Document:

<PAGE>   1
                                                                   EXHIBIT 10.23

Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended, and Rule 406 under the Securities Act of 1933, as amended.
These omitted portions have been marked with "*" and have been filed separately
with the Securities and Exchange Commission.

                              [ZONAGEN LETTERHEAD]

                                 January 7, 2000

              Synkem SA
              47 rue de Longvic
              21300 CHENOVE
              France
              Attn:  Patrice Binay, Ph.D.

                  Re:      June, 1997 Supply Agreement between Synkem SA and
                           Zonagen, Inc.

              Dear Dr. Binay:

                      Pursuant to our recent discussions, this letter shall
              evidence the terms of our agreement concerning the October, 1999
              shipment of [**] kg of phentolamine mesylate by Synkem SA
              ("Synkem") to Zonagen, Inc. ("Zonagen") (the "Overage Shipment").
              As we have discussed, the Overage Shipment was delivered by Synkem
              prior to Zonagen's submission of an order for the Compound. While
              the unexpected shipment has led to difficulties for both Synkem
              and Zonagen, it is my understanding that we have reached an
              agreement concerning payment for the Overage Shipment and have
              further agreed to amend or waive certain provisions of the June,
              1997 Supply Agreement by and between Zonagen and Synkem (the
              "Agreement") relating to the Overage Shipment. Pursuant to Article
              20 of the Agreement, the following will evidence the terms of our
              understanding and the amendment of the Agreement. Unless otherwise
              defined herein, capitalized terms shall have the same meanings
              ascribed thereto in the Agreement.

                      1. Zonagen will purchase the Compound included in the
               Overage Shipment at a price of [ ** ] per kilogram, which Synkem
               represents to be its actual production cost for such Compound.
               Attached hereto is a schedule setting forth the calculation of
               Synkem's actual cost of production for the Compound included in
               the Overage Shipment. The provisions of this Paragraph 1 shall
               amend and supersede the provisions of Clause 3.1 of the Agreement
               with respect to the purchase price otherwise payable by Zonagen
               for the Compound included in the Overage Shipment.

<PAGE>   2

Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended, and Rule 406 under the Securities Act of 1933, as amended.
These omitted portions have been marked with "*" and have been filed separately
with the Securities and Exchange Commission.
              Dr. Patrice Binay
              Synkem SA
              January 7, 2000, page 2

                           2. Following the date upon which the U.S. Food and
                  Drug Administration issues its final approval of the New Drug
                  Application submitted by Zonagen for Vasomax(R) (the "Approval
                  Date"), Zonagen shall pay a premium price for subsequent
                  orders of the Compound as herein provided to compensate Synkem
                  for the difference between the price paid for the Overage
                  Shipment pursuant to Paragraph 1 above and the price otherwise
                  payable for the Overage Shipment pursuant to Clause 3.1 of the
                  Agreement (which the parties hereby stipulate to be [ ** ] per
                  kilogram). With respect to the initial [ ** ] kilograms of
                  Compound purchased by Zonagen following the Approval Date,
                  Zonagen shall pay, in addition to the purchase price payable
                  therefor under Clause 3.1 of the Agreement, an additional
                  [ ** ] per kilogram. Zonagen shall only be required to pay
                  such increased price with respect to orders for the Compound
                  submitted by Zonagen from time to time following the Approval
                  Date. If Zonagen does not purchase an additional [ ** ]
                  kilograms of Compound after the Approval Date or the Agreement
                  is otherwise terminated before such purchases are completed,
                  Zonagen shall not otherwise be required to compensate Synkem
                  for the difference between the purchase price payable for the
                  Overage Shipment pursuant to Paragraph 1 above and the
                  purchase price otherwise payable for the Overage Shipment
                  pursuant to Clause 3.1 of the Agreement. After Zonagen has
                  purchased an additional [ ** ] kg of Compound at the increased
                  price pursuant to this Paragraph 2, Zonagen shall no longer be
                  required to pay such increased price for subsequent orders of
                  the Compound and the purchase price payable for such orders
                  shall be determined in accordance with the provisions of the
                  Agreement.

                           3. Upon the complete execution of this letter
                  agreement by Zonagen and Synkem, Zonagen shall have a period
                  of thirty (30) days to complete its inspection of the Compound
                  included in the Overage Shipment pursuant to Clause 9.1(h) of
                  the Agreement. Within thirty (30) days of Zonagen's acceptance
                  of the Overage Shipment, Zonagen shall remit payment for the
                  Overage Shipment at the price set forth in Paragraph 1 above.

                           4. Synkem acknowledges and agrees that Zonagen's
                  purchase of the Overage Shipment pursuant to this letter
                  agreement shall satisfy, in full, Zonagen's minimum purchase
                  requirements for the years 2000 and 2001 as set forth in
                  Article 5 of the Agreement. The provisions of this Paragraph 4
                  shall supersede the provisions of Article 5 of the Agreement
                  with respect to the minimum purchase requirements for the
                  years 2000 and 2001.

                           5. Except as otherwise amended and superseded by the
                  terms of this letter agreement, the Agreement shall remain in
                  full force and effect as originally written.

<PAGE>   3

Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended, and Rule 406 under the Securities Act of 1933, as amended.
These omitted portions have been marked with "*" and have been filed separately
with the Securities and Exchange Commission.
              Dr. Patrice Binay
              Synkem SA
              January 7, 2000, page 3

                           6. This letter agreement may be executed in multiple
                  counterparts with the same effect as if all parties had signed
                  the same document. All counterparts shall be construed
                  together and shall constitute the same agreement.

                           If the foregoing accurately reflects your
                  understanding of our agreements, please so indicate by
                  returning to the undersigned a fully signed counterpart of
                  this letter agreement. The duplicate copy of this letter
                  agreement may be retained for your records.

                                           Sincerely yours,

                                           Zonagen, Inc.

                                           By: /s/ David Bowman
                                             -------------------------------
                                           Name: David Bowman
                                                ----------------------------
                                           Title: Vice President, Operations
                                                 ---------------------------

               Agreed to and Accepted
               this 25th day of January, 2000

               Synkem SA

               By:    /s/ Dr. Patrice Binay
                   ---------------------------------------
               Name:   Dr. Patrice Binay
                    --------------------------------------
               Title:   Business Development Manager
                     -------------------------------------<PAGE>   1

                                                                    EXHIBIT 10.3

                              CONSULTING AGREEMENT

         This Consulting Agreement ("AGREEMENT") is entered into between Group 1
Automotive, Inc., a Delaware corporation having offices at 950 Echo Lane, Suite
350, Houston, Texas 77024, ("Employer"), and Sterling B. McCall, Jr., an
individual currently residing at 37 Saddlebrook, Houston, Texas 77024
("CONSULTANT"), to be effective as of November 4, 1999.

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

         WHEREAS, Employer and Consultant entered into an Employment Agreement
dated as of November 3, 1997 (the "EMPLOYMENT AGREEMENT");

         WHEREAS, the parties to the Employment Agreement have determined it to
be in their mutual interests to revise their relationship from employer/employee
to employer/consultant; and

         WHEREAS, from the date first stated above, this Agreement will replace
the Employment Agreement in its entirety, and the Employment Agreement shall be
terminated and of no further force and effect.

1.       DUTIES:

         1.1. Employer agrees to employ Consultant, and Consultant agrees to be
employed by Employer, beginning November 4, 1999 and continuing throughout the
Term (as defined below) of this Agreement, subject to the terms and conditions
of this Agreement.

         1.2. Consultant shall (i) continue to serve as Chairman of the
following subsidiaries of Employer: Southwest Toyota, Inc., SMC Luxury Cars,
Inc., and McCall Automotive, Inc. and (ii) from the date of this Agreement,
serve as a consultant of Employer.

         1.3. Consultant shall, during the term hereof, devote such reasonable
amount of time as may be requested from time to time by the Chief Executive
Officer of Group 1.

2.       COMPENSATION AND BENEFITS:

         2.1. Consultant's consulting fee under this Agreement shall be $300,000
per annum and shall be paid in semi-monthly installments in accordance with
Employer's standard payroll practice.

         2.2. Consultant's participation in bonus plans shall be governed by the
bonus and incentive plans adopted by the Board of Directors of Employer in which
Consultant is a participant. Consultant's participation in such bonus and
incentive plans shall terminate as of December 31, 1999.

<PAGE>   2

         2.3. While employed by Employer, Consultant shall be allowed to
participate, on the same basis generally as other employees of Employer, in all
general employee benefit plans and programs, including improvements or
modifications of the same, which on the effective date or thereafter are made
available by Employer to all or substantially all of Employer's employees. Such
benefits, plans, and programs may include, without limitation, medical, health,
and dental care, life insurance, disability protection, and pension plans.
Nothing in this Agreement is to be construed or interpreted to provide greater
rights, participation, coverage, or benefits under such benefit plans or
programs than provided to similarly situated employees pursuant to the terms and
conditions of such benefit plans and programs. For the term of this Agreement,
Employer shall provide Consultant an office and a secretary, such secretary to
be selected by Consultant. Consultant's secretary shall be an employee of
Employer with a base salary not to exceed $2,000 per month. Consultant shall be
responsible for all office and secretarial expenses above the $2,000 per month
paid by Employer to Consultant's secretary, except for those direct expenses
related to Consultant's services to Employer. In addition, in accordance with
Employer's previous arrangement with Consultant and for the term of this
Agreement, Employer shall continue to provide Consultant with the use of three
(3) Dealer vehicles.

         2.4. Employer shall not by reason of this Article 2 be obligated to
institute, maintain, or refrain from changing, amending, or discontinuing, any
such incentive compensation or employee benefit program or plan, so long as such
actions are similarly applicable to covered employees generally. Moreover,
unless specifically provided for in a written plan document adopted by the Board
of Directors of Employer, none of the benefits or arrangements described in this
Article 2 shall be secured or funded in any way, and each shall instead
constitute an unfunded and unsecured promise to pay money in the future
exclusively from the general assets of Employer and its subsidiaries and
affiliates.

         2.5. Employer may withhold from any compensation, benefits, or amounts
payable under this Agreement all federal, state, city, or other taxes as may be
required pursuant to any law or governmental regulation or ruling.

3.       TERM OF THIS AGREEMENT, EFFECT OF EXPIRATION OF TERM, AND TERMINATION
         PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH TERMINATION:

         3.1. The term of this Agreement shall be effective from November 4,
1999 through November 2, 2002.

         3.2. This Agreement will terminate for the following reasons:

         (i)      upon Consultant's death; or

         (ii)     upon Consultant's becoming incapacitated by accident,
                  sickness, or other circumstance which in the reasonable
                  opinion of a qualified doctor approved by Employer's Board of
                  Directors renders him mentally or physically incapable of
                  performing the duties and services required of Consultant, and
                  which will continue in the reasonable opinion of such doctor
                  for a period of not less than 180 days.

                                                                               2
<PAGE>   3

         3.3. Upon termination of the employment relationship as a result of
Consultant's death, Consultant's heirs, administrators, or legatees shall be
entitled to Consultant's pro rata consulting fee through the date of such
termination which has not been paid.

         3.4. Upon termination of the consulting relationship as a result of
Consultant's incapacity, Consultant shall be entitled to his pro rata consulting
fee through the date of such termination.

         3.5. In all cases, the compensation and benefits payable to Consultant
under this Agreement upon termination of the consulting relationship shall be
reduced and offset by any amounts to which Consultant may otherwise be entitled
under any and all severance plans (excluding any pension, retirement and profit
sharing plans of Employer that may be in effect from time to time) or policies
of Employer or its subsidiaries or affiliates or any successor to all or a
portion of the business or assets of Employer.

         3.6. Termination of the consulting relationship shall not terminate
those obligations imposed by this Agreement which are continuing in nature,
including, without limitation, Consultant's obligations of confidentiality,
non-competition and Consultant's continuing obligations with respect to business
opportunities that had been entrusted to Consultant by Employer.

         3.7. This Agreement governs the rights and obligations of Employer and
Consultant with respect to Consultant's compensation and other perquisites of
employment.

4.       OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS:

         4.1. Employer owns certain confidential and proprietary information and
trade secrets to which Consultant will be given access for the purpose of
carrying out his responsibilities hereunder. Furthermore, Employer agrees to
provide Consultant with confidential and proprietary information and trade
secrets regarding the Employer and its subsidiaries and affiliates, in order to
assist Consultant in satisfying his obligations hereunder. Consultant, in turn,
agrees that the name "Sterling McCall" is proprietary to Group 1 and that
Consultant may not use the name "Sterling McCall" in connection with any
automotive business with the exception of the "Sterling McCall Old Car Museum"
located in Fayette County, Texas.

         4.2. All information, ideas, concepts, improvements, discoveries, and
inventions, whether patentable or not, which are conceived, made, developed or
acquired by Consultant, individually or in conjunction with others, during the
term of this Agreement (whether during business hours or otherwise and whether
on Employer's premises or otherwise) which relate to Employer's or any of its
subsidiaries' or affiliates' businesses, products or services (including,
without limitation, all such information relating to corporate opportunities,
research, financial and sales data, pricing and trading terms, evaluations,
opinions, interpretations, acquisition prospects, the identity of customers or
their requirements, the identity of key contacts within the customer's
organizations or within the organization of acquisition prospects, or marketing
and merchandising techniques, prospective names, and marks) shall be disclosed
to Employer and are and shall be the sole and exclusive property of Employer.
Upon termination of Consultant's relationship with Employer, for any reason,
Consultant promptly shall deliver the same, and all copies thereof, to Employer.

                                                                               3
<PAGE>   4

         4.3. Consultant will not, at any time during or after the term of this
Agreement, make any unauthorized disclosure of any confidential business
information or trade secrets of Employer or its subsidiaries or affiliates, or
make any use thereof, except in the carrying out of his responsibilities
hereunder. As a result of Consultant's relationship with Employer, Consultant
may also from time to time have access to, or knowledge of, confidential
business information or trade secrets of third parties, such as customers,
suppliers, partners, joint venturers, and the like, of Employer and its
subsidiaries and affiliates. Consultant also agrees to preserve and protect the
confidentiality of such third party confidential information and trade secrets
to the same extent, and on the same basis, as Employer's or any of its
subsidiaries' or affiliates' confidential business information and trade
secrets.

         4.4. If, during the term of this Agreement, Consultant creates any
original work of authorship fixed in any tangible medium of expression which is
the subject matter of copyright (such as videotapes, written presentations on
acquisitions, computer programs, E-mail, voice mail, electronic databases,
drawings, maps, architectural renditions, models, manuals, brochures, or the
like) relating to Employer's, or any of its subsidiaries' or affiliates'
businesses, products, or services, whether such work is created solely by
Consultant or jointly with others, whether during business hours or otherwise
and whether on Employer's or any of its subsidiaries' or affiliates' premises or
otherwise), Employer shall be deemed the author of such work if the work is
prepared by Consultant in the scope of his duties; or, if the work is not
prepared by Consultant within the scope of his duties but is specially ordered
by Employer or any of its subsidiaries or affiliates as a contribution to a
collective work, as a part of a motion picture or other audiovisual work, as a
translation, as a supplementary work, as a compilation, or as an instructional
text, then the work shall be considered to be work made for hire and Employer or
any of its subsidiaries or affiliates shall be the author of the work. If such
work is neither prepared by Consultant within the scope of his duties nor a work
specially ordered that is deemed to be a work made for hire, then Consultant
hereby agrees to assign, and by these presents does assign, to Employer all of
Consultant's worldwide right, title, and interest in and to such work and all
rights of copyright therein.

         4.5. Both during the term of this Agreement and thereafter, Consultant
shall assist Employer, or any of its subsidiaries or affiliates and their
nominees, at any time, in the protection of Employer's or any of its
subsidiaries' or affiliates' worldwide right, title, and interest in and to
information, ideas, concepts, improvements, discoveries, and inventions, and its
copyrighted works, including without limitation, the execution of all formal
assignment documents requested by Employer or any of its subsidiaries or
affiliates or their nominees and the execution of all lawful oaths and
applications for applications for patents and registration of copyright in the
United States and foreign countries.

5.       NON-COMPETITION OBLIGATIONS:

         5.1. As part of the consideration for the Merger, and as an additional
incentive for Group 1 to enter into this Agreement, Sterling B. McCall, Jr. (the
"DESIGNATED PERSON") and Group 1 agree to the non-competition provisions of this
Article 5. The Designated Person agrees that during the period of the Designated
Person's non-competition obligations hereunder, the Designated Person will not,
directly or indirectly for the Designated Person or for others:

                                                                               4
<PAGE>   5

                           (i) engage in the Restricted Area 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, including financing, any other Person who is engaged
                  in the Restricted Area, directly or indirectly, in any
                  business competitive with any line of business conducted by
                  Group 1 or any of its subsidiaries or affiliates engaged in
                  automotive retailing; and

                           (iii) induce any employee of Group 1 or any of its
                  subsidiaries or affiliates to terminate his or her employment
                  with Group 1 or any of its subsidiaries or affiliates, or hire
                  or assist in the hiring of any such employee by Person not
                  affiliated with Group 1 or any of its subsidiaries or
                  affiliates.

         These non-competition obligations shall apply until the later of (i)
three (3) years after the Effective Time (as defined in the Plan and Agreement
of Reorganization among Group 1 Automotive, Inc., SM Merger, Inc. and SMC
Investment, Inc., dated as of November 4, 1999) (ii) the period specified in the
Consulting Agreement. If Group 1 and its subsidiaries and affiliates abandon a
particular aspect of their business, that is, cease such aspect of their
business with the intention to permanently refrain from such aspect of their
business, then this non-competition covenant shall not apply to such former
aspect of that business.

         During this non-competition period, the Designated Person will not
engage in these restricted activities or assist in the industry consolidation
efforts on behalf of any publicly held entity in the automotive retailing
industry (nor any entity with the ultimate intention of becoming a publicly held
entity or being acquired in any manner by a publicly held entity), regardless of
geographic area or market.

         For the purposes of this Article 5 "RESTRICTED AREA" shall mean (i)
Harris County, Texas; and (ii) any county adjacent to Harris County, Texas.

                  (b) The Designated Person understands that the foregoing
         restrictions may limit his ability to engage in certain businesses
         during the period provided for above, but acknowledge that the
         Designated Person will receive sufficiently high remuneration and other
         benefits under this Agreement to justify such restriction. The
         Designated Person acknowledges that money damages would not be
         sufficient remedy for any breach of this Article 5 by the Designated
         Person, and Group 1 or any of its subsidiaries or affiliates shall be
         entitled to enforce the provisions of this Article 5 by terminating any
         payments then owing to the Designated Person under this Agreement
         and/or to specific performance and injunctive relief as remedies for
         such breach or any threatened breach, without any requirement for the
         securing or posting of any bond in connection with such remedies. Such
         remedies shall not be deemed the exclusive remedies for a breach of
         this Article 5, 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 from Group 1 and
         the Designated Person's agents involved in such breach.

                                                                               5
<PAGE>   6

                  (c) It is expressly understood and agreed that Group 1 and the
         Designated Person considers the restrictions contained in this Article
         5 to be reasonable and necessary to protect the legitimate business
         interests of Group 1 and its affiliates, including 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.

                  (d) The parties hereto expressly acknowledge that Group 1's
         rights under this Article 5 are assignable and that such rights shall
         be fully enforceable by any of Group 1's assignees or successors in
         interest.

6.       MISCELLANEOUS:

         6.1. For purposes of this Agreement the terms "AFFILIATES" or
"AFFILIATED" means an entity who directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with
Employer. For purposes of this Agreement the term "CONTROL" including the terms
"CONTROLLED," "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means the
possession, directly or indirectly or as trustee or executor, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of stock or as trustee or executor, by contract or credit
arrangement or otherwise.

         6.2. Employer, Group 1 and Consultant shall refrain, both during the
consulting relationship and after the consulting relationship terminates, from
making any negative or critical statements about each other or any of their
respective subsidiaries or affiliates, directors, officers, employees, agents or
representatives or disclosing any conflicts with same, or from publishing any
oral or written statements about each other or any of their respective
subsidiaries or affiliates, directors, officers, employees, agents or
representatives that are slanderous, libelous, or defamatory; or that disclose
private or confidential information about each other or any of their respective
subsidiaries' or affiliates' business affairs, or about their respective
directors, officers, employees, agents, or representatives; or that constitute
an intrusion into the seclusion or private lives of each other or any of their
respective subsidiaries or affiliates, directors, officers, employees, agents,
or representatives; or that give rise to unreasonable publicity about the
private lives of each other or any of their respective subsidiaries or
affiliates, directors, officers, employees, agents, or representatives; or that
place each other or any of their respective subsidiaries or affiliates,
directors, officers, employees, agents, or representatives in a false light
before the public; or that constitute a misappropriation of the name or likeness
of each other or any of their respective subsidiaries or affiliates or any of
such entities' directors, officers, employees, agents, or representatives. A
violation or threatened violation of this prohibition may be enjoined.

         6.3. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or

                                                                               6
<PAGE>   7

when mailed by United States registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:

     If to Employer to:

         Group 1 Automotive, Inc.
         950 Echo Lane, Suite 350
         Houston, TX 77024
         Attn: Chief Executive Officer

     with a copy to:

         Vinson & Elkins L.L.P.
         2300 First City Tower
         1001 Fannin Street
         Houston, TX 77002-6760
         Attn: John S. Watson

     If to Consultant, to the address shown on the first page hereof

     with a copy to:

         Robert D. Remy
         Two Memorial City Plaza
         820 Gessner, Suite 1360
         Houston, TX 77024

Either Employer or Consultant may furnish a change of address to the other in
writing in accordance herewith, except that notices of changes of address shall
be effective only upon receipt.

         6.4. This Agreement shall be governed in all respects by the laws of
the State of Texas, excluding any conflict-of-law rule or principle that might
refer the construction of the Agreement to the laws of another State or country.

         6.5. No failure by either party hereto at any time to give notice of
any breach by the other party of, or to require compliance with, any condition
or provision of this Agreement shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.

         6.6. It is a desire and intent of the parties that the terms,
provisions, covenants, and remedies contained in this Agreement shall be
enforceable to the fullest extent permitted by law. If any such term, provision,
covenant, or remedy of this Agreement or the application thereof to any person,
association, or entity or circumstances shall, to any extent, be construed to be
invalid or unenforceable in whole or in part, then such term, provision,
covenant, or remedy shall be construed in a manner so as to permit its
enforceability under the applicable law to the fullest extent permitted by law.
In any case, the remaining provisions of this Agreement or the application
thereof to any

                                                                               7
<PAGE>   8

person, association, or entity or circumstances other than those to which they
have been held invalid or unenforceable, shall remain in full force and effect.

         6.7. Any and all claims, demands, causes of action, disputes,
controversies and other matters in question arising out of or relating to this
Agreement, any provision hereof, the alleged breach thereof, or in any way
relating to the subject matter of this Agreement, involving Employer, its
subsidiaries and affiliates and Consultant (all of which are referred to herein
as "CLAIMS"), even though some or all of such Claims allegedly are
extra-contractual in nature, whether such Claims sound in contract, tort or
otherwise, at law or in equity, under state or federal law, whether provided by
statute or the common law, for damages or any other relief, including equitable
relief and specific performance, shall be resolved and decided by binding
arbitration pursuant to the Federal Arbitration Act in accordance with the
Commercial Arbitration Rules then in effect with the American Arbitration
Association. In the arbitration proceeding the Consultant shall select one
arbitrator, the Employer shall select one arbitrator and the two arbitrators so
selected shall select a third arbitrator. Should one party fail to select an
arbitrator within five days after notice of the appointment of an arbitrator by
the other party or should the two arbitrators selected by the Consultant and the
Employer fail to select an arbitrator within ten days after the date of the
appointment of the last of such two arbitrators, any person sitting as a Judge
of the United States District Court of the Southern District of Texas, Houston
Division, upon application of the Consultant or the Employer, shall appoint an
arbitrator to fill such space with the same force and effect as though such
arbitrator had been appointed in accordance with the immediately preceding
sentence of this Section 7.7. The decision of a majority of the arbitrators
shall be binding on the Consultant, the Employer and its subsidiaries and
affiliates. The arbitration proceeding shall be conducted in Houston, Texas.
Judgment upon any award rendered in any such arbitration proceeding may be
entered by any federal or state court having jurisdiction.

         This agreement to arbitrate shall be enforceable in either federal or
state court. The enforcement of this agreement to arbitrate and all procedural
aspects of this Agreement to arbitrate, including but not limited to, the
construction and interpretation of this agreement to arbitrate, the scope of the
arbitrable issues, allegations of waiver, delay or defenses to arbitrability,
and the rules governing the conduct of the arbitration, shall be governed by and
construed pursuant to the Federal Arbitration Act.

         In deciding the substance of any such Claim, the Arbitrators shall
apply the substantive laws of the State of Texas; provided, however, that the
Arbitrators shall have no authority to award treble, exemplary or punitive type
damages under any circumstances regardless of whether such damages may be
available under Texas law, the parties hereby waiving their right, if any, to
recover treble, exemplary or punitive type damages in connection with any such
Claims.

         6.8. This Agreement shall be binding upon and inure to the benefit of
Employer, its subsidiaries and affiliates and any other person, association, or
entity which may hereafter acquire or succeed to all or a portion of the
business or assets of Employer by any means, whether direct or indirect, by
purchase, merger, consolidation, or otherwise. Consultant's rights and
obligations under this Agreement are personal and such rights, benefits, and
obligations of Consultant shall not be

                                                                               8
<PAGE>   9

voluntarily or involuntarily assigned, alienated, or transferred, whether by
operation of law or otherwise, by Consultant without the prior written consent
of Employer.

         6.9. Except as provided in (1) written company policies promulgated by
Employer dealing with issues such as securities trading, business ethics,
governmental affairs and political contributions, consulting fees, commissions
and other payments, compliance with law, investments and outside business
interests of officers and employees, reporting responsibilities, administrative
compliance, and the like, (2) the written benefits, plans, and programs
referenced in Sections 2.2, 2.3 and 2.4, or (3) any signed written agreements
contemporaneously or hereafter executed by Employer and Consultant, this
Agreement constitutes the entire agreement of the parties with regard to such
subject matters, and contains all of the covenants, promises, representations,
warranties, and agreements between the parties with respect to such subject
matters and replaces and merges previous agreements and discussions pertaining
to the relationship between Employer and Consultant. Specifically, but not by
way of limitation, any other employment agreement or arrangement in existence as
of the date hereof between Employer or any of its subsidiaries or affiliates and
Consultant is hereby canceled and Consultant hereby irrevocably waives and
renounces all of Consultant's rights and claims under any such agreement or
arrangement.

         6.10. The parties hereto expressly acknowledge that Group 1's and
Employer's rights under this Agreement are assignable and that such rights shall
be fully enforceable by any of Group 1's or Employer's assignees or successors
in interest.

                            [signature page follows]

                                                                               9
<PAGE>   10
        IN WITNESS WHEREOF, Employer and Consultant have duly executed this
Agreement in multiple originals to be effective on the date first stated above.

                                        GROUP 1 AUTOMOTIVE, INC.

                                        By: /s/ Scott L. Thompson
                                           ----------------------
                                        Name:  Scott L. Thompson
                                        Title: Senior Vice President

                                        /s/ Sterling B. McCall, Jr.
                                        ---------------------------
                                        Sterling B. McCall, Jr.

                                                                              10

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