EXHIBIT 10.1

EMPLOYMENT AGREEMENT

This Employment Agreement ("Agreement") is entered into between Group 1 Automotive, Inc. having offices at 950 Echo Lane, Suite 350, Houston, Texas 77024 ("Employer"), and B. B. Hollingsworth, Jr., an individual currently residing at 5763 Indian Circle, Houston, Texas 77057 ("Employee"), to be effective as of October __, 1997.

For and in consideration of the mutual promises, covenants, and obligations contained herein, Employer and Employee agree as follows:

1. EMPLOYMENT AND DUTIES:

1.1. Employer agrees to employ Employee, and Employee agrees to be employed by Employer, beginning October __, 1997 and continuing throughout the Term (as defined below) of this Agreement, subject to the terms and conditions of this Agreement.

1.2. Employee shall serve as "Chief Executive Officer" of Employer. Employee agrees to serve in the assigned position and to perform diligently and to the best of Employee's abilities the duties and services appertaining to such position as determined by Employer, as well as such additional or different duties and services appropriate to such position which Employee from time to time may be reasonably directed to perform by Employer. Employee shall at all times comply with and be subject to such policies and procedures as Employer may establish from time to time.

1.3. Employee shall, during the period of Employee's employment by Employer, devote Employee's full business time, energy, and best efforts to the business and affairs of Employer. Employee may not engage, directly or indirectly, in any other business, investment, or activity that interferes with Employee's performance of Employee's duties hereunder, is contrary to the interests of Employer or any of its subsidiaries or affiliates, or requires any significant portion of Employee's business time; provided, however, that Employee may engage in passive personal investments that do not conflict with the business and affairs of the Employer or any of its subsidiaries or affiliates or interfere with Employee's performance of his or her duties hereunder.

1.4. Employee acknowledges and agrees that Employee owes a fiduciary duty of loyalty, fidelity and allegiance to act at all times in the best interests of Employer or any of its subsidiaries or affiliates and to do no act which would injure the business, interests, or reputation of Employer or any of its subsidiaries or affiliates. In keeping with these duties, Employee shall make full disclosure to Employer of all business opportunities pertaining to Employer's business and shall not appropriate for Employee's own benefit business opportunities concerning the subject matter of the fiduciary relationship.

1.5. It is agreed that any direct or indirect interest in, connection with, or benefit from any outside activities, particularly commercial activities, which interest might in any way adversely affect Employer, or any of its affiliates, involves a possible conflict of interest. In keeping with Employee's fiduciary duties to Employer, Employee agrees that Employee shall not knowingly become involved in a conflict of interest with Employer, or its affiliates, or upon discovery thereof, allow such a conflict to continue. Moreover, Employee agrees that Employee shall disclose to Employer's General Counsel

(who shall be Employer's outside General Counsel unless Employer has employed an inside General Counsel) any facts which might involve such a conflict of interest that has not been approved by Employer's President. Employer and Employee recognize that it is impossible to provide an exhaustive list of actions or interests which constitute a "conflict of interest". Moreover, Employer and Employee recognize there are many borderline situations. In some instances, full disclosure of facts by Employee to Employer's General Counsel may be all that is necessary to enable Employer or its subsidiaries or affiliates to protect its interests. In others, if no improper motivation appears to exist and the interests of Employer or its subsidiaries or affiliates have not suffered, prompt elimination of the outside interest will suffice. In still others, it may be necessary for Employer to terminate the employment relationship. Employee agrees that Employer's determination as to whether a conflict of interest exists shall be conclusive. Employer reserves the right to take such action as, in its judgment, will end the conflict.

2. COMPENSATION AND BENEFITS:

2.1. Employee's initial base salary under this Agreement shall be $360,000.00 per annum and shall be paid in semi-monthly installments in accordance with Employer's standard payroll practice. Employee's base salary may be increased from time to time by Employer and, after any such change, Employee's new level of base salary shall be Employee's base salary for purposes of this Agreement until the effective date of any subsequent change.

2.2 Employee's participation in bonus plans shall be governed by the bonus and incentive plans adopted by the Board of Directors of Employer in which Employee is a participant.

2.3. If Employee is granted stock options, Employee will enter into a separate written stock option agreement pursuant to which Employee shall be granted the option to acquire common stock of Employer subject to the terms and conditions of Employer's 1996 Stock Incentive Plan and the stock option agreement entered into thereunder. The number of shares, exercise price per share and other terms of the options shall be as specified in such other written agreement.

2.4. While employed by Employer, Employee shall be allowed to participate, on the same basis generally as other employees of Employer, in all general employee benefit plans and programs, including improvements or modifications of the same, which on the effective date or thereafter are made available by Employer to all or substantially all of Employer's employees. Such benefits, plans, and programs may include, without limitation, medical, health, and dental care, life insurance, disability protection, and pension plans. Nothing in this Agreement is to be construed or interpreted to provide greater rights, participation, coverage, or benefits under such benefit plans or programs than provided to similarly situated employees pursuant to the terms and conditions of such benefit plans and programs.

2.5. Employer shall not by reason of this Article 2 be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such incentive compensation or employee benefit program or plan, so long as such actions are similarly applicable to covered employees generally. Moreover, unless specifically provided for in a written plan document adopted by the Board of Directors of Employer, none of the benefits or arrangements described in this Article 2 shall be

secured or funded in any way, and each shall instead constitute an unfunded and unsecured promise to pay money in the future exclusively from the general assets of Employer and its subsidiaries and affiliates.

2.6. Employer may withhold from any compensation, benefits, or amounts payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling.

3. TERM OF THIS AGREEMENT, EFFECT OF EXPIRATION OF TERM, AND TERMINATION PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH TERMINATION:

3.1. The term of this Agreement shall be for five (5) years from October __, 1997 through October __, 2002. Should Employee remain employed by Employer beyond the expiration of the Term, such employment shall convert to a month-to-month relationship terminable at any time by either Employer or Employee for any reason whatsoever, with or without cause, upon thirty days notice. Upon such termination of the continued at-will employment relationship by either Employer or Employee for any reason whatsoever, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate. Employee shall be entitled to pro rata salary through the date of such termination, but Employee shall not be entitled to any bonus with respect to the operations of the Employer and its subsidiaries and affiliates during the calendar year in which Employee's employment with Employer is terminated. Upon termination of employment, Employee shall repay to Employer all advances received by Employee from Employer or any of its subsidiaries or affiliates, including all advances drawn against any bonus.

3.2. Notwithstanding any other provisions of this Agreement, Employer shall have the right to terminate Employee's employment under this Agreement at any time for any of the following reasons:

(i) For "cause" upon the determination by Employer's Board of Directors that "cause" exists for the termination of the employment relationship. As used in this Section 3.2(i), the term "cause" shall mean (a) Employee has engaged in gross negligence, gross incompetence or willful misconduct in the performance of, or Employee's willful refusal without proper reason to perform, the duties and services required of Employee pursuant to this Agreement; (b) Employee has been convicted of a felony; or (c) Employee's material breach of any material provision of this Agreement or corporate code or policy. It is expressly acknowledged and agreed that the decision as to whether "cause" exists for termination of the employment relationship by Employer is delegated to Employer's Board of Directors for determination. Employee, if he so requests, after reasonable notice of such Board of Directors meeting, shall be entitled to be heard before the Board of Directors. If Employee disagrees with the decision reached by Employer's Board of Directors, the dispute will be limited to whether Employer's Board of Directors reached its decision in good faith;

(ii) for any other reason whatsoever, including termination without cause, in the sole discretion of Employer's Board of Directors;

(iii) upon Employee's death; or

(iv) upon Employee's becoming incapacitated by accident, sickness, or other circumstance which in the reasonable opinion of a qualified doctor approved by Employer's Board of Directors renders him mentally or physically incapable of performing the duties and services required of Employee, and which will continue in the reasonable opinion of such doctor for a period of not less than 180 days.

The termination of Employee's employment shall constitute a "Termination for Cause" if made pursuant to Section 3.2(i); the effect of such termination is specified in Section 3.4. The termination of Employee's employment shall constitute an "Involuntary Termination" if made pursuant to Section 3.2(ii); the effect of such termination is specified in Section 3.5. The effect of the employment relationship being terminated pursuant to Section 3.2(iii) as a result of Employee's death is specified in Section 3.7. The effect of the employment relationship being terminated pursuant to Section 3.2(iv) as a result of the Employee becoming incapacitated is specified in Section 3.8.

3.3. Notwithstanding any other provisions of this Agreement, Employee shall have the right to terminate the employment relationship under this Agreement at any time for any of the following reasons:

(i) a material breach by Employer of any material provision of this Agreement, which remains uncorrected for 30 days following written notice of such breach by Employee to Employer's Board of Directors;

(ii) the dissolution of Employer; or

(iii) for any other reason whatsoever, in the sole discretion of Employee.

The termination of Employee's employment by Employee shall constitute an "Involuntary Termination" if made pursuant to Section 3.3(i) or 3.3(ii); the effect of such termination is specified in Section 3.5. The termination of Employee's employment by Employee shall constitute a "Voluntary Termination" if made pursuant to Sections 3.3(iii); the effect of such termination is specified in Section 3.4.

3.4. Upon a "Voluntary Termination" of the employment relationship by Employee or a termination of the employment relationship for "Cause" by Employer, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate as of the date of termination. Employee shall be entitled to pro rata salary through the date of such termination, but Employee shall not be entitled to any bonuses with respect to the operations of the Employer and its subsidiaries and affiliates during the calendar year in which Employee's employment with Employer is terminated.

3.5. Upon an Involuntary Termination of the employment relationship by either Employer or Employee pursuant to Sections 3.2(ii) or 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 the compensation specified in Section 2.1, payable bi-weekly, as if Employee's employment (which shall cease on the date of such Involuntary Termination) had continued for the full Term of this Agreement. Upon an Involuntary Termination of the employment relationship by Employee pursuant to Sections 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 lump sum payment the compensation specified in
Section 2.1 as if Employee's employment (which shall cease on the date of such Involuntary Termination) had continued for the full Term of this Agreement. 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. Employee's rights under this Section 3.5 are Employee's sole and exclusive rights against Employer or its subsidiaries or affiliates, 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.

3.6. Employee covenants not to sue or lodge any claim, demand or cause of action against Employer based on Involuntary Termination for any monies other than those specified in Section 3.5. If Employee breaches this covenant, Employer, and its subsidiaries' and affiliates' shall be entitled to recover from Employee all sums expended by Employer, and its subsidiaries and affiliates (including costs and attorneys' fees) in connection with such suit, claim, demand or cause of action. Employer and its subsidiaries and affiliates shall not be entitled to offset any of the amounts specified in the immediately preceding sentence against amounts otherwise owing by Employer and its subsidiaries and affiliates to Employee prior to a final determination under the terms of the arbitration provisions of this Agreement that Employee has breached the covenant contained in this Section 3.6.

3.7. Upon termination of the employment relationship as a result of Employee's death, Employee's heirs, administrators, or legatees shall be entitled to Employee's pro rata salary through the date of such termination, but Employee's heirs, administrators, or legatees shall not be entitled to any individual bonuses with respect to the operations of the Employer and its subsidiaries and affiliates during the calendar year in which Employee's employment with Employer is terminated.

3.8. Upon termination of the employment relationship as a result of Employee's incapacity, Employee shall be entitled to his pro rata salary through the date of such termination, but Employee shall not be entitled to any individual bonuses with respect to the operations of the Employer and its subsidiaries and affiliates during the calendar year in which Employee's employment with Employer is terminated.

3.9. In all cases, the compensation and benefits payable to Employee under this Agreement upon termination of the employment relationship 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.

3.10. Termination of the employment relationship shall not terminate those obligations imposed by this Agreement which are continuing in nature, including, without limitation, Employee's obligations of confidentiality, non-competition and Employee's continuing obligations with respect to business opportunities that had been entrusted to Employee by Employer during the employment relationship.

3.11. This Agreement governs the rights and obligations of Employer and Employee with respect to Employee's salary and other perquisites of employment.

4. UNITED STATES FOREIGN CORRUPT PRACTICES ACT AND OTHER LAWS:

4.1. Employee shall at all times comply with United States laws applicable to Employee's actions on behalf of Employer and its subsidiaries and affiliates, including specifically, without limitation, the United States Foreign Corrupt Practices Act, generally codified in 15 USC 78 (FCPA), as the FCPA may hereafter be amended, and/or its successor statutes. If Employee pleads guilty to or nolo contendre or admits civil or criminal liability under the FCPA or other applicable United States law, or if a court finds that Employee has personal civil or criminal liability under the FCPA or other applicable United States law, or if a court finds that Employee committed an action resulting in Employer or any of its subsidiaries having civil or criminal liability or responsibility under the FCPA or other applicable United States law, such action or finding shall constitute "cause" for termination under this Agreement unless Employer's Board of Directors determines that the actions found to be in violation of the FCPA or other applicable United States law were taken in good faith and in compliance with all applicable policies of Employer. Moreover, to the extent that Employer or any of its subsidiaries is found or held responsible for any civil or criminal fines or sanctions of any type under the FCPA or other applicable United States law or suffers other damages as a result of Employee's actions, Employee shall be responsible for, and shall reimburse and pay to such Employer an amount of money equal to, such civil or criminal fines, sanctions or damages. The rights afforded Employer under this provision are in addition to any and all rights and remedies otherwise afforded by the law.

5. OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS:

5.1. Employer owns certain confidential and proprietary information and trade secrets to which Employee will be given access for the purpose of carrying out his or her employment responsibilities hereunder. Furthermore, Employer agrees to provide Employee with confidential and proprietary information and trade secrets regarding the Employer and its subsidiaries and affiliates, in order to assist Employee in satisfying his or her obligations hereunder.

5.2 All information, ideas, concepts, improvements, discoveries, and inventions, whether patentable or not, which are conceived, made, developed or acquired by Employee, individually or in conjunction with others, during Employee's employment by Employer (whether during business hours or otherwise and whether on Employer's premises or otherwise) which relate to Employer's or any of

its subsidiaries' or affiliates' businesses, products or services (including, without limitation, all such information relating to corporate opportunities, research, financial and sales data, pricing and trading terms, evaluations, opinions, interpretations, acquisition prospects, the identity of customers or their requirements, the identity of key contacts within the customer's organizations or within the organization of acquisition prospects, or marketing and merchandising techniques, prospective names, and marks) shall be disclosed to Employer and are and shall be the sole and exclusive property of Employer. Upon termination of Employee's employment, for any reason, Employee promptly shall deliver the same, and all copies thereof, to Employer.

5.3. Employee will not, at any time during or after his employment by Employer, make any unauthorized disclosure of any confidential business information or trade secrets of Employer or its subsidiaries or affiliates, or make any use thereof, except in the carrying out of his employment responsibilities hereunder. As a result of Employee's employment by Employer, Employee may also from time to time have access to, or knowledge of, confidential business information or trade secrets of third parties, such as customers, suppliers, partners, joint venturers, and the like, of Employer and its subsidiaries and affiliates. Employee also agrees to preserve and protect the confidentiality of such third party confidential information and trade secrets to the same extent, and on the same basis, as Employer's or any of its subsidiaries' or affiliates' confidential business information and trade secrets.

5.4. If, during Employee's employment by Employer, Employee creates any original work of authorship fixed in any tangible medium of expression which is the subject matter of copyright (such as videotapes, written presentations on acquisitions, computer programs, E-mail, voice mail, electronic databases, drawings, maps, architectural renditions, models, manuals, brochures, or the like) relating to Employer's, or any of its subsidiaries' or affiliates' businesses, products, or services, whether such work is created solely by Employee or jointly with others (whether during business hours or otherwise and whether on Employer's or any of its subsidiaries' or affiliates' premises or otherwise), Employer shall be deemed the author of such work if the work is prepared by Employee in the scope of his or her employment; or, if the work is not prepared by Employee within the scope of his or her employment but is specially ordered by Employer or any of its subsidiaries or affiliates as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, or as an instructional text, then the work shall be considered to be work made for hire and Employer or any of its subsidiaries or affiliates shall be the author of the work. If such work is neither prepared by Employee within the scope of his or her employment nor a work specially ordered that is deemed to be a work made for hire, then Employee hereby agrees to assign, and by these presents does assign, to Employer all of Employee's worldwide right, title, and interest in and to such work and all rights of copyright therein.

5.5. Both during the period of Employee's employment by Employer and thereafter, Employee shall assist Employer, or any of its subsidiaries or affiliates and their nominees, at any time, in the protection of Employer's or any of its subsidiaries' or affiliates' worldwide right, title, and interest in and to information, ideas, concepts, improvements, discoveries, and inventions, and its copyrighted works, including without limitation, the execution of all formal assignment documents requested by Employer or any of its subsidiaries or affiliates or their nominees and the execution of all lawful oaths and applications for applications for patents and registration of copyright in the United States and foreign countries.

6. POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS:

6.1. As part of the consideration for the compensation and benefits to be paid and extended to Employee hereunder, and as an additional incentive for Employer to enter into this Agreement, Employer and Employee agree to the non-competition provisions of this Article 6. Employee agrees that during the period of Employee's non-competition obligations hereunder, Employee will not, directly or indirectly for Employee or for others, in any geographic area or market where Employer or any of its subsidiaries or affiliated companies are conducting any business as of the date of termination of the employment relationship or have during the previous twelve months conducted any business:

(i) engage in any business competitive with any line of business conducted by Employer or any of its subsidiaries or affiliates;

(ii) render advice or services to, or otherwise assist, any other person, association, or entity who is engaged, directly or indirectly, in any business competitive with any line of business conducted by Employer or any of its subsidiaries or affiliates;

(iii) encourage or induce any current or former employee of Employer or any of its subsidiaries or affiliates to leave the employment of Employer or any of its subsidiaries or affiliates or proselytize, offer employment, retain, hire or assist in the hiring of any such employee by any person, association, or entity not affiliated with Employer or any of its subsidiaries or affiliates; provided, however, that nothing in this subsection (iii) shall prohibit Employee from offering employment to any prior employee of Employer or any of its subsidiaries or affiliates who was not employed by Employer or any of its subsidiaries or affiliates at any time in the twelve (12) months prior to the termination of Employee's employment.

The non-competition obligations set forth in subsections (i) and (ii) of this
Section 6.1 shall apply during Employee's employment and for a period of three
(3) years after termination of employment. The obligations set forth in subsection (iii) of this Section 6.1 with respect to employees shall apply during Employee's employment and for a period of five (5) years after termination of employment If Employer or any of its subsidiaries or affiliates abandons a particular aspect of its business, that is, ceases such aspect of its business with the intention to permanently refrain from such aspect of its business, then this post-employment non-competition covenant shall not apply to such former aspect of that business.

6.2. Employee understands that the foregoing restrictions may limit his ability to engage in certain businesses anywhere in the world during the period provided for above, but acknowledges that Employee will receive sufficiently high remuneration and other benefits (e.g., the right to receive compensation under Section 3.6 for the remainder of the Term upon Involuntary Termination and access to certain confidential and proprietary information and trade secrets) under this Agreement to

justify such restriction. Employee acknowledges that money damages would not be sufficient remedy for any breach of this Article 6 by Employee, and Employer or any of its subsidiaries or affiliates shall be entitled to enforce the provisions of this Article 6 by terminating any payments then owing to Employee under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach, without any requirement for the securing or posting of any bond in connection with such remedies. Such remedies shall not be deemed the exclusive remedies for a breach of this Article 6, but shall be in addition to all remedies available at law or in equity to Employer or any of its subsidiaries or affiliates, including, without limitation, the recovery of damages from Employee and his agents involved in such breach.

6.3. It is expressly understood that the restrictions contained in this Article 6 are related to and result from the agreements of Employer and Employee in Article 5 and agreed that Employer and Employee consider the restrictions contained in this Article 6 to be reasonable and necessary to protect the confidential and proprietary information and trade secrets of Employer and its subsidiaries and affiliates. Nevertheless, if any of the aforesaid restrictions are found by a court having jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions therein set forth to be modified by such courts so as to be reasonable and enforceable and, as so modified by the court, to be fully enforced.

7. MISCELLANEOUS:

7.1. For purposes of this Agreement the terms "affiliates" or "affiliated" means an entity who directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with Employer.

7.2. Employee shall refrain, both during the employment relationship and after the employment relationship terminates, from publishing any oral or written statements about Employer or any of its subsidiaries' or affiliates' directors, officers, employees, agents or representatives that are slanderous, libelous, or defamatory; or that disclose private or confidential information about Employer or any of its subsidiaries' or affiliates' business affairs, officers, employees, agents, or representatives; or that constitute an intrusion into the seclusion or private lives of Employer or any of its subsidiaries' or affiliates' directors, officers, employees, agents, or representatives; or that give rise to unreasonable publicity about the private lives of Employer or any of its subsidiaries' or affiliates' officers, employees, agents, or representatives; or that place Employer or its subsidiaries' or affiliates' or its officers, employees, agents, or representatives in a false light before the public; or that constitute a misappropriation of the name or likeness Employer or any of its subsidiaries' or affiliates' or its officers, employees, agents, or representatives. A violation or threatened violation of this prohibition may be enjoined.

7.3. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to Employer to:

Group 1 Automotive, Inc.
950 Echo Lane, Suite 350
Houston, TX 77024

Attn: Chief Executive Officer

with a copy to:

Vinson & Elkins L.L.P.

2300 First City Tower
1001 Fannin Street
Houston, TX 77002-6760

Attn: John S. Watson

If to Employee, to the address shown on the first page hereof.

Either Employer or Employee may furnish a change of address to the other in writing in accordance herewith, except that notices of changes of address shall be effective only upon receipt.

7.4. This Agreement shall be governed in all respects by the laws of the State of Texas, excluding any conflict-of-law rule or principle that might refer the construction of the Agreement to the laws of another State or country.

7.5. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

7.6. It is a desire and intent of the parties that the terms, provisions, covenants, and remedies contained in this Agreement shall be enforceable to the fullest extent permitted by law. If any such term, provision, covenant, or remedy of this Agreement or the application thereof to any person, association, or entity or circumstances shall, to any extent, be construed to be invalid or unenforceable in whole or in part, then such term, provision, covenant, or remedy shall be construed in a manner so as to permit its enforceability under the applicable law to the fullest extent permitted by law. In any case, the remaining provisions of this Agreement or the application thereof to any person, association, or entity or circumstances other than those to which they have been held invalid or unenforceable, shall remain in full force and effect.

7.7. Any and all claims, demands, cause of action, disputes, controversies and other matters in question arising out of or relating to this Agreement, any provision hereof, the alleged breach thereof, or in any way relating to the subject matter of this Agreement, involving Employer, its subsidiaries and affiliates and Employee (all of which are referred to herein as "Claims"), even though some or all of such Claims allegedly are extra-contractual in nature, whether such Claims sound in

contract, tort or otherwise, at law or in equity, under state or federal law, whether provided by statute or the common law, for damages or any other relief, including equitable relief and specific performance, shall be resolved and decided by binding arbitration pursuant to the Federal Arbitration Act in accordance with the Commercial Arbitration Rules then in effect with the American Arbitration Association. In the arbitration proceeding the Employee shall select one arbitrator, the Employer shall select one arbitrator and the two arbitrators so selected shall select a third arbitrator. Should one party fail to select an arbitrator within five days after notice of the appointment of an arbitrator by the other party or should the two arbitrators selected by the Employee and the Employer fail to select an arbitrator within ten days after the date of the appointment of the last of such two arbitrators, any person sitting as a Judge of the United States District Court of the Southern District of Texas, Houston Division, upon application of the Employee or the Employer, shall appoint an arbitrator to fill such space with the same force and effect as though such arbitrator had been appointed in accordance with the immediately preceding sentence of this Section 7.7. The decision of a majority of the arbitrators shall be binding on the Employee, the Employer and its subsidiaries and affiliates. The arbitration proceeding shall be conducted in Houston, Texas. Judgment upon any award rendered in any such arbitration proceeding may be entered by any federal or state court having jurisdiction.

This agreement to arbitrate shall be enforceable in either federal or state court. The enforcement of this agreement to arbitrate and all procedural aspects of this Agreement to arbitrate, including but not limited to, the construction and interpretation of this agreement to arbitrate, the scope of the arbitrable issues, allegations of waiver, delay or defenses to arbitrability, and the rules governing the conduct of the arbitration, shall be governed by and construed pursuant to the Federal Arbitration Act.

In deciding the substance of any such Claim, the Arbitrators shall apply the substantive laws of the State of Texas; provided, however, that the Arbitrators shall have no authority to award treble, exemplary or punitive type damages under any circumstances regardless of whether such damages may be available under Texas law, the parties hereby waiving their right, if any, to recover treble, exemplary or punitive type damages in connection with any such Claims.

7.8. This Agreement shall be binding upon and inure to the benefit of Employer its subsidiaries and affiliates and any other person, association, or entity which may hereafter acquire or succeed to all or a portion of the business or assets of Employer by any means whether direct or indirect, by purchase, merger, consolidation, or otherwise. Employee's rights and obligations under this Agreement are personal and such rights, benefits, and obligations of Employee shall not be voluntarily or involuntarily assigned, alienated, or transferred, whether by operation of law or otherwise, by Employee without the prior written consent of Employer.

7.9. Except as provided in (1) written company policies promulgated by Employer dealing with issues such as securities trading, business ethics, governmental affairs and political contributions, consulting fees, commissions and other payments, compliance with law, investments and outside business interests as officers and employees, reporting responsibilities, administrative compliance, and the like, (2) the written benefits, plans, and programs referenced in Sections 2.2, 2.3 and 2.4, or (3) any signed written agreements contemporaneously or hereafter executed by Employer and Employee, this Agreement constitutes the entire agreement of the parties with regard to such subject matters, and

contains all of the covenants, promises, representations, warranties, and agreements between the parties with respect to such subject matters and replaces and merges previous agreements and discussions pertaining to the employment relationship between Employer and Employee. Specifically, but not by way of limitation, any other employment agreement or arrangement in existence as of the date hereof between Employer or any of its subsidiaries or affiliates and Employee is hereby canceled and Employee hereby irrevocably waives and renounces all of Employee's rights and claims under any such agreement or arrangement.

IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement in multiple originals to be effective on the date first stated above.

GROUP 1 AUTOMOTIVE, INC.

Chief Executive Officer

EXHIBIT 10.2
EMPLOYMENT AGREEMENT

This Employment Agreement ("Agreement") is entered into between Group 1 Automotive, Inc. having offices at 950 Echo Lane, Suite 350, Houston, Texas 77024 ("Employer"), and Robert E. Howard II, an individual currently residing at 1825 N. Coltrane, Edmond, Oklahoma 73034 ("Employee"), to be effective as of October __, 1997.

For and in consideration of the mutual promises, covenants, and obligations contained herein, Employer and Employee agree as follows:

1. EMPLOYMENT AND DUTIES:

1.1. Employer agrees to employ Employee, and Employee agrees to be employed by Employer, beginning October __, 1997 and continuing throughout the Term (as defined below) of this Agreement, subject to the terms and conditions of this Agreement.

1.2. Employee shall serve as "President -- Howard Group" of Employer. Employee agrees to serve in the assigned position and to perform diligently and to the best of Employee's abilities the duties and services appertaining to such position as determined by Employer, as well as such additional or different duties and services appropriate to such position which Employee from time to time may be reasonably directed to perform by Employer. Employee shall at all times comply with and be subject to such policies and procedures as Employer may establish from time to time.

1.3. Employee shall, during the period of Employee's employment by Employer, devote Employee's full business time, energy, and best efforts to the business and affairs of Employer. Employee may not engage, directly or indirectly, in any other business, investment, or activity that interferes with Employee's performance of Employee's duties hereunder, is contrary to the interests of Employer or any of its subsidiaries or affiliates, or requires any significant portion of Employee's business time; provided, however, that Employee may engage in passive personal investments that do not conflict with the business and affairs of the Employer or any of its subsidiaries or affiliates or interfere with Employee's performance of his or her duties hereunder.

1.4. Employee acknowledges and agrees that Employee owes a fiduciary duty of loyalty, fidelity and allegiance to act at all times in the best interests of Employer or any of its subsidiaries or affiliates and to do no act which would injure the business, interests, or reputation of Employer or any of its subsidiaries or affiliates. In keeping with these duties, Employee shall make full disclosure to Employer of all business opportunities pertaining to Employer's business and shall not appropriate for Employee's own benefit business opportunities concerning the subject matter of the fiduciary relationship.

1.5. It is agreed that any direct or indirect interest in, connection with, or benefit from any outside activities, particularly commercial activities, which interest might in any way adversely affect Employer, or any of its affiliates, involves a possible conflict of interest. In keeping with Employee's fiduciary duties to Employer, Employee agrees that Employee shall not knowingly become involved in a conflict of interest with Employer, or its affiliates, or upon discovery thereof, allow such a conflict to continue. Moreover, Employee agrees that Employee shall disclose to Employer's General Counsel (who shall be Employer's outside General Counsel unless Employer has employed an inside General Counsel) any facts which might involve such a conflict of interest that has not been approved by Employer's President. Employer and Employee recognize that it is impossible to provide an exhaustive list of actions or interests which constitute a "conflict of interest". Moreover, Employer and Employee recognize there are many borderline situations. In some instances, full disclosure of facts by Employee to Employer's General Counsel may be all that is necessary to enable Employer or its subsidiaries or affiliates to protect its interests. In others, if no improper motivation appears to exist and the interests of Employer or its subsidiaries or affiliates have not suffered, prompt elimination of the outside interest will suffice. In still others, it may be necessary for Employer to terminate the employment relationship. Employee agrees that Employer's determination as to whether a conflict of interest exists shall be conclusive. Employer reserves the right to take such action as, in its judgment, will end the conflict.

2. COMPENSATION AND BENEFITS:

2.1. Employee's initial base salary under this Agreement shall be $300,000.00 per annum and shall be paid in semi-monthly installments in accordance with Employer's standard payroll practice. Employee's base salary may be increased from time to time by Employer and, after any such change, Employee's new level of base salary shall be Employee's base salary for purposes of this Agreement until the effective date of any subsequent change.

2.2 Employee's participation in bonus plans shall be governed by the bonus and incentive plans adopted by the Board of Directors of Employer in which Employee is a participant.

2.3. If Employee is granted stock options, Employee will enter into a separate written stock option agreement pursuant to which Employee shall be granted the option to acquire common stock of Employer subject to the terms and conditions of Employer's 1996 Stock Incentive Plan and the stock option agreement entered into thereunder. The number of shares, exercise price per share and other terms of the options shall be as specified in such other written agreement.

2.4. While employed by Employer, Employee shall be allowed to participate, on the same basis generally as other employees of Employer, in all general employee benefit plans and programs, including improvements or modifications of the same, which on the effective date or thereafter are made available by Employer to all or substantially all of Employer's employees. Such benefits, plans, and programs may include, without limitation, medical, health, and dental care, life insurance, disability protection, and pension plans. Nothing in this Agreement is to be construed or interpreted to provide greater rights, participation, coverage, or benefits under such benefit plans or programs

than provided to similarly situated employees pursuant to the terms and conditions of such benefit plans and programs.

2.5. Employer shall not by reason of this Article 2 be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such incentive compensation or employee benefit program or plan, so long as such actions are similarly applicable to covered employees generally. Moreover, unless specifically provided for in a written plan document adopted by the Board of Directors of Employer, none of the benefits or arrangements described in this Article 2 shall be secured or funded in any way, and each shall instead constitute an unfunded and unsecured promise to pay money in the future exclusively from the general assets of Employer and its subsidiaries and affiliates.

2.6. Employer may withhold from any compensation, benefits, or amounts payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling.

3. TERM OF THIS AGREEMENT, EFFECT OF EXPIRATION OF TERM, AND TERMINATION PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH TERMINATION:

3.1. The term of this Agreement shall be for five (5) years from October __, 1997 through October __, 2002. Should Employee remain employed by Employer beyond the expiration of the Term, such employment shall convert to a month-to-month relationship terminable at any time by either Employer or Employee for any reason whatsoever, with or without cause, upon thirty days notice. Upon such termination of the continued at-will employment relationship by either Employer or Employee for any reason whatsoever, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate. Employee shall be entitled to pro rata salary through the date of such termination, but Employee shall not be entitled to any bonus with respect to the operations of the Employer and its subsidiaries and affiliates during the calendar year in which Employee's employment with Employer is terminated. Upon termination of employment, Employee shall repay to Employer all advances received by Employee from Employer or any of its subsidiaries or affiliates, including all advances drawn against any bonus.

3.2. Notwithstanding any other provisions of this Agreement, Employer shall have the right to terminate Employee's employment under this Agreement at any time for any of the following reasons:

(i) For "cause" upon the determination by Employer's Board of Directors that "cause" exists for the termination of the employment relationship. As used in this Section 3.2(i), the term "cause" shall mean (a) Employee has engaged in gross negligence, gross incompetence or willful misconduct in the performance of, or Employee's willful refusal without proper reason to perform, the duties and services required of Employee pursuant to this Agreement; (b) Employee has been convicted of a felony; or (c) Employee's

material breach of any material provision of this Agreement or corporate code or policy. It is expressly acknowledged and agreed that the decision as to whether "cause" exists for termination of the employment relationship by Employer is delegated to Employer's Board of Directors for determination. Employee, if he so requests, after reasonable notice of such Board of Directors meeting, shall be entitled to be heard before the Board of Directors. If Employee disagrees with the decision reached by Employer's Board of Directors, the dispute will be limited to whether Employer's Board of Directors reached its decision in good faith;

(ii) for any other reason whatsoever, including termination without cause, in the sole discretion of Employer's Board of Directors;

(iii) upon Employee's death; or

(iv) upon Employee's becoming incapacitated by accident, sickness, or other circumstance which in the reasonable opinion of a qualified doctor approved by Employer's Board of Directors renders him mentally or physically incapable of performing the duties and services required of Employee, and which will continue in the reasonable opinion of such doctor for a period of not less than 180 days.

The termination of Employee's employment shall constitute a "Termination for Cause" if made pursuant to Section 3.2(i); the effect of such termination is specified in Section 3.4. The termination of Employee's employment shall constitute an "Involuntary Termination" if made pursuant to Section 3.2(ii); the effect of such termination is specified in Section 3.5. The effect of the employment relationship being terminated pursuant to Section 3.2(iii) as a result of Employee's death is specified in Section 3.7. The effect of the employment relationship being terminated pursuant to Section 3.2(iv) as a result of the Employee becoming incapacitated is specified in Section 3.8.

3.3. Notwithstanding any other provisions of this Agreement, Employee shall have the right to terminate the employment relationship under this Agreement at any time for any of the following reasons:

(i) a material breach by Employer of any material provision of this Agreement, which remains uncorrected for 30 days following written notice of such breach by Employee to Employer's Board of Directors;

(ii) the dissolution of Employer; or

(iii) for any other reason whatsoever, in the sole discretion of Employee.

The termination of Employee's employment by Employee shall constitute an "Involuntary Termination" if made pursuant to Section 3.3(i) or 3.3(ii); the effect of such termination is specified in Section 3.5. The termination of Employee's employment by Employee shall constitute a "Voluntary Termination" if made pursuant to Sections 3.3(iii); the effect of such termination is specified in Section 3.4.

3.4. Upon a "Voluntary Termination" of the employment relationship by Employee or a termination of the employment relationship for "Cause" by Employer, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate as of the date of termination. Employee shall be entitled to pro rata salary through the date of such termination, but Employee shall not be entitled to any bonuses with respect to the operations of the Employer and its subsidiaries and affiliates during the calendar year in which Employee's employment with Employer is terminated.

3.5. Upon an Involuntary Termination of the employment relationship by either Employer or Employee pursuant to Sections 3.2(ii) or 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 the compensation specified in Section 2.1, payable bi-weekly, as if Employee's employment (which shall cease on the date of such Involuntary Termination) had continued for the full Term of this Agreement. Upon an Involuntary Termination of the employment relationship by Employee pursuant to Sections 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 lump sum payment the compensation specified in
Section 2.1 as if Employee's employment (which shall cease on the date of such Involuntary Termination) had continued for the full Term of this Agreement. 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. Employee's rights under this Section 3.5 are Employee's sole and exclusive rights against Employer or its subsidiaries or affiliates, 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.

3.6. Employee covenants not to sue or lodge any claim, demand or cause of action against Employer based on Involuntary Termination for any monies other than those specified in Section 3.5. If Employee breaches this covenant, Employer, and its subsidiaries' and affiliates' shall be entitled to recover from Employee all sums expended by Employer, and its subsidiaries and affiliates (including costs and attorneys' fees) in connection with such suit, claim, demand or cause of action. Employer and its subsidiaries and affiliates shall not be entitled to offset any of the amounts specified in the immediately preceding sentence against amounts otherwise owing by Employer and its subsidiaries and affiliates to Employee prior to a final determination under the terms of the arbitration provisions of this Agreement that Employee has breached the covenant contained in this Section 3.6.

3.7. Upon termination of the employment relationship as a result of Employee's death, Employee's heirs, administrators, or legatees shall be entitled to Employee's pro rata salary through the date of such termination, but Employee's heirs, administrators, or legatees shall not be entitled to any individual bonuses with respect to the operations of the Employer and its subsidiaries and affiliates during the calendar year in which Employee's employment with Employer is terminated.

3.8. Upon termination of the employment relationship as a result of Employee's incapacity, Employee shall be entitled to his pro rata salary through the date of such termination, but Employee shall not be entitled to any individual bonuses with respect to the operations of the Employer and its subsidiaries and affiliates during the calendar year in which Employee's employment with Employer is terminated.

3.9. In all cases, the compensation and benefits payable to Employee under this Agreement upon termination of the employment relationship 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.

3.10. Termination of the employment relationship shall not terminate those obligations imposed by this Agreement which are continuing in nature, including, without limitation, Employee's obligations of confidentiality, non-competition and Employee's continuing obligations with respect to business opportunities that had been entrusted to Employee by Employer during the employment relationship.

3.11. This Agreement governs the rights and obligations of Employer and Employee with respect to Employee's salary and other perquisites of employment.

4. UNITED STATES FOREIGN CORRUPT PRACTICES ACT AND OTHER LAWS:

4.1. Employee shall at all times comply with United States laws applicable to Employee's actions on behalf of Employer and its subsidiaries and affiliates, including specifically, without limitation, the United States Foreign Corrupt Practices Act, generally codified in 15 USC 78 (FCPA), as the FCPA may hereafter be amended, and/or its successor statutes. If Employee pleads guilty to or nolo contendre or admits civil or criminal liability under the FCPA or other applicable United States law, or if a court finds that Employee has personal civil or criminal liability under the FCPA or other applicable United States law, or if a court finds that Employee committed an action resulting in Employer or any of its subsidiaries having civil or criminal liability or responsibility under the FCPA or other applicable United States law, such action or finding shall constitute "cause" for termination under this Agreement unless Employer's Board of Directors determines that the actions found to be in violation of the FCPA or other applicable United States law were taken in good faith and in compliance with all applicable policies of Employer. Moreover, to the extent that Employer or any of its subsidiaries is found or held responsible for any civil or criminal fines or

sanctions of any type under the FCPA or other applicable United States law or suffers other damages as a result of Employee's actions, Employee shall be responsible for, and shall reimburse and pay to such Employer an amount of money equal to, such civil or criminal fines, sanctions or damages. The rights afforded Employer under this provision are in addition to any and all rights and remedies otherwise afforded by the law.

5. OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS:

5.1. Employer owns certain confidential and proprietary information and trade secrets to which Employee will be given access for the purpose of carrying out his or her employment responsibilities hereunder. Furthermore, Employer agrees to provide Employee with confidential and proprietary information and trade secrets regarding the Employer and its subsidiaries and affiliates, in order to assist Employee in satisfying his or her obligations hereunder.

5.2 All information, ideas, concepts, improvements, discoveries, and inventions, whether patentable or not, which are conceived, made, developed or acquired by Employee, individually or in conjunction with others, during Employee's employment by Employer (whether during business hours or otherwise and whether on Employer's premises or otherwise) which relate to Employer's or any of its subsidiaries' or affiliates' businesses, products or services (including, without limitation, all such information relating to corporate opportunities, research, financial and sales data, pricing and trading terms, evaluations, opinions, interpretations, acquisition prospects, the identity of customers or their requirements, the identity of key contacts within the customer's organizations or within the organization of acquisition prospects, or marketing and merchandising techniques, prospective names, and marks) shall be disclosed to Employer and are and shall be the sole and exclusive property of Employer. Upon termination of Employee's employment, for any reason, Employee promptly shall deliver the same, and all copies thereof, to Employer.

5.3. Employee will not, at any time during or after his employment by Employer, make any unauthorized disclosure of any confidential business information or trade secrets of Employer or its subsidiaries or affiliates, or make any use thereof, except in the carrying out of his employment responsibilities hereunder. As a result of Employee's employment by Employer, Employee may also from time to time have access to, or knowledge of, confidential business information or trade secrets of third parties, such as customers, suppliers, partners, joint venturers, and the like, of Employer and its subsidiaries and affiliates. Employee also agrees to preserve and protect the confidentiality of such third party confidential information and trade secrets to the same extent, and on the same basis, as Employer's or any of its subsidiaries' or affiliates' confidential business information and trade secrets.

5.4. If, during Employee's employment by Employer, Employee creates any original work of authorship fixed in any tangible medium of expression which is the subject matter of copyright (such as videotapes, written presentations on acquisitions, computer programs, E-mail, voice mail, electronic databases, drawings, maps, architectural renditions, models, manuals, brochures, or the like) relating to Employer's, or any of its subsidiaries' or affiliates' businesses, products, or services,

whether such work is created solely by Employee or jointly with others (whether during business hours or otherwise and whether on Employer's or any of its subsidiaries' or affiliates' premises or otherwise), Employer shall be deemed the author of such work if the work is prepared by Employee in the scope of his or her employment; or, if the work is not prepared by Employee within the scope of his or her employment but is specially ordered by Employer or any of its subsidiaries or affiliates as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, or as an instructional text, then the work shall be considered to be work made for hire and Employer or any of its subsidiaries or affiliates shall be the author of the work. If such work is neither prepared by Employee within the scope of his or her employment nor a work specially ordered that is deemed to be a work made for hire, then Employee hereby agrees to assign, and by these presents does assign, to Employer all of Employee's worldwide right, title, and interest in and to such work and all rights of copyright therein.

5.5. Both during the period of Employee's employment by Employer and thereafter, Employee shall assist Employer, or any of its subsidiaries or affiliates and their nominees, at any time, in the protection of Employer's or any of its subsidiaries' or affiliates' worldwide right, title, and interest in and to information, ideas, concepts, improvements, discoveries, and inventions, and its copyrighted works, including without limitation, the execution of all formal assignment documents requested by Employer or any of its subsidiaries or affiliates or their nominees and the execution of all lawful oaths and applications for applications for patents and registration of copyright in the United States and foreign countries.

6. POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS:

6.1. As part of the consideration for the compensation and benefits to be paid and extended to Employee hereunder, and as an additional incentive for Employer to enter into this Agreement, Employer and Employee agree to the non- competition provisions of this Article 6. Employee agrees that during the period of Employee's non-competition obligations hereunder, Employee will not, directly or indirectly for Employee or for others, in any geographic area or market where Employer or any of its subsidiaries or affiliated companies are conducting any business as of the date of termination of the employment relationship or have during the previous twelve months conducted any business:

(i) engage in any business competitive with any line of business conducted by Employer or any of its subsidiaries or affiliates;

(ii) render advice or services to, or otherwise assist, any other person, association, or entity who is engaged, directly or indirectly, in any business competitive with any line of business conducted by Employer or any of its subsidiaries or affiliates;

(iii) encourage or induce any current or former employee of Employer or any of its subsidiaries or affiliates to leave the employment of

Employer or any of its subsidiaries or affiliates or proselytize, offer employment, retain, hire or assist in the hiring of any such employee by any person, association, or entity not affiliated with Employer or any of its subsidiaries or affiliates; provided, however, that nothing in this subsection
(iii) shall prohibit Employee from offering employment to any prior employee of Employer or any of its subsidiaries or affiliates who was not employed by Employer or any of its subsidiaries or affiliates at any time in the twelve (12) months prior to the termination of Employee's employment.

The non-competition obligations set forth in subsections (i) and (ii) of this
Section 6.1 shall apply during Employee's employment and for a period of three
(3) years after termination of employment. The obligations set forth in subsection (iii) of this Section 6.1 with respect to employees shall apply during Employee's employment and for a period of five (5) years after termination of employment If Employer or any of its subsidiaries or affiliates abandons a particular aspect of its business, that is, ceases such aspect of its business with the intention to permanently refrain from such aspect of its business, then this post-employment non-competition covenant shall not apply to such former aspect of that business.

6.2. Employee understands that the foregoing restrictions may limit his ability to engage in certain businesses anywhere in the world during the period provided for above, but acknowledges that Employee will receive sufficiently high remuneration and other benefits (e.g., the right to receive compensation under Section 3.6 for the remainder of the Term upon Involuntary Termination and access to certain confidential and proprietary information and trade secrets) under this Agreement to justify such restriction. Employee acknowledges that money damages would not be sufficient remedy for any breach of this Article 6 by Employee, and Employer or any of its subsidiaries or affiliates shall be entitled to enforce the provisions of this Article 6 by terminating any payments then owing to Employee under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach, without any requirement for the securing or posting of any bond in connection with such remedies. Such remedies shall not be deemed the exclusive remedies for a breach of this Article 6, but shall be in addition to all remedies available at law or in equity to Employer or any of its subsidiaries or affiliates, including, without limitation, the recovery of damages from Employee and his agents involved in such breach.

6.3. It is expressly understood that the restrictions contained in this Article 6 are related to and result from the agreements of Employer and Employee in Article 5 and agreed that Employer and Employee consider the restrictions contained in this Article 6 to be reasonable and necessary to protect the confidential and proprietary information and trade secrets of Employer and its subsidiaries and affiliates. Nevertheless, if any of the aforesaid restrictions are found by a court having jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions therein set forth to be modified by such courts so as to be reasonable and enforceable and, as so modified by the court, to be fully enforced.

7. CONCERNING THE TULSA CHEVROLET DEALERSHIP:

If the shares of common stock of Employer placed in escrow in accordance with the Stock Purchase Agreement (the "Stock Purchase Agreement") by and among Employer, Howard Pontiac-GMC, Inc. and the stockholders of Howard Pontiac-GMC, Inc. are released and distributed according to the formula described in Section 5.19 of the Stock Purchase Agreement, Employer shall release Employee from his obligations under Section 1 and Section 6 of this Agreement to the extent necessary to permit Employee to:

(i) Own and operate the Chevrolet dealership in Tulsa, Oklahoma ("Tulsa Chevrolet");

(ii) Own and operate the Honda and Saturn dealerships adjoining Tulsa Chevrolet;

(iii) Expand the existing Tulsa Chevrolet facility ("Existing Facility") or construct a replacement facility ("Replacement Facility") on property within five miles of the Existing Facility;

(iv) Acquire any other automobile franchise provided that such acquired automobile franchise is moved into, or adjacent to, the Existing Facility or the Replacement Facility; and

(v) Temporarily operate any acquired automobile franchise pending the relocation of such acquired automobile franchise into, or adjacent to, the Existing Facility or the Replacement Facility.

8. MISCELLANEOUS:

8.1. For purposes of this Agreement the terms "affiliates" or "affiliated" means an entity who directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with Employer.

8.2. Employee shall refrain, both during the employment relationship and after the employment relationship terminates, from publishing any oral or written statements about Employer or any of its subsidiaries' or affiliates' directors, officers, employees, agents or representatives that are slanderous, libelous, or defamatory; or that disclose private or confidential information about Employer or any of its subsidiaries' or affiliates' business affairs, officers, employees, agents, or representatives; or that constitute an intrusion into the seclusion or private lives of Employer or any of its subsidiaries' or affiliates' directors, officers, employees, agents, or representatives; or that give rise to unreasonable publicity about the private lives of Employer or any of its subsidiaries' or affiliates' officers, employees, agents, or representatives; or that place Employer or its subsidiaries'

or affiliates' or its officers, employees, agents, or representatives in a false light before the public; or that constitute a misappropriation of the name or likeness Employer or any of its subsidiaries' or affiliates' or its officers, employees, agents, or representatives. A violation or threatened violation of this prohibition may be enjoined.

8.3. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to Employer to:

Group 1 Automotive, Inc.
950 Echo Lane, Suite 350
Houston, TX 77024

Attn: Chief Executive Officer

with a copy to:

Vinson & Elkins L.L.P.

2300 First City Tower
1001 Fannin Street
Houston, TX 77002-6760

Attn: John S. Watson

If to Employee, to the address shown on the first page hereof.

with a copy to:

Randall K. Calvert
6520 N. Western, Suite 100 Oklahoma City, Oklahoma 73116

Either Employer or Employee may furnish a change of address to the other in writing in accordance herewith, except that notices of changes of address shall be effective only upon receipt.

8.4. This Agreement shall be governed in all respects by the laws of the State of Oklahoma, excluding any conflict-of-law rule or principle that might refer the construction of the Agreement to the laws of another State or country.

8.5. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be

deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

8.6. It is a desire and intent of the parties that the terms, provisions, covenants, and remedies contained in this Agreement shall be enforceable to the fullest extent permitted by law. If any such term, provision, covenant, or remedy of this Agreement or the application thereof to any person, association, or entity or circumstances shall, to any extent, be construed to be invalid or unenforceable in whole or in part, then such term, provision, covenant, or remedy shall be construed in a manner so as to permit its enforceability under the applicable law to the fullest extent permitted by law. In any case, the remaining provisions of this Agreement or the application thereof to any person, association, or entity or circumstances other than those to which they have been held invalid or unenforceable, shall remain in full force and effect.

8.7. Any and all claims, demands, cause of action, disputes, controversies and other matters in question arising out of or relating to this Agreement, any provision hereof, the alleged breach thereof, or in any way relating to the subject matter of this Agreement, involving Employer, its subsidiaries and affiliates and Employee (all of which are referred to herein as "Claims"), even though some or all of such Claims allegedly are extra- contractual in nature, whether such Claims sound in contract, tort or otherwise, at law or in equity, under state or federal law, whether provided by statute or the common law, for damages or any other relief, including equitable relief and specific performance, shall be resolved and decided by binding arbitration pursuant to the Federal Arbitration Act in accordance with the Commercial Arbitration Rules then in effect with the American Arbitration Association. In the arbitration proceeding the Employee shall select one arbitrator, the Employer shall select one arbitrator and the two arbitrators so selected shall select a third arbitrator. Should one party fail to select an arbitrator within five days after notice of the appointment of an arbitrator by the other party or should the two arbitrators selected by the Employee and the Employer fail to select an arbitrator within ten days after the date of the appointment of the last of such two arbitrators, any person sitting as a Judge of the United States District Court of the Western District of Oklahoma, upon application of the Employee or the Employer, shall appoint an arbitrator to fill such space with the same force and effect as though such arbitrator had been appointed in accordance with the immediately preceding sentence of this
Section 7.7. The decision of a majority of the arbitrators shall be binding on the Employee, the Employer and its subsidiaries and affiliates. The arbitration proceeding shall be conducted in Oklahoma City, Oklahoma. Judgment upon any award rendered in any such arbitration proceeding may be entered by any federal or state court having jurisdiction.

This agreement to arbitrate shall be enforceable in either federal or state court. The enforcement of this agreement to arbitrate and all procedural aspects of this Agreement to arbitrate, including but not limited to, the construction and interpretation of this agreement to arbitrate, the scope of the arbitrable issues, allegations of waiver, delay or defenses to arbitrability, and the rules governing the conduct of the arbitration, shall be governed by and construed pursuant to the Federal Arbitration Act.

In deciding the substance of any such Claim, the Arbitrators shall apply the substantive laws of the State of Oklahoma; provided, however, that the Arbitrators shall have no authority to award treble, exemplary or punitive type damages under any circumstances regardless of whether such damages may be available under Oklahoma law, the parties hereby waiving their right, if any, to recover treble, exemplary or punitive type damages in connection with any such Claims.

8.8. This Agreement shall be binding upon and inure to the benefit of Employer its subsidiaries and affiliates and any other person, association, or entity which may hereafter acquire or succeed to all or a portion of the business or assets of Employer by any means whether direct or indirect, by purchase, merger, consolidation, or otherwise. Employee's rights and obligations under this Agreement are personal and such rights, benefits, and obligations of Employee shall not be voluntarily or involuntarily assigned, alienated, or transferred, whether by operation of law or otherwise, by Employee without the prior written consent of Employer.

8.9. Except as provided in (1) written company policies promulgated by Employer dealing with issues such as securities trading, business ethics, governmental affairs and political contributions, consulting fees, commissions and other payments, compliance with law, investments and outside business interests as officers and employees, reporting responsibilities, administrative compliance, and the like, (2) the written benefits, plans, and programs referenced in Sections 2.2, 2.3 and 2.4, or (3) any signed written agreements contemporaneously or hereafter executed by Employer and Employee, this Agreement constitutes the entire agreement of the parties with regard to such subject matters, and contains all of the covenants, promises, representations, warranties, and agreements between the parties with respect to such subject matters and replaces and merges previous agreements and discussions pertaining to the employment relationship between Employer and Employee. Specifically, but not by way of limitation, any other employment agreement or arrangement in existence as of the date hereof between Employer or any of its subsidiaries or affiliates and Employee is hereby canceled and Employee hereby irrevocably waives and renounces all of Employee's rights and claims under any such agreement or arrangement.

IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement in multiple originals to be effective on the date first stated above.

GROUP 1 AUTOMOTIVE, INC.

Chief Executive Officer

EXHIBIT 10.3

EMPLOYMENT AGREEMENT

This Employment Agreement ("Agreement") is entered into between Group 1 Automotive, Inc. having offices at 950 Echo Lane, Suite 350, Houston, Texas 77024 ("Employer"), and Sterling B. McCall, Jr., an individual currently residing at 37 Saddlebrook, Houston, Texas 77024 ("Employee"), to be effective as of October __, 1997.

For and in consideration of the mutual promises, covenants, and obligations contained herein, Employer and Employee agree as follows:

1. EMPLOYMENT AND DUTIES:

1.1. Employer agrees to employ Employee, and Employee agrees to be employed by Employer, beginning October __, 1997 and continuing throughout the Term (as defined below) of this Agreement, subject to the terms and conditions of this Agreement.

1.2. Employee shall serve as "President -- McCall Group" of Employer. Employee agrees to serve in the assigned position and to perform diligently and to the best of Employee's abilities the duties and services appertaining to such position as determined by Employer, as well as such additional or different duties and services appropriate to such position which Employee from time to time may be reasonably directed to perform by Employer. Employee shall at all times comply with and be subject to such policies and procedures as Employer may establish from time to time.

1.3. Employee shall, during the period of Employee's employment by Employer, devote Employee's full business time, energy, and best efforts to the business and affairs of Employer. Employee may not engage, directly or indirectly, in any other business, investment, or activity that interferes with Employee's performance of Employee's duties hereunder, is contrary to the interests of Employer or any of its subsidiaries or affiliates, or requires any significant portion of Employee's business time; provided, however, that Employee may engage in passive personal investments that do not conflict with the business and affairs of the Employer or any of its subsidiaries or affiliates or interfere with Employee's performance of his or her duties hereunder.

1.4. Employee acknowledges and agrees that Employee owes a fiduciary duty of loyalty, fidelity and allegiance to act at all times in the best interests of Employer or any of its subsidiaries or affiliates and to do no act which would injure the business, interests, or reputation of Employer or any of its subsidiaries or affiliates. In keeping with these duties, Employee shall make full disclosure to Employer of all business opportunities pertaining to Employer's business and shall not appropriate for Employee's own benefit business opportunities concerning the subject matter of the fiduciary relationship.

1.5. It is agreed that any direct or indirect interest in, connection with, or benefit from any outside activities, particularly commercial activities, which interest might in any way adversely affect Employer, or any of its affiliates, involves a possible conflict of interest. In keeping with Employee's fiduciary duties to Employer, Employee agrees that Employee shall not knowingly become involved in a conflict of interest with Employer, or its affiliates, or upon discovery thereof, allow such a conflict to continue. Moreover, Employee agrees that Employee shall disclose to Employer's General Counsel (who shall be Employer's outside General Counsel unless Employer has employed an inside General

Counsel) any facts which might involve such a conflict of interest that has not been approved by Employer's President. Employer and Employee recognize that it is impossible to provide an exhaustive list of actions or interests which constitute a "conflict of interest". Moreover, Employer and Employee recognize there are many borderline situations. In some instances, full disclosure of facts by Employee to Employer's General Counsel may be all that is necessary to enable Employer or its subsidiaries or affiliates to protect its interests. In others, if no improper motivation appears to exist and the interests of Employer or its subsidiaries or affiliates have not suffered, prompt elimination of the outside interest will suffice. In still others, it may be necessary for Employer to terminate the employment relationship. Employee agrees that Employer's determination as to whether a conflict of interest exists shall be conclusive. Employer reserves the right to take such action as, in its judgment, will end the conflict.

2. COMPENSATION AND BENEFITS:

2.1. Employee's initial base salary under this Agreement shall be $300,000.00 per annum and shall be paid in semi-monthly installments in accordance with Employer's standard payroll practice. Employee's base salary may be increased from time to time by Employer and, after any such change, Employee's new level of base salary shall be Employee's base salary for purposes of this Agreement until the effective date of any subsequent change.

2.2 Employee's participation in bonus plans shall be governed by the bonus and incentive plans adopted by the Board of Directors of Employer in which Employee is a participant.

2.3. If Employee is granted stock options, Employee will enter into a separate written stock option agreement pursuant to which Employee shall be granted the option to acquire common stock of Employer subject to the terms and conditions of Employer's 1996 Stock Incentive Plan and the stock option agreement entered into thereunder. The number of shares, exercise price per share and other terms of the options shall be as specified in such other written agreement.

2.4. While employed by Employer, Employee shall be allowed to participate, on the same basis generally as other employees of Employer, in all general employee benefit plans and programs, including improvements or modifications of the same, which on the effective date or thereafter are made available by Employer to all or substantially all of Employer's employees. Such benefits, plans, and programs may include, without limitation, medical, health, and dental care, life insurance, disability protection, and pension plans. Nothing in this Agreement is to be construed or interpreted to provide greater rights, participation, coverage, or benefits under such benefit plans or programs than provided to similarly situated employees pursuant to the terms and conditions of such benefit plans and programs.

2.5. Employer shall not by reason of this Article 2 be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such incentive compensation or employee benefit program or plan, so long as such actions are similarly applicable to covered employees generally. Moreover, unless specifically provided for in a written plan document adopted by the Board of Directors of Employer, none of the benefits or arrangements described in this Article 2 shall be secured or funded in any way, and each shall instead constitute an unfunded and unsecured promise

to pay money in the future exclusively from the general assets of Employer and its subsidiaries and affiliates.

2.6. Employer may withhold from any compensation, benefits, or amounts payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling.

3. TERM OF THIS AGREEMENT, EFFECT OF EXPIRATION OF TERM, AND TERMINATION PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH TERMINATION:

3.1. The term of this Agreement shall be for five (5) years from October __, 1997 through October __, 2002. Should Employee remain employed by Employer beyond the expiration of the Term, such employment shall convert to a month-to-month relationship terminable at any time by either Employer or Employee for any reason whatsoever, with or without cause, upon thirty days notice. Upon such termination of the continued at-will employment relationship by either Employer or Employee for any reason whatsoever, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate. Employee shall be entitled to pro rata salary through the date of such termination, but Employee shall not be entitled to any bonus with respect to the operations of the Employer and its subsidiaries and affiliates during the calendar year in which Employee's employment with Employer is terminated. Upon termination of employment, Employee shall repay to Employer all advances received by Employee from Employer or any of its subsidiaries or affiliates, including all advances drawn against any bonus.

3.2. Notwithstanding any other provisions of this Agreement, Employer shall have the right to terminate Employee's employment under this Agreement at any time for any of the following reasons:

(i) For "cause" upon the determination by Employer's Board of Directors that "cause" exists for the termination of the employment relationship. As used in this Section 3.2(i), the term "cause" shall mean (a) Employee has engaged in gross negligence, gross incompetence or willful misconduct in the performance of, or Employee's willful refusal without proper reason to perform, the duties and services required of Employee pursuant to this Agreement; (b) Employee has been convicted of a felony; or (c) Employee's material breach of any material provision of this Agreement or corporate code or policy. It is expressly acknowledged and agreed that the decision as to whether "cause" exists for termination of the employment relationship by Employer is delegated to Employer's Board of Directors for determination. Employee, if he so requests, after reasonable notice of such Board of Directors meeting, shall be entitled to be heard before the Board of Directors. If Employee disagrees with the decision reached by Employer's Board of Directors, the dispute will be limited to whether Employer's Board of Directors reached its decision in good faith;

(ii) for any other reason whatsoever, including termination without cause, in the sole discretion of Employer's Board of Directors;

(iii) upon Employee's death; or

(iv) upon Employee's becoming incapacitated by accident, sickness, or other circumstance which in the reasonable opinion of a qualified doctor approved by Employer's Board of Directors renders him mentally or physically incapable of performing the duties and services required of Employee, and which will continue in the reasonable opinion of such doctor for a period of not less than 180 days.

The termination of Employee's employment shall constitute a "Termination for Cause" if made pursuant to Section 3.2(i); the effect of such termination is specified in Section 3.4. The termination of Employee's employment shall constitute an "Involuntary Termination" if made pursuant to Section 3.2(ii); the effect of such termination is specified in Section 3.5. The effect of the employment relationship being terminated pursuant to Section 3.2(iii) as a result of Employee's death is specified in Section 3.7. The effect of the employment relationship being terminated pursuant to Section 3.2(iv) as a result of the Employee becoming incapacitated is specified in Section 3.8.

3.3. Notwithstanding any other provisions of this Agreement, Employee shall have the right to terminate the employment relationship under this Agreement at any time for any of the following reasons:

(i) a material breach by Employer of any material provision of this Agreement, which remains uncorrected for 30 days following written notice of such breach by Employee to Employer's Board of Directors;

(ii) the dissolution of Employer; or

(iii) for any other reason whatsoever, in the sole discretion of Employee.

The termination of Employee's employment by Employee shall constitute an "Involuntary Termination" if made pursuant to Section 3.3(i) or 3.3(ii); the effect of such termination is specified in Section 3.5. The termination of Employee's employment by Employee shall constitute a "Voluntary Termination" if made pursuant to Sections 3.3(iii); the effect of such termination is specified in Section 3.4.

3.4. Upon a "Voluntary Termination" of the employment relationship by Employee or a termination of the employment relationship for "Cause" by Employer, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate as of the date of termination. Employee shall be entitled to pro rata salary through the date of such termination, but Employee shall not be entitled to any bonuses with respect to the operations of the Employer and its subsidiaries and affiliates during the calendar year in which Employee's employment with Employer is terminated.

3.5. Upon an Involuntary Termination of the employment relationship by either Employer or Employee pursuant to Sections 3.2(ii) or 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 the compensation specified in Section 2.1, payable bi-weekly, as if Employee's employment (which shall cease on the date of such Involuntary Termination) had continued for the full Term of this Agreement. Upon an Involuntary Termination of the employment relationship by Employee pursuant to Sections 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 lump sum payment the compensation specified in
Section 2.1 as if Employee's employment (which shall cease on the date of such Involuntary Termination) had continued for the full Term of this Agreement. 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. Employee's rights under this Section 3.5 are Employee's sole and exclusive rights against Employer or its subsidiaries or affiliates, 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.

3.6. Employee covenants not to sue or lodge any claim, demand or cause of action against Employer based on Involuntary Termination for any monies other than those specified in Section 3.5. If Employee breaches this covenant, Employer, and its subsidiaries' and affiliates' shall be entitled to recover from Employee all sums expended by Employer, and its subsidiaries and affiliates (including costs and attorneys' fees) in connection with such suit, claim, demand or cause of action. Employer and its subsidiaries and affiliates shall not be entitled to offset any of the amounts specified in the immediately preceding sentence against amounts otherwise owing by Employer and its subsidiaries and affiliates to Employee prior to a final determination under the terms of the arbitration provisions of this Agreement that Employee has breached the covenant contained in this Section 3.6.

3.7. Upon termination of the employment relationship as a result of Employee's death, Employee's heirs, administrators, or legatees shall be entitled to Employee's pro rata salary through the date of such termination, but Employee's heirs, administrators, or legatees shall not be entitled to any individual bonuses with respect to the operations of the Employer and its subsidiaries and affiliates during the calendar year in which Employee's employment with Employer is terminated.

3.8. Upon termination of the employment relationship as a result of Employee's incapacity, Employee shall be entitled to his pro rata salary through the date of such termination, but Employee shall not be entitled to any individual bonuses with respect to the operations of the Employer and its subsidiaries and affiliates during the calendar year in which Employee's employment with Employer is terminated.

3.9. In all cases, the compensation and benefits payable to Employee under this Agreement upon termination of the employment relationship 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.

3.10. Termination of the employment relationship shall not terminate those obligations imposed by this Agreement which are continuing in nature, including, without limitation, Employee's obligations of confidentiality, non-competition and Employee's continuing obligations with respect to business opportunities that had been entrusted to Employee by Employer during the employment relationship.

3.11. This Agreement governs the rights and obligations of Employer and Employee with respect to Employee's salary and other perquisites of employment.

4. UNITED STATES FOREIGN CORRUPT PRACTICES ACT AND OTHER LAWS:

4.1. Employee shall at all times comply with United States laws applicable to Employee's actions on behalf of Employer and its subsidiaries and affiliates, including specifically, without limitation, the United States Foreign Corrupt Practices Act, generally codified in 15 USC 78 (FCPA), as the FCPA may hereafter be amended, and/or its successor statutes. If Employee pleads guilty to or nolo contendre or admits civil or criminal liability under the FCPA or other applicable United States law, or if a court finds that Employee has personal civil or criminal liability under the FCPA or other applicable United States law, or if a court finds that Employee committed an action resulting in Employer or any of its subsidiaries having civil or criminal liability or responsibility under the FCPA or other applicable United States law, such action or finding shall constitute "cause" for termination under this Agreement unless Employer's Board of Directors determines that the actions found to be in violation of the FCPA or other applicable United States law were taken in good faith and in compliance with all applicable policies of Employer. Moreover, to the extent that Employer or any of its subsidiaries is found or held responsible for any civil or criminal fines or sanctions of any type under the FCPA or other applicable United States law or suffers other damages as a result of Employee's actions, Employee shall be responsible for, and shall reimburse and pay to such Employer an amount of money equal to, such civil or criminal fines, sanctions or damages. The rights afforded Employer under this provision are in addition to any and all rights and remedies otherwise afforded by the law.

5. OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS:

5.1. Employer owns certain confidential and proprietary information and trade secrets to which Employee will be given access for the purpose of carrying out his or her employment responsibilities hereunder. Furthermore, Employer agrees to provide Employee with confidential and proprietary information and trade secrets regarding the Employer and its subsidiaries and affiliates, in order to assist Employee in satisfying his or her obligations hereunder.

5.2 All information, ideas, concepts, improvements, discoveries, and inventions, whether patentable or not, which are conceived, made, developed or acquired by Employee, individually or in conjunction with others, during Employee's employment by Employer (whether during business hours or otherwise and whether on Employer's premises or otherwise) which relate to Employer's or any of

its subsidiaries' or affiliates' businesses, products or services (including, without limitation, all such information relating to corporate opportunities, research, financial and sales data, pricing and trading terms, evaluations, opinions, interpretations, acquisition prospects, the identity of customers or their requirements, the identity of key contacts within the customer's organizations or within the organization of acquisition prospects, or marketing and merchandising techniques, prospective names, and marks) shall be disclosed to Employer and are and shall be the sole and exclusive property of Employer. Upon termination of Employee's employment, for any reason, Employee promptly shall deliver the same, and all copies thereof, to Employer.

5.3. Employee will not, at any time during or after his employment by Employer, make any unauthorized disclosure of any confidential business information or trade secrets of Employer or its subsidiaries or affiliates, or make any use thereof, except in the carrying out of his employment responsibilities hereunder. As a result of Employee's employment by Employer, Employee may also from time to time have access to, or knowledge of, confidential business information or trade secrets of third parties, such as customers, suppliers, partners, joint venturers, and the like, of Employer and its subsidiaries and affiliates. Employee also agrees to preserve and protect the confidentiality of such third party confidential information and trade secrets to the same extent, and on the same basis, as Employer's or any of its subsidiaries' or affiliates' confidential business information and trade secrets.

5.4. If, during Employee's employment by Employer, Employee creates any original work of authorship fixed in any tangible medium of expression which is the subject matter of copyright (such as videotapes, written presentations on acquisitions, computer programs, E-mail, voice mail, electronic databases, drawings, maps, architectural renditions, models, manuals, brochures, or the like) relating to Employer's, or any of its subsidiaries' or affiliates' businesses, products, or services, whether such work is created solely by Employee or jointly with others (whether during business hours or otherwise and whether on Employer's or any of its subsidiaries' or affiliates' premises or otherwise), Employer shall be deemed the author of such work if the work is prepared by Employee in the scope of his or her employment; or, if the work is not prepared by Employee within the scope of his or her employment but is specially ordered by Employer or any of its subsidiaries or affiliates as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, or as an instructional text, then the work shall be considered to be work made for hire and Employer or any of its subsidiaries or affiliates shall be the author of the work. If such work is neither prepared by Employee within the scope of his or her employment nor a work specially ordered that is deemed to be a work made for hire, then Employee hereby agrees to assign, and by these presents does assign, to Employer all of Employee's worldwide right, title, and interest in and to such work and all rights of copyright therein.

5.5. Both during the period of Employee's employment by Employer and thereafter, Employee shall assist Employer, or any of its subsidiaries or affiliates and their nominees, at any time, in the protection of Employer's or any of its subsidiaries' or affiliates' worldwide right, title, and interest in and to information, ideas, concepts, improvements, discoveries, and inventions, and its copyrighted works, including without limitation, the execution of all formal assignment documents requested by Employer or any of its subsidiaries or affiliates or their nominees and the execution of all lawful oaths and applications for applications for patents and registration of copyright in the United States and foreign countries.

6. POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS:

6.1. As part of the consideration for the compensation and benefits to be paid and extended to Employee hereunder, and as an additional incentive for Employer to enter into this Agreement, Employer and Employee agree to the non-competition provisions of this Article 6. Employee agrees that during the period of Employee's non-competition obligations hereunder, Employee will not, directly or indirectly for Employee or for others, in any geographic area or market where Employer or any of its subsidiaries or affiliated companies are conducting any business as of the date of termination of the employment relationship or have during the previous twelve months conducted any business:

(i) engage in any business competitive with any line of business conducted by Employer or any of its subsidiaries or affiliates;

(ii) render advice or services to, or otherwise assist, any other person, association, or entity who is engaged, directly or indirectly, in any business competitive with any line of business conducted by Employer or any of its subsidiaries or affiliates;

(iii) encourage or induce any current or former employee of Employer or any of its subsidiaries or affiliates to leave the employment of Employer or any of its subsidiaries or affiliates or proselytize, offer employment, retain, hire or assist in the hiring of any such employee by any person, association, or entity not affiliated with Employer or any of its subsidiaries or affiliates; provided, however, that nothing in this subsection (iii) shall prohibit Employee from offering employment to any prior employee of Employer or any of its subsidiaries or affiliates who was not employed by Employer or any of its subsidiaries or affiliates at any time in the twelve (12) months prior to the termination of Employee's employment.

The non-competition obligations set forth in subsections (i) and (ii) of this
Section 6.1 shall apply during Employee's employment and for a period of three
(3) years after termination of employment. The obligations set forth in subsection (iii) of this Section 6.1 with respect to employees shall apply during Employee's employment and for a period of five (5) years after termination of employment If Employer or any of its subsidiaries or affiliates abandons a particular aspect of its business, that is, ceases such aspect of its business with the intention to permanently refrain from such aspect of its business, then this post-employment non-competition covenant shall not apply to such former aspect of that business.

6.2. Employee understands that the foregoing restrictions may limit his ability to engage in certain businesses anywhere in the world during the period provided for above, but acknowledges that Employee will receive sufficiently high remuneration and other benefits (e.g., the right to receive compensation under Section 3.6 for the remainder of the Term upon Involuntary Termination and access to certain confidential and proprietary information and trade secrets) under this Agreement to

justify such restriction. Employee acknowledges that money damages would not be sufficient remedy for any breach of this Article 6 by Employee, and Employer or any of its subsidiaries or affiliates shall be entitled to enforce the provisions of this Article 6 by terminating any payments then owing to Employee under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach, without any requirement for the securing or posting of any bond in connection with such remedies. Such remedies shall not be deemed the exclusive remedies for a breach of this Article 6, but shall be in addition to all remedies available at law or in equity to Employer or any of its subsidiaries or affiliates, including, without limitation, the recovery of damages from Employee and his agents involved in such breach.

6.3. It is expressly understood that the restrictions contained in this Article 6 are related to and result from the agreements of Employer and Employee in Article 5 and agreed that Employer and Employee consider the restrictions contained in this Article 6 to be reasonable and necessary to protect the confidential and proprietary information and trade secrets of Employer and its subsidiaries and affiliates. Nevertheless, if any of the aforesaid restrictions are found by a court having jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions therein set forth to be modified by such courts so as to be reasonable and enforceable and, as so modified by the court, to be fully enforced.

7. MISCELLANEOUS:

7.1. For purposes of this Agreement the terms "affiliates" or "affiliated" means an entity who directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with Employer.

7.2. Employee shall refrain, both during the employment relationship and after the employment relationship terminates, from publishing any oral or written statements about Employer or any of its subsidiaries' or affiliates' directors, officers, employees, agents or representatives that are slanderous, libelous, or defamatory; or that disclose private or confidential information about Employer or any of its subsidiaries' or affiliates' business affairs, officers, employees, agents, or representatives; or that constitute an intrusion into the seclusion or private lives of Employer or any of its subsidiaries' or affiliates' directors, officers, employees, agents, or representatives; or that give rise to unreasonable publicity about the private lives of Employer or any of its subsidiaries' or affiliates' officers, employees, agents, or representatives; or that place Employer or its subsidiaries' or affiliates' or its officers, employees, agents, or representatives in a false light before the public; or that constitute a misappropriation of the name or likeness Employer or any of its subsidiaries' or affiliates' or its officers, employees, agents, or representatives. A violation or threatened violation of this prohibition may be enjoined.

7.3. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to Employer to:

Group 1 Automotive, Inc.
950 Echo Lane, Suite 350
Houston, TX 77024

Attn: Chief Executive Officer

with a copy to:

Vinson & Elkins L.L.P.

2300 First City Tower
1001 Fannin Street
Houston, TX 77002-6760

Attn: John S. Watson

If to Employee, to the address shown on the first page hereof.

with a copy to:

Robert D. Remy
Two Memorial City Plaza 820 Gessner, Suite 1360 Houston, Texas 77024

Either Employer or Employee may furnish a change of address to the other in writing in accordance herewith, except that notices of changes of address shall be effective only upon receipt.

7.4. This Agreement shall be governed in all respects by the laws of the State of Texas, excluding any conflict-of-law rule or principle that might refer the construction of the Agreement to the laws of another State or country.

7.5. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

7.6. It is a desire and intent of the parties that the terms, provisions, covenants, and remedies contained in this Agreement shall be enforceable to the fullest extent permitted by law. If any such term, provision, covenant, or remedy of this Agreement or the application thereof to any person, association, or entity or circumstances shall, to any extent, be construed to be invalid or unenforceable in whole or in part, then such term, provision, covenant, or remedy shall be construed in a manner so as to permit its enforceability under the applicable law to the fullest extent permitted by law. In any case, the remaining provisions of this Agreement or the application thereof to any person, association,

or entity or circumstances other than those to which they have been held invalid or unenforceable, shall remain in full force and effect.

7.7. Any and all claims, demands, cause of action, disputes, controversies and other matters in question arising out of or relating to this Agreement, any provision hereof, the alleged breach thereof, or in any way relating to the subject matter of this Agreement, involving Employer, its subsidiaries and affiliates and Employee (all of which are referred to herein as "Claims"), even though some or all of such Claims allegedly are extra-contractual in nature, whether such Claims sound in contract, tort or otherwise, at law or in equity, under state or federal law, whether provided by statute or the common law, for damages or any other relief, including equitable relief and specific performance, shall be resolved and decided by binding arbitration pursuant to the Federal Arbitration Act in accordance with the Commercial Arbitration Rules then in effect with the American Arbitration Association. In the arbitration proceeding the Employee shall select one arbitrator, the Employer shall select one arbitrator and the two arbitrators so selected shall select a third arbitrator. Should one party fail to select an arbitrator within five days after notice of the appointment of an arbitrator by the other party or should the two arbitrators selected by the Employee and the Employer fail to select an arbitrator within ten days after the date of the appointment of the last of such two arbitrators, any person sitting as a Judge of the United States District Court of the Southern District of Texas, Houston Division, upon application of the Employee or the Employer, shall appoint an arbitrator to fill such space with the same force and effect as though such arbitrator had been appointed in accordance with the immediately preceding sentence of this Section 7.7. The decision of a majority of the arbitrators shall be binding on the Employee, the Employer and its subsidiaries and affiliates. The arbitration proceeding shall be conducted in Houston, Texas. Judgment upon any award rendered in any such arbitration proceeding may be entered by any federal or state court having jurisdiction.

This agreement to arbitrate shall be enforceable in either federal or state court. The enforcement of this agreement to arbitrate and all procedural aspects of this Agreement to arbitrate, including but not limited to, the construction and interpretation of this agreement to arbitrate, the scope of the arbitrable issues, allegations of waiver, delay or defenses to arbitrability, and the rules governing the conduct of the arbitration, shall be governed by and construed pursuant to the Federal Arbitration Act.

In deciding the substance of any such Claim, the Arbitrators shall apply the substantive laws of the State of Texas; provided, however, that the Arbitrators shall have no authority to award treble, exemplary or punitive type damages under any circumstances regardless of whether such damages may be available under Texas law, the parties hereby waiving their right, if any, to recover treble, exemplary or punitive type damages in connection with any such Claims.

7.8. This Agreement shall be binding upon and inure to the benefit of Employer its subsidiaries and affiliates and any other person, association, or entity which may hereafter acquire or succeed to all or a portion of the business or assets of Employer by any means whether direct or indirect, by purchase, merger, consolidation, or otherwise. Employee's rights and obligations under this Agreement are personal and such rights, benefits, and obligations of Employee shall not be voluntarily or involuntarily assigned, alienated, or transferred, whether by operation of law or otherwise, by Employee without the prior written consent of Employer.

7.9. Except as provided in (1) written company policies promulgated by Employer dealing with issues such as securities trading, business ethics, governmental affairs and political contributions, consulting fees, commissions and other payments, compliance with law, investments and outside business interests as officers and employees, reporting responsibilities, administrative compliance, and the like, (2) the written benefits, plans, and programs referenced in Sections 2.2, 2.3 and 2.4, or (3) any signed written agreements contemporaneously or hereafter executed by Employer and Employee, this Agreement constitutes the entire agreement of the parties with regard to such subject matters, and contains all of the covenants, promises, representations, warranties, and agreements between the parties with respect to such subject matters and replaces and merges previous agreements and discussions pertaining to the employment relationship between Employer and Employee. Specifically, but not by way of limitation, any other employment agreement or arrangement in existence as of the date hereof between Employer or any of its subsidiaries or affiliates and Employee is hereby canceled and Employee hereby irrevocably waives and renounces all of Employee's rights and claims under any such agreement or arrangement.

IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement in multiple originals to be effective on the date first stated above.

GROUP 1 AUTOMOTIVE, INC.

Chief Executive Officer

EXHIBIT 10.4

EMPLOYMENT AGREEMENT

This Employment Agreement ("Agreement") is entered into between Group 1 Automotive, Inc. having offices at 950 Echo Lane, Suite 350, Houston, Texas 77024 ("Employer"), and Charles M. Smith, an individual currently residing at 11145 N. Country Squire, Houston, Texas 77024 ("Employee"), to be effective as of October __, 1997.

For and in consideration of the mutual promises, covenants, and obligations contained herein, Employer and Employee agree as follows:

1. EMPLOYMENT AND DUTIES:

1.1. Employer agrees to employ Employee, and Employee agrees to be employed by Employer, beginning October __, 1997 and continuing throughout the Term (as defined below) of this Agreement, subject to the terms and conditions of this Agreement.

1.2. Employee shall serve as "President -- Smith Group" of Employer. Employee agrees to serve in the assigned position and to perform diligently and to the best of Employee's abilities the duties and services appertaining to such position as determined by Employer, as well as such additional or different duties and services appropriate to such position which Employee from time to time may be reasonably directed to perform by Employer. Employee shall at all times comply with and be subject to such policies and procedures as Employer may establish from time to time.

1.3. Except for Employee's performance of his duties relating to the ownership and operation of Russell & Smith Ford, Inc. (also d/b/a Russell & Smith Honda) and W. C. & M. Enterprises Incorporated (d/b/a Streater-Smith) consistent with Employee's past conduct in performing such duties:

(i) Employee shall, during the period of Employee's employment by Employer, devote Employee's full business time, energy, and best efforts to the business and affairs of Employer; and

(ii) Employee may not engage, directly or indirectly, in any other business, investment, or activity that interferes with Employee's performance of Employee's duties hereunder, is contrary to the interests of Employer or any of its subsidiaries or affiliates, or requires any significant portion of Employee's business time (provided, however, that Employee may engage in passive personal investments that do not conflict with the business and affairs of the Employer or any of its subsidiaries or affiliates or interfere with Employee's performance of his duties hereunder).

1.4. Employee acknowledges and agrees that Employee owes a fiduciary duty of loyalty, fidelity and allegiance to act at all times in the best interests of Employer or any of its subsidiaries or affiliates and to do no act which would injure the business, interests, or reputation of Employer or any of its subsidiaries or affiliates. In keeping with these duties, Employee shall make full disclosure to Employer of all business opportunities pertaining to Employer's business and shall not appropriate for Employee's own benefit business opportunities concerning the subject matter of the fiduciary relationship.

1.5. It is agreed that any direct or indirect interest in, connection with, or benefit from any outside activities, particularly commercial activities, which interest might in any way adversely affect Employer, or any of its affiliates, involves a possible conflict of interest. In keeping with Employee's fiduciary duties to Employer, Employee agrees that Employee shall not knowingly become involved in a conflict of interest with Employer, or its affiliates, or upon discovery thereof, allow such a conflict to continue. Moreover, Employee agrees that Employee shall disclose to Employer's General Counsel (who shall be Employer's outside General Counsel unless Employer has employed an inside General Counsel) any facts which might involve such a conflict of interest that has not been approved by Employer's President. Employer and Employee recognize that it is impossible to provide an exhaustive list of actions or interests which constitute a "conflict of interest". Moreover, Employer and Employee recognize there are many borderline situations. In some instances, full disclosure of facts by Employee to Employer's General Counsel may be all that is necessary to enable Employer or its subsidiaries or affiliates to protect its interests. In others, if no improper motivation appears to exist and the interests of Employer or its subsidiaries or affiliates have not suffered, prompt elimination of the outside interest will suffice. In still others, it may be necessary for Employer to terminate the employment relationship. Employee agrees that Employer's determination as to whether a conflict of interest exists shall be conclusive. Employer reserves the right to take such action as, in its judgment, will end the conflict. For the purposes of this Agreement, Employee's performance of his duties relating to the ownership and operation of Russell & Smith Ford, Inc. (also d/b/a Russell & Smith Honda) and W. C. & M. Enterprises Incorporated (d/b/a Streater-Smith) consistent with Employee's past conduct in discharging such duties shall not constitute a "conflict of interest."

2. COMPENSATION AND BENEFITS:

2.1. Employee's initial base salary under this Agreement shall be $300,000.00 per annum and shall be paid in semi-monthly installments in accordance with Employer's standard payroll practice. Employee's base salary may be increased from time to time by Employer and, after any such change, Employee's new level of base salary shall be Employee's base salary for purposes of this Agreement until the effective date of any subsequent change.

2.2 Employee's participation in bonus plans shall be governed by the bonus and incentive plans adopted by the Board of Directors of Employer in which Employee is a participant.

2.3. If Employee is granted stock options, Employee will enter into a separate written stock option agreement pursuant to which Employee shall be granted the option to acquire common stock of Employer subject to the terms and conditions of Employer's 1996 Stock Incentive Plan and the stock option agreement entered into thereunder. The number of shares, exercise price per share and other terms of the options shall be as specified in such other written agreement.

2.4. While employed by Employer, Employee shall be allowed to participate, on the same basis generally as other employees of Employer, in all general employee benefit plans and programs, including improvements or modifications of the same, which on the effective date or thereafter are made available by Employer to all or substantially all of Employer's employees. Such benefits, plans, and programs may include, without limitation, medical, health, and dental care, life insurance,

disability protection, and pension plans. Nothing in this Agreement is to be construed or interpreted to provide greater rights, participation, coverage, or benefits under such benefit plans or programs than provided to similarly situated employees pursuant to the terms and conditions of such benefit plans and programs.

2.5. Employer shall not by reason of this Article 2 be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such incentive compensation or employee benefit program or plan, so long as such actions are similarly applicable to covered employees generally. Moreover, unless specifically provided for in a written plan document adopted by the Board of Directors of Employer, none of the benefits or arrangements described in this Article 2 shall be secured or funded in any way, and each shall instead constitute an unfunded and unsecured promise to pay money in the future exclusively from the general assets of Employer and its subsidiaries and affiliates.

2.6. Employer may withhold from any compensation, benefits, or amounts payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling.

3. TERM OF THIS AGREEMENT, EFFECT OF EXPIRATION OF TERM, AND TERMINATION PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH TERMINATION:

3.1. The term of this Agreement shall be for five (5) years from October __, 1997 through October __, 2002. Should Employee remain employed by Employer beyond the expiration of the Term, such employment shall convert to a month-to-month relationship terminable at any time by either Employer or Employee for any reason whatsoever, with or without cause, upon thirty days notice. Upon such termination of the continued at-will employment relationship by either Employer or Employee for any reason whatsoever, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate. Employee shall be entitled to pro rata salary through the date of such termination, but Employee shall not be entitled to any bonus with respect to the operations of the Employer and its subsidiaries and affiliates during the calendar year in which Employee's employment with Employer is terminated. Upon termination of employment, Employee shall repay to Employer all advances received by Employee from Employer or any of its subsidiaries or affiliates, including all advances drawn against any bonus.

3.2. Notwithstanding any other provisions of this Agreement, Employer shall have the right to terminate Employee's employment under this Agreement at any time for any of the following reasons:

(i) For "cause" upon the determination by Employer's Board of Directors that "cause" exists for the termination of the employment relationship. As used in this Section 3.2(i), the term "cause" shall mean (a) Employee has engaged in gross negligence, gross incompetence or willful misconduct in the performance of, or Employee's willful refusal without proper reason to perform, the duties and services required of Employee pursuant to this Agreement; (b) Employee has been convicted of a felony; or (c) Employee's material breach of any

material provision of this Agreement or corporate code or policy. It is expressly acknowledged and agreed that the decision as to whether "cause" exists for termination of the employment relationship by Employer is delegated to Employer's Board of Directors for determination. Employee, if he so requests, after reasonable notice of such Board of Directors meeting, shall be entitled to be heard before the Board of Directors. If Employee disagrees with the decision reached by Employer's Board of Directors, the dispute will be limited to whether Employer's Board of Directors reached its decision in good faith;

(ii) for any other reason whatsoever, including termination without cause, in the sole discretion of Employer's Board of Directors;

(iii) upon Employee's death; or

(iv) upon Employee's becoming incapacitated by accident, sickness, or other circumstance which in the reasonable opinion of a qualified doctor approved by Employer's Board of Directors renders him mentally or physically incapable of performing the duties and services required of Employee, and which will continue in the reasonable opinion of such doctor for a period of not less than 180 days.

The termination of Employee's employment shall constitute a "Termination for Cause" if made pursuant to Section 3.2(i); the effect of such termination is specified in Section 3.4. The termination of Employee's employment shall constitute an "Involuntary Termination" if made pursuant to Section 3.2(ii); the effect of such termination is specified in Section 3.5. The effect of the employment relationship being terminated pursuant to Section 3.2(iii) as a result of Employee's death is specified in Section 3.7. The effect of the employment relationship being terminated pursuant to Section 3.2(iv) as a result of the Employee becoming incapacitated is specified in Section 3.8.

3.3. Notwithstanding any other provisions of this Agreement, Employee shall have the right to terminate the employment relationship under this Agreement at any time for any of the following reasons:

(i) a material breach by Employer of any material provision of this Agreement, which remains uncorrected for 30 days following written notice of such breach by Employee to Employer's Board of Directors;

(ii) the dissolution of Employer; or

(iii) for any other reason whatsoever, in the sole discretion of Employee.

The termination of Employee's employment by Employee shall constitute an "Involuntary Termination" if made pursuant to Section 3.3(i) or 3.3(ii); the effect of such termination is specified in Section 3.5.

The termination of Employee's employment by Employee shall constitute a "Voluntary Termination" if made pursuant to Sections 3.3(iii); the effect of such termination is specified in Section 3.4.

3.4. Upon a "Voluntary Termination" of the employment relationship by Employee or a termination of the employment relationship for "Cause" by Employer, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate as of the date of termination. Employee shall be entitled to pro rata salary through the date of such termination, but Employee shall not be entitled to any bonuses with respect to the operations of the Employer and its subsidiaries and affiliates during the calendar year in which Employee's employment with Employer is terminated.

3.5. Upon an Involuntary Termination of the employment relationship by either Employer or Employee pursuant to Sections 3.2(ii) or 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 the compensation specified in Section 2.1, payable bi-weekly, as if Employee's employment (which shall cease on the date of such Involuntary Termination) had continued for the full Term of this Agreement. Upon an Involuntary Termination of the employment relationship by Employee pursuant to Sections 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 lump sum payment the compensation specified in
Section 2.1 as if Employee's employment (which shall cease on the date of such Involuntary Termination) had continued for the full Term of this Agreement. 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. Employee's rights under this Section 3.5 are Employee's sole and exclusive rights against Employer or its subsidiaries or affiliates, 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.

3.6. Employee covenants not to sue or lodge any claim, demand or cause of action against Employer based on Involuntary Termination for any monies other than those specified in Section 3.5. If Employee breaches this covenant, Employer, and its subsidiaries' and affiliates' shall be entitled to recover from Employee all sums expended by Employer, and its subsidiaries and affiliates (including costs and attorneys' fees) in connection with such suit, claim, demand or cause of action. Employer and its subsidiaries and affiliates shall not be entitled to offset any of the amounts specified in the immediately preceding sentence against amounts otherwise owing by Employer and its subsidiaries and affiliates to Employee prior to a final determination under the terms of the arbitration provisions of this Agreement that Employee has breached the covenant contained in this Section 3.6.

3.7. Upon termination of the employment relationship as a result of Employee's death, Employee's heirs, administrators, or legatees shall be entitled to Employee's pro rata salary through the date of such termination, but Employee's heirs, administrators, or legatees shall not be entitled to any individual bonuses with respect to the operations of the Employer and its subsidiaries and affiliates during the calendar year in which Employee's employment with Employer is terminated.

3.8. Upon termination of the employment relationship as a result of Employee's incapacity, Employee shall be entitled to his pro rata salary through the date of such termination, but Employee shall not be entitled to any individual bonuses with respect to the operations of the Employer and its subsidiaries and affiliates during the calendar year in which Employee's employment with Employer is terminated.

3.9. In all cases, the compensation and benefits payable to Employee under this Agreement upon termination of the employment relationship 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.

3.10. Termination of the employment relationship shall not terminate those obligations imposed by this Agreement which are continuing in nature, including, without limitation, Employee's obligations of confidentiality, non-competition and Employee's continuing obligations with respect to business opportunities that had been entrusted to Employee by Employer during the employment relationship.

3.11. This Agreement governs the rights and obligations of Employer and Employee with respect to Employee's salary and other perquisites of employment.

4. UNITED STATES FOREIGN CORRUPT PRACTICES ACT AND OTHER LAWS:

4.1. Employee shall at all times comply with United States laws applicable to Employee's actions on behalf of Employer and its subsidiaries and affiliates, including specifically, without limitation, the United States Foreign Corrupt Practices Act, generally codified in 15 USC 78 (FCPA), as the FCPA may hereafter be amended, and/or its successor statutes. If Employee pleads guilty to or nolo contendere or admits civil or criminal liability under the FCPA or other applicable United States law, or if a court finds that Employee has personal civil or criminal liability under the FCPA or other applicable United States law, or if a court finds that Employee committed an action resulting in Employer or any of its subsidiaries having civil or criminal liability or responsibility under the FCPA or other applicable United States law, such action or finding shall constitute "cause" for termination under this Agreement unless Employer's Board of Directors determines that the actions found to be in violation of the FCPA or other applicable United States law were taken in good faith and in compliance with all applicable policies of Employer. Moreover, to the extent that Employer or any of its subsidiaries is found or held responsible for any civil or criminal fines or sanctions of any type under the FCPA or other applicable United States law or suffers other damages as a result of Employee's actions, Employee shall be responsible for, and shall reimburse and pay to such Employer an amount of money equal to, such civil or criminal fines, sanctions or damages. The rights afforded Employer under this provision are in addition to any and all rights and remedies otherwise afforded by the law.

5. OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS:

5.1. Employer owns certain confidential and proprietary information and trade secrets to which Employee will be given access for the purpose of carrying out his employment responsibilities hereunder. Furthermore, Employer agrees to provide Employee with confidential and proprietary information and trade secrets regarding the Employer and its subsidiaries and affiliates, in order to assist Employee in satisfying his obligations hereunder.

5.2 All information, ideas, concepts, improvements, discoveries, and inventions, whether patentable or not, which are conceived, made, developed or acquired by Employee, individually or in conjunction with others, during Employee's employment by Employer (whether during business hours or otherwise and whether on Employer's premises or otherwise) which relate to Employer's or any of its subsidiaries' or affiliates' businesses, products or services (including, without limitation, all such information relating to corporate opportunities, research, financial and sales data, pricing and trading terms, evaluations, opinions, interpretations, acquisition prospects, the identity of customers or their requirements, the identity of key contacts within the customer's organizations or within the organization of acquisition prospects, or marketing and merchandising techniques, prospective names, and marks) shall be disclosed to Employer and are and shall be the sole and exclusive property of Employer. Upon termination of Employee's employment, for any reason, Employee promptly shall deliver the same, and all copies thereof, to Employer.

5.3. Employee will not, at any time during or after his employment by Employer, make any unauthorized disclosure of any confidential business information or trade secrets of Employer or its subsidiaries or affiliates, or make any use thereof, except in the carrying out of his employment responsibilities hereunder. As a result of Employee's employment by Employer, Employee may also from time to time have access to, or knowledge of, confidential business information or trade secrets of third parties, such as customers, suppliers, partners, joint venturers, and the like, of Employer and its subsidiaries and affiliates. Employee also agrees to preserve and protect the confidentiality of such third party confidential information and trade secrets to the same extent, and on the same basis, as Employer's or any of its subsidiaries' or affiliates' confidential business information and trade secrets.

5.4. If, during Employee's employment by Employer, Employee creates any original work of authorship fixed in any tangible medium of expression which is the subject matter of copyright (such as videotapes, written presentations on acquisitions, computer programs, E-mail, voice mail, electronic databases, drawings, maps, architectural renditions, models, manuals, brochures, or the like) relating to Employer's, or any of its subsidiaries' or affiliates' businesses, products, or services, whether such work is created solely by Employee or jointly with others (whether during business hours or otherwise and whether on Employer's or any of its subsidiaries' or affiliates' premises or otherwise), Employer shall be deemed the author of such work if the work is prepared by Employee in the scope of his employment; or, if the work is not prepared by Employee within the scope of his employment but is specially ordered by Employer or any of its subsidiaries or affiliates as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, or as an instructional text, then the work shall be considered to be work made for hire and Employer or any of its subsidiaries or affiliates shall be the author of the work. If such work is neither prepared by Employee within the scope of his employment nor a work specially

ordered that is deemed to be a work made for hire, then Employee hereby agrees to assign, and by these presents does assign, to Employer all of Employee's worldwide right, title, and interest in and to such work and all rights of copyright therein.

5.5. Both during the period of Employee's employment by Employer and thereafter, Employee shall assist Employer, or any of its subsidiaries or affiliates and their nominees, at any time, in the protection of Employer's or any of its subsidiaries' or affiliates' worldwide right, title, and interest in and to information, ideas, concepts, improvements, discoveries, and inventions, and its copyrighted works, including without limitation, the execution of all formal assignment documents requested by Employer or any of its subsidiaries or affiliates or their nominees and the execution of all lawful oaths and applications for applications for patents and registration of copyright in the United States and foreign countries.

6. POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS:

6.1. As part of the consideration for the compensation and benefits to be paid and extended to Employee hereunder, and as an additional incentive for Employer to enter into this Agreement, Employer and Employee agree to the non-competition provisions of this Article 6. Employee agrees that during the period of Employee's non-competition obligations hereunder, Employee will not, directly or indirectly for Employee or for others, in any geographic area or market where Employer or any of its subsidiaries or affiliated companies are conducting any business as of the date of termination of the employment relationship or have during the previous twelve months conducted any business:

(i) engage in any business competitive with any line of business conducted by Employer or any of its subsidiaries or affiliates;

(ii) render advice or services to, or otherwise assist, any other person, association, or entity who is engaged, directly or indirectly, in any business competitive with any line of business conducted by Employer or any of its subsidiaries or affiliates;

(iii) encourage or induce any current or former employee of Employer or any of its subsidiaries or affiliates to leave the employment of Employer or any of its subsidiaries or affiliates or proselytize, offer employment, retain, hire or assist in the hiring of any such employee by any person, association, or entity not affiliated with Employer or any of its subsidiaries or affiliates; provided, however, that nothing in this subsection (iii) shall prohibit Employee from offering employment to any prior employee of Employer or any of its subsidiaries or affiliates who was not employed by Employer or any of its subsidiaries or affiliates at any time in the twelve (12) months prior to the termination of Employee's employment.

The non-competition obligations set forth in subsections (i) and (ii) of this
Section 6.1 shall apply during Employee's employment and for a period of three
(3) years after termination of employment. The obligations set forth in subsection (iii) of this Section 6.1 with respect to employees shall apply during Employee's employment and for a period of five (5) years after termination of employment If Employer or any of its subsidiaries or affiliates abandons a particular aspect of its business, that is, ceases such aspect of its business with the intention to permanently refrain from such aspect of its business, then this post-employment non-competition covenant shall not apply to such former aspect of that business.

6.2. Employee understands that the foregoing restrictions may limit his ability to engage in certain businesses anywhere in the world during the period provided for above, but acknowledges that Employee will receive sufficiently high remuneration and other benefits (e.g., the right to receive compensation under Section 3.6 for the remainder of the Term upon Involuntary Termination and access to certain confidential and proprietary information and trade secrets) under this Agreement to justify such restriction. Employee acknowledges that money damages would not be sufficient remedy for any breach of this Article 6 by Employee, and Employer or any of its subsidiaries or affiliates shall be entitled to enforce the provisions of this Article 6 by terminating any payments then owing to Employee under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach, without any requirement for the securing or posting of any bond in connection with such remedies. Such remedies shall not be deemed the exclusive remedies for a breach of this Article 6, but shall be in addition to all remedies available at law or in equity to Employer or any of its subsidiaries or affiliates, including, without limitation, the recovery of damages from Employee and his agents involved in such breach.

6.3. It is expressly understood that the restrictions contained in this Article 6 are related to and result from the agreements of Employer and Employee in Article 5 and agreed that Employer and Employee consider the restrictions contained in this Article 6 to be reasonable and necessary to protect the confidential and proprietary information and trade secrets of Employer and its subsidiaries and affiliates. Nevertheless, if any of the aforesaid restrictions are found by a court having jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions therein set forth to be modified by such courts so as to be reasonable and enforceable and, as so modified by the court, to be fully enforced.

6.4. Nothing in this Section 6 shall prohibit Employee from performing his duties relating to the ownership and operation of Russell & Smith Ford, Inc. (also d/b/a Russell & Smith Honda) and W. C. & M. Enterprises Incorporated (d/b/a Streater-Smith) in a manner consistent with Employee's past conduct in performing such duties.

7. MISCELLANEOUS:

7.1. For purposes of this Agreement the terms "affiliates" or "affiliated" means an entity who directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with Employer.

7.2. Employee shall refrain, both during the employment relationship and after the employment relationship terminates, from publishing any oral or written statements about Employer or any of its subsidiaries' or affiliates' directors, officers, employees, agents or representatives that are slanderous, libelous, or defamatory; or that disclose private or confidential information about Employer or any of its subsidiaries' or affiliates' business affairs, officers, employees, agents, or representatives; or that constitute an intrusion into the seclusion or private lives of Employer or any of its subsidiaries' or affiliates' directors, officers, employees, agents, or representatives; or that give rise to unreasonable publicity about the private lives of Employer or any of its subsidiaries' or affiliates' officers, employees, agents, or representatives; or that place Employer or its subsidiaries' or affiliates' or its officers, employees, agents, or representatives in a false light before the public; or that constitute a misappropriation of the name or likeness Employer or any of its subsidiaries' or affiliates' or its officers, employees, agents, or representatives. A violation or threatened violation of this prohibition may be enjoined.

7.3. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to Employer to:

Group 1 Automotive, Inc.
950 Echo Lane, Suite 350
Houston, TX 77024

Attn: Chief Executive Officer

with a copy to:

Vinson & Elkins L.L.P.

2300 First City Tower
1001 Fannin Street
Houston, TX 77002-6760

Attn: John S. Watson

If to Employee, to the address shown on the first page hereof.

Either Employer or Employee may furnish a change of address to the other in writing in accordance herewith, except that notices of changes of address shall be effective only upon receipt.

7.4. This Agreement shall be governed in all respects by the laws of the State of Texas, excluding any conflict-of-law rule or principle that might refer the construction of the Agreement to the laws of another State or country.

7.5. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed

a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

7.6. It is a desire and intent of the parties that the terms, provisions, covenants, and remedies contained in this Agreement shall be enforceable to the fullest extent permitted by law. If any such term, provision, covenant, or remedy of this Agreement or the application thereof to any person, association, or entity or circumstances shall, to any extent, be construed to be invalid or unenforceable in whole or in part, then such term, provision, covenant, or remedy shall be construed in a manner so as to permit its enforceability under the applicable law to the fullest extent permitted by law. In any case, the remaining provisions of this Agreement or the application thereof to any person, association, or entity or circumstances other than those to which they have been held invalid or unenforceable, shall remain in full force and effect.

7.7. Any and all claims, demands, cause of action, disputes, controversies and other matters in question arising out of or relating to this Agreement, any provision hereof, the alleged breach thereof, or in any way relating to the subject matter of this Agreement, involving Employer, its subsidiaries and affiliates and Employee (all of which are referred to herein as "Claims"), even though some or all of such Claims allegedly are extra-contractual in nature, whether such Claims sound in contract, tort or otherwise, at law or in equity, under state or federal law, whether provided by statute or the common law, for damages or any other relief, including equitable relief and specific performance, shall be resolved and decided by binding arbitration pursuant to the Federal Arbitration Act in accordance with the Commercial Arbitration Rules then in effect with the American Arbitration Association. In the arbitration proceeding the Employee shall select one arbitrator, the Employer shall select one arbitrator and the two arbitrators so selected shall select a third arbitrator. Should one party fail to select an arbitrator within five days after notice of the appointment of an arbitrator by the other party or should the two arbitrators selected by the Employee and the Employer fail to select an arbitrator within ten days after the date of the appointment of the last of such two arbitrators, any person sitting as a Judge of the United States District Court of the Southern District of Texas, Houston Division, upon application of the Employee or the Employer, shall appoint an arbitrator to fill such space with the same force and effect as though such arbitrator had been appointed in accordance with the immediately preceding sentence of this Section 7.7. The decision of a majority of the arbitrators shall be binding on the Employee, the Employer and its subsidiaries and affiliates. The arbitration proceeding shall be conducted in Houston, Texas. Judgment upon any award rendered in any such arbitration proceeding may be entered by any federal or state court having jurisdiction.

This agreement to arbitrate shall be enforceable in either federal or state court. The enforcement of this agreement to arbitrate and all procedural aspects of this Agreement to arbitrate, including but not limited to, the construction and interpretation of this agreement to arbitrate, the scope of the arbitrable issues, allegations of waiver, delay or defenses to arbitrability, and the rules governing the conduct of the arbitration, shall be governed by and construed pursuant to the Federal Arbitration Act.

In deciding the substance of any such Claim, the Arbitrators shall apply the substantive laws of the State of Texas; provided, however, that the Arbitrators shall have no authority to award treble, exemplary or punitive type damages under any circumstances regardless of whether such damages may

be available under Texas law, the parties hereby waiving their right, if any, to recover treble, exemplary or punitive type damages in connection with any such Claims.

7.8. This Agreement shall be binding upon and inure to the benefit of Employer its subsidiaries and affiliates and any other person, association, or entity which may hereafter acquire or succeed to all or a portion of the business or assets of Employer by any means whether direct or indirect, by purchase, merger, consolidation, or otherwise. Employee's rights and obligations under this Agreement are personal and such rights, benefits, and obligations of Employee shall not be voluntarily or involuntarily assigned, alienated, or transferred, whether by operation of law or otherwise, by Employee without the prior written consent of Employer.

7.9. Except as provided in (1) written company policies promulgated by Employer dealing with issues such as securities trading, business ethics, governmental affairs and political contributions, consulting fees, commissions and other payments, compliance with law, investments and outside business interests as officers and employees, reporting responsibilities, administrative compliance, and the like, (2) the written benefits, plans, and programs referenced in Sections 2.2, 2.3 and 2.4, or (3) any signed written agreements contemporaneously or hereafter executed by Employer and Employee, this Agreement constitutes the entire agreement of the parties with regard to such subject matters, and contains all of the covenants, promises, representations, warranties, and agreements between the parties with respect to such subject matters and replaces and merges previous agreements and discussions pertaining to the employment relationship between Employer and Employee. Specifically, but not by way of limitation, any other employment agreement or arrangement in existence as of the date hereof between Employer or any of its subsidiaries or affiliates and Employee is hereby canceled and Employee hereby irrevocably waives and renounces all of Employee's rights and claims under any such agreement or arrangement.

IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement in multiple originals to be effective on the date first stated above.

GROUP 1 AUTOMOTIVE, INC.

Chief Executive Officer

EXHIBIT 10.5

EMPLOYMENT AGREEMENT

This Employment Agreement ("Agreement") is entered into between Group 1 Automotive, Inc. having offices at 950 Echo Lane, Suite 350, Houston, Texas 77024 ("Employer"), and John T. Turner, an individual currently residing at 5405 Maryanna Drive, Austin, Texas 78746 ("Employee"), to be effective as of October __, 1997.

For and in consideration of the mutual promises, covenants, and obligations contained herein, Employer and Employee agree as follows:

1. EMPLOYMENT AND DUTIES:

1.1. Employer agrees to employ Employee, and Employee agrees to be employed by Employer, beginning October __, 1997 and continuing throughout the Term (as defined below) of this Agreement, subject to the terms and conditions of this Agreement.

1.2. Employee shall serve as "Senior Vice President -- Corporate Development" of Employer. Employee agrees to serve in the assigned position and to perform diligently and to the best of Employee's abilities the duties and services appertaining to such position as determined by Employer, as well as such additional or different duties and services appropriate to such position which Employee from time to time may be reasonably directed to perform by Employer. Employee shall at all times comply with and be subject to such policies and procedures as Employer may establish from time to time.

1.3. Employee shall, during the period of Employee's employment by Employer, devote Employee's full business time, energy, and best efforts to the business and affairs of Employer. Employee may not engage, directly or indirectly, in any other business, investment, or activity that interferes with Employee's performance of Employee's duties hereunder, is contrary to the interests of Employer or any of its subsidiaries or affiliates, or requires any significant portion of Employee's business time; provided, however, that Employee may engage in passive personal investments that do not conflict with the business and affairs of the Employer or any of its subsidiaries or affiliates or interfere with Employee's performance of his or her duties hereunder.

1.4. Employee acknowledges and agrees that Employee owes a fiduciary duty of loyalty, fidelity and allegiance to act at all times in the best interests of Employer or any of its subsidiaries or affiliates and to do no act which would injure the business, interests, or reputation of Employer or any of its subsidiaries or affiliates. In keeping with these duties, Employee shall make full disclosure to Employer of all business opportunities pertaining to Employer's business and shall not appropriate for Employee's own benefit business opportunities concerning the subject matter of the fiduciary relationship.

1.5. It is agreed that any direct or indirect interest in, connection with, or benefit from any outside activities, particularly commercial activities, which interest might in any way adversely affect Employer, or any of its affiliates, involves a possible conflict of interest. In keeping with Employee's fiduciary duties to Employer, Employee agrees that Employee shall not knowingly become involved in a conflict of interest with Employer, or its affiliates, or upon discovery thereof, allow such a conflict to continue. Moreover, Employee agrees that Employee shall disclose to Employer's General Counsel (who shall be Employer's outside General Counsel unless Employer has employed an inside General Counsel) any facts which might involve such a conflict of interest that has not been approved by Employer's President. Employer and Employee recognize that it is impossible to provide an exhaustive list of actions or interests which constitute a "conflict of interest". Moreover, Employer and Employee recognize there are many borderline situations. In some instances, full disclosure of facts by Employee to Employer's General Counsel may be all that is necessary to enable Employer or its subsidiaries or affiliates to protect its interests. In others, if no improper motivation appears to exist and the interests of Employer or its subsidiaries or affiliates have not suffered, prompt elimination of the outside interest will suffice. In still others, it may be necessary for Employer to terminate the employment relationship. Employee agrees that Employer's determination as to whether a conflict of interest exists shall be conclusive. Employer reserves the right to take such action as, in its judgment, will end the conflict.

2. COMPENSATION AND BENEFITS:

2.1. Employee's initial base salary under this Agreement shall be $250,000.00 per annum and shall be paid in semi-monthly installments in accordance with Employer's standard payroll practice. Employee's base salary may be increased from time to time by Employer and, after any such change, Employee's new level of base salary shall be Employee's base salary for purposes of this Agreement until the effective date of any subsequent change.

2.2 Employee's participation in bonus plans shall be governed by the bonus and incentive plans adopted by the Board of Directors of Employer in which Employee is a participant.

2.3. If Employee is granted stock options, Employee will enter into a separate written stock option agreement pursuant to which Employee shall be granted the option to acquire common stock of Employer subject to the terms and conditions of Employer's 1996 Stock Incentive Plan and the stock option agreement entered into thereunder. The number of shares, exercise price per share and other terms of the options shall be as specified in such other written agreement.

2.4. While employed by Employer, Employee shall be allowed to participate, on the same basis generally as other employees of Employer, in all general employee benefit plans and programs, including improvements or modifications of the same, which on the effective date or thereafter are made available by Employer to all or substantially all of Employer's employees. Such benefits, plans, and programs may include, without limitation, medical, health, and dental care, life insurance, disability protection, and pension plans. Nothing in this Agreement is to be construed or interpreted to provide greater rights, participation, coverage, or benefits under such benefit plans or programs than provided to similarly situated employees pursuant to the terms and conditions of such benefit plans and programs.

2.5. Employer shall not by reason of this Article 2 be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such incentive compensation or employee benefit program or plan, so long as such actions are similarly applicable to covered employees generally. Moreover, unless specifically provided for in a written plan document adopted by the Board of Directors of Employer, none of the benefits or arrangements described in this Article 2 shall be secured or funded in any way, and each shall instead constitute an unfunded and unsecured promise to pay money in the future exclusively from the general assets of Employer and its subsidiaries and affiliates.

2.6. Employer may withhold from any compensation, benefits, or amounts payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling.

3. TERM OF THIS AGREEMENT, EFFECT OF EXPIRATION OF TERM, AND TERMINATION PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH TERMINATION:

3.1. The term of this Agreement shall be for five (5) years from October __, 1997 through October __, 2002. Should Employee remain employed by Employer beyond the expiration of the Term, such employment shall convert to a month-to-month relationship terminable at any time by either Employer or Employee for any reason whatsoever, with or without cause, upon thirty days notice. Upon such termination of the continued at-will employment relationship by either Employer or Employee for any reason whatsoever, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate. Employee shall be entitled to pro rata salary through the date of such termination, but Employee shall not be entitled to any bonus with respect to the operations of the Employer and its subsidiaries and affiliates during the calendar year in which Employee's employment with Employer is terminated. Upon termination of employment, Employee shall repay to Employer all advances received by Employee from Employer or any of its subsidiaries or affiliates, including all advances drawn against any bonus.

3.2. Notwithstanding any other provisions of this Agreement, Employer shall have the right to terminate Employee's employment under this Agreement at any time for any of the following reasons:

(i) For "cause" upon the determination by Employer's Board of Directors that "cause" exists for the termination of the employment relationship. As used in this Section 3.2(i), the term "cause" shall mean (a) Employee has engaged in gross negligence, gross incompetence or willful misconduct in the performance of, or Employee's willful refusal without proper reason to perform, the duties and services required of Employee pursuant to this Agreement; (b) Employee has been convicted of a felony; or (c) Employee's material breach of any material provision of this Agreement or corporate code or policy. It is expressly acknowledged and agreed that the decision as to whether "cause" exists for termination of the employment relationship by Employer is delegated to Employer's Board of Directors for determination. Employee, if he so requests, after reasonable notice of such Board of Directors meeting, shall be

entitled to be heard before the Board of Directors. If Employee disagrees with the decision reached by Employer's Board of Directors, the dispute will be limited to whether Employer's Board of Directors reached its decision in good faith;

(ii) for any other reason whatsoever, including termination without cause, in the sole discretion of Employer's Board of Directors;

(iii) upon Employee's death; or

(iv) upon Employee's becoming incapacitated by accident, sickness, or other circumstance which in the reasonable opinion of a qualified doctor approved by Employer's Board of Directors renders him mentally or physically incapable of performing the duties and services required of Employee, and which will continue in the reasonable opinion of such doctor for a period of not less than 180 days.

The termination of Employee's employment shall constitute a "Termination for Cause" if made pursuant to Section 3.2(i); the effect of such termination is specified in Section 3.4. The termination of Employee's employment shall constitute an "Involuntary Termination" if made pursuant to Section 3.2(ii); the effect of such termination is specified in Section 3.5. The effect of the employment relationship being terminated pursuant to Section 3.2(iii) as a result of Employee's death is specified in Section 3.7. The effect of the employment relationship being terminated pursuant to Section 3.2(iv) as a result of the Employee becoming incapacitated is specified in Section 3.8.

3.3. Notwithstanding any other provisions of this Agreement, Employee shall have the right to terminate the employment relationship under this Agreement at any time for any of the following reasons:

(i) a material breach by Employer of any material provision of this Agreement, which remains uncorrected for 30 days following written notice of such breach by Employee to Employer's Board of Directors;

(ii) the dissolution of Employer; or

(iii) for any other reason whatsoever, in the sole discretion of Employee.

The termination of Employee's employment by Employee shall constitute an "Involuntary Termination" if made pursuant to Section 3.3(i) or 3.3(ii); the effect of such termination is specified in Section 3.5. The termination of Employee's employment by Employee shall constitute a "Voluntary Termination" if made pursuant to Sections 3.3(iii); the effect of such termination is specified in Section 3.4.

3.4. Upon a "Voluntary Termination" of the employment relationship by Employee or a termination of the employment relationship for "Cause" by Employer, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate

as of the date of termination. Employee shall be entitled to pro rata salary through the date of such termination, but Employee shall not be entitled to any bonuses with respect to the operations of the Employer and its subsidiaries and affiliates during the calendar year in which Employee's employment with Employer is terminated.

3.5. Upon an Involuntary Termination of the employment relationship by either Employer or Employee pursuant to Sections 3.2(ii) or 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 the compensation specified in Section 2.1, payable bi-weekly, as if Employee's employment (which shall cease on the date of such Involuntary Termination) had continued for the full Term of this Agreement. Upon an Involuntary Termination of the employment relationship by Employee pursuant to Sections 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 lump sum payment the compensation specified in
Section 2.1 as if Employee's employment (which shall cease on the date of such Involuntary Termination) had continued for the full Term of this Agreement. 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. Employee's rights under this Section 3.5 are Employee's sole and exclusive rights against Employer or its subsidiaries or affiliates, 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.

3.6. Employee covenants not to sue or lodge any claim, demand or cause of action against Employer based on Involuntary Termination for any monies other than those specified in Section 3.5. If Employee breaches this covenant, Employer, and its subsidiaries' and affiliates' shall be entitled to recover from Employee all sums expended by Employer, and its subsidiaries and affiliates (including costs and attorneys' fees) in connection with such suit, claim, demand or cause of action. Employer and its subsidiaries and affiliates shall not be entitled to offset any of the amounts specified in the immediately preceding sentence against amounts otherwise owing by Employer and its subsidiaries and affiliates to Employee prior to a final determination under the terms of the arbitration provisions of this Agreement that Employee has breached the covenant contained in this Section 3.6.

3.7. Upon termination of the employment relationship as a result of Employee's death, Employee's heirs, administrators, or legatees shall be entitled to Employee's pro rata salary through the date of such termination, but Employee's heirs, administrators, or legatees shall not be entitled to any individual bonuses with respect to the operations of the Employer and its subsidiaries and affiliates during the calendar year in which Employee's employment with Employer is terminated.

3.8. Upon termination of the employment relationship as a result of Employee's incapacity, Employee shall be entitled to his pro rata salary through the date of such termination, but Employee shall not be entitled to any individual bonuses with respect to the operations of the Employer and its subsidiaries and affiliates during the calendar year in which Employee's employment with Employer is terminated.

3.9. In all cases, the compensation and benefits payable to Employee under this Agreement upon termination of the employment relationship 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.

3.10. Termination of the employment relationship shall not terminate those obligations imposed by this Agreement which are continuing in nature, including, without limitation, Employee's obligations of confidentiality, non-competition and Employee's continuing obligations with respect to business opportunities that had been entrusted to Employee by Employer during the employment relationship.

3.11. This Agreement governs the rights and obligations of Employer and Employee with respect to Employee's salary and other perquisites of employment.

4. UNITED STATES FOREIGN CORRUPT PRACTICES ACT AND OTHER LAWS:

4.1. Employee shall at all times comply with United States laws applicable to Employee's actions on behalf of Employer and its subsidiaries and affiliates, including specifically, without limitation, the United States Foreign Corrupt Practices Act, generally codified in 15 USC 78 (FCPA), as the FCPA may hereafter be amended, and/or its successor statutes. If Employee pleads guilty to or nolo contendre or admits civil or criminal liability under the FCPA or other applicable United States law, or if a court finds that Employee has personal civil or criminal liability under the FCPA or other applicable United States law, or if a court finds that Employee committed an action resulting in Employer or any of its subsidiaries having civil or criminal liability or responsibility under the FCPA or other applicable United States law, such action or finding shall constitute "cause" for termination under this Agreement unless Employer's Board of Directors determines that the actions found to be in violation of the FCPA or other applicable United States law were taken in good faith and in compliance with all applicable policies of Employer. Moreover, to the extent that Employer or any of its subsidiaries is found or held responsible for any civil or criminal fines or sanctions of any type under the FCPA or other applicable United States law or suffers other damages as a result of Employee's actions, Employee shall be responsible for, and shall reimburse and pay to such Employer an amount of money equal to, such civil or criminal fines, sanctions or damages. The rights afforded Employer under this provision are in addition to any and all rights and remedies otherwise afforded by the law.

5. OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS:

5.1. Employer owns certain confidential and proprietary information and trade secrets to which Employee will be given access for the purpose of carrying out his or her employment responsibilities hereunder. Furthermore, Employer agrees to provide Employee with confidential and proprietary information and trade secrets regarding the Employer and its subsidiaries and affiliates, in order to assist Employee in satisfying his or her obligations hereunder.

5.2 All information, ideas, concepts, improvements, discoveries, and inventions, whether patentable or not, which are conceived, made, developed or acquired by Employee, individually or in conjunction with others, during Employee's employment by Employer (whether during business hours or otherwise and whether on Employer's premises or otherwise) which relate to Employer's or any of its subsidiaries' or affiliates' businesses, products or services (including, without limitation, all such information relating to corporate opportunities, research, financial and sales data, pricing and trading terms, evaluations, opinions, interpretations, acquisition prospects, the identity of customers or their requirements, the identity of key contacts within the customer's organizations or within the organization of acquisition prospects, or marketing and merchandising techniques, prospective names, and marks) shall be disclosed to Employer and are and shall be the sole and exclusive property of Employer. Upon termination of Employee's employment, for any reason, Employee promptly shall deliver the same, and all copies thereof, to Employer.

5.3. Employee will not, at any time during or after his employment by Employer, make any unauthorized disclosure of any confidential business information or trade secrets of Employer or its subsidiaries or affiliates, or make any use thereof, except in the carrying out of his employment responsibilities hereunder. As a result of Employee's employment by Employer, Employee may also from time to time have access to, or knowledge of, confidential business information or trade secrets of third parties, such as customers, suppliers, partners, joint venturers, and the like, of Employer and its subsidiaries and affiliates. Employee also agrees to preserve and protect the confidentiality of such third party confidential information and trade secrets to the same extent, and on the same basis, as Employer's or any of its subsidiaries' or affiliates' confidential business information and trade secrets.

5.4. If, during Employee's employment by Employer, Employee creates any original work of authorship fixed in any tangible medium of expression which is the subject matter of copyright (such as videotapes, written presentations on acquisitions, computer programs, E-mail, voice mail, electronic databases, drawings, maps, architectural renditions, models, manuals, brochures, or the like) relating to Employer's, or any of its subsidiaries' or affiliates' businesses, products, or services, whether such work is created solely by Employee or jointly with others (whether during business hours or otherwise and whether on Employer's or any of its subsidiaries' or affiliates' premises or otherwise), Employer shall be deemed the author of such work if the work is prepared by Employee in the scope of his or her employment; or, if the work is not prepared by Employee within the scope of his or her employment but is specially ordered by Employer or any of its subsidiaries or affiliates as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, or as an instructional text, then the work shall be considered to be work made for hire and Employer or any of its subsidiaries or affiliates shall be the author of the work. If such work is neither prepared by Employee within the scope of his or her employment nor a work specially ordered that is deemed to be a work made for hire, then Employee hereby agrees to assign, and by these presents does assign, to Employer all of Employee's worldwide right, title, and interest in and to such work and all rights of copyright therein.

5.5. Both during the period of Employee's employment by Employer and thereafter, Employee shall assist Employer, or any of its subsidiaries or affiliates and their nominees, at any time, in the protection of Employer's or any of its subsidiaries' or affiliates' worldwide right, title, and interest in and to information, ideas, concepts, improvements, discoveries, and inventions, and its

copyrighted works, including without limitation, the execution of all formal assignment documents requested by Employer or any of its subsidiaries or affiliates or their nominees and the execution of all lawful oaths and applications for applications for patents and registration of copyright in the United States and foreign countries.

6. POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS:

6.1. As part of the consideration for the compensation and benefits to be paid and extended to Employee hereunder, and as an additional incentive for Employer to enter into this Agreement, Employer and Employee agree to the non-competition provisions of this Article 6. Employee agrees that during the period of Employee's non-competition obligations hereunder, Employee will not, directly or indirectly for Employee or for others, in any geographic area or market where Employer or any of its subsidiaries or affiliated companies are conducting any business as of the date of termination of the employment relationship or have during the previous twelve months conducted any business:

(i) engage in any business competitive with any line of business conducted by Employer or any of its subsidiaries or affiliates;

(ii) render advice or services to, or otherwise assist, any other person, association, or entity who is engaged, directly or indirectly, in any business competitive with any line of business conducted by Employer or any of its subsidiaries or affiliates;

(iii) encourage or induce any current or former employee of Employer or any of its subsidiaries or affiliates to leave the employment of Employer or any of its subsidiaries or affiliates or proselytize, offer employment, retain, hire or assist in the hiring of any such employee by any person, association, or entity not affiliated with Employer or any of its subsidiaries or affiliates; provided, however, that nothing in this subsection (iii) shall prohibit Employee from offering employment to any prior employee of Employer or any of its subsidiaries or affiliates who was not employed by Employer or any of its subsidiaries or affiliates at any time in the twelve (12) months prior to the termination of Employee's employment.

The non-competition obligations set forth in subsections (i) and (ii) of this
Section 6.1 shall apply during Employee's employment and for a period of three
(3) years after termination of employment. The obligations set forth in subsection (iii) of this Section 6.1 with respect to employees shall apply during Employee's employment and for a period of five (5) years after termination of employment If Employer or any of its subsidiaries or affiliates abandons a particular aspect of its business, that is, ceases such aspect of its business with the intention to permanently refrain from such aspect of its business, then this post-employment non-competition covenant shall not apply to such former aspect of that business.

6.2. Employee understands that the foregoing restrictions may limit his ability to engage in certain businesses anywhere in the world during the period provided for above, but acknowledges that Employee will receive sufficiently high remuneration and other benefits (e.g., the right to receive compensation under Section 3.6 for the remainder of the Term upon Involuntary Termination and access to certain confidential and proprietary information and trade secrets) under this Agreement to justify such restriction. Employee acknowledges that money damages would not be sufficient remedy for any breach of this Article 6 by Employee, and Employer or any of its subsidiaries or affiliates shall be entitled to enforce the provisions of this Article 6 by terminating any payments then owing to Employee under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach, without any requirement for the securing or posting of any bond in connection with such remedies. Such remedies shall not be deemed the exclusive remedies for a breach of this Article 6, but shall be in addition to all remedies available at law or in equity to Employer or any of its subsidiaries or affiliates, including, without limitation, the recovery of damages from Employee and his agents involved in such breach.

6.3. It is expressly understood that the restrictions contained in this Article 6 are related to and result from the agreements of Employer and Employee in Article 5 and agreed that Employer and Employee consider the restrictions contained in this Article 6 to be reasonable and necessary to protect the confidential and proprietary information and trade secrets of Employer and its subsidiaries and affiliates. Nevertheless, if any of the aforesaid restrictions are found by a court having jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions therein set forth to be modified by such courts so as to be reasonable and enforceable and, as so modified by the court, to be fully enforced.

7. MISCELLANEOUS:

7.1. For purposes of this Agreement the terms "affiliates" or "affiliated" means an entity who directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with Employer.

7.2. Employee shall refrain, both during the employment relationship and after the employment relationship terminates, from publishing any oral or written statements about Employer or any of its subsidiaries' or affiliates' directors, officers, employees, agents or representatives that are slanderous, libelous, or defamatory; or that disclose private or confidential information about Employer or any of its subsidiaries' or affiliates' business affairs, officers, employees, agents, or representatives; or that constitute an intrusion into the seclusion or private lives of Employer or any of its subsidiaries' or affiliates' directors, officers, employees, agents, or representatives; or that give rise to unreasonable publicity about the private lives of Employer or any of its subsidiaries' or affiliates' officers, employees, agents, or representatives; or that place Employer or its subsidiaries' or affiliates' or its officers, employees, agents, or representatives in a false light before the public; or that constitute a misappropriation of the name or likeness Employer or any of its subsidiaries' or affiliates' or its officers, employees, agents, or representatives. A violation or threatened violation of this prohibition may be enjoined.

7.3. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to Employer to:

Group 1 Automotive, Inc.
950 Echo Lane, Suite 350
Houston, TX 77024

Attn: Chief Executive Officer

with a copy to:

Vinson & Elkins L.L.P.

2300 First City Tower
1001 Fannin Street
Houston, TX 77002-6760

Attn: John S. Watson

If to Employee, to the address shown on the first page hereof.

Either Employer or Employee may furnish a change of address to the other in writing in accordance herewith, except that notices of changes of address shall be effective only upon receipt.

7.4. This Agreement shall be governed in all respects by the laws of the State of Texas, excluding any conflict-of-law rule or principle that might refer the construction of the Agreement to the laws of another State or country.

7.5. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

7.6. It is a desire and intent of the parties that the terms, provisions, covenants, and remedies contained in this Agreement shall be enforceable to the fullest extent permitted by law. If any such term, provision, covenant, or remedy of this Agreement or the application thereof to any person, association, or entity or circumstances shall, to any extent, be construed to be invalid or unenforceable in whole or in part, then such term, provision, covenant, or remedy shall be construed in a manner so as to permit its enforceability under the applicable law to the fullest extent permitted by law. In any case, the remaining provisions of this Agreement or the application thereof to any person, association, or entity or circumstances other than those to which they have been held invalid or unenforceable, shall remain in full force and effect.

7.7. Any and all claims, demands, cause of action, disputes, controversies and other matters in question arising out of or relating to this Agreement, any provision hereof, the alleged breach thereof, or in any way relating to the subject matter of this Agreement, involving Employer, its subsidiaries and affiliates and Employee (all of which are referred to herein as "Claims"), even though some or all of such Claims allegedly are extra-contractual in nature, whether such Claims sound in contract, tort or otherwise, at law or in equity, under state or federal law, whether provided by statute or the common law, for damages or any other relief, including equitable relief and specific performance, shall be resolved and decided by binding arbitration pursuant to the Federal Arbitration Act in accordance with the Commercial Arbitration Rules then in effect with the American Arbitration Association. In the arbitration proceeding the Employee shall select one arbitrator, the Employer shall select one arbitrator and the two arbitrators so selected shall select a third arbitrator. Should one party fail to select an arbitrator within five days after notice of the appointment of an arbitrator by the other party or should the two arbitrators selected by the Employee and the Employer fail to select an arbitrator within ten days after the date of the appointment of the last of such two arbitrators, any person sitting as a Judge of the United States District Court of the Southern District of Texas, Houston Division, upon application of the Employee or the Employer, shall appoint an arbitrator to fill such space with the same force and effect as though such arbitrator had been appointed in accordance with the immediately preceding sentence of this Section 7.7. The decision of a majority of the arbitrators shall be binding on the Employee, the Employer and its subsidiaries and affiliates. The arbitration proceeding shall be conducted in Houston, Texas. Judgment upon any award rendered in any such arbitration proceeding may be entered by any federal or state court having jurisdiction.

This agreement to arbitrate shall be enforceable in either federal or state court. The enforcement of this agreement to arbitrate and all procedural aspects of this Agreement to arbitrate, including but not limited to, the construction and interpretation of this agreement to arbitrate, the scope of the arbitrable issues, allegations of waiver, delay or defenses to arbitrability, and the rules governing the conduct of the arbitration, shall be governed by and construed pursuant to the Federal Arbitration Act.

In deciding the substance of any such Claim, the Arbitrators shall apply the substantive laws of the State of Texas; provided, however, that the Arbitrators shall have no authority to award treble, exemplary or punitive type damages under any circumstances regardless of whether such damages may be available under Texas law, the parties hereby waiving their right, if any, to recover treble, exemplary or punitive type damages in connection with any such Claims.

7.8. This Agreement shall be binding upon and inure to the benefit of Employer its subsidiaries and affiliates and any other person, association, or entity which may hereafter acquire or succeed to all or a portion of the business or assets of Employer by any means whether direct or indirect, by purchase, merger, consolidation, or otherwise. Employee's rights and obligations under this Agreement are personal and such rights, benefits, and obligations of Employee shall not be voluntarily or involuntarily assigned, alienated, or transferred, whether by operation of law or otherwise, by Employee without the prior written consent of Employer.

7.9. Except as provided in (1) written company policies promulgated by Employer dealing with issues such as securities trading, business ethics, governmental affairs and political contributions,

consulting fees, commissions and other payments, compliance with law, investments and outside business interests as officers and employees, reporting responsibilities, administrative compliance, and the like, (2) the written benefits, plans, and programs referenced in Sections 2.2, 2.3 and 2.4, or (3) any signed written agreements contemporaneously or hereafter executed by Employer and Employee, this Agreement constitutes the entire agreement of the parties with regard to such subject matters, and contains all of the covenants, promises, representations, warranties, and agreements between the parties with respect to such subject matters and replaces and merges previous agreements and discussions pertaining to the employment relationship between Employer and Employee. Specifically, but not by way of limitation, any other employment agreement or arrangement in existence as of the date hereof between Employer or any of its subsidiaries or affiliates and Employee is hereby canceled and Employee hereby irrevocably waives and renounces all of Employee's rights and claims under any such agreement or arrangement.

IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement in multiple originals to be effective on the date first stated above.

GROUP 1 AUTOMOTIVE, INC.

Chief Executive Officer

EXHIBIT 10.6

EMPLOYMENT AGREEMENT

This Employment Agreement ("Agreement") is entered into between Group 1 Automotive, Inc. having offices at 950 Echo Lane, Suite 350, Houston, Texas 77024 ("Employer"), and Scott L. Thompson, an individual currently residing at 8610 Hawaii Lane, Jersey Village, Texas 77040 ("Employee"), to be effective as of October __, 1997.

For and in consideration of the mutual promises, covenants, and obligations contained herein, Employer and Employee agree as follows:

1. EMPLOYMENT AND DUTIES:

1.1. Employer agrees to employ Employee, and Employee agrees to be employed by Employer, beginning October __, 1997 and continuing throughout the Term (as defined below) of this Agreement, subject to the terms and conditions of this Agreement.

1.2. Employee shall serve as "Senior Vice President -- Chief Financial Officer" and "Treasurer" of Employer. Employee agrees to serve in the assigned position and to perform diligently and to the best of Employee's abilities the duties and services appertaining to such position as determined by Employer, as well as such additional or different duties and services appropriate to such position which Employee from time to time may be reasonably directed to perform by Employer. Employee shall at all times comply with and be subject to such policies and procedures as Employer may establish from time to time.

1.3. Employee shall, during the period of Employee's employment by Employer, devote Employee's full business time, energy, and best efforts to the business and affairs of Employer. Employee may not engage, directly or indirectly, in any other business, investment, or activity that interferes with Employee's performance of Employee's duties hereunder, is contrary to the interests of Employer or any of its subsidiaries or affiliates, or requires any significant portion of Employee's business time; provided, however, that Employee may engage in passive personal investments that do not conflict with the business and affairs of the Employer or any of its subsidiaries or affiliates or interfere with Employee's performance of his or her duties hereunder.

1.4. Employee acknowledges and agrees that Employee owes a fiduciary duty of loyalty, fidelity and allegiance to act at all times in the best interests of Employer or any of its subsidiaries or affiliates and to do no act which would injure the business, interests, or reputation of Employer or any of its subsidiaries or affiliates. In keeping with these duties, Employee shall make full disclosure to Employer of all business opportunities pertaining to Employer's business and shall not appropriate for Employee's own benefit business opportunities concerning the subject matter of the fiduciary relationship.

1.5. It is agreed that any direct or indirect interest in, connection with, or benefit from any outside activities, particularly commercial activities, which interest might in any way adversely affect Employer, or any of its affiliates, involves a possible conflict of interest. In keeping with Employee's fiduciary duties to Employer, Employee agrees that Employee shall not knowingly become involved in a conflict of interest with Employer, or its affiliates, or upon discovery thereof, allow such a conflict to continue. Moreover, Employee agrees that Employee shall disclose to Employer's General Counsel (who shall be Employer's outside General Counsel unless Employer has employed an inside General Counsel) any facts which might involve such a conflict of interest that has not been approved by Employer's President. Employer and Employee recognize that it is impossible to provide an exhaustive list of actions or interests which constitute a "conflict of interest". Moreover, Employer and Employee recognize there are many borderline situations. In some instances, full disclosure of facts by Employee to Employer's General Counsel may be all that is necessary to enable Employer or its subsidiaries or affiliates to protect its interests. In others, if no improper motivation appears to exist and the interests of Employer or its subsidiaries or affiliates have not suffered, prompt elimination of the outside interest will suffice. In still others, it may be necessary for Employer to terminate the employment relationship. Employee agrees that Employer's determination as to whether a conflict of interest exists shall be conclusive. Employer reserves the right to take such action as, in its judgment, will end the conflict.

2. COMPENSATION AND BENEFITS:

2.1. Employee's initial base salary under this Agreement shall be $180,000.00 per annum and shall be paid in semi-monthly installments in accordance with Employer's standard payroll practice. Employee's base salary may be increased from time to time by Employer and, after any such change, Employee's new level of base salary shall be Employee's base salary for purposes of this Agreement until the effective date of any subsequent change.

2.2 Employee's participation in bonus plans shall be governed by the bonus and incentive plans adopted by the Board of Directors of Employer in which Employee is a participant.

2.3. If Employee is granted stock options, Employee will enter into a separate written stock option agreement pursuant to which Employee shall be granted the option to acquire common stock of Employer subject to the terms and conditions of Employer's 1996 Stock Incentive Plan and the stock option agreement entered into thereunder. The number of shares, exercise price per share and other terms of the options shall be as specified in such other written agreement.

2.4. While employed by Employer, Employee shall be allowed to participate, on the same basis generally as other employees of Employer, in all general employee benefit plans and programs, including improvements or modifications of the same, which on the effective date or thereafter are made available by Employer to all or substantially all of Employer's employees. Such benefits, plans, and programs may include, without limitation, medical, health, and dental care, life insurance, disability protection, and pension plans. Nothing in this Agreement is to be construed or interpreted to provide greater rights, participation, coverage, or benefits under such benefit plans or programs than provided to similarly situated employees pursuant to the terms and conditions of such benefit plans and programs.

2.5. Employer shall not by reason of this Article 2 be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such incentive compensation or employee benefit program or plan, so long as such actions are similarly applicable to covered employees generally. Moreover, unless specifically provided for in a written plan document adopted by the Board of Directors of Employer, none of the benefits or arrangements described in this Article 2 shall be secured or funded in any way, and each shall instead constitute an unfunded and unsecured promise to pay money in the future exclusively from the general assets of Employer and its subsidiaries and affiliates.

2.6. Employer may withhold from any compensation, benefits, or amounts payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling.

3. TERM OF THIS AGREEMENT, EFFECT OF EXPIRATION OF TERM, AND TERMINATION PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH TERMINATION:

3.1. The term of this Agreement shall be for five (5) years from October __, 1997 through October __, 2002. Should Employee remain employed by Employer beyond the expiration of the Term, such employment shall convert to a month-to-month relationship terminable at any time by either Employer or Employee for any reason whatsoever, with or without cause, upon thirty days notice. Upon such termination of the continued at-will employment relationship by either Employer or Employee for any reason whatsoever, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate. Employee shall be entitled to pro rata salary through the date of such termination, but Employee shall not be entitled to any bonus with respect to the operations of the Employer and its subsidiaries and affiliates during the calendar year in which Employee's employment with Employer is terminated. Upon termination of employment, Employee shall repay to Employer all advances received by Employee from Employer or any of its subsidiaries or affiliates, including all advances drawn against any bonus.

3.2. Notwithstanding any other provisions of this Agreement, Employer shall have the right to terminate Employee's employment under this Agreement at any time for any of the following reasons:

(i) For "cause" upon the determination by Employer's Board of Directors that "cause" exists for the termination of the employment relationship. As used in this Section 3.2(i), the term "cause" shall mean (a) Employee has engaged in gross negligence, gross incompetence or willful misconduct in the performance of, or Employee's willful refusal without proper reason to perform, the duties and services required of Employee pursuant to this Agreement; (b) Employee has been convicted of a felony; or (c) Employee's material breach of any material provision of this Agreement or corporate code or policy. It is expressly acknowledged and agreed that the decision as to whether "cause" exists for termination of the employment relationship by Employer is delegated to Employer's Board of Directors for determination. Employee, if he so requests, after reasonable notice of such Board of Directors meeting, shall be

entitled to be heard before the Board of Directors. If Employee disagrees with the decision reached by Employer's Board of Directors, the dispute will be limited to whether Employer's Board of Directors reached its decision in good faith;

(ii) for any other reason whatsoever, including termination without cause, in the sole discretion of Employer's Board of Directors;

(iii) upon Employee's death; or

(iv) upon Employee's becoming incapacitated by accident, sickness, or other circumstance which in the reasonable opinion of a qualified doctor approved by Employer's Board of Directors renders him mentally or physically incapable of performing the duties and services required of Employee, and which will continue in the reasonable opinion of such doctor for a period of not less than 180 days.

The termination of Employee's employment shall constitute a "Termination for Cause" if made pursuant to Section 3.2(i); the effect of such termination is specified in Section 3.4. The termination of Employee's employment shall constitute an "Involuntary Termination" if made pursuant to Section 3.2(ii); the effect of such termination is specified in Section 3.5. The effect of the employment relationship being terminated pursuant to Section 3.2(iii) as a result of Employee's death is specified in Section 3.7. The effect of the employment relationship being terminated pursuant to Section 3.2(iv) as a result of the Employee becoming incapacitated is specified in Section 3.8.

3.3. Notwithstanding any other provisions of this Agreement, Employee shall have the right to terminate the employment relationship under this Agreement at any time for any of the following reasons:

(i) a material breach by Employer of any material provision of this Agreement, which remains uncorrected for 30 days following written notice of such breach by Employee to Employer's Board of Directors;

(ii) the dissolution of Employer; or

(iii) for any other reason whatsoever, in the sole discretion of Employee.

The termination of Employee's employment by Employee shall constitute an "Involuntary Termination" if made pursuant to Section 3.3(i) or 3.3(ii); the effect of such termination is specified in Section 3.5. The termination of Employee's employment by Employee shall constitute a "Voluntary Termination" if made pursuant to Sections 3.3(iii); the effect of such termination is specified in Section 3.4.

3.4. Upon a "Voluntary Termination" of the employment relationship by Employee or a termination of the employment relationship for "Cause" by Employer, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate

as of the date of termination. Employee shall be entitled to pro rata salary through the date of such termination, but Employee shall not be entitled to any bonuses with respect to the operations of the Employer and its subsidiaries and affiliates during the calendar year in which Employee's employment with Employer is terminated.

3.5. Upon an Involuntary Termination of the employment relationship by either Employer or Employee pursuant to Sections 3.2(ii) or 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 the compensation specified in Section 2.1, payable bi-weekly, as if Employee's employment (which shall cease on the date of such Involuntary Termination) had continued for the full Term of this Agreement. Upon an Involuntary Termination of the employment relationship by Employee pursuant to Sections 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 lump sum payment the compensation specified in
Section 2.1 as if Employee's employment (which shall cease on the date of such Involuntary Termination) had continued for the full Term of this Agreement. 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. Employee's rights under this Section 3.5 are Employee's sole and exclusive rights against Employer or its subsidiaries or affiliates, 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.

3.6. Employee covenants not to sue or lodge any claim, demand or cause of action against Employer based on Involuntary Termination for any monies other than those specified in Section 3.5. If Employee breaches this covenant, Employer, and its subsidiaries' and affiliates' shall be entitled to recover from Employee all sums expended by Employer, and its subsidiaries and affiliates (including costs and attorneys' fees) in connection with such suit, claim, demand or cause of action. Employer and its subsidiaries and affiliates shall not be entitled to offset any of the amounts specified in the immediately preceding sentence against amounts otherwise owing by Employer and its subsidiaries and affiliates to Employee prior to a final determination under the terms of the arbitration provisions of this Agreement that Employee has breached the covenant contained in this Section 3.6.

3.7. Upon termination of the employment relationship as a result of Employee's death, Employee's heirs, administrators, or legatees shall be entitled to Employee's pro rata salary through the date of such termination, but Employee's heirs, administrators, or legatees shall not be entitled to any individual bonuses with respect to the operations of the Employer and its subsidiaries and affiliates during the calendar year in which Employee's employment with Employer is terminated.

3.8. Upon termination of the employment relationship as a result of Employee's incapacity, Employee shall be entitled to his pro rata salary through the date of such termination, but Employee shall not be entitled to any individual bonuses with respect to the operations of the Employer and its subsidiaries and affiliates during the calendar year in which Employee's employment with Employer is terminated.

3.9. In all cases, the compensation and benefits payable to Employee under this Agreement upon termination of the employment relationship 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.

3.10. Termination of the employment relationship shall not terminate those obligations imposed by this Agreement which are continuing in nature, including, without limitation, Employee's obligations of confidentiality, non-competition and Employee's continuing obligations with respect to business opportunities that had been entrusted to Employee by Employer during the employment relationship.

3.11. This Agreement governs the rights and obligations of Employer and Employee with respect to Employee's salary and other perquisites of employment.

4. UNITED STATES FOREIGN CORRUPT PRACTICES ACT AND OTHER LAWS:

4.1. Employee shall at all times comply with United States laws applicable to Employee's actions on behalf of Employer and its subsidiaries and affiliates, including specifically, without limitation, the United States Foreign Corrupt Practices Act, generally codified in 15 USC 78 (FCPA), as the FCPA may hereafter be amended, and/or its successor statutes. If Employee pleads guilty to or nolo contendre or admits civil or criminal liability under the FCPA or other applicable United States law, or if a court finds that Employee has personal civil or criminal liability under the FCPA or other applicable United States law, or if a court finds that Employee committed an action resulting in Employer or any of its subsidiaries having civil or criminal liability or responsibility under the FCPA or other applicable United States law, such action or finding shall constitute "cause" for termination under this Agreement unless Employer's Board of Directors determines that the actions found to be in violation of the FCPA or other applicable United States law were taken in good faith and in compliance with all applicable policies of Employer. Moreover, to the extent that Employer or any of its subsidiaries is found or held responsible for any civil or criminal fines or sanctions of any type under the FCPA or other applicable United States law or suffers other damages as a result of Employee's actions, Employee shall be responsible for, and shall reimburse and pay to such Employer an amount of money equal to, such civil or criminal fines, sanctions or damages. The rights afforded Employer under this provision are in addition to any and all rights and remedies otherwise afforded by the law.

5. OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS:

5.1. Employer owns certain confidential and proprietary information and trade secrets to which Employee will be given access for the purpose of carrying out his or her employment responsibilities hereunder. Furthermore, Employer agrees to provide Employee with confidential and proprietary information and trade secrets regarding the Employer and its subsidiaries and affiliates, in order to assist Employee in satisfying his or her obligations hereunder.

5.2 All information, ideas, concepts, improvements, discoveries, and inventions, whether patentable or not, which are conceived, made, developed or acquired by Employee, individually or in conjunction with others, during Employee's employment by Employer (whether during business hours or otherwise and whether on Employer's premises or otherwise) which relate to Employer's or any of its subsidiaries' or affiliates' businesses, products or services (including, without limitation, all such information relating to corporate opportunities, research, financial and sales data, pricing and trading terms, evaluations, opinions, interpretations, acquisition prospects, the identity of customers or their requirements, the identity of key contacts within the customer's organizations or within the organization of acquisition prospects, or marketing and merchandising techniques, prospective names, and marks) shall be disclosed to Employer and are and shall be the sole and exclusive property of Employer. Upon termination of Employee's employment, for any reason, Employee promptly shall deliver the same, and all copies thereof, to Employer.

5.3. Employee will not, at any time during or after his employment by Employer, make any unauthorized disclosure of any confidential business information or trade secrets of Employer or its subsidiaries or affiliates, or make any use thereof, except in the carrying out of his employment responsibilities hereunder. As a result of Employee's employment by Employer, Employee may also from time to time have access to, or knowledge of, confidential business information or trade secrets of third parties, such as customers, suppliers, partners, joint venturers, and the like, of Employer and its subsidiaries and affiliates. Employee also agrees to preserve and protect the confidentiality of such third party confidential information and trade secrets to the same extent, and on the same basis, as Employer's or any of its subsidiaries' or affiliates' confidential business information and trade secrets.

5.4. If, during Employee's employment by Employer, Employee creates any original work of authorship fixed in any tangible medium of expression which is the subject matter of copyright (such as videotapes, written presentations on acquisitions, computer programs, E-mail, voice mail, electronic databases, drawings, maps, architectural renditions, models, manuals, brochures, or the like) relating to Employer's, or any of its subsidiaries' or affiliates' businesses, products, or services, whether such work is created solely by Employee or jointly with others (whether during business hours or otherwise and whether on Employer's or any of its subsidiaries' or affiliates' premises or otherwise), Employer shall be deemed the author of such work if the work is prepared by Employee in the scope of his or her employment; or, if the work is not prepared by Employee within the scope of his or her employment but is specially ordered by Employer or any of its subsidiaries or affiliates as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, or as an instructional text, then the work shall be considered to be work made for hire and Employer or any of its subsidiaries or affiliates shall be the author of the work. If such work is neither prepared by Employee within the scope of his or her employment nor a work specially ordered that is deemed to be a work made for hire, then Employee hereby agrees to assign, and by these presents does assign, to Employer all of Employee's worldwide right, title, and interest in and to such work and all rights of copyright therein.

5.5. Both during the period of Employee's employment by Employer and thereafter, Employee shall assist Employer, or any of its subsidiaries or affiliates and their nominees, at any time, in the protection of Employer's or any of its subsidiaries' or affiliates' worldwide right, title, and interest in and to information, ideas, concepts, improvements, discoveries, and inventions, and its

copyrighted works, including without limitation, the execution of all formal assignment documents requested by Employer or any of its subsidiaries or affiliates or their nominees and the execution of all lawful oaths and applications for applications for patents and registration of copyright in the United States and foreign countries.

6. POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS:

6.1. As part of the consideration for the compensation and benefits to be paid and extended to Employee hereunder, and as an additional incentive for Employer to enter into this Agreement, Employer and Employee agree to the non-competition provisions of this Article 6. Employee agrees that during the period of Employee's non-competition obligations hereunder, Employee will not, directly or indirectly for Employee or for others, in any geographic area or market where Employer or any of its subsidiaries or affiliated companies are conducting any business as of the date of termination of the employment relationship or have during the previous twelve months conducted any business:

(i) engage in any business competitive with any line of business conducted by Employer or any of its subsidiaries or affiliates;

(ii) render advice or services to, or otherwise assist, any other person, association, or entity who is engaged, directly or indirectly, in any business competitive with any line of business conducted by Employer or any of its subsidiaries or affiliates;

(iii) encourage or induce any current or former employee of Employer or any of its subsidiaries or affiliates to leave the employment of Employer or any of its subsidiaries or affiliates or proselytize, offer employment, retain, hire or assist in the hiring of any such employee by any person, association, or entity not affiliated with Employer or any of its subsidiaries or affiliates; provided, however, that nothing in this subsection (iii) shall prohibit Employee from offering employment to any prior employee of Employer or any of its subsidiaries or affiliates who was not employed by Employer or any of its subsidiaries or affiliates at any time in the twelve (12) months prior to the termination of Employee's employment.

The non-competition obligations set forth in subsections (i) and (ii) of this
Section 6.1 shall apply during Employee's employment and for a period of three
(3) years after termination of employment. The obligations set forth in subsection (iii) of this Section 6.1 with respect to employees shall apply during Employee's employment and for a period of five (5) years after termination of employment If Employer or any of its subsidiaries or affiliates abandons a particular aspect of its business, that is, ceases such aspect of its business with the intention to permanently refrain from such aspect of its business, then this post-employment non-competition covenant shall not apply to such former aspect of that business.

6.2. Employee understands that the foregoing restrictions may limit his ability to engage in certain businesses anywhere in the world during the period provided for above, but acknowledges that Employee will receive sufficiently high remuneration and other benefits (e.g., the right to receive compensation under Section 3.6 for the remainder of the Term upon Involuntary Termination and access to certain confidential and proprietary information and trade secrets) under this Agreement to justify such restriction. Employee acknowledges that money damages would not be sufficient remedy for any breach of this Article 6 by Employee, and Employer or any of its subsidiaries or affiliates shall be entitled to enforce the provisions of this Article 6 by terminating any payments then owing to Employee under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach, without any requirement for the securing or posting of any bond in connection with such remedies. Such remedies shall not be deemed the exclusive remedies for a breach of this Article 6, but shall be in addition to all remedies available at law or in equity to Employer or any of its subsidiaries or affiliates, including, without limitation, the recovery of damages from Employee and his agents involved in such breach.

6.3. It is expressly understood that the restrictions contained in this Article 6 are related to and result from the agreements of Employer and Employee in Article 5 and agreed that Employer and Employee consider the restrictions contained in this Article 6 to be reasonable and necessary to protect the confidential and proprietary information and trade secrets of Employer and its subsidiaries and affiliates. Nevertheless, if any of the aforesaid restrictions are found by a court having jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions therein set forth to be modified by such courts so as to be reasonable and enforceable and, as so modified by the court, to be fully enforced.

7. MISCELLANEOUS:

7.1. For purposes of this Agreement the terms "affiliates" or "affiliated" means an entity who directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with Employer.

7.2. Employee shall refrain, both during the employment relationship and after the employment relationship terminates, from publishing any oral or written statements about Employer or any of its subsidiaries' or affiliates' directors, officers, employees, agents or representatives that are slanderous, libelous, or defamatory; or that disclose private or confidential information about Employer or any of its subsidiaries' or affiliates' business affairs, officers, employees, agents, or representatives; or that constitute an intrusion into the seclusion or private lives of Employer or any of its subsidiaries' or affiliates' directors, officers, employees, agents, or representatives; or that give rise to unreasonable publicity about the private lives of Employer or any of its subsidiaries' or affiliates' officers, employees, agents, or representatives; or that place Employer or its subsidiaries' or affiliates' or its officers, employees, agents, or representatives in a false light before the public; or that constitute a misappropriation of the name or likeness Employer or any of its subsidiaries' or affiliates' or its officers, employees, agents, or representatives. A violation or threatened violation of this prohibition may be enjoined.

7.3. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to Employer to:

Group 1 Automotive, Inc.
950 Echo Lane, Suite 350
Houston, TX 77024

Attn: Chief Executive Officer

with a copy to:

Vinson & Elkins L.L.P.

2300 First City Tower
1001 Fannin Street
Houston, TX 77002-6760

Attn: John S. Watson

If to Employee, to the address shown on the first page hereof.

Either Employer or Employee may furnish a change of address to the other in writing in accordance herewith, except that notices of changes of address shall be effective only upon receipt.

7.4. This Agreement shall be governed in all respects by the laws of the State of Texas, excluding any conflict-of-law rule or principle that might refer the construction of the Agreement to the laws of another State or country.

7.5. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

7.6. It is a desire and intent of the parties that the terms, provisions, covenants, and remedies contained in this Agreement shall be enforceable to the fullest extent permitted by law. If any such term, provision, covenant, or remedy of this Agreement or the application thereof to any person, association, or entity or circumstances shall, to any extent, be construed to be invalid or unenforceable in whole or in part, then such term, provision, covenant, or remedy shall be construed in a manner so as to permit its enforceability under the applicable law to the fullest extent permitted by law. In any case, the remaining provisions of this Agreement or the application thereof to any person, association, or entity or circumstances other than those to which they have been held invalid or unenforceable, shall remain in full force and effect.

7.7. Any and all claims, demands, cause of action, disputes, controversies and other matters in question arising out of or relating to this Agreement, any provision hereof, the alleged breach thereof, or in any way relating to the subject matter of this Agreement, involving Employer, its subsidiaries and affiliates and Employee (all of which are referred to herein as "Claims"), even though some or all of such Claims allegedly are extra-contractual in nature, whether such Claims sound in contract, tort or otherwise, at law or in equity, under state or federal law, whether provided by statute or the common law, for damages or any other relief, including equitable relief and specific performance, shall be resolved and decided by binding arbitration pursuant to the Federal Arbitration Act in accordance with the Commercial Arbitration Rules then in effect with the American Arbitration Association. In the arbitration proceeding the Employee shall select one arbitrator, the Employer shall select one arbitrator and the two arbitrators so selected shall select a third arbitrator. Should one party fail to select an arbitrator within five days after notice of the appointment of an arbitrator by the other party or should the two arbitrators selected by the Employee and the Employer fail to select an arbitrator within ten days after the date of the appointment of the last of such two arbitrators, any person sitting as a Judge of the United States District Court of the Southern District of Texas, Houston Division, upon application of the Employee or the Employer, shall appoint an arbitrator to fill such space with the same force and effect as though such arbitrator had been appointed in accordance with the immediately preceding sentence of this Section 7.7. The decision of a majority of the arbitrators shall be binding on the Employee, the Employer and its subsidiaries and affiliates. The arbitration proceeding shall be conducted in Houston, Texas. Judgment upon any award rendered in any such arbitration proceeding may be entered by any federal or state court having jurisdiction.

This agreement to arbitrate shall be enforceable in either federal or state court. The enforcement of this agreement to arbitrate and all procedural aspects of this Agreement to arbitrate, including but not limited to, the construction and interpretation of this agreement to arbitrate, the scope of the arbitrable issues, allegations of waiver, delay or defenses to arbitrability, and the rules governing the conduct of the arbitration, shall be governed by and construed pursuant to the Federal Arbitration Act.

In deciding the substance of any such Claim, the Arbitrators shall apply the substantive laws of the State of Texas; provided, however, that the Arbitrators shall have no authority to award treble, exemplary or punitive type damages under any circumstances regardless of whether such damages may be available under Texas law, the parties hereby waiving their right, if any, to recover treble, exemplary or punitive type damages in connection with any such Claims.

7.8. This Agreement shall be binding upon and inure to the benefit of Employer its subsidiaries and affiliates and any other person, association, or entity which may hereafter acquire or succeed to all or a portion of the business or assets of Employer by any means whether direct or indirect, by purchase, merger, consolidation, or otherwise. Employee's rights and obligations under this Agreement are personal and such rights, benefits, and obligations of Employee shall not be voluntarily or involuntarily assigned, alienated, or transferred, whether by operation of law or otherwise, by Employee without the prior written consent of Employer.

7.9. Except as provided in (1) written company policies promulgated by Employer dealing with issues such as securities trading, business ethics, governmental affairs and political contributions,

consulting fees, commissions and other payments, compliance with law, investments and outside business interests as officers and employees, reporting responsibilities, administrative compliance, and the like, (2) the written benefits, plans, and programs referenced in Sections 2.2, 2.3 and 2.4, or (3) any signed written agreements contemporaneously or hereafter executed by Employer and Employee, this Agreement constitutes the entire agreement of the parties with regard to such subject matters, and contains all of the covenants, promises, representations, warranties, and agreements between the parties with respect to such subject matters and replaces and merges previous agreements and discussions pertaining to the employment relationship between Employer and Employee. Specifically, but not by way of limitation, any other employment agreement or arrangement in existence as of the date hereof between Employer or any of its subsidiaries or affiliates and Employee is hereby canceled and Employee hereby irrevocably waives and renounces all of Employee's rights and claims under any such agreement or arrangement.

IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement in multiple originals to be effective on the date first stated above.

GROUP 1 AUTOMOTIVE, INC.

Chief Executive Officer

EXHIBIT 10.10

RIGHTS AGREEMENT

between

Group 1 Automotive, Inc.

and

ChaseMellon Shareholder Services, L.L.C.

as Rights Agent

Section 1.  Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
            -------------------

Section 2.  Appointment of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
            ---------------------------

Section 3.  Issue of Right Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
            ---------------------------

Section 4.  Form of Right Certificates  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12
            --------------------------

Section 5.  Execution, Authentication and Delivery  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
            --------------------------------------

Section 6.  Registration, Registration of Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
            ---------------------------------------------------

Section 7.  Mutilated, Destroyed, Lost and Stolen Right Certificates  . . . . . . . . . . . . . . . . . . . . . . . .  16
            --------------------------------------------------------

Section 8.  Exercise of Rights; Purchase Price; Expiration Date of Rights . . . . . . . . . . . . . . . . . . . . . .  17
            -------------------------------------------------------------

Section 9.  Cancellation and Destruction of Right Certificates  . . . . . . . . . . . . . . . . . . . . . . . . . . .  19
            --------------------------------------------------

Section 10.  Reservation and Availability of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  19
             --------------------------------------

Section 11.  Record Date  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
             -----------

Section 12.  Adjustment of Purchase Price, Number of Shares or Number of Rights . . . . . . . . . . . . . . . . . . .  21
             ------------------------------------------------------------------

Section 13.  Certificate of Adjusted Purchase Price or Number of Shares . . . . . . . . . . . . . . . . . . . . . . .  30
             ----------------------------------------------------------

Section 14.  Consolidation, Merger or Sale or Transfer of Assets or Earning Power . . . . . . . . . . . . . . . . . .  31
             --------------------------------------------------------------------

Section 15.  Fractional Rights and Fractional Shares  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  33
             ---------------------------------------

Section 16.  Rights of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  34
             ----------------

Section 17.  Agreement of Right Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  35
             --------------------------

Section 18.  Right Certificate Holder Not Deemed a Stockholder  . . . . . . . . . . . . . . . . . . . . . . . . . . .  36
             -------------------------------------------------

Section 19.  Concerning the Rights Agent  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  36
             ---------------------------

Section 20.  Duties of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  37
             ----------------------

Section 21.  Merger or Consolidation or Change of Name of Rights Agent  . . . . . . . . . . . . . . . . . . . . . . .  40
             ---------------------------------------------------------

Section 22.  Change of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  40
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Section 23.  Issuance of New Right Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  42
             ----------------------------------

Section 24.  Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  42
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Section 25.  Mandatory Redemption and Exchange  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  43
             ---------------------------------

Section 26.  Notice of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  45
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Section 27.  Securities Laws Registrations  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  46
             -----------------------------

Section 28.  Notices  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  47
             -------

Section 29.  Supplements and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  48
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Section 30.  Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  48
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Section 31.  Benefits of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  49
             --------------------------

Section 32.  Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  49
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Section 33.  Governing Law  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  49
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Section 34.  Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  49
             ------------

Section 35.  Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  49
             --------------------

Exhibits

Exhibit A - Certificate of Designation of Preferred Shares Exhibit B - Right Certificate
Exhibit C - Summary of Rights

RIGHTS AGREEMENT

This Rights Agreement, dated as of October 3, 1997, is between Group 1 Automotive, Inc., a Delaware corporation (the "Company"), and ChaseMellon Shareholder Services, L.L.C., a national banking association, as Rights Agent.

WHEREAS, the Board of Directors of the Company, having determined its actions to be in the interests of the Company, has authorized the creation of Rights, has authorized and directed the issuance to the Holders of record of Common Shares of the Company outstanding on the date (the "Effective Date") of closing of the acquisition by the Company (the "Acquisitions") of Howard Pontiac-GMC, Inc., Bob Howard Chevrolet, Inc., Bob Howard Automotive-H, Inc. Bob Howard Motors, Inc., Bob Howard Dodge, Inc., Southwest Toyota, Inc., SMC Luxury Cars, Inc., Mike Smith Autoplaza, Inc., Smith, Liu & Kutz, Inc., Courtesy Nissan, Inc., Smith, Liu & Corbin, Inc., Round Rock Nissan, Inc. and Foyt Motors, Inc., immediately after the Acquisitions of one Right with respect to each Common Share of the Company outstanding on the Effective Date and has further authorized and directed the issuance of one Right with respect to each Common Share that shall become outstanding between the Effective Date and the earlier of the Distribution Date, the Redemption Date and the Final Expiration Date; and

WHEREAS, the Board of Directors of the Company has authorized and directed that the terms and conditions under which the Rights are to be distributed, including without limitation those affecting the exercise thereof, the securities or other property to be acquired thereby and the purchase price to be paid therefor, shall be set forth in a written agreement between the Company and a rights agent made for the benefit of the holders of the Rights to the extent so provided therein.

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto agree as follows:

Section 1. Certain Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated:

"Acquiring Person" shall mean any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 20% or more of the Voting Shares of the Company then outstanding, but shall not include (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee benefit plan of the Company or of any Subsidiary of the Company or trustee or fiduciary with respect to any such plan when acting in such capacity, (iv) any trustee of or fiduciary with respect to any such plan when acting in such capacity, or (v) any Grandfathered Stockholder. Notwithstanding the foregoing, no Person shall become an "Acquiring Person" as the result of an acquisition of Voting Shares by the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 20% or more of the Voting Shares of the Company then outstanding; provided, however, that, if a Person shall become the Beneficial Owner of 20% or more of the Voting Shares of the Company then outstanding by reason of share purchases by the Company and shall, after such share purchases by the Company and at a time when such Person is the Beneficial Owner of 20% or more of the Voting Shares of the Company then outstanding, become the Beneficial Owner of any additional Voting Shares of the Company, then such Person shall be deemed to be an "Acquiring Person". Notwithstanding the foregoing, if the Board of Directors of the Company determines in good faith that a Person who would otherwise be an "Acquiring Person", as defined pursuant to the foregoing provisions of

this paragraph (a), has become such inadvertently, and such Person divests as promptly as practicable a sufficient number of Common Shares so that such Person would no longer be an "Acquiring Person," as defined pursuant to the foregoing provisions of this paragraph (a), then such Person shall not be deemed to be an "Acquiring Person" for any purposes of this Agreement.

"Agreement" shall mean this Rights Agreement as hereafter amended from time to time.

"Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act as in effect on the date of this Agreement.

A Person shall be deemed the "Beneficial Owner" of and shall be deemed to "own beneficially" any securities which (without duplication):

(i) such Person or any of such Person's Affiliates or Associates beneficially owns, directly or indirectly, within the meaning of either Section 13 or 16 of the Exchange Act;

(ii) such Person or any of such Person's Affiliates or Associates has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), or upon the exercise of conversion rights, exchange rights, rights (other than these Rights), warrants or options, or otherwise; or (B) the right to vote pursuant to any agreement, arrangement or understanding; or

(iii) are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person's Affiliates or Associates has any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities) for the purpose of acquiring, holding, voting or disposing of any securities of the Company; provided, however, that, for purposes of each clause of this definition, a Person shall not be deemed the Beneficial

Owner of, or to own beneficially, securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange; and provided, further, that, for purposes of each clause of this definition, a Person shall not be deemed the Beneficial Owner of, or to own beneficially, any security as a result of any agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding (1) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations promulgated under the Exchange Act and (2) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report) and provided, further, that notwithstanding anything to the foregoing to the contrary, a Person engaged in the business of underwriting securities shall not be deemed the "Beneficial Owner" of, or to "own beneficially", any securities acquired in good faith in a firm commitment underwriting until the expiration of 40 days after the date of such acquisition.

Notwithstanding anything in this definition to the contrary, the phrase "then outstanding", when used with reference to a Person's Beneficial Ownership of securities of the Company (or to the number of such securities "beneficially owned"), shall mean the number of such securities then issued and outstanding together with the number of such securities not then actually issued and outstanding which such Person would be deemed to own beneficially hereunder.

"Business Day" shall mean any day other than a Saturday, Sunday or a day on which banking institutions in the State of Texas or the state wherein the principal office of the Rights Agent is located are authorized or obligated by law or executive order to close.

"Close of Business" on any given date shall mean 5:00 P.M., eastern time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 P.M., eastern time, on the next succeeding Business Day.

"Closing Price", with respect to any security, shall mean the last sale price, regular way, on a specific Trading Day or, in case no such sale takes place on such Trading Day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if such security is not then listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which such security is listed or admitted to trading or, if such security is not then listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System or such other system then in use, or, if on any such Trading Day such security is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such security selected by the Board of Directors of the Company. If such security is not publicly held or so listed or traded, "Closing Price" shall mean the fair value per unit of such security as determined in good faith by the Board of Directors of the Company, whose determination shall be described and the Closing Price set forth in a statement filed with the Rights Agent.

"Common Shares" when used with reference to the Company shall mean shares of capital stock of the Company which have no preference over any other class of stock with respect to dividends or assets, which are not redeemable at the option of the Company and with

respect to which no sinking, purchase or similar fund is provided and shall initially mean the shares of Common Stock, par value $.01, of the Company. "Common Shares" when used with reference to any Person other than the Company shall, if used with reference to a corporation, mean the capital stock (or equity interest) with the greatest voting power of such other Person or, if such other Person is a Subsidiary of another Person, the Person or Persons which ultimately control such first-mentioned Person and, if used with reference to any other Person, mean the equity interest in such Person (or, if the net worth determined in accordance with generally accepted accounting principles of another Person (other than an individual) which controls such first-mentioned Person is greater than such first-mentioned Person, then such other Person) with the greatest voting power or managerial power with respect to the business and affairs of such Person.

"Company" shall mean Group 1 Automotive, Inc., a Delaware corporation, and its successors.

"Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Rights Agent.

"Distribution Date" shall mean the earlier of (i) the tenth Business Day after the Shares Acquisition Date or (ii) the tenth Business Day (or such later date as may be determined by action of the Board of Directors prior to such time as any Person becomes an Acquiring Person) after the date of commencement by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the

Company or of any Subsidiary of the Company, or any trustee of or fiduciary with respect to any such plan when acting in such capacity) of, or after the date of the first public announcement of the intent of any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any trustee of or fiduciary with respect to any such plan when acting in such capacity) to commence, a tender or exchange offer the consummation of which would result in any Person becoming the Beneficial Owner of 20% or more of the then outstanding Voting Shares of the Company; provided, however, that an occurrence described in clause (ii) of this definition above shall not cause the occurrence of the Distribution Date if the Board of Directors of the Company shall, prior to such tenth Business Day (or such later date as described in clause (ii) above), determine that such tender or exchange offer is spurious, unless, thereafter, the Board of Directors of the Company shall make a contrary determination, in which event the Distribution Date shall occur on the later to occur of such tenth Business Day (or such later date as described in clause (ii) above) and the date of such latter determination.

"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and any successor statute thereto.

"Final Expiration Date" shall mean the Close of Business on the tenth anniversary of the Effective Date.

"Grandfathered Stockholders" shall mean at any time Robert E. Howard, II, provided, however, that Robert E. Howard, II shall not be a Grandfathered Stockholder if he makes an acquisition of Common Shares that would increase his percentage ownership of the outstanding Common Shares immediately after consummation of the Company's initial public offering (the "Offering"), before taking into account any acquisitions of Common Shares by Robert E. Howard, II in the Offering, by 2.0%.

"Person" shall mean any individual, firm, corporation, partnership, limited partnership, limited liability company, trust or other entity, and shall include any successor (by merger or otherwise) of such entity.

"Preferred Shares" shall mean shares of Series A Junior Participating Preferred Stock, par value $.01 per share, of the Company having the rights and preferences set forth in the form of Certificate of Designation of Series A Junior Participating Preferred Stock attached hereto as Exhibit A.

"Purchase Price" shall mean the initial price at which the holder of a Right may, subject to the terms and conditions of this Agreement, purchase one one-thousandth (1/1000) of a Preferred Share (which initial price is set forth in Section 8(b) hereof), as such price shall be adjusted pursuant to the terms of this Agreement.

"Redemption Date" shall mean the time at which the Rights are redeemed pursuant to Section 24 herein or the time at which all of the Rights are mandatorily redeemed and exchanged pursuant to Section 25 hereof.

"Redemption Price" shall have the meaning specified in Section 24(b) herein. "Right" shall mean one preferred share purchase right which initially represents the right of the registered holder thereof to purchase one one-thousandth (1/1000) of a Preferred Share upon the terms and subject to the conditions herein set forth.

"Rights Agent" shall mean ChaseMellon Shareholder Services, L.L.C., a national banking association, and any successor thereto appointed in accordance with the terms hereof, in its capacity as agent for the Company and the holders of the Rights pursuant to this Agreement.

"Right Certificate" shall mean a certificate, in substantially the form of Exhibit B attached to this Rights Agreement, evidencing the Rights registered in the name of the holder thereof.

"Rights Register" and "Rights Registrar" shall have the meanings specified in Section 6.

"Shareholder Services" means the principal office of the Rights Agent at which it administers shareholder services business, which, in the case of ChaseMellon Shareholder Services, L.L.C. shall, until hereafter changed, be its office at 2323 Bryan Street, Suite 2300, Dallas, Texas 75201.

"Shares Acquisition Date" shall mean the first date of public announcement (which for purposes of this definition shall include without limitation a report filed pursuant to Section 13(d) or Section 16(a) of the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such.

"Subsidiary" of any Person shall mean any corporation or other entity of which a majority of the outstanding capital stock or other equity interests having ordinary voting power in the election of directors or similar officials is owned, directly or indirectly, by such Person.

"Summary of Rights" shall mean a Summary of Rights to Purchase Preferred Shares in substantially the form attached as Exhibit C to this Agreement.

"Trading Day" shall mean a day on which the principal national securities exchange or the NASDAQ National Market on which any of the Voting Shares of the Company are listed or admitted to trading is open for the transaction of business or, if none of the Voting Shares of the Company is listed or admitted to trading on any national stock exchange or the NASDAQ National Market, a Business Day.

"Voting Shares" shall mean (i) the Common Shares of the Company and (ii) any other shares of capital stock of the Company entitled to vote generally in the election of directors or entitled to vote together with the Common Shares in respect of any merger or consolidation of the Company, any sale of all or substantially all of the Company's assets or any liquidation, dissolution or winding up of the Company. Whenever any provision of this Agreement requires a determination of whether a number of Voting Shares comprising a specified

percentage of such Voting Shares is, was or will be beneficially owned or has been voted, tendered, acquired, sold or otherwise disposed of or a determination of whether a Person has offered or proposed to acquire a number of Voting Shares comprising such specified percentage, the number of Voting Shares comprising such specified percentage of Voting Shares shall in every such case be deemed to be the number of Voting Shares comprising the specified percentage of all the Company's then outstanding Voting Shares.

"Wholly-Owned Subsidiary" of a Person shall mean any corporation or other entity all the outstanding capital stock or other equity interests of which having ordinary voting power in the election of directors or similar officials (other than directors' qualifying shares or similar interests) are owned, directly or indirectly, by such Person.

Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-Rights Agents as it may deem necessary or desirable.

Section 3. Issue of Right Certificates. (a) From and after the Effective Date until the Distribution Date, (i) outstanding Rights will be evidenced (subject to the provisions of paragraph (b) of this Section 3) by the certificates for outstanding Common Shares of the Company and not by separate Right Certificates, and (ii) the right to receive Right Certificates will be transferable only in connection with the transfer of Common Shares of the Company. As soon as practicable after the Distribution Date, the Rights Agent will send, by first-class, insured, postage-prepaid mail, to each record holder of Common Shares of the Company as of the Close of Business on the Distribution Date, at the address of such holder shown on the stock transfer records of the Company, a Right Certificate evidencing one Right for each Common Share so held. From and after the Distribution Date, the Rights will be evidenced solely by such Right Certificates.

(b) On the Effective Date, or as soon thereafter as practicable, the Company will send a copy of a Summary of Rights, by first-class, postage-prepaid mail, to each record holder of Common Shares of the Company as of the Close of Business on the Effective Date, at the address of such holder shown on the stock transfer records of the Company. With respect to Common Shares outstanding on the Effective Date, the certificates evidencing such Common Shares shall, together with copies of such Summary of Rights, thereafter also evidence the outstanding Rights (as such Rights may be amended or supplemented) distributed with respect thereto until the earlier of the Distribution Date or the date of surrender thereof to the Company's transfer agent for registration of transfer or exchange of Common Shares. Until the Distribution Date (or, if earlier, the Redemption Date or Final Expiration Date), the surrender for registration of transfer or exchange of any certificate for Common Shares outstanding as of the Close of Business on the Effective Date, with or without a copy of the Summary of Rights attached thereto, shall also constitute the surrender for registration of transfer or exchange of the outstanding Rights associated with the Common Shares represented thereby.

(c) The Company agrees that, at any time after the Effective Date and prior to the Distribution Date (or, if earlier, the Redemption Date or Final Expiration Date) at which it issues any of its Common Shares upon original issue or out of treasury, it will concurrently distribute to the holder of such Common Shares one Right for each such Common Share, which Right shall be subject to the terms and provisions of this Agreement and will evidence the right to purchase the same number of one one-thousandths (1/1000) of a Preferred Share at the same Purchase Price as the Rights then outstanding.

(d) Certificates for Common Shares issued after the Effective Date but prior to the earliest of the Distribution Date, the Redemption Date and the Final Expiration Date, whether upon registration of transfer or exchange of Common Shares outstanding on the Effective Date or upon

original issue or out of treasury thereafter, shall have impressed on, printed on, written on or otherwise affixed to them the following legend:

This certificate also evidences and entitles the holder hereof to certain Rights as set forth in a Rights Agreement between Group 1 Automotive, Inc. and ChaseMellon Shareholder Services, L.L.C., dated as of October 3, 1997 (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of Group 1 Automotive, Inc. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. Group 1 Automotive, Inc. will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. As described in the Rights Agreement, Rights issued to or acquired by any Acquiring Person or any Affiliate or Associate thereof (each as defined in the Rights Agreement) shall, under certain circumstances, become null and void.

With respect to certificates containing the foregoing legend, until the Distribution Date, outstanding Rights associated with the Common Shares represented by such certificates shall be evidenced by such certificates alone, and the surrender of any such certificate for registration of transfer or exchange of the Common Shares evidenced thereby shall also constitute surrender for registration of transfer or exchange of outstanding Rights (as such Rights may be amended or supplemented) associated with the Common Shares represented thereby.

(e) If the Company purchases or acquires any of its Common Shares after the Effective Date, but prior to the Distribution Date, any Rights associated with such Common Shares shall be deemed cancelled and retired so that the Company shall not be entitled to exercise any Rights associated with the Common Shares which are no longer outstanding.

Section 4. Form of Right Certificates. The form of Right Certificates (and the forms of election to purchase Preferred Shares (or other securities) and of assignment to be printed on the reverse thereof) shall in form and substance be substantially the same as Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, as may be required to comply with any applicable law or with any rule or regulation made

pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed or as may be necessary to conform to usage. Subject to the provisions of Section 23 hereof, the Right Certificates, whenever issued, shall be dated as of the date of authentication thereof, but, regardless of any adjustments of the Purchase Price or the number of Preferred Shares (or other securities) as to which a Right is exercisable (whether pursuant to this Agreement or any future amendments or supplements to this Agreement), or both, occurring after the Effective Date and prior to the date of such authentication, such Right Certificates may, on their face, without invalidating or otherwise affecting any such adjustment, expressly entitle the holders thereof to purchase such number of Preferred Shares at the Purchase Price per one one-thousandth (1/1000) of a Preferred Share as to which a Right would be exercisable if the Distribution Date were the Effective Date; no adjustment of the Purchase Price or the number of Preferred Shares (or other securities) as to which a Right is exercisable, or both, effected subsequent to the date of authentication of any Right Certificate shall be invalidated or otherwise affected by the fact that such adjustment is not expressly reflected on the face or in the provisions of such Right Certificate.

Pending the preparation of definitive Right Certificates, the Company may execute, and upon Company Order the Rights Agent shall authenticate and send, by first-class, insured, postage-prepaid mail, to each record holder of Common Shares of the Company as of the Close of Business on the Distribution Date, temporary Right Certificates which are printed, lithographed, typewritten, mimeographed or otherwise produced substantially of the tenor of the definitive Right Certificates in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Right Certificates may determine, as evidenced by their execution of such Right Certificates.

If temporary Right Certificates are issued, the Company will cause definitive Right Certificates to be prepared without unreasonable delay. After the preparation of definitive Right Certificates, the

temporary Right Certificates shall be exchangeable for definitive Right Certificates, upon surrender of the temporary Right Certificates at the Shareholder Services Office of the Rights Agent, without charge to the holder. Upon surrender for cancellation of any one or more temporary Right Certificates, the Company shall execute and the Rights Agent shall authenticate and deliver in exchange therefor one or more definitive Right Certificates, evidencing a like number of Rights. Until so exchanged, the temporary Right Certificates shall in all respects be entitled to the same benefits under this Agreement as definitive Right Certificates.

Section 5. Execution, Authentication and Delivery. The Right Certificates shall be executed on behalf of the Company by its Chairman of the Board, its President or one of its Vice Presidents, attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Right Certificates may be manual or facsimile.

Right Certificates bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Right Certificates or did not hold such offices at the date of authentication of such Right Certificates. At any time and from time to time after the execution and delivery of this Agreement and prior to the Distribution Date, the Company may deliver Right Certificates executed by the Company to the Rights Agent for authentication, together with a Company Order for the authentication and delivery of such Right Certificates; and the Rights Agent in accordance with such Company Order shall authenticate and deliver such Right Certificates as in this Agreement provided and not otherwise.

No Right Certificate shall be entitled to any benefit under this Agreement or be valid or obligatory for any purpose unless there appears on such Right Certificate a certificate of authentication substantially in the form provided for herein executed by the Rights Agent by manual signature, and

such certificate upon any Right Certificate shall be conclusive evidence, and the only evidence, that such Right Certificate has been duly authenticated and delivered hereunder.

Section 6. Registration, Registration of Transfer and Exchange. From and after the Distribution Date and prior to the earlier of the Redemption Date and the Final Expiration Date, the Company shall cause to be kept at the Shareholder Services Office of the Rights Agent a Rights Register (a "Rights Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Right Certificates and of transfers of Rights. The Rights Agent is hereby appointed the registrar and transfer agent (the "Rights Registrar") for the purpose of registering Right Certificates and transfers of Rights as herein provided and the Rights Agent agrees to maintain such Rights Register in accordance with such regulations so long as it continues to be designated as Rights Registrar hereunder.

Upon surrender to the Rights Agent for registration of transfer of any Right Certificate, the Company shall execute, and the Rights Agent shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Right Certificates evidencing a like number of Rights.

At the option of the holder, Right Certificates may be exchanged for other Right Certificates upon surrender of the Right Certificates to be exchanged to the Rights Agent. Whenever any Right Certificates are so surrendered for exchange, the Company shall execute, and the Rights Agent shall authenticate and deliver, the Right Certificates which the holder making the exchange is entitled to receive.

All Right Certificates issued upon any registration of transfer or exchange of Right Certificates shall be the valid obligations of the Company, evidencing the same Rights, and entitled to the same benefits under this Agreement, as the Right Certificates surrendered upon such registration of transfer or exchange.

Every Right Certificate presented or surrendered for registration of transfer or exchange shall (if so required by the Company or the Rights Agent) be duly endorsed, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Rights Registrar duly executed, by the holder thereof or his attorney duly authorized in writing.

No service charge shall be made for any registration of transfer or exchange of Right Certificates, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Right Certificates, other than exchanges not involving any transfer.

The provisions of this Section 6 shall be subject to the provisions of
Section 15.

Section 7. Mutilated, Destroyed, Lost and Stolen Right Certificates. If any mutilated Right Certificate is surrendered to the Rights Agent, the Company shall execute and the Rights Agent shall authenticate and deliver in exchange therefor a new Right Certificate of like tenor, for a like number of Rights and bearing a registration number not contemporaneously outstanding.

If there shall be delivered to the Company and the Rights Agent (i) evidence to their satisfaction of the destruction, loss or theft of a Right Certificate and (ii) such security or indemnity, if any, as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Rights Agent that such Right Certificate has been acquired by a bona fide purchaser, the Company shall execute and upon its request the Rights Agent shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Right Certificate, a new Right Certificate of like tenor, for a like number of Rights and bearing a registration number not contemporaneously outstanding.

Upon the issuance of any new Right Certificate under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed

in relation thereto and any other expenses (including the fees and expenses of the Rights Agent) connected therewith.

Every new Right Certificate issued pursuant to this Section in lieu of any destroyed, lost or stolen Right Certificate shall constitute an additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Right Certificate shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Agreement equally and proportionately with any and all other Right Certificates duly issued hereunder.

The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Right Certificates.

Section 8. Exercise of Rights; Purchase Price; Expiration Date of Rights. (a) The registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein) in whole or in part at any time after the Distribution Date upon surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at its Shareholder Services Office, together with payment of the Purchase Price for each one one-thousandth (1/1000) of a Preferred Share (or other securities) as to which the Rights are exercised, at or prior to the earliest of (i) the Close of Business on the Final Expiration Date, (ii) the time of redemption on the Redemption Date or (iii) the time at which such Rights are mandatorily redeemed and exchanged as provided in Section 25 hereof.

(b) The Purchase Price for each one one-thousandth (1/1000) of a Preferred Share pursuant to the exercise of a Right shall initially be $65, shall be subject to adjustment from time to time as provided in Sections 12 and 14 hereof and shall be payable in lawful money of the United States of America in accordance with paragraph (c) below.

(c) Upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase duly executed, accompanied by payment of the Purchase Price for the securities to be purchased and an amount equal to any applicable transfer tax required to be paid by the holder of such Right Certificate in accordance with Section 10 in cash, or by certified check or cashier's check payable to the order of the Company, the Rights Agent shall thereupon promptly (i) (A) requisition from any transfer agent of the Preferred Shares (or other securities) certificates for such number of one one-thousandths of a Preferred Share (or other securities) as are to be purchased and registered in such name or names as may be designated by the registered holder of such Right Certificate or, if appropriate, in the name of a depositary agent or its nominee, and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests, and (B) requisition from a depositary agent appointed by the Company, if any, depositary receipts representing such number of one one-thousandths of a Preferred Share as are to be purchased and registered in such name or names as may be designated by such holder (in which case certificates for the Preferred Shares represented by such receipts shall be deposited by the transfer agent with such depositary agent), and the Company hereby directs such depositary agent to comply with all such requests, (ii) when appropriate, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional shares in accordance with Section 15, (iii) promptly after receipt of such certificates or depositary receipts registered in such name or names as may be designated by such holder, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate and (iv) when appropriate, after receipt, promptly deliver such cash to or upon the order of such holder.

(d) If the registered holder of the Right Certificate shall exercise less than all the Rights evidenced thereby, a new Right Certificate evidencing Rights equal to the Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Right Certificate or to his duly authorized assigns, subject to the provisions of
Section 15 hereof.

Section 9. Cancellation and Destruction of Right Certificates. All Right Certificates surrendered for the purpose of exercise, transfer or exchange shall, if surrendered to the Company or to any of its other agents, be delivered to the Rights Agent for such purpose and for cancellation or, if surrendered to the Rights Agent for such purpose, shall be cancelled by it. No Right Certificates shall be authenticated in lieu of or in exchange for any Right Certificates cancelled as provided in this Section except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation, and the Rights Agent shall so cancel, any other Right Certificate purchased or acquired by the Company. The Rights Agent shall deliver all cancelled Right Certificates to the Company, or shall, pursuant to a Company Order, destroy such cancelled Right Certificates and in such case shall deliver a certificate of destruction thereof to the Company.

Section 10. Reservation and Availability of Shares. The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued Preferred Shares or any Preferred Shares held in its treasury, the number of Preferred Shares that will be sufficient to permit the exercise in full of all outstanding Rights in accordance with Section 8; provided, however, that the Company will not be required to reserve and keep available Common Shares or Preferred Shares sufficient to permit the exercise in full of all outstanding Rights pursuant to the adjustments set forth in
Section 12(a)(ii) or Section 14 until such time as the Rights become exercisable pursuant to such adjustments.

The Company covenants and agrees that it will take all such action as may be necessary to ensure that all Preferred Shares or Common Shares of the Company issued upon exercise of Rights shall (subject to payment of the Purchase Price) be duly authorized, validly issued, fully paid and nonassessable.

The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery

of the Right Certificates or of any Preferred Shares (or depository receipts therefor) or Common Shares of the Company upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Right Certificates to a Person other than, or in respect of the issuance or delivery of certificates or depositary receipts for the Preferred Shares or Common Shares of the Company upon exercise of Rights evidenced by Right Certificates in a name other than that of, the registered holder of the Right Certificate evidencing Rights surrendered for transfer or exercise or to issue or deliver any certificates or depositary receipts for Preferred Shares or Common Shares of the Company upon the exercise of any Rights until any such tax shall have been paid (any such tax being payable by the holder of such Right Certificate at the time of surrender thereof) or until it has been established to the Company's satisfaction that no such tax is due.

Section 11. Record Date. Each Person in whose name any certificate for Preferred Shares or Common Shares of the Company is issued upon the exercise of, or upon mandatory redemption and exchange of, Rights shall for all purposes be deemed to have become the holder of record of the Preferred Shares or Common Shares represented thereby on, and such certificate shall be dated,
(i) in the case of the exercise of Rights, the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable transfer taxes) was made, or (ii) in the case of the mandatory redemption and exchange of Rights, the date of such mandatory redemption and exchange; provided, however, that, if the date of such surrender and payment or mandatory redemption and exchange is a date upon which the transfer books of the Company for its Preferred Shares or Common Shares, as the case may be, are closed, such Person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding Business Day on which such transfer books of the Company are open.

Section 12. Adjustment of Purchase Price, Number of Shares or Number of Rights. The Purchase Price, the number and kind of shares of capital stock of the Company covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 12.

(a) (i) If the Company shall at any time (A) declare a dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine the outstanding Preferred Shares into a smaller number of Preferred Shares or (D) issue any shares of its capital stock in a reclassification of the Preferred Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 12(a), the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of capital stock issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised thereafter shall be entitled to receive, upon payment of the Purchase Price for the number of one one-thousandths of a Preferred Share for which a Right was exercisable immediately prior to such date, the aggregate number and kind of shares of capital stock which, if such Right had been duly exercised immediately prior to such date (at a time when the Preferred Shares transfer books of the Company were open), such holder would have acquired upon such exercise and been entitled to receive upon payment or effectuation of such dividend, subdivision, combination or reclassification; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. If an event occurs which would require an adjustment under both Section 12(a)(i) and Section 12(a)(ii), the adjustment provided for in this Section 12(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 12(a)(ii).

(ii) Subject to action of the Board of Directors of the Company pursuant to Section 25 of this Agreement, if any Person shall become an Acquiring Person, each holder of a Right shall thereafter have a right to receive, upon exercise thereof at a price equal to the then current Purchase Price multiplied by the number of one one-thousandths of a Preferred Share for which a Right is then exercisable, in accordance with the terms of this Agreement and in lieu of Preferred Shares, such number of Common Shares of the Company as shall equal the result obtained by (x) multiplying the then current Purchase Price by the number of one one-thousandths of a Preferred Share for which a Right is then exercisable and dividing that product by (y) 50% of the then current per share market price of the Company's Common Shares (determined pursuant to Section 12(d)) on the date such Person became an Acquiring Person. If any Person shall become an Acquiring Person and the Rights shall then be outstanding, the Company shall not take any action which would eliminate or diminish the benefits intended to be afforded by the Rights.

Notwithstanding any other provision of this Agreement, from and after the time any Person shall become an Acquiring Person, any Rights that are or were acquired or beneficially owned by any such Acquiring Person (or any Associate or Affiliate of such Acquiring Person) shall be null and void and any holder of such Rights shall thereafter have no right to exercise such Rights under any provision of this Agreement. No Right Certificate shall be issued pursuant to this Agreement that represents Rights beneficially owned by an Acquiring Person whose Rights would be null and void pursuant to the preceding sentence or by any Associate or Affiliate thereof; no Right Certificate shall be issued at any time upon the transfer of any Rights to an Acquiring Person whose Rights would be null and void pursuant to the preceding sentence or to any Associate or Affiliate thereof or to any nominee (acting in its capacity as such) of such Acquiring Person, Associate or Affiliate; and any Right Certificate delivered to the Rights Agent for transfer to an Acquiring Person whose Rights would be null and void

pursuant to the preceding sentence or to any Associate or Affiliate thereof or to any nominee (acting in its capacity as such) of such Acquiring Person, Associate or Affiliate shall be cancelled.

(iii) If on or after the Distribution Date there shall not be sufficient Common Shares issued but not outstanding, or authorized but unissued, to permit the exercise in full of all outstanding Rights in accordance with the foregoing subparagraph (ii), the Company agrees to take all such action as is within its power, including without limitation appropriate action by its Board of Directors, as may be necessary to amend the Company's charter to authorize additional Common Shares for issuance upon exercise of the Rights. If, notwithstanding the foregoing, the stockholders shall not approve an amendment to the Company's charter authorizing such additional Common Shares, the adjustment prescribed in Section 12(a)(ii) shall not be made but, in lieu thereof, each holder of a Right shall have the right to receive, upon exercise thereof in accordance with the terms of this Agreement, such number of one one-thousandths of Preferred Shares as shall equal the result obtained by
(x) multiplying the then current Purchase Price by the number of one one-thousandths of a Preferred Share for which a Right is then exercisable and dividing that product by (y) 50% of the then current per share market price of one one-thousandth of a Preferred Share (determined pursuant to Section 12(d)) on the date such Person became an Acquiring Person.

(b) If the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Shares entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Preferred Shares (or shares having the same rights, privileges and preferences as the Preferred Shares ("equivalent preferred shares")) or securities convertible into or exchangeable for Preferred Shares or equivalent preferred shares at a price per Preferred Share or equivalent preferred share (together with any additional consideration required upon conversion or exchange in the case of a security convertible into or exchangeable for Preferred Shares or equivalent preferred shares), less than the current per share market price of the Preferred Shares

(determined pursuant to Section 12(d) on such record date), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of Preferred Shares outstanding on such record date plus the number of Preferred Shares which the aggregate offering price of the total number of Preferred Shares and/or equivalent preferred shares so to be offered (together with the aggregate of any additional consideration required upon conversion or exchange in the case of any convertible or exchangeable securities so to be offered) would purchase at such current market price and the denominator of which shall be the number of Preferred Shares outstanding on such record date plus the number of additional Preferred Shares and/or equivalent preferred shares to be offered for subscription or purchase (or into or for which the convertible or exchangeable securities so to be offered are initially convertible or exchangeable); provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. In case all or part of such subscription or purchase price may be paid in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent. Preferred Shares owned by or held for the account of the Company or any of its Subsidiaries shall not be deemed outstanding for the purpose of any computation described in this Section 12(b). The adjustment described in this Section 12(b) shall be made successively whenever such a record date is fixed; and, if none of such rights, options or warrants is so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.

(c) If the Company shall fix a record date for the making of a distribution to all holders of the Preferred Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness

or assets (other than a regular quarterly cash dividend or a dividend payable in Preferred Shares) or subscription rights or warrants (excluding those referred to in Section 12(b)), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the then current per share market price of the Preferred Shares (determined pursuant to Section 12(d)) on such record date, less the fair market value (as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent) of the portion of the assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to one Preferred Share and the denominator of which shall be such current per share market price of the Preferred Shares; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company to be issued upon the exercise of one Right. Such adjustments shall be made successively whenever such a record date is fixed; and, if such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.

(d)(i) For the purpose of any computation hereunder, the "current per share market price" of the Common Shares on any date shall be deemed to be the average of the daily Closing Prices per share of such Common Shares for the 30 consecutive Trading Days immediately prior to such date; provided, however, that, if the issuer of such Common Shares shall announce (A) a dividend or distribution on such Common Shares payable in such Common Shares or securities convertible into such Common Shares or (B) any subdivision, combination or reclassification of such Common Shares, and the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, shall occur during such period of 30 Trading Days, then, and in each such case,

the current per share market price of the Common Shares shall be appropriately adjusted to reflect the current market price per Common Share equivalent.

(ii) For the purpose of any computation hereunder, the "current per share market price" of the Preferred Shares shall be determined in the same manner as set forth above for Common Shares in paragraph (i) of this
Section 12(d). If the current per share market price of the Preferred Shares cannot be determined in the manner provided above, the "current per share market price" of the Preferred Shares shall be conclusively deemed to be the current per share market price of the Common Shares (determined in the manner provided above) multiplied by one thousand.

(e) No adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; provided; however, that any adjustments which by reason of this
Section 12(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 12 shall be made to the nearest cent or to the nearest ten-thousandth of a Common Share or other share or one ten-millionth of a Preferred Share, as the case may be, and references herein to the "number of one one-thousandths of a Preferred Share" (or similar phrases) shall be construed to include fractions of one one-thousandth of a Preferred Share. Notwithstanding the first sentence of this Section 12(e), any adjustment required by this Section 12 shall be made no later than the earlier of (i) three years from the date of the transaction which requires such adjustment or (ii) the thirtieth day preceding the Final Expiration Date.

(f) If as a result of an adjustment made pursuant to Section
12(a), the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than Preferred Shares, thereafter the number of such other shares so receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares contained in this Section 12 and the provisions

of this Agreement, including without limitation Sections 8, 10, 11 and 14, with respect to the Preferred Shares shall apply on like terms to any such other shares.

(g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall, whether or not the Right Certificate evidencing such Rights reflects such adjusted Purchase Price, evidence the right to purchase, at the adjusted Purchase Price, the number of one one-thousandths of a Preferred Share purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.

(h) Unless the Company shall have exercised its election as provided in Section 12(i), upon each adjustment of the Purchase Price pursuant to Section 12(b) or 12(c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price per one one-thousandth of a Preferred Share, that number of one one-thousandths of a Preferred Share obtained by (i) multiplying
(x) the number of one-thousandths of a share covered by a Right immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price.

(i) The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights outstanding in lieu of any adjustment in the number of one one-thousandths of a Preferred Share purchasable upon the exercise of a Right. Each Right outstanding after such adjustment of the number of Rights shall be exercisable for the number of one one-thousandths of a Preferred Share for which a Right was exercisable immediately prior to such adjustment of the Purchase Price. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make

a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Right Certificates have been issued, shall be at least 10 days later than the date of the public announcement. Until such record date, however, any adjustment in the number of one one-thousandths of a Preferred Share for which a Right shall be exercisable made as required by this Agreement shall remain in effect. If Right Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 12(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Right Certificates on such record date Right Certificates evidencing, subject to Section 15 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Right Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Right Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Right Certificates so to be distributed shall be issued, executed and authenticated in the manner provided for herein and shall be registered in the names of the holders of record of Right Certificates on the record date specified in the public announcement.

(j) Irrespective of any adjustment or change in the Purchase Price or the number of one one-thousandths of a Preferred Share issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the Purchase Price and the number of one one-thousandths of a Preferred Share which were expressed in the initial Right Certificates issued hereunder.

(k) Before taking any action that would cause an adjustment reducing the Purchase Price below one one-thousandth of the amount of consideration per Preferred Share determined by the Board

of Directors of the Company to be capital, or below one one-thousandth of the par value, if any, per Preferred Share issuable upon exercise of the Rights, the Company agrees to take such corporate action as is within its power, including without limitation appropriate action by its Board of Directors, and which is, in the opinion of its counsel, necessary in order that the Company may validly and legally issue fully paid and nonassessable one one-thousandths of Preferred Shares at such adjusted Purchase Price.

(l) In any case in which this Section 12 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuance to the holder of any Right exercised after such record date of the Preferred Shares or other capital stock or securities of the Company, if any, issuable upon such exercise over and above the Preferred Shares or other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional securities upon the occurrence of the event requiring such adjustment.

(m) Anything in this Section 12 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 12, as and to the extent that it in its sole discretion shall determine to be advisable in order that any combination or subdivision of the Preferred Shares, issuance wholly for cash of any of the Preferred Shares at less than the current market price, issuance wholly for cash of Preferred Shares or securities which by their terms are convertible into or exchangeable for Preferred Shares, dividends on Preferred Shares payable in Preferred Shares or issuance of rights, options or warrants referred to in subsection (b) of this Section 12, hereafter effected by the Company to holders of its Preferred Shares shall not be taxable to such shareholders.

(n) If at any time prior to the Distribution Date, the Company shall (i) declare or pay any dividend on the Common Shares payable in Common Shares or (ii) effect a subdivision or combination of the Common Shares (by reclassification or otherwise than by payment of dividends in Common Shares) into a greater or lesser number of Common Shares, then in any such case (i) the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision or combination shall be adjusted by multiplying such Purchase Price by a fraction, the numerator of which is the number of Common Shares outstanding immediately before such event and the denominator of which is the number of Common Shares outstanding immediately after such event, and (ii) the number of Rights outstanding immediately after such event shall be adjusted, either through cancellation of outstanding Rights or through distribution of additional Rights (but without duplication of the Company's obligations under Section 3(c)), so that the certificate evidencing each Common Share outstanding immediately after such event shall also evidence the associated Right to purchase the same number of one one-thousandths of a Preferred Share as to which a Right would have entitled the holder thereof to purchase immediately prior to such event. The adjustment provided for in this
Section 12(n) shall be made successively whenever such a dividend is declared or paid or such a subdivision or combination is effected. If an event occurs which would require an adjustment under Section 12(a)(ii) and this Section
12(n), the adjustments provided for in this Section 12(n) shall be in addition and prior to any adjustment required pursuant to Section 12(a)(ii).

Section 13. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in Section 12 or 14 hereof, the Company shall (a) promptly prepare a certificate setting forth such adjustment, and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent and with each transfer agent for the Common Shares of the Company and the Preferred Shares a copy of such certificate and (c) mail a brief summary thereof to each holder of record of a Right Certificate in accordance with Section 28 hereof.

Section 14. Consolidation, Merger or Sale or Transfer of Assets or Earning Power. If, directly or indirectly, (a) the Company shall consolidate with, or merge with and into, any other Person, (b) any Person shall merge with and into the Company and the Company shall be the continuing or surviving corporation of such merger and, in connection with any such merger, all or part of the Common Shares of the Company shall be changed into or exchanged for stock or other securities of any other Person (or the Company) or cash or any other property, or (c) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one or a series of two or more transactions, assets of the Company or its Subsidiaries which constitute more than 50% of the assets or which produce more than 50% of the earning power of the Company and its Subsidiaries (taken as a whole) to any Person or any Affiliate or Associate of such Person other than the Company or one or more of its Wholly-Owned Subsidiaries, then, and in each such case, the Company agrees that, as a condition to engaging in any such transaction, it will make or cause to be made proper provision so that (i) each holder of a Right (except as otherwise provided herein) shall thereafter have the right to receive, upon the exercise thereof in accordance with the terms of this Agreement and in lieu of Preferred Shares, such number of Common Shares of such other Person (including the Company as successor thereto or as the surviving corporation) or, if such other Person is a Subsidiary of another Person, of the Person or Persons (other than individuals) which ultimately control such first-mentioned Person, as shall be equal to the result obtained by (X) multiplying the then current Purchase Price by the number of one one-thousandths of a Preferred Share for which a Right is then exercisable (without taking into account any adjustment previously made pursuant to Section
12(a)(ii)) and dividing that product by (Y) 50% of the current per share market price of the Common Shares of such other Person (determined pursuant to Section
12(d)) on the date of consummation of such consolidation, merger, sale or transfer; (ii) the issuer of such Common Shares shall thereafter be liable for, and shall assume, by virtue of such consolidation, merger, sale or

transfer, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term "Company", as used herein, shall thereafter be deemed to refer to such issuer; and (iv) such issuer shall take such steps (including without limitation the reservation of a sufficient number of shares of its Common Shares in accordance with Section 10) in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to the Common Shares thereafter deliverable upon the exercise of the Rights. The Company shall not enter into any transaction of the kind referred to in this
Section 14 if at the time of such transaction there are outstanding any rights, warrants, instruments or securities or any agreement or arrangements which, as a result of the consummation of such transaction, would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights. The Company shall not consummate any such consolidation, merger, sale or transfer unless prior thereto the Company and such issuer shall have executed and delivered to the Rights Agent an agreement supplemental to this Agreement complying with the provisions of this Section 14. The provisions of this
Section 14 shall similarly apply to successive mergers or consolidations or sales or other transfers. For the purposes of this Section 14, 50% of the assets of the Company and its Subsidiaries shall be determined by reference to the book value of such assets as set forth in the most recent consolidated balance sheet of the Company and its Subsidiaries (which need not be audited) and 50% of the earning power of the Company and its Subsidiaries shall be determined by reference to the mathematical average of the operating income resulting from the operations of the Company and its Subsidiaries for the two most recent full fiscal years as set forth in the consolidated and consolidating financial statements of the Company and its Subsidiaries for such years; provided, however, that, if the Company has, during such period, engaged in one or more transactions to which purchase accounting is applicable, such determination shall be made by reference to the pro forma operating income of the Company and its

Subsidiaries giving effect to such transactions as if they had occurred at the commencement of such two-year period.

Section 15. Fractional Rights and Fractional Shares. (a) The Company shall not be required to issue or distribute Right Certificates which evidence fractional Rights. If, on the Distribution Date or thereafter, as a result of any adjustment effected pursuant to Section 12(i) or otherwise hereunder, a Person would otherwise be entitled to receive a Right Certificate evidencing a fractional Right, the Company shall, in lieu thereof, pay or cause to be paid to such Person an amount in cash equal to the same fraction of the current market value of a whole Right. For the purpose of this Section 15(a), the current market value of a whole Right shall be the Closing Price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable.

(b) The Company shall not be required to issue fractions of Preferred Shares (other than fractions which are integral multiples of one one-thousandth of a Preferred Share) upon exercise of the Rights or to distribute certificates which evidence fractional Preferred Shares (other than fractions which are integral multiples of one one-thousandth of a Preferred Share). Fractions of Preferred Shares in integral multiples of one one-thousandth of a Preferred Share may, at the election of the Company, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Company and a depositary selected by it, provided that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial owners of the Preferred Shares. If, on the Distribution Date or thereafter, as a result of any adjustment effected hereunder in the number of one one-thousandths of a Preferred Share as to which a Right has become exercisable, a Person would otherwise be entitled to receive a fractional Preferred Share that is not an integral multiple of one one-thousandth of a Preferred Share, the Company shall, in lieu thereof, pay to such Person at the time such Right is exercised as herein provided an amount in cash equal to the same fraction (which is not an integral multiple of one

one-thousandth of a Preferred Share) of the current market value of one Preferred Share. For purposes of this Section 15(b), the current market value of a Preferred Share shall be the Closing Price of a Preferred Share for the Trading Day immediately prior to the date of such exercise.

(c) Should any adjustment contemplated by Section 12(a)(ii) or any mandatory redemption and exchange contemplated by Section 25 occur, the Company shall not be required to issue fractions of Common Shares upon exercise of the Rights or to distribute certificates which evidence fractional Common Shares. If after any such adjustment or mandatory redemption and exchange, a Person would otherwise be entitled to receive a fractional Common Share of the Company upon exercise of any Right Certificate or upon mandatory redemption and exchange as contemplated by Section 25, the Company shall, in lieu thereof, pay to such Person at the time such Right is exercised as herein provided or upon such mandatory redemption and exchange an amount in cash equal to the same fraction of the current market value of one Common Share. For purposes of this
Section 15(c), the current market value of a Common Share shall be the Closing Price of a Common Share for the Trading Day immediately prior to the date of such exercise or the date of such mandatory redemption and exchange.

(d) The holder of a Right by the acceptance thereof expressly waives his right to receive any fractional Rights or any fractional shares upon exercise or mandatory redemption and exchange of a Right (except as provided above).

Section 16. Rights of Action. (a) All rights of action in respect of the obligations and duties owed to the holders of the Rights under this Agreement are vested in the registered holders of the Rights; and, without the consent of the Rights Agent or of the holder of any other Rights, any registered holder of any Rights may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding, judicial or otherwise, against the Company to enforce, or otherwise to act in respect of, such holder's right to exercise such Rights in the manner provided in the Right Certificate evidencing such Rights and in this Agreement. Without limiting the

foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of, the obligations of any Person subject to this Agreement.

(b) No right or remedy herein conferred upon or reserved to the registered holder of Rights is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy, whether hereunder or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

(c) No delay or omission of any registered holder of Rights to exercise any right or remedy accruing hereunder shall impair any such right or remedy or constitute a waiver of any default hereunder or an acquiescence therein. Every right and remedy given hereunder or by law to such holders may be exercised from time to time, and as often as may be deemed expedient, by such holders.

Section 17. Agreement of Right Holders. Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that:

(a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the Common Shares of the Company;

(b) after the Distribution Date, the Right Certificates are transferable only on the registry books of the Rights Agent if surrendered at the Shareholder Services Office of the Rights Agent duly endorsed or accompanied by a proper instrument of transfer; and

(c) the Company and the Rights Agent may deem and treat the person in whose name the Right Certificate (or, prior to the Distribution Date, the associated Common Shares certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificates or the associated Common Shares certificate made by anyone other than the Company or the Rights Agent) for all purposes, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary.

Section 18. Right Certificate Holder Not Deemed a Stockholder. No holder, as such, of any Right (whether or not then evidenced by a Right Certificate) shall be entitled to vote, receive dividends or be deemed for any purpose the holder of Preferred Shares, Common Shares of the Company or any other securities of the Company which may at any time be issuable on the exercise (or mandatory redemption and exchange) of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon any such holder, as such, any of the rights of a stockholder of the Company, including without limitation any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, to give or withhold consent to any corporate action, to receive notice of meetings or other actions affecting stockholders (except as provided in Section 26) or to receive dividends or subscription rights until the Right or Rights evidenced by such Right Certificate shall have been exercised (or mandatorily redeemed and exchanged) in accordance with the provisions hereof.

Section 19. Concerning the Rights Agent. The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless

against, any loss, liability or expense, incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability in the premises.

The Rights Agent shall be protected and shall incur no liability for, or in respect of any action taken, suffered or omitted by it in connection with, its administration of this Agreement in reliance upon any Right Certificate or certificate for Preferred Shares, Common Shares of the Company or other securities of the Company, Company Order, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be executed and, where necessary, verified or acknowledged, by the proper person or persons, or otherwise upon the advice of its counsel as set forth in Section 20 hereof.

Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Right Certificates, by their acceptance thereof, shall be bound.

(a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion.

(b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board, the President, any Vice President, the

Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate.

(c) The Rights Agent shall be liable hereunder to the Company or any other Person only for its own negligence, bad faith or willful misconduct. Anything in this Agreement to the contrary notwithstanding, in no event shall the Rights Agent be liable for special, indirect or consequential loss or damage of any kind whatsoever (including, but not limited to, lost profits), even if the Rights Agent has been advised of the likelihood of such loss or damage and regardless of the form of action.

(d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except its authentication thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only.

(e) The Rights Agent shall not have any responsibility with respect to the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or with respect to the validity or execution of any Right Certificate (except its authentication thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 12(a)(ii) hereof) or any adjustment in the terms of the Rights (including the manner, method or amount thereof) provided for in Sections 3, 12, 14, 24 and 25, or the ascertainment of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after actual notice that such change or adjustment is required); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of

any Preferred Shares or Common Shares to be issued pursuant to this Agreement or any Right Certificate or as to whether any Preferred Shares or Common Shares will, when issued, be duly authorized, validly issued, fully paid and nonassessable.

(f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement.

(g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the Chairman of the Board, the President, any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer.

(h) The Rights Agent and any shareholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company.

(i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss of the Company resulting from any such act, default, neglect or misconduct provided reasonable care was exercised in the selection and continued employment thereof.

Section 21. Merger or Consolidation or Change of Name of Rights Agent. Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the corporate trust business or shareholder services business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of
Section 22. If at the time such successor Rights Agent shall succeed to the agency created by this Agreement any of the Right Certificates shall have been authenticated but not delivered, any such successor Rights Agent may adopt the authentication of the predecessor Rights Agent and deliver such Right Certificates so authenticated, and, if at that time any of the Right Certificates shall not have been authenticated, any successor Rights Agent may authenticate such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. If at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been authenticated but not delivered, the Rights Agent may adopt the authentication under its prior name and deliver Right Certificates so authenticated; and, in case at that time any of the Right Certificates shall not have been authenticated, the Rights Agent may authenticate such Right Certificates either in its prior name or in its changed name; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement.

Section 22. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days' notice in writing mailed to the Company and to each transfer agent for the Common Shares of the Company and the Preferred

Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent for the Common Shares of the Company and the Preferred Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the registered holder of a Right Certificate (or, prior to the Distribution Date, of Common Shares), then any registered holder of a Right Certificate (or, prior to the Distribution Date, of Common Shares) may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be either (A) a corporation organized and doing business under the laws of the United States or of any state of the United States, which is authorized under such laws to exercise corporate trust or shareholder services powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50 million or (B) an affiliate of such a corporation. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent for the Common Shares of the Company and the Preferred Shares, and mail a notice thereof in writing to the

registered holders of the Right Certificates. Failure to give any notice provided for in this Section 22, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.

Section 23. Issuance of New Right Certificates. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Purchase Price per share and the number or kind or class of shares or other securities purchasable under the Right Certificates made in accordance with the provisions of this Agreement.

Section 24. Redemption. (a) The Rights may be redeemed by action of the Board of Directors of the Company pursuant to paragraph (b) of this Section 24, or may be redeemed and exchanged by action of the Board of Directors of the Company pursuant to Section 25 herein, but shall not be redeemed in any other manner.

(b) The Board of Directors of the Company may, at its option, at any time prior to the time any Person becomes an Acquiring Person redeem all but not less than all the then outstanding Rights at a redemption price of one cent ($0.01) per Right then outstanding, appropriately adjusted to reflect any adjustment in the number of Rights outstanding pursuant to Section 12(i) herein (such redemption price being hereinafter referred to as the "Redemption Price"). Any such redemption of the Rights by the Board of Directors may be made effective at such time, on such basis and with such conditions as the Board of Directors in its sole discretion may establish.

(c) The right of the registered holders of Right Certificates to exercise the Rights evidenced thereby or, if the Distribution Date has not theretofore occurred, the inchoate right of the registered holders of Rights to exercise the same shall, without notice to such holders or to the Rights Agent and without further action, terminate and be of no further force or effect effective as of the time of adoption

by the Board of Directors of the Company of a resolution authorizing and directing the redemption of the Rights pursuant to paragraph (b) of this
Section 24 (or, alternatively, if the Board of Directors qualified such action as to time, basis or conditions, then at such time, on such basis and with such conditions as the Board of Directors may have established pursuant to such paragraph (b)); thereafter, the only right of the holders of Rights shall be to receive the Redemption Price. The Company shall promptly give public notice of any redemption resolution pursuant to paragraph (b) of this Section 24; provided, however, that the failure to give, or any defect in, any such notice shall not affect the validity of such redemption. Within 10 days after the adoption of any redemption resolution pursuant to paragraph (b) of this Section 24, the Company shall give notice of such redemption to the holders of the then outstanding Rights by mailing such notice to all such holders at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agents for the Common Shares. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption shall state the method by which the payment of the Redemption Price will be made.

(d) Neither the Company nor any of its Affiliates or Associates may acquire (other than, in the case of such Affiliates and Associates, in their capacity as holders of Common Shares of the Company), redeem or purchase for value any Rights at any time in any manner other than as specifically set forth in this Section 24 or in Section 25 herein, and other than in connection with the purchase of Common Shares prior to the Distribution Date.

Section 25. Mandatory Redemption and Exchange. (a) The Board of Directors of the Company may, at its option, at any time after any Person becomes an Acquiring Person, issue Common Shares of the Company in mandatory redemption of, and in exchange for, all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become null and void pursuant to the provisions of Section 12(a)(ii) hereof) at an exchange ratio of one Common Share for

each Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof. Notwithstanding the foregoing, the Board of Directors shall not be empowered to effect such redemption and exchange at any time after any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any such Subsidiary, or any trustee of or fiduciary with respect to any such plan when acting in such capacity), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the Voting Shares then outstanding.

(b) Immediately upon the action of the Board of Directors of the Company ordering the mandatory redemption and exchange of any Rights pursuant to subsection (a) of this Section 25 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive such number of Common Shares as is provided in paragraph (a) of this Section 25. The Company shall promptly give public notice of any such redemption and exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such redemption and exchange. The Company promptly shall mail a notice of any such redemption and exchange to all the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of mandatory redemption and exchange shall state the method by which the redemption and exchange of the Common Shares for Rights will be effected and, in the event of any partial redemption and exchange, the number of Rights which will be redeemed and exchanged. Any partial redemption and exchange shall be effected pro rata based on the number of Rights (other than Rights which have become null and void pursuant to the provisions of Section 12(a)(ii) hereof) held by each holder of Rights.

(c) In any mandatory redemption and exchange pursuant to this
Section 25, the Company, at its option, may substitute Preferred Shares (or equivalent preferred shares, as such term is defined in Section 12(b) hereof) for Common Shares, at the initial rate of one one-thousandth of a Preferred Share (or equivalent preferred share) for each Common Share, as appropriately adjusted.

Section 26. Notice of Certain Events. If the Company shall, on or after the Distribution Date, propose (a) to pay any dividend or other distribution payable in stock of any class of the Company or any Subsidiary of the Company to the holders of its Preferred Shares, (b) to distribute to the holders of its Preferred Shares rights or warrants to subscribe for or to purchase any additional Preferred Shares or shares of stock of any class or any other securities, rights or options, (c) to make any other distribution to the holders of its Preferred Shares (other than a regular quarterly cash dividend),
(d) to effect any reclassification of its Preferred Shares (other than a reclassification involving only the subdivision of outstanding Preferred Shares), (e) to effect any consolidation or merger into or with, or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one or more transactions, of more than 50% of the assets or earning power of the Company and its Subsidiaries (determined as provided in Section 14 herein) to, any other Person (other than the Company or a Wholly-Owned Subsidiary or Wholly-Owned Subsidiaries), (f) to effect the liquidation, dissolution or winding up of the Company or (g) if the Rights have theretofore become exercisable with respect to Common Shares pursuant to Section 12(a)(ii) herein, to declare or pay any dividend or other distribution on the Common Shares payable in Common Shares or in stock of any other class of the Company or any Subsidiary of the Company or to effect a subdivision or combination of the Common Shares (by reclassification or otherwise than by payment of dividends in Common Shares) then, in each such case, the Company shall give to each holder of a Right Certificate, in accordance with Section 28 hereof, notice of such proposed action, which shall specify the date of authorization by the Board of Directors of the Company of, and record date for, such stock dividend

or such distribution of rights or warrants or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, winding up, subdivision or combination is to take place and the date of participation therein by the holders of the Common Shares of the Company or the Preferred Shares, or both, if any such date is to be fixed. Such notice shall be so given in the case of any action covered by clause (a),
(b) or (g) above at least 20 days prior to the record date for determining holders of the Preferred Shares or of the Common Shares of the Company, as the case may be, for purposes of such action, and in the case of any such other action, at least 20 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the Preferred Shares or Common Shares of the Company, as the case may be, whichever shall be the earlier.

If any of the events set forth in Section 12(a)(ii) of this Agreement shall occur, then, in any such case, the Company shall as soon as practicable thereafter give to each holder of a Right Certificate, in accordance with
Section 28 hereof, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights under
Section 12(a)(ii) hereof.

Section 27. Securities Laws Registrations. To the extent legally required, the Company agrees that it will prepare and file, no later than the Distribution Date, and will use its best efforts to cause to be declared effective, a registration statement under the Securities Act of 1933, as amended, registering the offering, sale and delivery of the Preferred Shares issuable upon exercise of the Rights, and the Company will, thereafter, use its best efforts to maintain such registration statement (or another) continuously in effect so long as any Rights remain outstanding and exercisable with respect to Preferred Shares. Should the Rights become exercisable with respect to securities of the Company or one of its Subsidiaries other than Preferred Shares, the Company agrees that it will, to the extent legally required, promptly thereafter prepare and file, or cause to be prepared and filed, and will use its best efforts to cause to be declared effective, a registration statement under such Act registering the

offering, sale and delivery of such other securities and the Company will, thereafter, use its best efforts to maintain such registration statement (or another) continuously in effect so long as any outstanding Rights are exercisable with respect to such securities. The Company further agrees to use its best efforts, from and after the Distribution Date, to qualify or register for sale the Preferred Shares or other securities of the Company or one of its Subsidiaries issuable upon exercise of the Rights under the securities or "blue sky" laws (to the extent legally required thereunder) of all jurisdictions in which registered holders of Right Certificates reside determined by reference to the Rights Register.

Section 28. Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows:

Group 1 Automotive, Inc. 950 Echo Lane, Suite 350 Houston, Texas 77024 Attention: Secretary

Subject to the provisions of Section 22 hereof, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Right Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows:

ChaseMellon Shareholder Services, L.L.C.

2323 Bryan Street, Suite 2300
Dallas, Texas 75201
Attention: Shareholder Services Division

Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Right Certificate shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the Rights

Register of the Company or, prior to the Distribution Date, on the stock transfer records for the Common Shares of the Company.

Section 29. Supplements and Amendments. The Company may from time to time supplement or amend this Agreement (which supplement or amendment shall be evidenced by a writing signed by the Company and the Rights Agent) without the approval of any holders of Right Certificates in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, to make any other provisions in regard to matters or questions arising hereunder, or to add, delete, modify or otherwise amend any provision, which the Company may deem necessary or desirable, including without limitation extending the Final Expiration Date and, provided that at the time of such amendment or supplement the Distribution Date has not occurred, the period during which the Rights may be redeemed; provided, however, that, from and after such time as any Person becomes an Acquiring Person, any such amendment or supplement shall not materially and adversely affect the interests of the holders of Right Certificates. Without limiting the foregoing, the Board of Directors of the Company may by resolution adopted at any time prior to such time as any Person becomes an Acquiring Person amend this Agreement to lower the thresholds set forth in the definitions of Acquiring Person and Distribution Date herein from 20% to a percentage not less than the greater of (i) the sum of .001% and the largest percentage of the outstanding Voting Shares then known to the Company to be beneficially owned by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any trustee of or fiduciary with respect to any such plan when acting in such capacity), and (ii) 10%.

Section 30. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.

Section 31. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Rights (and, prior to the Distribution Date, the Common Shares) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Rights (and, prior to the Distribution Date, the Common Shares).

Section 32. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

SECTION 33. GOVERNING LAW. THIS AGREEMENT AND EACH RIGHT CERTIFICATE (AND, PRIOR TO THE DISTRIBUTION DATE, THE RIGHTS REPRESENTED BY CERTIFICATES FOR COMMON SHARES) ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF DELAWARE AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE APPLICABLE TO CONTRACTS TO BE MADE AND PERFORMED ENTIRELY WITHIN SUCH STATE.

Section 34. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

Section 35. Descriptive Headings. Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and attested, all as of the day and year first above written.

GROUP 1 AUTOMOTIVE, INC.

Attest:

By   /s/ John S. Watson                 By  /s/ B. B. Hollingsworth, Jr.
   ------------------------------------    -----------------------------------
Name:    John S. Watson                 Name:   B. B. Hollingsworth, Jr.
Title:   Secretary                      Title:  Chairman, President and
Officer                                         Chief Executive Officer

ChaseMellon Shareholder Services, L.L.C.

As Rights Agent

Attest:

By   /s/ Margaret W. Smith              By  /s/ Barbara J. Robbins
   ------------------------------------    -----------------------------------
Name:    Margaret W. Smith              Name:   Barbara J. Robbins
Title:   Authorized Officer             Title:  Authorized Officer

EXHIBIT 10.11

GROUP 1 AUTOMOTIVE, INC.

1998 EMPLOYEE STOCK PURCHASE PLAN

1. PURPOSE. The GROUP 1 AUTOMOTIVE, INC. 1998 EMPLOYEE STOCK PURCHASE PLAN (the "Plan") is intended to provide an incentive for employees of GROUP 1 AUTOMOTIVE, INC. (the "Company") and certain of its subsidiaries to acquire or increase a proprietary interest in the Company through the purchase of shares of the Company's common stock. The Plan is intended to qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). The provisions of the Plan shall be construed in a manner consistent with the requirements of that section of the Code.

2. DEFINITIONS. Where the following words and phrases are used in the Plan, they shall have the respective meanings set forth below, unless the context clearly indicates to the contrary:

(a) "Board" means the Board of Directors of the Company.

(b) "Code" means the Internal Revenue Code of 1986, as amended.

(c) "Committee" means a committee appointed from time to time by the Board to administer the Plan as provided in paragraph 3.

(d) "Company" means Group 1 Automotive, Inc., a Delaware corporation.

(e) "Date of Exercise" means the last day of each Option Period.

(f) "Date of Grant" means January 1, 1998, and, thereafter, the first day of each successive April, July, October, and January.

(g) "Eligible Compensation" means regular straight-time earnings or base salary, except that such term shall not include payments for overtime, incentive compensation, bonuses and other special payments.

(h) "Exchange Act" means the Securities Exchange Act of 1934, as amended.

(i) "Option Period" means the three month period beginning on each Date of Grant.

(j) "Option Price" shall have the meaning assigned to such term in paragraph 8(b).

(k) "Participating Company" means any present or future parent or subsidiary corporation of the Company that participates in the Plan pursuant to paragraph 4.

(l) "Plan" means this Group 1 Automotive, Inc. 1998 Employee Stock Purchase Plan, as amended from time to time.

(m) "Restriction Period" means the period of time during which shares of Stock acquired by a participant in the Plan may not be sold, assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered or disposed of by such participant as provided in paragraph 8(d).

(n) "Stock" means the shares of the Company's common stock, par value $.01 per share.

3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Committee, the members of which shall be appointed from time to time by the Board. Each member of the Committee shall serve for a term commencing on a date specified by the Board and continuing until he dies, resigns, or is removed from office by the Board. Subject to the provisions of the Plan, the Committee shall interpret the Plan and all options granted under the Plan, make such rules as it deems necessary for the proper administration of the Plan, and make all other determinations necessary or advisable for the administration of the Plan. In addition, the Committee shall correct any defect or supply any omission or reconcile any inconsistency in the Plan, or in any option granted under the Plan, in the manner and to the extent that the Committee deems desirable to carry the Plan or any option into effect. The Committee shall, in its sole discretion, make such decisions or determinations and take such actions, and all such decisions, determinations and actions taken or made by the Committee pursuant to this and the other paragraphs of the Plan shall be conclusive on all parties. The Committee shall not be liable for any decision, determination or action taken in good faith in connection with the administration of the Plan. The Committee shall have the authority to delegate routine day-to-day administration of the Plan to such officers and employees of the Company as the Committee deems appropriate.

4. PARTICIPATING COMPANIES. The Committee may designate any present or future parent or subsidiary corporation of the Company that is eligible by law to participate in the Plan as a Participating Company by written instrument delivered to the designated Participating Company. Such written instrument shall specify the effective date of such designation and shall become, as to such designated Participating Company and persons in its employment, a part of the Plan. The terms of the Plan may be modified as applied to the Participating Company only to the extent permitted under Section 423 of the Code. Transfer of employment among the Company and Participating Companies (and among any other parent or subsidiary corporation of the Company) shall not be considered a termination of employment hereunder. Any Participating Company may, by appropriate action of its Board of Directors, terminate its participation in the Plan. Moreover, the Committee may, in its discretion, terminate a Participating Company's Plan participation at any time.

5. ELIGIBILITY. Subject to the provisions hereof, all employees of the Company and the Participating Companies who are employed by the Company or any Participating Company as of a Date of Grant shall be eligible to participate in the Plan; provided, however, that no option shall be granted to an employee if such employee, immediately after the option is granted, owns stock possessing five percent or more of the total combined voting power or value of all classes of stock

of the Company or of its parent or subsidiary corporations (within the meaning of Sections 423(b)(3) and 424(d) of the Code).

6. STOCK SUBJECT TO THE PLAN. Subject to the provisions of paragraph 13, the aggregate number of shares which may be sold pursuant to options granted under the Plan shall not exceed 200,000 shares of the authorized Stock, which shares may be unissued shares or reacquired shares, including shares bought on the market or otherwise for purposes of the Plan. Should any option granted under the Plan expire or terminate prior to its exercise in full, the shares theretofore subject to such option may again be subject to an option granted under the Plan. Any shares that are not subject to outstanding options upon the termination of the Plan shall cease to be subject to the Plan.

7. GRANT OF OPTIONS.

(a) IN GENERAL. Following the effective date of the Plan and continuing while the Plan remains in force, the Company shall offer options under the Plan to purchase shares of Stock to all eligible employees who elect to participate in the Plan. Except as otherwise determined by the Committee, these options shall be granted on each Date of Grant. Except as provided in paragraph 13, the term of each option shall be for three months, which shall begin on a Date of Grant and end on the last day of such three-month period. Subject to subparagraph 7(d), the number of shares of Stock subject to an option for a participant shall be equal to the quotient of (i) the aggregate payroll deductions withheld on behalf of such participant during the Option Period in accordance with subparagraph 7(b), divided by (ii) the Option Price of the Stock applicable to the Option Period, including fractions; provided, however, that the maximum number of shares of Stock that may be subject to any option for a participant may not exceed 3,000 (subject to adjustment as provided in paragraph 13).

(b) ELECTION TO PARTICIPATE; PAYROLL DEDUCTION AUTHORIZATION. An eligible employee may participate in the Plan only by means of payroll deduction. Except as provided in subparagraph 7(f), each eligible employee who elects to participate in the Plan shall deliver to the Company, within the time period prescribed by the Committee, a written payroll deduction authorization in a form prepared by the Company whereby he gives notice of his election to participate in the Plan as of the next following Date of Grant, and whereby he designates an integral percentage of his Eligible Compensation to be deducted from his compensation for each pay period and paid into the Plan for his account. The designated percentage may not be less than 1% nor exceed 10%.

(c) CHANGES IN PAYROLL AUTHORIZATION. The payroll deduction authorization referred to in subparagraph 7(b) may not be changed during the Option Period. However, a participant may withdraw from the Plan as provided in paragraph 9.

(d) $25,000 LIMITATION. No employee shall be granted an option under the Plan which permits his rights to purchase Stock under the Plan and under all other employee stock purchase plans of the Company and its parent and subsidiary corporations to accrue at a rate which exceeds $25,000 of fair market value of Stock (determined at the time such option is granted) for each calendar year in which such option is outstanding at any time (within the meaning of Section

423(b)(8) of the Code). Any payroll deductions in excess of the amount specified in the foregoing sentence shall be returned to the participant as soon as administratively feasible after the next following Date of Exercise.

(e) LEAVES OF ABSENCE. During a paid leave of absence approved by the Company and meeting the requirements of Treasury Regulation
Section 1.421-7(h)(2), a participant's elected payroll deductions shall continue. A participant may not contribute to the Plan during an unpaid leave of absence. If a participant takes an unpaid leave of absence that is approved by the Company and meets the requirements of Treasury Regulation Section 1.421-7(h)(2), then such participant's payroll deductions for such Option Period that were made prior to such leave may remain in the Plan and be used to purchase Stock under the Plan on the Date of Exercise relating to such Option Period. If a participant takes a leave of absence that is not described in the first or third sentence of this subparagraph 7(e), then he shall be considered to have withdrawn from the Plan pursuant to the provisions of paragraph 9 hereof. Further, notwithstanding the preceding provisions of this subparagraph
7(e), if a participant takes a leave of absence that is described in the first or third sentence of this subparagraph 7(e) and such leave of absence exceeds 90 days, then he shall be considered to have withdrawn from the Plan pursuant to the provisions of paragraph 9 hereof on the 91st day of such leave of absence.

(f) CONTINUING ELECTION. Subject to the limitation set forth in subparagraph 7(d), a participant (i) who has elected to participate in the Plan pursuant to subparagraph 7(b) as of a Date of Grant and (ii) who takes no action to change or revoke such election as of the next following Date of Grant and/or as of any subsequent Date of Grant prior to any such respective Date of Grant shall be deemed to have made the same election, including the same attendant payroll deduction authorization, for such next following and/or subsequent Date(s) of Grant as was in effect immediately prior to such respective Date of Grant. Payroll deductions that are limited by subparagraph 7(d) shall recommence at the rate provided in such participant's payroll deduction authorization at the beginning of the first Option Period that is scheduled to end in the following calendar year, unless the participant changes the amount of his payroll deduction authorization pursuant to paragraph 7, withdraws from the Plan as provided in paragraph 9, or is terminated from participation in the Plan as provided in paragraph 10.

8. EXERCISE OF OPTIONS.

(a) GENERAL STATEMENT. Subject to the limitation set forth in subparagraph 7(d), each participant in the Plan automatically and without any act on his part shall be deemed to have exercised his option on each Date of Exercise to the extent of his unused payroll deductions under the Plan and to the extent the issuance of Stock to such participant upon such exercise is lawful.

(b) "OPTION PRICE" DEFINED. The term "Option Price" shall mean the per share price of Stock to be paid by each participant on each exercise of his option, which price shall be equal to 85% of the fair market value of the Stock on the Date of Exercise or on the Date of Grant, whichever amount is less. For all purposes under the Plan, the fair market value of a share of Stock on a particular date shall be equal to the closing price of the Stock on the New York Stock Exchange,

Inc. on that date (or, if no shares of Stock have been traded on that date, on the next regular business date on which shares of the Stock are so traded).

(c) DELIVERY OF SHARE CERTIFICATES. As soon as practicable after each Date of Exercise, the Company shall deliver to a custodian selected by the Committee one or more certificates representing (or shall otherwise cause to be credited to the account of such custodian) the total number of whole shares of Stock respecting options exercised on such Date of Exercise in the aggregate (for both whole and fractional shares) of all of the participating employees hereunder. Any remaining amount representing a fractional share shall not be certificated (or otherwise so credited) and such remaining amount shall be paid in cash to the custodian. Such custodian shall keep accurate records of the beneficial interests of each participating employee in such shares by means of participant accounts under the Plan, and shall provide each eligible employee with quarterly or such other periodic statements with respect thereto as may be directed by the Committee. If the Company is required to obtain from any U.S. commission or agency authority to issue any such shares, the Company shall seek to obtain such authority. Inability of the Company to obtain from any commission or agency (whether U.S. or foreign) authority which counsel for the Company deems necessary for the lawful issuance of any such shares shall relieve the Company from liability to any participant in the Plan except to return to him the amount of his payroll deductions under the Plan which would have otherwise been used upon exercise of the relevant option.

(d) RESTRICTIONS ON TRANSFER. The Committee may from time to time specify with respect to a particular grant of options the Restriction Period that shall apply to the shares of Stock acquired pursuant to such options. Unless otherwise specified by the Committee, the Restriction Period applicable to shares of Stock acquired under the Plan shall be a period of six months after the Date of Exercise of the options pursuant to which such shares were acquired. Except as hereinafter provided, during the Restriction Period applicable to shares of Stock acquired under the Plan, such shares may not be sold, assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered or disposed of by the participant who has purchased such shares; provided, however, that such restriction shall not apply to the transfer, exchange or conversion of such shares of Stock pursuant to a merger, consolidation or other plan of reorganization of the Company, but the stock, securities or other property (other than cash) received upon any such transfer, exchange or conversion shall also become subject to the same transfer restrictions applicable to the original shares of Stock, and shall be held by the custodian, pursuant to the provisions hereof. Upon the expiration of such Restriction Period, the transfer restrictions set forth in this subparagraph 8(d) shall cease to apply and the optionee may, pursuant to procedures established by the Committee and the custodian, direct the sale or distribution of some or all of the whole shares of Stock in his Company stock account that are not then subject to transfer restrictions and, in the event of a sale, request payment of the net proceeds from such sale. Further, upon the termination of the participant's employment with the Company and its parent or subsidiary corporations for any reason whatsoever, the transfer restrictions set forth in this subparagraph 8(d) shall cease to apply and the custodian shall, upon the request of such participant, deliver to such participant a certificate issued in his name representing (or otherwise credit to an account of such participant) the aggregate whole number of shares of Stock in his Company stock account under the Plan. At the time of distribution of such shares, any fractional share in such Company stock account shall be converted to cash based on the fair market value of the Stock on the date of distribution and such cash shall be paid to the

participant. The Committee may cause the Stock issued in connection with the exercise of options under the Plan to bear such legends or other appropriate restrictions, and the Committee may take such other actions, as it deems appropriate in order to reflect the transfer restrictions set forth in this subparagraph 8(d) and to assure compliance with applicable laws.

9. WITHDRAWAL FROM THE PLAN.

(a) GENERAL STATEMENT. Any participant may withdraw in whole from the Plan at any time prior to the Date of Exercise relating to a particular Option Period. Partial withdrawals shall not be permitted. A participant who wishes to withdraw from the Plan must timely deliver to the Company a notice of withdrawal in a form prepared by the Company. The Company, promptly following the time when the notice of withdrawal is delivered, shall refund to the participant the amount of his payroll deductions under the Plan which have not yet been otherwise returned to him or used upon exercise of options; and thereupon, automatically and without any further act on his part, his payroll deduction authorization and his interest in unexercised options under the Plan shall terminate.

(b) ELIGIBILITY FOLLOWING WITHDRAWAL. A participant who withdraws from the Plan shall be eligible to participate again in the Plan upon expiration of the Option Period during which he withdrew (provided that he is otherwise eligible to participate in the Plan at such time).

10. TERMINATION OF EMPLOYMENT.

(a) GENERAL STATEMENT. Except as provided in subparagraph 10(b), if the employment of a participant terminates for any reason whatsoever, then his participation in the Plan automatically and without any act on his part shall terminate as of the date of the termination of his employment. The Company shall promptly refund to him the amount of his payroll deductions under the Plan which have not yet been otherwise returned to him or used upon exercise of options, and thereupon his interest in unexercised options under the Plan shall terminate.

(b) TERMINATION BY RETIREMENT, DEATH OR DISABILITY. If the employment of a participant terminates after such participant has attained age 65 or due to such participant's death or permanent and total disability (within the meaning of Section 22(e)(3) of the Code), then such participant, or such participant's personal representative, as applicable, shall have the right to elect either to:

(1) withdraw all of such participant's accumulated unused payroll deductions under the Plan; or

(2) exercise such participant's option for the purchase of Stock on the last day of the Option Period during which termination of employment occurs for the purchase of the number of full shares of Stock which the accumulated payroll deductions at the date of such participant's termination of employment will purchase at the applicable Option Price (subject to subparagraph 7(d)), with any excess payroll deduction amounts to be returned to such participant or such personal representative.

The participant or, if applicable, such personal representative, must make such election by giving written notice to the Committee at such time and in such manner as the Committee prescribes. In the event that no such written notice of election is timely received by the Committee, the participant or personal representative will automatically be deemed to have elected as set forth in clause (2) above, and promptly after the exercise so described in clause (2) above, all shares of Stock in such participant's account under the Plan shall be distributed to the participant or such personal representative.

11. RESTRICTION UPON ASSIGNMENT OF OPTION. An option granted under the Plan shall not be transferable otherwise than by will or the laws of descent and distribution. Each option shall be exercisable, during his lifetime, only by the employee to whom granted. The Company shall not recognize and shall be under no duty to recognize any assignment or purported assignment by an employee of his option or of any rights under his option or under the Plan.

12. NO RIGHTS OF STOCKHOLDER UNTIL EXERCISE OF OPTION. With respect to shares of Stock subject to an option, an optionee shall not be deemed to be a stockholder, and he shall not have any of the rights or privileges of a stockholder, until such option has been exercised. With respect to an individual's Stock held by the custodian pursuant to subparagraph
8(d), the custodian shall, as soon as practicable, pay the individual any cash dividends attributable thereto and shall, in accordance with procedures adopted by the custodian, facilitate the individual's voting rights attributable thereto.

13. CHANGES IN STOCK; ADJUSTMENTS. Whenever any change is made in the Stock, by reason of a stock dividend or by reason of subdivision, stock split, reverse stock split, recapitalization, reorganization, combination, reclassification of shares or other similar change, appropriate action will be taken by the Committee to adjust accordingly the number of shares subject to the Plan, the maximum number of shares that may be subject to any option, and the number and Option Price of shares subject to options outstanding under the Plan.

If the Company shall not be the surviving corporation in any merger or consolidation (or survives only as a subsidiary of another entity), or if the Company is to be dissolved or liquidated, then, unless a surviving corporation assumes or substitutes new options (within the meaning of Section 424(a) of the Code) for all options then outstanding, (i) the Date of Exercise for all options then outstanding shall be accelerated to a date fixed by the Committee prior to the effective date of such merger or consolidation or such dissolution or liquidation and (ii) upon such effective date any unexercised options shall expire and the Company promptly shall refund to each participant the amount of such participant's payroll deductions under the Plan which have not yet been otherwise returned to him or used upon exercise of options.

14. USE OF FUNDS; NO INTEREST PAID. All funds received or held by the Company under the Plan shall be included in the general funds of the Company free of any trust or other restriction, and may be used for any corporate purpose. No interest shall be paid to any participant.

15. TERM OF THE PLAN. The Plan shall be effective upon the date of its adoption by the Board, provided the Plan is approved by the stockholders of the Company within 12 months thereafter. Notwithstanding any provision in the Plan, no option granted under the Plan shall be

exercisable prior to such stockholder approval, and, if the stockholders of the Company do not approve the Plan by the Date of Exercise of the first option granted hereunder, then the Plan shall automatically terminate, no options may be exercised hereunder, and the Company promptly shall refund to each participant the amount of such participant's payroll deductions under the Plan; and thereupon, automatically and without any further act on his part, his payroll deduction authorization and his interest in unexercised options under the Plan shall terminate. Except with respect to options then outstanding, if not sooner terminated under the provisions of paragraph 16, the Plan shall terminate upon and no further payroll deductions shall be made and no further options shall be granted after June 30, 2007.

16. AMENDMENT OR TERMINATION OF THE PLAN. The Board in its discretion may terminate the Plan at any time with respect to any Stock for which options have not theretofore been granted. The Board and the Committee shall each have the right to alter or amend the Plan or any part thereof from time to time; provided, however, that no change in any option theretofore granted may be made that would impair the rights of the optionee without the consent of such optionee.

17. SECURITIES LAWS. The Company shall not be obligated to issue any Stock pursuant to any option granted under the Plan at any time when the offer, issuance or sale of shares covered by such option has not been registered under the Securities Act of 1933, as amended, or does not comply with such other state, federal or foreign laws, rules or regulations, or the requirements of any stock exchange upon which the Stock may then be listed, as the Company or the Committee deems applicable and, in the opinion of legal counsel for the Company, there is no exemption from the requirements of such laws, rules, regulations or requirements available for the offer, issuance and sale of such shares. Further, all Stock acquired pursuant to the Plan shall be subject to the Company's policies concerning compliance with securities laws and regulations, as such policies may be amended from time to time. The terms and conditions of options granted hereunder to, and the purchase of shares by, persons subject to Section 16 of the Exchange Act shall comply with any applicable provisions of Rule 16b-3. As to such persons, the Plan shall be deemed to contain, and such options shall contain, and the shares issued upon exercise thereof shall be subject to, such additional conditions and restrictions as may be required from time to time by Rule 16b-3 to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions.

18. NO RESTRICTION ON CORPORATE ACTION. Nothing contained in the Plan shall be construed to prevent the Company or any subsidiary from taking any corporate action that is deemed by the Company or such subsidiary to be appropriate or in its best interest, whether or not such action would have an adverse effect on the Plan or any option granted under the Plan. No employee, beneficiary or other person shall have any claim against the Company or any subsidiary as a result of any such action.

19. MISCELLANEOUS PROVISIONS.

(a) PARENT AND SUBSIDIARY CORPORATIONS. For all purposes of the Plan, a corporation shall be considered to be a parent or subsidiary corporation of the Company only if such corporation is a parent or subsidiary corporation of the Company within the meaning of Sections 424(e) and (f) of the Code.

(b) NUMBER AND GENDER. Wherever appropriate herein, words used in the singular shall be considered to include the plural and words used in the plural shall be considered to include the singular. The masculine gender, where appearing in the Plan, shall be deemed to include the feminine gender.

(c) HEADINGS. The headings and subheadings in the Plan are included solely for convenience, and if there is any conflict between such headings or subheadings and the text of the Plan, the text shall control.

(d) NOT A CONTRACT OF EMPLOYMENT. The adoption and maintenance of the Plan shall not be deemed to be a contract between the Company or any Participating Company and any person or to be consideration for the employment of any person. Participation in the Plan at any given time shall not be deemed to create the right to participate in the Plan, or any other arrangement permitting an employee of the Company or any Participating Company to purchase Stock at a discount, in the future. The rights and obligations under any participant's terms of employment with the Company or any Participating Company shall not be affected by participation in the Plan. Nothing herein contained shall be deemed to give any person the right to be retained in the employ of the Company or any Participating Company or to restrict the right of the Company or any Participating Company to discharge any person at any time, nor shall the Plan be deemed to give the Company or any Participating Company the right to require any person to remain in the employ of the Company or such Participating Company or to restrict any person's right to terminate his employment at any time. The Plan shall not afford any participant any additional right to compensation as a result of the termination of such participant's employment for any reason whatsoever.

(e) COMPLIANCE WITH APPLICABLE LAWS. The Company's obligation to offer, issue, sell or deliver Stock under the Plan is at all times subject to all approvals of and compliance with any governmental authorities (whether domestic or foreign) required in connection with the authorization, offer, issuance, sale or delivery of Stock as well as all federal, state, local and foreign laws. Without limiting the scope of the preceding sentence, and notwithstanding any other provision in the Plan, the Company shall not be obligated to grant options or to offer, issue, sell or deliver Stock under the Plan to any employee who is a citizen or resident of a jurisdiction the laws of which, for reasons of its public policy, prohibit the Company from taking any such action with respect to such employee.

(f) SEVERABILITY. If any provision of the Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions hereof; instead, each provision shall be fully severable and the Plan shall be construed and enforced as if said illegal or invalid provision had never been included herein.

(g) GOVERNING LAW. All provisions of the Plan shall be construed in accordance with the laws of Texas except to the extent preempted by federal law.

EXHIBIT 10.12

AGREEMENT BETWEEN
TOYOTA MOTOR SALES, U.S.A., INC.
AND
GROUP 1 AUTOMOTIVE, INC.

Agreement, dated _____________,1997, entered between Group Automotive, Inc., a Delaware corporation, with its principal place of business at 950 Echo Lane, Houston, TX 77024, ("Group 1") and Toyota Motor Sales, U.S.A., Inc. ("TMS"), a California corporation, with its principal place of business at 19001 South Western Avenue, Torrance, CA, 90509.

WHEREAS, Group 1 is currently the owner, directly or through its Affiliates (as defined in Paragraph 1 below) of three (3) Toyota and one (1) Lexus automobile dealerships; and

WHEREAS, Group 1 may wish to acquire, directly or through an Affiliate, additional Toyota and Lexus dealerships; and

WHEREAS, Group 1 wants to issue stock in a public offering of securities anticipated to be traded on the New York Stock Exchange; and

WHEREAS, TMS has advised Group 1 of TMS' policy limiting the number of commonly owned or controlled, directly or through an Affiliate (as defined below), dealerships by a single entity, which is currently as follows:

A. TOYOTA

A single entity shall not hold an ownership interest, directly or through an Affiliate, in more than: (a) the greater of one
(1) dealership or 20% of the Toyota dealer count in a "Metro" market ("Metro" markets are multiple Toyota dealership markets as defined by TMS); (b) the lesser of five (5) dealerships or 5% of the Toyota dealerships in any Toyota Region ("Toyota Region" currently includes nine TMS Regions, Central Atlantic Toyota, Southeast Toyota, and Gulf States Toyota); and (c) seven (7) Toyota dealerships nationally.

LEXUS

A single entity shall not hold an ownership interest, directly or through an Affiliate, in more than: (a) two (2) Lexus dealerships in any Area ("Area" currently includes Eastern, Southern, Central and Western); and (b) three (3) Lexus dealerships nationally.

"Affiliate" of, or a person or entity "affiliated" with, a specified person or entity, means a person or entity that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the person or entity specified. For the purpose of this definition, the term "control" (including the terms "controlling," "controlled by" and "under common control with" means the possession, directly or indirectly, or the power to direct or cause the direction of the management and policies of a person or entity, whether through the ownership of securities, by contract or otherwise.

B. In order for an entity to acquire additional Toyota or Lexus dealerships, within the limits of this Agreement, each Toyota or Lexus dealership which it owns, directly or through an Affiliate, must: a) be in full compliance with all of the terms of its Dealer Agreement;
b) meet all of the applicable Toyota or Lexus Market Representation policies and standards; and c) meet applicable performance criteria for the most recent twelve (12) month period.

C. In order to allow TMS sufficient time to evaluate performance at its existing dealerships, an entity may not acquire any additional Toyota or Lexus dealership within nine (9) months of its prior acquisition of a similar make dealership.

D. If the purchase of any Toyota or Lexus dealership would result in exceeding the limits set forth in Paragraph 1 above, TMS will reject a dealer's application for approval of the ownership transfer until such time as the dealer shall divest itself of the appropriate number of dealerships to bring it into compliance with the requirements of this Agreement.

WHEREAS, Group 1 and TMS are willing to resolve these issues in accordance with the terms set forth herein,

NOW THEREFORE, Group 1 and TMS agree as follows:

CHANGE IN OWNERSHIP OF GROUP 1

1. TMS shall have the right to approve any ownership or voting rights of Group 1 of twenty percent (20%) or greater by any individual or entity; PROVIDED HOWEVER, that if TMS reasonably determines that such individual or entity is unqualified to own a Toyota or Lexus dealership, or has interests incompatible with TMS, and such transfer is effected, Group 1 must, within ninety (90) days from the date of notification by TMS of its determination, either: a) transfer the assets of its Toyota and Lexus dealerships to a third party acceptable to TMS; b) voluntarily terminate its Toyota and Lexus Dealership Agreements; or c) demonstrate that such individual or entity in fact owns less that 20% of the outstanding shares of Group 1, or does not have 20% of the voting rights in Group 1.

OWNERSHIP OF CONTIGUOUS DEALERSHIPS

2. Group 1 shall not own contiguous dealerships (as that term is defined in the applicable Toyota or Lexus Dealer Agreement or policy) with common boundaries.

SEPARATE LEGAL ENTITIES FOR EACH TOYOTA AND LEXUS DEALERSHIP

3. Group 1 shall create separate legal entities for each Toyota and Lexus dealership which it owns, directly or through an Affiliate, shall obtain a separate motor vehicle license for each dealership, and shall maintain separate financial statements for each such dealership. Consistent with TMS policy, the name "Toyota" or "Lexus," as applicable shall appear in the d/b/a of each dealership.

FACILITY STANDARDS

4. In no instance shall a Toyota or Lexus dealership or any department(s) thereof be dualled with any other brand without TMS' prior written approval.

GENERAL MANAGERS

5. Each Toyota and Lexus dealership owned or controlled by Group 1 shall have a qualified, approved (subject to the exception noted in Paragraph 6 below) General Manager. Each General Manager shall work at the Toyota or Lexus dealership premises, shall devote all of his/her efforts to the management of the dealership and shall have no other business interests or management responsibilities.

APPROVAL OF THE GENERAL MANAGER

6. Whenever Group 1 nominates a new General Manager candidate for a Toyota or Lexus dealership, TMS shall have the right to withhold a decision concerning approval or rejection of the candidate for a period of up to one year, at its sole discretion; PROVIDED, HOWEVER, that the candidate may operate in the capacity of General Manager until TMS has approved or rejected him/her.

LIMITATIONS ON THE AUTHORITY OF THE GENERAL MANAGER

7. Group 1 shall advise TMS of the limitations, by category and, where applicable, by specific action, on the authority of the General Manager regarding the operation of the dealership, and shall provide the name of the individual at Group 1 who has such authority with respect to each listed category or specific action, in accordance with Paragraph 8 below.

IDENTIFICATION OF GROUP 1 CONTACT OFFICIAL

8. Group 1 shall identify, in each Toyota and Lexus Dealer Agreement, the Group 1 executive (other than the General Manager of the dealership) who will respond directly to any Toyota or Lexus concerns regarding the operation or performance of the dealership, which executive will have full authority, in accordance with Group 1 management policies, to resolve issues raised by TMS in connection with the operation of the dealership.

SELLING TOYOTA AND LEXUS PRODUCTS

9. Group 1 shall make available to the customers at its Toyota and Lexus dealerships, all Toyota products, including vehicles, Genuine Parts and Accessories, retail financing (whether for purchases or leases) and extended service contracts.

REPRESENTATION ON TOYOTA AND LEXUS DEALER ORGANIZATIONS

10. No more than one representative each from the Toyota, and, separately, Lexus, dealerships owned, directly or through an Affiliate, by Group 1, may serve on the National Dealer

Council or any future Toyota or Lexus national board(s) which may be established, and no more than one representative each may serve on either a Regional or Area Dealer Council, or Toyota or Lexus Dealer Association Board of Directors.

DEALERSHIP PERSONNEL TRAINING

11. Group 1 shall not substitute training courses or certification programs of its own for those provided or sponsored by TMS without the prior approval of TMS.

PUBLIC OFFERING OF SECURITIES BY GROUP 1

12. TMS shall not object to a public offering of securities by Group 1 so long as the limitations on ownership of voting control of Group 1 contained in this agreement are not exceeded or breached in any way. In addition, TMS hereby approves the increase to 100% in equity interest in each Toyota and Lexus dealership in which subsidiaries of Group 1 now have a majority equity interest.

FINANCIAL DISCLOSURES

13. Group 1 shall provide TMS with copies of all information and materials filed with the Securities Exchange Commission, including, but not limited to, quarterly and annual financial statement filings, prospectuses and other materials related to Group 1.

PROSPECTUS DISCLAIMER AND INDEMNIFICATION AND HOLD HARMLESS AGREEMENT

14. Group 1 shall place in its registration statement and its prospectus, as well as in any other document offering shares in Group 1 to public or private investors, the following disclaimer:

No Manufacturer (as defined in this Prospectus) has been involved, directly or indirectly, in the preparation of this Prospectus or in the Offering being made hereby. No Manufacturer has made any statements or representations in connection with the Offering or has provided any information or materials that were used in connection with the Offering, and no Manufacturer has any responsibility for the accuracy or completeness of this Prospectus.

Group 1 shall indemnify and hold harmless TMS pursuant to the terms of the Indemnification and Hold Harmless Agreement set forth in Attachment 1 to this Agreement.

SOLE AGREEMENT OF THE PARTIES

15. There are no prior agreements or understandings, either oral or written, between the Parties affecting this Agreement, except as otherwise specified or referred to in this Agreement. No change or addition to, or deletion of any portion of this Agreement shall be valid or binding upon the parties hereto unless approved in writing signed by an officer of each of the parties hereto.

SEVERABILITY

16. If any provision of this Agreement should be held invalid or unenforceable for any reason whatsoever, or conflicts with any applicable law, this Agreement will be considered divisible as to such provision(s), and such provision(s) will be deemed amended to comply with such law, or if it (they) cannot be so amended without materially affecting the tenor of the Agreement, then it (they) will be deemed deleted from this Agreement in such jurisdiction, and in either case, the remainder of the Agreement will be valid and binding.

NO IMPLIED WAIVERS

17. The failure of either party at any time to require performance by the other party of any provision herein shall in no way affect the right of such party to require such performance an any time thereafter, nor shall any waiver by any party of a breach of any provision herein constitute a waiver of any succeeding breach of the same or any other provision, nor constitute a waiver of the provision itself.

TMS POLICIES

18. This Agreement refers to certain policies and standards. Group 1 acknowledges that these policies and standards are prepared by TMS in its sole discretion based upon TMS' evaluation of the marketplace. TMS may reasonably amend its policies and standards from time to time.

APPLICABLE LAW

19. This Agreement shall be governed by and construed according to the laws of California.

BENEFIT

20. This Agreement is entered into by and between TMS and Group 1 for their sole and mutual benefit. Neither this Agreement nor any specific provision contained in it is intended or shall be construed to be for the benefit of any third party.

NOTICE TO THE PARTIES

21. Any notices permitted or required under the terms of this Agreement shall be directed to the following respective addresses of the parties, or if either of the parties shall have specified another address by notice in writing to the other party, then to the address last specified:

TOYOTA MOTOR SALES, U.S.A., INC.
19001 South Western Avenue
Torrance, California 90509

GROUP 1 AUTOMOTIVE, INC.
950 Echo Lane
Houston, TX 77024

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

GROUP 1 AUTOMOTIVE INC.

TOYOTA MOTOR SALES, U.S.A., INC.

ATTACHMENT I

INDEMNIFICATION AGREEMENT

INDEMNIFICATION AGREEMENT, made this _____ day of, ____________ 1997 between Group 1 Automotive, Inc., a Delaware corporation ("Group 1") the address of which is 950 Echo Lane, Suite 350, Houston, Texas 77024 and Toyota Motor Sales, U.S.A., Inc., a California corporation the address of which is 19001 S. Western Avenue, Torrance, CA 90509 ("TMS").

WITNESSETH

WHEREAS, Group 1 has been formed to own subsidiary corporations which will own and operate automobile dealerships; and

WHEREAS, Group 1 intends to publicly offer and sell shares of stock ("Group 1 Stock") in a public offering pursuant to the Securities Act of 1933 (the "Act");

WHEREAS, TMS has consented to the offer and sale of such Group 1 Stock to the public; and

WHEREAS, in recognition of TMS' demand for complete protection against liability and threats of legal action and in order to obtain TMS' consent to the offer and sale of such shares, Group 1 wishes to provide in this Agreement for the indemnification of TMS as set forth herein.

NOW, THEREFORE, in consideration of the mutual promises made herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

1. INDEMNITY OF TMS

Group 1 hereby agrees to indemnify and hold harmless TMS and its affiliates from and against any and all losses, liabilities, judgments, amounts paid in settlement, claims, damages and expenses whatsoever (collectively a "Claim"), including, but not limited to, any and all expenses whatsoever incurred investigating, preparing or defending against any litigation, commenced or threatened, to which TMS may become subject under the Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the securities laws of any state (the "Blue Sky Laws"), any other statute or at common law or otherwise under the laws of any foreign country, arising in connection with the sale of the Group 1 stock. In addition, Group 1 hereby agrees to indemnify and hold harmless TMS from any and all claims of the shareholders of Group 1 with respect to the sale of the Group 1 Stock. If it is ultimately determined, based upon a final decision of a court, arbitrator or other authorized panel or a settlement entered into by the parties to the dispute and consented to by TMS that TMS was liable for such Claim in whole or in part, the indemnification set forth herein shall be of no force or effect, and TMS shall immediately reimburse Group 1 for any expenses advanced by Group 1 pursuant to this Agreement. Group 1 shall reimburse TMS for expenses incurred by TMS which are covered by the indemnification provisions of this Agreement within

thirty (30) days after receipt by Group 1 of the written request for reimbursement (which shall include detailed information with respect to such expenses) by TMS.

2. NOTIFICATION AND DEFENSE OF CLAIM

(a) If any litigation is commenced against TMS in respect of which indemnity may be sought pursuant to this Agreement, TMS shall promptly notify Group 1 in writing of the commencement of any such litigation.

(b) If any litigation referred to in paragraph (a) above is brought against TMS and it gives notice to Group 1 of the commencement of such litigation, Group 1 will be entitled to participate in such litigation, and, to the extent that it wishes (unless (i) Group 1 is also a party to such proceeding and TMS determines in good faith that joint representation would be inappropriate, or (ii) Group 1 fails to provide reasonable assurance to TMS of its financial capacity to defend such proceeding and provide indemnification with respect to such litigation), to assume the defense of such litigation with counsel reasonably satisfactory to TMS and, after notice from Group 1 to TMS of its election to assume the defense of such litigation, Group 1 will not, as long as it diligently conducts such defense, be liable to TMS under this Agreement for any fees of other counsel or any expenses with respect to the defense of such litigation, in each case subsequently incurred by TMS in connection with the defense of such litigation.

(c) Group 1 agrees promptly to notify TMS of the commencement of any litigation against Group 1 in connection with the issue and sale of the Group 1 Stock. Group 1 and TMS agree to cooperate with each other in the defense of any litigation.

(d) TMS shall not, except with Group 1 prior written consent, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to TMS of a release from all liability in respect to such litigation.

3. ENFORCEMENT

(a) Group 1 expressly confirms and agrees that it has entered into this Agreement and assumes the obligations imposed on it in order to induce TMS to consent to the offer and sale of the Group 1 Stock and acknowledges that TMS is relying upon this Agreement to grant such consent.

(b) In the event TMS is required to bring any action to enforce rights or to collect moneys due under this Agreement and is successful in such action, Group 1 shall reimburse TMS for all of TMS' reasonable fees and expenses in bringing and pursuing such action.

4. SUBROGATION

(a) In the event of payment under this Agreement, Group 1 shall be subrogated to the extent of such payment to all of the rights of recovery of TMS, which shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such document necessary to enable Group 1 effectively to bring suit to enforce such rights.

(b) Group 1 shall not be liable under this Agreement to make any payment in connection with any claim or litigation made against TMS to the extent TMS has otherwise actually received payment (under any insurance policy or otherwise) of the amounts otherwise indemnifiable hereunder.

5. MISCELLANEOUS

(a) This Agreement shall be interpreted and construed in accordance with the laws of the State of California, without giving effect to the conflict of law rules.

(b) This Agreement shall be binding upon and inure to the benefit of Group 1, TMS and their respective legal representatives, successors and assigns.

(c) No amendment, modification or termination of this Agreement shall be effective unless in writing and signed by both parties hereto.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first above written.

TOYOTA MOTOR SALES, U.S.A., INC.

GROUP 1 AUTOMOTIVE, INC.

President

EXHIBIT 10.13

SUPPLEMENTAL AGREEMENT TO
GENERAL MOTORS CORPORATION
DEALER SALES AND SERVICE AGREEMENT

This Supplemental Agreement to General Motors Corporation Dealer Sales and Service Agreement is entered into between Group 1 Automotive, Inc. and General Motors Corporation.

WHEREAS Group 1 Automotive, Inc. is interested in acquiring ownership of one or more GM Dealerships in selected areas of the United States;

WHEREAS, the parties desire to enter into a positive and productive business relationship which will accomplish our mutual goals and promote sales of GM products consistent with GM's Brand strategy for its products and focus on a total customer enthusiasm;

WHEREAS, the organization and ownership structure of Group 1 Automotive, Inc. and its retail operating systems are such that the terms of the Dealer Agreement are not wholly adequate to address the legitimate business needs and concerns of Group 1 Automotive, Inc. and GM;

NOW, THEREFORE, the parties agree as follows:

1. Purpose of Agreement

1.1 Purpose of Agreement. The parties acknowledge that Group 1 Automotive, Inc. desires to purchase the stock or assets of one or more current GM Dealerships and to be appointed as the replacement Dealer by the appropriate Divisions. The parties further acknowledge that the ownership arrangements of Group 1 Automotive, Inc. and the operating processes and procedures of Group 1 Automotive, Inc. require that the parties supplement the standard terms and provisions of the Dealer Agreement to assure that the legitimate business needs of GM in regard to the representation of its products are satisfied. The parties have agreed to enter into this Agreement for that purpose. This agreement shall not apply in any respect to Saturn Dealers or dealerships.

1.2 Definitions. For purposes of this Agreement, the following terms shall have the meaning indicated:

1.2.1    "Agreement" means this Supplemental Agreement to
         General Motors Corporation Dealer Sales and Service
         Agreement.

1.2.2    "Group 1 Automotive" or "Group 1" means Group 1
         Automotive, Inc.

1.2.3    "Dealer Agreement" means a General Motors Corporation
         Dealer Sales and Service Agreement, a copy of which
         is attached hereto as Exhibit A and is incorporated
         herein by reference.  It also includes any
         superseding Dealer Agreements.

1.2.4    "Dealer Company" or "Dealer" means the business
         entity owned or controlled by Group 1 Automotive,
         Inc. that is a party to a Dealer Agreement and is
         defined as the "Dealer" for purposes of the Dealer
         Agreement.

1.2.5    "Division" or "Divisions" means one or more of the
         marketing divisions of GM; Chevrolet, Pontiac-GMC,
         Oldsmobile, Buick, Cadillac.

1.2.6    "GM" means General Motors Corporation.

1.2.7    "GM Dealerships" means a specific, physical location
         from which Dealership Operations are conducted by a
         Dealer pursuant to the terms of one or more Dealer
         Agreements.  It does not include Saturn Dealerships.

1.2.8    "Voting stock" means any stock of Group 1 Automotive,
         Inc. that has voting rights as well as any debt or
         equity security of Group 1 Automotive, Inc. that is
         convertible into stock of Group 1 Automotive, Inc.
         that has voting rights.

2. Group 1 Automotive, Inc. Ownership

2.1 Ownership Structure.

Each Dealer will be a separate company, distinct from Group 1 Automotive, Inc. in the form of either a corporation, partnership or other business enterprise form acceptable to GM, which is capitalized in accordance with the "GM Owned Working Capital Agreement". Each of the Dealer companies will be owned by Group 1 Automotive, Inc. or may have minority interests held by employees of that Dealer Company subject to GM approval.

2.2 Group 1 Automotive, Inc. hereby warrants that the representations and assurances contained in this Agreement are within its authority to make and do not contravene any directive, policy or procedure of Group 1 Automotive, Inc..

2.3 Change in Ownership. Any material change in ownership of any Dealer company and any material change in Group 1 Automotive, Inc. or any event described in section 2.4.2(b) shall be considered a change in ownership of the Dealer Company under the terms of the dealer agreements and all applicable terms of the Dealer Agreement as supplemented by this Agreement will apply to any such change.

2.4 Acquisition of Ownership Interest by Third Party. Given the ultimate control Group 1 Automotive, Inc., will have over the Dealer Companies, and the Divisions' strong interest in assuring that those who own and control their Dealers have interests consistent with those of the Divisions Group 1 Automotive, Inc. agrees to the following:

2.4.1    Group 1 Automotive, Inc. will deliver to GM copies of
         all Schedules 13D and 13G, and all amendments thereto
         and terminations thereof, received by Group 1
         Automotive, Inc., within five (5) days of receipt of
         such Schedules.  If Group 1 Automotive Inc. is aware
         of any ownership of its stock that should have been
         reported to it on Schedule 13D but that is not
         reported in a timely manner, it will promptly give GM
         written notice of such ownership, with any relevant
         information about the owner that Group 1 Automotive,
         Inc. possesses.

2.4.2    If Group 1 Automotive, Inc. through its Board of
         Directors or through shareholder action proposes or
         if any person, entity or group sends Group 1
         Automotive, Inc. a schedule 13D, or any amendment
         thereto, disclosing (a) a binding agreement to acquire
         or the acquisition of aggregate ownership of more
         than twenty percent (20%) of the voting stock of
         Group 1 Automotive, Inc. and (b) Group 1 Automotive,
         Inc. through its Board of Directors or through
         shareholder action proposes or if any plans or
         proposals which relate to or would result in the
         following:  (i) the acquisition by any person of more
         than 20% of the voting stock of Group 1 Automotive,
         Inc. other than for the purposes of ordinary passive
         investment (ii) an extraordinary corporate
         transaction, such as a material merger,
         reorganization or liquidation, involving Group 1
         Automotive, Inc. or a sale or transfer of a material
         amount of assets of Group 1 Automotive, Inc. and its
         subsidiaries; or (iii) any change which together with
         any changes made to the Board of Directors within the
         preceding year, would result in a change in control
         of the then current board of directors of Group 1
         Automotive, Inc. or (iv) in the case of an entity
         that produces or controls or is controlled by or is
         under common control with an entity that either
         produces motor vehicles or is a motor vehicle
         franchisor, the acquisition by any such person entity
         or group of more than 20% of the voting stock of
         Group 1 Automotive, Inc. and any proposal by any such
         person, entity or group through the Group 1
         Automotive, Inc. Board of Directors or shareholders
         action to change the board of directors of Group 1
         Automotive, Inc., then if such actions in GM's
         business judgment could have a material or adverse
         effect on its image or reputation in the GM
         dealerships or be materially incompatible with GM's
         interest (and upon notice of GM's reasons for such
         judgment), Group 1 Automotive, Inc. agree that it
         will take one of the remedial actions set forth in
         Section 2.4.3 below within ninety (90) days of
         receiving such Schedule 13D or such amendment.

2.4.3    If Group 1 Automotive, Inc. is obligated under
         Section 2.4.2 above to take remedial action, it will
         (a) transfer to GM or its designee, and GM or its
         designee will acquire the assets, properties or
         business associated with any Dealer Company at fair
         market value as determined in accordance with Exhibit
         B, or (b) provide evidence to the Divisions that such
         person entity or group no longer has such threshold
         level of ownership interest in Group 1 Automotive,
         Inc. or that the actions described in Section
         2.4.2(b) will not occur.

2.4.4    Should Group 1 Automotive, Inc. or Dealer company
         enter into an agreement to transfer the assets of a
         Dealer company to a third party, the right of first
         refusal described in Article 12.3 of the Dealer
         Agreement shall apply to any such transfer.

2.4.5    Group 1 Automotive, Inc. will describe such
         provisions of this Section in any  prospectus it
         delivers in connection with the offer or sale of its
         stock as may be required by any applicable laws or
         regulations.

2.5 Officers and Key Management. Group 1 Automotive, Inc. agrees to provide to GM a list of the key management of Group 1 Automotive, Inc. and their responsibilities in regard to the control and management of Group 1 Automotive, Inc. and each Dealer Company. Each Dealer Company shall agree to propose to GM any material changes in the key management of the Dealer Company or their responsibilities. Such proposal should be provided to GM in writing prior to such change to the extent practicable and shall include sufficient information to permit GM to evaluate the proposed change consistent with normal policies and procedures. Group 1 Automotive, Inc. will notify GM in writing of any material change in the key management of Group 1 Automotive, Inc. or their responsibilities. For purposes of this Agreement, the term "key management" shall mean CEO, President and Vice Presidents with respect to each dealer company and executive officers with respect to Group 1 Automotive, Inc..

3. Group 1 Automotive, Inc. Operating Policies and Procedures

3.1 GM Brand Strategy. Group 1 Automotive, Inc. acknowledges that GM has a Brand Strategy and has invested significant capital in the development of corporate, divisional and brand image. Relevant information regarding this strategy has been shared with Group 1 Automotive, Inc.. Group 1 Automotive, Inc. agrees to accommodate GM's Brand Strategy in its GM Dealerships Operations. Group 1 Automotive, Inc. will incorporate in each of its GM Dealerships the following as a minimum in support of the GM Brand Strategy:

3.1.1    GM has developed retail and service operating
         standards for each of its Divisions.  At each of its
         GM Dealerships, Group 1 Automotive, Inc. will
         implement and use those divisional standards, or
         higher standards which it may develop, subject to
         GM's approval.

3.1.2    Dealer marketing associations for each of the
         Divisions are an integral part of GM's Brand
         Strategy.  Group 1 Automotive, Inc. and enhance GM
         and Divisional brand and marketing practices and
         goals.  Group 1 Automotive, Inc. agrees and each
         Dealer Company shall agree that the Dealer Company
         will participate in the appropriate dealer marketing
         association or group as provided in Section 11.

3.1.3    Group 1 Automotive, Inc. will not, and will not
         permit any Dealer Company to jointly advertise or
         market any of their non-GM automotive operations in
         conjunction with its approved GM Dealership
         Operations (it being understood that the advertising
         example attached hereto as Exhibit C will be
         permissible).

4. Acquisition of GM Dealerships

4.1 In consideration for the representations, covenants and commitments contained herein, and assuming compliance with the normal requirements of General Motors regarding transfer of assets and appointment as a dealer, General Motors will permit the acquisition of up to ten (10) General Motors Dealerships during the period commencing from the date of this Agreement and ending 24 months thereafter. If GM requests Group 1 Automotive, Inc. to consider purchasing certain GM dealerships, such dealerships are to be included in the number of acquisitions. If there is a material dispute between any GM affiliate and Group 1 Automotive, Inc., then GM may elect not to approve any public companies dealerships until the dispute is resolved (even if the preapproved number has not been met).

4.2 Following the 24 month period, each Dealer company in which Group 1 Automotive, Inc. has an investment must be in compliance with the terms of the General Motors Policies for Changes in GM Dealership Ownership/management bulletin of September 19, 1994 (a copy of which has already been provided) including any revisions or replacements of that bulletin, in order to be approved for additional acquisitions of General Motors Dealerships.

4.3 Multiple Dealer Policy. Group 1 Automotive, Inc. recognizes that customers benefit from competition in the market place and agree that any proposal to acquire additional GM dealerships shall be subject to the terms of General Motors Multiple Dealer Investor/Multiple Dealer Operator policies as set forth in NAO Bulletin 94-11, including any revisions of replacements to the bulletin.

4.4 Limitation in Multiple Dealer Area. GM and Group 1 Automotive, Inc. agree that Group 1 Automotive, Inc. will not attempt to acquire more than 50% of the GM dealerships, by franchise line in a GM defined Multiple Dealer area. GM will provide upon Group 1 Automotive, Inc. request the number of GM dealerships, by line, in the Multiple Dealer area and the maximum number of dealerships Group 1 Automotive, Inc. and may acquire in that Multiple Dealer Area.

4.5 Evaluation of Operations. GM will conduct semiannual evaluation meetings with the management of Group 1 Automotive, Inc. and the Dealer Operators of each GM Dealer Company to review the performance of each GM Dealer Company. In the event GM advises Group 1 Automotive, Inc. for any two consecutive evaluation periods that the performance of a GM dealership is not meeting the sales volume, Customer Satisfaction and Branding requirements of GM, GM will have the right to demand a change in the management of the dealer company not meeting those

requirements. Group 1 Automotive, Inc. will make the management changes at any deficient dealership within not more than six (6) months after notice of the deficiencies.

5. Dealership Operations

5.1 Dealership Operations. Each Dealer Company shall be a distinct and complete business entity which shall include complete Dealership Operations as that term is defined in the Dealer Agreement including, but not limited to, sales, service, parts, and used car operations. This requirement will not preclude certain centralized functions provided that they are consistent with GM's Channel Strategy, and that such centralized functions are reviewed with and approved by GM, which approval shall not be unreasonably withheld. However, no sales, service or parts operations may be combined with any non-GM representation and all GM Dealerships will have reasonable used or car operations.

5.2 GM Channel Strategy. Group 1 Automotive, Inc. further stipulates and agrees that if Group 1 Automotive, Inc., GM, and the public are to realize the potential benefits that Group 1 Automotive, Inc. represents to be the result of the acquisitions proposed by Group 1 Automotive, Inc., then an integral component of the participation by Group 1 Automotive, Inc. and Dealer Company is their agreement that all GM Dealerships shall fully comply with General Motors Channel Strategy including proper divisional representation alignment and facilities that are properly located and that are in compliance with appropriate divisional image programs. The Channel Strategy is set forth in a memorandum dated October 5, 1995, from Ronald L. Zarrella to all GM dealers, and in the written statement of the strategy as it relates to each of Dealer Company, copies of which will be provided to Group 1 Automotive, Inc. and each Dealer Company Group, 1 Automotive, Inc. agrees and each Dealer Company shall agree that within 12 months of the acquisition of any GM Dealership that is not consistent with the Channel Strategy, Group 1 Automotive, Inc. and Dealer Company will have complied with the Channel Strategy for that location. Notwithstanding the above, GM will consider reasonable requests from Group 1 Automotive, Inc. for an extension if Group 1 Automotive, Inc. is making reasonable progress and is unable to comply with the Channel Strategy for reasons beyond Group 1 Automotive, Inc. control. If Group 1 Automotive, Inc. and Dealer Company fail to do so within the time provided, then Group 1 Automotive, Inc. will cause Dealer Company and Dealer Company will agree to terminate the representation of such products as reasonably required by GM to comply with the Channel Strategy. If such Termination is required, GM will compensate Group 1 Automotive, Inc. the sum of $1,000 for each unit of GM retail planning guide for each Dealer Agreement so terminated.

5.3 Exclusive Representation. Group I Automotive, Inc. agrees and each Dealer Company shall agree that all GM Dealerships shall be used solely for the exclusive representation of GM products and related services and in no event shall be used for the display, sale or promotion or warranty service of any new vehicle other than those

of General Motors Corporation (provided that if Group 1 Automotive, Inc. acquires a GM Dealership having a sales and service agreement with a competitive automobile manufacturer of importer and related sales and service operations at the same facility, at GM's request Group 1 Automotive, Inc. shall cause the competitive sales and service operations to be relocated within one year of acquisition, Group 1 Automotive, Inc. agrees and each Dealer Company shall agree that should a Dealer Company cease to provide exclusive representation of GM products, based on the proper franchise alignment as determined by the Channel Strategy, then that shall constitute good cause in and of itself for the termination of the Dealer Agreement then in effect with such Dealer Company and Group 1 Automotive, Inc. shall cause Dealer Company to and Dealer Company shall voluntarily terminate the Dealer Agreements then in effect.

5.4 Image Compliance. Any Dealer Company acquired by Group 1 Automotive, Inc. shall be brought into compliance with applicable Divisional facility image requirements. Any new construction or significant interior or exterior remodeling of any GM Dealerships shall incorporate the appropriate divisional image program and shall be subject to approval by the appropriate Division before such construction is undertaken.

5.5 Corporate Name and Tradenames. Both the corporate name and any tradename or d/b/a of each Dealer Company must include the names of those GM Divisions represented by such Dealer Company.

5.6 Dealer Company Advertising. Group 1 Automotive, Inc. agrees that the advertising of each of the Dealer companies will maintain and support the GM brand strategy. Newspaper, radio, television and any other form of advertising will not combine GM brands or non GM brands, unless GM has approved combined operations and will clearly identify each GM dealership as a separate entity at its approved location (it being understood that the advertising example attached hereto as Exhibit C will be permissible).

6. Dealer Operator

6.1 Appointment of Dealer Operator. For purposes of the Dealer Agreement, including Paragraph Third and Article 2 and for each GM Dealership, Group 1 Automotive, Inc. shall appoint an individual who shall act as Executive Manager of that GM Dealership only and who shall be considered as Dealer Operator for purposes of the Dealer Agreement. The Divisions will rely upon the personal qualifications and management skills of Dealer Operator. Group 1 Automotive, Inc. hereby represents that Dealer Operator will have complete managerial authority to make all decisions, and enter into any and all necessary business commitments required in the normal course of conducting Dealership Operations on behalf of Dealer Company and may take all actions normally required of a Dealer Operator pursuant to Paragraph Third and Article 2 of the Dealer Agreement. Group 1 Automotive, Inc will not revoke, modify or amend such authority without the prior written approval of the applicable

Division (except as provided in Section 6.3 below). Because of the unique structure of Group 1 Automotive, Inc., the 15% ownership requirement contained in Article 2 of the Dealer Agreement shall not apply to Dealer Operator.

6.2 Removal of Dealer Operator. Except as provided in Section 6.3 below, the removal or withdrawal of Dealer Operator without Divisions' prior written consent shall constitute grounds for termination of the Dealer Agreements. However, the Divisions recognize that employment responsibilities of the Dealer Operator with Dealer Company may change, making it impractical for the Dealer Operator to continue to fulfill his/her responsibilities as Dealer Operator. In that case, or in the event Dealer Operator leaves the employ of the Dealer Company, Dealer Company shall have the opportunity to propose a replacement Dealer Operator. The Divisions will not unreasonably withhold approval of any such proposal, provided the proposed replacement has the skills and qualifications to act as Dealer Operator pursuant to the standard policies and procedures of GM.

6.3 Replacement Dealer Operator. Dealer Company shall make every effort to obtain the consent of the Divisions to a proposed replacement Dealer Operator prior to the removal or withdrawal of the approved Dealer Operator. If that is not practical, Dealer Company shall notify Division in writing within 10 days following the removal or withdrawal of the approved Dealer Operator. Within 30 days of that removal or withdrawal, Dealer Company will submit to Division a plan and appropriate applications to replace Dealer Operator with a qualified replacement acceptable to Divisions. The replacement Dealer Operator must assume his/her responsibilities no later than 90 days following the withdrawal of the approved Dealer Operator. Republic shall be permitted to appoint a temporary general manager to manage the GM Dealership during the interim period while the Dealer Operator is being replaced.

7. Dispute Resolution. Group 1 Automotive, Inc. agrees not to join any legal or administrative action a seller of a General Motors dealership may take against General Motors in the event General Motors declines to approve a proposed transfer to Group 1 Automotive, Inc. Group 1 Automotive, Inc. and GM stipulate and agree and each Dealer Company shall stipulate and agree that the dispute resolution process attached hereto as Exhibit D, or any replacement process offered to all GM Dealers, shall be the exclusive source of resolution of any dispute regarding the Dealer Agreements and this agreement including, but not limited to, involuntary termination of the Dealer Agreements and/or approval of Group 1 Automotive, Inc. for additional investment in or ownership of GM Dealerships. The parties further agree that the Chevrolet dealer dispute resolution process will be used for the resolution of the matter, regardless of the GM Division involved.

8. Right to Purchase or Lease. In the event of any termination of the Dealer Agreement or any transaction or event that would, in effect, discontinue Dealership Operations from that GM Dealership, or a transfer of assets, properties or business to GM or a GM designee pursuant to Section 2.4.3, Group 1 Automotive, Inc. agrees and each Dealer Company shall agree to provide GM with: (a) the right to purchase the dealership assets, properties or business for

fair market value based on automotive use through the process attached hereto as Exhibit B, and (b) an assignment of any existing lease or lease options that are available, subject in each case to any legal or contractual obligations existing at such time, provided, however, that Group 1 Automotive, Inc. shall assure GM or its delegate of quite possession of the dealership facilities for a period of not less than five years if this right is exercised with respect to such facilities within ten years of the execution of this Agreement. If, however, Group 1 Automotive, Inc. enters into a financing arrangement with respect to such facilities then such assurance of quite possession would be subordinated to the interests of any lender in connection with any default by Group 1 Automotive, Inc. under the terms of the financing arrangement other than a default due to the discontinuance of dealership operations from such facilities. The Parties agree that GM may exercise its rights under this Section 8 with respect to some or all of the dealership facilities to which it may apply at any given time, and that failure to exercise such rights as to one facility shall not affect GM's rights as to other facilities.

9. Electronic Funds Transfer. Group 1 Automotive, Inc. agrees that each Dealer Company will use Electronic Funds Transfer (EFT) for settlement of the dealership obligations to GM and that GM will have right of offset for any unpaid debit balances for any Dealer Company at the time the indebtedness is due and will have the right to collect those amounts from the account for any other Dealer Company.

10. Compliance with Policies and Procedures. Each Dealer Company must comply with all terms of the Dealer Agreement and all GM policies applicable to Dealer Company's Dealership Operations. Those procedures include policies precluding joint advertising and prohibiting sales of GM auction vehicles from other than the purchasing GM Dealership. Except as specifically provided herein, all Dealership Operations shall be conducted consistent with requirements for other GM dealerships.

11. Membership in Dealer Marketing Group. Each Dealer Company will join its respective dealer marketing group and area marketing group including membership financial support and will participate as a regular member in meetings and marketing activities.

12. Capital Standards. Group 1 Automotive, Inc. agrees and Dealer Company shall agree that Dealer Company shall maintain, at all times, sufficient working capital to meet or exceed the minimum net working capital standards for the Dealer Company as determined from time to time by GM consistent with its normal practices and procedures. Group 1 Automotive, Inc. and Dealer Company shall provide such documentation as reasonably requested by GM to assure compliance with that requirement. Group 1 Automotive, Inc. shall submit an annual consolidated balance sheet for the combined GM Dealership operations of Group 1 Automotive, Inc.

13. Discontinuance of Representation. In the event that Group 1 Automotive, Inc. determines, voluntarily or otherwise to discontinue representation in any given Multiple Dealer Area, Group 1 Automotive, Inc. shall grant the right to GM to acquire at fair market value as determined in accordance with Exhibit B the right to representation of the Divisions previously represented by any Dealer Company in that Multiple Dealer Area. GM shall also

have the option to acquire the fixed assets and/or the Dealership Facilities in that Multiple Dealer Area. The terms and conditions for the exercise of such rights shall be set forth in appropriate and customary documents. Group 1 Automotive, Inc. has received GM's standard option agreements modified for this Agreement.

14. Supplement to Dealer Agreement. The parties agree that each Dealer Company shall be required to execute an addendum to the Dealer Agreements binding the Dealer Company to the applicable portions of this Agreement. For each Dealer Company, this Agreement shall supplement the terms of the Dealer Agreements in accordance with Article 17.11 of the Dealer Agreements.

15. Further Modifications. In the event that the policies of GM with regard to Dealerships owned or controlled in whole or in part by public shareholders should be modified, the parties agree to review such modifications to determine whether modification to this Agreement is appropriate.

16. No Third Party Rights. Nothing in this Agreement or the Dealer Agreement shall be construed to confer any rights upon any person not a party hereto or thereto, nor shall it create in any party an interest as a third party beneficiary of this Agreement or the Dealer Agreement. Group 1 Automotive, Inc. and Dealer Company hereby agree to indemnify and hold harmless GM, its directors, officers, employees, subsidiaries, agents and representatives from and against all claims, actions, damages, expenses, costs and liability, including attorneys fees, arising from or in connection with any action by a thirty-party in its capacity as a stockholder of Group 1 Automotive, Inc. relating to this Agreement other than through a derivative stockholder suit authorized by the Board of Group 1 Automotive, Inc., provided that Group 1 Automotive, Inc. shall have the right to assume the defense and control any such actions or suits and that GM shall not settle any such actions or suits without Group 1 Automotive, Inc. consent (such consent not to be unreasonably withheld). Notwithstanding the above, GM may choose, at its own expense, to manage and control its own defense in any such action.

17. Modification of Dealer Agreement. This Agreement is intended to modify and adapt certain provisions of the Dealer Agreement and is intended to be incorporated as part of the Dealer Agreement for each Dealer Company. In the event that any provisions of this Agreement are in conflict with other provisions of the standard Dealer Agreement, the provisions contained in this Agreement shall govern. Except as expressly provided in this Agreement the terms of the Dealer Agreements remain unchanged and apply herein.

18. Confidentiality. Each party agrees not to disclose the content of this Agreement to non-affiliated entities and to treat the Agreement with the same degree of confidentiality as it treats its own confidential documents of the same nature, except as expressly provided by Article 2.3.5 of this Agreement or unless authorized by the other party, required by law, pertinent to judicial or administrative proceedings or to proceedings under the Dispute Resolution Process.

19. Duration of Agreement. This Agreement remains in effect so long as Group 1 Automotive, Inc. or any successor thereto, directly or indirectly holds or has an agreement to hold an ownership interest in any GM Dealer Company.

IN WITNESS WHEREOF, the parties have executed this Agreement this _____ day of ________________, 1997.

GROUP 1 AUTOMOTIVE, INC.              GENERAL MOTORS CORPORATION

By:                                   By:


--------------------------------      -----------------------------------------
B.B. Hollingsworth, Jr.               E. K. Roggenkamp, III
Chairman, President and               General Manager
Chief Executive Officer               North American Operations
                                      Dealer Network Investment and Development

rosie.wpd

EXHIBIT 10.14

NISSAN
NISSAN MOTOR CORPORATION U.S.A

December 11, 1996

Mr. Charles M. Smith
Acura Southwest
10455 Southwest Fwy.
Houston, TX 77074-1101

Dear Mr. Smith:

You have requested that Nissan Motor Corporation in U.S.A. ("Nissan") consent to a re-structuring of your dealerships wherein the Sterling Automotive Group, Inc. ("Sterling"), which will become a publicly held corporation, acquires all of the stock of Round Rock Nissan, Inc.; Town North Nissan, Inc.; and Courtesy Nissan, Inc., ("Dealer").

This is to advise you that Nissan has approved the proposed restructuring and transfer in principle, SUBJECT TO THE EXECUTION BY DEALER AND YOU OF A TERM AGREEMENT ("AGREEMENT") AND INDEMNIFICATION AGREEMENT IN A FORM ACCEPTABLE TO NISSAN CONTAINING CERTAIN TERMS AND CONDITIONS INCLUDING, BUT NOT LIMITED TO THE FOLLOWING:

1. Sterling will at all times own 100% of the stock of Dealer;

2. Dealer will be maintained as a separate corporate entity;

3. The officers of Dealer will be Charles M. Smith ("Smith" or "you"), Sterling B. McCall, Jr., and James M. Kline;

4. Smith agrees that any transfer of his ownership interest in Sterling, or other action (such as dilution due to subsequent acquisitions) which would significantly decrease his overall ownership in Sterling requires the prior written consent of Nissan, which will not be unreasonably withheld. Accordingly, any change in the ownership of one or more key directors which would result in an ownership interest less than 20% without consent from Nissan will be void and grounds for termination of the Agreement;

5. Nissan will have no obligation to transact business with any person who is not named either as a Dealer Principal or Executive Manager of Dealer in the Agreement;

6. Restrictions in the Registration Statement providing that in the event that anyone acquires, after the date of the initial public offering, an ownership interest in Sterling greater than 20% and Nissan determines that said interest is adverse to Nissan, the Agreement shall be terminated. This provision would not, however, prevent Sterling from re-applying for the dealership based on the new ownership structure;

7. Smith, Ronald Kutz, Catherine Andrus, and Randy Ross will devote 100% of their time to the affairs of Dealer;

Mr. Charles M. Smith
December 11, 1996

8. The Board of Directors of Sterling will delegate the management of the dealership operations to the Dealer Principal and the Executive Manager and the Dealer Principal and Executive Manager will have full and complete control over the Dealership Operations;

9. The Executive Manager will be physically present at the dealership on a full-time basis and have a substantial portion of their compensation tied to Dealer's overall performance;

10. Any change in the Dealer Principal or Executive Manager of Dealer, or the CEO, Chairman or equivalent officer of Sterling, from that specified in the Agreement requires the prior written consent of Nissan and any change in the management of Dealer or the CEO, Chairman or equivalent officer of Sterling without such consent is void and grounds for termination.

11. Site Control rights, including the Right of First Refusal on sale of dealership assets in the event of a transfer by dealer or a change in control of Sterling as referred to in paragraphs 4 and 6 above, Right of First Refusal on the sale or lease of the dealership property and Exclusivity;

12. Dealer must achieve at least regional average sales penetration and CSI within six months of the date of the Agreement and maintain at least regional average sales penetration and CSI at all times thereafter. Sterling will not be considered for additional dealerships until it is in compliance with this provision; and

13. Smith, Sterling B. McCall, Jr., and James M. Kline will hold harmless and indemnify Nissan from and against all losses, liabilities, claims, etc., relating to the public offering.

Additionally, receipt of outstanding documentation and any additional documentation as requested may be necessary in order to complete processing to this receipt.

Very Truly Yours,

NISSAN MOTOR CORPORATION U.S.A

J.C. Fassino
Regional Vice President

EXHIBIT 10.15

September 29, 1997

Mr. Charles S. Smith
Acura Southwest
10455 Southwest Freeway
Houston, TX 77074-1101

Dear Mr. Smith:

By letter dated December 11, 1996 (the "Approval Letter") Nissan advised you that Nissan would approve the proposed restructuring of your dealership wherein Group 1 Automotive, Inc. ("Group 1"), which become a publicly held corporation, acquires all of the stock of Round Rock Nissan, Inc., Town North Nissan, Inc. and Courtesy Nissan, Inc. (collectively referred to as "Dealer"), subject to certain terms and conditions, including those set forth therein. This letter will confirm our recent discussions in which Nissan has agreed to modify certain of the terms and conditions for approval previously communicated to you as follows:

1. All references to Sterling Automotive Group, Inc. shall mean Group 1.

2. Paragraph 3 of the Approval Letter shall be amended to read in its entirety as follows:

"Charles M. Smith ("Smith") will be an officer of Dealer."

3. Paragraph 4 of the Approval Letter shall be amended to read in its entirety as follows:

"Smith agrees that for a period of five years after the execution of the Nissan Dealer Sales and Service Agreements for the Dealers referenced above, which Nissan and Smith agree to use their best efforts to execute as soon as reasonably practicable, any transfer of his stock ownership in Group 1 which would decrease his stock ownership in Group 1, which will be 679,000 shares upon completion of the Group 1 acquisitions, to less than 169,750 shares, requires the prior written consent of Nissan."

4. Paragraph 6 of the Approval Letter shall be amended to read in its entirety as follows:

"Nissan shall have the right to approve any ownership or voting rights of Group 1 of twenty percent (20%) or greater by any individual or entity; PROVIDED HOWEVER, that if Nissan determines that such individual or entity is unqualified to own a Nissan dealership, or has interests incomparable with Nissan, and such transfer is effected, Group 1 must, within ninety (90) days from the date of notification by Nissan of its determination, either; (a) transfer the assets of its Nissan dealerships to a third party acceptable to Nissan; or (b) voluntarily terminate its Nissan dealership agreements; or (c)

demonstrate that such individual or entity in fact owns less than 20% of the outstanding shares of Group 1."

5. Paragraph 10 of the Approval Letter shall be amended to read in its entirety as follows:

"Any change in the Dealer Principal or Executive Manager of Dealer from that specified in the Agreement requires the prior written consent of Nissan, which shall not be unreasonably withheld, recognizing that some time may be required to find a replacement in the event of death, incapacity or termination and termination may require prompt action, and any change in the management of Dealer without such consent is void and grounds for termination."

6. Paragraph 11 of the Approval Letter shall be amended to read in its entirety as follows:

"Site Control rights, including the Right of First Refusal on sale of dealership assets in the event of a transfer by dealer or a change of control Group 1 as referred to in paragraph 6 above, Right of First Refusal on the sale or lease of the dealership property and Exclusivity."

7. Paragraph 13 of the Approval Letter shall be amended to read in its entirety as follows:

"Group 1 and Smith (in Smith's case up to a maximum of $350,000, and only in the event Group 1 is unable to satisfy its obligation) will hold harmless and indemnity Nissan from and against all losses, liabilities and claims relating to the public offering."

Aside from the above modifications, the other terms and conditions for approval of your proposed restructuring remain as set forth in the Approval Letter.

Very truly yours,

NISSAN MOTORS CORPORATION U.S.A.

J.C. Fassino
Regional Vice President

EXHIBIT 10.16

Supplemental Terms and Conditions

This Agreement is made this 4th day of September, 1997 by and between Ford Motor the Company, a Delaware corporation with its principal place of business at The American Road, Dearborn, Michigan (hereinafter called "Ford"), and Group 1 Automotive, Inc., a Delaware corporation with its principal place of business at 950 Echo Lane, Suite 350, Houston, Texas 77024 (hereinafter called the "the Company").

AGREEMENT

1. Definitions. For purposes hereof, the following definitions shall apply

a. "Agreement" shall mean the Ford, Lincoln or Mercury Sales and Service Agreement.

b. "General Manager" shall mean the person designated by the Company pursuant to paragraph F (ii) of the Agreement with full day to day management authority and approved by Ford in writing.

c. "Securities Act" shall mean the Securities Act of 1933, as amended.

d. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

e. "SEC" shall mean the Securities and Exchange Commission.

f. "Dealership" shall mean each Ford, Mercury or Lincoln authorized dealership owned or controlled directly or indirectly by the Company.

g. "Delegation Certificate" shall be the instrument executed by an authorized officer of the Company granting full day to day operational and management control of the Dealership to the General Manager.

h. "CSI" shall mean the Customer Satisfaction Index used by Ford to measure customer satisfaction in terms of the selling process as well as after sales service, as such may be modified from time to time by Ford.

i. "Supplemental Terms" shall mean these Supplemental Terms and Conditions.

2. Scope. The Company has indicated that it will seek to acquire or to apply for Ford, Mercury and Lincoln authorized dealerships. In order to simplify future discussions and to avoid any misunderstanding, these Supplemental Terms are intended to apply to those situations where Ford is willing to approve the Company (or its designated wholly owned or controlled direct or indirect subsidiary) as the purchaser of the capital stock or assets of a Ford, Mercury or Lincoln authorized dealership or where it is willing to enter into an Agreement with the Company with respect to a new dealership location. In each situation where Ford is willing to enter into an Agreement, the Company

will cause the Dealership to execute an Agreement and will cause such Dealership to be bound by these Supplemental Terms.

3. Sole Ownership. To maintain financial and operational autonomy and accountability, each Dealership will be a separate corporation with the Ford, Mercury and/or Lincoln dealership operation being its sole business unless otherwise agreed in writing by Ford; provided, however, that if, at the time of acquisition of any Dealership, such Dealership is not a separate corporation, the Company will use reasonable efforts to cause the Dealership to be held as a separate corporation as soon as practicable. The Company shall furnish to Ford a copy of the certificate of incorporation and bylaws of each Dealership. As is required of all Ford authorized dealerships, each Dealership shall submit monthly financial and operating performance data to Ford.

4. Capitalization. Each Dealership will be separately and fully capitalized to ensure the maintenance of net cash, working capital and operating investment in accordance with Ford guidelines. Other than through dividends permitted by the law of the state of incorporation of each Dealership, the effect of which shall not impair the ability of the Dealership, to meet the above mentioned Ford capitalization guidelines, or through arms-length transactions, all cash and other assets generated by each Dealership will remain within the Dealership and none of the assets of any Dealership owned or controlled by the Company shall be used directly or indirectly to secure the debt or liability of the Company or any other Dealership or other business owned or controlled by the Company.

5. General Manager. The Company shall delegate in writing the complete day to day management control of each Dealership to the General Manager of such Dealership whose appointment shall be subject to Ford's prior written approval which shall not be unreasonably withheld. The General Manager shall be designated in paragraph F (ii) of the Agreement and shall have full managerial authority and accountability for operating the Dealership in accordance with the terms of the Agreement and the Supplemental Terms. Each person nominated by the Company as a General Manager must have substantial, successful retail automotive experience and must meet Ford's high standards for moral and ethical behavior. Upon the appointment of a General Manager, a copy of the Delegation Certificate shall be submitted to Ford. All proposed changes to the Delegation Certificate shall be in writing, submitted to Ford and subject to Ford's prior written approval. The Company will notify Ford and obtain Ford's prior written approval of any proposed change to the General Manager, such approval not to be unreasonably withheld. The Company shall have the right to appoint an interim General Manager as a temporary replacement for any General Manager who is terminated for cause or who voluntarily resigns, in each case without the prior written approval of Ford. In the event that an interim General Manager is appointed, the Company shall work with Ford to appoint a permanent General Manager within 90 days after the appointment of the interim General Manager. In addition to meeting the criteria Ford customarily applies to new dealer candidates, the General Manager will be assigned to the Dealership for a sufficient time (being a minimum of 3 years unless otherwise agreed by Ford in writing) to allow the General Manager to develop and maintain ties to the local community evidenced by involvement in community civic and

charitable organizations. The General Manager must reside in the Dealer Locality as required by the Agreement.

6. Compensation Plans. The Company will cause each Dealership to provide to its General Manager and other key employees of the Dealership, as deemed appropriate, as part of their compensation, incentive programs that will provide specific financial rewards to the General Manager and such other employees that are payable to them at least annually and are based upon the achievement and maintenance by the Dealership of the long term and short term operating performance objectives described in paragraph 7 hereof.

7. Performance Criteria. Should any Dealership fail to meet reasonable performance criteria established by Ford relating to such matters as sales performance, CSI and such other performance criteria that Ford may reasonably apply to all its authorized dealers, Ford will have the right to implement the following procedure. Ford shall notify the Company and the General Manager in writing of such failure and shall grant the Company and the General Manager 90 days to either cure the failure in total or, with respect to sales performance and CSI only, to present to Ford evidence of progress to cure the failure indicating in Ford's reasonable judgment that the failure will be cured within one year of Ford's notice. Should the failure not be cured within the above period, persons delegated with authority from the Company immediately shall meet with authorized personnel from Ford to arrange for the orderly and expeditious replacement of the General Manager. Should agreement not be reached upon the identity of an appropriate replacement General Manger within 90 days of the end of the cure period, Ford may terminate the Agreement with immediate effect. Requirements that each Dealership consistently meet or exceed Ford's regional average retail car and truck market share and comparable dealer group average customer satisfaction ratings, as measured by CSI or other criteria established by Ford, shall be considered reasonable performance requirements. Ford will not unreasonably withhold its consent to the appointment of an appropriate replacement General Manger.

8. Additional Appointments. Should any Dealership fail to maintain for any 12 month period the level of CSI at substantially the same level that was reported for such Dealership as of the date of its acquisition by the Company, the Company shall not seek or apply for another Ford authorized dealership until such time as such level of CSI is restored to Ford's reasonable satisfaction. Ford will provide each Dealership a report monthly, summarizing its CSI performance for the preceding month and for the calendar year to date. Unless otherwise agreed by Ford in writing, the Company shall not seek or apply for a Ford authorized dealership if, once owning such dealership, the Company would own or control, directly or indirectly, the greater of (a) 15 Ford and 15 Lincoln Mercury Dealerships or (b) that number of Ford authorized dealerships with total retail sales of new vehicles in the immediately preceding calendar year of more than 5% of the total Ford and Lincoln Mercury branded vehicles sold at retail in the United States; provided, however, that in no event shall the Company seek or apply for a Ford authorized dealership in any market area, as defined from time to time by Ford for its dealership network, that would result in the Company owning or

controlling, directly or indirectly, more than one Ford authorized dealership in those market areas having 2 or less Ford authorized dealerships in them, or in the Company owning or controlling, directly or indirectly, more than 33% of the Ford authorized dealerships in market areas, as defined from time to time by Ford for its dealership network, having more than 3 authorized Ford dealerships in them, it being understood that this proviso is intended to apply separately to Ford and to Lincoln Mercury dealerships. Should the above limitations be exceeded and, notwithstanding the above limitations, the Company seek Ford's approval to acquire an additional authorized dealership, Ford's refusal to approve such an acquisition shall be deemed to be a reasonable action by Ford.

9. Major Changes. The Company shall submit to Ford copies of all effective registration statements and final reports, proxies and information statements it files with the SEC pursuant to the Securities Act or the Exchange Act within five (5) business days of filing with the SEC. The Company, shall submit to Ford all filings submitted to the SEC by third parties that are required to disclose significant holdings or substantial acquisitions of, or changes in, the ownership of the voting securities (or other securities convertible into voting securities) of the Company including, without limitation, Schedules 13D or 13G. Should any SEC filing disclose that (a) a person, entity or group has a binding agreement to acquire, or has acquired, voting securities (or other securities convertible into voting securities) of the Company that would place 50% or more of the voting securities (or other securities convertible into voting securities) of the Company into the hands of such person, entity or group, or (b) a person or entity that owns or controls fifty percent (50%) of the voting securities (or other securities convertible into voting securities) of the Company intends or may intend to acquire additional voting securities (or other securities convertible into voting securities) of the Company, or (c) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries is planned or anticipated or (d) a sale or transfer of a material amount of assets of the Company, or any of its subsidiaries, is planned or anticipated, or (e) a change has been made or is planned to be made in the Board of Directors or management of the Company or (f) any other material change in the Company's business or corporate structure or (g) any action similar to those noted above, the Company shall provide 30 days prior written notice to Ford describing the matter disclosed in such filing in detail. If any such action is believed by Ford in its reasonable judgment to have a material and adverse effect on its reputation in the market place with respect to an action described in (e), (f), or (g) or with respect to the other actions should Ford reasonably conclude that such action will not be compatible with the interests of Ford, the Company agrees that within 90 days of Ford's notice thereof, the Company shall sell or cause to be sold one or more of the Dealerships, as specified in the notice, to Ford or its designee at fair market value, determined in accordance with Attachment A or resign the Agreements, or provide evidence to Ford that the proposed action which gave rise to the issuance of Ford's notice will not take place. Should the Company enter into an agreement to transfer the assets or capital stock of any Dealership to a third party, Ford's right of first refusal provided in paragraph 24(b) of the Agreement shall apply.

10. Exclusive Dealership Facilities. Each Dealership shall operate as an exclusive fully dedicated Ford, Mercury and/or Lincoln dealership, as the case may be, and the Company will not accept a sales and service agreement with any other automobile manufacturer or importer or allow the merchandising, display, sale or service of new vehicles other than Ford, Mercury or Lincoln vehicles at the facilities and locations approved by Ford and used by any Dealership for the conduct

of its business ("Ford Approved Facilities"). Unless otherwise agreed in writing, should the Company acquire a Dealership having a sales and service agreement with a competitive automobile manufacturer or importer and related sales and service operations at the Ford Approved Facilities, it shall cause the Dealership to relocate such competitive sales and service operations from the Ford Approved Facilities within one year of acquisition; provided, however, that Ford shall grant the Company additional time to effect such relocation if Ford believes the Company is making reasonable progress in so doing. No Dealership will merchandise, display or sell new Ford, Mercury or Lincoln vehicles at any unauthorized location including those owned or controlled by the Company. In conducting its advertising programs each Dealership shall portray the products it is authorized to sell and service under the Agreement in a distinctive manner taking care not to mingle such advertising with advertising of competitive make new vehicles or used vehicles.

11. Advertising. The Company recognizes the benefit of local cooperative advertising and has indicated that it will cause each Dealership to become a fully participating member of the local Ford, Lincoln or Mercury dealer advertising group (FDAF/LMDA).

12. Auctions. Used vehicle purchases from Ford sponsored auctions will be governed by a separate "Sponsored Auction Agreement" which will be executed by each Dealership.

13. Dealership Name. The trade name and corporate name of each Dealership will be subject to Ford's approval and will not include any reference to any non-Ford, Mercury or Lincoln make vehicle.

14. Site Control. Any existing agreement covering a Dealership or its assets relating to site control will be assumed by the Company and shall remain in full force and effect.

15. Dispute Settlement. Any dispute concerning the Agreement or the Supplemental Terms shall be resolved Using the arbitration plan described in paragraph 18 of the Agreement; provided, however, that notwithstanding anything in the Agreement to the contrary, the use of such Plan shall be mandatory and not optional and; provided, further, that no dispute need be brought before the Ford Dealer Policy Board.

16. Agreement and Supplemental Terms. The Company confirms that the provisions of these Supplemental Terms are material to its relationship with Ford and that a failure by the Company to fully comply with any material term hereof, after having been given a reasonable opportunity to cure such failure, will constitute good and just cause for Ford, in its discretion, to terminate the Agreement and these Supplemental Terms with immediate effect.

17. Binding Effect. These Supplemental Terms are intended to modify certain provisions of the Agreement and to be incorporated as a part of the Agreement. Should there be an inconsistency between the terms of these Supplemental Terms and any provision of the Agreement, the terms of these Supplemental Terms shall apply.

18. Parent-Subsidiary. The Company shall cause each Dealership to carry out the actions and to assume the responsibilities provided herein.

IN WITNESS WHEREOF, the Company and Ford, through their authorized officers, have set there hands on the day and year above written.

Ford Motor Company                           Group 1 Automotive, Inc.

By: /s/ FORD MOTOR COMPANY                   By: /s/ B.B. HOLLINGSWORTH, JR.
   ------------------------                     -------------------------------
                                             B.B. Hollingsworth, Jr.
Its:

    -----------------------

        OWNERS'                         TITLE                PERCENT OF
         NAMES                                               OWNERSHIP
---------------           -------------------------          ----------
Sterling McCall           President/General Manager             100%
---------------           -------------------------          ----------

---------------           -------------------------          ----------

---------------           -------------------------          ----------

---------------           -------------------------          ----------

---------------           -------------------------          ----------

---------------           -------------------------          ----------

New Vehicle Sales and Showroom                   Used Vehicle
Display and Sales

9400 Southwest Freeway                           9400 Southwest Freeway
Houston, Texas 77057                             Houston, Texas 77057

Sales and General Office                         Body and Paint

9400 Southwest Freeway
Houston, Texas 77057

Parts                                            Service

9400 Southwest Freeway                           9400 Southwest Freeway
Houston, Texas 77057                             Houston, Texas 77057

Southwest Toyota, Inc. d/b/a Sterling McCall Toyota                       DEALER
--------------------------------------------------------------------------------
             (Dealer Entity Name)

Date:          By:       /s/ Sterling B. McCall, Jr.
      --------     ---------------------------------------- --------------------
                                  Signature                        Title

Date:          By:
      --------     ---------------------------------------- --------------------
                                  Signature                        Title

Date:          By:
      --------     ---------------------------------------- --------------------
                                  Signature                        Title



Gulf States Toyota, Inc.                                             DISTRIBUTOR
--------------------------------------------------------------------------------
             (Distributor Name)
                                                            Group Vice President
Date:  2/9/93  By:            /s/ J.S. Bishop               Sales & Marketing
      --------     ---------------------------------------- --------------------
                            Signature J.S. Bishop                 Title

Date:          By:

Date: APR 5 1993 By:        /s/  Shinji Sakai                    President
      ----------     -------------------------------------- --------------------
                                                                   Title

  (Internal combustion models only)

Avalon                    Land Cruiser
Camry                     Previa
Celica                    RAV4
Corolla                   4Runner
Paseo                     Tacoma Truck
Supra                     T100 Truck
Tercel

with a revised Addendum which defines the structure of the modified PMA.

I.           TERM OF AGREEMENT  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II.          OWNERSHIP AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
III.         MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
IV.          APPROVED DEALER LOCATIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
V.           CERTIFICATION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3


VI.          ACQUISITION, DELIVERY AND INVENTORY OF LEXUS PRODUCTS  . . . . . . . . . . . . . . . . . . . . . . . . . . 1
             A.    APPOINTMENT OF DEALER  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
             B.    AVAILABILITY AND ALLOCATION OF PRODUCT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
             C.    PRICES AND TERMS OF SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
             D.    MODE, PLACE AND CHARGES FOR DELIVERY OF PRODUCTS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
             E.    DAMAGE CLAIMS AGAINST TRANSPORTATION CARRIERS  . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
             F.    DELAY OR FAILURE OF DELIVERY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
             G.    DIVERSION CHARGES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
             H.    CHANGES OF DESIGN, OPTIONS OR SPECIFICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
             I.    DISCONTINUANCE OF MANUFACTURE OR IMPORTATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
             J.    MINIMUM VEHICLE INVENTORIES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
             K.    PRODUCT MODIFICATIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

VII.         DEALER MARKETING OF LEXUS PRODUCTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
             A.    DEALER'S SALES RESPONSIBILITIES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
             B.    EXPORT POLICY  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
             C.    LEXUS DEALER ASSOCIATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
             D.    USED VEHICLES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
             E.    PRIMARY AREA OF RESPONSIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
             F.    EVALUATION OF DEALER'S SALES AND MARKETING PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . 5

III.         DEALER SERVICE OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
             A.    CUSTOMER SERVICE STANDARDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
             B.    NEW MOTOR VEHICLE PRE-DELIVERY SERVICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
             C.    WARRANTY AND POLICY SERVICE  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

IX.          USE OF PARTS AND ACCESSORIES IN NON-WARRANTY SERVICE . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
             A.    WARRANTY DISCLOSURES AS TO NON-GENUINE PARTS AND ACCESSORIES . . . . . . . . . . . . . . . . . . . . 7
             B.    ROADSIDE ASSISTANCE PROGRAM  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
             C.    SERVICE CAMPAIGN INSPECTIONS AND CORRECTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
             D.    COMPLIANCE WITH SAFETY AND EMISSION CONTROL REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . 8
             E.    COMPLIANCE WITH CONSUMER PROTECTION STATUTES, RULES AND REGULATIONS  . . . . . . . . . . . . . . . . 8

X.           SERVICE AND PARTS ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
             A.    ORGANIZATION AND STANDARDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
             B.    SERVICE EQUIPMENT AND SPECIAL TOOLS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
             C.    PARTS STOCKING LEVEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
             D.    AFTER-HOURS DELIVERY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
             E.    ASSISTANCE PROVIDED BY DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
                   1.   Service Manuals And Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
                   2.   Field Service Personnel Assistance  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
             F.    EVALUATION OF DEALER'S SERVICE AND PARTS
                   PERFORMANCE  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10

XI.          CUSTOMER SATISFACTION RESPONSIBILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
             A.    DEALER'S CUSTOMER SATISFACTION OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
                   1.   DEALER's Customer Satisfaction Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
                   2.   Employee Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
                   3.   Customer Satisfaction Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
                   4.   Customer Assistance Response System . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
             B.    EVALUATION OF DEALER'S CUSTOMER SATISFACTION PERFORMANCE . . . . . . . . . . . . . . . . . . . . .  11

XII.         DEALERSHIP FACILITIES AND IDENTIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12
             A.    FACILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12
             B.    SERVICE RECEPTION AREA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12
             C.    DEALER'S OPERATING HOURS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12
             D.    SIGNS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12
             E.    EVALUATION OF DEALERSHIP FACILITIES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13
             F.    USE OF LEXUS MARKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13
                   1.   Use By Dealer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13
                   2.   Discontinuance of Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13

XIII.        CAPITAL, CREDIT, RECORDS AND UNIFORM SYSTEMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
             A.    NET WORKING CAPITAL  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
             B.    FLOORING AND LINES OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
             C.    PAYMENT TERMS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
             D.    UNIFORM ACCOUNTING SYSTEM  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
             E.    RECORDS MAINTENANCE  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
             F.    EXAMINATION OF DEALERSHIP ACCOUNTS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . .  15
             G.    TAXES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
             H.    CONFIDENTIALITY  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
             I.    DATA TRANSMISSION SYSTEMS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
             J.     SALES REPORTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16

XIV.         TRANSFERS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
             A.    SALE OF OWNERSHIP INTEREST IN DEALERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
             B.    RIGHT OF FIRST REFUSAL OR OPTION TO PURCHASE . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
                   1.   Rights Granted  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
                   2.   Exercise of Distributor's Rights  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
                   3.   Right of First Refusal  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18
                   4.   Option to Purchase  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18
                   5.   Dealer's Obligations  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18

XV.          SUCCESSION RIGHTS UPON DEATH OR INCAPACITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  19
             A.    SUCCESSION TO OWNERSHIP AFTER DEATH OF OWNER . . . . . . . . . . . . . . . . . . . . . . . . . . .  19
             B.    INCAPACITY OF OWNER  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
             C.    NOMINATION OF SUCCESSOR PRIOR TO DEATH OR INCAPACITY OF OWNER  . . . . . . . . . . . . . . . . . .  20

XVI.         TERMINATION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
             A.    VOLUNTARY TERMINATION BY DEALER  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
             B.    TERMINATION FOR CAUSE  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
                   1.   Immediate Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
                   2.   Termination Upon Sixty Days Notice  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  22
                   3.   Termination for Failure of Performance  . . . . . . . . . . . . . . . . . . . . . . . . . . .  23
                   4.   Termination Upon Death or Incapacity  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
             C.    NOTICE OF TERMINATION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
             D.    CONTINUANCE OF BUSINESS RELATIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
             E.    REPURCHASE PROVISIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
                   1.   DISTRIBUTOR'S Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
                   2.   Responsibilities of DEALER  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25
                   3.   Payment by DISTRIBUTOR  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  26

XVII.        MANAGEMENT OF DISPUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  26
             A.    ALTERNATIVE DISPUTE RESOLUTION PROGRAMS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  26
             B.    APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27
             C.    MUTUAL RELEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27

XVIII.       DEFENSE AND INDEMNIFICATION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27
             A.    DEFENSE AND INDEMNIFICATION BY DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27
             B.    DEFENSE AND INDEMNIFICATION BY DEALER  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  28
             C.    CONDITIONAL DEFENSE AND/OR INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . .  29
             D.    THE EFFECT OF SUBSEQUENT DEVELOPMENTS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  29
             E.    TIME TO RESPOND AND RESPONSIBILITIES OF THE PARTIES  . . . . . . . . . . . . . . . . . . . . . . .  30

XIX.         GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30
             A.    NOTICES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30
             B.    NO IMPLIED WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30
             C.    SOLE AGREEMENT OF THE PARTIES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  31
             D.    DEALER NOT AN AGENT OR REPRESENTATIVE  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  31
             E.    ASSIGNMENT OF RIGHTS OR DELEGATION OF DUTIES . . . . . . . . . . . . . . . . . . . . . . . . . . .  31
             F.    NO FRANCHISE FEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  31
             G.    SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  31
             H.    NEW AND SUPERSEDING DEALER AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  32
             I.    BENEFIT  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  32

XX.          DEFINITIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  32
             A.    DEALER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  32
             B.    OWNER  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  32
             C.    GENERAL MANAGER  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  32
             D.    DEALER FACILITIES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  32
             E.    APPROVED LOCATION(S) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  32
             F.    LEXUS MARKS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  32
             G.    LEXUS MOTOR VEHICLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  33
             H.    GENUINE LEXUS PARTS AND ACCESSORIES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  33
             I.    LEXUS PRODUCTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  33

XXI.         ADDITIONAL PROVISIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  34

                                                                    PERCENT OF
             OWNERS NAMES                        ADDRESS            OWNERSHIP

             Sterling B. McCall, Jr.     9400 Southwest Freeway     100%
                                         Houston, TX 77057


             OFFICERS NAMES                      ADDRESS            TITLE

             Sterling B. McCall, Jr.     9400 Southwest Freeway     President
             Sterling B. McCall, III     Houston, TX 77057          Secretary

III.         MANAGEMENT

SALES AND GENERAL OFFICE                       BODY AND PAINT

10422 Southwest Freeway
Houston, TX 77074

PARTS AND SERVICE                              OTHER FACILITIES

10422 Southwest Freeway
Houston, TX 77074

DATE: 6/27/95      By:       /s/ Sterling B. McCall                Pres.
     -----------      ---------------------------------------      ----------
                      SIGNATURE                                    TITLE


                                  LEXUS, A Division of
                                  TOYOTA MOTOR SALES, U.S.A., INC.



DATE: 8/21/95      By:       /s/ Shinji Sakai                      Pres.
     -----------      ---------------------------------------      ----------
                      SIGNATURE                                    TITLE

located at               ---------------------------------------------------
                                       (Dealer) McCall Lexus

10400 Southwest Freeway                           Houston, Texas
--------------------------------------------------------------------------------
      Address                                     (City, State)

NEW VEHICLE SALES AND SHOWROOM            USED VEHICLE DISPLAY AND SALES
10422 Southwest Freeway                   10422 Southwest Freeway
Houston, Texas 77074                      Houston, Texas 77074

SALES AND GENERAL OFFICE                  BODY AND PAINT
10422 Southwest Freeway
Houston, Texas 77074

PARTS AND SERVICE                         OTHER FACILITIES
10422 Southwest Freeway
Houston, Texas 77074

                                      SMC Luxury Cars, Inc.         , DEALER
                                      ------------------------------
                                               (Dealer Entity Name)


DATE:              By:     /s/ Sterling B. McCall                President
     ----------         ---------------------------------------  ---------------
                        SIGNATURE                                TITLE

DATE: 5/21/90      By:    /s/ Y. Togo                              President
     -----------      ---------------------------------------      ----------
                      SIGNATURE                                    TITLE

By: /s/ C.D. KARGES
   ----------------------------
    Name:
    Title:

By: /s/
   ----------------------------
    Name:
    Title:

By: /s/ SCOTT C. THOMPSON
   ----------------------------
    Name:
    Title:

FACILITY:        Up to $125,000,000 Revolving Credit Facility to be available
                 in two tranches, (i) $75,000,000 Floor Plan Tranche and (ii)
                 $50,000,000 Acquisition Tranche. In addition, a Swing Line
                 will be available to fund family activity under the Floor Plan
                 Tranche.

CO-BORROWERS:    Group 1 Automotive, Inc. (the "Company") and its wholly-owned
                 subsidiaries.

ADMINISTRATIVE
AGENT:           Texas Commerce Bank National Association ("TCB")

FLOOR PLAN
AGENT:           Comerica Bank ("Comerica")

ARRANGER:        Chase Securities Inc. ("CSI")

LENDERS:         TCB, Comerica and a group of lenders acceptable to TCB,
                 Comerica, CSI and the Company.

PURPOSE:         General corporate needs including acquisitions of auto
                 dealerships and to finance new and program vehicle
                 inventories.

MATURITY:        Three years from the Closing Date, renewable annually.

SECURITY:        The Facility will be secured by:

                 (i)      a pledge of the stock of subsidiaries (as permitted
                          by manufacturers),

                 (ii)     a first priority lien on all inventory, accounts
                          receivable, and machinery and equipment of the Floor
                          Plan Subsidiaries,

                 (iii)    a second priority lien on all inventory, accounts
                          receivable, and machinery and equipment of all
                          subsidiaries other than those in (ii) above, and

                 (iv)     a first priority mortgage on all current and future
                          unencumbered real estate (if any).

AVAILABILITY:    Availability of the Facility shall be equal to the lesser of
                 (i) $125,000,000 or (ii) the sum of (x) the Floor Plan
                 Availability plus (y) the Acquisition Availability.

                 The Floor Plan Availability shall be an amount of up to
                 $75,000,000, governed as outlined under "Payments,
                 Curtailment" below.

PREPAYMENTS:     The Co-Borrowers shall immediately prepay any outstandings
                 under the Facility to the extent that the usage under either
                 tranche exceeds the Availability of either tranche.

PAYMENTS,
CURTAILMENT:     Advances are due the earlier to occur of (i) receipt of cash
                 or (ii) 10 days from the vehicle sale date. After 365 days,
                 the units will be curtailed at 2% per month for the next 12
                 months, with payment due in full by the 24th month.
                 Demonstrator and program car sublimits and curtailments to be
                 negotiated.

INTEREST RATE
OPTIONS:         Floor Plan Tranche. At the option of the Borrower, (i)
                 Comerica's Prime Rate less 0.50% or (ii) LIBOR plus 150 basis
                 points.

                 Acquisition Tranche. The Company shall be entitled to select
                 between the following interest rate options for borrowings
                 under the Acquisition Tranche: Alternate Base Rate; or LIBOR
                 plus the Applicable Margin in accordance with the following
                 table.

--------------------------------------------------
     APPLICABLE MARGIN
-----------------------------
ALTERNATE BASE
     RATE              LIBOR       LEVERAGE RATIO
--------------------------------------------------
  125.0 bps         275.0 bps         x > 1.75
   75.0 bps         225.0 bps      1.25 < x < 1.75
   25.0 bps         175.0 bps      1.00 < x < 1.25
    0.0 bps         150.0 bps         x < 1.00
--------------------------------------------------

INTEREST PERIODS:         Floor Plan Tranche.

                                LIBOR Loans:                 1, 2, or 3 months
                                Comerica Prime Rate Loans:   Daily

                                Interest on LIBOR Loans and advances will be
                                payable on the last day of each month, and
                                upon prepayment if permitted. Interest on
                                LIBOR and Comerica Prime Rate Loans and
                                advances will be on the basis of a 360-day
                                year (calculated on the basis of actual days
                                elapsed).

                          Acquisition Tranche.

                                LIBOR Loans:                 1, 2, 3 or 6 months
                                Alternative Base Rate Loans: up to 90 days.

                                Interest on LIBOR loans and advances will be
                                payable on the last day of each Interest
                                Period (and at the end of each three months,
                                in the case of Interest Periods of longer
                                than three months), and upon prepayment if
                                permitted. In respect of LIBOR loans and
                                advances, interest shall be payable in
                                arrears on the basis of a 360-day year
                                (calculated on the basis of actual days
                                elapsed). Interest on Alternate Base Rate
                                loans will be payable quarterly in arrears,
                                and upon prepayment, on the basis of a
                                365/366-day year for loans when based on the
                                Prime Rate and a 360-day year for loans when
                                based on the Federal Funds Effective Rate (in
                                each case calculated on the basis of actual
                                days elapsed).

FUNDING:                  Floor Plan Tranche. Borrowings of (i) Comerica Prime
                          Rate Loans shall be in any amount and (ii) LIBOR
                          Loans shall be in minimum amounts and integral
                          multiples of $1,000,000.

                          Acquisition Tranche. Borrowings of (i) Alternate Base
                          Rate Loans shall be in minimum amounts and integral
                          multiples of $1,000,000 and (ii) LIBOR Loans shall be
                          in minimum amounts and integral multiples of
                          $1,000,000.

NOTIFICATION
SCHEDULE:                 The Company must provide notice prior to the proposed
                          date of borrowing, in accordance with the following
                          schedule:

                          LIBOR Rate Loans:                 3 business days.
                          Alternate Base Rate Loans:        1 business day.

LETTERS OF CREDIT:        Annual fees for Letters of Credit shall be equal to
                          the greater of $500 or the Applicable Margin for
                          Acquisition Tranche LIBOR Loans multiplied by the
                          amount of the Letter of Credit.  TCB will receive a
                          fronting fee of 0.125%.

COMMITMENT FEES:          The Commitment Fee, payable quarterly in arrears on
                          the average unused amount of the Revolver shall be 25
                          basis points.

ARRANGEMENT FEE:          See Annex I.

AGENCY FEE:               See Annex I.

FLOOR PLAN
SERVICING FEES:           See Annex I.

PARTICIPATION
FEES:                     See Annex I.

COMMITMENT
REDUCTIONS:               The Company may irrevocably reduce the Amount pro
                          rata across both tranches in integral multiples of
                          $5,000,000 at any time upon three days notice;
                          however, prepayments of LIBOR borrowings on any day
                          other than the last day of an interest period must be
                          accompanied by payment of all breakage costs and
                          funding losses, if any.

INITIAL LOAN:             Conditions Precedent shall be usual and customary for
                          transactions of this nature including, but not
                          limited to, the following:

                          o       Completion of an initial public offering with
                                  net proceeds of no less than [to be
                                  determined] and simultaneous acquisition of
                                  the "Founding Companies."

WARRANTIES:               Representations and warranties shall be usual and
                          customary for transactions of this nature including,
                          but not limited to, the following:

                          o       Existence, authorization, no conflicts,
                                  validity and binding effect

COVENANTS:                Affirmative Covenants for the Company and its
                          subsidiaries include, but are not limited to, the
                          following:

                          (i)     Maintenance of proper books of record and
                                  account, and granting of access to the Agent
                                  and the Lenders and their representatives to
                                  visit and inspect the properties (including
                                  but not limited to inventory and accounts
                                  receivable), books and records of the
                                  Borrower, maintain financial records in
                                  accordance with GAAP;

COVENANTS:                The following negative covenants shall apply to the
                          Company and its subsidiaries:

                          (i)      Minimum Net Worth - The Company will not
                                   allow the Shareholders' Equity to be less
                                   than equal to the sum of (x) 90% of post-IPO
                                   net worth plus (y) 75% of Consolidated Net
                                   Income (but only to the extent such amount is
                                   positive) subsequent to the IPO plus (z) 100%
                                   of the net proceeds from the sale of equity.
                                   The Company will not allow Consolidated
                                   Tangible Net Worth to be less than $25
                                   million.

                          (ii)     Restricted Payments and Investments - The
                                   Company and its subsidiaries will not (i) pay
                                   any cash dividends or make any other
                                   distribution on any equity interest of the
                                   Borrower, (ii) redeem, purchase or otherwise
                                   acquire or retire any such equity interests;
                                   or (iii) make investments other than
                                   Permitted Investments, unless in each case
                                   immediately after giving effect thereto, (a)
                                   no Default or Event of Default has occurred
                                   or would be created thereby and (b) the
                                   aggregate of such payments and investments
                                   would not exceed one-third of Consolidated
                                   Net Income since December 31, 1997.

                          (iv)     Fixed Charge Coverage - The Company shall
                                   not permit the Fixed Charge Coverage Ratio to
                                   be less than 1.25 of (x) Earnings Available
                                   for Fixed Charges (calculated quarterly on a
                                   rolling four quarter basis).

                          (v)      Interest Coverage - The Company shall not
                                   permit the Interest Coverage Ratio to be less
                                   than 2.50 (calculated quarterly on a rolling
                                   four quarter basis).

                          (vi)     Leverage Ratio - The Company shall not
                                   permit the Leverage Ratio to be greater than
                                   2.0.

DEFAULT:                  Events of Default shall include those provisions
                          usual and customary for such transactions including,
                          but not limited to, the following:

                          (i)      Nonpayment of any principal amounts
                                   of the loans when due; nonpayment of any
                                   interest, fees, or other amounts within 5
                                   days of the due date thereof;

                          (ii)     Breach of any negative covenants or breach
                                   of any notice requirement;

                          (iii)    Breach of any other covenant or obligation
                                   which remains uncured for 30 days after the
                                   earlier of (x) the Company obtaining
                                   knowledge thereof or (y) written notice
                                   thereof having been given to the Borrower.

                          (iv)     Any representation, warranty, or statement
                                   shall be untrue or incorrect in any material
                                   respect when made;

                          (v)      Failure of the Company or a subsidiary to
                                   make payments on any debt exceeding $1
                                   million in the aggregate, or breach of any
                                   covenant contained in any agreement relating
                                   to such indebtedness causing or permitting
                                   the acceleration of such indebtedness;

PARTICIPATIONS:           The Lenders shall be permitted to participate and
                          assign loans, notes and commitments.  Assignments
                          will be subject to the payment of a service fee
                          payable by the assigning Lender to the Agent and
                          shall only be permitted with the prior written
                          consent of the Borrower, which shall not be
                          unreasonably withheld; provided however, each
                          assignment shall be in a minimum principal amount of
                          $5,000,000.

YIELD PROTECTION:         Standard yield protection and indemnification,
                          including capital adequacy requirements, will be
                          incorporated into the Credit Agreement to
                          satisfactorily compensate the Lenders in the event
                          that any existing or future law, requirement,
                          guideline, or request of relevant authorities shall
                          increase costs, reduce payments or earnings, or
                          increase capital requirements.

INDEMNITIES:              The Company will indemnify, defend and hold harmless
                          the Agent and Lenders and their respective
                          shareholders, directors, officers, counsels,
                          employees and agents from and against all costs,
                          liability and expense (including interest, penalties,
                          attorney's fees and amounts paid in settlement) to
                          which any of them may become subject arising out of
                          or based upon the Facility, including consequences of
                          their own negligence, whether by alleged or actual
                          negligence of the party to be indemnified or
                          otherwise, except and to

                          the extent caused by the gross negligence or willful
                          misconduct of the party otherwise so indemnified.

EXPENSES:                 The Co-Borrowers will be liable for all reasonable
                          costs associated with the financing including, but
                          not limited to, legal and recording costs.

MAJORITY BANKS:           Banks representing at least 66 2/3% of the
                          commitments.

GOVERNING LAW:            State of Texas

AMERICAN ISUZU MOTORS, INC.                FOYT MOTORS, INC.


By: /s/ J. T. MALONEY                      By:
   --------------------------------           ---------------------------------
Name: J. T. Maloney                        Name:
     ------------------------------             -------------------------------

Title: Sr. V. P. and General               Title:
      -----------------------------              ------------------------------
       Manager Light Vehicles

                                           GROUP 1 AUTOMOTIVE, INC.


                                           By: /s/ F. R. TODARO
                                              ---------------------------------
                                           Name: F. R. Todaro
                                                -------------------------------
                                           Title: VP Corporate Services
                                                 ------------------------------

                                               ARTICLE I

                                            THE ACQUISITION
1.1     The Acquisition  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2     Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3     Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1     Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2     Qualification  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3     Authorization  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4     Approvals  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5     Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.6     Subsidiaries; Equity Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7     Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.8     Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9     Undisclosed Liabilities  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10    Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.11    Contracts and Commitments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12    Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.13    Tax Matters  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.14    Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.15    Compliance with Law  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.16    Permits  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.17    Employee Benefit Plans and Policies  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.18    Title  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.19    Insurance  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.20    Affiliate Interests  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.21    Environmental Matters  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.22    Intellectual Property  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.23    Bank Accounts  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.24    Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10

                                              ARTICLE III

                                   REPRESENTATIONS AND WARRANTIES OF
                                            THE STOCKHOLDER

3.1     Capital Stock  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
3.2     Authorization of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
3.3     Approvals  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
3.4     Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11

                                               ARTICLE IV

                                     REPRESENTATIONS AND WARRANTIES
                                              OF AUTOMALL
4.1     Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
4.2     Authorization  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
4.3     Approvals  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12
4.4     Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12

                                               ARTICLE V

                                      COVENANTS OF THE COMPANY AND
                                            THE STOCKHOLDER

5.1     Acquisition Proposals  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12
5.2     Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12
5.3     Conduct of Business by the Company Pending the Acquisition . . . . . . . . . . . . . . . . . . . . .  13
5.4     Confidentiality  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
5.5     Notification of Certain Matters  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
5.6     Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
5.7     Agreement to Defend  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
5.8     Stockholder's Agreements Not to Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
5.9     Intellectual Property Matters  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
5.10    Cooperating in connection with IPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
5.11    Removal of Related Party Guarantees  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
5.12    Termination of Related Party Agreements  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
5.13    Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
5.14    LIFO Adjustment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
5.15    Management Agreement.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
5.16    Consent of Chalmers-Ramsey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16

                                               ARTICLE VI

                                         COVENANTS OF AUTOMALL

6.1     Confidentiality  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
6.2     Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
6.3     Agreement to Defend  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
6.4     Removal of Personal Guarantee  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17

                                              ARTICLE VII

                                               CONDITIONS

7.1     Conditions Precedent to Obligation of Each Party to Effect the Acquisition . . . . . . . . . . . . .  17
7.2     Additional Conditions Precedent to Obligations of Automall . . . . . . . . . . . . . . . . . . . . .  17
7.3     Additional Conditions Precedent to Obligations of the Stockholder.   . . . . . . . . . . . . . . . .  18

                                              ARTICLE VIII

                                   EFFECTIVENESS OF REPRESENTATIONS,
                                       WARRANTIES AND AGREEMENTS
8.1     Effectiveness of representations, warranties and agreements  . . . . . . . . . . . . . . . . . . . .  18

                                               ARTICLE IX

                                             MISCELLANEOUS

9.1     Disclosure Letter  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  19
9.2     Termination  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  19
9.3     Automatic Termination  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  19
9.4     Effect of Termination  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
9.5     Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
9.6     Waiver and Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
9.7     Public Statements  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
9.8     Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
9.9     Notices  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
9.10    Governing Law  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  22
9.11    Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  22
9.12    Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  22
9.13    Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  22
9.14    Entire Agreement; Third Party Beneficiaries  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  22