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EXHIBIT 10.56
ANCILLARY AGREEMENT
This Ancillary Agreement ("Agreement") dated as of the 18th day of
December, 1997, is among Group 1 Automotive, Inc., a Delaware corporation
("Group 1") and the Persons listed on the signature pages hereof under the
caption "Owners" (collectively, the "Owners").
RECITALS:
WHEREAS, the Owners are the owners of Prestige Chrysler Plymouth
Northwest, LTD., Maxwell Chrysler Plymouth Dodge Jeep Eagle, LTD., and Prestige
Chrysler Plymouth South, LTD. (collectively, the "Dealerships"); and
WHEREAS, the Dealerships are franchised automotive retailers of
Chrysler Corporation automotive products; and
WHEREAS, Chrysler Corporation has initiated a program entitled "Project
2000" to realign and consolidate its various brands; and
WHEREAS, Group 1 has entered into Purchase Agreements (the "Purchase
Agreements") dated as the date hereof with the Owners to acquire the Dealerships
for consideration which does not include the full value of the Dealerships; and
WHEREAS, Group 1 recognizes that the implementation of Project 2000 has
been initiated, but has not yet been completed, and Group 1 desires that the
Dealerships complete the implementation of Project 2000 and that the Owners
receive value for the completion of Project 2000 as additional consideration for
their interests in the Dealerships.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
agreements herein contained, the parties hereto hereby agree as follows:
1. Certain Payment. Group 1 shall pay to the Owners and to David
Kellerman the Ancillary Amount as soon as reasonably practicable after the
determination of the Ancillary Amount. The "Ancillary Amount" shall be an amount
equal to the difference of (a) the Ancillary Earnings, and (b) the Interim
Payments; provided, however, that in no event shall the Ancillary Amount exceed
$15,000,000. The "Ancillary Earnings" shall be an amount equal to the difference
of (a) the product of (i) the Ancillary Incremental Income Increase, times (ii)
7.33, and (b) the sum of (i) the Capital Costs of implementation of the Changes
resulting in the Ancillary Incremental Income Increase, plus (ii) $4,056,345.
The "Ancillary Incremental Income Increase" shall be an amount equal to 0.60
times, the difference of (a) aggregate pre-tax income attributable to all
Chrysler Corporation dealerships owned by Group 1 and operated by Thomas Nyle
Maxwell, Jr. in Travis and Williamson counties, Texas for the first full
calendar year after the completion of all Changes in Travis and Williamson
counties, Texas, and (b) $4,989,462. "Changes" shall mean only acquisitions and
dispositions of automotive franchises of Chrysler Corporation by the
Dealerships, including the
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awarding of a new franchise point, and shall not include any image, building or
site enhancements that may be included in the implementation of Project 2000.
The Ancillary Incremental Pre-Tax Income Increase shall be determined from the
final audited financial statements of Group 1 for the first full calendar year
after the completion of all Changes in Travis and Williamson counties, Texas.
"Capital Costs" shall include all costs incurred in acquiring new franchises
(net of indebtedness incurred for flooring of vehicle inventory), moving
franchises to alternate facilities, modification of facilities to accommodate
expanded franchise operations, and compensation to owners of other Chrysler
Corporation franchises in the market ( proceeds from the sale of any franchises,
if any, shall be deducted in determining these incurred Capital Costs). Further,
the aggregate pre-tax income after all Changes shall be determined by both
parties as if the operations managed by Thomas Nyle Maxwell, Jr. were stand
alone operations, before the effects of any management or overhead charges
allocated from Group 1 or any cost savings attributable to the Group 1
relationship. "Interim Payments" shall mean the payments described in paragraph
2 below.
2. Interim Payments. Group 1 agrees to pay to the Owners and to David
Kellerman in the proportions set forth in Exhibit A upon completion of each
transaction the following: (a) $2,000,000 upon the completion of the acquisition
of a new metro add-point from Chrysler Corporation, and (b) $750,000 upon the
completion of the acquisition of the first Jeep franchise for the Austin, Texas
market (the payments described in (a) and (b) above are collectively referred to
herein as the "Interim Payments"). The Interim Payments are non-refundable,
regardless of the results of the computations contained in Section 1 above.
3. Method of Payment. Payments under this Agreement shall be made in
cash and Group 1 Common Stock in the proportions set forth in Exhibit A. For
purposes of such calculation, the value of Group 1 Common Stock received by the
Owners shall be the average closing price of Group 1 Common Stock on the New
York Stock Exchange, as reported in the Wall Street Journal, for the five
trading days immediately preceding the payment date.
4. Term. This Agreement shall be effective as of the Closing Date of
the Purchase Agreements, and shall terminate and be of no further force and
effect if and when the Purchase Agreements are terminated without closing the
transactions described therein.
5. Character of Payment. Payments under this Agreement are additional
consideration and additional purchase price for the Owners' interests in the
Dealerships, and the parties agree to report such amounts on such basis for
income tax purposes.
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IN WITNESS WHEREOF, each of the parties have executed this Agreement as
of the date first above written.
GROUP 1 AUTOMOTIVE, INC. OWNERS
By: /s/ John T. Turner /s/ Thomas Nyle Maxwell, Jr.
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John T. Turner Thomas Nyle Maxwell, Jr.
Senior Vice President
/s/ Thomas Nyle Maxwell, Sr.
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Thomas Nyle Maxwell, Sr.
/s/ Clarence J. Kellerman
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Clarence J. Kellerman
/s/ Albert Maxwell
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Albert Maxwell
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EXHIBIT A
TNM, Jr. CJK TNM, Sr. AM DK
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Payment 48.3% 23.9% 17.2% 7.6% 3.0%
Proportions
Payable: Cash 50% 70% 70% 50% 50%
Stock 50% 30% 30% 50% 50%
Exhibit A-1