<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
LITHIA MOTORS, INC.
(Exact Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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<PAGE>
LITHIA MOTORS, INC.
360 E. JACKSON STREET
MEDFORD, OREGON 97501-5289
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 20, 1999
To the Shareholders of Lithia Motors, Inc.:
I am pleased to invite you to the Annual Meeting of Shareholders of LITHIA
MOTORS, INC., which will be held at the Rogue Valley Country Club, 2660
Hillcrest Road, Medford, Oregon 97504, on Thursday, May 20, 1999, at 4:00 p.m.,
Pacific Daylight Savings Time. I would like the opportunity to meet you
personally, introduce you to our management team and Directors, and answer any
questions you may have.
This formal Notice of Meeting, the Proxy Statement, the proxy card and a copy of
the Annual Report to Shareholders describing the Company's operations for the
year ended December 31, 1998 are enclosed.
I hope that you will be able to attend the meeting in person. Whether or not you
plan to attend the meeting, please sign and return the enclosed proxy card
promptly. A prepaid return envelope is provided for this purpose. Your shares
will be voted at the meeting in accordance with your proxy.
If you have shares in more than one name, or if your stock is registered in more
than one way, you may receive multiple copies of the proxy materials. If so,
please sign and return each proxy card you receive so that all of your shares
may be voted. I look forward to meeting you at the Annual Meeting.
Very truly yours,
LITHIA MOTORS, INC.
SIDNEY B. DeBOER
CHAIRMAN OF THE BOARD,
April 25, 1999 CHIEF EXECUTIVE OFFICER AND SECRETARY
<PAGE>
LITHIA MOTORS, INC.
------------------------
PROXY STATEMENT
GENERAL
This Proxy Statement is being sent to Shareholders of Lithia Motors, Inc. (the
"Company") in connection with the annual meeting of shareholders to be held on
May 20, 1999 for the following purposes:
1. To elect directors of the Company for the ensuing year (Proposal
No. 1);
2. To approve an amendment to the Company's 1996 Stock Incentive Plan
to increase the number of shares of the Company's Common Stock that
may be issued thereunder by 615,000 shares to a total of 1,700,000
shares (Proposal No. 2); and
3. To consider and act on such other matters as may properly come
before the meeting.
The Board of Directors has fixed the close of business on March 31, 1999, as the
record date for determining shareholders entitled to notice of and to vote at
the meeting or any adjournment thereof. Only holders of record of Common Stock
of the Company at the close of business on the record date will be entitled to
notice of and to vote at the meeting and any adjournment thereof. Further
information regarding voting rights and the matters to be voted upon is
presented in this proxy statement.
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement and the accompanying Annual Report to Shareholders, the
Notice of Annual Meeting and the proxy card are being furnished to the
shareholders of Lithia Motors, Inc., an Oregon corporation (the "Company"), in
connection with the solicitation of proxies by the Company's Board of Directors
for use at the Company's 1999 Annual Meeting of Shareholders (the "Annual
Meeting") to be held at the Rogue Valley Country Club, 2660 Hillcrest Road,
Medford, Oregon 97504, on Thursday, May 20, 1999, at 4:00 p.m. Pacific Daylight
Savings Time and any adjournment thereof. The solicitation of proxies by mail
may be followed by personal solicitation of certain shareholders, by officers or
regular employees of the Company. All expenses of the Company associated with
this solicitation will be borne by the Company.
The two persons named as proxies on the enclosed proxy card, Sidney B. DeBoer
and M. L. Dick Heimann, were designated by the Board of Directors. All properly
executed proxies will be voted (except to the extent that authority to vote has
been withheld) and where a choice has been specified by the shareholder as
provided in the proxy card, it will be voted in accordance with the
specification so made. Proxies submitted without specification will be voted FOR
Proposal No. 1 to elect the nominees for directors proposed by the Board of
Directors and FOR Proposal No. 2 to approve an amendment to the Company's 1996
Stock Incentive Plan to increase the number of shares of the Company's Common
Stock that may be issued thereunder by 615,000 shares to a total of 1,700,000
shares.
<PAGE>
A proxy may be revoked by a shareholder prior to its exercise by written notice
to the Secretary of the Company, by submission of another proxy bearing a later
date or by voting in person at the Annual Meeting. Such notice or later proxy
will not affect a vote on any matter taken prior to the receipt thereof by the
Company.
These proxy materials and the Company's 1998 Annual Report to Shareholders are
being mailed on or about April 20, 1999 to shareholders of record on March 31,
1999 of the Company's Common Stock. The principal executive office and mailing
address of the Company is 360 E. Jackson Street, Medford, Oregon 97501.
VOTING AT THE MEETING
Class A and Class B Common Stock constitute the only classes of securities
entitled to notice of and to vote at the meeting. As of the record date, there
were 6,149,688 shares of Class A Common Stock and 4,110,000 shares of Class B
Common Stock outstanding and entitled to vote. The Class A and Class B Common
Stock vote together as a single voting group on all matters submitted to a vote
of the shareholders.
At the annual meeting, each share of Class A Common Stock is entitled to one
vote per share and each share of Class B Common Stock outstanding is entitled to
ten votes at the Annual Meeting. If a quorum is present at the Annual Meeting
(i) the five nominees for election as directors who receive the greatest number
of votes cast for the election of directors shall be elected directors; and (ii)
Proposal No. 2 to approve an amendment to the Lithia Motors, Inc. 1996 Stock
Incentive Plan will be approved if it receives the affirmative vote of the
holders of at least a majority of the votes present in person or represented by
proxy at the Annual Meeting that voted on Proposal No. 2.
With respect to the election of directors, directors are elected by a plurality
of the votes cast and only votes cast in favor of a nominee will have an effect
on the outcome. Therefore, abstention from voting or nonvoting by brokers will
have no effect thereon. With respect to voting on Proposal No. 2, abstention
from voting will have the same effect as voting against the proposal and
nonvoting by brokers will have no effect thereon. Therefore, while broker
non-votes will be counted for purposes of establishing a quorum, they will not
be considered voted on such proposal.
2
<PAGE>
BUSINESS TO BE CONDUCTED AT THE MEETING
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Bylaws provide for not less than two and not more than seven
directors. The Board of Directors has currently established the number of
directors at five. Directors are elected by the shareholders at the Company's
annual meeting and serve until the next annual meeting or until their successors
are elected and qualified. The Board of Directors has nominated the following
persons to serve as directors for the ensuing year:
<TABLE>
<CAPTION>
NAME AGE HAS BEEN A DIRECTOR SINCE
- ---- --- -------------------------
<S> <C> <C>
Sidney B. DeBoer 55 1968
M. L. Dick Heimann 55 1970
Thomas Becker 47 1997
R. Bradford Gray 47 1997
William J. Young 56 1997
</TABLE>
On February 8, 1999, the Board of Directors approved the acquisition of seven
dealerships from the Moreland Automotive Group, headquartered in Colorado. The
Company anticipates completing the Moreland acquisition during the second
quarter of 1999. After completion of this acquisition, the size of the Board
will be increased from five members to six members and W. Douglas Moreland will
be appointed as a Director of the Company in accordance with Section 2.1 and
Section 2.2 of the Company Bylaws. Mr. Moreland is the president and majority
shareholder of the Moreland Automotive Group.
SIDNEY B. DEBOER. Mr. DeBoer has served as the Chairman, Chief Executive Officer
and Secretary of the Company since 1968. He also is a member of various
automobile industry organizations, including the President's Club of the
National Automobile Dealers Association, Oregon Auto Dealers Association,
Medford New Car Dealers Association, Chrysler Dealer Council, Toyota Dealer
Council and Honda Dealer Council.
M.L. DICK HEIMANN. Mr. Heimann has served as the Chief Operating Officer and
Director of the Company since 1970 and was appointed President in 1997. Prior to
joining the Company, he served as a district manager of Chrysler Corporation
from 1967 to 1970. He is a member of various automobile industry organizations
including the Oregon Auto Dealers Association, the Jeep Dealer Council and the
Medford New Car Dealers Association, for which he has previously served as
president. Mr. Heimann is a graduate of University of Colorado with a Bachelor
of Science degree in Biology and Languages.
R. BRADFORD GRAY. Mr. Gray has served as Executive Vice President of the Company
since 1996 and became a Director of the Company in 1997. From 1981 to 1995, he
served in various capacities with the Company, including as General Manager of
the Company's Grants Pass (1991-1995) and Lithia Dodge (1989-1991) dealerships.
Since 1975, Mr. Gray has held various positions in the automobile sales
industry, including sales representative, sales manager and general manager.
3
<PAGE>
THOMAS BECKER. Mr. Becker became a Director of the Company on March 1, 1997. Mr.
Becker is the Executive Director of Pacific Retirement Services, Inc. and Rogue
Valley Manor in Medford, Oregon. Pacific Retirement Services, Inc. is the parent
corporation of a number of retirement centers and related operations in Oregon,
California and Texas. Mr. Becker began his career with Rogue Valley Manor on
January 1, 1978. Mr. Becker holds a Bachelor of Science degree from the
University of Oregon.
WILLIAM J. YOUNG. Mr. Young became a Director of the Company on March 1, 1997.
Mr. Young is the Chairman of the Board, President and Chief Executive Officer of
ARC Capital, a holding company with three wholly-owned subsidiaries operating in
the machine vision industry. Mr. Young has been with ARC Capital since 1994.
Prior to 1994, Mr. Young served with Volkswagen of America ("VOA") for 18 years,
most recently as President and Chief Executive Officer. During his tenure as
President and CEO of VOA, Mr. Young also served as President of V-Crest Systems,
Inc. ("VCI"), a computer services company serving 1,200 auto dealer agencies,
and Director of VCI, Inc., a $2 billion financial services company.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held four regular meetings during the year ended December
31, 1998. Mr. Gray missed two of the four meetings during 1998. No other
director attended fewer than 75 percent of the meetings of the Board of
Directors and committees thereof, if any, during the period that he was a member
of the Board of Directors during 1998.
The Compensation Committee, consisting of Messrs. Becker and Young, both
non-employee outside directors, and Mr. DeBoer, reviews and approves salaries
for the executive officers, grants of stock options and other incentive
compensation for employees of the Company. The Compensation Committee also
administers the Company's 1996 Stock Incentive Plan and the Company's Employee
Stock Purchase Plan. The Compensation Committee held one meeting during 1998.
In 1998, the Audit Committee consisted of Messrs. Becker and Young, both
non-employee outside directors, and Mr. DeBoer, who were responsible for
recommending the selection of auditors for the Company and reviewing the results
of the audit and other reports and services provided by the Company's
independent auditors. The Audit Committee held four meetings during 1998.
The Board of Directors does not have a Nominating Committee. The entire Board
serves this function.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company are paid $12,000 per year and
receive an additional $500 per meeting of the Board or a committee of the Board
in excess of one meeting per month. Non-employee directors were also granted a
stock option for 1,500 shares of Class A Common Stock under the Company's 1997
Non-Discretionary Stock Option Plan for Non-Employee Directors on January 2,
1998. These stock options have an exercise price equal to the closing price of
the Class A Common Stock on the date of grant, fully vest six months following
the date of grant and generally expire 10 years following such date. Directors
of the Company who are employees do not receive any additional compensation for
serving as a director. All directors are reimbursed for out-of-pocket expenses
that they incur in connection with attending Board and committee meetings.
4
<PAGE>
PROPOSAL NO. 2
APPROVAL OF AN AMENDMENT TO THE COMPANY'S 1996 STOCK INCENTIVE PLAN
In April 1996, the Board and the Company's shareholders adopted the Company's
1996 Stock Incentive Plan (the "Plan"). The Plan provides for the granting of
stock-based awards ("Awards") to executive officers (including those who are
directors), to other employees and to non-employee consultants of the Company.
Such Awards may take any form approved by the Board or by a committee designated
by the Board, including stock options, stock bonuses, stock appreciation rights
and restricted stock awards. Stock options granted under the Plan may be either
options that qualify as "incentive stock options," within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended ("Incentive Options"), or
those that do not qualify as such "incentive stock options" ("Non-qualified
Options").
In April 1999, the Company's Board of Directors approved an amendment to the
Plan to increase the number of shares covered by the Plan by 615,000 to a total
of 1,700,000 shares, subject to approval by the Company's shareholders. A more
complete summary of the Plan is set forth in Appendix A.
5
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 1999, certain information
furnished to the Company with respect to ownership of the Company's Common Stock
of (i) each Director, (ii) the "Named Executive Officers" (as defined under
"Executive Compensation"), (iii) all persons known by the Company to be
beneficial owners of more than 5 percent of its Common Stock, and (iv) all
executive officers and Directors as a group.
<TABLE>
<CAPTION>
COMMON STOCK (A) (B)
--------------------------------------
NUMBER OF PERCENT OF SHARES
SHAREHOLDER SHARES OUTSTANDING
--------------------------------------------------- --------------- ----------------------
<S> <C> <C> <C>
Lithia Holding Company, LLC (C) (D) Class A -- --
Class B 4,110,000 100%
Sidney B. DeBoer (C) (D) (E) Class A 91,279 1.5%
Class B 4,110,000 100%
J.P. Morgan & Co. Incorporated (F) Class A 668,100 10.9%
60 Wall Street Class B -- --
New York, NY 10260
Mellon Bank Corp. (G) Class A 514,100 8.4%
500 Grant Street Class B -- --
Pittsburgh, PA 15258
Capital Guardian Trust Company (H) Class A 509,000 8.3%
333 South Hope Street, 55th Floor Class B -- --
Los Angeles, CA 90071
Wellington Management Company LLP (I) Class A 484,900 7.9%
75 State Street Class B -- --
Boston, Massachusetts 02109
Bank One Corp. (J) Class A 424,100 6.9%
One First National Plaza Class B -- --
Chicago, IL 60670
Gardner Lewis Asset Management (K) Class A 407,000 6.6%
285 Wilmington West Chester Pike Class B -- --
Chadds Ford, PA 19317
M. L. Dick Heimann (D) (L) Class A 70,954 2.1%
Class B -- --
R. Bradford Gray (D) (M) Class A 42,263 *
Class B -- --
Brian R. Neill (N) Class A 31,959 *
Class B -- --
Thomas Becker (O) Class A 13,200 *
Class B -- --
William J. Young (O) Class A 3,000 *
Class B -- --
All executive officers and directors as a Class A 312,885
group (6 persons) (P) Class B 4,110,000 100%
</TABLE>
- ----------------------------------
*Less than one percent
6
<PAGE>
(A) Applicable percentage of ownership is based on 6,149,688 shares of Class A
Common Stock outstanding and 4,110,000 shares of Class B Common Stock
outstanding as of March 31, 1999 together with applicable options for such
shareholders. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission, and includes voting and
investment power with respect to shares. Shares of Common Stock subject to
options or warrants currently exercisable or exercisable within 60 days
after March 31, 1999 are deemed outstanding for computing the percentage
ownership of the person holding such options or warrants, but are not
deemed outstanding for computing the percentage of any other person.
(B) The Class A Common Stock is entitled to one vote per share and the Class B
Common Stock is entitled to 10 votes per share and is convertible into
Class A Common Stock on a share for share basis at the option of the holder
thereof or under certain other circumstances.
(C) Such person can be reached c/o 360 E. Jackson Street, Medford, Oregon
97501.
(D) Lithia Holding's members are Mr. DeBoer (53.6%), Mr. Heimann (34.9%), Mr.
Gray (7.0%), DeBoer Insurance, L.L.C. (3.8%) and Sid and Karen DeBoer
Foundation (0.7%). Mr. DeBoer, as the manager of Lithia Holding and
pursuant to the terms of its operating agreement, has the sole voting and
investment power with respect to all of the Class B Common Stock held.
DeBoer Insurance, L.L.C. is owned by Mr. DeBoer's adult children.
(E) Class A holdings include 30,954 shares subject to options exercisable
within 60 days of March 31, 1999.
(F) The following information is obtained solely from a Form 13G filing
prepared by J. P. Morgan & Co. Incorporated ("J. P. Morgan"). J.P. Morgan
is the parent holding company of Morgan Guaranty Trust Company of New York,
a bank as defined in Section 3(a)(6) of the Securities Exchange Act of 1934
and J. P. Morgan Investment Management, Inc. and J. P. Morgan Florida
Federal Savings Bank, both of which are investment advisers registered
under Section 203 of the Investment Advisers Act of 1940. J.P. Morgan has
sole voting power with respect to 567,000 shares and sole dispositive power
with respect to all 668,100 shares.
(G) The following information is obtained solely from a Form 13G filing
prepared by Mellon Bank Corporation ("Mellon"). Mellon is a parent holding
company for certain banks and Investment Advisors under Section 203 of the
Investment Advisers Act of 1940, including The Boston Company, Inc. and
Boston Group Holdings, Inc. Mellon has sole voting power with respect to
514,100 shares and sole dispositive power with respect to all 514,100
shares. The Boston Company, Inc. and Boston Group Holdings, Inc., as the
parent holding company of The Boston Company, Inc. are deemed to be the
beneficial holders of 391,900 of the reported shares.
(H) The following information is obtained solely from a Form 13G filing
prepared by Capital Guardian Trust Company ("Capital Guardian"). Capital
Guardian is a bank as defined in Section 3(a)(6) of the Securities Exchange
Act of 1934 and serves as an investment manager for several institutional
customers. Capital Guardian has sole investment with respect to 339,000
shares and sole dispositive power with respect to all 509,000 shares.
(I) The following information is obtained solely from a Form 13G filing
prepared by Wellington Management Company, LLP ("WMC"). WMC is deemed to
have beneficial ownership of these shares as a result of its capacity as
investment adviser. Such securities are owned of record by clients of WMC.
WMC has shared voting power with respect to 254,400 shares and shared
dispositive power with respect to all 484,900 shares. WMC is the parent
holding company of Wellington Trust Company, NA, a bank as defined in
Section 3(a)(6) of the Securities Exchange Act of 1934.
(J) The following information is obtained solely from a Form 13G filing
prepared by Bank One Corp. ("Bank One"). Bank One is deemed to have
beneficial ownership of these shares as a result of its capacity as a
parent holding company for certain investment advisory companies. Bank One
has sole voting power with respect to all 424,100 shares and sole
dispositive power with respect to 421,200 shares.
(K) The following information is obtained solely from a Form 13G filing
prepared by Gardner Lewis Asset Management, an investment adviser
registered under Section 203 of the Investment Advisers Act of 1940.
Gardner Lewis Asset Management has sole voting and dispositive power with
respect to all 407,000 shares.
(L) Includes 70,954 shares subject to options exercisable within 60 days of
March 31, 1999 and 5,230 shares held by Mr. Heimann's spouse.
(M) Includes 42,263 shares subject to options exercisable within 60 days of
March 31, 1999.
(N) Includes 20,840 shares subject to options exercisable within 60 days of
March 31, 1999.
(O) Includes 3,000 shares subject to options exercisable within 60 days of
March 31, 1999.
(P) Includes 171,011 shares subject to options exercisable within 60 days of
March 31, 1999 and 5,230 shares held by Mr. Heimann's spouse.
7
<PAGE>
EXECUTIVE OFFICERS
The following table identifies the current executive officers of the Company,
the positions they hold, and the year in which they began serving in their
respective capacities. Officers of the Company are elected by the Board of
Directors at the Annual Meeting to hold office until their successors are
elected and qualified.
<TABLE>
<CAPTION>
POSITION HELD
NAME AGE CURRENT POSITION(S) WITH COMPANY SINCE
- -------------------------- ------- ------------------------------------------------------- -----------------
<S> <C> <C> <C>
Sidney B. DeBoer 55 Chairman, Chief Executive Officer and Secretary 1968
M. L. Dick Heimann 55 President, Chief Operating Officer and Director 1970
R. Bradford Gray 47 Executive Vice President and Director 1995
Brian R. Neill 45 Senior Vice President and Chief Financial Officer 1995
</TABLE>
For information on the business background of Messrs. DeBoer, Heimann and Gray,
see "Election of Directors" above.
BRIAN R. NEILL. Mr. Neill has served as the Chief Financial Officer of the
Company since September 1995 and as Senior Vice President since 1997. Prior to
joining the Company, he served as the Senior Vice President and Chief of
Operations of Jackson Federal Bank in Medford, Oregon from 1977 to 1991. Mr.
Neill is a graduate of Northwest Christian College with a Bachelor of Science
degree in Management.
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows compensation paid to the Chief Executive Officer and
each of the three other executive officers who had total compensation during
1998 exceeding $100,000 (the "Named Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards
------------------------------------------------- ---------------
Other Securities
Annual Underlying
Name and Principal Position Year Salary Bonus (A) Compensation (B) Options (#)
- ------------------------------- --------- ------------ ----------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
Sidney B. DeBoer 1998 $371,700 $77,000 $9,809 12,000
Chairman, Chief Execu- 1997 $364,800 $4,689 $9,711 3,636
tive Officer and Secretary 1996 $344,550 $1,500 $7,282 68,500
M. L. Dick Heimann 1998 $298,875 $51,000 $4,456 12,000
President, Chief Operat- 1997 $273,000 $1,996 $7,262 3,636
ing Officer and Director 1996 $273,000 $1,500 $5,842 68,500
R. Bradford Gray 1998 $263,000 $48,660 $6,617 8,000
Executive Vice President 1997 $238,000 $3,898 $6,795 2,909
And Director 1996 $196,000 $3,851 $6,426 68,500
Brian R. Neill 1998 $94,500 $25,300 $6,023 4,000
Senior Vice President 1997 $83,500 $200 $5,098 727
and Chief Financial Officer 1996 $63,500 $150 $988 54,800
</TABLE>
8
<PAGE>
(A) Includes a "years of service bonus" of $1,500 in 1996 and $1,000 in 1997
and 1998 for each of the Named Executive Officers. All full-time employees
are entitled to an annual "years of service bonus" equal to $150 per year
in 1996 and $100 per year in 1997 and 1998 for each year of employment
(maximum of $1,500 in 1996 and $1,000 in 1997 and 1998) for undergoing a
physical and other health counseling.
(B) Includes an automobile allowance and Company contributions to employees'
401(k) account.
STOCK OPTIONS
The following table contains information concerning the grant of stock options
under the Company's 1996 Stock Incentive Plan (the "Plan") to the Named
Executive Officers in 1998.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential
Individual Grants (A) Realizable Value
----------------------------------------------------------------- At Assumed Annual
Number of % of Total Rates of Stock Price
Securities Options Appreciation for
Underlying Granted to Option Term (B)
Options Employees in Exercise Expiration --------------------------
Name Granted Fiscal Year Price ($/Sh.) Date 5% 10%
- ---- ------- ----------- ------------- ----- --- ---
<S> <C> <C> <C> <C> <C> <C>
Sidney B. DeBoer 12,000 7.7% $16.23 01/01/03 $31,202 $ 90,360
M. L. Dick Heimann 12,000 7.7% $16.23 01/01/03 $31,202 $ 90,360
R. Bradford Gray 8,000 5.2% $14.75 01/01/06 $56,340 $134,943
Brian R. Neill 4,000 2.6% $14.75 01/01/06 $28,170 $ 67,472
</TABLE>
- -----------------
(A) Options granted to Messrs. DeBoer and Heimann in 1998 vest as to 50% on the
first anniversary of the date of grant and as to an additional 50% on the
second anniversary thereof and have a term of 5 years. Mr. Gray's options
vest as to 1,221 shares on December 31, 2002 and 6,779 shares on January 1,
2003 and expire 8 years from the date of grant. Mr. Neill's options vest
100% on January 1, 2003 and expire 8 years from the date of grant. The
market value of the underlying securities on the date of grant was $14.75.
(B) These calculations are based on certain assumed annual rates of
appreciation as prescribed by rules adopted by the Securities and Exchange
Commission requiring additional disclosure regarding executive
compensation. Under these rules, an assumption is made that the shares
underlying the stock options shown in this table could appreciate at rates
of 5% and 10% per annum on a compounded basis over the term of the stock
options. Actual gains, if any, on stock option exercises are dependent on
the future performance of the Company's Common Stock and overall stock
market conditions. There can be no assurance that amounts reflected in this
table will be achieved, or may not be exceeded.
9
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table provides information concerning the exercise of options
during 1998 and unexercised options held as of the end of the fiscal year, with
respect to the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Underlying
Number of Unexercised Value of Unexercised
Shares Options In-The-Money Options
Acquired Value At FY-End (#) At FY-End (A)
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sidney B. DeBoer - - 39,954 14,182 $529,809 $ 37,121
M. L. Dick Heimann - - 69,954 14,182 $925,086 $ 37,121
R. Bradford Gray - - 28,563 50,846 $387,326 $595,013
Brian R. Neill - - 13,990 24,987 $189,145 $290,748
</TABLE>
- -----------------
(A) Market value of the underlying securities at December 31, 1998 ($16.50 per
share), minus exercise price of the unexercised options.
BOARD REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors consists of Messrs. Becker,
Young and DeBoer. Messrs. Becker and Young are non-employee, outside directors
and are responsible for establishing compensation of officers who also serve on
the Board of Directors. The entire Board is responsible for reviewing and
providing feedback on non-director executive officer compensation.
COMPENSATION PHILOSOPHY AND POLICIES
The Company's philosophy is to structure executive officer compensation so that
it will attract, motivate and retain senior management by providing an
opportunity for competitive compensation based on performance. Executive officer
compensation includes competitive base salaries and long-term stock-based
incentive opportunities in the form of options exercisable to purchase the
Company's Class A Common Stock.
It is the policy of the Board that, to the extent possible, compensation will be
structured so that it meets the "performance-based" criteria as defined by
Section 162(m) of the Internal Revenue Code of 1986, as amended, and therefore
is not subject to federal income tax deduction limitations.
BASE SALARIES
Base salaries for the Named Executive Officers were determined by the Board
based on factors including, but not limited to, length of service, salaries for
comparable positions within the industry and Company performance.
ANNUAL BONUS
The Board of Directors adopted a formal bonus plan during 1998. Under the bonus
plan, the Compensation Committee establishes a bonus pool for each fiscal year
and makes bonus
10
<PAGE>
awards to individuals selected by the Chief Executive Officer. Award amounts
are determined on the basis of the achievement of both Company and individual
performance goals. Provision is made for the elimination or reduction of
awards for Company performance below a minimum level and for unsatisfactory
individual performance. The Compensation Committee has broad authority to
alter, amend or terminate the bonus plan. The Company has the option of
paying the bonus in cash, stock or stock options. The Named Executive
Officers received cash bonuses related to 1998 performance ranging between
$25,000 and $76,000.
During 1998, the Company also provided a "years of service bonus" of up to
$1,000 for each of the Named Executive Officers. At the discretion of the Board,
all full-time employees are eligible for an annual "years of service bonus"
equal to $100 per year for each year of employment (maximum of $1,000).
401(k) PLAN
The Company maintains a 401(k) plan, which covers substantially all eligible
full-time employees. Any Company contribution to the 401(k) plan is at the
discretion of the Board of Directors. Messrs. DeBoer, Heimann and Gray each
received a Company contribution of $2,000 and Mr. Neill received a Company
contribution of $1,921 under this 401(k) plan during 1998.
EMPLOYEE STOCK PURCHASE PLAN
The Company maintains an Employee Stock Purchase Plan, which covers
substantially all eligible full-time employees. Mr. DeBoer, Mr. Heimann and Mr.
Gray are not currently eligible to participate in the Employee Stock Purchase
Plan since employees who control 5% or more of the total voting power of all
classes of the Company's stock are not eligible.
STOCK OPTION AWARDS FOR 1998
The Company's 1996 Stock Incentive Plan provides for the issuance of incentive
and/or nonqualified stock options to officers and employees of the Company to
purchase shares of the Company's Class A Common Stock. See "Option Grants in
Last Fiscal Year" table for a summary of options granted to the Named Executive
Officers during 1998.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. DeBoer's 1998 base salary of $371,700, annual bonus of $77,000 and other
annual compensation of $9,809 were determined in the same manner as the other
executives as described above.
SUBMITTED BY:
Thomas Becker
William J. Young
INDEPENDENT ACCOUNTANTS
A representative of KPMG Peat Marwick LLP is expected to be present at the
Annual Meeting. The representative will be given the opportunity to make a
statement on behalf of the firm if such representative so desires, and will be
available to respond to appropriate shareholder questions. KPMG Peat Marwick LLP
was the Company's independent accountant for the year ended December 31, 1998.
11
<PAGE>
STOCK PERFORMANCE GRAPH
The SEC requires that registrants include in their information statement a
line-graph presentation comparing cumulative five-year shareholder returns on an
indexed basis, assuming a $100 initial investment and reinvestment of dividends,
of (a) the registrant, (b) a broad-based equity market index and (c) an
industry-specific index or a registrant-constructed peer group index. The
broad-based market index used is the Russell 2000. In the prior year, the
Company used the Nasdaq Stock Market U.S. Total Return Index as its broad based
market index, but chose to change since, beginning January 1999, the Company is
no longer traded on the Nasdaq National Market, but on the New York Stock
Exchange. The peer group index used is composed of Cross Continent Auto
Retailers, United Auto Group, Inc., Republic Industries, Inc., Sonic Automotive,
Inc. and Group 1 Automotive, Inc., the only other publicly traded automobile
dealerships in the United States as of December 31, 1998 that are of comparable
size to the Company. The peer group index used utilizes the same methods of
presentation and assumptions for the total return calculation as the Company,
the Russell 2000 and the Nasdaq U.S. Index. All companies in the peer group
index are weighted in accordance with their market capitalizations.
<TABLE>
<CAPTION>
Annual Percentage Return
Year Ended
----------------------------------------------
Company/Index 12/31/96 (1) 12/31/97 12/31/98
- ------------------------------ ------------ ------------- ------------
<S> <C> <C> <C>
Lithia Motors, Inc. 1.18 32.52 11.87
Russell 2000 5.20 22.57 1.56
Nasdaq U.S. Index (0.09) 23.61 39.20
Peer Group Index 0.41 (26.58) (30.18)
Indexed Returns
Base Year Ended
Period ----------------------------------------
Company/Index 12/18/96 12/31/96 12/31/97 12/31/98
- ------------------------------ ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Lithia Motors, Inc. $100.00 $101.18 $134.09 $150.00
Russell 2000 100.00 105.20 128.73 125.45
Nasdaq U.S. Index 100.00 99.91 122.60 172.05
Peer Group Index 100.00 100.41 73.72 51.47
</TABLE>
(1) Represents return from December 18, 1996, the date the Company began
trading, through December 31, 1996.
12
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LEASE AND PURCHASE OF REAL ESTATE FROM LITHIA PROPERTIES
Several of the parcels of real property on which the Company's businesses are
located are owned by Lithia Properties, the members of which are the Company
(20%), Sidney B. DeBoer (35%), M. L. Dick Heimann (30%) and three of Mr.
DeBoer's children, who own 5% each. The Company and the affiliated entities paid
an aggregate of $1.46 million in lease payments to Lithia Properties during the
year ended December 31, 1998.
The Company and Lithia Properties have entered into lease agreements with
respect to each facility, effective January 1, 1997. The leases have terms of 30
years and have aggregate annual lease payments of $1.55 million in 1999. The
Company is also responsible for property taxes, insurance and maintenance
expenses. The lease payments were originally determined in January 1997 by a
formula, which set the monthly payment at 0.83% of the fair market value of the
properties according to independent appraisals. Lease payments are paid monthly
and are adjusted each year beginning January 1998 to an amount equal to any
increase in the cost of living based on the Consumer Price Index entitled U.S.
CITY AVERAGE - ALL ITEMS FOR ALL URBAN CONSUMERS (base year 1982-84 = 100)
published by the Bureau of Labor Statistics of the U.S. Department of Labor.
Lithia Properties retained Mark DeBoer Construction, Inc. to perform certain
remodeling to some of Lithia Properties' facilities. Mark DeBoer, the owner of
Mark DeBoer Construction, Inc., is the son of Sidney B. DeBoer and is one of the
members of Lithia Properties. The general contractor fee was $821,000 in 1998,
an arrangement the Company believes is fair in comparison with fees negotiated
with independent third parties.
The Company has generally chosen to lease its facilities in the past. It may
continue this practice in the future and assign any rights it acquires to
purchase real estate in connection with the acquisition of dealerships to Lithia
Properties or others. No future transfers to or leases with Lithia Properties
will be undertaken without the unanimous approval of the independent directors
on the Company's Board of Directors and a determination by such independent
directors that such transactions are the equivalent of a negotiated arm's-length
transaction with a third party.
In September 1998, the Company loaned Mr. Neill, the Company's Chief Financial
Officer, $160,000 with interest at 8.75 percent. Principal and interest are due
in full in September 1999. The loan is secured by equity securities and real
estate owned by Mr. Neill.
GUARANTEE OF LITHIA PROPERTIES INDEBTEDNESS; SHORT-TERM LOAN FROM LITHIA
PROPERTIES
The Company has guaranteed and has committed to guarantee certain indebtedness
of Lithia Properties incurred in connection with the purchase or refinancing of
real property which secures mortgage loans. All of the properties securing these
loans are occupied by the Company under long-term leases with Lithia Properties.
The loans have a total outstanding principal balance of approximately $9.2
million with interest rates from 8.67% to 10.5% and remaining terms of from one
to 11 years.
13
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the 1934 Act requires the Company's directors and executive
officers and persons who own more than ten percent of the outstanding shares of
the Company's Common Stock ("ten percent shareholders"), to file with the SEC
initial reports of beneficial ownership and reports of changes in beneficial
ownership of shares of Common Stock and other equity securities of the Company.
To the Company's knowledge, based solely on review of the copies of such reports
furnished to the Company or otherwise in its files and on written
representations from its directors, executive officers and ten percent
shareholders that no other reports were required, during the fiscal year ended
December 31, 1998, the Company's officers, directors and ten percent
shareholders complied with all applicable Section 16(a) filing requirements,
except that Dorothy Crockett, an officer of the Company, filed one late report
on Form 4 relating to one stock option exercise transaction and Sidney B.
DeBoer, an officer and director of the Company, filed one late report on Form 5
relating to two transactions in which he gifted shares of the Company's Class B
Common Stock.
OTHER BUSINESS
The Company knows of no other business to be conducted at the meeting.
SHAREHOLDER PROPOSALS
Proposals of Shareholders intended to be presented by such Shareholders at next
year's Annual meeting must be received by the Company at its principal office no
later than December 27, 1999 and must satisfy the conditions established by the
Securities and Exchange Commission for shareholder proposals to be included in
the Company's proxy statement for that meeting.
FORM 10-K
The Company will provide, without charge, on the written request of any
beneficial owner of shares of the Company's Common Stock a copy of the Company's
Annual report on Form 10-K as filed with the Securities and Exchange Commission
for the Company's fiscal year ended December 31, 1998. Written requests should
be mailed to the Secretary, Lithia Motors, Inc., 360 E. Jackson Street, Medford,
Oregon 97501.
By Order of the Board of Directors:
SIDNEY B. DeBOER
CHAIRMAN, CHIEF EXECUTIVE
OFFICER AND SECRETARY
Dated: April 25, 1999
14
<PAGE>
APPENDIX A
1996 STOCK INCENTIVE PLAN SUMMARY
GENERAL
In April 1996, the Board and the Company's shareholders adopted the Company's
1996 Stock Incentive Plan (the "Plan"). The Plan provides for the granting of
stock-based awards ("Awards") to executive officers (including those who are
directors), to other employees and to non-employee consultants of the Company.
Such Awards may take any form approved by the Board or by a committee designated
by the Board, including stock options, stock bonuses, stock appreciation rights
and restricted stock awards. Stock options granted under the Plan may be either
options that qualify as "incentive stock options," within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended ("ISOs"), or those that do
not qualify as such "incentive stock options" ("NQSOs"). The Plan, which permits
up to 1,085,000 shares of the Company's Class A Common Stock to be issued,
terminates on April 4, 2006. As of March 31, 1999, Incentive and Non-Qualified
Options with respect to a total of 557,855 shares of Class A Common Stock were
outstanding, and Options covering 91,263 shares of the Company's Class A Common
Stock have been exercised. An additional 435,882 shares are available for
issuance under the Plan. As of March 31, 1999, options with respect to 234,387
shares were exercisable. The Board has approved an amendment to the Plan to
increase the number of shares under the Plan by 615,000 shares to a total of
1,700,000 shares, subject to shareholder approval. At March 31, 1999, four
officers, two outside directors and 34 other employees were eligible to
participate in the Plan.
ADMINISTRATION
The Plan is administered by the Compensation Committee of the Board. Subject to
the terms of the Plan, the Compensation Committee determines the persons to whom
Awards are granted and the terms and the number of shares covered by each Award.
The term of each option may not exceed ten years from the date the option is
granted, or five years in the case of an incentive stock option granted to a
holder of more than 10% of the fully-diluted capital stock of the Company.
Options may become exercisable in whole at grant or in installments over time,
as determined by the Committee.
TERMINATION
With respect to the stock options granted by the Company to date, such options
generally expire when the optionee ceases to be affiliated with the Company.
Options may not be transferred other than by will or the laws of descent and
distribution, and during the lifetime of an optionee may be exercised only by
the optionee.
VESTING
Awards under the Plan generally vest over a five-year period. The Plan provides,
however, that any Award may contain, at the discretion of the Committee, a
provision conditioning or accelerating the receipt of benefits pursuant to such
Award upon the occurrence of specified events, including continued employment by
the Company, a change in control, merger, dissolution or liquidation of the
Company or the sale of substantially all of the Company's assets. The
acceleration of vesting of Awards in the event of a merger or other similar
event
A-1
<PAGE>
may be seen as an anti-takeover provision and may have the effect of
discouraging a proposal for merger, a takeover attempt or other efforts to gain
control of the Company.
MEANS OF EXERCISING OPTIONS
Under the terms of the stock options issued to date, payment upon the exercise
of an option may be in cash, by check or by delivery of shares of Class A Common
Stock with a "fair market value," as defined in the Plan, equal to the aggregate
exercise price.
MINIMUM OPTION PRICE
The exercise prices of ISOs under the Program must equal or exceed the fair
market value of the Common Stock on the date of grant (110% of the fair market
value in the case of employees who holds 10% or more of the voting power of the
Common Stock (a "10% Stockholder")).
DURATION OF OPTIONS
Subject to earlier termination of the option as a result of termination of
employment, death or disability, each option granted under the Plan shall expire
on the date specified by the Compensation Committee, but in no event more than
(i) ten years and one day from the date of grant in the case of NQSOs, (ii) ten
years from the date of grant in the case of ISOs generally, and (iii) five years
from the date of grant in the case of ISOs granted to a 10% Stockholder. Awards
generally terminate eight to ten years from the date of grant.
FEDERAL TAX EFFECTS OF ISOS
The Company intends that ISOs granted under the Plan will qualify as incentive
stock options under Section 422 of the Internal Revenue Code of 1986, as
amended. An optionee acquiring stock pursuant to an ISO receives favorable tax
treatment in that the optionee does not recognize any taxable income at the time
of the grant of the ISO or upon exercise. The tax treatment of the disposition
of ISO stock depends upon whether the stock is disposed of within the holding
period, which is the later of two years from the date the ISO is granted or one
year from the date the ISO is exercised. If the optionee disposes of ISO stock
after completion of the holding period, the optionee will recognize as capital
gains income the difference between the amount received in such disposition and
the basis in the ISO stock, i.e. the option's exercise price. If the optionee
disposes of ISO stock before the holding period expires, it is considered a
disqualifying disposition and the optionee must recognize the gain on the
disposition as ordinary income in the year of the disqualifying disposition.
Generally, the gain is equal to the difference between the option's exercise
price and the stock's fair market value at the time the option is exercised and
sold (the "bargain purchase element"). While the exercise of an ISO does not
result in taxable income, there are implications with regard to the alternative
minimum tax ("AMT"). When calculating income for AMT purposes, the favorable tax
treatment granted ISOs is
A-2
<PAGE>
disregarded and the bargain purchase element of the ISO will be considered as
part of AMT income. Just as the optionee does not recognize any taxable income
on the grant or exercise of an ISO, the Company is not entitled to a deduction
on the grant or exercise of an ISO. Upon a disqualifying disposition of ISO
stock, the Company may deduct from taxable income in the year of the
disqualifying disposition an amount generally equal to the amount that the
optionee recognizes as ordinary income due to the disqualifying disposition.
FEDERAL TAX EFFECTS OF NQSOS
If an option does not meet the statutory requirements of Section 422 of the
Internal Revenue Code and therefore does not qualify as an ISO, the difference,
if any, between the option's exercise price and the fair market value of the
stock on the date the option is exercised is considered compensation and is
taxable as ordinary income to the optionee in the year the option is exercised,
and is deductible by the Company for federal income tax purposes in such year.
Although an optionee will generally realize ordinary income at the time the NQSO
is exercised, if the stock issued upon exercise of the option is considered
subject to a "substantial risk of forfeiture" and no "Section 83 Election" has
been filed, then the optionee is not taxed when the option is exercised, but
rather when the forfeiture restriction lapses. At that time, the optionee will
realize ordinary income in an amount equal to the difference between the
option's exercise price and the fair market value of the stock on the date the
forfeiture restriction lapses.
The foregoing summary of federal income tax consequences of stock options does
not purport to be complete, nor does it discuss the provisions of the income tax
laws of any state or foreign country in which the optionee resides.
FUTURE STOCK OPTION COMMITMENTS
The Company is contractually committed to grant stock options to certain key
employees of the Moreland Automotive Group pursuant to the terms of the
Agreements and Plans of Reorganization (the "Agreements"). These stock options
will be granted in accordance with the terms of the Plan. The Company is
required to grant stock options in an amount equal to six percent of the total
number of shares of Class A Common Stock issued or issuable under the terms of
the Agreements. The stock options must be granted in the years 1999 and 2000.
Because the exact number of shares of Class A Common Stock issuable is dependent
upon, in part, the share price at a future date, the Company can not determine
the specific number of stock options which would be granted following completion
of the Agreements at this time. The Company estimates that the total number of
stock options to be granted pursuant to the Agreements will be approximately
115,000 shares.
A-3
<PAGE>
NEW PLAN BENEFITS TABLE
1996 PLAN
The following options have been granted under the Company's 1996 Plan from
January 1, 1999 through March 31, 1999:
<TABLE>
<CAPTION>
NAME AND POSITION NUMBER OF UNITS (A)
- ----------------- -------------------
<S> <C>
Sidney B. DeBoer, Chairman, Chief Executive Officer and Secretary 12,000
M. L. Dick Heimann, President, Chief Operating Officer and Director 12,000
R. Bradford Gray, Executive Vice President 8,000
Brian R. Neill, Senior Vice President and Chief Financial Officer 4,000
Thomas Becker, Director --
William J. Young, Director --
All Current Executive Officers as a Group (4 people) 36,000
All Non-Executive Officer Directors as a Group (2 people) --
All Non-Executive Officer Employees as a Group (1,846 people) 14,600
</TABLE>
- --------------------------
(A) Such options were granted at an exercise price per share that is equal to
the fair market value (110% of fair market value for Messrs. DeBoer and
Heimann) of the Company's Class A Common Stock on the date of grant. The
average per share exercise price of all option grants included in the above
table is $17.28. Options granted vest over two to five-year periods and
expire five to ten years from the date of grant. Option grants under the
1996 Plan are discretionary and therefore, grants for the remainder of 1999
or thereafter cannot be determined.
A-4
<PAGE>
LITHIA MOTORS, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 20, 1999
The undersigned hereby names, constitutes and appoints Sidney B. DeBoer and
M. L. Dick Heimann, or either of them acting in absence of the other, with full
power of substitution, my true and lawful attorneys and Proxies for me and in my
place and stead to attend the Annual Meeting of the Shareholders of Lithia
Motors, Inc. (the "Company") to be held at 4:00 p.m. on Thursday, May 20, 1999,
and at any adjournment thereof, and to vote all the shares of Common Stock held
of record in the name of the undersigned on March 31, 1999, with all the powers
that the undersigned would possess if he were personally present.
<TABLE>
<S> <C> <C> <C>
1. PROPOSAL 1 / /FOR / /WITHHOLD AUTHORITY
ELECTION OF DIRECTORS all nominees listed below to vote for all nominees
listed below
</TABLE>
To withhold authority to vote for any individual nominee, strike a line through
the nominee's name in the list below:
SIDNEY B. DEBOER M. L. DICK HEIMANN THOMAS BECKER R. BRADFORD GRAY WILLIAM
J. YOUNG
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF
THE NOMINEES NAMED ABOVE.
2. PROPOSAL 2 TO APPROVE AN AMENDMENT TO THE LITHIA MOTORS, INC. 1996 STOCK
INCENTIVE PLAN.
FOR PROPOSAL 2 / / AGAINST PROPOSAL 2 / / ABSTAIN ON PROPOSAL 2 / /
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
APPROVAL OF PROPOSAL 2
<PAGE>
3. Upon such other matters as may properly come before, or incident to the
conduct of the Annual Meeting, the Proxy holders shall vote in such manner
as they determine to be in the best interests of the Company. Management is
not presently aware of any such matters to be presented for action at the
meeting.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY. IF NO SPECIFIC
DIRECTION IS GIVEN AS TO ANY OF THE ABOVE ITEMS, THIS PROXY WILL BE VOTED FOR
EACH OF
THE NOMINEES NAMED IN PROPOSAL 1 AND FOR PROPOSAL 2.
Signature(s) ______________________
Dated _______________________, 1999
NOTE: Please sign as name appears
hereon. Joint owners should each
sign. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title as
such.
I do / / do not / / plan to attend
the meeting. (Please check)
The shareholder signed above
reserves the right to revoke this
Proxy at any time prior to its
exercise by written notice
delivered to the Company's
Secretary at the Company's
corporate offices at 360 E. Jackson
Street, Medford, Oregon 97501,
prior to the Annual Meeting. The
power of the Proxy holders shall
also be suspended if the
shareholder signed above appears at
the Annual Meeting and elects in
writing to vote in person.
