Document:

Exhibit 10.4

 

VENOCO, INC.

2000 STOCK INCENTIVE PLAN

NONQUALIFIED STOCK OPTION AGREEMENT

 

THIS
NONQUALIFIED STOCK OPTION AGREEMENT (this “Option
Agreement”) by and between Venoco, Inc., a Delaware Company
(the “Company”), and                     
(the “Participant”)
evidences the nonqualified stock option (the “Option”) granted by the Company to the Participant as to
the number of shares of the Company’s common stock, $0.01 par value (the “Common Stock”) set forth
below.

 

	
  Award Date

  	
   

  	
  Number of Shares of

  Common Stock

  	
   

  	
  Exercise Price 

  per Share

  	
   

  	
  Expiration Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Vesting.  The Option shall become vested as to 20% of
the total number of shares of Common Stock subject to the Option on the Award
Date.  The Option shall become vested as
to the remaining shares of Common Stock in equal amounts on the first, second,
third and fourth anniversary of the Award Date, such that the Option will be
fully vested on the fourth anniversary of the Award Date.

 

Terms and Conditions.  The Option is granted under the Venoco, Inc. 2000 Stock Incentive
Plan (the “Plan”).  The Option is subject to the provisions of
the Plan (except for Appendix A attached thereto) and the Terms and Conditions
of Nonqualified Stock Option (the “Terms”)
attached to this Option Agreement and incorporated herein by reference.  The Option has been granted to the
Participant in addition to, and not in lieu of, any other form of compensation
otherwise payable or to be paid to the Participant.  The Option is not and shall not be deemed to
be an incentive stock option within the meaning of Section 422 of the
Code.  Capitalized terms are defined in
the Plan if not defined herein or in the Terms. 
The parties agree to the terms of the Option set forth herein.  The Participant acknowledges receipt of a
copy of the Terms and the Plan, specifically acknowledges and agrees to Section 17
of the Terms, and agrees to maintain in confidence all information provided by
the Company in connection with the Option.

 

	
  “PARTICIPANT”

  	
  VENOCO, INC.,

  
	
   

  	
  a
  Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Timothy M. Marquez

  
	
   

  	
   

  	
  Chief Executive Officer

  
					

 

 

TERMS AND CONDITIONS OF

NONQUALIFIED STOCK OPTION AGREEMENT

WITH                           

 

1.             Vesting; Limits on Exercise.

 

1.1           As
set forth on the cover page of this Option Agreement, the Option shall
vest and become exercisable in percentage installments of the aggregate number
of shares of Common Stock subject to the Option.  The Option may be exercised only to the
extent the Option is vested and exercisable.

 

1.2           To
the extent that the Option is vested and exercisable, the Participant has the
right to exercise the Option (to the extent not previously exercised), and such
right shall continue, until the expiration or earlier termination of the
Option.

 

1.3           Fractional
share interests shall be disregarded, but may be cumulated. Cash will be paid
in lieu of fractional shares at the time of exercise.

 

1.4           No
fewer than 1 share of Common Stock (subject to adjustment pursuant to Section 4.2.1
of the Plan) may be purchased at any one time, unless the number of shares (or
fractions thereof) purchased is the total number at the time exercisable under
the Option.

 

2.             Continuance of
Employment/Service Required; No Employment/Service Commitment.

 

2.1           The
vesting schedule requires continued employment or service through each
applicable vesting date as a condition to the vesting of the applicable
installment of the Option and the rights and benefits under this Option
Agreement.  Partial employment or
service, even if substantial, during any vesting period will not entitle the
Participant to any proportionate vesting or avoid or mitigate a termination of
rights and benefits upon or following a termination of employment or service as
provided in Section 5 below or under the Plan.

 

2.2           Nothing
contained in this Option Agreement or the Plan constitutes an employment
commitment by the Company, affects the Participant’s status as an employee who
is subject to termination without cause, confers upon the Participant any right
to remain employed by or in service to the Company or any Subsidiary,
interferes in any way with the right of the Company or any Subsidiary at any
time to terminate such employment or service, or affects the right of the
Company or any Subsidiary to increase or decrease the Participant’s other
compensation.

 

3.             Method of Exercise of Option.

 

3.1           The
Option shall be exercisable by the delivery to the Secretary of the Company of:

 

1

 

(a)           an executed Option Exercise Agreement in
substantially the form attached hereto as Exhibit “A” or such other form
as the Committee may require from time to time (the “Exercise Agreement”);

 

(b)           payment for the Exercise Price as provided
pursuant to Section 3.2 below;

 

(c)           satisfaction of the tax withholding
provisions of Section 4.4 of the Plan; and

 

(d)           any written statements or agreements required
by the Committee to be made by the Participant pursuant to Section 4.3 of
the Plan.

 

3.2           Payment
for the shares of Common Stock to be purchased pursuant to the Option may be
made by any of the following methods:

 

(a)           Participant may pay by check or electronic
funds transfer to the Company, subject to such specific procedures or
directions as the Committee may establish.

 

(b)           Participant may elect to receive upon
exercise of the Option the net number of shares of Common Stock determined
according to the following formula (a “Cashless
Exercise”):

 

	
   

  	
  Net
  Number = 

  	
  (A x B) – (A x C)

  	
   

  
	
   

  	
   

  	
  B

  	
   

  

 

For the purpose of this
formula:

 

	
   

  	
   

  	
  A

  	
  =

  	
  the total number of shares
  with respect to which the Option is then being exercised.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  B

  	
  =

  	
  the Fair Market Value (as
  defined in the Plan) per share of the Common Stock on the date the Exercise
  Agreement is executed.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  C

  	
  =

  	
  the exercise price in
  effect for the shares with respect to which the Option is being exercise.

  

 

4.             Change in Control.

 

4.1           In
accordance with Section 4.2.2 of the Plan, immediately upon the occurrence
of a Change in Control (as defined below), the Option shall become fully vested
and exercisable.  Subject to Sections
4.2.3 through 4.2.6 of the Plan, the Participant shall have the right to
exercise the Option (to the extent not previously exercised) until the
Expiration Date or earlier termination of the Option.

 

4.2           For
the purpose of this Option Agreement, a “Change in
Control” shall mean the occurrence of one of the following
events:

 

(a)           Timothy M. Marquez, Bernadette B. Marquez,
their respective legal

 

2

 

representatives,
devisees, donees and heirs and any Trust for the benefit of either or both of
Timothy M. Marquez and Bernadette B. Marquez and/or the issue of either of them
(the “Marquez Family”) individually or collectively no longer are the “beneficial
owners” (as defined in Rule 13d-3 under the Securities Exchange Act of
1934), directly or indirectly, of securities of the Company representing more
than 50% of the combined voting power of the Company’s then outstanding
securities;

 

(b)           the stockholders of the Company approve and
the Company consumates a merger or consolidation of the Company with any other
Company, other than (a) a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 65% of the combined
voting power of the voting securities of the Company (or such surviving entity)
outstanding immediately after such merger or consolidation or (b) a merger
or consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no “person” (as such term is used in Section 13(d) and
14(d) of the Exchange Act other than the Marquez Family) acquires more
than 50% of the combined voting power of the Company’s then outstanding
securities; or

 

(c)             the stockholders of the Company approve a
plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company’s
assets.  For purposes of this clause (c),
the term “the sale or disposition by the Company of all or substantially all of
the Company’s assets” shall mean a sale or other disposition transaction or
series of related transactions (other than transactions related to the creation
of a master limited partnership or royalty trust in which the Company continues
its corporate existence) involving assets of the Company or of any direct or
indirect subsidiary of the Company (including the stock of any direct or
indirect subsidiary of the Company) in which the value of the assets or stock
being sold or otherwise disposed of (as measured by the purchase price being
paid therefor or by such other method as the Board of Directors of the Company
determines is appropriate in a case where there is no readily ascertainable
purchase price) constitutes more than two-thirds of the “fair market value of
the Company” (as hereinafter defined). 
For purposes of the preceding sentence, the “fair market value of the
Company” shall be the aggregate market value of the Company’s outstanding
common stock (on a fully diluted basis) plus the aggregate market value of the
Company’s other outstanding equity securities. 
The aggregate market value of the Company’s equity securities shall be
determined by multiplying the number of shares of the Company’s common stock
(on a fully diluted basis) outstanding on the date of the execution and
delivery of a definitive agreement with respect to the transaction or series of
related transactions (the “Transaction Date”) by the average closing price of
such security for the ten trading days immediately preceding the Transaction
Date, or if not publicly traded, by such other method as the Board of Directors
of the Company shall determine is appropriate.

 

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5.             Termination of Employment or
Service.

 

5.1           In
the event the Participant’s employment by or service to the Company is
terminated by the Company for any reason other than for Misconduct (as defined
below), the Option shall become fully vested and exercisable.  The Participant shall have the right to
exercise the Option (to the extent not previously exercised), and such right
shall continue, until the earlier of the expiration of the Option or two (2) years
following the date on which the Participant’s employment or service terminated.

 

5.2           In
the event the Participant’s employment by or service to the Company is
terminated by the Company because of the Participant’s Misconduct, the Option
(regardless of whether all or a portion of the Option is vested), and all other
rights in respect thereof, shall terminate and become null and void on the date
of such termination.

 

5.3           In
the event the Participant’s employment by or service to the Company terminates
for any reason other than as described in Section 5.1 or 5.2, the unvested
portion of the Option, and all other rights in respect thereof, shall terminate
and become null and void on the date on which the Participant’s employment or
service terminated.  The Participant
shall have the right to exercise the vested portion of the Option (to the
extent not previously exercised), and such right shall continue, until the
earlier of the expiration of the Option or two (2) years following the
date on which the Participant’s employment or service terminated.

 

5.4           For
the purpose of this Option Agreement, “Misconduct”
means (a) the willful and continued failure by Participant to
substantially perform his duties with the Company (other than any such failure
resulting from Participant’s incapacity due to physical or mental illness),
after a written demand for substantial performance is delivered to Participant
by the Board, which demand specifically identifies the manner in which the
Board believes that Participant has not substantially performed his duties, or (b) the
willful engaging by Participant in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise.  For purposes hereof, no act, or failure to
act, on Participant’s part shall be deemed “willful” unless done, or omitted to
be done, by Participant not in good faith and without reasonable belief that
Participant’s action or omission was in the best interest of the Company.

 

6.             Non-Transferability of
Options.  The Option and any other rights of the
Participant under this Option Agreement or the Plan are nontransferable and
exercisable only by the Participant, except as set forth in Section 1.5 of
the Plan.

 

7.             Securities Law Compliance.  The
Participant acknowledges that the Option and the shares of Common Stock are not
being registered under the Securities Act, based, in part, in reliance upon an
exemption from registration under Securities and Exchange Commission Rule 701
promulgated under the Securities Act of 1933, and a comparable exemption from
qualification under the Colorado Securities Act, as each may be amended from
time to time.  The Participant, by
executing this Option Agreement, hereby makes the following representations to
the Company and acknowledges that the Company’s reliance on federal and state
securities law exemptions from registration and qualification is predicated, in
substantial part, upon the accuracy of these representations:

 

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7.1           The
Participant is acquiring the Option and, if and when he exercises the Option,
will acquire the shares of Common Stock solely for the Participant’s own
account, for investment purposes only, and not with a view to or an intent to
sell, or to offer for resale in connection with any unregistered distribution,
all or any portion of the shares within the meaning of the Securities Act, the
Colorado Securities Act, or other applicable state securities laws.

 

7.2           The
Participant has had an opportunity to ask questions and receive answers from
the Company regarding the terms and conditions of the Option and the
restrictions imposed on any shares of Common Stock purchased upon exercise of
the Option.  The Participant has been
furnished with, and/or has access to, such information as he considers
necessary or appropriate for deciding whether to exercise the Option and
purchase shares of Common Stock. 
However, in evaluating the merits and risks of an investment in the
Common Stock, the Participant has and will rely upon the advice of his/her own
legal counsel, tax advisors, and/or investment advisors.

 

7.3           The
Participant is aware that the Option may be of no practical value, that any
value it may have depends on its vesting and exercisability as well as an
increase in the value of the underlying shares of Common Stock to an amount in
excess of the Exercise Price, and that any investment in common shares of a
closely held Company such as the Company is non-marketable, non-transferable
and could require capital to be invested for an indefinite period of time,
possibly without return, and at substantial risk of loss.

 

7.4           The
Participant understands that any shares of Common Stock acquired on exercise of
the Option will be characterized as “restricted securities” under the federal
securities laws, and that, under such laws and applicable regulations, such
securities may be resold without registration under the Securities Act only in
certain limited circumstances, including in accordance with the conditions of Rule 144
promulgated under the Securities Act, as presently in effect, with which the
Participant is familiar.

 

7.5           The Participant has read and understands the
restrictions and limitations set forth in the Plan and this Option Agreement
(including these Terms), which are imposed on the Option and any shares of
Common Stock which may be acquired upon exercise of the Option.

 

7.6           At no time was an oral representation made to the Participant relating
to the Option or the purchase of shares of Common Stock and the Participant was
not presented with or solicited by any promotional meeting or material relating
to the Option or the Common Stock.

 

8.             Lock-Up. 
Neither the Participant nor any permitted transferee may, directly or
indirectly, offer, sell or transfer or dispose of any of the shares of Common
Stock acquired upon exercise of the Option (the “Shares”) or any interest therein (or agree to do any
thereof) (collectively, a “Transfer”)
during the period commencing as of 14 days prior to and ending one year, or
such lesser period of time as the relevant underwriters may permit, after the
effective date of a registration statement covering any public offering of the
Company’s securities of which the Participant has notice.  For the purpose of this Section 8 “Participant”
includes, where the context so requires, any permitted direct or indirect
transferee of the Participant.  The
Participant shall agree and consent to the entry of stop transfer instructions
with the Company’s transfer agent against the Transfer of the Company’s
securities beneficially owned by the Participant and shall confirm the
limitations hereunder by agreement with and for the benefit of

 

5

 

the
relevant underwriters by a lock-up agreement or other agreement in customary
form.  Notwithstanding anything else
herein to the contrary, this Section 8 shall not be construed so as to
prohibit the Participant from participating in a registration or a public
offering of the Common Stock with respect to any shares which he may hold at
that time; provided, however, that such participation shall be at the sole
discretion of the board of directors.

 

9.             (intentionally left blank)

 

10.           Non-Transferability of
Shares.

 

10.1         Except as provided in Section 10.2, no
Shares may be sold, transferred, assigned, pledged, or encumbered at any time
until the first to occur of (i) the Public Offering Date, (ii) two
years after the date the Shares were issued upon exercise of the Option, or (iii) the
sale of all or substantially all of the Common Stock or assets of the Company
to a person who is not an affiliate of the Company.

 

10.2         Notwithstanding the restrictions contained in
Section 10.1, the Shares may be transferred as provided in this Section 10.2,
provided, however, that such transfers remain subject to the
right of first refusal in Section 10.3:

 

(a)           Transfers to the Company.

 

(b)           Transfers with the written approval of the
Committee.

 

(c)           Transfers by gift to “immediate family” as
that term is defined in Rule 16a-1(e) under the Exchange Act.

 

(d)           In the event of the Participant’s death,
transfers to the Participant’s beneficiary, or in the absence of a validly
designated beneficiary, transfers by will or the laws of descent and
distribution.

 

(e)           In the event the Participant suffers a
permanent disability, transfers by the Participant’s duly authorized legal
representative on behalf of the Participant.

 

(f)            Transfers made pursuant to Sections 13 or 14.

 

10.3         The Company shall have a right of first
refusal, as set forth below, to purchase the Shares before the Shares (or any
interest in them) can be validly transferred to any other person or entity.

 

(a)           Before there can be a valid sale or transfer
of any Shares (or any interest in them) by any holder thereof, the holder shall
first give notice in writing to the Company, mailed or delivered in accordance
with the provisions of Section 18.5, of his or her intention to sell or
transfer such Shares (the “Option
Notice”).  The Option
Notice shall specify the identity of the proposed transferee, the number of Shares
to be sold or transferred to the transferee, the price per Share and the terms
upon which such holder intends to make such sale or transfer.  If the payment terms for the Shares described
in the Option Notice differ from delivery of cash or a check at closing, the
Company shall have the option, as set forth herein, of purchasing the Shares

 

6

 

for cash (or a cash
equivalent) at closing in an amount which the Company determines is a fair
value equivalent of that payment.  The
determination of a fair value equivalent shall be made in the Company’s best
judgment and such determination shall be mailed or delivered to the selling or
transferring stockholder (the “Company’s
Notice”) within ten (10) days of its receipt of the Option
Notice.  Should the selling or
transferring stockholder disagree with the Company’s determination of a fair
value equivalent, he shall have the right (the “Retraction Right”) to retract the proposed sale or
transfer to a third party and the offer of Shares to the Company pursuant to
the Option Notice (such retraction to be made in writing and mailed or
delivered in accordance with the provisions of Section 18.5 within fifteen
(15) days after receipt of the Company’s Notice).  If the stockholder again proposes to sell or
transfer the Shares, the stockholder shall again offer such Shares to the
Company pursuant to the terms of this Section 10.3 prior to any sale or
transfer.

 

(b)           Subject to the selling stockholder’s
Retraction Right, during the 60-day period commencing upon receipt of the
Option Notice by the Company (the “Option
Period”), the Company shall have an option to purchase any or
all of the Shares specified in the Option Notice at the price offered therein
(the “Right of First Refusal”).

 

(c)           Not more than thirty (30) days after receipt
of the Option Notice, the Company shall give written notice to the stockholder
desiring to sell or transfer Shares of the number of such Shares to be
purchased (or, if no Shares are to be purchased, stating such fact) by the
Company pursuant to the terms of this Section 10.3 (the “Purchase Notice”).  Purchases pursuant to this Section 10.3
shall be consummated within thirty (30) days after delivery of the Purchase
Notice to the selling stockholder, but in no event later than the expiration of
the Option Period.  The purchase price
shall be paid at the closing in cash, by check, by cancellation of money
purchase indebtedness, or, if the payment terms set forth in the Option Notice
differ from payment in cash or by check at closing, in accordance with the
payment terms set forth in the Option Notice (or payment of the amount set
forth in the Company’s Notice in cash, by cancellation of money purchase
indebtedness, or by check).  The purchase
price shall be paid against surrender by the selling stockholder of one or more
stock certificates evidencing the number of Shares specified in the Option
Notice, free and clear of all security interests and liens, with duly endorsed
stock powers.

 

(d)           Unless all of the Shares referred to in the
Option Notice are to be purchased as indicated in the Purchase Notice, the
stockholder desiring to sell or transfer may dispose of any Shares referred to
in the Option Notice that are not to be purchased by the Company to the person
or persons specified in the Option Notice during a period of twenty (20) days
commencing upon his or her receipt of the Purchase Notice; provided,
however, that he shall not sell or transfer such Shares (a) at a lower
price or on terms more favorable to the Participant or transferee than those
specified in the Option Notice, and (b) to a person other than the person
or persons specified in the Option Notice; and provided further that
such transfer is consistent with the other provisions and limitations of the
Plan and this Option Agreement (including these Terms).  If the transfer is not consummated within
such twenty (20) day period, the stockholder shall again offer such Shares to
the Company pursuant to the terms of this Section 10.3 prior to any sale
or transfer to the same or any other person.

 

7

 

(e)           Notwithstanding anything to the contrary, the
Company may assign any or all of its rights under this Section 10.3 to one
or more stockholders of the Company.

 

(f)            The Company’s Right of First Refusal pursuant
to this Section 10.3 shall terminate to the extent it is not exercised
prior to the Public Offering Date or the consummation of a sale of all or
substantially all of the assets or Common Stock of the Company to a person who
is not an affiliate of the Company.

 

11.           Put Right.

 

11.1         Following the second anniversary of the Award
Date, Participant shall have the right (the “Put Right”) to require, upon notice to the Company, that
the Company purchase some or all of the Shares (the “Put Shares”) under the terms provided in this Section 11.

 

11.2         Participant may exercise the Put Right no
more than once per fiscal quarter by providing notice (“Put Notice”) to the Company during the thirty (30) day
period immediately following the conclusion of a fiscal quarter (the “Put Notice Period”).  The Put Notice shall specify the number of
Shares for which the Participant seeks to exercise the Put Right and shall
specify a closing date for the purchase which shall be not less than thirty
(30) days after the date of the Put Notice.

 

11.3         Within fifteen (15) days after receipt of the
Put Notice, the Company shall provide notice (“Price Notice”) to the Participant of the purchase price
of the Put Shares.  The purchase price
for the Put Shares shall be Fair Value (as defined in Section 11.7) of the
shares on the date of the Put Notice, provided, however, that if
the Fair Value is determined in accordance with subsection (d) of Section 9.4,
the Price Notice must contain only a statement to that effect along with the
name of the independent third party selected by the Company to determine Fair
Value.

 

11.4         The number of Shares that the Company may be
required to purchase during any Put Notice Period shall not exceed the lesser of
(i) 0.5% of the number of Shares
of Common Stock then outstanding and (ii) the maximum number of
Shares the Company may lawfully purchase at the closing date of the purchase
under Section 160 and other applicable provisions of the Delaware General
Company Law; provided, however, that in no event shall the Company be required
to purchase Shares unless, until and to the extent such purchase is permitted
by the terms of the Company’s primary credit facility and the Indenture
relating to the Company’s 8.75% Senior Notes due 2011, as amended and
supplemented from time to time.  If (x)
the Company grants a Put Right to other employees of or consultants to the
Company or its subsidiaries, (y) more than one Put Notice is given during a Put
Notice Period and (z) the limitations imposed by this Section 11.4 (other
than subsection (i)) on the ability of the Company to purchase Shares
allow the Company to purchase some, but not all Shares subject to such Put
Notices, the Company shall pay the maximum amount it is permitted to pay
hereunder to such persons pro rata in accordance with the number of Put Shares
designated by them in their respective Put Notices.

 

11.5         The purchase price for the Put Shares shall
be paid by the Company in the form of a check or electronic transfer of
immediately available funds on the date set forth in the Put

 

8

 

Notice which shall be no
earlier than sixty (60) days after the date of the Put Notice; provided,
however, that if Fair Value is determined by an independent third party
pursuant to Section 9.4(d), the purchase price for the Put Shares shall be
net of one-half of the expenses of the independent third party and the net
purchase price shall be paid within thirty (30) days after the independent
third party provides its determination of Fair Value to both the Participant
and the Company.  The purchase price
shall be paid against surrender by the Participant of one or more stock
certificates evidencing the number of Shares specified in the Put Notice, free
and clear of all security interests and liens, with duly endorsed stock
powers.  No adjustments (other than
pursuant to Section 4.2 of the Plan) shall be made to the purchase price
for fluctuations in the value of the Common Stock after the date of the Put
Notice.

 

11.6         Participant’s Put Right shall terminate to
the extent that it is not exercised prior to the first to occur of (i) the
Public Offering Date, (ii) the consummation of a sale of all or
substantially all of the assets or Common Stock of the Company to a person who
is not an affiliate of the Company or (iii) March 1, 2015.

 

11.7         For the purpose of this Option Agreement, “Fair Value” shall mean:

 

(a)           if the stock is listed or admitted to trade
on a national securities exchange, the closing price of the stock on the
Composite Tape, as published in the Western Edition of The Wall Street Journal,
of the principal national securities exchange on which the stock is so listed
or admitted to trade, on such date, or, if there is no trading of the stock on
such date, then the closing price of the stock as quoted on such Composite Tape
on the next preceding date on which there was trading in such shares;

 

(b)           if the stock is not listed or admitted to
trade on a national securities exchange, the last/closing price for the stock
on such date, as furnished by the National Association of Securities Dealers, Inc.
(“NASD”) through the
NASDAQ National Market Reporting System or a similar organization if the NASD
is no longer reporting such information;

 

(c)           if the stock is not listed or admitted to
trade on a national securities exchange and is not reported on the National
Market Reporting System, the mean between the bid and asked price for the stock
on such date, as furnished by the NASD or a similar organization; or

 

(d)           if the stock is not listed or admitted to
trade on a national securities exchange, is not reported on the National Market
Reporting System and if bid and asked prices for the stock are not furnished by
the NASD or a similar organization, the value, as mutually agreed by the
Company and the Participant within thirty (30) days after the date of the Put
Notice, as applicable, or, in the absence of such agreement, as determined by
an independent third party selected by the Participant and the Company, based
on the trading values of a comparable group of public companies with
appropriate discounts for the illiquidity and minority status of the Shares, provided,
however, that the discounts for all such factors shall not exceed 15% in
the aggregate.  If the Company and the
Participant are unable to select promptly a mutually agreeable independent
third party for this determination, the independent third party shall be
selected pursuant to C.R.S. Section 13-22-205.  All fees and expenses of the independent
third party shall be borne equally by the Company and the Participant.

 

9

 

12.           No Stockholder Rights
Following Exercise of a Repurchase or Put Right.  If
the Participant (or any permitted transferee who is an employee of the Company)
ceases to be an employee of the Company and holds Shares as to which the Right
of First Refusal or Put Right has been exercised, the Participant shall be
entitled to the value of such Shares in accordance with the provisions of Section 10
or 11, as applicable, but (unless otherwise required by law) shall no longer be
entitled to participation in the Company or other rights as a stockholder with
respect to the Shares subject to the repurchase or put.  To the maximum extent permitted by law, the
Participant’s rights following the exercise of the Right of First Refusal or
Put Right shall, with respect to the repurchase or put and the Shares covered
thereby, be solely the rights that he has as a general creditor of the Company
to receive payment of the amount specified in Section 10 or 11, as applicable.

 

13.           Tag Along Right.  If
Timothy M. Marquez or any affiliate thereof (collectively, “Marquez”) proposes to sell,
to a Third Party Purchaser (as defined below) in one transaction or in a series
of related transactions ( a “Tag Along
Sale”) either (i) more than 50% of his equity interest in
the Company or (ii) control of the Company, then the Participant shall
have the right (the “Tag Along
Right”) to participate in such Tag Along Sale on the following
terms:

 

13.1         Marquez shall give the Participant not less
than 20 days’ written notice (a “Sale Notice”)
of his intention, describing the price offered, all other material terms and
conditions of the Tag Along Sale and, if the consideration payable pursuant to
the Tag Along Sale consists in whole or in part of consideration other than
cash, such information relating to such other consideration as the Participant
may reasonably request.

 

13.2         In connection with any Tag Along Sale, the Participant
shall have the right, in his sole discretion, to sell, at a price equal to the
average consideration per share received by Marquez for all shares of Common
Stock sold by Marquez in the Tag Along Sale, and otherwise on the same terms
and conditions, as Marquez, the lesser of either (i) all of the Shares
then held by him or (ii) a portion of such Shares equal to a fraction, the
numerator of which is the total number of shares of Common Stock to be
purchased by the Third Party Purchaser, and the denominator of which is the
number of shares of Common Stock owned by persons other than the
Participant.  Any fractional shares will
be rounded to the nearest whole share.

 

13.3         The Participant must exercise his tag-along
right by giving written notice to Marquez within ten (10) days after the
delivery of a Sale Notice, specifying the number of Shares that the Participant
desires to include in the Tag Along Sale. 
At the closing for the Tag Along Sale, against payment of the
consideration, the Participant will deliver to the Third Party Purchaser the
certificate or certificates representing such number of Shares free and clear
of security interests and liens and duly endorsed, together with all other
documents necessary to effect such Tag Along Sale.

 

13.4         There shall be no liability on the part of
Marquez to the Participant if the proposed third party sale is not consummated
for any reason.

 

10

 

13.5         For the purpose of this Agreement, a “Third Party Purchaser” means
any person that is not a stockholder or an affiliate thereof that purchases or
agrees to purchase the shares of Common Stock in connection with a Tag Along
Sale or Compelled Sale (as defined in Section 14).

 

13.6         Participant’s Tag Along Right shall terminate
to the extent that it is not exercised prior to the Public Offering Date.

 

14.           Right to Compel Sale.

 

14.1         If at any time Marquez proposes to sell all,
or a majority of his, its or their shares of Common Stock to a Third Party
Purchaser, Marquez shall have the right (the “Compelled Sale Right”), exercisable as set forth
below, to compel the Participant to sell to the Third Party Purchaser (a “Compelled Sale”) all, but not
less than all, of the shares of such Common Stock (to the extent acquired upon
exercise of the Option), if any, then held by the Participant.  In connection with any Compelled Sale, the
Participant will receive a price equal to the average consideration per share
received by Marquez for all shares of Common Stock sold by Marquez in the
Compelled Sale.

 

14.2         In the event Marquez elects to exercise its
right to cause a Compelled Sale, it will deliver written notice (a “Compelled Sale Notice”) to the Participant
and the Company, setting forth the consideration and describing the other material
terms and conditions of the Compelled Sale, including the proposed closing
date, which shall be not less than 20 days from the date the Compelled Sale
Notice is delivered.  At the closing for
the Compelled Sale, against payment of the consideration, the Participant shall
deliver to the Third Party Purchaser the certificate or certificates
representing the number of shares of Common Stock held by the Employee, duly
endorsed and free and clear of security interests and liens, together with all
other documents necessary to effect such Compelled Sale.

 

14.3         There shall be no liability on the part of
Marquez to the Participant if any proposed Compelled Sale is not consummated
for any reason.

 

14.4         The Compelled Sale Right shall terminate to
the extent that it is not exercised prior to the Public Offering Date.

 

15.           Bonus Payment.

 

15.1         In the event the Company declares and pays a
cash dividend to its common stockholders, the Participant shall be entitled to
receive a cash payment (the “Dividend
Payment”) from the Company equal to the product of (i) the
per share amount of the dividend payable to holders of the Company’s Common
Stock, and (ii) the number of shares of Common Stock issuable upon
exercise of that portion of the Participant’s Option which is vested and
exercisable as of the record date used by the Company for the purpose of
determining the stockholders that are eligible to receive the dividend.

 

15.2         The Company shall pay the Dividend Payment to
the Participant within thirty (30) days after the date on which the Company
pays the cash dividend on its Common Stock.

 

11

 

15.3         All payments made pursuant to this Section 15
shall be net of any withholding or other taxes applicable to such payment.

 

16.           Plan.  The
Option and all rights of the Participant under this Option Agreement are
subject to, and the Participant agrees to be bound by, all of the terms and
conditions of the Plan, incorporated herein by this reference.  In the event of a conflict or inconsistency
between this Option Agreement and the Plan, this Option Agreement shall
govern.  The Participant acknowledges
receipt of a copy of the Plan and agrees to be bound by the terms thereof and
of this Option Agreement.  The
Participant acknowledges reading and understanding the Plan and this Option
Agreement.  Unless otherwise expressly
provided in other sections of this Option Agreement, provisions of the Plan
that confer discretionary authority on the Board or the Committee do not and
shall not be deemed to create any rights in the Participant unless such rights
are expressly set forth herein or are otherwise in the sole discretion of the
Board or the Committee so conferred by appropriate action of the Board or the
Committee under the Plan after the date hereof.

 

17.           Satisfaction of All Rights
to Equity.  The Option is in complete satisfaction of any
and all rights that the Participant may have (under an employment, consulting,
or other written or oral agreement with the Company, or otherwise) to receive (1) stock
options or a restricted stock award with respect to the Company’s securities,
and/or (2) any other equity or derivative security in or with respect to
the Company.  This Option Agreement
supersedes the terms of all prior understandings and agreements, written or
oral, of the parties with respect to such matters.  The Participant shall have no further rights
or benefits under any prior agreement conveying any right with respect to any
security or derivative security in or with respect to the Company.  The foregoing notwithstanding, this Section 17
shall not adversely affect the Participant’s rights under any prior option or
restricted stock agreement under the Plan (provided such agreement is expressly
labeled as an option, restricted stock, or award agreement under the Plan and
is similar in form to this Option Agreement) which has been signed by an
authorized officer of the Company.

 

18.           Miscellaneous 

 

18.1         Entire Agreement.  This
Option Agreement (including these Terms and together with the form of Exercise
Agreement attached hereto) and the Plan together constitute the entire
agreement and supersede all prior understandings and agreements, written or
oral, of the parties hereto with respect to the subject matter hereof.  The Plan, this Option Agreement and the
Exercise Agreement may be amended pursuant to Section 4.5 of the
Plan.  Such amendment must be in writing
and signed by the Company.  The Company
may, however, unilaterally waive any provision of the Option Agreement in
writing to the extent such waiver does not adversely affect the interests of
the Participant hereunder, but no such waiver shall operate as or be construed
to be a subsequent waiver of the same provision or a waiver of any other
provision hereof.

 

18.2         Delaware Law.  This
Option Agreement and the Exercise Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware without
regard to conflict of law principles thereunder.

 

12

 

18.3         Limited Rights.  The
Participant has no rights as a stockholder of the Company with respect to the
Option as set forth in Section 4.6 of the Plan.  The Option does not place any limit on the
corporate authority of the Company as set forth in Section 4.12 of the
Plan.

 

18.4         Arbitration.  Any dispute, controversy or
claim arising out of or relating to this Option Agreement (including these
Terms), the Plan, and/or the Exercise Agreement, their enforcement or
interpretation, or because of an alleged breach, default, or misrepresentation
in connection with any of their provisions, will be determined exclusively by
confidential, final and binding arbitration in Denver, Colorado, pursuant to
the Colorado Arbitration Act.  The
arbitration shall be before a single neutral arbitrator mutually agreed upon by
the parties or, if the parties are unable to agree upon an arbitrator, the
arbitrator shall be selected pursuant to C.R.S. Section 13-22-205.  Disputes, controversies or claims subject to
final and binding arbitration under this Agreement include, without limitation,
all those that could otherwise be tried in court to a judge or jury in the
absence of this Section 18.4.  The
Participant and the Company agree that they each expressly waive any rights to
have such matters heard or tried before a judge or jury in another
tribunal.  The arbitrator’s award in any
JAMS proceeding will be final, binding, and conclusive upon the parties,
subject only to judicial review provided by statute, and a judgment rendered on
the arbitration award can be entered in any state or federal court having
jurisdiction thereof.  Nothing in this Section 18.4,
however, shall limit the right of the parties to stipulate and agree to conduct
the arbitration before and pursuant to the then existing rules of any
other agreed-upon arbitration services provider.

 

18.5         Notice.  Any notice to be given under the Option
Agreement shall be in writing and addressed to the Company at its principal
office in the Denver metropolitan area,
Colorado to the attention of the Chief
Executive Officer, with a copy addressed to the Company at its principal office
in Carpinteria, California to the attention of the General Counsel, and
to the Participant at the address reflected or last reflected on the Company’s
payroll records, or to such other address as is provided by the Participant in
writing.  Any notice shall be delivered
in person or shall be enclosed in a properly sealed envelope, addressed as
aforesaid, registered or certified, and deposited (postage and registry or
certification fee prepaid) in a post office or branch post office regularly
maintained by the United States Government. 
Any such notice shall be given only when received, but if the
Participant is no longer an Eligible Person, shall be deemed to have been duly
given as of the date mailed in accordance with this provision.

 

(Remainder of Page Intentionally
Left Blank)

 

13

 

EXHIBIT A

 

VENOCO, INC.

2000 STOCK INCENTIVE PLAN

OPTION EXERCISE AGREEMENT

 

The
undersigned (the “Purchaser”)
hereby irrevocably elects to exercise his/her right, evidenced by that certain
Nonqualified Stock Option Agreement dated as of                                         
(the “Option Agreement”)
under the Venoco, Inc. 2000 Stock Incentive Plan (the “Plan”), to purchase                                     
shares of Common Stock, par value $0.01 per share (the “Shares”), of Venoco, Inc., a Delaware Company (the “Company”), at an exercise
price of                 
dollars per share.  Capitalized terms
used herein and not otherwise defined shall have the meaning set forth in the
Option Agreement, or if not contained therein, in the Plan.

 

1.             Form of Warrant
Exercise Price.  The Purchaser intends that payment of the
Exercise Price shall be made as (check applicable line):

 

                              a cash exercise with respect to                   
shares of Common Stock; and/or

 

                              a Cashless Exercise with respect to                   
shares of Common Stock.

 

2.             Purchase Price.  In
the event the Purchaser has elected a cash exercise with respect to some or all
of the Shares to be issued pursuant hereto, the Purchaser shall pay the
exercise price of $                        
per share, for an aggregate exercise amount of $                    
to the Company in accordance with the terms of the Option Agreement.

 

3.             Delivery.  The
Company shall deliver a certificate representing the Shares and registered in
the name of the Purchaser to:                                                                                                            

 

4.             Investment Representations.  The
Purchaser acknowledges that the sale of the Shares by the Purchaser is
restricted by SEC Rule 701.  The
Purchaser hereby affirms as made as of the date hereof the representations in Section 7
of the “Terms and Conditions of Nonqualified Stock Option” (which are attached
to and a part of the Option Agreement, the “Terms”) and such representations are incorporated herein
by this reference.  The Purchaser
represents that he has no need for liquidity in this investment, has the
ability to bear the economic risk of this investment, and can afford a complete
loss of the purchase price for the Shares. 
The Purchaser acknowledges receipt of the Company’s condensed
consolidated financial information.  The
Purchaser also understands and acknowledges (i) that the certificates
representing the Shares will be legended as provided for in Section 4.3.3
of the Plan, and (ii) that the Company has no obligation to register the
Shares or file any registration statement under federal or state securities
laws.

 

 

5.             Restrictions on the Shares.  The
Purchaser represents that he has read the Plan and the Option Agreement and
acknowledges that the Shares are and shall remain subject to various
restrictions, including but not limited to, restrictions on transfer, a right
of first refusal in favor of the Company and a compelled sale right in favor of
the Company, restrictions on transfer under state and federal securities laws
and a lock-up provision, in each case as set forth in the Plan or the Option
Agreement.  As a condition to any
permitted transfer of the Shares, the Company may require the transferee to
execute a written agreement, in a form acceptable to the Committee, that the
transferee acknowledges and agrees to the foregoing terms and restrictions
imposed on the Shares.

 

6.             Plan and Option Agreement.  The
Purchaser acknowledges that all of his/her rights are subject to, and the
Purchaser agrees to be bound by, all of the terms and conditions of the Plan
and the Option Agreement (including the Terms), both of which are incorporated
herein by this reference.  If a conflict
or inconsistency between the terms and conditions of this Exercise Agreement
and of the Plan and Option Agreement shall arise, the terms of the Plan and/or
Option Agreement shall govern.  The
Purchaser acknowledges receipt of a copy of all documents referenced herein
(including the Terms and a disclosure statement) and acknowledges reading and
understanding these documents and having an opportunity to ask any questions
that he may have had about them.  Any
controversy or claim arising out of or relating to this Exercise Agreement
shall be submitted to arbitration in accordance with Section 18.4 of the
Terms, and Delaware law shall apply as provided in Section 18.2 of the
Terms.

 

7.             Entire Agreement.  This
Exercise Agreement, the Option Agreement (including the Terms), and the Plan
together constitute the entire agreement and supersede all prior understandings
and agreements, written or oral, of the parties hereto with respect to the
subject matter hereof.  The Plan, the
Option Agreement and this Exercise Agreement may be amended pursuant to Section 4.5
of the Plan.  Such amendment must be in writing
and signed by the Company.  The Company
may, however, unilaterally waive any provision hereof or of the Option
Agreement in writing to the extent such waiver does not adversely affect the
interests of the Participant hereunder, but no such waiver shall operate as or
be construed to be a subsequent waiver of the same provision or a wavier of any
other provision hereof.

 

	
  “PURCHASER”

  	
  ACCEPTED
  BY:

  
	
   

  	
  VENOCO,
  INC.

  
	
   

  	
   

  	
   

  	
   

  
	
  Signature

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
   

  
	
  Print
  Name

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (To be
  completed by the Company after the price

  	
   

  
	
  Date

  	
   

  	
  (including
  applicable withholding taxes), value (if

  
	
   

  	
   

  	
  applicable)
  and receipt of funds is verified.)

  	
   

  
						

 

14Exhibit
10.1

 

 

 

STOCK
PURCHASE AGREEMENT

 

 

 

 

Dated as of November 15, 2005

 

 

STOCK
PURCHASE AGREEMENT (this “Agreement”), dated as of November 15,
2005 (the “Closing Date”), between PRIMEDIA Inc., a Delaware corporation
(“Purchaser”), Automotive.com, Inc., a Delaware corporation (the “Company”),
and the stockholders set forth on Schedule A to this Agreement
(each a “Stockholder” and collectively, the “Stockholders”).

 

WHEREAS,
the Company owns and operates the
website www.automotive.com (and
related websites) which provides information and services relating to new and
used automobiles (collectively, the “Company Business”);

 

WHEREAS,
the Stockholders collectively own all of the issued and outstanding capital
stock of the Company;

 

WHEREAS,
Purchaser desires to purchase, and the Stockholders desire to sell to
Purchaser, an aggregate of 10,493,930 shares of the issued and outstanding
Common Stock (as hereinafter defined) of the Company on the terms and
conditions set forth herein.

 

NOW,
THEREFORE in consideration of the mutual covenants and the
respective representations and warranties contained herein, the parties hereby
agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

The following terms shall
have the respective meanings given thereto in the sections indicated below:

 

	
  Defined Term

  	
   

  	
  Section

  
	
  “1933 Act”

  	
   

  	
  4.02(c)

  
	
  “Additional Agreements”

  	
   

  	
  5.01

  
	
  “Additional Purchase
  Price”

  	
   

  	
  2.02

  
	
  “Agreement”

  	
   

  	
  Preamble

  
	
  “Base Purchase Price”

  	
   

  	
  2.02

  

 

2

 

	
  Defined Term

  	
   

  	
  Section

  
	
  “Cap”

  	
   

  	
  8.02(c)

  
	
  “Claims”

  	
   

  	
  8.02(a)

  
	
  “Closing Date”

  	
   

  	
  Preamble

  
	
  “Code”

  	
   

  	
  4.13(b)

  
	
  “Common Stock”

  	
   

  	
  2.01

  
	
  “Company”

  	
   

  	
  Preamble

  
	
  “Company Business”

  	
   

  	
  Preamble

  
	
  “Company Disclosure
  Letter”

  	
   

  	
  Article IV

  
	
  “Company Employee”

  	
   

  	
  6.02

  
	
  “Company’s Additional
  Agreements”

  	
   

  	
  4.01

  
	
  “Confidentiality
  Agreement”

  	
   

  	
  10.01

  
	
  “Contribution
  Agreement”

  	
   

  	
  7.01(e)

  
	
  “Domain Names”

  	
   

  	
  4.11(a)

  
	
  “Effective Time”

  	
   

  	
  3.01

  
	
  “Employee Benefit
  Program”

  	
   

  	
  4.13(a)(iii)

  
	
  “Employment Agreements”

  	
   

  	
  6.08

  
	
  “Environmental Laws”

  	
   

  	
  4.17(d)

  
	
  “ERISA”

  	
   

  	
  4.13(a)(ii)

  
	
  “Financial Statements”

  	
   

  	
  4.09

  
	
  “GAAP”

  	
   

  	
  4.09

  
	
  “Governmental
  Authority”

  	
   

  	
  4.04

  
	
  “Hazardous Materials”

  	
   

  	
  4.17(e)

  
	
  “Indemnitee”

  	
   

  	
  8.04

  
	
  “Indemnitor”

  	
   

  	
  8.04

  
	
  “Intellectual Property”

  	
   

  	
  4.11(b)

  
	
  “Laws”

  	
   

  	
  4.04

  
	
  “License Agreement”

  	
   

  	
  7.01(h)

  
	
  “Lien”

  	
   

  	
  4.02(b)

  
	
  “Material Adverse
  Effect”

  	
   

  	
  4.01

  
	
  “Material Contracts”

  	
   

  	
  4.12(a)

  
	
  “New Car Leads”

  	
   

  	
  4.22

  
	
  “Outstanding Shares”

  	
   

  	
  4.02(a)

  
	
  “Person”

  	
   

  	
  9.03(b)

  
	
  “Plan”

  	
   

  	
  4.13(a)(ii)

  

 

3

 

	
  Defined Term

  	
   

  	
  Section

  
	
  “Proposed Settlement”

  	
   

  	
  8.06(a)

  
	
  “Purchase Price”

  	
   

  	
  2.02

  
	
  “Purchaser”

  	
   

  	
  Preamble

  
	
  “Purchaser’s Additional
  Agreements”

  	
   

  	
  5.01

  
	
  “Real Estate Lease”

  	
   

  	
  4.12(a)

  
	
  “Regulations”

  	
   

  	
  4.18(g)

  
	
  “Shares”

  	
   

  	
  2.01

  
	
  “Shared Services
  Agreement”

  	
   

  	
  7.01(g)

  
	
  “Software”

  	
   

  	
  4.11(b)

  
	
  “Stockholder”

  	
   

  	
  Preamble

  
	
  “Stockholder
  Representatives”

  	
   

  	
  3.02

  
	
  “Stockholder
  Representatives Agreement”

  	
   

  	
  3.02

  
	
  “Stockholders
  Agreement”

  	
   

  	
  7.01(f)

  
	
  “Tax”

  	
   

  	
  9.03(a)

  
	
  “Tax Return”

  	
   

  	
  9.03(c)

  
	
  “Transaction Expenses”

  	
   

  	
  6.01

  

 

ARTICLE II

 

PURCHASE
AND SALE OF THE SHARES

 

2.01         Shares.  Upon the terms and subject to the conditions
of this Agreement, effective immediately, each Stockholder hereby sells,
conveys, assigns, transfers and delivers to Purchaser, and Purchaser purchases
and acquires from each Stockholder, the number of shares of issued and
outstanding common stock, par value $0.001 per share, of the Company (the “Common
Stock”) set forth opposite such Stockholder’s name on Schedule A
(the “Shares”), which Shares shall collectively comprise approximately seventy
three and one-half percent (73.5%) of the Company’s total issued and
outstanding Common Stock on a fully-diluted basis.

 

4

 

2.02         Purchase Price.  Concurrently with the execution of this
Agreement, in consideration of the sale, conveyance, assignment, transfer and
delivery of the Shares by the Stockholders to Purchaser and in reliance upon
the representations and warranties made herein by the Company and the
Stockholders, Purchaser shall pay to the Stockholder Representatives (as
defined in Section 3.02 below), for the benefit of the Stockholders,
employees, certain creditors and former stockholders of the Company listed on Schedule 2.02,
the amount equal to Seventy-Two Million Five Hundred Thousand Dollars
($72,500,000) (the “Base Purchase Price”).  In addition to the Base Purchase Price,
Purchaser shall pay to the Stockholder Representatives each calendar quarter as
set forth below, for the benefit of the Stockholders and former stockholders of
the Company listed on Schedule 2.02, an additional purchase price equal to
thirty percent (30%) of the Remaining Free Cash Flow (as defined in the
Stockholders Agreement) for such calendar quarter (the “Additional Purchase
Price”).  The calculations of
Remaining Free Cash Flow shall be consistent with the calculations of Remaining
Free Cash Flow under the Stockholders Agreement.  The Additional Purchase Price shall be paid
at the end of each calendar quarter commencing in 2005 and ending in 2008 or,
if the Put/Call Extension Notice (as defined in the Stockholders Agreement) is
delivered, 2009.  Such payments shall be
made within 45 days after each such calendar quarter, provided that the payment
date for the Additional Purchase Price for the last quarter of any calendar
year shall be within 45 days after the date on which the Company’s independent
auditor shall have issued its report containing its opinion as to the
consolidated audited financial statements of the Company for the prior calendar
year; provided, however, that, in the event
that the Company’s independent auditor fails to issue its report within 90
calendar days following the applicable calendar year end, the dividend payment
date shall be the 95th calendar day following such calendar year end.  The Base

 

5

 

Purchase Price and the Additional Purchase Price, if any, shall be
referred to herein collectively as the “Purchase Price.”

 

2.03         Purchase Price Payments.  All payments of the Purchase Price by
Purchaser to the Stockholder Representatives shall be made by wire transfer of
immediately available funds in New York City to an account specified by the
Stockholder Representatives.  The Base Purchase
Price shall be disbursed by the Stockholder Representatives to the
Stockholders, employees, certain creditors and former stockholders of the
Company in accordance with Schedule 2.02.  The Additional Purchase Price shall be
disbursed by the Stockholder Representatives to the Stockholders on a pro rata
basis in accordance with their share ownership percentages set forth in Schedule 2.03.  Notwithstanding anything herein to the
contrary, Purchaser’s sole payment obligation is to deliver the Purchase Price
to the Stockholder Representatives and Purchaser shall have no obligation or
liability with respect to disbursements made by the Stockholder Representatives
to any Stockholders, employees, certain creditors and former stockholders or
any other party.

 

ARTICLE III

 

CLOSING;
STOCKHOLDER REPRESENTATIVES

 

3.01         Closing Date Calculations; Effective Time.  For purposes of this Agreement, all
calculations to be made as of the Closing Date shall be made as of 11:59 p.m.
on the date hereof.  The actual time of
the execution of this Agreement on the date hereof is referred to herein as the
“Effective Time.”

 

3.02         Appointment of Stockholder Representatives.  Pursuant to that certain Stockholder
Representatives Agreement dated as of November 15, 2005 (the “Stockholder
Representatives Agreement”), the Stockholders appointed Gary Fudge, Jason Phillips

 

6

 

and Joshua Speyer as the representatives (the “Stockholder
Representatives”)  with
the full authority to act on behalf of the Stockholders on all matters
relating to this Agreement, including without limitation, (i) those
relating to payment to each of the Stockholders of their pro rata portions of
the Purchase Price or any other amounts paid to the Stockholders hereunder, (ii) after
the Closing, the power to execute and deliver any amendments, waivers or
modifications to this Agreement and the Company’s Additional Agreements (as
defined in Section 4.01 hereof) and (iii) giving or receiving notices
or other communications or accepting summonses or other process on behalf of
the Stockholders.  Any action of the
Stockholder Representatives under or pursuant to this Agreement shall require
consent of a majority of the Stockholder Representatives and shall be binding
on the Stockholders, and Purchaser shall have no liability whatsoever with
respect to any Stockholder for the actions taken by the Stockholder
Representatives hereunder.  

 

ARTICLE IV

 

REPRESENTATIONS
AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS

 

Each of the Company and
the Stockholders, jointly and severally, represents and warrants to Purchaser,
except as set forth in the disclosure letter dated as of the date hereof
delivered by the Company to Purchaser (the “Company Disclosure Letter”) as
follows:

 

4.01         Organization and Authority of the Company.  The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has the full corporate power and authority to (a) carry on its
business in all material respects as currently conducted and (b) enter
into this Agreement and the other agreements and instruments referred to in
this Agreement that the Company and/or the

 

7

 

Stockholders are executing and delivering (the “Company’s Additional
Agreements”) and to carry out the transactions contemplated hereby and
thereby.  The Company is in good standing
and qualified to do business in each jurisdiction where the nature of its
businesses requires such qualification, except where the failure to be in good
standing or to be so qualified would not have a Material Adverse Effect.  A “Material Adverse Effect” shall mean
a material adverse effect on the business, assets or condition (financial or
otherwise) of the Company, excluding any such effects arising out of or
resulting from changes in the general economy (including those arising from
acts of war or terrorism) or the reaction of employees, suppliers or customers
to (i) the Company’s entering into this Agreement, (ii) the
announcement thereof or (iii) the consummation of the transactions
contemplated hereby.   True and complete
copies of the Certificate of Incorporation of the Company, as filed with the
Secretary of State of the State of Delaware and in effect as of the date
hereof, and By-Laws of the Company, as amended and in effect as of the date
hereof, have heretofore been made available to Purchaser.

 

8

 

4.02         Capitalization of Company and Title to Shares.

 

(a)           The
authorized capital of the Company consists solely of 19,500,000 shares of
Common Stock, of which 14,059,727 shares are issued and outstanding as of the
date hereof (the “Outstanding Shares”). 
Schedule 4.02(a) of the Company Disclosure Letter sets
forth the ownership of the Outstanding Shares among the Stockholders.  Except as set forth on Schedule 4.02(a) of
the Company Disclosure Letter, the Outstanding Shares are the only issued and
outstanding securities of the Company. 
The Shares have been duly and validly authorized and issued, are fully
paid and non-assessable and are subject to no preemptive rights.  Except as set forth on Schedule 4.02(a) of
the Company Disclosure Letter or as provided in the Contribution Agreement,
there are no outstanding (i) options, warrants or other rights to purchase
any capital stock of the Company, (ii) securities convertible into or
exchangeable for shares of capital stock of the Company or (iii) commitments
of any kind to which the Company is a party, or by which the Company is bound,
for the issuance of any additional securities.

 

(b)           Except
pursuant to those agreements listed on Schedule 4.02(b) of the
Company Disclosure Letter, each of the Stockholders has good and valid title to
the Outstanding Shares listed next to its name on Schedule 4.02(a) of
the Company Disclosure Letter, free and clear of any covenant, condition,
restriction, right of first refusal, voting trust arrangement or adverse claim
of any kind.  When transferred to
Purchaser at the Effective Time, the Shares will be free and clear of any lien,
claim, charge, encumbrance, mortgage, pledge or security interest of any kind (“Lien”).

 

(c)           None
of the Outstanding Shares were issued in violation of the Securities Act of
1933, as amended (the “1933 Act”) or the securities or blue sky laws of
any state or other jurisdiction.  Each
Stockholder hereby waives any claim that any of the

 

9

 

Outstanding Shares were issued in violation of the 1933 Act or the
securities or blue sky laws of any state or other jurisdiction.

 

(d)           The
Company does not have any subsidiaries and does not own, directly or indirectly,
any equity interest in any other Person.

 

4.03         Authorization of Agreement.  The execution, delivery and performance by
the Company of this Agreement and the Company’s Additional Agreements and the
consummation by the Company of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary corporate action of the
Company.  Each of the Stockholders has
the full right, power, legal capacity and authority to enter into this
Agreement and the Company’s Additional Agreements, if applicable, and to
perform his, her or its obligations hereunder and thereunder.  This Agreement and the Company’s Additional
Agreements have been duly executed and delivered by the Company and the
Stockholders and constitute legal, valid and binding obligations of the Company
and the Stockholders, enforceable in accordance with their respective terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting the rights
of creditors generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and by an implied covenant of good faith and fair dealing.

 

4.04         No Conflicts.   Neither the execution, delivery or
performance of this Agreement or any of the Company’s Additional Agreements,
nor the consummation by the Company and the Stockholders of the transactions
contemplated hereby or thereby, nor compliance by the Company and the
Stockholders with the terms and provisions hereof or thereof, will, directly or
indirectly (with or without notice or lapse of time or both), (i) conflict

 

10

 

with the Certificate of Incorporation or By-Laws of the Company, as
amended to date, (ii) conflict with, or result in the breach or
termination of, or constitute a default under (or with notice or lapse of time
or both, result in the breach or termination of or constitute a default under)
or result in the termination or suspension of, or accelerate the performance
required by the terms, conditions or provisions of, any note, bond, mortgage,
indenture, license, lease, agreement, commitment or other instrument to which
the Company is a party or by which the Company is bound, except for those
agreements listed on Schedule 4.04, (iii) constitute a
violation by any Stockholder or the Company of any law, statute, rule,
regulation, ordinance, order, ruling, writ, judgment, injunction or decree
(collectively, “Laws”) of any foreign or domestic federal, state or
local legislative, judicial, executive or other governmental authority (“Governmental
Authority”) applicable to the Company or the Shares or (iv) result in
the creation of any Lien upon any of the Shares or any assets of the Company;
except, in the case of clauses (ii) and (iii) above, for such
conflicts, defaults, breaches, terminations, suspensions, acceleration of
performance or violations which, taken as a whole, would not have a Material
Adverse Effect or a material adverse effect on the Company’s and the
Stockholders’ ability to consummate the transactions contemplated by this
Agreement and the Company’s Additional Agreements.

 

4.05         No Consents.  No order, permission, consent, approval,
license, authorization, registration, or validation of, or filing with, or
notice to, or exemption by, any Governmental Authority is required to
authorize, or is required in connection with, the execution, delivery or
performance by the Company or the Stockholders of this Agreement or any of the
Company’s Additional Agreements, except as would not, individually or in the
aggregate, have a Material Adverse Effect.

 

11

 

4.06         Compliance with Laws.  The Company is in material compliance with
all applicable Laws.

 

4.07         Litigation.             Except
as set forth on Schedule 4.07 of the Company Disclosure Letter,
there are no actions, suits, inquiries, proceedings or investigations pending
or, to the Stockholder Representatives’ knowledge, expressly threatened to be
instituted by any third party before any court or other Governmental Authority (a) against
the Company which, if decided adversely to the Company would, individually or
in the aggregate, have a Material Adverse Effect or (b) against any of the
Stockholders relating to the transactions contemplated by this Agreement or the
Company’s Additional Agreements.

 

4.08         No Brokers.  There is no obligation or liability,
contingent or otherwise, for brokers’ or finders’ fees or commissions in
connection with the transactions contemplated by this Agreement for which the
Company is liable.

 

4.09         Financial Statements.  Attached as Schedule 4.09 of the
Company Disclosure Letter are: (a) the audited statements of income for
the Company for the years ended December 31, 2004 and December 31,
2003 and the unaudited statement of income for the Company for the nine-month
period ended September 30, 2005; (b) the audited balance sheets for
the Company as of December 31, 2004 and December 31, 2003 and the
unaudited balance sheet for the Company as of September 30, 2005 and (c) the
audited statements of cash flow for the Company for the years ended December 31,
2004 and December 31, 2003 and the unaudited statement of cash flow for
the Company for the nine-month period ended September 30, 2005
(collectively, the “Financial Statements”).  The Financial Statements have been prepared
from books and records maintained by the Company consistent with past practice
and in accordance with generally accepted accounting principles as in effect in
the United States of America

 

12

 

(“GAAP”).  The Financial
Statements fairly present, in all material respects, the consolidated financial
condition of the Company for the periods and as of the dates indicated and the
results of operations for the periods then ended.

 

4.10         Undisclosed Liabilities.      Except
for the liabilities (a) set forth on the Financial Statements or not
required by GAAP to be reflected on the Financial Statements, (b) set
forth on Schedule 4.10 of the Company Disclosure Letter, or (c) incurred
since December 31, 2004 in the ordinary course of business consistent with
past practice, the Company is not subject to any liability or liabilities,
whether absolute, accrued, contingent or otherwise and whether due or to become
due, which would, individually or in the aggregate, have a Material Adverse
Effect.

 

4.11         Intellectual Property.

 

(a)           Schedule 4.11(a) of
the Company Disclsoure Letter contains a complete and correct list and
description (including the record owners and identifying numbers) of all
Internet domain names (“Domain Names”) and registered patents,
copyrights, trademarks, trade names and service marks (and all existing and
pending applications for, and any renewals, extensions, reissuances,
continuations, revisions and reexaminations of, any of the foregoing) owned by
the Company or held by third parties on behalf of the Company (including,
without limitation, Domain Names registered by a third party on behalf of the
Company).

 

(b)           Except
as set forth on Schedule 4.11(b) of the Company Disclsoure
Letter, there are no proceedings pending or, to the Stockholder Representatives’
knowledge, threatened against the Company that directly challenge, and no
express claim or demand in writing by any person or entity has been made to or
upon the Company that directly challenges, the rights of the Company in respect
of any patents, trademarks, service marks, trade names, trade dress, trade
secrets, copyrights, Domain Names, (including Software under development and
all object

 

13

 

codes, source codes and other related documentation), or applications
for or renewals, extensions, reissuances, continuations, revisions or
reexaminations of any of the foregoing, or any computer software developed or
under development by or for the Company (including, without limitation, all
source code, executable code, data, databases and related documentation
(collectively, the “Software”)), in each case to the extent owned or
otherwise used by the Company (collectively, “Intellectual Property”).

 

(c)           Except
as set forth on Schedule 4.11(c) of the Company Disclsoure
Letter, no Intellectual Property owned by the Company (i) is subject to
any outstanding order, ruling, judgment, decree or stipulation by or with any
Governmental Authority, or any express and enforceable contract, agreement,
commitment or undertaking with any person or entity, restricting the scope or
use of any such Intellectual Property, or (ii) to the Stockholder
Representatives’ knowledge, infringes or misappropriates the rights of any
other person or entity, or (iii) to the Stockholder Representatives’
knowledge, is being infringed or misappropriated by any other person or entity.

 

(d)           Except
as set forth on Schedule 4.11(d) of the Company Disclsoure
Letter, the Company has not granted any material license (other than such
licenses and permissions for one-time or other limited use granted in the
ordinary course of business and the Terms of Use governing the website at www.automotive.com
and related websites) to any person or entity to use any of the Intellectual
Property owned or otherwise used by the Company.

 

(e)           The
Company owns or has the right to use all of the Intellectual Property necessary
to conduct its business immediately following the Effective Time as conducted
immediately prior to the Effective Time.

 

(f)            To
the Stockholder Representatives’ knowledge, the Company has full

 

14

 

rights to register, transfer, renew and otherwise use, all the Domain
Names without interference from any third-party, whether or not Company or a
third-party is listed as the registrant.

 

4.12         Contracts and Commitments.

 

(a)           Schedule 4.12(a) of
the Company Disclsoure Letter lists: (i) all contracts to which the
Company is a party (or by which the Company has rights or obligations) that
involve the receipt of revenue, or require the expenditure, by the Company, of
more than One Hundred Fifty Thousand Dollars ($150,000) in any consecutive
twelve-month period after the date hereof, other than those terminable on not
more than 90 days’ notice; (ii) all agreements governing long-term
indebtedness of, or any guarantee thereof by, the Company; (iii) all
material licensing agreements with third parties to which the Company is a
party; (iv) each collective bargaining or other agreement with any labor
union or other representative of a group of employees to which the Company is a
party; (v) each partnership, joint venture, contribution, tax sharing or
other agreement involving a sharing of profits, losses, costs or liabilities by
the Company with any third party; (vi) each written contract or other
agreement to which the Company is a party and containing terms which impose or
purport to impose non-competition obligations upon the Company; (vii) each
written warranty, guaranty or other similar undertaking with respect to
contractual performance extended by the Company other than in the ordinary
course of business; (viii) all real property leases (each, a “Real
Estate Lease”) to which the Company is a party; and (ix) the agreements
relating to the sale of leads listed on Schedule 4.22(b) (with
(i) through (ix) collectively referred to as the “Material
Contracts”).

 

(b)           The
Company has not obtained any letter of credit for, or given any power of
attorney to, any person or entity for any purpose whatsoever that, in each
case, is outstanding or will be in effect on the Closing Date.

 

15

 

(c)           The
Company is not in default, and to the Stockholder Representatives’ knowledge,
there is no basis for any claim of default, under any of the Material
Contracts, except such claims or defaults as would not, individually or in the
aggregate, have a Material Adverse Effect. 
To the knowledge of the Stockholder Representatives, all of the Material
Contracts are in full force and effect and are valid, binding and enforceable
in accordance with their respective terms. 
Except as provided in those agreements identified on Schedule 4.12(c) of
the Company Disclsoure Letter, no consent by, notice to or approval from any
Person is required under any of the Material Contracts as a result of the
consummation of the transactions contemplated by this Agreement, except such consents
the failure to obtain of which would not, individually or in the aggregate,
have a Material Adverse Effect.

 

(d)           The
Company has heretofore delivered or made available to Purchaser true and
correct copies of all of the Material Contracts, including all amendments,
modifications and supplements thereto.

 

4.13         Employee Benefits.

 

(a)           Schedule 4.13
of the Company Disclosure Letter lists:

 

(i)    each
employment or severance agreement between the Company and any employee of the
Company;

 

(ii)   each
“employee benefit plan” (as such term is defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended (“ERISA”),
or comparable provisions of foreign law) of the Company that is covered by
ERISA or comparable provisions of foreign law and that is maintained or
provides benefits for the benefit of any employee of the Company (a “Plan,”
and collectively, the “Plans”); and

 

16

 

(iii)  each
plan, policy or arrangement not subject to ERISA maintained by the Company for
the benefit of any employee of the Company and providing for retirement
benefits, termination bonuses, deferred compensation, bonuses, severance, stock
options, or employee insurance coverage (the “Employee Benefit Programs,”
with each individually, an “Employee Benefit Program”).

 

(b)           To
the knowledge of the Stockholder Representatives, each Plan and Employee
Benefit Program has been maintained and administered at all times in material
compliance with its terms and conditions and all applicable Laws, including,
but not limited to, ERISA and the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder (the “Code”),
applicable to such Plan and Employee Benefit Program.

 

(c)           To
the knowledge of the Stockholder Representatives, no “reportable event” (as
such term is used in Section 4043 of ERISA, but excluding events for which
the 30-day notice period has been waived), “prohibited transaction” (as such
term is used in Section 406 of ERISA or Section 4975 of the Code, but
excluding transactions that are exempt under a statutory or administrative
exemption), or “fiduciary breach” under ERISA has heretofore occurred with
respect to any Plan that could reasonably be expected to result in any material
liability to the Company and there exists no condition or set of circumstances
which could reasonably be expected to result in a “reportable event” (other
than events for which the 30-day notice period has been waived).

 

(d)           The
Company has not contributed to or participated in any pension plan which is a “Multi
Employer Plan,” as defined in Section 3(37) of ERISA.  No Plan is subject to Title IV of ERISA or Section 412
of the Code.

 

17

 

(e)           Complete
and correct copies of all Plans and Employee Benefit Programs listed on Schedule 4.13
of the Company Disclosure Letter have been delivered or otherwise made
available to Purchaser.

 

(f)            No
employee of the Company is represented for purposes of collective
bargaining.  There are no work stoppages or,
to the Stockholder Representatives’ knowledge, threatened work stoppages, and
to the Stockholder Representatives’ knowledge, no union organizing effort is
under way with respect to any employees of the Company.

 

(g)           Each
individual who renders services to the Company who is classified by the Company
as having the status of independent contractor or other non-employee status for
any purpose (including for purposes of taxation and tax reporting and under any
Plan or employee Benefit Program) is properly so characterized.

 

4.14         Absence of Certain Changes.  Since December 31, 2004, the Company has
not:

 

(a)           suffered
any Material Adverse Effect;

 

(b)           suffered
the loss of any material business relationships for the Company Business with
any third parties;

 

(c)           except
in the ordinary course of business, written off as uncollectible any notes or
accounts receivable (or any portion thereof) that, individually or in the
aggregate, are material to the Company;

 

(d)           except
in the ordinary course of business, (i) sold, transferred or otherwise
disposed of, or (ii) suffered any material damage or destruction (ordinary
wear and tear excepted) of, or (iii) mortgaged, pledged or otherwise
suffered or permitted the imposition of

 

18

 

any Lien on, any properties or assets, whether real, personal, fixed,
tangible or intangible, that, individually or in the aggregate, are material to
the Company;

 

(e)           except
in the ordinary course of business, made any capital expenditures or
commitments for capital assets that, individually or in the aggregate, are
material to the Company;

 

(f)            made
any change in any accounting practices, principles, policies or methods, except
as required by law, or made any change in accounting standards, that,
individually or in the aggregate, are material to the Company;

 

(g)           except
in the ordinary course of business, reduced any insurance coverages in any
manner that, individually or in the aggregate, are material to the Company;

 

(h)           except
in the ordinary course of business, entered into any material employment,
deferred compensation or other similar agreement (or any amendment to any such
existing agreement), amended any of the Plans described on Schedule 4.13
of the Company Disclosure Letter or adopted any new employee benefit plan or,
except as disclosed on Schedule 4.14(i) of the Company
Disclosure Letter, granted any general increase in compensation, bonus or other
benefits payable to employees of the Company;

 

(i)            incurred
any obligations or liabilities (whether absolute, accrued or contingent and
whether due or to become due) related to indebtedness for borrowed money that,
individually or in the aggregate, are material to the Company;

 

(j)            except
in the ordinary course of business, changed its collection procedures or its
payment incentives for customers;

 

(k)           amended
its Certificate of Incorporation or By-laws (except that the Company filed a
Certificate of Amendment of its Certificate of Incorporation on November 9,
2005

 

19

 

and the Company’s Board of Directors has determined to amend the Bylaws
in the manner set forth in the Stockholders Agreement); or

 

(l)            whether
in writing or otherwise, agreed to take any action in the future that is
otherwise prohibited to be taken pursuant to this Section 4.14.

 

4.15         Transactions with Affiliates.  Other than services of employees and
directors of the Company, there are no services currently being provided to the
Company by any Stockholder or other affiliate of the Company that are material
to the Company.

 

4.16         Insurance.  Schedule 4.16 of the Company
Disclosure Letter contains a list and brief description of all policies or
binders of insurance held by or on behalf of the Company, or providing coverage
for any of the properties, assets or operations of the Company or otherwise
used in connection with the Company Business (in each case specifying the
insurer, the amount of coverage and the type of insurance).

 

4.17         Environmental Matters.

 

(a)           The
Company has not engaged in any operation upon any real property leased by the
Company on which any Hazardous Materials (as hereinafter defined) have been
handled, manufactured, treated, stored, used or generated by the Company,
except for such quantities handled, manufactured, treated, stored, used or
generated in connection with the normal operation and maintenance of such
property in the ordinary course of the business of the Company in material
compliance with applicable Laws and except for such activities as would not,
individually or in the aggregate, have a Material Adverse Effect.

 

(b)           The
Company is not a party to any litigation in which it is alleged, and the
Company has not received express notice of or an express request for
information related to any allegation or investigation of the possibility, that
it or any of its assets is subject to any

 

20

 

liability, clean-up or other obligation arising out of or relating to
any discharge, or the storage, handling or disposal, of any Hazardous Material,
except where any such allegations or investigations would not, individually or
in the aggregate, have a Material Adverse Effect.

 

(c)           The
Company is in compliance with all Environmental Laws (as hereinafter defined)
relating to its leased real properties, except where non-compliance with such
laws would not be reasonably likely to have a Material Adverse Effect.  The Company has not received any unresolved
written or oral communication, relating to any of its leased real property,
from any Governmental Authority alleging that the Company is not in such full
compliance and, to the Stockholder Representatives’ knowledge, there are no
circumstances that are reasonably likely to prevent or interfere with such compliance
in the future, except such as would not, individually or in the aggregate, have
a Material Adverse Effect.

 

(d)           “Environmental
Laws” means all federal, state, local and foreign laws and regulations
relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata), including, without limitation, laws and
regulations relating to emissions, discharges, disposal, releases or threatened
releases of Hazardous Materials (as hereinafter defined), or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.

 

(e)           “Hazardous
Materials” means any material defined as a “hazardous substance” under Section 101
of the Comprehensive Environmental Response, Compensation and Liability Act, as
amended.

 

4.18         Taxes.   Except as set forth on Schedule 4.18
of the Company Disclosure Letter:

 

21

 

(a)           The
Company has filed all material Tax Returns that it was required to file under
applicable laws and regulations. All such Tax Returns were correct and complete
in all material respects.  All material
Taxes shown to be due and owing by the Company on any such Tax Return have been
paid.  To the Stockholder Representatives’
knowledge, no claim has ever been made by an authority in a jurisdiction where
the Company does not file Tax Returns that it is or may be subject to taxation
by that jurisdiction.  There are no Liens
for Taxes (other than Taxes not yet due and payable) upon any of the assets of
the Company.

 

(b)           The Company has
withheld and paid all Taxes required to have been withheld and paid in
connection with any amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party, other than those
employment-related Taxes associated with the payment of the Recognition Bonuses.

 

(c)           No foreign,
federal, state, or local tax audits or administrative or judicial Tax
proceedings are pending or being conducted with respect to the Company.  The Company has not received from any
foreign, federal, state, or local taxing authority any (i) written notice
indicating an intent to open an audit or other review, (ii) written
request for information related to Tax matters or (iii) written notice of
deficiency or proposed adjustment for any amount of Tax proposed, asserted, or
assessed by any taxing authority against the Company.

 

(d)           Schedule 4.18 of the Company
Disclosure Letter lists all federal, state, local, and foreign Tax
Returns filed with respect to the Company for the past three fiscal years and
indicates those Tax Returns that have been audited or currently are the subject
of audit. The Stockholders have delivered to Purchaser correct and complete
copies of all Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by the Company for the past three fiscal years.

 

22

 

(e)           The Company has
not waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency.

 

(f)            The Company is
not a United States real property holding corporation within the meaning of
Code §897(c)(2) during the applicable period specified in Code
§897(c)(1)(A)(ii).

 

(g)           The Company has
no liability for the material Taxes of any Person (as defined in Section 9.03)
under Treasury Regulations (“Regulations”) §1.1502-6 (or any similar provision
of state, local, or foreign law), as a transferee or successor, by contract, or
otherwise.

 

(h)           The unpaid
material Taxes of the Company do not exceed the reserve for Tax liability
(rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) included on the Company’s books and
records.

 

(i)            The Company has
not distributed stock of another Person, and has not had its stock distributed
by another Person, in a transaction that was purported or intended to be
governed in whole or in part by Code §355.

 

(j)            The
Company has not participated in a reportable transaction within the meaning of
Regulations §1.6011-4 (or any predecessor provision thereto).

 

4.19         Sufficiency of Assets.  The
material tangible properties and assets currently used by the Company in the
conduct of its business (including, without limitation, the material tangible
assets reflected on the Financial Statements) are in good operating condition
(subject to normal wear and tear), and are adequate and sufficient for the
operation of the Company Business as now conducted.  All of the material
tangible assets of the Company used to conduct its business as of the date
hereof are owned or leased by it.

 

23

 

4.20         Real Estate Leases.

 

(a)           Schedule 4.20
of the Company Disclosure Letter contains a complete and correct list of all
Real Estate Leases.

 

(b)           To
the Stockholder Representatives’ knowledge, there is no default by any other
party under any Real Estate Lease and, except as set forth on Schedule 4.20
of the Company Disclosure Letter, to the Stockholder Representatives’
knowledge, there is no fact or circumstance that, with the giving of notice or
lapse of time or both, would constitute a default thereunder.

 

(c)           The
Company does not own, and has never owned, any real property.

 

4.21         Customers.  Schedule 4.21 of the Company
Disclosure Letter sets forth for the year ended December 31, 2004 and the
nine-month period ended September 30, 2005, the top ten (10) customers
(by revenues) of the Company Business.

 

4.22         Leads.

 

(a)           Schedule 4.22(a) of
the Company Disclosure Letter sets forth for the year ended December 31,
2004 and the nine-month period ended September 30, 2005, the approximate
number of New Car Leads sold by the Company Business during each month during
such period.  For purposes of this Section 4.22(a),
“New Car Leads” shall mean a unique inquiry by a customer with regard to
the purchase of a new car for which the Company receives cash consideration.

 

(b)           With
respect to those agreements listed on Schedule 4.22(b) of the Company
Disclosure Letter, the Company has not resold leads (as such term may be
defined in such agreements) to any parties in material violation of the terms
of such agreements.

 

4.23         Prepaid Revenues.  The Company has not collected or received any prepaid
revenues with respect to the Company Business.

 

24

 

4.24         No Debt or Unpaid Dividends.  As of the date hereof, the Company does not
have outstanding any indebtedness for borrowed money and has not declared any
dividends with respect to its outstanding shares of capital stock that have not
been paid out prior to the date hereof.

 

4.25         Recognition Bonuses.  The aggregate amount of the Recognition Bonuses (as
defined in Section 6.12) have been fully accrued as a liability of the
Company prior to the Closing Date.  All
Recognition Payments have been determined by the Board of Directors of the
Company to represent discretionary payments to be paid to certain designated
employees in recognition of services provided to the Company prior to the date
hereof.

 

ARTICLE V

 

REPRESENTATIONS
AND WARRANTIES OF PURCHASER

 

Purchaser represents and
warrants to the Company and the Stockholders as follows:

 

5.01         Organization of Purchaser.  Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the full corporate power and authority to enter into this Agreement and
the other agreements and instruments referred to in this Agreement that
Purchaser is executing and delivering (the “Purchaser’s Additional
Agreements,” and, together with the Company’s Additional Agreements, the “Additional
Agreements”), and to carry out the transactions contemplated hereby and
thereby.

 

5.02         Authorization of Agreement.  The execution, delivery and performance by
Purchaser of this Agreement and Purchaser’s Additional Agreements and the
consummation by Purchaser of the transactions contemplated hereby and thereby,
have been

 

25

 

duly authorized by all necessary corporate action of Purchaser.  This Agreement and Purchaser’s Additional
Agreements have been duly executed and delivered by Purchaser and constitute
legal, valid and binding obligations of Purchaser, enforceable in accordance
with their respective terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting the rights of creditors generally and by general
equitable principles (regardless of whether such enforceability is considered
in a proceeding in equity or at law) and by an implied covenant of good faith
and fair dealing.

 

5.03         No Conflicts.  Neither the execution, delivery or
performance of this Agreement or any of Purchaser’s Additional Agreements, nor
the consummation by Purchaser of the transactions contemplated hereby or
thereby, nor compliance by Purchaser with the terms and provisions hereof or
thereof will: (i) conflict with the Certificate of Incorporation or Bylaws
of Purchaser; (ii) conflict with, or result in the breach or termination
of, or constitute a default (or with notice or lapse of time or both,
constitute a default) under or result in the termination or suspension of, or
accelerate the performance required by any of the terms, conditions or
provisions of, any note, bond, mortgage, indenture, license, lease, agreement,
commitment or other instrument to which Purchaser is a party or by which
Purchaser is bound; or (iii) constitute a violation by Purchaser of any
Law of any Governmental Authority applicable to Purchaser.

 

5.04         No Consents.  No order, permission, consent, approval,
license, authorization, registration, or validation of, or filing with, or
notice to, or exemption by, any Governmental Authority is required to
authorize, or is required in connection with, the execution, delivery or
performance by Purchaser of this Agreement or any of Purchaser’s Additional
Agreements.

 

26

 

5.05         Litigation.             There
are no actions, suits, inquiries, proceedings or investigations pending, or, to
Purchaser’s knowledge, threatened before any court or other Governmental
Authority against Purchaser relating to the transactions contemplated by this
Agreement or Purchaser’s Additional Agreements.

 

5.06         No Brokers.  Purchaser has not incurred any obligation or
liability, contingent or otherwise, for brokers’ or finders’ fees or
commissions in connection with the transactions contemplated by this Agreement.

 

5.07         Investment Purpose.

 

(a)           Purchaser
is an “accredited investor” (as defined in Rule 501 of the 1933 Act)
purchasing the Shares for its own account for investment purposes and not with
a view toward distribution or re-sale in violation of the 1933 Act or any other
applicable securities laws, rules or regulations.

 

(b)           Purchaser
acknowledges that none of the Shares have been registered under federal law or
qualified under state law, but rather have been offered for sale in accordance
with certain exemptions under applicable law, and that the Shares may not be
resold by it unless they are subsequently registered or qualified under
applicable law, or an exemption from such registration and qualification is
then available.

 

5.08         Purchaser’s Examination.  Purchaser acknowledges and agrees that no
representation or warranty has been or is being made by the Company or the
Stockholders except as expressly set forth in this Agreement and no
representation or warranty is being made by the Company or the Stockholders as
to the future operations, budgets, results or prospects of the Company.

 

27

 

ARTICLE VI

 

FURTHER
AGREEMENTS OF THE PARTIES

 

6.01         Expenses.  Purchaser, the Company and the Stockholders
shall bear their own respective expenses incurred in connection with the
negotiation and preparation of this Agreement, the Additional Agreements and
the consummation and performance of the transactions contemplated hereby and thereby
and in connection with all obligations required to be performed by each of them
under this Agreement and the Additional Agreements (collectively, the “Transaction
Expenses”), except as otherwise may be provided herein.  All financial advisory, brokerage and legal
fees of the Company incurred in connection with the negotiation and preparation
of this Agreement, the Additional Agreements and the consummation and
performance of the transactions contemplated hereby and thereby shall be paid
by the Stockholder Representatives, on behalf of the Stockholders, from the
Purchase Price as set forth in Schedule 2.03 and shall not be paid
by the Company.

 

28

 

6.02         Employees.  Following the Effective Time, the Company shall
employ each employee employed by the Company immediately prior to the Effective
Time (each, a “Company Employee,” and collectively, the “Company
Employees”) at no less than the wage or salary in effect immediately prior
to the Closing Date.  The Stockholders shall
be solely responsible for all bonuses for all employees of the Company employed
as of the Closing Date for the year ended December 31, 2005 (other than
bonuses for 2005 actually paid prior to the date hereof, if any) (collectively,
the “2005 Employee Bonuses”) and Primedia shall have no obligation with
respect to the 2005 Employee Bonuses. The Stockholders shall be solely
responsible to fund the aggregate amount for the 2005 Employee Bonuses (the “Bonus
Funds”).  The Company will pay out
the Bonus Funds to the Company Employees according to the instructions of the
Stockholder Representatives.  The Bonus
Funds are incremental to the Working Capital Requirement (as defined in Section 6.10)
and any amounts retained by the Company (or contributed by the Stockholders)
for the Recognition Payments (as defined in Section 6.12).

 

6.03         Further Assurances.  Each of Purchaser and each Stockholder shall
execute such documents and other papers and take such further actions as the
other party may reasonably request in order to carry out the provisions hereof
and the transactions contemplated hereby, including, without limitation, to
obtain any consents from any party to any Material Contract which is required
in connection with the transactions contemplated hereby, provided that such
obligation shall not require expenditure of money by any Stockholder.

 

6.04         Correspondence.  Each party will promptly remit to the other
party or the Company any correspondence received by it which properly belongs
to any other party.

 

29

 

6.05         No Disclosure; Press Releases.

 

(a)           Each
of Purchaser and each Stockholder agrees that it shall not make any public
announcement or issue any press release in connection with the transactions
contemplated hereby, except (i) as provided in Section 6.05(b) or (ii) if
Purchaser or any Stockholder (x) is ordered to make such disclosure by a court
of competent jurisdiction or (y) is advised by legal counsel that such
disclosure is required under applicable Laws or the rules and regulations of
any stock exchange upon which Purchaser’s securities are traded, in which case
the party making the required disclosure shall inform the other party as to the
timing and contents of such disclosure prior to making such disclosure.

 

(b)           Each of
Purchaser and each Stockholder shall not issue any press release in connection
with the transactions contemplated hereby, without prior approval of the other
party.  Any subsequent press release or
public announcement made by either party hereto after approval of a press
release shall be consistent with (including in scope) the mutually agreed upon
press release or releases.

 

6.06         Transfer Taxes.  The Stockholders, on the one hand, and
Purchaser, on the other hand, shall each pay half of any state or local sales,
transfer or like taxes payable in connection with the transactions contemplated
pursuant to this Agreement, including, without limitation, any stock transfer
or stamp Taxes in respect of the transfer of the Shares.

 

6.07         Guarantees, Joint Obligations.  To the extent that (a) any Stockholder
is a guarantor of any obligations of the Company to any third party, including,
without limitation, obligations under any equipment lease or contract, or
(b) any Stockholder is jointly liable with the Company on any contract, the
Company agrees that it shall promptly use commercially reasonable efforts
(without any expenditure of monies) to have the Stockholders released from all
such guarantees.

 

30

 

6.08         Employment Agreements.  Concurrently with their execution of this
Agreement, the individuals set forth on Schedule 6.08 shall enter
into employment agreements (collectively, the “Employment Agreements”)
with the Company.

 

6.09         Record Retention.  Gary Fudge, Joshua Speyer and Jason Phillips
(the “Founders”) shall maintain any agreements, documents, books, records and
files relating to the Company (collectively, “Records”) in their possession for
a period of six (6) years following the Closing Date, or, in the case of
Records related to Taxes, until the expiration of the applicable statute of
limitations; provided that if any Founder intends to destroy any Records after
such time period, such Founder shall first offer such Records to the Purchaser
prior to any such destruction.

 

6.10         Working Capital Funds.  On the Closing Date, the Company shall retain
at least $1,300,000 on hand to meet the Company’s working capital obligations,
which amount shall be increased to at least a total of $1,500,000 (the “Working
Capital Requirement”) within three (3) days of the date hereof, and
which Working Capital Requirement is a good faith estimate of the expenses of
the Company for the 30-day period following the Closing Date and the Company’s
current obligations.

 

6.11         Non-Compete Agreements.

 

(a)           For
a period of three (3) years from the date hereof, each of Craig Buccola,
Ann Wagner and Todd Busby agrees that he or she shall not serve as an employee,
consultant, officer, director, lender, manager or member of any company or
other entity, or act as a sole proprietor of any company or entity, or own or
acquire or operate any company or entity that engages in a business that
competes, directly or indirectly, with the business of the Company as currently
conducted (each a “Competing Entity”).

 

31

 

(b)           For
a period of five (5) years from the date hereof, Gary Fudge agrees that he
shall not serve as an employee, consultant, officer, director, lender, manager
or member of any Competing Entity, or act as a sole proprietor of any Competing
Entity or own, acquire or operate any Competing Entity.

 

(c)           Each
of Joshua Speyer and Jason Phillips agrees that, from the period commencing on
the date hereof and ending three (3) years from the earlier of
(i) his termination of employment from the Company or (ii) the Select
Call Closing Date, the Call Closing Date or the Put Closing Date, as applicable
(as such terms are defined in the Stockholders Agreement), he shall not serve
as an employee, consultant, officer, director, lender, manager or member of any
company or entity, or act as a sole proprietor of any company or entity or own,
acquire or operate any company or entity that engages in a business that
competes, directly or indirectly, with the business of the Company as currently
conducted or conducted prior to the earlier of his termination of employment or
the Select Call Closing Date, the Call Closing Date or the Put Closing Date, as
applicable.

 

6.12         Recognition Bonuses.  Schedule 6.12 sets forth the amount and date of
certain payments to be made to certain employees of the Company as determined
by the Board of Directors prior to the date hereof (each a “Recognition
Payment”).  To the extent any amounts
need to be contributed to the Company to ensure the full funding of such Recognition
Payments, the Founders shall have sole responsibility to fund such additional
amounts, including such amounts necessary for any employment-related Taxes
associated with such payments, and shall provide funds to the Company no later
than 10 calendar days before the date of payment.   If the Founders fail to contribute the
requisite amount of funds necessary to pay the Recognition Payments, any
dividends payable to the Founders pursuant to Section 3.1 of the
Stockholders

 

32

 

Agreement shall be withheld until such funds are
provided in full.   The Company shall pay
the Recognition Payments, in such amounts and on such dates as has been
previously designated by the Board of Directors of the Company, to each
designated person regardless of whether such person continues to be employed by
the Company and regardless of such person’s title, duties or performance at the
Company after the date hereof.  
Notwithstanding anything herein, at no time shall Primedia have
any obligation with respect to any Recognition Payments, including, without
limitation, the funding or payment thereof.

 

ARTICLE VII

 

CLOSING
DELIVERIES

 

7.01         Documents to be Delivered by the Stockholders.  Concurrently with the execution of this Agreement,
the Stockholders and the Company shall deliver to Purchaser the following:

 

(a)           certificates
representing all of the Shares;

 

(b)           (i) a
copy of resolutions adopted by the Board of Directors of the Company
authorizing the execution, delivery and performance of this Agreement and the
Company’s Additional Agreements as applicable, and (ii) a certificate of a
duly authorized officer of the Company, dated the Closing Date, stating that
such resolutions were duly adopted and are in full force and effect at such
date, and setting forth the incumbency of each person executing this Agreement,
or any document required by this Section 7.01 on behalf of the Company;

 

(c)           the
Employment Agreements;

 

33

 

(d)           the
Contribution Agreement dated as of the date hereof between the Company and
Purchaser relating to the contribution of Purchaser’s online automotive assets
to the Company (the “Contribution Agreement”);

 

(e)           the
Stockholders Agreement dated as of the date hereof between the Company,
Purchaser and the stockholders and optionholders of the Company relating to
certain rights and obligations of such parties with respect to their interest
in the Company (the “Stockholders Agreement”);

 

(f)            the
Shared Services Agreement dated as of the date hereof between the Company and
Purchaser (the “Shared Services Agreement”);

 

(g)           the
License Agreement dated as of the date hereof between the Company and Purchaser
(the “License Agreement”); and

 

(h)           a certificate duly executed by an executive officer of the Company and a
form of notice to the Internal Revenue Service in accordance with the
requirements of Regulations §1.897-2(h)(2) and
in a form reasonably satisfactory to Purchaser, dated the Closing Date.

 

7.02         Documents to be Delivered by Purchaser.  Concurrently with the execution of this
Agreement, Purchaser shall deliver to the Stockholder Representatives the
following:

 

(a)           (i) a
copy of resolutions adopted by the Board of Directors (or executive committee
thereof) of Purchaser authorizing the execution, delivery and performance of
this Agreement and the Purchaser’s Additional Agreements as appropriate, and
(ii) a certificate of a duly authorized officer of Purchaser, dated the
Closing Date, stating that such resolutions were duly adopted and are in full
force and effect at such date, and setting forth the

 

34

 

incumbency of each person executing this Agreement, or any document
required by this Section 7.02 on behalf of Purchaser;

 

(b)           the
Employment Agreements;

 

(c)           the
Contribution Agreement;

 

(d)           the
Stockholders Agreement;

 

(e)           the
Shared Services Agreement; and

 

(f)            the
License Agreement;

 

7.03         Funds to be Delivered.  Concurrently with the execution of this
Agreement, Purchaser shall wire to the Stockholder Representatives the Base
Purchase Price.

 

ARTICLE VIII

 

INDEMNIFICATION

 

8.01         Survival.  The covenants, representations and warranties
of the Company and the Stockholders, on the one hand, and Purchaser, on the
other hand, shall survive the Closing Date until the twelve (12) month
anniversary of the Closing Date, other than (i) the representations and
warranties in Sections 4.01 (Organization of the Company), 4.02 (Capitalization
of Company and Title to Shares), 4.03 (Authorization of Agreement), 4.17
(Environmental Matters), 5.01 (Organization of Purchaser) and 5.02
(Authorization of Agreement), all of which shall survive indefinitely,
(ii) the representations and warranties in Section 4.18 (Taxes),
which shall survive until the expiration of the applicable statute of
limitations, (iii) any covenants and agreements on the part of the
Company, Stockholders or Purchaser, as applicable, set forth herein to be
performed

 

35

 

at and after the Closing Date and having no specified term shall
survive indefinitely and (iv) any covenants and agreements on the part of
the Company, Stockholders or Purchaser, as applicable, set forth herein to be
performed at and after the Closing Date and having a specified term shall
survive until the end of such specified term. 
The expiration of any covenant, representation or warranty shall have no
effect on the continued validity of any claim if written notice was given in
accordance with this Article VIII before the date of such expiration.

 

8.02         Indemnification by the Stockholders.

 

(a)           Subject
to the provisions of this Article VIII, the Stockholders, jointly and
severally, shall indemnify, defend and hold harmless Purchaser, Purchaser’s
parent, subsidiaries and other affiliates (other than the Company) and their
respective officers, directors, employees, agents and representatives from,
against and in respect of any and all damages, losses, charges, claims,
penalties, liabilities, demands, actions, suits, costs and expenses (including,
without limitation, all fines, interest, amounts paid in settlement and
reasonable legal fees and expenses) (collectively, the “Claims”), that
arise from or relate or are attributable to (i) any breach by the Company
or the Stockholders of any representation or warranty made by the Company and
the Stockholders, in each case, under Article IV hereof, (ii) any
breach of any covenant or agreement on the part of the Company or any of the
Stockholders set forth in this Agreement, (iii) any liability or
obligation to brokers retained by the Company in connection with the
transactions contemplated by this Agreement or (iv) any liability or
obligation to Stockholders or the former stockholders of the Company listed on Schedule 2.02
relating to the distribution of the Purchase Price by the Stockholder
Representatives.

 

(b)           Notwithstanding
the foregoing, no Stockholder shall have any liability to indemnify any
Indemnitee on account of any Claim or series of related Claims pursuant to clauses
(i) and (ii) of Section 8.02(a) (other than representations
made under Sections 4.02 (Capitalization of Company and Title to Shares), as to
which the threshold amount set forth in

 

36

 

this Section 8.02(b) shall not apply) unless and until, and
only to the extent that, the aggregate liability of the Stockholders in respect
of such Claims, when aggregated with the liability in respect of all such other
Claims made pursuant to clauses (i) and (ii) of Section 8.02(a),
amounts to more than $1,000,000, whereupon the Stockholders shall be liable to
pay such amounts due pursuant to clauses (i) and (ii) of
Section 8.02(a) only in excess thereof.

 

(c)           The
maximum aggregate liability of Stockholders for any and all Claims under
clauses (i) and (ii) of Section 8.02(a) shall not exceed
$15,000,000 in the aggregate (the “Cap”); provided that the maximum
aggregate liability of each individual Stockholder for any and all Claims under
clauses (i) and (ii) of Section 8.02(a) (other
representations made under Sections 4.02 (Capitalization of Company and Title
to Shares), as to which the limitation set forth in this
Section 8.02(c) shall not apply) shall not exceed the product of the
Cap multiplied by such Stockholders’ percentage interest in the Company set
forth in Schedule 8.02 hereto.

 

(d)           In
addition to the foregoing, the Stockholders, jointly and severally, shall
indemnify, defend and hold harmless Purchaser, Purchaser’s parent, subsidiaries
and other affiliates (other than the Company) from and against any and all
Claims incurred in connection with or arising out of (a) any Taxes of any
of the Company with respect to any Tax period or portion thereof ending on or
before the Closing Date (or for any Tax year beginning before and ending after
the Closing Date, to the extent allocable (as determined in the following
sentence) to the portion of such period beginning before and ending on the
Closing Date), and (b) the unpaid Taxes of any Person (other than the
Company) under Treasury regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract, or otherwise.  For purposes of
the preceding sentence, in the case of any Taxes that are imposed on a periodic
basis and are payable for a Tax period that includes (but does not end on) the
Closing

 

37

 

Date, the portion of such Tax that relates to the portion of such Tax
period ending on the Closing Date shall (x) in the case of any Taxes other than
Taxes based upon or related to income or receipts, be deemed to be the amount
of such Tax for the entire Tax period multiplied by a fraction the numerator of
which is the number of days in the Tax period ending on the Closing Date and
the denominator of which is the number of days in the entire Tax period, and
(y) in the case of any Tax based upon or related to income or receipts, be
deemed equal to the amount which would be payable if the relevant Tax period
ended on the Closing Date.

 

(e)           In
addition to any other rights Purchaser may have, Purchaser shall be permitted
to set off against any payments to be made by Purchaser under this Agreement or
the Stockholders Agreement any indemnification payments that the Stockholders
are obligated to pay to Purchaser pursuant to any final adjudication of any
claims hereunder by a court of competent jurisdiction.

 

8.03         Indemnification by Purchaser.

 

(a)           Subject to
the provisions of this Article VIII, Purchaser shall indemnify, defend and
hold harmless the Stockholders and their respective agents and representatives
from, against and in respect of any and all Claims that arise from or relate or
are attributable to (i) any breach by Purchaser of any representation or
warranty made by Purchaser, in each case, under Article V hereof,
(ii) any breach of any covenant or agreement on the part of Purchaser set
forth in this Agreement or in any of Purchaser’s Additional Agreements and
(iii) any liability or obligation to brokers retained by Purchaser in connection
with the transactions contemplated by this Agreement.

 

(b)           The
maximum aggregate liability of Purchaser for any and all Claims under clause
(i) of Section 8.03(a) shall not exceed $15,000,000 in the
aggregate.

 

38

 

8.04         Notice to the Indemnitor.  Promptly after the assertion of any claim by
a third party or occurrence of any event which may give rise to a claim for
indemnification from an indemnifying party (the “Indemnitor”) under this
Article VIII, an indemnified party (the “Indemnitee”) shall notify
the Indemnitor in writing of such claim. 
In any case where one or more of the Indemnitors is a Stockholder, the
notification shall be made to the Stockholder Representatives.  The Indemnitor shall then have thirty (30)
days to advise the Indemnitee whether the Indemnitor accepts the defense of
such claim and the Indemnitor shall have no obligation to the Indemnitee for
legal fees incurred by the Indemnitee before or after the date of any
assumption of the defense by the Indemnitor. 
The Indemnitor shall in no way be liable to the Indemnitee for any claim
not presented to the Indemnitor by the Indemnitee for a defense within thirty
(30) days of the claim being presented in writing to the Indemnitee by the
party making the claim.

 

8.05         Right of Parties to Settle or Defend.  If the Indemnitor determines to accept the defense of such claim, the Indemnitee shall have
the right to be represented by its own counsel at its own expense, its
participation to be subject to reasonable direction of the Indemnitor, and the
Indemnitee shall provide all requested waivers and authorities for the
Indemnitor to act on behalf of the Indemnitee. 
If the Indemnitor fails to undertake the defense of or settle or pay any
such third party claim within thirty (30) days after the Indemnitee has given
written notice to the Indemnitor of the claim, or if the Indemnitor, after
having given such notification to the Indemnitee, fails within thirty (30) days
to defend, settle or pay such claim, then the Indemnitee may take any and all
necessary action to dispose of such claim; provided,  however,
that in no event shall the Indemnitee settle such claim without the prior
consent of the Indemnitor.

 

39

 

8.06         Settlement
Proposals.

 

(a)           In
the event the Indemnitee desires to settle any third-party claim the defense of
which has not been assumed by the Indemnitor, the Indemnitee shall advise the
Indemnitor in writing of the amount it proposes to pay in settlement thereof
(the “Proposed Settlement”).  The
Indemnitor shall have twenty (20) days after the Indemnitor’s receipt of the
notice of the Proposed Settlement to advise the Indemnitee whether it accepts
the Proposed Settlement.  If the
Indemnitor notifies the Indemnitee that it accepts the Proposed Settlement or
does not deliver such notice within twenty (20) days after receipt of notice
from the Indemnitee, the Indemnitee may offer the Proposed Settlement to the
third party making the claim.  If, after
approval by the Indemnitor, the Proposed Settlement is not accepted by the
party making such claim, any new Proposed Settlement figure which the
Indemnitee may wish to present to the party making such claim shall again first
be presented to the Indemnitor in accordance with the provisions of this
Section 8.06.

 

(b)           Except as
provided in the immediately following sentence, the Indemnitor may settle such
third-party claim that it has agreed to accept the defense of on any terms
which it may deem reasonable.  In the
event the Indemnitor desires to settle such third-party claim, the Indemnitor
shall not, without the Indemnitee’s prior written consent, (i) settle or
compromise such proceeding, claim or demand, or consent to the entry of any
judgment which does not include as an unconditional term thereof the delivery
by the claimant or plaintiff to the Indemnitee of a written release from all
liability in respect of such proceeding, claim or demand or (ii) settle or
compromise any such proceeding, claim or demand, in any manner that may
materially adversely affect the Indemnitee.

 

40

 

8.07         Exclusive
Remedy; No Special Damages.

 

(a)           The
indemnification obligations of this Article VIII shall be the sole and
exclusive remedy for all claims for breach of any representation, warranty,
covenant or agreement under this Agreement, and no other remedy shall be had in
contract, tort or otherwise.

 

(b)           No
Indemnitee shall have any right to seek indemnification hereunder, for any
Losses for consequential, incidental, special, exemplary, punitive, indirect or
multiple damages, including lost profits, connected with or resulting from any
breach of this Agreement, or actions undertaken in connection with or related
hereto, including any such Losses which are based upon breach of contract,
tort, breach of warranty, strict liability, statute, operation of law or any
other theory of recovery.

 

8.08         Reimbursement.  At the time the amount of any liability on
the part of the Indemnitor under this Article VIII is determined (which,
in the case of payments to third persons, shall be the earlier of (i) the
date of such payments by the Indemnitee or (ii) the date that a court of
competent jurisdiction shall enter a final judgment, order or decree (after
exhaustion of appeal rights) establishing such liability), the Indemnitor
shall, within thirty (30) days after receipt of notice from the Indemnitee, pay
to the Indemnitee the amount of the indemnity claim.

 

8.09         Certain Adjustments.  The parties
agree that any indemnification payments made pursuant to this Agreement shall
be treated for Tax purposes as an adjustment to the Purchase Price, unless
otherwise required by applicable law. 
Such payments shall not be reduced to take account of any actual Tax
benefits realized by the Purchaser arising from the incurrence or payment of
the indemnifiable Claim by the Indemnitor. 
In addition, such payments shall be net of any amounts actually
recovered by the Indemnitee under insurance policies with respect to such
payments.

 

41

 

ARTICLE IX

 

TAX
MATTERS

 

9.01         Tax Returns.

 

(a)           The
Company shall prepare or cause to be prepared and file or cause to be filed all
Tax Returns of the Company for all Tax periods ending on or prior to the
Closing Date which are filed after the Closing Date.  The Company shall permit the Stockholder
Representatives to review and comment on each such Tax Return described in the
preceding sentence prior to filing and shall make such revisions to such Tax
Returns as are reasonably requested by the Stockholder Representatives.  No such Tax Return shall be filed without the
prior consent of the Stockholder Representatives, which consent shall not be unreasonably
withheld or delayed.

 

(b)           The
Company shall prepare or cause to be prepared and file or cause to be filed any
Tax Returns of any of the Company for Tax periods which begin before the
Closing Date and end after the Closing Date. 
The Company shall permit the Stockholder Representatives to review and
comment on each such Tax Return described in the preceding sentence prior to
filing and shall make such revisions to such Tax Returns as are reasonably
requested by the Stockholder Representatives. 
No such Tax Return shall be filed without the prior consent of the
Stockholder Representatives, which consent shall not be unreasonably withheld
or delayed.

 

(c)           On
or after the Closing Date, neither Purchaser nor the Company or any
Stockholder, respectively, shall amend any Tax Return, consent to the waiver or
extension of the statute of limitations relating to Taxes of the Company, take
any Tax position on any Tax Return, or compromise or settle any Tax liability,
if such action could have the effect of increasing the Tax liability or
reducing any Tax asset of the Stockholders or Purchaser, respectively, in each
case, without the other party’s written consent, which consent shall not be
unreasonably withheld

 

42

 

or delayed.

 

9.02         Cooperation.  The Stockholders, the Company and Purchaser
shall reasonably cooperate, and shall cause their respective affiliates,
officers, employees, agents, auditors and representatives reasonably to
cooperate, in preparing and filing all Tax Returns, including maintaining and
making available to each other all records necessary in connection with Taxes
and in resolving all disputes and audits relating to Taxes with respect to all
Taxable periods.

 

9.03         Definitions.  For purposes of this Agreement,

 

(a)           “Tax”
or “Taxes” means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code §59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, ad
valorem, sales, use, transfer, registration, value added, alternative or add-on
minimum, abandoned or unclaimed property subject to the escheatment laws of any
state, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.

 

(b)           “Person”
means any individual, corporation, limited or general partnership, limited
liability company, limited liability partnership, trust, association, joint
venture, Governmental Entity and other entity and group (which term shall
include a “group” as such term is defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended).

 

(c)           “Tax
Return” shall mean any return, report, statement, election, information
return or other document (including schedules or any related or supporting
information), and any amendment thereof, 
filed or required to be filed with any Governmental

 

43

 

Authority in connection with the determination, assessment or
collection of any Tax or the administration of any Laws relating to any Tax.

 

ARTICLE X

 

MISCELLANEOUS

 

10.01       Entire Agreement.  This Agreement (together with the Schedules
and Exhibits hereto and the Additional Agreements) contains, and is intended
as, a complete statement of all of the terms of the arrangements between the
parties with respect to the matters provided for herein, and supersedes any
previous agreements and understandings between the parties with respect to
those matters; provided, however, that the Nondisclosure Agreement dated
June 14, 2005 (the “Confidentiality Agreement”) shall remain in
full force and effect according to its terms.

 

10.02       Governing Law; Jurisdiction.  This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the state of New
York.  Purchaser and each Stockholder
hereby irrevocably submit to the jurisdiction of any United States Federal
Court (or, if such court shall not have jurisdiction, any New York State Court)
sitting in New York City (and any appellate court therefrom) over any action or
proceeding arising out of or relating in any manner (whether in contract, tort
or otherwise) to this Agreement.  Each of
Purchaser and each Stockholder hereby irrevocably waives any objection that it
may have to venue and the defense of an inconvenient forum to the maintenance
of such action or proceeding.

 

10.03       Amendment; Waiver.  No provision of this Agreement may be amended
or modified except by an instrument or instruments in writing signed by the
parties hereto. Any party may waive compliance by another with any of the
provisions of this Agreement.  No waiver
of any provision hereof shall be construed as a waiver of any other

 

44

 

provision or subsequent breach. 
Any waiver must be in writing. 
The failure of any party hereto to enforce at any time any provision
hereof shall not be construed to be a waiver of such provision or to affect in
any way the validity hereof or any part hereof or the right of any party
thereafter to enforce each and every such provision.

 

10.04       Notices.  All notices and other communications under
this Agreement shall be in writing and shall be deemed given when delivered
personally, mailed by registered mail, return receipt requested, sent by
documented overnight delivery service or, to the extent receipt is confirmed,
by facsimile to the parties at the following addresses (or to such other
address as a party may have specified by notice given to the other party
pursuant to this provision):

 

If to the Purchaser, to
it at:

 

PRIMEDIA, Inc.

745 Fifth Avenue

New York, NY  10151

Attention:  Sheila Spence

Phone:      (212) 745-0100

Fax:          (212) 745-0645

 

With a copy to:

 

PRIMEDIA, Inc.

745 Fifth Avenue

New York, NY  10151

Attention:  General Counsel

Phone:      (212)
745-0100

Fax:          (212) 745-0131

 

45

 

If to Stockholders, to
the Stockholder Representatives at:

 

Automotive.com, Inc.

230 Commerce

Suite 290

Irvine, CA  92602

Attention: Gary Fudge,
Jason Phillips and Joshua Speyer

Phone:     (714) 389-5000

Fax:         (714) 389-5065

 

With a copy to:

 

Latham & Watkins
LLP

650 Town Center Drive

Suite 2000

Costa Mesa, CA 92626

Attention:  R. Scott Shean

Phone:      (714) 540-1235

Fax:          (714) 755-8290

 

10.05       Separability.  If any provision of this Agreement is held by
any court of competent jurisdiction to be illegal, invalid or unenforceable,
such provision shall be of no force and effect, but the illegality, invalidity
or unenforceability shall have no effect upon and shall not impair the
enforceability of any other provision of this Agreement.

 

10.06       Assignment and Binding Effect.  Neither party hereto may assign any of its
rights or delegate any of its duties under this Agreement without the prior
written consent of the other party hereto. 
All of the terms and provisions of this Agreement shall be binding on,
and shall inure to the benefit of, the respective legal successors and
permitted assigns of the parties.

 

10.07       No Benefit to Others.  The representations, warranties, covenants
and agreements contained in this Agreement and the Additional Agreements are
for the sole benefit of the parties hereto and thereto and their respective
successors and permitted assigns and shall not be construed as conferring and
are not intended to confer any rights on any other persons;

 

46

 

provided, however, that the Company’s employees are intended
third-party beneficiaries of Purchaser’s obligations in Section 6.02
hereof.

 

10.08       Counterparts.  This Agreement may be executed by facsimile
in two (2) or more counterparts, each of which shall be deemed an
original, and each party thereto may become a party hereto by executing a
counterpart hereof.  This Agreement and
any counterpart so executed shall be deemed to be one and the same instrument.

 

10.09       Interpretation.  Article titles, headings to sections and
the table of contents are inserted for convenience of reference only and are
not intended to be a part or to affect the meaning or interpretation
hereof.  The Schedules referred to herein
shall be construed with and as an integral part of this Agreement to the same
extent as if they were set forth verbatim herein.  The specification of any dollar amount in the
representations and warranties contained in this Agreement or the inclusion of
any specific item in any schedule hereto is not intended to imply that
such amounts or higher or lower amounts, or the items so included or other
items, are or are not material, and no party hereto shall use the fact of the
setting of such amounts or the inclusion of any such item in any dispute or
controversy between the parties as to whether any obligation, item or matter
not described herein or included in a Schedule is or is not material for
purposes hereof.  As used herein,
“include”, “includes” and “including” are deemed to be followed by “without
limitation” whether or not they are in fact followed by such words or words of
like import; “writing”, “written” and comparable terms refer to printing,
typing, lithography and other means of reproducing words in a visible form;
references to a person are also to its successors and permitted assigns;
“hereof”, “herein”, “hereunder” and comparable terms refer to the entirety
hereof and not to any particular article, section or other subdivision
hereof or attachment hereto; references to any gender include references to the
plural and vice

 

47

 

versa; references to this Agreement or other documents are as amended
or supplemented from time to time; references to “Article”, “Section” or
another subdivision or to an attachment or “Schedule” are to an article,
section or subdivision hereof or an attachment or “Schedule” hereto.

 

10.10       Disclosure.  Any representation made “to the knowledge of
Purchaser” or “to Purchaser’s knowledge” shall mean to the knowledge of the
individuals set forth on Schedule 10.10 attached to this Agreement.

 

10.11       No Presumption.  This Agreement shall be construed without
regard to any presumption or rule requiring construction or interpretation
against the party drafting.

 

[SIGNATURE PAGE TO
FOLLOW]

 

48

 

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

 

 

	
   

  	
  PURCHASER

  
	
   

  	
   

  	
   

  
	
   

  	
  PRIMEDIA, Inc., a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Christopher Fraser

  	
   

  
	
   

  	
   

  	
  Name:  Christopher Fraser

  	
   

  
	
   

  	
   

  	
  Title:    Senior Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
  Automotive.com, Inc., a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Jason Phillips

  	
   

  
	
   

  	
   

  	
  Name:  Jason Phillips

  	
   

  
	
   

  	
   

  	
  Title:    COO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  STOCKHOLDERS

  
	
   

  	
   

  	
   

  
	
   

  	
  Chris and Pamela Callahan

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Chris and Pamela Callahan

  	
   

  
	
   

  	
  Chris and Pamela Callahan

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Daniel D. Ferrell

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Daniel D. Ferrell

  	
   

  
	
   

  	
  Daniel D. Ferrell

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Gerry E. Naegle

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Gerry E. Naegle

  	
   

  
	
   

  	
  Gerry E. Naegle

  	
   

  

 

EXECUTION COPY

SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT

 

 

	
   

  	
  James R. Phillips, as Custodian for Senna Nichole
  Phillips

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ James R. Phillips

  	
   

  
	
   

  	
  James R. Phillips

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  James R. Phillips, as Custodian for Lucille Rose
  Opal

  Polich

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ James R. Phillips

  	
   

  
	
   

  	
  James R. Phillips

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Tod A. and Caren T. Phillips

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Tod A. Phillips and Caren T. Phillips

  	
   

  
	
   

  	
  Tod A. and Caren T. Phillips

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Jodie Anne Phillips Polich

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Jodie Anne Phillips Polich

  	
   

  
	
   

  	
  Jodie Anne Phillips Polich

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Daniel N. Rohr, Sr.

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Daniel N. Rohr, Sr.

  	
   

  
	
   

  	
  Daniel N. Rohr, Sr.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Carol and Franklin Speyer, JTWROS

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Carol Speyer and Franklin Speyer

  	
   

  
	
   

  	
  Carol and Franklin Speyer, JTWROS

  	
   

  

 

EXECUTION COPY

SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT

 

 

	
   

  	
  Joshua A. Speyer

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joshua A. Speyer

  	
   

  
	
   

  	
  Joshua A. Speyer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Jason E. Phillips

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jason E. Phillips

  	
   

  
	
   

  	
  Jason E. Phillips

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  James R. Phillips and Meredith Coleman Revocable
  Trust

  Dated 8/23/93

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Meredith Coleman Phillips and James R. Phillips

  	
   

  
	
   

  	
  Name:

  	
  Meredith Coleman Phillips and James R. Phillips

  	
   

  
	
   

  	
  Title:

  	
  Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Robert W. LeMaster and Rosalie T. LeMaster, Trustees
  of

  the Robert W. and Rosalie T. LeMaster Trust U/A DTD

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Rosalie T. LeMaster

  	
   

  
	
   

  	
  Name:

  	
  Rosalie T. LeMaster

  	
   

  
	
   

  	
  Title:

  	
  Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Gary A. Fudge, Trustee of the Trust of Gary A. Fudge

  U/D/T Dated January 27, 1997

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gary A. Fudge

  	
   

  
	
   

  	
  Name:

  	
  Gary A. Fudge

  	
   

  
	
   

  	
  Title:

  	
  Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Todd Busby

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Todd Busby

  	
   

  
	
   

  	
  Todd Busby

  	
   

  
								

 

EXECUTION COPY

SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT

 

 

	
   

  	
  Ann Wagner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ann Wagner Phillips

  	
   

  
	
   

  	
  Ann Wagner

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Patrick Eger

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Patrick Eger

  	
   

  
	
   

  	
  Patrick Eger

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Craig Buccola

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Craig Buccola

  	
   

  
	
   

  	
  Craig Buccola

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Gary Hibbard

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gary Hibbard

  	
   

  
	
   

  	
  Gary Hibbard

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Chad Hayashibara

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Chad Hayashibara

  	
   

  
	
   

  	
  Chad Hayashibara

  	
   

  

 

EXECUTION COPY

SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT

 

 

	
   

  	
  Fudge Family Foundation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gary A. Fudge

  	
   

  
	
   

  	
  Gary A. Fudge, President

  	
   

  

 

EXECUTION COPY

SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT

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