Document:

exv4w3

 

Exhibit 4.3

FIRST AMENDMENT TO CREDIT AGREEMENT

     THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is dated as of July 9, 2007 and is
entered into by and among The Babcock & Wilcox Company, a Delaware corporation (the
“Borrower”), CERTAIN OF THE GUARANTORS executing the signature pages hereto, CERTAIN LENDERS AND
SYNTHETIC INVESTORS (as such terms are defined in the hereinafter described Credit Agreement)
listed on the signature pages hereto (the “Lenders”), and CREDIT SUISSE, CAYMAN ISLANDS
BRANCH, as Administrative Agent (in such capacity, “Administrative Agent”) and as Collateral
Agent (in such capacity, “Collateral Agent”), and is made with reference to that certain CREDIT
AGREEMENT dated as of February 22, 2006 (the “Credit Agreement”) by and among Borrower, Lenders,
Administrative Agent and the other agents party thereto. Capitalized terms used herein without
definition shall have the same meanings herein as set forth in the Credit Agreement after giving
effect to this Amendment.

RECITALS

     WHEREAS, the Borrower has requested that the Lenders and the Synthetic Investors agree to
amend certain provisions of the Credit Agreement as provided for herein; and

     WHEREAS, subject to certain conditions provided for herein, the Lenders and the Synthetic
Investors are willing to agree to such amendments.

     NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants
herein contained, the parties hereto agree as follows:

   SECTION I. Amendments

1.1  Amendments to Section 1: Definitions.

     A. Section 1.1 of the Credit Agreement is hereby amended by adding the following definitions
in proper alphabetical sequence:

     “Available Amount” shall mean, at any time,

     (a) the sum of (i) 35% of Excess Cash Flow; plus (ii) 100% of the aggregate net
cash proceeds received by the Borrower since the First Amendment Effective Date from the
issuance of Stock or from capital contributions to the Borrower;

     less

(b) the amount thereof theretofore utilized for Investments under Section 8.3(h)(ii) and
Restricted Payments under Section 8.5(e)(ii).

 

 

     “ECF Calculation Date” means the last day of the most recently ended Fiscal Quarter for
which financial statements were delivered pursuant to Section 6.1(a) or 6.1(b).

     “Secunda Purchase Agreement” means that certain Asset Purchase Agreement dated as of
June 1, 2007 by and among J. Ray McDermott Canada, Ltd., Secunda International Limited and
the other sellers listed on the signature pages thereto.

     “First Amendment” means that certain First Amendment to Credit Agreement dated as of
July ___, 2007 among the Borrower, the Administrative Agent, the Collateral Agent and the
Lenders and Synthetic Investors listed on the signature pages thereto.

     “First Amendment Effective Date” means the date of satisfaction of the conditions
referred to in Section II of the First Amendment.

     B. Section 1.1 of the Credit Agreement is hereby further amended by deleting the “and” at the
end of clause (e) in the definition of “Customary Permitted Liens”, and inserting new clauses (g)
and (h), such new clauses (g) and (h) to read their entirety as follows:

          “(g) liens, pledges or deposits relating to escrows established in connection with the
purchase or sale of property otherwise permitted hereunder and the amounts secured thereby
shall not exceed the aggregate consideration in connection with such purchase or sale
(whether established for an adjustment in purchase price or liabilities, to secure
indemnities, or otherwise): and

          “(h) bankers’ Liens, rights of setoff and other similar Liens existing solely with
respect to cash and Cash Equivalents on deposit in one or more accounts maintained by the
Borrower or a Subsidiary, in each case granted in the ordinary course of business in favor
of the bank or banks with which such accounts are maintained, securing amounts owing to such
bank with respect to cash management and operating account arrangements, including those
involving pooled accounts and netting arrangements; provided that, unless such Liens are
non-consensual and arise by operation of law, in no case shall any such Liens secure (either
directly or indirectly) the repayment of any Indebtedness”

     C. Section 1.1 of the Credit Agreement is hereby further amended by deleting the definition of
“Excess Cash Flow” in its entirety and replacing it with the following definition:

          “Excess Cash Flow” means, for any ECF Calculation Date, an amount (if positive) equal
to (i) EBITDA for the period (taken as one accounting period) from the beginning of the
Borrower’s Fiscal Quarter that commenced April 1, 2007 to the ECF Calculation Date
minus (ii) the sum, without duplication, of the amounts for such period of (a)
Capital Expenditures, plus (b) Interest Expense.

     D. Section 1.1 of the Credit Agreement is hereby further amended by inserting the words
“except in the case where acquired using Indebtedness permitted by Section 8.1(d) or 8.1(h)(only in
the case of assumed debt pursuant to 8.1(h))” at the end of clause (e) in the definition of
“Permitted Acquisitions”.

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     E. Section 1.1 of the Credit Agreement is hereby further amended by deleting the definition of
“ECF Year End Offer Date” in its entirety.

1.2 Amendments to Section 2.8: Optional Prepayments.

     Section 2.8 of the Credit Agreement is hereby amended by adding the following sentence at the
end thereto:

“A notice of prepayment of the outstanding principal amount of the Loans and Swing Loans in
whole or in part may state that such notice is conditioned upon the effectiveness of other
credit facilities, and if any notice so states it may be revoked by the Borrower by notice
to the Administrative Agent on or prior to the date specified for such prepayment that the
refinancing condition has not been met and the notice of such prepayment is to be revoked
(it being understood that any Loans outstanding at the time of such notice or drawn
thereafter will, upon such revocation, be continued as Base Rate Loans and, thereafter, may
be converted to Eurodollar Rate Loans pursuant to Section 2.11).”

1.3 Amendments to Section 2.9: Mandatory Prepayments.

     Section 2.9 of the Credit Agreement is hereby amended by deleting clause (c) in its entirety
and replacing it with the word “[Reserved]”.

1.4 Amendment to Section 2.18: Incremental Facilities.

     The Credit Agreement is hereby amended by adding a new Section 2.18 to read as follows:

     “ Section 2.18 Incremental Facilities

     The Borrower may by written notice to the Administrative Agent elect to request prior
to the Revolving Facility Termination Date, one or more increases to the existing Revolving
Commitments (any such increase, the “New Revolving Commitments”), by an amount not in excess
of $200,000,000 in the aggregate and not less than $25,000,000 individually (or such lesser
amount which shall be approved by Administrative Agent); provided that any such increase in
the Revolving Commitments shall be accompanied by a corresponding decrease in the Synthetic
Commitments which itself shall be accompanied by a corresponding repayment of Synthetic
Loans and/or a refund of Credit-Linked Deposits, as applicable. Such notice shall specify
(A) the date (each, an “Increased Amount Date”) on which the Borrower proposes that the New
Revolving Commitments shall be effective, which shall be a date not less than 10 Business
Days after the date on which such notice is delivered to the Administrative Agent and (B)
the identity of each Lender or other Person that is an Eligible Assignee (each, a “New
Revolving Lender”) to whom the Borrower proposes any portion of such New Revolving
Commitments be allocated and the amounts of such allocations; provided that the
Administrative Agent may elect or decline to arrange such New Revolving Commitments in its
sole discretion and any Lender approached to provide all or a portion of the New Revolving
Commitments may elect or decline, in its sole discretion, to provide a New Revolving
Commitment. Such New Revolving Commitments shall

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become effective, as of such Increased Amount Date; provided that (1) no Default or
Event of Default shall exist on such Increased Amount Date before or after giving effect to
such New Revolving Commitments; (2) the Borrower and its Subsidiaries shall be in pro forma
compliance with each of the covenants set forth in Article V as of the last day of the most
recently ended Fiscal Quarter after giving effect to such New Revolving Commitments; (3) the
New Revolving Commitments shall be effected pursuant to a joinder agreement in form and
substance acceptable to the Administrative Agent in its reasonable discretion, executed and
delivered by the Borrower, the New Revolving Lender and the Administrative Agent, and which
shall be recorded in the Register and each New Revolving Lender shall be subject to the
requirements set forth in Section 2.16(f); (4) the Borrower shall make any payments required
pursuant to Section 2.14(e) in connection with the New Revolving Commitments; and (5) the
Borrower shall deliver or cause to be delivered any legal opinions or other documents
reasonably requested by Administrative Agent in connection with any such transaction.

     On the Increased Amount Date on which New Revolving Commitments are effected, subject
to the satisfaction of the foregoing terms and conditions, (a) each of the Revolving Lenders
shall assign to each of the New Revolving Lenders, and each of the New Revolving Lenders
shall purchase from each of the Revolving Lenders, at the principal amount thereof (together
with accrued interest), such interests in the Revolving Loans outstanding on such Increased
Amount Date as shall be necessary in order that, after giving effect to all such assignments
and purchases, such Revolving Loans will be held by existing Revolving Lenders and New
Revolving Lenders ratably in accordance with their Revolving Commitments after giving effect
to the addition of such New Revolving Commitments to the Revolving Commitments, (b) each New
Revolving Commitment shall be deemed for all purposes a Revolving Commitment and each Loan
made thereunder (a “New Revolving Loan”) shall be deemed, for all purposes, a Revolving Loan
and (c) each New Revolving Lender shall become a Lender with respect to the New Revolving
Commitment and all matters relating thereto.

     The Administrative Agent shall notify the Lenders and the Synthetic Investors promptly
upon receipt of Borrower’s notice of the Increased Amount Date and in respect thereof (y)
the New Revolving Commitments and the New Revolving Lenders, and (z) in the case of each
notice to any Revolving Lender, the respective interests in such Revolving Lender’s
Revolving Loans, in each case subject to the assignments contemplated by this Section.

     The terms and provisions of the New Revolving Loans shall be identical to the Revolving
Loans. Each joinder agreement may, without the consent of any other Lenders, effect such
amendments to this Agreement and the other Loan Documents as may be necessary or
appropriate, in the opinion of the Administrative Agent to effect the provision of this
Section 2.18. ”

1.5 Amendments to Section 6.1: Financial Statements.

     A. Section 6.1 of the Credit Agreement is hereby amended by deleting clause (c) in its
entirety and inserting a new clause (c), such clause (c) to read in its entirety as follows:

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“ (c) Compliance Certificate. Together with each delivery of any financial statement
pursuant to clause (a) or (b) above, a certificate of a Responsible Officer of the Borrower
substantially in the form of Exhibit K (each, a “Compliance Certificate”) (i) showing in
reasonable detail the calculations used in determining the Leverage Ratio and demonstrating
compliance with each of the other financial covenants contained in Article V (Financial
Covenants), and (ii) stating that no Default or Event of Default has occurred and is
continuing or, if a Default or an Event of Default has occurred and is continuing, stating
the nature thereof and the action which the Borrower has taken or proposes to take with
respect thereto.”

     B. Section 6.1 of the Credit Agreement is hereby further amended by deleting clause (e)
therein in its entirety.

1.6 Amendments to Section 6.2: Collateral Reporting Requirements.

     Section 6.2(a) of the Credit Agreement is hereby amended by replacing the first word
“Together” therein with the following words: “If requested by the Administrative Agent, together.”

1.7 Amendments to Section 8.1: Indebtedness.

     Section 8.1 of the Credit Agreement is hereby amended by deleting “and” at the end of
paragraph (m) thereof, deleting the period at the end of clause (n) thereof, adding “; and” at the
end of clause (n) thereof and inserting a new clause (o) immediately after paragraph (n) thereof,
such clause (o) to read in its entirety as follows:

“ (o) Indebtedness in respect of any insurance premium financing for insurance being
acquired by the Borrower or any Subsidiary under customary terms and conditions and not in
connection with the borrowing of money.”

1.8 Amendments to Section 8.2: Liens, Etc.

     A. Section 8.2 of the Credit Agreement is hereby amended by deleting clause (d) in its
entirety and replacing it with the following:

“ (d) Liens granted by the Borrower or any Subsidiary of the Borrower under a Capital Lease
and Liens to which any property is subject at the time, on or after the Effective Date, of
the Borrower’s or such Subsidiary’s acquisition thereof in accordance with this Agreement,
in each case securing Indebtedness permitted under Section 8.1(d) or 8.1(h)(only in the case
of assumed debt pursuant to 8.1(h)) and limited to the property purchased (and proceeds
thereof) with the proceeds subject to such Capital Lease or Indebtedness.”

     B. Section 8.2 of the Credit Agreement is hereby further amended by deleting “and” at the end
of clause (m) thereof, changing clause (n) thereof to clause (o) and inserting a new clause (n)
immediately after clause (m), such clause (n) to read in its entirety as follows:

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“ (n) Liens securing insurance premium financing permitted under Section 8.1(o)
(Indebtedness) under customary terms and conditions; provided, that no such Lien may extend
to or cover any property other than the insurance being acquired with such financing, the
proceeds thereof and any unearned or refunded insurance premiums related thereto; and”

1.9 Amendments to Section 8.3: Investments.

     A. Section 8.3(e) of the Credit Agreement is hereby amended by inserting a new clause (iv) at
the end thereof as follows:

“ or (iv) Babcock & Wilcox Canada Ltd. in the form of loans to J. Ray McDermott Canada, Ltd.
or its Affiliates in connection with the consummation of the acquisition contemplated by the
Secunda Purchase Agreement and in an aggregate amount not to exceed $55,000,000 (or its
equivalent).”

     B. Section 8.3 of the Credit Agreement is hereby further amended by deleting clause (h) in its
entirety and replacing it with the following:

“ (h) direct or indirect Investments in Permitted Joint Ventures engaged in an Eligible Line
of Business; provided, however, that the aggregate outstanding amount of all such
Investments, including Letters of Credit and other credit support obligations from the
Borrower or its Subsidiaries, pursuant to this clause (h) shall not exceed (i) $5,000,000 at
any time plus (ii) the amount of any Restricted Payments permitted to be made
pursuant to Section 8.5(e) but not actually made as of the date of determination
plus (iii) an amount equal to any repayments, interest, returns, profits,
distributions, income and similar amounts actually received in cash in respect of Permitted
Joint Ventures (which amount shall not exceed the amount of such Investment valued at the
fair market value of such Investment at the time such Investment was made);”

1.10 Amendments to Section 8.4: Sale of Assets.

     A. Section 8.4 of the Credit Agreement is hereby amended by deleting the reference to
“$500,000” in the first paragraph therein and replacing it with “$1,000,000”.

     B. Section 8.4 of the Credit Agreement is hereby further amended by deleting the word “and” at
the end of clause (i), inserting the word “; and” at the end of clause (j) thereof and inserting a
new clause (k) as follows:

     “(k) so long as no Default or Event of Default is continuing or would result therefrom, the
sale of the “Diamond Power Factory” Real Property located in Dumbarton, Scotland, and related plant
and equipment.”

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1.11 Amendments to Section 8.5: Restricted Payments.

     Section 8.5 of the Credit Agreement is hereby amended by deleting clause (e) in its entirety
and inserting a new clause (e), such clause (e) to read in its entirety as follows:

“ (e) so long as no Default or Event of Default has occurred and is continuing, or would
result therefrom, the Borrower may make Restricted Payments in an aggregate amount not to
exceed the result of (i) $50,000,000 plus (ii) so long as the Leverage Ratio, pro
forma for the making of such Restricted Payments, is less than 2.00:1.00, the Available
Amount.”

1.12 Amendments to Section 8.8: Transactions with Affiliates.

     Section 8.8 of the Credit Agreement is hereby amended by adding the following sentence at the
end thereof:

“Notwithstanding the foregoing, the Borrower and its Subsidiaries may invest in loans to J.
Ray McDermott Canada, Ltd. or its Affiliates in connection with the consummation of the
acquisition contemplated by the Secunda Purchase Agreement, in an amount not to exceed the
amounts permitted under Section 8.3(e)(iv).”

1.13 Amendments to Section 8.14: Capital Expenditures.

     Section 8.14 of the Credit Agreement is hereby amended by deleting “$30,000,000 in the second
row of the second column of the table therein and replacing it with “$45,000,000”.

1.14 Amendments to Section 10.5: Indemnifications.

     Section 10.5 of the Credit Agreement is hereby amended by inserting a new clause (c)
immediately following clause (b) thereof to read in its entirety as follows:

“ (c) To the extent required by any applicable law, the Administrative Agent may withhold
from any payment to any Lender or any Synthetic Investor an amount equivalent to any
applicable withholding tax. If the Internal Revenue Service or any other Governmental
Authority asserts a claim that the Administrative Agent did not properly withhold tax from
amounts paid to or for the account of any Lender or any Synthetic Investor because the
appropriate form was not delivered or was not properly executed or because such Lender or
such Synthetic Investor failed to notify the Administrative Agent of a change in
circumstances which rendered the exemption from or reduction of withholding tax ineffective
or for any other reason, such Lender or such Synthetic Investor, as applicable, shall
indemnify the Administrative Agent fully for all amounts paid, directly or indirectly, by
the Administrative Agent as tax or otherwise, including any penalties or interest and
together with any all expenses incurred.”

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  SECTION II. CONDITIONS TO EFFECTIVENESS

     This Amendment shall become effective as of the date hereof only upon the satisfaction of all
of the following conditions precedent (the date of satisfaction of such conditions being referred
to herein as the “First Amendment Effective Date”):

     A. Execution. The Administrative Agent shall have received a counterpart signature page of
this Amendment duly executed by the Borrower, each of the Guarantors and Requisite Lenders.

     B. Opinions. The Administrative Agent shall have received favorable written opinions of (a)
Baker Botts L.L.P., counsel to the Loan Parties and (b) Liane K. Hinrichs, Vice President, General
Counsel and Corporate Secretary of the Borrower, in each case dated as of the First Amendment
Effective Date addressing such matters as the Administrative Agent may reasonably request.

  SECTION III. REAFFIRMATION OF CREDIT SUPPORT

     A. Each of the Borrower and each Guarantor (each, individually, a “Credit Support Party” and,
collectively, the “Credit Support Parties”) has read this Amendment and consents to the terms
hereof and further hereby confirms and agrees that, notwithstanding the effectiveness of this
Amendment, the obligations of such Credit Support Party under, and the Liens granted by such Credit
Support Party as collateral security for the Indebtedness, obligations and liabilities evidenced by
the Credit Agreement and the other Loan Documents pursuant to, each of the Loan Documents to which
such Credit Support Party is a party shall not be impaired and each of the Loan Documents to which
such Credit Support Party is a party is, and shall continue to be, in full force and effect and are
hereby confirmed and ratified in all respects

     B. Each Credit Support Party (other than the Borrower) acknowledges and agrees that (i)
notwithstanding the conditions to effectiveness set forth in this Amendment, such Credit Support
Party is not required by the terms of the Credit Agreement or any other Loan Document to consent to
the amendments to the Credit Agreement effected pursuant to this Amendment and (ii) nothing in the
Credit Agreement, this Amendment or any other Loan Document shall be deemed to require the consent
of such Credit Support Party to any future amendments to the Credit Agreement.

  SECTION IV. REPRESENTATIONS AND WARRANTIES

     In order to induce Lenders and Synthetic Investors to enter into this Amendment and to amend
the Credit Agreement in the manner provided herein, the Borrower represents and warrants to each
Lender and each Synthetic Investor that the following statements are true and correct in all
material respects:

     A. Corporate Power and Authority. The Borrower and each Guarantor has all requisite corporate
or other organizational power and authority to enter into this Amendment and to carry out the
transactions contemplated by, and perform its obligations under, the Credit Agreement and the other
Loan Documents.

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     B. Authorization of Agreements. The execution and delivery of this Amendment has been duly
authorized by all necessary corporate or other organizational action on the part of the Borrower
and each Guarantor.

     C. No Conflict. The execution and delivery by the Borrower and each Guarantor of this
Amendment does not and will not (i) violate (A) any provision of any law, statute, rule or
regulation, or of the certificate or articles of incorporation or partnership agreement, other
constitutive documents or by-laws of the Borrower or any such Guarantor or (B) any applicable order
of any court or any rule, regulation or order of any Governmental Authority, (ii) be in conflict
with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default
under any Contractual Obligation of the Borrower or any Guarantor, where any such conflict,
violation, breach or default referred to in clause (i) or (ii) of this Section IV.C., individually
or in the aggregate could reasonably be expected to have a Material Adverse Effect, (iii) except as
permitted under the Credit Agreement, result in or require the creation or imposition of any Lien
upon any of the properties or assets of the Borrower or any such Guarantor (other than any Liens
created under any of the Loan Documents in favor of Collateral Agent on behalf of Lenders), or (iv)
require any approval of stockholders or partners or any approval or consent of any Person under any
Contractual Obligation of the Borrower or any Guarantor except for such approvals or consents which
will be obtained on or before the First Amendment Effective Date and except for any such approvals
or consents the failure of which to obtain will not have a Material Adverse Effect.

     D. Governmental Consents. No action, consent or approval of, registration or filing with or
any other action by any Governmental Authority is or will be required in connection with the
execution and delivery by the Borrower or any Guarantor, except for such actions, consents and
approvals the failure of which to obtain or make could not reasonably be expected to result in a
Material Adverse Effect or which have been obtained and are in full force and effect.

     E. Binding Obligation. This Amendment has been duly executed and delivered by the Borrower
and each Guarantor and constitutes a legal, valid and binding obligation of the Borrower and each
such Guarantor, enforceable against the Borrower and each Guarantor in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or
other similar laws affecting creditors’ rights generally and except as enforceability may be
limited by general principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

     F. Incorporation of Representations and Warranties from Credit Agreement. The representations
and warranties contained in Article IV of the Credit Agreement are and will be true and correct in
all material respects on and as of the First Amendment Effective Date to the same extent as though
made on and as of that date, except to the extent such representations and warranties specifically
relate to an earlier date, in which case they were true and correct in all material respects on and
as of such earlier date.

     G. Absence of Default. No event has occurred and is continuing or will result from the
consummation of the transactions contemplated by this Amendment that would constitute an Event of
Default or a Default, except for the events expressly being waived hereby.

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  SECTION V. MISCELLANEOUS

     A. Effect on the Credit Agreement and the Other Loan Documents.

     (i) Except as specifically modified by this Amendment, the Credit Agreement and the
other Loan Documents shall remain in full force and effect and are hereby ratified and
confirmed.

     (ii) The execution, delivery and performance of this Amendment shall not constitute a
waiver of any provision of, or operate as a waiver of any right, power or remedy of any
Agent, Lender or Synthetic Investor under, the Credit Agreement or any of the other Loan
Documents except as otherwise expressly provided for herein.

     B. Headings. Section and Subsection headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment for any other
purpose or be given any substantive effect.

     C. Applicable Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

     D. Counterparts. This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so executed and delivered
shall be deemed an original, but all such counterparts together shall constitute but one and the
same instrument; signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to the same document.

[Remainder of this page intentionally left blank.]

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     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and
delivered by their respective officers thereunto duly authorized as of the date first written
above.

	 	 	 	 	 	 	 
	BORROWER:	 	THE BABCOCK & WILCOX COMPANY
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ James C. Lewis	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: James C. Lewis	 	 
	 

	 	 	 	Title: Vice President and Treasurer	 	 
	 
	 	 	 	 	 	 
	GUARANTORS:	 	AMERICON EQUIPMENT SERVICES, INC.	 	 
	 	 	AMERICON, INC.	 	 
	 	 	APPLIED SYNERGISTICS, INC.	 	 
	 	 	B&W SERVICE COMPANY	 	 
	 	 	BABCOCK & WILCOX CHINA HOLDINGS, INC.	 	 
	 	 	BABCOCK & WILCOX CONSTRUCTION CO., INC.	 	 
	 	 	BABCOCK & WILCOX DENMARK HOLDINGS, INC.	 	 
	 	 	BABCOCK & WILCOX EBENSBURG POWER, INC.	 	 
	 	 	BABCOCK & WILCOX EQUITY INVESTMENTS, INC.	 	 
	 	 	BABCOCK & WILCOX INTERNATIONAL SALES AND SERVICE CORPORATION	 	 
	 	 	BABCOCK & WILCOX INTERNATIONAL, INC.	 	 
	 	 	DIAMOND OPERATING CO., INC.	 	 
	 	 	DIAMOND POWER AUSTRALIA HOLDINGS, INC.	 	 
	 	 	DIAMOND POWER CHINA HOLDINGS, INC.	 	 
	 	 	DIAMOND POWER EQUITY INVESTMENTS, INC.	 	 
	 	 	DIAMOND POWER INTERNATIONAL, INC.	 	 
	 	 	PALM BEACH RESOURCE RECOVERY CORPORATION	 	 
	 	 	POWER SYSTEMS OPERATIONS, INC.	 	 
	 	 	REVLOC RECLAMATION SERVICE, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ James C. Lewis	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	James C. Lewis	 	 
	 

	 	 	 	Treasurer of each of the above-listed Guarantors	 	 

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	 	 	NATIONAL ECOLOGY COMPANY	 	 
	 	 	NORTH COUNTY RECYCLING, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Robert E. Stumpf	 	 
	 

	 	 	 	 	 	 
	 	 	Name:   Robert E. Stumpf	 	 
	 	 	Title:     Secretary and Treasurer	 	 

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	AGENT and LENDER:	 	CREDIT SUISSE, CAYMAN ISLANDS BRANCH,	 	 
	 	 	as Administrative Agent, Lender, Synthetic Investor and Collateral Agent	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Robert Hetu	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Robert Hetu	 	 
	 

	 	 	 	Title: Managing Director	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Denise L. Alvarez	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Denise L. Alvarez	 	 
	 

	 	 	 	Title: Associate	 	 

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	LENDERS and
	 	 	 	 	 	 
	SYNTHETIC INVESTORS
	 	 	 	 	 	 
	 	 	By signing below, you have indicated your
consent to the Second Amendment to the Credit
Agreement	 	 
	 
	 	 	 	 	 	 
	 	 	Name of Institution:	 	 
	 
	 	 	 	 	 	 
	 	 	ALLIED IRISH BANKS, PLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Shreya Shah	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Shreya Shah	 	 
	 

	 	 	 	Title: Vice President	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Gregory J. Wiske	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Gregory J. Wiske	 	 
	 

	 	 	 	Title: Vice President	 	 

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	LENDERS and
	 	 	 	 	 	 
	SYNTHETIC INVESTORS
	 	 	 	 	 	 
	 	 	By signing below, you have indicated your
consent to the Second Amendment to the Credit
Agreement	 	 
	 
	 	 	 	 	 	 
	 	 	Name of Institution:	 	 
	 
	 	 	 	 	 	 
	 	 	BANK OF AMERICA, N.A.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Robert W. Troutman	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Robert W. Troutman	 	 
	 

	 	 	 	Title: Managing Director	 	 

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	LENDERS and
	 	 	 	 	 	 
	SYNTHETIC INVESTORS
	 	 	 	 	 	 
	 	 	By signing below, you have indicated your
consent to the Second Amendment to the Credit
Agreement	 	 
	 
	 	 	 	 	 	 
	 	 	Name of Institution:	 	 
	 
	 	 	 	 	 	 
	 	 	THE BANK OF NOVA SCOTIA	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ D. Mills	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: D. Mills	 	 
	 

	 	 	 	Title: Director	 	 

6

 

	 	 	 	 	 	 	 
	LENDERS and
	 	 	 	 	 	 
	SYNTHETIC INVESTORS
	 	 	 	 	 	 
	 	 	By signing below, you have indicated your
consent to the Second Amendment to the Credit
Agreement	 	 
	 
	 	 	 	 	 	 
	 	 	Name of Institution:	 	 
	 
	 	 	 	 	 	 
	 	 	CALYON NEW YORK BRANCH	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Page Dillehunt	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Page Dillehunt	 	 
	 

	 	 	 	Title: Managing Director	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Michael Willis	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Michael Willis	 	 
	 

	 	 	 	Title: Director	 	 

7

 

	 	 	 	 	 	 	 
	LENDERS and
	 	 	 	 	 	 
	SYNTHETIC INVESTORS
	 	 	 	 	 	 
	 	 	By signing below, you have indicated your
consent to the Second Amendment to the Credit
Agreement	 	 
	 
	 	 	 	 	 	 
	 	 	Name of Institution:	 	 
	 
	 	 	 	 	 	 
	 	 	JPMORGAN CHASE BANK, N.A.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Dianne L. Russell	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Dianne L. Russell	 	 
	 

	 	 	 	Title: Vice President	 	 

8

 

	 	 	 	 	 	 	 
	LENDERS and
	 	 	 	 	 	 
	SYNTHETIC INVESTORS
	 	 	 	 	 	 
	 	 	By signing below, you have indicated your
consent to the Second Amendment to the Credit
Agreement	 	 
	 
	 	 	 	 	 	 
	 	 	Name of Institution:	 	 
	 
	 	 	 	 	 	 
	 	 	NATIXIS	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Timothy L. Polvado	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Timothy L. Polvado	 	 
	 

	 	 	 	Title: Managing Director	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Louis P. Laville, III	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Louis P. Laville, III	 	 
	 

	 	 	 	Title: Managing Director	 	 

9

 

	 	 	 	 	 	 	 
	LENDERS and
	 	 	 	 	 	 
	SYNTHETIC INVESTORS
	 	 	 	 	 	 
	 	 	By signing below, you have indicated your
consent to the Second Amendment to the Credit
Agreement	 	 
	 
	 	 	 	 	 	 
	 	 	Name of Institution:	 	 
	 
	 	 	 	 	 	 
	 	 	NATIONAL CITY BANK	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Stephen Monto	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Stephen Monto	 	 
	 

	 	 	 	Title: Vice President	 	 

10

 

	 	 	 	 	 	 	 
	LENDERS and
	 	 	 	 	 	 
	SYNTHETIC INVESTORS
	 	 	 	 	 	 
	 	 	By signing below, you have indicated your
consent to the Second Amendment to the Credit
Agreement	 	 
	 
	 	 	 	 	 	 
	 	 	Name of Institution:	 	 
	 
	 	 	 	 	 	 
	 	 	PNC BANK, NATIONAL ASSOCIATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ W. J. Bowne	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: W. J. Bowne	 	 
	 

	 	 	 	Title: Managing Director	 	 

11

 

	 	 	 	 	 	 	 
	LENDERS and
	 	 	 	 	 	 
	SYNTHETIC INVESTORS
	 	 	 	 	 	 
	 	 	By signing below, you have indicated your
consent to the Second Amendment to the Credit
Agreement	 	 
	 
	 	 	 	 	 	 
	 	 	Name of Institution:	 	 
	 
	 	 	 	 	 	 
	 	 	WELLS FARGO BANK, N.A.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Philip C. Lauinger III	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Corbin M. Womac	 	 
	 

	 	 	 	Title: Assistant Vice President	 	 

12

 

	 	 	 	 	 	 	 
	LENDERS and
	 	 	 	 	 	 
	SYNTHETIC INVESTORS
	 	 	 	 	 	 
	 	 	By signing below, you have indicated your
consent to the Second Amendment to the Credit
Agreement	 	 
	 
	 	 	 	 	 	 
	 	 	Name of Institution:	 	 
	 
	 	 	 	 	 	 
	 	 	AMEGY BANK N.A.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Michael Skarke	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Michael Skarke	 	 
	 

	 	 	 	Title: Banking Officer	 	 

13

 

	 	 	 	 	 	 	 
	LENDERS and
	 	 	 	 	 	 
	SYNTHETIC INVESTORS
	 	 	 	 	 	 
	 	 	By signing below, you have indicated your
consent to the Second Amendment to the Credit
Agreement	 	 
	 
	 	 	 	 	 	 
	 	 	Name of Institution:	 	 
	 
	 	 	 	 	 	 
	 	 	COMPASS BANK	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Tom Brosig	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Tom Brosig	 	 
	 

	 	 	 	Title: Senior Vice President	 	 

14

 

	 	 	 	 	 	 	 
	LENDERS and
	 	 	 	 	 	 
	SYNTHETIC INVESTORS
	 	 	 	 	 	 
	 	 	By signing below, you have indicated your
consent to the Second Amendment to the Credit
Agreement	 	 
	 
	 	 	 	 	 	 
	 	 	Name of Institution:	 	 
	 
	 	 	 	 	 	 
	 	 	WHITNEY NATIONAL BANK	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Larry Stephens	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Larry Stephens	 	 
	 

	 	 	 	Title: Vice President	 	 

15exv10w3

 

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

Performance-based restricted stock agreement

 

 

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,

 Performance-based restricted stock agreement

2

 

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

 Performance-based restricted stock agreement

3

 

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.

 Performance-based restricted stock agreement

4

 

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

 

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

A-2

 

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

A-3

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