Material Agreement, Financial Obligation (Form 8-K)

Item 1.01. Entry Into a Material Definitive Agreement

Indenture and 5.500% Senior Notes due 2030

On September 10, 2025, Lithia Motors, Inc. (the "Company") completed a private offering (the "Offering") of $600 million aggregate principal amount of its 5.500% Senior Notes due 2030 (the "Senior Notes") that was exempt from the registration requirements of the Securities Act of 1933, as amended.

The Company intends to use the net proceeds of the Offering to repay a portion of the borrowings outstanding under its revolving lines of credit. Such amounts may be reborrowed and used for general corporate purposes, including acquisitions and working capital.

The Senior Notes were issued pursuant to an indenture dated as of September 10, 2025 (the "Indenture"), among the Company, U.S. Bank Trust Company, National Association, as trustee (the "Trustee"), and the subsidiary guarantors named therein (the "Guarantors"). The Senior Notes will be unconditionally guaranteed (the "Guarantees") on a senior unsecured basis by each subsidiary that is a borrower under or that guarantees obligations under the Company's U.S. Bank credit facility or certain other capital markets indebtedness of the Company or any Guarantor.

The Senior Notes and the Guarantees will be the Company's and the Guarantors' senior unsecured obligations, will rank pari passu in right of payment with all of the Company's and the Guarantors' existing and future senior indebtedness, be effectively subordinated to any of the Company's and the Guarantors' existing and future secured debt (including obligations under the Company's credit facilities, manufacturer floor plan facilities and mortgage loans), to the extent of the value of the assets securing such debt, rank senior in right of payment to all of the Company's and the Guarantors' existing and future subordinated obligations and be structurally subordinated to all of the existing and future liabilities (including trade payables and the Company's securitization facilities) of each of the Company's subsidiaries that do not guarantee the Senior Notes (including the Company's existing and any future securitization subsidiaries).

The Senior Notes will bear interest from September 10, 2025 at an annual rate of 5.500%, payable semi-annually on each April 1 and October 1 during which the Senior Notes are outstanding, commencing on April 1, 2026. The Senior Notes will mature on October 1, 2030. The Company may redeem some or all of the Senior Notes at any time on or after October 1, 2027, at the redemption prices set forth in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. Prior to October 1, 2027, the Company may redeem up to 40% of the aggregate principal amount of the Senior Notes (including any additional notes) with funds in an aggregate amount up to the net cash proceeds of certain equity offerings at a redemption price equal to 105.500% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, at any time prior to October 1, 2027, the Company may redeem some or all of the Senior Notes at a price equal to 100% of the principal amount, plus a "make-whole" premium, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

The terms of the Indenture, among other things, limit the ability of the Company and its subsidiaries to (i) engage in sale and leaseback transactions, (ii) incur liens, (iii) guarantee other indebtedness without also guaranteeing the Senior Notes and (iv) consolidate, merge or sell all or substantially all of the Company's assets. These covenants are subject to a number of important exceptions and qualifications. The Indenture provides for customary events of default which include, among other things, (subject in certain cases to customary grace and cure periods) defaults based on: (i) the failure to make payments under the Indenture when due, (ii) breach of covenants, (iii) acceleration of other material indebtedness, (iv) bankruptcy or insolvency events and (v) material judgments. Generally, if an event of default occurs, the trustee or the holders of at least 30% in principal amount of the then outstanding Senior Notes may declare all of the Senior Notes to be due and payable, or, in certain circumstances, the Senior Notes automatically will become due and payable immediately.

The Trustee and its affiliates maintain relationships in the ordinary course of business with the Company and its subsidiaries, including the provision of commercial banking, investment banking, trustee and/or other financial services.

A copy of the Indenture is set forth as Exhibit 4.1 to this Current Report on Form 8-K, and is incorporated herein by reference. The descriptions of the Indenture and the Senior Notes (a form of which is attached as an exhibit to the Indenture) in this report are only summaries and are qualified in their entirety by reference to the actual terms of the Indenture and the Senior Notes, respectively.

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

The information set forth above under Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.03.