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EXHIBIT 2.7
STOCK PURCHASE AGREEMENT
AMONG
GROUP 1 AUTOMOTIVE, INC.,
SMC LUXURY CARS, INC.
AND
THE STOCKHOLDERS OF
SMC LUXURY CARS, 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 . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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 . . . . . . . . . . . . . . . . . . . . . 11
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.3 Conduct of Business by the Company Pending the Acquisition . . 14
5.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 16
5.5 Notification of Certain Matters . . . . . . . . . . . . . . . 16
5.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.7 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . 16
5.8 Stockholders' Agreements Not to Sell . . . . . . . . . . . . . 16
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 . . . . . . . . . . . . . . . . . . . 17
5.14 Employment Agreement . . . . . . . . . . . . . . . . . . . . . 17
5.15 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.16 Subordination and Non-Disturbance Agreement . . . . . . . . . 18
ARTICLE VI
COVENANTS OF GROUP 1
6.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 18
6.2 Reservation of Group 1 Common Stock . . . . . . . . . . . . . 19
6.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.4 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . 19
6.5 Removal of Personal Guarantee . . . . . . . . . . . . . . . . 19
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6.6 Employment Agreement . . . . . . . . . . . . . . . . . . . . . 19
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 . . 20
7.3 Additional Conditions Precedent to Obligations of the
Stockholders. . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VIII
EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES
AND AGREEMENTS;INDEMNIFICATION; NON-COMPETITION
8.1 Effectiveness of representations, warranties and agreements . 21
8.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 22
8.3 Non-Competition Obligations . . . . . . . . . . . . . . . . . 24
ARTICLE IX
MISCELLANEOUS
9.1 Disclosure Letter . . . . . . . . . . . . . . . . . . . . . . 25
9.2 Termination . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.3 Effect of Termination . . . . . . . . . . . . . . . . . . . . 26
9.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.5 Restrictions on Transfer of Group 1 Common Stock . . . . . . . 26
9.6 Respecting the IPO . . . . . . . . . . . . . . . . . . . . . . 27
9.7 Waiver and Amendment . . . . . . . . . . . . . . . . . . . . . 28
9.8 Public Statements . . . . . . . . . . . . . . . . . . . . . . 28
9.9 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.10 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.11 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . .28
9.12 Severability. . . . . . . . . . . . . . . . . . . . . . . . . ..28
9.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.14 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.15 Entire Agreement; Third Party Beneficiaries . . . . . . . . . 30
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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"), SMC Luxury Cars, 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
common stock, 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 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 common stock, par value $.01 per share of
the Company ("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 Xxxxxx &
Xxxxxx L.L.P., 0000 Xxxxx Xxxx Xxxxx, Xxxxxxx, Xxxxx 00000 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
Xxxx-Xxxxx-Xxxxxx 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
1,000,000 shares of the Company Common Stock, of which 100,000 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 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
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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
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
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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 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.
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(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.
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 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.
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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 multiemployer 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;
(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
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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 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.
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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 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.
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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.
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,
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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; (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; (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 for a period of two years from the Closing Date;
(vii) such Stockholder acknowledges that as a result of the substantial
restrictions, imposed 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.
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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 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)
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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 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
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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 to the
extent necessary to pay federal, state or corporate income taxes or
earnings of the Company attributable to such Stockholder under state or
federal law), (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;
(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
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(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 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
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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 xxxx, 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 for those
Related Party Agreements that are disclosed in the Company Disclosure Letter as
agreements that shall not be subject to this Section 5.12.
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 transactions
or agreements that shall not be subject to this Section 5.13.
5.14 Employment Agreement. Xxxxxxxx X. XxXxxx, Xx. and Xxxxx X.
Xxxxxx hereby agree to enter on or prior to the Closing Date into Employment
Agreements substantially in the form of Exhibit A attached hereto (the
"Employment Agreements"), which agreements shall (i) employ Xxxxxxxx X. XxXxxx,
Xx. as President of XxXxxx Group, provide for an annual salary of $300,000 and
have a term of five years and (ii) employ Xxxxx X. Xxxxxx as Chief Operating
Officer of XxXxxx Group, provide for an annual salary of $300,000 and have a
term of five years.
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5.15 Leases. Xxxxxxxx X. XxXxxx, Xx. hereby agrees to enter into, or
cause his affiliates to enter into, on or prior to the Closing Date, leases
with the Company, in form substantially similar to the lease attached hereto as
Exhibit B (the "Lease") covering the properties owned by Xxxxxxxx X. XxXxxx,
Xx. or his affiliates identified on Exhibit C to the Lease, including any
changes that may be reasonably required by (i) any lender to Xxxxxxxx X.
XxXxxx, Xx. or any of his affiliates or (ii) any automobile manufacturer with
whom the Company or any of its affiliates does business solely in connection
with the properties identified in Exhibit C to the Lease, in each case (i) or
(ii) above, whose consent must be obtained pursuant to any agreement with
Xxxxxxxx X. XxXxxx, Xx. or any of his affiliates existing on the date hereof.
5.16 Subordination and Non-Disturbance Agreement. Xxxxxxxx X. XxXxxx,
Xx. ("XxXxxx") hereby agrees to cause his affiliates SBM-L Family Limited
Partnership and SBM-L I&E Family Limited Partnership to grant to Group 1 an
option to purchase the premises (the "Premises") located at 00000 Xxxxxxxxx
Xxxxxxx and 10610 Wilcrest, each in Houston, Texas, to be described more
particularly at a later date in Exhibit A to the Leases (the "SNDA Purchase
Option"). The SNDA Purchase Option shall be granted to Group 1 pursuant to a
written option agreement executed by Group 1 and the appropriate XxXxxx
affiliate, in form and substance satisfactory to Group 1, and delivered to
Group 1 on or before the tenth (10th) day after the date hereof. The SNDA
Purchase Option shall be exercisable only by written notice to the appropriate
XxXxxx affiliate, on a date (the "SNDA Exercise Date") at any time after (i)
the expiration of ninety (90) days after the Closing Date, and (ii) the failure
of the appropriate XxXxxx affiliate to obtain a Mutual Recognition and
Attornment Agreement in the form required under Article 11 to the Lease
("SNDA"), in form and substance reasonably satisfactory to Group 1, from each
then current holder and owner of any indebtedness which is secured by liens or
security interests covering the Premises (the "Indebtedness"). The SNDA
Purchase Option may only be exercised by Group 1 with respect to those premises
for which a SNDA has not been obtained. The purchase price of the SNDA
Purchase Option shall be the principal amount outstanding under that portion of
the Indebtedness attributable to the premises being purchased on the SNDA
Exercise Date; provided, however, that the same has not been modified or
amended after the date hereof. The purchase of such premises shall occur on or
before thirty (30) days after the SNDA Exercise Date, and the appropriate
XxXxxx affiliate shall deliver to Group 1 a Special Warranty Deed and Xxxx of
Sale, executed and acknowledged by such affiliate covering the premises being
purchased, subject to all matters currently affecting such premises (except the
Indebtedness), together with all other documents customarily used for the sale
of real property in Texas. Article 11(iv) of the Lease shall be modified to
the extent necessary to reflect the foregoing provisions.
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
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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.
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 Agreements.
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;
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(c) Group 1 and the underwriters of the IPO shall have entered
into an underwriting agreement in connection with 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 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, except as permitted under Section 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.
(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
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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
Xxxxxx & Xxxxxx, 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.
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, 5.16, 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.
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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 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
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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 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.
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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, Xxxxxxxx X. XxXxxx, Xx. and Xxxxx X. Xxxxxx
(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
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. 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
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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.
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
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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 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: (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
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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 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 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
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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.
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: 0000 Xxxxxxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxxx X. XxXxxx, Xx.
with a copy to: Two Memorial City Plaza
820 Xxxxxxx, Suite 1360
Xxxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxx
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if to the Stockholders: 0000 Xxxxxxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxxx X. XxXxxx, Xx.
with a copy to: Two Memorial City Plaza
820 Xxxxxxx, Suite 1360
Xxxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxx
if to Group 1: 000 Xxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Attention: X.X. Xxxxxxxxxxxxx, Xx.
President and
Chief Executive Officer
with a copy to: Xxxxxx & Xxxxxx L.L.P.
2300 First City Tower
0000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000-0000
Telecopy: (000) 000-0000
Attention: Xxxx X. Xxxxxx
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 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.
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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 contemplated otherwise 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/ X.X. XXXXXXXXXXXXX, XX.
------------------------------------
X.X. Xxxxxxxxxxxxx, Xx.
President and Chief Executive Officer
SMC LUXURY CARS, INC.
By: /s/ XXXXXXXX X. XXXXXX, XX.
-----------------------------------
Xxxxxxxx X. XxXxxx, Xx.
Chairman of the Board
STOCKHOLDERS:
SMC INVESTMENT, INC.
By: /s/ XXXXXXXX X. XXXXXX, XX.
-----------------------------------
Xxxxxxxx X. XxXxxx, Xx.
President
SBM-T FAMILY LIMITED PARTNERSHIP
BY: SBM-T LIMITED-LIABILITY
COMPANY, General Partner
By: /s/ XXXXXXXX X. XXXXXX, XX.
------------------------------------
Name: Xxxxxxxx X. XxXxxx, Xx.
Title:
/s/ XXXXXXXX X. XXXXXX
--------------------------------------
Xxxxxxxx X. XxXxxx
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SCHEDULE I
OTHER FOUNDING COMPANIES
Xxx Xxxxxx Automotive-H, Inc.
Xxx Xxxxxx Chevrolet, Inc.
Xxx Xxxxxx Dodge, Inc.
Xxx Xxxxxx Motors, Inc.
Courtesy Nissan, Inc.
Foyt Motors, Inc.
Xxxxxx Pontiac-GMC, Inc.
Xxxx Xxxxx Autoplaza, Inc.
Round Rock Nissan, Inc.
Xxxxx, Xxx & Xxxxxx, Inc.
Xxxxx, Liu & Xxxx, Inc.
Southwest Toyota, Inc.
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SMC Luxury
SCHEDULE II
Shares of Company Shares of Group 1
Stockholder Common Stock Common Stock(1)(2)
---------- ----------------- -------------------
SMC Investment, Inc. . . . . . . . . . . . . . . . . . 91,393 525,785
Xxxxxxxx X. XxXxxx . . . . . . . . . . . . . . . . . . 5,324 30,629
SBM-T Family Limited Partnership . . . . . . . . . . . 3,283 18,887
--------------------------------
(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 Xxxxxx X. Xxxxxx XX that shall be distributed to the
Stockholders as result of the failure of Xxxxxx 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, Xxxxxx Pontiac - GMC,
Inc. and the stockholders of Xxxxxx Pontiac - GMC, Inc. dated
as of June 14, 1997.
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EXHIBIT A
[EMPLOYMENT AGREEMENT]
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EXHIBIT B
[LEASE]
35
