July 6, 1999
Mr. Stephen Tubbs
Vice President Business Development
GE Financial Assurance
7125 W. Jefferson Ave., Suite 200
Lakewood, CO 80235
Re: Agreement between GE Capital Management Corporation and The Cobalt
Group, Inc.
Dear Stephen:
This letter ("Letter Agreement") sets forth the principal terms and
conditions of a proposed binding agreement ("Definitive Contemplated Agreement")
between GE Capital Management Corporation ("GE") and The Cobalt Group, Inc.
("Cobalt").
I. Terms of the Definitive Contemplated Agreement
1. OBLIGATIONS OF COBALT
A. Cobalt will develop, with the cooperation of GE, on a schedule to
be reasonably agreed by the parties, the following Web-based automobile extended
warranty origination modules:
i) A dealer module ("Dealer Direct"). Cobalt will prepare a
Dealer Direct functional specification ("Specification"). Upon acceptance of
the Specification by GE, Cobalt will develop, according to the Specification:
(a) an Internet dealer user interface; (b) underlying software code; (c)
integration of Cobalt's Web-based inventory management system with Dealer
Direct; (d) the ability for dealers to manage retail pricing; and (e) a direct
data feed to GE. Cobalt will work with its automotive dealer customers
("Cobalt Clients") to run tests of Dealer Direct and make modifications, as
mutually agreed with GE; and
ii) A consumer module ("Consumer Direct"), based
substantially on GE's existing consumer extended warranty origination system.
According to a mutually agreed specification, Cobalt will modify the existing
Internet user interface, integrate it with Cobalt automotive inventory
management system as well as in Cobalt's automotive portal, DEALERNET-TM-,
provide availability in dealer Web sites and configure a direct data feed to GE.
Cobalt will work with the Cobalt Clients and the DEALERNET user base to run
tests of Consumer Direct and make modifications, as mutually agreed with GE.
B. Cobalt intends to develop automotive customer "Personal Pages" in
the future which will allow customers of Cobalt Clients to review their
automobile's service histories, receive service reminders, purchase various
products and services, all of which will be sponsored by the Cobalt Client from
whom they purchased their car. Cobalt and GE agree to negotiate in good
faith for the specification and development of extended warranty product
related enhancements to Cobalt's Personal Pages products.
C. During the term of the Definitive Contemplated Agreement, Cobalt
shall have the right to distribute Dealer Direct as a standard component of
Cobalt's service offerings to Cobalt Clients and to offer a Consumer Direct
extended warranty origination link on Cobalt Client Web sites at such client's
option. Cobalt sales consultants will provide basic training on the use of
Dealer Direct. Cobalt shall also have the right to distribute Consumer Direct
as part of DEALERNET, both at the Dealernet.com primary address and as a content
component for other Web portal businesses ("Cobalt Affiliates"). Cobalt Clients
and Cobalt Affiliates shall be subject to GE's standard qualification criteria
for originators of its extended warranty products. Cobalt Clients and Cobalt
Affiliates will have the right to decline these services. Cobalt shall have the
right to modify Dealer Direct and Consumer Direct to remain consistent with its
other Web-based products from time to time, provided that such modifications
shall not materially affect the suitability of Dealer Direct and Consumer Direct
as extended warranty origination systems.
D. GE shall be the exclusive non-automotive manufacturer extended
warranty provider for Dealer Direct and DEALERNET and shall be the exclusive
endorsed non-automotive manufacturer provider of extended warranty services
included in Cobalt's Web Edge Dealer Website Management interface to Cobalt
Clients for a period of one year. Exclusivity will be guaranteed for a period
of one year from product launch. Renewal of exclusivity will be subject to
mutually agreed performance standards regarding extended warranty originations.
Cobalt Clients and Cobalt Affiliates will have the right to remove the feature
at their discretion and nothing in this agreement shall be construed to prevent
Cobalt from installing alternative extended warranty service products at the
direction of Cobalt clients. Notwithstanding any of the foregoing, at all times
Cobalt shall have complete control over Cobalt Client Web sites.
2. OBLIGATIONS OF GE
A. GE will provide Cobalt with direction on the automobile extended
warranty business necessary to develop the Specifications and for Cobalt to
perform its development obligations. GE will provide Cobalt with the software
code and interface components of its Consumer Direct extended warranty
origination system and with algorithms for extended warranty pricing to be
incorporated into Dealer Direct. GE will cooperate with Cobalt to enable direct
feeds of extended warranty and other data from Cobalt systems to GE and to
facilitate reporting, as the parties shall reasonably agree. GE will pay to
Cobalt, a one time fee for deployment of Dealer Direct, according to a Statement
of Work, which the parties shall cooperate in preparing.
B. GE will provide Cobalt's sales force with training on Dealer
Direct and Consumer Direct, all necessary sales collateral, and telephone
support to Cobalt Clients through a toll-free number support line. GE will
support Dealer Direct and Consumer Direct customers at a service standard
consistent with its existing customers and in a manner that is consistent with
that advertised in GE sales collateral.
C. GE will pay Cobalt extended warranty origination fees for each
extended warranty sold through Dealer Direct or Consumer Direct, unless
otherwise prohibited by law. Both parties recognize that payments to Cobalt
Clients and Cobalt Affiliates may also be necessary from time-to-time in the
course of business and that such payments will be negotiated in good faith.
Cobalt may, at its discretion, rout Consumer Direct extended warranty leads to
Dealer Web sites from DEALERNET. To the extent that sales channel conflicts
arise over pricing, both parties agree to negotiate in good faith to resolve
such issues.
Fees payable to Cobalt shall be:
Cobalt Dealer Affiliate
------ ------ ---------
Dealer Direct electronic origination TBD TBD N/A
Dealer site consumer direct origination TBD TBD N/A
DEALERNET consumer direct origination TBD N/A N/A
Private label DEALERNET consumer direct origination TBD N/A TBD
D. Except for GE and its agents, Cobalt shall be the exclusive
distributor for Dealer Direct.
3. TERM. The term of the Definative Agreement shall be three years from
the date of signing.
4. ISSUANCE OF WARRANT. Upon execution of the Definitive Contemplated
Agreement, Cobalt will issue to GE, or its designated affiliate, warrants to
purchase up to 100,000 shares of Cobalt common stock at a price equal to the
offering price at Cobalt's initial public offering. The warrants shall be
exercisable for a period of 30 days from the date of Cobalt's final prospectus.
II. Cooperation.
GE and Cobalt agree to use their best efforts to take, or cause to be
taken, such action to execute and deliver the Definitive Contemplated Agreement
and such additional documents and instruments, and to do, or cause to be done,
all things necessary to consummate and make effective the transactions
contemplated by this Letter Agreement within 30 days of the date of this Letter
Agreement. The Definitive Contemplated Agreement shall contain definitive terms
consistent with the terms of this Letter Agreement, and shall contain such
additional terms and conditions as are customarily found in agreements of this
nature and complexity.
GE and Cobalt agree to use good faith efforts to explore further
strategic opportunities such as potential cooperative training programs.
III. Binding Effect
This Letter Agreement shall be non-binding, other than the obligation of
each party to use its best efforts to negotiate and execute the Definitive
Contemplated Agreement.
IV. Miscellaneous
This Letter Agreement (1) may not be assigned, in whole or in part, by
either party without the prior written consent of the other party, provided that
GE may assign this Letter Agreement to one or more of its affiliated
corporations; (2) constitutes the entire agreement of the parties and supersedes
all prior understandings, whether written or oral, between the parties thereto;
(3) may be executed in multiple counterparts, each of which shall be deemed an
original,
but all of which together shall constitute one and the same agreement; and
(4) will be interpreted and construed in accordance with, and will be
governed by, the laws of the State of California.
Please indicate your agreement to the terms of this Letter Agreement by
signing below and returning a copy of the signed Letter Agreement to the
attention of the undersigned.
Sincerely,
The Cobalt Group, Inc.
By:
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David Douglass
Chief Financial Officer and Vice
President of Operations
GE Capital Management Corporation
By:
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Daniel C. Munson
President
Date:
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