EXHIBIT
10.20


 


LITHIA
MOTORS, INC.


 


OUTSIDE
DIRECTOR NONQUALIFIED DEFERRED COMPENSATION AGREEMENT


 


THIS
AGREEMENT by and among Lithia Motors, Inc., an Oregon corporation (the “Company”),
and                                          
(the “Director”) is dated effective                                 200          
(the “Effective Date”).


 


RECITALS


 


A.            On
November 22, 2005, the Company’s Board of Directors approved the granting of a
nonqualified deferred compensation benefit (the “Plan”), the terms of which are
set forth in this Agreement, to members of the Board of the Directors who are
not employees of the Company (“Outside Directors”). As of that date, all
Outside Directors are eligible to participate in the Plan or will become
eligible to participate in the Plan upon commencement of their service as a
director of the Company.


 


B.            The
Director is an Outside Director.


 


C.            The
Company and the Director execute this Agreement to evidence the Director’s
election to defer constructive and actual receipt of what would otherwise be
current compensation in the form of fees payable or shares issuable to the
Director for services performed as a member of the Company’s Board of Directors
and for service on any board committee.


 


AGREEMENT


 


The Director and the Company agree as follows:


 


Article 1


Definitions


 


In addition to those defined terms set forth in the
Recitals to this Agreement, the following are defined terms that shall have the
specified meanings whenever used in the Agreement:


 


1.1  “Claimant”
means the Director, any designated beneficiary, or other person who believes
that he or she is being denied a benefit to which he or she is entitled under
this Agreement.


 


1.2  “Code” means the Internal Revenue Code of 1986,
as amended.


 


1.3  “Compensation” means director cash fees that would be
paid or stock issuable to the Director during a Plan Year.


 


1.4  “Deferral
Account” means the
Company’s accounting of the Director’s accumulated Deferrals plus accrued
interest, if applicable.


 


1.5  “Deferrals”
means the amount of the Director’s Compensation that the Director elects to
defer according to this Agreement.


 


1.6  “Election
Form” means the form attached as Appendix A.


 


1.7  “Plan
Administrator”  means the
person or persons designated from time to time by the Company’s Board of
Directors to administer the terms of this Agreement, or if no person or persons
have been designated, the Company’s Board of Directors.


 


1.8  “Plan Year”
means the calendar year.


 


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1.9  “Termination
of Services” means that the Director ceases to be a Director of the
Company.


 


1.10  “Unforeseeable
Emergency” means severe financial hardship resulting from an illness
or accident of the Director, the Director’s spouse or a dependent (as defined
in Section 152(a) of the Code), loss of the Director’s property due to
casualty, or other similar extraordinary and unforeseeable circumstances
arising as a result of events beyond the control of the Director.


 


Article 2


Deferral Election


 


2.1  Initial Election. The Director shall make an initial
deferral election under this Agreement by filing with the Company a signed
Election Form within 30 days after the Director becomes eligible to participate
in the Plan, for the first Plan Year of eligibility, or thereafter, prior to
the beginning of the Plan Year for which Compensation is to be deferred . The
Election Form shall set forth the amount of Compensation to be deferred and
shall be effective to defer only Compensation earned after the date the
Election Form is received by the Company.


 


2.2  Election Changes. The Director may modify the amount of
Compensation to be deferred annually by filing a new Election Form with the
Company prior to the beginning of the Plan Year in which the Compensation is to
be deferred. The modified deferral election shall not be effective until the
calendar year following the year in which the subsequent Election Form is
received and approved by the Company. Unless and until and new Election Form is
delivered to the Company, the Director’s election will remain in effect with
respect to succeeding Plan Years.


 


2.3  Change in Time and Form of Distribution. The timing of a distribution of the
Deferral Account may not be accelerated except as set forth in Section 4.2 or
except as permitted under Rule 409A of the Code. Any change which delays the
timing of distributions or changes the form of distributions may only be made
by a written agreement signed by the Company and the Executive and only if the
following requirements are met:


 


2.3.1        Any
election to change the time and form of distribution may not take effect until
at least 12 months after the date on which the election is made; and


 


2.3.2        Other
than in the event of death, Disability (as defined under Rule 409A of the Code)
or Unforeseeable Emergency, the first payment or distribution with respect to
such election must be deferred for a period of at least 5 years from the date
such payment or distribution would otherwise have been made.


 


2.3.3        Any
election related to a payment or distribution to be made at a specified time
may not be made less than 12 months prior to the date of the first scheduled
payment or distribution.


 


Article 3


Deferral
Account


 


3.1  Establishing and Crediting. The Company shall establish a
Deferral Account on its books for the Director and shall credit to the Deferral
Account the following amounts:


 


3.1.1  Deferrals.
The portion of the Compensation deferred by the Director as of the time the
Compensation would have otherwise been paid to the Director.


 


3.1.2  Dividends
on Stock. The account shall also be credited with any cash or stock
dividends, stock splits or the like, that would have been paid or issuable with
respect to the shares of Class A Common Stock, the issuance of which deferred
hereunder.


 


3.1.3  Interest.
At the end of each Plan Year
under this Agreement, interest is to be credited


 


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on the account cash
balance at an annual rate equal to the interest rate on the Company’s used car flooring
line of credit by reference to such rate as of the last business day of the
preceding Plan Year.


 


3.2  Statement of Accounts. Within 120 days after the end of each
Plan Year, the Company shall provide to the Director a statement setting forth
the Deferral Account balance.


 


3.3  Accounting Device Only. The Deferral Account is solely a
device for measuring amounts to be paid under this Agreement. The Deferral
Account is not a trust fund of any kind. The Director is a general unsecured
creditor of the Company for the payment of cash benefits. The benefits
represent the mere promise of the Company to pay such benefits. The Director’s
rights are not subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment, or garnishment by the
Director’s creditors.


 


Article
4


Payment of Benefit


 


4.1 
Timing of Distribution. The
Deferral Account balance is payable to the Director starting within one month
following Termination of Services in accordance with the form of distribution
indicated on the Election Form.


 


4.2 Hardship Distribution.
Upon the Board of Director’s determination (following petition by the Director)
that the Director has suffered an Unforeseeable Emergency, the Company shall
distribute to the Director all or a portion of the Deferral Account balance as
determined by the Company. The amount distributed may not exceed the amount
necessary to satisfy the financial hardship plus amounts necessary to pay taxes
reasonably anticipated as a result of the distribution, after taking into account
the extent to which such hardship is or may be relieved through reimbursement
or compensation by insurance or otherwise or by liquidation of the Director’s
assets (to the extent the liquidation of such assets would not itself cause
severe financial hardship).


 


Article 5


Death
Benefit


 


In the event of the Director’s death before all benefit
payments have been made under this Agreement, the Company shall pay the
remaining benefits to the Director’s designated beneficiary, or if no
beneficiary is designated, to the Director’s estate, at the same time and in
the same amounts they would have been paid to the Director had the Director
survived.


 


Article 6


Beneficiaries


 


6.1  Beneficiary Designations. The Director shall designate a
beneficiary or beneficiaries by filing a written designation with the Company.
The Director may revoke or modify the designation at any time by filing a new
designation. However, designations will only be effective if signed by the
Director and received by the Company during the Director’s lifetime. The
Director’s beneficiary designation shall be deemed automatically revoked if the
beneficiary predeceases the Director or if the Director names a spouse as
beneficiary and the marriage is subsequently dissolved. If the Director dies
without a valid beneficiary designation, all payments and distributions shall
be made to the Director’s estate.


 


6.2  Facility of Payment. If a benefit is payable to a minor, to
a person declared incompetent, or to a person incapable of handling the
disposition of his or her property, the Company may pay or distribute such
benefit to the guardian, legal representative or person having the care or
custody of such minor, incompetent person or incapable person. The Company may
require proof of incompetence, minority or guardianship as it may deem
appropriate prior to distribution of the benefit. Such distribution shall
completely discharge the Company from all liability with respect to such
benefit.


 


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Article
7


Amendments
and Termination


 


This Agreement may be amended or terminated only by a written agreement
signed by the Company and the Director. Notwithstanding the foregoing, the
Company may amend or terminate this Agreement at any time if, pursuant to
legislative, judicial or regulatory action, continuation of the Agreement would
(i) cause benefits to be taxable to the Director prior to actual receipt, or
(ii) result in significant financial penalties or other significantly
detrimental ramifications to the Company (other than the financial impact of
paying the benefits). In no event shall this Agreement be terminated under this
section without payment to the Director of the Deferral Account balance
attributable to the Director’s Deferrals and interest credited on such amounts.


 


Article 8


Administration


 


8.1  Plan Administrator. This Agreement shall be administered by
the Plan Administrator. The Plan Administrator shall have such powers as are
necessary to carry out the intent and administration of this Agreement, including
but not limited to (a) interpreting the provisions of the Agreement; (b)
establishing and revising the method of accounting for the Agreement; (c)
maintaining a record of benefit payments; (d) establishing rules and
prescribing any forms necessary or desirable to administer the Agreement; and
(e) appointing agents, counsel, accountants, consultants and other persons as
may be required to assist in administering the Agreement.


 


8.2  Claims Procedure.


 


8.2.1        Benefits
shall be paid in accordance with the provisions of this Agreement. A Claimant shall
send a written request for such benefit, setting forth the claim, to the
Company at its principal place of business. The claim will be forwarded to the
Plan Administrator.


 


8.2.2        Upon
proper delivery and receipt of a claim, the Plan Administrator shall advise the
Claimant that a reply will be forthcoming within 90 days and shall deliver such
reply within such period. The Plan Administrator may, however, extend the reply
period for an additional 90 days for reasonable cause.


 


If the claim is denied in
whole or in part, the Plan Administrator shall provide written notice, setting
forth: (i) the specific reason or reasons for such denial; (ii) the specific
reference to pertinent provisions of this Agreement on which such denial is
based; (iii) a description of any additional material or information necessary
for the Claimant to perfect the claim and an explanation why such material or
such information is necessary; (iv) appropriate information as to the steps to
be taken if the Claimant wishes to submit the claim for review; and (v) the
time limits for requesting a review under Section 8.2.3 and for review under
Section 8.2.4.


 


8.2.3        If
the claim is denied and a review is desired, the Claimant must, within 60 days
after receipt by the Claimant of the written denial of claim, as described
above, request in writing that the Plan Administrator reconsider the
determination of the Company. Such request must be addressed to the Plan
Administrator at the Company’s principal place of business. The Claimant or his
or her duly authorized representative may review the pertinent documents and
submit issues and comments in writing for consideration of the Plan
Administrator. If the Claimant does not request a reconsideration of the Plan
Administrator’s determination within such 60 day period, then the Claimant
shall be barred and stopped from challenging the Plan Administrator’s
determination.


 


8.2.4        Within
60 days after the Plan Administrator’s receipt of a timely and properly delivered
request for review, the Plan Administrator shall review the Company’s
determination, and after considering all materials presented by the Claimant,
shall render a written option, setting forth the specific reasons for the
decision and containing specific references to the pertinent provisions of this


 


4

















 


Agreement on which
the decision is based. If special circumstances require that the 60-day time
period be extended, the Plan Administrator will notify the Claimant and the
Plan Administrator will render the decision as soon as possible, but not later
than 120 days after receipt of the request for review.


 


Miscellaneous


 


9.1  Binding Effect. This Agreement
shall bind the Director and the Company and their beneficiaries, survivors,
executors, administrators and transferees.


 


9.2  No Guarantee of Continued Position. This Agreement is not a
contract for employment, nor does it entitle the Director to remain a director
of the Company. It also does not require the Director to remain a director nor
interfere with the Director’s right to resign at any time.


 


9.3 
Non-Transferability. Benefits under this Agreement cannot be
sold, transferred, assigned, pledged, attached or encumbered in any manner.


 


9.4  Tax
Withholding. The Company shall withhold any taxes that are required
to be withheld from the benefits provided under this Agreement.


 


9.5  Applicable
Law. The Agreement and all rights hereunder shall be governed by the
laws of Oregon, except to the extent the laws of the United States of America
otherwise require.


 


9.6  Unfunded
Arrangement. The Director and the Director’s beneficiary are general
unsecured creditors of the Company for the payment of benefits under this
Agreement. The benefits represent the mere promise by the Company to pay such
benefits. The rights to benefits are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors.


 


9.7  Reorganization. The Company shall
not merge or consolidate into or with another Company, or reorganize, or sell
substantially all of its assets to another Company, firm, or person unless such
succeeding or continuing Company, firm, or person agrees to assume and
discharge the obligations of the Company under this Agreement. Upon the
occurrence of such event, the term “Company” as used in this Agreement shall be
deemed to refer to the successor or survivor Company.


 


9.8  Attorney
Fees. In the event of litigation, arbitration, mediation or any other
form of dispute resolution to enforce any provision of this Agreement, the
prevailing party shall be entitled to recover its reasonable attorneys fees,
including fees on appeal, if any, in addition to other relief awarded.


 


9.9  Notice.
Any notice required or permitted to be given under this Agreement shall be in
writing, signed by the party giving the same. If such notice is mailed to a
party hereto, it shall be sent by United States certified mail, postage
prepaid, addressed to such party’s last known address as shown on the Company’s
records.


 


9.10  Entire
Agreement. This Agreement constitutes the entire agreement between
the Company and the Director as to the subject matter hereof. No rights are
granted to the Director by virtue of this Agreement other than those
specifically set forth herein.


 


IN WITNESS
WHEREOF, the Director and a duly authorized Company officer have signed this
Agreement.


 


	
  Director:

  	
  Lithia Motors, Inc.

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  	 

	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
								



 


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APPENDIX
A


to


LITHIA
MOTORS, INC.


OUTSIDE
DIRECTOR NONQUALIFIED DEFERRED COMPENSATION AGREEMENT


 


DEFERRAL
ELECTION


 


I elect to defer my
Compensation pursuant to this Agreement with the Company, as follows:


 




	
  Amount of Deferral

  	
   

  	
  Duration of Deferral Election

  
	
   

  	
   

  	
   

  
	
  [Initial one or more, as
  applicable]

  	
   

  	
  [Initial One]

  
	
   

  	
   

  	
   

  
	
         
  I elect to defer         % or $               of
  my cash Compensation annually.

  	
   

  	
           
  One Year only

  
	
          I elect
  to defer       % of my stock .

  	
   

  	
         
  For        [Insert Number] Years

  
	
  Compensation annually

  	
   

  	
         
  Until Termination of Service

  
	
   

  	
   

  	
         
  Until                       ,
              (Date)

  






 


I understand that I may
change the amount of my deferrals by filing a new election form with the
Company; provided, however, that any subsequent election will not be effective
until the calendar year following the year in which the new election is
received and accepted by the Company.


 


FORM OF
DISTRIBUTION


 


I elect to have the
benefits under the Agreement distributed to me in the following form:


[Initial
One]


            
Lump Sum


            
Equal monthly installments for 120 months (any distribution of shares will be
in whole shares only)


            
Other (describe)


 


I understand that I may
not change the form or timing of distribution elected without written approval
of the Board of Directors of the Company and that any change in the time and
form of distribution must be in compliance with Section 2.3 of the Agreement.


 


	
  Printed Name: 

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature: 

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  
	
  SSN:

  	
   

  	
   

  	
   

  
									



 


Received by the
Company this             
day of                       ,
                       .


 


	
  By:

  	
   

  	
   

  
	
   

  
	
  Title:

  	
   

  	
   

  
				



 


6

















 


BENEFICIARY
DESIGNATION


 


for


LITHIA
MOTORS, INC.


OUTSIDE
DIRECTOR NONQUALIFIED DEFERRED COMPENSATION AGREEMENT


 


I designate the following
person or persons as beneficiary of benefits under this Agreement payable
following my death:


 


PRIMARY:


 


	
  Name

  	
  Relationship

  	
  Percentage

  
	
   

  	
   

  	
   

  	
   

  
	
                                                                                                                                                                                         

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
                                                                                                                                                                                         

  	
   

  
	
   

  	
   

  
	
  CONTINGENT:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name

  	
  Relationship

  	
  Percentage

  
	
   

  	
   

  	
   

  	
   

  
	
                                                                                                                                                                                         

  	
   

  
	
   

  	
   

  
	
                                                                                                                                                                                         

  	
   

  



 


Note:      To name a trust as beneficiary, please provide
the name of the trustee(s) and the exact name and date of the trust
agreement.


 


I understand that I may
change these beneficiary designations by filing a new written designation with
the Company. I further understand that the designations will be automatically
revoked if the beneficiary predeceases me, or, if I have named my spouse as
beneficiary and our marriage is subsequently dissolved. If no beneficiary is
designated or if none of the designated beneficiaries are living at my death,
then the benefits shall be payable as provided by the Agreement.


 


	
  Printed Name:

  	
   

  	
   

  
	
   

  
	
  Signature:

  	
   

  	
   

  
	
   

  
	
  Date:

  	
   

  	
   

  
					



 


Received by the
Company this                      
day of                           ,
                    .


 


	
  By:

  	
   

  	
   

  
	
   

  
	
  Title:

  	
   

  	
   

  
				



 


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