Lithia Motors Inc. has adopted a golden-parachute plan to protect four top executives in the event of a takeover or merger.
Lithia filed the plan with the Securities and Exchange Commission last month as the retailers stock traded at historic lows.
For months, the depressed stock price had prompted rumors that Lithia is ripe for a takeover. Lithia has not received any offers, CEO Sid DeBoer told Automotive News today.
Under the plan, DeBoer and his two sons -- Bryan DeBoer, president, and Jeff DeBoer, senior vice president -- would receive twice their base salary if they are fired after a takeover. The severance pay would be based on the highest annual salary during the two years preceding the termination date.
Vice Chairman Dick Heimann would receive twice his base salary for the year in which termination occurs.
The executives will receive the severance pay in 24 monthly payments after their termination and will receive up to two years of health benefits.
Sometimes controversial, such plans are typical for executives at many publicly traded companies to help fend off hostile takeovers.
Lithias stock price plunged to just above $2 last month and now is trading at $3.80. Lithia started trading its stock in 1996 at $11.50 a share. The stock peaked at $30 in March 2006.
Separately, Lithia on Monday said its board voted to suspend its quarterly dividend for the fourth quarter of 2008 because of the economic slump. The retailer slashed its third-quarter dividend to 5 cents a share from 14 cents per share in the first and second quarters of 2008.
The retailer has reported quarterly net losses since the fourth quarter of 2007. The company last year launched a plan to restructure its operations and shed 29 under-performing dealerships. Lithia sells 27 brands at 98 stores in 13 states.
Lithia, of Medford, Ore., ranks No. 8 on the Automotive News list of the top 125 dealership groups in the United States, with new-vehicle sales of 63,607 in 2007.