8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) January 30, 2007

Autobytel Inc.

(Exact name of registrant as specified in its charter)

Delaware	0-22239	33-0711569
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

18872 MacArthur Boulevard, Irvine, California	92612-1400
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (949) 225-4500

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

In connection with the appointment of Monty Houdeshell as Executive Vice President, Finance of the Company, Mr. Houdeshell and the Company entered into an Employment Agreement (the “Employment Agreement”). A copy of the Employment Agreement is attached hereto as Exhibit 10.1 and incorporated herein by reference.

Mr. Houdeshell, 58, has been Executive Vice President, Finance of the Company since January 30, 2007. Prior thereto, Mr. Houdeshell served as Senior Vice President, Chief Administrative Officer of RemedyTemp, Inc. from December 2004 to June 2006. From January 2003 to June 2006, he also served as Senior Vice President, Chief Financial Officer of RemedyTemp. From 1988 until November 1999 he was Vice President, Chief Financial Officer of Furon Company. Prior to 1988, he was Vice President, Chief Financial Officer of Oak Industries, Inc. Mr. Houdeshell holds a Masters in Business Administration from the University of Southern California and a Bachelor of Science from Ohio State University.

Pursuant to the Employment Agreement, Mr. Houdeshell agreed to assume the position of Executive Vice President and Chief Financial Officer of the Company the day after it files its Annual Report on Form 10-K for fiscal year 2006.

The Employment Agreement is for a three year term that ends on January 30, 2010 and automatically renews for additional one year periods unless either party notifies the other of its intent not to renew no later than one hundred twenty days prior to the expiration of the then current term. Mr. Houdeshell is entitled to an annual base salary of $300,000 during the term, and is eligible for a bonus of at least 60% of his annual base salary. In addition, Mr. Houdeshell may participate in any benefit plans generally afforded to executive officers. If Mr. Houdeshell’s employment is terminated without “cause,” if Mr. Houdeshell terminates his employment with “good reason” (each as defined in the Employment Agreement) or if the Company delivers to Mr. Houdeshell a Non-Renewal Notice (as defined in the Employment Agreement), Mr. Houdeshell is entitled to a payment equal to the sum of his then annual base salary and a bonus of 60% of his annual base salary, as well as benefits for twelve months following such termination.

In the event of a change of control during the term of his employment or at any time during the six month period following such term, Mr. Houdeshell is entitled to a lump sum payment equal to two times the sum of his then annual base salary and a bonus of 60% of his annual base salary, so long as Mr. Houdeshell agrees, if requested, to continue with the Company or any successor for ninety days after the change of control. If Mr. Houdeshell’s compensation is deemed to be parachute payments under the Internal Revenue Code, then the Company has agreed to make additional payments to him to compensate for his additional tax obligations.

Mr. Houdeshell was granted options to purchase 300,000 shares of common stock. Assuming Mr. Houdeshell remains actively employed by the Company through each stated anniversary date then Mr. Houdeshell’s options vest, as to 100,000 of the shares, on January 30, 2008, and thereafter, (i) options to purchase 6,250 of the shares will vest on each monthly anniversary thereafter ending on January 30, 2010, and (ii) upon filing by the Company of its Annual Report on Form 10-K for the fiscal years ending on December 31, 2007, December 31, 2008 and December 31, 2009, options to purchase 16,667, 16,667 and 16,666 shares, respectively, will vest, provided in respect of this clause (ii) Mr. Houdeshell and the Company have satisfied reasonable performance criteria established by the Board of Directors or a committee thereof in its sole discretion. The vesting of the options will accelerate upon a change of control. The options may be exercised once they vest. The exercise price for the shares of common stock was set on January 30, 2007 at $3.74 per share. A copy of the Inducement Stock Option Agreement between Mr. Houdeshell and the Company is attached hereto as Exhibit 10.2 and incorporated herein by reference.

Mr. Houdeshell also entered into an indemnification agreement with the Company.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

EXHIBIT NO.	DESCRIPTION OF DOCUMENT
10.1	Employment Agreement, dated as of January 30, 2007 between the Company and Mr. Houdeshell
10.2	Inducement Stock Option Agreement, dated January 30, 2007 between the Company and Mr. Houdeshell
99.1	Press release, dated January 30, 2007 announcing the election of Mr. Houdeshell

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Autobytel Inc.
	By:	/s/ Ariel Amir
		Ariel Amir, Executive Vice President and Chief Legal and Administrative Officer
Date: February 2, 2007

INDEX OF EXHIBITS

EXHIBIT NO.	DESCRIPTION OF DOCUMENT
10.1	Employment Agreement, dated as of January 30, 2007 between the Company and Mr. Houdeshell
10.2	Inducement Stock Option Agreement, dated January 30, 2007 between the Company and Mr. Houdeshell
99.1	Press release, dated January 30, 2007 announcing the election of Mr. Houdeshell

EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

This Employment Agreement (this “Agreement”) is made and entered into as of January 30, 2007, by and between AUTOBYTEL INC., a Delaware corporation (the “Company”), and MONTY HOUDESHELL (the “Executive”).

Recitals

WHEREAS, the Company desires to employ the Executive as the Company’s Executive Vice President, Finance, effective on the date hereof (the “Commencement Date”), and employ Executive as Executive Vice President and Chief Financial Officer on the day following the filing of the Company’s Annual Report on Form 10-K for fiscal year 2006, and the Executive desires to be employed by the Company in such capacities beginning on the applicable dates, on the terms and subject to the conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and with reference to the above recitals, the parties hereby agree as follows:

ARTICLE 1

TERM OF EMPLOYMENT

1.1 TERM OF EMPLOYMENT. The Company hereby employs the Executive, and the Executive hereby accepts such employment by the Company, for a period (as such period may be extended, the “Term”) commencing on the date hereof and expiring on the first to occur of (a) the termination of the Executive’s employment pursuant to Article 6, and (b) January 30, 2010 (the “Termination Date”). Provided that if the Executive’s employment has not previously been terminated pursuant to Article 6, the Executive’s employment pursuant to this Agreement shall automatically renew for additional one (1) year periods unless either party notifies the other party in writing of its desire not to renew the Executive’s employment under this Agreement no later than one-hundred twenty (120) days prior to the Termination Date or any applicable anniversary of the Termination Date (a “Non-Renewal Notice”). If the Company delivers the Non-Renewal Notice and the Executive does not terminate his employment prior to the end of the Term, then such non-renewal shall be deemed to be a termination by the Company of the Executive’s employment without Cause (as defined below) as of immediately prior to the expiration of the Term, and Section 6.2 shall govern such termination. If the Executive delivers the Non-Renewal Notice and the Company does not terminate the Executive’s employment prior to the end of the Term, then such non-renewal shall be deemed to be a termination by the Executive of his employment without Good Reason (as defined below) as of immediately prior to the expiration of the Term, and Section 6.4 shall govern such termination.

ARTICLE 2

DUTIES AND OBLIGATIONS

2.1 DUTIES. Beginning on the Commencement Date and continuing through the date the Company files its Annual Report on Form 10-K for fiscal year 2006 with the Securities and Exchange Commission (“SEC”), the Executive shall be employed as the Executive Vice President, Finance of the Company, and shall have such power and authority as is customarily held by the executive vice president of finance of similarly situated companies. Effective on the

day following the Company’s filing of its Annual Report on Form 10-K for fiscal year 2006 with the SEC, the Executive will be employed as the Executive Vice President and Chief Financial Officer of the Company and shall have such power and authority as is customarily held by the executive vice president and chief financial officer of similarly situated companies. During the Term, the Executive shall: (i) devote his full business time, attention and energies to the business of the Company; (ii) use his best efforts to promote the interests of the Company; (iii) perform such functions and services as shall lawfully be directed by the Chief Executive Officer; (iv) act in accordance with the policies and directives of the Company; and (v) report directly to the Chief Executive Officer.

2.2 RESTRICTIONS. Except as provided in Section 8.2(i), the Executive covenants and agrees that, while actually employed by the Company, he shall not engage in any other business duties or pursuits whatsoever, or directly or indirectly render any services of a business or commercial nature to any other Person (as defined below), including, but not limited to, providing services to any business that is in competition with or similar in nature to the Company, whether for compensation or otherwise, without the prior written consent of the Board of Directors (the “Board”). However, the expenditure of reasonable amounts of time for educational, charitable, or professional activities shall not be deemed a breach of this Agreement, if those activities do not materially interfere with the services required under this Agreement, and such activities shall not require the prior written consent of the Board. Notwithstanding anything herein contained to the contrary, this Agreement shall not be construed to prohibit the Executive from making passive personal investments or conducting personal business, financial or legal affairs or other personal matters if those activities do not materially interfere with the services required hereunder. In addition to the foregoing, notwithstanding anything contained herein to the contrary, this Agreement shall not be construed to prohibit the Executive from serving as a board member with respect to up to two privately held companies so long as any such company is not engaged in any Competitive Business (as defined in Section 8.2 hereof). Any other service as a director or board member of any other corporation, company, or other business entity, shall be subject to the approval of the Board.

ARTICLE 3

COMPENSATION

3.1 BASE SALARY. As compensation for the services to be rendered by the Executive pursuant to this Agreement, the Company hereby agrees to pay the Executive a base salary (the “Base Salary”) equal to at least Three Hundred Thousand Dollars ($300,000.00) per year during the Term of this Agreement, which rate shall be reviewed by the Board at least annually and may be increased (but not reduced) by the Board in such amounts as the Board deems appropriate. The Base Salary shall be paid in substantially equal bimonthly installments, in accordance with the normal payroll practices of the Company.

3.2 BONUS. The Board may, in its sole discretion, provide the Executive with the opportunity to earn an annual bonus (“Bonus”) for each fiscal year of the Company occurring in whole or in part during the Term of sixty percent (60%) (the “Target”) of the Executive’s Base Salary for such fiscal year. The Bonus, if any, payable to the Executive shall be based on such criteria as may be established by the Board, in its sole discretion, from time to time. The Executive shall participate in all other short term and long term bonus or incentive plans or

arrangements in which other senior executives of the Company are eligible to participate from time to time. Any bonus shall be paid as promptly as practicable following the end of the preceding fiscal year. The provisions of this Section 3.2 shall be subject to the provisions of Section 3.4.

3.3 WITHHOLDING. The Company shall have the right to deduct or withhold from the compensation due to the Executive hereunder any and all sums required for federal income and employee social security taxes and all state or local income taxes now applicable or that may be enacted and become applicable during the Term.

3.4 RIGHT TO SEEK APPROVAL. The Company may provide for shareholder approval of any performance based compensation provided herein and may provide for the compensation committee to establish any applicable performance goals and determine whether such performance goals have been met.

3.5 CHANGE OF CONTROL. Notwithstanding Article 1 above, in the event of a Change of Control (as defined in Section 3.6) of the Company (a) during the Term while the Executive remains employed by the Company, or (b) at any time during the six (6) month period following the termination of the Executive’s employment with the Company (other than for Cause or without Good Reason), the Company shall pay to the Executive, concurrently with the consummation of such Change of Control, a lump sum amount equal to two (2) times the sum of the Executive’s annual Base Salary plus the Bonus (at the Target level) (the “Severance Compensation”); provided, that the Company’s obligation to pay the Severance Compensation shall be conditioned on the following: if the Executive is employed by the Company at the time of the Change of Control and the Person or Group (each as defined in Section 3.6.) that acquires the Company requests that the Executive continue as an employee of the Company, the successor entity, or any of their respective affiliates on substantially the same (or better, from the Executive’s perspective) terms relating to salary, bonus, and benefits as contained in this Agreement, the Executive shall agree to continue such employment for a period of ninety (90) days from the date of the Change of Control or such lesser period of time as the Person or Group shall request. If the Executive’ employment with the Company is terminated pursuant to Section 6.2 on or after the date Executive becomes entitled to receive the Severance Compensation, then notwithstanding anything set forth in Section 6.2, the Company shall not be required to make any payments to the Executive pursuant to Section 6.2(a), other than continuing to provide all benefits in accordance with Section 4 to the extent set forth in Section 6.2(a). If the Executive’s employment with the Company is terminated pursuant to Section 6.2 before the Executive becomes entitled to the Severance Compensation, then notwithstanding the foregoing, the amount of the Severance Compensation shall be reduced by the amount to which the Executive is entitled pursuant to Section 6.2(a).

3.6 DEFINITION OF CHANGE OF CONTROL. For purposes of this Agreement “Change of Control” means the occurrence of any of the following: (i)the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation but not including any underwritten public offering registered under the Securities Act of 1933 (“Public Offering”) or any offering of securities under Rule 144A promulgated under the Securities Act of 1933 (“Rule 144A Offering”)) in one or a series of related transactions of all or substantially all of the assets of the Company taken as a whole to any individual, corporation, limited liability company,

partnership, or other entity (each, a (“Person”) or group of Persons acting together (each a “Group”) (other than any of the Company’s wholly-owned subsidiaries or any Company employee pension or benefits plan), (ii) except in respect of a voluntary or involuntary filing under applicable bankruptcy or insolvency laws, the adoption of a plan relating to the liquidation or dissolution of the Company, (iii) the consummation of any transactions (including any stock or other purchase, sale, acquisition, disposition, merger, consolidation or reorganization, but not including any Public Offering or Rule 144A Offering)) the result of which is that any Person or Group (other than any of the Company’s wholly-owned Subsidiaries, any underwriter temporarily holding securities pursuant to a Public Offering or any Company employee pension or benefits plan), becomes the beneficial owners of more than forty percent (40%) of the aggregate voting power of all classes of stock of the Company having the right to elect directors under ordinary circumstances; or (iv) the first day on which a majority of the members of the Board are not individuals who were nominated for election or elected to the Board with the approval of two-thirds of the members of the Board just prior to the time of such nomination or election.

3.7 STOCK OPTIONS. On the Commencement Date, and subject to compliance with federal and state securities laws, the Company shall grant to the Executive under the Inducement Stock Option Agreement, found in Schedule I hereto, stock options to purchase Three Hundred Thousand (300,000) shares of the Company’s common stock at an exercise price equal to the closing price of the Company’s common stock on the date of grant (the “Stock Options”). The Company and the Executive agree that the terms and conditions set forth on Schedule I hereto are hereby deemed incorporated by reference and shall govern the Stock Options granted under this Agreement.

ARTICLE 4

EMPLOYEE BENEFITS

4.1 BENEFITS. The Company agrees that the Executive shall be entitled to all ordinary and customary perquisites afforded generally to executive employees of the Company (except to the extent employee contribution may be required under the Company’s benefit plans as they may now or hereafter exist), which shall in no event be less than the benefits generally afforded to the other executive employees of the Company as of the date hereof or from time to time, but in any event shall include any qualified or non-qualified pension, profit sharing and savings plans, any death benefit and disability benefit plans, life insurance coverages, any medical, dental, health and welfare plans or insurance coverages and any stock purchase programs that are approved in writing by the Board, in its sole discretion.

4.2 VACATION. The Executive shall be entitled to four (4) weeks of paid vacation for each full calendar year of his employment hereunder. To the extent accrued vacation time is unused in any given year, it may be carried over in accordance with the policies of the Company then in effect. Notwithstanding anything to the contrary, however, the Executive shall not be entitled to carry over any unused vacation for a period exceeding two (2) years.

ARTICLE 5

BUSINESS EXPENSES

5.1 EXPENSES. The Company shall pay or reimburse the Executive for all reasonable and authorized business expenses incurred by the Executive during the Term; such payment or reimbursement shall not be unreasonably withheld so long as said business expenses have been incurred for and promote the business of the Company and are normally and customarily incurred by employees in comparable positions at other comparable businesses in the same or similar market. Notwithstanding the above, the Company shall not pay or reimburse the Executive for the costs of any membership fees or dues for private clubs, civic organizations, and similar organizations or entities, unless such organizations and the fees and costs associated therewith have first been approved in writing by the Board, in its sole discretion.

5.2 TRAVEL COSTS. Subject to the provisions of this Article 5, the Company shall reimburse the Executive for expenses incurred with business-related travel. For business-related flights over four hours, Executive shall be reimbursed for Business Class travel expenses.

5.3 RECORDS. As a condition to reimbursement under this Article 5, the Executive shall furnish to the Company adequate records and other documentary evidence required by federal and state statutes and regulations for the substantiation of each expenditure. The Executive acknowledges and agrees that failure to furnish the required documentation may result in the Company denying all or part of the expense for which reimbursement is sought.

ARTICLE 6

TERMINATION OF EMPLOYMENT

6.1 TERMINATION FOR CAUSE. The Company may, during the Term, without notice to the Executive, terminate the Executive’s employment under this Agreement and discharge the Executive for Cause (as defined below), and in such event, except as set forth in the proviso to this Section 6.1, neither party shall have any rights or obligations under Article 2, Sections 3.1 and 3.2, or Articles 4 and 5; provided, however, that (a) the Company shall pay the Executive any amount due and owing as of the termination date pursuant to Section 3.1 and Section 3.2 (excluding a Bonus for the year in which the termination occurs) and Articles 4 and 5 (subject, in each case, to Section 3.3), and (b) the remaining provisions of this Agreement shall remain in full force and effect in accordance with their terms. As used herein, the term “Cause” shall refer to the termination of the Executive’s employment as a result of any one or more of the following: (i) any conviction of, or pleading of nolo contendre by, the Executive for any crime of moral turpitude or felony; (ii) any wilfull misconduct of the Executive which has a materially injurious effect on the business or reputation of the Company; (iii) the gross dishonesty of the Executive which has a materially injurious effect on the business or reputation of the Company; or (iv) a material failure to consistently discharge his duties under this Agreement which failure continues for thirty (30) days following written notice from the Company detailing the area or areas of such failure, other than such failure resulting from his Disability (as defined below); provided, that clause (iv) above shall be deemed to be deleted from this Agreement and shall have no force or effect concurrently with the consummation of a Change of Control. For purposes of this Section 6.1, no act or failure to act, on the part of the Executive, shall be considered “willful” if it is done, or omitted to be done, by the Executive in good faith or with

reasonable belief that his action or omission was in the best interest of the Company. The Executive shall have the opportunity to cure any such acts or omissions (other than clause (i) above) within thirty (30) days of the Executive’s receipt of a notice from the Company finding that, in the good faith opinion of the Company, the Executive is guilty of acts or omissions constituting “Cause.”

6.2 TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. Subject to Section 6.4, the Company shall have the right, at any time in its sole and subjective discretion, to terminate the Executive’s employment under this Agreement without Cause upon not less than thirty (30) days prior written notice to the Executive. The term “termination without Cause” shall mean the termination by the Company of the Executive’s employment for any reason other than those expressly set forth in Section 6.1, or no reason at all, and shall also mean the Executive’s decision to terminate his employment under this Agreement by reason of any act, decision or omission by the Company or the Board that: (A) materially modifies, reduces, changes, or restricts the Executive’s salary, bonus opportunities, options or other compensation benefits or perquisites, or the Executive’s authority, functions, services, duties, rights, and privileges as, or commensurate with the Executive’s position as the Executive Vice President, Finance or Executive Vice President and Chief Financial Officer of the Company, as the case may be, as described in Section 2.1 hereof; (B) relocates the Executive without his consent from the Company’s offices located at 18872 MacArthur Boulevard, Irvine, California, 92612-1400 to any other location in excess of fifty (50) miles beyond the geographic limits of Irvine, California; (C) deprives the Executive of his titles and positions of Executive Vice President, Finance or Executive Vice President and Chief Financial Officer of the Company, as the case may be; or (D) involves or results in any failure by the Company to comply with any provision of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive (each a “Good Reason”). In the event the Company or the Executive shall exercise the termination right granted pursuant to this Section 6.2, then except as set forth in the proviso below, neither party shall have any rights or obligations under Article 2, Sections 3.1 and 3.2, or Articles 4 and 5; provided, however, that, subject to Section 3.5, the Company shall pay to the Executive (a) an amount equal to twelve (12) months of the Executive’s Base Salary in effect at the time of termination plus the Bonus (at the Target level) and shall continue to provide all benefits in accordance with Section 4 for a period of twelve (12) months after the effective date of the termination (subject in each case to Section 3.3), except that the Company shall not be required to provide such benefits to the extent that, during such twelve (12) month period, the Executive receives substantially similar (or better, from the Executive’s perspective) benefits from a new employer, and (b) any amount due and owing as of the termination date pursuant to Section 3.2 (including a Bonus for the year in which the termination occurs prorated to the date of termination based on the performance of the Company in such year as of the date on which the termination occurs versus the performance targets for the Company established by the Board for the entire year, and using such factors as the Board shall determine in its sole discretion (e.g., revenue, EBITDA, net income, etc.)) and Article 5 (subject, in each case, to Section 3.3), and the remaining provisions of this Agreement shall remain in full force and effect in accordance with their terms. The amounts and benefits required by clause (a) above shall be provided only if the Executive has executed (and not revoked) a release in favor of the Company (which release shall be substantially in the form attached as Exhibit A). The amounts payable pursuant to this Section 6.2 shall be in payment for the services rendered by the Executive pursuant to this Agreement during the Term, and, subject to Section 3.5, the Executive shall not be entitled to any additional amounts in consideration for such services.

6.3 TERMINATION FOR DEATH OR DISABILITY. The Executive’s employment shall terminate automatically upon the Executive’s death during the Term. If the Company determines in good faith that the Disability (as defined below) of the Executive has occurred during the Term, it shall give written notice to the Executive of its intention to terminate his employment. In such event, the Executive’s employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive, provided that, within the thirty (30) days after such receipt, the Executive shall not have returned to full-time performance of his duties. For purposes of this Agreement, “Disability” shall mean the inability of the Executive to perform his duties to the Company on account of physical or mental illness or incapacity for a period of one-hundred twenty (120) consecutive calendar days, or for a period of one hundred eighty (180) calendar days, whether or not consecutive, during any three hundred sixty-five (365) day period.

6.4 TERMINATION WITHOUT GOOD REASON. Anything in this Agreement to the contrary notwithstanding, during the Term the Executive shall have the right, in his sole and subjective discretion, to terminate his employment under this Agreement without Good Reason upon not less than thirty (30) days prior written notice to the Company, except that if the termination date is to occur in the first quarter of the Company’s fiscal year the notice shall provide that the termination date shall not occur until the day after the Company files its Annual Report on Form 10-K for the prior fiscal year with the SEC, and in such event, neither party shall have any rights or obligations under Article 2, Sections 3.1 and 3.2, or Articles 4 and 5; provided, however, that (a) the Company shall pay the Executive any amount due and owing as of the termination date pursuant to Section 3.1 and Section 3.2 (including a Bonus for the year in which the termination occurs, which shall be prorated to the date of termination, and any component of which that is based on the financial performance of the Company (as opposed to the individual performance of the Executive) shall be paid at the same time as the Company pays a bonus to its other executive officers that are employed by the Company as of the end of the calendar year in which the termination occurs) and Articles 4 and 5 (subject, in each case, to Section 3.3), and (b) the remaining provisions of this Agreement shall remain in full force and effect in accordance with their terms.

6.5 STOCK OPTIONS. Upon the Executive’s termination under this Article 6, the Company’s obligations with respect to any stock option to purchase shares of the Company’s common stock granted to the Executive shall be determined by the terms and conditions of such option as set forth in the Executive’s written option agreement regarding such options, including, with respect to the Stock Options, the terms and conditions set forth on Schedule I hereto.

ARTICLE 7

PARACHUTE TAX INDEMNITY

7.1 GROSS-UP PAYMENT.

(a) If it shall be determined that any amount paid, distributed or treated as paid or distributed by the Company to or for the benefit of the Executive (whether paid

or payable or distributed or distributable pursuant to the terms of this Agreement, any stock option agreement between the Executive and the Company or otherwise, but determined without regard to any additional payments required under this Article 7) (a “Payment”) would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, being hereinafter collectively referred to as the “Excise Tax”), then the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by the Executive of all federal, state and local taxes (including any interest or penalties imposed with respect to such taxes), including without limitation, any income taxes (including any interest or penalties imposed with respect thereto) and Excise Tax imposed on the Gross-up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

(b) The determinations of whether and when a Gross-Up Payment is required under this Article 7 shall be made by the Company based on its good faith interpretation of applicable law. The amount of such Gross-Up Payment and the valuation assumptions to be utilized in arriving at such determination shall be made by the Company which shall provide detailed supporting calculations to the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment subject to the Excise Tax, or such earlier time as is requested by the Company. Any Gross-Up Payment, as determined pursuant to this Article 7, shall be paid by the Company to the Executive within twenty-five (25) days of the receipt of notice from the Executive that there has been a Payment subject to the Excise Tax. Any determinations by the Company shall be binding upon the Executive, provided, however, if it is later determined that there has been an underpayment of Excise Tax and that the Executive is required to make an additional Excise Tax payment(s) on any Payment or Gross-Up Payment, the Company shall provide a similar full gross-up on such additional liability.

(c) For purposes of any determinations made by the Company acting under Section 7.1(b):

(i) All Payments and Gross-Up Payments with respect to the Executive shall be deemed to be “parachute payments” under Section 280G(b) (2) of the Code and to be “excess parachute payments” under Section 280G(b) (1) of the Code that are fully subject to the Excise Tax under Section 4999 of the Code, except to the extent (if any) that the Company determines in good faith that a Payment in whole or in part does not constitute a “parachute payment” or otherwise is not subject to Excise Tax;

(ii) The value of any non-cash benefits or deferred or delayed payments or benefits shall be determined in a manner consistent with the principles of Section 280G of the Code; and

(iii) The Executive shall be deemed to pay federal, state and local income taxes at the actual maximum marginal rate applicable to individuals in the calendar year in which the Gross-Up Payment is made, net of any applicable reduction in federal income taxes for any state and local taxes paid on the amounts in question.

7.2 CLAIMS AND PROCEEDINGS. The Executive shall notify the Company in writing of any Excise Tax claim by the Internal Revenue Service (or any other state or local taxing authority) that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notification shall be given as soon as practicable but no later than twenty (20) business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which he gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such Excise Tax claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim; (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company after consultation in good faith with the Executive and subject to approval by the Executive (which approval shall not be unreasonably withheld) under the circumstances set forth in Section 7.1; (iii) cooperate with the Company in good faith in order to effectively contest such claim; and (iv) permit the Company to participate in any proceeding relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expense. Without limitation of the foregoing provisions of this Article 7, the Company shall control the Excise Tax portion of any proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such Excise Tax claim and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that the Executive may elect at his sole option to pay the tax claimed and require the Company to contest through a suit for a refund. If the Executive elects to pay such Excise Tax claim and contest through a suit for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest and penalties) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, however, that any Company-directed extension of the statute of limitations relating to payment of taxes for the Executive’s taxable year with respect to which such contested Excise Tax amount is claimed to be due shall be effective only if it can be and is limited to the contested Excise Tax liability.

7.3 REFUNDS. If, after the Executive’s receipt of an amount advanced by the Company pursuant to this Article 7 for payment of Excise Taxes, the Executive files an Excise Tax refund claim and receives any refund with respect to such claim, the Executive shall (subject to the Company’s complying with the requirements of this Article 7) except as provided below, promptly pay to the Company the amount of any such refund of Excise Tax (together with any interest paid or credited thereon, but after any and all taxes applicable thereto), plus the amount (after any and all taxes applicable-thereto) of the refund (if any is applied for and received) of

any income tax paid by the Executive with respect to and as a result of his prior receipt of any previously paid Gross-Up Payment indemnifying the Executive with respect to any such Excise Tax later so refunded. In the event the Executive files for a refund of the Excise Tax and such request would, if successful, require the Executive to refund any amount to the Company pursuant to this provision, then the Executive shall be required to seek a refund of the Income Tax portion of any corresponding Gross-Up Payment so long as such refund request would not have a material adverse effect on the Executive (which determination shall be made by independent tax counsel selected by the Executive after good faith consultation with the Company and subject to approval of the Company, which approval shall not be unreasonably withheld). If, after the Executive’s receipt of an amount advanced by the Company pursuant to this Article 7, a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of the Gross-Up Payment required to be paid.

ARTICLE 8

RESTRICTIVE COVENANTS

8.1 COVENANT NOT TO DISCLOSE CONFIDENTIAL INFORMATION. During the Term and following termination of Executive’s employment under this Agreement, the Executive agrees that, without the Company’s prior written consent, he will not use or disclose to any person, firm, association, partnership, entity or corporation, any confidential information concerning: (i) the business, operations or internal structure of the Company or any division or part thereof; (ii) the customers of the Company or any division or part thereof; (iii) the financial condition of the Company or any division or part thereof; and (iv) other confidential information pertaining to the Company or any division or part thereof, including without limitation, trade secrets, technical data, marketing analyses and studies, operating procedures, customer and/or inventory lists, or the existence or nature of any of the Company’s agreements or agreements of any division thereof (other than this Agreement, any indemnification agreement and any other option or compensation related agreements involving, the Executive); provided, however, that the Executive shall be entitled to disclose such information: (i) to the extent the same shall have otherwise become publicly available (unless made publicly available by the Executive); (ii) during, the course of or in connection with any actual or potential litigation, arbitration, or other proceeding based upon or in connection with the subject matter of this Agreement; (iii) as may be necessary or appropriate to conduct his duties hereunder, provided the Executive is acting, in good faith and in the best interest of the Company; (iv) as may be required by law or judicial process or (v) if the information is generally known to personnel in the Executive’s trade or business.

8.2 COVENANT NOT TO COMPETE. The Executive acknowledges that he will establish favorable relations with the customers, clients and accounts of the Company and will have access to trade secrets of the Company. Therefore, in consideration of such relations to further protect trade secrets, directly or indirectly, of the Company, the Executive agrees that at all times during his employment with the Company through the one (1) year anniversary of the date of termination of the Executive’s employment, the Executive will not, directly or indirectly, without the express written consent of the Board:

(i) own or have any interest in or act as an officer, director, partner, principal, employee, agent, representative, consultant or independent contractor of, or in any way assist in, any business which is engaged, directly or indirectly, in any business competitive with the Company in those automotive markets and/or automotive products lines in which the Company competes within the United States at any time during the Term, or become associated with or render services to any person, firm, corporation or other entity so engaged (“Competitive Businesses”); provided, however, that the Executive may own without the express written consent of the Company not more than two percent (2%) of the issued and outstanding securities of any company or enterprise whose securities are listed on a national securities exchange or actively traded in the over the counter market;

(ii) solicit clients, customers or accounts of the Company for, on behalf of or otherwise related to any such Competitive Businesses or any products related thereto; or

(iii) solicit any person who is or shall be in the employ or service of the Company to leave such employ or service for employment with the Executive or an affiliate of the Executive.

Notwithstanding the foregoing, if any court determines that the covenant not to compete, or any part thereof, is unenforceable because of the duration of such provision or the geographic area or scope covered thereby, such court shall have the power to reduce the duration, area or scope of such provision to the extent necessary to make the provision enforceable and, in its reduced form, such provision shall then be enforceable and shall be enforced. The Company shall pay and be solely responsible for any attorney’s fees, expenses, costs and court or arbitration costs incurred by the Executive in any matter or dispute between the Executive and the Company which pertains to this Article 8 if the Executive prevails in the contest in whole or in part.

8.3 SPECIFIC PERFORMANCE. Recognizing that irreparable damage will result to the Company in the event of the breach or threatened breach of any of the foregoing covenants and assurances by the Executive contained in Sections 8.1 and 8.2, and that the Company’s remedies at law for any such breach or threatened breach may be inadequate, the Company and its successors and assigns, in addition to such other remedies which may be available to them, shall, upon making a sufficient showing under applicable law, be entitled to an injunction to be issued by any court of competent jurisdiction ordering compliance with this Agreement or enjoining and restraining the Executive, and each and every person, firm or company acting in concert or participation with him, from the continuation of such breach. The obligations of the Executive and rights of the Company pursuant to this Article 8 shall survive the termination of the Executive’s employment under this Agreement. The covenants and obligations of the Executive set forth in this Article 8 are in addition to and not in lieu of or exclusive of any other obligations and duties the Executive owes to the Company, whether expressed or implied in fact or law.

ARTICLE 9

GENERAL PROVISIONS

9.1 FINAL AGREEMENT. Except with respect to the terms of (a) any existing confidentiality, non-disclosure, and non-competition agreements between the Company and the Executive (solely for the purposes of permitting either party to seek remedies for a breach thereof in respect of acts or omissions occurring prior to the date hereof), and (b) any existing indemnification agreements, including, without limitation, any indemnification agreement, inventions agreements, and stock option agreements between the Executive and the Company, this Agreement is intended to be the final, complete and exclusive agreement between the parties relating to the employment of the Executive by the Company and all prior or contemporaneous understandings, representations and statements, oral or written, are merged herein. No modification, waiver, amendment, discharge or change of this Agreement shall be valid unless the same is in writing and signed by the party against which the enforcement thereof is or may be sought.

9.2 NO WAIVER. No waiver, by conduct or otherwise, by any party of any term, provision, or condition of this Agreement, shall be deemed or construed as a further or continuing waiver of any such term, provision, or condition nor as a waiver of a similar or dissimilar condition or provision at the same time or at any prior or subsequent time.

9.3 RIGHTS CUMULATIVE. The rights under this Agreement, or by law or equity, shall be cumulative and may be exercised at any time and from time to time. No failure by any party to exercise, and no delay in exercising, any rights shall be construed or deemed to be a waiver thereof, nor shall any single or partial exercise by any party preclude any other or future exercise thereof or the exercise of any other right.

9.4 NOTICE. Except as otherwise provided in this Agreement, any notice, approval, consent, waiver or other communication required or permitted to be given or to be served upon any person in connection with this Agreement shall be in writing. Such notice shall be personally served, sent by fax, or sent prepaid by either registered or certified mail with return receipt requested or reputable overnight courier and shall be deemed given (i) if personally served, when delivered to the person to whom such notice is addressed, (ii) if given by fax, as evidenced by receipt of the facsimile sending machine, (iii) if given by mail, two (2) business days following deposit in the United States mail or (iv) if given by overnight courier, the day after it is sent as evidenced by courier receipt. Such notices shall be addressed to the party to whom such notice is to be given at the party’s address set forth below or as such party shall otherwise direct.

If to the Company:

Autobytel Inc.

18872 MacArthur Boulevard

Irvine, California 92612-1400

Facsimile: (949) 862-1323

Attn: President

If to the Executive:

Monty Houdeshell

P.O. Box 6426

Laguna Niguel, California 92607

9.5 SUCCESSORS. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the successors and assigns of the parties hereto.

9.6 GOVERNING LAW. This Agreement shall be construed and enforced in accordance with the laws of the State of California, without giving effect to the principles of conflict of laws thereof.

9.7 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one instrument.

9.8 SEVERABILITY. The provisions of this Agreement are agreed to be severable, and if any provision, or application thereof, is held invalid or unenforceable, then such holding shall not affect any other provision or application.

9.9 CONSTRUCTION. As used herein, and as the circumstances require, the plural term shall include the singular, the singular shall include the plural, the neuter term shall include the masculine and feminine genders, and the feminine term shall include the neuter and the masculine genders.

9.10 ARBITRATION. Except as otherwise provided in Section 8.3 hereof, any controversy or claim arising out of, or related to, this Agreement, or the breach thereof, shall be settled by binding arbitration in the City of Irvine, California, in accordance with the employment arbitration rules then in effect of the American Arbitration Association, and the arbitrator’s decision shall be binding and final, and judgment upon the award rendered may be entered in any court having jurisdiction thereof. Each party hereto shall pay its or their own expenses incident to the negotiation, preparation and resolution of any controversy or claim arising out of, or related to, this Agreement, or the breach thereof; provided, however, the Company shall pay and be solely responsible for any attorneys’ fees and expenses and court or arbitration costs incurred by the Executive as a result of a claim brought by either the Executive or the Company alleging that the other party breached or otherwise failed to perform this Agreement or any provision hereof to be performed by the other party if the Executive prevails in the contest in whole or in part.

9.11 LEGAL FEES. All reasonable attorney’s fees and costs incurred by the parties in connection with the negotiation and preparation of this Agreement and diligence related matters shall be borne by the Company.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

AUTOBYTEL INC.
By:	/s/ James E. Riesenbach
Name:	James E. Riesenbach
Title:	Chief Executive Officer

MONTY HOUDESHELL
By:	/s/ Monty Houdeshell

EX-10.2

Exhibit 10.2

INDUCEMENT STOCK OPTION AGREEMENT

THIS AGREEMENT, made as of the 30th day of January, 2007 (the “Grant Date”), by and between Autobytel Inc. (“Autobytel” or the “Company”) and Monty Houdeshell (“Optionee”).

RECITALS

WHEREAS, the Board has determined to offer employment to Optionee pursuant to an employment agreement between the Company and the Optionee, dated as of January 30, 2007 (the “Employment Agreement”).

WHEREAS, as an inducement to accept such employment offer, the Board has determined to offer Optionee an option (the “Option”) to purchase 300,000 shares of Common Stock (the shares subject to this award being referred to below as the “Shares”) under the terms and conditions set forth herein.

WHEREAS, the exercise price for the Shares subject to this Option shall be equal to the Fair Market Value (as defined in the Appendix hereto) of the underlying Shares on the Grant Date.

WHEREAS, all capitalized terms in this Agreement, to the extent not otherwise defined herein, shall have the meaning assigned to them in the attached Appendix.

NOW THEREFORE, it is hereby agreed as follows:

1. Grant of Option. Autobytel hereby grants to Optionee, as of the Grant Date, an Option to purchase up to 300,000 Shares at the Exercise Price per Share. The Shares shall be purchasable from time to time in accordance with the Vesting Schedule in Paragraph 3.

2. Option Term. The Option shall have a maximum term of ten (10) years measured from the Grant Date and shall accordingly expire at the close of business on the tenth anniversary of the Grant Date, unless sooner terminated in accordance with Paragraph 4 or 5.

3. Exercisability/Vesting. The right to exercise the Option shall vest in the Optionee, and the Option shall become exercisable in accordance with the Vesting Schedule set forth herein. The Option shall remain exercisable to the extent vested until the Expiration Date or the sooner termination of the Option term under Paragraph 4 or 5. The right to exercise the Option shall vest in the Optionee as follows:

(i) 100,000 of the Options shall vest on the first anniversary of the Commencement Date (as defined in the Employment Agreement) provided the Optionee is actively employed by the Company on such anniversary date;

(ii) 6,250 of the Options shall vest on each monthly anniversary of the Commencement Date over the period beginning on the thirteenth (13th) monthly anniversary of the

Commencement Date and ending on the thirty-sixth (36th) monthly anniversary of the Commencement Date; provided the Optionee is actively employed by the Company on the respective vesting dates; and

(iii) on the date the Company files with the Securities and Exchange Commission under the Securities and Exchange Act of 1934, as amended, its Annual Report on Form 10-K (each a “Form 10-K”) for each of the fiscal years ending on December 31, 2007, December 31, 2008 and December 31, 2009, 16,667, 16,667 and 16,666 of the Options shall vest, respectively, but only if (I) the Optionee is actively employed by the Company on the respective vesting dates, and (II) the Company and the Optionee have satisfied reasonable performance criteria established as described below in this clause (iii). Notwithstanding the foregoing, if any such filing of a Form 10-K by the Company is delayed beyond the expiration of the Term (as defined in the Employment Agreement), the Options shall be subject to vesting (whether or not the Executive is still employed by the Company) if and when such Form 10-K is filed provided that the performance criteria established by the Board or such committee in respect of such respective fiscal year are met. The performance criteria shall include, among other factors, revenue and EBITDA targets for the Company and shall be set by the Board or a committee thereof in its sole discretion within 90 days of the Board adopting the operating plan of the Company for such respective year.

Vesting in the Shares may be accelerated pursuant to the provisions of Paragraph 4 or 5 below. Unless otherwise specifically provided herein, no Shares shall vest following the Optionee’s cessation of Service.

4. Cessation of Service.

(a) Termination due to Death or Disability. As of the date of the Optionee’s termination due to death or Disability (as defined below), any unexercised portion of any Option shall be exercisable (to the extent previously vested) from the date of such termination of the Optionee’s Service until two (2) years following such termination date, but in no event later than ten (10) years following the Grant Date. As to unvested Options at the date of the Optionee’s termination due to death or Disability, all unvested performance-based Options shall terminate and all time-based Options that have not yet vested shall vest and shall be exercisable from the date of such termination of the Optionee’s Service until ninety (90) days following such termination date, but in no event later than ten (10) years following the Grant Date. For purposes hereof, “Disability” shall have the same meaning and be determined in the same manner as set forth in the Employment Agreement.

(b) Termination for Cause. As of the date of the Optionee’s termination of Service for Cause (as defined below), any unvested or unexercised portion of any Option shall terminate immediately and shall be of no further force or effect. For purposes hereof, “Cause” shall have the same meaning and be determined in the same manner as set forth in the Employment Agreement.

(c) Termination Without Cause or for Good Reason. As of the date of the Optionee’s termination of Service by Autobytel without Cause or by the Optionee for Good Reason (as

defined below), any unexercised portion of any Option shall (to the extent previously vested) be exercisable from such termination of the Optionee’s Service until the date that is two (2) years following the termination date, but in no event later than ten (10) years following the Grant Date. As to unvested Options at the date of the Optionee’s termination of Service by Autobytel without Cause or by Optionee for Good Reason, all unvested performance-based Options shall terminate and all time-based Options that have not yet vested shall vest and shall be exercisable from the date of such termination of the Optionee’s Service until ninety (90) days following such termination date, but in no such event later than ten (10) years following the Grant Date. The term “without Cause” shall mean the termination of the Optionee’s Service for any reason other than those expressly set forth in the definition “for Cause” above, or no reason at all, or for Good Reason. For purposes hereof, “Good Reason” shall have the same meaning and be determined in the same manner as set forth in the Employment Agreement.

(d) Termination Without Good Reason. As of the date of any voluntary termination of Service with the Company by the Optionee other than due to death or Disability, and other than for Good Reason, any unvested portion of any Option shall terminate immediately and shall be of no further force or effect. Any previously vested but unexercised portion of any Option shall remain exercisable from the date of such termination of employment until the second anniversary of the termination date, but in no event later than ten (10) years following the Grant Date.

(e) Termination upon Expiration of Employment Agreement. As of the date of any termination of Optionee’s Service with the Company at the time of, or subsequent to, the expiration of the Employment Agreement by lapse of time and for no other reason, then any previously vested but unexercised portion of any Option shall remain exercisable from the date of such termination of employment until the second anniversary of such termination date, but in no event later than ten (10) years following the Grant Date.

5. Change in Control.

In the event of a Change of Control (as defined below) while the Optionee is employed by the Company, any unvested installment of any Option shall immediately vest and become exercisable from the date of such Change of Control until the second anniversary of the Change of Control, but in no event later than ten (10) years following the Grant Date provided, however, that notwithstanding the foregoing, any such stock options shall remain exercisable beyond such dates so long as Executive is an employee of the Company or any successor thereto or affiliate thereof, but in no event later than ten (10) years following the Grant Date. For purposes hereof, “Change of Control” shall have the same meaning and be determined in the same manner as set forth in the Optionee’s employment agreement with the Company.

6. Adjustment in Shares. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without Autobytel’s receipt of consideration, the Company shall make appropriate equitable adjustments to (i) the number and/or class of securities subject to the Option and (ii) the Exercise Price in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder; provided, however, that the aggregate Exercise Price shall remain the same.

7. Stockholder Rights. The holder of the Option shall not have any stockholder rights with respect to the Shares until such person shall have exercised the Option, paid the Exercise Price and become a holder of record of the purchased Shares.

8. Manner of Exercising Option.

(a) In order to exercise the Option for all or any part of the Shares for which the Option is at the time exercisable, Optionee or, in the case of exercise after Optionee’s death, Optionee’s executor, administrator, heir or legatee, as the case may be, must take the following actions:

(i) The Secretary of Autobytel shall be provided with written notice of the Option exercise (the “Exercise Notice”) in substantially the form of Exhibit I attached hereto, in which there is specified the number of Shares to be purchased under the exercised Option.

(ii) The Exercise Price for the purchased Shares shall be paid in one or more of the following alternative forms:

• cash or check made payable to Autobytel’s order; or

• Shares of Common Stock held by Optionee (or any other person or persons exercising the Option) for the requisite period necessary to avoid a charge to Autobytel’s earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date; or

• if established by Autobytel and permitted under applicable law (including the financial accounting rules associated with avoiding additional financial expense through the method of exercise), through a “same day sale” commitment from Optionee and a broker-dealer selected by Autobytel whereby the Optionee irrevocably elects to exercise the Option and to sell a portion of the Shares so purchased sufficient to pay for the total Exercise Price for the Shares being exercised and whereby the broker-dealer irrevocably commits upon receipt of such Shares to forward the total Exercise Price for the Shares being exercised directly to Autobytel plus the applicable Federal, state and local income taxes required to be withheld by Autobytel by reason of such exercise.

(iii) Appropriate documentation evidencing the right to exercise the Option shall be furnished to Autobytel if the person or persons exercising the Option is other than Optionee.

(iv) Appropriate arrangement must be made with Autobytel for the satisfaction of all Federal, state and local income tax withholding requirements applicable to the Option exercise.

(b) Except to the extent the sale and remittance procedure specified above is utilized in connection with the exercise of the Option, payment of the Exercise Price for the purchased Shares must accompany the Exercise Notice delivered to Autobytel in connection with the Option exercise.

(c) As soon as practicable after the Exercise Date, Autobytel shall issue to or on behalf of Optionee (or any other permitted person or persons exercising the Option) a certificate or certificates representing the purchased Shares. The right to receive Shares under this Agreement may not be assigned, transferred, pledged or otherwise disposed of in any way by the Optionee (other than by will or the laws of descent and distribution).

(d) In no event may the Option be exercised for fractional Shares.

9. No Impairment of Rights. This Agreement shall not in any way affect the right of Autobytel to adjust, reclassify, reorganize or otherwise make changes in its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

10. Compliance with Laws and Regulations.

(a) The exercise of the Option and the issuance of the Shares upon such exercise shall be subject to compliance by Autobytel and Optionee with all applicable requirements of law relating thereto and with all applicable regulations of any stock exchange (or the Nasdaq Global Market, if applicable) on which the Common Stock may be listed for trading at the time of such exercise and issuance.

(b) The inability of Autobytel to obtain approval from any regulatory body having authority deemed by Autobytel to be necessary to the lawful issuance and sale of any Common Stock pursuant to the Option shall relieve Autobytel of any liability with respect to the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained. However, Autobytel shall use its best efforts to obtain all such applicable approvals.

11. Successors and Assigns. Except to the extent otherwise provided in Paragraph 4(a) or 5, the provisions of this Agreement shall inure to the benefit of, and be binding upon, Autobytel and its successors and assigns and Optionee, Optionee’s assigns and the legal representatives, heirs and legatees of Optionee’s estate.

12. Governing Law. The interpretation, performance, and enforcement of this Agreement shall be governed by the laws of the State of California without resort to its conflict-of-laws rules.

13. Non-Statutory Stock Options. The Option granted hereunder is not intended to be an incentive stock option within the meaning of Section 422 of the Code.

14. No Right to Continued Service. Nothing in this Agreement shall confer upon Optionee any right to continue in the Service of Autobytel or shall interfere with or restrict in any way the rights of Autobytel which are hereby expressly reserved, to discharge Optionee at any time for any reason whatsoever, with or without Cause.

15. Notices. Any notice required to be given or delivered to Autobytel under the terms of this Agreement shall be in writing and addressed to Autobytel at its principal corporate offices. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at the most recent address reflected in Autobytel’s employment records. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.

16. Administration of Option. The Board shall have full discretion to interpret all provisions of this Option, and all decisions of the Board regarding the Option shall be binding on all parties.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.

AUTOBYTEL INC.
By:	/s/ James E. Riesenbach
Name:	James E. Riesenbach
Title:	Chief Executive Officer
OPTIONEE
	/s/ Monty Houdeshell
	Monty Houdeshell
	Optionee

EXHIBIT I

NOTICE OF EXERCISE

I hereby notify Autobytel Inc. (“Autobytel”) that I elect to purchase              shares of Autobytel’s Common Stock (the “Purchased Shares”) at the Option exercise price of $             per share (the “Exercise Price”) pursuant to that certain Option (the “Option”) granted to me pursuant to Autobytel’s inducement Option grant.

Concurrently with the delivery of this Exercise Notice to the Secretary of Autobytel, I shall hereby pay to Autobytel the Exercise Price for the Purchased Shares in accordance with the provisions of my agreement with Autobytel evidencing the Option and shall deliver whatever additional documents may be required by such agreement as a condition for exercise. Alternatively, I may utilize the special broker/dealer sale and remittance procedure specified in my agreement to effect payment of the Exercise Price for any Purchased Shares in which I am vested at the time of exercise to the extent established by Autobytel and permitted by the terms of the Option grant agreement and applicable law (including the financial accounting rules associated with avoiding additional financial expense through the method of exercise).

                    , 200    

Date

	Optionee
	Address:
Print name in exact manner it is to appear on the stock certificate:
Address to which certificate is to be sent, if different from address above:
Social Security Number:

APPENDIX

The following definitions shall be in effect under the Agreement:

A. Agreement shall mean this Inducement Stock Option Agreement.

B. Board shall mean Autobytel’s Board of Directors.

C. Code shall mean the Internal Revenue Code of 1986, as amended.

D. Common Stock shall mean Autobytel’s common stock, par value $0.001 per share.

E. Exercise Date shall mean the date on which the Option shall have been exercised in accordance with Paragraph 8 of the Agreement.

F. Exercise Price shall mean $3.74 per Share.

G. Expiration Date shall mean the date on which the Option term expires as specified in Paragraph 2.

H. Fair Market Value per share of Common Stock on any relevant date shall be determined in accordance with the following provisions:

(i) If the Common Stock is at the time traded on the Nasdaq Global Market, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question, as the price is reported by the National Association of Securities Dealers on the Nasdaq Global Market or any successor system. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.

(ii) If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on the Stock Exchange determined by the Board to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.

(iii) If the Common Stock is not at the time traded on any Stock Exchange and is not reported on the Nasdaq Global Market or any successor system, then the Fair Market Value shall be the average between the highest bid and lowest asked prices for the Common Stock on the relevant date by an established quotation service for over-the-counter securities.

(iv) If the Common Stock is not at the time traded on any Stock Exchange, is not reported on the Nasdaq Global Market or a successor system, and is not otherwise publicly traded, then the Fair Market Value shall be established by the Board acting in good faith and taking into consideration all factors which it deems appropriate, including, without limitation, recent sale or offer prices for the Common Stock in private arms-length transactions.

I. Grant Date shall mean the date designated in the preamble to the Agreement granting the Option.

J. Optionee shall mean the person to whom the Option is granted as specified in the Agreement.

K. Service shall mean Optionee’s service with Autobytel, whether as an employee, director or consultant, which has not been interrupted or terminated. Optionee’s Service shall not be deemed to have terminated merely because of a change in the capacity in which Optionee renders service to Autobytel.

M. Shares shall mean the number of shares of Common Stock subject to the Option.

N. Stock Exchange shall mean the American Stock Exchange or the New York Stock Exchange.

O. Vesting Schedule shall mean the vesting schedule specified in Paragraph 3 of the Agreement, pursuant to which Optionee will vest in the Shares in one or more installments over his or her period of Service, subject to acceleration in accordance with the provisions of the Agreement.

EX-99.1

Exhibit 99.1

AUTOBYTEL INC. HIRES MONTY HOUDESHELL TO BECOME

EVP AND CHIEF FINANCIAL OFFICER

Former CFO of RemedyTemp, Furon Company and Oak Industries Joins Autobytel

Irvine, CA—January 30, 2007—Autobytel Inc. (Nasdaq: ABTL), a leading Internet automotive marketing services company, today announced that Monty A. Houdeshell will become Autobytel’s Chief Financial Officer. Houdeshell, who joins the Company as Executive Vice President, Finance, will become CFO the day after the filing of the company’s Form 10-K for fiscal year 2006.

Houdeshell served as CFO for three publicly-traded companies in a variety of industries, including communications technology, healthcare and manufacturing. As a key member of the company’s executive team, he will play a central role in developing the corporate strategic plan, driving operating efficiencies and supporting revenue growth across the company.

“Monty is an experienced CFO with an impressive background in public companies and turnaround situations, and I am thrilled that he has joined the Autobytel team as we continue our mission to lead the Automotive Internet,” said Autobytel President and CEO Jim Riesenbach. “His wide-ranging career as a finance executive is marked by his commitment to providing transparency and clarity in financial reporting, as well as deep knowledge of and support for business operations - a major focus for us as we continue on our path to transform the company. In addition, we will benefit greatly from his proven track record leading numerous acquisitions and divestitures, strict and successful cost-management programs, Sarbanes Oxley compliance implementation, strategic planning, rigorous process discipline and proactive investor relations.”

Most recently, Houdeshell served as CFO for NASDAQ-listed Remedy Temp, a professional staffing organization, until its acquisition. Previously he was CFO of NYSE-listed Furon Company, a manufacturer of high performance polymer products for the industrial and medical markets. Formerly Houdeshell was CFO of NYSE-listed Oak Industries, producer of electronic components and communications and cable equipment, and held a variety of finance and administrative positions at Twentieth Century-Fox Film Corp where he started his career.

“I am very pleased to be joining the Autobytel team and am impressed by the energy and concentration focused around the Company’s core mission,” said Houdeshell. “I share the management team’s commitment to laying a solid foundation of financial discipline, planning, and reporting, that should help us to reap the tremendous opportunities of the Automotive Internet to the benefit of our shareholders.”

Houdeshell will be taking over from Mike Schmidt who has served as CFO since May 2005. As previously disclosed, Schmidt will leave to pursue other opportunities. “We are very grateful for Mike’s dedication and service over the past two years and wish him well in his future endeavors,” said Riesenbach.

About Autobytel Inc.

Autobytel Inc. (Nasdaq: ABTL) is one of the largest online automotive marketplaces, empowering consumers to make smart vehicle choices using objective automotive data and insightful interactive editorial content. The result is a convenient car-buying process backed by a nationwide network of dealers who are committed to providing a positive consumer experience. Every day consumers choose Autobytel-owned and operated websites—Autobytel.com, Autoweb.com, CarSmart.com, Car.com, AutoSite.com, Autoahorros.com, and CarTV.com – to facilitate their car-shopping decisions. Autobytel’s ability to attract millions of highly qualified, in-market car buyers and connect them with retailers has made it a leader in facilitating the entire customer car-buying lifecycle.

The Company’s innovative marketing, advertising and CRM products, including its Web Control^® customer management system, Retention Performance Marketing (RPM^®) service reminder program and Special Finance Leads^SM are designed to enable dealers to offer a premium consumer experience. Since pioneering pro-consumer online automotive content and purchasing in 1995, Autobytel has helped more than twenty-seven million car buyers, generating billions of dollars in car sales for dealers.

Contact:

Autobytel Inc. Investor Relations

Jennifer Klein, Vice President, Investor Relations, 949.862.1362 (jenniferkl@autobytel.com)

Autobytel Inc. Media Relations

Melanie Webber, Vice President, Corporate Communications, 949.862.3023

(melaniew@autobytel.com)