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EXHIBIT 2.12
STOCK PURCHASE AGREEMENT
AMONG
GROUP 1 AUTOMOTIVE, INC.,
COURTESY NISSAN, INC.
AND
THE STOCKHOLDERS OF
COURTESY NISSAN, INC.
DATED AS OF
JUNE 14, 1997
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TABLE OF CONTENTS
ARTICLE I
THE ACQUISITION
1.1 The Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS
2.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 Subsidiaries; Equity Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.7 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.10 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.11 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.12 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.13 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.14 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.15 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.16 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.17 Employee Benefit Plans and Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.18 Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.19 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.20 Affiliate Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.21 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.22 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.23 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.24 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDERS
3.1 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2 Authorization of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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3.3 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.4 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.5 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF GROUP 1
4.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.3 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.4 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.5 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE V
COVENANTS OF THE COMPANY AND
THE STOCKHOLDERS
5.1 Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.2 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.3 Conduct of Business by the Company Pending the Acquisition . . . . . . . . . . . . . . . . . . . . . 15
5.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.5 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.7 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.8 Stockholders' Agreements Not to Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.9 Intellectual Property Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.10 Cooperating in connection with IPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.11 Removal of Related Party Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.12 Termination of Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.13 Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.14 Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.15 LIFO Adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VI
COVENANTS OF GROUP 1
6.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.2 Reservation of Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.4 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.5 Removal of Personal Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.6 Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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ARTICLE VII
CONDITIONS
7.1 Conditions Precedent to Obligation of Each Party to Effect the Acquisition . . . . . . . . . . . . . 19
7.2 Additional Conditions Precedent to Obligations of Group 1 . . . . . . . . . . . . . . . . . . . . . 19
7.3 Additional Conditions Precedent to Obligations of the Stockholders. . . . . . . . . . . . . . . . 20
ARTICLE VIII
EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES
AND AGREEMENTS; INDEMNIFICATION; NON-COMPETITION
8.1 Effectiveness of representations, warranties and agreements . . . . . . . . . . . . . . . . . . . . 21
8.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.3 Non-Competition Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE IX
MISCELLANEOUS
9.1 Disclosure Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.2 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.3 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.5 Restrictions on Transfer of Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.6 Respecting the IPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.7 Waiver and Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.8 Public Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.9 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.10 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.14 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.15 Entire Agreement; Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement"), dated as of the 14th
day of June, 1997, is among Group 1 Automotive, Inc., a Delaware corporation
("Group 1"), Courtesy Nissan, Inc., a Texas corporation (the "Company"), and
the Persons (defined in Section 2.6 below) listed on the signature pages hereof
under the caption "Stockholders" (collectively, the "Stockholders," and each of
those Persons, individually, a "Stockholder").
PRELIMINARY STATEMENT
The parties to this Agreement have determined it is in their best
long-term interests to effect a business combination pursuant to which:
(A) Group 1 will acquire all of the issued and
outstanding Class A Voting and Class B Non-Voting Common Stock, each
par value $.01 per share, of the Company from the Stockholders (the
"Acquisition");
(B) Group 1 will acquire (the "Other Acquisitions") all
of the common stock of the entities listed in the accompanying
Schedule I (each an "Other Founding Company" and, collectively with
the Company, the "Founding Companies") pursuant to agreements that are
(i) similar to this Agreement and (ii) entered into among those
entities and their equity owners and Group 1 (collectively, the "Other
Agreements"); and
(C) Group 1 shall effect a public offering of shares of
its common stock and issue and sell those shares (the "IPO").
Group 1 has provided to the Board of Directors of the Company and the
Stockholders a draft of the Registration Statement on Form S-1 (the
"Registration Statement") to be filed with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act") describing Group 1 and its subsidiaries after giving effect
to the Acquisition and the Other Acquisitions.
The respective Boards of Directors of Group 1 and the Company have
approved this Agreement and the Acquisition pursuant to the terms and
conditions herein set forth.
For federal income tax purposes, it is intended that the Acquisition
and the Other Acquisitions and the IPO shall constitute a transaction described
in Section 351 of the Internal Revenue Code of 1986, as amended (the "Code").
The parties hereto desire to set forth certain representations,
warranties and covenants made by each to the other as an inducement to the
consummation of the Acquisition.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
representations, warranties and covenants herein contained, the parties hereto
hereby agree as follows:
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ARTICLE I
THE ACQUISITION
1.1 The Acquisition. At the Closing (as defined below), each
Stockholder shall sell to Group 1 and Group 1 shall purchase from each
Stockholder that number of shares of Class A Common Voting Stock, par value
$.01 per share of the Company ("Voting Stock") and that number of Class B
Non-Voting Stock, par value $.01 per share of the Company ("Non-Voting Stock",
and together with the Voting Stock, the "Company Common Stock") as set forth
opposite their respective names in Schedule II hereto in exchange for that
number of shares of common stock, par value $.01 per share of Group 1 ("Group 1
Common Stock") set forth opposite their respective names in Schedule II hereto
(as may be appropriately adjusted for stock splits, reverse stock splits and/or
stock dividends). In the event that the Board of Directors of Group 1 approves
a reverse stock split upon the recommendation of the Representatives of the
Underwriters in connection with the IPO, the number of shares of Group 1 Common
Stock to be received by the shareholders of the Founding Companies shall be
decreased proportionately as a result of the reverse stock split; provided,
however, that in the event that the number of shares of Group 1 Common Stock
resulting from the reverse stock split recommended by the Representatives of
the Underwriters is less than the number of shares resulting from a 4.444 for 5
reverse stock split, a 4.444 for 5 reverse stock split shall be implemented and
the number of shares of Group 1 Common Stock resulting from such 4.444 for 5
reverse stock split to be received by the shareholders of the Founding
Companies shall be further decreased proportionately to the number of shares
that would have been issued to the shareholders of the Founding Companies had
the reverse stock split recommended by the Representatives of the Underwriters
been implemented. If the number of shares of Group 1 Common Stock received by
a Stockholder pursuant to this Agreement includes a fractional share as a
result of a reverse stock split affecting the Group 1 Common Stock, such
fractional share shall be rounded up to the nearest whole share of Group 1
Common Stock.
1.2 Closing Date. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇ &
▇▇▇▇▇▇ L.L.P., ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ on the same date as
the closing of the IPO, as soon as practicable after the satisfaction or waiver
of the conditions set forth in Article VII or at such other time and place and
on such other date as Group 1 and the Company shall agree; provided, that the
conditions set forth in Article VII shall have been satisfied or waived at or
prior to such time. The date on which the Closing occurs is herein referred to
as the "Closing Date."
1.3 Transfer of Shares. At the Closing, and subject to the
satisfaction or waiver of the conditions set forth in Article VII, the
Stockholders will sell, transfer and deliver that number of shares of Company
Common Stock as set forth opposite their respective names in Schedule II hereto
to Group 1 (in proper form and duly endorsed for transfer) and Group 1 will
purchase such shares of Company Common Stock and will issue, transfer and
deliver to the Stockholders that number of shares of Group 1 Common Stock (in
proper form) set forth opposite their respective names in Schedule II hereto.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS
The Company and the Stockholders hereby represent and warrant to Group
1 as follows:
2.1 Corporate Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation with all requisite corporate power and
authority to own or lease its properties and conduct its business as now owned,
leased or conducted and to execute, deliver and perform this Agreement and each
instrument required hereby to be executed and delivered by it at the Closing.
The disclosure letter delivered by the Company prior to the execution and
delivery of this Agreement (the "Company Disclosure Letter") includes true and
complete copies of the articles of incorporation and bylaws of the Company, as
amended and presently in effect.
2.2 Qualification. The Company is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction in which
the nature of the business as now conducted or the character of the property
owned or leased by it makes such qualification necessary, except where the
failure to be so qualified or in good standing would not have a material
adverse affect on the business, assets, prospects or condition (financial or
otherwise) of the Company (a "Material Adverse Effect"). The Company
Disclosure Letter sets forth a list of the jurisdictions in which the Company
is qualified to do business, if any.
2.3 Authorization. The execution and delivery by the Company of
this Agreement, the performance of its obligations pursuant to this Agreement
and the execution, delivery and performance of each instrument required hereby
to be executed and delivered by the Company at the Closing have been duly and
validly authorized by all requisite corporate action on the part of the
Company. This Agreement has been, and each instrument required hereby to be
executed and delivered by the Company at the Closing will then be, duly
executed and delivered by it, and this Agreement constitutes, and, to the
extent it purports to obligate the Company, each such instrument will
constitute (assuming due authorization, execution and delivery by each other
party thereto), the legal, valid and binding obligation of the Company
enforceable against it in accordance with its terms.
2.4 Approvals. Except for applicable requirements, if any, of the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the Securities Act, and the Texas Motor Vehicle Commission, and except
to the extent set forth in the Company Disclosure Letter, no filing or
registration with, and no consent, approval, authorization, permit, certificate
or order of any federal, state, foreign or local court, tribunal or
governmental agency or authority is required by any applicable statute or other
applicable law or by any applicable judgment, order or decree or any applicable
rule or regulation of any federal, state, foreign or local court, tribunal or
governmental agency or authority to permit the Company to execute, deliver or
perform this Agreement or any instrument required hereby to be executed and
delivered by it at the Closing.
2.5 Absence of Conflicts. Except to the extent set forth in the
Company Disclosure Letter, neither the execution and delivery by the Company of
this Agreement or any instrument required hereby to be executed and delivered
by it at the Closing, nor the performance by the Company of its obligations
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under this Agreement or any such instrument will (assuming receipt of all
consents, approvals, authorizations, permits, certificates and orders disclosed
as requisite in the Company Disclosure Letter pursuant to Section 2.4) (a)
violate or breach the terms of or cause a default under (i) any applicable
federal, state, foreign or local statute or other applicable law, (ii) any
applicable judgment, order or decree or any applicable rule or regulation of
any federal, state, foreign or local court, tribunal or governmental agency or
authority, (iii) any applicable permits received from any federal, state,
foreign or local governmental agency (iv) the articles of incorporation or
bylaws of the Company or (v) any contract or agreement to which the Company is
a party or by which it, or any of its properties, is bound, or (b) result in
the creation or imposition of any lien, claim or encumbrance on any of the
properties or assets of the Company, or (c) result in the cancellation,
forfeiture, revocation, suspension or adverse modification of any existing
consent, approval, authorization, license, permit, certificate or order of any
federal, state, foreign or local court, tribunal or governmental agency or
authority, or (d) with the passage of time or the giving of notice or the
taking of any action of any third party have any of the effects set forth in
clause (a), (b) or (c) of this Section, except, with respect to clauses (a),
(b), (c) or (d) of this Section, where such matter would not have a Material
Adverse Effect or a material adverse effect upon the ability of the Company to
consummate the transactions contemplated hereby.
2.6 Subsidiaries; Equity Investments. The Company does not
control directly or indirectly, or have any direct or indirect equity
participation in any individual, firm corporation, partnership, limited
partnership, limited liability company, trust or other entity ("Person").
2.7 Capitalization.
(a) The authorized capital stock of the Company consists
of 2,000 shares of the Company Common Stock, consisting of 1,000
shares of Voting Stock of which 700 shares are issued and outstanding
and 1,000 shares of Non-Voting Stock of which 300 shares are issued
and outstanding (no shares being held in treasury). Each outstanding
share of the Company Common Stock has been duly authorized, is validly
issued, fully paid and nonassessable and was not issued in violation
of any preemptive rights of any stockholder. Set forth in the Company
Disclosure Letter are the names and addresses (as reflected in the
corporate records of the Company) of each record holder of the Company
Common Stock, together with the number of shares held by each such
Person.
(b) There is not outstanding any capital stock or other
security, including without limitation any option, warrant or right
granted by the Company, entitling the holder thereof to purchase or
otherwise acquire any shares of capital stock of the Company. Except
as disclosed in the Company Disclosure Letter, there are no contracts,
agreements, commitments or arrangements obligating the Company (i) to
issue, sell, pledge, dispose of or encumber any shares of, or any
options, warrants or rights of any kind to acquire, or any securities
that are convertible into or exercisable or exchangeable for, any
shares of, any class of capital stock of the Company or (ii) to
redeem, purchase or acquire or offer to acquire any shares of, or any
outstanding option, warrant or right to acquire, or any securities
that are convertible into or exercisable or exchangeable for, any
shares of, any class of capital stock of the Company.
2.8 Financial Statements. Included in the Company Disclosure
Letter are true and complete copies of the financial statements of the Company
consisting of (i) an unaudited balance sheet of the Company as of December 31,
1996 (the "1996 Balance Sheet") and the related unaudited statements of
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income, changes in stockholders' equity and cash flows for the year then ended
(including the notes thereto) (the "Company 1996 Financial Statements") and
(ii) unaudited balance sheets of the Company as of December 31, 1995 and 1994,
and the related unaudited statements of income, changes in stockholders' equity
and cash flows for the calendar years then ended (including the notes thereto)
(collectively with the Company 1996 Financial Statements, the "Company
Financial Statements"). The Company Financial Statements present fairly the
financial position of the Company and the results of its operations and changes
in financial position as of the dates and for the periods indicated therein in
conformity with generally accepted accounting principles applied on a
consistent basis. The Company Financial Statements do not omit to state any
liabilities, absolute or contingent, required to be stated therein in
accordance with generally accepted accounting principles consistently applied.
All accounts receivable of the Company reflected in the Company 1996 Financial
Statements and as incurred since December 31, 1996 represent sales made in the
ordinary course of business, are collectible (net of any reserves for doubtful
accounts shown in the Company 1996 Financial Statements) in the ordinary course
of business and, except as set forth in the Company Disclosure Letter, are not
in dispute or subject to counterclaim, set-off or renegotiation. The Company
Disclosure Letter contains an aged schedule of accounts receivable included in
the Company Financial Statements.
2.9 Undisclosed Liabilities. Except as and to the extent of the
amounts specifically reflected or accrued for in the 1996 Balance Sheet or as
set forth in the Company Disclosure Letter, the Company does not have any
material liabilities or obligations of any nature whether absolute, accrued,
contingent or otherwise, and whether due or to become due. The reserves
reflected in the 1996 Balance Sheet are adequate, appropriate and reasonable in
accordance with generally accepted accounting principles applied on a
consistent basis.
2.10 Certain Agreements. Except as set forth in the Company
Disclosure Letter, neither the Company nor any of its officers or directors, is
a party to, or bound by, any contract, agreement or organizational document
which purports to restrict, by virtue of a noncompetition, territorial
exclusivity or other provision covering such subject matter purportedly
enforceable by a third party against the Company, or any of its officers or
directors, the scope of the business or operations of the Company or any of its
officers or directors, geographically or otherwise.
2.11 Contracts and Commitments. The Company Disclosure Letter
includes (i) a list of all contracts to which the Company is a party or by
which its property is bound that involve consideration or other expenditure in
excess of $50,000 or performance over a period of more than six months or that
is otherwise material to the business or operations of the Company ("Material
Contracts"); (ii) a list of all real or personal property leases to which the
Company is a party involving consideration or other expenditure in excess of
$50,000 over the term of the lease ("Material Leases"); (iii) a list of all
guarantees of, or agreements to indemnify or be contingently liable for, the
payment or performance by any Person to which the Company is a party
("Guarantees") and (iv) a list of all contracts or other formal or informal
understandings between the Company and any of its officers, directors,
employees, agents or stockholders or their affiliates ("Related Party
Agreements"). True and complete copies of each Material Contract, Material
Lease, Guarantee and Related Party Agreement have been furnished to Group 1.
2.12 Absence of Changes. Except as set forth in the Company
Disclosure Letter, there has not been, since December 31, 1996, any material
adverse change with respect to the business, assets, prospects or condition
(financial or otherwise) of the Company. Except as set forth in the Company
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Disclosure Letter, since December 31, 1996, the Company has not engaged in any
transaction or conduct of any kind which would be proscribed by Section 5.3
herein after execution and delivery of this Agreement. Notwithstanding the
preceding sentence, the Company makes no representation regarding, and need not
disclose, increases in compensation (of the type contemplated in Section
5.3(f)) since December 31, 1996, for any employee who after such increase would
receive annual compensation of less than $50,000.
2.13 Tax Matters.
(a) Except as set forth in the Company Disclosure Letter
(and except for filings and payments of assessments the failure of
which to file or pay will not materially adversely affect the
Company), (i) all returns and reports ("Tax Returns") of or with
respect to any Tax (as defined below) which is required to be filed on
or before the Closing Date by or with respect to the Company have been
or will be duly and timely filed, (ii) all items of income, gain,
loss, deduction and credit or other items required to be included in
each such Tax Return have been or will be so included and all
information provided in each such Tax Return is true, correct and
complete, (iii) all Taxes which have become or will become due with
respect to the period covered by each such Tax Return have been or
will be timely paid in full, (iv) all withholding Tax requirements
imposed on or with respect to the Company have been or will be
satisfied in full, and (v) no penalty, interest or other charge is or
will become due with respect to the late filing of any such Tax Return
or late payment of any such Tax. For purposes of this Agreement,
"Taxes" shall mean all taxes, charges, imposts, tariffs, fees, levies
or other similar assessments or liabilities, including income taxes,
ad valorem taxes, excise taxes, withholding taxes, stamp taxes or
other taxes of or with respect to gross receipts, premiums, real
property, personal property, windfall profits, sales, use, transfers,
licensing, employment, payroll and franchises imposed by or under any
law; and such terms shall include any interest, fines, penalties,
assessments or additions to tax resulting from, attributable to or
incurred in connection with any such tax or any contest or dispute
thereof.
(b) The Company Disclosure Letter sets forth all periods
for which Tax Returns of the Company (i) have been audited by the
applicable governmental authorities or (ii) are no longer subject to
audit due to the expiration of the applicable statute of limitations.
(c) There is no claim against the Company for any Taxes,
and no assessment, deficiency or adjustment has been asserted or
proposed with respect to any Tax Return of or with respect to the
Company, other than those disclosed (and to which are attached true
and complete copies of all audit or similar reports) in the Company
Disclosure Letter.
(d) Except as set forth in the Company Disclosure Letter,
there is not in force any extension of time with respect to the due
date for the filing of any Tax Return of or with respect to the
Company or any waiver or agreement for any extension of time for the
assessment or payment of any Tax of or with respect to the Company.
(e) The total amounts set up as liabilities for current
and deferred Taxes in the Balance Sheet are sufficient to cover the
payment of all Taxes, whether or not assessed or
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disputed, which are, or are hereafter found to be, or to have been,
due by or with respect to the Company up to and through the periods
covered thereby.
(f) All Tax allocation or sharing agreements affecting
the Company shall be terminated prior to the Closing Date and no
payments shall be due or will become due by the Company on or after
the Closing Date pursuant to any such agreement or arrangement.
(g) Except as set forth in the Company Disclosure Letter,
the Company will not be required to include any amount in income for
any taxable period beginning the Closing Date as a result of a change
in accounting method for any taxable period ending on or before the
Closing Date or pursuant to any agreement with any Tax authority with
respect to any such taxable period.
(h) The Company has not consented to have the provisions
of Section 341(f)(2) of the Code apply with respect to a sale of its
stock.
(i) From January 1, 1990 through the Closing Date, (a)
the Company continuously has been and will be an S Corporation within
the meaning of Section 1361 of the Code, and (b) each holder of the
Company stock has been an individual resident of the United States or
an estate or trust described in Section 1361(c)(2) of the Code that is
permitted to hold the stock of an S Corporation.
2.14 Litigation.
(a) Except as set forth in the Company Disclosure Letter,
there are no actions at law, suits in equity, investigations,
proceedings or claims pending or, to the knowledge of the Company,
threatened against or specifically affecting the Company before or by
any federal, state, foreign or local court, tribunal or governmental
agency or authority which if determined adversely to the Company would
have a Material Adverse Effect.
(b) Except as contemplated by this Agreement and except
to the extent set forth in the Company Disclosure Letter, the Company
has substantially performed all obligations required to be performed
by it to date and is not in default under, and, to the knowledge of
the Company, no event has occurred which, with the lapse of time or
action by a third party could result in a default under any contract
or other agreement to which the Company is a party or by which it or
any of its properties is bound or under any applicable judgment, order
or decree of any federal, state, foreign or local court, tribunal or
governmental agency or authority, other than such defaults that would
not, individually or in the aggregate, have a Material Adverse Effect.
2.15 Compliance with Law. Except as set forth in the Company
Disclosure Letter, the Company is in compliance with all applicable statutes
and other applicable laws and all applicable rules and regulations of all
federal, state, foreign and local governmental agencies and authorities, except
where the failure to be in compliance would not have a Material Adverse Effect.
2.16 Permits. Except as set forth in the Company Disclosure
Letter, the Company owns or holds all franchises, licenses, permits, consents,
approvals and authorizations of all governmental agencies and authorities,
federal, state, foreign and local, necessary for the conduct of its business,
except for those franchises, licenses, permits, consents, approvals and
authorizations which the failure to own or hold
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would not, in the aggregate, have a Material Adverse Effect. Each franchise,
license, permit, consent, approval and authorization so owned or held is in
full force and effect, and the Company is in compliance with all of its
obligations with respect thereto, except where the failure to be in full force
and effect or to be in compliance would not, in the aggregate, have a Material
Adverse Effect, and, to the knowledge of the Company, no event has occurred
which allows, or upon the giving of notice or the lapse of time or otherwise
would allow, revocation or termination of any franchise, license, permit,
consent, approval or authorization so owned or held.
2.17 Employee Benefit Plans and Policies.
(a) The Company Disclosure Letter provides a description
of each of the following which is sponsored, maintained or contributed
to by the Company for the benefit of its employees, or has been so
sponsored, maintained or contributed to within six years prior to the
Closing Date:
(i) each "employee benefit plan," as such term is
defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") ("Plan"); and
(ii) each personnel policy, stock option plan,
collective bargaining agreement, bonus plan or arrangement,
incentive award plan or arrangement, vacation policy,
severance pay plan, policy or agreement, deferred compensation
agreement or arrangement, executive compensation or
supplemental income arrangement, consulting agreement,
employment agreement and each other employee benefit plan,
agreement, arrangement, program, practice or understanding
that is not described in Section 2.17(a)(i) ("Benefit Program
or Agreement").
True and complete copies of each of the Plans, Benefit Programs or
Agreements, related trusts, if applicable, and all amendments thereto,
have been furnished to Group 1.
(b) The Company does not contribute to or have an
obligation to contribute to, and has not at any time contributed to or
had an obligation to contribute to, a plan subject to Title IV of
ERISA, including, without limitation, a multi employer plan within the
meaning of Section 3(37) of ERISA.
(c) Except as otherwise set forth in the Company
Disclosure Letter,
(i) Each Plan and each Benefit Program or
Agreement has been administered, maintained and operated in
accordance with the terms thereof and in compliance with its
governing documents and applicable law (including, where
applicable, ERISA and the Code);
(ii) There is no matter pending with respect to
any of the Plans before any governmental agency, and there are
no actions, suits or claims pending (other than routine claims
for benefits) or threatened against, or with respect to, any
of the Plans or Benefit Programs or Agreements or their
assets;
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(iii) No act, omission or transaction has occurred
which would result in imposition on the Company of (A) breach
of fiduciary duty liability damages under Section 409 of
ERISA, (B) a civil penalty assessed pursuant to subsections
(c), (i) or (l) of Section 502 of ERISA or (C) a tax imposed
pursuant to Chapter 43 of Subtitle D of the Code;
(iv) Each of the Plans intended to be qualified
under Section 401 of the Code satisfies the requirements of
such Section, has received a favorable determination letter
from the Internal Revenue Service regarding such qualified
status and has not, since receipt of the most recent favorable
determination letter, been amended or operated in a way which
would adversely affect such qualified status;
(v) As to any Plan intended to be qualified under
Section 401 of the Code, there has been no termination or
partial termination of the Plan within the meaning of Section
411(d)(3) of the Code; and
(vi) The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby
will not (A) require the Company to make a larger contribution
to, or pay greater benefits under, any Plan or Benefit Program
or Agreement than it otherwise would or (B) create or give
rise to any additional vested rights or service credits under
any Plan or Benefit Program or Agreement.
(d) There does not currently exist, and there has not at
any time existed, any corporation, trade, business or entity under
common control with the Company, within the meaning of Section 414(b),
(c), (m) or (o) of the Code or Section 4001 of ERISA.
(e) Termination of employment of any employee of the
Company after consummation of the transactions contemplated by this
Agreement would not result in payments under the Plans or Benefit
Programs or Agreements which, in the aggregate, would result in
imposition of the sanctions imposed under Sections 280G and 4999 of
the Code.
(f) Each Plan which is an "employee welfare benefit
plan", as such term is defined in Section 3(1) of ERISA, may be
unilaterally amended or terminated in its entirety without liability
except as to benefits accrued thereunder prior to such amendment or
termination.
(g) The Company Disclosure Letter sets forth by name and
job description of the employees of the Company as of the date of this
Agreement (the "Company Employees"). None of said employees are
subject to union or collective bargaining agreements. The Company has
not at any time had or been threatened with any work stoppages or
other labor disputes or controversies with respect to its employees.
2.18 Title. Except as set forth in the Company Disclosure Letter,
the Company has good and valid title to all properties and assets which it
purports to own, including without limitation the properties and assets which
are reflected in the 1996 Balance Sheet (other than those disposed of since
such date in the ordinary course of business) and good and valid leasehold
interests in all properties and assets which it purports to hold under lease,
and each such ownership or leasehold interest is free and clear of
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all liens, claims and encumbrances other than as set forth in the applicable
lease agreements and those reflected in the Company Financial Statements or the
Company Disclosure Letter.
2.19 Insurance. The Company Disclosure Letter identifies, by name
of underwriter, risk insured, amount insured, policy number and date of
issuance all policies of insurance owned by the Company as of the date hereof
or as to which the Company, as of the date hereof, is a beneficiary. All such
policies are currently in full force and effect.
2.20 Affiliate Interests. Except as set forth in the Company
Disclosure Letter, no employee, officer or director, or former employee,
officer or director of the Company has any interest in any property, tangible
or intangible, including without limitation, patents, trade secrets, other
confidential business information, trademarks, service marks or trade names,
used in or pertaining to the business of the Company, except for the normal
rights of employees and stockholders.
2.21 Environmental Matters. The Company is in compliance in all
material respects with all laws, rules, regulations, and other legal
requirements relating to the prevention of pollution and the protection of the
environment (collectively, "Environmental Laws"), and the Company possesses and
can transfer to Group 1 or a Subsidiary of Group 1 all permits, licenses, and
similar authorizations required under Environmental Laws for operation of its
business as currently conducted. Furthermore, there is no physical condition
existing on any property ever owned or operated by the Company nor are there
any physical conditions existing on any other property that may have been
affected by the Company's operations which could give rise to any material
remedial obligation under any Environmental Laws or which could result in any
material liability to any third party pursuant to any Environmental Laws.
2.22 Intellectual Property. Except as set forth in the Company
Disclosure Letter, the Company owns, or is licensed or otherwise has the right
to use all patents, trademarks, copyrights, and other proprietary rights
("Intellectual Property") that are material to the condition (financial or
otherwise) or conduct of the business and operations of the Company. To the
knowledge of the Company, (a) the use of the Intellectual Property by the
Company does not infringe on the rights of any Person, subject to such claims
and infringements as do not, in the aggregate, give rise to any liability on
the part of the Company which could have a Material Adverse Effect and (b) no
Person is infringing on any right of the Company with respect to any
Intellectual Property. No claims are pending or, to the knowledge of the
Company, threatened that the Company is infringing or otherwise adversely
affecting the rights of any Person with regard to any Intellectual Property.
All of the Intellectual Property that is owned by the Company is owned free and
clear of all encumbrances and was not misappropriated from any Person. All of
the Intellectual Property that is licensed by the Company is licensed pursuant
to valid and existing license agreements. The consummation of the transactions
contemplated by this Agreement will not result in the loss of any Intellectual
Property.
2.23 Bank Accounts. The Company Disclosure Letter includes the
names and locations of all banks in which the Company has an account or safe
deposit box and the names of all Persons authorized to draw thereon or to have
access thereto.
2.24 Disclosure. The Company has disclosed in writing, or pursuant
to this Agreement and the Company Disclosure Letter, all facts material to the
business, assets, prospects and condition (financial or otherwise) of the
Company. No representation or warranty to Group 1 by the Company contained in
this Agreement, and no statement contained in the Company Disclosure Letter,
any
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certificate, list or other writing furnished to Group 1 by the Company pursuant
to the provisions hereof or in connection with the transactions contemplated
hereby, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements herein or therein not
misleading. All statements contained in this Agreement, the Company Disclosure
Letter, and any certificate, list, document or other writing delivered pursuant
hereto or in connection with the transactions contemplated hereby shall be
deemed a representation and warranty of the Company for all purposes of this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDERS
Each Stockholder hereby individually with respect to the shares of
Company Common Stock owned by such Stockholder, severally and not jointly,
represents and warrants to Group 1 that:
3.1 Capital Stock. Such Stockholder is the beneficial and record
owner of the number of shares of Company Common Stock as set forth in the
Company Disclosure Letter, free and clear of any lien, claim, pledge,
encumbrance or other adverse claim. Except for such shares of Company Common
Stock set forth in the Company Disclosure Letter and Schedule II hereto, such
Stockholder does not own, beneficially or of record, any capital stock or other
security, including without limitation any option, warrant or right entitling
the holder thereof to purchase or otherwise acquire any shares of capital stock
of the Company.
3.2 Authorization of Agreement.
(a) Such Stockholder has full legal right, power,
capacity and authority to execute, deliver and perform its obligations
pursuant to this Agreement and to execute, deliver and perform its
obligations under each instrument required hereby to be executed and
delivered by such Stockholder at the Closing.
(b) This Agreement has been, and each instrument required
hereby to be executed and delivered by such Stockholder at the Closing
will then be, duly executed and delivered by such Stockholder, and
this Agreement constitutes and, to the extent it purports to obligate
such Stockholder, each such instrument will constitute (assuming due
authorization, execution and delivery by each other party thereto),
the legal, valid and binding obligation of such Stockholder
enforceable against it in accordance with its terms.
3.3 Approvals. Except for applicable requirements, if any, of the
HSR Act, the Securities Act and the Texas Motor Vehicle Commission, no filing
or registration with, and no consent, approval, authorization, permit,
certificate or order of any court, tribunal or governmental agency or
authority, federal, state, foreign or local, is required by any applicable
statute or other applicable law or by any applicable judgment, order or decree
or any applicable rule or regulation of any court, tribunal or governmental
agency or authority, federal, state, foreign or local, to permit such
Stockholder to execute, deliver or perform this Agreement or any instrument
required hereby to be executed and delivered by it at the Closing.
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3.4 Absence of Conflicts. Except to the extent set forth in the
Company Disclosure Letter, neither the execution and delivery by such
Stockholder of this Agreement or any instrument required hereby to be executed
and delivered by it at the Closing, nor the performance by such Stockholder of
its obligations under this Agreement or any such instrument will (a) violate or
breach the terms of or cause a default under (i) any applicable statute or
other applicable law, federal, state, foreign or local, (ii) any applicable
judgment, order or decree or any applicable rule or regulation of any court,
tribunal or governmental agency or authority, federal, state, foreign or local,
(iii) the organizational documents of such Stockholder or (iv) any contract or
agreement to which such Stockholder is a party or by which it, or any of its
properties, is bound, or (b) result in the creation or imposition of any lien,
claim or encumbrance on any of the properties or assets of such Stockholder, or
(c) result in the cancellation, forfeiture, revocation, suspension or adverse
modification of any existing consent, approval, authorization, license, permit,
certificate or order of any court, tribunal or governmental agency or
authority, federal, state, foreign or local, or (d) with the passage of time or
the giving of notice or the taking of any action of any third party have any of
the effects set forth in clause (a), (b) or (c) of this Section, except, with
respect to clauses (a), (b), (c) or (d) of this Section, where such matter
would not have a Material Adverse Effect on the Company or the ability of the
Company or such Stockholder to consummate the transactions contemplated hereby.
3.5 Investment Intent. Each Stockholder makes the following
representations relating to its acquisition of shares of Group 1 Common Stock:
(i) such Stockholder will be acquiring the shares of Group 1 Common Stock to be
issued pursuant to the Acquisition to such Stockholder solely for such
Stockholder's account, for investment purposes only and with no current
intention or plan to distribute, sell or otherwise dispose of any of those
shares (other than with respect to the shares listed in the Company Disclosure
Letter which will be sold by such Stockholder ("Selling Stockholder") in the
IPO ("Selling Stockholder IPO Shares")); (ii) such Stockholder is not a party
to any agreement or other arrangement for the disposition of any shares of
Group 1 Common Stock other than this Agreement (other than an Underwriting
Agreement to be entered into by certain of the Stockholders in connection with
the sale of the Selling Stockholder IPO Shares); (iii) such Stockholder is an
"accredited investor" as defined in Securities Act Rule 501(a); (iv) such
Stockholder (A) is able to bear the economic risk of an investment in the Group
1 Common Stock acquired pursuant to this Agreement, (B) can afford to sustain a
total loss of that investment, (C) has such knowledge and experience in
financial and business matters, and such past participation in investments,
that he or she is capable of evaluating the merits and risks of the proposed
investment in the Group 1 Common Stock, (D) has received and reviewed the draft
Registration Statement, (E) has had an adequate opportunity to ask questions
and receive answers from the officers of Group 1 concerning any and all matters
relating to the transactions contemplated hereby, including the background and
experience of the current and proposed officers and directors of Group 1, the
plans for the operations of the business of Group 1, the business, operations
and financial condition of the Other Founding Companies and any plans of Group
1 for additional acquisitions, and (F) has asked all questions of the nature
described in the preceding clause (E), and all those questions have been
answered to his or her satisfaction; (v) such Stockholder acknowledges that the
shares of Group 1 Common Stock to be delivered to such Stockholder pursuant to
the Acquisition have not been and will not be registered under the Securities
Act or qualified under applicable blue sky laws and therefore may be required
to be held for an indefinite period of time and may not be resold by such
Stockholder without compliance with the Securities Act; (vi) such Stockholder
acknowledges that he or she has agreed, pursuant to Section 9.5 herein, not to
sell the shares of Group 1 Common Stock to be delivered to such Stockholder
pursuant to the Acquisition (other than any Selling Stockholder IPO Shares) for
a period of two years from the Closing Date; (vii) such Stockholder
acknowledges that as a result of the substantial restrictions, imposed
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both contractually and by the Securities Act, on the resale of the shares of
Group 1 Common Stock received in the Acquisition, such shares of Group 1 Common
Stock will have a substantially lower value than those shares of Group 1 Common
Stock that are registered under the Securities Act and sold in the IPO; (viii)
such Stockholder, if a corporation, partnership, trust or other entity,
acknowledges that it was not formed for the specific purpose of acquiring the
Group 1 Common Stock; and (ix) without limiting any of the foregoing, such
Stockholder agrees not to dispose of any portion of Group 1 Common Stock unless
either (1) a registration statement under the Securities Act is in effect as to
the applicable shares and the disposition is made in accordance with that
registration statement, or (2) the Stockholder has notified Group 1 of the
proposed disposition, provided Group 1 with a detailed description of the
circumstances surrounding the proposed disposition and furnished Group 1 with
written opinion of counsel opining that the proposed disposition would not
require registration of any securities under federal or state securities law.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF GROUP 1
Group 1 hereby represents and warrants to the Company and the
Stockholders that:
4.1 Corporate Organization. Group 1 is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware with all requisite corporate power and authority to execute, deliver
and perform this Agreement and each instrument required hereby to be executed
and delivered by it at the Closing.
4.2 Authorization. The execution and delivery by Group 1 of this
Agreement, the performance by Group 1 of its obligations pursuant to this
Agreement, and the execution, delivery and performance of each instrument
required hereby to be executed and delivered by Group 1 at the Closing have
been duly and validly authorized by all requisite corporate action on the part
of Group 1. This Agreement has been, and each instrument required hereby to be
executed and delivered by Group 1 at or prior to the Closing will then be, duly
executed and delivered by Group 1. This Agreement constitutes, and, to the
extent it purports to obligate Group 1, each such instrument will constitute
(assuming due authorization, execution and delivery by each other party
thereto), the legal, valid and binding obligation of Group 1, enforceable
against it in accordance with its terms.
4.3 Approvals. Except for applicable requirements, if any, of the
HSR Act, the Securities Act and the Texas Motor Vehicle Commission, no filing
or registration with, and no consent, approval, authorization, permit,
certificate or order of any court, tribunal or government agency or authority,
federal, state, foreign or local, is required by any applicable statute or
other applicable law or by any applicable judgment, order or decree or any
applicable rule or regulation of any court, tribunal or governmental agency or
authority, federal, state, foreign or local, to permit Group 1, to execute,
deliver or consummate the transactions contemplated by this Agreement or any
instrument required hereby to be executed and delivered by Group 1 at or prior
to the Closing.
4.4 Absence of Conflicts. Neither the execution and delivery by
Group 1 of this Agreement or any instrument required hereby to be executed by
it at or prior to the Closing nor the performance by
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Group 1 of its obligations under this Agreement or any such instrument will (a)
violate or breach the terms of or cause a default under (i) any applicable
statute or other applicable law, federal, state, foreign or local, (ii) any
applicable judgment, order or decree or any applicable rule or regulation of
any court, tribunal or governmental agency or authority, federal, state,
foreign or local, (iii) the organizational documents of Group 1 or (iv) any
contract or agreement to which Group 1 is a party or by which it or any of its
property is bound, or (b) result in the creation or imposition of any lien,
claim or encumbrance on any of the properties or assets of Group 1 or any of
its subsidiaries (other than any lien, claim or encumbrance created by the
Company), or (c) result in the cancellation, forfeiture, revocation, suspension
or adverse modification of any existing consent, approval, authorization,
license, permit certificate or order of any court, tribunal or governmental
agency or authority, federal, state, foreign or local or (d) with the passage
of time or the giving of notice or the taking of any action by any third party
have any of the effects set forth in clause (a), (b) or (c) of this Section,
except, with respect to clauses (a), (b), (c) or (d) of this Section, where
such matter would not have a material adverse effect on the business, assets,
prospects or condition (financial or otherwise) of Group 1 and its
subsidiaries, taken as a whole.
4.5 Capitalization.
(a) The authorized capital stock of Group 1 consists of
1,000,000 shares of preferred stock, par value $.01 per share,
issuable in series, of which preferred stock none is outstanding and
50,000,000 shares of Group 1 Common Stock, of which 450,000 shares are
issued and outstanding; in addition, options have been granted to
purchase 565,000 shares of Group 1 Common Stock. Each outstanding
share of Group 1 Common Stock has been duly authorized, is validly
issued, fully paid and nonassessable and was not issued in violation
of the preemptive rights of any stockholder of Group 1.
(b) Group 1 will issue a total of 9,550,000 shares of
Group 1 Common Stock (less 2,000,000 divided by the Net IPO price) in
connection with the Acquisition and the Other Acquisitions, subject to
adjustment as provided in the Stock Purchase Agreements to be executed
in connection with the Acquisition and the Other Acquisitions. "Net
IPO Price" is the per share IPO price of Group 1 Common Stock, less
applicable underwriting discounts and a pro rata portion of expenses
related to the IPO.
(c) All shares of Group 1 Common Stock issuable pursuant
to the Acquisition are duly authorized and will, when issued, be
validly issued, fully paid and nonassessable and not issued in
violation of the preemptive rights of any stockholder of Group 1.
ARTICLE V
COVENANTS OF THE COMPANY AND
THE STOCKHOLDERS
5.1 Acquisition Proposals. Prior to the Closing Date, neither the
Company, any of its officers, directors, employees or agents nor any
Stockholder shall agree to, solicit or encourage inquiries or proposals with
respect to, furnish any information relating to, or participate in any
negotiations or discussions concerning, any acquisition, business combination
or purchase of all or a substantial portion
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of the assets of, or a substantial equity interest in, the Company, other than
the transactions with Group 1 contemplated by this Agreement.
5.2 Access. The Company shall afford Group 1's officers,
employees, counsel, accountants and other authorized representatives access,
during normal business hours throughout the period prior to the Closing Date,
to all its properties, books, contracts, commitments and records and, during
such period, the Company shall furnish promptly to Group 1 any information
concerning its business, properties and personnel as Group 1 may reasonably
request; provided, however, that no investigation pursuant to this Section or
otherwise shall affect or be deemed to modify any representation or warranty
made by the Company or the Stockholders pursuant to this Agreement.
5.3 Conduct of Business by the Company Pending the Acquisition.
The Company and the Stockholders covenant and agree that, from the date of this
Agreement until the Closing Date, unless Group 1 shall otherwise agree in
writing or as otherwise expressly contemplated by this Agreement or as
disclosed in the Company Disclosure Letter:
(a) The business of the Company shall be conducted only
in, and the Company shall not take any action except in, the ordinary
course of business and consistent with past practice;
(b) The Company shall not directly or indirectly do any
of the following: (i) issue, sell, pledge, dispose of or encumber, (A)
any capital stock of the Company or (B) other than in the ordinary
course of business and consistent with past practice and not relating
to the borrowing of money, any assets of the Company, (ii) amend or
propose to amend the articles of incorporation or bylaws of the
Company, (iii) split, combine or reclassify any outstanding capital
stock, or declare, set aside or pay any dividend payable in cash,
stock, property or otherwise with respect to its capital stock whether
now or hereafter outstanding (other than cash dividends paid to
Stockholders in a manner consistent with past practice of the Company
as disclosed to its independent auditors), (iv) redeem, purchase or
acquire or offer to acquire any of its capital stock, (v) incur any
indebtedness for borrowed money, or (vi) except in the ordinary course
of business and consistent with past practice, enter into any
contract, agreement, commitment or arrangement with respect to any of
the matters set forth in this Section 5.3(b);
(c) The Company shall use its best efforts (i) to
preserve intact the business organization of the Company, (ii) to
maintain in effect any franchises, authorizations or similar rights of
the Company, (iii) to keep available the services of its current
officers and key employees, (iv) to preserve the goodwill of those
having business relationships with it, (v) to maintain and keep its
properties in as good a repair and condition as presently exists,
except for deterioration due to ordinary wear and tear; and (vi) to
maintain in full force and effect insurance comparable in amount and
scope of coverage to that currently maintained by it;
(d) The Company shall not make or agree to make any
single capital expenditure or enter into any purchase commitments in
excess of $25,000;
(e) The Company shall perform its obligations under any
contracts and agreements to which it is a party or to which its assets
are subject, except for such obligations as the Company in good faith
may dispute;
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(f) The Company shall not increase the salary, benefits,
stock options, bonus or other compensation of any officer, director or
employee of the Company; and shall not grant, to any individual,
severance or termination pay that exceeds the lesser of (i) such
individual's compensation for the calendar month immediately preceding
such individual's grant of severance or termination pay, or (ii)
$10,000;
(g) The Company shall not take any action that would, or
that reasonably could be expected to, result in any of the
representations and warranties set forth in this Agreement becoming
untrue or any of the conditions to the Acquisition set forth in
Article VII not being satisfied. The Company promptly shall advise
Group 1 orally and in writing of any change or event having, or which,
insofar as reasonably can be foreseen, would have, a Material Adverse
Effect; and
(h) The Company shall not (i) amend or terminate any Plan
or Benefit Program or Agreement except as may be required by
applicable law, (ii) increase or accelerate the payment or vesting of
the amounts payable under any Plan or Benefit Program or Agreement, or
(iii) adopt or enter into any personnel policy, stock option plan,
collective bargaining agreement, bonus plan or arrangement, incentive
award plan or arrangement, vacation policy, severance pay plan, policy
or agreement, deferred compensation agreement or arrangement,
executive compensation or supplemental income arrangement, consulting
agreement, employment agreement or any other employee benefit plan,
agreement, arrangement, program, practice or understanding (other than
the Plans and the Benefit Programs or Agreements).
5.4 Confidentiality. The Company and the Stockholders agree, and
the Company agrees to cause its officers, directors, employees, representatives
and consultants, to hold in confidence, and not to disclose to others for any
reason whatsoever, any non-public information received by them or their
representatives in connection with the transactions contemplated hereby except
(i) as required by law; (ii) for disclosure to officers, directors, employees
and representatives of the Company as necessary in connection with the
transactions contemplated hereby; and (iii) for information which becomes
publicly available other than through the actions of the Company or a
Stockholder. In the event the Acquisition is not consummated, the Company and
the Stockholders will return all non-public documents and other material
obtained from Group 1 or its representatives in connection with the
transactions contemplated hereby or certify to Group 1 that all such
information has been destroyed.
5.5 Notification of Certain Matters. The Company shall give
prompt notice to Group 1, orally and in writing, of (i) the occurrence, or
failure to occur, of any event which occurrence or failure would be likely to
cause any representation or warranty contained in this Agreement to be untrue
or inaccurate at any time from the date hereof to the Closing or (ii) any
material failure of the Company, or any officer, director, employee or agent
thereof, or any Stockholder to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder.
5.6 Consents. Subject to the terms and conditions of this
Agreement, the Company shall (i) take all reasonable steps to obtain all
consents, waivers, approvals (including all applicable automobile manufacturers
approvals, and such approvals shall not contain any unreasonably burdensome
restrictions on the Company or Group 1), authorizations and orders required in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the Acquisition; and (ii) take, or cause to be taken, all
appropriate action, and do, or cause to be done, all things necessary or proper
to
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consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement.
5.7 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any governmental authority or other Person
or other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages
in connection therewith, whether before or after the Closing, the Company and
the Stockholders agree to cooperate and use reasonable efforts (such efforts
shall not include incurring any costs to third parties) to defend against and
respond thereto.
5.8 Stockholders' Agreements Not to Sell. Each of the
Stockholders hereby covenants and agrees not to sell, pledge, transfer or
dispose of or encumber any shares of Company Common Stock currently owned,
either beneficially or of record, by such Stockholder, except pursuant to
Section 9.5 of this Agreement.
5.9 Intellectual Property Matters. The Company shall use its best
efforts to preserve its ownership rights to the Intellectual Property free and
clear of any liens, claims or encumbrances and shall use its best efforts to
assert, contest and prosecute any infringement of any issued foreign or
domestic patent, trademark, service ▇▇▇▇, trade name or copyright that forms a
part of the Intellectual Property or any misappropriation or disclosure of any
trade secret, confidential information or know-how that forms a part of the
Intellectual Property.
5.10 Cooperating in connection with IPO. The Company and the
Stockholders will (a) provide Group 1 with all information concerning the
Company or the Stockholders which is reasonably requested by Group 1 from time
to time in connection with effecting the IPO and (b) cooperate with Group 1 and
their representatives in the preparation of the Registration Statement
(including the Financial Statements) and in responding to comments of the staff
of the Commission, if any, with respect thereto. The Company and the
Stockholders agree promptly to (a) advise Group 1, if at any time during the
period in which a prospectus relating to the IPO is required to be delivered
under the Securities Act, any information contained in the then current
Registration Statement prospectus concerning the Company or any of the
Stockholders becomes incorrect or incomplete in any material respect and (b)
provide Group 1 with information needed to correct or complete such
information.
5.11 Removal of Related Party Guarantees. The Company and the
Stockholders agree to take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things necessary, proper or advisable to
terminate, waive or release all Company guarantees (such guarantees shall be
referred to herein as "Related Guarantees," as described in the Company
Disclosure Letter pursuant to Section 2.11 of this Agreement) of indebtedness
or other obligations of any of the Company's officers, directors, shareholders
or employees or their affiliates.
5.12 Termination of Related Party Agreements. The Company and the
Stockholders agree to take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things necessary, proper or advisable to terminate
the Related Party Agreements on or prior to the Closing Date, except those
Related Party Agreements that are disclosed in the Company Disclosure Letter as
agreements that shall not be subject to Section 5.12.
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5.13 Related Party Agreements. The Company agrees, and the
Stockholders agree to cause the Company, not to enter into any Related Party
Agreements or engage in any transactions with the Stockholders or their
affiliates; except for those Related Party Agreements or transactions with
affiliates that are disclosed in the Company Disclosure Letter as agreements or
transactions that shall not be subject to this Section 5.13.
5.14 Employment Agreement. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, a Stockholder, hereby
agrees to enter on or prior to the Closing Date into an Employment Agreement
substantially in the form of Exhibit A (the "Employment Agreement"), which
agreement shall employ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ as President of ▇▇▇▇▇ Group, and shall
provide for an annual salary of $300,000 and a term of five years.
5.15 LIFO Adjustment. The Company, and not the Stockholders, shall
be responsible for the payment of all costs and liabilities relating to any
LIFO adjustment caused by the termination of the Company's status as an S
corporation as a result of the transactions contemplated hereby.
ARTICLE VI
COVENANTS OF GROUP 1
6.1 Confidentiality. Group 1 agrees, and Group 1 agrees to cause
its officers, directors, employees, representatives and consultants, to hold in
confidence all, and not to disclose to others for any reason whatsoever, any
non-public information received by it or its representatives in connection with
the transactions contemplated hereby except (i) as required by law; (ii) for
disclosure to officers, directors, employees and representatives of Group 1 as
necessary in connection with the transactions contemplated hereby or as
necessary to the operation of Group 1's business; and (iii) for information
which becomes publicly available other than through the actions of Group 1. In
the event the Acquisition is not consummated, Group 1 will return all
non-public documents and other material obtained from the Company or its
representatives in connection with the transactions contemplated hereby or
certify to the Company that all such information has been destroyed.
6.2 Reservation of Group 1 Common Stock. Group 1 shall reserve
for issuance and shall issue, out of its authorized but unissued capital stock,
such number of shares of Group 1 Common Stock as may be issuable upon
consummation of the Acquisition.
6.3 Consents. Subject to the terms and conditions of this
Agreement, Group 1 shall (i) obtain all consents, waivers, approvals,
authorizations and orders required in connection with the authorization,
execution and delivery of this Agreement and the consummation of the
Acquisition; and (ii) take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement.
6.4 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any governmental authority or other Person
or other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages
in connection therewith, whether before or after the Closing, Group 1 agrees to
cooperate and use reasonable efforts to defend against and respond thereto.
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6.5 Removal of Personal Guarantees. Group 1 will use commercially
reasonable efforts to have all personal guarantees by any of the Company's
officers, directors, shareholders or employees of any obligation of the Company
terminated, waived or released.
6.6 Employment Agreement. Group 1 hereby agrees to enter into the
Employment Agreement.
ARTICLE VII
CONDITIONS
7.1 Conditions Precedent to Obligation of Each Party to Effect the
Acquisition. The respective obligations of each party to effect the
Acquisition shall be subject to the fulfillment at or prior to the Closing Date
of the following conditions:
(a) No order shall have been entered and remain in effect
in any action or proceeding before any federal, state, foreign or
local court or governmental agency or other federal, state, foreign or
local regulatory or administrative agency or commission that would
prevent or make illegal the consummation of the Acquisition;
(b) There shall have been obtained any and all material
permits, approvals and consents of securities or "blue sky"
commissions of each jurisdiction and of any other governmental agency
or authority, with respect to the consummation of the Acquisition,
which the failure to obtain would have a material adverse effect on
the business, assets, prospects or condition (financial or otherwise)
of Group 1 and its subsidiaries, taken as a whole;
(c) Group 1, each of the Selling Stockholders and the
underwriters of the IPO shall have entered into an underwriting
agreement in connection with the IPO providing for the underwriters'
purchase from Group 1 and the Selling Stockholders of the shares to be
sold by Group 1 and the Selling Stockholders in the IPO;
(d) The parties to the Other Agreements shall have
delivered a written representation (a "Closing Representation") to the
Company and Group 1 to the effect that no conditions to their
obligations to consummate the Other Acquisitions remain to be
satisfied and that such parties will consummate the Other Acquisitions
simultaneously with the Closing of the Acquisition; and
(e) The applicable waiting period under the HSR Act with
respect to the transactions contemplated by this Agreement shall have
expired or been terminated.
7.2 Additional Conditions Precedent to Obligations of Group 1.
The obligation of Group 1 to effect the Acquisition is also subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) The representations and warranties of the Company and
the Stockholders contained in Article II and Article III,
respectively, shall be accurate as of the Closing Date as though such
representations and warranties had been made at and as of the Closing
Date; all of
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the terms, covenants and conditions of this Agreement to be complied
with and performed by the Company and the Stockholders on or before
the Closing Date shall have been duly complied with and performed in
all material respects, and a certificate to the foregoing effect dated
the Closing Date and signed by the chief executive officer of the
Company and each of the Stockholders shall have been delivered to
Group 1;
(b) There shall have been obtained any and all material
permits, approvals and consents of securities or blue sky commissions
of any jurisdiction, and of any other governmental body or agency,
that reasonably may be deemed necessary so that the consummation of
the Acquisition and the transactions contemplated thereby will be in
compliance with applicable laws, the failure to comply with which
would have a material adverse effect on the business, assets,
prospects or condition (financial or otherwise) of Group 1 and its
subsidiaries, taken as a whole, after consummation of the Acquisition;
(c) Group 1 shall have received evidence, satisfactory to
Group 1, that all Related Party Agreements required to be terminated
shall have been terminated and all Related Guarantees shall have been
terminated, waived or released pursuant to Sections 5.11 and 5.12
hereto.
(d) Group 1 shall have received executed representations
from each Stockholder stating that such Stockholder (with respect to
shares owned beneficially or of record by him or her) has no current
plan or intention to sell or otherwise dispose of the Group 1 Common
Stock to be received by him or her in the Acquisition other than the
Selling Stockholder IPO Shares.
(e) Since the date of this Agreement, no material adverse
change in the business, operations or financial condition of the
Company shall have occurred, and the Company shall not have suffered
any damage, destruction or loss (whether or not covered by insurance)
materially adversely affecting the properties or business of the
Company and Group 1 shall have received a certificate signed by the
chief executive officer of the Company dated the Closing Date to such
effect.
7.3 Additional Conditions Precedent to Obligations of the
Stockholders. The obligation of the Stockholders to effect the Acquisition is
also subject to the fulfillment at or prior to the Closing Date of the
following condition:
(a) The representations and warranties of Group 1
contained in Article IV, other than the representation contained in
Section 4.5(a), shall be accurate as of the Closing Date as though
such representations and warranties had been made at and as of the
Closing Date, except that Group 1 shall be permitted to accomplish a
reverse stock split pursuant to the provisions of Section 1.1; all the
terms, covenants and conditions of this Agreement to be complied with
and performed by Group 1 on or before the Closing Date shall have been
duly complied with and performed in all material respects; and a
certificate to the foregoing effect dated the Closing Date and signed
by the chief executive officer of Group 1 shall have been delivered to
the Company.
(b) The Stockholders shall have received an opinion from
▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., dated as of the Closing, to the effect that
the Acquisition, the Other Acquisitions and IPO, in the aggregate,
will constitute a transaction described in Section 351 of the Code.
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ARTICLE VIII
EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES
AND AGREEMENTS; INDEMNIFICATION; NON-COMPETITION
8.1 Effectiveness of representations, warranties and agreements.
(a) Except as set forth in Section 8.1(b) of this
Agreement, the representations, warranties and agreements of each
party hereto shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any other
party hereto, any Person controlling any such party or any of their
officers, directors, representatives or agents whether prior to or
after the execution of this Agreement.
(b) The representations, warranties and agreements in
this Agreement shall terminate at the Closing, except that the
agreements set forth in Sections 5.4, 5.7, 5.15, 6.1, 6.4, 6.5, 8.2,
8.3, 9.4 and 9.5 shall survive the Closing.
(c) The parties hereto agree that the sole and exclusive
remedies for breaches of this Agreement, for negligence, negligent
misrepresentation or for any tort (except for any tort based on intent
to deceive) committed in connection with the transactions described
in, or contemplated by this Agreement are those set forth in this
Agreement, and that no claim may be made by any party hereto for any
matter in connection with the transactions described in, or
contemplated by, this Agreement unless specifically set forth in this
Agreement and then only pursuant to the terms of this Agreement.
8.2 Indemnification.
(a) Group 1 agrees to indemnify and hold harmless each
Stockholder, each underwriter, each Person, if any, who controls such
Stockholder or underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, and the officers,
directors, agents, general and limited partners, and employees of each
Stockholder and each such controlling Person from and against any and
all losses, claims, damages, liabilities, and expenses (including
reasonable costs of investigation) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact
contained in any registration statement or prospectus pursuant to
which such Stockholder sells shares of Group 1 Common Stock pursuant
to an underwritten public offering or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or based
upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses arise out of, or are based upon, any
such untrue statement or omission or allegation thereof based upon
information furnished in writing to Group 1 by such Stockholder or
underwriter or on such Stockholder's or underwriter's behalf expressly
for use therein.
(b) Each Stockholder, severally and not jointly, agrees
to indemnify and hold harmless Group 1, and each Person, if any, who
controls Group 1 within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act and the officers,
directors, agents and employees of Group 1 and each such controlling
Person to the same extent as the
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foregoing indemnity from Group 1 to such Stockholder, but only with
respect to information furnished in writing by such Stockholder or on
such Stockholder's behalf expressly for use in any registration
statement or prospectus pursuant to which such Stockholder sells
shares of Group 1 Common Stock pursuant to an underwritten public
offering. The liability of any Stockholder under this Section 8.2(b)
shall be limited to the aggregate cash and property received by such
Stockholder pursuant to the sale of Group 1 Common Stock covered by
such registration statement or prospectus.
(c) If any action or proceeding (including any
governmental investigation) shall be brought or asserted against any
Person entitled to indemnification under Section 8.2(a) or 8.2(b)
above (an "Indemnified Party") in respect of which indemnity may be
sought from any party who has agreed to provide such indemnification
under Section 8.2(a) or 8.2(b) above (an "Indemnifying Party"), the
Indemnified Party shall give prompt notice to the Indemnifying Party
and the Indemnifying Party shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to such Indemnified
Party, and shall assume the payment of all reasonable expenses of such
defense. Such Indemnified Party shall have the right to employ
separate counsel in any such action or proceeding and to participate
in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party unless (i) the
Indemnifying Party has agreed to pay such fees and expenses or (ii)
the Indemnifying Party fails promptly to assume the defense of such
action or proceeding or fails to employ counsel reasonably
satisfactory to such Indemnified Party or (iii) the named parties to
any such action or proceeding (including any impleaded parties)
include both such Indemnified Party and Indemnifying Party (or an
Affiliate of the Indemnifying Party), and such Indemnified Party shall
have been advised by counsel that there is a conflict of interest on
the part of counsel employed by the Indemnifying Party to represent
such Indemnified Party (in which case, if such Indemnified Party
notifies the Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense of
such action or proceeding on behalf of such Indemnified Party).
Notwithstanding the foregoing, the Indemnifying Party shall not, in
connection with any one such action or proceeding or separate but
substantially similar related actions or proceedings in the same
jurisdiction arising out of the same general allegations or
circumstances, be liable at any time for the fees and expenses of more
than one separate firm of attorneys (together in each case with
appropriate local counsel). The Indemnifying Party shall not be
liable for any settlement of any such action or proceeding effected
without its written consent (which consent will not be unreasonably
withheld), but if settled with its written consent, or if there be a
final judgment for the plaintiff in any such action of proceeding, the
Indemnifying Party shall indemnify and hold harmless such Indemnified
Party from and against any loss or liability (to the extent stated
above) by reason of such settlement or judgment. The Indemnifying
Party shall not consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a
release, in form and substance reasonably satisfactory to the
Indemnified Party, from all liability in respect of such action or
proceeding for which such Indemnified Party would be entitled to
indemnification hereunder.
(d) If the indemnification provided for in this Section
8.2(d) is unavailable to the Indemnified Parties in respect of any
losses, claims, damages, liabilities or judgments referred to herein,
then each such Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall
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contribute to the amount paid or payable by such Indemnified Party as
a result of such losses, claims, damages, liabilities and judgments as
between Group 1 on the one hand and each Stockholder on the other, in
such proportion as is appropriate to reflect the relative fault of the
Stockholder and of each Stockholder in connection with the statements
or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of Group 1 on the one hand and of
each Stockholder on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of
a material fact or the omission or alleged omission to state a
material fact relates to information supplied by such party, and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. Group 1
and the Stockholders agree that it would not be just and equitable if
contribution pursuant to this Section 8.2(d) were determined by pro
rata allocation or by any other method of allocation which does not
take account of the equitable considerations referred to in the first
two sentences of this Section 8.2(d). The amount paid or payable by
an Indemnified Party as a result of the losses, claims, damages,
liabilities or judgments referred to in Sections 8.2(a) and 8.2(b)
hereof shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this Section
8.2(d), no Stockholder shall be required to contribute any amount in
excess of the amount by which the total price at which the securities
of such Stockholder were offered to the public exceeds the amount of
any damages which such Stockholder has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or
alleged omission. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f)(1) of the Securities Act) shall
be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
8.3 Non-Competition Obligations.
(a) As part of the consideration for the acquisition of
the Company Common Stock, and as an additional incentive for Group 1
to enter into this Agreement, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇.▇. ▇▇▇
(the "Designated Stockholders") and Group 1 agree to the
non-competition provisions of this Section 8.3. The Designated
Stockholders agree that during the period of the Designated
Stockholder's non-competition obligations hereunder, the Designated
Stockholders will not, directly or indirectly for the Designated
Stockholders or for others, in any geographic area or market where
Group 1 or any of its subsidiaries or affiliated companies are
conducting any business as of the date in question or have during the
previous twelve months conducted any business:
(i) engage in any business competitive with any
line of business conducted by Group 1 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 Group 1 or any of its
subsidiaries or affiliates;
(iii) encourage or induce any current or former
employee of Group 1 or any of its subsidiaries or affiliates
to leave the employment of Group 1 or any of its subsidiaries
or affiliates or proselytize, offer employment, retain, hire
or assist in the
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hiring of any such employee by any person, association, or
entity not affiliated with Group 1 or any of its subsidiaries
or affiliates; provided, however, that nothing in this
subsection (iii) shall prohibit a Designated Stockholder from
offering employment to any prior employee of Group 1 or any of
its subsidiaries or affiliates who was not employed by Group 1
or any of its subsidiaries or affiliates at any time in the
twelve (12) months prior to the termination of such Designated
Stockholder's employment.
The non-competition obligations set forth in subsections (i)
and (ii) of this Section 8.3(a) shall apply during each Designated
Stockholder's employment and for a period of three (3) years after
termination of employment. The obligations set forth in subsection
(iii) of this Section 8.3(a) with respect to employees shall apply
during each Designated Stockholder's employment and for a period of
five (5) years after termination of employment. The non-competition
obligations set forth in this Section 8.3(a) shall not apply to
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇'▇ activities relating to ▇▇▇▇▇▇▇ & ▇▇▇▇▇ Ford, Inc.
and ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Honda-Nissan-Mitsubishi. If Group 1 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
8.3, an "affiliate" of Group 1 is any person who directly, or
indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, Group 1.
(b) The Designated Stockholders understand that the
foregoing restrictions may limit their ability to engage in certain
businesses anywhere in the world during the period provided for above,
but acknowledge that the Designated Stockholders will receive
sufficiently high remuneration and other benefits under this Agreement
to justify such restriction. The Designated Stockholders acknowledge
that money damages would not be sufficient remedy for any breach of
this Section 8.3 by the Designated Stockholders, and Group 1 or any of
its subsidiaries or affiliates shall be entitled to enforce the
provisions of this Section 8.3 by terminating any payments then owing
to the Designated Stockholders 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 Section 8.3, but
shall be in addition to all remedies available at law or in equity to
Group 1 or any of its subsidiaries or affiliates, including, without
limitation, the recovery of damages by Group 1 from the Designated
Stockholders' agents involved in such breach.
(c) It is expressly understood and agreed that Group 1
and the Designated Stockholders consider the restrictions contained in
this Section 8.3 to be reasonable and necessary to protect the
confidential and proprietary information and trade secrets of Group 1
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.
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ARTICLE IX
MISCELLANEOUS
9.1 Disclosure Letter. The Company Disclosure Letter, executed by
the Company as of the date hereof, and delivered to Group 1 on the date hereof,
contains all disclosure required to be made by the Company under the various
terms and provisions of this Agreement. Each item of disclosure set forth in
the Company Disclosure Letter specifically refers to the article and section of
the Agreement to which such disclosure responds, and shall not be deemed to be
disclosed with respect to any other article or section of the Agreement. A
substantially complete draft of the Company Disclosure Letter shall have been
delivered to Group 1 at least five business days prior to the date of this
Agreement.
9.2 Termination. This Agreement may be terminated and the
Acquisition and the other transactions contemplated herein may be abandoned at
any time prior to the Closing:
(a) by mutual consent of Group 1 and the Stockholders;
(b) by either Group 1 or the Stockholders if the
Acquisition and all of the Other Acquisitions have not been effected
on or before December 31, 1997;
(c) by either Group 1 or the Company if a final,
unappealable order to restrain, enjoin or otherwise prevent, or
awarding substantial damages in connection with, a consummation of the
Acquisition or the other transactions contemplated hereby shall have
been entered;
(d) by Group 1 if (i) since the date of this Agreement
there has been a material adverse change in the business operations or
financial condition of the Company or (ii) there has been a material
breach of any representation or warranty set forth in this Agreement
by the Company which breach has not been cured within ten business
days following receipt by the Company of notice of such breach (or if
such breach cannot be cured within such time, reasonable efforts have
begun to cure such breach and such breach is then cured within 30 days
after notice); or
(e) by the Company if there has been a material breach of
any representation or warranty set forth in this Agreement by Group 1
which breach has not been cured within ten business days following
receipt by Group 1 of notice of such breach (or if such breach cannot
be cured within such time, reasonable efforts have begun to cure such
breach and such breach is then cured within 30 days after notice).
9.3 Effect of Termination. In the event of any termination of
this Agreement pursuant to Section 9.2, the Company and Group 1 shall have no
obligation or liability to each other except that the provisions of Sections
5.4, 6.1, 9.3 and 9.4 shall survive any such termination.
9.4 Expenses. Regardless of whether the Acquisition is
consummated, all costs and expenses in connection with this Agreement and the
transactions contemplated hereby incurred by Group 1 shall be paid by Group 1
and all such costs and expenses incurred by the Company shall be paid by the
Company; subject, however, to the agreement set forth in the letter of intent
dated April 15, 1997 with respect to the funding of the expenses of Group 1 by
the Founding Companies. The Company and Group
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1 each represent and warrant to each other that there is no broker or finder
involved in the transactions contemplated hereby.
9.5 Restrictions on Transfer of Group 1 Common Stock. (a) During
the two-year period ending on the second anniversary of the Closing Date (the
"Restricted Period"), no Stockholder voluntarily will (other than with respect
to the Selling Stockholder IPO Shares): (i) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (A) any shares of
Group 1 Common Stock received by any Stockholder in the Acquisition or (B) any
interest in (including any option to buy or sell) any of those shares of Group
1 Common Stock, in whole or in part, and Group 1 will have no obligation to,
and shall not, treat any such attempted transfer as effective for any purpose;
or (ii) engage in any transaction, whether or not with respect to any shares of
Group 1 Common Stock or any interest therein, the intent or effect of which is
to reduce the risk of owning the shares of Group 1 Common Stock acquired
pursuant to this Agreement (including for example engaging in put, call,
short-sale, straddle or similar market transactions). Notwithstanding the
foregoing, each Stockholder may (i) pledge shares of Group 1 Common Stock,
provided that the pledgee of such shares shall agree not to sell or otherwise
dispose of any such shares for the Restricted Period; (ii) transfer shares to
immediate family members or the estate of any such individual (including,
without limitation, any transfer by such Stockholder to or among any
partnership, trust, custodial or other similar accounts or funds that are for
the benefit of his immediate family members), provided that such person or
entity shall agree not to sell or otherwise dispose of (other than pursuant to
this Section 9.5) any such shares for the Restricted Period; and (iii) transfer
shares by will or the laws of descent and distribution or otherwise by reason
of such Stockholder's death. The certificates evidencing the Group 1 Common
Stock delivered to each Stockholder pursuant to this Agreement will bear a
legend substantially in the form set forth below and containing such other
information as Group 1 may deem necessary or appropriate:
EXCEPT PURSUANT TO THE TERMS OF THE STOCK PURCHASE AGREEMENT AMONG THE
ISSUER, THE HOLDER OF THIS CERTIFICATE AND THE OTHER PARTIES THERETO,
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE VOLUNTARILY
SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED,
DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL
NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED VOLUNTARY SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION,
APPOINTMENT OR OTHER DISPOSITION OF ANY OF THOSE SHARES, DURING THE
TWO-YEAR PERIOD ENDING ON ______________ [DATE THAT IS THE
SECOND-ANNIVERSARY OF THE CLOSING DATE] (THE "RESTRICTED PERIOD"). ON
THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER
AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED
WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
(b) Each Stockholder, severally and not jointly with any other Person,
(i) acknowledges that the shares of Group 1 Common Stock to be delivered to
that Stockholder pursuant to this Agreement (other than the Selling
Stockholder IPO Shares) have not been and, if applicable, will not be
registered under the Securities Act and therefore may not be resold by that
Stockholder without compliance with the Securities Act and (ii) covenants that
none of the shares of Group 1 Common Stock issued to that Stockholder pursuant
to this Agreement will be offered, sold, assigned, pledged, hypothecated,
transferred
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or otherwise disposed of except after full compliance with all the applicable
provisions of the Securities Act and the rules and regulations of the
Commission and applicable state securities laws and regulations. All
certificates evidencing shares of Group 1 Common Stock issued pursuant to this
Agreement will bear the following legend in addition to the legend prescribed
by Section 9.5(a):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL SUCH SHARES ARE REGISTERED UNDER SUCH ACT, OR SUCH
STATE LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY IS
OBTAINED TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED."
In addition, certificates evidencing shares of Group 1 Common Stock issued
pursuant to the Acquisition to each Stockholder will bear any legend required
by the securities or blue sky laws of the state in which that Stockholder
resides.
9.6 Respecting the IPO. Each of the Company and the Stockholders
acknowledges and agrees that: (a) no firm commitment, binding agreement or
promise or other assurance of any kind, whether express or implied, oral or
written, exists at the date hereof that the Registration Statement will become
effective or that the IPO will occur at a particular price or within a
particular range of prices or occur at all; (b) neither Group 1 or any of its
representatives nor any prospective underwriters in the IPO will have any
liability to the Company, the Stockholders or any of their respective
affiliates or associates for any failure of (i) the Registration Statement to
become effective (provided, however, that Group 1 will use its reasonable best
efforts to cause the Registration Statement to become effective prior to
December 31, 1997) or (ii) the IPO to occur at a particular price or within a
particular range of prices or to occur at all; and (c) the decision of
Stockholders to enter into this Agreement, has been or will be made independent
of, and without reliance on, any statements, opinions or other communications
of, or due diligence investigations that have been or will be made or performed
by, any prospective underwriter relative to Group 1 or the IPO. The
Underwriters shall have no obligation to any of the Company and the
Stockholders with respect to any disclosure contained in the Registration
Statement.
9.7 Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is, or whose stockholders are, entitled to
the benefits thereof. This Agreement may not be amended or supplemented at any
time, except by an instrument in writing signed on behalf of each party hereto,
only as may be permitted by applicable provisions of the Delaware General
Corporation Law or the Texas Business Corporation Act. The waiver by any party
hereto of any condition or of a breach of another provision of this Agreement
shall not operate or be construed as a waiver of any other condition or
subsequent breach. The waiver by any party hereto of any of the conditions
precedent to its obligations under this Agreement shall not preclude it from
seeking redress for breach of this Agreement other than with respect to the
condition so waived. Notwithstanding the above, no provision of this Agreement
may be waived nor may this Agreement be amended after the Registration
Statement has been filed with the SEC in accordance with the Securities Act
unless, in the opinion of counsel to Group 1, such waiver or amendment will not
result in the issuance of Group 1 Common Stock pursuant to the Acquisition
being integrated (under United States securities laws) with the IPO.
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9.8 Public Statements. The Company, the Stockholders and Group 1
agree to consult with each other prior to issuing any press release or
otherwise making any public statement with respect to the transactions
contemplated hereby, and shall not issue any such press release or make any
such public statement prior to such consultation, except as may be required by
law.
9.9 Assignment. This Agreement shall inure to the benefit of and
will be binding upon the parties hereto and their respective legal
representatives, successors and permitted assigns. This Agreement shall not be
assignable by the parties hereto without the written consent of the other
parties hereto.
9.10 Notices. All notices, requests, demands, claims and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (i)
delivered in person or by courier, (ii) sent by telecopy or facsimile
transmission, answer back requested, or (iii) mailed, by registered or
certified mail, postage prepaid, return receipt requested, to the parties
hereto at the following addresses:
if to the Company: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
if to the Stockholders: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
with a copy to: ▇▇▇▇ & Sudan, L.L.P.
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
if to Group 1: ▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇.▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇.
President and Chief Executive Officer
with a copy to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
2300 First City Tower
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section 9.10. Such notices shall be
effective, (i) if delivered in person or by courier, upon actual receipt by the
intended recipient, (ii) if sent by telecopy or facsimile transmission, when
the answer back
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is received, or (iii) if mailed, upon the earlier of five days after deposit in
the mail and the date of delivery as shown by the return receipt therefor.
Delivery to the Stockholders' representative, if any, of any notice to
Stockholders hereunder shall constitute delivery to all Stockholders and any
notice given by such Stockholders' representative shall be deemed to be notice
given by all Stockholders.
9.11 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, excluding any
choice of law rules that may direct the application of the laws of another
jurisdiction.
9.12 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provision, covenants and
restrictions of this Agreement shall continue in full force and effect and
shall in no way be affected, impaired or invalidated unless such an
interpretation would materially alter the rights and privileges of any party
hereto or materially alter the terms of the transactions contemplated hereby.
9.13 Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
9.14 Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
9.15 Entire Agreement; Third Party Beneficiaries. This Agreement,
including the Exhibits hereto and the Company Disclosure Letter, constitutes
the entire agreement and supersedes all other prior agreements and
understandings, both oral and written, among the parties or any of them, with
respect to the subject matter hereof (except as otherwise contemplated by this
Agreement) and neither this nor any document delivered in connection with this
Agreement, confers upon any Person not a party hereto any rights or remedies
hereunder.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
GROUP 1 AUTOMOTIVE, INC.
By: /s/ ▇.▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇.
-----------------------------------
▇.▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇.
President and Chief Executive Officer
COURTESY NISSAN, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President
STOCKHOLDERS:
/s/ ▇. ▇. ▇▇▇▇▇
--------------------------------------
▇. ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇. ▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇. ▇▇▇
/s/ ▇▇▇ ▇▇▇▇ LIU
--------------------------------------
▇▇▇ ▇▇▇▇ ▇▇▇
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SCHEDULE I
OTHER FOUNDING COMPANIES
▇▇▇ ▇▇▇▇▇▇ Automotive-H, Inc.
▇▇▇ ▇▇▇▇▇▇ Chevrolet, Inc.
▇▇▇ ▇▇▇▇▇▇ Dodge, Inc.
▇▇▇ ▇▇▇▇▇▇ Motors, Inc.
Foyt Motors, Inc.
▇▇▇▇▇▇ Pontiac-GMC, Inc.
▇▇▇▇ ▇▇▇▇▇ Autoplaza, Inc.
Round Rock Nissan, Inc.
SMC Luxury Cars, Inc.
▇▇▇▇▇, ▇▇▇ & ▇▇▇▇▇▇, Inc.
▇▇▇▇▇, Liu & ▇▇▇▇, Inc.
Southwest Toyota, Inc.
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SCHEDULE II
Shares of
Shares of Non-Voting Shares of Group 1
Stockholder Voting Stock Stock Common Stock(1)(2)
----------- ------------ ------------ -------------------
▇. ▇. ▇▇▇▇▇ . . . . . . 250 0 115,577
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ . . . . 250 0 115,577
▇▇▇ ▇▇▇▇ Liu . . . . . . 100 300 184,923
▇▇▇▇▇▇ ▇. ▇. ▇▇▇ . . . . 100 0 46,231
----------------------------------
(1) As may be appropriately adjusted for stock splits, reverse stock
splits and/or stock dividends. In the event that the Board of Directors of
Group 1 approves a reverse stock split upon the recommendation of the
Representatives of the Underwriters in connection with the IPO, the number of
shares of Group 1 Common Stock to be received by the shareholders of the
Founding Companies shall be decreased proportionately as a result of the reverse
stock split; provided, however, that in the event that the number of shares of
Group 1 Common Stock resulting from the reverse stock split recommended by the
Representatives of the Underwriters is less than the number of shares resulting
from a 4.444 for 5 reverse stock split, a 4.444 for 5 reverse stock split shall
be implemented and the number of shares of Group 1 Common Stock resulting from
such 4.444 for 5 reverse stock split to be received by the shareholders of the
Founding Companies shall be further decreased proportionately to the number of
shares that would have been issued to the shareholders of the Founding Companies
had the reverse stock split recommended by the Representatives of the
Underwriters been implemented. If the number of shares of Group 1 Common Stock
received by a Stockholder pursuant to this Agreement includes a fractional share
as a result of a reverse stock split affecting the Group 1 Common Stock, such
fractional share shall be rounded up to the nearest whole share of Group 1
Common Stock.
(2) The shares of Group 1 Common Stock to be issued to each of the
Stockholders as set forth on this Schedule II shall be increased proportionately
as a result of the release from escrow of 592,303 shares of Group 1 Common Stock
issued to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇ that shall be distributed to the Stockholders as
result of the failure of ▇▇▇▇▇▇ Pontiac-GMC, Inc. and Group 1 to acquire the
Chevrolet dealership in Tulsa, Oklahoma, all in accordance with the provisions
of the Stock Purchase Agreement among Group 1, ▇▇▇▇▇▇ Pontiac-GMC, Inc. and the
stockholders of ▇▇▇▇▇▇ Pontiac-GMC, Inc. dated as of June 14, 1997.
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EXHIBIT A
[Employment Agreement]
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