EMPLOYMENT AGREEMENT - B.B. HOLLINGSWORTH, JR.
 
                                                                    
 
                              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 November 3, 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 November 3, 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 "Chairman, President and 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.
<PAGE>   2
         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-
<PAGE>   3
         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
November 3, 1997 through November 2, 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
 
 
 
 
 
                                      -3-
<PAGE>   4
                 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.
 
 
 
 
 
                                      -4-
<PAGE>   5
         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
 
 
 
 
 
                                      -5-
<PAGE>   6
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
 
 
 
 
 
                                      -6-
<PAGE>   7
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.
 
 
 
 
 
                                      -7-
<PAGE>   8
         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,
 
 
 
 
 
                                      -8-
<PAGE>   9
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
 
 
 
 
 
                                      -9-
<PAGE>   10
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,
 
 
 
 
 
                                      -10-
<PAGE>   11
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.
 
 
 
 
 
                                      -11-
<PAGE>   12
         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.
 
 
 
                                       By: /s/ B. B. HOLLINGSWORTH, JR.
                                           -------------------------------------
                                           B. B. Hollingsworth, Jr.
                                           Chairman, President and Chief
                                           Executive Officer
 
 
                                       /s/ B. B. HOLLINGSWORTH, JR.        
                                       -----------------------------------------
                                       Employee