UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 
Form 10-Q


x     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2013
or
¨     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to                 .

Commission file number 1-34761

 
Autobytel Inc.
(Exact name of registrant as specified in its charter)


 
 
 
 
Delaware
33-0711569
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer identification number)
 
 
18872 MacArthur Boulevard, Suite 200, Irvine, California
92612
(Address of principal executive offices)
(Zip Code)
(949) 225-4500
(Registrant's telephone number, including area code)

 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨
Accelerated filer  ¨
Non-accelerated filer  ¨
Smaller reporting company  x
 
 
(Do not check if a smaller reporting company)
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of April 29, 2013, there were 8,863,400 shares of the Registrant's Common Stock, $0.001 par value, outstanding.


 
 
 
 
 
INDEX
 
 
 
Page
 
PART I. FINANCIAL INFORMATION
 
 
 
 
ITEM 1.
Financial Statements
 
 
 
 
 
Unaudited Consolidated Condensed Balance Sheets as of March 31, 2013 and December 31, 2012
3
 
 
 
 
Unaudited Consolidated Condensed Statements of Income and Comprehensive Income for the Three Months Ended March 31, 2013 and the Three Months Ended March 31, 2012
4
 
 
 
 
Unaudited Consolidated Condensed Statements of Cash Flows for the Three Months Ended March 31, 2013 and the Three Months Ended March 31, 2012
5
 
 
 
 
Notes to Unaudited Consolidated Condensed Financial Statements
6
 
 
 
ITEM 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
12
 
 
 
ITEM 3.
Quantitative and Qualitative Disclosures About Market Risk
17
 
 
 
ITEM 4.
Controls and Procedures
17
 
 
 
 
PART II. OTHER INFORMATION
 
 
 
 
ITEM 1A.
Risk Factors
17
 
 
 
ITEM 6.
Exhibits
18
 
 
 
 
Signatures
19
2


PART I. FINANCIAL INFORMATION
Item 1.  Financial Statements
AUTOBYTEL INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
(Amounts in thousands, except share and per-share data)
 
 
 
March 31,
   
December 31,
 
 
 
2013
     
2012*
 
Assets
           
Current assets:
           
Cash and cash equivalents
 
$
14,718
   
$
15,296
 
Accounts receivable, net of allowances for bad debts and customer credits of $443 and $426 at March 31, 2013 and December 31, 2012, respectively
   
11,717
     
10,081
 
Prepaid expenses and other current assets
   
498
     
504
 
Total current assets
   
26,933
     
25,881
 
Property and equipment, net
   
1,588
     
1,593
 
Intangible assets, net
   
1,204
     
1,539
 
Goodwill
   
11,677
     
11,677
 
Other assets
   
148
     
77
 
Total assets
 
$
41,550
   
$
40,767
 
Liabilities and Stockholders' Equity
               
Current liabilities:
               
Accounts payable
 
$
5,279
   
$
3,837
 
Accrued expenses and other current liabilities
   
4,297
     
5,377
 
Deferred revenues
   
2
     
168
 
Total current liabilities
   
9,578
     
9,382
 
Convertible note payable
   
5,000
     
5,000
 
Other non-current liabilities
   
667
     
620
 
Total liabilities
   
15,245
     
15,002
 
Commitments and contingencies
   
 
     
 
 
Stockholders' equity:
               
Preferred stock, $0.001 par value; 11,445,187 shares authorized; none outstanding
   
     
 
Common stock, $0.001 par value; 200,000,000 shares authorized and 8,863,400 and 8,855,400 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively
   
9
     
9
 
Additional paid-in capital
   
306,458
     
306,252
 
Accumulated deficit
   
(280,162
)
   
(280,496
)
Total stockholders' equity
   
26,305
     
25,765
 
Total liabilities and stockholders' equity
 
$
41,550
   
$
40,767
 
 
               
* Amounts were derived from audited financial statements
               
See accompanying notes to unaudited consolidated condensed financial statements.
3


AUTOBYTEL INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(Amounts in thousands, except per-share data)

 
 
 
Three Months Ended March 31,
 
 
 
2013
   
2012
 
Revenues:
 
   
 
Lead fees
 
$
17,517
   
$
15,794
 
Advertising
   
715
     
859
 
Other revenues
   
29
     
52
 
Total revenues
   
18,261
     
16,705
 
Cost of revenues (excludes depreciation of $28 and $32 for the three months ended March 31, 2013 and 2012, respectively)
   
11,669
     
9,869
 
Gross profit
   
6,592
     
6,836
 
Operating expenses:
               
Sales and marketing
   
2,241
     
2,345
 
Technology support
   
1,705
     
1,828
 
General and administrative
   
2,290
     
2,015
 
Depreciation and amortization
   
424
     
402
 
Litigation settlements
   
(71
)
   
(70
)
Total operating expenses
   
6,589
     
6,520
 
 
               
Operating income
   
3
     
316
 
Interest and other income (expense), net
   
402
     
(1
)
Income before income tax provision
   
405
     
315
 
Income tax provision
   
71
     
62
 
Net income and comprehensive income
 
$
334
   
$
253
 
               
Basic income per common share
 
$
0.04
   
$
0.03
 
 
               
Diluted income per common share
 
$
0.04
   
$
0.03
 
 
               


See accompanying notes to unaudited consolidated condensed financial statements.
4


AUTOBYTEL INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Amounts in thousands)


 
 
 
   
 
 
 
Three Months Ended March 31,
 
 
 
2013
   
2012
 
Cash flows from operating activities:
 
   
 
Net income
 
$
334
   
$
253
 
Adjustments to reconcile net income to net cash (used in) provided by  operating activities:
               
Depreciation and amortization
   
538
     
508
 
Provision for bad debts
   
8
     
36
 
Provision for customer credits
   
169
     
86
 
Share-based compensation
   
186
     
281
 
Changes in assets and liabilities:
               
Accounts receivable
   
(1,813
)
   
(564
)
Prepaid expenses and other current assets
   
6
     
188
 
Other assets
   
(71
)
   
 
Accounts payable
   
1,442
     
1,024
 
Accrued expenses and other current liabilities
   
(1,052
)
   
(819
)
Deferred revenues
   
(166
)
   
(100
)
Non-current liabilities
   
47
     
1
 
Net cash (used in) provided by operating activities
   
(372
)
   
894
 
Cash flows from investing activities:
               
Purchases of property and equipment
   
(198
)
   
(39
)
          Change in short-term investment
   
     
350
 
Net cash (used in) provided by investing activities
   
(198
)
   
311
 
Cash flows from financing activities:
               
Proceeds from exercise of stock options
   
20
     
5
 
          Payment of contingent fee arrangement
   
(28
)
   
(83
)
          Repurchase of common stock
   
     
(224
)
Net cash used in financing activities
   
(8
)
   
(302
)
Net (decrease) increase in cash and cash equivalents
   
(578
)
   
903
 
Cash and cash equivalents, beginning of period
   
15,296
     
11,209
 
Cash and cash equivalents, end of period
 
$
14,718
   
$
12,112
 


See accompanying notes to unaudited consolidated condensed financial statements.
5


AUTOBYTEL INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1. Organization and Operations

Autobytel Inc. ("Autobytel" or the "Company") is an automotive marketing services company that assists automotive retail dealers ("Dealers") and automotive manufacturers ("Manufacturers") market and sell new and used vehicles through its programs for online lead referrals ("Leads"), Dealer marketing products and services, and online advertising programs and data products.
The Company's consumer-facing automotive websites ("Company Websites"), including its flagship website Autobytel.com®, provide consumers with information and tools to aid them with their automotive purchase decisions and the ability to submit inquiries requesting Dealers to contact the consumers regarding purchasing or leasing vehicles ("Vehicle Leads"). For consumers who may not be able to secure loans through conventional lending sources, the Company Websites provide these consumers the ability to submit inquiries requesting Dealers or other lenders that may offer vehicle financing to these consumers to contact the consumers regarding vehicle financing ("Finance Leads"). The Company's mission for consumers is to be "Your Lifetime Automotive Advisor®" by engaging consumers throughout the entire lifecycle of their automotive needs.
The Company was incorporated in Delaware on May 17, 1996. Its principal corporate offices are located in Irvine, California. The Company's common stock is listed on The NASDAQ Capital Market under the symbol ABTL.

2. Basis of Presentation
The accompanying unaudited consolidated condensed financial statements presented herein are presented on the same basis as the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") for the year ended December 31, 2012 ("2012 Form 10-K").  Autobytel has made its disclosures in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation with respect to interim financial statements, have been included.  The statements of income and comprehensive income and cash flows for the periods ended March 31, 2013 and 2012 are not necessarily indicative of the results of operations or cash flows expected for the year or any other period.  The unaudited consolidated condensed financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto in the 2012 Form 10-K.
On July 11, 2012, the Company implemented a 1-for-5 reverse split of the Company's common stock, $0.001 par value per share ("Reverse Stock Split").  Accordingly, each five shares of common stock were reclassified into one share of common stock.  All share and per share amounts and all options and other common stock derivatives, including their exercise/conversion prices, for all periods presented have been adjusted to reflect the Reverse Stock Split as though it had occurred as of the earliest period presented.  Such reclassification did not impact prior period net income or total stockholders' equity.


6


AUTOBYTEL INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS – (continued)

3.  Recent Accounting Pronouncements

Accounting Standards Codification 220 "Comprehensive Income."  In February 2013, Accounting Standards Update ("ASU") No. 2013-02, "Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income" was issued.  The objective of this ASU is to improve the reporting of reclassifications out of accumulated other comprehensive income.  The amendments in this ASU seek to attain this objective by requiring an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under U.S. generally accepted accounting principles to be reclassified in its entirety to net income.  This ASU is effective prospectively for reporting periods beginning after December 15, 2012.  Adoption of this ASU did not have a material impact effect on the Company's consolidated financial results.
4.  Computation of Basic and Diluted Net Income Per Share

Basic net income per share is computed using the weighted average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted average number of common shares, and if dilutive, potential common shares outstanding, as determined under the treasury stock and if-converted method, during the period. Potential common shares consist of common shares issuable upon the exercise of stock options, common shares issuable upon the exercise of the warrant described below and common shares issuable upon conversion of the convertible note described in Note 6 below.  The following are the share amounts utilized to compute the basic and diluted net income per share for the three months ended March 31, 2013 and 2012 (adjusted for the Reverse Stock Split):

 
 
   
 
 
 
Three Months Ended March 31,
 
 
 
2013
   
2012
 
Basic shares:
 
   
 
Weighted average common shares outstanding
   
8,856,289
     
9,224,755
 
Weighted average common shares repurchased
   
     
(7,282
)
Basic shares
   
8,856,289
     
9,217,473
 
 
               
Diluted Shares:
               
Basic Shares
   
8,856,289
     
9,217,473
 
Weighted average dilutive securities
   
219,243
     
278,489
 
Dilutive Shares
   
9,075,532
     
9,495,962
 
For the three months ended March 31, 2013 and March 31, 2012, weighted average dilutive securities included dilutive options.
For the three months ended March 31, 2013, 2.6 million of potentially anti-dilutive securities have been excluded from the calculation of diluted net income per share, respectively.  For the three months ended March 31, 2012, 2.5 million of potentially anti-dilutive securities have been excluded from the calculation of diluted net income per share, respectively.

 On February 13, 2012, the Company announced that the Board of Directors had approved a stock repurchase program that authorized the repurchase of up to $1.5 million of Company common stock.  The Board of Directors authorized the Company to repurchase an additional $2.0 million of Company Common Stock on June 7, 2012.  Under these repurchase programs, the Company may repurchase common stock from time to time on the open market or in private transactions. This authorization does not require the Company to purchase a specific number of shares, and the Board of Directors may suspend, modify or terminate the program at any time.  The Company will fund repurchases through the use of available cash. The Company began repurchasing its common stock on March 7, 2012.   During the three months ended March 31, 2012, 45,988 shares were repurchased for an aggregate price of $0.2 million.  The average price paid for all shares repurchased during the three months ended March 31, 2012 was $4.87.  No shares were repurchased during the quarter ended March 31, 2013. The shares repurchased in the three months ended March 31, 2012 were cancelled by the Company and returned to authorized and unissued shares.
7



AUTOBYTEL INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS – (continued)


 
Warrant.  On September 17, 2010 ("Acquisition Date"), the Company acquired substantially all of the assets of privately-held Autotropolis, Inc., a Florida corporation, and Cyber Ventures, Inc., a Florida corporation (collectively, "Cyber").  In connection with the acquisition of Cyber, the Company issued to the sellers a warrant to purchase 400,000 shares of Company common stock ("Warrant"). The Warrant was valued at $3.15 per share on the Acquisition Date using an option pricing model with the following key assumptions: risk-free rate of 2.3%, stock price volatility of 77.5% and a term of 8.04 years.  The Warrant was valued based on long-term volatilities of the Company and comparable public companies as of the Acquisition Date.  The exercise price of the warrant is $4.65 per share (as adjusted for stock splits, stock dividends, combinations and other similar events).  The Warrant becomes exercisable on the third anniversary of the issuance date and expires on the eighth anniversary of the issuance date.  The right to exercise the Warrant is accelerated in the event of a change in control of the Company.

5. Share-Based Compensation
Share-based compensation expense is included in costs and expenses in the accompanying Unaudited Consolidated Condensed Statements of Income and Comprehensive Income as follows:

 
 
   
 
 
Three Months Ended March 31,
 
 
2013
   
2012
 
 
   
 
 
(in thousands)
 
Share-based compensation expense:
 
   
 
   Cost of revenues
 
$
12
   
$
12
 
   Sales and marketing
   
35
     
92
 
   Technology support
   
60
     
92
 
   General and administrative
   
79
     
86
 
   Share-based compensation costs
   
186
     
282
 
 
               
Amount capitalized to internal use software
   
     
1
 
Total share-based compensation costs
 
$
186
   
$
281
 
Service-Based Options.  During the three months ended March 31, 2013, the Company granted 57,000 service-based stock options with weighted average grant date fair values of $2.19 and weighted average exercise prices of $4.01.  During the three months ended March 31, 2012, the Company granted 19,400 service-based stock options with weighted average grant date fair values of $2.41 and weighted average exercise prices of $3.93.  These options are valued using a Black-Scholes option pricing model and generally vest one-third on the first anniversary of the grant date and ratably over twenty-four months thereafter.  The vesting of these awards is contingent upon the employee's continued employment with the Company during the vesting period.
  Performance-based Options.  During the three months ended March 31, 2013, the Company granted 87,117 performance-based stock options ("2013 Performance Options") to certain employees with a weighted average grant date fair value of $2.19, using a Black-Scholes option pricing model.  The 2013 Performance Options are subject to two vesting requirements and conditions: (i) percentage achievement of 2013 revenues and earnings before interest, taxes, depreciation and amortization ("EBITDA") goals and (ii) time vesting.
During the three months ended March 31, 2012, the Company granted 249,199 performance-based stock options ("2012 Performance Options") to certain employees with a weighted average grant date fair value of $2.39, using a Black-Scholes option pricing model.  The 2012 Performance Options are subject to two vesting requirements and conditions: (i) percentage achievement of 2012 revenues and EBITDA goals and (ii) time vesting.  Based on the Company's 2012 revenues and EBITDA performance, 161,394 of the 2012 Performance Options vested under the performance vesting condition, and one-third of these options vested on the first anniversary of the grant date, with the remainder vesting ratably over twenty-four months thereafter.
8

AUTOBYTEL INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS – (continued)
Market Condition Options.  In 2009 the Company granted 213,650 stock options to substantially all employees at exercise prices equal to the price of the stock on the grant date of $1.75, with a fair market value per option granted of $0.97, using a Black-Scholes option pricing model.  One-third of these options cliff vested on the first anniversary following the grant date and the remaining two-thirds vested ratably over twenty-four months thereafter.  In addition, the remaining two-thirds of the awards were subject to satisfaction of market price conditions for the Company's common stock, which conditions have been satisfied. During the three months ended March 31, 2013 and March 31, 2012, 4,000 and 930 of these market condition stock options were exercised, respectively.
During the three months ended March 31, 2013, 8,000 stock options (inclusive of the 4,000 market condition stock options exercised during the period)  were exercised, with aggregate weighted average exercise prices of $2.43.  There were 1,606 stock options (inclusive of the 930 market condition stock options exercised during the period) exercised during the three months ended March 31, 2012, with aggregate weighted average exercise prices of $2.32.  The grant date fair value of stock options granted during these periods was estimated using the Black-Scholes option pricing model using the following weighted average assumptions:

 
 
Three Months Ended March 31,
 
 
 
2013
   
2012
 
Dividend yield
   
     
 
Volatility
   
72
%
   
84
%
Risk-free interest rate
   
0.6
%
   
0.7
%
Expected life (years)
   
4.3
     
4.2
 


6. Selected Balance Sheet Accounts
Property and Equipment.  Property and equipment consists of the following:
 
 
 
   
 
 
 
March 31,
   
December 31,
 
 
 
2013
   
2012
 
 
 
(in thousands)
 
Computer software and hardware and capitalized internal use software
 
$
11,927
   
$
11,729
 
Furniture and equipment
   
1,252
     
1,252
 
Leasehold improvements
   
892
     
892
 
 
   
14,071
     
13,873
 
Less – Accumulated depreciation and amortization
   
(12,483
)
   
(12,280
)
Property and equipment, net
 
$
1,588
   
$
1,593
 



The Company periodically reviews long-lived assets to determine if there are any impairment indicators.  The Company assesses the impairment of these assets, or the need to accelerate amortization, whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Company's judgments regarding the existence of impairment indicators are based on legal factors, market conditions and operational performance of our long-lived assets.  If such indicators exist, the Company evaluates the assets for impairment based on the estimated future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. Should the carrying amount of an asset exceed its estimated future undiscounted cash flows, an impairment loss is recorded for the excess of the asset's carrying amount over its fair value. Fair value is generally determined based on a valuation process that provides an estimate of the fair value of these assets using a discounted cash flow model, which includes assumptions and estimates.
Concentration of Credit Risk and Risks Due to Significant Customers.  Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. Cash and cash equivalents are primarily maintained with two high credit quality financial institutions in the United States. Deposits held by banks exceed the amount of insurance provided for such deposits. These deposits may be redeemed upon demand. Accounts receivable are primarily derived from fees billed to Dealers and Manufacturers.  The Company generally requires no collateral to support its accounts receivables and maintains an allowance for bad debts for potential credit losses.
9


AUTOBYTEL INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS – (continued)
The Company has a concentration of credit risk with its automotive industry related accounts receivable balances, particularly with General Motors, Urban Science Applications (acting on behalf of several Manufacturers) and Nissan/Infiniti.  During the first three months of 2013, approximately 25% of the Company's total revenues were derived from these three customers, and approximately 36%, or $4.4 million of gross accounts receivable related to these three customers at March 31, 2013.
During the first three months of 2012, approximately 32% of the Company's total revenues were derived from General Motors, Urban Science Applications and AutoNation, and approximately 36%, or $4.0 million of gross accounts receivables related to these three customers at March 31, 2012.
Intangible Assets.  The Company amortizes specifically identified intangible assets using the straight-line method over the estimated useful lives of the assets.
In connection with the acquisition of Cyber on September 17, 2010, the Company identified $4.5 million of intangible assets.  The intangible assets will be amortized over the following estimated useful lives:

Intangible Asset
 
Estimated Useful Life
Trademarks/trade names
 
5 years
Software and publications
 
3 years
Customer relationships
 
3 years
Employment/non-compete agreements
 
5 years
 
Amortization expense for the remainder of the year and for the next four years is as follows:
Year
 
Amortization Expense
 
 
(in thousands)
 
 
 
2013
 
$ 700
2014
 
284
2015
 
208
2016
 
3
2017
 
 
 
$ 1,195
 
Goodwill. The Company recognized $11.7 million in goodwill related to the acquisition of Cyber in 2010. Goodwill represents the excess of the purchase price over the fair value of net assets acquired. Goodwill is not amortized and is assessed annually for impairment or whenever events or circumstances indicate that the carrying value of such assets may not be recoverable.
 
10


AUTOBYTEL INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS – (continued)
Accrued Expenses and Other Current Liabilities.  Accrued expenses and other current liabilities consisted of the following:
 
 
 
March 31,
   
December 31,
 
 
 
2013
   
2012
 
 
 
(in thousands)
 
Compensation and related costs and professional fees
 
$
1,135
   
$
2,006
 
Other accrued expenses
   
2,691
     
2,847
 
Amounts due to customers
   
155
     
149
 
Other current liabilities
   
316
     
375
 
Total accrued expenses and other current liabilities
 
$
4,297
   
$
5,377
 
 
Long-term debt.  In connection with the acquisition of Cyber, the Company issued a convertible subordinated promissory note for $5.0 million ("Convertible Note") to the sellers.  The fair value of the Convertible Note as of the Acquisition Date was $5.9 million.  This valuation was estimated using a binomial option pricing method.  Key assumptions used in valuing the Convertible Note included a market yield of 15.0% and stock price volatility of 77.5%.  As the Convertible Note was issued with a substantial premium, the Company recorded the premium as additional paid-in capital.  Interest is payable at an annual interest rate of 6% in quarterly installments.  The entire outstanding balance of the Convertible Note is due and payable on September 30, 2015.  At any time after September 30, 2013, the holders of the Convertible Note may convert all or any part of, but in 40,000 minimum share increments, the then outstanding and unpaid principal of the Convertible Note into fully paid shares of the Company's common stock at a conversion price of $4.65 per share (as adjusted for stock splits, stock dividends, combinations and other similar events).  The right to convert the Convertible Note into common stock of the Company is accelerated in the event of a change in control of the Company.  In the event of default, the entire unpaid balance of the Convertible Note will become immediately due and payable and will bear interest at the lower of 8% per year and the highest legal rate permissible under applicable law.

7.  Taxes

The Company was audited in June 2011 by the New York State Department of Taxation and Finance for sales tax for the period December 1, 2003 through February 28, 2011.  The Company paid $166,000 related to this sales tax audit in April 2013 and the audit is now closed. The Company was also notified of an examination by the New York State Department of Taxation and Finance for income tax for the period January 1, 2009 through December 31, 2011 that is scheduled for June 2013.  The Company believes it has made adequate reserves for state tax items through March 31, 2013.

8. Commitments and Contingencies
Employment Agreements

The Company has employment agreements and retention agreements with certain key employees. A number of these agreements require severance payments, continuation of certain insurance benefits and acceleration of vesting of stock options in the event of a termination of employment by the Company without cause or by the employee for good reason.

Litigation
 
         From time to time, the Company may be involved in litigation matters arising from the normal course of its business activities. The actions filed against the Company and other litigation, even if not meritorious, could result in substantial costs and diversion of resources and management attention, and an adverse outcome in litigation could materially adversely affect its business, results of operations, financial condition and cash flows.
 

9. Other Income
 
In March 2013, the Company received a $0.5 million payment related to termination of a license agreement under which the Company had licensed certain rights in the Company's proprietary software, business procedures, and brand. The license agreement, originally entered into in 2002, had an original term of 25 years, with the licensee having the right to terminate the agreement early upon two years notice.  The license agreement did not generate any revenue for the Company, other than $250,000 annually which was recorded as other income since inception of the license agreement.  The licensee exercised its right to terminate the license agreement and, in order to terminate the license agreement prior to the end of the notice period, agreed to a pre-payment of the annual license fees that otherwise would have been due during the two-year notice period.
 
11

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations
The Securities and Exchange Commission ("SEC") encourages companies to disclose forward-looking information so that investors can better understand a company's future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "anticipates," "estimates," "expects," "projects," "intends," "plans," "believes," "will" and words of similar substance used in connection with any discussion of future operations or financial performance identify forward-looking statements. In particular, statements regarding expectations and opportunities, industry trends, new product expectations and capabilities, and our outlook regarding our performance and growth are forward-looking statements. This Quarterly Report on Form 10-Q also contains statements regarding plans, goals and objectives. There is no assurance that we will be able to carry out our plans or achieve our goals and objectives or that we will be able to do so successfully on a profitable basis. These forward-looking statements are just predictions and involve risks and uncertainties, many of which are beyond our control, and actual results may differ materially from these statements. Factors that could cause actual results to differ materially from those reflected in forward-looking statements include, but are not limited to, those discussed in this Item 2 and under the heading "Risk Factors" in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2012 ("2012 Form 10-K"). Investors are urged not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date on which they were made. Except as may be required by law, we do not undertake any obligation, and expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. All forward-looking statements contained herein are qualified in their entirety by the foregoing cautionary statements.
You should read the following discussion of our results of operations and financial condition in conjunction with our unaudited consolidated condensed financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the notes thereto in the 2012 Form 10-K.
Our corporate website is located at www.autobytel.com. Information on our website is not incorporated by reference in this Quarterly Report. At or through the Investor Relations section of our website we make available free of charge our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to these reports as soon as practicable after the reports are electronically filed with or furnished to the SEC.

Basis of Presentation

The accompanying unaudited consolidated condensed financial statements presented herein are presented on the same basis as the 2012 Form 10-K.  We have made disclosures in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation with respect to interim financial statements, have been included.  The statements of income and comprehensive income and cash flows for the periods ended March 31, 2013 and 2012 are not necessarily indicative of the results of operations or cash flows expected for the year or any other period.  The unaudited consolidated condensed financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto in the 2012 Form 10-K.

On July 11, 2012, the Company implemented a 1-for-5 reverse split of the Company's common stock, $0.001 par value per share ("Reverse Stock Split").  Trading of the common stock on a post-Reverse Stock Split adjusted basis on The NASDAQ Capital Market began on July 12, 2012. Accordingly, each five shares of common stock were reclassified into one share of common stock.  All share and per share amounts and all options and other common stock derivatives, including their exercise/conversion prices, for all periods presented have been adjusted to reflect the Reverse Stock Split as though it had occurred as of the earliest period presented.  Such reclassification did not impact prior period net income or total stockholders' equity.

Overview
We are an automotive marketing services company that assists automotive retail dealers ("Dealers") and automotive manufacturers ("Manufacturers") market and sell new and used vehicles to consumers through our programs for online lead referrals ("Leads"), Dealer marketing products and services, and online advertising programs and data products.  Our consumer-facing automotive websites ("Company Websites"), which include our flagship website Autobytel.com®, provide consumers with information and tools to aid them with their automotive purchase decisions and the ability to submit inquiries requesting Dealers to contact the consumers regarding purchasing or leasing vehicles ("Vehicle Leads").  For consumers who may not be able to secure loans through conventional lending sources, our Company Websites provide these consumers the ability to submit inquiries requesting Dealers or other lenders that may offer vehicle financing to these consumers to contact the consumers regarding vehicle financing ("Finance Leads").  The Company's mission for consumers is to be "Your Lifetime Automotive Advisor®" by engaging consumers throughout the entire lifecycle of their automotive needs.
12

Lead quality is measured by the conversion of Leads to actual vehicle sales.  Leads are internally-generated from our Company Websites ("Internally-Generated Leads") or acquired ("Non-Internally-Generated Leads") from third parties that generate Leads from their websites ("Non-Company Websites").  We rely on detailed feedback from Manufacturer and wholesale customers to confirm the performance of our Leads.  In addition, in 2011 we started using R.L. Polk & Co. to evaluate the performance quality of both our Internally-Generated Leads as well as those we acquire from our third party Lead suppliers.  Our Manufacturers and wholesale customers and R.L. Polk & Co. match the Leads we deliver to our customers against vehicle sales data to provide us with closing rates for the Leads we deliver to our customers and information that allows us to compare these closing rates to the closing rates of the Leads we acquire from third party suppliers.  Findings from these data suggest that Internally-Generated Leads close at over twice the industry average derived from the data. Based on the most current Polk data, automotive Leads from consumers shopping on Autobytel.com have a conversion rate of 24% within 90 days of Lead submission.
In addition, we report a number of key metrics to our customers, allowing them to gain a better understanding of the revenue opportunities that they may realize from acquiring Leads from us.  We can now optimize the mix of Leads we deliver to our Dealers based on multiple sources of quality measurements. Also by reporting the buying behavior of potential consumers, the findings also can help shape improvements to online Lead management; online advertising and dealership sales process training.  By providing actionable data, we are now placing considerable intelligence in the hands of our customers, and are seeing increased budget allocations for purchasing Leads from us.
For the three months ended March 31, 2013, our business, results of operations and financial condition were affected, and may continue to be affected in the future, by general economic and market factors, conditions in the automotive industry, the market for Leads and the market for advertising services, including, but not limited to, the following:
·
The adverse effect of high unemployment on the number of vehicle purchasers;
·
Availability of, and interest rates for, financing for vehicle purchases;
·
Pricing and purchase incentives for vehicles;
·
Disruption in the available inventory of automobiles;
·
The expectation that consumers will be purchasing fewer vehicles overall during their lifetime as a result of better quality vehicles and longer warranties;
·
The impact of gasoline prices on demand for vehicles;
·
Increases or decreases in the number of retail Dealers or in the number of Manufacturers and other wholesale customers in our customer base;
·
Volatility in spending by Manufacturers and others in their marketing budgets and allocations; and
·
The effect of changes in search engine algorithms and methodologies on our Lead generation and website advertising activities and margins.
 
13


Results of Operations
 Three Months Ended March 31, 2013 Compared to the Three Months Ended March 31, 2012

The following table sets forth certain income statement data for the three-month periods ended March 31, 2013 and 2012 (certain amounts may not calculate due to rounding):
 
 
   
   
   
   
 
 
 
2013
   
% of total revenues
   
2012
   
% of total revenues
   
$ Change
   
% Change
 
 
 
(Dollar amounts in thousands)
   
 
Revenues:
 
   
   
   
   
   
 
Lead fees
 
$
17,517
     
96
%
 
$
15,794
     
95
%
 
$
1,723
     
11
%
Advertising
   
715
     
4
     
859
     
5
     
(144
)
   
(17
)
Other revenues
   
29
     
     
52
     
     
(23
)
   
(44
)
Total revenues
   
18,261
     
100
     
16,705
     
100
     
1,556
     
9
 
Cost of revenues (excludes depreciation of $28 and $32 for the three months ended March 31, 2013 and 2012, respectively)
   
11,669
     
64
     
9,869
     
59
     
1,800
     
18
 
Gross profit
   
6,592
     
36
     
6,836
     
41
     
(244
)
   
(4
)
Operating expenses:
                                               
Sales and marketing
   
2,241
     
12
     
2,345
     
14
     
(104
)
   
(4
)
Technology support
   
1,705
     
9
     
1,828
     
11
     
(123
)
   
(7
)
General and administrative
   
2,290
     
13
     
2,015
     
12
     
275
     
14
 
Depreciation and amortization
   
424
     
2
     
402
     
2
     
22
     
5
 
Litigation settlements
   
(71
)
   
     
(70
)
   
     
(1
)
   
1
 
Total operating expenses
   
6,589
     
36
     
6,520
     
39
     
69
     
1
 
Operating income
   
3
     
     
316
     
2
     
(313
)
   
(99
)
       Interest and other income (expense), net
   
402
     
2
     
(1
)
   
     
403
     
(40,300
)
Income before income tax provision
   
405
     
2
     
315
     
2
     
90
     
29
 
       Income tax provision
   
71
   
­—
     
62
     
     
9
     
15
 
Net income
 
$
334
     
2
%
 
$
253
     
2
%
 
$
81
     
32
%
 
Lead fees.  Lead revenue increased $1.7 million or 11% in the first quarter of 2013 compared to the first quarter of 2012 primarily due to an increase of 18% and 11% in the volume of automotive Leads delivered to new and used retail Dealers and Manufacturers and other wholesale purchasers, respectively.

Advertising. Advertising revenues decreased $0.1 million or 17% in the first quarter of 2013 compared to the first quarter of 2012 due primarily to a decrease in site advertising revenue.

Cost of Revenues.  Cost of revenues consists of Lead and traffic acquisition costs and other cost of revenues. Lead and traffic acquisition costs consist of payments made to our Lead providers, including internet portals and on-line automotive information providers. Other cost of revenues consists of search engine marketing ("SEM") and fees paid to third parties for data and content, including search engine optimization ("SEO") activity, included on our properties, connectivity costs, development costs related to our websites, costs associated with our video and editorial content, compensation related expense and technology license fees, server equipment depreciation and technology amortization directly related to the Company's websites. SEM, sometimes referred to as paid search marketing, is the practice of bidding on keywords on search engines to drive traffic to a website.  
Cost of revenues increased $1.8 million or 18% in the first quarter of 2013 compared to the first quarter of 2012 primarily due to an increase in SEM costs.
14


      Sales and Marketing. Sales and marketing expense includes costs for developing our brand equity, personnel costs and other costs associated with Dealer sales, website advertising, Dealer support and bad debt expense. Sales and marketing expense in the first quarter of 2013 decreased by $0.1 million or 4% compared to the first quarter of 2012 due primarily to lower headcount-related compensation costs.
Technology Support. Technology support expense includes compensation, benefits, software licenses and other direct costs incurred by the Company to enhance, manage, maintain, support, monitor and operate the Company's websites and related technologies, and to operate the Company's internal technology infrastructure. Technology support expenses in the first quarter of 2013 decreased by $0.1 million or 7% compared to the first quarter of 2012 due to decreased personnel costs and computer software and maintenance costs.
General and Administrative. General and administrative expense consists of executive, financial and legal personnel expenses and costs related to being a public company. General and administrative expense in the first quarter of 2013 increased by $0.3 million or 14% compared to the first quarter of 2012 due to an increase in headcount-related compensation costs, insurance costs, professional fees and one-time relocation expenses.
Depreciation and amortization.  Depreciation and amortization expense increased $22,000 in the first quarter of 2013 compared to the first quarter of 2012 primarily due to addition of assets since the first quarter of 2012.
Litigation settlements.  Litigation settlements for the first quarter of 2013 were $71,000 compared to $70,000 in the first quarter of 2012.
Interest and other income (expense), net. Interest and other income was $0.4 million for the first quarter of 2013 compared to interest and other expense of $1,000 in the first quarter of 2012.  The first quarter of 2013 included receipt of a $0.5 million final payment related to early termination of a license agreement pursuant to which the Company, as licensor, had licensed certain rights in the Company's proprietary software, business procedures, and brand.
Income taxes. Income tax expense was $71,000 in the first quarter of 2013 compared to $62,000 in the first quarter of 2012. The current quarter tax expense related to various state taxes and the deferred tax liability related to tax deductible goodwill amortization.
15


Liquidity and Capital Resources
The table below sets forth a summary of our cash flows for the three months ended March 31, 2013 and 2012:
 
 
 
Three Months Ended March 31,
 
 
 
2013
   
2012
 
 
 
(in thousands)
 
Net cash (used in) provided by operating activities
 
$
(372
)
 
$
894
 
Net cash (used in) provided by investing activities
   
(198
)
   
311
 
Net cash used in financing activities
   
(8
)
   
(302
)
Our principal sources of liquidity are our cash and cash equivalents balances and positive operating cash flow.  Our cash and cash equivalents totaled $14.7 million as of March 31, 2013 compared to cash and cash equivalents of $15.3 million as of December 31, 2012.

On February 13, 2012, we announced that the Board of Directors had approved a stock repurchase program that authorized the repurchase of up to $1.5 million of Company common stock.  The Board of Directors authorized us to repurchase an additional $2.0 million of Company common stock on June 7, 2012.  Under these repurchase programs, we may repurchase common stock from time to time on the open market or in private transactions. This authorization does not require us to purchase a specific number of shares, and the Board of Directors may suspend, modify or terminate the programs at any time.  We will fund repurchases through the use of available cash. We began repurchasing Company common stock on March 7, 2012.  During the three months ended March 31, 2012, 45,988 shares were repurchased for an aggregate price of $0.2 million.  The average price paid for all shares repurchased during the three months ended March 31, 2012 was $4.87.  No shares were repurchased during the quarter ended March 31, 2013.  The shares repurchased in the three months ended March 31, 2012 were cancelled by the Company and returned to authorized and unissued shares.
   
We entered into an $8.0 million revolving credit facility ("Facility") in February 2013 with Union Bank, N.A.  The Facility may be used as a source to finance capital expenditures, acquisitions, stockholder buybacks, and other general corporate purposes.  Borrowings under the Facility will bear interest at either the bank's Reference Rate (prime rate) minus 0.50% or the London Interbank Offering Rate (LIBOR) plus 1.50%, at the option of the Company.  We will also pay a commitment fee on the unused facility of 0.10% payable quarterly in arrears.  The Facility has not been drawn against as of March 31, 2013.  The Facility contains certain customary representations and warranties, affirmative and negative covenants and restrictive and financial covenants, including that the Company maintain a minimum consolidated net liquidity, profitability, EBITDA and tangible net worth, with which the Company was in compliance with as of March 31, 2013.  Borrowings under the Facility are to be secured by a first priority security interest on our accounts receivable and proceeds thereof.  The Facility matures in February 2015.
Net Cash (Used in) Provided by Operating Activities.  Net cash used in operating activities in the three months ended March 31, 2013 of $0.4 million resulted primarily from net income of $0.3 million, as adjusted for non-cash charges to earnings, in addition to cash used to reduce accrued liabilities of $1.0 million primarily related to the payment of annual incentive compensation amounts and severance accrued in 2012 and paid in the first three months of 2013, a $1.8 million increase in our accounts receivable balance related to the timing of payments received from our customers offset by a $1.4 million increase in our accounts payable balance related to the timing of payments made.  Net cash provided by operating activities in the three months ended March 31, 2012 of $0.9 million resulted primarily from net income of $0.3 million, as adjusted for non-cash charges to earnings, in addition to cash used to reduce accrued liabilities of $0.8 million primarily related to the payment of annual incentive compensation amounts and severance accrued in 2011 and paid in the first three months of 2012 offset by a $1.0 million increase in our accounts payable balance related to the timing of payments made.
Net Cash (Used in) Provided by Investing Activities.  Net cash used in investing activities was $0.2 million in the three months ended March 31, 2013 primarily related to purchases of property and equipment. Net cash provided by investing activities was $0.3 million in the three months ended March 31, 2012 primarily related to net changes in a certificate of deposit used to secure the processing of certain SEM activity offset by purchases of property and equipment.
Net Cash Used in Financing Activities.  Stock options for 8,000 shares of stock were exercised in the three months ended March 31, 2013 resulting in $20,000 cash inflow.  Net cash used in financing activities in the three months ended March 31, 2013 also consisted of contingent payments of $28,000 related to the Cyber acquisition.  Stock options for 1,606 shares of stock were exercised in the three months ended March 31, 2012 resulting in $5,000 cash inflow.  Net cash used in financing activities in the three months ended March 31, 2012 consisted of a contingent payment of $83,000 related to the Cyber acquisition and $0.2 million used to repurchase our common stock.  Our future cash flows from employee stock options, if any, will depend on the future timing, exercise price, and amount of stock option exercises.
16


Off-Balance Sheet Arrangements
At March 31, 2013, we had no off-balance sheet arrangements as defined in Regulation SK, Item 303(a)(4)(D)(ii).

Item 3.  Quantitative and Qualitative Disclosures about Market Risk
In the ordinary course of business, we are exposed to various market risk factors, including fluctuations in interest rates and changes in general economic conditions.  For the three months ended March 31, 2013 there were no material changes in the information required to be provided under Item 305 of Regulation S-K from the information disclosed in Item 7A of the 2012 Form 10-K.

Item 4.  Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended ("Exchange Act"). Based on the evaluation, our Chief Executive Officer and our Chief Financial Officer believe that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective at ensuring that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required financial disclosure.
As of the end of the period covered by this Quarterly Report on Form 10-Q, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.
Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls and internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls may be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II. OTHER INFORMATION

Item 1A.  Risk Factors

The risk factors set forth in Part I, Item 1A, "Risk Factors" of the 2012 Form 10-K may affect our future financial condition and results of operations.  The risks described in the 2012 Form 10-K are not the only risks we face.  In addition to the risks set forth in the 2012 Form 10-K additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business.

17


Item 6.  Exhibits
2.1‡
Asset Purchase Agreement dated as of  September 16, 2010, by and among Autotropolis, Inc., a Florida corporation, Cyber Ventures, Inc., a Florida corporation, William Ferriolo, Ian Bentley and the Ian Bentley Revocable Trust created U/A/D 3/1/2005, Autobytel Inc., a Delaware corporation, and Autobytel Acquisition Subsidiary, Inc., a Delaware corporation, which is incorporated herein by reference to Exhibit 2.1 of the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010 filed with the SEC on November 12, 2010 (SEC File No. 1-34761)
 
 
3.1
Fifth Amended and Restated Certificate of Incorporation of Autobytel Inc. (formerly Autobytel.com Inc. ("Autobytel" or the "Company")) certified by the Secretary of State of Delaware (filed December 14, 1998), as amended by Certificate of Amendment dated March 1, 1999, Second Certificate of Amendment of the Fifth Amended and Restated Certificate of Incorporation of Autobytel dated July 22, 1999, Third Certificate of Amendment of the Fifth Amended and Restated Certificate of Incorporation of Autobytel dated August 14, 2001, Certificate of Designation of Series A Junior Participating Preferred Stock dated July 30, 2004, and Amended Certificate of Designation of Series A Junior Participating Preferred Stock dated April 24, 2009, which is incorporated herein by reference to Exhibit 3.1 of the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009 filed with the SEC on April 24, 2009 (SEC File No. 000-22239) and as amended by the Fourth Certificate of Amendment of the Fifth Amended and Restated Certificate of Incorporation of Autobytel effective as of July 11, 2012, which is incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed with the SEC on July 12, 2012 (SEC File No. 1-34761)
 
 
3.2
Third Amended and Restated Bylaws of Autobytel dated April 27, 2011, which is incorporated herein by reference to Exhibit 3.1 of the Current Report on Form 8-K filed with the SEC on April 29, 2011 (SEC File No. 1-34761), as amended by  Amendment to Third Amended and Restated Bylaws of Autobytel dated September 13, 2012, which is incorporated herein by reference to Exhibit 3.1 of the Current Report on Form 8-K filed with the SEC on September 14, 2012 (SEC File No. 1-34761)
 
 
4.1
Form of Common Stock Certificate of Autobytel is incorporated herein by reference to Exhibit 4.1 of the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2001 filed with the SEC on November 14, 2001 (SEC File No. 000-22239)
 
 
4.2
Tax Benefit Preservation Plan, dated as of May 26, 2010, between Autobytel Inc. and Computershare Trust Company, N.A., as rights agent, together with the following exhibits thereto: Exhibit A – Form of Right Certificate; Exhibit B – Summary of Rights to Purchase Shares of Preferred Stock of Autobytel Inc. is incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on June 2, 2010 (SEC File No. 000-22239)
 
 
4.3
Certificate of Adjustment Under Section 11(m) of the Tax Benefit Preservation Plan dated July 12, 2012, is incorporated by reference to Exhibit 4.3 to the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2012 filed with the SEC on November 8, 2012 (SEC File No. 001-34761)
 
 
10.1*
Amended and Restated Employment Agreement dated as of April 24, 2013 between Autobytel and John J. Skocilic
 
 
10.2*
Amended and Restated Severance Agreement dated May 1, 2013 between Autobytel and John J. Skocilic
 
 
31.1*
Rule 13a-14(a)/15d-14(a) Certification by Principal Executive Officer
 
 
31.2*
Rule 13a-14(a)/15d-14(a) Certification by Principal Financial Officer
 
 
32.1*
Section 1350 Certification by Principal Executive Officer and Principal Financial Officer
 
 
101.INS**
XBRL Instance Document
 
 
101.SCH**
XBRL Taxonomy Extension Schema Document
 
 
101.CAL**
XBRL Taxonomy Calculation Linkbase Document
 
 
101.DEF**
XBRL Taxonomy Extension Definition Document
 
 
101.LAB**
XBRL Taxonomy Label Linkbase Document
 
 
101.PRE**
XBRL Taxonomy Presentation Linkbase Document
 
 

* Filed herewith
Certain schedules in this Exhibit have been omitted in accordance with Item 601(b)(2) of Regulation S-K.  Autobytel will furnish supplementally a copy of any omitted schedule or exhibit to the Securities and Exchange Commission upon request; provided, however, that Autobytel may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedule or exhibit so furnished.
** Furnished with this report.  In accordance with Rule 406T of Regulation S-T, the information in these exhibits shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.
18


 
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
 
 
 
 
 
 
AUTOBYTEL INC.
 
 
 
 
 
 
 
 
 Date: May 2, 2013
 
By:
/s/ Curtis E. DeWalt
 
 
 
 
 
Curtis E. DeWalt
 
 
 
 
 
Senior Vice President and Chief Financial Officer
 
 
 
 
 
(Duly Authorized Officer and Principal Financial Officer)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Date: May 2, 2013
 
By:
/s/ Wesley Ozima
 
 
 
 
 
Wesley Ozima
 
 
 
 
 
Vice President and Controller
 
 
 
 
 
(Principal Accounting Officer)
 
 

19


EXHIBIT INDEX


2.1‡
Asset Purchase Agreement dated as of  September 16, 2010, by and among Autotropolis, Inc., a Florida corporation, Cyber Ventures, Inc., a Florida corporation, William Ferriolo, Ian Bentley and the Ian Bentley Revocable Trust created U/A/D 3/1/2005, Autobytel Inc., a Delaware corporation, and Autobytel Acquisition Subsidiary, Inc., a Delaware corporation, which is incorporated herein by reference to Exhibit 2.1 of the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010 filed with the SEC on November 12, 2010 (SEC File No. 1-34761)
 
 
3.1
Fifth Amended and Restated Certificate of Incorporation of Autobytel Inc. (formerly Autobytel.com Inc. ("Autobytel" or the "Company")) certified by the Secretary of State of Delaware (filed December 14, 1998), as amended by Certificate of Amendment dated March 1, 1999, Second Certificate of Amendment of the Fifth Amended and Restated Certificate of Incorporation of Autobytel dated July 22, 1999, Third Certificate of Amendment of the Fifth Amended and Restated Certificate of Incorporation of Autobytel dated August 14, 2001, Certificate of Designation of Series A Junior Participating Preferred Stock dated July 30, 2004, and Amended Certificate of Designation of Series A Junior Participating Preferred Stock dated April 24, 2009, which is incorporated herein by reference to Exhibit 3.1 of the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009 filed with the SEC on April 24, 2009 (SEC File No. 000-22239) and as amended by the Fourth Certificate of Amendment of the Fifth Amended and Restated Certificate of Incorporation of Autobytel effective as of July 11, 2012, which is incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed with the SEC on July 12, 2012 (SEC File No. 1-34761)
 
 
3.2
Third Amended and Restated Bylaws of Autobytel dated April 27, 2011, which is incorporated herein by reference to Exhibit 3.1 of the Current Report on Form 8-K filed with the SEC on April 29, 2011 (SEC File No. 1-34761), as amended by  Amendment to Third Amended and Restated Bylaws of Autobytel dated September 13, 2012, which is incorporated herein by reference to Exhibit 3.1 of the Current Report on Form 8-K filed with the SEC on September 14, 2012 (SEC File No. 1-34761)
 
 
4.1
Form of Common Stock Certificate of Autobytel is incorporated herein by reference to Exhibit 4.1 of the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2001 filed with the SEC on November 14, 2001 (SEC File No. 000-22239)
 
 
4.2
Tax Benefit Preservation Plan, dated as of May 26, 2010, between Autobytel Inc. and Computershare Trust Company, N.A., as rights agent, together with the following exhibits thereto: Exhibit A – Form of Right Certificate; Exhibit B – Summary of Rights to Purchase Shares of Preferred Stock of Autobytel Inc. is incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on June 2, 2010 (SEC File No. 000-22239)
 
 
4.3
Certificate of Adjustment Under Section 11(m) of the Tax Benefit Preservation Plan dated July 12, 2012, is incorporated by reference to Exhibit 4.3 to the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2012 filed with the SEC on November 8, 2012 (SEC File No. 001-34761)
 
 
10.1*
Amended and Restated Employment Agreement dated as of April 24, 2013 between Autobytel and John J. Skocilic
 
 
10.2*
Amended and Restated Severance Agreement dated May 1, 2013 between Autobytel and John J. Skocilic
 
 
31.1*
Rule 13a-14(a)/15d-14(a) Certification by Principal Executive Officer
 
 
31.2*
Rule 13a-14(a)/15d-14(a) Certification by Principal Financial Officer
 
 
32.1*
Section 1350 Certification by Principal Executive Officer and Principal Financial Officer
 
 
101.INS**
XBRL Instance Document
 
 
101.SCH**
XBRL Taxonomy Extension Schema Document
 
 
101.CAL**
XBRL Taxonomy Calculation Linkbase Document
 
 
101.DEF**
XBRL Taxonomy Extension Definition Document
 
 
101.LAB**
XBRL Taxonomy Label Linkbase Document
 
 
101.PRE**
XBRL Taxonomy Presentation Linkbase Document

* Filed herewith

Certain schedules in this Exhibit have been omitted in accordance with Item 601(b)(2) of Regulation S-K.  Autobytel will furnish supplementally a copy of any omitted schedule or exhibit to the Securities and Exchange Commission upon request; provided, however, that Autobytel may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedule or exhibit so furnished.
** Furnished with this report.  In accordance with Rule 406T of Regulation S-T, the information in these exhibits shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.
 


20
Exhibit 10.1

Glenn E. Fuller
 Executive Vice President, Chief Legal and
Administrative Officer and Secretary
Direct Line:  949.862.1392
Facsimile:   949.797.0484
glennf@autobytel.com



April 24, 2013

John Skocilic

Re: Amended and Restated Employment Agreement


Dear John:

This agreement confirms, updates and restates the terms and conditions upon which you are employed by Autobytel Inc., a Delaware corporation ("Company"), as of May 1, 2013 ("Amendment Effective Date").
1.            Employment.
(a)            As of the Amendment Effective Date you are employed as the Company's Senior Vice President, Technology. In such capacity, you will report to the Company's President and Chief Executive Officer or such other senior executive officer as designated by the Company from time to time.
(b)            Your employment is at will and not for a specified term and may be terminated by the Company or you at any time, with or without cause or good reason and with or without prior, advance notice. This "at-will" employment status will remain in effect throughout the term of your employment by the Company and cannot be modified except by a written amendment to this offer letter that is executed by both parties (which in the case of the Company, must be executed by the Company's Chief Legal Officer) and that expressly negates the "at-will" employment status.
(c)            Upon any termination of your employment by either party, whether with or without cause or good reason, you will be entitled to receive only such severance benefits, if any, as are set forth in that certain Amended and Restated Severance Benefits Agreement dated as of May 1, 2013 between you and the Company ("Severance Benefits Agreement"), as the Severance Benefits Agreement may be further amended, modified or terminated by agreement of the parties.  Receipt of any such severance benefits is subject to your compliance with the terms and conditions of the Severance Benefits Agreement.  You agree to assist and cooperate (including, but not limited to, providing information to the Company and/or testifying in a proceeding) in the investigation and handling of any internal investigation, legislative matter, or actual or threatened court action, arbitration, administrative proceeding, or other claim involving any matter that arose during the period of your employment.  You shall be reimbursed for reasonable expenses actually incurred in the course of rendering such assistance and cooperation.  Your agreement to assist and cooperate shall not affect in any way the content of information or testimony provided by you.


John Skocilic
Amended and Restated Employment Agreement
Page 2


(d)            You will be governed by and will comply with Company policies and procedures, as such policies and procedures may exist from time to time, generally applicable to all Company employees, including the Company's Employee Handbook, Securities Trading Policy, Code of Conduct and Ethics for Employees, Officer and Directors, and Sexual Harassment Policy, copies of which you acknowledge have been provided to you.

2.            Compensation, Benefits and Expenses.
(a)            As compensation for the services to be rendered by you pursuant to this agreement, the Company hereby agrees to pay you at a Semi-Monthly Rate equal to Eight Thousand Five Hundred Forty-one Dollars and Sixty-seven Cents ($8,541.67).  The Semi-Monthly Rate shall be paid in accordance with the normal payroll practices of the Company.
(b)            You shall be entitled to participate in annual incentive compensation plans, if any, that may be adopted by the Company from time to time and that are afforded generally to persons employed by the Company at your position level (subject to the terms and conditions of any such annual incentive compensation plans). Should such an annual incentive compensation plan be adopted for any annual period, your target annual incentive compensation opportunity will be as established by the Company for each annual period, which may be up to 55% of your annualized rate (i.e., 24 X Semi-Monthly Rate) based on achievement of objectives specified by the Company each annual incentive compensation period (which may include Company-wide performance objectives, divisional or department performance objectives, individual performance objectives and/or subjective performance evaluations, allocated between and among such performance objectives and evaluations as the Company may determine in its sole discretion). Specific annual incentive compensation plan details, target incentive compensation opportunity and objectives for each annual compensation plan period will be set forth in written documents provided to you by the Company. Awards under annual incentive plans may be prorated for a variety of factors, including time employed by the Company during the year, adjustments in base compensation or target award percentage changes during the year, and unpaid leaves.  You understand that the Company's annual incentive compensation plans, their structure and components, specific target incentive compensation opportunities and objectives, and the achievement of objectives and payouts, if any, thereunder are subject to the sole discretion of the Company's Board of Directors, or a committee thereof.
(c)            You shall be entitled to participate in such ordinary and customary benefits plans afforded generally to persons employed by the Company at your level (subject to the terms and conditions of such benefit plans, your making of any required employee contributions required for your participation in such benefits, and your ability to qualify for and satisfy the requirements of such benefits plans).
(d)            You are solely responsible for the payment of any tax liability that may result from any compensation, payments or benefits that you receive from the Company. The Company shall have the right to deduct or withhold from the compensation due to you hereunder any and all sums required by applicable federal, state, local or other laws, rules or regulations, including, without limitation federal and state income taxes, social security or FICA taxes, and state unemployment taxes, now applicable or that may be enacted and become applicable during your employment by the Company.


John Skocilic
Amended and Restated Employment Agreement
Page 3


3.            Other Employment Documents.  You acknowledge and agree that you continue to be subject to and bound by the terms and conditions of the following agreements: (i) Employee Confidentiality Agreement dated as of June 4, 1998; and (ii) Mutual Agreement to Arbitrate dated as of July 30, 2010.
4.            Amendments and Waivers.  This agreement may be amended, modified, superseded, or cancelled, and the terms and conditions hereof may be waived, only by a written instrument signed by the parties hereto (which in the case of the Company, must be executed by the Company's Chief Legal Officer) or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power, or privilege hereunder will operate as a waiver thereof, nor will any waiver on the part of any party of any right hereunder, nor any single or partial exercise of any rights hereunder, preclude any other or further exercise thereof or the exercise of any other right hereunder.
5.            Notices.  Any notice required or permitted under this agreement will be considered to be effective in the case of (i) certified mail, when sent postage prepaid and addressed to the party for whom it is intended at its address of record, three (3) days after deposit in the mail; (ii) by courier or messenger service, upon receipt by recipient as indicated on the courier's receipt; or (iii) upon receipt of an Electronic Transmission by the party that is the intended recipient of the Electronic Transmission. The record addresses, facsimile numbers of record, and electronic mail addresses of record for you are set forth on the signature page to this agreement and for the Company as set forth in the letterhead above and may be changed from time to time by notice from the changing party to the other party pursuant to the provisions of this Section 5. For purposes of this Section 5, "Electronic Transmission" means a communication (i) delivered by facsimile, telecommunication or electronic mail when directed to the facsimile number of record or electronic mail address of record, respectively, which the intended recipient has provided to the other party for sending notices pursuant to this Agreement and (ii) that creates a record of delivery and receipt that is capable of retention, retrieval, and review, and that may thereafter be rendered into clearly legible tangible form.
6.            Choice of Law.  This agreement, its construction and the determination of any rights, duties or remedies of the parties arising out of or relating to this agreement will be governed by, enforced under and construed in accordance with the laws of the State of California, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws of such state.

7.            Severability.  Each term, covenant, condition, or provision of this agreement will be viewed as separate and distinct, and in the event that any such term, covenant, condition or provision will be deemed to be invalid or unenforceable, the arbitrator or court finding such invalidity or unenforceability will modify or reform this agreement to give as much effect as possible to the terms and provisions of this agreement.  Any term or provision which cannot be so modified or reformed will be deleted and the remaining terms and provisions will continue in full force and effect.

8.            Interpretation.  Every provision of this agreement is the result of full negotiations between the parties, both of whom have either been represented by counsel throughout or otherwise been given an opportunity to seek the aid of counsel. No provision of this agreement shall be construed in favor of or against any of the parties hereto by reason of the extent to which any such party or its counsel participated in the drafting thereof. Captions and headings of sections contained in this agreement are for convenience only and shall not control the meaning, effect, or construction of this agreement. Time periods used in this Agreement shall mean calendar periods unless otherwise expressly indicated.


John Skocilic
Amended and Restated Employment Agreement
Page 4

9.            Entire Agreement.  This agreement, together with the Company policies and procedures referenced above in Section 1(d) and the agreements referenced above in Sections 1(c) and 3, is intended to be the final, complete and exclusive agreement between the parties relating to your employment by the Company and all prior or contemporaneous understandings, representations and statements, oral or written, are merged herein.  Without limiting the generality of the forgoing, this agreement supersedes in its entirety your Employment Agreement dated as of June 4, 1998, as amended prior to this agreement.  No modification, waiver, amendment, discharge or change of this agreement shall be valid unless the same is in writing and signed by the party against which the enforcement thereof is or may be sought.

10.              Counterparts; Facsimile or PDF Signature.  This agreement may be executed in counterparts, each of which will be deemed an original hereof and all of which together will constitute one and the same instrument. This agreement may be executed by facsimile or PDF signature by either party and such signature shall be deemed binding for all purposes hereof, without delivery of an original signature being thereafter required.

Please confirm your understanding of, agreement to, and aceptance of the foregoing by signing and returning to the undersigned the duplicate copy of this offer letter enclosed herewith.
 
Autobytel Inc., a Delaware corporation
By: /s/ Glenn E. Fuller
Glenn E. Fuller
EVP, Chief Legal and Administrative
Officer and Secretary
Accepted and Agreed
as of te date
first written above:
/s/ John Skocilic
John Skocilic

Exhibit 10.2
AUTOBYTEL INC.
AMENDED AND RESTATED
SEVERANCE BENEFITS AGREEMENT

This Amended and Restated Severance Benefits Agreement ("Agreement") entered into effective as of May 1, 2013 ("Effective Date") between Autobytel Inc., a Delaware corporation ("Autobytel" or "Company"), and John Skocilic ("Employee").
Background
The Company and Employee have previously entered into an  Amended and Restated Severance Agreement dated as of July 30, 2010, as amended October 16, 2012, (collectively the "Prior Severance Agreement").  In connection with Employee's promotion as a Senior Vice President of the Company, Autobytel has determined that it is in its best interests to provide Employee with certain severance benefits to encourage Employee's continued employment with, and dedication to the business of, the Company.
In consideration of the foregoing and other good and valuable consideration, receipt of which is hereby acknowledged, the Parties hereby agree as follows.
1.            Definitions.  For purposes of this Agreement, the terms below that begin with initial capital letters within this Agreement shall have the specially defined meanings set forth below (unless the context clearly indicates a different meaning).
(a)            "409A Suspension Period" shall have the meaning set forth in Section 3.
 
(b)            "Arbitration Agreement" means that certain Mutual Agreement to Arbitrate dated as of July 30, 2010 entered into by and between the Company and Employee.
 
(c)            "Cause" shall mean the termination of the Employee's employment by the Company as a result of any one or more of the following:
(i)            any conviction of, or pleading of nolo contendre by, the Employee for any felony;
 
(ii)            any willful misconduct of the Employee which has a materially injurious effect on the business or reputation of the Company;
 
(iii)            the gross dishonesty of the Employee in any way that adversely affects the Company; or
 
(iv)            a material failure to consistently discharge Employee's employment duties to the Company which failure continues for thirty (30) days following written notice from the Company detailing the area or areas of such failure, other than such failure resulting from Employee's Disability.



For purposes of this definition of Cause, no act or failure to act, on the part of the Employee, shall be considered "willful" if it is done, or omitted to be done, by the Employee in good faith or with reasonable belief that Employee's action or omission was in the best interest of the Company.  Employee shall have the opportunity to cure any such acts or omissions (other than clauses (i)  and (iii) above) within thirty (30) days of the Employee's receipt of a written notice from the Company notifying Employee that, in the opinion of the Company, "Cause" exists to terminate Employee's employment.
(d)            "Change of Control" shall mean any of the following events:
(i)        When any "person" as defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d) and 14(d) thereof (including a "group" as defined in Section 13(d) of the Exchange Act, but excluding the Company, any Subsidiary or any employee benefit plan sponsored or maintained by the Company or any Subsidiary (including any trustee of such plan acting as trustee)), directly or indirectly, becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, as amended from time to time), of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities.

(ii)        When the individuals who, as of the Effective Date, constitute the Board ("Incumbent Board"), cease for any reason to constitute at least a majority of the Board; provided however, that any individual becoming a director subsequent to such date, whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall, for purposes of this section, be counted as a member of the Incumbent Board in determining whether the Incumbent Board constitutes a majority of the Board.

(iii)        Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another corporation (a "Business Combination"), in each case, unless, following such Business Combination:

(1)  all or substantially all of the individuals and entities who were the beneficial owners of the then outstanding shares of common stock of the Company and the beneficial owners of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of the then outstanding shares of common stock and the combined voting power of the then outstanding securities entitled to vote generally in the election of directors, respectively, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or indirectly or through one or more subsidiaries); and

(2)  no person (excluding any employee benefit plan or related trust of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, fifty percent (50%) or more of the then outstanding shares of common
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stock of the corporation resulting from such Business Combination or the combined voting power of such corporation except to the extent that such ownership existed prior to the Business Combination.

(iv) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

(e)            "COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act, as amended, and the rules and regulations promulgated thereunder.
 
(f)            "Code" shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.
 
(g)            "Company" means Autobytel, and upon any assignment to and assumption of this Agreement by any Successor Company, shall mean such Successor Company.
 
(h)            "Disability" shall mean the inability of the Employee to perform Employee's duties to the Company on account of physical or mental illness or incapacity for a period of one-hundred twenty (120) consecutive calendar days, or for a period of one hundred eighty (180) calendar days, whether or not consecutive, during any three hundred sixty-five (365) day period.
 
(i)            "Employee's Position" means Employee's position as the Senior Vice President, Technology of the Company.
 
(j)            "Employee's Primary Location" means Autobytel's headquarters located at 18872 MacArthur Boulevard, Suite 200, Irvine, California, 92612-1400.
 
(k)            "Good Reason" means any act, decision or omission by the Company that: (A) materially modifies, reduces, changes, or restricts Employee's base salary as in existence as of the Effective Date or as of the date prior to any such change, whichever is more beneficial for Employee at the time of the act, decision, or omission by the Company; (B) materially modifies, reduces, changes, or restricts the Employee's Health and Welfare Benefits as a whole as in existence as of the Effective Date hereof or as of the date prior to any such change, whichever are more beneficial for Employee at the time of the act, decision, or omission by the Company; (C) materially modifies, reduces, changes, or restricts the Employee's authority, duties, or responsibilities commensurate with the Employee's Position but excluding the effects of any reductions in force other than the Employee's own termination; (D) relocates the Employee's primary place of employment without Employee's consent from Employee's Primary Location to any other location in excess of a forty (40) mile radius from the Employee's Primary Location other than on a temporary basis or requires any such relocation as a condition to continued employment by Company; (E) constitutes a failure or refusal by any Company Successor to assume  this Agreement; or (F) involves or results in any material failure by the Company to comply with any provision of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of written notice thereof given by the Employee.  Notwithstanding the foregoing, no event shall constitute "Good Reason" unless (i) the Employee first provides written notice to the Company within ninety (90) days of the event(s) alleged to constitute Good Reason, with such notice specifying the grounds that are alleged to constitute Good Reason, and (ii) the Company fails to cure such a material
3



breach to the reasonable satisfaction of the Employee within thirty (30) days after Company's receipt of such written notice.
(l)            "Health and Welfare Benefits" means all Company medical, dental, vision, life and disability plans in which Employee participates.
 
(m)            "Separation from Service" or "Separates from Service" shall mean Employee's termination of employment, as determined in accordance with Treas. Reg. § 1.409A-1(h).  Employee shall be considered to have experienced a termination of employment when the facts and circumstances indicate that Employee and the Company reasonably anticipate that either (i) no further services will be performed for the Company after a certain date, or (ii) that the level of bona fide services Employee will perform for the Company after such date (whether as an employee or as an independent contractor) will permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed by Employee (whether as an employee or independent contractor) over the immediately preceding thirty-six (36) month period (or the full period of services to the Company if Employee has been providing services to the Company for less than thirty six (36) months).  If Employee is on military leave, sick leave, or other bona fide leave of absence, the employment relationship between Employee and the Company shall be treated as continuing intact, provided that the period of such leave does not exceed six months, or if longer, so long as Employee retains a right to reemployment with the Company under an applicable statute or by contract.  If the period of a military leave, sick leave, or other bona fide leave of absence exceeds six months and Employee does not retain a right to reemployment under an applicable statute or by contract, the employment relationship shall be considered to be terminated for purposes of this Agreement as of the first day immediately following the end of such six-month period.  In applying the provisions of this section, a leave of absence shall be considered a bona fide leave of absence only if there is a reasonable expectation that Employee will return to perform services for the Company.  For purposes of determining whether Employee has incurred a Separation from Service, the Company shall include the Company and any entity that would be considered a single employer with the Company under Code Section 414(b) or 414(c).
 
(n)            "Severance Period" shall equal twelve (12) months.
 
(o)            "Successor Company" means any successor to Autobytel or its assets by reason of any Change of Control.
 
(p)            "Termination Without Cause" means termination of Employee's employment with the Company (i) by the Company (a) for any reason other than (1) death, (2) Disability or (3) those reasons expressly set forth in the definition of "Cause," (b) for no reason at all, or (c) in connection with or as a result of a Change of Control; provided, however, that a termination of Employee's employment with the Company in connection with a Change of Control shall not constitute a Termination Without Cause if Employee is offered employment with the Successor Company under terms and conditions, including position, salary and other compensation, and benefits, that would not provide Employee the right to terminate Employee's employment for Good Reason.
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2.            Severance Benefits and Conditions.
 
(a)            In the event of (i) Termination Without Cause by the Company, or (ii) the termination of Employee's employment with the Company by Employee for Good Reason within 30 days following the earlier of (1) the Company's failure to cure within the 30-day period set forth in the definition of Good Reason, and (2) the Company's notice to Employee that it will not cure the event giving rise to such termination for Good Reason, then (A) Employee shall receive upon such termination a lump sum amount equal to the number of months constituting the Severance Period at the time of termination times the Employee's monthly base salary (determined as the Employee's highest monthly base salary paid to Employee while employed by the Company; base salary does not include any bonus, commissions or other incentive payments or compensation); (B) subject to Section 2(b) below, Employee shall be entitled to a continuation of all Health and Welfare Benefits for Employee and, if applicable, Employee's eligible dependents during the Severance Period at the time they would have been provided or paid had the Employee remained an employee of Company during the Severance Period and at the levels provided prior to the event giving rise to a termination; and (C) the Company shall make available to Employee career transition services at a level and with a provider selected by the Company in accordance with Section 2(g) below.
 
(b)            (i) With respect to Health and Welfare Benefits that are eligible for continuation coverage under COBRA, in the event the Company is unable to continue Employee's and Employee's eligible dependents' (assuming such dependents were covered by Autobytel at the time of termination) participation under the Company's then existing insurance policies for such Health and Welfare Benefits, Employee may elect to obtain coverage for such Health and Welfare Benefits either by (1) electing COBRA continuation benefits for Employee and Employee's eligible dependents; (2) obtaining individual coverage for Employee and Employee's eligible dependents (if Employee and Employee's eligible dependents qualify for individual coverage); or (3) electing coverage as eligible dependents under another person's group coverage (if Employee and Employee's eligible dependents qualify for such dependent coverage), or any combination of the foregoing alternatives. Employee may also initially elect COBRA continuation benefits and later change to individual coverage or dependent coverage for Employee or any eligible dependent of Employee, but Employee understands that if continuation of Health and Welfare Benefits under COBRA is not initially selected by Employee or is later terminated by Employee, Employee will not be able to return to continuation coverage under COBRA. The Company shall pay directly or reimburse to Employee the monthly premiums for the benefits or coverage selected by Employee, with such payment or reimbursement not to exceed the monthly premiums the Company would have paid assuming Employee elected continuation of benefits under COBRA.  The Company's obligation to pay or reimburse for the Health and Welfare Benefits covered by this Section 2(b)(i) shall terminate upon the earlier of (i) the end of the Severance Period; and (ii) Employee's employment by an employer that provides Employee and Employee's eligible dependents with group coverage substantially similar to the Health and Welfare Benefits provided to Employee and Employee's eligible dependents at the time of the termination of Employee's employment with the Company, provided that Employee and Employee's eligible dependents are eligible for participation in such group coverage.
 
(ii) With respect to Health and Welfare Benefits that are not eligible for continuation coverage under COBRA, in the event the Company is unable to continue Employee's participation under the Company's then existing insurance policies for such Health and Welfare
5



Benefits, Employee may elect to obtain coverage for such Health and Welfare Benefits either by (1) obtaining individual coverage for Employee (if Employee qualifies for individual coverage); or (2) electing coverage as an eligible dependent under another person's group coverage (if Employee qualifies for such dependent coverage), or any combination of the foregoing alternatives. The Company shall pay directly or reimburse to Employee the monthly premiums for the benefits or coverage selected by Employee, with such payment or reimbursement not to exceed the monthly premiums the Company paid for such Health and Welfare Benefits at the time of termination of Employee's employment with the Company.  The Company's obligation to pay or reimburse for the Health and Welfare Benefits covered by this Section 2(b)(ii) shall terminate upon the earlier of (i) the end of the Severance Period; and (ii) Employee's employment by an employer that provides Employee with group coverage substantially similar to the Health and Welfare Benefits provided to Employee at the time of the termination of Employee's employment with the Company, provided that Employee is eligible for participation in such group coverage. Employee acknowledges and agrees that the Company shall not be obligated to provide any Health and Welfare Benefits covered by this Section 2(b)(ii) for Employee if Employee does not qualify for coverage under the Company's existing insurance policies for such Health and Welfare Benefits, for individual coverage, or for dependent coverage.
(c)            The payments and benefits set forth in Sections 2(a) and 2(b) are conditioned upon and shall be provided to Employee only if (i) Employee has executed and delivered to the Company a Separation and Release Agreement in favor of the Company and Releasees, which agreement shall be substantially in the form attached hereto as Exhibit A ("Release") no later than the expiration of the applicable period of time allowed for Employee to consider the Release as set forth in Section 17 of the Release ("Release Consideration Period"); (ii) Employee has not revoked the Release prior to the expiration of the applicable revocation period set forth in Section 17 of the Release ("Release Revocation Period"); and (iii) the Release has become effective and non-revocable no later than the cumulative period of time represented by the sum of the maximum Release Consideration Period and the maximum Release Revocation Period. No payments or benefits set forth in Sections 2(a) or 2(b) shall be due or payable to, or provided to, Employee if the Release has not become effective and non-revocable in accordance with the requirements of this Section 2(c).
(d)            Upon satisfaction of the conditions set forth in Section 2(c), but subject to the last sentence of this Section 2(d), all payments under Section 2(a)(A) shall be made to Employee within five (5) business days after the Release becomes effective and non-revocable in accordance with its terms. In any case, the payment under Section 2(a)(A) shall be made no later than two and one-half months after the end of the calendar year in which Employee's Separation from Service occurs, provided that the Release shall have become effective and non-revocable in compliance with Section 2(c) prior to expiration of such two and one-half month period. If the period of time covered by the entire allowed Release Consideration Period, the entire Revocation Period and the entire five business day period described above in this Section 2(d) (considering such periods consecutively) begins in one calendar year and ends in the following calendar year, all payments under Section 2(a)(A) shall be made to Employee on the first business day of such following calendar year which is five (5) or more business days after the date on which the Release became effective and non-revocable in accordance with its terms.
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(e)            In addition to the payments and benefits under Sections 2(a) and 2(b), to the extent required by applicable law or the Company's incentive or other compensation plans applicable to Employee, if any, upon any termination of Employee's employment Employee shall receive (i) any amounts earned and due and owing to Employee as of the termination date with respect to any base salary, incentive compensation or commissions; and (ii) any other payments required by applicable law (including payments with respect to accrued and unused vacation time). Payments required under this Section 2(e) are not conditioned upon Employee's signing the Release and shall be made within the time period(s) required by applicable law.
(f)            All payments and benefits under this Section 2 are subject to legally required federal, state and local payroll deductions and withholdings.
(g)            To receive career transition services, Employee must contact the service provider no later than 30 days after the Release becomes effective.
(h)            Other than the payments and benefits provided for in this Section 2, Employee shall not be entitled to any additional payments or benefits from the Company resulting from a termination of Employee's employment with the Company.
3.            Taxes.  All payments made pursuant to this Agreement will be subject to withholding of applicable taxes. Notwithstanding the foregoing, and except as otherwise specifically provided elsewhere in this Agreement, Employee is solely responsible and liable for the satisfaction of any federal, state, province or local taxes that may arise with respect to this Agreement (including any taxes and interest arising under Section 409A of the Code).  Neither the Company nor any of its employees, directors, or service providers shall have any obligation whatsoever to pay such taxes or interest, to prevent Employee from incurring them, or to mitigate or protect Employee from any such tax or interest liabilities.  Notwithstanding anything in this Agreement to the contrary, if any amounts that become due under this Agreement on account of Employee's termination of employment constitute "nonqualified deferred compensation" within the meaning of Section 409A of the Code, payment of such amounts shall not commence until Employee incurs a Separation from Service.  If, at the time of Employee's Separation from Service under this Agreement, Employee is a "specified employee" (within the meaning of Section 409A of the Code), any amounts that constitute "nonqualified deferred compensation" within the meaning of Section 409A of the Code that become payable to Employee on account of Employee's Separation from Service (including any amounts payable pursuant to the preceding sentence) will not be paid until after the end of the sixth calendar month beginning after Employee's Separation from Service ("409A Suspension Period").  Within 14 calendar days after the end of the 409A Suspension Period, Employee shall be paid a lump sum payment, without interest, in cash equal to any payments delayed because of the preceding sentence.  Thereafter, Employee shall receive any remaining benefits as if there had not been an earlier delay.  With respect to the reimbursement of expenses to which Employee is entitled under this Agreement, if any, or the provision of in-kind benefits to Employee as specified under this Agreement, if any, such reimbursement of expenses or provision of in-kind benefits shall be subject to the following conditions:  (i) the expenses eligible for reimbursement or the amount of in-kind benefits provided in one taxable year shall not affect the expenses eligible for reimbursement or the amount of in-kind benefits provided in any other taxable year, except for any medical reimbursement arrangement providing for the reimbursement of expenses referred to in Section 105(b) of the Code, solely to the
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extent that the arrangement provides for a limit on the amount of expenses that may be reimbursed under such arrangement over some or all of the period in which the reimbursement arrangement remains in effect; (ii) the reimbursement of an eligible expense shall be made no later than the end of the calendar year after the calendar year in which such expense was incurred; (iii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit; and (iv) the right to reimbursement or provision of in-kind benefits shall not apply to any expenses incurred or benefits to be provided beyond the last day of the second taxable year following the year in which Employee's Separation from Service occurred.
4.            Arbitration.  Any controversy or claim arising out of, or related to, this Agreement, or the breach thereof, shall be governed by the terms of the Arbitration Agreement, which is incorporated herein by reference.
 
5.            Entire Agreement.  All oral or written agreements or representations express or implied, with respect to the subject matter of this Agreement are set forth in this Agreement.  This Agreement contains the entire integrated understanding between the parties hereto and supersedes any prior employment, severance, or change-in-control protective agreement or other agreement, plan or arrangement between the Company or any predecessor and Employee.  No provision of this Agreement shall be interpreted to mean that Employee is subject to receiving fewer benefits than those available to Employee without reference to this Agreement. The Parties acknowledge and agree that the Prior Severance Agreement is hereby terminated and shall have no further force or effect.
 
6.            Notices. Except as otherwise provided in this Agreement, any notice, approval, consent, waiver or other communication required or permitted to be given or to be served upon any person in connection with this Agreement shall be in writing.  Such notice shall be personally served, sent by fax or cable, or sent prepaid by either registered or certified mail with return receipt requested or Federal Express and shall be deemed given (i) if personally served or by Federal Express, when delivered to the person to whom such notice is addressed, (ii) if given by fax or cable, when sent, or (iii) if given by mail, two (2) business days following deposit in the United States mail.  Any notice given by fax or cable shall be confirmed in writing, by overnight mail or Federal Express within forty-eight (48) hours after being sent.  Such notices shall be addressed to the party to whom such notice is to be given at the party's address set forth below or as such party shall otherwise direct.
 
If to the Company:
Autobytel Inc.
18872 MacArthur Boulevard, Suite 200
Irvine, California, 92612-1400
Facsimile:  (949) 862-1323
                                                                                          Attn:  Chief Legal Officer

If to the Employee:
 To Employee's latest home address on file with the Company

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7.            No Waiver.  No waiver, by conduct or otherwise, by any party of any term, provision, or condition of this Agreement, shall be deemed or construed as a further or continuing waiver of any such term, provision, or condition nor as a waiver of a similar or dissimilar condition or provision at the same time or at any prior or subsequent time.
 
8.            Amendment to this Agreement.  No modification, waiver, amendment, discharge or change of this Agreement, shall be valid unless the same is in writing and signed by the party against whom enforcement of such modification, waiver amendment, discharge, or change is or may be sought.
 
9.            Non-Disclosure.  Unless required by applicable law, rule, regulation or order or to enforce this Agreement, Employee shall not disclose the existence of this Agreement or the underlying terms to any third party, including without limitation, any former, present or future employee of the Company, other than to Employee's immediate family who have a need to know such matters or to Employee's tax or legal advisors who have a need to know such matters.  If Employee does disclose this Agreement or any of its terms to any of Employee's immediate family or tax or legal advisors, then Employee will inform them that they also must keep the existence of this Agreement and its terms confidential.  The Company may disclose the existence or terms of the Agreement and its terms and may file this Agreement as an exhibit to its public filings if it is required to due so under applicable law, rule, regulation or order.
 
10.            Enforceability; Severability.  If any provision of this Agreement shall be invalid or unenforceable, in whole or in part, such provision shall be deemed to be modified or restricted to the extent and in the manner necessary to render the same valid and enforceable, or shall be deemed excised from this Agreement, as the case may require, and this Agreement shall be construed and enforced to the maximum extent permitted by law as if such provision had been originally incorporated herein as so modified or restricted, or as if such provision had not been originally incorporated herein, as the case may be.
 
11.            Governing Law.  This Agreement shall be construed and enforced in accordance with the laws of the State of California without giving effect to such State's choice of law rules.  This Agreement is deemed to be entered into entirely in the State of California.  This Agreement shall not be strictly construed for or against either party.
 
12.            No Third Party Beneficiaries.  Except as otherwise set forth in this Agreement, nothing contained in this Agreement is intended or shall be construed to create rights running to the benefit of any third party.
 
13.            Successors of the Company.  The rights and obligations of the Company under this Agreement shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Company, including any Successor Company.  This Agreement shall be assignable by the Company in the event of a merger or similar transaction in which the Company is not the surviving entity, or a sale of all or substantially all of the Company's assets.
 
14.            Rights Cumulative.  The rights under this Agreement, or by law or equity, shall be cumulative and may be exercised at any time and from time to time.  No failure by any party to exercise, and no delay in exercising, any rights shall be construed or deemed to be a waiver thereof, or
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shall any single or partial exercise by any party preclude any other or future exercise thereof or the exercise of any other right.
15.            No Right or Obligation of Employment.  Employee acknowledges and agrees that nothing in this Agreement shall confer upon Employee any right with respect to continuation of employment by the Company, nor shall it interfere in any way with Employee's right or the Company's right to terminate Employee's employment at any time, with or without Cause.
 
16.            Interpretation.  Every provision of this Agreement is the result of full negotiations between the parties, both of whom have either been represented by counsel throughout or otherwise been given an opportunity to seek the aid of counsel.  Each party hereto further agrees and acknowledges that it is sophisticated in legal affairs and has reviewed this Agreement in detail.  Accordingly, no provision of this Agreement shall be construed in favor of or against any of the parties hereto by reason of the extent to which any such party or its counsel participated in the drafting thereof. Captions and headings of sections contained in this Agreement are for convenience only and shall not control the meaning, effect, or construction of this Agreement. Time periods used in this Agreement shall mean calendar periods unless otherwise expressly indicated.
 
17.            Legal and Tax Advice.  Employee acknowledges that: (i) the Company has encouraged Employee to consult with an attorney and/or tax advisor of Employee's choosing (and at Employee's own cost and expense) in connection with this Agreement, and (ii) Employee is not relying upon the Company for, and the Company has not provided, legal or tax advice to Employee in connection with this Agreement.  It is the responsibility of Employee to seek independent tax and legal advice with regard to the tax treatment of this Agreement and the payments and benefits that may be made or provided under this Agreement and any other related matters. Employee acknowledges that Employee has had a reasonable opportunity to seek and consider advice from Employee's counsel and tax advisors.
 
18.            Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one instrument.  The parties agree that facsimile copies of signatures shall be deemed originals for all purposes hereof and that a party may produce such copies, without the need to produce original signatures, to prove the existence of this Agreement in any proceeding brought hereunder.


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IN WITNESS WHEREOF, the Company and Employee have executed and entered into this Agreement effective as of the date first shown above. 
AUTOBYTEL INC.
By: /s/ Glenn E. Fuller
Glenn E. Fuller
Executive Vice President, Chief Legal and
 Administrative Officer
EMPLOYEE
/s/ John Skocilic
John Skocilic


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EXHIBIT A

SEPARATION AND RELEASE AGREEMENT

It is hereby agreed by and between you, John Skocilic (for yourself, your spouse, family, agents and attorneys) (jointly, "You" or "Employee"), and Autobytel Inc., its predecessors, successors, affiliates, directors, employees, shareholders, fiduciaries, insurers, employees and agents (jointly, the "Company"), as follows:

1.    Separation of Employment. You acknowledge that your employment with the Company ended effective [_______], 201[__] ("Employment Termination Date"), and that You will perform no further duties, functions or services for the Company subsequent to the Employment Termination Date. You have resigned or hereby resign from all officer and director positions You held with the Company or any of its subsidiaries effective as of the Employment Termination Date. This Separation and Release Agreement ("Release") is entered into in connection with that certain Amended and Restated Severance Benefits Agreement dated effective as of May 1, 2013 by and between the Company and Employee ("Severance Benefits Agreement").

2.    Release Consideration. In exchange for your promises and obligations in this Release and the Severance Benefits Agreement, including the release of claims set forth below, if You sign and do not revoke this Release and this Release becomes effective, the Company will pay You the amounts, and will provide the benefits, due to You under the Severance Benefits Agreement, minus legally required federal, state and local payroll deductions and withholdings.  Payment of any monetary amount provided for in this Section 2 will be made within the time periods required by the Severance Benefits Agreement (except for payments or benefits that will be paid or provided over time as provided therein) and, if no time is specified, within 5 business days after this Release becomes effective.

3.    Acknowledgement of Receipt of Amounts Due. You acknowledge and agree that You have received all, and that the Company does not owe You any additional, payments, benefits or other compensation as a result of your employment with the Company or your separation from employment with the Company, including, but not limited to, wages, commissions, bonuses, vacation pay, severance pay, expenses, fees, or other compensation or payments of any kind or nature, other than those amounts or benefits, if any, payable or to be provided to You after the date hereof pursuant to the Severance Benefits Agreement after this Release becomes effective.

4.                  Return of Company Property.  You represent and warrant that You have returned to the Company any and all documents, software, equipment (including, but not limited to, computers and computer-related items), and all other materials or other things in your possession, custody, or control which are the property of the Company, including, but not limited to, Company identification, keys, computers, cell phones, and the like, wherever such items may have been located; as well as all copies (in whatever form thereof) of all materials relating to your employment, or obtained or created in the course of your employment with the Company. You hereby represent that, other than those materials You have returned to the Company pursuant to this Section 4, You have not copied or caused to be copied, and have not transferred or printed-out or caused to be transferred or printed-out, any software, computer disks, e-mails or other documents other than those documents generally available to the
1



public, or retained any other materials originating with or belonging to the Company.  You further represent that You have not retained in your possession, custody or control, any software, documents or other materials in machine or other readable form, which are the property of the Company, originated with the Company, or were obtained or created in the course of or relate to your employment with the Company.

5.    Confidentiality and Non-Solicitation/Interference.

(a) You shall keep confidential, and shall not hereafter use or disclose to any person, firm, corporation, governmental agency, or other entity, in whole or in part, at any time in the future, any trade secret, proprietary information, or confidential information of the Company, including, but not limited to, information relating to trade secrets, processes, methods, pricing strategies, customer lists, marketing plans, product introductions, advertising or promotional programs, sales, financial results, financial records and reports, regulatory matters and compliance, and other confidential matters, except as required by law and as necessary for compliance purposes.  These obligations are in addition to the obligations set forth in any confidentiality or non-disclosure agreement between You and the Company, including, without limitation, that certain Employee Confidentiality Agreement dated as of [_______], [__], which shall remain binding on You after the Employment Termination Date.

(b) Unless required by applicable law, rule, regulation or order or to enforce this Agreement, Employee shall not disclose the existence of the Severance Benefits Agreement or this Release or the underlying terms to any third party, including without limitation, any former, present or future employee of the Company, other than to Employee's immediate family who have a need to know such matters or to Employee's tax or legal advisors who have a need to know such matters.  If Employee does disclose this Release, the Severance Benefits Agreement or any of their respective terms to any of Employee's immediate family or tax or legal advisors, then Employee will inform them that they also must keep the existence of this Release, the Severance Benefits Agreement and their respective terms confidential.  The Company may disclose the existence or terms of this Release, the Severance Benefits Agreement and their respective terms and may file this Release and the Severance Benefits Agreement as exhibits to its public filings if it is required to due so under applicable law, rule, regulation or order.

(c) For a period of one (1) year immediately following this Release becoming effective, You agree that You will not interfere with Company's business by soliciting an employee to leave Company's employ, or by inducing a consultant or vendor to sever its relationship with Company.  You may not, at any time, use the Company's trade secrets to solicit business from any source, including the Company's customers or clients.  This Section 5(c) is not intended to, and shall not, prevent You from lawful competition with the Company.  You represent and warrant that You have not engaged in any of the foregoing activities prior to the effective date of this Release.

6.    Nondisparagement. You agree that neither You nor anyone acting on your behalf or at your direction will disparage, denigrate, defame, criticize, impugn or otherwise damage or assail the reputation or integrity of the Company to any third party and in particular to any current or former employee, officer, director, contractor, supplier, customer, or client of the Company or prospective or actual purchaser of the equity interests of the Company or its business or assets.
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7.    Unconditional General Release of Claims.

(a)                In consideration for the payment and benefits provided for in Section 2, and notwithstanding the provisions of Section 1542 of the Civil Code of California, You unconditionally release and forever discharge the Company, and the Company's current, former, and future controlling shareholders, subsidiaries, affiliates, related companies, predecessor companies, divisions, directors, trustees, officers, employees, agents, attorneys, successors, and assigns (and the current, former, and future controlling shareholders, directors, trustees, officers, employees, agents, and attorneys of any such subsidiaries, affiliates, related companies, predecessor companies, and divisions) (all of the foregoing released persons or entities being referred to herein as "Releasees"), from any and all claims, complaints, demands, actions, suits, causes of action, obligations, damages and liabilities of whatever kind or nature, whether known or unknown, based on any act, omission, event, occurrence, or nonoccurrence from the beginning of time to the date of execution of this Release, including, but not limited to, claims that arise out of or in any way relate to your employment or your separation from employment with the Company.

(b)                You acknowledge and agree that the foregoing unconditional and general release includes, but is not limited to, (i) any claims for salary, bonuses, commissions, equity, compensation (except as specified in this Agreement), wages, penalties, premiums, severance pay, vacation pay or any benefits under the Employee Retirement Income Security Act of 1974, as amended; (ii) any claims of harassment, retaliation or discrimination; (iii) any claims based on any federal, state or governmental constitution, statute, regulation or ordinance, including, without limitation, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act, the Americans With Disabilities Act, Section 1981 of the Civil Rights Act of 1866, the California Fair Employment and Housing Act, the California Family Rights Act, the Family and Medical Leave Act, the California Constitution, the California Labor Code, the California Industrial Welfare Commission Wage Orders, the California Government Code, the Worker Adjustment and Retraining Notification Act; (iv) whistleblower claims, claims of breach of implied or express contract, breach of promise, misrepresentation, negligence, fraud, estoppel, defamation, infliction of emotional distress, violation of public policy, wrongful or constructive discharge, or any other employment-related tort, and any claims for costs, fees, or other expenses, including attorneys' fees; and (v) any other aspect of your employment or the termination of your employment.

(c)                For the purpose of implementing a full and complete release, You expressly acknowledge and agree that this Release resolves all claims You may have against the Company and the Releasees as of the date of this Release, including but limited to claims that You did not know or suspect to exist in your favor at the time of the execution of this Release.  You expressly waive any and all rights which You may have under the provisions of Section 1542 of the California Civil Code or any similar state or federal statute.  Section 1542 provides as follows:
"A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor."
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(d)                This Release will not waive the Employee's rights to indemnification under the Company's certificate of incorporation or by-laws or, if applicable, any written agreement between the Company and the Employee, or under applicable law.

(e)                You hereby certify that You have not experienced a job‑related illness or injury for which You have not already filed a claim.

(f)                This general release does not waive or release rights or claims arising after You sign this Release.

8.    Covenant Not to Sue.  A "covenant not to sue" is a promise not to sue in court.  This covenant differs from a general release of claims in that, besides waiving and releasing the claims covered by this Release, You represent and warrant that You have not filed, and agree that You will not file, or cause to be filed or maintained, any judicial complaint, lawsuit or demand for arbitration involving any claims You have released in this Release, and You agree to withdraw any judicial complaints, lawsuits or demands for arbitration You have filed, or were filed on your behalf, prior to the effective date of this Release.  Still, You may sue to enforce this Release.  You agree if You breach this covenant, then You must pay the legal expenses incurred by incurred by any Releasee in defending against your suit, including reasonable attorneys' fees, or, at the Company's option, return everything paid to You under this Agreement.  In that event, the Company shall be excused from making any further payments or continuing any other benefits otherwise owed to You under paragraph 2 of this Agreement.  Furthermore, You give up all rights to individual damages in connection with any administrative or court proceeding with respect to your employment with or termination of employment from, the Company.  You also agree that if You are awarded money damages, You will assign your right and interest to such money damages (i) in connection with an administrative charge, to the relevant administrative agency; and (ii) in connection with a lawsuit or demand for arbitration, to the Company.

9.    Cooperation With Company. You agree to assist and cooperate (including, but not limited to, providing information to the Company and/or testifying truthfully in a proceeding) in the investigation and handling of any internal investigation, governmental matter, or actual or threatened court action, arbitration, administrative proceeding, or other claim involving any matter that arose during the period of your employment.  You shall be reimbursed for reasonable expenses actually incurred in the course of rendering such assistance and cooperation. Your agreement to assist and cooperate shall not affect in any way the content of information or testimony provided by You.

10.        No Reemployment. You acknowledge and agree that the Company has no obligation to employ You or offer You employment in the future and You shall have no recourse against the Company if it refuses to employ You or offer You employment.  If You do seek re-employment, then this Release shall constitute sufficient cause for the Company to refuse to re-employ You.  Notwithstanding the foregoing, the Company has the right to offer to re-employ You in the future if, in its sole discretion, it chooses to do so.
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11.        No Admission of Liability. This Release does not constitute an admission that the Company or any other Releasee has violated any law, rule, regulation, contractual right or any other duty or obligation.

12.        Severability. Should any provision of this Release be declared or be determined by any court or arbitrator to be illegal or invalid, the validity of the remaining parts, terms, or provisions shall not be affected, and said illegal or invalid part, term, or provision shall be deemed not to be part of this Release.

13.        Governing Law. This Release is made and entered into in the State of California and shall in all respects be interpreted, enforced, and governed under the law of that state, without reference to conflict of law provisions thereof.

14.        Interpretation.  The language of all parts in this Release shall be construed as a whole, according to fair meaning, and not strictly for or against any party. The captions and headings contained in this Agreement are for convenience only and shall not control the meaning, effect, or construction of this Agreement.

15.        Knowing and Voluntary Agreement.  You have carefully reviewed this Release and understand the terms and conditions it contains. By entering into this Release, You are giving up potentially valuable legal rights. You specifically acknowledge that You are waiving and releasing any rights You may have under the ADEA. You acknowledge that the consideration given for this waiver and release is in addition to anything of value to which You were already entitled. You acknowledge that You are signing this Release knowingly and voluntarily and intend to be bound legally by its terms.

16.        Entire Agreement. You hereby acknowledge that no promise or inducement has been offered to You, except as expressly stated in this Release and in the Severance Benefits Agreement, and You are relying upon none.  This Release and the Severance Benefits Agreement represent the entire agreement between You and the Company with respect to the subject matter hereof, and supersede any other written or oral understandings between the parties pertaining to the subject matter hereof and may only be amended or modified with the prior written consent of You and the Company.

17.        Period for Review and Consideration/Revocation Rights.

[Alternative 1 for Section 17 if Employee is NOT age 40 or over at time of separation from employment]

You understand that You have seven (7) days after this Release has been delivered to You by the Company to decide whether to sign this Release, although You may sign this Release at any time within the seven (7) day period.  If You do sign it, You also understand that You will have an additional three (3) days after the date You deliver this signed Release to the Company and to change your mind and revoke this Release, in which case a written notice of revocation must be delivered to the Company's Chief Legal Officer, Autobytel Inc., 18872 MacArthur Blvd. Suite 200, Irvine, California 92612-1400, on or before the third (3rd) day after your delivery of this signed Release to the
5



Company (or on the next business day if the third calendar day is not a business day).  You understand that this Release will not become effective or enforceable until after that three (3) day period has passed.  If You revoke this Release, this Release shall not be effective or enforceable as to any rights You may have under this Release.  In the event that You revoke this Release, You will not be entitled to the payments and benefits specified in Paragraph 2.

[Alternative 2 for Section 17 if Employee is age 40 or over at time of separation from employment, separation from employment is NOT in connection with a group separation, and ADEA Claims are being released]

You understand that You have twenty-one (21) days after this Release has been delivered to You by the Company to decide whether to sign this Release, although You may sign this Release at any time within the twenty-one (21) day period.  If You do sign it, You also understand that You will have an additional seven (7) days after the date You deliver this signed Release to the Company and to change your mind and revoke this Release, in which case a written notice of revocation must be delivered to the Company's Chief Legal Officer, Autobytel Inc., 18872 MacArthur Blvd. Suite 200, Irvine, California 92612-1400, on or before the seventh (7th) day after your delivery of this signed Release to the Company (or on the next business day if the seventh calendar day is not a business day).  You understand that this Release will not become effective or enforceable until after that seven (7) day period has passed.  If You revoke this Release, this Release shall not be effective or enforceable as to any rights You may have under this Release.  In the event that You revoke this Release, You will not be entitled to the payments and benefits specified in Paragraph 2.

[Alternative 3 for Section 17 if Employee is age 40 or over at time of separation from employment, separation from employment IS in connection with a group termination, and ADEA Claims are being released]
(a)            You understand that You have forty-five (45) days after this Release has been delivered to You by the Company to decide whether to sign this Release, although You may sign this Release at any time within the forty-five (45) day period.  If You do sign it, You also understand that You will have an additional seven (7) days after You sign to change your mind and revoke the Agreement, in which case a written notice of revocation must be delivered to the Company's Chief Legal Officer, Autobytel Inc., 18872 MacArthur Blvd. Suite 200, Irvine, California 92612-1400, on or before the seventh (7th) day after your delivery of this signed Release to the Company (or on the next business day if the seventh calendar day is not a business day).  You understand that this Release will not become effective or enforceable until after that seven (7) day period has passed.  If You revoke this Release, this Release shall not be effective or enforceable as to any rights You may have under this Release.  In the event that You revoke this Release, You will not be entitled to the payments and benefits specified in Paragraph 2.
(b)            You acknowledge that You have received the group information of employees included in the Company's ____________ group termination program, the eligibility factors for participation in the program, and the time limits for participation in the program.  You also acknowledge that You have received lists of the ages and job titles of employees eligible or selected for the program and employees not eligible or selected for the group termination program.  This information is set forth on Appendix A attached hereto and incorporated herein by reference.
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18.        Advice of Attorney and Tax Advisor.  Employee acknowledges that: (i) the Company has advised Employee to consult with an attorney and/or tax advisor of Employee's choosing (and at Employee's own cost and expense) before executing this Release, and (ii) Employee is not relying upon the Company for, and the Company has not provided, legal or tax advice to Employee in connection with this Release.  It is the responsibility of Employee to seek independent tax and legal advice with regard to the tax treatment of this Release and the payments and benefits that may be made or provided under this Release and any other related matters. Employee acknowledges that Employee has had a reasonable opportunity to seek and consider advice from Employee's attorney and tax advisors.


PLEASE READ CAREFULLY.  THIS RELEASE INCLUDES A GENERAL RELEASE OF ALL CLAIMS, KNOWN AND UNKNOWN. YOU MAY NOT MAKE ANY CHANGES TO THE TERMS OF THIS RELEASE THAT ARE NOT AGREED UPON BY THE COMPANY IN WRITING. ANY CHANGES SHALL CONSTITUTE A REJECTION OF THIS RELEASE BY EMPLOYEE.



Dated: ___________________, 201_ _______________
John Skocilic
Dated: ___________________, 201_ AUTOBYTEL INC.
By: _______________
[Officer's Name]
[Title]

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Exhibit 31.1
CERTIFICATION
I, Jeffrey H. Coats, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Autobytel Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 2, 2013
 
31
 
 
 
 
 
 
/s/ Jeffrey H. Coats
 
 
Jeffrey H. Coats
 
 
President and Chief Executive Officer
 
Exhibit 31.2
CERTIFICATION
I, Curtis E. DeWalt, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Autobytel Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 2, 2013
 
 
 
 
 
 
 
 
/s/ Curtis E. DeWalt
 
 
Curtis E. DeWalt,
 
 
Senior Vice President and
Chief Financial Officer
 
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Autobytel Inc. (the "Company") on Form 10-Q for the period ended March 31, 2013 (the "Report"), we, Jeffrey H. Coats, President and Chief Executive Officer of the Company, and Curtis E. DeWalt, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
 
 
 
 
 
 
 
 
/s/ Jeffrey H. Coats
 
 
Jeffrey H. Coats
 
 
President and Chief Executive Officer
 
 
May 2, 2013
 
 
 
 
 
 
 
 
 
/s/ Curtis E. DeWalt
 
 
Curtis E. DeWalt
 
 
Senior Vice President and
 
 
Chief Financial Officer
 
 
May 2, 2013
 
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to Autobytel Inc. and will be retained by Autobytel Inc. and furnished to the Securities and Exchange Commission or its staff upon request.