EXHIBIT 10.3.1
LITHIA MOTORS, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. The Lithia Motors, Inc. Employee Stock Purchase
Plan (the "Plan") is intended to provide an incentive for employees of Lithia
Motors, Inc. (the "Company") and its participating Subsidiaries to acquire or
increase their proprietary interests in the Company through the purchase of
shares of Common Stock of the Company. The Plan is intended to qualify as an
"Employee Stock Purchase Plan" under Sections 421 and 423 of the Internal
Revenue Code of 1986, as amended (the "Code"). The provisions of the Plan
will be construed in a manner consistent with the requirements of such
sections of the Code and the regulations issued thereunder.
2. DEFINITIONS. As used in this Plan:
2.1. "Account" means the account recorded in the records
of the Company established on behalf of a Participant to which the amount of
the Participant's payroll deductions authorized under Section 6 and purchases
of Common Stock under Section 8 shall be credited, and any distributions of
shares of Common Stock under Section 9 and withdrawals under Section 10 shall
be charged.
2.2. "Benefits Representative" means the employee benefits
department of the Company or any such other person, regardless of whether
employed by an Employer, who has been formally, or by operation or practice,
designated by the Committee to assist the Committee with the day-to-day
administration of the Plan.
2.3. "Board" means the Board of Directors of the Company.
2.4. "Code" means the Internal Revenue Code of 1986, or
any successor thereto, as amended and in effect from time to time. Reference
in the Plan to any Section of the Code shall be deemed to include any
amendments or successor provisions to any Section and any treasury
regulations thereunder.
2.5. "Committee" means the Compensation Committee of the
Board. The Board shall have the power to fill vacancies on the Committee
arising by resignation, death, removal or otherwise. The Board, in its sole
discretion, may split the powers and duties of the Committee among one or
more separate Committees, or retain all powers and duties of the Committee in
a single Committee. The members of the Committee shall serve at the
discretion of the Board.
2.6. "Common Stock" or "Stock" means the Class A Common
Stock, without par value, of the Company.
2.7. "Company" means Lithia Motors, Inc. an Oregon
corporation, and any successor thereto.
2.8. "Disability" means any complete and permanent
disability as defined in Section 22(e)(3) of the Code.
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2.9. "Effective Date" means the date on which this Plan is
approved by the shareholders of the Company which date shall be, the
inception date of the Plan.
2.10. "Employee" means any person who, at such time, is in
the Employment of and Employer.
2.11. "Employer" means the Company, its successors, any
future parent (as defined in Section 424(e) of the Code) and each current or
future Subsidiary which has been designated by the Board or the Committee as
a participating employer in the Plan.
2.12. "Employment" means Employment as an employee or
officer by the Company or a Subsidiary as designated in such entity's payroll
records, or by any corporation issuing or assuming rights or obligations
under the Plan in any transaction described in Section 424(a) of the Code or
by a parent corporation or a subsidiary corporation of such corporation. In
this regard, neither the transfer of a Participant from Employment by the
Company to Employment by a Subsidiary nor the transfer of a Participant from
Employment by a Subsidiary to Employment by either the Company or any by any
other Subsidiary shall be deemed to be a termination of Employment of the
Participant. Moreover, the Employment of a Participant shall not be deemed
to have been terminated because of absence from active Employment on account
of temporary illness or during authorized vacation, temporary leaves of
absence from active Employment granted by Company or any Subsidiary for
reasons of professional advancement, education, health, or government
service, or during military leave for any period if the Participant returns
to active Employment within 90 days after the termination of military leave,
or during any period required to be treated as a leave of absence which, by
virtue of any valid law or agreement, does not result in a termination of
Employment. Any worker treated as an independent contractor by the Company
or any Subsidiary who is later reclassified as a common-law employee shall
not be in Employment during any period in which such worker was treated by
the Company or a Subsidiary as an independent contractor. Any "leased
employee", as described in Section 414(n) of the Code, shall not be deemed an
Employee hereunder.
2.13. "Entry Date" means the first day of each Fiscal
Quarter.
2.14. "Fiscal Quarter" means a three consecutive month
period beginning on each January 1, April 1, July 1 and October 1, commencing
with the first such date following the Effective Date and continuing until
the Plan is terminated.
2.15. "Market Price" means, subject to the next paragraph,
the market value of a share of Stock on any date, which shall be determined
as (i) the closing sales price on the immediately preceding business day of a
share of Stock as reported on the New York Stock Exchange or other principal
securities exchange on which shares of Stock are then listed or admitted to
trading or (ii) if not so reported, the average of the closing bid and asked
prices for a share of Stock on the immediately preceding business day as
quoted on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ"), or (iii) if not quoted on NASDAQ, the average of the
closing bid and asked prices for a share of Stock as quoted by the National
Quotation Bureau's "Pink Sheets" or the National Association of Securities
Dealers' OTC Bulletin Board System. If the price of a share of Stock shall
not be so reported pursuant to the previous sentence, the fair market value
of a share of Stock shall be determined by the Committee in its discretion
provided that such method is appropriate for purposes of an employee stock
purchase plan under Section 423 of the Code.
Notwithstanding the previous paragraph of this definition, the
Market Price of a share of Stock solely for purposes of determining the
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option price on the first or last day of the Fiscal Quarter in accordance
with Section 7.2 shall be based on the Market Price on the first or last day
of the Fiscal Quarter, as applicable, and not on the immediately preceding
business day.
2.16. "Participant" means any Employee who meets the
eligibility requirements of Section 3 and who has elected to and is
participating in the Plan.
2.17. "Plan" means the Lithia Motors, Inc. Employee Stock
Purchase Plan, as set forth herein, and all amendments hereto.
2.18. "Stock" means the Common Stock (as defined above).
2.19. "Subsidiary" means any domestic or foreign
corporation, limited liability company, partnership or other form of business
entity (other than the Company) (i) which, pursuant to Section 424(f) of the
Code, is included in an unbroken chain of entities beginning with the Company
if, at the time of the granting of the option, each of the entities other
than the last entity in the unbroken chain owns at least a majority of the
total combined voting power of all interests in one of the other entities in
such chain and (ii) which has been designated by the Board or the Committee
as a entity whose Employees are eligible to participate in the Plan.
2.20. "Total Pay" means regular straight-time earnings or
base salary, plus payments for overtime, shift differentials, incentive
compensation, bonuses, and other special payments, fees, allowances or
extraordinary compensation.
3. ELIGIBILITY.
3.1. Eligibility Requirements. Participation in the Plan
is voluntary. Each Employee who has completed at least six (6) consecutive
months of continuous Employment with an Employer (calculated from his last
date of hire to the termination of his Employment for any reason), is
regularly scheduled to work at least 20 hours per week and has reached the
age of majority in the jurisdiction of his legal residency, will be eligible
to participate in the Plan on the first day of the payroll period commencing
on or after the earlier of (i) the Effective Date or (ii) the Entry Date on
which the Employee satisfies the aforementioned eligibility requirements.
Each Employee whose Employment terminates and who is rehired by an Employer
shall be treated as a new Employee for eligibility purposes under the Plan.
3.2. Limitations on Eligibility. Notwithstanding any
provision of this Plan to the contrary, no Employee will be granted an option
under the Plan:
3.2.1. if, immediately after the grant, the Employee
would own stock, and/or hold outstanding options to purchase stock,
possessing five percent (5%) or more of the total combined voting power
or value of all classes of stock of the Company or of any Subsidiary; or
3.2.2. which permits the Employee's rights to purchase
stock under this Plan and all other employee stock purchase plans
(within the meaning of Section 423 of the Code) of the Company and its
Subsidiaries to accrue at a rate which exceeds $25,000 of the fair
market value of the stock (determined at the time such option is
granted) for each Fiscal year in which such option is outstanding at
any time, all as determined in accordance with Section 423(b)(8) of the
Code.
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For purposes of Section 3.2.1 above, pursuant to Section 424(d)
of the Code, (i) the Employee with respect to whom such limitation is being
determined shall be considered as owning the stock owned, directly or
indirectly, by or for his brothers and sisters (whether by the whole or half
blood), spouse, ancestors, and lineal descendants; and (ii) stock owned,
directly or indirectly, by or for a corporation, partnership, estate, or
trust, shall be considered as being owned proportionately by or for its
shareholders, partners, or beneficiaries. In addition, for purposes of
Section 3.2.2 above, pursuant to Section 423(b)(8) of the Code, (i) the right
to purchase stock under an option accrues when the option (or any portion
thereof) first becomes exercisable during the calendar year, (ii) the right
to purchase stock under an option accrues at the rate provided in the option
but in no case may such rate exceed $25,000 of fair market value of such
stock (determined at the time such option is granted) for any one calendar
year, and (iii) a right to purchase stock which has accrued under one option
granted pursuant to the Plan may not be carried over to any other option.
4. SHARES SUBJECT TO THE PLAN. The total number of shares of
Common Stock that upon the exercise of options granted under the Plan will
not exceed 250,000 shares (subject to adjustment as provided in Section 16),
and such shares may be originally issued shares, treasury shares, reacquired
shares, shares bought in the market, or any combination of the foregoing. If
any option which has been granted expires or terminates for any reason
without having been exercised in full, the unpurchased shares will again
become available for purposes of the Plan. Any shares which are not subject
to outstanding options upon the termination of the Plan shall cease to be
subject to the Plan.
5. PARTICIPATION.
5.1. Payroll Deduction Authorization. An Employee shall
be eligible to participate in the Plan as of the first Entry Date following
such Employee's satisfaction of the eligibility requirements of Section 3,
or, if later, the first Entry Date following the date on which the Employee's
Employer adopted the Plan. At least 10 days (or such other period as may be
prescribed by the Committee or a Benefits Representative) prior to the first
Entry Date as of which an Employee is eligible to participate in the Plan,
the Employee shall execute and deliver to the Benefits Representative, on the
form prescribed for such purpose, an authorization for payroll deductions
which specifies his chosen rate of payroll deduction contributions pursuant
to Section 6, and such other information as is required to be provided by the
Employee on such enrollment form. The enrollment form shall authorize the
Employer to reduce the Employee's Base Pay by the amount of such authorized
contributions. To the extent provided by the Committee or a Benefits
Representative, each Participant shall also be required to open a stock
brokerage account with a brokerage firm which has been engaged to administer
the purchase, holding and sale of Common Stock for Accounts under the Plan
and, as a condition of participation hereunder, the Participant shall be
required to execute any form required by the brokerage firm to open and
maintain such brokerage account.
5.2. Continuing Effect of Payroll Deduction
Authorization. Payroll deductions for a Participant will commence with the
first payroll period beginning after the Participant's authorization for
payroll deductions becomes effective, and will end with the payroll period
that ends when terminated by the Participant in accordance with Section 6.3
or due to his termination of Employment in accordance with Section 11.
Payroll deductions will also cease when the Participant is suspended from
participation due to a withdrawal of payroll deductions in accordance with
Section 10. When applicable with respect to Employees who are paid on a
hourly wage basis, the authorized payroll deductions shall be withheld from
wages when actually paid following the period in which the compensatory
services were rendered. Only payroll deductions that are credited to the
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Participant's Account during the Fiscal Quarter will be used to purchase
Common Stock pursuant to Section 8 regardless of when the work was performed.
5.3. Employment and Shareholders Rights. Nothing in this
Plan will confer on a Participant the right to continue in the employ of the
Employer or will limit or restrict the right of the Employer to terminate the
Employment of a Participant at any time with or without cause. A Participant
will have no interest in any Common Stock to be purchased under the Plan or
any rights as a shareholder with respect to such Stock until the Stock has
been purchased and credited to the Participant's Account.
6. PAYROLL DEDUCTIONS.
6.1. Participant Contributions by Payroll Deductions. At
the time a Participant files his payroll deduction authorization form, the
Participant will elect to have deductions made from the Participant's Base
Pay for each payroll period such authorization is in effect in whole
percentages at the rate of not less than 1% nor more than 10% of the
Participant's Base Pay.
6.2. No Other Participant Contributions Permitted. All
payroll deductions made for a Participant will be credited to the
Participant's Account under the Plan. A Participant may not make any
separate cash payment into such Account.
6.3. Changes in Participant Contributions. Subject to
Sections 10 and 21, a Participant may increase, decrease, suspend, or resume
payroll deductions under the Plan by giving written notice to a designated
Benefits Representative at such time and in such form as the Committee or
Benefits Representative may prescribe from time to time. Such increase,
decrease, suspension or resumption will be effective as of the first day of
the payroll period as soon as administratively practicable after receipt of
the Participant's written notice, but not earlier than the first day of the
payroll period of the Fiscal Quarter next following receipt and acceptance of
such form. Notwithstanding the previous sentence, a Participant may
completely discontinue contributions at any time during a Fiscal Quarter,
effective as of the first day of the payroll period as soon as
administratively practicable following receipt of a written discontinuance
notice from the Participant on a form provided by a designated Benefits
Representative. Following a discontinuance of contributions, a Participant
cannot authorize any payroll contributions to his Account for the remainder
of the Fiscal Quarter in which the discontinuance was effective.
7. GRANTING OF OPTION TO PURCHASE STOCK.
7.1. Quarterly Grant of Options. For each Fiscal Quarter,
a Participant will be deemed to have been granted an option to purchase, on
the first day of the Fiscal Quarter, as many whole and fractional shares as
may be purchased with the payroll deductions (and any cash dividends as
provided in Section 8) credited to the Participant's Account during the
Fiscal Quarter.
7.2. Option Price. The option price of the Common Stock
purchased with the amount credited to the Participant's Account during each
Fiscal Quarter will be the lower of:
7.2.1. 85% of the Market Price of a share of Stock on
the first day of the Fiscal Quarter; or
7.2.2. 85% of the Market Price of a share of Stock on
the last day of the Fiscal Quarter.
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Only the Market Price as of the first day of the Fiscal Quarter and the
last day of the Fiscal Quarter shall be considered for purposes of
determining the option purchase price; interim fluctuations during the Fiscal
Quarter shall not be considered.
8. EXERCISE OF OPTION.
8.1. Automatic Exercise of Options. Unless a Participant
has elected to withdraw payroll deductions in accordance with Section 10, the
Participant's option for the purchase of Common Stock will be deemed to have
been exercised automatically as of the last day of the Fiscal Quarter for the
purchase of the number of whole and fractional shares of Common Stock which
the accumulated payroll deductions (and cash dividends on the Common Stock as
provided in Section 8.2) in the Participant's Account at that time will
purchase at the applicable option price. Fractional shares may be issued
under the Plan. As of the last day of each Fiscal Quarter, the balance of
each Participant's Account shall be applied to purchase the number of whole
and fractional shares of Stock as determined by dividing the balance of such
Participant's Account as of such date by the option price determined pursuant
to Section 7.2. The Participant's Account shall be debited accordingly. The
Committee or its delegate shall make all determinations with respect to
applicable currency exchange rates when applicable.
8.2. Dividends Generally. Cash dividends paid on shares
of Common Stock which have not been delivered to the Participant pending the
Participant's request for delivery pursuant to Section 9.3, will be combined
with the Participant's payroll deductions and applied to the purchase of
Common Stock at the end of the Fiscal Quarter in which the cash dividends are
received, subject to the Participant's withdrawal rights set forth in Section
10. Dividends paid in the form of shares of Common Stock or other securities
with respect to shares that have been purchased under the Plan, but which
have not been delivered to the Participant, will be credited to the shares
that are credited to the Participant's Account.
8.3. Pro-rata Allocation of Available Shares. If the
total number of shares to be purchased under option by all Participants
exceeds the number of shares authorized under Section 4, a pro-rata
allocation of the available shares will be made among all Participants
authorizing such payroll deductions based on the amount of their respective
payroll deductions through the last day of the Fiscal Quarter.
9. OWNERSHIP AND DELIVERY OF SHARES.
9.1. Beneficial Ownership. A Participant will be the
beneficial owner of the shares of Common Stock purchased under the Plan on
exercise of his option and will have all rights of beneficial ownership in
such shares. Any dividends paid with respect to such shares will be credited
to the Participant's Account and applied as provided in Section 8 until the
shares are delivered to the Participant.
9.2. Registration of Stock. Stock to be delivered to a
Participant under the Plan will be registered on the books and records of the
Company in the name of the Participant, or if the Participant so directs by
written notice to the designated Benefits Representative or brokerage firm,
if any, prior to the purchase of Stock hereunder, in the names of the
Participant and one such other person as may be designated by the
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Participant, as joint tenants with rights of survivorship or as tenants by
the entireties, to the extent permitted by applicable law. Any such
designation shall not apply to shares purchased after a Participant's death
by the Participant's beneficiary or estate, as the case may be, pursuant to
Section 11.2. If a brokerage firm is engaged by the Company to administer
Accounts under the Plan, such firm shall provide such account registration
forms as are necessary for each Participant to open and maintain a brokerage
account with such firm.
9.3. Delivery of Stock Certificates. The Company, or a
brokerage firm or other entity selected by the Company, shall deliver to each
Participant a certificate for the number of shares of Common Stock purchased
by the Participant hereunder as soon as practicable after the close of each
Fiscal Quarter. Alternatively, in the discretion of the Committee, the stock
certificate may be delivered to a designated stock brokerage account
maintained for the Participant and held in "street name" in order to
facilitate the subsequent sale of the purchased shares.
9.4. Regulatory Approval. In the event the Company is
required to obtain from any commission or agency the authority to issue any
stock certificate hereunder, the Company shall seek to obtain such
authority. The inability of the Company to obtain from any such commission
or agency the authority which counsel for the Company deems necessary for the
lawful issuance of any such certificate shall relieve the Company from
liability to any Participant, except to return to the Participant the amount
of his Account balance used to exercise the option to purchase the affected
shares.
10. WITHDRAWAL OF PAYROLL DEDUCTIONS. At any time during a
Fiscal Quarter, but in no event later than 15 days (or such shorter
prescribed by the Committee or a Benefits Representative) prior to the last
day of the Fiscal Quarter, a Participant may elect to abandon his election to
purchase Common Stock under the Plan. By written notice to the designated
Benefits Representative on a form provided for such purpose, the Participant
may thus elect to withdraw all of the accumulated balance in his Account
being held for the purchase of Common Stock in accordance with Section 8.2.
Partial withdrawals will not be permitted. All such amounts will be paid to
the Participant as soon as administratively practical after receipt of his
notice of withdrawal. After receipt and acceptance of such withdrawal
notice, no further payroll deductions will be made from the Participant's
Base Pay beginning as of the next payroll period during the Fiscal Quarter in
which the withdrawal notice is received. The Committee, in its discretion,
may determine that amounts otherwise withdrawable hereunder by Participants
shall be offset by an amount that the Committee, in its discretion,
determines to be reasonable to help defray the administrative costs of
effecting the withdrawal, including, without limitation, fees imposed by any
brokerage firm which administers such Participant's Account. After a
withdrawal, an otherwise eligible Participant may resume participation in the
Plan as of the first day of the Fiscal Quarter next following his delivery of
a payroll deduction authorization pursuant to the procedures prescribed in
Section 5.1.
11. TERMINATION OF EMPLOYMENT.
11.1. General Rule. Upon termination of a Participant's
Employment for any reason, his participation in the Plan will immediately
terminate.
11.2. Termination Due to Retirement, Death or Disability.
If the Participant's termination of Employment is due to (i) retirement from
Employment on or after his attainment of age 65, (ii) death or (iii)
Disability, the Participant (or the Participant's personal representative or
legal guardian in the event of Disability, or the Participant's beneficiary
(as defined in Section 12) or the administrator of his will or executor of
his estate in the event of death), will have the right to elect, either to:
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11.2.1. Withdraw all of the cash and shares of Common Stock
credited to the Participant's Account as of his termination date; or
11.2.2. Exercise the Participant's option for the purchase
of Common Stock on the last day of the Fiscal Quarter (in which
termination of Employment occurs) for the purchase of the number of
shares of Common Stock which the cash balance credited to the
Participant's Account as of the date of the Participant's termination
of Employment will purchase at the applicable option price.
The Participant (or, if applicable, such other person designated
in the first paragraph of this Section 11.2) must make such election by
giving written notice to the Benefits Representative at such time and in such
manner as prescribed from time to time by the Committee or Benefits
Representative. In the event that no such written notice of election is
received by the Benefits Representative within 30 days of the Participant's
termination of Employment date, the Participant (or such other designated
person) will automatically be deemed to have elected to withdraw the balance
in the Participant's Account as of his termination date. Thereafter, any
accumulated cash and shares of Common Stock credited to the Participant's
Account as of his termination of Employment date will be delivered to or on
behalf of the Participant as soon as administratively practicable.
11.3. Termination Other Than for Retirement, Death or
Disability. Upon termination of a Participant's Employment for any reason
other than retirement, death, or Disability pursuant to Section 11.2, the
participation of the Participant in the Plan will immediately terminate.
Thereafter, any accumulated cash and shares of Common Stock credited to the
Participant's Account as of his termination of Employment date will be
delivered to the Participant as soon as administratively practicable.
11.4. Rehired Employees. Any Employee whose Employment
terminates and who is subsequently rehired by an Employer shall be treated as
a new Employee for purposes of eligibility to participate in the Plan.
12. ADMINISTRATION OF THE PLAN.
12.1. No Participation in Plan by Committee Members. No
options may be granted under the Plan to any member of the Committee during
the term of his membership on the Committee.
12.2. Authority of the Committee. Subject to the
provisions of the Plan, the Committee shall have the plenary authority to (i)
interpret the Plan and all options granted under the Plan, (ii) make such
rules as it deems necessary for the proper administration of the Plan, (iii)
make all other determinations necessary or advisable for the administration
of the Plan, and (iv) correct any defect or supply any omission or reconcile
any inconsistency in the Plan or in any option granted under the Plan in the
manner and to the extent that the Committee deems advisable. Any action
taken or determination made by the Committee pursuant to this and the other
provisions of the Plan shall be conclusive on all parties. The act or
determination of a majority of the Committee shall be deemed to be the act or
determination of the Committee. By express written direction, or by the
day-to-day operation of Plan administration, the Committee may delegate the
authority and responsibility for the day-to-day administrative or ministerial
tasks of the Plan to a Benefits Representative, including a brokerage firm or
other third party engaged for such purpose.
12.3. Meetings. The Committee shall designate a chairman
from among its members to preside at its meetings, and may designate a
secretary, without regard to whether that person is a member of the
Committee, who shall keep the minutes of the proceedings. Meetings shall be
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held at such times and places as shall be determined by the Committee, and
the Committee may hold telephonic meetings. The Committee may take any
action otherwise proper under the Plan by the affirmative vote of a majority
of its members, taken at a meeting, or by the affirmative vote of all of its
members taken without a meeting. The Committee may authorize any one or more
of their members or any officer of the Company to execute and deliver
documents on behalf of the Committee.
12.4. Decisions Binding. All determinations and decisions
made by the Committee shall be made in its discretion pursuant to the
provisions of the Plan, and shall be final, conclusive and binding on all
persons including the Company, Participants, and their estates and
beneficiaries.
12.5. Expenses of Committee. The Committee may employ
legal counsel, including, without limitation, independent legal counsel and
counsel regularly employed by the Company, consultants and agents as the
Committee may deem appropriate for the administration of the Plan. The
Committee may rely upon any opinion or computation received from any such
counsel, consultant or agent. All expenses incurred by the Committee in
interpreting and administering the Plan, including, without limitation,
meeting expenses and professional fees, shall be paid by the Company.
12.6. Indemnification. Each person who is or was a member
of the Committee shall be indemnified by the Company against and from any
damage, loss, liability, cost and expense that may be imposed upon or
reasonably incurred by him in connection with or resulting from any claim,
action, suit, or proceeding to which he may be a party or in which he may be
involved by reason of any action taken or failure to act under the Plan,
except for any such act or omission constituting willful misconduct or gross
negligence. Such person shall be indemnified by the Company for all amounts
paid by him in settlement thereof, with the Company's approval, or paid by
him in satisfaction of any judgment in any such action, suit, or proceeding
against him, provided he shall give the Company an opportunity, at its own
expense, to handle and defend the same before he undertakes to handle and
defend it on his own behalf. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such persons
may be entitled under the Company's Articles of Incorporation or Bylaws, as a
matter of law, or otherwise, or any power that the Company may have to
indemnify them or hold them harmless.
13. DESIGNATION OF BENEFICIARY. At such time, in such manner,
and using such form as shall be prescribed from time to time by the Committee
or a Benefits Representative, a Participant may file a written designation of
a beneficiary who is to receive any Common Stock and/or cash credited to the
Participant's Account at the Participant's death. Such designation of
beneficiary may be changed by the Participant at any time by giving written
notice to the Benefits Representative at such time and in such form as
prescribed. Upon the death of a Participant, and receipt by the Benefits
Representative of proof of the identity at the Participant's death of a
beneficiary validly designated under the Plan, the Benefits Representative
will take appropriate action to ensure delivery of such Common Stock and/or
cash to such beneficiary. In the event of the death of a Participant and the
absence of a beneficiary validly designated under the Plan who is living at
the time of such Participant's death, the Benefits Representative will take
appropriate action to ensure delivery of such Common Stock and/or cash to the
executor or administrator of the estate of the Participant, or if no such
executor or administrator has been appointed (to the knowledge of the
Benefits Representative), the Committee, in its discretion, may direct
delivery of such Common Stock and/or cash to the spouse or to any one or more
dependents of the Participant as the Committee may designate in its
discretion. No beneficiary will, prior to the death of the Participant,
acquire any interest in any Common Stock or cash credited to the
Participant's Account.
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14. TRANSFERABILITY. No amounts credited to a Participant's
Account, whether cash or Common Stock, nor any rights with regard to the
exercise of an option or to receive Common Stock under the Plan, may be
assigned, transferred, pledged, or otherwise disposed of in any way by the
Participant other than by will or the laws of descent and distribution. Any
such attempted assignment, transfer, pledge, or other disposition will be
void and without effect. Each option shall be exercisable, during the
Participant's lifetime, only by the Employee to whom the option was granted.
The Company shall not recognize, and shall be under no duty to recognize, any
assignment or purported assignment by an Employee of his option or of any
rights under his option.
15. NO RIGHTS AS A SHAREHOLDER UNTIL CERTIFICATE ISSUED. With
respect to shares of Stock subject to an option, an optionee shall not be
deemed to be a shareholder, and the optionee shall not have any of the rights
or privileges of a shareholder. An optionee shall have the rights and
privileges of a shareholder when, but not until, a certificate for shares has
been issued to the optionee following exercise of his option.
16. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The Board
shall make or provide for such adjustments in the maximum number of shares
specified in Section 4 and the number and option price of shares subject to
options outstanding under the Plan as the Board shall determine is
appropriate to prevent dilution or enlargement of the rights of Participants
that otherwise would result from any stock dividend, stock split, stock
exchange, combination of shares, or other change in the capital structure of
the Company, merger, consolidation, spin-off of assets, reorganization,
partial or complete liquidation, issuance of rights or warrants to purchase
securities, any other corporate transaction or event having an effect similar
to any of the foregoing.
In the event of a merger of one or more corporations into the
Company, or a consolidation of the Company and one or more other corporations
in which the Company is the surviving corporation, each Participant, at no
additional cost, shall be entitled, upon his payment for all or part of the
Common Stock purchasable by him under the Plan, to receive (subject to any
required action by shareholders) in lieu of the number of shares of Common
Stock which he was entitled to purchase, the number and class of shares of
stock or other securities to which such holder would have been entitled
pursuant to the terms of the agreement of merger or consolidation if,
immediately prior to such merger or consolidation, such holder had been the
holder of record of the number of shares of Common Stock equal to the number
of shares purchasable by the Participant hereunder.
If the Company is not the surviving corporation in any
reorganization, merger or consolidation (or survives only as a subsidiary of
an entity other than a previously wholly-owned subsidiary of the Company), or
if the Company is to be dissolved or liquidated or sell substantially all of
its assets or stock to another corporation or other entity, then, unless a
surviving corporation assumes or substitutes new options (within the meaning
of Section 424(a) of the Code) for all options then outstanding, (i) the date
of exercise for all options then outstanding shall be accelerated to dates
fixed by the Committee prior to the effective date of such corporate event,
(ii) a Participant may, at his election by written notice to the Company,
either (x) withdraw from the Plan pursuant to Section 10 and receive a refund
from the Company in the amount of the accumulated cash and Stock balance in
the Participant's Account, (y) exercise a portion of his outstanding options
as of such exercise date to purchase shares of Stock, at the option price, to
the extent of the balance in the Participant's Account, or (z) exercise in
full his outstanding options as of such exercise date to purchase shares of
Stock, at the option price, which exercise shall require such Participant to
pay the related option price, and (iii) after such effective date any
unexercised option shall expire. The date the Committee selects for the
exercise date under the preceding sentence shall be deemed to be the exercise
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date for purposes of computing the option price per share of Stock. If the
Participant elects to exercise all or any portion of the options, the Company
shall deliver to such Participant a stock certificate issued pursuant to
Section 9.4 for the number of shares of Stock with respect to which such
options were exercised and for which such Participant has paid the option
price. If the Participant fails to provide the notice set forth above within
three days after the exercise date selected by the Committee under this
Section 16, the Participant shall be conclusively presumed to have requested
to withdraw from the Plan and receive payment of the accumulated balance of
his Account. The Committee shall take such steps in connection with such
transactions as the Committee shall deem necessary or appropriate to assure
that the provisions of this Section 16 are effectuated for the benefit of the
Participants.
Except as expressly provided in this Section 16, the issue by the
Company of shares of stock of any class, or securities convertible into
shares of stock of any class, for cash or property, or for labor or services
either upon direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of the
Company convertible into such shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the number
or price of shares of Stock then available for purchase under the Plan.
17. PLAN EXPENSES; USE OF FUNDS; NO INTEREST PAID. The
expenses of the Plan shall be paid by the Company except as otherwise
provided herein or under the terms and conditions of any agreement entered
into between the Participant and any brokerage firm engaged to administer
Accounts. All funds received or held by the Company under the Plan shall be
included in the general funds of the Company free of any trust or other
restriction, and may be used for any corporate purpose. No interest shall be
paid to any Participant or credited to his Account under the Plan.
18. TERM OF THE PLAN. The Plan shall become effective upon the
approval of the Plan by the holders of the majority of the Common Stock
present and represented at a special or annual meeting of the Company's
shareholders held on or before 12 months from December 18, 1997. Except with
respect to options then outstanding, if not terminated sooner under the
provisions of Section 19, no further options shall be granted under the Plan
at the earlier of (i) December 31, 2007, or (ii) the point in time when no
shares of Stock reserved for issuance under Section 4 are available.
19. AMENDMENT OR TERMINATION OF THE PLAN. The Board shall have
the plenary authority to terminate or amend the Plan; provided, however, that
the Board shall not, without the approval of the shareholders of the Company,
(i) increase the maximum number of shares which may be issued under the Plan
pursuant to Section 4, (ii) materially amend the requirements as to the class
of employees eligible to purchase Stock under the Plan, or (iii) permit the
members of the Committee to purchase Stock under the Plan. No termination,
modification, or amendment of the Plan shall adversely affect the rights of a
Participant with respect to an option previously granted to him under such
option without his written consent.
In addition, to the extent that the Committee determines that, in
the opinion of counsel, (i) the listing for qualification requirements of any
national securities exchange or quotation system on which the Company's
Common Stock is then listed or quoted, or (ii) the Code or Treasury
regulations issued thereunder, require shareholder approval in order to
maintain compliance with such listing or qualification requirements or to
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maintain any favorable tax advantages or qualifications, then the Plan shall
not be amended by the Board in such respect without first obtaining such
required approval of the Company's shareholders.
20. SECURITIES LAWS RESTRICTIONS ON EXERCISE. The Committee
may, in its discretion, require as conditions to the exercise of any option
that the shares of Common Stock reserved for issuance upon the exercise of
the option shall have been duly listed, upon official notice of issuance,
upon a stock exchange, and that either (i) a Registration Statement under the
Securities Act of 1933, as amended, with respect to said shares shall be
effective; or (ii) the Participant shall have represented at the time of
purchase, in form and substance satisfactory to the Company, that it is his
intention to purchase the Stock for investment and not for resale or
distribution.
21. SECTION 16 COMPLIANCE. The Plan, and transactions
hereunder by persons subject to Section 16 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), are intended to comply with all
applicable conditions of Rule 16b-3 or any successor exemption provision
promulgated under the Exchange Act. To the extent that any provision of the
Plan or any action by the Committee or the Board fails, or is deemed to fail,
to so comply, such provision or action shall be null and void but only to the
extent permitted by law and deemed advisable by the Committee in its
discretion.
22. WITHHOLDING TAXES FOR DISQUALIFYING DISPOSITION. Whenever
shares of Stock that were received upon the exercise of an option granted
under the Plan are disposed of within two years after the date of grant of
such option or one year from the date of exercise of such option (within the
meaning of Section 423(a)(1)), the Company shall have the right to require
the participant to remit to the Company in cash an amount sufficient to
satisfy federal, state and local withholding and payroll tax requirements, if
any, attributable to such disposition prior to authorizing such disposition
or permitting the delivery of any certificate or certificates with respect
thereto.
23. NO RESTRICTION ON CORPORATE ACTION. Subject to Section
19, nothing contained in the Plan shall be construed to prevent the Board or
any Employer from taking any corporate action which is deemed by the Employer
to be appropriate or in its best interest, whether or not such action would
have an adverse effect on the Plan or any option granted under the Plan. No
Employee, beneficiary or other person shall have any claim against any
Employer as a result of any such action.
24. USE OF FUNDS. The Employers shall promptly transfer all
amounts withheld under Section 6 to the Company or to any brokerage firm
engaged to administer Accounts, as directed by the Company. All payroll
deductions received or held by the Company under the Plan may be used by the
Company for any corporate purpose, and the Company will not be obligated to
segregate such payroll deductions.
25. MISCELLANEOUS.
25.1. Options Carry Same Rights and Privileges. To the
extent required to comply with the requirements of Section 423 of the Code,
all Employees granted options under the Plan to purchase Common Stock shall
have the same rights and privileges hereunder.
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25.2. Headings. Any headings or subheadings in this Plan
are inserted for convenience of reference only and are to be ignored in the
construction or interpretation of any provisions hereof.
25.3. Gender and Tense. Any words herein used in the
masculine shall be read and construed in the feminine when appropriate.
Words in the singular shall be read and construed as though in the plural,
and vice-versa, when appropriate.
25.4. Governing Law. This Plan shall be governed and
construed in accordance with the laws of the State of Oregon to the extent
not preempted by federal law.
25.5. Regulatory Approvals and Compliance. The Company's
obligation to sell and deliver Common Stock under the Plan is at all times
subject to all approvals of and compliance with the (i) regulations of any
applicable stock exchanges (including NASDAQ) and (ii) any governmental
authorities required in connection with the authorization, issuance, sale or
delivery of such Stock, as well as federal, state and foreign securities laws.
25.6. Severability. In the event that any provision of
this Plan shall be held illegal, invalid, or unenforceable for any reason,
such provision shall be fully severable, but shall not affect the remaining
provisions of the Plan, and the Plan shall be construed and enforced as if
the illegal, invalid, or unenforceable provision had not been included herein.
25.7. Refund of Contributions on Noncompliance with Tax
Law. In the event the Company should receive notice that this Plan fails to
qualify as an "employee stock purchase plan" under Section 423 of the Code,
all then existing Account balances will be paid to the Participants and the
Plan shall immediately terminate.
25.8. No Guarantee of Tax Consequences. The Company,
Board, and the Committee do not make any commitment or guarantee that any tax
treatment will apply or be available to any person participating or eligible
to participate in the Plan, including, without limitation, any tax imposed by
the United States or any state thereof, any estate tax, or any tax imposed by
a foreign government.
25.9. Company as Agent for the Employers. Each Employer,
by adopting the Plan, appoints the Company and the Board as its agents to
exercise on its behalf all of the powers and authorities hereby conferred
upon the Company and the Board by the terms of the Plan, including, but not
by way of limitation, the power to amend and terminate the Plan.
IN WITNESS WHEREOF, this Plan is hereby executed by a duly
authorized officer of the Company.
As approved by the Board of Directors of Lithia Motors, Inc on
December 18, 1997.
/s/ Sidney B. DeBoer
Sidney B. DeBoer, Secretary
As approved by the Shareholders of Lithia Motors, Inc on May __,
1998.
Sidney B. DeBoer, Secretary
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