UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X]
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 2018
or
[ ]
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the transition period from
to
Commission file number 1-34761
AutoWeb,
Inc.
(Exact name of registrant as specified in its charter)
Delaware
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33-0711569
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(State or other jurisdiction of incorporation or
organization)
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(I.R.S. Employer Identification Number)
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18872 MacArthur Boulevard, Suite 200, Irvine,
California
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92612
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(Address of principal executive offices)
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(Zip Code)
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(949) 225-4500
(Registrant’s telephone number, including area
code)
Indicate by check mark whether the registrant: (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [
]
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit such files). Yes
[X] No [ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,”
“accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
Large
accelerated filer [ ]
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Accelerated
filer [X]
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Non-accelerated
filer [ ]
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Smaller
reporting company [X]
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Emerging
growth company [ ]
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards pursuant to Section 13(a) of the Exchange Act. [
]
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes [ ]
No [X]
As of
November 5, 2018, there were
12,948,950
shares of the Registrant’s
Common Stock, $0.001 par value,
outstanding.
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PART I. FINA
N
CIAL
INFORMATION
Item 1.
Financial
Statements
AUTOWEB, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
(Amounts in thousands, except share and per-share
data)
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Assets
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Current
assets:
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Cash
and cash equivalents
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$
15,824
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$
24,993
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Short-term
investment
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257
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254
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Accounts
receivable, net of allowances for bad debts and customer credits of
$615 and $892 at September 30, 2018 and December 31, 2017,
respectively
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25,267
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25,911
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Prepaid
expenses and other current assets
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1,268
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1,805
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Total
current assets
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42,616
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52,963
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Property
and equipment, net
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3,614
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4,311
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Investments
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—
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100
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Intangible
assets, net
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13,487
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29,113
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Goodwill
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—
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5,133
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Long-term
deferred tax asset
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—
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692
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853
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601
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Total
assets
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$
60,570
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$
92,913
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Liabilities and Stockholders’ Equity
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Current
liabilities:
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Accounts
payable
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$
10,386
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$
7,083
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Accrued
employee-related benefits
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2,921
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2,411
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Other
accrued expenses and other current liabilities
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7,983
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7,252
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Current
convertible note payable
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1,000
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—
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Total
current liabilities
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22,290
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16,746
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Convertible
note payable
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—
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1,000
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Borrowings
under revolving credit facility
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—
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8,000
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Total
liabilities
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22,290
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25,746
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Commitments
and contingencies (Note 11)
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Stockholders’
equity:
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Preferred
stock, $0.001 par value, 11,445,187 shares authorized
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—
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—
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Series
A Preferred stock, none issued and outstanding
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—
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—
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Common
stock, $0.001 par value; 55,000,000 shares authorized, and
12,948,950 and 13,059,341 shares issued and outstanding at
September 30, 2018 and December 31, 2017, respectively
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13
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13
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Additional
paid-in capital
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360,698
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356,054
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(322,431
)
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(288,900
)
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Total
stockholders’ equity
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38,280
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67,167
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Total
liabilities and stockholders’ equity
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$
60,570
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$
92,913
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See accompanying notes to unaudited consolidated condensed
financial statements.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF
OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(Amounts in thousands, except per-share data)
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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Revenues:
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Lead
fees
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$
24,986
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$
27,711
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$
71,277
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$
83,149
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Advertising
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6,606
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8,946
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21,643
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24,914
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103
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215
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416
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741
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Total
revenues
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31,695
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36,872
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93,336
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108,804
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26,278
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25,786
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74,702
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74,171
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Cost
of revenues – impairment
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9,014
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—
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9,014
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—
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Gross
(loss) profit
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(3,597
)
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11,086
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9,620
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34,633
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Operating
expenses:
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Sales
and marketing
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3,333
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3,692
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10,096
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10,684
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Technology
support
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4,303
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3,141
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10,653
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9,582
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General
and administrative
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3,639
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2,818
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11,980
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9,040
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Depreciation
and amortization
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1,172
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1,192
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3,495
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3,623
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—
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—
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5,133
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—
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Long-lived
asset impairment
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1,968
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—
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1,968
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—
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Total
operating expenses
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14,415
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10,843
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43,325
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32,929
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Operating
(loss) income
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(18,012
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243
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(33,705
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1,704
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Interest
and other income (expense), net
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(24
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(93
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178
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(289
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(Loss)
Income before income tax provision
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(18,036
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150
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(33,527
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1,415
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—
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81
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4
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539
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Net
(loss) income and comprehensive (loss) income
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$
(18,036
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$
69
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$
(33,531
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$
876
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Basic
(loss) earnings per common share
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$
(1.41
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$
0.01
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$
(2.64
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$
0.08
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Diluted
(loss) earnings per common share
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$
(1.41
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$
0.01
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$
(2.64
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$
0.07
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See
accompanying notes to unaudited consolidated condensed financial
statements.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH
FLOWS
(Amounts in thousands)
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Nine Months Ended
September 30,
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Cash
flows from operating activities:
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Net
(loss)
income
and
comprehensive (loss) income
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$
(33,531
)
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$
876
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Adjustments
to reconcile net income (loss) to net cash (used in) provided by
operating activities:
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Depreciation
and amortization
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6,534
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5,499
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Goodwill
impairment
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5,133
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—
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Intangible
asset impairment
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9,014
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—
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Provision
for bad debts
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216
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294
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Provision
for customer credits
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177
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29
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Share-based
compensation
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4,365
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2,918
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Gain
on investment
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(25
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—
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Loss
on disposal of assets
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—
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7
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Long-lived
asset impairment
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1,968
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—
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Change
in deferred tax asset
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692
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119
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Changes
in assets and liabilities:
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Accounts
receivable
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251
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5,808
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Prepaid
expenses and other current assets
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532
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(392
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Other
assets
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(615
)
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132
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Accounts
payable
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3,303
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290
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Accrued
expenses and other current liabilities
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1,243
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(3,112
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Net
cash (used in) provided by operating activities
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(743
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12,468
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Cash
flows from investing activities:
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Purchases
of property and equipment
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(828
)
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(1618
)
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Purchase of intangible asset
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—
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(600
)
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Proceeds
from sale of investment
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125
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—
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Net
cash used in investing activities
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(703
)
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(2,218
)
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Cash
flows from financing activities:
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Payments
on term loan borrowings
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—
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(3,938
)
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Payment
on revolving credit facility
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(8,000
)
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—
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Repurchase
of common stock
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—
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(1,196
)
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Proceeds
from issuance of common stock
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200
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—
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Proceeds
from exercise of stock options
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77
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1,068
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Net
cash used in financing activities
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(7,723
)
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(4,066
)
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Net
(decrease) increase in cash and cash equivalents
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(9,169
)
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6,184
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Cash
and cash equivalents, beginning of period
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24,993
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38,512
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Cash
and cash equivalents, end of period
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$
15,824
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$
44,696
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Supplemental
disclosure of cash flow information:
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Cash
paid for income taxes
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$
—
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$
445
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Cash
paid for interest
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$
103
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$
648
|
See accompanying notes to unaudited consolidated condensed
financial statements.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS
1. Organization and Operations
AutoWeb, Inc. (“
AutoWeb
” or “
Company
”) is a
digital marketing company for
the automotive industry that assists automotive retail dealers
(“
Dealers
”) and
automotive manufacturers (“
Manufacturers
”) market and sell
new and used vehicles to consumers by utilizing the Company’s
digital sales enhancing products and services.
The Company’s consumer-facing automotive
websites (“
Company
Websites
”) provide
consumers with information and tools to aid them with their
automotive purchase decisions and gives in-market consumers the
ability to connect with Dealers regarding purchasing or leasing
vehicles. These consumers are connected to Dealers via the
Company’s various programs for online lead referrals
(“
Leads
”)
. The AutoWeb
®
“click traffic”
consumer referral product engages with car buyers from
AutoWeb’s network of automotive websites and uses the
Company’s proprietary technology to present them with highly
relevant offers based on their make and model of interest and their
geographic location. The Company then directs these in-market
consumers to key areas of a Dealer’s or Manufacturer’s
website to maximize conversion for sales or other products or
services.
The
Company was incorporated in Delaware on May 17, 1996. Its
principal corporate offices are located in Irvine, California. The
Company’s common stock is listed on The NASDAQ Capital Market
under the symbol AUTO.
On October 9, 2017,
the Company changed its name from Autobytel Inc. to AutoWeb, Inc.,
assuming the name of AutoWeb, Inc., which was the name of the
company that the Company acquired in October 2015. In connection
with this name change, the Company changed its stock ticker symbol
from “ABTL” to “AUTO” on The NASDAQ Capital
Market.
2. Basis of Presentation
The accompanying unaudited consolidated condensed
financial statements are presented on the same basis as the
Company’s Annual Report on Form 10-K for the year ended
December 31, 2017 (“
2017 Form 10-K
”)
filed with the Securities and Exchange Commission
(“
SEC
”). AutoWeb has made its
disclosures in accordance with U.S. generally accepted accounting
principles (“
GAAP
”) for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial
statements. In the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary
for a fair presentation with respect to interim financial
statements, have been included. Certain amounts have
been reclassified from the prior year presentation to conform to
the current year presentation. The unaudited consolidated condensed
statements of operations and comprehensive income (loss) and cash
flows for the periods ended September 30, 2018 and 2017 are not
necessarily indicative of the results of operations or cash flows
expected for the year or any other period. The Company
had no items of comprehensive income or loss for any of the periods
presented. The unaudited consolidated condensed financial
statements should be read in conjunction with the audited
consolidated financial statements and the notes thereto in the 2017
Form 10-K.
3. Recent Accounting Pronouncements
Issued but not yet adopted by the Company
The Company considers the applicability and impact of all
Accounting Standards Updates (
“
ASU
”) issued by the Financial
Accounting Standards Board
(
“
FASB
”
)
. ASUs not listed below were assessed and
determined to be either not applicable or are expected to have
minimal impact on the Company’s consolidated result of
operations, financial position and cash flows.
Accounting Standards
Codification 220 “Comprehensive Income.”
In
February 2018, the
FASB issued ASU
No.
2018-02, “Reclassification of Certain Tax Effects
from Accumulated Other Comprehensive Income.” The new
guidance allows a reclassification from accumulated other
comprehensive income to retained earnings for stranded tax effects
resulting from the Tax Cuts and Jobs Act (“
TCJA
”) and will improve the
usefulness of information reported to financial statement users.
The ASU will take effect for all
entities for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2018. The Company believes this
ASU will not have a material effect on the consolidated financial
statements and related disclosures.
Accounting Standards
Codification 842 “Leases.”
In February 2016, the FASB issued ASU No. 2016-02
(Topic 842), “Leases.” Topic 842 provides guidance on
accounting for leases which requires lessees to recognize most
leases on their balance sheets for the rights and obligations
created by those leases. The guidance requires enhanced disclosures
regarding the amount, timing, and uncertainty of cash flows arising
from leases that will be effective for interim and annual periods
beginning after December 15, 2018, with early adoption permitted.
The Company expects to adopt the requirements of the new standard
effective January 1, 2019 and elect certain available transitional
practical expedients.
In July 2018, the FASB issued updated guidance which allows an
additional transition method to adopt the new leases standard at
the adoption date, as compared to the beginning of the earliest
period presented and recognize a cumulative-effect adjustment to
the beginning balance of retained earnings in the period of
adoption. The Company expects to elect this transition method at
the adoption date of January 1, 2019. The Company continues to
analyze its lease portfolio to determine the impact that the new
standard will have on its consolidated financial statements.
Further, the Company is in the process of reviewing and updating
our business processes, as necessary, to assist in our ongoing
lease data collection and analysis. Additionally, the Company is
updating its accounting policies and internal controls that would
be impacted by the new guidance, to ensure readiness for adoption
in the first quarter of 2019.
SEC Release No. 33-10532, Disclosure Update
and Simplification.
In August 2018, the SEC adopted the
final rule under SEC Release No. 33-10532, “
Disclosure Update and
Simplification”
, amending certain disclosure
requirements that were redundant, duplicative, overlapping,
outdated or superseded. In addition, the amendments expanded the
disclosure requirements on the analysis of stockholders’
equity for interim financial statements. Under the amendments, an
analysis of changes in each caption of stockholders' equity
presented in the balance sheet must be provided in a note or
separate statement. The analysis should present a reconciliation of
the beginning balance to the ending balance of each period for
which a statement of comprehensive income is required to be filed.
This final rule is effective on November 5, 2018. The Company will
adopt the requirements of the new standard for the interim
reporting of the first quarter of 2019.
Recently adopted by the Company
Accounting Standards
Codification 606 “Revenue from Contracts with
Customers.”
In
May 2014, ASU No. 2014-09, “Revenue from Contracts with
Customers (Topic 606)” was issued.
The new
standard sets forth a single comprehensive model for recognizing
and reporting revenue
and requires the
use of a five-step methodology to depict the transfer of promised
goods and services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in
exchange for those goods or services.
Additionally,
ASU No. 2014-09 requires enhanced
disclosure regarding revenue recognition.
On January 1,
2018, the Company adopted ASC 606 using the modified retrospective
transition method, which had no material impact on operations, and
required no cumulative adjustment to be made to beginning retained
earnings on January 1, 2018. Therefore, results for reporting
periods beginning after January 1, 2018 are presented under ASC
606, while prior period amounts have not been adjusted.
See Note 4 for further
discussion.
Accounting Standards
Codification 805 “Business
Combinations.”
In January 2017, ASU No. 2017-01,
“Clarifying the Definition of a Business” was
issued. ASU No. 2017-01 provides a more robust framework
to use in determining when a set of assets and activities is a
business. The Company adopted ASU No. 2017-01 on January
1, 2018, and it did not have a material effect on the consolidated
financial statements.
Accounting Standards
Codification 718 “Compensation – Stock
Compensation.”
In May 2017, ASU No. 2017-09, “Scope of
Modification Accounting” was issued. The
amendments in this update provide guidance about which changes to
the terms or conditions of a share-based payment award require an
entity to apply modification accounting in Topic 718. An entity
should apply ASU No. 2017-09 on a prospective basis for an award
modified on or after the adoption date for annual periods, and
interim periods within those annual periods, beginning after
December 15, 2017. Additionally, in June 2018, FASB issued ASU No.
2018-07, “Compensation—Stock Compensation (Topic 718):
Improvements to Nonemployee Share-Based Payment Accounting.”
The update largely aligns the accounting for share-based payment
awards issued to employees and nonemployees, particularly with
regards to the measurement date and the impact of performance
conditions. Under the new guidance, the existing employee guidance
will apply to nonemployee share-based transactions (as long as the
transaction is not effectively a form of financing). The cost of
nonemployee awards will continue to be recorded as if the grantor
had paid cash for the goods or services. In addition, the
contractual term will be able to be used in lieu of an expected
term in the option-pricing model for nonemployee awards. The
Company adopted ASU No. 2017-09 and ASU No. 2018-07 in the current
year and, therefore,
results for reporting periods beginning
after January 1, 2018 are presented under AS
U No. 2017-09 and ASU No. 2018-07
, while
prior period amounts have not been adjusted.
See Note 6 for further
discussion.
4. Revenue Recognition
Revenue
is recognized when the Company transfers control of promised goods
or services to the Company’s customers, or when the Company
satisfies any performance obligations under contract. The amount of
revenue recognized reflects the consideration the Company expects
to be entitled to in exchange for respective goods or services
provided. Further, under ASC 606, contract assets or contract
liabilities that arise from past performance but require further
performance before obligation can be fully satisfied must be
identified and recorded on the balance sheet until respective
settlements have been met.
The
Company performs the following steps in order to properly determine
revenue recognition and identify relevant contract assets and
contract liabilities:
●
identify
the contract with a customer;
●
identify
the performance obligations in the contract;
●
determine
the transaction price;
●
allocate
the transaction price to the performance obligations in the
contract; and
●
recognize
revenue when, or as, the Company satisfies a performance
obligation.
The
Company earns revenue by providing leads, advertising, and mobile
products and services used by Dealers and Manufacturers in their
efforts to market and sell new and used vehicles to consumers. The
Company enters into contracts that can include various combinations
of products and services, which are generally capable of being
distinct and accounted for as separate performance obligations. The
Company records revenue on distinct performance obligations at a
single point in time, when control is transferred to the
customer.
The
Company has three main revenue sources – Lead fees,
advertising, and other revenue. Accordingly, the Company recognizes
revenue for each source as described below:
●
Lead
fees -
paid by Dealers and
Manufacturers participating in the Company’s Lead programs
and are comprised of Lead transaction and/or monthly subscription
fees. Lead fees are recognized in the period when service is
provided.
●
Advertising -
fees paid by Dealers and Manufacturers
for (i) display advertising on the Company’s websites and
(ii) fees from the Company’s click traffic program. Revenue
is recognized in the period advertisements are displayed on the
Company’s websites or the period in which clicks have been
delivered, as applicable.
The Company recognizes gross
revenue from the delivery of action-based advertisements in the
period in which a user takes the action for which the marketer
contracted for with the Company. For advertising revenue
arrangements where the Company is not the principal, the Company
recognizes revenue on a net basis.
●
Other
revenues -
consists primarily of
revenues from the Company’s mobile products and revenues from
the Company’s Reseller Agreement with SaleMove, Inc.
Revenue is recognized in the period in which products or services
are sold.
Variable Consideration
The
Company’s products, namely Leads, are generally sold with a
right-of-return for services that do not meet customer requirements
as specified by the relevant contract. Rights-of-return are
estimable, and provisions for estimated returns are recorded as a
reduction in revenue by the Company in the period revenue is
recognized, and thereby accounted for as variable consideration.
The Company includes the allowance for customer credits in its net
accounts receivable balances on the Company’s balance sheet
at period end. Allowance for customer credits totaled $133,000
and
$213,000 as of
September 30, 2018 and December 31, 2017,
respectively.
See
further discussion below on significant judgments exercised by the
Company in regards to variable consideration.
Contract Assets and Contract Liabilities Unbilled
Revenue
Timing
of revenue recognition may differ from the timing of invoicing to
customers. The Company records a receivable when revenue is
recognized prior to invoicing. From time-to-time, the Company may
have balances on its balance sheet representing revenue that has
been recognized by the Company upon satisfaction of performance
obligations and earning a right to receive payment. These not-yet
invoiced receivable balances are driven by the timing of
administrative transaction processing, and are not indicative of
partially complete performance obligations, or
unbilled revenue
. Unbilled revenue
represents revenue that is partially earned, whereby control of
promised services has not yet transferred to the customer, and for
which the Company has not earned the complete right to payment. The
Company had zero unbilled revenue included in its consolidated
balance sheets as of September 30, 2018 and December 31,
2017.
Deferred Revenue
The Company defers the recognition of revenue when
cash payments are received or due in advance of satisfying its
performance obligations, including amounts which are refundable.
Such activity is not a common practice of operation for the
Company.
The
Company had zero deferred revenue included in its consolidated
balance sheets as of September 30, 2018 and December 31,
2017.
Payment
terms and conditions can vary by contract type. Generally, payment
terms within the Company’s customer contracts include a
requirement of payment within 30 to 60 days from date of invoice.
Typically, customers make payments after receipt of invoice for
billed services, and less typically, in advance of rendered
services.
Practical Expedients and Exemptions
The
Company excludes from the transaction price all sales taxes related
to revenue producing transactions collected from the customer for a
governmental authority.
The
Company applies the new revenue standard requirements to a
portfolio of contracts (or performance obligations) with similar
characteristics for transactions where it is expected that the
effects of applying the revenue recognition guidance to the
portfolio would not differ materially on the financial statements
from that of applying the same guidance to the individual contracts
(or performance obligations) within that portfolio.
The
Company generally expenses incremental costs of obtaining a
contract when incurred because the amortization period would be
less than one year. These costs primarily relate to sales
commissions and are recorded in selling, marketing, and
distribution expense.
Significant Judgments
The
Company provides Dealers and Manufacturers with various
opportunities to market their vehicles to potential vehicle buyers,
namely via consumer lead and click traffic referrals and online
advertising products and services. Proper revenue recognition of
digital marketing activities, as well as proper recognition of
assets and liabilities related to these activities, requires
management to exercise significant judgment with the following
items:
●
Arrangements with Multiple Performance Obligations
-
The
Company enters into contracts with customers that often include
multiple products and services to a customer. Determining whether
products and/or services are distinct performance obligations that
should be accounted for singularly or separately may require
significant judgment.
●
Variable Consideration and Customer Credits
-
The
Company’s products are generally sold with a right-of-return.
Additionally, the Company will sometimes provide customer credits
or sales incentives. These items are accounted for as variable
consideration when
determining the
allocation of the transaction price to performance obligations
under a contract.
The
allowance for customer credits is an estimate of adjustments for
services that do not meet customer requirements. Additions to the
estimated allowance for customer credits are recorded as a
reduction of revenues and are based on the Company’s
historical experience of: (i) the amount of credits issued; (ii)
the length of time after services are rendered that the credits are
issued; (iii) other factors known at the time; and (iv) future
expectations. Reductions in the estimated allowance for customer
credits are recorded as an increase in
revenues.
As specific customer credits are
identified, they are charged against this allowance with no impact
on revenues.
Returns and
credits are measured at contract inception, with respective
obligations reviewed each reporting period or as further
information becomes available, whichever is earlier, and only to
the extent that it is probable that a significant reversal of any
incremental revenue will not occur.
The allowance for customer credits is included in
the net accounts receivable balances of the Company’s balance
sheets as of September 30, 2018 and December 31,
2017.
The
Company has not made any significant changes to judgments in
applying ASC 606 during the nine months ended September 30,
2018.
Disaggregation of Revenue
The
Company disaggregates revenue
from contracts with customers by
revenue source and has determined that disaggregating revenue into
these categories sufficiently depicts the differences in the
nature, amount, timing, and uncertainty of its revenue streams. The
Company has three main sources of
revenue: lead fees, advertising, and other
revenues.
The
following table summarizes revenue from contracts with customers,
disaggregated by revenue source, for the three and nine months
ended September 30, 2018 and 2017. Revenue is recognized net of
allowances for returns and any taxes collected from customers,
which are subsequently remitted to governmental
authorities.
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|
|
|
|
|
|
|
Lead
fees
|
$
24,986
|
$
27,711
|
$
71,277
|
$
83,149
|
Advertising
|
|
|
|
|
Clicks
|
5,559
|
7,436
|
18,020
|
20,403
|
Display
and other advertising
|
1,047
|
1,510
|
3,623
|
4,511
|
|
103
|
215
|
416
|
741
|
Total
revenue
|
$
31,695
|
$
36,872
|
$
93,336
|
$
108,804
|
5. Net Earnings
(Loss) Per Share and Stockholders’ Equity
Basic
net earnings (loss) per share is computed using the weighted
average number of common shares outstanding during the period,
excluding any unvested restricted stock. Diluted net earnings
(loss) per share is computed using the weighted average number of
common shares, and if dilutive, potential common shares
outstanding, as determined under the treasury stock and
if-converted methods, during the period. Potential common shares
consist of unvested restricted stock and common shares issuable
upon the exercise of stock options, the exercise of warrants, and
conversion of convertible notes.
The
Company used the following share amounts to compute the basic and
diluted net (loss) earnings per share for the three and nine
months ended September 30, 2018 and 2017:
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|
|
|
|
|
Basic
Shares:
|
|
|
|
|
Weighted
average common shares outstanding
|
12,948,150
|
12,881,812
|
12,959,666
|
11,729,181
|
Weighted
average unvested restricted stock
|
(161,413
)
|
(119,584
)
|
(249,084
)
|
(115,574
)
|
Weighted
average common shares repurchased
|
—
|
(60,230
)
|
—
|
(20,297
)
|
Basic
Shares
|
12,786,737
|
12,701,998
|
12,710,582
|
11,593,310
|
|
|
|
|
|
Diluted
Shares:
|
|
|
|
|
Basic
shares
|
12,786,737
|
12,701,998
|
12,710,582
|
11,593,310
|
Weighted
average dilutive securities
|
—
|
498,587
|
—
|
621,449
|
Incremental
shares from convertible preferred stock
|
—
|
—
|
—
|
1,064,660
|
Diluted
Shares
|
12,786,737
|
13,200,585
|
12,710,582
|
13,279,419
|
For the three and nine months ended September 30,
2018, the Company’s basic and diluted net loss per share are
the same since the Company generated a net loss for the period and
potentially dilutive securities are excluded from diluted net loss
per share because they have an anti-dilutive impact. For the three
and nine months ended September 30, 2017, weighted average dilutive
securities included dilutive options, restricted stock awards, and
shares of common stock issued in June 2017 upon conversion of the
Series B Junior Participating Convertible Preferred Stock, $0.001
par value per share, (“
Series B Preferred
Stock
”) that was issued
in connection with the acquisition of Autobytel, Inc. (formerly
AutoWeb, Inc.) (“
AWI
”).
For the three and nine months ended September 30, 2018, 4.0 and 4.3
million of potentially anti-dilutive securities related to common
stock have been excluded from the calculation of diluted net
earnings per share, respectively. For the three and nine months
ended September 30, 2017, 3.9 and 3.1 million of potentially
anti-dilutive securities related to common stock have been excluded
from the calculation of diluted net earnings per
share.
On September 6, 2017, the Company announced that
its board of directors authorized the Company to repurchase up to
$3.0 million of the Company’s common stock.
Under the
repurchase program, the Company may repurchase common stock from
time to time on the open market or in private transactions. This
authorization does not require the Company to purchase a specific
number of shares, and the board of directors may suspend, modify or
terminate the program at any time. The Company anticipates that it
would fund future repurchases, if any, through the use of available
cash. No shares were repurchased during the three and nine
months ended September 30, 2018. As of September 30, 2018, $2.3
million remains available for the Company to repurchase common
stock.
On June 22, 2017,
the Company obtained stockholder approval for the issuance of
shares of the Company’s common stock upon (i) the conversion
of the Company’s then outstanding Series B Preferred Stock;
and (ii) the conversion of shares of Series B Preferred Stock that
would be issued upon exercise of the warrant to purchase up to
148,240 shares of Series B Preferred Stock issued in connection
with the acquisition of AWI (“
AWI Warrant
”). Upon obtaining
stockholder approval for the conversion, each outstanding share of
Series B Preferred Stock was automatically converted into 10 shares
of the Company’s common stock, which resulted in the
outstanding shares of Series B Preferred Stock being converted into
1,680,070 shares of the Company’s common stock, and the AWI
Warrant converted into warrants to acquire up to 1,482,400 shares
of the Company’s common stock.
Warrants.
The
warrant to purchase 69,930 shares of the Company’s common
stock issued in connection with the acquisition of AutoUSA was
valued at $7.35 per share for a total value of $0.5 million
(“
AutoUSA
Warrant
”). The
Company used an option pricing model to determine the value of the
AutoUSA Warrant. Key assumptions used in valuing the
AutoUSA Warrant are as follows: risk-free interest rate of 1.6%,
stock price volatility of 65.0% and a term of 5.0
years. The AutoUSA Warrant was valued based on long-term
stock price volatilities of the Company. The exercise
price of the AutoUSA Warrant is $14.30 per share (as may be
adjusted for stock splits, stock dividends, combinations, and other
similar events). The AutoUSA Warrant became exercisable
on January 13, 2017 and expires on January 13,
2019.
The AWI Warrant was valued at $1.72 per share for
a total value of $2.5 million. The Company used an
option pricing model to determine the value of the AWI
Warrant. Key assumptions used in valuing the AWI Warrant
were as follows: risk-free interest rate of 1.9%, stock price
volatility of 74.0% and a term of 7.0 years. The AWI
Warrant was valued based on long-term stock price volatilities of
the Company’s common stock. On June 22, 2017, the
Company received stockholder approval which resulted in the
automatic conversion of the AWI Warrant into warrants to acquire up
to 1,482,400 shares of the Company’s common stock at an
exercise price of $18.45 per share of common stock. The AWI Warrant
became exercisable on October 1, 2018, subject to the following
vesting conditions: (i) with respect to the first one-third (1/3)
of the warrant shares, if at any time after the issuance date of
the AWI Warrant and prior to the expiration date of the AWI Warrant
the weighted average closing price of the Company’s common
stock for the preceding 30 trading days (adjusted for any stock
splits, stock dividends, reverse stock splits or combinations of
the Company’s common stock occurring after the issuance date)
(“
Weighted Average Closing
Price
”) is at or above
$30.00; (ii) with respect to the second one-third (1/3) of the
warrant shares, if at any time after the issuance date of the AWI
Warrant and prior to the expiration date the Weighted Average
Closing Price is at or above $37.50; and (iii) with respect to the
last one-third (1/3) of the warrant shares, if at any time after
the issuance date of the AWI Warrant and prior to the expiration
date the Weighted Average Closing Price is at or above
$45.00. The AWI Warrant expires on October 1,
2022
6.
Share-Based Compensation
Share-based
compensation expense is included in costs and expenses in the
accompanying Unaudited Consolidated Condensed Statements of
Operations and Comprehensive Income (Loss) as follows:
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|
|
|
|
|
|
|
Share-based
compensation expense:
|
|
|
|
|
Cost
of revenues
|
$
2
|
$
20
|
$
21
|
$
59
|
Sales
and marketing
|
520
|
409
|
904
|
1,222
|
Technology
support
|
886
|
138
|
1,213
|
401
|
General
and administrative
|
388
|
397
|
2,228
|
1,238
|
Share-based
compensation costs
|
1,796
|
964
|
4,366
|
2,920
|
|
|
|
|
|
Less
amount capitalized to internal use software:
|
—
|
1
|
1
|
2
|
Total
share-based compensation costs
|
$
1,796
|
$
963
|
$
4,365
|
$
2,918
|
During the nine months ended September 30, 2018, certain awards
were modified or accelerated in connection with the termination of
employment of certain former officers of the Company. In accordance
with guidance provided under ASC 718 and related ASU No. 2017-09
and ASU No. 2018-07, the Company recognized award modification and
acceleration expenses related to these events in the period
incurred. Modification expense was determined by using the
Black-Scholes option pricing model to estimate the fair value of
the modified awards as of the new measurement date and respective
fair value assumptions. As reflected in the table above, the
Company recognized award modification and acceleration expense of
$1.2 million and $2.1 million in the three and nine months ended
September 30, 2018, respectively. There were no modification or
acceleration expenses recognized in 2017.
Service-Based
Options.
The Company
granted the following service-based options for the three and nine
months ended September 30, 2018 and 2017,
respectively:
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|
|
|
|
|
|
|
|
|
|
Number
of service-based options granted
|
33,000
|
83,850
|
1,749,700
|
457,100
|
Weighted
average grant date fair value
|
$
1.65
|
$
3.72
|
$
1.83
|
$
6.29
|
Weighted
average exercise price
|
$
3.04
|
$
7.23
|
$
3.29
|
$
12.51
|
The
Company recognizes compensation expense for stock option grants
based on the fair value at the date of grant using the
Black-Scholes option pricing model. The Company uses historical
data, among other factors, to estimate the expected option life and
has elected to estimate forfeiture rates. The risk-free rate is
based on the United States Treasury Department yield curve in
effect at the time of grant for the expected life of the option.
The Company assumes an expected dividend yield of zero for all
periods. Options generally vest one-third on the first anniversary
of the grant date and ratably over twenty-four months
thereafter. The vesting of these awards is contingent
upon the employee’s continued employment with the Company
during the vesting period and vesting may be accelerated in the
event of a change in control of the Company.
In
April 2018, the Company entered into an Inducement Stock Option
Award Agreement with the Company’s CEO, Jared Rowe
(“
Rowe Option Award
Agreement
”
). Pursuant to
the Rowe Option Award Agreement, Mr. Rowe was granted stock options
to purchase 1,000,000 shares of common stock
(
“
Rowe Employment
Options
”), which shall vest monthly in 36 monthly
installments on the first day of each calendar month following the
date of grant. These options have an exercise price of $3.26 per
share and a term of seven years from the date of grant. Upon a
change in control of the Company or in the event of a termination
of Mr. Rowe’s employment by the Company without cause or by
Mr. Rowe with good reason, all unvested options will vest. In the
event of a termination of Mr. Rowe’s employment with the
Company by reason of Mr. Rowe’s death or disability, the
lesser of: (i) 1/3rd of the total number of these options and (ii)
the total number of unvested options will vest upon the date of
termination.
Market Condition
Options.
On January
21, 2016, the Company granted 100,000 stock options to its former
chief executive officer (“
Former
CEO
”) with an exercise price of $17.09 and
grant date fair value of $1.47 per option, using a Monte Carlo
simulation model (“
Former
CEO Market Condition
Options
”).
The Former CEO Market Condition Options were previously valued at
$2.94 per option but were revalued when the requisite stockholder
approval for the Company’s Amended and Restated 2014 Equity
Incentive Plan was obtained in June 2016. The Former CEO Market
Condition Options were subject to both stock price-based and
service-based vesting requirements that must be satisfied for the
Former CEO Market Condition Options to vest and become exercisable.
On April 12, 2018, pursuant to the stock option award agreement,
vesting of the Former CEO Market Condition Options was accelerated
with the termination of employment of the Former CEO, resulting in
the recognition of approximately $0.8 million of non-recurring
share-based compensation expense during the first quarter of 2018.
The Former CEO Market Condition Options may be exercised at any
time on or before April 13, 2020.
Stock option
exercises.
The
following stock options were exercised during the three and nine
months ended September 30, 2018 and 2017,
respectively:
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|
|
|
|
|
|
|
|
|
|
Number
of stock options exercised
|
1,000
|
15,000
|
16,967
|
191,074
|
Weighted
average exercise price
|
$
1.75
|
$
4.20
|
$
4.51
|
$
5.58
|
The
grant date fair value of stock options granted during these periods
was estimated using the Black-Scholes option pricing model using
the weighted average assumptions listed below:
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|
|
|
|
|
|
|
|
|
|
Dividend
yield
|
—
|
—
|
—
|
—
|
Volatility
|
66
%
|
63
%
|
68
%
|
62
%
|
Risk-free
interest rate
|
2.9
%
|
1.8
%
|
2.6
%
|
1.8
%
|
Expected
life (years)
|
4.5
|
4.4
|
4.5
|
4.4
|
Restricted Stock
Awards
. The Company
granted an aggregate of 125,000 restricted stock awards
(“
RSAs
”) on April 23, 2015 in connection with the
promotion of one of its executive officers. Of these
125,000 RSAs, 25,000 were service-based and 100,000 were
performance-based. The forfeiture restrictions of the service-based
RSAs lapse with respect to one-third of the restricted stock on
each of the first, second, and third anniversaries of the date of
the award. Forfeiture restrictions lapsed on 8,333
shares and 8,333 shares of restricted stock on April 23, 2016 and
April 23, 2017, respectively. During the nine months ended
September 30, 2018, 8,333 of the foregoing service-based RSAs and
100,000 of the performance-based RSAs were forfeited upon the
resignation of this executive officer.
The Company granted
an aggregate of 345,000 RSAs on September 27, 2017 to senior
officers of the Company. These RSAs are service- based and the
forfeiture restrictions lapse with respect to one-third of the
restricted stock on each of the first, second, and third
anniversaries of the date of the award. During the nine months
ended September 30, 2018, 80,000 shares of RSAs were forfeited upon
the resignation of two executive officers, the forfeiture
restrictions on 175,000 shares of RSA lapsed upon the termination
of employment of the former CEO and three officers of the Company,
and the forfeiture restrictions of 40,000 shares of RSAs were
modified upon the entry into a consulting agreement with a former
executive officer. During the three months ended September 30,
2018, the forfeiture restrictions on 90,000 shares of RSAs lapsed
in connection with the termination of employment of three officers
of the Company. Accordingly, the Company recognized expenses of
$364,000 and $787,000 related to the acceleration of vesting and
modification of RSAs in the three and nine months ended September
30, 2018, respectively. As of September 30, 2018, 60,000 shares of
RSAs remain unvested.
7. Investments
The Company’s investments at September 30,
2018 and December 31, 2017 consisted primarily of investments in
SaleMove and GoMoto, Inc.,
a Delaware corporation (“
GoMoto
”).
In
September 2013, the Company entered into a Convertible Note
Purchase Agreement with SaleMove in which AutoWeb invested $150,000
in SaleMove in the form of an interest bearing, convertible
promissory note. In November 2014, the Company invested an
additional $400,000 in SaleMove in the form of an interest bearing,
convertible promissory note. Upon closing of a preferred stock
financing by SaleMove in July 2015, these two notes were converted
in accordance with their terms into an aggregate of 190,997 Series
A Preferred Stock, which shares were previously classified as a
long-term investment on the consolidated balance sheet. The Company
recorded an impairment charge of $0.6 million in SaleMove in the
three months ended December 31, 2017. On June 5, 2018, the Company
sold its shares of Series A Preferred stock back to SaleMove for
$125,000. The gain of $125,000 is recorded in Interest and other
income (expense) on the Unaudited Consolidated Condensed Statement
of Operations and Comprehensive Income (Loss) for the nine months
ended September 30, 2018.
In
October 2013, the Company entered into a Reseller Agreement with
SaleMove to become a reseller of SaleMove’s technology for
enhancing communications with consumers. SaleMove’s
technology allows Dealers and Manufacturers to enhance the online
shopping experience by interacting with consumers in real-time,
including live video, audio, and text-based chat or by phone. The
Company and SaleMove share equally in revenues from
automotive-related sales of the SaleMove products and services. In
connection with this reseller arrangement, the Company
advanced
$1.0 million to
SaleMove to fund SaleMove’s 50% share of various product
development, marketing and sales costs and expenses. These
previously advanced funds are repaid to the Company from
SaleMove’s share of net revenues and expenses from the
Reseller Agreement each reporting period. During the three months
ended September 30, 2018, the Company performed a qualitative
review of the agreement with SaleMove and, based on several factors
related to the trend in operating results from this reseller
arrangement and costs being incurred by the Company, the parties
agreed to allow the arrangement to expire November 30, 2018, one
month earlier than the original expiration date of December 31,
2018. Upon expiration of the Reseller Agreement, the remaining
outstanding advances are no longer recoverable from SaleMove, and,
accordingly, the Company has impaired the remaining balance of
$364,000 of advances due from SaleMove. The impairment charge is
included in “Long-lived asset impairment” in the
Unaudited Consolidated Condensed Statement of Operations and
Comprehensive (Loss) Income for the three and nine months ended
September 30, 2018.
In December 2014, the Company entered into a
Series Seed Preferred Stock Purchase Agreement with GoMoto in which
the Company paid $100,000 for 317,460 shares of Series Seed
Preferred Stock, $0.001 par value per share. The
$100,000 investment in GoMoto was recorded at cost because the
Company does not have significant influence over
GoMoto. In October 2015 and May 2016, the Company
invested an additional $375,000 and $375,000, respectively, in
GoMoto in the form of convertible promissory notes
(“
GoMoto Notes
”). The GoMoto Notes accrue
interest at an annual rate of 4.0% and are due and payable in full
upon demand by the Company or at GoMoto’s option ten
days’ written notice unless converted prior to the repayment
of the GoMoto Notes. The GoMoto Notes will be converted
into preferred stock of GoMoto in the event of a preferred stock
financing by GoMoto of at least $1.0 million prior to repayment of
the GoMoto Notes. At September 30, 2018 and 2017, both the GoMoto
Notes and related interest receivable are fully reserved on the
Unaudited Consolidated Condensed Balance Sheets because the Company
believes the amounts are not recoverable. Further, the three months
ended September 30, 2018, represented the third consecutive quarter
of declining operating results for GoMoto and, as such, the Company
performed a qualitative review of its investment in GoMoto. Based
on continuing deterioration in GoMoto’s financial position,
the Company believes that uncertainty exists in the recoverability
of its remaining investment of $100,000 in GoMoto and, accordingly,
recognized a loss on the investment during the three months ended
September 30, 2018 which has been recorded in “Interest and
other income (expense)” on the Unaudited Consolidated
Condensed Statement of Operations and Comprehensive (Loss) Income
for the three and nine months ended September 30,
2018.
8. Selected Balance Sheet Accounts
Property and
equipment
. Property
and equipment consists of the
following:
|
|
|
|
|
Computer software and hardware
|
$
11,585
|
$
11,065
|
Capitalized internal use
software
|
5,977
|
5,774
|
Furniture and equipment
|
1,743
|
1,703
|
Leasehold improvements
|
1,605
|
1,539
|
|
20,910
|
20,081
|
Less—Accumulated depreciation and
amortization
|
(17,296
)
|
(15,770
)
|
Property and Equipment,
net
|
$
3,614
|
$
4,311
|
Concentration of Credit Risk
and Risks Due to Significant Customers
. Financial instruments that potentially subject
the Company to concentrations of credit risk consist primarily of
cash and cash equivalents and accounts receivable. Cash and cash
equivalents are primarily maintained with two high credit quality
financial institutions in the United States. Deposits held by banks
exceed the amount of insurance provided for such deposits. These
deposits may be redeemed upon demand.
Accounts
receivable are primarily derived from fees billed to Dealers and
Manufacturers. The Company generally requires no collateral to
support its accounts receivables and maintains an allowance for bad
debts for potential credit losses.
The
Company has a concentration of credit risk with its automotive
industry-related accounts receivable balances, particularly with
Urban Science Applications (which represents Acura, Audi, Honda,
Nissan, Infiniti, Subaru, Toyota, Volkswagen, and Volvo), Trilogy,
General Motors and Media.net Advertising. During the first nine
months of 2018, approximately 42% of the Company’s total
revenues was derived from these four customers, and approximately
51%, or $13.2 million of gross accounts receivables related to
these four customers at September 30, 2018. During the first nine
months of 2017, approximately 33% of the Company’s total
revenues was derived from Urban Science Applications, General
Motors and Media.net, and approximately 43%, or $12.2 million of
gross accounts receivables, related to these three customers at
September 30, 2017.
Accrued Expenses and Other
Current Liabilities
. Accrued
expenses and other current liabilities consisted of the
following:
|
|
|
|
|
Other
accrued expenses
|
$
7,154
|
$
6,307
|
Amounts
due to customers
|
392
|
438
|
Other
current liabilities
|
437
|
507
|
Total
other accrued expenses and other current liabilities
|
$
7,983
|
$
7,252
|
Convertible Notes Payable
. In
connection with the acquisition of AutoUSA, the Company issued a
convertible subordinated promissory note for $1.0 million
(“
AutoUSA Note
”)
to AutoNationDirect.com, Inc. The fair value of the AutoUSA Note as
of the AutoUSA acquisition date was $1.3 million. This valuation
was estimated using a binomial option pricing method. Key
assumptions used by the Company’s outside valuation
consultants in valuing the AutoUSA Note included a market yield of
1.6% and stock price volatility of 65.0%. As the AutoUSA Note was
issued with a substantial premium, the Company recorded the premium
as additional paid-in capital. Interest is payable at an annual
interest rate of 6% in quarterly installments. The entire
outstanding balance of the AutoUSA Note is to be paid in full on
January 31, 2019. The holder of the AutoUSA Note may at any time
convert all or any part, but at least 30,600 shares, of the then
outstanding and unpaid principal of the AutoUSA Note into fully
paid shares of the Company’s common stock at a conversion
price of $16.34 per share (as adjusted for stock splits, stock
dividends, combinations, and other similar events). In the event of
default, the entire unpaid balance of the AutoUSA Note will become
immediately due and payable and will bear interest at the lower of
8% per year or the highest legal rate permissible under applicable
law.
9. Long-Lived Assets and Impairment
Intangible
Assets.
The Company
amortizes the costs of specifically identified definite-lived
intangible assets using the straight-line method over the estimated
useful lives of the assets.
The Company’s intangible assets are
amortized over the following estimated useful lives
:
|
|
September
30, 2018
(
in
thousands
)
|
December
31, 2017
(
in
thousands
)
|
Definite-lived
Intangible
Asset
|
|
|
|
|
|
|
|
Trademarks/trade
names/licenses/domains
|
3
-7 years
|
$
16,589
|
$
(14,734
)
|
$
1,855
|
$
16,589
|
$
(4,037
)
|
$
12,552
|
Software
and publications
|
3
years
|
1,300
|
(1,300
)
|
—
|
1,300
|
(1,300
)
|
—
|
Customer
relationships
|
2 -
10 years
|
19,563
|
(14,485
)
|
5,078
|
19,563
|
(10,555
)
|
9,008
|
Employment/non-compete
agreements
|
1 -
5 years
|
1,510
|
(1,510
)
|
—
|
1,510
|
(1,493
)
|
17
|
|
5 -
7 years
|
8,955
|
(4,601
)
|
4,354
|
8,955
|
(3,619
)
|
5,336
|
|
$
47,917
|
$
(36,630
)
|
$
11,287
|
$
47,917
|
$
(21,004
)
|
$
26,913
|
|
|
|
|
Indefinite-lived
Intangible
Asset
|
|
|
|
|
|
|
|
Domain
|
Indefinite
|
$
2,200
|
$
—
|
$
2,200
|
$
2,200
|
$
—
|
$
2,200
|
Amortization
expense on intangible assets with definite lives is included in
both Cost of revenues and Depreciation and amortization in the
Unaudited Consolidated Condensed Statements of Operations. Total
amortization expense was $1.6 million and $5.0 million for the
three and nine months ended September 30, 2018, respectively.
Amortization expense was $1.3 million and $4.1 million for the
three and nine months ended September 30, 2017,
respectively.
Amortization expense for the remainder of the year
and for future years is as follows:
|
|
Year
|
|
2018
|
$
1,511
|
2019
|
4,872
|
2020
|
2,371
|
2021
|
1,499
|
2022
|
902
|
Thereafter
|
132
|
|
$
11,287
|
Goodwill.
Goodwill
represents the excess of the purchase price over the fair value of
net assets acquired. Goodwill is not amortized and is
assessed annually for impairment or earlier, when events or
circumstances indicate that the carrying value of such assets may
not be recoverable. The Company impaired goodwill by $5.1 million
during the nine months ended September 30,
2018.
|
|
Goodwill
as of December 31, 2017
|
$
5,133
|
|
(5,133
)
|
Goodwill
as of September 30, 2018
|
$
—
|
Impairment Testing of Intangible Assets
On October 5, 2017, the Company and DealerX
Partners, LLC, a Florida limited liability company
(“
DealerX
”), entered into a Master License and
Services Agreement (“
DealerX License
Agreement
”). Pursuant to
the terms of the DealerX License Agreement, AutoWeb was granted a
perpetual license to access and use DealerX’s proprietary
platform and technology for targeted, online
marketing.
The transaction consideration consisted of: (i)
$8.0 million in cash paid to DealerX upon execution of the DealerX
License Agreement and (ii) the right to 710,856 shares of the
Company’s common stock, par value $0.001 per share,
representing approximately five percent of the Company’s
outstanding Common Stock as of the date the parties entered into
the DealerX License Agreement (“
Market Capitalization
Shares
”) if on or before
October 5, 2022: (i) AutoWeb’s market capitalization averaged
at least $225.0 million over a consecutive 90 day period or (ii)
there occurred a change in control of AutoWeb that reflected a
market capitalization of at least $225.0 million. If the Market
Capitalization Shares were issued to DealerX, DealerX’s
obligations to continue to support the platform
(“
Platform Support
Obligations
”) would
continue in perpetuity. Alternatively, upon the occurrence of
certain events prior to the issuance of the Market Capitalization
Shares, AutoWeb could elect to make an additional lump-sum payment
of $12.5 million (“
Alternative Cash
Payment
”) in order to
extend DealerX’s Platform Support Obligations in perpetuity.
If the Alternative Cash payment was made, DealerX’s
contingent right to receive the Market Capitalization Shares would
be terminated. The fair value of the Market Capitalization Shares
was calculated at $2.5 million. At the transaction date the Company
recorded approximately $10.5 million as a definite-lived intangible
asset which was amortized over its expected useful life of 7
years.
The
Company makes judgments about the recoverability of purchased
intangible assets with definite lives whenever events or changes in
circumstances indicate that an impairment may exist. Recoverability
of purchased intangible assets with definite lives is measured by
comparing the carrying amount of the asset to the future
undiscounted cash flows the asset is expected to generate. In the
third quarter of 2018, the Company performed an analysis of its
planned future use of two intangible assets in the licenses and
customer relationships asset groups. As a result of realignment
activities finalized in the third quarter, the Company made a
determination that the Company's use of certain assets would not be
continued as originally planned. Accordingly, the Company performed
further analysis to quantitatively determine the amount of
impairment for each of these intangible assets as of September 30,
2018.
A
structured test was performed with the DealerX license intangible
asset, whereby lead generation and acquisition cost, amongst other
things, was compare to alternate sources of lead generation
available to the Company. As a result of the Company’s
analysis, the Company concluded that the effectiveness of the
platform was not in-line with the enhanced consumer-to-client
matchmaking that the Company is seeking and made the decision in
the third quarter to terminate DealerX’s Platform Support
Obligations, significantly impacting the usability of the asset by
the Company. Accordingly, the Company recorded impairment charges
of $9.0 million in connection with the impairment of this
long-lived asset with the expense recorded in Cost of
revenues-impairment on the Company’s Unaudited Consolidated
Condensed Statements of Operations and Comprehensive Income (Loss)
for the three and nine months ended September 30,
2018.
A quantitative analysis was performed by the Company on its
customer relationship intangible assets, whereby it examined
available data, namely historical activity and cash flows resulting
from the customer relationships of previous acquisitions, in
concert with projected future use of acquired customer
relationships within the parameters of the Company’s future
strategic plans. As a result of this analysis, the Company
determined there to be impairment of $1.6 million related to
customer relationship intangible assets acquired in a 2015
acquisition for which projected cash flows did not support the
carrying values. Additionally, the Company determined that the
estimated useful life of these customer relationship intangible
assets had changed from 10 years to 5 years. This change in
estimate has no impact on the current period but will impact
amortization expense in future periods as amortization will be
accelerated over the remaining estimated useful life of this asset
due to the change in estimate.
10. Credit Facility
The Company and MUFG Union Bank, N.A. entered into
a Loan Agreement dated February 26, 2013, as amended on September
10, 2013, January 13, 2014, May 20, 2015, June 1, 2016, June 28,
2017, and December 27, 2017 (the original Loan Agreement, as
amended, is referred to collectively as the
“
Credit Facility
Agreement
”). The Credit Facility Agreement
provided for (i) a $9.0 million term loan; (ii) a $15.0 million
term loan; and (iii) an $8.0 million working capital revolving line
of credit (“
Revolving
Loan
”). The term
loans were fully paid as of December 31, 2017. The Revolving Loan
was fully paid as of March 31,
2018.
11. Commitments and Contingencies
Employment Agreements
The
Company has employment agreements and severance benefits/retention
agreements with certain key employees. A number of these agreements
require severance payments and continuation of certain insurance
benefits in the event of a termination of the employee’s
employment by the Company without cause or by the employee for good
reason (as defined is these agreements). Stock option agreements
and restricted stock award agreements with some key employees
provide for acceleration of vesting of stock options and lapsing of
forfeiture restrictions on restricted stock in the event of a
change in control of the Company, upon termination of employment by
the Company without cause or by the employee for good reason, or
upon the employee’s death or disability.
Litigation
From
time to time, the Company may be involved in litigation matters
arising from the normal course of its business activities. Such
litigation, even if not meritorious, could result in substantial
costs and diversion of resources and management attention, and an
adverse outcome in litigation could materially adversely affect its
business, results of operations, financial condition and cash
flows.
12. Income
Taxes
On
December 22, 2017, the U.S. government enacted comprehensive tax
legislation known as the TCJA. The TCJA made a number of changes to
the federal income tax law that took effect in 2018, including, but
not limited to (1) reduction of the U.S. federal corporate tax rate
from a maximum of 35% to 21%; (2) elimination of the corporate
alternative minimum tax; (3) a new limitation on deductible
interest expense; (4) the Transition Tax; (5) limitations on the
deductibility of certain executive compensation; (6) changes to the
bonus depreciation rules for fixed asset additions: and (7)
limitations on net operating loss carryovers generated after
December 31, 2017, to 80% of taxable income.
ASC 740 “
Income
Taxes
” , requires the
effects of changes in tax laws to be recognized in the period in
which the legislation is enacted. However, due to the complexity
and significance of the TCJA's provisions, the SEC staff issued
Staff Accounting Bulletin 118 (“
SAB 118
”), which provides guidance on accounting
for the tax effects of the TCJA. SAB 118 provides a measurement
period that should not extend beyond one year from the TCJA
enactment date for companies to complete the accounting under ASC
740. In accordance with SAB 118, a company must reflect the income
tax effects of those aspects of the TCJA for which the accounting
under ASC 740 is complete. To the extent that a company’s
accounting for certain income tax effects of the TCJA is incomplete
but it is able to determine a reasonable estimate, it must record a
provisional estimate in the financial statements. If a company
cannot determine a provisional estimate to be included in the
financial statements, it should continue to apply ASC 740 on the
basis of the provisions of the tax laws that were in effect
immediately before the enactment of the
TCJA.
At September 30, 2018 and December 31, 2017, the Company has not
completed its accounting for the tax effects of enactment of the
TCJA; however, the Company has made a reasonable estimate of the
effects of the TCJA’s change in the federal rate and revalued
its deferred tax assets based on the rates at which they are
expected to reverse in the future, which is generally the new 21%
federal corporate tax rate plus applicable state tax rate. For the
year ended December 31, 2017, the Company recorded a decrease in
deferred tax assets and deferred tax liabilities of $11.7 million
and $0.0 million, respectively, with a corresponding net adjustment
to deferred income tax expense of $11.7 million. In addition, in
2017, the Company recognized a deemed repatriation of $0.6 million
of deferred foreign income from its Guatemala subsidiary, which did
not result in any incremental tax cost after application of foreign
tax credits. The Company’s provisional estimates will be
adjusted during the measurement period defined under SAB 118, based
upon ongoing analysis of data and tax positions along with the new
guidance from regulators and interpretations of the law. On an
interim basis, the Company estimates an annual effective tax rate
and records a quarterly income tax provision in accordance with the
estimated annual rate, adjusted accordingly by the tax effect of
certain discrete items that arise during the quarter. As the fiscal
year progresses, the Company refines its estimated annual effective
tax rate based on actual year-to-date results recognized for the
year-to-date. This process can result in significant changes to the
Company's estimated effective tax rate. When such activity occurs,
the income tax provision is adjusted during the quarter in which
the estimates are refined and adjusted. As such, the
Company’s year-to-date tax provision reflects the estimated
annual effective tax rate. These changes, along with adjustments to
the Company's deferred taxes and related valuation allowance, may
create fluctuation in the overall effective tax rate from period to
period.
During
2017, management assessed available evidence to estimate if
sufficient future taxable income will be generated to utilize the
existing deferred tax assets. A significant piece of objective
negative evidence evaluated was the cumulative losses incurred over
the three-year period ended December 31, 2017. The Company was
projecting pre-tax income for 2017 until the three months ended
December 31, 2017, in which the Company incurred a significant
pre-tax loss due to the impairment of goodwill. The Company
experienced increased costs of providing services to its customers,
as well as decrease in market share resulting from increased
competition. Additionally, the Company also projects that 2018
pre-tax profits, if any, may not offset the cumulative three-year
pre-tax loss as of December 31, 2017. Based on this evaluation, the
Company recorded an additional valuation allowance of $16.7 million
against its deferred tax assets during the year ended December 31,
2017. At September 30, 2018 and December 31, 2017, the Company has
recorded a valuation allowance of $21.3 million against its
deferred tax assets.
The
Company’s effective tax rate for the nine months ended
September 30, 2018 differed from the U.S. federal statutory rate
primarily due to operating losses that receive no tax benefit as a
result of an existing valuation allowances recorded against the
Company’s existing tax assets.
Item 2.
Management’s
Disc
u
ssion and Analysis of
Financial Condition and Results of Operations
Cautionary Note Concerning Forward-Looking
Statements
The Securities and Exchange Commission
(“
SEC
”) encourages companies to disclose
forward-looking information so that investors can better understand
a company’s future prospects and make informed investment
decisions. This Quarterly Report on Form 10-Q contains
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Words such as
“anticipates,” “could,” “may,”
“estimates,” “expects,”
“projects,” “intends,” “plans,”
“believes,” “will” and words of similar
substance used in connection with any discussion of future
operations or financial performance identify forward-looking
statements. In particular, statements regarding expectations and
opportunities, industry trends, new product expectations and
capabilities, and our outlook regarding our performance and growth
are forward-looking statements. This Quarterly Report on Form 10-Q
also contains statements regarding plans, goals and objectives.
There is no assurance that we will be able to carry out our plans
or achieve our goals and objectives or that we will be able to do
so successfully on a profitable basis. These forward-looking
statements are just predictions and involve significant risks and
uncertainties, many of which are beyond our control, and actual
results may differ materially from these statements. Factors that
could cause actual outcomes or results to differ materially from
those reflected in forward-looking statements include, but are not
limited to, those discussed in this Item 2 and under the heading
“Risk Factors” in our annual report on Form 10-K for
the year ended December 31, 2017 (“
2017 Form
10-K
”). Investors are
urged not to place undue reliance on forward-looking statements.
Forward-looking statements speak only as of the date on which they
were made. Except as may be required by law, we do not undertake
any obligation, and expressly disclaim any obligation, to update or
alter any forward-looking statements, whether as a result of new
information, future events or otherwise. All forward-looking
statements contained herein are qualified in their entirety by the
foregoing cautionary statements.
You
should read the following discussion of our results of operations
and financial condition in conjunction with our unaudited
consolidated condensed financial statements and related notes
included in Part I, Item 1 of this Quarterly Report on Form 10-Q
and our audited consolidated financial statements and the notes
thereto in the 2017 Form 10-K.
Our corporate website is located at
www.autoweb.com
.
Information on our website is not incorporated by reference in this
Quarterly Report on Form 10-Q. At or through the Investor Relations
section of our website we make available free of charge our Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K and all amendments to these reports as soon as
practicable after the reports are electronically filed with or
furnished to the SEC.
Unless
the context otherwise requires, the terms “we,”
“us,” “our,” “AutoWeb,” and
“Company” refer to AutoWeb, Inc. and its consolidated
subsidiaries.
Basis of Presentation and Critical Accounting Policies
See Note 2,
Basis of
Presentation
, to the
accompanying unaudited consolidated condensed financial
statements.
We prepare our financial statements in conformity
with accounting principles generally accepted in the United States
of America (“
GAAP
”), which require us to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Accordingly,
actual results could differ materially from our estimates. To the
extent that there are material differences between these estimates
and our actual results, our financial condition or results of
operations may be affected. For a detailed discussion of the
application of our critical accounting policies, see Note 2 of the
“Notes to Consolidated Financial Statements” in Part
II, Item 8 “Financial Statements and Supplementary
Data” in the 2017 Form 10-K. There have been no changes to
our critical accounting policies since we filed our 2017 Form
10-K.
Overview
We are a digital marketing services company that
assists automotive retail dealers (“
Dealers
”) and automotive manufacturers
(“
Manufacturers
”)
market and sell new and used vehicles to consumers through our
programs for online lead referrals, Dealer marketing products and
services, online advertising and consumer traffic referral
programs, and mobile products.
Our consumer-facing automotive websites
(“
Company
Websites
”) provide
consumers with information and tools to aid them with their
automotive purchase decisions and the ability to submit inquiries
requesting Dealers to contact the consumers regarding purchasing or
leasing vehicles
(“
Leads
”)
. Leads are
internally-generated from our Company Websites
(“
Internally-Generated
Leads
”) or acquired from
third parties (“
Non-Internally-Generated
Leads
”) that generate
Leads from their websites. Our AutoWeb®
consumer traffic referral product provides
consumers who are shopping for vehicles online with targeted offers
based on make, model and geographic location. As these consumers
conduct online research on a Company Website or on the site of one
of our network of automotive publishers, they are presented with
relevant offers on a timely basis and, upon the consumer clicking
on the displayed advertisement, are sent to the appropriate website
location of one of our Dealer, Manufacturer or advertising
customers.
Our business, results of operations and financial
condition are impacted by the volume and quality of our Leads. We
measure Lead quality by the conversion of Leads to actual vehicle
sales, which we refer to as the “buy rate.” Buy rate is
the percentage of the consumers submitting Leads that we delivered
to our customers represented by the number of these consumers who
purchased vehicles within ninety days of the date of the Lead
submission. We rely on detailed feedback from Manufacturers
and wholesale customers to confirm the performance of our Leads.
Our Manufacturer and other wholesale customers each
match the Leads we deliver to our customers against vehicle sales
to provide us with information about vehicle purchases by the
consumers who submitted Leads that we delivered to these customers.
AutoWeb also obtains vehicle
registration data from a third-party provider. This information,
together with our internal analysis allows us to estimate the buy
rate for the consumers who submitted the Internally Generated Leads
that we delivered to our customers. Based on the most current
information and our internal analysis, we have estimated that, on
average, consumers who submit Internally-Generated Leads that we
deliver to our customers have an estimated buy rate of
approximately 17%. Buy rates that individual Dealers may
achieve can be impacted by factors such as the strength of
processes and procedures within the dealership to manage
communications and follow up with consumers.
Total
revenues in the first nine months of 2018 were $93.3 million
compared to $108.8 million in the first nine months of 2017. The
decline in revenue was primarily due to less efficient traffic
acquisition
and lower retail dealer
count and lead volumes. We believe that a large part of the
inefficiency in traffic acquisition was the result of increased
traffic acquisition costs as we invest in new traffic acquisition
strategies, as well as the consumers shift to mobile and our
ability to efficiently convert traffic to
leads.
During
the third quarter of 2018, we completed a comprehensive review of
our products, traffic acquisition, pricing policies, distribution
channels, technology infrastructure, strategic positioning and
organizational capabilities. This review involved a significant
change in key management and organizational structure.
We move
into the fourth quarter of 2018 with a plan that will be executed
strategically. We will continue to work with our traffic partners
to optimize our search engine marketing (“
SEM
”) methodologies and rebuild
our high-quality traffic streams. We also expect to invest in new
product development and technology infrastructure, and to continue
to restructure our organization to better align with our revised
strategy, which will likely result in significant costs. We cannot
provide an exact timeframe for resolution of these issues, as we
are early in the implementation of our revised strategy. However,
our plan is designed to enable us to grow impressions, improve
conversion, expand distribution, and increase capacity. This focus,
along with plans to develop new, innovative products will create
opportunities for improved quality of delivery and strengthen our
position for revenue growth.
For the three and nine months ended September 30, 2018, our
business, results of operations and financial condition were
affected, and may continue to be affected in the future, by general
economic, employment and market factors, conditions in the
automotive industry, the markets for Leads, and online advertising
services, including, but not limited to, the
following:
●
Pricing,
interest rates and purchase incentives for vehicles;
●
The
expectation that consumers will be purchasing fewer vehicles
overall during their lifetime as a result of better quality
vehicles and longer warranties;
●
The
impact of fuel prices on demand for the number and types of
vehicles;
●
Increases
or decreases in the number of retail Dealers or in the number of
Manufacturers and other wholesale customers in our customer
base;
●
The
effect of changes in search engine algorithms and methodologies on
our Lead generation and website advertising activities and
margins;
●
Volatility
in spending by Manufacturers and others in their marketing budgets
and allocations;
●
The
competitive impact of consolidation in the online automotive
referral industry;
●
The
effect of changes in transportation policy, including the potential
increase of public transportation options; and
●
The
effect of fewer vehicles being purchased as a result of new
business models and changes in consumer attitudes regarding the
need for vehicle ownership.
Results of Operations
Three
Months Ended September 30, 2018 Compared to the Three Months Ended
September 30, 2017
The following table sets forth certain statement
of operations data for the three-month periods ended September 30,
2018 and 2017
(certain balances
and calculations have been rounded for
presentation):
|
|
|
|
|
|
|
|
(Dollar amounts in thousands)
|
|
Revenues:
|
|
|
|
|
|
|
Lead
fees
|
$
24,986
|
79
%
|
$
27,711
|
75
%
|
$
(2,725
)
|
(10
)%
|
Advertising
|
6,606
|
21
|
8,946
|
24
|
(2,340
)
|
(26
)
|
Other
revenues
|
103
|
—
|
215
|
1
|
(112
)
|
(52
)
|
Total
revenues
|
31,695
|
100
|
36,872
|
100
|
(5,177
)
|
(14
)
|
Cost
of revenues
|
26,278
|
83
|
25,786
|
70
|
492
|
2
|
Cost
of revenues - impairment
|
9,014
|
28
|
—
|
—
|
9,014
|
N/A
|
Gross
(loss) profit
|
(3,597
)
|
(11
)
|
11,086
|
30
|
(14,683
)
|
N/A
|
Operating
expenses:
|
|
|
|
|
|
|
Sales
and marketing
|
3,333
|
11
|
3,692
|
10
|
(359
)
|
(10
)
|
Technology
support
|
4,303
|
14
|
3,141
|
9
|
1,161
|
37
|
General
and administrative
|
3,639
|
11
|
2,818
|
7
|
821
|
29
|
Depreciation
and amortization
|
1,172
|
4
|
1,192
|
3
|
(20
)
|
(2
)
|
Goodwill
Impairment
|
—
|
—
|
—
|
—
|
—
|
—
|
Long-lived
asset impairment
|
1,968
|
6
|
—
|
—
|
1,968
|
N/A
|
|
14,415
|
45
|
10,843
|
29
|
3,572
|
33
|
Operating
(loss) income
|
(18,012
)
|
(57
)
|
243
|
1
|
(18,255
)
|
N/A
|
Interest
and other income (expense), net
|
(24
)
|
—
|
(93
)
|
—
|
69
|
(74
)
|
(Loss)
Income before income tax provision
|
(18,036
)
|
(57
)
|
150
|
—
|
(18,186
)
|
N/A
|
|
—
|
—
|
81
|
—
|
(81
)
|
N/A
|
Net
(loss) income
|
$
(18,036
)
|
(57
)%
|
$
69
|
—
%
|
$
(18,105
)
|
N/A
|
Lead
fees
. Lead fees revenues decreased $2.7
million, or 10%, in the third quarter of 2018 compared to the third
quarter of 2017 primarily due to less efficient traffic acquisition
and
lower retail dealer count and lead
volumes
.
Advertising
. Advertising revenues
decreased $2.3 million, or 26%, in the third quarter of 2018
compared to the third quarter of 2017 as a result of a decrease in
$1.9 million decrease in click revenue associated with decreased
pricing per click coupled with a $0.4 million decrease in display
advertising traffic on our website.
Other Revenues
. Other revenues consist
primarily of revenues from our mobile products and revenues from
our Reseller Agreement with SaleMove. Other revenues decreased to
$0.1 million in the third quarter of 2018 from $0.2 million in the
third quarter of 2017 primarily due to lower customer utilization
of the mobile product and SaleMove product. The SaleMove Reseller
Agreement will expire November 30, 2018.
Cost of Revenues.
Cost of revenues
consists of purchase request and traffic acquisition costs and
other cost of revenues. Purchase request and traffic acquisition
costs consist of payments made to our purchase request providers,
including internet portals and online automotive information
providers. Other cost of revenues consists of SEM and fees paid to
third parties for data and content, including search engine
optimization activity, included on our websites, connectivity
costs, development costs related to our websites, compensation
related expense and technology license fees, server equipment
depreciation, and technology amortization directly related to the
Company Websites. SEM, sometimes referred to as paid search
marketing, is the practice of bidding on keywords on search engines
to drive traffic to a website. Cost of revenues increased $0.5
million, or 2%, in the third quarter of 2018 compared to the third
quarter of 2017 primarily due to increased traffic acquisition
costs.
Cost of Revenues-Impairment.
Cost of
revenues-impairment consists of impairment charges on
definite-lived intangible assets which are directly related to
websites or technology that generate revenue for the Company. The
Company makes judgments about the recoverability of purchased
intangible assets with definite lives whenever events or changes in
circumstances indicate that an impairment may exist. Recoverability
of purchased intangible assets with definite lives is measured by
comparing the carrying amount of the asset to the future
undiscounted cash flows the asset is expected to generate. In the
third quarter of 2018, the Company made a decision to terminate the
platform support provision of an existing perpetual license used to
support the Company’s websites, significantly impacting the
usability of the asset by the Company. As a result, in the quarter
ended September 30, 2018, the Company recorded charges of
approximately $9.0 million in connection with the impairment of
this long-lived asset to cost of revenues-impairment. The Company
did not have a comparable charge in the same period for
2017.
Gross Profit
. Gross profit in the third
quarter of 2018 decreased $14.7 million from the third quarter of
2017 due to decreased revenue and increased cost of revenues as
mentioned above. A major contributor to the increased cost of
revenues was the one-time impairment charge related to the DealerX
license of $9.0 million that was charged to cost of revenues. As a
percentage of net revenue, our gross profit was (11%) and 30% for
the three months ended September 30, 2018 and 2017, respectively.
The decrease was significantly impacted by the $9.0 million
impairment charge related to DealerX, which as a percentage of net
revenue, was 28%.
Sales and Marketing
. Sales and
marketing expense includes costs for developing our brand equity,
personnel costs, and other costs associated with Dealer sales,
website advertising, and dealer support. Sales and marketing
expense in the third quarter of 2018 decreased $0.4 million, or
10%, compared to the third quarter of 2017 due primarily to lower
media spend, offset by increased head-count costs.
Technology Support
. Technology support
expense includes compensation, benefits, software licenses and
other direct costs incurred by the Company to enhance, manage,
maintain, support, monitor and operate the Company’s websites
and related technologies, and to operate the Company’s
internal technology infrastructure. Technology support expense in
the third quarter of 2018 increased by $1.2 million, or 37%,
compared to the third quarter of 2017 due primarily to severance
and other headcount-related costs coupled with consulting costs
associated with the management realignment of the information
technology function in September 2018.
General and Administrative
. General and
administrative expense consists of executive, financial and legal
personnel expenses and costs related to being a public company.
General and administrative expense in the third quarter of 2018
increased by $0.8 million, or 29%, from the third quarter of 2017
due primarily to increased compensation-related costs and increased
professional fees.
Depreciation and Amortization
.
Depreciation and amortization expense in the third quarter of 2018
decreased $20,000 from the third quarter of 2017 primarily due to
normal amortization.
Long-Lived Asset Impairment.
The
Company records impairment losses on long-lived assets when events
and circumstances indicate that the assets might be impaired.
Events that may indicate that the assets might be impaired include,
but are not limited to, a significant downturn in the economy, a
loss of a major customer or group of customers or a significant
decrease in the market value of an asset. During the third quarter
of 2018, the Company recorded an impairment of approximately $0.4
million related to the impairment of asset advances to SaleMove
which were determined to be non-recoverable at September 30, 2018.
In addition, approximately $1.6 million was recorded as an
impairment on customer relationships acquired in a 2015 acquisition
after an analysis showed that a significant percentage of the
acquired customers were no longer part of the dealer
base.
Other Income (Expense), Net
. Other
income (expense), net increased $0.1 million from the third quarter
of 2017 due to a decrease in interest expense of $0.2 million due
to payoff of term loans and revolving line of credit in the fourth
quarter of 2017 and the first quarter of 2018, and the gain on the
sale of our investment in SaleMove, offset by the write-down of our
GoMoto investment in the third quarter of 2018.
Income Taxes.
Income tax expense was zero in the
third quarter of 2018 compared to income tax expense of $81,000 in
the third quarter of 2017. Income tax expense quarter
over quarter differed from the federal statutory rate primarily due
to operating losses that receive no tax benefit as a result of
valuation allowances placed on accrued tax assets for such
losses.
Nine Months Ended September 30, 2018 Compared to the Nine Months
Ended September 30, 2017
The following table sets forth certain statement
of operations data for the nine-month periods ended September 30,
2018 and 2017
(certain balances
and calculations have been rounded for
presentation):
|
|
|
|
|
|
|
|
(Dollar amounts in thousands)
|
|
|
Revenues:
|
|
|
|
|
|
|
Lead
fees
|
$
71,277
|
76
%
|
$
83,149
|
76
%
|
$
(11,872
)
|
(14
)%
|
Advertising
|
21,643
|
24
|
24,914
|
23
|
(3,271
)
|
(13
)
|
|
416
|
0
|
741
|
1
|
(352
)
|
(44
)
|
Total
revenues
|
93,336
|
100
|
108,804
|
100
|
(15,468
)
|
(14
)
|
Cost
of revenues
|
74,702
|
80
|
74,171
|
68
|
531
|
1
|
Cost
of revenues - impairment
|
9,014
|
10
|
—
|
—
|
9,014
|
N/A
|
Gross
profit
|
9,620
|
10
|
34,633
|
32
|
(25,013
)
|
(72
)
|
Operating
expenses:
|
|
|
|
|
|
|
Sales
and marketing
|
10,096
|
11
|
10,684
|
10
|
(588
)
|
(6
)
|
Technology
support
|
10,653
|
11
|
9,582
|
9
|
1,071
|
11
|
General
and administrative
|
11,980
|
13
|
9,040
|
8
|
2,940
|
33
|
Depreciation
and amortization
|
3,495
|
4
|
3,623
|
3
|
(128
)
|
(4
)
|
Goodwill
Impairment
|
5,133
|
5
|
—
|
—
|
5,133
|
N/A
|
Long-lived
asset impairment
|
1,968
|
2
|
—
|
—
|
1,968
|
N/A
|
|
43,325
|
46
|
32,929
|
30
|
10,396
|
32
|
Operating
(loss) income
|
(33,705
)
|
(36
)
|
1,704
|
2
|
(35,409
)
|
N/A
|
Interest
and other income (expense), net
|
178
|
—
|
(289
)
|
—
|
467
|
N/A
|
(Loss)
income before income tax provision
|
(33,527
)
|
(36
)
|
1,415
|
2
|
(34,942
)
|
N/A
|
|
4
|
—
|
539
|
1
|
(535
)
|
(99
)
|
Net
(loss) income
|
$
(33,531
)
|
(36
)%
|
$
876
|
1
%
|
$
(34,407
)
|
N/A
%
|
Lead Fees
. Lead fees revenues decreased
$11.9 million, or 14%, in the first nine months of 2018 compared to
the first nine months of 2017 primarily due to less efficient
traffic acquisition and
lower retail
dealer count and lead volumes
.
Advertising.
Advertising revenues
decreased $3.3 million, or 13%, in the first nine months of 2018
compared to the first nine months of 2017 due to a decrease in
click revenue of $2.4 million associated with decreased pricing per
click coupled with a decrease of $0.9 million associated with
display advertising traffic on our website.
Other Revenues
. Other revenues
decreased to $0.4 million in the first nine months of 2018 from
$0.7 million in the first nine months of 2017 primarily due to
lower customer utilization of the mobile product and SaleMove
product. The SaleMove Reseller Agreement will expire November 30,
2018.
Cost of Revenues
. Cost of revenues
increased $0.5 million in the first nine months of 2018 compared to
the first nine months of 2017 primarily due to increased traffic
acquisition costs associated with both lead and click
volume.
Cost of Revenues-Impairment
. Cost of
revenues-impairment expense of $9.0 million incurred in the nine
months ended September 30, 2018 is due to the Company’s
decision to
terminate the platform
support provision of an existing perpetual license used to support
the Company’s websites, significantly impacting the usability
of the asset by the Company
and resulting in an impairment
charge to the related intangible asset. The Company did not have a
comparable charge in the same period for
2017.
Gross Profit
. Gross profit decreased
$25.0 million in the first nine months of 2018 compared to the
first nine months in 2017 due to decreased revenue and increased
cost of revenues as mentioned above. A major contributor to the
increased cost of revenues was the one-time impairment charge
related to the DealerX license of $9.0 million that was charged to
cost of revenues. As a percentage of net revenue, our gross profit
was 10% and 32% for the nine months ended September 30, 2018 and
2017, respectively. The decrease was significantly impacted by the
$9.0 million impairment charge related to DealerX, which as a
percentage of net revenue, was 10%.
Sales and Marketing
. Sales and
marketing expense in the first nine months of 2018 decreased $0.6
million, or 6%, compared to the first nine months of 2017 due
primarily to lower headcount-related costs and media spend, offset
by severance costs.
Technology Support
. Technology support
expense in the first nine months of 2018 increased by $1.1 million,
or 11%, compared to the first nine months of 2017 due primarily to
severance and other headcount-related costs coupled with consulting
costs associated with the management realignment of the information
technology function in September 2018.
General and Administrative
. General and
administrative expense in the first nine months of 2018 increased
$2.9 million, or 33%, from the first nine months of 2017 due
primarily to $1.4 million in severance-related costs associated
with the termination of the Company’s former CEO in April
2018, coupled with increased compensation-related costs and
professional fees.
Depreciation and Amortization.
Depreciation and amortization expense in the first nine months of
2018 decreased $0.1 million to $3.5 million compared to $3.6
million in the first nine months of 2017 primarily due to normal
depreciation and amortization.
Goodwill impairment.
The Company
evaluated enterprise goodwill for impairment in the first nine
months of 2018 due to the Company’s decreased stock price
since its prior annual goodwill impairment analysis on October 1,
2017. As of March 31, 2018, the carrying value of AWI was higher
than its fair value based on market capitalization at that date. As
a result, a non-cash impairment charge of $5.1 million was
recording during the nine months ended September 30,
2018.
Long-lived asset impairment.
The
Company records impairment losses on long-lived assets when events
and circumstances indicate that the assets might be impaired.
Events that may indicate that the assets might be impaired include,
but are not limited to, a significant downturn in the economy, a
loss of a major customer or group of customers or a significant
decrease in the market value of an asset. During the third quarter
of 2018, the Company recorded an impairment of approximately $0.4
million related to the impairment of asset advances to SaleMove
which were determined to be non-recoverable at September 30, 2018.
In addition, approximately $1.6 million was recorded as an
impairment on customer relationships acquired in a 2015 acquisition
after an analysis showed that a significant percentage of the
acquired customers were no longer part of the dealer
base.
Other Income (Expense), Net.
Other
income (expense), net increased $0.5 million to $0.2 million for
the first nine months of 2018 compared to $(0.3) million in the
first nine months of 2017 primarily to a decrease in Interest
expense of $0.5 million due to the payoff of term loans and
revolving line of credit in the fourth quarter of 2017 and the
first quarter of 2018.
Income Taxes.
Income tax expense was $4,000 in the
first nine months of 2018 compared to income tax expense of $0.5
million in the first nine months of 2017. Income tax
expense for the first nine months of 2018 differed from the federal
statutory rate primarily due to operating losses that receive no
tax benefit as a result of valuation allowances placed on tax
assets for such losses.
Liquidity and Capital Resources
The
table below sets forth a summary of our cash flows for the nine
months ended September 30, 2018 and 2017:
|
Nine Months Ended
September 30,
|
|
|
|
|
|
Net
cash provided by (used in) operating activities
|
$
(743
)
|
$
12,468
|
Net
cash used in investing activities
|
(703
)
|
(2,218
)
|
Net
cash used in financing activities
|
(7,723
)
|
(4,066
)
|
Our principal
sources of liquidity are our cash and cash equivalents balances
totaling $15.8 million at September 30, 2018, and our cashflows
generated from operations. While we believe that our existing
sources of liquidity will be sufficient to fund our operations for
the next twelve months, our future capital requirements will depend
on many factors, including but not limited to, implementing new
strategic plans, modernizing and upgrading our technology and
systems, pursuing business objectives and responding to business
opportunities, challenges or unforeseen circumstances, developing
new or improving existing products or services, enhancing our
operating infrastructure and acquiring complementary businesses and
technologies. To the extent that our existing liquidity is
insufficient to fund our future activities, we may need to engage
in equity or debt financings to secure additional funds. However,
additional funds may not be available when we need them, on terms
that are acceptable to us, or at all.
For
information concerning the Company’s previously announced
share repurchase authorization, see Note 5, Notes to Unaudited
Consolidated Condensed Financial Statements included in Part I,
Item 1 of this Quarterly Report on Form 10-Q. We did not repurchase
any shares during the nine months ended September 30, 2018 and
2017.
Credit Facility and Term Loan
. For
information concerning our term and revolving bank loans, see Note
9, Notes to Unaudited Consolidated Condensed Financial Statements
included in Part I, Item 1 of this Quarterly Report on Form
10-Q.
Net Cash Provided by Operating
Activities
Net cash used in operating activities totaled
$0.7 million for the nine months ended September 30, 2018, as
compared to cash provided by operating activities of $12.5 million
for the nine months ended September 30, 2017. This decrease
in cash provided by operating activities was driven by a decrease
in gross profit, an increase in compensation charges incurred as a
result of organizational headcount changes, and increased payments
on technology enhancements, partially offset by a decrease in
interest paid and an increase in liabilities accrued which will not
be paid until 2019.
Net Cash Used in Investing
Activities
. Net cash used in investing activities
was $0.7 million in the nine months ended September 30, 2018, which
primarily related to purchases of property and equipment and
expenditures related to capitalized internal use software of $0.8
million, offset by $0.1 million in proceeds from the sale of the
SaleMove investment.
Net
cash used in investing activities was $2.2 million in the nine
months ended September 30, 2017, which primarily related to
purchases of property and equipment and expenditures related to
capitalized internal use software.
Net Cash Used in Financing
Activities
. Net cash used in financing activities
of $7.7 million in the nine months ended September 30, 2018,
primarily related to payments of $8.0 million to pay down the
revolving credit facility in March 2018, offset by proceeds from
the issuance of common stock and the exercise of stock
options.
Net
cash used in financing activities of $4.1 million primarily related
to payments of $3.9 million made against the term loan borrowings
and $1.2 million used to repurchase Company common stock in the
first nine months of 2017. In addition, stock options for 191,074
shares of the Company’s common stock were exercised in the
first nine months of 2017 resulting in $1.1 million cash
inflow.
Off-Balance Sheet Arrangements
At
September 30, 2018, we had no off-balance sheet arrangements as
defined in Regulation S-K, Item 303(a)(4)(D)(ii).
Item 3.
Quantit
a
tive and Qualitative Disclosures about Market
Risk
In the ordinary course of business, we are exposed to various
market risk factors, including fluctuations in interest rates and
changes in general economic conditions. For the three
months ended September 30, 2018, there were no material changes in
the information required to be provided under Item 305 of
Regulation S-K from the information disclosed in Item 7A of the
2017 Form 10-K.
Item
4.
Co
n
trols and
Procedures
As of the end of the period covered by this
Quarterly Report on Form 10-Q, we carried out an evaluation under
the supervision and with the participation of our management,
including our Chief Executive Officer and our Interim Chief
Financial Officer, of the effectiveness of the design and operation
of our disclosure controls and procedures pursuant to Rule 13a-15
under the Securities Exchange Act of 1934, as amended
(“
Exchange Act
”). Disclosure controls and procedures
ensure that the information required to be disclosed by us in the
reports that we file or submit under the Exchange Act are
(i) recorded, processed, summarized, and reported within the
time periods specified in the SEC’s rules and forms and
(ii) accumulated and communicated to our management, including
our principal executive officer and principal financial officer, as
appropriate, to allow timely decisions regarding required financial
disclosure. Based on this evaluation, our Chief Executive Officer
and our Interim Chief Financial Officer believe that, due to the
material weakness in internal control over financial reporting
previously reported in our 2017 Form 10-K, our disclosure controls
and procedures were not effective as of September 30,
2018.
As
previously reported in our 2017 Form 10-K, in connection with their
attestation report on our internal control over financial reporting
as of December 31, 2017, Moss Adams LLP identified what they
believed was a material weakness in our evaluation and measurement
of goodwill for impairment and valuation of deferred tax
assets.
A
material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement
of our annual or interim financial statements will not be prevented
or detected on a timely basis. Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluations of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may
deteriorate.
With
respect to the material weakness identified by Moss Adams LLP, we
are continuing to take steps to remediate this material weakness in
our internal control over financial reporting, including
identifying and documenting controls for increased management
review of goodwill and valuation of deferred tax assets. We have
also dedicated additional external resources to assist in improving
internal controls so that they are designed to operate at a
sufficient level of precision.
Effective January
1, 2018, we adopted the new revenue guidance under
Accounting Standards
Codification 606 “Revenue from Contracts with
Customers.”
The adoption of this guidance requires the
implementation of new accounting policies and processes, which
changed the Company’s internal controls over financial
reporting for revenue recognition and related
disclosures.
As
of the end of the period covered by this Quarterly Report on Form
10-Q, other than the items mentioned in the above paragraph, there
were no changes in our internal control over financial reporting
(as defined in Rule 13a-15(f) under the Exchange Act) that have
materially affected, or were reasonably likely to materially
affect, our internal control over financial reporting.
Our
management, including our Chief Executive Officer and our Interim
Chief Financial Officer, does not expect that our disclosure
controls and internal control over financial reporting will prevent
all errors and all fraud. A control system, no matter how well
conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met.
Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must
be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of
fraud, if any, within the Company have been detected. These
inherent limitations include the realities that judgments in
decision-making can be faulty and that breakdowns can occur because
of a simple error or mistake. Additionally, controls may be
circumvented by the individual acts of some persons, by collusion
of two or more people, or by management override of the
control.
The
design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated
goals under all potential future conditions; over time, a control
may become inadequate because of changes in conditions, or the
degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud
may occur and not be detected.
PART II. OT
H
ER
INFORMATION
Item 1A. Risk Factors
The following factors, which supplement or update the risk factors
set forth in Part I, Item 1A, “Risk Factors” of our
2017 Form 10-K, may affect our future financial condition and
results of operations. The risks described below are not
the only risks we face. In addition to the risks set
forth in the 2017 Form 10-K, as supplemented or superseded by the
risk factors set forth below, additional risks and uncertainties
not currently known to us or that we currently deem to be
immaterial may also materially and adversely affect our
business.
We may require additional capital to implement new strategic plans,
modernize and upgrade our technology and systems, pursue business
objectives and respond to business opportunities, challenges or
unforeseen circumstances. If capital is not available to us, or is
not available on favorable terms, our financial performance
could be materially and adversely
affected
.
We may
require additional capital to implement new strategic plans,
modernize and upgrade our technology and systems, pursue business
objectives and respond to business opportunities, challenges or
unforeseen circumstances, including to develop new products or
services, improve existing products and services, enhance our
operating infrastructure and acquire complementary businesses and
technologies. As a result, we may need to engage in equity or debt
financings to secure additional funds. However, additional funds
may not be available when we need them, on terms that are
acceptable to us, or at all.
Any
debt financing that we secure in the future could involve
restrictive covenants that may make it more difficult for us to
obtain additional capital. Volatility in the credit markets may
also have an adverse effect on our ability to obtain debt
financing. If we raise additional funds through further issuances
of equity or convertible debt securities, our existing stockholders
could suffer significant dilution, and any new equity securities we
issue could have rights, preferences and privileges superior to
those of holders of our common stock. If we are unable to obtain
adequate financing or financing on terms satisfactory to us, when
we require it, our ability to continue to implement new strategic
plans, modernize and upgrade our technology and systems, pursue
business objectives and respond to business opportunities,
challenges or unforeseen circumstances could be significantly
limited, and our financial performance could be materially and
adversely affected.
Data privacy laws, rules and regulations.
Various laws, rules and regulations govern the
collection, use, retention, sharing and security of data that we
receive from our users, advertisers and affiliates. In addition, we
have and post on our website our own privacy policies and practices
concerning the collection, use and disclosure of user data and
personal information. Any failure, or perceived failure, by us to
comply with our posted privacy policies, Federal Trade Commission
requirements or orders or other federal or state privacy or
consumer protection-related laws, regulations or industry
self-regulatory principles could result in proceedings or actions
against us by governmental entities or others. Further, failure or
perceived failure by us to comply with our policies, applicable
requirements or industry self-regulatory principles related to the
collection, use, sharing or security of personal information or
other privacy-related matters could result in a loss of user
confidence in us, damage to our brands, and ultimately in a loss of
users, advertisers or Lead referral and advertising affiliates. We
cannot predict whether new legislation or regulations concerning
data privacy and retention issues related to our business will be
adopted, or if adopted, whether they could impose requirements that
may result in a decrease in our user registrations and materially
and adversely affect our financial
performance. Proposals that have or are currently being
considered include restrictions relating to the collection and use
of data and information obtained through the tracking of internet
use, including the possible implementation of a “Do Not
Track” list, that would allow internet users to opt-out of
such tracking. Other proposals include enhanced rights for
consumers to obtain information regarding the sharing or sale of
their personal information and rights to opt-out or prevent the
sharing or sale of their personal information to third parties,
similar to the European Union’s General Data Protection
Regulation. The State of California has already enacted AB 375, the
California Consumer Privacy Act of 2018, which includes significant
new personal data privacy rights for consumers. The law
becomes effective on January 1, 2020, but may be subject to various
amendments before it becomes effective. Depending on the provisions
of the law that become effective, compliance with this law could
have a
material and adverse effect on
our financial performance
Interruptions or failures in our information technology platforms,
communication systems or security systems could materially and
adversely affect our financial performance.
Our
information technology and communications systems are susceptible
to outages and interruptions due to fire, flood, earthquake, power
loss, telecommunications failures, cyber-attacks, terrorist
attacks, technology operations and development failures, failure of
redundant systems and disaster recovery plans and similar events.
Our planned technology modernization
efforts that began in the third quarter of 2018 and that are
anticipated to continue through 2019 may have temporary negative
impacts on performance of our systems as our systems are moved to
new platforms.
Outages and
interruptions could damage our reputation and harm our operating
results. Despite our network security measures, our information
technology platforms are vulnerable to computer viruses, worms,
physical and electronic break-ins, sabotage and similar disruptions
from unauthorized tampering, as well as coordinated
denial-of-service attacks. We do not have multiple site capacity
for all of our services. In the event of delays or disruptions to
services we rely on third party providers to perform disaster
recovery planning and services on our behalf. We are vulnerable to
extended failures to the extent that planning, and services are not
adequate to meet our continued technology platform, communication
or security systems’ needs. We rely on third party providers
for our primary and secondary internet connections. Our co-location
service and public cloud services that provide infrastructure and
platform services, environmental and power support for our
technology platforms, communication systems and security systems
are received from third party providers. We have little or no
control over these third-party providers. Any disruption of the
services they provide us or any failure of these third-party
providers to effectively design and implement sufficient security
systems or plan for increases in capacity could, in turn, cause
delays or disruptions in our services. We are insured for some, but
not all, of these events. Even for those events for which we are
insured and have coverage under the terms and conditions of the
applicable policies, there are no assurances given that the
coverage limits would be sufficient to cover all losses we might
incur or experience.
If we lose our key personnel or are unable to attract, train and
retain additional highly qualified sales, marketing, managerial and
technical personnel, our business may suffer.
Our
future success depends on our ability to identify, hire, train and
retain highly qualified sales, marketing, managerial and technical
personnel. In addition, as we introduce new services we may
need to hire additional personnel. We may not be able to attract,
assimilate or retain such personnel in the future. The inability to
attract and retain the necessary executive, managerial, technical,
sales and marketing personnel could have a material adverse effect
on our financial performance.
Our
business and operations are substantially dependent on the
performance of our executive officers and key
employees. Each of these executive officers could be
difficult to replace. There is no guarantee that these or any
of our other executive officers and key employees will remain
employed with us. The loss of the services of one or more of our
executive officers or key employees could have a material adverse
effect on our financial performance.
Qualified
individuals are in high demand, and we may incur significant costs
to attract and retain them. In order to attract and retain
executives and other key employees in a competitive marketplace, we
must provide competitive compensation packages, including cash and
stock-based compensation. Our primary forms of stock-based
incentive awards are stock options and restricted stock units. If
the anticipated value of such stock-based incentive awards does not
materialize, if our stock-based compensation otherwise ceases to be
viewed as a valuable benefit, or if our total compensation package
is not viewed as being competitive, our ability to attract, retain
and motivate executives and key employees could be
weakened.
Our
current executives may view the business differently than prior
members of management, and over time may make changes to our
strategic focus, operations or business plans with corresponding
changes in how we report our results of operations. We can make no
assurances that our current executives will be able to
properly manage any such shift in focus or that
any changes to our business would ultimately prove
successful. We cannot ensure that we will be able to retain the
services of any members of our senior management or other key
employees. If we do not succeed in attracting well-qualified
employees, retaining and motivating existing employees or
integrating new executives and employees, our business could be
materially and adversely affected.
|
Asset
Purchase and Sale Agreement dated as of December 19, 2016 by and
among AutoWeb, Inc., Car.com, Inc., a Delaware corporation, and
Internet Brands, Inc., a Delaware corporation, incorporated by
reference to Exhibit 2.1 to the Current Report on Form 8-K filed
with the SEC on December 21, 2016 (SEC File No.
001-34761)
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Sixth
Restated Certificate of Incorporation of AutoWeb, Inc.,
incorporated by reference to Exhibit 3.4 to the Current Report on
Form 8-K filed with the SEC on October 10, 2017 (SEC File No.
001-34761) (“
October 2017
Form 8-K
”)
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Seventh
Amended and Restated Bylaws of AutoWeb, Inc. dated October 9, 2017,
incorporated by reference to Exhibit 3.5 to the October 2017 Form
8-K
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Tax
Benefit Preservation Plan dated as of May 26, 2010 between Company
and Computershare Trust Company, N.A., as rights agent, together
with the following exhibits thereto: Exhibit A – Form of
Right Certificate; and Exhibit B – Summary of Rights to
Purchase Shares of Preferred Stock of Company, incorporated by
reference to Exhibit 4.1 to the Current Report on Form 8-K filed
with the SEC on June 2, 2010 (SEC File No. 000-22239), Amendment
No. 1 to Tax Benefit Preservation Plan dated as of April 14, 2014,
between Company and Computershare Trust Company, N.A., as rights
agent, incorporated by reference to Exhibit 4.1 to the Current
Report on Form 8-K filed with the SEC on April 16, 2014 (SEC File
No. 001-34761), Amendment No. 2 to Tax Benefit Preservation Plan
dated as of April 13, 2017, between Company and Computershare Trust
Company, N.A., as rights agent, incorporated by reference to
Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on
April 14, 2017 (SEC File No. 001-34761)
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Certificate
of Adjustment Under Section 11(m) of the Tax Benefit Preservation
Plan, incorporated by reference to Exhibit 4.3 to the Quarterly
Report on Form 10-Q for the quarterly period ended September 30,
2012 filed with the SEC on November 8, 2012 (SEC File No.
001-34761)
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Offer of Employment dated as of October 2, 2018 between Company and
Sara Partin
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Inducement Stock Option Award Agreement dated as of October 22,
2018 between Company and Sara Partin
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Indemnification Agreement dated as of October 22, 2018 between
Company and Sara Partin
|
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Severance Benefits Agreement dated October 22, 2018 between Company
and Sara Partin
|
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Rule 13a-14(a)/15d-14(a) Certification by Principal Executive
Officer
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Rule 13a-14(a)/15d-14(a) Certification by Principal Financial
Officer
|
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Section 1350 Certification by Principal Executive Officer and
Principal Financial Officer
|
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101.INS††
|
XBRL Instance Document
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101.SCH††
|
XBRL Taxonomy Extension Schema Document
|
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101.CAL††
|
XBRL Taxonomy Calculation Linkbase Document
|
|
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101.DEF††
|
XBRL Taxonomy Extension Definition Document
|
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101.LAB††
|
XBRL Taxonomy Label Linkbase Document
|
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101.PRE††
|
XBRL Taxonomy Presentation Linkbase Document
|
■
Management Contract or
Compensatory Plan or Arrangement.
‡
Certain
schedules in this Exhibit have been omitted in accordance with Item
601(b)(2) of Regulation S-K. AutoWeb, Inc. will furnish
supplementally a copy of any omitted schedule or exhibit to the
Securities and Exchange Commission upon request; provided, however,
that AutoWeb, Inc. may request confidential treatment pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for
any schedule or exhibit so furnished.
††
Furnished
with this report. In accordance with Rule 406T of Regulation S-T,
the information in these exhibits shall not be deemed to be
“filed” for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended, or otherwise subject to liability
under that section, and shall not be incorporated by reference into
any registration statement or other document filed under the
Securities Act of 1933, as amended, except as expressly set forth
by specific reference in such filing.
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
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Date: November 8, 2018
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By:
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/s/ Wesley Ozima
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Wesley Ozima
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Senior Vice President and
Interim Chief Financial Officer
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(Principal Financial and Accounting Officer)
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Exhibit 10.1
AutoWeb, Inc.
|
Glenn
E. Fuller
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18872 MacArthur Blvd., Suite 200
|
Executive
Vice President, Chief Legal and Administrative
|
Irvine, CA 92612-1400
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Officer
and Secretary
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Phone: (949) 225-4500
|
Direct
Line: 949.862.1392
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www.autoweb.com
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Facsimile:
949.797.0484
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glenn.fuller@autoweb.com
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October
2, 2018
Sara
Partin
[Personal
Residence Address Redacted]
Re:
Offer of Employment
Dear
Sara:
This
letter confirms the terms and conditions upon which AutoWeb, Inc.,
a Delaware corporation (“
Company
”) is offering employment
to you. Note that this offer of employment and your employment by
the Company is contingent upon various conditions and requirements
that must be completed prior to commencement of employment, which
conditions and requirements are set forth below.
1.
Employment
.
(a) Effective
as of the date you commence employment with the Company
(“
Commencement
Date
”), which date is anticipated to be
October 22,
2018
,
the Company will employ you in the capacity set forth on the
Exhibit A attached hereto (“
Offer Letter Schedule
”). In such
capacity, you will report to such person or persons as may be
designated by the Company from time to time.
(b) Your
employment is at will and not for a specified term and may be
terminated by the Company or you at any time, with or without cause
or good reason and with or without prior, advance notice. This
“at-will” employment status will remain in effect
throughout the term of your employment by the Company and cannot be
modified except by a written amendment to this offer letter that is
executed by both parties (which in the case of the Company, must be
executed by the Company’s Chief Legal Officer) and that
expressly negates the “at-will” employment
status.
2.
Compensation,
Benefits and Expenses
.
As compensation for the services to be
rendered by you pursuant to this agreement, you will receive the
payments and be entitled to participate in the benefits set forth
below, subject to the terms and conditions set forth below or in
such payment or benefit plans or arrangements. If at any time a
conflict between anything in this letter and the applicable benefit
plan arises, the terms of the benefit plan controls. Your
compensation and benefits shall be paid or made available in
accordance with the Company’s normal payroll and other
practices and policies of the Company.
(a) The
Company hereby agrees to pay you a base salary as set forth on the
Offer Letter Schedule.
(b) You
shall be eligible to participate in annual incentive compensation
plans, if any, that may be adopted by the Company from time to time
and that are afforded generally to persons employed by the Company
at your employment level and position, geographic location and
applicable department or operations within the Company (subject to
the terms and conditions of any such annual incentive compensation
plans). Should such an annual incentive compensation plan be
adopted for any annual period, your target annual incentive
compensation opportunity will be as established by the Company for
each annual period, which may be up to a percentage set forth on
the Offer Letter Schedule of your annualized rate (i.e., 24 X
Semi-monthly Rate) based on achievement of objectives specified by
the Company each annual incentive compensation period (which may
include Company-wide performance objectives; divisional, department
or operations performance objectives and/or individual performance
objectives, allocated between and among such performance objectives
as the Company may determine) and subject to adjustment by the
Company based on the Company’s evaluation and review of your
overall individual job performance in the sole discretion of the
Company. Specific annual incentive compensation plan details,
target incentive compensation opportunity and objectives for each
annual compensation plan period will be established each year.
Awards under annual incentive plans may be prorated by the Company
in its discretion for a variety of factors, including time employed
by the Company during the year, adjustments in base compensation or
target award percentage changes during the year, and unpaid time
off. You understand that the Company’s annual incentive
compensation plans, their structure and components, specific target
incentive compensation opportunities and objectives, the
achievement of objectives and the determination of actual awards
and payouts, if any, thereunder are subject to the sole discretion
of the Company. Awards, if any, under any annual incentive
compensation plan shall only be earned by you, an payable to you,
if you remain actively employed by the Company through the date on
which award payouts are made by the Company under the applicable
annual incentive compensation plan. You will not earn any such
award if your employment ends for any reason prior to that
date.
(c) Upon
commencement of employment with the Company you will be granted the
number of options to acquire shares of the Company’s common
stock set forth on the Offer Letter Schedule. The vesting,
exercise, termination and other terms and conditions of these
options shall be governed by and subject to the terms and
conditions of the applicable stock option plan and stock option
award agreement. The granting and exercise of such options are also
subject to compliance with applicable federal and state securities
laws and the Company’s Security Trading Policy.
(d) You
shall be entitled to participate in such ordinary and customary
benefits plans afforded generally to persons employed by the
Company at your employment position and level and geographic
location (subject to the terms and conditions of such benefit
plans, your enrollment in the plans and making of any required
employee contributions required for your participation in such
benefits, your ability to qualify for and satisfy the requirements
of such benefits plans). Upon commencement of employment with the
Company, you will begin accruing vacation under the Company’s
vacation accrual policy at the rate set forth on the Offer Letter
Schedule. Accrual of vacation is subject to a limitation on accrual
as set forth in the Company’s vacation accrual
policy.
(e) You
are solely responsible for the payment of any tax liability that
may result from any compensation, payments or benefits that you
receive from the Company. The Company shall have the right to
deduct or withhold from the compensation due to you hereunder any
and all sums required by applicable federal, state, local or other
laws, rules or regulations, including, without limitation federal
and state income taxes, social security or FICA taxes, and state
unemployment taxes, now applicable or that may be enacted and
become applicable during your employment by the
Company.
(f) Upon
termination of your employment by either party, whether with or
without cause, you will be entitled to receive only that portion of
your compensation, benefits, reimbursable expenses and other
payments and benefits required by applicable law or by the
Company’s compensation or benefit plans, policies or
agreements in which you participate and pursuant to which you are
entitled to receive the compensation or benefits thereunder under
the circumstances of and at the time of such termination (subject
to and payable in accordance with the terms and conditions of such
plans, policies or agreements).
3.
Pre-Hire Conditions
and Requirements
.
You
have previously submitted an Application for Employment and a
Consent to Conduct a Background Check. This offer of employment and
your employment by the Company is contingent upon various
conditions and requirements for new hires that must be completed
prior to commencement of employment. These conditions and
requirements include, among other things, the
following:
(i)
Successful completion of the Company’s background
check.
(ii)
Your
acceptance, execution and delivery of this offer letter together
with the Company’s Employee Confidentiality Agreement and
Mutual Agreement to Arbitrate, the forms of which accompany this
offer letter and which are hereby incorporated herein by reference.
Please sign this offer letter and these other documents and return
the signed original documents to Ondria Kernan in the
Company’s Human Resources Department.
(iii)
Your execution and delivery of your acknowledgment and agreement to
the Company’s
Employee Handbook
and the various policies included therein, Securities Trading
Policy, and Code of Conduct and Ethics. Upon your acceptance of
this offer letter, you will be provided instructions how to access
online, sign and return these documents.
(iv)
Your compliance with all applicable federal and state laws, rules,
regulation and orders,
including (1) your
execution and delivery of an I-9 Employment Eligibility
Verification together with complying verification documents; and
(2) your execution and delivery of a W-4 Employee’s
Withholding Allowance Certificate. Upon your acceptance of this
offer letter, you will be provided instructions how to access
online, sign and return these documents.
The
documents referenced in Sections 3(ii), (iii) and (iv) above are
referred to herein as the “
Standard Employee
Documents
.”
4.
Amendments
and Waivers
. This agreement may be amended, modified,
superseded, or cancelled, and the terms and conditions hereof may
be waived, only by a written instrument signed by the parties
hereto or, in the case of a waiver, by the party waiving
compliance. No delay on the part of any party in exercising any
right, power, or privilege hereunder will operate as a waiver
thereof, nor will any waiver on the part of any party of any right
hereunder, nor any single or partial exercise of any rights
hereunder, preclude any other or further exercise thereof or the
exercise of any other right hereunder.
5.
Notices
.
Any notice required or permitted under this agreement will be
considered to be effective in the case of (i) certified mail, when
sent postage prepaid and addressed to the party for whom it is
intended at its address of record, three (3) days after deposit in
the mail; (ii) by courier or messenger service, upon receipt by
recipient as indicated on the courier's receipt; or (iii) upon
receipt of an Electronic Transmission by the party that is the
intended recipient of the Electronic Transmission. The record
addresses, facsimile numbers of record, and electronic mail
addresses of record for you are set forth on the signature page to
this agreement and for the Company as set forth in the letterhead
above and may be changed from time to time by notice from the
changing party to the other party pursuant to the provisions of
this Section 5. For purposes of this Section 5, "
Electronic Transmission
” means a
communication (i) delivered by facsimile, telecommunication or
electronic mail when directed to the facsimile number of record or
electronic mail address of record, respectively, which the intended
recipient has provided to the other party for sending notices
pursuant to this Agreement and (ii) that creates a record of
delivery and receipt that is capable of retention, retrieval, and
review, and that may thereafter be rendered into clearly legible
tangible form.
6.
Choice
of Law
. This agreement, its construction and the
determination of any rights, duties or remedies of the parties
arising out of or relating to this agreement will be governed by,
enforced under and construed in accordance with the laws of the
State of California, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws of such
state.
7.
Severability
.
Each term, covenant, condition, or provision of this agreement will
be viewed as separate and distinct, and in the event that any such
term, covenant, condition or provision will be deemed to be invalid
or unenforceable, the arbitrator or court finding such invalidity
or unenforceability will modify or reform this agreement to give as
much effect as possible to the terms and provisions of this
agreement. Any term or provision which cannot be so modified or
reformed will be deleted and the remaining terms and provisions
will continue in full force and effect.
8.
Interpretation
.
Every provision of this agreement is the result of full
negotiations between the parties, both of whom have either been
represented by counsel throughout or otherwise been given an
opportunity to seek the aid of counsel. No provision of this
agreement shall be construed in favor of or against any of the
parties hereto by reason of the extent to which any such party or
its counsel participated in the drafting thereof. Captions and
headings of sections contained in this agreement are for
convenience only and shall not control the meaning, effect, or
construction of this agreement. Time periods used in this Agreement
shall mean calendar periods unless otherwise expressly
indicated.
9.
Entire
Agreement
. This Agreement, together with the Standard
Employee Documents, is intended to be the final, complete and
exclusive agreement between the parties relating to the employment
of you by the Company and all prior or contemporaneous
understandings, representations and statements, oral or written,
are merged herein. No modification, waiver, amendment, discharge or
change of this agreement shall be valid unless the same is in
writing and signed by the party against which the enforcement
thereof is or may be sought.
10.
Counterparts;
Facsimile or PDF Signature
. This agreement may be executed
in counterparts, each of which will be deemed an original hereof
and all of which together will constitute one and the same
instrument. This agreement may be executed by facsimile or PDF
signature by either party and such signature shall be deemed
binding for all purposes hereof, without delivery of an original
signature being thereafter required.
This
offer shall expire five (5) calendar days from the date of this
offer letter. Should you wish to accept this offer and its terms
and conditions, please confirm your understanding of, agreement to,
and acceptance of the foregoing by signing and returning to the
undersigned the duplicate copy of this offer letter enclosed
herewith.
AUTOWEB,
INC.
By:
/s/ Glenn E.
Fuller
Glenn
E. Fuller
Executive Vice
President, Chief Legal and Administrative Officer and
Secretary
Accepted
and Agreed
as of
the date
first
written above:
Sara
Partin
[Personal Residence
Address Redacted]
Exhibit A
Offer Letter Schedule
Employment Capacity/Title:
SVP, Chief Human Resources
Officer
Employment Commencement Date:
October 22, 2018
Base Salary:
Semi-monthly Rate of Eleven Thousand Four
Hundred Fifty-eight Dollars and Thirty-four Cents ($11,458.34)
which equates to an annualized rate of approximately Two Hundred
Seventy-five Thousand Dollars ($275,000).
Annual Incentive Compensation Target:
40%
Stock Options:
50,000. Priced at closing price of common
stock on The Nasdaq Capital Market on employment commencement date.
Stock Options shall be granted as inducement options under NASDAQ
rules.
Vacation Accrual Rate
: V
acation
accrues at a rate equal to 3 weeks (120 hours for full-time
employees) per year (5 hours per pay period).
SP
|
GEF
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Employee
Initials
|
Company
Initials
|
Exhibit 10.2
AUTOWEB, INC.
Inducement Stock Option Award Agreement
(Non-Qualified Stock Options)
THESE OPTIONS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (“SECURITIES ACT”), OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND OTHER APPLICABLE STATE
SECURITIES LAWS WITH RESPECT TO SUCH SECURITY IS THEN IN EFFECT, OR
SUCH REGISTRATION UNDER THE SECURITIES ACT AND OTHER APPLICABLE
SECURITIES LAWS IS NOT REQUIRED DUE TO AVAILABLE EXEMPTIONS FROM
SUCH REGISTRATION. SHOULD THERE BE ANY REASONABLE UNCERTAINTY OR
GOOD FAITH DISAGREEMENT BETWEEN THE COMPANY AND PARTICIPANT AS TO
THE AVAILABILITY OF SUCH EXEMPTIONS, THEN PARTICIPANT SHALL BE
REQUIRED TO DELIVER TO THE COMPANY AN OPINION OF COUNSEL
(SKILLED
IN SECURITIES MATTERS, SELECTED BY PARTICIPANT AND REASONABLY
SATISFACTORY TO THE COMPANY)
IN FORM AND SUBSTANCE
SATISFACTORY TO THE COMPANY THAT SUCH OFFER, SALE OR TRANSFER,
PLEDGE OR HYPOTHECATION IS IN COMPLIANCE WITH AN AVAILABLE
EXEMPTION UNDER THE SECURITIES ACT AND OTHER APPLICABLE SECURITIES
LAWS.
This
Inducement Stock Option Award Agreement (“
Agreement
”) is entered into
effective as of the Grant Date set forth on the signature page to
this Agreement (“
Grant
Date
”) by and between AutoWeb, Inc., a Delaware
corporation (“
Company
”), and the person set
forth as Participant on the signature page hereto
(“
Participant
”).
Participant has not
previously been an employee or director of the Company. The Company
has determined to offer employment to Participant, and as an
inducement material to Participant’s decision to accept such
employment offer, the Company determined to grant Participant the
Options (as defined herein) under the terms and conditions set
forth herein.
This
Agreement and the stock options granted hereby have not been
granted pursuant to The AutoWeb, Inc. 2018 Equity Incentive Plan
(“
Plan
”), but
certain capitalized terms identified herein and not defined herein
shall have the same meanings as defined in the Plan.
1.
Grant of
Options
. The Company hereby grants to Participant
non-qualified stock options (“
Options
”) to purchase the number
of shares of common stock of the Company, par value $0.001 per
share, set forth on the signature page to this Agreement
(“
Shares
”), at
the exercise price per Share set forth on the signature page to
this Agreement (“
Exercise
Price
”). The Options are not intended to qualify as
incentive stock options under Section 422 of the Code (as such term
is defined in the Plan).
2.
Term of
Options
. Unless the Options terminate earlier pursuant to
the provisions of this Agreement, the Options shall expire on the
seventh (7
th
) anniversary of the
Grant Date (“
Option
Expiration Date
”).
3.
Vesting
. The
Options shall become vested and exercisable in accordance with the
vesting schedule set forth on the signature page to this Agreement
(“
Vesting
Schedule
”). No installments of the Options shall vest
after Participant’s termination of employment for any
reason.
4.
Exercise of
Options
.
(a)
Manner
of Exercise
. To the extent vested, the Options may be
exercised, in whole or in part, by delivering written notice to the
Company in accordance with Section 7(f) of this Agreement in such
form as the Company may require from time to time, or at the
direction of the Company, through the procedures established with
the Company’s third party option administration service. Such
notice shall specify the number of Shares subject to the Options
that are being exercised and shall be accompanied by full payment
of the Exercise Price of such Shares in a manner permitted under
the terms of Section 5.5 of the Plan (as if these Options had been
granted under the Plan) (including same day sales through a
broker), except that payment in whole or in part in a manner set
forth in clauses (ii), (iii) or (iv) of Section 5.5(b) of the Plan
(as if these Options had been granted under the Plan), may only be
made with the consent of the Committee (as such term is defined in
the Plan). The Options may be exercised only in multiples of whole
Shares, and no fractional Shares shall be issued.
(b)
Issuance
of Shares
. Upon exercise of the Options and payment of the
Exercise Price for the Shares as to which the Options are exercised
and satisfaction of all applicable tax withholding requirements,
the Company shall issue to Participant the applicable number of
Shares in the form of fully paid and nonassessable
Shares.
(c)
Withholding
.
No Shares will be issued on exercise of the Options unless and
until Participant pays to the Company or makes satisfactory
arrangements with the Company for payment of, any federal, state,
local or foreign taxes required by law to be withheld in respect of
the exercise of the Options. Participant may remit withholding
payment following Option exercise through the use of broker
assisted Option exercise. Participant hereby agrees that the
Company may withhold from Participant’s wages or other
remuneration the applicable taxes. At the discretion of the
Company, the applicable taxes may be withheld in kind from the
Shares otherwise deliverable to Participant on exercise of the
Options, up to Participant’s minimum required withholding
rate or such other rate determined by the Committee that will not
trigger a negative accounting impact.
(d)
Compliance
with
Securities Trading Policy
.
Shares issued upon exercise of the
Options may only be sold, pledged or otherwise transferred in
compliance with the Company’s securities trading policies
generally applicable to officers, directors or employees of the
Company as long as Participant is subject to such securities
trading policy.
(e)
Limitation
on Number of Resales or Transfers of Shares
. The number of
Shares that may be resold or transferred to the public or through
any public securities trading market at any time may not exceed (i)
for any one sale or transfer order, twenty-five percent (25%) of
the Average Daily Volume; and (ii) for all sales or transfer volume
in any calendar week, twenty-five percent (25%) of the Weekly
Volume. For purposes of this Section 4(e), (i) “
Average Daily Volume
” will be
determined once at the beginning of each calendar quarter for
application during such quarter based on an averaging of the daily
volume of sales of Company Common Stock as reported by The NASDAQ
Capital Market (provided that if the Company’s Common Stock
is not then listed on The NASDAQ Capital Market, as reported by
such trading market on which the Common Stock is traded) for each
trading day over the 90-trading day period preceding such
determination; and (ii) “
Average Weekly Volume
” is
calculated by multiplying the Average Daily Volume by the number of
trading days in the calendar week preceding the proposed sale or
transfer of Shares.
5.
Option
Termination and Other Provisions
.
(a)
Termination
Upon Expiration of Option Term
. The Options shall terminate
and expire in their entirety on the Option Expiration Date. In no
event may Participant exercise the Options after the Option
Expiration Date, even if the application of another provision of
this Section 5 may result in an extension of the exercise period
for the Options beyond the Option Expiration Date.
(b)
Termination
of Employment
.
(i)
Termination of Employment Other Than Due to Death, Disability or
Cause
.
(1) Participant
may exercise the vested portion of the Options for a period of
ninety (90) days (but in no event later than the Option Expiration
Date) following any termination of Participant’s employment
with Company, either by Participant or Company, other than in the
event of a termination of Participant’s employment by Company
for Cause (as defined below), voluntary termination by Participant
without Good Reason (as defined below) or by reason of
Participant’s death or Disability (as defined below). In the
event the termination of Participant’s employment is by
Company without Cause or by Participant for Good Reason, any
unvested portion of the Options shall become immediately and fully
vested as of the date of such termination.
(2) In
the event of a voluntary termination of employment with the Company
by Participant without Good Reason, (i) unvested Options as of the
date of termination shall immediately terminate in their entirety
and shall thereafter not be exercisable to any extent whatsoever;
and (ii) Participant may exercise any portion of the Options that
are vested as of the date of termination for a period of ninety
(90) days (but in no event later than the Option Expiration Date)
following the date of termination.
(3) To
the extent Participant is not entitled to exercise the Options at
the date of termination of employment, or if Participant does not
exercise the Options within the time specified in the Plan or this
Agreement for post-termination of employment exercises of the
Options, the Options shall terminate.
(4) For
purposes of this Agreement, the terms “
Cause
” and “
Good Reason
”
shall have the meanings ascribed
to them in that certain Severance Benefits Agreement listed on the
signature page to this Agreement by and between Company and
Participant (“
Severance
Agreement
”).
(ii)
Termination of Employment for Cause
. Upon the termination of
Participant’s employment by the Company for Cause, unless the
Options have been earlier terminated, the Options (whether vested
or not) shall immediately terminate in their entirety and shall
thereafter not be exercisable to any extent whatsoever; provided
that the Company, in its discretion, may, by written notice to
Participant given as of the date of termination, authorize
Participant to exercise any vested portion of the Options for a
period of up to thirty (30) days following Participant’s
termination of employment for Cause, provided that in no event may
Participant exercise the Options beyond the Option Expiration
Date.
(iii)
Termination of Participant’s Employment By Reason of
Participant’s Death
. In the event Participant’s
employment is terminated by reason of Participant’s death,
the Options, to the extent vested as of the date of termination,
may be exercised at any time within twelve (12) months following
the date of termination (but in no event later than the Option
Expiration Date) by Participant’s executor or personal
representative or the person to whom the Options shall have been
transferred by will or the laws of descent and distribution, but
only to the extent Participant could exercise the Options at the
date of termination.
(iv)
Termination
of Participant’s Employment By Reason of Participant’s
Disability
. In the event that Participant ceases to be an
employee by reason of Participant’s Disability, unless the
Options have been earlier terminated, Participant (or
Participant’s attorney-in-fact, conservator or other
representative on behalf of Participant) may, but only within
twelve (12) months from the date of such termination of employment
(but in no event later than the Option Expiration Date), exercise
the Options to the extent Participant was otherwise entitled to
exercise the Options at the date of such termination of employment.
For purposes of this Agreement, “
Disability”
shall mean
Participant’s becoming “permanently and totally
disabled” within the meaning of Section 22(e)(3) of the Code
or as otherwise determined by the Committee in its discretion. The
Committee may require such proof of Disability as the Committee in
its sole and absolute discretion deems appropriate, and the
Committee’s determination as to whether Participant has
incurred a Disability shall be final and binding on all parties
concerned.
(c)
Change
in Control
. In the event of a Change in Control, the effect
of the Change in Control on the Options shall be determined by the
applicable provisions of the Plan (including, without limitation,
Article 10 of the Plan) (as if the Options had been granted under
the Plan), provided that (i) to the extent the Options are assumed
or substituted by the successor company in connection with the
Change in Control (or the Options are continued by Company if it is
the ultimate parent entity after the Change in Control), the
Options will vest and become fully exercisable in accordance with
clause (i) of Section 10.2(a) of the Plan (as if the Options had
been granted under the Plan), if within twenty-four (24) months
following the date of the Change in Control Participant’s
employment is terminated by Company or a Subsidiary (or the
successor company or a subsidiary or parent thereof) without Cause
or by Participant for Good Reason, and any vested Options (either
vested prior to the Change in Control or accelerated by reason of
this Section 5(c)) may be exercised for a period of twenty-four
(24) months after the date of such termination of employment (but
in no event later than the Option Expiration Date); and (ii) any
portion of the Options which vests and becomes exercisable pursuant
to Section 10.2(b) of the Plan (as if the Options had been granted
under the Plan), as a result of such Change in Control will (1)
vest and become exercisable on the day prior to the date of the
Change in Control if Participant is then employed by the Company or
a Subsidiary and (2) terminate on the date of the Change in
Control. For purposes of Section 10.2(a) of the Plan, the Options
shall not be deemed assumed or substituted by a successor company
(or continued by Company if it is the ultimate parent entity after
the Change in Control) if the Options are not assumed, substituted
or continued with equity securities of the successor company or
Company, as applicable, that are publicly-traded and listed on an
exchange in the United States and that have voting, dividend and
other rights, preferences and privileges substantially equivalent
to the Shares. If the Options are not deemed assumed, substituted
or continued for purposes of Section 10.2(a) of the Plan, the
Options shall be deemed not assumed, substituted or continued and
governed by Section 10.2(b) of the Plan. Notwithstanding the
foregoing, if on the date of the Change in Control the Fair Market
Value of one Share is less than the Exercise Price per Share, then
the Options shall terminate as of the date of the Change in Control
except as otherwise determined by the Committee.
(d)
Extension
of Exercise Period
. Notwithstanding any provisions of this
Section 5 to the contrary, if following termination of employment
or service the exercise of the Options or, if in conjunction with
the exercise of the Options, the sale of the Shares acquired on
exercise of the Options, during the post-termination of service
time period set forth in the paragraph of this Section 5 applicable
to the reason for termination of service would, in the
determination of the Company, violate any applicable federal or
state securities laws, rules, regulations or orders (or any Company
policy related thereto), including its securities trading policy),
the running of the applicable period to exercise the Options shall
be tolled for the number of days during the period that the
exercise of the Options or sale of the Shares acquired on exercise
would in the Company’s determination constitute such a
violation;
provided,
however
, that in no event shall the exercisability of the
Options be extended beyond the Option Expiration Date.
(e)
Adjustments
.
The number of Options may be subject to adjustment as provided in
Section 11.2 of the Plan (as if the Options had been granted under
the Plan).
(f)
Other
Governing Agreements or Plans
. To the extent not prohibited
by the Plan, the provisions of this Section 5 regarding the
acceleration of vesting of Options and the extension of the
exercise period for Options following a Change in Control or a
termination of Participant’s employment with Company shall be
superseded and governed by the provisions, if any, of a written
employment or severance agreement between Participant and Company
or a severance plan of Company covering Participant, including a
change in control severance agreement or plan, to the extent such a
provision (i) is specifically applicable to option awards or grants
made to Participant and (ii) provides for the acceleration of
Options vesting or for a longer extension period for the exercise
of the Options in the case of a Change in Control or a particular
event of termination of Participant’s employment with Company
(e.g., an event of termination governed by Section 5(b)(i)) to this
Agreement than is provided in the provision of this Section 5
applicable to a Change in Control or to the same event of
employment termination;
provided,
however
, that in no event shall the exercisability of the
Options be extended beyond the Option Expiration Date.
(g)
Forfeiture
upon Engaging in Detrimental Activities
. If, at any
time within the twelve (12) months after (i) Participant exercises
any portion of the Options; or (ii) the effective date of any
termination of Participant’s employment by the Company or by
Participant for any reason, Participant engages in, or is
determined by the Committee in its sole discretion to have engaged
in, any (i) material breach of any non-competition,
non-solicitation, non-disclosure or settlement or release covenant
or agreement with the Company or any Subsidiary; (ii) activities
during the course of Participant’s employment with the
Company or any Subsidiary constituting fraud, embezzlement, theft
or dishonesty; or (iii) activity that is otherwise in conflict
with. or adverse or detrimental to the interests of the Company or
any Subsidiary, then (x) the Options shall terminate effective as
of the date on which Participant engaged in or engages in that
activity or conduct, unless terminated sooner pursuant to the
provisions of this Agreement, and (y) the amount of any gain
realized by Participant from exercising all or a portion of the
Options at any time following the date that Participant engaged in
any such activity or conduct, as determined as of the time of
exercise, shall be forfeited by Participant and shall be paid by
Participant to the Company, and recoverable by the Company, within
sixty (60) days following such termination date of the
Options. For purposes of the foregoing, the following will be
deemed to be activities in conflict with or adverse or detrimental
to the interests of the Company or any Subsidiary: (i)
Participant’s conviction of, or pleading guilty or nolo
contendre to any misdemeanor involving moral turpitude or any
felony, the underlying events of which related to
Participant’s employment with the Company; (ii) knowingly
engaged or aided in any act or transaction by the Company or a
Subsidiary that results in the imposition of criminal, civil or
administrative penalties against the Company or any Subsidiary; or
(iii) misconduct during the course of Participant’s
employment by the Company or any Subsidiary that results in an
accounting restatement by the Company due to material noncompliance
with any financial reporting requirement under applicable
securities laws, whether such restatement occurs during or after
Participant’s employment by the Company or any
Subsidiary.
(h)
Reservation
of Committee Discretion to Accelerate Option Vesting and Extend
Option Exercise Window
. The Committee reserves the right, in
its sole and absolute discretion, to accelerate the vesting of the
Options and to extend the exercise window for Options that have
vested (either in accordance with the terms of this Agreement or by
discretionary acceleration by the Committee) under circumstances
not otherwise covered by the foregoing provisions of this Section
5; provided that in no event may the Committee extend the exercise
period for Options beyond the Option Expiration Date. The Committee
is under no obligation to exercise any such discretion and may or
may not exercise such discretion on a case-by-case
basis.
6.
Non-Registered
Option and Shares
.
(a) Participant
hereby acknowledges that the Options and any Shares that may be
acquired upon exercise of the Options pursuant hereto are, as of
the date hereof, not registered: (i) under the Securities Act, on
the ground that the issuance of the Options and the underlying
shares is exempt from registration under Section 4(2) of the
Securities Act as not involving any public offering or, with
respect to Options, because the grant of the Options alone may not
constitute an offer or sale of a security under the Securities Act
until such time as the Options are exercised or exercisable or (ii)
under any applicable state securities law because the grant of the
Options does not involve any public offering or is otherwise exempt
under applicable state securities laws, and (iii) that the
Company’s reliance on the Section 4(2) exemption of the
Securities Act and under applicable state securities laws is
predicated in part on the representations hereby made to the
Company by Participant. Participant represents and warrants that
Participant is acquiring the Options and will acquire the Shares
for investment for Participant’s own account, with no present
intention of reselling or otherwise distributing the
same.
(b) If,
at the time of issuance of shares upon exercise of the Options, no
registration statement is in effect with respect to such shares
under applicable provisions of the Securities Act and other
applicable securities laws, Participant hereby agrees that
Participant will not sell, transfer, offer, pledge or hypothecate
all or any part of the shares unless and until Participant shall
first have given notice to the Company describing such sale,
transfer, offer, pledge or hypothecation and there shall be
available exemptions from such registration requirements that
exist. Should there be any reasonable uncertainty or good faith
disagreement between the Company and Participant as to the
availability of such exemptions, then Participant shall be required
to deliver to the Company (1) an opinion of counsel (skilled in
securities matters, selected by Participant and reasonably
satisfactory to the Company) in form and substance satisfactory to
the Company to the effect that such offer, sale, transfer, pledge
or hypothecation is in compliance with an available exemption under
the Securities Act and other applicable securities laws, or (2) an
interpretative letter from the Securities and Exchange Commission
to the effect that no enforcement action will be recommended if the
proposed offer, sale, transfer, pledge or hypothecation is made
without registration under the Securities Act. The Company may at
its election require that Participant provide the Company with
written reconfirmation of Participant’s investment intent as
set forth in Section 6(a) with respect to the shares. The shares
issued upon exercise of the Options shall bear a legend reading
substantially as follows:
“THESE SHARES
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (“
SECURITIES
ACT
”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND OTHER
APPLICABLE STATE SECURITIES LAWS WITH RESPECT TO SUCH SECURITY IS
THEN IN EFFECT, OR SUCH REGISTRATION UNDER THE SECURITIES ACT AND
OTHER APPLICABLE SECURITIES LAWS IS NOT REQUIRED DUE TO AVAILABLE
EXEMPTIONS FROM SUCH REGISTRATION. SHOULD THERE BE ANY REASONABLE
UNCERTAINTY OR GOOD FAITH DISAGREEMENT BETWEEN THE COMPANY AND
PARTICIPANT AS TO THE AVAILABILITY OF SUCH EXEMPTIONS, THEN
PARTICIPANT SHALL BE REQUIRED TO DELIVER TO THE COMPANY AN OPINION
OF COUNSEL (SKILLED IN SECURITIES MATTERS, SELECTED BY PARTICIPANT
AND REASONABLY SATISFACTORY TO THE COMPANY) IN FORM AND SUBSTANCE
SATISFACTORY TO THE COMPANY THAT SUCH OFFER, SALE OR TRANSFER,
PLEDGE OR HYPOTHECATION IS IN COMPLIANCE WITH AN AVAILABLE
EXEMPTION UNDER THE SECURITIES ACT AND OTHER APPLICABLE SECURITIES
LAWS.”
(c) The
exercise of the Option and the issuance of the Shares upon such
exercise shall be subject to compliance by the Company and
Participant with all applicable requirements of law, rules,
regulations or orders relating thereto and with all applicable
rules and regulations of any stock exchange or securities trading
market on which the Shares may be listed for trading at the end of
such exercise and issuance.
(d) The
inability of the Company to obtain approval from any regulatory
body having authority deemed by the Company to be necessary to the
lawful issuance and sale of any Shares pursuant to the Options
shall relieve the Company of any liability with respect to the
nonissuance or sale of the Shares as to which such approval shall
not have been obtained. However, the Company shall use its best
efforts to obtain all such applicable approvals.
(a)
No
Rights of Stockholder
. Participant shall not have any of the
rights of a stockholder with respect to the Shares subject to this
Agreement until such Shares have been issued upon the due exercise
of the Options.
(b)
Nontransferability
of Options
. The Options shall be nontransferable or
assignable except to the extent expressly provided in the Plan (as
if the Options had been granted under the Plan). Notwithstanding
the foregoing, Participant may by delivering written notice to the
Company in a form provided by or otherwise satisfactory to the
Company, designate a third party who, in the event of
Participant’s death, shall thereafter be entitled to exercise
the Options.
This Agreement is not
intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
(c)
Severability
.
If any provision of this Agreement shall be held unlawful or
otherwise invalid or unenforceable in whole or in part by a court
of competent jurisdiction, such provision shall (i) be deemed
limited to the extent that such court of competent jurisdiction
deems it lawful, valid and/or enforceable and as so limited shall
remain in full force and effect, and (ii) not affect any other
provision of this Agreement or part thereof, each of which shall
remain in full force and effect.
(d)
Governing
Law, Jurisdiction and Venue
. This Agreement shall be
governed by and interpreted in accordance with the laws of the
State of Delaware other than its conflict of laws principles. The
parties agree that in the event that any suit or proceeding is
brought in connection with this Agreement, such suit or proceeding
shall be brought in the state or federal courts located in New
Castle County, Delaware, and the parties shall submit to the
exclusive jurisdiction of such courts and waive any and all
jurisdictional, venue and inconvenient forum objections to such
courts.
(e)
Headings
.
The headings in this Agreement are for reference purposes only and
shall not affect the meaning or interpretation of this
Agreement.
(f)
Notices
.
All notices required or permitted under this Agreement shall be in
writing and shall be sufficiently made or given if hand delivered
or mailed by registered or certified mail, postage prepaid. Notice
by mail shall be deemed delivered on the date on which it is
postmarked.
Notices
to the Company should be addressed to:
AutoWeb,
Inc.
18872
MacArthur Blvd., Suite 200
Irvine,
CA 92612-1400
Attention: Chief
Legal Officer
Notices
to Participant should be addressed to Participant at
Participant’s address as it appears on the Company’s
records.
The
Company or Participant may by writing to the other party designate
a different address for notices. If the receiving party consents in
advance, notice may be transmitted and received via telecopy or via
such other electronic transmission mechanism as may be available to
the parties. Such notices shall be deemed delivered when
received.
(g)
Agreement
Not an Employment Contract
. This Agreement is not an
employment or service contract, and nothing in this Agreement or in
the granting of the Options shall be deemed to create in any way
whatsoever any obligation on Participant’s part to continue
as an employee of the Company or any Subsidiary or on the part of
the Company or any Subsidiary to continue Participant’s
employment or service as an employee.
(h)
Counterparts
.
This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original Agreement but all of which, taken
together, shall constitute one and the same Agreement binding on
the parties hereto. The signature of any party hereto to any
counterpart hereof shall be deemed a signature to, and may be
appended to, any other counterpart hereof.
(i)
Administration
.
The Committee shall have the power to interpret this Agreement and
to adopt such rules for the administration, interpretation and
application of this Agreement as are consistent with this Agreement
and to interpret or revoke any such rules. All actions taken and
all interpretations and determinations made by the Committee
(including determinations as to the calculation, satisfaction or
achievement of performance-based vesting requirements, if any, to
which the Options are subject) shall be final and binding upon
Participant, the Company and all other interested persons. No
member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to
this Agreement.
(j)
Policies
and Procedures
.
Participant
agrees that Company may impose, and Participant agrees to be bound
by, Company policies and procedures with respect to the ownership,
timing and manner of resales of shares of Company's securities,
including without limitation, (i) restrictions on insider trading;
(ii) restrictions designed to delay and/or coordinate the timing
and manner of sales by officers, directors and affiliates of the
Company following a public offering of the Company's securities;
(iii) stock ownership or holding requirements applicable to
officers and/or directors of Company; and (iv) the required use of
a specified brokerage firm for such resales.
(k)
Entire
Agreement; Modification
. This Agreement contains the entire
agreement between the parties with respect to the subject matter
contained herein and may not be modified except as provided herein
or in a written document signed by each of the parties hereto and
may be rescinded only by a written agreement signed by both
parties.
Remainder of Page Intentionally Left Blank; Signature Page
Follows
IN
WITNESS WHEREOF, the parties have executed this Agreement effective
as of the Grant Date.
Grant
Date:
|
October 22,
2018
|
Total Options
Awarded:
|
50,000
|
Exercise Price Per
Share:
|
$2.50
|
Severance Benefits
Agreement:
|
Severance
Benefits Agreement dated
October 22,
2018
|
|
|
Vesting
Schedule:
|
(i) thirty-three and one-third percent (33 1/3%) shall vest and
become exercisable on the first anniversary after the Grant Date;
and (ii) one thirty-sixth (1/36th) shall vest and become
exercisable on each successive monthly anniversary thereafter for
the following twenty-four (24) months ending on the third
anniversary of such vesting commencement date.
|
|
|
“Company
”
|
AutoWeb, Inc., a
Delaware corporation
|
|
|
|
By:
/s/ Glenn E.
Fuller
|
|
Glenn E.
Fuller
|
|
EVP, Chief Legal
and Administrative
|
|
Officer and
Secretary
|
|
|
“Participant
”
|
|
|
Sara
Partin
|
|
|
Exhibit
10.3
AUTOWEB, INC.
INDEMNIFICATION AGREEMENT
This
Indemnification Agreement (“
Agreement
”) is
made and entered into as of October 22, 2018 by and between
AutoWeb, Inc., a Delaware corporation (“
Company
”), and
Sara Partin (“
Indemnitee
”).
Background
In
order to attract and retain the services of highly qualified
individuals, such as Indemnitee, to serve the Company and, in part,
to induce Indemnitee to continue to provide services to the
Company, the Company wishes to provide for indemnification and
advancement of expenses to Indemnitee to the maximum extent
permitted by law.
The
Company’s Seventh Amended and Restated Bylaws, as amended
(“
Bylaws
”), and
the Company’s Sixth Restated Certificate of Incorporation, as
amended (“
Certificate
”),
require that the Company indemnify the directors, officers,
employees and other agents of the Company, including persons
serving at the request of the Company in those capacities with
other corporations or enterprises, as authorized by the General
Corporation Law of the State of Delaware, as amended
(“
DGCL
”), and
the Bylaws and the Certificate each expressly provide that the
indemnification provided therein is not exclusive and contemplates
that the Company may enter into separate agreements with its
directors, officers, employees and other agents of the
Company.
Indemnitee does not
believe that the protection currently provided by applicable law,
the Bylaws, the Certificate and available insurance may be adequate
under the circumstances, and the Company has determined that
Indemnitee and other directors, officers, employees and agents of
the Company may not be willing to serve or continue to serve in
such capacities without additional protections. The Company desires
and has requested Indemnitee to serve or continue to serve as a
director, officer, employee or agent of the Company, as the case
may be, and has proffered this Agreement to Indemnitee as an
additional inducement to serve in such capacity. Indemnitee is
willing to serve, or to continue to serve, as a director, officer,
employee or agent of the Company, as the case may be, if Indemnitee
is furnished the indemnity provided herein by the
Company.
This
Agreement is a supplement to, and in furtherance of, the Bylaws,
the Certificate and any resolutions adopted pursuant thereto, and
must not be deemed a substitute therefor, nor to diminish or
abrogate any rights of Indemnitee thereunder.
In
consideration of Indemnitee’s agreement to serve and the
mutual agreements set forth herein, the sufficiency of which is
hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
Agreement
1.
Services to the Company.
Indemnitee will
serve, at the will of the Company (or its stockholders, as
applicable) or under separate contract if any such contract exists,
as Senior Vice President and Chief Human Resources Officer, or as a
director, officer, agent or other fiduciary of an affiliate of the
Company, including any subsidiary or employee benefit plan of the
Company (each, an “
Affiliate
”),
to the best of Indemnitee’s ability so long as Indemnitee
remains in such position(s);
provided, however,
that (i)
Indemnitee may at any time and
for any reason resign from such position(s) (subject to any
contractual obligation that Indemnitee may have assumed apart from
this Agreement or any obligation imposed by operation of law), and
(ii) neither the Company nor any Affiliate have any obligation
under this Agreement to continue Indemnitee in any such
position(s). This Agreement is not an employment contract between
the Company (or any of its Affiliates) and Indemnitee. Nothing in
this Agreement may be construed or interpreted as giving Indemnitee
any right to be retained in the employ of the Company (or any of
its Affiliates). Indemnitee specifically acknowledges and agrees
that except as may be provided in a written employment contract
between Indemnitee and the Company or an Affiliate: (i)
Indemnitee’s employment with the Company or any of its
Affiliates is at-will, and (ii) Indemnitee may be discharged at any
time for any reason. The foregoing notwithstanding, this Agreement
will continue in force after Indemnitee has ceased to serve as
Senior Vice President and Chief Human Resources Officer of the
Company.
2.
Indemnity of Indemnitee.
The Company
hereby agrees to hold harmless and indemnify Indemnitee to the
fullest extent authorized or permitted by the provisions of the
Bylaws, the Certificate, the DGCL or other applicable law. The
phrase “to the fullest extent authorized or permitted”
includes to the fullest extent authorized or permitted by any
amendments or replacements of the Bylaws, the Certificate, or the
DGCL (or other applicable law) adopted or enacted after the date of
this Agreement that increase the extent to which a corporation may
indemnify its directors, officers, employees or
agents.
3.
Additional Indemnity.
In addition to,
and not in limitation of, the indemnification otherwise provided
for herein, and subject only to the exclusions set forth in
Section 4 hereof, the Company hereby further agrees to hold
harmless and indemnify Indemnitee against any and all Expenses (as
defined below) that Indemnitee becomes legally obligated to pay
because of any claim or claims made against or by Indemnitee in
connection with any threatened, pending or completed action, suit
or proceeding whether by or in the right of the Company or
otherwise and whether civil, criminal, legislative, arbitrational,
administrative or investigative, and whether formal or informal
including any appeal therefrom, to which Indemnitee is, was or at
any time becomes a party, potential party, or a participant,
including as a non-party witness or otherwise, or is threatened to
be made a party, by reason of the fact that Indemnitee is, was or
at any time becomes a director, officer, employee or other agent of
the Company, or is or was serving, or at any time serves at the
request of, the Company or any Affiliate as a director, officer,
employee or other agent (including a trustee, partner or manager)
of another corporation, limited liability company, partnership,
joint venture, trust, employee benefit plan or other enterprise,
including an Affiliate (collectively, a “
Proceeding
”),
in each case whether or not Indemnitee was serving in that capacity
at the time any liability or Expense is incurred. The definition of
“Proceeding” must be considered met if Indemnitee in
good faith believes the situation might lead to or culminate in the
institution of a Proceeding. “
Expenses
” mean
all expenses, including attorneys’ fees, witness fees, fees
of experts, forensic consultants and other professionals,
retainers, court costs, travel expenses, photocopying, printing and
binding costs, telephone charges, and any other cost, disbursement
or expense customarily incurred in connection with defending,
prosecuting, preparing to prosecute or defend, investigating, being
prepared to be a witness in, responding to a subpoena or other
discovery request, or otherwise participating in, a Proceeding,
damages, penalties, interest charges thereon, judgments, fines, and
amounts paid in settlement, any federal, state, local or foreign
taxes imposed on Indemnitee as a result of the actual or deemed
receipt of any payments under this Agreement, ERISA excise taxes
and penalties imposed on Indemnitee, costs associated with any
appeals, including without limitation the premium, security for,
and other costs relating to any costs bond, supersedeas bond, or
other appeal bond or its equivalent, and any other amounts for time
spent by Indemnitee for which Indemnitee is not compensated by the
Company or any Affiliate or third party for any period during which
Indemnitee is not an agent, in the employment of, or providing
services for compensation to, the Company or any Affiliate. Without
limiting the generality of the foregoing, references to
“serving at the request of the Company as a director,
officer, employee or agent” includes:
(i) Indemnitee’s performance of services for, on behalf
of, or for the benefit of the Company or any Affiliate while
Indemnitee is serving as a director, officer, employee or other
agent of the Company or an Affiliate regardless of whether
Indemnitee is at the time a director, officer or employee of the
Company or the Affiliate for, on behalf of, or for the benefit of
which Indemnitee performed services; or (ii) any service by
Indemnitee that imposes duties on, involves services by, Indemnitee
with respect to an employment benefit plan, its participants or
beneficiaries, including as a deemed fiduciary
thereto.
4.
Limitations on Additional Indemnity.
No
indemnity pursuant to Sections 2 or 3 hereof must be paid by
the Company:
(a
)
On
account of any claim against Indemnitee solely for an accounting of
profits made from the purchase or sale by Indemnitee of securities
of the Company pursuant to the provisions of Section 16(b)
(“
Section 16(b)
”)
of the Securities Exchange Act of 1934, as amended
(“
Exchange
Act
”), or similar provisions of any federal, state or
local statutory law;
provided,
that
with respect to a claim against
Indemnitee
solely for
an accounting of profits made from the purchase or sale by
Indemnitee of securities of the Company pursuant to the provisions
of Section 16(b) or similar provisions of any federal, state
or local law,
Indemnitee is
entitled to the advancement of legal expenses
unless the Company reasonably determines that Indemnitee clearly
violated Section 16(b) and must disgorge profits to the
Company pursuant to the terms thereof. Notwithstanding anything to
the contrary stated or implied in this Section 4(a),
indemnification pursuant to this Agreement relating to any
Proceeding against Indemnitee for an accounting of profits made
from the purchase or sale by Indemnitee of securities of the
Company pursuant to the provisions of Section 16(b) or similar
provisions of any federal, state or local laws is not prohibited if
Indemnitee ultimately
establishes in any Proceeding that no recovery of
such profits from Indemnitee is permitted under Section 16(b)
or similar provisions of any federal, state or local
laws;
(b
)
On
account of any reimbursement of the Company by the Indemnitee of
any bonus or other incentive-based or equity-based compensation or
of any profits realized by the Indemnitee from the sale of
securities of the Company, as required in each case under the
Exchange Act (including any such reimbursements that arise from an
accounting restatement of the Company pursuant to Section 304 of
the Sarbanes-Oxley Act of 2002 (“
Sarbanes-Oxley
Act
”), or the payment to the Company of profits
arising from the purchase and sale by Indemnitee of securities in
violation of Section 306 of the Sarbanes-Oxley Act),
provided
, Indemnitee is entitled to
advancement of Expenses related to, arising out of, or resulting
from a Proceeding to recover such compensation or profits prior to
the final adjudication of that Proceeding;
(c
)
On account of
Indemnitee’s conduct that is established by a final judgment,
not subject to appeal, as knowingly fraudulent or deliberately
dishonest or that constituted willful misconduct;
(d
)
On account of
Indemnitee’s conduct that is established by a final judgment,
not subject to appeal, as constituting a breach of
Indemnitee’s duty of loyalty to the Company or resulting in
any personal profit or advantage to which Indemnitee was not
legally entitled;
(e
)
For which payment
is actually made to Indemnitee under a valid and collectible
insurance policy or under a valid and enforceable indemnity clause,
bylaw or agreement, except in respect of any excess beyond payment
under such insurance, clause, bylaw or agreement and such payment
fully compensates Indemnitee against all expenses. Notwithstanding
anything to the contrary stated or implied in this
Section 4(e), (i) Indemnitee has no obligation to reduce,
offset, allocate, pursue or apportion any indemnification, hold
harmless, exoneration, advancement, contribution or insurance
coverage among multiple persons possessing those obligations to
Indemnitee prior to the Company’s satisfaction and
performance of its obligations under this Agreement; and (ii) the
Company must perform fully its obligations under this Agreement
regardless of whether Indemnitee holds, may pursue or has pursued
any indemnification, advancement, hold harmless, exoneration,
contribution or insurance coverage rights against any person or
entity other than the Company;
(f
)
If indemnification
is not lawful, as established by the Company by a final judgment on
such issue not subject to appeal; or
(g
)
In connection with
any Proceeding (or part thereof) initiated by Indemnitee, or any
Proceeding by Indemnitee against the Company or an Affiliate or the
directors, officers, employees or other agents of the Company or an
Affiliate, unless (i) such indemnification is expressly
required to be made by law, (ii) the Proceeding was authorized
by the Company’s Board of Directors (“
Board
”),
(iii) such indemnification is provided by the Company, in its
sole discretion, pursuant to the powers vested in the Company under
the DGCL or any other applicable law, (iv) the Proceeding is
initiated pursuant to Section 10 hereof, or (v) the
Proceeding initiated by Indemnitee is a
cross-claim or counter-claim
.
5.
Continuation of Indemnity.
All
agreements and obligations of the Company contained herein continue
during the period Indemnitee is a director, officer, employee or
other agent of the Company (or is or was serving at the request of
the Company as a director, officer, employee or other agent
(including trustee, partner or manager) of another corporation,
limited liability company, partnership, joint venture, trust,
employee benefit plan or other enterprise) and will continue
thereafter so long as Indemnitee is subject to any Proceeding by
reason of the fact that Indemnitee was serving in the capacity
referred to herein.
6.
Partial Indemnification.
The Company
will indemnify Indemnitee for a portion of the Expenses that
Indemnitee becomes legally obligated to pay in connection with any
Proceeding even if not entitled hereunder to indemnification for
the total amount thereof, and the Company must indemnify Indemnitee
for the portion thereof to which Indemnitee is entitled and the
acceptance of such partial payment will not be an admission by
Indemnitee that he or she is not entitled to all of his or her
Expenses or a bar against Indemnitee seeking recovery of the full
amount of Expenses.
7.
Notice
and Other Indemnification Procedures.
(a)
Notification of Proceeding.
Indemnitee
agrees to notify the Company in writing promptly upon being served
with any summons, citation, subpoena, complaint, indictment,
information or other document relating to any Proceeding. The
failure of Indemnitee to so notify the Company does not relieve the
Company of any obligation that it may have to Indemnitee under this
Agreement or otherwise and any delay in giving notice will not
constitute a waiver by Indemnitee of any rights under this
Agreement.
(b)
Request for Indemnification and Indemnification
Payments.
Upon written request by Indemnitee for
indemnification, a determination, if required by applicable law,
with respect to Indemnitee’s entitlement thereto must be made
in the specific case: (i) if a Change in Control (as defined
in Section 8(b)) shall have occurred, by Independent Counsel (as
defined below) in a written opinion to the Board, a copy of which
must be delivered to Indemnitee; or (ii) if a Change in Control
shall not have occurred, (A) by a majority vote of the
Disinterested Directors (as defined below), even though less than a
quorum of the Board, (B) by a committee of Disinterested Directors
designated by a majority vote of the Disinterested Directors, even
though less than a quorum of the Board, (C) if there are no such
Disinterested Directors or, if such Disinterested Directors so
direct, by Independent Counsel in a written opinion to the Board, a
copy of which must be delivered to Indemnitee or (D) if so directed
by the Board, by the stockholders of the Company; and, if it is so
determined that Indemnitee is entitled to indemnification, payment
to Indemnitee must be made promptly, but in no event more than ten
(10) days after such determination. Indemnitee agrees to
cooperate with the person, persons or entity making such
determination with respect to Indemnitee’s entitlement to
indemnification, including providing to such person, persons or
entity upon reasonable advance request any documentation or
information that is not privileged or otherwise protected from
disclosure and which is reasonably available to Indemnitee and
reasonably necessary to such determination. Any costs or Expenses
(including attorneys’ fees and disbursements) incurred by or
on behalf of Indemnitee in so cooperating with the person, persons
or entity making such determination must be borne by the Company
(irrespective of the determination as to Indemnitee’s
entitlement to indemnification) and the Company hereby indemnifies
and agrees to hold Indemnitee harmless therefrom. The Company must
advise Indemnitee promptly in writing with respect to any
determination that Indemnitee is or is not entitled to
indemnification, including a description of any reason or basis for
which indemnification has been denied. Claims for advancement of
Expenses must be made under the provisions of Section 9 of
this Agreement.
In the
event the determination of entitlement to indemnification is to be
made by Independent Counsel, the Independent Counsel must be
selected as provided in this Section 7(b). If a Change in
Control shall not have occurred, the Board must select the
Independent Counsel, and the Company must give prompt, written
notice to Indemnitee advising him of the identity of the
Independent Counsel so selected. If a Change in Control shall have
occurred, Indemnitee must select the Independent Counsel (unless
Indemnitee requests that the selection be made by the Board, in
which event the preceding sentence applies), and Indemnitee must
give written notice to the Company advising it of the identity of
the Independent Counsel so selected. In either event, Indemnitee or
the Company, as the case may be, may, within ten (10) days after
such written notice of selection has been given, deliver to the
Company or to Indemnitee, as the case may be, a written objection
to the selection;
provided,
however
, that the objection may be asserted only on the
basis that the Independent Counsel so selected does not meet the
requirements of “Independent Counsel” as defined below,
and the objection must set forth with particularity the factual
basis of such assertion. Absent a proper and timely objection, the
person so selected will act as Independent Counsel. If a written
objection is so made and substantiated, the Independent Counsel so
selected may not serve as Independent Counsel unless and until the
objection is withdrawn or the Delaware Court of Chancery has
determined that such objection is without merit. If, within twenty
(20) days after the later of submission by Indemnitee of a written
request for indemnification and the final disposition of the
Proceeding, no Independent Counsel has been selected and not
objected to, either the Company or Indemnitee may petition the
Delaware Court of Chancery for resolution of any objection which
shall have been made by the Company or Indemnitee to the
other’s selection of Independent Counsel and/or for the
appointment as Independent Counsel of a person selected by that
court or by such other person as that court may designate, and the
person with respect to whom all objections are so resolved or the
person so appointed will act as Independent Counsel. The Company
agrees to pay the reasonable fees and expenses, including any
retainer or advance, of the Independent Counsel referred to above
and to indemnify such counsel fully against any and all Expenses,
claims, liabilities and damages arising out of or relating to this
Agreement or its engagement pursuant hereto. “
Disinterested Director
” means a
director of the Company who is not, and was not, a party to the
Proceeding in respect of which indemnification is sought by
Indemnitee. “
Independent
Counsel
” means a law firm, or a member of a law firm,
that is experienced in matters of corporation law and neither
presently is, nor in the past five years has been, retained to
represent: (i) the Company, any Affiliate or Indemnitee in any
matter material to any such person (other than with respect to
matters concerning the Indemnitee under this Agreement, or of other
indemnitees under similar indemnification agreements), or (ii) any
other party to the Proceeding giving rise to a claim for
indemnification hereunder. Notwithstanding the foregoing, the term
“Independent Counsel” does not include any person who,
under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing
either the Company or Indemnitee in an action to determine
Indemnitee’s rights under this Agreement.
(c)
Notice to Insurers.
If, at the time of
the receipt by the Company of a notice pursuant to
Section 7(a) hereof, the Company has liability insurance in
effect which may cover that Proceeding, the Company must give
prompt notice of the commencement of that Proceeding to the
insurers in accordance with the procedures set forth in the
respective policies. The Company must thereafter take all necessary
or desirable action to cause those insurers to pay, on behalf of
Indemnitee, all Expenses payable to Indemnitee in respect of such
Proceeding in accordance with the terms of their policies, but any
such action by the Company will not relieve it of its obligations
hereunder.
(d)
Notwithstanding
anything in this Agreement to the contrary, no determination as to
entitlement to indemnification under this Agreement may be required
to be made prior to the final disposition of the Proceeding as to
Indemnitee.
8.
Assumption
of Defense.
(a)
In the event the
Company is requested by Indemnitee to pay the Expenses of any
Proceeding, the Company, if appropriate, will be entitled to assume
the defense of that Proceeding, or to participate to the extent
permissible in that Proceeding, with counsel approved by
Indemnitee, which approval may not be unreasonably withheld or
delayed. Upon assumption of the defense by the Company and the
retention of such counsel by the Company, the Company will not be
liable to Indemnitee under this Agreement for any fees of counsel
subsequently incurred by Indemnitee with respect to the same
Proceeding;
provided,
that
Indemnitee will have the right to employ separate counsel in that
Proceeding at Indemnitee’s sole cost and expense. After the
Company has assumed the defense of a Proceeding, Indemnitee will be
entitled to, at Indemnitee’s own expense, engage counsel for
the purpose of monitoring the defense being provided by counsel
retained by the Company, and the Company must direct that counsel
to cooperate with and provide requested information to
Indemnitee’s monitoring counsel. Notwithstanding the
foregoing, if (i) Indemnitee’s counsel delivers a
written notice to the Company stating that such counsel has
reasonably concluded that there may be a conflict of interest
between the Company and Indemnitee in the conduct of any defense in
the Proceeding, (ii) the Company has not, in fact, employed
counsel or otherwise actively pursued the defense of the Proceeding
within a reasonable time, or thereafter reasonably maintained the
defense of the Proceeding, (iii) there has been a Change in
Control (as defined below), or (iv) Indemnitee reasonably
concludes that counsel engaged by the Company on behalf of
Indemnitee may not adequately represent Indemnitee, then in any
such event the fees and expenses of Indemnitee’s counsel to
defend the Proceeding must be at the expense of the Company and
subject to the indemnification and advancement of expenses
provisions of this Agreement.
Provided, however,
that in the event
there are other defendants in a Proceeding who are entitled to
counsel other than counsel engaged by the Company, the Company will
only be obligated to pay the fees and expenses of one (1) counsel
for all those defendants, including Indemnitee, unless
Indemnitee’s counsel delivers a written notice to the Company
stating that such counsel has reasonably concluded that there may
be a conflict of interest that would prevent one (1) counsel from
representing all such defendants, including
Indemnitee.
(b)
For purposes of
this Agreement, a “
Change in
Control
” is deemed to have occurred if (i) any
“person” (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act), other than a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or a corporation owned directly or indirectly by the
stockholders of the Company in substantially the same proportions
as their ownership of stock of the Company, (A) who is or
becomes the beneficial owner, directly or indirectly, of securities
of the Company representing ten percent (10%) or more of the
combined voting power of the Company’s then outstanding
Voting Securities (as defined below), increases his, her or its
beneficial ownership of such securities by five percent (5%) or
more over the percentage so owned by such person, or
(B) becomes the “beneficial owner” (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing more than twenty percent
(20%) of the total voting power represented by the Company’s
then outstanding Voting Securities, (ii) during any period of
two (2) consecutive years, individuals who at the beginning of that
period constitute the Board and any new director whose election by
the Board or nomination for election by the Company’s
stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to
constitute a majority thereof, or (iii) the Company merges or
consolidates with any other corporation other than a merger or
consolidation that would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into Voting Securities of the surviving entity, or its ultimate
parent) at least sixty percent (60%) of the total voting power
represented by the Voting Securities, as defined below, of the
Company or such surviving entity, or its ultimate parent,
outstanding immediately after such merger or consolidation, or the
stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the
Company of (in one (1) transaction or a series of transactions) all
or substantially all of the Company’s assets, (iv) the
Company commences any case, action or proceeding before any court
or governmental body (or a third party commences any such
proceeding that remains undismissed by or consented to within sixty
(60) days) relating to bankruptcy, reorganization, insolvency,
liquidation, receivership, dissolution, winding-up or relief of
debtors, or (v) the Company commences any general assignment
for the benefit of creditors, composition, marshaling of assets for
creditors, or other similar arrangement in respect of its creditors
generally or any substantial portion of its creditors.
(c)
For
purposes of this Agreement, “
Voting
Securities
” means any securities of the Company that
vote generally in the election of directors.
(d)
Notwithstanding
any other provision of this Agreement, to the extent that
Indemnitee has been successful on the merits or otherwise,
including, without limitation, the dismissal of an action without
prejudice, in defense of any Proceeding or in the defense of any
claim, issue or matter therein, the Company must indemnify
Indemnitee against all Expenses incurred by Indemnitee in
connection therewith.
9.
A
dvances
of Expenses.
(a)
The Company will
advance to Indemnitee, prior to the final adjudication of any
Proceeding of this Agreement, any and all Expenses relating to,
arising out of or resulting from any Proceeding (other than a
Proceeding for which indemnification is excluded pursuant to
Section 4(g)) paid or incurred by Indemnitee or which Indemnitee
determines are reasonably likely to be paid or incurred by
Indemnitee. The right to advances under this Section 9 in all
events continues until final disposition of any Proceeding,
including all possible appeals therefrom. Advances must be made
without regard to Indemnitee’s ability to repay the Expenses
and without regard to Indemnitee’s ultimate entitlement to
indemnification under the other provisions of this Agreement.
Advances must be unsecured and interest free. Advances include any
and all reasonable Expenses incurred in pursuing an action to
enforce this right of advancement, including Expenses incurred in
preparing and forwarding statements to the Company or its insurance
carrier(s) to support the advances claimed.
(b)
Indemnitee’s
right to such advancement is not subject to the satisfaction of any
standard of conduct. Without limiting the generality or effect of
the foregoing, within fifteen (15) business days after any request
by Indemnitee, the Company must, in accordance with such request
(but without duplication), (i) pay such Expenses on behalf of
Indemnitee, (ii) advance to Indemnitee funds in an amount
sufficient to pay such Expenses, or (iii) reimburse Indemnitee
for such Expenses.
(c)
Indemnitee
undertakes to the fullest extent permitted by law to repay the
amounts advanced pursuant to this Agreement (without interest) if
and to the extent that it is ultimately determined by a court of
competent jurisdiction in a final judgment, not subject to appeal,
that Indemnitee is not entitled to be indemnified therefor by the
Company. No other form of undertaking may be required other than
the execution of this Agreement.
(d)
Indemnitee must use
commercially reasonable efforts to provide documentation to the
Company relating to Expenses as incurred in order to permit the
Company to properly deduct the advancement of Expenses pursuant to
this Section 9;
provided,
however,
that Indemnitee will only be required to provide
such documentation to the extent that such provision will not
constitute a waiver of the attorney-client privilege or the work
product doctrine.
10.
Enforcement; Presumption of Entitlement.
(a)
Any right to
indemnification or advances granted by this Agreement to Indemnitee
is enforceable by or on behalf of Indemnitee in any court of
competent jurisdiction if (i) the claim for indemnification is
denied, in whole or in part; (ii) no disposition of such claim
is made within seventy (70) days of request therefor; (iii) payment
of indemnification is not made to Indemnitee within ten (10) days
of a determination that Indemnitee is entitled to indemnification;
(iv) advancement of Expenses is not timely made; or (v) the Company
or any other person takes or threatens to take action to declare
this Agreement unenforceable or institutes litigation or other
action or proceeding to deny or recover from Indemnitee the
benefits provided by, or intended to be provided by, this
Agreement. Indemnitee, in such enforcement action, if successful in
whole or in part, must be entitled to be paid also the Expenses of
prosecuting Indemnitee’s claim. The Company must pay interest
at the legal rate under Delaware law on all amounts that the
Company is obligated to advance or indemnify pursuant to this
Agreement, commencing on the date on which the Company must advance
Expenses or the earlier of the date of determination of
indemnification or seventy (70) days of a request therefor and
ending on the date on which payment is made.
(b)
It is a defense to
any action for which a claim for indemnification is made under
Sections 2 and 3 hereof (other than an action brought to
enforce a claim for Expenses pursuant to Section 8 hereof)
that Indemnitee is not entitled to indemnification because of the
limitations set forth in Section 4 hereof.
(c)
In any such
Proceeding instituted by Indemnitee pursuant to this
Section 10, the Company must be precluded, to the fullest
extent permitted by law, from asserting that the procedures and
presumptions of this Agreement are not valid, binding and
enforceable and must stipulate in any such court that the Company
is bound by all the provisions of this Agreement and is precluded
from making any assertion to the contrary.
(d)
In making any
determination concerning Indemnitee’s right to
indemnification, it must be presumed that Indemnitee has satisfied
the applicable standard of conduct, and to the fullest extent not
prohibited by law, the Company has the burden of proof to overcome
that presumption by its adducing clear and convincing evidence to
the contrary. Neither the failure of the Company (including the
Disinterested Directors, the Company’s stockholders, or
Independent Counsel) to have made a determination prior to the
commencement of such enforcement action that indemnification of
Indemnitee is proper in the circumstances, nor an actual
determination by the Company (including the Disinterested
Directors, the Company’s stockholders, or Independent
Counsel) that such indemnification is improper is a defense to the
action or creates a presumption that Indemnitee is not entitled to
indemnification under this Agreement or otherwise. Any judicial
proceeding must be conducted in all respects as a trial
de novo
on the merits and
Indemnitee must not be prejudiced by any actual determination by
the Company any assertion to the contrary.
(e)
For purposes of any
determination of good faith, Indemnitee must be deemed to have
acted in good faith if Indemnitee’s action is based on the
records or books of account of the Company or any Affiliate,
including financial statements, or on information supplied to
Indemnitee by the directors or officers of the Company or any
Affiliate in the course of their duties, or on the advice of legal
counsel for the Company or an Affiliate or on information or
records given or reports made to the Company or an Affiliate by an
independent certified public accountant or by an appraiser or other
expert selected with the reasonable care by the Enterprise. The
provisions of this Section 10(e) must not be deemed to be exclusive
or to limit in any way the other circumstances in which the
Indemnitee may be deemed to have met the applicable standard of
conduct set forth in this Agreement. Whether or not the foregoing
provisions of this Section 10(e) are satisfied, it must in any
event be presumed that Indemnitee has at all times acted in good
faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company.
(f)
Subject to Section
7(d), if a determination of whether Indemnitee is entitled to
indemnification is not made within forty (40) days after receipt by
the Company of the request therefor, the requisite determination of
entitlement to indemnification must, to the fullest extent not
prohibited by law, be deemed to have been made and Indemnitee must
be entitled to such indemnification, absent (i) a misstatement by
Indemnitee of a material fact, or an omission of a material fact
necessary to make Indemnitee’s statement not materially
misleading, in connection with the request for indemnification, or
(ii) a prohibition of such indemnification under applicable law;
provided, however
, that
such 40-day period may be extended for a reasonable time, not to
exceed an additional thirty (30) days, if the person, persons or
entity making the determination with respect to entitlement to
indemnification in good faith requires such additional time for the
obtaining or evaluating of documentation and/or information
relating thereto; and
provided
,
further,
that the foregoing provisions
of this Section 10(f) do not apply (i) if the determination of
entitlement to indemnification is to be made by the and if (A)
within ten (10) days after receipt by the Company of the request
for such determination the Board has resolved to submit such
determination to the stockholders for their consideration at an
annual meeting thereof to be held within sixty (60) days after such
receipt and such determination is made thereat, or (B) a special
meeting of stockholders is called within ten (10) days after such
receipt for the purpose of making such determination, such meeting
is held for such purpose within sixty (60) days after having been
so called and such determination is made thereat, or (ii) if the
determination of entitlement to indemnification is to be made by
Independent Counsel pursuant to Section 7(a) of this
Agreement.
(g)
The remedies
provided for in this Section 10 are in addition to any other
remedies available to Indemnitee at law or in equity or pursuant to
the Certificate, the Bylaws or other written agreement between the
Company and Indemnitee.
11.
Unauthorized Settlements.
Any provision
herein to the contrary notwithstanding, the Company is not
obligated pursuant to the terms of this Agreement to indemnify
Indemnitee under this Agreement for any amounts paid in settlement
of a Proceeding effected by Indemnitee without the Company’s
written consent. Further, the Company must not, without the prior
written consent of Indemnitee, effect any settlement of:
(a) any Proceeding if Indemnitee is or could have been a
party, or (b) any Proceeding in which the Company is, or could
be, jointly liable with Indemnitee (or would be if joined in such
Proceeding) unless such settlement solely involves the payment of
money and includes a complete and unconditional release of
Indemnitee from all liability on any claims that are the subject
matter of such Proceeding. Neither the Company nor Indemnitee may
unreasonably withhold, delay or condition consent to any proposed
settlement;
provided,
however,
that: (i) the Company may in any event decline
to consent to (or to otherwise admit or agree to any liability for
indemnification hereunder in respect of) any proposed settlement if
the Company is also a party in such Proceeding and determines in
good faith that such settlement is not in the best interests of the
Company and its stockholders, and (ii) Indemnitee may withhold
consent to any settlement that does not provide a complete and
unconditional release of Indemnitee requires Indemnitee to take any
action other than executing a release of parties providing a
release of Indemnitee, or imposes any penalty or other limitation
or disqualification on Indemnitee. The Company must notify
Indemnitee promptly of the receipt of any settlement offer or if it
intends to submit a settlement offer and must provide Indemnitee a
reasonable time to consider the offer.
12.
Mutual Acknowledgment.
Both the Company
and Indemnitee acknowledge that in certain instances, Federal or
state law or applicable public policy may prohibit the Company from
indemnifying its directors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee
understands and acknowledges that the Company has undertaken or may
be required in the future to undertake with the Securities and
Exchange Commission to submit the question of indemnification to a
court in certain circumstances for a determination of the
Company’s right under public policy to indemnify
Indemnitee.
13.
Period of Limitations.
No legal action
may be brought and no cause of action may be asserted by or in the
right of the Company against Indemnitee, Indemnitee’s estate,
spouse, heirs, executors or personal or legal representatives after
the expiration of two (2) years from the date of accrual of such
cause of action, and any claim or cause of action of the Company
will be extinguished and deemed released unless asserted by the
timely filing of a legal action within such two (2)-year period;
provided, however,
that if
any shorter period of limitations is otherwise applicable to any
such cause of action, such shorter period must govern.
14.
Subrogation.
In the event of payment
under this Agreement and after Indemnitee has no more Expenses in
respect of a Proceeding, the Company will be subrogated to the
extent of such payment to all of the rights of recovery of
Indemnitee, who must execute all documents required and must do all
acts that may be necessary to secure such rights and to enable the
Company effectively to bring suit to enforce such
rights.
15.
Non-Exclusivity of Rights.
The rights
conferred on Indemnitee by this Agreement are not exclusive of any
other right which Indemnitee may have or hereafter acquire under
any statute, provision of the Certificate or the Bylaws, each as
may be amended from time to time, agreement, vote of stockholders
or directors, or otherwise.
16.
Survival
of Rights; Change in Control.
(a)
The rights
conferred on Indemnitee by this Agreement continue after Indemnitee
has ceased to be a director, officer, employee or other agent of
the Company or to serve at the request of the Company as a
director, officer, trustee, fiduciary, partner, manager, employee
or other agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise and will inure to
the benefit of Indemnitee’s heirs, executors and
administrators.
(b)
The Company must
require and cause any successor thereto (whether direct or
indirect) in connection with a Change in Control, by written
agreement, expressly to assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be
required to perform if no such Change in Control
occurred.
17.
Contribution.
(a)
If the
indemnification provided for by this Agreement is unavailable in
whole or in part and may not be paid to Indemnitee for any reason
other than those set forth in Section 4 hereof, then in
respect to any Proceeding in which the Company is jointly liable
with Indemnitee (or would be if joined in such Proceeding), to the
fullest extent permissible under applicable law, the Company, in
lieu of indemnifying and holding harmless Indemnitee, must pay, in
the first instance, the entire amount of Expenses incurred by
Indemnitee in connection with any Proceeding without requiring
Indemnitee to contribute to such payment, and the Company hereby
waives and relinquishes any right of contribution it may have at
any time against Indemnitee.
(b)
The Company hereby
agrees to indemnify and hold harmless fully to the extent
permissible under applicable law Indemnitee from any claims for
contribution that may be brought by officers, directors or
employees of the Company (other than Indemnitee) who may be jointly
liable with Indemnitee.
18.
Liability
Insurance.
(a)
For the duration of
Indemnitee’s service as a director and/or officer of the
Company, and thereafter for so long as Indemnitee may be subject to
any pending or possible indemnifiable claim, the Company must use
best efforts (taking into account the scope and amount of coverage
available relative to the cost thereof) to cause to be maintained
in effect policies of directors’ and officers’
liability insurance, errors and omissions insurance and employment
practices insurance providing coverages for directors and/or
officers of the Company that are at least substantially comparable
in scope and amount to that provided by the Company’s current
policies covering directors and officers. The minimum AM Best
rating for the insurance carriers of such insurance must be not
less than A-VI.
(b)
In the event of a
Change in Control, the Company must (i) maintain in force any
and all insurance policies then maintained by the Company providing
liability insurance in respect of Indemnitee, or (ii) require
and cause any successor thereto (whether direct or indirect) to
obtain and maintain a directors’ and officers’
liability insurance policy (and any other liability insurance
policies, including errors and omissions and employment practices,
to the extent such liability policies were claims-made policies
immediately prior to the Change in Control) that provides coverage
for Indemnitee that is at least substantially comparable in scope
and amount to that provided to Indemnitee by the Company as of
immediately prior to the Change in Control, in each case for the
six-year period immediately following the Change in Control. This
“tail coverage” must be placed by the Company’s
insurance broker and be placed with a carrier or carriers having an
AM Best rating that is not less than A-VI.
(c)
In the event that
any action is instituted by Indemnitee under this Agreement or
under any liability insurance policies maintained by the Company to
enforce or interpret any of the terms hereof or thereof, Indemnitee
is entitled to be paid all Expenses incurred by Indemnitee with
respect to that action, regardless of whether Indemnitee is
ultimately successful in that action, and is entitled to the
advancement of Expenses with respect to that action, unless as a
part of that action a court of competent jurisdiction over that
action determines that each of the material assertions made by
Indemnitee as a basis for such action was not made in good faith or
was frivolous.
(d)
The Company must
make available to Indemnitee a copy of all applications, binders,
policies, declarations, endorsements and other related materials in
respect of policies required to be obtained or maintained pursuant
to this Agreement. The Company must not discontinue or
significantly reduce the scope or amount of coverage from one (1)
policy period to the next without the prior approval thereof by a
majority vote of the incumbent directors of the Company, even if
less than a quorum. The Company must provide Indemnitee with at
least thirty (30) days’ notice of the non-renewal of,
cancellation of or failure to pay any premium due in respect of
such insurance policies.
19.
Optional Trust.
The Company may, but is
not required to, create a trust fund, grant a security interest or
use other means, including without limitation a letter of credit,
to ensure the payment of such amounts as may be necessary to
satisfy its obligations to indemnify and advance Expenses pursuant
to this Agreement.
20.
No Imputation.
The knowledge and/or
actions, or failure to act, of any director, officer, agent or
employee of the Company or the Company itself must not be imputed
to Indemnitee for purposes of determining any rights under this
Agreement.
21.
Severability.
The provisions of this
Agreement are severable in the event that any of the provisions
hereof (including any provision within a single section, paragraph
or sentence) are held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, and the remaining
provisions, including without limitation in the same section,
paragraph or sentence, must remain enforceable to the fullest
extent permitted by law. Furthermore, to the fullest extent
possible, the provisions of this Agreement (including, without
limitations, each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that
is not itself invalid, void or unenforceable) must be construed so
as to give effect to the intent manifested by the provision held
invalid, illegal or unenforceable.
22.
Coverage.
This Agreement applies with
respect to Indemnitee’s service as Senior Vice President and
Chief Human Resources Officer of the Company prior to the date of
this Agreement.
23.
Governing Law.
This Agreement and the
relationship of the parties hereto with respect to the subject
matter hereof are governed by and construed and enforced in
accordance with the laws of the State of Delaware, as applied to
contracts between Delaware residents, entered into and to be
performed entirely within the State of Delaware, without regard to
the conflict of laws principles thereof.
24.
Amendment and Termination.
No amendment,
modification, termination or cancellation of this Agreement is
effective unless it is in writing signed by both the parties
hereto. No waiver of any of the provisions of this Agreement may be
deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor may such waiver constitute a
continuing waiver.
25.
Identical Counterparts; Facsimile.
This
Agreement may be executed in one (1) or more counterparts,
including counterparts transmitted by facsimile or other electronic
communication, each of which shall for all purposes be deemed to be
an original but all of which together constitute but one (1) and
the same Agreement. Only one (1) such counterpart need be produced
to evidence the existence of this Agreement. Facsimile signatures,
or signatures delivered by other electronic transmission, are as
effective as original signatures.
26.
Headings.
The headings of the sections
of this Agreement are inserted for convenience only and must not be
deemed to constitute part of this Agreement or to affect the
construction hereof.
27.
Construction
of Certain Phrases.
(a)
For purposes of
this Agreement, references to the “Company” includes,
in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed
in a consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its
directors, officers, employees, agents or fiduciaries, so that if
Indemnitee is or was a director, officer, employee, agent or
fiduciary of such constituent corporation, or is or was serving at
the request of such constituent corporation as a director, officer,
employee, agent or fiduciary of another corporation, partnership,
joint venture, employee benefit plan, trust or other enterprise,
Indemnitee will stand in the same position under the provisions of
this Agreement with respect to the resulting or surviving
corporation as Indemnitee would have with respect to such
constituent corporation if its separate existence had
continued.
(b)
For purposes of
this Agreement, references to “other enterprise”
includes employee benefit plans; references to “fines”
includes any excise taxes assessed on Indemnitee with respect to an
employee benefit plan; and references to “serving at the
request of the Company” includes any service as a director,
officer, employee, agent or fiduciary of the Company that imposes
duties on, or involves services by, such director, officer,
employee, agent or fiduciary with respect to an employee benefit
plan, its participants or its beneficiaries; and if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed
to be in the interest of the participants and beneficiaries of an
employee benefit plan, Indemnitee must be deemed to have acted in a
manner “not opposed to the best interests of the
Company” as referred to in this Agreement.
28.
Notices.
All notices and other
communications required or permitted hereunder must be in writing,
shall be effective when given, and must in any event be deemed to
be given (a) five (5) days after deposit with the U.S. Postal
Service or other applicable postal service, if delivered by first
class mail, postage prepaid, (b) upon delivery, if delivered
by hand or by electronic transmission, (c) one (1) business
day after the business day of deposit with overnight courier,
freight prepaid, or (d) one (1) day after the business day of
delivery by facsimile transmission with answer-back received, if
delivered by facsimile transmission, with copy by first class mail,
postage prepaid, and must be addressed if to Indemnitee, at
Indemnitee’s address as set forth beneath Indemnitee’s
signature to this Agreement and if to the Company at the address of
its principal corporate offices (attention: secretary) or at such
other address as such party may designate by ten (10) days’
advance written notice to the other party hereto.
29.
Consent to Jurisdiction.
The Company and
Indemnitee each hereby irrevocably consent to the jurisdiction of
the Courts of Chancery of the State of Delaware for all purposes in
connection with any action or proceeding which arises out of or
relates to this Agreement and agree that any action instituted
under this Agreement must be commenced, prosecuted and continued
only in that Court, which is the exclusive and only proper forum
for adjudicating such a claim
30.
Equitable Relief.
The Company and
Indemnitee agree that a monetary remedy for breach of this
Agreement may be inadequate, impracticable and difficult of proof,
and further agree that such breach may cause Indemnitee irreparable
harm. Accordingly, the Company and Indemnitee agree that Indemnitee
may enforce this Agreement by seeking equitable remedies, including
injunctive relief and/or specific performance, without any showing
of actual damage or irreparable harm and that by seeking equitable
remedies, Indemnitee will not be precluded from seeking or
obtaining any other relief to which Indemnitee may be entitled. The
Company and Indemnitee further agree that Indemnitee is entitled to
such equitable remedies without the necessity of posting bonds or
other undertaking in connection therewith. The Company hereby
waives any requirement of a bond or other undertaking.
31.
Integration and Entire Agreement.
This
Agreement sets forth the entire understanding between the parties
hereto and supersedes and merges all previous written and oral
negotiations, commitments, understandings and agreements relating
to the subject matter hereof between the parties hereto;
provided, however,
that
this Agreement is a supplement to and in furtherance of the
Certificate, the Bylaws, the DGCL and any other applicable law, and
must not be deemed a substitute therefor, and does not diminish or
abrogate any rights of Indemnitee thereunder, and this Agreement
does not release the Company from its obligations to the extent
such obligations have been incurred under the Prior Indemnification
Agreement.
[Signature page follows]
IN WITNESS WHEREOF,
the parties hereto
have executed this Agreement on and as of the day and year first
above written.
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AUTOWEB, INC.
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By:
/s/ Glenn E.
Fuller
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Glenn E.
Fuller
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Executive Vice
President, Chief Legal
|
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and Administrative
Officer and
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Secretary
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/s/ Sara Partin
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Signature
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Print Name: Sara
Partin
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Address: AutoWeb,
Inc.
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18872 MacArthur
Blvd.
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Irvine,
CA 92612
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Exhibit 10.4
AUTOWEB,
INC.
SEVERANCE
BENEFITS AGREEMENT
This
Severance Benefits Agreement (“
Agreement
”) entered into effective
as of October 22, 2018 (“
Effective Date
”) between AutoWeb,
Inc., a Delaware corporation (“
AutoWeb
” or
“Company”
), and Sara Partin
(“
Employee
”).
Background
AutoWeb
has determined that it is in its best interests to provide Employee
with certain severance benefits to encourage Employee’s
continued employment with, and dedication to the business of, the
Company.
In
consideration of the foregoing and other good and valuable
consideration, receipt of which is hereby acknowledged, the Parties
hereby agree as follows.
1.
Definitions
.
For purposes of this Agreement, the terms below that begin with
initial capital letters within this Agreement shall have the
specially defined meanings set forth below (unless the context
clearly indicates a different meaning).
(a)
“
409A Suspension Period
”
shall have the meaning set forth in Section 3.
(b)
“
Arbitration Agreement
”
means that certain Mutual Agreement to Arbitrate dated as October
22, 2018 entered into by and between the Company and
Employee.
(c)
“
Cause
” shall mean the
termination of the Employee’s employment by the Company as a
result of any one or more of the following:
(i)
any
conviction of, or pleading of nolo contendere by, the Employee for
any felony;
(ii
)
any willful misconduct of the Employee which has a materially
injurious effect on the business or reputation of the
Company;
(iii
)
the
gross dishonesty of the Employee in any way that adversely affects
the Company; or
(iv
)
a material failure
to consistently discharge Employee’s employment duties to the
Company which failure continues for thirty (30) days following
written notice from the Company detailing the area or areas of such
failure, other than such failure resulting from Employee’s
Disability.
For
purposes of this definition of Cause, no act or failure to act, on
the part of the Employee, shall be considered “willful”
if it is done, or omitted to be done, by the Employee in good faith
or with reasonable belief that Employee’s action or omission
was in the best interest of the Company. Employee shall have the
opportunity to cure any such acts or omissions (other than clauses
(i) and (iii) above) within thirty (30) days of the
Employee’s receipt of a written notice from the Company
notifying Employee that, in the opinion of the Company,
“Cause” exists to terminate Employee’s
employment.
(d)
“
Change of Control
” shall
mean any of the following events:
(i)
When
any “person” as defined in Section 3(a)(9) of the
Exchange Act and as used in Sections 13(d) and 14(d) thereof
(including a “group” as defined in Section 13(d) of the
Exchange Act, but excluding the Company, any Subsidiary or any
employee benefit plan sponsored or maintained by the Company or any
Subsidiary (including any trustee of such plan acting as trustee)),
directly or indirectly, becomes the “beneficial owner”
(as defined in Rule 13d-3 under the Exchange Act, as amended from
time to time), of securities of the Company representing 50% or
more of the combined voting power of the Company’s then
outstanding securities.
(ii)
When
the individuals who, as of the Effective Date, constitute the Board
(“
Incumbent
Board
”), cease for any
reason to constitute at least a majority of the Board; provided
however, that any individual becoming a director subsequent to such
date, whose election, or nomination for election by the
Company’s stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall, for purposes of this section, be counted as a member of the
Incumbent Board in determining whether the Incumbent Board
constitutes a majority of the Board.
(iii)
Consummation of a reorganization,
merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the acquisition
of assets of another corporation (a “
Business
Combination
”), in each
case, unless, following such Business
Combination:
(1)
all
or substantially all of the individuals and entities who were the
beneficial owners of the then outstanding shares of common stock of
the Company and the beneficial owners of the combined voting power
of the then outstanding voting securities of the Company entitled
to vote generally in the election of directors immediately prior to
such Business Combination beneficially own, directly or indirectly,
more than fifty percent (50%) of the then outstanding shares of
common stock and the combined voting power of the then outstanding
securities entitled to vote generally in the election of directors,
respectively, as the case may be, of the corporation resulting from
such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company
or all or substantially all of the Company’s assets either
directly or indirectly or through one or more subsidiaries);
and
(2)
no
person (excluding any employee benefit plan or related trust of the
Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, fifty
percent (50%) or more of the then outstanding shares of common
stock of the corporation resulting from such Business Combination
or the combined voting power of such corporation except to the
extent that such ownership existed prior to the Business
Combination.
(iv)
Approval by the stockholders of the
Company of a complete liquidation or dissolution of the
Company.
(e)
“
COBRA
” shall mean the
Consolidated Omnibus Budget Reconciliation Act, as amended, and the
rules and regulations promulgated thereunder.
(f)
“
Code
” shall mean the
Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder.
(g)
“
Company
” means AutoWeb,
and upon any assignment to and assumption of this Agreement by any
Successor Company, shall mean such Successor Company.
(h)
“
Disability
” shall mean
the inability of the Employee to perform Employee’s duties to
the Company on account of physical or mental illness or incapacity
for a period of one-hundred twenty (120) consecutive calendar days,
or for a period of one hundred eighty (180) calendar days, whether
or not consecutive, during any three hundred sixty-five (365) day
period.
(i)
“
Employee’s
Position
” means Employee’s position as the SVP,
Chief Human Resources Officer of the Company.
(j)
“
Employee’s Primary Work
Location
” means AutoWeb’s headquarters located
at 18872 MacArthur Blvd, Suite 200, Irvine, CA 92612
(k)
“
Good Reason
” means any
act, decision or omission by the Company that: (A) materially
modifies, reduces, changes, or restricts Employee’s base
salary as in existence as of the Effective Date or as of the date
prior to any such change, whichever is more beneficial for Employee
at the time of the act, decision, or omission by the Company; (B)
materially modifies, reduces, changes, or restricts the
Employee’s Health and Welfare Benefits as a whole as in
existence as of the Effective Date hereof or as of the date prior
to any such change, whichever are more beneficial for Employee at
the time of the act, decision, or omission by the Company; (C)
materially modifies, reduces, changes, or restricts the
Employee’s authority, duties, or responsibilities
commensurate with the Employee’s Position but excluding the
effects of any reductions in force other than the Employee’s
own termination; (D) only if employee has relocated to the
Irvine, California area, either relocates the employee’s
place of employment from Executive’s Primary Work Location to
any other location in excess of a forty (40) mile radius from the
Executive’s Primary Work Location or requires any such
relocation as a condition to continued employment by Company or
Successor Company; (E) requires Executive to relocate from Atlanta,
GA; (F) constitutes a failure or refusal by any Company Successor
to assume this Agreement; or (G) involves or results in any
material failure by the Company to comply with any provision of
this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of written notice
thereof given by the Employee. Notwithstanding the foregoing, no
event shall constitute “Good Reason” unless (i) the
Employee first provides written notice to the Company within ninety
(90) days of the event(s) alleged to constitute Good Reason, with
such notice specifying the grounds that are alleged to constitute
Good Reason, and (ii) the Company fails to cure such a material
breach to the reasonable satisfaction of the Employee within thirty
(30) days after Company’s receipt of such written
notice.
(l)
“
Health and Welfare
Benefits
” means all Company medical, dental, vision,
life and disability plans in which Employee
participates.
(m)
“
Separation from Service
”
or “
Separates from
Service
” shall mean Employee’s termination of
employment, as determined in accordance with Treas. Reg. §
1.409A-1(h). Employee shall be considered to have experienced a
termination of employment when the facts and circumstances indicate
that Employee and the Company reasonably anticipate that either (i)
no further services will be performed for the Company after a
certain date, or (ii) that the level of bona fide services Employee
will perform for the Company after such date (whether as an
employee or as an independent contractor) will permanently decrease
to no more than twenty percent (20%) of the average level of bona
fide services performed by Employee (whether as an employee or
independent contractor) over the immediately preceding thirty-six
(36) month period (or the full period of services to the Company if
Employee has been providing services to the Company for less than
thirty six (36) months). If Employee is on military leave, sick
leave, or other bona fide leave of absence, the employment
relationship between Employee and the Company shall be treated as
continuing intact, provided that the period of such leave does not
exceed six months, or if longer, so long as Employee retains a
right to reemployment with the Company under an applicable statute
or by contract. If the period of a military leave, sick leave, or
other bona fide leave of absence exceeds six months and Employee
does not retain a right to reemployment under an applicable statute
or by contract, the employment relationship shall be considered to
be terminated for purposes of this Agreement as of the first day
immediately following the end of such six-month period. In applying
the provisions of this section, a leave of absence shall be
considered a bona fide leave of absence only if there is a
reasonable expectation that Employee will return to perform
services for the Company. For purposes of determining whether
Employee has incurred a Separation from Service, the Company shall
include the Company and any entity that would be considered a
single employer with the Company under Code Section 414(b) or
414(c).
(n)
“
Severance Period
” shall
equal Six (6) months.
(o)
“
Successor Company
” means
any successor to AutoWeb or its assets by reason of any Change of
Control.
(p)
“
Termination Without
Cause
” means termination of Employee’s
employment with the Company (i) by the Company (a) for any reason
other than (1) death, (2) Disability or (3) those reasons expressly
set forth in the definition of “Cause,” (b) for no
reason at all, or (c) in connection with or as a result of a Change
of Control; provided, however, that a termination of
Employee’s employment with the Company in connection with a
Change of Control shall not constitute a Termination Without Cause
if Employee is offered employment with the Successor Company under
terms and conditions, including position, salary and other
compensation, and benefits, that would not provide Employee the
right to terminate Employee’s employment for Good
Reason.
2.
Severance Benefits
and Conditions
.
(a)
In the event of (i)
Termination Without Cause by the Company, or (ii) the termination
of Employee’s employment with the Company by Employee for
Good Reason within 30 days following the earlier of (1) the
Company’s failure to cure within the 30-day period set forth
in the definition of Good Reason, and (2) the Company’s
notice to Employee that it will not cure the event giving rise to
such termination for Good Reason, then (A) Employee shall receive
upon such termination a lump sum amount equal to the number of
months constituting the Severance Period at the time of termination
times the Employee’s monthly base salary (determined as the
Employee’s highest monthly base salary paid to Employee while
employed by the Company; base salary does not include any bonus,
commissions or other incentive payments or compensation); (B)
subject to Section 2(b) below, Employee shall be entitled to a
continuation of all Health and Welfare Benefits for Employee and,
if applicable, Employee’s eligible dependents during the
Severance Period at the time they would have been provided or paid
had the Employee remained an employee of Company during the
Severance Period and at the levels provided prior to the event
giving rise to a termination; and (C) the Company shall make
available to Employee career transition services at a level and
with a provider selected by the Company in accordance with Section
2(g) below.
(b)
(i) With
respect to Health and Welfare Benefits that are eligible for
continuation coverage under COBRA, in the event the Company is
unable to continue Employee’s and Employee’s eligible
dependents’ (assuming such dependents were covered by AutoWeb
at the time of termination) participation under the Company’s
then existing insurance policies for such Health and Welfare
Benefits, Employee may elect to obtain coverage for such Health and
Welfare Benefits either by (1) electing COBRA continuation benefits
for Employee and Employee’s eligible dependents; (2)
obtaining individual coverage for Employee and Employee’s
eligible dependents (if Employee and Employee’s eligible
dependents qualify for individual coverage); or (3) electing
coverage as eligible dependents under another person’s group
coverage (if Employee and Employee’s eligible dependents
qualify for such dependent coverage), or any combination of the
foregoing alternatives. Employee may also initially elect COBRA
continuation benefits and later change to individual coverage or
dependent coverage for Employee or any eligible dependent of
Employee, but Employee understands that if continuation of Health
and Welfare Benefits under COBRA is not initially selected by
Employee or is later terminated by Employee, Employee will not be
able to return to continuation coverage under COBRA. The Company
shall pay directly or reimburse to Employee the monthly premiums
for the benefits or coverage selected by Employee, with such
payment or reimbursement not to exceed the monthly premiums the
Company would have paid assuming Employee elected continuation of
benefits under COBRA. The Company’s obligation to pay or
reimburse for the Health and Welfare Benefits covered by this
Section 2(b)(i) shall terminate upon the earlier of (i) the end of
the Severance Period; and (ii) Employee’s employment by an
employer that provides Employee and Employee’s eligible
dependents with group coverage substantially similar to the Health
and Welfare Benefits provided to Employee and Employee’s
eligible dependents at the time of the termination of
Employee’s employment with the Company, provided that
Employee and Employee’s eligible dependents are eligible for
participation in such group coverage.
(ii) With
respect to Health and Welfare Benefits that are not eligible for
continuation coverage under COBRA, in the event the Company is
unable to continue Employee’s participation under the
Company’s then existing insurance policies for such Health
and Welfare Benefits, Employee may elect to obtain coverage for
such Health and Welfare Benefits either by (1) obtaining individual
coverage for Employee (if Employee qualifies for individual
coverage); or (2) electing coverage as an eligible dependent under
another person’s group coverage (if Employee qualifies for
such dependent coverage), or any combination of the foregoing
alternatives. The Company shall pay directly or reimburse to
Employee the monthly premiums for the benefits or coverage selected
by Employee, with such payment or reimbursement not to exceed the
monthly premiums the Company paid for such Health and Welfare
Benefits at the time of termination of Employee’s employment
with the Company. The Company’s obligation to pay or
reimburse for the Health and Welfare Benefits covered by this
Section 2(b)(ii) shall terminate upon the earlier of (i) the end of
the Severance Period; and (ii) Employee’s employment by an
employer that provides Employee with group coverage substantially
similar to the Health and Welfare Benefits provided to Employee at
the time of the termination of Employee’s employment with the
Company, provided that Employee is eligible for participation in
such group coverage. Employee acknowledges and agrees that the
Company shall not be obligated to provide any Health and Welfare
Benefits covered by this Section 2(b)(ii) for Employee if Employee
does not qualify for coverage under the Company’s existing
insurance policies for such Health and Welfare Benefits, for
individual coverage, or for dependent coverage.
(c) The
payments and benefits set forth in Sections 2(a) and 2(b) are
conditioned upon and shall be provided to Employee only if (i)
Employee has executed and delivered to the Company a Separation and
Release Agreement in favor of the Company and Releasees, which
agreement shall be substantially in the form attached hereto as
Exhibit A (“
Release
”) no later than the
expiration of the applicable period of time allowed for Employee to
consider the Release as set forth in Section 17 of the Release
(“
Release Consideration
Period
”); (ii) Employee has not revoked the Release
prior to the expiration of the applicable revocation period set
forth in Section 17 of the Release (“
Release Revocation Period
”); and
(iii) the Release has become effective and non-revocable no later
than the cumulative period of time represented by the sum of the
maximum Release Consideration Period and the maximum Release
Revocation Period. No payments or benefits set forth in Sections
2(a) or 2(b) shall be due or payable to, or provided to, Employee
if the Release has not become effective and non-revocable in
accordance with the requirements of this Section 2(c).
(d) Upon
satisfaction of the conditions set forth in Section 2(c), but
subject to the last sentence of this Section 2(d), all payments
under Section 2(a)(A) shall be made to Employee within five (5)
business days after the Release becomes effective and non-revocable
in accordance with its terms. In any case, the payment under
Section 2(a)(A) shall be made no later than two and one-half months
after the end of the calendar year in which Employee’s
Separation from Service occurs, provided that the Release shall
have become effective and non-revocable in compliance with Section
2(c) prior to expiration of such two and one-half month period. If
the period of time covered by the entire allowed Release
Consideration Period, the entire Revocation Period and the entire
five business day period described above in this Section 2(d)
(considering such periods consecutively) begins in one calendar
year and ends in the following calendar year, all payments under
Section 2(a)(A) shall be made to Employee on the first business day
of such following calendar year which is five (5) or more business
days after the date on which the Release became effective and
non-revocable in accordance with its terms.
(e) In
addition to the payments and benefits under Sections 2(a) and 2(b),
to the extent required by applicable law or the Company’s
incentive or other compensation plans applicable to Employee, if
any, upon any termination of Employee’s employment Employee
shall receive (i) any amounts earned and due and owing to Employee
as of the termination date with respect to any base salary,
incentive compensation or commissions; and (ii) any other payments
required by applicable law (including payments with respect to
accrued and unused vacation time). Payments required under this
Section 2(e) are not conditioned upon Employee’s signing the
Release and shall be made within the time period(s) required by
applicable law.
(f) All
payments and benefits under this Section 2 are subject to legally
required federal, state and local payroll deductions and
withholdings.
(g) To
receive career transition services, Employee must contact the
service provider no later than 30 days after the Release becomes
effective.
(h) Other
than the payments and benefits provided for in this Section 2,
Employee shall not be entitled to any additional payments or
benefits from the Company resulting from a termination of
Employee’s employment with the Company.
3.
Taxes
. All
payments made pursuant to this Agreement will be subject to
withholding of applicable taxes. Notwithstanding the foregoing, and
except as otherwise specifically provided elsewhere in this
Agreement, Employee is solely responsible and liable for the
satisfaction of any federal, state, province or local taxes that
may arise with respect to this Agreement (including any taxes and
interest arising under Section 409A of the Code). Neither the
Company nor any of its employees, directors, or service providers
shall have any obligation whatsoever to pay such taxes or interest,
to prevent Employee from incurring them, or to mitigate or protect
Employee from any such tax or interest liabilities. Notwithstanding
anything in this Agreement to the contrary, if any amounts that
become due under this Agreement on account of Employee’s
termination of employment constitute “nonqualified deferred
compensation” within the meaning of Section 409A of the Code,
payment of such amounts shall not commence until Employee incurs a
Separation from Service. If, at the time of Employee’s
Separation from Service under this Agreement, Employee is a
“specified employee” (within the meaning of Section
409A of the Code), any amounts that constitute “nonqualified
deferred compensation” within the meaning of Section 409A of
the Code that become payable to Employee on account of
Employee’s Separation from Service (including any amounts
payable pursuant to the preceding sentence) will not be paid until
after the end of the sixth calendar month beginning after
Employee’s Separation from Service (“
409A Suspension Period
”). Within
14 calendar days after the end of the 409A Suspension Period,
Employee shall be paid a lump sum payment, without interest, in
cash equal to any payments delayed because of the preceding
sentence. Thereafter, Employee shall receive any remaining benefits
as if there had not been an earlier delay. With respect to the
reimbursement of expenses to which Employee is entitled under this
Agreement, if any, or the provision of in-kind benefits to Employee
as specified under this Agreement, if any, such reimbursement of
expenses or provision of in-kind benefits shall be subject to the
following conditions: (i) the expenses eligible for
reimbursement or the amount of in-kind benefits provided in one
taxable year shall not affect the expenses eligible for
reimbursement or the amount of in-kind benefits provided in any
other taxable year, except for any medical reimbursement
arrangement providing for the reimbursement of expenses referred to
in Section 105(b) of the Code, solely to the extent that the
arrangement provides for a limit on the amount of expenses that may
be reimbursed under such arrangement over some or all of the period
in which the reimbursement arrangement remains in effect;
(ii) the reimbursement of an eligible expense shall be made no
later than the end of the calendar year after the calendar year in
which such expense was incurred; (iii) the right to
reimbursement or in-kind benefits shall not be subject to
liquidation or exchange for another benefit; and (iv) the right to
reimbursement or provision of in-kind benefits shall not apply to
any expenses incurred or benefits to be provided beyond the last
day of the second taxable year following the year in which
Employee's Separation from Service occurred.
4.
Arbitration
.
Any controversy or claim arising out of, or related to, this
Agreement, or the breach thereof, shall be governed by the terms of
the Arbitration Agreement, which is incorporated herein by
reference.
5.
Entire
Agreement
. All oral or written agreements or representations
express or implied, with respect to the subject matter of this
Agreement are set forth in this Agreement. This Agreement contains
the entire integrated understanding between the parties hereto and
supersedes any prior employment, severance, or change-in-control
protective agreement or other agreement, plan or arrangement
between the Company or any predecessor and Employee. No provision
of this Agreement shall be interpreted to mean that Employee is
subject to receiving fewer benefits than those available to
Employee without reference to this Agreement. The Parties
acknowledge and agree that the Prior Severance Agreement is hereby
terminated and shall have no further force or effect.
6.
Notices
.
Except as otherwise provided in this Agreement, any notice,
approval, consent, waiver or other communication required or
permitted to be given or to be served upon any person in connection
with this Agreement shall be in writing. Such notice shall be
personally served, sent by fax or cable, or sent prepaid by either
registered or certified mail with return receipt requested or
Federal Express and shall be deemed given (i) if personally served
or by Federal Express, when delivered to the person to whom such
notice is addressed, (ii) if given by fax or cable, when sent, or
(iii) if given by mail, two (2) business days following deposit in
the United States mail. Any notice given by fax or cable shall be
confirmed in writing, by overnight mail or Federal Express within
forty-eight (48) hours after being sent. Such notices shall be
addressed to the party to whom such notice is to be given at the
party’s address set forth below or as such party shall
otherwise direct.
If to
the Company:
AutoWeb,
Inc.
18872
MacArthur Boulevard, Suite 200
Irvine,
California, 92612-1400
Facsimile: (949)
862-1323
Attn:
Chief Legal Officer
If to
the Employee:
To
Employee’s latest home address on file with the
Company
7.
No Waiver
.
No waiver, by conduct or otherwise, by any party of any term,
provision, or condition of this Agreement, shall be deemed or
construed as a further or continuing waiver of any such term,
provision, or condition nor as a waiver of a similar or dissimilar
condition or provision at the same time or at any prior or
subsequent time.
8.
Amendment to this
Agreement
. No modification, waiver, amendment, discharge or
change of this Agreement, shall be valid unless the same is in
writing and signed by the party against whom enforcement of such
modification, waiver amendment, discharge, or change is or may be
sought.
9.
Non-Disclosure
.
Unless required by applicable law, rule, regulation or order or to
enforce this Agreement, Employee shall not disclose the existence
of this Agreement or the underlying terms to any third party,
including without limitation, any former, present or future
employee of the Company, other than to Employee’s immediate
family who have a need to know such matters or to Employee’s
tax or legal advisors who have a need to know such matters. If
Employee does disclose this Agreement or any of its terms to any of
Employee’s immediate family or tax or legal advisors, then
Employee will inform them that they also must keep the existence of
this Agreement and its terms confidential. The Company may disclose
the existence or terms of the Agreement and its terms and may file
this Agreement as an exhibit to its public filings if it is
required to do so under applicable law, rule, regulation or
order.
10.
Enforceability;
Severability
. If any provision of this Agreement shall be
invalid or unenforceable, in whole or in part, such provision shall
be deemed to be modified or restricted to the extent and in the
manner necessary to render the same valid and enforceable, or shall
be deemed excised from this Agreement, as the case may require, and
this Agreement shall be construed and enforced to the maximum
extent permitted by law as if such provision had been originally
incorporated herein as so modified or restricted, or as if such
provision had not been originally incorporated herein, as the case
may be.
11.
Governing
Law
. This Agreement shall be construed and enforced in
accordance with the laws of the State of California without giving
effect to such State’s choice of law rules. This Agreement is
deemed to be entered into entirely in the State of California. This
Agreement shall not be strictly construed for or against either
party.
12.
No Third Party
Beneficiaries
. Except as otherwise set forth in this
Agreement, nothing contained in this Agreement is intended or shall
be construed to create rights running to the benefit of any third
party.
13.
Successors of the
Company
. The rights and obligations of the Company under
this Agreement shall inure to the benefit of, and shall be binding
upon, the successors and assigns of the Company, including any
Successor Company. This Agreement shall be assignable by the
Company in the event of a merger or similar transaction in which
the Company is not the surviving entity, or a sale of all or
substantially all of the Company’s assets.
14.
Rights
Cumulative
. The rights under this Agreement, or by law or
equity, shall be cumulative and may be exercised at any time and
from time to time. No failure by any party to exercise, and no
delay in exercising, any rights shall be construed or deemed to be
a waiver thereof, nor shall any single or partial exercise by any
party preclude any other or future exercise thereof or the exercise
of any other right.
15.
No Right or
Obligation of Employment
. Employee acknowledges and agrees
that nothing in this Agreement shall confer upon Employee any right
with respect to continuation of employment by the Company, nor
shall it interfere in any way with Employee’s right or the
Company’s right to terminate Employee’s employment at
any time, with or without Cause.
16.
Interpretation
.
Every provision of this Agreement is the result of full
negotiations between the parties, both of whom have either been
represented by counsel throughout or otherwise been given an
opportunity to seek the aid of counsel. Each party hereto further
agrees and acknowledges that it is sophisticated in legal affairs
and has reviewed this Agreement in detail. Accordingly, no
provision of this Agreement shall be construed in favor of or
against any of the parties hereto by reason of the extent to which
any such party or its counsel participated in the drafting thereof.
Captions and headings of sections contained in this Agreement are
for convenience only and shall not control the meaning, effect, or
construction of this Agreement. Time periods used in this Agreement
shall mean calendar periods unless otherwise expressly
indicated.
17.
Legal and Tax
Advice
. Employee acknowledges that: (i) the Company has
encouraged Employee to consult with an attorney and/or tax advisor
of Employee’s choosing (and at Employee’s own cost and
expense) in connection with this Agreement, and (ii) Employee is
not relying upon the Company for, and the Company has not provided,
legal or tax advice to Employee in connection with this Agreement.
It is the responsibility of Employee to seek independent tax and
legal advice with regard to the tax treatment of this Agreement and
the payments and benefits that may be made or provided under this
Agreement and any other related matters. Employee acknowledges that
Employee has had a reasonable opportunity to seek and consider
advice from Employee’s counsel and tax advisors.
18.
Counterparts
.
This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which shall
constitute one instrument. The parties agree that facsimile copies
of signatures shall be deemed originals for all purposes hereof and
that a party may produce such copies, without the need to produce
original signatures, to prove the existence of this Agreement in
any proceeding brought hereunder.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF,
the Company and
Employee have executed and entered into this Agreement effective as
of the date first shown above.
|
AUTOWEB, INC.
|
|
|
|
By:
/s/ Glenn E.
Fuller
|
|
Glenn E.
Fuller
|
|
Executive Vice
President, Chief Legal and
|
|
Administrative
Officer and Secretary
|
|
|
|
|
|
EMPLOYEE
|
|
|
|
/s/ Sara Partin
|
|
Sara Partin
|
EXHIBIT A
SEPARATION AND RELEASE AGREEMENT
It is
hereby agreed by and between you, Sara Partin (for yourself, your
spouse, family, agents and attorneys) (jointly, “
You
” or “
Employee
”), and AutoWeb, Inc., its
predecessors, successors, affiliates, directors, employees,
shareholders, fiduciaries, insurers, employees and agents (jointly,
the “
Company
”),
as follows:
1.
Separation
of Employment
. You acknowledge that your employment with the
Company ended effective [_______], 201[__] (“
Employment Termination Date
”), and
that You will perform no further duties, functions or services for
the Company subsequent to the Employment Termination Date. You have
resigned or hereby resign from all officer and director positions
You held with the Company or any of its subsidiaries effective as
of the Employment Termination Date. This Separation and Release
Agreement (“
Release
”) is entered into in
connection with that certain Severance Benefits Agreement dated
effective as of October 22, 2018 by and between the Company and
Employee (“
Severance Benefits
Agreement
”).
2.
Release
Consideration
. In exchange for your promises and obligations
in this Release and the Severance Benefits Agreement, including the
release of claims set forth below, if You sign and do not revoke
this Release and this Release becomes effective, the Company will
pay You the amounts, and will provide the benefits, due to You
under the Severance Benefits Agreement, minus legally required
federal, state and local payroll deductions and withholdings.
Payment of any monetary amount provided for in this Section 2 will
be made within the time periods required by the Severance Benefits
Agreement (except for payments or benefits that will be paid or
provided over time as provided therein) and, if no time is
specified, within 5 business days after this Release becomes
effective.
3.
Acknowledgement
of Receipt of Amounts Due
. You acknowledge and agree that
You have received all, and that the Company does not owe You any
additional, payments, benefits or other compensation as a result of
your employment with the Company or your separation from employment
with the Company, including, but not limited to, wages,
commissions, bonuses, vacation pay, severance pay, expenses, fees,
or other compensation or payments of any kind or nature, other than
those amounts or benefits, if any, payable or to be provided to You
after the date hereof pursuant to the Severance Benefits Agreement
after this Release becomes effective.
4.
Return
of Company Property
. You represent and warrant that You have
returned to the Company any and all documents, software, equipment
(including, but not limited to, computers and computer-related
items), and all other materials or other things in your possession,
custody, or control which are the property of the Company,
including, but not limited to, Company identification, keys,
computers, cell phones, and the like, wherever such items may have
been located; as well as all copies (in whatever form thereof) of
all materials relating to your employment, or obtained or created
in the course of your employment with the Company. You hereby
represent that, other than those materials You have returned to the
Company pursuant to this Section 4, You have not copied or caused
to be copied, and have not transferred or printed-out or caused to
be transferred or printed-out, any software, computer disks,
e-mails or other documents other than those documents generally
available to the public, or retained any other materials
originating with or belonging to the Company. You further represent
that You have not retained in your possession, custody or control,
any software, documents or other materials in machine or other
readable form, which are the property of the Company, originated
with the Company, or were obtained or created in the course of or
relate to your employment with the Company.
5.
Confidentiality
and Non-Solicitation/Interference
.
(a) You
shall keep confidential, and shall not hereafter use or disclose to
any person, firm, corporation, governmental agency, or other
entity, in whole or in part, at any time in the future, any trade
secret, proprietary information, or confidential information of the
Company, including, but not limited to, information relating to
trade secrets, processes, methods, pricing strategies, customer
lists, marketing plans, product introductions, advertising or
promotional programs, sales, financial results, financial records
and reports, regulatory matters and compliance, and other
confidential matters, except as required by law and as necessary
for compliance purposes. These obligations are in addition to the
obligations set forth in any confidentiality or non-disclosure
agreement between You and the Company, including, without
limitation, that certain Employee Confidentiality Agreement dated
as of October 22, 2018, which shall remain binding on You after the
Employment Termination Date.
(b)
Unless required by applicable law, rule, regulation or order or to
enforce this Agreement, Employee shall not disclose the existence
of the Severance Benefits Agreement or this Release or the
underlying terms to any third party, including without limitation,
any former, present or future employee of the Company, other than
to Employee’s immediate family who have a need to know such
matters or to Employee’s tax or legal advisors who have a
need to know such matters. If Employee does disclose this Release,
the Severance Benefits Agreement or any of their respective terms
to any of Employee’s immediate family or tax or legal
advisors, then Employee will inform them that they also must keep
the existence of this Release, the Severance Benefits Agreement and
their respective terms confidential. The Company may disclose the
existence or terms of this Release, the Severance Benefits
Agreement and their respective terms and may file this Release and
the Severance Benefits Agreement as exhibits to its public filings
if it is required to do so under applicable law, rule, regulation
or order.
(c) For
a period of one (1) year immediately following this Release
becoming effective, You agree that You will not interfere with
Company’s business by soliciting an employee to leave
Company’s employ, or by inducing a consultant or vendor to
sever its relationship with Company. You may not, at any time, use
the Company’s trade secrets to solicit business from any
source, including the Company’s customers or clients. This
Section 5(c) is not intended to, and shall not, prevent You from
lawful competition with the Company. You represent and warrant that
You have not engaged in any of the foregoing activities prior to
the effective date of this Release.
6.
Nondisparagement
.
You agree that neither You nor anyone acting on your behalf or at
your direction will disparage, denigrate, defame, criticize, impugn
or otherwise damage or assail the reputation or integrity of the
Company publicly or privately to any third party, including without
limitation (i) to any current or former employee, officer,
director, contractor, supplier, customer, or client of the Company;
(ii) any prospective or actual purchaser of the equity interests of
the Company or its business or assets; or (iii) to any person or
entity in the automotive industry, automotive marketing,
advertising or other services, or the automotive
press.
7.
Unconditional
General Release of Claims
.
(a)
In consideration
for the payment and benefits provided for in Section 2, and
notwithstanding the provisions of Section 1542 of the Civil Code of
California, You unconditionally release and forever discharge the
Company, and the Company’s current, former, and future
controlling shareholders, subsidiaries, affiliates, related
companies, predecessor companies, divisions, directors, trustees,
officers, employees, agents, attorneys, successors, and assigns
(and the current, former, and future controlling shareholders,
directors, trustees, officers, employees, agents, and attorneys of
any such subsidiaries, affiliates, related companies, predecessor
companies, and divisions) (all of the foregoing released persons or
entities being referred to herein as “
Releasees
”), from any and all
claims, complaints, demands, actions, suits, causes of action,
obligations, damages and liabilities of whatever kind or nature,
whether known or unknown, based on any act, omission, event,
occurrence, or nonoccurrence from the beginning of time to the date
of execution of this Release, including, but not limited to, claims
that arise out of or in any way relate to your employment or your
separation from employment with the Company.
(b)
You acknowledge and
agree that the foregoing unconditional and general release
includes, but is not limited to, (i) any claims for salary,
bonuses, commissions, equity, compensation (except as specified in
this Agreement), wages, penalties, premiums, severance pay,
vacation pay or any benefits under the Employee Retirement Income
Security Act of 1974, as amended; (ii) any claims of harassment,
retaliation or discrimination; (iii) any claims based on any
federal, state or governmental constitution, statute, regulation or
ordinance, including, without limitation, Title VII of the Civil
Rights Act of 1964, the Civil Rights Act of 1991, the Age
Discrimination in Employment Act, the Americans With Disabilities
Act, Section 1981 of the Civil Rights Act of 1866, the California
Fair Employment and Housing Act, the California Family Rights Act,
the Family and Medical Leave Act, the California Constitution, the
California Labor Code, the California Industrial Welfare Commission
Wage Orders, the California Government Code, the Worker Adjustment
and Retraining Notification Act; (iv) whistleblower claims, claims
of breach of implied or express contract, breach of promise,
misrepresentation, negligence, fraud, estoppel, defamation,
infliction of emotional distress, violation of public policy,
wrongful or constructive discharge, or any other employment-related
tort, and any claims for costs, fees, or other expenses, including
attorneys’ fees; and (v) any other aspect of your employment
or the termination of your employment.
(c)
For the purpose of
implementing a full and complete release, You expressly acknowledge
and agree that this Release resolves all claims You may have
against the Company and the Releasees as of the date of this
Release, including but limited to claims that You did not know or
suspect to exist in your favor at the time of the execution of this
Release. You expressly waive any and all rights which You may have
under the provisions of Section 1542 of the California Civil
Code or any similar state or federal statute. Section 1542 provides
as follows:
“A general
release does not extend to claims which the creditor does not know
or suspect to exist in his or her favor at the time of executing
the release, which if known by him or her must have materially
affected his or her settlement with the
debtor.”
(d)
This Release will
not waive the Employee’s rights to indemnification under the
Company’s certificate of incorporation or by-laws or, if
applicable, any written agreement between the Company and the
Employee, or under applicable law.
(e)
You
hereby certify that You have not
experienced a job-related illness or injury for which You have not
already filed a claim.
(f)
This general
release does not waive or release rights or claims arising after
You sign this Release.
8.
Covenant
Not to Sue
.
A
“covenant not to sue” is a promise not to sue in court.
This covenant differs from a general release of claims in that,
besides waiving and releasing the claims covered by this Release,
You represent and warrant that You have not filed, and agree that
You will not file, or cause to be filed or maintained, any judicial
complaint, lawsuit or demand for arbitration involving any claims
You have released in this Release, and You agree to withdraw any
judicial complaints, lawsuits or demands for arbitration You have
filed, or were filed on your behalf, prior to the effective date of
this Release. Still, You may sue to enforce this Release. You agree
if You breach this covenant, then You must pay the legal expenses
incurred by incurred by any Releasee in defending against your
suit, including reasonable attorneys’ fees, or, at the
Company’s option, return everything paid to You under this
Agreement. In that event, the Company shall be excused from making
any further payments or continuing any other benefits otherwise
owed to You under paragraph 2 of this Agreement. Furthermore, You
give up all rights to individual damages in connection with any
administrative or court proceeding with respect to your employment
with or termination of employment from, the Company. You also agree
that if You are awarded money damages, You will assign your right
and interest to such money damages (i) in connection with an
administrative charge, to the relevant administrative agency; and
(ii) in connection with a lawsuit or demand for arbitration, to the
Company.
9.
Cooperation
With Company
. You agree to assist and cooperate (including,
but not limited to, providing information to the Company and/or
testifying truthfully in a proceeding) in the investigation and
handling of any internal investigation, governmental matter, or
actual or threatened court action, arbitration, administrative
proceeding, or other claim involving any matter that arose during
the period of your employment. You shall be reimbursed for
reasonable expenses actually incurred in the course of rendering
such assistance and cooperation. Your agreement to assist and
cooperate shall not affect in any way the content of information or
testimony provided by You.
10.
No
Reemployment
.
You
acknowledge and agree that the Company has no obligation to employ
You or offer You employment in the future and You shall have no
recourse against the Company if it refuses to employ You or offer
You employment. If You do seek re-employment, then this Release
shall constitute sufficient cause for the Company to refuse to
re-employ You. Notwithstanding the foregoing, the Company has the
right to offer to re-employ You in the future if, in its sole
discretion, it chooses to do so.
11.
No
Admission of Liability
. This Release does not constitute an
admission that the Company or any other Releasee has violated any
law, rule, regulation, contractual right or any other duty or
obligation.
12.
Severability
.
Should any provision of this Release be declared or be determined
by any court or arbitrator to be illegal or invalid, the validity
of the remaining parts, terms, or provisions shall not be affected,
and said illegal or invalid part, term, or provision shall be
deemed not to be part of this Release.
13.
Governing
Law
. This Release is made and entered into in the State of
California and shall in all respects be interpreted, enforced, and
governed under the law of that state, without reference to conflict
of law provisions thereof.
14.
Interpretation
.
The language of all parts in this Release shall be construed as a
whole, according to fair meaning, and not strictly for or against
any party. The captions and headings contained in this Agreement
are for convenience only and shall not control the meaning, effect,
or construction of this Agreement.
15.
Knowing
and Voluntary Agreement
. You have carefully reviewed this
Release and understand the terms and conditions it contains. By
entering into this Release, You are giving up potentially valuable
legal rights. You specifically acknowledge that You are waiving and
releasing any rights You may have under the ADEA. You acknowledge
that the consideration given for this waiver and release is in
addition to anything of value to which You were already entitled.
You acknowledge that You are signing this Release knowingly and
voluntarily and intend to be bound legally by its
terms.
16.
Entire
Agreement
. You hereby acknowledge that no promise or
inducement has been offered to You, except as expressly stated in
this Release and in the Severance Benefits Agreement, and You are
relying upon none. This Release and the Severance Benefits
Agreement represent the entire agreement between You and the
Company with respect to the subject matter hereof, and supersede
any other written or oral understandings between the parties
pertaining to the subject matter hereof and may only be amended or
modified with the prior written consent of You and the
Company.
17.
Arbitration.
Any controversy or claim arising out or, or related to, this
Release Agreement, or the breach thereof, shall be governed by the
terms of the Arbitration Agreement (as defined in the Severance
Benefits Agreement).
18.
Protected
Rights
:
(a)
An individual may
not be held criminally or civilly liable under any federal or state
trade secret law for the disclosure of a trade secret that: (a) is
made (i) in confidence to a federal, state, or local government
official, either directly or indirectly, or to an attorney; and
(ii) solely for the purpose of reporting or investigating a
suspected violation of law;
or (b) is made in a
complaint
or other document that is filed under seal in a lawsuit or other
proceeding. Further, an individual who files a lawsuit for
retaliation by an employer for reporting a suspected violation of
law may disclose the employer’s trade secrets to the attorney
and use the trade secret information in the court proceeding if the
individual: (a) files any document containing the trade secret
under seal; and (b) does not disclose the trade secret, except
pursuant to court order.
(b)
Employee
understands that nothing contained in your Confidentiality
Agreement limits Employee’s ability to file a charge or
complaint with the Equal Employment Opportunity Commission, the
National Labor Relations Board, the Occupational Safety and Health
Administration, the Securities and Exchange Commission or any other
federal, state or local governmental agency or commission
(“Government Agencies”). Employee further understands
that this Agreement does not limit Employee’s ability to
communicate with any Government Agencies or otherwise participate
in any investigation or proceeding that may be conducted by any
Government Agency, including providing documents or other
information, without notice to Company. This Agreement does not
limit Employee’s right to receive an award for information
provided to any Government Agencies.
19.
Period
for Review and Consideration/Revocation Rights
.
[
Alternative
1 for Section 18 if Employee is NOT age 40 or over at time of
separation from employment
]
You
understand that You have seven (7) days after this Release has been
delivered to You by the Company to decide whether to sign this
Release, although You may sign this Release at any time within the
seven (7) day period. If You do sign it, You also understand that
You will have an additional three (3) days after the date You
deliver this signed Release to the Company and to change your mind
and revoke this Release, in which case a written notice of
revocation must be delivered to the Company’s Chief Legal
Officer, AutoWeb, Inc., 18872 MacArthur Blvd. Suite 200, Irvine,
California 92612-1400, on or before the third (3
rd
) day after your
delivery of this signed Release to the Company (or on the next
business day if the third calendar day is not a business day). You
understand that this Release will not become effective or
enforceable until after that three (3) day period has passed. If
You revoke this Release, this Release shall not be effective or
enforceable as to any rights You may have under this Release. In
the event that You revoke this Release, You will not be entitled to
the payments and benefits specified in Paragraph 2.
[
Alternative
2 for Section 18 if Employee is age 40 or over at time of
separation from employment, separation from employment is NOT in
connection with a group separation, and ADEA Claims are being
released
]
You
understand that You have twenty-one (21) days after this Release
has been delivered to You by the Company to decide whether to sign
this Release, although You may sign this Release at any time within
the twenty-one (21) day period. If You do sign it, You also
understand that You will have an additional seven (7) days after
the date You deliver this signed Release to the Company and to
change your mind and revoke this Release, in which case a written
notice of revocation must be delivered to the Company’s Chief
Legal Officer, AutoWeb, Inc., 18872 MacArthur Blvd. Suite 200,
Irvine, California 92612-1400, on or before the seventh (7th) day
after your delivery of this signed Release to the Company (or on
the next business day if the seventh calendar day is not a business
day). You understand that this Release will not become effective or
enforceable until after that seven (7) day period has passed. If
You revoke this Release, this Release shall not be effective or
enforceable as to any rights You may have under this Release. In
the event that You revoke this Release, You will not be entitled to
the payments and benefits specified in Paragraph 2.
[
Alternative
3 for Section 18 if Employee is age 40 or over at time of
separation from employment, separation from employment IS in
connection with a group termination, and ADEA Claims are being
released
]
(a) You
understand that You have forty-five (45) days after this Release
has been delivered to You by the Company to decide whether to sign
this Release, although You may sign this Release at any time within
the forty-five (45) day period. If You do sign it, You also
understand that You will have an additional seven (7)
days after You sign to change your
mind and revoke the Agreement, in which case a written notice of
revocation must be delivered to the Company’s Chief Legal
Officer, AutoWeb, Inc., 18872 MacArthur Blvd. Suite 200, Irvine,
California 92612-1400, on or before the seventh (7th) day after
your delivery of this signed Release to the Company (or on the next
business day if the seventh calendar day is not a business day).
You understand that this Release will not become effective or
enforceable until after that seven (7) day period has passed. If
You revoke this Release, this Release shall not be effective or
enforceable as to any rights You may have under this Release. In
the event that You revoke this Release, You will not be entitled to
the payments and benefits specified in Paragraph 2.
(b) You
acknowledge that You have received the group information of
employees included in the Company’s ____________ group
termination program, the eligibility factors for participation in
the program, and the time limits for participation in the program.
You also acknowledge that You have received lists of the ages and
job titles of employees eligible or selected for the program and
employees not eligible or selected for the group termination
program. This information is set forth on Appendix A attached
hereto and incorporated herein by reference.
20.
Advice
of Attorney and Tax Advisor
. Employee acknowledges that: (i)
the Company has advised Employee to consult with an attorney and/or
tax advisor of Employee’s choosing (and at Employee’s
own cost and expense) before executing this Release, and (ii)
Employee is not relying upon the Company for, and the Company has
not provided, legal or tax advice to Employee in connection with
this Release. It is the responsibility of Employee to seek
independent tax and legal advice with regard to the tax treatment
of this Release and the payments and benefits that may be made or
provided under this Release and any other related matters. Employee
acknowledges that Employee has had a reasonable opportunity to seek
and consider advice from Employee’s attorney and tax
advisors.
PLEASE
READ CAREFULLY. THIS RELEASE INCLUDES A GENERAL RELEASE OF ALL
CLAIMS, KNOWN AND UNKNOWN. YOU MAY NOT MAKE ANY CHANGES TO THE
TERMS OF THIS RELEASE THAT ARE NOT AGREED UPON BY THE COMPANY IN
WRITING. ANY CHANGES SHALL CONSTITUTE A REJECTION OF THIS RELEASE
BY EMPLOYEE.
|
___________________________________
|
|
Sara
Partin
|
|
|
Dated:
|
AutoWeb
Inc.
|
|
|
|
By:
________________________________
|
|
Glenn E.
Fuller
|
|
Executive Vice
President, Chief Legal and
|
|
Administrative
Officer and Secretary
|
Exhibit
31.1
CERTIFICATION
I,
Jared R. Rowe, certify that:
1.
I have reviewed
this quarterly report on Form 10-Q of AutoWeb, Inc.;
2.
Based on my
knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period
covered by this report;
3.
Based on my
knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
4.
The
registrant’s other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a)
Designed such
disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
b)
Designed such
internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
c)
Evaluated the
effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
d)
Disclosed in this
report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting;
and
5.
The
registrant’s other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the
audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a)
All significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to
record, process, summarize, and report financial information;
and
b)
Any fraud, whether
or not material, that involves management or other employees who
have a significant role in the registrant’s internal control
over financial reporting.
Date:
November 8, 2018
/s/ Jared R.
Rowe
Jared
R. Rowe
President and Chief
Executive Officer
Exhibit
31.2
CERTIFICATION
I,
Wesley Ozima, certify that:
1.
I have reviewed
this quarterly report on Form 10-Q of AutoWeb, Inc.;
2.
Based on my
knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period
covered by this report;
3.
Based on my
knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
4.
The
registrant’s other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a)
Designed such
disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
b)
Designed such
internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
c)
Evaluated the
effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
d)
Disclosed in this
report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting;
and
5.
The
registrant’s other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the
audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a)
All significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to
record, process, summarize, and report financial information;
and
b)
Any fraud, whether
or not material, that involves management or other employees who
have a significant role in the registrant’s internal control
over financial reporting.
Date:
November 8, 2018
/s/ Wesley
Ozima
Wesley
Ozima
Senior
Vice President and
Interim
Chief Financial Officer
Exhibit
32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Quarterly Report of AutoWeb, Inc. (the
“Company”) on Form 10-Q for the period ended June 30,
2018 (the “Report”), we, Jared R. Rowe, President and
Chief Executive Officer of the Company, and Wesley Ozima, Senior
Vice President and Interim Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.
The Report fully
complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of
1934;
and
2.
The information
contained in the Report fairly presents, in all material respects,
the financial condition and result of operations of the
Company.
/s/ Jared R.
Rowe
Jared
R. Rowe
President and Chief
Executive Officer
November 8,
2018
/s/ Wesley
Ozima
Wesley
Ozima
Senior
Vice President and
Interim
Chief Financial Officer
November 8,
2018
A
signed original of this written statement required by Section 906,
or other document authenticating, acknowledging, or otherwise
adopting the signatures that appear in typed form within the
electronic version of this written statement required by Section
906, has been provided to AutoWeb, Inc. and will be retained by
AutoWeb, Inc. and furnished to the Securities and Exchange
Commission or its staff upon request.