EXHIBIT
10.8


 


SUMMARY


2006
DISCRETIONARY SUPPORT SERVICES BONUS PROGRAM


 


The annual bonuses paid
to Lithia’s executives and managers are determined based on certain pre-established
performance objectives and specific targets under the 2006 Discretionary Support
Services Bonus Program (the “Bonus Plan”), subject to shareholder approval of
the Bonus Plan. The Bonus Plan replaces the 2005 Discretionary Executive Bonus
Plan. The Board of Directors annually determines the participants, the
performance objectives, the specific targets for each of the performance objectives
and the percentage of the bonus determined based on that target. The Bonus Plan
is not a contract guarantying a bonus. The payment of any bonuses is in the negative
discretion of the Board of Directors. Performance achievement of each objective
is determined in the sole judgment of the Compensation Committee. In making
such judgment, the Compensation Committee disregards the impact (whether
positive or negative) resulting from a changes in accounting rules. Further,
with respect to managers, the Compensation Committee may disregard the impacts
resulting from a material change from the current core business model, a major
acquisition or series of acquisitions, or a disposition of a major portion of
our business.


 


To be eligible to
participate in the Bonus Plan, the executive or manager must be employed with the
Company full time for the entire service year in an eligible position and be
employed as of February 28 of the following year.


 


Under the Bonus Plan,
each participant will have a Maximum Bonus Potential based on a percentage of
that participant’s annual salary. The participant’s bonus received under the Bonus
Plan will be a percentage of the participant’s Maximum Bonus Potential,
determined based on the accomplishment of the shared company objectives
measured as of December year-end. Approximately 57 employees are eligible to
participate under the Bonus Plan at Maximum Bonus Potential percentages ranging
from 5% to 150%. The six senior executive officers Maximum Bonus Potential
percentage is 150%.


 


The following are the
general performance objectives for the Bonus Plan and the maximum percentage of
the participant’s Maximum Bonus Potential that may be achieved under each such
performance objective for 2006. For each year, the Board of Directors may
change which of these performance objectives will be considered, the specific
targets, and the applicable percentages for each of the performance objectives.
Such changes must be made before March 31 of each year.


 


	
  Objectives

  	
   

  	
  Maximum
  Percentage of 

  Maximum Bonus Potential 

  (2006)

  	
   

  
	
  Financial Performance:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1.
  Pre-Tax Net Profit 

  (per share)

  	
   

  	
  20

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  2.
  Return on Average Equity

  	
   

  	
  8

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  3.
  Pre-Tax Net Margin Retention 

  (Pre-Tax Net Profit/Total Revenue)

  	
   

  	
  8

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  4.
  Overall Company Growth 

  (based on revenue growth and net profit growth)

  	
   

  	
  5

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  5.
  Used Vehicle Department Growth 

  (based on revenue growth and net profit growth)

  	
   

  	
  3

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  6.
  Fixed Departments Growth 

  (based on revenue growth and net profit growth)

  	
   

  	
  3

  	
  %

  



 


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  Non-Financial Performance:

  	
   

  	
   

  	
   

  
	
  7.
  Approved to Purchase Stores 

  (satisfy specific manufacturer criteria to purchase stores)

  	
   

  	
  10

  	
  %

  
	
  8.
  Minimum Sales Requirement 

  (at or above threshold set by specified manufacturers)

  	
   

  	
  5

  	
  %

  
	
  9.
  Sales Satisfaction Scores 

  (% of stores equaling or exceeding manufacturers’ criteria)

  	
   

  	
  3

  	
  %

  
	
  10.
  Service Satisfaction Scores 

  (% of stores equaling or exceeding manufacturers’ criteria)

  	
   

  	
  3

  	
  %

  
	
  Project Related Objectives:
  Implementation of the following programs:

  	
   

  	
   

  	
   

  
	
  11.
  Human Resources Development 

  (external and internal recruiting, Multi-store Manager Development Plan,
  training, core competencies review program)

  	
   

  	
  10

  	
  %

  
	
  12.
  Used Vehicle Inventory Management 

  (hiring and training goals and management system)

  	
   

  	
  5

  	
  %

  
	
  13.
  Office Automation 

  (automation of specific certain systems and related studies)

  	
   

  	
  4

  	
  %

  
	
  14.
  Internet Sales Process 

  (implementation of identified aspects of internet sales plan)

  	
   

  	
  3

  	
  %

  
	
  15.
  Service Department Follow-Up Systems 

  (implementation of system)

  	
   

  	
  2

  	
  %

  
	
  16.
  Departmental Action Plans and Tracking Systems 

  (development of action plans and tracking systems)

  	
   

  	
  2

  	
  %

  
	
  17.
  Car Deal Process Improvement 

  (implementation of specific improvements)

  	
   

  	
  2

  	
  %

  
	
  18.
  New Business Development 

  (achievement of specific new business development objectives)

  	
   

  	
  4

  	
  %

  
	
   

  	
   

  	
  100

  	
  %

  



 


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