and fully vested and exercisable. If the Company has effected an IPO
as of such termination date, any unvested portion of the 1998 Performance
Options shall become vested and exercisable to the extent the stock price
targets in Paragraph 2.(a)(i)-(vi) above are met on the termination date or as
of the immediately preceding six (6) month anniversary of the date of grant, or
as of the six (6) month anniversary of the grant date following such
termination. Any shares subject to the 1998 Performance Options that become
vested and exercisable in accordance with the foregoing and any previously
vested but unexercised 1998 Performance Options shall remain exercisable from
the date of such termination of employment until the date that is one (1) year
following the termination date, provided, however, that if the Average Trading
Price as of the date of termination exceeds the Company's IPO initial offering
price by at least thirty (30) percent, the vested and unexercised 1998
Performance Options shall remain exercisable until the date that is two (2)
years following the termination date.

         (f) Termination Without Good Reason. Regardless of whether the Company
has or has not effected an IPO as of the date of any voluntary termination of
employment with the Company by the Executive other than due to death or
Disability and other than for Good Reason, as of the date of such termination by
the Executive any unvested portion of the 1998 Performance Options shall
terminate immediately and shall be of no further force or effect. Any previously
vested but unexercised 1998 Performance Options shall remain exercisable from
the date of such termination of employment until the date that is one (1) year
following the termination date, provided, however, that if the Average Trading
Price as of the date of termination exceeds the Company's IPO initial offering
price by at least thirty (30) percent, the vested and unexercised 1998
Performance Options shall remain exercisable until the date that is two (2)
years following the termination date.

          (g) Change of Control. In the event of a Change of Control while the
Executive is employed by the Company, or the Executive's employment is
terminated by the Company without Cause or by the Executive for Good Reason
within six (6) months prior to a Change of Control during the Term, any
otherwise unvested installment of the 1998 Performance Options shall immediately
vest and become exercisable to the extent (i) the installment meets the
applicable stock price targets in Paragraph 2.(a)(i)-(vi) above based on the
Average Trading Price at the time of or within six (6) months of the Change of
Control but without regard to any anniversary of the installment's grant date if
the Company has effected an IPO as of the date of the Change of Control; or (ii)
the fair market value (as determined by an independent appraiser designated by
the Company) per share of the Company's common stock exceeds the Exercise Price
of the installment by an amount equal to or greater than the applicable dollar
amount for the installment as set forth in 2.(a)(i)-(vi) above if the Company
has not effected an IPO as of the date of the Change of Control. Any shares
subject to the 1998 Performance Options that become vested and exercisable in
accordance with the foregoing and any previously vested but unexercised 1998
Performance Options shall be at the Executive's option either cashed out based
on a value per share determined in accordance with (i) or (ii) of this clause
(g), as applicable, or remain exercisable from the date of such Change of
Control until the date that is one (1) year following the Change of Control
date, provided, however, that if the Average Trading Price as of the date of the
Change of Control exceeds the Company's IPO initial offering price by at least
thirty (30) percent, the vested and unexercised 1998 Performance Options shall
remain exercisable until the date that is two (2) years following the Change of
Control date.


                                       19


   1

                                                                    EXHIBIT 10.9

   
[*] Confidential Treatment has been requested for certain portions of this
    exhibit.
    

 
                              MARKETING AGREEMENT

                                     between

                       AUTO-BY-TEL ACCEPTANCE CORPORATION

                                on the one hand,

                                       and

                              AIU INSURANCE COMPANY
                 AMERICAN INTERNATIONAL SOUTH INSURANCE COMPANY
                         AMERICAN HOME ASSURANCE COMPANY
                    AMERICAN INTERNATIONAL INSURANCE COMPANY
          AMERICAN INTERNATIONAL INSURANCE COMPANY OF CALIFORNIA, INC.
                       ILLINOIS NATIONAL INSURANCE COMPANY
                           MINNESOTA INSURANCE COMPANY
             NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA
               THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA

                                       and

                                AUTO-BY-TEL, INC.
                       as Guarantor of the obligations of
                       AUTO-BY-TEL ACCEPTANCE CORPORATION
                                    hereunder


   2
TABLE OF CONTENTS Page ---- 1. REPRESENTATIONS AND WARRANTIES................................................2 Section 1.1 Representations and Warranties of ABTAC and ABT.................2 Section 1.2 Representations and Warranties of AIC...........................2 2. MARKETING ARRANGEMENT.........................................................3 Section 2.1 Phases of Marketing Arrangement.................................3 Section 2.2 Preparation of Marketing Materials..............................4 Section 2.3 Ownership of Marketing Materials................................4 Section 2.4 Development Costs...............................................4 3. COVENANTS, DUTIES AND RIGHTS OF AIC...........................................5 Section 3.1 Regulatory Authorizations.......................................5 Section 3.2 Initial Product Offering........................................5 Section 3.3 Low Cost Products...............................................5 Section 3.4 Reservation of Rights...........................................5 Section 3.5 Toll Free Number................................................5 Section 3.6 Cross-Promotion.................................................5 Section 3.7 Payment of Development Costs....................................6 Section 3.8 Books and Records: Auditing.....................................6 4. COVENANTS, DUTIES AND RIGHTS OF ABTAC AND ABT.................................6 Section 4.1 Insurance Marketing Materials...................................6 Section 4.2 Relationships with ABT Friends..................................6 Section 4.3 Hyperlink Development Costs.....................................7 Section 4.4 Cross-Promotion.................................................7 Section 4.5 Guarantee.......................................................7 Section 4.6 Additional Services.............................................7 5. [RESERVED]....................................................................7 6. EXCLUSIVITY...................................................................7 Section 6.1 Exclusivity.....................................................7 Section 6.2 Exception From Exclusivity......................................8 Section 6.3 AIC Marks.......................................................8 Section 6.4 ABT Marks.......................................................8 7. FIRST REFUSAL.................................................................8 Section 7.1 New Product.....................................................8 Section 7.2 Right of First Refusal..........................................8 8. COMPENSATION..................................................................8
i 3
Page ---- 9. POLICIES.....................................................................9 Section 9.1 Product Control................................................9 Section 9.2 Underwriting and Administration................................9 Section 9.3 Policy and Quote Records.......................................9 Section 9.4 Billing........................................................9 Section 9.5 Authority as Insurance Provider................................9 Section 9.6 Privacy........................................................10 Section 9.7 Fair Credit Reporting..........................................10 10. CONFIDENTIALITY..............................................................10 Section 10.1 Confidential Information.......................................10 Section 10.2 Return of Confidential Information.............................10 Section 10.3 Survival of Confidentiality....................................10 11. USE OF NAMES/TRADEMARKS......................................................11 Section 11.1 Limitation on Use of AIC Marks.................................11 Section 11.2 Limitation on Use of ABT Marks.................................11 Section 11.3 Low Cost Logo..................................................11 Section 11.4 Use of User Data...............................................11 12. INDEPENDENT CONTRACTOR.......................................................11 Section 12.1 No Joint Venture...............................................11 Section 12.2 Limitations on Authority.......................................11 13. [RESERVED]...................................................................12 14. TERM AND TERMINATION.........................................................12 Section 14.1 Renewal........................................................12 Section 14.2 Cure Period....................................................12 Section 14.3 Termination Upon Insolvency....................................12 Section 14.4 Termination Upon Use of Marks..................................12 Section 14.5 Responsibilities Upon Termination..............................12 15. INDEMNIFICATION..............................................................13 16. NOTICES......................................................................13 Section 16.1 Legal and Regulatory Proceedings...............................13 Section 16.2 Addresses, etc.................................................13 17. MISCELLANEOUS................................................................13 Section 17.1 Choice of Law, Venue, Jurisdiction.............................13 Section 17.2 Assignment.....................................................13 Section 17.3 Modification; Waiver...........................................14
ii 4
Page ---- Section 17.4 Entire Agreement...............................................14 Section 17.5 Remedies.......................................................14 Section 17.6 References and Section Headings................................14 Section 17.7 Severability...................................................14 Section 17.8 Signatures and Recording.......................................14
-iii- 5 MARKETING AGREEMENT THIS AGREEMENT is made as of July 22, 1996, between AUTO-BY-TEL ACCEPTANCE CORPORATION ("ABTAC") a Delaware corporation, having its offices at 2711 E. Coast Highway, Suite 203, Corona Del Mar, California 92625, on the one hand, and AIU INSURANCE COMPANY, AMERICAN INTERNATIONAL SOUTH INSURANCE COMPANY, AMERICAN HOME ASSURANCE COMPANY, AMERICAN INTERNATIONAL INSURANCE COMPANY, AMERICAN INTERNATIONAL INSURANCE COMPANY OF CALIFORNIA, INC., ILLINOIS NATIONAL INSURANCE COMPANY, MINNESOTA INSURANCE COMPANY, NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA and THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA (collectively "AIC"), all member companies of American International Group, Inc. having offices at 505 Carr Road, Wilmington, Delaware 19809, on the other hand and AUTO-BY-TEL, INC. ("ABT") a Delaware corporation, having its offices at 2711 E. Coast Highway, Suite 203, Corona Del Mar, California 92625, in its capacity as Guarantor of ABTAC's obligations hereunder ("ABT"). W I T N E S S E T H: WHEREAS, AIC underwrites private passenger automobile, homeowner/tenant/condo, and personal umbrella liability insurance ("Products"), as well as (directly or through its affiliates) the products ("Additional Products") enumerated on Schedule A hereto and has experience in providing direct response marketing; and WHEREAS, AIC wishes to market Products, but primarily private passenger automobile insurance, to users of ABT's Internet Website and those Websites of its contractual partners which are approved by AIC from time to time ("Users"); and WHEREAS, AIC and ABTAC share a common philosophy on delivering a low-cost, high-quality program to Users; and WHEREAS, AIG Marketing, Inc. ("AIGM") acts as a marketing group for and on behalf of AIC and in such capacity has negotiated this Agreement on behalf of AIC and will provide such services and compensation as set forth herein; and WHEREAS, ABT is engaged in the marketing of automobile pricing and automobile buying services to Users via the Internet and ABTAC is a wholly-owned subsidiary of ABT established to, among other things, enter into arrangements pursuant to which Users are afforded the opportunity to enter into transactions they may find beneficial; and WHEREAS, ABT, through ABTAC, is desirous of authorizing and providing AIC access to its Internet Server ("Server"); and WHEREAS, AIC is desirous of securing access to the Server for the publication, display and exhibition of AIC's direct response sales materials to ABT Users. NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, ABT, ABTAC and AIC agree as follows: 6 1. REPRESENTATIONS AND WARRANTIES. Section 1.1 Representations and Warranties of ABTAC and ABT. Each of ABTAC and ABT, as the case may be, hereby makes the following representations and warranties to AIC: (a) Each of ABT and ABTAC has been duly organized and is validly existing as a corporation under the laws of the state of Delaware and each is duly licensed where required as a "Licensee" or is otherwise qualified in each state in which it transacts business and is not in default of such state's applicable laws, rules and regulations, except where the failure to so qualify or such default would not have a material adverse effect on its ability to conduct its business or to perform its obligations under this Agreement. (b) Each of ABT and ABTAC has the requisite power and authority and legal right to execute and deliver this Agreement, engage in the transactions contemplated by this Agreement, and perform and observe those terms and conditions of this Agreement to be performed or observed by it hereunder. The person or persons signatory to this Agreement and any document executed pursuant to it on behalf of each of ABT and ABTAC have full power and authority to bind either ABT or ABTAC, as the case may be. The execution, delivery and performance of this Agreement, and the performance by each of ABT and ABTAC of all transactions contemplated herein and therein, have been duly authorized by all necessary and appropriate corporate action on the part of ABT and ABTAC, as the case may be. (c) This Agreement has been duly authorized and executed by each of ABT and ABTAC and is valid, binding and enforceable against each of them in accordance with its terms, except that such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws (whether statutory, regulatory or decisional) now or hereafter in effect relating to creditors' rights generally, and the execution, delivery and performance by each of ABT and ABTAC of this Agreement do not conflict with any term or provision of (i) its certificates of incorporation or bylaws, (ii) any law, rule, regulation, order, judgment, writ, injunction or decree applicable to ABTAC of any court, regulatory body, administrative agency or governmental body having jurisdiction over either ABT or ABTAC or (iii) any agreement to which either ABT or ABTAC is a party or by which its property is bound. (d) No consent, approval, authorization or order of, registration or filing with, or notice to any governmental authority or court is required under applicable law in connection with the execution, delivery and performance by either ABT or ABTAC of this Agreement. (e) There is no action, proceeding or investigation pending or, to the best knowledge of both ABT and ABTAC, threatened against either of them before any court, administrative agency or other tribunal (i) asserting the invalidity of this Agreement, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement, or (iii) which could reasonably be expected to materially and adversely affect the performance by either of them of their respective obligations under, or the validity or enforceability of, this Agreement. (f) ABTAC or ABT, as the case may be, has all regulatory approvals, authorizations, licenses, permits and other permissions, consents and authorities whatsoever, as needed to operate the ABT Website. (g) ABTAC or ABT, as the case may be, warrants that it has the legal and valid right to use any registered or unregistered trademark, tradename, service mark, logo, emblem or other proprietary designation, or any variations, derivatives and modifications thereof, used by it in the Insurance Marketing Materials as defined hereafter (the "ABT Marks") Section 1.2 Representations and Warranties of AIC. AIC hereby makes the following representations and warranties, to ABTAC: 2 7 (a) AIC is duly licensed where and as required in each state in which it transacts business and is not in default of such state's applicable laws, rules and regulations, except where such default would not have a material adverse effect on the ability of AIC to conduct its business or to perform its obligations under this Agreement. (b) AIC has the requisite power and authority and legal right to execute and deliver, engage in the transactions contemplated by, and perform and observe the terms and conditions of, this Agreement. The person or persons signatory to this Agreement and any document executed pursuant to it on behalf of AIC have full power and authority to bind AIC. The execution, delivery and performance of this Agreement, and the performance by AIC of all transactions contemplated herein and therein, have been duly authorized by all necessary and appropriate and corporate action on the part of AIC. (c) This Agreement has been duly authorized and executed by AIC and is valid, binding and enforceable against AIC in accordance with its terms, except that such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws (whether statutory, regulatory or decisional) now or hereafter in effect relating to creditors' rights generally, and the execution, delivery and performance by AIC of this Agreement do not conflict with any term or provision of the certificate of incorporation or bylaws of AIC, or any law, rule, regulation, order, judgment, writ, injunction or decree applicable to AIC of any court, regulatory body, administrative agency or governmental body having jurisdiction over AIC. (d) No consent, approval, authorization or order of, registration or filing with, or notice to any governmental authority or court is required under applicable law in connection with the execution, delivery and performance by AIC of this Agreement. (e) There is no action, proceeding or investigation pending or, to the best knowledge of AIC, threatened against it before any court, administrative agency or other tribunal (i) asserting the invalidity of this Agreement, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement, or (iii) which could reasonably be expected to materially and adversely affect the performance by AIC of its obligations under, or the validity or enforceability of, this Agreement. (f) AIC warrants that it has all regulatory approvals, authorizations, licenses, permits and other permissions, consents and authorities whatsoever, as needed (i) to offer and sell the Products in each of the states (except for New Jersey, Massachusetts, North Carolina, South Carolina and New Hampshire (the "Excepted States")), territories and the District of Columbia of the United States (the "Territory") and to otherwise perform its obligations under this Agreement, and (ii) to use any Insurance Marketing Materials (as defined in Section 2.2 of this Agreement) developed by AIC, or provided for inclusion in any Insurance Marketing Materials developed jointly with ABTAC. (g) AIC warrants that it has the legal and valid right to use any registered or unregistered trademark, tradename, service mark, logo, emblem or other proprietary designation, or any variations, derivatives and modifications thereof, used by it in the Insurance Marketing Materials as defined hereafter (the "AIC Marks"). 2. MARKETING ARRANGEMENT. Section 2.1 Phases of Marketing Arrangement. ABTAC and AIC shall cooperate to provide the means for Users interested in the Products to establish contact with AIC and purchase Products in three phases as follows: (a) "'Phase 1' - Toll Free Telephone Marketing" Users accessing the ABT Website shall be able to click on an icon and access another page at the ABT Website containing information about the Products as well as a toll free telephone number. Users dialing the toll free number will be connected to AIC 3 8 [*] Confidential Treatment Requested employees who shall provide further information about the Products and take User information in order to prepare a request for quote (an "RFQ"). AIC will evaluate the RFQs for which they have received sufficient User information (either on the first User call or after subsequent contact) and quote qualified Users prices for the requested Products. Phase 1 shall commence approximately 30 days from the date of this Agreement and end when AIC and ABTAC agree that Phase 2 shall commence. (b) "'Phase 2' - Electronic File Transfer" Users accessing the ABT Website shall be able to click on an icon and access another page at the ABT Website containing information about the Products as well as an RFQ which the User can fill out and submit electronically. The ABT Website will forward the RFQ files electronically to AIC. Upon receipt of the RFQ files, AIC employees shall evaluate the RFQs for which they have received sufficient User information (either at first or after subsequent contact) and quote any qualified User prices for the requested Products. Phase 2 shall commence on such date as AIC and ABTAC agree (cooperatively and in good faith) which date is expected to be approximately 60 days from the date of the commencement of Phase 1 implementation. Phase 2 shall end when AIC and ABTAC agree that Phase 3 shall commence. (c) "'Phase 3' - Internet Hyperlink" Users accessing the ABT Website shall be able to click on an icon and be hyperlinked to an AIC Website containing information about the Products as well as an insurance RFQ which the User can fill out and submit electronically. The AIC Website will evaluate the RFQ file in real time (subject to System capabilities) and, if satisfactory (either at first or after subsequent contact), will quote any qualified User prices for the requested Products. Phase 3 shall commence on such date as AIC and ABTAC agree (cooperatively and in good faith) which date is expected to be prior to June 1, 1997. Section 2.2 Preparation of Marketing Materials. (a) AIC and ABTAC shall cooperate to prepare and produce (in each Phase of development) the Web page or pages describing the Products on the ABT Website (the "Insurance info Pages"), the Phase 2 ABT Website request for quote and electronic transfer mechanism, the Phase 3 hyperlink and AIC Website request for quote, and all other marketing materials (the "Collateral Materials") to be used to market and advertise the Products or the Insurance Info Pages (the Insurance Info Pages and the Other Materials, collectively, the "Insurance Marketing Materials"). (a) The content and form of the Insurance Marketing Materials must be approved in writing by both AIC and ABTAC prior to use. Any modification in any Insurance Marketing Materials shall be submitted by the party proposing the modification to the other party in writing for approval. Unless the requested modification is in any Insurance Marketing Material which is subject to any filing or notice requirement with any governmental entity, which materials are under the sole control of AIC, the party receiving such submission shall preliminarily respond to the submitting party within two (2) business days of receipt of such submission and shall deliver its final approval or disapproval within five (5) business days of receipt of such submission. Approval of requested modifications in Insurance Marketing Materials shall not be unreasonably withheld or delayed. ABTAC acknowledges that any change in any Insurance Marketing Materials subject to any filing or notice requirement with any governmental entity may take considerable time to secure the required approvals or to make the required filings. AIC acknowledges that the ABT Website may (and is likely to) change from time-to-time in response to, among other things, new display and/or hyperlink technologies, Internet server consolidation or congestion, and changes in Internet providers. Section 2.3 Ownership of Marketing Materials. Insurance Marketing Materials shall be owned by ABT if provided by ABT, AIC if provided by AIC, and by AIC if jointly produced. Ownership rights with respect to the AIC Marks and the ABT Marks shall not be affected by this Section 2.3. Section 2.4 Development Costs. AIC shall pay [*] for the development of the Insurance Marketing Materials; provided, however, that the parties hereto agree that AIC's obligations to pay for costs related to Phase I and Phase 2 shall not exceed in the aggregate [*]. 4 9 [*] Confidential Treatment Requested 3. COVENANTS, DUTIES AND RIGHTS OF AIC. Section 3.1 Regulatory Authorizations. AIC shall, at its own cost and expense, secure and maintain all regulatory approvals, authorizations, licenses, permits and other permissions, consents and authorities whatsoever, as needed to offer and sell the Products in the Territory ("Insurance Approval"). AIC shall use its best efforts to either (i) secure Insurance Approval as needed to offer and sell the Products in the Excepted States and the provinces of Canada, or (ii) to establish relationships with insurance producers or underwriters in the Excepted States and the provinces of Canada which will allow the offering and sale of Products in such jurisdictions in a manner which, as closely as possible, mirrors the offering and sale of Products in the Territory. AIC shall give ABTAC written notice promptly upon securing Insurance Approval in any Excepted State or province of Canada and thereafter for all purposes such jurisdiction shall be considered part of the Territory. AIC shall be responsible for all aspects of any relationship established pursuant to clause (ii) of the second sentence of this Section 3.1, and all Products sold pursuant to any such relationship shall, for all purposes of this Agreement, be considered Products sold within the Territory. Section 3.2 Initial Product Offering. AIC shall initially offer only automobile insurance, but shall use its best efforts to offer all Products by [*]. In addition, AIC will facilitate the development of plans to market those Additional Products through marketing on the ABT Website, either directly, or through relationships between ABTAC and AIC affiliates offering such products, which such relationships shall be facilitated and established in accordance with Section 3.6 of this Agreement. Section 3.3 Low Cost Products. AIC shall offer low-cost, high-quality Products to qualified Users. AIC shall not offer insurance products similar to the Products at prices lower than those quoted for the Products to qualified Users except through distribution channels with lower distribution and/or acquisition costs to AIC. For purposes of this Section 3.3, the similarity of the Products shall be determined on the basis of the coverage terms, limitations and conditions and the price levels shall be determined on the basis of persons of like underwriting profiles seeking similar insurance products. Section 3.4 Reservation of Rights. (a) AIC reserves the right to suspend, restrict or modify the offer and sale of the Products to accommodate regulations; provided, however, that AIC shall use its best efforts to limit such suspension, restriction or modification to the smallest scope possible (in both qualitative and temporal terms) to enable ABTAC to realize the full expectancy of this Agreement. (b) AIC reserves the right to use the services of AIGM for various marketing, servicing and administrative functions under this Agreement; provided, however, that AIC shall remain responsible at all times for its obligations under this Agreement. Section 3.5 Toll Free Number. AIC shall secure and maintain at least one toll free telephone number for use in Phase 1. AIC shall (i) inform ABTAC of such number, (ii) use its best efforts not to change such number, and (iii) devote sufficient numbers of its trained employees to the answering of such number so that Users dialing the number have to wait, on average, no more than three minutes to be connected to an employee who will take the User's RFQ and provide any requested information. From the commencement of Phase 1, the toll free number shall be so staffed no less than [*] per day on weekdays and [*] per day on Saturdays. AIC acknowledges that ABTAC believes that the Internet is utilized most heavily during non-business hours and on weekends, and therefore agrees that it shall perform test marketing of expanded hours for the staffing of the toll free number. Section 3.6 Cross-Promotion. AIC shall promote and advertise the ABT Website on the Website of AIGM, and shall use its best efforts to promote and advertise the ABT Website on the Websites of all AIC corporate affiliates and all AIC affinity partners (collectively, the "AIC Friends") and to promote recognition and awareness of the ABT Website via ongoing public relations efforts. AIC shall use its best efforts to secure the cooperation of the AIC Friends in ABTAC's development and implementation of hyperlinks between the Websites of the AIC Friends, on the one hand, and the ABT Website, on the other. AIC agrees to facilitate the development of relationships between AIC's affiliates and ABTAC with respect to the marketing of 5 10 [*] Confidential Treatment Requested Additional Products or any other personal or commercial insurance products to Users. Any compensation to be paid to ABTAC by the AIC affiliate offering such products shall be mutually agreed upon by ABTAC and the related AIC affiliate. Section 3.7 Payment of Development Costs. (a) AIC shall promptly, and in any event, within 30 business days, pay ABTAC [*] in connection with the development of the hyperlinks contemplated by Phase 3 and by Section 4.3 of this Agreement. (b) AIC shall, subject to the reimbursement limit set forth in Section 2.4, promptly, and in any event, within 30 business days, pay ABTAC [*] in connection with the development of the electronic transmission mechanism contemplated by Phase 2. Section 3.8 Books and Records: Auditing. (a) AIC shall keep complete and accurate records of all of its activities under this Agreement at the address specified in Section 16.2 of this Agreement. AIC shall, no later than the 30th day of each month, deliver to ABTAC (i) the amounts to which ABTAC is entitled pursuant to Section 8 of this Agreement, and (ii) a report setting forth the amounts to be paid to ABTAC hereunder, accompanied by detail sufficient to permit ABTAC to determine the basis of the computation and the accuracy of the amount, together with a list of all Users of ABT's Website which have contacted AIC through the toll free number provided on ABT's Website and such other information as ABTAC shall reasonably request from time to time in order to monitor the performance of this Agreement. Subject to the provisions of the Insurance Information and Privacy Protection Model Act, as enacted in various states (as so enacted, the "Privacy Act"), all records maintained by AIC related to this Agreement shall be open to inspection and copying by ABTAC's employees, agents, attorneys, accountants or other authorized representatives at reasonable times during normal business hours. (b) ABTAC may also appoint public accountants of its choice, and at its sole expense, for the purpose of auditing AIC's performance of its obligations under this Agreement and AIC agrees to grant such accountants access to all records necessary to determine the compliance of AIC with the compensation provisions of this Agreement. If the results of such audit reveal a discrepancy between the amounts paid by AIC hereunder and the amounts which should have been paid hereunder, then the appropriate payments shall be made (i) if to ABTAC, immediately, and (ii) if to AIC, by the withholding of 1/12 of such amount from the payments to be made to ABTAC over the succeeding twelve months. If the discrepancy is in ABTAC's favor and exceeds $100,000, then AIC shall reimburse ABTAC for the full cost of the audit. 4. COVENANTS, DUTIES AND RIGHTS OF ABTAC AND ABT. Section 4.1 Insurance Marketing Materials. ABTAC shall maintain the Insurance Marketing Materials (as available) at the ABT Website. Section 4.2 Relationships with ABT Friends. ABT and ABTAC shall use best efforts to establish and maintain relationships with major automobile-related products and service providers on the Internet (such entities with which ABT or ABTAC has established such relationships, the "ABT Friends") such as, among others, Edmund's, Microsoft, Auto-Site and Kelly Blue Book which relationships may include toll free "800" numbers and/or hyperlinks with the Websites of the ABT Friends to the ABT Website allowing users at ABT Friends' Websites to link to the ABT Website and view the Insurance Marketing Materials and/or hyperlinks between the Websites of those ABT Friends approved in advance by AIC with the Website of AIGM. If ABTAC proposes to establish a hyperlink between the Website of AIGM and that of any ABT Friend, it shall submit such proposal to AIC in advance for approval. AIC shall preliminarily respond to ABTAC within two (2) business days of receipt of such submission and shall deliver its final approval or disapproval within five (5) business days of receipt of such submission. Approval of such proposed hyperlinks shall not be unreasonably withheld. AIC and ABTAC agree that (i) any compensation to be paid to any ABT Friends in connection with any relationship with respect to users at or originating at their Websites shall be solely the responsibility of ABTAC and (ii) any such users shall be considered Users for all purposes under this Agreement. 6 11 [*] Confidential Treatment Requested Section 4.3 Hyperlink Development Costs. (a) ABTAC shall use its best efforts to develop and implement the electronic transfer mechanism necessary for Phase 2 and the hyperlink necessary for Phase 3. (b) ABTAC shall use its best efforts to develop and implement hyperlinks between the Websites of the AIC Friends and that of ABT to allow users of the Websites of the AIC Friends to link to the ABT Website. (c) ABTAC shall, no less frequently than monthly and no more frequently than weekly (and in connection with the electronic transfer mechanism necessary for Phase 2, subject to the reimbursement limit set forth in Section 2.4), submit to AIC for reimbursement ABTAC's out-of-pocket expenses incurred in connection with this Section 4.3, such submission to be accompanied by detail sufficient to permit AIC to determine the basis of the computation and the accuracy of the amount claimed. Such reimbursement shall be made by AIC within 30 days of receipt of the related request. Section 4.4 Cross-Promotion. ABTAC shall promote and advertise the ABT Website through Internet search engines and other public mass media and to promote recognition and awareness of the ABT Website via ongoing public relations efforts. Section 4.5 Guarantee. ABT hereby unconditionally and irrevocably guarantees to AIC, its successors, endorsees and assigns, the performance when due of all present and future obligations and liabilities of all kinds of ABTAC arising out of or in connection with this Agreement, whether due or to become due, secured or unsecured, absolute or contingent, joint or several ("Obligations"). The Guarantor agrees that AIC and ABTAC may mutually agree to modify the Obligations or any agreement between AIC and ABTAC without in any way impairing or affecting this Guarantee. Section 4.6 Additional Services. ABTAC hereby agrees that it shall provide AIC, upon request of AIC, the following additional services: (a) Consulting services concerning marketing of automobile insurance to ABT Users; (b) Data concerning persons requesting the Phase 1 toll free number directly from ABT corporate offices; (c) E-Mail monitoring and consulting service in respect of and during Phase 3; (d) Hyperlink monitoring and consulting service in respect of and during Phase 3; (e) Access to officers of ABT for Internet marketing trend updates; and (f) Icon design consulting services for AIGM Website. 5. [RESERVED] 6. EXCLUSIVITY. Section 6.1 Exclusivity. (a) The parties hereto shall have an exclusive arrangement for the first [*] months of the Initial Term (as defined in Section 14.1 of this Agreement) (such first [*] months, the "Initial Exclusivity Period") whereby ABT and ABTAC, separately or together, shall not provide Website access to any other underwriter of Products and whereby AIC shall not market Products with any other Internet automobile buying program, automobile purchase assistance or financing program, automobile pricing service, vehicle information service or on-line service including, among others both existing and to be created or initiated, America On-Line, Microsoft, Prodigy, CompuServe and NetCom (collectively, "Internet Auto Providers"). The exclusivity of this Agreement shall automatically continue for a [*] month period beyond the Initial Exclusivity Period, and thereafter for successive [*] month periods, unless one party shall give the other party written 7 12 [*] Confidential Treatment Requested notice not less than 60 days prior to the end of the Initial Exclusivity Period or the then current [*] month exclusivity period, as the case may be, that the exclusivity shall end at the end of the Initial Exclusivity Period or the then current [*] month exclusivity period, as the case may be. (b) After the termination of the exclusivity of this Agreement, if either party uses the "Prohibited Marketing Term" ascribed to it in this clause (b), the other party shall have the right, but not the obligation, to terminate this Agreement upon 30 days written notice. With respect to AIC, the Prohibited Marketing Term shall be "[x] Low Cost Auto Insurance [y]" where "x" is the name of any Internet Auto Provider, and "y" is the name of AIC or any affiliate thereof or any variation thereon which conveys or links "x," "y" and the term Low Cost within any logo, service mark, trademark or icon. With respect to ABTAC or ABT, the Prohibited Marketing Term shall be "ABT Low Cost Auto Insurance [y]" where "y" is the name of any underwriter of Products except AIC or any affiliate thereof which conveys or links ABT or any affiliate thereof to "y" and the term Low Cost within any logo, service mark, trademark or icon. Section 6.2 Exception From Exclusivity. AIC's relationship with United Buying Services, Inc., as in effect on the date of this Agreement, is exempt from the provisions of Section 6.1 of this Agreement. Section 6.3 AIC Marks. If, either in conjunction with a properly noticed termination of exclusivity or at any time after such notice is delivered, AIC intends to use any AIC Marks in conjunction with the offering or sale of Products through any Internet Auto Providers, then AIC must give ABTAC 30 days prior written notice thereof. Section 6.4 ABT Marks. If, either in conjunction with a properly noticed termination of exclusivity or at any time after such notice is delivered, ABT or ABTAC intends to use any ABT Marks in conjunction with the marketing of any Products outside of the terms of this Agreement, then ABTAC must give AIC 30 days prior written notice thereof. 7. FIRST REFUSAL. Section 7.1 New Product. In the event that either (i) an insurer or entity other than AIC or any of its affiliates (a "Competing Insurer") proposes a program to offer on the ABT Website any personal or commercial insurance other than the Products offered pursuant to this Agreement (a "New Product") or (ii) ABTAC wishes to market a New Product through a Competing Insurer, then ABTAC shall immediately give AIC written notice of such New Product and the related terms (the "New Product Notice"). Section 7.2 Right of First Refusal. ABTAC hereby grants to AIC the right of first refusal to offer such New Product to ABT's Users on terms no less favorable to ABTAC or ABT's Users than those proposed by the Competing Insurer. AIC shall be obligated to respond with its intent to ABTAC within 10 business days after its receipt of the New Product Notice. If AIC does not respond within such period, ABTAC may market such New Product on terms no less favorable than those set forth in the related New Product Notice. 8. COMPENSATION. During the term of this Agreement, for the services to be performed by ABTAC hereunder (except for those services under Section 4.6 hereof), ABTAC shall be paid compensation by AIC calculated in accordance with Schedule B attached hereto and made a part hereof. All payments due ABTAC hereunder shall be made within thirty (30) days after the end of the month they become due. For the services to be 8 13 performed by ABTAC under Section 4.6 hereof, ABTAC shall be paid by AIC compensation for each year (or portion thereof) by August 31 of such year in an amount to be determined in good faith discussions to be held between AIC and ABTAC based on the value of such services. 9. POLICIES. Section 9.1 Product Control. Subject to its obligations under Section 3.3 hereof to offer low-cost insurance products, AIC reserves the sole right and power, exercisable in good faith at any time, to change the terms, rates, conditions, or other provisions contained in the Products or to reject requests for quotes for the Products or to rescind or refuse to renew or cancel any policy issued hereunder, in accordance with AIC's underwriting standards, except as may be limited by the terms of the policies or by applicable law or regulation. AIC further reserves the sole right and power to change its underwriting standards for the Products in accordance with sound insurance practices consistent with AIC's normal business practices and subject to applicable insurance law and further to suspend, restrict or modify the offer and sale of the Products for regulatory reasons. AIC shall inform ABTAC in writing promptly upon its taking any action under this Section 9.1. In the event AIC suspends the offer and sale of Products (or so restricts or modifies such offer and sale so as to render the Products unavailable to the majority of Users previously qualified for such Products on the terms and conditions previously offered) in any jurisdiction or area within the Territory, it shall use its best efforts to make provision for the offer and sale by another underwriter of Products in such jurisdiction or area in a manner which minimizes the effect of such suspension upon the orderly marketing of the Products in such jurisdiction or area, and maximizes the expectancy of ABTAC under this Agreement. If AIC has not made such provision within 10 days of any such suspension, ABTAC shall be entitled to establish a relationship with another underwriter of Products in such jurisdiction or area, such relationship to be for a term not to exceed twelve months, and shall be entitled to make such agreements as necessary to secure such relationship, including the use of a Prohibited Marketing Term (in connection with the offering and sale of Products in such jurisdiction or area), and no aspect of such relationship or agreements shall give rise to any rights of AIC under this Agreement. Section 9.2 Underwriting and Administration. AIC shall, at its expense, provide all underwriting, policy issuance services, policyholder services, premium disbursement and accounting services, premium collection, claims adjustment, and all other administrative services required for policies issued pursuant to this Agreement. Section 9.3 Policy and Quote Records. All policy and quote records for the policies issued hereunder shall be the property of AIC. Policy records shall include but not be limited to all policy requests for quotes, policy declarations pages, policy underwriting files and policy claim files, or computer data files containing such information. Section 9.4 Billing. AIC shall be responsible for the billing and collection of insurance premiums from all Users who purchase insurance under this Agreement. Section 9.5 Authority as Insurance Provider. Nothing in this Agreement shall be construed to mean that either ABT or ABTAC is a broker or an agent, and in no event shall either ABT or ABTAC have any authority or represent itself as having authority other than as is specifically set forth in this Agreement. Without limiting the generality of the foregoing, neither ABT nor ABTAC shall do any of the following: (a) Attempt to or make, waive, alter or change any term, rate or condition stated in any AIC policy, contract or AIC approved form; bind coverage; or discharge any contract in the name of AIC. (b) Offer to pay or pay directly or indirectly any rebate of premiums or any other inducement not specified in the policy to any person. 9 14 (c) Transact business in contravention of the rules and regulations of an Insurance Department and/or other governmental authorities having jurisdiction of all subject matters embraced within this Agreement. Section 9.6 Privacy. (a) ABTAC recognizes that, in the performance of its obligations under this Agreement, if permitted by the Privacy Act and other applicable laws, AIC may disclose personal or privileged information about individuals collected or received in connection with insurance transactions. Since the disclosure of such information is protected by law, ABTAC agrees that it will not redisclose any such privileged information of which ABTAC has actual notice without the individual's written authorization, unless such disclosure is permitted by law. (b) ABT and ABTAC represents and warrants to AIC that neither ABT nor ABTAC shall use such information as is disclosed by AIC pursuant to Section 9.6(a) other than in connection with the marketing of a product or service. Section 9.7 Fair Credit Reporting. Nothing herein shall be construed to require or imply that AIC is required to provide User information to ABT or ABTAC in contravention of the Fair Credit Reporting Act (the "FCRA"). AIC is not a "consumer reporting agency" as defined in the FCRA. 10. CONFIDENTIALITY. Section 10.1 Confidential Information. In performing their obligations pursuant to this Agreement, the parties may be provided access to and receive disclosure of certain confidential and/or proprietary information about the other including but not limited to names of Users, information provided by Users to AIC for the purpose of obtaining an insurance quotation, names of policyholders, marketing philosophy and objectives, financial results, technological developments, computer system information (including information provided in connection with the development of the Phase 2 and Phase 3 applications and links), trade secrets, and other materials and information that such party considers confidential and/or proprietary ("Confidential Information"). Unless expressly provided otherwise in this Agreement, AIC, ABT and ABTAC agree not to give, sell, or in any way transfer, either directly or indirectly, Confidential Information to any person or organization for any purpose without the prior written approval of the other, except as may be required by law, rule or regulation (including any filings under any securities law) or court order. Notwithstanding anything to the contrary herein, AIC, ABT and ABTAC may use Confidential Information for market research purposes upon written consent from the other party, to the extent permissible by law. AIC, ABT and ABTAC promise to make best efforts to see that all parties including employees comply with this provision. These obligations as to confidentiality and nonuse shall survive the termination of this Agreement. Section 10.2 Return of Confidential Information. Except as otherwise herein provided, all Confidential Information furnished by one party to the other in connection with this Agreement is the exclusive property of that party and shall be returned to that party upon request or upon termination of this Agreement. Section 10.3 Survival of Confidentiality. All obligations and duties of the parties with respect to Confidential Information shall survive for five years after the termination of this Agreement. Confidential Information shall no longer be considered Confidential Information to the extent that such information (a) is developed by a party independently, without reference to any Confidential Information of the other party's; (b) is obtained from a third party authorized to disclose it; (c) becomes a part of the public domain without the fault of the disclosing party; (d) is released by the disclosing party to third parties without similar restrictions; or (e) is released from such restrictions by prior written agreement. 10 15 11. USE OF NAMES/TRADEMARKS. Section 11.1 Limitation on Use of AIC Marks. (a) ABTAC agrees that neither it nor ABT shall use the AIC Marks without AIC's prior written consent. (b) AIC hereby grants to ABT and ABTAC a limited license to use and reproduce any AIC Mark approved in accordance with Sections 2.2(b) and 11.1 (a) of this Agreement, in connection with the marketing arrangements set forth in this Agreement and for no other purpose, and hereby agrees to provide ABT and ABTAC, for the sole purpose of marketing the Products, acceptable copies of the appropriate AIC Marks for purposes of reproduction. (c) For so long as AIC or one of its affiliates has the right to use the mark "AIG," AIC shall permit ABTAC to use the term "Auto-By-Tel Low Cost Auto Insurance From AIG" in marketing the Products during the term of this Agreement; provided however that the permission granted hereby shall not diminish AIC's rights to approve the form and content of any Insurance Marketing Materials pursuant to Section 2.2(b) hereof. Section 11.2 Limitation on Use of ABT Marks. (a) AIC agrees that it shall not use the ABT Marks without ABTAC's prior written consent. (b) ABTAC hereby grants to AIC a limited license to use and reproduce any ABT Mark approved in accordance with Sections 2.2(b) and 11.2(a) of this Agreement, in connection with the marketing arrangements set forth in this Agreement and for no other purpose, and hereby agree to provide AIC, for the sole purpose of marketing the Products, acceptable copies of the appropriate ABT Marks for purposes of reproduction. Section 11.3 Low Cost Logo. The "Auto-By-Tel; Low Cost Auto Insurance Through [NAME OF PROVIDER]" logo, and all variations and derivatives shall remain the exclusive property of ABTAC; provided, however, that such logo shall not refer to AIC after the termination of this Agreement. Section 11.4 Use of User Data. Notwithstanding anything in this Agreement to the contrary, AIC shall give to ABT and ABTAC User information subject to Sections 9.6 and 9.7 which may be used by ABT and ABTAC in any lawful manner, including for solicitation of such Users for financial products marketed through the ABT Website, automobile pricing, purchasing, leasing and information services offered or marketed through the ABT Website and any affinity programs in which ABT or ABTAC may participate. The ownership interest in such User data shall be held by AIC. Neither ABT nor ABTAC is an agent for purposes of collection of insurance data. 12. INDEPENDENT CONTRACTOR. Section 12.1 No Joint Venture. Nothing contained in this Agreement creates or is intended to create the relationship of a joint venture, partnership, agency or association between AIC and ABTAC. Nothing in this Agreement shall be construed to mean that either ABT or ABTAC is a broker or an agent, and in no event may ABTAC bind AIC to any contract of insurance or vary the terms of any such contract, nor may AIC bind ABT or ABTAC to any relationship or vary the terms of any agreement between ABT or ABTAC and any third party. Section 12.2 Limitations on Authority. Each of AIC, ABT and ABTAC shall have only those powers enumerated herein and none other shall be implied. Without limiting the generality of the foregoing, neither AIC, ABT nor ABTAC shall do any of the following: (a) Make, accept or endorse notes, endorse checks payable to the other party, or otherwise incur any expense or liability on behalf of the other party. (b) Waive a forfeiture. 11 16 (c) Extend the time for the payment of monies due the other party beyond the time agreed to by the other party. (d) Collect money for the other party. (e) Institute, prosecute, or maintain any legal proceedings in connection with any matter pertaining to the other party's business, unless otherwise approved in writing by the other party, nor accept legal process on behalf of the other party. (f) Hold itself out as an authorized agent of the other party in order to deal with any regulatory authority or file any contract or policy on behalf of the other party or contact or discuss any matter with any regulatory authority on behalf of the other party without written approval of that party. 13. [RESERVED] 14. TERM AND TERMINATION. Section 14.1 Renewal. This Agreement shall remain in effect for a period of five (5) years from the effective date ("Initial Term"). This Agreement shall automatically renew for subsequent five-year terms ("Renewal Term") unless written notice is given by either party of its intention to terminate this Agreement at the expiration of the Initial Term or any Renewal Term, as the case may be, at least one hundred eighty (180) days prior to such expiration. This Agreement shall also terminate if required by governmental authority or court of law, but only insofar as this Agreement applies to such jurisdiction affected. Section 14.2 Cure Period. If any party shall be in breach of any material obligation under this Agreement and such breach shall remain uncured for a period of thirty (30) days after written notice thereof from the other party (or, if such breach is curable and requires more than thirty (30) days to cure, if such cure is not commenced within thirty (30) days and thereafter diligently prosecuted), then the other party may, by written notice sent, cancel this Agreement upon 30 days after delivery of such notice. Non-payment of amounts due under this Agreement shall be deemed to be a breach of a material obligation hereunder, but institution of suit for payment of amounts due under this Agreement shall not be deemed to be a cancellation hereunder. This Section 14.2 shall not apply to termination pursuant to Section 14.3 or Section 14.4 of this Agreement. Section 14.3 Termination Upon Insolvency. At any party's option, and upon written notice of exercise of the option, this Agreement terminates upon the voluntary or involuntary bankruptcy or insolvency of a party, the voluntary or involuntary dissolution or liquidation of a party, the admission in writing by a party of its inability to pay its debts as they mature, or the assignment by a party for the benefit of creditors. Section 14.4 Termination Upon Use of Marks. If any party shall give notice to the other, under Section 6.1(b), then the Agreement shall terminate 30 days after receipt of such notice. Section 14.5 Responsibilities Upon Termination. The termination of this Agreement shall not terminate, affect, or impair any rights, obligations, or other liabilities of any party hereto which may accrue prior to such termination or which, under the terms of this Agreement, continue after the termination. After termination of this Agreement, coverage under the insurance policies issued hereunder shall continue pursuant to their terms. Ownership of all renewals written after termination of this Agreement shall at all times remain with AIC. Each party shall return all property and information rightfully belonging to the other party which is in its possession at the time of termination except as otherwise provided herein. The provisions of this Paragraph 14.5 shall survive termination of this Agreement. 12 17 15. INDEMNIFICATION. Each party shall hold the other (and its directors, officers, employees and authorized agents) harmless from and against any damages, liabilities, claims, charges, reasonable attorneys' fees, or other costs arising from or in connection with any claim, action, or proceeding relating to or arising from (a) any grossly negligent act or omission or any intentional misconduct relating to the subject matter of this Agreement or (b) the failure to comply with the terms of this Agreement. The provisions of this Section 15 shall survive the termination of this Agreement. 16. NOTICES. Section 16.1 Legal and Regulatory Proceedings. Each party shall promptly notify the others of any legal or regulatory proceeding or threat of legal or regulatory proceeding with respect to any matters which are the subject of this Agreement, except AIC shall have no obligation to notify ABTAC of legal proceedings involving claims under the Products. Section 16.2 Addresses, etc. All notices pursuant to this Agreement shall be by facsimile transmission, by personal delivery, or by registered or certified mail, return receipt requested, to the addresses of the parties listed below, or such other address as any party listed below shall specify in writing to the others in a notice conforming to this Section 16.2: If to AIC: AIG MARKETING, INC. 505 Carr Road Wilmington, DE 19809 Attention: J. Ernest Hansen, President, or his successor If to ABTAC: AUTO-BY-TEL ACCEPTANCE CORPORATION 2711 E. Coast Highway, Suite 203 Corona Del Mar, CA 92625 Attention: Peter Ellis, President, or his successor with copies to R.S. GRIMES & CO. 152 West 57th Street, 24th Floor New York, NY 10019 Attention: Robert S. Grimes, President, or his successor 17. MISCELLANEOUS. Section 17.1 Choice of Law, Venue, Jurisdiction. This Agreement shall be governed by the internal laws of the State of New York. The parties agree that any action in law or in equity brought under this Agreement shall be brought only in a state or federal court seated in New York County, New York, and each party hereto consents to the exclusive jurisdiction of such court and venue of such action. 13 18 Section 17.2 Assignment. Without the prior written consent of the other party, which consent shall not be unreasonably withheld, this Agreement may not be assigned in whole or in part by any party other than to an affiliate and subsidiary (provided (A) such affiliate or subsidiary (i) shall agree in writing to be bound by the terms of this Agreement and (ii) has a net worth immediately following the assignment equal to or greater than that of the assignor, and (B) the assignor gives written assurances that it will cause the assignee to perform as contained herein or the assignor will perform in the assignee's place). Notwithstanding the foregoing, ABTAC may assign this Agreement to ABT or any wholly owned subsidiary of ABT or ABTAC, provided, however, that the guarantee of ABT pursuant to Section 4.5 herein shall apply as to such subsidiary assignee in the same manner as it applied to ABTAC. Section 17.3 Modification; Waiver. This Agreement may only be revised and/or modified in a writing which must be executed by each of the parties to this Agreement. No other change, modification, addition, or deletion to any portion of this Agreement will be valid or binding upon any of them. Section 17.4 Entire Agreement. This Agreement constitutes the entire Agreement between the parties with respect to the subject matter contained herein and supersedes all oral or written negotiations of the parties. Section 17.5 Remedies. All remedies of any party are cumulative. Waiver by any party of any obligation of any other party does not constitute waiver of any future or other obligation of said party. Section 17.6 References and Section Headings. Any reference to the singular shall include reference to the plural and vice versa. Section headings are for description only and shall not be used to interpret this Agreement. Section 17.7 Severability. If any part, term, or provision of this Agreement shall be held void, illegal, or unenforceable, the validity of the remaining portions or provisions shall not be affected thereby. Section 17.8 Signatures and Recording. This Agreement shall not go into force until duly executed on behalf of ABTAC, ABT and AIC. Each party represents and warrants that each of the respective officers executing this Agreement on its behalf is duly authorized by its Board of Directors and is acting within the scope of his or her authority to bind said party under this Agreement. 14 19 IN WITNESS WHEREOF, the parties hereto have executed this Agreement below through their duly authorized officers as of the date first above written. AIU INSURANCE COMPANY AMERICAN INTERNATIONAL SOUTH INSURANCE COMPANY AMERICAN HOME ASSURANCE COMPANY AMERICAN INTERNATIONAL INSURANCE COMPANY AMERICAN INTERNATIONAL INSURANCE COMPANY OF CALIFORNIA, INC. ILLINOIS NATIONAL INSURANCE COMPANY MINNESOTA INSURANCE COMPANY NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA By: /s/ JOHN G. COLONA -------------------------------------- John G. Colona, Vice President AUTO-BY-TEL ACCEPTANCE CORPORATION By: -------------------------------------- Peter Ellis, President AUTO-BY-TEL, INC., as Guarantor By: -------------------------------------- Peter Ellis, President 15 20 IN WITNESS WHEREOF, the parties hereto have executed this Agreement below through their duly authorized officers as of the date first above written. AIU INSURANCE COMPANY AMERICAN INTERNATIONAL SOUTH INSURANCE COMPANY AMERICAN HOME ASSURANCE COMPANY AMERICAN INTERNATIONAL INSURANCE COMPANY AMERICAN INTERNATIONAL INSURANCE COMPANY OF CALIFORNIA, INC. ILLINOIS NATIONAL INSURANCE COMPANY MINNESOTA INSURANCE COMPANY NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA By: -------------------------------------- John G. Colona, Vice President AUTO-BY-TEL ACCEPTANCE CORPORATION By: /s/ PETER ELLIS -------------------------------------- Peter Ellis, President AUTO-BY-TEL, INC., as Guarantor By: /s/ PETER ELLIS -------------------------------------- Peter Ellis, President 15 21 [*] [*] Confidential Treatment Requested AMERICAN INTERNATIONAL COMPANIES c/o AIG Marketing, Inc. 505 Carr Road Wilmington, Delaware 19809 July 23, 1996 Auto-By-Tel, Inc. 2711 East Coast Highway Suite 203 Corona del Mar, California 92625 Attention: Mr. Peter Ellis, President - ---------- Re: Marketing Agreement between Auto-By-Tel Acceptance Corporation on the one hand, and AIU Insurance Company, American International South Insurance Company, American Home Assurance Company, American International Insurance Company, American International Insurance Company of California, Inc., Illinois National Insurance Company, Minnesota Insurance Company, National Union Fire Insurance Company of Pittsburgh, PA and The Insurance Company of the State of Pennsylvania on the other hand, and Auto-By-Tel, Inc. as Guarantor of the obligations of Auto-By-Tel Acceptance Corporation dated as of July 22, 1996 (the "Marketing Agreement") ---------------------------------------------------------------------- Gentlemen: Reference is made to Section 8 of the above-referenced Marketing Agreement. Capitalized terms used herein and in the attached Schedule A, and not defined herein or therein, shall have the meanings ascribed thereto in the Marketing Agreement. This will confirm our agreement that compensation to be paid for the services provided to AIC pursuant to Section 4.6 of the Marketing Agreement shall be calculated and paid in accordance with the attached Schedule A on or before August 31, 1997, and on each August 31st thereafter for as long as the Marketing Agreement is in effect. Please confirm that this represents our understanding with respect to the foregoing matter by executing a copy of this letter in the space provided below and returning to the undersigned. Best regards. Very truly yours, AIU INSURANCE COMPANY AMERICAN INTERNATIONAL SOUTH INSURANCE COMPANY AMERICAN HOME ASSURANCE COMPANY AMERICAN INTERNATIONAL INSURANCE COMPANY AMERICAN INTERNATIONAL INSURANCE COMPANY OF CALIFORNIA, INC. ILLINOIS NATIONAL INSURANCE COMPANY MINNESOTA INSURANCE COMPANY NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA By: /S/ JOHN G. COLONA ------------------- John G. Colona, Vice President 22 cc: Mr. Robert S. Grimes Robert S. Grimes & Company 152 West 57th Street 24th Floor New York, NY 10019 CONFIRMED AS OF JULY 24, 1996 AUTO-BY-TEL ACCEPTANCE CORP. By: /S/ PETER R. ELLIS ----------------------------------- Peter Ellis, President -2- [*] Confidential Treatment Requested. SCHEDULE A [*] Schedule A-1 23 [*] Confidential Treatment Requested. ADDITIONAL COMPENSATION CHART ----------------------------- [*] Schedule A-2 24 SCHEDULE A ADDITIONAL PRODUCTS AIG Life Division Mega Term (High Limit Term Life) Graded Premium Life Senior Life Birthday Life Whole Life Universal Life Survivorship Universal Life Fixed Annuities Variable Annuities Variable Life AIG A & H Division Hospital Indemnity Hospital Accident Cancer Coverage Accidental Death & Dismemberment (AD&D) AIG Warranty Services Mechanical Breakdown Vehicle Service Agreement (VSA) GAP Coverage (stand alone or with above-mentioned products) Computer Warranty Coverage AIG Capital Management Corp. AIG All Ages Funds Schedule A-1 25 [*] Confidential Treatment Requested SCHEDULE B BASE COMPENSATION Compensation due to ABTAC pursuant to this Agreement shall be based on a flat fee calculated on the basis of [*] after the commencement of Phase 1. Calculations to adjust the compensation from a [*] basis to a [*] will occur in months [*] through [*]; the resultant adjustments will be offset against the payments of future compensation in months [*] through [*]. For purposes of this Schedule B, net collected premium basis means the [*] for any new or renewal policy reduced only by those amounts not collected against the expectancy embodied in the annualized amount. Illustrations of the compensation calculation are attached as pages Schedule B-2 through Schedule B-7. Compensation for new and renewal automobile policies after month 12 shall be based on a [*] calculated on the basis of [*]. Compensation for homeowners and personal umbrella liability policies shall be based on a [*] calculated on the basis of [*]. All payments due ABTAC by AIC during the term of this Agreement shall be paid by AIC to ABTAC thirty (30) days after the end of each calendar month. Schedule B-1 26 [*] Confidential Treatment Requested EXAMPLE # 1 [*] Schedule B-2 27 [*] Confidential Treatment Requested EXAMPLE # 2 [*] Schedule B-3 28 [*] Confidential Treatment Requested EXAMPLE # 3 Same as #1 Except Policy Written in Month 7 [*] Schedule B-4 29 [*] Confidential Treatment Requested EXAMPLE # 4 [*] Schedule B-5 30 [*] Confidential Treatment Requested EXAMPLE # 5 [*] Schedule B-6 31 [*] Confidential Treatment Requested EXAMPLE # 6 [*] Schedule B-7 32 [*] Confidential Treatment Requested autobytel.com November 12, 1998 Via Facsimile - ------------- And Certified Mail, Return Receipt Requested - -------------------------------------------- AIG MARKETING, INC. 505 Carr Road Wilmington, DE 19809 Attention: J. Ernest Hansen, President Or his successor Re: Marketing Agreement, dated as of July 22, 1996, between Auto-By-Tel Acceptance Corporation ("ABTAC") and Auto-By-Tel Corporation as guarantor, and all member companies of American International Group, (collectively "AIC") as signatory thereto (the "Agreement"). -------------------------------------------------------------------- Dear Mr. Hansen: Reference is made to Section 6.1(a) of the above referenced Agreement. This letter serves as notice that ABTAC elects to terminate the [*] provisions of the Agreement, upon the expiration of the now current [*] month [*] period effective [*]. Please contact me should you have any questions or comments. Very truly yours, /s/ Mark W. Lorimer ------------------------------- Mark W. Lorimer cc: Robert Sandler R.S. Grimes & Co. 152 West 57th Street, 24th Floor New York, NY 10019 Attention: Robert S. Grimes President, Or his successor
   1

                                                                   EXHIBIT 10.12

                        AUTO-BY-TEL MARKETING CORPORATION
                          MASTER SUBSCRIPTION AGREEMENT

    THIS AGREEMENT is entered into by and between Auto-By-Tel Marketing
Corporation, a Delaware Corporation, with its principal place of business at
18872 MacArthur Boulevard, Second Floor, Irvine, CA 92612-1400 ("ABT"), and
[Legal Name] a(n) [STInc] [Entity], with its principal place of business at
[Address], [City], [ST] [Zip] ("Dealer").

    In consideration of the following mutual covenants and promises and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, ABT AND DEALER, on their own behalf and on behalf of each
of their d.b.a. operation(s) set forth in Appendix "A" attached hereto,
intending to be legally bound hereby, warrant, covenant and agree as follows:

1.  SERVICES TO BE PERFORMED.
    ABT shall provide an Internet marketing program and Online Services to
attract Potential Purchasers. ABT shall forward to Dealer information regarding
the identified Potential Purchasers interested in purchasing/leasing a vehicle
of the make subscribed to by Dealer and in the zip code area subscribed to by
Dealer.

2.  USE OF SERVICES.
    (A) DEALER CONTACT REPRESENTATIVE(S). Dealer shall designate a key
employee(s) for the new vehicle program and a key employee(s) for the Used car
CyberStore(TM) program, if so elected by Dealer, to act as a liaison ("ABT
Manager") between ABT and Dealer. Dealer's ABT Manager shall be available to ABT
to receive instructions from time to time from ABT or its authorized agent.
Dealer may change the ABT Manager, provided that Dealer notifies ABT within ten
(10) days with the identity of the newly designated ABT Manager. Except as
otherwise provided to Dealer by ABT, Dealer shall be responsible for all
internal costs, if any, associated with the training of its key employee(s) to
use and implement ABT's systems and services within Dealer's facilities.

    (B) CUSTOMER SERVICE STANDARDS. Dealer agrees to abide by ABT's Customer
Service Standards as set forth herein and on any Appendices or Amendments. In
order to improve the services offered by ABT and maintain uniform delivery and
quality standards among its Dealers, ABT reserves the right to amend the
Customer Service Standards from time to time or impose additional Customer
Service Standards, and ABT agrees to promptly notify Dealer in writing of any
revisions thereto. Dealer acknowledges that ABT's Customer Service Standards are
crucial to the value of ABT's services, and agrees to adopt and abide by such
revisions, even though they may require more work or expense to implement. ABT
agrees that it will not impose amendments or additions unless they are applied
to all Dealers.
        (i) Dealer shall relay to Potential Purchasers a full and complete
    response to the Potential Purchasers' inquiries transmitted by ABT to Dealer
    within 24 hours of Dealer's receipt of the inquiry from ABT; and
        (ii) Dealer's initial response shall be by telephone and shall disclose
    all of the following information (the "Dealer Information"):
              (a) the availability of the vehicle inquired about;
              (b) the manufacturer's suggested retail price of the vehicle;
              (c) all requested options;
              (d) the price at which Dealer will sell or lease the vehicle with
        all requested options to the Potential Purchaser;
              (e) all other terms, costs and conditions required by law to be
        disclosed to prospective purchasers; and
              (f) relevant financing terms and conditions to which a consumer
        shall be entitled to receive.

    (C) DEALER INFORMATION. Dealer agrees that all Dealer Information
transmitted to a Potential Purchaser shall remain in full force and effect and
be binding on Dealer for a period of seven (7) days after its transmittal,
provided the identified vehicle still remains available for sale. If pricing,
terms, incentives or availability of vehicles used in the Dealer Information to
the Prospective Purchaser are in reliance on a manufacturer sponsored program,
the time period in which the terms and conditions shall remain in full force and
effect shall coincide with the termination date of the Manufacturer's program,
but shall not exceed seven (7) days. Dealer agrees to include a statement to
such effect in the Dealer Information and shall inform the Prospective Purchaser
of any reduction in the time period as set forth above. Any claim for damages
arising out of Dealer's failure to inform Potential Purchasers of all
information required by this Section shall be borne solely by Dealer who shall
hold ABT harmless from any loss as a result.

    (D) PERIODIC OPERATIONS REPORTS. Dealer shall report to ABT on a monthly
basis the number and names of Potential Purchasers who purchased vehicles from
Dealer, the number of vehicles financed and amounts financed, and such other
data as ABT may request. Upon Dealer's written request, ABT shall furnish to
Dealer on a quarterly basis an operations report stating the number of purchase
requests received by ABT from Potential Purchasers in Dealer's Territory. ABT
shall use its best efforts to provide prompt transmission of data to Dealer, but
shall not be liable for any loss of data or delays or errors in transmitting
data or for any damages arising from any data loss, delay or error.

3.  FINANCING PROGRAM PARTICIPATION.
    ABT, through its affiliate, Auto-By-Tel Acceptance Corporation, a Delaware
Corporation ("ABTAC"), offers third party, low-cost financing programs for
consumers on its website from sources arranged by ABTAC (the "Financing
Arrangements"). Dealer's participation in offering financing through ABTAC,
regardless of compensation to Dealer, is a material element of this Agreement.
Dealer must be able to accommodate purchase requestors who are pre-approved for
financing. Dealer participation in making ABTAC finance programs available to a
purchase requestor is not OPTIONAL. Dealer agrees to fully participate in good
faith by offering, arranging and accepting ABTAC financing. Dealer agrees to
take such actions as reasonably requested by such Lenders or ABTAC to ensure
high quality service and satisfaction to ABT customers in the handling of their
Financing Arrangements. Dealer agrees it will not intentionally disparage or
otherwise mislead customer as to the terms and conditions of the Financing
Arrangements. Dealer shall not actively solicit the conversion of pre-approved
financing and/or insurance for any ABTAC, credit union, or affinity programs
presented by the purchase requestor to Dealer.
    In many cases, Dealer will be compensated from a Lender for placing
financing through ABTAC. However, some Lenders do not offer compensation, and
neither ABT nor ABTAC makes any guarantee that Dealer will receive compensation
from any Lender. ABTAC uses its best efforts to negotiate advantageous terms for
Dealers through Lenders and will, from time to time, add or delete Lenders,
including banks, credit unions, thrift and loans and other sources to benefit
customers and/or Dealers. Dealer agrees to timely enter into Dealer
Participation Agreements with all Lenders as required by ABTAC within ten (10)
working days from receipt.
    Dealer shall be paid a flat fee, as set forth on Appendix "B" hereto. Any
disagreement regarding the terms and conditions of a lender's Dealer
Participation Agreement shall be between Dealer and Lender, and shall not
involve ABT or ABTAC. 
    Dealer understands that each ABTAC finance contract will be pre-approved at
the Lender's prevailing buy rate. Dealer further understands that both the
customer and Dealer will be notified of the customer finance rate (APR) by ABT.

4.  DEALER REAL TIME 2 INFORMATION SYSTEM
    In consideration of the fees paid as set forth in Section 12 of this
agreement, ABT hereby grants to Dealer a nonexclusive, non-transferable license
and password to access and use for up to two simultaneous users, ABT's
proprietary real time access program referred to as Dealer Real Time 2 (DRT2),
subject to the terms and conditions of Appendix "C." Dealer agrees to dedicate a
personal computer and certain related ancillary equipment that meets or exceeds
ABT's minimal system specifications, for use in ABT's Dealer Real Time 2
Internet program and services. ABT will provide access and technical support
services to Dealer to assist Dealer in the access and use of the DRT2 system.

                                       1
   2

5.  EQUIPMENT.
    ABT Equipment. ABT warrants that it possesses, or has access to and the
right to use, computer and other equipment necessary for it to perform its
services and provide the programs contemplated by this Agreement.
    Dealer Equipment. Unless otherwise agreed between the parties, Dealer, at
its sole cost and expense, shall provide for itself a IBM compatible personal
computer with the minimum specifications determined by ABT to properly receive
and process purchase requests, facsimile machine and other office equipment
specified by ABT in order to receive and properly use ABT's services provided
under this Agreement. To ensure consistent, high quality service by Dealer, ABT
reserves the right to specify from time to time the equipment and software
required by its participating Dealers.
    Equipment Maintenance. Dealer, at its sole expense, shall maintain all its
own computer/office equipment used for ABT services in good and proper working
order, and shall assume all responsibility for loss, damage and maintenance to
Dealer's own equipment. Dealer holds ABT harmless from any claim concerning
Dealer's own equipment.

6.  ASSIGNMENT OF TERRITORY.
    Subject to the terms and conditions of this Agreement, and its Appendices
and/or Amendments, ABT hereby grants to Dealer the exclusive non-transferable
right to conduct business using ABT's services (except for the Used Vehicle
CyberStore(TM)) within the geographic area designated by the Zip Codes set forth
in Appendix "A," attached hereto for each of Dealer's franchised makes and
incorporated herein by this reference. This exclusive territory extends only to
the make(s) of motor vehicles set forth in each Appendix "A" attached hereto
(together referred to as the "Territory"). Unless otherwise agreed to between
the parties, during the first six months of this Agreement this assigned
territory shall remain fixed. Thereafter, to provide and maintain the highest
quality of services to Dealer and Purchase Requester, ABT, in its sole
discretion, reserves the right to alter Dealer's Territory upon thirty- (30)
days' written notice to Dealer.
    ABT retains the right to market and use its programs and services for
similar make dealers in all areas other than Dealer's Territory as designated
above, and within Dealer's Territory for all makes of motor vehicles not listed
above.

7.  CONFIDENTIALITY.
    During the term of this Agreement, Dealer will have access to and become
acquainted with various trade secrets consisting of formulas, strategies,
processes, computer programs, compilations of information, records,
specifications, and contractual information, all of which are owned by ABT and
regularly used in the operation of ABT's business. Dealer shall promptly sign
any confidentiality agreements submitted by ABT to protect ABT's proprietary
rights.
    Dealer, on behalf of itself and its employees, agrees to keep all
information with respect to ABT's services confidential. Dealer acknowledges and
agrees that the sale or unauthorized use or disclosure of any of ABT's trade
secrets constitutes theft and will greatly damage ABT. Dealer shall not impart
ABT's services or the concept thereof to any person or entity other than
Dealer's key employee(s) without the previous written consent of ABT.
    ABT agrees to treat all information provided by Dealer confidential. ABT
may, however, transmit pertinent vehicle information to consumers making
inquiries concerning the terms of purchase and financing or leasing of motor
vehicles.
    Notwithstanding the foregoing, if either party is required to produce any
such information by order of any government agency, court of competent
jurisdiction, or other regulatory body, it may, upon not less than five (5)
days' written notice to the other party, release the required information.

8.  TITLE TO SYSTEM, TRADEMARKS.
    To the extent permitted by law, the services to be provided under this
Agreement and any Appendices or Amendments are proprietary to ABT, and title
thereto remains in ABT. All proprietary title and rights extends to any
extension of this Agreement and any Appendices and Amendments, together with all
copies thereof.
    All applicable rights to patents, copyrights, trademarks and trade secrets
in the System and in the name "Auto-By-Tel" and its logo, now and in the future,
belong exclusively to ABT. Any and all trademarks and service marks associated
with ABT are and shall remain the exclusive property of ABT. If, during the term
of this Agreement, a trademark registration is filed by ABT, all rights belong
to ABT and ABT shall bear the costs for such registration. Dealer is permitted
to use the trademark and service mark only as set forth herein or only as
authorized in writing by ABT.

9.  EXCLUSIVITY; NON-COMPETITION.
    Dealer acknowledges and agrees that its compliance with Sections 2, 6 and 8
is essential to this Agreement and necessary to protect the business and good
will of ABT. Any breach of Sections 2, 6 or 8 hereof will cause irreparable harm
and continuing damage to ABT, for which money damages may not provide adequate
relief. Dealer understands and agrees that ABT's services include certain key
elements (the "Key Elements") which include:
        (i)   electronic transmission of customer purchase or lease requests;
        (ii)  rapid response by Dealer to customers (including immediate
              telephone contact with up-front, firm pricing provided over the
              telephone);
        (iii) proper transmission to customers of the required Dealer
              Information and adherence to Customer Service Standards, as stated
              above;
        (iv)  customer purchase or lease documentation completed or nearly
              completed prior to customer's arrival at the dealership for pickup
              so as to ensure the customer spends as little time as possible at
              the dealership; and
        (v)   continued Dealer training and support to implement and maintain
              ABT's style and quality of services.
                  The parties agree that ABT's services are restricted solely to
use by Dealer and its designated key employee(s) and other duly authorized ABT
Dealers. Dealer agrees it will not compete with ABT in providing for its own
benefit the services contemplated in this Agreement, its Appendices and/or
Amendments.
    Nothing in this section shall prohibit Dealer from establishing and
maintaining its own Internet web site and/or participating in any factory direct
program involving the Internet, World Wide Web online or other electronic means.
Similarly, Dealer is not prohibited from establishing for its own internal use,
business plans, policies or procedures that involve some or all of the "Key
Elements."

10. INDEMNIFICATION.
    ABT agrees to indemnify and hold Dealer harmless against any and all losses,
liabilities, claims, awards, damages, judgments, settlements, and costs,
including fees and expenses, arising out of ABT's negligence or wrongful
conduct, or arising out of or related to any third party claim arising out of or
related to ABT's negligence or wrongful conduct, or from any other act done or
omitted to be done by ABT in executing the terms of this Agreement.
    Dealer agrees to indemnify and hold harmless ABT and its subsidiaries and/or
affiliates and their respective members, managers, directors, officers,
employees and agents against any and all losses, liabilities, claims, awards,
damages, judgments, settlements, and costs, including fees and expenses, arising
out of or related to Dealer's negligence or wrongful conduct, or arising out of
any third party claim, including, but not limited to, any claim for damages by
any person or entity regarding the purchase, lease and/or finance of a motor
vehicle from Dealer or resulting from Dealer's utilization of ABT's services, or
from any other act done or omitted to be done by Dealer in executing the terms
of this Agreement.
    In the event ABT shall be served with notification of action or suit against
Dealer, ABT shall promptly notify Dealer of such claim and Dealer shall defend
and settle, at its sole cost and expense, all such claims, actions, lawsuits or
proceedings. In all events, ABT, in its sole discretion, shall have the right to
participate in the defense of any such action through counsel of its own
choosing and at ABT's sole expense. In the event Dealer shall be served with
notification of action or suit against ABT, Dealer shall promptly notify ABT of
such claim(s), and ABT, in its sole discretion, shall defend and settle all such
actions or suits through counsel of its own choosing.

                                       2

   3
   
[*] Confidential Treatment Requested
    

11. TERM AND TERMINATION & REINSTATEMENT.
    This Agreement shall be for a term of five (5) years, unless terminated
earlier pursuant to this Section.
    (a) ABT may terminate this Agreement:
        (i)  immediately if Dealer does not adhere to its obligations under
             Sections 2, 3, 6 and/or 8; or
        (ii) immediately if any fees due ABT pursuant to Sections 9, 11 and/or
             12 are unpaid and outstanding more than thirty (30) days after ABT
             makes a written request therefor in the form of an invoice or any
             other written communication; or
        (iii) immediately for any other breach of this Agreement by Dealer which
             is not cured within ten (10) days after written notice by ABT to
             Dealer; or
        (iv) upon thirty (30) days' notice following Dealer's failure to
             exercise ABTAC Dealer Participation Agreement(s) in accordance with
             Section 3; or
        (v)  at any other time with or without cause upon thirty (30) days'
             written notice to Dealer.
    (b) Dealer may terminate this Agreement:
        (i)  immediately, if an order for liquidation against ABT is entered and
             not stayed in a bankruptcy proceeding; or
        (ii) immediately, if ABT is guilty of willful misconduct in the
             performance of its duties under this Agreement; or
        (iii) upon thirty (30) days' written notice in accordance with Section
             17 of this Agreement following the effective date of any shrinkage
             of Dealer's Territory pursuant to Section 6; or
        (iv) at any other time, in Dealer's sole discretion, upon thirty- (30)
             days written notice to ABT in accordance with Section 17 of this
             Agreement. Dealer shall be responsible for all fees due up to and
             including the effective date of said termination.
    If this Agreement is terminated prior to the date set forth herein, the
parties agree to continue to be bound to the covenants and promises set forth in
Sections 6, 7, 8, 9, 17, 19 and 21 hereof.
   
    (c) If this agreement is terminated pursuant to Section 11(a)(ii) Dealer
        may, within 30 days after termination, apply in writing for
        reinstatement of this Subscription Agreement. The acceptance or
        rejection of Dealers application is within the sole discretion of ABT
        and conditioned upon 1) the territory is available for distribution, 2)
        Any unpaid fees are paid satisfied and 3) Dealer pre-pays to ABT a
        reinstatement fee of [*].
    
    (d) Dealer's participation in the Used Car CyberStore(TM) program may be
        cancelled by Dealer independently of the new vehicle subscription, upon
        thirty-(30) days written notice to ABT.

12. SUBSCRIPTION FEES.
   
    (a) As consideration for the ABT Master Subscription, Dealer shall pay ABT
        [WrittenAMTInFee] Dollars ($[InFee]) as an INITIAL START-UP FEE, to be
        paid concurrently with the execution of this agreement. Of this fee,
        [*] shall be allocated for DRT2 initial start-up fee, receipt of which 
        is hereby acknowledged.
    (b) As additional ongoing consideration, Dealer shall pay ABT the amount of
        [WrittenAMTMoFee] ($[MoFee]) as a total MONTHLY SUBSCRIPTION FEE that is
        due and payable monthly in advance on the first day of every month. The
        total monthly amount due shall be allocated as follows: DRT2(TM) Access
        Fee, [*]; Used Car CyberStore, [UCCSMoFee]; [Make], [MoMakeFee]
        [Make1] [MoMkFee1] [Make2] [MoMkFee2] [Make3] [MoMkFee3] [Make4]
        [MoMkFee4] [Make5] [MoMkFee5] [Make6] [MoMkFee6] [Make7] [MoMkFee7]
    
    (c) The first month's total fee is due and payable concurrently with the
        execution of this agreement, receipt of which is hereby acknowledged.
        ABT in their sole discretion may change these monthly subscription fees
        upon thirty-(30) days' written notice to Dealer.

13. TAXES.
    Dealer is solely responsible for paying all taxes (local, state and federal)
imposed by the sale or lease of any vehicles. ABT shall be responsible for
paying all taxes imposed upon ABT by reason of providing services to Dealer. In
the event ABT is required to collect and/or pay any taxes by reason of a
consumer's purchase or lease of a vehicle through the services ABT provides to
Dealer, Dealer shall promptly pay to ABT such taxes required to be collected or
paid by ABT.

14. WARRANTY LIMITATION.
    Except as otherwise provided in Appendix "D," ABT makes no warranty
regarding the performance of the services hereunder, and Dealer specifically
waives all warranties, expressed or implied, arising out of or in connection
with the services to be provided by ABT hereunder. Specifically excluded are all
warranties, expressed or implied, including but not limited to, merchantability
and fitness for a particular purpose. In no event shall ABT be liable for any
loss of business profits or for any consequential, incidental, punitive or
similar damages, or for any third party claims of damages, even if advised of
the possibility of such damages.

15. NO WAIVER; NO REFUND.
    The failures of either party to exercise in any respect any right provided
for herein shall not be deemed a waiver of any right hereunder. All fees paid to
ABT under this agreement are deemed earned upon the execution of this agreement
or delivery of services whichever occurs first. All fees paid to ABT are
non-refundable regardless of circumstances.

16. INDEPENDENT CONTRACTORS.
    The relationship between ABT and Dealer created by this Agreement and/or any
Appendices or Amendments hereto shall be that of independent contractor. Nothing
contained in this Agreement shall be construed as creating or constituting a
franchise, partnership, agency, or joint venture between ABT and Dealer.

17. NOTICES.
    All notices and requests in connection with this Agreement and/or any
Appendices and/or Amendments hereto shall be given or made upon the respective
parties in writing and shall be deemed given on the day deposited in the U.S.
mail, postage prepaid, certified or registered, return receipt requested, and
addressed as designated at the top of this Agreement, or to such address as the
party to receive the notice or request so designates by written notice to the
other. Notices may also be made by Facsimile and shall be deemed given on the
day sent when a confirming notice from the sending facsimile machine has been
generated. Notices may be made by overnight delivery service or courier, and
shall be deemed received on the day scheduled for delivery.

18. ASSIGNMENT.
    This Agreement and the rights and duties hereunder, including any Appendices
or Amendments hereto shall not be assignable by Dealer, except upon written
consent of ABT. This Agreement and the rights and duties hereunder shall be
assignable by ABT without restriction.

19.  PRESS RELEASES.
    Except as agreed in writing between the parties, Dealer is prohibited from
issuing any press release(s) or making any public announcement(s) regarding
Dealer's business relationship with ABT or ABT's services or programs provided
to Dealer. Nothing in this section shall be construed to prohibit Dealer from
making reference to their affiliation with Auto-By-Tel in any advertisement
published by Dealer for their own benefit. Dealer may upon written request
receive a copy of ABT's logo, trademarks artwork and other printed material
along with a revocable limited license permitting the use of such materials by
Dealer within Dealer's advertisements.

                                       3

   4

20. GOVERNING LAW AND JURISDICTION.
    This Agreement and the performance hereunder shall be governed and construed
in accordance with the laws of the State of California. Any dispute or claim
arising between the parties hereto shall be brought in a court of competent
jurisdiction located in the County of Orange in the State of California, and the
parties hereto agree to jurisdiction in California.

21. OTHER AGREEMENTS; ATTACHMENTS.
    This Agreement and all Appendices and Amendments hereto supersedes any and
all agreements, oral or written, between the parties, and contains all of the
representations, covenants, and agreements between the parties with respect to
services described in this Agreement. Each party to this Agreement acknowledges
that no representations, inducements, promises, or agreements, orally or
otherwise, have been made by any party, or anyone acting on behalf of any party,
which are not contained in this Agreement and/or any Appendices and/or
Amendments hereto. No other agreement(s), statement(s), or promise(s) not
contained in this Agreement or Appendices or Amendments hereto will be valid or
binding. The parties agree that any unilateral changes, amendments or
modifications made by one party are invalid against the other party. Any
amendment, change or modification of this Agreement will be effective only when
in writing and signed by the party to be charged. Upon ABT's request, Dealer
agrees to confirm in writing any amendment, modification, or change in original
terms or other action that alters the terms of this Agreement. 
    All Appendices and subsequent Amendments hereto are incorporated into this
Agreement by this reference as though fully set forth herein.

22. SEVERABILITY.
    If any provision of this Agreement shall be held to be invalid, illegal or
unenforceable, such determination shall in no way alter or impair the validly,
legality and enforceability of the remaining provisions of this Agreement and
any Appendices and/or Amendments hereto.

23. ABT USED CAR CYBERSTORE PARTICIPATION ELECTION
    NOTE: BY SIGNING APPENDIX "D" YOU ARE AGREEING TO PARTICIPATE IN THE
OPTIONAL ABT USED CAR CYBERSTORE(TM) (CYBERSTORE) AT AN ADDITIONAL MONTHLY FEE
PER MONTH AS SET FORTH IN SECTION 12. ABT NEW VEHICLE MASTER SUBSCRIPTION MUST
BE ESTABLISHED AND MAINTAINED CONCURRENTLY WITH THIS ELECTION.

    In addition to the terms and conditions set forth in Appendix "D," Dealer
    agrees as follows:
    The ABT Used Car CyberStore(TM) program will provide an Internet marketing
program and online services targeted at persons ("Prospects") interested in
purchasing or leasing used vehicles ("Vehicles"), and establishes a database
permitting Dealer to publish "ABT Certified" Vehicles (as described below).
Prospects will be able to search the database for Vehicles by make, model and
option specifications. Purchase requests will be routed to dealers having the
appropriate Vehicle in the database, based on geographic and other appropriate
parameters established by ABT.
    Dealer agrees that only "ABT Certified" vehicles that satisfy all
requirements specified by ABT's "Certified Car Checklist" may participate in the
ABT Used Car CyberStore(TM) program. The ABT Checklist requirements will be
provided to Dealer by ABT. ABT reserves the right to change the Checklist from
time to time. ABT may also establish a compliance program to ensure that ABT
certification and Checklist requirements are being met, and Dealer agrees to
cooperate with any such compliance program(s). Dealer agrees to indemnify ABT
for all liabilities for customary third party claims arising in connection with
ABT certified vehicles.
    Dealer may periodically upload Vehicle photographic images and information
for Certified vehicles to ABT's CyberStore database. Dealer agrees, at Dealer's
expense, to make training resources available to Dealer's ABT Manager(s) in
order to facilitate use of the equipment, software and other components of the
ABT Used Car CyberStore(TM) program.
    In participating in the optional ABT Used Car CyberStore(TM) program, Dealer
understands and agrees that additional fees and requirements apply, as set forth
in Appendix "D."


This Agreement is executed this ________day of __________________________, 1998.
DEALER: [Legal Name]


By:____________________________________________________
Name:   [Auth Agnt]
Title:  [Title]

AUTO-BY-TEL MARKETING CORPORATION

By: ____________________________________________________
Name:   Brent Jones
Title:  Chief Operating Officer

                                       4

   5
                                  APPENDIX "A"

                     EXCLUSIVE ZIP CODE TERRITORY ASSIGNMENT

SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN SECTION 5 OF THE ABT MASTER
SUBSCRIPTION AGREEMENT BETWEEN AUTO-BY-TEL MARKETING CORPORATION AND
[LEGALNAME], THE FOLLOWING ZIP CODES ARE ASSIGNED TO DEALER AND SHALL COMPRISE
DEALERS EXCLUSIVE TERRITORY:










Acknowledged:  [Legal Name]




Dealer Principal:_____________________________________ Date:____________________
                 [AuthAgnt]
                 [Title]


   6
   
[*] Confidential Treatment Requested
    

                                  APPENDIX "B"

               ABTAC FINANCING PARTICIPATION DISCLOSURE STATEMENT

ABTAC has entered into arrangements with an affiliate of the Chase Manhattan
Automotive Finance Corporation ("Chase"), Triad Financial Corporation ("Triad")
and General Electric Capital Auto Financial Services Inc. ("GECAL") and may
enter into agreements with additional banks and finance companies (each, a
"Finance Company") to make available to ABT Purchase Requesters financing for
vehicles purchases.

Dealer desires to instruct ABTAC to specify to Finance Company a binding amount
of fee or "dealer participation" for these financing arrangements, which amount
Dealer will be paid directly by Finance Company. Dealer and ABTAC agree as
follows:

   
Dealer hereby instructs ABTAC to inform Finance Company that Dealer agrees to
accept, subject to the terms of the dealer agreement between Finance Company and
Dealer, as compensation for financing transactions, the amount indicated below.
In doing so, Dealer accepts a [*] fee according to the following schedule to be
paid directly to Dealer by Finance Company and Dealer shall not [*].
    

The following fee schedule will be paid to dealer directly by finance source.

The flat rate fee schedule is as follows:

   
[*]
    


Acknowleged:   [Legal Name]




Dealer Principal:___________________________________ Date:______________________
                 [Auth Agnt]
                 [Title]


   7
                                  APPENDIX "C"

                DEALER REAL TIME 2(TM) LICENSE TERMS & CONDITIONS

        Dealer agrees to the following terms and conditions, in addition to
those set forth in the Master Subscription Agreement:

        1. System Requirements. Dealer shall provide at their own expense a
personal computer and related equipment that meets or exceeds the following
minimum specifications:

        133 PENTIUM PROCESSOR; 32MB RAM; 33.6 MODEM (THE FASTER THE BETTER!);
        2GB HARD DRIVE; WINDOWS '95; ISP (INTERNET SERVICE PROVIDER - IE: AT &
        T, NETCOM, MCI....); NETSCAPE NAVIGATOR WEB BROWSER SOFTWARE (VERSION
        3.0 OR LATER).

        2. Technical Support. Licensor shall maintain for the benefit of the
Licensee a technical support help-line. Licensor shall establish and staff such
help-line with persons knowledgeable about the DRT 2 program. The hours of
availability shall be between 6:00 a.m. And 6:00 p.m. PST, excluding Sundays and
federal holidays. Technicians will provide assistance to licensee with respect
to accessing and using the DRT 2 program only. Technical assistance and support
regarding computer or related hardware are beyond the scope of this agreement
and will not be provided by Licensor. The hours of the availability of the
help-line are subject to change at the sole discretion of the licensor.

        3. Covenants of licensee. During the term of this agreement:

           (a) Licensee shall adopt and enforce such internal policies,
procedures and monitoring mechanisms as are necessary to ensure that the DRT 2
program is used only in accordance with this agreement and that all steps
necessary to ensure that no person or entity will have unauthorized access to
the programs are taken.

               (b)     Licensee shall not:
                             (i)    assign, sublicense, lease, encumber or
                                    otherwise transfer or attempt to transfer
                                    the DRT 2 program or any portion thereof;
                             (ii)   permit any third party other than the
                                    Licensee or its authorized agent acting in
                                    behalf of Licensee, to have access to the
                                    DRT 2 passwords or to use programs, whether
                                    by timesharing, networking, or any other
                                    means;
                             (iii)  duplicate, modify, translate, reverse,
                                    engineer, decompile or disassemble the DRT 2
                                    program;
                             (iv)   possess or use the programs or any portion
                                    thereof, other than in machine readable
                                    object code;
                             (v)    remove any copyright, trademark, patent or
                                    other proprietary notices from the DRT 2
                                    program(s), or any portion thereof without
                                    the express written consent of Licensor.

        4. Program Modifications: Only the Licensor shall make Program
modifications. Licensor shall from time to time provide upgrades and/or
modifications to the DRT 2 program to Licensee. Licensee shall accept any
upgrades or other modification made by licensor to the programs.

        5. No warranty. The programs are provided on an "as is" basis. Licensor
makes no warranties or representations, express or implied, including but not
limited to any implied warranties of merchantability and fitness for a
particular purpose.

        6. Limitation of remedies. Regardless of whether any remedy set forth
herein fails of its essential purpose, in no event will the licensor be liable
the damages to the licensee for any special, consequential, indirect or similar
damages, including any lost profits or lost data beyond the access fee paid for
the month in which they occurred, arising out of the use or inability to use the
DRT 2 program or any data supplied therewith.

        7. Proprietary data. Licensee acknowledges that the programs are
proprietary to licensor and that it has (and will have) no interest therein or
in any modifications or improvements thereto, and hereby assigns to licensor all
rights in any such modifications or improvements made by or on behalf of
licensee.

        8. Confidentiality. For the purpose of this agreement, confidential
information includes the DRT 2 programs and all other information provided by
licensor marked "confidential." Information shall not be deemed confidential
information and licensee and licensee's employees shall have no obligation with
respect to any such information if such information: (a) is or falls into the
public domain through no wrongful act of licensee or the licensee's employees;
(b) is rightfully received from a third party who is without restriction and
without breach of this agreement; (c) is approved for release by written
authorization of an officer of licensor; or (d) is disclosed pursuant to the
requirements of a governmental agency or operation of law.

        9. Should the licensee or licensee's employees learn of confidential
information from licensor or any other source, neither licensee nor licensee's
employees shall, at any time during the term, or for one year thereafter,
disclose such information to any individual, agency, company or other entity.
Licensee shall not use such confidential information for licensee's own
advantage other than as permitted by this agreement.

        10. Both parties recognize and acknowledge that breach of this Section
12 would cause irreparable injury inadequately compensable in damages.
Accordingly, licensor may seek and obtain injunctive relief against a breach or
threatened breach hereof, in addition to any other legal remedies that may be
available at law or in equity.

        11. Assignment. Except for assignments to affiliates, provided each such
affiliate agrees to be bound by the terms hereof, licensee may not, without
licensor's prior written consent, assign its rights or delegate its obligations
under this agreement.

        12. Independent contractors. Nothing in this agreement shall be deemed
or construed by the parties or any third person to create a franchise, agency,
partnership or joint venture between licensor and licensee.

        13. Waiver. A failure of this licensor to enforce at any time any
provision of this agreement shall in no way affect the full right of the
licensor to enforce such provision at any time thereafter.


Acknowledged: [Legal Name]




Dealer Principal:__________________________________ Date:_______________________
                 [AuthAgnt]
                 [Title]


   8
   
[*] Confidential Treatment Requested
    

                                  APPENDIX "D"

                        USED CAR CYBERSTORE(TM) ELECTION

        The undersigned Dealer elects to participate in the ABT Used Car
CyberStore(TM) services program and agrees to the following terms and
conditions, in addition to those set forth in the Master Subscription Agreement:

1.      CUSTOMER SERVICE GUIDELINES.

        Dealer agrees to abide by ABT's Used Car CyberStore Customer Service
Guidelines ("Guidelines") ABT in their sole discretion may, from time to time,
amend the Guidelines, or impose additional Guidelines on thirty (30) days'
notice to Dealer. Dealer acknowledges that following the Guidelines is crucial
to the value of ABT's services and agrees to follow them and any amendments or
additions to it even though they may require extra work or expense. The
Guidelines include the following:

        (i) Dealer will warranty all vehicles sold through the CyberStore. The
warranty coverage will not be less favorable to the purchaser than the law of
the where Dealer is located, and as a minimum will be: "Three months or 3,000
miles, whichever comes first." The warranty will cover all matters governed by
applicable law and by the form of the attached Warranty. Dealer will indemnify
ABT for any third party claims arising under any warranty.

        (ii) Dealer will provide prices ("Posted Prices") and vehicle
information for display on the ABT Website of all Vehicles posted to the
CyberStore. Dealer agrees to price Vehicles competitively. Dealer, and not ABT,
shall be solely responsible for the quality and accuracy of such information.
ABT reserves the right to monitor the quality of the photos and information
submitted. Dealer shall promptly correct any information or photo(s) deemed by
ABT to be inaccurate or below necessary quality levels set forth in Section 5.
If Dealer fails to correct such photo image(s) or information within 72 hours of
ABT's written notification thereof, ABT may remove the photo image(s) and/or
information from its website.

        (iii) Except where expressly prohibited by law, Dealer will offer, in
writing, a return option allowing a purchaser to return a Vehicle to Dealer
within 72 hours or 300 miles, whichever comes first. Provided there has been no
damage to the Vehicle, Dealer will refund 100% of the amount paid by the
purchaser to the Dealer for the Vehicle. Dealer will provide each purchaser the
name and phone number of the Dealer employee to contact to exercise the
repurchase option. Dealer will facilitate the purchaser's exercise of the option
in good faith, and will use its best efforts to maximize the purchaser's
satisfaction with the repurchase experience. Dealer agrees to refund all amounts
due to the purchaser within five business days.

        (iv) Dealer will participate in the emergency repair system established
by ABT. The emergency repair system will allows a purchaser of a CyberStore
Vehicle who is more than 100 miles from their residence and encounters a
situation where the vehicle is not operational (i.e. cannot be driven), to
contact the nearest CyberStore Dealer (the "Repairing Dealer") and have the
Repairing Dealer perform any warranted service or repair. The Repairing Dealer
will contact the dealership where the purchaser acquired its Vehicle (the
"Selling Dealer") and obtain an irrevocable Repair Order (an "R.O.") from the
Selling Dealer authorizing the repair the vehicle. For other covered items other
than those which disabled the vehicle, the owner should return to the Selling
Dealer. In the interest of customer satisfaction and improved inter-dealer
relations, the resulting R.O. will be calculated on an internal basis of "cost
plus 25%" for parts and labor in all states, except for those states with higher
mandates, in which states the applicable law will govern. In the event of a
"major" repair (i.e. engine or transmission), the Selling Dealer will have the
option of providing alternate transportation to the customer, retrieving the
affected unit, and repairing the Vehicle at the Selling Dealer's service
location. In the event of any dispute between the Selling Dealer and the
Repairing Dealer, ABT will act as mediator. In such circumstance, ABT's
decisions will be final and binding upon both parties.

        (v) Dealer agrees to adopt ABT sales procedures on Vehicle sales
instituted through ABT's CyberStore program, including firm phone price quotes
not to exceed the posted price, advanced document preparation, a
"no-hassle-no-haggle" sales style and to take any other actions necessary to
minimize the time spent by the Prospect in closing the transaction. Dealer will
respond to the Prospect's inquiries within 24 hours from Dealer's receipt of the
inquiry from ABT. Dealer's initial response will be by telephone and will
disclose all "Dealer Information," as that term is defined in the Master
Subscription Agreement. Dealer agrees that all terms and conditions contained in
the Dealer Information transmitted to a Prospect shall remain in full force and
effect and will be binding for a period of seven (7) days after its transmittal,
provided the identified vehicle still remains available for sale.

2. DEALER EQUIPMENT. In order to assure consistent, high quality service by all
dealers participating in the CyberStore, ABT reserves the right to specify the
equipment and software required by participating dealers. Dealer will provide at
their own expense the computer and equipment and receive the services provided
in this Agreement as specified by ABT including the ABT Dealer Real Time 2(TM)
program. Dealer AT their own expense, will maintain all of its specified
equipment in good and proper working order. Dealer will assume all
responsibility for loss, damage and maintenance of Dealer's equipment and hereby
holds ABT, its officers, directors, agents and other representatives harmless
from any claim concerning the specified equipment.

3. DEALER REPORTS. On a monthly basis, Dealer will report to ABT the number and
names of Prospects who purchased used vehicles from Dealer, the number of used
vehicles financed and the amounts financed and any other information ABT may
request.

4. SUBSCRIPTION FEES. Dealer may publish an unlimited number of vehicles
(images) on the CyberStore for a subscription fee of [*] per month, which
amount shall be due and payable in advance on the first day of each month. For
each vehicle, Dealer shall publish one digital image together with relevant
information in accordance with the Agreement. Such images shall be produced by
Dealer in accordance with the Specifications and Guidelines set forth in Section
5 below.

Upon receipt of an executed copy of this Amendment, ABT shall ship to Dealer a
digital camera of ABT's choice, for the purposes of producing images of vehicles
for publishing on the CyberStore.



5. SPECIFICATIONS AND GUIDELINES: All vehicle images shall (i) contain the
vehicle as the sole subject matter of the image, and shall not contain any
people, images of people, graphics, photos, artwork, overlays, signs, numbers,
banners, balloons or any form of visual advertisement, or any other image that
would have the effect of distracting from the vehicle; (ii) be side or angular
photographs; and (iii) be true and correct images of the vehicle, without
retouching, modification, manipulation or enhancement.

6. DIGITAL CAMERAS: ABT shall provide the dealer for their use, a Digital Camera
for the first six-(6) months. Upon the conclusion of a six-(6) month of paid
subscription term title and possession of this camera shall transfer to the
Dealer. In the event Dealer shall cancel this subscription before the sixth
(6th) month anniversary, Dealer shall promptly pay ABT the sum of [*].




Accepted:  [Legal Name]




Dealer Principal: ______________________________________ Date: _________________
                  [AuthAgnt]
                  [Title]

   9

               ATTENTION DEALER: This is a suggested sample form.
                 Please add all state-mandated disclosures, etc.

                               FRONT SIDE OF FORM

                                    WARRANTY

[ ] FULL [X] LIMITED WARRANTY. The dealer will pay 100% of the labor and 100% of
the parts for the covered systems that fail during the warranty period. See
reverse side of this form for the explanation of warranty coverage, exclusions,
and the dealer's repair obligations.

SYSTEMS COVERED:                                   DURATION:

Engine                Power steering               90 days or 3000 miles
Transmission          Power brakes                 whichever occurs first.
Transaxle             Air Conditioning
Drive line            Electrical
Rear end
*SEE BELOW FOR SYSTEMS AND PARTS COVERAGE.

TRAVEL REPAIR PROVISION. A vehicle purchased through the Used Car CyberStore
that becomes inoperative when traveling over 100 miles from the originating
dealer will be eligible for repair at Auto-By-Tel accredited dealerships. Travel
repair service will be available throughout the U.S. and Canada via the
Auto-by-Tel accredited dealer network. On major repairs, the selling dealer has
the option of providing the customer with alternate transportation and repairing
the unit at the selling dealer's location. A vehicle that is non-operational
will be repaired sufficiently to return to the originating dealer where
additional repairs can be completed. To take advantage of the Travel Repair
Provision, customers may contact the originating dealer who will direct them to
the nearest Auto-By-Tel accredited dealership, or inquire through the
Auto-By-Tel Website for instructions and directions: www.autobytel.com. PLEASE
NOTE: Appearance and convenience items will NOT be covered by the Travel Repair
Provision, nor will light bulbs, fuses, alignments, adjustments, switches, oil
filters, and other maintenance items.

SERVICE CONTRACT. A service contract is available at an extra charge on this
vehicle. Ask your Dealer for details as to coverage, deductible, price and
exclusions.

PRE PURCHASE INSPECTION: ASK the dealer if you may have this vehicle inspected
by your mechanic either on or off the lot.


AUTO-BY-TEL HOME AND AWAY WARRANTY:


- --------------------  ----------    ------------------------  -----  ----------
vehicle make          model         dealer stock number       year   vin number

   10

                                BACK SIDE OF FORM

[ ] FULL [X] LIMITED WARRANTY. The dealer will pay 100% of the labor and 100% of
the parts for the covered systems that fail during the warranty period. The
following is the entire representation of coverage, no other systems or parts
are suggested or implied. State law may give your additional rights.

SYSTEMS COVERED:            PARTS COVERED:

ENGINE:                     All internally lubricated parts including timing
                            chains, gears and cover, timing belt, pulleys and
                            cover, oil pump and gears, water pump, valve covers,
                            oil pan, manifolds, flywheel, harmonic balancer,
                            engine mounts, seals and gaskets, engine block,
                            cylinder heads and turbocharger housing if damaged
                            by the failure of internally lubricated parts.

TRANSMISSION/TRANSFER CASE: All internally lubricated parts, torque converter,
                            vacuum modulator, transmission mounts, seals and
                            gaskets. (MANUAL CLUTCH ASSEMBLY AND COMPONENT PARTS
                            ARE NOT COVERED)

FRONT WHEEL DRIVE:          All internally lubricated parts, axle shafts, output
                            shafts, constant velocity joints, front hub
                            bearings, seals and gaskets.

REAR WHEEL DRIVE:           All internally lubricated parts, propeller shafts,
                            supports and U-joints, drive shafts, axle shafts and
                            bearings, seals and gaskets.

BRAKES:                     Master cylinder, power booster, wheel cylinders,
                            calipers, hydraulic lines and fittings. (ABS
                            COMPONENT PARTS ARE NOT COVERED.)

STEERING:                   Steering gear housing and all internal parts, power
                            steering pump, valve body and rack.

ELECTRICAL:                 Alternator, generator and starter.

AIR CONDITIONER             Compressor, evaporator core, condenser.


                ALL SYSTEMS AND PARTS LISTED ARE COVERED 90 DAYS
              FROM PURCHASE OR 3000 MILES, WHICHEVER OCCURS FIRST.

By accepting this warranty, Customer agrees to release Auto-By-Tel from all
obligations with respect to the acquisition of covered unit.


____________________________________            ________________________________
AUTO-BY-TEL ACCREDITED DEALER / DATE            CUSTOMER SIGNATURE / DATE


   1

                                                                   EXHIBIT 10.13

                                                                 EXECUTION COPY

   
[*] Confidential Treatment has been requested for certain portions of this 
    exhibit. 
    

                      FINANCING INQUIRY REFERRAL AGREEMENT

                   This FINANCING INQUIRY REFERRAL AGREEMENT ("Agreement"),
dated as of October 25, 1996, between Chase Manhattan Automotive Finance
Corporation, a Delaware corporation ("CAF"), with its principal place of
business at 900 Stewart Avenue, Garden City, New York 11530, on the one hand,
and Auto-By-Tel Acceptance Corporation ("ABTAC"), a Delaware corporation, with
its principal place of business at 18722 MacArthur Blvd., Irvine, CA 92612 and
Auto-By-Tel, Inc. ("ABT"), a Delaware corporation, located at 18722 MacArthur
Blvd., Irvine, CA 92612, as guarantor of the obligations of ABTAC under this
Agreement, (in such capacity, the "Guarantor").

                               W I T N E S S E T H

                   WHEREAS, ABTAC is in the business of, among other things
identifying persons interested in arranging financing for the purchase or lease
of new and used Vehicles and trucks ("Vehicles") who visit the ABT Internet
website and purchase a new Vehicle ("Customers") and CAF and Chase Manhattan
Bank U.S.A., N.A. (hereinafter referred to collectively in the singular as
"CAF") is in the business of extending financing to certain persons for the
purchase and lease of Vehicles; and

                   WHEREAS, ABTAC desires to refer such Customers to CAF, and
CAF desires to purchase from Dealers (as defined herein) retail installment sale
contracts originated by such Dealers to finance the purchase of new motor
Vehicles only (excluding recreational vehicles) (such transactions, "RFTs") and
to pay marketing fees in connection with RFTs purchased by CAF as a result of
ABTAC's referrals;

                   NOW THEREFORE, in consideration of the foregoing premises,
and for other good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged, and intending to be legally bound, ABTAC and CAF
agree as follows:


SECTION 1. FINANCING PROGRAM

        (a) ABTAC shall cause to be included on the ABT Website an application
for credit containing requests for the information designated by CAF as set
forth on Exhibit A hereto (the "Application"). The Application shall request the
information specified by CAF and shall be in a form reasonably satisfactory to
CAF. CAF may request changes from time to time in the information solicited by
the Application and, provided the requests are made in writing and with
reasonable notice,



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[*] Confidential Treatment Requested
    

ABTAC shall use its best efforts to promptly accommodate such requests;
provided, however, that CAF shall use its best efforts not to request changes to
the information requested by, or form of, the Application (unless such changes
are required by law) more often than once in any three-month period; provided,
further, if such changes are required by law, and CAF gives ABTAC 30 days
notice, ABTAC shall honor such requested change within such thirty (30) day
period.

        (b) Unless it already has done so, CAF will enter into its standard
dealer agreement ("Closing Agreement") with each seller of Vehicles in the
United States and the District of Columbia (the "Territory") who has executed an
on-line purchase referral agreement with ABT (each, a "Dealer," and together the
"Dealers"). The Closing Agreement shall contain customary terms no less
favorable to the Dealers than CAF's customary agreements in use with its other
financing programs and shall govern the terms upon which the Dealer and CAF will
close vehicle financing transactions referred through this Agreement. Upon
execution of a Closing Agreement, CAF shall assign such Dealer an identifying
number (the "Dealer ID") and inform ABTAC of such number. CAF may terminate its
relationship with any Dealer at any time for any reason, subject to the terms
and conditions of its Closing Agreement with such Dealer. CAF shall notify ABT
if it terminates any such Dealer under the provisions of its Closing Agreement
with such Dealer. Notwithstanding the foregoing, CAF shall not be obligated to
enter into a Closing Agreement or otherwise do business with any Dealer which
CAF has determined it will not do any business.

        (c) Except as specified to the contrary in this Agreement, ABTAC (i)
shall not be a party to, (ii) shall not have any obligations with respect to,
and (iii) shall be held harmless by each Dealer and CAF with respect to any
losses or liabilities arising from or in connection with, the Closing
Agreements. If for any reason the Closing Agreement between a Dealer and CAF is
terminated, then CAF shall be under no obligation to approve any Application
received from Customers of such Dealer.

   
        (d) CAF agrees to offer a buy-rate for each approved Customer credit
application at terms no less favorable than those offered to the applicable
Dealer by CAF. For each Customer credit application approved, CAF agrees to
inform ABTAC of the buy-rate offered to the applicable Dealer for RFTs. On a
monthly basis, the buy rate for RFTs purchased from Dealers by CAF that month
shall average no higher than [*] (the "Base Range"). CAF may, upon 90 days
written notice (a "Base Range Notice") to ABTAC, raise the Base Range.
    

   
               Subject to the ability of CAF to handle the systems issues
involved, as reasonably determined by CAF, and pursuant to a methodology to be
agreed upon by CAF and ABTAC, from time to time, upon ten (10) business days
written request from ABTAC, CAF shall raise the buy rate offered on RFTs, up to
a limit [*] over the life of the term of this Agreement, which raise shall be
paid to ABTAC in the form of an increase in the fees paid to ABTAC by CAF
pursuant to Section 6. Such increase in fees shall be determined by reference to
the present value
    




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[*] Confidential Treatment Requested
    

of such rate raise determined in accordance with the assumptions employed by CAF
for its valuation of excess spread on the portion of the excess spread CAF
retains on such loan.

        (e) For so long as the "Exclusivity Conditions" (as defined below) are
met, CAF shall not enter into any agreement or arrangement similar to this
Agreement with any other Internet automobile buying, purchase assistance, or
automotive pricing information program or service, whereby the Internet program
or service provider receives or solicits credit information from its customers
to finance the purchase of new motor vehicles only (excluding recreational
vehicles), forwards that information for credit review to CAF and CAF purchases
that customer's retail installment sales contract originated by an automobile
dealer that has executed an on-line purchase or financing referral agreement or
similar agreement with the Internet program or service provider; provided,
however, that (i) CAF's rights to and/or use of IBM's Auto Loan Exchange System
for indirect dealer financing shall not violate the provisions of this Section
1(e); and (ii) CAF, any affiliate of CAF or any person controlled by or under
common control with CAF may, after the date hereof, acquire control (through
merger, acquisition, consolidation or purchase of all or substantially all of
the assets) of any corporation or other entity (other than a corporation or
entity which has as its primary line of business services substantially similar
to ABT and ABTAC) which at the time of such acquisition is engaged in a business
or service substantially similar to that contemplated by this Agreement, so that
such corporation or entity (including the surviving or continuing entity in any
acquisition effective on a merger, consolidation or purchase of assets) shall
not violate the provisions of this Section 1(e). CAF shall not use or
participate in the use of the ABTAC Marks (as defined in Schedule 2) in
conjunction with the offering or making of any automobile finance product or
product related thereto on the Internet.

        For purposes of this Agreement, the term "Exclusivity Conditions" shall
mean the occurrence of the following two conditions:

   
        (i)   ABTAC forwards to CAF not less than [*] of the Applications for
              RFTs ABTAC receives from Customers who qualify for financing from
              or through ABTAC within the Base Range; and

        (ii)  Of the Applications received by CAF from ABTAC, not less than [*]
              result in an RFT purchased from a Dealer.
    

        (f) From time to time, ABTAC shall forward to CAF Applications received
from Customers. CAF shall review each forwarded Application and, if such
Application does not represent a credit which CAF will approve within the Base
Range, CAF shall so inform ABTAC and ABTAC may forward such Application to
another financing source.




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[*] Confidential Treatment Requested
    

        (g) ABTAC will be responsible for informing Dealers of the nature of
CAF's financing program. ABTAC will provide CAF with a list of the Dealers with
addresses so that CAF may forward Closing Agreements to them for signature. CAF
shall provide ABTAC with a copy of the form of Closing Agreement.

        (h) ABTAC shall comply at all times with the provisions of the federal
Fair Credit Reporting Act and the Equal Credit Opportunity Act as well as the
so-called "fair lending" laws, in each case pertaining to the performance of its
obligations under this Agreement: including but not limited to the following:

            (A) ABTAC will not submit any Application or credit information to
        CAF with respect to applicants if ABTAC has any knowledge that such
        Application, credit information or applicant is fraudulent, or that the
        Application or credit information contains information which ABTAC knows
        is untrue; and

            (B) ABTAC will, on its Website, advise each applicant that his/her
        Application may be submitted to Chase Manhattan Bank USA, N.A., 802
        Delaware Avenue, Wilmington DE 19801, or such other address as CAF may
        specify from time to time.

SECTION 2. RECEIPT AND TRANSMISSION OF APPLICANT INFORMATION

        (a) Subject to the provisions of Section 1 (f), ABTAC will transmit each
completed Application to CAF by telephone, telefax, e-mail, or other electronic
or agreed upon means. When transmitting an Application to CAF, ABTAC will also
designate the Dealer that is to be notified of the credit decision.

        (b) ABTAC will not use any such information in any manner which violates
applicable law in effect from time to time.

SECTION 3. UNDERWRITING

        (a) Upon receipt, CAF will review each Application in accordance with
its underwriting criteria in effect from time to time. ABTAC acknowledges that
CAF has sole discretion in determining whether or not to approve an Application,
which discretion CAF agrees to exercise in a manner consistent with its
company-wide or market-wide underwriting procedures, as the case may be. CAF
shall inform ABTAC whether an Applicant has been approved, conditionally
approved or denied, but shall not reveal the reasons it has denied any
Application.

   
        (b) CAF will complete its review of no less than [*] of the Applications
within [*] after electronic receipt of the Application and a further [*] of the
Applications within [*] of
    

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[*] Confidential Treatment Requested
    

such time. Compliance with these performance standards shall be measured on a
monthly basis. If CAF fails to comply with these performance standards, ABTAC's
sole remedy shall be to terminate this Agreement pursuant to Section 9(b). CAF's
business hours will be 8:00 a.m. to 9:00 p.m. Eastern Time, each day of the
year, except for those days banks located in New York are required to close.
Subject to the mutual agreement of the parties, the parties shall review the
foregoing business hours and expand same if justified economically by business
volume.

        (c) CAF reserves the sole right and power to change the Underwriting
Criteria in accordance with sound lending practices consistent with CAF's normal
business practices and subject to applicable law, and further to suspend,
restrict or modify the purchase of RFTs from Dealers in any portion of the
Territory for any reason. CAF shall provide ABTAC with advance written notice,
given as early as practicable, of any actions under this clause (c) it plans to
implement. Any such actions shall be taken in good faith and only if consistent
with actions taken by CAF on a company-wide basis.


SECTION 4. COMMUNICATION OF CREDIT DECISIONS

   
        At the completion of underwriting, subject to the time-frames set forth
in Paragraph 3(b) of this Agreement, CAF will notify ABTAC, [via E-MAIL] or such
other method as agreed upon by the parties from time to time, of CAF's credit
decision, and ABTAC shall use its best efforts to promptly notify the Dealer and
the Applicant on behalf of the Dealer and CAF of CAF's credit decision, and in
any event shall notify no less than [*] of such Dealers and Applicants within
[*]. If CAF declines a request for credit, CAF will send to the Applicant any 
and all notices required pursuant to federal or applicable state law or 
regulation including, but not limited to, those required under the federal Equal
Credit Opportunity Act and Federal Reserve Regulation B. CAF shall not provide 
Applications received from ABTAC which do not result in an RFT purchase from a 
Dealer to any other financing source, including without limitation, ProCredit 
Corp.
    

SECTION 5. CLOSING AND FUNDING

        CAF and the Dealer shall use its best efforts to close approved
financing within 24 business hours after receipt from the Dealer of all properly
completed and required documentation pursuant to the terms of the Closing
Agreements. CAF will remit the proceeds of each purchased RFT to the related
Dealer in a timely manner.




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SECTION 6. COMPENSATION

   
        (a) During the term of this Agreement, CAF shall pay ABTAC a service
fee, in the amounts determined by reference to Exhibit A, and during the term of
this Agreement, CAF shall pay to each Dealer a service fee, in the amounts
determined by reference to Exhibit A and further subject to the terms of the
Closing Agreement for each RFT purchased under the terms of this Agreement. The
payment to ABTAC shall be made on the business day following any funding and the
payment to Dealer shall be made in accordance with the terms of the applicable
Closing Agreement. Dealer may markup CAF's buy rate, up to a maximum of [*],
subject to the terms of the Closing Agreement and any applicable agreement
between the Dealer and ABTAC, which shall be provided to CAF. Dealers will earn
reserves in accordance with CAF's standard practices in connection with any such
mark up, subject to the terms of the Closing Agreement.
    

   
        (b) ABTAC may appoint public accountants of its choice no more than once
during any 12 month period, and at its sole expense, for the purpose of auditing
CAF's compliance with the compensation provisions specified in Section 6 of this
Agreement and CAF agrees to grant such accountants access, during normal
business hours and upon reasonable notice, to all records necessary to determine
the compliance of CAF with the compensation provisions of Section 6 of this
Agreement. If the results of such audit reveal a discrepancy between the amounts
paid by CAF hereunder and the amounts which should have been paid hereunder,
then the appropriate payments shall be made (i) if to ABTAC, immediately, and
(ii) if to CAF, by the withholding of [*] of such amount from the payments to be
made to ABTAC over the succeeding six months with any balance due hereunder
payable on the 180th day notwithstanding any termination of this Agreement. If
the discrepancy is in ABTAC's favor and exceeds [*], then CAF shall reimburse
ABTAC for the full cost of the audit.
    

SECTION 7. REPORTS

        (a) Each business day, via facsimile or such other method as agreed upon
by the parties from time to time, CAF will send to ABTAC a report identifying
each RFT to an Applicant, sorted by Dealer ID, that was purchased from a Dealer
on the preceding day (or, in the case of a report submitted on a Monday, each
RFT purchased from a Dealer on each of the three preceding days).

        (b) On or before the 10th day of each month, via facsimile or such other
method as agreed upon by the parties from time to time, CAF will send to ABTAC a
report, sorted by Dealer ID, outlining for the preceding month (i) the number of
Applications received from ABTAC, (ii) the number of Applications that were
approved, (iii) the number of Applications that were denied, (iv) the number of
Applications pending at month-end, and (v) the average processing time for



                                        6

   7

Applications, and the amount financed under each RFT. In the case of the
information set forth in clauses (i), (ii) and (iii) of the preceding sentence,
the report shall identify each Application by name of applicant. CAT shall
include with such report, a report indicating any Dealers which executed a
Closing Agreement and any Closing Agreements which terminated.

        (c) On or before the 10th day of each month, via facsimile or such other
method as agreed upon by the parties from time to time, CAF will send to ABTAC a
report on the performance of RFTs purchased from Dealer detailing, for each
month this Agreement shall have been in effect, the number and aggregate
outstanding balance of (i) RFTs purchased during the month, (ii) RFTs in a
current status, (iii) RFTs more than 30 but less than 60 days delinquent, (iv)
RFTs more than 60 but less than 90 days delinquent, and (v) RFTs more than 90
days delinquent, (vi) repossessions and repossession ratio, (vii) gross and net
charge-offs and loss ratios. This monthly report will be provided on an overall
portfolio basis with respect to RFTs purchased from Dealers.

        (d) ABTAC agrees to maintain complete and accurate books and records and
procedures concerning the taking and referral of Applications and credit
information and compliance with all applicable law. Throughout the term of this
Agreement, and for a period of twenty five (25) months after the termination of
this Agreement, CAF, its duly authorized agents, representatives or employees or
federal or state agencies having jurisdiction over CAF, may from time to time,
upon reasonable notice and during normal business hours, inspect such books,
records and procedures to ensure compliance with ABTAC's obligations concerning
the taking and referral of Applications and credit information under this
Agreement and compliance with all applicable law.

        (e) On or before the 10th day of each month, via facsimile or such other
method as agreed upon by the partners from time to time, ABTAC will send to CAF
a report specifying for the preceding month, the number of Applications for RFTs
ABTAC receives from customers who qualified that month for financing from or
through ABTAC within the Base Range.


SECTION 8. INDEMNIFICATION

        (a) ABTAC shall defend, indemnify and hold harmless CAF and its
affiliates and all of its and their officers, directors, owners, agents,
attorneys, and employees, from and against any and all loss, liability, claims,
counterclaims, damage, cost or expense (including reasonable attorney's fees and
costs), whether asserted in a judicial or administrative proceeding, arising out
of either (i) a breach of the representations and warranties of ABTAC designated
on Schedule 2 as items A(l), A(2), A(3), A(4), A(6) or A(7); (ii) a breach of
the provisions of Section 1(h); (iii) the receipt of a Customer's Application
information by any person or entity other than CAF or




                                       7

   8

another entity that has a business relationship with ABTAC and a permissible
purpose to receive such information, by hacking or by any other authorized or
unauthorized method, unless such person or entity obtained or received such
information directly or indirectly from CAF; or (iv) any gross negligence or
intentional misconduct of ABTAC in connection with ABTAC's performance of its
obligations under this Agreement.

        (b) CAF shall defend, indemnify and hold harmless ABTAC and its
affiliates and all of its and their officers, directors, owners, agents,
attorneys, and employees, from and against any and all loss, liability, claims,
counterclaims, damage, cost or expense including reasonable attorney's fees and
costs), whether asserted in a judicial or administrative proceeding, arising out
of either (i) a breach of the representations and warranties of CAF designated
on Schedule 2 as items B(1), B(2), B(3), B(4), B(6) or B(7); or (ii) any gross
negligence or intentional misconduct of CAF in connection with CAF's performance
of its obligations under this Agreement.

        (c) Promptly after the receipt by either party hereto of notice of any
claim, action, suit or proceeding of any third party which is subject to
indemnification hereunder, such party (the "Indemnified Party") shall give
written notice of such claim to the party obligated to provide indemnification
hereunder (the "Indemnifying Party"), stating the nature and basis of such claim
and the amount thereof, to the extent known. Failure of the Indemnified Party to
give such notice shall not relieve the Indemnifying Party from any liability
which it may have on account of this indemnification or otherwise, except to the
extent that the Indemnifying Party is materially and adversely prejudiced
thereby. The Indemnifying Party shall be entitled to participate in the defense
of and, if it so chooses, to assume the defense of, or otherwise contest, such
claim, action, suit or proceeding with counsel selected by the Indemnifying
Party and reasonably satisfactory to the Indemnified Party. Upon the election by
the Indemnifying Party to assume the defense of, or otherwise contest, such
claim, action, suit or proceeding, the Indemnifying Party shall not be liable
for any legal or other expenses subsequently incurred by the Indemnified Party
in connection with the defense thereof. Although the Indemnified Party shall
have the right to participate in the defense thereof and to employ counsel, at
its own expense, separate from the counsel employed by the Indemnifying Party.
Notwithstanding the foregoing, the Indemnifying Party shall be liable for the
fees and expenses of counsel employed by the Indemnified Party, if, and only to
the extent that (i) the Indemnifying Party has not employed counsel or counsel
reasonably acceptable to the Indemnified Party to assume the defense of action
within a reasonable time after receiving notice of the commencement of the
action, (ii) the employment of counsel and the amount reimbursable therefor by
the Indemnified Party has been authorized in writing by the Indemnifying Party
or (iii) representation of the Indemnifying Party and the Indemnified Party by
the same counsel would, in the opinion of such counsel, constitute a conflict of
interest (in which case the Indemnifying Party will not have the right to direct
the defense of such action on behalf of the Indemnified Party). The parties
shall use commercially reasonable efforts to minimize Losses from claims by
third parties and shall act in good faith in responding to, defending against,
settling or



                                       8

   9
   
[*] Confidential Treatment Requested
    

otherwise dealing with such claims, notwithstanding any dispute as to liability
as between the parties under this Article 9. The parties shall also cooperate in
any such defense, give each other full access to all information relevant
thereto and make employees and other representatives available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Whether or not the Indemnifying Party shall have
assumed the defense, the Indemnifying Party shall not be obligated to indemnify
the other party hereunder for any settlement entered into without the
Indemnifying Party's prior written consent, which consent shall not be
unreasonably withheld. The Indemnifying Party shall not compromise or settle any
claim, action, suit or proceeding, without the consent of the Indemnified Party
(which consent shall not be unreasonably withheld) unless the terms of such
settlement or compromise release the Indemnified Party from any and all
liability with respect to such claim, action, suit or proceeding.

SECTION 9. TERM AND TERMINATION

   
        (a) This Agreement shall remain in effect for a period of [*]
years from the date hereof unless terminated by either party upon one hundred
eighty (180) days prior written notice. This Agreement shall also terminate if
required by governmental authority or court of law, but only insofar as this
Agreement applies to such jurisdiction affected.
    

        (b) If any party shall be in breach of any material obligation under
this Agreement and such breach shall remain uncured for a period of thirty (30)
days after written notice thereof from the other party (or, if such breach is
curable and requires more than thirty (30) days to cure, if such cure is not
commenced within thirty (30) days and thereafter diligently prosecuted), then
the other party may, by written notice sent, terminate this Agreement upon 30
days after delivery of such notice. Non-payment of amounts due under this
Agreement shall be deemed to be a breach of a material obligation hereunder, but
institution of suit for payment of amounts due under this Agreement shall not be
deemed to be an automatic termination hereunder. Notwithstanding anything in
this Agreement to the contrary, either party has the right to terminate this
Agreement immediately, upon written notice to the other party, if the other
party's breach of any material obligation of this Agreement causes the
non-breaching party to be in violation of any applicable law, rule, regulation
or order.

        (c) ABTAC may terminate this Agreement on thirty (30) business days
notice at any time between the receipt of a Base Range Notice and the date
specified in such notice for the increase in the Base Range.

        (d) Notwithstanding paragraph 9(a) above, CAF may terminate this
Agreement on thirty (30) days written notice if, on the first business day of
any calendar month, the Exclusivity Conditions have not been met during the most





                                        9

   10

recently completed six (6) month period, measured on a weighted average basis.
For any six month period, CAF's right under this Section 9(d) shall expire on
the fifteenth day of the month following the end of such period, but shall have
no effect on any right CAF may have to terminate under any other provision of
this Agreement.

        (e) At any party's option, and upon written notice of exercise of the
option, this Agreement shall terminate upon the voluntary or involuntary
bankruptcy or insolvency of a party, the voluntary or involuntary dissolution or
liquidation of a party, the admission in writing by a party of its inability to
pay its debts as they mature, or the assignment by a party for the benefit of
creditors.


SECTION 10. NOTICES

        All notices or transmissions pursuant to this Agreement, unless
otherwise specified, shall be by facsimile transmission, by personal delivery,
or by registered or certified mail, return receipt requested, to the addresses
of the parties listed on Schedule 1 hereto, or such other address as any party
listed below shall specify in writing to the others in a notice conforming to
this Section.


SECTION 11. GUARANTEE

        The Guarantor hereby unconditionally and irrevocably guarantees to CAF,
its successors, endorsees and assigns, the performance when due of all present
and future obligations and liabilities of all kinds of ABTAC arising out of or
in connection with the Agreement, whether due or to become due, secured or
unsecured, absolute or contingent, joint or several ("Obligations"). The
Guarantor agrees that CAF and ABTAC may mutually agree to modify the Obligations
or any agreement between CAF and ABTAC without in any way impairing or affecting
this Guarantee. The Guarantor agrees that the liability hereunder will not be
affected by any settlement, extension, renewal, or modification of this
Agreement or by the discharge or release of the Obligations of ABTAC, whether by
operation of law or otherwise. The Guarantor agrees to also be liable for all
fees and costs, including reasonable attorney's fees, incurred by CAF in
enforcing the terms of this guarantee.

SECTION 12. REPRESENTATIONS, GENERAL

        The representations and warranties set forth on Schedule 2 to this
Agreement and the provisions of general application set forth on Schedule 3 to
this Agreement are incorporated herein by reference and shall have the same
force and effect as if set forth herein in their entirety.



                                       10

   11

        IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officer on the date first above written.


CHASE MANHATTAN AUTOMOTIVE FINANCE CORPORATION

By:  /s/  [SIG]
   -------------------------------------------

Title:   President
      ----------------------------------------

AUTO-BY-TEL ACCEPTANCE CORPORATION


By:
   -------------------------------------------

Title:  
      ----------------------------------------

AUTO BY-TEL, INC., as Guarantor

By:
   -------------------------------------------

Title:
      ----------------------------------------




                                       11

   12

        IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officer on the date first above written.


CHASE MANHATTAN AUTOMOTIVE FINANCE CORPORATION

By:
   -------------------------------------------

Title:   
      ----------------------------------------

AUTO-BY-TEL ACCEPTANCE CORPORATION


By:  /s/  [SIG]  
   -------------------------------------------

Title:  Chief Operating Officer
      ----------------------------------------

AUTO BY-TEL, INC., as Guarantor

By:  /s/  [SIG]
   -------------------------------------------

Title:   President
      ----------------------------------------




                                       11





   13
   
[*] Confidential Treatment Requested
    

                                    EXHIBIT A

                                       to

                      Financing Inquiry Referral Agreement,
                      dated as of October 25, 1996, between
                 Chase Manhattan Automotive Finance Corporation,
                     and Auto-By-Tel Acceptance Corporation
              and Auto-By-Tel, Inc., as guarantor (the "Agreement")

                              COMPENSATION SCHEDULE

Capitalized terms used in this Exhibit and not defined herein shall have the
meanings ascribed thereto in the Agreement.

The following compensation shall be paid for each financing contract (RFT or
lease) funded pursuant to the Agreement:



                                  Fee to ABTAC
                                  ------------


                 Amount Financed                      Flat Fee
                 ---------------                      --------
   
                       [*]                              [*]
                       [*]                              [*]
                       [*]                              [*]
                       [*]                              [*]
    

                                  Fee to Dealer
                                  -------------

                 Amount Financed                      Flat Fee
                 ---------------                      --------
   
                       [*]                              [*]
                       [*]                              [*]
                       [*]                              [*]
                       [*]                              [*]
    

Contracts or title documents which have to be returned to the Dealer for the
correction of errors and omissions will not require payment, and will not be
funded, until corrected documents are received and accepted by CAF. All amounts
paid to Dealer shall be subject to the terms of the Closing Agreements.



                             Exhibit A - Page 1 of 1


   14

                                   SCHEDULE 1

                                       to

                      Financing Inquiry Referral Agreement,
                      dated as of October 25, 1996, between
                 Chase Manhattan Automotive Finance Corporation,
                     and Auto-By-Tel Acceptance Corporation
              and Auto-By-Tel, Inc., as guarantor (the "Agreement")

                                     NOTICES

                     Capitalized terms used in this Schedule
                 and not defined herein shall have the meanings
                       ascribed thereto in the Agreement.

If to CAF:
                   Chase Manhattan Automotive Finance Corporation
                   900 Stewart Avenue
                   Garden City, New York 11530
                   Attention:   Anthony Langan,
                                Marketing Executive,
                                or his successor


If to ABTAC:       AUTO-BY-TEL ACCEPTANCE CORPORATION
                   18722 MacArthur Blvd.
                   Irvine, CA 92612
                   Attention:   Peter Ellis,
                                President,
                                or his successor


If to ABT:         AUTO-BY-TEL, INC. 
                   18722 MacArthur Blvd.
                   Irvine, CA 92612
                   Attention:   Peter Ellis,
                                President,
                                or his successor



                            Schedule 1 - Page 1 of 1

   15

                                   SCHEDULE 2

                                       to

                      Financing Inquiry Referral Agreement,
                      dated as of October 25, 1996, between
                 Chase Manhattan Automotive Finance Corporation,
                     and Auto-By-Tel Acceptance Corporation
              and Auto-By-Tel, Inc., as guarantor (the "Agreement")


                         REPRESENTATIONS AND WARRANTIES

                     Capitalized terms used in this Schedule
                 and not defined herein shall have the meanings
                       ascribed thereto in the Agreement.

(A) Representations and Warranties of ABTAC.


ABTAC hereby makes the following representations and warranties to CAF:

        (1) ABTAC has been duly organized and is validly existing as a
corporation under the laws of the state of Delaware and is duly licensed where
required as a "Licensee" or is otherwise qualified in each state in which it
transacts business and is not in default of such state's applicable laws, rules
and regulations, except where the failure to so qualify or such default would
not have a material adverse effect on its ability to conduct its business or to
perform its obligations under the Agreement.

        (2) ABTAC has the requisite power and authority and legal right to
execute and deliver the Agreement, engage in the transactions contemplated by
the Agreement, and perform and observe those terms and conditions of the
Agreement to be performed or observed by it hereunder. The person signing the
Agreement, and any document executed pursuant to it, on behalf of ABTAC has full
power and authority to bind ABTAC. The execution, delivery and performance of
the Agreement, and the performance by ABTAC of all transactions contemplated
therein, have been duly authorized by all necessary and appropriate corporate
action on the part of ABTAC.

        (3) The Agreement has been duly authorized and executed by ABTAC and is
valid, binding and enforceable against ABTAC in accordance with its terms,
except that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws (whether statutory, regulatory
or decisional) now or hereafter in effect relating to creditors' rights
generally, and the execution, delivery and



                            Schedule 2 - Page 1 of 3

   16

performance by ABTAC of the Agreement do not conflict with any term or provision
of (i) its certificate of incorporation or bylaws, (ii) any law, rule,
regulation, order, judgment, writ, injunction or decree applicable to ABTAC of
any court, regulatory body, administrative agency or governmental body having
jurisdiction over ABTAC or (iii) any agreement to which ABTAC is a party or by
which its property is bound.

        (4) No consent, approval, authorization or order of, registration or
filing with, or notice to any governmental authority or court is required under
applicable law in connection with the execution, delivery and performance by
ABTAC of the Agreement.

        (5) There is no action, proceeding or investigation pending or, to the
best knowledge of ABTAC, threatened against it before any court, administrative
agency or other tribunal (i) asserting the invalidity of the Agreement, (ii)
seeking to prevent the consummation of any of the transactions contemplated by
the Agreement, or (iii) which could reasonably be expected to materially and
adversely affect its performance of its respective obligations under, or the
validity or enforceability of, the Agreement.

        (6) ABTAC has all regulatory approvals, authorizations, licenses,
permits and other permissions, consents and authorities whatsoever, needed to
operate the ABT Website and perform ABTAC's obligations under the Agreement.

        (7) ABTAC warrants that it has the legal and valid right to use any
registered or unregistered trademark, tradename, service mark, logo, emblem or
other proprietary designation, or any variations, derivatives and modifications
thereof, used by it in the materials provided to CAF or used by ABTAC in
connection with the Agreement (the "ABTAC Marks").

(B) Representations and Warranties of CAF. CAF hereby makes the following
representations and warranties to ABTAC:

        (1) CAF is duly licensed where and as required in each state in which it
transacts business and is not in default of such state's applicable laws, rules
and regulations, except where such default would not have a material adverse
effect on the ability of CAF to conduct its business or to perform its
obligations under the Agreement.

        (2) CAF has the requisite power and authority and legal right to execute
and deliver, engage in the transactions contemplated by, and perform and observe
the terms and conditions of, the Agreement. The person or persons signatory to
the Agreement and any document executed pursuant to it on behalf of CAF have
full power and authority to bind CAF. The execution, delivery and performance of
the Agreement, and the performance by CAF of all transactions contemplated
therein, have




                            Schedule 2 - Page 2 of 3


   17

been duly authorized by all necessary and appropriate and corporate action on
the part of CAF.

        (3) The Agreement has been duly authorized and executed by CAF and is
valid, binding and enforceable against CAF in accordance with its terms, except
that such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws (whether statutory, regulatory or decisional)
now or hereafter in effect relating to creditors' rights generally, and the
execution, delivery and performance by CAF of the Agreement do not conflict with
any term or provision of the certificate of incorporation or bylaws of CAF, or
any law, rule, regulation, order, judgment, writ, injunction or decree
applicable to CAF of any court, regulatory body, administrative agency or
governmental body having jurisdiction over CAF.

        (4) No consent, approval, authorization or order of, registration or
filing with, or notice to any governmental authority or court is required under
applicable law in connection with the execution, delivery and performance by CAF
of the Agreement.

        (5) There is no action, proceeding or investigation pending or, to the
best knowledge of CAF, threatened against it before any court, administrative
agency or other tribunal (i) asserting the invalidity of the Agreement, (ii)
seeking to prevent the consummation of any of the transactions contemplated by
the Agreement, or (iii) which could reasonably be expected to materially and
adversely affect the performance by CAF of its obligations under, or the
validity or enforceability of, the Agreement.

        (6) CAF warrants that it has all regulatory approvals, authorizations,
licenses, permits and other permissions, consents and authorities whatsoever, as
needed (i) to offer and enter into the financing arrangements with Customers
contemplated by the Agreement in each jurisdiction in the Territory and to
otherwise perform its obligations under the Agreement, and (ii) to use any
materials developed, provided or used by CAF in connection with the Agreement.

        (7) CAF warrants that it has the legal and valid right to use any
registered or unregistered trademark, tradename, service mark, logo, emblem or
other proprietary designation, or any variations, derivatives and modifications
thereof, used by it in any materials provided to ABTAC or used by CAF in
connection with the Agreement.




                            Schedule 2 - Page 3 of 3



   18

                                   SCHEDULE 3

                                       to

                      Financing Inquiry Referral Agreement,
                      dated as of October 25, 1996, between
                 Chase Manhattan Automotive Finance Corporation,
                     and Auto-By-Tel Acceptance Corporation
              and Auto-By-Tel, Inc., as guarantor (the "Agreement")


                       PROVISIONS OF GENERAL APPLICABILITY

                     Capitalized terms used in this Schedule
                 and not defined herein shall have the meanings
                       ascribed thereto in the Agreement.


        (a) Entire Agreement. Except as specified in paragraph (b) of this
Schedule 3, the Agreement and the exhibits and schedules thereto constitute the
entire agreement of the parties, and may be amended from time to time only upon
the execution of a written amendment by the parties. The indemnities of Section
8 of the Agreement shall survive the termination thereof.

        (b) Confidentiality. Both ABTAC and CAF have made and will continue
throughout the term of the Agreement to make available to the other party
confidential and proprietary materials and information ("Proprietary
Information"). Prospectively, each party shall advise the other of material and
information that is confidential and/or proprietary. Proprietary Information
does not include materials or information that: (a) are already, or otherwise
become, generally known by third parties as a result of no act or omission of
the receiving party; (b) subsequent to disclosure hereunder are lawfully
received from a third party having the right to disseminate the information and
without restriction on disclosure; (c) are generally furnished to others by the
disclosing party without restriction on disclosure; (d) were already known by
the receiving party prior to receiving them from the disclosing party and were
not received from a third party in breach of that third party's obligations or
confidentiality; or (e) are independently developed by the receiving party
without use of confidential information of the disclosing party.

             (i) Each party shall maintain the confidentiality of the other's
Proprietary Information and will not disclose such Proprietary Information
without the written consent of the other party unless required to by law, rule,
regulation or court




                            Schedule 3 - Page 1 of 3

   19

order of any applicable jurisdiction. Each party shall also keep confidential
the terms of the Agreement and/or schedule hereto. The confidentiality
provisions of the Agreement shall survive the termination of the Agreement.
Notwithstanding any contrary provision of the Agreement, the confidentiality
provisions of the two confidentiality agreements executed by the parties hereto
prior to the date of the Agreement shall remain in full force and effect.

             (ii) Notwithstanding any contrary provision of the Agreement, as
long as each party protects Proprietary Information of the other, neither the
exposure to the other party's confidential information nor its ownership of work
products shall prevent either party from using ideas, concepts, expressions,
know-how, skills and experience possessed by either party prior to its
association with the other party or developed by either party during its
association with the other party.

        (c) Limitation of Liability. In no event shall either party be liable to
the other party for any incidental, special, exemplary or consequential losses
or damages of any kind whatsoever (including but not limited to lost profits),
even if advised of the possibility of such losses or damages and regardless of
the form of action.

        (d) Assignment. Either party shall have the right to transfer or assign
the Agreement to any direct or indirect wholly-owned subsidiary at no charge or
penalty; provided, however, that such assignee assumes assignors obligations,
and assignee remains liable hereunder.

        (e) Waiver. Neither party shall be deemed to be in default of any
provision of the Agreement or be liable to the other party or to any third party
for any delay, error, failure in performance or interruption of performance
resulting directly or indirectly from causes beyond that party's reasonable
control. The period of performance shall be extended to such extent as may be
appropriate after the cause of the delay has been removed. If any excusable
delay or failure to perform by a party exceeds thirty (30) days, the other party
shall have the right to terminate the Agreement without liability.

        (f) Severability. If any provision of the Agreement is declared or found
to be illegal, unenforceable or void, then both parties shall be relieved of all
obligations arising under such provision, but only to the extent that such
provision is illegal, unenforceable or void, it being the intent and agreement
of the parties that the Agreement shall be deemed amended by modifying such
provision to the extent necessary to make it legal and enforceable while
preserving its intent or, if that is not possible, by substituting therefore
another provision that is legal and enforceable and achieves the same objective.
Each party agrees that it will perform its obligations hereunder in accordance
with all applicable laws, rules and regulations now or hereafter in effect.




                            Schedule 3 - Page 2 of 3


   20

        (g) Arbitration. The parties acknowledge that the Agreement evidences a
transaction involving interstate commerce. Any controversy or claim arising out
of or relating to the Agreement, or the breach of the same, shall be settled
through consultation and negotiation in good faith and a spirit of mutual
cooperation. However, if those attempts fail, the parties agree that any
misunderstandings or disputes arising from the Agreement shall be decided by
arbitration which shall be conducted, upon request by either party, in Orange
County, California, before three (3) arbitrators (unless both parties agree on
one (1) arbitrator) designated by the American Arbitration Association (the
"AAA"), in accordance with the terms of the Commercial Arbitration Rule of the
AAA, and, to the maximum extent applicable, the United States Arbitration Act
(Title 9 of the United States Code), or if such Act is not applicable, any
substantially equivalent state law. The parties further agree that the
arbitrator(s) (i) will decide which party must bear the expense, of the
arbitration proceedings; (ii) shall not have the authority to award punitive
damages; and (iii) shall apply the internal laws of the State of California.
Notwithstanding anything herein to the contrary, either party may proceed to a
court of competent jurisdiction to obtain injunctive relief at any time.

        (h) Force Majeure. Neither party shall be deemed to be in default of any
provision of the Agreement or be liable to the other party or to any third party
for any delay, error, failure in performance or interruption of performance
resulting directly or indirectly from causes beyond that party's reasonable
control. The period of performance shall be extended to such extent as may be
appropriate after the cause of the delay has been removed.

        (i) Media Releases. ABTAC and CAF may utilize media releases to
publicize their business relationship with the prior approval of the other party
which shall not be unreasonably withheld. ABTAC and CAF shall not use any trade
name, service mark or any other information which identifies the other in sales,
marketing, advertising and publicity materials placed in any medium without
obtaining the prior written approval of the other.

        (j) Governing Law. The Agreement shall be governed by and construed in
accordance with the laws of the State of California, without regard to conflicts
of law principles.

        (k) No Agency: No Joint Venture. Neither of ABTAC nor CAF is the agent
or representative of the other. Nothing contained herein nor the acts of the
parties hereto shall be construed to create a partnership, agency or joint
venture between ABTAC and CAF.

        (l) Counterparts. The Agreement may be signed in two or more
counterparts, each of which shall be deemed an original, and taken together they
shall be considered one agreement.




                            Schedule 3 - Page 3 of 3

   1

                                                                   EXHIBIT 10.14

   
[*] Confidential Treatment has been requested for certain portions of this 
    exhibit. 
    

                 MARKETING AND APPLICATION PROCESSING AGREEMENT


      This MARKETING AND APPLICATION PROCESSING AGREEMENT ("Agreement"), dated
as of February 1, 1997, between General Electric Capital Auto Financial
Services, Inc. ("GECAFS"), a Delaware corporation with its principal place of
business at 600 Hart Road, Barrington, Illinois, and Auto-By-Tel Acceptance
Corporation ("ABTAC") and Auto-By-Tel Corporation ("ABT") (as guarantor of the
obligations of ABTAC under this Agreement, in such capacity, the "Guarantor"),
each a Delaware corporation with its principal place of business at 18872
MacArthur Boulevard, Suite 200, Irvine, California 92612.

                                   WITNESSETH:

      WHEREAS, ABTAC is in the business of, among other things marketing
financial services to persons interested in arranging financing for the lease of
new and used motor vehicles ("Vehicles") who visit the ABT Internet website
("Customers") and GECAFS and its affiliates are in the business of purchasing
leases of Vehicles from authorized dealers in the business of leasing such
goods; and

      WHEREAS, ABTAC desires to promote the services of GECAFS to certain such
Customers in exchange for a marketing fee, and GECAFS desires to purchase leases
and is willing to pay such fees, in connection with new lease accounts opened as
a result of ABTAC's marketing;

      NOW, THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound, ABTAC and GECAFS agree as
follows:

                          SECTION 1. FINANCING PROGRAM

      (A) ABTAC will cause to be included on the ABT Website, along with
specific identification of GECAFS as a participating lender in form and content
reasonably satisfactory to GECAFS, either an application in a form reasonably
satisfactory to GECAFS, substantially as set forth on Exhibit A hereto, or a
non-specific credit application soliciting information requested by GECAFS.
(Each such completed application is referred to herein as a "GECAFS Application"
and each Customer who completes a GECAFS Application is referred to herein as an
"Applicant.") GECAFS may, from time to time, request changes in the information
solicited by such application and ABTAC will use its best efforts to accommodate
such requests. GECAFS will be under no obligation hereunder with respect to any
GECAFS Application which does not solicit the information requested by GECAFS.

      (B) GECAFS will offer to enter into a contract purchase agreement
("Closing Agreement") with each seller of Vehicles in the continental United
States (excluding Alaska and Hawaii) and the District of Columbia ("United
States") who has executed an on-line purchase request referral agreement with
ABT and who otherwise meets GECAFS's standards for such relationships
("Dealer(s)"). ABTAC will assist GECAFS in securing signed Closing Agreements
with Dealers and will provide GECAFS with the address of each Dealer to
facilitate this process. The Closing Agreement will contain customary terms no
less favorable to the Dealers than GECAFS's customary agreements in use with its
other leasing programs and will govern the terms upon which the Dealer and
GECAFS will close the Vehicle leasing transactions the subject of this Agreement
(Contracts"). ABTAC agrees, subject to its reasonable business judgment and
available resources, to promote its leasing programs to Dealers and to support,
assist and cooperate with GECAFS in the marketing of this program, and its
proper execution, to Dealers. Upon execution of a Closing Agreement, GECAFS will
assign such Dealer an identifying number (the "Dealer ID") and inform ABTAC of
such number. GECAFS will be responsible for informing Dealers of the nature of
its leasing programs. ABTAC will be responsible for informing Dealers of the
nature of its services and the differences, if any, between the programs
described by GECAFS and the ABTAC programs.



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        (C) ABTAC will not be a party to, will have no obligations with respect
to and will be held harmless by GECAFS with respect to any act or omission by
GECAFS which gives rise to any losses or liabilities arising from or in
connection with the Closing Agreements. If for any reason the Closing Agreement
between a Dealer and GECAFS is terminated, then GECAFS will be under no
obligation to approve any application received from customers of such Dealer.

   
        (D) GECAFS agrees to provide each Applicant lease rates and terms not
less favorable to Applicants than those offered by GECAFS to similar customers
in its customary lease programs unless ABTAC requests, and GECAFS agrees to
offer, less favorable terms. The standard money factor used to derive a monthly
payment for any Contract will be the rate factor announced by GECAFS from time
to time in its sole discretion as the minimum rate factor acceptable to GECAFS.
Upon ten business days' prior written notice, ABTAC may request that GECAFS
increase such rate factor, for such Contracts purchased by GECAFS and for such
period as ABTAC may specify, by an amount which will result in a remittance to
ABTAC, in accordance with Section 6 hereof, of a certain sum requested by ABTAC,
not to exceed [*] unless otherwise agreed, for each applicable Contract
purchased by GECAFS during such period.

        (E) Each GECAFS Application received by ABTAC with respect to which
GECAFS is competitive will be forwarded to GECAFS for review until such time as
the volume targets set forth in Section 1(F) are achieved. As used herein,
"competitive" will mean cases in which the Applicant's monthly Contract payment
under the standard GECAFS program applicable to such Contracts would be not more
than [*] greater than the lowest monthly Contract payment otherwise available to
the Applicant, all other Contract terms being equal, from any other source of
financing with whom ABTAC is then doing business under the same or similar terms
as ABTAC's agreement with GECAFS. "Competitiveness" will be determined as
accurately as possible in good faith with reference to available data. GECAFS
and ABTAC each reserves the right to audit the process by which
"competitiveness" is determined. If GECAFS declines to proceed with the
transaction as described, GECAFS will return such GECAFS Application to ABTAC
for additional information or forwarding to another financing source, as the
case may be. If ABTAC requests, GECAFS will cooperate with ABTAC in developing a
screening methodology based upon GECAFS's underwriting criteria then in effect
which would enable ABTAC to forward to GECAFS only those GECAFS Applications
meeting an agreed-upon subset of credit criteria and to forward the remaining
applications to other financing sources. Such responsibilities are illustrated
by the Process Map attached hereto as Exhibit B, as may be modified from time to
time. GECAFS and ABTAC have agreed upon the responsibilities of each in
developing the tools necessary to implement this Process Map and this Agreement.

        (F) The terms of this Agreement are based in part upon the expectation
by GECAFS of monthly Contract volume targets of [*], [*] and [*],
respectively, during the first three years of this Agreement and upon the
expectation of ABTAC of providing such volume. The standard for
"competitiveness" set forth above and volume targets will be subject to review
after six months, and periodically thereafter, based upon the extent to which
those expectations are being realized.
    

          SECTION 2. RECEIPT AND TRANSMISSION OF APPLICANT INFORMATION

        (A) Subject to the provisions of Section 1, ABTAC will transmit each
completed GECAFS Application to GECAFS by telephone, telefax, e-mail, or other
electronic or agreed-upon means. Also subject to the provisions of Section 1,
ABTAC is under no obligation to screen or review any GECAFS Application before
transmission to GECAFS; provided, however, that ABTAC agrees not to transmit
incomplete Applications or Applicant information that ABTAC actually knows to be
false or misleading in any material respect.


                                       2
   3
        (B) ABTAC also agrees to subject Applicant information to the security
and confidentiality procedures consistent with its corporate policies in effect
from time to time. ABTAC will not use any such information in any manner which
violates applicable law in effect from time to time and will keep communications
from GECAFS to Applicants or Dealers confidential.

        (C) GECAFS acknowledges and agrees that ABTAC has no liability, duty or
obligation with respect to the processing, underwriting, funding, or closing of
any lease. Except as set forth herein, ABTAC will have no responsibility for,
and makes no representation or warranty in connection with, the truth or
accuracy of the information provided by or on behalf of any Applicant or in the
GECAFS Application or regarding the eligibility of the Applicant for a lease.

        (D) ABTAC will not make, and will use its best efforts to keep any of
its employees or agents from making, any oral or written statement to Applicants
or Dealers that would discourage, on a basis prohibited by law, an Applicant
from making or pursuing any transaction contemplated by this Agreement.

                             SECTION 3. UNDERWRITING

        (A) Upon receipt, GECAFS will review each GECAFS Application in
accordance with its underwriting criteria and applicable law. GECAFS will
approve all GECAFS Applications meeting the underwriting criteria unless, in
accordance with its usual practice of applying GECAFS's underwriting policies,
the Applicant is otherwise not creditworthy. ABTAC acknowledges that GECAFS has
sole discretion in determining whether or not to approve a GECAFS Application,
which discretion GECAFS agrees to exercise in a manner consistent with its
customary underwriting procedures in effect from time to time.

        (B) The goal of GECAFS will be to complete its review within four hours
after electronic receipt of a GECAFS Application but, absent unusual
circumstances, such review will be completed not later than the following
business day.

        (C) GECAFS reserves the sole right and power to change the underwriting
criteria in accordance with GECAFS's normal business practices and subject to
applicable law, and further to suspend, restrict or modify the purchase of
leases in any portion of the United States for regulatory reasons. GECAFS will
provide ABTAC with advance written notice, given as early as practicable, of any
actions it plans to implement under this Section. Any such actions will be taken
in good faith.

                  SECTION 4. COMMUNICATION OF CREDIT DECISIONS

        At the completion of underwriting as set forth in Section 3(B) of this
Agreement, GECAFS will notify ABTAC of GECAFS's credit decision. ABTAC will
notify the Dealer and the Applicant on behalf of GECAFS, in the case of
approval, and the Applicant in the case of disapproval. If GECAFS declines a
request for credit, GECAFS will send to the Applicant any and all notices
required, but only those required, pursuant to federal or applicable state law
or regulation including, but not limited to, those required under the federal
Equal Credit Opportunity Act and Federal Reserve Regulation B.

                         SECTION 5. CLOSING AND FUNDING

        After the notification to the Dealer and Applicant, ABTAC will have no
responsibility under this Agreement to any of the Dealer (except as set forth in
Section l(B)), the Applicant or GECAFS. GECAFS will use its best efforts to
close all approved Contracts and will, absent unusual circumstances, remit the
proceeds of each Contract to the related Dealer within two business days
following compliance with all requirements for submission of Contracts under the
terms of the applicable Closing Agreement. Contracts submitted incorrectly with
respect to the parameters of the ABTAC program will not be accepted by GECAFS
but will be corrected by agreement with the Dealer or returned to the Dealer for
correction and resubmission provided, however, that GECAFS may afford



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the Dealer the benefit of any GECAFS program available to its dealers from time
to time the effect of which does not adversely affect the applicant's rate.
GECAFS will advise ABTAC of the existence and provisions of such programs. ABTAC
will assist GECAFS in encouraging Dealers to resubmit such corrected Contracts
to GECAFS for approval and not to other lenders.

                             SECTION 6. COMPENSATION

   
      During the term of this Agreement, GECAFS will pay to ABTAC a marketing
fee of [*] for each Contract that is funded under the terms of this
Agreement. GECAFS will use its best efforts to effect such payment, and any
amount payable pursuant to Section 1.D. hereof, weekly for Contracts funded in
the prior period but in no event will compensation for any Contract be paid more
than 30 days after funding. ABTAC will be responsible for compensating the
associated Dealer in accordance with its on-line purchase referral agreement
with such Dealer.
    

                               SECTION 7. REPORTS

        (A) On or before the 10th day of each month, GECAFS will transmit
electronically to ABTAC a report, sorted by Dealer ID and identifying the name
of each Applicant, outlining for the preceding month: (1) the number of GECAFS
Applications received from ABTAC, (2) the number of GECAFS Applications that
were approved and funded, (3) the number of GECAFS Applications pending at
month-end and (4) the number and aggregate outstanding balance of Contracts
funded during the effectiveness of this Agreement. GECAFS will include with such
report a report indicating any Dealers which executed a Closing Agreement and
any Closing Agreements which terminated during the preceding month.

   
        (B) On the effective date of this Agreement, ABTAC will advise GECAFS in
writing of all sources of financing with whom ABTAC is doing business in the
same or similar fashion as GECAFS. On or before the 10th day of each month,
ABTAC will advise GECAFS in writing of any additions or deletions to such list.
In addition, on or before the 10th day of each month, ABTAC will transmit
electronically to GECAFS a report outlining for the preceding month: [*].

        (C) GECAFS and ABTAC will meet periodically, upon reasonable request, to
review all aspects of the program. GECAFS agrees to discuss with ABTAC, not less
than quarterly, at least the following aggregate portfolio performance
information for the ABTAC leases: [*].
    

                SECTION 8. STANDARDS FOR TRANSMITTING INFORMATION

        GECAFS will either provide or make available to ABTAC its unique code
sets and edit procedures on a periodic basis as deemed necessary by GECAFS to
permit performance hereunder. ABTAC will transmit all Applications and other
information to GECAFS in the pre-defined format utilizing such GECAFS code sets
and in accordance with such parameters, all as set forth in Exhibit C attached
hereto and as may be amended from time to time.



                                       4
   5
                              SECTION 9. GUARANTEE

        Guarantor hereby unconditionally and irrevocably guarantees to GECAFS,
its successors, endorsees and assigns, the performance when due of all present
and future obligations and liabilities of all kinds of ABTAC arising out of or
in connection with the Agreement, whether due or to become due, secured or
unsecured, absolute or contingent, joint or several ("Obligations"). The
Guarantor agrees that GECAFS and ABTAC may mutually agree to modify the
Obligations or any agreement between GECAFS and ABTAC without in any way
impairing or affecting this Guarantee.

                   SECTION 10. REPRESENTATIONS AND WARRANTIES

        (A) Representations and Warranties of ABTAC. ABTAC hereby makes the
following representations and warranties to GECAFS:

               (1) ABTAC has been duly organized and is validly existing as a
corporation under the laws of the state of Delaware and is duly licensed where
required or is otherwise qualified in each state in which it transacts business
and is not in default of such state's applicable laws, rules and regulations,
except where the failure to so qualify or such default would not have a material
adverse effect on its ability to conduct its business or to perform its
obligations under the Agreement.

               (2) ABTAC has the requisite power and authority and legal right
to execute and deliver the Agreement, engage in the transactions contemplated by
the Agreement, and perform and observe those terms and conditions of the
Agreement to be performed or observed by it hereunder. The person signing the
Agreement, and any document executed pursuant to it, on behalf of ABTAC has full
power and authority to bind ABTAC. The execution, delivery and performance of
the Agreement, and the performance by ABTAC of all transactions contemplated
therein, have been duly authorized by all necessary and appropriate corporate
action on the part of ABTAC.

               (3) The Agreement has been duly authorized and executed by ABTAC
and is valid, binding and enforceable against ABTAC in accordance with its
terms, except that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws (whether statutory, regulatory
or decisional) now or hereafter in effect relating to creditors' rights
generally, and the execution, delivery and performance by ABTAC of the Agreement
do not conflict with any term or provision of (a) its certificate of
incorporation or bylaws, (b) any law, rule, regulation, order, judgment, writ,
injunction or decree applicable to ABTAC of any court, regulatory body,
administrative agency or governmental body having jurisdiction over ABTAC or (3)
any agreement to which ABTAC is, a party or by which its property is bound.

               (4) No consent, approval, authorization or order of, registration
or filing with, or notice to any governmental authority or court is required
under applicable law in connection with the execution, delivery and performance
by ABTAC of the Agreement.

               (5) There is no action, proceeding or investigation pending or,
to the best knowledge of ABTAC, threatened against it before any court,
administrative agency or other tribunal (a) asserting the invalidity of the
Agreement, (b) seeking to prevent the consummation of any of the transactions
contemplated by the Agreement, or (3) which could reasonably be expected to
materially and adversely affect its performance of its respective obligations
under, or the validity or enforceability of, the Agreement.

               (6) All regulatory approvals, authorizations, licenses, permits
and other permissions, consents and authorities whatsoever needed to operate the
ABT Website and perform this Agreement have been received.



                                       5
   6
               (7) ABTAC warrants that it has the legal and valid right to use
any registered or unregistered trademark, tradename, service mark, logo, emblem
or other proprietary designation, or any variations, derivatives and
modifications thereof, used by it in the materials provided to GECAFS or used by
ABTAC in connection with the Agreement.

        (B) Representations and Warranties of GECAFS. GECAFS hereby makes the
following representations and warranties to ABTAC:

               (1) GECAFS has been duly organized and is validly existing as a
corporation under the laws of the state of Delaware and is duly licensed where
required or is otherwise qualified in each state in which it transacts business
and is not in default of such state's applicable laws, rules and regulations,
except where the failure to so qualify or such default would not have a material
adverse effect on its ability to conduct its business or to perform its
obligations under the Agreement.

               (2) GECAFS has the requisite power and authority and legal right
to execute and deliver, engage in the transactions contemplated by, and perform
and observe the terms and conditions of, the Agreement. The person or persons
signatory to the Agreement and any document executed pursuant to it on behalf of
GECAFS have full power and authority to bind GECAFS. The execution, delivery and
performance of the Agreement, and the performance by GECAFS of all transactions
contemplated therein, have been duly authorized by all necessary and appropriate
and corporate action on the part of GECAFS.

               (3) The Agreement has been duly authorized and executed by GECAFS
and is valid, binding and enforceable against GECAFS in accordance with its
terms, except that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws (whether statutory, regulatory
or decisional) now or hereafter in effect relating to creditors' rights
generally, and the execution, delivery and performance by GECAFS of the
Agreement do not conflict with any term or provision of (a) its certificate of
incorporation or bylaws, (b) any law, rule, regulation, order, judgment, writ,
injunction or decree applicable to GECAFS of any court, regulatory body,
administrative agency or governmental body having jurisdiction over GECAFS or
(3) any agreement to which GECAFS is a party or by which its properly is bound.

               (4) No consent, approval, authorization or order of, registration
or filing with, or notice to any governmental authority or court is required
under applicable law in connection with the execution, delivery and performance
by GECAFS of the Agreement.

               (5) There is no action, proceeding or investigation pending or,
to the best knowledge of GECAFS, threatened against it before any court,
administrative agency or other tribunal (a) asserting the invalidity of the
Agreement, (b) seeking to prevent the consummation of any of the transactions
contemplated by the Agreement, or (3) which could reasonably be expected to
materially and adversely affect the performance by GECAFS of its obligations
under, or the validity or enforceability of, the Agreement.

               (6) GECAFS warrants that it has all regulatory approvals,
authorizations, licenses, permits and other permissions , consents and
authorities whatsoever, as needed (a) to offer and enter into the financing
arrangements with Customers contemplated by the Agreement in each jurisdiction
in the United States and to otherwise perform its obligations under the
Agreement, and (b) to use any materials developed, provided or used by GECAFS in
connection with the Agreement.

               (7) GECAFS warrants that it has the legal and valid right to use
any registered or unregistered trademark, tradename, service mark, logo, emblem
or other proprietary designation, or any variations, derivatives and
modifications thereof, used by it in any materials provided to ABTAC or used by
GECAFS in connection with the Agreement.



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                           SECTION 11. INDEMNIFICATION

        (A) ABTAC will defend, indemnify and hold harmless GECAFS and its
affiliates and all of its and their officers, directors, owners, agents,
attorneys, and employees, from and against any and all loss, liability, claims,
damage, cost or expense (including attorney's fees and costs) by third parties
arising out of any gross negligence or intentional misconduct of ABTAC in
connection with ABTAC's performance of its obligations under this Agreement or
relating to any breach or alleged breach of a third-party's proprietary rights
in connection with any intellectual property (except if provided by GECAFS),
used by ABTAC in performance of its obligations under this Agreement.

        (B) GECAFS will defend, indemnify and hold harmless ABTAC and its
affiliates and all of its and their officers, directors, owners, agents,
attorneys, and employees, from and against any and all loss, liability, claims,
damage, cost or expense (including attorney's fees and costs) by third parties
arising out of any gross negligence or intentional misconduct of GECAFS in
connection with GECAFS's performance of its obligations under this Agreement or
relating to any claim regarding GECAFS's conduct with respect to any financing
transaction or proposed financing transaction (including Customer claims) in
connection with this Agreement and any breach or alleged breach of any law by
GECAFS relating to consumer financing (unless caused solely by ABTAC) in
connection with this Agreement and the transactions contemplated thereby.

        (C) The indemnified party must give the indemnifying party prompt notice
of any claims covered by the indemnity of this Agreement. Each party will
promptly notify the others of any legal or regulatory proceeding or threat of
legal or regulatory proceeding with respect to any matters which are the subject
of this Agreement; provided, however, that the failure to notify will not afford
relief hereunder except to the extent that it results in prejudice.

                        SECTION 12. TERM AND TERMINATION

   
        (A) This Agreement will remain in effect for a period of [*] years
from the date hereof unless terminated by either party upon [*] months' prior
written notice. This Agreement will also terminate if, required by governmental
authority or court of law, but only insofar as this Agreement applies to such
jurisdiction affected. In consideration of the significant investment made by
GECAFS in the implementation of this Agreement, a termination fee in the amount
of [*] will be due and payable from ABTAC to GECAFS in the event that ABTAC
terminates this Agreement prior to the first anniversary hereof, except for
cause as set forth below. Notwithstanding the foregoing, such termination fee
will be reduced by [*] for each full calendar month during which the volume
targets set forth in Section 1(F) are met and, provided further, that no
termination penalty will be incurred in the event that the parties cannot agree
in good faith upon the continued validity of the "competitiveness" standard
after six months as set forth in Section l(E).
    

        (B) If any party will be in breach of any material obligation under this
Agreement and such breach will remain uncured for a period of 30 days after
written notice thereof from the other party (or, if such breach is curable and
requires more than 30 days to cure, if such cure is not commenced within 30 days
and thereafter diligently prosecuted), then the other party may, by written
notice sent, terminate this Agreement 30 days after delivery of such notice.
Non-payment of amounts due under this Agreement will be deemed to be a breach of
a material obligation hereunder, but institution of suit for payment of amounts
due under this Agreement will not be deemed to be an automatic termination
hereunder.

        (C) At any party's option, and upon written notice of exercise of the
option, this Agreement will terminate upon the voluntary or involuntary
bankruptcy or insolvency of a party, the voluntary or involuntary dissolution or
liquidation of a party, the admission in writing by a party of its inability to
pay its debts as they mature, or the assignment by a party for the benefit of
creditors.



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                               SECTION 13. NOTICES

        All notices or transmissions pursuant to this Agreement, unless
otherwise specified, will be by facsimile transmission, by personal delivery, or
by registered or certified mail, return receipt requested, to the addresses of
the parties set forth in the Preamble to this Agreement or such other address as
any party listed below will specify in writing to the others.

                 SECTION 14. PROVISIONS OF GENERAL APPLICABILITY

        (A) Entire Agreement. The Agreement and the exhibits thereto constitute
the entire agreement of the parties, and may be amended from time to time only
upon the execution of a written amendment by the parties.

        (B) Confidentiality. Both ABTAC and GECAFS have made and will continue
throughout the term of the Agreement to make available to the other party
confidential and proprietary materials and information ("Proprietary
Information"). Prospectively, each party will advise the other of material and
information that is confidential and/or proprietary. Proprietary Information
does not include material or information that: (1) are already, or otherwise
become, generally known by third parties as a result of no act or omission of
the receiving party; (2) subsequent to disclosure hereunder are lawfully
received from a third party having the right to disseminate the information and
without restriction on disclosure; (3) are generally furnished to others by the
disclosing party without restriction on disclosure; (4) were already known by
the receiving party prior to receiving them from the disclosing party and were
not received from a third party in breach of that third party's obligations or
confidentiality; or (5) ideas, concepts, expressions, know-how, skills and
experience possessed by either party prior to its association with the other
party or developed by either party during its association with the other party
without regard to Proprietary Information.

        Each party will maintain the confidentiality of the other's Proprietary
Information and will not disclose such Proprietary Information without the
written consent of the other party unless legally required by law, rule,
regulation or court order of any applicable jurisdiction; in which case, each
party will, before disclosing the Information, (unless prior notice is
prohibited), promptly notify the other of the compelled disclosure. If a
protective order or other appropriate relief from compelled disclosure is not
obtained before disclosure is due, or if compliance with the provisions of this
section is waived, only that portion of the Information will be furnished which
counsel advises is legally required. Each party will also keep confidential the
terms of the Agreement. The confidentiality provisions of the Agreement will
survive the termination of the Agreement.

        (C) Limitation of Liability. In no event will either party be liable to
the other party for any incidental, special, exemplary or consequential damages,
even if advised of the possibility of such damages.

        (D) Appointment or Assignment. ABTAC and GECAFS will have the right to
appoint an affiliate to provide any services to be provided hereunder or to
assign the Agreement to any affiliate at no charge or penalty; provided,
however, that such appointee will agree to be governed by the provisions hereof
with respect to the provision of such services and such assignee assumes the
obligations of its assignor.

        (E) Waiver. Neither party will be deemed to be in default of any
provision of the Agreement or be liable to the other party or to any third party
for any delay, error, failure in performance or interruption of performance
resulting directly or indirectly from causes beyond that party's reasonable
control. The period of performance will be extended to such extent as may be
appropriate after the cause of the delay has been removed. If any excusable
delay or failure to perform by a party exceeds 30 days, the other party will
have the right to terminate the Agreement without liability.



                                       8
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        (F) Severability. If any provision of the Agreement is declared or found
to be illegal, unenforceable or void, then both parties will be relieved of all
obligations arising under such provision, but only to the extent that such
provision is illegal, unenforceable or void; it being the intent and agreement
of the parties that the Agreement will be deemed amended by modifying such
provision to the extent necessary to make it legal and enforceable while
preserving its intent or, if that is not possible, by substituting therefore
another provision that is legal and enforceable and achieves the same objective.
Each party agrees that it will perform its obligations hereunder in accordance
with all applicable laws, rules and regulations now or hereafter in effect.

        (G) Arbitration. Any controversy or claim arising out of or relating to
the Agreement, or the breach of the same, will be settled through consultation
and negotiation in good faith and a spirit of mutual cooperation. However, if
those attempts fail, the parties agree that any misunderstandings or disputes
arising from the Agreement will be decided by arbitration which will be
conducted, upon request by either party, in Orange County, California, before
three (3) arbitrators (unless both parties agree on one (1) arbitrator)
designated by the American Arbitration Association (the ("AAA"), in accordance
with the terms of the Commercial Arbitration Rules of the AAA, and, to the
maximum extent applicable, the United States Arbitration Act (Title 9 of the
United States Code), or if such Act is not applicable, any substantially
equivalent state law. The parties further agree that they will share the expense
of the arbitration proceedings equally. Notwithstanding anything herein to the
contrary, either party may proceed to a court of competent jurisdiction to
obtain injunctive relief at any time.


        (H) Media Releases. ABTAC and GECAFS may utilize media releases to
publicize their business relationship only with the prior approval of the other
party which will not be unreasonably withheld. ABTAC and GECAFS will not use any
trade name, service mark or any other information which identifies the other in
sales, marketing and publicity materials without obtaining the prior written
approval of the other.

        (I) Governing Law. The Agreement will be governed by and construed in
accordance with the laws of the State of California, without regard to conflicts
of law principles.

        IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officer on the date first above written.

GENERAL ELECTRIC CAPITAL AUTO FINANCIAL SERVICES, INC.


By: [SIG]
    ------------------------------------
Its: Managing Dir. N.A.
     -----------------------------------

AUTO-BY-TEL ACCEPTANCE CORPORATION

By: [SIG]
    ------------------------------------
Its: Chief Operating Officer
     -----------------------------------

AUTO-BY-TEL CORPORATION, as Guarantor


By: [SIG]
    ------------------------------------
Its: Vice President/GC
     -----------------------------------



                                       9
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[GE LOGO]       GE Capital                                            EXHIBIT A
                Consumer Application
- ------------------------------------
INSTRUCTIONS: Please Use Black Ink To Complete Application. You may apply for credit individually or jointly. Please indicate whether you are applying: [ ] Individually or [ ] Jointly Please indicate whether the vehicle will be used primarily for: [ ] Personal or Family Purposes or [ ] Business, Commercial or Agricultural Purposes Boxes A and C below are to be completed by the Applicant. If this is a joint application, the Joint Applicant should complete Box B. If this is not a joint application, Box B should be completed with information about the Applicant's spouse if: (1) the Applicant is relying on the spouse's income as a repayment source for the credit requested or (2) the Applicant resides in a community property state or is relying on property as a repayment source which is located in a community property state (that is, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin). When completing Boxes A and B please note that alimony, child support, or separate maintenance income need not be revealed if you do not wish it considered a repayment source. If you reside in a community property state, please indicate whether you are: Applicant [ ] Married [ ] Separated [ ] Unmarried (includes single, divorced, or widowed) Joint Applicant [ ] Married [ ] Separated [ ] Unmarried (includes single, divorced, or widowed) If you are married and reside in a community property state, unless otherwise indicated on this application it will be presumed that all stated income and assets are community property, all stated debts and obligations are liabilities of the community property, and this request for credit is made in the interest of your marriage or family.
VEHICLE INFORMATION Type of Contract: [ ] Retail Installment [ ] "Flexible Loan" [ ] Long Term Lease [ ] Lease Assumption # Dealership Name - ----------------------------------------------------------------------------------------------------------------------------------- Dealer Phone Contact Yr. Make []New Model Mileage []Used []Demo - ----------------------------------------------------------------------------------------------------------------------------------- LEASE INFORMATION Cap MSRP Term Mo. Payment - ----------------------------------------------------------------------------------------------------------------------------------- RETAIL INSTALLMENT INFORMATION Amount Financed Invoice Dlr. Installed Options Credit Ins. MBP $ $ $ $ $ - ----------------------------------------------------------------------------------------------------------------------------------- Fax Other Charges Cash Down Payment $ Yr. Make Model Residual "Flexible Loan" Only Term Mo. Payment $ $ Trade In $ - ----------------------------------------------------------------------------------------------------------------------------------- A. INFORMATION REGARDING APPLICANT: - ----------------------------------------------------------------------------------------------------------------------------------- Full Name Date of Birth Social Security Number Ages of Dependents Home Phone - - [ ] - ----------------------------------------------------------------------------------------------------------------------------------- Current Address Street City State County Zip Code How Long? # Yrs. in Community Yrs. Mos. - ----------------------------------------------------------------------------------------------------------------------------------- Previous Address (Min. 5 yr. history - use addt'l sheets if necessary) Zip Code How Long? Business Phone Yrs. Mos. [ ] - ----------------------------------------------------------------------------------------------------------------------------------- Employer Name Business Address How Long? Occupation Yrs. Mos. - ----------------------------------------------------------------------------------------------------------------------------------- Self Employed Nature of Business Gross Monthly Income Source of Other Income Amount Total Gross Monthly [ ]Yes [ ]No $ (Alimony, Child Support Maintenance Optional) $ Income $ - ----------------------------------------------------------------------------------------------------------------------------------- Previous Employer Name, City, State Phone How Long? Occupation [ ] Yrs. Mos. - ----------------------------------------------------------------------------------------------------------------------------------- Nearest Relative Not Living With You (Full Address) Phone Relationship [ ] - ----------------------------------------------------------------------------------------------------------------------------------- Personal Reference (Full Address) Phone [ ] - ----------------------------------------------------------------------------------------------------------------------------------- B. INFORMATION REGARDING JOINT APPLICANT, SPOUSE OR OTHER PERSONS: - ----------------------------------------------------------------------------------------------------------------------------------- Full Name Relationship to the Applicant (if any) Date of Birth Social Security Number - ----------------------------------------------------------------------------------------------------------------------------------- Current Address (if different than applicant) Street City State Zip Code How Long? Occupation Yrs. Mos. - ----------------------------------------------------------------------------------------------------------------------------------- Employer Name Business Address How Long? Business Phone Yrs. Mos. [ ] - ----------------------------------------------------------------------------------------------------------------------------------- Self Employed Nature of Business Total Gross Monthly Source of Other Income Amount Total Gross Monthly [ ]Yes [ ]No Income $ (Alimony, Child Support Maintenance Optional) $ Income $ - ----------------------------------------------------------------------------------------------------------------------------------- Previous Employer Name, City, State Phone How Long? Occupation [ ] Yrs. Mos. - ----------------------------------------------------------------------------------------------------------------------------------- C. FINANCIAL INFORMATION - ALL LOANS, LEASES AND OTHER OBLIGATIONS (INCLUDING ALIMONY, CHILD SUPPORT, MAINTENANCE) - ----------------------------------------------------------------------------------------------------------------------------------- Residence Lienholder or Landlord Name Account No. Original Balance Balance Owing Mo. Payment [ ]Buying or Own [ ]Rent ----------------------------------------------------------------------------------------------------------------- [ ]With Parents Address $ $ $ - ----------------------------------------------------------------------------------------------------------------------------------- Name and Account No. Address $ $ $ - ----------------------------------------------------------------------------------------------------------------------------------- Name and Account No. Address $ $ $ - ----------------------------------------------------------------------------------------------------------------------------------- Previous Vehicle Was Name of Lessor or Financing Creditor Branch No. City, State Account No. Original Balance [ ]Open [ ]Leased [ ]Purchased [ ]Paid [ ]Trade - ----------------------------------------------------------------------------------------------------------------------------------- Checking Name Branch Phone Account No. Balance [ ] $ - ----------------------------------------------------------------------------------------------------------------------------------- Saving/ Name Branch Phone Account No. Balance Money Mkt. [ ] $ - ----------------------------------------------------------------------------------------------------------------------------------- Have You Ever Obtained Credit [ ] Yes (List Name & Address) Have You Ever No Under A Different Name? [ ] No Filed Bankruptcy Yes - Date_____________ - ----------------------------------------------------------------------------------------------------------------------------------- The following driver information is not required if application is being made for retail installment credit or "Flexible Loan" credit. - ----------------------------------------------------------------------------------------------------------------------------------- LIST ALL OPERATORS IN ORDER OF MOST FREQUENT USE: - ----------------------------------------------------------------------------------------------------------------------------------- % of Vehicle Use Birth Date Operator's License Number State Years Licensed Mo. Day Yr. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Garaging Address Number & Street City State Zip Phone Number If Other Than Residence [ ] - -----------------------------------------------------------------------------------------------------------------------------------
11 [*] Confidential Treatment Requested Exhibit A: Continued [*] 12 [*] Confidential Treatment Requested Exhibit A: Continued [*] 13 [*] Confidential Treatment Requested Exhibit A: Continued [*] 14 Exhibit B [FLOW CHART] GECAL - AFS / ABT Process Flow As Of 01/28/97 15 [*] Confidential Treatment Requested EXHIBIT C to Financing Inquiry Referral Agreement. dated as of February 1, 1997, between General Electric Capital Auto Financial Services, Inc. and Auto-By-Tel Acceptance Corporation and Auto-By-Tel, Inc., as Guarantor (the "Agreement") INFORMATION STANDARDS [*]
   1

                                                                   EXHIBIT 10.16

   
[*] Confidential Treatment has been requested for certain portions of this 
    exhibit. 
    

                      DATA LICENSE AND WEB SITE AGREEMENT

This Data License and Web Site Agreement (the "Agreement") is entered into as
of April 1, 1997 (the "Effective Date"), between (i) IntelliChoice, Inc. a
California corporation with a place of business at 471 Division Street,
Campbell, California 95008-6922 ("IntelliChoice") and (ii) Auto-By-Tel
Marketing Corporation, a California corporation with its principal place of
business at 18872 MacArthur Blvd., Suite 200, Irvine, California 92612-1400
("ABT") and Auto-By-Tel Corporation, a California corporation with its principal
place of business at 18872 MacArthur Blvd., Suite 200, 92612-1400 and the parent
company of ABT ("Parent").

                                    RECITALS

A.    IntelliChoice provides certain information concerning new and used
      automobiles and their purchase, sale, lease and financing to other
      companies, including by means of an Internet World Wide Web site ("Web
      Site").

B.    ABT hosts several Web Sites where it provides certain data and services to
      end-users wishing to purchase, sell, lease, or finance new and used
      automobiles.

C.    ABT wishes to license certain data from IntelliChoice for use by ABT on
      its Web Site and to have IntelliChoice place certain other information on
      IntelliChoice's Web Site; IntelliChoice is willing to provide such
      license and services on the terms of this Agreement.

D.    This Agreement sets forth the agreements of the parties on these matters
      and related covenants, conditions and restrictions.


                                   AGREEMENTS

IN CONSIDERATION OF THE ABOVE RECITALS AND THE MUTUAL PROMISES CONTAINED
HEREIN, THE PARTIES AGREE AS FOLLOWS:

1.    DEFINITIONS

      A.    "ABT Site" shall mean the World Wide Web site, currently published
in HTML format, available through URL http://www.autobytel.com and resident on
an ABT-owned host server which provides those persons and entities that access
that Web Site certain information concerning new and used automobiles,
financing and other related information.

      B.    "ABT Auxiliary Site" shall mean one or more World Wide Web sites,
available through various URLs, resident on an ABT-owned host server, which is
run by ABT for one or more Affinity Groups or Credit Unions, which provides
those persons that access that Web Site

                                       1

   2
certain information concerning new and used automobiles, financing, and other
related information.

     C.   "ABT Site Clients" shall mean persons or entities that or who access
the ABT Site.

     D.   "Affinity Group" shall mean a group of individuals or entities that
are members of a business, charitable, mutual benefit or similar organization,
or who access the ABT or ABT Auxiliary Site via one specific web site, that has
been submitted by ABT in writing and approved as such by IntelliChoice in
writing in its reasonable discretion.

     E.   "Affinity Group Clients" shall mean members of an Affinity Group.

     F.   "Affinity Group Data" shall mean information contained in
IntelliChoice's proprietary database consisting of that type of information
described on Exhibit "A" as Affinity Group Data and such Updates to such data as
IntelliChoice may compile from time to time in its sole and complete discretion,
in the format and media provided by IntelliChoice.

     G.   "Affinity Group Services" shall mean those services listed on Exhibit
"A" as Affinity Group Services.

     H.   "Affinity Group Site" shall mean the World Wide Web site, currently
published in HTML format, and resident on the IntelliChoice host server, which
will allow Affinity Group Clients the ability to access and utilize Affinity
Group Data and Affinity Group Services, and support the "look and feel" as
further defined in Section 3.H. The Affinity Group Site shall have Links to and
from the ABT Site or ABT Auxiliary Site. Neither ABT nor IntelliChoice shall
authorize any other Link to or from the Affinity Group Site without the consent
of the other party.

     I.   "Client Data" shall mean data, in both individual and aggregate (i.e.,
compilation of information) form, of persons or entities that access the
IntelliChoice Site, including the Sites, such as, by way of example only, name,
information request details, purchase, lease and financing information, which is
ascertainable or recordable by IntelliChoice as the result of the access.

     J.   "Credit Union" shall mean a credit union that has been submitted by
ABT in writing and approved in writing as such by IntelliChoice in its
reasonable discretion.

     K.   "Credit Union Client" shall mean a member of a Credit Union.

     L.   "Credit Union Data" shall mean information contained in
IntelliChoice's proprietary database consisting of that type of information
described on Exhibit "B" as Credit Union Data and such Updates to such data as
IntelliChoice may compile from time to time in its sole and complete discretion,
in the format and media provided by IntelliChoice.



                                       2

   3
     M.   "Credit Union Services" shall mean those services listed on Exhibit
"B" as Credit Union Services.

     N.   "Credit Union Site" shall mean the World Wide Web site published in
HTML format, and resident on the IntelliChoice host server which will allow
Credit Union Clients the ability to access and utilize Credit Union Data and
Credit Union Services, and support the "look and feel" as further defined in
Section 3.H.. The Credit Union Site shall have Links to and from the ABT Site
or ABT Auxiliary Site. Neither ABT nor IntelliChoice shall authorize any other
Link to or from the Credit Union Site without the consent of the other party.

     O.   "Data License" shall have the meaning specified in Section 2.A. below.

     P.   "Data Transfer Date" shall mean the date IntelliChoice first delivers
to ABT IntelliChoice Car Data as required by Section 2.A.

     Q.   "HTML" shall mean the Hypertext Markup Language.

     R.   "IntelliChoice Car Data" shall mean, collectively, the IntelliChoice
New Car Data and the IntelliChoice Used Car Data.

     S.   "IntelliChoice Client" shall mean persons or entities that or who
access the IntelliChoice Site (including the Sites).

     T.   "IntelliChoice Data" shall mean, collectively, the IntelliChoice New
Car Data, the Credit Union Data, the Affinity Group Data, the Credit Union Data
and any other data or information now or hereafter contained on the
IntelliChoice Site.

     U.   "IntelliChoice New Car Data" shall mean information contained in
IntelliChoice's proprietary database consisting of that type of information
described on Exhibit "C" as IntelliChoice New Car Data relating to information
compiled by IntelliChoice on certain makes and models of current model year
automobiles and such Updates to such data as IntelliChoice may compile from
time to time in its sole and complete discretion, in the format and media
provided by IntelliChoice.

     V.   "IntelliChoice Rights" has the meaning specified in Section 5.A.
below.

     W.   "IntelliChoice Used Car Data" shall mean information contained in
IntelliChoice's proprietary database consisting of that type of information
described on Exhibit "C" as IntelliChoice Used Car Data relating to information
compiled by IntelliChoice on certain makes and models of pre-current model year
automobiles and such Updates to such data as IntelliChoice may compile from time
to time in its sole and complete discretion, in the format and media provided by
IntelliChoice.



                                       3
   4
     X.   "IntelliChoice Services" shall mean all services of any nature
provided by IntelliChoice hereunder, including without limitation, the Credit
Union Services, the Affinity Group Services, and all services and obligations
to operate, maintain, support or provide the IntelliChoice Site, including the
Credit Union Site and the Affinity Group Site, and the Links to the ABT Site
from the IntelliChoice Site.

     Y.   "IntelliChoice Site" shall mean the World Wide Web site, currently
published in HTML format, available through URL http://www.intellichoice.com
and resident on an IntelliChoice owned host server which provides those persons
and entities that access that Web Site certain information concerning new and
used automobiles, financing and other related information, together with the
Affinity Group Site and the Credit Union Site. It is understood that the
IntelliChoice Site does not include any portion of the site resident on the host
server which IntelliChoice does not at the relevant time make available to the
general public at no cost or expense to the user.


     Z.   "Link" shall mean a hypertext link, in the form of a text or
graphical link, toolbar button or menu item.

     AA.  "Sites" shall mean, collectively, the Affinity Group Site and the
Credit Union Site.



                                       4



   5
   
[*] Confidential Treatment Requested
    

2.   DATA LICENSE

     A.  IntelliChoice Car Data. On the terms and conditions set forth herein,
IntelliChoice hereby grants to ABT a non-exclusive, limited term,
non-transferable right and license (the "Data License"), during the Agreement
Term to (i) reproduce and display IntelliChoice Car Data solely on the ABT Site
and (ii) use, and reproduce the IntelliChoice Car Data internally, solely for
the purpose of supporting the use of the IntelliChoice Car Data on the ABT
Site. ABT will permit the use or accessing of the IntelliChoice Car Data solely
by end-users of the ABT Site by means of accessing, viewing, printing or
downloading such data from the ABT Site for their own use and not for
sublicensing, reproduction or reuse by any other person or entity. ABT does not
currently have a license governing the use of the ABT Site. In the event ABT
institutes a license governing the use of the ABT Site, IntelliChoice shall
have the right to approve, which approval shall not be unreasonably withheld,
the terms by which users of the ABT Site are authorized to access and use the
IntelliChoice Car Data. ABT may not use, perform or display the IntelliChoice
Car Data (or permit such use, performance or display by any other person or
entity) in any other format, in any other way or through any other means. The
Data License is limited to rights and uses expressly permitted by this
Agreement.

     B.   Limits. ABT agrees, even after the Agreement Term, to comply with the
terms of Sections 5.B. with respect to the IntelliChoice Car Data. ABT has no
rights in the IntelliChoice Data or its use not expressly set forth in Section
2.A.

     C.   Format. IntelliChoice Car Data will be formatted as tab-delimited,
ASCII text files. Compression methods will be used if mutually agreed. Such
format and means can change from time to time if mutually acceptable.

     D.   Transfer. IntelliChoice Car Data will be uploaded by IntelliChoice to
IntelliChoice's FTP server (currently "ftp://mail.intellichoice.com"). ABT will
download from such server using a name and password to be mutually agreed.

     E.   Update Schedule. IntelliChoice Car Data will be updated as follows.
IntelliChoice, in its sole discretion, may update the IntelliChoice Car Data
more frequently:
          IntelliChoice New Car Data         [*]
          IntelliChoice Used Car Data        [*]


3.   SITES AND RELATED OBLIGATIONS

     A.   Creation and Maintenance of Credit Union Site. IntelliChoice shall
use reasonable commercial efforts to have the Credit Union Site complete and
available on IntelliChoice's host server for access to and use of the Credit
Union Data and Credit Union Services within 30 days of the Effective Date.
Thereafter, during the Agreement Term, IntelliChoice shall use reasonable
commercial efforts to maintain the Credit Union Site. The Credit Union Site
shall provide Credit


                                       5
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Union Clients with the ability to access and use Credit Union Data and Credit
Union Services and shall provide a Link to the ABT Site or ABT Auxiliary Site
through which a Credit Union Client may fill out a Purchase Request and Link
back to the Credit Union Site.

     B. Creation and Maintenance of Affinity Group Site. IntelliChoice shall
use reasonable commercial efforts to have the Affinity Group Site complete and
available on IntelliChoice's host server for access to and use of the Affinity
Group Data and Affinity Group Services within 30 days of the Effective Date.
Thereafter, during the Agreement Term, IntelliChoice shall use reasonable
commercial efforts to maintain the Affinity Group Site. The Affinity Group Site
shall provide Affinity Group Clients with the ability to access and use
Affinity Group Data and Affinity Group Services and shall provide a Link to the
ABT Site or ABT Auxiliary Site through which a Affinity Group Client may fill
out a Purchase Request and Link back to the Affinity Group Site.

     C. Creation and Maintenance of ABT and ABT Auxiliary Sites. ABT shall use
reasonable commercial efforts to have the ABT and/or ABT Auxiliary Sites
complete and available on ABT's host server with Links to the Credit Union Site
and Affinity Group Site, the capability to capture a Purchase Request from a
Credit Union Client or Affinity Group Client, Links back to the linking site,
and the ability to track purchase requests, within 30 days of the Effective
Date. Thereafter, during the Agreement Term, ABT shall use reasonable
commercial efforts to maintain the ABT Site or ABT Auxiliary Site with these
capabilities. IntelliChoice may terminate this Agreement upon 90 days written
notice to ABT if ABT either (i) establishes Websites or portions thereof
serving in excess of 25% of the aggregate number of its credit union clients
which Websites or portions thereof contain third party data similar or
competitive with the Credit Union Data, or (ii) establishes Websites or
portions thereof serving in excess of 25% of the aggregate number of its
affinity group clients which Websites or portions thereof contain third party
data similar or competitive with the Affinity Group Data. In the event of a
termination pursuant to the immediately preceding sentence, IntelliChoice shall
be entitled to all moneys earned through he date of termination, ABT shall be
relieved of any obligation to pay moneys which have not been earned at the date
of termination. Any such termination shall not be deemed a default by either
ABT or IntelliChoice, and after such termination, this Agreement shall be of no
further force or effect.

     D. Registering and Deregistering Credit Union and Affinity Sites. ABT
shall submit to Intellichoice in writing each affinity group or credit union
proposed to be registered as an Affinity Group or Credit Union. IntelliChoice
shall respond in writing with its approval, within its reasonable discretion,
within five business days. ABT shall notify IntelliChoice in writing of any
Affinity Group or Credit Union which ABT has deregistered.

     E. Access and License Rights. The right of Credit Union Clients and
Affinity Group Clients to access and use the Credit Union Site and/or the
Affinity Group Site shall be subject to all rules and policies and all license
terms and restrictions generally applied by IntelliChoice to the IntelliChoice
Site.


                                       6
   7
     F. Links To ABT Site. IntelliChoice shall create and, during the Agreement
Term after creation, maintain Links embedded in the IntelliChoice Site linking
it to the ABT Site in: (i) that portion of the IntelliChoice Site which
provides new vehicle information; and (ii) that portion of the IntelliChoice
Site which provides used vehicle information. IntelliChoice agees that, during
the Agreement Term, it shall not create Links from the IntelliChoice Site to any
web site operated by Auto Web, Reynolds and Reynolds, CUC International,
StoneAge or AutoTown on its own branded host server (each, an "Excluded Site").
Irrespective of the foregoing, a site shall not be deemed an Excluded Site if
the site is labeled or co-labeled as a site of Microsoft Corporation and any
Link to that site is undertaken as an obligation of a contract which is in force
between IntelliChoice and Microsoft prior to the date that this contract is
signed. In addition, during the Agreement Term, IntelliChoice shall not create a
Link to any other web site which specifically identifies or characterizes that
website as a "vehicle buying" program or service. The foregoing sentence shall
not prevent IntelliChoice from providing any Link to any web site other than the
Excluded Sites, including sites that provide vehicle buying programs or
services, so long as such Link does not itself specifically identify or
characterize the website as a vehicle buying program or service. In addition,
during the Agreement Term, IntelliChoice shall from time to time, on a rotating
on and off basis, place banner advertising for the ABT Site on the IntelliChoice
Site, in places, sizes and frequency determined by IntelliChoice in its
discretion.

     G. Identification Technology. ABT has developed software (the "Tracking
Software") designed to identify which Clients pass from the ABT Site to the
IntelliChoice Site (including the Affinity Group Site or the Credit Union Site)
or from the IntelliChoice Site to the ABT Site using any Links on either Site
or otherwise qualify for a Purchase Referral (as defined below). Additionally,
IntelliChoice and ABT may, together or independently, desire to create or
modify such Tracking Software.). In such event, the parties will use reasonable
efforts to agree upon the criteria for the Tracking Software and to allocate
development obligations. Unless otherwise agreed, each party will bear its own
expense in connection with such development. Each party shall retain all rights
to Tracking Software which they have developed.

     H. Rights. The Sites and all proprietary rights used on the Sites or in
connection therewith (including any search engines, data, software, trademarks
or tradenames and other IntelliChoice Rights) shall be published by and owned
and operated solely by IntelliChoice. The rights of ABT, Credit Union Clients
and Affinity Group Clients to access and use the Site (and data and services
provided thereon) shall in all respects be non-exclusive. IntelliChoice will
have any rights in the Client Data that are authorized by any IntelliChoice
Client or are otherwise available to it at law or in equity. Except for the
obligation of IntelliChoice to provide the Credit Union Data and Credit Union
Services on the Credit Union Site and to provide the Affinity Group Data and
the Affinity Group Services on the Affinity Group Site, all aspects of the
creation and maintenance of the Sites shall be in IntelliChoice's sole
discretion, including formats, layouts, content, locations, etc.
Notwithstanding the foregoing sentence, the Affinity Group Site and the Credit
Union Site will be designed so that users may reasonably perceive such Sites as
part of the ABT Site through the use of the "look and feel" of the ABT Site.
ABT will provide graphic


                                       7
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images, user interface specifications and any navigational information
necessary to reproduce such look and feel, and IntelliChoice Agrees, subject
the following sentence, to incorporate ABT comments on the format, layout,
content, locations, etc. of the Affinity Group Site and the Credit Union Site
with the goal of reasonably recreating such look and fee. The parties agree
that "look and feel" refers to the general background of the screen, and that
the functionality of the Sites (e.g. the design of the searching capabilities,
the layout of the CarBuilder application, etc.) will not be modified from the
way that IntelliChoice has designed such functionality. Additionally, the
uniform reference locator of the Sites will begin with the prefix 
"http://www.intellichoice.com/" followed by the name of ABT's choice. At the
option of IntelliChoice, the Sites may contain graphical and textual
representations of the ABT Trademarks; provided, that the style, content and
format of such ABT Trademarks shall be subject to the provisions of Section 6.

4.   ADDITIONAL OBLIGATIONS

     A.   Responsibility for ABT Site. ABT shall have all obligations and
responsibilities (as well as ownership) of the ABT Site and its publication
(subject to the rights of IntelliChoice licensed hereunder). ABT shall embed in
the ABT Site text and graphical Links that will prominently feature
IntelliChoice as a provider of data and services for the ABT Site and ABT
Clients; such Links shall at a minimum appear in the ABT "Information Provider"
section of the ABT Site (which Link shall be at least as prominent as any
other Link in such section other than for "CarPoint") and in each place the
IntelliChoice Car Data in available; each such Link shall be approved by
IntelliChoice. In addition, in each place the IntelliChoice Data is available,
IntelliChoice shall be prominently disclosed and credited as the provider of
such data. To the extent that any Links or references contain the IntelliChoice
corporate name or IntelliChoice Trademarks (as hereinafter defined),
construction and design of such Links or reference shall be subject to the
provisions of Section 6 hereof. Without limiting ABT's obligations hereunder,
it must comply with all applicable laws and regulations relating to the use of
the Internet, including laws and regulations regarding prohibited usage,
materials and transmission on the Internet. As between ABT and IntelliChoice,
ABT shall be reasonable for the compliance with such laws and regulations of its
affiliates, employees, agents, consultants, customers and guests.

     B.   Responsibility for IntelliChoice Site. IntelliChoice shall have all
obligations and responsibilities (as well as ownership) of the IntelliChoice
Site and its publication. Any Link to the ABT Site shall be approved by ABT. To
the extent that any Links or references contain the ABT corporate name or ABT
Trademarks (as hereinafter defined), construction and design of such Links or
reference shall be subject to the provisions of Section 6 hereof. Without
limiting IntelliChoice's obligations hereunder, it must comply with all
applicable laws and regulations relating to the use of the Internet, including
laws and regulations regarding prohibited usage, materials and transmission on
the Internet. As between ABT and IntelliChoice, IntelliChoice shall be
responsible for the compliance with such laws and regulations of its
affiliates, employees, agents, consultants, customers and guests.


                                       8
   9
   
[*] Confidential Treatment Requested
    

     C.   Acceptance. ABT shall have one week following the date a Site becomes
available during which to review and conduct testing of the Site to determine
whether it provides access to the applicable data and services. If, during the
course of such testing ABT reasonably determines that the IntelliChoice Site
fails to substantially provide such access (generally, "non-conformities"), it
shall so notify IntelliChoice in a writing which sets forth the
non-conformities discovered. IntelliChoice shall have a period of one week
thereafter in which to correct such non-conformities and publish a revised
version of the Site to ABT for further testing pursuant to the procedures set
forth in this Section. The foregoing procedures shall be repeated until ABT
determines that there are no material non-conformities in the Site. In the
event the IntelliChoice Site is not approved after two (2) iterations of the
foregoing process, ABT may terminate this Agreement, which termination shall
end all obligations of the parties and shall be without further liability or
obligation by either party, other than obligations which survive termination.
Should ABT not reject the Site by providing the writing described above within
one week, ABT shall be deemed to have accepted the Site (an "Acceptance").

5.   COMPENSATION

   
     A.   Initial Fee. ABT agrees to pay to IntelliChoice, upon execution of
this Agreement, a one-time fee of [*] as a fee to create the Sites (the
"Initial Fee").

     B.   Monthly Fees. In consideration of the Data License and the provisions
of Section 3.F, ABT agrees to pay IntelliChoice monthly fees (the "Monthly
Fees") as follows: (i) for the first six months following the Data Transfer
Date, the sum of [*] per month; and (ii) for the remainder of the Agreement
Term, the sum of [*] per month. The Monthly Fees shall be due in advance on the
Data Transfer Date and of the same calendar day of each month during the
Agreement Term thereafter. Nothing in this Agreement, except a termination of
this Agreement per Section 10 shall relieve ABT of the Monthly Fee obligation.

     C.   Affinity Client Fee. In consideration of the Affinity Group Site,
Affinity Group Data and Affinity Services, ABT agrees to pay IntelliChoice [*]
per month for each Affinity Client ABT has registered with IntelliChoice during
such month. Affinity Group Clients registered during a month shall be charged to
a pro-rata basis for such month. There shall be no pro-rations for any month in
which an Affinity Client is de-registered by ABT.
    





                                       9
   10
   
[*] Confidential Treatment Requested
    

          D.   Referral Fees

   
               (i)    Credit Unions: Links. For each "Referral" (as defined
               below) for new vehicles submitted by an IntelliChoice Client
               (other than an Affinity Group Client) or by a Credit Union
               Client, ABT shall pay IntelliChoice a onetime fee of [*]. For
               each Referral for used vehicles purchased by an IntelliChoice
               Client (other than an Affinity Group Client) or by a Credit Union
               Client, ABT shall pay IntelliChoice a onetime fee of [*].
                
               (ii)   Affinity Group. For each Referral from an Affinity Group
               Client for a new or used vehicle, ABT shall pay IntelliChoice a
               onetime fee of [*].

               (iii)  Referral. A Referral shall mean any completion of a
               purchase request (a "Transaction Request") by any IntelliChoice
               Client (including any Credit Union Client or Affinity Group
               Client) that accesses the IntelliChoice Site (including the
               Sites) and thereafter submits a Transaction Request with ABT
               (whether at the ABT Site, the IntelliChoice Site, or elsewhere),
               whether or not the applicable client initiates first contact
               through the ABT Site or the IntelliChoice Site and whether or not
               such IntelliChoice Client makes a direct Link to the ABT Site or
               accesses the ABT Site or otherwise makes a Transaction Request at
               some later date. It is understood that each request for lease,
               financing or similar purpose will only occur in conjunction with,
               or after, a Transaction Request, and not independent of a
               Transaction Request. The parties will establish mechanisms in
               addition to the Tracking Software to track such Clients,
               including mechanisms to determine whether each person or entity
               that completes a Transaction Request accessed the IntelliChoice
               Site at any prior time. Multiple requests from an individual car
               buyer made within [*] shall count as one Referral. Multiple
               requests from an employee of a credit union or affinity group,
               made on behalf of credit union or affinity group members, shall
               count as one Referral only to the extent that only one Referral
               would have been counted if the credit union or affinity group
               members had made the requests themselves. Referrals shall be paid
               monthly, within twenty (20) days after the calendar month in
               which the Referral is made. Each payment of Referral Fees shall
               be accompanied by a detailed report, showing the transactions
               upon which the fees are based (including the name of each Credit
               Union Client, Affinity Group Client and the details of the
               transaction). Referral Fees will be payable after the Agreement
               Term for IntelliChoice Clients who access the IntelliChoice Car
               Data during the Agreement Term and make a Transaction Request
               within one (1) month after the Agreement Term.
    
  
          E.   Books and Records: Audit. ABT agrees to maintain, until two (2)
years after the termination of this Agreement, complete books, records and
accounts regarding all Purchase Requests. ABT agrees to allow IntelliChoice's
independent auditor, no more than three times each calendar year, to audit and
examine such books, records and account during ABT's normal

                                       10
             
   11

business hours and upon at least five (5) days' prior written notice to ABT, in
order to verify the accuracy of the reports under this Section. Such audit
shall be subject to the auditor's agreement to confidentiality restrictions
substantially similar to the terms and conditions of Section 10 if so
requested by ABT. Such auditor shall report to ABT and IntelliChoice only
whether any Purchase Referral Fees were under-reported and, if so, the amount
of such under-reporting. If such auditor reasonably determines that ABT has not
made full accounting to IntelliChoice under this Agreement, ABT agrees to
promptly pay IntelliChoice the amount of such shortfall (together with late
charges as applicable). If such auditor reasonably determines that ABT has
overpaid IntelliChoice under this Agreement, ABT shall have a credit balance in
its account with IntelliChoice of the amount of such overpayment. In addition,
if any such examination reveals an under reporting to IntelliChoice with
respect to Purchase Referral Fees of five percent (5%) or more, ABT shall
reimburse IntelliChoice its costs of such examination.

     F.   Taxes. ABT shall pay or, at IntelliChoice's option, reimburse
IntelliChoice for any and all taxes, duties and assessments imposed on ABT or
IntelliChoice in connection with the license and other transactions
contemplated in this Agreement, including, without, limitation, all sales, use,
excise and other taxes and duties, and excluding only taxes based upon
IntelliChoice's income, and taxes (other than sales, use, and excise taxes) due
by IntelliChoice under current taxing authority rules and regulations.

     G.   Late Charges. Downtime Offsets: Etc. Any amounts not paid when due
shall bear interest at the lesser of fifteen percent (15%) per annum and the
maximum legal rate. All amounts shall be payable without offset, except the
offset of a credit balance determined in Section 5E. Downtime or unavailability
of a Site for any reason within the reasonable control of IntelliChoice for
greater than seven (7) days in a month shall give ABT the right to terminate
this Agreement, upon 30 day's notice, if the Site continues to be unavailable
or down for seven (7) days within the notification period. A termination under
this clause is not a default by IntelliChoice, and this Agreement will
terminate without other force or effect. Upon termination, IntelliChoice is
entitled to all moneys earned through the date of termination. ABT is relieved
of any obligation to pay fees which have not been earned at the date of
termination.

     H.   Obligations of Parent. Parent hereby agrees that it is jointly and
severally liable for all of the obligations of ABT hereunder. Parent
acknowledges that it is obtaining direct benefit from this contract by reason
of its ownership of ABT and its direct and indirect interests in the
transactions contemplated hereby.

6.   PROPRIETARY RIGHTS.

     A.   Ownership. ABT agrees that IntelliChoice owns all right, title and
interest in the IntelliChoice Data, the IntelliChoice Site, and all technology
incorporated therein or used therein, and any and all presentations,
modifications, enhancements and copies thereof, and in all trademarks, trade
names, inventions, copyrights, patents, know-how and trade secrets used in or
connection with the IntelliChoice Data, the IntelliChoice Site, and/or any
software used on or in


                                       11
   12

connection with the IntelliChoice Site (collectively, the "IntelliChoice
Rights"). ABT's use of the IntelliChoice Rights is authorized only for the
purposes and to the extent set forth in this Agreement, and upon termination of
this Agreement such authorization will cease immediately and ABT will deliver
to IntelliChoice any tangible embodiments of any of the IntelliChoice Rights.
ABT has no rights in or to any of the IntelliChoice Rights other than as
expressly set forth in this Agreement and will acquire no additional rights
during the Agreement Term.

     B.   Limits. The right to use the IntelliChoice Car Data and to access
the Sites in accordance with the terms of this Agreement does not convey any
license, expressly or by implication, to manufacture, duplicate or otherwise
copy or reproduce any IntelliChoice Data except as expressly provided in this
Agreement. ABT agrees, during and after the Agreement Term: (a) not to copy
(other than regular back-up copies), modify, disassemble, reverse engineer or
decompile any IntelliChoice Rights, (b) not to copy, perform, distribute or
sublicense the IntelliChoice Rights except as expressly permitted hereby, and
(c) to maintain the IntelliChoice Rights which are not publicly available in
complete confidence without disclosure to any third party (except employees
with a need for access who agree to comply with your obligations), notify us
immediately of any unauthorized disclosure or use, and cooperate with
IntelliChoice to protect all proprietary rights in and ownership of the
Intellectual Property. ABT may not retain, modify, copy, or distribute any
IntelliChoice Rights which are accessed via the IntelliChoice Site. In addition,
ABT acknowledges that no ABT Client, Credit Union Client or Affinity Group
Client is granted permission to retain, modify, copy, or distribute any
IntelliChoice Rights which are accessed via the IntelliChoice Site or the Sites.
ABT will promptly notify IntelliChoice in writing of any such retention,
modification, copying, or distribution of which it obtains actual knowledge or
has reason to believe, and ABT agrees that any Credit Union or Affinity Group
who suffers such retention, modification, or distribution shall immediately be
deregistered.

     C.   Improvements. All right, title and interest in and to any
developments, modifications, derivations, continuations or improvements made,
discovered or used by IntelliChoice or ABT during and after the term of this
Agreement arising out of or in connection with the IntelliChoice Site or the
IntelliChoice Data, including but not limited to, the presentation, retrieval,
display, charge for access to the IntelliChoice Data (if any), shall belong
exclusively to IntelliChoice, and ABT is not hereby granted any license
thereto. ABT hereby retains all right, title and interest in and to all
suggestions, drawings, reports, designs, specifications, screen displays and
other materials or assistance provided by ABT and acknowledged as such in
writing by IntelliChoice with respect to the Sites.

7.   TRADEMARKS AND MARKETING

     A.   Trademarks. The trademarks, trade names and other product and company
identifiers of IntelliChoice that IntelliChoice may adopt from time to time,
including but not limited to IntelliChoice. Just the Facts, CarCenter,
CarBuilder, and Window Sticker Plus (collectively, the "IntelliChoice
Trademarks"), are the sole property of IntelliChoice.  Except for the use of
IntelliChoice's Corporate name and logo among other customer names and logos in
a

                                       12
   13
listing of ABT's customers, or as otherwise set forth in this Agreement, ABT
shall not use IntelliChoice's corporate name or the IntelliChoice Trademarks
with any product or service for any means, including any promotional
advertisement without IntelliChoice's prior written consent. Any IntelliChoice
Trademarks which ABT uses must be reproduced with the appropriate trademark
notations in accordance with IntelliChoice's instructions and in the form and
manner designated by IntelliChoice. The trademarks, trade names and other
product and company identifiers of ABT that ABT may adopt from time to time
(collectively, the "ABT Trademarks"), are the sole property of ABT. Except for
the use of ABT's Corporate name and logo among other customer names and logos
in a listing of IntelliChoice's customers, or as otherwise set forth in this
Agreement, IntelliChoice shall not use ABT's corporate name or the ABT
Trademarks with any product or service for any means, including any promotional
advertisement without ABT's prior written consent. Any ABT Trademarks which
IntelliChoice uses must be reproduced with the appropriate trademark notations
in accordance with ABT's instructions and in the form and manner designated by
ABT.

     B.   Marketing. All representations of IntelliChoice Trademarks that ABT
shall incorporate on the ABT Site or ABT Auxiliary Sites shall be exact copies
of those used by IntelliChoice or shall be first submitted to IntelliChoice for
approval (which shall not be unreasonably withheld) of design, color, and other
details. ABT shall incorporate the IntelliChoice name and logo in all marketing
materials or promotional advertisement related to the Sites; provided, however,
that any promotional advertisement, marketing material or other public
communication used for such purpose shall not be published or disseminated
without the prior written approval of IntelliChoice.

8.   WARRANTY; DISCLAIMERS OF WARRANTY

     A.   Services. IntelliChoice warrants that, during the Agreement Term, the
IntelliChoice Services will be provided in a professional, workerlike manner.
If a claim occurs under this warranty, ABT must notify IntelliChoice within 30
days after ABT becomes aware of any facts supporting the claim. IntelliChoice
will either correct the problem or re-perform the Services. THESE ARE
INTELLICHOICE'S ONLY OBLIGATIONS AND ABT'S ONLY REMEDY FOR BREACH OF WARRANTY,
EXCEPT FOR THE PROVISIONS OF SECTION 5.G., WITHOUT LIMITING SECTION 8.D.,
INTELLICHOICE MAKES NO OTHER WARRANTY, GUARANTY OR PROMISE CONCERNING THE
INTELLICHOICE SERVICES EXCEPT FOR THE PROVISIONS OF SECTION 5.G.

     B.   Data. IntelliChoice has conducted research to obtain the
IntelliChoice Data in the manner IntelliChoice considers to be commercially
reasonable from sources IntelliChoice considers to be reliable. IntelliChoice
has made no independent verification of the accuracy of the information it has
received. The IntelliChoice Data is comprised of the most recent available
information in IntelliChoice's database. Timeliness of data is dependent upon
IntelliChoice's collection schedule and the level of cooperation from third
parties, including, but not limited to, dealers and car manufacturers.
IntelliChoice cannot assure that the IntelliChoice Data will be



                                       13
   14
current at any time. WITHOUT LIMITING SECTION 8.D, INTELLICHOICE MAKES NO
GUARANTY, WARRANTY OR REPRESENTATION WITH RESPECT TO INTELLICHOICE DATA OR ANY
OTHER INFORMATION CONTAINED IN THE INTELLICHOICE SITE, INCLUDING AS TO
COMPLETENESS, ADEQUACY, ACCURACY OR CURRENT NATURE.

        C.      Sites. IntelliChoice shall use reasonable commercial efforts to
maintain the Sites. If ABT claims IntelliChoice has breached this obligation,
ABT must notify IntelliChoice within 30 days after ABT becomes aware of any
facts supporting the claim. IntelliChoice will correct the problem as soon as
commercially reasonable. THIS IS INTELLICHOICE'S ONLY OBLIGATION AND ABT'S ONLY
REMEDY FOR BREACH OF THIS OBLIGATION EXCEPT FOR THE PROVISION OF SECTION 5.G.
WITHOUT LIMITING SECTION 8.D, INTELLICHOICE MAKES NO GUARANTY, WARRANTY OR
REPRESENTATION WITH RESPECT TO THE AVAILABILITY OR PERFORMANCE OF THE
INTELLICHOICE SITE (INCLUDING THE SITES), OR THE PERFORMANCE OF ANY HOST SERVER
ON WHICH SUCH SITES ARE RESIDENT. IN ADDITION, ABT RECOGNIZES THAT
INTELLICHOICE HAS NO CONTROL OVER THE INTERNET OR ACCESS PROVIDERS THEREFORE
AND HAS NO RESPONSIBILITY OF ANY NATURE WITH RESPECT THERETO.

        D.      General Disclaimer. Except as expressly set forth in this
Section 8., INTELLICHOICE MAKES NO WARRANTIES WITH RESPECT TO THE INTELLICHOICE
SERVICES, THE INTELLICHOICE DATA, THE INTELLICHOICE SITE OR ANY INFORMATION
CONTAINED THEREIN, OR ANY OTHER SUBJECT MATTER OR TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT, EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, AND INTELLICHOICE
SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR INFRINGEMENT WITH RESPECT TO ANY SUCH MATTERS.

9.      LIMITATION OF LIABILITY.

        IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY LOST PROFITS, LOSS OF
USE (EXCEPT FOR THE PROVISIONS OF SECTION 5.G.), LOSS OR INTERRUPTION OF
BUSINESS, OR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY
KIND, HOWEVER CAUSED, AND WHETHER BASED ON CONTRACT, TORT (INCLUDING
NEGLIGENCE), STRICK LIABILITY, STATUTORY CLAIM OR ANY OTHER THEORY OF
LIABILITY. THE FOREGOING LIMITATION SHALL APPLY WHETHER OR NOT EITHER PARTY
KNOWS OR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT WILL
INTELLICHOICE BE LIABLE FOR (A) ANY REPRESENTATION OR WARRANTY MADE TO ANY
CLIENT OR OTHER THIRD PARTY BY ABT, OR ANY AGENT OF ABT, OR (B) THE
UNAVAILABILITY OF THE INTELLICHOICE SITE, THE INTELLICHOICE DATA OR OTHERWISE.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, EXCEPT AS TO ITS
LIABILITY, IF ANY, UNDER SECTION 11,

                                       14
   15
   
[*] Confidential Treatment Requested
    

INTELLICHOICE'S ENTIRE AGGREGATE LIABILITY TO ABT FOR DAMAGES CONCERNING
PERFORMANCE OR NONPERFORMANCE OR IN ANY WAY RELATED TO THE SUBJECT MATTER
HEREOF, AND REGARDLESS OF WHETHER THE CLAIM FOR SUCH DAMAGES IS BASED IN
CONTRACT OR IN TORT (INCLUDING NEGLIGENCE) STRICT LIABILITY, STATUTORY OR OTHER
THEORY OF LIABILITY, SHALL NOT EXCEED THE HIGHEST AMOUNT OF PAYMENTS OF MONTHLY
FEES MADE HEREUNDER BY ABT WITHIN ANY CONSECUTIVE SIX MONTH PERIOD. IN THAT
REGARD, ABT ACKNOWLEDGES THAT ABT IS RECEIVING VALUE FROM INTELLICHOICE'S
OBLIGATIONS HEREUNDER AS THEY ARE RECEIVED, SO THAT DAMAGES ARE GENERALLY
NEITHER BACKWARD OR FORWARD LOOKING.

10.  TERM AND TERMINATION

   
     A.   Term. This Agreement shall commence on the Effective Date and shall
continue in full force and effect for [*] after the Data Transfer Date unless
earlier terminated in accordance with the provisions of this Agreement (the
"Initial Term"). Thereafter, this Agreement shall renew automatically for [*] 
(the "Renewal Terms") unless-either party provides thirty (30) days prior
written notice to the other party of its intent to terminate for convenience.
The Initial Term and any Renewal Term are collectively the ""Agreement Term".
    

     B.   Termination for Cause. If either party defaults in the performance of
any provision of this Agreement, and the default is one which is reasonably
susceptible of cure, then the non-defaulting party may give written notice to
the defaulting party that if the default is not cured within thirty (30) days
this Agreement will terminate. If the non-defaulting party gives such notice
and the default is not cured within thirty (30) days, this Agreement shall
terminate automatically without any obligation on the non-defaulting party to
provide any further notice of termination. If the default is one which is not
reasonably susceptible of cure, this Agreement shall terminate immediately upon
the giving of notice by the non-defaulting party, with no cure period provided.

     C.   Effect of Termination.

          (I)  Upon the termination of this Agreement, the following provisions
shall take effect:

               (A)  The rights and licenses granted under this Agreement,
including IntelliChoice's obligations under Section 3, shall automatically
terminate and ABT shall cease any use of any IntelliChoice Rights, and
IntelliChoice shall cease use of any ABT Rights;

               (B)  All payments owed to IntelliChoice shall become due and
payable;

               (C)  Except as otherwise provided herein, the non-breaching
parties shall have all other rights and remedies available at law or in equity
(and for such purposes, each party



                                       15
   16
acknowledges that injunctive relief will be appropriate to protect the other
party's Rights, which are unique and special and which cannot be protected
through the award of damages); and

                (D)     The provisions of Sections 2.B, 6, 7.A, 8.D, 9, 10.C,
11, 12, and 13 shall survive the termination of this Agreement.

11.     CONFIDENTIALITY

        A.      Obligation of Confidentiality. The parties acknowledges that by
reason of their relationship to each other hereunder, each shall have access to
certain information and materials concerning the other's business, plans,
customers, technology and products that is confidential and of substantial
value to that other party, which value would be impaired if such information
were disclosed to third parties. Confidential Information shall consist of the
IntelliChoice Rights (as to IntelliChoice) and, as to each party, such other
information and materials of such party as are marked as "Confidential",
"Proprietary" or some similar designation ("Confidential Information"). Each
party agrees that it shall not use in any way, for its own account or the
account of any third party, nor disclose to any third party, any such
Confidential Information revealed to it by the other party (except to carry out
its express rights and obligations under this Agreement) and shall take every
reasonable precaution to protect the confidentiality of such information.

        B.      Exceptions. Information shall not be deemed Confidential
Information hereunder if such information: (I) is known to the recipient on the
Effective Date directly or indirectly from a source other than one having an
obligation of confidentiality to the providing party; (II) hereafter becomes
known (independently of disclosure by the providing party) to the recipient
directly or indirectly from a source other than one as to which the recipient
is aware that such source has an obligation of confidentiality to the providing
party; (III) becomes publicly known or otherwise ceases to be secret or
confidential, except through a breach of this Agreement by the recipient; or
(IV) was independently developed by the recipient without use of or reference
to the providing party's confidential information.

12.     TRADEMARK INDEMNITY

        Each party shall defend, or at its option settle, any claim brought
against the other by a third party and shall indemnify and hold harmless the
other party against all costs and expenses of such claims alleging that, in the
case of IntelliChoice, ABT's Trademarks, and, in the case of ABT,
IntelliChoice's Trademarks, infringe a trademark, trade name, service mark or
other intellectual property right of such third party, provided however, that:
(i) the party to be indemnified shall notify the indemnifying party promptly of
any such claim and gives the indemnifying party full and complete authority,
information and assistance to defend or settle such claim at the indemnifying
party's expense; and (ii) the party to be indemnified gives the indemnifying
party full control of the defense and all negotiations for its compromise and
settlement.

                                       16
   17
13.  GENERAL

     A.   Successors and Assigns. This Agreement and the rights and
obligations hereunder may not be assigned or sublicensed by either party. Any
attempt by either party to license, assign or transfer any of the rights,
duties or obligations under this Agreement is void. Notwithstanding the
foregoing, IntelliChoice may assign or transfer this Agreement in connection
with any sale, or transfer of substantially all the ownership of IntelliChoice
or its assets. Subject to the foregoing, this Agreement will benefit and bind
the successors and assigns of the parties. For purposes of the foregoing, any
transaction or series of transactions (other than a public offering) which
results in an aggregate transfer of fifty percent (50%) or more of the assets
or stock of ABT shall be considered an assignment of for purposes of this
Agreement. 

     B.   Notices. All notices the parties may give to each other will be in
writing and by personal delivery or by first class mail, registered or
certified, postage prepaid with return receipt requested, addressed to the
other party at the address provided at the beginning of the Agreement or to
such other address as the parties designate to the other in writing pursuant to
this Section. 12.B. A notice under this Agreement will be effective on personal
delivery or three (3) days after deposit, if by U.S. mail.

     C.   Severability. If any provision of this Agreement is held by a court
of competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions shall continue in full force and effect. EACH PART OF THIS AGREEMENT
THAT LIMITS LIABILITY, DISCLAIMS WARRANTIES OR GUARANTEES, OR EXCLUDES DAMAGES
IS SEVERABLE AND INDEPENDENT OF ANY OTHER PROVISION AND IS TO BE ENFORCED THAT
WAY. IF ANY REMEDY FAILS TO FULFILL ITS ESSENTIAL PURPOSE, THE LIMITATIONS OF
LIABILITY AND EXCLUSIONS OF DAMAGES REMAIN IN EFFECT.

     D.   Waivers. Any waivers must be in writing and the waiver of one breach
or default in exercising any rights will not constitute a waiver of any
subsequent breach or default.

     E.   Attorney's Fees. If any action or arbitration is brought to enforce
or interpret the provisions of this Agreement, the prevailing party will be
entitled to reasonable attorney's fees and costs, in additions to any other
relief to which that party may be entitled and awarded by a court of competent
jurisdiction, including any fees and costs incurred on any appeal.

     F.   Integration. This Agreement represents the entire agreement between
the parties, may only be amended by a writing signed by both parties and
supersedes all prior agreements and understandings with respect to the matters
covered by this Agreement.

     G.   Force Majeure. Neither party will be liable to the other for delays
or failures in performance arising out of or resulting from causes beyond the
reasonable control of that party, including, without limitation, acts of God,
labor disputes or disturbance, material shortages or


                                       17
   18
rationing, riots, acts of war, governmental regulation, communication or
utility failures, or casualties.

     H.   Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, and all of which
together will constitute the Agreement.

     I.   Injunctive Relief. In addition to any of the other remedies available
to the parties hereto, each party agrees that it shall be entitled to a decree
of specific performance or an injunction restraining violations of a parties'
proprietary rights (including any violation of Section 10 of this Agreement).
No remedy provided herein is intended to be exclusive of any other remedy, and
each and every remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or equity.

     J.   Governing Law. This Agreement shall be governed by the laws of the
State of California.

     K.   Expenses. Each party hereto shall pay such party's own expenses
incurred (including, without limitation, the fees of counsel) on such party's
behalf in connection with this Agreement or the performance of its services
hereunder.

     L.   Entire Agreement. This Agreement embodies the entire agreement and
understanding of the parties hereto as to the subject matter of this Agreement,
and supersedes all prior or contemporaneous written or oral communications or
agreements between the parties regarding the subject matter hereof. Without
limiting the foregoing, neither party has any obligation to provide any
services or data not expressly set forth in this Agreement, including any
additional development work, maintenance or support. This Agreement may only be
amended by written agreement between parties.

     M.   Independent Contractors. The parties will act as independent
contractors in the performance of this Agreement, and nothing contained in this
Agreement will be construed to (i) give either party the power to direct and
control the day-to-day activities of the other, (ii) constitute the parties, as
partners, joint venturers, co-owners or otherwise as participants in a joint or
common undertaking, or (iii) allow either party to create or assume any
obligation on behalf of the other party for any purpose whatsoever. All
financial obligations associated with each party's business are the sole
responsibility of that party. All sales and other agreements between ABT and
ABT Clients are ABT's exclusive responsibility and will have no effect on ABT's
obligations under this Agreement. All sales and other agreements between
IntelliChoice and IntelliChoice Clients and IntelliChoice's exclusive
responsibility and will have no effect on IntelliChoice's obligations under
this Agreement.

     N.   Arbitration. Any controversy between ABT and IntelliChoice related
directly or indirectly to any this Agreement or any rights or obligations
hereunder (including as to whether a



                                       18


   19
dispute is subject to arbitration) will be settled by binding arbitration under
the commercial rules of the American Arbitration Association then in effect,
except as specifically stated in this Agreement. It does not matter whether the
controversy is based on contract, tort, strict liability or other legal theory.
Despite the foregoing, ABT and IntelliChoice will not arbitrate controversies
involving violation of any of the proprietary rights of either party (including
of the IntelliChoice Rights) or of third parties. Any arbitration will be held
in Santa Clara, California, by one arbitrator with significant knowledge about
the electronic information services industry. Each party reserves the right to
obtain an interim or permanent injunction in court to prevent infringement,
misappropriation or other violation of its proprietary rights of and/or the use
of rights in violation of this Agreement. The Federal Arbitration Act, 9 U.S.C.
Sections 1-15, not state law, will govern the arbitrability of all claims and
all aspects of any arbitration. The arbitrator will not have authority to award
any punitive, exemplary or other non-compensatory damages or any penalties
relating to any dispute arbitrated or litigated. At the request of a party, the
arbitrator will establish a discovery schedule that will: (i) allow each party
to notice the depositions of up to three persons (and the length of any such
deposition will not exceed two days), (ii) allow each party to serve up to 10
requests for production of up to forty documents or things, and (iii) require
each party to notify the other party of the names and address of each person
knowing any facts relating to the claims being arbitrated and describing
briefly for each person the relevant facts known by that person. Each party
will be allowed at least 20 days after receiving those names and addresses to
notice the depositions stated in (i) above. The scope of the depositions,
requests for production and the extent of the parties' obligations to respond
will be governed by the Federal Rules of Civil Procedure. Except as provided
above, there will be no discovery in any arbitration that results from this
Agreement.




                                       19

   20
     IN WITNESS WHEREOF, the parties by their duly authorized representatives
have entered into this Agreement as of the Effective Date.

Auto-By-Tel Marketing Corporation       IntelliChoice, Inc.


By: /s/ MARK W. LORIMER                 By: /s/ PETER S. LEVY
    -----------------------------           ----------------------------
    Mark W. Lorimer,                        Peter S. Levy, President
    Vice President & Secretary



Auto-By-Tel Corporation


By: /s/ MARK W. LORIMER
    -----------------------------
    Mark W. Lorimer,
    Vice President & Secretary








                                       20
   21

                                   EXHIBIT A
                        Affinity Group Data and Services


URL:

     www.intellichoice.com/(to be specified)


CONTENT AND FUNCTIONALITY:

     Current model-year vehicle criteria search engine:
          Search Criteria:
               Drive
               Passenger Doors
               Transmission
               Body Style
               Base Price or Monthly Payment (Max)
               Horsepower (Min)
               EPA City Mileage (Min)
               EPA Highway Mileage (Min)
               Seating Capacity (Min)
               Specified Safety Features
               Specified Optional Features
          Search Results:
               IntelliChoice Value Rating
               Vehicle Name
               Base Price
               Monthly Loan Payment

     New Car Pricing Reports: (Example is attached as Exhibit A-1)
          ABT supplied header image
          Model and Trim-Line Name
          Pricing Data:
               Last Mfg. Price Change
               Mfg. Code
               Base Invoice Price
               Destination Charge
               Consumer Rebate
               Dealer Incentive
          Consumer Information:
               General:
                    MPG (City/Highway)
                    Full Warranty
               Dimensions:
                    Wheelbase
                    Overall Length
                    Curb Weight
                    Cargo capacity
                    Seating Capacity
                    Front Headroom
                    Front Legroom
               Safety:
                    ABS Brakes


   22
               Automatic Seatbelts
               Driver Side Airbag
               Passenger Side Airbag

          Standard Features
          Packages
          Features
          IntelliChoice Attribution

     Listing and photo of current model-year Best Overall Value of the Year
     (BOVY) winners by category (At ABT's option)

     Listing of all current Manufacturer Rebates and Incentives (At ABT's
     option)

     Listing of current National and Regional Manufacturer leases included
     those awarded the IntelliChoice Gold Star Lease Award (At ABT's option)

LINKS:

     As specified in Section 3B.

WINDOW STICKER PLUS:

     IntelliChoice is in the process of developing and testing an application
     (working title: Window Sticker Plus) which allows users to select only
     valid options and features for selected trim lines. The application then
     computes a detailed window sticker for the vehicle. IntelliChoice will add
     this application to the Affinity Group Site within 30 days of implementing
     it at it's own site, www.intellichoice.com

   23


                                   EXHIBIT B
                         Credit Union Data and Services


URL:

     www.intellichoice.com/(to be specified)


CONTENT AND FUNCTIONALITY:

     Current model-year vehicle criteria search engine:
          Search Criteria:
               Drive
               Passenger Doors
               Transmission
               Body Style
               Base Price or Monthly Payment (Max)
               Horsepower (Min)
               EPA City Mileage (Min)
               EPA Highway Mileage (Min)
               Seating Capacity (Min)
               Specified Safety Features
               Specified Optional Features
          Search Results:
               IntelliChoice Value Rating
               Vehicle Name
               Base Price
               Monthly Loan Payment

     New Car Pricing Reports: (Example is attached as Exhibit A-1)
          ABT supplied header image
          Model and Trim-Line Name
          Pricing Data:
               Last Mfg. Price Change
               Mfg. Code
               Base Invoice Price
               Destination Charge
               Consumer Rebate
               Dealer Incentive
          Consumer Information:
               General:
                    MPG (City/Highway)
                    Full Warranty
               Dimensions:
                    Wheelbase
                    Overall Length
                    Curb Weight
                    Cargo capacity
                    Seating Capacity
                    Front Headroom
                    Front Legroom
               Safety:
                    ABS Brakes
                    Automatic Seatbelts
                    Driver Side Airbag
                    Passenger Side Airbag


   24
          Standard Features
          Packages
          Features
          IntelliChoice Attribution

     Listing and photo of current model-year Best Overall Value of the Year
     (BOVY) winners by category (At ABT's option)

     Listing of all current Manufacturer Rebates and Incentives (At ABT's
     option)

LINKS:

     As specified in Section 3B.

WINDOW STICKER PLUS:

     IntelliChoice is in the process of developing and testing an application
     (working title: Window Sticker Plus) which allows users to select only
     valid options and features for selected trim lines. The application then
     computes a detailed window sticker for the vehicle. IntelliChoice will add
     this application to the Credit Union Site within 30 days of implementing
     it at it's own site, www.intellichoice.com

   25
                                   EXHIBIT C
                           New Car and Used Car Data

NEW CAR DATA:
- -------------

FILE#1: NEW VEHICLE FILE
- ------------------------
1 Tag Unique IntelliChoice vehicle ID used as foreign key to other data files. 2 Brand Manufacturer name. 3 Model First word of model name (Model 1). 4 Series Remainder of model name (Model 2 - Model 5). 5 Doors Number of Doors 6 Class Classification of model. 7 Bodystyle Bodystyle 8 Invoice Invoice price 9 Retail Retail price 10 Destination Destination fee 11 Luxury Tax Luxury tax amount 12 Gas Guzzler Gas Guzzler tax amount FILE #2: STANDARD FEATURES - -------------------------- 1 Tag Unique IntelliChoice vehicle ID. 2 Name Feature Name.
26 FILE #3: OPTION PACKAGES - ------------------------
1 Tag Unique IntelliChoice vehicle ID. 2 Name Option Package Name 3 Availability Availability of option package 4 Invoice Invoice Price 5 Retail Retail Price 6 Components List of option package components. FILE #4: OPTION PACKAGE RELATIONS - --------------------------------- 1 Tag Unique IntelliChoice vehicle ID. 2 Name Option Package Name. 3 Relationship with Option package name of relation 4 Relationship Type Type of relation FILE #5: COLOR AVAILABILITY - --------------------------- 1 Tag Unique IntelliChoice vehicle ID. 2 Name Manufacturer name of paint. 3 Exterior Color 1 Exterior color. If two tone, then the upper color. 4 Exterior Color 2 Only used if two tone. Lower color. 5 Interior Color Material color. USED CAR DATA: - ------------- FILE #1: VEHICLE - ----------------------- 1 Year Year. 2 Brand Manufacturer name. 3 Model First word of model name (Model 1). 4 Series Remainder of model name (Model 2 - Model 5).
27 5 Class Classification of model. 6 Look Up Class Foreign key value, used in lookup of File #3. 7 Price Original Base Price. 8 Equipment Schedule Reference Reference Foreign key to File #4.
FILE #2: MPG FUNCTION FILE: 1 Year Year of vehicle to which the used mileage function stored in this record applies. 2 Low Dollar Amount Minimum dollar amount of used vehicle to which this mileage function applies. 3 High Dollar Amount Maximum dollar amount of used vehicle to which this mileage function applies. 4 Constant Constant in two degree polynomial mileage function. 5 Coefficient 1 Coefficient of x in two degree polynomial mileage function. 6 Coefficient 2 Coefficient of x squared in two degree polynomial mileage function.
28 FILE #3: MPG2 FUNCTION FILE: 1 Year Year of vehicle to which the used mileage function stored in this record applies. 2 Class Vehicle classification to which the used mileage function stored in this record applies. 3 Constant Constant in two degree polynomial mileage function. 4 Coefficient 1 Coefficient of x in two degree polynomial mileage function. 5 Coefficient 2 Coefficient of x squared in two degree polynomial mileage function.
FILE #4: FEATURE SCHEDULE: 1 Year Year. 2 Schedule Schedule to which this entry applies. 3 Name Name of feature. 4 Availability Availability of feature. 5 Offset Feature value offset.
   1

                                                                   EXHIBIT 10.17

   
[*] Confidential Treatment has been requested for certain portions of this 
    exhibit. 
    

                        KELLEY BLUE BOOK/AUTO-BY-TEL AGREEMENT

This Agreement supersedes the prior Agreements executed June 27, 1996 and
January 31, 1996 between Kelley Blue Book and Auto-By-Tel.

1.      Kelley Blue Book will provide a link to Auto-By-Tel from its pages
        beyond the "Buy A Car Now" and "Buy A New Car Now" buttons on the used
        car report pages and new car pricing report pages, respectively.
        (www.kbb.com/buyueast.html, www.kbb.com/buyneast.html and
        www.kbb.com/cgi-bin/cgi.exe?kbb+nc+byn)

2.      Auto-By-Tel's link will be placed as the third position of the "auto
        buying services" on these pages.

3.      Kelley Blue Book may, from time to time, change the geographic regions
        of the United States to which this service pertains. Initially, it will
        include all states, except California, Nevada, and Arizona.

   
4.      [*]. Auto-By-Tel will pay Kelley Blue Book a referral fee of [*]
        generated from the Kelley Blue Book site per month.
    

5.      Kelley Blue Book will invoice Auto-By-Tel, with payment due in thirty
        (30) days. If payment is not made in a timely manner, Kelley Blue Book
        may, at its option, terminate this Agreement immediately.

6.      Auto-By-Tel will provide a link to Kelley Blue Book's New and Used Car
        Pricing services. Users coming to Kelley Blue Book from Auto-By-Tel's
        site will see the Kelley Blue Book services in a controlled mode. In the
        controlled mode, all links to the Kelley Blue Book Home Page will be
        replaced with links to a page on the Auto-By-Tel site, and all other
        outside links, i.e. links to other "buying services", links to the
        Carfax service, and banner ads will be removed and the normal controlled
        mode service charge will be waived.

7.      Auto-By-Tel and Kelley Blue Book will not disclose the terms of this
        Agreement to any outside entity at any time for any reason.

8.      This Agreement will extend for a period of thirty (30) days from its
        effective date. It shall continue automatically until either party
        discontinues this Agreement by providing the other party with thirty
        (30) days prior written notice of such termination.

/s/ PETE ELLIS             11-19-97         /s/ STEVE HENSON         11/17/97
- ---------------------------------------     ------------------------------------
Pete Ellis                   Date           Steve Henson               Date
AUTO-BY-TEL                                 KELLEY BLUE BOOK



   2
   
[*] Confidential Treatment Requested
    

                                   AMENDMENT
                     Kelley Blue Book/Auto-By-Tel Agreement

This is an Amendment to the Agreement executed November 19, 1997 by and 
between Kelley Blue Book and Auto-By-Tel.

Paragraph 6 shall be Amended, effective 7/1/98, to read:

6. Auto-By-Tel will provide a link to Kelley Blue Book's New and Used Car
   Pricing services. Users coming to Kelley Blue Book from Auto-By-Tel's site
   will see the Kelley Blue Book services in a controlled mode. In the
   controlled mode, all links to the Kelley Blue Book Home Page will be replaced
   with links to a page on the Auto-By-Tel site, and all other outside links
   (banner ads, links to other buying services, vehicle history, finance sites,
   etc.) will be removed. Kelley Blue Book and Auto-By-Tel will work together on
   the "look and feel" of the controlled mode pages. Kelley Blue Book will track
   the number of reports (New Car, Trade-In and Retail Used Car) downloaded each
   month by users coming from the Auto-By-Tel site. At the end of each month,
   the number of reports will be multiplied by the price per report of 2 cents
   and used as the invoice amount for that month. Minimum payment, regardless of
   the number of reports downloaded, will be [*] per month. Kelley Blue Book
   will invoice Auto-By-Tel, with payment due by the 30th day of the following
   month.

Paragraph 9 shall be added:

9. Once an Auto-By-Tel user has downloaded a used car report, Kelley Blue Book
   will, at Auto-By-Tel's option, pass back much of the vehicle information,
   including zip code, vehicle make/model, year, equipment, suggested retail
   price, etc. via the URL string to Auto-By-Tel.



/s/ MARK LORIMER         6/30/98       /s/ STEVE HENSON             6/26/98
- -----------------------------------    ----------------------------------------
Mark W. Lorimer          Date          Steve Henson                 Date
AUTO-BY-TEL                            KELLEY BLUE BOOK

   3
                             ADDENDUM TO AGREEMENT
                         Kelley Blue Book / Auto-By-Tel


This is an Addendum to the Agreement executed November 19, 1997 by and between
Kelley Blue Book and Auto-By-Tel.

Effective February 13, 1998, Auto-By-Tel gives authorization to Kelley Blue Book
to use the Auto-By-Tel registered trademark within the 'Web Export' function of
Kelley Blue Book's KARPOWER(R) Used Car valuation software.




/s/ MARK W. LORIMER          2/9/98              /s/ STEPHEN HENSON       2/9/98
- -----------------------------------              -------------------------------
Mark W. Lorimer C.O.O.        Date               Stephen Henson            Date
Auto-By-Tel                                      Kelley Blue Book
   1

                                                                   Exhibit 10.18

   
[*] Confidential Treatment has been requested for certain portions of this 
    exhibit. 
    

CLASSIFIEDS2000 LISTINGS DISTRIBUTION, SPONSORSHIP, DISPLAY ADVERTISING AND
                         NETWORK AFFILIATION AGREEMENT

This LISTINGS DISTRIBUTION, SPONSORSHIP, DISPLAY ADVERTISING AND NETWORK
AFFILIATION AGREEMENT (the "Agreement") is between CLASSIFIEDS2000, INC., a
California corporation having its place of business at 617 Palomar Avenue,
Sunnyvale, CA 94086 ("Classifieds2000"), and AUTO-BY-TEL, CORPORATION, a
Delaware Corporation, having its place of business at 18872 MacArthur Blvd.,
2nd Floor, Irvine, CA 92612 ("Customer"). This Agreement is effective as of May
29, 1998 (the "Effective Date").

WHEREAS, Classifieds2000 is the creator and administrator of an Internet
classifieds service (the "Classifieds2000 Service");

WHEREAS, Customer is in the business of distributing Vehicle Listings
("Classified Advertisements" or "Listings") and offering other services on its
own Web site and elsewhere on the Internet on behalf of its clients;

WHEREAS, Customer desires to: (a) license Classifieds2000 to distribute
Classified Advertisements through the Classifieds2000 Service; (b) be one of
four (4) sponsors of the Classifieds2000 Vehicles Channel; (c) display banner
and in-line text advertorials through the Classifieds2000 Vehicles category;
and (d) be a Network Affiliate of the Classifieds2000 Network, as the
Classifieds2000 Network presently exists or is augmented or supplemented from
time to time during the term of this Agreement.

WHEREAS, Customer and Classifieds2000 desire that this new Agreement replace
any and all oral or written agreements or understandings between the parties as
to the subject matter of this Agreement.

NOW, THEREFORE, the parties hereby agree as follows:

1. SERVICES. Classifieds2000 will provide to Customer the services described in
this section. For the purposes of this section, a Listing means a single used
vehicle listing that is delivered to Classifieds2000 according to the
Classifieds2000 Standard Vehicle Upload Specification. A summary of such
services is shown in Attachment A.

        1.1.    DISTRIBUTION OF LISTINGS. Classifieds2000 will distribute all
Listings provided by Customer within the Vehicles section of the
Classifieds2000 Service. Customer may include listings from DealerSites.com in
the Listings feed that it sends to Classifieds2000. Classifieds2000 will
provide Customer with the ability to remotely and automatically upload and
update the Listings it distributes in the Classifieds2000 Service on a regular
basis. The upload and update capability currently allows changes on a twenty
four-hour basis.

        1.1.1.  DETAIL PAGE LAYOUT AND BRANDING. For each Listing distributed
by Customer, Classifieds2000 will display a detail page in a layout exactly as
Customer's Listings are displayed in the current Classifieds2000 Service. Each
Listing will display the Customer logo and will contain links to additional
pages describing Customer's services. An example of this layout is shown in
Attachment B.

        1.1.2.  CONTACT REQUEST LEADS. Classifieds2000 will provide Customer
with contact request leads via a specialized Customer enhanced email form that
captures specific information and directly processes such information into
Customer's contact request service.

        1.2.    NETWORK-WIDE EXPOSURE. Classifieds2000 will integrate and
display Customer's branding throughout the Classifieds2000 Service in the
manner described below in order to provide users with easy access from various
points within the Vehicles Channel of Classifieds2000's premier classifieds to
the Customer Site.

   
        1.2.1.  CATEGORY-ENTRY SPONSOR BUTTON. Customer will be the exclusive
Auto Buying Service Sponsor. As such, Customer shall receive a fixed presence
logo link and FasTrak box on the Entry Page of the Vehicles Channel. The logo
shall link to a page of Customer's choice. Minimum impressions from this box
shall be [*] per month.
    

   
        1.2.2.  PRODUCTS AND SERVICES PAGE. Customer will receive a fixed
presence logo, text link and two lines of text in the New Car Price Quotes
Section of the Products and Services Page. The text link shall link to
Customer's FasTrak new car buying form. Minimum impressions from this page shall
be [*] per month. Logo specifications shall be: 88x31 pixels.
    

                                       1.
   2
   
[*] Confidential Treatment Requested
    

   
          1.2.3. INLINE TEXT ADVERTORIALS. Customer will receive four (4)
separate Text Advertorial links that will rotate randomly throughout the Search
Results Grid of the Vehicles Channel of the Classifieds2000 Service. Minimum
impressions from the Inline Text Advertorials shall be [*] per month. Inline 
text specifications shall be no greater than sixty (60) characters long; no 
mention of any company names or brands.

          1.2.4. PAGE BOTTOM TEXT ADVERTISEMENTS. Customer will receive a Page
Bottom Text Advertisement that will rotate on the Vehicle Search Results Pages
and the Vehicle Details Pages of the Private Party Listings. These
advertisements shall link to Customer's FasTrak new car buying form. Minimum
impressions from the Page Bottom Text Advertisements shall be [*].

          1.2.5. BANNER ADVERTISEMENTS. Customer will receive a minimum of 
[*] banner impressions per month. Banner Specifications shall be 468 x 60 
pixels; 10K maximum file size.
    

          1.2.6. SEASONAL PROMOTIONS. Customer will be included in all
relevant Classifieds2000 Service seasonal promotions for advertisers/sponsors
that occur during the term of this Agreement. The impressions for this type of
advertisement will vary.

     1.3. CLASSIFIEDS2000 NETWORK AFFILIATION. Classifieds2000 will develop and
offer the following network affiliation service to Member:

          1.3.1. CONTENT AND TECHNOLOGY. Classifieds2000 will provide Customer
with a private label classified advertising service including the Search Ad,
Place Ad, Change Ad, Cool Notify and Hot List features ("Customer
Classifieds"). The Customer Classifieds shall include the Vehicles category and
any other classified categories selected by Member. The look and feel of the
Customer Classifieds Service shall be as shown on:
http://classifieds2000.com/cgi-cls/Display.exe?Customer-demo+class.

          1.3.2. LISTINGS RESTRICTIONS. In the Vehicles category, the Customer
Classifieds shall contain only private party listings provided by
Classifieds2000.

          1.3.3. ALL SERVICE UPGRADES AND NEW CATEGORIES. All new standard
feature enhancements and categories will be added to the Customer Classifieds
as they are released.

          1.3.4. PROMOTION OF CUSTOMER CLASSIFIEDS ON WWW.AUTOBYTEL.COM/
("CUSTOMER SITE"). Customer will provide a prominent home page link and
tool/menu bar link to the Customer Classifieds from the Customer Site.

          1.3.5. ADVERTISING SALES. No third party advertising or banners shall
be displayed in the Customer Classifieds.

          1.3.6. FREE SERVICE. Private parties will be able to list and view
merchandise and services for free on Customer Classifieds.

          1.3.7. EXCLUSIVITY. For the Term of this Agreement, Customer shall
not enter into any on line co-branding or private label arrangements wherein
any party (other than Classifieds2000) provides a private party classifieds
service ("For Sale by Owner") to Customer.

          1.3.8. CLASSIFIEDS2000 MARKS. A credit for the Classifieds2000
Service and a "Powered By Classifieds2000 - The Internet Classifieds" logo will
be displayed on each page within the Customer Classifieds.

          1.3.9. OPTION TO REMOVE OF CUSTOMER CLASSIFIEDS. Customer shall have
the option of removing Customer Classifieds if it determines that it has a
negative impact on Customer's Cyberstore service.

     1.4. REPORTING. Classifieds2000 shall provide periodic reports by email to
Customer outlining the number of banner impressions and total click-throughs
delivered, number of Customer listings in the Classifieds2000 database, and
detail pages viewed. Classifieds2000 shall commit to quarterly performance
reviews to assess the quality of purchase requests being sent to Customer.
Classifieds2000 shall commit to working closely with Customer to improve the
quality of purchase requests throughout the term of this Agreement.

     1.5. ADDITIONAL PER LISTING SERVICES. The fee for additional per listing
services such as secondary detail pages will be on a per listing or setup fee
basis



                                       2.
   3
   
[*] Confidential Treatment Requested
    

2.   FEES. The fees for the services contemplated in this Agreement shall be as
     follows:

   
     2.1  A flat fee of [*] per month for the Listings Distribution Services
          described in Section 1.1 together with the Network Affiliation
          Services described in Section 1.3 herein; plus

     2.2  A flat fee of [*] per month for the Network Wide Exposure Services
          described in Section 1.2 herein; plus
    

     2.3  A variable "Bounty" as follows:

   
          i.   [*] per Unique New Car Purchase Request forwarded to Customer for
               the first [*] Unique New Car Purchase Requests;

          ii.  [*] per Unique New Car Purchase Request beginning with [*] up to
               and including [*] Unique New Car Purchase Requests; and

          iii. [*] per Unique New Car Purchase Requests after the first [*] new 
               car purchase requests.

     2.4  [*]
    

     2.5  The total number of Unique New Car Purchase Request shall be
          calculated in accordance with Customer's standard de-duplication
          formula as set forth in item (i) on the attached Schedule C,
          incorporated herein by this reference.

     2.6  All fees payable to Classifieds2000 shall be invoiced monthly at the
          beginning of the month. Fees due under this Agreement shall be paid
          within thirty (30) days of receipt of a statement of such payment
          obligations. In the event there is an unpaid thirty (30) days after
          payment is due, Customer shall also pay interest at the rate of the
          lesser of one and one-half (1.5%) per month or the then-highest
          interest rate allowed to be imposed by applicable law, plus
          Classifieds2000's reasonable costs of collection.

3.   TERM. The term of this Agreement shall be as follows:

   
     3.1  This Agreement shall have a stipulated start date of June 1, 1998,
          and shall remain in effect for [*]

     3.2  [*]

     3.3  [*]

     3.4  After this Agreement has been in effect for [*] [*], either party 
          may terminate or renegotiate the terms upon thirty (30) days written 
          notice.
    

4.   ADDITIONAL TERMS AND CONDITIONS.

     4.1. CLASSIFIED ADVERTISEMENTS. Customer hereby authorizes Classifieds2000
          to use, reproduce, publicly distribute and publicly display
          Classified Advertisements on the Classifieds2000 Service. Customer
          will be solely responsible for creating, managing, editing,
          reviewing, deleting and otherwise controlling the Listings. Customer
          will deliver to Classifieds2000 Customers' Classifieds Advertisements
          in the format specified by the document "Classifieds2000 Vehicle
          Listing Import Specification." Classifieds2000 and its affiliates may
          decline to include any Classified Advertisements in the
          Classifieds2000 Service for any reason or at any time.



                                       3.

   4
   
[*] Confidential Treatment Requested
    

        4.2.    DISPLAY ADVERTISING. Electronic images and URLs must be 
submitted at least 3 days before the desired start date. GIFs and go-to URLs 
should be e-mailed to ron@classifieds2000.com. Classifieds2000 and its
related parties reserve the right, at any time, and for any reason in its sole
discretion to decline any advertising and to cease further publication of any
advertising, and shall not be liable in any way, provided that any amounts
received for advertising that is not published will be refunded.

        4.3.    TERMINATION. This Agreement may be terminated by the parties as
follows:

                4.3.1   This Agreement will terminate automatically in the event
                        that Classifieds2000 decides, in its sole discretion, to
                        stop operating its Web-accessible service.

   
                4.3.2   Either party may terminate this Agreement after [*]
                        provided that sixty (60) days prior written notice is 
                        delivered.
    

                4.3.3   Either party may terminate this agreement upon the
                        material breach of the other party, if such breach
                        remains uncured for thirty (30) days following written
                        notice to the breaching party; except that
                        Classifieds2000 may, by providing written notice,
                        terminate this Agreement immediately if the monthly
                        fees are not paid when due, as set forth herein.

                4.3.4   Either Party may terminate this Agreement upon thirty
                        (30) days written notice to Classifieds2000 upon the
                        determination that the Unique New Car Purchase
                        Requests forwarded to Customer fall below Customer's
                        acceptable quality standard should such unacceptable
                        quality standard remains uncured for sixty (60) days
                        following written notice to the other party. For the
                        purposes of this Agreement, Customer's quality standard
                        shall be determined in accordance with the formula set
                        forth in item (ii) on the attached Schedule C,
                        incorporated herein by this reference.

                4.3.5   Except for Classified Advertisements that
                        Classifieds2000 requires for maintenance of its
                        systems, upon the expiration or termination of this
                        Agreement, Classifieds2000 will promptly remove the
                        Classified Advertisements from its systems. Sections 2,
                        4.3, 4.5, 4.6, 4.7, 4.8, 4.9, 4.10, 4.11 and 4.12
                        shall survive any termination or expiration of this
                        Agreement.

        4.4.    DISCLAIMER OF WARRANTIES. Classifieds2000 provides all Services
performed hereunder "AS IS" and without any warranty of any kind.
Classifieds2000 does not guarantee continuous or uninterrupted service to and
use of the Services. In the event of interruption of Services, Classifieds2000's
sole obligation shall be to restore service as soon as practicably and
reasonably possible.

        4.5.    TRADEMARKS. Neither party may use the other party's trademarks,
service marks, trade names, logos, or other commercial or product designations
(collectively, "Marks") for any purpose whatsoever without the prior written
consent of the other party. Notwithstanding the foregoing, each party grants to
the other a revocable, non-exclusive, nontransferable, royalty-free, worldwide
license to use each other's respective Marks (a) in conjunction with the
Services for the purposes of marketing, promotion, and Classified
Advertisements directories or indexes, and (b) in electronic or printed
advertising, publicity, press releases, newsletters and mailings about the
Services or Classifieds2000.

        4.6.    CLASSIFIEDS2000 SERVICE PROMOTION. Customer may not use the
names of specific Classifieds2000 affiliates to promote, advertise, or publicly
state, either verbally or in written form, that Customer's listings are being
distributed on such affiliates' Web sites without explicitly stating that this
distribution is enabled via an arrangement with Classifieds2000.

        4.7.    INDEMNITY. Customer agrees to defend, indemnify and hold
harmless Classifieds2000 and its directors, officers, agents and employees for
any and all losses, costs, liabilities or expenses (including without
limitation reasonable attorneys' and expert witnesses' fees) incurred or
arising from any Classified Advertisements.

        4.8.    LIMITATIONS ON LIABILITY. IN NO EVENT SHALL CLASSIFIEDS2000 BE
LIABLE FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES
(INCLUDING BUT NOT LIMITED TO SUCH DAMAGES ARISING FROM BREACH OF CONTRACT OR
WARRANTY OR FROM NEGLIGENCE OR STRICT LIABILITY), OR FOR INTERRUPTED
COMMUNICATIONS, LOST DATA OR LOST PROFITS, ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT, EVEN IF CLASSIFIEDS2000 HAS BEEN ADVISED OF (OR KNOWS OR SHOULD
KNOW OF) THE POSSIBILITY OF SUCH DAMAGES. UNDER NO CIRCUMSTANCES SHALL
CLASSIFIEDS2000 BE LIABLE TO CUSTOMER OR ANY THIRD PARTIES FOR AN AMOUNT
GREATER THAN THE AMOUNTS RECEIVED FROM CUSTOMER HEREUNDER.

        4.9.    GOVERNING LAW. This Agreement will be governed and construed
in accordance with the laws of the State of California without giving effect to
principles of conflict of laws. Customer agrees to submit to jurisdiction in
California and further agrees that any cause of action arising under this
Agreement may be brought in a court in Santa Clara County, California.


                                       4.
   5
     4.10.  SUCCESSORS AND ASSIGNS. Neither party may assign this Agreement
without prior written consent of the other, except that no such consent shall
be required for assignments in connection with the sale of all or substantially
all of the assets or securities of a party or by merger (whether by operation
of law or otherwise). The parties' rights and obligations will bind and inure
to the benefit of their respective successors, heirs, executors and
administrators and permitted assigns.

     4.11. ENTIRE AGREEMENT. This Agreement sets forth the entire understanding
and agreement of the parties and supersedes any and all oral or written
agreements or understandings between the parties as to the subject matter of
this Agreement. This Agreement may be changed only by a written agreement
signed by both parties.

     4.12. CONFIDENTIALITY. This Agreement and its terms and conditions are
confidential information of both parties. Neither party may disclose the terms
and conditions hereof without the advance written consent of the other party.

Signed:

AUTO-BY-TEL, CORPORATION                CLASSIFIEDS2000, INC.

                                        /s/ Mark S. Lockareff  
- ----------------------------            --------------------------------------
Customer Signature                      Signature

                                        /s/ Mark Lockareff
- -------------------------------         --------------------------------------
Anne M. Benvenuto                       Mark Lockareff
Senior Vice President, Marketing        Vice President, Classified Advertising

                                         6/4/98
- -------------------------------         --------------------------------------
Date                                    Date


  

          
                                       5.
   6
     4.10.  SUCCESSORS AND ASSIGNS. Neither party may assign this Agreement
without prior written consent of the other, except that no such consent shall
be required for assignment in connection with the sale of all or substantially
all of the assets or securities of a party or by merger (whether by operation
of law or otherwise). The parties' rights and obligations will bind and inure
to the benefit of their respective successors, heirs, executors and
administrators and permitted assigns.

     4.11  ENTIRE AGREEMENT. This Agreement set forth the entire understanding
and agreement of the parties and supersedes any and all oral or written
agreements or understandings between the parties as to the subject matter of
this Agreement. This Agreement may be changed only by a written agreement
signed by both parties.

     4.12.  CONFIDENTIALITY. This Agreement and its terms and conditions are
confidential information of both parties. Neither party may disclose the terms
and conditions hereof without the advance written consent of the other party.


Signed:


AUTO-BY-TEL, CORPORATION                CLASSIFIEDS2000, INC.



                                        /s/ [SIG]
- -------------------------------         -------------------------------
Customer Signature                      Signature



/s/                                     /s/ MARK LOCKAREFF
- -------------------------------         -------------------------------
Anne M. Benvenuto                       Mark Lockareff
                                        Vice President, Classified
                                        Advertising

                                        6/4/98
- -------------------------------         -------------------------------
Date                                    Date









                                       5.
   7
   
[*] Confidential Treatment Requested
    

                                  ATTACHMENT A


   
USED CAR PROGRAM FLAT FEE INCLUDES: Fixed Monthly [*] [*] ----------- ---------- - - Listings Distribution on Network - - Per Listing Branding & Links - - Unlimited Dealer Participation - - Unlimited Contact Request Leads - - FSBO Listings on ABT Site NEW CAR PROGRAM FLAT FEE INCLUDES: Fixed Monthly [*] [*] - - Exclusive Buying Service Sponsor - - Real Estate Slotting Fee [*] TOTAL MONTHLY FIXED [*] TOTAL ANNUAL FIXED [*] TOTAL VARIABLE (ESTIMATED*) PER MONTH MONTH # PRs S/PR TOTAL Jun-98 [*] [*] [*] * [*] Jul-98 [*] [*] [*] Aug-98 [*] [*] [*] Sep-98 [*] [*] [*] Oct-98 [*] [*] [*] Nov-98 [*] [*] [*] Dec-98 [*] [*] [*] Jan-99 [*] [*] [*] Feb-99 [*] [*] [*] Mar-99 [*] [*] [*] Apr-99 [*] [*] [*] May-99 [*] [*] [*] ESTIMATED TOTAL ANNUAL VARIABLE [*] [*] TOTAL ESTIMATED MONTHLY COST Jun-98 [*] Jul-98 [*] Aug-98 [*] Sep-98 [*] Oct-98 [*] Nov-98 [*] Dec-98 [*] Jan-99 [*] Feb-99 [*] Mar-99 [*] Apr-99 [*] May-99 [*] ---------- TOTAL ESTIMATED ANNUAL COST [*] ----------
8 [*] Confidential Treatment Requested SCHEDULE C TO THAT CERTAIN CLASSIFIED2000 LISTING DISTRIBUTION, SPONSORSHIP, DISPLAY ADVERTISING AND NETWORK AFFILIATION AGREEMENT ("AGREEMENT") BETWEEN CLASSIFIEDS2000, INC AND AUTO-BY-TEL CORPORATION THE FOLLOWING LANGUAGE SHALL BE INCORPORATED INTO SECTION 2.4 OF THE AGREEMENT AS THOUGH FULLY SET FORTH THEREIN: i. Unique Purchase Request. For the purposes of this Agreement, a "Unique Purchase Request" shall be a new car purchase request electronic form with all data fields deemed mandatory by Customer completed by the user, which has been received by Customer from Classifieds2000, and for which Customer has not, within the previous ninety (90) day period, received a duplicate new car purchase request from Classifieds2000, or any other source from which Customer regularly receives purchase requests, for the same or similar vehicle, as determined by the year, make and model; from the same user, as identified by the same name, zip code and/or the same e-mail address. THE FOLLOWING LANGUAGE SHALL BE INCORPORATED INTO SECTION 4.3.4 OF THE AGREEMENT AS THOUGH FULLY SET FORTH THEREIN: ii. Customer may terminate this Agreement at any time during the term of hereof, if, based upon a random sampling over a thirty (30) day period of not less than [*] referred by Classifieds2000 for either new or used vehicles, it is determined that the number of Classifieds2000 referred purchase requests which are converted to actual sales of vehicles is less than fifteen percent (15%) of the total number of conversion experienced by Customer with non-Classifieds2000 purchase requests during the same time frame. 9 ATTACHMENT B [CLASSIFIEDS2000 LETTERHEAD] "The most visited classifieds on the web!" FEATURES 7.25% OR 7.75% HOME CLICK HERE! SEARCH ADS CLICK HERE FOR MORE INFORMATION PLACE ADS DELETE ADS SEARCH ADS CHANGE ADS CATEGORIES / VEHICLES / CARS COOL NOTIFY HOT LIST Back to List Next Cool Notify Add to Hot List HELP AUTO-BY-TEL - RISK FREE VEHICLE! 72 hour money back refund! [PHOTOGRAPH] AUTO-BY-TEL MAKES YOUR USED CAR PURCHASE RISK-FREE - - Full refund within 72-hours - - National 3Mo./3K Mi. Limited Warranty - - Travel Repair Program - - Certified 135 Point Inspection CAR 1996, Pontiac Grand Am SE, 31K miles, $11,300 OPTIONS 31227 exterior Air Conditioning Cruise Control Two Door Automatic Transmission DESCRIPTION bucket seats, am/fm radio, tilt steering wheel, power door locks, stock number 67801 VEHICLE ID 1G2NE12M7TM565098 SELLER INFO More about Auto-By-Tel Purchase Guidelines Birmingham, Alabama 35209 Back to List Next Cool Notify Add to Hot List
   1

                                                                   EXHIBIT 10.19

   
[*] Confidential Treatment has been requested for certain portions of this 
    exhibit. 
    

                            J.D. POWER AND ASSOCIATES

                                LICENSE AGREEMENT

     This License Agreement (the "Agreement") is dated as of June 4, 1998 by and
between J.D. POWER AND ASSOCIATES, a California corporation, and Auto-By-Tel
Corporation, a Delaware corporation, which together with its wholly-owned
subsidiary, Auto-By-Tel Marketing Corporation, a Delaware corporation, is
referred to herein as "Licensee." 

1.1 GRANT OF LICENSE.

     (a) J. D. Power and Associates hereby grants to Licensee a nonexclusive
license to use the trade name and services mark, "J. D. Power and Associates,"
(collectively called the "Service Marks") in connection with the promotion and
advertising of the claim(s) arising out of the J. D. Power and Associates 1998
Dealer Satisfaction With Online Buying Services Study(SM) as set forth on the
attached Exhibit 1 (the "Claims") as follows:

            (i)   On the proprietary Extranet for clients located in the United
                  States operated by Licensee presently known as the Dealer Real
                  Time System ("DRT").

            (ii)  In print or other traditional advertising media primarily
                  circulated in the United States and Canada; and

            (iii) In Licensee's media /press releases ("Press Releases")
                  circulated in United States and Canada.

     (b) J. D. Power and Associates will sell to Licensee merchandise described
in Exhibit 4 bearing the Service Marks and Claims (the "Merchandise") provided
that Licensee and any person or entity acting on behalf of Licensee first
obtains written approval for each use of the Service Marks and Merchandise from
J. D. Power and Associates pursuant to Section 1.4 hereof. Licensee shall

   2
   
[*] Confidential Treatment Requested
    

not use any of the Service Marks or Merchandise except as expressly permitted by
the terms of this Agreement.

   
     (c) Use of the Claims as contemplated herein shall begin upon date of
execution of this Agreement and shall continue until [*] inclusive.
    

1.2  USE BY LICENSEE'S DISTRIBUTOR'S, DEALERS, DEALER ASSOCIATIONS AND THEIR
ADVERTISING AGENCIES.

     (a) J.D. Power and Associates will permit Licensee's distributors,
dealers, dealer associations and their advertising agencies to use the Service
Marks in connection with the promotion and advertising of the Claims for the
term of this Agreement, provided that such distributors, dealers, associations
and agencies first execute and deliver to J.D. Power and Associates a written
agreement for the express benefit of J.D. Power and Associates, in the form
attached hereto as Exhibit 2, to be bound by the terms of this Agreement.

     (b) It is the obligation of Licensee to advise all parties acting on behalf
of Licensee, and all of Licensee's distributors, dealers, dealer associations
and their advertising agencies, of the rights and obligations stated herein.
Once such advice has been given by Licensee, Licensee has no further obligation
to monitor the compliance of its distributors, dealers, dealer associations and
their advertising agencies with the terms of this License Agreement.

1.3  J.D. POWER AND ASSOCIATES' OWNERSHIP.

Licensee acknowledges that J.D. Power and Associates is the exclusive owner of
the Service Marks, and agrees to do nothing inconsistent with such ownership.
Licensee agrees that the license or use of the Service Marks shall not create
any

   3

interest or right, express or implied, in Licensee except as set forth in this
Agreement. Licensee shall not grant, assign, convey, sublicense or transfer any
of its rights or obligations hereunder without the written consent of J.D. Power
and Associates except as expressly permitted by this Agreement.

1.4  USE OF SERVICE MARKS AND QUALITY CONTROL.

     (a) Licensee shall faithfully reproduce the Service Marks and Claims as the
same may be modified from time to time by J.D. Power and Associates in its sole
discretion. J.D. Power and Associates agrees to give Licensee not less than
thirty (30) days' written notice of any such modifications.

     (b) No Service Mark may be used unless the entire text of each proposed use
is first submitted to J.D. Power and Associates for review, along with samples
which are accurate and true representations of the final form of the proposed
use of the Service Mark, and is first "Approved As Is" on the written form that
J.D. Power and Associates then uses for such purposes. Once a specific creative
execution has been so approved, it can be re-used without additional approval.
If any changes of any kind whatsoever are made to the content of a creative
execution that has been previously approved, it must again be submitted to J.D.
Power and Associates for review and approval before it is used. Licensee shall
comply with the then current Guidelines for J.D. Power and Associates
Advertising Usage Approval, the current version of which is attached as 
Exhibit 3.

     (c) No Merchandise may be used unless a written proposal describing each
proposed use is first submitted to J.D. Power and Associates for review, and
unless such proposed use is first "Approved As Is" on the written form that J.
D. Power and Associates uses for such purposes. If any changes of any kind
whatsoever are made to the use of the Merchandise that has been previously

   4
   
[*] Confidential Treatment Requested
    

approved, the new proposed use must again be submitted to J.D. Power and
Associates for review and approval.

2.1  LICENSE FEE.

   
     (a) Licensee shall pay a one-time license fee of [*] and submit a
signed License Agreement prior to any advertising or promotional use of any
claim. Liquidated damages in the amount [*] or, in the case of Merchandise,
twice the purchase price of the Merchandise involved, will be paid for any
creative execution of advertising or public relations/promotional use of a
Service Mark for which prior written approval from J.D. Power and Associates was
not obtained.
    

     (b) J.D. Power and Associates has the right, upon reasonable notice, at its
sole cost, to have an inquiry conducted by an independent party of Licensee's
media schedules, tear sheets and other documents relating to use of the Service
Marks.

3.1  INFRINGEMENT OF THE SERVICE MARKS.

If any third party's unauthorized or incorrect use of the Service Marks comes to
the attention of Licensee, Licensee shall give J.D. Power and Associates prompt
notice of all details. Licensee shall cooperate and assist J.D. Power and
Associates in its investigation and prosecution of any such unauthorized or
incorrect use but shall have no right to commence any action, or proceeding
concerning infringement of the Service Marks.

   5

3.2  INDEMNITY.

J.D. Power and Associates does not endorse any of Licensee's Claims, and
Licensee shall indemnify J.D. Power and Associates with respect to all losses or
damages, including reasonable attorneys' fees that relate in any way to
Licensee's use of the Service Marks; provided, however, that Licensee shall have
no liability to J.D. Power and Associates for the acts or omissions of J.D.
Power and Associates or its employees.

4.1  TERM.

This Agreement shall be effective as of the date of this Agreement and shall
remain in effect as provided in Section 1.1.

4.2  TERMINATION.

J.D. Power and Associates may terminate this Agreement upon written notice if
Licensee commits or threatens to commit any breach of this Agreement unless
Licensee withdraws the threat or cures the breach within five (5) days after the
date of such notice. Licensee may terminate this Agreement at any time upon 30
days prior written notice to J.D. Power and Associates. Licensee shall
discontinue all use of the Service Marks or any confusingly similar or
conflicting names or service marks after the effective date of the termination
or expiration of this Agreement, and will destroy all Merchandise remaining in
Licensee's possession, custody, and or control.

5.1  AMENDMENT.

No waiver, alteration or amendment of this Agreement shall be effective except
pursuant to a writing by an authorized representative of the party to be bound
thereby.

   6

           IN WITNESS WHEREOF, the duly authorized representatives of J.D. Power
and Associates and Licensee have executed this Agreement as of the date first
set forth above.

J.D. POWER AND ASSOCIATES              AUTO-BY-TEL CORPORATION

BY:  [SIG]                             BY: [SIG]
     ------------------------------         ------------------------------------

ITS: CFO                               ITS: SR. V.P. MARKETING
     ------------------------------         ------------------------------------

                                       AUTO-BY-TEL MARKETING CORPORATION

                                       BY:  [SIG]
                                            ------------------------------------

                                       ITS: President
                                            ------------------------------------

   7

5.2  GOVERNING LAW.

This Agreement shall be governed by and interpreted in accordance with the
internal laws of the State of California.

5.3  NO ENDORSEMENT.

It is understood that J.D. Power and Associates approval of creative executions
submitted to it for review does not constitute an endorsement by J.D. Power and
Associates of any of Licensee's Claims.

5.4  WHOLE AGREEMENT.

This Agreement constitutes the complete, final and exclusive statement of the
terms of the agreement between the parties with respect to its subject matter
and supersedes any and all other agreements, written or oral, with respect
thereto.

5.5  HEADINGS.

The headings in the Agreement are for convenience only and are of no legal
effect.


   8

                                    EXHIBIT 1

      J.D. POWER AND ASSOCIATES 1998 DEALER SATISFACTION WITH ONLINE BUYING

                               SERVICES STUDY(SM)

          AUTO-BY-TEL CORPORATION AND AUTO-BY-TEL MARKETING CORPORATION
          -------------------------------------------------------------
            "#1 in Dealer Satisfaction With Internet Buying Services"

          Based on top ranking in Dealer Services, Web Site Technology and Sales
          Effectiveness.

DISCLAIMER: J.D. POWER AND ASSOCIATES 1998 DEALER SATISFACTION WITH ONLINE
BUYING SERVICES STUDY(SM). STUDY CONDUCTED AMONG DEALERSHIP INTERNET SPECIALISTS
WHO COMPLETED 540 INDIVIDUAL EVALUATIONS.

   9

                                    EXHIBIT 2

                              AGREEMENT TO BE BOUND


- --------------------------------------------------------------------------------
    (name of distributor, dealer, dealer association or advertising agency)

hereby agrees, for the express benefit of J.D. Power and Associates, to be bound
by the terms of the License Agreement between J.D. Power and Associates and
Auto-By-Tel Corporation and Auto-By-Tel Marketing Corporation.


- ------------------------------------
By:
      ------------------------------
Its:
      ------------------------------

   10

                                    EXHIBIT 3

                         GUIDELINES FOR LICENSED USE OF

                         J.D. POWER AND ASSOCIATES NAME

OBJECTIVE

J.D. Power and Associates marketing information provides data to ensure that
consumer needs are properly identified and addressed. While the purpose and
intent in providing this information has not been promotional use, we realize
that manufacturers, and their distributors are able to establish product
differentiation by doing so. It will always be the goal of J.D. Power and
Associates to encourage our subscribers to use the information we collect to
meet the needs of a consumer-driven marketplace and not merely create a contest
ranking.

In light of the above, widespread use of J.D. Power and Associates marketing
information findings in advertising has required us to establish a licensing
arrangement with formal policies and procedures for reviewing all materials
which use information derived from J.D. Power and Associates proprietary
information. These policies and procedures are intended to protect:

     1.   Our clients from making misstatements about the information used,
          thereby preventing costly production problems (e.g., network
          disapproval).

     2.   The findings of the studies conducted by J.D. Power and Associates.

     3.   Manufacturer claims approved by J.D. Power and Associates.

     4.   Consumers from misrepresentation.

   11

                         GUIDELINES FOR LICENSED USE OF

                         J.D. POWER AND ASSOCIATES NAME

POLICIES/PROCEDURES

J.D. Power and Associates, via the signed license agreement, permits licensees
to use the specifically awarded claim from J. D. Power and Associates' survey as
part of their print or broadcast advertising promotion, or public relations
provided that:

      a.  the manufacturer or the United States affiliate of the manufacturer is
          a paid subscriber to the study being cited, and has committed via a
          signed Letter of Intent to be a subscriber of the study during the
          period that the advertising is placed, and has signed and executed a
          license agreement with J.D. Power and Associates.

      b.  the advertiser or its agency cites data from the most recently
          published version of the study containing the specific claim.

      c.  the specific data cited is in the format and context used solely in
          the respective study's management report.

      d.  advertising claims promote the advertiser's positive results without
          denigrating other manufacturers.

      e.  only manufacturers ranking above industry average may be identified.
          Any segment that falls below industry average will not be permitted in
          an advertising claim. Manufacturers shall not disclose to advertising
          associations specific comparisons with makes or models that fall in
          the lower half of rankings.

      f.  advertising claims are judged to be consistent with the findings from
          the survey cited.


   12

                         GUIDELINES FOR LICENSED USE OF

                         J.D. POWER AND ASSOCIATES NAME

      g.  a disclaimer is included that identifies the source of the data to the
          appropriate J.D. Power and Associates survey and identifies the number
          of consumers responding to the survey.

      h.  advertising claims have been reviewed and written approval has been
          granted by J.D. Power and Associates. Review complete upon receipt of
          claim approval (form indicated "Approved As Is").

      i.  clear and conspicuous disclosure of all information must be included
          in advertising. Disclaimers must not be relied upon to convey full
          disclosure.

      j.  all creative executions submitted must include a representation of
          visuals that will accompany advertising.

      k.  the advertiser and consumer understand that the use of the J.D. Power
          and Associates trade name and service mark does not in any way imply
          endorsement of advertising claims or imply that J.D. Power and
          Associates has rated, endorsed, or chosen any particular make or
          model.

      1.  in order for J. D. Power and Associates to better monitor usage and
          proper dissemination of information from syndicated studies,
          manufacturers/distributors shall provide J.D. Power and Associates
          with a complete copy of all materials taken from J. D. Power and
          Associates studies and forwarded internally.

   13

                         GUIDELINES FOR LICENSED USE OF

                         J.D. POWER AND ASSOCIATES NAME

AWARD/LOGO REPRODUCTION

The following details the policy for the use of the J.D. Power and Associates
Service Mark reflecting the J.D. Power and Associates award ("Award") or
circular award logo, hereinafter ("Logo").

      1.  The Award must be an actual photographic representation. Photographic
          representation excludes the use of line art, computerized
          presentation, or any other non-photographic presentation.

      2.  The circular J.D. Power and Associates Logo contained in the Award
          must be 1" (one inch) minimum in its final reproduced form. There
          will be no exceptions to this policy.

      3.  The final version of the Award must include the 1" minimum circular
          Logo and all other features of the Award must be proportionally
          correct.

      4.  There is only one situation that allows reproduction of the Logo by
          itself, (outside the context of the full award representation), and
          that is use by the awardees of the "#1 Customer Satisfaction,"
          "Airline," "Tire," "Computer," and "Medium Duty Truck" studies. All
          other advertising featuring the Award must include a photographic
          reproduction of the actual Award following the above guidelines.

Advertising or promotion that does not meet the above criteria shall not be
granted permission for use in public media. If an advertisement is aired or
published that does not conform to the above standards, J. D. Power and
Associates reserves the right to take appropriate legal or administrative
action.

   14

                         GUIDELINES FOR LICENSED USE OF

                         J.D. POWER AND ASSOCIATES NAME

CONTACT

The Advertising Specialist at J.D. Power and Associates will be responsible for
coordinating the review of the claim and issuing the release for its use.

J.D. Power and Associates will attempt to process all requests within three
working days of receipt of the proposed advertising copy and will strive to
accommodate special client timing needs. Maximum turnaround time for responding
to requests will be five working days.

IMPORTANT: In an effort to protect your interests as well as the integrity of
the information produced by J.D. Power and Associates, we would appreciate your
assistance in helping us monitor what may be inappropriate or incorrect usage of
J.D. Power and Associates marketing information. In such cases, please notify
the Advertising Specialist.

POLICY EFFECTIVE DATE: REVISED FEBRUARY 1998

   15

                                    EXHIBIT 4

     IN CONNECTION WITH THE promotion of Claims, Licensee will purchase any and
all merchandise (the "Merchandise" from J.D. Power and Associates that bear the
Service Marks and Claims, provided that Licensee agrees to be bound by the terms
of the License Agreement by signing and delivering to J.D. Power and Associates
a signed License Agreement or, in the case of distributors, dealers, or
advertising agencies, an Agreement to be Bound (Exhibit 2).

     According to the License Agreement, all proposed Merchandise using the
Service Marks or Claims must be reviewed by J.D. Power and Associates, and
submitted along with written descriptions of any proposed use of the
Merchandise. This will be sent either by fax or mail. Merchandise is then
reviewed and will receive an "Approved As Is" status before J.D. Power and
Associates will move forward with production of Merchandise.

     Merchandise available will be on a variety of items and in a range of
costs. J.D. Power and Associates has established this Merchandise program to
ensure that all items bearing the J.D. Power and Associates Service Marks and
Claims retain their official status and are of the highest quality reproduction
and the integrity protected through the entire creative and production process.
   16

   
[*] Confidential Treatment Requested
    

                     [J.D. POWER AND ASSOCIATES LETTERHEAD]

                                                       INVOICE NO.:        16895
                                                       INVOICE DATE:    12/30/98
                                                       PURCHASE ORDER NO.:

CLIENT NO.:  124409

BILL TO:  Mr. Eric Schaefer
          AUTOBYTEL.COM                                SHIP TO:
          18872 MacArthur Blvd.
          Irvine, CA 92612


                                  DESCRIPTION

   
1 License Fee for extension of license for "#1 in Dealer
Satisfaction with Online Buying Services" claim to
[*]                                                                   [*]

               8020:          

                                              NET SALES               [*]
                                              SALES TAX                
                                              TOTAL AMOUNT DUE        [*]

    
PAYMENT DUE UPON RECEIPT

Interest at the rate of 2% per month will be charged on any account over 30 days
past due.
   1
                                                                   EXHIBIT 10.20

   
[*] Confidential Treatment has been requested for certain portions of this 
    exhibit. 
    

                            AT&T WorldNet(SM) Service
                      Site Page Sponsorship and Commission
                                    Agreement

                  AT&T Corp., a New York corporation ("AT&T"), and Auto-By-Tel
Marketing Corporation, 18872 MacArthur Blvd., Second Floor, Irvine, CA 92612, a
Delaware corporation ("Company") agree to enter into this Site Page Sponsorship
and Commission Agreement, including all schedules attached hereto (the
"Agreement"). This Agreement becomes effective when signed by Company and
accepted in writing by AT&T. The effective date (the "EFFECTIVE DATE") of this
Agreement shall be the date indicated below AT&T's signature on the Agreement.
Company and AT&T acknowledge receipt of good and valuable consideration for
making this Agreement and pursuant to the terms and conditions of this Agreement
agree as follows:

                                 Key Definitions

"AT&T Contact"         Sharon Love
                       Advertising Sales Director, 
                       AT&T WorldNet Service, 400 Interpace Pkwy
                       Parsippany, NJ 07054-1113
                       Tel: 201-331-7725, Fax: 201-331-4689

"Company Contact"      Peter R. Ellis
                       CEO/President, Auto-By-Tel
                       18872 MacArthur Blvd.
                       Irvine, CA 92612-1400
                       Tel: 714-225-4500: Fax: 714-225-4541

"Company Site"         means the Company's World Wide Web site on the
                       Internet currently known as "Auto-By-Tel" at URL,
                       http://www.autobytel.com. All references to the Company
                       Site in this Agreement shall include the Tracked Pages as
                       defined below,

"Content"              means information, data and/or other materials created by
                       Company and/or third parties, including all updates
                       thereof.

"Automotive Page"      means the page of the Service, currently known as the
                       Automotive Page, and currently accessible at the home
                       page (i.e., the "explore view") of the Service at the
                       URLs, http://www.att.net and http://www.worldnet.att.net;
                       or the equivalent of such Automotive Page as determined
                       by AT&T, which is the primary site within the Service
                       where automotive information and services are aggregated.

"Tracked Pages"        means the pages of the Company Site to which a User can
                       link through the Service and be tracked in accordance
                       with Section 2.2.

"Market Square"        means the page of the Service, currently known as Market
                       Square, or its equivalent as determined by AT&T.

"Members"/"Visitors"/  "Members" means registered subscribers of the Service;
"Users"                Visitors" means users of AT&T WorldNet Service's public
                       sites on the Internet who are not Members; and "Users"
                       means Members and Visitors, collectively.


                                       1

   2
   
[*] Confidential Treatment Requested
    

"Service"              means AT&T WorldNet Service.

"Teaser Material"      means Content, such as financing material, race car
                       results, manufacturer news, recall information, etc., to
                       be provided by Company to AT&T and to be used to attract
                       users of the Service to the Tracked Pages in accordance
                       with Section 2.3

"Term"                 means the period commencing on the date of this Agreement
                       and, unless terminated earlier pursuant to Section 8,
                       ending six (6) calendar months following the month in
                       which the Deployment Date occurs, subject to renewal as
                       provided in Section 1.2 below.

1.0     Scope of Agreement

        1.1 Sponsorship. During the Term, Company shall be the sole sponsor of
and the only Aggregate Automotive Service on the Automotive Page. "Sole sponsor"
means that, unless otherwise agreed by the parties, only the Company Icon,
Teaser Material and other Content provided by Company shall be displayed under
the 435 pixel width bar entitled " Automotive" on the Automotive Page.
"Aggregate Automotive Service" means a service that provides Internet users who
wish to purchase a car with the ability to place purchase requests with respect
to new and/or used cars..] If Company ceases to be the sole sponsor and the only
Aggregate Automotive Service on the Automotive Page, Company shall have the
right to terminate this Agreement in accordance with Section 8.

        1.2 Deployment Date; Renewals. (a) The "DEPLOYMENT DATE" means the date
on which the Tracked Pages will first generally be made available to Users
through the Service, which date shall be mutually agreed upon by the parties.

   
        (b) The Term shall automatically be extended for additional consecutive
[*] (each a "RENEWAL TERM") unless either party provides written notice to the 
other party, at least thirty (30) days prior to expiration of the Term, of its 
desire not to renew. Any reference herein to the "Term" shall include each 
Renewal Term, if any.
    

        1.3 Non-Exclusivity; The relationship specified in this Agreement shall
be nonexclusive for both parties (i.e., AT&T shall be entitled to make the sites
of other companies available anywhere on the Service, and the Company shall be
entitled to make the Company Site and any of its Content available through
online or Internet access services other than the Service).

         1.4 Market Square. During the initial Term of this Agreement, Company
shall receive a text listing on, and link to the Company Site from, the "Market
Square" area of the Service. Any link from Market Square shall be tracked in
accordance with Section 2.2. The size and placement of the link shall be
determined by AT&T in its sole discretion.

2.0     Development of Automotive Page; Linkage & Tracking; Teaser Material;
        Company Icon

        2.1 Development of Automotive Page. (a) Company shall, at its expense,
develop and make available to AT&T Content for display on the Automotive Page in
accordance with Section 1.1. AT&T may reasonably require Company to present the
Content in a specific format and font, in order to fit graphically within the
look and feel of the Automotive Page, and the specific use determined by AT&T.
As between AT&T and Company, Company shall have sole ownership of all Content
provided by Company to AT&T for the Automotive Page.

        (b) AT&T shall, at its expense, design and develop the Automotive Page
Trade Dress. "Automotive Page Trade Dress" means the general image, formats and
appearance (i.e., the "look and feel") of the Automotive Page, including without
limitation, the size and placement of the icons, Teaser Material and other
material, the distinctive headers on the page, the colors, designs


                                        2

   3

and all other aspects of the page, as amended from time to time as provided in
Section 2.1 (d). As between AT&T and Company, AT&T shall have sole ownership of
all the Automotive Page Trade Dress.

        (c) Except as expressly provided in Section 1.1 and in this Section
2.1 (c), AT&T may, at its discretion, place advertising or any other Content
anywhere on the Automotive Page, provided that no service offered and no
advertising displayed on the Automotive Page shall comprise or include an
Aggregate Automotive Service. All revenue received by AT&T from advertising or
such other Content, as between Company and AT&T, shall belong exclusively to
AT&T. No service offered at the Tracked Pages or through a transaction with a
User arising out of the Tracked Pages, and no advertising displayed at the
Tracked Pages, shall comprise or include local or long distance telephone
service or online or Internet access service (other than a service offered by
AT&T).

        (d) AT&T may, at its discretion and at its expense, from time to time
modify or supplement the Automotive Page Trade Dress. AT&T may require Company
to modify or supplement, at Company's expense, the Content made available
through the Automotive Page upon reasonable advance notice.

        (e) Company shall not (i) on the Company Site or otherwise use trade
dress that is substantially similar or confusingly similar to the Automotive
Page Trade Dress or (ii) make the Content available to third parties using trade
dress substantially similar or confusingly similar to the Automotive Page Trade
Dress.

        (f) For Content that is of a "critical business nature," Company may
change or modify any Content made available by Company for use on the Automotive
Page upon one (1) business day prior notice to AT&T, and for Content that is of
a non-critical business nature, upon seven (7) calendar days prior notice,
provided that, in each case, the Content continues to meet the minimum
specifications as agreed to by the parties.

        2.2 Linkage & Tracking. Users shall be linked from the Service with the
subset of the Company Site that constitutes the Tracked Pages, which shall be
identical to the corresponding pages of the Company Site accessed through the
URL www.autobytel.com (except for the addition of the WorldNet Icon and other
changes as may be necessary to comply with the provisions of this Agreement) and
which shall have distinct URLs in order to ensure the separate and accurate
identification of all revenues generated by Users (as specified in Sections 4
below). Company will not invite or solicit any User, in their capacity as a User
of the Service, to connect directly with the Company Site by any means other
than through the Tracked Pages for the purpose of avoiding payment of commission
to AT&T. AT&T acknowledges that Company conducts extensive advertising aimed at
users of Internet at-large designed to attract users to the Company Site.

        2.3 Teaser Material. From time to time, Company shall make available
Teaser Material to AT&T. The Teaser Material shall be located on Company's
server. AT&T may use the Teaser Material on or in connection with the Service,
either independently or in conjunction with the Company Icon, for purposes of
promoting visits by Users to the Tracked Pages. AT&T may reasonably require
Company to present the Teaser Material in a specific format and font, in order
to fit graphically within the look and feel of the Service, and the specific use
determined by AT&T. The Teaser Material may be used in AT&T's sole discretion as
a hyperlink icon appearing on the Service during the Term, which will link Users
with the Company Site. Teaser Material shall not contain advertisements, but may
contain references to Company programs or other promotions.

        2.4. Company Icon. Company shall furnish to AT&T at least fourteen (14)
days prior to the Deployment Date, one full color representation, in "GIF" or
"JPEG" format (on diskette or by email), of Company's hyperlink icon ("Company
Icon") to be used to take Users from the Service to the Tracked Pages. If
Company subsequently modifies the Company Icon, it shall furnish a
representation in the same format which AT&T shall substitute for the prior
version within seven (7) days after receipt. The size and format of the Company
Icon shall be subject to the reasonable approval of AT&T. The Company Icon, may,
in AT&T's sole discretion, be included among the hyperlink icons appearing on
the Service during the Term; when clicked upon by a User, the Company Icon will
link that User with the Tracked Pages.


                                        3

   4

         2.5 Company Permissions. (a) Company hereby grants to AT&T during the
Term a worldwide, nonexclusive, nontransferable, nonassignable right (except as
provided in Section 10(c)) to use (i.e., to copy, transmit, distribute, display
and perform both privately and publicly), the Company Icon, the Company name,
the Company Site name, and other related textual and graphic material to be
provided by Company to AT&T from time to time (the "Other Material") on the
Service. Company also authorizes AT&T to refer in advertising, marketing and
promotion to the fact that the Tracked Pages are accessible through the Service,
provided that any such statement: (A) does not include any trademarks, service
marks, design marks, symbols and/or other indicia of origin of Company other
than Company's name and/or the Company Site name in a non-distinctive typeface
(i.e. not the typeface used in the logo design of either mark); and (B) except
as set forth in Section 1.1, does not state, suggest or imply by the wording or
prominence of such statement, or otherwise, that Company co-brands, sponsors,
authorizes, and/or is the source or origin of the Service. All such use of the
Company Icon, the Company name, the Company Site name, and the Other Material
shall inure to the benefit of Company and shall not create any rights, title or
interest in them for AT&T. No other use of the Company's names, trademarks,
service marks, design marks, symbols and/or other indicia of origin will be made
by AT&T for any purpose, without the prior written approval of Company. AT&T
shall use the Company's name, the Company Site name and the Other Material in
accordance with such reasonable guidelines as Company may provide to AT&T from
time to time. AT&T agrees to cooperate with Company in facilitating Company's
monitoring and control of the use of its name and marks and to supply Company
with samples of AT&T's use of such names and marks upon request.

3.0     WorldNet Icon

        3.1 WorldNet Icon. The graphic depicted on the attached Schedule A (the
"WORLDNET ICON") shall be displayed by Company on each of the Tracked Pages
during the Term, in the position within the page layout shown on Schedule A;
AT&T-shall furnish to Company at least fourteen (14) days prior to the
Deployment Date, a full color representation of the WorldNet Icon in "GIF or
"JPEG" format (on diskette) for Company's use under this Agreement. If AT&T
subsequently modifies the WorldNet Icon, it shall furnish a representation in
the same format which Company shall substitute for the prior version within
seven (7) days after receipt. If AT&T so requests, the WorldNet Icon shall be
implemented as a "return icon", which when clicked upon by a User will link such
User back to the Automotive Page or such other page as mutually agreed by the
parties.

        3.2 AT&T Permissions. AT&T hereby grants to Company during the Term a
worldwide, nonexclusive, nontransferable, nonassignable right to use (i.e., to
copy, transmit, distribute, display and perform both privately and publicly) the
WorldNet Icon solely on each of Designated Page as provided in Section 3.1
above. AT&T also authorizes Company to refer in Company's advertising, marketing
and promotion to the fact that the Company Site is accessible through the
Service, provided that any such statement: (a) does not include any trademarks,
service marks, design marks, symbols and/or other indicia of origin of AT&T
other than the name of AT&T and/or the name of an agreed upon segment of the
Service and/or the name of the Service, in a nondistinctive typeface (i.e. not
the typeface used in the logo design of any such mark); and (b) does not state,
suggest or imply by the wording or prominence of such statement, or otherwise,
that AT&T is co-branding, sponsoring, authorizing, and/or is the source or
origin of the Company Site or any Content or Company Products. All such use of
the WorldNet Icon shall inure to the benefit of AT&T. Nothing in this Agreement
shall create any rights, title or interest for Company in the WorldNet Icon
(except to the extent provided in the first sentence of this Section) or in any
of AT&T's other names, trademarks, service marks, design marks, symbols and/or
other indicia of origin and no use of such will be made by Company for any
purpose without the prior written approval of AT&T. Company shall use the
WorldNet Icon in accordance with such reasonable guidelines as AT&T may provide
to Company from time to time. Company agrees to cooperate with AT&T in
facilitating AT&T's monitoring and control of the use of the WorldNet Icon and
to supply AT&T with samples of use of the WorldNet Icon upon request.


                                        4

   5
   
[*] Confidential Treatment Requested
    

4.0     Commissions.

   
        4.1. Sponsorship Fee. (a) During the initial Term and in each Renewal
Term, if any, Company shall pay AT&T a non-refundable, monthly fee (the
"Sponsorship Fee") in arrears equal to (i) a minimum of [*] dollars plus (ii)
[*] dollars for each additional [*] Automotive Page Views over [*] in any such
month, with overages rolling up to next [*] increment. For example, if there are
[*] Automotive Page Views in a month, the Sponsorship Fee for that month be [*]
and if there are [*] Automotive Page Views in a month, the Sponsorship Fee would
be [*], and so on. The Sponsorship Fee shall not be less than in any month,
regardless of the number of Automotive Page Views, "Automotive Pages Views"
means the number of times the Automotive Page is served, as determined by a
third party auditor selected by AT&T.

        (b) During the initial Term, the Sponsorship Fee shall be capped at [*]
dollars per month. Beginning on the first day of each Renewal Term, if any, the
cap on the Sponsorship Fee shall be automatically adjusted in proportion to any
increase in the number of Members of the Service, as reported by AT&T on the
first day of such Renewal Term. For the purposes of this calculation, the
parties agree that the baseline for the number of Members of the Service for the
initial Term is [*]. Thus, for example, if the Agreement is renewed beginning on
the date that is six-months after the Deployment Date and the number of Members
reported by AT&T on such date is [*], the monthly cap on the Sponsorship Fee for
such six-month Renewal Term shall be [*].

        4.2 Commission Revenue. (a) During the initial Term, Company shall pay
AT&T [*] dollars for each Unique New Vehicle Purchase Request made by a User
after the [*] Unique Vehicle Purchase Request in any one month. "Unique New
Vehicle Purchase Request" means any purchase request for a new vehicle by a User
that is received by Company for which Company has not, within the previous
[*] day period, received a purchase request for a new vehicle from a
person identified by the same name and/or the same e-mail address.

        (b) In addition, Company shall pay AT&T [*] dollars for each Unique Used
Car Inquiry by a User that results in a request for purchase information.
"Unique Used Car Inquiry" means any request for purchase information on a used
car from a User that is received by Company for which Company has not, within
the previous [*] day period, received a request for purchase information
on a used car from a person identified by the same name and/or the same e-mail
address.
    

        4.3 Tax Responsibility. Company is solely responsible and liable for the
collection and remittance of any applicable federal, state and/or local sales
taxes on all retail, advertising, and subscription membership, or similar sales.

        4.4 Auditing. AT&T shall have the right, at its expense, upon five (5)
business days written notice and during Company's normal business hours, to
inspect and audit the site logs of the Company Site and other books and records
of Company as necessary to verify any reports, information or payments due to
AT&T under this Agreement. In the event of any shortfall in payment to AT&T is
found which exceeds five percent (5%) of the total due to AT&T for the reporting
period audited, Company shall reimburse AT&T for all reasonable costs of the
audit, including without limitation, accountant fees and attorney fees, without
limitation of AT&T's other rights and remedies.

        4.5 Payments and Reporting to AT&T. (a) Payments. The first payment of
the Sponsorship Fee shall be due 30 days after the end of the calendar month
containing the Deployment Date, but shall be prorated based on the number of
days for which the Automotive Page was "live" in accordance with the terms of
this Agreement. All subsequent payments of the Sponsorship Fee shall be due
thirty (30) days after the end of the applicable calendar month. All other
payments under this Agreement are due thirty (30) days after the end of the
applicable calendar quarter. For


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all payments under this Agreement, Company will submit payment in full on or
prior to the due date pursuant to the terms set forth in Schedule B.

        (b) Overdue Payments. Any amount payable by Company under Section 4 not
paid when due shall bear interest at a rate of fifteen (15) percent per annum
until paid in full. Such interest will be computed from the date payment was due
until the date actually received by AT&T.

        (c) Company Reports. Within thirty (30) days following the close of each
calendar month for so long as Company or any Company Affiliate receives gross
consideration to which AT&T is entitled a commission (as provided in Sections
4.2), Company shall furnish AT&T with a statement showing the number of Users
who visited the Company Site, the number of Users who completed New Car Purchase
Requests and Used Car Inquiries during such month, and the calculation of the
payment due to AT&T from each such category.

        4.6 Company Affiliate. "COMPANY AFFILIATE" means a corporation or other
entity that controls, is controlled by or is under common control with Company,
where "control" means the direct or indirect ownership or control of more than
fifty percent (50%) of the stock or other equity interest entitled to vote for
the election of directors or equivalent governing body.

5.0     Press Releases. Neither party shall issue any press release or other 
public statement concerning the existence of this Agreement or the terms hereof
without the prior written approval of the other party. Any press release issued
by either party whose primary focus is the relationship established under this
Agreement shall give first and primary mention to the method of accessing the
Company Site set forth in this Agreement.

6.0     User Considerations.

        6.1 Editorial Standards. The Content at the Company Site and any Content
provided to AT&T by Company shall at all times during the Term conform with the
Editorial Standards (annexed as Schedule C below).

        6.2 Minimum Specifications. Company's server on which the Tracked Pages
will be hosted, and from which the Tracked Pages will be accessed by Users,
shall at all times meet the following minimum specifications: no page of the
Tracked Pages shall have a download time of more than sixty (60) seconds at a
modem speed of 28.8 kbps.

        6.3 Customer Service Standards. Company shall adequately staff, equip,
maintain and offer to all Users, at its sole expense, customer services which
shall equal or exceed the standards which follow: Company shall (a) forward any
electronic mail inquiries regarding Users and/or the Service to AT&T within
twenty-four (24) hours following receipt; (b) electronically notify AT&T of any
failure of service regarding the Company Site that affects Users within sixty
(60) minutes of Company's becoming aware of its occurrence and give AT&T at
least twenty-four (24) hours prior notice of any scheduled down time; and (c)
provide AT&T with access (which may be by beeper) to Company's technical support
twenty-four (24) hours per day, three hundred sixty-five (365) days per year,
(d) display customer service contact information prominently and clearly within
the Company Site, (e) maintain a maximum response time for service inquiries
submitted by e-mail by Users of no more than twenty-four (24) hours.

        6.4 Security Standards Company shall provide secure connections, Secure
Sockets Layer ("SSL"), to the Tracked Pages for the transfer of User information
required to complete an electronic transaction, if any, in which case, Company
shall provide and maintain the necessary hardware and software to support SSL,
version 2, at a minimum, at its sole expense. Company agrees to store all
User-identifiable information, including credit card information, off-line
behind a secure firewall. Company shall initiate all credit card settlements via
either direct dial connection or dedicated private line connection to the card
transaction processing agent.


                                        6

   7

        6.5 User Privacy. Company agrees that it will not sell, lease, barter,
or give away to third parties any User's name, telephone number, e-mail address,
residential address, office address and/or fax number. Company further agrees
that it will not send unsolicited e-mail messages or other unsolicited
communications to Users; except that Company may send e-mails to Users, so long
as such Users have an option at all times to elect not to receive such e-mail.

7.0 Confidentiality. The parties agree and acknowledge that, as a result of
negotiating, entering into and performing this Agreement, each party has and
will have access to certain of the other party's Confidential Information (as
defined below). Each party also understands and agrees that misuse and/or
disclosure of that information could adversely affect the other party's
business. Accordingly, the parties agree that, during the term of this Agreement
and thereafter, each party shall use and reproduce the other party's
Confidential Information only for purposes of this Agreement and only to the
extent necessary for such purpose and shall restrict disclosure of the other
party's Confidential Information to its employees, consultants or independent
contractors with a need to know and shall not disclose the other party's
Confidential Information to any third party without the prior written approval
of the other party. Notwithstanding the foregoing, it shall not be a breach of
this Agreement for either party to disclose Confidential Information of the
other party if compelled to do so under law, in a judicial or other governmental
investigation or proceeding, provided the other party has been given prior
notice to permit such other party a reasonable opportunity to object to the
judicial or governmental requirement to disclosure. As used in this Agreement,
the term "Confidential Information" refers to: (a) the terms and conditions of
this Agreement; (b) each party's trade secrets, business plans, strategies,
methods and/or practices; (c) any and all information which is governed by any
now-existing or future non-disclosure agreement between the parties; and (d) any
other information relating to either party that is not generally known to the
public, including information about either party's personnel, products,
customers, marketing strategies, services or future business plans.
Notwithstanding the foregoing, the term "Confidential Information" specifically
excludes (i) information that is now in the public domain or subsequently enters
the public domain by publication or otherwise through no action or fault of the
other party; (ii) information that is known to either party without restriction,
prior to receipt from the other party under this Agreement, from its own
independent sources, and which was not acquired, directly or indirectly, from
the other party; (iii) information that either party receives from any third
party having a legal right to transmit such information, and not under any
obligation to keep such information confidential; and (iv) information
independently developed by either party's employees or agents provided that
either party can show that such information was developed without reference to
the Confidential Information received hereunder. The provisions of this Section
shall apply for the duration of the Term of this Agreement and for three (3)
years after the expiration or termination of this Agreement.

8.0 Termination and Severance. (a) This Agreement may be terminated immediately
by either party (i) if the other party shall fail to do business in the normal
course or become subject to a bankruptcy or any similar proceeding, (ii) thirty
(30) days after delivery of written notice from the terminating party to the
effect that the other party has committed a material breach under this
Agreement, provided such breach is not cured within such thirty (30) day period,
(iii) if the Deployment Date does not occur within thirty (30) days of the
Effective Date of this Agreement, provided such termination right is exercised
before deployment occurs, (iv) thirty (30) days after delivery of written notice
that, in the case AT&T is the terminating party, AT&T intends to terminate all
or a substantial part of the Service, and, in the case Company is the
terminating party, Company intends to terminate all or a substantial part of the
Company Site, or (v) if Company ceases to be the sole sponsor and only Aggregate
Automotive Service on the Automotive Page, then Company shall have the right to
terminate this Agreement upon thirty (30) days' written notice to AT&T.

        (b) If Company's Site fails to perform in accordance with this
Agreement, including, without limitation, with respect to "User Considerations"
under Section 6 or "Product Responsibility" under Section 9, AT&T shall have the
right at any time and at its discretion to sever immediately one or all of the
links between the Service and the Tracked Pages. In the event that AT&T severs a
link,


                                        7

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AT&T will give Company prompt notice of such fact and Company shall have five
(5) days to resolve the problem to the reasonable satisfaction of AT&T. If the
link remains severed for more than ten (10) days, then AT&T may, immediately and
without further notice, terminate this Agreement.

        (c) Amounts due and owing AT&T arising prior to any termination shall
continue to be paid to AT&T pursuant to Section 4, but AT&T shall not be
entitled to collect commissions or any Sponsorship Fee accruing after such
termination. The Sponsorship Fee payable upon termination shall be prorated
based on the number of days in the calendar month prior to the termination date.

9.0     Liability.

        9.1 Product and Content Responsibility. Company acknowledges that AT&T
does not advocate or endorse the purchase or the use of products, if any, or
services offered by Company by or through the Company Site or otherwise (the
"COMPANY PRODUCTS"), nor does it guaranty the quality, fitness, or results of
any such Company Products or their compliance with any law or regulation; and
that AT&T is providing the Company Site an exposure on the Service to enable
Company to offer Company Products for sale and has no control over the selection
of goods or services offered for sale, over their quality or content or over the
Content, advertisements or any other material at the Tracked Pages or the
Company Site (except the WorldNet Icon). As between AT&T and Company, Company
shall have sole responsibility and liability for: (a) the quality of all Company
Products and compliance thereof with all Government Standards (defined in
Section 9.2 below) (including without limitation safety standards); (b)
processing all orders by Users of Company Products; and (c) shipping or
otherwise furnishing Company Products as ordered and in timely fashion, in the
event products are offered for sale by or through the Company Site. Company
agrees to furnish Company Products as ordered to all Users throughout the United
States and all of its possessions and territories, including Puerto Rico and the
U.S. Virgin Islands, as well as Canada. Company shall display adequate notices,
in a manner and form satisfactory to AT&T, on all Tracked Pages that offer
Company Products. "Adequate notices" means (a) the selling company's legal name
and place of business, (b) any territorial restrictions on the delivery of
products or services offered by or through the Company Site, (c) the selling
company's refund and return policies and (d) any other notices required by
applicable laws. Further, AT&T may require that Company reproduce the following
sentence in connection with Company Products offered on Tracked Pages: AT&T DOES
NOT ADVOCATE OR ENDORSE THE PURCHASE OR USE OF ANY OF THE PRODUCTS BEING OFFERED
FOR SALE BY [COMPANY], NOR DOES IT MAKE ANY IMPLIED WARRANTY OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OF ANY SUCH PRODUCTS OR THEIR COMPLIANCE OR
[COMPANY'S] COMPLIANCE WITH ANY APPLICABLE LAW OR REGULATION.

        9.2 Representations and warranties of AT&T. AT&T represents and warrants
that: (a) AT&T has the right to enter into this Agreement and to grant the
rights and licenses granted herein; and (b) AT&T shall comply with all
applicable laws, statutes, ordinances, rules and regulations of each county,
state and city or other political entity with respect to the operation of the
Service (collectively, "Government Standards").

        9.3 Representations and warranties of Company. Company represents and
warrants that: (a) Company has the right to enter into this Agreement and to
grant the rights and licenses granted herein; is the owner of the Company Site;
is a wholly-owned subsidiary of the Auto-By-Tel Corporation; and will cause the
Auto-By-Tel Corporation to execute a performance guarantee, in a form reasonably
satisfactory to AT&T, to cover its obligations under this Agreement; (b) the
Company Site and the reproduction, distribution, transmission, public
performance and public display of the Company Site, the Tracked Pages, the
Company name, the Company Site name, the Other Material and the Teaser Material
and any other Content provided to AT&T pursuant to this Agreement do not and
will not (i) invade the right of privacy or publicity of any third person, (ii)
contain any libelous, obscene, indecent or otherwise unlawful material; or (iii)
infringe any patent, copyright or trademark right in any jurisdiction or
otherwise contravene any rights of any


                                        8
   9

third person and Company has received no notice of such infringement; (iv) or
otherwise fail to comply with any Government Standards; (c) the Company Products
are and will be accurately presented, delivered as promised, merchantable and
fit for the purposes for which they are intended; (d) the Company Products will
be in all respects safe and noninjurious for the persons intended to use them,
and all packaging, promotional materials, and Company's marketing, sales and
distribution methods shall meet or exceed all Government Standards; (e) Company
will not package, market, sell or distribute any Company Products or cause or
permit any Company Products to be packaged, marketed, sold or distributed in
violation of any such Government Standards; provided that the representations
and warranties in subsection (b) above shall not apply to User Content or
Product Content (as defined below). Instead, Company represents and warrants
that it shall monitor and edit such User Content and Product Content and shall
promptly remove any User Content and Product Content from the Company Site which
fails to conform with the warranties and representations in subsection (b)
above. "USER CONTENT" means content uploaded by Users and/or other end users of
the Company Site; "PRODUCT CONTENT" means language incorporated by the
manufacturer thereof (other than Company) in Company Products.

        9.4 Indemnities. Each party to this Agreement shall and hereby agrees to
defend, indemnify and hold harmless the other party and each of its officers,
directors, employees and agents (each, an "Indemnitee") against and in respect
of any loss, debt, liability, damage, obligation, claim, demand, judgment or
settlement of any nature or kind, known or unknown, liquidated or unliquidated,
including without limitation all reasonable costs and expenses incurred (legal,
accounting or otherwise) (collectively, "DAMAGES") arising out of, resulting
from or based upon any claim, action or proceeding by any third party alleging
any breach of any representation, warranty or covenant made by such indemnifying
party (the "INDEMNIFYING PARTY") in this Agreement. Company further agrees to
defend, indemnify and hold harmless AT&T and its officers, directors, employees
and agents against and in respect of any Damages arising out of, or resulting
from or based upon any claim, action or proceeding by any third party relating
to the Company Products, User Content, Product Content, Company Site, and other
Content provided to AT&T pursuant to this Agreement and to other materials or
information that Users can link to from the Tracked Pages. Whenever a claim
shall arise for indemnification under this Section 9.4, the relevant
Indemnitees, as appropriate, shall promptly notify the Indemnifying Party and
request the Indemnifying Party to defend the same.

        9.5 No Consequential or Punitive Damages. NEITHER PARTY WILL BE LIABLE
TO THE OTHER PARTY (NOR TO ANY PERSON CLAIMING RIGHTS DERIVED FROM THE OTHER
PARTY'S RIGHTS) FOR INCIDENTAL, INDIRECT, CONSEQUENTIAL, SPECIAL, PUNITIVE OR
EXEMPLARY DAMAGES OF ANY KIND -- INCLUDING LOST REVENUES OR PROFITS, LOSS OF
BUSINESS OR LOSS OF DATA -- ARISING OUT OF THIS AGREEMENT (INCLUDING WITHOUT
LIMITATION AS A RESULT OF ANY BREACH OF ANY WARRANTY OR OTHER TERM OF THIS
AGREEMENT), REGARDLESS OF WHETHER THE PARTY LIABLE OR ALLEGEDLY LIABLE WAS
ADVISED, HAD OTHER REASON TO KNOW, OR IN FACT KNEW OF THE POSSIBILITY THEREOF.

        9.6 Acknowledgment of No Warranty. EXCEPT AS EXPRESSLY PROVIDED HEREIN,
NEITHER PARTY WARRANTS THAT THE SERVICE OR THE COMPANY SITE, AS THE CASE MAY BE,
WILL PERFORM IN THE MANNER EXPECTED OR WITHOUT INTERRUPTION, ERROR OR DEFECT.
EXCEPT AS SET EXPRESSLY FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY
WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR WARRANTIES AGAINST
INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS NOT SPECIFICALLY ENUMERATED.

        9.7 Limitation of Liability. Each party's liability to the other party
for any and all claims and damages incurred by such party relating to or arising
out of the subject matter of this Agreement, whether in contract, tort, implied
warranty, strict liability or other form of action, except for (a) real or
tangible property damage or personal injury or death, and (b) any claims or
damages relating to or arising out of any claim, action or proceeding by a third
party which is


                                        9
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subject to any right of indemnity provided herein; shall be limited to the
amounts paid by Company to AT&T pursuant to this Agreement. AT&T and Company
each acknowledges that the provisions of this Agreement were negotiated to
reflect an informed, voluntary allocation between them of all risks (both known
and unknown) associated with the transactions associated with this Agreement.

        9.8 Insurance. Company has obtained and shall maintain during the term
of the Agreement, appropriate insurance covering the Company Site and all
transactions made through it, and all products and services offered and/or sold
through it, with a reputable insurer . Such insurance shall have limits of not
less than One Million Dollars ($1,000,000) per occurrence and Three Million
Dollars ($3,000,000) in the aggregate and shall have a deductible of not more
than Ten Thousand Dollars ($10,000) per occurrence. Such insurance shall be
primary, and no insurance maintained by AT&T shall be deemed contributory in any
way. Such policy shall be non-cancelable except after (30) days prior written
notice to AT&T. Company shall furnish AT&T with a copy of such policy within
(30) days after execution of this Agreement and to the extent such an insurance
must be renewed, shall furnish AT&T with proof of renewal at least thirty (30)
days prior to the termination date of coverage.

10.0 Miscellaneous Provisions. (a) The provisions of Section 2.5 (for a
reasonable period following termination), Section 4 (to the extent any payments
are accrued prior to termination), Sections 5, 6.5, 7, 8(d), 9 and 10, shall
survive termination or expiration of this Agreement. (b) Company and AT&T are
independent contractors under this Agreement, and nothing herein shall be
construed to create a partnership, joint venture or agency relationship between
Company and AT&T. Neither party has authority to enter into agreements of any
kind on behalf of the other party. (c) Neither Company nor AT&T may assign this
Agreement or any of its rights or delegate any of its duties under this
Agreement without the prior written consent of the other, except that (i) AT&T
may, without Company's consent, assign this Agreement to a present or future
affiliate or successor and may assign its right to receive payments and (ii)
Company may, without AT&T's consent, assign this Agreement to a present or
future affiliate or successor, provided that such affiliate or successor in not
an Online Service Provider. "Online Service Provider" means any entity that, in
AT&T's reasonable judgment, competes with AT&T in the marketing, offering or
provision of online computer services (whether or not such services include or
offer access to the Internet), Internet access services or communication
services (including local exchange, interexchange or international
communications services). Any purported assignment or delegation without such
required consent shall be null and void. (d) This Agreement, its interpretation,
performance or any breach thereof, shall be construed in accordance with, and
all questions with respect thereto shall be determined by, the laws of the state
of New York applicable to contracts entered into and wholly to be performed
within said state. Any controversy or claim arising out of or relating to this
Agreement or the breach thereof shall be settled by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association,
and by judgment upon the award rendered by the arbitrator(s) may be entered into
any court having jurisdiction thereof. (e) No waiver of any breach of any
provision of this Agreement shall constitute a waiver of any prior, concurrent
or subsequent breach of the same or any other provisions hereof, and no waiver
shall be effective unless made in writing and signed by an authorized
representative of the waiving party. (f) All notices, demands and other
communications hereunder shall be in writing or by written telecommunications,
and shall be deemed to have been duly given: (i) if mailed to the other party's
Addressee by certified mail, postage prepaid, on the date three (3) days from
the date of mailing, (ii) if delivered by overnight courier, when received by
the Addressee or (iii) if sent by confirmed telecommunication, one business day
following receipt by the Addressee. "ADDRESSEE" shall mean (A) each party's
respective "Contact" as set forth under "Key Definitions" above, plus in the
case of AT&T, with a copy to V.P. Law, AT&T WorldNet Service, 295 North Maple
Avenue, Basking Ridge, New Jersey 07920, and, in the case of Company, with a
copy to General Counsel, Auto-By-Tel Marketing Corporation, 18872 MacArthur
Blvd., Second Floor, Irvine, CA 92612; in each case by the same means of 
delivery or (B) such other addressee as one party may notify to the other party.
(g) In the event any provision of this Agreement shall for any reason be held to
be


                                       10

   11

invalid, illegal or unenforceable in any respect, the remaining provisions shall
remain in full force and effect. (h) In resolving any dispute or construing any
provision hereunder, there shall be no presumptions made or inferences drawn (i)
because the attorneys for one of the parties drafted the Agreement; (ii) because
of the drafting history of the Agreement; or (iii) because of the inclusion of a
provision not contained in a prior draft, or the deletion of a provision
contained in a prior draft. (i) Section headings are for convenience only and
are not a part of this Agreement. (j) This Agreement contains the entire
understanding of the parties hereto with respect to the transactions and matters
contemplated hereby, supersedes all previous agreements between AT&T and Company
concerning the subject matter, and cannot be amended except by a writing signed
by both parties. No party hereto has relied on any statement, representation or
promise of any other party or with any other officer, agent, employee or
attorney for the other party in executing this Agreement except as expressly
stated herein.

AUTO-BY-TEL MARKETING CORPORATION      AT&T CORPORATION

By: /s/ MARK W. LORIMIR                By: /s/ CHRIS VARLEY
    -----------------------------          -------------------------------------
        (Authorized Signature)                 (Authorized Signature)

        MARK W. LORIMIR                        CHRIS VARLEY
    -----------------------------          -------------------------------------
        (Typed or Printed Name)                (Typed or Printed Name)

        EXECUTIVE VICE PRESIDENT               CONTENT DIRECTOR
    -----------------------------          -------------------------------------
        (Title)                                (Title)

        6/25/97                                6/25/97
    -----------------------------          -------------------------------------
        (Date)                                 (Date)


                                       11
   12

                                   SCHEDULE A


[LOGO]

Please place WorldNet Icon on top left side of all pages.


                                       12


   13

                                   SCHEDULE B

                                  PAYMENT TERMS

[Please make a copy of this form each calendar quarter to complete and mail with
                      your quarterly commission payments]

Submit Payments each quarter to AT&T c/o

      [NationsBank
      P.O. Box 277757
      Atlanta, GA 30384-7757]

Date:
      -----------------------------

From:
      -----------------------------
      Auto-By-Tel Marketing Corp.


SUBJECT: Please indicate either: (a) AT&T WorldNet Service Monthly Page
Sponsorship Fee or (b) Quarterly Commission Payment, as the case may be.

Credit to Account No.


Commission Payment for ______ Month [Quarter] , 19__
    (enter applicable month or quarter, and year)

If any problems or questions arise with this payment, please contact:


                                       13

   14

                                   SCHEDULE C

                               Editorial Standards

Neither the Company Site nor any product or service offered at the Company Site
shall contain.

        1. Any matter which is libelous, defamatory or which discloses private
or personal matters concerning any person, including home phone numbers and
addresses, credit card information, and/or Member account information such as
Member passwords.

        2. Any messages, data, images, programs, or other matter which are
obscene or pornographic or which contain racial, ethnic or religious slurs or
similar epithets, or advocating violence, hate or other language that is deeply
and widely offensive.

        3. Any messages, data, images, programs, or other matter that would
violate the property rights of others, including unauthorized copyrighted text,
images or programs, trade secrets or other confidential proprietary information
or trademarks or service marks used in an infringing fashion.

Furthermore, the Company Site shall not be used by any person or entity who
conducts, or solicits the performance of, any illegal activity or other activity
which infringes the rights of AT&T, Members, Visitors, merchants, or other
publishers of information on the Service.


                                       14
   1
                                                                   EXHIBIT 10.21

   
[*] Confidential Treatment has been requested for certain portions of this 
    exhibit. 
    

                                                                   April 1, 1997

[NBC LETTERHEAD]

Federal Express
Mr. Peter Ellis
President/CEO
Auto-By-Tel
11872 MacArthur Blvd., Second Floor
Irvine, CA 92612

           Re: Auto-By-Tel Participation in NBC Syndication Platform

Dear Mr. Ellis:

      This Letter sets forth the initial agreement between NBC Multimedia, Inc.
("NBC"), and Auto-By-Tel Marketing Corporation ("Company") with respect to the
Company's agreement to provide content as part of NBC's Syndication Platform.
The terms and conditions shall be as follows:

1.    Description of NBC Syndication Platform: NBC intends to create a menu of
      localized world wide web services (the "NBC Syndication Platform") which
      it will offer to the NBC Television Network's ("NBC TV") owned and
      operated stations and interested affiliates (the "Stations"). NBC agrees
      that if it does actually offer the NBC Syndication Platform, localized
      versions of the Auto-By-Tel online automotive information, purchasing
      financing and related services created and operated by the Company
      ("Auto-By-Tel") shall be among the list of primary services offered as
      part of such platform subject to the terms and conditions hereof. Company
      acknowledges (i) that each Station will have the sole right to determine
      which individual services it will accept as part of the NBC Syndication
      Platform, (ii) that Auto-By-Tel may or may not be included in any
      individual Station's list of such services, and (iii) that NBC and
      declining Stations shall have no liability or obligations to Company due
      to any Stations' decision not to so include Auto-By-Tel.

2.    Creation of Auto-By-Tel Local Sites: Company agrees that it shall create
      customized local versions of Auto-By-Tel (each a "Auto-By-Tel Local
      Site") for use by Stations participating in the NBC Syndication Platform.
      Such Auto-By-Tel Local Sites will be designed to provide online viewers
      of the Stations' world wide web sites (the "Station Sites") with
      automotive information and purchasing financing and related services.
      Each such Auto-By-Tel Local Site shall be a mirror Auto-By-Tel site which
      shall be framed within a sub-page of the Station Site but which will
      contain material to be provided by Company and located at a to be
      established URL on a server of the Company. As a result, all online
      viewers will be accessing and bookmarking the Auto-By-Tel Local Site
      content through the NBC Syndication Platform's portion of the Station's
      URL, and any user searches will continue to take place within the portion
      of the Station Site framing the Auto-By-Tel Local Site.

3.    Links: As a condition of utilizing the NBC Syndication Platform, each
      participating Station will be required to devote a portion of the front
      page of the Station Site to the NBC Syndication Platform, subject to
      Station's right to have overall design control of the Station Site. Each
      Station shall be encouraged to devote enough space on its front page to
      permit the placement of hotlinks to the individual services which make up
      the NBC Syndication Platform within space on such front page allocated
      and dedicated to the NBC Syndication Platform, but at a minimum, each
      participating Station Site's front page shall contain a prominent hotlink
      to a special sub-page devoted to hotlinks for all of the services making
      up the NBC Syndication Platform, the size and placement 
 
   2
      of which shall be comparable to that of any other link to a service
      offered by the Station. NBC agrees that when the individual services which
      make up the NBC Syndication Platform are displayed and a hotlink to the
      Auto-By-Tel Local Site is provided, whether on a front page or on a
      separate page, the link to the Auto-By-Tel Local Site which may be either
      a generic category description or a Auto-By-Tel logo or text (the
      "Auto-By-Tel Link") shall be comparable and consistent with the links
      devoted to any of the other individual services which are part of the NBC
      Syndication Platform.

4.    Management of Auto-By-Tel Local Sites:  The day-to-day management of the
      Auto-By-Tel Local Sites, and all costs associated therewith, shall be the
      responsibility of the Company subject to the following:

      (a) Content - Company will provide all of the content for each of the
      Auto-By-Tel Local Sites, provided that as part of the localization and
      customizing process required herein, NBC and the Stations may provide
      relevant local material (but not advertising) in their own discretion from
      time to time with reasonable notice for use on the relevant Auto-By-Tel
      Local Sites and Company will make good faith efforts to include such
      material in its reasonable discretion. Company will acquire all necessary
      rights and licenses required for the operation of each Auto-By-Tel Local
      Site as contemplated herein and for the acquisition and use of any content
      (e.g., automobile purchase analyses, appreciation costs, financing
      incentives, etc.) not provided by NBC and the Stations. Each of the
      Company, NBC and the Stations will retain and own all copyrights and other
      intellectual property rights in, and to, the material which that entity
      contributes for use hereunder.

      (b) Editorial - Editorial standards and direction regarding the inclusion
      and presentation of content will come from Company. In addition, Company
      agrees to allow NBC to review the Auto-By-Tel Local Sites for compliance
      with any NBC Broadcast Standards and Practices which may apply to the
      Auto-By-Tel Local Sites and make all changes requested by NBC in
      connection therewith. Finally, Company agrees to comply with any Rules and
      Regulations of the Federal Communications Commission which may be
      applicable to the Auto-By-Tel Local Sites and/or the rules and regulations
      of any other governmental body having jurisdiction.

      (c) Technology - Auto-By-Tel shall be responsible for all maintenance of
      the Auto-By-Tel Local Sites (including customer service, technical upkeep,
      etc.) including the costs associated therewith. Auto-By-Tel agrees to use
      its best efforts to work with NBC's technology partners to coordinate the
      interface between the Auto-By-Tel Local Sites and the Station Sites and
      provide the required services contemplated herein.

      (d) Branding - NBC shall create the Auto-By-Tel Link and may request that
      Company provide appropriate proprietary material for use thereon. The
      Auto-By-Tel Local Sites will be co-branded with trademarks and other
      material to be provided by NBC, the Stations and Company subject to the
      approval of each party and provided that the size of such brands shall be
      left to the reasonable discretion of NBC. The parties agree that the
      Company's brands on the Auto-By-Tel Local Sites shall be not more than
      fifty percent (50%) smaller than, but as visible as, the brands of NBC and
      the relevant Stations. Company agrees to abide by all requirements and
      guidelines which NBC and the Stations may have regarding the use of their
      trademarks, service marks and other brands and agrees that it shall make
      no use of such marks and brands which is not approved in advance by NBC
      and the relevant Stations. Branding for all other areas of the NBC
      Syndication Platform and the Station Sites shall be at the sole discretion
      of NBC and the Stations.

5.    Promotion: As a condition of utilizing the NBC Syndication Platform, each
      Station will be required of offer a minimum of 10 on-air promos
      concerning, or mentions of,


                                       2
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[*] Confidential Treatment Requested
    

        the URL address of the Station Site per week. NBC shall encourage
        Stations to include information regarding the NBC Syndication Platform
        as part of such promos or mentions.

   
6.      Exclusivity: NBC agrees that Auto-By-Tel will be the exclusive service
        provider for the online automotive purchasing and information category
        of the NBC Syndication Platform offered by NBC, provided that Company
        acknowledges that nothing in this Section 6 or elsewhere in the Letter
        Agreement shall restrict NBC rights in any way in connection with NBC's
        world wide web site ("NBC.com"), MSNBC.com, Intellicast.com or any
        other future NBC related interactive (or other) services other than the
        NBC Syndication Platform. Notwithstanding the foregoing, Company
        acknowledges that (i) other services provided by third parties may be
        offered to the Stations by NBC as part of the NBC Syndication Platform
        which happen to provide online automotive information in addition to
        their primary services as long as NBC does not offer such third party
        services in place of Company's services on the NBC Syndication Platform
        or materially promote such competing aspects of such third party
        services to the Stations or the public (other than through general
        advertising) in connection with the NBC Syndication Platform and (ii)
        NBC will have no ability to prevent the Stations from placing competing
        services elsewhere on their own Station Sites. Company agrees that NBC
        will be the exclusive United States television distribution partner for
        Auto-By-Tel's content and service, and Company agrees not to provide
        the Auto-By-Tel service, or any portion thereof, to national or
        regional television networks, syndicated programming services or
        syndicated or like content platforms distributed by or through the
        foregoing; provided, however, that NBC recognizes that such exclusivity
        shall not prevent Company from providing the Auto-By-Tel service to any
        internet service provider which uses televisions as a delivery device
        (i.e., Web TV). The exclusivity terms of this Paragraph 6 will be
        contingent upon NBC's reaching and then maintaining over each following
        year on average the following critical mass of Station support for the
        NBC Syndication Platform: [*] If such contingencies are not
        met, the exclusivity terms of this Section 6 shall no longer apply,
        but all other terms of this Letter Agreement shall remain in effect
        until the termination hereof. In addition, if Company is not able to
        provide competitive, localized coverage and service for any of the NBC
        TV markets, NBC will be free to contract with Company's competitors in
        order to obtain online automotive information in such markets.

7.      Advertising Sales: Company shall be responsible for the sale of
        advertising inventory to be placed on each Auto-By-Tel Local Site, if
        any. Company shall have the responsibility of administering the contract
        for such advertising, paying all necessary expenses and collecting all
        fees related thereto in return for a seller's commission of [*] of the
        gross advertising revenues related to such sale (the "Sales
        Commission"). Unless the parties mutually agree to the contrary, if
        Company decides in its sole discretion to sell advertising inventory for
        the Auto-By-Tel Local Sites at less than the rates normally charged by
        Company for advertising appearing elsewhere on Auto-By-Tel (the "Normal
        Rates") or barters such inventory in any way, such advertising inventory
        shall be deemed to have been sold at such Normal Rates for purposes of
        calculating revenues for purposes of Section 8(b) below. Company
        acknowledges that NBC and the Stations will be solely responsible for
        the sale of advertising which appears within the area of the Station
        Sites which frames Auto-By-Tel Local Sites and that Company will have no
        right to advertising revenues received by NBC and Stations in connection
        with such frames or any other portions of the
    


                                       3
   4
   
[*] Confidential Treatment Requested
    

      Station Sites other than the Auto-By-Tel Local Sites. NBC acknowledges
      that manufacturers' financing and insurance products or services offered
      through the Auto-By-Tel Local Site shall not be deemed advertising for
      the purposes hereof.

8.    Financial Terms: Company agrees that it will be responsible for all costs
      and expenses associated with the creation and operation of the Auto-By-Tel
      Local Sites. Auto-By-Tel shall make the following monthly payments to NBC.

   
      (a)   Annual License Fee - Company will pay NBC a license fee of [*]
      hereof and upon each anniversary date of the launch of the NBC Syndication
      Platform occurring during the term hereof. This fee shall also be
      considered a non-refundable advance on any revenues payable to NBC in
      connection with the terms of sub-section (c) of this Section 8.
    

      (b)   Advertising Revenues - NBC and Company will equally share (i.e.,
      50/50) all gross revenues received by Company in connection with the sale
      of advertising for display anywhere within the Auto-By-Tel Local Sites
      after deduction of the Sales Commission is made but prior to the
      deduction of any expenses of any kind.

   
      (c)   Lead Generation Revenues - Company will pay NBC [*] for each online
      or physical (e.g., mail, fax, etc.) submission of any "unique purchase
      request" to Auto-By-Tel by any individual or corporate user which is
      received by Company and attributable to usage on an Auto-By-Tel Local
      Site. "Unique purchase request" shall mean a purchase request from a user
      with a different name and e-mail address from any name or address received
      by Company in the past. In addition, once the Auto-By-Tel Local Sites
      generate [*] such submissions in any calendar year during the term hereof,
      then Company will pay NBC [*] for each such submission received thereafter
      until the end of that calendar year. The parties agree that the Annual
      License Fee described above shall be an advance against payments for the
      first [*] submissions otherwise owed hereunder.
    

      (d)   Future Revenue - The parties agree that if any future revenue
      generating opportunities not engaged in by Company through its
      Auto-By-Tel service as of the date hereof or described above are created
      in connection with the Auto-By-Tel Local Sites, the parties will
      negotiate in good faith regarding what revenue sharing arrangements
      between the parties would be appropriate, provided that, unless such
      opportunities involve characteristics which would make them materially
      different from the opportunities described above, it is the intent of the
      parties to share such revenues equally.

9.    Payment and Audit Conditions. At the end of each month in which Company
      receives any revenue of the type described in Section 8 (b) and (c),
      Company shall prepare a monthly statement providing sufficient detail
      regarding the source of such revenue and will deliver such statement
      along with the required payment described therein to NBC no less than
      thirty (30) days following such date. Company agrees that NBC shall have
      the right to conduct a reasonable audit of the relevant books and records
      of such party in order to determine compliance with the terms of this
      Letter Agreement. The parties agree that all amounts due under this
      Agreement from the Company to NBC shall be paid directly to NBC and not
      to any of the individual Stations.

10.   Representations and Warranties: (a) Company represents and warrants to
      NBC and the Stations that it has the right and power to perform its
      obligations and to grant the rights granted herein, that Company's
      creation and operation of the Auto-By-Tel Local Sites pursuant to this
      Letter Agreement will not violate any agreement or obligation between
      Company and a third party or any laws or regulations and that, except for
      material provided by NBC and the Stations, the material included on the
      Auto-By-Tel Local Sites and the Auto-By-Tel Link as well as the operation
      of the Auto-By-Tel 

                                       4
   5
   
[*] Confidential Treatment Requested
    

      Local Sites as contemplated herein will, to the best of its knowledge, be
      accurate and correct and will not violate or infringe any third party
      rights, including intellectual property rights. Company also agrees that
      standard software industry representation and warranties will apply to
      all software and technology used by Company in order to carry out its
      obligations described herein. Company acknowledges that the Final
      Agreement (as defined below) will contain additional and more detailed
      versions of the representations and warranties described above.

      (b)   NBC represents and warrants to Company that it has the right and
      power to perform its obligations and to grant the rights granted herein
      and that the material provided by NBC to Company for inclusion on the
      Auto-By-Tel Local Sites will, to the best of its knowledge, be accurate
      and correct and will not violate or infringe any third party rights,
      including intellectual property rights.

11.   Indemnity. (a) Company agrees to indemnify, defend, and hold NBC, the
      Stations, their affiliates and their successors, officers, directors and
      employees harmless from any and all actions, causes of action, claims,
      demands, costs, liabilities, expenses (including reasonable attorneys'
      fees) and damages arising out of or in connection with any third party
      claims (i) relating to Company's operation and management of the
      Auto-By-Tel Local Sites, or (ii) relating to a breach of any of Company's
      representations and/or warranties set forth in Section 10 of this Letter
      Agreement.

      (b)   NBC agrees to indemnify, defend, and hold Company, its affiliates
      and its successors, officers, directors and employees harmless from any
      and all actions, causes of action, claims, demands, costs, liabilities,
      expenses (including reasonable attorneys' fees) and damages arising out
      of or in connection with any third party claims relating to a breach of
      any of NBC's representations and/or warranties set forth in Section 10 of
      this Letter Agreement.

      (c)   The indemnified party agrees to notify the other party promptly of
      any written claims or demands against the indemnified party for which the
      other party is responsible, and the Indemnified Party for which the other
      party will be entitled, at its option, to assume the defense or
      settlement of any such claim, provided that no settlement shall be
      reached without the consent of the indemnifying party. The indemnified
      party will promptly be reimbursed by the other party for Indemnified
      Amounts as they are incurred.

      (d)   IN NO EVENT UNDER ANY CIRCUMSTANCES SHALL EITHER PARTY (OR ITS
      AFFILIATES) BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, INCIDENTAL,
      CONSEQUENTIAL OR PUNITIVE DAMAGES ARISING OUT OF OR IN CONNECTION WITH ITS
      OBLIGATION UNDER THIS LETTER AGREEMENT; PROVIDED HOWEVER, THAT THE
      FORGOING LIMITATION SHALL NOT APPLY TO DIRECT DAMAGES RESULTING FROM THE
      INTENTIONAL OR WILLFUL BREACH OF THIS LETTER AGREEMENT.

   
12.   Term. The initial term of this Letter Agreement shall be [*],
      and ninety (90) days prior to the end of the initial term, the parties
      agree to negotiate in good faith regarding a possible extension of the
      term hereof for an additional [*]. Either party may terminate
      this Letter Agreement upon a material default by the other party of the
      terms hereof which default is not cured within thirty (30) days following
      such party's receipt of a written notice regarding the default. In
      addition, if Company materially alters the nature or quality of its
      service (e.g., changes Auto-By-Tel from a free to subscription service),
      NBC may terminate this Letter Agreement, at its option, by providing
      Company with ten (10) days prior notice thereof in writing. Finally, if
      NBC determines in its sole discretion at any time, not to offer the NBC
      Syndication Platform as such term is described in Paragraph 1, it will
      inform the Company of such 
    

                                       5
   6
     decision in writing and this Letter Agreement shall be deemed terminated as
     of the date of such notice.

13.  Formal Agreement. Recognizing that time is of the essence, this Letter
     Agreement shall serve as the intent of both parties to enter into a more
     formal agreement for the creation and operation of Auto-By-Tel Local Sites
     (the "Final Agreement"). Both parties shall use reasonable efforts to
     complete the Final Agreement within a reasonable time period following the
     date of execution of this Letter Agreement, provided, however, that
     notwithstanding the foregoing, if no Final Agreement is reached, the terms
     contained herein shall govern the relationship between the parties for the
     Term.

14.  NBC Local Link. The parties agree that each Auto-By-Tel Local Site shall
     include a link (which may include an appropriate NBC logo) to the NBC
     Local section of NBC.com in its first page.

15.  Confidentiality. Neither party shall issue a press release or make any
     statement to the general public concerning this Letter Agreement, the NBC
     Syndication Platform or the Auto-By-Tel Local Sites, or the existence
     thereof, without the express prior written consent of the other; provided,
     however, that NBC agrees that Company may file this Letter Agreement with
     the Securities and Exchange Commission (the "SEC") if so required by the
     Securities Act of 1933 and Securities Exchange Act of 1934, in each case,
     as amended, the rules and regulations related thereto or any applicable
     state laws (the "Securities Laws") as long as Company agrees to use its
     best efforts to obtain confidential treatment of the economic and other
     material terms hereof under the Securities Laws and consult with NBC
     during the process.

16.  Miscellaneous. This Letter Agreement constitutes the entire agreement and
     understanding of the parties relating to the subject matter hereof and
     supersedes all prior and contemporaneous agreements, negotiations, and
     understandings between the parties, both oral and written, provided that
     the Non-Disclosure and Confidentiality Agreement between the parties shall
     remain in full force and effect. No waiver or modification of any
     provision of this Letter Agreement shall be effective unless in writing
     and signed by both parties. Any waiver by either party of any provision of
     this Letter Agreement shall not be construed as a waiver of any other
     provision of this Letter Agreement, nor shall such waiver operate as or be
     construed as a waiver of such provision respecting any future event or
     circumstance. This Letter Agreement shall be governed by and construed
     under the laws of the State of New York applicable to contracts fully
     executed in New York, without regard to New York conflicts law. The
     parties hereby consent to and submit to the jurisdiction of the federal
     and state courts located in the State of New York.

                                       6
   7
     If you are in agreement with the above terms and conditions, please
indicate your acceptance by signing in the space provided below, and return one
original to me. This Letter Agreement shall be null and void if not signed
within 7 days of the date set forth above.

                                        Very truly yours,

                                        NBC MULTIMEDIA, INC.

                                        By: /s/ KEN KRUSHEL
                                           -------------------------------------

                                        Name:  Ken Krushel

                                        Title: Vice President

ACCEPTED AND AGREED;

AUTO-BY-TEL MARKETING
CORPORATION

By: /s/ MARK W. LORIMER
   -----------------------------------

Name:  Mark W. Lorimer

Title: Vice President, General Counsel
       and Secretary

                                       7
   8
   
[*] Confidential Treatment Requested
    

   
[*]
    

NBC must reach and maintain over each following year, on average, the following
critical mass:

   
[*]
    
   1

                                                                   EXHIBIT 10.23

   
[*] Confidential Treatment has been requested for certain portions of this 
    exhibit. 
    

                               autobytel.com inc.

                         LICENSE AND SERVICES AGREEMENT

This LICENSE AND SERVICES AGREEMENT (this "Agreement") is entered into as of
AUGUST 7, 1998, (the "Effective Date") by and between autobytel.com inc., a
Delaware corporation with offices at 18872 MacArthur Boulevard, Irvine,
California, 92612 ("ABT"), and Auto-By-Tel AB, a Swedish corporation with
offices at Haradsvagen 255, 14172 Huddinge, Sweden ("ABT/Nordic"), and
describes the terms and conditions pursuant to which ABT will grant to
ABT/Nordic a license to use and modify the Software and Business Procedures (as
defined below) and to use certain related technology, to deploy, develop and
support a localized version of such Software and Business Procedures.

                                   BACKGROUND

        WHEREAS, ABT is engaged in an Internet-based marketing business for new
and used vehicles in North America that provides Internet users with fast,
haggle-free, and courteous purchasing and related services designed to improve
consumers' overall vehicle buying experience;

        WHEREAS, ABT/Nordic desires to market new and used vehicles, including
construction equipment vehicles, in Finland, Norway, Sweden and Denmark using
the ABT proprietary Software, technology, and ABT Business Procedures;

        WHEREAS, ABT/Nordic desires to develop a localized version of ABT's
proprietary Software and Business Procedures applicable to Finland, Norway,
Sweden and Denmark;

        NOW, THEREFORE, in consideration of the mutual promises and upon the
terms and conditions set forth below, the parties agree as follows:

1. Definitions

        1.1 "ABT Brand" means the "Auto-By-Tel" trademark, service mark and
logo, and does not include the mark DealerSites.com.

        1.2 "Business Procedures" means the proprietary business procedures for
offering purchasing-related services, as delivered by ABT to ABT/Nordic before
the Effective Date, and any updates or new revisions thereof.

        1.3 "Confidential Information" means this Agreement and all its
Attachments, any addenda hereto signed by both parties, all Software listings,
Documentation, information, data, drawings,



                                       1
   2

   
[*] Confidential Treatment Requested
    

benchmark tests, specifications, trade secrets, object code and machine-readable
copies of the Software, Business Procedures, and any other proprietary
information disclosed by one party to the other.

   
        1.4 "Current Term" means the initial [*] after the Launch Date, and any
[*] renewal described in Section 11.1, during which this Agreement is in effect.
    

        1.5 "Derivative Work" means a derivative work within the meaning of 17
U.S.C. Section 101 of the U.S. copyright law.

        1.6 "Documentation" means any electronic instructions, manuals or other
materials, including without limitation on-line help files, regarding the
development or use of the Software provided by ABT under this Agreement.

        1.7 "DRT" means the Dealer Communication System portion of the Software.

        1.8 "Error Correction" means a patch to, or release or version of the
Software containing error corrections or fixes.

        1.9 "Extensions" means any modifications or additions to the Software or
Business Procedures that are not Derivative Works of the Software or Business
Procedures.

        1.10 "Fees" mean all minimum and monthly license, maintenance and other
fees payable to ABT hereunder.

        1.11 "Global Brand Protocols" means the procedures for use of the ABT
Brand set forth on Attachment B along with any revisions thereof provided by ABT
from time to time in its sole discretion.

        1.12 "Gross Revenues" means all payments actually received by ABT/Nordic
with regard to the Local Business, including without limitation fees received
from dealers for participating in the Internet referral system, payments
received from dealers as a result of Internet inquiries referred to them, sums
received as payments for advertising on internet sites which are part of the
Local Business, gross revenues (but not reimbursement of costs or expenses) from
providing maintenance of, and training regarding, the DRT, and all other
revenues arising directly out of the Local Business. Gross revenues will not
include revenues from sales of cars or other vehicles, from servicing of cars or
other vehicles or from other activities by ABT/Nordic or any of its affiliates
other than the operation of the Local Business. Gross Revenues received in any
currencies other than U.S. dollars will be converted into U.S. dollars at the
exchange rate in effect at 12:00 noon, Eastern Standard Time, on the first
business day of the calendar month in which such revenues are received.

   
        1.13 "Launch Date" means the first date ABT/Nordic makes the World Wide
Web site for the Local Business generally available on the World Wide Web; but
in no event later than [*].
    


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        1.14 "Local Business" means a business providing Internet based
marketing of automotive and automotive related products and services, including
without limitation trucks and construction vehicles relating to vehicle dealers
located in the Territory. The parties acknowledge that the inclusion of trucks
and construction vehicles in the Local Business must not be construed to
obligate ABT to include trucks and construction vehicles in the operation of the
ABT business generally, nor to create any Software or Business Procedures
relating thereto.

        1.15 "Localized Version" means a Derivative Work of the Software and
Business Procedures that implements the core functionality of the Software and
Business Procedures, but incorporates the language, currency and functional
variations for the various countries of the Territory, which Derivative Works
are in each case created by or for use by ABT/Nordic.

        1.16 "Localize, or Localization" means any modifications to the Software
or Business Procedures necessary to facilitate the operation and functionality
of the Software on the operating systems or platforms within the Territory, or
the modification of the Business Procedures to meet local custom or
technological or regulatory requirements.

        1.17 "Fiscal Quarter" means a period of three (3) consecutive calendar
months which period commences upon the Launch Date, or three (3), six (6), or
nine (9) months thereafter; or the anniversary of any of the foregoing.

        1.18 "Fiscal Year" means a period of four (4) consecutive Fiscal
Quarters commencing on the Launch Date or the anniversary thereof.

        1.19 "Software" means ABT's existing proprietary Software products
specified on Attachment A hereto, together with any Error Corrections, Updates
or Upgrades thereof provided to ABT/Nordic pursuant to this Agreement.

        1.20 "Territory" means the geographical area of Finland, Norway, Sweden
and Denmark.

        1.21 "Update" means a release or version of the Software containing
minor functional enhancements, or extensions.

        1.22 "Upgrade" means any version of the Software designated as such by
ABT, which contains new functionality or significantly enhanced operation.

2. Grant of License

        2.1 License. Subject to the terms and conditions of this Agreement, ABT
hereby grants to ABT/Nordic:

                (a) a non-exclusive, non-transferable license to use, reproduce,
transmit, and to distribute, to provide access to and make available to
employees of ABT/Nordic, the Software and Business



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Procedures in the Territory, and to create Derivative Works and Extensions,
solely in connection with the development of a Localized Version or Extension in
connection with the operation of the Local Business in the Territory; and to
provide access to and make available the Software and Business Procedures to
third party contractors, solely in accordance with Section 10.4.

                (b) an exclusive, non-transferable license in the Territory to
use, reproduce, make available on a server, and distribute, transmit, make
available and provide access to, to employees of ABT/Nordic, the Software in
object code format and the Business Procedures, solely for the operation of the
Local Business in the Territory, provided that ABT/Nordic operates the Local
Business solely in the accordance with the Business Procedures, and only with
respect to vehicle dealers in the Territory.

                (c) a non-exclusive license to distribute, make available,
provide access to, and to publicly perform and display, and to transmit copies
of the client or "run-time" portions of the Software, or the DRT, in object code
format, in the Territory, and to reproduce the Software as necessary to exercise
such rights.

        2.2 Sublicenses. ABT/Nordic may (a) grant non-exclusive sublicenses to
vehicle dealers in the Territory to use copies of the DRT in object code format,
solely for use in connection with the Local Business, and (b) grant to third
parties the right to use and reproduce copies of client or "run-time" portions
of the Software for use in connection with the Local Business' Web site. Such
sublicenses must be granted solely in connection with end user licenses in a
form subject to ABT's approval, which will not be unreasonably withheld.
ABT/Nordic may grant sublicenses of the rights granted in Section 2.1 only upon
the prior written approval of ABT. ABT shall not grant to any third party in the
Territory a license to the use DRT in connection with a Local Business.

        2.3 Copies. ABT shall deliver to ABT/Nordic, as soon as practicable, one
(1) copy of the Software in executable form, and one (1) copy of the Software in
commented source code form including APIs, one (1) copy of the related
Documentation and one (1) copy of the Business Procedures. ABT/Nordic will be
entitled to make one (1) copy of the Software solely for backup or archival
purposes, and a reasonable number of copies for development purposes, and to
retain one (1) copy of the Software for production purposes. Except as otherwise
set forth herein, ABT/Nordic may not copy, distribute, reproduce, use or allow
access to the Software and Business Procedures. All copies of the Software will
be subject to the terms and conditions of this Agreement. Whenever ABT/Nordic is
permitted to copy or reproduce all or any part of the Software and Business
Procedures, all titles, trademark symbols, copyright symbols and legends, and
other proprietary markings of ABT or its suppliers or licensors must be
reproduced. ABT/Nordic shall not alter or remove any of ABT's trademarks,
copyright notices or other proprietary notices affixed to the Software by ABT.

        2.4 Ownership. ABT owns all right, title and interest in and to the
Software and Business Procedures, together with any Localized Version or other
modifications to the Software and Business Procedures made by either ABT or
ABT/Nordic in connection with Localization of the Software or Business
Procedures. The licenses granted herein transfers to ABT/Nordic neither title,
nor any



                                       4
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proprietary or intellectual property rights to the Software, Business
Procedures, or Documentation, or any copyrights, patents, or trademarks,
embodied or used in connection therewith, except for the rights expressly
granted herein. Upon development of any Localized Version by ABT/Nordic,
ABT/Nordic hereby assigns all right, title and interest to such Localized
Version to ABT. Such Localized Version will be included as, and incorporated in,
the Software for the purposes of the license grant in this Section 2. ABT hereby
grants ABT/Nordic an irrevocable, perpetual, worldwide, non-exclusive, fully
paid-up, transferable, sublicenseable license to reproduce, distribute, publicly
perform and display, transmit, make available, provide access to, and prepare
Derivative Works of the Extensions, and Derivative Works thereof, in connection
with the Local Business. The foregoing license will survive the termination of
this Agreement. All rights in Software and Business Procedures not expressly
granted hereunder are reserved to ABT.

        2.5 Software and Business Procedure Localization. As between the
parties, ABT/Nordic is responsible for any changes to the Software,
Documentation, or Business Procedures necessary to Localize them in accordance
with the operation of the Local Business. All such Localization changes, and the
development of any Extensions, must be approved by ABT prior to development and
implementation. All such Localization changes and the development of any
Extensions must be either (i) performed by ABT in accordance with Section 3.2
below; or (ii) performed by ABT/Nordic, or by its independent contractor
approved by ABT, under the technical oversight and subject to the approval of
ABT, subject to Section 3.2 below. ABT will assist ABT/Nordic and any
independent contractors approved by ABT in all reasonable ways in making
Localization changes and developing Extensions, subject to any fees due for such
services pursuant to Section 6.2. Any modifications made to the Software,
Documentation, or Business Procedures without the approval of ABT will be a
material breach of this Agreement. In the event the Business Procedures violate
the laws or regulations of the Territory or the European Union, the parties will
cooperate in good faith to Localize them to comply with the laws and regulations
of the Territory or the European Union, as applicable. Upon completion of any
Localized Version or Extension, ABT/Nordic must disclose to ABT a copy of such
Localized Version or Extension. Any such disclosure of Localized Software or
Extension must be in source code format.

        2.6 Updates and Upgrades. During the term of this Agreement, and subject
to ABT/Nordic's payment to ABT of the Maintenance Fee set forth in Section 5.3
below, ABT will deliver to ABT/Nordic any Error Corrections, Updates or Upgrades
to the Software or Business Procedures that ABT uses or releases to any of ABT's
other local country affiliates or United States licensees. ABT/Nordic shall
promptly implement all use Error Corrections, Updates, or Upgrades provided by
ABT under this Agreement, to the extent (i) consistent with Localization
requirements and (ii) such Error Corrections, Updates, or Upgrades do not cause
material errors in the software, Internet or telecommunications operations of
the Local Business. Notwithstanding the above, ABT will not be obligated to
provide such Error Corrections, Updates or Upgrades during the period during
which, in the reasonable discretion of ABT's project manager, they are in
release solely for testing purposes or otherwise not suitable for release
outside the United States.



                                       5
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[*] Confidential Treatment Requested
    

        2.7 License Restrictions. ABT/Nordic shall not:

                (a) sell, lease, license, sublicense or distribute the Software,
Documentation, or Business Procedures except in accordance with this Agreement;

                (b) provide, disclose, divulge or make available to, or permit
use of the Software, Documentation, Business Procedures, or Localized Version by
any third party without ABT's prior written consent, except as specifically
authorized by this Agreement; or

                (c) use the Software for any purpose except as expressly
provided for in this Agreement.

        2.8 Third Party Technology. The parties acknowledge that certain
software, equipment, or technology of third parties, including without
limitation server equipment, server software, and database software, may be
required to operate the Software. ABT shall cooperate reasonably with ABT/Nordic
to identify any such third-party technology that will be available to
ABT/Nordic, but ABT will not be obligated to provide any such third party
technology to ABT/Nordic.

   
        2.9 Reimbursement for Certain Extensions. If ABT/Nordic wishes to create
an Extension, it may request reimbursement for the development of such Extension
pursuant to this Section 2.9. ABT/Nordic will submit to ABT a description in
reasonable detail of such Extension. ABT shall, at ABT/Nordic's expense in
accordance with Section 3.2, prepare a high-level specification, budget and
schedule for development of the Extension. If the budgeted development fees for
the Extension (the "Estimated Fees") are under [*], then ABT will not be
obligated to reimburse ABT/Nordic for the development of such Extension. If the
budgeted development fees for the Extension are [*] or over, then ABT shall have
a right of first refusal to perform such development, as follows: ABT may,
within ten (10) days after the completion of the aforementioned estimate, elect
by written notice to perform the development of such Extension, pursuant Section
3.2. If ABT does not provide such notice within such ten (10) day period,
ABT/Nordic may, in its discretion, elect to perform the development of such
Extension, subject to the terms of Section 2.5. Upon completion of the
Extension, ABT/Nordic shall provide a copy of such Extension in source code
format, including any related technical documentation, to ABT. If, within the
next one (1) year period after ABT/Nordic provides the Extension to ABT, either
ABT or its affiliates use such Extension (other than solely for testing
purposes), ABT shall, no later than thirty (30) days after the date of such use,
reimburse ABT/Nordic [*] of the Estimated Fees for development of such
Extension.
    

        2.10 Outsourcing. Upon ABT/Nordic's request, the parties will use
reasonable efforts to enter into an agreement, before the Launch Date, to allow
ABT/Nordic to engage a third party to operate the Software on ABT/Nordic's
behalf.

3. Obligations.


                                       6
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        3.1 Services. Upon mutual agreement, ABT may, from time to time, perform
services and provide support to ABT/Nordic that will be subject to a Services
Agreement in a format similar to the Services Agreement included on Attachment D
hereto (the "Services" as further defined below).

                (a) In addition to the compensation set forth in the definitive
Services Agreement, ABT/Nordic shall reimburse ABT for the reasonable actual
travel and living expenses of ABT's personnel engaged in performing the Services
at locations other than ABT's facilities, together with other reasonable
out-of-pocket expenses incurred in connection with the performance of such
Services. ABT shall adhere to any travel policy reasonably promulgated by
ABT/Nordic in connection therewith.

                (b) ABT/Nordic shall pay ABT for any Services provided under
this Section 3.1 in accordance with the payment terms set forth in Section 5
below.

        3.2 Scope of Services. The parties currently anticipate that the
Services that may be performed in accordance with Section 3.1 above may include
the following. However, nothing in this Section 3.2 will be deemed to create any
binding obligation on either party.

                (a) Hardware selection and configuration consulting services;

                (b) Business model conversion support for software systems and
operating procedures;

                (c) Marketing, sales and information technology training;

                (d) Support for training of vehicle dealers in the use of the
DRT portions of the Software; and

                (e) Business Procedures marketing support, including support
regarding know-how, cooperative advertising or other co-marketing activities.

        3.3 ABT/Nordic Obligations. ABT/Nordic shall operate the Local Business 
solely in accordance with the Localized Business Procedures. ABT/Nordic shall
operate the Local Business solely in accordance with the laws, regulations, and
other requirements of the Territory and of the European Union. During the term
of this Agreement, ABT/Nordic will devote sufficient resources and personnel to
the Local Business to market, promote and operate the Local Business properly.
ABT/Nordic will be responsible for training vehicle dealers in the use of the
DRT portions of the Software and will be solely responsible for all costs and
expenses related to the marketing, promotion and operation of the Local Business
and for performing its obligations hereunder. ABT/Nordic will ensure that only
properly trained and qualified persons perform its technical obligations under
this Agreement.

        3.4 Hyperlinks. ABT shall, on and after the Launch Date, maintain a
location on its Web Page where ABT provides links to its local country
affiliates, and display at that location a hypertext link pointing toward
ABT/Nordic's home Web page for the Local Business, and ABT/Nordic shall, on and
after the Launch Date, display a hypertext link on the home Web page for the
Local Business pointing to such location.



                                       7
   8

        3.5 Territory and Sales. The parties acknowledge that ABT/Nordic may
receive inquiries or orders for sales of products or services from persons
outside the Territory. In such case, ABT/Nordic shall respond to such inquiries
only in accordance with the laws of the Territory and the European Union. In
addition, ABT/Nordic acknowledges that ABT may enter into agreements with other
parties who will operate a Local Business outside the Territory. ABT/Nordic
shall use its best efforts to resolve any channel conflicts with such third
parties relating to such inquiries in the manner which, in ABT's reasonable
discretion, best promotes overall worldwide use of the business of providing
Internet-based marketing of automobiles using the ABT Brand, the Software and
the Business Procedures.

4. Warranty and Disclaimer

        4.1 ABT Warranty. ABT warrants that (a) during the term of this
Agreement, the Software will perform in substantial accordance with the
Documentation; and (b) the Software, together with third party technology
identified in accordance with Section 2.8, is all the technology ABT uses to
operate its Internet-based marketing business for new and used cars in the
manner ABT operates such business as of the Effective Date. If the Software does
not perform as warranted in accordance with subsection (a) of this Section 4.1,
ABT shall use commercially reasonable efforts to provide Error Corrections to
correct the Software in accordance with the escalation procedures in 
Attachment C, and include the correction therefor in the next Error Correction
released by ABT and provided to ABT/Nordic under Section 6.2 below. If
additional technology is necessary due to a breach of the warranty in subsection
(b) of this Section 4.1, ABT shall cooperate in good faith to assist ABT/Nordic
in procuring any such additional technology. The foregoing are ABT/Nordic's sole
and exclusive remedies for breach of warranty. The warranty will apply only if
the then-current version of the Software has been properly installed and used at
all times and in accordance with the Localized Business Procedures and any
relevant Documentation.

        4.2 ABT/Nordic Warranty. ABT/Nordic represents and warrants that 
ABT/Nordic is sufficiently capitalized to undertake the business transaction
contemplated hereunder.

        4.3 Disclaimer. EXCEPT FOR THE EXPRESS LIMITED WARRANTY SET FORTH IN
SECTION 4.1 ABOVE, THE SOFTWARE, DOCUMENTATION AND BUSINESS PROCEDURES ARE
PROVIDED "AS-IS" AND WITHOUT WARRANTY OF ANY KIND, WHETHER EXPRESS, IMPLIED,
STATUTORY OR OTHERWISE. ABT HEREBY DISCLAIMS ANY WARRANTY THAT THE OPERATION OF
THE SOFTWARE WILL BE UNINTERRUPTED OR ERRO