Exhibit 10.39
FIRST AMENDMENT TO THE EMPLOYMENT AGREEMENT
DATED EFFECTIVE AS OF APRIL 9, 2005, BETWEEN
GROUP 1 AUTOMOTIVE, INC. AND EARL J. HESTERBERG
     THIS FIRST AMENDMENT (the “First Amendment”) to the Employment Agreement
dated effective as of April 9, 2005, between Group 1 Automotive, Inc., and Earl
J. Hesterberg (the “Employment Agreement”), is entered into, effective as of
November 8, 2007, by and between Group 1 Automotive, Inc., a Delaware
corporation (the “Employer”), and Earl J. Hesterberg (the “Employee”).
RECITALS
     WHEREAS, the Employer and the Employee desire to amend the Employment
Agreement to comply with section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”);
     WHEREAS, the Employer and the Employee desire all severance amounts payable
pursuant to the Employment Agreement to be paid in a lump sum to the Employee;
     WHEREAS, the Employer and the Employee desire all severance amounts payable
pursuant to the Employment Agreement to be delayed for six months following the
termination of the employment relationship; and
     WHEREAS, any capitalized term used herein, and not otherwise defined
herein, shall have the meaning set forth in the Employment Agreement.
     NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements set forth below, the parties hereto agree as follows:
     1. Section 2.3 of the Employment Agreement shall be amended and restated in
its entirety as follows:
Employee’s bonus for the first twelve (12) months of the Term shall be
$1,000,000 earned and payable on the first anniversary of the Start Date if
Employee is then employed by the Employer and shall be in lieu of participation
in Employer’s Annual Incentive Compensation Program. Employee’s bonus for the
second twelve (12) months of the Term shall be at least $510,000 (of which
$350,000 shall be payable following the end of Employer’s 2006 fiscal year and
the remainder of which will be payable following Employer’s 2007 fiscal year,
provided that Employee is employed by the Employer at the time of each
individual scheduled payment) in accordance with Employer’s Annual Incentive
Compensation Program. All subsequent bonus awards shall be determined by the
compensation committee of the Board (the “Compensation Committee”) in its sole
discretion in accordance with the terms of Employer’s Annual Incentive
Compensation Program, and any subsequent payments made pursuant to the Annual
Incentive Compensation Program shall be made on or before March 15th

 

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of the year following the year in which the services giving rise to such bonus
award were performed.
     2. Section 2.6 of the Employment Agreement shall be amended and restated in
its entirety as follows:
Employee shall be entitled to incur, and be reimbursed for, all reasonable
out-of-pocket business expenses incurred in the performance of Employee’s duties
on behalf of Employer. Employer shall reimburse Employee for such expenses, in
accordance with Employer’s policies regarding reimbursement of expenses (which
Employer’s reimbursement policies will comply with Treasury Regulation §
1.409A-3(i)(1)(iv)), subject to the Employee presenting appropriate supporting
documents regarding such expenses as required by Employer’s policies.
     3. Section 3.5 of the Employment Agreement shall be amended and restated in
its entirety as follows:
Upon an Involuntary Termination of the employment relationship during the Term
by Employer pursuant to Section 3.2(ii), or by Employee pursuant to
Section 3.3(i), Employee shall be entitled, in consideration of Employee’s
continuing obligations hereunder after such termination (including, without
limitation, Employee’s non-competition obligations), to receive a payment in an
amount equal to Employee’s base salary determined pursuant to Section 2.1 and in
effect immediately prior to the Involuntary Termination, divided by twelve
(12) and multiplied by the lesser of (i) twenty-four (24) months or (ii) the
number of months remaining in the Term, payable in a single lump sum payment on
the first day of the seventh month following the Employee’s “separation from
service” (within the meaning of Treasury Regulation § 1.409A-1(h)) with the
Employer (“Separation from Service”), but Employee shall not be entitled to any
bonuses with respect to the operations of Employer, its subsidiaries and/or
affiliates for the calendar year in which Employee’s employment with Employer is
terminated.
Upon an Involuntary Termination of the employment relationship by Employee
pursuant to Section 3.3(ii), Employee shall be entitled, in consideration of
Employee’s continuing obligations hereunder after such termination (including,
without limitation, Employee’s non-competition obligations), to receive in a
single lump sum payment on the first day of the seventh month following the
Employee’s Separation from Service, a payment in an amount equal to Employee’s
base salary determined pursuant to Section 2.1 and in effect immediately prior
to the Involuntary Termination, divided by twelve (12) and multiplied by the
lesser of (i) twenty-four (24) months or (ii) the number of months remaining in
the Term. In the event of an Involuntary Termination pursuant to
Sections 3.2(ii), 3.3(i) or 3.3(ii), all Restricted Stock and stock options
granted to Employee under Section 2.4 shall, subject to the conditions stated in
Section 2.4.4, become 100% vested, the exercise of which shall continue to be
permitted as if Employee’s employment had continued for the full Term of this
Agreement, but Employee shall not be entitled to any bonuses with respect to the

 

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operations of Employer, its subsidiaries and/or affiliates for the calendar year
in which Employee’s employment with Employer is terminated. Employee shall not
be under any duty or obligation to seek or accept other employment following
Involuntary Termination and the amounts due Employee hereunder shall not be
reduced or suspended if Employee accepts subsequent employment. As noted in
Section 2.4.4, the rights and liabilities of Employer and Employee regarding
entitlement to continuation of all such compensation and vesting of all such
Restricted Stock and stock options, shall be conditioned and dependent on the
Employee’s consent and agreement to the promises set forth in Sections 5 and 6
of this Agreement and to the enforceability of such covenants stated therein.
If it shall be determined that any payment or distribution by the Employer to or
for the benefit of the Employee, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, would be
subject to the excise tax imposed by the Section 4999 of the Internal Revenue
Code of 1986, as amended (the “Code”), or any interest or penalties are incurred
by the Employee with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
“Excise Tax”), then the Employer shall pay to the Employee an amount equal to
the Excise Tax within the first sixty (60) days of the calendar year in which
the Employee will file his Federal income tax return for the payment or
distribution giving rise to such Excise Tax; provided, Employer shall not be
required to pay taxes that result from such Excise Tax payment. Employee’s
rights and remedies under this Section 3.5 shall be Employee’s sole and
exclusive rights and remedies against Employer or its subsidiaries or affiliates
concerning Employee’s employment and termination from Employer, and Employer’s
and its subsidiaries’ and affiliates’ sole and exclusive liability to Employee
under this Agreement, in contract, tort, or otherwise, for any Involuntary
Termination of the employment relationship or concerning Employee’s employment
and termination from Employer.
     4. Section 3.9 of the Employment Agreement shall be amended and restated in
its entirety as follows:
In all cases, the compensation and benefits payable to Employee under this
Agreement upon Separation from Service shall be reduced and offset by any
amounts to which Employee may otherwise be entitled under any and all severance
plans (excluding any pension, retirement and profit sharing plans of Employer
that may be in effect from time to time) or policies of Employer or its
subsidiaries or affiliates or any successor to all or a portion of the business
or assets of Employer (“Other Severance”); provided, however, in the event this
Section 3.9 would result in a substitution for a payment of deferred
compensation otherwise payable pursuant to this Agreement within the meaning of
Treasury Regulation § 1.409A-3(f) and an impermissible change in the timing of
the payment of deferred compensation pursuant to § 409A of the Code and the
guidance promulgated pursuant thereto, then no amounts payable pursuant to this

 

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Agreement will be reduced and instead such Other Severance to which the Employee
would be entitled shall be forfeited.
     IN WITNESS WHEREOF, the parties have executed this First Amendment as of
the date set forth below, to be effective as of the first date written above.

            THE EMPLOYER:

GROUP 1 AUTOMOTIVE, INC.
      By:   /s/ Darryl M. Burman         Name:   Darryl M. Burman       
Title:   Vice President & General Counsel         Date:   November 8, 2007     
  EMPLOYEE:
      By:   /s/ Earl J. Hesterberg         Name:   Earl J. Hesterberg,
Individually        Date:  November 8, 2007