Exhibit 10.3
 
(for non-executives)
 
LITHIA MOTORS, INC.
RESTRICTED STOCK UNIT AGREEMENT
(Time Vesting)

This Restricted Stock Unit Agreement (“Agreement”) is entered into pursuant to
the Amended and Restated 2003 Stock Incentive Plan (the “Plan”) as adopted by
the Board of Directors and Shareholders of Lithia Motors, Inc., an
Oregon corporation (the “Company”) and as amended from time to time.  Unless
otherwise defined herein, capitalized terms defined in this Agreement have the
meanings as defined in the Plan. Any inconsistency between this Agreement and
the terms and conditions of the Plan will be resolved in accordance with the
Plan.

 

“Recipient”           Number of Restricted Stock Units (“RSUs”)           “Date
of Grant”  February 1, 2013  

 
 
1.            GRANT OF RESTRICTED STOCK UNIT AWARD

1.1           The Grant.  The Company hereby awards to Recipient and Recipient
accepts the award of RSUs specified above on the terms and conditions set forth
in this Agreement and the Plan (the “Award”).  Each RSU represents the right to
receive one share of Class A Common Stock of the Company (a “Share”) on an
applicable Settlement Date (as defined in Section 1.3 of this Agreement),
subject to the terms of this Agreement and the Plan.

1.2           Vesting.  Subject to the continued employment of Recipient with
the Company or any Subsidiary, 25 percent of the RSUs (rounded to the nearest
whole RSU) shall vest on each of the second and third anniversaries of the Date
of Grant, and all remaining RSUs shall vest on the fourth anniversary of the
Date of Grant (each such date, a “Vesting Date”).  The foregoing vesting
schedule is illustrated by the following table:

Anniversary Date
Vesting of
Award
Vested RSUs
February 1, 2015
25%
___
February 1, 2016
25%
___
February 1, 2017
All remaining unvested RSUs
___

1.3           Settlement of RSUs.  There is no obligation for the Company to
make payments or distributions with respect to RSUs except for the distribution
of Shares with respect to vested RSUs after the applicable Vesting Date. The
Company’s issuance of one Share for each vested RSU (the “Settlement”) may be
subject to such conditions, restrictions and contingencies as the Committee
shall determine.  The Company agrees not to exercise its right under the Plan to
settle the RSU in any medium other than Shares.  Unless receipt of the Shares is
validly deferred pursuant to the RSU Deferral Plan effective January 1, 2012,
RSUs shall be settled as soon as practicable after the applicable Vesting Date
(each date of Settlement, a “Settlement Date”), but in no event later than March
15 of the calendar year following the calendar year in which the Vesting Date
occurs.  Notwithstanding the foregoing, the payment dates set forth in this
Section 1.3 have been specified for the purpose of complying with the short-term
deferral exception under Section 409A of the Internal Revenue Code of 1986, and
to the extent payments are made during the periods permitted under Section 409A
(including applicable periods before or after the specified payment dates set
forth in this Section 1.3), the Company shall be deemed to have satisfied its
obligations under the Plan and shall be deemed not to be in breach of its
payment obligations hereunder.
 
 
 

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(for non-executives)
 
1.4           Termination of Recipient’s Employment.

(a)           Voluntary or Involuntary Termination.  Except as otherwise
provided in this Section 1.4, if Recipient’s employment with the Company or any
Subsidiary terminates as a result of a voluntary or involuntary termination, all
outstanding unvested RSUs shall immediately be forfeited.

(b)           Death.  If Recipient’s employment with the Company or any
Subsidiary terminates as a result of Recipient’s death, Recipient shall become
vested in a prorated number of RSUs. The prorated portion of the RSUs that is
vested as of Recipient’s death shall be the total number of RSUs multiplied by a
fraction, the numerator of which shall be the number of full months elapsed from
the Date of Grant through the date of Recipient’s death, and the denominator of
which shall be 48.  The Vesting Date for additional RSU vesting under this
Section 1.4(b) shall be the date of Recipient’s death.

(c)           Disability.  If Recipient becomes Disabled while employed by the
Company or a Subsidiary, RSUs shall continue to vest as scheduled in Section 1.2
of this Agreement for so long as Recipient remains Disabled.  If Recipient dies
after having become Disabled, Section 1.4(b) of this Agreement shall apply.

(d)           Qualified Retirement.  If Recipient terminates employment due to a
Qualified Retirement, Recipient shall become vested in a prorated number of
RSUs.  A “Qualified Retirement” means Recipient voluntarily terminates
employment on or after Recipient attains age 65 and has at least four complete
years of employment with the Company or a Subsidiary.  The prorated portion of
the RSUs that is vested as of Recipient’s Qualified Retirement shall be the
total number of RSUs multiplied by a fraction, the numerator of which shall be
the number of full months elapsed from the Date of Grant through the date of
Recipient’s Qualified Retirement, and the denominator of which shall be 48.

Notwithstanding anything in this Agreement to the contrary, in no event will any
Settlement occur prior to the applicable Vesting Date.

1.5           Effect of Leaves of Absence on RSU Vesting. Notwithstanding
anything in this Agreement to the contrary:

 
(a)
No RSUs will vest while Recipient is on an unpaid leave of absence; and

 
(b)
The vesting schedule in Section 1.2 of this Agreement shall automatically be
extended by the duration of any unpaid leave of absence in excess of 90 days.

2.           REPRESENTATIONS AND COVENANTS OF RECIPIENT

2.1           No Representations by or on Behalf of the Company.  Recipient is
not relying on any representation, warranty or statement made by the Company or
any agent, employee or officer, director, shareholder or other controlling
person of the Company regarding the RSUs or this Agreement.
 
 
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(for non-executives)
 
2.2           Tax Considerations.  The Company has advised Recipient to seek
Recipient’s own tax and financial advice with regard to the federal and state
tax considerations resulting from Recipient’s receipt of the Award and
Recipient’s receipt of the Shares upon Settlement of the vested portion of the
Award.  Recipient understands that the Company, to the extent required by law,
will report to appropriate taxing authorities the payment to Recipient of
compensation income upon the Settlement of RSUs under the Award and Recipient
shall be solely responsible for the payment of all federal and state taxes
resulting from such Settlement.

2.3           Agreement to Enter into Lock-Up Agreement with an
Underwriter.  Recipient understands and agrees that whenever the Company
undertakes a firmly underwritten public offering of its securities, Recipient
will, if requested to do so by the managing underwriter in such offering, enter
into an agreement not to sell or dispose of any securities of the Company owned
or controlled by Recipient, including any the RSUs, provided that such
restriction will not extend beyond 12 months from the effective date of the
registration statement filed in connection with such offering.

3.           GENERAL RESTRICTIONS OF TRANSFERS OF UNVESTED RSUS

3.1           No Transfers of Unvested RSUs.  Except for a transfer upon
Recipient’s death, Recipient agrees for himself or herself, his or her
executors, administrators and other successors in interest that none of the
RSUs, nor any interest therein, may be voluntarily or involuntarily sold,
transferred, assigned, donated, pledged, hypothecated or otherwise disposed of,
gratuitously or for consideration prior to their vesting in accordance with this
Agreement.

3.2           Award Adjustments.  The number of RSUs granted under this Award
shall, at the discretion of the Committee, be subject to adjustment under the
Plan in the event the outstanding shares of Common Stock are hereafter
increased, decreased, changed into or exchanged for a different number or kind
of shares of Common Stock or for other securities of the Company or of another
corporation, by reason of any reorganization, merger, consolidation,
reclassification, stock split up, combination of shares of Common Stock, or
dividend payable in shares of Common Stock or other securities of the
Company.  If Recipient receives any additional RSUs pursuant to the Plan, such
additional (or other) RSUs shall be deemed  granted hereunder and shall be
subject to the same restrictions and obligations on the RSUs as originally
granted as imposed by this Agreement.

3.3           Invalid Transfers.  Any disposition of the RSUs other than in
strict compliance with the provisions of this Agreement shall be void.

4.           PAYMENT OF TAX WITHHOLDING AMOUNTS.  To the extent the Company is
responsible for withholding income taxes, upon the vesting of the Award
Recipient must pay to the Company or make adequate provision for the payment of
all Tax Withholding.  It is expected that the Award will vest under Section 1.2
of this Agreement during a period in which trading is not permitted under the
Company’s insider trading policy. To satisfy the Tax Withholding requirement,
Recipient irrevocably elects to settle the Tax Withholding obligation by the
Company withholding a number of Shares otherwise deliverable upon vesting having
a market value sufficient to satisfy the statutory minimum tax withholding of
Recipient. If the Company later determines that additional Tax Withholding was
or has become required beyond any amount paid or provided for by Recipient,
Recipient will pay such additional amount to the Company immediately upon demand
by the Company.  If Recipient fails to pay the amount demanded, the Company may
withhold that amount from other amounts payable by the Company to Recipient.

5.           MISCELLANEOUS PROVISIONS

5.1           Amendment and Modification.  Except as otherwise provided by the
Plan, this Agreement may be amended, modified and supplemented only by written
agreement of all of the parties hereto.
 
 
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(for non-executives)
   
5.2           Assignment.  This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by Recipient
without the prior written consent of the Company.

5.3           Governing Law.  To the extent not preempted by federal law, this
Agreement and the rights and obligations of the parties hereunder shall be
governed by and construed in accordance with the internal laws of the State of
Oregon applicable to the construction and enforcement of contracts wholly
executed in Oregon by residents of Oregon and wholly performed in Oregon.  Any
action or proceeding brought by any party hereto shall be brought only in a
state or federal court of competent jurisdiction located in the County of
Multnomah in the State of Oregon and all parties hereto hereby submit to the in
personal jurisdiction of such court for purposes of any such action or
procedure.

5.4           Arbitration.  The parties agree to submit any dispute arising
under this Agreement to final, binding, private arbitration in Portland,
Oregon.  This includes not only disputes about the meaning or performance of the
Agreement, but disputes about its negotiation, drafting, or execution.  The
dispute will be determined by a single arbitrator in accordance with the
then-existing rules of arbitration procedure of Multnomah County, Oregon Circuit
Court, except that there shall be no right of de novo review in Circuit Court
and the arbitrator may charge his or her standard arbitration fees rather than
the fees prescribed in the Multnomah County Circuit Court arbitration
procedures.  The proceeding will be commenced by the filing of a civil complaint
in Multnomah County Circuit Court and a simultaneous request for transfer to
arbitration. The parties expressly agree that they may choose an arbitrator who
is not on the list provided by the Multnomah County Circuit Court Arbitration
Department, but if they are unable to agree upon the single arbitrator within
ten days of receipt of the Arbitration Department list, they will ask the
Arbitration Department to make the selection for them.  The arbitrator will have
full authority to determine all issues, including arbitrability, to award any
remedy, including permanent injunctive relief, and to determine any request for
costs and expenses in accordance with Section 5.5 of this Agreement.  The
arbitrator’s award may be reduced to final judgment in Multnomah County Circuit
Court.  The complaining party shall bear the arbitration expenses and may seek
their recovery if it prevails.  Notwithstanding any other provision of this
Agreement, an aggrieved party may seek a temporary restraining order or
preliminary injunction in Multnomah County Circuit Court to preserve the status
quo during the arbitration proceeding.

5.5           Attorney Fees.  If any suit, action, or proceeding is instituted
in connection with any controversy arising out of this Agreement or the
enforcement of any right hereunder, the prevailing party will be entitled to
recover, in addition to costs, such sums as the court or arbitrator may adjudge
reasonable as attorney fees, including fees on any appeal.

5.6           Headings.  The headings of the sections and subsections of this
Agreement are inserted for convenience only and shall not constitute a part
hereof.

5.7           Entire Agreement.  This Agreement and the Plan embody the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and supersedes all prior written or oral communications
or agreements all of which are merged herein.  There are no restrictions,
promises, warranties, covenants, or undertakings, other than those expressly set
forth or referred to herein.

5.8           No Waiver.  No waiver of any provision of this Agreement or any
rights or obligations of any party hereunder shall be effective, except pursuant
to a written instrument signed by the party or parties waiving compliance, and
any such waiver shall be effective only in the specific instance and for the
specific purpose stated in such writing.
 
 
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(for non-executives)
 
5.9           Severability of Provisions.  In the event that any provision
hereof is found invalid or unenforceable pursuant to judicial decree or
decision, the remainder of this Agreement shall remain valid and enforceable
according to its terms.

5.10         Incorporation by Reference, Etc.  The provisions of the Plan are
hereby incorporated herein by reference.  Except as otherwise set forth herein,
this Agreement shall be construed in accordance with the provisions of the Plan
and any interpretations, amendments, rules and regulations promulgated by the
Committee from time to time pursuant to the Plan.  The Committee shall have the
final authority to interpret and construe the Plan and this Agreement and to
make any and all determinations under them, and its decision shall be final,
binding and conclusive upon Recipient and his or her legal representative in
respect to any questions arising under the Plan or this Agreement.

5.11         Notices.  All notices or other communications pursuant to this
Agreement shall be in writing and shall be deemed duly given if delivered
personally or by courier service, or if mailed by certified mail, return receipt
requested, prepaid and addressed to the Company executive offices to the
attention of the Corporate Secretary, or if to Recipient, to the address
maintained by the personnel department, or such other address as such party
shall have furnished to the other party in writing.

5.12         Acceptance of Agreement. Unless Recipient notifies the Corporate
Secretary in writing within 14 days after the Date of Grant that Recipient does
not wish to accept this Agreement, Recipient will be deemed to have accepted
this Agreement and will be bound by the terms of this Agreement and the Plan.

5.13         No Right of Employment.  Nothing contained in the Plan or this
Agreement shall be construed as giving Recipient any right to be retained, in
any position, as an employee of the Company or any Subsidiary.

 
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(for non-executives)
 
Recipient and the Company have executed this Agreement effective as of the Grant
Date.
 
 
RECIPIENT
         
 
Signature             Type or Print Name:               Social Security Number:
                            COMPANY LITHIA MOTORS, INC.                     By:
        Chris Holzshu, CFO          

* Please take the time to read and understand this Agreement in its
entirety.  If you have any specific questions or do not fully understand any of
the provisions, please contact Chris Holzshu in writing within 10 days of
receipt of this Agreement.

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