Exhibit 10.26
SUPPLEMENTAL AGREEMENT TO
DEALER SALES AND SERVICE AGREEMENT
(PUBLICLY TRADED COMPANY)
THIS SUPPLEMENTAL AGREEMENT (this "Supplemental Agreement"), dated as of
April 27, 1998, is entered into among Muller Chevrolet, Oldsmobile, Isuzu, Inc.,
dba Muller Isuzu ("Dealer") Hometown Auto Retailers, Inc. ("Public Company") and
American Isuzu Motors Inc. ("Distributor").
WHEREAS, Distributor and Dealer are parties to a Dealer Sales and Service
Agreement dated December 14, 1995 (the "Dealer Agreement") which authorizes
Dealer to conduct dealership operations from the Dealership Locations identified
in the Dealer Agreement;
WHEREAS, the shareholders of Dealer have sold or intend to sell all of the
issued and outstanding shares of stock of Dealer to Public Company (the
"Acquisition");
WHEREAS, in accordance with the Dealer Agreement, Dealer has requested
Distributor's consent to the Acquisition; and
WHEREAS, Distributor is willing to furnish its consent to the Acquisition
in consideration for, and in reliance upon, certain understandings, assurances
and representations which the parties wish to document.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereby agree as follows:
1. LIMITATIONS UPON CHANGE OF EXECUTIVE MANAGER
A. Designation of Executive Manager. As set forth in Section 4 of
the Dealer Agreement, William C. Muller shall be Executive Manager of Dealer.
Dealer and Public Company agree that Executive Manager shall have complete and
irrevocable authority to make all decisions, and enter into any and all
necessary business commitments, required in the normal course of conducting
dealership operations on behalf of Dealer. Neither Dealer nor Public Company
will revoke, modify or otherwise impose limitations upon such authority without
the prior written consent of Distributor.
B. Change of Executive Manager. Without limiting the restrictions
set forth in the Dealer Agreement, the removal or withdrawal of Executive
Manager without Distributor's prior written consent shall constitute grounds for
termination of the Dealer Agreement, subject to applicable law.
2. LIMITATIONS UPON CHANGES IN OWNERSHIP
A. Change in Ownership of Dealer. Dealer and Public Company hereby
represent and warrant that upon consummation of the Acquisition, Dealer will be
a wholly-owned subsidiary of Public Company. Any change in the ownership of
Dealer, or any event with respect to Public Company described in subparagraph B
below, shall be considered a change in Ownership of Dealer under the terms of
the Dealer Agreement, arid all applicable provisions of the Dealer Agreement
will apply to any such change.
B. Change in Ownership of Public Company. Given the control Public
Company has over Dealer, and Distributor's strong interest in assuring that
those who own and control Distributor's dealerships have interests consistent
with those of Distributor, Dealer and Public Company agree that if any person or
entity hereinafter acquires or controls more than 20% of the issued and
outstanding common stock of Public Company at any time and Distributor
reasonably concludes that such person or entity does not have interests
compatible with those of Distributor or is otherwise not qualified to have an
ownership interest in the dealerships at the Dealership Locations, then within
90 days of receipt of written notice from Distributor, Dealers and Public
Company will: (i) transfer the assets associated with Dealer to a third party
acceptable to
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Distributor, (ii) voluntarily terminate the Dealer Agreement, or (iii) provide
evidence to Distributor that such person or entity no longer has such an
Ownership interest in Public Company. In the event that Dealer enters into an
agreement to transfer its assets to a third party as set forth in (i) above,
Distributor shall have a right of first refusal to purchase such assets in
accordance with the terms and procedures set forth in subparagraph C below.
Dealer and Public Company agree that if an Ownership interest is acquired in
Public Company by a person or entity which notifies Public Company via Schedule
13D filed with the Securities and Exchange Commission, Dealer and Public Company
shall advise Distributor in writing, and attach a copy of that Schedule.
C. Exercise of Right of First Refusal. Prior to exercising its right
of first refusal pursuant to subparagraph B above, Distributor shall have a
reasonable opportunity to inspect the assets, including real estate, before
making its decision. If Dealer has entered into a bona fide written buy/sell
agreement, the purchase price and other terms of sale will be those set forth in
such agreement and any related documents, unless Dealer and Distributor agree to
other terms. Upon Distributor's request, Dealer agrees to provide all documents
relating to the proposed transfer. If Dealer refuses to provide such
documentation or states that such documents do not exist, it will be presumed
that the agreement is not bona fide. In the absence of a bona fide written
buy/sell agreement, the purchase price of the dealership assets will be
determined by good faith negotiations by Dealer and Distributor. If agreement
cannot be reached within a reasonable time, the price and other terms of sale
will be established by arbitration according to the rules of the American
Arbitration Association. Dealer agrees to transfer the assets by Warranty Deed
where possible, conveying marketable title free and clear of liens and
encumbrances. The Deed will be in proper form for recording and Dealer will
deliver complete possession of the assets when the Deed is delivered. Dealer
will also furnish copies of any easements, licenses or other documents affecting
the property and assign any permits or licenses necessary for the conduct of
Dealer's operations. Distributor's rights under this section may be assigned to
any third party and in connection with any such assignment, Distributor will
guarantee full payment of the purchase price by the assignee. Distributor's
rights under this subparagraph C shall be subject to the terms of applicable
state law.
3. LIMITATIONS UPON NUMBER AND LOCATIONS OF DEALERSHIPS
Dealer and Public Company acknowledge that Distributor's consent is
required for the acquisition of each new Isuzu point and the Distributor's
consent to the number and locations of dealerships which may be owned by Public
Company or any subsidiary of Public Company will be given on a case by case
basis. Dealer and Public Company shall provide such documentation as is
reasonably requested by Distributor regarding the ownership interests of all
such persons and entities in Distributor's dealerships. In the event that Dealer
or Public Company shall acquire ownership or control of more than one of
Distributor's dealerships, then Dealer and/or Public Company shall obtain
separate motor vehicle licenses, and shall maintain separate financial
statements, for each dealership.
4. WORKING CAPITAL REQUIREMENTS
Dealer and Public Company agree that Dealer shall maintain, at all
times, sufficient working capital to meet or exceed the minimum net working
capital standards for Dealer as determined from time to time by Distributor
consistent with its standard policies. Dealer and Public Company shall provide
such documentation as is reasonably requested by Distributor to assure
compliance with this requirement. Public Company agrees to submit an annual
consolidated balance sheet for the combined dealership operations of Public
Company. Public Company agrees, upon Distributor's request, to provide
Distributor with copies of the materials filed by Public Company with the
Securities and Exchange Commission.
5. INDEMNITY
Public Company agrees to indemnify and hold Distributor harmless
from and against any and all claims, liabilities, losses, damages, costs and
expenses arising out of or in connection with the sale of stock in
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Public Company. Public Company further agrees to indemnify and hold Distributor
harmless from and against any and all claims of the shareholders of Public
Company, and all liabilities, losses, damages, costs and expenses incurred in
connection therewith, unless a final determination is made that Distributor was
in fact liable for such claims, liabilities, losses, damages, costs or expenses.
6. MISCELLANEOUS
A. Effect of Supplemental Agreement. The parties agree that this
Supplemental Agreement is intended to supplement the terms of the Dealer
Agreement and not to limit the rights and obligations of the parties contained
therein. This Supplemental Agreement is hereby incorporated into the Dealer
Agreement and made a part thereof. In the event that any of the provisions of
this Supplemental Agreement are in actual conflict with other provisions of the
Dealer Agreement, the provisions contained in this Supplemental Agreement shall
govern. In the event that the policies of Distributor with regard to the issues
addressed herein are hereinafter modified, the parties agree to review such
modifications to determine whether modifications of this Supplemental Agreement
are appropriate.
B. Construction. This Supplemental Agreement shall be governed by
and construed in accordance with the laws of the State of California. The
failure of either party to enforce any of the provisions of this Supplemental
Agreement or the failure to exercise any election provided for herein shall in
no way be considered to be a waiver of such provisions or elections. All
capitalized terms used herein and not defined herein shall have the meanings set
forth in the Dealer Agreement
C. Alternative Dispute Resolution. In the event of any dispute
between the parties regarding the Dealer Agreement or this Supplemental
Agreement, Dealer and Public Company agree to participate in any alternative
dispute resolution procedures specified in the standard policies of Distributor.
Upon final determination through such dispute resolution, each party shall have
recourse to a review de novo by the appropriate state court or administrative
agency consistent with the provisions of state law. The parties agree that
should a party making such appeal lose the issues presented on appeal, then that
party shall pay the reasonable expenses, including reasonable attorneys' fees,
of the other party for the defense of such de novo review.
D. No Third Party Beneficiaries. Nothing in this Supplemental
Agreement or the Dealer Agreement shall be construed to confer any rights upon
any person not a party hereto or thereto, nor shall it create in any party an
interest as a third party beneficiary of this Supplemental Agreement or the
Dealer Agreement. Dealer and Public Company hereby agree to indemnify and hold
harmless Distributor, its affiliates, subsidiaries, directors, officers,
employees, agents and representatives from and against all claims, actions,
liabilities, damages, costs and expenses (including reasonable attorneys' fees)
arising from or in connection with any action by a third party in its capacity
as a stockholder of Public Company other than through a derivative stockholder
suit authorized by the Board of Directors of Public Company.
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IN WITNESS WHEREOF, the parties have executed this Supplemental Agreement
effective as of the date set forth in the introductory paragraph hereof.
MULLER CHEVROLET, OLDSMOBILE, HOMETOWN AUTO RETAILERS, INC.
ISUZU, INC.
By: /s/ William Muller By: /s/ Joseph Shaker
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Name: William Muller Name: Joseph Shaker
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Title: Pres. Title: President & COO
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AMERICAN ISUZU MOTORS INC.
By: /s/ R. W. Reilly
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Name: R. W. Reilly
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Senior Vice President
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Title: General Manager, LV
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