ex4-1





 







Exhibit 4.1


 



DESCRIPTION OF SECURITIES



REGISTERED PURSUANT TO SECTION 12 OF THE



SECURITIES EXCHANGE ACT OF 1934


 



The following summary description of
the securities of AutoWeb, Inc., a Delaware corporation
(“Company” or
“AutoWeb”),
is not complete and is qualified in
its entirety by reference to, and should be read in conjunction
with, the Company’s Seventh Restated Certificate of
Incorporation (“Certificate of
Incorporation”), Seventh
Amended and Restated Bylaws (“Bylaws”), Tax Benefit Preservation Plan dated as
of May 26, 2010, as amended, between the Company and Computershare
Trust Company, N.A., as rights agent (“Tax Benefits Preservation
Plan”) and applicable
provisions of the Delaware General Corporation Law
(“DGCL”).


 



Authorized Capital Stock


 


The
Company’s authorized capital stock consists of 55,000,000
shares of Common Stock, $0.001 par value per share
(“Common
Stock”), and 11,445,187 shares of Preferred Stock,
$0.001 par value per share (“Preferred Stock”). Of the
11,445,187 shares of Preferred Stock authorized, the
Company’s Board of Directors (“Board”) has designated 2,000,000
shares as Series A Junior Participating Preferred Stock. $0.001 par
value per share (“Series A
Preferred Stock”). As of March 8, 2021 there were no
shares of Preferred Stock issued or outstanding.


 



Securities Registered Under the Exchange Act


 


The
Common Stock is the only security of AutoWeb registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended
(“Exchange
Act”). The
Common Stock is listed on The NASDAQ Capital Market under the
ticker symbol “AUTO.” Computershare Trust Company, N.A.
is the transfer agent and registrar for the Common
Stock.


 



Description of Authorized Capital Stock


 


Description
of Common Stock


 



Fully Paid and Nonassessable. All of the
outstanding shares of Common Stock are fully paid and nonassessable
and are not subject to further calls or assessments by the
Company.


 



Voting Rights. The
holders of Common Stock are entitled to one vote per share of
Common Stock. Other than as provided in the Certificate of
Incorporation, the Bylaws or pursuant to applicable law, or the
rules or regulations of any stock exchange applicable to the
Company, all matters will be decided by the vote of a majority in
voting power of the shares of Common Stock present in person or by
proxy at the meeting of stockholders and entitled to vote on the
matter other than the election of directors. With respect to the
election of directors, 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. Holders
of Common Stock are not entitled to cumulative voting rights in the
election of directors.


 



Dividends. The holders of Common Stock are entitled to
receive such dividends, if any, as may be declared from time to
time by the Board in its discretion from funds legally available
therefor, subject to the rights of any holders of our Preferred
Stock to receive such dividends.


 



Liquidation Distributions. Upon liquidation, dissolution or
winding-up, the holders of Common Stock are entitled to share
ratably in any assets remaining available for distribution after
the satisfaction in full of the prior rights of creditors,
including holders of Company indebtedness, and the aggregate
liquidation preference of any Preferred Stock then
outstanding.


 



No Preemptive or Similar Rights; No Redemption or Sinking Fund
Provisions. The Common Stock has no preemptive or other
subscription rights, and there are no conversion rights or
redemption or sinking fund provisions with respect to the Common
Stock.


 


 




 

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Description
of Preferred Stock


 



Undesignated Preferred Stock.
The undesignated shares of Preferred Stock may be issued from time
to time in one or more series pursuant to a resolution or
resolutions providing for such issue duly adopted by the Board. The
Board is further authorized to determine or alter the rights,
powers (including voting powers), preferences and privileges, and
the qualifications, limitations or restrictions thereof, granted to
or imposed upon any wholly unissued series of Preferred Stock and,
to fix the number of shares of any series of Preferred Stock and,
to fix the number of shares of any series of Preferred Stock and
the designation of any such series of Preferred Stock. The Board,
within the limits and restrictions stated in any resolution or
resolutions of the Board originally fixing the number of shares
constituting any series of Preferred Stock, may increase or
decrease (but not below the number of shares in any such series
then outstanding) the number of shares of any series subsequent to
the issue of shares of that series.

 



Series A Preferred Stock. The number of shares of Series A Preferred Stock may
be increased or decreased by resolution of the
Board; provided, that no decrease shall reduce the number of
shares of Series A Preferred Stock to a number less than the number
of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding securities
issued by the Company convertible into Series A Preferred Stock.
The following is a summary of the rights, powers, preferences and
privileges of the Series A Preferred Stock set forth in the Amended
Certificate of Designation of Series A Junior Participating
Preferred Stock (“Series A Preferred Stock
Certificate of Designation”), which is attached as Exhibit A to the
Certificate of Incorporation. 

 


Rank.
The Series A Preferred Stock ranks, with respect to the payment of
dividends and the distribution of assets, junior to all series of
any other class of the Company’s Preferred
Stock.


 


Voting. The
holders of Series A Preferred Stock are entitled to one vote per
share of Series A Preferred Stock.


 

 



                                  

Dividend
and Distribution Rights of Series A Preferred
Stock.







 


(A)           Subject
to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior
to the Series A Preferred Stock with respect to dividends, the
holders of shares of Series A Preferred Stock, in preference to the
holders of Common Stock and of any other junior stock, shall be
entitled to receive, when, as and if declared by the Board out of
funds legally available for the purpose, quarterly dividends
payable in cash on the first day of April, July, October and
January in each year (each such date being referred to herein as a
“Quarterly Dividend Payment
Date”), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a
share or fraction of a share of (a) $1.00 per share or (b) subject
to the provision for adjustment hereinafter set forth, 100 times
the aggregate per share amount of all cash dividends, and 100 times
the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions, other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares
of Common Stock (by reclassification or otherwise), declared on the
Common Stock since the immediately preceding Quarterly Dividend
Payment Date or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction of
a share of Series A Preferred Stock. In the event the Company shall
at any time declare or pay any dividend on the Common Stock payable
in shares of Common Stock, or effect a subdivision or combination
or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in
shares of Common Stock) into a greater or lesser number of shares
of Common Stock, then in each such case the amount to which holders
of shares of Series A Preferred Stock were entitled immediately
prior to such event under clause (b) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.


 


(B)           The
Company shall declare a dividend or distribution on the Series A
Preferred Stock as provided in the foregoing paragraph (A)
immediately after it declares a dividend or distribution on the
Common Stock (other than a dividend payable in shares of Common
Stock); provided, that in the event no dividend or distribution
shall have been declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1.00 per share on
the Series A Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.



 


 




 

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(C)           Dividends
shall begin to accrue and be cumulative on outstanding shares of
Series A Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares, unless the date of
issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such shares,
or unless the date of issue is a Quarterly Dividend Payment Date or
is a date after the record date for the determination of holders of
shares of Series A Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either
of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the
shares of Series A Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among
all such shares at the time outstanding. The Board may fix a record
date for the determination of holders of shares of Series A
Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more
than 60 days prior to the date fixed for the payment
thereof.



 


Liquidation,
Dissolution or Winding Up. Upon
any liquidation, dissolution or winding up of the Company, no
distribution shall be made (1) to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock unless,
prior thereto, the holders of shares of Series A Preferred Stock
shall have received $100.00 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or
not declared, to the date of such payment, provided that the
holders of shares of Series A Preferred Stock shall be entitled to
receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate
amount to be distributed per share to holders of shares of Common
Stock, or (2) to the holders of shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding
up) with the Series A Preferred Stock, except distributions made
ratably on the Series A Preferred Stock and all such parity stock
in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding
up. In the event the Company shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock)
into a greater or lesser number of shares of Common Stock, then in
each such case the aggregate amount to which holders of shares of
Series A Preferred Stock were entitled immediately prior to such
event under the proviso in clause (1) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.



 


Consolidation,
Merger. In case the Company shall enter into any
consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other
stock or securities, cash and/or any other property, then in any
such case each share of Series A Preferred Stock shall at the same
time be similarly exchanged or changed into an amount per share,
subject to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may be,
into which or for which each share of Common Stock is changed or
exchanged. In the event the Company shall at any time declare or
pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of
the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock)
into a greater or lesser number of shares of Common Stock, then in
each such case the amount set forth in the preceding sentence with
respect to the exchange or change of shares of Series A Preferred
Stock shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.



 


No
Redemption. Shares of Series A
Preferred Stock are not redeemable.



 



Possible Anti-Takeover Effects Of Provisions in The Company’s
Certificate of Incorporation, Bylaws, and Tax Benefit Preservation
Plan and the DGCL


 


Provisions
of our Certificate of Incorporation and Bylaws relating to our
corporate governance and provisions in our Tax Benefit Preservation
Plan could make it difficult for a third party to acquire AutoWeb
and could discourage a third party from attempting to acquire
control of AutoWeb. The issuance of Preferred Stock could decrease
the amount of earnings and assets available for distribution to the
holders of Common Stock or could adversely affect the rights and
powers, including voting rights, of the holders of the Common
Stock. These provisions could limit the price that some investors
might be willing to pay in the future for shares of Common Stock
and may have the effect of delaying or preventing corporate actions
such as a merger, asset sale or other change in control of the
Company.


 


 




 

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Number of Directors; Classification; Filing Vacancies; Removal; No
Cumulative Voting. The Certificate of Incorporation provides
that the number of directors that will constitute the whole Board shall be designated in
the Bylaws. The Bylaws provide that the authorized number of
directors shall be eight until changed by an amendment to the
Bylaws. The Board is authorized
to adopt, alter, amend or repeal the Bylaws, including to increase
or decrease the authorized number of directors, without stockholder
approval.


 


The
terms of office of the Board of Directors is divided into three
classes. At each annual meeting of stockholders, the successors to
directors whose term will then expire will be elected to serve from
the time of election and qualification until the third annual
meeting following election. The directorships will be distributed
among the three classes so that, as nearly as possible, each class
will consist of one-third of the number of directors constituting
the whole Board of Directors. Classification of the Board may have
the effect of delaying or preventing changes in control or change
in our management because less than a majority of the number of
directors are up for election at each annual meeting.


 


Directors may be
removed only for cause by a vote of the holders of a majority of
the shares entitled to vote at an election of directors. Any
vacancy on the Board, including vacancies created by an increase in
the size of the Board, may be filled by a majority of the remaining
directors then in office, whether or not less than a quorum, or by
a sole remaining director.


 


No
stockholder is permitted to cumulate votes at any election of
directors.


 



Advance Notice Provision for Nomination of
Directors. The Bylaws provide that only persons who
are nominated in accordance with the advance notice procedures in
the Bylaws shall be eligible for election as directors of the
Company, except as may be otherwise provided in the Certificate of
Incorporation with respect to the right of holders of Preferred
Stock of the Company to nominate and elect a specified number of
directors in certain circumstances. Nominations of persons for
election to the Board may be made at any annual meeting of
stockholders or at any special meeting of stockholders called for
the purpose of electing directors, (i) if specified in the notice
of meeting (or any supplement thereto) given by or at the
discretion of the Board (or a duly authorized committee thereof),
(ii) by or at the direction of the Board (or any duly authorized
committee thereof) or (iii) by any stockholder of the Company (1)
who is a stockholder of record on the date of the giving of the
advance notice and on the record date for the determination of
stockholders entitled to vote at such meeting and (2) who complies
with the advance notice procedures set forth in the
Bylaws.


 


In
addition to any other applicable requirements, for a nomination to
be made by a stockholder, such stockholder must have given timely
notice thereof in proper written form to the Secretary of the
Company.


 


To be
timely, a stockholder’s notice to the Secretary must be
delivered to or mailed and received at the principal executive
offices of the Company (a) in the case of an annual meeting, not
less than ninety (90) days nor more than one hundred and twenty
(120) days prior to the anniversary date of the immediately
preceding annual meeting of stockholders; provided, however, that in the event that
the date of the annual meeting is more than thirty (30) days before
or more than seventy (70) days after such anniversary date, notice
by the stockholder must be so delivered not earlier than the close
of business on the one hundred twentieth (120th) day prior to such
annual meeting and not later than the close of business on the
later of the ninetieth (90th) day prior to such
annual meeting or the tenth (10th) day following the
day on which public announcement of the date of such meeting is
first made by the Company; and (b) in the case of a special meeting
of stockholders called for the purpose of electing directors, not
earlier than the close of business on the one hundred twentieth
(120th) day prior to such special meeting and not later than the
close of business on the later of the ninetieth (90th) day prior to
such special meeting or the tenth (10th) day following the day on
which public announcement is first made of the date of the special
meeting and of the nominees proposed by the Board to be elected at
such meeting.

 


 




 

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To be
in proper written form, a stockholder’s notice to the
Secretary must set forth (a) as to each person whom the stockholder
proposes to nominate for election as a director (i) the name, age,
business address and residence address of the person; (ii) the
principal occupation or employment of the person; (iii) (A) the
class or series and number of shares of capital stock of the
Company which are owned beneficially or of record by the person,
and (B) the name of each nominee holder of shares of capital stock
of the Company owned beneficially but not of record by such person
or affiliates or associates of such person and the number of shares
held by each such nominee; (iv) a description of any agreement,
arrangement or understanding (including any derivative or short
positions, profit interests, options, warrants, stock appreciation
or similar rights, hedging transactions and borrowed or loaned
shares) that has been entered into as of or prior to, and is in
effect as of, the date of the stockholder’s notice by, or on
behalf of, such person or any affiliates or associates of such
person, the effect or intent of which is to mitigate loss to,
manage risk or benefit of share price changes for, or increase or
decrease the voting power of, such person or any affiliate or
associate of such person, with respect to shares of stock of the
Company; and (v) any other information relating to the person that
would be required to be disclosed in a proxy statement or other
filings required to be made in connection with solicitations of
proxies for election of directors pursuant to Section 14 of the
Exchange Act, and the rules and regulations promulgated thereunder;
and (b) as to the stockholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination is made (i) the name
and record address of such stockholder as they appear on the
Company’s books, and of such beneficial owner; (ii) (A) the
class or series and number of shares of capital stock of the
Company which are owned beneficially or of record by such
stockholder and such beneficial owner, and (B) the name of each
nominee holder of shares of capital stock of the Company owned
beneficially but not of record by such stockholder or beneficial
owner and the number of shares held by each such nominee; (iii) a
description of all arrangements or understandings between such
stockholder and/or such beneficial owner and each proposed nominee
and any other person or persons (including their names) pursuant to
which the nomination(s) are to be made by such stockholder; (iv) a
description of any agreement, arrangement or understanding
(including any derivative or short positions, profit interests,
options, warrants, stock appreciation or similar rights, hedging
transactions and borrowed or loaned shares) that has been entered
into as of the date of the stockholder’s notice by, or on
behalf of, such stockholder and such beneficial owners, the effect
or intent of which is to mitigate loss to, manage risk or benefit
of share price changes for, or increase or decrease the voting
power of, such stockholder or such beneficial owner, with respect
to shares of stock of the Company; (v) a representation that such
stockholder is a holder of record of the stock of the Company as of
the date of the stockholder’s advance notice required by the
Bylaws and that such stockholder intends to be a holder of record
of stock of the Company on the record date for the determination of
stockholders entitled to vote at such meeting; (vii) that such
stockholder intends to appear in person or by proxy at the meeting
to nominate the persons named in its notice; (viii) a
representation whether the stockholder or the beneficial owner, if
any, intends or is part of a group which intends (1) to deliver a
proxy statement and/or form of proxy to holders of at least the
percentage of the Company’s outstanding capital stock
required to elect the nominee and/or (2) otherwise to solicit
proxies or votes from stockholders in support of such nomination;
and (ix) any other information relating to such stockholder that
would be required to be disclosed in a proxy statement or other
filings required to be made in connection with solicitations of
proxies for election of directors pursuant to and in accordance
with Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. Such notice must be accompanied by a
written consent of each proposed nominee to being named as a
nominee and to serve as a director if elected. The Company may
require any proposed nominee to furnish such other information as
it may reasonably require to determine the eligibility of such
proposed nominee to serve as a director of the
Company.

 


                       

Advance Notice Provision for Proposing Business at Stockholder
Meetings. No business may be transacted at an annual meeting
of stockholders, other than business that is either (a) specified
in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board (or any duly authorized committee
thereof), (b) otherwise properly brought before the annual meeting
by or at the direction of the Board (or any duly authorized
committee thereof) or (c) otherwise properly brought before the
annual meeting by any stockholder of the Company (i) who is a
stockholder of record on the date of the giving of the advance
notice provided for in the Bylaws and on the record date for the
determination of stockholders entitled to vote at such annual
meeting and (ii) who complies with the advance notice procedures
set forth in the Bylaws.

 


In
addition to any other applicable requirements, for business to be
properly brought before an annual meeting by a stockholder, such
stockholder must have given timely notice thereof in proper written
form to the Secretary of the Company and any proposed business must
constitute a proper matter for stockholder action.

 


 


 

 




 

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To be
timely, a stockholder’s notice to the Secretary must be
delivered to or mailed and received at the principal executive
offices of the Company not less than ninety (90) days nor more than
one hundred and twenty (120) days prior to the anniversary date of
the immediately preceding annual meeting of stockholders;
provided,
however, that in
the event that the date of the annual meeting is more than thirty
(30) days before or more than seventy (70) days after such
anniversary date, notice by the stockholder must be so delivered
not earlier than the close of business on the one hundred twentieth
(120th) day prior to such annual meeting and not later than the
close of business on the later of the ninetieth (90th) day prior to
such annual meeting or the tenth (10th) day following the day on
which public announcement of the date of such meeting is first made
by the Company.

 


To be
in proper written form, a stockholder’s notice to the
Secretary must set forth (a) as to each matter such stockholder
proposes to bring before the annual meeting a brief description of
the business desired to be brought before the annual meeting, the
text of the proposal or business (including the text of any
resolutions proposed for consideration and in the event that such
business includes a proposal to amend the Bylaws of the Company,
the language of the proposed amendment), the reasons for conducting
such business at the meeting and any material interest in such
business of such stockholder and the beneficial owner, if any, on
whose behalf the proposal is made, and (b) as to the stockholder
giving the notice and the beneficial owner, if any, on whose behalf
the proposal is made (i) the name and record address of such
stockholder as they appear on the Company’s books, and of the
beneficial owner; (ii) (A) the class or series and number of shares
of capital stock of the Company which are owned beneficially or of
record by such stockholder and such beneficial owner, and (B) the
name of each nominee holder of shares of capital stock of the
Company owned beneficially but not of record by such stockholder or
beneficial owner and the number of shares held by each such
nominee; (iii) a description of all arrangements or understandings
between such stockholder and/or beneficial owner and any other
person or persons (including their names) in connection with the
proposal of such business by such stockholder and such beneficial
owner and any material interest of such stockholder and/or
beneficial owner in such business; (iv) a description of any
agreement, arrangement or understanding (including any derivative
or short positions, profit interests, options, warrants, stock
appreciation or similar rights, hedging transactions and borrowed
or loaned shares) that has been entered into as of or prior to, and
is in effect as of, the date of the stockholder's notice by, or on
behalf of, such stockholder and such beneficial owners, the effect
or intent of which is to mitigate loss to, manage risk or benefit
of share price changes for, or increase or decrease the voting
power of, such stockholder or such beneficial owner, with respect
to shares of stock of the Company; (v) a representation that such
stockholder is a holder of record of stock of the Company as of the
date of the giving of the stockholder’s advance notice
required by the Bylaws and intends to be a holder of record of
stock of the Company on the record date for the determination of
stockholders entitled to vote at such annual meeting date; (vi) a
representation that such stockholder intends to appear in person or
by proxy at the annual meeting to bring such business before the
meeting; and (vii) a representation whether the stockholder or the
beneficial owner, if any, intends or is part of a group which
intends (1) to deliver a proxy statement and/or form of proxy to
holders of at least the percentage of the Company’s
outstanding capital stock required to approve or adopt the proposal
and/or (2) otherwise to solicit proxies or votes from stockholders
in support of such proposal.

 


The
foregoing notice requirements shall be deemed satisfied by a
stockholder with respect to business other than a nomination of a
director if the stockholder has notified the Company of such
stockholder’s intention to present a proposal at an annual
meeting in compliance with applicable rules and regulations
promulgated under the Exchange Act and such stockholder’s
proposal has been included in a proxy statement that has been
prepared by the Corporation to solicit proxies for such annual
meeting.

 


Notwithstanding the
foregoing advance notice provisions, a stockholder shall also
comply with all applicable requirements of the Exchange Act and the
rules and regulations thereunder with respect to the matters set
forth in this advance notice provision of the Bylaws; provided,
however, that any references in these Bylaws to the Exchange Act or
the rules promulgated thereunder are not intended to and shall not
limit any requirements applicable to proposals as to any other
business to be considered pursuant to the advance notice provision,
and compliance with the advance notice provision shall be the
exclusive means for a stockholder to submit other business (other
than, as provided above, matters brought properly under and in
compliance with Rule 14a-8 of the Exchange Act, as may be amended
from time to time). Nothing in the advance notice provision shall
be deemed to affect any rights of stockholders to request inclusion
of proposals in the Company’s proxy statement pursuant to
applicable rules and regulations promulgated under the Exchange
Act.


 


 




 

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No Stockholder Actions by Written Consent. Actions to be taken by the Company’s
stockholders may be taken only at a duly called annual or special
meeting of stockholders and not by written
consent.


 



Special Meetings. The By-laws provide that special meetings
may be called only by the Board (or a committee thereof authorized
to call special meetings), the Chairman of the Board, or the
Company’s President. This provision may delay consideration
of a stockholder proposal until the Company’s next annual
meeting unless a special meeting is called pursuant to our
By-laws.


 



Amendment of Bylaws. The Board is authorized
to adopt, alter, amend or repeal the Bylaws without stockholder
approval. Any Bylaw made or altered by the stockholders may be
altered or repealed by the Board.


 



Issuance of Preferred Stock.
The Certificate of Incorporation allows the Board to issue
preferred stock with rights senior to those of the Common Stock
without any further vote or action by the
stockholders.


 



Tax Benefit Preservation Plan.
The Board adopted the Tax Benefit Preservation Plan to protect
stockholder value by preserving important tax assets. The Company
has generated substantial net operating loss carryovers and other
tax attributes for United States federal income tax purposes
(“Tax
Benefits”) that can
generally be used to offset future taxable income and therefore
reduce federal income tax obligations. However, the Company’s
ability to use the Tax Benefits will be adversely affected if there
is an “ownership change” of the Company as defined
under Section 382 of the Internal Revenue Code
(“Section 382”). In general, an ownership change will
occur if the Company’s “5% shareholders” (as
defined under Section 382) collectively increase their
ownership in the Company by more than 50% over a rolling three-year
period. The Tax Benefit Preservation Plan was adopted to reduce the
likelihood that the Company’s use of its Tax Benefits could
be substantially limited under
Section 382.


 


Under the Tax Benefit Preservation Plan, rights to
purchase capital stock of the Company (“Rights”) have been distributed as a dividend at
the rate of five Rights for each share of Common Stock issued and
outstanding.  Each Right entitles its holder, upon
triggering of the Rights, to purchase one one-hundredth of a share
of Series A Junior Participating Preferred Stock at a price of
$20.00 (as this price may be adjusted under the Tax Benefit
Preservation Plan) (“Purchase
Price”) or, in certain
circumstances, to instead acquire shares of Common Stock. The
Rights will convert into a right to acquire Common Stock or other
capital stock of the Company in certain circumstances and subject
to certain exceptions. The shares of Series A Preferred Stock
purchasable upon exercise of the Rights have been previously
authorized by the Board, and the rights, powers, preferences and
privileges of the Series A Preferred Stock are as set forth in the
Series A Preferred Stock Certificate of
Designation.


 


The Rights will be triggered upon the acquisition
of beneficial ownership of 4.90% or more of the Company’s
outstanding Common Stock or future acquisitions by any existing
holders of beneficial ownership of 4.90% or more of the
Company’s outstanding Common Stock (an
“Acquiring
Person” as defined in the
Tax Benefit Preservation Plan). If a person or group acquires
beneficial ownership of 4.90% or more of the Company Common Stock,
all Rights holders, except the Acquiring Person, will be entitled
to acquire at the then exercise price of a Right that number of
shares of Common Stock which, at the time, has a market value of
two times the exercise price of the Rights.  For purposes of
the Tax Benefit Preservation Plan, ownership is in general
determined pursuant to applicable rules and regulations of the
Internal Revenue Code, including Section 382 and by the definition
of “beneficial ownership” of Rule 13d-3 of the
Securities Exchange Act of 1934, as amended.


 


The
Tax Benefit Preservation Plan authorizes the Board to exercise
discretionary authority to deem a person acquiring Common Stock in
excess of 4.90% not to be an Acquiring Person under the Tax Benefit
Preservation Plan, and thereby not trigger the Rights, if the Board
finds that the beneficial ownership of the shares by the person
acquiring the shares (i) will not be likely to directly or
indirectly limit the availability to the Company of the net
operating loss carryovers and other tax attributes that the plan is
intended to preserve or (ii) is otherwise in the best
interests of the Company.


 


 




 

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Until the earlier to occur of (i) the close
of business on the tenth business day following the first date of
public announcement that a person, entity or group (each, a
“person”) has become an Acquiring Person, by
acquiring beneficial ownership of 4.90% or more of the outstanding
shares of Common Stock, or that the Board has concluded that a
person has become an Acquiring Person, or (ii) the close of
business on the tenth business day (or, except in certain
circumstances, such later date as may be specified by the Board)
following the commencement of, or announcement of an intention to
make, a tender offer or exchange offer the consummation of which
would result in the beneficial ownership by a person (with certain
exceptions) of 4.90% or more of the outstanding shares of Common
Stock (the earlier of such dates being called the
“Distribution
Date”), the Rights are
evidenced, by Common Stock certificates that may still be
outstanding and representing issued and outstanding shares of
Common Stock or by the registration in book-entry form of Common
Stock issued and outstanding, and the Rights will be transferable
only in connection with the transfer of shares of the underlying
Common Stock. Any person that owned 4.90% or more of the issued and
outstanding shares of Common Stock on May 26, 2010
(“Record Date”) will not be deemed an Acquiring Person
unless and until such person acquires ownership of any additional
shares of Common Stock. Until a Right is exercised or exchanged,
the holder thereof, as such, will have no rights as a stockholder
of the Company, including, without limitation, the right to vote or
to receive dividends.


 


The
Rights are not exercisable until the Distribution Date. The Rights
will expire upon the earliest of (i) the close of business on
May 26, 2023 unless that date is advanced or extended,
(ii) the time at which the Rights are redeemed or exchanged
under the Tax Benefit Preservation Plan, (iii) if the Board
elects to extend the Tax Benefit Preservation Plan beyond May 26,
2023, the end of the calendar month in which the Company’s
2023 annual meeting of stockholders is held if stockholder approval
of the Tax Benefit Preservation Plan has not been received before
such time, (iv) the repeal of Section 382 or any
successor statute if the Board determines that the Tax Benefit
Preservation Plan is no longer necessary for the preservation of
the Company’s Tax Benefits, (v) the beginning of a
taxable year of the Company to which the Board determines that no
Tax Benefits may be carried forward, or (vi) such time as the Board
determines that a limitation on the use of the Tax Benefits under
Section 382 would no longer be material to the
Company.



 


The
number of outstanding Rights is subject to adjustment in the event
of a stock dividend on the Common Stock payable in shares of Common
Stock or subdivisions, consolidations or combinations of the Common
Stock occurring, in any such case, before the Distribution Date.
The Purchase Price payable, and the number of shares of Series A
Preferred Stock or other securities or property issuable, upon
exercise of the Rights is subject to adjustment from time to time
to prevent dilution: (i) in the event of a stock dividend on,
or a subdivision, combination or reclassification of, the Series A
Preferred Stock, (ii) upon the grant to holders of the Series
A Preferred Stock of certain rights or warrants to subscribe for or
purchase Series A Preferred Stock at a price, or securities
convertible into Series A Preferred Stock with a conversion price,
less than the then-current market price of the Series A Preferred
Stock or (iii) upon the distribution to holders of the Series
A Preferred Stock of evidences of indebtedness or assets (excluding
regular periodic cash dividends or dividends payable in Series A
Preferred Stock) or of subscription rights or warrants (other than
those referred to above).   With certain exceptions, no
adjustment in the Purchase Price will be required until cumulative
adjustments require an adjustment of at least 1% in such Purchase
Price. No fractional shares of Common Stock or Series A Preferred
Stock will be issued (other than fractions of Series Preferred
Stock which are integral multiples of one one-hundredth of a share
of Series A Preferred Stock, which may, at the election of the
Company, be evidenced by depositary receipts), and in lieu thereof
an adjustment in cash will be made based on the current market
price of the Series A Preferred Stock or the Common
Stock.



   


In
the event that any person becomes an Acquiring Person, (i) each
holder of a Right, other than holders of Rights owned by the
Acquiring Person, related persons, or transferees (which will
thereupon become null and void), will thereafter (subject to any
delay of exercisability approved by the Board) have the right to
receive upon exercise of a Right (including payment of the Purchase
Price) that number of shares of Common Stock having a market value
of two times the Purchase Price in lieu of shares of Series A
Preferred Stock; and (ii) the Board, in its sole discretion, may
permit the Rights, other than Rights owned by the Acquiring Person,
related persons, or transferees (which will thereupon become void),
to be exercisable in a cashless exercise for 50% of the shares of
Common Stock that would otherwise be purchasable upon the payment
of the Purchase Price in consideration of the surrender to the
Company of the exercised Rights in lieu of payment of the Purchase
Price.



 


At
any time after any person becomes an Acquiring Person but before
the acquisition by such Acquiring Person of ownership of 50% or
more of the shares of Common Stock then outstanding, the Board may
exchange the Rights, other than Rights owned by such Acquiring
Person, related persons, or transferees (which will have become
null and void), in whole or in part, for shares of Common Stock or
Series A Preferred Stock (or a series of the Company’s
Preferred Stock having equivalent rights, preferences and
privileges), at an exchange ratio of one share of Common Stock, or
a fractional share of Series A Preferred Stock of equivalent value,
per Right (subject to adjustment).



  


 




 

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At any time before the time an Acquiring Person
becomes such, the Board may redeem the Rights in whole, but not in
part, at a price of $0.001 per Right (“Redemption
Price”) payable, at the
option of the Company, in cash, shares of Common Stock or such
other form of consideration as the Board shall determine. The
redemption of the Rights may be made effective at such time, on
such basis and with such conditions as the Board in its sole
discretion may establish. Immediately upon any redemption of the
Rights, the right to exercise the Rights will terminate and the
only right of the holders of Rights will be to receive the
Redemption Price as rounded to the nearest $0.01. For so long as
the Rights are then redeemable, the Company may, except with
respect to the Redemption Price, amend the Plan in any manner.
After the Rights are no longer redeemable, the Company may, except
with respect to the Redemption Price, amend the Plan in any manner
that does not adversely affect the interests of holders of the
Rights (other than the Acquiring Person, related persons, or
transferees).


 


The
Tax Benefit Preservation Plan could discourage a third party from
attempting to acquire control of AutoWeb.


 



Section 203 of the DGCL. The Company is subject to Section 203 of the DGCL. In
general, this statute prohibits a publicly-held Delaware
corporation from engaging in a “business combination”
with an “interested stockholder” for a period of three
years after the date of the transaction in which the person became
an interested stockholder, unless the business combination is
approved in a prescribed manner. For purposes of Section 203,
a “business combination” includes a merger, asset sale
or other transaction resulting in a financial benefit to the
interested stockholder, and an “interested stockholder”
is a person who, together with affiliates and associates, owns or
did own 15% or more of the corporation’s voting stock.
Section 203 could discourage a third party from attempting to
acquire control of AutoWeb.


 


 




 

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