EXHIBIT 99
LITHIA MOTORS, INC.
1997 NON-DISCRETIONARY STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE OF THE PLAN
The purpose of this 1997 Non-Discretionary Stock Option Plan For
Non-Employee Directors (the "Plan") is to advance the interests of Lithia
Motors, Inc., an Oregon business corporation (the "Company") and its
shareholders by enabling the Company to attract and retain the services of
qualified outside directors as members of the Board of Directors of the Company
who are not employees of the Company or any of its Subsidiaries by giving them
an opportunity to participate in the ownership of the Company. The Options
granted under this Plan are intended to NOT qualify as incentive stock options
as defined in Section 422 of the Internal Revenue Code of 1986, as amended. It
is intended that this Plan be considered and interpreted as constituting a
"non-discretionary plan" under Section 16 of the Securities Exchange Act of
1934, as amended, and within the meaning of the rules, regulations and
interpretations under such as adopted from time to time by the Securities and
Exchange Commission.
2. DEFINITIONS
As used herein, the following definitions shall apply:
(a) "Board of Directors" shall mean the Board of Directors of the Company.
(b) "Committee" shall mean the Committee appointed as specified in Article
V of this Plan, or the Board of Directors if no such Committee shall have been
appointed.
(c) "Common Stock" shall mean the Class A Common Stock of the Company.
(d) "Company" shall mean Lithia Motors, Inc., an Oregon business
corporation.
(e) "Effective Date" shall mean the effective date of this Plan, March 1,
1997. [Subject to approval by the holders of a majority of the Company's
outstanding shares present, in person or by proxy, and entitled to vote at an
annual meeting of shareholders or at a special meeting of shareholders called
for the purpose of approving this Plan].
(f) "Employee" means any person employed by the Company or a Subsidiary.
(g) "Non-Employee Director" means any person who is a director of the
Company but who is not at such time an Employee.
(h) "Option" shall mean an option to purchase Shares of Common Stock of the
Company granted under this Plan pursuant to a written option agreement.
(i) "Optionee" shall mean any individual who is granted an Option under
this Plan.
(j) "Parent" shall mean any corporation in an unbroken chain of
corporations ending with the Company if, at the time of the granting of an
Option, each of the corporations other than the Company owns stock possessing
50 percent or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
(k) "Plan" means this 1997 Non-Discretionary Stock Option Plan for
Non-Employee Directors of Lithia Motors, Inc.
(l) "Share" shall mean a share of the Common Stock.
(m) "Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if, at the time of the granting of an
Option, each of the corporations other than the last corporation in the unbroken
chain owns stock possessing 50 percent or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
3. STOCK SUBJECT TO THE PLAN
Except as provided in Section 9.1, the total number of Shares of Common
Stock covered by all Options granted under this Plan shall not exceed 15,000
Shares, which Shares may be in whole or in part, as the Board shall from time to
time determine, authorized but unissued Shares or issued Shares which have been
reacquired by the Company. There shall at all times be reserved for issuance
upon the exercise of Options to be granted from time to time under this Plan the
number of Shares of Common Stock covered by this Plan as herein set forth. If an
Option shall expire or terminate for any reason without having been exercised in
full, unless this Plan itself shall have been terminated, the unpurchased Shares
covered thereby shall be added to the Shares otherwise available for Options
which may be granted in accordance with the terms of this Plan. If an Option is
exercised in part or in full, the number of Shares covered by this Plan and
reserved for issuance under this Plan shall automatically be reduced by the
number of Shares purchased pursuant to the exercise of such Option.
4. DURATION OF THE PLAN
This Plan shall be effective as of March 1, 1997, and shall continue in
effect until Options have been exercised with respect to all of the Shares
reserved for this Plan (subject to any adjustments under Section 9.1 of this
Plan), provided, however, that unless sooner terminated by action of the Board
of Directors, this Plan shall terminate on, and no Option may be granted
hereunder after eighth anniversary of the Effective Date. The Board of Directors
shall have the right to suspend or terminate this Plan at any time except with
respect to any Options then outstanding under this Plan.
5. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee appointed by the Board of
Directors and consisting of not less than two directors. The Board of Directors
may at any time assume the responsibilities of and act as the Committee if the
Board of Directors so elects. The Board of Directors may from time to time
appoint members of the Committee in substitution for and in addition to members
previously appointed and may fill vacancies, however caused, in the Committee.
The Committee may select one of its members as its chairman and shall hold its
meetings at such times and places as it shall deem advisable. A majority of the
members of the Committee shall constitute a quorum. All actions of the Committee
shall be taken by a majority of its members. Any action may be taken by a
written instrument signed by all Committee members, and all actions so taken
shall be fully as effective as if it has been taken by a vote of a majority of
the members at a meeting duly called and held.
Subject to the provisions of this Plan and any additional terms or
conditions imposed by the Board, the Committee shall administer the Plan and the
Options granted thereunder and shall have the authority to prescribe the form of
the agreement embodying the Options. Subject to the provisions contained in this
Plan, the Committee may from time to time adopt rules and regulations relating
to the administration of the Plan and the interpretation and construction by the
Committee of the provisions of the Plan or an option agreement shall be final
and conclusive. The Committee may correct any defect, supply any omission or
reconcile any inconsistency in this Plan or in any option agreement in the
manner and to the extent it shall deem appropriate.
Notwithstanding any other provision of this Plan, the Committee shall not
have any power to determine (a) who shall receive grants of Options under this
Plan, (b) the number of shares covered by Options in each grant of Option under
this Plan, or (c) the timing of grants of Option under this Plan.
No director who shall hold or be eligible to hold an Option under this Plan
shall vote on any action taken thereunder by the Committee which involves such
director.
6. ELIGIBILITY
Each Non-Employee Director shall be eligible to receive Options in
accordance with this Plan.
7. OPTION AWARDS, TERMS AND CONDITIONS
7.1 All persons who are Non-Employee Directors of the Company on the
Effective Date shall pursuant to this Plan receive an Option for 1,500 Shares,
which Option shall be first exercisable on September 1, 1997, at an Option
exercise price of $ per share, subject to the other terms and conditions of this
Section 7.
7.2 All persons who are not Directors of the Company on the Effective Date
but who commence service as a Non-Employee Director of the Company on or before
the first anniversary of the Effective Date shall, pursuant to this Plan,
receive on the second day of January of the year following the year in which
such Director commenced service as a an Option for 1,500 Shares, which Option
shall become first exercisable six (6) months following the date of grant, at an
Option exercise price determined in accordance with Section 14 hereof and
subject to the other terms and conditions of this Section 7.
7.3 All persons who are Non-Employee Directors of the Company on the second
day of January of each year the Plan remains effective, shall pursuant to this
Plan receive on each such date an Option for 1,500 Shares, which Option shall
become first exercisable six (6) months following the date of grant, at an
Option exercise price determined in accordance with Section 7.4 hereof and
subject to the other terms and conditions of this Section 7.
7.4 Except as set forth in Section 7.1, all Options granted under this Plan
shall be exercisable at a per share Option exercise price equal to 100% percent
of the fair market value of a Share on the date of the grant of such Option (the
appropriate anniversary date of the Plan). Fair market value shall be determined
as follows: (a) if the Company's Common Stock is publicly traded but not on a
recognized securities exchange (including the NASDAQ national market system),
the fair market value of a share of Common Stock shall be the average of the bid
and asked prices at closing on such date in the over the counter market; (b) if
the Company's Common Stock is publicly traded on a recognized securities
exchange (include the NASDAQ national market system), the fair market value of a
share of Common Stock shall be the average of the highest and lowest selling
prices on such date or the nearest preceding date on which trading occurred; or
(c) if the Company's Common Stock is not publicly traded, the fair market value
shall be determined by the Committee.
7.5 All Options granted under this Plan shall be evidenced by written
option agreements the form of which shall have been approved from time to time
by the Committee. The option agreements shall be consistent with this Plan and
shall include in substance the terms and conditions of this Section 7 as
appropriate.
7.6 Each Option shall specify the term or duration of the Option granted;
provided that no Option shall be exercisable after the expiration of 10 years
from the date of the grant of such Option. Partial exercise shall be permitted
from time to time.
7.7 No Option shall be transferable by the Optionee otherwise than by will
or the laws of descent and distribution, and Options shall be exercisable during
the lifetime of the Optionee only by that Optionee.
7.8 Each Option shall provide that in the event that an Optionee ceases to
be a Director of the Company for any reason other than the death or disability
of the Optionee, any Option or unexercised portion thereof which was otherwise
exercisable on the date of such termination as a Director shall terminate unless
exercised within a period of 90 days from the date on which the Optionee ceased
to be a Director, provided that this provision shall not extend the time within
which the Option may be exercised beyond the limits described in Section 7.6 of
this Plan.
7.9 Each Option shall provide that in the event that an Optionee ceases to
be a Director of the Company by reason of the Optionee becoming disabled, any
Option or unexercised portion thereof which was otherwise exercisable on the
date of such termination as a Director shall terminate unless exercised within a
period of one year from the date on which the Optionee ceased to be a Director,
provided that this provision shall not extend the time within which the Option
may be exercised beyond the limits described in Section 7.6 of this Plan.
Disability shall be determined in accordance with Section 105(d)(4) of the
Internal Revenue Code of 1986, as amended.
7.10 Each option shall provide that, in the event an Optionee shall die
while a Director of the Company and shall not have fully exercised an Option,
the Option may be exercised, to the extent not previously exercised and subject
to any vesting provisions, at any time within one year after the Optionee's
death by the estate of the Optionee or by any person or persons who shall have
acquired the Option directly from the Optionee by bequest or inheritance,
provided that this provision shall not extend the time within which the Option
may be exercised beyond the limits described in Section 7.6 of the Plan.
7.11 Each Option shall specify that the Optionee by accepting the option
agrees that whenever the Company undertakes a firmly underwritten public
offering of its securities and if requested by the managing underwriter in such
offering, the Optionee will enter into an agreement not to sell or dispose of
any securities of the Company owned or controlled by the Optionee provided that
such restriction shall not extend beyond 12 months from the effective date of
the registration statement filed in connection with such offering.
8. EXERCISE OF OPTIONS TO PURCHASE SHARES
8.1 Shares may be purchased or acquired pursuant to an option granted under
this Plan only upon receipt by the Company of written notice signed and
delivered by the Optionee (or, in the case of exercise after death of the
Optionee, by the executor, administrator, heir or legatee of the Optionee, as
the case may be) directed to the President or Chief Financial Officer of the
Company at the principal business office of the Company. Such notice shall state
the number of Shares being purchased, shall specify the method of payment of the
exercise price for the Shares being purchased, and, unless in the opinion of
counsel for the Company such a representation is not required in order to comply
with the Securities Act of 1933, as amended, shall contain a representation that
it is the Optionee's then present intention to acquire the Shares issuable upon
exercise of the Option for investment and not with a view to, or in connection
with, any distribution thereof.
8.2 On or before the completion of the purchase of Shares pursuant to the
exercise of an Option, the Optionee must have paid the Company the full purchase
price of said Shares by check or, if allowed by either the terms of the Option
or by action of the Committee at the time of such exercise, by surrender of
other previously acquired securities of the Company, including a "cashless"
exercise effected through a registered broker/dealer or directly with the
Company. If the exercise price is being paid in whole or in part by the delivery
of other securities of the Company, the notice shall be accompanied by delivery
of the certificates or instruments representing such other securities duly
endorsed for transfer. Any other securities of the Company shall be valued at
the publicly reported price for the last sale, or the average of the publicly
reported closing bid and asked prices, as applicable, on the last business day
preceding the day the Company receives such notice, or, if there are no publicly
reported prices of such other securities of the Company, at the fair market
value of such other securities of the Company, as determined in good faith by
the Board of Directors.
8.3 No Shares shall be issued until full payment therefor has been made and
an exercising Optionee shall have none of the rights of a shareholder of the
Company as to dividends, voting or otherwise, as to such Shares until a
certificate or certificates representing the Shares so acquired are issued to
such exercising Optionee. Each Optionee who has exercised an Option shall, upon
notification of the amount due and prior to or concurrently with delivery of the
certificate or certificates representing the Shares, pay to the Company amounts
necessary to satisfy applicable federal, state and local withholding tax
requirements and, if the Optionee fails to do so, the Company may withhold such
amounts from other amounts owed by the Company to the Optionee.
8.4 No Shares shall be issued with respect to the exercise of any Option
unless the exercise and the issuance and delivery of the Shares shall comply
with all relevant provisions of law, including, without limitation, any
applicable state securities laws, the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, the Internal Revenue Code of 1986,
as amended, the respective rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance. Inability of the Company to obtain from any regulatory body
having jurisdiction authority deemed by the Company's counsel to be necessary to
the lawful issuance and sale of any Shares hereunder shall relieve the Company
of any liability for the nonissuance or sale of such Shares. The Board may
require any action or agreement by an Optionee as may from time to time be
necessary to comply with the federal and state securities laws. The Company
shall not be obliged to register Options granted or Shares purchased under the
Plan under any federal or state securities laws.
9. CHANGES IN CAPITAL STRUCTURE
9.1 Except as provided in Section 9.2, in the event that the outstanding
Shares of Common Stock are hereafter increased or decreased or changed into or
exchanged for a different number or kind of Shares or other securities of the
Company or of another corporation, by reason of any reorganization, merger,
consolidation, reclassification, stock split-up, combination of Shares, or
dividend payable in Shares, appropriate adjustment shall be made by the
Committee in the number and kind of Shares for the purchase of which Options may
be granted under this Plan. In addition, the Committee shall make appropriate
adjustment in the number and kind of Shares as to which outstanding Options, or
portions thereof then unexercised, shall be made as well as a corresponding
adjustment in the exercise price per Share under each such Option. Any
determination by the Committee as to what adjustments shall be made, and the
extent thereof, shall be final, binding on all parties and conclusive.
9.2 In the event of any dissolution or liquidation of the Company, or any
merger or consolidation with one or more corporations in which the Company is
not the surviving entity, in lieu of any continuing rights under an Option, the
Committee may, in its sole discretion, provide a 30-day period immediately prior
to such event during which the Optionee shall have the right to exercise an
Option in whole or in part without any limitations on exercisability.
10. AMENDMENT OF PLAN
The Board of Directors may at any time and from time to time modify or
amend this Plan in such respect as it shall deem advisable to conform with any
other changes in the law while this Plan is in effect or for any other reason,
provided, however, that except as provided in Section 9.1 hereof no change in an
Option already granted to an Optionee shall be made without the written consent
of such Optionee, and provided, further, that unless also approved by the
unanimous written consent of the shareholders of the Company or by a vote of
shareholders owning not less than a majority of all shares entitled to vote and
represented at an annual meeting or a special meeting called for the purpose of
such approval, no amendment or change (a) increasing the maximum number of
Shares as to which Options may be granted under this Plan, (b) reducing the
exercise price of Options, (c) extending the period during which Options may be
granted or exercised under this Plan, or (d) changing the class of persons
eligible to receive Options under the Plan shall be effective. This Plan shall
not be amended within six months following the adoption of this Plan or a
previous amendment to this Plan, unless such subsequent amendment is in response
to changes in the federal income tax laws.
11. CONTINUATION AS A DIRECTOR
Nothing in the Plan or any Option or right granted pursuant hereto shall
confer upon any Non-Employee Director or transferee a continued right to be
nominated for or to serve on the Board.
12. ISSUE AND TRANSFER TAXES
The Board of Directors may from time to time agree to require the Company
to pay issuance or transfer taxes on Shares issued pursuant to the exercise of
an Option under this Plan.