Exhibit 10.3
PERFORMANCE-BASED RESTRICTED STOCK AGREEMENT
     THIS PERFORMANCE-BASED RESTRICTED STOCK AGREEMENT (this “Agreement”) is
made as of the effective date set forth on the attached notice of grant (the
“Grant Notice”), between GROUP 1 AUTOMOTIVE, INC., a Delaware corporation (the
“Company”), and the employee set forth on the Grant Notice (“Employee”).
     1. Award. Pursuant to the GROUP 1 AUTOMOTIVE, INC. 1996 STOCK INCENTIVE
PLAN, as amended (the “Plan”), the number of shares (the “Restricted Shares”) of
the Company’s common stock set forth in the Grant Notice shall be issued as
hereinafter provided in Employee’s name subject to certain restrictions thereon.
The Restricted Shares shall be issued upon acceptance hereof by Employee (which
shall be demonstrated by Employee’s execution of the Grant Notice) and upon
satisfaction of the conditions of this Agreement and the Grant Notice. Employee
acknowledges receipt of a copy of the Plan, and agrees that this award of
Restricted Shares shall be subject to all of the terms and provisions of the
Plan, including future amendments thereto, if any, pursuant to the terms
thereof. In the event of any conflict between the terms of this Agreement and
the Plan, the Plan shall control. The Plan and the Grant Notice are incorporated
herein by reference as a part of this Agreement. Capitalized terms used but not
defined herein shall have the meanings attributed to such terms in the Plan.
     2. Restricted Shares. Employee hereby accepts the Restricted Shares when
issued and agrees with respect thereto as follows:
     (a) Forfeiture Restrictions. The Restricted Shares may not be sold,
assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered
or disposed of to the extent then subject to the Forfeiture Restrictions (as
hereinafter defined), and in the event of termination of Employee’s employment
with the Company for any reason other than death or Disability (as hereinafter
defined), Employee shall, for no consideration, forfeit to the Company all
Restricted Shares to the extent then subject to the Forfeiture Restrictions. The
prohibition against transfer and the obligation to forfeit and surrender
Restricted Shares to the Company upon termination of employment are herein
referred to as the “Forfeiture Restrictions.” The Forfeiture Restrictions shall
be binding upon and enforceable against any transferee of the Restricted Shares.
For purposes of this Agreement, the term “Disability” shall mean that Employee
has become disabled within the meaning of section 409A(a)(2)(C) of the Code and
applicable administrative authority thereunder.
     (b) Lapse of Forfeiture Restrictions. With respect to each Performance
Period (as defined on Exhibit A hereto, which Exhibit is fully incorporated
herein by this reference), the Forfeiture Restrictions shall lapse as to the
Restricted Shares in accordance with the performance-based vesting schedule set
forth on Exhibit A (the “Vesting Schedule”), provided that Employee has been
continuously employed by the Company from the date of this Agreement through the
date that the Committee certifies the results for such Performance Period. To
the extent that performance target(s) are not
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achieved in a particular Performance Period, if they are determined by the
Committee to be achieved on a cumulative basis with respect to such Performance
Period during any subsequent Performance Period during the Term, in accordance
with the provisions of Exhibit A, then the Forfeiture Restrictions shall lapse
as to the corresponding percentage of Restricted Shares set forth with respect
to such Performance Period on the Vesting Schedule. To the extent that the
performance target(s) with respect to any Performance Period(s) are not achieved
during the Term of this Agreement in accordance with the requirements of
Exhibit A, the corresponding percentage of Restricted Shares as set forth on the
Vesting Schedule with respect to such Performance Period(s) shall be forfeited
to the Company. The Company shall not issue fractional shares and shall round to
the nearest whole share when calculating vesting and lapsing of the Forfeiture
Restrictions. Notwithstanding the foregoing, the Forfeiture Restrictions shall
lapse as to all of the Restricted Shares then subject to the Forfeiture
Restrictions on the date Employee’s employment with the Company is terminated by
reason of death or Disability.
     (c) Certificates. A certificate evidencing the Restricted Shares shall be
issued by the Company in Employee’s name, pursuant to which Employee shall have
all of the rights of a stockholder of the Company with respect to the Restricted
Shares, including, without limitation, voting rights and the right to receive
dividends (provided, however, that dividends paid in shares of the Company’s
stock (“Stock Dividends”) shall be subject to the Forfeiture Restrictions).
Employee may not sell, transfer, pledge, exchange, hypothecate or otherwise
dispose of the Restricted Shares and any Stock Dividends thereon until the
Forfeiture Restrictions have expired and a breach of the terms of this Agreement
shall cause a forfeiture of the Restricted Shares and any Stock Dividends
thereon. The certificate shall be delivered upon issuance to the Secretary of
the Company or to such other depository as may be designated by the Committee as
a depository for safekeeping until the forfeiture of such Restricted Shares and
any Stock Dividends thereon occurs or the Forfeiture Restrictions lapse pursuant
to the terms of the Plan and this award. On the date of this Agreement, Employee
shall deliver to the Company a stock power, endorsed in blank, relating to the
Restricted Shares and any Stock Dividends thereon. As soon as practicable
following the lapse of the Forfeiture Restrictions without forfeiture as to any
portion of the Restricted Shares and any Stock Dividends thereon, the Company
shall cause a new certificate or certificates to be issued without legend
(except for any legend required pursuant to applicable securities laws or any
other agreement to which Employee is a party) in the name of Employee in
exchange for the certificate evidencing the Restricted Shares and any Stock
Dividends thereon. However, the Company, in its sole discretion, may elect to
deliver the certificate either in certificate form or electronically to a
brokerage account established for Employee’s benefit at a brokerage/financial
institution selected by the Company. Employee agrees to complete and sign any
documents and take additional action that the Company may request to enable it
to deliver the shares on Employee’s behalf.
     (d) Corporate Acts. The existence of the Restricted Shares shall not affect
in any way the right or power of the Board or the stockholders of the Company to
make or authorize any adjustment, recapitalization, reorganization or other
change in the Company’s capital structure or its business, any merger or
consolidation of the Company,
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any issue of debt or equity securities, the dissolution or liquidation of the
Company or any sale, lease, exchange or other disposition of all or any part of
its assets or business or any other corporate act or proceeding. The
prohibitions of Section 2(a) hereof shall not apply to the transfer of
Restricted Shares pursuant to a plan of reorganization of the Company, but the
stock, securities or other property received in exchange therefor shall also
become subject to the Forfeiture Restrictions and provisions governing the
lapsing of such Forfeiture Restrictions applicable to the original Restricted
Shares for all purposes of this Agreement and the certificates representing such
stock, securities or other property shall be legended to show such restrictions.
     3. Withholding of Tax/Tax Election. To the extent that the receipt of the
Restricted Shares or the lapse of any Forfeiture Restrictions results in
compensation income to Employee for federal or state income tax purposes,
Employee shall deliver to the Company at the time of such receipt or lapse, as
the case may be, such amount of money as the Company may require to meet its
obligation under applicable tax laws or regulations or make such other
arrangements to satisfy such withholding obligation as the Company, in its sole
discretion, may approve. In addition, the Company may withhold unrestricted
shares of stock of the Company (valued at their fair market value on the date of
withholding of such shares) otherwise to be issued upon the lapse of the
Forfeiture Restrictions or from any cash compensation otherwise payable to the
Employee to satisfy its withholding obligations. If Employee makes the election
authorized by section 83(b) of the Code in connection with the award of the
Restricted Shares, Employee shall submit to the Company a copy of the statement
filed by Employee to make such election.
     4. Status of Stock. Employee agrees that the Restricted Shares issued under
this Agreement will not be sold or otherwise disposed of in any manner which
would constitute a violation of any applicable securities laws, whether federal
or state, or the Company’s Code of Conduct. Employee also agrees that (a) the
certificates representing the Restricted Shares may bear such legend or legends
as the Committee deems appropriate in order to reflect the Forfeiture
Restrictions and to assure compliance with applicable securities laws, (b) the
Company may refuse to register the transfer of the Restricted Shares on the
stock transfer records of the Company if such proposed transfer would constitute
a violation of the Forfeiture Restrictions or, in the opinion of counsel
satisfactory to the Company, of any applicable securities law, and (c) the
Company may give related instructions to its transfer agent, if any, to stop
registration of the transfer of the Restricted Shares.
     5. Employment Relationship. For purposes of this Agreement, Employee shall
be considered to be in the employment of the Company as long as Employee remains
an employee or a consultant of either the Company, a parent or subsidiary
corporation (as defined in section 424 of the Code) of the Company, or any
successor corporation. Nothing in the adoption of the Plan, nor the award of the
Restricted Shares thereunder pursuant to this Agreement, shall confer upon
Employee the right to continued employment or engagement as a consultant by the
Company or affect in any way the right of the Company to terminate such
employment or consulting relationship at any time. Unless otherwise expressly
provided in a written employment or consulting agreement or by applicable law,
Employee’s employment or engagement as a consultant by the Company shall be on
an at-will basis, and the employment and/or consulting relationship may be
terminated at any time by either Employee or the
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Company for any reason whatsoever, with or without cause. Any question as to
whether and when there has been a termination of such employment and/or
consulting relationship, and the cause of such termination, shall be determined
by the Committee, and its determination shall be final.
     6. Notices. Any notices or other communications provided for in this
Agreement shall be sufficient if in writing. In the case of Employee, such
notices or communications shall be effectively delivered if hand delivered to
Employee at his principal place of employment or if sent by registered or
certified mail to Employee at the last address Employee has filed with the
Company. In the case of the Company, such notices or communications shall be
effectively delivered if sent by registered or certified mail to the Company at
its principal executive offices.
     7. Entire Agreement; Amendment. This Agreement and the documents
incorporated by reference herein replace and merge all previous agreements and
discussions relating to the same or similar subject matters between Employee and
the Company and constitute the entire agreement between Employee and the Company
with respect to the subject matter of this Agreement; provided, however, that
the terms of this Agreement shall not modify and shall be subject to the terms
and conditions of any employment, consulting and/or severance agreement between
the Company and Employee in effect as of the date a determination is to be made
under this Agreement. Without limiting the scope of the preceding sentence,
except as provided therein, all prior understandings and agreements, if any,
among the parties hereto relating to the subject matter hereof are hereby null
and void and of no further force and effect. Any modification of this Agreement
shall be effective only if it is in writing and signed by both Employee and an
authorized officer of the Company.
     8. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of any successors to the Company and all persons lawfully claiming under
Employee.
     9. Controlling Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to conflicts
of laws principles thereof.
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EXHIBIT A
TO
PERFORMANCE-BASED RESTRICTED STOCK AGREEMENT
VESTING SCHEDULE
Vesting in General: The term of this Agreement (the “Term”) shall commence on
January 1, 2007 and end on December 31, 2010. With respect to each fiscal year
of the Company ending respectively on December 31, 2007, December 31, 2008,
December 31, 2009, and December 31, 2010 (each, a “Performance Period”), a
percentage of the Restricted Shares and any Stock Dividends thereon shall vest
according to the Vesting Schedule set forth below based upon the satisfaction of
the performance targets described below (the “Performance Targets”) for such
Performance Period; provided, however, that if vesting does not occur with
respect to the Restricted Shares and any Stock Dividends thereon that are first
subject to vesting as a result of the Company’s performance with respect to a
particular Performance Target during such Performance Period, such Restricted
Shares and any Stock Dividends thereon may become vested upon the satisfaction
of such Performance Target on a cumulative basis during multiple consecutive
Performance Periods during the Term, as described below.

                  Number of Shares Performance Period End Date   Performance
Target   Subject to Vesting
 
       
December 31, 2007
  Gross Margin   2,500
December 31, 2007
  Same Store Revenue Growth   2,500
December 31, 2007
  Reduction of SG&A   2,500
 
       
December 31, 2008
  Gross Margin   2,500
December 31, 2008
  Same Store Revenue Growth   2,500
December 31, 2008
  Reduction of SG&A   2,500
 
       
December 31, 2009
  Gross Margin   2,500
December 31, 2009
  Same Store Revenue Growth   2,500
December 31, 2009
  Reduction of SG&A   2,500
 
       
December 31, 2010
  Gross Margin   2,500
December 31, 2010
  Same Store Revenue Growth   2,500
December 31, 2010
  Reduction of SG&A   2,500

For sake of clarity, each 2,500 share increment of the Restricted Shares (and
any Stock Dividends thereon) shall vest on the basis of the achievement of a
single Performance Target in a particular Performance Period (or cumulatively,
in multiple Performance Periods, as described below), without regard to the
Company’s performance with respect to the other Performance Targets during such
Performance Period.
Performance Targets: In order to achieve the vesting of the numbers of
Restricted Shares and any Stock Dividends thereon for a particular Performance
Target in a particular Performance Period as set forth in the Vesting Schedule,
the corresponding Performance Target (as described below) must be met for such
Performance Period, based upon the results from the Company’s
Exhibit A to Performance-based restricted stock agreement

A-1

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operations as published in the Company’s filings with the Securities Exchange
Commission, and certified by the Committee.

1.   Gross Margin: The Company must have a total gross margin of ___% for such
Performance Period.   2.   Same Store Revenue Growth: The Company’s same store
revenue growth (expressed as a percentage and based on total revenue) for such
Performance Period shall be at or above the median same store revenue growth for
the Peer Organizations (as defined below) for such Performance Period.   3.  
Reduction of SG&A: The Company must experience a reduction of sales, general and
administrative (“SG&A”) expenses, expressed as a percentage of gross profit,
during such Performance Period to at least the level corresponding to such
Performance Period as set forth in the schedule below:

      Calendar Year   Level of SG&A Expenses
2007
                      %
2008
                      %
2009
                      %
2010
                      %

Peer Organizations: “Peer Organizations” for purposes of the Same Store Revenue
Growth performance target include the following five publicly traded companies
in the automotive retail sector: Asbury Automotive, AutoNation, Lithia Motors,
Sonic Automotive, and United Auto.
No company shall be added to, or removed from, such list of Peer Organizations
during the term of this Agreement; provided, however, that a company shall be
removed from such list of Peer Organizations for a Performance Period if
(a) during such period, (i) such company ceases to maintain publicly available
statements of operations prepared in accordance with United States generally
accepted accounting principles, consistently applied (“GAAP”), (ii) such company
is not the surviving entity in any merger, consolidation, or other
non-bankruptcy reorganization (or survives only as a subsidiary of an entity
other than a previously wholly owned subsidiary of such company), (iii) such
company sells, leases, or exchanges all or substantially all of its assets to
any other person or entity (other than a previously wholly owned subsidiary of
such company), or (iv) such company is dissolved and liquidated, or (b) more
than 20% of such company’s revenues (determined on a consolidated basis based on
the regularly prepared and publicly available statements of operations of such
company prepared in accordance with GAAP) for any fiscal year of such company
that ends during such Performance Period are attributable to the operation of
businesses other than automotive retail sales and such company does not provide
publicly available statements of operations with respect to its automotive
retail business that are separate from the statements of operations provided
with respect to its other businesses. Any organization that is removed from such
list of Peer Organizations pursuant to the provisions of this paragraph shall
not be included in the list of Peer Organizations for any subsequent Performance
Period after the Performance Period in which it was so removed.
Exhibit A to Performance-based restricted stock agreement

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Calculations of whether the Performance Targets have been achieved under this
Agreement shall be based upon the Company’s and the Peer Organizations’
respective financial results as described in their respective regularly prepared
and publicly available consolidated statements of operations prepared in
accordance with GAAP. Notwithstanding the foregoing, in the event that an
Extraordinary Event (as defined below) occurs during any Performance Period, the
Committee shall determine whether the Performance Targets have been met by the
Company with respect to such Performance Period by using financial information
of the Company and, to the extent publicly available, for the Peer
Organizations, that is adjusted to exclude the portion of the Company’s (and, as
applicable, the Peer Organizations’) financial results attributable to
dealerships located in the geographic area(s) and/or business line(s) impacted
by such Extraordinary Event, as applicable.
For purposes of this Agreement, “Extraordinary Event” shall mean:

1.   The occurrence of a natural disaster in a county or parish in which a
dealership of the Company is located, if such natural disaster results in the
declaration by the federal government that the county or parish has experienced
a major disaster or, in the case of a dealership located in the United Kingdom,
a declaration is made by the applicable governmental authority that the county
or parish in which such dealership is located experienced a disaster that
entitles persons in such county to apply for governmental disaster assistance.

2.   The discontinuation of the production of new automobiles by an automobile
manufacturer that supplies Company dealerships or the loss by the Company or
particular dealerships of the Company of franchise rights from such a
manufacturer.

Cumulative Vesting Opportunity: Notwithstanding the foregoing, if in any
Performance Period during the Term (other than the Performance Period for the
fiscal year ending December 31, 2010), the Company did not achieve any of the
Performance Target set forth above as to such Performance Period, Employee will
continue to have the opportunity to satisfy such Performance Target(s) on a
cumulative basis. A Performance Target will be determined by the Committee to
have been satisfied with respect to a particular Performance Period on a
cumulative basis if, taking into account the average rate of the Company’s
performance as to such Performance Target based on all completed Performance
Periods during the Term prior to the date of determination, the Company achieved
such Performance Target.
Exhibit A to Performance-based restricted stock agreement

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