EXHIBIT 10.2
[Form for Independent
Directors]
INDEMNITY
AGREEMENT
THIS AGREEMENT is made as of
_________________, ______ by and between Lithia Motors, Inc., an
Oregon corporation (Company), and ______________________________
(Indemnitee), a director of the Company.
RECITALS
A. It is essential to the Company
to retain and attract as directors the most capable persons
available.
B. The increase in corporate
litigation subjects directors to expensive litigation risks at the
same time that the availability and coverage of directors’
and officers’ liability insurance have been reduced.
C. It is now and always has been
the express policy of the Company to indemnify its directors and
officers so as to provide them with the maximum possible protection
permitted by law.
D. The Restated Articles of
Incorporation of the Company (Restated Articles) require
indemnification of the directors and officers of the Company as
provided in the Restated Articles and permit additional
indemnifications of directors and officers by contract. The Oregon
Business Corporation Act (the “Act”) expressly provides
that the indemnification provisions set forth in the Act are not
exclusive, and thereby contemplates that contracts may be entered
into between the Company and members of the Board of Directors with
respect to indemnification of directors and officers.
NOW,
THEREFORE, the Company and Indemnitee agree as follows:
1. Services to the Company;
Cooperation .
Indemnitee will serve or continue to serve as a director of the
Company for so long as Indemnitee is duly elected or until
Indemnitee tenders a resignation in writing or is
removed.
2. Definitions . As used in
this Agreement:
(a) The
term “Change in Control” shall mean that any of the
following has occurred: (i) any “person” (as such term
is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended), other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or
a company owned directly or indirectly by the stockholders of the
Company in substantially the same proportions as their ownership of
stock of the Company, is or becomes the “beneficial
owner” (as defined in Rule 13d-3 under that Act), directly or
indirectly, of securities of the Company representing 20% or more
of the total voting power represented by the Company’s then
outstanding Voting Securities, (ii) during any period of two
consecutive years, individuals who at the beginning of such period
constitute the Board of Directors of the Company and any new
director whose election by the Board of Directors or nomination for
election by the Company’s stockholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in office
who either were directors at the
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beginning of the period or whose election
or nomination for election was previously so approved, cease for
any reason to constitute a majority thereof, or (iii) the
stockholders of the Company approve a merger or consolidation of
the Company with any other entity, other than a merger or
consolidation which would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into Voting Securities of the surviving entity) at least 80% of the
total voting power represented by the Voting Securities of the
Company or such surviving entity outstanding immediately after such
merger or consolidation, or the stockholders of the Company approve
a plan of complete liquidation of the Company or an agreement for
the sale or disposition by the Company (in one transaction or a
series of transactions) of all or substantially all of the
Company’s assets.
(b)
The term “Expenses” shall include expenses of
investigations, judicial or administrative proceedings or appeals,
personal travel and per diem expenses, attorneys’ fees and
disbursements and any expenses of establishing a right to
indemnification under Section 11 of this Agreement, but shall not
include amounts paid in settlement by Indemnitee or the amount of
judgments or fines against Indemnitee.
(c)
The term “Proceeding” shall include any threatened,
pending or completed action, suit or proceeding, arbitration,
mediation or investigation, whether brought in the right of the
Company or otherwise and whether of a civil, criminal,
administrative or investigative nature, in which Indemnitee may be
or may have been involved as a party or otherwise, by reason of the
fact that Indemnitee is or was a director or officer of the Company
or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, whether or not serving in
such capacity at the time any liability or expense is incurred for
which indemnification or reimbursement can be provided under this
Agreement.
(d)
The term “Independent Legal Counsel” shall mean legal
counsel, selected as provided in Section 10, who has not otherwise
performed services for the Company or the Indemnitee within the
last five years (other than in connection with matters referred to
in Section 10).
(e)
References to “other enterprise” shall include employee
benefit plans; references to “fines” shall include any
excise tax assessed with respect to any employee benefit plan;
references to “serving at the request of the Company”
shall include any service as a director, officer, employee or agent
of the Company which imposes duties on, or involves services by,
such director, officer, employee or agent with respect to an
employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner reasonably believed
to be in the best interest of an employee benefit plan shall be
deemed to have acted in a manner “not opposed to the best
interests of the Company” as referred to in this
Agreement.
3. Indemnity in Third-Party
Proceedings . The
Company shall indemnify Indemnitee in accordance with the
provisions of this Section 3 if Indemnitee is a party to or
threatened to be made a party to any Proceeding (other than a
Proceeding by or in the right of the Company to procure a judgment
in its favor) against all Expenses, judgments, fines and amounts
paid in settlement actually and reasonably incurred by Indemnitee
in connection with the Proceeding, but only if Indemnitee acted in
good faith and in a manner which Indemnitee reasonably
believed
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to be in or not opposed to the best
interests of the Company and, in the case of a criminal proceeding,
in addition, had no reasonable cause to believe that
Indemnitee’s conduct was unlawful.
4. Indemnity in Proceedings by
or in the Right of the Company . The Company shall indemnify
Indemnitee in accordance with the provisions of this Section 4 if
Indemnitee is a party to or threatened to be made a party to any
Proceeding by or in the right of the Company to procure a judgment
in its favor against all Expenses actually and reasonably incurred
by Indemnitee in connection with the defense or settlement of the
Proceeding, but only if Indemnitee acted in good faith and in a
manner which Indemnitee reasonably believed to be in or not opposed
to the best interests of the Company. No indemnification for
Expenses shall be made under this Section 4 in respect of any
claim, issue or matter as to which Indemnitee shall have been
finally adjudged by a court to be liable to the Company, unless and
only to the extent that any court in which the Proceeding was
brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of
the case, Indemnitee is fairly and reasonably entitled to
indemnity.
5. Indemnification of Expenses
of Successful Party . Notwithstanding any other provisions of
this Agreement, to the extent that Indemnitee has been successful,
on the merits or otherwise, in defense of any Proceeding or in
defense of any claim, issue or matter therein, including the
dismissal of an action without prejudice, the Company shall
indemnify Indemnitee against all Expenses incurred in connection
therewith.
6. Additional
Indemnification .
(a) The Company agrees, as set
forth in this Section 6(a), to indemnify Indemnitee to the fullest
extent permitted by law, notwithstanding that such indemnification
may not be specifically authorized by the Company’s Restated
Articles of Incorporation, the Company’s Bylaws, the Act or
the other provisions of this Agreement. Accordingly,
notwithstanding any limitation in Sections 3, 4 or 5, the Company
shall indemnify Indemnitee to the fullest extent permitted by law
if Indemnitee is a party to or threatened to be made a party to any
Proceeding (including a Proceeding by or in the right of the
Company to procure a judgment in its favor) against all judgments,
fines, amounts paid in settlement and Expenses actually and
reasonably incurred by Indemnitee in connection with the
Proceeding. No indemnity shall be made under this Section 6(a) on
account of Indemnitee’s conduct which constitutes a breach of
Indemnitee’s duty of loyalty to the Company or its
shareholders or is an act or omission not in good faith or which
involves intentional misconduct or a knowing violation of the
law.
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