AUTOWEB, INC.

To Be Held on June 21, 2018

TO OUR STOCKHOLDERS:

 

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (“Annual Meeting”) of AutoWeb, Inc., a Delaware corporation (“AutoWeb” or “Company”), will be held at the Company’s offices at 18872 MacArthur Boulevard, Suite 200, Irvine, California 92612-1400, on Thursday, June 21, 2018, at 10:00 a.m. Pacific Time for the following purposes:

 At the Annual Meeting, the Board of Directors (“Board”) intends to present Michael A. Carpenter, Mark N. Kaplan, and Jose Vargas as nominees for election to the Board.

The Board has fixed the close of business on April 27, 2018, as the record date for the determination of the holders of record of the Company’s common stock entitled to notice of, and to vote at, the Annual Meeting.

 

A list of stockholders entitled to vote at the Annual Meeting will be open for examination by any stockholder for any purpose germane to the meeting during ordinary business hours for a period of 10 days prior to the Annual Meeting at the offices of AutoWeb located at 18872 MacArthur Boulevard, Suite 200, Irvine, California 92612-1400, and will also be available for examination by any stockholder present at the Annual Meeting until its adjournment.

 

PLEASE READ CAREFULLY THE ACCOMPANYING PROXY STATEMENT. AUTOWEB INVITES ALL STOCKHOLDERS TO ATTEND THE ANNUAL MEETING.  TO ENSURE THAT YOUR SHARES WILL BE VOTED AT THE ANNUAL MEETING, PLEASE COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.

 

	By Order of the Board of Directors
	Glenn E. Fuller Executive Vice President, Chief Legal and Administrative Officer and Secretary

Irvine, California

April 27, 2018 

IMPORTANT

 

YOUR VOTE IS IMPORTANT.  WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY CARD AND PROMPTLY RETURN IT IN THE ENVELOPE PROVIDED TO VOTE PROCESSING, C/O BROADRIDGE, 51 MERCEDES WAY, EDGEWOOD, NEW YORK 11717, TO BE RECEIVED NO LATER THAN 11:59 P.M. EASTERN TIME ON THE DAY BEFORE THE ANNUAL MEETING.  IN ORDER TO AVOID THE ADDITIONAL EXPENSE TO AUTOWEB OF FURTHER SOLICITATION, THE COMPANY ASKS YOUR COOPERATION IN MAILING IN YOUR PROXY CARD PROMPTLY. PRIOR TO THE ANNUAL MEETING, STOCKHOLDERS MAY ALSO PROVIDE VOTING INSTRUCTIONS USING THE INTERNET AT WWW.PROXYVOTE.COM OR BY CALLING 1.800.690.6903 AS DESCRIBED IN THE PROXY STATEMENT AND ACCOMPANYING PROXY CARD. THE CUTOFF TIME FOR PROVIDING VOTING INSTRUCTIONS USING THE INTERNET OR BY CALLING IS 11:59 P.M. EASTERN TIME THE DAY BEFORE THE DATE OF THE ANNUAL MEETING.

 

PROXY STATEMENT

AutoWeb, Inc.

18872 MacArthur Boulevard, Suite 200

Irvine, California 92612-1400

 
Annual Meeting

To Be Held on June 21, 2018

 

The Annual Meeting

 

The enclosed proxy is solicited by and on behalf of the Board of Directors (“Board”) of AutoWeb, Inc., a Delaware corporation (“AutoWeb” or “Company”), for use at AutoWeb’s 2018 Annual Meeting of Stockholders (“Annual Meeting”) to be held on Thursday, June 21, 2018 at 10:00 a.m. Pacific Time at the Company’s offices located at 18872 MacArthur Boulevard, Suite 200, Irvine, California 92612-1400, and at any and all adjournments or postponements thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders.

 

This Proxy Statement of AutoWeb is being mailed on or about May 4, 2018, to each stockholder of record as of the close of business on April 27, 2018.

 

Record Date and Outstanding Shares

 

The Board has fixed the close of business on April 27, 2018, as the record date for the Annual Meeting (“Record Date”).  Only holders of record of AutoWeb’s common stock, $0.001 par value per share (“Common Stock”), at the close of business on the Record Date are entitled to notice of, and to vote at, the Annual Meeting.  As of the close of business on the Record Date, there were 12,896,225 shares of Common Stock outstanding and entitled to vote.

 

Quorum and Voting

 

Quorum.  The holders of record of a majority in voting power of the shares of stock of the Company issued and outstanding and entitled to be voted, present in person or by proxy, will constitute a quorum for the transaction of business at the Annual Meeting or any adjournment or postponement thereof.  Shares not present in person or by proxy at the Annual Meeting will not be counted for purposes of determining a quorum at the Annual Meeting.  In the event there are not sufficient shares present to establish a quorum or to approve proposals at the time of the Annual Meeting, the Annual Meeting may be adjourned in order to permit further solicitation of proxies by the Company.

 

 Vote Required.  Holders of Common Stock are entitled to one vote for each share held as of the Record Date on all matters to be voted on at the Annual Meeting. The Company’s Bylaws, as amended (“Bylaws”), provide that, except as otherwise provided in the Company’s Certificate of Incorporation, as amended (“Certificate of Incorporation”), the rules or regulations of any stock exchange applicable to the Company or by applicable law or regulation, all matters will be decided by the vote of a majority in voting power of the shares present in person or by proxy and entitled to vote at the Annual Meeting and on the matter. For Proposal 1 (Nomination and Election of Directors Proposal), the Bylaws provide that the persons receiving the greatest number of votes, up to the number of directors then to be elected, will be the persons elected. The affirmative vote of a majority in voting power of the shares present in person or by proxy and entitled to vote at the Annual Meeting and on such proposal is required to approve Proposal 2 (2018 Equity Incentive Plan Proposal) and Proposal 3 (Accounting Firm Ratification Proposal).   None of the proposals is contingent upon the approval of any other proposal.

 

 

 

Abstentions.  Abstentions will be counted for purposes of determining a quorum at the Annual Meeting.  An abstention for any proposal, other than Proposal 1 (Nomination and Election of Directors Proposal), will have the same effect as a vote against such proposal.  As to Proposal 1, because the number of nominees is equal to the number of directors being elected at the Annual Meeting, abstentions will not affect the election of the nominees to the Board as long as each nominee receives at least one vote in favor of the nominee’s election.

 

Broker Discretionary Voting.  If your shares are held in a brokerage account, by a bank or other nominee, you are considered the beneficial owner of shares held in “street name,” and the proxy materials are being sent to you by your broker, bank, or other nominee who is considered, with respect to those shares, the stockholder of record.  As the beneficial owner, you have the right to direct your broker, bank, or other nominee how to vote.  If you do not give instructions to your brokerage firm or bank, it will still be able to vote your shares with respect to “discretionary” proposals, but will not be allowed to vote your shares with respect to “non-discretionary” proposals.  The Company expects that Proposal 3 (Accounting Firm Ratification Proposal) will be considered to be a discretionary proposal on which banks and brokerage firms may vote.  The Company expects that all other proposals being presented to stockholders at the Annual Meeting will be considered to be non-discretionary items on which banks and brokerage firms may not vote.  Therefore, if you do not instruct your broker or bank regarding how you would like your shares to be voted, your bank or brokerage firm will not be able to vote on your behalf with respect to these proposals.  In the case of these non-discretionary items, the shares will be treated as “broker non-votes.” Broker non-votes are shares that are held in “street name” by a bank or brokerage firm that indicates on its proxy that it does not have discretionary authority to vote on a particular matter.  Your failure to give instructions to your bank or broker will not affect the outcome of Proposal 1 as long as a nominee receives at least one vote in favor of the nominee’s election, nor affect the outcomes of Proposals 2 and 3 because these proposals require the affirmative vote of a majority in voting power of the shares present in person or by proxy and entitled to vote at the Annual Meeting and on these proposals, and broker non-votes will not be deemed “entitled to vote on the proposal” and therefore are not counted in the vote for these proposals.

 

Expenses of Proxy Solicitation

 

This solicitation is being made by the Company. Officers, directors, and regular employees of AutoWeb may solicit proxies in person or by regular mail, electronic mail, facsimile transmission, or personal calls.  These persons will receive no additional compensation for solicitation of proxies but may be reimbursed for reasonable out-of-pocket expenses.  In addition, AutoWeb has retained MacKenzie Partners, Inc. to act as a proxy solicitor in conjunction with the Annual Meeting.  The estimated fees and costs for those proxy solicitation services are $6,500.00 plus reasonable disbursements.

 

AutoWeb will pay all of the expenses of soliciting proxies to be voted at the Annual Meeting.  Banks, brokerage firms and other custodians, nominees or fiduciaries will be requested to forward soliciting material to their principals and to obtain authorization for the execution of proxies, and will be reimbursed for their reasonable out-of-pocket expenses incurred in that regard.

 

 

Voting of Proxies

 

Shares may be voted by completing, dating, and signing the accompanying proxy card and promptly returning it in the enclosed envelope. Stockholders may provide voting instructions for voting of their proxies using the Internet at www.proxyvote.com or by calling 1.800.690.6903. Providing voting instructions using the Internet or by calling requires stockholders to input the Control Number located on their proxy cards.  The cutoff time for providing voting instructions via the Internet or by calling is 11:59 p.m. Eastern Time the day before the date of the Annual Meeting (“Voting Instructions Cutoff Time”).

 

All properly signed proxies received prior to the vote at the Annual Meeting that are not properly revoked prior to the vote will be voted at the Annual Meeting according to the instructions indicated on the proxies or, if no direction is indicated, such proxies will be voted “FOR” Proposal 1 (Nomination and Election of Directors Proposal); “FOR” Proposal 2 (2018 Equity Incentive Plan Proposal); and “FOR” Proposal 3 (Accounting Firm Ratification Proposal).  The Board does not presently intend to present any other matter for action at the Annual Meeting and no stockholder has given timely notice in accordance with the Bylaws of any matter that it intends to be brought before the meeting.  If any other matters are properly brought before the Annual Meeting, the persons named in the proxies will have discretion to vote on those matters in accordance with their best judgment.

 

Revocability of Proxy

 

If you are the holder of record for your shares, you may revoke your proxy at any time before it is exercised at the Annual Meeting by taking either of the following actions: (i) delivering to the Company’s Secretary a revocation of the proxy or a proxy relating to the same shares and bearing a later date prior to the vote at the Annual Meeting; or (ii) attending the Annual Meeting and voting in person, although attendance at the Annual Meeting will not, by itself, revoke a proxy. Stockholders may also revoke a prior proxy by providing later voting instructions for voting of a later proxy prior to the Voting Instructions Cutoff Time.

 

Recommendation of the Board of Directors

 

The Board recommends that AutoWeb stockholders vote “FOR” the election of Messrs. Michael A. Carpenter, Mark N. Kaplan, and Jose Vargas as Class II Directors under Proposal 1 (Nomination and Election of Directors Proposal); “FOR” Proposal 2 (2018 Equity Incentive Plan Proposal); and “FOR” Proposal 3 (Accounting Firm Ratification Proposal).  

 

TO ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL MEETING, PLEASE COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.  PRIOR TO THE VOTING INSTRUCTIONS CUTOFF TIME, STOCKHOLDERS MAY ALSO PROVIDE VOTING INSTRUCTIONS USING THE INTERNET AT WWW.PROXYVOTE.COM OR BY CALLING 1.800.690.6903 AS DESCRIBED IN THIS PROXY STATEMENT AND ACCOMPANYING PROXY CARD.

 

A copy of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, accompanies this Proxy Statement.  If requested, AutoWeb will furnish you with a copy of any exhibit listed on the exhibit index to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, upon payment of a reasonable copy fee.

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING TO BE HELD ON JUNE 21, 2018:  Copies of the Notice of Annual Meeting of Stockholders, this Proxy Statement, the form of Proxy Card, and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, are available online at http://www.autoweb.com/proxymaterials.  Stockholders wishing to attend the Annual Meeting may obtain directions by calling the Company at 949.862.1393.

 

 

PROPOSAL 1

 

NOMINATION AND ELECTION OF DIRECTORS

 

Nominees for Class II Directors

 

Messrs. Michael A. Carpenter, Mark N. Kaplan, and Jose Vargas are the Board’s nominees as Class II Directors for election at the Annual Meeting.  The Board made these nominations at the recommendation of the Board’s Corporate Governance and Nominations Committee.  A Class II Director will hold office until the 2021 Annual Meeting of Stockholders and until that director’s successor is duly qualified and elected.

 

Michael A. Carpenter. Mr. Carpenter has served as a director of AutoWeb since September 2012. Mr. Carpenter served as the Chief Executive Officer and as a director of Ally Financial Inc. from November 2009 until his retirement in February 2015. Ally Financial is one of the nation’s largest financial services companies, with a concentration in automotive lending. In 2007, he founded Southgate Alternative Investments, Inc. From 2002 to 2006, he was Chairman and Chief Executive Officer of Citigroup Alternative Investments, overseeing proprietary capital and customer funds globally in various alternative investment vehicles. From 1998 to 2002, Mr. Carpenter was Chairman and Chief Executive Officer of Citigroup’s Global Corporate & Investment Bank with responsibility for Salomon Smith Barney Inc. and Citibank’s corporate banking activities globally. Mr. Carpenter was named Chairman and Chief Executive Officer of Salomon Smith Barney Inc. in 1998, shortly after the merger that created Citigroup. Prior to Citigroup, Mr. Carpenter was Chairman and Chief Executive Officer of Travelers Life & Annuity and Vice Chairman of Travelers Group Inc. responsible for strategy and business development. From 1989 to 1994, Mr. Carpenter was Chairman of the Board, President and Chief Executive Officer of Kidder Peabody Group Inc., a wholly owned subsidiary of General Electric Company. From 1986 to 1989, Mr. Carpenter was Executive Vice President of GE Capital Corporation. He first joined GE in 1983 as Vice President of Corporate Business Development and Planning and was responsible for strategic planning and development as well as mergers and acquisitions. Earlier in his career, Mr. Carpenter spent nine years as Vice President and Director of the Boston Consulting Group and three years with Imperial Chemical Industries of the United Kingdom. Mr. Carpenter was elected to the board of CIT, Inc., a publicly held financial holding company, on May 1, 2016. He also serves on the boards of Law Finance Group, US Retirement Partners, the New York City Investment Fund, the Rewards Network, Inc., and Client 4 Life Management Systems, and has been a board member of the New York Stock Exchange, General Signal, Loews Cineplex and various other private and public companies. Mr. Carpenter received a B.S. Degree from the University of Nottingham, England, and a M.B.A. from the Harvard Business School where he was a Baker Scholar. Mr. Carpenter also holds an honorary degree of Doctor of Laws from the University of Nottingham. Mr. Carpenter’s experience in investment and commercial banking, executive management and capital markets led the Board to conclude that Mr. Carpenter should serve as one of the Company’s directors.

 

Mark N. Kaplan. Mr. Kaplan has served as a director of AutoWeb since June 1998. Mr. Kaplan was a member of the law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1979 through 1998 and currently is of counsel to that firm, Chairman of the Board and Chief Operating Officer of Engelhard Minerals & Chemicals Corporation (mining and chemicals) from 1977 to 1979, and President and Chief Executive Officer of Drexel Burnham Lambert (investment banking) from 1970 to 1977. Mr. Kaplan serves as Chairman of the compensation committee of the board of directors of American Biltrite Inc., a publicly traded company. He is a Trustee of Bard College, the New York Academy of Medicine, a member and former Chairman of the New York City Audit Committee, a Trustee and Chairman of the Audit Committee of WNET.org (provider of public media in the New York City metropolitan area), a director of twenty investment funds managed by Gresham Investment Management LLC, as well as an advisor to fifteen additional private Gresham fund properties. Mr. Kaplan has also served on the boards of Volt Information Services, Inc., Congoleum Corp., DRS Technologies Inc., and other privately held entities or mutual funds. Mr. Kaplan was formerly the Chairman of the Audit Advisory Committee of the Board of Education of The City of New York, Vice-Chairman and Governor of the board of directors of The American Stock Exchange, Inc., and a director of Security Industry Automation Corporation. Mr. Kaplan holds an A.B. Degree from Columbia College and a LL.B Degree from Columbia Law School. Mr. Kaplan’s experience in securities and corporate laws, mergers and acquisitions, investment banking and business management, as well as his qualification as an audit committee financial expert, led the Board to conclude that Mr. Kaplan should serve as one of the Company’s directors.

 

Jose Vargas. Mr. Vargas has served as a director of AutoWeb since October 1, 2015 and as the Company’s Chief Revenue Officer from October 1, 2015 to April 12, 2018. From September 18, 2013 to October 1, 2015, Mr. Vargas was a director and president of a company that provided an internet-based, pay-per-click advertising marketplace for the automotive industry, which was acquired by the Company as of October 1, 2015. Mr. Vargas is a co-founder, director and the president of People F, Inc., a British Virgin Islands business company (“PeopleFund”), a holding company that is focused on investments in technology, internet and media, and a co-founder of, and currently serves as a co-managing director and president of PF Holding Inc., a British Virgin Islands business company (“PF Holding”), an entity affiliated with PeopleFund that is focused on investments in technology, internet and media, as well as vice president and a director of PF Auto, Inc., a British Virgin Islands business company (“PF Auto”), an entity affiliated with PeopleFund, and co-managing director, president and secretary of Auto Holdings Ltd., a British Virgin Islands business company (“Auto Holdings”), also an entity affiliated with PeopleFund. Mr. Vargas is also a director or officer of a number of privately-held companies that include Healthcare, Inc., an online search, comparison and recommendation tool for healthcare consumers, Blue Mountain 17 Inc., Blue Mountain 18 Inc., Blue Mountain 30 Inc., Blue Mountain 31 Inc., Blue Mountain 45 Inc., Blue Mountain 46 Inc., Blue Mountain 48 Inc., Blue Mountain 73 Inc., Classifieds Corp., Gray Mountain Inc., PeopleFund Inc., People Ventures Inc., Startups Holding, Inc.; MapFit Inc. (prior: GeoFi, Inc.), PF Classifieds Inc., PF Healthcare Inc., Galeb3 Inc., Healthcare.com Insurance Services, LLC, Startups.com I, Limited, Startups.com Inc., and Startups.com III, L.P. Mr. Vargas received a B.S. Degree from Florida International University.

 

 

 

Mr. Vargas was appointed to the Board pursuant to the Stockholder Agreement described below under the section of this Proxy Statement entitled “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT” upon AutoWeb’s acquisition of Autobytel, Inc. (formerly AutoWeb, Inc.) as of October 1, 2015. Mr. Vargas serves as one of the two representatives on the Board designated by the former owners of the acquired company. Mr. Vargas’ experience in founding and growing technology and online media companies led the Board to conclude that Mr. Vargas should serve as one of the Company’s directors.

 

 Voting for Election of Class II Directors

 

The persons named in the enclosed proxy card will vote “FOR” the election of Michael A. Carpenter, Mark N. Kaplan, and Jose Vargas as Class II Directors unless instructed otherwise in the proxy.  Because no other nominees have been properly and timely nominated in accordance with the Bylaws, Messrs. Carpenter, Kaplan, and Vargas will each be elected as Class II Directors as long as they each receive at least one vote for the nominee’s respective election.  Holders of Common Stock are not entitled to cumulate their votes in the election of directors.  Although Messrs. Carpenter, Kaplan, and Vargas have each consented to serve as a director if elected, and the Board has no reason to believe that any of them will be unable to serve as a director, if Messrs. Carpenter, Kaplan, or Vargas withdraws his nomination or otherwise becomes unavailable to serve, the persons named as proxies will vote for any substitute nominee designated by the Board.  Abstentions and “broker non-votes” will not have any effect on the outcome of the voting for the election of Class II Directors as long as a nominee receives at least one vote in favor of the nominee’s election.

 

Recommendation of the Board of Directors

 

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE ELECTION OF

MR. CARPENTER, MR. KAPLAN, AND MR. VARGAS.

 

 

 

PROPOSAL 2

APPROVAL OF AUTOWEB, INC.

2018 EQUITY INCENTIVE PLAN

 

 

Background and Reason for Proposal

On April 12, 2018, upon recommendation of the Compensation Committee of the Board (“Compensation Committee”), the Board approved the adoption of the 2018 Equity Incentive Plan (“2018 Plan”) subject to the approval of the stockholders at the Annual Meeting. If approved by the stockholders, the 2018 Plan will replace the Company’s 2014 Equity Incentive Plan, as amended and restated in 2016 (“2014 Plan”). The total number of shares available for awards under the 2018 Plan will be 2,003,758 shares, less any awards made after December 31, 2017 under the 2014 Plan (counted at the Fungible Share Ratio described below). If the stockholders approve the 2018 Plan at the Annual Meeting, no new awards will be made under the 2014 Plan. All awards under the 2018 Plan are approved by the Compensation Committee or, subject to limited delegation of authority and discretion to award up to 50,000 awards per year, by the Board’s Non-Executive Stock Option Committee. The number of awards that may be approved under the 2018 Plan is not known at this time. The Compensation Committee’s determination to recommend the adoption of the 2018 Plan to the Board was made after the Compensation Committee’s consultation with Frederik W. Cook & Co., the Compensation Committee's independent compensation consultant.

The Board believes a compensation policy that includes a balanced mix of cash and equity is the most effective way to attract and retain talented employees whose interests are aligned with AutoWeb stockholders. The Board recommends stockholder approval of the 2018 Plan because it believes that equity-based compensation:

As of December 31, 2017, a total of 603,758 shares of Common Stock remained available for future awards under the 2014 Plan. If the Company’s stockholders do not approve the 2018 Plan, the 2014 Plan, which was previously approved by the Company’s stockholders, will continue in full force and effect. However, the Board expects that no, or almost no, shares will be available for future awards under the 2014 Plan by the Annual Meeting. Consequently, the Board will be required to alter substantially the Company’s compensation program, which includes equity as well as cash compensation, if the stockholders do not approve the 2018 Plan at the Annual Meeting. The Board believes that approval of the 2018 Plan is important for the Company to continue to recruit and retain talented directors, officers, employees, consultants and advisors. Without approval of the proposed 2018 Plan, the Board believes it will be severely limited in its ability to use equity as a component of its compensation philosophy, a result that would put AutoWeb at a considerable competitive disadvantage to its direct and indirect competitors for high level professionals.

 

It is generally expected that the share reserve under the 2018 Plan, if this Proposal 2 is approved by stockholders, will last AutoWeb for a period of approximately two to three years based upon its average burn rate for 2015-2017.

 

Burn Rate and Overhang

 

In setting and recommending to stockholders the number of additional shares to authorize under the 2018 Plan, the Compensation Committee and the Board considered historical equity awards granted under the 2014 Plan, as well as the Company’s three-year average burn rate for the preceding three fiscal years as follows:

 

 

Year	Time-Vested Stock Options Granted	Performance-Based Stock Options Earned	Time-Vested Stock Awards Granted	Performance-Based Stock Awards Earned	Total	Weighted Average Common Shares Outstanding	Burn Rate
2017	466,600	0	345,000	0	811,600	11,852,539(1)	6.8%
2016	833,900	0	0	0	833,900	10,673,015	7.8%
2015	606,750	2,955	25,000	0	634,705	9,907,066	6.4%
Three-Year Average Burn Rate							7.0%

 

 

The burn rate is the ratio of the number of shares underlying awards granted under the 2014 Plan during a fiscal year (except that the Company identifies performance-based awards as earned) to the number of the Company’s weighted average common shares outstanding for the corresponding fiscal year.

 

The Company calculates overhang as the sum of the total number of shares subject to equity awards outstanding and the total number of shares available for grant under the 2014 Plan (the only plan under which the Company currently makes equity awards) divided by the sum of the total number of shares of Common Stock outstanding, the total number of shares subject to equity awards outstanding (which are not already included in total Common Stock outstanding) and the total number of shares available for grant under the 2014 Plan. The Company’s overhang as of December 31, 2017, was 23.2%. If the 2018 Plan is approved, the additional 1.4 million shares available for issuance would increase the overhang to approximately 29.2%.

 

The following table shows certain information about shares subject to outstanding awards under our Prior Plans (as defined below) as of December 31, 2017:

 

Number of shares that will be authorized for future grant after stockholder approval of the 2018 Plan (1)	2,003,758
Number of restricted shares and performance-based restricted shares at December 31, 2017	453,333
Number of shares relating to outstanding stock options at December 31, 2017	2,745,284
Weighted average remaining term of outstanding options	3.9 years
Weighted average exercise price of outstanding options	$11.50

 

 

Section 162(m) of the IRC

 

Section 162(m) of the Internal Revenue Code (“IRC”) precludes a deduction for compensation paid to certain employees to the extent that the employee’s compensation for the taxable year exceeds $1 million. In December 2017, Congress enacted Public Law No. 115-97, commonly referred to as the “Tax Cuts and Jobs Act.” Among other things, Public Law No. 115-97 eliminated an exception for performance-based compensation from the $1 million deductibility cap and the definition of “outside director” under Section 162(m) of the IRC. Because some states, including California, have not conformed their tax laws to these changes, the 2018 Plan provides that if the Committee determines at the time a Restricted Stock Award, a Restricted Stock Unit Award, a Performance Award or Other Share-Based Award is granted to a participant who is, or is likely to be, as of the end of the tax year in which the Company would claim a deduction under applicable state law in connection with such Award, a “covered employee” within the meaning of Section 162(m) of the IRC as in effect immediately before the enactment of Public Law No. 115-97, then the Committee may determine that lapsing of restrictions thereon and the distribution of cash, shares or other property pursuant thereto, as applicable will be subject to the achievement of one or more objective performance goals established by the Committee and set forth in the 2018 Plan. Approval of Proposal 2 is intended to constitute stockholder approval of the material terms of performance goals for purposes of Section 162(m) of the IRC immediately prior to the enactment Public Law No. 115-97. Although the 2018 Plan includes provisions intended to allow for continued deductibility of performance based compensation under non-conforming state tax laws, there is no assurance that such compensation will continue to be deductible. In addition, the Board has not adopted a policy that all compensation must be deductible under applicable tax laws or be intended to qualify as performance-based compensation.

 

 

 

The following description of the 2018 Plan is qualified in its entirety by reference to, and should be read in conjunction with, the full text of the 2018 Plan, a copy of which is attached to this Proxy Statement as Appendix A.

 

Summary of the 2018 Plan

 

Purpose of the 2018 Plan. The purpose of the 2018 Plan is to assist AutoWeb and its subsidiaries in attracting and retaining individuals who, serving as employees, directors, officers, consultants and/or advisors, are expected to contribute to its success and to achieve long-term objectives that will benefit its stockholders through the additional incentives inherent in the awards under the 2018 Plan.

 

Shares Available. As of the date the stockholders approve this Proposal 2, the total number of shares of Common Stock that may be issued under the 2018 Plan (subject to the adjustment provisions described under “Adjustments upon Changes in Capitalization or Changes in Control ” below) will be 2,003,758 shares, less one share for every one share that was subject to an option or SAR granted under the 2014 Plan after December 31, 2017 and prior to the effective date of the 2018 Plan, and 1.75 shares for every one share that was subject to a Full Value Award granted under the 2014 Plan after December 31, 2017 and prior to the effective date of the 2018 Plan. Any shares that are subject to options or SARs will be counted against this limit as one share for every one share granted, and any shares that are subject to Full Value Awards will be counted against this limit as 1.75 shares for every one share granted. The rate at which Full Value Awards are counted is referred to herein as the “Fungible Share Ratio.”

 

As used in this Proposal 2, “Prior Plans” means, collectively, the Company’s 1998 Stock Option Plan, 2000 Stock Option Plan, Amended and Restated 2001 Restricted Stock and Option Plan, 2004 Restricted Stock and Option Plan, 2010 Equity Incentive Plan, and 2014 Plan. If any shares subject to an award under the 2018 Plan are forfeited, an award expires or an award is settled for cash (in whole or in part), or after December 31, 2017 any shares subject to an award under the Prior Plans are forfeited, or an award under the Prior Plans expires or is settled for cash (in whole or in part), the shares subject to such award or award under the Prior Plans will, to the extent of such forfeiture, expiration or cash settlement, again be available for awards under the 2018 Plan. In the event that withholding tax liabilities arising from an award other than an option or SAR or, after December 31, 2017, an award other than an option or SAR under any Prior Plan are satisfied by the tendering of shares (either actually or by attestation) or by the withholding of shares by the Company, the shares so tendered or withheld shall be added to the shares available for awards under the 2018 Plan. The following shares may not be added to the shares authorized for grant:  (i) shares tendered by the participant or withheld by the Company in payment of the exercise price of an option under the 2018 Plan or after December 31, 2017, an option granted under the Prior Plans, or to satisfy any tax withholding obligation with respect to options or SARs under the 2018 Plan, or after December 31, 2017, options or SARs under the Prior Plans; (ii) shares subject to an SAR under the 2018 Plan, or after December 31, 2017, an SAR granted under the Prior Plans that are not issued in connection with its stock settlement on exercise thereof; and (iii) shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of options under the 2018 Plan or after December 31, 2017, options granted under the Prior Plans.

 

Any shares that again become available for grant as described in preceding paragraph above must be added back as (i) one share if such shares were subject to options or SARs granted under the 2018 Plan or options or SARs granted under the Prior Plans, and (ii) as 1.75 shares if such shares were subject to Full Value Awards granted under the 2018 Plan or Full Value Awards granted under the Prior Plans.

 

Shares of Common Stock under awards made in substitution or exchange for awards granted by a company acquired by the Company or a subsidiary, or with which the Company or any subsidiary combine(s), do not reduce the maximum number of shares that may be issued under the 2018 Plan. In addition, if a company acquired by the Company or a subsidiary, or with which the Company or any subsidiary combine(s), has shares remaining available under a plan approved by its stockholders, the available shares (adjusted to reflect the exchange or valuation ratio in the acquisition or combination) may be used for awards under the 2018 Plan and will not reduce the maximum number of shares of Common Stock that may be issued under the 2018 Plan; provided, however, that awards using such available shares may not be made after the date awards or grants could have been made under the pre-existing plan, absent the acquisition or combination, and may only be made to individuals who were not employees or directors of AutoWeb or its subsidiaries prior to the acquisition or combination.

 

 

 

The maximum number of shares of Common Stock that may be issued under the 2018 Plan pursuant to the exercise of incentive stock options is 2,003,758 shares, subject to the adjustment provisions described under “Adjustments Upon Changes in Capitalization or Changes in Control ” below.

 

Limitation on Awards to Non-Employee Directors. Notwithstanding any other provision of the 2018 Plan to the contrary, the aggregate of the following during any single calendar year shall not exceed $750,000, and any compensation that is deferred shall be counted toward this limit for the year in which it was first earned, and not when paid or settled if later: (i) the aggregate grant date fair value (as calculated by the Company for financial accounting purposes) of all awards granted to any non-employee Director for services during such calendar year and (ii) the sum of all cash payments to any non-employee Director made for services during such calendar year.

 

Eligibility. Options, SARs, restricted stock awards, restricted stock unit awards and performance awards may be granted under the 2018 Plan. Options may be either “incentive stock options,” as defined in Section 422 of the IRC, or nonstatutory stock options. Awards may be granted under the 2018 Plan to any employee or officer of AutoWeb or its subsidiaries, non-employee member of the Board and consultant or advisor (subject to meeting conditions specified in the 2018 Plan) who is a natural person and provides services to the Company or a subsidiary, except for incentive stock options which may be granted only to the Company’s employees or employees of a subsidiary. The 2018 Plan defines a “subsidiary” as any corporation, limited liability company, partnership, joint venture or similar entity in which the Company owns, directly or indirectly, an equity interest possessing more than 50% of the combined voting power of the total outstanding equity interests of such entity; provided, however, in the case of an incentive stock option, “subsidiary” is defined to mean any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the relevant time each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain.

 

Awards to be Granted to Certain Individuals and Groups. As of the Record Date, approximately 235 employees and non-employee directors were eligible to participate in the 2018 Plan. The Compensation Committee, in its discretion, selects the persons to whom awards may be granted, determines the type of awards, determines the times at which awards will be made, determines the number of shares subject to each award (or the dollar value of certain performance awards), and determines the other terms and conditions relating to the awards. For this reason, it is not possible to determine the benefits or amounts that will be received by any particular person in the future.

  

Limits on Awards to Participants. The 2018 Plan provides that no participant may (i) be granted options or SARs during any calendar year with respect to more than 500,000 shares of Common Stock and (ii) be granted restricted stock awards, restricted stock unit awards, performance awards and/or Other Share-Based Awards (as defined below) intended to comply with the qualified performance-based exception under Section 162(m) of the IRC as in effect immediately before enactment of Public Law No. 115-97 and applicable state tax law and in any calendar year that are denominated in shares and under which more than 500,000 shares may be earned for each 12 months in the performance period. In addition to the foregoing, during any calendar year no participant may be granted performance awards that are intended to comply with the qualified performance-based exception under Section 162(m) of the IRC as in effect immediately before enactment of Public Law No. 115-97 and applicable state tax law and are denominated in cash under which more than $2,500,000 may be earned for each 12 months in the performance period (together, collectively with the limitations in the preceding sentence, the “Limitations”). If an award is cancelled, the cancelled award will continue to be counted toward the applicable Limitation (or, if denominated in cash, toward the dollar amount in the preceding sentence).

 

Administration. The 2018 Plan will be administered by the Compensation Committee (or a subcommittee upon approval of the Board) which must consist of at least two members of the Board, each of whom must qualify as a “non-employee director” under Rule 16b-3 of the Securities Exchange Act of 1934, as amended (“Securities Exchange Act”), to the extent required, an “outside director” under Section 162(m) of the IRC as in effect immediately before enactment of Public Law No. 115-97 and an “independent director” under the rules of the principal U.S. securities exchange on which the Common Stock is traded. The Compensation Committee has the authority to determine the terms and conditions of awards, interpret and administer the 2018 Plan. The Compensation Committee may (i) delegate to a committee of one or more directors the right to make awards, cancel or suspend awards and otherwise take action on its behalf under the 2018 Plan, and (ii) to the extent permitted by law, delegate to an executive officer or a committee of executive officers the right to designate officers (other than those officers subject to Section 16 of the Securities Exchange Act) and employees of the Company or any subsidiary to be recipients of awards and determine the number of awards to be received by those officers and employees; provided that any resolution of the Compensation Committee must comply with Sections 152 or 157 of the Delaware General Corporation Law, as the case may be, and the Compensation Committee may not authorize an officer to designate himself or herself as a recipient of a stock option.

 

 

 

Stock Options. The Compensation Committee may grant either non-qualified stock options or incentive stock options. A stock option entitles the recipient to purchase a specified number of shares of Common Stock at a fixed price subject to terms and conditions set by the Compensation Committee. The purchase price of shares of Common Stock covered by a stock option cannot be less than 100% of the fair market value of the Common Stock on the date the option is granted.

 

However, the exercise price of an incentive stock option granted to any person, who at the time of grant, owns (or is deemed to own) stock possessing more than 10% of the total combined voting power of the Company or any parent or subsidiary of the Company (a “10% Stockholder”), must be at least 110% of the fair market value of the Common Stock on the date of grant. Fair market value of the Common Stock is generally equal to the closing price for the Common Stock on the principal securities exchange on which the Common Stock is traded on the date the option is granted (or if there was no closing price on that date, on the last preceding date on which a closing price was reported). To the extent that the aggregate fair market value, determined at the time of grant, of shares of Common Stock with respect to incentive stock options that are exercisable for the first time by a participant during any calendar year (under all plans of the Company or parent or subsidiary) exceed $100,000, the portion exceeding that amount will be treated as non-statutory options.

 

The 2018 Plan permits payment of the purchase price of stock options to be made by cash or cash equivalents, shares of Common Stock previously acquired by the participant, any other form of consideration approved by the Compensation Committee and permitted by applicable law (including withholding of shares of Common Stock that would otherwise be issued on exercise), or any combination thereof. Options granted under the 2018 Plan must expire no later than seven years from the date of grant; however, incentive stock options granted to a 10% Stockholder must expire no later than five years from the date of grant.

 

Stock Appreciation Rights. The Compensation Committee is authorized to grant SARs in conjunction with a stock option or other award granted under the 2018 Plan and to grant SARs separately. The grant price of a SAR may not be less than 100% of the fair market value of a share of Common Stock on the date the SAR is granted. The term of a SAR may be no more than seven years from the date of grant.

 

Upon exercise of a SAR, the participant will have the right to receive the excess of the fair market value of the shares covered by the SAR on the date of exercise over the grant price. Payment may be made in cash, shares of Common Stock or other property, or any combination thereof, as the Compensation Committee may determine. Shares issued upon the exercise of SARs are valued at their fair market value as of the date of exercise.

 

Restricted Stock Awards. Restricted stock awards may be issued either alone or in addition to other awards granted under the 2018 Plan, and are also available as a form of payment of performance awards and other earned cash-based incentive compensation. The Compensation Committee determines the terms and conditions of restricted stock awards, including the number of shares of Common Stock granted, and any conditions for vesting that must be satisfied, which typically will be based principally or solely on continued provision of services, but may include a performance-based component. Unless otherwise provided in, and subject to the execution of, the award agreement, the holder of a restricted stock award will have the rights of a stockholder from the date of grant of the award, including the right to vote the shares of Common Stock and the right to receive distributions on the shares; provided, however, that any dividends, shares or other property distributed with respect to the award will be subject to the same restrictions and risk of forfeiture as the award.

 

 

 

Restricted Stock Unit Awards. Awards of restricted stock units having a value equal to an identical number of shares of Common Stock may be granted either alone or in addition to other awards granted under the 2018 Plan, and are also available as a form of payment of performance awards granted under the 2018 Plan and other earned cash-based incentive compensation. The Compensation Committee determines the terms and conditions of restricted stock units. The holder of a restricted stock unit award will not have voting rights with respect to the award. Any dividend equivalents, shares or other property distributed with respect to the award will be subject to the same restrictions and risk of forfeiture as the award.

 

Other Share-Based Awards. The 2018 Plan also provides for the award of shares of Common Stock and other awards that are valued in whole or in part by reference to, or are otherwise based on, Common Stock or other property (“Other Share-Based Awards”). These awards may be granted above, or in addition to, other awards under the 2018 Plan. Other Share-Based Awards may be paid in cash, shares of Common Stock or other property, or a combination thereof, as determined by the Compensation Committee. The Compensation Committee determines the terms and conditions of Other Share-Based Awards.

 

Performance Awards. Performance awards provide participants with the opportunity to receive shares of Common Stock, cash or other property based on performance and other vesting conditions. Performance awards may be granted from time to time and on such terms and conditions as determined at the discretion of the Compensation Committee. Subject to the share limit and maximum dollar value set forth above, the Compensation Committee has the discretion to determine (i) the number of shares of Common Stock under, or the dollar value of, a performance award; and (ii) the conditions that must be satisfied for grant or for vesting, which typically will be based principally or solely on achievement of performance goals. The performance period for performance awards may not be longer than five years.

  

Performance Criteria. If the Compensation Committee determines at the time a restricted stock award, a restricted stock unit award, a performance award, or Other Share-Based Award is granted to a participant who is or is likely to be, as of the end of the tax year in which the Company would claim a deduction under applicable state law in connection with such award, a “covered employee” within the meaning of Section 162(m) of the IRC as in effect immediately before the enactment of Public Law No. 115-97, then the Committee may determine that the lapsing of restrictions thereon and the distribution of cash, shares or other property pursuant thereto, as applicable, will be based on the attainment of specified levels of one or more of the following: net sales; revenue; revenue growth or product revenue growth; operating income (before or after taxes); pre- or after-tax income or loss (before or after allocation of corporate overhead and bonus); earnings or loss per share; net income or loss (before or after taxes); return on equity; total stockholder return; return on assets or net assets; appreciation in and/or maintenance of the price of the shares or any other publicly-traded securities of the Company; market share; gross profits; earnings or losses (including earnings or losses before taxes, before interest and taxes, or before interest, taxes, depreciation and amortization); economic value-added models or equivalent metrics; comparisons with various stock market indices; reductions in costs; cash flow or cash flow per share (before or after dividends); return on capital (including return on total capital or return on invested capital); cash flow return on investment; improvement in or attainment of expense levels or working capital levels, including cash, inventory and accounts receivable; operating margin; gross margin; year-end cash; cash margin; debt reduction; stockholders equity; operating efficiencies; market share; customer satisfaction; customer growth; employee satisfaction; regulatory achievements (including submitting or filing applications or other documents with regulatory authorities or receiving approval of any such applications or other documents and passing pre-approval inspections); strategic partnerships or transactions (including in-licensing and out-licensing of intellectual property); establishing relationships with commercial entities with respect to the marketing, distribution and sale of the Company’s products (including with group purchasing organizations, distributors and other vendors); lead supply or other supply chain achievements; co-development, co-marketing, profit sharing, joint venture or other similar arrangements; financial ratios (including those measuring liquidity, activity, profitability or leverage); cost of capital or assets under management; financing and other capital raising transactions (including sales of the Company’s equity or debt securities); factoring transactions; sales or licenses of the Company’s assets (including its intellectual property, whether in a particular jurisdiction or territory or globally; or through partnering transactions); implementation, completion or attainment of measurable objectives with respect to research, development, manufacturing, commercialization, products or projects, production volume levels, acquisitions and divestitures; factoring transactions; and recruiting and maintaining personnel. These performance goals also may be based solely by reference to the Company’s performance or the performance of a subsidiary, division, business segment or business unit of the Company, or based upon the relative performance of other companies or upon comparisons of any of the indicators of performance relative to other companies. Any performance goals that are financial metrics, may be determined in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), in accordance with accounting principles established by the International Accounting Standards Board (“IASB Principles”), or may be adjusted when established to include or exclude any items otherwise includable or excludable under GAAP or under IASB Principles. The Compensation Committee may also exclude the impact of an event or occurrence which the Compensation Committee determines should appropriately be excluded, including (i) restructurings, discontinued operations, items of an unusual nature or infrequency of occurrence or non-recurring items; (ii) an event either not directly related to the operations of the Company, subsidiary, division, business segment or business unit or not within the reasonable control of management; (iii) the cumulative effects of tax or accounting changes in accordance with U.S. generally accepted accounting principles; (iv) asset write-downs, (v) litigation or claim judgments or settlements; (vi) acquisitions or divestitures; (vii) reorganization or change in the corporate structure or capital structure of the Company; (viii) foreign exchange gains and losses; (ix) a change in the fiscal year of the Company; (x) the refinancing or repurchase of bank loans or debt securities; (xi), unbudgeted capital expenditures; (xii) the issuance or repurchase of equity securities and other changes in the number of outstanding shares; (xiii) conversion of some or all of convertible securities to common stock; (xiv) any business interruption event; or (xv) the effect of changes in other laws or regulatory rules affecting reported results. With respect to any such restricted stock award, restricted stock unit award, performance award, or Other Share-Based Award, the Compensation Committee may adjust downwards, but not upwards, the amount payable pursuant to such award, and the Compensation Committee may not waive the achievement of the applicable performance goals except in the case of the death or disability of the participant or a change in control of the Company. The Compensation Committee has the power to impose such other restrictions on such awards as it may deem necessary or appropriate to ensure that such awards satisfy all requirements for “qualified performance-based compensation” within the meaning of Section 162(m) of the IRC in effect immediately before enactment of Public Law No. 115-97 and applicable state tax law. Notwithstanding the foregoing, the Compensation Committee, in its sole discretion, may grant performance-based awards that are based on other metrics, not specifically set forth above.

 

 

 

Dividends; Dividend Equivalents. The Committee is authorized to establish procedures pursuant to which the payment of any award may be deferred. Awards other than options and SARs may, if determined by the Compensation Committee, provide that the participant will be entitled to receive amounts equivalent to cash, stock or other property dividends declared with respect to shares of Common Stock covered by an award. The Compensation Committee may provide that these amounts will be deemed to have been reinvested in additional shares of Common Stock or otherwise reinvested; provided, however, that in all cases such dividend equivalents shall be subject to the same vesting or performance conditions and risks of forfeiture as the underlying award and shall not be paid unless and until the underlying award vests.

 

No Repricing. The 2018 Plan prohibits option and SAR repricings (other than to reflect stock splits, spin-offs or other corporate events described under “Adjustments upon Changes in Capitalization or Changes in Control ” below) unless stockholder approval is obtained. For purposes of the 2018 Plan, a “repricing” means a reduction in the exercise price of an option or the grant price of a SAR, the cancellation of an option or SAR in exchange for cash or another award (except in connection with a change in control or for awards granted in assumption of or in substitution for awards previously granted by a company acquired by the Company or with which it combines) under the 2018 Plan if the exercise price or grant price of the option or SAR is greater than the fair market value of the Common Stock, or any other action with respect to an option or SAR that would be treated as a repricing under the rules of the principal U.S. securities exchange on which the Common Stock is traded.

 

Nontransferability of Awards. In general, no award and no shares that have not been issued or as to which any applicable restriction, performance or deferral period has not lapsed, may be sold, assigned, transferred, pledged or otherwise encumbered, other than by will or the laws of descent and distribution, and such award may be exercised during the life of the participant only by the participant or the participant’s guardian, members of a committee for incompetent former employees or similar persons duly authorized by law to administer the estate or assets of former employees. To the extent and under such terms and conditions as determined by the Compensation Committee and except for incentive stock options, options may be exercised and the shares acquired on exercise may be resold by a participant’s family member who has acquired the options from the participant through a gift or a domestic relations order (a “Permitted Assignee”). A “family member” includes any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships, any person sharing the participant’s household (other than a tenant or employee), a trust in which these persons have more than 50% of the beneficial interest, a foundation in which these persons (or the participant) control the management of assets, and any other entity in which these persons (or the participant) own more than 50% of the voting interests; provided that such Permitted Assignee will be bound by and subject to all of the terms and conditions of the 2018 Plan and the award agreement relating to the transferred award and must execute an agreement satisfactory to the Company evidencing those obligations; and provided further that the participant remains bound by the terms and conditions of the 2018 Plan. Awards may not be transferred to third party financial institutions and may not be transferred for value. A transfer for value does not include:  (i) a transfer under a domestic relations order in settlement of marital property rights; or (ii) a transfer to an entity in which more than 50% of the voting interests are owned by the family members (or the participant) in exchange for an interest in that entity. An incentive stock option is not transferable (other than by will or by the laws of descent and distribution) by the participant and is exercisable, during the lifetime of the participant, only by the participant.

 

 

 

Adjustments upon Changes in Capitalization or Changes in Control. In the event of any merger, reorganization, consolidation, recapitalization, dividend or distribution (whether in cash, shares or other property, other than a regular cash dividend), stock split, reverse stock split, spin-off or similar transaction or other change in the Company’s corporate structure affecting its Common Stock or the value thereof, appropriate adjustments to the 2018 Plan and awards will be made as the Compensation Committee determines to be equitable and appropriate, including adjustments in the number and class of shares of stock subject to the 2018 Plan, the number, class and option or exercise price of shares subject to awards outstanding under the 2018 Plan, and the limits on the number of awards that any person may receive.

 

Under the 2018 Plan, award agreements may provide that (i) options and SARs outstanding as of the date of the change in control (as defined in the 2018 Plan attached hereto) will be cancelled and terminated without payment therefor if the fair market value (as defined in the 2018 Plan) of one share of the Common Stock as of the date of the change in control is less than the per share option exercise price or SAR grant price, and (ii) all performance awards will be considered to be earned and payable (either in full or pro rata based on the portion of the performance period completed as of the date of the change in control), and any limitations or other restrictions will lapse, and performance awards will be immediately settled or distributed. In addition, unless otherwise provided in an award agreement, in the event of a change in control of the Company in which the successor company assumes or substitutes for an option, SAR, restricted stock award, restricted stock unit award or Other Share-Based Award (or in which the Company is the ultimate parent corporation and continues the award), if a participant’s employment with the successor company (or the Company) or a subsidiary thereof, terminates within 24 months following such change in control (or such other period set forth in the award agreement, including prior thereto, if applicable) and under the circumstances specified in the award agreement:

 

 

 

 

 

 

Unless otherwise provided in an award agreement, in the event of a change in control of the Company to the extent the successor company does not assume or substitute for an option, SAR, restricted stock award, restricted stock unit award or Other Share-Based Award (or in which the Company is the ultimate parent corporation and does not continue the award), then immediately prior to the change in control:

 

 

 

 

The Compensation Committee, in its discretion, may determine that, upon the occurrence of a change in control of the Company, each option and SAR outstanding will terminate within a specified number of days after notice to the participant, and/or that each participant will receive, with respect to each share subject to such option or SAR, an amount equal to the excess of the fair market value of such share immediately prior to the occurrence of such change in control over the exercise price per share of such option and/or SAR; such amount to be payable in cash, in one or more kinds of stock or property (including the stock or property, if any, payable in the transaction) or in a combination thereof, as the Compensation Committee, in its discretion, may determine.

 

Termination of Employment. The Compensation Committee will determine and set forth in the award agreement whether any awards will continue to be exercisable, and the terms of exercise, on and after the date the participant ceases to be employed by, or to otherwise provide services to, the Company, whether by reason of death, disability, voluntary or involuntary termination of employment or service, or otherwise.

 

Amendment and Termination. The 2018 Plan may be amended or terminated by the Board except that stockholder approval is required for any amendment to the 2018 Plan which increases the number of shares of Common Stock available for awards under the 2018 Plan (except for adjustments described under “Adjustments Upon Changes of Capitalization or Changes in Control ” above), expands the types of awards available under the 2018 Plan, changes the class of persons eligible to receive incentive stock options, materially expands the class of persons eligible to participate in the 2018 Plan, eliminates the requirements of the 2018 Plan with respect to minimum exercise price, minimum grant price and stockholder approval, or increases the maximum permissible term of any option or SAR specified in the 2018 Plan. The 2018 Plan may be amended without shareholder approval to provide for awards that do not receive favorable tax treatment under Code Section 162(m) or 422 or otherwise. No amendment or termination of the 2018 Plan may materially impair a participant’s rights under an award previously granted under the 2018 Plan without the consent of the participant.

 

The 2018 Plan will expire on June 19, 2028, except with respect to awards then outstanding, and no further awards may be granted thereafter.

 

Federal Income Tax Consequences

 

The following discussion summarizes certain federal income tax considerations of awards under the 2018 Plan; however, it does not purport to be complete and does not describe the state, local or foreign tax considerations or the consequences for any particular individual. Tax consequences may vary depending on particular circumstances, and the federal income tax laws are subject to change, sometimes with retroactive effect. Participants in the 2018 Plan who are residents of or are employed in a country other than the United States may be subject to taxation in accordance with the tax laws of that particular country in addition to or in lieu of United States federal income taxes.

 

 

 

Stock Options. A participant does not realize ordinary income on the grant of a stock option. Upon exercise of a non-qualified stock option, the participant will realize ordinary income equal to the excess of the fair market value of the shares of Common Stock on the exercise date over the option exercise price paid. The cost basis of the shares acquired for capital gain purposes on the future sale of the shares is the fair market value of the shares at the time of exercise, and the holding period of the shares for capital gain purposes begins on the date on which the option is exercised and not the date on which the option was granted. Upon exercise of an incentive stock option, the excess of the fair market value of the shares of Common Stock acquired over the option exercise price will be an item of tax preference to the participant, which may be subject to an alternative minimum tax for the year of exercise. If no disposition of the shares is made within two years from the date of grant of the incentive stock option or within one year after the transfer of the shares to the participant, the participant does not realize taxable income for regular income tax purposes as a result of exercising the incentive stock option; the tax basis of the shares received for capital gain purposes is the option exercise price paid; and any gain or loss realized on the sale of the shares is long-term capital gain or loss. If the participant disposes of the shares within the two-year or one-year periods referred to above, the participant will realize ordinary income for regular income tax purposes at that time in an amount equal to the excess of the fair market value of the shares at the time of exercise (or the net proceeds of disposition, if less so long as certain conditions are satisfied) over the option exercise price paid. Any gain in excess of that amount will be treated as a capital gain. A capital gain will be long-term if the participant’s holding period for the shares is more than 12 months. For capital gain purposes on such a disposition, the tax basis of the shares will be equal to the exercise price paid, plus the amount of ordinary income recognized by the participant as a result of such disposition. Special rules may apply with respect to certain tax basis adjustments for purposes of computing a participant’s alternative minimum taxable income on a subsequent sale of the shares and certain tax credits which may arise with respect to participants subject to the alternative minimum tax.

 

Stock Appreciation Rights. No ordinary income will be realized by a participant in connection with the grant of a SAR. When the SAR is exercised, the participant will realize ordinary income in an amount equal to the sum of the amount of any cash received and the fair market value of the shares of Common Stock or other property received upon the exercise.

 

Restricted Stock, Performance and Restricted Stock Unit Awards. The participant will not realize ordinary income on the grant of an unvested restricted stock award (or an unvested performance award if the shares of Common Stock are issued on grant), but will realize ordinary income when the shares subject to the award become vested in an amount equal to the excess of (i) the fair market value of the shares on the vesting date over (ii) the purchase price, if any, paid for the shares. The participant may, however, elect under Section 83(b) of the IRC to include as ordinary income in the year unvested shares are granted, an amount equal to the excess of (i) the fair market value of unvested shares on the date of issuance, over (ii) the purchase price, if any, paid for the shares. If the Section 83(b) election is made, the participant will not realize any additional taxable income when the shares become vested. However, if the participant subsequently fails to vest in such shares, the participant will not be entitled to a tax deduction for the amount of income previously recognized by the participant as a result of filing the Section 83(b) election. The Section 83(b) election must be filed by the participant with the Internal Revenue Service within 30 days after the date on which the unvested shares are issued to the participant.

 

The participant will not realize ordinary income on the grant of a restricted stock unit award (or a performance award under which shares of Common Stock are not issued on grant), but will realize ordinary income when the shares subject to the award are issued to the participant after they become vested. The amount of ordinary income will be equal to the excess of (i) the fair market value of the shares on the date they are issued over (ii) the purchase price, if any, paid for the award. Under federal income tax laws, a participant is not entitled to file a Section 83(b) election upon the grant of a restricted stock unit.

 

Upon disposition of shares of Common Stock acquired under a restricted stock award, performance award or restricted stock unit award, the participant will realize a capital gain or loss equal to the difference between the selling price and the sum of the amount paid for the shares plus any amount realized as ordinary income upon vesting of the shares. The participant’s holding period in shares issued pursuant to a restricted stock unit award begins on the date the shares are actually issued to the participant. The participant’s holding period for capital gain purposes in shares subject to a restricted stock award will generally begin on the vesting date of the shares. However, if the participant files a Section 83(b) election with respect to unvested shares subject to a restricted stock award, the participant’s holding period will begin on the date the shares are issued.

 

 

 

Tax Withholding.  Any ordinary income that is recognized by an employee on the vesting, exercise or issuance of any award under the 2018 Plan or as a result of a Section 83(b) election filed by the employee is subject to withholding of income and employment taxes.

 

Company Tax Deduction. The Company generally will be entitled to a tax deduction in connection with an award under the 2018 Plan, subject to the limitation on deductibility set forth in Section 162(m) of the IRC, in an amount equal to the ordinary income realized by a participant and at the time the participant realizes such income (for example, on the exercise of a nonqualified stock option or vesting of a restricted stock award). However, the Company will not be entitled to a deduction for any income recognized by a participant for alternative minimum taxable income purposes on the exercise of an incentive stock option. As amended by Public Law No. 115-97, Section 162(m) of the IRC limits the deductibility of compensation paid to any person who served as the Chief Executive Officer or Chief Financial Officer at any time during the taxable year and the three other most highly compensated officers for the taxable year. Consequently, compensation paid to these persons will be deductible by the Company for federal income tax purposes only to the extent that it does not exceed $1 million.

 

Section 409A of the IRC. If the settlement of, or issuance of shares with respect to, a restricted stock unit, performance award or other award is deferred following the vesting of such restricted stock unit or award, such unit or award may be subject to IRC Section 409A. Section 409A of the IRC imposes certain restrictions on the timing and form of payment of deferred compensation.

 

Section 280G of the IRC.  For certain persons, if a change in control (as defined in the IRC) of the Company causes an award to vest or become newly payable, or if the award was granted within one year of a change in control and the value of such award or vesting or payment, when combined with all other payments in the nature of compensation contingent on such change in control, equals or exceeds the dollar limit provided in Section 280G of the IRC (generally, this dollar limit is equal to three times the five-year historical average of the individual’s annual compensation received from the Company), then the entire amount exceeding the individual’s average annual compensation will be considered an excess parachute payment. The recipient of an excess parachute payment must pay a 20% excise tax on this excess amount, and the Company cannot deduct the excess amount from its taxable income.

 

Accounting for Stock-Based Compensation

 

The Company accounts for its stock-based payments, including stock options and restricted stock, in accordance with the requirements of U.S. GAAP, including Financial Accounting Standard Board’s Accounting Standards Codification (“ASC”) Topic 718 “Compensation-Stock Compensation” (“FASB ASC Topic 718”). The Company recognizes share-based compensation based on the fair value of awards, net of estimated forfeitures on a straight line basis over the requisite service periods, which is generally over the award’s respective vesting period, or on an accelerated basis over the estimated performance periods for options with performance conditions. Restricted stock fair value is measured on the grant date based on the quoted market price of the Common Stock, and the stock option fair value is estimated on the grant date using the Black-Scholes option pricing model based on the underlying Common Stock closing price as of the date of grant, the expected term, stock price volatility and risk-free interest rates.

 

 Vote Required

 

The affirmative vote of a majority of the shares of Common Stock present in person or by proxy and entitled to vote at the Annual Meeting and on the proposal is required to approve Proposal 2. The persons named in the enclosed proxy card will vote FOR the proposal unless instructed otherwise in the proxy. Abstentions will have the same effect as votes against the proposal. “Broker non-votes” will not have any effect on the outcome of this proposal.

 

Recommendation of the Board of Directors

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL 2.

   

 

 

PROPOSAL 3

RATIFICATION OF APPOINTMENT OF

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Board’s Audit Committee has appointed Moss Adams LLP (“Moss Adams”) as the Company’s independent registered public accounting firm for 2018.  The Audit Committee and the Board recommend that the Company’s stockholders ratify this appointment.  In line with this recommendation, the Board intends to introduce the following resolution at the Annual Meeting:

 

RESOLVED , that the appointment of Moss Adams LLP as the independent registered public accounting firm for the Company for the year 2018 is ratified.

 

Stockholder ratification of the Audit Committee’s selection of Moss Adams as the Company’s independent registered public accounting firm is not required by the Bylaws or otherwise.  Nevertheless, the Board is submitting the selection of Moss Adams to the stockholders for ratification as a matter of good corporate practice and will reconsider whether to retain Moss Adams if the stockholders fail to ratify the Audit Committee’s selection.  In addition, even if the stockholders ratify the selection of Moss Adams, the Audit Committee may in its discretion appoint a different independent registered public accounting firm at any time during the year if the Audit Committee determines that a change is in the best interests of the Company.  A member of Moss Adams is expected to attend the Annual Meeting to make a statement if the member desires and to respond to appropriate questions that may be asked by stockholders.

 

Vote Required

 

The affirmative vote of a majority of the shares of Common Stock present in person or by proxy and entitled to vote at the Annual Meeting and on the proposal is required to approve Proposal 3. The persons named in the enclosed proxy card will vote “FOR” the proposal unless instructed otherwise in the proxy. Abstentions will have the same effect as votes against the proposal. “Broker non-votes” will not have any effect on the outcome of this proposal.

 

Board of Directors Recommendation

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL 3.

 

 

BOARD OF DIRECTORS

 

The current members of the Board of AutoWeb are as follows:

Name		Age		Position
Michael J. Fuchs		72		Chairman of the Board
Michael A. Carpenter		71		Director
Matias de Tezanos		38		Director
Mark N. Kaplan		88		Director
Jared R. Rowe		44		Director, President and Chief Executive Officer
Jeffrey M. Stibel		44		Director
Janet M. Thompson		68		Director
Jose Vargas		39		Director

  

 Michael J. Fuchs. Mr. Fuchs has served as a director of AutoWeb since September 1996 and became Chairman in June 1998.  Since May 2001, Mr. Fuchs has been engaged in private investing for his own behalf.  From November 2000 to May 2001, Mr. Fuchs was Chief Executive Officer of MyTurn.com, Inc. and was Interim Chief Executive Officer from April 2000 to October 2000.  Mr. Fuchs was a consultant from November 1995 to April 2000.  Mr. Fuchs was Chairman and Chief Executive Officer of Home Box Office, a division of TimeWarner Entertainment Company, L.P., a leading pay-television company, from October 1984 until November 1995, and Chairman and Chief Executive Officer of Warner Music Group, a division of Time Warner Inc., from May 1995 to November 1995.  Mr. Fuchs holds a B.A. Degree from Union College and a J.D. Degree from the New York University School of Law.  Mr. Fuchs was a significant early investor in the Company.  Mr. Fuchs’ experience as an executive officer in various entertainment and media companies and his broad investment and management experience led the Board to conclude that Mr. Fuchs should serve as one of the Company’s directors.

 

Michael A. Carpenter.  See Mr. Carpenter’s biographical information included under the section of this Proxy Statement entitled “PROPOSAL 1–NOMINATION AND ELECTION OF DIRECTORS–Nominees for Class II Directors.”

 

Matias de Tezanos. Mr. de Tezanos has served as a director of AutoWeb since October 1, 2015 and as the Company’s Chief Strategy Officer from October 1, 2015 to February 13, 2017. From October 1, 2013 to October 1, 2015, Mr. de Tezanos was a director and chief executive officer of a company that provided an internet-based, pay-per-click advertising marketplace for the automotive industry, which was acquired by the Company as of October 1, 2015. Mr. de Tezanos is a co-founder, director and the Chief Executive Officer of PeopleFund, a holding company that is focused on investments in technology, internet and media, and a co-founder of, and currently serves as co-managing director and chief executive officer of PF Holding, a holding company that is focused on investments in technology, internet and media affiliated with PeopleFund. Mr. de Tezanos also serves as president and a director of PF Auto, an entity affiliated with PeopleFund, and secretary and a director of Auto Holdings, also an entity affiliated with PeopleFund. In addition, Mr. de Tezanos is an officer of director of a member of privately-held companies, including Ignite Holdings Company, Inc. DBA KingoEnergy, a global company that offers off-grid communities prepaid solar energy service in developing countries, Iguama Inc., an online marketplace offering US products in Latin America, P3 Global Management Inc., a smart city infrastructure development and advisory firm, Bidtellect, Inc., CLPF, Inc., CookUnity Inc., Global Media, Ltd., Healthcare.com Insurance Services, LLC, Kaptyn Inc. (prior P3GM Holdings, Inc.), Longevity Holdings, Inc., Media Assets Management Inc., Orionis Biosciences LLC, PFO Investment, LLC, Startups.com Holding Inc., Blue Mountain 30 Inc., Blue Mountain 31 Inc., Blue Pacific Ventures Inc., Classifieds Corp., Gray Mountain Inc., Mapfit Inc., Moshos Inc., People Ventures, Inc., Petrol Ventures Inc., PF Classifieds Inc., PF Healthcare Inc., PFO Investment, Inc., PFP Investment, Inc., RDBCOM Corporation, and Startups.com Inc. Mr. de Tezanos attended the Conservatory of Music in Guatemala in 2000.

 

Mr. de Tezanos was appointed to the Board pursuant to the Stockholder Agreement described below under the section of this Proxy Statement entitled “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT” upon AutoWeb’s acquisition of Autobytel, Inc. (formerly AutoWeb, Inc.) as of October 1, 2015. Mr. de Tezanos serves as one of the two representatives on the Board designated by the former owners of Autobytel, Inc. Mr. de Tezanos’ experience in founding and growing technology and online media companies led the Board to conclude that Mr. de Tezanos should serve as one of the Company’s directors.

 

 

 

Mark N. Kaplan. See Mr. Kaplan’s biographical information included under the section of this Proxy Statement entitled “PROPOSAL 1–NOMINATION AND ELECTION OF DIRECTORS–Nominees for Class II Directors.”

 

Jared R. Rowe. Mr. Rowe was appointed President and Chief Executive Officer, and as a director, of AutoWeb, Inc. on April 12, 2018.  Mr. Rowe was Senior Operating Executive at Cerberus Operations and Advisory Company (“Cerberus”) from July 2017 to April 2018, a proprietary operations affiliate of Cerberus Capital Management L. P. which is a leading private investment firm.  Prior to his tenure at Cerberus, he was the Chief Executive Officer at YP LLC from September 2016 to June 2017, a leading local marketing solutions provider in the U.S. dedicated to helping local businesses and communities grow and a Cerberus portfolio company.  From 2010 until 2016, Mr. Rowe held several senior leadership positions within Cox Automotive, including President of Cox Automotive’s Media Solutions Group, where he was responsible for leading the AutoTrader, Kelley Blue Book, Dealer.com and Haystack businesses.  Mr. Rowe has a Master of Business Administration from the Stephen M. Ross School of Business at the University of Michigan at Ann Arbor and received his Bachelor of Business Administration, Automotive Marketing from Northwood University. Mr. Rowe’s management experience of more than two decades in the automotive and digital marketing industries led the Board to enter into an employment agreement with Mr. Rowe that provides for his appointment as the Company’s President and Chief Executive Officer and to serve as one of the Company’s directors.

 

Jeffrey M. Stibel.  Mr. Stibel has served as a director of AutoWeb since December 2006.  He has been a partner of Bryant Stibel & Company since its inception in 2013 and has overseen the firm’s venture and private equity investments.  Mr. Stibel was previously president and chief executive officer of Web.com, Inc. and The Dun & Bradstreet Credibility Corporation, and currently serves as Dun & Bradstreet Corporation’s Vice Chairman. Mr. Stibel received a Bachelor’s Degree in psychology, philosophy and cognitive science from Tufts University, a Master’s Degree from Brown University, where he was the recipient of a Brain and Behavior Fellowship while studying for a PhD.  Mr. Stibel’s experience as an executive officer of various online marketing and technology companies led the Board to conclude that Mr. Stibel should serve as one of the Company’s directors.

 

Janet M. Thompson.  Ms. Thompson has served as a director of AutoWeb since March 2008.  Since January 1, 2015, Ms. Thompson has been Senior Vice President of Ipsos Automotive, a global automotive market research company. Prior to that Ms. Thompson was Vice President, Marketing of Advanstar Communications Inc., the leading provider of integrated media solutions to the automotive aftermarket, pharmaceutical, healthcare, power sports and fashion industries from July 2011 to January 1, 2015; Vice President, Automotive Group for The Marketing Arm, an Omnicom Group agency, from January 2011 to June 2011; Executive Vice President of the Diversified Agency Services Division of Omnicom Group, an advertising firm, from November 2007 to August 2010; Vice President, Marketing Nissan and Infiniti Divisions of Nissan North America, from July 2004 to September 2007; and from July 1999 to July 2004, Ms. Thompson was Chief Executive Officer and President of The Designory, Inc., a marketing firm owned by the Omnicom Group.  Ms. Thompson held sales or marketing positions at Mazda Motor of America, Toyota Motor Sales, U.S.A. and Chrysler Corporation, from 1972 to 1994.  Ms. Thompson received a B.A. Degree in business from Western Michigan University and a M.B.A. from University of Detroit. Ms. Thompson has the distinction of being named one of the Top 100 Women in the Automotive Industry in both 2005 and 2010.  Ms. Thompson’s experience as an advertising and marketing executive in the automotive industry led the Board to conclude that Ms. Thompson should serve as one of the Company’s directors.

 

Jose Vargas.  See Mr. Vargas’s biographical information included under the section of this Proxy Statement entitled “PROPOSAL 1–NOMINATION AND ELECTION OF DIRECTORS–Nominees for Class II Directors.”

 

 

 

EXECUTIVE OFFICERS

 

The current executive officers of AutoWeb are as follows:

 

Name		Age		Position
Jared R. Rowe		44		President and Chief Executive Officer, Director
Glenn E. Fuller		63		Executive Vice President, Chief Legal and Administrative Officer and Secretary
John J. Skocilic, Jr.		49		Executive Vice President, Chief Information Officer
John D. Steerman		53		Executive Vice President, Mobile, Lead Operations and Product Development
Wesley Ozima		56		Senior Vice President, Controller and Interim Chief Financial Officer
Taren Peng		44		Senior Vice President, Technology

 

Jared R. Rowe.  See Mr. Rowe’s biographical information included under the section of this Proxy Statement entitled “BOARD OF DIRECTORS.”

 

 Glenn E. Fuller.  Mr. Fuller joined AutoWeb as Vice President, Legal Affairs in October 2006 and was promoted to Senior Vice President, Chief Legal Officer and Secretary in April 2008, Senior Vice President, Chief Legal and Administrative Officer and Secretary in December 2008, and Executive Vice President, Chief Legal and Administrative Officer and Secretary as of January 19, 2009.  Prior to joining AutoWeb, Mr. Fuller was in private legal practice from August 2002 to October 2006, and from June 1996 to July 2002, he served as Senior Vice President, Chief Legal Officer and General Counsel of Freedom Communications, Inc. (newspapers, television stations and other media).  From April 1994 to June 1996, Mr. Fuller was of counsel to the law firm of Gibson, Dunn & Crutcher LLP and was associated with that firm from September 1980 to May 1987.  Mr. Fuller was a partner in the law firm of Pettis, Tester, Kruse & Krinsky from January 1988 to December 1992 and employed as an attorney at that firm from May 1987 to December 1987 and from January 1993 to June 1993.  From July 1993 to January 1994, Mr. Fuller was Executive Vice President and General Counsel of Airline Computerized Ticketing (airline ticketing).  Mr. Fuller received a B.A. Degree from California State University at Long Beach and a J.D. Degree from the University of Southern California.

 

John J. Skocilic, Jr.  Mr. Skocilic joined AutoWeb as Dealer Real Time Specialist in June 1998 and has served in various capacities at AutoWeb including: Manager, Systems Engineering and Architecture; Senior Director IT Operations; and Vice President, Technology; and was appointed as Senior Vice President, Technology in April 2013, Executive Vice President, Technology in January 2016 and, more recently, he was promoted to Executive Vice President, Chief Information Officer effective January 1, 2017. During his time with AutoWeb, Mr. Skocilic has been responsible for leading the implementation of numerous technologies, including AutoWeb Data Centers, Patented Lead Engine Technologies, and the re-launch of www.AutoWeb.com, the flagship website for AutoWeb.  Prior to joining AutoWeb, Mr. Skocilic served as Computer Technician of C.S.S. Laboratories, from 1997 to 1998, where he was responsible for support of computer systems implemented by The City of New York.  Mr. Skocilic held the position of Professor at Coastline Community College in the Computer Service and Technology Department from 1998 to 2002.

 

 John D. Steerman.  Mr. Steerman joined AutoWeb as Director of Lead Operations in May 2007 and has served in various positions and held various titles with the Company since that date.  In December 2011, Mr. Steerman was appointed Senior Vice President, Lead and Site Product Development and Operations, to Senior Vice President, Mobile, Lead Operations and Product Development in January 21, 2014 and to Executive Vice President, Mobile, Lead Operations and Product Development effective January 1, 2016.  Prior to joining AutoWeb, Mr. Steerman was a District Sales Manager with Ford Motor Company, from June 1992 to October 1996.  In that role, he was responsible for managing distribution, marketing and training in several of Ford’s top volume markets, including Houston and Fort Worth, Texas.  From November 1996 to July 2007, Mr. Steerman worked at Nissan North America where he held numerous sales and marketing positions, including Senior Manager eBusiness, during which time Mr. Steerman managed the re-launch of NissanUSA.com and Infiniti.com, as well as the launch of a lead management program for both Nissan and Infiniti Divisions.  While at Nissan, Mr. Steerman also managed a task force that launched Nissan’s Full Size Truck and SUV and was a member of the Infiniti Global Management team that was responsible for the strategic and operational plan to launch the Infiniti brand globally.  Mr. Steerman received a B.S. Degree in Finance and a M.B.A. from Pennsylvania State University.

 

 

 

Wesley Ozima.  Mr. Ozima, has been AutoWeb’s Senior Vice President, Controller since January 1, 2017, and was appointed Interim Chief Financial Officer on April 13, 2018, upon the resignation of Kimberly Boren. Mr. Ozima joined AutoWeb as Director, Business Assurance & Internal Controls in August 2004 and was appointed Vice President  and Controller in March 2009. Prior to joining AutoWeb, Mr. Ozima served as Assistant Director, Business Assurance & Consulting Group of Volt Information Sciences, Inc. from December 2000 to August 2004, and as Senior Manager with Gelman LLP (CPA and consulting firm) from October 1998 to December 2000. Prior to that, Mr. Ozima had served ten years at Deloitte & Touche LLP as a Senior Consultant and an Audit Senior Manager from August 1988 to October 1998. Mr. Ozima received a B.S. Degree in Business Administration (Accounting) from California State University, Northridge.

 

Taren Peng. Mr. Peng rejoined AutoWeb as Vice President, Web and Mobile Development in March 2014. He was promoted to Senior Vice President, Technology on January 1, 2017. Prior to rejoining AutoWeb, Inc., Mr. Peng held Director of Engineering positions from 2006 to 2010 in the Custom Engineering and Production Engineering departments at Nexa Technologies, a subsidiary of Penson Worldwide, which facilitated major system and application enhancements, as well as projects and initiatives to onboard large domestic and international trading institutions and banks onto the US and Canadian stocks and options trading markets. From 2011 to 2014, Mr. Peng held management positions with architect capacities at PayPal in the Payments Infrastructure and Central Architecture divisions, and from June 2000 to July 2006 and from July 2010 to October 2011, Mr. Peng held various positions in the Company’s software development division. Mr. Peng attended California State University, Northridge, where he received a B.A. Degree in Fine Arts, with a focus in Industrial Design. He later received a Master of Business Administration and Master of Science in Leadership from Grand Canyon University, Arizona.

 

 All of the officers named in the Executive Officer table above served as executive officers during 2017, except for Messrs. Ozima and Peng, who became executive officers in 2018. In addition, three other individuals served as executive officers of the Company during 2017 until their employment with the Company ceased in 2018. Jeffrey H. Coats served as the Company’s President and Chief Executive officer until the termination of Mr. Coats’ employment by the Company without cause effective April 12, 2018; Kimberly S. Boren served as the Company’s Executive Vice President, Chief Financial Officer until her resignation effective as of April 12, 2018; and William A. Ferriolo served as the Company’s Executive Vice President, Chief Operating Officer until his resignation effective as of March 1, 2018.   Mr. Coats, Mr. Ferriolo, and Ms. Boren are included in this Proxy Statement as named executive officers of the Company for 2017.

 

All executive officers of AutoWeb are chosen by the Board and serve at its discretion.

 

 

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth certain information regarding the calculation of beneficial ownership of Common Stock as of the Record Date, by all persons known by AutoWeb to be beneficial owners of more than 5% of the Common Stock of AutoWeb, each director and nominee, each of the named executive officers identified in the section of this Proxy Statement entitled “EXECUTIVE COMPENSATION–Summary Compensation,” and all directors and executive officers as a group (including the named executive officers, but excluding Mr. Coats, Mr. Ferriolo and Ms. Boren, who are not current executive officers).  Shares of Common Stock are deemed to be outstanding and to be beneficially-owned by the persons listed below for the purpose of computing the percentage ownership of the person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person, if that person has the right to acquire beneficial ownership of such shares within 60 days of the Record Date through the exercise of any option, warrant or other right or the conversion of any security, or pursuant to the power to revoke, or the automatic termination of, a trust, discretionary account or similar arrangement.  Except as otherwise noted, the persons or entities in this table have sole voting and investing power with respect to all shares of Common Stock beneficially owned by them subject to community property laws, where applicable.  The information with respect to each person specified is as supplied or confirmed by that person, based upon statements filed with the Securities and Exchange Commission (“SEC”) or based upon the actual knowledge of AutoWeb.

 

Name of Beneficial Owner(1):	Number	Percentage
Jose Vargas(2)(3)	2,833,191	21.9%
Matias de Tezanos(2)	2,782,928	21.6%
Auto Holdings Ltd.(2)	2,782,928	21.6%
Jeffrey H. Coats(4)	700,978	5.2%
Piton Capital Partners LLC(5)	690,000	5.4%
William A. Ferriolo(6)	263,412	2.0%
Glenn E. Fuller(7)	245,153	1.9%
Kimberly S. Boren(8)	177,229	1.4%
John J. Skocilic, Jr.(9)	164,666	1.3%
Michael J. Fuchs(10)	106,680	*
Mark N. Kaplan(11)	61,000	*
Michael A. Carpenter(12)	59,000	*
Janet M. Thompson(13)	56,040	*
Jeffrey M. Stibel(14)	55,000	*
All executive officers (including named executive officers, other than Messrs. Coats and Ferriolo and Ms. Boren) and directors as a group (13 persons)(15)	4,214,454	30.6%

 

* Less than 1%.

 

(1)	Unless otherwise indicated, the address of all the owners is: c/o AutoWeb, Inc., 18872 MacArthur Blvd., Suite 200, Irvine, CA 92612-1400.

(2)

The information presented in the table with respect to the beneficial ownership of Auto Holdings and Messrs. de Tezanos and Vargas (other than Mr. Vargas’ options to purchase Common Stock listed in footnote 3 below) was obtained solely from the Schedule 13D/A filed April 26, 2018 (“Auto Holdings Schedule 13D/A”), jointly filed by the following persons: (i) Auto Holdings; (ii) PF Holding; (iii) Ceiba International Corp., a Panama company (“Ceiba”); (iv) Jose Vargas, a director of AutoWeb; (v) Galeb3 Inc., a Florida corporation owned solely by Mr. Vargas (“Galeb3”); (vi) Matias de Tezanos, a citizen of Costa Rica and director of AutoWeb; (vii) Manatee Ventures Inc., a British Virgin Islands business company wholly owned by Mr. de Tezanos and his wife Isabel Ruiz Estrada (“Manatee”); (viii) John Peter Klose de Ojeda, a citizen of Guatemala; (ix) Richard Aitkenhead Castillo, a citizen of Guatemala; (x) Investment and Development Finance Corp., a Panama company (“IDFC”); (xi) IDC Financial, S.A., a Panama company (“IDC Financial”); (xii) Juan Christian Klose Pieters; (xiii) Margarita Klose; (xiv) Jorge Miguel Fernandez Bianchi, a citizen of Guatemala; (xv) PeopleFund; and (xvi) PF Auto (collectively, the “Reporting Persons”). The Auto Holdings Schedule 13D/A states that each of the Reporting Persons disclaims beneficial ownership of the reported shares except to the extent of their pecuniary interest therein. Pursuant to an Amended and Restated Stockholder Agreement dated as of October 1, 2015 by and among AutoWeb, Auto Holdings, Manatee, Galeb3, Mr. de Tezanos, Mr. Vargas, and other parties to that agreement (as amended, “Stockholder Agreement”), the reported shares are subject to irrevocable proxies in favor of AutoWeb’s Chief Executive Officer, Chief Financial Officer and Chief Legal Officer, and each of them individually, to exercise all voting rights of the applicable stockholders with respect to the shares at any meeting of stockholders of the Company, and in any action by written consent of the stockholders of the Company, in accordance with the recommendations of or instructions provided by the Board. The Auto Holdings Schedule 13D/A lists the addresses of the Reporting Persons as follows: (i) Auto Holdings, PF Auto, Mr. de Tezanos, Manatee, Mr. Juan Christian Klose Pieters, Ms. Margarita Klose IDC Financial, Jorge Miguel Fernandez Bianchi, PF Holding, PeopleFund,: Diagonal 6, 12-42 zona 10, Edificio Design Center, Torre II, Of. 1103, Guatemala City, Guatemala 01010; (ii) Ceiba, IDFC, Mr. John Peter Klose de Ojeda and Mr. Aitkenhead Castillo: 13 calle 2-60, zona 10, Edificio Topacio Azul, Of. 1301, Guatemala City, Guatemala 01010; and (iii) Mr. Vargas and Galeb3: 3401 N. Miami Avenue, Suite 205, Miami, Florida 33127. The reported shares do not include up to 1,153,110 shares that may be acquired upon conversion of certain warrants to purchase Common Stock that have stock price based vesting conditions that have not yet been met.

 

(3)	Includes 32,510 shares issuable upon exercise of options exercisable within 60 days of the Record Date.

(4)	Includes 595,703 shares issuable upon exercise of options exercisable within 60 days of the Record Date.

(5)	Based on Schedule 13G filed by Piton Capital Partners LLC c/o Kokino LLC, 201 Tresser Blvd., 3rd Floor, Stamford, CT 06901 on March 26, 2018. Piton Capital Partners LLC is deemed to have beneficial ownership of such shares.

(6)	Includes 176,856 shares issuable upon exercise of options exercisable within 60 days of the Record Date.

(7)	Includes 40,000 shares of Restricted Stock and 198,453 shares issuable upon exercise of options exercisable within 60 days of the Record Date.

(8)

Includes 40,000 shares of Restricted Stock and 135,969 shares issuable upon exercise of options exercisable within 60 days of the Record Date. The number of shares and percentage ownership reflected in the table for Ms. Boren and the indicated number of shares of Restricted Stock and options exercisable within 60 days of the Record Date reflected in this footnote assumes that the Company and Ms. Boren have entered into the proposed consulting agreement described in the section of this Proxy Statement entitled “EXECUTIVE COMPENSATION-Employment Agreements-Kimberly S. Boren.” In the event the Company and Ms. Boren do not enter into the proposed consulting agreement, the total number of shares and percentage ownership for the table would be 129,901 and 1%, respectively, the shares of Restricted Stock would be forfeited and would no longer be outstanding, and the options exercisable within 60 days of the Record Date would be 128,641.

(9)	Includes 30,000 shares of Restricted Stock and 128,357 shares issuable upon exercise of options exercisable within 60 days of the Record Date.

(10)	Includes 51,000 shares issuable upon exercise of options exercisable within 60 days of the Record Date.

(11)	Includes 51,000 shares issuable upon exercise of options exercisable within 60 days of the Record Date.

(12)	Includes 45,000 shares issuable upon exercise of options exercisable within 60 days of the Record Date.

(13)	Includes 51,000 shares issuable upon exercise of options exercisable within 60 days of the Record Date.

(14)	Includes 51,000 shares issuable upon exercise of options exercisable within 60 days of the Record Date.

(15)

Includes (i) 886,903 shares issuable upon exercise of options exercisable within 60 days of the Record Date; and (ii) an estimated 273,224 shares related to Mr. Rowe’s right to purchase from the Company up to $1,000,000 of Common Stock prior to June 12, 2018, at the closing price of the Common Stock on the date of exercise (assuming for the purposes of this calculation a per share closing price of $3.66 on April 26, 2018).

 

 

CORPORATE GOVERNANCE MATTERS

 

Board Classes

 

Committees of the Board of Directors

 

The Board has constituted an Audit Committee, a Compensation Committee, and a Corporate Governance and Nominations Committee. Copies of the charters of each of these committees are posted and available on the Corporate Governance link of the Investor Relations section of the Company’s website, www.autoweb.com.  Information on the Company’s website is not incorporated by reference in this Proxy Statement.

 

Audit Committee.  The Audit Committee was established by the Board in accordance with Section 3(a)(58)(A) of the Exchange Act.  The Audit Committee met on five occasions in 2017 and operates under a charter approved by the Board.  The Audit Committee’s primary responsibilities are to:

 

 

The Audit Committee currently consists of Mark N. Kaplan (Chairman), Michael A. Carpenter, Michael J. Fuchs, and Janet M. Thompson.  The Audit Committee meets periodically with the Company’s independent registered public accounting firm, both with and without management present.  The Board has determined that Mr. Kaplan is an “audit committee financial expert” within the meaning of Item 407(d)(5)(ii) of Regulation S-K under the Securities Act.  The identification of Mr. Kaplan as an “audit committee financial expert” does not impose on him any duties, obligations or liabilities that are greater than the duties, obligations and liabilities imposed on him as a member of the Audit Committee in the absence of this identification.

 

Compensation Committee.  The Compensation Committee, which met on five occasions in 2017 and operates under a charter approved by the Board, is responsible for:

 

 

 

 

 

 

 

Corporate Governance and Nominations Committee.  The Corporate Governance and Nominations Committee, which met on one occasion in 2017 and operates under a charter approved by the Board, is responsible for:

 

 

 

 

 

The Corporate Governance and Nominations Committee currently consists of Michael J. Fuchs (Chairman), Mark N. Kaplan, and Jeffrey M. Stibel.

 

Attendance at Board and Committee Meetings

 

During the fiscal year ended December 31, 2017, the Board held a total of six meetings. Other than Mr. de Tezanos, each member of the Board attended 75% or more of the aggregate of (i) the total number of meetings of the Board held during the period in 2017 for which the director was a member; and (ii) the total number of meetings held by all committees of which the director was a member during 2017 and during the period in which the director served as a member of the committees. Mr. de Tezanos was absent from two meetings of the Board held in 2017. The Board and its committees typically meet in executive session without management present during regularly scheduled meetings of the Board and the committees.

 

Attendance at Annual Meeting of Stockholders

 

All directors attended the 2017 annual meeting of stockholders, of which five directors attended in person and three attended by telephone. Typically, a Board meeting is scheduled on the date of any annual meeting of stockholders.  Although the Board has not adopted a formal policy, all directors are expected to attend the annual meeting of stockholders.

 

Director Independence

 

All directors, other than Messrs. de Tezanos and Vargas, and all members of the Audit, Compensation, and Corporate Governance and Nomination Committees satisfy the definition of independent director under the Nasdaq Rules. The current members of the Audit Committee and the Compensation Committee are “independent” under the Nasdaq listing rules and the SEC rules regarding audit committee and compensation committee membership.

 

In connection with Mr. Carpenter’s appointment to the Board in September 2012, the Corporate Governance and Nominations Committee and the Board determined that Mr. Carpenter was an “independent director” within the meaning of the Nasdaq Rules applicable to the Company, including the additional independence requirements for serving on audit committees.  In addition to Mr. Carpenter’s broad business, operational and financial experience, particularly in the automotive sector, and other evaluation factors considered by the Company’s Corporate Governance and Nominations Committee and the Board, in their consideration and evaluation of Mr. Carpenter, the Company’s Corporate Governance and Nominations Committee and the Board considered that Mr. Jeffrey H. Coats, the Company’s former President and Chief Executive Officer and former member of the Board, has personally known Mr. Carpenter since they were both employed at General Electric Company or its various subsidiaries or divisions and that Mr. Coats was a partner in Southgate Alternative Investments, Inc. (“Southgate”), an investment fund founded by Mr. Carpenter to acquire general partnership interests in hedge funds.  The Corporate Governance and Nominations Committee and the Board also considered that Mr. Coats’ investment in Southgate was funded by loans from Mr. Carpenter in the aggregate principal amount of $450,000.  These loans were restructured in July 2016 with accrued but unpaid interest capitalized into the principal.  The new principal amount of $592,271.00 is represented by a note that accrues interest at a rate of 1.4% per annum and is secured by Mr. Coats’ interests in certain Southgate investments. The note is now payable in monthly installments of principal plus accrued interest, with the balance due in full on December 31, 2025. Although the Corporate Governance and Nominations Committee and the Board do not consider this arrangement between Messrs. Carpenter and Coats prevents Mr. Carpenter from being an “independent director,” in connection with his service on the Board or on the Audit Committee, Mr. Carpenter did not participate in any decisions related to Mr. Coats’ employment at the Company or his compensation.

 

 

 

Compensation Committee Interlocks and Insider Participation

 

Ms. Thompson and Messrs. Fuchs, Kaplan, and Stibel served as the members of the Compensation Committee during the Company’s last completed fiscal year. No member of the Compensation Committee was an officer or employee of the Company during its last completed fiscal year. None of the Company’s executive officers served as a member of the Compensation Committee or Board of any other entity that has an executive officer serving as a member of the Board or Compensation Committee, except: (i) Mr. Vargas, an executive officer until April 12, 2018 and director of the Company, and Mr. de Tezanos, an executive officer of the Company until February 13, 2017 and a director of the Company, each serves as a board member or executive officer of the various companies controlled by or affiliated with Messrs. de Tezanos and Vargas: identified in their biographies included in the section in this Proxy Statement entitled “PROPOSAL 1 — NOMINATION AND ELECTION OF DIRECTORS — Nominees for Class II Directors.”

 

Board Leadership Structure

 

The Board does not have a policy on whether the roles of Chief Executive Officer and Chairman of the Board should be separate and, if they are to be separate, whether the Chairman of the Board should be selected from the non-employee directors or be an employee of the Company.  The Board believes that the Company and its stockholders benefit when the Board is free to determine the most appropriate leadership structure in light of the experience, skills and availability of directors and the Chief Executive Officer as well as other circumstances.  Currently, Mr. Fuchs serves as the Chairman of the Board, and Mr. Rowe serves as a director and Chief Executive Officer.  The Board believes this is the most appropriate structure for the Company at this time because it makes the best use of the experience, skills and availability of Mr. Fuchs and Mr. Rowe.

 

Board’s Role in Oversight of Risk

 

It is management’s responsibility to manage risk and bring to the Board’s attention the most material risks to AutoWeb.  The Board, including through Board committees comprised solely of independent directors, regularly reviews various areas of significant risk to AutoWeb and advises and directs management on the scope and implementation of policies, strategic initiatives and other actions designed to mitigate various types of risks. Specific examples of risks reviewed by the Board with management include competition risks, industry risks, economic risks, liquidity risks, business operations risks, cyber security risks and risks related to acquisitions and dispositions.  The Audit Committee regularly reviews with management and the independent auditors significant financial risk exposures and the processes management has implemented to monitor, control and report these exposures.  Specific examples of risks reviewed by the Audit Committee include risks related to the preparation of the Company’s financial statements, disclosure controls and procedures, internal controls and procedures required by the Sarbanes-Oxley Act of 2002, accounting, financial and auditing risks, treasury risks (insurance, credit and debt), matters reported to the Audit Committee through anonymous reporting procedures, risks posed by significant litigation matters and compliance with applicable laws and regulations.  The Audit Committee also monitors compliance with the Company’s Code of Conduct and Ethics for Employees, Officers and Directors and evaluates proposed transactions with related persons for compliance with laws and regulations and with Company policies and contracts. The Company’s Compensation Committee reviews and evaluates potential risks related to the attraction and retention of talent and risks related to the design of compensation programs established by the Compensation Committee for AutoWeb’s executive officers. These procedures, however, cannot guaranty that all material risks will be identified, or if identified, reasonably and adequately mitigated. They also cannot assure that all persons are in compliance with the Company’s policies and procedures or that the Company and its employees are in compliance with all applicable laws and regulations.

 

 

 

Executives’ base salaries are fixed in amount and thus do not encourage excessive risk-taking.  Incentive compensation is capped and is tied to overall corporate performance.  A significant portion of compensation provided to the executive officers is in the form of equity awards subject to time vesting that help to further align executives’ interests with those of the Company’s stockholders.  The Compensation Committee believes that these awards do not encourage unnecessary or excessive risk-taking since the ultimate value of the awards is tied to the Company’s stock price, and since awards are staggered and subject to long-term vesting schedules to help ensure that executives have significant value tied to long-term stock price performance.

 

The Compensation Committee has also reviewed the Company’s compensation programs for employees generally and has concluded that these programs do not create risks that are reasonably likely to have a material adverse effect on the Company.  The Compensation Committee believes that the design of the Company’s annual cash and long-term equity incentives provides an effective and appropriate mix of incentives to help ensure the Company’s performance is focused on long-term stockholder value creation and does not encourage the taking of short-term risks at the expense of long-term results.  In general, incentive compensation opportunities for Company employees are capped, and the Company has discretion to reduce incentive compensation payments (or pay no incentive compensation) based on individual performance and any other factors it may determine to be appropriate in the circumstances.  As with the compensation of the Company’s executive officers, a portion of the compensation for employees generally is delivered in the form of equity awards that help further align the interests of employees with those of stockholders.

 

Board Nominee Process

 

The Corporate Governance and Nominations Committee considers candidates for nomination as directors who are suggested by the committee’s members and other directors, as well as management and stockholders.  A stockholder who wishes to recommend a prospective nominee for the Board should notify AutoWeb’s Secretary or any member of the Corporate Governance and Nominations Committee in writing with whatever supporting material the stockholder considers appropriate.  The Corporate Governance and Nominations Committee will also consider whether to nominate any person nominated by a stockholder pursuant to the provisions of the Bylaws relating to stockholder nominations as described in the section of this Proxy Statement entitled “FUTURE STOCKHOLDER NOMINATIONS AND PROPOSALS” below.

 

Generally, once the Corporate Governance and Nominations Committee identifies a prospective nominee, the Corporate Governance and Nominations Committee will make an initial determination as to whether to conduct a full evaluation of the candidate.  This initial determination will be based on the information provided to the Corporate Governance and Nominations Committee with the recommendation of the prospective candidate, as well as the Corporate Governance and Nominations Committee’s own knowledge of the prospective candidate, which may be supplemented by inquiries to the person making the recommendation or others.  Generally, the preliminary determination will be based primarily on the need for additional Board members to fill vacancies or expand the size of the Board and the likelihood that the prospective nominee can satisfy evaluation factors determined by the Corporate Governance and Nominations Committee to be appropriate from time to time for that evaluation.  If the Corporate Governance and Nominations Committee determines, in consultation with the other members of the Board, as appropriate, that additional consideration is warranted, it may request a third-party search firm to gather additional information about the prospective nominee’s background and experience and to report its findings to the Corporate Governance and Nominations Committee.

 

 

 

 

 

The Corporate Governance and Nominations Committee generally intends to nominate current members of the Board in the year in which their respective term expires so long as they continue to exhibit the qualities described above and are otherwise qualified to serve as members of the Board.

 

The Corporate Governance and Nominations Committee may also consider such other relevant factors as it deems appropriate, including the current composition of the Board, the balance of management and independent directors, the need for Audit Committee expertise and the evaluations of other prospective nominees.  In connection with this evaluation, the Corporate Governance and Nominations Committee will determine whether to interview the prospective nominee, and if warranted, one or more members of the Corporate Governance and Nominations Committee and others, as appropriate, will interview prospective nominees in person or by telephone.  After completing this evaluation and interview, the Corporate Governance and Nominations Committee will make a recommendation to the full Board as to the persons who should be nominated by the Board, and the Board determines the nominees after considering the recommendation and report of the Corporate Governance and Nominations Committee.

 

The Corporate Governance and Nominations Committee and the Board review the qualities of the Board members as a group, including the diversity of the Board’s career experiences, viewpoints, company affiliations, expertise with respect to the various facets of the Company’s business operations and business experiences.  The Board has not adopted a formal policy and did not employ any particular benchmarks with respect to these qualities, but was mindful of achieving an appropriate balance of these qualities with respect to the Board as a whole.  Moreover, the Board and Corporate Governance and Nominations Committee considered each nominee’s overall service to the Company during the previous term, each nominee’s personal integrity and willingness to apply sound and independent business judgment with respect to the Company’s matters, as well as the individual experience of each director noted within their biographies above.

 

Stockholder Communication with the Board of Directors

 

Stockholders and other parties interested in communicating directly with any director or with the non-management directors as a group may do so by writing to the Corporate Secretary, AutoWeb, Inc., 18872 MacArthur Boulevard, Suite 200, Irvine, California 92612-1400.  The Company established a process for handling correspondence received by it addressed to non-management members of the Board.  Under that process, the Secretary reviews all such correspondence and forwards to the Board a summary of all such correspondence and copies of all correspondence that, in the opinion of the Secretary, deals with the functions of the Board or committees thereof or that the Secretary otherwise determines requires the attention of the Board.  The Board may at any time review a log of all correspondence received by AutoWeb that is addressed to members of the Board and request copies of any such correspondence.  Concerns relating to accounting, internal controls or auditing matters are immediately brought to the attention of the Chairman of the Audit Committee and handled in accordance with procedures established by the Audit Committee with respect to those matters.

 

Code of Conduct and Ethics

 

The Board has adopted a Code of Conduct and Ethics for Employees, Officers and Directors (“Code of Ethics”).  The Code of Ethics is applicable to the Company’s employees, officers and directors, including the principal executive officer, the principal financial officer and the principal accounting officer.  The Code of Ethics is posted and available on the Corporate Governance link of the Investor Relations section of the Company’s website, www.autoweb.com, and a copy of the Code of Ethics may also be obtained, free of charge, by writing to the Corporate Secretary, AutoWeb, Inc., 18872 MacArthur Blvd., Suite 200, Irvine, California 92612-1400. The Company intends to post amendments to, or waivers from, the Code of Ethics (to the extent applicable to the Company’s Chief Executive Officer, Principal Financial Officer or Principal Accounting Officer or directors) at this location on the Company’s website. Information on the Company’s website is not incorporated by reference in this Proxy Statement. The adoption of the Code of Ethics and other standards of conduct is not a representation or warranty that all persons subject to the Code of Ethics or standards are or will be in complete compliance with the Code of Ethics or any other standards of conduct that may be adopted.

 

 

 

Certain Relationships and Related Party Transactions

 

The Company’s Code of Ethics provides specific guidelines regarding conflict of interest situations as well as a process for reporting and approving related party transactions.

 

The Company’s written Code of Ethics defines a related party transaction as any transaction (or series of transactions) in excess of $120,000 since the beginning of the Company’s last fiscal year, or any currently proposed transactions, in which the Company is a participant and in which any member of the Management Group (as defined below), any stockholder owning more than 5% of the Company’s voting stock, or any immediate family member of any of the foregoing persons has a direct or indirect material interest.  An “immediate family member” means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of such director, executive officer or nominee for director, and any person (including domestic partners, but excluding tenants or employees) sharing the household of a director, director nominee, executive officer or stockholder owning more than 5% of the Company’s voting stock.  A “transaction” includes, but is not limited to, any commercial or financial transaction or arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements or relationships.  The “Management Group” is comprised of the Chief Executive Officer, Principal Financial Officer, Principal Accounting Officer (or any person performing similar functions), any other officer of the Company and any director or nominee for director.  Any covered person who may be involved in a related party transaction must promptly report that transaction to the Chairman of the Audit Committee or the Company’s Chief Legal Officer (“CLO”), who must then report the transaction to the Chairman of the Audit Committee upon becoming advised of such transaction.  The Audit Committee, in its sole discretion, must approve or disapprove all related party transactions.  Conflicts of interest or potential conflicts of interest must be reported to the CLO who will evaluate the circumstances relating to the conflict of interest or potential conflict of interest and report the findings of such evaluation to the Chief Executive Officer, who in turn, if warranted under the circumstances, must report such situation or activity to the Chairman of the Audit Committee; provided, however, (i) that if the conflict of interest or potential conflict of interest involves any member of the Management Group, the CLO must report that situation or activity to the Chairman of the Audit Committee; and (ii) the CLO is not precluded from reporting any conflict of interest or potential conflict of interest involving any covered person who is not a member of Management Group directly to the Chairman of the Audit Committee should the CLO believe such direct reporting to the Chairman of the Audit Committee is warranted under the circumstances.  Upon being advised of a complaint, concern or other reporting under the Code of Ethics, the Chairman of the Audit Committee will confer with the other members of the Audit Committee.  If appropriate under the circumstances, the Chairman of the Audit Committee may request that the CLO issue a written advisory to the covered person as to whether or not the reported situation or activity constitutes a violation of the Code of Ethics.  If the CLO would not be the appropriate party to issue a written advisory, outside counsel may be retained to issue such written advisory unless the Audit Committee determines that such written advisory can be issued by the Chairman of the Audit Committee without outside counsel input.

 

Although the Company’s Code of Ethics provides guidelines regarding conflict of interest situations, it cannot and does not set forth every possible conflict of interest scenario.  Therefore, the Code of Ethics provides that there is no substitute for sound judgment and common sense by directors, officers or other employees in each case based upon the particular facts involved.  The foregoing description of the Company’s Code of Ethics is not intended to constitute a representation as to compliance by any covered person.

 

AutoWeb has engaged Soluciones AW, S.A. (“Soluciones”) to provide office space and related office services to AW GUA, Limitada, AutoWeb’s wholly-owned, indirect subsidiary in Guatemala (“AW GUA”). Under the agreement between AW GUA and Soluciones, AW GUA pays Soluciones 107% of the actual expenses paid and costs incurred by Soluciones in providing the office space and related office services. During the period from January 1, 2017 to March 31, 2018, AW GUA made payments to Soluciones of approximately $321,000. Soluciones is controlled by PeopleFund, which in turn is controlled by Messrs. Vargas and de Tezanos, each a director of AutoWeb. Mr. Vargas was also an officer of the Company during this period and until April 12, 2018, and Mr. de Tezanos was an officer of AutoWeb during 2017 until February 13, 2017. The Audit Committee and Board evaluated the arrangement with Soluciones and the potential conflict and its potential impact on the Company. The Audit Committee and Board considered the Company’s significant investment in the operations in Guatemala acquired upon the acquisition of AutoWeb and the benefit the Company derives from its investment and these operations. The Audit Committee and the Board concluded that the benefits to the Company resulting from the continued engagement of Soluciones outweighed the potential conflict that might arise from the relationship. The Audit Committee and the Board (with Messrs. Vargas and de Tezanos abstaining) each approved the Soluciones arrangement in accordance with the Company’s Code of Ethics and waived the potential conflict.

 

 

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

AND

AUDIT COMMITTEE REPORT

 

 

Independent Registered Public Accounting Firm

 

Moss Adams has been appointed by the Company’s Audit Committee as the Company’s independent registered public accounting firm to audit the Company’s consolidated financial statements for the fiscal year ending December 31, 2018, and to perform procedures related to the financial statements included in the Company’s quarterly reports on Form 10-Q, beginning with the quarter ended March 31, 2018.  Moss Adams also served as the Company’s independent registered public accounting firm for the years ended December 31, 2017, 2016 and 2015. Representatives of Moss Adams are expected to be present at the Annual Meeting to respond to appropriate questions and to make such statements as they may desire.

 

Principal Accountant Fees and Services

 

Aggregate fees for professional services rendered by Moss Adams for the years ended December 31, 2017 and 2016 were as follows:

 

	2017	2016
Audit fees	$607,000	$515,000
Audit-related fees	7,500	7,750
All other fees	-	8,000
Total	$614,500	$530,750

 

Audit Fees.  Audit fees consist of professional services rendered in connection with the audits of the Company’s annual consolidated financial statements, reviews of the Company’s internal accounting and reporting controls under Section 404 of the Sarbanes-Oxley Act of 2002 and reviews of interim consolidated financial statements included in the Company’s Quarterly Reports on Form 10-Q.

 

Audit-Related Fees.  Audit-related fees for 2017 and 2016 consist of services rendered in connection with the audit of the Company’s Retirement Savings 401(k) Plan.  

 

All Other Fees.  All other fees for 2016 consist of fees related to review of a Registration Statement on Form S-8 filed by the Company with the SEC.

 

The Audit Committee has determined that the services described above were compatible with maintaining Moss Adams’ audit independence.

 

Pre-Approval Policy for Services

 

Under its charter, the Audit Committee is required to pre-approve all audit (including the annual audit engagement letter with the independent registered public accounting firm) and permitted non-audit services (including the fees and terms thereof) provided to the Company by the Company’s independent registered public accounting firm, subject to the de minimis exception for non-audit services as described in the Exchange Act.  The Audit Committee consults with management with respect to pre-approval, including whether the provision of permitted non-audit services is compatible with maintaining the registered public accounting firm’s independence, and may not delegate these responsibilities to management.  The Audit Committee may delegate to any member or members of the Audit Committee the power to grant any pre-approval, provided that the pre-approval is reported to the Audit Committee at the next scheduled Audit Committee meeting.

  

Each member of the Audit Committee has the authority to approve fees for services by the Company’s independent registered public accounting firm of up to $50,000.  Any approved fees may be exceeded by no more than 20% without seeking further approval even if the total amount of those fees, including the excess, exceeds $50,000.  This authority is delegated first to Mr. Kaplan, then in the following order to Ms. Thompson, Mr. Fuchs and Mr. Carpenter.  Any approval by a member of the Audit Committee is required to be reported to the Audit Committee at the next regularly scheduled meeting of the Audit Committee.  All fees for services provided by Moss Adams during 2017 and 2016, respectively, were approved by the Audit Committee.

 

 

 

From time to time, the Audit Committee pre-approves fees and services up to a maximum amount for future services relating to recurring tax matters and securities filings.

 

Audit Committee Report

 

The following Audit Committee Report is provided in accordance with the rules and regulations of the SEC.  Pursuant to those rules and regulations, this Audit Committee Report is not to be deemed “soliciting materials” or “filed” with the SEC, subject to Regulation 14A or 14C of the Exchange Act or subject to the liabilities of Section 18 of the Exchange Act.  This Audit Committee Report shall not be deemed to be incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act or the Exchange Act except to the extent that AutoWeb specifically incorporates this information by reference.

 

The Audit Committee has reviewed and discussed the Company’s audited financial statements for the fiscal year ended December 31, 2017 with the management of the Company.  The Audit Committee has discussed with Moss Adams the matters required to be discussed by the Auditing Standard No. 1301, Communications with Audit Committee (AS1301), as adopted by the Public Company Accounting Oversight Board (“PCAOB”)  The Audit Committee has also received the written disclosures and the letter from Moss Adams required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed with Moss Adams the independent accountant’s independence.

 

Based on the foregoing review and discussions, the Audit Committee has recommended to the Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

 

The members of the Audit Committee are not professionally engaged in the practice of auditing or accounting and are not employed by AutoWeb for accounting, financial management or internal control purposes.  Members of the Audit Committee relied, without independent verification, on the information provided to them and on the representations made by management and the independent auditors.  Accordingly, the Audit Committee’s oversight does not provide any basis, other than the review and discussions with management and the independent auditors referred to above, to determine that management has maintained appropriate accounting and financial reporting principles and policies or internal controls over financial reporting and procedures designed to assure compliance with accounting standards and applicable laws and regulations.  Furthermore, the Audit Committee’s considerations and discussions referred to above do not assure that the audit of AutoWeb’s financial statements has been carried out in accordance with auditing standards generally accepted in the United States or that AutoWeb’s auditors are in fact “independent.”

 

The Audit Committee

Mark N. Kaplan, Chairman Michael J. Fuchs Janet M. Thompson Michael A. Carpenter

 

 

EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

In this Compensation Discussion and Analysis we describe our 2017 compensation practices, philosophy and objectives for our 2017 named executive officers.  For 2017, our named executive officers were:

 

 

Mr. Coats served as the Company’s President and Chief Executive Officer until the termination of his employment effective April 12, 2018. Mr. Ferriolo served as the Company’s Executive Vice President, Chief Operating Officer until his resignation effective March 1, 2018. Ms. Boren served as the Company’s Executive Vice President, Chief Financial Officer until her resignation effective April 12, 2018.

 

The names, ages and backgrounds of our executive officers are included in the section of this Proxy Statement entitled “EXECUTIVE OFFICERS.”

 

General Compensation Philosophy and Objectives.  The role of the Compensation Committee is to determine, or recommend to the Board for determination, the salaries and other compensation of our executive officers and any other officer who reports directly to the Chief Executive Officer, and to make grants under, and to administer, the stock option, restricted stock and other employee equity and incentive compensation plans.

 

To promote responsible compensation practices:

 

 

 

 

 

The Company’s compensation philosophy for executive officers is to align compensation with corporate performance and efforts to increase stockholder value, while providing a total compensation opportunity that is broadly competitive and enables the Company to attract, motivate, reward and retain key executives and employees. The Company does not target specific compensation percentiles.  Accordingly, each executive officer’s compensation package is typically comprised of the following three elements:

 

 

 

 

 

 

Additionally, the Company’s executive officers are typically entitled to severance payments in the event of termination of employment without cause or by the executive officer for good reason and other benefits and perquisites that are discussed below.

 

Compensation decisions are designed to promote the Company’s business objectives and strategy and enable the Company to attract, retain and motivate qualified executive officers who are able to contribute to the Company’s long-term success.  Among the factors considered by the Company in determining executive officer compensation are the ability to recruit individuals with the necessary talents and the need to retain and motivate the Company’s executive officers.  The Company considers the competitive market for executives in setting each element of compensation indicated above.  However, the Company does not attempt to set each compensation element for each executive within a particular range related to levels provided by comparable companies.  Rather, the Company uses market comparisons as one factor in making compensation decisions.  The Company also considers other factors in making executive compensation decisions, including geographic market factors, individual contribution and performance, management skills, internal pay equity, the undertaking of new roles and responsibilities, importance of the executive’s role and responsibilities to the Company’s future success and the executive’s experience, including prior work experience, length of service to the Company, leadership and growth potential.

 

Under the Company’s compensation structure, the mix of base annual salary, annual variable performance awards and long-term equity-based incentive awards varies depending upon level of responsibility and experience.  In allocating compensation among these elements, the Company believes that the compensation of members of senior management who have the greatest ability to influence the Company’s performance should have a greater proportion of their compensation based on Company performance than lower levels of management.  There is, however, no pre-established policy for the allocation between either cash and non-cash or short-term and long-term compensation.  The mix of compensation determined by the Company is between base annual salary compensation and incentive compensation.  Long-term equity incentive compensation is determined separately and may not be awarded every year.

 

Base Annual Salary.  The objective of base annual salary is to secure the services of the Company’s executive officers and reflect job responsibilities, individual performance, market competitiveness, the value of such services to the Company’s business and the size of the Company’s business.  Salaries for executive officers are generally determined on an individual basis by evaluating each executive’s scope of responsibility, performance, prior experience and salary history, as well as, competitive market information.  The Compensation Committee also considers the recommendations of the Chief Executive Officer (except in the case of the Chief Executive Officer’s own compensation).  The Chief Executive Officer is not present during any voting or deliberations by the Compensation Committee with respect to the Chief Executive Officer’s compensation.

 

Annual Non-Equity Incentive Compensation, Retention and Discretionary Awards.  The Company’s compensation structure provides for the opportunity for executive officers to be awarded annual incentive compensation pursuant to incentive compensation plans established each year (“Annual Incentive Compensation Plans”).  Annual Incentive Compensation Plans are generally performance-based, and all awards are ultimately made at the sole discretion of the Compensation Committee.  The objective of the annual incentive compensation awards under these plans is to enhance retention and motivate individuals to achieve specific goals established by the Compensation Committee.  These goals may consist of any or all of the following:

 

 

 

 

 The Compensation Committee from time to time also considers various other discretionary, retention or incentive compensation alternatives for the Company’s executive officers, including discretionary awards for completion of special projects (including acquisition and disposition transactions).

 

The Compensation Committee establishes a target annual incentive compensation award opportunity for each executive officer based on a percentage of base annual salary.  The target annual incentive compensation award opportunity percentages for 2017 ranged between 60% and 70% of annual base salary for named executive officers other than the Chief Executive Officer, and 100% of base annual salary for the Chief Executive Officer.  The Compensation Committee established target award opportunities for the named executive officers after reviewing survey data provided by the Company’s Independent Compensation Consultant (described below), and, in the case of named executive officers other than the Chief Executive Officer, input from the Chief Executive Officer.  The Company believes this is a meaningful incentive to achieve the incentive compensation goals and an appropriate and reasonable allocation to performance-based annual cash incentive compensation to motivate executive officers.

 

Typically, the Compensation Committee, with the participation of the Chief Executive Officer, sets compensation performance goals for the Company for the year. Generally, unless specific individual performance goals are established, the target annual incentive compensation award opportunity for executive officers has been based upon the attainment of Company-wide performance goals, which reflects the Company’s belief that executive officers are accountable for the Company’s overall operating performance. If the Compensation Committee elects to allocate any portion of an executive officer’s target annual incentive compensation award opportunity to specific individual performance goals, the Compensation Committee sets the individual performance goals for the Chief Executive Officer, and the Chief Executive Officer, after consultation with the Compensation Committee, sets the specific individual performance goals for the other executive officers.  If specific individual performance goals are established, a percentage allocation between Company-wide business objectives and individual performance goals is determined that the Company believes is an appropriate and reasonable allocation that aligns the annual incentive compensation of executive officers with individual performance.  The individual performance goals are based on and reflect each individual’s responsibilities and, to the extent applicable, contribution to revenue, and may at times include such factors as leadership, team work, growth initiatives and other activities that are considered important to contributing to the long-term performance of the Company.

 

For Company-wide goals, the Compensation Committee may adopt a formula that establishes an award payout range based on the level of performance attained, with a minimum below which no payment is made and a maximum beyond which no additional incentive compensation is paid.  In determining the extent to which the Company-wide performance goals are met for a given period, the Compensation Committee exercises its judgment whether to reflect or exclude specific circumstances that the Company experienced during the year as well as the impact of unusual or infrequently occurring events or other particular circumstances affecting the Company’s business, changes in accounting principles, acquisitions, dispositions, impairment of assets, restructuring charges and litigation costs and successes, and may also consider the relative risks in achieving the goals reflected in the Company’s annual operating plan.

 

Long-Term Equity Incentive Awards.  Equity-based compensation in the form of stock options or restricted stock awards are provided to link the interests of executive officers with the long-term interests of the Company’s stockholders, support a pay-for-performance culture, foster employee stock ownership, focus the management team on increasing value for the stockholders and to encourage executive officers to remain in the Company’s employ.  In addition, stock options and restricted stock awards help to provide a long-term balance to the overall compensation program.  While cash bonus payments are focused on short-term performance, the multi-year vesting schedule of stock options and the forfeiture restrictions on restricted stock awards create incentives for increases in stockholder value over a longer term.

 

The Company grants stock options that are performance-based, service-based or a combination of the two.  Although the Company views all stock options as performance-based because they require the stock price to increase in order for the recipient to realize value from the stock options, the Company has granted stock options subject to vesting based on levels of achievement of specified Company goals that encourage preservation and enhancement of stockholder value.  Service-based vesting also encourages executive retention.  Restricted stock that is subject to forfeiture in the event an executive officer leaves the Company prior to the lapse of the forfeiture restrictions provides similar retention and long-term motivational effects.  The Company views restricted stock as providing employment retention incentives and an incentive to increase stock values because they become more valuable as the price of Common Stock increases.

 

 

 

The level of long-term incentive compensation is determined based on an evaluation of competitive factors, the position and level of responsibility of each executive officer, the Company’s belief that stock options should be a significant part of the total mix of executive officer compensation and the goals of the compensation objectives described above.  The options are granted with exercise prices of not less than the fair market value of the Company’s stock on the date of grant.  Depending on the circumstances, in establishing grant levels, the Company may consider the equity ownership levels of the recipients, exercise prices of existing grants or prior grants that are fully vested.  The Company does not have a policy requiring executive officers or directors to hold shares acquired following stock option exercise or restricted stock vesting for any additional length of time, unless the shares are specifically subject to a resale restriction, and there are no ownership guidelines for executives or directors, as this is not viewed as competitive for a public company of AutoWeb’s size.

 

The Company typically awards stock options or restricted stock awards to executive officers upon first joining the Company, promotion to more senior executive positions and annually, with approximately mid-year supplemental annual award adjustments made in some years.  At the discretion of the Compensation Committee, executive officers may also be granted stock options or restricted stock awards based upon completion of special projects (including acquisition or disposition transactions) or to provide greater incentives to continue their employment with the Company and to strive to increase the value of the Common Stock. The number of shares subject to each stock option granted or restricted stock awarded is within the discretion of the Compensation Committee and is based on anticipated future contributions and ability to impact the Company’s results, past performance or consistency within the officer’s internal pay level.  The Compensation Committee considers these factors, as well as applicable contractual requirements, the value of long-term equity incentive grants, the compensation expense associated with awards, leverage and stockholder dilution.  Stock option grants prior to the adoption of the Company’s 2010 Equity Incentive Plan typically had a term of ten years, but options granted after the adoption of the 2010 Equity Incentive Plan expire no later than seven years from the date of grant.  Stock options and restricted stock awards generally vest and become exercisable over a three-year period, and the vesting of stock options and lapsing of forfeiture restrictions for restricted stock awards typically accelerate upon (i) a termination of employment without cause by the Company or for good reason by the executive officer; or (ii) a change in control of the Company if coupled with a termination of employment by the Company without cause or by the executive officer for good reason or if the acquirer does not assume, retain or exchange the options as provided in the applicable plan pursuant to which the options were granted or the applicable option award agreement. In the case of stock options granted on or after March 17, 2014 to Mr. Coats, vesting of stock options also accelerate upon the death or disability of the Chief Executive Officer.

 

The Compensation Committee approves all restricted stock options, subject to limited delegation to the Non-Executive Stock Option Committee, which consists of the Company’s Chief Executive Officer, for stock option grants to non-executive officers, and restricted stock awards.  Generally, the Compensation Committee approves stock option grants to newly hired employees who are executive officers prior to the date of commencement of employment, with the employment commencement date as the grant date.

 

Stockholder Approval of Executive Compensation.  At the Company’s 2017 Annual Meeting of Stockholders (“2017 Annual Meeting”), the stockholders voted on an advisory proposal regarding approval of the compensation paid to the Company’s named executive officers.  The Compensation Committee considered that approximately 94% of the shares present at the 2017 Annual Meeting and entitled to vote on the proposal were voted in favor of approval of the proposal.  The Company values stockholders’ opinions and will consider the outcome of the Company’s say-on-pay proposals when making future executive compensation decisions regarding the Company’s named executive officers.  In addition, at the Company’s 2013 Annual Meeting of Stockholders, the stockholders voted on an advisory basis with respect to the frequency of future advisory votes to approve the compensation of our named executive officers.  Approximately 58% of the votes cast on this proposal were cast for a frequency of every two years.  In light of this vote, the Board determined that it would include a proposal for an advisory say-on-pay proposal every two years.

 

 

Option Forfeiture Provisions for Accounting Restatements.  For stock options granted to the named executive officers in and after 2013, the stock option award agreements provide for forfeiture of unexercised options and recovery of gain from exercised options if at any time within 12 months after the named executive officer exercises the options, or if within 12 months of the date of termination of employment with the Company, as applicable, it is determined that the named executive officer engaged in any misconduct that resulted in an accounting restatement due to material noncompliance with any financial reporting requirement under applicable securities laws.

 

2017 Compensation Decisions.  For 2017, the Compensation Committee determined the compensation of the Company’s 2017 named executive officers in accordance with the general compensation philosophy and objectives described above.

 

Overall in 2017.  The Company believes that pay and performance were aligned in 2017 because the total compensation levels reported in the Summary Compensation Table for all of the ongoing named executive officers was lower in 2017 than in 2016. The Company’s Chief Executive Officer’s total compensation, as reported in the Summary Compensation table, was 46% lower in 2017 than in 2016. Further, the total compensation disclosed in the Summary Compensation Table for each named executive officers in 2017, other than Mr. Skocilic, was below the median of the amounts paid by our 2017 Peer Group companies.

 

CEO 2017 Compensation Overview. No changes to Mr. Coats’ $550,000 base annual salary or 100% of base annual salary target annual incentive compensation target percentage were made in 2017. Mr. Coats received a payout of $157,300 under the Company’s 2017 Incentive Plan, representing a 28.6% payout of his target annual incentive compensation award opportunity and a reduction of 67% compared to his earned cash incentive award for 2016. See the section entitled “2017 Annual Incentive Compensation Plan Awards” below. Mr. Coats was not granted any stock options in connection with the January 2017 grants made by the Compensation Committee to other named executive officers and was awarded 85,000 restricted shares in connection with the September 2017 awards made by the Compensation Committee. See the section entitled “2017 Long-Term Equity Incentive Awards- September 2017 Restricted Stock Awards” below.

 

 

Market comparisons were provided for the Company’s executive officers covering base salaries; annual incentives (levels and plan design); long-term incentive grant values, awards, types and mix; and total direct compensation. The Compensation Committee reviewed market pay and relative performance data from the 2016 Peer Group. At the time, AutoWeb’s estimated 2016 revenue after the acquisition of Autobytel, Inc. (formerly AutoWeb, Inc.) in 2015 and the Company’s market capitalization value approximated the peer group median. Further, the Company’s trailing operating income was above the median and approaching the 75th percentile. The Company does not target a particular benchmark level for the pay and performance levels. The Compensation Committee, in consultation with the Independent Compensation Consultant, considered the 2016 Executive Compensation Review in connection with compensation decisions made by the Committee in January 2017.

 

In June 2017, the Compensation Committee again consulted with the Independent Compensation Consultant, which conducted an independent review of the Company’s executive compensation program on behalf of the Compensation Committee (“2017 Executive Compensation Review”) to provide an updated competitive reference on pay levels and performance alignment.  The 2017 Executive Compensation Review used a peer group, proposed by the Independent Compensation Consultant and approved by the Compensation Committee in April 2017, with industry- and size-appropriate companies that were mostly based in high cost of living locations (e.g., Boston, New York, Seattle and northern California) similar to the Company’s location in Orange County, California to reflect local labor market and cost of living. The peer group used for the 2017 Executive Compensation Review (“2017 Peer Group”) consisted of the following 20 U.S. based, publicly traded, application/internet software and services companies with an approximate range of $47 million to $447 million in revenue and market caps below $1.617 million at the time: Angie’s List, ARI Network Services, Bazaarvoice, Care.com, DHI Group, IPass, Jive Software, Leaf Group (formerly Demand Media), Limelight Networks, LivePerson, Marchex, QuinStreet, Reis, Rocket Fuel, Tech Target, Telenav, Travelzoo, TrueCar, XO Group and Zix.

 

Market comparisons were provided for the Company’s executive officers covering base salaries; annual incentives (levels and plan design); long-term incentive grant values, awards, types and mix; and total direct compensation. The Compensation Committee reviewed market pay and relative performance data from the 2017 Peer Group. At the time, AutoWeb’s estimated 2017 revenue approximated the peer group median and the Company’s market capitalization value approximated the 25th percentile of the peer group. Further, the Company’s GAAP operating income was above the median and the 75th percentile for the peer group. The Company does not target a particular benchmark level for the pay and performance levels. The Compensation Committee, in consultation with the Independent Compensation Consultant, considered the updated equity compensation information contained in the 2017 Executive Compensation Review in connection with the Committee’s decision to made restricted stock awards to the named executive officers in September 2017.

 

2017 Base Annual Salary.  The Compensation Committee considered increases in the base annual salaries of Messrs. Ferriolo, Fuller, and Skocilic for 2017. In connection with its annual review of executive compensation, and after reviewing the 2016 Executive Compensation Review and consultation with the Independent Compensation Consultant, the Compensation Committee approved: (i) an increase of $18,700 in Mr. Ferriolo's base annual salary from $366,300 to $385,000 in recognition of this promotion to Executive Vice President, Chief Operating Officer; (ii) an increase of $15,250 in Mr. Fuller's base annual salary from $305,000 to $320,250 to recognize his continued performance; and (iii) an increase of $38,000 in Mr. Skocilic's base annual salary from $253,000 to $291,000 in recognition of his promotion to Executive Vice President, Chief Information Officer, with each these increases effective January 1, 2017. Neither Mr. Coats nor Ms. Boren received an increase in their base annual salary in 2017.

 

2017 Annual Incentive Compensation Plan Awards.  The Compensation Committee set the 2017 target annual incentive compensation award opportunities for Mr. Coats, Ms. Boren, Mr. Ferriolo, Mr. Fuller, and Mr. Skocilic under the 2017 Annual Incentive Compensation Plan (“2017 Incentive Plan”) at 100%, 60%, 70%, 70%, and 60% of base annual salary, respectively.

 

The 2017 Incentive Plan was based primarily on the following two Company-wide performance goals, each weighted 50%:

 

 

 

 

 

Award payout opportunities for each goal were based upon percentage of achievement of the goal compared to the corresponding percentage on a sliding scale that reduced award payout opportunities by approximately 3% for every 1% that achievement fell below goal and increased award payout opportunities approximately 3% for every 1% that achievement exceeded the goal (“2017 Award Opportunity Scale”).  Achievement of a goal below 67% revenue or non-EPS performance would result in no awards for that goal, and performance achievement over 100% on either scale was capped at 120%.  The sum of the weighted percentages derived from the 2017 Award Opportunity Scale for the 2017 Revenue Goal and the 2017 Non-GAAP EPS Goal was applied to each named executive officer’s target annual incentive compensation award opportunity to determine the officer’s 2017 award payout opportunity.  The Compensation Committee selected these two goals and assigned them equal weighting under the 2017 Incentive Plan because the Compensation Committee believed these goals best reflected the criteria for measuring the Company’s overall performance and performance of strategic initiatives for 2017.

 

Award payouts to the 2017 named executive officers under the 2017 Incentive Plan were paid in January 2018 and reflected the following factors considered by the Compensation Committee in determining incentive compensation award payouts under the 2017 Incentive Plan:

 

 

 

 

 

2017 Long-Term Equity Incentive Awards.  The Company made the following equity incentive awards to named executive officers during 2017.

 

January 2017 Stock Option Grants. On January 26, 2017 stock options were granted to Ms. Boren, Mr. Fuller, and Mr. Skocilic. After considering the Chief Executive Officer’s recommendation for grants to named executive officers other than himself, and after consultation with the Independent Compensation Consultant and consideration of the 2016 Executive Compensation Review, the Compensation Committee approved the grants of 20,000, 25,000, and 35,000 stock options to Ms. Boren, Mr. Fuller, and Mr. Skocilic, respectively, at an exercise price of $13.81 per share. The exercise price for these stock option grants was the closing price for the Common Stock on The Nasdaq Capital Market as of the grant date. These stock option grants vest one-third on the first anniversary following the grant date, with the remaining two-thirds vesting ratably over 24 months thereafter and expire seven years from the date of grant. The vesting of stock options will accelerate upon the occurrence of certain events as provided in the applicable plan pursuant to which the stock options were granted or the applicable stock option award agreement, including (i) upon termination of the named executive officer’s employment with the Company without cause or by the named executive officer for good reason; and (ii) upon a change in control of AutoWeb if such change in control is coupled with a termination of the named executive officer’s employment without cause or by the named executive officer for good reason or if the acquirer does not assume, retain or exchange the options. See the section of this Proxy Statement below entitled “EXECUTIVE COMPENSATION–Potential Payments Upon Termination or Change in Control.”

 

The grants of stock options to the foregoing named executive officers were made in connection with an annual Company-wide option grant to employees and in recognition of their efforts during 2016 in (i) achieving growth in total revenues for 2016 to a record $156.7 million, a 133% increase in advertising revenue over 2015 (including a 308% increase in click revenues over the prior year) and a 12% increase in non-GAAP income over 2015; (ii) completing initiatives undertaken by the Company, including the integration of the 2015 acquisitions of Dealix and Autobytel, Inc. (formerly AutoWeb Inc.) and the divestiture of the specialty finance leads; and (iii) rolling out the Company’s usedcars.com website.

 

  September 2017 Restricted Stock Awards. On September 27, 2017, the Compensation Committee approved awards of restricted stock (“Restricted Shares”) in the amounts of 85,000, 40,000, 70,000, 40,000 and 30,000 shares to Mr. Coats, Ms. Boren, Mr. Ferriolo, Mr. Fuller, and Mr. Skocilic, respectively. The closing price of the Common Stock on The Nasdaq Capital Market as of the grant date was $7.14 per share. The Restricted Shares are subject to forfeiture restrictions, with the forfeiture restrictions lapsing as to one-third of the shares each anniversary of the date of grant over three years. The lapsing of the forfeiture restrictions will accelerate upon the occurrence of certain events as provided in the applicable plan pursuant to which the Restricted Shares were granted or the applicable restricted stock award agreement, including (i) upon termination of the named executive officer’s employment with the Company without cause or by the named executive officer for good reason; and (ii) upon a change in control of AutoWeb if such change in control is coupled with a termination of the named executive officer’s employment without cause or by the named executive officer for good reason or if the acquirer does not assume, retain or exchange the Restricted Shares. In the case of Mr. Coats, as a member of the Board, if he voluntarily terminated his employment with the Company without good reason but continued to be a member of the Board after termination of employment, then his Restricted Shares remaining subject to forfeiture would remain in effect and continue to lapse in accordance with the vesting schedule set forth as long has he remains a member of the Board. See the section of this Proxy Statement below entitled “EXECUTIVE COMPENSATION–Potential Payments Upon Termination or Change in Control.”

 

In deciding to make these restricted stock awards, the Compensation Committee considered the 2017 Executive Compensation Review and data from the 2017 Peer Group, consulted with the Independent Compensation Consultant, and considered the number of stock options granted to the named executive officers in January 2017 and the Chief Executive Officer’s recommendations as to named executive officers other than himself. The Compensation Committee considered that the 2017 Peer Group data provided by the Company’s Independent Compensation Consultant in the 2017 Executive Compensation Review reflected that the stock option grants made to named executive officers in January 2017 were below the median of the peer group equity awards and that stock options were not the prevalent equity award type made by the peer group companies. From the 2017 Executive Compensation Review, the Committee also considered that the Company’s total shareholder return (“TSR”) was much stronger when measured over a longer time period, with the five-year TSR near the highest of the peer group companies, and that 2016 financial growth was in the 80th-85th percentile range for growth in revenue, operating income and non-GAAP earnings per share.

 

 

 

All of the foregoing 2017 equity grants reflected the Compensation Committee’s belief that equity-based compensation in the form of stock options and restricted stock link the interests of named executive officers with the long-term interests of the Company’s stockholders, supports a pay-for-performance culture, fosters stock ownership by named executive officers, focuses the management team on increasing value for the stockholders, and encourages named executive officers to remain in the Company’s employ. The exercise price of the stock options and the closing price of the Common Stock on the grant date of the Restricted Shares were higher than the $3.66 closing price of the Common Stock on April 26, 2018, such that the stock options are not currently providing any in-the-money compensation value, and the compensation value of the Restricted Shares has diminished. This reflects the fall in stock price since the applicable grants and is viewed by the Company as a pay-for-performance outcome that is aligned with stockholder return.

 

Severance and Change in Control Terms.  The Company has entered into agreements with the named executive officers that provide for severance benefits, including continuation of monthly salary or lump sum cash payments and continuation of health and welfare benefits for specified periods of time, upon termination of the named executive officer’s employment with the Company without cause or by the named executive officer for good reason.  In addition, the vesting of stock options and restricted stock awarded to the named executive officers may accelerate upon the occurrence of various events, including (i) termination of the named executive officer’s employment without cause or by the named executive officer with good reason; and (ii) upon a change in control of AutoWeb if such change in control is coupled with a termination of the named executive officer’s employment without cause or by the named executive officer for good reason or if the acquirer does not assume, retain or exchange the options. The arrangements are designed as a recruiting and retention mechanism to assist the Company in providing adequate employment security to compete for highly qualified executive officers and induce them to invest themselves in a career with the Company, to assist in retention of the Company’s executive officers during the uncertainty that might accompany any possible change in control, and to offset any motivation executive officers might otherwise have to resist a change in control that could result in loss of their employment.  Information regarding applicable terms of the foregoing severance arrangement for the Company’s named executive officers is provided below under the section of this Proxy Statement entitled “EXECUTIVE COMPENSATION–Potential Payments Upon Termination or Change in Control.”

 

By reason of the termination of Mr. Coats’ employment by the Company without cause effective as of April 12, 2018, Mr. Coats became entitled to receive the severance benefits and acceleration of the vesting of his stock options and lapsing of the forfeiture restrictions on his restricted stock awards set forth in his employment agreement and the applicable award agreements for his stock options and restricted stock awards. Upon resignation of her employment with the Company effective April 12, 2018, Ms. Boren was not entitled to receive any severance benefits or payments under her severance benefits agreement, nor acceleration of the vesting of her stock options or lapsing of the forfeiture restrictions on her restricted stock awards set forth in the applicable award agreements for her stock options and restricted stock awards. Upon Mr. Ferriolo’s resignation of his employment with the Company effective March 1, 2018, Mr. Ferriolo was not entitled to receive any severance benefits or payments under his severance benefits agreement, nor acceleration of the vesting of his stock options or lapsing of the forfeiture restrictions on his restricted stock awards. See the section of this Proxy Statement below entitled “EXECUTIVE COMPENSATION–Potential Payments Upon Termination or Change in Control.”

 

Upon termination of Mr. Coats’ employment with the Company, the Company and Mr. Coats entered into a Consulting Services Agreement providing for Mr. Coats to perform transition services for the Company for a period of 12 months, which agreement provides for (i) the payment of consulting fees to Mr. Coats; and (ii) extension of the post-termination exercise periods of certain of his stock options.

 

As of the filing of this Proxy Statement with the SEC, the Company and Ms. Boren are in the process of negotiating the terms of a Consulting Services Agreement providing for Ms. Boren to perform transition services for the Company for a period of 12 months. If the Company and Ms. Boren do enter into the proposed Consulting Services Agreement, in consideration for Ms. Boren's consulting services the agreement will provide for: (i) the continued vesting of her unvested stock options and restricted stock awards in accordance with their terms during the term of the consulting arrangement; (ii) the tolling of the post-termination exercise periods of her vested stock options until the end of the consulting arrangement; and (iii) the acceleration of the vesting of her stock options and lapsing of the forfeiture provisions of her restricted stock in the event that a change in control of the Company occurs during the term of the consulting arrangement. See the section of this Proxy Statement below entitled “EXECUTIVE COMPENSATION–Employment Agreements–Kimberly S. Boren.”

 

 

Benefits and Perquisites.  Except as discussed below, executive officers typically participate in employee benefit plans that are generally available to all employees on the same terms.

 

All employees have company-provided life insurance with a death benefit of one times the employee’s annual salary, capped at $300,000; provided, however, that the Company’s chief executive officer is furnished life insurance with a death benefit equal to two times annual salary, capped at $1.1 million, with a guaranteed limit of $750,000 that can be increased to the $1.1 million cap upon underwriting approval by the carrier.

 

All employees above the senior manager level are provided with enhanced supplemental short and long-term disability insurance by the Company in addition to the Company’s standard short- and long-term disability insurance in order to attract and retain these employees. For these executive officers who qualify for the coverage, the Company also provides an additional supplemental long-term disability plan that offers a benefit of up to 75% of the executive’s base annual salary, up to a maximum benefit of $5,000 per month. The benefit begins 90 calendar days after the onset of the disability and may continue up to age 65.

 

Tax Implications

 

IRC Section 162(m) Limitation.  In making 2017 compensation decisions, the Compensation Committee considered the potential impact of Section 162(m) of the IRC as then in effect.  In general, Section 162(m) then disallowed a tax deduction for the compensation paid in any tax year in excess of $1.0 million to certain executives of publicly-held.  The $1.0 million limitation applied per executive per year and only to the compensation paid to the chief executive officer and to each of the next three most highly compensated officers other than the chief financial officer.  At that time, certain types of “performance-based compensation” were exempt from the $1.0 million limit (including income from stock options, performance-based restricted stock and certain formula-driven compensation that if, among other conditions, that compensation was subject to certain performance goals approved by stockholders. The Compensation Committee’s policy was generally to attempt to qualify executive compensation for deductibility.  However, the Compensation Committee believed that stockholder interests were best served by not restricting its discretion and flexibility in crafting compensation programs even when those programs could result in certain non-deductible compensation expenses.  Therefore, the Compensation Committee has from time to time approved elements of compensation for certain covered officers that may not be fully deductible.  In addition, although some amounts recorded as compensation by the Company to certain of the Company’s executive officers may be limited by Section 162(m), that limitation currently does not result in the current payment of increased federal income taxes by the Company due to the Company’s significant net operating loss carry forwards.

 

In December 2017, Congress enacted Public Law No. 115-97, commonly referred to as the “Tax Cuts and Jobs Act,” which, among other things, eliminated the “performance-based compensation” exemption from Section 162(m) of the IRC, effective for tax years beginning after December 31, 2017, such that compensation paid to our covered executives (which now consists of our Chief Executive and Financial officers and our other three most highly compensated officers) in excess of $1.0 million will not be deductible unless the compensation qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. The Company cannot give any assurance that any incentive awards outstanding after December 31, 2017 that the Compensation Committee intended to satisfy the Section 162(m) “performance-based compensation” exemption requirements will in fact do so because of uncertainties regarding the application and interpretation of Section 162(m) of the IRC, including the uncertain scope of the abovementioned transition relief. The Compensation Committee has from time to time approved elements of compensation for covered officers that may not be fully deductible and reserves the right to approve compensation for covered officers that may not be fully deductible in appropriate circumstances.

 

IRC Sections 280G and 4999.  The Compensation Committee has considered the potential impact of Sections 280G and 4999 of the IRC in structuring the compensation and severance packages for the Company’s executives.  Section 280G disallows a tax deduction by the payor for “excess parachute payments” made to executives, and Section 4999 imposes a 20% non-deductible excise tax on the executive receiving an excess parachute payment.  In general, a parachute payment to an executive is a payment to the executive in the nature of compensation that is contingent on a change in control of the Company and that exceeds three times the executive’s “base amount.”  An executive’s base amount is generally the average compensation received by the executive from the Company during the five-year period preceding the change in control of the Company.  An excess parachute payment is any amount over the portion of the base amount allocated to that parachute payment.

 

 

In general, it is the Compensation Committee’s policy to qualify its executives’ compensation for deductibility under applicable tax laws.  The Compensation Committee believes, however, that stockholder interests are best served by not restricting its discretion and flexibility in crafting compensation programs even though those programs may result in certain non-deductible compensation expenses.  Therefore, the Compensation Committee has from time to time approved elements of compensation for certain officers that may not be fully deductible and that provide for the Company to “gross up” the payment made to the executive to compensate the executive for the 20% excise tax, and the Compensation Committee reserves the right to do so in the future in appropriate circumstances.

 

In connection with the structuring of Mr. Coats’ compensation and severance package, the Compensation Committee considered the effects of Sections 280G and 4999.  In light of the estimated expense to the Company, the Compensation Committee elected not to provide Mr. Coats with a gross-up payment in the event any amount of severance payments or compensation made to Mr. Coats were found to be excess parachute payments, but did not want to diminish the value of the motivational and retention aspects of Mr. Coats’ severance compensation package.  Therefore, certain aspects of Mr. Coats’ severance package were structured to mitigate the applicability of Sections 280G and 4999 to Mr. Coats’ severance compensation.

  

Compensation Committee Report

 

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K adopted by the SEC, and, based on that review and discussions, recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 and the Proxy Statement on Schedule 14A in connection with the Company’s 2018 Annual Meeting of Stockholders.

 

Compensation Committee   Janet M. Thompson, Chairwoman Michael J. Fuchs Mark N. Kaplan Jeffrey M. Stibel

 

The above report of the Compensation Committee will not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall this report be incorporated by reference in any of the Company’s filings under the Securities Act or the Exchange Act except to the extent that the Company specifically incorporates the same by reference.

 

 

Summary Compensation

 

Mr. Coats and Ms. Boren ceased to be executive officers of the Company on April 12, 2018 and Mr. Ferriolo ceased to be an executive officer on March 1, 2018. Mr. Skocilic was appointed Executive Vice President, Chief Information Officer effective as of January 1, 2017.

 

The table below and the accompanying footnotes summarize the compensation attributed for fiscal years 2017, 2016, and 2015, as applicable, to the Company’s executive officers who constitute named executive officers for the fiscal year ended December 31, 2017.

 

2017 Summary Compensation Table

 

Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards ($)(1)	Option Awards ($)(1)	Non-Equity Incentive Plan Compensation ($)(2)	All Other Compensation ($)	Total ($)
Jeffrey H. Coats	2017	550,000	—	606,900	—	157,300	11,814(3)	1,326,014
President and Chief	2016	550,000	50,000	—	1,362,276	479,600	14,358(4)	2,456,234
Executive Officer	2015	495,000	—	—	139,232	328,185	13,583(5)	976,000
Kimberly S. Boren	2017	300,000	—	285,600	138,276	72,480	6,534(6)	802,890
Executive Vice President,	2016	274,811	25,000	—	480,580	160,417	6,534(7)	947,342
Chief Financial Officer	2015	263,409	—	—	189,005	112,980	6,534(8)	571,928
William A. Ferriolo	2017	385,000	—	499,800	—	98,077	6,303(9)	989,180
Executive Vice President,	2016	366,300	—	—	585,698	232,619	6,303(10)	1,190,920
Chief Operating Officer	2015	314,985	—	907,250	503,416	135,222	6,303(11)	1,867,176
Glenn E. Fuller	2017	320,250	—	285,600	172,845	85,114	8,758(12)	872,567
Executive Vice President,	2016	305,000	25,000	—	384,084	211,172	8,758(13)	934,014
Chief Legal and Administrative Officer and Secretary	2015	305,000	—	—	141,552	166,530	8,758(14)	621,840
John J. Skocilic, Jr.	2017	291,000	—	214,200	241,983	64,936	7,739(15)	819,858
Executive Vice President,
Chief Information Officer

 

(1)

The dollar amounts listed do not necessarily reflect the dollar amounts of compensation actually realized or that may be realized. The dollar amount reported for stock awards and option awards is the aggregate grant date fair value of awards granted during the year calculated in accordance with FASB ASC Topic 718. See Note 9 of the “Notes to Consolidated Financial Statements” in Part IV, Item 15-Exhibits and Financial Statement Schedules of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, which accompanies this Proxy Statement, for assumptions made in these valuations.

(2)	Represents amounts awarded under the 2017 Incentive Plan. For information on the amounts earned in 2017, see the section of this Proxy Statement entitled “EXECUTIVE COMPENSATION–Compensation Discussion and Analysis–2017 Compensation Decisions–2017 Annual Incentive Compensation Plan Awards.”

(3)	Represents $6,665 for health insurance premiums for dependent and $5,149 for supplemental insurance premiums.

(4)	Represents $6,209 for health insurance premiums for dependent, $3,000 for 401(k) plan match and $5,149 for supplemental insurance premiums.

(5)	Represents $5,554 for health insurance premiums for dependent, $3,000 for 401(k) plan match and $5,029 for supplemental insurance premiums.

(6)	Represents $3,000 for 401(k) plan match and $3,534 for supplemental insurance premiums.

(7)	Represents $3,000 for 401(k) plan match and $3,534 for supplemental insurance premiums.

(8)	Represents $3,000 for 401(k) plan match and $3,534 for supplemental insurance premiums.

(9)	Represents $3,000 for 401(k) plan match and $3,303 for supplemental insurance premiums.

(10)	Represents $3,000 for 401(k) plan match and $3,303 for supplemental insurance premiums.

(11)	Represents $3,000 for 401(k) plan match and $3,303 for supplemental insurance premiums.

(12)	Represents $3,000 for 401(k) plan match and $5,758 for supplemental insurance premiums.

(13)	Represents $3,000 for 401(k) plan match and $5,758 for supplemental insurance premiums.

(14)	Represents $3,000 for 401(k) plan match and $5,758 for supplemental insurance premiums.

(15)	Represents $3,000 for 401(k) plan match and $4,739 for supplemental insurance premiums.

 

 

Grants of Plan-Based Awards in 2017

 

The following table sets forth for each of the named executive officers information concerning plan-based awards, including stock and stock option awards, granted during 2017.  During 2017, the Company granted: (i) stock options at exercise prices equal to the fair market value of a share of the Common Stock as determined by the closing price on The Nasdaq Capital Market on the date of grant, and (ii) shares of Restricted Stock.  The term of each option granted is seven years from the date of grant.  See “Potential Payments Upon Termination or Change in Control.”

 

2017 Grants of Plan-Based Awards Table 

 

		Estimated Future Payouts Under Non-Equity Incentive Plan Awards			Estimated Future Payouts Under Equity Incentive Plan Awards			All Other Stock Awards: Number of Shares of Stock or	All Other Option Awards: Number of Securities Underlying	Exercise or Base Price of	Closing Price on Grant	Grant Date Fair Value of Stock and Option
Name	Grant Date	Threshold ($)	Target ($)	Maximum ($)	Threshold (#)	Target (#)	Maximum (#)	Units   (#)(1)	Options (#)(2)	Awards ($/Share)	Date ($/Share)	Awards ($)(3)
Jeffrey H. Coats	09/27/17	5,500	550,000	880,000	—	—	—	85,000	—	—	7.14	606,900
Kimberly S. Boren	01/26/17	1,800	180,000	288,000	—	—	—	—	20,000	13.81	13.81	138,276
09/27/17		—	—	—	—	—	—	40,000	—	—	7.14	285,600
William A. Ferriolo	09/27/17	2,695	269,500	431,200	—	—	—	70,000	—	—	7.14	499,800
Glenn E. Fuller	01/26/17	2,242	224,175	358,680	—	—	—	—	25,000	13.81	13.81	172,846
09/27/17		—	—	—	—	—	—	40,000	—	—	7.14	285,600
John J. Skocilic, Jr.	01/26/17	1,746	174,600	279,360	—	—	—	—	35,000	13.81	13.81	241,984
09/27/17		—	—	—	—	—	—	30,000	—	—	7.14	214,200

 

(1)	All stock awards were granted from the 2014 Plan and vest one-third on the first anniversary following the date of grant, with the remaining awards vesting one-third annually thereafter.
(2)	All options were granted from the 2014 Plan and vest one-third on the first anniversary following the date of grant, with the remaining two-thirds vesting ratably over twenty-four months thereafter.
(3)	The dollar amount reported for option and stock awards is the aggregate grant date fair value of awards granted during the year calculated in accordance with FASB ASC Topic 718.

 

 

Outstanding Equity Awards at 2017 Year-End

 

The following table sets forth, for each of the named executive officers, information concerning outstanding stock option awards as of December 31, 2017.

 

2017 Outstanding Equity Awards at Fiscal Year-End Table

 

	Option Awards							Stock Awards
Name	Grant Date	Number of Securities Underlying Unexercised Options Exercisable (#)	Number of Securities Underlying Unexercised Options Unexercisable (#)	Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)	Option Exercise Price ($)	Option Expiration Date		Number of Shares or Units of Stock That Have Not Vested (#)	Market Value of Shares or Units of Stock That Have Not Vested ($)	Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
Jeffrey H. Coats(1)	09/27/17(4)	—	—	—	—	—		85,000	765,850	—	—
	01/21/16(3)	—	—	100,000	17.09	01/21/23		—	—	—	—
	01/21/16(2)	95,842	54,158	—	17.09	01/21/23		—	—	—	—
	01/23/15(2)	29,167	833	—	10.20	01/23/22		—	—	—	—
	03/17/14	37,000	—	—	14.32	03/17/21		—	—	—	—
	01/21/14	50,000	—	—	17.64	01/21/21		—	—	—	—
	01/24/13	22,500	—	—	4.00	01/24/20		—	—	—	—
	01/10/12	37,692	—	—	3.90	01/10/19		—	—	—	—
	04/03/09	167,511	—	—	1.75	04/03/19		—	—	—	—
	11/03/08	1,000	—	—	3.85	11/03/18		—	—	—	—
Kimberly S. Boren(5)	09/27/17(4)	—	—	—	—	—		40,000	360,400	—	—
	01/26/17(2)	—	20,000	—	13.81	01/26/24		—	—	—	—
	09/21/16(2)	5,007	6,993	—	16.82	09/21/23		—	—	—	—
	07/15/16(2)	14,173	15,827		14.41	07/15/23		—	—	—	—
	01/21/16(2)	14,057	7,943	—	17.09	01/21/23		—	—	—	—
	05/18/15(2)	5,170	830	—	13.22	05/18/22		—	—	—	—
	01/23/15(2)	14,584	416	—	10.20	01/23/22		—	—	—	—
	01/21/15(2)	19,445	555	—	9.10	01/21/22		—	—	—	—
	03/17/14	7,400	—	—	14.32	03/17/21		—	—	—	—
	01/21/14	10,000	—	—	17.64	01/21/21		—	—	—	—
	01/24/13	6,875	—	—	4.00	01/24/20		—	—	—	—
	01/10/12	12,340	—	—	3.90	01/10/19		—	—	—	—
	12/07/11	10,000	—	—	3.80	12/07/18		—	—	—	—
	01/20/11	5,739	—	—	4.80	01/20/18		—	—	—	—
	04/26/10	5,000	—	—	3.95	04/26/20		—	—	—	—
William A. Ferriolo(7)	09/27/17(4)	—	—	—	—	—		70,000	630,700	—	—
	12/15/16(2)	8,344	16,656	—	14.10	12/15/23		—	—	—	—
	07/15/16(2)	14,173	15,827	—	14.41	07/15/23		—	—	—	—
	01/21/16(2)	15,978	9,022	—	17.09	01/21/23		—	—	—	—
	04/23/15(2)(6)	40,000	5,000	—	15.37	04/23/22		8,333	75,080	100,000	901,000
	01/23/15(2)	38,889	1,111	—	10.20	01/23/22		—	—	—	—
	03/17/14	7,400	—	—	14.32	03/17/21		—	—	—	—
	01/21/14	10,000	—	—	17.64	01/21/21		—	—	—	—
	01/24/13	8,594	—	—	4.00	01/24/20		—	—	—	—
	01/10/12	15,425	—	—	3.90	01/10/19		—	—	—	—
	12/07/11	10,000	—	—	3.80	12/07/18		—	—	—	—