SEC Connect
 

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
SCHEDULE 14A
 
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. 1)
 
 
 
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
 
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Preliminary Proxy Statement
 
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
☐ 
Soliciting Material Pursuant to § 240.14a-12
  
Autobytel Inc.
(Name of Registrant as Specified In Its Charter)
 
__________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
 
 
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EXPLANATORY NOTE
 
This definitive revised proxy statement of Autobytel Inc. (the “Company”) for the Annual Meeting of Stockholders amends and restates the definitive proxy statement of the Company that was filed with the Securities and Exchange Commission on April 28, 2017 (the “Original Filing”) to correct certain imaging errors that occurred under the caption “Terms of Stockholder Agreement – Standstill Provision” on page 12. In the Original Filing, our service provider experienced an error in its software which caused the omission of certain text in the transmitted document. The service provider has acknowledged its responsibility for these errors. The sole purpose of filing this definitive revised proxy statement is to correct those errors. No other changes have been made to the Original Filing.  These errors will not appear in any copy of the definitive revised proxy statement sent to stockholders.
 
 
 
 
 
 
 
 
 
 
April 28, 2017
 
Dear Fellow Stockholders,
 
2016 was another banner year for Autobytel, highlighted by record revenues and our ongoing commitment to provide high-quality products for our dealer and OEM customers. This commitment was further reflected by our increased investment in internal-lead generation capabilities and new traffic sources, which we expect will result in accelerated growth of our clicks and leads products. In 2016, we also rolled out the new beta version of our usedcars.com site and completed the integration of the Dealix and AutoWeb acquisitions from 2015, each of which brought us very important strategic assets.
 
Our acquisition of AutoWeb in October 2015 provided us with additional talent, cost-effective technology and development resources. More importantly, AutoWeb brought us a fast-growing, advertising-related click product that has strengthened our position in the automotive digital landscape. This high-growth product has also exposed Autobytel to the much larger search and pay-per-click auto market.
 
Our click product continues to grow at a very strong rate, with revenues up more than 300% in 2016. We also experienced approximately 98% customer retention, further validating the exceptional quality of its high-intent consumer traffic. We have been very methodical in our rollout of this product, having only introduced it to a small number of our customers thus far. However, we plan to make it available to many more of our thousands of dealer and OEM customers in 2017.
 
When we acquired Dealix in May 2015, we added an extensive network of dealers and bolstered our used car practice with Dealix' usedcars.com consumer-facing website. This site represents the core of our nascent used car leads and used car clicks business. In fact, the used car industry represents less than 10% of our revenues today even though the volume of annual used car sales in the U.S. is generally 2 to 3 times that of new car sales.
 
During the third quarter of 2016, we launched a new beta version of usedcars.com with fully responsive technology and mobile-friendly application. We remain very excited about the strength of the usedcars.com domain and expect our continued investment will make it the premier used vehicle destination for consumers, providing an even stronger growth path in the months and years ahead.
 
In the 2016 third quarter, we also began increasing our investment in traffic acquisition to bolster our leads business with high-quality, in-market consumers, as well as increase the volume of consumers to our click product. The result of this investment was reflected by our 16% sequential increase in clicks during the fourth quarter of 2016 despite the typical seasonal headwinds. And because of our ongoing commitment to lead quality, we are continuing to focus on enhanced methodologies to increase meaningfully the mix of internally-generated leads from the current 80% level, while only utilizing volume from a small number of trusted suppliers who share our high standard of quality.
 
At the end of the 2016 fourth quarter, we divested our specialty finance leads product. This divestiture enables us to further dedicate time and resources to our core vehicle leads and fast-growing click products for both new and used vehicles.
 
Our overall market presence remained strong in 2016 as we estimate that sales from consumers submitting leads through Autobytel’s network accounted for approximately 5% of all new light vehicle retail sales in the U.S. and approximately 2% of all used car sales. We also expanded our leads program with nearly every OEM on our platform and continue to deliver leads to all major OEMs, with the exception of one luxury brand that has yet to launch a leads program with its dealers.
 
Accounting for leads that we deliver to OEMs, we're delivering leads to approximately 22,000 dealer franchises, which includes all of our direct retail dealers. We believe these metrics illustrate the breadth of our dealer footprint and our expanding influence in the automotive industry.
 
We expect 2017 to be a year of growth and continued investment for Autobytel. Specifically, we will focus on investments in technology, including investment in our consumer acquisition technology, the AutoWeb ad platform, and our consumer facing websites – which include car.com, autoweb.com, Autobytel.com and usedcars.com. We will also maintain our keen focus on providing our dealer and OEM customers with high-quality, high-intent car buyers. Finally, we remain committed to helping our customers sell more cars and trucks while simplifying the consumer’s path to purchase – be it through new or used car leads, clicks, or one of our many value-added product offerings.
 
 
 
 
On behalf of our board of directors and management team, I would like to extend our deepest appreciation to our hard-working employees who helped make 2016 an exceptional year for Autobytel, as well as express gratitude for the continued support of our loyal stockholders and customers.
 
Sincerely,
Jeffrey H. Coats
President and Chief Executive Officer
 
This letter contains forward-looking statements. These statements are based on Autobytel’s current expectations, assumptions, estimates and projections about the company’s business and industry, and involve known and unknown risks, uncertainties and other factors that may cause the company’s or the company’s industry’s results, levels of activity, performance or achievement to be materially different from any future results, levels of activity, performance or achievements expressed or implied in or contemplated by the forward-looking statements. Words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “may,” “should,” “estimate,” “predict,” “guidance,” “potential,” “continue,” “goal,” “objective” or the negative of those terms or other similar expressions, identify forward-looking statements. These forward-looking statements include, but are not limited to, (i) the company’s expectations with respect to the usedcars.com website; and (ii) the company’s plans and expectations with respect to 2017. Autobytel’s actual results and the timing of events may differ significantly from those discussed in the forward-looking statements as a result of various factors, many of which are beyond the company’s control, including but not limited to, Autobytel’s ability to integrate successfully Dealix and AutoWeb, and those factors discussed in the company’s annual and quarterly reports filed with the Securities and Exchange Commission under the caption “Risk Factors.”  Because of these factors, risks and uncertainties, we caution against placing undue reliance on forward-looking statements. Statements regarding past performance and not be indicative of future results. Except to the extent as may be required by law, Autobytel undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date of this letter.
 
 
 
 
 
 
AUTOBYTEL INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
 
To Be Held on June 22, 2017
 
TO OUR STOCKHOLDERS:
 
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (“Annual Meeting”) of Autobytel Inc., a Delaware corporation (“Autobytel” or “Company”), will be held at the Company’s offices at 18872 MacArthur Boulevard, Suite 200, Irvine, California 92612-1400, on Thursday, June 22, 2017, at 10:00 a.m. Pacific Time, for the following purposes:
 
1.   
To elect three (3) Class I Directors (“Nomination and Election of Directors Proposal”);
 
2.   
To approve the issuance of shares of the Company’s common stock, $0.001 par value per share, upon conversion of the Company’s Series B Junior Participating Convertible Preferred Stock, $0.001 par value per share (“Series B Preferred Stock Conversion Proposal”);
 
3.   
To approve the extension of and amendments to the Autobytel Inc. Tax Benefit Preservation Plan (“Tax Benefit Preservation Plan Proposal”);
 
4.   
To hold an advisory vote on the compensation of the Company’s named executive officers (“Say-on-Pay Proposal”);
 
5.   
To ratify the appointment, by the Company’s Audit Committee, of Moss Adams LLP as the Company’s independent registered public accounting firm for 2017 (“Accounting Firm Ratification Proposal”); and
 
6.   
To transact such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof.
 
 At the Annual Meeting, the Board of Directors (“Board”) intends to present Jeffrey H. Coats, Matías de Tezanos and Jeffrey M. Stibel as nominees for election to the Board.
 
The Board has fixed the close of business on April 28, 2017 as the record date for the determination of the holders of record of the Company’s common stock entitled to notice of, and to vote at, the Annual Meeting.
 
A list of stockholders entitled to vote at the Annual Meeting will be open for examination by any stockholder for any purpose germane to the meeting during ordinary business hours for a period of 10 days prior to the Annual Meeting at the offices of Autobytel, 18872 MacArthur Boulevard, Suite 200, Irvine, California 92612-1400, and will also be available for examination by any stockholder present at the Annual Meeting until its adjournment.
 
 
 
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PLEASE READ CAREFULLY THE ACCOMPANYING PROXY STATEMENT.  AUTOBYTEL INVITES ALL STOCKHOLDERS TO ATTEND THE ANNUAL MEETING.  TO ENSURE THAT YOUR SHARES WILL BE VOTED AT THE ANNUAL MEETING, PLEASE COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
 
 
 
 
By Order of the Board of Directors
 
Jeffrey H. Coats
President and Chief Executive Officer
Irvine, California
April 28, 2017 
 
IMPORTANT
 
YOUR VOTE IS IMPORTANT.  WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY CARD AND PROMPTLY RETURN IT IN THE ENVELOPE PROVIDED TO VOTE PROCESSING, C/O BROADRIDGE, 51 MERCEDES WAY, EDGEWOOD, NEW YORK 11717, TO BE RECEIVED NO LATER THAN 11:59 P.M. EASTERN TIME ON THE DAY BEFORE THE ANNUAL MEETING.  IN ORDER TO AVOID THE ADDITIONAL EXPENSE TO AUTOBYTEL OF FURTHER SOLICITATION, THE COMPANY ASKS YOUR COOPERATION IN MAILING IN YOUR PROXY CARD PROMPTLY. PRIOR TO THE ANNUAL MEETING, STOCKHOLDERS MAY ALSO PROVIDE VOTING INSTRUCTIONS USING THE INTERNET AT WWW.PROXYVOTE.COM OR BY CALLING 1.800.690.6903 AS DESCRIBED IN THE PROXY STATEMENT AND ACCOMPANYING PROXY CARD. THE CUTOFF TIME FOR PROVIDING VOTING INSTRUCTIONS USING THE INTERNET OR BY CALLING IS 11:59 P.M. EASTERN TIME THE DAY BEFORE THE DATE OF THE ANNUAL MEETING.
 
 
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PROXY STATEMENT
___________________________ 
 
Autobytel Inc.
18872 MacArthur Boulevard, Suite 200
Irvine, California 92612-1400
 
  _____________________________
 
Annual Meeting
To Be Held on June 22, 2017
 
  ______________________________
 
The Annual Meeting
 
The enclosed proxy is solicited by and on behalf of the Board of Directors (“Board”) of Autobytel Inc., a Delaware corporation (“Autobytel” or “Company”), for use at Autobytel’s 2017 Annual Meeting of Stockholders (“Annual Meeting”) to be held on Thursday, June 22, 2017 at 10:00 a.m. Pacific Time, at the Company’s offices located at 18872 MacArthur Boulevard, Suite 200, Irvine, California 92612-1400, and at any and all adjournments or postponements thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders.
 
This Proxy Statement of Autobytel is being mailed on or about May 5, 2017 to each stockholder of record as of the close of business on April 28, 2017.
 
Record Date and Outstanding Shares
 
The Board has fixed the close of business on April 28, 2017 as the record date for the Annual Meeting (“Record Date”).  Only holders of record of Autobytel’s common stock, $0.001 par value per share (“Common Stock”), at the close of business on the Record Date, are entitled to notice of, and to vote at, the Annual Meeting.  As of the close of business on the Record Date, there were 11,071,584 shares of Common Stock outstanding and entitled to vote.
 
Quorum and Voting
 
Quorum.  The holders of record of a majority in voting power of the shares of stock of the Company issued and outstanding and entitled to be voted, present in person or by proxy, will constitute a quorum for the transaction of business at the Annual Meeting or any adjournment or postponement thereof.  Shares not present in person or by proxy at the Annual Meeting will not be counted for purposes of determining a quorum at the Annual Meeting.  In the event there are not sufficient shares present to establish a quorum or to approve proposals at the time of the Annual Meeting, the Annual Meeting may be adjourned in order to permit further solicitation of proxies by the Company.
 
 Vote Required.  Holders of Common Stock are entitled to one vote for each share held as of the Record Date on all matters to be voted on at the Annual Meeting. The Company’s Sixth Amended and Restated Bylaws (“Bylaws”) provide that, except as otherwise provided in the Company’s Fifth Amended and Restated Certificate of Incorporation, as amended (“Certificate of Incorporation”), the Bylaws, the rules or regulations of any stock exchange applicable to the Company or by applicable law or regulation, all matters will be decided by the vote of a majority in voting power of the shares present in person or by proxy and entitled to vote at the Annual Meeting and on the matter. For Proposal 1 (Nomination and Election of Directors Proposal), the Bylaws provide that the persons receiving the greatest number of votes, up to the number of directors then to be elected, will be the persons elected.  A majority of the votes cast at the Annual Meeting on Proposal 2 (Series B Preferred Stock Conversion Proposal) is required to approve Proposal 2.  The affirmative vote of a majority in voting power of the shares present in person or by proxy and entitled to vote at the Annual Meeting and on such proposal is required to approve Proposal 3 (Tax Benefit Preservation Plan Proposal), Proposal 4 (Say-on-Pay Proposal), and Proposal 5 (Accounting Firm Ratification Proposal).   Proposal 4 is non-binding and advisory. None of the proposals are contingent upon the approval of any other proposal.
 
 
 
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Abstentions.  Abstentions will be counted for purposes of determining a quorum at the Annual Meeting.  An abstention for any proposal, other than Proposal 1 (Nomination and Election of Directors Proposal) and Proposal 2 (Series B Preferred Stock Conversion Proposal), will have the same effect as a vote against such proposal.  As to Proposal 1, because the number of nominees is equal to the number of directors being elected at the Annual Meeting, abstentions will not affect the election of the nominees to the Board as long as each nominee receives at least one vote in favor of the nominee’s election. As to Proposal 2, abstentions will not be counted as votes cast with respect to Proposal 2 and will not affect the outcome of the proposal.
 
Broker Discretionary Voting.  If your shares are held in a brokerage account, by a bank or other nominee, you are considered the beneficial owner of shares held in “street name,” and the proxy materials are being sent to you by your broker, bank, or other nominee who is considered, with respect to those shares, the stockholder of record.  As the beneficial owner, you have the right to direct your broker, bank, or other nominee how to vote.  If you do not give instructions to your brokerage firm or bank, it will still be able to vote your shares with respect to “discretionary” proposals, but will not be allowed to vote your shares with respect to “non-discretionary” proposals.  The Company expects that Proposal 5 (Accounting Firm Ratification Proposal) will be considered to be a discretionary proposal on which banks and brokerage firms may vote.  The Company expects that all other proposals being presented to stockholders at the Annual Meeting will be considered to be non-discretionary items on which banks and brokerage firms may not vote.  Therefore, if you do not instruct your broker or bank regarding how you would like your shares to be voted, your bank or brokerage firm will not be able to vote on your behalf with respect to these proposals.  In the case of these non-discretionary items, the shares will be treated as “broker non-votes.” Broker non-votes are shares that are held in “street name” by a bank or brokerage firm that indicates on its proxy that it does not have discretionary authority to vote on a particular matter.  Your failure to give instructions to your bank or broker will not: (i) affect the outcome of Proposal 1 as long as a nominee receives at least one vote in favor of the nominee’s election; (ii) affect the outcome of Proposal 2 because this proposal requires the affirmative vote of a majority of the votes cast on Proposal 2, and broker non-votes would not be deemed cast; or (iii) affect the outcomes of Proposals 3, 4, or 5 because these proposals require the affirmative vote of a majority in voting power of the shares present in person or by proxy and entitled to vote at the Annual Meeting and on these proposals, and broker non-votes will not be deemed “entitled to vote on the proposal” and therefore are not counted in the vote for these proposals.
 
Expenses of Proxy Solicitation
 
This solicitation is being made by the Company. Officers, directors, and regular employees of Autobytel may solicit proxies in person or by regular mail, electronic mail, facsimile transmission, or personal calls.  These persons will receive no additional compensation for solicitation of proxies but may be reimbursed for reasonable out-of-pocket expenses.  In addition, Autobytel has retained MacKenzie Partners, Inc. to act as a proxy solicitor in conjunction with the Annual Meeting.  The estimated fees and costs for those proxy solicitation services are $6,500 plus reasonable disbursements.
 
Autobytel will pay all of the expenses of soliciting proxies to be voted at the Annual Meeting.  Banks, brokerage firms and other custodians, nominees or fiduciaries will be requested to forward soliciting material to their principals and to obtain authorization for the execution of proxies, and will be reimbursed for their reasonable out-of-pocket expenses incurred in that regard.
 
Voting of Proxies
 
Shares may be voted by completing, dating, and signing the accompanying proxy card and promptly returning it in the enclosed envelope. Stockholders may provide voting instructions for voting of their proxies using the Internet at www.proxyvote.com or by calling 1.800.690.6903. Providing voting instructions using the Internet or by calling requires stockholders to input the Control Number located on their proxy cards.  The cutoff time for providing voting instructions via the Internet or by calling is 11:59 p.m. Eastern Time the day before the date of the Annual Meeting (“Voting Instructions Cutoff Time”).
 
 
 
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All properly signed proxies received prior to the vote at the Annual Meeting that are not properly revoked prior to the vote will be voted at the Annual Meeting according to the instructions indicated on the proxies or, if no direction is indicated, such proxies will be voted “FOR” Proposal 1 (Nomination and Election of Directors Proposal); “FOR” Proposal 2 (Series B Preferred Stock Conversion Proposal); “FOR” Proposal 3 (Tax Benefit Preservation Plan Proposal); “FOR” Proposal 4 (Say-on-Pay Proposal); and “FOR” Proposal 5 (Accounting Firm Ratification Proposal).  The Board does not presently intend to present any other matter for action at the Annual Meeting and no stockholder has given timely notice in accordance with the Bylaws of any matter that it intends to be brought before the meeting.  If any other matters are properly brought before the Annual Meeting, the persons named in the proxies will have discretion to vote on those matters in accordance with their best judgment.
 
Revocability of Proxy
 
If you are the holder of record for your shares, you may revoke your proxy at any time before it is exercised at the Annual Meeting by taking either of the following actions: (i) delivering to the Company’s Secretary a revocation of the proxy or a proxy relating to the same shares and bearing a later date prior to the vote at the Annual Meeting; or (ii) attending the Annual Meeting and voting in person, although attendance at the Annual Meeting will not, by itself, revoke a proxy. Stockholders may also revoke a prior proxy by providing later voting instructions for voting of a later proxy prior to the Voting Instructions Cutoff Time.
 
Recommendation of the Board of Directors
 
The Board of Directors of Autobytel recommends that Autobytel stockholders vote “FOR” the election of Messrs. Jeffrey H. Coats, Matías de Tezanos, and Jeffrey M. Stibel as Class I Directors under Proposal 1 (Nomination and Election of Directors Proposal); “FOR” Proposal 2 (Series B Preferred Stock Conversion Proposal); “FOR” Proposal 3 (Tax Benefit Preservation Plan Proposal); “FOR” Proposal 4 (Say-on-Pay Proposal); and “FOR” Proposal 5 (Accounting Firm Ratification Proposal).
 
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL MEETING, PLEASE COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.  PRIOR TO THE VOTING INSTRUCTIONS CUTOFF TIME, STOCKHOLDERS MAY ALSO PROVIDE VOTING INSTRUCTIONS USING THE INTERNET AT WWW.PROXYVOTE.COM OR BY CALLING 1.800.690.6903 AS DESCRIBED IN THIS PROXY STATEMENT AND ACCOMPANYING PROXY CARD.
 
A copy of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 accompanies this Proxy Statement.  If requested, Autobytel will furnish you with a copy of any exhibit listed on the exhibit index to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 upon payment of a reasonable copy fee.
 
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING TO BE HELD ON JUNE 22, 2017:  Copies of the Notice of Annual Meeting of Stockholders, Letter to Stockholders, this Proxy Statement, the form of Proxy Card and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 are available online at http://www.autobytel.com/proxymaterials.  Stockholders wishing to attend the Annual Meeting may obtain directions by calling the Company at 949.862.1390.
 
 
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PROPOSAL 1
NOMINATION AND ELECTION OF DIRECTORS
 
Nominees for Class I Directors
 
Mr. Jeffrey H. Coats, Mr. Matías de Tezanos, and Mr. Jeffrey M. Stibel are the Board’s nominees as Class I Directors for election at the Annual Meeting.  The Board made these nominations at the recommendation of the Board’s Corporate Governance and Nominations Committee.  A Class I Director will hold office until the 2020 Annual Meeting of Stockholders and until that director’s successor is duly qualified and elected.
 
Jeffrey H. Coats.   Mr. Coats has served as a director of Autobytel since August 1996 and was appointed as the Company’s President and Chief Executive Officer on December 11, 2008.  Since August 2001, Mr. Coats has also been Managing Director of Maverick Associates LLC, a financial consulting and investment company.  From July 1999 to July 2001, Mr. Coats was a Founder and Managing Director of TH Lee Global Internet Managers, L.P., a fund manager focused on making equity investments in e-commerce and Internet-related companies globally.  Mr. Coats remains a limited partner of the fund.  Mr. Coats served as Managing Director of GE Equity, Inc., a wholly-owned subsidiary of General Electric Capital Corporation, from April 1996 to July 1999. Mr. Coats holds a B.B.A. Degree in Finance from the University of Georgia and a M.B.A. in International Management from the American Graduate School of International Management.  Mr. Coats’ experience in venture and private equity, banking, executive management and capital markets led the Board to conclude that Mr. Coats should serve as one of the Company’s directors.
 
Matías de Tezanos.   Mr. de Tezanos has served as a director of Autobytel since October 1, 2015 and as the Company’s Chief Strategy Officer from October 1, 2015 to February 13, 2017. From October 1, 2013 to October 1, 2015, Mr. de Tezanos was a director and chief executive officer of AutoWeb, Inc., a Delaware corporation (“AutoWeb”), an internet-based, pay-per-click advertising marketplace for the automotive industry, prior to its acquisition by Autobytel as of October 1, 2015. Mr. de Tezanos is a co-founder, director and the Chief Executive Officer of People F, Inc., a British Virgin Islands business company (“PeopleFund”), a holding company that is focused on investments in technology, internet and media, and a co-founder of, and currently serves as co-managing director and chief executive officer of, PF Holding, Inc., a British Virgin Islands business company (“PF Holding”), a holding company that is focused on investments in technology, internet and media affiliated with PeopleFund. Mr. de Tezanos also serves as president and a director of PF Auto, Inc., a British Virgin Islands business company (“PF Auto”), an entity affiliated with PeopleFund, and managing director, secretary and a director of Auto Holdings Ltd., a British Virgin Islands business company (“Auto Holdings”), also an entity affiliated with PeopleFund. In addition, Mr. de Tezanos currently holds positions at Ignite Holdings Company, Inc. DBA KingoEnergy, a global company that offers off-grid communities prepaid solar energy service in developing countries, where he has served as a director since December 2011; Iguama Inc., an online marketplace offering US products in Latin America, where he has served as a director since January 2011; and P3 Global Management Inc., a smart city infrastructure development and advisory firm, where he has served as a director since November 2012. Previously, Mr. de Tezanos was a co-founder, chief executive officer and a director of BrokersWeb, an internet-based insurance advertising and marketing company, from September 1, 2008 to September 15, 2011, when it was acquired by VantageMedia; chief executive officer of ClickDiario Network, an ad network in Latin America, from January 1, 2002 to June 1, 2007 when it was acquired by FOX International Channels in 2007; a founder of Hoteles.com, a hotel reservations site for Spanish speaking internet users, which was acquired by Expedia, Inc. in 2003; a director of BlueKite, Ltd., a cross border remittance company, from March 2006 until the company was acquired by XOOM Corporation in 2014; and Healthcare, Inc., an online search, comparison and recommendation tool for healthcare consumers, where he served as a director from March 2006 to October 2014.
 
Mr. de Tezanos was appointed to the Board pursuant to the Stockholder Agreement described below under the section of this Proxy Statement entitled “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT” upon Autobytel’s acquisition of AutoWeb as of October 1, 2015. Mr. de Tezanos serves as one of the two representatives on the Board designated by the holders of the Company’s Series B Junior Participating Convertible Preferred Stock. Mr. de Tezanos’ experience in founding and growing technology and online media companies led the Board to conclude that Mr. de Tezanos should serve as one of the Company’s directors.
 
Jeffrey M. Stibel.   Mr. Stibel has served as a director of Autobytel since December 2006.  Since August 2010, Mr. Stibel has been the Chairman and Chief Executive Officer of Dun & Bradstreet Credibility Corp.  From August 2005 to September 2009, Mr. Stibel was first President and Chief Executive Officer of Web.com, Inc., a leading provider of online marketing services for small businesses, and then President and a member of the board of directors of Web.com Group, Inc., a successor company to Web.com, Inc.  Mr. Stibel serves on the Board of Brown University’s Entrepreneurship Program, University of Southern California’s Innovation Institute and Tufts University’s Center for Leadership.  Mr. Stibel received a Bachelor’s Degree from Tufts University, a Master’s Degree from Brown University and studied for a Ph.D. at Brown University, where he was a Brain and Behavior Fellow.  Mr. Stibel’s experience as an executive officer of various online marketing and technology companies led the Board to conclude that Mr. Stibel should serve as one of the Company’s directors.
 
 Voting for Election of Class I Directors
 
The persons named in the enclosed proxy card will vote “FOR” the election of Jeffrey H. Coats, Matías de Tezanos, and Jeffrey M. Stibel as Class I Directors unless instructed otherwise in the proxy.  Because no other nominees have been properly and timely nominated in accordance with the Bylaws, Messrs. Coats, de Tezanos, and Stibel will each be elected as Class I Directors as long as they each receive at least one vote for the nominee’s respective election.  Holders of Common Stock are not entitled to cumulate their votes in the election of directors.  Although Messrs. Coats, de Tezanos and Stibel have each consented to serve as a director if elected, and the Board has no reason to believe that any of them will be unable to serve as a director, if Messrs. Coats, de Tezanos and Stibel withdraws such person’s nomination or otherwise becomes unavailable to serve, the persons named as proxies will vote for any substitute nominee designated by the Board.  Abstentions and “broker non-votes” will not have any effect on the outcome of the voting for the election of Class I Directors as long as a nominee receives at least one vote in favor of the nominee’s election.
 
Recommendation of the Board of Directors
 
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE ELECTION OF MR. COATS, MR. DE TEZANOS AND MR. STIBEL.
 
 
 
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PROPOSAL 2
APPROVAL OF ISSUANCE OF COMMON STOCK UPON CONVERSION OF SERIES B PREFERRED STOCK
 
 
Under this Proposal 2, the Board is seeking stockholder approval for the issuance of shares of Common Stock upon (i) the conversion of the Company’s outstanding Series B Junior Participating Convertible Preferred Stock, par value $0.001 per share, (“Series B Preferred Stock”); and (ii) the conversion of shares of Series B Preferred Stock issued upon exercise of the AutoWeb Warrants (as described below). The Company is seeking this approval pursuant to Section 5635 of the Listing Rules (“Nasdaq Rules”) of The Nasdaq Stock Market (“Nasdaq”). The shares of Series B Preferred Stock that have already been issued and the Series B Preferred Stock that is issuable upon exercise of the AutoWeb Warrants, have and will be issued from shares of preferred stock previously authorized by stockholders, and the holders of Common Stock are not being asked to approve the issuance or sale of those securities and do not have preemptive rights to subscribe to additional shares if issued.
 
As of the Record Date, there were 168,007 shares of Series B Preferred Stock outstanding and the AutoWeb Warrants provide for the purchase from the Company of up to 148,240 shares of Series B Preferred Stock at an exercise price of $184.47 per share of Series B Preferred Stock. Should the stockholders approve Proposal 2, each share of Series B Preferred Stock would automatically convert into 10 shares of Common Stock, which will result in the outstanding shares of Series B Preferred Stock being converted into 1,680,070 shares of Common Stock, and the AutoWeb Warrants would convert into warrants to acquire up to 1,482,400 shares of Common Stock at an exercise price of approximately $18.45 per share of Common Stock. The Company would not receive any additional consideration upon the conversion of Series B Preferred Stock.
 
Background and Reasons for Proposal
 
As previously reported in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on October 6, 2015 (SEC File Number 1-34761) (“AutoWeb Acquisition Form 8-K”), on October 1, 2015, Autobytel entered into and consummated an Agreement and Plan of Merger (“Merger Agreement”), by and among Autobytel, New Horizon Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Autobytel (“Merger Sub”), AutoWeb, and José Vargas, in his capacity as Stockholder Representative. Pursuant to the Merger Agreement, Merger Sub merged with and into AutoWeb (“AutoWeb Merger”), with AutoWeb continuing as the surviving corporation and as a wholly owned subsidiary of Autobytel. The merger consideration consisted of: (i) 168,007 newly issued shares of Series B Preferred Stock; (ii) warrants, which provide for the purchase up to 148,240 shares of Series B Preferred Stock (“AutoWeb Warrants”); and (iii) $279,299 in cash to cancel vested, in-the-money options to acquire shares of AutoWeb common stock. In connection with the AutoWeb Merger, Autobytel, Auto Holdings and the other Restricted Stockholders (as defined below) entered into that certain Amended and Restated Stockholder Agreement, which agreement has been further amended and restated (the Amended and Restated Stockholder Agreement, as subsequently amended and restated is referred to herein as the “Stockholder Agreement”). The Stockholder Agreement provides for various restrictions on transfer of securities of Autobytel held by the Restricted Stockholders and grants to the Company an irrevocable proxy to vote any shares of Common Stock held by the Restricted Stockholders.
 
Section 5635(a)(1) of the Nasdaq Rules requires stockholder approval prior to the issuance of common stock, or of securities convertible into or exercisable for common stock, in connection with the acquisition of the stock or assets of another company, if (i) the common stock has, or will have upon issuance, voting power equal to or in excess of 20% of the voting power of the issuing company outstanding before the issuance of such stock or of securities convertible into or exercisable for common stock; or (ii) the number of shares of common stock to be issued is or will be equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance of such stock or securities. Section 5635(a)(2) of the Nasdaq Rules requires stockholder approval prior to the issuance of common stock, or of securities convertible into or exercisable for common stock, in connection with the acquisition of the stock or assets of another company, if any director, officer or Substantial Shareholder (as defined by Section 5635(e)(3) of the Nasdaq Rules) of the issuing company has a 5% or greater interest (or such persons collectively have a 10% or greater interest), directly or indirectly, in the company or assets to be acquired, and the issuance of common stock, or of securities convertible into or exercisable for common stock, could result in an increase in outstanding common shares or voting power of 5% or more. In addition, Section 5635(b) of the Nasdaq Rules requires stockholder approval prior to any issuance of securities when the issuance will result in a change of control of the issuing company. The Nasdaq Rules do not define what constitutes a change of control, and interpretations of the change of control rule by the staff of Nasdaq have indicated that whether a transaction constitutes a change of control is a facts-and-circumstances test. Nasdaq staff interpretations do suggest that the Nasdaq staff may find that a change of control has occurred when, as a result of the issuance of securities, an investor or a group owns, or has the right to acquire, 20% or more of the outstanding shares of an issuing company’s common stock or voting power. For the purpose of calculating the holdings of any person or entity, Nasdaq would take into account, in addition to the securities received by such person or entity in the transaction, all of the shares owned by such person or entity unrelated to the transaction and would assume the conversion of any convertible securities held by such person or entity.
 
 
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The issuance of shares of Common Stock upon conversion of the outstanding shares of Series B Preferred Stock and the shares of Series B Preferred Stock that might be acquired upon exercise of the AutoWeb Warrants is subject to Section 5635(a)(1) of the Nasdaq Rules because those shares would represent more than 20% of the Common Stock and would have voting power in excess of 20% of the voting power of the Common Stock outstanding before the conversion of the Series B Preferred Stock. The issuance of shares of Common Stock upon conversion of the outstanding shares of Series B Preferred Stock and the shares of Series B Preferred Stock that might be acquired upon exercise of the AutoWeb Warrants is subject to Section 5635(a)(2) because the Restricted Stockholders constitute a Substantial Shareholder of the Company and had a 5% or greater interest in AutoWeb prior to the AutoWeb Merger and those shares to be issued would result in an increase in the Common Stock and would have voting power of 5% or more of the Common Stock. The issuance of shares of Common Stock upon conversion of the outstanding shares of Series B Preferred Stock and the shares of Series B Preferred Stock that might be acquired upon exercise of the AutoWeb Warrants might be subject to Section 5635(b) because the issuance of those shares would result in the Restricted Stockholders owning 20% or more of the outstanding shares of the Common Stock. In connection with the AutoWeb Merger, the Company agreed to use all commercially reasonable efforts to obtain approval of the conversion from the Company’s stockholders no later than the third annual meeting of the stockholders of the Company occurring after October 1, 2015, including (i) holding a meeting (which meeting may be an annual meeting of the stockholders) to propose the stockholder approval; (ii) recommending that the stockholders of the Company vote their shares in favor of the conversion; and (iii) solicit proxies in favor of the conversion; provided, in each case, that the Board determines that doing so would be consistent with the exercise of the fiduciary duties of the Board.
 
In deciding to present this Proposal 2 to the stockholders at the Annual Meeting and to recommend a vote “FOR” its approval by the stockholders (with Messrs. Mylod, de Tezanos and Vargas recused from the Board’s deliberations and voting on the matter), the Board considered the following:
 
 
If the Series B Preferred Stock Special Dividends (as defined below) were to go into effect, the stockholders would incur further, ongoing, economic dilution as long as the Series B Preferred Stock Special Dividends continued to accrue.
 
 
The proxy granted to the Board would mitigate the effect of the dilution of the existing common stockholders’ voting rights resulting from the conversion by taking the votes from that block of shares away from the Restricted Stockholders and vesting them in the Company for the exercise in the best interests of the Company and all its stockholders. The standstill provisions in the Stockholder Agreement would mitigate the effect of the dilution of the existing common stockholders’ voting rights resulting from the conversion by preventing the Restricted Stockholders from using their significant ownership of Common Stock to control or affect the management of the Company.
 
 
The Company’s Rights Plan (as defined below) and the restrictions in the Stockholder Agreement limit the ability of the Restricted Stockholders to increase further their beneficial ownership and voting power in the Company.
 
 
Stockholder approval of the proposal would simplify capital structure of the Company and eliminate the risk that the Series B Preferred Stock Special Dividends will go into effect, making the Company’s current and future capital structure easier for investors and other business partners to understand.
 
 
Stockholder approval of the proposal would eliminate uncertainty about the future rights of the Restricted Stockholders.
 
 
The Company is obligated under the Merger Agreement to use all commercially reasonable efforts to obtain approval of the conversion from the Company’s stockholders no later than the third annual meeting of the stockholders of the Company occurring after October 1, 2015, including (i) holding a meeting (which meeting may be an annual meeting of the stockholders) to propose the stockholder approval; (ii) recommending that the stockholders of the Company vote their shares in favor of the conversion; and (iii) solicit proxies in favor of the conversion; provided, in each case, that the Board determines that doing so would be consistent with the exercise of the fiduciary duties of the Board.
 
 
If the stockholders do not approve the proposal, the Company could be required to present the proposal at the 2018 annual meeting of stockholders or at a special meeting of stockholders.
 
 
The Company's calculation of its diluted net earnings per share already anticipates the shares of Common Stock that would be issued upon conversion of current outstanding shares of Series B Preferred Stock.
 
 
The Restricted Stockholders requested that the Board present the proposal at the Annual Meeting rather than the 2018 annual meeting of stockholders.
 
 
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This Proposal 2 contains summary descriptions of the Merger Agreement, the Series B Preferred Stock as established by Certificate of Designation (as defined below) and the AutoWeb Warrants which are not complete and are qualified in their entirety by reference to the full text of the Merger Agreement, the Certificate of Designation and the AutoWeb Warrants, each of which is incorporated herein by reference and filed as Exhibits 2.1, 3.1 and 10.1, respectively, to the AutoWeb Acquisition Form 8-K. In addition, this Proposal 2 contains a summary description of the Stockholder Agreement which is not complete and is qualified in its entirety by reference to the full text of the Stockholder Agreement which is incorporated herein by reference and filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 2, 2017 (SEC File Number 1-34761).
 
Potential Share Ownership by the Restricted Stockholders
 
The former stockholders of AutoWeb (or the assignees of their Series B Preferred Stock and AutoWeb Warrants) include PeopleFund, PF Holding, Manatee Ventures Inc., a British Virgin Islands business company wholly owned by Mr. de Tezanos and his wife Isabel Ruiz Estrada (“Manatee”), Galeb3 Inc., a Florida corporation wholly owned by Mr. Vargas (“Galeb3”), Del Saler, Inc., a British Virgin Islands business company wholly owned by Julio Gonzalez Arrivillaga, who is a director of PeopleFund, (“Del Saler”), Ceiba International Corp., a Panama company (“Ceiba”), Picua Limited, a British Virgin Islands business company, Robert J. Mylod, Jr. (appointed to the Board upon closing of the AutoWeb Merger and serving as such until his resignation effective April 13, 2017), Jeffrey H. Boyd, and William Ferriolo, Autobytel’s Executive Vice President, Chief Operating Officer. Based solely on information made available to the Company by AutoWeb, the Company believes that (i) PeopleFund is ultimately controlled by Matías de Tezanos (appointed to the Board and as the Company’s Chief Strategy Officer upon closing of the AutoWeb Merger), José Vargas (appointed to the Board and as the Company’s Chief Revenue Officer upon closing of the AutoWeb Merger), Julio Gonzalez Arrivillaga, and Diego Fernandez; (ii) PF Holdings, Inc. is a British Virgin Islands business company ultimately controlled by Messrs. de Tezanos, Vargas, Arrivillaga, and Fernandez; (iii) Manatee is wholly owned by Mr. de Tezanos and his wife, Maria Isabel Ruiz Estrada; (iv) Galeb3 is wholly owned by Mr. Vargas; (v) Del Saler, Inc. is wholly owned and controlled by Mr. Arrivillaga, and (vi) Ceiba is a multi-purpose private equity and venture capital investment vehicle controlled by Inversiones y Desarrollos de Centroamérica, a British Virgin Islands business company and investment bank and private equity firm focused on banking, real estate development, energy, and social responsibility.
 
As of the Record Date, on a consolidated basis, Auto Holdings and its affiliates, including former stockholders of AutoWeb and their affiliates (or the assignees of their Series B Preferred Stock and AutoWeb Warrants), and the former stockholders of AutoWeb and their affiliates (or the assignees of their Series B Preferred Stock and AutoWeb Warrants) (together, the “Restricted Stockholders”) hold:
 
1,633,786 shares of Common Stock;

168,007 shares of Series B Preferred Stock; and
 
AutoWeb Warrants to purchase 148,240 shares of Series B Preferred Stock.
 
The 1,633,786 shares of Common Stock held by the Restricted Stockholders as a group represent approximately 14.8% of the outstanding shares of Common Stock as of the Record Date. Assuming that as of the Record Date the issuance of shares had been approved by the Company’s stockholders pursuant to Section 5635 of the Nasdaq Rules, on the Record Date, the Restricted Stockholders would have owned (i) a total of 3,313,856 shares of Common Stock, or approximately 26.0% of the issued and outstanding shares of Common Stock as of the Record Date (after giving effect to the issuance of the additional 1,680,070 shares of Common Stock upon conversion of the Series B Preferred Stock); and (ii) the AutoWeb Warrant to acquire 1,482,400 shares of Common Stock, which, assuming the AutoWeb Warrants had been exercised as of the Record Date and the 1,482,400 shares of Common Stock issuable upon exercise of the AutoWeb Warrants had been issued and were outstanding as of the Record Date would represent an additional 10.4% of the issued and outstanding shares of the Common Stock as of the Record Date (noting, however, that as described below, the AutoWeb Warrants are not exercisable before October 1, 2018 and are subject to significant Common Stock price performance conditions before the AutoWeb Warrants can be exercised).
 
 
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As described below, the Company amended the Stockholder Agreement and increased the Restricted Stockholder’s Rights Plan Exemption (as defined below) to permit (i)(1) each of Messrs. de Tezanos and Vargas to purchase up to an additional 100,000 shares of Common Stock (of which authorization, Mr. Vargas has purchased 7,753 shares); (2) Ceiba to purchase up to an additional 150,829 shares of Common Stock; and (3) each of Messrs. Ferriolo, Mylod and Arrivillaga to purchase up to an additional 25,000 shares of Common Stock in open market transactions; and (ii) the granting of options to acquire Common Stock or other equity-based awards to Restricted Stockholders in connection with any such Restricted Stockholder’s service to the Company, provided that such grants or awards are approved by the Board pursuant to the Company’s then-current equity incentive plans.
 
Description of Series B Preferred Stock
 
The rights, preferences, and privileges of the Series B Preferred Stock are set forth in a Certificate of Designations of Series B Junior Participating Convertible Preferred Stock of Autobytel Inc. (“Certificate of Designations”). The Certificate of Designations is summarized below:
 
Conversion. Each share of Series B Preferred Stock is convertible at the option of the holder of such share into 10 shares of Common Stock (subject to adjustments and accrued dividends as set forth below); provided that any holder may only convert such number of shares of Series B Preferred Stock into shares of Common Stock such that such holder (including a “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) that includes such holder), does not become a beneficial owner (as defined in Rules 13d-3 and 13d-5 of the Exchange Act, except that for purposes of this clause, any such person or group shall be deemed to have “beneficial ownership” of all shares that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of greater than 19.9% of the Common Stock or total voting power of the Company’s voting stock outstanding immediately prior to the date on which shares of Series B Preferred Stock were first issued (“Effective Date”); and provided, further, that the aggregate number shares of Common Stock issued upon conversion of any Series B Preferred Stock shall not exceed 4.9% of the Common Stock or total voting power of the Company’s voting stock outstanding immediately prior to the Effective Date. If the stockholder approval required under Section 5635 of the Nasdaq Rules is obtained, all shares of the Series B Preferred Stock will automatically convert into shares of the Common Stock. The Series B Preferred Stock has standard anti-dilution adjustments (e.g., for stock dividends and share splits) and a dividend payable in-kind as set forth below.
 
No Redemption Rights. Series B Preferred Stock is not redeemable either at Autobytel’s option or at the option of the holders of Series B Preferred Stock at any time.
 
Ranking. Series B Preferred Stock, with respect to dividend rights and rights on liquidation, winding-up and dissolution of Autobytel, ranks junior to all other preferred stock of Autobytel, other than a class or series of preferred stock established after the date on which the Series B Preferred Stock is issued by Autobytel the terms of which expressly provide that such class or series will rank on a parity with or junior to the Series B Preferred Stock as to dividend rights and rights on liquidation, winding-up and dissolution of Autobytel.
 
Dividends. If the Board declares and Autobytel pays a dividend in the form of cash or other assets (other than shares of Common Stock or rights or warrants to subscribe for Common Stock) in respect of any shares of Common Stock, the holders of Series B Preferred Stock will be entitled to receive the same dividend on an as-converted basis as if the stockholder approval had been obtained. In addition to the foregoing dividends, special dividends shall commence accruing on the Series B Preferred Stock on the day following the third annual meeting of the stockholders of Autobytel following October 1, 2015 (“Series B Preferred Stock Special Dividends”). The Series B Preferred Stock Special Dividends (i) will accrue at an annual rate equal to 8% on the Share Value (as defined in the Certificate of Designations) of the Series B Preferred Stock in effect at the time of the dividend (with the initial Share Value being equal to the initial Conversion Price (as defined in the Certificate of Designations) of $12.49 per share of Series B Preferred Stock times 10, or $124.90 per share); (ii) will be payable quarterly in arrears; and (iii) will not be paid in cash and will only be paid by being added to the then-current Share Value for the Series B Preferred Stock for purposes of determining the conversion rate for the Series B Preferred Stock. The Share Value and Conversion Price are subject to adjustment as set forth in the Certificate of Designations, including adjustments which increase the Share Value by reason of accrued Series B Preferred Stock Special Dividends.
 
 
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Liquidation Preference. In the event Autobytel voluntarily or involuntarily liquidates, dissolves or winds up, each holder of Series B Preferred Stock at the time will be entitled to receive for each share of Series B Preferred Stock held by such holder liquidating distributions of the remaining assets of Autobytel as if such share of Series B Preferred Stock had been converted, immediately prior to such liquidating distributions, into the number of shares of Common Stock into which such share of Series B Preferred Stock would then be convertible if the stockholder approval had been obtained.
 
Voting Rights. Except as follows or as otherwise required by applicable law, holders of Series B Preferred Stock do not have any voting rights on any matter. The consent of the holders of at least a majority of the Series B Preferred Stock then outstanding, voting together as a single class, is required for Autobytel to take certain actions including, among other things: (i) amending, altering or repealing any provision of the Certificate of Incorporation, the Certificate of Designations or the Bylaws of the Company that would alter or change the voting powers, preference or special rights of the Series B Preferred Stock so as to affect them adversely; or (ii) the consummation of a binding share exchange or reclassification involving the Common Stock or a merger or consolidation of Autobytel with another entity.
 
Description of the AutoWeb Warrants
 
Exercisability.  The AutoWeb Warrants are exercisable on or after October 1, 2018, provided that the following additional vesting conditions are satisfied: (i) with respect to the first 1/3 of the warrant shares, if at any time after the issuance date and prior to the expiration date of the AutoWeb Warrants, the weighted average closing price of the Common Stock on The Nasdaq Capital Market for the preceding 30 trading days (adjusted for any stock splits, stock dividends, reverse stock splits or combinations of the Common Stock occurring after the issuance date) (“Weighted Average Closing Price”) of the Common Stock is at or above $30.00; (ii) with respect to the second 1/3 of the warrant shares, if at any time after the issuance date and prior to the expiration date the Weighted Average Closing Price of the Common Stock is at or above $37.50; and (iii) with respect to the last 1/3 of the warrant shares, if at any time after the issuance date and prior to the expiration date the Weighted Average Closing Price of the Common Stock is at or above $45.00. The AutoWeb Warrants expire on October 1, 2022 to the extent not exercised prior to such date. The Weighted Average Closing Price of the Common Stock for the 30 trading days preceding the Record Date is $12.40.
 
Exercise Price. The AutoWeb Warrants are exercisable at an exercise price per share of Series B Preferred Stock of $184.47.
 
Terms of Stockholder Agreement
 
The following is a summary of the material terms of the Stockholder Agreement.
 
Board Representation. The Stockholder Agreement provides that the Restricted Stockholders collectively have the right to designate for nomination (i) two members of the Board, as long as they beneficially own 15% or more of the Common Stock (including any capital stock that could be converted into Common Stock) and (ii) one member of the Board, as long as they beneficially own 5% or more (but less than 15%) of the Common Stock (including any capital stock that could be converted into Common Stock).
 
Irrevocable Proxies. Each Restricted Stockholder executed and delivered an irrevocable proxy with respect to shares of Common Stock currently owned by, or acquired in the future by, such Restricted Stockholder (“Restricted Stockholder Proxies”). The Restricted Stockholder Proxies give Autobytel’s Chief Executive Officer, Chief Financial Officer and Chief Legal Officer the right to exercise all voting rights of the Restricted Stockholder’s at any meeting (whether annual or special and whether or not an adjourned or postponed meeting) of stockholders of the Company, and in any action by written consent of the stockholders of the Company, in accordance with the recommendations of or instructions provided by the Board. The Restricted Stockholder Proxies will terminate upon the later of: (i) October 1, 2017; and (ii) such time as the Restricted Stockholders beneficially own less than 4.9% of the Common Stock (including any amount of capital stock that could be convertible into Common Stock). Further, if not terminated pursuant to the preceding, the Restricted Stockholder Proxies will terminate on October 1, 2020.
 
 
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Rights Plan Exemption. In connection with the execution of the Stockholder Agreement, the Board exercised its discretionary authority under the Company’s Tax Benefit Preservation Plan (“Rights Plan”) to deem the Restricted Stockholders not to be an “Acquiring Person” (as defined in the Rights Plan) and to grant an exemption under the Rights Plan (“Rights Plan Exemption”) to permit: (i)(1) each of Messrs. de Tezanos and Vargas to purchase up to an additional 100,000 shares of Common Stock in open market transactions (of which authorization, Mr. Vargas has purchased 7,753 shares); (2) Ceiba to purchase up to an additional 150,829 shares of Common Stock in open market transactions; and (3) each of Messrs. Ferriolo, Mylod and Arrivillaga to purchase up to an additional 25,000 shares of Common Stock in open market transactions; and (ii) the granting of options to acquire Common Stock or other equity-based awards to Restricted Stockholders in connection with any such Restricted Stockholder’s service to the Company, provided that such grants or awards are approved by the Board pursuant to the Company’s then-current equity incentive plans. The foregoing exemption is subject to and in reliance upon, the Restricted Stockholders remaining in compliance with the terms and conditions set forth in the Stockholder Agreement.
 
Standstill Provision.  The Restricted Stockholders have agreed not to:
 
●   acquire or otherwise seek to acquire any securities of Autobytel or any assets of Autobytel;
   
●   participate in any business combination, extraordinary transaction or any solicitation of proxies with respect to Autobytel;
 
●   form or participate in a “group” to effect the foregoing;
 
●   otherwise act to seek to control or influence the management, Board or policies of Autobytel;
   
●   nominate any person to the Board to seek to control or influence the management, Board or policies of Autobytel;
   
●   participate in any special meeting or written consent of stockholders of Autobytel;
   
●   request any list of stockholders of Autobytel;
 
●   enter into any voting agreement with respect to the Common Stock or any other voting securities;
   
●   initiate any stockholder proposals;
 
●   participate in any financing for the acquisition of securities or assets of Autobytel; 
 
●   seek to influence any person with respect to voting of any Autobytel securities;
 
●   seek any changes in composition of the Board or management;
  
●   take any actions that may impede the acquisition of control of Autobytel;
  
●   cause the Common Stock to be eligible for termination of registration under Section 12 of the Exchange Act;
  
●   take any actions that might force Autobytel to make a public announcement regarding any of the types of matters set forth above;
  
●   enter into any discussions or arrangements with any third party regarding the matters set forth above; or
 
●   request that any of the foregoing is waived.
 

 
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The standstill provisions will terminate when the Restricted Stockholders beneficially own less than 4.9% of the Common Stock (including any amount of capital stock that could be converted into Common Stock).
 
Restrictions on Transfers of Shares. Prior to October 1, 2017, the Restricted Stockholders are prohibited from transferring any capital stock of the Company except for transfers to immediate family members. After October 1, 2017, the Restricted Stockholders may not transfer capital stock in excess of the volume limitations contained in Rule 144 of the Securities Act of 1933, as amended (“Securities Act”), nor may the Restricted Stockholders transfer capital stock which would result in a person owning 4.9% or more of the Common Stock (including any amount of capital stock that could be convertible into Common Stock). Provided that until the Restricted Stockholders beneficially own less than 4.9% of the outstanding Common Stock (including any amount of capital stock that could be convertible into Common Stock), Autobytel has a right of first refusal to purchase any such securities a Restricted Stockholder proposes to transfer.
 
Registration Rights. After October 1, 2018, the Restricted Stockholders will have the following registration rights:
 
Demand Registration. If the Company is eligible to use a Form S-3 registration statement and receives a request from one or more Restricted Stockholders that the Company file a registration statement with respect to registrable securities having an aggregate offering price of at least $5,000,000 (net of selling expenses), then Autobytel must as soon as practicable (or within 90 days) file a Form S-3 registration statement covering all restricted securities requested to be included by the Restricted Stockholder(s). The Restricted Stockholders are only entitled to make two such demand requests. Autobytel may delay the requested registration for up to 90 days, although Autobytel may not delay a registration more than once in any 12-month period, in certain circumstances where the Board believes in its good faith judgment that it would be materially detrimental to Autobytel and its stockholders for such registration statement to either become effective or remain effective because such action would: (i) interfere with a significant acquisition, corporate reorganization or other similar transaction involving Autobytel; (ii) require premature disclosure of material information that Autobytel has a bona fide business purpose for preserving as confidential; or (iii) render Autobytel unable to comply with requirements under the Securities Act or the Exchange Act.
 
Piggyback Registration. When Autobytel proposes to register Common Stock in connection with a public offering solely for cash, holders of registrable securities will have the right to register shares of the same class as being sold by Autobytel for sale along with Autobytel.
 
The Company will not receive any proceeds from sales of shares by the Restricted Stockholders pursuant to any such demand or piggyback registrations.
 
Consequences of Approving Proposal 2
 
Stockholder approval of Proposal 2 will have the following consequences:
 
Concentration of Ownership and Voting Power. The 1,633,786 shares of Common Stock held by the Restricted Stockholders as a group represent approximately 14.8% of the outstanding shares of Common Stock as of the Record Date. Assuming that as of the Record Date the issuance of shares had been approved by the Company’s stockholders pursuant to Section 5635 of the Nasdaq Rules, on the Record Date, the Restricted Stockholders would have owned (i) a total of 3,313,856 shares of Common Stock, or approximately 26.0% of the issued and outstanding shares of Common Stock as of the Record Date (after giving effect to the issuance of the additional 1,680,070 shares of Common Stock upon conversion of the Series B Preferred Stock); and (ii) the AutoWeb Warrant to acquire 1,482,400 shares of Common Stock, which, assuming the AutoWeb Warrants had been exercised as of the Record Date and the 1,482,400 shares of Common Stock issuable upon exercise of the AutoWeb Warrants had been issued and were outstanding as of the Record Date would represent an additional 10.4% of the issued and outstanding shares of the Common Stock as of the Record Date (noting, however, that as described above, the AutoWeb Warrants are not exercisable before October 1, 2018 and are subject to significant Common Stock price performance conditions before the AutoWeb Warrants can be exercised).
 
 
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Therefore, our existing stockholders will incur substantial dilution to their voting interests and will own a smaller percentage of our outstanding Common Stock if Proposal 2 is approved. Accordingly, the holders of the Common Stock issued upon conversion of the Series B Preferred Stock (or the Company’s management voting such shares under Restricted Stockholder Proxies) will have significant voting power with respect to voting shares of the Company and will be able to exert substantial influence over our business and affairs and to have a significant effect on the outcome of matters brought before the stockholders, including the approval of mergers and other business combination transactions. The Restricted Stockholders will for the life of the AutoWeb Warrants have the opportunity to profit from the difference between the exercise price of the AutoWeb Warrants and the market price. The possibility of future sales of Common Stock by the Restricted Stockholders could have a depressive effect on the market price of the Common Stock. Further, the concentration of ownership could make it difficult for a third party to acquire the Company and could discourage a third party from attempting to acquire control of the Company.
 
Concentration of Voting Power with Management. As described above, the Stockholder Agreement provides that any current or future capital stock of the Company that a Restricted Stockholder holds is subject to the Restricted Stockholder Proxies granted in favor of Company’s management to be exercised at the direction of the Board. These irrevocable proxies may not, subject to certain conditions, expire until October 1, 2020. Accordingly, if Proposal 2 is approved by the stockholders, these proxies, combined with the voting of other shares of Common Stock held by the Company’s management, would result in the Company’s management having the right to vote up to 26.9% of the voting power of the Company’s voting stock on any matter presented to stockholders for a vote. This percentage would increase to 34.5% if the AutoWeb Warrants were exercised in full. While the Board will direct the Restricted Stockholder Proxies to be exercised in a manner consistent with its fiduciary duties, the interests of management and the Board may be different than the interests of other stockholders. Further, the concentration of voting power with the Company’s management could make it difficult for a third party to acquire the Company, and could discourage a third party from attempting to acquire control of the Company.
 
Potential Conflicts of Interest. The Stockholder Agreement provides that the Restricted Stockholders have the right to designate two individuals for nomination to the Board (currently, the designated directors are Matías de Tezanos and José Vargas). In addition, Mr. Mylod, a former director of the Company, and Mr. Ferriolo, an executive officer of the Company, are Restricted Stockholders. Furthermore, as discussed above if Proposal 2 is approved by the stockholders, the amount of the voting power of the Company’s voting stock that the Board, as a whole, will have the power to direct through the Restricted Stockholder Proxies will increase significantly. The interests of these persons may be different than the interests of our other stockholders. SeePotential Share Ownership by the Restricted Stockholders andCORPORATE GOVERNANCE MATTERS - Certain Relationships and Related Party Transactions.Notwithstanding the foregoing, a designated director is not relieved of any fiduciary duty or other duty or obligations to the Company’s stockholders.
 
Delaware General Corporation Law Section 203. The Company is subject to Section 203 of the Delaware General Corporation Law (“Section 203”). In general, this statute prohibits a publicly-held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder unless: (i) the transaction that resulted in the stockholder becoming an interested stockholder or the business combination is approved by the board of directors of the corporation; (ii) upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, subject to certain exclusions of shares held by directors and officers of the corporation from the calculation; or (iii) the business combination is approved by the corporation’s stockholders in a manner prescribed by Section 203. For purposes of Section 203, a “business combination” includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder, and an “interested stockholder” is a person who, together with affiliates and associates, owns or did own 15% or more of the corporation’s voting stock. The concentration of ownership of Common Stock by the Restricted Stockholders, combined with the restrictions imposed by Section 203, could make it difficult for a third party to acquire the Company, and could discourage a third party from attempting to acquire control of the Company.
 
 
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Consequences of Not Approving Proposal 2
 
The failure of stockholders to approve Proposal 2 will have the following consequences:
 
Voting Rights. The Series B Preferred Stock will not be convertible into Common Stock and holders of shares of Series B Preferred Stock will not be able to vote on matters submitted to a vote of our stockholders. The amount of the voting power of the Company’s voting stock subject to the Restricted Stockholder Proxies will not increase.
 
Dividends. If stockholder approval to convert the Series B Preferred Stock to Common Stock is not obtained on or before the third annual meeting of the stockholders of the Company after October 1, 2015, the Series B Preferred Stock will start to accrue the Series B Preferred Stock Special Dividends. The accrual of the foregoing dividends will have a dilutive effect on the economic interests of the holders of Common Stock in the event of an acquisition of the Company or if the Company were to declare any cash or other dividends on the Company’s Common Stock.
 
AutoWeb Warrants. The AutoWeb Warrants will continue to remain outstanding and exercisable in accordance with their terms for Series B Preferred Stock.
 
Contractual Obligations. The Company could be required to present the proposal at the 2018 annual meeting of stockholder or at a future special meeting of stockholders in order to comply with its obligations under the Merger Agreement to use all commercially reasonable efforts to obtain approval of the conversion from the Company’s stockholders.
 
Vote Required
 
In accordance with the Nasdaq Rules, the affirmative vote of a majority of the votes cast on this proposal is required to approve Proposal 2. The persons named in the enclosed proxy card will vote “FOR” the proposal unless instructed otherwise in the proxy. Abstentions and broker non-votes will not be counted as votes cast with respect to Proposal 2 and will not have any effect on the outcome of this proposal. The Board has instructed the proxyholders under the Restricted Stockholder Proxies to vote the shares of Common Stock subject to the Restricted Stockholder Proxies “FOR” Proposal 2.
 
Recommendation of the Board of Directors
 
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL 2.
   
 
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PROPOSAL 3
APPROVAL OF EXTENSION OF AND AMENDMENTS TO THE AUTOBYTEL INC.
TAX BENEFIT PRESERVATION PLAN
 
Background and Reasons for Proposal
 
 
The Company has generated substantial net operating loss (“NOL”) carryforwards and other tax attributes for United States federal income tax purposes (“Tax Benefits”) that can generally be used to offset future taxable income and therefore reduce federal income tax obligations.  However, the Company’s ability to use the Tax Benefits will be adversely affected if there is an “ownership change” of the Company as defined under Section 382 (“Section 382”) of the Internal Revenue Code (“IRC”).  In general, a Section 382 ownership change will occur if the Company’s “5 percent shareholders” (as defined under Section 382) collectively increase their ownership in the Company by more than 50% over a rolling three-year period.  As of December 31, 2016, the Company had NOL carryforwards of approximately $106.2 million for federal and state income tax purposes available to offset future taxable income.  Until the NOL carryforwards expire, they can generally be used to reduce any future federal income tax and, as a result, are a very valuable asset to the Company.  The Board believes that it is in the Company’s and its stockholders’ best interests to prevent the imposition of limitations on the use of the Company’s NOL carryforwards.  These NOL carryforwards expire on various dates ranging from 2017 to 2031.
 
After consultation with its legal, tax, and investment banking advisors, effective as of May 26, 2010 (“Plan Adoption Date”), the Company entered into a Tax Benefit Preservation Plan with Computershare Trust Company, N.A., as rights agent (“Rights Plan”).  The Board adopted the Rights Plan with the intent to protect stockholder value by preserving the Company’s Tax Benefits.  At the time the Company adopted the Rights Plan, the Company terminated its existing stockholders rights plan, which plan was not designed to protect the Tax Benefits.  The Rights Plan was subsequently approved by the Company’s stockholders at the 2011 Annual Meeting of Stockholders, as further extended and amended at the 2014 Annual Meeting of Stockholders, but will expire unless it is re-approved by the stockholders at the Annual Meeting.
 
A period of unusually high trading volume in the Company’s stock in May 2010 prompted the Board’s initial decision to adopt the Rights Plan.  The trading highlighted concerns that an “ownership change,” as defined under Section 382, could occur unless action was taken to protect against such an event.  This concern was also raised by certain significant stockholders of the Company in discussions with the Company’s management. The Rights Plan is intended to protect stockholder value by reducing the risk of a Section 382 ownership change, thereby preserving the Company’s ability to use its NOL carryforwards. The Rights Plan is intended to act as a deterrent to any person or group acquiring 4.90% or more of the Company’s outstanding Common Stock without the approval of the Board.  Although the Rights Plan is intended to reduce the likelihood of an “ownership change” that could adversely affect the Company, the Rights Plan will not prevent all transfers that could result in such an “ownership change.”
 
The Rights Plan was first extended and amended at the 2014 Annual Meeting of Stockholders and was set to expire on May 26, 2017, unless extended.  The Board has concluded that it is still in the Company’s and its stockholders’ best interests to prevent the imposition of limitations on the use of the Company’s NOL carryforwards and to protect stockholder value by preserving the Company’s Tax Benefits. After consultation with its legal, tax, and investment banking advisors, on April 13, 2017, the Board approved the extension of the Rights Plan and certain amendments to the extended plan.  The text of the Rights Plan, as amended, is included as Appendix A to this Proxy Statement.  The amendments to the Rights Plan:
 
extend the expiration date of the Rights Plan until the earliest of: (i) the close of business on May 26, 2020; (ii) the time at which the preferred share purchase rights are redeemed or exchanged as provided in the Rights Plan; (iii) the end of the calendar month in which occurs the final adjournment of the Annual Meeting, if stockholder approval of the Rights Plan, as amended, is not received at the Annual Meeting; (iv) the repeal of Section 382 or any successor statute if the Board determines that the Rights Plan is no longer necessary for the preservation of Tax Benefits; (v) the beginning of a taxable year of the Company to which the Board determines that no Tax Benefits may be carried forward; or (vi) such time as the Board determines that a limitation on the use of the Tax Benefits under Section 382 would no longer be material to the Company; 
 
in light of the small decrease in the trading price of the Company’s Common Stock since the last change in the “Purchase Price” under the Rights Plan, decrease the Purchase Price from $75.00 to $73.00; and 
 
to update the Rights Plan to (i) eliminate the provisions in the Rights Plan exempting Coghill (as defined in the Rights Plan) as an Acquiring Person (as defined in the Rights Plan), which exemption is no longer applicable given that Coghill is no longer the subject of an exemption under the Rights Plan; and (ii) revise the definition of the Company's Certificate of Incorporation to reflect amendments to the Certificate of Incorporation since April 2009.
 
 
 
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The Board is asking stockholders to approve the Rights Plan, as amended by these amendments, at the Annual Meeting.  If the stockholders do not approve the amended Rights Plan at the Annual Meeting, it will terminate at the end of the calendar month in which the final adjournment of the Annual Meeting occurs.
 
Section 382 Ownership Changes
 
Generally, an “ownership change” can occur through one or more acquisitions of a company’s shares by which one or more stockholders, each of whom owns or is deemed to own directly or indirectly 5% or more in value of the company’s stock, increase their aggregate percentage ownership by more than 50 percentage points over the lowest percentage of stock owned by such stockholder at any time during the preceding rolling three-year period.  Calculating whether an “ownership change” has occurred is complex and subject to inherent uncertainty.  This uncertainty results from the complexity of Section 382 as well as limitations on the knowledge of the ownership of, and transactions in, the securities of any publicly-traded company, including the Common Stock.  The Company has analyzed the ownership information available to it, along with various scenarios of possible future changes of ownership.  In light of this analysis and the Company’s current stock price and daily trading volume, the Company believes that if the Rights Plan is not approved and therefore is terminated, the Company may likely undergo a Section 382 “ownership change.”
 
If the Company were to experience a Section 382 “ownership change,” the use of its NOLs and credits to offset its taxable income subsequent to the “ownership change” would be materially limited.  The annual limit is subject to substantial limitations and is generally calculated by multiplying (i) the aggregate value of the Company’s outstanding equity, or market capitalization, immediately prior to the “ownership change” (subject to certain reductions) by (ii) the federal long-term tax-exempt interest rate in effect for the month of the “ownership change.”  If the Company were to have taxable income in excess of the NOL utilization limitations following a Section 382 “ownership change” it would not be able to offset that excess taxable income with the NOLs.  Although any loss carryforwards not used as a result of any Section 382 limitation would remain available to offset income in future years (again, subject to the Section 382 limitation), an “ownership change” could significantly defer the utilization of the loss carryforwards, accelerate payment of federal income tax and/or cause some of the NOLs to expire unused.  Although the Company cannot accurately predict the potential additional tax liability that may result from a Section 382 “ownership change” and subsequent limitation on its NOLs, the Company believes they could be material to it.  If an “ownership change” were to have occurred at December 31, 2016, the Company would have had an annual limitation of approximately $2.45 million of NOLs (using the December 2016 applicable interest factor of 1.68% and the Company’s market capitalization of $150 million).
 
Summary Description of the Rights Plan
 
The following description of terms of the Rights Plan, as amended, does not purport to be complete and is qualified in its entirety by reference to the Rights Plan, which is attached hereto as Appendix A and is incorporated herein by reference.  You are urged to read carefully the Rights Plan in its entirety as the discussion below is only a summary.
 
Rights.  Pursuant to the Rights Plan, the Board declared a dividend of one preferred share purchase right (each a “Right” and together the “Rights”) for each outstanding share of Common Stock under the terms of the Rights Plan.  The dividend was payable on June 11, 2010 (“Plan Record Date”) to the stockholders of record as of the close of business on that date.  Each Right entitles the registered holder to purchase from the Company .01 of a share of Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company (“Preferred Stock”) at a price of $73.00 per .01 of a share of Preferred Stock (“Purchase Price”), subject to adjustment or, in circumstances described below, to instead acquire shares of Common Stock.  As a result of the Company’s 1-for-5 reverse stock split effective July 11, 2012, the number of Rights associated with each share of the Company’s Common Stock increased from one Right per share to five Rights per share pursuant to the terms of the Rights Plan. In the event that any person becomes an “Acquiring Person” (as defined in the Rights Plan), each holder of a Right, other than Rights owned by the Acquiring Person, related persons or transferees (which will thereupon become null and void), will thereafter have the right to receive upon exercise of a Right (including payment of the Purchase Price), in lieu of shares of Preferred Stock, that number of shares of Common Stock (subject to any delay of exercisability approved by the Board) having a market value of two times the Purchase Price.  The description and terms of the Rights are set forth in the Rights Plan.
 
 
 
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Exercisability of Rights; Distribution Date.  Until the earlier to occur of (i) the close of business on the tenth business day following the first date of public announcement that a person, entity or group (each, a “person”) has become an Acquiring Person, by acquiring ownership of 4.90% or more of the outstanding shares of Common Stock, or that the Board has concluded that a person has become an Acquiring Person, or (ii) the close of business on the 10th business day (or, except in certain circumstances, such later date as may be specified by the Board) following the commencement of, or announcement of an intention to make, a tender offer or exchange offer the consummation of which would result in the ownership by a person (with certain exceptions) of 4.90% or more of the outstanding shares of Common Stock (the earlier of such dates being called the “Distribution Date”), the Rights will be evidenced, with respect to Common Stock certificates outstanding as of the Plan Record Date (or any book-entry shares in respect thereof), only by such Common Stock certificate (or registration in book-entry form), and the Rights will be transferable only in connection with the transfer of Common Stock.  The Rights are not exercisable until the Distribution Date.
 
For purposes of the Rights Plan, ownership is in general determined pursuant to applicable rules and regulations of the IRC, including Section 382, and by the definition of “beneficial ownership” of Rule 13d-3 of the Exchange Act.  Ownership for Section 382 purposes is generally determined by an economic test, while the SEC definition of “beneficial ownership” focuses generally on the right to vote or control disposition of the shares.
 
Term of the Tax Benefit Preservation Plan and Expiration of Rights.  If the Rights Plan, as amended, is not approved by the Company’s stockholders at the Annual Meeting, the Rights Plan, as amended, will terminate, and the Rights will expire at the end of the calendar month in which the final adjournment of the Annual Meeting occurs.  Additionally, the Rights will expire upon the earliest of (i) the close of business on May 26, 2020 unless that date is advanced or extended; (ii) the time at which the Rights are redeemed or exchanged under the Rights Plan; (iii) the repeal of Section 382 or any successor statute if the Board determines that the Rights Plan is no longer necessary for the preservation of the Company’s Tax Benefits; (iv) the beginning of a taxable year of the Company to which the Board determines that no Tax Benefits may be carried forward; and (v) such time as the Board determines that a limitation on the use of the Tax Benefits under Section 382 would no longer be material to the Company.  The Rights Plan requires the Board to consider the determination under subsection (v) at least annually.
 
Transferability of Rights.  The Rights Plan provides that until the Distribution Date (or earlier expiration or redemption of the Rights), the Rights will be attached to and will be transferred with and only with the Common Stock.  Until the Distribution Date (or the earlier expiration or redemption of the Rights), new shares of Common Stock issued after the Plan Record Date upon transfer or new issuances of Common Stock will contain a notation incorporating the Rights by reference (with respect to shares represented by certificates) or notice thereof will be provided in accordance with applicable law (with respect to uncertificated shares).  Until the Distribution Date (or earlier expiration of the Rights), the surrender for transfer of any certificates representing shares of Common Stock outstanding as of the Plan Record Date, even without such notation, or the transfer by book-entry of any uncertificated shares of Common Stock, will also constitute the transfer of the Rights associated with such shares.  As soon as practicable following the Distribution Date, separate certificates evidencing the Rights (“Right Certificates”) will be mailed to holders of record of the Common Stock as of the close of business on the Distribution Date, and the Rights will thereafter be evidenced solely by such separate Right Certificates.
 
Cashless Exercise of Rights.  If any person becomes an Acquiring Person, the Board, in its sole discretion, may permit the Rights, other than Rights owned by the Acquiring Person, related persons or transferees (which will thereupon become null and void), to be exercised by the holders of the Rights without cash payment by surrendering the Rights Certificates (as defined below) for 50% of the shares of Common Stock that would otherwise be received upon exercise and payment of the Purchase Price.
 
Exchange Option.  At any time after any person becomes an Acquiring Person but before the acquisition by such Acquiring Person of ownership of 50% or more of the shares of Common Stock then outstanding, the Board, at its option, may exchange the Rights other than Rights owned by such Acquiring Person, related persons or transferees (which will have become null and void), in whole or in part, for shares of Common Stock (or a series of the Company’s preferred stock having equivalent rights, preferences and privileges), at an exchange ratio of one share of Common Stock, or a fractional share of preferred stock of equivalent value, per Right (subject to adjustment).
 
 
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Redemption of Rights.  At any time before the time an Acquiring Person becomes such, the Board may redeem the Rights in whole, but not in part, at a price of $0.001 per Right (“Redemption Price”) payable, at the option of the Company, in cash, shares of Common Stock or such other form of consideration as the Board shall determine.  The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish.  Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate, and the only right of the holders of Rights will be to receive the Redemption Price as rounded to the nearest $0.01.
 
Stockholders Owning 4.90% or More as of Plan Adoption Date.  Stockholders who owned 4.90% or more of the Company’s outstanding Common Stock as of the close of business on the Plan Adoption Date will not be deemed an Acquiring Person and will not trigger the Rights Plan so long as they do not (i) acquire any additional shares of Common Stock or (ii) fall under 4.90% ownership of Common Stock and then re-acquire 4.90% or more of the Common Stock.  The Rights Plan does not exempt any future acquisitions of Common Stock by these persons.
 
Exemptions.  Under the Rights Plan, the Board may, in its sole discretion, exempt any person from being deemed an Acquiring Person for purposes of the Rights Plan if the Board determines that such person’s ownership of Common Stock will not be likely to directly or indirectly limit the availability of the Company’s Tax Benefits or is otherwise in the best interests of the Company.  The Board also has the authority under the Rights Plan to grant exemptions for certain inadvertent acquisitions, subject to specified conditions.  The Board will not have any obligation, implied or otherwise, to grant any such exemptions.
 
Preferred Stock.  The terms of the shares of Preferred Stock purchasable upon exercise of the Rights have been previously authorized as set forth in the Company’s Amended Certificate of Designation of Series A Junior Participating Preferred Stock.  Because of the nature of the Preferred Stock’s dividend and liquidation rights, following the Company’s 1-for-5 reverse stock split effective July 11, 2012 the value of the one one-hundredth interest in a share of Preferred Stock purchasable upon exercise of each Right in general should approximate the value of one-fifth of a share of Common Stock.
 
Anti-Dilution.  The Purchase Price payable, and the number of shares of Preferred Stock or Common Stock or other securities or property issuable, upon exercise of the Rights is subject to adjustment from time to time to prevent dilution, including, in the event of stock dividends, distributions (excluding regular periodic cash dividends) or the grant of subscription rights or warrants to stockholders.
 
No Stockholder Rights.  Until a Right is exercised or exchanged, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends.
 
Amendment of Rights Plan.  For so long as the Rights are then redeemable, the Company may, except with respect to the Redemption Price, amend the Rights Plan in any manner.  After the Rights are no longer redeemable, the Company may, except with respect to the Redemption Price, amend the Rights Plan in any manner that does not adversely affect the interests of holders of the Rights (other than the Acquiring Person, related persons or transferees).
 
Other Considerations
 
As described above in “Background and Reasons for Proposal,” the Company has significant NOLs that may be limited if an “ownership change” under Section 382 of the IRC were to occur.  The Rights Plan is an important tool in reducing the likelihood that such an “ownership change” will occur and, therefore, in protecting the Company’s ability to offset future taxable income.  The Rights Plan is designed to deter any person, entity or group from buying the Company’s Common Stock if the acquisition would result in a stockholder owning 4.90% or more of the Company’s outstanding Common Stock and to deter persons, entities or groups now owning more than 4.90% of Common Stock under Section 382 from acquiring additional shares of the Company’s Common Stock without the approval of the Board.  In this way, the Rights Plan works to protect against an “ownership change” under Section 382 and is applicable to all holders of the Company’s Common Stock.  Therefore, the Board believes it is in the Company’s and its stockholders’ best interests to approve the Rights Plan, as amended.
 
 
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Nonetheless, you should consider the following points:
 
The Rights Plan May Not Be Effective. The Rights Plan may not be effective in deterring all transfers that could result in such an “ownership change.” In particular, it will not protect against (i) an “ownership change” that may have occurred before the implementation of the Rights Plan about which the Company is not aware due to delays in ownership reporting by stockholders, or (ii) an “ownership change” resulting from purchasers of shares who become 5% shareholders for purposes of Section 382, notwithstanding the Rights Plan, either because the purchaser is unaware of the Rights Plan or makes a conscious decision to discount the potential consequences under the Rights Plan.
 
● 
The Realizable Value of the Company’s NOLs Cannot Be Determined. The amount and timing of the Company’s future taxable income, if any, cannot be accurately predicted, and the Company cannot estimate the exact amount of NOLs that can ultimately be used to reduce its income tax liability. Although the Company is unable to quantify an exact value, it believes the NOLs are a very valuable asset, and the Board believes it is in the stockholders’ best interests to attempt to deter the imposition of additional limitations on their use by adopting the Rights Plan.

Potential Effects on Liquidity. The Rights Plan is expected to deter stockholders from acquiring, directly or indirectly, additional shares of the Company’s Common Stock in excess of the specified limitations. Furthermore, a stockholder’s ability to dispose of the Company’s stock may be limited by reducing the class of potential acquirers for that stock.

Potential Impact on Value. Because the Rights Plan may restrict a stockholder’s ability to acquire the Company’s Common Stock, the market value of the Common Stock might be affected. The Rights Plan could discourage or prevent accumulations of substantial blocks of shares in which the Company’s stockholders might receive a substantial premium above market value.  However, these disadvantages are outweighed, in the opinion of the Board, by the importance of maintaining the availability of the Company’s Tax Benefits.  The Rights Plan is intended to reduce the risk that the Company may be unable to fully utilize its Tax Benefits as a result of future transfers of the Company’s Common Stock.

Potential Anti-Takeover Effect. The Rights Plan could be deemed to have an “anti-takeover” effect because, among other things, it restricts the ability of a person, entity or group to accumulate more than 4.90% of the Company’s outstanding Common Stock without the approval of the Board.
 
Vote Required
 
The affirmative vote of a majority of the shares of Common Stock present in person or by proxy and entitled to vote at the Annual Meeting and on the proposal is required to approve the Rights Plan, as amended. The persons named in the enclosed proxy card will vote “FOR” the proposal unless instructed otherwise in the proxy. Abstentions will have the same effect as votes against the proposal. “Broker non-votes” will not have any effect on the outcome of this proposal.
 
Recommendation of the Board of Directors
 
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” PROPOSAL 3.
 
 
 
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PROPOSAL 4
ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS
 
The Board believes that the Company’s long-term success depends in large measure on the talents of its employees. Autobytel’s compensation system plays a significant role in its ability to attract, retain and motivate the highest quality workforce.  The Board believes that the Company’s current compensation program directly links executive compensation to performance, aligning the interests of Autobytel’s executive officers with those of its stockholders.  The Board endorses the Company’s executive compensation program and encourages stockholders to review the Compensation Discussion and Analysis, tables and disclosures included under the Section entitled “EXECUTIVE COMPENSATION” of this Proxy Statement.
 
Section 14A of the Exchange Act requires that the Company periodically submit to the stockholder for an advisory vote a resolution to approve the compensation of its named executive officers as described in this Proxy Statement. At the Company’s 2013 annual meeting of stockholders, approximately 58% of the votes present and entitled to vote on the proposal voted to approve the holding of this advisory vote every two years. In light of this vote, the Board determined to include a stockholder advisory vote on the compensation of the named executive officers in the Company's proxy materials every two years. At the Company’s 2015 annual meeting of stockholders, approximately 92% of the votes present and entitled to vote on the proposal voted for approval of this resolution.
 
The Board recommends that the stockholders vote “FOR the following resolution:
 
RESOLVED, that the stockholders approve the compensation of the Company’s named executive officers as described in this Proxy Statement under “Executive Compensation,” including the Compensation Discussion and Analysis and the tabular and narrative disclosure contained in this Proxy Statement.
 
Because the vote on this Proposal 4 is advisory, it will not be binding upon the Board or the Board’s Compensation Committee, and neither the Board nor the Compensation Committee will be required to take any action as a result of the outcome of the vote on this proposal.  However, the Board and Compensation Committee value the opinions that the Company’s stockholders express in their votes and will take into account the outcome of the vote when considering future executive compensation arrangements.
 
Vote Required and Recommendation of the Board of Directors
 
The affirmative vote of a majority of the shares of Common Stock present in person or by proxy and entitled to vote at the Annual Meeting and on the proposal is required to approve the advisory (non-binding) vote on executive compensation.  The persons named in the enclosed proxy card will vote “FOR the proposal unless instructed otherwise in the proxy.  Abstentions will have the same effect as votes against the proposal. “Broker non-votes” will not have any effect on the outcome of this proposal.
 
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL 4.
 
 
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PROPOSAL 5 
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
The Board’s Audit Committee has appointed Moss Adams LLP (“Moss Adams”) as the Company’s independent registered public accounting firm for 2017.  The Audit Committee and the Board recommend that the Company’s stockholders ratify this appointment.  In line with this recommendation, the Board intends to introduce the following resolution at the Annual Meeting:
 
RESOLVED, that the appointment of Moss Adams LLP as the independent registered public accounting firm for the Company for the year 2017 is ratified.
 
Stockholder ratification of the Audit Committee’s selection of Moss Adams as the Company’s independent registered public accounting firm is not required by the Bylaws or otherwise.  Nevertheless, the Board is submitting the selection of Moss Adams to the stockholders for ratification as a matter of good corporate practice and will reconsider whether to retain Moss Adams if the stockholders fail to ratify the Audit Committee’s selection.  In addition, even if the stockholders ratify the selection of Moss Adams, the Audit Committee may in its discretion appoint a different independent registered public accounting firm at any time during the year if the Audit Committee determines that a change is in the best interests of the Company.  A member of Moss Adams is expected to attend the Annual Meeting to make a statement if the member desires and to respond to appropriate questions that may be asked by stockholders.
 
Vote Required
 
The affirmative vote of a majority of the shares of Common Stock present in person or by proxy and entitled to vote at the Annual Meeting and on the proposal is required to approve Proposal 5. The persons named in the enclosed proxy card will vote “FOR” the proposal unless instructed otherwise in the proxy. Abstentions will have the same effect as votes against the proposal. “Broker non-votes” will not have any effect on the outcome of this proposal.
 
Board of Directors Recommendation
 
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL 5.
 
 
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BOARD OF DIRECTORS
 
The current members of the Board of Autobytel are as follows:
 
 
 
 
 
Name
 
 Age
 
Position
Michael J. Fuchs
 
71
 
Chairman of the Board
Michael A. Carpenter
 
70
 
Director
Jeffrey H. Coats
 
59
 
Director, President and Chief Executive Officer
Matías de Tezanos
 
37
 
Director
Mark N. Kaplan
 
87
 
Director
Jeffrey M. Stibel
 
43
 
Director
Janet M. Thompson
 
67
 
Director
José Vargas
 
38
 
Director, Chief Revenue Officer
 
Michael J. Fuchs. Mr. Fuchs has served as a director of Autobytel since September 1996 and became Chairman in June 1998.  Since May 2001, Mr. Fuchs has been engaged in private investing for his own behalf.  From November 2000 to May 2001, Mr. Fuchs was Chief Executive Officer of MyTurn.com, Inc. and was Interim Chief Executive Officer from April 2000 to October 2000.  Mr. Fuchs was a consultant from November 1995 to April 2000.  Mr. Fuchs was Chairman and Chief Executive Officer of Home Box Office, a division of TimeWarner Entertainment Company, L.P., a leading pay-television company, from October 1984 until November 1995, and Chairman and Chief Executive Officer of Warner Music Group, a division of Time Warner Inc., from May 1995 to November 1995.  Mr. Fuchs holds a B.A. Degree from Union College and a J.D. Degree from the New York University School of Law.  Mr. Fuchs was a significant early investor in the Company.  Mr. Fuchs’ experience as an executive officer in various entertainment and media companies and his broad investment and management experience led the Board to conclude that Mr. Fuchs should serve as one of the Company’s directors.
 
Michael A. Carpenter.  Mr. Carpenter has served as a director of Autobytel since September 2012.  Mr. Carpenter served as the Chief Executive Officer and as a director of Ally Financial Inc. from November 2009 until his retirement in February 2015.  Ally Financial is one of the nation’s largest financial services companies, with a concentration in automotive lending.  In 2007, he founded Southgate Alternative Investments, Inc.  From 2002 to 2006, he was Chairman and Chief Executive Officer of Citigroup Alternative Investments, overseeing proprietary capital and customer funds globally in various alternative investment vehicles.  From 1998 to 2002, Mr. Carpenter was Chairman and Chief Executive Officer of Citigroup’s Global Corporate & Investment Bank with responsibility for Salomon Smith Barney Inc. and Citibank’s corporate banking activities globally.  Mr. Carpenter was named Chairman and Chief Executive Officer of Salomon Smith Barney Inc. in 1998, shortly after the merger that created Citigroup.  Prior to Citigroup, Mr. Carpenter was Chairman and Chief Executive Officer of Travelers Life & Annuity and Vice Chairman of Travelers Group Inc. responsible for strategy and business development.  From 1989 to 1994, Mr. Carpenter was Chairman of the Board, President and Chief Executive Officer of Kidder Peabody Group Inc., a wholly owned subsidiary of General Electric Company.  From 1986 to 1989, Mr. Carpenter was Executive Vice President of GE Capital Corporation.  He first joined GE in 1983 as Vice President of Corporate Business Development and Planning and was responsible for strategic planning and development as well as mergers and acquisitions.  Earlier in his career, Mr. Carpenter spent nine years as Vice President and Director of the Boston Consulting Group and three years with Imperial Chemical Industries of the United Kingdom. Mr. Carpenter was elected to the board of CIT, Inc., a publicly held financial holding company, on May 1, 2016.  Mr. Carpenter received a B.S. Degree from the University of Nottingham, England, and a M.B.A. from the Harvard Business School where he was a Baker Scholar.  Mr. Carpenter also holds an honorary degree of Doctor of Laws from the University of Nottingham.  He serves on the boards of CIT, Inc., Law Finance Group, US Retirement Partners and the New York City Investment Fund and has been a board member of the New York Stock Exchange, General Signal, Loews Cineplex and various other private and public companies.  Mr. Carpenter’s experience in investment and commercial banking, executive management and capital markets led the Board to conclude that Mr. Carpenter should serve as one of the Company’s directors.
 
 
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Jeffrey H. Coats.  See Mr. Coats’ biographical information included under the section of this Proxy Statement entitled “PROPOSAL 1–NOMINATION AND ELECTION OF DIRECTORS–Nominees for Class I Directors.”
 
Matías de Tezanos. See Mr. de Tezanos’ biographical information included under the section of this Proxy Statement entitled “PROPOSAL 1–NOMINATION AND ELECTION OF DIRECTORS–Nominees for Class I Directors.”
 
              Mark N. Kaplan. Mr. Kaplan has served as a director of Autobytel since June 1998.  Mr. Kaplan was a member of the law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1979 through 1998 and currently is of counsel to that firm, Chairman of the Board and Chief Operating Officer of Engelhard Minerals & Chemicals Corporation (mining and chemicals) from 1977 to 1979, and President and Chief Executive Officer of Drexel Burnham Lambert (investment banking) from 1970 to 1977.  Mr. Kaplan serves as Chairman of the Board of directors of American Biltrite Inc., a publicly-traded company (adhesive-coated, pressure-sensitive papers and films; tile flooring).  He also is a Trustee of Bard College, the New York Academy of Medicine, a member and former Chairman of the New York City Audit Committee, a Trustee and Chairman of the Audit Committee of WNET.org (provider of public media in the New York City metropolitan area), a director of a number of offshore commodity funds managed by Gresham Management Co.  Mr. Kaplan was formerly the Chairman of the Audit Advisory Committee of the Board of Education of The City of New York, Vice-Chairman and Governor of the board of directors of The American Stock Exchange, Inc., and a director of Security Industry Automation Corporation.  Mr. Kaplan holds an A.B. Degree from Columbia College and a LL.B Degree from Columbia Law School.  Mr. Kaplan’s experience in securities and corporate laws, mergers and acquisitions, investment banking and business management, as well as his qualification as an audit committee financial expert, led the Board to conclude that Mr. Kaplan should serve as one of the Company’s directors.
 
Jeffrey M. Stibel.  See Mr. Stibel’s biographical information included under the section of this Proxy Statement entitled “PROPOSAL 1–NOMINATION AND ELECTION OF DIRECTORS–Nominees for Class I Directors.”
 
Janet M. Thompson.  Ms. Thompson has served as a director of Autobytel since March 2008.  Since January 1, 2015, Ms. Thompson has been Senior Vice President of Ipsos Automotive, a global automotive market research company. Prior to that Ms. Thompson was Vice President, Marketing of Advanstar Communications Inc., the leading provider of integrated media solutions to the automotive aftermarket, pharmaceutical, healthcare, power sports and fashion industries from July 2011 to January 1, 2015; Vice President, Automotive Group for The Marketing Arm, an Omnicom Group agency, from January 2011 to June 2011; Executive Vice President of the Diversified Agency Services Division of Omnicom Group, an advertising firm, from November 2007 to August 2010; Vice President, Marketing Nissan and Infiniti Divisions of Nissan North America, from July 2004 to September 2007; and from July 1999 to July 2004, Ms. Thompson was Chief Executive Officer and President of The Designory, Inc., a marketing firm owned by the Omnicom Group.  Ms. Thompson held sales or marketing positions at Mazda Motor of America, Toyota Motor Sales, U.S.A. and Chrysler Corporation, from 1972 to 1994.  Ms. Thompson received a B.A. Degree in business from Western Michigan University and a M.B.A. from University of Detroit. Ms. Thompson has the distinction of being named one of the Top 100 Women in the Automotive Industry in both 2005 and 2010.  Ms. Thompson’s experience as an advertising and marketing executive in the automotive industry led the Board to conclude that Ms. Thompson should serve as one of the Company’s directors.
 
José Vargas.  Mr. Vargas has served as a director of Autobytel and as the Company’s Chief Revenue Officer since October 1, 2015. From September 18, 2013 to October 1, 2015, Mr. Vargas was a director and president of AutoWeb, an internet-based, pay-per-click advertising marketplace for the automotive industry, prior to its acquisition by the Company as of October 1, 2015. Mr. Vargas is a co-founder, director and the president of Peoplefund, a holding company that is focused on investments in technology, internet and media, and a co-founder of, and currently serves as a co-managing director and president of PF Holding, an entity affiliated with PeopleFund that is focused on investments in technology, internet and media, as well as vice president and a director of PF Auto, an entity affiliated with PeopleFund, and co-managing director and president of Auto Holdings, also an entity affiliated with PeopleFund. Mr. Vargas was a co-founder of and currently serves on the board of directors of Healthcare, Inc., an online search, comparison and recommendation tool for healthcare consumers.  Previously, Mr. Vargas was a co-founder, president and a director of BrokersWeb, an internet-based insurance advertising and marketing company, from September 1, 2008 to September 15, 2011, when it was acquired by VantageMedia, LLC. Mr. Vargas was a co-founder, president and a director of BlueKite Ltd., a cross border remittance company, from August 1, 2012 to January 10, 2014, when it was acquired in 2014 by XOOM Corporation; and was founder and chief executive officer of MailCreations.com, Inc., an opt-in email marketing, lead generation and data mining company, from April 17, 2001 to June 4, 2004, when it was acquired. Mr. Vargas received a B.S. Degree from Florida International University.
 
Mr. Vargas was appointed to the Board pursuant to the Stockholder Agreement described below under the section of this Proxy Statement entitled “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT” upon Autobytel’s acquisition of AutoWeb, as of October 1, 2015. Mr. Vargas serves as one of the two representatives on the Board designated by the holders of the Company’s Series B Junior Participating Convertible Preferred Stock. Mr. Vargas’ experience in founding and growing technology and online media companies led the Board to conclude that Mr. Vargas should serve as one of the Company’s directors.
 
 
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EXECUTIVE OFFICERS
 
The current executive officers of Autobytel are as follows:
 
 Name
 
Age
 
Position
Jeffrey H. Coats
 
59
 
President and Chief Executive Officer, Director
Kimberly S. Boren
 
43
 
Executive Vice President, Chief Financial Officer
William A. Ferriolo
 
44
 
Executive Vice President, Chief Operating Officer
Glenn E. Fuller
 
62
 
Executive Vice President, Chief Legal and Administrative Officer and Secretary
José Vargas
 
38
 
Chief Revenue Officer, Director
John D. Steerman
 
52
 
Executive Vice President, Mobile, Lead Operations and Product Development
John J. Skocilic, Jr.
 
48
 
Executive Vice President, Chief Information Officer
 
Jeffrey H. Coats.  See Mr. Coats’ biographical information included under the section of this Proxy Statement entitled “PROPOSAL 1–NOMINATION AND ELECTION OF DIRECTORS–Nominees for Class I Directors.”
 
Kimberly S. Boren.  Ms. Boren rejoined Autobytel as Senior Director of Financial Planning and Analysis in April 2010.  She was promoted to Vice President, Advertising Operations and Analytics in December 2010, Senior Vice President of Advertising Operations and Analytics in December 2011, Senior Vice President, Business Analysis and Websites in February 2014, Senior Vice President, Chief Financial Officer effective as of April 1, 2015, and Executive Vice President, Chief Financial Officer in September 2016.  Prior to rejoining Autobytel, Ms. Boren held leadership roles at Experian in the Interactive Business Group, Honeywell in both the automotive and aerospace businesses, and Shepherd Packaging and Container.  From July 2007 to June 2009, Ms. Boren held various positions in the finance group at Autobytel.  Ms. Boren attended the University of California, Santa Barbara, where she received a B.A. Degree in Communications with a focus in Business Economics.  She later received a M.B.A. in Finance from the University of Southern California.
 
William A. Ferriolo.   Mr. Ferriolo joined Autobytel as Vice President, Cyber Ventures Division in September 2010 in connection with the Company’s acquisition of the businesses of Cyber Ventures, Inc. and Autotropolis, Inc.  Mr. Ferriolo was appointed as Senior Vice President, Consumer Acquisitions in December 2011 and promoted to Executive Vice President, Consumer Acquisitions effective April 23, 2014, Executive Vice President, Chief Business Officer in January 2016, and Executive Vice President, Chief Operating Officer in December 2016.  Prior to joining Autobytel, from 2003 to 2010, Mr. Ferriolo served as President and Co-Founder of Cyber Ventures, Inc. and Autotropolis, Inc., where he was responsible for search engine optimization, search engine marketing, dealer accounts and sales.  From 1997 to 2003, Mr. Ferriolo served as Service Manager and High Line Sales Associate for Dimmitt Automotive Group, where he was responsible for the service department and high line vehicle sales.  From 1991 to 1997, Mr. Ferriolo served as a Service Advisor at the Carlisle Automotive Group, where he was responsible for servicing of customer vehicles.
 
Glenn E. Fuller.  Mr. Fuller joined Autobytel as Vice President, Legal Affairs in October 2006 and was promoted to Senior Vice President, Chief Legal Officer and Secretary in April 2008, Senior Vice President, Chief Legal and Administrative Officer and Secretary in December 2008, and Executive Vice President, Chief Legal and Administrative Officer and Secretary as of January 19, 2009.  Prior to joining Autobytel, Mr. Fuller was in private legal practice from August 2002 to October 2006, and from June 1996 to July 2002, he served as Senior Vice President, Chief Legal Officer and General Counsel of Freedom Communications, Inc. (newspapers, television stations and other media).  From April 1994 to June 1996, Mr. Fuller was of counsel to the law firm of Gibson, Dunn & Crutcher LLP and was associated with that firm from September 1980 to May 1987.  Mr. Fuller was a partner in the law firm of Pettis, Tester, Kruse & Krinsky from January 1988 to December 1992 and employed as an attorney at that firm from May 1987 to December 1987 and from January 1993 to June 1993.  From July 1993 to January 1994, Mr. Fuller was Executive Vice President and General Counsel of Airline Computerized Ticketing (airline ticketing).  Mr. Fuller received a B.A. Degree from California State University at Long Beach and a J.D. Degree from the University of Southern California.
 
 
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José Vargas.  See Mr. Vargas’ biographical information included under the section of this Proxy Statement entitled “BOARD OF DIRECTORS.”
 
John D. Steerman.  Mr. Steerman joined Autobytel as Director of Lead Operations in May 2007 and has served in various positions and held various titles with the Company since that date.  In December 2011, Mr. Steerman was appointed Senior Vice President, Lead and Site Product Development and Operations, to Senior Vice President, Mobile, Lead Operations and Product Development in January 21, 2014 and to Executive Vice President, Mobile, Lead Operations and Product Development effective January 1, 2016.  Prior to joining Autobytel, Mr. Steerman was a District Sales Manager with Ford Motor Company, from June 1992 to October 1996.  In that role, he was responsible for managing distribution, marketing and training in several of Ford’s top volume markets, including Houston and Fort Worth, Texas.  From November 1996 to July 2007, Mr. Steerman worked at Nissan North America where he held numerous sales and marketing positions, including Senior Manager eBusiness, during which time Mr. Steerman managed the re-launch of NissanUSA.com and Infiniti.com, as well as the launch of a lead management program for both Nissan and Infiniti Divisions.  While at Nissan, Mr. Steerman also managed a task force that launched Nissan’s Full Size Truck and SUV and was a member of the Infiniti Global Management team that was responsible for the strategic and operational plan to launch the Infiniti brand globally.  Mr. Steerman received a B.S. Degree in Finance and a M.B.A. from The Pennsylvania State University.
 
John J. Skocilic, Jr.  Mr. Skocilic joined Autobytel as Dealer Real Time Specialist in June 1998 and has served in various capacities at Autobytel including: Manager, Systems Engineering and Architecture; Senior Director IT Operations; and Vice President, Technology; and was appointed as Senior Vice President, Technology in April 2013, Executive Vice President, Technology in January 2016 and, more recently, he was promoted to Executive Vice President, Chief Information Officer effective January 1, 2017. During his time with Autobytel, Mr. Skocilic has been responsible for leading the implementation of numerous technologies, including Autobytel Data Centers, Patented Lead Engine Technologies, and the re-launch of www.autobytel.com, the flagship website for Autobytel.  Prior to joining Autobytel, Mr. Skocilic served as Computer Technician of C.S.S. Laboratories, from 1997 to 1998, where he was responsible for support of computer systems implemented by The City of New York.  Mr. Skocilic held the position of Professor at Coastline Community College in the Computer Service and Technology Department from 1998 to 2002.
 
All of the officers named in the Executive Officer table above served as executive officers during 2016.  H. Donald Perkins, Jr. served as the Company’s Executive Vice President, Strategic and Business Development until December 31, 2016, at which time his employment with the Company ceased.  Mr. Perkins is reported in this Proxy Statement as a named executive officer of the Company for 2016.
 
All executive officers of Autobytel are chosen by the Board and serve at its discretion.
 
 
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
The following table sets forth certain information regarding the calculation of beneficial ownership of Autobytel’s Common Stock as of the Record Date, by all persons known by Autobytel to be beneficial owners of more than 5% of the Common Stock of Autobytel, each director and nominee, each of the named executive officers identified in the section of this Proxy Statement entitled “EXECUTIVE COMPENSATION–Summary Compensation,” and all directors and executive officers (including the named executive officers other than Mr. Perkins, who is not a current executive officer) as a group.  Shares of Common Stock are deemed to be outstanding and to be beneficially-owned by the persons listed below for the purpose of computing the percentage ownership of the person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person, if that person has the right to acquire beneficial ownership of such shares within 60 days of the Record Date through the exercise of any option, warrant or other right or the conversion of any security, or pursuant to the power to revoke, or the automatic termination of, a trust, discretionary account or similar arrangement.  Except as otherwise noted, the persons or entities in this table have sole voting and investing power with respect to all shares of Common Stock beneficially owned by them subject to community property laws, where applicable.  The information with respect to each person specified is as supplied or confirmed by that person, based upon statements filed with the SEC or based upon the actual knowledge of Autobytel.
 
 
 
Shares Beneficially
Owned
 
 
Name of Beneficial Owner:
 
Number
 
 
Percentage
 
 
Auto Holdings Ltd.(1)
  1,475,268 
  13.3 
%
Matías de Tezanos(1)
  1,475,268 
  13.3 
%
José Vargas(1)(2)
  1,483,021 
  13.4 
%
Jeffrey H. Coats(3)
  451,583 
  3.9 
%
William Ferriolo(4)
  334,855 
  3.0 
%
Glenn E. Fuller(5)
  158,805 
  1.4 
%
Michael J. Fuchs(6)
  97,680 
  * 
 
Kimberly S. Boren(7)
  110,966 
  1.0 
%
Mark N. Kaplan(8)
  52,000 
  * 
 
Jeffrey M. Stibel(9)
  49,000 
  * 
 
Janet M. Thompson(10)
  52,040 
  * 
 
Michael A. Carpenter(11)
  49,000 
  * 
 
All executive officers (including named executive officers, other than Mr. Perkins) and directors as a group (13 persons)(12)
  1,589,373 
  12.8 
%
 
*
Less than 1%.
 
(1)
The information presented in the table with respect to the beneficial ownership of Auto Holdings and Messrs. de Tezanos and Vargas was obtained solely from the Schedule 13D filed with the SEC on May 5, 2015, as amended on October 14, 2015 and November 23, 2015 (collectively, the “Auto Holdings Schedule 13D”), jointly filed by the following persons:  (i) Auto Holdings; (ii) PF Auto; (iii) Ceiba; (iv) José Vargas, a citizen of Venezuela and an officer and director of Autobytel; (v) Galeb3; (vi) Matías de Tezanos, a citizen of Costa Rica and a director of Autobytel; (vii) Manatee; (viii) John Peter Klose de Ojeda, a citizen of Guatemala; (ix) Richard Aitkenhead Castillo, a citizen of Guatemala; (x) Investment and Development Finance Corp., a Panama company (“IDFC”), (xi) IDC Financial, S.A., a Panama company (“IDC Financial”); (xii) Juan Christian Klose Pieters; and (xiii) Margarita Klose (collectively, the “Reporting Persons”).  The Auto Holdings Schedule 13D states that each of the Reporting Persons disclaims beneficial ownership of the reported shares except to the extent of their pecuniary interest therein. Pursuant to the Stockholder Agreement, the reported shares are subject to irrevocable proxies in favor of Autobytel’s Chief Executive Officer, Chief Financial Officer and Chief Legal Officer, and each of them individually, to exercise all voting rights of the applicable stockholders with respect to the shares at any meeting of stockholders of the Company, and in any action by written consent of the stockholders of the Company, in accordance with the recommendations of or instructions provided by the Board. The Auto Holdings Schedule 13D lists the addresses of the Reporting Persons as follows: (i) Auto Holdings, PF Auto, Mr. de Tezanos, Manatee, Mr. Juan Christian Klose Pieters, Ms. Margarita Klose and IDC Financial: Diagonal 6, 12-42 zona 10, Edificio Design Center, Torre II, Of. 1103, Guatemala City, Guatemala 01010; (ii) Ceiba, IDFC, Mr. John Peter Klose de Ojeda and Mr. Aitkenhead Castillo: 13 calle 2-60, zona 10, Edificio Topacio Azul, Of. 1301, Guatemala City, Guatemala 01010; and (iii) Mr. Vargas and Galeb3: 3250 NE 1st Avenue, Suite 915, Miami, Florida 33137.
 
 
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(2)
Includes 7,753 shares of Common Stock acquired by Mr. Vargas in open market transactions on November 28, 2016. The information presented in the table with respect to the beneficial ownership of these shares of Common Stock was obtained solely from the Form 4/A filed November 28, 2016.
(3)
Includes 437,914 shares issuable upon exercise of options exercisable within 60 days of the Record Date.
(4)
Includes 184,090 shares issuable upon exercise of options exercisable within 60 days of the Record Date.
(5)
Includes 152,105 shares issuable upon exercise of options exercisable within 60 days of the Record Date
(6)
Includes 45,000 shares issuable upon exercise of options exercisable within 60 days of the Record Date.
(7)
Includes 109,706 shares issuable upon exercise of options exercisable within 60 days of the Record Date.
(8)
Includes 45,000 shares issuable upon exercise of options exercisable within 60 days of the Record Date.
(9)
Includes 45,000 shares issuable upon exercise of options exercisable within 60 days of the Record Date.
(10)
Includes 50,000 shares issuable upon exercise of options exercisable within 60 days of the Record Date.
(11)
Includes 35,000 shares issuable upon exercise of options exercisable within 60 days of the Record Date.
(12)
Includes 1,316,337 shares issuable upon exercise of options exercisable within 60 days of the Record Date. Excludes shares subject to the proxies described in Footnote 1 above.
 
As described under the section of this Proxy Statement entitled “PROPOSAL 2–APPROVAL OF SERIES B PREFERRED STOCK CONVERSION,” Autobytel acquired AutoWeb on October 1, 2015, and in connection with the acquisition, Autobytel issued the following securities to the former stockholders of AutoWeb: (1) 168,007 newly issued shares of Series B Preferred Stock; and (2) the AutoWeb Warrants to purchase up to 148,240 shares of Series B Preferred Stock. Each share of Series B Preferred Stock outstanding and the shares of Series B Preferred Stock that may be acquired upon exercise of the AutoWeb Warrants are convertible into 10 shares of Common Stock upon approval of such conversion by the Company’s stockholders. For a description of the Series B Preferred Stock and the AutoWeb Warrants, see PROPOSAL 2–APPROVAL OF SERIES B PREFERRED STOCK CONVERSION.
 
 
 
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CORPORATE GOVERNANCE MATTERS
 
Board Classes
 
The Board is divided into three classes, with each class holding office for staggered three-year terms.  The term of the Class I Directors, Jeffrey H. Coats, Jeffrey M. Stibel, and Matías de Tezanos, expires at the Annual Meeting; the term of the Class II Directors, Mark N. Kaplan, Michael A. Carpenter, and José Vargas, expires in 2018; and the term of the Class III Directors, Michael J. Fuchs and Janet M. Thompson, expires in 2019.
 
Committees of the Board of Directors
 
The Board has constituted an Audit Committee, a Compensation Committee and a Corporate Governance and Nominations Committee. Copies of the charters of each of these committees are posted and available on the Corporate Governance link of the Investor Relations section of the Company’s website, www.autobytel.com.  Information on the Company’s website is not incorporated by reference in this Proxy Statement.
 
Audit Committee.  The Audit Committee was established by the Board in accordance with Section 3(a)(58)(A) of the Exchange Act.  The Audit Committee met on four occasions in 2016 and operates under a charter approved by the Board.  The Audit Committee’s primary responsibilities are to:
 
oversee Autobytel’s accounting and financial reporting policies, processes, practices and internal controls;
 
appoint, approve the compensation of, and oversee the Company’s independent registered public accounting firm;
 
review the quality and objectivity of Autobytel’s independent audit and financial statements; and
 
act as liaison between the Board and the independent registered public accounting firm.
 
The Audit Committee currently consists of Mark N. Kaplan (Chairman), Janet M. Thompson, Michael J. Fuchs and Michael A. Carpenter.  The Audit Committee meets periodically with the Company’s independent registered public accounting firm, both with and without management present.  The Board has determined that Mr. Kaplan is an “audit committee financial expert” within the meaning of Item 407(d)(5)(ii) of Regulation S-K under the Securities Act.  The identification of Mr. Kaplan as an “audit committee financial expert” does not impose on him any duties, obligations or liabilities that are greater than the duties, obligations and liabilities imposed on him as a member of the Audit Committee in the absence of this identification.
 
Compensation Committee.  The Compensation Committee, which met on six occasions in 2016 and operates under a charter approved by the Board, is responsible for:
 
determining or recommending to the Board the compensation of the Chief Executive Officer and each other executive officer or any other officer who reports directly to the Chief Executive Officer based on the performance of each officer;
 
  
making recommendations to the Board regarding stock option and purchase plans and other equity compensation arrangements;
 
granting equity awards and approving any delegation of such responsibility under certain circumstances; and
 
preparing reports regarding executive compensation for disclosure in Autobytel’s proxy statements or as otherwise required by applicable laws.
 

 
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              The Compensation Committee currently consists of Janet M. Thompson (Chairwoman), Michael J. Fuchs, Mark N. Kaplan and Jeffrey M. Stibel.  The Compensation Committee does not have authority to delegate its responsibilities to a subcommittee without approval of the Board.  The Board has approved the creation of the Non-Executive Stock Option Committee, a committee of the Board that currently consists of one director, Jeffrey H. Coats, the Company’s President and Chief Executive Officer.  The Non-Executive Stock Option Committee has the authority to grant stock options to eligible persons who (i) are employed by the Company or its subsidiaries and are not subject to reporting under Section 16(a) of the Exchange Act or (ii) are consultants or service providers to the Company or its subsidiaries.  The Non-Executive Stock Option Committee may not grant more than 50,000 options in the aggregate in any one fiscal year, and individual grants cannot exceed more than 5,000 options. The processes of the Compensation Committee and the role of the Chief Executive Officer and compensation consultants in determining or recommending the amount or form of executive or director compensation are discussed in the section of this Proxy Statement entitled “EXECUTIVE COMPENSATION–Compensation Discussion and Analysis.”
 
Corporate Governance and Nominations Committee.  The Corporate Governance and Nominations Committee, which met on one occasion in 2016 and operates under a charter approved by the Board, is responsible for:
 
identifying individuals qualified to become directors and selecting director nominees or recommending nominees to the Board for nomination;
 
recommending nominees for appointment to committees of the Board;
 
developing and recommending charters of committees of the Board; and
 
overseeing the corporate governance of Autobytel and, as deemed necessary or desirable from time to time, developing and recommending corporate governance policies to the Board.
 
The Corporate Governance and Nominations Committee currently consists of Michael J. Fuchs (Chairman), Mark N. Kaplan and Jeffrey M. Stibel.
 
Attendance at Board and Committee Meetings
 
During the fiscal year ended December 31, 2016, the Board held a total of seven meetings.  Each member of the Board, other than Mr. Vargas, attended 75% or more of the aggregate of (i) the total number of meetings of the Board held during the period in 2016 for which the director was a member; and (ii) the total number of meetings held by all committees of which the director was a member during 2016 and during the period in which the director served as a member of the committees. Mr. Vargas was absent from two meetings of the Board held in 2016. The Board and its committees typically meet in executive session without management present during regularly scheduled meetings of the Board and the committees.
 
Attendance at Annual Meeting of Stockholders
 
All directors attended the 2016 annual meeting of stockholders, of which seven directors attended in person and two attended by telephone. Typically, a Board meeting is scheduled on the date of any annual meeting of stockholders.  Although the Board has not adopted a formal policy, all directors are expected to attend the annual meeting of stockholders.
 
Director Independence
 
All directors, other than Jeffrey H. Coats, Matías de Tezanos and José Vargas, and all committee members satisfy the definition of independent director under the Nasdaq Rules.  The current members of the Audit Committee and the Compensation Committee are “independent” under the Nasdaq listing rules and the SEC rules regarding audit committee and compensation committee membership.
 
 
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In connection with Mr. Carpenter’s appointment to the Board in September 2012, the Corporate Governance and Nominations Committee and the Board determined that Mr. Carpenter is an “independent director” within the meaning of the Nasdaq Rules applicable to the Company, including the additional independence requirements for serving on audit committees.  In addition to Mr. Carpenter’s broad business, operational and financial experience, particularly in the automotive sector, and other evaluation factors considered by the Company’s Corporate Governance and Nominations Committee and the Board, in their consideration and evaluation of Mr. Carpenter, the Company’s Corporate Governance and Nominations Committee and the Board considered that Mr. Jeffrey H. Coats, the Company’s President and Chief Executive Officer and a member of the Board, has personally known Mr. Carpenter since they were both employed at General Electric Company or its various subsidiaries or divisions and that Mr. Coats was a partner in Southgate Alternative Investments, Inc. (“Southgate”), an investment fund founded by Mr. Carpenter to acquire general partnership interests in hedge funds.  The Corporate Governance and Nominations Committee and the Board also considered that Mr. Coats’ investment in Southgate was funded by loans from Mr. Carpenter in the aggregate principal amount of $450,000.  These loans are represented by notes that accrue interest at a rate of 8% per annum, are secured by Mr. Coats’ interests in certain Southgate investments, and are now payable upon demand. Although the Corporate Governance and Nominations Committee and the Board do not consider this arrangement between Messrs. Carpenter and Coats prevents Mr. Carpenter from being an “independent director,” in connection with his service on the Board or on the Audit Committee, Mr. Carpenter will recuse himself in any decisions related to Mr. Coats’ employment at the Company or his compensation as long as this indebtedness remains outstanding.
 
Compensation Committee Interlocks and Insider Participation
 
Ms. Thompson, Mr. Fuchs, Mr. Kaplan and Mr. Stibel served as the members of the Compensation Committee during the Company’s last completed fiscal year. No member of the Compensation Committee was an officer or employee of the Company during its last completed fiscal year. Except for Messrs. de Tezanos and Vargas, none of the Company’s executive officers served as a member of the Compensation Committee or Board of any other entity that has an executive officer serving as a member of the Company’s Board or Compensation Committee. Mr. Vargas, an executive officer and director of the Company, and Mr. de Tezanos, an executive officer of the Company during 2016 and 2017 (until February 13, 2017, at which time he resigned as an officer of the Company) and a director of the Company, each serves as a board member and executive officer of the following investment holding companies controlled by and affiliated with Messrs. de Tezanos and Vargas: Classifieds Corp., Gray Mountain, Healthcare.com Insurance Services, Inc., People Fund, People Ventures, Inc., PF Auto, and PF Healthcare, Inc. Mr. Vargas serves as an executive officer and Mr. de Tezanos serves as a director of the following investment holding companies controlled by and affiliated with Messrs. de Tezanos and Vargas: AutoHoldings, Blue Mountain 30 Inc., Blue Mountain 31 Inc. and Blue Pacific Ventures Inc.; and Mr. de Tezanos serves as an executive officer and Mr. Vargas serves as a director of the following investment holding companies controlled by and affiliated with Messrs. de Tezanos and Vargas: GeoFi, Inc., PF Holding and Healthcare, Inc.
 
Board Leadership Structure
 
The Board does not have a policy on whether the roles of Chief Executive Officer and Chairman of the Board should be separate and, if they are to be separate, whether the Chairman of the Board should be selected from the non-employee directors or be an employee of the Company.  The Board believes that the Company and its stockholders benefit when the Board is free to determine the most appropriate leadership structure in light of the experience, skills and availability of directors and the Chief Executive Officer as well as other circumstances.  Currently, Mr. Fuchs serves as the Chairman of the Board, and Mr. Coats serves as a director and Chief Executive Officer.  The Board believes this is the most appropriate structure for the Company at this time because it makes the best use of the experience, skills and availability of Mr. Fuchs and Mr. Coats.
 
 
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Board’s Role in Oversight of Risk
 
It is management’s responsibility to manage risk and bring to the Board’s attention the most material risks to Autobytel.  The Board, including through Board committees comprised solely of independent directors, regularly reviews various areas of significant risk to Autobytel and advises and directs management on the scope and implementation of policies, strategic initiatives and other actions designed to mitigate various types of risks. Specific examples of risks reviewed by the Board with management include competition risks, industry risks, economic risks, liquidity risks, business operations risks and risks related to acquisitions and dispositions.  The Audit Committee regularly reviews with management and the independent auditors significant financial risk exposures and the processes management has implemented to monitor, control and report these exposures.  Specific examples of risks reviewed by the Audit Committee include risks related to the preparation of the Company’s financial statements, disclosure controls and procedures, internal controls and procedures required by the Sarbanes-Oxley Act of 2002, accounting, financial and auditing risks, treasury risks (insurance, credit and debt), matters reported to the Audit Committee through anonymous reporting procedures, risks posed by significant litigation matters and compliance with applicable laws and regulations.  The Audit Committee also monitors compliance with the Company’s Code of Conduct and Ethics for Employees, Officers and Directors and evaluates proposed transactions with related persons for compliance with laws and regulations and with Company policies and contracts. The Company’s Compensation Committee reviews and evaluates potential risks related to the attraction and retention of talent and risks related to the design of compensation programs established by the Compensation Committee for Autobytel’s executive officers. These procedures, however, cannot guaranty that all material risks will be identified, or if identified, reasonably and adequately mitigated. They also cannot assure that all persons are in compliance with the Company’s policies and procedures or that the Company and its employees are in compliance with all applicable laws and regulations.
 
Executives’ base salaries are fixed in amount and thus do not encourage risk-taking.  Incentive compensation is capped and is tied to overall corporate performance.  A significant portion of compensation provided to the executive officers is in the form of equity awards subject to time vesting that help to further align executives’ interests with those of the Company’s stockholders.  The Compensation Committee believes that these awards do not encourage unnecessary or excessive risk-taking since the ultimate value of the awards is tied to the Company’s stock price, and since awards are staggered and subject to long-term vesting schedules to help ensure that executives have significant value tied to long-term stock price performance.
 
The Compensation Committee has also reviewed the Company’s compensation programs for employees generally and has concluded that these programs do not create risks that are reasonably likely to have a material adverse effect on the Company.  The Compensation Committee believes that the design of the Company’s annual cash and long-term equity incentives provides an effective and appropriate mix of incentives to help ensure the Company’s performance is focused on long-term stockholder value creation and does not encourage the taking of short-term risks at the expense of long-term results.  In general, incentive compensation opportunities for Company employees are capped, and the Company has discretion to reduce incentive compensation payments (or pay no incentive compensation) based on individual performance and any other factors it may determine to be appropriate in the circumstances.  As with the compensation of the Company’s executive officers, a portion of the compensation for employees generally is delivered in the form of equity awards that help further align the interests of employees with those of stockholders.
 
Board Nominee Process
 
The Corporate Governance and Nominations Committee considers candidates for nomination as directors who are suggested by the committee’s members and other directors, as well as management and stockholders.  A stockholder who wishes to recommend a prospective nominee for the Board should notify Autobytel’s Secretary or any member of the Corporate Governance and Nominations Committee in writing with whatever supporting material the stockholder considers appropriate.  The Corporate Governance and Nominations Committee will also consider whether to nominate any person nominated by a stockholder pursuant to the provisions of the Bylaws relating to stockholder nominations as described in the section of this Proxy Statement entitled “FUTURE STOCKHOLDER NOMINATIONS AND PROPOSALS” below.
 
Generally, once the Corporate Governance and Nominations Committee identifies a prospective nominee, the Corporate Governance and Nominations Committee will make an initial determination as to whether to conduct a full evaluation of the candidate.  This initial determination will be based on the information provided to the Corporate Governance and Nominations Committee with the recommendation of the prospective candidate, as well as the Corporate Governance and Nominations Committee’s own knowledge of the prospective candidate, which may be supplemented by inquiries to the person making the recommendation or others.  Generally, the preliminary determination will be based primarily on the need for additional Board members to fill vacancies or expand the size of the Board and the likelihood that the prospective nominee can satisfy evaluation factors determined by the Corporate Governance and Nominations Committee to be appropriate from time to time for that evaluation.  If the Corporate Governance and Nominations Committee determines, in consultation with the other members of the Board, as appropriate, that additional consideration is warranted, it may request a third-party search firm to gather additional information about the prospective nominee’s background and experience and to report its findings to the Corporate Governance and Nominations Committee.
 
 
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              The Corporate Governance and Nominations Committee will then evaluate the prospective nominee against factors it considers appropriate from time to time, which currently include:
 
The ability of the prospective nominee to represent the interests of the stockholders of Autobytel;
 
The prospective nominee’s standards of integrity, commitment and independence of thought and judgment;
 
The prospective nominee’s ability to dedicate sufficient time, energy and attention to the diligent performance of his or her duties; and
 
The extent to which the prospective nominee would contribute to the range of talent, skill and expertise appropriate for the Board.
 
The Corporate Governance and Nominations Committee generally intends to nominate current members of the Board in the year in which their respective term expires so long as they continue to exhibit the qualities described above and are otherwise qualified to serve as members of the Board.
 
The Corporate Governance and Nominations Committee may also consider such other relevant factors as it deems appropriate, including the current composition of the Board, the balance of management and independent directors, the need for Audit Committee expertise and the evaluations of other prospective nominees.  In connection with this evaluation, the Corporate Governance and Nominations Committee will determine whether to interview the prospective nominee, and if warranted, one or more members of the Corporate Governance and Nominations Committee and others, as appropriate, will interview prospective nominees in person or by telephone.  After completing this evaluation and interview, the Corporate Governance and Nominations Committee will make a recommendation to the full Board as to the persons who should be nominated by the Board, and the Board determines the nominees after considering the recommendation and report of the Corporate Governance and Nominations Committee.
 
The Corporate Governance and Nominations Committee and the Board review the qualities of the Board members as a group, including the diversity of the Board’s career experiences, viewpoints, company affiliations, expertise with respect to the various facets of the Company’s business operations and business experiences.  The Board has not adopted a formal policy and did not employ any particular benchmarks with respect to these qualities, but was mindful of achieving an appropriate balance of these qualities with respect to the Board as a whole.  Moreover, the Board and Corporate Governance and Nominations Committee considered each nominee’s overall service to the Company during the previous term, each nominee’s personal integrity and willingness to apply sound and independent business judgment with respect to the Company’s matters, as well as the individual experience of each director noted within their biographies above.
 
Stockholder Communication with the Board of Directors
 
Stockholders and other parties interested in communicating directly with any director or with the non-management directors as a group may do so by writing to Secretary, Autobytel Inc., 18872 MacArthur Boulevard, Suite 200, Irvine, California 92612-1400.  The Company established a process for handling correspondence received by it addressed to non-management members of the Board.  Under that process, the Secretary reviews all such correspondence and forwards to the Board a summary of all such correspondence and copies of all correspondence that, in the opinion of the Secretary, deals with the functions of the Board or committees thereof or that the Secretary otherwise determines requires the attention of the Board.  The Board may at any time review a log of all correspondence received by Autobytel that is addressed to members of the Board and request copies of any such correspondence.  Concerns relating to accounting, internal controls or auditing matters are immediately brought to the attention of the Chairman of the Audit Committee and handled in accordance with procedures established by the Audit Committee with respect to those matters.
 
 
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Code of Conduct and Ethics
 
The Board has adopted a Code of Conduct and Ethics for Employees, Officers and Directors (“Code of Ethics”).  The Code of Ethics is applicable to the Company’s employees, officers and directors, including the principal executive officer, the principal financial officer and the principal accounting officer.  The Code of Ethics is posted and available on the Corporate Governance link of the Investor Relations section of the Company’s website, www.autobytel.com, and a copy of the Code of Ethics may also be obtained, free of charge, by writing to the Corporate Secretary, Autobytel Inc., 18872 MacArthur Blvd., Suite 200, Irvine, California 92612-1400. The Company intends to post amendments to, or waivers from, the Code of Ethics (to the extent applicable to the Company’s Chief Executive Officer, Principal Financial Officer or Principal Accounting Officer or directors) at this location on the Company’s website. Information on the Company’s website is not incorporated by reference in this Proxy Statement. The adoption of the Code of Ethics and other standards of conduct is not a representation or warranty that all persons subject to the Code of Ethics or standards are or will be in complete compliance with the Code of Ethics or any other standards of conduct that may be adopted.
 
Certain Relationships and Related Party Transactions
 
The Company’s Code of Ethics provides specific guidelines regarding conflict of interest situations as well as a process for reporting and approving related party transactions.
 
The Company’s written Code of Ethics defines a related party transaction as any transaction (or series of transactions) in excess of $120,000 since the beginning of the Company’s last fiscal year, or any currently proposed transactions, in which the Company is a participant and in which any member of the Management Group (as defined below), any stockholder owning more than 5% of the Company’s voting stock, or any immediate family member of any of the foregoing persons has a direct or indirect material interest.  An “immediate family member” means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of such director, executive officer or nominee for director, and any person (including domestic partners, but excluding tenants or employees) sharing the household of a director, director nominee, executive officer or stockholder owning more than 5% of the Company’s voting stock.  A “transaction” includes, but is not limited to, any commercial or financial transaction or arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements or relationships.  The “Management Group” is comprised of the Chief Executive Officer, Principal Financial Officer, Principal Accounting Officer (or any person performing similar functions), any other officer of the Company and any director or nominee for director.  Any covered person who may be involved in a related party transaction must promptly report that transaction to the Chairman of the Audit Committee or the Company’s Chief Legal Officer (“CLO”), who must then report the transaction to the Chairman of the Audit Committee upon becoming advised of such transaction.  The Audit Committee, in its sole discretion, must approve or disapprove all related party transactions.  Conflicts of interest or potential conflicts of interest must be reported to the CLO who will evaluate the circumstances relating to the conflict of interest or potential conflict of interest and report the findings of such evaluation to the Chief Executive Officer, who in turn, if warranted under the circumstances, must report such situation or activity to the Chairman of the Audit Committee; provided, however, (i) that if the conflict of interest or potential conflict of interest involves any member of the Management Group, the CLO must report that situation or activity to the Chairman of the Audit Committee; and (ii) the CLO is not precluded from reporting any conflict of interest or potential conflict of interest involving any covered person who is not a member of Management Group directly to the Chairman of the Audit Committee should the CLO believe such direct reporting to the Chairman of the Audit Committee is warranted under the circumstances.  Upon being advised of a complaint, concern or other reporting under the Code of Ethics, the Chairman of the Audit Committee will confer with the other members of the Audit Committee.  If appropriate under the circumstances, the Chairman of the Audit Committee may request that the CLO issue a written advisory to the covered person as to whether or not the reported situation or activity constitutes a violation of the Code of Ethics.  If the CLO would not be the appropriate party to issue a written advisory, outside counsel may be retained to issue such written advisory unless the Audit Committee determines that such written advisory can be issued by the Chairman of the Audit Committee without outside counsel input.
 
Although the Company’s Code of Ethics provides guidelines regarding conflict of interest situations, it cannot and does not set forth every possible conflict of interest scenario.  Therefore, the Code of Ethics provides that there is no substitute for sound judgment and common sense by directors, officers or other employees in each case based upon the particular facts involved.  The foregoing description of the Company’s Code of Ethics is not intended to constitute a representation as to compliance by any covered person.
 
 
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Autobytel has engaged Soluciones AW, S.A. (“Soluciones”) to provide office space and related office services to AW GUA, Limitada, Autobytel’s wholly-owned, indirect subsidiary in Guatemala (“AW GUA”). Under the agreement between AW GUA and Soluciones, AW GUA pays Soluciones 107% of the actual expenses paid and costs incurred by Soluciones in providing the office space and related office services. During the period from January 1, 2016 to March 31, 2017, AW GUA made payments to Soluciones of approximately $184,000. Soluciones is controlled by PeopleFund, which in turn is controlled by Messrs. Vargas and de Tezanos, each a director of Autobytel. Mr. Vargas was also an officer of the Company during this period and remains an officer of Autobytel, and Mr. de Tezanos was an officer of Autobytel during 2016 and in 2017 until February 13, 2017. The Audit Committee and Board evaluated the arrangement with Soluciones and the potential conflict and its potential impact on the Company. The Audit Committee and Board considered the Company’s significant investment in the operations in Guatemala acquired upon the acquisition of AutoWeb and the benefit the Company derives from its investment and these operations. The Audit Committee and the Board concluded that the benefits to the Company resulting from the continued engagement of Soluciones outweighed the potential conflict that might arise from the relationship. The Audit Committee and the Board (with Messrs. Vargas and de Tezanos abstaining) each approved the Soluciones arrangement and waived the potential conflict.
 
 
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
AND
AUDIT COMMITTEE REPORT
 
 
Independent Registered Public Accounting Firm
 
Moss Adams has been appointed by the Company’s Audit Committee as the Company’s independent registered public accounting firm to audit the Company’s consolidated financial statements for the fiscal year ending December 31, 2016, and to perform procedures related to the financial statements included in the Company’s quarterly reports on Form 10-Q, beginning with the quarter ended March 31, 2017.  Moss Adams also served as the Company’s independent registered public accounting firm for the years ended December 31, 2015, 2014 and 2013. Representatives of Moss Adams are expected to be present at the Annual Meeting to respond to appropriate questions and to make such statements as they may desire.
 
Principal Accountant Fees and Services
 
Aggregate fees for professional services rendered by Moss Adams for the years ended December 31, 2016 and 2015 were as follows:
 
 
 
2016
 
 
2015
 
Audit fees
 $515,000 
 $439,000 
Audit-related fees
  7,750 
  231,110 
All other fees
  8,000 
  -- 
Total
 $530,750 
 $670,110 
 
Audit Fees.  Audit fees consist of professional services rendered in connection with the audits of the Company’s annual consolidated financial statements, reviews of the Company’s internal accounting and reporting controls under Section 404 of the Sarbanes-Oxley Act of 2002 and reviews of interim consolidated financial statements included in the Company’s Quarterly Reports on Form 10-Q.
 
Audit-Related Fees.  Audit-related fees for 2016 consist of services rendered in connection with the audit of the Company’s Retirement Savings (401(k)) Plan.  Audit-related fees for 2015 consist of services rendered in connection with audit procedures performed related to the acquisitions of Dealix Corporation (“Dealix”) and Autotegrity, Inc. (“Autotegrity”) and AutoWeb and the audit of the Company’s Retirement Savings (401(k)) Plan.  
 
All Other Fees.  All other fees for 2016 consist of fees related to the review of the Company’s Form S-8 Registration Statements.
 
The Audit Committee has determined that the services described above were compatible with maintaining Moss Adams’ audit independence.
 
Pre-Approval Policy for Services
 
Under its charter, the Audit Committee is required to pre-approve all audit (including the annual audit engagement letter with the independent registered public accounting firm) and permitted non-audit services (including the fees and terms thereof) provided to the Company by the Company’s independent registered public accounting firm, subject to the de minimis exception for non-audit services as described in the Exchange Act.  The Audit Committee consults with management with respect to pre-approval, including whether the provision of permitted non-audit services is compatible with maintaining the registered public accounting firm’s independence, and may not delegate these responsibilities to management.  The Audit Committee may delegate to any member or members of the Audit Committee the power to grant any pre-approval, provided that the pre-approval is reported to the Audit Committee at the next scheduled Audit Committee meeting.
 
 
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Each member of the Audit Committee has the authority to approve fees for services by the Company’s independent registered public accounting firm of up to $50,000.  Any approved fees may be exceeded by no more than 20% without seeking further approval even if the total amount of those fees, including the excess, exceeds $50,000.  This authority is delegated first to Mr. Kaplan, then in the following order to Ms. Thompson, Mr. Fuchs and Mr. Carpenter.  Any approval by a member of the Audit Committee is required to be reported to the Audit Committee at the next regularly scheduled meeting of the Audit Committee.  All fees for services provided by Moss Adams during 2016 and 2015, respectively, were approved by the Audit Committee.
 
From time to time, the Audit Committee pre-approves fees and services up to a maximum amount for future services relating to recurring tax matters and securities filings.
 
Audit Committee Report
 
The following Audit Committee Report is provided in accordance with the rules and regulations of the SEC.  Pursuant to those rules and regulations, this Audit Committee Report is not to be deemed “soliciting materials” or “filed” with the SEC, subject to Regulation 14A or 14C of the Exchange Act or subject to the liabilities of Section 18 of the Exchange Act.  This Audit Committee Report shall not be deemed to be incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act or the Exchange Act except to the extent that Autobytel specifically incorporates this information by reference.
 
The Audit Committee has reviewed and discussed the Company’s audited financial statements for the fiscal year ended December 31, 2016 with the management of the Company.  The Audit Committee has discussed with Moss Adams the matters required to be discussed by the Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board (“PCAOB”) in Rule 3200T.  The Audit Committee has also received the written disclosures and the letter from Moss Adams required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed with Moss Adams the independent accountant’s independence.
 
Based on the foregoing review and discussions, the Audit Committee has recommended to the Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
 
The members of the Audit Committee are not professionally engaged in the practice of auditing or accounting and are not employed by Autobytel for accounting, financial management or internal control purposes.  Members of the Audit Committee relied, without independent verification, on the information provided to them and on the representations made by management and the independent auditors.  Accordingly, the Audit Committee’s oversight does not provide any basis, other than the review and discussions with management and the independent auditors referred to above, to determine that management has maintained appropriate accounting and financial reporting principles and policies or internal controls over financial reporting and procedures designed to assure compliance with accounting standards and applicable laws and regulations.  Furthermore, the Audit Committee’s considerations and discussions referred to above do not assure that the audit of Autobytel’s financial statements has been carried out in accordance with auditing standards generally accepted in the United States or that Autobytel’s auditors are in fact “independent.”
 
The Audit Committee
 
Mark N. Kaplan, Chairman
Michael J. Fuchs
Janet M. Thompson
Michael A. Carpenter
 
 
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EXECUTIVE COMPENSATION
 
Compensation Discussion and Analysis
 
In this Compensation Discussion and Analysis we describe our 2016 compensation practices, philosophy and objectives for our named executive officers.  For 2016, our named executive officers were:
 
Jeffrey H. Coats, President and Chief Executive Officer
 
Kimberly S. Boren, Executive Vice President, Chief Financial Officer
 
Glenn E. Fuller, Executive Vice President, Chief Legal and Administrative Officer and Secretary
 
William A. Ferriolo, Executive Vice President, Chief Operating Officer 
 
H. Donald Perkins, Jr., former Executive Vice President, Strategic and Business Development
 
Mr. Perkins served as the Company’s Executive Vice President, Strategic and Business Development during 2016 until December 31, 2016, at which time his employment with the Company ceased.
 
The names, ages and backgrounds of our executive officers are included in the section of this Proxy Statement entitled “EXECUTIVE OFFICERS.”
 
General Compensation Philosophy and Objectives.  The role of the Compensation Committee of the Company’s Board is to determine, or recommend to the Board for determination, the salaries and other compensation of our executive officers and any other officer who reports directly to the Chief Executive Officer, and to make grants under, and to administer, the stock option, restricted stock and other employee equity and incentive compensation plans.
 
To promote responsible compensation practices:
 
●  
The Compensation Committee directly engaged an independent compensation consultant (see “Compensation Consultants”);
 
●  
Award agreements for stock options granted to executive officers contain option forfeiture provisions (see “Option Forfeiture Provisions for Accounting Restatements” below);
 
●  
The Autobytel Inc. Amended and Restated 2014 Equity Incentive Plan (“Amended and Restated 2014 Plan” ) prohibits repricing of option and stock appreciation rights (except for certain adjustments upon changes in capitalization or control) without stockholder approval; and
 
●  
The Company’s securities trading policy generally precludes executive officers from engaging in transactions involving put or call options, short sales and buying or holding Company common stock on margin. All trades by executive officers must be pre-cleared with the Company’s Chief Legal Officer.
 
The Company’s compensation philosophy for executive officers is to align compensation with corporate performance and efforts to increase stockholder value, while providing a total compensation opportunity that is broadly competitive and enables the Company to attract, motivate, reward and retain key executives and employees. The Company does not target specific compensation percentiles.  Accordingly, each executive officer’s compensation package is typically comprised of the following three elements:

●  
Base annual salary that is designed primarily to reflect individual responsibilities and to compare with similar roles at the Company and at technology and online marketing companies that are of comparable size to the Company and with which the Company competes for executive personnel;
 
●  
Annual variable performance awards, such as incentive compensation, payable in cash, stock options or shares of stock and tied to the achievement of pre-established financial and individual performance goals; and
 
●  
Long-term, stock-based incentive awards, which strengthen the mutuality of interests between the executive officers and the Company’s stockholders, reward executive officers for future stock price increases and retain executive officers through continued service requirements.
 
 
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Additionally, the Company’s executive officers are typically entitled to severance payments in the event of termination of employment without cause or by the executive officer for good reason and other benefits and perquisites that are discussed below.
 
Compensation decisions are designed to promote the Company’s business objectives and strategy and enable the Company to attract, retain and motivate qualified executive officers who are able to contribute to the Company’s long-term success.  Among the factors considered by the Company in determining executive officer compensation are the ability to recruit individuals with the necessary talents and the need to retain and motivate the Company’s executive officers.  The Company considers the competitive market for executives in setting each element of compensation indicated above.  However, the Company does not attempt to set each compensation element for each executive within a particular range related to levels provided by comparable companies.  Rather, the Company uses market comparisons as one factor in making compensation decisions.  The Company also considers other factors in making executive compensation decisions, including geographic market factors, individual contribution and performance, management skills, internal pay equity, the undertaking of new roles and responsibilities, importance of the executive’s role and responsibilities to the Company’s future success and the executive’s experience, including prior work experience, length of service to the Company, leadership and growth potential.
 
Under the Company’s compensation structure, the mix of base annual salary, annual variable performance awards and long-term stock-based incentive awards varies depending upon level of responsibility and experience.  In allocating compensation among these elements, the Company believes that the compensation of members of senior management who have the greatest ability to influence the Company’s performance should have a greater proportion of their compensation based on Company performance than lower levels of management.  There is, however, no pre-established policy for the allocation between either cash and non-cash or short-term and long-term compensation.  The mix of compensation determined by the Company is between base annual salary compensation and incentive compensation.  Long-term equity incentive compensation is determined separately and may not be awarded every year.
 
Base Annual Salary.  The objective of base annual salary is to secure the services of the Company’s executive officers and reflect job responsibilities, individual performance, market competitiveness, the value of such services to the Company’s business and the size of the Company’s business.  Salaries for executive officers are generally determined on an individual basis by evaluating each executive’s scope of responsibility, performance, prior experience and salary history, as well as, competitive market information.  The Compensation Committee also considers the recommendations of the Chief Executive Officer (except in the case of the Chief Executive Officer’s own compensation).  The Chief Executive Officer is not present during any voting or deliberations by the Compensation Committee with respect to the Chief Executive Officer’s compensation.
 
Annual Non-Equity Incentive Compensation, Retention and Discretionary Awards.  The Company’s compensation structure provides for the opportunity for executive officers to be awarded annual incentive compensation pursuant to incentive compensation plans established each year (“Annual Incentive Compensation Plans”).  Annual Incentive Compensation Plans are generally performance-based, and all awards are ultimately made at the sole discretion of the Compensation Committee.  The objective of the annual incentive compensation awards under these plans is to enhance retention and motivate individuals to achieve specific goals established by the Compensation Committee.  These goals may consist of any or all of the following:
 
  Company-wide performance goals;
 
  Specific individual goals that are intended to advance the Company’s business and create long-term stockholder value; and
 
  Overall individual performance.
 
 The Compensation Committee from time to time also considers various other discretionary, retention or incentive compensation alternatives for the Company’s executive officers, including discretionary awards for completion of special projects (including acquisition and disposition transactions).
 
 
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The Compensation Committee establishes a target annual incentive compensation award opportunity for each executive officer based on a percentage of base annual salary.  The target annual incentive compensation award opportunity percentages currently range between 60% and 70% of annual base salary for named executive officers other than the Chief Executive Officer, and 100% of base annual salary for the Chief Executive Officer in 2016.  The Compensation Committee established target award opportunities for the named executive officers after reviewing survey data provided by the Company’s Independent Compensation Consultant (described below), and, in the case of named executive officers other than the Chief Executive Officer, input from the Chief Executive Officer.  The Company believes this is a meaningful incentive to achieve the incentive compensation goals and an appropriate and reasonable allocation to performance-based annual cash incentive compensation to motivate executive officers.
 
Typically, the Compensation Committee, with the participation of the Chief Executive Officer, sets compensation performance goals for the Company for the year. Generally, unless specific individual performance goals are established, the target annual incentive compensation award opportunity for executive officers has been based upon the attainment of Company-wide performance goals, which reflects the Company’s belief that executive officers are accountable for the Company’s overall operating performance. If the Compensation Committee elects to allocate any portion of an executive officer’s target annual incentive compensation award opportunity to specific individual performance goals, the Compensation Committee sets the individual performance goals for the Chief Executive Officer, and the Chief Executive Officer, after consultation with the Compensation Committee, sets the specific individual performance goals for the other executive officers.  Generally, if specific individual performance goals are established, 33% or less of the incentive compensation for each executive officer has been based upon specific individual performance goals to make executive officers accountable for achieving business objectives.  The Company believes this is an appropriate and reasonable allocation that aligns the annual incentive compensation of executive officers with individual performance.  The individual performance goals are based on and reflect each individual’s responsibilities and, to the extent applicable, contribution to revenue, and may at times include such factors as leadership, team work, growth initiatives and other activities that are considered important to contributing to the long-term performance of the Company.
 
For Company-wide goals, the Compensation Committee may adopt a formula that establishes an award payout range based on the level of performance attained, with a minimum below which no payment is made and a maximum beyond which no additional incentive compensation is paid.  In determining the extent to which the Company-wide performance goals are met for a given period, the Compensation Committee exercises its judgment whether to reflect or exclude specific circumstances that the Company experienced during the year as well as the impact of unusual or infrequently occurring events or other particular circumstances affecting the Company’s business, changes in accounting principles, acquisitions, dispositions, impairment of assets, restructuring charges and litigation costs and successes, and may also consider the relative risks in achieving the goals reflected in the Company’s annual operating plan.
 
Long-Term Equity Incentive Awards.  Equity-based compensation in the form of stock options or restricted stock awards are provided to link the interests of executive officers with the long-term interests of the Company’s stockholders, support a pay-for-performance culture, foster employee stock ownership, focus the management team on increasing value for the stockholders and to encourage executive officers to remain in the Company’s employ.  In addition, stock options and restricted stock awards help to provide a long-term balance to the overall compensation program.  While cash bonus payments are focused on short-term performance, the multi-year vesting schedule of stock options and the forfeiture restrictions on restricted stock awards create incentives for increases in stockholder value over a longer term.
 
The Company grants stock options that are performance-based, service-based or a combination of the two.  Although the Company views all stock options as performance-based because they require the stock price to increase in order for the recipient to realize value from the stock options, the Company has granted stock options subject to vesting based on levels of achievement of specified Company goals that encourage preservation and enhancement of stockholder value.  Service-based vesting also encourages executive retention.  Restricted stock that is subject to forfeiture in the event an executive officer leaves the Company prior to the lapse of the forfeiture restrictions provides similar retention and long-term motivational effects.  The Company views restricted stock as providing employment retention incentives and an incentive to increase stock values because they become more valuable as the price of Autobytel’s Common Stock increases.
 
 
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The level of long-term incentive compensation is determined based on an evaluation of competitive factors, the position and level of responsibility of each executive officer, the Company’s belief that stock options should be a significant part of the total mix of executive officer compensation and the goals of the compensation objectives described above.  The options are granted with exercise prices of not less than the fair market value of the Company’s stock on the date of grant.  Depending on the circumstances, in establishing grant levels, the Company may consider the equity ownership levels of the recipients, exercise prices of existing grants or prior grants that are fully vested.  The Company does not have a policy requiring executive officers or directors to hold shares acquired following stock option exercise or restricted stock vesting for any additional length of time, unless the shares are specifically subject to a resale restriction, and there are no ownership guidelines for executives or directors, as this is not viewed as competitive for a public company of Autobytel’s size.
 
The Company typically awards stock options to executive officers upon first joining the Company, promotion to more senior executive positions and annually.  At the discretion of the Compensation Committee, executive officers may also be granted stock options based upon completion of special projects (including acquisition or disposition transactions) or to provide greater incentives to continue their employment with the Company and to strive to increase the value of the Common Stock. The number of shares subject to each stock option granted is within the discretion of the Compensation Committee and is based on anticipated future contributions and ability to impact the Company’s results, past performance or consistency within the officer’s internal pay level.  The Compensation Committee considers these factors, as well as applicable contractual requirements, the value of long-term equity incentive grants, the compensation expense associated with awards, leverage and stockholder dilution.  Stock option grants prior to the adoption of the Company’s 2010 Equity Incentive Plan typically had a term of ten years, but options granted after the adoption of the 2010 Equity Incentive Plan expire no later than seven years from the date of grant.  Stock options generally vest and become exercisable over a three-year period, and the vesting of stock options typically accelerate upon (i) a termination of employment without cause by the Company or for good reason by the executive officer; or (ii) a change in control of the Company if coupled with a termination of employment by the Company without cause or by the executive officer for good reason or if the acquirer does not assume, retain or exchange the options as provided in the applicable plan pursuant to which the options were granted or the applicable option award agreement. In the case of stock options granted on or after March 17, 2014 to the Chief Executive Officer, vesting of stock options also accelerate upon the death or disability of the Chief Executive Officer.
 
The Compensation Committee approves all stock options, subject to limited delegation to the Non-Executive Stock Option Committee, which consists of the Company’s Chief Executive Officer, for stock option grants to non-executive officers.  Generally, the Compensation Committee approves stock option grants to newly hired employees who are executive officers prior to the date of hire with the date of hire as the grant date.
 
Stockholder Approval of Executive Compensation.  At the Company’s 2015 Annual Meeting of Stockholders (“2015 Annual Meeting”), the stockholders voted on an advisory proposal regarding approval of the compensation paid to the Company’s named executive officers.  The Compensation Committee considered that approximately 92% of the shares present at the 2015 Annual Meeting and entitled to vote on the proposal were voted in favor of approval of the proposal.  The Company values stockholders’ opinions and will consider the outcome of the Company’s say-on-pay proposals when making future executive compensation decisions regarding the Company’s named executive officers.  In addition, at the Company’s 2013 Annual Meeting of Stockholders, the stockholders voted on an advisory basis with respect to the frequency of future advisory votes to approve the compensation of our named executive officers.  Approximately 58% of the votes cast on this proposal were cast for a frequency of every two years.  In light of this vote, the Board determined that it would include a proposal for an advisory say-on-pay proposal every two years. An advisory vote on the compensation paid to the Company’s named executive officers is being presented to stockholders for approval at the Annual Meeting.
 
 
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Compensation Consultants.  The Compensation Committee may, from time to time, directly retain the services of independent consultants and other experts to assist the Compensation Committee in connection with executive compensation matters. During 2016, the Compensation Committee engaged the services of Frederic W. Cook & Co., Inc., a national executive compensation consulting firm (“Independent Compensation Consultant”), to provide market data and to review and provide recommendations regarding the Company’s executive compensation programs and compensation of the non-management members of the Board and its committees.  The Independent Compensation Consultant performs services solely on behalf of the Compensation Committee and has no relationship with the Company’s management except as it may relate to the Independent Compensation Consultant’s performance of its services for the Compensation Committee.  The Company’s executive officers did not participate in the selection of the Independent Compensation Consultant.  Periodically, the Company’s Chief Executive Officer seeks input from the Independent Compensation Consultant on compensation matters relating to named executive officers other than the Chief Executive Officer in providing information to the Compensation Committee regarding executive compensation matters.  These inquiries relating to named executive officer compensation occur with the advance knowledge of the Compensation Committee chairperson.  The Compensation Committee has concluded that the Independent Compensation Consultant is independent and that no conflict of interest exists that would prevent the Independent Compensation Consultant from independently advising the Compensation Committee.
 
Option Forfeiture Provisions for Accounting Restatements.  For stock options granted to the named executive officers in and after 2013, the stock option award agreements provide for forfeiture of unexercised options and recovery of gain from exercised options if at any time within 12 months after the named executive officer exercises the options, or if within 12 months of the date of termination of employment with the Company, as applicable, it is determined that the named executive officer engaged in any misconduct that resulted in an accounting restatement due to material noncompliance with any financial reporting requirement under applicable securities laws.
 
2016 Compensation Decisions.  For 2016, the Compensation Committee determined the compensation of the Company’s 2016 named executive officers in accordance with the general compensation philosophy and objectives described above.
 
2016 Compensation Review and Peer Group. In addition to the foregoing general compensation philosophy and objectives, in 2016 the Compensation Committee consulted with the Independent Compensation Consultant, which conducted an independent review of the Company’s executive compensation program on behalf of the Compensation Committee (“2016 Executive Compensation Review”) to provide a competitive reference on pay levels and performance alignment.  The 2016 Executive Compensation Review used a peer group, proposed by the Independent Compensation Consultant and approved by the Compensation Committee in connection with the 2014 Executive Compensation Review, which group was updated in December 2015 to remove companies that were no longer the right size, replacing them with industry- and size-appropriate companies that were mostly based in California to reflect local labor market and cost of living. The peer group used for the 2016 Executive Compensation Review (“2016 Peer Group”) consisted of the following 17 U.S. based, publicly traded, application/internet software and services companies with an approximate range of $52 million to $340 million in revenue and market caps below $789 million at the time: Angie’s List, Bazaarvoice, Demand Media, DHI Group, eGain Communications, Jive Software, Limelight Networks, Marchex, QuinStreet, Spark Networks, Tech Target, Telenav, Travelzoo, United Online, XO Group and Zix.  Market comparisons were provided for the Company’s executive officers covering base salaries; annual incentives (levels and plan design); long-term incentive grant values, awards, types and mix; and total direct compensation. The Compensation Committee reviewed market pay and relative performance data from the 2016 Peer Group. At the time, Autobytel’s estimated 2016 revenue after the acquisition of AutoWeb in 2015 and the Company’s market capitalization value approximated the peer group median. Further, the Company’s trailing operating income was above the median and approaching the 75th percentile. The Company does not target a particular benchmark level for the pay and performance levels.
 
 
 
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CEO Compensation Overview.  In 2016, compensation decisions for Mr. Coats, the Company’s Chief Executive Officer, were made with the context of 2015 relative total stockholder return (“TSR”) performance and relative revenue and operating income growth over one and three years that was above the 75th percentile of the 2016 Peer Group companies and that was the highest of the peer sample. This high previous performance at the time was considered when Mr. Coats’ annual equity grant was made, which has fair value that is slightly above the 2016 Peer Group median, and results in disclosed total compensation for Mr. Coats that is also slightly above the median. The slightly above-median grant value not only reflected very high trailing performance, but also that Mr. Coats was granted 30,000 options in 2015, which was among the lowest grants in the 2016 Peer Group that year and did not reflect the high performance level achieved. The disclosed total compensation level for Mr. Coats of $2,406,234 (as reflected in the Summary Compensation Table below) is only slightly above the median in the 2016 Peer Group data of $2,370,000, and this reflected the performance in 2015 that preceded the equity award.
 
As the vehicle for Mr. Coats’ equity compensation awards, the Compensation Committee granted stock options with 60% of the options having only service-based vesting (“Coats Service-Based Options”) and 40% of the options having both service-based vesting and a performance-based vesting component based on increases in the trading price of the Company’s Common Stock (“Coats Performance-Based Options”). The Committee’s intention was to reward only future price increases, starting from an exercise price that was considerably higher than the trading price at the time that the Company had made its previous option awards to Mr. Coats. The Coats Performance-Based Options have the challenging stock price increase conditions described below. The grant date fair value of the Coats Service-Based Options was set below the median of the 2016 Peer Group companies and only the highly performance driven Coats Performance-Based Options caused the grant date fair value of the total grant of options to Mr. Coats to be above the median for the 2016 Peer Group.
 
The 2016 stock option awards to Mr. Coats were granted a little over two months following high relative performance in 2015, which resulted in TSR that was the highest of the 2016 Peer Group companies over one- three- and five-years. The Coats Service-Based Options had a grant date fair value that was below the median of the 2016 Peer Group companies, with a value that was slightly above the median solely as a result of the Coats Performance-Based Options with stock price hurdles that were set requiring stock price growth of 105%, 120%, and 163% above the $17.09 closing price of the Common Stock on the date of grant. The total grant date fair value of the Coats Service-Based Options and Coats Performance-Based Options is reported in the Summary Compensation Table below at a level that is 6.5% of the grant date fair value of the CEOs for the 2016 Peer Group companies, but the performance that preceded the awards to Mr. Coats was above the 75th percentile for the TSR, revenue growth, and operating income growth measures that were reviewed by the Compensation Committee.
 
The closing stock price on April 13, 2017 was $11.82, which is below the price at which the 2016 options were granted to Mr. Coats. As a result, Mr. Coats’ awards, which have a total grant date fair value of $1,362,276 (as reported in the Summary Compensation Table below), are not currently providing any in-the-money value reward to Mr. Coats, and the Coats Performance-Based Options, with stock price hurdles of $35, $37.50, and $45, are not yet earned or vested. The Company views this as pay-for-performance and believes that the equity awards delivery of actual compensation, which is currently not providing any actual compensation, is adjusting with shareholder value, which was the intent when structuring the awards.
 
2016 Base Annual Salary.  The Compensation Committee did not consider any increases in the base annual salaries of Messrs. Ferriolo, Fuller, or Perkins for 2016. In connection with its annual review of executive compensation,  and after reviewing the 2016 Executive Compensation Review and consultation with the Independent Compensation Consultant, the Compensation Committee approved an increase of $55,000 in Mr. Coats’ base annual salary from $495,000 to $550,000 and an increase in his target annual incentive compensation award opportunity from 85% to 100% effective January 1, 2016 to recognize his continued performance in leading the Company’s growth, profitability and total shareholder return and his leadership in implementing and integrating the AutoWeb, Dealix and Autotegrity acquisitions. In connection with the promotion of Ms. Boren to Executive Vice President, Chief Financial Officer (which was effective in September 2016) after consultation with the Independent Compensation Consultant and based on input from the Company’s Chief Executive Officer, the Compensation Committee approved an increase of $35,000 in Ms. Boren’s base annual salary from $265,000 to $300,000 and an increase in her target annual incentive compensation award opportunity from 55% to 60% effective September 21, 2016 to recognize her promotion.
 
 
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2016 Annual Incentive Compensation Plan Awards.  The 2016 Annual Incentive Compensation Plan (“2016 Incentive Plan”) was based on the following two Company-wide performance goals (“2016 Company Performance Goals”), each weighted 50%:
 
●  
percentage achievement of the Company’s revenue goal of $157.8 million (“2016 Revenue Goal”) under the Company’s 2016 operating plan approved by the Board; and 

●  
percentage achievement of the Company’s Non-GAAP EPS (defined as (i) GAAP net income before amortization of acquired intangibles, non-cash stock-based compensation, acquisition costs, severance costs, gain or loss on investment or sale, litigation settlements and income taxes divided by (ii) weighted average diluted shares outstanding) goal of $1.44 under the 2016 operating plan approved by the Board (“2016 Non-GAAP EPS Goal ”).
 
Award payout opportunities for each goal were based upon percentage of achievement of the goal compared to the corresponding percentage on a sliding scale that reduced award payout opportunities by approximately 3% for every 1% that achievement fell below goal and increased award payout opportunities approximately 3% for every 1% that achievement exceeded the goal (“2016 Award Opportunity Scale”).  Achievement of a goal at or below 67% would result in no awards for that goal, and performance achievement over 100% was capped at 120%.  The sum of the weighted percentages derived from the 2016 Award Opportunity Scale for the 2016 Revenue Goal and the 2016 Non-GAAP EPS Goal was applied to each named executive officer’s target annual incentive compensation award opportunity to determine the officer’s 2016 award payout opportunity.  The Compensation Committee selected these two goals and assigned them equal weighting under the 2016 Incentive Plan because the Compensation Committee believed these goals best reflected the criteria for measuring the Company’s overall performance and performance of strategic initiatives for 2016.  Award payouts to the 2016 named executive officers under the 2016 Incentive Plan were paid in January 2017 and reflected the pre-established formula without discretionary adjustment to the results, except as disclosed below for Ms. Boren and Messrs. Ferriolo and Fuller.
 
The Compensation Committee set the 2016 target annual incentive compensation award opportunities for Mr. Coats, Ms. Boren, Mr. Ferriolo, Mr. Fuller, and Mr. Perkins under the 2016 Incentive Plan at 100%, 57% (prorated to reflect the increase in her target opportunity to 60% from 55% upon her promotion effective September 2016), 65%, 70%, and 65% of base annual salary, respectively.
 
In determining incentive compensation award payouts under the 2016 Incentive Plan, the Compensation Committee considered the following:

●  
2016 revenues of approximately $156.7 million represented approximately a 99% achievement of the 2016 Revenue Goal and resulted in an approximately 97% targeted award payout for the 2016 Revenue Goal from the 2016 Award Opportunity Scale; and 2016 Non-GAAP EPS of approximately $1.33 represented approximately a 93% achievement of the 2016 Non-GAAP EPS Goal and resulted in an approximately 78% targeted award payout for the 2016 Non-GAAP EPS Goal from the 2016 Award Opportunity Scale, which combined resulted in an approximately 87.2% combined target award payout under the 2016 Incentive Plan; and
 
●  
The performance and contributions of the 2016 named executive officers to the Company in achieving another year of revenue growth and profitability for 2016 as well as strong stockholder return; and
 
●  
In the case of Ms. Boren and Messrs. Ferriolo and Fuller, recognition of their significant efforts in connection with the disposition of the Company’s specialty finance leads group in December 2016 and formation of the Company’s new subsidiary in Guatemala and transfer and integration of the former AutoWeb operations in Guatemala to the new subsidiary.
 
              Based on its evaluation of the foregoing items, the Compensation Committee approved cash award payouts under the 2016 Incentive Plan to Mr. Coats, Ms. Boren, Mr. Ferriolo, Mr. Fuller, and Mr. Perkins of $479,600, $135,417, $207,619, $186,172, and $167,206, respectively. Mr. Coats’ incentive compensation plan payout reflected the application of the 87.2% Company performance component of the incentive plan without any adjustment. The incentive compensation plan payout for Ms. Boren, Mr. Ferriolo and Mr. Fuller reflected the 87.2% Company performance component of the incentive plan plus $25,000 each in supplemental incentive compensation payments in recognition of their efforts during 2016.
 
 
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2016 Long-Term Equity Incentive Awards.  The Company made an annual grant of stock options to the named executive officers on January 21, 2016. Of the options granted to Mr. Coats, 40% of the options are subject to challenging stock price performance goals combined with a time-based vesting schedule. Further, the Company granted additional options to certain named executive officers below the chief executive officer in recognition of personal high performance or promotions that occurred during 2016.
 
January 2016 Service-Based Grants. On January 21, 2016 stock options were granted to Mr. Coats, Ms. Boren, Mr. Ferriolo, and Mr. Fuller. After considering the Chief Executive Officer’s recommendation for grants to named executive officers other than himself, and after consultation with the Independent Compensation Consultant and consideration of the 2016 Executive Compensation Review, the Compensation Committee approved the grants of 150,000, 22,000, 25,000, and 22,000 stock options to Mr. Coats, Ms. Boren, Mr. Ferriolo, and Mr. Fuller, respectively, at an exercise price of $17.09 per share (the grant to Mr. Coats being the Coats Service-Based Options referenced above). The grants of stock options to the foregoing named executive officers were made in connection with an annual Company-wide option grant to employees in recognition of their efforts during 2015 in achieving revenue growth and profitability for 2015 and initiatives undertaken by the Company, including continued growth of autobytel.com, the Company’s flagship website, increasing display website advertising revenue and profit, the continued growth of the commercial relationship with AutoWeb, increasing advertising click revenue, and the overall growth in lead revenue.  These ongoing awards to named executive officers employed during 2015 and granted in 2016 were below the median of the peer data provided by the Company’s Independent Compensation Consultant. The revenue and operating income growth achieved in 2015 was above the 75th percentile of our 2016 Peer Group companies, as was our one-year, three-year, and five-year TSR through the end of 2015.
 
Coats Performance-Based Stock Options In addition to the Coats Service-Based Options granted to Mr. Coats on January 21, 2016, the Compensation Committee also approved (after its review of the 2016 Executive Compensation Review and consultation with the Independent Compensation Consultant) the grant to Mr. Coats of the Coats Performance-Based Options, which provide for the purchase of 100,000 shares of Common Stock at an exercise price of $17.09. The Coats Performance-Based Options reflected 40% of the total number of stock options granted to Mr. Coats in 2016. The Coats Performance-Based Options will become vested and exercisable in accordance with the following service-based vesting schedule: (i) 33 1/3% will vest and become exercisable on the first anniversary after the grant date; and (ii) 1/36th will vest and become exercisable on each successive monthly anniversary thereafter for the following 24 months ending on the third anniversary of the grant date of these stock options; provided, however, that in addition to the service-based vesting schedule, the Coats Performance-Based Options will be subject to the satisfaction of the following additional stock price performance conditions: (i) with respect to the first 1/3 of the Coats Performance-Based Options, if at any time after the grant date and prior to the expiration date of the Coats Performance-Based Options the weighted average closing price of the Common Stock on The Nasdaq Capital Market for the preceding 30 trading days (adjusted for any stock splits, stock dividends, reverse stock splits or combinations of the Common Stock occurring after the issuance date) (“Weighted Average Closing Price”) is at or above $30.00; (ii) with respect to the second 1/3 of the Coats Performance-Based Options, if at any time after the grant date and prior to the expiration date the Weighted Average Closing Price is at or above $37.50; and (iii) with respect to the last 1/3 of the Coats Performance-Based Options, if at any time after the grant date and prior to the expiration date the Weighted Average Closing Price is at or above $45.00. The Coats Performance-Based Options expire on the seventh anniversary of the grant date.
 
Special Option Grants to Other Named Executive Officers to Reflect Performance and Promotions. After considering the Chief Executive Officer’s recommendation, further review and consideration of the 2016 Executive Compensation Review and consultation with the Independent Compensation Consultant, and further consideration of the number of stock option awards made to these named executive officers in January 2016, on July 15, 2016, the Compensation Committee approved the grants of 30,000 stock options to each of Ms. Boren, Mr. Ferriolo, and Mr. Fuller, at an exercise price of $14.41 per share.
 
On September 21, 2016, the Compensation Committee approved a grant of 12,000 stock options to Ms. Boren in connection with her promotion to Executive Vice President, Chief Financial Officer at an exercise price of $16.82 per share.
 
 
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On December 15, 2016, the Compensation Committee approved a grant of 25,000 stock options to Mr. Ferriolo in connection with his promotion to Executive Vice President, Chief Operating Officer at an exercise price of $14.10 per share.
 
All of the foregoing 2016 stock option grants reflected the Compensation Committee’s belief that equity-based compensation in the form of stock options links the interests of named executive officers with the long-term interests of the Company’s stockholders, supports a pay-for-performance culture, fosters stock ownership by named executive officers, focuses the management team on increasing value for the stockholders, and encourages named executive officers to remain in the Company’s employ. All equity awards granted to the named executive officers in 2016 were stock options. As of March 31, 2017, the exercise price of these stock options was higher than the closing price of the Company's common stock , which are not currently providing any actual compensation based on the April 13, 2017 stock price of $11.82. This reflects the fall in stock price since grant and is viewed by the Company as a pay-for-performance outcome that is aligned with stockholder return.
 
The exercise price for all stock option grants was the closing price for Autobytel’s common stock on The Nasdaq Capital Market as of the applicable grant date.  All of the foregoing stock option grants vest one-third on the first anniversary following the grant date, with the remaining two-thirds vesting ratably over 24 months thereafter, with the Coats Performance-Based Options having the additional stock price performance conditions described above. The vesting of stock options (i) may accelerate upon a change in control of Autobytel in accordance with the applicable plan pursuant to which the stock options were granted and the applicable stock option award agreements if such change in control is coupled with a termination of the named executive officer’s employment with the Company by the Company without cause or by the named executive officer good reason or if the acquirer does not assume, retain or exchange the options as provided in the applicable plan pursuant to which the stock options were granted or the applicable stock option award agreement; and (ii) will accelerate in the event the executive officer’s employment with the Company is terminated without cause by the Company or for good reason by the executive officer (as such terms are defined in the applicable executive officer’s severance benefits or employment agreement). In addition, the vesting of stock options granted to Mr. Coats will be accelerated upon Mr. Coats’ death or disability.
 
Severance and Change in Control Terms.  The Company has entered into agreements with various key employees, including the executive officers, which provide for severance benefits under certain qualifying employment termination events.  In addition, certain of the agreements also provide for payments and benefits in the event of certain qualifying employment termination in connection with a change in control of the Company.  The agreements are designed as a recruiting and retention mechanism to assist the Company in providing adequate employment security to compete for highly qualified executive officers and induce them to invest themselves in a career with the Company, to assist in retention of the Company’s executive officers during the uncertainty that might accompany any possible change in control, and to offset any motivation executive officers might otherwise have to resist a change in control that could result in loss of their employment.  Information regarding applicable terms of such agreements for the Company’s named executive officers is provided below under the section of this Proxy Statement entitled “EXECUTIVE COMPENSATION–Potential Payments Upon Termination or Change in Control.”
 
Under the Coats Employment Agreement (as defined below in the section of this Proxy Statement entitled “EXECUTIVE COMPENSATIONEmployment Agreements”), Mr. Coats is entitled to specified payments upon the occurrence of certain qualifying termination events, including a qualifying termination in connection with or following a change in control of the Company.  The Compensation Committee approved these terms in connection with its evaluation of the Coats Employment Agreement after consultation with the Independent Compensation Consultant.  The Coats Employment Agreement contains confidentiality and non-solicitation provisions that extend beyond termination.  See the section below entitled “Tax Implications–IRC Sections 280G and 4999” regarding the Compensation Committee’s consideration of IRC Sections 280G and 4999 in structuring Mr. Coats’ employment and severance package.  The Coats Employment Agreement provides for a lump sum payout to Mr. Coats in the event of a termination of Mr. Coats’ employment in connection with a change in control of the Company equal to the sum of (i) 1.75 times the sum of his base annual salary and his target annual incentive compensation opportunity; and (ii) his target annual incentive compensation opportunity at the rate of his base annual salary and the target annual incentive compensation opportunity in effect immediately before such termination, prorated for the amount of time Mr. Coats was employed by the Company prior to the date of termination during such plan year. See the section of this Proxy Statement entitled “EXECUTIVE COMPENSATION–Potential Payments Upon Termination or Change in Control.”
 
 
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The severance benefits agreements with Ms. Boren, Mr. Fuller, and Mr. Ferriolo provide that these named executive officers are entitled to lump sum payments equal to their base annual salary upon the occurrence of certain qualifying termination events, including a qualifying termination in connection with or following a change in control of the Company.  The severance benefits agreement with Mr. Fuller, which has not been amended since 2012, provides for a gross-up to offset any excise tax on excess parachute payments to preserve the net value to Mr. Fuller of these severance benefits so that the value of the motivational and retention aspects of the severance compensation packages for Mr. Fuller would not be diminished. See the section of this Proxy Statement entitled “EXECUTIVE COMPENSATION–Potential Payments Upon Termination or Change in Control.”
 
In the event of a change in control of the Company prior to the determination of awards under the Company’s then-current annual incentive compensation plan, the Compensation Committee will determine the level of achievement of the applicable plan for purposes of such officers’ awards and the applicable award payouts, if any, as of the change in control event. Unvested stock options will be accelerated and become fully vested and exercisable as of the change in control event unless the options are assumed by the acquirer.
 
For information concerning payments made to Mr. Perkins under his pre-existing severance benefit agreement upon termination of his employment with the Company in December 31, 2016, see “EXECUTIVE COMPENSATION–Potential Payments Upon Termination or Change in Control.”  
 
Benefits and Perquisites.  Except as discussed below, executive officers typically participate in employee benefit plans that are generally available to all employees on the same terms.
 
All employees above the senior manager level are provided with enhanced supplemental short and long-term disability insurance by the Company in addition to the Company’s standard short- and long-term disability insurance in order to attract and retain these employees. For these executive officers who qualify for the coverage, the Company also provides an additional supplemental long-term disability plan that offers a benefit of up to 75% of the executive’s base annual salary, up to a maximum benefit of $5,000 per month. The benefit begins 90 calendar days after the onset of the disability and may continue up to age 65.
 
Tax Implications
 
IRC Section 162(m) Limitation.  The Compensation Committee has considered the potential impact of Section 162(m) of the IRC on the compensation paid to the Company’s executive officers.  In general, Section 162(m) disallows a tax deduction for the compensation paid to certain executives of publicly-held companies in excess of $1.0 million in any taxable year.  The $1.0 million limitation applies per executive per year and only to the compensation paid to the chief executive officer and to each of the next three most highly compensated officers other than the chief financial officer, and provided that compensation is not performance-based.  In general, it is the Compensation Committee’s policy to qualify executive compensation for deductibility under applicable tax laws.  The Compensation Committee believes, however, that stockholder interests are best served by not restricting its discretion and flexibility in crafting compensation programs even though these programs may result in certain non-deductible compensation expenses.  Therefore, the Compensation Committee has from time to time approved elements of compensation for certain officers that may not be fully deductible and reserves the right to do so in the future in appropriate circumstances.  In addition, although some amounts recorded as compensation by the Company to certain of the Company’s executive officers may be limited by Section 162(m), that limitation currently does not result in the current payment of increased federal income taxes by the Company due to the Company’s significant net operating loss carry forwards.
 
IRC Sections 280G and 4999.  The Compensation Committee has considered the potential impact of Sections 280G and 4999 of the IRC in structuring the compensation and severance packages for the Company’s executives.  Section 280G disallows a tax deduction by the payor for “excess parachute payments” made to executives, and Section 4999 imposes a 20% non-deductible excise tax on the executive receiving an excess parachute payment.  In general, a parachute payment to an executive is a payment to the executive in the nature of compensation that is contingent on a change in control of the Company and that exceeds three times the executive’s “base amount.”  An executive’s base amount is generally the average compensation received by the executive from the Company during the five-year period preceding the change in control of the Company.  An excess parachute payment is any amount over the portion of the base amount allocated to that parachute payment.
 
 
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In general, it is the Compensation Committee’s policy to qualify its executives’ compensation for deductibility under applicable tax laws.  The Compensation Committee believes, however, that stockholder interests are best served by not restricting its discretion and flexibility in crafting compensation programs even though those programs may result in certain non-deductible compensation expenses.  Therefore, the Compensation Committee has from time to time approved elements of compensation for certain officers that may not be fully deductible and that provide for the Company to “gross up” the payment made to the executive to compensate the executive for the 20% excise tax, and the Compensation Committee reserves the right to do so in the future in appropriate circumstances.
 
In connection with the structuring of Mr. Coats’ compensation and severance package, the Compensation Committee considered the effects of Sections 280G and 4999.  In light of the estimated expense to the Company, the Compensation Committee elected not to provide Mr. Coats with a gross-up payment in the event any amount of severance payments or compensation made to Mr. Coats were found to be excess parachute payments, but did not want to diminish the value of the motivational and retention aspects of Mr. Coats’ severance compensation package.  Therefore, certain aspects of Mr. Coats’ severance package were structured to mitigate the applicability of Sections 280G and 4999 to Mr. Coats’ severance compensation.
  
Compensation Committee Report
 
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K adopted by the SEC, and, based on that review and discussions, recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 and the Proxy Statement on Schedule 14A in connection with the Company’s 2017 Annual Meeting of Stockholders.
 
 
Compensation Committee
 
Janet M. Thompson, Chairwoman
Michael J. Fuchs
Mark N. Kaplan
Jeffrey M. Stibel
 
The above report of the Compensation Committee will not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall this report be incorporated by reference in any of the Company’s filings under the Securities Act or the Exchange Act except to the extent that the Company specifically incorporates the same by reference.
 
 
-48-
 
 
Summary Compensation
 
The table below and the accompanying footnotes summarize the compensation attributed for fiscal years 2016, 2015 and 2014, as applicable, to the Company’s executive officers who constitute named executive officers for the fiscal year ended December 31, 2016.
 
2016 Summary Compensation Table
 
Name and Principal Position
 
Year
 
Salary
($)
 
 
Bonus
($)
 
 
Stock
Awards
($)(1)
 
 
Option
Awards
($)(1)
 
 
Non-Equity
Incentive Plan
Compensation
($)(2)
 
 
All Other Compensation
($)
 
 
 
Total
($)
 
Jeffrey H. Coats
 
2016
  550,000 
   
   
  1,362,276 
  479,600 
  14,358 
(3)
  2,406,234 
President and Chief Executive Officer,
 
2015
  495,000 
   
   
  139,232 
  328,185 
  13,583 
(4)
  976,000 
Director
 
2014
  492,656 
   
   
  639,759 
  553,670 
  10,487 
(5)
  1,696,572 
 
 
    
    
    
    
    
    
 
    
Kimberly S. Boren
 
2016
  274,811 
   
   
  480,580 
  135,417 
  6,534 
(7)
  897,342 
Executive Vice President,  
 
2015
  263,409 
   
   
  189,005 
  112,980 
  6,534 
(8)
  571,928 
Chief Financial Officer(6)
 
    
    
    
    
    
    
 
    
 
 
 
    
    
    
    
    
     
 
    
William A. Ferriolo
 
2016
  366,300 
   
   
  585,698 
  207,619 
  6,303 
(10)
  1,165,920 
Executive Vice President,
 
2015
  314,985 
   
  907,250 
  503,416 
  135,222 
  6,303 
(11)
  1,867,176 
Chief Operating Officer(9)
 
2014
  273,698 
   
   
  127,952 
  199,032 
  5,348 
(12)
  606,030 
 
 
    
    
    
    
    
    
 
    
Glenn E. Fuller
 
2016
  305,000 
   
   
  384,084 
  186,172 
  8,758 
(13)
  884,014 
Executive Vice President, Chief Legal
 
2015
  305,000 
   
   
  141,552 
  166,530 
  8,758 
(14)
  621,840 
and Administrative Officer and Secretary
 
2014
  303,698 
   
   
  147,776 
  281,086 
  6,972 
(15)
  739,532 
 
 
    
    
    
    
    
    
 
    
H. Donald Perkins, Jr.
 
2016
  295,000 
   
   
  81,018 
  167,206 
  316,784 
(17)
  860,008 
Executive Vice President, Strategic and
 
2015
  157,557 
   
   
  302,657 
  80,724 
  64,946 
(18)
  605,884 
Business Development(16)
 
 
    
    
    
    
    
     
 
    
 
(1)
The dollar amounts listed do not necessarily reflect the dollar amounts of compensation actually realized or that may be realized. The dollar amount reported for stock awards and option awards is the aggregate grant date fair value of awards granted during the year calculated in accordance with FASB ASC Topic 718. See Note 9 of the “Notes to Consolidated Financial Statements” in Part IV, Item 15-Exhibits and Financial Statement Schedules of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, which accompanies this Proxy Statement, for assumptions made in these valuations.
(2)
Represents amounts related to level of achievement of Company performance goals under the 2016 Incentive Plan. For information on the amounts earned in 2016, see the section of this Proxy Statement entitled “EXECUTIVE COMPENSATIONCompensation Discussion and Analysis2016 Compensation Decisions2016 Annual Incentive Compensation Plan Awards.
 
 
-49-
 
 
(3)
Represents $6,209 for health insurance premiums for dependent, $3,000 for 401(k) plan match and $5,149 for supplemental insurance premiums.
(4)
Represents $5,554 for health insurance premiums for dependent, $3,000 for 401(k) plan match and $5,029 for supplemental insurance premiums.
(5)
Represents $5,458 for health insurance premiums for dependent and $5,029 for supplemental insurance premiums.
(6)
Ms. Boren was appointed Chief Financial Officer effective as of April 1, 2015.
(7)
Represents $3,000 for 401(k) plan match and $3,534 for supplemental insurance premiums.
(8)
Represents $3,000 for 401(k) plan match and $3,534 for supplemental insurance premiums.
(9)
Mr. Ferriolo was appointed Chief Operating Officer effective as of December 15, 2016.
(10)
Represents $3,000 for 401(k) plan match and $3,303 for supplemental insurance premiums.
(11)
Represents $3,000 for 401(k) plan match and $3,303 for supplemental insurance premiums.
(12)
Represents $3,000 for 401(k) plan match and $2,348 for supplemental insurance premiums.
(13)
Represents $3,000 for 401(k) plan match and $5,758 for supplemental insurance premiums.
(14)
Represents $3,000 for 401(k) plan match and $5,758 for supplemental insurance premiums.
(15)
Represents $3,000 for 401(k) plan match and $3,972 for supplemental insurance premiums.
(16)
Mr. Perkins’ employment with the Company was terminated without cause effective as of December 31, 2016.
(17)
Represents $3,000 for 401(k) plan match, $14,892 for vacation pay, $295,000 for severance and $3,892 for supplemental insurance premiums.
(18)
Represents $3,000 for 401(k) plan match, $1,946 for supplemental insurance premiums and $60,000 related to consulting fees paid to Mr. Perkins in 2015 prior to his employment by the Company.
 
 
 
-50-
 
 
Grants of Plan-Based Awards in 2016
 
The following table sets forth for each of the named executive officers information concerning plan-based awards, including stock and stock option awards, granted during 2016.  During 2016, the Company granted stock options at exercise prices equal to the fair market value of a share of the Common Stock as determined by the closing price on The Nasdaq Capital Market on the date of grant.  The term of each option granted is seven years from the date of grant.  The vesting of certain option awards accelerate if there is a change in control of the Company or involuntary termination of employment.  Option awards may be cancelled before their expiration dates if the optionee’s status as an employee is terminated or upon the optionee’s death or disability.
 
2016 Grants of Plan-Based Awards Table 
 
 
 
 
 
Estimated Future Payouts Under Non-Equity Incentive Plan Awards
 
 
Estimated Future Payouts Under Equity Incentive Plan Awards
 
All Other Stock Awards: Number of Shares of Stock or
All Other Option Awards: Number of Securities Underlying
Exercise or Base Price of
Closing Price on Grant
Grant Date Fair Value of Stock and Option 
Name
 
Grant
Date
 
 Threshold
($)
 
 Target
($)
 
 Maximum
($)
 
 Threshold
(#)
 
 Target
(#)  
 
 Maximum
(#)
 
Units
(#)(1) 
  Options (#)(1) 
 Awards
($/Share)
 
   Date
($/Share)
 
 Awards
($)(2) 
 
Jeffrey H. Coats
 
01/21/16
 
  5,500 
  550,000 
  880,000 
   
   
   
   
  150,000 
  17.09 
  17.09 
  1,215,276 

 
   01/21/16
(3)
   
   
   
   
  100,000 
  100,000 
   
   
  17.09 
  17.09 
  147,000 

 
 
 
    
    
    
    
    
    
    
    
    
    
    
Kimberly S. Boren
 
01/21/16
 
  1,553 
  155,295 
  248,472 
   
   
   
   
  22,000 
  17.09 
  17.09 
  178,241 

 
07/15/16
 
   
   
   
   
   
   
   
  30,000 
  14.41 
  14.41 
  205,843 

 
09/21/16
 
   
   
   
   
   
   
   
  12,000 
  16.82 
  16.82 
  96,496 

 
 
 
    
    
    
    
    
    
    
    
    
    
    
William Ferriolo
 
01/21/16
 
  2,381 
  238,095 
  380,952 
   
   
   
   
  25,000 
  17.09 
  17.09 
  202,546 

 
07/15/16
 
   
   
   
   
   
   
   
  30,000 
  14.41 
  14.41 
  205,843 

 
12/15/16
 
   
   
   
   
   
   
   
  25,000 
  14.10 
  14.10 
  177,309 

 
 
 
    
    
    
    
    
    
    
    
    
    
    
Glenn E. Fuller
 
01/21/16
 
  2,135 
  213,500 
  341,600 
   
   
   
   
  22,000 
  17.09 
  17.09 
  178,241 

 
07/15/16
 
   
   
   
   
   
   
   
  30,000 
  14.41 
  14.41 
  205,843 

 
 
 
    
    
    
    
    
    
    
    
    
    
    
H. Donald Perkins, Jr.
 
01/21/16
 
  1,918 
  191,750 
  306,800 
   
   
   
   
  10,000 
  17.09 
  17.09 
  81,018 
 
(1)
All options were granted from the 2014 Equity Incentive Plan and vest one-third on the first anniversary following the date of grant, with the remaining two-thirds vesting ratably over twenty-four months thereafter.
(2)
The dollar amount reported for option and stock awards is the aggregate grant date fair value of awards granted during the year calculated in accordance with FASB ASC Topic 718.
(3)
The terms of these Stock Price-Based Vesting Options are described under the section of this Proxy Statement entitled “EXECUTIVE COMPENSATION–Compensation Discussion and Analysis2016 Compensation Decisions2016 LongTerm Equity Incentive Awards.
 
 
 
-51-
 
 
Outstanding Equity Awards at 2016 Year-End
 
The following table sets forth, for each of the named executive officers, information concerning outstanding stock option awards as of December 31, 2016.
 
2016 Outstanding Equity Awards at Fiscal Year-End Table
 
 
 
 
 
 
 
 
 Option Awards             

Stock Awards           
 
Name
 
 
Grant Date
 
 
 
 
Number of Securities  Underlying Unexercised Options (#)
Exercisable
 
 
Number of Securities Underlying Unexercised Options (#) 
Unexercisable
 
 
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised  Options (#)
Unearned
 
 Option Exercise
Price
($)
 
 Option Exercise Date
 
 
Number of Shares or Units of Stock That Have Not Vested
($)
 
 
Market Value of Shares or Units of Stock That Have Not Vested
($)
 
 
Equity Incentive Plan Awards: Unearned Shares, Units or Other Rights That Have Not Vested (#)
 
 
 Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Jeffrey H. Coats(1)
01/21/16
  (6)
   
   
  100,000 
  17.09 
 
01/21/23
 
   
   
   
   
     
01/21/16
  (4)
   
  150,000 
   
  17.09 
 
01/21/23
 
   
   
   
   
     
01/23/15
  (4)
  19,171 
  10,829 
   
  10.20 
 
01/23/22
 
   
   
   
   
     
03/17/14
  (4)
  33,919 
  3,081 
   
  14.32 
 
03/17/21
 
   
   
   
   
     
01/21/14
  (4)
  48,612 
  1,388 
   
  17.64 
 
01/21/21
 
   
   
   
   
     
01/24/13
  (2)
  22,500 
   
   
  4.00 
 
01/24/20
 
   
   
   
   
     
01/10/12
  (3)
  37,692 
   
   
  3.90 
 
01/10/19
 
   
   
   
   
     
01/20/11
    
  26,196 
   
   
  4.80 
 
01/20/18
 
   
   
   
   
     
04/03/09
    
  167,511 
   
   
  1.75 
 
04/03/19
 
   
   
   
   
     
11/03/08
    
  1,000 
   
   
  3.85 
 
11/03/18
 
   
   
   
   
     
11/01/07
    
  1,000 
   
   
  11.60 
 
11/01/17
 
   
   
   
   
 
 
-52-
 
 

Kimberly S. Boren
 09/21/16
  (4)
   
  12,000 
   
  16.82 
 09/21/23
   
   
   
   
     
 07/15/16
  (4)
   
  30,000 
   
  14.41 
 07/15/23
   
   
   
   
     
 01/21/16
  (4)
   
  22,000 
   
  17.09 
 01/21/23
   
   
   
   
     
 05/18/15
  (4)
  3,178 
  2,822 
   
  13.22 
 05/18/22
   
   
   
   
     
 01/23/15
  (4)
  9,592 
  5,408 
   
  10.20 
 01/23/22
   
   
   
   
     
 01/21/15
  (4)
  12,785 
  7,215 
   
  9.10 
 01/21/22
   
   
   
   
     
 03/17/14
  (4)
  6,785 
  615 
   
  14.32 
 03/17/21
   
   
   
   
     
 01/21/14
  (4)
  9,723 
  277 
   
  17.64 
 01/21/21
   
   
   
   
     
 01/24/13
  (2)
  6,875 
   
   
  4.00 
 01/24/20
   
   
   
   
     
 01/10/12
  (3)
  12,340 
   
   
  3.90 
 01/10/19
   
   
   
   
     
12/07/11
    
  10,000 
   
   
  3.80 
12/07/18
   
   
   
   
     
01/20/11
    
  5,739 
   
   
  4.80 
01/20/18
   
   
   
   
     
12/17/10
    
  10,000 
   
   
  4.30 
12/17/17
   
   
   
   
     
04/26/10
    
  5,000 
   
   
  3.95 
04/26/20
   
   
   
   
     
 
    
    
    
    
    
 
    
    
    
    
William A. Ferriolo
12/15/16
  (4)
   
  25,000 
   
  14.10 
12/15/23
   
   
   
   
     
07/15/16
  (4)
   
  30,000 
   
  14.41 
07/15/23
   
   
   
   
     
01/21/16
  (4)
   
  25,000 
   
  17.09 
01/21/23