Exhibit 10.3.4

 

 (Senior Executives, with performance- and time-vesting)

 

 

LITHIA MOTORS, INC.

RESTATED RESTRICTED STOCK UNIT AGREEMENT

(Performance and Time Vesting)

 

This Restated Restricted Stock Unit Agreement (“Agreement”) is entered into
pursuant to the 2013 Amended and Restated Stock Incentive Plan (the “Plan”)
adopted by the Board of Directors and Shareholders of Lithia Motors, Inc., an
Oregon corporation (the “Company”), as amended from time to time. Unless
otherwise defined herein, capitalized terms in this Agreement have the meanings
given to them in the Plan. Any inconsistency between this Agreement and the
terms and conditions of the Plan will be resolved in favor of the Plan.
Compensation paid pursuant to this Agreement is intended to qualify as
performance-based compensation under Section 162(m) of the Internal Revenue Code
of 1986 (the “Code”).

 

 

“Recipient”

[                    ]

 

 

 

 

Number of Restricted Stock Units (“RSUs”)

[                    ]   

 

 

 

 

“Date of Grant”

January 1, 2014

 

                              

 

1.     GRANT OF RESTRICTED STOCK UNIT AWARD

 

1.1     The Grant. The Company hereby awards to Recipient, and Recipient hereby
accepts, the 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     Forfeiture; Vesting; Clawback. The RSUs are subject to forfeiture in
accordance with the performance criteria specified in Section 1.2(a) of this
Agreement. Any RSUs not forfeited will vest according to the schedule set forth
in Section 1.2(b) of this Agreement. The RSUs, the Shares issued upon vesting of
the RSUs and any proceeds received upon the sale of the Shares are subject to
recovery by the Company as specified in Section 1.2(c) of this Agreement.

 

(a)      Forfeiture.

 

(i)     The RSUs are subject to forfeiture based on the Company’s 2014 Pro Forma
earnings per share (the “2014 Pro Forma EPS”). The number of RSUs that will be
forfeited is determined according to the highest earnings per share threshold
set forth on the table below (each, an “EPS Threshold”) that the 2014 Pro Forma
EPS meets or exceeds. The table below specifies the applicable percentage of
RSUs that will be retained (the “Earned RSUs”), subject to adjustment as
provided in Section 1.2(a)(ii), at the specified EPS Threshold. When the
Committee certifies the number of Earned RSUs as provided in Section
1.2(a)(iii), all RSUs that are not Earned RSUs are forfeited.

 

EPS Threshold

Percentage of Earned RSUs

$ 4.68 (highest)

100%

$ 4.57

90%

$ 4.46

80%

$ 4.36

70%

$ 4.25

60%

$ 4.14

50%

$ 4.04

40%

$ 0.01

30%

$ 0.00 or negative earnings per share (lowest)

0%

 

 

 
 

--------------------------------------------------------------------------------

 

 

(Senior Executives, with performance- and time-vesting)

 

 

(ii)     If the 2014 Pro Forma EPS is at least $4.04 and falls between the EPS
Thresholds specified in the table above, the percentage of Earned RSUs will be
determined on a pro-rata basis and the number of Earned RSUs will be rounded to
the nearest whole RSU. If the 2014 Pro Forma EPS is positive but less than
$4.04, the percentage of Earned RSUs will not exceed 30%.

 

Example 1: If the 2014 Pro Forma EPS is $4.30, the percentage of Earned RSUs
would be 60% plus an additional percentage calculated as follows: (a) the amount
by which 2014 Pro Forma EPS exceeds the highest applicable EPS Threshold
multiplied by (b) a fraction, (i) the numerator of which is 10% and the (ii)
denominator of which is the difference between the highest applicable EPS
Threshold and the next-highest EPS Threshold that was exceeded (in this example,
$4.36 - $4.25 = $0.11):

 

$0.05 (10%/$0.11) = 4.5%

 

The resulting percentage of Earned RSUs correlating to an EPS of $4.30 would be
64.5%. If the Award were 1,000 RSUs, the number of Earned RSUs would be 64.5% of
1,000, or 645 RSUs. The number of forfeited RSUs would be 1,000 minus 645, or
355. The Earned RSUs would be subject to the vesting according to the schedule
specified in Section 1.2(b) of this Agreement.

 

(iii)     The 2014 Pro Forma EPS will be calculated by deducting from the
Company’s consolidated diluted income (loss) per share, as set forth in the
audited consolidated statement of income for the Company and its subsidiaries
for the 2014 fiscal year, non-operational transactions or disposal activities,
for example:

 

  i. asset impairment and disposal gain;   ii. gains or losses on the sale of
real estate or stores;   iii. gains or losses on equity investment;  

iv.

reserves for real estate leases, Company owned service contracts (e.g., lifetime
oil), and legal matters;

  v. related income tax adjustments for any of the above.

          

As soon as practicable, the Director of Internal Audit of the Company shall
calculate the 2014 Pro Forma EPS, and shall submit those calculations to the
Committee. At or prior to the regularly scheduled meeting of the Committee held
in the first fiscal quarter of 2014, the Committee in its sole discretion shall
determine and certify in writing (which may consist of approved minutes of the
meeting) the 2014 Pro Forma EPS and the number of Earned RSUs and whether and to
what extent the EPS Threshold set forth above has been attained. Unless
otherwise required under this Agreement, no Shares or other amounts shall be
delivered or paid unless the Committee certifies the 2014 Pro Forma EPS and the
number of Earned RSUs.

 

 

 
2

--------------------------------------------------------------------------------

 

 

(Senior Executives, with performance- and time-vesting)

 

 

The Committee may adjust 2014 Pro Forma EPS to include any of the following
(provided such adjustment does not increase the amount of compensation that
would otherwise be due upon attainment of unadjusted 2014 Pro Forma EPS): (A)
any or all items that were excluded from the calculation of non-GAAP earnings as
reflected in any published earnings release, (B) litigation or claim judgments,
settlements or reserves, (C) the effect of changes in tax law, accounting
principles or other laws or provisions affecting reported results and (D) any
other non-operational items.

 

(b)     Vesting. Any Earned RSUs shall vest subject to the continued employment
of Recipient with the Company or any Subsidiary through the vesting dates set
forth in the table below (each, a “Vesting Date”). The number of Shares to which
Recipient is entitled on each Vesting Date shall be rounded up to the nearest
whole Share (except for the last Vesting Date, on which all remaining RSUs shall
vest).

 

Vesting Date

Vesting of

Award

January 1, 2015

25%

January 1, 2016

25%

January 1, 2017

25%

January 1, 2018

25%

 

Example 2: If there are 645 Earned RSUs as described in Example 1, above, they
would vest and entitle Recipient to receive Shares as follows.

 

Vesting Date

Vesting of

Award

Shares

January 1, 2015

25%

162

January 1, 2016

25%

162

January 1, 2017

25%

162

January 1, 2018

25%

159

 

(c)     Clawback. If the Company’s financial statements are restated at any time
within three years after the Committee certifies the number of Earned RSUs under
Section 1.2(a)(iii) of this Agreement, the 2014 Pro Forma EPS shall be
recalculated (the resulting number, the “Recalculated 2014 Pro Forma EPS”) based
on the restated financial statements. If, based on the Company’s restated
financial statements, the Recalculated 2014 Pro Forma EPS is less than the 2014
Pro Forma EPS that the Committee previously certified, (i) any Earned RSUs
subject to vesting shall be adjusted to reflect the number of RSUs that would
have been Earned RSUs based on the Recalculated 2014 Pro Forma EPS and (ii)
Recipient shall repay to the Company a number of Shares calculated by
subtracting the number of Shares Recipient should have received based on the
Recalculated 2014 Pro Forma EPS from the number of Shares Recipient received
under this Award (the “Excess Shares”) and any dividend paid on the Excess
Shares (the “Excess Dividends”). If any Excess Shares are sold by Recipient
before the Company’s demand for repayment (including any Shares withheld for
taxes under Section 4 of this Agreement), Recipient shall repay to the Company
100% of the proceeds of such sale or sales. The Committee may, in its sole
discretion, reduce the amount to be repaid by Recipient to take into account the
tax consequences of such repayment for Recipient.

 

If any portion of the Excess Shares and Excess Dividends was deferred under the
RSU Deferral Plan effective January 1, 2012 (the “Deferral Plan”), that portion
shall be recovered by canceling the amounts so deferred under the Deferral Plan
and any dividends or other earnings credited under the Deferral Plan with
respect to such cancelled amounts. The Company may seek direct repayment from
Recipient of any Excess Shares, Excess Dividends and proceeds not so recovered
and may, to the extent permitted by applicable law, offset such amounts against
any compensation or other amounts owed by the Company to Recipient. In
particular, such amounts may be recovered by offset against the after-tax
proceeds of deferred compensation payouts under the Company’s Deferred
Compensation Plan, the Company’s Supplemental Executive Retirement Plan at the
times such deferred compensation payouts occur under the terms of those plans.
Amounts that remain unpaid for more than 60 days after demand by the Company
shall accrue interest at the rate used from time to time for crediting interest
under the Deferred Compensation Plan.

 

 
3

--------------------------------------------------------------------------------

 

 

(Senior Executives, with performance- and time-vesting)

 

 

1.3     Settlement of Earned RSUs. There is no obligation for the Company to
make payments or distributions with respect to RSUs except for the issuance of
Shares to settle Earned RSUs after the applicable Vesting Date. The Company’s
issuance of one Share for each vested Earned RSU (“Settlement”) may be subject
to such conditions, restrictions and contingencies as the Committee shall
determine. Unless receipt of the Shares is validly deferred pursuant to the RSU
Deferral Plan effective January 1, 2012, Earned 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 Code Section 409A, and to the extent payments are made during the periods
permitted under Code 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.

 

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 (whether or not determined to be Earned RSUs) shall
immediately be forfeited. Recipient shall not be treated as terminating
employment if Recipient is on an approved leave of absence.

 

(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 Earned RSUs. The prorated portion of the Earned RSUs that is
vested as of Recipient’s death shall be the total number of Earned 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 RSUs
vesting under this Section 1.4(b) shall be the date of Recipient’s death.
Payment upon death shall be the total number of shares vested as a result of
this Section 1.4(b), reduced by the number of Shares previously delivered to
Recipient.

 

(c)     Disability. If Recipient becomes Disabled while employed by the Company
or a Subsidiary, Earned RSUs shall continue to vest as scheduled in Section 1.2
of this Agreement for so long as Recipient remains Disabled. If Recipient dies
while 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
Earned RSUs. A “Qualified Retirement” means the 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 Earned RSUs that is vested as of Recipient’s Qualified Retirement shall be
the total number of Earned 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. The Vesting Date for additional RSUs vesting under this Section 1.4(d) shall
be the date of Recipient’s Qualified Retirement. Payment upon Qualified
Retirement shall be the total number of shares vested as a result of this
Section 1.4(d), reduced by the number of Shares previously delivered to
Recipient.

 

 

 
4

--------------------------------------------------------------------------------

 

 

(Senior Executives, with performance- and time-vesting)

 

 

Notwithstanding anything in this Agreement to the contrary, in no event will any
Settlement occur prior to the applicable Vesting Date (i.e., the Vesting Date
set forth in Section 1.2 unless the Vesting Date is earlier pursuant to Section
1.4 as a result of Recipient’s death or Qualified Retirement).

 

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.

 

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.

 

 

 
5

--------------------------------------------------------------------------------

 

 

(Senior Executives, with performance- and time-vesting)

 

 

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. If the Award is scheduled to vest during a period in which
trading is not permitted under the Company’s insider trading policy (a “Blackout
Period”), to satisfy the Tax Withholding requirement, Recipient irrevocably
elects to settle the Tax Withholding obligation for an Award that vests in a
Blackout Period 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.

 

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.

 

 

 
6

--------------------------------------------------------------------------------

 

 

(Senior Executives, with performance- and time-vesting)

 

 

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.

 

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.

 

 
7

--------------------------------------------------------------------------------

 

 

(Senior Executives, with performance- and time-vesting)

 

 

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. If you have any
specific questions or do not fully understand any of the provisions, please
contact Larissa McAlister in writing.

 

 8