Exhibit 3.1
RESTATED ARTICLES OF INCORPORATION
OF
LITHIA MOTORS, INC.
The following Restated Articles of Incorporation of Lithia Motors, Inc.
(the "Corporation") amend and supersede the heretofore existing Articles of
Incorporation, including all amendments made thereto.
ARTICLE I: Name of Corporation
The name of the corporation is Lithia Motors, Inc.
ARTICLE II: Number of Authorized Shares
The total number of shares of stock of all classes which the corporation
shall have the authority to issue is one hundred forty million (140,000,000)
shares, consisting of fifteen million (15,000,000) shares of a single class of
preferred stock with no par value, one hundred million (100,000,000) shares of
Class A Common Stock with no par value, and twenty-five million (25,000,000)
shares of Class B Common Stock with no par value. After any shares of Class A
Common Stock are issued and outstanding, the Board of Directors of the
corporation shall not, without the vote or consent of the holders of the
corporation's Class A Common Stock, issue any shares of Class B Common Stock
except as provided by Article III, Section 2.
ARTICLE III: Rights and Limitations of Capital Stock
The relative rights and limitations of each class of capital stock shall
be as set forth in this Article III.
Section 1. Voting of Class A and Class B Stock
(a) In all elections of directors, and in all other matters as to
which the vote or consent of shareholders of the corporation shall be required
or shall be taken, each holder of one or more shares of Class A Common Stock
shall be entitled to one (1) vote for each share of the Class A Common Stock
then held.
(b) In all elections of directors, and in all other matters as to
which the vote or consent of shareholders of the corporation shall be required
or shall be taken, each holder
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of one or more shares of Class B Common Stock shall be entitled to ten (10)
votes for each share of the Class B Common Stock then held.
(c) Except as otherwise required by law, the holders of shares of
Class A Common Stock and the holders of shares of Class B Common Stock shall
vote together as one class on all matters submitted to a vote of the
corporation's shareholders.
Section 2. Dividends and Distributions With Respect to Class A and Class B
Stock. The holders of shares of Class A Common Stock and the holders of shares
of Class B Common Stock shall be entitled to receive whatever dividends, payable
in cash or otherwise, are lawfully declared by the Board of Directors from time
to time with respect to those shares. Shares of Class A Common Stock and Class B
Common Stock shall have equal rights to share in and receive any dividends,
liquidation proceeds and other distributions made by the corporation with
respect to the corporation"s common stock. In furtherance of and not limiting
the foregoing, in the event that the holders of shares of Class A Common Stock
are entitled to receive a dividend or distribution payable in whole or in part
in additional shares of Class A Common Stock, the holders of shares of Class B
Common Stock shall be entitled to receive a proportionately equal dividend or
distribution payable in shares of Class B Common Stock.
Section 3. Restrictions on Transfer of Class B Stock
(a) Except as provided in subsection 3(b) of this Article III, no
person holding shares of Class B Common Stock or any beneficial interest therein
(a "Class B Holder") may transfer any interest in such Class B shares to any
person other than a "Permitted Transferee". Neither the corporation nor the
transfer agent, if any, for the Class B Common Stock (the "Transfer Agent"),
shall register the transfer of any interest in shares of Class B Common Stock,
except to a "Permitted Transferee" of the transferor.
(b) For purposes of this Section 3, the term "Permitted Transferee"
shall mean and include the corporation and also shall have the following
meanings in the indicated circumstances:
(1) In the case of a Class B Holder who is a natural person
holding record and beneficial ownership of one or more shares of
Class B Common Stock, "Permitted Transferee" means:
(i) The spouse of that Class B Holder (the "Spouse").
(ii) A lineal descendant of a great grandparent of that
Class B Holder or of the Spouse (a "Descendant").
(iii) The trustee of a trust (including a voting trust)
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maintained for the benefit of any one or more of the following
persons, and for no other person: (A) that Class B Holder, (B)
the Spouse, (C) one or more Descendants, or (D) an
organization to which contributions are deductible for federal
income, estate or gift tax purposes (a "Charitable
Organization"). A trust described in the preceding sentence
may grant a general or special power of appointment to the
Spouse or to one or more of the Descendants. A trust described
in the first sentence of this subsection 3(b)(1)(iii) may
permit trust assets to be used to pay taxes, legacies and
other obligations of the trust or of the estate of the Class B
Holder which are payable by reason of the death of the Class B
Holder, the Spouse or a Descendant. In order to be a
"Permitted Transferee", a trust which is otherwise described
in this subsection 3(b)(1)(iii) must prohibit any transfer
(other than the granting of a power of appointment as provided
in the second sentence of this subsection 3(b)(1)(iii)) of any
beneficial interest in shares of Class B Common Stock to any
person other than "Permitted Transferees" as defined in
clauses (A) through (D) of this subsection 3(b)(1)(iii). A
trust which satisfies all of the conditions of this subsection
3(b)(1)(iii) shall be referred to herein as a "Trust".
(iv) Any Charitable Organization, including but not
limited to a Charitable Organization established by that Class
B Holder or a Descendant.
(v) An Individual Retirement Account, as defined in
Section 408(a) of the Internal Revenue Code, with respect to
which that Class B Holder is a participant or beneficiary, but
only if that Class B Holder is vested with the power to direct
the investment of funds deposited into that Individual
Retirement Account and to control the voting of securities
held by that Individual Retirement Account (an "IRA").
(vi) A pension, profit sharing, stock bonus or other
type of plan or trust with respect to which that Class B
Holder is a participant or beneficiary and which satisfies the
requirements for qualification under Section 401 of the
Internal Revenue Code, but only if that Class B Holder is
vested with the power to direct the investment of funds
deposited into that plan or trust and to control the voting of
securities held by that plan or trust (a "Plan").
(vii) A corporation all of the outstanding capital stock
of which is owned by persons who are included in one or more
of the following classes of permitted owners: (A) that Class B
Holder, (B) the Spouse, (C) one or more Descendants, (D) any
Permitted Transferee of that Class B Holder (determined
pursuant to this subsection 3(b)), (E) any other Class B
Holder, and/or (F) a Permitted Transferee of any other Class B
Holder (determined pursuant to this subsection 3(b)). If 50%
or more of the voting shares of a corporation described in the
preceding sentence (or of any survivor of a merger
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or consolidation of such a corporation), are acquired in the
aggregate by one or more persons who are not included in one
or more of the classes of permitted owners described in the
preceding sentence, then all shares of Class B Common Stock
then held by that corporation shall be deemed without further
act on any person's part to be converted into shares of Class
A Common Stock in accordance with the provisions of subsection
4(b) of this Article III, and any and all stock certificates
representing those shares of Class B Common Stock shall
thereupon cease to represent shares of Class B Common Stock
and shall thereafter be deemed for all purposes to represent
an identical number of shares of Class A Common Stock.
(viii) A partnership in which more than fifty percent
(50%) of the capital interests and more than fifty percent
(50%) of the voting interests are owned by persons who are
included in one or more of the following classes of permitted
owners: (A) that Class B Holder, (B) the Spouse, (C) one or
more Descendants, (D) any Permitted Transferee of that Class B
Holder (determined pursuant to this subsection 3(b)), (E) any
other Class B Holder, and/or (F) a Permitted Transferee of any
other Class B Holder (determined pursuant to this subsection
3(b)). If 50% or more of the capital interests or 50% or more
of the voting interests in a partnership described in the
preceding sentence are acquired in the aggregate by one or
more persons who are not included in one or more of the
classes of permitted owners described in the preceding
sentence, then all shares of Class B Common Stock then held by
that partnership shall be deemed without further act on any
person's part to be converted into shares of Class A Common
Stock in accordance with the provisions of subsection 4(b) of
this Article III, and any and all stock certificates
representing those shares of Class B Common Stock shall
thereupon cease to represent shares of Class B Common Stock
and shall thereafter be deemed for all purposes to represent
an identical number of shares of Class A Common Stock.
(ix) A limited liability company in which more than
fifty percent (50%) of the capital interests and more than
fifty percent (50%) of the voting interests are owned by
persons who are included in one or more of the following
classes of permitted owners: (A) that Class B Holder, (B) the
Spouse, (C) one or more Descendants, (D) any Permitted
Transferee of that Class B Holder (determined pursuant to this
subsection 3(b)), (E) any other Class B Holder, and/or (F) a
Permitted Transferee of any other Class B Holder (determined
pursuant to this subsection 3(b)). If 50% or more of the
capital interests or 50% or more of the voting interests in a
limited liability company described in the preceding sentence
are acquired in the aggregate by one or more persons who are
not included in one or more of the classes of permitted owners
described in the preceding sentence, then all shares of Class
B Common Stock then held by that limited liability company
shall be deemed
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without further act on any person's part to be converted into
shares of Class A Common Stock in accordance with the
provisions of subsection 4(b) of this Article III, and any and
all stock certificates representing those shares of Class B
Common Stock shall thereupon cease to represent shares of
Class B Common Stock and shall thereafter be deemed for all
purposes to represent an identical number of shares of Class A
Common Stock.
(x) Another Class B Holder or another Class B Holder's
Permitted Transferee (determined pursuant to this subsection
3(b)).
(xi) In the event of the death of a Class B Holder, that
Class B Holder's estate and heirs.
(2) In the case of a Class B Holder which is holding shares of
Class B Common Stock as trustee of an IRA, a Plan or a Trust other
than a Trust described in subsection 3(b)(3) of this Article III,
each of the following shall be a "Permitted Transferee": (a) any
participant in or beneficiary of such IRA, such Plan or such Trust,
(b) the person who transferred those shares of Class B Common Stock
to such IRA, such Plan or such Trust, and (c) a Permitted Transferee
of any person described in clause (a) or (b) of this subsection
3(b)(2).
(3) In the case of a Class B Holder which is holding shares of
Class B Common Stock as trustee pursuant to a Trust which is
irrevocable on the "Issue Date" (as defined in subsection 3(d)(6)),
"Permitted Transferee" means any person in existence on the Issue
Date to whom or for whose benefit principal may be distributed
either during the term of that Trust or at the end of the term of
that Trust, whether by power of appointment or otherwise.
(4) In the case of a Class B Holder which is holding record
(but not beneficial) ownership of shares of Class B Common Stock as
nominee for the person who is the beneficial owner thereof on the
"Issue Date", "Permitted Transferee" means that beneficial owner and
a Permitted Transferee of that beneficial owner (determined pursuant
to this subsection 3(b)).
(5) In the case of a Class B Holder which is a partnership
holding record and beneficial ownership of shares of Class B Common
Stock, "Permitted Transferee" means any person who is a partner of
that partnership at the time that partnership first becomes a Class
B Holder, and also means any Permitted Transferee of that partner
(determined pursuant to this subsection 3(b)).
(6) In the case of a Class B Holder which is a limited
liability company holding record and beneficial ownership of shares
of Class B Common Stock, "Permitted Transferee" means any person who
is a member of that limited liability company at the time that
limited liability company first becomes a Class B
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Holder, and also means any Permitted Transferee of that member
(determined pursuant to this subsection 3(b)).
(7) In the case of a Class B Holder which is a corporation
(other than a Charitable Organization described in subsection
3(b)(1)(iv)) holding record and beneficial ownership of shares of
Class B Common Stock (a "Corporate Holder"), "Permitted Transferee"
means: (a) any person who is a shareholder of that Corporate Holder
at the time the Corporate Holder first becomes a Class B Holder, or
any Permitted Transferee of any such shareholder (determined
pursuant to this subsection 3(b)); and (b) the survivor (the
"Survivor") of a merger or consolidation of that Corporate Holder,
but only for so long as that Survivor is controlled, directly or
indirectly, by: (i) those shareholders of the Corporate Holder who
are shareholders of the Corporate Holder at the time the Corporate
Holder first becomes a Class B Holder, and/or (ii) any Permitted
Transferees of such shareholders (determined pursuant to this
subsection 3(b)).
(8) In the case of a Class B Holder which is the estate of a
deceased Class B Holder which held record and beneficial ownership
of shares of Class B Common Stock at the time of death, and in the
case of a Class B Holder which is the estate of a bankrupt or
insolvent Class B Holder which held record and beneficial ownership
of shares of Class B Common Stock at the time of bankruptcy or
insolvency, "Permitted Transferee" means a Permitted Transferee of
that deceased, bankrupt or insolvent Class B Holder (determined
pursuant to this subsection 3(b)).
(9) In the case of any Class B Holder who desires to gift one
or more shares of Class B Common Stock to any other Class B Holder
or to any Permitted Transferee of any other Class B Holder
(determined pursuant to this subsection 3(b)), "Permitted
Transferee" means any such other donee Class B Holder or Permitted
Transferee.
(10) In the case of any Class B Holder, "Permitted Transferee"
means any person which will hold record (but not beneficial)
ownership of shares of Class B Common Stock as nominee for that
Class B Holder or a Permitted Transferee of that Class B Holder
(determined pursuant to this subsection 3(b)).
(11) Only those persons specifically identified as "Permitted
Transferees" in the preceding provisions of this subsection 3(b)
shall be "Permitted Transferees" for purposes of this Section 3.
(c) Notwithstanding any contrary provision set forth in this Section
3, any Class B Holder may pledge that Holder's shares of Class B Common Stock to
a pledgee pursuant to a bona fide pledge of those shares as collateral security
for indebtedness due to the pledgee, provided that such shares shall not be
transferred to, registered in the name of, or voted by, the pledgee and shall
remain subject to the provisions of this Section 3. In the
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event foreclosure or other similar action by a pledgee shall cause record or
beneficial ownership of pledged Class B Common Stock to be transferred to a
person who is not a Permitted Transferee of the pledgor, such pledged shares of
Class B Common Stock shall be converted into shares of Class A Common Stock at
the moment of transfer of ownership, in accordance with the provisions of
subsection 4(b).
(d) For purposes of this Article III:
(1) The relationship between any two persons which is derived
by or through legal adoption shall be considered a natural
relationship.
(2) Each joint owner of shares of Class B Common Stock and
each owner of a community property interest in shares of Class B
Common Stock shall be considered a "Class B Holder" of such shares.
(3) A minor for whom shares of Class B Common Stock are held
pursuant to a Uniform Transfer to Minors Act or similar law shall be
considered to be the Class B Holder of such shares (and the
custodian of those shares shall not be considered to be a Class B
Holder of those shares).
(4) Unless otherwise specified, the term "person" means and
includes natural persons, corporations, partnerships, unincorporated
associations, firms, joint ventures, limited liability companies,
trusts and all other entities.
(5) The term "transfer" shall mean and include any form of
voluntary or involuntary sale, exchange, gift, bequest, devise,
assignment, disposition, pledge, hypothecation, encumbrance,
appointment, grant of voting power or proxy, or other conveyance of
any and every kind, including but not limited to conveyances by
operation of law.
(6) With respect to particular shares of Class B Common Stock,
the "Issue Date" shall be the date on which those shares of Class B
Common Stock are first issued by the corporation.
(e) Any purported transfer of shares of Class B Common Stock to any
person who is not a Permitted Transferee shall be void and of no effect, and the
purported transferee shall have no rights as a shareholder of the corporation
and no other rights against or with respect to the corporation. The corporation
may, as a condition to the transfer or the registration of transfer of shares of
Class B Common Stock to a purported Permitted Transferee, require the furnishing
of such affidavits or other proof as the corporation deems necessary to
establish that such transferee is a Permitted Transferee. Each certificate
representing shares of Class B Common Stock shall be endorsed with a legend
which states that shares of Class B Common Stock are not transferable to any
person other than certain restricted transferees and are subject to certain
restrictions as set forth in the Restated
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Articles of Incorporation filed by the corporation with the Secretary of State
of the State of Oregon.
Section 4. Conversion of Class B Common Stock
(a) Each holder of one or more shares of Class B Common Stock shall
have the right and option at any time to convert one or more shares of Class B
Common Stock into an equivalent number of fully paid and nonassessable shares of
Class A Common Stock (i.e. one share of Class B Common Stock for one share of
Class A Common Stock). Such right shall be exercised by the surrender to the
corporation (at any time during normal business hours at the principal executive
offices of the corporation or at the office of the Transfer Agent) of the
certificate representing the share(s) of Class B Common Stock to be converted,
accompanied by: (1) a written notice stating the election by the holder thereof
to convert, and (2) instruments of transfer (if so required by the corporation
or the Transfer Agent), in form satisfactory to the corporation and to the
Transfer Agent, duly executed by such holder or such holder's duly authorized
attorney, and (3) transfer tax stamps or funds therefor (if required pursuant to
subsection 4(f)).
(b) Subject to, and without limiting the effect of, subsection 3(e),
if there is any transfer or other change in the beneficial ownership (as
determined under Rule 13d-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended) of any share
of Class B Common Stock or of any interest in any share of Class B Common Stock,
and if the new beneficial owner of that share of Class B Common Stock is not a
"Permitted Transferee" (as defined in subsection 3(b) of this Article III) of
the person who shall have been the beneficial owner of that share of Class B
Common Stock immediately prior to that change in beneficial ownership, then each
such share of Class B Common Stock shall thereupon be converted automatically
into one (1) fully paid and nonassessable share of Class A Common Stock, and any
and all stock certificates representing each such share of Class B Common Stock
shall thereupon cease to represent shares of Class B Common Stock and shall
thereafter be deemed for all purposes to represent an identical number of shares
of Class A Common Stock.
(1) A determination by the Secretary of the corporation that a
change in beneficial ownership of one or more shares of Class B
Common Stock requires conversion under this subsection 4(b) shall be
conclusive. If the Secretary of the corporation determines that a
change in beneficial ownership of one or more shares of Class B
Common Stock requires conversion under this subsection 4(b), then
the Secretary of the corporation shall promptly request that each
holder of record of each such share of Class B Common Stock deliver
to the corporation for conversion hereunder, and each such holder
shall thereupon be required, within ten (10) days following that
request, to deliver to the corporation for conversion hereunder, the
certificate representing each such share of Class B Common Stock,
together with instruments of transfer, in form satisfactory to the
corporation and Transfer Agent, duly executed by such holder or such
holder's duly authorized attorney, and together
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with transfer tax stamps or funds therefor (if required pursuant to
subsection 4(f)).
(2) Notwithstanding any other provision of this Article III,
the transfer to any person of capital interests, voting interests or
other membership interests in a limited liability company which
holds record and beneficial ownership of shares of Class B Common
Stock shall not cause or be deemed to have caused any change in the
beneficial ownership of any share(s) of Class B Common Stock or of
any interest(s) in share(s) of Class B Common Stock which are owned
by that limited liability company, unless and until such time as 50%
or more of the capital interests or 50% or more of the voting
interests in that limited liability company are held by one or more
persons who would not be "Permitted Transferees" (as determined
under subsection 3(b)(6)) of that limited liability company. If at
any time the Secretary of the corporation determines that 50% or
more of the capital interests or 50% or more of the voting interests
in a limited liability company (which holds record and beneficial
ownership of shares of Class B Common Stock) are acquired or held by
one or more persons who would not be "Permitted Transferees" (as
determined under subsection 3(b)(6)) of that limited liability
company, then all shares of Class B Common Stock then held by that
limited liability company shall be converted automatically into an
equivalent number of shares of Class A Common Stock in accordance
with the provisions of this subsection 4(b), and any and all stock
certificates representing those shares of Class B Common Stock shall
thereupon cease to represent shares of Class B Common Stock and
shall thereafter be deemed for all purposes to represent an
identical number of shares of Class A Common Stock.
(c) If, on the record date for any annual meeting of shareholders,
the number of shares of Class B Common Stock then outstanding is less than one
percent (1%) of the aggregate number of shares of Class B Common Stock and Class
A Common Stock then outstanding, as determined by the Secretary of the
corporation, then each share of Class B Common Stock then outstanding shall
thereupon automatically be converted into one (1) fully paid and nonassessable
share of Class A Common Stock, and each share of Class B Common Stock then
authorized but unissued shall thereupon automatically be deemed an authorized
but unissued share of Class A Common Stock. Upon making such determination, the
Secretary of the corporation shall promptly request that each holder of record
of one or more shares of Class B Common Stock deliver to the corporation for
conversion hereunder, and each such holder shall thereupon be required, within
ten (10) days following that request, to deliver to the corporation for
conversion hereunder, the certificates representing all shares of Class B Common
Stock held by such holder, together with instruments of transfer in form
satisfactory to the corporation and Transfer Agent, duly executed by such holder
or such holder's duly authorized attorney, and together with transfer tax stamps
or funds therefor (if required pursuant to subsection 4(f)).
(d) As promptly as practicable following the surrender for
conversion of a certificate representing shares of Class B Common Stock in the
manner provided in subsections (a), (b) or (c) of this Section 4 and the payment
in cash of any amount required
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by the provisions of subsection 4(f), the corporation will deliver or cause to
be delivered at the office of the Transfer Agent, to or upon the written order
of the holder of such certificate, a certificate or certificates representing
the number of full shares of Class A Common Stock issuable upon such conversion,
issued in such name or names as such holder may direct. In the case of a
conversion under subsection 4(a), the conversion shall be deemed to have been
made immediately prior to the close of business on the date of the surrender of
the certificate representing the converted shares of Class B Common Stock. In
the case of a conversion under subsection 4(b), the conversion shall be deemed
to have been made on the date that the beneficial ownership of such share(s) has
changed as set forth in subsection 4(b). In the case of a conversion under
subsection 4(c), the conversion shall be deemed to have occurred on the annual
meeting record date on which the condition set forth in subsection 4(c) is
determined by the Secretary of the corporation to have occurred. Upon the date
of any conversion under subsection 4(b), all rights of the holder of the
converted share(s) of Class B Common Stock shall cease, and the new beneficial
owner(s) of such shares shall be treated for all purposes as having become the
record holder(s) of the shares of Class A Common Stock issued in the conversion.
Upon the date of any conversion under subsection 4(c), all rights of the holders
of shares of Class B Common Stock shall cease, and such holders shall be treated
for all purposes as having become the record holders of the shares of Class A
Common Stock issued in the conversion.
(e) The corporation covenants that it will at all times reserve and
keep available, solely for the purpose of enabling the issuance upon conversion
of all outstanding shares of Class B Common Stock, a number of shares of Class A
Common Stock which is equal to the number of then-outstanding shares of Class B
Common Stock. The preceding sentence shall not preclude the corporation from
satisfying its obligations in respect of the conversion of outstanding shares of
Class B Common Stock by delivery of purchased shares of Class A Common Stock
which are held in the treasury of the corporation. The corporation covenants
that if any shares of Class A Common Stock required to be reserved for purposes
of conversion hereunder shall require registration with or the approval of any
governmental authority under any federal or state law before such shares of
Class A Common Stock may be issued upon conversion, then the corporation will
cause such shares to be duly registered or approved. Prior to delivery of shares
of Class A Common Stock which are required to be delivered in connection with
the conversion of shares of Class B Common Stock, the corporation will endeavor
to list those shares of Class A Common Stock upon each national securities
exchange upon which the outstanding Class A Common Stock is listed at the time
of such delivery. The corporation covenants that all shares of Class A Common
Stock which are issued upon conversion of shares of fully paid and nonassessable
Class B Common Stock shall, upon issue, be fully paid and nonassessable.
(f) The issuance of certificates for shares of Class A Common Stock
upon conversion of shares of Class B Common Stock shall be made without charge
for any stamp or other similar tax in respect of such issuance. However, if any
such certificate is to be issued in a name other than the person in whose name
the converted shares of Class B Common Stock are registered immediately prior to
conversion, then the person or persons
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requesting the issuance thereof shall pay to the corporation the amount of any
tax which may be payable in connection with any transfer involved in such
issuance, or shall establish to the satisfaction of the corporation that such
tax has been paid.
Section 5. Preferred Stock. The Board of Directors of the corporation
shall have the authority at any time, without action of the shareholders, to
adopt and file articles of amendment which provide for the issuance of shares of
preferred stock in one or more series. The Board of Directors may establish, fix
and/or alter the designations, powers, preferences, qualifications, limitations,
restrictions and/or relative rights applicable to any series of preferred stock,
including, without limitation, dividend rights (and whether dividends are
cumulative), conversion rights( if any), voting rights (including the number of
votes, if any, per share, as well as the number of members, if any, of the Board
of Directors or the percentage of members, if any, of the Board of Directors
each series of preferred stock may be entitled to elect), rights and terms of
redemption (including sinking fund provisions, if any), redemption price and
liquidation preferences of any wholly unissued series of preferred stock, and
the number of shares constituting any such series and the designation thereof.
The Board of Directors also is authorized to increase or decrease the number of
shares of any series of preferred stock subsequent to the issuance of shares of
such series, but not below the number of shares of such series then outstanding.
Notwithstanding the preceding sentences of this Section 5, the Board of
Directors shall have no power to alter the rights of any shares of preferred
stock then outstanding without the consent of the holders of a majority of the
outstanding shares the rights of which are to be altered. Shares of preferred
stock which are redeemed, purchased or otherwise acquired by the corporation may
be reissued except as otherwise provided by law.
Section 6. Distributions Upon Liquidation. In the event of any
dissolution, liquidation or winding up of the affairs of the corporation in
accordance with applicable law, whether voluntary or involuntary, and after
payment or provision for payment of the debts and other liabilities of the
corporation, the holders of each series of preferred stock, if any, shall be
entitled to receive, out of the net assets of the corporation, an amount for
each share of preferred stock which is equal to the required amount which shall
have been fixed and determined by the Board of Directors in the resolution or
resolutions creating such shares and series, plus an amount equal to all
dividends accrued and unpaid on shares of such series to the date fixed for
distribution, and no more, before any of the assets of the corporation shall be
distributed or paid over to the holders of Class A or Class B Common Stock.
After payment in full of such amounts to the holders of preferred stock of all
series, the remaining assets and funds of the corporation shall be divided among
and paid to the holders of shares of Class A Common Stock and Class B Common
Stock, with each share of Class A and Class B Common Stock being treated equally
for such purposes. If, upon such dissolution, liquidation or winding up, the
assets of the corporation distributable as aforesaid among the holders of
preferred stock of all series shall be insufficient to permit full payment of
the required preferential amounts to those holders, then the corporation"s
assets shall be distributed ratably among the holders of shares of preferred
stock in proportion to the respective total amounts which the holders are
entitled to receive as provided in this
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Section 6.
ARTICLE IV: Management of Corporation
The following provisions are inserted for the management of the business
and for the conduct of the affairs of the corporation, and for further
definition, limitation and regulation of the powers of the corporation and of
its directors and shareholders:
Section 1. Election of Directors. Except to the extent that these Restated
Articles of Incorporation grant to the holders of any series of preferred stock
the right (voting separately by class or series) to elect additional directors
under specified circumstances, the number of directors of the corporation shall
be as fixed from time to time by or pursuant to the Bylaws of the corporation.
Each director shall serve until his or her successor is duly elected and
qualified or until his or her earlier death, resignation or removal. The
election of directors need not be by written ballot unless required by the
Bylaws of the corporation.
Section 2. Removal of Directors. Except to the extent that these Restated
Articles of Incorporation grant to the holders of any series of preferred stock
the right (voting separately by class or series) to elect directors under
specified circumstances, any director or directors may be removed from office at
any time, with or without cause, by the affirmative vote of not less than a
majority of the total number of votes represented by the then outstanding shares
of capital stock of the corporation entitled to vote generally in the election
of directors, voting together as a single class. Unless previously filled by the
vote of at least a majority of the total number of votes represented by the then
outstanding shares of capital stock of the corporation entitled to vote
generally in the election of directors (voting together as a single class), any
vacancy in the Board of Directors resulting from any such removal may be filled
by vote of a majority of the directors then in office, even if less than a
quorum, and any directors so chosen shall hold office until the next annual
shareholders meeting and until their successors shall have been elected and
qualified or until their earlier death, resignation or removal.
Section 3. Right of Preferred Stock to Vote for Directors. Notwithstanding
the foregoing paragraphs of this Article IV, if at any time the Board of
Directors of the corporation shall have adopted and filed articles of amendment
which give to the holders of any series of preferred stock issued by the
corporation the right (voting separately by class or series) to elect directors
at an annual or special meeting of shareholders, then the election, term of
office, filling of vacancies and other features of such directorships shall be
governed by the terms of those articles of amendment applicable thereto (as
those articles may be amended from time to time).
Section 4. Calling of Meetings. Special meetings of shareholders of the
corporation for any purpose may be called at any time by: (i) a majority of the
Board of Directors, or (ii) the President of the corporation, or (iii) one or
more shareholders who, in the
Restated Articles of Lithia Motors, Inc. Page 12 of 24
aggregate, own shares representing ten percent (10%) or more of the total votes
of all shares then outstanding. No other person or persons shall have authority
to call a special meeting of the shareholders of the corporation.
ARTICLE V: No Preemptive Rights
No holder of shares of any class shall have any preemptive or preferential
right to subscribe to or otherwise acquire any shares of stock of the
corporation, or any obligations or securities convertible into or carrying
options or warrants to purchase shares of stock of the corporation, whether now
or hereafter authorized and whether unissued or held by the corporation as
treasury stock (whether or not the issuance or sale of any such shares,
obligations or securities would adversely affect such shareholder's
proportionate voting power), other than any rights which the Board of Directors
in its discretion may from time to time grant.
ARTICLE VI: Elections or Actions by Written Consent
Any election of directors or other action by the shareholders of the
corporation may be effected at an annual or special meeting of shareholders or
by written consent of the shareholders given in lieu of such a meeting. The
record date with respect to the determination of shareholders entitled to
consent in writing to any action shall be the first date on which a signed
written consent setting forth the action to be taken or proposed to be taken is
delivered to the corporation by delivery to its registered office in Oregon, to
its principal place of business, or to an officer or agent of the corporation
having custody of the book in which proceedings of meetings of shareholders are
recorded. Any action by written consent shall be deemed effective as of the day
on which written consents, signed by all shareholders, are delivered to the
corporation by delivery to its registered office in Oregon, to its principal
place of business, or to an officer or agent of the corporation having custody
of the book in which proceedings of meetings of shareholders are recorded. Any
delivery which is made to the corporation's registered office under this Article
VI shall be by hand or by certified or registered mail, return receipt
requested.
ARTICLE VII: Limitation on Liability of Directors
No director of the Corporation is personally liable to the Corporation or
its shareholders for monetary damages for conduct as a director, except for the
following:
(a) Any breach of the director's duty of loyalty to the Corporation or its
shareholders;
(b) Acts or omissions not in good faith or which involve intentional
misconduct or
Restated Articles of Lithia Motors, Inc. Page 13 of 24
a knowing violation of law;
(c) Any distribution to shareholders that is unlawful under the Oregon
Business Corporation Act or successor statute; or
(d) Any transaction from which the director derived an improper personal
benefit.
This Article VII does not limit or eliminate the liability of a director
for any act or omission occurring before the effective date of this Article VII.
No amendment to or repeal of this Article VII may make any director of the
Corporation personally liable to the Corporation or its shareholders for
monetary damages for any act or omission as a director occurring before the
effective date of that amendment or repeal. This Article VII is intended to
limit the liability of any director of the Corporation to the greatest extent
authorized under the Oregon Business Corporation Act. Any further limitation on
the liability of directors authorized under any amendment to the Oregon Business
Corporation Act is incorporated into this Article VII on the effective date of
that amendment.
ARTICLE VIII: Indemnification
Section 1. Non-Derivative Actions. Subject to the provisions of Sections
3, 5 and 6 of this Article VIII, the Corporation shall indemnify any person who
was or is a party to or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, or investigative, (including all appeals) (other than an action
by or in the right of the Corporation) by reason of or arising from the fact
that the person is or was a director or officer of the Corporation or one of its
subsidiaries, or is or was serving at the request of the Corporation as a
director, officer, partner, or trustee of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against reasonable expenses (including attorney's fees), judgments,
fines, penalties, excise taxes assessed with respect to any employee benefit
plan and amounts paid in settlement actually and reasonably incurred by the
person to be indemnified in connection with such action, suit or proceeding if
the person acted in good faith, did not engage in intentional misconduct, and,
with respect to any criminal action or proceeding, did not know the conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith or, with respect to any criminal action or proceeding, that the person
knew that the conduct was unlawful.
Section 2. Derivative Actions. Subject to the provisions of Sections 3, 5
and 6 of this Article VIII, the Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit (including all appeals) by or in the right of the
Corporation to procure a judgment in its favor by reason of or arising from the
fact that the person is or was a director or officer of the
Restated Articles of Lithia Motors, Inc. Page 14 of 24
Corporation or one of its subsidiaries, or is or was serving at the request of
the Corporation as a director, officer, partner, or trustee of another foreign
or domestic corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise, against reasonable expenses (including attorneys'
fees) actually incurred by the person to be indemnified in connection with the
defense or settlement of such action or suit if the person acted in good faith,
provided, however, that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for deliberate misconduct in the performance of that person's duty to the
Corporation, for any transaction in which the person received an improper
personal benefit, for any breach of the duty of loyalty to the Corporation, or
for any distribution to shareholders which is unlawful under the Oregon Business
Corporation Act, or successor statute, unless and only to the extent that the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper.
Section 3. Determination of Right to Indemnification in Certain Cases.
Subject to the provisions of Sections 5 and 6 of this Article VIII,
indemnification under Sections 1 and 2 of this Article VIII shall not be made by
the Corporation unless it is expressly determined that indemnification of the
person who is or was an officer or director, or is or was serving at the request
of the Corporation as a director, officer, partner, or trustee of another
foreign or domestic corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, is proper in the circumstances because the
person has met the applicable standard of conduct set forth in Sections 1 or 2
of this Article VIII. That determination may be made by any of the following:
(a) By the Board of Directors by majority vote of a quorum
consisting of directors who are not or were not parties to the action, suit or
proceeding;
(b) If a quorum cannot be obtained under paragraph (a) of this
subsection, by majority vote of a committee duly designated by the Board of
Directors consisting solely of two or more directors not at the time parties to
the action, suit or proceeding (directors who are parties to the action, suit or
proceeding may participate in designation of the committee);
(c) By special legal counsel selected by the Board of Directors or
its committee in the manner prescribed in (a) or (b) or, if a quorum of the
Board of Directors cannot be obtained under (a) and a committee cannot be
designated under (b) the special legal counsel shall be selected by majority
vote of the full Board of Directors, including directors who are parties to the
action, suit or proceeding;
(d) If referred to them by Board of Directors of the Corporation by
majority vote of a quorum (whether or not such quorum consists in whole or in
part of directors who are parties to the action, suit or proceeding), by the
shareholders; or
Restated Articles of Lithia Motors, Inc. Page 15 of 24
(e) By a court of competent jurisdiction.
Section 4. Indemnification of Persons Other than Officers or Directors.
Subject to the provisions of Section 6 of this Article VIII, in the event any
person not entitled to indemnification under Sections 1 and 2 of this Article
VIII was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding of a type referred to in
Sections 1 or 2 of this Article VIII by reason of or arising from the fact that
such person is or was an employee or agent (including an attorney) of the
Corporation or one of its subsidiaries, or is or was serving at the request of
the Corporation as an employee or agent (including an attorney) of another
foreign or domestic corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, the Board of Directors of the Corporation by a
majority vote of a quorum (whether or not such quorum consists in whole or in
part of directors who were parties to such action, suit or proceeding) or the
stockholders of the Corporation by a majority vote of the outstanding shares
upon referral to them by the Board of Directors of the Corporation by a majority
vote of a quorum (whether or not such quorum consists in whole or in part of
directors who were parties to such action, suit or proceeding) may, but shall
not be required to, grant to such person a right of indemnification to the
extent described in Sections 1 or 2 of this Article VIII as if the person were
acting in a capacity referred to therein, provided that such person meets the
applicable standard of conduct set forth in such Sections. Furthermore, the
Board of Directors may designate by resolution in advance of any action, suit or
proceeding, those employees or agents (including attorneys) who shall have all
rights of indemnification granted under Sections 1 and 2 of this Article VIII.
Section 5. Successful Defense. Notwithstanding any other provision of
Sections 1, 2, 3 or 4 of this Article VIII, but subject to the provisions of
Section 6 of this Article VIII, to the extent a director, officer, or employee
is successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Sections 1, 2 or 4 of this Article VIII, or in defense
of any claim, issue or matter therein, that person shall be indemnified against
expenses (including attorneys fees) actually and reasonably incurred by him in
connection therewith.
Section 6. Condition Precedent to Indemnification Under Sections 1, 2, 4
or 5. Any person who desires to receive the benefits otherwise conferred by
Sections 1, 2, 4 or 5 of this Article VIII shall promptly notify the Corporation
that the person has been named a defendant to an action, suit or proceeding of a
type referred to in Sections 1, 2, 4, or 5 of this Article VIII and intends to
rely upon the right of indemnification described in Sections 1, 2, 4 or 5 of
this Article VIII. The notice shall be in writing and mailed, via registered or
certified mail, return receipt requested, to the President of the Corporation at
the executive offices of the Corporation or, in the event the notice is from the
President, to the registered agent of the Corporation. Failure to give the
notice required hereby shall entitle the Board of Directors of the Corporation
by a majority vote of a quorum (consisting of directors who, insofar as
indemnity of officers or directors is concerned, were not parties to such
action, suit or proceeding, but who, insofar as indemnity of employees or agents
is concerned, may or may not have been parties) or, if referred to them by the
Board of Directors of the Corporation by a majority vote of a quorum (consisting
of directors who, insofar as indemnity of officers or directors is concerned,
were not parties to such action, suit
Restated Articles of Lithia Motors, Inc. Page 16 of 24
or proceeding, but who, insofar as indemnity of employees or agents is
concerned, may or may not have been parties), the shareholders of the
Corporation by a majority of the votes entitled to be cast by holders of shares
of the Corporation's stock which have unlimited voting rights to make a
determination that such a failure was prejudicial to the Corporation in the
circumstances and that, therefore, the right to indemnification referred to in
Sections 1, 2 or 4 of this Article VIII shall be denied in its entirety or
reduced in amount.
Section 7. Advances for Expenses. Expenses incurred by a person
indemnified hereunder in defending a civil, criminal, administrative or
investigative action, suit or proceeding (including all appeals) or threat
thereof, may be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of such person to repay such expenses if it shall ultimately be determined that
the person is not entitled to be indemnified by the Corporation and a written
affirmation of the person's good faith belief that he or she has met the
applicable standard of conduct. The undertaking must be a general personal
obligation of the party receiving the advances but need not be secured and may
be accepted without reference to financial ability to make repayment.
Section 8. Insurance. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation or one of its subsidiaries or is or was serving at the request
of the Corporation as a director, officer, partner, trustee, employee or agent
of another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise against any liability asserted against
and incurred by that person in any such capacity, or arising out of his status
as such, whether or not the Corporation would have the power to indemnify that
person against such liability under the provisions of this Article or under the
Oregon Business Corporation Act.
Section 9. Purpose and Exclusivity. The indemnification referred to in the
various Sections of this Article VIII shall be deemed to be in addition to and
not in lieu of any other rights to which those indemnified may be entitled under
any statute, rule of law or equity, agreement, vote of the stockholders or Board
of Directors or otherwise. The Corporation is authorized to enter into
agreements of indemnification. The purpose of this Article VIII is to augment
the provisions of the Oregon Business Corporation Act dealing with
indemnification.
Section 10. Severability. If any of the provisions of this Article VIII
are found, in any action, suit or proceeding, to be invalid or ineffective, the
validity and the effect of the remaining provisions shall not be affected.
Restated Articles of Lithia Motors, Inc. Page 17 of 24
ARTICLE IX: Articles and Bylaws
Section 1. Restated Articles of Incorporation. The corporation reserves
the right to alter, amend, repeal or rescind any provision contained in these
Restated Articles of Incorporation in any manner now or hereafter permitted by
law, and all rights conferred on shareholders herein are granted subject to this
reservation. The affirmative vote of the holders of not less than a majority of
the total number of votes represented by the then outstanding shares of capital
stock of the corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to amend or
repeal these Restated Articles of Incorporation, or to adopt any provision
inconsistent with the purpose or intent of Articles IV through IX or Section 1
of Article III of these Restated Articles of Incorporation.
Section 2. Bylaws. In furtherance and not in limitation of the powers
conferred by the Oregon Business Corporation Act, the Board of Directors shall
have the power to make, alter, amend, repeal or rescind the Bylaws of the
corporation, subject to the power of the shareholders to alter, amend, repeal or
rescind any Bylaw made by the Board of Directors.
DATED effective the _____________ day of October, 1996.
Restated Articles of Lithia Motors, Inc. Page 18 of 24
ARTICLE IX
Series M Preferred Stock
Ten Thousand Five Hundred (10,500) shares of Preferred Stock are hereby
designated Series M-2002 Preferred Stock (the "Series M-2002 Preferred Stock").
An additional Four Thousand Five Hundred (4,500) shares of Preferred Stock are
hereby designated Series M-2003 Preferred Stock (the "Series M-2003 Preferred
Stock"). Collectively, the Series M-2002 Preferred Stock and the Series M-2003
Preferred Stock may be referred to as the Series M Preferred Stock. The Series M
Preferred Stock will have the preferences, limitations, and relative rights as
set forth in this Article IX. Except as otherwise provided in subsection 5(b) of
this Article IX, the preferences, limitations and relative rights of the shares
of Series M-2002 Preferred Stock and the shares of Series M-2003 Preferred Stock
shall be the same.
Section 1. Voting. Shares of Series M Preferred Stock will vote on an
as-if converted basis together with shares of Common Stock as a single voting
group on all matters submitted to a vote of the shareholders of the corporation.
For purposes of this Section 1, "as-if converted" means that each holder of
Series M Preferred Stock shall be entitled to cast a number of votes equal to
the number of shares of Class A Common Stock that would have been issuable upon
conversion of such holder"s Series M Preferred Stock if the Company had given
notice of conversion thereof on the date of the filing with the Colorado
Secretary of State of Articles of Merger relating to the merger of Cherry Creek
Dodge, Incorporated, a Colorado corporation, with and into Lithia Acquisition
Corp. #99-1, a Colorado corporation (the "Filing Date"). Series M Preferred
Stock will also entitle the holders thereof to vote as a separate voting group
to the extent set forth in Section 6, below.
Section 2. Dividends. Shares of Series M Preferred Stock shall not have a
dividend preference. Shares of Series M Preferred Stock shall, however,
participate in any dividend that may, from time to time, be declared by the
Board of Directors of the corporation with respect to the corporation"s Common
Stock on an as-if converted basis. For purposes of this Section 2, "as-if
converted" means that each holder of Series M Preferred Stock shall be entitled
to receive the dividend that would be payable on, the number of shares of Class
A Common Stock that would have been issuable upon conversion of such holder"s
Series M Preferred Stock if the Company had given notice of conversion thereof
on the record date for the dividend being paid.
Section 3. Distributions Upon Liquidation
(a) Liquidation Preference. Upon any dissolution, liquidation, or
winding up of the corporation, whether voluntary or involuntary (a
"Liquidation"), the holders of Series M Preferred Stock will be entitled to
receive out of the assets of the corporation available for distribution to
shareholders, before any payment or distribution may be made with respect to
shares of Common Stock, an amount per share equal to $1,000.00 (such amount to
be adjusted proportionately in the event the shares of Series M Preferred Stock
are subdivided into a greater number or combined into lesser number). The
relative priority of the Series M Preferred Stock"s liquidation rights in
comparison to the liquidation rights of any other series of Preferred Stock
which may be issued by the corporation will be as determined in the designation
of rights and preferences of such other series.
Restated Articles of Lithia Motors, Inc. Page 19 of 24
(b) Allocation of Liquidation Preference. If upon any Liquidation,
the assets available to be distributed to the holders of Series M Preferred
Stock are insufficient to permit the payment to such holders of the full
liquidation preference (including any accrued and unpaid dividends) to which
they are entitled pursuant to subsection 3(a), then all of the assets of the
corporation available for distribution will be distributed ratably to the
holders of shares of Series M Preferred Stock in accordance with the amount
payable with respect to each share.
Section 4. Redemption
(a) Redemption at Option of the Corporation. The corporation may
redeem all or any part of the shares of Series M Preferred Stock. Any such
redemption at the option of the corporation may occur at any time after that
date which is two years from the date of the original issuance of the shares to
be redeemed and from time to time thereafter and must occur in the manner
prescribed in subsection 4(b) below. In the event of a partial redemption of the
outstanding Series M Preferred Stock, the corporation shall call for redemption
an equal portion of the shares of Series M Preferred Stock owned by each holder,
subject to rounding.
(b) Notice of Call for Redemption by the Corporation. Before making
any redemption pursuant to subsection 4(a), the corporation will deliver a
written notice (a "Redemption Notice") to each record holder of any shares of
Series M Preferred Stock. Any Redemption Notice will be sent by certified or
registered mail, return receipt requested, or by overnight delivery service, to
the address shown for such holder on the corporation's records. Any Redemption
Notice will include: (i) the number of shares of Series M Preferred Stock held
of record by such holder which the corporation proposes to redeem; (ii) the
redemption price as determined in accordance with subsection 4(c) (the
"Redemption Price") to be paid for each share repurchased; (iii) the date (the
"Redemption Date") on which the corporation proposes to pay the Redemption Price
for the shares to be redeemed; and (iv) the person and place to which the holder
is to send the certificates representing the shares of Series M Preferred Stock
being redeemed. Any Redemption Notice will be sent at least twenty (20) calendar
days before the Redemption Date.
(c) Redemption Price. The Redemption Price of shares of Series M
Preferred Stock will be $1,000.00 per share (such amount to be adjusted
proportionately in the event the shares of Series M Preferred Stock are
subdivided into a greater number or combined into a lesser number). The
redemption price shall be payable by wire transfer to such bank account as the
holder may designate in writing at the time the certificate is surrendered;
provided, however, that if the holder fails to provide wire instructions or the
amount payable to the holder is less than $10,000, the corporation may pay the
Redemption Price by check delivered to the holder in person or by mail at the
most recent address reflected on the corporation"s records. The Redemption Price
for each share of Series M Preferred Stock shall be paid on the Redemption Date
or the date that the certificate representing such share is received by the
Company at the place designated in the Redemption Notice, which ever is later.
If less than all of the shares represented by a certificate are redeemed, the
corporation shall promptly send to the holders a new certificate representing
the unredeemed shares.
Section 5. Conversion. The shares of Series M Preferred Stock will have
the following conversion rights:
Restated Articles of Lithia Motors, Inc. Page 20 of 24
(a) Conversion at the Option of the Corporation. Each share of
Series M Preferred Stock is convertible, at the option of the corporation, into
fully paid and nonassessable shares of the corporation"s Class A Common Stock,
at the Conversion Ratio (as defined below) in effect at the time of conversion
determined as provided in subsection 5(e).
(b) Procedures for Conversion at the Option of the Corporation. In
order to effect any conversion pursuant to subsection 5(a), the corporation will
deliver a written notice (a "Conversion Notice") to each record holder of any
shares of Series M Preferred Stock. Any Conversion Notice will be sent by
certified or registered mail, return receipt requested, or by overnight delivery
service, to the address shown for such holder on the corporation's records. Any
Conversion Notice will include: (i) the number of shares of Series M Preferred
Stock held of record by such holder which the corporation proposes to convert;
(ii) an explanation of the calculation of the Conversion Ratio; (iii) the number
of shares of Class A Common Stock that such holder will receive as a result of
the conversion; (iv) the proposed effective date (the "Conversion Date") on
which the conversion shall be effective (which shall not be more than five
business days after the date of the Conversion Notice); and (v) the person and
place to which the holder is to send the certificates representing the shares of
Series M Preferred Stock being converted.
(c) Conversion at the Option of the Holder. Any holder of shares of
Series M-2002 Preferred Stock may, on or after the earlier of (a) the occurrence
of a Change of Control of the corporation (as such phrase is hereinafter
defined) or (b) the third anniversary of the Filing Date, tender for conversion
all or any part of the shares of Series M-2002 Preferred Stock held by such
holder. Any holder of shares of Series M-2003 Preferred Stock may, on or after
the earlier of (a) the occurrence of a Change of Control of the corporation (as
such phrase is hereinafter defined) or (b) the fourth anniversary of the Filing
Date, tender for conversion all or any part of the shares of Series M-2003
Preferred Stock held by such holder. For purposes of this subsection 5(c) a
"Change of Control" of the corporation shall be deemed to have occurred only if
Lithia Holding Company, L.L.C. ceases to be the beneficial owner of shares of
the corporation"s common stock which, in aggregate, represent at least 51% of
the total votes of all outstanding shares of the corporation"s common stock.
(d) Procedures for Conversion at the Option of the Holder. Any
conversion of Series M Preferred Stock at the option of the holder of those
shares shall be subject to the following terms and conditions:
1. Any holder of shares of Series M Preferred Stock who wishes to
tender some or all of such shares for conversion must give written notice
to the corporation at its principal office that the holder elects to
convert such shares, including a statement of the number of shares of
Series M Preferred Stock to be converted (the "Tendered Shares"), which
shall be accompanied by the certificate or certificates representing the
Tendered Shares (the "Conversion Election").
2. Within two business days of the receipt of a Conversion Election,
the corporation will determine whether or not the approval of the
corporation"s shareholders is required under any applicable law or the
listing requirements of any exchange on which any of the corporation"s
securities are then trading prior to the corporation issuing shares of
Class A Common Stock upon the conversion of the Tendered Shares. This
determination by the corporation shall be final as between the corporation
and the holders of the Tendered Shares.
3. If the corporation determines that shareholder approval is not
necessary prior to the
Restated Articles of Lithia Motors, Inc. Page 21 of 24
issuance of shares of Class A Common Stock upon the conversion of the
Tendered Shares or such shareholder approval has already been obtained,
the corporation shall send the holders of the Tendered Shares a Conversion
Notice containing the information required in a Conversion Notice given by
the corporation pursuant to subsection 5(a) except that the Conversion
Date specified in such Conversion Notice shall be a date no later than
seven business days after the date on which the corporation received the
Conversion Election and the corporation shall be responsible for
forwarding on the certificate or certificates representing the Tendered
Shares to the appropriate person and place. On such Conversion Date, the
Tendered Shares shall be converted into fully paid and nonassessable
shares of the corporation"s Class A Common Stock, at the Conversion Ratio
(as defined below) determined as provided in subsection 5(e).
4. If the corporation determines that shareholder approval is
necessary prior to the issuance of shares of Class A Common Stock upon the
conversion of the Tendered Shares and such shareholder approval has not
already been obtained at the time of receipt of Conversion Election or is
not obtained within such time after receipt of the Conversion Election as
the holders of the Tendered Shares may, in their sole discretion, allow
the corporation, the corporation shall redeem the Tendered Shares in
accordance with Section 4 except that the Redemption Notice shall only
state the corporation"s intent to redeem the Tendered Shares and specify
the Redemption Date and the Redemption Date specified in such Redemption
Notice shall be a date no later than seven business days after the date on
which the corporation received the Conversion Election.
(e) Conversion Ratio. Each share of Series M Preferred Stock shall
be convertible into the number of shares of Class A Common Stock that results
from dividing (1) $1,000.00 (such amount to be adjusted proportionately in the
event the shares of Series M Preferred Stock are subdivided into a greater
number or combined into lesser number) by (2) the "fair market value" of the
corporation"s Class A Common Stock on the date the Conversion Notice or the
Conversion Election, as the case may be, is given (the "Conversion Ratio"). For
purposes of the foregoing, the "fair market value" of the corporation"s Class A
Common Stock on any date means the average Daily Sales Price over the 15
consecutive trading days ending with the second trading day preceding such date.
Daily Sales Price means, for any trading day, (1) the last sales price of the
Class A Common Stock reported by the New York Stock Exchange or other principal
securities exchange on which shares of Class A Common Stock are then listed or
admitted to trading or (2) if not on an exchange, the last sales price quoted by
the National Association of Securities Dealers Automated Quotation System
("Nasdaq"), (3) if not traded on an exchange or quoted on Nasdaq, the average of
the closing bid and asked prices for the Class A Common Stock as quoted by the
National Quotation Bureau"s "Pink Sheets" or the National Association of
Securities Dealers" OTC Bulletin Board System or (4) if none of the above are
available, the value of the Class A Common Stock as established in good faith by
the corporation"s board of directors. No fractional shares shall be issued upon
any conversion of shares of Series M Preferred Stock. Instead, the number of
shares of Class A Common Stock to be issued shall be rounded down to the nearest
whole number and the holder shall receive a cash payment equal to the fair
market value (as determined above) of the fractional share which the holder
would otherwise have been entitled to receive.
(f) Conversion Procedures. As of the Conversion Date each holder of
shares of Series M Preferred Stock whose shares are being converted will for all
purposes be considered to be a holder of the shares of Class A Common Stock into
which such shares are being converted and not as a holder of shares of Series M
Preferred Stock specified in either the Conversion Notice or in such holder"s
Conversion Election. However, before any holder of Series M Preferred Stock will
be entitled to receive a certificate representing the shares of Class A Common
Stock into which the holder"s shares of Series M Preferred Stock were converted
or to receive any distribution with respect to such shares of Class A Common
Stock, such holder must surrender the certificate or certificates representing
the shares of Series M Preferred
Restated Articles of Lithia Motors, Inc. Page 22 of 24
Stock which were converted at the office of the corporation or at the office of
any transfer agent appointed to serve as such for the corporation"s Class A
Common Stock. Upon either the Conversion Date or, if later, the delivery by the
holder of the certificates representing the shares of Series M Preferred Stock
which were converted, the corporation will cause to be delivered a certificate
issued in the name of such holder representing the shares of Class A Common
Stock into which such shares of Series M Preferred Stock were converted and, if
less than all of the shares of Series M Preferred Stock represented by the
certificates so delivered were converted, a new certificate representing the
unconverted shares of Series M Preferred Stock. If there exists any legend
restricting transfer of the surrendered Series M Preferred Stock shares, such
legend will be placed on the Class A Common Stock shares issued upon the
conversion of such shares of Series M Preferred Stock.
Section 6. Protective Provisions. Without either the approval of a
majority of the outstanding shares of Series M Preferred Stock at a meeting of
the shareholders with such holders being entitled to vote as a separate voting
group or a written consent signed by the holders of all of the outstanding
shares of Series M Preferred Stock, the corporation will not amend its Articles
of Incorporation in a manner that would either (a) increase the number of shares
of Preferred Stock designated as Series M-2002 Preferred Stock or the number of
shares of Preferred Stock designated as Series M-2003 Preferred Stock; or (b)
change or alter in any manner the preferences, limitations, or relative rights
of the Series M Preferred Stock.
Restated Articles of Lithia Motors, Inc. Page 23 of 24
Section 7. Status of Acquired or Unissued Shares. All shares of Series M
Preferred Stock that are acquired at any time by the corporation by reason of
redemption, conversion, or otherwise will automatically become undesignated
shares of Preferred Stock. All shares designated as Series M Preferred Stock
that remain unissued on December 31, 2000 will automatically become undesignated
shares of Preferred Stock on such date.
Restated Articles of Lithia Motors, Inc. Page 24 of 24