UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
(Amendment
No.
)
Filed
by the Registrant ☒
Filed
by a Party other than the Registrant ☐
Check
the appropriate box:
☒
Preliminary Proxy
Statement
☐
Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
☐
Definitive Proxy
Statement
☐
Definitive
Additional Materials
☐
Soliciting Material
Pursuant to § 240.14a-12
AutoWeb, Inc.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment
of Filing Fee (Check the appropriate box):
☐
Fee computed on
table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1)
Title of each class
of securities to which transaction applies:
(2)
Aggregate number of
securities to which transaction applies:
(3)
Per unit price or
other underlying value of transaction computed pursuant to Exchange
Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4)
Proposed maximum
aggregate value of transaction:
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Fee paid previously
with preliminary materials.
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Check box if any
part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
(1)
Amount previously
paid:
(2)
Form, Schedule or
Registration Statement No.:
Preliminary Copy
AUTOWEB, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on June 18, 2020
TO OUR STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders (“Annual
Meeting”) of AutoWeb,
Inc., a Delaware corporation (“AutoWeb” or “Company”), will be held at the Company’s
offices at 400 North Ashley Drive, Suite 300, Tampa, Florida
33602, on Thursday, June 18, 2020, at 8:00 a.m. Eastern
Time for the following purposes:
1.
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To elect three (3) Class I Directors
(“Election of Directors
Proposal”);
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2.
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To approve the extension of and amendments to the AutoWeb, Inc. Tax
Benefit Preservation Plan (“Tax Benefit Preservation Plan
Proposal”);
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To approve the amendment and restatement of the Company’s
Certificate of Incorporation to (i) clarify the authority of the
Board of Directors to determine or alter the voting powers of any
wholly unissued series of preferred stock issued under the
Certificate of Incorporation’s preferred stock Board of
Directors authorization provision; (ii) delete two outdated
cross-references to the Company’s initial public offering in
provisions of the Certificate of Incorporation that were previously
deleted; and (iii) delete a duplicative clause in the existing
preferred stock authorization provision (“Certificate of Incorporation
Amendment Proposal”);
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4.
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To ratify the appointment, by the Company’s Audit Committee,
of Moss Adams LLP as the Company’s independent registered
public accounting firm for 2020 (“Accounting Firm Ratification
Proposal”);
and
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5.
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To transact such other business as may properly come before the
Annual Meeting and any adjournment or postponement
thereof.
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At the Annual Meeting, the Board of
Directors (“Board”) intends to present Matias de Tezanos,
Chan W. Galbato, and Jared R. Rowe as nominees for election to the
Board.
The
Board has fixed the close of business on April 22, 2020, as
the record date for the determination of the holders of record of
the Company’s common stock entitled to notice of, and to vote
at, the Annual Meeting.
A
list of stockholders entitled to vote at the Annual Meeting will be
open for examination by any stockholder for any purpose germane to
the meeting during ordinary business hours for a period of 10 days
prior to the Annual Meeting at the offices of AutoWeb located at
400 North Ashley Drive, Suite 300, Tampa, Florida 33602, and
will also be available for examination by any stockholder present
at the Annual Meeting until its adjournment.
PLEASE READ CAREFULLY THE ACCOMPANYING PROXY STATEMENT. AUTOWEB
INVITES ALL STOCKHOLDERS TO ATTEND THE ANNUAL MEETING. TO
ENSURE THAT YOUR SHARES WILL BE VOTED AT THE ANNUAL MEETING, PLEASE
COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE.
Although we intend to hold the Annual Meeting in person, we are
actively monitoring the public health and travel concerns of our
stockholders, directors and employees in light of the COVID-19
pandemic, as well as the related protocols that federal, state and
local governments have imposed. As part of our precautions, we may
consider the possibility of changing the location of the Annual
Meeting and/or holding a virtual meeting by means of remote
communication. We will announce any alternative arrangements for
the annual meeting as promptly as practicable if a decision is made
to change the location of the Annual Meeting and/or hold a virtual
meeting.
Tampa, Florida
April __, 2020 [To be
completed in Definitive Notice]
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By Order of the Board of Directors
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Glenn E. Fuller
Executive Vice President,
Chief Legal Officer and Secretary
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IMPORTANT
YOUR VOTE IS IMPORTANT. WHETHER
OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
DATE, AND SIGN THE ENCLOSED PROXY CARD AND PROMPTLY RETURN IT IN
THE ENVELOPE PROVIDED TO VOTE PROCESSING, C/O BROADRIDGE, 51
MERCEDES WAY, EDGEWOOD, NEW YORK 11717, TO BE RECEIVED NO LATER
THAN 11:59 P.M. EASTERN TIME ON THE DAY BEFORE THE ANNUAL
MEETING. IN ORDER TO AVOID THE ADDITIONAL EXPENSE TO AUTOWEB
OF FURTHER SOLICITATION, THE COMPANY ASKS YOUR COOPERATION IN
MAILING IN YOUR PROXY CARD PROMPTLY. PRIOR TO THE ANNUAL MEETING,
STOCKHOLDERS MAY ALSO PROVIDE VOTING INSTRUCTIONS USING THE
INTERNET AT WWW.PROXYVOTE.COM
OR BY CALLING 1.800.690.6903 AS
DESCRIBED IN THE PROXY STATEMENT AND ACCOMPANYING PROXY CARD. THE
CUTOFF TIME FOR PROVIDING VOTING INSTRUCTIONS USING THE INTERNET OR
BY CALLING IS 11:59 P.M. EASTERN TIME THE DAY BEFORE THE DATE OF
THE ANNUAL MEETING.
Preliminary
Copy
PROXY STATEMENT
AutoWeb, Inc.
400 North Ashley, Suite 300
Tampa, Florida 33602
Annual Meeting
To Be Held on June 18, 2020
The Annual Meeting
The enclosed proxy is solicited by and on behalf
of the Board of Directors (“Board”) of AutoWeb, Inc., a Delaware corporation
(“AutoWeb” or “Company”), for use at AutoWeb’s 2020 Annual
Meeting of Stockholders (“Annual
Meeting”) to be held on
Thursday, June 18, 2020, at 8:00 a.m. Eastern Time at the
Company’s offices located at 400 North Ashley Drive, Suite
300, Tampa, Florida, and at any and all adjournments or
postponements thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of
Stockholders.
Although we intend to hold the Annual Meeting in person, we are
actively monitoring the public health and travel concerns of our
stockholders, directors and employees in light of the COVID-19
pandemic, as well as the related protocols that federal, state and
local governments have imposed. As part of our precautions, we may
consider the possibility of changing the location of the Annual
Meeting and/or holding a virtual meeting by means of remote
communication. We will announce any alternative arrangements for
the annual meeting as promptly as practicable if a decision is made
to change the location of the Annual Meeting and/or hold a virtual
meeting.
This Proxy Statement of AutoWeb is being mailed on
or about April___, 2020 [To be
completed in Definitive Proxy Statement], to each stockholder of record as of the close of
business on April 22, 2020.
Record Date and Outstanding Shares
The Board has fixed the close of business on
April 22, 2020, as the record date for the Annual Meeting
(“Record Date”). Only holders of record of
AutoWeb’s common stock, $0.001 par value per share
(“Common Stock”), at the close of business on the Record
Date are entitled to notice of, and to vote at, the Annual
Meeting. As of the close of business on the Record Date, there
were ______ [To be
completed in Definitive Proxy Statement] shares of Common Stock outstanding and entitled to
vote.
Quorum and Voting
Quorum. The holders of
record of a majority in voting power of the shares of Common Stock
of the Company issued and outstanding and entitled to be voted,
present in person or by proxy, will constitute a quorum for the
transaction of business at the Annual Meeting or any adjournment or
postponement thereof. Shares not present in person or by proxy at
the Annual Meeting will not be counted for purposes of determining
a quorum at the Annual Meeting. In the event there are not
sufficient shares present to establish a quorum or to approve
proposals at the time of the Annual Meeting, the Annual Meeting may
be adjourned in order to permit further solicitation of proxies by
the Company.
Vote Required. Holders of
Common Stock are entitled to one vote for each share held as of the
Record Date on all matters to be voted on at the Annual
Meeting. The Company’s Bylaws, as amended
(“Bylaws”), provide that, except as otherwise
provided in the Company’s Certificate of Incorporation
(“Certificate of
Incorporation”), the
rules or regulations of any stock exchange applicable to the
Company or by applicable law or regulation, all matters will be
decided by the vote of a majority in voting power of the shares
present in person or by proxy and entitled to vote at the Annual
Meeting and on the matter. For Proposal 1 (Election of
Directors Proposal), the Bylaws provide that the persons receiving
the greatest number of votes, up to the number of directors then to
be elected, will be the persons elected. The affirmative
vote of a majority in voting power of the shares present in person
or by proxy and entitled to vote at the Annual Meeting and on such
proposal is required to approve Proposal 2 (Tax Benefit Preservation
Plan Proposal) and Proposal 4
(Accounting Firm Ratification Proposal). The affirmative vote of a
majority of the shares of Common Stock outstanding on the Record
Date is required to approve Proposal 3 (Certificate of
Incorporation Amendment Proposal). None of the proposals are
contingent upon the approval of any other
proposal.
Abstentions. Abstentions
will be counted for purposes of determining a quorum at the Annual
Meeting. An abstention for any proposal, other than
Proposal 1 (Election of Directors Proposal), will have the
same effect as a vote against such proposal. As to
Proposal 1 (Election of Directors Proposal), because the
number of nominees is equal to the number of directors being
elected at the Annual Meeting, abstentions will not affect the
election of the nominees to the Board as long as each nominee
receives at least one vote in favor of the nominee’s
election.
Broker Discretionary Voting. If your shares are held in a brokerage
account, by a bank or other nominee, you are considered the
beneficial owner of shares held in “street name,” and
the proxy materials are being sent to you by your broker, bank, or
other nominee who is considered, with respect to those shares, the
stockholder of record. As the beneficial owner, you have the
right to direct your broker, bank, or other nominee how to
vote. If you do not give instructions to your brokerage firm
or bank, it will still be able to vote your shares with respect to
“discretionary” proposals but will not be allowed to
vote your shares with respect to “non-discretionary”
proposals. The Company expects that Proposal 4
(Accounting Firm Ratification Proposal) will be considered to be a
discretionary proposal on which banks and brokerage firms may
vote. The Company expects that all other proposals being
presented to stockholders at the Annual Meeting will be considered
to be non-discretionary items on which banks and brokerage firms
may not vote. Therefore, if you do not instruct your broker or
bank regarding how you would like your shares to be voted, your
bank or brokerage firm will not be able to vote on your behalf with
respect to these proposals. In the case of these
non-discretionary items, the shares will be treated as
“broker non-votes.” Broker non-votes are shares that
are held in “street name” by a bank or brokerage firm
that indicates on its proxy that it does not have discretionary
authority to vote on a particular matter. Your failure to give
instructions to your bank or broker will not (i) affect the outcome
of Proposal 1 (Election of Directors Proposal), as long as a
nominee receives at least one vote in favor of the nominee’s
election; nor (ii) affect the outcome of Proposal 2
(Tax Benefit Preservation Plan Proposal) because this proposal requires the affirmative
vote of a majority in voting power of the shares present in person
or by proxy and entitled to vote at the Annual Meeting and on this
proposal, and broker non-votes will not be deemed “entitled
to vote on the proposal” and therefore are not counted in the
vote for this proposal. However, your failure to give instructions
to your bank or broker with respect to Proposal 3 (Certificate of
Incorporation Amendment Proposal) will have the effect of a vote against Proposal 3
(Certificate of Incorporation Amendment Proposal) because your bank or broker will not vote your
shares with respect to this proposal and this proposal requires the
affirmative vote of a majority of the shares of Common Stock
outstanding on the Record Date.
Expenses of Proxy Solicitation
This
solicitation is being made by the Company, and officers, directors,
and regular employees of AutoWeb may solicit proxies in person or
by regular mail, electronic mail, facsimile transmission, or
personal calls. These persons will receive no additional
compensation for solicitation of proxies but may be reimbursed for
reasonable out-of-pocket expenses. In addition, AutoWeb has engaged
Mackenzie Partners, Inc. to act as proxy solicitor in connection
conjunction with the Annual Meeting. The estimated fees and costs
for those proxy solicitation services are $7,500 plus reasonable
disbursements.
AutoWeb
will pay all of the expenses of soliciting proxies to be voted at
the Annual Meeting. Banks, brokerage firms and other
custodians, nominees or fiduciaries will be requested to forward
soliciting material to their principals and to obtain authorization
for the execution of proxies and will be reimbursed for their
reasonable out-of-pocket expenses incurred in that
regard.
Voting of Proxies
Shares may be voted by completing, dating, and
signing the accompanying proxy card and promptly returning it in
the enclosed envelope. Stockholders may provide voting instructions
for voting of their proxies using the Internet at
www.proxyvote.com
or by calling 1.800.690.6903.
Providing voting instructions using the Internet or by calling
requires stockholders to input the Control Number located on their
proxy cards. The cutoff time for providing voting instructions
via the Internet or by calling is 11:59 p.m. Eastern Time the
day before the date of the Annual Meeting
(“Voting Instructions Cutoff
Time”).
All properly signed proxies received prior to the
vote at the Annual Meeting that are not properly revoked prior to
the vote will be voted at the Annual Meeting according to the
instructions indicated on the proxies or, if no direction is
indicated, such proxies will be voted “FOR” Proposal 1 (Election of Directors
Proposal); “FOR” Proposal 2 (Tax Benefit Preservation
Plan Proposal); “FOR” Proposal 3 (Certificate of
Incorporation Amendment Proposal); and “FOR” Proposal 4 (Accounting Firm
Ratification Proposal). The Board does not presently intend to
present any other matter for action at the Annual Meeting and no
stockholder has given timely notice in accordance with the Bylaws
of any matter that it intends to be brought before the
meeting. If any other matters are properly brought before the
Annual Meeting, the persons named in the proxies will have
discretion to vote on those matters in accordance with their best
judgment.
Revocability of Proxy
If
you are the holder of record for your shares, you may revoke your
proxy at any time before it is exercised at the Annual Meeting by
taking either of the following actions: (i) delivering to
the Company’s Secretary a revocation of the proxy or a proxy
relating to the same shares and bearing a later date prior to the
vote at the Annual Meeting; or (ii) attending the Annual
Meeting and voting in person, although attendance at the Annual
Meeting will not, by itself, revoke a proxy. Stockholders may also
revoke a prior proxy by providing later voting instructions for
voting of a later proxy prior to the Voting Instructions Cutoff
Time.
Recommendation of the Board of Directors
The Board recommends that AutoWeb stockholders
vote “FOR” the election of Messrs. Matias de Tezanos, Chan W. Galbato, and Jared R.
Rowe as
Class I Directors under Proposal 1 (Election of Directors
Proposal); “FOR” Proposal 2 (Tax Benefit Preservation
Plan Proposal); “FOR” Proposal 3 (Certificate of
Incorporation Amendment Proposal); and “FOR” Proposal 4 (Accounting Firm
Ratification Proposal).
Additional Information
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE ANNUAL MEETING TO BE HELD ON JUNE 18, 2020: Copies
of the Notice of Annual Meeting of Stockholders, this Proxy
Statement, the form of Proxy Card, and the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31,
2019, are available online at http://www.autoweb.com/proxymaterials. Stockholders
wishing to attend the Annual Meeting may obtain directions by
calling the Company at 949.437.4651.
A
copy of the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2019, accompanies this Proxy
Statement. If requested, AutoWeb will furnish you with a copy
of any exhibit listed on the exhibit index to the Company’s
Annual Report on Form 10-K for the fiscal year ended
December 31, 2019, upon payment of a reasonable copy
fee.
Because the Company qualifies as a “smaller
reporting company” (as defined in applicable Securities and
Exchange Commission (“SEC”) rules), it has elected to comply with the
scaled compensation disclosure requirements applicable to smaller
reporting companies. Accordingly, this Proxy Statement does not
include certain disclosures and tables that would otherwise be
required.
TO ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL MEETING,
PLEASE COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT
PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED, WHETHER OR NOT YOU
PLAN TO ATTEND THE ANNUAL MEETING. PRIOR TO THE VOTING
INSTRUCTIONS CUTOFF TIME, STOCKHOLDERS MAY ALSO PROVIDE VOTING
INSTRUCTIONS USING THE INTERNET AT PROXYVOTE.COM
OR BY CALLING 1.800.690.6903 AS
DESCRIBED IN THIS PROXY STATEMENT AND ACCOMPANYING PROXY
CARD.
PROPOSAL 1
NOMINATION AND ELECTION OF DIRECTORS
Nominees for Class I Directors
Messrs. Matias
de
Tezanos, Chan W. Galbato, and
Jared R. Rowe are the Board’s nominees as Class I
Directors for election at the Annual Meeting. The Board made
these nominations at the recommendation of the Board’s
Corporate Governance and Nominations Committee. A
Class I Director will hold office until the 2023 Annual
Meeting of Stockholders and until that director’s successor
is duly qualified and elected.
Matias de Tezanos. Mr. de Tezanos has
served as a director of AutoWeb since October 1, 2015 and as the
Company’s Chief Strategy Officer from October 1, 2015 to
February 13, 2017. From October 1, 2013 to October 1, 2015, Mr. de
Tezanos was a director and chief executive officer of a company
that provided an internet-based, pay-per-click advertising
marketplace for the automotive industry, which was acquired by the
Company as of October 1, 2015. Mr. de Tezanos is a co-founder,
director and the Chief Executive Officer of People F, Inc., a
holding company that is focused on investments in technology,
internet and media (“PeopleFund”),
and a co-founder of, and currently serves as co-managing director
and chief executive officer of PF Holding, Inc., a holding company
that is focused on investments in technology, internet and media
affiliated with PeopleFund. Mr. de Tezanos also serves as president
and a director of PF Auto, Inc., an entity affiliated with
PeopleFund and secretary and a director of Auto Holdings Ltd., also
an entity affiliated with PeopleFund. In addition, Mr. de Tezanos
is an officer or director of a number of privately-held
companies, including Ignite Holdings Company, Inc. DBA KingoEnergy,
a global company that offers off-grid communities prepaid solar
energy service in developing countries, Iguama Inc., an online
marketplace offering US products in Latin America, P3 Global
Management Inc., a smart city infrastructure development and
advisory firm, Bidtellect, Inc., Stellar Corporation G.K, CLPF,
Inc., CookUnity Inc., Global Media, Ltd., Healthcare.com Insurance
Services, LLC, Kaptyn Inc. (formerly known as P3GM Holdings, Inc.),
Longevity Holdings, Inc., Media Assets Management Inc., Orionis
Biosciences LLC, PFO Investment, LLC, Startups.com Holding Inc.,
Blue Mountain 30 Inc., Blue Mountain 31 Inc., Blue Pacific Ventures
Inc., Classifieds Corp., Gray Mountain Inc., Mapfit Inc., Moshos
Inc., People Ventures, Inc., Petrol Ventures Inc., PF Classifieds
Inc., PF Healthcare Inc., PFO Investment, Inc., PFP Investment,
Inc., RDBCOM Corporation, Nanostar Inc. and Startups.com
Inc.
Chan W. Galbato. Mr. Galbato has served
as a director of AutoWeb since January 2019. Mr. Galbato is the
Chief Executive Officer of Cerberus Operations and Advisory
Company, LLC. Prior to joining Cerberus in 2009, he owned and
managed CWG Hillside Investments LLC, a consulting business, from
2007 to 2009. From 2005 to 2007, he served as President and CEO of
the Controls Group of businesses for Invensys plc and President of
Services for The Home Depot. Mr. Galbato previously served as
President and Chief Executive Officer of Armstrong Floor Products
and Chief Executive Officer of Choice Parts. He spent 14 years with
General Electric Company, holding several operating and finance
leadership positions within its various industrial divisions as
well as holding the role of President and CEO of Coregis Insurance
Company, a G.E. Capital company. Mr. Galbato currently serves as
Chairman of Avon Products, Inc., Director of Blue Bird Corporation,
Director of DynCorp International, Director of Electrical
Components International, Director of FirstKey Homes, LLC, Director
of New Avon LLC, Director of Staples Solutions B.V., and Director
on the Executive Committee of Steward Health Care, LLC. Previously,
Mr. Galbato served as a director of the publicly-traded Brady
Corporation for seven years, including as Lead Director. He also
served as Chairman to North American Bus Industries, Inc., Guilford
Mills and YP Holdings LLC until their sales in 2013, 2012 and 2017
respectively, and as director of Tower International, Inc. until
Cerberus’ exit in 2014. Before beginning his business career,
he played professional baseball with the Montreal Expos in their
minor league system. Mr. Galbato holds a master’s degree in
business administration from the University of Chicago and a
Bachelor of Arts in Economics from the State University of New
York.
Jared R. Rowe. Mr. Rowe was appointed
President and Chief Executive Officer, and as a director, of
AutoWeb in April 2018. Prior to joining AutoWeb, Mr. Rowe
served as Senior Operating Executive at Cerberus Operations and
Advisory Company and as Chief Executive Officer at The Real Yellow
Pages (YP), a local marketing solutions provider and Cerberus
portfolio company. Before his work with YP and Cerberus, Jared held
several senior leadership positions within Cox Automotive, where he
was President of Kelley Blue Book, President of Autotrader, and
ultimately the President of Cox Automotive’s Media Solutions
Group, where he was responsible for leading the Autotrader, Kelley
Blue Book, Dealer.com and Haystak businesses. Mr. Rowe serves on
the board of Off Lease Only, a privately-held company that operates
used automobile dealerships. Mr. Rowe has a Master of Business
Administration from the Stephen M. Ross School of Business at the
University of Michigan at Ann Arbor and received his Bachelor of
Business Administration, Automotive Marketing from Northwood
University.
Voting for Election of
Class I Directors
The persons named in the enclosed proxy card will
vote “FOR” the election of Matias de
Tezanos, Chan W. Galbato, and
Jared R. Rowe, as Class I Directors unless instructed otherwise in
the proxy. Because no other nominees have been properly and timely
nominated in accordance with the Bylaws, Messrs.
de
Tezanos,
Galbato, and Rowe will each be elected as Class I Directors as long
as they each receive at least one vote for his respective
election. Holders of Common Stock are not entitled to
cumulate their votes in the election of directors. Although
Messrs. de
Tezanos, Galbato, and Rowe have
each consented to serve as a director if elected, and the Board has
no reason to believe that any of them will be unable to serve as a
director, if Messrs. de
Tezanos, Galbato, or Rowe
withdraws his nomination or otherwise becomes unavailable to serve,
the persons named as proxies will vote for any substitute nominee
designated by the Board. Abstentions and “broker
non-votes” will not have any effect on the outcome of the
voting for the election of Class I Directors as long as a nominee
receives at least one vote in favor of his
election.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
STOCKHOLDERS VOTE
“FOR” THE ELECTION OF MESSRS. MATIAS DE TEZANOS, CHAN
W. GALBATO, AND JARED R. ROWE.
PROPOSAL 2
APPROVAL
OF EXTENSION OF AND AMENDMENTS TO THE AUTOWEB, INC.
TAX BENEFIT PRESERVATION PLAN
Background and Reasons for Proposal
The
Company has generated substantial net operating loss
(“NOL”)
carryforwards and other tax attributes for United States federal
income tax purposes (“Tax
Benefits”) that can generally be used to offset future
taxable income and therefore reduce federal income tax
obligations. However, the Company’s ability to use the
Tax Benefits will be adversely affected if there is an
“ownership change” of the Company as defined under
Section 382 (“Section 382”) of the Internal
Revenue Code (“IRC”). In general, a
Section 382 ownership change will occur if the Company’s
“5 percent shareholders” (as defined under
Section 382) collectively increase their ownership in the
Company by more than 50% over a rolling three-year period. As
of December 31, 2019, the Company had NOL carryforwards of
approximately $146.7 million for federal and state income tax
purposes available to offset future taxable income. Until the
NOL carryforwards expire, they can generally be used to reduce any
future federal income tax and, as a result, are a valuable asset to
the Company. The Board believes that it is in the
Company’s and its stockholders’ best interests to
prevent the imposition of limitations on the use of the
Company’s NOL carryforwards. These NOL carryforwards
expire on various dates through 2038.
After
consultation with its legal, tax, and investment banking advisors,
effective as of May 26, 2010 (“Plan Adoption Date”), the Company
entered into a Tax Benefit Preservation Plan with Computershare
Trust Company, N.A., as rights agent (“Rights Plan”). The Board
adopted the Rights Plan with the intent to protect stockholder
value by reducing the risk of a Section 382 ownership change,
thereby preserving the Company’s Tax Benefits and ability to
use its NOL carryforwards. The Rights Plan is intended to act as a
deterrent to any person or group acquiring 4.90% or more of the
Company’s outstanding Common Stock without the approval of
the Board. The Rights Plan was subsequently approved by the
Company’s stockholders at the 2011 Annual Meeting of
Stockholders and was extended and amended at the 2014 and 2017
Annual Meetings of Stockholders. Although the Rights Plan is
intended to reduce the likelihood of an “ownership
change” that could adversely affect the Company, the Rights
Plan will not prevent all transfers that could result in such an
“ownership change.” At the time the Company adopted the
Rights Plan, the Company terminated its existing stockholders
rights plan, which plan was not designed to protect the Tax
Benefits.
The
Rights Plan was set to expire on May 26, 2020, unless
extended. The Board has concluded that it is still in the
Company’s and its stockholders’ best interests to
prevent the imposition of limitations on the use of the
Company’s NOL carryforwards and to protect stockholder value
by preserving the Company’s Tax Benefits. After consultation
with its legal, tax, and investment banking advisors, on March 31,
2020, the Board approved amendments to the Rights Plan
to:
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extend
the expiration date of the Rights Plan until the earliest of: (i)
the close of business on May 26, 2023; (ii) the time at which the
preferred share purchase rights are redeemed or exchanged as
provided in the Rights Plan; (iii) the end of the calendar month in
which occurs the final adjournment of the Annual Meeting, if
stockholder approval of the Rights Plan, as amended, is not
received at the Annual Meeting; (iv) the repeal of Section 382 or
any successor statute if the Board determines that the Rights Plan
is no longer necessary for the preservation of Tax Benefits; (v)
the beginning of a taxable year of the Company to which the Board
determines that no Tax Benefits may be carried forward; or (vi)
such time as the Board determines that a limitation on the use of
the Tax Benefits under Section 382 would no longer be material to
the Company;
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decrease
the Purchase Price (see below) from $73.00 to $20.00 in light of
the decrease in the trading price of the Company’s Common
Stock since the last change in the “Purchase Price”
under the Rights Plan in 2017; and
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update
the Rights Plan to revise the definition of the Company’s
Certificate of Incorporation to reflect amendments to the
Certificate of Incorporation since April 2017.
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The
Board is asking stockholders to approve the Rights Plan, as amended
by these amendments, at the Annual Meeting. If the stockholders do
not approve the amended Rights Plan at the Annual Meeting, the
Rights Plan and the Rights will expire at the end of the calendar
month in which the final adjournment of the Annual Meeting
occurs.
Section 382 Ownership Changes
Generally, an
“ownership change” can occur through one or more
acquisitions of a company’s shares by which one or more
stockholders, each of whom owns or is deemed to own directly or
indirectly 5% or more in value of the company’s stock,
increase their aggregate percentage ownership by more than 50
percentage points over the lowest percentage of stock owned by such
stockholder at any time during the preceding rolling three-year
period. Calculating whether an “ownership change”
has occurred is complex and subject to inherent
uncertainty. This uncertainty results from the complexity of
Section 382 as well as limitations on the knowledge of the
ownership of, and transactions in, the securities of any
publicly-traded company, including the Common Stock. The
Company has analyzed the ownership information available to it,
along with various scenarios of possible future changes of
ownership. In light of this analysis and the Company’s
current stock price and daily trading volume, the Company believes
that if the Rights Plan is not approved and therefore expires, the
Company may undergo a Section 382 “ownership
change.”
If the
Company were to experience a Section 382 “ownership
change,” the use of its NOLs and credits to offset its
taxable income subsequent to the “ownership change”
would be materially limited. The annual limit is subject to
substantial limitations and is generally calculated by multiplying
(i) the aggregate value of the Company’s outstanding
equity, or market capitalization, immediately prior to the
“ownership change” (subject to certain reductions) by
(ii) the federal long-term tax-exempt interest rate in effect
for the month of the “ownership change.” If the
Company were to have taxable income in excess of the NOL
utilization limitations following a Section 382
“ownership change” it would not be able to offset that
excess taxable income with the NOLs. Although any loss
carryforwards not used as a result of any Section 382
limitation would remain available to offset income in future years
(again, subject to the Section 382 limitation), an
“ownership change” could significantly defer the
utilization of the loss carryforwards, accelerate payment of
federal income tax and/or cause some of the NOLs to expire
unused. Although the Company cannot accurately predict the
potential additional tax liability that may result from a
Section 382 “ownership change” and subsequent
limitation on its NOLs, the Company believes they could be material
to it. If an “ownership change” were to have
occurred at December 31, 2019, the Company would have had an
annual limitation of approximately $0.5 million of NOLs (using the
December 2019 applicable interest factor of 1.59% and the
Company’s market capitalization of $32.5 million). If the
Company’s use of its NOLs were limited to a $0.5 million
annual limit, most, if not all of the Company’s pre-2018 NOLs
would expire and not be used by the Company.
Summary Description of the Rights Plan
The
following description of terms of the Rights Plan, as amended, does
not purport to be complete and is qualified in its entirety by
reference to the Rights Plan, which is attached to this Proxy
Statement as Appendix
A and incorporated herein by reference. You are urged to read carefully the Rights Plan
in its entirety as the discussion below is only a
summary.
Rights. Pursuant to
the Rights Plan, the Board declared a dividend of one preferred
share purchase right (each a “Right” and together the
“Rights”) for
each outstanding share of Common Stock under the terms of the
Rights Plan. The dividend was payable on June 11, 2010
(“Plan Record Date”) to the stockholders
of record as of the close of business on that date. Each Right
entitles the registered holder to purchase from the Company .01 of
a share of Series A Junior Participating Preferred Stock, par value
$0.001 per share, of the Company (“Preferred Stock”) at a price of
$20.00 per .01 of a share of Preferred Stock (“Purchase Price”), subject to
adjustment or, in circumstances described below, to instead acquire
shares of Common Stock. As a result of the Company’s
1-for-5 reverse stock split effective July 11, 2012, the number of
Rights associated with each share of the Company’s Common
Stock increased from one Right per share to five Rights per share
pursuant to the terms of the Rights Plan. In the event that any
person becomes an “Acquiring
Person” (as defined in the Rights Plan), each holder
of a Right, other than Rights owned by the Acquiring Person,
related persons or transferees (which will thereupon become null
and void), will thereafter have the right to receive upon exercise
of a Right (including payment of the Purchase Price), in lieu of
shares of Preferred Stock, that number of shares of Common Stock
(subject to any delay of exercisability approved by the Board)
having a market value of two times the Purchase Price. The
description and terms of the Rights are set forth in the Rights
Plan.
Exercisability of Rights;
Distribution Date. Until the earlier to occur of
(i) the close of business on the tenth business day following
the first date of public announcement that a person, entity or
group (each, a “person”) has become an Acquiring
Person, by acquiring ownership of 4.90% or more of the outstanding
shares of Common Stock, or that the Board has concluded that a
person has become an Acquiring Person, or (ii) the close of
business on the 10th business day (or, except in certain
circumstances, such later date as may be specified by the Board)
following the commencement of, or announcement of an intention to
make, a tender offer or exchange offer the consummation of which
would result in the ownership by a person (with certain exceptions)
of 4.90% or more of the outstanding shares of Common Stock (the
earlier of such dates being called the “Distribution Date”), the Rights
will be evidenced, with respect to Common Stock certificates
outstanding as of the Plan Record Date (or any book-entry shares in
respect thereof), only by such Common Stock certificate (or
registration in book-entry form), and the Rights will be
transferable only in connection with the transfer of Common
Stock. The Rights are not exercisable until the Distribution
Date.
For
purposes of the Rights Plan, ownership is in general determined
pursuant to applicable rules and regulations of the IRC, including
Section 382, and by the definition of “beneficial
ownership” of Rule 13d-3 of the Exchange Act. Ownership
for Section 382 purposes is generally determined by an
economic test, while the SEC definition of “beneficial
ownership” focuses generally on the right to vote or control
disposition of the shares.
Term of the Tax Benefit
Preservation Plan and Expiration of Rights. If the
Rights Plan, as amended, is not approved by the Company’s
stockholders at the Annual Meeting, the Rights Plan, as amended,
and the Rights will expire at the end of the calendar month in
which the final adjournment of the Annual Meeting occurs. If
the Rights Plan, as amended is approved by the Company’s
stockholders at the Annual Meeting, the Rights Plan and the Rights
will expire upon the earliest of (i) the close of business on
May 26, 2023 unless that date is advanced or extended;
(ii) the time at which the Rights are redeemed or exchanged
under the Rights Plan; (iii) the repeal of Section 382 or
any successor statute if the Board determines that the Rights Plan
is no longer necessary for the preservation of the Company’s
Tax Benefits; (iv) the beginning of a taxable year of the
Company to which the Board determines that no Tax Benefits may be
carried forward; and (v) such time as the Board determines
that a limitation on the use of the Tax Benefits under
Section 382 would no longer be material to the
Company. The Rights Plan requires the Board to consider the
determination under subsection (v) at least
annually.
Transferability of
Rights. The Rights Plan provides that until the
Distribution Date (or earlier expiration or redemption of the
Rights), the Rights will be attached to and will be transferred
with and only with the Common Stock. Until the Distribution Date
(or the earlier expiration or redemption of the Rights), new shares
of Common Stock issued after the Plan Record Date upon transfer or
new issuances of Common Stock will contain a notation incorporating
the Rights by reference (with respect to shares represented by
certificates) or notice thereof will be provided in accordance with
applicable law (with respect to uncertificated shares). Until
the Distribution Date (or earlier expiration of the Rights), the
surrender for transfer of any certificates representing shares of
Common Stock outstanding as of the Plan Record Date, even without
such notation, or the transfer by book-entry of any uncertificated
shares of Common Stock, will also constitute the transfer of the
Rights associated with such shares. As soon as practicable
following the Distribution Date, separate certificates evidencing
the Rights (“Right
Certificates”) will be mailed to holders of record of
the Common Stock as of the close of business on the Distribution
Date, and the Rights will thereafter be evidenced solely by such
separate Right Certificates.
Cashless Exercise of
Rights. If any person becomes an Acquiring Person, the
Board, in its sole discretion, may permit the Rights, other than
Rights owned by the Acquiring Person, related persons or
transferees (which will thereupon become null and void), to be
exercised by the holders of the Rights without cash payment by
surrendering the Rights Certificates (as defined below) for 50% of
the shares of Common Stock that would otherwise be received upon
exercise and payment of the Purchase Price.
Exchange
Option. At any time after any person becomes an
Acquiring Person but before the acquisition by such Acquiring
Person of ownership of 50% or more of the shares of Common Stock
then outstanding, the Board, at its option, may exchange the Rights
other than Rights owned by such Acquiring Person, related persons
or transferees (which will have become null and void), in whole or
in part, for shares of Common Stock (or a series of the
Company’s preferred stock having equivalent rights,
preferences and privileges), at an exchange ratio of one share of
Common Stock, or a fractional share of preferred stock of
equivalent value, per Right (subject to adjustment).
Redemption of
Rights. At any time before the time an Acquiring Person
becomes such, the Board may redeem the Rights in whole, but not in
part, at a price of $0.001 per Right (“Redemption Price”) payable, at the
option of the Company, in cash, shares of Common Stock or such
other form of consideration as the Board shall determine. The
redemption of the Rights may be made effective at such time, on
such basis and with such conditions as the Board in its sole
discretion may establish. Immediately upon any redemption of the
Rights, the right to exercise the Rights will terminate, and the
only right of the holders of Rights will be to receive the
Redemption Price as rounded to the nearest $0.01.
Stockholders Owning 4.90%
or More as of Plan Adoption Date. Stockholders who owned
4.90% or more of the Company’s outstanding Common Stock as of
the close of business on the Plan Adoption Date will not be deemed
an Acquiring Person and will not trigger the Rights Plan so long as
they do not (i) acquire any additional shares of Common Stock
or (ii) fall under 4.90% ownership of Common Stock and then
re-acquire 4.90% or more of the Common Stock. The Rights Plan
does not exempt any future acquisitions of Common Stock by these
persons.
Exemptions. Under
the Rights Plan, the Board may, in its sole discretion, exempt any
person from being deemed an Acquiring Person for purposes of the
Rights Plan if the Board determines that such person’s
ownership of Common Stock will not be likely to directly or
indirectly limit the availability of the Company’s Tax
Benefits or is otherwise in the best interests of the
Company. The Board also has the authority under the Rights
Plan to grant exemptions for certain inadvertent acquisitions,
subject to specified conditions. The Board will not have any
obligation, implied or otherwise, to grant any such
exemptions.
Preferred
Stock. The terms of the shares of Preferred Stock
purchasable upon exercise of the Rights have been previously
authorized as set forth in the Company’s Amended Certificate
of Designation of Series A Junior Participating Preferred
Stock. Because of the nature of the Preferred Stock’s
dividend and liquidation rights, following the Company’s
1-for-5 reverse stock split effective July 11, 2012 the value of
the one one-hundredth interest in a share of Preferred Stock
purchasable upon exercise of each Right in general should
approximate the value of one-fifth of a share of Common
Stock.
Anti-Dilution. The
Purchase Price payable, and the number of shares of Preferred Stock
or Common Stock or other securities or property issuable, upon
exercise of the Rights is subject to adjustment from time to time
to prevent dilution, including, in the event of stock dividends,
distributions (excluding regular periodic cash dividends) or the
grant of subscription rights or warrants to
stockholders.
No Stockholder
Rights. Until a Right is exercised or exchanged, the holder
thereof, as such, will have no rights as a stockholder of the
Company, including, without limitation, the right to vote or to
receive dividends.
Amendment of Rights
Plan. For so long as the Rights are then redeemable,
the Company may, except with respect to the Redemption Price, amend
the Rights Plan in any manner. After the Rights are no longer
redeemable, the Company may, except with respect to the Redemption
Price, amend the Rights Plan in any manner that does not adversely
affect the interests of holders of the Rights (other than the
Acquiring Person, related persons or transferees).
Other Considerations
As
described above in “Background and Reasons for
Proposal,” the Company has significant NOLs that may be
limited if an “ownership change” under Section 382
of the IRC were to occur. The Rights Plan is an important tool in
reducing the likelihood that such an “ownership change”
will occur and, therefore, in protecting the Company’s
ability to offset future taxable income. The Rights Plan is
designed to deter any person, entity or group from buying the
Company’s Common Stock if the acquisition would result in a
stockholder owning 4.90% or more of the Company’s outstanding
Common Stock and to deter persons, entities or groups now owning
more than 4.90% of Common Stock under Section 382 from acquiring
additional shares of the Company’s Common Stock without the
approval of the Board. In this way, the Rights Plan works to
protect against an “ownership change” under
Section 382 and is applicable to all holders of the
Company’s Common Stock. Therefore, the Board believes it
is in the Company’s and its stockholders’ best
interests to approve the Rights Plan, as amended.
Nonetheless, you
should consider the following points:
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The Rights Plan May Not Be
Effective. The Rights Plan may not be effective in
deterring all transfers that could result in such an
“ownership change.” In particular, it will not
protect against (i) an “ownership change” that may
have occurred before the implementation of the Rights Plan about
which the Company is not aware due to delays in ownership reporting
by stockholders, or (ii) an “ownership change”
resulting from purchasers of shares who become 5% shareholders for
purposes of Section 382, notwithstanding the Rights Plan, either
because the purchaser is unaware of the Rights Plan or makes a
conscious decision to discount the potential consequences under the
Rights Plan.
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The Realizable Value of the Company’s NOLs Cannot Be
Determined. The amount and timing of the Company’s
future taxable income, if any, cannot be accurately predicted, and
the Company cannot estimate the exact amount of NOLs that can
ultimately be used to reduce its income tax
liability. Although the Company is unable to quantify an exact
value, it believes the NOLs are a very valuable asset, and the
Board believes it is in the stockholders’ best interests to
attempt to deter the imposition of additional limitations on their
use by adopting the Rights Plan.
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Potential Effects on Liquidity. The Rights Plan is
expected to deter stockholders from acquiring, directly or
indirectly, additional shares of the Company’s Common Stock
in excess of the specified limitations. Furthermore, a
stockholder’s ability to dispose of the Company’s stock
may be limited by reducing the class of potential acquirers for
that stock.
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Potential Impact on Value. Because the Rights Plan may
restrict a stockholder’s ability to acquire the
Company’s Common Stock, the market value of the Common Stock
might be affected. The Rights Plan could discourage or prevent
accumulations of substantial blocks of shares in which the
Company’s stockholders might receive a substantial premium
above market value. However, these disadvantages are
outweighed, in the opinion of the Board, by the importance of
maintaining the availability of the Company’s Tax
Benefits. The Rights Plan is intended to reduce the risk that
the Company may be unable to fully utilize its Tax Benefits as a
result of future transfers of the Company’s Common
Stock.
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Potential Anti-Takeover Effect. The Rights Plan could be deemed to
have an “anti-takeover” effect because, among other
things, it restricts the ability of a person, entity or group to
accumulate more than 4.90% of the Company’s outstanding
Common Stock without the approval of the Board.
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Vote Required
The
affirmative vote of a majority of the shares of Common Stock
present in person or by proxy and entitled to vote at the Annual
Meeting and on the proposal is required to approve the Rights Plan,
as amended. The persons named in the enclosed proxy card will vote
“FOR” the
proposal unless instructed otherwise in the proxy. Abstentions will
have the same effect as votes against the proposal. “Broker
non-votes” will not have any effect on the outcome of this
proposal.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE “FOR” PROPOSAL 2.
PROPOSAL 3
APPROVAL OF AMENDMENT AND RESTATEMENT
OF THE COMPANY’S CERTIFICATE OF INCORPORATION TO: (I) CLARIFY
THE AUTHORITY OF THE BOARD OF DIRECTORS TO DETERMINE OR ALTER THE
VOTING POWERS OF ANY WHOLLY UNISSUED SERIES OF PREFERRED STOCK
ISSUED UNDER THE CERTIFICATE OF INCORPORATION’S PREFERRED
STOCK BOARD AUTHORIZATION PROVISION; (II) DELETE TWO OUTDATED
CROSS-REFERENCES TO THE COMPANY’S INITIAL PUBLIC OFFERING IN
PROVISIONS OF THE CERTIFICATE OF INCORPORATION THAT WERE PREVIOUSLY
DELETED; AND (III) DELETE A DUPLICATIVE CLAUSE IN THE EXISTING
PREFERRED STOCK AUTHORIZATION PROVISION
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The
Board has adopted resolutions approving, declaring the advisability
of and recommending to the Company’s stockholders for their
approval the amendment and restatement of the Company’s
Certificate of Incorporation (“Certificate of Incorporation”) to
(i) clarify the authority of the Board
to determine or alter the voting powers of any wholly unissued
series of preferred stock issued under the Certificate of
Incorporation’s preferred stock Board authorization
provision; (ii) delete two outdated cross-references to the
Company’s in itial public offering in provisions of the
Certificate of Incorporation that were previously deleted; and
(iii) delete a duplicative clause in the existing preferred stock
authorization provision. If this proposal is approved by the
stockholders, the amendment and restatement of the
Certificate of Incorporation will become effective upon the filing
with the Secretary of State of the State of Delaware of the Seventh
Amended and Restated Certificate of Incorporation of the Company in
the form attached to this Proxy Statement as Appendix B-1 and incorporated
herein by reference.
The
approval and implementation of Proposal 3 would delete the
following from the Certificate of Incorporation:
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The first sentence
of Article X that currently reads: “At the election of
directors of the Corporation, each holder of stock of any class or
series shall be entitled to one vote for each share held.”
(“Legacy Voting
Provision”);
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The cross-reference
in (i) the second sentence of Article VII that reads:
“Effective upon the consummation of an underwritten public
offering as described in Section 3(b)(i)(C) of Article IV, B
hereof;” and (ii) Article XII that reads: “Effective
upon the Initial Public Offering (as defined in Article IV Section
3(b)(i) above).” (“Outdated Cross-Reference
Clauses”); and
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The duplicate
clause in the second sentence of Article IV, Section B that reads:
“to fix the number of shares of any series of Preferred Stock
(“Duplicate
Clause”).
The
proposed changes to the Company’s Certificate of
Incorporation are reflected in the comparison of the proposed
Seventh Amended and Restated Certificate of Incorporation to the
Company’s existing Sixth Restated Certificate of
Incorporation attached to this Proxy Statement as Appendix B-2 and incorporated
herein by reference.
Background and Reasons For the Amendment and Restatement of the
Certificate of Incorporation
The
Certificate of Incorporation authorizes the issuance of up to
11,445,187 shares of Preferred Stock, $0.001 par value per share.
The Certificate of Incorporation also contains the following
provision (“Preferred Stock
Board Authorization Provision”) that authorizes the
Board, without stockholder approval, to issue the authorized shares
of Preferred Stock in one or more series having such rights, powers
(including voting powers), preferences, privileges and restrictions
as the Board may determine by resolution (the underlined text is
the Duplicate Clause):
The
undesignated shares of Preferred Stock may be issued from time to
time in one or more series pursuant to a resolution or resolutions
providing for such issue duly adopted by the Board of Directors
(authority to do so being hereby expressly vested in the Board).
The Board of Directors is further authorized to determine or alter
the rights, powers (including voting powers), preferences and
privileges, and the qualifications, limitations or restrictions
thereof, granted to or imposed upon any wholly unissued series of
Preferred Stock, and,
to fix the number of shares of any series of Preferred Stock
to fix the number of shares of any series of Preferred Stock and
the designation of any such series of Preferred Stock. The Board of
Directors, within the limits and restrictions stated in any
resolution or resolutions of the Board of Directors originally
fixing the number of shares constituting any series, may increase
or decrease (but not below the number of shares in any such series
then outstanding) the number of shares of any series subsequent to
the issue of shares of that series.
At the
Company’s 2013 Annual Meeting of Stockholders, the Company
sought and received stockholder approval to amend the Preferred
Stock Board Authorization Provision to make clear and explicitly
state the authority of the Board to determine the voting powers for
any series of preferred stock authorized by the Board under the
Preferred Stock Authorization Provision (“Board-Authorized Preferred
Stock”). The intent of the 2013 amendment was to
eliminate any uncertainty regarding the Board’s authority to
determine or alter the voting powers of any series of
Board-Authorized Preferred Stock. However, the Company
inadvertently did not also propose to amend Article X of the
Certificate of Incorporation to delete the Legacy Voting Provision
that predated the Company’s initial public offering in 1999
(“IPO”) and
conversion of pre-IPO series of preferred stock into Common Stock.
Because the Legacy Voting Provision provides that at the election
of directors each holder of stock of any class or series is
entitled to one vote for each share held, it could be interpreted
to restrict the Board’s authority to determine the voting
power at the election of directors of any wholly unissued series of
Board-Authorized Preferred Stock. Accordingly, some uncertainty
existed as to the Board’s full authority to determine voting
powers at the election of directors for any series of wholly
unissued Board-Authorized Preferred Stock. To eliminate this
uncertainty, the Board has approved the amendment and restatement
of the Certificate of Incorporation to delete the Legacy Voting
Provision.
The
Board of Directors believes that the complexity and timing of
business financing and possible future transactions require
flexibility and the ability to move quickly to close transactions.
If the proposed amendment is approved, it would clarify the
Board’s authority to determine or alter by resolution the
voting powers, including at election of directors, of up to
11,445,187 shares of preferred stock. The Board would be able to
make such determinations without any further stockholder approval
(except as may otherwise be required by applicable law or rules of
any stock exchange on which our securities may then be listed). The
Board’s authority would include the authority to create one
or more series of Preferred Stock with no, one or more votes per
share at the election of directors. The Board believes that any
uncertainty regarding the Board’s authority under the
Preferred Stock Authorization Provision to determine the voting
powers of Board-Authorized Preferred Stock adversely impacts the
Board’s flexibility to create preferred stock for corporate
purposes, including in connection with capital raising and
acquisitions. The Board has determined that the removal of any
uncertainty regarding limitations on the Board’s authority to
determine the voting powers of any wholly unissued Board-Authorized
Preferred Stock at the election of directors is advisable and in
the best interests of the Company and its
stockholders.
Although the
elimination of the Legacy Voting Provision is intended to allow the
Company to avoid the costs, expenses and delay associated with
obtaining stockholder approval, some issuances of preferred stock
(as well as our Common Stock) may be nevertheless subject to
stockholder approval requirements under applicable laws and/or the
rules of any stock exchange on which our securities may then be
listed. For example, Rule 5635 of The Nasdaq Capital Market sets
forth several circumstances in which stockholder approval is
required prior to the issuance of securities.
The Board of Directors has no current plans, arrangements or
understandings with respect to the issuance of any shares of
Board-Authorized Preferred Stock, other than the Series A Junior
Participating Preferred Stock that may be issued under the
Company's Tax Benefit Preservation Plan (see Proposal 2
above).
In
addition to, and in connection with, the deletion of the Legacy
Voting Provision, the Board has determined to amend and restate the
Certificate of Incorporation to delete the Outdated Cross-Reference
Clauses and the Duplicate Clause.These deletions are proposed to
eliminate any potential confusion caused by these clauses. The
Board believes that these deletions are non-substantive and that it
is convenient to delete these clauses at the same time that the
Certificate of Incorporation is otherwise being amended and
restated for other reasons. The Outdated Cross-Reference Clauses
reference provisions of the Certificate of Incorporation that
related to three series of preferred stock that were converted into
Common Stock in connection with the Company’s IPO, which
provisions were deleted from the Certificate of Incorporation upon
approval of the stockholders at the Company’s 2013 Annual
Meeting of Stockholders. However, the Outdated Cross-reference
provisions inadvertently were not deleted at the same time. The
Duplicative Clause reflects a drafting error in the existing
Preferred Stock Board Authorization Provision.
Principal Effects of the Elimination of the Legacy Voting
Provision.
The
elimination of the Legacy Voting Provision under this Proposal 3
alone will not have any immediate effect on the issued and
outstanding and reserved shares of Common Stock, on options,
warrants or notes exercisable for or convertible into Common Stock
or upon the number of authorized shares of Preferred Stock. The
actual effects of the amendment upon the holders of Common Stock,
if any, cannot be stated unless and until the Board determines or
alters the voting powers at the election of directors of any wholly
unissued series of preferred stock.
Effect on Board’s
Authority under Existing Preferred Stock Board Authorization
Provision. The elimination of the Legacy Voting Provision
will remove uncertainty as to the Board’s authority to
determine the voting powers at the election of directors of any
wholly unissued series of Board-Authorized Preferred Stock. Should
the stockholder not approve this Proposal 3, this uncertainty will
remain and may cause the Board of Directors to obtain stockholder
approval of a new series of preferred stock when such approval may
not be necessary. Even if this Proposal 3 is not approved by the
stockholders, the Board is still authorized to determine the voting
powers of Board-Authorized Preferred Stock, provided that each
share of Board-Authorized Preferred stock will have one vote in the
election of directors of the Company.
The relative voting power
of the holders of the Common Stock at the election of directors
could be adversely affected. The relative voting power of
the holders of Common Stock in the election of directors would not
be immediately affected by elimination of the Legacy Voting
Provision. However, the relative voting power of the holders of
Common Stock could be adversely affected if the Board designates a
new series of Board-Authorized Preferred Stock, or amends an
existing wholly unissued series of Board-Authorized Preferred
Stock, such as the Series A Junior Participating Preferred Stock,
and provides for voting powers greater than one vote per share of
Board-Authorized Preferred Stock at the election of
directors.
No Effect on the Number of
Issued and Outstanding or Reserved Shares of Common
Stock. Currently, the
Company is authorized to issue up to a total of 200,000,000 shares
of Common Stock of which ________________ [To be completed in
Definitive Proxy Statement] shares were issued and
outstanding as of the Record Date. The elimination of the
Legacy Voting Provision will not affect the number of authorized
shares of Common Stock, the number of shares of Common Stock
outstanding or the number of shares of Common Stock reserved for
issuance of Common Stock under outstanding stock options or
warrants. The approval and implementation of this Proposal 3 will
not alone alter the relative rights and preferences of existing
stockholders. All issued and outstanding shares of Common Stock
will remain fully paid and non-assessable after the implementation
of the proposed amendment and restatement. The number of
stockholders of record will not change as a result of stockholder
approval of this Proposal 3.
No Effect on Number of
Authorized Shares of Preferred Stock. Currently the Company is authorized to
issue up to a total of 11,445,187 shares of Preferred Stock, par
value $0.001 per share, none of which are issued and outstanding.
Currently, 2,000,000 shares of Preferred Stock are designated
“Series A Junior Participating Preferred Stock,” with
the number of Series A Junior Participating Preferred Stock shares
being subject to increase or decrease by resolution of the Board.
The Series A Junior Participating Preferred Stock is reserved for
issuance in accordance with the Company’s Tax Benefit
Preservation Plan. The elimination of the Legacy Voting Provision
will not change either the total number of authorized shares of
Preferred Stock or the par value of the Preferred
Stock.
No Change in Par Value Per
Share, Stated Capital or Additional Paid-In Capital. The
elimination of the Legacy Voting Provision will not change the par
value per share of the Common Stock, the stated capital
attributable to the Common Stock or the additional paid-in capital
account on the Company’s balance sheet. The per-share net
income or loss and net book value of the Common Stock will not be
affected as a result of the elimination of the Legacy Voting
Provision.
No Effect on Outstanding
Options, Stock Option and Equity Incentive Plans, and
Warrants. The elimination of the Legacy Voting Provision
will not affect the terms of outstanding options to purchase Common
Stock or any outstanding warrants to purchase shares of Common
Stock.
No Effect on Tax Benefit
Preservation Plan. The elimination of the Legacy Voting
Provision will not affect the Company’s Tax Benefit
Preservation Plan, the number of Rights associated with each share
of the Company’s Common Stock then outstanding or issued or
the number of shares of Common Stock that might be issued should
the Rights be triggered.
No Effect on the
Company’s Registration and Reporting Under the Securities
Exchange Act of 1934 or on the Company’s NASDAQ Capital
Market Listing. The Company’s Common Stock is
currently registered under Section 12(b) of the Securities
Exchange Act of 1934, as amended (“Exchange Act”), and the Company is
subject to the periodic reporting and other requirements of the
Exchange Act. The elimination of the Legacy Voting Provision will
not affect the registration of the Common Stock or the
Company’s reporting obligations under the Exchange Act. If
the Legacy Voting Provision is eliminated, the Company’s
Common Stock will continue to be listed on The Nasdaq Capital
Market under the symbol “AUTO”, subject to continued
compliance with the exchange's listing criteria.
No Effects of the Proposed Amendment and Restatement of the
Certificate of Incorporation to Delete the Duplicate Clause and the
Outdated Cross-Reference Clauses.
The
approval and implementation of the amendment and restatement of the
Certificate of Incorporation to delete the Duplicate Clause and the
Outdated Cross-Reference Clauses under this Proposal 3 are
non-substantive and will have no effect on any stockholders or
class or series of capital stock of the Company.
Disadvantages and Risks Associated with the Elimination of the
Legacy Voting Provision
The
availability of undesignated preferred stock that could be issued
with voting rights at the election of directors greater than one
vote per share may have certain negative effects on the holders of
our Common Stock. The actual effects cannot be stated until the
Board of Directors determines the specific voting powers of any
wholly unissued series of Board-Authorized Preferred Stock. Even
though the Board of Directors believes that the elimination of the
uncertainty regarding its authority to issue Preferred Stock
outweigh any potential disadvantages that might result from the
actual issuance of any such shares of Preferred Stock, the
following are some of the possible disadvantages that could result
from the elimination of the Legacy Voting Provision.
●
The elimination of
the Legacy Voting Provision will eliminate any uncertainty
concerning the Board of Directors’ power, without future
stockholder approval, to create one or more series of preferred
stock having a voting power of more than one vote per share at the
election of directors. The relative voting power of the holders of
Common Stock in the election of directors would not be immediately
affected by elimination of the Legacy Voting Provision. The
relative voting power of the holders of Common Stock would be
adversely affected if the Board designates a new series of
Board-Authorized Preferred Stock, or amends an existing wholly
unissued series of Board-Authorized Preferred Stock, such as the
Series A Junior Participating Preferred Stock, and provides for
voting powers greater than one vote per share of Board-Authorized
Preferred Stock at the election of directors.
●
Preferred stock
could be used, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the
Company. For example, the Board of Directors could designate and
issue a series of Preferred Stock with voting rights sufficient to
out vote the holders of our Common Stock at the election of
directors. The effect of those provisions could delay or frustrate
a merger, tender offer or proxy contest, the removal of incumbent
directors, or the assumption of control by stockholders, even if
such proposed actions would be beneficial to our stockholders. This
could include discouraging unsolicited proposals to acquire the
Company even if such bid represents a premium over our then
existing trading price and thereby prevent stockholders from
receiving the maximum value for their shares.
The
Board of Directors believes that the advantages of eliminating the
Legacy Voting Provision outweigh its potential disadvantages. To
the extent issuance of Preferred Stock may have anti-takeover
effects, potential acquirers will be encouraged to negotiate
directly with the Board of Directors, enabling the Board of
Directors to consider the proposed transaction and other strategic
alternatives with adequate time and flexibility in order to
discharge effectively its obligation to act on the proposed
transaction in a manner that best serves all the
stockholders’ interests. It is also the Board of
Directors’ view that the existence of Preferred Stock issued
under the preferred stock authorization provision should not
discourage anyone from proposing a merger or other transaction at a
price reflective of the true value of the Company and that is in
the best interests of its stockholders.
Other
provisions of our existing Certificate of Incorporation and Bylaws,
our Tax Benefit Preservation Plan and certain provisions of
Delaware law may already have the effect of preventing,
discouraging or delaying any change in the control of our Company.
The following provisions may have anti-takeover effects: (i) the
lack of cumulative voting in the election of directors that would
otherwise allow less than a majority of stockholders to elect
director candidates; (ii) restrictions on who may call a special
meeting of our stockholders; (iii) advance notice procedures for
stockholder proposals and director nominations; (iv) the
classification of our Board of Directors into three classes, and
that each director be elected for a full term of three years,
thereby reducing the possibility that a third party could effect a
sudden or surprise change of control of our Board of Directors
because the third party could potentially only replace those
directors up for election in any given year; (v) the inability of
stockholders to take action by written consent, and (vi) the
existing preferred stock authorization provision that allows the
Board of Directors to issue series of Preferred Stock that could
convert into voting Common Stock at a ratio higher than
one-for-one, thereby potentially diluting the voting power of
existing holders of Common Stock.
In
addition, the Company has not opted out of Section 203 of the
Delaware General Corporation Law in its Certificate of
Incorporation and are therefore subject to Section 203. In general,
Section 203 prohibits a purchaser who acquires, without the
approval of the Company’s Board of Directors, 15% or more of
our outstanding voting stock, an “interested
stockholder,” from completing a “business
combination” with the Company for three years, unless such
interested stockholder (i) increases its holdings of voting stock
from less than 15% to at least 85% of our outstanding voting stock
(excluding for such purposes, shares owned by directors, officers
and certain employee stock plans) in a single transaction, (ii)
obtains the subsequent approval of our Board of Directors and the
approval, at a special or annual meeting of the holders of at least
66 2/3% of our outstanding voting stock held by persons other than
the interested stockholder, or (iii) obtained the approval of our
Board of Directors of the “business combination” before
such purchaser became an “interested stockholder.” The
definition of “business combinations” contained in
Section 203 is defined broadly to include a merger, consolidation,
asset sale or other similar transaction. Section 203 encourages
persons interested in acquiring the Company to negotiate in advance
with our Board of Directors because the special stockholder voting
requirement imposed by Section 203 can be avoided if such person,
prior to acquiring 15% of a company’s voting stock, obtains
the approval of our Board of Directors for such acquisition or for
the proposed business combination. In addition, Section 203
provides limited protection against the potential inequities
inherent in “two-tier” business combination
transactions. Under Section 203, any merger, consolidation or
similar transaction following a partial tender offer that has not
been approved by a majority of our Board of Directors requires
approval by the holders of at least 66 2/3% of the remaining shares
of our outstanding stock (unless the acquirer obtains 85% or more
of our voting stock in such partial tender offer). Furthermore,
Section 203 tends to discourage the accumulation of large blocks of
stock by third parties which may be disruptive to the stability of
our relationships with our employees, customers and major
lenders.
Implementation of Proposal 3
If
Proposal 3 is approved at the Annual Meeting, the amendment and
restatement of the Certificate of Incorporation will become
effective upon filing of an Amended and Restated Certificate of
Incorporation with the office of the Secretary of State of the
State of Delaware.
No Dissenters’ or Appraisal Rights
Under
the General Corporation Law of the State of Delaware, stockholders
are not entitled to appraisal rights with respect to the amendment
and restatement of the Certificate of Incorporation proposed by
this Proposal 3.
Vote Required and Recommendation of the Board of
Directors
The
affirmative vote of a majority of the shares of Common Stock issued
and outstanding on the Record Date is required to approve this
Proposal 3. The persons named in the enclosed proxy card will vote
FOR the proposal unless
instructed otherwise in the proxy. Abstentions, “broker
non-votes” and shares not present in person or by proxy at
the Annual Meeting will have the same effect as votes against the
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL
3
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board’s Audit Committee has appointed
Moss Adams LLP (“Moss Adams”) as the Company’s independent
registered public accounting firm for 2020. The Audit
Committee and the Board recommend that the Company’s
stockholders ratify this appointment. In line with this
recommendation, the Board intends to introduce the following
resolution at the Annual Meeting:
RESOLVED, that the appointment of Moss Adams LLP as the
independent registered public accounting firm for the Company for
the year 2020 is ratified.
Stockholder
ratification of the Audit Committee’s selection of Moss Adams
as the Company’s independent registered public accounting
firm is not required by the Bylaws or otherwise. Nevertheless,
the Board is submitting the selection of Moss Adams to the
stockholders for ratification as a matter of good corporate
practice and the Audit Committee will reconsider whether to retain
Moss Adams if the stockholders fail to ratify its
selection. In addition, even if the stockholders ratify the
selection of Moss Adams, the Audit Committee may in its discretion
appoint a different independent registered public accounting firm
at any time during the year if the Audit Committee determines that
a change is in the best interests of the Company. A
representative of Moss Adams is expected to be present at the
Annual Meeting, either in person or available remotely, to make a
statement if the representative desires and to respond to
appropriate questions that may be asked by
stockholders.
Vote Required
The affirmative vote of a majority of the shares
of Common Stock present in person or by proxy and entitled to vote
at the Annual Meeting and on the proposal is required to approve
Proposal 4. The persons named in the enclosed proxy card will vote
“FOR” the proposal unless instructed otherwise
in the proxy. Abstentions will have the same effect as votes
against the proposal. “Broker non-votes” will not have
any effect on the outcome of this proposal.
Board of Directors Recommendation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL
4.
BOARD OF DIRECTORS
The
current members of the Board of AutoWeb are as
follows:
Name
|
|
Age
|
|
Position
|
Michael J. Fuchs
|
|
75
|
|
Chairman of the Board
|
Michael A. Carpenter
|
|
73
|
|
Director
|
Matias de Tezanos
|
|
40
|
|
Director
|
Chan W. Galbato
|
|
57
|
|
Director
|
Mark
N. Kaplan
|
|
90
|
|
Director
|
Jared R. Rowe
|
|
46
|
|
Director, President and Chief Executive Officer
|
Janet M. Thompson
|
|
70
|
|
Director
|
Jose Vargas
|
|
41
|
|
Director
|
Michael J.
Fuchs. Mr. Fuchs has served as
a director of AutoWeb since September 1996 and became Chairman in
June 1998. Since May 2001, Mr. Fuchs has been engaged in private
investing for his own behalf. From November 2000 to May 2001, Mr.
Fuchs was Chief Executive Officer of MyTurn.com, Inc. and was
Interim Chief Executive Officer from April 2000 to October 2000.
Mr. Fuchs was a consultant from November 1995 to April 2000. Mr.
Fuchs was Chairman and Chief Executive Officer of Home Box Office,
a division of TimeWarner Entertainment Company, L.P., a leading
pay-television company, from October 1984 until November 1995, and
Chairman and Chief Executive Officer of Warner Music Group, a
division of Time Warner Inc., from May 1995 to November 1995. Mr.
Fuchs holds a B.A. Degree from Union College and a J.D. Degree from
the New York University School of Law. Mr. Fuchs was a significant
early investor in the Company.
Michael A.
Carpenter. Mr. Carpenter
has served as a director of AutoWeb since September 2012. Mr.
Carpenter served as the Chief Executive Officer and as a director
of Ally Financial Inc. from November 2009 until his retirement in
February 2015. Ally Financial is one of the nation’s largest
financial services companies, with a concentration in automotive
lending. In 2007, Mr. Carpenter founded Southgate Alternative
Investments, Inc. From 2002 to 2006, he was Chairman and Chief
Executive Officer of Citigroup Alternative Investments, overseeing
proprietary capital and customer funds globally in various
alternative investment vehicles. From 1998 to 2002, Mr. Carpenter
was Chairman and Chief Executive Officer of Citigroup’s
Global Corporate & Investment Bank with responsibility for
Salomon Smith Barney Inc. and Citibank’s corporate banking
activities globally. Mr. Carpenter was named Chairman and Chief
Executive Officer of Salomon Smith Barney Inc. in 1998, shortly
after the merger that created Citigroup. Prior to Citigroup, Mr.
Carpenter was Chairman and Chief Executive Officer of Travelers
Life & Annuity and Vice Chairman of Travelers Group Inc.
responsible for strategy and business development. From 1989 to
1994, Mr. Carpenter was Chairman of the Board, President and Chief
Executive Officer of Kidder Peabody Group Inc., a wholly owned
subsidiary of General Electric Company. From 1986 to 1989, Mr.
Carpenter was Executive Vice President of GE Capital Corporation.
He first joined GE in 1983 as Vice President of Corporate Business
Development and Planning and was responsible for strategic planning
and development as well as mergers and acquisitions. Earlier in his
career, Mr. Carpenter spent nine years as Vice President and
Director of the Boston Consulting Group and three years with
Imperial Chemical Industries of the United Kingdom. Mr. Carpenter
was elected to the board of CIT, Inc., a publicly held financial
holding company, on May 1, 2016. He also serves on the boards of
Law Finance Group, US Retirement Partners, the New York City
Investment Fund, the Rewards Network, Inc., Client 4 Life
Management Systems, and Validity Capital, and has been a board
member of the New York Stock Exchange, General Signal, Loews
Cineplex and various other private and public companies. Mr.
Carpenter received a Bachelor of Science degree from the University
of Nottingham, England, and a Master of Business Administration
from the Harvard Business School where he was a Baker Scholar. Mr.
Carpenter also holds an honorary degree of Doctor of Laws from the
University of Nottingham. Mr. Carpenter’s experience in
investment and commercial banking, executive management and capital
markets led the Board to conclude that Mr. Carpenter should serve
as one of the Company’s directors.
Matias de
Tezanos. See
Mr. de Tezanos’ biographical
information included under the section of this Proxy Statement
entitled “PROPOSAL 1–ELECTION OF
DIRECTORS–Nominees for Class I Directors.”
Chan W.
Galbato.
See Mr. Galbato’s
biographical information included under the section of this Proxy
Statement entitled “PROPOSAL 1–ELECTION OF
DIRECTORS–Nominees for Class I Directors.”
Mark N.
Kaplan. Mr. Kaplan has
served as a director of AutoWeb since June 1998. Mr. Kaplan was a
member of the law firm of Skadden, Arps, Slate, Meagher & Flom
LLP from 1979 through 1998 and currently is of counsel to that
firm, Chairman of the Board and Chief Operating Officer of
Engelhard Minerals & Chemicals Corporation (mining and
chemicals) from 1977 to 1979, and President and Chief Executive
Officer of Drexel Burnham Lambert (investment banking) from 1970 to
1977. Mr. Kaplan serves as Chairman of the compensation committee
of the board of directors of American Biltrite Inc., a publicly
traded company. He is a Trustee of Bard College, the New York
Academy of Medicine, a member and former Chairman of the New York
City Audit Committee, a member of the New York City Housing
Authority Audit Committee, a Trustee and Chairman of the Audit
Committee of WNET.org (provider of public media in the New York
City metropolitan area), a director of twenty investment funds
managed by Gresham Investment Management LLC, as well as an advisor
to fifteen additional private Gresham fund properties. Mr. Kaplan
has also served on the boards of Volt Information Services, Inc.,
Congoleum Corp., DRS Technologies Inc., and other privately held
entities or mutual funds. Mr. Kaplan was formerly the Chairman of
the Audit Advisory Committee of the Board of Education of The City
of New York, Vice-Chairman and Governor of the board of directors
of The American Stock Exchange, Inc., and a director of Security
Industry Automation Corporation. Mr. Kaplan holds a Bachelor of
Arts degree from Columbia College and a Bachelor of Laws degree
from Columbia Law School. Mr. Kaplan’s experience in
securities and corporate laws, mergers and acquisitions, investment
banking and business management, as well as his qualification as an
audit committee financial expert, led the Board to conclude that
Mr. Kaplan should serve as one of the Company’s
directors.
Jared R.
Rowe.
See Mr. Rowe’s
biographical information included under the section of this Proxy
Statement entitled “PROPOSAL 1–ELECTION OF
DIRECTORS–Nominees for Class I Directors.”
Janet M.
Thompson. Ms. Thompson has
served as a director of AutoWeb since March 2008. Ms. Thompson is
Executive Vice President of HAAH Automotive Holdings, an
exclusive distributor for Asian automotive brands in North
America.
From January 2015 to February 2019, Ms. Thompson was Senior Vice
President of Ipsos Automotive, a global automotive market research
company. Prior to that Ms. Thompson was Vice President, Marketing
of Advanstar Communications Inc., the leading provider of
integrated media solutions to the automotive aftermarket,
pharmaceutical, healthcare, power sports and fashion industries
from July 2011 to January 1, 2015; Vice President, Automotive Group
for The Marketing Arm, an Omnicom Group agency, from January 2011
to June 2011; Executive Vice President of the Diversified Agency
Services Division of Omnicom Group, an advertising firm, from
November 2007 to August 2010; Vice President, Marketing Nissan and
Infiniti Divisions of Nissan North America, from July 2004 to
September 2007; and from July 1999 to July 2004, Ms. Thompson was
Chief Executive Officer and President of The Designory, Inc., a
marketing firm owned by the Omnicom Group. Ms. Thompson held sales
or marketing positions at Mazda Motor of America, Toyota Motor
Sales, U.S.A. and Chrysler Corporation, from 1972 to 1994. Ms.
Thompson received a Bachelor of Arts degree in business from
Western Michigan University and a Master of Business Administration
from University of Detroit. Ms. Thompson has the distinction of
being named one of the Top 100 Women in the Automotive Industry in
both 2005 and 2010.
Jose
Vargas. Mr. Vargas has
served as a director of AutoWeb since October 1, 2015 and as the
Company’s Chief Revenue Officer from October 1, 2015 to April
12, 2018. From September 18, 2013 to October 1, 2015, Mr. Vargas
was a director and president of a company that provided an
internet-based, pay-per-click advertising marketplace for the
automotive industry, which was acquired by the Company as of
October 1, 2015. Mr. Vargas is a co-founder, director and the
president of PeopleFund, and a co-founder of, and currently serves
as a co-managing director and president of PF Holding, as well as
vice president and a director of PF Auto, an entity affiliated with
PeopleFund, and co-managing director, president and secretary of
Auto Holdings, also an entity affiliated with PeopleFund. Mr.
Vargas is also a director or officer of a number of privately-held
companies that include Healthcare, Inc., an online search,
comparison and recommendation tool for healthcare consumers, Blue
Mountain 17 Inc., Blue Mountain 18 Inc., Blue Mountain 30 Inc.,
Blue Mountain 31 Inc., Blue Mountain 45 Inc., Blue Mountain 46
Inc., Blue Mountain 48 Inc., Blue Mountain 73 Inc., Classifieds
Corp., Gray Mountain Inc., PeopleFund Inc., People Ventures Inc.,
PV SU Holding, Inc., PV SU Investment, Limited Partnership, MapFit
Inc. (prior: GeoFi, Inc.), PF Classifieds Inc., PF Healthcare Inc.,
Galeb3 Inc., and Healthcare.com Insurance Services, LLC. Mr. Vargas
received a Bachelor of Science degree from Florida International
University.
Messrs. de Tezanos and Vargas were appointed to
the Board pursuant to the Stockholder Agreement described below
under the section of this Proxy Statement entitled
“SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT” upon AutoWeb’s acquisition of
Autobytel, Inc. (formerly, AutoWeb, Inc.), as of October 1, 2015.
They serve as the two representatives on the Board designated by
the former owners of Autobytel, Inc. (formerly AutoWeb, Inc.) prior
to its acquisition by the Company. Their experience in founding and
growing technology and online media companies led the Board to
conclude that they should serve as directors of the
Company.
EXECUTIVE OFFICERS
The
current executive officers of AutoWeb are as follows:
Name
|
|
Age
|
|
Position
|
Jared R. Rowe
|
|
46
|
|
President, Chief Executive Officer, and Director
|
Daniel R. Ingle
|
|
50
|
|
Executive Vice President, Chief Operating Officer
|
Glenn E. Fuller
|
|
65
|
|
Executive Vice President, Chief Legal Officer and
Secretary
|
Joseph P. (“JP”) Hannan
|
|
48
|
|
Executive Vice President, Chief Financial Officer
|
Sara E. Partin
|
|
38
|
|
Senior Vice President, Chief People Officer
|
Jared R.
Rowe. See
Mr. Rowe’s biographical
information included under the section of this Proxy Statement
entitled “PROPOSAL 1–ELECTION OF
DIRECTORS–Nominees for Class I Directors.”
Daniel R.
Ingle. Mr. Ingle joined AutoWeb as Executive Vice
President, Chief Operating Officer in January 2019. Prior to
joining AutoWeb, Mr. Ingle was Vice President of International
Business Development at Cox Automotive focused on the global
expansion of Kelley Blue Book. Mr. Ingle joined Kelley Blue Book in
2006 and has held several different leadership positions including
Vice President of Vehicle Valuations and Industry Solutions and
Vice President of Analytic Insights and Technology. Prior to Kelley
Blue Book, Mr. Ingle served as Director of Information Technology
for Capital One Auto Finance and held other positions at
PeopleFirst.com, Thomson Technology Consulting Group and Ernst and
Young, in addition to conducting his own consulting business. Mr.
Ingle received his Bachelor of Science degree in Management
Information Systems from Ohio University.
Glenn E.
Fuller. Mr. Fuller
joined AutoWeb as Vice President, Legal Affairs in October 2006 and
was promoted to Senior Vice President, Chief Legal Officer and
Secretary in April 2008, Senior Vice President, Chief Legal
and Administrative Officer and Secretary in December 2008,
Executive Vice President, Chief Legal and Administrative Officer
and Secretary as of January 19, 2009, and Executive Vice
President, Chief Legal Officer and Secretary as of March 1,
2019. Prior to joining AutoWeb, Mr. Fuller was in private
legal practice from August 2002 to October 2006, and from June 1996
to July 2002, he served as Senior Vice President, Chief Legal
Officer and General Counsel of Freedom Communications, Inc.
(newspapers, television stations and other media). From April
1994 to June 1996, Mr. Fuller was of counsel to the law firm
of Gibson, Dunn & Crutcher LLP and was associated with
that firm from September 1980 to May 1987. Mr. Fuller was
a partner in the law firm of Pettis, Tester, Kruse &
Krinsky from January 1988 to December 1992 and employed as an
attorney at that firm from May 1987 to December 1987 and from
January 1993 to June 1993. From July 1993 to January 1994,
Mr. Fuller was Executive Vice President and General Counsel of
Airline Computerized Ticketing (airline
ticketing). Mr. Fuller received his Bachelor of Arts
degree from California State University at Long Beach and a Juris
Doctor degree from the University of Southern
California.
Joseph P.
(“JP”)
Hannan. Mr. Hannan joined AutoWeb as Executive Vice
President, Chief Financial Officer in December 2018. Prior to
joining AutoWeb, Mr. Hannan served as the Chief Financial Officer
of Social Reality, Inc. (October 2016 to December 2018). Mr. Hannan
was employed by Cumulus Media, Inc. (NASDAQ: CMLS), serving as
Senior Vice President, Treasurer and Chief Financial Officer (March
2010 to June 2016), as Interim Chief Financial Officer (July 2009
to March 2010) and Vice President and Controller (April 2008 to
July 2009). He also served concurrently as Chief Financial Officer
of Modern Luxury Media, an affiliate of Cumulus Media, Inc., from
August 2010 to June 2016. From May 2006 to July 2007, Mr. Hannan
served as Vice President and Chief Financial Officer of the radio
division of Lincoln National Corporation (NYSE: LNC), and from
March 1995 to November 2005 he served in a number of executive
positions including Chief Operating Officer and Chief Financial
Officer of Lambert Television, Inc., a privately held television
broadcasting, production and syndication company. Mr. Hannan has
served as a director on a number of company boards, and is
currently Chairman of Barefoot Luxury, Inc., an international
hospitality company based in Atlanta, Georgia. He previously served
as a director of Regent Communications, Inc., International Media
Group, and iBlast, Inc. Mr. Hannan received his Bachelor of Science
degree from the Marshall School of Business at the University of
Southern California.
Sara E.
Partin. Ms. Partin joined
AutoWeb as Senior Vice President, Chief People Officer in October
2018. Prior to joining AutoWeb, Ms. Partin was the Chief Human
Resources Officer of The Real Yellow Pages (YP) and held multiple
senior human resources leadership positions at Cox Automotive,
including leading people integration efforts for Autotrader, Kelley
Blue Book, and Dealer.com. Prior to her work with Cox Automotive,
Ms. Partin was an associate attorney at the law firms of Kilpatrick
Townsend & Stockton LLP, Dow Lohnes PLLC, and Alston & Bird
LLP. Ms. Partin received her Bachelor of Arts Degree in History
from Stanford University and her Juris Doctor degree
from Harvard Law School.
All
of the officers named in the Executive Officer table above served
as executive officers during 2019.
All
executive officers of AutoWeb are chosen by the Board of Directors
and serve at its discretion.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information
regarding the calculation of beneficial ownership of Common Stock
as of the Record Date, by all persons known by AutoWeb to be
beneficial owners of more than 5% of the Common Stock of AutoWeb,
each director and nominee, each of the named executive officers
identified in the section of this Proxy Statement entitled
“EXECUTIVE
COMPENSATION–Summary Compensation,” and all directors and executive officers
as a group (including the named executive officers). Shares of
Common Stock are deemed to be outstanding and to be
beneficially-owned by the persons listed below for the purpose of
computing the percentage ownership of the person, but are not
treated as outstanding for the purpose of computing the percentage
ownership of any other person, if that person has the right to
acquire beneficial ownership of such shares within 60 days of the
Record Date through the exercise of any option, warrant or other
right or the conversion of any security, or pursuant to the power
to revoke, or the automatic termination of, a trust, discretionary
account or similar arrangement. Except as otherwise noted, the
persons or entities in this table have sole voting and dispositive
power with respect to all shares of Common Stock beneficially owned
by them subject to community property laws, where
applicable. The information with respect to each person
specified is as supplied or confirmed by that person, based upon
statements filed with the SEC or based upon the actual knowledge of
AutoWeb.
Name of Beneficial Owner (1)
|
Number
of Shares of Common Stock Beneficially Owned
|
Percent
of Common Stock Beneficially Owned
|
Investment and Development Finance Corp.
(2)(5)
|
2,902,928
|
22.1%
|
Matias de Tezanos (4)(5)
|
2,882,928
|
21.9%
|
Jose Vargas (3)(5)
|
2,882,710
|
21.9%
|
Auto Holdings Ltd (5)
|
2,782,928
|
21.2%
|
1 8 999 Trust (6)
|
1,173,445
|
8.9%
|
Piton Capital Partners LLC (7)
|
965,000
|
7.3%
|
Jared R. Rowe (8)
|
942,830
|
6.7%
|
Daniel R. Ingle (9)
|
119,432
|
*
|
Michael J. Fuchs (10)
|
114,680
|
*
|
Joseph P. Hannan (11)
|
91,250
|
*
|
Michael A. Carpenter (12)
|
73,000
|
*
|
Mark N. Kaplan (13)
|
69,000
|
*
|
Janet M. Thompson (14)
|
64,040
|
*
|
Chan W. Galbato (15)
|
14,383
|
*
|
All executive officers (including named executive
officers) and directors as a group (12 persons) (16)
|
6,172,101
|
41.8%
|
*
Less than 1%
(1)
|
Unless otherwise indicated, the address of all the owners is: c/o
AutoWeb, Inc., 400 North Ashley Drive, Suite 300, Tampa, Florida
33602.
|
(2)
|
In addition to the beneficial ownership reported in Footnote 5
below, the beneficial ownership of Investment and Development
Finance Corp., a Panama business company
(“IDFC”),
includes the additional 120,000 shares, in the aggregate, reported
on Form 4s filed May 21, 23, and 24, 2018.
|
(3)
|
In addition to the beneficial ownership reported in Footnote 5
below, the beneficial ownership of Mr. Vargas includes the
additional 82,029 shares reported on a Form 4 filed December 11,
2018.
|
(4)
|
In addition to the beneficial ownership reported in Footnote 5
below, the beneficial ownership of Mr. de Tezanos includes the
additional 100,000 shares reported on Form 4s filed December 11,
2018 and August 16, 2019.
|
(5)
|
The information presented in this line item with respect to the
beneficial ownership of Auto Holdings, IDFC, and Messrs. de Tezanos
and Vargas was obtained from the Schedule 13D/A filed April 26,
2018 (“Auto Holdings Schedule
13D/A”), jointly filed by
the following persons: (i) Auto Holdings; (ii) PF Holding; (iii)
Ceiba International Corp., a Panama business company
(“Ceiba”); (iv) Jose Vargas, a director of AutoWeb;
(v) Galeb3 Inc., a Florida corporation owned solely by Mr. Vargas
(“Galeb3”); (vi) Matias de Tezanos, a citizen of
Costa Rica and director of AutoWeb; (vii) Manatee Ventures Inc., a
British Virgin Islands business company wholly owned by Mr. de
Tezanos and his wife Isabel Ruiz Estrada
(“Manatee”);
(viii) John Peter Klose de Ojeda, a citizen of Guatemala; (ix)
Richard Aitkenhead Castillo, a citizen of Guatemala; (x) IDFC; (xi)
IDC Financial, S.A., a Panama business company
(“IDC
Financial”); (xii) Juan
Christian Klose Pieters; (xiii) Margarita Klose; (xiv) Jorge Miguel
Fernandez Bianchi, a citizen of Guatemala; (xv) PeopleFund; and
(xvi) PF Auto (collectively, “Auto Holdings Reporting
Persons”). The Auto
Holdings Schedule 13D/A states that each of the Auto Holdings
Reporting Persons disclaims beneficial ownership of the reported
shares except to the extent of their pecuniary interest therein and
discloses that Mr. Vargas has sole voting and dispositive power
with respect to 17,753 shares and that he and the other Auto
Holdings Reporting Persons share dispositive power with respect to
2,782,928 shares. Pursuant to an Amended and Restated Stockholder
Agreement dated as of October 1, 2015, by and among AutoWeb, Auto
Holdings, IDFC, Mr. de Tezanos, Mr. Vargas, and other parties to
that agreement (as amended, “Stockholder
Agreement”), the reported
shares are subject to irrevocable proxies in favor of
AutoWeb’s Chief Executive Officer, Chief Financial Officer,
and Chief Legal Officer, and each of them individually, to exercise
all voting rights of the applicable stockholders with respect to
the shares at any meeting of stockholders of the Company, and in
any action by written consent of the stockholders of the Company,
in accordance with the recommendations of or instructions provided
by the Board. The Auto Holdings Schedule 13D/A lists the addresses
of the Auto Holdings Reporting Persons as follows: (i) Auto
Holdings, PF Auto, Mr. de Tezanos, Manatee, Mr. Juan Christian
Klose Pieters, Ms. Margarita Klose IDC Financial, Jorge Miguel
Fernandez Bianchi, PF Holding, PeopleFund, Diagonal 6, 12-42 zona
10, Edificio Design Center, Torre II, Of. 1103, Guatemala City,
Guatemala 01010; (ii) Ceiba, IDFC, Mr. John Peter Klose de Ojeda
and Mr. Aitkenhead Castillo: 13 calle 2-60, zona 10, Edificio
Topacio Azul, Of. 1301, Guatemala City, Guatemala 01010; and (iii)
Mr. Vargas and Galeb3: 3401 N. Miami Avenue, Suite 205, Miami,
Florida 33127. The reported shares do not include up to 1,153,110
shares that may be acquired upon conversion of certain warrants to
purchase Common Stock that have stock price based vesting
conditions that have not yet been met.
|
(6)
|
The information presented in the table with respect to the
beneficial ownership of The 1 8 999 Trust was obtained from the
Schedule 13D/A filed on March 4, 2019 (“1 8 999 Trust Schedule
13D/A”), jointly by the
following persons: (i) The 1 8 999 Trust; (ii) Daniel M. Negari;
(iii) The Insight Trust; and (iv) Michael R. Ambrose,
(collectively, the “1 8 999 Reporting
Persons”). The 1 8 999
Trust Schedule 13D/A lists the address of the 1 8 999 Trust
Reporting Persons as follows: 2121 E. Tropicana Avenue, Suite 2,
Las Vegas, NV 89119. The 1 8 999 Trust Schedule 13D/A discloses
that the 1 8 999 Trust has shared voting and dispositive power with
respect to 973,112 shares; Mr. Negari has sole voting and
dispositive power with respect to 133 shares and shared voting and
dispositive power with respect to 973,245 shares; and the Insight
Trust and Mr. Ambrose have shared voting and dispositive power with
respect to 200,200 shares. Pursuant to a Tax Benefit Preservation
Plan Exemption Agreement dated as of November 30, 2018, by and
among the Company and the 1 8 999 Trust Reporting Persons
(“1 8
999 Trust Exemption Agreement”), approximately 531,205 shares of the
shares of Common Stock reported as beneficially owned by the 1 8
999 Reporting Persons are subject to irrevocable proxies in favor
of AutoWeb’s Chief Executive Officer, Chief Financial Officer
and Chief Legal Officer, as each of them individually, to exercise
all voting rights of the applicable stockholders with respect to
the shares at any meeting of stockholders of the Company, and in
any action by written consent of the stockholders of the Company,
in accordance with the recommendations of or instructions provided
by the Board.
|
(7)
|
The information presented in the table with respect to the
beneficial ownership of Piton Capital Partners LLC
(“Piton”) was obtained solely from the Schedule
13G/A filed February 11, 2020 (“Piton Schedule
13G/A”). The Piton
Schedule 13G/A lists the address of Piton Capital Partners LLC as
follows: c/o Kokino LLC, 201 Tresser Boulevard, 3rd Floor,
Stamford, Connecticut 06901, Attention: Garrett Lynam. Pursuant to
a Tax Benefit Preservation Plan Exemption Agreement dated as of
November 15, 2017, by and between the Company and Piton
(“Piton Exemption
Agreement”),
approximately 322,759 shares of the shares of Common Stock reported
as beneficially owned by Piton are subject to irrevocable proxies
in favor of AutoWeb’s Chief Executive Officer, Chief
Financial Officer and Chief Legal Officer, as each of them
individually, to exercise all voting rights of the applicable
stockholders with respect to the shares at any meeting of
stockholders of the Company, and in any action by written consent
of the stockholders of the Company, in accordance with the
recommendations of or instructions provided by the
Board.
|
(8)
|
Includes 868,055 shares issuable upon exercise of options
exercisable within 60 days of the Record Date.
|
(9)
|
Includes 112,292 shares issuable upon exercise of options
exercisable within 60 days of the Record Date.
|
(10)
|
Includes 59,000 shares issuable upon exercise of options
exercisable within 60 days of the Record Date.
|
(11)
|
Includes 91,250 shares issuable upon exercise of options
exercisable within 60 days of the Record Date.
|
(12)
|
Includes 59,000 shares issuable upon exercise of options
exercisable within 60 days of the Record Date.
|
(13)
|
Includes 59,000 shares issuable upon exercise of options
exercisable within 60 days of the Record Date.
|
(14)
|
Includes 55,000 shares issuable upon exercise of options
exercisable within 60 days of the Record Date.
|
(15)
|
Includes 14,383 shares issuable upon exercise of options
exercisable within 60 days of the Record Date.
|
(16)
|
Includes 13,333 shares of Restricted Stock and 1,607,399 shares
issuable upon exercise of options exercisable within 60 days of the
Record Date. Also includes shares subject to irrevocable proxies
granted to Company’s management as provided for in the
Stockholder Agreement, the 1 8 999 Trust Exemption Agreement, and
the Piton Exemption Agreement.
|
CORPORATE GOVERNANCE MATTERS
Board Classes
The
Board is divided into three classes, with each class holding office
for staggered three-year terms. The term of the Class I
Directors, Matias de Tezanos, Chan W. Galbato, and Jared R. Rowe,
expires at the Annual Meeting; the term of the Class II Directors,
Michael A. Carpenter, Mark N. Kaplan, and Jose Vargas, expires in
2021; and the term of the Class III Directors, Michael J. Fuchs and
Janet M. Thompson, expires in 2022.
Committees of the Board of Directors
The
Board has constituted an Audit Committee, a Compensation Committee,
and a Corporate Governance and Nominations Committee. Copies of the
charters of each of these committees are posted and available on
the Corporate Governance link of the Investor Relations section of
the Company’s website,
www.autoweb.com. Information on the Company’s
website is not incorporated by reference in this Proxy
Statement.
Audit Committee. The
Audit Committee was established by the Board in accordance with
Section 3(a)(58)(A) of the Exchange Act. The Audit
Committee met on six occasions in 2019 and operates under a charter
approved by the Board. The Audit Committee’s
primary responsibilities are to:
●
oversee
AutoWeb’s accounting and financial reporting policies,
processes, practices and internal controls; and
●
appoint,
approve the compensation of, and oversee the Company’s
independent registered public accounting firm.
The Audit Committee currently consists of Mark N.
Kaplan (Chairman), Michael A. Carpenter, Chan W. Galbato, and Janet
M. Thompson. The Audit Committee meets periodically with the
Company’s independent registered public accounting firm, both
with and without management present. The Board has determined
that Mr. Kaplan is an “audit committee financial
expert” within the meaning of Item 407(d)(5)(ii) of
Regulation S-K under the Securities Act of 1933, as amended,
(“Securities
Act”). The
identification of Mr. Kaplan as an “audit committee
financial expert” does not impose on him any duties,
obligations or liabilities that are greater than the duties,
obligations and liabilities imposed on him as a member of the Audit
Committee in the absence of this
identification.
Compensation Committee. The Compensation Committee, which met on
four occasions in 2019 and operates under a charter approved by the
Board, is responsible for:
●
determining
or recommending to the Board the compensation of the Chief
Executive Officer and each other executive officer or any other
officer who reports directly to the Chief Executive Officer based
on the performance of each officer;
●
making
recommendations to the Board regarding stock option plans and other
equity compensation arrangements;
●
granting
equity awards and approving any delegation of such responsibility
under certain circumstances; and
●
preparing
reports regarding executive compensation for disclosure in
AutoWeb’s proxy statements or as otherwise required by
applicable laws.
The Compensation Committee currently consists of
Janet M. Thompson (Chairwoman), Michael J. Fuchs, Mark N. Kaplan,
and Chan W. Galbato. The Compensation Committee does not have
authority to delegate its responsibilities to a subcommittee
without approval of the Board. The Board has approved the
creation of the Non-Executive Stock Option Committee, a committee
of the Board that currently consists of one director, Jared R.
Rowe, the Company’s President and Chief Executive
Officer. The Non-Executive Stock Option Committee has the
authority to grant stock options to eligible persons who
(i) are employed by the Company or its subsidiaries and are
not subject to reporting under Section 16(a) of the Exchange
Act or (ii) are consultants or service providers to the
Company or its subsidiaries. The Non-Executive Stock Option
Committee may not grant more than 250,000 options in the aggregate
in any one fiscal year, and individual grants cannot exceed more
than 25,000 options. In accordance with the Company’s
bylaws, the Board has also authorized
the Company’s Chief Executive Officer to appoint vice
presidents of the Company (“CEO Appointed Vice Presidents”)
who are not (i) executive officers of the Company; (ii) officers
subject to Section 16 of the Exchange Act; or (iii) reporting
directly to the Chief Executive Officer, and in connection with
such grant of authority the Compensation Committees recommended
that the Board authorize, and the Board did authorize, the
Company’s Chief Executive Officer to determine the
compensation (including salaries pursuant to the Company’s
bylaws) of CEO Appointed Vice Presidents; provided that any CEO
Appointed Vice President’s annual base salary does not exceed
$300,000 and any annual incentive compensation target does not
exceed 40% of the vice president’s annual base salary).
The processes of the Compensation
Committee and the role of the Chief Executive Officer and
compensation consultants in determining or recommending the amount
or form of executive or director compensation are discussed in the
section of this Proxy Statement entitled “EXECUTIVE
COMPENSATION–Named Executive Officers Compensation
Narrative.”
Corporate Governance and Nominations Committee. The Corporate Governance and Nominations
Committee, which met twice in 2019 and operates under a charter
approved by the Board, is responsible for:
●
identifying
individuals qualified to become directors and selecting director
nominees or recommending nominees to the Board for
nomination;
●
recommending
nominees for appointment to committees of the
Board;
●
developing
and recommending charters of committees of the Board;
and
●
overseeing
the corporate governance of AutoWeb and, as deemed necessary or
desirable from time to time, developing and recommending corporate
governance policies to the Board.
The
Corporate Governance and Nominations Committee currently consists
of Michael J. Fuchs (Chairman), Mark N. Kaplan, and Chan W.
Galbato.
Attendance at Board and Committee Meetings
During
the fiscal year ended December 31, 2019, the Board held a total of
seven meetings. Each member of the Board who served in 2019
attended 80% or more of the aggregate of (i) the total number of
meetings of the Board held during the period in 2019 for which the
director was a member; and (ii) the total number of meetings held
by all committees of which the director was a member during 2019
and during the period in which the director served as a member of
the committees; provided, however, that Mr. Fuchs only attended 50%
of the meetings of the Audit Committee held in 2019 prior to his
ceasing to be a member of the Audit Committee on June 20, 2019. The
Board and its committees typically meet in executive session
without management present during regularly scheduled meetings of
the Board and the committees.
Attendance at Annual Meeting of Stockholders
All
directors who served in 2019 (except for Mr. Jeffrey Stibel who
resigned as a director on January 11, 2019) attended the 2019
annual meeting of stockholders, of which six directors attended in
person and two attended by telephone. Typically, a Board meeting is
scheduled on the date of any annual meeting of
stockholders. Although the Board has not adopted a formal
policy, all directors are expected to attend the annual meeting of
stockholders.
Director Independence
All
directors, other than Messrs. de Tezanos, Rowe and Vargas, and all
members of the Audit, Compensation, and Corporate Governance and
Nominations Committees satisfy the definition of independent
director under the Nasdaq listing rules. The current members
of the Audit Committee, Compensation Committee and Corporate
Governance and Nominations Committee are “independent”
under the Nasdaq listing rules and the SEC rules regarding audit
committee and compensation committee membership.
Compensation Committee Interlocks and Insider
Participation
Ms. Thompson
and Messrs. Fuchs, Kaplan, and Galbato served as the members of the
Compensation Committee during the Company’s last completed
fiscal year. No member of the Compensation Committee was an
officer or employee of the Company during its last completed fiscal
year. None of the Company’s executive officers served as a
member of the compensation committee or board of any other entity
that has an executive officer serving as a member of the Board or
Compensation Committee.
Board Leadership Structure
The
Board does not have a policy on whether the roles of Chief
Executive Officer and Chairman of the Board should be separate and,
if they are to be separate, whether the Chairman of the Board
should be selected from the non-employee directors or be an
employee of the Company. The Board believes that the Company
and its stockholders benefit when the Board is free to determine
the most appropriate leadership structure in light of the
experience, skills and availability of directors and the Chief
Executive Officer as well as other circumstances. Currently,
Mr. Fuchs serves as the Chairman of the Board, and Mr. Rowe serves
as a director and Chief Executive Officer. The Board believes
this is the most appropriate structure for the Company at this time
because it makes the best use of the experience, skills and
availability of Mr. Fuchs and Mr. Rowe.
Board’s Role in Oversight of Risk
It
is management’s responsibility to manage risk and bring to
the Board’s attention the most material risks to
AutoWeb. The Board, including through Board committees
comprised solely of independent directors, regularly reviews
various areas of significant risk to AutoWeb and advises and
directs management on the scope and implementation of policies,
strategic initiatives and other actions designed to mitigate
various types of risks. Specific examples of risks reviewed by the
Board with management include competition risks, industry risks,
economic risks, liquidity risks, business operations risks, cyber
security risks and risks related to acquisitions and
dispositions. The Audit Committee regularly reviews with
management and the independent auditors significant financial risk
exposures and the processes management has implemented to monitor,
control and report these exposures. Specific examples of risks
reviewed by the Audit Committee include risks related to the
preparation of the Company’s financial statements, disclosure
controls and procedures, internal controls and procedures required
by the Sarbanes-Oxley Act of 2002, accounting, financial and
auditing risks, treasury risks (insurance, credit and debt),
matters reported to the Audit Committee through anonymous reporting
procedures, risks posed by significant litigation matters and
compliance with applicable laws and regulations. The Audit
Committee also oversees compliance with the Company’s Code of
Conduct and Ethics for Employees, Officers and Directors and
evaluates proposed transactions with related persons for compliance
with laws and regulations and with Company policies and contracts.
The Company’s Compensation Committee reviews and evaluates
potential risks related to the attraction and retention of talent
and risks related to the design of compensation programs
established by the Compensation Committee for AutoWeb’s
executive officers. These procedures, however, cannot guaranty that
all material risks will be identified, or if identified, reasonably
and adequately mitigated. They also cannot assure that all persons
are in compliance with the Company’s policies and procedures
or that the Company and its employees are in compliance with all
applicable laws and regulations.
Executives’
base salaries are fixed in amount and thus do not encourage
excessive risk-taking. Incentive compensation in large part is
tied to overall corporate performance. A significant portion
of compensation provided to the executive officers is in the form
of equity awards subject to time- and performance-vesting that are
intended to further align executives’ interests with those of
the Company’s stockholders. The Compensation Committee
believes that these awards do not encourage unnecessary or
excessive risk-taking since the ultimate value of the awards is
tied to the Company’s stock price, and since awards are
staggered and subject to long-term vesting schedules to help ensure
that executives have significant value tied to long-term stock
price performance.
The
Compensation Committee has also reviewed the Company’s
compensation programs for employees generally and has concluded
that these programs do not create risks that are reasonably likely
to have a material adverse effect on the Company. The
Compensation Committee believes that the design of the
Company’s annual cash and long-term equity incentives
provides an effective and appropriate mix of incentives to help
ensure the Company’s performance is focused on long-term
stockholder value creation and does not encourage the taking of
short-term risks at the expense of long-term results. In
general, incentive compensation opportunities for Company employees
are capped, and the Company has discretion to reduce or increase
incentive compensation payments (or pay no incentive compensation)
based on individual performance and any other factors it may
determine to be appropriate in the circumstances. As with the
compensation of the Company’s executive officers, a portion
of the compensation for other officers and some other
managerial-level employees generally is delivered in the form of
equity awards that help further align the interests of these
officers and other employees with those of
stockholders.
Board Nominee Process
The Corporate Governance and Nominations Committee
considers candidates for nomination as directors who are suggested
by the committee’s members and other directors, as well as
management and stockholders. A stockholder who wishes to
recommend a prospective nominee for the Board should notify
AutoWeb’s Secretary or any member of the Corporate Governance
and Nominations Committee in writing with whatever supporting
material the stockholder considers appropriate. The Corporate
Governance and Nominations Committee will also consider whether to
nominate any person nominated by a stockholder pursuant to the
provisions of the Bylaws relating to stockholder nominations as
described in the section of this Proxy Statement entitled
“FUTURE STOCKHOLDER NOMINATIONS
AND PROPOSALS”
below.
Generally,
once the Corporate Governance and Nominations Committee identifies
a prospective nominee, the Corporate Governance and Nominations
Committee will make an initial determination as to whether to
conduct a full evaluation of the candidate. This initial
determination will be based on the information provided to the
Corporate Governance and Nominations Committee with the
recommendation of the prospective candidate, as well as the
Corporate Governance and Nominations Committee’s own
knowledge of the prospective candidate, which may be supplemented
by inquiries to the person making the recommendation or
others. Generally, the preliminary determination will be based
primarily on the need for additional Board members to fill
vacancies or expand the size of the Board and the likelihood that
the prospective nominee can satisfy evaluation factors determined
by the Corporate Governance and Nominations Committee to be
appropriate from time to time for that evaluation. If the
Corporate Governance and Nominations Committee determines, in
consultation with the other members of the Board, as appropriate,
that additional consideration is warranted, it may request a
third-party search firm to gather additional information about the
prospective nominee’s background and experience and to report
its findings to the Corporate Governance and Nominations
Committee.
The
Corporate Governance and Nominations Committee will then evaluate
the prospective nominee against factors it considers appropriate
from time to time, which currently include:
●
The
ability of the prospective nominee to represent the interests of
the stockholders of AutoWeb;
●
The
prospective nominee’s standards of integrity, commitment and
independence of thought and judgment; and
●
The
extent to which the prospective nominee would contribute to the
range of talent, skill and expertise appropriate for the
Board.
The
Corporate Governance and Nominations Committee generally intends to
nominate current members of the Board in the year in which their
respective term expires so long as they continue to exhibit the
qualities described above and are otherwise qualified to serve as
members of the Board.
The
Corporate Governance and Nominations Committee may also consider
such other relevant factors as it deems appropriate, including the
current composition of the Board, the balance of management and
independent directors, the need for Audit Committee expertise and
the evaluations of other prospective nominees. In connection
with this evaluation, the Corporate Governance and Nominations
Committee will determine whether to interview the prospective
nominee, and if warranted, one or more members of the Corporate
Governance and Nominations Committee and others, as appropriate,
will interview prospective nominees in person or by
telephone. After completing this evaluation and interview, the
Corporate Governance and Nominations Committee will make a
recommendation to the full Board as to the persons who should be
nominated by the Board, and the Board determines the nominees after
considering the recommendation and report of the Corporate
Governance and Nominations Committee.
The
Corporate Governance and Nominations Committee and the Board review
the qualities of the Board members as a group, including the
diversity of the Board’s career experiences, viewpoints,
company affiliations, expertise with respect to the various facets
of the Company’s business operations and business
experiences. The Board has not adopted a formal policy and did
not employ any particular benchmarks with respect to these
qualities but was mindful of achieving an appropriate balance of
these qualities with respect to the Board as a
whole. Moreover, the Board and Corporate Governance and
Nominations Committee considered each nominee’s overall
service to the Company during the previous term, each
nominee’s personal integrity and willingness to apply sound
and independent business judgment with respect to the
Company’s matters, as well as the individual experience of
each director noted within their biographies above.
Stockholder Communications with the Board of Directors
Stockholders
and other parties interested in communicating directly with any
director or with the non-management directors as a group may do so
by writing to the Secretary, AutoWeb, Inc., 400 North Ashley Drive,
Suite 300, Tampa, Florida 33602. The Company has established a
process for handling correspondence received by it addressed to
non-management members of the Board. Under that process, the
Secretary reviews all such correspondence and forwards to the Board
a summary of all such correspondence and copies of all
correspondence that, in the opinion of the Secretary, deals with
the functions of the Board or committees thereof or that the
Secretary otherwise determines requires the attention of the
Board. The Board may at any time review a log of all
correspondence received by AutoWeb that is addressed to members of
the Board and request copies of any such
correspondence. Concerns relating to accounting, internal
controls or auditing matters are immediately brought to the
attention of the Chairman of the Audit Committee and handled in
accordance with procedures established by the Audit Committee with
respect to those matters.
Code of Conduct and Ethics
The Board has adopted a Code of Conduct and Ethics
for Employees, Officers and Directors (“Code of
Ethics”). The Code
of Ethics is applicable to the Company’s employees, officers
and directors, including the principal executive officer, the
principal financial officer and the principal accounting
officer. The Code of Ethics is posted and available on the
Corporate Governance link of the Investor Relations section of the
Company’s website, www.autoweb.com, and a copy of the Code of
Ethics may also be obtained, free of charge, by writing to the
Corporate Secretary, AutoWeb, Inc., 400 North Ashley Drive, Suite
300, Tampa, Florida 33602. The Company intends to post
amendments to, or waivers from, the Code of Ethics (to the extent
applicable to the Company’s Chief Executive Officer,
Principal Financial Officer or Principal Accounting Officer or
directors) at this location on the Company’s website.
Information on the Company’s website is not incorporated by
reference in this Proxy Statement. The adoption of the Code of
Ethics and other standards of conduct is not a representation or
warranty that all persons subject to the Code of Ethics or
standards are or will be in complete compliance with the Code of
Ethics or any other standards of conduct that may be
adopted.
Certain Relationships and Related Party Transactions
The
Company’s Code of Ethics provides specific guidelines
regarding conflict of interest situations as well as a process for
reporting and approving related party transactions.
The Company’s written Code of Ethics defines
a related party transaction as any transaction (or series of
transactions) in excess of $120,000 since the beginning of the
Company’s last fiscal year, or any currently proposed
transactions, in which the Company is a participant and in which
any member of the Management Group (as defined below), any
stockholder owning more than 5% of the Company’s voting
stock, or any immediate family member of any of the foregoing
persons has a direct or indirect material interest. An
“immediate family member” means any child, stepchild,
parent, stepparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law or sister-in-law of
such director, executive officer or nominee for director, and any
person (including domestic partners, but excluding tenants or
employees) sharing the household of a director, director nominee,
executive officer or stockholder owning more than 5% of the
Company’s voting stock. A “transaction”
includes, but is not limited to, any commercial or financial
transaction or arrangement or relationship (including any
indebtedness or guarantee of indebtedness) or any series of similar
transactions, arrangements or relationships. The
“Management Group” is comprised of the Chief Executive
Officer, Principal Financial Officer, Principal Accounting Officer
(or any person performing similar functions), any other officer of
the Company and any director or nominee for
director. Any covered person who may be involved in a
related party transaction must promptly report that transaction to
the Chairman of the Audit Committee or the Company’s Chief
Legal Officer (“CLO”), who must then report the transaction to
the Chairman of the Audit Committee upon becoming advised of such
transaction. The Audit Committee, in its sole discretion, must
approve or disapprove all related party
transactions. Conflicts of interest or potential conflicts of
interest must be reported to the CLO who will evaluate the
circumstances relating to the conflict of interest or potential
conflict of interest and report the findings of such evaluation to
the Chief Executive Officer, who in turn, if warranted under the
circumstances, must report such situation or activity to the
Chairman of the Audit Committee;
provided, however,
(i) that if the conflict of interest or potential conflict of
interest involves any member of the Management Group, the CLO must
report that situation or activity to the Chairman of the Audit
Committee; and (ii) the CLO is not precluded from reporting
any conflict of interest or potential conflict of interest
involving any covered person who is not a member of Management
Group directly to the Chairman of the Audit Committee should the
CLO believe such direct reporting to the Chairman of the Audit
Committee is warranted under the circumstances. Upon being
advised of a complaint, concern or other reporting under the Code
of Ethics, the Chairman of the Audit Committee will confer with the
other members of the Audit Committee. If appropriate under the
circumstances, the Chairman of the Audit Committee may request that
the CLO issue a written advisory to the covered person as to
whether or not the reported situation or activity constitutes a
violation of the Code of Ethics. If the CLO would not be the
appropriate party to issue a written advisory, outside counsel may
be retained to issue such written advisory unless the Audit
Committee determines that such written advisory can be issued by
the Chairman of the Audit Committee without outside counsel
input.
Although
the Company’s Code of Ethics provides guidelines regarding
conflict of interest situations, it cannot and does not set forth
every possible conflict of interest scenario. Therefore, the
Code of Ethics provides that there is no substitute for sound
judgment and common sense by directors, officers or other employees
in each case based upon the particular facts involved. The
foregoing description of the Company’s Code of Ethics is not
intended to constitute a representation as to compliance by any
covered person.
AutoWeb has engaged Soluciones AW, S.A.
(“Soluciones”) to provide office space and related
office services to AW GUA, Sociedad de Responsabilidad Limitada,
AutoWeb’s wholly-owned, indirect subsidiary in Guatemala
(“AW
GUA”). Under the
agreement between AW GUA and Soluciones, AW GUA pays Soluciones
107% of the actual expenses paid and costs incurred by Soluciones
in providing the office space and related office services.
During the period from January 1,
2019 to March 31, 2020, AW GUA made payments to Soluciones of
approximately $213,814. Soluciones is controlled by
PeopleFund, which in turn is controlled by Messrs. Vargas and de
Tezanos, each a director of AutoWeb. For information concerning the
beneficial ownership of the Company’s Common Stock by Messrs.
De Tezanos and Vargas and PeopleFund, see the section of this Proxy
Statement entitled “SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT.” The Audit Committee and Board evaluated
the arrangement with Soluciones and the potential conflict and its
potential impact on the Company. The Audit Committee and Board
considered the Company’s significant investment in the
operations in Guatemala acquired upon the acquisition of AutoWeb
and the benefit the Company derives from its investment and these
operations. The Audit Committee and the Board concluded that the
benefits to the Company resulting from the continued engagement of
Soluciones outweighed the potential conflict that might arise from
the relationship. The Audit Committee and the Board (with Messrs.
Vargas and de Tezanos abstaining) each approved the Soluciones
arrangement in accordance with the Company’s Code of Ethics
and waived any potential conflict.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
AND
AUDIT COMMITTEE REPORT
Independent Registered Public
Accounting Firm
Moss
Adams has been appointed by the Company’s Audit Committee as
the Company’s independent registered public accounting firm
to audit the Company’s consolidated financial statements for
the fiscal year ending December 31, 2020, and to perform
procedures related to the financial statements included in the
Company’s quarterly reports on Form 10-Q, beginning with
the quarter ended March 31, 2020. Moss Adams also served
as the Company’s independent registered public accounting
firm for the years ended December 31, 2019, 2018 and 2017. A
representative of Moss Adams is expected to be present at the
Annual Meeting, either in person or available remotely, to make a
statement if the representative desires and to respond to
appropriate questions that may be asked by
stockholders.
Principal Accountant Fees and Services
Aggregate
fees for professional services rendered by Moss Adams for the years
ended December 31, 2019 and 2018 were as follows:
|
|
|
Audit
fees
|
$530,500
|
$523,500
|
Audit-related
fees
|
8,000
|
13,750
|
Tax
fees
|
9,375
|
9,700
|
Total
|
$547,875
|
$546,950
|
Audit Fees. Audit
fees consist of professional
services rendered in connection with the 2019 audit and 2018 audit
of the Company’s annual consolidated financial statements and
reviews of interim consolidated financial statements included in
the Company’s Quarterly Reports on
Form 10-Q.
Audit-Related Fees. Audit-related fees for 2019 and 2018
consist of services rendered in connection with the audit of the
Company’s Retirement Savings 401(k) Plan and, in addition for
2018, fees related to review of Registration Statements on Form S-8
filed by the Company with the SEC.
Tax Fees. Tax fees for 2019 and
2018 consist of fees related to tax consulting services and
evaluations of the Company’s tax benefits, including net
operating loss carryovers, under Internal Revenue Code Section
382.
The
Audit Committee has determined that the services described above
were compatible with maintaining Moss Adams’ audit
independence.
Pre-Approval Policy for Services
Under
its charter, the Audit Committee is required to pre-approve all
audit (including the annual audit engagement letter with the
independent registered public accounting firm) and permitted
non-audit services (including the fees and terms thereof) provided
to the Company by the Company’s independent registered public
accounting firm, subject to the de minimis exception for non-audit
services as described in the Exchange Act. The Audit Committee
consults with management with respect to pre-approval, including
whether the provision of permitted non-audit services is compatible
with maintaining the registered public accounting firm’s
independence, and may not delegate these responsibilities to
management. The Audit Committee may delegate to any member or
members of the Audit Committee the power to grant any pre-approval,
provided that the pre-approval is reported to the Audit Committee
at the next scheduled Audit Committee meeting.
Each
member of the Audit Committee has the authority to approve fees for
services by the Company’s independent registered public
accounting firm of up to $50,000. Any approved fees may be
exceeded by no more than 20% without seeking further approval even
if the total amount of those fees, including the excess, exceeds
$50,000. This authority is delegated first to Mr. Kaplan,
then in the following order to Ms. Thompson, Mr. Galbato
and Mr. Carpenter. Any approval by a member of the Audit
Committee is required to be reported to the Audit Committee at the
next regularly scheduled meeting of the Audit Committee. All
fees for services provided by Moss Adams during 2019 and 2018,
respectively, were approved by the Audit Committee.
From
time to time, the Audit Committee pre-approves fees and services up
to a maximum amount for future services relating to recurring tax
matters and securities filings.
Audit Committee Report
The
following Audit Committee Report is provided in accordance with the
rules and regulations of the SEC. Pursuant to those rules and
regulations, this Audit Committee Report is not to be deemed
“soliciting materials” or “filed” with the
SEC, subject to Regulation 14A or 14C of the Exchange Act or
subject to the liabilities of Section 18 of the Exchange
Act. This Audit Committee Report shall not be deemed to be
incorporated by reference by any general statement incorporating by
reference this Proxy Statement into any filing under the Securities
Act or the Exchange Act except to the extent that AutoWeb
specifically incorporates this information by
reference.
The Audit Committee has reviewed and discussed the
Company’s audited financial statements for the fiscal year
ended December 31, 2019, with the management of the
Company. The Audit Committee has discussed with Moss Adams the
matters required to be discussed by the applicable requirements of
the Public Company Accounting Oversight Board
(“PCAOB”) and the SEC. The Audit Committee has
also received the written disclosures and the letter from Moss
Adams required by applicable requirements of the PCAOB regarding
the independent accountant’s communications with the Audit
Committee concerning independence, and has discussed with Moss
Adams the independent accountant’s
independence.
Based
on the foregoing review and discussions, the Audit Committee has
recommended to the Board that the audited financial statements be
included in the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2019.
The
members of the Audit Committee are not professionally engaged in
the practice of auditing or accounting and are not employed by
AutoWeb for accounting, financial management or internal control
purposes. Members of the Audit Committee relied, without
independent verification, on the information provided to them and
on the representations made by management and the independent
auditors. Accordingly, the Audit Committee’s oversight
does not provide any basis, other than the review and discussions
with management and the independent auditors referred to above, to
determine that management has maintained appropriate accounting and
financial reporting principles and policies or internal controls
over financial reporting and procedures designed to assure
compliance with accounting standards and applicable laws and
regulations. Furthermore, the Audit Committee’s
considerations and discussions referred to above do not assure that
the audit of AutoWeb’s financial statements has been carried
out in accordance with the standards of the PCAOB or that
AutoWeb’s auditors are in fact
“independent.”
|
The Audit Committee
Mark
N. Kaplan, Chairman
Michael
A. Carpenter
Chan
W. Galbato
Janet
M. Thompson
|
|
|
EXECUTIVE COMPENSATION
Named Executive Officers Compensation Narrative
For
2019, the Company’s named executive officers
are:
●
Jared
R. Rowe, President and Chief Executive Officer
●
Daniel
R. Ingle, Executive Vice President, Chief Operating
Officer
●
Joseph P.
(“JP”) Hannan, Executive Vice President,
Chief Financial Officer
The names, ages and backgrounds of the
Company’s current executive officers are included in the
section of this Proxy Statement entitled “EXECUTIVE
OFFICERS,” with Mr.
Rowe’s biographical information included under the section of
this Proxy Statement entitled “PROPOSAL 1–ELECTION OF
DIRECTORS–Nominees for Class I Directors.”
General
Compensation Philosophy and Objectives. The role of the Compensation Committee is
to determine, or recommend to the Board for determination, the
salaries and other compensation of the Company’s executive
officers and any other officer who reports directly to the Chief
Executive Officer, and to make grants under, and to administer, the
stock option, restricted stock and other employee equity and
incentive compensation plans.
To
promote responsible compensation practices:
●
The Compensation Committee directly engaged an
independent compensation consultant (see “Compensation
Consultants”);
●
The
Company’s 2018 Equity Incentive Plan prohibits repricing of
option and stock appreciation rights (except for certain
adjustments upon changes in capitalization or control) without
stockholder approval;
●
The
Company’s securities trading policy generally precludes
executive officers from engaging in transactions involving put or
call options, short sales and buying or holding Common Stock on
margin. All trades by executive officers must be pre-cleared with
the Company’s Chief Legal Officer.
The
Company’s compensation philosophy for executive officers is
to align compensation with corporate performance and efforts to
increase stockholder value, while providing a total compensation
opportunity that is broadly competitive and enables the Company to
attract, motivate, reward and retain key executives and employees.
The Company does not target specific compensation
percentiles. Accordingly, each executive officer’s
compensation package is typically comprised of the following three
elements:
●
Base
annual salary that is designed primarily to reflect individual
responsibilities and personal experience and to compare with
similar roles at the Company and at technology and online marketing
companies that are of comparable size to the Company and with which
the Company competes for executive personnel;
●
Annual
variable performance awards, such as incentive compensation,
payable in cash, stock options or shares of stock to reward
executive officers for the achievement of pre-established Company
financial performance goals;
●
Long-term,
equity-based incentive awards to strengthen the mutuality of
interests between the executive officers and the Company’s
stockholders, reward executive officers for increasing stockholder
value, and retain executive officers through continued service
requirements.
Additionally,
the Company’s executive officers are typically entitled to
severance payments in the event of termination of employment
without cause or by the executive officer for good reason and other
benefits and perquisites that are discussed below.
Compensation
decisions are designed to promote the Company’s business
objectives and strategy and enable the Company to attract, retain
and motivate qualified executive officers who are able to
contribute to the Company’s long-term success. Among the
factors considered by the Company in determining executive officer
compensation are the ability to recruit individuals with the
necessary talents and the need to retain and motivate the
Company’s executive officers. The Company considers the
competitive market for executives in setting each element of
compensation indicated above. However, the Company does not
attempt to set each compensation element for each executive within
a particular range related to levels provided by comparable
companies. Rather, the Company uses market comparisons as one
factor in making compensation decisions. The Company also
considers other factors in making executive compensation decisions,
including local market forces, individual contribution and
performance, management skills, internal pay equity, the
undertaking of new roles and responsibilities, importance of the
executive’s role and responsibilities to the Company’s
future success and the executive’s experience, including
prior work experience, length of service to the Company, leadership
and growth potential.
Under
the Company’s compensation structure, the mix of base annual
salary, annual variable performance awards, and long-term,
equity-based incentive awards varies depending upon level of
responsibility and experience. In allocating compensation
among these elements, the Company believes that the compensation of
members of senior management who have the greatest ability to
influence the Company’s performance should have a greater
proportion of their compensation based on Company performance than
lower levels of management. There is, however, no
pre-established policy for the allocation between either cash and
non-cash or short-term and long-term compensation. The mix of
compensation determined by the Company is between base annual
salary compensation and incentive compensation. Long-term,
equity-based compensation is determined separately and may not be
awarded every year.
Base Annual
Salary. The objective of base
annual salary is to secure the services of the Company’s
executive officers and reflect job responsibilities, individual
performance, market competitiveness, the value of such services to
the Company’s business, and the size of the Company’s
business. Salaries for executive officers are generally
determined on an individual basis by evaluating each executive
officer’s scope of responsibility, performance, prior
experience, and salary history, as well as, competitive market
information. The Compensation Committee also considers the
recommendations of the Chief Executive Officer (except in the case
of the Chief Executive Officer’s own compensation). The
Chief Executive Officer is not present during any voting or
deliberations by the Compensation Committee with respect to the
Chief Executive Officer’s compensation.
Annual
Non-Equity-Based Incentive Compensation, Retention and
Discretionary Awards. The
Company’s compensation structure provides for the opportunity
for executive officers to be awarded annual incentive compensation
pursuant to incentive compensation plans established each year
(“Annual Incentive Compensation
Plans”). Annual
Incentive Compensation Plans are generally performance-based, and
all awards are ultimately made at the sole discretion of the
Compensation Committee. The objective of the annual incentive
compensation awards under these plans is to enhance retention and
motivate individuals to achieve specific goals established by the
Compensation Committee. These goals may consist of any or all
of the following:
●
Company-wide
performance goals;
●
Specific
individual goals that are intended to advance the Company’s
business and create long-term stockholder value;
●
Overall
individual performance; or
●
Other
factors deemed relevant to the Company’s overall financial
and operating performance, including market and competitive
factors.
The Compensation Committee from time to time also considers various
other discretionary, retention or incentive compensation
alternatives for the Company’s executive officers, including
discretionary awards for completion of special projects (including
acquisition and disposition transactions).
The
Compensation Committee establishes a target annual incentive
compensation award opportunity for each executive officer based on
a percentage of base annual salary. The Compensation Committee
establishes target award opportunities for executive officers after
reviewing survey data provided by the Company’s Independent
Compensation Consultant (described below), and, in the case of
executive officers other than the Chief Executive Officer, input
from the Chief Executive Officer. The Company believes this is
a meaningful incentive to achieve the incentive compensation goals
and an appropriate and reasonable allocation to performance-based
annual cash incentive compensation to motivate executive
officers.
Typically,
the Compensation Committee, with the participation of the Chief
Executive Officer, sets compensation performance goals for the
Company for the year. Generally, unless specific individual
performance goals are established, the target annual incentive
compensation award opportunity for executive officers has been
based upon the attainment of Company-wide performance goals, which
reflects the Company’s belief that executive officers are
accountable for the Company’s overall operating performance.
If the Compensation Committee elects to allocate any portion of an
executive officer’s target annual incentive compensation
award opportunity to specific individual performance goals, the
Compensation Committee sets the individual performance goals for
the Chief Executive Officer, and the Chief Executive Officer, after
consultation with the Compensation Committee, sets the specific
individual performance goals for the other executive
officers. If specific individual performance goals are
established, a percentage allocation between Company-wide business
objectives and individual performance goals is determined that the
Company believes is an appropriate and reasonable allocation that
aligns the annual incentive compensation of executive officers with
individual performance. The individual performance goals are
based on, and reflect, each individual’s responsibilities
and, to the extent applicable, contribution to revenue, and may at
times include such factors as leadership, teamwork, growth
initiatives and other activities that are considered important to
contributing to the long-term performance of the
Company.
For
Company-wide goals, the Compensation Committee may adopt a formula
that establishes an award payout range based on the level of
performance attained, with a minimum below which no payment is made
and a maximum beyond which no additional incentive compensation is
paid. In determining the extent to which the Company-wide
performance goals are met for a given period, the Compensation
Committee exercises its judgment whether to reflect or exclude
specific circumstances that the Company experienced during the year
as well as the impact of unusual or infrequently occurring events
or other particular circumstances affecting the Company’s
business, changes in accounting principles, acquisitions,
dispositions, impairment of assets, restructuring charges and
litigation costs and successes, and may also consider the relative
risks in achieving the goals reflected in the Company’s
annual operating plan.
Long-Term,
Equity-Based Incentive Awards. Equity-based compensation in the form of
stock options or restricted stock awards are provided to link the
interests of executive officers with the long-term interests of the
Company’s stockholders, support a pay-for-performance
culture, foster employee stock ownership, focus the management team
on increasing value for the stockholders and to encourage executive
officers to remain in the Company’s employ. In addition,
stock options and restricted stock awards help to provide a
long-term balance to the overall compensation program. While
cash bonus payments are focused on short-term performance, the
multi-year vesting schedule of stock options and the forfeiture
restrictions on restricted stock awards create incentives for
increases in stockholder value over a longer
term.
The
Company grants stock options that are performance-based,
service-based or a combination of the two. Although the
Company views all stock options as performance-based because they
require the stock price to increase in order for the recipient to
realize value from the stock options, the Company has granted stock
options subject to vesting based on levels of achievement of
specified Company goals that encourage preservation and enhancement
of stockholder value. Service-based vesting also encourages
executive retention. Restricted stock that is subject to
forfeiture in the event an executive officer leaves the Company
prior to the lapse of the forfeiture restrictions provides similar
retention and long-term motivational effects. The Company
views restricted stock as providing employment retention incentives
and an incentive to increase stock values because they become more
valuable as the price of Common Stock increases.
The
level of long-term incentive compensation is determined based on an
evaluation of competitive factors, the position and level of
responsibility of each executive officer, the Company’s
belief that stock options should be a significant part of the total
mix of executive officer compensation and the goals of the
compensation objectives described above. Options are granted
with exercise prices of not less than the closing price of the
Company’s stock on the date of grant. Depending on the
circumstances, in establishing grant levels, the Company may
consider the equity ownership levels of the recipients and exercise
prices of existing grants or prior grants that are fully or
partially vested. The Company does not have a policy requiring
executive officers or directors to hold shares acquired following
stock option exercise or restricted stock vesting for any
additional length of time, unless the shares are specifically
subject to a resale restriction, and there are no ownership
guidelines for executives or directors, as this is not viewed as
competitive for a public company of AutoWeb’s
size.
The
Company typically awards stock options or restricted stock awards
to executive officers upon first joining the Company, promotion to
more senior executive positions and annually, with approximately
mid-year supplemental annual award adjustments made in some
years. At the discretion of the Compensation Committee,
executive officers may also be granted stock options or restricted
stock awards based upon completion of special projects (including
acquisition or disposition transactions) or to provide greater
incentives to continue their employment with the Company and to
strive to increase the value of the Common Stock. The number of
shares subject to each stock option granted or restricted stock
awarded is within the discretion of the Compensation Committee and
is based on anticipated future contributions and ability to impact
the Company’s results, past performance or consistency within
the officer’s internal pay level. The Compensation
Committee considers these factors, as well as applicable
contractual requirements, the value of long-term equity incentive
grants, the compensation expense associated with awards, leverage
and stockholder dilution. Stock option grants prior to the
adoption of the Company’s 2010 Equity Incentive Plan
typically had a term of ten years, but options granted after the
adoption of the 2010 Equity Incentive Plan expire no later than
seven years from the date of grant. Stock options and
restricted stock awards generally vest and become exercisable over
a three-year period, and the vesting of stock options and lapsing
of forfeiture restrictions for restricted stock awards typically
accelerate upon (i) a termination of employment without cause by
the Company or for good reason by the executive officer; or (ii) a
change in control of the Company, which may or may not be coupled
with a termination of employment by the Company without cause or by
the executive officer for good reason, or if the acquirer does not
assume, retain or exchange the options as provided in the
applicable plan pursuant to which the options were granted or the
applicable option award agreement. Equity awards may also provide
for full or limited acceleration of vesting upon the death or
disability of the award recipient.
The
Compensation Committee approves all stock options and other
equity-based awards, subject to limited delegation to the
Non-Executive Stock Option Committee, which consists of the
Company’s Chief Executive Officer, for stock option grants to
non-executive officers. Generally, the Compensation Committee
approves stock option grants to newly hired employees who are
executive officers prior to the date of commencement of employment,
with the employment commencement date as the grant
date.
Stockholder
Approval of Executive Compensation. At the Company’s 2019 Annual
Meeting of Stockholders (“2019 Annual
Meeting”), the
stockholders voted on an advisory proposal regarding approval of
the compensation paid to the Company’s named executive
officers. The Compensation Committee considered that
approximately 85% of the shares present at the 2019 Annual Meeting
and entitled to vote on the proposal were voted in favor of
approval of the proposal. The Company values
stockholders’ opinions and will consider the outcome of the
Company’s say-on-pay proposals when making future executive
compensation decisions regarding the Company’s named
executive officers. In addition, at the 2019 Annual Meeting,
the stockholders voted on an advisory basis with respect to the
frequency of future advisory votes to approve the compensation of
the Company’s named executive officers. Approximately
81% of the votes cast on this proposal were cast for a frequency of
every two years. In light of this vote, the Board determined
that it would present to stockholders a proposal for an advisory
say-on-pay proposal every two years.
Compensation
Consultants. The
Compensation Committee may, from time to time, directly retain the
services of independent consultants and other experts to assist the
Compensation Committee in connection with executive compensation
matters. During 2019, the Compensation Committee engaged the
services of Frederic W. Cook & Co., Inc., a national
executive compensation consulting firm (“Independent Compensation
Consultant”), to provide
market data and to review and provide recommendations regarding the
Company’s executive compensation programs and compensation of
the non-management members of the Board and its
committees. The Independent Compensation Consultant performs
services solely on behalf of the Compensation Committee and has no
relationship with the Company’s management except as it may
relate to the Independent Compensation Consultant’s
performance of its services for the Compensation
Committee. The Company’s executive officers did not
participate in the selection of the Independent Compensation
Consultant. Periodically, the Company’s Chief
Executive Officer seeks input from the Independent Compensation
Consultant on compensation matters relating to named executive
officers other than the Chief Executive Officer in providing
information to the Compensation Committee regarding executive
compensation matters. These inquiries relating to named
executive officer compensation occur with the advance knowledge of
the Compensation Committee chairperson. The Compensation
Committee has concluded that the Independent Compensation
Consultant is independent and that no conflict of interest exists
that would prevent the Independent Compensation Consultant from
independently advising the Compensation
Committee.
Option Forfeiture
Provisions for Accounting Restatements. For stock options granted to the
named executive officers during and after 2013, the stock option
award agreements provide for forfeiture of unexercised options and
recovery of gain from exercised options if at any time within 12
months after the named executive officer exercises the options, or
if within 12 months of the date of termination of employment with
the Company, as applicable, it is determined that the named
executive officer engaged in misconduct that resulted in an
accounting restatement due to material noncompliance with any
financial reporting requirement under applicable securities
laws.
2019
Compensation Decisions. For 2019, the Compensation Committee
determined the compensation of the Company’s 2019 named
executive officers in accordance with the general compensation
philosophy and objectives described above.
Compensation Reviews and Peer Group. In addition to the foregoing general
compensation philosophy and objectives, in August 2019, the
Compensation Committee consulted with the Independent Compensation
Consultant, which conducted an independent review of the
Company’s executive compensation program on behalf of the
Compensation Committee (“2019 Executive Compensation
Review”) to provide a
competitive reference on pay levels and performance
alignment. The 2019 Executive Compensation Review used a peer
group, proposed by the Independent Compensation Consultant and
approved by the Compensation Committee in June 2019, with industry-
and size-appropriate companies that were mostly based in high cost
of living locations (e.g., Boston, New York, Seattle and northern
California) similar to the Company’s location in Orange
County, California to reflect local labor market and cost of
living. The peer group used for the 2019 Executive Compensation
Review (“2019 Peer
Group”) consisted of the
following 17 U.S. based, publicly-traded, internet technology,
marketing services, and automotive industry broadly similar to the
Company, with an approximate range of $56 million to $358 million
in revenue and market capitalizations below $1.116 billion at the
time: Brightcove, Care.com, ChannelAdvisor, DHI Group, Ideanomics,
Leaf Group, Limelight Networks, Marchex, Rubicon Project, Seachange
Int’l, Support.com, TechTarget, Telaria, Telenav, Travelzoo,
TrueCar, U.S. Auto Parts, and Zix Corp.
Market comparisons were provided for the
Company’s executive officers covering base salaries; annual
incentives (levels and plan design); long-term incentive grant
values, awards, types and mix; and total direct compensation. The
Compensation Committee reviewed market pay and relative performance
data from the 2019 Peer Group. At the time, AutoWeb’s
estimated 2019 revenue approximated the peer group median and the
Company’s market capitalization value approximated the
25th
percentile of the peer group. Further,
the Company’s GAAP operating income was in the
25th
percentile for the peer group. The
Company does not target a particular benchmark level for the
pay and performance levels.
The
Compensation Committee, in consultation with the Independent
Compensation Consultant, considered the equity compensation
information contained in the 2019 Executive Compensation Review in
connection with the Committee’s decisions regarding stock
option awards to the continuing named executive officers during
2019.
2019 Base Annual Salary. The Compensation Committee
established the 2019 base annual salary of Mr. Ingle in connection
with the commencement of his employment with the Company after
consideration of the 2017 Executive Compensation Review and
consultation with, and confirmation of market data by, the
Independent Compensation Consultant. Based on the foregoing, the
Compensation Committee established Mr. Ingle’s base annual
salary for 2019 at $380,000. The base annual salary reported in the
Summary Compensation Table for Mr. Ingle reflects the proration of
his base annual salary for the time he was employed by the Company
during 2019.
The
Compensation Committee did not consider any changes in the base
annual salaries for Messrs. Rowe or Hannan for 2019 compared to
their 2018 base annual salaries.
2019 Annual Incentive Compensation Plan Awards. The Compensation Committee set the
2019 target annual incentive compensation award opportunities for
Messrs. Rowe, Ingle, and Hannan under the 2019 Annual Incentive
Compensation Plan (“2019 Incentive
Plan”) at 100%, 65%, and
55% of base annual salary, respectively.
The
2019 Incentive Plan allows for annual discretionary cash incentive
compensation awards for Company personnel selected to participate
in the 2019 Incentive Plan. In determining the amount of awards, if
any, under the 2019 Incentive Plan, the Compensation Committee
considers the following factors:
●
Level
of achievement of the following two Company-wide performance goals,
each weighted 50%:
o
The Company’s revenue goal of $142.0 million
(“2019
Revenue Goal”) under the
Company’s 2019 operating plan approved by the Board;
and
o
The Company’s Non-GAAP Adjusted EBITDA Goal
(defined as (i) GAAP net income before interest, taxes,
depreciation, amortization, non-cash stock-based compensation,
non-cash gains or losses, and other extraordinary items) of $6.4
million under the 2019 operating plan approved by the Board
(“2019
Non-GAAP Adjusted EBITDA Goal”).
The
Compensation Committee selected these two goals and assigned them
equal weighting under the 2019 Incentive Plan because the
Compensation Committee believed these goals best reflected the
criteria for measuring the Company’s overall performance and
performance of strategic initiatives for 2019.
●
Contributions of
individual 2019 Incentive Plan participants to the Company’s
overall financial and operating performance.
●
Level of
achievement of individual goals that may be established for Plan
participants.
●
Level of
achievement of Company initiatives and projects that may arise
during the year.
●
Evaluation of a
participant’s overall performance during the
year.
●
Other factors
deemed relevant to the Company’s overall financial and
operating performance, including market and competitive
factors.
Award payout opportunities for each of the 2019
named executive officers were based primarily upon the percentage
achievement of the applicable Company-wide performance goals
compared to the corresponding percentage on a sliding award payout
scale (“2019 Award Opportunity
Scale”) that (i) in the
case of the 2019 Revenue Goal, reduced award payout opportunities
by 10% for every 1% that achievement fell below the 2019 Revenue
Goal (with no award payout opportunity below 90% achievement of the
2019 Revenue Goal) and increased award payout opportunities by 10%
for every 1% that achievement exceeded the 2019 Revenue Goal (with
the payout award opportunity capped at 200%); and (ii) in the case
of the 2019 Non-GAAP Adjusted EBITDA Goal, reduced award payout
opportunities by 5% for every 1% that achievement fell below the
2019 Non-GAAP Adjusted EBITDA Goal (with no award payout
opportunity below 90% achievement of the 2019 Non-GAAP Adjusted
EBITDA Goal) and increased award payout opportunities by 5% for
every 1% that achievement exceeded the 2019 Non-GAAP Adjusted
EBITDA Goal (with the payout award opportunity capped at
200%). The sum of the weighted percentages derived from the
2019 Award Opportunity Scale for the 2019 Revenue Goal and the 2019
Non-GAAP Adjusted EBITDA Goal was considered for each named
executive officer’s target annual incentive compensation
award opportunity in the determination of a named executive
officer’s 2019 award payout under the 2019 Incentive
Plan.
The
Company did not achieve either the 2019 Revenue Goal or the 2019
Non-GAAP Adjusted EBITDA Goal, and the level of achievement for
each goal fell below the minimum award payout opportunity. The
Compensation Committee did not determine that any other evaluation
factors under the 2019 Incentive Plan warranted any payouts to the
2019 named executive officers. Accordingly, there were no award
payouts under the 2019 Incentive Plan to Messrs. Rowe, Ingle, or
Hannan.
2019 Long-Term, Equity-Based Incentive Awards.
Inducement
Option Grant. On January 16,
2019, after consultation with the Independent Compensation
Consultant, as an inducement to enter into employment with the
Company, the Compensation Committee approved a grant of stock
options to Mr. Ingle to purchase 165,000 shares of Common Stock
(“Ingle Inducement
Options”), at an exercise
price of $3.53 per share. The exercise price for these stock option
grants was the closing price for the Common Stock on The Nasdaq
Capital Market as of the grant date. These stock option grants vest
one-third on the first anniversary following the grant date, with
the remaining two-thirds vesting ratably over 24 months thereafter
and expire seven years from the date of grant. The vesting of stock
options will accelerate upon the occurrence of certain events as
provided in the applicable plan pursuant to which the stock options
were granted or the applicable stock option award agreement,
including (i) upon termination of the named executive
officer’s employment with the Company without cause or by the
named executive officer for good reason; and (ii) upon a change in
control of AutoWeb if such change in control is coupled with a
termination of the named executive officer’s employment
without cause or by the named executive officer for good reason or
if the acquirer does not assume, retain or exchange the
options.
March
2019 Stock Option Grants. On
March 1, 2019, stock options were granted to Messrs. Rowe, Ingle,
and Hannan in connection with the Company’s annual equity
awards to employees. Options were granted because they require the
Company’s share price to increase after grant in order to
provide value to the executive, consistent with the transformation
effort. The Company views options as inherently performance-based
and aligned with creating value for stockholders. After considering
the Chief Executive Officer’s recommendation for grants to
named executive officers other than himself, and after consultation
with the Independent Compensation Consultant, the Compensation
Committee approved the grants of 350,000, 82,500, and 75,000 stock
options, respectively, to Messrs. Rowe, Ingle, and Hannan, at an
exercise price of $3.39 per share. The exercise price for these
stock option grants was the closing price for the Common Stock on
The Nasdaq Capital Market as of the grant date. These stock option
grants vest one-third on the first anniversary following the grant
date, with the remaining two-thirds vesting ratably over 24 months
thereafter and expire seven years from the date of grant. The
vesting of stock options will accelerate upon the occurrence of
certain events as provided in the applicable plan pursuant to which
the stock options were granted or the applicable stock option award
agreement, including (i) upon termination of the named executive
officer’s employment with the Company without cause or by the
named executive officer for good reason; and (ii) upon a change in
control of AutoWeb if such change in control is coupled with a
termination of the named executive officer’s employment
without cause or by the named executive officer for good reason or
if the acquirer does not assume, retain or exchange the
options.
August 2019
Stock Option Grants. On August
6, 2019, the Compensation Committee approved stock option grants in
the amounts of 185,000, 100,000, and 75,000 to Messrs. Rowe, Ingle,
and Hannan, respectively, at an exercise price of $3.17 per share.
The exercise price for these stock option grants was the closing
price for the Common Stock on The Nasdaq Capital Market as of the
grant date. These stock option grants were subject to both a time-
and performance-vesting requirement. The stock options vest: (i)
one-third on the first anniversary following the grant date, with
the remaining two-thirds vesting ratably over 24 months thereafter;
and (ii) if at any time after August 6, 2019 and prior to the
expiration date of the stock options the weighted average closing
price of the Common Stock on The Nasdaq Capital Market for the
preceding 10 trading days (adjusted for any stock splits, stock
dividends, reverse stock splits or combinations of the common stock
occurring after the issuance date) is at or above $5.00. The stock
options expire seven years from the date of grant. The vesting of
stock options will accelerate upon the occurrence of certain events
as provided in the applicable plan pursuant to which the stock
options were granted or the applicable stock option award
agreement, including (i) upon termination of the named executive
officer’s employment with the Company without cause or by the
named executive officer for good reason; and (ii) upon a change in
control of AutoWeb if such change in control is coupled with a
termination of the named executive officer’s employment
without cause or by the named executive officer for good reason or
if the acquirer does not assume, retain or exchange the
options.
In
deciding to make these stock option grants, the Compensation
Committee considered the 2019 Executive Compensation Review and
data from the 2019 Peer Group, consulted with the Independent
Compensation Consultant, and considered the number of stock options
granted to the named executive officers in March 2019 and the Chief
Executive Officer’s recommendations as to named executive
officers other than himself. The Compensation Committee considered
that the 2019 Peer Group data provided by the Company’s
Independent Compensation Consultant in the 2019 Executive
Compensation Review reflected that the stock option grants made to
named executive officers in March 2019 were below the median of the
peer group equity awards.
For additional information concerning the change
in control provisions of the above options awards, see the section
of this Proxy Statement below entitled “EXECUTIVE
COMPENSATION–Potential Payments Upon Termination or Change in
Control.”
All
of the foregoing 2019 equity grants reflected the Compensation
Committee’s belief that equity-based compensation in the form
of stock options link the interests of named executive officers
with the long-term interests of the Company’s stockholders,
supports a pay-for-performance culture, fosters stock ownership by
named executive officers, focuses the management team on increasing
value for the stockholders, and encourages named executive officers
to remain in the Company’s employ.
Severance
and Change in Control Terms. The Company has entered into
agreements with the named executive officers that provide for
severance benefits, including continuation of monthly salary or
lump sum cash payments and continuation of health and welfare
benefits for specified periods of time, upon termination of the
named executive officer’s employment with the Company without
cause or by the named executive officer for good reason. In
addition, the vesting of stock options and restricted stock awarded
to the named executive officers may accelerate upon the occurrence
of various events, including (i) termination of the named executive
officer’s employment without cause or by the named executive
officer with good reason; and (ii) upon a change in control of
AutoWeb if such change in control is coupled with a termination of
the named executive officer’s employment without cause or by
the named executive officer for good reason or if the acquirer does
not assume, retain or exchange the options; provided, however, that
in the case of the inducement options granted to Mr. Rowe in
connection with the commencement of his employment, a termination
of employment in connection with a change in control is not
required for the acceleration of the vesting of any such unvested
inducement options. The arrangements are designed as a recruiting
and retention mechanism to assist the Company in providing adequate
employment security to compete for highly qualified executive
officers and induce them to invest themselves in a career with the
Company, to assist in retention of the Company’s executive
officers during the uncertainty that might accompany any possible
change in control, and to offset any motivation executive officers
might otherwise have to resist a change in control that could
result in loss of their employment. Information
regarding applicable terms of the foregoing severance arrangement
for the Company’s named executive officers is provided below
under the section of this Proxy Statement entitled
“EXECUTIVE
COMPENSATION–Potential Payments Upon Termination or Change in
Control.”
Benefits
and Perquisites. Except
as discussed below, executive officers typically participate in
employee benefit plans that are generally available to all
employees on the same terms.
All
employees have company-provided life insurance with a death benefit
of one times the employee’s annual salary, capped at
$300,000.
All
employees above the senior manager level are provided with enhanced
supplemental short and long-term disability insurance by the
Company in addition to the Company’s standard short- and
long-term disability insurance in order to attract and retain these
employees. For executive officers who qualify for the
coverage, the Company also provides an additional supplemental
long-term disability plan that offers a benefit of up to 75% of the
executive’s base annual salary, up to a maximum benefit of
$5,000 per month. The benefit begins 90 calendar days after the
onset of the disability and may continue up to age 65.
During
the term of Mr. Rowe’s employment agreement, as amended, Mr.
Rowe receives a monthly travel and housing accommodation in the
amount of $15,000. In the event Mr. Rowe elects to relocate to the
Tampa, Florida area, this monthly travel and housing accommodation
will cease and the Company will pay actual moving costs and actual
sales brokerage fees incurred for the sale of his personal
residence. This moving and relocation assistance is not to exceed
$200,000 in the aggregate.
Tax Implications
IRC
Section 162(m). In
general, Section 162(m) disallows a tax deduction for the
compensation paid in any tax year in excess of $1.0 million to
certain executives of publicly-held companies. The
$1.0 million limitation applies per executive per year and
only to the compensation paid to the chief executive officer and to
each of the next three most highly compensated officers other than
the chief financial officer (for years commencing before 2018). In
December 2017, Congress enacted Public Law No. 115-97, commonly
referred to as the “Tax Cuts and Jobs Act”
(“TCJA”), which, among other things, eliminated the
“performance-based compensation” exemption from Section
162(m) of the Internal Revenue Code (“IRC”), effective for tax years beginning after
December 31, 2017, such that compensation paid to the
Company’s executives subject to Section 162(m) in excess of
$1.0 million will not be deductible unless the compensation
qualifies for transition relief applicable to certain arrangements
in place as of November 2, 2017. In addition, the TCJA now includes
the chief financial officer in the group of officers subject to the
limitation. The Company cannot give any assurance that any
incentive awards outstanding after December 31, 2017 that the
Compensation Committee intended to satisfy the Section 162(m)
“performance-based compensation” exemption requirements
will in fact do so because of uncertainties regarding the
application and interpretation of Section 162(m) of the IRC,
including the uncertain scope of the abovementioned transition
relief.
The Compensation Committee believes that
stockholder interests are best served by not restricting its
discretion and flexibility in crafting compensation programs even
when those programs could result in certain non-deductible
compensation expenses. Therefore, the Compensation
Committee has from time to time approved elements of compensation
for certain covered officers that may not be fully
deductible. In addition, although some amounts recorded as compensation by
the Company to certain of the Company’s executive officers
may be limited by Section 162(m), that limitation currently is
not expected to result in the current payment of increased federal
income taxes by the Company due to the Company’s significant
net operating loss carry forwards.
IRC
Sections 280G and 4999. The Compensation Committee has
considered the potential impact of Sections 280G and 4999 of
the IRC in structuring the compensation and severance packages for
the Company’s executives. Section 280G disallows a
tax deduction by the payor for “excess parachute
payments” made to executives, and Section 4999 imposes a
20% non-deductible excise tax on the executive receiving an excess
parachute payment. In general, a parachute payment to an
executive is a payment to the executive in the nature of
compensation that is contingent on a change in control of the
Company and that exceeds three times the executive’s
“base amount.” An executive’s base amount is
generally the average compensation received by the executive from
the Company during the five-year period preceding the change in
control of the Company. An excess parachute payment is any
amount over the portion of the base amount allocated to that
parachute payment.
In
general, it is the Compensation Committee’s policy to qualify
its executives’ compensation for deductibility under
applicable tax laws. The Compensation Committee believes,
however, that stockholder interests are best served by not
restricting its discretion and flexibility in crafting compensation
programs even though those programs may result in certain
non-deductible compensation expenses. Therefore, the
Compensation Committee has from time to time approved elements of
compensation for certain officers that may not be fully deductible
and that provide for the Company to “gross up” the
payment made to the executive to compensate the executive for the
20% excise tax, and the Compensation Committee reserves the right
to do so in the future in appropriate circumstances. Currently,
none of the Company’s executives have tax “gross
up” provisions.
Summary Compensation
The
table below and the accompanying footnotes summarize the
compensation attributed for fiscal years 2019, 2018, and 2017, as
applicable, to the Company’s executive officers who
constitute named executive officers for the fiscal year ended
December 31, 2019.
2019 Summary Compensation Table
Name
and Principal Position
|
Year
|
|
|
|
|
Non-Equity Incentive Plan Compensation ($)
(2)
|
All
Other Compensation ($)
|
|
Jared
R. Rowe
|
|
550,000
|
—
|
—
|
942,261
|
—
|
186,932(4)
|
1,679,193
|
President
and Chief Executive Officer
|
|
394,167
|
250,000 (3)
|
—
|
1,815,720
|
397,808
|
154,456 (5)
|
3,012,151
|
|
|
|
|
|
|
|
|
|
Daniel
R. Ingle
|
2019
|
364,182
|
—
|
—
|
626,923
|
—
|
6,760(7)
|
997,865
|
Executive
Vice President,
Chief Operating Officer (6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
P. Hannan
|
2019
|
350,016
|
—
|
—
|
261,590
|
—
|
6,383(8)
|
617,989
|
Executive
Vice President, Chief Financial Officer
|
2018
|
14,584
|
100,000(3)
|
—
|
148,055
|
—
|
—
|
262,639
|
(1)
|
The dollar amounts listed do not necessarily reflect the dollar
amounts of compensation actually realized or that may be realized.
The dollar amount reported for stock awards and option awards is
the aggregate grant date fair value of awards granted during the
year calculated in accordance with FASB ASC Topic 718. See Note 10
of the “Notes to Consolidated Financial Statements” in
Part IV, Item 15-Exhibits and Financial Statement Schedules of the
Company’s Annual Report on Form 10-K for the year ended
December 31, 2019, which accompanies this Proxy Statement, for
assumptions made in these valuations.
|
(2)
|
Represents amounts awarded under the Company’s Annual
Non-Equity Incentive Compensation Plan. For information on the
amounts earned in 2019, see the section of this Proxy Statement
entitled “EXECUTIVE
COMPENSATION–Named Executive Officers Compensation
Narrative–2019 Compensation Decisions–2019 Annual
Incentive Compensation Plan Awards.”
|
(3)
|
Represents signing bonus paid upon commencement of employment with
the Company.
|
(4)
|
Represents $180,000 for travel and housing accommodations, $3,000
for 401(k) plan match, and $3,932 for supplemental insurance
benefits.
|
(5)
|
Represents $129,500 for travel and housing accommodations, $19,293
for legal expenses, $3,000 for 401(k) plan match, and $2,663 for
supplemental insurance benefits.
|
(6)
|
Mr. Ingle commenced employment with the Company on January 16,
2019.
|
(7)
|
Represents $3,000 for 401(k) plan match and $3,760 for supplemental
insurance benefits.
|
(8)
|
Represents $3,000 for 401(k) plan match and $3,383 for supplemental
insurance benefits.
|
Outstanding Equity Awards at 2019 Year-End
The
following table sets forth, for each of the named executive
officers, information concerning outstanding stock option awards as
of December 31, 2019.
2019 Outstanding Equity Awards at Fiscal Year-End
Table
Name
|
Grant
Date
|
Number
of Securities Underlying Options Exercisable (#)
|
Number
of Securities Underlying Options Unexercisable (#)
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options (#)
|
Option
Exercise Price ($)
|
Option
Expiration Date
|
Number
of Shares or Units of Stock That Have Not Vested (#)
|
Market Value of Shares or Units of Stock That Have
Not Vested (#) (1)
|
Equity
Incentive Plan Awards:Number of Unearned Shares, Units or Other
Rights That Have Not Vested (#)
|
Equity
Incentive Plan Awards:Market or Payout of Unearned Shares, Units or
Other Rights That Have Not Vested ($)
|
Jared
R. Rowe
|
08/06/19(2)
|
—
|
185,000
|
—
|
3.17
|
08/06/26
|
—
|
—
|
—
|
—
|
|
03/01/19(3)
|
—
|
350,000
|
—
|
3.39
|
03/01/26
|
—
|
—
|
—
|
—
|
|
04/12/18(4)
|
555,556
|
444,444
|
—
|
3.26
|
04/12/25
|
—
|
—
|
—
|
—
|
Daniel
R. Ingle
|
08/06/19(2)
|
—
|
100,000
|
—
|
3.17
|
08/06/26
|
—
|
—
|
—
|
—
|
|
03/01/19(3)
|
—
|
82,500
|
—
|
3.39
|
03/01/26
|
—
|
—
|
—
|
—
|
|
01/06/19(3)
|
—
|
165,000
|
—
|
3.53
|
01/16/26
|
—
|
—
|
—
|
—
|
Joseph
P. Hannan
|
08/06/19(2)
|
—
|
75,000
|
—
|
3.17
|
08/06/26
|
—
|
—
|
—
|
—
|
|
03/01/19(3)
|
—
|
75,000
|
—
|
3.39
|
03/01/26
|
—
|
—
|
—
|
—
|
|
12/17/18(3)
|
40,000
|
80,000
|
—
|
2.30
|
12/17/25
|
—
|
—
|
—
|
—
|
(1)
|
The dollar amounts in this column are calculated using the closing
price of the Company’s common stock on December 31,
2019.
|
(2)
|
The
options granted are subject to the satisfaction of the following
time- and performance-vesting conditions: (i) One-third of the stock options granted vest on the
first anniversary following the grant date, and the remaining
two-thirds vesting ratably over 24 months thereafter; and (ii) if
at any time after August 6, 2019 and prior to the expiration date
of the stock options the weighted average closing price of the
Common Stock on The Nasdaq Capital Market for the preceding 10
trading days (adjusted for any stock splits, stock dividends,
reverse stock splits or combinations of the common stock occurring
after the issuance date) is at or above $5.00. The vesting of these stock options will
accelerate upon (i) a termination of employment without cause
by the Company or for good reason by the named executive officer;
or (ii) a change in control of the Company if coupled with a
termination of employment by the Company without cause or by the
named executive officer for good reason or if the acquirer does not
assume, retain or exchange the options as provided in the
applicable plan pursuant to which the options were granted or the
applicable option award agreement.
|
(3)
|
The options granted are subject to the following vesting condition:
one-third of the stock options granted vest on the first
anniversary following the grant date, and the remaining two-thirds
vesting ratably over 24 months thereafter. The vesting of these
stock options will accelerate upon (i) a termination of
employment without cause by the Company or for good reason by the
named executive officer; or (ii) a change in control of the Company
if coupled with a termination of employment by the Company without
cause or by the named executive officer for good reason or if the
acquirer does not assume, retain or exchange the options as
provided in the applicable plan pursuant to which the options were
granted or the applicable option award agreement.
|
(4)
|
Mr. Rowe was granted stock options to purchase 1,000,000 shares of
Common Stock upon the commencement of his employment with the
Company, which vest monthly in 36 monthly installments on the first
day of each calendar month beginning on May 1, 2018.
|
Employment Agreements
The Company has entered into written employment
agreements with the named executive officers. The employment
of these executive officers is “at will” and not for a
specified term. Under the terms of their respective
agreements, each executive is entitled to all customary benefits
afforded generally to executive officers of the Company, including
any qualified or non-qualified pension, profit sharing and savings
plans, any death benefit and disability benefit plans, life
insurance coverages, any medical, dental, health and welfare plans
or insurance coverages and any stock purchase programs that are
approved in writing by the Board. The Company will pay or
reimburse each of these executives for all reasonable business
expenses incurred while employed by the Company. The
employment agreements with these executive officers also provide
for specified payments and continuation of benefits in the event of
a termination of the executive officer’s employment with the
Company by the Company without cause or by the executive officer
for good reason, including any such termination in connection with
a change in control of the Company. For a description of these
termination and change in control provisions see the section of
this Proxy Statement below entitled “Potential Payments Upon
Termination or Change in Control.” Each of these employment agreements
contains confidentiality and non-solicitation provisions that
extend beyond termination of employment.
Jared R.
Rowe. The Company and Mr. Rowe, the Company’s
President and Chief Executive Officer, have entered into an
employment agreement dated April 2018, as amended on August 26,
2019 (collectively, the “Rowe Employment
Agreement”) pursuant to
which the Company paid Mr. Rowe a one-time signing bonus in the
amount of $250,000 and a base annual salary of $550,000, which may
be increased in the discretion of the Board or the Compensation
Committee. Mr. Rowe is also eligible to receive an annual incentive
compensation opportunity targeted at 100% of his base annual salary
based upon annual performance goals and achievement of those goals,
as established and determined by the Board or the Compensation
Committee.
Mr.
Rowe also receives a monthly travel and housing accommodation in
the amount of $15,000. In the event that Mr. Rowe elects to
relocate to the Tampa, Florida area, this monthly travel and
housing accommodation will cease, and the Company will pay actual
moving costs and actual sales brokerage fees incurred for the sale
of his personal residence. This moving and relocation assistance is
not to exceed $200,000 in the aggregate. Additionally, the Company
paid on behalf Mr. Rowe approximately of $29,700 in legal fees
incurred in connection with the negotiation and review of the Rowe
Employment Agreement by Mr. Rowe’s counsel. Mr. Rowe is
entitled to all customary benefits afforded generally to executive
employees of the Company.
Daniel R.
Ingle. The Company and Mr.
Ingle entered into an employment agreement dated as of January 16,
2019, in connection with his joining the Company as the
Company’s Executive Vice President, Chief Operating Officer.
In addition, the Company and Mr. Ingle have entered into a
Severance Benefits Agreement dated as of January 16, 2019. Mr.
Ingle’s current base annual salary is $380,000. Mr. Ingle is
also eligible to receive an annual incentive compensation
opportunity targeted at 65% of his base annual salary based upon
annual performance goals and the achievement of those goals, as
established and determined by the Compensation
Committee.
Joseph P.
Hannan. The Company and Mr.
Hannan entered into an employment agreement dated as of December
17, 2018, in connection with his joining the Company as the
Company’s Executive Vice President, Chief Financial Officer.
In addition, the Company and Mr. Hannan have entered into a
Severance Benefits Agreement dated as of December 17, 2018. Mr.
Hannan’s current base annual salary is $350,000. Mr. Hannan
is also eligible to receive an annual incentive compensation
opportunity targeted at 55% of his base annual salary based upon
annual performance goals and the achievement of those goals, as
established and determined by the Compensation
Committee.
In
light of the financial impact of the COVID-19 pandemic on the
Company, Mr. Rowe has voluntarily
agreed to a temporary 30% reduction in his monthly base salary, and
Messrs. Ingle and Hannan have voluntarily agreed to temporary 10%
reductions in their respective monthly base salary. These temporary
reductions will be in effect for the months of April, May and June
2020, and the reduction amounts will be payable in the event
a change in control of the Company occurs during 2020. In addition, Mr. Rowe has voluntarily agreed to
forego temporarily his $15,000 per month travel and housing
accommodation allowance for the same three-month period. The
other elements of these executives’ compensation are
unchanged.
Potential Payments Upon Termination or Change in
Control
Payments
and other benefits payable upon various termination and change in
control situations are set out as if the conditions for payments
had occurred and the terminations or change in control took place
on December 31, 2019. The amounts set forth in the table below
are estimates of the amounts which would have been paid out to each
named executive officer listed in the table upon termination of
employment or change in control of the Company based on
compensation and agreements in effect for the year ended December
31, 2019. The actual amounts to be paid out can be determined
only at the time of such named executive officer’s separation
from the Company or change in control event. In addition, it
is possible that the Company and the executive may hereafter agree
to payments and other benefits that differ materially from those
described below. The table below reflects the amount of
compensation to each of the named executive officers, in the event
of termination of such executive’s employment by the Company
without cause or by the named executive officer for good reason (in
connection with and not in connection with a change in control of
the Company); and (ii) upon a change in control of the Company not
in connection with a termination of such executive’s
employment by the Company without cause or by the named executive
officer for good reason. The disclosures below do not take
into consideration any requirements under IRC Section 409A,
which could affect, among other things, the timing of payments and
distributions.
Termination and Change in Control Estimated Payments
Table
Name
|
Benefit
Description
|
Termination without cause by Company or for good
reason by executive NOT in connection with a Change in
Control($) (1)
|
Termination without cause by Company or for good
reason by executive in connection with a Change in
Control($) (1)
|
Change in Control NOT in connection with
Termination without cause by Company or for good reason by
executive ($) (1)
|
Jared R. Rowe (2)
|
24-month
base monthly salary continuation
|
1,100,000
|
|
—
|
|
Lump
sum severance payment
|
—
|
2,200,000
|
—
|
|
Pro-Rata
non-equity incentive- based compensation
|
—
|
|
—
|
|
Stock-based
awards
|
—
|
—
|
—
|
|
Continuation
of health and welfare benefits
|
45,838
|
45,838
|
—
|
|
|
|
|
Daniel R. Ingle (3)
|
Lump
sum severance payment
|
190,000
|
190,000
|
—
|
|
Stock-based
awards
|
-----
|
------
|
|
|
Continuation
of health and welfare benefits
|
15,193
|
15,193
|
----
|
|
Outplacement
services
|
3,950
|
3,950
|
|
|
|
|
|
|
|
|
|
|
Joseph P. Hannan (4)
|
Lump
sum severance payment
|
175,000
|
175,000
|
—
|
|
Stock-based
awards
|
6,800
|
6,800
|
6,800(5)
|
|
Continuation
of health and welfare benefits
|
15,005
|
15,005
|
—
|
|
Outplacement
services
|
3,950
|
3,950
|
—
|
(1)
|
For stock options the amount represents the positive difference
between the closing price of the Company’s stock on December
31, 2019 and the exercise price of the stock option.
|
(2)
|
If Mr. Rowe’s employment is terminated by the Company without
cause or by Mr. Rowe with good reason, Mr. Rowe is entitled to: (i)
continued monthly payments of his base annual salary for 24 months
after the employment termination date; (ii) reimbursement or
payment of the premiums for continuation of the medical, dental,
and visions benefits under COBRA for a period of 18 months after
the employment termination date; and (iii) his annual incentive
compensation payout based on actual performance for the entire
performance period, prorated for the amount of time Mr. Rowe was
employed by the Company prior to the date of termination during
such performance period. If Mr. Rowe’s employment is
terminated by the Company without cause or by Mr. Rowe for good
reason upon, or within 18 months following, a change in control of
the Company, Mr. Rowe is entitled to: (i) a lump sum payment equal
to two (2) times the sum of his base annual salary plus his annual
incentive compensation opportunity target; (ii) reimbursement or
payment of the premiums for continuation of his medical, dental,
and visions insurance benefits under COBRA for a period of 18
months after employment termination; and (iii) his annual incentive
compensation payout based on his target annual incentive
compensation, prorated for the amount of time Mr. Rowe was employed
by the Company prior to the date of termination during such
performance period. The Company is not obligated to make additional
payments to Mr. Rowe to compensate for his additional tax
obligations if Mr. Rowe’s compensation is deemed to be excess
parachute payments under the Internal Revenue Code. Payment of the
severance benefits under the Rowe Employment Agreement is
conditioned on Mr. Rowe’s execution of a general release in
favor of AutoWeb.
|
(3)
|
If Mr. Ingle’s employment is terminated by the Company
without cause or if he terminates his employment with good reason,
Mr. Ingle is entitled to (i) a lump sum payment equal to 50%
Mr. Ingle’s annual base salary (determined as the highest
annual base salary paid to Mr. Ingle while employed by the
Company); (ii) continuation of AutoWeb medical, dental,
vision, life and disability insurance benefits for Mr. Ingle and
Mr. Ingle’s eligible dependents (at the time of termination)
for six months; (iii) Mr. Ingle’s annual incentive
compensation plan payout for the annual incentive compensation plan
year in which date of termination occurred, based on actual
performance for the entire performance period and prorated for the
amount of time Mr. Ingle was employed by the Company prior to the
date of termination during such plan year; and
(iv) outplacement services for six months.
|
(4)
|
If Mr. Hannan’s employment is terminated by the Company
without cause or if he terminates his employment with good reason,
Mr. Hannan is entitled to (i) a lump sum payment equal to 50%
Mr. Hannan’s annual base salary (determined as the highest
annual base salary paid to Mr. Hannan while employed by the
Company); (ii) continuation of AutoWeb medical, dental,
vision, life and disability insurance benefits for Mr. Hannan and
Mr. Hannan’s eligible dependents (at the time of termination)
for six months; (iii) Mr. Hannan’s annual incentive
compensation plan payout for the annual incentive compensation plan
year in which date of termination occurred, based on actual
performance for the entire performance period and prorated for the
amount of time Mr. Hannan was employed by the Company prior to the
date of termination during such plan year; and
(iv) outplacement services for six months.
|
(5)
|
Assumes that unvested options are not assumed by acquiring entity
and accelerate immediately prior to a change in
control.
|
Under the employment or severance benefits
agreements with each of the named executive officers,
“cause” will generally be deemed to exist when the
individual has been convicted of, or pled nolo contendere to, a
felony, has engaged in willful misconduct or gross dishonesty that
has a materially injurious effect on the Company’s business
or reputation, or has materially failed to consistently discharge
the officer’s duties for thirty days after notice, subject to
a cure period in some events; “termination without
cause” will generally be
deemed to occur if AutoWeb terminates the named executive
officer’s employment for any reason other than cause or no
reason at all, or the termination by the executive officer for good
reason. “Good reason” will generally exist when the named
executive officer’s duties and responsibilities, compensation
or benefits have been materially decreased when the named executive
officer has been required to relocate; when the Company has
breached the Company’s agreement with the named executive
officer; or a successor company fails to assume the officer’s
agreement following a change in control. In general, a
“change in
control” of the Company
is deemed to occur if: (i) the Company sells all or
substantially all of the Company’s assets; (ii) as a
result of transactions a person or group becomes the beneficial
owner of more than 50% of the Common Stock; or (iii) a
majority of the Company’s directors in office are not
nominated for election or elected to the Board with the approval of
two-thirds of the directors who are in office just prior to the
time of such nomination or election.
Unvested
stock options may vest and the forfeiture restrictions on
restricted stock awards still subject to restrictions shall lapse
upon: (i) a termination of employment without cause by the
Company or for good reason by the named executive officer; or
(ii) a change in control if coupled with a termination of
employment by the Company without cause or by the named executive
officer for good reason or if the acquirer does not assume, retain
or exchange the options as provided in the applicable plan pursuant
to which the stock options were granted or the applicable stock
option award agreement. In the event of a change in
control of the Company prior to the determination of awards under
the Company’s then-current annual incentive compensation
plan, the Compensation Committee will determine the level of
achievement of the applicable plan for purposes of such
officer’s awards and the applicable award payouts, if any, as
of the change in control event.
Director Compensation
The
following table provides summary information concerning
compensation paid or accrued by the Company to or on behalf of the
Company’s non-employee directors who served during the year
ended December 31, 2019. Mr. Jeffrey Stibel resigned from the Board
and Mr. Chan W. Galbato was appointed to the Board on January 11,
2019.
2019 Director Compensation Table
Name
|
Fees Earned or
Paid in
Cash
($)
|
|
|
Michael
J. Fuchs
|
89,500
|
19,671(2)
|
109,171
|
Michael
A. Carpenter
|
49,000
|
19,671(2)
|
68,671
|
Mark
N. Kaplan
|
90,000
|
19,671(2)
|
109,671
|
Chan
W. Galbato
|
45,250
|
27,509(2)
|
72,759
|
Janet
M. Thompson
|
65,000
|
19,671(2)
|
84,671
|
Jeffrey M. Stibel (3)
|
8,750
|
---
|
8,750
|
(1)
|
The dollar amounts listed do not necessarily reflect the dollar
amounts of compensation actually realized or that may be realized
by the Company’s directors. The option award amounts
represent the aggregate grant date fair value of the option awards,
as estimated for financial statement purposes in accordance with
FASB ASC Topic 718. For additional information regarding
assumptions made in these valuations, refer to Note 10 of the
“Notes to Consolidated Financial Statements” in
Part IV, Item 15–Exhibits and Financial Statement
Schedules of the Company’s Annual Report on Form 10-K
for the year ended December 31, 2019, accompanying this Proxy
Statement.
|
(2)
|
10,000 option awards granted on June 20, 2019, at an exercise price
of $3.69 per share; provided that in the case of Mr. Galbato, also
includes 4,383 option awards granted on January 11, 2019, at an
exercise price of $3.38, upon Mr. Galbato’s appointment to
serve on the Board.
|
(3)
|
Mr. Stibel resigned from the Board effective January 11,
2019.
|
The
Company’s outside directors currently receive cash
compensation for service on the Board or any committee or
subcommittee thereof. These directors currently receive the
following fees: (i) annual fee of $35,000 payable
quarterly and (ii) $1,000 for each Board or committee meeting
attended, whether by phone or in person, with the Chairman of the
Board or committee, as applicable, receiving $2,000 for each such
meeting rather than $1,000. The Company also reimburses
directors for expenses incurred in connection with attendance at
Board and committee or subcommittee meetings. In addition to
the foregoing annual and meeting fees, each of the Chairman of the
Board and the Chairman of the Audit Committee is currently entitled
to a $25,000 annual retainer payable quarterly; the Chairman of the
Compensation Committee is entitled to a $10,000 annual retainer
payable quarterly; and the Chairman of the Corporate Governance and
Nominations Committee is entitled to a $5,000 annual retainer
payable quarterly. The retainers were established based on
market data provided by the Compensation Committee’s
Independent Compensation Consultant and an internal assessment of
the amount of time required to be devoted to Company
matters.
In
light of the financial impact of the COVID-19 pandemic on the
Company, the Board’s Compensation Committee has approved a
temporary 50% reduction in the
quarterly and meeting fees for the Board’s independent
outside directors. These temporary reductions will be in effect for
the months of April, May and June 2020.
Annual
grants of 10,000 stock options were made to each non-employee
director. To receive these option grants, a director must be a
non-employee director at the time of grant. The option grant dates
were determined by the Board, but the Board generally has granted
options in conjunction with the Company’s annual meeting of
stockholders. Options awarded in 2019 have a term of seven
years and vest in equal monthly installments over a twelve-month
period commencing with the date of grant. The exercise price of
these options was no less than 100% of the fair market value per
share of Common Stock on the date of the grant of the
option. The annual grant of options to new non-employee
directors generally have been made upon joining the Board, with the
number of stock options granted being pro-rated for the year in
which the new director joins the Board based on the period of
service from the grant date to the date of the next annual
meeting.
Directors
who are also full-time employees or who are not otherwise deemed to
be independent outside directors do not receive stock options or
other compensation for their service as directors. Neither Mr. de
Tezanos nor Mr. Vargas, who no longer serve as officers of the
Company, received any stock options or other compensation for their
service as directors.
Equity Compensation Plans
The
following table summarizes information, as of December 31, 2019,
relating to the Company’s equity compensation plans pursuant
to which the Common Stock may be issued (or that have options
outstanding under expired or terminated plans).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
price
of outstanding
|
(excludingsecurities
reflected
|
Plan
Category
|
|
|
|
|
|
|
|
Equity compensation plans approved by
stockholders (1)
|
2,891,606
|
$6.38
|
1,974,833
|
Equity compensation plans not approved by
stockholders (2)
|
1,470,000
|
$3.12
|
—
|
Total
|
4,361,606
|
$5.28
|
1,974,833
|
(1)
|
Includes the Company’s Amended and Restated 2001 Stock and
Option Plan, 2010 Equity Incentive Plan, Amended and Restated 2014
Equity Incentive Plan, and the 2018 Equity Incentive Plan. Only the
2018 Plan is currently available for future stock option or other
equity-based awards.
|
(2)
|
Includes (i) 1,000,000
inducement stock options granted to Mr. Jared R. Rowe, the
Company’s President and Chief Executive Officer, under an
Inducement Stock Option Agreement dated April 12, 2018, which
options expire April 12, 2025; (ii) 50,000 inducement stock options
granted to Ms. Sara E. Partin, the Company’s Senior Vice
President, Chief People Officer, under Inducement Stock Option
Agreements dated October 22, 2018, which options expire October 22,
2025; (iii) 120,000 inducement stock options granted to Mr. Joseph
P. Hannan, the Company’s Executive Vice President, Chief
Financial Officer, under an Inducement Stock Option Agreement dated
December 17, 2018, which options expire December 17, 2025; and (iv)
165,000 inducement stock options granted to Mr. Daniel R. Ingle,
the Company’s Executive Vice President, Chief Operating
Officer, under an Inducement Stock Option Agreement dated January
16, 2019, which options expire January 16, 2026.
Also
includes (i) 100,000 inducement stock options granted to Mr.
Timothy L. Branham, the Company’s former Senior Vice
President, Chief Technology Officer, under an Inducement Stock
Option Agreement dated December 17, 2018; and (ii) 35,000
inducement stock options granted to Mr. Mark Ugar, the
Company’s former Vice President, Strategy and Development,
under an Inducement Stock Option Agreement dated December 28,
2018. Messrs. Branham’s
and Ugar’s employment with the Company was terminated,
without cause, on April 1, 2020 and February 3, 2020, respectively,
and their inducement options will expire June 30, 2020 and May 3,
2020, respectively, if not exercised or extended (in accordance
with the terms of their respective Inducement Stock Option
Agreements) prior to their expiration.
|
|
|
Inducement Stock Option Grants.
The Compensation Committee of the Board and the Board approved
grants of stock options to acquire shares of the Company’s
Common Stock to the individuals referenced in Footnote 2 to the
Equity Compensation Plans table above, at an exercise price equal
to the closing price of the Common Stock on The Nasdaq Capital
Market on the day the individual commenced employment with the
Company (“Grant Date”). The options were granted as inducement
options under Nasdaq listing rules and have a term of seven years.
One-third of the options vest on the first anniversary of the Grant
Date and one thirty-sixth of the options shall vest on each
successive monthly anniversary of the Grant Date for the following
twenty-four months, except for Mr. Rowe’s grant which vests
in 36 monthly installments on the first day of each calendar month
following the April 12, 2018 grant date. Vesting of the options
will accelerate upon the occurrence of certain events, including
upon a change in control of the Company or upon a termination of
the individual’s employment by the Company without cause or
by the individual for good reason, as set forth in each
individual’s employment or severance benefit agreement, with
the exception of Mr. Ugar who did not receive a severance benefits
agreement upon his employment with the Company.
Exchange Act Section 16(a) Filings
Based
solely upon the Company’s review of forms filed by directors,
officers, and beneficial owners of more than ten percent of the
Common Stock pursuant to Section 16(a) of the Exchange Act and
written representations, the Company is not aware of any failures
by any such person to file on a timely basis the forms required to
be filed by them pursuant to Section 16(a) of the Exchange Act
during the most recent fiscal year.
TRANSACTION OF OTHER BUSINESS AT ANNUAL MEETING
As
of the date of this Proxy Statement, the Board does not presently
intend to present any other matter for action at the Annual Meeting
and no stockholder has given timely notice in accordance with the
Company’s Bylaws of any matter that it intends to be brought
before the meeting. Should any other matters arise
requiring the vote of stockholders, it is intended that proxies
will be voted in respect thereto in accordance with the best
judgment of the person or persons voting the proxies.
FUTURE STOCKHOLDER NOMINATIONS AND PROPOSALS
In order to be included in AutoWeb’s proxy
materials for the 2021 annual meeting of stockholders, any proposal
must be received by January ___, 2021 [To be
completed in Definitive Proxy Statement] and otherwise comply with the requirements of
Rule 14a-8 of the Exchange Act.
In
addition, the Bylaws establish advance notice procedures with
regard to stockholder nominations for the election of directors or
other business to be properly brought before an annual
meeting. For nominations or other business to be properly
brought before the meeting by a stockholder, a stockholder must
provide written notice delivered to the Secretary of AutoWeb no
less than 90 nor more than 120 days prior to the anniversary date
of the immediately preceding annual meeting. The notice must
contain specified information and representations concerning the
stockholder (and the beneficial owner, if any, on whose behalf the
nomination or proposal is made), the nominee(s) or other
business. However, in the event that the date of the annual
meeting is more than 30 days before or more than 70 days after such
anniversary date, the stockholder must deliver the notice not
earlier than the close of business on the 120th day prior to such
annual meeting and not later than the close of business on the
later of the 90th day prior to such annual meeting or the 10th day
following the day on which public announcement of the date of such
meeting is first made by AutoWeb. Notwithstanding compliance
with the foregoing advance notice provisions, unless required by
applicable law, if the stockholder (or a qualified representative
of the stockholder) does not appear at the annual meeting to
present the nomination or other business, the nomination will be
disregarded and other business will not be transacted,
notwithstanding that proxies in respect of the nomination or other
business may have been received by AutoWeb. All notices of
nominations or proposals by stockholders, whether or not to be
included in AutoWeb’s proxy materials, should be sent to
AutoWeb, Inc., 400 North Ashley Drive, Suite 300, Tampa,
Florida 33602, Attention: Corporate Secretary. A copy of the
full text of the provisions of the Bylaws discussed above may be
obtained by writing to the Corporate Secretary of
AutoWeb.
AutoWeb
reserves the right to reject, rule out of order or take other
appropriate action with respect to any nominations or proposals
that do not comply with these and other applicable
requirements.
Because
AutoWeb did not have timely notice of any other matters to be
brought before the Annual Meeting, the enclosed proxy card confers
discretionary authority to vote on any other matters that may be
presented at the meeting.
Please return your proxy as soon as
possible. Unless a quorum consisting of a majority of the
outstanding shares entitled to vote is represented at the meeting,
no business can be transacted. Therefore, please be sure to
complete, date and sign your proxy exactly as your name appears on
your proxy, and return it in the enclosed prepaid return envelope.
Prior to the Voting Instructions Cutoff Time, stockholders may also
provide voting instructions using the Internet at
www.proxyvote.com
or by calling 1.800.690.6903 as
described in this Proxy Statement and accompanying proxy
card. Please act promptly to ensure that you will be
represented at the Annual Meeting.
April___, 2020 [To be
completed in Definitive Proxy Statement]
|
By Order of the Board of Directors
|
|
Glenn E. Fuller
Executive Vice President,
Chief Legal Officer and Secretary
|
AUTOBYTEL
INC.
and
COMPUTERSHARE
TRUST COMPANY, N.A.
as
Rights Agent
TAX
BENEFIT PRESERVATION PLAN
Dated
as of May 26, 2010
TABLE
OF CONTENTS
|
|
|
1
|
Certain
Definitions.
|
1
|
2
|
Appointment
of Rights Agent.
|
6
|
3
|
Issue
of Right Certificates.
|
6
|
4
|
Form
of Right Certificates.
|
7
|
5
|
Countersignature
and Registration.
|
7
|
6
|
Transfer,
Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right
Certificates.
|
7
|
7
|
Exercise
of Rights, Purchase Price; Expiration Date of Rights.
|
8
|
8
|
Cancellation
and Destruction of Right Certificates.
|
9
|
9
|
Availability
of Shares of Capital Stock.
|
9
|
10
|
Capital
Stock Record Date.
|
9
|
11
|
Adjustment
of Purchase Price, Number and Kind of Shares and Number of
Rights.
|
10
|
12
|
Certificate
of Adjusted Purchase Price or Number of Shares.
|
15
|
13
|
[Reserved].
|
15
|
14
|
Fractional
Rights and Fractional Shares.
|
15
|
15
|
Rights
of Action.
|
16
|
16
|
Agreement
of Right Holders.
|
16
|
17
|
Right
Certificate Holder Not Deemed a Stockholder.
|
17
|
18
|
Concerning
the Rights Agent.
|
17
|
19
|
Merger
or Consolidation or Change of Name of Rights Agent.
|
17
|
20
|
Duties
of Rights Agent.
|
17
|
21
|
Change
of Rights Agent.
|
19
|
22
|
Issuance
of New Right Certificates.
|
19
|
23
|
Redemption.
|
20
|
24
|
Exchange.
|
21
|
25
|
Notice
of Certain Events.
|
22
|
26
|
Notices.
|
22
|
27
|
Supplements
and Amendments.
|
23
|
28
|
Successors.
|
23
|
29
|
Benefits
of this Plan.
|
23
|
30
|
Process
to Seek Exemption.
|
23
|
31
|
Determinations
and Actions by the Board of Directors.
|
23
|
32
|
Severability.
|
24
|
33
|
Governing
Law.
|
24
|
34
|
Counterparts.
|
24
|
35
|
Descriptive
Headings.
|
24
|
36
|
Force
Majeure.
|
24
|
37
|
Interpretation.
|
24
|
|
|
|
Exhibit
A
|
Form
of Right Certificate
|
|
Exhibit
B
|
Summary
of Rights
|
|
TAX
BENEFIT PRESERVATION PLAN
This Tax Benefit
Preservation Plan, dated as of May 26, 2010 (“Plan”), is entered into
between Autobytel Inc., a Delaware corporation (the
“Company”), and
Computershare Trust Company, N.A., a federally chartered trust
company, as Rights Agent (the “Rights
Agent”).
Background
The Company has
generated certain substantial net operating loss carryovers and
other tax attributes for United States federal income tax purposes
(collectively, “NOLs”), which will
potentially provide valuable Tax Benefits (as defined below) to the
Company. The ability to use the NOLs may be adversely affected by
an “ownership change” of the Company within the meaning
of Section 382 (as defined below). The Company desires to avoid
such an “ownership change” and thereby preserve the
ability to use the NOLs. In furtherance of such objective, the
Company desires to enter into this Plan.
The Board of
Directors of the Company (the “Board”) has authorized
shares of preferred stock designated as “Series A Junior
Participating Preferred Stock” and has authorized and
declared a dividend of one preferred share purchase right (a
“Right”) for each share of
Common Stock (as hereinafter defined) of the Company outstanding as
of the Close of Business (as defined below) on June 11, 2010 (the
“Record
Date”), each Right initially representing the right to
purchase one one-hundreth (subject to adjustment) of a share of
Preferred Stock (as hereinafter defined), upon the terms and
subject to the conditions herein set forth, and has further
authorized and directed the issuance of one Right (subject to
adjustment as provided herein) with respect to each share of Common
Stock that shall become outstanding between the Record Date and the
earlier of the Distribution Date and the Expiration Date (as such
terms are hereinafter defined); provided, however, that Rights may
be issued with respect to shares of Common Stock that shall become
outstanding after the Distribution Date and before the Expiration
Date in accordance with Section 22.
Accordingly, in
consideration of the premises and the mutual agreements herein set
forth and intending to be legally bound hereby, the parties agree
as follows:
1. Certain
Definitions. For purposes of this Plan, the following terms
have the meaning indicated:
(a) “Acquiring Person” shall
mean any Person (other than any Exempt Person) that has become, in
itself or together with all Affiliates of such Person, the
Beneficial Owner of 4.90% or more of the shares of Common Stock
then outstanding; provided,
however, that Coghill (as defined herein) shall not be
deemed an “Acquiring Person” so long as (1) Coghill,
together with its Affiliates and Associates, is not the Beneficial
Owner of more than 8,121,610 shares of Common Stock (other than
pursuant to a transaction authorized in writing in advance by the
Board of Directors, including a dividend or distribution paid or
made by the Company on the outstanding shares of Common Stock or
pursuant to a split or subdivision of Common Stock), (2) the
Standstill Agreement (as defined herein) continues to be binding on
Coghill, (3) Coghill is in substantial compliance (as determined by
the Board in its sole discretion) with the terms of the Standstill
Agreement, as amended from time to time, (4) any and all amendments
to the Standstill Agreement have been approved by the Board, and
(5) no amendments, if executed after the Distribution Date, cure,
or have the effect of curing, any prior breach of the Standstill
Agreement or any amendment thereto; further provided, however, that,
subject to the following sentence, any Existing Holder (as defined
below) will not be deemed to be an Acquiring Person for any purpose
of this Plan on and after the date on which the adoption of this
Plan is first publicly announced; provided, further, that a Person
will not be deemed to have become an Acquiring Person solely as a
result of (i) a reduction in the number of shares of Common Stock
outstanding, (ii) the exercise of any options, warrants, rights or
similar interests (including restricted stock) granted by the
Company to its directors, officers and employees, (iii) any
unilateral grant of any security by the Company or any issuance by
the Company of shares of its capital stock to such Person, or (iv)
an Exempt Transaction.
If a Person is not
deemed an Acquiring Person by reason of the Person’s status
as an Existing Holder or pursuant to the provisions in subsections
(i) through (iv) above, such Person will become an Acquiring Person
if that Person thereafter acquires Beneficial Ownership of any
additional shares of Common Stock (other than (a) pursuant to a
dividend or distribution paid or made by the Company on the
outstanding Common Stock, (b) pursuant to a split or subdivision of
the outstanding Common Stock, or (c) pursuant to any of the
provisions in subsections (i) through (iv) above), unless, upon
becoming the Beneficial Owner of such additional share or shares of
Common Stock, such Person is not then the Beneficial Owner of 4.90%
or more of the shares of Common Stock then
outstanding.
Notwithstanding the foregoing, if a
Person who would otherwise be an “Acquiring Person,” as
defined pursuant to the foregoing provisions of this Section 1(a),
has become such inadvertently (including, because (A) such Person
was unaware that it Beneficially Owned a percentage of shares of
outstanding Common Stock that would otherwise cause such Person to
be an “Acquiring Person” or (B) such Person was aware
of the extent of its Beneficial Ownership of Common Stock but had
no actual knowledge of the consequences of such Beneficial
Ownership under this Plan), then the Board may, in its sole
discretion, determine that if such Person divests as promptly as
practicable a sufficient number of shares of Common Stock so that
such Person would no longer be an Acquiring Person, as defined
pursuant to the foregoing provisions of this Section 1(a), then
such Person shall not be deemed to be or to have become an
“Acquiring Person” for purposes of this Plan as a
result of such inadvertent acquisition.
Further notwithstanding the foregoing,
if a Person who would otherwise be an “Acquiring
Person,” as defined pursuant to the foregoing provisions of
this Section 1(a), has become such as a result of an acquisition of
Beneficial Ownership of shares of Common Stock that the Board in
its sole discretion determines in good faith, prior to the
Distribution Date that would otherwise occur as a result of such
acquisition will not be likely to directly or indirectly limit the
availability to the Company of the Tax Benefits or is otherwise in
the best interests of the Company, then such Person shall not be
deemed to be or to have become an “Acquiring Person”
for purposes of this Plan as a result of such acquisition. The
Board shall not have any obligation, implied or otherwise, to make
any such determination. For the sake of clarity, any Person deemed
not to have become an “Acquiring Person” pursuant to
the preceding sentence will be subject to the provisions of this
Section 1(a) with respect to any future acquisitions of Beneficial
Ownership of shares of Common Stock.
(b) “Affiliate” shall mean,
with respect to any Person, any other Person (whether or not an
Exempt Person) whose shares of Common Stock would be deemed
constructively owned by such first Person, owned by a single
“entity” as defined in Section 1.382-3(a)(1) of the
Treasury Regulations, or any comparable successor provision, or
otherwise aggregated with shares owned by such first Person for
purposes of Section 382.
(c) “Associate,” with respect
to any Person, shall have the meaning set forth in Rule 12b-2 of
the General Rules and Regulations under the Exchange
Act.
(d) “Authorized Officer” shall
have the meaning set forth in Section 20(b) hereof.
(e) A Person shall be
deemed the “Beneficial Owner” of, and
shall be deemed to “Beneficially Own” and have
“Beneficial Ownership” of, any securities:
(i) which, for
purposes of Section 382, such Person is the “beneficial
owner” of or is deemed to constructively own or otherwise are
to be aggregated with shares owned by such Person;
(ii) which such Person or any of such
Person’s Affiliates or Associates, directly or indirectly has
the right to acquire (whether such right is exercisable immediately
or only after the passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in writing and other
than customary agreements with and between underwriters and selling
group members with respect to a bona fide public offering of
securities) or upon the exercise of conversion rights, exchange
rights, rights, warrants or options, or otherwise; provided, however, that a Person shall
not be deemed the “Beneficial Owner” of or to
“beneficially own” securities tendered pursuant to a
tender or exchange offer made by such Person or any of such
Person’s Affiliates or Associates until such tendered
securities are accepted for payment, purchase or
exchange;
(iii) which such
Person, or any of such Person’s Affiliates or Associates,
directly or indirectly has the right to vote or dispose of or has
“beneficial” ownership of within the meaning of Rule
13d−3 of the General Rules and Regulations under the Exchange
Act as in effect on the date of this Agreement; provided, however, that a Person shall
not be deemed the “Beneficial Owner” of, or to
“Beneficially Own,” any security if the agreement,
arrangement or understanding to vote such security (1) arises
solely from a revocable proxy or consent given to such Person in
response to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable rules and regulations
promulgated under the Exchange Act and (2) is not also then
reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report);
(iv) which are Beneficially Owned,
directly or indirectly, by any other Person with whom (or with any
Affiliate or Associate of such other Person) such Person (or any of
such Person’s Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in writing and other
than customary agreements with and between underwriters and selling
group members with respect to a bona fide public offering of
securities) for the purpose of acquiring, holding, voting (except
to the extent contemplated by the proviso to Section 1(e)(iii)
hereof) or disposing of any securities of the Company;
or
(v) which such
Person or any of such Person’s Affiliates or Associates has a
Synthetic Long Position that has been disclosed in a filing by such
Person or any of such Person’s Affiliates or Associates
pursuant to Regulation 13D-G or Regulation 14D under the Exchange
Act in respect of which Common Stock are the “subject
security” (as such term is used in such Regulations);
provided,
however, that a Person will not
be deemed the “Beneficial Owner” of, or to
“Beneficially Own,” any security (A) that may be
acquired upon the exercise of Rights prior to the exercise of such
Rights, (B) tendered pursuant to a tender or exchange offer made by
or on behalf of such Person or any of such Person’s
Affiliates or Associates until such tendered security is accepted
for purchase or exchange, (C) solely as a result of such Person
having the right to vote such security pursuant to a revocable
proxy as described in the proviso to subparagraph (iii) of this
paragraph (e), or (D) if such beneficial ownership arises solely as
a result of such Person’s status as a “clearing
agency,” as defined in Section 3(a)(23) of the Exchange
Act.
Provided,
however, that nothing in this
paragraph (e) shall cause a Person engaged in business as an
underwriter of securities to be the “Beneficial Owner”
of, or to “Beneficially Own” any securities acquired
through such Person’s participation in good faith in a firm
commitment underwriting until the expiration of forty (40) days
after the date of such acquisition.
The percentage of
shares of the outstanding Common Stock deemed Beneficially Owned by
a Person for purposes of this Plan shall be no less than that
determined in accordance with Sections 1.382-2(a)(3), 1.382-2T(g),
(h), (j) and (k) of the Treasury Regulations, and any comparable
successor provisions; provided, however, that for the sole purpose
of determining the percentage of shares of the outstanding Common
Stock owned by any particular Person (and not for the purpose of
determining the percentage of shares of outstanding Common Stock
owned by any other Person), Common Stock held by such Person shall
not be treated as no longer owned by such Person pursuant to
Treasury Regulation § 1.382-2T(h)(2)(i)(A), or any comparable
successor provision.
(f) “Board” shall have the
meaning set forth in the background hereto.
(g) “Book Entry” shall mean an
uncertificated book entry for the Common Stock.
(h) “Business Day” shall mean
any day other than a Saturday, a Sunday or a day on which banking
institutions in the State of New York or the State of California
are authorized or obligated by law or executive order to
close.
(i) “Cashless Exercise” shall
have the meaning set forth in Section 11(o) hereof.
(j) “Certificate of
Incorporation” shall mean the Fifth Amended and
Restated Certificate of Incorporation of the Company, as filed with
the Secretary of State of the State of Delaware on December 14,
1998, together with the Certificate of Amendment of the Certificate
of Incorporation as filed with the Secretary of State of the State
of Delaware on March 1, 1999, the Second Certificate of Amendment
of the Certificate of Incorporation as filed with the Secretary of
State of the State of Delaware on July 22, 1999, the Third
Certificate of Amendment to the Certificate of Incorporation as
filed with the Secretary of State of the State of Delaware on
August 14, 2001, and the Amended Certificate of Designation of
Series A Junior Participating Preferred Stock as filed with the
Secretary of State of the State of Delaware on April 24, 2009, as
the same may be amended and restated from time to
time.
(k) “Close of Business” on any
given date shall mean 5:00 P.M., Eastern time, on such date;
provided, however, that if such date is not a Business Day it shall
mean 5:00 P.M., Eastern time, on the next succeeding Business
Day.
(l)
“Code” shall mean the
Internal Revenue Code of 1986, as amended.
(m)
“Coghill” shall mean
Coghill Capital Management, L.L.C., CCM Master Qualified Fund,
Ltd., and Clint Coghill.
(n) “Common Stock” when used
with reference to the Company shall mean the common stock, par
value $0.001 per share, of the Company.
(o) “Common Stock Equivalents”
shall have the meaning set forth in Section 11(a)(iii)
hereof.
(p) “Current Value” shall have
the meaning set forth in Section 11(a)(iii) hereof.
(q) “Distribution Date” shall
have the meaning set forth in Section 3(a) hereof.
(r) “Equivalent Preferred
Shares” shall have the meaning set forth in Section
11(b) hereof.
(s) “Exchange Act” shall mean
the Securities Exchange Act of 1934, as amended.
(t) “Exchange Ratio” shall
have the meaning set forth in Section 24(a) hereof.
(u) “Exemption Request” shall
have the meaning set forth in Section 30 hereof.
(v) “Exempt Person” shall mean
(i) the Company or any Subsidiary (as such term is hereinafter
defined) of the Company, in each case including in its fiduciary
capacity, (ii) any employee benefit and/or savings plan of the
Company or of any Subsidiary of the Company, or (iii) any entity or
trustee holding (or acting in a fiduciary capacity in respect of)
Common Stock for or pursuant to the terms of any such plan or for
the purpose of funding any such plan or funding other benefits for
employees of the Company or of any Subsidiary of the
Company.
(w) “Exempt Transaction” shall
mean any transaction that the Board, in its sole discretion, has
declared exempt pursuant to Section 30, which determination shall
be irrevocable with respect to such transaction.
(x) “Existing Holder” shall
mean any Person who, together with all Affiliates, Beneficially
Owned shares of Common Stock in excess of 4.90% of the shares of
Common Stock then outstanding immediately before the first public
announcement hereof.
(y) “Expiration Date” shall
have the meaning set forth in Section 7(a) hereof.
(z) “Invalidation Time” shall
have the meaning set forth in Section 11(a)(ii)
hereof.
(aa) “NASDAQ” shall mean The
Nasdaq Stock Market.
(bb) “New York Stock Exchange”
shall mean the New York Stock Exchange, Inc.
(cc) “NOLs” shall have the
meaning set forth in the background hereto.
(dd)
“Person” shall mean any
individual, firm, corporation, partnership, limited liability
company, limited liability partnership, trust, association,
unincorporated organization or other legal entity or any group of
persons making a “coordinated acquisition” of shares or
otherwise treated as an entity within the meaning of Section
1.382-3(a)(1) of the Treasury Regulations, or any comparable
successor provision.
(ee)
“Plan” shall have the
meaning ascribed thereto in the preamble to this Plan, and such
term shall include all amendments to this Plan.
(ff)
“Preferred Stock” shall
mean the Series A Junior Participating Preferred Stock, par value
$0.001 per share, of the Company.
(gg)
“Purchase Price” shall
have the meaning set forth in Section 7(b) hereof.
(hh)
“Record Date” shall have
the meaning set forth in the background hereto.
(ii)
“Redemption
Date” shall have the meaning set forth in Section 7(a)
hereof.
(jj)
“Redemption Price” shall
have the meaning set forth in Section 23(a) hereof.
(kk)
“Requesting Person” shall
have the meaning set forth in Section 30 hereof.
(ll)
“Right” shall have the
meaning set forth in the background hereto.
(mm)
“Right Certificate” shall
have the meaning set forth in Section 3(a) hereof.
(nn) “Securities Act” shall
mean the Securities Act of 1933, as amended.
(oo) “Section 11(a)(ii) Trigger
Date” shall have the meaning set forth in Section
11(a)(iii) hereof.
(pp) “Section 382” shall mean
Code section 382, and all Treasury Regulations promulgated under
it, and any comparable successor provision.
(qq) “Spread” shall have the
meaning set forth in Section 11(a)(iii) hereof.
(rr)
“Standstill Agreement”
shall mean the Standstill Agreement between the Company and
Coghill, dated as of January 13, 2009.
(ss)
“Stock Acquisition Date”
shall mean the first date of public announcement (which, for
purposes of this definition, shall include, a report filed or
amended pursuant to Section 13(d) of the Exchange Act) (i) by the
Company or a Person or an Affiliate or Associate of the Person,
that the Person has become an Acquiring Person or (ii) by the
Company, that the Board has concluded, based on information from
any source, that a Person has become an Acquiring
Person.
(tt)
“Subsidiary” of any Person
shall mean any Person of which securities or other ownership
interests having ordinary voting power sufficient to elect a
majority of the board of directors or other Persons performing
similar functions are Beneficially Owned, directly or indirectly,
by such first Person, and any Person that is otherwise controlled
by such first Person.
(uu) “Substitution Period”
shall have the meaning set forth in Section 11(a)(iii)
hereof.
(vv) “Synthetic Long Position”
shall mean any option, warrant, convertible security, stock
appreciation right or other contractual right, whether or not
presently exercisable, which has an exercise or conversion
privilege or a settlement payment or mechanism at a price related
to Common Stock or a value determined in whole or in part with
reference to, or derived in whole or in part from, the market price
or value of Common Stock, whether or not such right is subject to
settlement in whole or in part in Common Stock, and which increases
in value as the value of Common Stock increases or which provides
to the holder of such right an opportunity, directly or indirectly,
to profit or share in any profit derived from any increase in the
value of Common Stock, but shall not include:
(i) rights of a pledgee
under a bona fide pledge of Common Stock;
(ii) rights of all
holders of Common Stock to receive Common Stock pro rata, or
obligations to dispose of Common Stock, as a result of a merger,
exchange offer, or consolidation involving the
Company;
(iii) rights or
obligations to surrender Common Stock, or have Common Stock
withheld, upon the receipt or exercise of a derivative security or
the receipt or vesting of equity securities, in order to satisfy
the exercise price or the tax withholding consequences of receipt,
exercise or vesting;
(iv) interests in
broad-based index options, broad-based index futures, and
broad-based publicly traded market baskets of stocks approved for
trading by the appropriate federal governmental
authority;
(v) interests or rights
to participate in employee benefit plans of the Company held by
employees or former employees of the Company; or
(vi) options granted to
an underwriter in a registered public offering for the purpose of
satisfying over-allotments in such offering.
The number of
shares of Common Stock in respect of which a Person has a Synthetic
Long Position shall be the notional or other number of shares of
Common Stock specified in a filing by such Person or any of such
Person’s Affiliates or Associates pursuant to Regulation
13D-G or Regulation 14D under the Exchange Act in respect of which
Common Stock is the “subject security” (as such term is
defined in such Regulations) or in the documentation evidencing the
Synthetic Long Position as being subject to be acquired upon the
exercise or settlement of the applicable right or as the basis upon
which the value or settlement amount of such right, or the
opportunity of the holder of such right to profit or share in any
profit, is to be calculated in whole or in part or, if no such
number of shares of Common Stock is specified in such filing or
documentation, as determined by the Board in good faith to be the
number of shares of Common Stock to which the Synthetic Long
Position relates.
(ww)
“Summary of Rights” shall
have the meaning set forth in Section 3(b) hereof.
(xx) “Tax Benefits” shall mean
all net operating loss carryovers, capital loss carryovers, general
business carryovers, alternative minimum tax credit carryovers and
foreign tax credit carryovers, if any, as well as any loss or
deduction attributable to a “net unrealized built-in
loss” within the meaning of Section 382 and the Treasury
Regulations promulgated thereunder, of the Company or any of its
Subsidiaries.
(yy)
“Trading Day” shall have
the meaning set forth in Section 11(d)(i) hereof.
(zz)
“Treasury Regulations”
shall mean final, temporary and proposed income tax regulations
promulgated under the Code.
(aaa)
“Trust” shall have the
meaning set forth in Section 24(a) hereof.
(bbb)
“Trust Agreement” shall
have the meaning set forth in Section 24(a) hereof.
Any determination
required by the definitions in the Plan shall be made by the Board
in its good faith judgment, which determination shall be binding on
the Rights Agent and the holders of Rights.
2. Appointment of
Rights Agent. The Company hereby appoints the Rights Agent
to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such
co-Rights Agents as it may deem necessary or desirable, upon ten
(10) days’ prior written notice to the Rights Agent. The
Rights Agent shall have no duty to supervise, and shall in no event
be liable for, the acts or omissions of any such co-Rights
Agent.
3. Issue of Right
Certificates.
(a) Until the earlier
of (i) the Close of Business on the tenth Business Day after the
Stock Acquisition Date or (ii) the Close of Business on the tenth
Business Day (or, unless the Distribution Date shall have
previously occurred, such later date as may be specified by the
Board) after the commencement by any Person (other than an Exempt
Person) of, or of the first public announcement of the intention of
such Person to commence, a tender or exchange offer, the
consummation of which would result in any Person (other than an
Exempt Person) becoming an Acquiring Person (the earlier of such
dates being referred to as the “Distribution Date”;
provided, however, that if either of such dates occurs after the
date of this Plan and on or before the Record Date, then the
Distribution Date shall be the Record Date), (x) the Rights will be
evidenced (subject to the provisions of Section 3(b) hereof) solely
by the certificates representing the Common Stock registered in the
names of the holders thereof (or by Book Entry shares in respect of
such Common Stock) and not by separate Right Certificates, and (y)
the Rights will be transferable only in connection with the
transfer of Common Stock. As soon as practicable after the
Distribution Date, the Company will prepare and execute, the Rights
Agent will countersign and the Company will send or cause to be
sent (and the Rights Agent will, if requested and provided with all
necessary information, send) by first-class, postage-prepaid mail,
to each record holder of Common Stock as of the Close of Business
on the Distribution Date (other than any Acquiring Person or any
Affiliate or Associate of an Acquiring Person), at the address of
such holder shown on the records of the Company or the transfer
agent or registrar for the Common Stock, one or more right
certificates, in substantially the form of Exhibit A hereto (a
“Right Certificate”), evidencing one Right (subject to
adjustment as provided herein) for each share of Common Stock so
held. As of and after the Distribution Date, the Rights will be
evidenced solely by such Right Certificates. The Company shall
promptly notify the Rights Agent in writing upon the occurrence of
the Distribution Date and, if such notification is given orally,
the Company shall confirm same in writing on or prior to the
Business Day next following. Until such notice is received by the
Rights Agent, the Rights Agent may presume conclusively for all
purposes that the Distribution Date has not occurred.
(b) As promptly as
practicable following the Record Date, the Company will send a copy
of a Summary of Rights to Purchase Shares of Preferred Stock, in
substantially the form of Exhibit B hereto (the “Summary of Rights”), by
first-class, postage-prepaid mail, to each record holder of Common
Stock as of the Close of Business on the Record Date (other than
any Acquiring Person or any Affiliate of any Acquiring Person), at
the address of such holder shown on the records of the Company or
the transfer agent or registrar for the Common Stock. Any failure
to send a copy of the Summary of Rights shall not invalidate the
Rights or affect their transfer with the Common Stock. With respect
to certificates representing Common Stock (or Book Entry shares of
Common Stock) outstanding as of the Record Date, until the
Distribution Date, the Rights will be evidenced solely by such
certificates registered in the names of the holders thereof (or the
Book Entry shares). Until the Distribution Date (or, if earlier,
the Expiration Date), the surrender for transfer of any certificate
for Common Stock (or any Book Entry shares of Common Stock)
outstanding on the Record Date shall also constitute the transfer
of the Rights associated with the Common Stock represented by such
certificate or Book Entry shares.
(c) Rights shall be
issued in respect of all shares of Common Stock issued or disposed
of after the Record Date but before the earlier of the Distribution
Date and the Expiration Date (or in certain circumstances provided
in Section 22 hereof, after the Distribution Date). Certificates
issued for Common Stock after the Record Date but before the
earlier of the Distribution Date and the Expiration Date (or in
certain circumstances provided in Section 22 hereof, after the
Distribution Date) shall have impressed on, printed on, written on
or otherwise affixed to them substantially the following
legend:
This certificate
also evidences and entitles the holder hereof to certain Rights as
set forth in a Tax Benefit Preservation Plan between Autobytel Inc.
(the “Company”) and Computershare Trust Company, N.A.,
as Rights Agent, dated as of May 26, 2010 and as amended from time
to time (the “Plan”), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at
the principal executive offices of the Company. Under certain
circumstances, as set forth in the Plan, such Rights will be
evidenced by separate certificates and will no longer be evidenced
by this certificate. The Company will mail to the holder of this
certificate a copy of the Plan without charge after receipt of a
written request therefor. Under certain circumstances, as set forth
in the Plan, Rights owned by or transferred to any Person who is or
becomes an Acquiring Person (as defined in the Plan) and certain
transferees thereof will become null and void and will no longer be
transferable.
With respect to any
Book Entry shares of Common Stock, such legend shall be included in
a notice to the registered holder of such shares in accordance with
applicable law. With respect to certificates containing the
foregoing legend or Book Entry shares, the holders of which were
delivered (or otherwise had) notice of the foregoing legend, until
the Distribution Date the Rights associated with the Common Stock
represented by such certificates or Book Entry shares shall be
evidenced solely by such certificates or Book Entry shares alone,
and the surrender for transfer of any such certificate or Book
Entry share, except as otherwise provided herein, shall also
constitute the transfer of the Rights associated with the Common
Stock represented thereby. In the event that the Company purchases
or otherwise acquires any Common Stock after the Record Date but
before the Distribution Date, any Rights associated with such
Common Stock shall be deemed canceled and retired so that the
Company shall not be entitled to exercise any Rights associated
with the shares of Common Stock which are no longer
outstanding.
Notwithstanding
this paragraph (c), neither the omission of the legend required
hereby, nor the failure to deliver the notice of such legend, shall
affect the enforceability of any part of this Plan or the rights of
any holder of the Rights.
4. Form of Right
Certificates. The Right Certificates (and the forms of
election to purchase shares and of assignment and the certificates
to be printed on the reverse thereof) shall each be substantially
in the form set forth in Exhibit A hereto and may have such marks
of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate
(but which do not affect the rights, duties, liabilities or
responsibilities of the Rights Agent) and as are not inconsistent
with the provisions of this Plan, or as may be required to comply
with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of NASDAQ or of any
other stock exchange or automated quotation system on which the
Rights may from time to time be listed or quoted, or to conform to
usage. Subject to the provisions of this Plan, the Right
Certificates shall entitle the holders thereof to purchase such
number of one one-hundredths of a share of Preferred Stock as shall
be set forth therein at the Purchase Price (as determined pursuant
to Section 7), but the amount and type of securities purchasable
upon the exercise of each Right and the Purchase Price thereof
shall be subject to adjustment as provided herein.
5. Countersignature
and Registration.
(a) The Right
Certificates shall be executed on behalf of the Company by the
President of the Company, either manually or by facsimile
signature, shall have affixed thereto the Company’s seal or a
facsimile thereof and shall be attested by the Secretary or an
Assistant Secretary of the Company, either manually or by facsimile
signature. The Right Certificates shall be countersigned by the
Rights Agent, either manually or by facsimile signature, and shall
not be valid for any purpose unless countersigned. In case any
officer of the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by
the Company, such Right Certificates, nevertheless, may be
countersigned by the Rights Agent and issued and delivered by the
Company with the same force and effect as though the Person who
signed such Right Certificates had not ceased to be such officer of
the Company; and any Right Certificate may be signed on behalf of
the Company by any Person who, at the actual date of the execution
of such Right Certificate, shall be a proper officer of the Company
to sign such Right Certificate, although at the date of the
execution of this Plan any such Person was not such an
officer.
(b) Following the
Distribution Date, receipt by the Rights Agent of written notice to
that effect and all other relevant information referred to in
Section 3(a), the Rights Agent will keep or cause to be kept, at an
office or agency designated for such purpose, books for
registration and transfer of the Right Certificates issued
hereunder. Such books shall show the names and addresses of the
respective holders of the Right Certificates, the number of Rights
evidenced on its face by each of the Right Certificates and the
date of each of the Right Certificates.
6. Transfer, Split Up,
Combination and Exchange of Right Certificates; Mutilated,
Destroyed, Lost or Stolen Right Certificates.
(a) Subject to the
provisions of this Plan, at any time after the Close of Business on
the Distribution Date and at or before the Close of Business on the
Expiration Date, any Right Certificate or Right Certificates may be
transferred, split up, combined or exchanged for another Right
Certificate or Right Certificates, entitling the registered holder
to purchase a like number of one one-hundredths of a share of
Preferred Stock (or other securities, cash or assets as the case
may be) as the Right Certificate or Right Certificates surrendered
then entitled such holder to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Right
Certificate or Right Certificates shall make such request in
writing delivered to the Rights Agent, and shall surrender the
Right Certificate or Right Certificates to be transferred, split
up, combined or exchanged at the office or agency of the Rights
Agent designated for such purpose. The Right Certificates are
transferable only on the registry books of the Rights Agent.
Neither the Rights Agent nor the Company shall be obligated to take
any action with respect to the transfer of any such surrendered
Right Certificate until the registered holder shall have (i)
properly completed and duly executed the certificate set forth in
the form of assignment on the reverse side of such Right
Certificate, (ii) provided such additional evidence of the identity
of the Beneficial Owner (or former Beneficial Owner) of the Rights
represented by such Right Certificate or Affiliates or Associates
thereof as the Company or the Rights Agent shall reasonably
request, and (iii) paid a sum sufficient to cover any tax or charge
that may be imposed in connection with any transfer, split up,
combination or exchange of Right Certificates as required by
Section 9(e) hereof. Thereupon the Rights Agent, subject to the
provisions of this Plan, shall countersign and deliver to the
Person entitled thereto a Right Certificate or Right Certificates,
as the case may be, as so requested. The Rights Agent shall forward
any such sum collected by it to the Company or to such Persons as
the Company shall specify by written notice. The Rights Agent shall
have no duty or obligation under any Section of this Plan which
requires the payment of taxes or charges unless and until it is
satisfied that all such taxes and/or charges have been
paid.
(b) Subject to the
provisions of this Plan, at any time after the Distribution Date
and before the Expiration Date, upon receipt by the Company and the
Rights Agent of evidence satisfactory to them of the loss, theft,
destruction or mutilation of a Right Certificate, and, in case of
loss, theft or destruction, of indemnity or security satisfactory
to them, and, at the Company’s request, reimbursement to the
Company and the Rights Agent of all reasonable expenses incidental
thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will make and
deliver a new Right Certificate of like tenor to the Rights Agent
for delivery to the registered holder in lieu of the Right
Certificate so lost, stolen, destroyed or mutilated.
7. Exercise of Rights,
Purchase Price; Expiration Date of Rights.
(a) Except as otherwise
provided herein, the Rights shall become exercisable on the
Distribution Date, and thereafter the registered holder of any
Right Certificate may, subject to Section 11(a)(ii) hereof and
except as otherwise provided herein, exercise the Rights evidenced
thereby in whole or in part upon surrender of the Right
Certificate, with the form of election to purchase and the
certificate on the reverse side thereof properly completed and duly
executed, to the Rights Agent at the office or agency of the Rights
Agent designated for such purpose, together with payment of the
Purchase Price for each one-hundredth of a share of Preferred Stock
(or other securities, cash or other assets, as the case may be) as
to which the Rights are exercised and an amount equal to any tax or
charge required to be paid by such holder under Section 9(e)
hereof, at any time which is both after the Distribution Date and
before the time (the “Expiration Date”) that is
the earliest of: (i) the Close of Business on May 26, 2014, (ii)
the time at which the Rights are redeemed as provided in Section 23
hereof (the “Redemption Date”), (iii)
the time at which such Rights are exchanged as provided in Section
24 hereof, (iv) the end of the calendar month in which occurs the
final adjournment of the Company’s 2011 annual meeting of
stockholders, if stockholder approval of this Plan has not been
received at such meeting, (v) the repeal of Section 382 or any
successor statute if the Board determines that this Plan is no
longer necessary for the preservation of Tax Benefits, (vi) the
beginning of a taxable year of the Company to which the Board
determines that no Tax Benefits may be carried forward, or (vii)
such time as the Board determines that a limitation on the use of
the Tax Benefits under Section 382 would no longer be material to
the Company. The Board shall at least annually consider whether to
make the determination provided by Section 7(a)(vii) in light of
all relevant factors, including, in particular, the amount and
anticipated utilization of the Company’s Tax Benefits and the
Company’s market capitalization. The Company shall promptly
notify the Rights Agent in writing upon the occurrence of the
Expiration Date and, if such notification is given orally, the
Company shall confirm same in writing on or prior to the Business
Day next following. Until such notice is received by the Rights
Agent, the Rights Agent may presume conclusively for all purposes,
prior to the Close of Business on May 26, 2014, that the Expiration
Date has not occurred.
(b) The Purchase Price
shall be initially $8.00 for each one one-hundredth of a share of
Preferred Stock purchasable upon the exercise of a Right (the
“Purchase
Price”). The Purchase Price and the number of one
one-hundredths of a share of Preferred Stock or other securities or
property to be acquired upon exercise of a Right shall be subject
to adjustment from time to time as provided in Section 11 hereof
and shall be payable in lawful money of the United States of
America in accordance with paragraph (c) of this Section
7.
(c) Except as otherwise
provided herein, upon receipt of a Right Certificate representing
exercisable Rights, with the form of election to purchase properly
completed and duly executed, accompanied (subject to the following
sentence and Section 11(o)) by payment of the aggregate Purchase
Price for the number of shares of Preferred Stock to be purchased
and an amount equal to any applicable tax or charge required to be
paid by the holder of such Right Certificate in accordance with
Section 6 hereof, in cash or by certified check, cashier’s
check or money order payable to the order of the Company, the
Rights Agent shall thereupon promptly (i) (A) requisition from any
transfer agent of the Preferred Stock, or make available if the
Rights Agent is the transfer agent for the Preferred Stock,
certificates for the number of shares of Preferred Stock to be
purchased, and the Company hereby irrevocably authorizes each such
transfer agent to comply with all such requests, or (B) requisition
from the depositary agent appointed by the Company depositary
receipts representing interests in such number of shares of
Preferred Stock as are to be purchased (in which case certificates
for the Preferred Stock represented by such receipts shall be
deposited by the transfer agent with the depositary agent), and the
Company hereby directs any such depositary agent to comply with
such request, (ii) when necessary to comply with this Plan,
requisition from the Company the amount of cash to be paid in lieu
of issuance of fractional shares in accordance with Section 14
hereof, (iii) after receipt of such certificates or depositary
receipts, cause the same to be delivered to or upon the order of
the registered holder of such Right Certificate, registered in such
name or names as may be designated by such holder and (iv) when
necessary to comply with this Plan, after receipt of the cash
requisitioned from the Company, deliver such cash to or upon the
order of the registered holder of such Right Certificate. If the
Company is obligated to issue other securities of the Company, pay
cash and/or distribute other property pursuant to Section 11(a)
hereof, the Company will make all arrangements necessary so that
such other securities, cash and/or other property are available for
distribution by the Rights Agent, if and when necessary to comply
with this Plan.
(d) Except as otherwise
provided herein, in case the registered holder of any Right
Certificate shall exercise less than all of the Rights evidenced
thereby, a new Right Certificate evidencing Rights equivalent to
the exercisable Rights remaining unexercised shall be issued by the
Rights Agent to the registered holder of such Right Certificate or
to his duly authorized assigns, subject to the provisions of
Section 6 and Section 14 hereof.
(e) Notwithstanding
anything in this Plan to the contrary, neither the Rights Agent nor
the Company shall be obligated to undertake any action with respect
to a registered holder of Rights or other securities into which the
Rights have been converted or exchanged upon the occurrence of any
purported transfer or exercise of Rights pursuant to Section 6
hereof or this Section 7 unless such registered holder shall have
(i) properly completed and duly executed the certificate contained
in the form of assignment or form of election to purchase set forth
on the reverse side of the Right Certificate surrendered for such
transfer or exercise and (ii) provided such additional evidence of
the identity of the Beneficial Owner, former Beneficial Owner
and/or Affiliates or Associates thereof as the Company or the
Rights Agent shall reasonably request.
8. Cancellation and
Destruction of Right Certificates. All Right Certificates
surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to
any of its agents, be delivered to the Rights Agent for
cancellation or in canceled form, or, if surrendered to the Rights
Agent, shall be canceled by it, and no Right Certificates shall be
issued in respect thereof except as expressly permitted by any of
the provisions of this Plan. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent
shall so cancel and retire, any other Right Certificate purchased
or acquired by the Company otherwise than upon the exercise
thereof. The Rights Agent shall deliver all canceled Right
Certificates to the Company, or shall, at the written request of
the Company, destroy or cause to be destroyed such canceled Right
Certificates, and in such case shall deliver a certificate of
destruction thereof to the Company.
9. Availability of
Shares of Capital Stock.
(a) The Company
covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued shares of Preferred
Stock or any shares of Preferred Stock held in its treasury, the
number of shares of Preferred Stock that will be sufficient to
permit the exercise in full of all outstanding Rights.
(b) So long as the
shares of Preferred Stock (and, following the time that a Person
becomes an Acquiring Person, shares of Common Stock and other
securities) issuable upon the exercise of Rights may be listed or
admitted to trading on NASDAQ or listed on any other national
securities exchange or quotation system, the Company shall use its
best efforts to cause, from and after such time as the Rights
become exercisable, all shares reserved for such issuance to be
listed or admitted to trading on NASDAQ or listed on such other
national securities exchange or quotation system upon official
notice of issuance upon such exercise.
(c) From and after such
time as the Rights become exercisable, the Company shall use its
best efforts, if then necessary, to permit the issuance of shares
of Preferred Stock (and following the time that a Person first
becomes an Acquiring Person, shares of Common Stock and other
securities) upon the exercise of Rights, to register and qualify
such shares of Preferred Stock (and following the time that a
Person first becomes an Acquiring Person, shares of Common Stock
and other securities) under the Securities Act and any applicable
state securities or “Blue Sky” laws (to the extent
exemptions therefrom are not available), cause such registration
statement and qualifications to become effective as soon as
possible after such filing and keep such registration and
qualifications effective until the earlier of (x) the date as of
which the Rights are no longer exercisable for such securities and
(y) the Expiration Date. The Company may temporarily suspend, for a
period of time not to exceed ninety (90) days, the exercisability
of the Rights in order to prepare and file a registration statement
under the Securities Act and permit it to become effective. Upon
any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the
suspension is no longer in effect. The Company shall notify the
Rights Agent whenever it makes a public announcement pursuant to
this Section 9(c) and give the Rights Agent a copy of such
announcement. Notwithstanding any provision of this Plan to the
contrary, the Rights shall not be exercisable in any jurisdiction
unless the requisite qualification or exemption in such
jurisdiction shall have been obtained and until a registration
statement under the Securities Act (if required) shall have been
declared effective.
(d) The Company
covenants and agrees that it will take all such action as may be
necessary to ensure that all shares of Preferred Stock (and
following the time that a Person first becomes an Acquiring Person,
shares of Common Stock and other securities) delivered upon
exercise of Rights (subject to payment of the Purchase Price) or
delivered pursuant to an exchange for Common Stock under Section
24, shall, at the time of delivery of the certificates therefor, be
duly and validly authorized and issued and fully paid and
nonassessable shares.
(e) The Company further
covenants and agrees that it will pay when due and payable any and
all taxes and charges which may be payable in respect of the
issuance or delivery of the Right Certificates or of any shares of
Preferred Stock (or shares of Common Stock and other securities)
upon the exercise of Rights. The Company shall not, however, be
required to pay any transfer tax or charge which may be payable in
respect of any transfer or delivery of Right Certificates to a
Person other than, or the issuance or delivery of certificates or
depositary receipts for the Preferred Stock (or shares of Common
Stock and other securities) in a name other than that of, the
registered holder of the Right Certificate evidencing Rights
surrendered for exercise or to issue or deliver any certificates or
depositary receipts for Preferred Stock (or shares of Common Stock
and other securities) upon the exercise of any Rights until any
such tax or charge shall have been paid (any such tax or charge
being payable by that holder of such Right Certificate at the time
of surrender) or until it has been established to the
Company’s or the Rights Agent’s satisfaction that no
such tax or charge is due.
10. Capital Stock
Record Date. Each Person in whose name any certificate for
Preferred Stock (or Common Stock or other securities, as the case
may be) is issued (or in whose name shares thereof are registered
in book-entry form) upon the exercise of Rights shall for all
purposes be deemed to have become the holder of record of the
shares of Preferred Stock (or Common Stock or other securities, as
the case may be) represented by such certificate (or registered in
book-entry form), and such certificate shall be dated (or the
registration in book-entry form shall be dated), the date upon
which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable
taxes or charges) was made or, if issued pursuant to Section 24,
the date upon which the Company issues such certificate or effects
such registration in book-entry form in exchange for the Rights;
provided, however, that if the applicable transfer books of the
Company are closed on such date, such Person shall be deemed to
have become the record holder of such shares on, and such
certificate shall be dated (or the registration in book-entry form
shall be dated), the next succeeding Business Day on which such
transfer books are open. Before the exercise of the Rights
evidenced thereby (or an exchange pursuant to Section 24), the
holder of a Right Certificate shall not be entitled to any rights
of a holder of Preferred Stock (or Common Stock or other
securities, as the case may be) for which the Rights shall be
exercisable, including the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided
herein.
11. Adjustment of
Purchase Price, Number and Kind of Shares and Number of
Rights. The Purchase Price, the number of shares of
Preferred Stock or other securities or property purchasable upon
exercise of each Right and the number of Rights outstanding are
subject to adjustment from time to time as provided in this Section
11.
(a)
(i) In the event the
Company shall at any time after the date of this Plan (A) declare a
dividend on the Preferred Stock payable in shares of Preferred
Stock, (B) subdivide the outstanding shares of Preferred Stock, (C)
combine the outstanding shares of Preferred Stock into a smaller
number of shares of Preferred Stock or (D) issue any shares of its
capital stock in a reclassification of the Preferred Stock
(including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this
Section 11(a), the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such
subdivision, combination or reclassification, as the case may be,
and the number and kind of shares of capital stock issuable on such
date, shall be proportionately adjusted so that the holder of any
Right exercised after such time shall be entitled to receive the
aggregate number and kind of shares of capital stock which, if such
Right had been exercised immediately before such date and at a time
when the Preferred Stock transfer books of the Company were open,
the holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification.
(ii) Subject to Section
24 of this Plan, and except as otherwise provided in this Section
11(a)(ii) and Section 11(a)(iii), in the event that any Person
becomes an Acquiring Person, each holder of a Right shall
thereafter have the right to receive, upon exercise thereof at a
price equal to the then-current Purchase Price, in accordance with
the terms of this Plan and in lieu of shares of Preferred Stock,
such number of shares of Common Stock (or at the option of the
Company, such number of one-hundredths of a share of Preferred
Stock) as shall equal the result obtained by multiplying (x) the
then-current Purchase Price, by (y) the number of one-hundredths of
a share of Preferred Stock for which a Right is then exercisable
and dividing the product of (x) and (y) by (z) 50% of the
then-current per share market price of the Common Stock (determined
pursuant to Section 11(d) hereof) on the date of the occurrence of
such event; provided, however, that the Purchase Price (as so
adjusted) and the number of shares of Common Stock so receivable
upon exercise of a Right shall thereafter be subject to further
adjustment as appropriate in accordance with this Section 11
hereof. Notwithstanding anything in this Plan to the contrary,
however, from and after the time (the “Invalidation Time”) when
any Person first becomes an Acquiring Person, any Rights that are
Beneficially Owned by (x) any Acquiring Person (or any Affiliate or
Associate of any Acquiring Person), (y) a transferee of any
Acquiring Person (or any such Affiliate or Associate) who becomes a
transferee after the Invalidation Time or (z) a transferee of any
Acquiring Person (or any such Affiliate or Associate) who became a
transferee before or concurrently with the Invalidation Time
pursuant to either (I) a transfer from the Acquiring Person to
holders of its equity securities or to any Person with whom it has
any continuing agreement, arrangement or understanding regarding
the transferred Rights or (II) a transfer that the Board has
determined is part of a plan, arrangement or understanding which
has the purpose or effect of avoiding the provisions of this
paragraph, and subsequent transferees of such Persons, shall be
void without any further action, and any holder of such Rights
shall thereafter have no rights whatsoever with respect to such
Rights under any provision of this Plan. The Company shall use all
reasonable efforts to ensure that the provisions of this Section
11(a)(ii) are complied with, but shall have no liability to any
holder of Right Certificates or other Person as a result of the
Company’s failure to make any determinations with respect to
an Acquiring Person or its Affiliates or Associates or transferees
hereunder. From and after the Invalidation Time, no Right
Certificate shall be issued pursuant to Section 3 or Section 6
hereof that represents Rights that are or have become void pursuant
to the provisions of this paragraph, and any Right Certificate
delivered to the Rights Agent that represents Rights that are or
have become void pursuant to the provisions of this paragraph shall
be canceled. The Company shall promptly notify the Rights Agent in
writing upon the occurrence of the Invalidation Time and, if such
notification is given orally, the Company shall confirm same in
writing on or prior to the Business Day next following. Until such
notice is received by the Rights Agent, the Rights Agent may
presume conclusively for all purposes that the Invalidation Time
has not occurred.
(iii) The Company may at
its option (or, if required to comply with its Certificate of
Incorporation, shall) substitute for a share of Common Stock
issuable upon the exercise of Rights in accordance with the
foregoing subparagraph (ii) such number or fraction of shares of
Preferred Stock (or, if required to comply with its Certificate of
Incorporation, equivalent shares of its capital stock) having an
aggregate current market value equal to the current per share
market price of a share of Common Stock. In the event that there
shall be an insufficient number of shares of Common Stock
authorized but unissued (and unreserved) to permit the exercise in
full of the Rights in accordance with the foregoing subparagraph
(ii), the Board shall, with respect to such deficiency, to the
extent permitted by applicable law and any material agreements then
in effect to which the Company is a party, (A) determine the excess
of (x) the value of the shares of Common Stock issuable upon the
exercise of a Right in accordance with the foregoing subparagraph
(ii) (the “Current
Value”) over (y) the then-current Purchase Price
multiplied by the number of one-hundredths of a share of Preferred
Stock for which a Right was exercisable immediately before the time
that the Acquiring Person became such (such excess, the
“Spread”), and (B) with
respect to each Right (other than Rights which have become void
pursuant to Section 11(a)(ii)), make adequate provision to
substitute for the shares of Common Stock issuable in accordance
with subparagraph (ii) upon exercise of the Right and payment of
the applicable Purchase Price, (1) cash, (2) a reduction in such
Purchase Price, (3) shares of Preferred Stock or other equity
securities of the Company (including shares or fractions of shares
of preferred stock which, by virtue of having dividend, voting and
liquidation rights substantially comparable to those of the shares
of Common Stock, are deemed in good faith by the Board to have
substantially the same value as the shares of Common Stock (such
shares of preferred stock and shares or fractions of shares of
preferred stock are hereinafter referred to as “Common Stock
Equivalents”)), (4) debt securities of the Company,
(5) other assets, or (6) any combination of the foregoing, having a
value which, when added to the value of the shares of Common Stock
actually issued upon exercise of such Right, shall have an
aggregate value equal to the Current Value (less the amount of any
reduction in such Purchase Price), where such aggregate value has
been determined by the Board upon the advice of a nationally
recognized investment banking firm selected in good faith by the
Board; provided, however, that if the Company shall not make
adequate provision to deliver value pursuant to clause (B) above
within thirty (30) days following the date that the Acquiring
Person became such (the “Section 11(a)(ii) Trigger
Date”), then the Company shall be obligated to
deliver, to the extent permitted by applicable law and any material
agreements then in effect to which the Company is a party, upon the
surrender for exercise of a Right and without requiring payment of
such Purchase Price, shares of Common Stock (to the extent
available), and then, if necessary, such number or fractions of
shares of Preferred Stock (to the extent available) and then, if
necessary, cash, which shares and/or cash have an aggregate value
equal to the Spread. If, within the thirty (30) day period referred
to above the Board shall determine in good faith that it is likely
that sufficient additional shares of Common Stock could be
authorized for issuance upon exercise in full of the Rights, then,
if the Board elects, such thirty (30) day period may be extended to
the extent necessary, but not more than ninety (90) days after the
Section 11(a)(ii) Trigger Date, in order that the Company may seek
stockholder approval for the authorization of such additional
shares (such thirty (30) day period, as it may be extended, is
hereinafter called the “Substitution Period”). To
the extent that the Company determines that some action need be
taken pursuant to the second and/or third sentence of this Section
11(a)(iii), the Company (x) shall provide, subject to Section
11(a)(ii) hereof and the last sentence of this Section 11(a)(iii)
hereof, that such action shall apply uniformly to all outstanding
Rights and (y) may suspend the exercisability of the Rights until
the expiration of the Substitution Period in order to seek any
authorization of additional shares and/or to decide the appropriate
form of distribution to be made pursuant to such second sentence
and to determine the value thereof. In the event of any such
suspension, the Company shall issue a public announcement stating
that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section
11(a)(iii), the value of the shares of Common Stock shall be the
current per share market price (as determined pursuant to Section
11(d)(i)) on the Section 11(a)(ii) Trigger Date and the per share
or fractional value of any “Common Stock Equivalent”
shall be deemed to equal the current per share market price of the
Common Stock on such date. The Board may, but shall not be required
to, establish procedures to allocate the right to receive shares of
Common Stock upon the exercise of the Rights among holders of
Rights pursuant to this Section 11(a)(iii).
(b) In case the Company
shall fix a record date for the issuance of rights, options or
warrants to all holders of Preferred Stock entitling them (for a
period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Stock (or shares having similar
rights, privileges and preferences as the Preferred Stock
(“Equivalent
Preferred Shares”)) or securities convertible into
Preferred Stock or Equivalent Preferred Shares at a price per share
of Preferred Stock or Equivalent Preferred Shares (or having a
conversion price per share, if a security convertible into shares
of Preferred Stock or Equivalent Preferred Shares) less than the
then current per share market price of the Preferred Stock
(determined pursuant to Section 11(d) hereof) on such record date,
the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately
before such record date by a fraction, the numerator of which shall
be the number of shares of Preferred Stock and Equivalent Preferred
Shares outstanding on such record date plus the number of shares of
Preferred Stock and Equivalent Preferred Shares which the aggregate
offering price of the total number of such shares so to be offered
(and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such current market
price, and the denominator of which shall be the number of shares
of Preferred Stock and Equivalent Preferred Shares outstanding on
such record date plus the number of additional shares of Preferred
Stock and/or Equivalent Preferred Shares to be offered for
subscription or purchase (or into which the convertible securities
so to be offered are initially convertible); provided, however,
that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the
shares of capital stock of the Company issuable upon exercise of
one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than
cash, the value of such consideration shall be as determined in
good faith by the Board, whose determination shall be described in
a statement filed with the Rights Agent and which shall be binding
on the Rights Agent. Shares of Preferred Stock and Equivalent
Preferred Shares owned by or held for the account of the Company
shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever
such a record date is fixed; and in the event that such rights,
options or warrants are not so issued, the Purchase Price shall be
adjusted to be the Purchase Price which would then be in effect if
such record date had not been fixed.
(c) In case the Company
shall fix a record date for the making of a distribution to all
holders of the Preferred Stock (including any such distribution
made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash
dividend or a dividend payable in Preferred Stock) or subscription
rights or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect
immediately before such record date by a fraction, the numerator of
which shall be the then-current per share market price of the
Preferred Stock (determined pursuant to Section 11(d) hereof) on
such record date, less the fair market value (as determined in good
faith by the Board whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the
Rights Agent) of the portion of such assets or evidences of
indebtedness so to be distributed or of such subscription rights or
warrants applicable to one share of Preferred Stock, and the
denominator of which shall be such current per share market price
of the Preferred Stock; provided, however, that in no event shall
the consideration to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of capital stock of the
Company to be issued upon exercise of one Right. Such adjustments
shall be made successively whenever such a record date is fixed;
and in the event that such distribution is not so made, the
Purchase Price shall again be adjusted to be the Purchase Price
that would then be in effect if such record date had not been
fixed.
(d)
(i) Except as otherwise
provided herein, for the purpose of any computation hereunder, the
“current per share market price” of any security (a
“Security” for the purpose
of this Section 11(d)(i)) on any date shall be deemed to be the
average of the daily closing prices per share of such Security for
the 30 consecutive Trading Days (as such term is hereinafter
defined) immediately before, but not including, such date;
provided, however, that in the event that the current per share
market price of the Security is determined during a period
following, but not including, the announcement by the issuer of
such Security of (A) a dividend or distribution on such Security
payable in shares of such Security or securities convertible into
such shares, or (B) any subdivision, combination or
reclassification of such Security, and before the expiration of 30
Trading Days after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination
or reclassification, then, and in each such case, the current per
share market price shall be appropriately adjusted to reflect the
current market price per share equivalent of such Security. The
closing price for each day shall be the last sale price, regular
way, or, in case no such sale takes place on such day, the average
of the closing bid and asked prices, regular way, in either case as
reported by the principal consolidated transaction reporting system
with respect to securities listed or admitted to trading on the New
York Stock Exchange or NASDAQ or, if the Security is not listed or
admitted to trading on the New York Stock Exchange or NASDAQ, as
reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national
securities exchange on which the Security is listed or admitted to
trading or, if the Security is not listed or admitted to trading on
any national securities exchange, the last quoted price or, if on
such date the Security is not so quoted or reported, the average of
the high and low asked prices in the over-the-counter market as
reported by any system then in use, or, if not so quoted, the
average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Security selected
by the Board. The term “Trading Day” shall mean a
day on which the principal national securities exchange on which
the Security is listed or admitted to trading is open for the
transaction of business or, if the Security is not listed or
admitted to trading on any national securities exchange, a Business
Day.
(ii) For the purpose of
any computation hereunder, if the Preferred Stock is publicly
traded, the “current per share market price” of the
Preferred Stock shall be determined in accordance with the method
set forth in Section 11(d)(i). If the Preferred Stock is not
publicly traded but the Common Stock is publicly traded, the
“current per share market price” of the Preferred Stock
shall be conclusively deemed to be the current per share market
price of the Common Stock as determined pursuant to Section
11(d)(i) multiplied by the then applicable Adjustment Number (as
defined in and determined in accordance with the Certificate of
Designation for the Preferred Stock). If neither the Common Stock
nor the Preferred Stock is publicly traded, “current per
share market price” shall mean the fair value per share as
determined in good faith by the Board, whose determination shall be
described in a statement filed with the Rights Agent and shall be
binding on the Rights Agent.
(e) No adjustment in
the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least 1% in the Purchase
Price; provided, however, that any adjustments not required to be
made by reason of this Section 11(e) shall be carried forward and
taken into account in any subsequent adjustment. All calculations
under this Section 11 shall be made to the nearest cent or to the
nearest one one-hundredth of a share of Preferred Stock or share of
Common Stock or other share or security as the case may be.
Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than
the earlier of (i) three years from the date of the transaction
which requires such adjustment or (ii) the Expiration Date. If as a
result of an adjustment made pursuant to Section 11(a) hereof, the
holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than the
Preferred Stock, thereafter the Purchase Price and the number of
such other shares so receivable upon exercise of a Right shall be
subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to
the Preferred Stock contained in Sections 11(a), 11(b), 11(c),
11(e), 11(h), 11(i) and 11(m) and the provisions of Sections 7, 9,
10 and 14 hereof with respect to the Preferred Stock shall apply on
like terms to any such other shares.
(f) All Rights
originally issued by the Company subsequent to any adjustment made
to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one
one-hundredths of a share of Preferred Stock purchasable from time
to time hereunder upon exercise of the Rights, all subject to
further adjustment as provided herein.
(g) Unless the Company
shall have exercised its election as provided in Section 11(i),
upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and 11(c), each Right
outstanding immediately before the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted Purchase
Price, that number of one one-hundredths of a share of Preferred
Stock (calculated to the nearest one-hundredth of a share of
Preferred Stock) obtained by (i) multiplying (x) the number of
one-hundredths of a share of Preferred Stock purchasable upon the
exercise of a Right immediately before such adjustment by (y) the
Purchase Price in effect immediately before such adjustment of the
Purchase Price and (ii) dividing the product so obtained by the
Purchase Price in effect immediately after such adjustment of the
Purchase Price.
(h) The Company may
elect on or after the date of any adjustment of the Purchase Price
or any adjustment made to the number of shares of Preferred Stock
for which a Right may be exercised pursuant to Section 11(a)(i),
11(b) or 11(c) hereof to adjust the number of Rights, in
substitution for any adjustment in the number of one one-hundredths
of a share of Preferred Stock purchasable upon the exercise of a
Right. Each of the Rights outstanding after such adjustment of the
number of Rights shall be exercisable for the number of one
one-hundredths of a share of Preferred Stock for which a Right was
exercisable immediately before such adjustment. Each Right held of
record before such adjustment of the number of Rights shall become
that number of Rights (calculated to the nearest one-hundredth)
obtained by dividing the Purchase Price in effect immediately
before adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement (with prompt written
notice thereof to the Rights Agent) of its election to adjust the
number of Rights, indicating the record date for the adjustment,
and, if known at the time, the amount of the adjustment to be made.
This record date may be the date on which the Purchase Price is
adjusted or any day thereafter, but, if the Right Certificates have
been issued, shall be at least ten (10) days later than the date of
the public announcement. If Right Certificates have been issued,
upon each adjustment of the number of Rights pursuant to this
Section 11(i), the Company may, as promptly as practicable, cause
to be distributed to holders of record of Right Certificates on
such record date Right Certificates evidencing, subject to Section
14 hereof, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the
Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Right Certificates held by
such holders before the date of adjustment, and upon surrender
thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled
as a result of such adjustment. Right Certificates so to be
distributed shall be issued, executed and countersigned in the
manner provided for herein and shall be registered in the names of
the holders of record of Right Certificates on the record date
specified in the public announcement.
(i) Irrespective of any
adjustment or change in the Purchase Price or the number of one
one-hundredths of a share of Preferred Stock issuable upon the
exercise of the Rights, the Right Certificates theretofore and
thereafter issued may continue to express the Purchase Price and
the number of one-hundredths of a share of Preferred Stock which
were expressed in the initial Right Certificates issued hereunder
without effect on the Purchase Price payable to exercise a Right or
the number of one one-hundredths of a share of Preferred Stock
issuable upon the exercise of a Right as provided
herein.
(j) Before taking any
action that would cause an adjustment reducing the Purchase Price
below the then par value, if any, of the shares of Preferred Stock
or other shares of capital stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in
the opinion of its counsel, be necessary in order that the Company
may validly and legally issue fully paid and nonassessable shares
of Preferred Stock or other such shares at such adjusted Purchase
Price.
(k) In any case in
which this Section 11 shall require that an adjustment in the
Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer (with prompt
written notice thereof to the Rights Agent) until the occurrence of
such event issuing to the holder of any Right exercised after such
record date the Preferred Stock, Common Stock or other capital
stock or securities of the Company, if any, issuable upon such
exercise over and above the Preferred Stock, Common Stock or and
other capital stock or securities of the Company, if any, issuable
upon such exercise on the basis of the Purchase Price in effect
before such adjustment; provided, however, that the Company shall
deliver to such holder a due bill or other appropriate instrument
evidencing such holder’s right to receive such additional
shares upon the occurrence of the event requiring such
adjustment.
(l) Notwithstanding
anything in this Section 11 to the contrary, the Company shall be
entitled to make such adjustments in the Purchase Price, in
addition to those adjustments expressly required by this Section
11, as and to the extent that the Board in its sole discretion
shall determine to be advisable in order that any consolidation or
subdivision of the Preferred Stock, issuance wholly for cash of any
shares of Preferred Stock at less than the current market price,
issuance wholly for cash of Preferred Stock or securities which by
their terms are convertible into or exchangeable for Preferred
Stock, dividends on Preferred Stock payable in shares of Preferred
Stock or issuance of rights, options or warrants referred to
hereinabove in Section 11(b), hereafter made by the Company to
holders of its Preferred Stock shall not be taxable to such
stockholders.
(m) Notwithstanding
anything in this Plan to the contrary, in the event that at any
time after the date of this Plan and before the Distribution Date,
the Company shall (i) declare and pay any dividend on the Common
Stock payable in Common Stock, or (ii) effect a subdivision,
combination or consolidation of the Common Stock (by
reclassification or otherwise than by payment of a dividend payable
in Common Stock) into a greater or lesser number of shares of
Common Stock, then, in any such case, the number of Rights
associated with each share of Common Stock then outstanding, or
issued or delivered thereafter, shall be proportionately adjusted
so that the number of Rights thereafter associated with each share
of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each
share of Common Stock immediately before such event by a fraction
the numerator of which shall be the total number of shares of
Common Stock outstanding immediately before the occurrence of the
event and the denominator of which shall be the total number of
shares of Common Stock outstanding immediately following the
occurrence of such event.
(n) The Company agrees
that, after the earlier of the Distribution Date or the Stock
Acquisition Date, it will not, except as permitted by Section 23,
24 or 27 hereof, take (or permit any Subsidiary to take) any action
if at the time such action is taken it is reasonably foreseeable
that such action will diminish substantially or eliminate the
benefits intended to be afforded by the Rights.
(o) In the event that
the Rights become exercisable, the Board in its sole discretion may
permit the Rights, subject to Section 7(e), to be exercised for 50%
of the shares of Common Stock (or other securities, cash or other
assets, as the case may be) that would otherwise be purchasable
under subsection (a), in consideration of the surrender to the
Company of the Right Certificate representing the Right so
exercised and without other payment of the Purchase Price
(“Cashless
Exercise”). Rights exercised under this Section 11(o)
shall be deemed to have been exercised in full and shall be
canceled.
12. Certificate of
Adjusted Purchase Price or Number of Shares. Whenever an
adjustment is made as provided in Section 11 hereof, the Company
shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such
adjustment, (b) file with the Rights Agent and with each transfer
agent for the Common Stock or the Preferred Stock a copy of such
certificate and (c) mail a brief summary thereof to each holder of
a Right Certificate (or if before the Distribution Date, to each
holder of a certificate representing shares of Common Stock or Book
Entry shares in respect thereof) in accordance with Section 26
hereof. The Rights Agent shall be fully protected in relying on any
such certificate and on any adjustment or statement therein
contained and shall have no duty or liability with respect to, and
shall not be deemed to have knowledge of any such adjustment or any
such event unless and until it shall have received such
certificate. Any adjustment to be made pursuant to Section 11
hereof shall be effective as of the date of the event giving rise
to such adjustment.
13. [Reserved].
14. Fractional Rights
and Fractional Shares.
(a) The Company shall
not be required to issue fractions of Rights (except before the
Distribution Date in accordance with Section 11(m) hereof) or to
distribute Right Certificates which evidence fractional Rights. In
lieu of such fractional Rights, there shall be paid to the
registered holders of the Right Certificates with regard to which
such fractional Rights would otherwise be issuable, an amount in
cash equal to the same fraction of the current market value of a
whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the
Rights for the Trading Day immediately before the date on which
such fractional Rights would have been otherwise issuable. The
closing price for any day shall be the last sale price, regular
way, or, in case no such sale takes place on such day, the average
of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system
with respect to securities listed or admitted to trading on the New
York Stock Exchange or NASDAQ or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange or NASDAQ, as
reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national
securities exchange on which the Rights are listed or admitted to
trading or, if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not
so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by such system then in use or,
if on any such date the Rights are not so quoted, the average of
the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board.
If on any such date no such market maker is making a market in the
Rights, the fair value of the Rights on such date as determined in
good faith by the Board shall be used.
(b) The Company shall
not be required to issue fractions of Preferred Stock (other than
fractions which are integral multiples of one one-hundredth of a
share of Preferred Stock) or to distribute certificates which
evidence fractional shares of Preferred Stock (other than fractions
which are integral multiples of one one-hundredth of a share of
Preferred Stock) upon the exercise or exchange of Rights. Interests
in fractions of Preferred Stock in integral multiples of one
one-hundredth of a share of Preferred Stock may, at the election of
the Company, be evidenced by depositary receipts, pursuant to an
appropriate agreement between the Company and a depositary selected
by it; provided that such agreement shall provide that the holders
of such depositary receipts shall have all the rights, privileges
and preferences to which they are entitled as beneficial owners
(for the purposes of this Section 14(b), as such term is defined in
Rule 13d-3 of the General Rules and Regulations under the Exchange
Act) of the Preferred Stock represented by such depositary
receipts. In lieu of fractional shares of Preferred Stock that are
not integral multiples of one one-hundredth of a share of Preferred
Stock, the Company shall pay to the registered holders of Right
Certificates at the time such Rights are exercised for shares of
Preferred Stock as herein provided an amount in cash equal to the
same fraction of the current market value of one share of Preferred
Stock. For the purposes of this Section 14(b), the current market
value of a share of Preferred Stock shall be the closing price of a
share of Preferred Stock (as determined pursuant to Section
11(d)(ii) hereof) for the Trading Day immediately before the date
of such exercise.
(c) The Company shall
not be required to issue fractions of shares of Common Stock or to
distribute certificates which evidence fractional shares of Common
Stock upon the exercise or exchange of Rights. In lieu of such
fractional shares of Common Stock, the Company shall pay to the
registered holders of the Right Certificates at the time such
Rights are exercised or exchanged for shares of Common Stock as
herein provided an amount in cash equal to the same fraction of the
current market value of a whole share of Common Stock (as
determined in accordance with Section 11(d)(i) hereof), for the
Trading Day immediately before the date of such exercise or
exchange.
(d) The holder of a
Right by the acceptance of the Right expressly waives his right to
receive any fractional Rights or any fractional shares upon
exercise or exchange of a Right (except as provided
above).
(e) Whenever a payment
for fractional Rights or fractional shares is to be made by the
Rights Agent, the Company shall (i) promptly prepare and deliver to
the Rights Agent a certificate setting forth in reasonable detail
the facts related to such payments and the prices and/or formulas
utilized in calculating such payments, and (ii) provide sufficient
monies to the Rights Agent in the form of fully collected funds to
make such payments. The Rights Agent shall be fully protected in
relying upon such a certificate and shall have no duty with respect
to, and shall not be deemed to have knowledge of any payment for
fractional Rights or fractional shares under any Section of this
Plan relating to the payment of fractional Rights or fractional
shares unless and until the Rights Agent shall have received such a
certificate and sufficient monies.
15. Rights of
Action. All rights of action in respect of this Plan,
excepting the rights of action given to the Rights Agent under
Section 18 and Section 20 hereof, are vested in the respective
registered holders of the Right Certificates (and, before the
Distribution Date, the registered holders of the Common Stock); and
any registered holder of any Right Certificate (or, before the
Distribution Date, of the Common Stock), without the consent of the
Rights Agent or of the holder of any other Right Certificate (or,
before the Distribution Date, of the Common Stock), on such
holder’s own behalf and for such holder’s own benefit,
may enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in
respect of, such holder’s right to exercise the Rights
evidenced by such Right Certificate (or, before the Distribution
Date, such Common Stock) in the manner provided in such Rights
Certificate and in this Plan. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Plan and will be entitled to
specific performance of the obligations under, and injunctive
relief against actual or threatened violations of, the obligations
of any Person subject to this Plan.
16. Agreement of Right
Holders. Every holder of a Right, by accepting the same,
consents and agrees with the Company and the Rights Agent and with
every other holder of a Right that:
(a) before the
Distribution Date, the Rights will not be evidenced by a Right
Certificate and will be transferable only in connection with the
transfer of the Common Stock;
(b) after the
Distribution Date, the Right Certificates are transferable only on
the registry books of the Rights Agent if surrendered at the office
or agency of the Rights Agent designated for such purpose, duly
endorsed or accompanied by a proper instrument of transfer, and
such additional evidence of the identity of the Beneficial Owner,
former Beneficial Owner and/or Affiliates or Associates thereof as
the Company or the Rights Agent shall reasonably
request;
(c) the Company and the
Rights Agent may deem and treat the Person in whose name the Right
Certificate (or, before the Distribution Date, the Common Stock
certificate (or Book Entry shares in respect of Common Stock)) is
registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or
writing on the Right Certificates or the Common Stock certificate
(or notices provided to holders of Book Entry shares of Common
Stock) made by anyone other than the Company or the Rights Agent)
for all purposes whatsoever, and neither the Company nor the Rights
Agent, subject to the penultimate sentence of Section 11(a)(ii),
shall be affected by any notice to the contrary; and
(d) notwithstanding
anything in this Plan to the contrary, neither the Company nor the
Rights Agent shall have any liability to any holder of a Right or
other Person as a result of its inability to perform any of its
obligations under this Plan by reason of any preliminary or
permanent injunction or other order, judgment, decree or ruling
(whether interlocutory or final) issued by a court or by a
governmental, regulatory, self-regulatory or administrative agency
or commission, or any statute, rule, regulation or executive order
promulgated or enacted by any governmental authority, prohibiting
or otherwise restraining performance of such obligation; provided,
however, that the Company must use its reasonable best efforts to
have any such injunction, order, judgment, decree or ruling lifted
or otherwise overturned as soon as possible.
17. Right Certificate
Holder Not Deemed a Stockholder. No holder, as such, of any
Right Certificate shall be entitled to vote, receive dividends or
be deemed for any purpose the holder of the Preferred Stock or any
other securities of the Company which may at any time be issuable
on the exercise or exchange of the Rights represented thereby, nor
shall anything contained herein or in any Right Certificate be
construed to confer upon the holder of any Right Certificate, as
such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting stockholders (except as
provided in this Plan), or to receive dividends or subscription
rights, or otherwise, until the Rights evidenced by such Right
Certificate shall have been exercised or exchanged in accordance
with the provisions hereof.
18. Concerning the
Rights Agent.
(a) The Company agrees
to pay to the Rights Agent reasonable compensation for all services
rendered by it hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and other
disbursements incurred in the preparation, delivery,
administration, execution and amendment of this Plan and the
exercise and performance of its duties hereunder. The Company also
agrees to indemnify the Rights Agent for, and to hold it harmless
against, any loss, liability, damage, judgment, fine, penalty,
claim, demand, settlement, cost or expense, incurred without gross
negligence, bad faith or willful misconduct on the part of the
Rights Agent, for any action taken, suffered or omitted by the
Rights Agent in connection with the acceptance, administration and
execution of this Plan or the exercise and performance of its
duties hereunder, including, without limitation, the costs and
expenses of defending against any claim of liability in the
premises. The provisions of this Section 18 and Section 20 below
(including, but not limited to, the indemnity provided herein)
shall survive the exercise or expiration of the Rights, the
termination of this Plan and the resignation or removal of the
Rights Agent. The costs and expenses incurred in enforcing this
right of indemnification shall be paid by the Company.
(b) The Rights Agent
shall be protected and shall incur no liability for, or in respect
of any action taken, suffered or omitted by it in connection with,
the acceptance and administration of this Plan in reliance upon any
Right Certificate or certificate for the Preferred Stock or Common
Stock or for other securities of the Company, instrument of
assignment or transfer, power of attorney, endorsement, affidavit,
letter, notice, direction, consent, certificate, statement, or
other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by
the proper person or persons, or otherwise upon the advice of
counsel as set forth in Section 20 hereof. The Rights Agent shall
not be deemed to have any duty or notice unless and until the
Company has provided the Rights Agent with actual written notice.
Anything in this Plan to the contrary notwithstanding, in no event
shall the Rights Agent be liable for special, punitive, indirect,
incidental or consequential loss or damage of any kind whatsoever
(including, but not limited to, lost profits), even if the Rights
Agent has been advised of the possibility of such loss or damage.
Any liability of the Rights Agent under this Plan shall be limited
to the amount of fees paid by the Company to the Rights
Agent.
19. Merger or
Consolidation or Change of Name of Rights
Agent.
(a) Any Person into
which the Rights Agent or any successor Rights Agent may be merged
or with which it may be consolidated, or any Person resulting from
any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any Person succeeding
to the shareholder services or corporate trust business of the
Rights Agent or any successor Rights Agent, shall be the successor
to the Rights Agent under this Plan without the execution or filing
of any paper or any further act on the part of any of the parties
hereto, provided that such Person would be eligible for appointment
as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall
succeed to the agency created by this Plan and at such time any of
the Right Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such
Right Certificates so countersigned; and in case at that time any
of the Right Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Right Certificates
either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Right
Certificates shall have the full force provided in the Right
Certificates and in this Plan.
(b) In case at any time
the name of the Rights Agent shall be changed and at such time any
of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under
its prior name and deliver Right Certificates so countersigned; and
in case at that time any of the Right Certificates shall not have
been countersigned, the Rights Agent may countersign such Right
Certificates either in its prior name or in its changed name; and
in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Plan.
20. Duties of Rights
Agent. The Rights Agent undertakes the duties and
obligations expressly imposed by this Plan (and no implied duties
or obligations shall be read against the Rights Agent) upon the
following terms and conditions, by all of which the Company and the
holders of Right Certificates, by their acceptance thereof, shall
be bound:
(a) The Rights Agent
may consult with legal counsel (who may be legal counsel for the
Company and/or the Board and/or an employee of the Rights Agent),
and the advice or opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent and the
Rights Agent shall incur no liability for or in respect of any
action taken, suffered, or omitted to be taken by it in accordance
with such advice or opinion.
(b) Whenever in the
performance of its duties under this Plan the Rights Agent shall
deem it necessary or desirable that any fact or matter be proved or
established by the Company prior to taking or suffering (or
omitting to take) any action hereunder, such fact or matter
(including, without limitation, the identity of any Acquiring
Person and the determination of the current per share market price
of any security) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of
the Board, the Chief Executive Officer, the President, the Chief
Financial Officer, any Executive Vice President, the Treasurer or
the Secretary of the Company (each, an “Authorized Officer”)and
delivered to the Rights Agent; and such certificate shall be full
and complete authorization and protection to the Rights Agent and
the Rights Agent shall incur no liability for or in respect of any
action taken, suffered omitted in good faith by it under the
provisions of this Plan in reliance upon such
certificate.
(c) The Rights Agent
shall be liable hereunder to the Company and any other Person only
for its own gross negligence, bad faith or willful
misconduct.
(d) The Rights Agent
shall not be liable for or by reason of any of the statements of
fact or recitals contained in this Plan or in the Right
Certificates (except its countersignature thereof) or be required
to verify the same, but all such statements and recitals are and
shall be deemed to have been made by the Company only.
(e) The Rights Agent
shall not have any liability nor be under any responsibility in
respect of the validity of this Plan or the execution and delivery
hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Right Certificate
(except its countersignature thereof); nor shall it be responsible
for any breach by the Company of any covenant or condition
contained in this Plan or in any Right Certificate; nor shall it be
responsible for any change in the exercisability of the Rights
(including the Rights becoming null and void pursuant to Section
11(a)(ii) hereof) or any adjustment in the terms of the Rights
(including the manner, method or amount thereof) provided for in
Sections 3, 11, 23 or 24 hereof, or the ascertaining of the
existence of facts that would require any such change or adjustment
(except with respect to the exercise of Rights evidenced by Right
Certificates after receipt of a certificate pursuant to Section 12
hereof describing such change or adjustment); nor shall it by any
act hereunder be deemed to make any representation or warranty as
to the authorization or reservation of any Preferred Stock to be
issued pursuant to this Plan or any Right Certificate or as to
whether any Preferred Stock will, when issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees
that it will perform, execute, acknowledge and deliver or cause to
be performed, executed, acknowledged and delivered all such further
and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Plan.
(g) The Rights Agent is
hereby authorized and directed to accept advice or instructions
with respect to the performance of its duties hereunder from any
one of the Authorized Officers of the Company, and to apply to such
Authorized Officers for advice or instructions in connection with
its duties, and such advice or instructions shall be full
authorization and protection to the Rights Agent and the Rights
Agent shall incur no liability for or in respect of any action
taken, suffered or omitted by it in good faith in accordance with
the advice or instructions of any such Authorized Officer or for
any delay in acting while waiting for those instructions. Any
application by the Rights Agent for written instructions from the
Company may, at the option of the Rights Agent, set forth in
writing any action proposed to be taken or omitted by the Rights
Agent with respect to its duties or obligations under this Plan and
the date on and/or after which such action shall be taken or
omitted and the Rights Agent shall not be liable for any action
taken, suffered or omitted in accordance with a proposal included
in any such application on or after the date specified therein
(which date shall not be less than three Business Days after the
date indicated in such application unless any such Authorized
Officer shall have consented in writing to an earlier date) unless,
prior to taking, suffering or omitting any such action, the Rights
Agent has received written instructions in response to such
application specifying the action to be taken, suffered, or
omitted.
(h) The Rights Agent
and any stockholder, affiliate, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract
with or lend money to the Company or otherwise act as fully and
freely as though it were not a Rights Agent under this Plan.
Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other
Person.
(i) The Rights Agent
may execute and exercise any of the rights or powers hereby vested
in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or
misconduct of any such attorneys or agents or for any loss to the
Company resulting from any such act, default, neglect or
misconduct, absent gross negligence, willful misconduct or bad
faith.
(j) No provision of
this Plan shall require the Rights Agent to expend or risk its own
funds or otherwise incur any financial liability in the performance
of any of its duties hereunder or in the exercise of its rights if
it believes that repayment of such funds or adequate
indemnification against such risk or liability is not assured to
it.
(k) If, with respect to
any Right Certificate surrendered to the Rights Agent for exercise
or transfer, the certificate attached to the form of assignment or
form of election to purchase, as the case may be, has not been
executed, the Rights Agent shall not take any further action with
respect to such requested exercise of transfer without first
consulting with the Company
21. Change of Rights
Agent. The Rights Agent or any successor Rights Agent may
resign and be discharged from its duties under this Plan upon
thirty (30) days’ notice in writing mailed to the Company
and, in the event that the Rights Agent or one of its affiliates is
not also the transfer agent for the Company, to each transfer agent
for the Common Stock or Preferred Stock by registered or certified
mail. In the event the transfer agency relationship in effect
between the Company and the Rights Agent terminates, the Rights
Agent will be deemed to have resigned automatically and be
discharged from its duties under this Plan as of the effective date
of such termination, and the Company shall be responsible for
sending any required notice. The Company may remove the Rights
Agent or any successor Rights Agent upon thirty (30) days’
notice in writing, mailed to the Rights Agent or successor Rights
Agent, as the case may be, and to each transfer agent for the
Common Stock or Preferred Stock by registered or certified mail,
and to the holders of the Right Certificates by first-class mail.
If the Rights Agent shall resign or be removed or shall otherwise
become incapable of acting, the Company shall appoint a successor
to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such
removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights
Agent or by the holder of a Right Certificate (who shall, with such
notice, submit his Right Certificate for inspection by the
Company), then the registered holder of any Right Certificate may
apply to any court of competent jurisdiction for the appointment of
a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be either (a) a Person
organized and doing business under the laws of the United States or
of any State of the United States which is authorized under such
laws to conduct shareholder services business and is subject to
supervision or examination by federal or state authority and which
has at the time of its appointment as Rights Agent a combined
capital and surplus of at least $10 million or (b) an Affiliate of
such Person. After appointment, the successor Rights Agent shall be
vested with the same powers, rights, duties and responsibilities as
if it had been originally named as Rights Agent without further act
or deed; but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at the time
held by it hereunder, and execute and deliver any further
assurance, conveyance, act or deed necessary for the purpose. Not
later than the effective date of any such appointment the Company
shall file notice thereof in writing with the predecessor Rights
Agent and each transfer agent for the Common Stock or Preferred
Stock, and, following the Distribution Date, mail a notice thereof
in writing to the registered holders of the Right Certificates.
Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the
appointment of the successor Rights Agent, as the case may
be.
22. Issuance of New
Right Certificates. Notwithstanding any of the provisions of
this Plan or of the Rights to the contrary, the Company may, at its
option, issue new Right Certificates evidencing Rights in such
forms as may be approved by its Board to reflect any adjustment or
change in the Purchase Price and the number or kind or class of
shares or other securities or property purchasable under the Right
Certificates made in accordance with the provisions of this Plan.
In addition, in connection with the issuance or sale of Common
Stock following the Distribution Date and before the Expiration
Date, the Company may with respect to shares of Common Stock so
issued or sold pursuant to (i) the exercise of stock options, (ii)
under any employee plan or arrangement, (iii) the exercise,
conversion or exchange of securities, notes or debentures issued by
the Company or (iv) a contractual obligation of the Company, in
each case existing before the Distribution Date, issue Right
Certificates representing the appropriate number of Rights in
connection with such issuance or sale.
23. Redemption.
(a) The Board may, at
any time before such time as any Person first becomes an Acquiring
Person, redeem all but not less than all the then outstanding
Rights at a redemption price of $0.001 per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar
transaction occurring in respect of the Common Stock after the date
hereof (the “Redemption Price”). The
redemption of the Rights may be made effective at such time, on
such basis and with such conditions as the Board in its sole
discretion may establish. The Company may, at its option, pay the
Redemption Price in cash, shares of Common Stock (based on the
current market price of the Common Stock at the time of redemption
as determined pursuant to Section 11(d)(i) hereof) or any other
form of consideration deemed appropriate by the Board.
Notwithstanding the foregoing, the aggregate Redemption Price
payable to any holder of Rights upon the redemption of all Rights
held by such holder shall be rounded to the nearest $0.01 (such
that fractions of $0.01 greater than or equal to $0.005 shall be
rounded up and fractions of $0.01 less than $0.005 shall be rounded
down); and further provided that the aggregate Redemption Price
payable to any holder of Rights upon the redemption of all Rights
held by such Person shall in no event be less than
$0.01.
(b) Immediately upon
the action of the Board ordering the redemption of the Rights
pursuant to paragraph (a) of this Section 23 (or at such later time
as the Board may establish for the effectiveness of such
redemption), and without any further action and without any notice,
the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the
Redemption Price. The Company shall promptly give public notice of
any such redemption (with prompt written notice thereof to the
Rights Agent); provided, however, that the failure to give, or any
defect in, any such notice shall not affect the validity of such
redemption. Within ten (10) days after such action of the Board
ordering the redemption of the Rights (or such later time as the
Board may establish for the effectiveness of such redemption), the
Company shall mail a notice of redemption to all the holders of the
then outstanding Rights at their last addresses as they appear upon
the registry books of the Rights Agent or, before the Distribution
Date, on the registry books of the transfer agent for the Common
Stock. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption shall state the method by
which the payment of the Redemption Price will be made. The failure
to give notice required by this Section 23(b) or any defect therein
shall not affect the validity of the action taken by the
Company.
(c) In the case of a
redemption under Section 23(a) hereof, the Company may, at its
option, discharge all of its obligations with respect to the Rights
by (i) issuing a press release announcing the manner of redemption
of the Rights and (ii) mailing payment of the Redemption Price to
the registered holders of the Rights at their last addresses as
they appear on the registry books of the Rights Agent or, before
the Distribution Date, on the registry books of the transfer agent
of the Common Stock, and upon such action, all outstanding Right
Certificates shall be void without any further action by the
Company.
24. Exchange.
(a) The Board may, at
its option, at any time after any Person first becomes an Acquiring
Person, exchange all or part of the then outstanding Rights (which
shall not include Rights that have not become effective or that
have become null and void pursuant to the provisions of Section
11(a)(ii) hereof ) for shares of Common Stock at an exchange ratio
of one share of Common Stock (or one-hundredth of a share of
Preferred Stock) per Right, appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after
the date hereof (such amount per Right being hereinafter referred
to as the “Exchange
Ratio”). Notwithstanding the foregoing, the Board
shall not be empowered to effect such exchange at any time after an
Acquiring Person becomes the Beneficial Owner of 50% or more of the
outstanding shares of Common Stock. The exchange of the Rights by
the Board may be made effective at such time, on such basis and
with such conditions as the Board in its sole discretion may
establish. Before effecting an exchange pursuant to this Section
24, the Board may direct the Company to enter into a Trust
Agreement in such form and with such terms as the Board shall then
approve (the “Trust
Agreement”). If the Board so directs, the Company
shall enter into the Trust Agreement and shall issue to the trust
created by such agreement (the “Trust”) all of the shares
of Common Stock issuable pursuant to the exchange, and all Persons
entitled to receive shares pursuant to the exchange shall be
entitled to receive such shares (and any dividends or distributions
made thereon after the date on which such shares are deposited in
the Trust) only from the Trust and solely upon compliance with the
relevant terms and provisions of the Trust Agreement.
(b) Immediately upon
the effectiveness of the action of the Board ordering the exchange
of any Rights pursuant to paragraph (a) of this Section 24 and
without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter
of a holder of such Rights shall be to receive that number of
shares of Common Stock equal to the number of such Rights held by
such holder multiplied by the Exchange Ratio. The Company shall
promptly give public notice of any such exchange (with prompt
written notice thereof to the Rights Agent) and shall promptly mail
a notice of any such exchange to all of the holders of the Rights
so exchanged at their last addresses as they appear upon the
registry books of the Rights Agent; provided, however, that the
failure to give, or any defect in, such notice shall not affect the
validity of such exchange. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of exchange will state the
method by which the exchange of the shares of Common Stock for
Rights will be effected and, in the event of any partial exchange,
the number of Rights which will be exchanged. Any partial exchange
shall be effected pro rata based on the number of Rights (other
than Rights which have become null and void pursuant to the
provisions of Section 11(a)(ii) hereof) held by each holder of
Rights.
(c) The Company may at
its option substitute, and, in the event that there shall not be
sufficient shares of Common Stock issued but not outstanding or
authorized but unissued (and unreserved) to permit an exchange of
Rights as contemplated in accordance with this Section 24 (or if
the issuance of Common Stock in exchange for any Rights would not
otherwise be permitted under the Certificate of Incorporation), the
Company shall substitute, to the extent of such insufficiency or to
the extent necessary to comply with its Certificate of
Incorporation, for each share of Common Stock that would otherwise
be issuable upon exchange of a Right, a number of shares of
Preferred Stock or fraction thereof (or Equivalent Preferred
Shares, as such term is defined in Section 11(b), or other
equivalent shares of its capital stock) such that the current per
share market price (determined pursuant to Section 11(d) hereof) of
one share of Preferred Stock (or Equivalent Preferred Share or
other equivalent share) multiplied by such number or fraction is
equal to the current per share market price of one share of Common
Stock (determined pursuant to Section 11(d) hereof) as of the date
of such exchange.
25. Notice of Certain
Events.
(a) In case the Company
shall at any time after the earlier of the Distribution Date or the
Stock Acquisition Date propose (i) to pay any dividend payable in
stock of any class to the holders of its Preferred Stock or to make
any other distribution to the holders of its Preferred Stock (other
than a regular quarterly cash dividend), (ii) to offer to the
holders of its Preferred Stock rights or warrants to subscribe for
or to purchase any additional shares of Preferred Stock or shares
of stock of any class or any other securities, rights or options,
(iii) to effect any reclassification of its Preferred Stock (other
than a reclassification involving only the subdivision or
combination of outstanding Preferred Stock), (iv) to effect the
liquidation, dissolution or winding up of the Company, or (v) to
declare or pay any dividend on the Common Stock payable in Common
Stock, to effect a subdivision, combination or consolidation of the
Common Stock (by reclassification or otherwise than by payment of
dividends in Common Stock), then, in each such case, the Company
shall give to the Rights Agent and to each holder of a Right
Certificate, in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the
purposes of such stock dividend or distribution or offering of
rights or warrants, or the date on which such liquidation,
dissolution, winding up, reclassification, subdivision, combination
or consolidation is to take place and the date of participation
therein by the holders of the Common Stock and/or Preferred Stock,
if any such date is to be fixed, and such notice shall be so given
in the case of any action covered by clause (i) or (ii) above at
least ten (10) days before the record date for determining holders
of the Preferred Stock for purposes of such action, and in the case
of any such other action, at least ten (10) days before the date of
the taking of such proposed action or the date of participation
therein by the holders of the Common Stock and/or Preferred Stock,
whichever shall be the earlier.
(b) In the event that
any Person becomes an Acquiring Person, then the Company shall as
soon as practicable thereafter give to the Rights Agent and to each
holder of a Right Certificate (or if occurring before the
Distribution Date, the holders of the Common Stock) in accordance
with Section 26 hereof, a notice of the occurrence of such event,
which notice shall describe such event and the consequences of such
event to holders of Rights under Section 11(a)(ii).
(c) The failure to give
notice required by this Section 25 or any defect therein shall not
affect the validity of the action taken by the Company or the vote
upon any such action.
26. Notices.
Except as otherwise provided herein, notices or demands authorized
by this Plan to be given or made by the Rights Agent or by the
holder of any Right Certificate to or on the Company shall be
sufficiently given or made if sent by overnight delivery service or
first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Rights Agent) as follows:
AUTOBYTEL
INC.
18872 MacArthur
Boulevard
Irvine, CA
92612-1400
Attention: General
Counsel
Subject to the
provisions of Section 21 hereof, any notice or demand authorized by
this Plan to be given or made by the Company or by the holder of
any Right Certificate to or on the Rights Agent shall be
sufficiently given or made if sent by overnight delivery service or
first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
COMPUTERSHARE TRUST
COMPANY, N.A.
250 Royall
Street
Canton, MA
02021
Attention: Client
Services
Notices or demands
authorized by this Plan to be given or made by the Company or the
Rights Agent to the holder of any Right Certificate (or if before
the Distribution Date, to each holder of a certificate representing
shares of Common Stock or Book Entry shares in respect thereof)
shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the address of such
holder as shown on the registry books of the Company.
27. Supplements and
Amendments. Except as otherwise provided in this Section 27,
for so long as the Rights are then redeemable, the Company may in
its sole and absolute discretion, and the Rights Agent shall, if
the Company so directs, supplement or amend any provision of this
Plan in any respect without the approval of any holders of the
Rights. At any time when the Rights are no longer redeemable,
except as otherwise provided in this Section 27, the Company may,
and the Rights Agent shall, if the Company so directs, supplement
or amend this Plan without the approval of any holders of Rights,
in order to (i) cure any ambiguity, (ii) correct or supplement any
provision contained herein which may be defective or inconsistent
with any other provisions herein, (iii) shorten or lengthen any
time period hereunder, or (iv) change or supplement the provisions
hereunder in any manner which the Company may deem necessary or
desirable; provided, however, that no such supplement or amendment
may adversely affect the interests of the holders of Rights as such
(other than an Acquiring Person or an Affiliate or Associate of an
Acquiring Person), and no such amendment may cause the Rights again
to become redeemable or cause this Plan again to become amendable
other than in accordance with this sentence. Notwithstanding
anything contained in this Plan to the contrary, no supplement or
amendment shall be made which decreases the Redemption Price. Upon
the delivery of a certificate from an appropriate officer of the
Company which states that the proposed supplement or amendment is
in compliance with the terms of this Section 27, the Rights Agent
shall promptly execute such supplement or amendment.
Notwithstanding anything contained in this Plan to the contrary,
the Rights Agent may, but shall not be obligated to, enter into any
supplement or amendment that affects the Rights Agent’s own
rights, duties, immunities or obligations under this Plan. The
Rights Agent hereby acknowledges that in all matters arising under
this Plan, including any amendment hereto pursuant to this Section
27, time is of the essence.
28. Successors.
All the covenants and provisions of this Plan by or for the benefit
of the Company or the Rights Agent shall bind and inure to the
benefit of their respective successors and assigns
hereunder.
29. Benefits of this
Plan. Nothing in this Plan shall be construed to give to any
Person other than the Company, the Rights Agent and the registered
holders of the Right Certificates (and, before the Distribution
Date, the Common Stock) any legal or equitable right, remedy or
claim under this Plan; but this Plan shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the
registered holders of the Right Certificates (and, before the
Distribution Date, the Common Stock).
30. Process to Seek
Exemption. Any Person who desires to effect any acquisition
of Common Stock that would, if consummated, result in such Person
becoming an Acquiring Person, may, in accordance with this Section
30, request that the Board grant an exemption with respect to such
acquisition under this Plan (the Person requesting such exemption,
a “Requesting
Person”) so that such acquisition will be deemed to be
an “Exempt Transaction” for purposes of this Plan (an
“Exemption
Request”). An Exemption Request shall be in proper
form and shall be delivered by fax and by registered mail, return
receipt requested, to the Secretary of the Company at the principal
executive offices of the Company. To be in proper form, an
Exemption Request shall set forth (i) the name and address of the
Requesting Person, (ii) the number and percentage of shares of
Common Stock then Beneficially Owned by the Requesting Person,
together with all Affiliates and Associates of the Requesting
Person, and (iii) a reasonably detailed description of the
transaction or transactions by which the Requesting Person would
propose to acquire Beneficial Ownership of Common Stock, such that
the Requesting Person would otherwise become an Acquiring Person,
and the maximum number and percentage of shares of Common Stock
that the Requesting Person proposes to acquire. The Board shall
make a determination whether to grant an exemption in response to
an Exemption Request as promptly as practicable (and, in any event,
within ten (10) Business Days) after receipt thereof pursuant to
registered mail; provided, that the failure of the Board to make a
determination within such period shall be deemed to constitute the
denial by the Board of the Exemption Request. The Board shall grant
an exemption in response to an Exemption Request only if the Board
determines in its sole discretion that the acquisition of
Beneficial Ownership of Common Stock by the Requesting Person will
not be likely to directly or indirectly limit the availability to
the Company of the Tax Benefits or is otherwise in the best
interests of the Company. Any exemption granted hereunder may be
granted in whole or in part, and may be subject to limitations or
conditions (including a requirement that the Requesting Person
agree that it will not acquire Beneficial Ownership of shares of
Common Stock in excess of the maximum number and percentage of
shares of Common Stock approved by the Board), in each case as and
to the extent the Board shall determine in its sole discretion to
be necessary or desirable to provide for the protection of the
Company’s Tax Benefits or otherwise in the best interests of
the Company. The Board shall not have any obligation, implied or
otherwise, to grant any Exemption Request. Any Exemption Request
may be submitted on a confidential basis and, except to the extent
required by applicable law, the Company shall maintain the
confidentiality of such Exemption Request and the Board’s
determination with respect thereto.
31. Determinations and
Actions by the Board of Directors. The Board shall have the
exclusive power and authority to administer this Plan and to
exercise the rights and powers specifically granted to the Board or
to the Company, or as may be necessary or advisable in the
administration of this Plan, including the right and power to (i)
interpret the provisions of this Plan and (ii) make all
determinations deemed necessary or advisable for the administration
of this Plan (including a determination to redeem or not redeem the
Rights or to amend or not amend this Plan). All such actions,
calculations, interpretations and determinations that are done or
made by the Board in good faith shall be final, conclusive and
binding on the Company, the Rights Agent, the holders of the
Rights, as such, and all other parties. The Rights Agent is
entitled always to presume that the Board acted in good faith and
shall be fully protected and incur no liability in reliance
thereon. The Board may delegate all or any portion of its power and
authority to administer this Plan and to exercise the rights and
powers hereunder to a committee of and appointed by the
Board.
32. Severability.
If any term, provision, covenant or restriction of this Plan or
applicable to this Plan is held by a court of competent
jurisdiction or other authority to be invalid, null and void or
unenforceable, the remainder of the terms, provisions, covenants
and restrictions of this Plan shall remain in full force and effect
and shall in no way be affected, impaired or invalidated; and
provided,
further, that if
any such excluded term, provision, covenant or restriction shall
adversely affect the rights, immunities, duties or obligations of
the Rights Agent, the Rights Agent shall be entitled to resign
immediately; provided, however, that notwithstanding
anything in this Plan to the contrary, if any such term, provision,
covenant or restriction is held by such court or authority to be
invalid, null and void or unenforceable and the Board determines in
its good faith judgment that severing the invalid language from
this Plan would adversely affect the purpose or effect of this
Plan, the right of redemption set forth in Section 23 hereof shall
be reinstated (with prompt notice to the Rights Agent) and shall
not expire until the Close of Business on the tenth Business Day
following the date of such determination by the Board.
33. Governing
Law. This Plan and each Right Certificate issued hereunder
shall be deemed to be a contract made under the laws of the State
of Delaware and for all purposes shall be governed by and construed
in accordance with the laws of such State applicable to contracts
to be made and performed entirely within such State.
34. Counterparts.
This Plan may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but
one and the same instrument. A signature to this Plan transmitted
electronically shall have the same authority, effect and
enforceability as an original signature.
35. Descriptive
Headings. Descriptive headings of the several sections of
this Plan are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions
hereof.
36. Force
Majeure. Notwithstanding anything to the contrary contained
herein, the Rights Agent shall not be liable for any delays or
failures in performance resulting from acts beyond its reasonable
control, including acts of God, terrorist acts, shortage of supply,
breakdowns or malfunctions, interruptions or malfunction of
computer facilities, loss of data due to power failures or
mechanical difficulties with information storage or retrieval
systems, labor difficulties, war or civil unrest.
37. Interpretation.
In this Plan, unless a clear contrary intention
appears:
(a) where not
inconsistent with the context, words in the plural number include
the singular number and vice versa;
(b) reference to any
Person includes such Person’s successors and assigns but, if
applicable, only such successors and assigns permitted by this
Plan;
(c) reference to any
gender includes each other gender;
(d) reference to any
agreement, document or instrument means such agreement, document or
instrument as amended or modified and in effect from time to time
in accordance with the terms thereof and includes all addenda,
exhibits and schedules thereto;
(e) all references to
Sections refer to the Sections of this Plan and all references to
Exhibits refer to the Exhibits attached to this Plan, each of which
is made a part of this Plan for all purposes;
(f) reference to any
law means such law as amended, modified, codified, replaced or
reenacted, in whole or in part, and in effect from time to time,
including rules and regulations promulgated thereunder, and
reference to any section or other provision of any law means that
provision of such law from time to time in effect and constituting
the substantive amendment, modification, codification, replacement
or reenactment of such section or other provision;
(g) “hereunder,”
“hereof,” “hereto,” and words of similar
import shall be deemed references to this Plan as a whole and not
to any particular Section or other provision hereof and, unless the
context otherwise requires, references herein to a specific
Section, subsection, preamble, recital, or Exhibit refer,
respectively, to Articles, Sections, subsections, preamble,
recitals, or Exhibits of this Plan;
(h) “including”
(and with correlative meaning, “include”) means
including without limitation;
(i) “or” is
used in the inclusive sense of “and/or”;
(j) with respect to the
determination of any period of time, “from” means
“from and including” and “to” means
“to but excluding”; and
(k) the terms
“Dollars” and “$” mean United States
Dollars.
[SIGNATURE
PAGE FOLLOWS]
IN WITNESS WHEREOF,
the parties hereto have caused this Tax Benefit Preservation Plan
to be duly executed as of the 26th day of May,
2010.
|
AUTOBYTEL
INC.
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|
|
By:
|
/s/ Glenn E.
Fuller
|
|
Glenn E.
Fuller
|
|
Executive Vice
President, Chief Legal and Administrative Officer and
Secretary
|
|
|
|
|
|
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COMPUTERSHARE TRUST
COMPANY, N.A., as Rights
Agent
|
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By:
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/s/ Dennis V.
Moccia
|
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Name: Dennis V.
Moccia
|
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Title: Manager,
Contract Administration
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Exhibit
A
Form
of Right Certificate
Certificate No.
R-______
NOT EXERCISABLE
AFTER May 26, 2014 OR SUCH EARLIER DATE AS PROVIDED BY THE TAX
BENEFIT PRESERVATION PLAN OR EARLIER IF REDEMPTION OR EXCHANGE
OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $0.001 PER RIGHT
AND TO EXCHANGE ON THE TERMS SET FORTH IN THE TAX BENEFIT
PRESERVATION PLAN. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE
TAX BENEFIT PRESERVATION PLAN, RIGHTS OWNED BY OR TRANSFERRED TO
ANY PERSON WHO IS OR BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE
TAX BENEFIT PRESERVATION PLAN) AND CERTAIN TRANSFEREES THEREOF WILL
BECOME NULL AND VOID AND WILL NO LONGER BE
TRANSFERABLE.
RIGHT
CERTIFICATE
AUTOBYTEL
INC.
This certifies that
___________________________ or registered assigns, is the
registered owner of the number of Rights set forth above, each of
which entitles the owner thereof, subject to the terms, provisions
and conditions of the Tax Benefit Preservation Plan, dated as of
May 26, 2010, as the same may be amended from time to time (the
“Plan”), between Autobytel Inc., a Delaware corporation
(the “Company”), and Computershare Trust Company, N.A.,
as Rights Agent (the “Rights Agent”), to purchase from
the Company at any time after the Distribution Date (as such term
is defined in the Plan) and before 5:00 P.M., Eastern time, on May
26, 2014 at the office or agency of the Rights Agent designated for
such purpose, or of its successor as Rights Agent, one
one-hundredth of a fully paid non-assessable share of Series A
Junior Participating Preferred Stock, par value $0.001 per share
(the “Preferred Stock”), of the Company at a purchase
price of $_______ per one one-hundredth of a share of Preferred
Stock (the “Purchase Price”), upon presentation and
surrender of this Right Certificate with the Form of Election to
Purchase duly executed. The number of Rights evidenced by this
Rights Certificate (and the number of one one-hundredths of a share
of Preferred Stock which may be purchased upon exercise hereof) set
forth above, and the Purchase Price set forth above, are the number
and Purchase Price as of __________ ___, 20__, based on the
Preferred Stock as constituted at such date. As provided in the
Plan, the Purchase Price, the number of one one-hundredths of a
share of Preferred Stock (or other securities or property) which
may be purchased upon the exercise of the Rights and the number of
Rights evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.
Any capitalized terms used herein and not otherwise defined shall
have the meaning attributed to them in the Plan.
Except as otherwise
provided in the Plan, in the event that any person, entity or group
becomes an Acquiring Person, if the Rights evidenced by this Right
Certificate are Beneficially Owned by (i) an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person, (ii) a
transferee of any such Acquiring Person, Associate or Affiliate, or
(iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, after such transfer,
became an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, such Rights shall become null and void and no
holder hereof shall have any right with respect to such
Rights.
As provided in the
Rights Agreement, the Purchase Price and the number and kind of
Preferred Stock or other securities that may be purchased upon the
exercise of the Rights evidenced by this Right Certificate are
subject to modification and adjustment upon the happening of
certain events, including any person, entity or group becoming an
Acquiring Person.
This Right
Certificate is subject to all of the terms, provisions and
conditions of the Plan, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and
to which Plan reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and
immunities hereunder of the Rights Agent, the Company and the
holders of the Right Certificates. Copies of the Plan are on file
at the principal executive offices of the Company. The Company will
mail to the holder of this Right Certificate a copy of the Plan
without charge after receipt of a written request
therefor.
This Right
Certificate, with or without other Right Certificates, upon
surrender at the office or agency of the Rights Agent designated
for such purpose, may be exchanged for another Right Certificate or
Right Certificates of like tenor and date evidencing Rights
entitling the holder to purchase a like aggregate number of shares
of Preferred Stock as the Rights evidenced by the Right Certificate
or Right Certificates surrendered shall have entitled such holder
to purchase. If this Right Certificate shall be exercised in part,
the holder shall be entitled to receive upon surrender hereof
another Right Certificate or Right Certificates for the number of
whole Rights not exercised.
Subject to the
provisions of the Plan, the Rights evidenced by this Certificate
(i) may be redeemed by the Company at a redemption price of $0.001
per Right or (ii) may be exchanged in whole or in part for shares
of the Company’s Common Stock, par value $0.001 per share, or
shares of Preferred Stock.
No fractional
shares of Common Stock or Preferred Stock will be issued upon the
exercise or exchange of any Right or Rights evidenced hereby (other
than fractions of Preferred Stock which are integral multiples of
one one-hundredths of a share of Preferred Stock, which may, at the
election of the Company, be evidenced by depositary receipts), but
in lieu thereof a cash payment will be made, as provided in the
Plan.
No holder of this
Right Certificate, as such, shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred
Stock or of any other securities of the Company which may at any
time be issuable on the exercise or exchange hereof, nor shall
anything contained in the Plan or herein be construed to confer
upon the holder hereof, as such, any of the rights of a stockholder
of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action, or
to receive notice of meetings or other actions affecting
stockholders (except as provided in the Plan) or to receive
dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by this Right Certificate shall have been
exercised or exchanged as provided in the Plan.
This Right
Certificate shall not be valid or obligatory for any purpose until
it shall have been countersigned by the Rights Agent.
WITNESS the
facsimile signature of the proper officers of the Company and its
corporate seal.
Dated as of
_________ __, 20__.
AUTOBYTEL
INC.
Countersigned:
COMPUTERSHARE TRUST
COMPANY, N.A., as Rights Agent
By:
Name:
Title:
Form
of Reverse Side of Right Certificate
FORM
OF ASSIGNMENT
(To
be executed by the registered holder if such
holder
desires to transfer the Right Certificate)
FOR VALUE
RECEIVED
__________________________
hereby sells,
assigns and
transfers
unto
(Please
print name and address of transferee)
_______ Rights
represented by this Right Certificate, together with all right,
title and interest therein, and does hereby irrevocably constitute
and appoint ___________________________ Attorney, to transfer said
Rights on the books of the within-named Company, with full power of
substitution.
Dated:
Signature
Guaranteed:
Signatures must be
guaranteed by a bank, trust company, broker, dealer or other
eligible institution participating in a recognized signature
guarantee medallion program.
(To
be completed)
The undersigned
hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by, were not acquired by the
undersigned from, and are not being sold, assigned or transferred
to an Acquiring Person or an Affiliate or Associate thereof (as
such terms are defined in the Plan).
________________________
Signature
Form
of Reverse Side of Right Certificate – continued
FORM
OF ELECTION TO PURCHASE
(To
be executed if holder desires to exercise
Rights
represented by Right Certificate)
TO AUTOBYTEL
INC.:
The undersigned
hereby irrevocably elects to exercise ________ Rights represented
by this Right Certificate to purchase the shares of Preferred Stock
(or other securities or property) issuable upon the exercise of
such Rights and requests that certificates representing such shares
of Preferred Stock (or such other securities) be issued in the name
of:
_________________________________________________________________________________________________________________________________
(Please print name
and address)
If such number of
Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of
such Rights shall be registered in the name of and delivered
to:
Please insert
social security
or other
identifying number
_________________________________________________________________________________________________________________________________
(Please print name
and address)
Dated:
______________________________________
Signature
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(Signature must
conform to holder specified on Right Certificate)
Signature
Guaranteed:
Signature must be
guaranteed by a bank, trust company, broker, dealer or other
eligible institution participating in a recognized signature
guarantee medallion program.
Form of Reverse
Side of Right Certificate -- continued
(To be
completed)
The undersigned
hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by, were not acquired by the
undersigned from, and are not being sold, assigned or transferred
to, an Acquiring Person or an Affiliate or Associate thereof (as
such terms are defined in the Plan).
_____________________________________
Signature
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NOTICE
The signature in
the Form of Assignment or Form of Election to Purchase, as the case
may be, must conform to the name as written upon the face of this
Right Certificate in every particular, without alteration or
enlargement or any change whatsoever.
In the event the
certification set forth above in the Form of Assignment or the Form
of Election to Purchase, as the case may be, is not completed, such
Assignment or Election to Purchase will not be
honored.
Exhibit
B
UNDER CERTAIN
CIRCUMSTANCES, AS SET FORTH IN THE TAX BENEFIT PRESERVATION PLAN,
RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN
ACQUIRING PERSON (AS DEFINED IN THE TAX BENEFIT PRESERVATION PLAN)
AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL
NO LONGER BE TRANSFERABLE.
SUMMARY OF RIGHTS
TO PURCHASE
SHARES OF PREFERRED
STOCK OF
AUTOBYTEL
INC.
On May 26, 2010,
the Board of Directors of Autobytel Inc. (the
“Company”) declared a dividend of one preferred share
purchase right (a “Right”) for each outstanding share
of Common Stock, par value $0.001 per share (the “Common
Stock”). The dividend is payable on June 11, 2010 (the
“Record Date”) to the stockholders of record on that
date. Each Right entitles the registered holder to purchase from
the Company one one-hundredth of a share of Series A Junior
Participating Preferred Stock, par value $0.001 per share, of the
Company (the “Preferred Stock”) at a price of $8.00 per
one one-hundredth of a share of Preferred Stock (the
“Purchase Price”), subject to adjustment. The
description and terms of the Rights are set forth in the Tax
Benefit Preservation Plan, dated as of May 26, 2010, as the same
may be amended from time to time (the “Plan”), between
the Company and Computershare Trust Company, N.A., as Rights Agent
(the “Rights Agent”).
The Plan is
designed to help protect the Company’s tax net operating loss
carryforwards. The Plan is intended to act as a deterrent to any
person or group from becoming or obtaining the right to become a
“5-percent shareholder” (as such term is used in
Section 382 of the Internal Revenue Code of 1986, as amended (the
“Code”), and the Treasury Regulations promulgated
thereunder) or, in certain cases, increasing such person’s or
group’s ownership of Common Stock, without the approval of
the Board of Directors. The Rights may cause substantial dilution
to a person or group that attempts to acquire a certain percentage
of shares in the Company on terms not approved by the Board of
Directors. Because of the dilution to a person or group that
attempts to acquire a certain percentage of shares in the Company,
the Plan may also have certain anti-takeover effects. Additionally,
the Board of Directors may redeem the Rights, as discussed more
fully below.
Until the earlier
to occur of (i) ten (10) business days following a public
announcement that a person or group of affiliated persons (with
certain exceptions, an “Acquiring Person”) has acquired
beneficial ownership of 4.90% or more of the shares of Common Stock
then outstanding or (ii) ten (10) business days (or such later date
as may be determined by action of the Board of Directors before
such time as any person or group of affiliated persons becomes an
Acquiring Person) after the date of commencement of a tender offer
or exchange offer the consummation of which would result in the
beneficial ownership by a person or group of 4.90% or more of the
then-outstanding shares of Common Stock (the earlier of such dates
being called the “Distribution Date”), the Rights will
be evidenced, with respect to any of the Common Stock certificates
(or book entry shares in respect of the Common Stock) outstanding
as of the Record Date, solely by such Common Stock certificate (or
such book entry shares).
The Plan provides
that, until the Distribution Date (or earlier redemption or
expiration of the Rights), the Rights will be transferred with and
only with the Common Stock. Until the Distribution Date (or earlier
redemption or expiration of the Rights), new Common Stock
certificates (or book entry shares in respect of the Common Stock)
issued after the Record Date upon transfer or new issuances of
Common Stock, as applicable, will contain a notation incorporating
the Plan by reference and, with respect to any uncertificated book
entry shares issued after the Record Date, proper notice will be
provided that incorporates the Plan by reference. Until the
Distribution Date (or earlier redemption or expiration of the
Rights), the surrender for transfer of any certificates for shares
of Common Stock (or book entry shares of Common Stock) outstanding
as of the Record Date, even without a notation incorporating the
Plan by reference (or such notice, in the case of Book Entry
shares), notice or a copy of this Summary of Rights, will also
constitute the transfer of the Rights associated with the shares of
Common Stock represented by such certificate or book entry shares,
as the case may be. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights
(“Right Certificates”) will be mailed to (or credited
to the account of) holders of record of the Common Stock as of the
close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.
The Rights are not
exercisable until the Distribution Date. The Rights will expire
upon the earliest of the close of business on May 26, 2014 (unless
that date is advanced or extended), the time at which the Rights
are redeemed or exchanged under the Plan, the end of the calendar
month in which the Company’s 2011 annual meeting of
stockholders occurs if stockholder approval of the Plan has not
been received at such meeting, the repeal of Section 382 of the
Code or any successor statute if the Board determines that the Plan
is no longer necessary for the preservation of the Company’s
tax benefits, the beginning of a taxable year of the Company to
which the Board determines that no tax benefits may be carried
forward, or such time as the Board determines that a limitation on
the use of the tax benefits under Section 382 would no longer be
material to the Company.
The Purchase Price
payable, and the number of shares of Preferred Stock or other
securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Stock, (ii) upon the grant to
holders of the Preferred Stock of certain rights or warrants to
subscribe for or purchase Preferred Stock at a price, or securities
convertible into Preferred Stock with a conversion price, less than
the then-current market price of the Preferred Stock or (iii) upon
the distribution to holders of the Preferred Stock of evidences of
indebtedness or assets (excluding regular periodic cash dividends
or dividends payable in Preferred Stock) or of subscription rights
or warrants (other than those referred to above).
The Rights are also
subject to adjustment in the event of a stock dividend on the
Common Stock payable in shares of Common Stock, or subdivisions,
consolidations or combinations of the Common Stock occurring, in
any such case, before the Distribution Date.
Shares of Preferred
Stock purchasable upon exercise of the Rights will not be
redeemable. Each share of Preferred Stock will be entitled, when,
as and if declared out of lawfully available funds, to a minimum
preferential quarterly dividend payment of $1.00 per share or an
amount equal to 100 times the dividend declared per share of Common
Stock. In the event of liquidation, dissolution or winding up of
the Company, the holders of the Preferred Stock will be entitled to
a minimum preferential liquidation payment of the greater of $1.00
per share but will be entitled to an amount equal to 100 times the
payment made per share of Common Stock. Finally, in the event of
any merger, consolidation or other transaction in which outstanding
shares of Common Stock are converted or exchanged, each share of
Preferred Stock will be entitled to receive 100 times the amount
received per share of Common Stock. These rights are protected by
customary anti-dilution provisions. Shares of Preferred Stock shall
rank junior to any other series of the Company’s preferred
stock.
Because of the
nature of the Preferred Stock’s dividend and liquidation
rights, the value of the one one-hundredth interest in a share of
Preferred Stock purchasable upon exercise of each Right should
approximate the value of one share of Common Stock.
If any person or
group of affiliated persons becomes an Acquiring Person, each
holder of a Right, other than Rights beneficially owned by the
Acquiring Person (which will thereupon become void), will
thereafter have the right to receive upon exercise of a Right and
payment of the Purchase Price, that number of shares of Common
Stock having a market value of two times the Purchase
Price.
If any person or
group of affiliated persons becomes an Acquiring Person, the Board
of Directors may permit, in its sole discretion, the Rights, other
than Rights beneficially owned by the Acquiring Person (which will
thereupon become void), to be exercisable for 50% of the shares of
Common Stock that would otherwise be purchasable upon the payment
of the Purchase Price in consideration of the surrender to the
Company of the exercised Rights and without other payment of the
Purchase Price.
At any time after
any person or group becomes an Acquiring Person and before the
acquisition by such person or group of 50% or more of the
outstanding shares of Common Stock, the Board of Directors may
exchange the Rights (other than Rights owned by such person or
group which will have become void), in whole or in part, for shares
of Common Stock or Preferred Stock (or a series of the
Company’s preferred stock having similar rights, preferences
and privileges), at an exchange ratio of one share of Common Stock,
or a fractional share of Preferred Stock (or of a share of a
similar class or series of the Company’s preferred stock
having similar rights, preferences and privileges) of equivalent
value, per Right (subject to adjustment).
With certain
exceptions, no adjustment in the Purchase Price will be required
until cumulative adjustments require an adjustment of at least 1%
in such Purchase Price. No fractional shares of Common Stock or
Preferred Stock will be issued (other than fractions which are
integral multiples of one one-hundredth of a share of Preferred
Stock, which may, at the election of the Company, be evidenced by
depositary receipts), and in lieu thereof an adjustment in cash
will be made based on the market price of the Preferred Stock on
the last trading day before the date of exercise.
At any time before
the time an Acquiring Person becomes such, the Board of Directors
may redeem the Rights in whole, but not in part, at a price of
$0.001 per Right, appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the
date of adoption of the Plan (the “Redemption Price”).
The redemption of the Rights may be made effective at such time, on
such basis and with such conditions as the Board of Directors in
its sole discretion may establish. Immediately upon any redemption
of the Rights, the right to exercise the Rights will terminate and
the only right of the holders of Rights will be to receive the
Redemption Price as rounded to the nearest $0.01.
For so long as the
Rights are then redeemable, the Company may, except with respect to
the Redemption Price, amend the Plan in any manner. After the
Rights are no longer redeemable, the Company may, except with
respect to the Redemption Price, amend the Plan in any manner that
does not adversely affect the interests of holders of the
Rights.
Until a Right is
exercised or exchanged, the holder thereof, as such, will have no
rights as a stockholder of the Company, including the right to vote
or to receive dividends.
A copy of the Plan
has been filed with the Securities and Exchange Commission as an
Exhibit to a Registration Statement on Form 8-A. A copy of the Plan
is available free of charge from the Company. This summary
description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Plan, as the same may
be amended from time to time, which is hereby incorporated herein
by reference.
AMENDMENT
NO. 1
TO
TAX
BENEFIT PRESERVATION PLAN
This Amendment No.
1 to Tax Benefit Preservation Plan (“Amendment”) is entered into
between Autobytel Inc., a Delaware corporation (“Company”), and Computershare Trust
Company, N.A., as rights agent (“Rights Agent”) effective as of
April 14, 2014.
Background
The Company and the
Rights Agent are parties to that certain Tax Benefit Preservation
Plan dated as of May 26, 2010 (“Plan”). The Board of Directors of
the Company deems it advisable and in the best interests of the
Company and its stockholders to amend the Plan to extend its
maturity date and to increase the Purchase Price (as defined in the
Plan). No Person (as defined in the Plan) has become an Acquiring
Person (as defined in the Plan).
1. Amendments. Pursuant to and in
accordance with Section 27 of the Plan, the Plan is hereby amended
as follows:
(a)
Paragraph (a),
clause (i) of Section 7 of the Plan is amended in its entirety to
read as follows:
“(i) the
Close of Business on May 26, 2017,”
(b)
Paragraph (a),
clause (iv) of Section 7 of the Plan is amended in its entirety to
read as follows:
“(iv) the end
of the calendar month in which occurs the final adjournment of the
Company’s 2014 annual meeting of stockholders, if stockholder
approval of this Plan has not been received at such
meeting,”
(c)
The last sentence
of paragraph (a) of Section 7 of the Plan is amended in its
entirety to read as follows:
“Until such
notice is received by the Rights Agent, the Rights Agent may
presume conclusively for all purposes, prior to the Close of
Business on May 26, 2017, that the Expiration Date has not
occurred.”
(d)
The first sentence
of paragraph (b) of Section 7 of the Plan is amended in its
entirety to read as follows;
“The Purchase
Price shall be $75.00 for each one one-hundredth of a share of
Preferred Stock purchasable upon the exercise of a Right (the
“Purchase
Price”).”
(e)
Each of the Legend
and paragraph one of the Form of Right Certificate, attached as
Exhibit A to the Plan, is amended so that the references to
“May 26, 2014” are replaced with “May 26,
2017”.
2. Effect of this Amendment. It is
the intent of the parties that this Amendment constitutes an
amendment of the Plan as contemplated by Section 27 thereof. Except
as provided herein, the Plan is in all other respects ratified and
confirmed and shall continue in full force and effect as amended
hereby. This Amendment shall be deemed effective as of the date
hereof as if executed by both parties hereto on such
date.
3. Counterparts. This Amendment
may be executed in any number of counterparts and each of such
counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute one and the
same instrument.
4. Governing Law. This Amendment
shall be deemed to be a contract made under the laws of the State
of Delaware and for all purposes shall be governed by and construed
in accordance with the laws of such state applicable to contracts
to be made and performed entirely within such state.
5. Severability. If any term,
provision, covenant or restriction of this Amendment is held by a
court of competent jurisdiction or other authority to be invalid,
illegal or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Amendment shall remain in full
force and effect and shall in no way be affected, impaired or
invalidated.
6. Descriptive Headings. The
captions herein are included for convenience of reference only, do
not constitute a part of this Amendment and shall be ignored in the
construction and interpretation hereof.
IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date set forth above.
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AUTOBYTEL
INC.
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By:
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/s/ Glenn E.
Fuller
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Glenn E.
Fuller
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Executive Vice
President, Chief Legal and Administrative Officer and
Secretary
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COMPUTERSHARE
TRUST COMPANY, N.A.
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By:
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/s/ Dennis V.
Moccia
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Name: Dennis V.
Moccia
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Title: Manager,
Contract Administration
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AMENDMENT
NO. 2
TO
TAX
BENEFIT PRESERVATION PLAN
This Amendment No.
2 to Tax Benefit Preservation Plan (“Amendment”) is entered into
between Autobytel Inc., a Delaware corporation (“Company”), and Computershare Trust
Company, N.A., as rights agent (“Rights Agent”) effective as of
April 13, 2017.
Background
The Company and the
Rights Agent are parties to that certain Tax Benefit Preservation
Plan dated as of May 26, 2010, as amended by Amendment No. 1
effective as of April 14, 2014 (as amended, the “Plan”). The Board of Directors of
the Company deems it advisable and in the best interests of the
Company and its stockholders to amend the Plan to extend its
maturity date and to increase the Purchase Price (as defined in the
Plan). No Person (as defined in the Plan) has become an Acquiring
Person (as defined in the Plan).
1.
Amendments. Pursuant to and in
accordance with Section 27 of the Plan, the Plan is hereby amended
as follows:
(a)
The first paragraph
of Paragraph (a) of Section 1 of the Plan is amended in its
entirety to read as follows:
“Acquiring
Person” shall mean any Person (other than any Exempt
Person) that has become, in itself or together with all Affiliates
of such Person, the Beneficial Owner of 4.90% or more of the shares
of Common Stock then outstanding; provided, however,
that, subject to the following sentence, any Existing Holder (as
defined below) will not be deemed to be an Acquiring Person for any
purpose of this Plan on and after the date on which the adoption of
this Plan is first publicly announced; and provided, further,
that a Person will not be deemed to have become an Acquiring Person
solely as a result of (i) a reduction in the number of shares of
Common Stock outstanding, (ii) the exercise of any options,
warrants, rights or similar interests (including restricted stock)
granted by the Company to its directors, officers and employees,
(iii) any unilateral grant of any security by the Company or any
issuance by the Company of shares of its capital stock to such
Person, or (iv) an Exempt Transaction.”
(b)
The Paragraph (j)
of Section 1 of the Plan is amended in its entirety to read as
follows:
“Certificate of
Incorporation” shall mean the Fifth Amended and
Restated Certificate of Incorporation of the Company, as filed with
the Secretary of State of the State of Delaware on December 14,
1998, together with the Certificate of Amendment of the Certificate
of Incorporation as filed with the Secretary of State of the State
of Delaware on March 1, 1999, the Second Certificate of Amendment
of the Certificate of Incorporation as filed with the Secretary of
State of the State of Delaware on July 22, 1999, the Third
Certificate of Amendment to the Certificate of Incorporation as
filed with the Secretary of State of the State of Delaware on
August 14, 2001, the Amended Certificate of Designation of Series A
Junior Participating Preferred Stock as filed with the Secretary of
State of the State of Delaware on April 24, 2009, the Fourth
Certificate of Amendment to Fifth Amended and Restated Certificate
of Incorporation of the Company, filed with the Secretary of State
of the State of Delaware on July 10, 2012, the Fifth Certificate of
Amendment to Fifth Amended and Restated Certificate of
Incorporation of the Company, filed with the Secretary of State of
the State of Delaware on July 3, 2013, and the Certificate of
Designations of Series B Junior Participating Convertible Preferred
Stock of the Company, filed with the Secretary of State of the
State of Delaware on October 1, 2015, as the same may be amended
and restated from time to time.”
(c)
Paragraph (m) of
Section 1 of the Plan is deleted in its entirety and amended to
read as follows:
“[Reserved]”
(d)
Paragraph (rr) of
Section 1 of the Plan is deleted in its entirety and amended to
read as follows:
“[Reserved]”
(e)
Paragraph (a),
clause (i) of Section 7 of the Plan is amended in its entirety to
read as follows:
“(i) the
Close of Business on May 26, 2020,”
(f)
Paragraph (a),
clause (iv) of Section 7 of the Plan is amended in its entirety to
read as follows:
“(iv) the end
of the calendar month in which occurs the final adjournment of the
Company’s 2017 annual meeting of stockholders, if stockholder
approval of this Plan has not been received at such
meeting,”
(g)
The last sentence
of paragraph (a) of Section 7 of the Plan is amended in its
entirety to read as follows:
“Until such
notice is received by the Rights Agent, the Rights Agent may
presume conclusively for all purposes, prior to the Close of
Business on May 26, 2020, that the Expiration Date has not
occurred.”
(h)
The first sentence
of paragraph (b) of Section 7 of the Plan is amended in its
entirety to read as follows;
“The Purchase
Price shall be $73.00 for each one one-hundredth of a share of
Preferred Stock purchasable upon the exercise of a Right (the
“Purchase
Price”).”
(i)
Each of the Legend
and paragraph one of the Form of Right Certificate, attached as
Exhibit A to the
Plan, is amended so that the references to “May 26,
2017” are replaced with “May 26,
2020.”
2. Effect of this Amendment. It is
the intent of the parties that this Amendment constitutes an
amendment of the Plan as contemplated by Section 27 thereof. Except
as provided herein, the Plan is in all other respects ratified and
confirmed and shall continue in full force and effect as amended
hereby. This Amendment shall be deemed effective as of the date
hereof as if executed by both parties hereto on such
date.
3. Counterparts. This Amendment
may be executed in any number of counterparts and each of such
counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute one and the
same instrument.
4. Governing Law. This Amendment
shall be deemed to be a contract made under the laws of the State
of Delaware and for all purposes shall be governed by and construed
in accordance with the laws of such state applicable to contracts
to be made and performed entirely within such state.
5. Severability. If any term,
provision, covenant or restriction of this Amendment is held by a
court of competent jurisdiction or other authority to be invalid,
illegal or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Amendment shall remain in full
force and effect and shall in no way be affected, impaired or
invalidated.
6. Descriptive Headings. The
captions herein are included for convenience of reference only, do
not constitute a part of this Amendment and shall be ignored in the
construction and interpretation hereof.
IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date set forth above.
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AUTOBYTEL
INC.
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|
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By:
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/s/ Glenn E.
Fuller
|
|
Glenn E.
Fuller
|
|
Executive Vice
President, Chief Legal and Administrative Officer and
Secretary
|
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COMPUTERSHARE
TRUST COMPANY, N.A.
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By:
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/s/ Dennis V.
Moccia |
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Name: Dennis V.
Moccia
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Title: Manager,
Contract Administration
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AMENDMENT NO. 3
TO
TAX BENEFIT PRESERVATION PLAN
This
Amendment No. 3 to Tax Benefit Preservation Plan
(“Amendment”) is
entered into between AutoWeb, Inc. (formerly known as Autobytel
Inc.), a Delaware corporation (“Company”), and Computershare Trust
Company, N.A., as rights agent (“Rights Agent”) effective as of
March 31, 2020.
Background
The
Company and the Rights Agent are parties to that certain Tax
Benefit Preservation Plan dated as of May 26, 2010, as amended by
Amendment No. 1 effective as of April 14, 2014 and Amendment No. 2
effective as of April 13, 2017 (as amended, the “Plan”). The Board of Directors of
the Company deems it advisable and in the best interests of the
Company and its stockholders to amend the Plan to extend its
maturity date and to increase the Purchase Price (as defined in the
Plan). No Person (as defined in the Plan) has become an Acquiring
Person (as defined in the Plan).
1.
Amendments. Pursuant to and in
accordance with Section 27 of the Plan, the Plan is hereby amended
as follows:
(a)
Paragraph (j) of
Section 1 of the Plan is amended in its entirety to read as
follows:
““Certificate
of Incorporation” shall mean the Sixth Restated
Certificate of Incorporation of the Company, as filed with the
Secretary of State of the State of Delaware on October 9, 2017, as
may be amended and restated from time to time.”
(b)
Paragraph (a),
clause (i) of Section 7 of the Plan is amended in its entirety to
read as follows:
“(i) the
Close of Business on May 26, 2023,”
(c)
Paragraph (a),
clause (iv) of Section 7 of the Plan is amended in its entirety to
read as follows:
“(iv) the end
of the calendar month in which occurs the final adjournment of the
Company’s 2020 annual meeting of the stockholders, if
stockholder approval of this Plan has not been received at such
meeting.”
(d)
The last sentence
of paragraph (a) of Section 7 of the Plan is amended in its
entirety to read as follows:
“Until such
notice is received by the Rights Agent, the Rights Agent may
presume conclusively for all purposes, prior to the Close of
Business on May 26, 2023, that the Expiration Date has not
occurred.”
(e)
The first sentence
of paragraph (b) of Section 7 of the Plan is amended in its
entirety to read as follows;
“The Purchase
Price shall be $20.00 for each one one-hundredth of a share of
Preferred Stock purchasable upon the exercise of a Right (the
“Purchase
Price”).”
(f)
Each of the Legend,
paragraph one of the Form of Right Certificate, attached as
Exhibit A to the
Plan, and the Summary of Rights, attached as Exhibit B to the Plan,
is amended so that the references to (i) “May 26, 2020”
are replaced with “May 26, 2023” and (ii) “$73.00
are replaced with “$20.00,” as applicable.
2. Effect of this Amendment. It is
the intent of the parties hereto that this Amendment constitutes an
amendment of the Plan as contemplated by Section 27 thereof. Except
as provided herein, the Plan is in all other respects ratified and
confirmed and shall continue in full force and effect as amended
hereby. This Amendment shall be deemed effective as of the date
hereof as if executed by both parties hereto on such
date.
3. Counterparts. This Amendment
may be executed in any number of counterparts and each of such
counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute one and the
same instrument.
4. Governing Law. This Amendment
shall be deemed to be a contract made under the laws of the State
of Delaware and for all purposes shall be governed by and construed
in accordance with the laws of such State applicable to contracts
to be made and performed entirely within such State.
5. Severability. If any term,
provision, covenant or restriction of this Amendment is held by a
court of competent jurisdiction or other authority to be invalid,
illegal or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Amendment shall remain in full
force and effect and shall in no way be affected, impaired or
invalidated.
6. Descriptive Headings. The
captions herein are included for convenience of reference only, do
not constitute a part of this Amendment and shall be ignored in the
construction and interpretation hereof.
IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date set forth above.
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AUTOWEB,
INC.
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Glenn
E. Fuller
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Executive
Vice President,
Chief
Legal Officer and Secretary
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COMPUTERSHARE TRUST
COMPANY, N.A.
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Name:
Dennis V. Moccia
Title:
Senior Manager, Contract Operations
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Autobytel Inc.
Certificate of Adjustment
Background
The shares of
common stock, par value $0.001 per share (“Common
Stock”), of Autobytel Inc. (“Company”),
a Delaware corporation, are listed on the NASDAQ Capital Market
(“NASDAQ”).
The Tax Benefit Preservation Plan
between the Company and Computershare Trust Company, N.A., as
Rights Agent, dated as of May 26, 2010 (“Plan”),
is intended to preserve the Company’s valuable tax assets.
The Company’s board of directors (“Board”)
adopted the Plan in May 2010, and the shareholders subsequently
approved the Plan at the annual meeting of the shareholders on June
23, 2011. On June 11, 2010, in accordance with the Plan, the Board
declared a dividend of one right (“Rights”)
for each outstanding share of the Company’s Common
Stock, each Right initially representing the right to
purchase one one-hundredth of a share of Series A Junior
Participating Preferred Stock, par value $0.001 per share,
conditioned upon the terms set forth in the Plan.
Pursuant
to section 12 of the Plan, the Company hereby provides to the
Rights Agent the following statement of facts and adjustment
certification:
Statement of Facts
One of the
continued listing requirements for continued listing on NASDAQ is
that the Common Stock of the Company maintains a minimum closing
bid of at least $1.00 per share. The Company’s shares have
been unable to meet this requirement, and, in order to prevent
delisting, the Company is implementing a reverse stock split with a
ratio of one-for-five. This does not change the relative rights and
preferences for existing shareholders, and the number of
shareholders of record are not affected. The reverse stock split
was approved by the shareholders at the Company’s annual
meeting on June 21, 2012. The reverse stock split became effective
after the close of trading on the NASDAQ Capital Market on July 11,
2012.
Adjustment
The
undersigned, a duly authorized representative of the Company, does
hereby certify as follows:
Pursuant to section 11(m) of the Plan,
following and subject to the effectiveness of the one-for-five
reverse stock split, the number of Rights associated with each
share of Common Stock then outstanding, or issued or delivered
thereafter, shall be proportionately adjusted so that the number of
Rights thereafter associated with each share of Common Stock
following such event shall equal the result obtained by multiplying
the number of Rights associated with each share of Common Stock
immediately before such event by a fraction, the numerator of which
shall be the total number of shares of Common Stock outstanding
immediately before the occurrence of the event and the denominator
of which shall be the total number of shares of Common Stock
outstanding immediately following the occurrence of such event.
Following such adjustment, the number of Rights associated with
each share of Common Stock, whether outstanding or subsequently
issued by the Company, shall be five.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the undersigned has executed this Certificate of
Adjustment this 12th day of July, 2012.
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AUTOBYTEL INC.
By:
/s/ Glenn E.
Fuller
Glenn
E. Fuller
Executive
Vice President, Chief Legal and
Administrative
Officer and Secretary
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[SIGNATURE
PAGE TO CERTIFICATE OF ADJUSTMENT FOR AUTOBYTEL INC.]
Appendix B-1
STATE OF DELAWARE
SEVENTH AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION
OF
AUTOWEB, INC.
AutoWeb, Inc., a
corporation organized and existing under the General Corporation
Law of the State of Delaware (“Corporation”), hereby certifies
that:
1. The
present name of the Corporation is AutoWeb, Inc. The
Corporation’s original Certificate of Incorporation was filed
with the Secretary of State of the State of Delaware on May 17,
1996 under the name “Auto-By-Tel
Corporation.”
2. This
Seventh Amended and Restated Certificate of Incorporation, which
restates and integrates and also further amends the provisions of
the Corporation’s Certificate of Incorporation, as amended
and restated, was duly adopted in accordance with Sections 242 and
245 of the General Corporation Law of the State of
Delaware.
3. The
text of the Seventh Amended and Restated Certificate of
Incorporation is set forth on Exhibit
“A” attached hereto and incorporated herein by
reference.
IN WITNESS WHEREOF, the Corporation has
caused this Seventh Amended and Restated Certificate of
Incorporation to be executed by its duly authorized officer on June
[__], 2020.
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AUTOWEB,
INC.
By:
___________________________
Name:
Glenn
E. Fuller
Title:
Executive Vice
President, Chief Legal Officer and Secretary
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Exhibit “A”
SEVENTH AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION
OF
AUTOWEB, INC.
(a Delaware corporation)
ARTICLE I
The
name of this corporation is AutoWeb, Inc. (“Corporation”).
ARTICLE II
The
address of the Corporation’s registered office in the State
of Delaware is 9 E. Loockerman Street, Suite 311, Dover, DE 19901
in the County of Kent. The name of its registered agent at such
address is Registered Agent Solutions, Inc.
ARTICLE III
The
purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the Delaware
General Corporation Law.
ARTICLE IV
A. Classes
of Stock. This Corporation is authorized to issue two
classes of stock, to be designated, respectively,
“Common Stock”
and “Preferred
Stock.” The total number of shares that this
Corporation is authorized to issue is sixty-six million four
hundred forty-five thousand one hundred eighty-seven (66,445,187).
The number of shares of Common Stock authorized to be issued is
fifty-five million (55,000,000), par value $0.001 per share. The
number of shares of Preferred Stock authorized to be issued is
eleven million four hundred forty-five thousand one hundred
eighty-seven (11,445,187), par value $0.001 per share.
B. Rights,
Preferences and Restrictions of the Preferred Stock. The
undesignated shares of Preferred Stock may be issued from time to
time in one or more series pursuant to a resolution or resolutions
providing for such issue duly adopted by the Board of Directors
(authority to do so being hereby expressly vested in the Board).
The Board of Directors is further authorized to determine or alter
the rights, powers (including voting powers), preferences and
privileges, and the qualifications, limitations or restrictions
thereof, granted to or imposed upon any wholly unissued series of
Preferred Stock, and to fix the number of shares of any series of
Preferred Stock and the designation of any such series of Preferred
Stock. The Board of Directors, within the limits and restrictions
stated in any resolution or resolutions of the Board of Directors
originally fixing the number of shares constituting any series, may
increase or decrease (but not below the number of shares in any
such series then outstanding) the number of shares of any series
subsequent to the issue of shares of that series.
Pursuant
to the authority conferred by this Article IV upon the Board of
Directors of the Corporation, the Board of Directors created a
series of two million (2,000,000) shares of Preferred Stock
designated as Series A Junior Participating Preferred Stock, par
value $0.001 per share, by filing a Certificate of Designation of
Series A Junior Participating Preferred Stock with the Secretary of
State of the State of Delaware (“Secretary of State”) on July 30,
2004. Such Certificate of Designation was amended by filing an
Amended Certificate of Designation of Series A Junior Participating
Preferred Stock with the Secretary of State on April 24, 2009 and
October 9, 2017. The powers (including voting powers),
designations, preferences and relative, participating, optional or
other special rights, and the qualifications, limitations or
restrictions thereof, of the Series A Junior Participating
Preferred Stock are set forth in Exhibit A
attached hereto and are incorporated herein by
reference.
ARTICLE V
The
Corporation is to have perpetual existence.
ARTICLE VI
The
election of directors need not be by written ballot unless a
stockholder demands election by written ballot at a meeting of
stockholders and before voting begins or unless the Bylaws of the
Corporation shall so provide.
ARTICLE VII
The
number of directors which constitute the whole Board of Directors
of the Corporation shall be designated in the Bylaws of the
Corporation. The terms of office of the Board of Directors will be
divided into three classes: the Class I term will expire at the
annual meeting of stockholders to be held in 1999; the Class II
term will expire at the annual meeting of stockholders to be held
in 2000; and the Class III term will expire at the annual meeting
of stockholders to be held in 2001. At each annual meeting of
stockholders after the initial classification, the successors to
directors whose term will then expire will be elected to serve from
the time of election and qualification until the third annual
meeting following election. The directorships will be distributed
among the three classes so that, as nearly as possible, each class
will consist of one-third of the directors.
ARTICLE VIII
In
furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the Board of Directors is expressly
authorized to adopt, alter, amend or repeal the Bylaws of the
Corporation.
ARTICLE IX
(A) No
director shall be personally liable to the Corporation or any
stockholder for monetary damages for breach of fiduciary duty as a
director, except for any matter in respect of which such director
(1) shall be liable under Section 174 of the General
Corporation Law of the State of Delaware or any amendment thereto
or successor provision thereto, or (2) shall be liable by
reason that, in addition to any and all other requirements for
liability, he:
(i)
shall have breached his duty of loyalty to the Corporation or its
stockholders;
(ii)
shall not have acted in good faith or, in failing to act, shall not
have acted in good faith;
(iii)
shall have acted in a manner involving intentional misconduct or a
knowing violation of law or, in failing to act, shall have acted in
a manner involving intentional misconduct or a knowing violation of
law; or
(iv)
shall have derived an improper personal benefit.
If the
Delaware General Corporation Law is amended after the date hereof
to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so
amended.
(B) The
Corporation shall indemnify to the fullest extent permitted under
and in accordance with the laws of the State of Delaware any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative by reason
of the fact that he is or was a director, officer, employee or
agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys’ fees), judgments,
fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
(C)
Expenses incurred in defending a civil, criminal, administrative or
investigative action, suit or proceeding shall (in the case of any
action, suit or proceeding against a director of the Corporation)
or may (in the case of any action, suit or proceeding against an
officer, employee or agent) be paid by the Corporation in advance
of the final disposition of such action, suit or proceeding as
authorized by the Board upon receipt of an undertaking by or on
behalf of the indemnified person to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified
by the Corporation as authorized in this Article IX.
(D) The
indemnification and other rights set forth in this Article IX shall
not be exclusive of any provisions with respect thereto in the
By-Laws or any other contract or agreement between the Corporation
and any officer, director, employee or agent of the
Corporation.
(E)
Neither the amendment nor repeal of this Article IX, paragraph (B),
(C) or (D), nor the adoption of any provision of this
Certificate of Incorporation inconsistent with Article IX,
paragraph (B), (C) or (D), shall eliminate or reduce the
effect of this Article IX, paragraphs (B), (C) or (D), in
respect of any matter occurring before such amendment, repeal or
adoption of an inconsistent provision or in respect of any cause of
action, suit or claim relating to any such matter which would have
given rise to a right of indemnification or right to receive
expenses pursuant to this Article IX, paragraph (B), (C) or
(D), if such provision had not been so amended or repealed or if a
provision inconsistent therewith had not been so
adopted.
ARTICLE X
No
stockholder will be permitted to cumulate votes at any election of
directors.
ARTICLE XI
Meetings of
stockholders may be held within or without the State of Delaware,
as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the laws of the State of
Delaware) outside of the State of Delaware at such place or places
as may be designated from time to time by the Board of Directors or
in the Bylaws of the Corporation.
ARTICLE XII
The
stockholders of the Corporation may not take action by written
consent without a meeting but must take such action at a duly
called annual or special meeting of stockholders.
ARTICLE XIII
Subject
to the limitations set forth herein, the Corporation reserves the
right to amend, alter, change or repeal any provision contained in
this Certificate of Incorporation, in the manner now or hereafter
prescribed by the laws of the State of Delaware, and all rights
conferred herein are granted subject to this
reservation.
Exhibit A
AMENDED
CERTIFICATE OF DESIGNATION
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
AutoWeb, Inc.
(“Company”), a
corporation organized and existing under the laws of the State of
Delaware, hereby certifies under the laws of the State of Delaware
as follows:
1. No
shares of Series A Junior Participating Preferred Stock have been
issued.
2. On
September 27, 2017, pursuant to the provisions of Section 151 of
the General Corporation Law of the State of Delaware and the
authority conferred upon the Board of Directors of the Company
(“Board of
Directors”) by Article IV of the Certificate of
Incorporation of the Company, as amended and/or restated, the Board
of Directors duly and validly adopted the following resolution
setting forth the Company’s Amended Certificate of
Designation of Series A Junior Participating Preferred
Stock:
Resolved, that pursuant to the authority
granted to and vested in the Board of Directors of the Company in
accordance with the provisions of the Certificate of Incorporation
of the Company, as amended and/or restated, and in accordance with
Section 151 of the General Corporation Law of the State of
Delaware, the Board of Directors has determined that it is
advisable and in the best interests of the Company and its
stockholders to amend in its entirety the certificate of
designation for the Series A Junior Participating Preferred Stock,
$0.001 par value per share, as follows:
Section
1. Designation
and Amount. Two million (2,000,000) shares of Preferred
Stock, $0.001 par value, are designated “Series A Junior
Participating Preferred Stock” with the designations and the
powers, preferences and rights, and the qualifications, limitations
and restrictions specified herein (“Junior Preferred Stock”). Such
number of shares may be increased or decreased by resolution of the
Board of Directors; provided, that no decrease shall reduce
the number of shares of Junior Preferred Stock to a number less
than the number of shares then outstanding plus the number of
shares reserved for issuance upon the exercise of outstanding
options, rights or warrants or upon the conversion of any
outstanding securities issued by the Company convertible into
Junior Preferred Stock.
Section
2. Dividends
and Distributions.
(A) Subject
to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior
to the Junior Preferred Stock with respect to dividends, the
holders of shares of Junior Preferred Stock, in preference to the
holders of Common Stock, par value $0.001 per share
(“Common
Stock”), of the Company, and of any other junior
stock, shall be entitled to receive, when, as and if declared by
the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of
April, July, October and January in each year (each such date being
referred to herein as a “Quarterly Dividend Payment Date”),
commencing on the first Quarterly Dividend Payment Date after the
first issuance of a share or fraction of a share of (a) $1.00 per
share or (b) subject to the provision for adjustment hereinafter
set forth, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions, other than
a dividend payable in shares of Common Stock or a subdivision of
the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately
preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of
any share or fraction of a share of Junior Preferred Stock. In the
event the Company shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the
amount to which holders of shares of Junior Preferred Stock were
entitled immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by
a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(B) The
Company shall declare a dividend or distribution on the Junior
Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the
Common Stock (other than a dividend payable in shares of Common
Stock); provided, that in
the event no dividend or distribution shall have been declared on
the Common Stock during the period between any Quarterly Dividend
Payment Date and the next subsequent Quarterly Dividend Payment
Date, a dividend of $1.00 per share on the Junior Preferred Stock
shall nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.
(C) Dividends
shall begin to accrue and be cumulative on outstanding shares of
Junior Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares, unless the date of
issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such shares,
or unless the date of issue is a Quarterly Dividend Payment Date or
is a date after the record date for the determination of holders of
shares of Junior Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either
of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the
shares of Junior Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among
all such shares at the time outstanding. The Board of Directors may
fix a record date for the determination of holders of shares of
Junior Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more
than 60 days prior to the date fixed for the payment
thereof.
Section
3. Certain
Restrictions.
(A) Whatever
quarterly dividends or other dividends or distributions payable on
the Junior Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Junior
Preferred Stock outstanding shall have been paid in full, the
Company shall not:
(i) declare
or pay dividends, or make any other distributions, on any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Junior Preferred
Stock;
(ii) declare
or pay dividends, or make any other distributions, on any shares of
stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Junior Preferred
Stock, except dividends paid ratably on the Junior Preferred Stock
and all such parity stock on which dividends are payable or in
arrears in proportion to the total amount to which the holders of
all such shares are then entitled;
(iii) redeem
or purchase or otherwise acquire for consideration shares of any
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Junior Preferred Stock, provided
that the Company may at any time redeem, purchase or otherwise
acquire shares of any such junior stock in exchange for shares of
any stock of the Company ranking junior (either as to dividends or
upon dissolution, liquidation or winding up) to the Junior
Preferred Stock; or
(iv) redeem
or purchase or otherwise acquire for consideration any shares of
Junior Preferred Stock, or any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding
up) with the Junior Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by
the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine
in good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The
Company shall not permit any subsidiary of the Company to purchase
or otherwise acquire for consideration any shares of stock of the
Company unless the Company could, under paragraph (A) of this
Section 3, purchase or otherwise acquire such shares at such time
and in such manner.
Section
4. Reacquired
Shares. Any shares of Junior Preferred Stock purchased or
otherwise acquired by the Company in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All
such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a
new series of Preferred Stock subject to the conditions and
restrictions on issuance set forth herein, in the Company’s
Certificate of Incorporation, as amended or restated from time to
time, or in any other Certificate of Designation creating a series
of Preferred Stock or any similar stock or as otherwise required by
law.
Section
5. Liquidation,
Dissolution or Winding Up. Upon any liquidation, dissolution
or winding up of the Company, no distribution shall be made (1) to
the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Junior Preferred Stock unless, prior thereto, the holders of shares
of Junior Preferred Stock shall have received $100.00 per share,
plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such
payment, provided that the holders of shares of Junior Preferred
Stock shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate amount to be distributed per share
to holders of shares of Common Stock, or (2) to the holders of
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Junior Preferred
Stock, except distributions made ratably on the Junior Preferred
Stock and all such parity stock in proportion to the total amounts
to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Company
shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate
amount to which holders of shares of Junior Preferred Stock were
entitled immediately prior to such event under the proviso in
clause (1) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such
event.
Section
6. Consolidation,
Merger, Etc. In case the Company shall enter into any
consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other
stock or securities, cash and/or any other property, then in any
such case each share of Junior Preferred Stock shall at the same
time be similarly exchanged or changed into an amount per share,
subject to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may be,
into which or for which each share of Common Stock is changed or
exchanged. In the event the Company shall at any time declare or
pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of
the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock)
into a greater or lesser number of shares of Common Stock, then in
each such case the amount set forth in the preceding sentence with
respect to the exchange or change of shares of Junior Preferred
Stock shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
Section
7. No
Redemption. The shares of Junior Preferred Stock shall not
be redeemable.
Section
8. Rank.
The Junior Preferred Stock shall rank, with respect to the payment
of dividends and the distribution of assets, junior to all series
of any other class of the Company’s Preferred
Stock.
Appendix B-2
Marked to Show Proposed Changes to Sixth Restated Certificate of
Incorporation
Exhibit “A”
SIXTH
SEVENTH AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION
OF
AUTOWEB, INC.
(a Delaware corporation)
ARTICLE I
The
name of this corporation is AutoWeb, Inc. (“Corporation”).
ARTICLE II
The
address of the Corporation’s registered office in the State
of Delaware is 9 E. Loockerman Street, Suite 311, Dover, DE 19901
in the County of Kent. The name of its registered agent at such
address is Registered Agent Solutions, Inc.
ARTICLE III
The
purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the Delaware
General Corporation Law.
ARTICLE IV
A. Classes
of Stock. This Corporation is authorized to issue two
classes of stock, to be designated, respectively,
“Common Stock”
and “Preferred
Stock.” The total number of shares that this
Corporation is authorized to issue is sixty-six million four
hundred forty-five thousand one hundred eighty-seven (66,445,187).
The number of shares of Common Stock authorized to be issued is
fifty-five million (55,000,000), par value $0.001 per share. The
number of shares of Preferred Stock authorized to be issued is
eleven million four hundred forty-five thousand one hundred
eighty-seven (11,445,187), par value $0.001 per share.
B. Rights,
Preferences and Restrictions of the Preferred Stock. The
undesignated shares of Preferred Stock may be issued from time to
time in one or more series pursuant to a resolution or resolutions
providing for such issue duly adopted by the Board of Directors
(authority to do so being hereby expressly vested in the Board).
The Board of Directors is further authorized to determine or alter
the rights, powers (including voting powers), preferences and
privileges, and the qualifications, limitations or restrictions
thereof, granted to or imposed upon any wholly unissued series of
Preferred Stock, and, to fix the number of shares of
any series of Preferred Stock and,
to fix
the number of shares of any series of Preferred Stock and the
designation of any such series of Preferred Stock. The Board of
Directors, within the limits and restrictions stated in any
resolution or resolutions of the Board of Directors originally
fixing the number of shares constituting any series, may increase
or decrease (but not below the number of shares in any such series
then outstanding) the number of shares of any series subsequent to
the issue of shares of that series.
Pursuant
to the authority conferred by this Article IV upon the Board of
Directors of the Corporation, the Board of Directors created a
series of two million (2,000,000) shares of Preferred Stock
designated as Series A Junior Participating Preferred Stock, par
value $0.001 per share, by filing a Certificate of Designation of
Series A Junior Participating Preferred Stock with the Secretary of
State of the State of Delaware (“Secretary of State”) on July 30,
2004. Such Certificate of Designation was amended by filing an
Amended Certificate of Designation of Series A Junior Participating
Preferred Stock with the Secretary of State on April 24, 2009 and
October 9, 2017. The powers (including voting powers),
designations, preferences and relative, participating, optional or
other special rights, and the qualifications, limitations or
restrictions thereof, of the Series A Junior Participating
Preferred Stock are set forth in Exhibit A
attached hereto and are incorporated herein by
reference.
ARTICLE V
The
Corporation is to have perpetual existence.
ARTICLE VI
The
election of directors need not be by written ballot unless a
stockholder demands election by written ballot at a meeting of
stockholders and before voting begins or unless the Bylaws of the
Corporation shall so provide.
ARTICLE VII
The number of
directors which constitute the whole Board of Directors of the
Corporation shall be designated in the Bylaws of the Corporation.
Effective upon
the consummation of an underwritten public offering as described in
Section 3(b)(i)(C) of Article IV, B hereof, the
The terms of office of the Board of Directors will be
divided into three classes: the Class I term will expire at the
annual meeting of stockholders to be held in 1999; the Class II
term will expire at the annual meeting of stockholders to be held
in 2000; and the Class III term will expire at the annual meeting
of stockholders to be held in 2001. At each annual meeting of
stockholders after the initial classification, the successors to
directors whose term will then expire will be elected to serve from
the time of election and qualification until the third annual
meeting following election. The directorships will be distributed
among the three classes so that, as nearly as possible, each class
will consist of one-third of the
directors.
ARTICLE VIII
In
furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the Board of Directors is expressly
authorized to adopt, alter, amend or repeal the Bylaws of the
Corporation.
ARTICLE IX
(A) No
director shall be personally liable to the Corporation or any
stockholder for monetary damages for breach of fiduciary duty as a
director, except for any matter in respect of which such director
(1) shall be liable under Section 174 of the General
Corporation Law of the State of Delaware or any amendment thereto
or successor provision thereto, or (2) shall be liable by
reason that, in addition to any and all other requirements for
liability, he:
(i)
shall have breached his duty of loyalty to the Corporation or its
stockholders;
(ii)
shall not have acted in good faith or, in failing to act, shall not
have acted in good faith;
(iii)
shall have acted in a manner involving intentional misconduct or a
knowing violation of law or, in failing to act, shall have acted in
a manner involving intentional misconduct or a knowing violation of
law; or
(iv)
shall have derived an improper personal benefit.
If the
Delaware General Corporation Law is amended after the date hereof
to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so
amended.
(B) The
Corporation shall indemnify to the fullest extent permitted under
and in accordance with the laws of the State of Delaware any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative by reason
of the fact that he is or was a director, officer, employee or
agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys’ fees), judgments,
fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
(C)
Expenses incurred in defending a civil, criminal, administrative or
investigative action, suit or proceeding shall (in the case of any
action, suit or proceeding against a director of the Corporation)
or may (in the case of any action, suit or proceeding against an
officer, employee or agent) be paid by the Corporation in advance
of the final disposition of such action, suit or proceeding as
authorized by the Board upon receipt of an undertaking by or on
behalf of the indemnified person to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified
by the Corporation as authorized in this Article IX.
(D) The
indemnification and other rights set forth in this Article IX shall
not be exclusive of any provisions with respect thereto in the
By-Laws or any other contract or agreement between the Corporation
and any officer, director, employee or agent of the
Corporation.
(E)
Neither the amendment nor repeal of this Article IX, paragraph (B),
(C) or (D), nor the adoption of any provision of this
Certificate of Incorporation inconsistent with Article IX,
paragraph (B), (C) or (D), shall eliminate or reduce the
effect of this Article IX, paragraphs (B), (C) or (D), in
respect of any matter occurring before such amendment, repeal or
adoption of an inconsistent provision or in respect of any cause of
action, suit or claim relating to any such matter which would have
given rise to a right of indemnification or right to receive
expenses pursuant to this Article IX, paragraph (B), (C) or
(D), if such provision had not been so amended or repealed or if a
provision inconsistent therewith had not been so
adopted.
ARTICLE X
At the election of directors of the
Corporation, each holder of stock of any class or series shall be
entitled to one vote for each share held. No
stockholder will be permitted to cumulate votes at any election of
directors.
ARTICLE XI
Meetings of
stockholders may be held within or without the State of Delaware,
as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the laws of the State of
Delaware) outside of the State of Delaware at such place or places
as may be designated from time to time by the Board of Directors or
in the Bylaws of the Corporation.
ARTICLE XII
Effective upon the Initial Public
Offering (as defined in Article IV Section 3(b)(i) above),
the The stockholders of the Corporation
may not take action by written consent without a meeting but must
take such action at a duly called annual or special meeting of
stockholders.
ARTICLE XIII
Subject
to the limitations set forth herein, the Corporation reserves the
right to amend, alter, change or repeal any provision contained in
this Certificate of Incorporation, in the manner now or hereafter
prescribed by the laws of the State of Delaware, and all rights
conferred herein are granted subject to this
reservation.
Exhibit A
AMENDED
CERTIFICATE OF DESIGNATION
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
AutoWeb, Inc.
(“Company”), a
corporation organized and existing under the laws of the State of
Delaware, hereby certifies under the laws of the State of Delaware
as follows:
1. No
shares of Series A Junior Participating Preferred Stock have been
issued.
2. On
September 27, 2017, pursuant to the provisions of Section 151 of
the General Corporation Law of the State of Delaware and the
authority conferred upon the Board of Directors of the Company
(“Board of
Directors”) by Article IV of the Certificate of
Incorporation of the Company, as amended and/or restated, the Board
of Directors duly and validly adopted the following resolution
setting forth the Company’s Amended Certificate of
Designation of Series A Junior Participating Preferred
Stock:
Resolved, that pursuant to the authority
granted to and vested in the Board of Directors of the Company in
accordance with the provisions of the Certificate of Incorporation
of the Company, as amended and/or restated, and in accordance with
Section 151 of the General Corporation Law of the State of
Delaware, the Board of Directors has determined that it is
advisable and in the best interests of the Company and its
stockholders to amend in its entirety the certificate of
designation for the Series A Junior Participating Preferred Stock,
$0.001 par value per share, as follows:
Section
1. Designation
and Amount. Two million (2,000,000) shares of Preferred
Stock, $0.001 par value, are designated “Series A Junior
Participating Preferred Stock” with the designations and the
powers, preferences and rights, and the qualifications, limitations
and restrictions specified herein (“Junior Preferred Stock”). Such
number of shares may be increased or decreased by resolution of the
Board of Directors; provided, that no decrease shall reduce
the number of shares of Junior Preferred Stock to a number less
than the number of shares then outstanding plus the number of
shares reserved for issuance upon the exercise of outstanding
options, rights or warrants or upon the conversion of any
outstanding securities issued by the Company convertible into
Junior Preferred Stock.
Section
2. Dividends
and Distributions.
(A) Subject
to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior
to the Junior Preferred Stock with respect to dividends, the
holders of shares of Junior Preferred Stock, in preference to the
holders of Common Stock, par value $0.001 per share
(“Common
Stock”), of the Company, and of any other junior
stock, shall be entitled to receive, when, as and if declared by
the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of
April, July, October and January in each year (each such date being
referred to herein as a “Quarterly Dividend Payment Date”),
commencing on the first Quarterly Dividend Payment Date after the
first issuance of a share or fraction of a share of (a) $1.00 per
share or (b) subject to the provision for adjustment hereinafter
set forth, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions, other than
a dividend payable in shares of Common Stock or a subdivision of
the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately
preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of
any share or fraction of a share of Junior Preferred Stock. In the
event the Company shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the
amount to which holders of shares of Junior Preferred Stock were
entitled immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by
a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(B) The
Company shall declare a dividend or distribution on the Junior
Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the
Common Stock (other than a dividend payable in shares of Common
Stock); provided, that in
the event no dividend or distribution shall have been declared on
the Common Stock during the period between any Quarterly Dividend
Payment Date and the next subsequent Quarterly Dividend Payment
Date, a dividend of $1.00 per share on the Junior Preferred Stock
shall nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.
(C) Dividends
shall begin to accrue and be cumulative on outstanding shares of
Junior Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares, unless the date of
issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such shares,
or unless the date of issue is a Quarterly Dividend Payment Date or
is a date after the record date for the determination of holders of
shares of Junior Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either
of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the
shares of Junior Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among
all such shares at the time outstanding. The Board of Directors may
fix a record date for the determination of holders of shares of
Junior Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more
than 60 days prior to the date fixed for the payment
thereof.
Section
3. Certain
Restrictions.
(A) Whatever
quarterly dividends or other dividends or distributions payable on
the Junior Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Junior
Preferred Stock outstanding shall have been paid in full, the
Company shall not:
(i) declare
or pay dividends, or make any other distributions, on any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Junior Preferred
Stock;
(ii) declare
or pay dividends, or make any other distributions, on any shares of
stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Junior Preferred
Stock, except dividends paid ratably on the Junior Preferred Stock
and all such parity stock on which dividends are payable or in
arrears in proportion to the total amount to which the holders of
all such shares are then entitled;
(iii) redeem
or purchase or otherwise acquire for consideration shares of any
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Junior Preferred Stock, provided
that the Company may at any time redeem, purchase or otherwise
acquire shares of any such junior stock in exchange for shares of
any stock of the Company ranking junior (either as to dividends or
upon dissolution, liquidation or winding up) to the Junior
Preferred Stock; or
(iv) redeem
or purchase or otherwise acquire for consideration any shares of
Junior Preferred Stock, or any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding
up) with the Junior Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by
the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine
in good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The
Company shall not permit any subsidiary of the Company to purchase
or otherwise acquire for consideration any shares of stock of the
Company unless the Company could, under paragraph (A) of this
Section 3, purchase or otherwise acquire such shares at such time
and in such manner.
Section
4. Reacquired
Shares. Any shares of Junior Preferred Stock purchased or
otherwise acquired by the Company in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All
such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a
new series of Preferred Stock subject to the conditions and
restrictions on issuance set forth herein, in the Company’s
Certificate of Incorporation, as amended or restated from time to
time, or in any other Certificate of Designation creating a series
of Preferred Stock or any similar stock or as otherwise required by
law.
Section
5. Liquidation,
Dissolution or Winding Up. Upon any liquidation, dissolution
or winding up of the Company, no distribution shall be made (1) to
the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Junior Preferred Stock unless, prior thereto, the holders of shares
of Junior Preferred Stock shall have received $100.00 per share,
plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such
payment, provided that the holders of shares of Junior Preferred
Stock shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate amount to be distributed per share
to holders of shares of Common Stock, or (2) to the holders of
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Junior Preferred
Stock, except distributions made ratably on the Junior Preferred
Stock and all such parity stock in proportion to the total amounts
to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Company
shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate
amount to which holders of shares of Junior Preferred Stock were
entitled immediately prior to such event under the proviso in
clause (1) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such
event.
Section
6. Consolidation,
Merger, Etc. In case the Company shall enter into any
consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other
stock or securities, cash and/or any other property, then in any
such case each share of Junior Preferred Stock shall at the same
time be similarly exchanged or changed into an amount per share,
subject to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may be,
into which or for which each share of Common Stock is changed or
exchanged. In the event the Company shall at any time declare or
pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of
the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock)
into a greater or lesser number of shares of Common Stock, then in
each such case the amount set forth in the preceding sentence with
respect to the exchange or change of shares of Junior Preferred
Stock shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
Section
7. No
Redemption. The shares of Junior Preferred Stock shall not
be redeemable.
Section
8. Rank.
The Junior Preferred Stock shall rank, with respect to the payment
of dividends and the distribution of assets, junior to all series
of any other class of the Company’s Preferred
Stock.