-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HxreP6zUrB5HcP37Q3mxTINBFCr1KqPO/ov69an8yLNAfG5R4DC50xm0S8btCxCh AgV+94P7LmgNDpD2655WHg== 0000912057-01-506495.txt : 20010409 0000912057-01-506495.hdr.sgml : 20010409 ACCESSION NUMBER: 0000912057-01-506495 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010402 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EBIX COM INC CENTRAL INDEX KEY: 0000814549 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 770021975 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-15946 FILM NUMBER: 1591755 BUSINESS ADDRESS: STREET 1: 3501 ALGONQUIN RD STREET 2: STE 500 CITY: ROLLING MEADOWS STATE: IL ZIP: 60008 BUSINESS PHONE: 8475063100 MAIL ADDRESS: STREET 1: 3501 ALGONQUIN ROAD CITY: ROLLING MEADOWS STATE: IL ZIP: 60008 FORMER COMPANY: FORMER CONFORMED NAME: DELPHI INFORMATION SYSTEMS INC /DE/ DATE OF NAME CHANGE: 19920703 10-K 1 a2042365z10-k.txt 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-15946 EBIX.COM, INC. (Exact name of registrant as specified in its charter) Delaware 77-0021975 (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation) 1900 E. Golf Road Schaumburg, Illinois 60173 (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 789-3047 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Title of each class Common Stock, par value $0.10 per share Preferred Share Purchase Rights Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K. / / As of March 1, 2001, the number of shares of Common Stock outstanding was 11,382,182. As of such date, the aggregate market value of Common Stock held by nonaffiliates, based upon the last sale price of the shares as reported on the NASDAQ SmallCap Market on such date, was approximately $5,634,931 (For this purpose, the Company has assumed, without determining, that directors, executive officers, and holders of more than 10% of the Company's shares are affiliates). Documents Incorporated by Reference -- Portions of the registrant's definitive proxy statement relating to its 2001 Annual Meeting of Stockholders are incorporated by reference into Part III. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EBIX.COM, INC. INDEX TO ANNUAL REPORT ON FORM 10-K
PAGE REFERENCE -------------- PART I Item 1. Business.................................................... 3 Item 2. Properties.................................................. 6 Item 3. Legal Proceedings........................................... 6 Item 4. Submission of Matters to a Vote of Security Holders......... 7 PART II Item 5. Market for Registrant's Common Stock and Related Stockholder Matters..................................................... 8 Item 6. Selected Financial Data..................................... 9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 9 Item 7A. Quantitative and Qualitative Disclosure About Market Risk... 16 Item 8. Financial Statements and Supplementary Data................. 18 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................... 43 PART III Item 10. Directors and Executive Officers of the Registrant.......... 43 Item 11. Executive Compensation...................................... 43 Item 12. Security Ownership of Certain Beneficial Owners and Management.................................................. 43 Item 13. Certain Relationships and Related Transactions.............. 43 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K......................................................... 44
2 PART I ITEM 1. BUSINESS ebix.com, Inc. (the "Company"), formerly Delphi Information Systems, Inc., was founded in 1976 as Delphi Systems, Inc., a California corporation. In this report, ebix.com, Inc. is referred to as the "Company" while ebix.com (1) refers to the Company's website, including the Company's Internet browser-based products described below. In 1983, Delphi Information Systems, Inc., a Delaware corporation, was formed and acquired all of the outstanding shares of Delphi Systems, Inc. in an exchange offer. In June 1987, Delphi Systems, Inc. was merged into and with Delphi Information Systems, Inc. On July 23, 1996, the Company acquired a majority interest, and on January 1, 1999, the Company acquired the remaining minority interest in Complete Broking Systems ("CBS") of Auckland, New Zealand. On March 23, 1998, the Board of Directors adopted a resolution to change the Company's fiscal year end to December 31 effective in April 1998. On October 22, 1999, the Company's shareholders approved a proposal to amend the Certificate of Incorporation to change the name of the Company from Delphi Information Systems, Inc. to ebix.com, Inc. The Company is an international provider of software and Internet-based solutions for the insurance industry. Historically and during 2000, the Company's revenue has been derived primarily from the licensing and sale of software comprised of proprietary software and third-party software (16.7% of revenue in 2000) and from professional, maintenance, and support services (83.3% of revenue in 2000). Professional services include consulting, implementation, training, and project management provided to the Company's customers with installed systems and those in the process of installing systems. The Company's software customer list includes a majority of the largest 100 insurance brokerages and top 200 agencies in the United States and Canada, and many of the largest global brokers. The Company's software operates on approximately 75,000 workstations and terminals at more than 2,000 customer sites. Information on the Company's revenues, fixed assets and goodwill in different geographic areas is furnished in Note 15 to the Consolidated Financial Statements, included elsewhere herein. Since the 1999 launching of the ebix.com website, the Company's development focus has changed to the development of this website, which includes transaction-oriented business to consumer and business to business processes over the Internet. PRODUCTS--The Company's product strategy focuses on the introduction and the successful commercialization of ebix.com. ebix.com is a website designed to meet the insurance needs of both the consumer and the insurance professional. ebix.com includes a virtual marketplace, ebix.mall, where consumers can define their desired policy coverages and seek competitive quotes from a number of agents, brokers and carriers in a timeframe defined by the consumer. ebix.com also includes ebix.link, an Internet browser-based product providing electronic information transmission between insurance carriers and insurance brokers. ebix.mall generates revenues through transaction fees and acceptance fees (currently, charges payable by an agent, broker or carrier, as the case may be, are $1.00 upon quoting and $20.00 upon processing a sale of a policy through the Company's site). ebix.link is expected to generate revenues through transaction fees. Although there were transactions on the website in 2000, the amount of revenue recognized to date has been immaterial. Transactions have not occurred on the website for ebix.link. - ------------------------ (1) ebix.com is a registered trademark of ebix.com, Inc. 3 In connection with the development of the website, the Company, in August 1999, entered into agreements with Hewlett-Packard and Infospace. See Notes 11 and 14 to the Consolidated Financial Statements, included elsewhere herein. Because the Company does not have the substantial capital necessary at this time to adequately promote the website, the Company cannot predict whether, when or how the website will generate substantial revenues. The Company's agreement with BRiT Insurance Holdings plc is intended to address these concerns. See Recent Developments, in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. In January 2001, the Company began marketing the ebixasp product. ebixasp is a web enabled system for insurance agencies to manage their businesses. This product is expected to generate revenues through initial registration and ongoing monthly subscription fees based on the number of personnel accessing the software on a concurrent basis. As of March 1, 2001, this product has not generated revenues. The Company continues to provide the agency management software product line which is comprised of "ebix.global" (formerly cd.global), a modular, state of the art, agency management solution providing flexibility and the ability to handle unstructured data and complex risk, and "ebix.one" (formerly cd.one), a structured system utilizing many features of the Company's previous products. The Company also continues to service but no longer sells six "legacy" products including: INfinity, INSIGHT, PC-ELITE, Insurnet, SMART, and Vista. The legacy products provide basic functions such as policy administration, claims handling, accounting, and financial reporting. The Company expects to maintain and support the legacy products as long as there is adequate economic and strategic justification. The Company will continue to encourage customers utilizing legacy products to migrate to newer products. Since the Company's exit from the hardware sector in the second quarter of the fiscal year ended March 31, 1997, the Company has continued to receive commissions from hardware vendors for product referrals although this is not a material source of revenue for the Company. The software products offered by the Company range in price from $350 to $1,700 on a per license basis, but the total contract value for certain multiple-site global brokers is over $1,000,000. In the fiscal year ended December 31, 2000 ("Fiscal 2000") and in the nine month transition period ended December 31, 1998 ("Transition Period 1998"), one domestic customer (including its foreign subsidiary), a New York Stock Exchange listed multi-national insurance company, accounted for approximately 12% and 16%, respectively, of consolidated revenue. There were no accounts receivable relating to this customer at the end of both Fiscal 2000 and Transition Period 1998. In the fiscal year ended December 31, 1999 ("Fiscal 1999"), no customer represented more than 10% of consolidated revenue. SYSTEM DESIGN AND ARCHITECTURE--The Company's new product offerings utilize the latest internet based architecture. "ebix.global" is a client/server based system, which runs on an Oracle relational database software technology. "ebix.one" is operational on Pervasive database software. PRODUCT DEVELOPMENT--At December 31, 2000, the Company employed 14 full-time employees and 20 offshore contract engineers engaged in product development activities. These activities include research and development of software enhancements such as adding functionality, improving usefulness, increasing responsiveness, adapting to newer software and hardware technologies and developing and maintaining the website. Product development expenditures were $3,938,000, $5,452,000, and $3,764,000 in Fiscal 2000, Fiscal 1999, and Transition Period 1998, respectively. 4 COMPETITION--Management believes its principal competition is represented by four companies, two of which provide client/server based software systems that are comparable to those offered by the Company and two of which provide websites devoted to insurance sales. These companies are larger than the Company and may have greater financial resources. The Company is not aware of any other companies that offer software that specifically addresses the independent agency marketplace. However, certain large hardware suppliers do sell systems and systems' components to independent agencies. The Company, to a much lesser extent, also experiences competition from small, independent or freelance developers and suppliers of software who sometimes work in concert with hardware companies to supply systems to independent agencies. The Company believes that most insurance carriers are in the process of reducing or eliminating their in-house agency and brokerage efforts. Nevertheless, some insurance carriers continue to operate subsidiaries which actively compete with the Company. These carriers have much greater financial resources than the Company and have in the past subsidized the automation of independent agencies through various incentives offered to promote the sale of the carriers' insurance products. Accordingly, there can be no assurances that insurance carriers will continue to withdraw from competition with the Company. Key competitive factors in the Company's software and services market are product technology, features and functions, ease of use, price, reputation, reliability, effects of insurance regulation, and quality of customer support and training. Management believes that overall, the Company competes favorably with respect to these factors. Key features of the Company's new ebix.com website products that the Company believes will be of competitive significance include the: (i) ability to complete end-to-end conversion of data from input to policy issuance, (ii) offering of both personal and commercial lines, (iii) provision of a new market to insurance brokers, insurance carriers and agents for expansion of their business, (iv) affording to insurance customers a marketplace in which insurance can be priced on an objective competitive basis, and (v) ability to complete transactions online. Management believes that overall, the Company competes favorably with respect to these factors. PROPRIETARY RIGHTS--The Company regards its software as proprietary and attempts to protect it with copyrights, trade secret laws and restrictions on disclosure and transferring title. Despite these precautions, it may be possible for third parties to copy aspects of the Company's products or, without authorization, to obtain and use information which the Company regards as trade secrets. Existing copyright law affords only limited practical protection and the Company's software is unpatented. DEFERRED REVENUE--The Company traditionally invoices software maintenance and support on a quarterly or annual basis in advance of providing the service. The software maintenance fees are recorded as deferred revenue and recognized ratably over the term of the respective software maintenance agreements. EMPLOYEES--At December 31, 2000, the Company had 93 employees, including 18 employees in sales and marketing, 14 employees in product development, 43 employees in customer service and operations, and 18 employees in general management, administration and finance. None of the Company's employees are presently covered by a collective bargaining agreement. Management believes that employee relations are good. RECENT DEVELOPMENTS--See Management's Discussion and Analysis of Financial Condition and Results of Operations, Recent Developments, in Item 7. 5 EXECUTIVE OFFICERS--The executive officers and senior management of the Company are as follows:
NAME AGE POSITION - ---- -------- ---------------------------------------- Robin Raina.......................... 33 President, Chief Executive Officer Richard J. Baum...................... 62 Senior Vice President-Finance & Administration, Chief Financial Officer and Secretary
The executive officers of the Company are elected annually by the Board. ROBIN RAINA, 33, was elected a director of the Company in February, 2000. Mr. Raina joined the Company in October 1997 as Vice President--Professional Services and was promoted to Senior Vice President--Sales and Marketing in February 1998. Mr. Raina was promoted to Executive Vice President, Chief Operating Officer in December 1998. Mr. Raina was appointed President effective August 2, 1999 and Chief Executive Officer effective September 23, 1999. Prior to joining the Company, from 1990 to 1997, Mr. Raina held senior management positions for Mindware/BPR serving in Asia and North America. While employed by Mindware/BPR, an international technology consulting firm, Mr. Raina was responsible for managing projects for multinational corporations including setting-up offshore laboratories, building intranets, managing service bureaus and support centers, providing custom programming, and year 2000 conversions. Mr. Raina holds an Industrial Engineering degree from Thapar University in Punjab, India. Richard J. Baum has been Senior Vice President--Finance & Administration, Chief Financial Officer and Secretary since July 21,1999, having joined the Company as Senior Controller in June 1999. Since 1988 he had been President of Consulting Capabilities Corp., a general business consulting firm specializing in turnaround and crisis management, which became inactive when he joined the Company. His prior executive level posts include Chief Financial Officer of General American Equities (1983-1987), Vice President of American Invesco Corp (1979-1983), Chief Financial Officer of Norlin Music, Inc. (1977-1979), Chief Financial Officer and member of the Board of Midas International Corp., (1972-1977). He is a CPA and holds an MBA from the University of Chicago. ITEM 2. PROPERTIES The Company's corporate headquarters are in Schaumburg (a suburb of Chicago), Illinois, where it leases approximately 6,000 square feet of office space. Substantially all corporate executive and administrative functions are located in Schaumburg. The Schaumburg lease expires in December 2001. The Company and its subsidiaries lease additional office space of approximately 11,300 square feet in Atlanta, Georgia; approximately 10,000 square feet in Billerica, Massachusetts, which is currently being subleased; approximately 12,000 square feet in Walnut Creek (San Francisco), California; approximately 5,000 square feet in Pittsburgh, Pennsylvania; approximately 6,000 square feet in Scarborough, (Toronto) Canada until December 2000 when the office was closed; approximately 2,800 square feet in Auckland, New Zealand; approximately 2,500 square feet in Sydney, Australia; approximately 1,000 square feet in London, England until December 2000 when the office was closed; and approximately 1,000 square feet in Singapore. Management believes its facilities are adequate for its current needs and that suitable additional or substitute space will be available as needed. ITEM 3. LEGAL PROCEEDINGS In the normal course of business, the Company is a party to various legal proceedings. The Company does not expect that any currently pending proceedings will, after giving effect to reserves and insurance, have a material adverse effect on its business, results of operations or financial condition. 6 On August 11, 2000, the Company was advised that the Securities and Exchange Commission had issued a formal Order of Investigation and subpoenaed documents relating to the Company's financial reporting since April 1, 1997, including, in particular, revenue recognition, software development cost capitalization, royalty costs, and classification of cash receipts. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the Company's Annual Meeting of Stockholders, held on November 20, 2000, the following members were elected to the Company's Board of Directors, each by the vote indicated to the right of such nominee's name:
NOMINEE FOR WITHHELD - ------- ---------- --------- Yuval Almog........................................... 8,854,737 1,429,989 Douglas C. Chisholm................................... 10,272,850 11,876 Dennis Drislane....................................... 10,272,850 11,876 William R. Baumel..................................... 10,188,863 95,863 Larry G. Gerdes....................................... 10,269,663 15,063 Robin Raina........................................... 10,271,364 13,362 William W. G. Rich.................................... 10,272,850 11,876 Roy L. Rogers......................................... 10,272,850 11,876
Abstentions and broker non-votes were not counted as either a vote for or withheld from the nominees for director and had no effect in determining the outcome of the election for directors. 7 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS MARKET INFORMATION The principal market for the Company's Common Stock is the Nasdaq SmallCap Market. The Company's Common Stock trades under the symbol "EBIX". As of March 1, 2001, there were 102 stockholders of record. The Company has not paid dividends on its Common Stock to date. There are no plans in the foreseeable future to do so. The following tables set forth the high and low closing bid prices for the Company's Common Stock for each calendar quarter in Fiscal 2000 and Fiscal 1999.
TWELVE MONTHS ENDED DECEMBER 31, 2000 HIGH LOW - ----------------- -------- -------- First quarter............................................... $14.00 $9.00 Second quarter.............................................. 12.38 3.13 Third quarter............................................... 6.25 3.13 Fourth quarter.............................................. 3.50 .47
TWELVE MONTHS ENDED DECEMBER 31, 1999 HIGH LOW - ----------------- -------- -------- First quarter............................................... $11.31 $7.56 Second quarter.............................................. 10.50 7.94 Third quarter............................................... 9.75 6.50 Fourth quarter.............................................. 11.19 6.69
As of March 1, 2001 there were 11,382,182 shares of Common Stock outstanding. During fiscal 2000, the Company sold securities that were not registered under the Securities Act of 1933 as follows: (1) The Company sold a total of 595,700 shares of its Common Stock on various dates in 2000 for an aggregate consideration of $4,467,750 to persons who held warrants issued in private placements by the Company in 1996 and 1997. The consideration paid per share consisted of the surrender of a warrant with respect to one share and $7.50 in cash. The exemption claimed from registration under the Securities Act of 1933 was Section 4(2) thereof, exempting transactions by an issuer not involving a public offering, based upon the fact that the sales were made exclusively to holders of warrants that had been issued in an earlier private placement. The shares issued on exercise of the warrants were subject to restrictions on resale. (2) On various dates in 2000, the Company granted options on 42,000 shares of Common Stock to directors for no payment in recognition of service under its Director Stock Option Plan. The exemption claimed from registration under the Securities Act of 1933 was Section 4(2) thereof, exempting transactions of an issuer not involving a public offering, based upon the fact that the options were granted exclusively to the Company's directors, sophisticated persons with a preexisting relationship with the Company. The options issued are subject to restrictions on transfer. 8 ITEM 6. SELECTED FINANCIAL DATA CONSOLIDATED FINANCIAL HIGHLIGHTS (IN THOUSANDS, EXCEPT PER SHARE DATA)
FISCAL YEARS ENDED YEAR YEAR NINE MONTHS MARCH 31, ENDED ENDED ENDED ------------------- DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998 1998 1997 ----------------- ----------------- ----------------- -------- -------- RESULTS OF OPERATIONS: Revenue........................ $ 11,764 $ 12,511 $13,402 $20,926 $27,714 Operating loss................. (11,455) (19,020) (5,346) (4,382) (6,028) NET LOSS....................... $(11,374) $(19,060) $(5,754) $(3,806) $(6,037) NET LOSS PER SHARE: (1) Basic and diluted.............. $ (1.00) $ (2.05) $ (0.78) $ (0.52) $ (0.99) SHARES USED IN COMPUTING PER SHARE DATA: (1) Basic and diluted.............. 11,348 9,279 7,395 7,347 6,093 FINANCIAL POSITION: Total assets................... $ 6,562 $ 13,389 $ 8,063 $ 9,702 $17,838 Short-term debt................ 106 217 4,032 1,923 1,600 Long-term debt................. -- 106 413 210 -- Stockholders' equity (deficit).................... $ (3,264) $ 2,983 $(4,517) $ 1,256 $ 4,513
- -------------------------- (1) Net loss per share and share data restated to reflect the one-for-five reverse stock split effective May 8, 1998. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company's current product strategy is focused on the design, development and successful commercialization of ebix.com, the Company's e-commerce insurance portal, which was launched on September 8, 1999. ebix.com is a website designed to meet the insurance needs of both the consumer and the insurance professional, consisting of ebix.mall and ebix.link. ebix.mall is a virtual marketplace, where consumers can define their desired policy coverages and seek competitive quotes from a number of agents, brokers and carriers in a timeframe defined by the consumer. ebix.link, an Internet browser-based product, provides electronic information transmission between insurance carriers and insurance brokers. Although transactions occurred on the website for ebix.mall in 1999 and 2000, and the Company began to generate revenue on ebix.mall in 2000, the amount of revenue recognized to date has been immaterial. Transactions have not occurred on the website for ebix.link. ebix.mall generates revenues through transaction fees and acceptance fees (currently, charges payable by an agent, broker or carrier, as the case may be, are $1.00 upon quoting, and $20.00 upon processing a sale of a policy through the Company's site). ebix.link is expected to generate revenues through transaction fees. In January 2001, the Company began marketing the ebixasp product. ebixasp is a web enabled system for agencies to manage their business. This product is expected to generate revenues through initial registration and ongoing monthly subscription fees based on the number of personnel accessing the software on a concurrent basis. Because the Company does not have the substantial capital necessary at this time to adequately promote the website, the Company cannot predict whether, when or how the website will generate substantial revenues. The Company's agreement with BRiT Insurance Holdings plc is intended to address these concerns. See Recent Developments, below, in this Item 7. 9 The Company continues to provide the agency management software product line which is comprised of "ebix.global" (formerly cd.global), a modular, state of the art, agency management solution providing flexibility and the ability to handle unstructured data and complex risk; and "ebix.one" (formerly cd.one), a structured system utilizing many features of the Company's previous products. The Company also continues to service but no longer sells six "legacy" products including: INfinity, INSIGHT, PC-ELITE, Insurnet, SMART, and Vista. The legacy products provide basic functions such as policy administration, claims handling, accounting, and financial reporting. The Company expects to maintain and support the legacy products as long as there is adequate economic and strategic justification. The Company will continue to encourage customers utilizing legacy products to migrate to newer products. The insurance industry has undergone significant consolidation over the past several years driven by the need for, and benefits from, economies of scale and scope in providing low-cost insurance. Consolidation has involved both insurance brokerages, the Company's primary customers, and insurance companies, and is directly impacting the manner in which insurance products are distributed. Management believes the insurance industry will continue to experience significant changes in the next several years to meet the changing distribution model. Changes in the insurance industry may create opportunities and challenges for the Company. Management believes consolidation will force brokerages to decrease distribution costs and eliminate labor-intensive tasks via automation. Competition will force brokerages to increase service levels via improved automated processes such as quoting and claims processing. Management believes that the Company can partner with customers to provide integrated information management solutions, and fully leverage information technology and services. Management expects the consolidation of the insurance industry to create a marketplace of fewer yet more sophisticated brokers and agents. In such an environment, the Company could be subject to heightened effects of competition, particularly with respect to product functionality, service and price. RECENT DEVELOPMENTS On March 30, 2001, the Company entered into an agreement (the "Agreement") with BRiT Insurance Holdings plc ("BRiT") for BRiT to invest $7,000,000 in cash in newly issued Company Common Stock at a price of $1.25 per share. BRiT will also exchange a 28% equity position, approximately half of its ownership, in Insurance Broadcast Systems, Inc. ("IBS"), a privately held company in the insurance related electronic education business, for an additional 1,344,000 shares of Company Common Stock. The Agreement also contemplates that the Company and BRiT will negotiate an agreement, expected to be entered into by May 2001, for the Company to receive fees for reviewing, developing and servicing BRiT's e-commerce infrastructure. The Agreement is contemplated to be consummated in two closings, the first, a BRiT cash purchase of 2,240,000 shares for $2,800,000, and the second covering the balance of the cash investment and the exchange for IBS stock. Each closing is subject to conditions typical in such transactions; the second is also subject to Company stockholder approval of the transaction and of a charter amendment authorizing additional shares, and execution of the BRiT e-commerce strategy agreement. The Company expects the first closing to occur in mid-April, and the second closing to occur in June. BRiT has the right to designate two members of the Company's board of directors following the second closing. After the issuance of Common Stock in both closings pursuant to the Agreement, BRiT will own approximately 38% of the Company's outstanding Common Stock. BRiT is entitled to have the Company register its stock for sale. In connection with the Agreement, the Company terminated its Stockholder Rights Plan, effective immediately, but BRiT has agreed not to acquire 49% or more of the Company's Common Stock without the approval of the the Company's Board of Directors. 10 In October 2000, the Company signed an agreement with the AltaVista Company to allow ebix.com to own exclusive rights to all advertising and promotional content on AltaVista's insurance channel as developed by AltaVista and the Company and included in the AltaVista website beginning December 2000. The term of the agreement expires December 2001. In February 2001, the Company signed an agreement with About.com, Inc. to create and maintain an Insurance Center channel on the About website that will offer to service the insurance needs of About's users. The agreement, designed to drive traffic to the co-branded Insurance Center on About.com, comprises content integration, co-branding, sponsorship and advertising. The term of the agreement expires on the earlier of the delivery of 500,000 filled application forms or thirty months from the effective date. In the interest of making the comparisons of the results of operations in this report as meaningful as possible (in light of the effects of the change in the Company's fiscal year), the discussion below focuses on Fiscal 2000 compared to Fiscal 1999 and on Fiscal 1999 compared to the pro forma twelve months ended December 31, 1998. RESULTS OF OPERATIONS EBIX.COM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS)
PRO FORMA TWELVE TRANSITION YEAR YEAR MONTHS PERIOD ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2000 1999 1998 1998 ------------ ------------ ------------ ------------ Revenue: Software.................................... $ 1,965 $ 1,438 $ 2,613 $ 2,084 Services and other.......................... 9,799 11,073 16,135 11,318 ------- ------- ------- ------- Total revenue........................... 11,764 12,511 18,748 13,402 Operating expenses: Software costs.............................. 84 1,217 486 1,469 Services and other costs.................... 6,309 9,168 7,744 6,190 Product development......................... 3,938 5,452 5,451 3,764 Sales and marketing......................... 5,098 5,416 3,010 2,109 General and administrative.................. 7,552 9,903 6,478 5,026 Amortization................................ 238 375 222 190 ------- ------- ------- ------- Total operating expenses................ 23,219 31,531 23,391 18,748 ------- ------- ------- ------- Operating loss.............................. (11,455) (19,020) (4,643) (5,346)
TOTAL REVENUE--The Company's revenue has been derived from the licensing and sale of proprietary software and third party software ("Software") and from professional services, maintenance services, and support services ("Services"). Professional services include consulting, implementation, training and project management provided to the Company's customers with installed systems and those in the process of installing systems. Total revenue is comprised of software revenue and services revenue. - Total revenue for Fiscal 2000 decreased $747,000 or 6.0% from Fiscal 1999. - Total revenue for Fiscal 1999 decreased $6,237,000 or 33.3% from the comparable prior twelve-month period ended December 31, 1998. 11 SOFTWARE REVENUE-- Software revenue is comprised of revenue from the sale of ebix (formerly "cd") products, current legacy products, and other third party software. Subsequent to the Company's exit from the hardware sector in Fiscal 1997, the Company continues to receive commissions from hardware vendors for product referrals although this is not a material source of revenue for the Company. These commissions are included in other income. - Total software revenue for Fiscal 2000 increased $527,000 or 36.7% from Fiscal 1999. Software revenue growth was due to the implementation of additional software seats purchased by existing customers. Substantially all of the software sold was proprietary software which does not result in obligations to third party providers. - Total software revenue for Fiscal 1999 decreased $1,175,000 or 45.0% from the comparable prior twelve-month period ended December 31, 1998. This decrease was due to Y2K purchase deferrals and a general decline in the software market for the Company's products. SERVICES REVENUE-- - Total services revenue for Fiscal 2000 decreased $1,274,000 or 11.5% from Fiscal 1999. This decrease is due to a decrease in support revenue associated with legacy products and decreases in consulting and custom programming revenue. - Total services revenue for Fiscal 1999 decreased $5,062,000 or 31.4% from the comparable prior twelve-month period ended December 31, 1998. This decrease is due to a decrease in support revenue associated with legacy products and decreases in consulting and custom programming revenue. SOFTWARE COSTS--Cost of Software revenue includes the cost of third party software and the amortization of purchased software cost. - Total software costs for Fiscal 2000 decreased $1,133,000 or 93.1% from Fiscal 1999. This decrease is due to a decrease in sales of software licensed by third party providers and the costs associated with such sales. - Total software costs for Fiscal 1999 increased $731,000 or 150.4% from the comparable prior twelve-month period ended December 31, 1998. This increase is due to royalties incurred from the sale of third party software. SERVICES AND OTHER COSTS--Cost of Services revenue includes costs associated with support, consulting, implementation and training services. - Total services and other costs for Fiscal 2000 decreased $2,859,000 or 31.2% from Fiscal 1999. This decrease is related to a reduction in staffing levels for consultants, trainers and support staff. - Total services and other costs for Fiscal 1999 increased $1,424,000 or 18.4% from the comparable prior twelve-month period ended December 31, 1998. This increase is due to increased support costs associated with payments made under royalty agreements to buy back support business from a competitor. PRODUCT DEVELOPMENT EXPENSES-- - Total product development expenses for Fiscal 2000 decreased $1,514,000 or 27.8% from Fiscal 1999. This decrease reflects a change in the Company's focus from the agency management products to the website, which at this time requires less product development. 12 - Total product development expenses for Fiscal 1999 were comparable to the prior twelve-month period ended December 31, 1998. This is related to development efforts associated with transferring the ebix.global and ebix.one products to the website. SALES AND MARKETING EXPENSES-- - Total sales and marketing expenses for Fiscal 2000 decreased $318,000 or 5.9% from Fiscal 1999. This decrease is attributable to a reduction in staffing levels partially offset by the increased warrant expense in 2000 (arising from the fact that it relates to warrants issued in mid 1999 and outstanding throughout 2000) and to the addition in the fourth quarter 2000 marketing expense, related to the AltaVista arrangement, which is expected to continue (although at a recently negotiated reduced rate). - Total sales and marketing expenses for Fiscal 1999 increased $2,406,000 or 79.9% from the comparable prior twelve-month period ended December 31, 1998. This increase is primarily attributable to the ebix.com product promotion. GENERAL AND ADMINISTRATIVE EXPENSES-- - Total general and administrative expenses for Fiscal 2000 decreased $2,351,000 or 23.7% from Fiscal 1999. This decrease is attributable to a reduction in staffing levels partially offset by (i) professional services costs related to the restatement of its financial statements for the transition period ended December 31, 1998 and the fiscal year ended March 31, 1998, (ii) a $359,000 loss related to the sublease of property, and (iii) a $285,000 expense related to an arbitration. - Total general and administrative expenses for Fiscal 1999 increased $3,425,000 or 52.9% from the comparable prior twelve-month period ended December 31, 1998. This increase is due to higher expenditures for bad debts, legal and audit fees, costs associated with the opening of the London, Singapore, and Atlanta offices, employee benefits, and compensation expense related to the issuance of stock options and warrants. AMORTIZATION - Total amortization of goodwill for Fiscal 2000 decreased $137,000 or 36.5% from Fiscal 1999. This decrease is attributable to the cessation of amortization related to a non-compete agreement in March 2000. - Total amortization of goodwill for Fiscal 1999 increased $153,000 or 68.9% from the comparable prior twelve-month period ended December 31, 1998. This increase is attributable to the inclusion of amortization of the non-compete agreement which began in January 1999. LIQUIDITY AND CAPITAL RESOURCES During Fiscal 2000 the Company experienced negative operating cash flow of $7,663,000. The Company funded cash used in operating activities and investing activities primarily through the use of cash proceeds from the exercise of stock warrants and employee stock options of approximately $4,519,000. Although the cash proceeds resulting from the exercise of stock warrants and options have provided the Company with unused sources of capital, the Company continues to experience operating losses as well as negative cash flows. The Company is therefore faced with liquidity concerns. In addition, because the Company does not have the substantial capital necessary at this time to adequately promote the website, the Company cannot predict whether, when or how the website will generate substantial revenues. The Company's agreement with BRiT Insurance Holdings plc is intended 13 to address these concerns (see Recent Developments above) and the Company believes its cash balances and funds from operations will be sufficient to meet all of its anticipated cash requirements for at least the next 12 months. Although transactions have occurred on ebix.mall in 1999 and 2000, and the Company began to generate revenue on ebix.mall in 2000, the amount of revenue has not been material. Transactions have not occurred on ebix.link in 2000. The Company expects to generate increased traffic to its website, having entered into agreements with AltaVista in Fiscal 2000 and About.com, Inc. in Fiscal 2001. However, there can be no assurance of the volume of traffic or amount of revenue that the ebix.com website will generate. In January 2001, the Company began marketing the ebixasp product. ebixasp is a web enabled system for insurance agencies to manage their business. This product is expected to generate revenues through initial registration and ongoing monthly subscription fees based on the number of personnel accessing the software on a concurrent basis. However, ebixasp has not yet begun generating revenue and there can be no assurances of the amount of revenue that the ebixasp product will generate. PROFESSIONAL SERVICE COSTS--The Company has incurred substantial professional services costs related to the restatement of its financial statements for the transition period ended December 31, 1998 and fiscal year ended March 31, 1998, as filed on June 1, 2000 in the Company's Form 10-K for the year ended December 31, 1999. In light of the presently ongoing Securities and Exchange Commission investigation (see Item 3. Legal Proceedings), the Company anticipates that it may incur substantial professional costs in fiscal 2001. DEFERRED REVENUE AND DEPOSIT LIABILITY--The Company traditionally invoices software maintenance and support in advance of providing the service. The software maintenance fees are recorded as deferred revenue and recognized ratably over the term of the software maintenance agreement. The Company's current liabilities at December 31, 2000 include deferred revenue of $2,706,000 and deposit liabilities of $1,465,000. These obligations are satisfied through normal ongoing operations of the Company's service organization and generally does not require payment to third parties. PRODUCT DEVELOPMENT--At December 31, 2000, the Company employed 14 full-time employees and 20 offshore contract engineers engaged in product development and activities. These activities include research and development of software enhancements, improving usefulness, adaptation to newer software and hardware technologies, and increasing responsiveness. Product development expenditures were $3,938,000, $5,452,000, and $3,764,000, for Fiscal 2000, Fiscal 1999, and Transition Period 1998, respectively. NON-COMPETE NOTE PAYABLE--The Company entered into a non-compete agreement in connection with a January 1991 acquisition. The final installment of $400,000 was due on January 31, 1997, but was subsequently converted to an 11.75% interest bearing unsecured note. As of December 31, 2000, the remaining balance of $119,574 (principal and interest) was due. REDEEMABLE WARRANTS--The Company received approximately $4,467,750 in cash from the exercise of common stock warrants in 2000. These funds have been used to reduce borrowings and fund operating expenses and accounts payable. OTHER WARRANTS--In connection with a May 1996 private equity placement, the Company issued a warrant to the placement agent (the "Agent's Warrant") to purchase 200,000 shares of the Company's common stock at $5.00 per share. The Agent's Warrant is not subject to redemption and expires May 1, 2001. At December 31, 2000, 11,450 shares may still be purchased under this warrant. On August 20, 1999, the Company granted a two year warrant to Hewlett-Packard to purchase 4.9% of the Company's outstanding common stock for $15.00 per share during the first year of the 14 warrant and $20.00 per share during the second year of the warrant. The Company also granted a second warrant to Hewlett-Packard under the same agreement for the purchase of 4.5% of the Company's outstanding common stock during the second year of the term of the agreement for $20.00 per share. The number of shares purchased upon exercise of the warrants will be measured based on the outstanding common stock as of the most recent quarter-end or year-end as reported on the Company's report on Form 10-Q or Form 10-K. At December 31, 2000, the warrants represent the rights to purchase 557,727 and 512,197 shares, respectively. For both warrants, if the fair value of the common stock is greater than the purchase price, Hewlett-Packard may elect to receive shares equal to the value of the warrant in lieu of exercising the warrant with cash. The Company also issued warrants in connection with the InfoSpace.com Internet Promotion Agreement dated August 31, 1999. The first warrant is for the purchase of 250,000 shares of the Company's common stock at a price of $15.00 per share if exercised during the first year of the agreement or $20.00 per share if exercised during the second year of the agreement. The Company also granted a second warrant to InfoSpace.com under the same agreement for the purchase of 4.9% of the Company's outstanding common stock at August 31, 1999, on a fully diluted basis including conversion of this warrant. These warrants represent the rights to purchase 526,572 shares at a price of $15.00 per share if exercised during the first year of the agreement or $20.00 per share if exercised during the second year of the agreement. The second warrant is exercisable in lieu of the Company paying invoices rendered by InfoSpace.com. Because the outstanding warrants expire in 2001 and the market price of the Company's Common Stock has been substantially below the warrant price, the Company currently expects the warrants to expire without exercise. COMMON STOCK OPTIONS--During the twelve months ended December 31, 2000, the Company received approximately $52,000 from the exercise of outstanding stock options. As of December 31, 2000, there are outstanding vested options to purchase approximately 455,000 shares of common stock at an average exercise price of $5.91 per share substantially in excess of recent market price. The majority of outstanding options have expiration dates in excess of six years from December 31, 2000. NEW ACCOUNTING STANDARDS--In June 1999, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 ("Statement 133"), "Accounting for Derivative Instruments and Hedging Activities." This standard requires that an entity recognize derivatives as either assets or liabilities on its balance sheet and measure those instruments at fair value. The Company is adopting this standard, effective during the first quarter of 2001. Based on current circumstances and the fact that the Company does not employ the use of any derivative investments, the Company does not believe that the application of Statement 133 will have a material effect on the Company's financial condition or results of operations. EURO CONVERSION--Effective January 1, 1999, eleven of the fifteen member countries of the European Union (the "participating countries") have agreed to adopt a new common legal currency (the "euro"). The participating countries established fixed conversion rates between their existing sovereign currencies (the "legacy currencies") and the euro. Following the introduction of the euro, the legacy currencies are scheduled to remain legal tender in the participating countries as denominations of the euro between January 1, 1999 and January 1, 2002 (the "transition period"). During the transition period transactions may be settled using either the euro or the participating country's legacy currency on a "no compulsion, no prohibition" basis. Conversion rates will no longer be computed directly from one legacy currency to another but rather will utilize a "triangulation" method specified by European Union regulations whereby payments made in a legacy currency are converted to the euro and subsequently converted to the recipient's desired legacy currency. Beginning January 1, 2002, the participating countries will issue new euro-denominated bills and coins for use in cash transactions. No later than July 1, 2002, the participating countries will withdraw all bills and coins denominated in 15 legacy currencies such that legacy currencies will no longer be legal tender for any transactions, completing the euro conversion. The Company currently has no bank accounts denominated in any legacy currency and has not entered into any material transactions denominated in any legacy currency. The Company has produced enhancements to certain software products marketed in Europe to accommodate the euro conversion process (the "euro module"). The cost to develop the euro module was not material and will be provided at minimal cost to existing customers under maintenance agreements. Management believes the euro module allows for the continued marketing and sale of the Company's products to customers requiring euro conversion capabilities. SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER THE SECURITIES LITIGATION REFORM ACT OF 1995--This Annual Report on Form 10-K contains various forward-looking statements and information that are based on management's beliefs as well as assumptions made by and information currently available to management, including statements regarding future economic performance and financial condition, liquidity and capital resources, acceptance of the Company's products by the market and management's plans and objectives. Such statements are subject to various risks and uncertainties which could cause actual results to vary materially from those stated. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, expected or projected. Such risks and uncertainties include the Company's ability to overcome its recent history of operating losses and declining revenues, the availability and amount of future sources of capital and the terms thereof, the extent to which the Company's ebix.com website can be successfully developed and marketed, the possible effects of the Securities and Exchange Commission's investigation of the Company's financial reporting, the risks associated with future acquisitions, the willingness of independent insurance agencies to outsource their computer and other processing needs to third parties, the Company's ability to continue to develop new products to effectively address market needs in an industry characterized by rapid technological change, the Company's dependence on the insurance industry (and in particular independent agents), the highly competitive and rapidly changing automation systems market, the Company's ability to effectively protect its applications software and other proprietary information, the Company's ability to attract and retain quality management, and software, technical sales and other personnel, the risks of disruption of the Company's Internet connections or internal service problems, the possibly adverse effects of a substantial increase in volume of traffic on the Company's website, mainframe and other servers, possible security breaches on the Company's website, and the possible effects of insurance regulation on the Company's business. Certain of these as well as other risks and uncertainties are described in more detail in the Company's periodic filings pursuant to the Securities Exchange Act of 1934. The Company undertakes no obligation to update any such factors or to publicly announce the results of any of the forward-looking statements contained herein to reflect future events or developments. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company is subject to certain market risks, including foreign currency and interest rates. The Company has foreign subsidiaries in Australia, Canada, New Zealand, Singapore and the United Kingdom (UK) that develop and sell software products and services in those respective countries. The Company is exposed to potential gains and losses from foreign currency fluctuations affecting net investments and earnings denominated in foreign currencies. The Company's primary exposure is to changes in exchange rates for the U.S. Dollar versus the Australian, Canadian, New Zealand and Singapore Dollars and the British pound. In Fiscal 2000, the net change in the cumulative foreign currency translation adjustment account, which is a component of stockholders equity, was an unrealized gain of $92,000. Unrealized foreign currency translation loss of $197,000, and $19,000 were reflected in Fiscal 1999 and the 1998 Transition Period, respectively. 16 ebix.com's exposure to interest rate risk relates to its debt obligations. The Company's market risk at December 31, 2000 is the potential loss arising from adverse changes in interest rates. As further described in Note 7 to the Consolidated Financial Statements included herein at Item 8, prior to Fiscal 1999 the Company's debt consisted primarily of a floating-rate bank line-of credit. There were no borrowings on the line of credit between July 1999 and the loan termination date of January 31, 2001; however, the Company was obligated to pay the lender minimum interest on the sum of $1,600,000. Interest rate risk is estimated as the potential increase in pretax loss resulting from a hypothetical 10% increase in interest rates on the Company's debt. However, there is no current interest rate risk, given the line of credit agreement was terminated on January 31, 2001 and the Company currently has no outstanding long term debt. The Company does not currently use any derivative financial instruments. 17 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEPENDENT AUDITORS' REPORT The Board of Directors ebix.com, Inc.: We have audited the accompanying consolidated balance sheets of ebix.com, Inc. and subsidiaries (the Company) as of December 31, 2000 and 1999, and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for each of the years then ended. In connection with our audits of the consolidated financial statements, we also have audited the consolidated financial statement schedule listed in Item 14(a)2 for the years ended December 31, 2000 and 1999. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ebix.com, Inc. and subsidiaries as of December 31, 2000 and 1999 and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth herein. /s/ KPMG LLP Chicago, Illinois March 30, 2001 18 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and Board of Directors of ebix.com, Inc.: We have audited the accompanying consolidated statements of operations, stockholders' equity (deficit) and cash flows for the nine-month period ended December 31, 1998 of ebix.com, Inc. (formerly known as Delphi Information Systems, Inc.) (a Delaware Corporation) and Subsidiaries as of December 31, 1998. These financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ebix.com, Inc. and Subsidiaries as of December 31, 1998, and the results of their operations and their cash flows for the nine-month period ended December 31, 1998 in conformity with accounting principles generally accepted in the United States. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. Schedule II listed in the index of financial statements is presented for purposes of complying with the Securities and Exchange Commission's rules and is not a part of the basic financial statements. This schedule for the nine-month period ended December 31, 1998 has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states, in all material respects, the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. Arthur Andersen LLP Chicago, Illinois May 26, 2000 19 EBIX.COM, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
DECEMBER 31, DECEMBER 31, 2000 1999 ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents................................... $ 3,060 $ 7,055 Accounts receivable, less allowances of $1,050 and $1,004 Unbilled receivables...................................... -- 120 Trade receivables......................................... 1,980 2,977 -------- -------- Total accounts receivable............................... 1,980 3,097 -------- -------- Other receivables........................................... 12 332 Other current assets........................................ 204 169 -------- -------- TOTAL CURRENT ASSETS.................................... 5,256 10,653 Property and equipment, net................................. 904 2,059 Purchased software, net..................................... -- 97 Goodwill, net............................................... 313 503 Other assets................................................ 89 77 -------- -------- TOTAL ASSETS................................................ $ 6,562 $ 13,389 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Accounts payable and accrued expenses....................... $ 4,326 $ 3,166 Accrued payroll and related benefits........................ 554 827 Current portion of long-term debt........................... 106 217 Current portion of capital lease obligation................. 132 97 Deposit liability........................................... 1,465 2,324 Deferred revenue............................................ 2,706 3,046 -------- -------- TOTAL CURRENT LIABILITIES............................... 9,289 9,677 Long-term debt, less current portion........................ -- 106 Capital lease obligation, less current portion.............. 317 623 -------- -------- Other liabilities........................................... 220 -- -------- -------- TOTAL LIABILITIES........................................... 9,826 10,406 -------- -------- STOCKHOLDERS' EQUITY (DEFICIT): Convertible Series D Preferred stock, $.10 par value, 2,000,000 shares authorized, no shares issued and outstanding at December 31, 2000: 221 shares issued and outstanding at December 31, 1999.......................... -- 49 Common stock, $.10 par value, 20,000,000 shares authorized, 11,382,182 and 10,763,549 issued and outstanding.......... 1,138 1,076 Additional paid-in capital.................................. 80,586 76,687 Deferred compensation....................................... (426) (1,549) Accumulated deficit......................................... (84,540) (73,166) Accumulated other comprehensive loss........................ (22) (114) -------- -------- TOTAL STOCKHOLDERS' EQUITY (DEFICIT)........................ (3,264) 2,983 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)........ $ 6,562 $ 13,389 ======== ========
See accompanying notes to consolidated financial statements. 20 EBIX.COM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED YEAR ENDED NINE MONTHS ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, 2000 1999 1998 ------------ ------------ ----------------- REVENUE: Software........................................... $ 1,965 $ 1,438 $ 2,084 Services and other................................. 9,799 11,073 11,318 -------- -------- -------- TOTAL REVENUE.................................... 11,764 12,511 13,402 OPERATING EXPENSES: Software costs..................................... 84 1,217 1,469 Services and other costs........................... 6,309 9,168 6,190 Product development................................ 3,938 5,452 3,764 Sales and marketing................................ 5,098 5,416 2,109 General and administrative......................... 7,552 9,903 5,026 Amortization of intangibles........................ 238 375 190 -------- -------- -------- TOTAL OPERATING EXPENSES......................... 23,219 31,531 18,748 -------- -------- -------- OPERATING LOSS................................... (11,455) (19,020) (5,346) Interest income.................................... 372 123 -- Interest expense................................... (142) (290) (366) Minority interest.................................. -- -- (102) Other income, net.................................. -- 220 308 -------- -------- -------- Loss before income taxes........................... (11,225) (18,967) (5,506) Income tax provision............................... (149) (93) (248) -------- -------- -------- Net loss........................................... $(11,374) $(19,060) $ (5,754) ======== ======== ======== Basic and diluted net loss per common share........ $ (1.00) $ (2.05) $ (0.78) ======== ======== ======== Basic and diluted weighted average shares outstanding...................................... 11,348 9,279 7,395 ======== ======== ========
See accompanying notes to consolidated financial statements. 21 EBIX.COM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
PREFERRED STOCK COMMON STOCK ADDITIONAL ------------------- --------------------- PAID-IN DEFERRED ACCUMULATED SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION DEFICIT -------- -------- ---------- -------- ---------- ------------ ----------- BALANCE, MARCH 31, 1998........... 221 $ 49 7,395,449 $ 740 $48,717 $ -- $(48,352) Net loss.......................... -- -- -- -- -- -- (5,754) Currency translation adjustment... -- -- -- -- -- -- -- Purchase of fractional shares due to reverse stock split.......... -- -- (35) -- -- -- -- ---- ---- ---------- ------ ------- ------- -------- BALANCES, DECEMBER 31, 1998....... 221 49 7,395,414 740 48,717 -- (54,106) ---- ---- ---------- ------ ------- ------- -------- Net loss.......................... -- -- -- -- -- -- (19,060) Currency translation adjustment... -- -- -- -- -- -- -- Exercise of stock options......... -- -- 231,963 23 1,016 -- -- Exercise of stock warrants........ -- -- 3,113,950 311 22,572 -- -- Acquisition of Delphi Australia... 22,222 2 187 -- -- Short swing profits............... -- -- -- -- 285 -- -- Deferred compensation related to the issuance of options and warrants........................ -- -- -- -- 3,910 (1,549) -- ---- ---- ---------- ------ ------- ------- -------- BALANCE, DECEMBER 31, 1999........ 221 49 10,763,549 1,076 76,687 (1,549) (73,166) ---- ---- ---------- ------ ------- ------- -------- Net loss.......................... -- -- -- -- -- -- (11,374) Currency translation adjustment... -- -- -- -- -- -- -- Conversion of preferred stock..... (221) (49) 9,945 1 48 Exercise of stock options......... -- -- 12,988 2 50 -- Exercise of stock warrants........ -- -- 595,700 59 4,408 -- Contribution of equipment......... -- -- -- -- 66 -- -- Deferred compensation and amortization related to options and warrants.................... -- -- -- -- (673) 1,123 ---- ---- ---------- ------ ------- ------- -------- BALANCE, DECEMBER 31, 2000........ -- -- 11,382,182 $1,138 $80,586 $ (426) $(84,540) ---- ---- ---------- ------ ------- ------- -------- ACCUMULATED OTHER COMPREHENSIVE COMPREHENSIVE (LOSS) INCOME TOTAL LOSS ------------- -------- ------------- BALANCE, MARCH 31, 1998........... $ 102 $ 1,256 Net loss.......................... -- (5,754) $ (5,754) Currency translation adjustment... (19) (19) (19) -------- $ (5,773) ======== Purchase of fractional shares due to reverse stock split.......... -- -- ------ ------- BALANCES, DECEMBER 31, 1998....... 83 (4,517) ------ ------- Net loss.......................... -- (19,060) $(19,060) Currency translation adjustment... (197) (197) (197) -------- $(19,257) ======== Exercise of stock options......... -- 1,039 Exercise of stock warrants........ -- 22,883 Acquisition of Delphi Australia... -- 189 Short swing profits............... -- 285 Deferred compensation related to the issuance of options and warrants........................ -- 2,361 ------ ------- BALANCE, DECEMBER 31, 1999........ (114) $ 2,983 ------ ------- Net loss.......................... -- (11,374) $(11,374) Currency translation adjustment... 92 92 92 -------- $(11,282) ======== Conversion of preferred stock..... -- Exercise of stock options......... -- 52 Exercise of stock warrants........ 4,467 Contribution of equipment......... -- 66 Deferred compensation and amortization related to options and warrants.................... 450 ------ ------- BALANCE, DECEMBER 31, 2000........ $ (22) $(3,264) ------ -------
See accompanying notes to consolidated financial statements. 22 EBIX.COM, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
YEAR ENDED YEAR ENDED NINE MONTHS ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, 2000 1999 1998 ------------ ------------ ----------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss........................................... $(11,374) $(19,060) $(5,754) ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES: Depreciation and amortization of property and equipment........................................ 1,359 764 841 Amortization of intangibles........................ 287 371 190 Stock-based compensation........................... 450 2,361 -- CHANGES IN ASSETS AND LIABILITIES: Trade receivable, net.............................. 997 (68) 1,135 Unbilled receivables, other receivables, and other current assets................................... 393 740 (162) Accounts payable and accrued expenses.............. 1,160 218 870 Accrued payroll and related benefits............... (273) 645 (237) Deposit liability, deferred revenue and other liabilities...................................... (662) 696 1,092 -------- -------- ------- Net cash used in operating activities............ (7,663) (13,333) (2,025) -------- -------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures............................... (138) (894) (184) Purchase of minority interest...................... -- (50) -- -------- -------- ------- Net cash used in investing activities............ (138) (944) (184) -------- -------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of debt................................. (217) (4,120) 2,312 Payments for capital lease obligations............. (588) 389 97 Proceeds from exercise of common stock warrants.... 4,467 22,883 -- Proceeds from exercise of common stock options..... 52 1,039 -- Proceeds from investors short swing profits........ -- 285 -- -------- -------- ------- Net cash provided by financing activities........ 3,714 20,476 2,409 -------- -------- ------- Effect of foreign exchange rates on cash and cash equivalents...................................... 92 (197) (19) Net change in cash and cash equivalents.......... (3,995) 6,002 181 Cash and cash equivalents at the beginning of the period........................................... 7,055 1,053 872 -------- -------- ------- Cash and cash equivalents at the end of the period........................................... $ 3,060 $ 7,055 $ 1,053 ======== ======== ======= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest paid...................................... $ 141 $ 273 $ 355 Income taxes paid.................................. 47 224 21 SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCE ACTIVITY: Conversion of preferred stock to common stock...... 49 -- --
See accompanying notes to consolidated financial statements. 23 EBIX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) NOTE 1--DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: NATURE OF BUSINESS--ebix.com, Inc. (formerly known as Delphi Information Systems, Inc.) and Subsidiaries, (the "Company") market software to insurance agents and brokers operating in the insurance industry, and provide customer support and maintenance services, as well as other implementation and consulting services such as training, data conversion and installation. The Company launched ebix.com on September 8, 1999. ebix.com is a website designed to meet the insurance needs of both the consumer and the insurance professional. ebix.com includes a virtual marketplace, ebix.mall, where consumers can define their desired policy coverages and seek competitive quotes from a number of agents, brokers and carriers in a timeframe defined by the consumer. ebix.com also includes ebix.link, an Internet browser-based product providing electronic transmission between insurance carriers and insurance brokers. The Company is pursuing the successful commercialization of ebix.com. In January 2001, the Company began marketing the ebixasp product. ebixasp is a web-enabled system for insurance agencies to manage their business. FINANCING ISSUES--The Company experienced decreased revenue, and negative operating cash flow, as well as continuing net losses in the twelve months ended December 31, 2000 ("Fiscal 2000"). The Company had experienced significant operating losses in each fiscal year since 1993, along with declining revenue. During these loss periods, the Company financed its operations through bank financing and private placements of equity capital. The Company is therefore faced with liquidity concerns. The Company's agreement with BRiT Insurance Holdings plc is intended to address these concerns. See Note 17. Management continues to believe that the Company is well suited to take advantage of the current market opportunities. The Company will aggressively market its products and services, fund development and monitor costs to ensure the Company's products incorporate state-of-the-art technologies and provide customers with value-added solutions. CONSOLIDATION--The consolidated financial statements include the accounts of ebix.com, Inc., ("ebix USA"), its wholly owned subsidiary, Delphi Information Systems International, Inc., ("Delphi International"), both Delaware corporations, and all subsidiaries of Delphi International. Foreign operations delivered software and provided related services to external customers accounting for approximately 24%, 18%, and 23% of consolidated revenue for Fiscal 2000 and the year ended December 31, 1999 ("Fiscal 99"), and the nine-months ended December 31, 1998 ("Transition Period 1998"), respectively. FISCAL YEAR--Prior to April 1998, the Company's fiscal year consisted of the twelve months ended March 31st. Effective April 1998, the Company changed its year-end to December 31st. RECLASSIFICATION--Certain prior year amounts have been reclassified to conform to the 2000 presentation. REVENUE RECOGNITION--The Company recognizes revenue for license fees from its software products upon delivery, provided that the fee is fixed and determinable, acceptance has occurred, collectibility is reasonably assured and persuasive evidence of an arrangement exists. Revenue from third party software is derived from the licensing of third party software products in connection with sales of the Company's software licenses, and is generally recognized upon delivery together with the Company's license revenue. Training, data conversion, installation and consulting services are generally recognized 24 EBIX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) NOTE 1--DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED) as revenue when the services are performed and collectibility is reasonably assured. Revenue for maintenance and support service is recognized ratably over the term of the support agreement. For certain contracts where services are deemed essential to the functionality of the software and the software has not been accepted by the customer, the software and related service revenue have not been recognized. In addition, all costs incurred in connection with these contracts have been expensed as the Company has been unable to estimate the total cost to achieve customer acceptance. Deferred revenue primarily includes maintenance and support payments or billings that have been received or recorded prior to performance. Deposit liability includes cash that has been received related to software products for which customer acceptance has not occurred. Revenue is allocated to each element of multi-element arrangements based on the price charged for the sale of each element separately. In certain contracts, maintenance for the first year is bundled with software fees. Unbundling of the maintenance is based on the price charged for renewal maintenance. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements." This bulletin provides guidance from the Staff on applying generally accepted accounting principles to revenue recognition in financial statements. The Company adopted SAB 101 in the fourth quarter of 2000. The implementation of SAB 101 did not have a material effect on the financial position or results of operations of the Company. CASH AND CASH EQUIVALENTS--The Company considers all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents. Such investments are stated at cost which approximates fair value. ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS--Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," requires that long-lived assets and certain identifiable intangibles to be held and used by any entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an indication of a potential impairment exists, recoverability of the respective assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate, to the carrying amount, including associated intangible assets, of such operation. If the operation is determined to be unable to recover the carrying amount of its assets, then intangible assets are written down first, followed by the other long-lived assets of the operation, to fair value. Fair value is determined based on discounted cash flows or appraised values, depending upon the nature of the assets. In determining the estimated future cash flows, the Company considers current and projected future levels of income as well as business trends, prospects and market and economic conditions. The carrying amount of the Company's long-lived assets at December 31, 2000 and 1999 primarily represents the original amounts invested less the recorded depreciation and amortization. Management believes the carrying amount of these investments is not impaired. COMPUTER SOFTWARE--Effective as of January 1, 1999, the Company has adopted the provisions of SOP 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use". Accordingly, certain costs to develop internal-use computer software are capitalized provided these costs will be recoverable. During Fiscal 1999, $323 of costs related to the implementation of the 25 EBIX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) NOTE 1--DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED) Company's new accounting system were capitalized and will be amortized over the expected useful life of the new system of 5 years. There were no costs capitalized during Fiscal 2000. SOFTWARE DEVELOPMENT COSTS AND PURCHASED SOFTWARE--The Company's policy is to capitalize internally generated software development costs and purchased software in compliance with Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting for the Costs of Computer Software To Be Sold, Leased or Otherwise Marketed." Under SFAS No. 86, capitalization of software development costs begins upon the establishment of technological feasibility for the product. The establishment of technological feasibility and the ongoing assessment of the recoverability of these costs consider external factors including, but not limited to, anticipated future gross product revenues, estimated economic life and changes in software and hardware technology. During Fiscal 1999 and Transition Period 1998, the Company's internally developed software costs were expensed due to the uncertainty of when technological feasibility was reached and the lack of underlying support. During Fiscal 2000, the Company did not have any research and development expenses eligible for capitalization under SFAS No. 86 given that costs incurred were primarily related to maintenance or were due to the provision of support on previously released software products. Purchased software relates to technology acquired in connection with acquisitions. Prior to Fiscal 1999, purchased software costs were amortized over 60 months. During Fiscal 1999, the amortization period was shortened to 45 months due to the introduction of ebix.com. Amortization expense was $97, $87, and $360 for Fiscal 2000, Fiscal 1999, and Transition Period 1998, respectively. Net purchased software costs at December 31, 2000 and December 31, 1999 consist of the following:
DECEMBER 31, 2000 DECEMBER 31, 1999 ------------------ ------------------ Total cost.................................. $ 345 $ 345 Less accumulated amortization............... (345) (248) ----- ----- -- $ 97 ===== =====
PROPERTY AND EQUIPMENT--Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over the assets' estimated useful lives. Leasehold improvements are amortized over the shorter of the expected life of the improvements or the lease term. Repairs and maintenance are charged to expense as incurred and major improvements are capitalized. Gains and losses resulting from sales or retirements are recorded as incurred, at which time related costs and accumulated depreciation are removed from the accounts. The estimated useful lives are as follows:
ASSET CATEGORY LIFE - -------------- -------- Computer equipment.......................................... 5 Computer software........................................... 3-5 Furniture, fixtures and other leasehold improvements........ 7
GOODWILL--Goodwill is amortized on the straight-line method over 5 years. Accumulated goodwill amortization was $954, $764, and $581, at December 31, 2000, 1999, and 1998, respectively. Goodwill 26 EBIX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) NOTE 1--DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED) amortization expense was $190, $182, and $190 for Fiscal 2000, Fiscal 1999, and Transition Period 1998, respectively. Under certain conditions, such as a change in profitability, the Company estimates the future undiscounted net cash flows before interest of the operating units to which the goodwill relates in order to evaluate impairment. If impairment exists, the carrying amount of goodwill is reduced by the estimated shortfall of cash flows on a discounted basis. INCOME TAXES--The Company follows the asset and liability method of accounting for income taxes pursuant to SFAS No. 109, "Accounting for Income Taxes." Deferred income taxes are recorded to reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. EARNINGS (LOSS) PER SHARE--Basic earnings per share ("EPS") is equal to net income (loss) divided by the weighted average number of shares of common stock outstanding for the period. The weighted average number of common shares outstanding for Fiscal 2000, Fiscal 1999, and Transition Period 1998 were 11,348,000, 9,279,000, and 7,395,000 respectively. Diluted EPS recognizes the dilutive effect of common stock equivalents and is equal to net income divided by the sum of the weighted average number of shares outstanding and common stock equivalents. At December 31, 2000, the Company's common stock equivalents consisted of stock options and common stock warrants. At December 31, 1999, and 1998 the Company's common stock equivalents consisted of stock options, common stock warrants, and convertible preferred stock. Consistent with previous standards, SFAS No. 128 prohibits inclusion of the impact of common stock equivalents in the calculation of EPS when inclusion results in antidilution. Accordingly, for Fiscal 2000, Fiscal 1999, and Transition Period 1998, basic and diluted EPS are equal because all potentially issuable common shares would be antidilutive. At December 31, 2000, there were 2,877,720 shares potentially issuable with respect to stock options and warrants, which could dilute Basic EPS in the future. FOREIGN CURRENCY TRANSLATION--The functional currency of the Company's foreign subsidiaries is the local currency of the country in which the subsidiary operates. The assets and liabilities of foreign subsidiaries are translated into U.S. Dollars at the rates of exchange at the balance sheet dates. Income and expense accounts are translated at the average exchange rates in effect during the period. Gains and losses resulting from the translation are deferred and included in the accompanying consolidated statements of stockholders' equity (deficit). USE OF ESTIMATES--The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United States of America 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 reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. SEGMENT REPORTING--SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" established reporting standards for companies operating in more than one business segment. Since the Company manages its business as a single entity that provides software and related services to a single industry on a worldwide basis, the Company reports as a single segment. The applicable enterprise-wide disclosures required by SFAS No. 131 are included in Note 15. 27 EBIX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) NOTE 1--DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED) CONCENTRATIONS--The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company places its cash and temporary investments with high quality financial institutions. Temporary investments are valued at the lower of cost or market and at the balance sheet dates approximate fair market value. In Fiscal 2000 and in Transition Period 1998, one domestic customer (including its foreign subsidiary), a New York Stock Exchange listed multi-national insurance company, accounted for approximately 12% and 16%, respectively, of consolidated revenue. There were no accounts receivable relating to this customer at December 31, 2000. In Fiscal 1999 no customer represented more than 10% of consolidated revenue. The Company currently utilizes hardware, software and services that support its website, from two third-party vendors under operating service agreements. Although there is a limited number of website service companies, management believes that other vendors could provide the Company with these website services. The terms of the current operating service agreements provide for fixed and variable payments, which are based on revenues realized by the Company. EMPLOYEE STOCK OPTIONS--The Company accounts for stock options issued to employees in accordance with Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." The Company has adopted the disclosure only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," for options and warrants issued to employees. Under APB No. 25, compensation expense is based on the difference, if any, on the measurement date, between the estimated fair value of the Company's stock and the exercise price of options to purchase that stock. Any resulting compensation expense is amortized on a straight-line basis over the vesting period of the options. NON-EMPLOYEE STOCK COMPENSATION--The Company accounts for stock compensation issued to non-employees in accordance with SFAS No. 123 and Emerging Issue Task Force ("EITF") Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in conjunction with Selling Goods or Services." SFAS No. 123 establishes a fair value based method of accounting for stock-based compensation plans. Under the fair value based method, compensation cost is measured at the grant date based on the value of the award, which is calculated using an option pricing model, and is recognized over the service period, which is usually the vesting period. ADVERTISING--Advertising costs are expensed as incurred. Advertising costs amounted to $1,824, $2,035, and $138 in Fiscal 2000, Fiscal 1999, and Transition Period 1998, respectively, and are included in sales and marketing expenses in the accompanying consolidated statements of operations. OTHER INCOME--Other income includes hardware sales and commissions, reimbursed travel and entertainment expenses, and sublease income. In Fiscal 2000, sublease income of $285 is offset by sublease expenses and sublease loss of $481 which is included in general and administrative expenses. Sublease income is offset by expenses incurred by the Company which total, $206 and $246, in Fiscal 1999 and Transition Period 1998, respectively. 28 EBIX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) NOTE 1--DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED) Other income, net, is comprised of the following:
TRANSITION FISCAL FISCAL PERIOD 2000 1999 1998 -------- -------- ---------- Hardware............................................ -- $ 9 $378 Sublease income..................................... -- 20 (70) Gain on APT investment (Note 4)..................... -- 191 -- ----- ---- ---- Total............................................... $ -- $220 $308 ===== ==== ====
FAIR VALUE OF FINANCIAL INSTRUMENTS--The following disclosures of the estimated fair value of financial instruments were made in accordance with the requirements of SFAS No. 107, "Disclosures about Fair Value of Financial Instruments." The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses--The carrying amount of these items is a reasonable estimate of their fair value due to the short maturity of these items. Notes payable--Rates currently available to the Company for notes payable with similar terms are used to estimate its fair value. Accordingly, the carrying amount of notes payable is a reasonable estimate of its fair value. NOTE 2--QUARTERLY FINANCIAL INFORMATION (UNAUDITED): The following is the quarterly unaudited financial information for fiscal 2000 and fiscal 1999.
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Year Ended December 31, 1999 Total revenues............................ $3,666 $3,717 $3,063 $2,065 Net loss.................................. (2,755) (4,421) (4,433) (7,451) Net loss applicable to common stockholders.............................. (2,755) (4,421) (4,433) (7,451) Net loss per common share Basic and diluted......................... $(0.35) $(0.51) $(0.43) $(0.76) Year Ended December 31, 2000 Total revenues............................ 2,855 2,993 2,883 $3,033 Net loss.................................. (2,955) (3,362) (2,475) (2,582) Net loss applicable to common stockholders.............................. (2,955) (3,362) (2,475) (2,582) Net loss per common share Basic and diluted......................... $(0.26) $(0.30) $(0.22) $(0.23)
29 EBIX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) NOTE 3--STOCKHOLDERS' EQUITY (DEFICIT): STOCKHOLDER RIGHTS AGREEMENT--On March 23, 1998, the Board of Directors of the Company adopted a stockholder rights plan (the "Stockholder Rights Plan") designed to protect the stockholders from certain unfair and coercive tactics. Pursuant to the Stockholder Rights Agreement (the "Rights Agreement"), the Company declared a dividend of one preferred share purchase right ("Right") on each outstanding share of the Company's Common Stock, $.10 par value per share ("Common Shares"), payable to stockholders of record at the close of business on March 23, 1998. The terms of the Rights may be amended by the Board of Directors of the Company without the consent of the holders of the Rights, except that from and after such time as any person becomes an Acquiring Person, no such amendment may make the Rights redeemable if the Rights are not then redeemable in accordance with the terms of the Rights Agreement or may adversely affect the interests of the holders of the Rights. The Board of Directors terminated the Stockholder Rights Plan effected March 30, 2001 (See Note 17). REDEEMABLE WARRANTS--The Company received approximately $4,468 in cash from the exercise of common stock warrants in Fiscal 2000. These funds have been used to reduce borrowings and fund operating expenses and accounts payable. OTHER WARRANTS--In connection with a 1996 private equity placement, the Company issued a warrant to the placement agent (the "Agent's Warrant") to purchase 200,000 shares of the Company's common stock at $5.00 per share. The Agent's Warrant is not subject to redemption and expires May 1, 2001. For Transition Period 1998 and Fiscal 1999, there was no activity related to this warrant. At December 31, 2000, 11,450 shares may still be purchased under this warrant. PREFERRED STOCK CONVERSION--On August 1, 2000, the Company's only preferred shareholder converted the remaining outstanding 221 shares of the Company's Series D Preferred Stock to 9,945 shares of the Company's common stock. NOTE 4--INVESTMENT IN APT: During Transition Period 1998 the Company owned approximately a 20% interest in the common stock of Alliance for Productive Technology, Inc. ("APT"), a privately held company formed as an alliance of agency automation vendors, insurance companies, agents' associations, and insurance industry organizations. This investment was accounted for using the equity method of accounting until Fiscal 1999 when the Company no longer exercised significant influence over APT. The Company's share of the results of operations of APT has been immaterial. The purpose of APT was to provide non-proprietary interface products and services to the insurance industry. The investment of $230 was recorded as a long-term other asset. A portion of the Company's investment was held as security for a note payable to APT (see Note 7). During Fiscal 1999, the Company's ownership was diluted to 14.8%. The assets of APT were sold to a third party effective November 30, 1999. As a result of the sale, the Company received proceeds of approximately $421, which represented its 14.8% share of the sales proceeds of APT, before repayment of the Company's note to APT. A gain on investment of $191 was recorded during 1999 and is reflected in other income in the accompanying consolidated statement of operations. 30 EBIX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) NOTE 5--PURCHASE OF MINORITY INTEREST: Prior to January 1999, Delphi Information Systems International, Inc., a wholly-owned subsidiary of the Company, held a fifty-four percent interest in Complete Broking Systems Australia PTY, Ltd. Effective January 1, 1999, the Company acquired the remaining forty-six percent interest. The Company paid approximately $50 and issued 22,222 shares of the Company's common stock in exchange for the minority interest and a non-compete agreement from the two former shareholders. The fair market value of the consideration has been allocated to the non-compete agreement and has been amortized over the fifteen-month life of the agreement. NOTE 6--PROPERTY AND EQUIPMENT: Property and equipment at December 31, 2000 and December 31, 1999 consists of the following:
2000 1999 -------- -------- Computer equipment and purchased software.................. $1,071 $ 7,667 Leasehold improvements..................................... -- 981 Furniture, fixtures and other.............................. 67 1,841 ------ ------- 1,138 10,489 Less accumulated depreciation and amortization............. (234) (8,430) ------ ------- $ 904 $ 2,059 ====== =======
Depreciation expense was $984, $676, and $481 in Fiscal 2000, Fiscal 1999 and Transition Period 1998, respectively. During Fiscal 2000, the Company wrote off fully depreciated assets in the amount of $8,548. NOTE 7--DEBT: Notes payable at December 31, 2000 and December 31, 1999, are comprised of the following:
2000 1999 -------- -------- Bank line-of-credit......................................... $ -- $ -- Non-compete note payable.................................... 106 216 Installment note............................................ -- 107 Less current portion........................................ (106) (217) ----- ----- $ -- $ 106 ===== =====
BANK LINE OF CREDIT--Effective January 1997, the Company established a line of credit up to $4,000 subject to borrowing base limits. Borrowings were secured by accounts receivable and certain other assets. The agreement provided for a minimum monthly interest at the bank's prime lending rate plus two and one-half percent (2.5%) on the greater of the actual amount outstanding or $1,600. The agreement contained certain covenants including the maintenance of a minimum net worth of $2,000 and restrictions upon certain activities by the Company without the approval of the bank including the incurrence of senior debt, certain mergers or acquisitions, and the payment of dividends. 31 EBIX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) NOTE 7--DEBT: (CONTINUED) In December 1997, March 1998, and September 1998, the Company executed amendments to the line of credit agreement extending the maturity date of the agreement to January 31, 2001, altering the provisions of the early termination fee, and modifying the criteria for determining the amount available under the line. In accordance with the agreement, as amended, the Company could borrow one times average monthly recurring maintenance collections and seventy-five percent of eligible non-maintenance receivables as defined. In April 1999 and October 1999, the Company executed additional amendments to the line of credit agreement. The April 1999 amendment waived the Company's previous default under the line of credit agreement. The October 1999 amendment provided for a forbearance period until the maturity date. In July 1999, the Company reduced the line of credit borrowings to zero. Between July 1999 and the loan termination date on January 31, 2001, the Company had no borrowings, but the Company was nevertheless obligated to pay to the lender minimum interest on the sum of $1,600 at a rate of prime plus 2.5%. During 2000, the Company paid approximately $93,000 in minimum interest on the unused commitment. NON-COMPETE NOTE PAYABLE--The Company entered into a non-compete agreement in connection with an acquisition in 1991. The final installment of $400 was originally due on January 31, 1997, but was subsequently converted to an 11.75% interest bearing unsecured note due January 2001. The commitment related to the non-compete agreement was amortized and expensed ratably over the life of the agreement. INSTALLMENT NOTE--The Company was obligated under an installment agreement for licensed software to pay a total of $203 in quarterly payments of $29, which included interest at 12%. The note was fully repaid in December 2000. NOTE 8--ACCOUNTS PAYABLE AND ACCRUED EXPENSES: Accounts payable and accrued expenses at December 31, 2000 and December 31, 1999, consist of the following:
2000 1999 -------- -------- Trade accounts payable...................................... $2,597 $1,350 Accrued royalty............................................. 342 267 Accrued audit and legal..................................... 797 580 Accrued and other liabilities............................... 590 969 ------ ------ $4,326 $3,166 ====== ======
32 EBIX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) NOTE 9--INCOME TAXES: Loss before income taxes consisted of:
NINE-MONTHS YEAR ENDED YEAR ENDED ENDED DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998 ----------------- ----------------- ----------------- Domestic..................... $(11,813) $(18,431) $(5,247) Foreign...................... 588 (536) (259) -------- -------- ------- Total........................ $(11,225) $(18,967) $(5,506) ======== ======== =======
The income tax provision consisted of:
NINE-MONTHS YEAR ENDED YEAR ENDED ENDED DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998 ----------------- ----------------- ----------------- U.S. Federal................. $ -- $-- $ -- State........................ -- -- -- Foreign...................... 149 93 248 ---- --- ---- Total........................ $149 $93 $248 ==== === ====
The income tax provision at the federal statutory rate differs from the effective rate because of the following items:
NINE-MONTHS YEAR ENDED YEAR ENDED ENDED DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998 ----------------- ----------------- ----------------- Statutory rate............... (34.0)% (34.0)% 34.0% State income tax............. -- -- 4.2 Amortization of intangible assets relating to acquired businesses................. -- -- Increase in valuation allowances................. 34.4 34.0 (38.2) Other, net................... (0.4) -- 4.5 ----- ----- ----- Effective rate............... 0.0% 0.0% 4.5% ===== ===== =====
Deferred income taxes reflect the impact of "temporary differences" between amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws. Temporary 33 EBIX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) NOTE 9--INCOME TAXES: (CONTINUED) differences and carryforwards which give rise to a significant portion of deferred tax assets and liabilities as of December 31, 2000 and 1999 are as follows:
DECEMBER 31, 2000 DECEMBER 31, 1999 DEFERRED TAX DEFERRED TAX ---------------------- ---------------------- ASSETS LIABILITIES ASSETS LIABILITIES -------- ----------- -------- ----------- Depreciation.......................... $ -- $151 $ -- $144 Accruals.............................. 333 -- 342 -- Bad debts............................. 343 -- 315 -- NOL carryforwards..................... 23,618 -- 20,261 -- Tax credit carryforwards.............. 746 -- 814 -- -------- ---- -------- ---- 25,040 151 21,732 144 Valuation allowance................... (24,889) -- (21,588) -- -------- ---- -------- ---- Total deferred taxes.................. $ 151 $151 $ 144 $144 ======== ==== ======== ====
Due to the uncertainty of realizing any of the net deferred tax assets, the Company has provided a valuation allowance against the entire net amount. At December 31, 2000, the Company has available domestic net operating loss carryforwards of approximately $69,500 which are available to offset future Federal taxable income, if any, through 2020, and investment business tax credit carryforwards of approximately $746 which are available to offset future Federal taxable income, if any, through 2010. The utilization of tax credits and net operating losses may be limited due to changes in ownership and other restrictions imposed by the Internal Revenue Code. NOTE 10--COMMITMENTS AND CONTINGENCIES: Lease Commitments: The Company leases office space under non-cancelable operating leases with expiration dates ranging through 2005, with various renewal options. Capital leases range from three to five years and are primarily for computer equipment. Assets under capital leases at December 31, 2000 and December 31, 1999 totaled $500 and $876, respectively, and accumulated depreciation was $93 and $209, respectively. 34 EBIX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) NOTE 10--COMMITMENTS AND CONTINGENCIES: (CONTINUED) Commitments for minimum rentals under noncancellable leases as of December 31, 2000 are as follows:
CAPITAL OPERATING YEAR LEASES LEASES - ---- -------- --------- 2001...................................................... $ 183 $1,180 2002...................................................... 161 952 2003...................................................... 131 805 2004...................................................... 76 150 2005...................................................... -- 138 ------ ------ Total minimum lease commitments........................... $ 551 $3,225 ====== Less: sublease income..................................... 1,054 ------ Net lease payments........................................ $2,171 ====== Less: amount representing interest........................ (102) ------ Present value of obligations under capital leases......... 449 Less: current portion..................................... (132) ------ Long-term obligations under capital leases................ $ 317 ======
Rental expense for office facilities and certain equipment subject to operating leases for Fiscal 2000, Fiscal 1999, and Transition Period 1998 was $1,067, $709, and $1,326, respectively. The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will, after giving effect to reserves of $447 at December 31, 2000 and insurance, not have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity. NOTE 11--INTERNET SERVICES AND PROMOTION AGREEMENTS: On August 20, 1999, the Company entered into a Strategic Supply, Services and Promotion Agreement with the Hewlett-Packard Company. Pursuant to the terms of the agreement, the Company is required to pay Hewlett-Packard a variable fee based on the percentage of revenues generated through the ebix.com website in exchange for joint marketing, co-branding, Internet services, and hardware and software provided by Hewlett-Packard to run the ebix.com website. In addition, the Company has the right to purchase Hewlett-Packard hardware at a discount. The Company is required to use only Hewlett-Packard hardware, unless it is not available or functional to meet to Company's needs. The agreement is cancelable by Hewlett-Packard prior to its August 20, 2002 termination date in the event the Company does not realize specified levels of revenues through August 31, 2000 or through August 31, 2001. There is no compensation due to either party in the event of early termination. The Company records expense related to this agreement in the period incurred. However, as of December 31, 2000, the Company has not made any payments to Hewlett-Packard or recognized any expense. In conjunction with the agreement, Hewlett-Packard contributed certain equipment with a fair value of $66 to the Company. 35 EBIX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) NOTE 11--INTERNET SERVICES AND PROMOTION AGREEMENTS: (CONTINUED) On August 31, 1999, the Company entered into an Internet Promotion Agreement with InfoSpace.com. Pursuant to the terms of the agreement, the Company is required to pay InfoSpace.com the greater of a variable fee based on a percentage of revenues generated as a result of user traffic via the InfoSpace.com website or a fixed monthly fee of $25 in exchange for a specified number of impressions of ebix.com promotional placements on the InfoSpace.com website. The Company records expense related to this agreement in the period incurred. In addition, the Company granted warrants to InfoSpace.com for the purchase of 776,572 shares of common stock (see Note 14). The agreement terminates on August 31, 2001, unless terminated by either party for cause, as defined in the Internet Promotion Agreement. The Company also entered into Content Distribution and Content Provider Agreements with InfoSpace.com on August 31, 1999. These agreements provide for the mutual right to place hypertext links on the other party's website, including the right to reproduce each party's trademarks, and the right for InfoSpace.com to sell banner advertising. Under this agreement, the Company is entitled to receive a percentage share in banner advertising revenue received by InfoSpace.com on the co-branded web pages and the Company in turn must pay to InfoSpace.com a percentage fee based on revenues received by the Company as a result of user traffic on the Company's website via any link established by content page provided by InfoSpace.com. The Company's policy is to record the revenues or expenses related to these agreements in the period earned or incurred. NOTE 12--CASH OPTION PROFIT SHARING PLAN AND TRUST: Effective January 1, 1988, the Company adopted and implemented a 401(k) Cash Option Profit Sharing Plan which allows participants to contribute a percentage of their compensation to the Profit Sharing Plan and Trust up to a maximum of $10. The Company is under no obligation to contribute to the Plan. The Company's contributions to the Plan were approximately $67 for Fiscal 2000, $89 for Fiscal 1999 and zero for the Transition Period 1998. NOTE 13--STOCK OPTIONS: The Company's 1996 Stock Incentive Plan (the "Plan") provides for the granting of stock options and stock appreciation rights to officers, directors and employees. The total number of shares reserved for grant under the 1996 Stock Incentive Plan is 2,700,000 at December 31, 2000. Options granted under this plan may be incentive stock options as defined under current tax laws or nonstatutory options. Options are granted at prices determined by the Board of Directors (not less than 100 percent of the market price of the stock at the time of grant for incentive stock options and 110 percent with respect to incentive stock options granted to optionees who own 10 percent or more of the Company's stock). Stock options under this plan generally become exercisable in 25 percent increments vesting on each of the first through fourth anniversaries of the date of grant. All options must be exercised within ten years of the date of grant (with respect to incentive stock optionees owning 10 percent or more of the Company's stock, the term may be no longer than five years). No stock appreciation rights have been issued under the Plan or are outstanding at December 31, 2000. The Company's 1998 Director Option Plan (the "Director Plan") provides for granting of options on up to 300,000 shares to non-employee directors. Only nonstatutory options may be granted under this plan. Options are granted at prices not less than 100% of the market price of the stock at the time 36 EBIX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) NOTE 13--STOCK OPTIONS: (CONTINUED) of grant. Stock options under this plan generally become exercisable over periods ranging from three months to three years. All options must be exercised within ten years of the date of grant. During 1999, the Company granted a total of 10,800 options (3,600 options per director) pursuant to the terms of the Director Plan. During 2000, the Company granted a total of 42,000 options to directors. During 2000, the Company granted 10,000 incentive stock options for which vesting is contingent upon increases in the Company's stock price and other performance based measures, such as achieving specified revenues for new products. During 1999, the Company granted 466,000 incentive stock options for which vesting is contingent upon increases in the Company's stock price and other performance based measures, such as achieving specified revenues for new products. For these options, vesting generally occurs when the Company's stock price equals $9.00, $12.00, $15.00 and $20.00 per share. The exercise price of each option, which has a ten year life, is equal to the market price of the Company's stock on the date of grant. Compensation cost is measured and recorded for these options using variable plan accounting as prescribed by APB Opinion No. 25 at the end of each quarterly reporting period and is subsequently adjusted for increases or decreases in the Company's stock price until the exercise date. Compensation expense related to these incentive options of approximately $1,510 was recognized in 1999 and a recovery of compensation expense of $880 was recognized in 2000 due to the market price being significantly less than the exercise price. At December 31, 2000, none of the incentive options were vested. The Company has granted nonstatutory and incentive options outside the Plan to purchase up to an aggregate of 79,333 shares. These options are granted at prices determined by the Board of Directors (no less than 100 percent of the market price). The options have a four year vesting period and must be exercised within ten years of the date of the grant. Included in these options are 35,000 and 43,333 options which the Company granted in 2000 and 1999, respectively, and 1,000 options granted prior to 1999, to persons who were not directors, officers or employees. These non-employee options were valued pursuant to SFAS No. 123. The majority of these options are performance based awards, with no service commitment and subject to vesting only if the Company's stock price reaches a certain price. At December 31, 2000, 20,417 of the non-employee options were vested. The Company has recognized compensation expense of approximately $189 and $214 related to these options during the years ended December 31, 2000 and 1999. Assumptions used in valuing the options are the same as those described below for employee options except the 10-year contractual life was substituted for the expected life of the option as required by SFAS No. 123. The Company applies APB Opinion 25 and related Interpretations in accounting for its employee stock-based compensation plans. Had compensation cost for these stock-based compensation plans been determined based on the fair value method prescribed by SFAS No. 123, using the Black-Scholes 37 EBIX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) NOTE 13--STOCK OPTIONS: (CONTINUED) option-pricing model with the assumptions summarized below, the Company's net loss and net loss per share would have been the pro forma amounts indicated below:
NINE-MONTHS YEAR ENDED YEAR ENDED ENDED DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998 ----------------- ----------------- ----------------- Net loss as reported......... $11,374 $19,060 $5,754 Pro forma net loss........... $13,327 $18,100 $6,303 Net loss per share, as reported................... $ 1.00 $ 2.05 $ 0.78 Net loss per share, pro forma...................... $ 1.17 $ 1.95 $ 0.85
The pro forma net loss and net loss per share for Fiscal 1999 results are less than the as reported amounts because the total expense for financial statement purposes of $1,510 recorded under APB Opinion No. 25 exceeds the total expense of $550 had such options been recorded pursuant to SFAS No. 123. The per share weighted-average fair values of stock options granted during Fiscal 2000, Fiscal 1999 and Transition Period 1998 were $5.43, $4.16, and $2.38, respectively, on the date of grant. The options were exercisable at December 31, 2000, 1999 and 1998 for 454,865, 327,877, and 299,031 shares, respectively. Both the pro forma disclosures and the weighted-average fair value of stock options on the date of grant were calculated using the Black-Scholes option-pricing model with the following assumptions:
NINE-MONTHS YEAR ENDED YEAR ENDED ENDED DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998 ----------------- ----------------- ----------------- Expected volatility.......... 93% 69% 44% Expected dividends........... None None None Weighted average risk-free interest rate.............. 6.09% 5.98% 5.30% Expected life of stock options.................... 10 years 4 years 6 years
38 EBIX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) NOTE 13--STOCK OPTIONS: (CONTINUED) Stock option activity during the last three periods was as follows:
WITHIN PLAN WEIGHTED- ------------------------ AVERAGE NONSTATUTORY INCENTIVE OUTSIDE EXERCISE EXERCISE OPTIONS OPTIONS PLAN PRICE RANGES PRICE ------------ --------- -------- ------------ --------- Options outstanding at March 31, 1998..... 847,008 -- 1,000 3.28 - 33.75 4.77 Option activity: Granted................................. 548,400 -- -- 3.38 - 5.12 5.07 Exercised............................... -- -- -- -- -- Canceled................................ (318,915) -- -- 3.28 - 33.75 4.59 --------- ------- ------ ------------ ---- Options outstanding at December 31, 1998.................................... 1,076,493 -- 1,000 2.93 - 26.25 4.59 Option activity: Granted................................. 290,895 432,250 43,333 6.66 - 10.00 7.54 Exercised............................... (229,975) -- -- 6.53 - 11.00 8.13 Canceled................................ (533,113) -- -- 2.94 - 10.00 5.59 --------- ------- ------ ------------ ---- Options outstanding at December 31, 1999.................................... 604,300 432,250 44,333 2.93 - 26.25 6.21 Option activity: Granted................................. 47,000 10,000 35,000 1.50 - 9.50 5.09 Exercised............................... (12,988) -- -- 3.28 - 8.69 3.97 Canceled................................ (211,893) -- -- 1.50 - 9.63 5.76 --------- ------- ------ ------------ ---- Options outstanding at December 31, 2000.................................... 426,419 442,250 79,333 1.50 - 9.63 6.23 ========= ======= ====== ============ ====
The following table summarizes information about stock options outstanding as of December 31, 2000:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------- WEIGHTED- ------------------- AVERAGE WEIGHTED- WEIGHTED- REMAINING AVERAGE AVERAGE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE RANGE OF EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE - ------------------------ ----------- ----------- --------- ----------- --------- $1.500 - 2.906 28,800 9.06 yrs $2.027 15,300 $2.493 2.907 - 3.500 94,600 7.87 3.320 42,950 3.281 3.510 - 5.940 224,305 6.98 5.278 152,305 5.226 5.90 - 6.750 429,197 8.61 6.669 195,059 6.663 6.751 - 9.625 171,100 8.83 8.720 49,251 8.437 ------- ------- 948,002 454,865 ======= =======
39 EBIX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) NOTE 13--STOCK OPTIONS: (CONTINUED) Effective July 1, 1999, the Company approved the 1999 Stock Purchase Plan ("Purchase Plan"), which provided for eligible employees to acquire an interest in the Company through the purchase of shares of common stock. The Purchase Plan had 2,000,000 shares of common stock reserved for sale to employees and is intended to qualified under Section 423 of the Internal Revenue Code. Under the Purchase Plan, each employee could choose each year to have up to 10 percent of his or her base earnings, up to $25, withheld to purchase common stock during each accumulation period (generally six months). The purchase price of the stock was 85% of the lower of its beginning-of-accumulation period or end-of-accumulation period market price. During August 2000, the Plan was terminated by the Board of Directors and funds were returned to the participants. NOTE 14--WARRANTS: On August 20, 1999, in connection with the Hewlett-Packard Strategic Supply, Services and Promotion Agreement (see Note 11), the Company granted a two year warrant to Hewlett-Packard to purchase 4.9% of the Company's outstanding common stock for $15.00 per share during the first year of the warrant and $20.00 per share during the second year of the warrant. The Company also granted a second warrant to Hewlett-Packard for the purchase of 4.5% of the Company's outstanding common stock during the second year of the term of the agreement for $20.00 per share. The number of shares purchased upon exercise of the warrants will be measured based on the outstanding common stock as of the most recent quarter or year-end as reported on the Company's report on Form 10-Q or Form 10-K. At December 31, 2000, the warrants represented rights to purchase 557,727 and 512,198 shares, respectively. For both warrants, if the fair value of the common stock at the exercise date is greater than the purchase price, Hewlett-Packard may elect to receive net shares equal to the value of the warrant in lieu of exercising the warrant with cash. The Hewlett-Packard warrants were valued pursuant to SFAS No. 123 and EITF Issue No. 96-18. The fair value of these warrants using the Black-Scholes option-pricing model and the same assumptions as in Note 13 for employee stock options, except a contractual life of two years, was approximately $424 and $597 respectively. The compensation expense will be recognized over the contractual period. In Fiscal 2000 and Fiscal 1999, total expense of $569 and $263 was recognized. The Company also issued warrants in connection with the InfoSpace.com Internet Promotion Agreement dated August 31, 1999 (see Note 11). The first warrant is for the purchase of 250,000 shares of the Company's common stock at a price of $15.00 per share if exercised during the first year of the agreement or $20.00 per share if exercised during the second year of the agreement. The Company also granted a second warrant to InfoSpace.com under the same agreement for the purchase of 4.9% of the Company's outstanding common stock on a fully diluted basis, including the warrant, at August 31, 1999. These warrants allow for the purchase of 526,572 shares at a price of $15.00 per share if exercised during the first year of the agreement or $20.00 per share if exercised during the second year of the agreement. The second warrant is exercisable in lieu of the Company paying invoices rendered by InfoSpace.com. The InfoSpace.com warrants were valued pursuant to SFAS No. 123 and EITF Issue No. 96-18. The fair value of these warrants using the Black-Scholes option-pricing model and the same assumptions as above, except a contractual life of two years, was approximately $81 and $813, respectively. Compensation expense for the first warrant will be recognized over the vesting period and 40 EBIX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) NOTE 14--WARRANTS: (CONTINUED) compensation expense for the second warrant will be recognized over the contractual period. In Fiscal 2000 and Fiscal 1999, total expense of $570 and $385 was recognized. NOTE 15--GEOGRAPHIC INFORMATION: The following information relates to geographic locations: Year ended December 31, 2000
DOMESTIC AUSTRALIA OTHER TOTAL -------- --------- -------- -------- Revenue.................................. $8,994 $1,468 $1,302 $11,764 Fixed assets............................. $ 819 $ 59 $ 26 $ 904
Year ended December 31, 1999
DOMESTIC AUSTRALIA OTHER TOTAL -------- --------- -------- -------- Revenue.................................... $10,218 $1,486 $806 $12,511 Fixed assets............................... $ 1,941 $ 64 $ 54 $ 2,059
Nine Months ended December 31, 1998
DOMESTIC AUSTRALIA OTHER TOTAL -------- --------- -------- -------- Revenue.................................... $10,361 $2,381 $660 $13,402 Fixed assets............................... $ 1,738 $ 60 $ 43 $ 1,841
NOTE 16--RELATED PARTY: The Company incurred royalty expense of approximately $0, $25, and $143 during Fiscal 2000, Fiscal 1999, and Transition Period 1998, respectively, to APT (see Note 4). NOTE 17--SUBSEQUENT EVENTS: On March 30, 2001, the Company entered into an agreement (the "Agreement") with BRiT Insurance Holdings plc ("BRiT") for BRiT to invest $7,000 in cash in newly issued Company Common Stock at a price of $1.25 per share. BRiT will also exchange a 28% equity position, approximately half of its ownership, in Insurance Broadcast Systems, Inc. ("IBS"), a privately held company in the insurance related electronic education business, for an additional 1,344,000 shares of Company Common Stock. The Agreement also contemplates that the Company and BRiT will negotiate an agreement, expected to be entered into by May 2001, for the Company to receive fees for reviewing, developing and servicing BRiT's e-commerce infrastructure. The Agreement is contemplated to be consummated in two closings, the first, a BRiT cash purchase of 2,240,000 shares for $2,800, and the second covering the balance of the cash investment and the exchange for IBS stock. Each closing is subject to conditions typical in such transactions; the 41 EBIX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) NOTE 17--SUBSEQUENT EVENTS: (CONTINUED) second is also subject to Company stockholder approval of the transaction and of a charter amendment authorizing additional shares, and execution of the BRiT e-commerce strategy agreement. The Company expects the first closing to occur in mid-April, and the second closing to occur in June. BRiT has the right to designate two members of the Company's board of directors following the second closing. After the issuance of Common Stock in both closings pursuant to the Agreement, BRiT will own approximately 38% of the Company's outstanding Common Stock. BRiT is entitled to have the Company register its stock for sale. In connection with the Agreement, the Company terminated its Stockholder Rights Plan, effective immediately, but BRiT has agreed not to acquire 49% or more of the Company's Common Stock without the approval of the the Company's Board of Directors. 42 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not Applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Certain information regarding directors of the Company required by this item is incorporated by reference to the information appearing under the captions "Proposal No. 1, Election of Directors" and "Compliance with Section 16(a) of the Exchange Act," in the Company's proxy statement for its 2001 Annual Meeting of Stockholders which will be filed with the Securities and Exchange Commission by April 30, 2001. ITEM 11. EXECUTIVE COMPENSATION There is hereby incorporated by reference the information appearing under the caption "Executive Compensation" in the Company's proxy statement for its 2001 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission by April 30, 2001. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT There is hereby incorporated by reference the information appearing under the caption "Security Ownership of Management and Certain Beneficial Owners" in the Company's proxy statement for its 2001 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission by April 30, 2001. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS There is hereby incorporated by reference the information appearing under the caption "Certain Transactions" in the Company's proxy statement for its 2001 Annual Meeting of Stockholders which will be filed with the Securities and Exchange Commission by April 30, 2001. 43 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. FINANCIAL STATEMENTS. The following consolidated financial statements and supplementary data of the Company and its subsidiaries, required by Part II, Item 8 are filed herewith: - Reports of Independent Public Accountants - Consolidated Balance Sheets as of December 31, 2000 and December 31, 1999 - Consolidated Statements of Operations for the Years Ended December 31, 2000 and December 31, 1999, and the nine months ended December 31, 1998. - Consolidated Statements of Stockholders' Equity (Deficit) for the Years Ended December 31, 2000 and December 31, 1999, and the nine months ended December 31, 1998. - Consolidated Statements of Cash Flows for the Years Ended December 31, 2000 and December 31, 1999, and the nine months ended December 31, 1998. - Notes to Consolidated Financial Statements (a) 2. FINANCIAL STATEMENTS. The following financial statement schedule is filed herewith: Schedule II--Valuation and Qualifying Accounts for the years ended December 31, 2000 and December 31, 1999, and the nine months ended December 31, 1998. Schedules other than those listed above have been omitted because they are not applicable or the required information is included in the financial statements or notes thereto.
EXHIBITS 3.1 Certificate of Incorporation, as amended (filed as Exhibit 3.1 to the Company's Registration Statement on Form S-8 (No. 333-23361), and incorporated herein by reference). 3.2* Bylaws of the Company 3.3 Certificate of Amendment of Certificate of Incorporation (filed as Exhibit 3.1 to the Company's Form 10-Q for the quarter ended June 30, 1998, and incorporated herein by reference). 3.4 Certificate of Amendment of Certificate of Incorporation dated November 5, 1999 (filed as Exhibit 3.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999, and incorporated herein by reference). 4.1 Form of Redeemable Warrant to purchase shares of common stock of Ebix.com, Inc. (filed as Exhibit 4.12 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1996, and incorporated herein by reference). 4.2 Form of Unit Investment Agreement to purchase common stock and warrants of Delphi Information Systems, Inc. (filed as Exhibit 4.13 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1996, and incorporated herein by reference). 4.3 Form of Warrant to purchase shares of common stock of Delphi Information Systems, Inc. held by R.J. Steichen & Company (filed as Exhibit 4.14 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1996, and incorporated herein by reference).
44 4.4 Rights Agreement between Delphi Information Systems, Inc. and ChaseMellon Shareholder Services, LLC, as Rights Agent (filed as Exhibit 99.1 to the Company's Registration of Certain Classes of Securities on Form 8-A (No. 000-15946) and incorporated herein by reference). MATERIAL CONTRACTS 10.1 Delphi Information Systems, Inc. 1983 Stock Incentive Plan, as amended (filed as Exhibit 10.1 to the Company's Registration Statement on Form S-1 (No. 33-45153) and incorporated herein by reference). + 10.2 Delphi Information Systems, Inc. Cash Option Profit Sharing Plan (filed as Exhibit 4.2 to the Company's Registration Statement on Form S-8 (No. 33-19310) and incorporated herein by reference). + 10.3 Delphi Information Systems, Inc. 1989 Stock Purchase Plan (included in the prospectus filed as part of the Company's Registration Statement on Form S-8 (No. 33-35952) and incorporated herein by reference). + 10.4 Delphi Information Systems, Inc. Non-Qualified Stock Option Plan for Directors (filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1992, and incorporated herein by reference). 10.5 Delphi Information Systems, Inc. 1996 Stock Incentive Plan (filed as Exhibit 4.3 to the Company's Registration Statement on Form S-8 (File No. 33323261), and incorporated herein by reference). + 10.6 Stock Purchase Warrant dated June 5, 1992, issued by the Company to Silicon Valley Bank, and related Registration Rights Agreement (filed as Exhibit 10.12 to the Company's Registration Statement on Form S-1 (No. 33-45153) and incorporated herein by reference). 10.7 Lease agreement dated September 1998 between the Company and Crossroads of Commerce III, relating to premises at 3501 Algonquin Road, Rolling Meadows, IL (filed as Exhibit 10.15 to the Company's Transition Report on Form 10-K for the transition period from April 1, 1998 to December 31, 1998 and incorporated herein by reference). 10.8 Lease agreement effective October, 1998 between the Company and 485 Properties LLC relating to premises at Five Concourse Parkway, Atlanta, Georgia (filed as Exhibit 10.16 to the Company's Transition Report on Form 10-K for the transition period from April 1, 1998 to December 31, 1998 and incorporated herein by reference). 10.9 Delphi Information Systems, Inc. 1998 Non-Employee Director's Stock Option Plan (filed as Exhibit A to the Company's proxy statement dated August 12, 1998, and incorporated herein by reference).+ 10.10 Strategic Supply, Service and Promotion Agreement between Hewlett-Packard Packard and Company, dated August 20, 1999 (filed as Exhibit 10.19 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference).** 10.11 Related Agreement Number One, Strategic Supply, Services and Promotion Agreement between Hewlett-Packard and Company, dated August 20, 1999 (filed as Exhibit 10.20 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference).** 10.12 Terms and condition of sale and service between Hewlett-Packard and Company, dated August 20, 1999 (filed as Exhibit 10.21 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference).**
45 10.13 Warrant to purchase shares of common stock between Hewlett-Packard and Company, dated August 20, 1999 (filed as Exhibit 10.22 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). 10.14 Internet Content (World Wide Web Site) Distribution Agreement between Infospace and Company, dated August 31, 1999 (filed as Exhibit 10.23 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). 10.15 Content Provider Agreement between Infospace and Company, dated August 31, 1999 (filed as Exhibit 10.24 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference).** 10.16 Internet Promotion Agreement between Infospace and Company, dated August 31, 1999 (filed as Exhibit 10.25 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference).** 10.17 Warrant issued to Infospace by the Company (filed as Exhibit 10.26 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). 10.18 Warrant issued to Infospace by the Company (filed as Exhibit 10.27 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). 10.19 Agreement dated as of July 15, 1999, between the Company, Tatum CFO Partners, LLP and Richard J. Baum (filed as Exhibit 10.28 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). + 10.20 Sublease agreement dated April 20, 2000 between the Company and Philips Electronics North American Company relating to the premises at 1900 Golf Road, Schaumburg, Illinois (filed as Exhibit 10.29 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). 10.21 Sublease agreement dated April 20, 2000 between the Company and Pepsi-Cola General Bottlers relating to the premises at 1300 Algonquin Road in Rolling Meadows, Illinois (filed as Exhibit 10.30 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). 10.22 Sublease agreement dated July 22, 1999 between the Company and Air Liquid America Corporation relating to the premise at Walnut Creek California (filed as Exhibit 10.31 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). 10.23 First Amendment to the Delphi Information Systems, Inc. 1996 Stock Incentive Plan (filed as Exhibit 10.32 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). 10.24 Delphi Information Systems, Inc. 1999 Stock Purchase Plan (filed as Exhibit 10.33 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). 10.25 Baum Severance agreement dated October 4, 2000 (filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 and incorporated herein by reference). + 10.26* Sublease agreement dated June 15, 2000, between the Company and Envoy Networks, Inc., relating to premises at 900 Middlesex Turnpike, Building 8, Second Floor, Billerica, MA.
46 10.27* Sublease agreement dated October 11, 2000, between the Company and Eric Swallow and Deborah Swallow, relating to the premises at 2055 N. Broadway, Walnut Creek, CA. 10.28* Channel Agreement dated October 31, 2000 between the Company and the Alta Vista Company** 21.1* The subsidiaries of the Company. 23.1* Consent of KPMG LLP 23.2* Consent of Arthur Andersen LLP
- ------------------------ * Filed herewith ** Confidential treatment has been requested for portions of this document. The redacted material has been filed with the commission pursuant to an application for confidential treatment. + Management Contracts and Compensation Agreements (b) REPORTS ON FORM 8-K None 47 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ebix.com, Inc. (Registrant) By: /s/ ROBIN RAINA ----------------------------------------- Robin Raina PRESIDENT AND CHIEF EXECUTIVE OFFICER AND DIRECTOR
Date: March 31, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ ROY ROGERS ------------------------------------ Chairman of the Board March 31, 2001 (Roy Rogers) /s/ ROBIN RAINA President, Chief Executive Officer ------------------------------------ and Director March 31, 2001 (Robin Raina) /s/ RICHARD J. BAUM Senior Vice President-Finance & ------------------------------------ Administration, Chief Financial March 31, 2001 (Richard J. Baum) Officer, and Secretary ------------------------------------ Director March 31, 2001 (Yuval Almog) /s/ WILLIAM R. BAUMEL ------------------------------------ Director March 31, 2001 (William R. Baumel) /s/ DOUG CHISHOLM ------------------------------------ Director March 31, 2001 (Doug Chisholm) /s/ DENNIS DRISLANE ------------------------------------ Director March 31, 2001 (Dennis Drislane) /s/ LARRY G. GERDES ------------------------------------ Director March 31, 2001 (Larry G. Gerdes) /s/ WILLIAM W. RICH ------------------------------------ Director March 31, 2001 (William W. Rich)
48 EXHIBIT INDEX
EXHIBITS 3.1 Certificate of Incorporation, as amended (filed as Exhibit 3.1 to the Company's Registration Statement on Form S-8 (No. 333-23361), and incorporated herein by reference). 3.2* Bylaws of the Company 3.3 Certificate of Amendment of Certificate of Incorporation (filed as Exhibit 3.1 to the Company's Form 10-Q for the quarter ended June 30, 1998, and incorporated herein by reference). 3.4 Certificate of Amendment of Certificate of Incorporation dated November 5, 1999 (filed as Exhibit 3.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). 4.1 Form of Redeemable Warrant to purchase shares of common stock of Ebix.com, Inc. (filed as Exhibit 4.12 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1996, and incorporated herein by reference). 4.2 Form of Unit Investment Agreement to purchase common stock and warrants of Delphi Information Systems, Inc. (filed as Exhibit 4.13 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1996, and incorporated herein by reference). 4.3 Form of Warrant to purchase shares of common stock of Delphi Information Systems, Inc. held by R.J. Steichen & Company (filed as Exhibit 4.14 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1996, and incorporated herein by reference). 4.4 Rights Agreement between Delphi Information Systems, Inc. and ChaseMellon Shareholder Services, LLC, as Rights Agent (filed as Exhibit 99.1 to the Company's Registration of Certain Classes of Securities on Form 8-A (No. 000-15946) and incorporated herein by reference). MATERIAL CONTRACTS 10.1 Delphi Information Systems, Inc. 1983 Stock Incentive Plan, as amended (filed as Exhibit 10.1 to the Company's Registration Statement on Form S-1 (No. 33-45153) and incorporated herein by reference). + 10.2 Delphi Information Systems, Inc. Cash Option Profit Sharing Plan (filed as Exhibit 4.2 to the Company's Registration Statement on Form S-8 (No. 33-19310) and incorporated herein by reference). + 10.3 Delphi Information Systems, Inc. 1989 Stock Purchase Plan (included in the prospectus filed as part of the Company's Registration Statement on Form S-8 (No. 33-35952) and incorporated herein by reference). + 10.4 Delphi Information Systems, Inc. Non-Qualified Stock Option Plan for Directors (filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1992, and incorporated herein by reference). 10.5 Delphi Information Systems, Inc. 1996 Stock Incentive Plan (filed as Exhibit 4.3 to the Company's Registration Statement on Form S-8 (File No. 33323261), and incorporated herein by reference). + 10.6 Stock Purchase Warrant dated June 5, 1992, issued by the Company to Silicon Valley Bank, and related Registration Rights Agreement (filed as Exhibit 10.12 to the Company's Registration Statement on Form S-1 (No. 33-45153) and incorporated herein by reference).
49 10.7 Lease agreement dated September 1998 between the Company and Crossroads of Commerce III, relating to premises at 3501 Algonquin Road, Rolling Meadows, IL (filed as Exhibit 10.15 to the Company's Transition Report on Form 10-K for the transition period from April 1, 1998 to December 31, 1998 and incorporated herein by reference). 10.8 Lease agreement effective October, 1998 between the Company and 485 Properties LLC relating to premises at Five Concourse Parkway, Atlanta, Georgia (filed as Exhibit 10.16 to the Company's Transition Report on Form 10-K for the transition period from April 1, 1998 to December 31, 1998 and incorporated herein by reference). 10.9 Delphi Information Systems, Inc. 1998 Non-Employee Director's Stock Option Plan (filed as Exhibit A to the Company's proxy statement dated August 12, 1998, and incorporated herein by reference).+ 10.10 Strategic Supply, Service and Promotion Agreement between Hewlett-Packard Packard and Company, dated August 20, 1999 (filed as Exhibit 10.19 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference).** 10.11 Related Agreement Number One, Strategic Supply, Services and Promotion Agreement between Hewlett-Packard and Company, dated August 20, 1999 (filed as Exhibit 10.20 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference).** 10.12 Terms and condition of sale and service between Hewlett-Packard and Company, dated August 20, 1999 (filed as Exhibit 10.21 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference).** 10.13 Warrant to purchase shares of common stock between Hewlett-Packard and Company, dated August 20, 1999 (filed as Exhibit 10.22 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). 10.14 Internet Content (World Wide Web Site) Distribution Agreement between Infospace and Company, dated August 31, 1999 (filed as Exhibit 10.23 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). 10.15 Content Provider Agreement between Infospace and Company, dated August 31, 1999 (filed as Exhibit 10.24 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference).** 10.16 Internet Promotion Agreement between Infospace and Company, dated August 31, 1999 (filed as Exhibit 10.25 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference).** 10.17 Warrant issued to Infospace by the Company (filed as Exhibit 10.26 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). 10.18 Warrant issued to Infospace by the Company (filed as Exhibit 10.27 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). 10.19 Agreement dated as of July 15, 1999, between the Company, Tatum CFO Partners, LLP and Richard J. Baum (filed as Exhibit 10.28 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference).+ 10.20 Sublease agreement dated April 20, 2000 between the Company and Philips Electronics North American Company relating to the premises at 1900 Golf Road, Schaumburg, Illinois (filed as Exhibit 10.29 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference).
50 10.21 Sublease agreement dated April 20, 2000 between the Company and Pepsi-Cola General Bottlers relating to the premises at 1300 Algonquin Road in Rolling Meadows, Illinois (filed as Exhibit 10.30 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). 10.22 Sublease agreement dated July 22, 1999 between the Company and Air Liquid America Corporation relating to the premise at Walnut Creek California (filed as Exhibit 10.31 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). 10.23 First Amendment to the Delphi Information Systems, Inc. 1996 Stock Incentive Plan (filed as Exhibit 10.32 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). 10.24 Delphi Information Systems, Inc. 1999 Stock Purchase Plan (filed as Exhibit 10.33 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). 10.25 Baum Severance agreement dated October 4, 2000 (filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 and incorporated herein by reference). + 10.26* Sublease agreement dated June 15, 2000, between the Company and Envoy Networks, Inc., relating to premises at 900 Middlesex Turnpike, Building 8, Second Floor, Billerica, MA. 10.27* Sublease agreement dated October 11, 2000, between the Company and Eric Swallow and Deborah Swallow, relating to the premises at 2055 N. Broadway, Walnut Creek, CA. 10.28* Channel Agreement dated October 31, 2000 between the Company and the Alta Vista Company** 21.1* The subsidiaries of the Company. 23.1* Consent of KPMG LLP 23.2* Consent of Arthur Andersen LLP
- ------------------------ * Filed herewith ** Confidential treatment has been requested for portions of this document. The redacted material has been filed with the commission pursuant to an application for confidential treatment. + Management Contracts and Compensation Agreements (b) REPORTS ON FORM 8-K None 51 SCHEDULE II EBIX.COM, INC. SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 31, 1999, AND THE NINE MONTHS ENDED DECEMBER 31, 1998 Allowance for doubtful accounts receivable
NINE MONTHS YEAR ENDED YEAR ENDED ENDED DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998 ----------------- ----------------- ----------------- Beginning balance............................. $1,004,000 $1,068,000 $ 860,000 Provision for allowance....................... 476,810 -- 699,000 Write-off of accounts receivable against allowance................................... (430,848) (64,000) (491,000) ---------- ---------- ---------- $1,049,962 $1,004,000 $1,068,000 ========== ========== ==========
52 EX-3.2 2 a2042365zex-3_2.txt BYLAWS OF DELPHI Exhibit 3.2 BYLAWS OF ebix.com, INC. A DELAWARE CORPORATION ARTICLE I OFFICES SECTION 1.01 REGISTERED OFFICE. The registered office of ebix.com, Inc. (hereinafter called the "Corporation") shall be at such place in the State of Delaware as shall be designated by the Board of Directors (hereinafter called the "Board"). SECTION 1.02 PRINCIPAL OFFICE. The principal office for the transaction of the business of the Corporation shall be at such location, within or without the State of Delaware, as shall be designated by the Board. SECTION 1.03 OTHER OFFICES. The Corporation may also have an office or offices at such other place or places, either within or without the State of Delaware, as the Board may from time to time determine or as the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 2.01 ANNUAL MEETINGS. Annual meetings of the stockholders of the Corporation for the purpose of electing directors and for the transaction of such other proper business as may come before such meetings may be held at such time, date and place as the Board shall determine by resolution. SECTION 2.02 SPECIAL MEETINGS. Special meetings of the stockholders of the Corporation for any purpose or purposes may be called by the Board, by the holders of shares of stock of the Corporation entitled to cast not less than ten percent of the votes at such meetings, or by a committee of the Board which has been duly designated by the Board and whose powers and authority, as provided in a resolution of the Board or in the Bylaws, include the power to call such meetings, but such special meetings may not be called by any other person or persons; provided, however, that if and to the extent that any special meeting of stockholders may be called by any other person or persons specified in any provision of the Certificate of Incorporation or any amendment thereto or any certificate filed under Section 151(g) of the General Corporation law of Delaware (or its successor statute as in effect from time to time hereafter), then such special meeting may also be called by the person or persons, in the manner, at the time and for the purposes so specified. (Amended May 17, 1987) SECTION 2.03 PLACE OF MEETINGS. All meetings of the stockholders shall be held at such places, within or without the State of Delaware, as may from time to time be designated by the person or persons calling the respective meetings and specified in the respective notices or waivers of notice thereof. SECTION 2.04 NOTICE OF MEETINGS. Except as otherwise required by law, notice of each meeting of the stockholders, whether annual or special, shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder of record entitled to vote at such meeting by delivering a typewritten or printed notice thereof to him personally, or by depositing such notice in the United States mail, in a postage prepaid envelope, directed to him at his address furnished by him to the Secretary of the Corporation for such purpose or, if he shall not have furnished to the Secretary his address for such purpose, then at his address last known to the Secretary, or by transmitting a notice thereof to him at such address by telegraph, cable or wireless. Except as otherwise expressly required by law, no publication of any notice of a meeting of the stockholders shall be required. Every notice of a meeting of the stockholders shall state the place, date and hour of the meeting and, in the case of a special meeting, shall also state the purpose or purposes for which the meeting is called. Except as otherwise expressly required by law, notice of any adjourned meeting of the stockholders need not be given if the time and place thereof are announced at the meeting at which the adjournment is taken. SECTION 2.05 QUORUM. The holders of record of a majority in voting interest of the shares of stock of the Corporation entitled to be voted, present in person or by proxy, shall constitute a quorum for the transaction of business at any meeting of the stockholders of the Corporation or any adjournment thereof. The stockholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. In the absence of a quorum at any meeting or any adjournment thereof, a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat or, in the absence therefrom of all the stockholders, any officer entitled to preside at or to act as secretary of such meeting may adjourn such meeting from time to time. At any such adjourned meeting at which a quorum is present any business may be transacted which might have been transacted at the meeting as originally called. SECTION 2.06 VOTING. (a) At each meeting of the stockholders, each stockholder shall be entitled to vote in person or by proxy each share or fractional share of the stock of the -2- Corporation which has voting rights on the matter in question and which shall have been held by him and registered in his name on the books of the Corporation: (i) on the date fixed pursuant to Section 6.05 of these Bylaws as the record date for the determination of stockholders entitled to notice of and to vote at such meeting, or (ii) if no such record date shall have been so fixed, then (A) at the close of business on the day next preceding the day on which notice of the meeting shall be given or (B) if notice of the meeting shall be waived, at the close of business on the day next preceding the day on which the meeting shall be held. (b) Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors in such other corporation is held directly or indirectly by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes. Persons holding stock of the Corporation in a fiduciary capacity shall be entitled to vote such stock. Persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the Corporation he shall have expressly empowered the pledgee to vote thereon, in which case only the pledgee or his proxy may represent such stock and vote thereon. Stock having voting power standing of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or with respect to which two or more persons have the same fiduciary relationship, shall be voted in accordance with the provisions of the General Corporation Law of Delaware. (c) Any such voting rights may be exercised by the stockholder entitled thereto in person or by his proxy appointed by an instrument in writing, subscribed by such stockholder or by his attorney thereunto authorized and delivered to the secretary of the meeting; provided, however, that no proxy shall be voted or acted upon after three years from its date unless said proxy shall provide for a longer period. The attendance at any meeting of a stockholder who may therefore have given a proxy shall not have the effect of revoking the same unless he shall in writing so notify the secretary of the meeting prior to the voting of the proxy. At any meeting of the stockholders all matters, except as otherwise provided in the Certificate of Incorporation, in these Bylaws or by law, shall be decided by the vote of a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat and thereon. The stockholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. The vote at any meeting of the stockholders on any question need not be by ballot, unless so directed by the chairman of the meeting. On a vote by ballot, each ballot shall be signed by the stockholder voting, or by his proxy if there by such proxy, and it shall state the number of shares voted. -3- SECTION 2.07 LIST OF STOCKHOLDERS. The Secretary of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the entire duration thereof and may be inspected by any stockholder who is present. SECTION 2.08 INSPECTOR OF ELECTION. If at any meeting of the stockholders a vote by written ballot shall be taken on any question, the chairman of such meeting may appoint an inspector or inspectors of election to act with respect to such vote. Each inspector so appointed shall first subscribe an oath faithfully to execute the duties of an inspector at such meeting with strict impartiality and according to the best of his ability. Such inspectors shall decide upon the qualification of the voters and shall report the number of shares represented at the meeting and entitled to vote on such question, shall conduct and accept the votes and, when the voting is completed, shall ascertain and report the number of shares voted respectively for and against the question. Reports of the inspectors shall be in writing and subscribed and delivered by them to the Secretary of the Corporation. Inspectors need not be stockholders of the Corporation, and any officer of the Corporation may be an inspector on any question other than a vote for or against a proposal in which he shall have material interest. SECTION 2.09 STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by the General Corporation Law of Delaware to be taken at any annual or special meeting of the stockholders, or any action which may be taken at any annual or special meeting of the stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing setting forth the action so taken shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE III BOARD OF DIRECTORS SECTION 3.01 GENERAL POWERS. The property, business and affairs of the Corporation shall be managed by or under the direction of the Board, which may exercise all of the powers of the Corporation, except such as are by the Certificate of Incorporation, by these Bylaws or by law conferred upon or reserved to the stockholders. -4- SECTION 3.02 NUMBER. The number of directors that shall constitute the whole Board shall be established by the Board from time to time, but in no event shall be less than four nor more than eight. SECTION 3.03 ELECTION OF DIRECTORS. The directors shall be elected by the stockholders of the Corporation, and at each election the persons receiving the greatest number of votes, up to the number of directors then to be elected, shall be the persons then elected. The election of directors is subject to any provisions contained in the Certificate of Incorporation relating thereto, including any provisions for a classified board. SECTION 3.04 RESIGNATIONS. Any director of the Corporation may resign at any time by giving written notice to the Board or to the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time is not specified, it shall take effect immediately upon its receipt, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 3.05 VACANCIES. Except as otherwise provided in the Certificate of Incorporation, any vacancy in the Board, whether because of death, resignation, disqualification, an increase in the number of directors or any other cause, may be filled by vote of the majority of the remaining directors, although less than a quorum, or by a sole remaining director. Each director so chosen to fill a vacancy shall hold office until his successor shall have been elected and shall qualify or until he shall resign or shall have been removed. No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of his term of office. Upon the resignation of one or more directors from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided hereinabove in the filling of other vacancies. SECTION 3.06 PLACE OF MEETING; TELEPHONE CONFERENCE MEETING. The Board may hold any of its meetings at such place or places within or without the State of Delaware as the Board may from time to time by resolution designate or as shall be designated by the person or persons calling the meeting or in the notice or waiver of notice of any such meeting. Directors may participate in any regular or special meeting of the Board by means of conference telephone or similar communications equipment pursuant to which all persons participating in the meeting of the Board can hear each other, and such participation shall constitute presence in person at such meeting. SECTION 3.07 FIRST MEETING. The Board shall meet as soon as practicable after each annual election of directors and notice of such first meeting shall not be required. -5- SECTION 3.08 REGULAR MEETING. Regular meetings of the Board may be held at such times as the Board shall from time to time by resolution determine. If any day fixed for a meeting shall be legal holiday at the place where the meeting is to be held, then the meeting shall be held at the same hour and place on the next succeeding business day which is not a legal holiday. Except as provided by law, notice of regular meetings need not be given. SECTION 3.09 SPECIAL MEETING. Special of the Board may be called at any time by the Chairman of the Board or the President or by any two (2) directors, to be held at the principal office of the Corporation, or at such other place or places, within or without the State of Delaware, as the person or persons calling the meeting may designate. Notice of the time and place of special meetings shall be given to each director either (i) by mailing or otherwise sending to him a written notice of such meeting, charges prepaid, addressed to him at his address as it is shown upon the records of the Corporation, or if it is not so shown on such records or is not readily ascertainable, at the place in which the meetings of the directors are regularly held, at least seventy-two (72) hours prior to the time of the holding of such meeting or (ii) by orally communicating the time and place of the special meeting to him at least forty-eight (48) hours prior to the time of the holding of such meeting. Either of the notices as above provided shall be due, legal and personal notice to such director. Whenever notice is required to be given, either to a stockholder or a director, under any provision of the General Corporation Law of Delaware, the Certificate of Incorporation or these Bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting, whether in person or by proxy, shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at nor the purpose of any regular or special meeting of directors or committee of directors need be specified in any written waiver of notice. All such waivers shall be filed with the corporate records or made a part of the minutes of the meeting. SECTION 3.10 QUORUM AND ACTION. Except as otherwise in these Bylaws or by law, the presence of a majority of the authorized number of directors shall be required to constitute a quorum for the transaction of business at any meeting of the Board, and all matters shall be decided at any such meeting, a quorum being present, by the affirmative votes of a majority of the directors present. In the absence of a quorum, a majority of directors present at any meeting may adjourn the same from time to time until a quorum shall be present. Notice of any adjourned meeting need not be given. The directors shall act only as a Board, and the individual directors shall have no power as such. SECTION 3.11 ACTION BY CONSENT. Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting -6- if a written consent thereto is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or such committee. Such action by written consent shall have the same force and effect as the unanimous vote of such directors. SECTION 3.12 COMPENSATION. No stated salary need be paid to directors, as such, for their services but, as fixed from time to time by resolution of the Board, the directors may receive directors' fees, compensation and reimbursement for expenses for attendance at directors' meetings, for serving on committees and for discharging their duties; provided, however, that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. SECTION 3.13 COMMITTEES. The Board may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers which may require it, but no such committee shall have any power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the Bylaws of the Corporation, and unless the resolution of the Board expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Any such committee shall keep written minutes of its meetings and report the same to the Board when required. In the absence of any member of any such committee, the members thereof present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may appoint another member of the Board to act at the meeting in the place of such absent member. A majority of the members, or replacements thereof, of any such committee shall constitute a quorum for the transaction of business. Every act or decision done or made by a majority of the members, or replacements thereof, of any such committee shall be regarded as the act or decision of the entire committee. SECTION 3.14 OFFICERS OF THE BOARD. The Board shall have a Chairman of the Board and may, at the discretion of the Board, have one or more Vice Chairmen. The Chairman of the Board and the Vice Chairmen shall be appointed from time to time by the Board and shall have such powers and duties as shall be designated by the Board. SECTION 3.15 REMOVAL. Any or all of the directors may be removed, either for or without cause, at any meeting of stockholders called expressly for that purpose, by the -7- affirmative vote, in person or by proxy, of the holders of a majority of the shares of stock of the Corporation then entitled to vote for the election of directors. (Amended May 17, 1987) ARTICLE IV OFFICERS SECTION 4.01 OFFICERS. The Officers of the Corporation shall be a Chairman of the Board, a Chief Executive Officer, a President, a Secretary and a Treasurer. The Corporation may also have, at the discretion of the Board, one or more Vice Presidents, one or more Assistant Vice Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers and such other officers as may be appointed in accordance with the provisions of Section 4.03 of these Bylaws. One person may hold two or more offices, except that the Secretary may not also hold the office of President. The salaries of all officers of the Corporation shall be fixed by the Board. SECTION 4.02 ELECTION. The officers of the Corporation, except such officers as may be appointed in accordance with the provisions of Section 4.03 or Section 4.05 of these Bylaws, shall be chosen annually by the Board, and each shall hold his office until he shall resign or shall be removed or otherwise disqualified to serve or until his successor shall be elected and qualified. SECTION 4.03 SUBORDINATE OFFICERS. The Board may appoint, or may authorize the Chief Executive Officer to appoint, such other officers as the business of the Corporation may require, each of whom shall have such authority and perform such duties as are provided in these Bylaws or as the Board or the President from time to time may specify and shall hold office until he shall resign or shall be removed or otherwise disqualified to serve. SECTION 4.04 REMOVAL AND RESIGNATION. Any officer may be removed, with or without cause, by a majority of the directors at the time in office, at any regular or special meeting of the Board or, except in case of an officer chosen by the Board, by the Chief Executive Officer upon whom such power of removal may be conferred by the Board. Any officer may resign at any time by giving written notice to the Board, the Chairman of the Board, the President or the Secretary of the Corporation. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 4.05 VACANCIES. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in the Bylaws for the regular appointments to such office. -8- SECTION 4.06 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the Corporation shall, subject to the control of the Board, have general supervision, direction and control of the business and affairs of the Corporation. He shall preside at all meetings of stockholders and the Board. He shall have the general powers and duties of management usually vested in the chief executive officer of a corporation and shall have such other powers and duties with respect to the administration of the business and affairs of the Corporation as may from time to time be assigned to him by the Board or as prescribed by the Bylaws. In the absence or disability of the President, the Chief Executive Officer, in addition to his assigned duties and powers, shall perform all the duties of the President and when so acting shall have all the powers and be subject to all restrictions upon the President. SECTION 4.07 PRESIDENT. The President shall exercise and perform such powers and duties with respect to the administration of the business and affairs of the Corporation as may from time to time be assigned to him by the Chief Executive Officer (unless the President is also the Chief Executive Officer) or by the Board or as is prescribed by the Bylaws. In the absence or disability of the Chief Executive Officer, the President shall perform all of the duties of the Chief Executive Officer and when so acting shall have all the powers and be subject to all the restrictions upon the Chief Executive Officer. SECTION 4.08 VICE PRESIDENT. The Vice President(s), if any, shall exercise and perform such powers and duties with respect to the administration of the business and affairs of the Corporation as from time to time may be assigned to each of them by the President, by the Chief Executive Officer, by the Board or as its prescribed by the Bylaws. In the absence or disability of the President, the Vice Presidents, in order of their rank as fixed by the Board, or if not ranked, the Vice President designated by the Board, shall perform all of the duties of the President and when so acting shall have all of the powers of and be subject to all the restrictions upon the President. SECTION 4.09 SECRETARY. The Secretary shall keep, or cause to be kept, a book of minutes at the principal office for the transaction of the business of the Corporation, or such other place as the Board may order, of all meetings of directors and stockholders, with the time and place of holding, whether regular or special, and if special, how authorized and the notice thereof given, the names of those present at directors' meetings, the number of shares present or represented at stockholders' meetings and the proceedings thereof. The Secretary shall keep, or cause to be kept, at the principal office for the transaction of the business of the Corporation or at the office of the Corporation's transfer agent, a share register, or a duplicate share register, showing the names of the stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation. The Secretary shall give, or cause to be given, notice of all the meetings of the stockholders and of the Board required by these Bylaws or by law to be given, and he shall keep -9- the seal of the Corporation in safe custody and shall have such other powers and perform such other duties as may be prescribed by the Board or these Bylaws. If for any reason the Secretary shall fail to give notice of any special meeting of the Board called by one or more of the persons identified in Section 3.09 of these Bylaws, or if he shall fail to give notice of any special meeting of the stockholders called by one or more of the persons identified in Section 2.02 of these Bylaws, then any such person or persons may give notice of any such special meeting. SECTION 4.10 TREASURER. The Treasurer shall keep and maintain, or cause to be kept and maintained, adequate and correct accounts of the properties and business transactions of the Corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, surplus and shares. Any surplus, including earned surplus, paid-in surplus and surplus arising from a reduction of capital, shall be classified according to source and shown in a separate account. The books of account at all reasonable times shall be open to inspection by any director. The Treasurer shall deposit all moneys and other valuables in the name and to the credit of the Corporation with such depositories as may be designated by the Board. He shall disburse the funds of the Corporation as may be ordered by the Board, shall render to the President, to the Chief Executive Officer and to the directors, whenever they request it, an account of all of his transactions as Treasurer and of the financial condition of the Corporation and shall have such other powers and perform such other duties as may be prescribed by the Board or these Bylaws. ARTICLE V CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC SECTION 5.01 EXECUTION OF CONTRACTS. The Board, except as otherwise provided in these Bylaws, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name and on behalf of the Corporation, and such authority may be general or confined to specific instances, and unless so authorized by the Board or by these Bylaws, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or in any amount. SECTION 5.02 CHECKS; DRAFT, ETC. All checks, drafts or other orders for payment of money, notes or other evidence of indebtedness, issued in the name of or payable to the Corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board. Each such person shall give such bond, if any, as the Board may require. SECTION 5.03 DEPOSIT. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board may select or as may be selected by any officer or -10- officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation to whom such power shall have been delegated by the Board. For the purpose of deposit and for the purpose of collection for the account of the Corporation, the President, the Chief Executive Officer, any Vice President or the Treasurer (or any other officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation who shall be determined by the Board from time to time) may endorse, assign and deliver checks, drafts and other orders for the payment of money which are payable to the order of the Corporation. SECTION 5.04 GENERAL AND SPECIAL BANK ACCOUNTS. The Board from time to time may authorize the opening and keeping of general and special bank accounts with such banks, trust companies or other depositories as the Board may select or as may be selected by an officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation to whom such power shall have been delegated by the Board. The Board may make such special rules and regulations with respects to such bank accounts, not inconsistent with the provisions of these Bylaws, as it may deem expedient. ARTICLE IV SHARES AND THEIR TRANSFER SECTION 6.01 CERTIFICATES FOR STOCK. Every owner of stock of the Corporation shall be entitled to have a certificate or certificates, in such form as the Board shall prescribe, certifying the number and class of shares of the stock of the Corporation owned by him. The certificates representing shares of such stock shall be numbered in the order in which they shall be issued and shall be signed in the name of the Corporation by the Chairman of the Board, the President or a Vice President and by the Secretary or an Assistant Secretary or by the Treasurer or an Assistant Treasurer. Any or all of the signatures on the certificates may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon any such certificate shall thereafter have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may nevertheless be issued by the Corporation with the same effect as though the person who signed such certificate, or whose facsimile signature shall have been placed thereupon, were such officer, transfer agent or registrar at the date of issue. A record shall be kept of the respective names of the persons, firms or corporations owning the stock represented by such certificates, the number and class of shares represented by such certificates, respectively, and the respective dates thereof, and in case of cancellation, the respective dates of cancellation. Every certificate surrendered to the Corporation for exchange or transfer shall be cancelled, and no new certificate or certificates shall be issued in exchange for any existing certificate until such existing certificate shall have been so cancelled, except in cases provided for in Section 6.04 of these Bylaws. SECTION 6.02 TRANSFER OF STOCK. Transfer of shares of stock of the Corporation shall be made only on the books of the Corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary, or with a transfer clerk or a transfer agent appointed as provided in Section 6.03 of -11- these Bylaws, and upon surrender of the certificate or certificates for such shares properly endorsed and the payment of all taxes thereon. The person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. Whenever any transfer of shares shall be made for collateral security, and not absolutely, such fact shall be stated expressly in the entry of transfer if, when the certificate or certificates shall be presented to the Corporation for transfer, both the transferor and the transferee request the Corporation to do so. SECTION 6.03 REGULATIONS. The Board may make such rules and regulations as it may deem expedient, not inconsistent with these Bylaws, concerning the issue, transfer and registration of certificates for shares of the stock of the Corporation. The Board may appoint, or authorize any officer or officers to appoint, one or more transfer clerks or one or more transfer agents and one or more registrars and may require all certificates for stock to bear the signature or signatures of any of them. SECTION 6.04 LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES. In any case of loss, theft, destruction, or mutilation of any certificate of stock, another may be issued in its place upon proof of such loss, theft, destruction, or mutilation and upon the giving of a bond of indemnity to the Corporation in such form and in such sums as the Board may direct; provided, however, that new certificate may be issued without requiring any bond when, in the judgment of the Board, it is proper to do so. SECTION 6.05 RECORD DATE. In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any other change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting nor more than sixty (60) days prior to any other action. If, in any case involving the determination of stockholders for any purpose other than other than notice of or voting at a meeting of stockholders, the Board shall not fix such a record date, the record date for determining stockholders for such purpose shall be the close of business on the day on which the Board shall adopt the resolution relating thereto. A determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of such meeting; provided, however, that the Board may fix a new record date for the adjourned meeting. SECTION 6.06 REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The President or any Vice President and the Secretary or any Assistant Secretary of this Corporation are authorized to vote, represent and exercise on behalf of this Corporation all rights incident to all shares of any other corporation r corporations standing in the name for this Corporation. The authority herein granted to said officers to vote or represent on behalf of this Corporation any and all shares held by this Corporation in any other corporation or corporations may be exercised either by such officers in person or by any person authorized so to do by proxy or power of attorney duly executed by said officers. -12- ARTICLE VII INDEMNIFICATION SECTION 7.01 ACTIONS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or as a member of any committee or similar body, against expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in, or not opposed to, the best interests of the Corporation and, with respect to any criminal action or proceeding, that he had reasonable cause to believe that his conduct was unlawful. SECTION 7.02 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or as a member of any committee or similar body, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnify for such expenses which the court shall deem proper. SECTION 7.03 DETERMINATION OF RIGHT OF INDEMNIFICATION. Any indemnification under Section 7.01 or 7.02 of these Bylaws (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 7.01 and 7.02 of these Bylaws. -13- Such determination shall be made (i) by the Board by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the stockholders. SECTION 7.04 INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY. Notwithstanding the other provisions of this Article VII, to the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 7.01 or 7.02 of these Bylaws, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. SECTION 7.05 ADVANCE OF EXPENSES. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board in the specific case upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article. (as amended) SECTION 7.06 OTHER RIGHTS AND REMEDIES. The indemnification and advancement of expenses provided by, or guaranteed pursuant to, the other subsections of this Article VII shall not be deemed exclusive and is declared expressly to be nonexclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. (as amended) SECTION 7.07 INSURANCE. Upon resolution passed by the Board, the Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or as a member of any committee or similar body, against any liability asserted against him and incurred by him in any such capacity or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article VII. SECTION 7.08 CONSTITUENT CORPORATIONS. For the purposes of this Article VII, references to "the Corporation" 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 and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another -14- corporation, partnership, joint venture, trust or other enterprise or as a member of any committee or similar body shall stand in the same position under the provisions of this Article VII with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. SECTION 7.09 EMPLOYEE BENEFIT PLANS. For the purposes of this Article VII, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries. A person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" within the meaning of this Article VII. SECTION 7.10 SEVERABILITY. If any part of this Article VII shall be found, in any action, suit or proceeding or appeal therefrom or in any other circumstances or as to any particular officer, director, employee or agent to be unenforceable, ineffective or invalid for any reason, the enforceability, effect and validity of the remaining parts or of such parts in other circumstances shall not be affected, except as otherwise required by applicable law. SECTION 7.11 AMENDMENTS. The foregoing provisions of this Article VII shall be deemed to constitute an agreement between the corporation and each of the persons entitled to indemnification hereunder, for as long as such provisions remain in effect. Any amendment to the foregoing provisions of this Article VII which limits or otherwise adversely affects the scope of indemnification or rights of any such persons hereunder shall, as to such persons, apply only to claims arising, or causes of action based on actions or events occurring, after such amendment and delivery of notice of such amendment to the person or persons so affected. Until notice of such amendment is given to the person or persons whose rights hereunder are adversely affected, such amendment shall have no effect on such rights of such persons hereunder. Any person entitled to indemnification under the foregoing provisions of this Article VII, as to any act or omission occurring prior to the date of receipt of such notice, shall be entitled to indemnification to the same extent as if such provisions had continued as Bylaws of the Corporation without such amendment. ARTICLE VIII MISCELLANEOUS SECTION 8.01 SEAL. The Board shall provide a corporate seal, which shall be in the form of a circle and shall bear the name of the Corporation and words and figures showing that the Corporation was incorporated in the State of Delaware and showing the year of incorporation. -15- SECTION 8.02 WAIVER OF NOTICES. Whenever notice is required to be given by these Bylaws or the Certificate of Incorporation or by law, the person entitled to said notice may waive such notice in writing, either before or after the time stated therein, and such waiver shall be deemed equivalent to notice. SECTION 8.03 LOANS AND GUARANTIES. The Corporation may lend money to, or guarantee any obligation of, and otherwise assist any officer or other employee of the Corporation or of its subsidiaries, including any officer who is a director, whenever, in the judgment of the Board, such loan, guaranty or assistance may reasonably be expected to benefit the Corporation. The loan, guaranty, or other assistance may be with or without interest and may be unsecured or secured in such manner as the Board shall approve, including, without limitation, a pledge of shares of stock of the Corporation. SECTION 8.04 GENDER. All personal pronouns used in these Bylaws shall include the other genders, whether used in the masculine, feminine or neuter gender, and the singular shall include the plural, and visa versa, whenever and as often as may be appropriate. SECTION 8.05 AMENDMENTS. These Bylaws, or any of them, may be rescinded, altered, amended or repealed, and new Bylaws may be made (i) by the Board, by vote of a majority of the number of directors then in office as directors, acting at any meeting of the Board or (ii) by the stockholders, by the vote of a majority of the outstanding shares of voting stock of the Corporation, at an annual meeting of stockholders, without previous notice, or at any special meeting of stockholders, provided that notice of such proposed amendment, modification, repeal or adoption is given in the notice of special meeting: provided, however, that Section 2.02 of these Bylaws can only be amended if that Section was amended would not conflict with the Corporation's Certificate of Incorporation. Any Bylaw made or altered by the stockholders may be altered or repealed by the Board or may be altered or repealed by the stockholders. -16- EX-10.26 3 a2042365zex-10_26.txt SUBLEASE AGREEMENT DATED JUNE 15, 2000 Exhibit 10.26 SUBLEASE AGREEMENT THIS SUBLEASE (the "Sublease") is made and entered into as of the 15 day of , June 2000, by and between ebix.com, Inc., a Delaware Corporation, formerly known as Delphi Information Systems, Inc. (the "Sublessor") with offices at 1900 E. Golf Road, Suite 1200, Schaumberg, IL, and Envoy Networks, Inc., a Delaware Corporation ("the Sublessee") with offices at 900 Middlesex Turnpike, Building 8, Billerica, MA 01821. WITNESSETH Whereas, Sublessor, as Tenant, has entered into a lease (the "Prime Lease") dated March 8, 1996, with Middlesex Technology Center Associates VIII Limited Partnership, as Landlord, (the "Prime Landlord") for 10,088 rentable square feet in Building 8, 900 Middlesex Turnpike, Second Floor, Billerica, Massachusetts (the "Premises") for a term ending June 30, 2001. A copy of the lease is attached as Exhibit "A". Whereas, Sublessor desires to sublease all (100%) of the 10,088 square feet of the Premises to Sublessee (the "Subleased Premises"), and Sublessee desires to enter into this Sublease upon and subject to the terms and conditions set forth in this Sublease Agreement. Whereas, Sublessor represents that it is not in default in preforming any of its obligations under the Prime Lease, including the payment of rent to date. NOW THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. All terms not expressly defined in this Sublease Agreement shall have the meanings given to them in the Prime Lease. 2. PRIME LANDLORD. Sublessee agrees to look solely to the Prime Landlord, and not to the Sublessor, for the performance of all services and obligations of the Prime Landlord under the Prime Lease with respect to the Subleased Premises. At Sublessee's expense and request, Sublessor will take all reasonable actions necessary to enable Sublessee to enforce Sublessor's rights as Tenant under the Prime Lease with respect to the Subleased Premises. This Sublease shall not be deemed, nor is it intended, to grant the Sublessee any rights against the Prime Landlord. The Sublessee hereby acknowledges and agrees that its sole remedy for any alleged or actual breach of its rights in connection with the Sublease shall be solely against the Sublessor. 1 3. SUBLEASE. Sublessor, for and in consideration of the Sublessee's payment of rent and performance of covenants contained in this Sublease, does hereby demise and lease the Subleased Premises to Sublessee. 4. TERM. The term of the Sublease (the "Term") shall be for a period commencing from the Sublease Commencement Date as defined hereinafter in this paragraph (the Sublease Commencement Date) and ending on June 30, 2001. A Commencement Date Letter Agreement shall be signed by both the Sublessor and Sublessee to represent the first effective day the Term of the Sublease begins. The Sublease Commencement Date is defined as the date on which the Sublessee is given occupancy of the Subleased Premises. Should the Sublessor be unable to give occupancy on or before July 1, 2000, other than due to the lack of consent on the part of the Prime Landlord, then this Sublease shall be null and void and no obligations will remain on the part of either party, provided however, that the effect of this provision can be altered by the execution of the Commencement Date Letter Agreement. Should occupancy be delayed due only to the lack of consent of the Prime Landlord, then the July 1, 2000 date shall be extended to July 15, 2000. All parties agree to use their best efforts so that occupancy can be given by June 15, 2000. 5. RENT. The monthly rent during the Term hereunder shall accrue at a gross rate of Eleven dollars ($11.00) per square feet, represented as an annual rate. It is agreed that the rentable square feet for this Sublease is Ten Thousand Eighty Eight (10,088) square feet. The monthly rent shall be payable in advance on the first day of each calendar month during the Term in the amount of Nine Thousand Two Hundred Forty Seven dollars and Thirty-Three cents ($9,247.33). Also included in the monthly rent are charges for electricity, Operating Cost and Operating Cost Escalation. Sublessee shall be responsible to pay utility charges (other than that included in Operating Cost), if any, except, as previously noted, electricity. Should the Term not begin on the First (1st) of the month, the rent due shall be pro rated on a daily basis based upon the number of days in that month. Should the Sublessee not vacate on or before the end of the Term of this Sublease, the Sublessee shall pay, or shall be obligated to pay as damages, the full amount required by the Holdover paragraph of the Prime Lease, plus all reasonable costs, including attorney's fees, expended to compel compliance with the requirements of the Prime Lease. All rent shall be payable at the office of the Sublessor, at the following address: ebix.com, Inc. 1900 East Golf Road, Suite 1200 Schaumburg, IL 60173 Attn: Richard J. Baum 2 or at any other address as directed by notice from Sublessor to Sublessee. 6. PRIME LEASE. A true and correct copy of the Prime Lease is attached hereto as Exhibit "A". Where not expressly inconsistent with the terms hereof, and except as otherwise stated herein to the contrary, this Sublease shall be subject and subordinate to the terms and conditions contained in the Prime Lease as said terms and conditions affect the Subleased Premises, and all of the terms and conditions of the Prime Lease, except as otherwise stated herein, are hereby incorporated into this Sublease and shall be binding upon Sublessee with respect to the Subleased Premises to the same extent as if Sublessee were named as Tenant and Sublessor as Landlord under the Prime Lease. For purposes of this Sublease, references in the Prime Lease to the "term" shall mean the Term of this Sublease, and references to the "Premises" in the Prime Lease shall mean the Subleased Premises. Each party agrees that it shall not do or omit to do anything which would result in a default under the Prime Lease, and each party agrees to defend, indemnify, and hold the other harmless from and against all claims, demands, or liabilities resulting from such party's breach, violation, or nonperformance of any of its obligations under the Prime Lease, as incorporated herein. 7. SECURITY DEPOSIT. Sublessee agrees to deposit with Sublessor, an amount equal to Nine Thousand Two Hundred Forty Seven dollars and Thirty-Three cents ($9,247.33), an amount equal to one month's rent, prior to the Sublessor giving the Sublessee occupancy, as security for Sublessee's faithful performance of Sublessee's obligations hereunder. Upon the satisfactory performance of the covenants contained herein, and within fifteen (15) days after the expiration of the Term of this Sublease, the Sublessor shall return this Security Deposit, along with interest accrued at a commercially reasonable rate, not to exceed six percent (6%) per annum. If Sublessee fails to pay rent or other charges when due under this Sublease, or fails to perform any of its other obligations hereunder, Sublessor may use or apply all or any portion of the Security Deposit for the payment of any rent or other amount then due hereunder and unpaid, for the payment of any other sum for which Sublessor may become obligated by reason of Sublessee's default or breach. If Sublessor so uses any portion of the Security Deposit, Sublessee shall, within 10 days after written demand by Sublessor, restore the Security Deposit to the full amount originally deposited, and Sublessee's failure to do so shall constitute a default under this Sublease. In the event Sublessor assigns its interest in this Sublease, Sublessor shall deliver to its assignee so much of the Security Deposit as is then held by Sublessor. Within fifteen (15) days after the term has expired, or Sublessee has vacated the Subleased Premises, whichever shall occur last, and subject to any final adjustment, if any, pursuant to the terms of the Prime Lease, and 3 provided that Sublessee is not then in default of any of its obligations hereunder, the Security Deposit, or so much thereof as had not theretofore been applied by Sublessor, shall be returned to Sublessee, or to the last assignee of Sublessee's interest hereunder, if any. 8. ALTERATIONS. Sublessee shall not make any alterations (structural or otherwise), improvements, or installations in or to the Subleased Premises without the prior written consent of the Sublessor which shall not be unreasonably withheld or delayed. All alterations and improvements shall be subject to the terms and conditions of the Prime Lease, and shall be subject to the approval of the Prime Landlord as provided for in the Prime Lease. Any alterations, improvements, or installations consented to by the Sublessor shall be made at the sole cost and expense of Sublessee. Any initial alterations will be at the sole expense of the Sublessee, and shall be subject to the consent of the Sublessor and the Prime Landlord. 9. REPAIRS AND ORDINARY MAINTENANCE. Any repair and maintenance obligations with respect to the Subleased Premises, which pertains to Sublessee's particular manner of use and occupancy, as Tenant under the Prime Lease, shall be performed by Sublessee, at Sublessee's sole cost and expense. Sublessee agrees that it will notify Sublessor promptly of the need for any repair to the Subleased Premises, even if Sublessor is not responsible for any such repair. Notwithstanding anything contained herein to the contrary, in the event that a condition exists in the Subleased Premises that the Prime Landlord is obligated to repair under the terms of the Prime Lease, Sublessee shall so advise Sublessor, who, in turn, shall promptly advise Prime landlord thereof. Sublessor shall have no liability to Sublessee for Prime Landlord's failure to make such repair. 10. UTILITIES AND SERVICES. Sublessee shall be entitled to all those services and utilities which the Prime Landlord is required to provide under the terms of the Prime Lease. Sublessee shall look solely to the Prime Landlord for the provision of such services and utilities, and Sublessor shall not be responsible for the Prime Landlord's failure to provide the same, nor shall such failure constitute an abrogation of any other terms and conditions of the Sublease. Sublessor hereby authorizes Prime Landlord to furnish to the Subleased Premises services that the Sublessor is entitled under the Prime Lease. The Sublessee shall also be entitled to use in common with others entitled thereto, subject to reasonable rules of general applicability to tenants of the Building from time to time made by the landlord of which Sublessee is given notice: (a) the common facilities included in the Building or on the Lot, including the parking facility to the extent from time to time designated by Prime Landlord; and (b) the building service fixtures and equipment serving the Premises. 4 11. ASSIGNMENT AND SUBLEASING. Sublessee shall not have the right to assign this Sublease or sublet the Subleased Premises, in whole or in part, without the prior written consent of the Sublessor and Prime Landlord in their sole discretion. 12. INSURANCE. Sublessee shall carry insurance for Bodily Injury and Property Damage in the amounts of $1,000,000 for each occurrence, and $2,000.000 aggregate, pursuant to the Prime Lease. Sublessee shall name both Sublessor and Prime Landlord as additional insureds on any required insurance policies. 13. WAIVER OF TRIAL BY JURY. The parties hereto hereby waive trial by jury in any action, proceeding, or counterclaim brought by either of the parties hereto against the other in connection with any dispute under this Sublease. 14. COMPLIANCE WITH LAWS. Sublessee shall promptly comply with all statutes, ordinances, rules, orders, regulations, and requirements of the Federal, State, and Municipal Governments, and of any and all of their Departments and Bureaus applicable to the use and occupancy of the Subleased Premises by Sublessee. 15. A. LIMITATIONS ON SUBLESSOR'S LIABILITY. Sublessee acknowledges that Sublessor has made no representations or warranties with respect to the building or the Subleased Premises except as provided in this Sublease, and Sublessee accepts the Subleased Premises in "AS IS" condition. If Sublessor assigns its leasehold estate in the building, Sublessor shall have no obligation to Sublessee that arises after that assignment. Sublessee shall then recognize Sublessor's assignee as Sublessor of this Sublease. Sublessor shall not be required to perform any of the covenants and obligations of the Prime Landlord under the Prime Lease, and insofar as any of the obligations of the Sublessor hereunder are required to be performed under the Prime Lease by the Prime Landlord thereunder, Sublessee shall rely on and look solely to the Prime Landlord for the performance thereof. Sublessor shall defend, indemnify, and hold Sublessee harmless from claims by Prime Landlord arising from Sublessee's assumption of Sublessor's obligations as Tenant under the Prime Lease, to the extent that Sublessor has expressly retained with regard to Sublessee, those rights and obligations of Tenant under the Prime Lease. For any such claim, Sublessor shall defend or pay all reasonable costs, attorney's fees, expenses, and liabilities. If Prime Landlord shall default in the performance of any of its obligations under the Prime Lease or breach any provision of the Prime Lease pertaining to the Subleased Premises, Sublessee shall have the right at Sublessee's expense and upon prior notice to 5 Sublessor, and in the name of the Sublessor to make any demand or institute any action or proceeding, in accordance with and not contrary to any provision of the Prime Lease, against the Prime Landlord under the Prime Lease for the enforcement of the Prime Landlord's obligations thereunder. Sublessee shall defend, indemnify and hold Sublessor harmless from and against any suit, action, cost, expense, damage or liability which arises out of or results from, or is alleged in a suit by the Prime Landlord to arise out of or result from Sublessee's exercise of its rights under this Paragraph. B. LIMITATIONS ON SUBLESSEE'S LIABILITY. The Sublessee shall not be liable to the Prime Landlord or to the Sublessor for any liability arising under the Prime Lease outside of the Term of the Sublease. The Sublessee shall also not be liable for the expense of making any alterations in the Subleased Premises at the end of the Sublease unless required by the Sublessor or by the Prime Landlord as a condition to the Alteration Paragraph of this Sublease, provided however, that should the Sublessee purchase, lease, or otherwise control any equipment, or other personal property, the removal of which is either required under the Prime Lease or could reasonably be construed as being required under the Prime Lease, including but not limited to a telephone system, then said equipment or property must be removed at the sole expense of Sublessee prior to the termination of this Sublease. 16. SUBORDINATION. This Sublease shall be subject to and subordinate to the Prime Lease, and ground lease and to any mortgage or deed of trust thereon or on the fee simple interest in the building or the land on which the building is located. 17. CASUALTY AND CONDEMNATION. If the Prime Lease is terminated with respect to the Subleased Premises pursuant to the provisions of the Prime Lease, this Sublease shall automatically terminate at the same time and the Sublessee shall have no claim against the Sublessor or the Prime Landlord for the loss of its subleasehold interest or any of Sublessee's property. If Prime Lease is not terminated with respect to the Subleased Premises upon the occurrence of a casualty or condemnation, the provisions of the Prime Lease with respect to casualty or condemnation shall apply to this Sublease and the Subleased Premises. 18. CONSENT OR APPROVAL FROM PRIME LANDLORD. If the consent or approval of Prime Landlord is required under the Prime Lease with respect to any matter relating to the Subleased Premises, Sublessee shall be required first to obtain the consent of the Sublessor with respect thereto, and if Sublessor grants such consent or approval, Sublessor or Sublessee may forward a request for consent or approval to the Prime Landlord, but Sublessor shall not be responsible for obtaining such consent or approval. Sublessor shall have no liability to Sublesssee for the failure of Prime Landlord to give its consent. The consent or approval of the Prime Landlord shall not release the Sublessor from any 6 duty, obligation, or liability to the Prime Landlord under the Prime Lease. 19. NOTICES. All notices given pursuant to the provisions of this Sublease shall be in writing, addressed to the party to whom notice is given and sent registered or certified mail, return receipt requested, in a postage paid envelope or by nationally recognized overnight delivery service, as follows:
TO SUBLESSOR: TO SUBLESSEE: ------------ ------------ ebix.com, Inc. Envoy Networks, Inc. 1900 East Golf Road, Suite 1200 900 Middlesex Turnpike Schaumburg, IL 60173 Building 8 Attn: Richard J. Baum Billerica, MA 01821 Attn: Triveni Upadhyay
It is understood and agreed that unless specifically modified by this Sublease, Sublessor shall be entitled to the length of notice required to be given Prime Landlord under the Prime Lease plus five (5) days and shall be entitled to give Sublessee the amount of notice required to be given Tenant under the Prime Lease. In no case, however, will the five (5) additional days be used to prejudice the Sublessee's rights under the Prime Lease. Either party by notice to the other may change or add persons and places where notices are to be sent or delivered. 20. BROKER'S AND COMMISSION. Sublessor and Sublessee each warrant that they have not dealt with any real estate broker or other commissioned salesperson in connection with this transaction and that no commissions are due. 21. SUBLESSOR'S AND SUBLESSEE'S POWER TO EXECUTE. Sublessor, subject to Prime Landlord's consent, and Sublessee covenant, warrant, and represent that they have full power and proper authority to execute this Sublease. 22. CONSENT TO SUBLEASE BY PRIME LANDLORD. This Sublease shall not become operative until and unless the Prime Landlord has given to Sublessor its consent hereto. Sublessor shall not be responsible for Prime Landlord's failure to consent to this Sublease. Should Prime Landlord not consent to this Sublease, each party shall be released from all obligations with respect hereto and neither party shall have any further rights in law or in equity with respect to this Sublease. 23. QUIET ENJOYMENT. Provided Sublessee is not in material breach or default of the Sublease, Sublessee shall peaceably and quietly hold and enjoy the Subleased Premises against 7 Sublessor and all persons claiming by, through or under Sublessor, for the Term hereof, subject to the provisions and conditions of this Sublease. 24. GOVERNING LAW. This Sublease shall be governed and construed in accordance with the law of the State of Massachusetts, without regard to the principles of Choice of Law. 25. ENTIRE AGREEMENT. This Sublease, which includes each of the Exhibits attached hereto, contains the entire Agreement between the parties and all prior negotiations and agreements are merged into this Sublease. This Sublease may not be changed, modified, terminated or discharged, in whole or in part, nor any of its provisions waived except by a written instrument which: (a) shall expressly refer to this Sublease, and (b) shall be executed by the party against whom enforcement of the change, modification, termination, discharge or waiver shall be sought. 26. BENEFIT. This Sublease shall be binding upon and inure to the benefit of the parties hereto, and to their respective successors and assigns, provided however, that this paragraph does not expand or alter the intent of the provisions regarding Assignment and Subletting contained herein. 27. ATTORNEY'S FEES. All attorney's fees and costs incurred by the Sublessor in connection with the drafting of this Sublease Agreement, including those costs incurred in obtaining the consent of the Prime Landlord to this Sublease, shall be borne by the Sublessor. IN WITNESS WHEREOF, the parties hereto have caused this Sublease to be properly executed as of the day and year first above written.
SUBLESSOR: SUBLESSEE: ebix.com, Inc. Envoy Networks, Inc. F/K/A Delphi Information Systems, Inc. By: /s/ R. J. Baum By: /s/ Triveni Upadhyay --------------------------------- ---------------------------- Name: R. J. Baum Name: Triveni Upadhyay ------------------------------- -------------------------- Title: CFO Date: 6/15/00 Title: President Date: 6/15/00 ------------ --------- ----------- ---------
8 CONSENT BY PRIME LANDLORD Prime Landlord's signature shall serve as acceptance, consent and approval of this Sublease. PRIME LANDLORD: Middlesex Technology Center Associates VIII Limited Partnership By: /s/ John A. Cataldo --------------------------------- Name: John A. Cataldo ------------------------------- Title: Executive Vice President Date: 6/19/00 ------------------------ ------- 9 EX-10.27 4 a2042365zex-10_27.txt SUBLEASE AGREEMENT DATED OCTOBER 11, 2000 Exhibit 10.27 OFFICE BUILDING LEASE 1. PARTIES. This Lease, dated, for reference purposes only, OCTOBER 11 2000 is made by and between ERIC SWALLOW AND DEBORAH SWALLOW (herein called "Landlord") and EBIX. COM, INC. (herein called "Tenant"). 2. PREMISES. a. Landlord does hereby lease to Tenant and Tenant hereby leases from Landlord that certain office space (herein called "Premises") indicated on Exhibit "A" attached hereto and by reference thereto made a part hereof, said Premises being agreed, for the purpose of this Lease, to have an area of approximately 5,634 square feet of rentable space as calculated by the Landlord and being situated on the 1ST 2ND & 3RD floors of that certain Building known as 2055 N. BROADWAY b. Said Lease is subject to the terms, covenants and conditions herein set forth and the Tenant covenants as a material part of the consideration for this Lease to keep and perform each and all of said terms, covenants and conditions by it to be kept and performed and that this Lease is made upon the condition of said performance. c. Substituted Premises. If the premises contain an area of 1,500 square feet or less, Landlord shall have the right at any time during the term hereof upon giving Tenant not less than sixty (60) days' prior written notice, to provide and furnish Tenant with space elsewhere in the Building of approximately the same size as the herein demised Premises and remove and place Tenant in such space with Landlord to pay all reasonable costs and expenses incurred as a result of such removal of Tenant. Should Tenant refuse to permit Landlord to move Tenant to such a new space at the end of said sixty (60) day period, Landlord shall have the right to cancel and terminate this lease effective ninety (90) days from the date of original notification by Landlord. If Landlord moves Tenant to such new space, this Lease and each and all of its terms, covenants and conditions shall remain in full force and effect and be deemed applicable to such new space, and such new space shall thereafter be deemed to be the "Premises" as though Landlord and Tenant had entered into an express written amendment to this Lease with respect thereto. 3. TERM. The term of this Lease shall be for five (5) years, commencing on the 1ST day of JANUARY 2001 and ending on the 31ST day of DECEMBER, 2005. 4. POSSESSION. a. If the Landlord, for any reason whatsoever, cannot deliver possession of said Premises to the Tenant at the commencement of the term hereof, this Lease shall not be void or voidable, nor shall Landlord be liable to Tenant for any loss or damage resulting therefrom, nor shall the expiration date of the above term be in any way extended, but in that event, all rent shall be abated during the period between the commencement of said term and the time when Landlord delivers possession. If Landlord is unable to deliver possession by January 15, 2001, the lease shall be voidable by the option of the Tenant. b. In the event that Landlord shall permit Tenant to occupy the Premises prior to the commencement date of the term, such occupancy shall be subject to all the provisions of this Lease. Said early possession shall not advance the termination date hereinabove provided. A Commencement Date Letter shall be signed to acknowledge the date of possession. 5. RENT. a. Basic Monthly Rental. Throughout the term, Tenant shall pay in lawful money of the United States to Landlord, rent for the Premises, without deduction or offset, prior notice or demand, in advance, on the first (1st) day of each calendar month of the term hereof in monthly installments as follows: TEN THOUSAND FOUR HUNDRED TWENTY-TWO Dollars ($10,422.90) together with any sales tax and the adjustment for increases in the cost of operation and maintenance as hereinafter provided in Paragraph 6. The first month's rent is payable upon execution of this Lease. If the Commencement Date is other than the first (1st) day of a calendar month, the rent payable hereunder shall be prorated on a daily basis and the rent for the partial month following the Commencement Date shall be payable on the first (1st) day of the second (2nd) full calendar month of the Term together with the regular monthly installment then due. All payments requiring proration shall be prorated on the basis of a thirty (30) day month. b. Tenant has deposited with Landlord the sum of THIRTY-ONE THOUSAND TWO HUNDRED SIXTY-EIGHT & 70/100 DOLLARS ($31,268.70) as security for the full and faithful performance of each and every provision of this Lease. If, at any time during the term hereof, or the term as it may be extended, Tenant shall be in default in payment of rent or payment of any other sums due Landlord as and for any other purpose whatever, Landlord may apply all or a part of the security deposit for such payment. Landlord may also apply all or a part of the deposit to repair damages to the Premises during or upon the termination of the tenancy created by this Lease. In such event, Tenant shall on demand pay to Landlord a like sum as additional security. If Tenant is not in default at the termination of this Lease, Landlord shall return the deposit to Tenant. Landlord shall not be required to keep this security deposit separate from its general funds, and Tenant shall not be entitled to interest on such deposit. Landlord may use a reasonable portion of this deposit as a non-refundable cleaning fee to clean up to the premises upon any termination (by expiration of term, default or otherwise) of this Lease. c. Tenant agrees that on the expiration of each anniversary year of the lease term, the monthly rental shall be subject to an adjustment based upon the following Year One $1.85 psf per month Year Two $1.95 psf per month Year Three $2.05 psf per month Year Four $2.15 psf per month Year Five $2.25 psf per month
1 6. ADJUSTMENT FOR INCREASES IN COST OF OPERATION AND MAINTENANCE. The cost of operation and maintenance payable shall, after the calendar year in which the term hereof commences be redetermined annually as of the first (1st) day of January as follows: a. Costs of Operation and Maintenance. The Landlord shall determine the amount by which its cost of operation and maintenance of said office building for the calendar year preceding that in which such determination is made the (Comparison Year) shall have increased relative to the base year of 2001. Tenant to receive copy of 2001 operating expenses by March 1, 2002. The term "cost of operation and maintenance" shall be deemed to mean those expenses actually incurred by Landlord with respect to the operation and maintenance of said office building which, in accordance with accepted principles of sound accounting practice as applied to the operation and maintenance of a first class building, are properly chargeable to the operation and maintenance of said office building including, without limitation, utilities, heating, air-conditioning, repair, maintenance, cost of janitorial and other services and maintenance contracts therefore, the building's share of the cost of maintaining the common and automobile parking area, including the building's pro rata share of park maintenance, supplies, wages, and salaries of employees used in the management operation and maintenance of said office building and payroll taxes (and similar governmental charges) with respect thereto, a Landlord management fee in the amount of five percent (5%) (which is part of the operating expenses) of the building's gross receipts, depreciation or rental of personal property used in maintenance, insurance, including fire and extended coverage, public liability and property damage and workmen's compensation insurance and war risk and earthquake insurance and such other insurance to the extent customarily carried by the owners of first class office buildings within the limits of Contra Costa County, property taxes as hereinafter defined, and other charges directly related to the operation and maintenance of said office building. Such costs shall not include broker's commission, interest, income taxes, salaries of executive officers of Landlord, capital expenditures which prolong the Building's useful life or depreciation on said office building. Landlord shall exclude from the cost of operation and maintenance any and all expenses relating to any operation, maintenance or supplies provided and furnished by Tenant at Tenant's own expense, and any expense, otherwise chargeable as part of the cost of operation and maintenance, that solely benefits a specific tenant in said office building. Operating expense pass throughs shall not exceed 8% in any given year. Capital Expenses and ongoing renovations of the building shall not be included in the buildings general operating expenses. Landlord will provide base year accounting of operating expenses prior to demand for operating expense pass throughs. b. Pro rata Share and Payment. The amount payable by Tenant in the first comparison year shall be the pro rata portion of the amount by which the cost determined pursuant to a. above shall have increased relative to the base year. Tenant's pro rata share of the increase in the cost of operation and maintenance is the ratio that the rentable square feet in said premises bears to the total rentable square feet in said office building, including basement, if any. That pro rata share has been determined to be SIXTY-TWO & 6/10 percent (62.6%). Landlord shall endeavor to give Tenant on or before the first day of March of each year following the respective Comparison Year a statement of the increase in rent by Tenant hereunder but failure to give such statement by said date shall not constitute a waiver by Landlord of its rights to require an increase in rent. Upon receipt of the statement for the first Comparison Year, Tenant shall pay in full the total amount of increase due for the first Comparison Year prorated for the portion of the first Comparison Year this lease is in effect, and in addition for the then current year, the amount of any such increase shall be used as an estimate for said current year and this amount shall be divided into twelve (12) equal monthly installments and Tenant shall pay to Landlord concurrently with the regular monthly rent payment next due following the receipt of such statement, an amount equal to one (1) monthly installment multiplied by the number of months from January in the calendar year in which said statement is submitted to the month of such payment, both months inclusive. Subsequent installments shall be payable concurrently with the regular monthly rent payments for the balance of that calendar year and shall continue until the next Comparison Year's statement is rendered. If the next or any succeeding Comparison Year results in a greater increase in Direct Expenses, then upon receipt of a statement from Landlord, Tenant shall pay a lump sum equal to such total increase in Direct Expenses over the Base Expense, less the total of the monthly installments of estimated increases paid in the previous calendar year for which comparison is then being made to the Base Year and the estimated monthly installments to be paid for the next year, following said Comparison Year, shall be adjusted to reflect such increase. If in any Comparison Year the Tenant's share of Direct Expenses be less than the preceding year, then upon receipt of Landlord's statement, any overpayment made by Tenant on the monthly installment basis provided above shall be credited toward the next monthly rent falling due and the estimated monthly installments of Direct Expenses to be paid shall be adjusted to reflect such lower Direct Expenses for the most recent Comparison Year. Even though the term has expired and Tenant has vacated the Premises, when the final determination is made of Tenant's share of Direct Expenses for the year in which this Lease terminates, Tenant shall immediately pay any increase due over the estimated expenses paid and conversely any overpayment made in the event said expenses decrease shall be immediately rebated by Landlord to Tenant. Notwithstanding anything contained in this Article, the rental payable by Tenant shall in no event be less than the rent specified in Article 5 hereinabove. c. Definition of Property Taxes. The term "property taxes," as used in this Lease, is defined as all real Estate taxes or personal property taxes levied with respect to said office building, and any improvements, fixtures and equipment and other property of the Landlord, real or personal, located in said office building and used in connection with the operation of said office building and the land upon which they are situated, or any tax, general or special assessment, or other charge of any description imposed upon or in respect of said building, including, without limitation, a tax upon any rent therefrom, excluding sales taxes, or any occupancy or use thereof, in lieu of or in addition to real Estate or personal property taxes, but excluding any of the Landlord's franchise taxes or any tax imposed upon Landlord's general net income. Tenant hereby agrees to pay all taxes which may be levied with respect to Tenant's personal property located upon said premises, including without limitation, the portion of the improvements to said premises the cost of which was borne by Tenant and not covered by any allowance for improvements granted to Tenant by Landlord, furniture, office equipment and other furnishings, and Tenant agrees to use its best efforts to cause such personal property to be taxed or assessed separately from said premises and not as a lien thereon. The Landlord shall have the right with Tenants consent to contest the amount or validity of any property taxes by appropriate legal proceedings and to include in the cost of operation and maintenance the cost of any such contest. Landlord shall contest such assessment by appropriate legal proceedings upon Tenant's request to do so provided tenants in said office building (including Tenant) 2 occupying more than fifty percent (50%) of the space in said office building join in Tenant's request, in which event the cost of said proceedings may be included in Landlord's cost of operation and maintenance. 7. USE. Tenant shall use the Premises for general office purposes and shall not use or permit the Premises to be used for any other purpose without the prior written consent of Landlord. Tenant shall not do or permit anything to be done in or about the Premises nor bring or keep anything therein which will in any way increase the existing rate of or affect any fire or other insurance upon the Building or any of its contents, or cause cancellation of any insurance policy covering said Building or any part thereof or any of its contents. Tenant shall not do or permit anything to be done in or about the Premises which will in any way obstruct or interfere with the rights of other tenants or occupants of the Building or injure or annoy them or use or allow the Premises to be used for any improper, immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about the Premises. Tenant shall not commit or suffer to be committed any waste in or upon the Premises. 8. COMPLIANCE WITH LAW. Tenant shall not use the Premises or permit any thing to be done in or about the Premises which will in any way conflict with any law, statute, ordinance or governmental rule or regulation now in force or which may hereafter be enacted or promulgated. Tenant shall at its sole cost and expense, promptly comply with all laws, statutes, ordinances and governmental rules, regulations or requirements now in force or which may hereafter be in force, and with the requirements of any board of fire insurance underwriters or other similar bodies now or hereafter constituted, relating to, or affecting the condition, use or occupancy of the Premises, excluding structural changes not related to or affected by Tenant's improvements or acts. The judgement of any court of competent jurisdiction or the admission of Tenant in any action against Tenant, whether Landlord be a party thereto or not, that Tenant has violated any law, statute, ordinance or governmental rule, regulation or requirement, shall be conclusive of that fact as between the Landlord and Tenant. 9. ALTERATIONS AND ADDITIONS. Tenant shall not make or suffer to be made any alterations, additions or improvements to or of the Premises or any part thereof without the written consent of Landlord first had and obtained and any alterations, additions or improvements to or of said Premises, including, but not limited to, wall covering, paneling and built-in cabinet work, but excepting movable furniture and trade fixtures, shall on the expiration of the term become a part of the realty and belong to the Landlord and shall be surrendered with the Premises. In the event Landlord consents to the making of any alterations, additions or improvements to the Premises by Tenant, the same shall be made by Tenant at Tenant's sole cost and expense, and any contractor or person selected by Tenant to make the same must first be approved of in writing by the Landlord. Any such alterations, additions or improvements made by Tenant shall be performed in accordance with all applicable laws, ordinances and codes, and in a first class workmanlike manner, and shall not weaken or impair the structural strength, or lessen the value, of the Building. In making any such alterations, additions or improvements, Tenant shall, at Tenant's sole cost and expense: a. file for and secure any necessary permits or approvals from all governmental departments or authorities having jurisdiction, and any utility company having an interest therein; and b. notify Landlord in writing at least fifteen (15) days prior to the commencement of work on any alteration, addition or improvement so that Landlord can post and record appropriate notices of nonresponsibility. Upon the expiration or sooner termination of the term hereof, Tenant shall, upon written demand by Landlord given at least thirty (30) days prior to the end of the term, at Tenant's sole cost and expense, forthwith and with all due diligence remove any alterations, additions, or improvements made by Tenant, designated by Landlord to be removed; provided that Tenant shall, forthwith and with all due diligence at its sole cost and expense, repair any damage to the Premises caused by such removal. Tenant may also, upon the expiration or sooner termination of the term hereof and provided that Tenant is not then in default hereunder, remove Tenant's movable equipment, furnishings, trade fixtures and other personal property (excluding any alterations, additions or improvements made by Tenant not specifically designated by Landlord to be removed), provided that Tenant shall, forthwith and with all due diligence at its sole cost and expense, repair any damages to the Premises caused by such removal. 10. REPAIRS. a. By taking possession of the Premises, Tenant shall be deemed to have accepted the Premises as being in good and sanitary order, condition and repair. Tenant shall, at Tenant's sole cost and expense, keep the Premises and every part thereof in good condition and repair, damage thereto from causes beyond the control of Tenant (and not caused by any act or omission of Tenant's agents, officers, employees, contractors, servants, invitees or guests) and ordinary wear and tear excepted. Tenant shall, upon the expiration or sooner termination of this Lease, surrender the Premises to the Landlord in good condition, ordinary wear and tear and damage from causes beyond the control of Tenant (and not caused by any act or omission of Tenant's agents, officers, employees, contractors, servants, invitees or guests) excepted. Except as specifically provided in an addendum, if any, to this Lease, Landlord shall have no obligation whatsoever to alter, remodel, improve, repair, decorate or paint the Premises or any part thereof and the parties hereto affirm that Landlord has made no representations to Tenant respecting the condition of the Premises or the Building except as specifically herein set forth. Landlord acknowledges that the premises are undergoing major renovations and anticipate completion of such by the start of the leasehold. However, if the work is not fully complete, the tenant has the right to document any needed repairs concerning Tenant's premises, at the time of possession, by process of a walkthrough and punchlist of the work to be completed in a timely manor by Landlord at Landlord's cost. b. Notwithstanding the provisions of article 10.a hereinabove, Landlord shall repair and maintain the structural portions of the Building, including the basic plumbing, air conditioning, heating, and electrical systems installed or furnished by Landlord, unless such maintenance or repairs are caused in part or in whole by the act, neglect, fault or omission of any duty by the Tenant, its agents, officers, employees, contractors, servants, invitees or guests, in which case Tenant shall pay to Landlord the reasonable cost of such maintenance or repairs. Landlord shall not be liable 3 for any failure to make any such repairs or to perform any maintenance for which Landlord is responsible as provided above unless such failure shall persist for an unreasonable time after the written notice of the need of such repairs or maintenance is given to Landlord by Tenant and is due solely to causes within Landlord's reasonable control. Except as provided in Article 21 hereof there shall be no abatement of rent unless use of the premises is restricted or denied during repair, and in any event there shall be no liability of Landlord by reason of any injury to or interference with Tenant's business arising from the making of any repairs, alterations or improvements in or to any portion of the Building or the Premises or in or to fixtures, appurtenances and equipment therein. Tenant shall not make repairs without notice to Landlord and shall only use contractors approved and agreed to by Landlord to perform any such repairs. 11. LIENS. Tenant shall keep the Premises and the property in which the Premises are situated free from any and all mechanics', materialmen's and other liens, and claims thereof, arising out of any work performed, materials furnished or obligations incurred by or for Tenant. Landlord may require, at Landlord's sole option, that Tenant shall provide to Landlord at Tenant's sole cost and expense a lien and completion bond, or its equivalent, in an amount equal to one and one-half (1-1/2) times any and all estimated costs of any improvements, additions or alterations of or to the Premises, to insure Landlord against any liability for mechanics' and materialmen's liens and to insure completion of the work. 12. ASSIGNMENT AND SUBLETTING. a. Tenant shall not mortgage, pledge, hypothecate or encumber this Lease or any interest therein. Tenant shall not assign this Lease or sublet, or suffer any other person (the agents and servants of Tenant excepted) to occupy or use, the said premises, or any portion thereof, or any right or privilege appurtenant thereto without the prior written consent of Landlord first had and obtained, which consent shall not be unreasonably withheld. Landlord's consent to one assignment or subletting shall not be deemed to be a consent to any subsequent assignment or subletting, nor shall Landlord's consent release Tenant from any of its obligations under this Lease unless such consent expressly so provides. Any assignment, subletting, occupation or use without the consent of Landlord shall be void and, at the option of Landlord, shall terminate this Lease. b. In the event at any time or times during the term of this lease Tenant desires to sublet all or part of the Premises, Landlord reserves the prior right and option (i) to sublet from Tenant any portion of the premises proposed by Tenant to be sublet for the term for which such portion is proposed to be sublet but at the same rent (including escalation as provided for in Paragraph 6 hereof) as Tenant is required to pay to Landlord under this lease for the same space, computed on a pro rata of square footage basis, or (ii) to terminate this lease as it pertains to the portion of the premises so proposed by Tenant to be sublet. Tenant shall notify Landlord in writing if Tenant proposes to sublet all or any part of the premises, designating the space proposed to be sublet and the terms of the proposed subletting. Landlord shall be allowed fifteen (15) days after Landlord's receipt of such notice from Tenant within which to exercise Landlord's foregoing option. If Landlord fails to exercise its said option, all the provisions of subparagraph a. above respecting subletting nevertheless shall be in full force and effect and nothing contained in this subparagraph b. shall be construed as a waiver by Landlord of any of its rights under said subparagraph a. Landlord's foregoing right and option shall continue throughout the entire term of this Lease. An assignment of this Lease shall be deemed a subletting of the whole of the premises for the purposes of this subparagraph b. c. In no event shall Tenant assign this Lease or sublet the premises or any portion thereof to any then-existing or prospective tenant of the building. 13. HOLD HARMLESS. Tenant shall indemnify and hold Landlord harmless from and against any and all claims arising out of (i) Tenant's use of the Premises or any part thereof for the conduct of its business, or (ii) any activity, work or other thing done, permitted or suffered by the Tenant in or about the Building or the Premises, or any part thereof, or (iii) any breach or default in the performance of any obligation on Tenant's part to be performed under the terms if this Lease, or (iv) any act or negligence of the Tenant, or any officer, agent, employee, contractor, servant, invitee or guest of Tenant, and in each case from and against any and all damages, losses, liabilities, lawsuits, judgements, and costs and expenses (including without limitation reasonable attorneys' fees) arising in connection with any such claim or claims described in clauses (i) through (iv) above, or any action or proceeding brought thereon. If any such action or proceeding be brought against Landlord, Tenant, upon notice from Landlord shall defend the same at Tenant's sole expense by counsel reasonably satisfactory to Landlord. Tenant as a material part of the consideration to Landlord hereby assumes all risk of damage or loss to property or injury or death to persons, in, upon or about the Premises, from any cause other than Landlord's sole negligence, and Tenant hereby waives all claims in respect thereof against Landlord. Landlord or its agents shall not be liable for any damage or loss to property entrusted to employees of the Building, nor for loss or damage to any property by theft or otherwise, nor for any injury to or death of or damage or loss to persons or property resulting from any accident, casualty or condition occurring in or about the Building or the Premises, or any part thereof, or any equipment, appliances or fixtures therein, or from any other cause whatsoever, unless caused solely by the negligence of Landlord, its agents, servants or employees. Landlord or its agents shall not be liable for interference with the light or other incorporeal hereditaments or any loss of business by Tenant, nor shall Landlord be liable for any latent defect in the Premises or in the Building. Tenant shall give prompt written notice to Landlord in case of fire or accidents in the Premises or in the Building or of defects therein or in the fixtures or equipment. 14. SUBROGATION. As long as both of their respective insurers so permit, Landlord and Tenant hereby mutually waive their respective rights of recovery against each other for any damages and losses insured by fire, extended coverage and other property insurance policies existing for the benefit of the respective parties. Each party shall obtain any special endorsements, if required by its insurer, to evidence compliance with the aforementioned waiver. 15. LIABILITY INSURANCE. Tenant shall, at Tenant's expense, obtain and keep in force during the term of this Lease a policy of comprehensive public liability insurance insuring Landlord and Tenant against any liability arising out of the ownership, use, occupancy, maintenance, repair or improvement of the Premises and all areas appurtenant thereto. 4 Such insurance shall provide single limit liability coverage of not less than $500,000 per occurrence for property damage and $500,000 per occurrence for bodily injury or death of one person and $1,000,000 for one accident. The limits of said insurance shall not, however, limit the liability of the Tenant hereunder, and Tenant is responsible for ensuring that the amount of liability insurance carried by Tenant is sufficient for Tenant's purposes. Tenant may carry said insurance under a blanket policy, providing, however, said insurance by Tenant shall have a Landlord's protective liability endorsement attached thereto in form and substance satisfactory to Landlord. If Tenant shall fail to procure and maintain said insurance, Landlord may, but shall not be required to, procure and maintain same, but at the expense of Tenant. Insurance required hereunder shall be in companies rated A+AAA or better in "Best's Insurance Guide". Tenant shall deliver to Landlord prior to occupancy of the Premises copies of policies of liability insurance required herein or certificates evidencing the existence and amounts of such insurance with evidence satisfactory to Landlord of payment of premiums. No policy shall be cancelable or subject to reduction of coverage except after fifteen (15) days' prior written notice to Landlord. Tenant acknowledges and agrees that insurance coverage carried by Landlord will not cover Tenant's property within the Premises or the Building and that Tenant shall be responsible, at Tenant's sole cost and expense, for providing insurance coverage for Tenant's movable equipment, furnishings, trade fixtures and other personal property in or upon the Premises or the Building, and for any alterations, additions or improvements to or of the Premises or any part thereof made by Tenant, in the event of damage or loss thereto from any cause whatsoever. 16. SERVICES AND UTILITIES. Provided that tenant is not in default hereunder, Landlord agrees to furnish to the Premises during reasonable hours of generally recognized business days to be defined as 8:00 AM - 5:00PM, M-F, and subject to the rules and regulations of the Building of which the Premises are a part, electricity for normal lighting and fractional horsepower office machines, heat and air conditioning required in Landlord's judgement for the comfortable use and occupation of the Premises, and janitorial service. Landlord shall also maintain and keep lighted during such hours the common stairs, common entries and toilet rooms in the Building of which the Premises are a part. Landlord shall not be liable for and failure to furnish any of the foregoing when such failure is caused by casualty, Act of God, accident, breakage, repairs, strikes, lockouts, labor disturbances or disputes, or other condition, beyond the reasonable control of Landlord, including, without limitation any governmental water, energy, or other conservation program. No such failure shall entitle Tenant to any damages, relieve Tenant of the obligation to pay the full rent reserved herein or constitute or be construed as a constructive or other eviction of Tenant. Landlord shall not be liable under any circumstances for injury to or death of or loss or damage to persons or property or damage to Tenant's business, however occurring, through or in connection with or incidental to failure to furnish any of the foregoing. Wherever heat generating machines or equipment are used in the Premises which affect the temperature otherwise maintained by the air conditioning system, Landlord reserves the right to install supplementary air conditioning units in the Premises and the cost thereof, including the cost of installation and the cost of operation and maintenance thereof, shall be paid by Tenant to Landlord upon demand by Landlord. Landlord acknowledges that Tenant's business requires 24/7 coverage for computer and phone equipment. Basic electrical shall be provided 24 hours for such purpose. In the event tenant uses after hours utilities, specifically HVAC, Tenant shall be billed for actual cost thereof or shall have the option to have Landlord create a formula agreed to by both Landlord and Tenant that the average cost of utilities shall be netted out of the full service lease and that then Tenant at Tenant's sole cost may separately meter the premises and have full control over its own utilities and pay for those utilities. Tenant will not, without the prior written consent of Landlord, use or permit the use of any apparatus or device in or upon the Premises, including, but without limitation thereto, machines using in excess of 120 volts, with the exception of (1) Mid-range IBM RS/6000 Computer, hereby known as CORPRS, which uses 220 volts, which will in any way increase the amount of electricity, or water usually furnished or supplied for the use of the Premises as general office space; nor will Tenant connect or permit connection with electric current or water supply lines, except (in the case of electric current) through existing electrical outlets in the Premises, any apparatus or device for the purpose of using electric current or water. If Tenant shall require water or electric current in excess of that usually furnished or supplied for the use of the Premises as general office space, Tenant shall first procure the written consent of Landlord, which Landlord may refuse, to the use thereof and Landlord may cause a water meter or electric current meter to be installed in the Premises, so as to measure the amount of water and electric current consumed for any such use. The cost of any such meters and of installation, maintenance and repair thereof shall be paid for by the Tenant and Tenant agrees to pay to Landlord promptly upon demand therefor by Landlord for all such water and electric current consumed as shown by said meters, at the rates charged for such services by the local public utility furnishing the same, plus any additional expense of not less than $50.00 per month incurred in keeping account of the water and electric current so consumed. If a separate meter is not installed, such excess cost for such water and electric current will be conclusively established by an estimate made by a utility company or electrical engineer selected by Landlord. 17. PROPERTY TAXES. Tenant shall pay, or cause to be paid, before delinquency, any and all taxes levied or assessed and which become payable during the term hereof upon all Tenant's leasehold improvements, equipment, furniture, fixtures and personal property located in the Premises; except only that which has been paid for by Landlord and is the standard of the Building. In the event any or all of the Tenant's leasehold improvements, equipment, furniture, fixtures or personal property shall be assessed and taxed with the Building, Tenant shall pay to Landlord its share of such taxes within ten (10) days after delivery to Tenant by Landlord of a statement in writing setting forth the amount of such taxes applicable to Tenant's property. If Tenant's leasehold improvements, equipment, furniture, fixtures and personal property are not separately assessed on the tax statement or bill, Landlord and Tenant's good faith determination of the amount of such taxes applicable to Tenant's property shall be a conclusive determination of Tenant's obligation to pay such amount as so determined by Landlord. Landlord and Tenant shall agree on a good faith determination of the amount of such taxes. 18. RULES AND REGULATIONS. Tenant shall faithfully observe and comply with the rules and regulations that Landlord shall from time to time promulgate. Landlord reserves the right from time to time to make all reasonable modifications to said rules. The additions and modifications to those rules shall be binding upon Tenant upon delivery 5 of a copy of them to Tenant. Landlord shall not be responsible to Tenant for the nonperformance of any said rules by any other tenants or occupants. 19. HOLDING OVER. If Tenant holds over after the term hereof, with or without the express or implied consent of Landlord, such tenancy shall be from month to month only, and not a renewal hereof or an extension for any further term, and in such case basic monthly rent shall be payable at the rate of one hundred fifty percent (150%) of the rent specified in Article 5 hereof, additional rent shall be payable in accordance with Article 6 hereof, and such month to month tenancy shall be subject to every other term, covenant and agreement contained herein. Nothing contained in this Article 19 shall be construed as consent by Landlord to any holding over by Tenant and Landlord expressly reserves the right to require Tenant to surrender possession of the Premises to Landlord as provided in Article 29 hereof upon the expiration of the term of this Lease or other termination of this Lease. 20. ENTRY BY Landlord. Landlord reserves and shall at any and all times have the right to enter the Premises, inspect the same, supply janitorial service and any other service to be provided by Landlord to Tenant hereunder, to submit said Premises to prospective purchasers, mortgagees or tenants, with 12 hour notice, and to post notices of nonresponsibility, and to alter, improve or repair the Premises and any portion of the building of which the Premises are a part that Landlord may deem necessary or desirable, without any abatement of rent, and may for such purpose erect scaffolding and other necessary structures where reasonably required by the character of the work to be performed, always providing that the entrance to the Premises shall not be blocked thereby, and further providing that the business of the Tenant shall not be interfered with unreasonably. Tenant hereby waives any claim for damages or for any injury or inconvenience to or interference with Tenant's business, any loss of occupancy or quiet enjoyment of the Premises, and any other damage or loss occasioned thereby. For each of the aforesaid purposes, Landlord shall at all times have and retain a key with which to unlock all of the doors in, upon and about the Premises, excluding Tenant's vaults, safes and files, and Landlord shall have the right to use any and all means which Landlord may deem proper to open said doors in an emergency in order to obtain entry to the Premises, without liability to Tenant except for any failure to exercise due care for Tenant's property under the circumstances of each entry. Any entry to the Premises obtained by Landlord by any of said means or otherwise shall not under any circumstances be construed or deemed to be a forcible or unlawful entry into, or a detainer of, or an eviction of Tenant from the Premises or any portion thereof. Landlord will provide 24 hour notice of scheduled or routine maintenance. 21. RECONSTRUCTION. In the event the Premises or the Building of which the Premises are a part are damaged by fire or other perils covered by the extended coverage insurance carried by Landlord for the Building, Landlord agrees to repair the same forthwith and this Lease shall remain in full force and effect, except that Tenant shall be entitled to a proportionate reduction of the rent while such repairs are being made, such proportionate reduction to be based upon the extent to which the making of such repairs shall materially interfere with the business carried on by the Tenant in the Premises. If the damage is due to the fault or neglect of Tenant, or its agents, officers, employees, contractors, servants, invitees or guests, there shall be no abatement of rent. In the event the Premises or the Building of which the Premises are a part are damaged as a result of any cause other than the perils covered by the fire and extended coverage insurance carried by Landlord on the Building, then Landlord shall forthwith repair the same, provided the extent of the destruction be less than ten percent (10%) of the then full replacement cost of the Premises or the Building of which the Premises are a part, as applicable. In the event the destruction of the Premises or the Building is to an extent greater than ten percent (10%) of the full replacement cost thereof, then Landlord shall have the option: (1) to repair or restore such damage, this Lease continuing in full force and effect, but the rent to be proportionately reduced as hereinabove in this Article provided; or (2) give notice to Tenant at any time within sixty (60) days after such damage terminating this Lease as of the date specified in such notice, which date shall be no less than thirty (30) and no more than sixty (60) days after the giving of such notice. In the event of giving such notice, this Lease shall expire and all interest of the Tenant in the Premises shall terminate on the date so specified in such notice and the rent, reduced by a proportionate amount based upon the extent, if any, to which such damage has materially interfered with the business carried on by the Tenant in the Premises, shall be paid up to the date of such termination. In the event the Premises are totally destroyed or the Premises cannot be restored as required herein under applicable laws and regulations, or more than fifty percent (50%) of the rentable area of the Building has been damaged, regardless of any damage to the Premises, notwithstanding the availability of insurance proceeds, this Lease shall be terminated effective the date of the damage. Notwithstanding anything to the contrary contained in this Article or Articles 10.b or 16, Landlord shall not have any obligation whatsoever to repair, reconstruct or restore the Premises when any damage thereto or to the Building occurs during the last twelve (12) months of the term of this Lease or any extension thereof. Landlord shall not be required to repair any injury or damage by fire or other cause, or to make any repairs or replacements, of any panels, decoration, office fixtures, furniture, railings, floor coverings, partitions, or any other property installed in the Premises by Tenant. Tenant shall not be entitled to any compensation or damages from Landlord for loss of the use of the whole or any part of the Premises, for damage to or loss of any of Tenant's fixtures or personal property, or for any damage to Tenant's business, or any inconvenience or annoyance occasioned by such damage, or by any repair, reconstruction or restoration by Landlord, or by any failure of Landlord to make any repairs, reconstruction or restoration under this Article or any other provision of this Lease. 22. DEFAULT. The occurrence of any one or more of the following events shall constitute a material default and breach of this Lease by Tenant. 6 a. The vacating or abandonment of the Premises by Tenant. b. The failure by Tenant to make any payment of rent or any other payment required to be made by Tenant hereunder, as and when due, where such failure shall continue for a period of five (5) days after written notice thereof by Landlord to Tenant. c. The failure by Tenant to observe or perform any of the covenants, conditions or provisions of this Lease to be observed or performed by the Tenant, other than as described in paragraphs a., b. or d. of this Article 22, where such failure shall continue for a period of thirty (30) days after written notice thereof by Landlord to Tenant; provided, however, that if the nature of Tenant's default is such that more than thirty (30) days are reasonably required for its cure, then Tenant shall not be deemed to be in default if Tenant commences such cure within said thirty (30) day period and thereafter diligently prosecutes such cure to completion, and if Tenant provides Landlord with such security as Landlord may require to fully compensate Landlord for any loss or liability to which Landlord might be exposed. d. The making by Tenant of any general assignment for the benefit of creditors; the filing by or against Tenant of a petition to have Tenant adjudged a bankrupt, or a petition for reorganization or arrangement under any law relating to bankruptcy (unless, in the case of a petition filed against Tenant, the same is dismissed within sixty (60) days); the appointment of a trustee or receiver to take possession of all or substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease, where possession is not restored to Tenant within thirty (30) days; or the attachment, execution, or other judicial or governmental seizure of all or substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease where such seizure is not discharged within thirty (30) days. 23. REMEDIES UPON DEFAULT. a. In the event of any such material default or breach by Tenant, Landlord may, at any time thereafter, with or without notice or demand, and without limiting Landlord in the exercise of any right or remedy which Landlord may have hereunder or otherwise at law or in equity by reason of such default or breach: (i) Terminate this Lease or Tenant's right to possession of the Premises by notice to Tenant or any other lawful means, in which case this Lease shall terminate and Tenant shall immediately surrender possession of the Premises to Landlord. In such event Landlord shall be entitled to recover from Tenant all unpaid installments of rent and other sums due and owing under this Lease as of the date of Tenant's default and all damages incurred by Landlord by reason of Tenant's default, including, but not limited to: (A) the cost of recovering possession of the Premises; (B) expenses of reletting, including necessary renovation and alteration of the Premises, reasonable attorneys' fees, and any real estate commission actually paid, that portion as is applicable to the unexpired term of the lease; (C) the worth at the time of award of any unpaid rent which has been earned at the time of such termination; plus (D) the worth at the time of award of any amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss Tenant proves could have been reasonably avoided; plus (E) the worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of the award exceeds the amount of such rental loss that Tenant proves could be reasonably avoided; plus the "worth at the time of award" of the amount referred to in subparagraphs C and D, above, shall be computed by allowing interest at ten percent (10%) per annum. The worth at the time of award of the amount referred to in subparagraph E shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%); (F) that portion of the leasing commission paid by Landlord and applicable to the unexpired term of this Lease. Unpaid installments of rent or other sums shall bear interest from the date due at the rate of prime plus three percent (3%) per annum; (G) at Landlord's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable law including but not limited to recovery amount allowed under California Civil Code Section 1951.2(a)(2); \ In the event Tenant shall have abandoned the Premises, Landlord shall have the option of (a) taking possession of the Premises and recovering from Tenant the amounts specified hereinabove, or (b) proceeding under the provisions of the following paragraphs (ii) and/or (iii). (ii) Maintain Tenant's right to possession, in which case this Lease shall continue in effect whether or not Tenant shall have abandoned the Premises. In such event Landlord shall be entitled to enforce all of Landlord's rights and remedies under this Lease, including without limitation the right to recover the rent as it becomes due hereunder. Notwithstanding any election by Landlord not to terminate this Lease or Tenant's right to possession, and whether or not Landlord has sublet the Premises or any part thereof as provided hereinabove, Landlord shall retain the right to and may at any time thereafter elect to terminate this Lease or Tenant's right to possession for any default of Tenant which remains uncured or for any subsequent default of Tenant by giving Tenant written notice thereof. In the event the premises is abandoned, the Landlord will work in good faith to mitigate all damages caused by the Tenant. (iii) Pursue any other remedy now or hereafter available to Landlord under the laws or judicial decisions of the State in which the premises are located. b. No entry upon or taking of possession of the Premises or any part thereof by Landlord nor any letting or subletting thereof by Landlord for Tenant, nor any appointment of a receiver, nor any other act of Landlord, whether acceptance of keys to the Premises or otherwise, shall constitute or be construed as an election by Landlord to terminate this Lease or Tenant's right to possession of the Premises unless a written notice of such election be given to Tenant by Landlord. c. In the event Landlord elects to terminate this Lease or Tenant's right to possession hereunder, Tenant shall surrender and vacate the Premises in broom-clean condition with reasonable notice, and Landlord may re-enter and 7 take possession of the Premises and may eject all parties in possession or eject some and not others or eject none. Any personal property of or under the control of Tenant remaining on the Premises at the time of such re-entry for a period of 30 or more days may be considered and treated by Landlord as abandoned. d. Termination of this Lease or Tenant's right to possession by Landlord shall notrelieve Tenant from any liability to Landlord under any provision of this Lease providing for any indemnification of Landlord by Tenant. 24. EMINENT DOMAIN. If more than twenty-five percent (25%) of the area of the Premises shall be taken or appropriated for any public or quasi-public use under the power of eminent domain, or conveyed in lieu thereof, either party hereto shall have the right, at its option, to terminate this Lease by written notice to the other party given within ten (10) days of the date of such taking, appropriation or conveyance, and Landlord shall be entitled to any and all income, rent, award, or any interest therein whatsoever which may be paid or made in connection with such public or quasi-public use or purpose, and Tenant shall have no claim against Landlord for the value of any unexpired term of this Lease. If any part of the Building other than the Premises may be so taken, appropriated or conveyed, Landlord shall have the right at its option to terminate this Lease, and in any such event Landlord shall be entitled to the entire award as above provided whether or not this Lease is terminated. If less than twenty-five percent (25%) of the Premises is so taken, appropriated or conveyed, or more than twenty-five percent (25%) thereof is so taken, appropriated or conveyed and neither party elects to terminate as herein provided, the rental thereafter to be paid hereunder for the Premises shall be reduced in the same ratio that the percentage of the area of the Premises so taken, appropriated or conveyed bears to the total area of the Premises immediately prior to the taking, appropriation or conveyance. 25. OFFSET STATEMENT. Tenant shall at any time and from time to time upon not less than ten (10) days' prior written notice from Landlord execute, acknowledge and deliver to Landlord a statement in writing, (a) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease as so modified is in full force and effect), and the date to which the rental and other charges are paid in advance, if any, and (b) acknowledging that there are not, to Tenant's knowledge any uncured defaults on the part of the Landlord hereunder, or specifying such defaults if any are claimed. Any such statement may be relied upon by any prospective purchaser or encumbrancer of all or any portion of the real property of which the Premises are a part or any interest therein. Tenant's failure to deliver said statement in the time required shall be conclusive upon Tenant that: (i) the Lease is in full force and effect, without modification except as may be represented by Landlord, (ii) there are no uncured defaults in Landlord's performance and Tenant has no right of offset, counterclaim or deduction against rent under the Lease, and (iii) no more than one month's rent has been paid in advance. 26. PARKING. Parking is to be included with the base rent and the number of allocated spaces is to match the percent of occupancy, which has been determined to be 62.6%, 10 parking stalls would be allocated and assigned for Tenant based on the 16 available stalls. Landlord reserves the right to adjust parking based upon other Tenants needs with mutual agreement with Tenant on the number of stalls. 27. CONSTRUCTION ON PREMISES. a. IMPROVEMENT OF THE PREMISES. As promptly as practicable after the date of execution of this Lease, Landlord shall undertake to prepare the premises for occupancy by Tenant in accordance with the provisions set forth herein between Landlord and Tenant. If the improvements and alterations specified in the "Floor Plan" attached hereto as Exhibit "B" are not substantially completed prior to the commencement date of the term of this Lease as provided in Paragraph 3 herein, and the failure or inability of Landlord to complete the premises was caused other than by reason of delays occasioned by Tenant, the term of this Lease and the obligation of Tenant to pay the installments of rent specified in Paragraph 5(a) herein shall not commence until said improvements and alterations are substantially completed and the premises are suitable for occupancy by Tenant. Landlord shall provide as Exhibit B and C from selected contractor a breakdown of work to be performed within 30 days of execution of lease document. b. OBLIGATIONS OF Landlord AND TENANT. The obligations of Landlord and Tenant to perform the work and supply the materials necessary to prepare the Premises for occupancy are set forth in detail in the "Floor Plan" and the work letter designated Exhibit "C", attached hereto and by this reference incorporated herein. Landlord shall do all things required of it as set forth in Exhibits "B" and "C", and shall have the work performed promptly and diligently in a workmanlike manner. Any cost of "over standard work" required by Tenant shall be paid for by Tenant before commencement of construction. Landlord shall have the sole right to initiate and to complete the work to be performed pursuant to Exhibits "B" and "C". Landlord shall have the right to designate the times when any work required of Tenant is to be performed, so that such work shall be performed in coordination with Landlord's work. 28. ACKNOWLEDGMENT OF COMMENCEMENT DATE. If the commencement date of the term of this Lease is delayed beyond thirty (30) days as provided in Paragraph 3 hereof, then Landlord and Tenant shall execute a written amendment to this Lease stating the date of commencement of the term. 29. SURRENDER OF PREMISES; REMOVAL OF PROPERTY. The voluntary or other surrender of this Lease by Tenant, or a mutual termination thereof, shall not work a merger, and shall at the option of Landlord, operate as an assignment to it of any or all subleases or subtenancies affecting the Premises. Upon the expiration of the term of this Lease, or upon any earlier termination of this Lease, Tenant shall quit and surrender possession of the Premises to Landlord in as good order and condition as the same are now or hereafter may be improved by Landlord or Tenant, reasonable wear and tear and repairs which are Landlord's obligation excepted, and shall, without expense to Landlord, remove or cause to be removed from the Premises all debris and rubbish, all furniture, equipment, business and trade fixtures, free-standing cabinet work, movable partitions and other articles of personal property owned by Tenant or installed or placed by Tenant at its expense in the Premises, and all similar articles 8 of any other persons claiming under Tenant unless Landlord exercises its option to have any subleases or subtenancies assigned to it, and Tenant shall repair all damage to the Premises resulting from such removal. Whenever Landlord shall re-enter the Premises as provided in Article 23 hereof, or as otherwise provided in this Lease, any property of Tenant not removed by Tenant upon the expiration of the term of this Lease (or within forty-eight [48] hours after a termination by reason of Tenant's default), as provided in this Lease, shall be considered abandoned and Landlord may remove any or all of such items and dispose of the same in any manner or store the same in a public warehouse or elsewhere for the account and at the expense and risk of Tenant, and if Tenant shall fail to pay the cost of storing any such property after it has been stored for a period of thirty (30) days or more, Landlord may sell any or all of such property at public or private sale, in such manner and at such times and places as Landlord, in its sole discretion, may deem proper, without notice to or demand upon Tenant for the payment of all or any part of such charges or the removal of any such property. Landlord shall apply the proceeds of such sale first, to the cost and expense of such sale, including reasonable attorneys' fees actually incurred; second, to the payment of the cost of or charges for storing any such property; third, to the payment of any other sums of money which may then or thereafter be due to Landlord from Tenant under any of the terms hereof; and fourth, the balance, if any, to Tenant. Landlord shall have a lien on all personal property, fixtures and trade fixtures of tenant, presently existing or subsequently acquired, placed in the Premises by or for the benefit of Tenant which Landlord may perfect and otherwise enforce and, without notice and without liability to Tenant or any other party, may be sold by Landlord at public or private sale with the proceeds being applied to amounts owed by Tenant and toward damages resulting from Tenant's breach under the Lease. All fixtures, equipment, alterations, additions, improvements and/or appurtenances attached to or built into the Premises prior to or during the term hereof, whether by Landlord at its expense or at the expense of Tenant or both, shall be and remain part of the Premises and shall not be removed by Tenant at the end of the term hereof unless otherwise expressly provided for in this Lease or unless such removal is required by Landlord pursuant to the provisions of Article 9 hereof. Such fixtures, equipment, alterations, additions, improvements and/or appurtenances shall include, without limitation, floor coverings, drapes, paneling, molding, doors, vaults (exclusive of vault doors), plumbing systems, electrical systems, lighting systems, silencing equipment, communication systems, all fixtures and outlets for the systems mentioned above and for all telephone, radio, telegraph and television purposes, and any special flooring or ceiling installations. 30. SUBORDINATION TO MORTGAGES AND DEEDS OF TRUST. This lease, at the option of Landlord, shall be subject to all ground or underlying leases which may now exist or hereafter be executed affecting the building and/or the land upon which the building is situated and to the lien of any mortgage and deeds of trust in any amount or amounts whatsoever now or hereafter placed on or against the land and/or building of which the premises are a part or on or against the Landlord's interest or Estate therein or on or against any ground or underlying lease without the necessity of having further instruments on the part of Tenant to effectuate such subordination. Notwithstanding the foregoing the Tenant covenants and agrees to execute and deliver upon demand such further instruments evidencing such subordination of the lease to such ground or underlying leases and to the lien of any such mortgages or deeds of trust as may be required by Landlord. Tenant hereby appoints Landlord the attorney in fact of the Tenant irrevocably to execute and deliver any such instrument or instruments for or in the name of Tenant. In the event of termination for any reason whatsoever of any ground or underlying lease, or the foreclosure of any mortgage, Tenant shall automatically be and become the Tenant of the ground or underlying Landlord and shall attorn to the ground or underlying Landlord, or to any mortgagee in possession, whatever the case may be. Tenant agrees to give any Mortgagees and/or Trust Deed Holders, by registered mail, a copy of any notice of default served upon the Landlord, provided that prior to such notice Tenant has been notified in writing (by way of Notice of Assignment of Rents and Leases, or otherwise) of the addresses of such Mortgagees and/or Trust Deed Holders. Tenant further agrees that if Landlord shall have failed to cure such default within the time provided for in this Lease, then the Mortgagees and/or Trust Deed Holders shall have an additional thirty (30) days within which to cure such default or if such default cannot be cured within that time, then such additional time as may be necessary if within such thirty (30) days any Mortgagee and/or Trust Deed Holder has commenced and is diligently pursuing the remedies necessary to cure such default (including but not limited to commencement of foreclosure proceedings if necessary to effect such cure), in which event this Lease shall not be terminated while such remedies are being so diligently pursued. 31. AUTHORITY OF PARTIES. a. CORPORATE AUTHORITY. If Tenant is a corporation, each individual executing this Lease on behalf of said corporation represents and warrants that he is duly authorized to execute and deliver this Lease on behalf of said corporation, in accordance with a duly adopted resolution of the board of directors of said corporation or in accordance with the bylaws of said corporation, and that this Lease is binding upon said corporation in accordance with its terms, Tenant and any guarantor(s) agree to provide Landlord with financial statements not more than 90 days old within 20 days of Landlord's request. b. PARTNERSHIPS. The Landlord herein is a Partnership; it is understood and agreed that any claim by Tenant on Landlord shall be limited to the assets of the Partnership, and furthermore, Tenant expressly waives any and all rights to proceed against the individual partners or the officers, directors or shareholders of any corporate partner, except to the extent of their interest in said Partnership. 9 32. GENERAL PROVISIONS. a. PLATS AND RIDERS. Clauses, plats and riders, if any, signed by the Landlord and the Tenant and endorsed on or affixed to this Lease are a part hereof. b. WAIVER. The waiver by Landlord of any term, covenant or condition herein contained shall not be deemed to be a waiver of such term, covenant or condition on any subsequent breach of the same or any other term, covenant or condition herein contained. The subsequent acceptance of rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by tenant of any term, covenant or condition of this lease, other than the failure of the tenant to pay the particular rental so accepted, regardless of Landlord's knowledge of such preceding breach at the time of the acceptance of such rent. c. NOTICES. All Notices and demands which may or are to be required or permitted to be given by either party to the other hereunder shall be in writing. All notices and demands by the Landlord to the Tenant shall be sent by United States Mail, postage prepaid, addressed to the Tenant at the Premises, or to such other place as Tenant may from time to time designate in a notice to the Landlord. All notices and demands by the Tenant to the Landlord shall be sent by United States Mail, postage prepaid, addressed to the Landlord at the Office of the Building, or to such other person or place as the Landlord may from time to time designate in a notice to the Tenant. d. JOINT OBLIGATIONS. If there be more than one Tenant the obligations hereunder imposed upon Tenants shall be joint and several. e. MARGINAL HEADINGS. The captions of paragraphs and Article titles of the Articles of this Lease are not a part of this Lease and shall have no effect upon the construction or interpretation of any part hereof. f. TIME. Time is of the essence of this Lease and each and all of its provisions in which performance is a factor. g. SUCCESSORS AND ASSIGNS. The covenants and conditions herein contained, subject to the provisions as to assignment apply to and bind the heirs, successors, executors, administrators, legal representatives and assigns of the parties hereto. h. RECORDATION. Neither Landlord nor Tenant shall record this Lease or a short form or memorandum hereof without the prior written consent of the other party. i. QUIET POSSESSION. Upon Tenant paying the rent reserved hereunder and observing and performing all of the covenants, conditions and provisions on Tenant's part to be observed and performed hereunder, Tenant shall have quiet possession of the Premises for the entire term hereof, subject to all the provisions of this Lease. j. LATE CHARGES. Tenant hereby acknowledges that late payment by tenant to Landlord of rent or other sums due hereunder will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which are impracticable or extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed upon Landlord by terms of any mortgage or trust deed covering the Premises or any part of the real property of which the Premises are a part. Accordingly, if any installment of rent or any other sum due from Tenant shall not be received by Landlord or Landlord's designee within ten (10) days after written notice that said amount is past due, then Tenant shall pay to Landlord, in each case, a late charge equal to ten percent (10%) of such overdue amount. The parties hereby agree that such late charge represents a fair and reasonable estimate of the cost that Landlord will incur by reason of late payment by Tenant. Acceptance of any late charges by Landlord shall in no event constitute a waiver of Tenant's default with respect to such overdue amount, nor prevent Landlord from exercising any of its other rights and remedies hereunder. k. PRIOR AGREEMENTS. This Lease contains all of the agreements of the parties hereto with respect to any matter covered or mentioned in this Lease, and no prior agreements or understanding pertaining to any such matters shall be effective for any purpose. No provision of this Lease may be amended or added to except by an agreement in writing signed by the parties hereto or their respective successors in interest. This Lease shall not be effective or binding on any party until fully executed by both parties hereto. l. INABILITY TO PERFORM. This Lease and the obligations of the Tenant hereunder shall not be affected or impaired because the Landlord is unable to fulfill any of its obligations hereunder or is delayed in doing so, if such inability or delay is caused by reason of strike, labor troubles, Acts of God, or any other cause, similar or dissimilar, beyond the reasonable control of the Landlord. m. ATTORNEYS FEES. In the event of any action or proceeding brought by either party against the other under this Lease the prevailing party shall be entitled to recover all its costs and expenses, including without limitation the fees of its attorneys in such action or proceeding in such amount as the court may adjudge reasonable as attorneys' fees. n. SALE OF PREMISES BY LANDLORD. In the event of any sale of the Building, Landlord shall be and is hereby entirely freed and relieved of all liability under any and all of its covenants and obligations contained in or derived from this Lease arising out of any act, occurrence or omission occurring after the consummation of such sale; and the purchaser, at such sale or any subsequent sale of the Building, shall be deemed, without any further agreement between the parties or their successors in interest or between the parties and any such purchaser, to have assumed and agreed to carry out each and every of the covenants and obligations of the Landlord under this Lease. o. NAME. Tenant shall not use the name of the Building or of the development in which the Building is situated for any purpose other than as an address of the business to be conducted by the Tenant in the Premises. p. SEPARABILITY. Any provision of this Lease which shall prove to be invalid, void or illegal shall in no way affect, impair or invalidate any other provision hereof and all such other provisions shall remain in full force and effect. q. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies at law or in equity. r. CHOICE OF LAW. This Lease shall be governed by the laws of the State in which the Premises are located. s. SIGNS AND AUCTIONS. Tenant shall not place any sign upon the Premises or Building or conduct any auction thereon without Landlord's prior written consent. 10 t. GENDER AND NUMBER. Wherever the context so requires, each gender shall include any other gender, and the singular number shall include the plural and vice-versa. u. CONSENTS. Whenever the consent of Landlord is required herein, such consent shall not be unreasonably withheld and the giving or withholding of such consent in any one or any number of instances shall not limit or waive the need for such consent in any other or future instances. 33. BROKERS. Tenant warrants that it has had no dealings with any real Estate broker or agents in connection with the negotiation of this Lease excepting only TRI COMMERCIAL-ONCOR INTERNATIONAL and that it knows of no other real Estate broker or agent who is entitled to a commission in connection with this Lease. Tenant agrees to indemnify and hold Landlord harmless from and against any and all claims, demands, losses, liabilities, lawsuits, judgements, and costs and expenses (including without limitation reasonable attorneys' fees) with respect to any alleged leasing commission or equivalent compensation alleged to be owing on account of Tenant's dealings with any real Estate broker or agent other than TRI COMMERCIAL-ONCOR INTERNATIONAL. Landlord shall pay a commission to TRI Commercial based upon TRI Commercial's Standard Schedule of Commissions. Tenant shall not be responsible for any commissions owed. 34. TENANT IMPROVEMENTS. Tenant Improvements to be detailed in work letter are as follows: 1. Build out 2 offices on the 2nd floor, with standard sidelight panels next to doors to allow light into offices. 2. Remove wall and door on the 3rd floor outside of bathrooms. 3. Paint all walls and ceilings, excepting metal support beams using quality grade paint. Colors to be chosen by Tenant with landlord approval. 4. Bathrooms shall be upgraded and refixturized as necessary to update to a first class condition including the removal of existing lockers. 5. Computer room shall have 12" anti-static vinyl tile floor installed. 6. Kitchen buildout to be determined in cooperation with Landlord and based on Exhibit B and C, which shall include copper connections for coffee and Tenant's proposed filtered water system (Tenant shall provide own water filtration system) 7. Remove wall between 2 offices on ground floor and make into one large conference room. 8. Install carpet in all areas except for bathrooms, computer room, and small splash area along kitchen sink and counter area. 9. Provide sufficient power to open floor cubicles on 2nd floor, and one 220 V line with adequate electrical outlets added for computer room. 10. At the time of possession, Tenant will not need acoustical ceiling tiles in 2nd floor open area. If either Tenant or Landlord deem it necessary to add acoustical ceiling tiles to provide sound control within the premises it shall be considered part of the original Tenant Improvements and provided as soon as reasonably possible by Landlord. 11. At the time of possession, Tenant will not need to have glass partitions installed dividing the 2nd floor and common hallway areas. If the Tenant or landlord deem it necessary to have installed to control sound, then the installation of such sound control will be the Landlords responsibility and will be considered part of the original Tenant Improvements and provided as soon as reasonably possible by Landlord. 12. Outside lighting will be provided on the West Side, main entrance, of the property to adequately provide a safe and comfortable environment prior to possession. 13. Security Access Equipment is in the process of review by Landlord and has not yet been determined. Landlord shall provide secure access to the premises. The parties hereto have executed this Lease on the dates specified immediately adjacent to their respective signatures. IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION TO YOUR ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE LANDLORD OR BY THE REAL ESTATE BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTIONS RELATING THERETO.
LANDLORD Executed at ____________________________ ERIC SWALLOW AND DEBORAH SWALLOW By /s/ Eric Swallow on _____________________________________ ------------------------------- Eric Swallow By /s/ Deborah Swallow Address ________________________________ -------------------------------- Deborah Swallow ________________________________________ TENANT EBIX.COM, INC. Executed at ____________________________ By /s/ R. J. Baum ------------------------------ on _____________________________________ By /s/ R. J. Baum ------------------------------ Address ________________________________
11 RULES AND REGULATIONS 1. No sign, placard, picture, advertisement, name or notice shall be inscribed, displayed, printed or affixed on or to any part of the outside or inside of the Building without first obtaining the written consent of Landlord and Landlord shall have the right to remove any such sign, placard, picture advertisement, name or notice without notice to and at the expense of Tenant. All approved signs or lettering on doors shall be printed, painted, affixed or inscribed at the expense of Tenant by a person approved of by Landlord. Tenant shall not place anything or allow anything to be placed near the glass of any window, door, partition or wall which may appear unsightly from outside the Premises; provided, however, that Landlord may furnish and install a Building standard window covering at all exterior windows. Tenant shall not without prior written consent of Landlord cover or otherwise sunscreen any window. 2. The sidewalks, halls, passages, exits, entrances, elevators and stairways shall not be obstructed by any of the Tenants or used by them for any purpose other than for ingress and egress from their respective Premises. 3. Tenant shall not alter any lock or install any new or additional locks or any bolts on any doors or windows of the Premises. 4. The toilet rooms, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein and the expense of any breakage, stoppage, or damage resulting from the violation of this rule shall be borne by the Tenant who, or whose agents, officers, employees, contractors, servants, invitees or guests, shall have caused it. 5. Tenant shall not overload the floor of the Premises or in any way deface the Premises or any part thereof. 6. No furniture, freight or equipment of any kind shall be brought into the Building without prior notice to Landlord and all moving of the same into or out of the Building shall be done at such times and in such manner as Landlord shall designate. Landlord shall have the right to prescribe the weight, size and position of all safes and other heavy equipment brought into the Building and also the times and manner of moving the same in and out of the building. Safes or other heavy objects shall, if considered necessary by Landlord, stand on supports of such thickness as is necessary to properly distribute the weight. Landlord will not be responsible for loss of or damage to any such safe or property from any cause and all damage done to the Building by moving or maintaining any such safe or other property shall be repaired at the expense of Tenant. 7. Tenant shall not use, keep or permit to be used or kept any foul or noxious gas or substance in the Premises, or permit or suffer the Premises to be occupied or used in a manner offensive or objectionable to the Landlord or other occupants of the Building by reason of noise, odors and/or vibrations, or interfere in any way with other tenants or those having business therein, nor shall any animals or birds be brought in or kept in or about the Premises or the Building. 8. No cooking shall be done or permitted by any Tenant on the Premises, nor shall the Premises be used for the storage of merchandise for washing clothes, for lodging, or for any improper, objectionable or immoral purpose. 9. Tenant shall not use or keep in the Premises or the Building any kerosene, gasoline or inflammable or combustible fluid or material, or use any method of heating or air conditioning other than that supplied by the Landlord. 10. Landlord will direct electricians as to where and how telephone and telegraph wires are to be introduced. No boring or cutting for wires will be allowed without the consent of the Landlord. The location of telephones, call boxes and other office equipment affixed to the Premises shall be subject to the approval of the Landlord. 11. On Saturdays, Sundays and legal holidays, and on other days between the hours of 6:00 p.m. and 8:00 a.m. the following day, access to the Building, or to the halls, corridors, elevators or stairways in the Building, or to the Premises may be refused unless the person seeking access is known to the person or employee of the Building in charge and has a pass or is properly identified. The Landlord shall in no case be liable for damages for any error with regard to the admission to or exclusion from the Building of any person. In case of invasion, mob, riot, public excitement, or other commotion, the Landlord reserves the right to prevent access to the Building during the continuance of the same by closing of the doors or otherwise, for the safety of the tenants and protection of the Building and of property in the Building. 12. Landlord reserves the right to exclude or expel from the Building any person who, in the judgement of Landlord, is intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of the rules and regulations of the Building. 13. No vending machine or machines of any description shall be installed, maintained or operated upon the Premises without the written consent of the Landlord. 14. Landlord shall have the right, exercisable without notice and without liability to Tenant, to change the name and street address of the Building of which the Premises are a part. 15. Tenant shall not disturb, solicit or canvass any occupant of the Building and shall cooperate to prevent same. 16. Without the written consent of Landlord, Tenant shall not use the name of the Building in connection with or in promoting or advertising the business of Tenant except as Tenant's address. 17. Landlord shall have the right to control and operate the public portions of the Building, and the public facilities, and heating and air conditioning, as well as facilities furnished for the common use of the tenants, in such manner as it deems best for the benefit of the tenants generally. 18. All entrance doors in the Premises shall be left locked when the Premises are not in use, and all doors opening to public corridors shall be kept closed except for normal ingress and egress from the Premises. 12 EX-10.28 5 a2042365zex-10_28.txt ALTA VISTA EXHIBIT 10.28 PRIVILEGED AND CONFIDENTIAL EXECUTION COPY ** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. THE REDACTED MATERIAL HAS BEEN INDICATED WITH A DOUBLE ASTERISK AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. CHANNEL AGREEMENT This Channel Agreement (the "Agreement") is made and effective as of October 31, 2000 (the "Effective Date") by and between ALTAVISTA COMPANY, a Delaware corporation with its principal business offices at 529 Bryant Street, Palo Alto, CA 94301 (together with all companies controlled by AltaVista, "AltaVista"), and EBIX.COM, a Delaware corporation with its principal business offices at 1900 East Golf Road, Schaumburg, IL 60173 ("Ebix"). WHEREAS, Ebix owns and provides a generally-available Web site that contains a comprehensive on-line insurance service; WHEREAS, AltaVista maintains or manages certain Web pages which may be delivered to users worldwide via various technologies, now known or hereafter developed, which may incorporate content supplied by AltaVista from third parties for the purpose of providing value to AltaVista users and providing access to the content, products or services of AltaVista or such third parties; WHEREAS, the Parties desire to make the Ebix Content available to visitors to the AV Platform (as defined below) in the manner set forth below; and WHEREAS, Ebix desires to receive a certain amount of promotion for its content on the AV Platform. NOW THEREFORE, in consideration for the agreements, covenants and conditions set forth herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I: DEFINITIONS Whenever used in this Agreement, the following terms will have the following meanings: 1.1 "ALTAVISTA DIRECT COMPETITOR(S)" means the following companies: America Online/Time Warner, Yahoo!, Microsoft, Lycos, AT&T/Excite@Home, ABC/Go Network, NBCi/SNAP, About.com, Real.com, Google, Northern Lights, CBS/Iwon.com, Juno, Go2Net.com, Inktomi, NetZero, and any other company as determined by mutual agreement of the parties, which agreement will not be unreasonably withheld. AltaVista reserves the right to update this list on a quarterly basis. 1.2 "ALTAVISTA CONTENT" means the Content originated by AltaVista that appears on the AV Platform. 1.3 "ALTAVISTA LOOK AND FEEL" means the distinctive and particular elements of graphics, design, organization, presentation, layout, user interface, navigation, trade dress and stylistic convention (including the digital implementations thereof) within the AV Platform and the total appearance and impression substantially formed by the combination, coordination and interaction of these elements, and includes the AltaVista Marks. 1.4 "ALTAVISTA MARKS" means all trademarks, service marks and corporate and brand identification and indicia, including without limitation word marks, logos and other picture marks, phrases, jingles, composite marks, corporate, commercial and institutional images, product designations and identifications of AltaVista, whether registered or not. 1.5 "AV PLATFORM" means a set of Web pages (generic or customized) that may function together as a Web site, and may include an Internet index, a search tool, advertising, e-commerce elements or any other feature that might be desirable on a Web site, and any Mirror Site related thereto; the AV Platform includes the principal AltaVista site located at the URL WWW.ALTAVISTA.COM and the Shopping.com section of the AV Platform, but does not include any specialty sites owned or controlled by AltaVista. 1.6 "AV PLATFORM HOME PAGE" means, with respect to the AV Platform, the Web page that is displayed to the user when the URL WWW.ALTAVISTA.COM is entered in the user's browser. 1.7 "CONTENT" means information, materials, features, products, services, advertisements, promotions, links, pointers, technology or software. 1.8 "CLICKTHROUGH" means (i) if a User is a first-time visitor to the Co-Branded Pages, each time such User links to the Insurance Channel via the Log In Page from the AV Platform and (ii) if the User is a repeat visitor to the Co-Branded Pages and such User has an existing login and password each time such repeat User links to the Insurance Channel via the Log In Page from the AV platform. 1.9 "HEADER" means the branding and navigational elements designed by AltaVista, which include the AltaVista Look and Feel, included by Ebix at the top of each Co-Branded Page, an example of which is set forth on SCHEDULE 1.9 attached hereto and incorporated by reference herein. 1.10 An "IMPRESSION" will be deemed to have occurred each time an Ebix hyperlink is displayed by AltaVista on the AV Platform that redirects Users to the Ebix Site or the Insurance Channel. 1.11 "LAUNCH DATE" means the first date when substantially all of the text links or other Standard Advertising Units provided hereunder, which redirect Users to either the Ebix Site or the Co-Branded Pages, are displayed to Users, in no event later than fifteen (15) days after the date this Agreement is last signed by the Parties. 1.12 "MIRROR SITE" means an Internet site that (a) contains the exact form and content of a Web site, (b) is located at a geographic location distinct from a Web site, and (c) is created for the purpose of improving the performance of and accessibility to a Web site. 1.13 "PARTY" or "PARTIES" means each of AltaVista and Ebix. 1.14 "PERSON" means any individual, corporation, partnership, limited liability company, trust, association or other entity or organization, including any governmental or political subdivision or any agency or instrumentality thereof. 1.15 "CO-BRANDED PAGES" means any and all Web pages within the Insurance Channel. Such Web pages shall be hosted and served by Ebix to Users who link to the Insurance Channel from 1 the AV Platform. Each Co-Branded Page will include the Header in a place defined by AltaVista. 1.16 "EBIX CONTENT" means the Content set forth on SCHEDULE 1.16. 1.17 "EBIX MARKS" means all trademarks, service marks and corporate and brand identification and indicia, including without limitation word marks, logos and other picture marks, phrases, jingles, composite marks, corporate, commercial and institutional images, product designations and identifications of Ebix, whether registered or not, as set forth in SCHEDULE 1.17. 1.18 "EBIX SITE" means the site currently located at www.ebix.com (and any natural evolution thereof) and any Mirror Site related thereto. 1.20 "INSURANCE CHANNEL" means that area accessible from the AV Platform that contains the Ebix Content within the Co-Branded Pages. The Insurance Channel may also be accessed by means of an Impression. 1.23 "TERM" has the meaning set forth in Section 10.1. 1.24 "THIRD PARTY" means any Person that is not a party hereto or a wholly owned affiliate of a party hereto. 1.25 A "USER" is a Person who has linked to the Insurance Channel from the AV Platform. 1.26 "LOG IN PAGE" means a Web page designed by Ebix with AltaVista's reasonable approval that is accessible from the AV Platform and hosted and maintained by Ebix for the purposes of gathering User information before such Users access the Co-Branded Pages, as more fully described in Section 2.2 below. 1.27 "STANDARD ADVERTISING UNIT" means any unit of advertising that AltaVista includes in its standard rate card, including, but not limited to, banner advertisements, tile advertisements, text links and advertising intercept units. ARTICLE II: CO-BRANDING AND DESIGN 2.1 CHANNEL DESIGN. AltaVista will design and control the format and presentation of the Header portion of each Insurance Channel Web page. Promptly after the Effective Date, AltaVista will provide Ebix with the Header in a format mutually agreed by the parties. The design of the Co-Branded Pages, including the Header, is as set forth in SCHEDULE 2.1 as of the Effective Date. AltaVista has the right to modify the Header from time to time during the term of this Agreement, and Ebix agrees to implement any new Header received from AltaVista within five (5) business days of receipt. The parties agree that an express condition of this Agreement is that Ebix will not include within the Co-Branded Pages any content, functionality, or messaging of any kind (including advertising, sponsorships and beyond-the-banner placements) of any AltaVista Direct Competitor. 2.2 LOG IN PAGE. Ebix will design the Log In Page, subject to AltaVista's approval which will not be unreasonably withheld, and will host and maintain the Log In Page in accordance with the terms of this Agreement. The Log In Page will be accessible to Users from the AV Platform and will include an AltaVista logo or other AltaVista branding at AltaVista's discretion. The Log In Page will include an on-line form which will require each User to enter personally-identifiable information before such User may access the Co-Branded Pages. Once a User completes the information contained within a Log In Page and opts in to provide such information to Ebix, or a repeat visitor with an existing password and login accesses the Co-Branded Pages via the Log In Page, each such visit to the Co-Branded Pages whether through the Log In Page or otherwise, will be counted as a Clickthrough. If, after the first three (3) months of the Term, fewer than two hundred fifty thousand (250,000) Users have completed a Log In Page, Ebix will modify the Log In Page to a mutually acceptable format. The Log In Page set forth in SCHEDULE 2.2 hereto. 2.3 LAUNCH. Within five (5) business days after receipt of the Header materials from AltaVista, but in any event no later than the Launch Date, Ebix will incorporate the Header into the Co-Branded Pages. Ebix agrees that the Header will at all times be displayed at the top of each Web page of the Co-Branded Pages such that the Header is higher than any Content (regardless of the source) or advertising on such Web pages. 2.4 GRANT OF LICENSE. Subject to the terms of this Agreement, AltaVista hereby grants to Ebix a non-exclusive, worldwide, non-transferable license for the Term, to display and distribute the Header on the Co-Branded Pages, and to make such copies as are necessary of the Header to perform such display and distribution. The foregoing license is solely for the purpose of permitting Ebix to promote the Co-Branded Pages in accordance with this Agreement, and will not be deemed to grant a license in the Header, or the AltaVista Look and Feel contained therein, for any other purpose. ARTICLE III: CONTENT 3.1 CONTENT. Ebix Content will consist of the Content described in SCHEDULE 1.15, which Ebix will have the right to change from time to time, subject to the provisions of this Agreement. 3.2 GRANT OF LICENSE. Subject to the terms of this Agreement, Ebix hereby grants to AltaVista a non-exclusive, non-transferable, worldwide, royalty-free license for the Term, to display and distribute the Ebix Content on the AV Platform, and to make such copies as are necessary to make such display and distribution, as determined by AltaVista in its sole discretion. 3.3 EDITORIAL CONTROL. Ebix will have editorial control over the topics covered by, and creation of, the Ebix Content, PROVIDED, that such Content meets the standards set forth in Section 11.2 below. Notwithstanding the foregoing, AltaVista may request that Ebix edit individual Content items in the event that the Content item reasonably appears to violate such standards. 3.4 EXCLUSIVITY. Subject to agreements between AltaVista and Third Parties, the Parties agree that Ebix will be the exclusive on-line insurance services provider on the AV Platform during the Term. Nothing in this Section 3.4 will restrict AltaVista from selling Standard Advertising Units to third parties on the AV Platform. Notwithstanding the foregoing, AltaVista will have the right to incorporate message boards, chat, email and other community functions and any and all insurance-related news stories delivered to AltaVista by any of its major news providers, including, but not limited to, AltaVista affiliates, AP or Reuters, or any other nationally recognized newspaper or news source, on Shopping.com or otherwise within the AV Platform. Except as otherwise set forth herein, nothing in this Agreement will preclude Ebix from providing advertising and marketing services on the Ebix Site with AltaVista Direct Competitors, with the goal of driving traffic to the EbixSite. Ebix will not display any advertising of any AltaVista Direct Competitor on the Co-Branded Pages. ARTICLE IV: ADVERTISING AND PLACEMENT 4.1 EBIX ADVERTISING ON THE AV PLATFORM. AltaVista will promote the Ebix Content and the Co-Branded Pages by 2 featuring active promotion of the Co-Branded Pages on the AV Platform in the form of Impressions, in accordance with the schedule set forth in SCHEDULE 4.1 (the "Placements"). The Placements will include Standard Advertising Units, which redirect Users to the Log In Page or to the Co-Branded Pages. In the event that AltaVista is unable to provide any of the Placements described herein, AltaVista will provide Ebix with a comparable placement of equal or greater value; subject to Ebix approval. 4.2 IMPRESSIONS GUARANTEE. Subject to the terms of this Agreement, AltaVista will use commercially reasonable efforts to deliver the Impressions set forth in SCHEDULE 4.1. 4.3 IMPRESSIONS SHORTFALL. In the event that, during the Term, AltaVista does not serve the number of Impressions guaranteed in SCHEDULE 4.1 for the relevant time period covered, the Parties agree that AltaVista will have three (3) months after the end of the relevant period to make good on such shortfalls at no additional cost to Ebix. 4.4 KEYWORDS. Subject to existing insertions orders for advertising as of the Effective Date, AltaVista will use commercially reasonable efforts to provide Ebix with the available keywords set forth on SCHEDULE 4.4 attached hereto and incorporated by reference herein, (a) whereby upon a search query on AltaVista's main search product relating to the keywords, AltaVista will display ad banners, graphic ads, or other text links (as mutually agreed) on the AltaVista search product results pages that link directly to the Log In Page, and (b) (a) whereby upon a search query on AltaVista's main search product, where the User accesses the search product through the AV Platform Home Page, AltaVista may display a search intercept text and/or graphic link (as mutually agreed by the Parties) on the AltaVista search product results pages that link directly to the Co-Branded Pages. Each such ad banner, search intercept text and graphic link, graphic ad, or text link shall be counted as an Impression. Graphic representations of the search intercept graphic link and the graphic ads are set forth in SCHEDULE 4.8 hereto. 4.5 ADVERTISING ON THE CO-BRANDED PAGES. (a) CO-BRANDED PAGES. Ebix owns all right, title and interest in and to the advertising and promotional spaces and inventory within the Co-Branded Pages of the Insurance Channel. Ebix and its agents will control and sell one hundred (100%) percent of all such advertising. (b) PUBLIC SITES. Ebix owns all right, title and interest in and to the advertising and promotional spaces on the Ebix Site. Ebix and its agents will control and sell and retain the revenue from one hundred (100%) percent of all such advertising. 4.6 SEARCH ENGINEERING. Ebix agrees that during the Term, AltaVista may periodically index the contents of the Ebix Site, and display the results of such indexing on the AltaVista search results pages, as AltaVista sees fit in its sole discretion. 4.7 REPORTING. AltaVista will provide Ebix with monthly reports in AltaVista's standard format relating to the number of Impressions and clicks to the Log In Page that have occurred during the preceding week, as measured by AltaVista's servers, for the advertising placements described in Section 4.1. Each such report will be provided by AltaVista within five (5) business days after the final day (Saturday) of the previous month. 4.8 LINKING. In addition to the Placements described in Section 4.1 above, Altavista will use commercially reasonable efforts to provide text links, which redirect Users to the Log In Page or to the Co-Branded Pages (as appropriate) from the areas on the AV Platform described below and as set forth in SCHEDULE 4.8 hereto. In the event that AltaVista is unable to provide any of the text links described herein, AltaVista will provide Ebix with a comparable text link placement of equal or greater value, acceptable to Ebix. In the event that AltaVista cannot provide comparable text link placement, Ebix will have the right to terminate this Agreement. (a) A text link placed on the AltaVista Platform Home Page; (b) A text link placed within that area of the AV Platform with an emphasis on automotive information and content (the "Auto Channel") or successor or replacement page; (c) An "Insurance" text link on the left rail of the page on the AV Platform dedicated to channel content (currently called the "Channels" page) or successor or replacement page; (d) An "Insurance" and a "powered by Ebix" text link located in the "Channels Selection" area of the page on the AV platform dedicated to channel content (currently called the "Channels" page) or successor or replacement page; (e) A text link placed within that area of the AV Platform with an emphasis on finance and money (the "Money Channel") or successor or replacement page; ARTICLE V: MARKETING/PROMOTION 5.1 MATERIALS. The Parties will cooperate with and reasonably assist the other Party in supplying material for marketing and promotional activities with respect to any on-line and off-line promotion, as the case may be, in relation to the Insurance Channel on the AV Platform. ARTICLE VI: DATA RIGHTS 6.1 USER DATA. Ebix will own all demographic and e-commerce data collected on any Log In Page or the Co-Branded Pages regarding the Users. Notwithstanding the foregoing, Ebix will provide names and email addresses for each of the Users to AltaVista quarterly, in the format reasonably agreed by the parties, within fifteen (15) days after the end of each quarter. Notwithstanding anything in this Agreement to the contrary, Ebix shall not be required to disclose any user information to AltaVista or any third party, or contact or solicit such users, in any manner which would result in a violation of: (i) its posted privacy policy, as may be amended or modified from time to time, or (ii) applicable law. 6.2 SOLICITATION RESTRICTION. During the term of this Agreement, Ebix will not promote any of the products or services offered by any AltaVista Direct Competitor to any User in its online promotions on or related to the Co-Branded Pages. ARTICLE VII: FEES AND PAYMENTS 7.1 FEES. (a) PRODUCTION FEE: On the Effective Date, Ebix will pay to ** in the amount set forth in SCHEDULE 7.1 (the "PRODUCTION FEE") in relation to the design, production, implementation and launch of the Insurance Channel within the AV Platform, which shall include at least one Web page containing Ebix programming, content and information. (b) PLACEMENT FEES: Ebix will pay AltaVista the fees set forth in SCHEDULE 7.1 for the promotion of the Insurance Channel by AltaVista as described in Section 4.1, including without limitation the Impressions (the "Placement Fees"). The 3 parties agree that Placement Fees will begin no later than the Launch Date. (c) CLICKTHROUGH FEE: Ebix will pay AltaVista the Clickthrough fee set forth in SCHEDULE 7.1 in accordance with the payment terms set forth therein. 7.2 LATE PAYMENTS. All amounts owed hereunder not paid when due and payable, provided these payments have not been made within thirty (30) days of the payment due date, will bear interest at the rate of ** percent per **. 7.3 TAXES. In addition to the amounts set forth above, each Party will pay to the relevant taxing authority, as appropriate, any applicable sales, use, goods and services, value added or other taxes payable under this Agreement (other than taxes levied or imposed on the other Party's income). ARTICLE VIII: PRODUCTION 8.1 The Parties acknowledge that AltaVista will have all management responsibility with regard to the AV Platform and the AltaVista Content, and that Ebix will have all management responsibility with respect to the Ebix Content and the Ebix Site. Ebix agrees to manage the Co-Branded Pages in accordance with the terms of SCHEDULE 8.1 in order to minimize any adverse affects on the Users. 8.2 Ebix will produce and maintain the Log In Page in accordance with the terms of SCHEDULE 8.1. The Log In Page is attached to this Agreement as SCHEDULE 8.2. ARTICLE IX: INTELLECTUAL PROPERTY RIGHTS 9.1 OWNERSHIP BY ALTAVISTA. Ebix acknowledges that, as between Ebix and AltaVista, AltaVista owns all right, title and interest in all intellectual property contained on the AV Platform and all Content contained thereon (except for Ebix Content, if any, appearing on the AV Platform), including the Header, the AltaVista Marks and the AltaVista Look and Feel. Ebix understands and agrees that its use of any of the foregoing AltaVista property in connection with this Agreement will not create in it any right, title or interest, in or to such property, and that all such use and goodwill associated with any such use will inure to the benefit of and be on behalf of AltaVista. 9.2 OWNERSHIP BY EBIX. AltaVista acknowledges that, as between AltaVista and Ebix, Ebix owns all right, title and interest in all intellectual property with respect to the Ebix Marks, Ebix Content, and the Ebix Site. AltaVista understands and agrees that its use of any of the foregoing Ebix property in connection with this Agreement will not create in it any right, title or interest, in or to such property, and that all such use and goodwill associated with any such use will inure to the benefit of and be on behalf of Ebix. 9.3 QUALITY CONTROL. Each Party's use of the other's trademarks, trade names, service marks, and logos will be in accordance with the terms of this Agreement and within such Party's policies regarding mark usage, which policies will be provided as of the Effective Date (as such policies may be amended from time to time during the Term of this Agreement). In the event that a Party determines that its marks are being used by the other Party in a manner that is inconsistent with its quality standards and provides notice of such inconsistency to the other Party, such other Party will promptly, after written notice (which may include electronic mail communication) pursuant to the provisions of this Agreement, (no more than thirty (30) days thereafter) cure such inconsistency; PROVIDED, that, if a Party fails to cure such inconsistency within the stated period, such Party will be in breach of this Agreement and will immediately cease using the marks of the other Party. All use of a Party's trademarks, trade names, service marks or logos by the other Party, including all goodwill arising therefrom, shall inure solely to the benefit of the owner of such marks, names or logos. Neither Party will register or attempt to register in any jurisdiction any trademark, trade name, service mark or logo that is the same as or confusingly similar to any trademark, trade name, service mark or logo of the other Party. Neither Party will form a combination mark with the marks of the other Party. ARTICLE X: TERM AND TERMINATION 10.1 TERM. This Agreement is effective as of the Effective Date, and expires one (1) year after the Launch Date, unless earlier terminated as set forth below. 10.2 TERMINATION BY EITHER PARTY. This Agreement will be subject to termination upon the occurrence of any of the following events: (a) Either Party may terminate if the other commits a material breach of this Agreement that is not cured within thirty (30) calendar days after receipt of written notice of the breach; (b) Either party may terminate immediately upon written notice if: (i) either Party files a petition for bankruptcy or is adjudicated as bankrupt; (ii) a petition in bankruptcy is filed against either Party and such petition is not removed or resolved within thirty (30) calendar days; (iii) either Party becomes insolvent or makes an assignment for the benefit of its creditors or an arrangement for its creditors pursuant to any bankruptcy law; (iv) either Party discontinues its business; or (v) a receiver is appointed for either Party or its business; (c) Either party has the right, exercisable in its sole discretion, to terminate this Agreement if the other Party has any change in the actual or beneficial ownership or Control of its voting stock in one or more related transactions such that after such transaction(s) such voting stock is held or Controlled by an entity, other than a Party hereto, that is a direct competitor of the other Party. Such termination will be effective upon thirty (30) calendar days written notice, and must be given at any time within thirty (30) calendar days following the closing of such transaction(s). For the purposes of this Agreement, "CONTROL" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether by contract or through the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of voting securities, including the ownership of more than fifty percent (50%) of the equity, partnership or similar interest in such Person or the combined voting power of the then outstanding securities of such Person entitled to vote generally in the election of the directors; and (d) AltaVista will have the right to immediately suspend the performance of its obligations hereunder or terminate this Agreement in the event that Ebix suffers any material breach of its security or violation of its own privacy policy causing the inadvertent disclosure of any User data. Such termination will be effective upon fourteen (14) days' written notice from AltaVista, provided Ebix fails to cure the breach within such fourteen (14) day period. (e) In accordance with this Section 10.2(e), Ebix will have the right to terminate the Agreement and suspend the performance of its obligations hereunder in the event that 4 AltaVista breaches any of its obligations defined in the Article IV Advertising and Placements. AltaVista will have fourteen (14) days to cure any such breach after it receives written notice of the breach from Ebix. If AltaVista fails to cure the breach within such timeframe, Ebix will provide AltaVista with an additional fourteen (14) days' prior written of its intent to terminate the Agreement pursuant to this Section. 10.3 EFFECT OF TERMINATION. (a) Termination of this Agreement by either Party will not act as a waiver of any breach of this Agreement and will not act as a release of either Party hereto from any accrued liability (including payments as set forth in the following section) or liability for breach of such Party's obligations under this Agreement. (b) Within fifteen (15) calendar days following the expiration or termination of this Agreement, each Party will pay to the other Party all sums, if any, due and owing as of the date of expiration or termination, net of any amounts due from the other Party as of such date. (c) In the event of termination of this Agreement, AltaVista will continue to have the option, at its sole discretion, to link to the Ebix Site until AltaVista is able to secure a suitable replacement for the Content provided hereunder. Notwithstanding this section, Ebix shall have no continuing obligations to make payments to AltaVista in connection with this Section. 10.4 SURVIVAL. The respective rights and obligations of AltaVista and Ebix under Articles 9, and 12 through 16 (inclusive) and Sections 7.4, 7.5, 7.6, 10.3, and 10.4 will survive expiration or termination of this Agreement. ARTICLE XI: REPRESENTATIONS AND WARRANTIES 11.1 MUTUAL REPRESENTATIONS AND WARRANTIES. Each Party hereby represents and warrants to the other Party that: (a) It is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all the necessary power and authority (i) to conduct its business in the manner in which its business is currently being conducted, (ii) to own and use its assets in the manner in which its assets are currently owned and used, and (iii) perform its obligations under this Agreement; and (b) Its execution and delivery of this Agreement, and the performance of its obligations and duties hereunder, will not (i) conflict with or result in any breach of any provision of its certificate of incorporation or by-laws, (ii) require any filing with, or permit, authorization, consent or approval of, any governmental entity, (iii) result in a violation or breach of, or constitute a default (or give rise to any right of termination, cancellation or acceleration) under, any terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which it is a party or by which any of its properties or assets may be bound, (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to it, excluding from the foregoing clauses (ii), (iii) and (iv) such filings, violations, breaches or defaults which would not, individually or in the aggregate, have a material adverse effect on it and its ability to perform under this Agreement. 11.2 REPRESENTATIONS AND WARRANTIES BY EBIX. Ebix further represents and warrants that: (a) It will operate and maintain the Co-Branded Pages in compliance with all applicable laws, regulations, statutes, and warranties, and the Ebix Content will not contain any matter which constitutes a libel, slander or violation of any personal proprietary or privacy right of any Third Party; (b) It has all rights, title, and licenses, if any, to operate an internet based, web-page service linking buyers and sellers of insurance and insurance related products. (c) It will remain a provider of insurance services and content and the features, functionality, or technology of the Ebix Content will not impose a material adverse effect upon the technical operations of the AV Platform; (d) It has sufficient rights in and to its Marks and Content (and its exploitation through the Internet via the AV Platform) such that AltaVista's use of such Marks and Content as set forth herein will not infringe the intellectual property rights of any Third Party; (e) Its Content, at the time it is provided to AltaVista, is true, correct, accurate, complete and timely; and (f) It will use its best efforts to make sure that the Content will be free of defects in material and workmanship under the use set forth herein, and will be free of any viruses, Trojan horses, trap doors, back doors, Easter eggs, worms, time bombs, cancel bots or other computer programming routines that are intended to damage interfere with intercept or expropriate any system data or personal information. 11.3 REPRESENTATIONS AND WARRANTIES BY ALTAVISTA. AltaVista further represents and warrants that: (a) The AltaVista Content on the pages of the AV Platform upon which the Ebix Content appears will not contain any matter which constitutes or a violation of any Third Party rights, including without limitation any intellectual property or other privacy rights; and (b) AltaVista has sufficient rights in the AltaVista Content to grant the rights and licenses granted hereunder, and to otherwise perform its obligations hereunder. ARTICLE XII: INDEMNIFICATION AND REMEDIES 12.1 EBIX INDEMNITY. Ebix will indemnify, defend and hold AltaVista and its officers, directors, shareholders, employees and agents harmless from and against all damages of any kind, including costs, liabilities and expenses (including reasonable attorneys' fees) (collectively, "DAMAGES"), incurred for any third party claim(s) arising out of or in connection with: (a) any misrepresentation or breach of any representation or warranty by Ebix hereunder; or (b) Ebix's performance or non-performance of its obligations under this Agreement. 12.2 ALTAVISTA INDEMNITY. AltaVista will indemnify, defend and hold Ebix, and its officers, directors, shareholders, employees and agents harmless from and against all Damages incurred for any third party claim(s) arising out of or in connection with: (a) any misrepresentation or breach of any representation or warranty by AltaVista hereunder; or (b) AltaVista's performance or non-performance of its obligations under this Agreement. 12.3 INDEMNIFICATION PROCEDURE (a) A Party seeking indemnification (the "INDEMNIFIED PARTY") will promptly notify the other party (the "INDEMNIFYING PARTY") in writing of any claim for indemnification, PROVIDED, that failure to give such notice will not relieve the Indemnifying Party of any liability hereunder (except to the extent the Indemnifying Party has suffered actual material prejudice by such failure). (b) The Indemnified Party will tender sole defense and control of such claim to the Indemnifying Party. The Indemnified Party will, if requested by the Indemnifying 5 Party, give reasonable assistance to the Indemnifying Party in defense of any claim. The Indemnifying Party will reimburse the Indemnified Party for any reasonable legal expenses directly incurred from providing such assistance, as such expenses are incurred. (c) The Indemnifying Party will have the right to consent to the entry of judgment with respect to, or otherwise settle, an indemnified claim with the prior written consent of the Indemnified Party, which consent will not be unreasonably withheld; PROVIDED, HOWEVER, that the Indemnified Party may withhold its consent if any such judgment or settlement imposes an unreimbursed monetary or continuing non-monetary obligation on such Party or does not include an unconditional release of that Party and its Affiliates from all liability in respect of claims that are the subject matter of the indemnified claim. 12.4 REMEDIES CUMULATIVE. Except as otherwise expressly specified herein, the rights and remedies granted to each Party under this Agreement are cumulative and in addition to, and not in lieu of, any other rights or remedies that such Party may possess at law or in equity. ARTICLE XIII: CONFIDENTIALITY 13.1 CONFIDENTIAL INFORMATION. "CONFIDENTIAL INFORMATION" means information about the disclosing Party's business or activities that are proprietary or confidential, which will include, but not be limited to, the material terms of this Agreement, information about technical processes and formulas, source codes, product designs, sales, cost and other unpublished financial information product and business plans, projections and marketing data, and all business, financial, technical and other information of a Party marked or designated by such Party as "confidential" or "proprietary"; PROVIDED, that information will not be considered Confidential Information of a disclosing Party if it can be shown that 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 disclosing Party; (ii) hereafter becomes known (independently of disclosure by the disclosing Party) to the recipient directly or indirectly from a source other than one having an obligation of confidentiality to the disclosing Party; (iii) becomes publicly known or otherwise ceases to be confidential, except through a breach of this Agreement by the recipient; or (iv) was independently developed by the recipient without use of Confidential Information of the other Party. Confidential Information may be disclosed to a legal, judicial or governmental entity; PROVIDED, that the disclosing Party has been given written notice by the recipient so that the disclosing Party can seek a protective order or the appropriate protection for the Confidential Information. 13.2 PROTECTION OF CONFIDENTIAL INFORMATION. The Parties recognize that, in connection with the performance of this Agreement, each of them may disclose to the other its Confidential Information, including the creation of materials and the development of technology and techniques that are not generally known in the industry. The Party receiving any Confidential Information of the other Party agrees to maintain the confidential status of such Confidential Information and not to use any such Confidential Information for any purpose other than the purposes for which it was originally disclosed to the receiving Party, and not to disclose any of such Confidential Information to any Third Party. 13.3 APPLICABILITY. The foregoing obligations will apply to directors, officers, employees and representatives of the Parties and any other person to whom the Parties have delivered copies of, or permitted access to, such Confidential Information in connection with the performance of this Agreement, and each Party will advise each of the above of the obligations set forth in this Article 13. 13.4 THIRD PARTY CONFIDENTIAL INFORMATION. Any confidential information of a Third Party disclosed to either AltaVista or Ebix will be treated by AltaVista or Ebix, as the case may be, in accordance with the terms under which such Third Party confidential information was disclosed; PROVIDED, that the Party disclosing such Third Party confidential information will first notify the other Party that such information constitutes Third Party confidential information and the terms applicable to such Third Party confidential information. 13.5 CONFIDENTIALITY OF AGREEMENT. Except as required by law (including disclosures necessary or appropriate in filings with the Securities Exchange Commission) or generally accepted accounting principles, and except to assert its rights hereunder or for disclosures on a "need-to-know" basis to its own officers, directors, employees and professional advisers or to prospective investors or acquirers in connection with an investment in or acquisition of such Party, each Party hereto agrees that neither it nor its directors, officers, employees, consultants or agents will disclose the specific terms of this Agreement without the prior written consent of the other Party, which will not be unreasonably withheld. 13.6 PUBLIC DISCLOSURE. In connection with any public disclosure or filing with any governmental agency, including the Securities and Exchange Commission, Ebix agrees to seek confidential treatment of the terms and conditions of this Agreement. Such confidential treatment request will not be filed without the prior written consent of AltaVista. In addition, any description of this Agreement in any publicly filed document by Ebix will not be filed without the prior written consent of AltaVista. The parties acknowledge and agree that neither party may, at any time, issue any press release or make any other disclosure about this Agreement, its term or its existence, including but not limited to any disclosure to its shareholders or other vendors, without the prior written approval of the other party. If, however, a party determines, upon the opinion of counsel, that disclosure regarding the other party, its affiliates, this Agreement or the relationship between such party and the other party and its affiliates is required by law, then disclosure will be permitted, but only after the other party is given the opportunity to review and reasonably revise all such written disclosure. Under such circumstances, a copy of any such written documentation will be provided to the other party at least three (3) business days prior to its expected disclosure. 13.7 PUBLIC ANNOUNCEMENTS. The parties will cooperate to create any and all appropriate public announcements relating to the relationship set forth in this Agreement. Neither party shall make any public announcement regarding the existence or content of this Agreement without the other party's prior written approval and consent. ARTICLE XIV: DISCLAIMER OF WARRANTIES EXCEPT AS EXPRESSLY SET FORTH HEREIN, NEITHER PARTY MAKES ANY OTHER WARRANTY, REPRESENTATION OR CONDITION TO THE OTHER PARTY IN RELATION TO THE SUBJECT MATTER HEREOF, AND EACH PARTY SPECIFICALLY DISCLAIMS ANY OTHER WARRANTIES, REPRESENTATIONS OR CONDITIONS OF ANY KIND, 6 WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT OF THIRD PARTY RIGHTS. ANY IMPLIED WARRANTY THAT MAY NOT BE DISCLAIMED IS HEREBY LIMITED TO THE EXTENT PERMITTED BY APPLICABLE LAW. ARTICLE XV: LIMITATION OF LIABILITY EXCEPT FOR A BREACH OF ARTICLE 13 OR A CLAIM PURSUANT TO INDEMNIFICATION OBLIGATIONS HEREIN, IN NO EVENT WILL A PARTY TO THIS AGREEMENT BE LIABLE FOR ANY PUNITIVE, SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT LIMITATION, FOR LOST PROFITS, IN ANY WAY ARISING OUT OF OR RELATING TO THIS AGREEMENT, EVEN IN THE EVENT SUCH PARTY HAS BEEN ADVISED AS TO THE POSSIBILITY OF SUCH DAMAGES. ARTICLE XVI: GENERAL PROVISIONS 16.1 NO JOINT VENTURE. The sole relationship between the Parties will be that of independent contractors. No partnership, joint venture, or other formal business relationship is hereby created between the Parties hereto. Neither Party will make any warranties or representations, or assume or create any obligations, on the other Party's behalf except as may be expressly permitted hereunder or in writing by such other Party. Each Party will be solely responsible for the actions of all their respective employees, agents and representatives. 16.2 GOVERNING LAW. This Agreement will be interpreted and construed in accordance with the laws of the State of Delaware, without regard to conflicts of laws principles. 16.3 AMENDMENT OR MODIFICATION. This Agreement may not be amended, modified or supplemented by the Parties in any manner, except by an instrument in writing signed on behalf of each of the Parties by a duly authorized officer or representative. 16.4 NO ASSIGNMENT. Neither Party will transfer or assign any rights or delegate any obligations hereunder, in whole or in part, whether voluntarily or by operation of law, without the prior written consent of the other Party. Any purported transfer, assignment or delegation by either Party without the appropriate prior written approval will be null and void and of no force or effect. Notwithstanding the foregoing, without securing such prior consent, either Party will have the right to assign or transfer by operation of law or otherwise this Agreement and the obligations hereunder to any successor of such Party by way of merger, consolidation, reorganization or the acquisition of substantially all of the business and assets of the transferring Party relating to the Agreement, subject to the provisions of Article X. 16.5 NOTICES. Any notice or other communication to be given hereunder will be in writing and will be (as elected by the Party giving such notice): (i) personally delivered; (ii) transmitted by postage prepaid registered or certified mail, return receipt requested; (iii) deposited prepaid with a nationally recognized overnight courier service. Unless otherwise provided herein, all notices will be deemed to have been duly given on: (a) the date of receipt (or if delivery is refused, the date of such refusal) if delivered personally or by courier; (b) three (3) days after the date of posting if transmitted by mail; or (c) if transmitted by facsimile, the date a confirmation of transmission is received. Either Party may change its address for purposes hereof on not less than three (3) days prior notice to the other Party. Notices hereunder will be directed to, unless otherwise instructed by the receiving Party: IF TO ALTAVISTA: 1070 Arastradero Road Palo Alto, California 94304 Attn: General Counsel WITH A COPY TO: 1070 Arastradero Road Palo Alto, CA 94304 Attn: VP, Sales IF TO EBIX: Richard J. Baum Vice President for Finance and Administration Ebix.com, Inc. 1900 East Golf Road, Suite 1200 Schuamburg, IL 601173 WITH A COPY TO: Robin Raina President Ebix.com, Inc. 5 Concourse Parkway, Suite 3200 Atlanta, GA 30328 16.6 WAIVER. Any of the provisions of this Agreement may be waived by the Party entitled to the benefit thereof. Neither Party will be deemed, by any act or omission, to have waived any of its rights or remedies hereunder unless such waiver is in writing and signed by the waiving Party, and then only to the extent specifically set forth in such writing. A waiver with reference to one event will not be construed as continuing or as a bar to or waiver of any right or remedy as to a subsequent event. 16.7 NO THIRD PARTY BENEFICIARIES. Nothing express or implied in this Agreement is intended to confer, nor will anything herein confer, upon any person other than the Parties and the respective successors or assigns of the Parties, any rights, remedies, obligations or liabilities whatsoever. 16.8 FEES AND EXPENSES. Each Party will be responsible for the payment of its own costs and expenses, including, but not limited to, attorney's fees and expenses, in connection with the negotiation and execution of this Agreement. 16.9 SEVERABILITY. If the application of any provisions of this Agreement to any particular facts of circumstances will be held to be invalid or unenforceable by any court of competent jurisdiction, then: (i) the validity and enforceability of such provision or provisions as applied to any other particular facts or circumstances and the validity of other provisions of this Agreement will not in any way be affected or impaired thereby; and (ii) such provision or provisions will be reformed without further action by the Parties hereto and only to the extent necessary to make such provision or provisions valid and enforceable when applied to such particular facts and circumstance. 16.10 COUNTERPARTS; FACSIMILES. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered will be deemed an original, and such 7 counterparts together will constitute one and the same instrument. Each Party will receive a duplicate original of the counterpart copy or copies executed by it. For purposes hereof, a facsimile copy of this Agreement, including the signature pages hereto, will be deemed to be an original. Notwithstanding the foregoing, the Parties will each deliver original execution copies of this Agreement to one another as soon as practicable following execution thereof. 16.11 RECITALS. The recitals first stated above are true and correct and are made a part of and incorporated by reference into this Agreement. 16.12 ENTIRE AGREEMENT. This Agreement represents the entire agreement of the Parties with respect to the subject matter hereof and supersedes all prior and/or contemporaneous agreements and understandings, written or oral between the Parties with respect to the subject matter hereof. IN WITNESS WHEREOF, duly authorized representatives of each of the Parties have executed this Agreement as of the date first written above. ALTAVISTA COMPANY EBIX.COM /s/ David Carnstedt /s/ Robin Raina - ----------------------------- ----------------------------- Signature Signature David Carnstedt Robin Raina - ----------------------------- ----------------------------- Name Name V.P. of Sales President and CEO - ----------------------------- ----------------------------- Title Title 8 SCHEDULE 1.9 HEADER SCHEDULE 1.16 EBIX CONTENT CONTENT DESCRIPTION. The Ebix Content consists of any or all of the text links, graphics, data elements, and insurance-related Content that are displayed and provided on the Ebix Site, except for any data, Content or information that promotes any AltaVista Direct Competitor. 10 SCHEDULE 1.17 EBIX MARKS EBIX.MALL Ebix.Com EBIX.LINK E-AGENT Ebix TV Ebixexchange.com Ebixchange.com Ebix Research Center Internet Insurance Exchange 11 SCHEDULE 2.0 LOG IN PAGE [WEB PAGE] 12 SCHEDULE 2.1 CO-BRANDED PAGES [WEB PAGE] 13 SCHEDULE 4.1 IMPRESSION GUARANTEE AltaVista will use commercially reasonable efforts to deliver a minimum of ** Impressions during the Term of the Agreement, through the Placements described below and as described in Section 4.1 of this Agreement. AltaVista will use commercially reasonable efforts to ensure that the Impressions in any year will be spread evenly across its constituent quarters, subject to seasonal fluctuations in traffic volume.
PLACEMENT IMPRESSIONS - ------------------------------------------------------------------------------- Keyword s search results on main search product as defined in ** Section 4.4 - ------------------------------------------------------------------------------- Money Channel ** - ------------------------------------------------------------------------------- AltaVista Platform Home Page ** - ------------------------------------------------------------------------------- AV Platform run of site (placements determined by AV in its ** sole discretion and excluding specialty search areas) - ------------------------------------------------------------------------------- TOTAL IMPRESSIONS ** - -------------------------------------------------------------------------------
14 SCHEDULE 4.4 KEYWORDS The following keywords are subject to availability pursuant to existing agreements between AltaVista and Third Parties as of the Effective Date. Ebix acknowledges that it acquires no rights in or to the keyword set forth below, other than the rights, if any, Ebix holds in such words independent of this Agreement. Auto Car Coverage Disability Home Life Vision health Quotesmith Insure Need insurance Webinsurancequote Online insurance Variable life Universal life Aarp Insurance research Instant insurance quotes Realtime insurance quotes Insurers statefarm Insurance Insurance Center Altavista Insurance Center Insurance Company Insurance Carriers Insurance Agent Insurance Agency Auto Insurance Car Insurance Car Insurance Quote Car Insurance Rate Auto Insurance Rate Auto Insurance Quote Life Insurance Life Insurance Rate Life Insurance Quote Term Life Term Life Rate Term Life Quote Health Insurance Health Insurance Rate Health Insurance Quote Individual Health Insurance Home Insurance Home Insurance Rate Home Insurance Quote Boat Insurance Boat Insurance Rate Boat Insurance Quote Vision Insurance Vision Insurance Rate Vision Insurance Quote Dental Insurance Dental Insurance Rate Dental Insurance Quote Motorcycle Insurance Motorcycle Insurance Rate Motorcycle Insurance Quote RV Insurance 15 RV Insurance Rate RV Insurance Quote Renters Insurance Renters Insurance Rate Renters Insurance Quote Business Insurance Business Insurance Rate Business Insurance Quote LTC Long term care Insweb Progressive Geico 16 SCHEDULE 4.8 LINK PLACEMENTS Search intercept graphic advertisements: 17 [WEB PAGE] 18 [WEB PAGE] 19 [WEB PAGE] 20 SCHEDULE 7.1 PAYMENTS PRODUCTION FEE: Ebix will pay AltaVista a ** in accordance with the terms of Section 7.1(a) of this Agreement. PLACEMENT FEES: Ebix will pay AltaVista a Placement Fees in the amount of **, with the first payment due ** and all subsequent payments due ** thereafter. In the event the Parties elect to renew this Agreement in accordance with Section 10, the Parties will mutually agree upon the Placement Fee for any such renewal term. CLICKTHROUGH FEE: For each Clickthrough AltaVista delivers beyond the ** Clickthroughs (the "Clickthrough Goal") during the Term ** Clickthrough and each Clickthrough thereafter), Ebix will pay AltaVista a fee for each such Clickthrough of **. On the first day of the month following the first date the Clickthrough Goal is reached, AltaVista will provide a monthly report of the total number of Clickthroughs generated during the previous month and an invoice for the total Clickthrough Fee. Ebix shall pay AltaVista the monthly Clickthrough fee within thirty (30) days after the date of the invoice. 21 SCHEDULE 8.1 OPERATING STANDARDS 1. EBIX SITE INFRASTRUCTURE. Ebix will be responsible for all communications, hosting and connectivity costs and expenses associated with the Ebix Site. Ebix will provide all hardware, software, telecommunications lines and other infrastructure necessary to meet traffic demands on the Ebix Site from AltaVista. Ebix will design and implement the network between the AltaVista and Ebix Site such that (i) no single component failure will have a materially adverse impact on AltaVista Users seeking to reach the Ebix Site from AltaVista and (ii) no single line under Ebix's reasonable control will run at more than 70% average utilization for a 5-minute peak in a daily period. In the event that Ebix elects to create a custom version of the Ebix Site in order to comply with the terms of this Agreement, Ebix will bear responsibility for all aspects of the implementation, management and cost of such customized site. 2. OPTIMIZATION; SPEED. Ebix will use commercially reasonable efforts to ensure that: (a) the functionality and features within the Ebix Site are optimized for the client software then in use by AltaVista Users; and (b) the Ebix Site is designed and populated in a manner that minimizes delays when AltaVista Users attempt to access such site. Prior to commercial launch of any material promotions described herein, Ebix will permit AltaVista to conduct performance and load testing of the Ebix Site (in person or through remote communications), with such commercial launch not to commence until such time as AltaVista is reasonably satisfied with the results of any such testing. 3. Technical Problems. Ebix agrees to use commercially reasonable efforts to address material technical problems (over which Ebix exercises control) affecting use by AltaVista Users of the Ebix Site (a "EBIX TECHNICAL PROBLEM") promptly following notice thereof, as set forth in ATTACHMENT 1 to this SCHEDULE 8.1. 4. MONITORING. Ebix will make commercially reasonable efforts too ensure that the performance and availability of the Ebix Site is monitored on a continuous (24 X 7) basis. Ebix will provide AltaVista with contact information (including e-mail, phone, pager and fax information, as applicable, for both during and after business hours) for Ebix's principal business and technical representatives, for use in cases when issues or problems arise with respect to the Ebix Site. 5. SECURITY. Ebix will utilize Internet standard encryption technologies (e.g., Secure Socket Layer - SSL) to provide a secure environment for conducting transactions and/or transferring private member information (e.g. credit card numbers, banking/financial information, and member address information) to and from the Ebix Site or the Insurance Channel. Ebix will facilitate periodic reviews of the Ebix Site by AltaVista in order to evaluate the security risks of such site. Ebix will promptly remedy any security risks or breaches of security as may be identified by AltaVista's Operations Security team. 6. TECHNICAL PERFORMANCE. i. Ebix will design the Ebix Site to support the AltaVista-Client embedded versions of the Microsoft Internet Explorer, 4.XX and 5.XX browsers (Windows and Macintosh), the Netscape Browser 4.XX and make commercially reasonable efforts to support any other browsers such as AOL. ii. To the extent Ebix creates customized pages on the Ebix Site for AltaVista Users, Ebix agrees to develop and employ a methodology to detect AltaVista Users. iii. Ebix will periodically review the technical information made available by AltaVista. iv. Ebix will design its site to support HTTP 1.0 or later protocol as defined in RFC 1945 and to adhere to AltaVista's parameters for refreshing or preventing the caching of information in AltaVista's proxy system as outlined in the document provided by AltaVista. Ebix is responsible for the manipulation of these parameters in web based objects so as allow them to be cached or not cached as outlined in RFC 1945. 7. ALTAVISTA INTERNET SERVICES PARTNER SUPPORT. AltaVista will provide Ebix with access to the standard online resources, standards and guidelines documentation, technical phone support, monitoring and after-hours assistance that AltaVista makes generally available to similarly situated web-based partners. AltaVista support will not, in any case, be involved with content creation on behalf of Ebix or support for any technologies, databases, software or other applications which are not supported by AltaVista or are related to any channel area other than the Ebix Site. Support to be provided by AltaVista is contingent on Ebix providing to AltaVista demo account information (where applicable), a detailed description of the Ebix Site's software, hardware and network architecture and access to the Ebix Site for purposes of such performance and the coordination load testing as AltaVista elects to conduct. 8. EBIX PROGRAMMING. The terms and conditions of this Schedule applicable to the Ebix Site will apply equally to any Ebix Content that is (a) programmed in HTML or (b) web-based. 22 ATTACHMENT 1 TO SCHEDULE 8.1 SERVICE LEVEL AGREEMENT REPORTING A CONDITION TO EBIX In the event that a problem condition is encountered with the Content or the Co-Branded Pages, AltaVista will report the condition to Ebix, and Ebix will use diligent efforts to resolve the problem reported (provided that the resolution of such problem is reasonably within Ebix's control), as soon as commercially practicable, in accordance with the following chart (ALL TIMES HEREIN ARE US/PACIFIC TIME ZONE):
LEVEL CONDITION MEANS OF CONTACT RESPONSE TIME - ------------------------------------------------------------------------------------------------------------------------- High Priority Content is unavailable; site is down; 24x7 pager 30minutes data security or privacy issues - ------------------------------------------------------------------------------------------------------------------------- Medium Priority Content is available, poor performance Email (work hours); pager (after hours) 1hour - ------------------------------------------------------------------------------------------------------------------------- Low Priority Low severity problems, bugs 24x7 email 48 hours - -------------------------------------------------------------------------------------------------------------------------
EBIX RESPONSE In each of the above instances, Ebix will respond by determining whether the reported problem is or was caused under circumstances within Ebix's reasonable control. If so, Ebix will work closely with AltaVista to ascertain and implement a timely solution to the problem. If not, Ebix will use its best efforts to communicate with the responsible parties to determine when a solution will be available. ESCALATION OF MEANS OF CONTACT In the rare event there is a problem with the Ebix pager or any other means of contact, Ebix shall provide the AltaVista with alternative contact telephone numbers and email addresses solely for the use as required by such rare circumstances. Such contact information may correspond, at Ebix's discretion, to certain Ebix personnel, including without limitation Network Architect, VP Engineering, etc. ADDITIONAL ALTAVISTA INFORMATION AltaVista shall provide Ebix with current and accurate emergency contact information to report all system outages and significant AltaVista performance problems. AltaVista shall respond to Ebix contacts respecting the foregoing within two (2) hours. Initial AltaVista emergency contact information: Scott Farrand, Director of Engineering, by pager 888.483.8578 and by email SCOTT.FARRAND@ALTAVISTA.COM MAILTO:SCOTT.FARRAND@ALTAVISTA.COM. (AltaVista shall reasonably notify Ebix reasonably in advance of any change in, or additions to, its emergency contacts.) PLANNED & SCHEDULED ACTIVITY Ebix and AltaVista shall exchange and continue to provide notices of planned enhancements and modifications of all relevant systems at least 48 hours in advance. CONDITIONS IDENTIFIED BY EBIX Ebix will notify AltaVista regarding conditions initially identified by Ebix as follows:
LEVEL CONDITION EBIX NOTIFICATION - ------------------------------------------------------------------------------------------------------------------------- High Priority Content is unavailable, Site is down. Email problem notification within 1 hour data security or privacy issues Email within 1 hour of resolution - ------------------------------------------------------------------------------------------------------------------------- Medium Priority Content available, poor performance Email problem notification within 2 hours Email within 1 day of problem resolution. - ------------------------------------------------------------------------------------------------------------------------- Low Email within 2 days depending on the nature of the problem.
23 EX-21.1 6 a2042365zex-21_1.txt SUBSIDIARIES OF THE COMPANY Exhibit 21.1 Subsidiaries Delphi Information Systems International, Inc. Canadian Insurance Computer Systems, Inc. Delphi Information Systems, (NZ) Ltd. Complete Broking Systems, (Malaysia) Sdn. Bhd. Complete Broking Systems Australia PTY, Ltd. Delphi Information Systems, (Singapore) PTE, Ltd. EX-23.1 7 a2042365zex-23_1.txt CONSENT OF KPMG LLP Exhibit 23.1 CONSENT OF KPMG LLP The Board of Directors ebix.com, Inc.: We consent to the incorporation by reference in the registration statements (Nos. 333-46066, 333-23261, and 033-62901) on Form S-8 and (Nos. 333-12781 and 33-62427) on Form S-3/A of ebix.com, Inc. of our report dated March 30, 2001, relating to the consolidated balance sheets of ebix.com, Inc. as of December 31, 2000 and 1999, and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows, and the related consolidated financial statement schedule for the years then ended, which report appears in the December 31, 2000 annual report on Form 10-K of ebix.com, Inc. Chicago, Illinois March 30, 2001 EX-23.2 8 a2042365zex-23_2.txt CONSENT OF ARTHUR ANDERSON EXHIBIT 23.2 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Board of Directors ebix.com, Inc. As independent public accountants, we hereby consent to the incorporation by reference of our report dated May 26, 2000, included in this Form 10-K into the Company's previously filed Registration Statements on Forms S-8 and S-3/A (File Nos. 333-46066, 333-23261, 333-12781, 33-62427, 33-62901). ARTHUR ANDERSEN LLP Chicago, Illinois March 27, 2001 -----END PRIVACY-ENHANCED MESSAGE-----