Document:

exv10w42

 

Exhibit 10.42

INCENTIVE COMPENSATION, CONFIDENTIALITY, 

NON-DISCLOSURE AND NON-COMPETE AGREEMENT

     This Incentive Compensation, Confidentiality, Non-Disclosure and Non-Compete Agreement
(“Agreement”) is entered into between Group 1 Automotive, Inc. (“Employer”), and Randy L. Callison
(“Employee”), as of December 31, 2006 (the “Effective Date”).

RECITALS

     WHEREAS, Employer desires to grant to Employee shares of restricted stock or restricted
stock units (collectively “Restricted Stock”) as part of an incentive compensation plan to
encourage Employee’s loyalty, future performance and continued employment with Employer.

     WHEREAS, in exchange for Employer granting to Employee shares of restricted stock or
restricted stock units and providing Employee with certain confidential and proprietary information
and trade secrets for the purpose of carrying out his employment responsibilities (as set forth in
Section 2 of this Agreement), Employee agrees to the non-competition provisions of Section 3 of
this Agreement.

AGREEMENT

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

	1.	 	INCENTIVE COMPENSATION

     1.1. Initial Grant. Employer hereby grants to Employee 10,000 shares of Restricted Stock in
accordance with the terms and conditions of Employer’s 1996 Stock Incentive Plan. Such shares of
Restricted Stock shall vest as follows: (i) 4,000 shares (or units) shall vest on January 1, 2009;
(ii) 2,000 shares (or units) shall vest on January 1, 2010; (iii) 2,000 shares (or units) shall
vest on January 1, 2011; and (iv) 2,000 shares (or units) shall vest on January 1, 2012.

     1.2. Additional Grants. Employee shall be eligible to receive additional grants under
Employer’s 1996 Stock Incentive Plan in such amounts as determined in the sole discretion of the
Compensation Committee, including grants of options or Restricted Stock.

     1.3. Options. If Employee is granted stock options, Employee shall 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, or any successor 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, unless modified specifically herein.

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     1.4. Condition of Grants. The rights and liabilities of Employer and Employee regarding
entitlement to, and vesting of, any incentive compensation granted pursuant to this Agreement shall
be conditioned and dependent on the Employee’s consent and agreement to the promises set forth in
Section 2 of this Agreement. In the event that any provision set forth in Section 2 is violated,
Employer shall have the right, among other remedies, to demand forfeiture of any cash or equity
award realized during the twelve (12) months prior to such violation or declaration.

	2.	 	OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS

     2.1. Provision of Confidential and Proprietary Information. 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
shall provide Employee with confidential and proprietary information and trade secrets regarding
Employer and its subsidiaries and affiliates, in order to assist Employee in satisfying his
obligations hereunder. Employer shall provide Employee with specialized training including
orientation, sales and financial information, and computer and systems training.

     2.2. Return of Proprietary Material. 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.

     2.3. Nondisclosure of Confidential Information. Except as required by law or process,
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.

     2.4. Ownership of Copyrighted Works. 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

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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.

     2.5. Protection of Proprietary Material. 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 patents
and registration of copyright in the United States and foreign countries.

	3.	 	NON-COMPETITION OBLIGATIONS

     3.1. Non-Competition Obligations. In consideration for Employer’s promises contained in
Section 2 of this Agreement, and as an additional incentive for Employer to enter into this
Agreement, Employer and Employee agree to the non-competition provisions of this Section 3.1.
Employee agrees that during the period of Employee’s non-competition obligations hereunder,
Employee will not, directly or indirectly for Employee or for others:

	 	(i)	 	engage in the Restricted Area in any business competitive with any line of
business conducted by Employer or any of its subsidiaries or affiliates (including
without limitation any public or private auto retailer);
	 
	 	(ii)	 	render advice or services to, or otherwise assist, any other person,
association, or entity who is engaged in the Restricted Area, directly or indirectly,
in any business competitive with any line of business conducted by Employer or any of
its subsidiaries or affiliates (including without limitation any public or private auto
retailer);
	 
	 	(iii)	 	engage in any business of, render advice or services to, or otherwise assist,
any private or public automobile dealership consolidator owning ten (10) or more
dealerships at the time Employee seeks to engage in any business of, render advice or
services to, or otherwise assist any such automobile dealership consolidator;
	 
	 	(iv)	 	solicit or accept the business of, or call upon, any customer or client of
Employer for the purpose of conducting competitive business or otherwise seeking profit
from a competitive activity; and

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	 	(v)	 	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 (v) 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 this Section 3.1 shall apply during Employee’s
employment and for a period of two (2) 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.

For purposes of this Section 3.1, the term “Restricted Area” shall mean a 50-mile radius from each
dealership that Employer has an ownership interest in on the date of Employee’s termination of
employment with Employer.

     3.2. Future Employment.

          3.2.1. If Employee in the future, seeks or is offered employment, or any other position or
capacity with another company or entity, Employee agrees to inform each new employer or entity,
before accepting employment, of the existence of the restrictions contained in Section 3.1.
Further, before taking any employment position with any person during the non-competition period,
Employee agrees to give prior written notice to Employer of the name of such person or entity.
Employer shall be entitled to advise such person or entity of the provisions of Section 3.1 and to
otherwise deal with such person or entity to ensure that the provisions of this Section are
enforced and duly discharged.

          3.2.2. If Employee in the future seeks or is offered employment with another company or
entity, Employee may provide Employer with written notice stating the name of the prospective
employer, Employee’s prospective position, responsibilities and duties, and the industry or
industries in which the prospective employer operates. Employer shall have ten (10) business days
from receipt of such notice to notify Employee of its belief that such prospective employment would
be a violation of the provisions of Section 3.1. If Employer fails to respond to Employee in
writing within such ten (10) business day period, Employer shall be estopped from asserting its
rights, if any, arising from a violation of Section 3.1 by reason of such employment as described
in such notice.

     3.3. Tolling of Restrictive Periods. If the Employee violates any of the restrictions
contained in Section 3.1, the restrictive periods shall be suspended and will not run in favor of
the Employee until such time as the Employee cures the violation to the satisfaction of Employer.

     3.4. Acknowledgment. Employee understands that the foregoing restrictions may limit his
ability to engage in certain businesses in locations where the Employer conducts business during
the period provided for above, but acknowledges that Employee’s job duties

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during his employment with Employer, receipt of Employer’s confidential and proprietary
information and trade secrets (as well as access to certain confidential and proprietary
information and trade secrets) and Employee’s receipt of sufficiently high remuneration and other
benefits under this Agreement justifies such restriction.

     3.5. Materiality and Conditionality of Section. Section 3.1 is material to this Agreement.
Employee’s agreement to strictly comply with Section 3.1 is a precondition for Employee’s receipt
of payments and vesting of Restricted Stock and stock options pursuant to Section 1 of this
Agreement. Whether or not Section 3.1 or any portion thereof has been held or found invalid or
unenforceable for any reason whatsoever by a court or other constituted legal authority of
competent jurisdiction, upon any violation of Section 3.1 or any portion thereof, or upon a finding
that a violation would have occurred if such Section or any portion thereof were enforceable, the
Employee and Employer agree that (i) the Employee’s interest in the Restricted Stock and stock
options pursuant to Section 1 of this Agreement shall automatically lapse and be forfeited; (ii)
Employer shall have no obligation to make any further payments to Employee under the terms of
Section 1 of this Agreement; and (iii) Employer shall be entitled to receive the full value of any
payments which were previously made to the Employee pursuant to Section 1 of this Agreement in the
previous twelve (12) months, as well as the value of any Restricted Stock or stock options that may
have vested during the past twelve (12) months from the date of the Employee’s termination, for any
reason, to the date on which a court or arbitration panel held or found the non-compete article to
have been violated. .

     3.6. Survival of Section. The Employee and Employer agree that all of the covenants contained
in Section 3.1 shall survive the termination or expiration of this Agreement, and agree further
that in the event any of the covenants contained in Section 3.1 shall be held by any court to be
effective in any particular area or jurisdiction only if said covenant is modified to be limited in
its duration or scope, then, at the sole option of Employer, the provisions of Section 3.5 may be
deemed to have been triggered, and the rights, liabilities and obligations set forth therein shall
apply. In the event Employer does not elect to trigger application of Section 3.5, then the court
shall have such authority to so reform the covenants and the parties hereto shall consider such
covenants and/or other provisions of Section 3 to be amended and modified with respect to that
particular area or jurisdiction so as to comply with the order of such court and, as to all other
jurisdictions, the covenants contained herein shall remain in full force and effect as originally
written. Should any court hold that the covenants in Section 3.1 are void and otherwise
unenforceable in a particular area or jurisdiction, then notwithstanding the foregoing provisions
of this Section 3.6, the provisions of Section 3.5 shall be applicable and the rights, liabilities
and obligations of the parties set forth therein shall apply. Alternatively, at the sole option of
Employer, Employer may consider such covenants to be amended and modified so as to eliminate
therefrom the particular area or jurisdictions as to which such covenants are so held void or
otherwise unenforceable and, as to all other areas and jurisdictions covered herein, the covenants
contained herein shall remain in full force and effect as originally written.

	4.	 	TERMINATION

     This Agreement (except for Sections 2 and 3), shall terminate upon the occurrence of any of
the following events:

     4.1. Subject to any applicable legal requirements, in the event the Employee becomes
“permanently disabled or incapacitated”. The term “permanently disabled or incapacitated” means
any ailment or condition that prevents the Employee from actively carrying out his duties hereunder
for the Employer for a continuous period of one hundred twenty (120)

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days. At the expiration of the one hundred twenty (120) day period, this Agreement shall be
deemed terminated. Employee will be paid his regular salary in effect at the start of such
disability up to the entire one hundred twenty (120) day period of disability.

     4.2. The written agreement of both the Employer and Employee.

     4.3. Termination For Cause. The Employer may terminate Employee with Cause as defined below.
For purposes of this Agreement, “Cause” shall mean: (i) indictment or conviction of any felony or
of any crime involving dishonesty; (ii) participation in any fraud or act of dishonesty against the
Employer; (iii) a violation of Employer policy which causes a material detriment to the Employer;
(iv) breach of Employee’s duties to the Employer, including but not limited to unsatisfactory
performance of job duties, in the sole determination of the Employer, which Employee fails to
correct within thirty (30) days after Employee is given written notice; (v) intentional damage to
any property of the Employer; (vi) conduct by Employee which, in the good faith and reasonable
determination of the Employer, demonstrates gross unfitness to serve; and (vii) material breach of
this Agreement.

     4.4. The death of Employee.

     4.5. Termination Without Cause. Employee’s employment with Employer can be terminated by the
Employer at anytime without cause on thirty (30) days’ written notice by Employer. In the event
Employer terminates this Agreement without cause, Employer has the option to provide Employee
thirty (30) days’ pay in lieu of thirty (30) days’ written notice at Employer’s sole option. This
pay in lieu of notice is in addition to any severance that Employee may be eligible for as provided
in Section 4.8 below.

     4.6. Termination by Employee. 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 breach by Employer of any material provision of this Agreement or the
occurrence of a “Constructive Termination Event,” which shall be defined as the failure
by the Employer to pay the Employee’s compensation as provided in this Agreement,
relocation without the Employee’s consent of the Employee’s primary employment location
to a location that is more than 50 miles from the location to which he will be required
to report on his first day of employment, a material diminution in the Employee’s
position, duties, responsibilities, reporting status, or authority, or if the Employee
is requested to perform any illegal activity or to sign-off on any inappropriate
financial statement or acknowledgement, except that before exercising his right to
terminate the employment relationship pursuant to any of the provisions of this
subsection (i), the Employee must first give written notice to the Employer’s Board of
Directors of the circumstances purportedly giving rise to his right to so terminate and
must provide the Employer with a minimum fifteen (15) days to correct the problem,
unless correction is inherently impossible;
	 
	 	(ii)	 	The involuntary reduction of Employee’s base salary or incentive compensation
targets (other than a reduction in such targets applied consistently to the Company’s
other executive officers that is designed to account for changes in relative EPS
projections as a result of such Corporate Change) within six (6) months after the
occurrence of any Corporate Change (defined below) that is not

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	 	 	 	cured by Employer or its successor, as applicable, within thirty (30) days of
receiving detailed written notice of such event from Employee. A “Corporate Change”
shall mean the first to occur of any of the following events: (1) an acquisition by
any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (each, a
“Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 50% or more of either: (i) the then outstanding shares of
common stock of Employer (the “Outstanding Common Stock”) or (ii) the combined
voting power of the then outstanding voting securities of Employer entitled to vote
generally in the election of directors (the “Outstanding Voting Securities”);
excluding, however, the following: (A) any acquisition directly from Employer
(including without limitation any public offering), other than an acquisition by
virtue of the exercise of a conversion privilege unless the security being so
converted was itself acquired directly from Employer; (B) any acquisition by
Employer; (C) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by Employer or any Person controlled by Employer; or (D) any
acquisition by any Person pursuant to a transaction which complies with clauses (A),
(B) and (C) of subsection (1) of this definition of “Corporate Change”); (2) within
any period of 24 consecutive months, a change in the composition of the board of
directors of Employer (the “Board”) such that the individuals who, immediately prior
to such period, constituted the Board (such Board will be hereinafter referred to as
the “Incumbent Board”) cease for any reason to constitute at least a majority of the
Board; provided, however, for purposes of this definition of “Corporate Change” that
any individual who becomes a member of the Board during such period, whose election,
or nomination for election by the Company’s stockholders, was approved by a vote of
at least a majority of those individuals who are members of the Board and who were
also members of the Incumbent Board (or deemed to be such pursuant to this proviso)
will be considered as though such individual were a member of the Incumbent Board;
but, provided further, that any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board will not be so considered as a member of the Incumbent
Board; provided further that any individual who voluntarily resigns from the Board
in connection with the reduction in size of the Board will not be deemed to be a
member of the Incumbent Board; (3) the consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the assets
of Employer (a “Corporate Transaction”); excluding, however, such a Corporate
Transaction pursuant to which (i) all or substantially all of the individuals and
entities who are the beneficial owners, respectively, of the Outstanding Common
Stock and Outstanding Voting Securities immediately prior to such Corporate
Transaction will beneficially own, directly or indirectly, more than 50% of,
respectively, the outstanding shares of common stock and the combined voting power
of the then outstanding voting securities entitled to vote generally in the election
of directors, as the case may be, of the entity resulting from such Corporate
Transaction (including, without limitation, an entity which as a result of such
transaction owns Employer or all or substantially all of the Employer’s assets,
either directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Corporate

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	 	 	 	 Transaction, of the Outstanding Common Stock and Outstanding Voting Securities, as
the case may be, (ii) no Person (other than Employer, any employee benefit plan (or
related trust) sponsored or maintained by Employer, by any entity controlled by
Employer, or by such entity resulting from such Corporate Transaction) will
beneficially own, directly or indirectly, more than 50% of, respectively, the
outstanding shares of common stock of the entity resulting from such Corporate
Transaction or the combined voting power of the outstanding voting securities of
such corporation entitled to vote generally in the election of directors, except to
the extent that such ownership existed with respect to Employer prior to the
Corporate Transaction, and (iii) individuals who were members of the Board
immediately prior to the approval by the stockholders of Employer of such Corporate
Transaction will constitute at least a majority of the members of the board of
directors of the entity resulting from such Corporate Transaction (it is intended
that this subsection (3) include Corporate Transactions that result in entities
other than corporations that are governed by bodies other than a board of directors,
including without limitation, limited liability companies that are governed by a
board of managers); or (4) the approval by the stockholders of Employer of a
complete liquidation or dissolution of Employer, other than to a corporation
pursuant to a transaction which would comply with clauses (i), (ii) and (iii) of
subsection (3) of this definition of “Corporate Change,” assuming for this purpose
that such transaction were a Corporate Transaction. Any such Corporate Change must
also constitute a change in control as such phrase is defined in section
409A(a)(2)(A)(v) of the Internal Revenue Code of 1986, as amended (the “Code”) and
the guidance issued thereunder, including consideration of all applicable
attribution of ownership rules under section 318 of the Code to the extent required
by any guidance under section 409 A of the Code; or

	 	(iii)	 	For any other reason whatsoever, in the sole discretion of Employee, upon
thirty (30) days’ written notice by Employee.

The termination of Employee’s employment by Employee shall constitute an “Involuntary Termination”
if made pursuant to Section 4.6(i) or 4.6(ii). The termination of Employee’s employment by
Employee shall constitute a “Voluntary Termination” if made pursuant to Section 4.6(iii).

     4.7. Payments Upon Voluntary Termination and Termination for Cause. Upon a “Voluntary
Termination” of the employment relationship by Employee pursuant to Section 4.6(iii), or for
“Cause” by Employer pursuant to Section 4.3, all compensation and benefits for Employee shall cease
and terminate as of the date of termination, and Employee shall not be entitled to Severance Pay
(as defined in Section 4.8 below). 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 Employer, its subsidiaries and/or affiliates for the calendar year in which
Employee’s employment with Employer is terminated.

     4.8. Severance Pay and Vesting of Stock Upon Involuntary Termination. Upon “Involuntary
Termination” of the employment relationship pursuant to Sections 4.6(i) or 4.6(ii), or upon
“Termination Without Cause” pursuant to Section 4.5, the Employer shall pay Employee $400,000.00,
less standard deductions and withholdings (“Severance Pay”), provided that Employee first executes
and does not revoke a release substantially in the form attached hereto as Exhibit A. Moreover,
upon “Involuntary Termination” of the employment relationship

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pursuant to Sections 4.6(i) or 4.6(ii), or upon “Termination Without Cause” pursuant to
Section 4.5, all Restricted Stock and stock options granted to Employee under the Incentive
Compensation Agreement shall become 100% vested, the exercise of which shall continue to be
permitted as if Employee’s employment had continued for the full Term of this Agreement. Employee
will be entitled to a pro-rated bonus (based on termination date), calculated in accordance with
the Employer’s Incentive Compensation Plan and paid in the next year following the release of
earnings for the year in which such termination occurred. Employee shall not be under any duty or
obligation to seek or accept other employment following Involuntary Termination and the amounts due
Employee hereunder shall not be reduced or suspended if Employee accepts subsequent employment. As
noted in the Incentive Compensation Agreement, the rights and liabilities of Employer and Employee
regarding entitlement to vesting of all Restricted Stock and stock options, shall be conditioned
and dependent on the Employee’s consent and agreement to the promises set forth therein and to the
enforceability of such covenants stated therein. If it shall be determined that any payment or
distribution by the Employer to or for the benefit of the Employee, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or otherwise, would be subject
to the excise tax imposed by the Section 4999 of the Internal Revenue Code of 1986, as amended, or
any interest or penalties are incurred by the Employee with respect to such excise tax (such excise
tax, together with any such interest and penalties, are hereinafter collectively referred to as the
“Excise Tax”), then the Employer shall pay to the Employee an amount equal to the Excise Tax;
provided, Employer shall not be required to pay taxes that result from such Excise Tax payment.
Employee’s rights and remedies under this Section 4.8 shall be Employee’s sole and exclusive rights
and remedies against Employer or its subsidiaries or affiliates concerning Employee’s employment
and termination from Employer, and Employer’s and its subsidiaries’ and affiliates’ sole and
exclusive liability to Employee under this Agreement, in contract, tort, or otherwise, for any
Involuntary Termination of the employment relationship or concerning Employee’s employment and
termination from Employer.

	5.	 	MISCELLANEOUS

     5.1. Fiduciary Duties. 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 be inconsistent with those duties. 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.

     5.2. Employment At-Will. Employee agrees and understands that nothing in this Agreement shall
confer any right with respect to continuation of employment with Employer, nor shall it interfere
in any way with Employee’s right or Employer’s right to terminate Employee’s employment at any
time, with or without cause, with or without notice (except as set forth in Section 4.5 and
4.6(iii)).

     5.3. Definition of “Affiliates” and “Affiliated.” 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.

     5.4. Prohibition of Publication of Certain Information. Except as required by law or process,
Employee shall refrain, both during the employment relationship and after the employment
relationship terminates, from publishing any oral or written statements about

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Employer at 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’ officers,
employees, agents, or representatives in a false light before the public; or that constitute a
misappropriation of the name or likeness of Employer or any of its subsidiaries’ or affiliates’ or
its officers, employees, agents, or representatives. Except as required by law or process, the
Employer shall refrain, and shall use its best efforts to assure that its directors, officers,
employees, agents and representatives, and its subsidiaries and affiliates and their directors,
officers, employees, agents and representatives, shall refrain, both during the employment
relationship and after the employment relationship terminates, from publishing any untrue oral or
written statements about the Employee that are slanderous, libelous, or defamatory; or that
disclose private or confidential information about the Employee; or that constitute an intrusion
into the seclusion or private life of the Employee; or that give rise to unreasonable publicity
about the private life of the Employee; or that place the Employee in a false light before the
public.

     5.5. Notice. 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 100

Houston, TX 77024

Attn: Presiding Director of the Board

With a copy to:

Fisher & Phillips LLP

18400 Von Karman Avenue, Suite 400

Irvine, CA 92612

Attn: John M. Polson, Esq.; and

Group 1 Automotive, Inc.

950 Echo Lane, Suite 100

Houston, TX 77024

Attn: General Counsel

If to Employee:

Randy L. Callison

13207 Holston Hills

Houston, TX 77069

10

 

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.

     5.6. Governing Law. This Agreement shall be governed in all respects by the law 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.

     5.7. No Waiver. No failure by either party hereto at anytime 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.

     5.8. Severability. 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.

     5.9. Arbitration. The parties agree that any claim, dispute, and/or controversy that they may
have arising from, related to, or having any relationship or connection whatsoever with this
Agreement, Employee’s employment, or other association with the Company, shall be submitted to and
determined exclusively by binding arbitration under the Federal Arbitration Act. In addition to
any other requirements imposed by law, the arbitrator selected shall be a retired Judge, or
otherwise qualified individual to whom the parties mutually agree, and shall be subject to
disqualification on the same grounds as would apply to a Judge. The arbitrator shall apply the
Federal Rules of Civil Procedure and Evidence, including all rules of pleading, discovery, evidence
and all rights to resolution of the dispute by means of motions for summary judgment and judgment
on the pleadings. Resolution of the dispute shall be based solely upon the law governing the
claims and defenses pleaded, and the arbitrator may not invoke any basis (including but not limited
to, notions of “just cause”) other than such controlling law. The arbitrator shall have the
immunity of a judicial officer from civil liability when acting in the capacity of an arbitrator,
which immunity supplements any other existing immunity. Likewise, all communications during or in
connection with the arbitration proceedings are privileged. Awards shall include the arbitrator’s
written reasoned opinion.

     5.10. Injunctive Relief. Employee agrees that breach of the restrictive covenants contained
in this Agreement will irreparably harm the Employer for which it may not have an adequate remedy
at law. As such, notwithstanding Section 5.9 of this Agreement, Employee agrees that the Employer
shall be entitled to seek injunctive relief, including but not limited to temporary, preliminary,
final injunctions, temporary restraining orders, and temporary protective orders, from a court of
competent jurisdiction to enforce said covenants in the event of breach or threatened breach by
Employee.

11

 

     5.11. Successors and Assigns. 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.
Notwithstanding anything to the contrary in this Section 5.11 or elsewhere in the Agreement, in the
event of the Employee’s death after becoming entitled to receipt of any payment or benefit, but
before receiving all such payments or benefits, the remaining payments shall be made to the
Employee’s survivors or estate and the remaining benefits shall be provided to his widow or other
survivors to the same extent and in the same manner as if he were still alive.

     5.12. Entire Agreement. 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 Section 1.3 of this Agreement or (3) any signed written agreements contemporaneously or
hereafter executed by Employer and Employee (including, but not limited to, the Employment
Agreement), 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.

     5.13. Headings. The headings contained in this Agreement are for reference only and shall not
affect the meaning or interpretation of any provision of this Agreement.

     5.14. Amendment. No amendments or additions to this Agreement shall be binding unless in
writing and signed by both parties hereto.

     5.15. Counterparts. This Agreement may be executed in counterparts, each of which shall be
deemed to be an original, but both of which together will constitute one and the same instrument

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

	 	 	 	 	 
	DATE: 12/31/2006  	GROUP 1 AUTOMOTIVE, INC.

 	 
	 	By:  	/s/ Earl J. Hesterberg
 	 
	 	 	Name:  	Earl J. Hesterberg 	 
	 	 	Title:  	President & Chief Executive Officer
 	 
	 	 	 
	DATE: 12/29/2006	 	                  /s/ Randy L. Callison
 	 
	 	 	RANDY L. CALLISON 	 
	 	 	 
	 

12exv10w43

 

Exhibit 10.43

SEVERANCE AND RELEASE AGREEMENT

     This Severance and Release Agreement (“Agreement”) is made and entered into by and between
Group 1 Automotive, Inc. (“Employer”) and Joe Herman (“Mr. Herman”).

     WHEREAS, Mr. Herman is separating from his position with Employer;

     WHEREAS, Employer wishes to provide Mr. Herman with certain benefits in consideration of his
separation and Mr. Herman’s specific promises and covenants contained herein, including his
agreement to fully and completely release all claims against Employer;

     NOW THEREFORE, in consideration of and in exchange for the promises, covenants, and releases
contained herein, the parties mutually agree as follows:

     1. Employment Separation Date. Mr. Herman’s separation from employment of all
positions he holds with Employer shall be effective on December 31, 2006, at which time Mr.
Herman’s entitlement to and eligibility for all forms of compensation and benefits from Employer,
including but not limited to salary, stock and stock options, vacation, leave time, and bonuses
shall cease except to the extent provided by this Agreement (“Separation Date”). Mr. Herman
understands and agrees that effective December 1, 2006 he will relinquish authority over the
Southeast Region to his successor, and that for the period of December 1 through December 31, 2006
he will assist in the transition of Region management to his successor for which he will be paid
only his base salary and existing employee benefits for which he is eligible and no other form of
compensation from Employer.

     2. Acknowledgment. Mr. Herman and Employer acknowledge that Mr. Herman’s separation
shall be deemed mutual and without cause, and following his separation on December 31, 2006 and
upon Mr. Herman’s receipt of the severance payments and other payments and consideration described
below, he will have received all wages and other compensation or remuneration of any kind from any
source due or owed from Employer, including but not limited to all bonuses, advances, vacation pay,
severance pay, restricted stock, stock options and any other incentive-based compensation to which
Mr. Herman was or may become entitled or eligible.

     3. Effective Date Of Agreement. This Agreement shall be effective as provided in the
Acknowledgment of Rights and Waiver of Claims under the Age Discrimination in Employment Act
(“ADEA”). Mr. Herman acknowledges that he is knowingly and voluntarily waiving and releasing any
rights he may have under the Age Discrimination in Employment Act (“ADEA”). Mr. Herman also
acknowledges that the consideration given for the waiver and release in the following paragraph is
in addition to anything of value to which Mr. Herman was already entitled. Mr. Herman and Employer
further acknowledge that Mr. Herman has been advised by this writing, as required by the Older
Workers’ Benefit Protection Act, and the parties agree, that: (a) Mr. Herman’s waiver and release
does not apply to any rights or claims that may arise after the Effective Date of this Agreement;
(b) Mr. Herman should consult with an attorney prior to executing this Agreement; (c) Mr. Herman
has at least twenty-one (21) days to consider this Agreement (although he may by his own choice
execute this Agreement earlier); (d) Mr. Herman has until seven (7) days following the execution of
this Agreement by the parties to revoke the Agreement by delivering written notice to Mr. Brooks
O’Hara at 950 Echo Lane, Suite 100, Houston, Texas 77024; and (e) this Agreement shall
not be effective until the date upon which the revocation period has expired (“Effective Date”).
Mr. Herman may revoke this

			
	 
	Initials           
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Agreement only by giving Employer formal, written notice of his revocation of this Agreement,
to be received by Employer no later than the close of business on the seventh day following Mr.
Herman’s execution of this Agreement. In the event that Mr. Herman exercises his right of
revocation, neither he nor Employer will have any obligations under this Agreement.

     4. Severance Benefits. In further consideration for this Agreement, Mr. Herman shall
be entitled to the following benefits, which Mr. Herman specifically acknowledges and agrees exceed
the benefits to which he would be entitled absent his agreement to the covenants, conditions and
terms set forth in this Agreement. If Mr. Herman should die prior to all amounts due hereunder
being paid, Employer shall pay all remaining unpaid severance, bonus, and consulting services
payments in accordance with the terms of this Agreement to Mr. Herman’s wife, Kathryn H. Herman, or
if Mrs. Herman does not survive Mr. Herman’s death, then to Mr. Herman’s estate.

          A. Severance Pay. Commencing on the first regular payroll date in January 2007,
Employer shall pay Mr. Herman severance pay in the form of salary continuation and in the gross
amount of $345,360.00 to be paid in six monthly installments of $57,560.00, less all customary and
required withholdings, including but not limited to Mr. Herman’s contribution for or to applicable
benefit plans beginning in January 2007 and ending in June 2007. The severance payments shall be
made pursuant to Employer’s regular and customary payroll schedule.

          B. Bonus Payment. Mr. Herman will receive a bonus for 2006 in the gross amount of
$115,000.00. The bonus shall be paid in six monthly installments of $19,166.66, less customary and
required withholdings, including but not limited to Mr. Herman’s contribution for or to applicable
benefit plans beginning in January 2007 and ending June 2007. Mr. Herman specifically understands
and agrees that this amount will be the sole bonus amount paid or owed to him upon execution of
this Agreement and that he will not be entitled to nor will he receive any other bonus amounts or
incentive based payments from Employer for any reason.

          C. Consulting Services. Employer agrees to utilize Mr. Herman’s experience and
knowledge on an as-needed consulting basis for a six month period from January 1, 2007 through June
30, 2007 (“Consulting Services Period”). During the Consulting Services Period, Employer: (1) will
pay Mr. Herman $3,500.00 per month less customary and required deductions, including but not
limited to applicable employee benefit premiums; (2) will make participation in the health
insurance, supplemental insurance, and retirement benefits plans, including the 401(k) plan and the
ESPP available to Mr. Herman at the same level he received while employed by Employer; and (3) will
make available the demonstrator vehicle now in his possession and a car allowance identical to the
car allowance he had at the time of his separation for Mr. Herman’s use during the Consulting
Services Period. Mr. Herman will not be eligible to participate in or accrue rights to any
deferred compensation plan, stock option plan, vacation plan, or any other Employer perquisite
during the Consulting Services Period. Mr. Herman specifically agrees to provide consulting
services and work on special projects as reasonably requested by Employer during the Consulting
Services Period.

          D. Employer Equipment. Mr. Herman shall be entitled to keep as his personal property
following his separation any Employer-purchased Blackberry, laptop computer, and cellular
telephone(s) being used by Mr. Herman at the time he executes this Agreement. Mr. Herman
specifically understands and agrees that he shall be responsible for all service fees and charges
incurred after December 31, 2006 related to the continued use or possession of these devices.

			
	 
	Initials           	-2- 	           Date

 

          E. Demonstrator Vehicle and Allowance. Mr. Herman shall be entitled to use the
demonstrator vehicle currently provided to him by Employer through June 30, 2007. Mr. Herman also
will be eligible to receive the same car allowance for which he was eligible as of December 31,
2006 while he is using the demonstrator. During such period, insurance coverage currently provided
by Employer in connection with use of demonstrator vehicles by executives of Employer shall
continue to apply to the demonstrator vehicle used by Mr. Herman. Mr. Herman is solely responsible
for fuel and ordinary repairs and maintenance of the demonstrator vehicle. On or before June 30,
2007, Mr. Herman shall return such demonstrator vehicle to Employer in a condition acceptable to
Employer. Mr. Herman agrees to indemnify and hold Employer harmless from any all loss or liability
arising, directly or indirectly, from Mr. Herman’s negligent use of the demonstrator vehicle.

     5. Release by Mr. Herman. In exchange for the consideration provided by Employer, Mr.
Herman agrees for himself and his heirs, agents, executors, administrators, successors and assigns
to forever release and discharge Employer and its subsidiaries, predecessor companies, successor
companies, related companies, parents, successors and assigns, current and former owners, officers,
directors, insurers, attorneys, agents, and employees from any and all claims, debts, promises,
agreements, demands, causes of action, attorneys’ fees, losses and expenses of every nature
whatsoever, known or unknown, suspected or unsuspected, filed or unfiled, arising prior to the
Effective Date of this Agreement, or arising from or in connection with Mr. Herman’s employment by
or termination of employment by Employer or any affiliate of Employer. This total release
includes, but is not limited to, any and all claims arising directly or indirectly from Mr.
Herman’s employment with Employer and the termination of that employment; claims or demands related
to salary, bonuses, commissions, vacation pay, restricted stock awards, stock options, fringe
benefits and expense reimbursements pursuant to any federal, state or local law or cause of action,
including, but not limited to, breach of contract, breach of the implied covenant of good faith and
fair dealing, infliction of emotional harm, wrongful discharge, negligence, violation of public
policy, defamation and impairment of economic opportunity; violation of the Georgia Constitution,
and any claims for violation of Title VII of the Civil Rights Act of 1964, as amended, the Age
Discrimination in Employment Act, the Employment Retirement Security Act, as amended, the
Rehabilitation Act of 1973, the Fair Labor Standards Act, the Family Medical Leave Act, the
Americans With Disabilities Act of 1990, and the Sarbanes Oxley Act.

     6. Release by Employer. In exchange for the consideration provided by Mr. Herman,
Employer hereby releases and forever discharges Mr. Herman from any and all claims, demands, causes
of action, obligations, charges, damages, liabilities, attorneys’ fees, and costs of any nature
whatsoever, contingent, or non-contingent, matured or unmatured, liquidated or unliquidated,
whether or not known, suspected or claimed, which Employer had, now has, or may claim to have had
as of the Effective Date of this Agreement. This total release includes, but is not limited to,
all claims arising directly or indirectly from Mr. Herman’s employment with Employer and the
termination of that employment; claims or demands related to salary, bonuses, commissions, stock,
stock options, vacation pay, fringe benefits and expense reimbursements pursuant to any federal,
state or local law or cause of action, including, but not limited to, breach of contract, breach of
the implied covenant of good faith and fair dealing, infliction of emotional harm, wrongful
discharge, violation of public policy, defamation and impairment of economic opportunity; by reason
of any act or omission whatsoever, concerning any matter, cause or thing, including, without
limiting the generality of the foregoing, any claims, demands, causes of action, obligations,
charges, damages, liabilities, attorneys’ fees and costs relating to or arising out of any alleged
violation of any contracts, express or implied, any covenant of good faith and fair dealing,
express or implied, or a tort, or

			
	 
	Initials           	-3- 	           Date

 

 

any legal restrictions on
any of Employer’s right to terminate Mr. Herman, or any federal, state, municipal or other
governmental statute, public policy, regulation or ordinance.

     7. Exclusions from Releases. The Releases herein contained do not include any claims
arising under this Agreement, or the provisions hereof, Mr. Herman’s right to indemnification from,
and defense of claims by, third parties arising out of, in connection with, or related to the
employment relationship, including, but not limited to accidents, discrimination and breach of
contract, and rights and obligations which by law are intended to survive termination, including,
but not limited to, such rights and obligations arising under or by virtue of COBRA.

     8. Newly Discovered Facts. Mr. Herman and Employer hereby acknowledge that they may
hereafter discover facts different from or in addition to those that they now know or believed to
be true when they expressly agreed to assume the risk of the possible discovery of additional
facts, and they agree that this Agreement will be and remain effective regardless of such
additional or different facts. Mr. Herman and Employer expressly agree that this Agreement shall
be given full force and effect according to each and all of its express terms and provisions,
including those relating to unknown or unsuspected claims, demands, causes of action, governmental,
regulatory or enforcement actions, charges, obligations, damages, liabilities, and attorneys’ fees
and costs, if any, as well as those relating to any other claims, demands, causes of action,
obligations, damages, liabilities, charges, and attorneys’ fees and costs specified herein.

     9. Confidentiality. Mr. Herman and Employer agree that they will keep the terms,
amount and fact of this Agreement completely confidential, and that they will not hereafter
disclose any information concerning this Agreement to anyone, including the amount of consideration
paid hereunder, the facts, allegations, and/or circumstances regarding his employment and/or
separation of employment with Employer; provided, however, that Mr. Herman may make such
disclosures to his immediate family, and to his professional representatives (e.g., attorneys,
accountants, auditors, tax preparers), all of whom will be informed of and agree to be bound by
this confidentiality clause, or other such disclosures required by law, and to enforce this
Agreement, and Employer may make such disclosures as required by law or as Employer, in its sole
discretion, deems necessary for business purposes.

     10. Covenant to Cooperate. Mr. Herman hereby acknowledges that a partial
consideration for the benefits he will receive pursuant to this Agreement and an inducement for
Employer to enter into this Agreement is Mr. Herman’s agreement to cooperate with Employer during
his employment and following his employment separation as follows:

          A. If reasonably requested by Employer, Mr. Herman will cooperate with Employer in the defense
or prosecution of one or more existing or future court actions, governmental investigations,
arbitrations, mediations or other legal or equitable proceedings which involve Employer or any of
its current or former employees, officers or directors. This cooperation may include, but shall
not be limited to, the availability to provide testimony in deposition, affidavit, trial, mediation
or arbitration, as well as preparation for that testimony. Mr. Herman acknowledges that he shall
make himself available at Employer’s reasonable request for any meetings or conferences Employer
deems necessary in preparation for the defense or prosecution of any such legal proceedings. If
Employer requests Mr. Herman to travel or travel is otherwise required in conjunction with Mr.
Herman’s providing assistance to Employer pursuant to this provision, Employer will reimburse or
pay for Mr. Herman’s necessary and reasonable travel expenses.

			
	 
	Initials           	-4- 	           Date

 

 

          B. Mr. Herman also agrees to assist and cooperate with Employer in the orderly transition of
the Southeast Region from his management to his successor and to be available as reasonably may be
needed to complete the transition in an orderly and professional manner.

          C. To faithfully and loyally perform his regular job duties as required until his employment
Separation Date.

     11. Employer Property. With the exception of the Employer equipment described in
Section 4(D) and the demonstrator vehicle described above in Section 4(E), Mr. Herman hereby
represents and warrants that on or before the Separation Date, he will return to Employer all of
Employer’s property and documents in his possession including, but not limited to, Employer’s
files, notes, records, computer recorded information, tangible property, credit cards, entry cards,
keys, identification badges, and any other electronic devices used in the course and scope of Mr.
Herman’s employment with Employer.

     12. Non-Recruiting Covenant. Mr. Herman agrees that Employer has invested substantial
time and effort in assembling its current staff of personnel. Mr. Herman hereby agrees that,
commencing on the Effective Date and continuing for thirty-six (36) months thereafter, he will not
directly or indirectly solicit for hire, or attempt to solicit for hire, any employee of Employer
or its affiliates, or induce or attempt to induce any employee of Employer to terminate or cease
employment with Employer.

     13. Non-Disclosure Covenant. Mr. Herman acknowledges that during the course of his
employment with Employer, he had access and was privy to Confidential Information (including trade
secrets) important to Employer’s business. Such Confidential Information includes, but is not
limited to (a) Employer’s Customer lists, any information regarding the Customers’ names, contact
information, contract terms, lease expiration dates, purchase history, buying and selling habits,
special needs and all other confidential information relating to Employer’s Customers (b)
information on the profitability and/or profit margins of Employer, acquisition targets, financial
records, statements, forecasts, inventory, business plans, strategy plans, sales figures, sales
reports, and internal memoranda regarding Employer; (c) marketing strategies, unique methods and
procedures regarding pricing and advertising; promotions, and sales; (d) current or potential
acquisition targets and financial data and other proprietary business information related to
ongoing operations of those targets and negotiations regarding acquisition of those targets; (e)
the names of Employer’s vendors and suppliers, information relating to costs, sales or services
provided to Employer by such vendors and suppliers; (f) compensation paid to Employer’s employees,
commission pay plans, incentive programs, and other terms of employment; and (g) any other
confidential and/or proprietary information regarding the manner of business operations
(hereinafter collectively referred to as “Confidential Information”). Mr. Herman acknowledges that
such Confidential Information constitutes trade secrets pursuant to the applicable statutes, that
the Confidential information is worthy of protection, that the Confidential Information is the sole
property of Employer, and that the covenants contained in this Agreement are a reasonable means to
provide such protection. Accordingly, Mr. Herman agrees that during the remainder of his
employment, following the termination of that employment, and for so long as the pertinent
information or data remains Confidential Information, he shall not divulge or make use of any
Confidential Information, directly or indirectly, personally or on behalf of any other person,
business, corporation, or entity without prior written consent of Employer. Mr. Herman further
acknowledges and agrees that any and all confidentiality agreements that he has previously entered
into regarding confidential and proprietary trade secrets of Employer shall continue to remain in
full force and effect and shall survive Mr. Herman’s separation of employment with Employer.

			
	 
	Initials           	-5- 	           Date

 

 

     14. Non-Disparagement. Mr. Herman shall not engage in any form of conduct or make any
statements or representations that disparage Employer or its subsidiaries, parent entities,
divisions, and current or former officers, directors, agents, attorneys, employees and affiliated
organizations and corporations, whether previously or hereafter affiliated in any manner, and their
respective predecessors, successors and assigns of each of the foregoing or any of their
reputations and Employer will instruct relevant management level employees to refrain from making
any disparaging comments about Mr. Herman.

     15. Stock Options/Shares. Mr. Herman specifically acknowledges and agrees that at the
time of his execution of this Agreement he has no full or pro-rata vested rights to any restricted
shares of Employer stock or stock options and that no such rights will vest or accrue to him prior
to or following the separation of his employment on December 31, 2006.

     16. Entire Agreement. This Agreement embodies the entire agreement of all the parties
hereto who have executed it and supersedes any and all other agreements, understandings,
negotiations, or discussions, either oral or in writing, express or implied, between the parties to
this Agreement. The parties to this Agreement each acknowledge that no representations,
inducements, promises, agreements or warranties, oral or otherwise, have been made by them, or
anyone acting on their behalf, which are not embodied in this Agreement; that they have not
executed this Agreement in reliance on any representation, inducement, promise, agreements,
warranty, fact or circumstances, not expressly set forth in this Agreement; and that no
representation, inducement, promise, agreement or warranty not contained in this Agreement
including, but not limited to, any purported settlements, modifications, waivers or terminations of
this Agreement, shall be valid or binding, unless executed in writing by all of the parties to this
Agreement. This Agreement may be amended, and any provision herein waived, but only in writing,
signed by the party against whom such an amendment or waiver is sought to be enforced.

     17. Binding Nature. This Agreement, and all the terms and provisions contained
herein, shall bind the heirs, personal representatives, agents acting on behalf of Mr. Herman,
successors and assigns of each party, and inure to the benefit of each party, its agents,
directors, officers, employees, servants, successors, and assigns.

     18. Construction. This Agreement shall not be construed in favor of one party or
against the other.

     19. Partial Invalidity. Should any portion, word, clause, phrase, sentence or
paragraph of this Agreement be declared void or unenforceable, such portion shall be considered
independent and severable from the remainder, the validity of which shall remain unaffected.

     20. Compliance with Terms. The failure to insist upon compliance with any term,
covenant or condition contained in this Agreement shall not be deemed a waiver of that term,
covenant or condition, nor shall any waiver or relinquishment of any right or power contained in
this Agreement at any one time or more times be deemed a waiver or relinquishment of any right or
power at any other time or times.

     21. Enforcement Costs. Mr. Herman agrees that in the event he breaches any provision
of this Agreement, he shall pay all costs and attorney’s fees incurred in conjunction with
enforcement of this Agreement.

			
	 
	Initials           	-6- 	           Date

 

 

     22. Governing Law and Jurisdiction. This Agreement shall be interpreted under the law
of the State of Georgia, both as to interpretation and performance.

     23. Section Headings. The section and paragraph headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.

     24. Counterparts. This Agreement may be executed in two counterparts, each of which
shall be deemed an original, all of which together shall constitute one and the same instrument.

     25. No Admissions. It is understood and agreed by the parties that this Agreement
represents a compromise and settlement for various matters and that the promises and consideration
in this Agreement shall not be construed to be an admission of any liability or obligation by
either party to the other party or any other person.

     26. Voluntary and Knowing. This Agreement is executed voluntarily and without any
duress, undue influence or coercion on the part or behalf of the parties hereto. Employee also
acknowledges being informed that he has the option of consulting with an attorney prior to the
execution of this Agreement. By signing below, Employee also acknowledges that he has read and
fully understands and agrees to the terms of this Agreement.

     27. Nonassignment of Rights. Mr. Herman warrants and represents that he has not heretofore
assigned or transferred to any person not a party to this Agreement any released matter or any part
or portion thereof and that he shall defend, indemnify, and hold
harmless Employer from and
against any claim (including the payment of reasonable attorneys’ fees and costs actually incurred
whether or not litigation is commenced) based on or in connection with or arising out of any such
assignment or transfer made, purported or claimed.

     28. Arbitration. The parties agree that any controversy or claim arising out of or
relating to this Agreement, or any dispute arising out of the interpretation or application of this
Agreement, shall be resolved by binding arbitration pursuant to the Federal Arbitration Act and any
applicable state law before a retired federal or Georgia State Court judge and that Georgia will be
the proper forum state for the arbitration. The arbitration proceedings will follow the federal
rules of civil procedure and evidence. Notwithstanding the foregoing, each party hereto shall have
the right to obtain a temporary restraining order or preliminary injunction to enforce its rights
under this Agreement in order to protect its rights until such time as an arbitrator makes a final
decision.

     IN WITNESS WHEREOF, the parties have executed this Agreement on the respective dates set forth
below.

	 	 	 	 	 	 
	 	 	GROUP 1 AUTOMOTIVE, INC.
	 
	/s/ Joe Herman  	 
	Joe Herman 	 	By:  	
/s/ James B. O’Hara 	 
	 	 	 	 	Name:  	James B. O’Hara 	 
	Date: 	  	 	 	Date: 	11-28-06 	 
	 

			
	Initials           	-7- 	           Date

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